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Justice Ginsburg

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Thryv, Inc. v. Click-To-Call Technologies, LP

https://www.courtlistener.com/opinion/4746632/thryv-inc-v-click-to-call-technologies-lp/

its rejection of Click-to-Call’s argument and canceling 13 of the patent’s claims as obvious or lacking novelty. Click-to-Call appealed, challenging only the Board’s de- termination that did not preclude inter partes re- view. The Court of Appeals dismissed the appeal for lack of jurisdiction, agreeing with Thryv and the Director (who in- tervened on appeal) that bar on appeal of the in- stitution decision precludes judicial review of the agency’s application of Citing our intervening decision in Cuozzo, see infra, at 6–7, we granted certiorari, vacated the judgment, and remanded. Click-to-Call Technologies, LP v. Oracle Corp., 579 U. S. (2016). On remand, the Court of Appeals again dismissed the appeal on the same ground. Thereafter, in another case, the en banc Federal Circuit held that “time-bar determinations under are ap- pealable” notwithstanding Wi-Fi LLC v. Broadcom Corp., The majority opinion construed reference to the determination whether to institute inter partes review “under this section” —————— 2 The 2001 suit was brought by Inforocket.Com, Inc.—then the exclu- sive licensee of the ’836 patent—against Keen, Inc. See Inforocket.Com, Inc. v. Keen, Inc., No. 1:01–cv–05130 (SDNY). While the suit was pend- ing, Keen acquired Inforocket and the District Court dismissed the suit without prejudice. By the time of the inter partes review petition, Keen had become Ingenio (now Thryv). Cite as: 590 U. S. (2020) 5 Opinion of the Court as trained on the likelihood-of-success requirement stated in The timeliness determination, the majority concluded, “is not ‘closely related’ to the institution decision addressed in ” (quoting Cuozzo, 579 U. S., at (slip op., at 12)). The majority therefore held that for appeals, does not displace the usual presumption favoring judicial review of agency action. Wi-Fi 878 F.3d, at 1374–1375. In a concurring opinion, Judge O’Malley emphasized a “simpler” basis for the same conclusion. at 1375. In her view, shields from review only the agency’s assessment of a petition’s “substantive adequacy,” not questions about the agency’s “authority to act.” at 1376. Judge Hughes, joined by Judges Lourie, Bryson, and Dyk, dissented, expressing a position that today’s dissent characterizes as “extraordinary.” Post, at 6. Those judges concluded that conveys Congress’ “clear and unmistakable” “intent to prohibit judicial review of the Board’s [inter partes review] institution decision.” Wi-Fi That prohibition applies to issues, the Federal Circuit dissenters maintained, because “describes when an [inter partes review] may be ‘instituted.’ ” 1378–1379 (quoting ). In light of its en banc decision in Wi-Fi the Court of Appeals granted panel rehearing in this case. Treating the Board’s application of as judicially reviewable, the panel’s revised opinion held that the

Justice Ginsburg

majority

Thryv, Inc. v. Click-To-Call Technologies, LP

https://www.courtlistener.com/opinion/4746632/thryv-inc-v-click-to-call-technologies-lp/

as judicially reviewable, the panel’s revised opinion held that the Board erred by insti- tuting review. The petition for inter partes review here was untimely, the Court of Appeals held, because the 2001 in- fringement complaint, though dismissed without prejudice, started the one-year clock under 3 The court there- fore vacated the Board’s final written decision, which had —————— 3 A footnote in the panel’s opinion noted that the Court of Appeals sit- 6 THRYV, INC. v. CLICK-TO-CALL TECHNOLOGIES, LP Opinion of the Court invalidated 13 of Click-to-Call’s claims for want of the req- uisite novelty and nonobviousness, and remanded with in- structions to dismiss. We granted certiorari to resolve the reviewability issue, 587 U. S. (2019), and now vacate the Federal Circuit’s judgment and remand with instructions to dismiss the ap- peal for lack of appellate jurisdiction. III A To determine whether precludes judicial review of the agency’s application of time prescription, we begin by defining scope. Section 314(d)’s text ren- ders “final and nonappealable” the “determination by the Director whether to institute an inter partes review under this section.” (emphasis added). That language in- dicates that a party generally cannot contend on appeal that the agency should have refused “to institute an inter partes review.” We held as much in Cuozzo. There, a party contended on appeal that the agency should have refused to institute in- ter partes review because the petition failed re- quirement that the grounds for challenging patent claims must be identified “with particularity.” 579 U. S., at (slip op., at 6) (internal quotation marks omitted). This “contention that the Patent Office unlawfully initiated its agency review is not appealable,” we held, for “that is what says.” at (slip op., at 7). Section 314(d), we explained, “preclud[es] review of the Patent Office’s institu- tion decisions” with sufficient clarity to overcome the —————— ting en banc had considered and agreed with the panel majority’s conclu- sion that a complaint voluntarily dismissed without prejudice can trigger time bar. Click-to-Call Technologies, LP v. Ingenio, Inc., 899 F.3d 1321, 1328, n. 3 On that issue, Judge Taranto is- sued a concurring opinion, at 1343–1347, and Judge Dyk, joined by Judge Lourie, issued a dissenting opinion, at 1350–1355. That ques- tion is outside the scope of our review. Cite as: 590 U. S. (2020) 7 Opinion of the Court “ ‘strong presumption’ in favor of judicial review.” at – (slip op., at 9–11) ). See Cuozzo, 579 U. S., at – (slip op., at 9–11) (finding “ ‘clear and convincing’ indications that Congress intended to bar review” (quot- ing 349–350

Justice Ginsburg

majority

Thryv, Inc. v. Click-To-Call Technologies, LP

https://www.courtlistener.com/opinion/4746632/thryv-inc-v-click-to-call-technologies-lp/

indications that Congress intended to bar review” (quot- ing 349–350 (1984))). We reserved judgment in Cuozzo, however, on whether would bar appeals reaching well beyond the deci- sion to institute inter partes review. 579 U. S., at (slip op., at 11). We declined to “decide the precise effect of on,” for example, “appeals that implicate constitu- tional questions.” Instead, we defined the bounds of our holding this way: “[O]ur interpretation applies where the grounds for attacking the decision to institute inter partes review consist of questions that are closely tied to the application and interpretation of statutes related to the Patent Office’s decision to initiate inter partes review.” B We therefore ask whether a challenge based on ranks as an appeal of the agency’s decision “to institute an inter partes review.” We need not venture beyond Cuozzo’s holding that bars review at least of mat- ters “closely tied to the application and interpretation of statutes related to” the institution decision, 579 U. S., at (slip op., at 11), for a challenge easily meets that measurement. Section 315(b)’s time limitation is integral to, indeed a condition on, institution. After all, sets forth a cir- cumstance in which “[a]n inter partes review may not be instituted.” Even Click-to-Call and the Court of Appeals recognize that governs institution. See Brief for Re- spondent Click-to-Call 1 ( is “a clear limit on the Board’s institution authority”); Wi-Fi 878 F.3d, at 8 THRYV, INC. v. CLICK-TO-CALL TECHNOLOGIES, LP Opinion of the Court 1373 (“ controls the Director’s authority to institute [inter partes review]”). Because expressly governs institution and noth- ing more, a contention that a petition fails under is a contention that the agency should have refused “to insti- tute an inter partes review.” A challenge to a pe- tition’s timeliness under thus raises “an ordinary dispute about the application of ” an institution-related statute. Cuozzo, 579 U. S., at (slip op., at 7). In this case as in Cuozzo, therefore, overcomes the pre- sumption favoring judicial review.4 C The AIA’s purpose and design strongly reinforce our con- clusion. By providing for inter partes review, Congress, concerned about overpatenting and its diminishment of competition, sought to weed out bad patent claims effi- ciently. See at (slip op., at 8); H. R. Rep. No. 112– 98, pt. 1, p. 40 (2011) (“The legislation is designed to estab- lish a more efficient and streamlined patent system that will improve patent quality and limit unnecessary and counterproductive litigation costs.”).5 —————— 4 We do not decide whether mandamus would be available in an ex- traordinary case. Cuozzo Speed Technologies,

Justice Ginsburg

majority

Thryv, Inc. v. Click-To-Call Technologies, LP

https://www.courtlistener.com/opinion/4746632/thryv-inc-v-click-to-call-technologies-lp/

be available in an ex- traordinary case. Cuozzo Speed Technologies, LLC v. Lee, 579 U. S. –, n. 5 (2016) (ALITO, J., concurring in part and dissenting in part) (slip op., at 5–6, n. 5). 5 The dissent acknowledges that “Congress authorized inter partes re- view to encourage further scrutiny of already issued patents.” Post, at 14. Yet the dissent, despite the Court’s decision upholding the constitu- tionality of such review in Oil States Energy Services, LLC v. Greene’s Energy Group, LLC, 584 U. S. appears ultimately to urge that Congress lacks authority to permit second looks. Patents are property, the dissent several times repeats, and Congress has no prerogative to allow “property-taking-by-bureaucracy.” Post, at 1, 18–21. But see Oil States, 584 U. S., at (slip op., at 7) (“patents are public franchises” (internal quotation marks omitted)). The second look Congress put in place is assigned to the very same bureaucracy that granted the patent in the first place. Why should that bureaucracy be trusted to give an Cite as: 590 U. S. (2020) 9 Opinion of the Court Allowing appeals would tug against that objec- tive, wasting the resources spent resolving patentability and leaving bad patents enforceable. A successful appeal would terminate in vacatur of the agency’s decision; in lieu of enabling judicial review of patentability, vacatur would unwind the agency’s merits decision. See Cuozzo, 579 U. S., at (slip op., at 8). And because a patent owner would need to appeal on untimeliness grounds only if she could not prevail on patentability, appeals would operate to save bad patent claims. This case illus- trates the dynamic. The agency held Click-to-Call’s patent claims invalid, and Click-to-Call does not contest that hold- ing. It resists only the agency’s institution decision, mind- ful that if the institution decision is reversed, then the agency’s work will be undone and the canceled patent claims resurrected. Other features of the statutory design confirm that Con- gress prioritized patentability over timeliness re- quirement. A petitioner’s failure to satisfy does not prevent the agency from conducting inter partes review of the challenged patent claims; the agency can do so at an- other petitioner’s request. (a). Nor does failure to sat- isfy prevent the original initiator from participating on the merits; the -barred party can join a proceed- ing initiated by another petitioner. (c). And once inter partes review is instituted, the agency may issue a fi- nal written decision even “[i]f no petitioner remains in the inter partes review.” It is unsurprising that a stat- utory scheme so consistently elevating resolution of patent- ability above a

Justice Ginsburg

majority

Thryv, Inc. v. Click-To-Call Technologies, LP

https://www.courtlistener.com/opinion/4746632/thryv-inc-v-click-to-call-technologies-lp/

scheme so consistently elevating resolution of patent- ability above a petitioner’s compliance with would exclude appeals, thereby preserving the Board’s ad- judication of the merits. —————— honest count on first view, but a jaundiced one on second look? See post, at 19–20. 10 THRYV, INC. v. CLICK-TO-CALL TECHNOLOGIES, LP Opinion of the Court Judicial review of rulings, moreover, would do lit- tle to serve other statutory goals. The purpose of all agree, is to minimize burdensome overlap between inter partes review and patent-infringement litigation. Brief for Petitioner 24; Brief for Federal Respondent 36; Brief for Re- spondent Click-to-Call 37. Judicial review after the agency proceedings cannot undo the burdens already occasioned. Nor are appeals necessary to protect patent claims from wrongful invalidation, for patent owners remain free to appeal final decisions on the merits. IV Click-to-Call advances a narrower reading of In Click-to-Call’s view, which the dissent embraces, post, at 6– 18, the bar on judicial review applies only to the agency’s threshold determination under of the question whether the petitioner has a reasonable likelihood of pre- vailing. Section 314(d) addresses the “determination by the Director whether to institute inter partes review under this section” (emphasis added), and, Click-to-Call maintains, contains “the only substantive determination refer- enced in” the same section as Brief for Respondent Click-to-Call 16. This interpretation, Click-to-Call argues, supplies a clear rule consonant with the presumption favor- ing judicial review. at 4–5 (Federal Circuit’s en banc Wi-Fi decision). Cuozzo is fatal to Click-to-Call’s interpretation. Section 314(d)’s review bar is not confined to the agency’s applica- tion of for in Cuozzo we held unreviewable the agency’s application of 579 U. S., at – (slip op., at 7–8). Far from limiting the appeal bar to and “nothing else” as Click-to-Call urges, Brief for Respondent 29, the Court’s opinion in Cuozzo explained that the bar extends to challenges grounded in “statutes re- lated to” the institution decision. 579 U. S., at (slip op., at 11). Cite as: 590 U. S. (2020) 11 Opinion of the Court The text of offers Click-to-Call no support. The provision sweeps more broadly than the determination about whether “there is a reasonable likelihood that the pe- titioner would prevail.” Rather, it encompasses the entire determination “whether to institute an inter partes review.” And refers not to a determination under subsec- tion (a), but to the determination “under this section.” That phrase indicates that governs the Director’s institu- tion of inter partes review. Titled “Institution of inter partes review,” is the section housing the command to the Director to “determine whether to institute an inter partes

Justice Ginsburg

majority

Thryv, Inc. v. Click-To-Call Technologies, LP

https://www.courtlistener.com/opinion/4746632/thryv-inc-v-click-to-call-technologies-lp/

the Director to “determine whether to institute an inter partes review,” Thus, every decision to institute is made “under” but must take account of specifications in other provisions—such as the particularity re- quirement at issue in Cuozzo and the timeliness re- quirement at issue here. Similar clarifying language recurs throughout the AIA. See, e.g., (referring to the Di- rector’s determination regarding “the institution of an inter partes review under section 314” (emphasis added)); (b) (referring to “a petition filed under section 311,” the section authorizing the filing of petitions (emphasis added)); (b)(1) (referring to “a preliminary response to the peti- tion under section 313,” the section authorizing the filing of preliminary responses to petitions (emphasis added)). If Congress had intended Click-to-Call’s meaning, it had at hand readymade language from a precursor to : “A determination by the Director under subsection (a) shall be final and non-appealable.” 35 U.S. C. (2006 ed.) (emphasis added) (governing inter partes reexamination). Or Congress might have borrowed from a related provision: “A determination by the Director pursuant to subsection (a) of this section that no substantial new question of patenta- bility has been raised will be final and nonappealable.” 35 U.S. C. (emphasis added) (governing ex parte reex- 12 THRYV, INC. v. CLICK-TO-CALL TECHNOLOGIES, LP Opinion of the Court amination). Instead, Congress chose to shield from appel- late review the determination “whether to institute an inter partes review under this section.” (emphasis added). That departure in language suggests a departure in meaning. See Henson v. Santander Consumer USA Inc., 582 U. S. (2017) (slip op., at 6). Click-to-Call doubts that Congress would have limited the agency’s institution authority in without ensur- ing judicial supervision. Congress entrusted the institution decision to the agency, however, to avoid the significant costs, already recounted, of nullifying a thoroughgoing de- termination about a patent’s validity. See at 8–9. That goal—preventing appeals that would frustrate effi- cient resolution of patentability—extends beyond appeals. Click-to-Call also contends that we adopted its interpre- tation of in SAS Institute Inc. v. Iancu, 584 U. S. Neither of our holdings in that case assists Click- to-Call, and both holdings remain governing law. SAS In- stitute first held that once the agency institutes an inter partes review, it must “resolve all of the claims in the case.” at (slip op., at 1). SAS Institute located that rule in which requires the agency to decide “the patenta- bility of any patent claim challenged by the petitioner.” (emphasis in original; internal quotation marks omit- ted). SAS Institute next held that did not bar judi- cial review of application. at

Justice Ginsburg

majority

Thryv, Inc. v. Click-To-Call Technologies, LP

https://www.courtlistener.com/opinion/4746632/thryv-inc-v-click-to-call-technologies-lp/

that did not bar judi- cial review of application. at – (slip op., at 12–14). Our decision explained that “nothing in or Cuozzo withdraws our power to ensure that an inter partes review proceeds in accordance with the law’s de- mands.” at (slip op., at 14). That reviewability hold- ing is inapplicable here, for Click-to-Call’s appeal chal- lenges not the manner in which the agency’s review “proceeds” once instituted, but whether the agency should have instituted review at all. Cite as: 590 U. S. (2020) 13 Opinion of the Court Click-to-Call homes in on a single sentence from SAS In- stitute’s reviewability discussion: “Cuozzo concluded that precludes judicial review only of the Director’s ‘ini- tial determination’ under that ‘there is a “reason- able likelihood” that the claims are unpatentable on the grounds asserted’ and review is therefore justified.” at (slip op., at 13) (quoting Cuozzo, 579 U. S., at (slip op., at 9)). But that sentence’s account of Cuozzo is incom- plete. Recall that Cuozzo itself applied appeal bar to a challenge on grounds other than See at 10. To understand how far beyond the bar on judi- cial review extends, we look to the statute and Cuozzo; for the reasons stated above, they establish that bars challenges resting on 6 —————— 6 Defending Click-to-Call’s interpretation, the dissent takes a view of our precedent that neither Click-to-Call nor the Federal Circuit ad- vances. See post, at 15–18. The dissent does not consider itself bound by Cuozzo’s conclusion that bars appeal of “questions that are closely tied to the application and interpretation of statutes related to the Patent Office’s decision to initiate inter partes review,” 579 U. S., at (slip op., at 11). According to the dissent, that statement is dicta later repudiated in SAS Institute Inc. v. Iancu, 584 U. S. But Cuozzo concerned an appeal resting on a “related statutory sec- tion”: 579 U. S., at (slip op., at 7). That challenge was tied to institution, the Court explained, for two reasons: first, because it “attack[ed] a ‘determination whether to institute’ review,” at – (slip op., at 7–8); second, because the challenge was related to invoking ’s condition on institution, at (slip op., at 12). Cuozzo’s recognition that can bar chal- lenges rooted in provisions other than was hardly “dicta,” post, at 16—it was the Court’s holding. And SAS Institute purported to adhere to Cuozzo, not to overrule it. 584 U. S., at – (slip op., at 13–14). The Court in SAS Institute said, specifically, that it discerned “nothing in Cuozzo” inconsistent with its conclusion. at (slip op., at

Justice Ginsburg

majority

Thryv, Inc. v. Click-To-Call Technologies, LP

https://www.courtlistener.com/opinion/4746632/thryv-inc-v-click-to-call-technologies-lp/

in Cuozzo” inconsistent with its conclusion. at (slip op., at 14). We do not so lightly treat our determinations as dicta and our decisions as overruling others sub silentio. Nor can we countenance the dissent’s dangerous insinuation that today’s decision is not “really” binding prec- edent. Post, at 17–18 (“[W]ho can say?”); post, at 18 (“Litigants and lower 14 THRYV, INC. v. CLICK-TO-CALL TECHNOLOGIES, LP Opinion of the Court V Click-to-Call presses an alternative reason why the Board’s ruling on its objection is appealable. The Board’s final written decision addressed the issue, so Click-to-Call argues that it may appeal under which authorizes appeal from the final written decision. But even labeled as an appeal from the final written deci- sion, Click-to-Call’s attempt to overturn the Board’s ruling is still barred by Because sole of- fice is to govern institution, Click-to-Call’s contention re- mains, essentially, that the agency should have refused to institute inter partes review. As explained, makes that contention unreviewable. * * * For the reasons stated, we vacate the judgment of the United States Court of Appeals for the Federal Circuit and remand the case with instructions to dismiss for lack of ap- pellate jurisdiction. It is so ordered. —————— courts alike will just have to wait and see.”). Lest any “confusion” re- main, post, at 17, we reaffirm today our holding in Cuozzo: Section 314(d) generally precludes appeals of the agency’s institution decision, includ- ing, beyond genuine debate, appeals “consist[ing] of questions that are closely tied to the application and interpretation of statutes related to” the institution decision. 579 U. S., at (slip op., at 7, 11). The appeal bar, we therefore reiterate, is not limited to the agency’s applica- tion of Cite as: 590 U. S. (2020) 15 Opinion Appendix of the of to opinion Court the Court APPENDIX OF KEY STATUTORY PROVISIONS 35 U.S. C. : “Institution of inter partes review “(a) THRESHOLD.—The Director may not authorize an inter partes review to be instituted unless the Di- rector determines that the information presented in the petition filed under section 311 and any response filed under section 313 shows that there is a reasonable likelihood that the petitioner would prevail with re- spect to at least 1 of the claims challenged in the peti- tion. “(b) TIMING.—The Director shall determine whether to institute an inter partes review under this chapter pursuant to a petition filed under section 311 within 3 months after— “(1) receiving a preliminary response to the petition under section 313; or “(2) if no such preliminary response is filed, the last date on

Justice Ginsburg

majority

Thryv, Inc. v. Click-To-Call Technologies, LP

https://www.courtlistener.com/opinion/4746632/thryv-inc-v-click-to-call-technologies-lp/

no such preliminary response is filed, the last date on which such response may be filed. “(c) NOTICE.—The Director shall notify the petitioner and patent owner, in writing, of the Director’s determi- nation under subsection (a), and shall make such notice available to the public as soon as is practicable. Such notice shall include the date on which the review shall commence. “(d) NO APPEAL.—The determination by the Director whether to institute an inter partes review under this section shall be final and nonappealable.” 16 THRYV, INC. v. CLICK-TO-CALL TECHNOLOGIES, LP Opinion Appendix of the of to opinion Court the Court 35 U.S. C. : “PATENT OWNER’S ACTION.—An inter partes review may not be instituted if the petition requesting the pro- ceeding is filed more than 1 year after the date on which the petitioner, real party in interest, or privy of the petitioner is served with a complaint alleging in- fringement of the patent. The time limitation set forth in the preceding sentence shall not apply to a request for joinder under subsection (c).” Cite as: 590 U. S. (2020) 1 GORSUCH, J., dissenting SUPREME COURT OF THE UNITED STATES No. 18–916 THRYV, INC., FKA DEX MEDIA, INC., PETITIONER v. CLICK-TO-CALL TECHNOLOGIES, LP, ET AL.

Justice Brennan

majority

Tate v. Short

https://www.courtlistener.com/opinion/108282/tate-v-short/

Petitioner accumulated fines of $425 on nine convictions in the Corporation Court of Houston, Texas, for traffic offenses. He was unable to pay the fines because of indigency[1] and the Corporation Court, which otherwise has no jurisdiction to impose prison sentences,[2] committed him to the municipal prison farm according to the provisions of a state statute and municipal ordinance[3] which required that he remain there a sufficient *397 time to satisfy the fines at the rate of five dollars for each day; this required that he serve 85 days at the prison farm. After 21 days in custody, petitioner was released on bond when he applied to the County Criminal Court of Harris County for a writ of habeas corpus. He alleged that: "Because I am too poor, I am, therefore, unable to pay the accumulated fine of $425." The county court held that "legal cause has been shown for the imprisonment," and denied the application. The Court of Criminal Appeals of Texas affirmed, stating: "We overrule appellant's contention that because he is too poor to pay the fines his imprisonment is unconstitutional." We granted certiorari, We reverse on the authority of our decision in The Illinois statute involved in Williams authorized both a fine and imprisonment. Williams was given the maximum sentence for petty theft of one year's imprisonment and a $500 fine, plus $5 in court costs. The judgment, as permitted by the Illinois statute, provided that if, when the one-year sentence expired, Williams did not pay the fine and court costs, he was to remain in jail a sufficient length of time to satisfy the total amount at the rate of $5 per day. We held that the Illinois statute as applied to Williams worked an invidious discrimination solely because he was too poor to pay the fine, and therefore violated the Equal Protection Clause. Although the instant case involves offenses punishable by fines only, petitioner's imprisonment for nonpayment *398 constitutes precisely the same unconstitutional discrimination since, like Williams, petitioner was subjected to imprisonment solely because of his indigency.[4] In four members of the Court anticipated the problem of this case and stated the view, which we now adopt, that "the same constitutional defect condemned in Williams also inheres in jailing an indigent for failing to make immediate payment of any fine, whether or not the fine is accompanied by a jail term and whether or not the jail term of the indigent extends beyond the maximum term that may be imposed on a person willing and able to pay a fine. In each case, the Constitution

Justice Brennan

majority

Tate v. Short

https://www.courtlistener.com/opinion/108282/tate-v-short/

able to pay a fine. In each case, the Constitution prohibits the State from imposing a fine as a sentence and then automatically converting it into a jail term solely because the defendant is indigent and cannot forthwith pay the fine in full." Our opinion in Williams stated the premise of this conclusion in saying that "the Equal Protection Clause of the Fourteenth Amendment requires that the statutory *399 ceiling placed on imprisonment for any substantive offense be the same for all defendants irrespective of their economic status." Since Texas has legislated a "fines only" policy for traffic offenses, that statutory ceiling cannot, consistently with the Equal Protection Clause, limit the punishment to payment of the fine if one is able to pay it, yet convert the fine into a prison term for an indigent defendant without the means to pay his fine. Imprisonment in such a case is not imposed to further any penal objective of the State. It is imposed to augment the State's revenues but obviously does not serve that purpose; the defendant cannot pay because he is indigent and his imprisonment, rather than aiding collection of the revenue, saddles the State with the cost of feeding and housing him for the period of his imprisonment. There are, however, other alternatives to which the State may constitutionally resort to serve its concededly valid interest in enforcing payment of fines. We repeat our observation in Williams in that -245 : "The State is not powerless to enforce judgments against those financially unable to pay a fine; indeed, a different result would amount to inverse discrimination since it would enable an indigent to avoid both the fine and imprisonment for nonpayment whereas other defendants must always suffer one or the other conviction. "It is unnecessary for us to canvass the numerous alternatives to which the State by legislative enactment —or judges within the scope of their authority —may resort in order to avoid imprisoning an indigent beyond the statutory maximum for involuntary nonpayment of a fine or court costs. Appellant has suggested several plans, some of which are *400 already utilized in some States, while others resemble those proposed by various studies. The State is free to choose from among the variety of solutions already proposed and, of course, it may devise new ones."[5] We emphasize that our holding today does not suggest any constitutional infirmity in imprisonment of a defendant with the means to pay a fine who refuses or neglects to do so. Nor is our decision to be understood *401 as precluding imprisonment as an enforcement

