source: Caselaw Access Project

author: Per Curiam.

license: Public Domain

text:
    O’HAIR et al. v. PAINE et al.
    No. 1190.
    Decided April 6, 1970

      James H. Anderson, Jr., for appellants Society of Separationists, Inc., et al.

      Solicitor General Griswold for appellees.
   Per Curiam.

The motion to dismiss is granted and the appeal is dismissed for want of jurisdiction.


author: Mr. Justice Douglas Mr. Justice Brennan,

text:
    AMERICAN FARM LINES v. BLACK BALL FREIGHT SERVICE et al.
    No. 369.
    Argued February 25, 1970
    Decided April 20, 1970

      Joseph A. Calif ano, Jr., argued the cause for appellant in No. 369. With him on the briefs were John D. Hawke, Jr., and William L. Peterson, Jr. Arthur J. Cerra argued the cause for appellant in No. 382. With him on the brief were Solicitor General Griswold, Assistant Attorney General McLaren, Deputy Solicitor General Springer, John H. D. Wigger, and Robert W. Ginnane.

      William H. Dempsey, Jr., argued the cause for appel-lees in both cases and filed a brief for appellees Consolidated Freightways Corp. et al. In both cases Ed White filed a brief for railroad appellees; William B. Adams, Peter T. Beardsley, and Nelson J. Cooney filed a brief for certain motor carrier appellees, and James W. Wrape and Robert E. Joyner filed a brief for Dealers Transit, Inc., et al.

       Together with No. 382, Interstate Commerce Commission v. Black Ball Freight Service et al., on appeal from the same court.

   Mr. Justice Douglas

delivered the opinion of the Court.

The Interstate Commerce Commission has statutory power to grant motor carriers temporary operating authority “without hearings or other proceedings” when the authority relates to a “service for which there is an immediate and urgent need” and where there is “no carrier service capable of meeting such need.” Interstate Commerce Act § 210a, 52 Stat. 1238, as amended, 49 U. S. C. § 310a. The ICC processes applications for such authority under rules promulgated in 1965. 49 CFR pt. 1131. Among other things, those rules require that an applicant accompany his application with supporting statements of shippers that contain information “designed to establish an immediate and urgent need for service which cannot be met by existing carriers.” Id., § 1131.2 (c). Each such supporting statement “must contain at least” 11 items of information including the following:

“(8) Whether efforts have been made to obtain the service from existing motor, rail, or water carriers, and the dates and results of such efforts.
“(9) Names and addresses of existing carriers who have either failed or refused to provide the service, and the reasons given for any such failure or refusal.”

Appellant American Farm Lines (AFL) filed an application for temporary operating authority. The application was accompanied by a supporting statement of the Department of Defense (DOD). The ICC Temporary Authorities Board denied the application on the ground that the “applicant has not established that there exists an immediate and urgent need for any of the service proposed.” Division I of the ICC (acting as an Appellate Division) reversed the Board and granted AFL temporary authority. Protesting carriers sought review of this action in the United States District Court for the Western District of Washington. A single judge of the District Court temporarily restrained the operation of the ICC order and the ICC thereupon ordered postponement of the operation of its grant. At that time numerous petitions for reconsideration were pending before the Commission and the stay order did not direct the Commission to stay its hand with respect to them. The record was indeed not filed with the court until much later. Meanwhile, the Commission granted the petitions and reopened the proceeding to receive a further supporting statement of DOD. This took the form of the verified statement of Vincent F. Caputo, DOD Director for Transportation and Warehousing Policy, which was submitted as a purported reply to the pending petitions for reconsideration. Based upon this statement, the ICC entered a new order granting the AFL application. A single judge of the District Court restrained the operation of the new order. Thereafter a three-judge District Court conducted a full hearing on the merits. The ICC admitted at that stage that its first order “may not have been based upon evidence to support its conclusion,” but argued that there was no infirmity in the new order. The three-judge court set aside both orders. 298 F. Supp. 1006. Both AFL and ICC appealed to this Court and we noted probable jurisdiction. 396 U. S. 884.

I

The first alleged error in the case is the failure of the Interstate Commerce Commission to require strict compliance with its own rules. The rules in question, unlike some of our own, do not involve “jurisdictional” problems but only require certain information to be set forth in statements filed in support of applications of motor carriers for temporary operating authority.

The Caputo statement asserted that part of the tremendous volume of traffic that DOD moved in the territories involved had to be moved “in the most expeditious manner possible,” and that, since air transport was prohibitively expensive “except in the most extreme emergencies,” there was an “imperative” need for the most expeditious motor carrier service. The need for this expeditious transport did not rest merely on a desire to obtain the most efficient service, but in addition rested on the need to coordinate arrival times of shipments with factory production schedules and with ship-loading or airlift times for overseas shipments. The particular inadequacies in existing service were pointed out, namely, the delays inherent in joint-line service, regular-route service, and the use of single drivers. The statement did not assert that none of the existing carriers provided sufficiently expeditious service to meet DOD needs; rather it claimed that the carriers providing satisfactory service in the territories in question were so few in number that the additional services of AFL were required to meet DOD’s transportation needs.

Concededly, the Caputo statement did not give the dates of DOD’s efforts to secure service from other existing carriers, or a complete list of the names and addresses of the carriers who failed or refused to provide service, as required by the terms of subsections (8) and (9), 49 CFR § 1131.2 (c). Such a complete listing of this information, given the volume of traffic involved, would indeed have been a monumental undertaking.

The failure of the Caputo statement to provide these particular specifics did not prejudice the carriers in making precise and informed objections to AFL’s application. The briefest perusal of the objecting carriers’ replies, which cover some 156 pages in the printed record of these appeals, belies any such contention. Neither was the statement so devoid of information that it, along with the replies of the protesting carriers, could not support a finding that AFL’s service was required to meet DOD’s immediate and urgent transportation needs. In our view, the District Court exacted a standard of compliance with procedural rules that was wholly unnecessary to provide an adequate record to review the Commission’s decision.

The Commission is entitled to a measure of discretion in administering its own procedural rules in such a manner as it deems necessary to resolve quickly and correctly urgent transportation problems. It is argued that the rules were adopted to confer important procedural benefits upon individuals; in opposition it is said the rules were intended primarily to facilitate the development of relevant information for the Commission’s use in deciding applications for temporary authority.

We agree with the Commission that the rules were promulgated for the purpose of providing the “necessary information” for the Commission “to reach an informed and equitable decision” on temporary authority applications. ICC Policy Release of January 23, 1968. The Commission stated that requests for temporary authority would be turned down “if the applications do not adequately comply with [the] . . . rules.” Ibid. (Emphasis added.) The rules were not intended primarily to confer important procedural benefits upon individuals in the face of otherwise unfettered discretion as in Vitarelli v. Seaton, 359 U. S. 535; nor is this a case in which an agency required by rule to exercise independent discretion has failed to do so. Accardi v. Shaughnessy, 347 U. S. 260; Yellin v. United States, 374 U. S. 109. Thus there is no reason to exempt this case from the general principle that “[i]t is always within the discretion of a court or an administrative agency to relax or modify its procedural rules adopted for the orderly transaction of business before it when in a given case the ends of justice require it. The action of either in such a case is not reviewable except upon a showing of substantial prejudice to the complaining party.” NLRB v. Monsanto Chemical Co., 205 F. 2d 763, 764. And see NLRB v. Grace Co., 184 F. 2d 126, 129; Sun Oil Co. v. FPC, 256 F. 2d 233; McKenna v. Seaton, 104 U. S. App. D. C. 50, 259 F. 2d 780.

We deal here with the grant of temporary authority similar to that granted in Estes Express Lines v. United States, 292 F. Supp. 842, aff’d, 394 U. S. 718. There the grant of temporary authority was upheld even though there may not have been literal compliance with subsections (8) and (9) of the Commission’s rules. That result was in line with § 210a (a) of the Act which was designed to provide the Commission with a swift and procedurally simple ability to respond to urgent transportation needs. That functional approach is served by treating (8) and (9) not as inflexible procedural conditions but as tools to aid the Commission in exercising its discretion to meet “an immediate and urgent need” for services where the existing service is incapable of meeting that need. Unlike some rules, the present ones are mere aids to the exercise of the agency’s independent discretion.

II

After the Commission issued its first order, petitions for reconsideration were filed and before they were passed upon, some carriers filed suit and a single judge temporarily restrained operation of that first order. It was after that order issued and over a month before the case was argued to the three-judge court that the Commission granted the petitions for rehearing and reopened the record and received the Caputo verified statement.

The District Court held that the pendency of the review proceedings deprived the Commission of jurisdiction to reopen the administrative record.

Congress has provided as respects some regulatory systems that the agency may modify any finding up until the record is filed with a court. Such is the provision of the National Labor Relations Act, as amended, 61 Stat. 147, 29 U. S. C. § 160 (d) and § 160 (e), which provides that any subsequent changes in the record will be made only at the direction of the court. A similar provision is included in § 5 of the Federal Trade Commission Act, 38 Stat. 719, as amended, 15 U. S. C. § 45 (c) and in § 11. of the Clayton Act, 38 Stat. 734, as amended, 15 U. S. C. § 21 (c). And a like provision is included in the review by the courts of appeals of orders of other designated federal agencies. 28 U. S. C. §2347 (c) (1964 ed., Supp. IV). But there is no such requirement in the Interstate Commerce Act. It indeed empowers the Commission “at any time to grant rehearings as to any decision, order, or requirement and to reverse, change, or modify the same.”

The power of the Commission to grant rehearings is not limited or qualified by the terms of 49 U. S. C. § 17 (6) or § 17 (7). Thus in § 17 (6) it is said, “Rehearing, reargument, or reconsideration may be granted if sufficient reason therefor be made to appear.” And § 17 (7) provides that if after rehearing or reconsideration the original decision, order, or requirement appears “unjust or unwarranted,” the Commission may “reverse, change, or modify” the same. These broad powers are plainly adequate to add to the findings or firm them up as the Commission deems desirable, absent any collision or interference with the District Court.

