author: Justice White Justice Scalia, Justice Blackmun,

text:
    CHEEK v. UNITED STATES
    No. 89-658.
    Argued October 3, 1990
    Decided January 8, 1991

      White, J., delivered the opinion of the Court, in which Rehnquist, C. J., and Stevens, O’ConnoR, and Kennedy, JJ., joined. Scalia, J., filed an opinion concurring in the judgment, post, p. 207. Blackmun, J., filed a dissenting opinion, in which MARSHALL, J., joined, post, p. 209. SoutER, J., took no part in the consideration or decision of the case.

      William R. Coulson argued the cause for petitioner. With him on the briefs was Susan M. Keegdn.

      Edwin S. Kneedler argued the cause for tljie United States. With him on the brief were Solicitor General Starr, Assistant Attorney General Peterson, Deputy Solicitor General Bryson, Robert E. Lindsay, and Alan Hechtkopf.

   Justice White

delivered the opinion of the Court.

Title 26, §7201 of the United States Code provides that any person “who willfully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof” shall be guilty of a felony. Under 26 U. S. C. § 7203, “[a]ny person required under this title ... or by regulations made under authority thereof to make a return . . . who willfully fails to . . . make such return” shall be guilty of a misdemeanor. This case turns on the meaning of the word “willfully” as used in §§7201 and 7203.

I

Petitioner John L. Cheek has been a pilot for American Airlines since 1973. He filed federal income tax returns through 1979 but thereafter ceased to file returns. He also claimed an increasing number of withholding allowances — eventually claiming 60 allowances by mid-1980 — and for the years 1981 to 1984 indicated on his W-4 forms that he was exempt from federal income taxes. In 1983, petitioner unsuccessfully sought a refund of all tax withheld by his employer in 1982. Petitioner’s income during this period at all times far exceeded the minimum necessary to trigger the statutory filing requirement.

As a result of his activities, petitioner was indicted for 10 violations of federal law. He was charged with six counts of willfully failing to file a federal income tax return for the years 1980, 1981, and 1983 through 1986, in violation of 26 U. S. C. § 7203. He was further charged with three counts of willfully attempting to evade his income taxes for the years 1980, 1981, and 1983 in violation of §7201. In those years, American Airlines withheld substantially less than the amount of tax petitioner owed because of the numerous allowances and exempt status he claimed on his W-4 forms. The tax offenses with which petitioner was charged are specific intent crimes that require the defendant to have acted willfully.

At trial, the evidence established that between 1982 and 1986, petitioner was involved in at least four civil cases that challenged various aspects of the federal income tax system. In all four of those cases, the plaintiffs were informed by the courts that many of their arguments, including that they were not taxpayers within the meaning of the tax laws, that wages are not income, that the Sixteenth Amendment does not authorize the imposition of an income tax on individuals, and that the Sixteenth Amendment is unenforceable, were frivolous or had been repeatedly rejected by the courts. During this time period, petitioner also attended at least two criminal trials of persons charged with tax offenses. In addition, there was evidence that in 1980 or 1981 an attorney had advised Cheek that the courts had rejected as frivolous the claim that wages are not income.

Cheek represented himself at trial and testified in his defense. He admitted that he had not filed personal income tax returns during the years in question. He testified that as early as 1978, he had begun attending seminars sponsored by, and following the advice of, a group that believes, among other things, that the federal tax system is unconstitutional. Some of the speakers at these meetings were lawyers who purported to give professional opinions about the invalidity of the federal income tax laws. Cheek produced a letter from an attorney stating that the Sixteenth Amendment did not authorize a tax on wages and salaries but only on gain or profit. Petitioner’s defense was that, based on the indoctrination he received from this group and from his own study, he sincerely believed that the tax laws were being unconstitutionally enforced and that his actions during the 1980-1986 period were lawful. He therefore argued that he had acted without the willfulness required for conviction of the various offenses with which he was charged.