Justice Stevens

dissenting

Gonzaga Univ. v. Doe

https://www.courtlistener.com/opinion/121157/gonzaga-univ-v-doe/

The Court's ratio decidendi in this case has a "now you see it, now you don't" character. At times, the Court seems to hold that the Family Educational Rights and Privacy Act of 1974 (FERPA or Act), 20 U.S. C. 122g, simply does not create any federal rights, thereby disposing of the case with a negative answer to the question "whether Congress intended to create a federal right, " ante, at 28. This interpretation would explain the Court's studious avoidance of the rights-creating language in the title and the text of the Act. Alternatively, its opinion may be read as accepting the proposition that FERPA does indeed create both parental rights of access to student records and student rights of privacy in such records, but that those federal rights are of a lesser value because Congress did not intend them to be enforceable by their owners. See, e. g., ante, at 290 (requiring of respondent "no less and no more" than what is required of plaintiffs attempting to prove that a statute creates an implied right of action). I shall first explain why the statute does, indeed, create federal rights, and then explain why the Court's novel attempt to craft a new category of second-class statutory rights is misguided. I Title 20 U.S. C. 122g, which embodies FERPA in its entirety, includes 10 subsections, which create rights for both students and their parents, and describe the procedures for enforcing and protecting those rights. Subsection (a)(1)(A) accords parents "the right to inspect and review the education records of their children."[1] Subsection (a)(1)(D) provides *294 that a "student or a person applying for admission" may waive "his right of access" to certain confidential statements. Two separate provisions protect students' privacy rights: subsection (a)(2) refers to "the privacy rights of students," and subsection (c) protects "the rights of privacy of students and their families." And subsection (d) provides that after a student has attained the age of 18, "the rights accorded to the parents of the student" shall thereafter be extended to the student. Given such explicit rights-creating language, the title of the statute, which describes "family educational rights," is appropriate: The entire statutory scheme was designed to protect such rights. Of course, as we have stated previously, a "blanket approach" to determining whether a statute creates rights enforceable under 42 U.S. C. 198 (1994 ed., Supp. V) is inappropriate. The precise statutory provision at issue in this case is 122g(b).[2] Although the rights-creating language in this subsection is not as explicit as it is in other parts of the statute, it is

Justice Stevens

dissenting

Gonzaga Univ. v. Doe

https://www.courtlistener.com/opinion/121157/gonzaga-univ-v-doe/

it is in other parts of the statute, it is clear that, in substance, 122g(b) formulates an individual right: in respondent's words, the "right of parents to withhold consent and prevent the unauthorized release of education record information by an educational *295 institution that has a policy or practice of releasing such information." Brief for Respondent 11. This provision plainly meets the standards we articulated in for establishing a federal right: It is directed to the benefit of individual students and parents; the provision is binding on States, as it is "couched in mandatory, rather than precatory, terms"; and the right is far from "`vague and amorphous,' " -41. Indeed, the right at issue is more specific and clear than rights previously found enforceable under 198 in and both of which involved plaintiffs' entitlement to "reasonable" amounts of money.[] As such, the federal right created by 122g(b) is "presumptively enforceable by 198," ante, at 284. The Court claims that 122g(b), because it references a "policy or practice," has an aggregate focus and thus cannot qualify as an individual right. See ante, at 288 (emphasis deleted). But 122g(b) does not simply ban an institution from having a policy or practice—which would be a more systemic requirement. Rather, it permits a policy or practice of releasing information, so long as "there is written consent from the student's parents specifying records to be released, the reasons for such release, and to whom, and with a copy of the records to be released to the student's parents and the student if desired by the parents." 20 U.S. C. 122g(b)(2)(A). The provision speaks of the individual "student," not students generally. In light of FERPA's stated purpose to "protect such individuals' rights to privacy by limiting the transferability of their records without their consent," 120 Cong. Rec. 9862 (1974) (statement of Sen. *296 Buckley), the individual focus of 122g(b) is manifest. Moreover, simply because a "pattern or practice" is a precondition to individual relief does not mean that the right asserted is not an individually enforceable right. Cf. (authorizing municipal liability under 198 when a municipality's "policy or custom" has caused the violation of an individual's federal rights). Although 122g(b) alone provides strong evidence that an individual federal right has been created, this conclusion is bolstered by viewing the provision in the overall context of FERPA. Not once in its opinion does the Court acknowledge the substantial number of references to "rights" in the FERPA provisions surrounding 122g(b), even though our past 198 cases have made clear that a given statutory provision's meaning is to be

Justice Stevens

dissenting

Gonzaga Univ. v. Doe

https://www.courtlistener.com/opinion/121157/gonzaga-univ-v-doe/

clear that a given statutory provision's meaning is to be discerned "in light of the entire legislative enactment,"[4] Rather, ignoring these provisions, the Court asserts that FERPA—not just 122g(b)—"entirely lack[s]" rights-creating language, ante, at 287. The Court also claims that "we have never before held that spending legislation drafted in terms resembling those of FERPA can confer enforceable rights." Ante, at 279. In making this claim, the Court contrasts FERPA's "[n]o funds shall be made available" language with "individually focused terminology" *297 characteristic of federal antidiscrimination statutes, such as "[n]o person shall be subjected to discrimination," ante, at 287. But the sort of rights-creating language idealized by the Court has never been present in our 198 cases; rather, such language ordinarily gives rise to an implied cause of action. See None of our four most recent cases involving whether a Spending Clause statute created rights enforceable under 198—Wright, and —involved the sort of "no person shall" rightscreating language envisioned by the Court. And in two of those cases—Wright and —we concluded that individual rights enforceable under 198 existed. See n. Although a "presumptively enforceable" right, ante, at 284, has been created by 122g(b), one final question remains. As our cases recognize, Congress can rebut the presumption of enforcement under 198 either "expressly, by forbidding recourse to 198 in the statute itself, or impliedly, by creating a comprehensive enforcement scheme that is incompatible with individual enforcement [actions]." 520 U. S., at 41. FERPA has not explicitly foreclosed enforcement under 198. The only question, then, is whether the administrative enforcement mechanisms provided by the statute are "comprehensive" and "incompatible" with 198 actions. As the Court explains, ante, at 289, FERPA authorizes the establishment of an administrative enforcement framework, and the Secretary of Education has created the Family Policy Compliance Office (FPCO) to "deal with violations" of the Act, 20 U.S. C. 122g(f). FPCO accepts complaints from the public concerning alleged FERPA violations and, if it so chooses, may follow up on such a complaint by informing institutions of the steps they must take to comply with FERPA, see 4 CFR 99.6-99.67 (2001), and, in exceptional cases, by administrative adjudication against noncomplying institutions, see 20 U.S. C. 124. These administrative *298 avenues fall far short of what is necessary to overcome the presumption of enforceability. We have only found a comprehensive administrative scheme precluding enforceability under 198 in two of our past cases—Middlesex County Sewerage 45 U.S. 1 and In Sea Clammers, the relevant statute not only had "unusually elaborate enforcement provisions," but it also permitted private citizens to bring enforcement actions in

Justice Stevens

dissenting

Gonzaga Univ. v. Doe

https://www.courtlistener.com/opinion/121157/gonzaga-univ-v-doe/

it also permitted private citizens to bring enforcement actions in 45 U.S., at 1-14. In Smith, the statute at issue provided for "carefully tailored" administrative proceedings followed by federal judicial In contrast, FERPA provides no guaranteed access to a formal administrative proceeding or to federal judicial review; rather, it leaves to administrative discretion the decision whether to follow up on individual complaints. As we said in 520 U. S., at 48, the enforcement scheme here is "far more limited than those in Sea Clammers and Smith, " and thus does not preclude enforcement under 198.[5] *299 II Since FERPA was enacted in 1974, all of the Federal Courts of Appeals expressly deciding the question have concluded that FERPA creates federal rights enforceable under 198.[6] Nearly all other federal and state courts reaching the issue agree with these Circuits.[7] Congress has not overruled these decisions by amending FERPA to expressly preclude recourse to 198. And yet, the Court departs from over a quarter century of settled law in concluding that FERPA creates no enforceable rights. Perhaps more pernicious than its disturbing of the settled status of FERPA rights, though, is the Court's novel use of our implied right of action cases in determining whether a federal right exists for 198 purposes. In my analysis of whether 122g(b) creates a right for 198 purposes, I have assumed the Court's forthrightness in stating that the question presented is "whether Congress intended to create a federal right, " ante, at 28, and that "[p]laintiffs suing under 198 do not have the burden of showing an intent to create a private remedy," ante, at 284. Rather than proceeding with a straightforward analysis *00 under these principles, however, the Court has undermined both of these assertions by needlessly borrowing from cases involving implied rights of action—cases which place a more exacting standard on plaintiffs. See ante, at 28-286. By using these cases, the Court now appears to require a heightened showing from 198 plaintiffs: "[I]f Congress wishes to create new rights enforceable under 198, it must do so in clear and unambiguous terms—no less and no more than what is required for Congress to create new rights enforceable under an implied private right of action." Ante, at 290. A requirement that Congress intend a "right to support a cause of action," ante, at 28, as opposed to simply the creation of an individual federal right, makes sense in the implied right of action context. As we have explained, our implied right of action cases "reflec[t] a concern, grounded in separation of powers, that Congress rather than

Justice Stevens

dissenting

Gonzaga Univ. v. Doe

https://www.courtlistener.com/opinion/121157/gonzaga-univ-v-doe/

concern, grounded in separation of powers, that Congress rather than the courts controls the availability of remedies for violations of statutes." n. 9. However, imposing the implied right of action framework upon the 198 inquiry, see ante, at 28-286, is not necessary: The separationof-powers concerns present in the implied right of action context "are not present in a 198 case," because Congress expressly authorized private suits in 198 itself. n. 9. Nor is it consistent with our precedent, which has always treated the implied right of action and 198 inquiries as separate. See, e. g., ibid.[8] It has been long recognized that the pertinent question in determining whether a statute provides a basis for a 198 suit is whether Congress intended to create individual rights binding on States—as opposed to mere "precatory terms" that do not "unambiguously" create state obligations, Penn- *01 hurst State School and or "generalized," "systemwide" duties on States, 520 U. S., at 4; 50 U. S., at 6. What has never before been required is congressional intent specifically to make the right enforceable under 198. Yet that is exactly what the Court, at points, appears to require by relying on implied right of action cases: the Court now asks whether "Congress nonetheless intended private suits to be brought before thousands of federal- and state-court judges," ante, at 290. If it were true, as the Court claims, that the implied right of action and 198 inquiries neatly "overlap in one meaningful respect—in either case we must first determine whether Congress intended to create a federal right, " ante, at 28, then I would have less trouble referencing implied right of action precedent to determine whether a federal right exists. Contrary to the Court's suggestion, however, our implied right of action cases do not necessarily cleanly separate out the "right" question from the "cause of action" question. For example, in the discussion of rights-creating language in which the Court characterizes as pertaining only to whether there is a right, ante, at 287, Cannon's reasoning is explicitly based on whether there is "reason to infer a private remedy," and the "propriety of implication of a cause of action," at Because Cannon and other implied right of action cases do not clearly distinguish the questions of "right" and "cause of action," it is inappropriate to use these cases to determine whether a statute creates rights enforceable under 198. The Court, however, asserts that it has not imported the entire implied right of action inquiry into the 198 context, explaining that while 198 plaintiffs share with implied right of action plaintiffs

Justice Stevens

dissenting

Gonzaga Univ. v. Doe

https://www.courtlistener.com/opinion/121157/gonzaga-univ-v-doe/

while 198 plaintiffs share with implied right of action plaintiffs the burden of establishing a federal right, 198 plaintiffs "do not have the burden of showing an intent to create a private remedy because 198 generally *02 supplies a remedy for the vindication of rights secured by federal statutes." Ante, at 284. If the Court has not adopted such a requirement in the 198 context—which it purports not to have done—then there should be no difference between the Court's "new" approach to discerning a federal right in the 198 context and the test we have "traditionally" used, as articulated in : whether Congress intended to benefit individual plaintiffs, whether the right asserted is not "`vague and amorphous,' " and whether Congress has placed a binding obligation on the State with respect to the right asserted. -41. Indeed, the Court's analysis, in part, closely tracks `s factors, as it examines the statute's language, and the asserted right's individual versus systematic thrust. See ante, at 287-289. The Court's opinion in other places, however, appears to require more of plaintiffs. By defining the 198 plaintiff's burden concerning "whether a statute confers any right at all," ante, at 285, as whether "Congress nonetheless intended private suits to be brought before thousands of federal- and state-court judges," ante, at 290, the Court has collapsed the ostensible two parts of the implied right of action test ("is there a right" and "is it enforceable") into one. As a result, and despite its statement to the contrary, ante, at 284, the Court seems to place the unwarranted "burden of showing an intent to create a private remedy," ib on 198 plaintiffs. Moreover, by circularly defining a right actionable under 198 as, in essence, "a right which Congress intended to make enforceable," the Court has eroded—if not eviscerated—the long-established principle of presumptive enforceability of rights under 198. Under this reading of the Court's opinion, a right under is second class compared to a right whose enforcement Congress has clearly intended. Creating such a hierarchy of rights is not only *0 novel, but it blurs the long-recognized distinction between rights and remedies. And it does nothing to clarify our 198 jurisprudence. Accordingly, I respectfully dissent.

Justice Douglas

concurring

Clay v. United States

https://www.courtlistener.com/opinion/108382/clay-v-united-states/

I would reverse this judgment of conviction and set the petitioner free. In[1] the wars *706 that the applicant would fight were not "carnal" but those "in defense of Kingdom interests." Since it was impossible to determine on exactly which grounds the Appeal Board had based its decision, we reversed the decision sustaining the judgment of conviction. We said: "It is difficult for us to believe that the Congress had in mind this type of activity when it said the thrust of conscientious objection must go to `participation in war in any form.' " In the present case there is no line between "carnal" war and "spiritual" or symbolic wars. Those who know the history of the Mediterranean littoral know that the jihad of the Moslem was a bloody war. This case is very close in its essentials to decided March 8, 1971. The church to which that registrant belonged favored "just" wars and provided guidelines to define them. The church did not oppose the war in Vietnam but the registrant refused to comply with an order to go to Vietnam because participating in that conflict would violate his conscience. The Court refused to grant him relief as a conscientious objector, overruling his constitutional claim. The case of Clay is somewhat different, though analogous. While there are some bits of evidence showing conscientious objection to the Vietnam conflict, the basic objection was based on the teachings of his religion. He testified that he was "sincere in every bit of what the Holy Qur'an and *707 the teachings of the Honorable Elijah Muhammad tell us and it is that we are not to participate in wars on the side of nobody who—on the side of nonbelievers, and this is a Christian country and this is not a Muslim country, and the Government and the history and the facts shows that every move toward the Honorable Elijah Muhammad is made to distort and is made to ridicule him and is made to condemn him and the Government has admitted that the police of Los Angeles were wrong about attacking and killing our brothers and sisters and they were wrong in Newark, New Jersey, and they were wrong in Louisiana, and the outright, every day oppressors and enemies are the people as a whole, the whites of this nation. So, we are not, according to the Holy Qur'an, to even as much as aid in passing a cup of water to the—even a wounded. I mean, this is in the Holy Qur'an, and as I said earlier, this is not me talking to

Justice Douglas

concurring

Clay v. United States

https://www.courtlistener.com/opinion/108382/clay-v-united-states/

as I said earlier, this is not me talking to get the draft board—or to dodge nothing. This is there before I was borned and it will be there when I'm dead but we believe in not only that part of it, but all of it." At another point he testified: "[T]he Holy Qur'an do teach us that we do not take part of—in any part of war unless declared by Allah himself, or unless it's an Islamic World War, or a Holy War, and it goes as far— the Holy Qur'an is talking still, and saying we are not to even as much as aid the infidels or the nonbelievers in Islam, even to as much as handing them a cup of water during battle." "So, this is the teachings of the Holy Qur'an before I was born, and the Qur'an, we follow not only that part of it, but every part." *708 The Koran defines jihad as an injunction to the believers to war against nonbelievers:[2] "O ye who believe! Shall I guide you to a gainful trade which will save you from painful punishment? Believe in Allah and His Apostle and carry on warfare (jihad) in the path of Allah with your possessions and your persons. That is better for you. If ye have knowledge, He will forgive your sins, and will place you in the Gardens beneath which the streams flow, and in fine houses in the Gardens of Eden: that is the great gain." M. Khadduri, War and Peace in the Law of Islam 55-56 The Sale edition of the Koran, which first appeared in England in 1734, gives the following translation at 410-411 (9th ed. 1923): "Thus God propoundeth unto men their examples. When ye encounter the unbelievers, strike off their heads, until ye have made a great slaughter among them; and bind them in bonds; and either give them a free dismission afterwards, or exact a ransom; until the war shall have laid down its arms. This shall ye do. Verily if God pleased he could take vengeance on them, without your assistance; but he commandeth you to fight his battles, that he may prove the one of you by the other. And as to those who fight in defence of God's true religion, God will not suffer their works to perish: he will guide them, and will dispose their heart aright; and *709 he will lead them into paradise, of which he hath told them. O true believers, if ye assist God, by fighting for his religion, he will assist you against

Justice Douglas

concurring

Clay v. United States

https://www.courtlistener.com/opinion/108382/clay-v-united-states/

by fighting for his religion, he will assist you against your enemies; and will set your feet fast." War is not the exclusive type of jihad; there is action by the believer's heart, by his tongue, by his hands, as well as by the sword. War and Peace in the Law of Islam 56. As respects the military aspects it is written: "The jihad, in other words, is a sanction against polytheism and must be suffered by all non-Muslims who reject Islam, or, in the case of the dhimmis (Scripturaries), refuse to pay the poll tax. The jihad, therefore, may be defined as the litigation between Islam and polytheism; it is also a form of punishment to be inflicted upon Islam's enemies and the renegades from the faith. Thus in Islam, as in Western Christendom, the jihad is the bellum justum." The jihad is the Moslem's counterpart of the "just" war as it has been known in the West.[3] Neither Clay nor Negre should be subject to punishment because he will not renounce the "truth" of the teaching of his respective church that wars indeed may exist which are just wars in which a Moslem or Catholic has a respective duty to participate. What Clay's testimony adds up to is that he believes only in war as sanctioned by the Koran, that is to say, a religious war against nonbelievers. All other wars are unjust. That is a matter of belief, of conscience, of religious principle. Both Clay and Negre were "by reason of religious *710 training and belief" conscientiously opposed to participation in war of the character proscribed by their respective religions. That belief is a matter of conscience protected by the First Amendment which Congress has no power to qualify or dilute as it did in 6 (j) of the Military Selective Service Act of 1967, 50 U.S. C. App. 456 (j) (1964 ed., Supp. V) when it restricted the exemption to those "conscientiously opposed to participation in war in any form." For the reasons I stated in Negre and in 463 and 470, that construction puts Clay in a class honored by the First Amendment, even though those schooled in a different conception of "just" wars may find it quite irrational. I would reverse the judgment below. MR. JUSTICE HARLAN, concurring in the result. I concur in the result on the following ground. The Department of Justice advice letter was at least susceptible of the reading that petitioner's proof of sincerity was insufficient as a matter of law because his conscientious objector claim had not been timely

Justice Stewart

majority

Geduldig v. Aiello

https://www.courtlistener.com/opinion/109065/geduldig-v-aiello/

For almost 30 years California has administered a disability insurance system that pays benefits to persons in private employment who are temporarily unable to work because of disability not covered by workmen's compensation. The appellees brought this action to challenge the constitutionality of a provision of the California program that, in defining "disability," excludes from coverage certain disabilities resulting from pregnancy. Because the appellees sought to enjoin the enforcement of this state statute, a three-judge court was convened pursuant to 28 U.S. C. 2281 and 2284.[1] On *487 the appellees' motion for summary judgment, the District Court, by a divided vote, held that this provision of the disability insurance program violates the Equal Protection Clause of the Fourteenth Amendment, and therefore enjoined its continued enforcement. The District Court denied a motion to stay its judgment pending appeal. The appellant thereupon filed a similar motion in this Court, which we granted. We subsequently noted probable jurisdiction of the appeal. I California's disability insurance system is funded entirely from contributions deducted from the wages of participating employees. Participation in the program is mandatory unless the employees are protected by a voluntary private plan approved by the State.[2] Each employee is required to contribute one percent of his salary, up to an annual maximum of $85.[3] These contributions are placed in the Unemployment Compensation Disability Fund, which is established and administered as a special trust fund within the state treasury.[4] It is from this Disability Fund that benefits under the program are paid. An individual is eligible for disability benefits if, during a one-year base period prior to his disability, he has contributed one percent of a minimum income of $300 to the Disability Fund.[5] In the event he suffers a compensable disability, the individual can receive a "weekly benefit amount" of between $25 and $105, depending on the amount he earned during the highest quarter of the *488 base period.[6] Benefits are not paid until the eighth day of disability, unless the employee is hospitalized, in which case benefits commence on the first day of hospitalization.[7] In addition to the "weekly benefit amount," a hospitalized employee is entitled to receive "additional benefits" of $12 per day of hospitalization.[8] "Weekly benefit amounts" for any one disability are payable for 26 weeks so long as the total amount paid does not exceed one-half of the wages received during the base period.[9] "Additional benefits" for any one disability are paid for a maximum of 20 days.[10] In return for his one-percent contribution to the Disability Fund, the individual employee is insured against the risk of

Justice Stewart

majority

Geduldig v. Aiello

https://www.courtlistener.com/opinion/109065/geduldig-v-aiello/

Fund, the individual employee is insured against the risk of disability stemming from a substantial number of "mental or physical illness[es] and mental or physical injur[ies]." It is not every disabling condition, however, that triggers the obligation to pay benefits under the program. As already noted, for example, any disability of less than eight days' duration is not compensable, except when the employee is hospitalized. Conversely, no benefits are payable for any single disability beyond 26 weeks. Further, disability is not compensable if it results from the individual's court commitment as a dipsomaniac, drug addict, or sexual psychopath.[11] Finally, 2626 of the Unemployment * Insurance Code excludes from coverage certain disabilities that are attributable to pregnancy. It is this provision that is at issue in the present case. Appellant is the Director of the California Department of Human Resources Development.[12] He is responsible for the administration of the State's disability insurance program. Appellees are four women who have paid sufficient amounts into the Disability Fund to be eligible for benefits under the program. Each of the appellees became pregnant and suffered employment disability as a result of her pregnancy. With respect to three of the appellees, Carolyn Aiello, Augustina Armendariz, and Elizabeth Johnson, the disabilities were attributable to abnormal complications encountered during their pregnancies.[13] The fourth, Jacqueline Jaramillo, experienced a normal pregnancy, which was the sole cause of her disability. At all times relevant to this case, 2626 of the Unemployment Insurance Code provided: " `Disability' or `disabled' includes both mental or physical illness and mental or physical injury. An individual shall be deemed disabled in any day in which, because of his physical or mental condition, he is unable to perform his regular or customary work. In no case shall the term `disability' or `disabled' include any injury or illness caused by or arising in connection with pregnancy up to the termination of such pregnancy and for a period of 28 days thereafter." (Emphasis added.) *490 Appellant construed and applied the final sentence of this statute to preclude the payment of benefits for any disability resulting from pregnancy. As a result, the appellees were ruled ineligible for disability benefits by reason of this provision, and they sued to enjoin its enforcement. The District Court, finding "that the exclusion of pregnancy-related disabilities is not based upon a classification having a rational and substantial relationship to a legitimate state purpose," held that the exclusion was unconstitutional under the Equal Protection Shortly before the District Court's decision in this case, the California Court of Appeal, in a suit brought by a woman

Justice Stewart

majority

Geduldig v. Aiello

https://www.courtlistener.com/opinion/109065/geduldig-v-aiello/

Court of Appeal, in a suit brought by a woman who suffered an ectopic pregnancy, held that 2626 does not bar the payment of benefits on account of disability that results from medical complications arising during pregnancy.[14] The state court construed the statute to preclude only the payment of benefits for disability accompanying normal pregnancy.[15] The appellant *491 acquiesced in this construction and issued administrative guidelines that exclude only the payment of "maternity benefits"—i. e., hospitalization and disability benefits for normal delivery and recuperation. Although Rentzer was decided some 10 days before the District Court's decision in this case, there was apparently no opportunity to call the court's attention to it. The appellant, therefore, asked the court to reconsider its decision in light of the construction that the California Court of Appeal had given to 2626 in the Rentzer case. By a divided vote, the court denied the motion for reconsideration. Although a more definitive ruling would surely have been preferable, we interpret the District Court's denial of the appellant's motion as a determination that its decision was not affected by the limiting construction given to 2626 in Rentzer. Because of the Rentzer decision and the revised administrative guidelines that resulted from it, the appellees Aiello, Armendariz, and Johnson, whose disabilities were attributable to causes other than normal pregnancy and delivery, became entitled to benefits under the disability insurance program, and their claims have since been paid. With respect to appellee Jaramillo, however, whose disability stemmed solely from normal pregnancy and childbirth, 2626 continues to bar the *492 payment of any benefits. It is evident that only Jaramillo continues to have a live controversy with the appellant as to the validity of 2626. The claims of the other appellees have been mooted by the change that Rentzer worked in the construction and application of that provision. Thus, the issue before the Court on this appeal is whether the California disability insurance program invidiously discriminates against Jaramillo and others similarly situated by not paying insurance benefits for disability that accompanies normal pregnancy and childbirth. II It is clear that California intended to establish this benefit system as an insurance program that was to function essentially in accordance with insurance concepts.[16] Since the program was instituted in 1946, it has been totally self-supporting, never drawing on general state revenues to finance disability or hospital benefits. The Disability Fund is wholly supported by the one percent of wages annually contributed by participating employees. At oral argument, counsel for the appellant informed us that in recent years between 90% and *493 103% of the