Unless Congress provides otherwise, “[wjhere a motion for rehearing is in fact filed there is no final action until the rehearing is denied.” Outland v. CAB, 109 U. S. App. D. C. 90, 93, 284 F. 2d 224, 227. In multi-party proceedings, such as the present one, some may seek judicial review and others may seek administrative reconsideration. “That both tribunals have jurisdiction does not mean, of course, that they will act at cross purposes.” Wrather-Alvarez Broadcasting, Inc. v. FCC, 101 U. S. App. D. C. 324, 327, 248 F. 2d 646, 649. The concept “of an indivisible jurisdiction which must be all in one tribunal or all in the other may fit” some statutory schemes, ibid., but it does not fit this one.

This power of the Commission to reconsider a prior decision does not necessarily collide with the judicial power of review. For while the court properly could provide temporary relief against a Commission order, its issuance does not mean that the Commission loses all jurisdiction to complete the administrative process. It does mean that thereafter the Commission is “without power to act inconsistently with the court’s jurisdiction.” Inland Steel Co. v. United States, 306 U. S. 153, 160. When the Commission made the additional findings after its first order was stayed by the court, it did not act inconsistently with what the court had done. It did not interfere in the slightest with the court’s protective order. What the Commission did came before the court was ready to hear arguments on the merits and before the record was filed with it. Moreover, the Commission in light of the District Court's stay, by express terms, directed AFL not to perform operations under the first order and made the second order effective only on further order of the Commission. Since by the Act the Commission never lost jurisdiction to pass on petitions for rehearing, and since the stay order did not forbid it from acting on those pending petitions, it was not necessary for the Commission to seek permission of the court to make those rulings.

The Commission reopened the record merely to remedy a deficiency in it before any judicial review of the merits had commenced and fully honored the stay order of the District Court. It therefore acted in full harmony with the court’s jurisdiction.

Reversed.

Mr. Justice Brennan,

whom Mr. Justice Stewart and Mr. Justice White join,

dissenting.

I would affirm the judgment of the District Court on the ground that “[e’Jven if ICC had jurisdiction to reopen the ICC proceeding and to consider the Caputo verified statement, [the statement] would not meet the requirements of categories (8) and (9) of ICC Rule 49 C. F. R. 1131.2 (c) ” 298 F. Supp. 1006, 1011.

Insofar as ICC regulations emphasize the requirement of information concerning the ability of existing carriers to provide the service sought by a shipper, they implement not only the statutory standard under Interstate Commerce Act § 210a, 49 U. S. C. § 310a, but also the fundamental scheme of our national transportation policy. Ever since the enactment in 1887 of the Interstate Commerce Act, 24 Stat. 379, national policy has reflected the congressional determination that the public interest is served by regulating competition among carriers. See, e. g., Act of September 18, 1940, § 1, 54 Stat. 899, 49 U. S. C. preceding § 1. Regulation of entry into the motor transportation industry is one important feature of the pattern of regulation. American Trucking Associations, Inc. v. United States, 344 U. S. 298 (1953); Pan-Atlantic Steamship Corp. v. Atlantic Coast Line R. Co., 353 U. S. 436, 440 (1957) (Burton, J., dissenting). The Motor Carrier Part of the Interstate Commerce Act was passed because “the industry was unstable economically, dominated by ease of competitive entry and a fluid rate picture” and “as a result . . . became overcrowded with small economic units which proved unable to satisfy even the most minimal standards of safety or financial responsibility.” Therefore, “Congress felt compelled to require authorization for all interstate operations to preserve the motor transportation system from over-competition.” American Trucking Associations, Inc. v. United States, supra, at 312-313. To ensure fair and effective regulation of entry, 49 U. S. C. §§ 305-309 require that entry ordinarily be authorized by the ICC only after full adversary proceedings.

Section 210a is a narrow exception to the basic procedural pattern of the Motor Carrier Part since it permits the Commission to grant temporary operating authority after conducting only a minimal adversary proceeding; under 49 CFR §§ 1131.2-1131.3 action is taken on the basis of the written application, supporting statements of shippers, and written responses and objections of protestants. But § 210a, like the statutory provision considered in United States v. Drum, 368 U. S. 370, 375 (1962), expressly “bespeaks congressional concern over diversions of traffic which may harm existing carriers upon whom the bulk of shippers must depend for access to market.” The section is explicit that the ICC may grant temporary operating authority only “to a point or points or within a territory having no carrier service capable of meeting such need.” (Emphasis supplied.)

This congressional concern to protect existing carriers was again forcefully expressed in the 1968 amendment to §203 (b)(5) of the Act, 82 Stat. 448, 49 U. S. C. §303 (b)(5) (1964 ed., Supp. IV), which curtails substantially the authority of agricultural cooperatives like AFL to haul nonmembers’ freight.

The Senate Committee noted that the decision of the Court of Appeals for the Ninth Circuit in Northwest Agricultural Cooperative Assn. v. ICC, 350 F. 2d 252 (1965), “and the publicity attendant thereto has, as a practical matter, been construed by some cooperatives as an invitation to substantially expand their hauling of non-farm-related traffic for nonfarm members, and by certain groups and organizations as a device to institute unlawful transportation activities.” S. Rep. No. 1152, 90th Cong., 2d Sess., 6. The report also states, at 2:

“The relative decline of the Nation’s common carrier system in recent years is a matter of serious concern. Several traffic studies reveal that common carriers have lost considerable traffic which they formerly handled and, at the same time, have been unable to share proportionately in the additional traffic generated by the Nation's expanding economy.
“This decline is essentially a result of the growth of unregulated private and exempt carriage. But it is also attributable in part to the growth of unauthorized and illegal carriage. Such illegal operators are inimical to the public interest, and if left unchecked, could ultimately undermine the common carrier system.”

The ICC recognizes its duty to give effect to this congressional concern for existing carriers in the provision of Rule 1131.4(b)(2) that “[a]n immediate and urgent need justifying a grant of temporary authority will be determined to exist only where it is established that there is or soon will be an immediate transportation need which reasonably cannot be met by existing carrier service.” This key determination is made upon the basis of the information supplied in response to items (8) and (9) of 49 CFR § 1131.2 (c). Reasonable disclosure of whatever evidence there may be as to the inadequacy of existing service is thus of crucial importance. Disclosure makes it possible for protestante to frame specific objections addressed to concrete situations, and thereby comply with the provision of Rule 1131.3(a)(2) that protests “must be specific as to the service which [the] protestant can and will offer . . . .” Disclosure also permits the ICC to come to an informed judgment that properly respects the congressional concern for existing carriers. It follows that details and not generalities are called for. There must be disclosure, by dates and results, of efforts made by the shipper to obtain the needed service from existing carriers, with names and specific reasons given for failure or refusal to provide the service. In a case such as this, ICC action without such information flouts the congressional concern.

ICC Rules 1131.2 (c) (8) and (9) are not hypertech-nical rules, or mere matters of housekeeping convenience. They go to the heart of the issue in a temporary authority proceeding. The significance of the rules does not depend on whether, in the Court's words, they “confer important procedural benefits upon individuals/' but rather on the fact that they are designed to elicit information crucial to determining whether in light of congressional policies a particular factual situation warrants the grant of a temporary authority. Nor is the question in this case, as the Court assumes, whether the ICC erred in failing to require “strict” compliance with the rules. The District Court did not hold the Commission to a standard of strict compliance, and appellees have not argued that strict compliance is required. The issue is whether there was reasonable compliance with rules that the ICC purported to apply in this case. The District Court found that the Caputo statement relied on by the ICC in issuing the new order “fails to show any efforts by the Department of Defense to obtain from existing carriers the service AFL seeks to provide, or the identity of any existing carriers who failed or refused to provide the needed service and the reasons given for any such failure or refusal.” 298 F. Supp., at 1011. I reach the same conclusion from my examination of the statement.

AFL argues that (8) and (9) require information, not action, and that therefore a response that no effort has been made to obtain the service from other carriers is compliance with both items. However, apart from the doubtful premise that in the circumstances of this case the statute would authorize a grant of temporary operating authority without proof of such effort, the argument is foreclosed by the ICC’s express finding in its second order that DOD did in fact attempt to obtain the service elsewhere. See SEC v. Chenery Corp., 332 U. S. 194, 196 (1947); Burlington Truck Lines, Inc. v. United States, 371 U. S. 156, 168-169 (1962).

The ICC makes- a different argument. It concedes that the DOD statement does not literally comply with (8) and (9) but argues that the content of the statement constitutes reasonable compliance. The ICC insists, therefore, that the protesting carriers were not prejudiced by the lack of specific information. Insofar as this argument rests on the extensive explanation in the DOD statement of the advantages of single-line service, ICC’s own rule refutes it. 49 CFR § 1131.4 (b)(4) states:

“Generally, the desire of a shipper for single-line service in lieu of existing interchange or connecting-carrier service will not warrant a grant of temporary authority. A grant of temporary authority to effectuate single-line service will be authorized only when it is clearly established that the carriers providing multiple-line service are not capable of, or have failed in, meeting the reasonable immediate and urgent needs of shippers or receivers between the points or territories and in respect of the commodity or commodities involved.”

Thus it was not enough for the statement to assert simply that DOD desires AFL’s single-line service because DOD is interested in economy and efficiency; the requirement is that the statement spell out in detail just what DOD’s needs are, why these needs cannot be met by existing carriers, and why the authority applied for will enable AFL to meet the needs. Consequently, in this case reasonable compliance with (8) and (9) means at least compliance sufficient to permit an informed application of the standard set forth in § 1131.4 (b)(4). In my view the DOD statement fails this test. It does not indicate specifically what needs are not being satisfied by the joint- or single-line services provided by existing certificated carriers, or how those needs were brought to the attention of the unsatisfactory carriers so as to discover whether they could improve their performance to meet DOD’s needs.

The statement begins by noting that DOD ships a “tremendous volume” of freight between the nine-state area and the five-state area in question, and that “[a] part of this traffic requires that it be transported from origin to destination in the most expeditious manner possible.” It adds that “[t]his defense need for speed has not been met in many, many instances by the current certified motor carriers due to a number of factors,” among which are the facts that the “majority” of carriers offer only joint-line service, that “virtually all” carriers use regular routes which “often” are circuitous, and that “some” carriers use single drivers instead of two-man teams. The statement then gives three examples of inadequate service. The first two examples show that joint-line service is in these instances slower than single-line service, but the single-line service cited is currently being provided by a certificated carrier. Thus these two examples do not show that any of DOD’s needs are not currently being met. The third example states that in some instances, where single-line service is available over regular routes, service over irregular routes would be faster. But the statement does not identify these instances; it does not state whether DOD brought the inadequacies to the attention of any carrier; nor does it state that to DOD’s knowledge there is no way the certificated carriers could speed up their service between the points in question so as to meet DOD’s reasonable “immediate and urgent need.” This entire segment of the Caputo statement fails substantially to carry out the purpose of Rules 1131.2 (c) (8) and (9) because it does not sufficiently identify what DOD regards as particular inadequacies in current service, so as to permit the protestants to make a focused response and the ICC to make a focused assessment of DOD’s asserted needs.