In the course of its instructions, the trial court advised the jury that to prove “willfulness” the Government must prove the voluntary and intentional violation of a known legal duty, a burden that could not be proved by showing mistake, ignorance, or negligence. The court further advised the jury that an objectively reasonable good-faith misunderstanding of the law would negate willfulness, but mere disagreement with the law would not. The court described Cheek’s beliefs about the income tax system and instructed the jury that if it found that Cheek “honestly and reasonably believed that he was not required to pay income taxes or to file tax returns,” App. 81, a not guilty verdict should be returned.

After several hours of deliberation, the jury sent a note to the judge that stated in part:

“ ‘We have a basic disagreement between some of us as to if Mr. Cheek honestly & reasonably believed that he was not required to pay income taxes.
“ ‘Page 32 [the relevant jury instruction] discusses good faith misunderstanding & disagreement. Is there any additional clarification you can give us on this point?’” Id., at 85.

The District Judge responded with a supplemental instruction containing the following statements:

“[A] person’s opinion that the tax laws violate his constitutional rights does not constitute a good faith misunderstanding of the law. Furthermore, a person’s disagreement with the government’s tax collection systems and policies does not constitute a good faith misunderstanding of the law.” Id., at 86.

At the end of the first day of deliberation, the jury sent out another note saying that it still could not reach a verdict because “ ‘[w]e are divided on the issue as to if Mr. Cheek honestly & reasonably believed that he was not required to pay income tax.’” Id., at 87. When the jury resumed its deliberations, the District Judge gave the jury an additional instruction. This instruction stated in part that “[a]n honest but unreasonable belief is not a defense and does not negate willfulness,” id., at 88, and that “[ajdvice or research resulting in the conclusion that wages of a privately employed person are not income or that the tax laws are unconstitutional is not objectively reasonable and cannot serve as the basis for a good faith misunderstanding of the law defense.” Ibid. The court also instructed the jury that “[pjersistent refusal to acknowledge the law does not constitute a good faith misunderstanding of the law.” Ibid. Approximately two hours later, the jury returned a verdict finding petitioner guilty on all counts.

Petitioner appealed his convictions, arguing that the District Court erred by instructing the jury that only an objectively reasonable misunderstanding of the law negates the statutory willfulness requirement. The United States Court of Appeals for the Seventh Circuit rejected that contention and affirmed the convictions. 882 F. 2d 1263 (1989). In prior cases, the Seventh Circuit had made clear that good-faith misunderstanding of the law negates willfulness only if the defendant’s beliefs are objectively reasonable; in the Seventh Circuit, even actual ignorance is not a defense unless the defendant’s ignorance was itself objectively reasonable. See, e. g., United States v. Buckner, 830 F. 2d 102 (1987). In its opinion in this case, the court noted that several specified beliefs, including the beliefs that the tax laws are unconstitutional and that wages are not income, would not be objectively reasonable. Because the Seventh Circuit’s interpretation of “willfully” as used in these statutes conflicts with the decisions of several other Courts of Appeals, see, e. g., United States v. Whiteside, 810 F. 2d 1306, 1310-1311 (CA5 1987); United States v. Phillips, 775 F. 2d 262, 263-264 (CA10 1985); United States v. Aitken, 755 F. 2d 188, 191-193 (CA1 1985), we granted certiorari, 493 U. S. 1068 (1990).

i-H h-H

The general rule that ignorance of the law or a mistake of law is no defense to criminal prosecution is deeply rooted in the American legal system. See, e. g., United States v. Smith, 5 Wheat. 153, 182 (1820) (Livingston, J., dissenting); Barlow v. United States, 7 Pet. 404, 411 (1833); Reynolds v. United States, 98 U. S. 145, 167 (1879); Shevlin-Carpenter Co. v. Minnesota, 218 U. S. 57, 68 (1910); Lambert v. California, 355 U. S. 225, 228 (1957); Liparota v. United States, 471 U. S. 419, 441 (1985) (White, J., dissenting); o. Holmes, The Common Law 47-48 (1881). Based on the notion that the law is definite and knowable, the common law presumed that every person knew the law. This common-law rule has been applied by the Court in numerous cases construing criminal statutes. See, e. g., United States v. International Minerals & Chemical Corp., 402 U. S. 558 (1971); Hamling v. United States, 418 U. S. 87, 119-124 (1974); Boyce Motor Lines, Inc. v. United States, 342 U. S. 337 (1952).