Justice Stewart

majority

Geduldig v. Aiello

https://www.courtlistener.com/opinion/109065/geduldig-v-aiello/

in recent years between 90% and *493 103% of the revenue to the Disability Fund has been paid out in disability and hospital benefits. This history strongly suggests that the one-percent contribution rate, in addition to being easily computable, bears a close and substantial relationship to the level of benefits payable and to the disability risks insured under the program. Over the years California has demonstrated a strong commitment not to increase the contribution rate above the one-percent level. The State has sought to provide the broadest possible disability protection that would be affordable by all employees, including those with very low incomes. Because any larger percentage or any flat dollar-amount rate of contribution would impose an increasingly regressive levy bearing most heavily upon those with the lowest incomes, the State has resisted any attempt to change the required contribution from the one-percent level. The program is thus structured, in terms of the level of benefits and the risks insured, to maintain the solvency of the Disability Fund at a one-percent annual level of contribution.[17] In ordering the State to pay benefits for disability accompanying normal pregnancy and delivery, the District Court acknowledged the State's contention "that coverage of these disabilities is so extraordinarily expensive that it would be impossible to maintain a program supported by employee contributions if these disabilities are included." There is considerable disagreement between the parties with respect to how great the increased costs would actually be, but they *494 would clearly be substantial.[18] For purposes of analysis the District Court accepted the State's estimate, which was in excess of $100 million annually, and stated: "[I]t is clear that including these disabilities would not destroy the program. The increased costs could be accommodated quite easily by making reasonable changes in the contribution rate, the maximum benefits allowable, and the other variables affecting the solvency of the program." Each of these "variables"—the benefit level deemed appropriate to compensate employee disability, the risks selected to be insured under the program, and the contribution rate chosen to maintain the solvency of the program and at the same time to permit low-income employees to participate with minimal personal sacrifice —represents a policy determination by the State. The essential issue in this case is whether the Equal Protection Clause requires such policies to be sacrificed or compromised in order to finance the payment of benefits to those whose disability is attributable to normal pregnancy and delivery. We cannot agree that the exclusion of this disability from coverage amounts to invidious discrimination under the Equal Protection California does not discriminate with respect

Justice Stewart

majority

Geduldig v. Aiello

https://www.courtlistener.com/opinion/109065/geduldig-v-aiello/

under the Equal Protection California does not discriminate with respect to the persons or groups which are eligible for disability insurance protection under the program. The classification challenged in this case relates to the asserted underinclusiveness of the set of risks that the State has selected to insure. Although California has created a program to insure most risks of employment *495 disability, it has not chosen to insure all such risks, and this decision is reflected in the level of annual contributions exacted from participating employees. This Court has held that, consistently with the Equal Protection Clause, a State "may take one step at a time, addressing itself to the phase of the problem which seems most acute to the legislative mind. The legislature may select one phase of one field and apply a remedy there, neglecting the others." ; Particularly with respect to social welfare programs, so long as the line drawn by the State is rationally supportable, the courts will not interpose their judgment as to the appropriate stopping point. "[T]he Equal Protection Clause does not require that a State must choose between attacking every aspect of a problem or not attacking the problem at all." The District Court suggested that moderate alterations in what it regarded as "variables" of the disability insurance program could be made to accommodate the substantial expense required to include normal pregnancy within the program's protection. The same can be said, however, with respect to the other expensive class of disabilities that are excluded from coverage—short-term disabilities. If the Equal Protection Clause were thought to compel disability payments for normal pregnancy, it is hard to perceive why it would not also compel payments for short-term disabilities suffered by participating employees.[19] It is evident that a totally comprehensive program would be substantially more costly than the present program and would inevitably require state subsidy, a higher *496 rate of employee contribution, a lower scale of benefits for those suffering insured disabilities, or some combination of these measures. There is nothing in the Constitution, however, that requires the State to subordinate or compromise its legitimate interests solely to create a more comprehensive social insurance program than it already has. The State has a legitimate interest in maintaining the self-supporting nature of its insurance program. Similarly, it has an interest in distributing the available resources in such a way as to keep benefit payments at an adequate level for disabilities that are covered, rather than to cover all disabilities inadequately. Finally, California has a legitimate concern in maintaining the contribution rate at a level that will

Justice Stewart

majority

Geduldig v. Aiello

https://www.courtlistener.com/opinion/109065/geduldig-v-aiello/

in maintaining the contribution rate at a level that will not unduly burden participating employees, particularly low-income employees who may be most in need of the disability insurance. These policies provide an objective and wholly non-invidious basis for the State's decision not to create a more comprehensive insurance program than it has. There is no evidence in the record that the selection of the risks insured by the program worked to discriminate against any definable group or class in terms of the aggregate risk protection derived by that group or class from the program.[20] There is no risk from which men are protected *497 and women are not. Likewise, there is no risk from which women are protected and men are not.[21] The appellee simply contends that, although she has received insurance protection equivalent to that provided all other participating employees, she has suffered discrimination because she encountered a risk that was outside the program's protection. For the reasons we have stated, we hold that this contention is not a valid one under the Equal Protection Clause of the Fourteenth Amendment. The stay heretofore issued by the Court is vacated, and the judgment of the District Court is Reversed. MR. JUSTICE BRENNAN, with whom MR. JUSTICE DOUGLAS and MR.

Justice Brennan

majority

Michelin Tire Corp. v. Wages

https://www.courtlistener.com/opinion/109344/michelin-tire-corp-v-wages/

Respondents, the Tax Commissioner and Tax Assessors of Gwinnett County, Ga., assessed ad valorem property taxes against tires and tubes imported by petitioner from France and Nova Scotia that were included on the assessment dates in an inventory maintained at its wholesale distribution warehouse in the county. Petitioner brought this action for declaratory and injunctive relief in the Superior Court of Gwinnett County, alleging that with the exception of certain passenger tubes that had been removed from the original shipping cartons,[1] the ad valorem property taxes assessed against *279 its inventory of imported tires and tubes were prohibited by Art. I, 10, cl. 2, of the Constitution, which provides in pertinent part: "No State shall, without the Consent of the Congress, lay any Imposts or Duties on Imports or Exports, except what may be absolutely necessary for executing its inspection Laws" After trial, the Superior Court granted the requested declaratory and injunctive relief. On appeal, the Supreme Court of Georgia affirmed in part and reversed in part, agreeing that the tubes in the corrugated shipping cartons were immune from ad valorem taxation, but holding that the tires had lost their status as imports and had become subject to such taxation because they had been mingled with other tires imported in bulk, sorted, and arranged for sale. We granted certiorari, The only question presented is whether the Georgia Supreme Court was correct in holding that the tires were subject to the ad valorem property tax.[2] We affirm without addressing the question whether the Georgia Supreme Court was correct in holding that the tires had lost their status as imports. We hold that, in any event, Georgia's assessment of a nondiscriminatory ad valorem property tax against the imported tires is not within the constitutional prohibition against laying "any Imposts or Duties on Imports." and that insofar as is to the contrary, that decision is overruled. I Petitioner, a New York corporation qualified to do business in Georgia, operates as an importer and wholesale *280 distributor in the United States of automobile and truck tires and tubes manufactured in France and Nova Scotia by Michelin Tires, Ltd. The business is operated from distribution warehouses in various parts of the country. Distribution and sale of tires and tubes from the Gwinnett County warehouse is limited to the 250-300 franchised dealers with whom petitioner does all of its business in six southeastern States. Some 25% of the tires and tubes are manufactured in and imported from Nova Scotia, and are brought to the United States in tractor-driven, over-the-road trailers packed and sealed at the Nova

Justice Brennan

majority

Michelin Tire Corp. v. Wages

https://www.courtlistener.com/opinion/109344/michelin-tire-corp-v-wages/

in tractor-driven, over-the-road trailers packed and sealed at the Nova Scotia factory. The remaining 75% of the imported tires and tubes are brought to the United States by sea from France and Nova Scotia in sea vans packed and sealed at the foreign factories. Sea vans are essentially over-the-road trailers from which the wheels are removed before being loaded aboard ship. Upon arrival of the ship at the United States port of entry, the vans are unloaded, the wheels are replaced, and the vans are tractor-hauled to petitioner's distribution warehouse after clearing customs upon payment of a 4% import duty. The imported tires, each of which has its own serial number, are packed in bulk into the trailers and vans, without otherwise being packaged or bundled. They lose their identity as a unit, however, when unloaded from the trailers and vans at the distribution warehouse. When unloaded they are sorted by size and style, without segregation by place of manufacture, stacked on wooden pallets each bearing four stacks of five tires of the same size and style, and stored in pallet stacks of three pallets each. This is the only processing required or performed to ready the tires for sale and delivery to the franchised dealers. Sales of tires and tubes from the Gwinnett County *281 distribution warehouse to the franchised dealers average 4,000-5,000 pounds per sale. Orders are filled without regard to the shipments in which the tires and tubes arrived in the United States or the place of their manufacture. Delivery to the franchised dealers is by common carrier or customer pickup. II Both Georgia courts addressed the question whether, without regard to whether the imported tires had lost their character as imports, Georgia's nondiscriminatory ad valorem tax fell within the constitutional prohibition against the laying by States of "any Imposts or Duties on Imports" The Superior Court expressed strong doubts that the ad valorem tax fell within the prohibition but concluded that it was bound by this Court's decisions to the contrary. The Superior Court : "While it would seem that where said tires and tubes have been placed in [petitioner's] general inventory for the purpose of sale to its customers, such inventory should be taxed to the same extent as any other inventory of any other business in Gwinnett County, and the Court would so hold if supported by the law, it is clear that where the property is imported for resale it retains its import exemption from ad valorem taxes until after such sale," "[for] [t]he immunity of imported goods from local taxation includes immunity

Justice Brennan

majority

Michelin Tire Corp. v. Wages

https://www.courtlistener.com/opinion/109344/michelin-tire-corp-v-wages/

[t]he immunity of imported goods from local taxation includes immunity from local ad valorem property taxes; Hooven & Allison ;" Pet. for Cert., App. A-4, A-3. Similarly, the Georgia Supreme Court 214 S.E. 2d. at 355: "[Petitioners] argue that an annual ad valorem tax is not a tax on imports within the meaning of *282 the federal constitutional provision. We reject this argument on the basis of the above-cited authority. [E. g.,]" is the leading decision of this Court holding that the States are prohibited by the Import-Export Clause from imposing a nondiscriminatory ad valorem property tax on imported goods until they lose their character as imports and become incorporated into the mass of property in the State. The Court there reviewed a decision of the California Supreme Court that had sustained the constitutionality of California's nondiscriminatory ad valorem tax on the ground that the Import-Export Clause only prohibited taxes upon the character of the goods as imports and therefore did not prohibit nondiscriminatory taxes upon the goods as property. See -31. This Court reversed on its reading of the seminal opinion construing the Import-Export Clause, as holding that "[w]hilst retaining their character as imports, a tax upon them, in any shape, is within the constitutional prohibition." Scholarly analysis has been uniformly critical of It is true that Mr. Chief Justice Marshall, speaking for the Court in said that "while [the thing imported remains] the property of the importer, in his warehouse, in the original form or package in which it was imported, a tax upon it is too plainly a duty on imports to escape the prohibition in the constitution." Commentators have uniformly agreed that misread this dictum in holding that the Court in Brown included nondiscriminatory ad valorem property taxes among prohibited "imposts" or "duties," for the contrary conclusion is plainly to be inferred from consideration of the specific abuses which led the Framers to include the Import-Export *283 Clause in the Constitution. See, e. g., Powell, State Taxation of Imports—When Does an Import Cease to Be an Import?, ; Note, The Supreme Court, 1958 Term, ; Early & Weitzman, A Century of Dissent: The Immunity of Goods Imported for Resale From Non-discriminatory State Personal Property Taxes, ; Dakin, The Protective Cloak of the Export-Import Clause: Immunity for the Goods or Immunity for the Process?, Our independent study persuades us that a nondiscriminatory ad valorem property tax is not the type of state exaction which the Framers of the Constitution or the Court in Brown had in mind as being an "impost" or "duty" and that 's reliance

Justice Brennan

majority

Michelin Tire Corp. v. Wages

https://www.courtlistener.com/opinion/109344/michelin-tire-corp-v-wages/

as being an "impost" or "duty" and that 's reliance upon the Brown dictum to reach the contrary conclusion was misplaced. III One of the major defects of the Articles of Confederation, and a compelling reason for the calling of the Constitutional Convention of 1787, was the fact that the Articles essentially left the individual States free to burden commerce both among themselves and with foreign countries very much as they pleased. Before 1787 it was commonplace for seaboard States with port facilities to derive revenue to defray the costs of state and local governments by imposing taxes on imported goods destined for customers in other States. At the same time, there was no secure source of revenue for the central government. James Madison, in his Preface to Debates in the Convention of 1787, 3 M. Farrand, The Records of the Federal Convention of 1787, p. 542 (1911) (hereafter Farrand), provides a graphic description of the situation: "The other source of dissatisfaction was the peculiar situation of some of the States, which having no *284 convenient ports for foreign commerce, were subject to be taxed by their neighbors, thro whose ports, their commerce was carried on. New Jersey, placed between Phila. & N. York, was likened to a Cask tapped at both ends: and N. Carolina between Virga. & S. Carolina to a patient bleeding at both Arms. The Articles of Confederation provided no remedy for the complaint: which produced a strong protest on the part of N. Jersey; and never ceased to be a source of dissatisfaction & discord, until the new Constitution, superseded the old."[3] And further, at 546-548: "Rh. I. was the only exception to a compliance with the recommendation from Annapolis [to have a Const. Convention], well known to have been swayed by an obdurate adherence to an advantage which her position gave her of taxing her neighbors thro' their consumption of imported supplies, an advantage which it was foreseen would be taken from her by a revisal of the Articles of Confederation. "The same want of a general power over Commerce *285 led to an exercise of this power separately, by the States, wch not only proved abortive, but engendered rival, conflicting and angry regulations. Besides the vain attempts to supply their respective treasuries by imposts, which turned their commerce into the neighboring ports, and to co-erce a relaxation of the British monopoly of the W. Indn. navigation, which was attempted by Virga. the States having ports for foreign commerce, taxed & irritated the adjoining States, trading thro' them, as N. Y. Pena. Virga. &

Justice Brennan

majority

Michelin Tire Corp. v. Wages

https://www.courtlistener.com/opinion/109344/michelin-tire-corp-v-wages/

States, trading thro' them, as N. Y. Pena. Virga. & S-Carolina." The Framers of the Constitution thus sought to alleviate three main concerns by committing sole power to lay imposts and duties on imports in the Federal Government, with no concurrent state power: the Federal Government must speak with one voice when regulating commercial relations with foreign governments, and tariffs, which might affect foreign relations, could not be implemented by the States consistently with that exclusive power;[4] import revenues were to be the major source of revenue of the Federal Government and should not be diverted to the States;[5] and harmony among the States might be disturbed unless seaboard States, with their crucial ports of entry, were prohibited from levying taxes on citizens of other States by taxing goods merely *286 flowing through their ports to the other States not situated as favorably geographically.[6] Nothing in the history of the Import-Export Clause even remotely suggests that a nondiscriminatory ad valorem property tax which is also imposed on imported goods that are no longer in import transit was the type of exaction that was regarded as objectionable by the Framers of the Constitution. For such an exaction, unlike discriminatory state taxation against imported goods as imports, was not regarded as an impediment that severely hampered commerce or constituted a form of tribute by seaboard States to the disadvantage of the other States. It is obvious that such nondiscriminatory property taxation can have no impact whatsoever on the Federal Government's exclusive regulation of foreign commerce, probably the most important purpose of the Clause's prohibition. By definition, such a tax does not fall on imports as such because of their place of origin. It cannot be used to create special protective tariffs or particular preferences for certain domestic goods, and it cannot be applied selectively to encourage or discourage any importation in a manner inconsistent with federal regulation. Nor will such taxation deprive the Federal Government of the exclusive right to all revenues from imposts and duties on imports and exports, since that right by definition only extends to revenues from exactions of a particular category: if nondiscriminatory ad valorem taxation is not in that category, it deprives the Federal *287 Government of nothing to which it is entitled. Unlike imposts and duties, which are essentially taxes on the commercial privilege of bringing goods into a country, such property taxes are taxes by which a State apportions the cost of such services as police and fire protection among the beneficiaries according to their respective wealth; there is no reason why an importer should

Justice Brennan

majority

Michelin Tire Corp. v. Wages

https://www.courtlistener.com/opinion/109344/michelin-tire-corp-v-wages/

respective wealth; there is no reason why an importer should not bear his share of these costs along with his competitors handling only domestic goods. The Import-Export Clause clearly prohibits state taxation based on the foreign origin of the imported goods, but it cannot be read to accord imported goods preferential treatment that permits escape from uniform taxes imposed without regard to foreign origin for services which the State supplies. See, e. g., It may be that such taxation could diminish federal impost revenues to the extent its economic burden may discourage purchase or importation of foreign goods. The prevention or avoidance of this incidental effect was not, however, even remotely an objective of the Framers in enacting the prohibition. Certainly the Court in Brown did not think so. See -444. Taxes imposed after an initial sale, after the breakup of the shipping packages, or the moment goods imported for use are committed to current operational needs are also all likely to have an incidental effect on the volume of goods imported; yet all are permissible. See, e. g., ; ; Youngstown Sheet & Tube What those taxes and nondiscriminatory ad valorem property taxes share, it should be emphasized, is *288 the characteristic that they cannot be selectively imposed and increased so as substantially to impair or prohibit importation.[7] Finally, nondiscriminatory ad valorem property taxes do not interfere with the free flow of imported goods among the States, as did the exactions by States under the Articles of Confederation directed solely at imported goods. Indeed, importers of goods destined for inland States can easily avoid even those taxes in today's world. Modern transportation methods such as air freight and containerized packaging, and the development of railroads and the Nation's internal waterways, enable importation directly into the inland States. Petitioner, for example, operates other distribution centers from wholesale warehouses in inland States. Actually, a quarter of the tires distributed from petitioner's Georgia warehouse are imported interstate directly from Canada. To be sure, allowance of nondiscriminatory ad valorem property taxation may increase the cost of goods purchased by "inland" consumers.[8] But as already noted, *289 such taxation is the quid pro quo for benefits actually conferred by the taxing State. There is no reason why local taxpayers should subsidize the services used by the importer; ultimate consumers should pay for such services as police and fire protection accorded the goods just as much as they should pay transportation costs associated with those goods.[9] An evil to be prevented *290 by the Import-Export Clause was the levying of taxes which could only be

Justice Brennan

majority

Michelin Tire Corp. v. Wages

https://www.courtlistener.com/opinion/109344/michelin-tire-corp-v-wages/

Clause was the levying of taxes which could only be imposed because of the peculiar geographical situation of certain States that enabled them to single out goods destined for other States. In effect, the Clause was fashioned to prevent the imposition of exactions which were no more than transit fees on the privilege of moving through a State.[10] A nondiscriminatory ad valorem property tax obviously stands on a different footing, and to the extent there is any conflict whatsoever with this purpose of the Clause, it may be secured merely by prohibiting the assessment of even nondiscriminatory property taxes on goods which are merely in transit through the State when the tax is assessed.[11] Admittedly, the wording of the prohibition of the Import-Export Clause does not in terms except nondiscriminatory taxes with some impact on imports or exports. But just as clearly, the Clause is not written in terms of a broad prohibition of every "tax." The prohibition is only against States laying "Imposts or Duties" on "Imports." By contrast, Congress is empowered to "lay and collect Taxes, Duties, Imposts, and Excises," which plainly lends support to a reading of the Import-Export Clause as not prohibiting every exaction or "tax" which falls in some measure on imported goods. Indeed, Professor Crosskey makes a persuasive demonstration *291 that the words "imposts" and "duties" as used in 1787 had meanings well understood to be exactions upon imported goods as imports. "Imposts" were like customs duties, that is, charges levied on imports at the time and place of importation. "Duties" was a broader term embracing excises as well as customs duties, and probably only capitation, land, and general property exactions were known by the term "tax" rather than the term "duty." 1 W. Crosskey, Politics and the Constitution in the History of the United States 296-297 (1953).[12] The characteristic common to both "imposts" *292 and "duties" was that they were exactions directed at imports or commercial activity as such and, as imposed by the seaboard States under the Articles of Confederation, *293 were purposefully employed to regulate interstate and foreign commerce and tax States situated less favorably geographically. In any event, since prohibition of nondiscriminatory ad valorem property taxation would not further the objectives of the Import-Export Clause, only the clearest constitutional mandate should lead us to condemn such taxation. The terminology employed in the Clause— "Imposts or Duties"—is sufficiently ambiguous that we decline to presume it was intended to embrace taxation *294 that does not create the evils the Clause was specifically intended to eliminate. IV The Court in nevertheless expanded the

Justice Brennan

majority

Michelin Tire Corp. v. Wages

https://www.courtlistener.com/opinion/109344/michelin-tire-corp-v-wages/

intended to eliminate. IV The Court in nevertheless expanded the prohibition of the Clause to include nondiscriminatory ad valorem property taxes, and did so with no analysis, but with only the statement that had marked the line "where the power of Congress over the goods imported ends, and that of the State begins, with as much precision as the subject admits." But the opinion in cannot properly be read to propose such a broad definition of "imposts" or "duties." The tax there held to be prohibited by the Import-Export Clause was imposed under a statute that required importers of foreign goods, and wholesalers selling the same by bale or package, to obtain a license and pay a $50 fee therefor, subject to certain forfeitures and penalties for noncompliance. The importers contested the validity of the statute, arguing that the license was a "palpable evasion" of the Import-Export Clause because it was essentially equivalent to a duty on imports. They contended that asserted differences between the license fee and a tax directly imposed on imports were more formal than substantial: the privilege of bringing the goods into the country could not realistically be divorced from the privilege of selling the goods, since the power to prohibit sale would be the power to prohibit importation, ; the payment of the tax at the time of sale rather than at the time of importation would be irrelevant since it would still be a tax on the same privilege at either time, ; and the fact that a license operates on the person of the importer while the duty operates on the goods themselves is irrelevant in that either levy would directly increase the cost of the goods, Since the *295 power to impose a license on importers would also entail a power to price them out of the market or prohibit them entirely, the importers concluded that such a power must be repugnant to the exclusive federal power to regulate foreign commerce, -425. The Attorney General of Roger Taney, later Chief Justice, defended the constitutionality of 's law. He argued that the fee was not a prohibited "impost" or "duty" because the license fee was not a tax upon the imported goods, but on the importers, a tax upon the occupation and nothing more, and the Import-Export Clause prohibited only exactions on the right of importation and not an exaction upon the occupation of importers. He contended that, in any event, the Clause, if not read as prohibiting only exactions on the right of importation, but, more broadly, as also prohibiting exactions on

Justice Brennan

majority

Michelin Tire Corp. v. Wages

https://www.courtlistener.com/opinion/109344/michelin-tire-corp-v-wages/

of importation, but, more broadly, as also prohibiting exactions on goods imported, would necessarily immunize imports from all state taxation at any time. Moreover, if the privilege of selling is a concomitant of the privilege of importing, the argument proved too much; the importer could sell free of regulation by the States in any place and in any manner, even importing free of regulations concerning the bringing of noxious goods into the city, or auctioning the goods in public warehouses, or selling at retail or as a traveling peddler, activities that had traditionally been subject to state regulation and taxation. The Court in Brown refused to define "imposts" or "duties" comprehensively, since the statute presented only the question "whether the legislature of a State can constitutionally require the importer of foreign articles to take out a license from the State, before he shall be permitted to sell a bale or package so imported." However, in holding that the license fee was within prohibited "imposts, *296 or duties on imports" the Court significantly characterized an impost or duty as "a custom or a tax levied on articles brought into a country," although also holding that, while normally levied before the articles are permitted to enter, the exactions are no less within the prohibition if levied upon the goods as imports after entry; since "imports" are the goods imported, the prohibition of imposts or duties on "imports" was more than a prohibition of a tax on the act of importation; it "extends to a duty levied after [the thing imported] has entered the country," And since the power to prohibit sale of an article is the power to prohibit its introduction into the country, the privilege of sale must be a concomitant of the privilege of importation, and licenses on the right to sell must therefore also fall within the constitutional prohibition. Taney's argument was persuasive, however, to the extent that the Court was prompted to declare that "the words of the prohibition ought not to be pressed to their utmost extent; in our complex system, the object of the powers conferred on the government of the Union, and the nature of the often conflicting powers which remain in the States, must always be taken into view [T]here must be a point of time when the prohibition ceases, and the power of the State to tax commences." The Court that there were two situations in which the prohibition would not apply. One was the case of a state tax levied after the imported goods had lost their status as imports. The Court

Justice Brennan

majority

Michelin Tire Corp. v. Wages

https://www.courtlistener.com/opinion/109344/michelin-tire-corp-v-wages/

imported goods had lost their status as imports. The Court devised an evidentiary tool, the "original package" test, for use in making that determination. The formula was: "It is sufficient for the present to say, generally, that when the importer has so acted upon the thing imported, *297 that it has become incorporated and mixed up with the mass of property in the country, it has, perhaps, lost its distinctive character as an import, and has become subject to the taxing power of the State; but while remaining the property of the importer, in his warehouse, in the original form or package in which it was imported, a tax upon it is too plainly a duty on imports to escape the prohibition in the constitution." -442. "It is a matter of hornbook knowledge that the original package statement of Justice Marshall was an illustration, rather than a formula, and that its application is evidentiary, and not substantive" The other was the situation of particular significance to our decision of this case, that is, when the particular state exaction is not a prohibited "impost" or "duty." The Court first its view of the characteristics of prohibited state levies. It said that the obvious clue was the express exception of the Import-Export Clause authorizing "imposts or duties" that "may be absolutely necessary for executing [the State's] inspection Laws." "[T]his exception," said the Court, "in favor of duties for the support of inspection laws, goes far in proving that the framers of the constitution classed taxes of a similar character with those imposed for the purposes of inspection, with duties on imports and exports, and supposed them to be prohibited." 12 Wheat., The characteristic of the prohibited levy, the Court said later in the opinion—illustrated by the license tax—was that "the tax intercepts the import, as an import, in its way to become incorporated with the general mass of property, and denies it the privilege of becoming so incorporated until it shall have contributed to the revenue of the State." The Court illustrated the kinds of state exactions that in its view fell without the prohibition as examples of neutral and nondiscriminatory taxation: a tax on itinerant peddlers, a service charge for the use of a public auctioneer, a property tax on plate or furniture personally used by the importer. These could not be considered within the constitutional prohibition because they were imposed without regard to the origin of the goods taxed. 444. In contrast, the exaction in question was a license fee which singled out imports, and therefore was prohibited because "the