The statement goes on to identify numerous points between which no known certificated carrier is authorized to provide single-line service. But for none of these specific routes does it explain why joint-line service is not or could not be made reasonably adequate for DOD’s needs.

The statement next refers to particular situations calling for reliable delivery times, and examples of how present service is unreliable. Again, there is a fatal lack of specific information showing that present service is inadequate. The statement explains that it is often necessary to coordinate arrival of inbound shipments with production schedules at factories. As an example, it cites a situation in which only one of the currently certificated carriers has proven able to meet the delivery schedules, even though other carriers were made aware of the need for “timed” deliveries. The one satisfactory carrier cannot transport the entire load. However, the statement does not identify the carriers whose service has been unsatisfactory; it does not' say what efforts were made to have them improve their service; and it does not say why they have not conformed to DOD requirements. The same is true of the example of present carriers' failure to make deliveries on time for transshipment outside the United States. It is also claimed that current carriers sometimes lack authority to formulate truckload shipments of diverse commodities, but no examples whatever are cited.

Finally, the statement gives five examples of outstanding service by AFL, and states that in each case DOD experience shows that joint-line carriers could not have met the Department’s needs. Again, the unsatisfactory carriers are not identified; their reasons for not improving are not reported; and the “experience” on which DOD bases its assessment of them is not specified.

In sum, the DOD statement fails to supply that concrete evidence of the inability of particular existing carriers to provide the needed service that would enable protestants and ICC to make an informed assessment of AFL’s application. Of course, DOD was not called upon to supply the specifics of innumerable instances of inadequate or unavailable service or of every effort to obtain improved service. However, the congressional concern expressed in the statutory limitation demanded that ICC be given at least enough specifics concerning inadequate or' unavailable service and efforts to obtain better service so that protestants would have an opportunity for informed rebuttal and ICC the basis for an informed determination. It is of course irrelevant that DOD is the Nation’s largest shipper and that its freight consists almost entirely of defense needs. ICC has held that “[wjhere necessary facts are lacking” the Government is in no better position than any other shipper. Riss & Co., Inc., Extension—Explosives, 64 M. C. C. 299, 328 (1955), National Freight, Inc., Extension—Commodities in Bulk, 84 M. C. C. 403, 407 (1961).

The Court purports to find in Estes Express Lines v. United States, 292 F. Supp. 842 (D. C. E. D. Ya. 1968), aff’d per curiam, 394 U. S. 718 (1969), some support for its glossing over the inadequacies in the DOD statement. In that case an ICC grant of temporary authority was sustained without a showing that efforts had been made to establish whether any other carrier was able to meet the asserted need for the applicant’s services. But the differences between that case and the present one are instructive. There the application was supported by statements of 11 separate shippers, each of whom reported that he had previously obtained the service from the applicant, and thus had never sought it elsewhere and, further, knew of no other carrier with the special characteristics of the applicant. The application covered a single route between the District of Columbia and Richmond, Virginia, and thus it could reasonably have been found that protestants were not prejudiced by any lack of information in the supporting statements. In striking contrast, the authority sought by AFL covers transportation between all points in a nine-state area and all points in a five-state area. In my view, where an applicant seeks temporary authority as broad as this, reasonable compliance with Rules 1131.2 (c) (8) and (9) requires more information than DOD provided. Accordingly, I would affirm.

       Section 210a(a) provides in part:
      “To enable the provision of service for which there is an immediate and urgent need to a point or points or within a territory having no carrier service capable of meeting such need, the Commission may, in its discretion and without hearings or other proceedings, grant temporary authority for such service by a common carrier or a contract carrier by motor vehicle, as the case may be. 2

       49 CFR § 1131.4 (b) (2) defines the statutory term “immediate and urgent need” as follows:
      “An immediate and urgent need justifying a grant of temporary authority will be determined to exist only where it is established that there is or soon will be an immediate transportation need which reasonably cannot be met by existing carrier service. Such a showing may involve a new or relocated plant, different method of distribution, new or unusual commodities, an origin or destination not presently served by carriers, a discontinuance of existing service, failure of existing carriers to provide service, or comparable situations which require new motor carrier service before an application for permanent authority can be filed and processed.”

       See 49 CFR § 1131.2(c).

       AFL is a federation of agricultural marketing cooperatives created in 1964 to provide transportation for its members. By-virtue of § 203 (b) (5) of the Interstate Commerce Act, 54 Stat. 921, as amended, 49 U. S. C. §303 (b)(5), AFL may transport freight for its members without obtaining a certificate of convenience and necessity from the ICC. In 1965 § 203 (b) (5) was construed to exempt from the certification requirement any freight transportation by an agricultural cooperative for shippers other than its own members to the extent that such nonmember transportation is incidental and necessary to its principal transportation activities. See Northwest Agricultural Cooperative Assn. v. ICC, 350 F. 2d 252. The next year, AFL began transporting freight for DOD. In 1968-1969 AFL’s ability to continue serving DOD was restricted by two events. First, certain competing carriers obtained injunctions prohibiting AFL from making two consecutive movements for DOD and from transporting freight for any nonmember except when going to pick up, or returning from delivery of, a member’s freight. Munitions Carriers Conference, Inc. v. American Farm Lines, 415 F. 2d 747. Second, § 203 (b) (5) was amended to restrict the exemption for agricultural cooperatives to those whose transportation for nonmembers does not exceed 15% of their total annual interstate transportation, measured by tonnage. See 82 Stat. 448, 49 U. S. C. §303 (b)(5) (1964 ed., Supp. IV). AFL had transported 74,155,685 pounds for DOD between December 1966 and June 1968, and, in an effort to continue providing this service, applied to the ICC in May 1968 for temporary operating authority. The authority sought was to transport general commodities, including Class A and B explosives moving on government bills of lading over irregular routes between points in Kentucky, Indiana, Illinois, Missouri, Arkansas, Louisiana, Texas, Oklahoma, and Kansas on the one hand, and points in Washington, California, Nevada, Utah,, and Arizona on the other.
      AFL has applied to the ICC for a certificate of permanent authority. It was estimated at oral argument that final action on this application will not be taken by ICC before mid-1971. Meanwhile the ICC may extend the temporary authority. Pan-Atlantic Steamship Corp. v. Atlantic Coast Line R. Co., 353 U. S. 436.

       The precise chronology of these events is shown in n. 9, infra.

       ICC is not appealing from the District Court's decision setting aside' the first order.

       It was once proposed that the same requirement be written into the law respecting those orders of the Commission reviewed by the courts of appeal as distinguished from the three-judge district courts. See H. R. Rep. No. 1619, 80th Cong., 2d Sess., 4. But the ICC was deleted from the measure. Id., at 1. And the Act as approved covered only other designated agencies. 28 U. S. C. §2342 (1964 ed., Supp. IV).

       See Baldwin v. Scott County Milling Co., 307 U. S. 478, 484.

       The District Court’s stay was issued October 2, 1968. On October 9, the Commission stayed the effective date of its first order “until further order of the Commission.” On November 5, 1968, the Commission reopened the proceeding before it and directed AFL, in light of the District Court's order, “not to perform” any operations under its first order “until further order of the Commission.” On November 12, 1968, the Commission advised the District Court of its action. On December 20, 1968, the Commission entered its second order which authorized commencement of service by AFL only on further notice by the ICC. On December 31, 1968, a supplemental complaint was filed in the District Court challenging the Commission’s second order. On January 6, 1969, a single judge of the District Court stayed that order. On March 26, 1969, the District Court entered its judgment now being reviewed.

       In some “emergency” situations temporary authority may be granted without the notice to protestants otherwise required by ICC rules. See 49 CFR § 1131.2 (d). That provision is not at issue in this case.

       The ICC makes no claim that it did not apply its regulations in this case; the insistence is that DOD’s supporting statement satisfied the rules. There is, therefore, no occasion to consider the question mooted in the briefs whether, in light of the principle applied in Service v. Dulles, 354 U. S. 363 (1957), the ICC could depart from its own rules. See also Vitarelli v. Seaton, 359 U. S. 535 (1959); Accardi v. Shaughnessy, 347 U. S. 260 (1954); Yellin v. United States, 374 U. S. 109 (1963); Bridges v. Wixon, 326 U. S. 135, 153 (1945).

       The ICC expressly found “[t]hat [DOD] has attempted but has been unable to obtain the required and necessary type of service and knows of no carrier in a position to meet its needs.”


author: Mr. Justice Douglas Mr. Justice Black, Mr. Chief Justice Burger,

text:
    LEWIS et al. v. MARTIN, DIRECTOR, CALIFORNIA DEPARTMENT OF SOCIAL WELFARE, et al.
    No. 829.
    Argued March 3-4, 1970
    Decided April 20, 1970

      Anthony G. Amsterdam argued the cause for appellants. On the brief were Rubin Tepper, Steven J. Antler, and Peter Sitkin.

      Jay S. Linderman, Deputy Attorney General of California, argued the cause for appellees. With him on the brief were Thomas C. Lynch, Attorney General, and Elizabeth Palmer, Deputy Attorney General.

      Francis X. Beytagh, Jr., argued the cause for the United States as amicus curiae urging reversal. On the brief were Solicitor General Griswold, Assistant Attorney General Ruckelshaus, Lawrence G. Wallace, and Alan S. Rosenthal. Martin Garbus and Carl Rachlin filed a brief for the Center on Social Welfare Policy & Law et al. as amici curiae urging reversal.
   Mr. Justice Douglas

delivered the opinion of the Court.