The proliferation of statutes and regulations has sometimes made it difficult for the average citizen to know and comprehend the extent of the duties and obligations imposed by the tax laws. Congress has accordingly softened the impact of the common-law presumption by making specific intent to violate the law an element of certain federal criminal tax offenses. Thus, the Court almost 60 years ago interpreted the statutory term “willfully” as used in the federal criminal tax statutes as carving out an exception to the traditional rule. This special treatment of criminal tax offenses is largely due to the complexity of the tax laws. In United States v. Murdock, 290 U. S. 389 (1933), the Court recognized that:

“Congress did not intend that a person, by reason of a bona fide misunderstanding as to his liability for the tax, as to his duty to make a return, or as to the adequacy of the records he maintained, should become a criminal by his mere failure to measure up to the prescribed standard of conduct.” Id., at 396.

The Court held that the defendant was entitled to an instruction with respect to whether he acted in good faith based on his actual belief. In Murdock, the Court interpreted the term “willfully” as used in the criminal tax statutes generally to mean “an act done with a bad purpose,” id., at 394, or with “an evil motive,” id., at 395.

Subsequent decisions have refined this proposition. In United States v. Bishop, 412 U. S. 346 (1973), we described the term “willfully” as connoting “a voluntary, intentional violation of a known legal duty,” id., at 360, and did so with specific reference to the “bad faith or evil intent” language employed in Murdock. Still later, United States v. Pomponio, 429 U. S. 10 (1976) (per curiam), addressed a situation in which several defendants had been charged with willfully filing false tax returns. The jury was given an instruction on willfulness similar to the standard set forth in Bishop. In addition, it was instructed that “‘[g]ood motive alone is never a defense where the act done or omitted is a crime. ’ ” Id., at 11. The defendants were convicted but the Court of Appeals reversed, concluding that the latter instruction was improper because the statute required a finding of bad purpose or evil motive. Ibid.

We reversed the Court of Appeals, stating that “the Court of Appeals incorrectly assumed that the reference to an ‘evil motive’ in United States v. Bishop, supra, and prior cases,” ibid., “requires proof of any motive other than an intentional violation of a known legal duty.” Id., at 12. As “the other Courts of Appeals that have considered the question have recognized, willfulness in this context simply means a voluntary, intentional violation of a known legal duty.” Ibid. We concluded that after instructing the jury on willfulness, “[a]n additional instruction on good faith was unnecessary.” Id., at 13. Taken together, Bishop and Pomponio conclusively establish that the standard for the statutory willfulness requirement is the “voluntary, intentional violation of a known legal duty.”

Ill

Cheek accepts the Pomponio definition of willfulness, Brief for Petitioner 5, and n. 4, 13, 36; Reply Brief for Petitioner 4, 6-7, 11, 13, but asserts that the District Court’s instructions and the Court of Appeals’ opinion departed from that definition. In particular, he challenges the ruling that a good-faith misunderstanding of the law or a good-faith belief that one is not violating the law, if it is to negate willfulness, must be objectively reasonable. We agree that the Court of Appeals and the District Court erred in this respect.