Justice Brennan

majority

Michelin Tire Corp. v. Wages

https://www.courtlistener.com/opinion/109344/michelin-tire-corp-v-wages/

which singled out imports, and therefore was prohibited because "the tax intercepts the import, as an import, in its way to become incorporated with the general mass of property." (Emphasis supplied.) Thus, it is clear that the Court's view in Brown was that merely because certain actions taken by the importer on his imported goods would so mingle them with the common property within the State as to "lose their distinctive character as imports" and render them subject to the taxing power of the State, did not mean that in the absence of such action, no exaction could be imposed on the goods. Rather, the Court clearly implied that the prohibition would not apply to a state tax that treated imported goods in their original packages no differently from the "common mass of property in the country"; that is, treated it in a manner that did not depend on the foreign origins of the goods. Despite the language and objectives of the Import-Export Clause, and despite the limited nature of the holding in the Court in ignored the warning that the boundary between the power of States to tax persons and property within their jurisdictions and the limitations on the power of the States to impose imposts or duties with respect to "imports" was a subtle and difficult line which *299 must be drawn as the cases arise. also ignored the cautionary remark that; for those reasons, it "might be premature to state any rule as being universal in its application." 12 Wheat., Although it was "sufficient" in the context of 's license tax on the right to sell imported goods to note that a tax imposed directly on imported goods which have not been acted upon in any way would clearly fall within the constitutional prohibition, that observation did not apply, as the foregoing analysis indicates, to a state tax which treated those same goods without regard to the fact of their foreign origin. compounded the error in misreading the Brown opinion by the further error of misreading the views of Mr. Chief Justice Taney as expressed in his opinion in the License Cases, As already observed, when the Chief Justice was Attorney General of he argued for the State. He had argued that the license fee requirement fell upon the importer, not the imported goods, and therefore fell without the Import-Export Clause's prohibition against imposts or duties on "imports." In the License Cases he observed that "further and more mature reflection has convinced me that the rule laid down [in ] is a just and safe one, and

Justice Brennan

majority

Michelin Tire Corp. v. Wages

https://www.courtlistener.com/opinion/109344/michelin-tire-corp-v-wages/

down [in ] is a just and safe one, and perhaps the best that could have been adopted for preserving the right of the United States on the one hand, and of the States on the other, and preventing collision between them. The question, I have already said, was a very difficult one for the judicial mind. In the nature of things, the line of division is in some degree vague and indefinite, and I do not see how it could be drawn more accurately and correctly, or more in harmony with the obvious intention and object of this provision in the *300 constitution. Indeed, goods imported, while they remain in the hands of the importer, in the form and shape in which they were brought into the country, can in no just sense be regarded as a part of that mass of property in the State usually taxed for the support of the State government." quoted this -34, as supporting the holding, that "a tax upon [imported goods], in any shape, is within the constitutional prohibition." But Mr. Chief Justice Taney said much more in his opinion in the License Cases, and what he said further makes crystal clear that the prohibition applied only to state exactions upon imports as imports and did not apply to nondiscriminatory ad valorem property taxes. For, continuing his analysis in the very paragraph from which ed only a part, he concluded: "A tax in any shape cannot be done directly, in the shape of a duty on imports, for that is expressly prohibited. And as it cannot be done directly, it could hardly be a just and sound construction of the constitution which would enable a State to accomplish precisely the same thing under another name, and in a different form." The Chief Justice then went on to distinguish an exaction upon imports as imports from property taxes indiscriminately applied to all owners of property, stating, : "Undoubtedly a State may impose a tax upon its citizens in proportion to the amount they are respectively worth; and the importing merchant is liable to this assessment like any other citizen, and is chargeable according to the amount of his property, whether it consists of money engaged in trade, or of imported goods which he proposes to sell, or any other property of which he is the owner. *301 But a tax of this description stands upon a very different footing from a tax on the thing imported, while it remains a part of foreign commerce, and is not introduced into the general mass of

Justice Brennan

majority

Michelin Tire Corp. v. Wages

https://www.courtlistener.com/opinion/109344/michelin-tire-corp-v-wages/

commerce, and is not introduced into the general mass of property in the State." (Emphasis supplied.) Thus Mr. Chief Justice Taney's opinion is authority, precisely contrary to the reading of that nondiscriminatory ad valorem property taxes are not prohibited by the Import-Export Clause. It follows from the foregoing that was wrongly decided. That decision therefore must be, and is, overruled.[13] *302 V Petitioner's tires in this case were no longer in transit. They were stored in a distribution warehouse from which petitioner conducted a wholesale operation, taking orders from franchised dealers and filling them from a constantly replenished inventory. The warehouse was operated no differently than would be a distribution warehouse utilized by a wholesaler dealing solely in domestic goods, and we therefore hold that the non-discriminatory property tax levied on petitioner's inventory of imported tires was not interdicted by the Import-Export Clause of the Constitution. The judgment of the Supreme Court of Georgia is accordingly Affirmed. MR. JUSTICE STEVENS took no part in the consideration or decision of this case. MR. JUSTICE WHITE, concurring in the judgment.

Justice Marshall

majority

United States v. Mitchell

https://www.courtlistener.com/opinion/110233/united-states-v-mitchell/

This case presents the question whether the Indian General Allotment Act of 1887 authorizes the award of money damages against the United States for alleged mismanagement of forests located on lands allotted to Indians under that Act. I In 1873, a Reservation was established by Executive Order in the State of Washington for the Quinault Tribe. 1 C. Kappler, Indian Affairs 923 (2d ed. 190). Much of the land within the Reservation was forested. By 1935, acting under the authority of the General Allotment Act of 1887, ch. 119, as amended, 25 U.S. C. 331 et seq., the Government had allotted all of the Reservation's land in trust *537 to individual Indians. Other enactments of Congress require the Secretary of the Interior to manage these forests, sell the timber, and pay the proceeds of such sales, less administrative expenses, to the allottees.[1] The respondents are 1,65 individual allottees of land contained in the Quinault Reservation, the Quinault Tribe, which now holds some allotments, and the Quinault Allottees Association, an unincorporated association formed to promote the interests of the allottees of the Quinault Reservation. In four actions consolidated in the Court of Claims, the respondents sought to recover damages from the Government for alleged mismanagement of timber resources found on the Reservation. The respondents asserted that the Government: (1) failed to obtain fair market value for timber sold; (2) failed to manage timber on a sustained-yield basis and to rehabilitate the land after logging; (3) failed to obtain payment for some merchantable timber; () failed to develop a proper system of roads and easements for timber operations and exacted improper charges from allottees for roads; (5) failed to pay interest on certain funds and paid insufficient interest on other funds; and (6) exacted excessive administrative charges from allottees. The respondents contended that they were entitled to recover money damages because this alleged misconduct breached a fiduciary duty owed to them by the United States as trustee of the allotted lands under the General Allotment Act. The United States moved to dismiss the respondents' actions on the ground that it had not waived its sovereign *538 immunity with respect to the claims raised. The Court of Claims, sitting en banc, denied the Government's motion. Reasoning that Government mismanagement of the kind alleged breaches the Government's fiduciary duty under the General Allotment Act, the court held that the Act provides Indian allottees a cause of action for money damages against the United States. We granted certiorari, and now reverse and remand. II It is elementary that "[t]he United States, as sovereign, is immune

Justice Marshall

majority

United States v. Mitchell

https://www.courtlistener.com/opinion/110233/united-states-v-mitchell/

is elementary that "[t]he United States, as sovereign, is immune from suit save as it consents to be sued and the terms of its consent to be sued in any court define that court's jurisdiction to entertain the suit." United A waiver of sovereign immunity "cannot be implied but must be unequivocally expressed." United In the absence of clear congressional consent, then, "there is no jurisdiction in the Court of Claims more than in any other court to entertain suits against the United States." United The individual claimants in this action premised jurisdiction in the Court of Claims upon the Tucker Act, 28 U.S. C. 191, which gives that court jurisdiction of "any claim against the United States founded either upon the Constitution, or any Act of Congress." The Tucker Act is "only a jurisdictional statute; it does not create any substantive right enforceable against the United States for money damages." United 2 U.S. 392, The Act merely "confers jurisdiction upon [the Court of Claims] whenever the substantive right exists." The individual claimants, therefore, must look beyond the jurisdictional statute for a waiver of sovereign immunity with respect to their claims. The same is true for the tribal claimant. Jurisdiction over *539 its claims was based on 2 of the Indian Claims Commission Act, 28 U.S. C. 1505. That provision states: "The Court of Claims shall have jurisdiction of any claim against the United States accruing after August 13, 196, in favor of any tribe, band, or other identifiable group of American Indians residing within the territorial limits of the United States or Alaska whenever such claim is one arising under the Constitution, laws or treaties of the United States, or Executive orders of the President, or is one which otherwise would be cognizable in the Court of Claims if the claimant were not an Indian tribe, band or group." By enacting this statute, Congress plainly intended to give tribal claimants the same access to the Court of Claims provided to individuals by the Tucker Act. The House Committee Report stated: "As respects claims accruing after its adoption this bill confers jurisdiction on the Court of Claims to determine and adjudicate any tribal claim of a character which would be cognizable in the Court of Claims if the claimant were not an Indian tribe. In such cases the claimants are to be entitled to recover in the same manner, to the same extent, and subject to the same conditions and limitations, and the United States shall be entitled to the same defenses, both at law and in equity, as in

Justice Marshall

majority

United States v. Mitchell

https://www.courtlistener.com/opinion/110233/united-states-v-mitchell/

same defenses, both at law and in equity, as in cases brought in the Court of Claims by non-Indians under section 15 of the Judicial Code [now 28 U.S. C. 191], as amended." H. R. Rep. No. 166, 79th Cong., 1st Sess., 13 (195). See also Hearings on H. R. 1198 and H. R. 131 before the House Committee on Indian Affairs, 79th Cong., 1st Sess., 19 (195) (statement of Assistant Solicitor Cohen); H. R. Rep. No. 352, 81st Cong., 1st Sess., 15-16 (199) (recodifying the statute). *50 Under 28 U.S. C. 1505, then, tribal claimants have the same access to the Court of Claims provided to individual claimants by 28 U.S. C. 191, and the United States is entitled to the same defenses at law and in equity under both statutes. It follows that 28 U.S. C. 1505 no more confers a substantive right against the United States to recover money damages than does 28 U.S. C. 191.[2] III Section 1 of the General Allotment Act authorizes the President to allot to each Indian residing on a reservation up to 80 acres of agricultural land or 160 acres of grazing land found within the reservation. as amended, 25 U.S. C. 331. Section 5 of the Act provides that the United *51 States shall retain title to such allotted lands in trust for the benefit of the allottees: "Upon the approval of the allotments provided for in this act by the Secretary of the Interior, he shall cause patents to issue therefor in the name of the allottees, which patents shall be of the legal effect, and declare that the United States does and will hold the land thus allotted, for the period of twenty-five years, in trust for the sole use and benefit of the Indian to whom such allotment shall have been made and that at the expiration of said period the United States will convey the same by patent to said Indian in fee, discharged of said trust and free of all charge or incumbrance whatsoever: Provided, That the President of the United States may in any case in his discretion extend the period. And if any conveyance shall be made of the lands set apart and allotted as herein provided, or any contract made touching the same, before the expiration of the time above mentioned, such conveyance or contract shall be absolutely null and void." 2 Stat. 389, as amended, 25 U.S. C. 38. Under 2 of the Indian Reorganization Act of 193, 8 Stat. 98, 25 U.S. C. 62, the United States now holds title

Justice Marshall

majority

United States v. Mitchell

https://www.courtlistener.com/opinion/110233/united-states-v-mitchell/

25 U.S. C. 62, the United States now holds title to these lands indefinitely. The Court of Claims held that the General Allotment Act creates a fiduciary duty on the part of the United States to manage timber resources properly and constitutes a waiver of sovereign immunity against a suit for money damages as compensation for breaches of that duty. The court drew both of these conclusions from the Act's language providing that the United States is to "hold the land in trust for the sole use and benefit of the" allottee. The court held that this language created an express trust, and concluded that money damages are available to compensate for breaches of this trust, apparently because that remedy is available in the *52 ordinary situation in which a trustee has violated a fiduciary duty and because without money damages allottees would have no effective redress for breaches of trust. We need not consider whether, had Congress actually intended the General Allotment Act to impose upon the Government all fiduciary duties ordinarily placed by equity upon a trustee, the Act would constitute a waiver of sovereign immunity. We conclude that the Act created only a limited trust relationship between the United States and the allottee that does not impose any duty upon the Government to manage timber resources. The Act does not unambiguously provide that the United States has undertaken full fiduciary responsibilities as to the management of allotted lands. The language of 5 that imposes the trust in question must be read in pari materia with the language of 1 and 2.[3] Both of these sections indicate that the Indian allottee, and not a representative of the United States, is responsible for using the land for agricultural *53 cultural or grazing purposes. Furthermore, the legislative history of the Act[] plainly indicates that the trust Congress placed on allotted lands is of limited scope. Congress intended that, even during the period in which title to allotted land would remain in the United States, the allottee would occupy the land as a homestead for his personal use in agriculture or grazing. See 12 U.S. 81, 96 ; 13 Cong. Rec. 3211 (1882) (Sen. Dawes) (the allottee is to be "the occupant of the land and enjoy all its use"). See also H. R. Rep. No. 227, 8th Cong., 2d Sess., 1 (1885); 17 Cong. Rec. 1630-1631 (1886) (Sens. Plumb and Dawes); ; 18 Cong. Rec. 190-191 (1886) (Rep. Skinner). Under this scheme, then, the allottee, and not the United States, was to manage the land. The earliest drafts of the

Justice Marshall

majority

United States v. Mitchell

https://www.courtlistener.com/opinion/110233/united-states-v-mitchell/

was to manage the land. The earliest drafts of the Act provided that, during the 25-year period before the allottee would receive fee simple title, the allottee would hold title to the land subject to a restraint on alienation. S. 1773, 6th Cong., 3d Sess. (1880); S. 155, 7th Cong., 1st Sess. (1882). On Senator Dawes' motion, this language was amended to provide that the United States would hold the land "in trust" for that period. 13 Cong. Rec. 3212 (1882). Senator Dawes explained that the statute as amended would still ensure that title to the land would be transferred to the Indian allottee at the expiration of 25 years. He promoted the amendment because he feared that States might attempt to tax allotted lands if the allottees held title to them subject to a restraint on alienation. By placing title in the United States in trust for the *5 allottee, his amendment made it "impossible to raise the question of [state] taxation." The next draft of the Act introduced in the Congress reflected this amendment, see S. 8, 8th Cong., 1st Sess. (188), as, of course, did the Act as enacted, (1887). It is plain, then, that when Congress enacted the General Allotment Act, it intended that the United States "hold the land in trust" not because it wished the Government to control use of the land and be subject to money damages for breaches of fiduciary duty, but simply because it wished to prevent alienation of the land and to ensure that allottees would be immune from state taxation.[5] *55 Furthermore, events surrounding and following the passage of the General Allotment Act indicate that the Act should not be read as authorizing, much less requiring, the Government to manage timber resources for the benefit of Indian allottees. In 187, this Court determined that Indians held only a right of occupancy, and not title, to Indian lands, and therefore that they could cut timber for the purpose of clearing the land, but not for the primary purpose of marketing the timber. United In 1889, two years after the General Allotment Act was enacted, the Attorney General determined that the rule of United applied to allotted as well as unallotted lands, unless a statute explicitly provided to the contrary. 19 Op. Atty. Gen. 232. Congress ratified the Attorney General's opinion by enacting a provision authorizing the sale of dead timber on Indian allotments and reservations, but forbidding the sale of live timber. Act of Feb. 16, 1889, ch. 172, See also Pine River Logging As time passed, Congress occasionally passed

Justice Marshall

majority

United States v. Mitchell

https://www.courtlistener.com/opinion/110233/united-states-v-mitchell/

also Pine River Logging As time passed, Congress occasionally passed legislation authorizing the harvesting and sale of timber on specific reservations. See, e. g., ch. 1350, 3 Stat. 91 (1906) In 1910, Congress reversed its general policy. It empowered the Secretary of the Interior to sell timber on unallotted lands and apply the proceeds of the sales, less administrative expenses, to the benefit of the Indians. Ch. 31, 7, as amended, 25 U.S. C. 07. The Secretary was also authorized to consent to the sale of timber by the owner of any Indian land "held under a trust or other patent containing restrictions on alienations." 8, as amended, 25 U.S. C. 06 (a). The Secretary *56 was directed to pay the proceeds of these sales, less administrative expenses, to the "owner" of the allotted lands. Congress subsequently enacted other legislation directing the Secretary on how to manage Indian timber resources.[6] The General Allotment Act, then, cannot be read as establishing that the United States has a fiduciary responsibility for management of allotted forest lands. Any right of the respondents to recover money damages for Government mis-management of timber resources must be found in some source other than that Act.[7] The judgment of the Court of Claims is reversed, and the case is remanded for further proceedings consistent with this opinion. It is so ordered. THE CHIEF JUSTICE took no part in the decision of this case. MR. JUSTICE WHITE, with whom MR. JUSTICE BRENNAN and MR.

Justice Burger

concurring

Teamsters v. Daniel

https://www.courtlistener.com/opinion/109975/teamsters-v-daniel/

I join in the opinion of the Court except as to the discussion of the 1970 amendment to 3 (a) (2) of the Securities Act. There is no need to deal, in this case, with the scope of the exemption, since it is not an issue presented for decision. The Commission argues that the new exemption from the registration requirement of the Act applies to participation in a pension plan, and infers that Congress must have understood that such participation is a security which otherwise would be subject to the Act. It is not necessary to evaluate the Commission's interpretation of the exemption, however, because even if it is correct, it does not support the conclusion the Commission draws. *571 First, the inference concerning Congress' understanding of the Act in 1970 is tenuous. The language of the amendment covers a variety of financial interests, some of which clearly are "securities" as defined in the Act. Congress most likely acted with a view to those interests, without considering other financial interests like those involved here, for which registration never had been required. Second, even if a draftsman concerned with exempting a variety of interests from the registration requirement may have believed, in 1970, that certain pension interests were within the statutory definition of "security," that would have little, if any, bearing on this case. At issue here is the construction of definitions enacted in 1933 and 1934. The briefs suggest that the construction of the 1970 amendment may be problematic. The scope of the exemption may be of real importance to someone in some future case—but it is not so in connection with this action. Accordingly, I reserve any expression of views on the issue at this time.

Justice Marshall

dissenting

Kelley v. Johnson

https://www.courtlistener.com/opinion/109423/kelley-v-johnson/

The Court today upholds the constitutionality of Suffolk County's regulation limiting the length of a policeman's *250 hair. While the Court only assumes for purposes of its opinion that "the citizenry at large has some sort of `liberty' interest within the Fourteenth Amendment in matters of personal appearance" ante, at 244, I think it clear that the Fourteenth Amendment does indeed protect against comprehensive regulation of what citizens may or may not wear. And I find that the rationales offered by the Court to justify the regulation in this case are insufficient to demonstrate its constitutionality. Accordingly, I respectfully dissent. I As the Court recognizes, the Fourteenth Amendment's guarantee against the deprivation of liberty "protects substantive aspects of liberty against unconstitutional restrictions by the State." Ante, at 244. And we have observed that "[l]iberty under law extends to the full range of conduct which the individual is free to pursue." See also[1] It seems to me manifest that that "full range of conduct" must encompass one's interest in dressing according to his own taste. An individual's personal appearance may reflect, sustain, and nourish his personality and may well be used as a means of expressing his * attitude and lifestyle.[2] In taking control over a citizen's personal appearance, the government forces him to sacrifice substantial elements of his integrity and identity as well. To say that the liberty guarantee of the Fourteenth Amendment does not encompass matters of personal appearance would be fundamentally inconsistent with the values of privacy, self-identity, autonomy, and personal integrity that I have always assumed the Constitution was designed to protect. See ; ; ; If little can be found in past cases of this Court or indeed in the Nation's history on the specific issue of a citizen's right to choose his own personal appearance, it is only because the right has been so clear as to be beyond question. When the right has been mentioned, its existence has simply been taken for granted. For instance, the assumption that the right exists is reflected in the 1789 congressional debates over which guarantees should be explicitly articulated in the Bill of Rights. I. Brant. The Bill of Rights 53-67 There was considerable debate over whether the right of assembly should be expressly mentioned. Congressman Benson of New York argued that its inclusion was necessary to assure that the right would not be infringed by the government. In response, Congressman Sedgwick of Massachusetts indicated: "If the committee were governed by that general *252 principle they might have declared that a man should have a right to wear

Justice Marshall

dissenting

Kelley v. Johnson

https://www.courtlistener.com/opinion/109423/kelley-v-johnson/

declared that a man should have a right to wear his hat if he pleased but [I] would ask the gentleman whether he thought it necessary to enter these trifles in a declaration of rights, in a Government where none of them were intended to be infringed." Thus, while they did not include it in the Bill of Rights, Sedgwick and his colleagues clearly believed there to be a right in one's personal appearance. And, while they may have regarded the right as a trifle as long as it was honored, they clearly would not have so regarded it if it were infringed. This Court, too, has taken as an axiom that there is a right in one's personal appearance.[3] Indeed, in 1958 we used the existence of that right as support for our recognition of the right to travel: "The right to travel is a part of the `liberty' of which the citizen cannot be deprived without due process of law under the Fifth Amendment. It may be as close to the heart of the individual as the choice *253 of what he eats, or wears, or reads." To my mind, the right in one's personal appearance is inextricably bound up with the historically recognized right of "every individual to the possession and control of his own person," Union Pacific R. and, perhaps even more fundamentally, with "the right to be let alone—the most comprehensive of rights and the right most valued by civilized men." at In an increasingly crowded society in which it is already extremely difficult to maintain one's identity and personal integrity, it would be distressing, to say the least, if the government could regulate our personal appearance unconfined by any constitutional strictures whatsoever.[4] *254 II Acting on its assumption that the Fourteenth Amendment does encompass a right in one's personal appearance, the Court justifies the challenged hair-length regulation on the grounds that such regulations may "be based on a desire to make police officers readily recognizable to the members of the public, or a desire for the esprit de corps which such similarity is felt to inculcate within the police force itself." Ante, at 248. While fully accepting the aims of "identifiability" and maintenance of esprit de corps, I find no rational relationship between the challenged regulation and these goals.[5] As for the first justification offered by the Court, I simply do not see how requiring policemen to maintain hair of under a certain length could rationally be argued to contribute to making them identifiable to the public as policemen. Surely, the fact that a

Justice Marshall

dissenting

Kelley v. Johnson

https://www.courtlistener.com/opinion/109423/kelley-v-johnson/

to the public as policemen. Surely, the fact that a uniformed police officer is wearing his hair below his collar will make him *255 no less identifiable as a policeman. And one cannot easily imagine a plainclothes officer being readily identifiable as such simply because his hair does not extend beneath his collar. As for the Court's second justification, the fact that it is the president of the Patrolmen's Benevolent Association, in his official capacity, who has challenged the regulation here would seem to indicate that the regulation would if anything, decrease rather than increase the police force's esprit de corps.[6] And even if one accepted the argument that substantial similarity in appearance would increase a force's esprit de corps, I simply do not understand how implementation of this regulation could be expected to create any increment in similarity of appearance among members of a uniformed police force. While the regulation prohibits hair below the ears or the collar and limits the length of sideburns, it allows the maintenance of any type of hairstyle, other than a ponytail. Thus, as long as their hair does not go below their collars, two police officers, one with an "Afro" hair style and the other with a crewcut could both be in full compliance with the regulation.[7] *256 The Court cautions us not to view the hair-length regulation in isolation, but rather to examine it "in the context of the county's chosen mode of organization for its police force." Ante, at 247. While the Court's caution is well taken, one should also keep in mind, as I fear the Court does not, that what is ultimately under scrutiny is neither the overall structure of the police force nor the uniform and equipment requirements to which its members are subject, but rather the regulation which dictates acceptable hair lengths. The fact that the uniform requirement, for instance, may be rationally related to the goals of increasing police officer "identifiability" and the maintenance of esprit de corps does absolutely nothing to establish the legitimacy of the hair-length regulation. I see no connection between the regulation and the offered rationales[8] and would accordingly affirm the judgment of the Court of Appeals.