Appellants are mothers and children who receive welfare assistance under California law. At the time these actions were commenced, California law provided that payments to a “needy child” who “lives with his mother and a stepfather or an adult male person assuming the role of spouse to the mother although not legally married to her” — known in the vernacular as a MARS— shall be computed after consideration is given to the income of the stepfather or MARS. The California law conclusively presumes that the needs of the children are reduced by the amount of income available from the man in the house whether or not it is in fact available or actually used to meet the needs of the dependent children.

Following our decision in King v. Smith, 392 U. S. 309, the Department of Health, Education, and Welfare (HEW) promulgated a regulation reaffirming its earlier rulings that the income of a man not ceremonially married to the mother of the dependent children may not be treated as available to the children unless there is proof that he has made actual contributions. Even where the man is ceremonially married to the mother but is not the real or adoptive father, his income may not be treated as available to the children unless he is legally obligated to support the children by state law.

These suits by appellants were brought in a three-judge District Court to have the California law and regulations declared invalid. That court dismissed the complaints, holding the HEW regulations were invalid. 312 F. Supp. 197. The cases are here on appeal and we noted probable jurisdiction. 396 U. S. 900.

The Social Security Act defines a dependent child as a “needy child . . . who has been deprived of parental support or care by reason of the death, continued absence from the home, or physical or mental incapacity of a parent, and who is living with” a specified relative. § 406 (a), 49 Stat. 629, 42 U. S. C. § 606 (a). This is the Aid to Families With Dependent Children (AFDC) program which we discussed in King v. Smith.

The federal statute provides that state agencies administering AFDC plans “shall, in determining need [of an eligible child], take into consideration any other income and resources [of the child] ... as well as any expenses reasonably attributable to the earning of any such income.” 42 U. S. C. § 602 (a) (7) (1964 ed., Supp. IV).

This directive was implemented by a regulation of HEW, effective July 1, 1967, wdiich, as then worded, provided in part:

“[0]nly income and resources that are, in fact, available to an applicant or recipient for current use on a regular basis will be taken into consideration in determining need and the amount of payment.”

We stated in King v. Smith, supra, at 319 n. 16, that those regulations “clearly comport with” the Act. And as we have noted, shortly after King v. Smith, HEW promulgated a new regulation which provided in pertinent part:

“(a) A State plan for aid and services to needy families with children . . . must provide that the determination whether a child has been deprived of parental support or care by reason of the death, continued absence from the home, or physical or mental incapacity of a parent . . . will be made only in relation to the child's natural or adoptive parent, or in relation to a child’s stepparent who is ceremonially married to the child’s natural or adoptive parent and is legally obligated to support the child under State law of general applicability which requires stepparents to support stepchildren to the same extent that natural or adoptive parents are required to support their children.
“(b) The inclusion in the family, or the presence in the home, of a ‘substitute parent’ or ‘man-in-the-house’ or any individual other than one described in paragraph (a) of this section is not an acceptable basis for a finding of ineligibility or for assuming the availability of income by the State. ... [I]n the consideration of all income and resources in establishing financial eligibility and the amount of the assistance payment, only such net income as is actually available for current use on a regular basis will be considered, and the income only of the parent described in paragraph (a) of this section will be considered available for children in the household in absence of proof of actual contributions.” (Emphasis added.)

In other words, the regulations explicitly negate the idea that in determining a child’s needs, a stepfather (i. e., a man married to a child’s mother but who has not adopted the child and is not legally obligated to support the child under state law) or a MARS may be presumed to be providing support.

We said in King v. Smith that AFDC aid can be granted “only if ‘a parent’ of the needy child is continually absent from the home.” 392 U. S., at 313. If the stepfather or MARS is a “parent” within the meaning of the federal Act, any federal matching assistance under the AFDC program for children living with a MARS or stepfather would not be available to appellants. The three-judge court said that “[t]he HEW regulation, by requiring proof of actual contributions from a MARS, reduces the expectation of Congress to a mere hope.” 312 F. Supp., at 202. We disagree. We traversed the entire spectrum of that question in King v. Smith, and find it unnecessary to restate the legislative history of the relevant statutes. We concluded that Congress “intended the term 'parent’ in § 406 (a) of the Act ... to include only those persons with a legal duty of support.” 392 U. S., at 327. And we went on to say:

“It is clear, as we have noted, that Congress expected 'breadwinners’ who secured employment would support their children. This congressional expectation is most reasonably explained on the basis that the kind of breadwinner Congress had in mind was one who was legally obligated to support his children. We think it beyond reason to believe that Congress would have considered that providing employment for the paramour of a deserted mother would benefit the mother’s children whom he was not obligated to support.
“By a parity of reasoning, we think that Congress must have intended that the children in such a situation remain eligible for AFDC assistance notwithstanding their mother’s impropriety.” Id., at 329.

That reasoning led us to invalidate Alabama’s “substitute father” regulation. Like reasoning leads us to hold, contrary to the three-judge District Court, that the HEW regulation is valid. We only add that HEW might reasonably conclude that only he who is as near as a real or adoptive father would be has that consensual relation to the family which makes it reliably certain that his income is actually available for support of the children in the household. HEW may, in other words, reasonably conclude that an obligation to support under state law must be of “general applicability” to make that obligation in reality a solid assumption on which estimates of funds actually available to children on a regular basis may be calculated.

Any lesser duty of support might merely be a device for lowering welfare benefits without guaranteeing that the child would regularly receive the income on which the reduction is based, that is to say, it would not approximate the obligation to support placed on and normally assumed by natural or adoptive parents. That reading of the Act and of King v. Smith certainly cannot be said to be impermissible.

Our decision in King v. Smith held only that a legal obligation to support was a necessary condition for qualification as a “parent”; it did not also suggest that it would always be a sufficient condition. We find nothing in this regulation to suggest inconsistency with the Act’s basic purpose of providing aid to “needy” children, except where there is a “breadwinner” in the house who can be expected to provide such aid himself. HEW, the agency charged with administering the Act, has apparently concluded that as a matter of current, practical realities, the relationship of the MARS to the home is less stable than that of the stepfather who at least has the additional tie of the ceremonial marriage, and that the likelihood of the MARS’ contributing his income to the children — even if legally obligated to do so — is sufficiently uncertain in the absence of the marriage tie, to prevent viewing him as a “breadwinner” unless the bread is actually set on the table. Nothing in this record shows that this administrative judgment does not correspond to the facts. We give HEW the deference due the agency charged with the administration of the Act, see, e. g., Red Lion Broadcasting Co., Inc. v. FCC, 395 U. S. 367, 381; Zemel v. Rusk, 381 U. S. 1, 11-12. In the absence of proof of actual con-”| tribution, California may not consider the child's “resources” to include either the income of a nonadopting stepfather who is not legally obligated to support the child as is a natural parent, or the income of a MARS— [^whatever the nature of his obligation to support.

California on remand is foreclosed from arguing that its assumption-of-income provisions are consistent with the Act as applied to MARS; the State is limited to demonstrating that those provisions may be retained under the Act as applied to nonadopting stepfathers by showing that the legal obligation placed on such stepparents is consistent with the obligation required by the federal regulation.

Whether in that posture of the case California’s laws and regulations are inconsistent with the federal standard is a question that the District Court did not reach. The case is therefore reversed and remanded so that such an adjudication can be made.

It is so ordered.

Mr. Justice Black,

with whom The Chief Justice joins,

dissenting.

In my dissenting opinion in Rosado v. Wyman, ante, at 430-433, I pointed out that in many lawsuits brought against state welfare authorities by recipients of Aid to Families With Dependent Children (AFDC) the real controversy is not between the AFDC recipients and the State but between the Federal Government and the state government. This case presents precisely that situation. The Solicitor General has informed the Court that the Department of Health, Education, and Welfare (HEW) — the federal agency vested by statute with the duty of insuring that States which receive federal AFDC matching funds abide by the federal requirements — has determined that § 11351 of the California Welfare and Institutions Code is inconsistent with federal AFDC regulations, 45 CFR § 203.1. This California statute provided when this suit was brought that the income of a stepfather or a man assuming the role of a spouse (MARS) to the mother of dependent, needy children shall be considered as available to the children in computing the AFDC assistance to which the children are entitled. The federal regulations, however, in general refuse to assume that the income of a stepfather or MARS is available to the children in the absence of proof of actual contributions. California admits that there is a conflict between these state and federal provisions but contends that the federal regulations are inconsistent with the requirements of the Social Security Act and that its statute is consistent with the Act. The controversy between these two governments is thus real and substantial. It was for exactly such situations that the Social Security Act provided a comprehensive remedial scheme for resolving disputes between federal and state governments. See 42 U. S. C. §§ 602, 604, 1316 (1964 ed. and Supp. IV). Under this scheme HEW has the power, subject to certain notice and hearing requirements, to terminate AFDC assistance to a State that refuses to conform to the federal policies. In this case, the termination of federal AFDC assistance to California or the credible threat to terminate that assistance in the near future would compel a resolution of the underlying issue in this lawsuit by forcing California (1) to amend its laws to conform to the existing federal regulations, (2) to challenge HEW’s determination of nonconformity in the federal courts as provided in 42 U. S. C. § 1316 (1964 ed., Supp. IV), or (3) to withdraw from the federally assisted AFDC program. Generally, the Act provides procedures that allow the state and federal governments to resolve their difference either by agreement or by lawsuit. As I stated in my dissent in Rosado v. Wyman, supra, at 434-435, if the congressional objective in establishing the Act’s remedial procedures is to be realized it is imperative that the integrity of these procedures not be undermined by premature lawsuits brought by welfare recipients. I think these remedial provisions of the Social Security Act reflect an unmistakable intent to give HEW primary jurisdiction over technical and difficult welfare issues and that these procedures should be the exclusive ones until they have been exhausted. Accordingly, in my view it was error for the District Court to assume jurisdiction and decide this case. It is strange indeed to me that the Federal Government has never been made a party to this lawsuit although its interests are deeply involved.

I would add this note of caution, however. The Federal Government has no power under our Constitution to force or coerce a State into disobeying its own valid laws while those laws are still on the books. My concern in this regard arises from my belief that a State, absent some express constitutional prohibition, has power and authority to fix and determine the property relationships and support obligations among persons within its boundaries. I certainly hope that the opinion of the Court today will not be interpreted as compelling a State to violate its own valid laws in order to obtain money from the Federal Government.