A

Willfulness, as construed by our prior decisions in criminal tax cases, requires the Government to prove that the law imposed a duty on the defendant, that the defendant knew of this duty, and that he voluntarily and intentionally violated that duty. We deal first with the case where the issue is whether the defendant knew of the duty purportedly imposed by the provision of the statute or regulation he is accused of violating, a case in which there is no claim that the provision at issue is invalid. In such a case, if the Government proves actual knowledge of the pertinent legal duty, the prosecution, without more, has satisfied the knowledge component of the willfulness requirement. But carrying this burden requires negating a defendant’s claim of ignorance of the law or a claim that because of a misunderstanding of the law, he had a good-faith belief that he was not violating any of the provisions of the tax laws. This is so because one cannot be aware that the law imposes a duty upon him and yet be ignorant of it, misunderstand the law, or believe that the duty does not exist. In the end, the issue is whether, based on all the evidence, the Government has proved that the defendant was aware of the duty at issue, which cannot be true if the jury credits a good-faith misunderstanding and belief submission, whether or not the claimed belief or misunderstanding is objectively reasonable.

In this case, if Cheek asserted that he truly believed that the Internal Revenue Code did not purport to treat wages as income, and the jury believed him, the Government would not have carried its burden to prove willfulness, however unreasonable a court might deem such a belief. Of course, in deciding whether to credit Cheek’s good-faith belief claim, the jury would be free to consider any admissible evidence from any source showing that Cheek was aware of his duty to file a return and to treat wages as income, including evidence showing his awareness of the relevant provisions of the Code or regulations, of court decisions rejecting his interpretation of the tax law, of authoritative rulings of the Internal Revenue Service, or of any contents of the personal income tax return forms and accompanying instructions that made it plain that wages should be returned as income.

We thus disagree with the Court of Appeals’ requirement that a claimed good-faith belief must be objectively reasonable if it is to be considered as possibly negating the Government’s evidence purporting to show a defendant’s awareness of the legal duty at issue. Knowledge and belief are characteristically questions for the factfinder, in this case the jury. Characterizing a particular belief as not objectively reasonable transforms the inquiry into a legal one and would prevent the jury from considering it. It would of course be proper to exclude evidence having no relevance or probative value with respect to willfulness; but it is not contrary to common sense, let alone impossible, for a defendant to be ignorant of his duty based on an irrational belief that he has no duty, and forbidding the jury to consider evidence that might negate willfulness would raise a serious question under the Sixth Amendment’s jury trial provision. Cf. Francis v. Franklin, 471 U. S. 307 (1985); Sandstrom v. Montana, 442 U. S. 510 (1979); Morissette v. United States, 342 U. S. 246 (1952). It is common ground that this Court, where possible, interprets congressional enactments so as to avoid raising serious constitutional questions. See, e. g., Edward J. DeBartolo Corp. v. Florida Gulf Coast Building & Construction Trades Council, 485 U. S. 568, 575 (1988); Crowell v. Benson, 285 U. S. 22, 62, and n. 30 (1932); Public Citizen v. Department of Justice, 491 U. S. 440, 465-466 (1989).

It was therefore error to instruct the jury to disregard evidence of Cheek’s understanding that, within the meaning of the tax laws, he was not a person required to file a return or to pay income taxes and that wages are not taxable income, as incredible as such misunderstandings of and beliefs about the law might be. Of course, the more unreasonable the asserted beliefs or misunderstandings are, the more likely the jury will consider them to be nothing more than simple disagreement with known legal duties imposed by the tax laws and will find that the Government has carried its burden of proving knowledge.

B

Cheek asserted in the trial court that he should be acquitted because he believed in good faith that the income tax law is unconstitutional as applied to him and thus could not legally impose any duty upon him of which he should have been aware. Such a submission is unsound, not because Cheek’s constitutional arguments are not objectively reasonable or frivolous, which they surely are, but because the Murdock-Pomponio line of cases does not support such a position. Those cases construed the willfulness requirement in the criminal provisions of the Internal Revenue Code to require proof of knowledge of the law. This was because in “our complex tax system, uncertainty often arises even among taxpayers who earnestly wish to follow the law,” and “ ‘[i]t is not the purpose of the law to penalize frank difference of opinion or innocent errors made despite the exercise of reasonable care.’” United States v. Bishop, 412 U. S. 346, 360-361 (1973) (quoting Spies v. United States, 317 U. S. 492, 496 (1943)).