Justice Scalia

dissenting

Camps Newfound/Owatonna, Inc. v. Town of Harrison

https://www.courtlistener.com/opinion/118111/camps-newfoundowatonna-inc-v-town-of-harrison/

The Court's negative Commerce Clause jurisprudence has drifted far from its moorings. Originally designed to create a national market for commercial activity, it is today invoked to prevent a State from giving a tax break to charities that benefit the State's inhabitants. In my view, Maine's tax exemption, which excuses from taxation only that property *596 used to relieve the State of its burden of caring for its residents, survives even our most demanding Commerce Clause scrutiny. I We have often said that the purpose of our negative Commerce Clause jurisprudence is to create a national market. As Justice Jackson once observed, the "vision of the Founders" was "that every farmer and every craftsman shall be encouraged to produce by the certainty that he will have free access to every market in the Nation, that no home embargoes will withhold his exports, and no foreign state will by customs duties or regulations exclude them." H. P. Hood & Sons, In our zeal to advance this policy, however, we must take care not to overstep our mandate, for the Commerce Clause was not intended "to cut the States off from legislating on all subjects relating to the health, life, and safety of their citizens, though the legislation might indirectly affect the commerce of the country." Huron Portland Cement Our cases have struggled (to put it nicely) to develop a set of rules by which we may preserve a national market without needlessly intruding upon the States' police powers, each exercise of which no doubt has some effect on the commerce of the Nation. See Oklahoma Tax The rules that we currently use can be simply stated, if not simply applied: Where a state law facially discriminates against interstate commerce, we observe what has sometimes been referred to as a "virtually per se rule of invalidity;" where, on the other hand, a state law is nondiscriminatory, but nonetheless adversely affects interstate commerce, we employ a deferential "balancing test," under which the law will be sustained unless "the burden imposed on [interstate] commerce is clearly excessive in relation to the putative local benefits," See Oregon *597 Waste Systems, While the "virtually per se rule of invalidity" entails application of the "strictest scrutiny," it does not necessarily result in the invalidation of facially discriminatory state legislation, see, e. g., for "what may appear to be a `discriminatory' provision in the constitutionally prohibited sense—that is, a protectionist enactment—may on closer analysis not be so," New Energy of Thus, even a statute that erects an absolute barrier to the movement of goods across state lines will

Justice Scalia

dissenting

Camps Newfound/Owatonna, Inc. v. Town of Harrison

https://www.courtlistener.com/opinion/118111/camps-newfoundowatonna-inc-v-town-of-harrison/

barrier to the movement of goods across state lines will be upheld if "the discrimination is demonstrably justified by a valid factor unrelated to economic protectionism," or to put a finer point on it, if the state law "advances a legitimate local purpose that cannot be adequately served by reasonable nondiscriminatory alternatives," at In addition to laws that employ suspect means as a necessary expedient to the advancement of legitimate state ends, we have also preserved from judicial invalidation laws that confer advantages upon the State's residents but do so without regulating interstate commerce. We have therefore excepted the State from scrutiny when it participates in markets rather than regulates them—by selling cement, for example, see Reeves, or purchasing auto hulks, see or hiring contractors, see Likewise, we have said that direct subsidies to domestic industry do not run afoul of the Commerce Clause. See New Energy at In sum, we have declared that "[t]he Commerce Clause does not prohibit all state action designed to give its residents an advantage in the marketplace, but only action of that description in con- *598 nection with the State's regulation of interstate commerce. " II In applying the foregoing principles to the case before us, it is of course important to understand the precise scope of the exemption created by Me. Rev. Stat. Ann., Tit. 36, 652(1)(A) (Supp. 16-17). The Court's analysis suffers from the misapprehension that 652(1)(A) "sweeps to cover broad swathes of the nonprofit sector," ante, at 594, including nonprofit corporations engaged in quintessentially commercial activities. That is not so. A review of Maine law demonstrates that the provision at issue here is a narrow tax exemption, designed merely to compensate or subsidize those organizations that contribute to the public fisc by dispensing public benefits the State might otherwise provide. Although Maine allows nonprofit corporations to be organized "for any lawful purpose," Me. Rev. Stat. Ann., Tit. 13—B, 201 (1981 and Supp. 16-17), the exemption supplied by 652(1)(A) does not extend to all nonprofit organizations, but only to those "benevolent and charitable institutions," 652(1)(A), which are "organized and conducted exclusively for benevolent and charitable purposes," 652(1)(C)(1) and only to those parcels of real property and items of personal property that are used "solely," 652(1)(A), "to further the organization's charitable purposes," The Maine Supreme Judicial Court has defined the statutory term "benevolent and charitable institutions" to include only those nonprofits that dispense "charity," which is in turn defined to include only those acts which are "`for the benefit of an indefinite number of persons, either by bringing their minds or hearts under

Justice Scalia

dissenting

Camps Newfound/Owatonna, Inc. v. Town of Harrison

https://www.courtlistener.com/opinion/118111/camps-newfoundowatonna-inc-v-town-of-harrison/

of persons, either by bringing their minds or hearts under the influence of education or religion, by relieving their bodies from disease, suffering, or constraint, by assisting them *5 to establish themselves in life, or by erecting or maintaining public buildings or works or otherwise lessening the burdens of government. ` " (16) Moreover, the Maine Supreme Judicial Court has further limited the 652(1)(A) exemption by insisting that the party claiming its benefit "bring its claim unmistakably within the spirit and intent of the act creating the exemption," and by proclaiming that the spirit and intent of 652(1)(A) is to compensate charitable organizations for their contribution to the public fisc. As the court has explained: "`[A]ny institution which by its charitable activities relieves the government of part of [its] burden is conferring a pecuniary benefit upon the body politic, and in receiving exemption from taxation it is merely being given a "quid pro quo" for its services in providing something which otherwise the government would have to provide.' " Episcopal Camp Thus, 652(1)(A) exemptions have been denied to organizations that do not provide substantial public benefits, as defined by reference to the state public policy. In one case, for example, an organization devoted to maintaining a wildlife sanctuary was denied exemption on the ground that the preserve's prohibition on deer hunting conflicted with state policy on game management, so that the preserve could not be deemed to provide a public benefit. See Holbrook Island Even churches have been denied exemptions, see Pentecostal Assembly of The Maine Supreme Judicial Court has adhered rigorously to the requirement that the exempt property be used "solely" for charitable purposes. Even when there is no question that the organization owning the property is devoted exclusively to charitable purposes, the entire exemption will be forfeited if even a small fraction of the property is not used in furtherance of those purposes. See ; Nature Conservancy of Pine Tree State, That 652(1)(A) serves to compensate private charities for helping to relieve the State of its burden of caring for its residents should not be obscured by the fact that this particular case involves a summer camp rather than a more traditional form of social service. The statute that the Court strikes down does not speak of "camps" at all, but rather lists as examples of "benevolent and charitable institutions" nonprofit nursing homes, boarding homes, community mental health service facilities, and child care centers, see 652(1)(A). Some summer camps fall within the exemption under a 1933 decision of the Supreme Judicial Court which applied it to a tuition-free

Justice Scalia

dissenting

Camps Newfound/Owatonna, Inc. v. Town of Harrison

https://www.courtlistener.com/opinion/118111/camps-newfoundowatonna-inc-v-town-of-harrison/

the Supreme Judicial Court which applied it to a tuition-free camp for indigent children, see Camp Emoh and under a recent 4-to-3 decision which relied heavily on the fact that the camp at issue provided "moral instruction" and training in "social living and civic responsibility," and was not only "nonprofit" but furnished its camping services below cost, see Episcopal Camp What is at issue in this case is not whether a summer camp can properly be regarded as relieving the State of social costs, but rather whether, assuming it can, a distinction between charities serving mainly residents and *1 charities operated principally for the benefit of nonresidents is constitutional.[1] III I turn next to the validity of this focused tax exemption— applicable only to property used solely for charitable purposes by organizations devoted exclusively to charity—under the negative Commerce Clause principles discussed earlier. The Court readily concludes that, by limiting the class of eligible property to that which is used "principally for the benefit of persons who are Maine residents," the statute "facially discriminates" against interstate commerce. That seems to me not necessarily true. Disparate treatment constitutes discrimination only if the objects of the disparate treatment are, for the relevant purposes, similarly situated. See General Motors 519 U.S. 298-2 *2 (17). And for purposes of entitlement to a tax subsidy from the State, it is certainly reasonable to think that property gratuitously devoted to relieving the State of some of its welfare burden is not similarly situated to property used "principally for the benefit of persons who are not residents of [the State]," 652(1)(A). As we have seen, the theory underlying the exemption is that it is a quid pro quo for uncompensated expenditures that lessen the State's burden of providing assistance to its residents. The Court seeks to establish "facial discrimination" by showing that the effect of treating disparate property disparately is to produce higher costs for those users of the property who come from out of State. But that could be regarded as an indirect effect upon interstate commerce produced by a tax scheme that is not facially discriminatory, which means that the proper mode of analysis would be the more lenient "balancing" standard discussed above. We follow precisely this mode of analysis in Tracy, upholding an Ohio law that provides preferential tax treatment to domestic public utilities. Such entities, we conclude, are not "similarly situated" to other fuel distributors; their insulation from out-of-state competition does not violate the negative Commerce Clause because it "serves important interests in health and safety." The Court in Tracy paints a compelling

Justice Scalia

dissenting

Camps Newfound/Owatonna, Inc. v. Town of Harrison

https://www.courtlistener.com/opinion/118111/camps-newfoundowatonna-inc-v-town-of-harrison/

health and safety." The Court in Tracy paints a compelling image of people shivering in their homes in the dead of winter without the assured service that competition-sheltered public utilities provide. See No less important, however, is the availability of many of the benefits provided by Maine's private charities and facilitated not by total insulation from competition but by favorable tax treatment: care for the sick and dying, for example, or nursing services for the elderly. Even if, however, the Maine statute displays "facial discrimination" against interstate commerce, that is not the end of the analysis. The most remarkable thing about today's judgment is that it is rendered without inquiry into whether the purposes of the tax exemption justify its favoritism. *3 Once having concluded that the statute is facially discriminatory, the Court rests. "[T]he Town," it asserts, "has made no effort to defend the statute under the per se rule." Ante, at 582. This seems to me a pointless technicality. The town of Harrison (Town) has asserted that the State's interest in encouraging private entities to shoulder part of its socialwelfare burden validates this provision under the negative Commerce Clause. Whether it does so because the presence of that interest causes the resident-benefiting charities not to be "similarly situated" to the non-resident-benefiting charities, and hence negates "facial discrimination," or rather because the presence of that interest justifies "facial discrimination," is a question that is not only of no consequence but is also probably unanswerable. To strike down this statute because the Town's lawyers put the argument in one form rather than the other is truly senseless.[2] If the Court were to proceed with that further analysis it would have to conclude, in my view, that this is one of those cases in which the "virtually per se rule of invalidity" does not apply. Facially discriminatory or not, the exemption is no more an artifice of economic protectionism than any state law which dispenses public assistance only to the State's residents.[3] Our cases have always recognized the legitimacy of *4 limiting state-provided welfare benefits to bona fide residents. As Justice Stevens once wrote for a unanimous Court: "Neither the overnight visitor, the unfriendly agent of a hostile power, the resident diplomat, nor the illegal entrant, can advance even a colorable claim to a share in the bounty that a conscientious sovereign makes available to its own citizens." States have restricted public assistance to their own bona fide residents since colonial times, see, M. Ierley, With Charity For All, Welfare and Society, Ancient Times to the Present 41 (1984), and such

Justice Scalia

dissenting

Camps Newfound/Owatonna, Inc. v. Town of Harrison

https://www.courtlistener.com/opinion/118111/camps-newfoundowatonna-inc-v-town-of-harrison/

Society, Ancient Times to the Present 41 (1984), and such self-interested behavior (or, put more benignly, application of the principle that charity begins at home) is inherent in the very structure of our federal system, cf. We have therefore upheld against equal protection challenge continuing residency requirements for municipal employment, see and bona fide *5 residency requirements for free primary and secondary schooling, see If the negative Commerce Clause requires the invalidation of a law such as 652(1)(A), as a logical matter it also requires invalidation of the laws involved in those cases. After all, the Court today relies not on any discrimination against out-of-state nonprofits, but on the supposed discrimination against nonresident would-be recipients of charity (the nonprofits' "customers"); surely those individuals are similarly discriminated against in the direct distribution of state benefits. The problem, of course, is not limited to municipal employment and free public schooling, but extends also to libraries, orphanages, homeless shelters, and refuges for battered women. One could hardly explain the constitutionality of a State's limiting its provision of these to its own residents on the theory that the State is a "market participant." These are traditional governmental functions, far removed from commercial activity and utterly unconnected to any genuine private market. If, however, a State that provides social services directly may limit its largesse to its own residents, I see no reason why a State that chooses to provide some of its social services indirectly—by compensating or subsidizing private charitable providers—cannot be similarly restrictive.[4] In fact, we have already approved it. In Board of Ed. of Ky. Annual Conference of Methodist Episcopal we upheld a state law providing an inheritance *6 tax exemption to in-state charities but denying a similar exemption to out-of-state charities. We recognized that such exemptions are nothing but compensation to private organizations for their assistance in alleviating the State's burden of caring for its less fortunate residents, see "[I]t cannot be said," we wrote, "that if a State exempts property bequeathed for charitable or educational purposes from taxation it is unreasonable or arbitrary to require the charity to be exercised or the education to be bestowed within her borders and for her people,"[5] It is true that the opinion in Board of Ed. of Ky. addressed only the Equal Protection and Privileges and Immunities Clauses of the Fourteenth Amendment, and not the Commerce Clause. A Commerce Clause argument was unquestionably raised by the plaintiff in error, however, in both brief, see Brief for Plaintiff in Error, D. T. 1906, No. 103, pp. 30-38, and oral argument, see and the Court

Justice Scalia

dissenting

Camps Newfound/Owatonna, Inc. v. Town of Harrison

https://www.courtlistener.com/opinion/118111/camps-newfoundowatonna-inc-v-town-of-harrison/

103, pp. 30-38, and oral argument, see and the Court could not have reached the disposition it did without rejecting it. "[T]he Court implicitly rejected [the] argumen[t] by refusing to address [it]." (10). The Commerce Clause objection went undiscussed, I think, because it was (as it is here) utterly contrived: The State's *7 legislated distinction between charity "bestowed within her borders and for her people" and charity bestowed elsewhere or for others did not implicate commerce at all, except to the indirect and permissible extent that innumerable state laws do. Finally, even if Maine's property tax exemption for local charities constituted facial discrimination against out-ofstate commerce, and even if its policy justification (unrelated to economic protectionism) were insufficient to survive our "virtually per se rule of invalidity," cf. there would remain the question whether we should not recognize an additional exception to the negative Commerce Clause, as we have in Tracy. As that case explains, just as a public health justification unrelated to economic protectionism may justify an overt discrimination against goods moving in interstate commerce, "so may health and safety considerations be weighed in the process of deciding the threshold question whether the conditions entailing application of the dormant Commerce Clause are present." Today's opinion goes to great length to reject the Town's contention that Maine's property tax exemption does not fall squarely within either the "market participant" or "subsidy" exceptions to the negative Commerce Clause, but never stops to ask whether those exceptions are the only ones that may apply. As we explicitly acknowledge in Tracy — which effectively creates what might be called a "public utilities" exception to the negative Commerce Clause—the "subsidy" and "market participant" exceptions do not exhaust the realm of state actions that we should abstain from scrutinizing under the Commerce Clause. In my view, the provision by a State of free public schooling, public assistance, and other forms of social welfare to only (or principally) its own residents—whether it be accomplished directly or by providing tax exemptions, cash, or other property to private organizations that perform the work for the State—implicates none of the concerns underlying our *8 negative Commerce Clause jurisprudence. That is, I think, self-evidently true, despite the Court's effort to label the recipients of the State's philanthropy as "customers," or "clientele," see, e. g., ante, at 576. Because 652(1)(A) clearly serves these purposes and has nothing to do with economic protectionism, I believe that it is beyond scrutiny under the negative Commerce Clause. * * * As I have discussed, there are various routes by which the Court could validate

Justice Scalia

dissenting

Camps Newfound/Owatonna, Inc. v. Town of Harrison

https://www.courtlistener.com/opinion/118111/camps-newfoundowatonna-inc-v-town-of-harrison/

there are various routes by which the Court could validate the statute at issue here: on the ground that it does not constitute "facial discrimination" against interstate commerce and readily survives the Pike v. Bruce Church balancing test; on the ground that it does constitute "facial discrimination" but is supported by such traditional and important state interests that it survives scrutiny under the "virtually per se rule of invalidity"; or on the ground that there is a "domestic charity" exception (just as there is a "public utility" exception) to the negative Commerce Clause. Whichever route is selected, it seems to me that the quid pro quo exemption at issue here is such a reasonable exercise of the State's taxing power that it is not prohibited by the Commerce Clause in the absence of congressional action. We held as much in Board of Ed. of Ky. and should not overrule that decision. The State of Maine may have special need for a charitable-exemption limitation of the sort at issue here: Its lands and lakes are attractive to various charities of more densely populated Eastern States, which would (if the limitation did not exist) compel the taxpayers of Maine to subsidize their generosity. But the principle involved in our disapproval of Maine's exemption limitation has broad application elsewhere. A State will be unable, for example, to exempt private schools that serve its citizens from state and local real estate taxes unless it exempts as well private schools attended predominantly or entirely by students from *9 out of State. A State that provides a tax exemption for real property used exclusively for the purpose of feeding the poor must provide an exemption for the facilities of an organization devoted exclusively to feeding the poor in another country. These results may well be in accord with the parable of the Good Samaritan, but they have nothing to do with the Commerce Clause. I respectfully dissent.

Justice Brennan

majority

United States v. Rodgers

https://www.courtlistener.com/opinion/110942/united-states-v-rodgers/

These consolidated cases involve the relationship between the imperatives of federal tax collection and rights accorded by state property laws. Section 7403 of the Internal Revenue Code of 1954, 26 U.S. C. 7403 (1976 ed. and Supp. V), authorizes the judicial sale of certain properties to satisfy the tax indebtedness of delinquent taxpayers. The issue in both cases is whether 7403 empowers a federal district court to order the sale of a family home in which a delinquent taxpayer had an interest at the time he incurred his indebtedness, but in which the taxpayer's spouse, who does not owe any of that indebtedness, has a separate "homestead" right as defined by Texas law. We hold that the statute does grant power to order the sale, but that s exercise is limed to some degree by equable discretion. We hold that, if the home is sold, the nondelinquent spouse is entled, as part of the distribution of proceeds required under 7403, to so much of the proceeds as represents complete compensation for the loss of the homestead estate. I A Section 7403 provides in full as follows: "(a) Filing. — In any case where there has been a refusal or neglect to pay any tax, or to discharge any liabily in respect thereof, whether or not levy has been made, the Attorney General or his delegate, at the request of the Secretary [of the Treasury], may direct a civil action to be filed in a district court of the Uned to enforce the lien of the Uned under this tle wh respect to such tax or liabily or to subject any *681 property, of whatever nature, of the delinquent, or in which he has any right, tle, or interest, to the payment of such tax or liabily. For purposes of the preceding sentence, any acceleration of payment under section 66(g) shall be treated as a neglect to pay tax. "(b) Parties. — All persons having liens upon or claiming any interest in the property involved in such action shall be made parties thereto. "(c) Adjudication and decree. — The court shall, after the parties have been duly notified of the action, proceed to adjudicate all matters involved therein and finally determine the mers of all claims to and liens upon the property, and, in all cases where a claim or interest of the Uned therein is established, may decree a sale of such property, by the proper officer of the court, and a distribution of the proceeds of such sale according to the findings of the court in respect to the

Justice Brennan

majority

United States v. Rodgers

https://www.courtlistener.com/opinion/110942/united-states-v-rodgers/

to the findings of the court in respect to the interests of the parties and of the Uned If the property is sold to satisfy a first lien held by the Uned the Uned may bid at the sale such sum, not exceeding the amount of such lien wh expenses of sale, as the Secretary directs. "(d) Receivership. — In any such proceeding, at the instance of the Uned the court may appoint a receiver to enforce the lien, or, upon certification by the Secretary during the pendency of such proceedings that is in the public interest, may appoint a receiver wh all the powers of a receiver in equy." As a general matter,[1] the "lien of the Uned " referred to in 7403(a) is that created by 26 U.S. C. 6321, which provides: "If any person liable to pay any tax neglects or refuses to pay the same after demand, the amount (including any *682 interest, addional amount, addion to tax, or assessable penalty, together wh any costs that may accrue in addion thereto) shall be a lien in favor of the Uned upon all property and rights to property, whether real or personal, belonging to such person."[2] Section 7403, whose basic elements go back to revenue legislation passed in 1868 ( 106 of the Act of July 20, 1868, ch. 186, ) is one of a number of distinct enforcement tools available to the Uned for the collection of delinquent taxes.[3] The Government may, for example, simply sue for the unpaid amount, and, on getting a judgment, exercise the usual rights of a judgment credor. See 26 U.S. C. 6502(a), 7401, 7402(a). Yet a third route is administrative levy under 26 U.S. C. 6(a), which provides: "If any person liable to pay any tax neglects or refuses to pay the same whin 10 days after notice and demand, shall be lawful for the Secretary [or his delegate] to collect such tax (and such further sum as shall be sufficient to cover the expenses of the levy) by levy upon all property and rights to property (except such property as is exempt under section 6334) belonging to such person or on which there is a lien provided in this chapter for the payment of such tax" Administrative levy, unlike an ordinary lawsu, and unlike the procedure in 7403, does not require any judicial intervention, and is up to the taxpayer, if he so *683 chooses, to go to court if he claims that the assessed amount was not legally owing. See generally[4] The common purpose of this formidable arsenal

Justice Brennan

majority

United States v. Rodgers

https://www.courtlistener.com/opinion/110942/united-states-v-rodgers/

owing. See generally[4] The common purpose of this formidable arsenal of collection tools is to ensure the prompt and certain enforcement of the tax laws in a system relying primarily on self-reporting. See G. M. Leasing ; Uned ; at 259-.[5] Moreover, has long been an axiom of our tax collection scheme that, although the definion of underlying property interests is left to state law, the consequences that attach to those interests is a matter left to federal law. See Uned v. ; Uned v. Union Central Life Insurance ; Aquilino v. Uned 3-5 and cases ced (attachment of federal lien depends on whether "property" or "rights to property" exist under state law; priory of federal lien depends on federal law); Uned v. 7 U.S. ; Springer v. Uned *684 B The substance of Texas law related to the homestead right may usefully be divided into two categories. Cf. First, in common wh a large number of Texas establishes the family home or place of business[6] as an enclave exempted from the reach of most credors. Thus, under Tex. Const., Art. 50: "The homestead of a family, or of a single adult person, shall be, and is hereby protected from forced sale, for the payment of all debts except for [certain exceptions not relevant here] No mortgage, trust deed, or other lien on the homestead shall ever be valid, except for [certain exceptions not relevant here]."[7] Second, in common wh a somewhat smaller number of Texas gives members of the family un addional rights in the homestead property self. Thus, in a clause not included in the above quotation, Tex. Const., Art 50, provides that "the owner or claimant of the property *685 claimed as homestead [may not], if married, sell or abandon the homestead whout the consent of the other spouse, given in such manner as may be prescribed by law."[8] Equally important, Art. 52, provides: "On the death of the husband or wife, or both, the homestead shall descend and vest in like manner as other real property of the deceased, and shall be governed by the same laws of descent and distribution, but shall not be partioned among the heirs of the deceased during the lifetime of the surviving husband or wife, or so long as the survivor may elect to use or occupy the same as a homestead, or so long as the guardian of the minor children of the deceased may be permted, under the order of the proper court having the jurisdiction, to use and occupy the same."[9] The effect of these provisions in

Justice Brennan

majority

United States v. Rodgers

https://www.courtlistener.com/opinion/110942/united-states-v-rodgers/

and occupy the same."[9] The effect of these provisions in the Texas Constution is to give each spouse in a marriage a separate and undivided possessory interest in the homestead, which is only lost by death or abandonment, and which may not be compromised eher by the other spouse or by his or her heirs.[10] It bears emphasis that the rights accorded by the homestead laws vest independently in each spouse regardless of whether one spouse, or both, actually owns the fee interest in the homestead. Thus, although analogy is somewhat hazardous in *686 this area, may be said that the homestead laws have the effect of reducing the underlying ownership rights in a homestead property to something akin to remainder interests and vesting in each spouse an interest akin to an undivided life estate in the property. See and cases ced; and cases ced; and cases ced. This analogy, although does some injustice to the nuances present in the Texas homestead statute,[11] serves to bring to the fore something that has been repeatedly emphasized by the Texas courts, and that was reaffirmed by the Court of Appeals in these cases: that the Texas homestead right is not a mere statutory entlement, but a vested property right. As the Supreme Court of Texas has put a spouse "has a vested estate in the land of which she cannot be divested during her life except by abandonment or a voluntary conveyance in the manner prescribed by law." at 218 S.W.2d, at ; see Uned v. Rogers, and cases ced.[12] II The two cases before us were consolidated for oral argument before the Uned Court of Appeals for the Fifth Circu, and resulted in opinions issued on the same day. Uned v. Rogers, ;[13] They arise out of legally comparable, but que distinct, sets of facts. A Lucille Mzi Bosco Rodgers is the widow of Philip S. Bosco, whom she married in 1937. She and Mr. Bosco acquired, as communy property, a residence in Dallas, Texas, and occupied as their homestead. Subsequently, in 1971 and the Internal Revenue Service issued assessments totaling more than $900,000 for federal wagering taxes, penalties, and interest, against Philip for the taxable years 1966 through 1971. These taxes remained unpaid at the time of Philip's death in Since Philip's death, Lucille has continued to occupy the property as her homestead, and now lives there wh her present husband. On September 23, 1977, the Government filed su under 26 U.S. C. 7402 and 7403 in the Uned District Court for the Northern District of Texas against Mrs. Rodgers

Justice Brennan

majority

United States v. Rodgers

https://www.courtlistener.com/opinion/110942/united-states-v-rodgers/

Court for the Northern District of Texas against Mrs. Rodgers and Philip's son, daughter, and executor. The su sought to reduce to judgment the assessments against Philip, to enforce the Government's tax liens, including the one that had attached to Philip's interest in the residence, and to obtain a deficiency judgment in the amount of any unsatisfied part of the liabily. On cross-motions for summary judgment, the District Court granted partial summary judgment on, among other things, the defendants' claim that the federal tax liens could not defeat Mrs. Rodgers' state-created right not to have her homestead subjected to a forced sale. Fed. Rule Civ. Proc. 54(b). The Court of Appeals affirmed on the homestead issue,[14] holding that if "a homestead interest is, under state law, a property right, possessed by the nontaxpayer spouse at the time the lien attaches to the taxpayer spouse's interest, then the federal tax lien may not be foreclosed against the homestead *688 property for as long as the nontaxpayer spouse maintains his or her homestead interest under state law." The court implied that the Government had the choice of eher waing until Mrs. Rodgers' homestead interest lapsed, or satisfying self wh a forced sale of only Philip Bosco's interest in the property. B Joerene Ingram is the divorced wife of Donald Ingram. During their marriage, Joerene and Donald acquired, as communy property, a residence in Dallas, Texas, and occupied as their homestead. Subsequently, in and 1973, the Internal Revenue Service issued assessments against Donald Ingram relating to unpaid taxes whheld from wages of employees of a company of which he was president. Deducting payments made on account of these liabilies, there remains unpaid approximately $9,000, plus interest. In addion, in 1973, the Service made an assessment against both Donald and Joerene in the amount of $283.33, plus interest, relating to their joint income tax liabily for 1971. These amounts remain unpaid. In March 1975, at about the time the Ingrams were seeking a divorce, their residence was destroyed by fire. In September 1975, the Ingrams obtained a divorce. In connection wh the divorce, they entered into a property settlement agreement, one provision of which was that Donald would convey to Joerene his interest in the real property involved in this case in exchange for $1,500, to be paid from the proceeds of the sale of the property. Joerene tried to sell the property, through a trustee, but was unsuccessful in those efforts, apparently because of the federal tax liens encumbering the property. To make matters worse, she then received notice from the Cy of