When this action was brought challenging the California statute as inconsistent with the federal regulations, HEW was in the process of considering the effect of its new regulations on the California statute. It is now clear that HEW was preparing to rule that the California provision was inconsistent with the federal requirements. If this Court today would vacate the judgment of the District Court, that order would leave HEW free to proceed to settle its controversy with California as Congress has provided. For this reason, and for those stated above, I would vacate the judgment of the District Court and order that the case be dismissed as prematurely brought.

Mr. Chief Justice Burger,

dissenting.

Unlike Dandridge v. Williams, ante, p. 471, the administrative procedures provided by statute have not been exhausted here. For this reason HEW’s primary jurisdiction remains a bar to the jurisdiction of federal courts over suits brought by welfare recipients. See Rosado v. Wyman, ante, p. 430 (dissenting opinion of Mr. Justice Black). I therefore join the dissent filed by Mr. Justice Black.

       Some of the appellants sue on behalf of themselves, their children, a man assuming the role of spouse (MARS), and all others similarly situated. There are also intervenors who represent two families, one with a stepfather and another with a MARS.

       Cal. Welf. & Inst’ns Code § 11351 (1966).
      On September 3, 1969, the Governor of California signed into law a new § 11351.5 of the California Welfare and Institutions Code, vrfiich became effective November 10, 1969. It leaves unchanged § 11351 and implementing regulations insofar as they apply to a stepfather, but repeals the old § 11351 insofar as it applied to “an adult male person assuming the role of spouse.” Under the new law, a MARS “shall be required to make a financial contribution to the family which shall not be less than it -would cost him to provide himself with an independent living arrangement.” The new law also provides that, under regulations to be promulgated by the State Welfare Department, the MARS and the mother will be required to present the Department with “all of the facts in connection with the sharing of expenses . . . .”

       The California regulations that governed a MARS at the time these suits were brought were Cal. State Dept, of Social Welfare, Public Social Services Manual §§ 42-535 (effective Nov. 1, 1967), 44-133.5 (effective July 1, 1967). As to a stepfather, the pertinent regulations were id. §§42-531 (effective Nov. 1, 1967), 4A-113.242 (effective July 1, 1967).
      For criminal sanctions against a natural father who fails to support his children see Cal. Penal Code §270; Cal. Welf. & Inst’ns Code §§ 11476-11477 (1966).

       45 CFR §203.1.

         Id., §203.1 (a).

       HEW Handbook of Public Assistance Administration, pt. IV, § 3131.7. In its present form the regula,tion provides:
      “(ii) ... in establishing financial eligibility and the amount of the assistance payment: . . . (e) only such net income as is actually available for current use on a regular basis will be conádered, and only currently available resources will be considered.” 45 CFR §233.20 (a) (3) (ii), 34 Fed. Reg. 1395.

       45 CFR. § 203.1.

       An exception is a, person whose presence is deemed essential to the well-being of the recipient of assistance and who is included in the family budget unit for calculation of need. See 42 U. S. C. § 602 (a) (7) (1964 ed., Supp. IV) which provides:
      “A State plan . . . must . . . provide that the State agency shall, in determining need, take into consideration any other income and resources of any child or relative claiming aid to families with dependent children, or of any other individual (living in the same home as such child and relative) whose needs the State determines should be considered in determining the need of the child or relative claiming such aid, as well as any expenses reasonably attributable to the earning of any such income . . . .”
      . . . The so-called AFDC “essential person” is also covered by regulation. See 45 CFR § 233.20 (a) (2) (vi), 34 Fed. Reg. 1394.

       “Under the Alabama regulation, an 'able-bodied man, married or single, is considered a substitute father of all the children of the applicant . . . mother’ in three different situations: (1) if ‘he lives in the home with the child’s natural or adoptive mother for the purpose of cohabitation’; or (2) if ‘he visits [the home] frequently for the purpose of cohabiting with the child’s natural or adoptive mother’; or (3) if ‘he does not frequent the home but cohabits with the child’s natural or adoptive mother elsewhere.' Whether the substitute father is actually the father of the children is irrelevant. It is also irrelevant whether he is legally obligated to support the children, and whether he does in fact contribute to their support. What is determinative is simply whether he ‘cohabits’ with the mother.” 392 U. S., at 313-314.


author: Mr. Justice Brennan

text:
    BACHELLAR et al. v. MARYLAND
    No. 729.
    Argued March 2, 1970
    Decided April 20, 1970

      Anthony O. Amsterdam argued the cause for petitioners. With him. on the brief was Fred E. Weisgal.

      H. Edgar Lentz, Assistant Attorney General of Maryland, argued the cause for respondent. With him on the brief were Francis B. Burch, Attorney General, and Edward F. Borgerding, Assistant Attorney General.
   Mr. Justice Brennan

delivered the opinion of the Court.

A jury in Baltimore City Criminal Court convicted petitioners of violating Md. Ann. Code, Art. 27, § 123 (1967 Repl. Vol.), which prohibits “acting in a disorderly manner to the disturbance of the public peace, upon any public street ... in any [Maryland] city . . .” The prosecution arose out of a demonstration protesting the Vietnam war which was staged between 3 and shortly after 5 o’clock on the afternoon of March 28, 1966, in front of a United States Army recruiting station located on a downtown Baltimore street. The Maryland Court of Special Appeals rejected petitioners’ contention that their conduct was constitutionally protected under the First and Fourteenth Amendments and affirmed their convictions. 3 Md. App. 626, 240 A. 2d 623 (1968). The Court of Appeals of Maryland denied certiorari in an unreported order. We granted certiorari, 396 U. S. 816 (1969). We reverse.

The trial judge instructed the jury that there were alternative grounds upon which petitioners might be found guilty of violating § 123. The judge charged, first, that a guilty verdict might be returned if the jury found that petitioners had engaged in “the doing or saying or both of that which offends, disturbs, incites or tends to incite a number of people gathered in the same area.” The judge also told the jury that “[a] refusal to obey a policeman’s command to move on when not to do so may endanger the public peace, may amount to disorderly conduct.” So instructed, the jury returned a general verdict of guilty against each of the petitioners.

Since petitioners argue that their conduct was constitutionally protected, we have examined the record for ourselves. When “a claim of constitutionally protected right is involved, it 'remains our duty ... to make an independent examination of the whole record/ ” Cox v. Louisiana (I), 379 U. S. 536, 545 n. 8 (1965). We shall discuss first the factual situation that existed until shortly before 5 o’clock on the afternoon of the demonstration, since the pattern of events changed after that time. There is general agreement regarding the nature of the events during the initial period.

Baltimore law enforcement authorities had advance notice of the demonstration, and a dozen or more police officers and some United States marshals were on hand when approximately 15 protesters began peacefully to march in a circle on the sidewalk in front of the station. The marchers carried or wore signs bearing such legends as: "Peasant Emancipation, Not Escalation,” “Make Love not War,” “Stop in the Name of Love," and “Why are We in Viet Nam?” The number of protesters increased to between 30 and 40 before the demonstration ended. A crowd of onlookers gathered nearby and across the street. From time to time some of the petitioners and other marchers left the circle and distributed leaflets among and talked to persons in the crowd. The lieutenant in charge of the police detail testified that he “overheard” some of the marchers debate with members of the crowd about “the Viet Cong situation,” and that a few in the crowd resented the protest; “[o]ne particular one objected very much to receiving the circular.” However, the lieutenant did not think that the situation constituted a disturbance of the peace. He testified that “[a]s long as the peace was not disturbed I wasn’t doing anything about it.”

Clearly the wording of the placards was not within that small class of “fighting words” that, under Chaplinsky v. New Hampshire, 315 U. S. 568, 574 (1942), are “likely to provoke the average person to retaliation, and thereby cause a breach of the peace,” nor is there any evidence that the demonstrators’ remarks to the crowd constituted “fighting words.” Any shock effect caused by the placards, remarks, and peaceful marching must be attributed to the content of the ideas being expressed, or to the onlookers’ dislike of demonstrations as a means of expressing dissent. But “[i]t is firmly settled that under our Constitution the public expression of ideas may not be prohibited merely because the ideas are themselves offensive to some of their hearers,” Street v. New York, 394 U. S. 576, 592 (1969); see also Cox v. Louisiana (I), supra; Edwards v. South Carolina, 372 U. S. 229 (1963); Terminiello v. Chicago, 337 U. S. 1 (1949), or simply because bystanders object to peaceful and orderly demonstrations. Plainly nothing that occurred during this period could constitutionally be the ground for conviction under § 123. Indeed, the State makes no claim that § 123 was violated then.

We turn now to the events that occurred shortly before and after 5 o’clock. The petitioners had left the marchers after half past 3 to enter the recruiting station. There they had attempted to persuade the sergeant in charge to permit them to display their antiwar materials in the station or in its window fronting on the sidewalk. The sergeant had told them that Army regulations forbade him to grant such permission. The six thereupon staged a sit-in on chairs and a couch in the station. A few minutes before 5 o’clock the sergeant asked them to leave, as he wanted to close the station for the day. When petitioners refused, the sergeant called on United States marshals who were present in the station to remove them. After deputizing several police officers to help, the marshals undertook to eject the petitioners.

There is irreconcilable conflict in the evidence as to what next occurred. The prosecution’s witnesses testified that the marshals and the police officers “escorted” the petitioners outside, and that the petitioners thereupon sat or lay down, “blocking free passage of the sidewalk.” The police lieutenant in charge stated that he then took over and three times ordered the petitioners to get up and leave. He testified that when they remained sitting or lying down, he had each of them picked up bodily and removed to a patrol wagon. In sharp contrast, defense witnesses said that each petitioner was thrown bodily out the door of the station and landed on his back, that petitioners were not positioned so as to block the sidewalk completely, and that no police command was given to them to move away; on the contrary, that as some of them struggled to get to their feet, they were held down by the police officers until they were picked up and thrown into the patrol wagon. The evidence is clear, however, that while petitioners were on the sidewalk, they began to sing “We Shall Overcome” and that they were surrounded by other demonstrators carrying antiwar placards. Thus, petitioners remained obvious participants in the demonstration even after their expulsion from the recruiting station. A crowd of 50-150 people, including the demonstrators, was in the area during this period.