Claims that some of the provisions of the tax code are unconstitutional are submissions of a different order. They do not arise from innocent mistakes caused by the complexity of the Internal Revenue Code. Rather, they reveal full knowledge of the provisions at issue and a studied conclusion, however wrong, that those provisions are invalid and unenforceable. Thus in this case, Cheek paid his taxes for years, but after attending various seminars and based on his own study, he concluded that the income tax laws could not constitutionally require him to pay a tax.

We do not believe that Congress contemplated that such a taxpayer, without risking criminal prosecution, could ignore the duties imposed upon him by the Internal Revenue Code and refuse to utilize the mechanisms provided by Congress to present his claims of invalidity to the courts and to abide by their decisions. There is no doubt that Cheek, from year to year, was free to pay the tax that the law purported to require, file for a refund and, if denied, present his claims of invalidity, constitutional or otherwise, to the courts. See 26 U. S. C. § 7422. Also, without paying the tax, he could have challenged claims of tax deficiencies in the Tax Court, § 6213, with the right to appeal to a higher court if unsuccessful. § 7482(a)(1). Cheek took neither course in some years, and when he did was unwilling to accept the outcome. As we see it, he is in no position to claim that his good-faith belief about the validity of the Internal Revenue Code negates willfulness or provides a defense to criminal prosecution under §§7201 and 7203. Of course, Cheek was free in this very case to present his claims of invalidity and have them adjudicated, but like defendants in criminal cases in other contexts, who “willfully” refuse to comply with the duties placed upon them by the law, he must take the risk of being wrong.

We thus hold that in a case like this, a defendant’s views about the validity of the tax statutes are irrelevant to the issue of willfulness and need not be heard by the jury, and, if they are, an instruction to disregard them would be proper. For this purpose, it makes no difference whether the claims of invalidity are frivolous or have substance. It was therefore not error in this case for the District Judge to instruct the jury not to consider Cheek’s claims that the tax laws were unconstitutional. However, it was error for the court to instruct the jury that petitioner’s asserted beliefs that wages are not income and that he was not a taxpayer within the meaning of the Internal Revenue Code should not be considered by the jury in determining whether Cheek had acted willfully.

IV

For the reasons set forth in the opinion above, the judgment of the Court of Appeals is vacated, and the case is remanded for further proceedings consistent with this opinion.

It is so ordered.

Justice Souter took no part in the consideration or decision of this case.

Justice Scalia,

concurring in the judgment.

I concur in the judgment of the Court because our cases have consistently held that the failure to pay a tax in the good-faith belief that it is not legally owing is not “willful.” I do not join the Court’s opinion because I do not agree with the test for willfulness that, it directs the Court of Appeals to apply on remand.

As the Court acknowledges, our opinions from the 1930’s to the 1970’s have interpreted the word “willfully” in the criminal tax statutes as requiring the “bad purpose” or “evil motive” of “intentionally] violating] a known legal duty.” See, e. g., United States v. Pomponio, 429 U. S. 10, 12 (1976); United States v. Murdock, 290 U. S. 389, 394-395 (1933). It seems to me that today’s opinion squarely reverses that long-established statutory construction when it says that a good-faith erroneous belief in the unconstitutionality of a tax law is no defense. It is quite impossible to say that a statute which one believes unconstitutional represents a “known legal duty.” See Marbury v. Madison, 1 Cranch 137, 177-178 (1803).