Justice Brennan

majority

United States v. Rodgers

https://www.courtlistener.com/opinion/110942/united-states-v-rodgers/

matters worse, she then received notice from the Cy of Dallas Department of Housing and Urban Rehabilation (Department) that unless she complied wh local ordinances, the remains of the fire-damaged *689 residence would be demolished. Following a hearing, the Department issued a final notice and a work order to demolish. Joerene Ingram and the trustee then filed su in Texas state court to quiet tle to the property, to remove the federal tax liens, and to enjoin demolion. The defendants were the Uned the Department, and several credors claiming an interest in the property. The Uned removed the su to the District Court for the Northern District of Texas. It then filed a counterclaim against Joerene Ingram and Donald Ingram (who was added as a defendant on the counterclaim) for both the unpaid whholding taxes and the joint liabily for unpaid income taxes. In s prayer for relief, the Government sought, among other things, judicial sale of the property under 7403. Pursuant to a stipulation of the parties, the property was sold unencumbered and the proceeds (approximately $,250) were deposed into the registry of the District Court pending the outcome of the su. The parties agreed that their rights, claims, and priories would be determined as if the sale had not taken place, and that the proceeds would be divided according to their respective interests. On cross-motions for summary judgment, the District Court granted summary judgment on the Government's counterclaims. The Court of Appeals affirmed in part, and reversed and remanded in part. It agreed that the Government could foreclose s lien on the proceeds from the sale of the property to collect the $283.33, plus interest, for the unpaid income tax owed by Joerene and Donald Ingram jointly. Applying s decision in Rodgers, however, held that the Government could not reach the proceeds of the sale of the property to collect the individual liabily of Donald Ingram, assuming Joerene Ingram had maintained her homestead interest in the property. The court remanded, however, for a factual determination of whether Joerene had "abandoned" the *690 homestead by dividing the insurance proceeds wh Donald and by attempting — even before the stipulation entered into wh the Government — to sell the property and divide the proceeds of that sale wh Donald.[15] C The Government filed a single petion for certiorari in both these cases. See this Court's Rule 19.4. We granted certiorari, in order to resolve a conflict among the Courts of Appeals as to the proper interpretation of 7403. III A The basic holding underlying the Court of Appeals' view that

Justice Brennan

majority

United States v. Rodgers

https://www.courtlistener.com/opinion/110942/united-states-v-rodgers/

The basic holding underlying the Court of Appeals' view that the Government was not authorized to seek a sale of the homes in which respondents held a homestead interest is that "when a delinquent taxpayer shares his ownership interest in property jointly wh other persons rather than being the sole owner, his `property' and `rights to property' to which the federal tax lien attaches under 26 U.S. C. 6321, and on which federal levy may be had under 26 U.S. C. 7403(a), involve only his interest in the property, and not the entire property." According to the Court of Appeals, this principle applies, not only in the homestead context, but in any cotenancy in which unindebted third parties share an ownership interest wh a delinquent taxpayer. See Folsom v. Uned We agree wh the Court of Appeals that the Government's lien under 6321 cannot extend beyond the property interests *691 held by the delinquent taxpayer.[] We agree that the Government may not ultimately collect, as satisfaction for the indebtedness owed to more than the value of the property interests that are actually liable for that debt. But, in this context at least, the right to collect and the right to seek a forced sale are two que different things. The Court of Appeals for the Fifth Circu recognized that was the only Court of Appeals that had adopted the view that the Government could seek the sale, under 7403, of only the delinquent taxpayer's "interest in the property, and not the entire property." and n. 12. We agree wh the prevailing view that such a restrictive reading of 7403 flies in the face of the plain meaning of the statute. See, e. g., Uned v. Trilling, ; Washington v. Uned ; Uned v. Overman, ; Uned v. Kocher, ; see 1 U.S. 326,[17] *692 Section 7403(a) provides, not only that the Government may "enforce [s] lien," but that may seek to "subject any property, of whatever nature, of the delinquent, or in which he has any right, tle, or interest, to the payment of such tax or liabily" (emphasis added). This clause in and of self defeats the reading proposed by the Court of Appeals.[18]*693 Section 7403(b) then provides that "[a]ll persons having liens upon or claiming any interest in the property involved in such action shall be made parties thereto" (emphasis added). Obviously, no joinder of persons claiming independent interests in the property would be necessary if the Government were only authorized to seek the sale of the delinquent taxpayer's own interests. Finally, 7403(c) provides that the district court

Justice Brennan

majority

United States v. Rodgers

https://www.courtlistener.com/opinion/110942/united-states-v-rodgers/

taxpayer's own interests. Finally, 7403(c) provides that the district court should "determine the mers of all claims to and liens upon the property, and, in all cases where a claim or interest of the Uned therein is established, may decree a sale of such property and a distribution of the proceeds of such sale according to the findings of the court in respect to the interests of the parties and of the Uned " (emphasis added). Again, we must read the statute *694 to contemplate, not merely the sale of the delinquent taxpayer's own interest, but the sale of the entire property (as long as the Uned has any "claim or interest" in ), and the recognion of third-party interests through the mechanism of judicial valuation and distribution. Our reading of 7403 is consistent wh the policy inherent in the tax statutes in favor of the prompt and certain collection of delinquent taxes. See It requires no cation to point out that interests in property, when sold separately, may be worth eher significantly more or significantly less than the sum of their parts. When the latter is the case, makes considerable sense to allow the Government to seek the sale of the whole, and obtain s fair share of the proceeds, rather than satisfy self wh a mere sale of the part. Our reading is supported by an examination of the historical background against which the predecessor statute to 7403 was enacted. In 1868, as today, state taxation consisted in large part of ad valorem taxation on real property. In enforcing such taxes against delinquent taxpayers, one usual remedy was a sale by the State of the assessed property. The prevailing — although admtedly not universal — view was that such sales were in rem proceedings, and that the tle that was created in the sale extinguished not only the interests of the person liable to pay the tax, but any other interests that had attached to the property, even if the owners of such interests could not otherwise be held liable for the tax. See generally H. Law of Tax Tles 231-2 ; W. Law of Taxation 122 (1877). Where in rem proceedings were the rule, they were generally held to cut off as well dower or homestead rights possessed by the delinquent taxpayer's See 142 Iowa 9, ; ; ; 299; 348. But cf. R. well, Power to Sell Land for the Non-Payment of Taxes 550 (3d ed. 1). *695 One evident purpose of the federal judicial sale provision enacted in 1868 was to obtain for the federal

Justice Brennan

majority

United States v. Rodgers

https://www.courtlistener.com/opinion/110942/united-states-v-rodgers/

provision enacted in 1868 was to obtain for the federal tax collector some of the advantages that many enjoyed through in rem tax enforcement. As one commentator has put echoing almost exactly the usual description of state in rem proceedings, the 7403 proceeding "from s very nature, is a proceeding in rem. The purchaser receives a complete new tle and not just somebody's interest. The court finds the state of the tle to the real estate in question, orders sold if the Uned has a lien on and divides the proceeds accordingly. All prior interests are cut off and the tle starts over again in the new purchaser." Rogge, The Tax Lien of the Uned 13 A. B. A. J. 6, 7 (1927). See G. Holmes, Federal Income Tax 546-547 (1920). Even as gave the Government the right to seek an undivided sale in an in rem proceeding, however, the predecessor to 7403 departed que sharply from the model provided by the by guaranteeing that third parties wh an interest in the property receive a share of the proceeds commensurate wh the value of their interests. This apparently unique provision was prompted, we can assume, by the sense that, precisely because the federal taxes involved were not taxes on the real property being sold, simple justice required significantly greater solicude for third parties than was generally available in state in rem proceedings.[19] Finally, our reading of the statute is significantly bolstered by a comparison wh the statutory language setting out the administrative levy remedy available to the Government.[20]*696 Under 26 U.S. C. 6(a), the Government may sell for the collection of unpaid taxes all nonexempt "property and rights to property belonging to such person [i. e., the delinquent taxpayer] or on which there is a lien provided in this chapter for the payment of such tax" (emphasis added). This language clearly embodies the limation that the Court of Appeals thought was present in 7403, and has been so interpreted by the courts.[21] Section 6, unlike 7403, does not require notice and hearing for third parties, because no rights of third parties are intended to be implicated by 6. Indeed, third parties whose property or interests in property have been seized inadvertently are entled to claim that the property has been "wrongfully levied upon," and may apply for s return eher through administrative channels, 26 U.S. C. 6343(b), or through a civil action filed in a federal district court, 7426(a)(1); see 7426(b)(1), 7426(b)(2)(A).[22] In the absence of such "wrongful levy," the entire proceeds of a sale conducted pursuant to administrative levy

Justice Brennan

majority

United States v. Rodgers

https://www.courtlistener.com/opinion/110942/united-states-v-rodgers/

entire proceeds of a sale conducted pursuant to administrative levy may be applied, whout any prior distribution of the sort required by 7403, to the expenses of the levy and sale, the specific tax liabily on the seized property, and the general tax liabily of the delinquent taxpayer. 26 U.S. C. 6342. We are not entirely unmoved by the force of the basic intuion underlying the Court of Appeals' view of 7403 — that the Government, though has the "right to pursue the property *697 of the [delinquent] taxpayer wh all the force and fury at s command," should not have any right, superior to that of other credors, to disturb the settled expectations of innocent third parties. Folsom v. Uned 306 F. 2d, at 7-8. In fact, however, the Government's right to seek a forced sale of the entire property in which a delinquent taxpayer had an interest does not arise out of s privileges as an ordinary credor, but out of the express terms of 7403. Moreover, the use of the power granted by 7403 is not the act of an ordinary credor, but the exercise of a sovereign prerogative, incident to the power to enforce the obligations of the delinquent taxpayer himself, and ultimately grounded in the constutional mandate to "lay and collect taxes."[23] Cf. -; ; Uned v. Snyder, Admtedly, if 7403 allowed for the gratuous confiscation of one person's property interests in order to satisfy another person's tax indebtedness, such a provision might pose significant difficulties under the Due Process Clause of the Fifth Amendment.[24] But, as we have already indicated, 7403 makes no further use of third-party property interests than to facilate the extraction of value from those concurrent property interests that are properly liable for the taxpayer's debt. To the extent that third-party property interests are "taken" in the process, 7403 provides compensation for that "taking" by requiring that the court distribute the proceeds of the sale "according to the findings of the court in respect to the interests of the parties and of the Uned *698" Cf. Uned v. Overman, 424 F. 2d, at Moreover, we hold, on the basis of what we are informed about the nature of the homestead estate in Texas, that is the sort of property interest for whose loss an innocent third party must be compensated under 7403. Cf. Uned v. General Motors Corp.,[25] We therefore see no contradiction, at least at the level of basic principle, between the enforcement powers granted to the Government under 7403 and the recognion of vested property interests granted to innocent

Justice Brennan

majority

United States v. Rodgers

https://www.courtlistener.com/opinion/110942/united-states-v-rodgers/

and the recognion of vested property interests granted to innocent third parties under state law. The exact method for the distribution required by 7403 is not before us at this time. But we can get a rough idea of the practical consequences of the principles we have just set out. For example, if we assume, only for the sake of illustration, that a homestead estate is the exact economic equivalent of a life estate, and that the use of a standard statutory or commercial table and an 8% discount rate is appropriate in calculating the value of that estate, then three nondelinquent surviving or remaining spouses, aged 30, 50, and 70 years, each holding a homestead estate, would be entled to approximately 97%, 89%, and 64%, respectively, of the proceeds of the sale of their homes as compensation for that *699 estate.[26] In addion, if we assume that each of these hypothetical nondelinquent spouses has a protected half-interest in the underlying ownership rights to the property being sold,[27] then their total compensation would be approximately 99%, 95%, and 82%, respectively, of the proceeds from such sale. In sum, the Internal Revenue Code, seen as a whole, contains a number of cumulative collection devices, each wh s own advantages and disadvantages for the tax collector. Among the advantages of administrative levy is that is quick and relatively inexpensive. Among the advantages of a 7403 proceeding is that gives the Federal Government the opportuny to seek the highest return possible on the forced sale of property interests liable for the payment of federal taxes. The provisions of 7403 are broad and profound. Nevertheless, 7403 is punctilious in protecting the vested rights of third parties caught in the Government's collection effort, and in ensuring that the Government not receive out of the proceeds of the sale any more than that to which is properly entled. Of course, the exercise in any particular case of the power granted under 7403 to seek the forced sale of property interests other than those of the delinquent taxpayer is left in the first instance to the good sense and common decency of the collecting authories. 26 U.S. C. 7403(a). We explore in Part IV of this opinion the nature *700 of the limed discretion left to the courts in proceedings brought under 7403. But that the power exists, and that is necessary to the prompt and certain enforcement of the tax laws, we have no doubt. B There is another, intermeshed but analytically distinguishable, ground advanced by the Court of Appeals and the respondents — and reerated

Justice Brennan

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United States v. Rodgers

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the Court of Appeals and the respondents — and reerated by the dissent — for denying the Government the right to seek the forced sale of property held as a homestead by a nondelinquent third party. Taken in self, this view would hold that, even if 7403 normally allows for the forced sale of property interests other than those directly liable for the indebtedness of the delinquent taxpayer, the special protections accorded by the exemption aspect of Texas homestead law, see should immunize from the reach of 7403. The Court of Appeals conceded that "the homestead interest of a taxpayer spouse, i. e., that of one who himself has tax liabily, clearly cannot by self defeat [the enforcement under 7403 of] a federal tax lien." ; see This proposion, although not explic in the Code, is clearly implic in 26 U.S. C. 6334(c) (relating to exemptions from levy),[28] and in our decisions in Uned v. -; Aquilino v. Uned 3 U. S., at 3-4; and Uned v. 7 U. S., at The Court of Appeals held that, if the homestead interest under Texas law were "merely an exemption" whout accompanying vested property rights, would not be effective against the Federal Government in a 7403 *701 proceeding, even in the case of a nondelinquent Nevertheless, the court concluded that, if the homestead estate both was claimed by a nondelinquent spouse and constuted a property right under state law, then would bar the Federal Government from pursuing a forced sale of the entire property. We disagree. If 7403 is intended, as we believe is, to reach the entire property in which a delinquent taxpayer has or had any "right, tle, or interest," then state-created exemptions against forced sale should be no more effective wh regard to the entire property than wh regard to the "right, tle, or interest" self. Accord, Uned v. Overman, 424 F. 2d, at 1145-1147; Herndon v. Uned[29] No exception of the sort carved out by the Court of Appeals appears on the face of the statute, and we decline to frustrate the policy of the statute by reading such an exception into Cf. ; Uned v. at -206. Moreover, the Supremacy Clause[30] — which provides the underpinning for the Federal Government's right to sweep aside state-created exemptions in the first place — is as potent in s application to innocent bystanders as in s application to delinquent debtors. See Uned v. Union Central Life Insurance 8 U. S., at ; cf. at -586; Uned v. Carmack, Whatever property rights attach to a homestead under Texas law are adequately

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rights attach to a homestead under Texas law are adequately discharged by the payment of compensation, and no further deference to state law is required, eher by 7403 or by the Constution. The dissent urges us to carve out an exception from the plain language of 7403 in that "small number of joint-ownership suations [in which] the delinquent taxpayer has no right to force partion or otherwise to alienate the entire property whout the consent of the co-owner." Post, at 715. Its primary argument in favor of such an exception is that would be consistent wh tradional limations on the rights of a lienholder. Post, at 713-715, 723-724. If 7403 truly embodied tradional limations on the rights of lienholders, however, then we would have to conclude that Folsom v. Uned was correctly decided, a proposion that even the dissent is not willing to advance. See post, at 713, 714, n. 2, 726. More importantly, we believe that the better analogy in this case is not to the tradional rights of lienholders, but to the tradional powers of a taxing authory in an in rem enforcement proceeding. See[31] *703 IV A Although we have held that the Supremacy Clause allows the federal tax collector to convert a nondelinquent spouse's *704 homestead estate into s fair cash value, and that such a conversion satisfies the requirements of due process, we are not blind to the fact that in practical terms financial compensation may not always be a completely adequate substute for a roof over one's head. Cf. Uned v. 564.54 Acres of Land, 0-3 This problem seems particularly acute in the case of a homestead interest. First, the nature of the market for life estates or the market for rental property may be such that the value of a homestead interest, calculated as some fraction of the total value of a home, would be less than the price demanded by the market for a lifetime's interest in an equivalent home. Second, any calculation of the cash value of a homestead interest must of necessy be based on actuarial statistics, and will unavoidably undercompensate persons who end up living longer than the average.[32] Indeed, is precisely because of problems such as these that a number of courts, in eminent domain cases involving property divided between a homestead interest and underlying ownership rights or between a life estate and a remainder interest, have refused to distribute the proceeds *705 according to an actuarial formula, and have instead placed the entire award in trust (or reinvested in a new parcel of property) wh the income

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reinvested in a new parcel of property) wh the income (or use) going to the life-estate holder during his or her lifetime, and the corpus vesting in the holder of the remainder interest upon the death of the life-estate holder.[33] If the sale and distribution provided for in 7403 were mandatory, the practical problems we have just would be of ltle legal consequence. The statute provides, however, that the court in a 7403 proceeding "shall proceed to adjudicate all matters involved therein and finally determine the mers of all claims to and liens upon the property, and, in all cases where a claim or interest of the Uned therein is established, may decree a sale of such property." (emphasis added), and respondents argue that this language allows a district court hearing a 7403 proceeding to exercise a degree of equable discretion and refuse to authorize a forced sale in a particular case. See ; Uned v. Eaves, 499 F.2d ; Uned v. Hershberger, 475 F. 2d, at 679-680; Uned v. Overman, 424 F. 2d, at ; Uned v. Morrison, The Court of Appeals agreed *706 wh this interpretation of the statute, although does not appear to have relied on and in any event neher nor the District Court undertook any particularized equable assessment of the cases now before us. We find the question to be close, but on balance, we too conclude that 7403 does not require a district court to authorize a forced sale under absolutely all circumstances, and that some limed room is left in the statute for the exercise of reasoned discretion. B The word "may," when used in a statute, usually implies some degree of discretion.[34] This common-sense principle of statutory construction is by no means invariable, however, see 258- ; see generally Uned ex rel. 156 U.S. 3, 9-0 and cases ced, and can be defeated by indications of legislative intent to the contrary or by obvious inferences from the structure and purpose of the statute, see In these cases, we have ltle to go on in discerning Congress' intent except for one crucial fact: before 19, the predecessor statute to 7403 used the word "shall" rather than the word "may" in describing the court's role in ordering a forced sale of property in which a claim or interest of the Uned had been shown. Revenue Act of 1926, Pub. L. 20, 44 Stat. (part 2) 9, 123-124. In 19, as one of a number of amendments in the text of the provision, Congress changed "shall" to "may." Revenue Act of 19, Pub. L. 740,

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"shall" to "may." Revenue Act of 19, Pub. L. 740, 802, 1743-1744. The other changes — specifically, expanding the scope of 7403 to include personal as well as real property, and adding the receivership option *707 now embodied in 7403(d), see at 681 — are explained in the legislative history.[] There is no direct explanation for the change from "shall" to "may."[] The Government argues that the only significance of the change from "shall" to "may" was that "Congress recognized had specifically authorized sale of interests in property, sale of the entire property, and receivership. Employing the term `shall' wh respect to each may have been perceived as confusing insofar as could be read as directing contradictory requirements." Reply Brief for Uned 8, n. 5. *708 We find this explanation plausible, but not compelling. If Congress had really meant no more than to adjust the forced sale language to take into account the receivership option, could have easily expressed that intention more clearly by language to the effect of "the court shall eher decree the sale of such property or, upon the instance of the Uned appoint a receiver to enforce the lien, etc." Moreover, the authors of an earlier, unpassed, otherwise virtually identical proposal introduced in the House, did not think necessary to change "shall" to "may" in their version of the legislation. See nn. Faced as we are wh such an ambiguous legislative record, we come to rest wh the natural meaning of the language enacted into law. In light of the fact that Congress did see f to explain the other changes in the 19 Act, we do not assert that Congress, whout comment or explanation, intended to create equable discretion where none existed before. On the other hand, there is support in our prior cases for the proposion that an unexplained change in statutory wording from "shall" to "may" is best construed as indicating a congressional belief that equable discretion existed all along. Moore v. Illinois Central R. 6 ; cf. In addion, reading "may" as eher conferring or confirming a degree of equable discretion conforms to the even more important principle of statutory construction that Congress should not lightly be assumed to have enacted a statutory scheme foreclosing a court of equy from the exercise of s tradional discretion. ; Porter v. Warner Holding ; Hecht v. Bowles, A 7403 proceeding is by s nature a proceeding in equy,[37] and judicial sales in general have tradionally *709 been accompanied by at least a limed degree of judicial discretion.[38] Finally, we are convinced that recognizing that

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of judicial discretion.[38] Finally, we are convinced that recognizing that district courts may exercise a degree of equable discretion in 7403 proceedings is consistent wh the policies of the statute: unlike an absolute exception, which we rejected above, the exercise of limed equable discretion in individual cases can take into account both the Government's interest in prompt and certain collection of delinquent taxes and the possibily that innocent third parties will be unduly harmed by that effort. C To say that district courts need not always go ahead wh a forced sale authorized by 7403 is not to say that they have unbridled discretion. We can think of virtually no circumstances, for example, in which would be permissible to refuse to authorize a sale simply to protect the interests of the delinquent taxpayer himself or herself.[39] And even when the interests of third parties are involved, we think that a *710 certain fairly limed set of considerations will almost always be paramount. First, a court should consider the extent to which the Government's financial interests would be prejudiced if were relegated to a forced sale of the partial interest actually liable for the delinquent taxes. Even the Government seems to concede that, if such a partial sale would not prejudice at all (because the separate market value of the partial interest is likely to be equal to or greater than s value as a fraction of the total value of the entire property) then there would be no reason at all to authorize a sale of the entire property. Tr. of Oral Arg. 7, 13; Reply Brief for Uned 8, n. 5.[40] We think that a natural extension of this principle, however, is that, even when the partial interest would be worth less sold separately than sold as part of the entire property, the possibily of prejudice to the Government can still be measured as a matter of degree. Simply put, the higher the expected market price, the less the prejudice, and the less weighty the Government's interest in going ahead wh a sale of the entire property.[41] Second, a court should consider whether the third party wh a nonliable separate interest in the property would, in the normal course of events (leaving aside 7403 and eminent domain proceedings, of course), have a legally recognized expectation that that separate property would not be subject *711 to forced sale by the delinquent taxpayer or his or her credors. If there is no such expectation, then there would seem to be ltle reason not to authorize the sale. Again, however, this factor

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reason not to authorize the sale. Again, however, this factor is amenable to considerations of degree. The Texas homestead laws are almost absolute in their protections against forced sale.[42] The usual cotenancy arrangement, which allows any cotenant to seek a judicial sale of the property and distribution of the proceeds, but which allows the other cotenants to resist the sale and apply instead for a partion in kind, is further along the continuum. And a host of other types of property interests are arrayed between and beyond. Third, a court should consider the likely prejudice to the third party, both in personal dislocation costs and in the sort of practical undercompensation Fourth, a court should consider the relative character and value of the nonliable and liable interests held in the property: if, for example, in the case of real property, the third party has no present possessory interest or fee interest in the property, there may be ltle reason not to allow the sale; if, on the other hand, the third party not only has a possessory interest or fee interest, but that interest is worth 99% of the value of the property, then there might well be virtually no reason to allow the sale to proceed. We do not pretend that the factors we have just outlined constute an exhaustive list; we certainly do not contemplate that they be used as a "mechanical checklist" to the exclusion of common sense and consideration of special circumstances. Cf. Moses H. Cone Hospal v. Mercury Construction Corp., We do emphasize, however, that the limed discretion accorded by 7403 should be exercised rigorously and sparingly, keeping in mind the Government's paramount interest in prompt and certain collection of delinquent taxes. *712 V In these cases, no individualized equable balance of the sort we have just outlined has yet been attempted. In the Rodgers case, the record before us, although is que clear as to the legal issues relevant to the second consideration noted above, affords us ltle guidance otherwise. In any event, we think that the task of exercising equable discretion should be left to the District Court in the first instance. The Ingram case is a b more complicated, even leaving aside the fact of the stipulated sale by which we are constrained to treat the escrow fund now sting in the registry of the District Court as if were a house. First, as the Court of Appeals pointed out, there remains a question under Texas law as to whether Joerene Ingram abandoned the homestead by the time of the stipulated sale.