The reaction of the onlookers to these events was substantially the same as that to the earlier events of the afternoon. The police lieutenant added only that two uniformed marines in the crowd appeared angry and that a few other bystanders “were debating back and forth about Bomb Hanoi and different things and I had to be out there to protect these people because they wouldn’t leave.” Earlier too, however, some of the crowd had taken exception to the petitioners’ protest against the Vietnam war.

On this evidence, in light of the instructions given by the trial judge, the jury could have rested its verdict on any of a number of grounds. The jurors may have found that petitioners refused “to obey a policeman’s command to move on when not to do so [might have endangered] the public peace.” Or they may have relied on a finding that petitioners deliberately obstructed the sidewalk, thus offending, disturbing, and inciting the bystanders. Or the jurors may have credited petitioners’ testimony that they were thrown to the sidewalk by the police and held there, and yet still have found them guilty of violating § 123 because their anti-Vietnam protest amounted to “the doing or saying ... of that which offends, disturbs, incites or tends to incite a number of people gathered in the same area.” Thus, on this record, we find that petitioners may have been found guilty of violating § 123 simply because they advocated unpopular ideas. Since conviction on this ground would violate the Constitution, it is our duty to set aside petitioners’ convictions.

Stromberg v. California, 283 U. S. 359 (1931), is the controlling authority. There the jury returned a general verdict of guilty against an appellant charged under a California statute making it an offense publicly to display a red flag (a) “as a sign, symbol or emblem of opposition to organized government,” (b) “as an invitation or stimulus to anarchistic action,” or (c) “as an aid to propaganda that is and was of a seditious character.” Id., at 361. This Court held that clause (a) was unconstitutional as possibly punishing peaceful and orderly opposition to government by legal means and within constitutional limitations. The Court held that, even though the other two statutory grounds were severable and constitutional, the conviction had to be reversed, because the verdict “did not specify the ground upon which it rested. As there were three purposes set forth in the statute, and the jury were instructed that their verdict might be given with respect to any one of them, independently considered, it is impossible to say under which clause of the statute the conviction was obtained. If any one of these clauses, which the state court has held to be separable, was invalid, it cannot be determined upon this record that the appellant was not convicted under that clause. . . . [T]he necessary conclusion from the manner in which the case was sent to the jury is that, if any of the clauses in question is invalid under the Federal Constitution, the conviction cannot be upheld.” 283 U. S., at 368. See also Williams v. North Carolina, 317 U. S. 287 (1942); Terminiello v. Chicago, supra; Yates v. United States, 354 U. S. 298 (1957); Street v. New York, supra.

On this record, if the jury believed the State’s evidence, petitioners’ convictions could constitutionally have rested on a finding that they sat or lay across a public sidewalk with the intent of fully blocking passage along it, or that they refused to obey police commands to stop obstructing the sidewalk in this manner and move on. See, e. g., Cox v. Louisiana (I), supra, at 554-555; Shuttlesworth v. Birmingham, 382 U. S. 87, 99-91 (1965). It is impossible to say, however, that either of these grounds was the basis for the verdict. On the contrary, so far as we can tell, it is equally likely that the verdict resulted “merely because [petitioners’ views about Vietnam were] themselves offensive to some of their hearers.” Street v. New York, supra, at 592. Thus, since petitioners’ convictions may have rested on an unconstitutional ground, they must be set aside.

The judgment of the Maryland Court of Special Appeals is reversed and the case is remanded for further proceedings not inconsistent with this opinion.

It is so ordered.

       The trial in the Criminal Court was de novo upon appeal from a conviction in the Municipal Court of Baltimore. The Criminal Court judge sentenced each petitioner to 60 days in jail and a $50 fine.

       The statute was amended in 1968 but without change in the operative language involved in this case. See Md. Ann. Code, Art. 27, § 123 (c) (Supp. 1969).

       Both elements of the instruction were based on the Maryland Court of Appeals’ construction of § 123 in Drews v. Maryland, 224 Md. 186, 192, 167 A. 2d 341, 343-344 (1961), vacated and remanded on other grounds, 378 U. S. 547 (1964), reaffirmed on remand, 236 Md. 349, 204 A. 2d 64 (1964), appeal dismissed and cert. denied, 381 U. S. 421 (1965). The instruction was “that disorderly conduct is the doing or saying or both of that which offends, disturbs, incites or tends to incite a number of people gathered in the same area. It is conduct of such nature as to affect the peace and quiet of persons who may witness it and who may be disturbed or provoked to resentment because of it. A refusal to obey a policeman’s command to move on when not to do so may endanger the public peace, may amount to disorderly conduct.”
      The trial judge refused to grant petitioners’ request that the jury be charged to disregard any anger of onlookers that arose from their disagreement with petitioners’ expressed views about Vietnam. For example, the judge refused to instruct the jury that “if the only threat of public disturbance arising from the actions of these defendants was a threat that arose from the anger of others who were made angry by their disagreement with the defendants’ expressed views concerning Viet Nam, or American involvement in Viet Nam, you must acquit these defendants. And if you have a reasonable doubt whether the anger of those other persons was occasioned by their disagreement with defendants’ views on Viet Nam, rather than by the conduct of the defendants in sitting or staying on the street, you must acquit these defendants.”

       Petitioners’ conduct in the station is not at issue in this case, since the State did not prosecute them for their conduct in that place.

       The local police officers were deputized as marshals because their local police powers did not extend to the federally operated recruiting station.

       The defense evidence indicated that petitioners were on the sidewalk after their removal from the recruiting station for only five minutes. A prosecution witness testified that they were there for 15 or 20 minutes.

       Maryland states in its brief, at 41-42, that “[obstructing the sidewalk had the legal effect under these circumstances of not only constituting a violation of ... § 123 . . . but also of Article 27, § 121 of the Maryland Code, obstructing free passage.” Had the State wished to ensure a jury finding on the obstruction question, it could have prosecuted petitioners under § 121, which specifically punishes “[a]ny person who shall wilfully obstruct or hinder the free passage of persons passing along or by any public street or highway . . .


author: Mb. Justice Marshall

text:
    WOODWARD et al. v. COMMISSIONER OF INTERNAL REVENUE
    No. 412.
    Argued February 26, 1970
    Decided April 20, 1970

      Donald P. Cooney argued the cause for petitioners. On the brief was Martin M. Cooney.

      Assistant Attorney General Walters argued the cause for respondent. With him on the brief were Solicitor General Griswold, Matthew J. Zinn, Gilbert E. Andrews, and Stuart A. Smith.

   Mb. Justice Marshall

delivered the opinion of the Court.

This case and United States v. Hilton Hotels Corp., post, p. 580, involve the tax treatment of expenses incurred in certain appraisal litigation.

Taxpayers owned or controlled a majority of the common stock of the Telegraph-Herald, an Iowa-publishing corporation. The Telegraph-Herald was incorporated in 1901, and its charter was extended for 20-year periods in 1921 and 1941. On June 9, 1960, taxpayers voted their controlling share of the stock of the corporation in favor of a perpetual extension of the charter. A minority stockholder voted against the extension. Iowa law requires “those stockholders voting for such renewal . . . [to] purchase at its real value the stock voted against such renewal.” Iowa Code §491.25 (1966).

Taxpayers attempted to negotiate purchase of the dissenting stockholder’s shares, but no agreement could be reached on the “real value” of those shares. Consequently, in 1962 taxpayers brought an action in state court to appraise the value of the minority stock interest. The trial court fixed a value, which was slightly reduced on appeal by the Iowa Supreme Court, Woodward v. Quigley, 257 Iowa 1077, 133 N. W. 2d 38, on rehearing, 257 Iowa 1104, 136 N. W. 2d 280 (1965). In July 1965, taxpayers purchased the minority stock interest at the price fixed by the court.

During 1963, taxpayers paid attorneys’, accountants’, and appraisers’ fees of over $25,000, for services rendered in connection with the appraisal litigation. On their 1963 federal income tax returns, taxpayers claimed deductions for these expenses, asserting that they were “ordinary and necessary expenses paid ... for the management, conservation, or maintenance of property held for the production of income” deductible under § 212 of the Internal Revenue Code of 1954, 26 U. S. C. § 212. The Commissioner of Internal Revenue disallowed the deduction “because the fees represent capital expenditures incurred in connection with the acquisition of capital stock of a corporation.” The Tax Court sustained the Commissioner’s determination, with two dissenting opinions, 49 T. C. 377 (1968), and the Court of Appeals affirmed, 410 F. 2d 313 (C. A. 8th Cir. 1969). We granted certiorari, 396 U. S. 875 (1969), to resolve the conflict over the deductibility of the costs of appraisal proceedings between this decision and the decision of the Court of Appeals for the Seventh Circuit in United States v. Hilton Hotels Corp., supra. We affirm.

Since the inception of the present federal income tax in 1913, capital expenditures have not been deductible. See Internal Revenue Code of 1954, § 263. Such expenditures are added to the basis of the capital asset with respect to which they are incurred, and are taken into account for tax purposes either through depreciation or by reducing the capital gain (or increasing the loss) when the asset is sold. If an expense is capital, it cannot be deducted as “ordinary and necessary,” either as a business expense under § 162 of the Code or as an expense of “management, conservation, or maintenance” under § 212.

It has long been recognized, as a general matter, that costs incurred in the acquisition or disposition of a capital asset are to be treated as capital expenditures. The most familiar example of such treatment is the capitalization of brokerage fees for the sale or purchase of securities, as explicitly provided by a longstanding Treasury regulation, Treas. Reg. on Income Tax § 1.263 (a)-2 (e), and as approved by this Court in Helvering v. Winmill, 305 U. S. 79 (1938), and Spreckels v. Commissioner, 315 U. S. 626 (1942). The Court recognized that brokers’ commissions are “part of the acquisition cost of the securities,” Helvering v. Winmill, supra, at 84, and relied on the Treasury regulation, which had been approved by statutory re-enactment, to deny deductions for such commissions even to a taxpayer for whom they were a regular and recurring expense in his business of buying and selling securities.