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abandoned the homestead by the time of the stipulated sale. Second, the Government, in addion to s lien for the individual debt of Donald Ingram, has a further lien for $283.33, plus interest, on the house, representing the joint liabily of Donald and Joerene Ingram. Because Joerene Ingram is not a "third party" as to that joint liabily, we can see no reason, as long as that amount remains unpaid, not to allow a "sale" of the "house" (i. e., a levy on the proceeds of the stipulated sale) for satisfaction of the debt. Moreover, once the dam is broken, there is no reason, under our interpretation of 7403, not to allow the Government to collect on the individual debt of Donald Ingram out of that portion of the proceeds of the sale representing property interests properly liable for the debt. On the other hand, would certainly be to Mrs. Ingram's advantage to discharge her personal liabily before the Government can proceed wh s "sale," in which event, assuming that she has not abandoned the homestead, the District Court will be obliged to strike an equable balance on the same general principles as those that govern the Rodgers case. The judgment of the Court of Appeals in Rodgers is reversed, s judgment in Ingram is vacated, and both cases *713A are remanded wh directions that they be remanded to the District Court for further proceedings consistent wh this opinion. So ordered. *713B JUSTICE BLACKMUN, wh whom JUSTICE REHNQUIST, JUSTICE STEVENS, and JUSTICE O'CONNOR join, concurring in the result in part and dissenting in part. The Court today properly rejects the broad legal principle concerning 26 U.S. C. 7403 that was announced by the Court of Appeals. See ante, at 687-688 and 690-691. I agree that, in some suations, 7403 gives the Government the power to sell property not belonging to the taxpayer. Our task, however, is to ascertain how far Congress intended that power to extend. In my view, 7403 confers on the Government the power to sell or force the sale of jointly owned property only insofar as the tax debtor's interest in that property would perm him to do so; does not confer on the Government the power to sell jointly owned property if an unindebted co-owner enjoys an indestructible right to bar a sale and to continue in possession. Because Mrs. Rodgers had such a right, and because she is not herself indebted to the Government, I dissent from the Court's disposion of her case. I It is basic in the common law that a lienholder enjoys

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is basic in the common law that a lienholder enjoys rights in property no greater than those of the debtor himself; that is, the lienholder does no more than step into the debtor's shoes. 1 L. Jones, Law of Liens 9, pp. 9-10 (1914). Thus, as a general rule, "[t]he lien of a judgment cannot be made effectual to bind or to convey any greater or other estate than the debtor himself, in the exercise of his rights, could voluntarily have transferred or alienated." 49 C. J. S., Judgments 478 (7) (collecting cases); Commercial Cred v. Davidson, ; Similarly, pursuant to a state tax lien, "no greater interest in land than that *714 which was held by the taxpayer and taxable to him may be sold, so that, where a sale is had for unpaid taxes on a leasehold estate, only the leasehold estate is subject to conveyance."[1] 85 C. J. S., Taxation 806 (1954) (footnote omted) (collecting cases); Uned v. Erie County, 31 F. Supp. The lienholder may compel the debtor to exercise his property rights in order to meet his obligations or the lienholder may exercise those rights for him. But the debtor's default does not vest in the lienholder rights that were not available to the debtor himself. In most suations in which a delinquent taxpayer shares property wh an unindebted third party, does no violence to this principle to order a sale of the entire property so long as the third party is fully compensated. A joint owner usually has at his disposal the power to convey the property or force s conveyance. Thus, for example, a joint tenant or tenant in common may seek partion. See generally W. Federal Tax Liens If a joint tenant is delinquent in his taxes, the Uned does no more than step into the delinquent taxpayer's shoes when compels a sale.[2] *715 In a small number of joint-ownership suations, however, the delinquent taxpayer has no right to force partion or otherwise to alienate the entire property whout the consent of the co-owner. These include tenancies by the entirety and certain homestead estates. See Federal Liens and Priories — Agenda for the Next Decade II, 77 Yale L. J. 5, 634 In this case, the homestead estate owned by the delinquent taxpayer — Mrs. Rodgers' deceased husband — did not include the right to sell or force the sale of the homestead during Mrs. Rodgers' lifetime whout her consent. Mrs. Rodgers had, and still has, an indefeasible right to possession, an interest, as the Court recognizes, "akin to an undivided life

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interest, as the Court recognizes, "akin to an undivided life estate." Ante, at 686. A lienholder stepping into the shoes of the delinquent taxpayer would not be able to force a sale. II By holding that the District Court has the discretion to order a sale of Mrs. Rodgers' property, the Court necessarily finds in the general language of 7403 a congressional intent to abrogate the rule that the tax collector's lien does not afford him rights in property in excess of the rights of the delinquent taxpayer.[3] I do not dispute that the general *7 language of 7403, standing alone, is subject to the interpretation the Court gives From s enactment in 1868[4] to the present day, the language of this statute has been sweeping; read lerally, adms of no exceptions. But when broadly worded statutes, particularly those of some antiquy, are in derogation of common-law principles, this Court has hesated to heed arguments that they should be applied lerally. See In such cases, the Court has presumed in the absence of a clear indication to the contrary that Congress did not mean by s use of general language to contravene fundamental precepts of the common law.[5] *717 A Apart from the general language of the statute, the Court points to nothing indicating a congressional intent to abrogate the tradional rule. It seems to me, indeed, that the evidence definely points the other way. Scholarly comment on 7403, and on 6321, the tax lien provision, consistently has maintained that, in such as Texas that confer on each spouse absolute rights to full use and possession of the homestead for life, the homestead property rights of an unindebted spouse may not be sold by the tax collector to satisfy the other spouse's tax debt.[6] Court decisions addressing *718 this point have been to the same [7] In 1966, the American Bar Association placed before Congress this virtually undisputed view of the law of federal tax liens. Legislative History 177.[8] Since 19, Congress repeatedly has addressed *719 the law of federal tax liens, directing some attention to 7403.[9] Against the background of this consensus among courts and commentators that tax liens may not be enforced against such homesteads so long as an unindebted spouse still lives, Congress did not change the law. In fact, in 1954 the Senate foiled an attempt by the House to extend the reach of federal tax liens to tenancies by the entirety, a spousal property interest similar to the Texas homestead.[10] The rule pronounced in the courts, e. g., Uned v. Hutcherson, (CA8 19); Uned v.

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courts, e. g., Uned v. Hutcherson, (CA8 19); Uned v. Nathanson, F. Supp. 193, and the view of the commentators, e. g., at 254; at 17, was that tenancies by the entirety, like Texas homesteads, could not be sold to enforce the tax liabily of one The House passed *720 an amendment that would have extended the tax lien created by 6321 expressly to the taxpayer's interest as tenant by the entirety. H. R. 8300, 83d Cong., 2d Sess., 6321 (1954) (Code bill). The Senate removed the language, stating: "The deletion of the phrase is intended to continue the existing law." S. Rep. No. 22, 83d Cong., 2d Sess., 5 (1954). It is true, of course, that tenancies by the entirety were held to be immune from federal tax sales on a theory different from that applied to homestead property like Mrs. Rodgers'. See ante, at 703-704, 1. But was established that both types of property interests precluded the Government from satisfying the tax debts of one spouse by selling the jointly owned property. In the absence of any evidence of congressional intent to the contrary, this deliberate choice to leave undisturbed the bar to tax enforcement created by a tenancy by the entirety[11] suggests that Congress did not object to the similar effect of the Texas homestead right, an effect consistent wh principles basic to the common law of liens. *721 B Although disclaiming as a basis for decision, the Court relies on 1 U.S. 326, to support s reading of 7403. Ante, at 691-692, n. 17. In Mansfield, a tenant who operated a distillery on leased property fell delinquent in s taxes. The Government sought to sell by administrative levy the entire fee, not just the tenant's leasehold interest. The fee was owned by a third party, and the delinquent taxpayer's leasehold interest obviously did not give him the power to sell the fee. The Mansfield Court would not allow a sale by administrative levy, but suggested that on the facts of that case, the Government could seek a judicial sale of the entire property under the predecessor of 7403. Focusing on just this portion of the Mansfield opinion, the Court now states that "[r]ead broadly, Mansfield is on `all fours' wh our holding today." Ante, at 692, n. 17. To the contrary, Mansfield is not on "all fours" wh today's holding, and indeed undermines In the same 1868 Act in which passed the original predecessor to 7403, Congress enacted a separate provision to ensure the collection of taxes from distillers. Section 8 of that Act required each

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United States v. Rodgers

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taxes from distillers. Section 8 of that Act required each distiller to own s distillery property in fee and free from liens. Alternatively, a distiller could file wh the tax collector the fee owner's wrten consent granting a tax lien of the Uned priory over all other claims to the property, and granting the Uned full tle in the property in case of forfeure. Act of July 20, 1868, ch. 186, 8, The taxpayer's landlord in Mansfield had executed such a waiver, and the Court stated that "the val question" was the waiver's 1 U.S., at 338. Rejecting the Government's posion, the Court held that the waiver did not perm sale of the property by administrative levy. The Court made clear, however, that s reading of the statute did *722 not render the waiver requirement useless. "By the waiver the government acquired the right, by a su [under the predecessor of 7403], to have sold, under the decree of a court, not only the distiller's leasehold interest, but the fee in the premises." Thus, the Mansfield Court considered the waiver to be a condion precedent to the Government's power, under the predecessor of 7403, to sell the landlord's fee interest when the tenant was in default in s taxes. If 7403 gives the Government this power whout the necessy of a waiver — as the Court today holds — seems unlikely that Congress would have considered necessary, in the very Act in which passed 7403's predecessor, to require that a distiller eher own the fee outright or obtain from s landlord advance authorization for a sale of the fee to satisfy the distiller's tax liabilies.[12] Outside the distillery context, Congress must have intended that the Government's power to force a sale of the fee would be no more extensive than that of the delinquent taxpayer. *723 C The Court's "broad reading" of Mansfield's holding reflects only the extraordinary breadth of s own. As read by the Court, Mansfield authorizes, whout the consent of the owner of the fee, a judicial sale of a building should a tenant fail to pay his taxes, a judicial sale of a farm should the holder of an easement across become delinquent,[13] or a judicial sale of a condominium or cooperative apartment house to satisfy the tax debt of any co-owner.[14] The Court imputes to Congress an intent to perm the sale of the farm or the building even though the fee owners have paid their taxes and even though, in signing a lease or conveying an easement, the fee owners did not surrender their

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United States v. Rodgers

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conveying an easement, the fee owners did not surrender their indefeasible right to prevent the sale of their property. Prior to 19, moreover, the predecessor of 7403(c) required a court at the Government's request to sell the property *724 in which the tax debtor had an interest. See ante, at 7009. Thus, the Court's view attributes to Congress the incredible intention to mandate the sale of the entire property whenever the holder of an easement, a tenant, or one wh a similarly minimal interest fails to pay a tax and the Government invokes s right to bring an action to enforce s lien. It is hardly surprising that counsel for the Government has been unable to ce a single instance before or after this Court's decision in Mansfield in which the Government, outside the context of the homestead cases, invoked 7403 or s predecessors to assert a property right greater than the tax-payer himself could have asserted. Tr. of Oral Arg. 14-. To abrogate the common-law rule that the tax collector gains only the property rights of the tax debtor leads to absurd results. III Whout direct evidence of congressional intent to contravene the tradional — and sensible — common-law rule, the Court advances three arguments purporting to lend indirect support for s construction of 7403. A First, the Court claims that s construction is consistent wh the policy favoring "the prompt and certain collection of delinquent taxes." Ante, at 694. This rationale would support any exercise of governmental power to secure tax payments. Were there two equally plausible supposions of congressional intent, this policy might counsel in favor of choosing the construction more favorable to the Government. But when one interpretation contravenes both tradional rules of law and the common sense and common values on which they are built, the fact that favors the Government's interests cannot be disposive.[15] *725 Moreover, the Government's interest would not be compromised substantially by a rule permting to sell property only when the delinquent taxpayer could have done so. In this case, the delinquent taxpayer's homestead interest, is assumed, gave him a "half-interest in the underlying ownership rights to the property being sold." Ante, at 699. An immediate forced sale of the entire property would yield for the Government no more than half the present value of the remainder interest, the residue left after the present values of the nondelinquent spouse's life estate and half-interest in the remainder are subtracted. As the Court notes, the Government can expect to receive only a small fraction of the proceeds. An immediate sale of the delinquent

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United States v. Rodgers

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fraction of the proceeds. An immediate sale of the delinquent taxpayer's future interest in the property might well command a commensurate price. Alternatively, the Government could maintain s lien on the property until Mrs. Rodgers dies and then could force a sale. Because the delinquent taxpayer's estate retains a half-interest in the remainder, the Government would be entled to half of the proceeds at that time. The Government's yield from this future sale, discounted to s present value, should not differ significantly from s yield under the Court's approach. The principal difference is that, following the common-law rule, Mrs. Rodgers' entlement to live out her life on her homestead would be respected. An approach consistent wh the common law need not prejudice the Government's interest in the "certain" collection of taxes. Under 7403(d),[] the District Court has the power to appoint a receiver, who could supervise the property to protect the Government's interests while respecting Mrs. Rodgers' rights to possession and enjoyment. *726 77 Yale L. J., at 638. Indeed, just such an approach was suggested by the American Bar Association's Commtee on Federal Liens, 84 A. B. A. Rep. 645, 681-682 (1959), which drafted the tax lien amendments adopted in 1966. Legislative History 108-109 (statement of Laurens Williams). B The Court would support s construction by contrasting 7403 wh the more restrictive language of 6, the administrative tax levy provision. Ante, at 695-697. It is true that 6 perms the sale only of "property and rights to property belonging to" the taxpayer, while 7403 generally authorizes the sale of property in which the taxpayer has an interest. But the greater power conferred by 7403 is needed to enable the Government to seek the sale of jointly owned property whenever the tax debtor's rights in the property would have permted him to seek a forced sale. Section 7403 certainly perms the Government, in such circumstances, to seek partion of the property in federal, rather than state, court, to seek authory to sell the tax debtor's part or the whole, and, in the same proceeding, to have determined the entlements of the various claimants, including competing lienholders, to the proceeds of the property sold. See generally 77 Yale L. J., at 628-629. Absent the more expansive language of 7403, this would not be possible. That language, however, does not manifest congressional intent to produce the extraordinary consequences yielded by the Court's interpretation. C The Court asserts that s construction of 7403 is consistent wh "the tradional powers of a taxing authory in an in rem enforcement proceeding," even if is not

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United States v. Rodgers

https://www.courtlistener.com/opinion/110942/united-states-v-rodgers/

in an in rem enforcement proceeding," even if is not consistent wh the tradional rights of lienholders. Ante, and 702. This, wh all respect, is not so. In rem tax enforcement proceedings never have been used to sell property *727 belonging to unindebted third parties in order to satisfy a tax delinquency unrelated to the property sold. As the Court recognizes, ante, at 694, such proceedings are brought to sell land in order to satisfy delinquent ad valorem taxes assessed on the land self. 2 T. Law of Taxation 866, 910 (3d ed. 1903). It is said that the land self is liable for such taxes, and that conflicting ownership rights thus do not bar s sale. See ; H. Law of Tax Tles 296 ; W. Law of Taxation 346-349 (1877). The cases relied upon by the Court for the proposion that in rem tax proceedings extinguish the homestead rights of an unindebted spouse merely applied this rule. 142 Iowa 9, ; ; On the other hand, if the tax is assessed on an individual's separate interest in the land, rather than on the land self, the tax debt is personal to the individual and "[n]othing more [than the individual's interest] can become delinquent; nothing more can be sold." ; see R. well, On the Power to Sell Land 908, 920, 942 (5th ed. 1889); 2 at ; The real property interests of third parties cannot be sold through an in rem proceeding to satisfy a personal tax liabily. The "tradional powers of a taxing authory" to sell the entire property and extinguish the interests of unindebted third parties thus are limed to collection of taxes assessed on the land self, and have no application to delinquent taxes, like those at issue in these cases, assessed personally against one joint owner.[17] *728 Some is true, have authorized by statute the sale of real property to satisfy the owner's tax debts, even where the delinquent taxes are unrelated to the property. See Larimer ; Iowa Land v. Douglas County, 8 S. D. 491 (1896). The Court does not suggest, however, that jointly owned real property ever has been sold pursuant to such a statute when an unindebted co-owner has indefeasible rights therein. Indeed, the tradional distinction between taxes for which the land is liable and tax liabilies personal to the taxpayer would preclude such a sale. Thus, even if one purpose of 7403's predecessor statute "was to obtain for the federal tax collector some of the advantages that many enjoyed through in rem tax enforcement," ante, at 695, Congress would

Justice Brennan

majority

United States v. Rodgers

https://www.courtlistener.com/opinion/110942/united-states-v-rodgers/

through in rem tax enforcement," ante, at 695, Congress would not have intended the result the Court reaches today. A state tax collector could not confiscate the indefeasible real property interests of a nondelinquent third party to satisfy the personal tax liabily of a co-owner.[18] *729 IV The Court recognizes that Mrs. Rodgers has an indestructible property right under Texas law to use, possess, and enjoy her homestead during her lifetime, and that the delinquent taxpayer's property interests would not have enabled him to disturb that right against her will. Ante, The Court recognizes that Mrs. Rodgers has no outstanding tax liabily and that the Government has no lien on Mrs. Rodgers' property or property rights. Because I conclude that Congress did not intend 7403 to perm federal courts to grant property rights to the Government greater than those enjoyed by the tax debtor, I would hold that the Government may not sell Mrs. Rodgers' homestead whout her consent. To the extent the Court holds to the contrary, I respectfully dissent. V Mrs. Ingram's case, however, is materially different. Like her husband, Mrs. Ingram was liable for back taxes, and consequently the Government had a lien on her interests in property as well as on her husband's interests. Exercising both spouses' rights in the homestead, the Government is entled *730 to force a sale, ; see (CA5 2), subject only to the discretion of the District Court. See ante, at 703-711. Second, when Mrs. Ingram and her former husband were divorced, the homestead became subject to partion under Texas law. See ante, at 685, n. 10. In Mrs. Ingram's case, therefore, I concur in the result.

Justice Blackmun

concurring

United States v. Security Industrial Bank

https://www.courtlistener.com/opinion/110811/united-states-v-security-industrial-bank/

This case concerns the Bankruptcy Act of 1978, 11 U.S. C. 101 et seq. (1976 ed., Supp. V), and, in particular, the exemption provisions of 522 of that Act. Specifically at issue is the effect of certain of these exemption provisions upon nonpossessory, nonpurchase-money obligations given by debtors to small loan companies before the enactment of the *83 Act. The purported liens apply generally, not specifically, to property of the kind described and, as a practicable matter, there is nothing to prevent the debtor's selling the property and replacing it or not replacing it, just as he chooses. Section 522, for the first time, established a set of federal exemptions for individual debtors. Concededly, the section, as all similar statutes, was enacted to protect the debtor's essential needs and to enable him to have a fresh start economically. Section 522(f)(2) permits the debtor to "avoid the fixing" of a nonpossessory, nonpurchase-money security interest in certain property, but the subsection does not extend to all property otherwise exempt under 522(d). It is limited to certain personal items, such as household furnishings, wearing apparel, jewelry, tools of the debtor's trade, and professionally prescribed health aids. The Court naturally struggles with the question of the application of the new exemption provisions to obligations created before the new Act. It notes its concern with constitutional problems and it also greets with obvious relief the possibility of construing the Act as being only prospective in its operation. It then quickly pursues the latter route in order to avoid any constitutional issue. I understand and can sympathize with the Court's desire thus to resolve the case. It is usually much easier to construe a statute so as to avoid a constitutional issue than it is to resolve the constitutional issue itself. And, of course, the Court's cases have announced that, where feasible, this is the preferred method. See, e. g., Were we writing on a "clean slate," however, I would not pursue, in this case, that principle of construction-preference, for I think that the case would deserve consideration in greater depth. I see nothing in the statute with which we are concerned that speaks or hints of only prospective applicability, or that compels it, and I would find it necessary to reach the constitutional issue. I would then resolve that *84 issue in favor of the debtor and against the small-loan-company creditor. I would do so because the exemptions in question are limited as to kinds of property and as to values; because the amount loaned has little or no relationship to the value of the

Justice Blackmun

concurring

United States v. Security Industrial Bank

https://www.courtlistener.com/opinion/110811/united-states-v-security-industrial-bank/

has little or no relationship to the value of the property; because these asserted lien interests come close to being contracts of adhesion; because repossessions by small loan companies in this kind of situation are rare; because the purpose of the statute is salutary and is to give the debtor a fresh start with a minimum for necessities; because there has been creditor abuse; because Congress merely has adjusted priorities, and has not taken for the Government's use or for public use; because the exemption provisions in question affect the remedy and not the debt; because the security interest seems to have little direct value and weight in its own right and appears useful mainly as a convenient tool with which to threaten the debtor to reaffirm the underlying obligation; because the statute is essentially economic regulation and insubstantial at that; and because there is an element of precedent favorable to the debtor to be found in such cases as Penn Central Transp. and PruneYard Shopping But we are not writing on a clean slate. It seems to me that the case of is precisely in point and, unless the Court chooses to overrule it, must control the present case. There, Holt and the eventual bankrupt signed an agreement in 1909 for the installation of an automatic sprinkler system on the property of the eventual bankrupt. The agreement specified that the system was to remain Holt's property until paid for and that he was to have a right to enter and remove it upon failure to pay as agreed. Thereafter, but also in 1909, a mortgage deed was executed covering the plant and what was "acquired and placed upon the said premises during the continuance of this trust." Section 8 of the Act of June 25, 1910, ch. 412, amended 47a(2) of the then Bankruptcy *85 Act to give the trustee in bankruptcy, as to property coming into the custody of the bankruptcy court, the rights of a creditor holding a lien. Upon Holt's debtor's bankruptcy, the mortgagees claimed the sprinkler system. Justice Holmes, writing for a unanimous Court, observed that before the amendment "Holt had a better title than the trustees would have got" and that the Court was of the opinion "that the act should not be construed to impair it." 232 U.S., He went on: "We do not need to consider whether or how far in any event the constitutional power of Congress would have been limited. It is enough that the reasonable and usual interpretation of such statutes is to confine their effect, so far as

Justice Blackmun

concurring

United States v. Security Industrial Bank

https://www.courtlistener.com/opinion/110811/united-states-v-security-industrial-bank/

such statutes is to confine their effect, so far as may be, to property rights established after they were passed. That is a familiar and natural mode of interpretation We are of opinion that [Holt's title] was not affected by the enactment of later date than the conditional sale. The opposite construction would not simply extend a remedy but would impute to the act of Congress an intent to take away rights lawfully retained, and unimpeachable at the moment when they took their start." -640. The Court then ruled against the claim of the mortgagees because they had made no advance on the faith of the sprinkler system and were not purchasers for value as against Holt, and because removal "would not affect the integrity of the structure on which the mortgagees advanced." thus also involved a pre-existing agreement, a subsequent change in the then Bankruptcy Act, and the Court's preservation of the pre-existing right. I see no way to distinguish that case from this one, and I would affirm the judgment of the Court of Appeals simply on the compelling authority of See also I would much prefer to avoid in this way the dicta the Court enunciates with respect to "takings."