The regulations do not specify other sorts of acquisition costs, but rather provide generally that “[t]he cost of acquisition . . . of . . . property having a useful life substantially beyond the taxable year” is a capital expenditure. Treas. Reg. on Income Tax § 1.263 (a)-2 (a). Under this general provision, the courts have held that legal, brokerage, accounting, and similar costs incurred in the acquisition or disposition of such property are capital expenditures. See, e. g., Spangler v. Commissioner, 323 F. 2d 913, 921 (C. A. 9th Cir. 1963); United States v. St. Joe Paper Co., 284 F. 2d 430, 432 (C. A. 5th Cir. 1960). See generally 4A J. Mertens, Law of Federal Income Taxation §§ 25.25, 25.26, 25.40, 25A.15 (1966 rev.). The law could hardly be otherwise, for such ancillary expenses incurred in acquiring or disposing of an asset are as much part of the cost of that asset as is the price paid for it.

More difficult questions arise with respect to another class of capital expenditures, those incurred in “defending or perfecting title to property.” Treas. Reg. on Income Tax § 1.263 (a)-2 (c). In one sense, any lawsuit brought against a taxpayer may affect his title to property — money or other assets subject to lien. The courts, not believing that Congress meant all litigation expenses to be capitalized, have created the rule that such expenses are capital in nature only where the taxpayer’s “primary purpose” in incurring them is to defend or perfect title. See, e. g., Rassenfoss v. Commissioner, 158 F. 2d 764 (C. A. 7th Cir. 1946); Industrial Aggregate Co. v. United States, 284 F. 2d 639, 645 (C. A. 8th Cir. 1960). This test hardly draws a bright line, and has produced a melange of decisions, which, as the Tax Court has noted, “[i]t would be idle to suggest . . . can be reconciled.” Ruoff v. Commissioner, 30 T. C. 204, 208 (1958).

Taxpayers urge that this “primary purpose” test, developed in the context of cases involving the costs of defending property, should be applied to costs incurred in acquiring or disposing of property as well. And if it is so applied, they argue, the costs here in question were properly deducted, since the legal proceedings in which they were incurred did not directly involve the question of title to the minority stock, which all agreed was to pass to taxpayers, but rather was concerned solely with the value of that stock.

We agree with the Tax Court and the Court of Appeals that the “primary purpose” test has no application here. That uncertain and difficult test may be the best that can be devised to determine the tax treatment of costs incurred in litigation that may affect a taxpayer’s title to property more or less indirectly, and that thus calls for a judgment whether the taxpayer can fairly be said to be “defending or perfecting title.” Such uncertainty is not called for in applying the regulation that makes the “cost of acquisition” of a capital asset a capital expense. In our view application of the latter regulation to litigation expenses involves the simpler inquiry whether the origin of the claim litigated is in the process of acquisition itself.

A test based upon the taxpayer’s “purpose” in undertaking or defending a particular piece of litigation would encourage resort to formalisms and artificial distinctions. For instance, in this case there can be no doubt that legal, accounting, and appraisal costs incurred by taxpayers in negotiating a purchase of the minority stock would have been capital expenditures. See Atzingen-Whitehouse Dairy Inc. v. Commissioner, 36 T. C. 173 (1961). Under whatever test might be applied, such expenses would have clearly been “part of the acquisition cost” of the stock. Helvering v. Winmill, supra. Yet the appraisal proceeding was no more than the substitute that state law provided for the process of negotiation as a means of fixing the price at which the stock was to be purchased. Allowing deduction of expenses incurred in such a proceeding, merely on the ground that title was not directly put in question in the particular litigation, would be anomalous.

Further, a standard based on the origin of the claim litigated comports with this Court's recent ruling on the characterization of litigation expenses for tax purposes in United States v. Gilmore, 372 U. S. 39 (1963). This Court there held that the expense of defending a divorce suit was a nondeductible personal expense, even though the outcome of the divorce case would affect the taxpayer’s property holdings, and might affect his business reputation. The Court rejected a test that looked to the consequences of the litigation, and did not even consider the taxpayer’s motives or purposes in undertaking defense of the litigation, but rather examined the origin and character of the claim against the taxpayer, and found that the claim arose out of the personal relationship of marriage.

The standard here pronounced may, like any standard, present borderline cases, in which it is difficult to determine whether the origin of particular litigation lies in the process of acquisition. This is not such a borderline case. Here state law required taxpayers to “purchase” the stock owned by the dissenter. In the absence of agreement on the price at which the purchase was to be made, litigation was required to fix the price. Where property is acquired by purchase, nothing is more clearly part of the process of acquisition than the establishment of a purchase price. Thus the expenses incurred in that litigation were properly treated as part of the cost of the stock that the taxpayers acquired.

Affirmed.

       Other federal court decisions on the point are in conflict. Compare Boulder Building Corp. v. United States, 125 F. Supp. 512 (D. C. W. D. Okla. 1954) (holding appraisal proceeding costs capital expenditures), with Smith Hotel Enterprises, Inc. v. Nelson, 236 F. Supp. 303 (D. C. E. D. Wis. 1964) (holding such costs deductible as ordinary and necessary business expense). And see Heller v. Commissioner, 2 T. C. 371 (1943), aff’d, 147 F. 2d 376 (C. A. 9th Cir. 1945) (holding dissenting stockholder’s appraisal costs deductible under predecessor to § 212).
      See also Naylor v. Commissioner, 203 F. 2d 346 (C. A. 5th Cir. 1953), in which expenses of litigation to fix the purchase price of stock sold pursuant to an option to purchase it at its net asset value on a certain date were held deductible under the predecessor of § 212.

       See § IIB of the Income Tax Act of 1913, 38 Stat. 167.

       The two sections are in pari materia with respect to the capital-ordinary distinction, differing only in, that § 212 allows deductions for the ordinary and necessary expenses of nonbusiness profitmaking activities. See United States v. Gilmore, 372 U. S. 39, 44-45 (1963). Heller v. Commissioner, n. 1, supra, may have been based in part on the premise that the predecessor of § 212 permitted the deduction of some expenses that would have been capitalized if incurred in the conduct of a trade or business.

       See Hochschild v. Commissioner, 161 F. 2d 817, 820 (C. A. 2d Cir. 1947) (Frank, J., dissenting).

       A large number of these decisions are collected in 4A Mertens, supra, §§ 25.24, 25A.16.

       Taxpayers argue at length that under Iowa law title to the stock passed before the appraisal proceeding. The Court of Appeals viewed Iowa law differently, and it seems to us that it was correct in so doing. See United States v. Hilton Hotels Corp., post, at 583-584, n. 2. But resolution of this question of state law makes no difference and is not necessary for decision of the case, since, as we hold in Hilton Hotels, the sequence in which title passes and price is determined is irrelevant for purposes of the tax question involved here.

       See, e. g., Petschek v. United States, 335 F. 2d 734 (C. A. 2d Cir. 1964), for a borderline case of whether legal expenses were incurred in the disposition of property.

       Taxpayers argue that “purchase” analysis cannot properly be applied to the appraisal situation, because the transaction is an involuntary one from their point of view — an argument relied upon by the District Court in the Smith Hotel Enterprises case, supra, n. 1. In the first place, the transaction is in a sense voluntary, since the majority holders know that under state law they will have to buy out any dissenters. More fundamentally, however, wherever a capital asset is transferred to a new owner in exchange for value either agreed upon or determined by law to be a fair quid pro quo, the payment itself is a capital expenditure, and there is no reason why the costs of determining the amount of that payment should be considered capital in the case of the negotiated price and yet considered deductible in the case of the price fixed by law. See Isaac G. Johnson & Co. v. United States, 149 F. 2d 851 (C. A. 2d Cir. 1945) (expenses of litigating amount of fair compensation in condemnation proceeding held capital expenditures).


author: Mr. Justice Marshall

text:
    UNITED STATES v. HILTON HOTELS CORP.
    No. 528.
    Argued February 26, 1970—
    Decided April 20, 1970

      Assistant Attorney General Walters argued the cause for the United States. With him on the brief were Solicitor General Griswold, Matthew J. Zinn, Gilbert E. Andrews, and Stuart A. Smith.

      Milton A. Levenfeld argued the cause for respondent. With him on the brief were Burton W. Ranter and Richard M. Kates.

   Mr. Justice Marshall

delivered the opinion of the

This is the companion case to Woodward v. Commissioner, ante, p. 572, and presents a similar question involving the tax treatment of appraisal litigation expenses.

In 1953 taxpayer Hilton Hotels Corporation, which owned close to 90% of the common shares of the Hotel Waldorf-Astoria Corporation, determined to merge the two companies. Hilton retained a consulting firm to prepare a merger study to determine a fair rate of exchange between Hilton stock and Waldorf stock. After this study was completed, on November 12, 1953, Hilton and Waldorf entered into a merger agreement under which Hilton would be the surviving corporation, and 1.25 shares of Hilton stock would be offered for each outstanding Waldorf share not already held by Hilton. On December 28, Hilton voted its Waldorf stock to approve the merger by the requisite majority. Prior to the vote, the holders of about 6% of the Waldorf shares had filed with Waldorf their written objections to the merger, and demanded payment for their stock, pursuant to § 91 of the New York Stock Corporation Law.

On December 31, 1953, Hilton filed the merger agreement and the certificate of consolidation with the Secretary. of State of New York, thus consummating the merger under New York law. On January 7, 1954, Hilton, made a cash offer to the dissenting Waldorf shareholders, which they rejected. The dissenters then began appraisal proceedings in the New York courts, pursuant to § 21 of the New York Stock Corporation Law.

Between January and May 1954, Hilton asked its consulting firm to value the Waldorf stock as of December 27, 1953, the day prior to the Waldorf shareholders’ vote approving the merger. Hilton also obtained the services of lawyers, and other professional services, in connection with the appraisal litigation. The appraisal proceeding was finally terminated in June 1955, when the state court approved a settlement agreed to by the parties.

Hilton deducted the fees paid to the consulting firm, and the cost of legal and other professional services arising out of the appraisal proceeding, as ordinary and necessary business expenses under § 162 of the Internal Revenue Code of 1954, 26 U. S. C. § 162. The Commissioner of Internal Revenue disallowed the deduction on the ground that the payments were capital expenditures. Hilton paid the tax and sued for a refund in the District Court. In the course of that suit, Hilton conceded, and the court held, that the payments to the consulting firm for the pre-merger determination of fair value were a nondeductible capital outlay. But the District Court held that the fees and costs related to the post-merger appraisal proceeding itself were deductible. 285 F. Supp. 617 (D. C. N. D. Ill. 1968). The Court of Appeals affirmed, 410 F. 2d 194 (C. A. 7th Cir.), and we granted certiorari, 396 U. S. 954 (1969). We reverse.