Justice Marshall

majority

United States v. Culbert

https://www.courtlistener.com/opinion/109821/united-states-v-culbert/

Respondent was convicted of violating the Hobbs Act, 18 U.S. C. 191 ( ed.), which provides in relevant part: "Whoever in any way or degree obstructs, delays, or affects commerce or the movement of any article or commodity in commerce, by robbery or extortion or attempts or conspires so to do, or commits or threatens physical *372 violence to any person or property in furtherance of a plan or purpose to do anything in violation of this section shall be fined not more than $10,000 or imprisoned not more than twenty years, or both." 191 (a). The question in this case is whether the government not only had to establish that respondent violated the express terms of the Act, but also had to prove that his conduct constituted "racketeering." The evidence at respondent's jury trial showed that he and an accomplice attempted to obtain $100,000 from a federally insured bank by means of threats of physical violence made to the bank's president. The United States Court of Appeals for the Ninth Circuit, with one judge dissenting, reversed the Hobbs Act conviction,[1] holding that, "`although an activity may be within the literal language of the Hobbs Act, it must constitute "racketeering" to be within the perimeters of the Act.'" We granted certiorari,[2] and we now reverse. *373 I Nothing on the face of the statute suggests a congressional intent to limit its coverage to persons who have engaged in "racketeering." To the contrary, the statutory language sweeps within it all persons who have "in any way or degree affect[ed] commerce by robbery or extortion." 18 U.S. C. 191 (a) ( ed.). These words do not lend themselves to restrictive interpretation; as we have recognized, they "manifest a purpose to use all the constitutional power Congress has to punish interference with interstate commerce by extortion, robbery or physical violence," The statute, moreover, carefully defines its key terms, such as "robbery," "extortion," and "commerce."[3] Hence the absence of any reference to "racketeering"—much less any definition of the word—is strong evidence that Congress did not intend to make "racketeering" an element of a Hobbs Act violation. *374 Respondent nevertheless argues that we should read a racketeering requirement into the statute. To do so, however, might create serious constitutional problems, in view of the absence of any definition of racketeering in the statute. Neither respondent nor either of the two Courts of Appeals that have read this requirement into the statute has even attempted to provide a definition. Without such a definition, the statute might well violate "the first essential of due process of law":

Justice Marshall

majority

United States v. Culbert

https://www.courtlistener.com/opinion/109821/united-states-v-culbert/

well violate "the first essential of due process of law": It would forbid "the doing of an act in terms so vague that [persons] of common intelligence [would] necessarily [have to] guess at its meaning and differ as to its application." ; see, e. g., But we need not concern ourselves with these potential constitutional difficulties because a construction that avoids them is virtually compelled by the language and structure of the statute. II A Nothing in the legislative history supports the interpretation of the statute adopted by the Court of Appeals.[4] The predecessor to the Hobbs Act, the Anti-Racketeering Act of 1934, ch. 69, was enacted, as its name implies, at a time when Congress was very concerned about racketeering activities. Despite these concerns, however, the Act, which was written in broad language similar to the language of the *37 Hobbs Act, nowhere mentioned racketeering.[] This absence of the term is not surprising, since the principal congressional committee working on the Act, known as the Copeland Committee, found that the term and the associated word "racket" had "for some time been used loosely to designate every conceivable sort of practice or activity which was either questionable, unmoral, fraudulent, or even disliked, whether criminal or not." S. Rep. No. 1189, 7th Cong., 1st Sess., 2 (1937).[6] The Copeland Committee proceeded to develop its own "working definition" of racketeering, but it did not incorporate *376 this definition into the Act. Critical to the definition was the existence of "an organized conspiracy to commit the crimes of extortion or coercion." Yet the Act itself did not require a conspiracy to engage in unlawful conduct, and the Senate Judiciary Committee Report expressly stated that a violation of the Act would be established "`whether the restraints [of commerce] are in form of conspiracies or not,'" S. Rep. No. 32, 73d Cong., 2d Sess., 2 (1934), quoting Justice Department memorandum; see H. R. Rep. No. 1833, 73d Cong., 2d Sess., 2 (1934). Moreover, the Act included a separate prohibition on conspiracies, 2 (d), ; see n. that would have been superfluous if proof of racketeering—as defined by the Copeland Committee to require conspiracy—were an integral element of the substantive offenses.[7] There is nothing in the legislative history to dispel the conclusion compelled by these observations. Congress simply did not intend to make racketeering a separate, unstated element of an Anti-Racketeering Act violation. B Given the absence of this intent in the Hobbs Act's predecessor, any requirement that racketeering be proved must be derived from the Hobbs Act itself or its legislative history. While the Hobbs

Justice Marshall

majority

United States v. Culbert

https://www.courtlistener.com/opinion/109821/united-states-v-culbert/

Hobbs Act itself or its legislative history. While the Hobbs Act was enacted to correct a perceived deficiency in the Anti-Racketeering Act, that deficiency had nothing to do with the element of racketeering. See United Rather, it involved the latter Act's requirement that the proscribed "force, violence or coercion" lead to exaction of "valuable consideration" and its exclusion of wage payments from the definition of consideration. See n. In construing the wage-payments exclusion, this Court had held that the Act *377 did not cover the actions of union truckdrivers who exacted money by threats or violence from out-of-town drivers in return for undesired and often unutilized services. United 31 U.S. 21 Shortly thereafter, several bills were introduced in Congress to alter this result. United and n.8. The bill that eventually became the Hobbs Act deleted the exception on which the Court had relied in Teamsters and substituted specific prohibitions against robbery and extortion for the Anti-Racketeering Act's language relating to the use of force or threats of force. The primary focus in the Hobbs Act debates was on whether the bill was designed as an attack on organized labor. Opponents of the bill argued that it would be used to prosecute strikers and interfere with labor unions. See, e. g., 91 Cong. Rec. 11848 (194) (remarks of Rep. Lane); ; The proponents of the bill steadfastly maintained that the purpose of the bill was to prohibit robbery and extortion perpetrated by anyone. See, e. g., ; ; ; Although there were many references in the debates to "racketeers" and "racketeering," see, e. g., ; ; none of the comments supports the conclusion that Congress did not intend to make punishable all conduct falling within the reach of the statutory language. To the contrary, the debates are fully consistent with the statement in the Report of the House Committee on the Judiciary that the purpose of the bill was "to prevent anyone from obstructing, delaying, or affecting commerce, or the movement of any article or commodity in commerce by robbery or extortion as defined in the bill." H. R. Rep. No. 238, 79th Cong., 1st Sess., 9 (194) (emphasis *378 added); see also S. Rep. No. 116, 79th Cong., 2d Sess., 1 (1946).[8] Indeed, many Congressmen praised the bill because it set out with more precision the conduct that was being made criminal. As Representative Hobbs noted, the words robbery and extortion "have been construed a thousand times by the courts. Everybody knows what they mean." 91 Cong. Rec. 11912 (194). See also ; ; In the wake of the Court's

Justice Marshall

majority

United States v. Culbert

https://www.courtlistener.com/opinion/109821/united-states-v-culbert/

See also ; ; In the wake of the Court's decision in Teamsters, moreover, a paramount congressional concern was to be clear about what conduct was prohibited: "We are explicit. That language is too general, and we thought it better to make this bill explicit, and leave nothing to the imagination of the court." 91 Cong. Rec. 11904 (194) See It is inconceivable that, at the same time Congress was so concerned about clearly defining the acts prohibited under the bill, it intended to make proof of racketeering—a term not mentioned in the statute—a separate prerequisite to criminal liability under the Hobbs Act.[9] *379 III We therefore conclude that respondent's position has no support in either the statute or its legislative history. Respondent also invokes, as did the court below, two maxims of statutory construction, but neither is applicable here. It is true that "ambiguity concerning the ambit of criminal statutes should be resolved in favor of lenity," and that, "unless Congress conveys its purpose clearly, it will not be deemed to have significantly changed the federal-state balance," United But here Congress has conveyed its purpose clearly, and we decline to manufacture ambiguity where none exists. The two maxims only apply "when we are uncertain about the statute's meaning"; they are "not to be used `in complete disregard of the purpose of the legislature.'" 431 U.S. 63, 77 quoting United 348 U.S. 03, 10 (19). With regard to the concern about disturbing the federal-state balance, moreover, there is no question that Congress intended to define as a federal crime conduct that it knew was punishable under state law. The legislative debates are replete with statements that the conduct punishable under the Hobbs Act was already punishable under state robbery and extortion statutes. See, e. g., 91 Cong. Rec. 11848 (194) ; ; Those who opposed the Act argued that it was a grave interference with the rights of the States. See, e. g., ; Congress apparently believed, however, that the States had not been effectively prosecuting robbery and extortion affecting interstate commerce and that the Federal Government had an obligation to do so. See, e. g., ; 11920 Our examination of the statutory language and the legislative history of the Hobbs Act impels us to the conclusion that Congress intended to make criminal all conduct within the reach of the statutory language. We therefore decline the invitation to limit the statute's scope by reference to an undefined category of conduct termed "racketeering." The judgment of the Court of Appeals is, accordingly, Reversed. MR. JUSTICE BRENNAN took no part in the

Justice Powell

majority

United States v. Byrum

https://www.courtlistener.com/opinion/108599/united-states-v-byrum/

Decedent, Milliken C. Byrum, created in 1958 an irrevocable trust to which he transferred shares of stock in three closely held corporations. Prior to transfer, he owned at least 71% of the outstanding stock of each corporation. The beneficiaries were his children or, in the event of their death before the termination of the trust, their surviving children. The trust instrument specified that there be a corporate trustee. Byrum designated as sole trustee an independent corporation, Huntington National Bank. The trust agreement vested *127 in the trustee broad and detailed powers with respect to the control and management of the trust property. These powers were exercisable in the trustee's sole discretion, subject to certain rights reserved by Byrum: (i) to vote the shares of unlisted stock held in the trust estate; (ii) to disapprove the sale or transfer of any trust assets, including the shares transferred to the trust; (iii) to approve investments and reinvestments; and (iv) to remove the trustee and "designate another corporate Trustee to serve as successor." Until the youngest living child reached age 21, the trustee was authorized in its "absolute and sole discretion" to pay the income and principal of the trust to or for the benefit of the beneficiaries, "with due regard to their individual needs for education, care, maintenance and support." After the youngest child reached 21, the trust was to be divided into a separate trust for each child, to terminate when the beneficiaries reached 35. The trustee was authorized in its discretion to pay income and principal from these trusts to the beneficiaries for emergency or other "worthy need," including education.[1] *128 When he died in 1964, Byrum owned less than 50% of the common stock in two of the corporations and 59% in the third. The trust had retained the shares *129 transferred to it, with the result that Byrum had continued to have the right to vote not less than 71% of the common stock in each of the three corporations.[2]*130 There were minority stockholders, unrelated to Byrum, in each corporation. Following Byrum's death, the Commissioner of Internal Revenue determined that the transferred stock was properly included within Byrum's gross estate under 2036 (a) of the Internal Revenue Code of 1954, 26 U.S. C. 2036 (a). That section provides for the inclusion in a decedent's gross estate of all property which the decedent has transferred by inter vivos transaction, if he has retained for his lifetime "(1) the possession or enjoyment of, or the right to the income from, the property" transferred, or "(2) the right, either alone or

Justice Powell

majority

United States v. Byrum

https://www.courtlistener.com/opinion/108599/united-states-v-byrum/

the property" transferred, or "(2) the right, either alone or in conjunction with any person, to designate the persons who shall possess or enjoy the property or the income *131 therefrom."[3] The Commissioner determined that the stock transferred into the trust should be included in Byrum's gross estate because of the rights reserved by him in the trust agreement. It was asserted that his right to vote the transferred shares and to veto any sale thereof by the trustee, together with the ownership of other shares, enabled Byrum to retain the "enjoyment of the property," and also allowed him to determine the flow of income to the trust and thereby "designate the persons who shall enjoy the income." The executrix of Byrum's estate paid an additional tax of $13,202.45, and thereafter brought this refund action in District Court. The facts not being in dispute, the court ruled for the executrix on cross motions for summary judgment. The Court of Appeals affirmed, one judge dissenting. We granted the Government's petition for certiorari. I The Government relies primarily on its claim, made under 2036 (a) (2), that Byrum retained the right to *132 designate the persons who shall enjoy the income from the transferred property. The argument is a complicated one. By retaining voting control over the corporations whose stock was transferred, Byrum was in a position to select the corporate directors. He could retain this position by not selling the shares he owned and by vetoing any sale by the trustee of the transferred shares. These rights, it is said, gave him control over corporate dividend policy. By increasing, decreasing, or stopping dividends completely, it is argued that Byrum could "regulate the flow of income to the trust" and thereby shift or defer the beneficial enjoyment of trust income between the present beneficiaries and the remaindermen. The sum of this retained power is said to be tantamount to a grantor-trustee's power to accumulate income in the trust, which this Court has recognized constitutes the power to designate the persons who shall enjoy the income from transferred property.[4] At the outset we observe that this Court has never held that trust property must be included in a settlor's gross estate solely because the settlor retained the power *133 to manage trust assets. On the contrary, since our decision in it has been recognized that a settlor's retention of broad powers of management does not necessarily subject an inter vivos trust to the federal estate tax.[5] Although there was no statutory analogue to 2036 (a) (2) when Northern Trust was decided, several lower

Justice Powell

majority

United States v. Byrum

https://www.courtlistener.com/opinion/108599/united-states-v-byrum/

2036 (a) (2) when Northern Trust was decided, several lower court decisions decided after the enactment of the predecessor of 2036 (a) (2) have upheld the settlor's right to exercise managerial powers without incurring estate-tax liability.[6] In Estate of a settlor reserved the power to direct the trustee in the management and investment of trust assets. The Government argued that the settlor was thereby empowered to cause investments to be made in such a manner as to control significantly the flow of income into the trust. The Tax Court rejected this argument, and held for the taxpayer. Although the court recognized that the settlor had reserved "wide latitude in the exercise of his discretion as to the types of investments to be made," it did not find this control over the flow of income to be equivalent *134 to the power to designate who shall enjoy the income from the transferred property. Essentially the power retained by Byrum is the same managerial power retained by the settlors in Northern Trust and in King. Although neither case controls this one—Northern Trust, because it was not decided under 2036 (a) (2) or a predecessor; and King, because it is a lower court opinion—the existence of such precedents carries weight.[7] The holding of Northern Trust, that the settlor of a trust may retain broad powers of management without adverse estate-tax consequences, may have been relied upon in the drafting of hundreds of inter vivos trusts.[8] The modification of this principle now sought by the Government could have a seriously adverse impact, especially upon settlors (and their estates) who happen to have been "controlling" stock-holders *135 of a closely held corporation. Courts properly have been reluctant to depart from an interpretation of tax law which has been generally accepted when the departure could have potentially far-reaching consequences. When a principle of taxation requires re-examination, Congress is better equipped than a court to define precisely the type of conduct which results in tax consequences. When courts readily undertake such tasks, taxpayers may not rely with assurance on what appear to be established rules lest they be subsequently overturned. Legislative enactments, on the other hand, although not always free from ambiguity, at least afford the taxpayers advance warning. The Government argues, however, that our opinion in United compels the inclusion in Byrum's estate of the stock owned by the trust. In O'Malley, the settlor of an inter vivos trust named himself as one of the three trustees. The trust agreement authorized the trustees to pay income to the life beneficiary or to accumulate it as a

Justice Powell

majority

United States v. Byrum

https://www.courtlistener.com/opinion/108599/united-states-v-byrum/

to the life beneficiary or to accumulate it as a part of the principal of the trust in their "sole discretion." The agreement further provided that net income retained by the trustees, and not distributed in any calendar year, " `shall become a part of the principal of the Trust Estate.' " at 629 n. 2. The Court characterized the effect of the trust as follows: "Here Fabrice [the settlor] was empowered, with the other trustees, to distribute the trust income to the income beneficiaries or to accumulate it and add it to the principal, thereby denying to the beneficiaries the privilege of immediate enjoyment and conditioning their eventual enjoyment upon surviving the termination of the trust." As the retention of this legal right by the settlor, acting as a trustee "in conjunction" with the other trustees, *136 came squarely within the language and intent of the predecessor of 2036 (a) (2), the taxpayer conceded that the original assets transferred into the trust were includable in the decedent's gross estate. The issue before the Court was whether the accumulated income, which had been added to the principal pursuant to the reservation of right in that respect, was also includable in decedent's estate for tax purposes. The Court held that it was. In our view, and for the purposes of this case, O'Malley adds nothing to the statute itself. The facts in that case were clearly within the ambit of what is now 2036 (a). That section requires that the settlor must have "retained for his life (2) the right to designate the persons who shall possess or enjoy the property or the income therefrom." O'Malley was covered precisely by the statute for two reasons: (1) there the settlor had reserved a legal right, set forth in the trust instrument; and (2) this right expressly authorized the settlor, "in conjunction" with others, to accumulate income and thereby "to designate" the persons to enjoy it. It must be conceded that Byrum reserved no such "right" in the trust instrument or otherwise. The term "right," certainly when used in a tax statute, must be given its normal and customary meaning. It connotes an ascertainable and legally enforceable power, such as that involved in O'Malley.[9] Here, the right ascribed to Byrum was the power to use his majority position and influence over the corporate directors to "regulate the flow of dividends" to the trust. That "right" was *137 neither ascertainable nor legally enforceable and hence was not a right in any normal sense of that term.[10] Byrum did retain the legal right to vote

Justice Powell

majority

United States v. Byrum

https://www.courtlistener.com/opinion/108599/united-states-v-byrum/

that term.[10] Byrum did retain the legal right to vote shares held by the trust and to veto investments and reinvestments. But the corporate trustee alone, not Byrum, had the right to pay out or withhold income and thereby to designate who among the beneficiaries enjoyed such income. Whatever power Byrum may have possessed with respect to the flow of income into the trust was derived not from an enforceable legal right specified in the trust instrument, but from the fact that he could elect a majority of the directors of the three corporations. The power to elect the directors conferred no legal right to command them to pay or not to pay dividends. A majority shareholder has a fiduciary duty not to misuse his power by promoting his personal interests at the expense of corporate interests.[11] Moreover, *138 the directors also have a fiduciary duty to promote the interests of the corporation.[12] However great Byrum's influence may have been with the corporate directors, their responsibilities were to all stockholders and were enforceable according to legal standards entirely unrelated to the needs of the trust or to Byrum's desires with respect thereto. The Government seeks to equate the de facto position of a controlling stockholder with the legally enforceable "right" specified by the statute. Retention of corporate control (through the right to vote the shares) is said to be "tantamount to the power to accumulate income" in the trust which resulted in estate-tax consequences in O'Malley. The Government goes on to assert that "[t]hrough exercise of that retained power, [Byrum] could increase or decrease corporate dividends. and thereby shift or defer the beneficial enjoyment of trust income."[13] This approach seems to us *139 not only to depart from the specific statutory language,[14] but also to misconceive the realities of corporate life. There is no reason to suppose that the three corporations controlled by Byrum were other than typical small businesses. The customary vicissitudes of such enterprises —bad years; product obsolescence; new competition; disastrous litigation; new, inhibiting Government regulations; even bankruptcy—prevent any certainty or predictability as to earnings or dividends. There is no assurance that a small corporation will have a flow of net earnings or that income earned will in fact be available for dividends. Thus, Byrum's alleged de facto "power to *140 control the flow of dividends" to the trust was subject to business and economic variables over which he had little or no control. Even where there are corporate earnings, the legal power to declare dividends is vested solely in the corporate board. In making decisions with respect

Justice Powell

majority

United States v. Byrum

https://www.courtlistener.com/opinion/108599/united-states-v-byrum/

solely in the corporate board. In making decisions with respect to dividends, the board must consider a number of factors. It must balance the expectation of stockholders to reasonable dividends when earned against corporate needs for retention of earnings. The first responsibility of the board is to safeguard corporate financial viability for the long term. This means, among other things, the retention of sufficient earnings to assure adequate working capital as well as resources for retirement of debt, for replacement and modernization of plant and equipment, and for growth and expansion. The nature of a corporation's business, as well as the policies and long-range plans of management, are also relevant to dividend payment decisions.[15] Directors of a closely held, small corporation must bear in mind the relatively limited access of such an enterprise to capital markets. This may require a more conservative policy with respect to dividends than would be expected of an established corporation with securities listed on national exchanges.[16] *141 Nor do small corporations have the flexibility or the opportunity available to national concerns in the utilization of retained earnings. When earnings are substantial, a decision not to pay dividends may result only in the accumulation of surplus rather than growth through internal or external expansion. The accumulated earnings may result in the imposition of a penalty tax.[17] These various economic considerations are ignored at the directors' peril. Although vested with broad discretion in determining whether, when, and what amount of dividends shall be paid, that discretion is subject to legal restraints. If, in obedience to the will of the majority stockholder, corporate directors disregard the interests of shareholders by accumulating earnings to an unreasonable extent, they are vulnerable to a derivative suit.[18] They are similarly vulnerable if they make an unlawful payment of dividends in the absence of net earnings or available surplus,[19] or if they fail to exercise *142 the requisite degree of care in discharging their duty to act only in the best interest of the corporation and its stockholders. Byrum was similarly inhibited by a fiduciary duty from abusing his position as majority shareholder for personal or family advantage to the detriment of the corporation or other stockholders. There were a substantial number of minority stockholders in these corporations who were unrelated to Byrum.[20] Had Byrum and the directors violated their duties, the minority shareholders would have had a cause of action under Ohio law.[21] The Huntington National Bank, as trustee, was one of the minority stockholders, and it had both the right and the duty to hold Byrum responsible for any wrongful or

Justice Powell

majority

United States v. Byrum

https://www.courtlistener.com/opinion/108599/united-states-v-byrum/

the duty to hold Byrum responsible for any wrongful or negligent action as a controlling stockholder or as a director of the corporations.[22] Although Byrum had reserved the right to remove the trustee, he would have been imprudent to do this when confronted by the *143 trustee's complaint against his conduct. A successor trustee would succeed to the rights of the one removed. We conclude that Byrum did not have an unconstrained de facto power to regulate the flow of dividends to the trust, much less the "right" to designate who was to enjoy the income from trust property. His ability to affect, but not control, trust income, was a qualitatively different power from that of the settlor in O'Malley, who had a specific and enforceable right to control the income paid to the beneficiaries.[23] Even had Byrum managed to flood the trust with income, he had no way of compelling the trustee to pay it out rather than accumulate it. Nor could he prevent the trustee from making payments from other trust assets,[24] although admittedly there were few of these at the time of Byrum's death. We cannot assume, however, that no other assets would come into the trust from reinvestments or other gifts.[25] *144 We find no merit to the Government's contention that Byrum's de facto "control," subject as it was to the economic and legal constraints set forth above, was tantamount to the right to designate the persons who shall enjoy trust income, specified by 2036 (a) (2).[26] *145 II The Government asserts an alternative ground for including the shares transferred to the trust within Byrum's gross estate. It argues that by retaining control, Byrum guaranteed himself continued employment and remuneration, as well as the right to determine whether and when the corporations would be liquidated or merged. Byrum is thus said to have retained "the enjoyment of the property" making it includable within his gross estate under 2036 (a) (1). The Government concedes that the retention of the voting rights of an "unimportant minority interest" would not require inclusion of the transferred shares under 2036 (a) (1). It argues, however, "where the cumulative effect of the retained powers and the rights flowing from the shares not placed in trust leaves the grantor in control of a close corporation, and assures that control for his lifetime, he has retained the `enjoyment' of the transferred stock."[27] Brief for United States 23. It is well settled that the terms "enjoy" and "enjoyment," as used in various estate tax statutes, "are not terms of art, but connote substantial present economic

Justice Powell

majority

United States v. Byrum

https://www.courtlistener.com/opinion/108599/united-states-v-byrum/

"are not terms of art, but connote substantial present economic benefit rather than technical vesting of title or estates."[28] For example, in in which the critical inquiry was whether the decedent had created a trust "intended. `to take effect in possession or enjoyment at or after his death,' "[29] at 348, the Court held that reserved powers of management of trust assets, similar to Byrum's power over the three corporations, did not subject an inter vivos trust to the federal estate tax. In determining whether the settlor had retained the enjoyment of the transferred property, the Court said: "Nor did the reserved powers of management of the trusts save to decedent any control over the economic benefits or the enjoyment of the property. He would equally have reserved all these powers and others had he made himself the trustee, but the transfer would not for that reason have been incomplete. The shifting of the economic interest in the trust property which was the subject of the tax was thus complete as soon as the trust was made. His power to recall the property and of control over it for his own benefit then ceased and as the trusts were not made in contemplation *147 of death, the reserved powers do not serve to distinguish them from any other gift inter vivos not subject to the tax." -347. The cases cited by the Government reveal that the terms "possession" and "enjoyment," used in 2036 (a) (1), were used to deal with situations in which the owner of property divested himself of title but retained an income interest or, in the case of real property, the lifetime use of the property. Mr. Justice Black's opinion for the Court in Church, traces the history of the concept. In none of the cases cited by the Government has a court held that a person has retained possession or enjoyment of the property if he has transferred title irrevocably, made complete delivery of the property and relinquished the right to income where the property is income producing.[30] The Government cites only one case, Estate of[31] in which a decedent had retained the right to vote transferred shares of stock and in which the stock was included *148 within the decedent's gross estate. In that case, it was not the mere power to vote the stock, giving the decedent control of the corporation, which caused the Tax Court to include the shares. The court held that " `on an inclusive view of the whole arrangement, this withholding of the income until decedent's death, coupled with the

Justice Powell

majority

United States v. Byrum

https://www.courtlistener.com/opinion/108599/united-states-v-byrum/

withholding of the income until decedent's death, coupled with the retention of the certificates under the pledge and the reservation of the right to vote the stock and to designate the company officers' " subjects the stock to inclusion within the gross estate. The settlor in Holland retained a considerably greater interest than Byrum retained, including an income interest.[32] As the Government concedes, the mere retention of the right-to-vote shares does not constitute the type of "enjoyment" in the property itself contemplated by 2036 (a) (1). In addition to being against the weight of precedent, the Government's argument that Byrum retained "enjoyment" within the meaning of 2036 (a) (1) is conceptually unsound. This argument implies, as it must under the express language of 2036 (a), that Byrum "retained for his life (1) the possession or enjoyment" of the "property" transferred to the trust or the "income" therefrom. The only property he transferred was corporate stock. He did not transfer "control" (in the sense used by the Government) as the trust never owned as much as 50% of the stock of any corporation. Byrum never divested himself of control, as he was able to vote a majority of the shares by virtue of what he owned and the right to vote those placed in *149 the trust. Indeed, at the time of his death he still owned a majority of the shares in the largest of the corporations and probably would have exercised control of the other two by virtue of being a large stockholder in each.[33] The statutory language plainly contemplates retention of an attribute of the property transferred—such as a right to income, use of the property itself, or a power of appointment with respect either to income or principal.[34] Even if Byrum had transferred a majority of the stock, but had retained voting control, he would not have retained "substantial present economic benefit," The Government points to the retention of two "benefits." The first of these, the power to liquidate or *150 merge, is not a present benefit; rather, it is a speculative and contingent benefit which may or may not be realized. Nor is the probability of continued employment and compensation the substantial "enjoyment of [the transferred] property" within the meaning of the statute. The dominant stockholder in a closely held corporation, if he is active and productive, is likely to hold a senior position and to enjoy the advantage of a significant voice in his own compensation. These are inevitable facts of the free-enterprise system, but the influence and capability of a controlling stockholder to favor

per_curiam

per_curiam

Zant v. Stephens

https://www.courtlistener.com/opinion/110702/zant-v-stephens/

The respondent was convicted of murder in a Georgia Superior Court. His sentencing jury found the following statutory aggravating circumstances:[1] *412 "(1) that the offense of murder was committed by a person with a prior record of conviction of a capital felony, Code Ann. 27-2534.1(b)(1); (2) that the murder was committed by a person who has a substantial history of serious assaultive criminal convictions, Code Ann. 27-2534.1(b)(1), and, (3) that the offense of murder was committed by a person who had escaped from the lawful custody of a peace officer or a place of lawful *413 confinement, Code Ann. 27-2534.1(b)(9)." The jury imposed the death penalty. On direct appeal, the Georgia Supreme Court affirmed. On the authority of it set aside the second statutory aggravating circumstance found by the jury. It upheld the death sentence, however, on the ground that in Arnold "that was the sole aggravating circumstance found by the jury," whereas in the case under review "the evidence supports the jury's findings of the other statutory aggravating circumstances, and consequently the sentence is not impaired." -262, 227 S. E. 2d, at 263. After exhausting his state postconviction remedies, the respondent applied for a writ of habeas corpus in Federal District Court. Relief was denied by that court, but the United States Court of Appeals for the Fifth Circuit "reverse[d] the district court's denial of habeas corpus relief insofar as it le[ft] standing the [respondent's] death sentence, and remanded for further proceedings." modified, We granted the petition for certiorari. In we upheld the Georgia death penalty statute because the standards and procedures set forth therein promised to alleviate to a significant degree the concern of that the death penalty not be imposed capriciously or in a freakish manner. We recognized that the constitutionality of Georgia death sentences ultimately would depend on the Georgia Supreme Court's construing the statute and reviewing capital sentences consistently with this concern. See 201-206 ; Our review of the statute did not lead us to examine all of its nuances. It was only after the state law relating to capital sentencing was clarified in concrete cases that we confronted and addressed more specific constitutional challenges in and Today, we are asked to decide whether a reviewing court constitutionally may sustain a death sentence as long as at least one of a plurality of statutory aggravating circumstances found by the jury is valid and supported by the evidence. The Georgia Supreme Court consistently has asserted that authority.[2] Its construction of state law is clear: "Where two or more statutory aggravating circumstances are found by the jury,