The Court of Appeals recognized that expenses of acquiring capital assets are capital expenditures for tax purposes. However, the court believed that the "primary purpose” test of Rassenfoss v. Commissioner, 158 F. 2d 764 (C. A. 7th Cir. 1946), should be applied to determine whether the appraisal proceeding was sufficiently related to the merger or the stock acquisition. Noting that “the proceeding was not necessary to the consummation of the merger nor did it function primarily to permit the acquisition of the objecting holders' shares,” the court found that “the paramount purpose of the appraisal proceeding was to determine the fair value of the dissenting stockholders’ shares in Waldorf.” 410 F. 2d, at 197.

As we held in Woodward, supra, the expenses of litigation that arise out of the acquisition of a capital asset are capital expenses, quite apart from whether the taxpayer’s purpose in incurring them is the defense or perfection of title to property. The chief distinction between this case and Woodward is that under New York law title to the dissenters’ stock passed to Waldorf as soon as they formally registered their dissent, placing them in the relationship of creditors of the company for the fair value of the stock, whereas under Iowa law passage of title was delayed until after the price was settled in the appraisal proceeding.

This is a distinction without a difference. The functional nature of the appraisal remedy as a forced purchase of the dissenters’ stock is the same, whether title passes before or after the price is determined. Determination and payment of a price is no less an element of an acquisition by purchase than is the passage of title to the property. In both Woodward and this case, the expenses were incurred in determining what that price should be, by litigation rather than by negotiation. The whole process of acquisition required both legal operations — fixing the price, and conveying title to the property — and we cannot see why the order in which those operations occurred under applicable state law should make any difference in the characterization of the expenses incurred for the particular federal tax purposes involved here.

Hilton also argues that the appraisal costs cannot be considered as its own capital expenditures, since Waldorf acquired the shares (on December 28) before the merger (on December 31). This argument would carry too far. It is true that title to the dissenters’ stock passed to Waldorf before that corporation was merged into the surviving corporation, Hilton. But the stock was never paid for by Waldorf; rather Hilton assumed all of Waldorf’s debts under the merger agreement, and finally paid for the stock after the appraisal proceeding was settled. If Waldorf’s acquisition of the minority stock interest was not a capital transaction of Hilton’s, then Hilton’s payment for the stock itself, as well as the expenditures made in fixing that price, would lose its character as a capital expenditure of Hilton’s. But Hilton concedes that the payment for the stock was a capital expenditure on its part. The debts that Hilton inherited from Waldorf retained their capital or ordinary character through the merger, and so did the expenditures for fixing the amount of those debts.

In short, the distinctions urged between this case and Woodward are not availing. The judgment of the Court of Appeals is reversed, and the case is remanded to the District Court with directions to dismiss the complaint.

It is so ordered.

       Section 91, subd. 9, of the New York Stock Corporation Law provides that a corporate consolidation becomes effective upon the filing of the requisite certificate. Section 21, subd. 6, of the same law provides that as of the time of a merger vote, a dissenting shareholder loses all rights as such, except the right to receive payment for the value of his shares.

       Iowa Code §491.25 (1966) provides that majority shareholders voting for renewal "shall have three years from the date such action for renewal was taken in which to purchase and pay for the stock voting against such renewal ...” There is no intimation in the statute itself, nor in Iowa cases construing it cited by petitioners in Woodward, supra, that dissenters lose any of their rights as shareholders, or that title passes to the majority shareholders, prior to the actual purchase of the dissenters’ shares.


author: Per Curiam. Mr. Justice Black,

text:
    STANDARD INDUSTRIES, INC. v. TIGRETT INDUSTRIES, INC., et al.
    No. 445.
    Argued March 2, 1970
    Decided April 20, 1970

      I. Walton Bader argued the cause for petitioner. With him on the briefs was Maximilian Bader.

      Ralph W. Kalish argued the cause and filed a brief for respondents.

      Lawrence G. Wallace argued the cause for the United States as amicus curiae urging reversal. With him on the brief were Solicitor General Griswold, Assistant Attorney General McLaren, and Richard H. Stern.

      Sidney Neuman argued the cause for the American Patent Law Association as amicus curiae. On the brief were Frank L. Neuhauser, John F. Witherspoon, Robert E. LeBlanc, William L. Mathis, and Henry Shur.

   Per Curiam.

The judgments are affirmed by an equally divided Court.

Mr. Justice Black,

with whom Mr. Justice Douglas joins,

dissenting.

In this case respondents sued petitioner for payments alleged to be due under a patent-licensing agreement. At trial and on appeal petitioner defended primarily on the ground that its product did not involve any use of the respondent’s patent. Petitioner did not at any time attack the validity of the patent itself, and apparently conceded that controlling law prevented it from doing so. The District Court found that the product did utilize the patented invention and awarded damages. The Court of Appeals for the Sixth Circuit affirmed in an opinion delivered May 27, 1969, 411 F. 2d 1218.

On June 16, 1969, this Court decided in Lear, Inc. v. Adkins, 395 U. S. 653, that a patent licensee could attack the validity of a patent. That case specifically overruled the patent-licensee estoppel doctrine applied in Automatic Radio Mfg. Co. v. Hazeltine Research, Inc., 339 U. S. 827 (1950), a doctrine that was the controlling law at all times in the proceedings below. Petitioner now seeks to attack the validity of the patent, but respondents argue that since the issue was never raised below, it cannot now be litigated.

The failure to assert invalidity below cannot, in these circumstances, be deemed a waiver of that defense. The Court has recognized that to be effective a waiver must be “an intentional relinquishment or abandonment of a known right or privilege,” Johnson v. Zerbst, 304 U. S. 458, 464 (1938), and we have frequently allowed parties to raise issues for the first time on appeal when there has been a significant change in the law since the trial. This principle has most often been applied in proceedings relating to criminal prosecutions, but it has also been invoked in purely civil cases. The principle has not been limited to constitutional issues, and the Court has permitted consideration on appeal of statutory arguments not presented below. In deciding whether such new arguments can be considered, we have primarily considered three factors: first, whether there has been a material change in the law; second, whether assertion of the issue earlier would have been futile; and third, whether an important public interest is served by allowing consideration of the issue. It is clear to me that all these criteria are met in this case.

Undoubtedly our decision in Lear was a major change in the field of patent law. The Court implicitly recognized this fact by overruling the estoppel holding in Automatic Radio. It is also clear that the trial court was satisfied that applicable law precluded the assertion of invalidity by patent licensees and thus earlier argument on the point would have been futile. Finally, and most importantly, an overriding public interest would be served by allowing petitioner to challenge the validity of this patent. Last Term we unanimously held that “the public’s interest in the elimination of specious patents would be significantly prejudiced if the retroactive effect of \Lear\ were limited in any way.” Lear, supra, at 674 n. 19. I do not understand how today’s decision can be reconciled with that statement. Although analytically this case may present a question of waiver and not retroactivity, the public interest that the Court felt required full retroactivity in Lear is an equally compelling reason for allowing petitioner’s attack now in spite of the concessions below. I would vacate the judgments below and remand the case to the District Court for a determination of the validity of the patent in issue.

      See White v. Maryland, 373 U. S. 59 (1963); cf. McConnell v. Rhay, 393 U. S. 2 (1968); Tehan v. Shott, 382 U. S. 406 (1966); Linkletter v. Walker, 381 U. S. 618, 622-629 (1965); Griffin v. California, 380 U. S. 609 (1965).

        Curtis Publishing Co. v. Butts, 388 U. S. 130, 142-145 (opinion of Harlan, J.), 172 n. 1 (separate opinion of Brennan, J.) (1967); Rosenblatt v. Baer, 383 U. S. 75 (1966); Uebersee Finanz-Korp. v. McGrath, 343 U. S. 205, 213 (1952); Hormel v. Helvering, 312 U. S. 552, 556-557 (1941).

       In Hormel v. Helvering, supra, the Court allowed the Commissioner of Internal Revenue to rely on § 22 (a) of the Revenue Act of 1934 although his argument before the Board of Tax Appeals had rested solely on §§ 166 and 167. We did so because of the intervening decision in Helvering v. Clifford, 309 U. S. 331 (1940).

       App. 52a, 129a-3.


text:
    SNYDER v. WARE et al.
    No. 1225.
    Decided April 20, 1970

      J. Minos Simon for appellant.
   Per Curiam.

The judgment is affirmed.


text:
    JACKSON et al. v. DEPARTMENT OF PUBLIC WELFARE OF FLORIDA et al.
    No. 471,
    Misc.
    Decided April 20, 1970

      Howard, W. Dixon for appellants.

      Earl Faircloth, Attorney General of Florida, T. T. Turnbull and Michael Schwartz, Assistant Attorneys General, and S. Strome Maxwell for appellees.
   Per Curiam.

The motion for leave to proceed in forma pauperis is granted. The judgment is vacated and the case is remanded to the District Court for reconsideration in light of Goldberg v. Kelly, ante, p. 254; Fed. Rule Civ. Proc. 23; and to determine whether the case is moot.

The Chief Justice, Mr. Justice Black, and Mr. Justice Stewart dissent.


text:
    GIAGNOCAVO v. BUCKS COUNTY COMMISSIONERS
    No. 1239.
    Decided April 20, 1970

      Peter A. Glascott for appellees.
   Per Curiam.

The motion to dispense with printing the jurisdictional statement is granted.

The motion to dismiss is granted and the appeal is dismissed for want of a substantial federal question.


text:
    SPARTAN’S INDUSTRIES, INC., et al. v. TEXAS
    No. 1255.
    Decided April 20, 1970

      William, H. Allen, William H. Bloch, George A. Kamp-mann, Oscar Spitz, Harold B. Berman, and Jay S. Fichtner for appellants.

      Crawford C. Martin, Attorney General of Texas, Nola White, First Assistant Attorney General, Alfred Walker, Executive Assistant Attorney General, and Robert C. Flowers and Monroe Clayton, Assistant Attorneys General, for appellee.
   Per Curiam.

The motion to dismiss is granted and the appeal is dismissed for want of a substantial federal question.