Although the facts of the present case involve erroneous reliance upon the Constitution in ignoring the otherwise “known legal duty” imposed by the tax statutes, the Court’s new interpretation applies also to erroneous reliance upon a tax statute in ignoring the otherwise “known legal duty” of a regulation, and to erroneous reliance upon a regulation in ignoring the otherwise “known legal duty” of a tax assessment. These situations as well meet the opinion’s crucial test of “reveal[ing] full knowledge of the provisions at issue and a studied conclusion, however wrong, that those provisions are invalid and unenforceable,” ante, at 205-206. There is, moreover, no rational basis for saying that a “willful” violation is established by full knowledge of a statutory requirement, but is not established by full knowledge of a requirement explicitly imposed by regulation or order. Thus, today’s opinion works a revolution in past practice, subjecting to criminal penalties taxpayers who do not comply with Treasury Regulations that are in their view contrary to the Internal Revenue Code, Treasury Rulings that are in their view contrary to the regulations, and even IRS auditor pronouncements that are in their view contrary to Treasury Rulings. The law already provides considerable incentive for taxpayers to be careful in ignoring any official assertion of tax liability, since it contains civil penalties that apply even in the event of a good-faith mistake, see, e. g., 26 U. S. C. §§6651, 6653. To impose in addition criminal penalties for misinterpretation of such a complex body of law is a startling innovation indeed.

I find it impossible to understand how one can derive from the lonesome word “willfully” the proposition that belief in the nonexistence of a textual prohibition excuses liability, but belief in the invalidity (i. e., the legal nonexistence) of a textual prohibition does not. One may say, as the law does in many contexts, that “willfully” refers to consciousness of the act but not to consciousness that the act is unlawful. See, e. g., American Surety Co. of New York v. Sullivan, 7 F. 2d 605, 606 (CA2 1925) (L. Hand, J.); cf. United States v. International Minerals & Chemical Corp., 402 U. S. 558, 563-565 (1971). Or alternatively, one may say, as we have said until today with respect to the tax statutes, that “willfully” refers to consciousness of both the act and its illegality. But it seems to me impossible to say that the word refers to consciousness that some legal text exists, without consciousness that that legal text is binding, i. e., with the good-faith belief that it is not a valid law. Perhaps such a test for criminal liability would make sense (though in a field as complicated as federal tax law, I doubt it), but some text other than the mere word “willfully” would have to be employed to describe it — and that text is not ours to write.

Because today’s opinion abandons clear and longstanding precedent to impose criminal liability where taxpayers have had no reason to expect it, because the new contours of criminal liability have no basis in the statutory text, and because I strongly suspect that those new contours make no sense even as a policy matter, I concur only in the judgment of the Court.

Justice Blackmun,

with whom Justice Marshall joins, dissenting.

It seems to me that we are concerned in this case not with “the complexity of the tax laws,” ante, at 200, but with the income tax law in its most elementary and basic aspect: Is a wage earner a taxpayer and are wages income?

The Court acknowledges that the conclusively established standard for willfulness under the applicable statutes is the “‘voluntary, intentional violation of a known legal duty.’” Ante, at 201. See United States v. Bishop, 412 U. S. 346, 360 (1973), and United States v. Pomponio, 429 U. S. 10, 12 (1976). That being so, it is incomprehensible to me how, in this day, more than 70 years after the institution of our present federal income tax system with the passage of the Income Tax Act of 1913, 38 Stat. 166, any taxpayer of competent mentality can assert as his defense to charges of statutory willfulness the proposition that the wage he receives for his labor is not income, irrespective of a cult that says otherwise and advises the gullible to resist income tax collections. One might note in passing that this particular taxpayer, after all, was a licensed pilot for one of our major commercial airlines; he presumably was a person of at least minimum intellectual competence.

The District Court’s instruction that an objectively reasonable and good-faith misunderstanding of the law negates willfulness lends further, rather than less, protection to this defendant, for it adds an additional hurdle for the prosecution to overcome. Petitioner should be grateful for this further protection, rather than be opposed to it.

This Court’s opinion today, I fear, will encourage taxpayers to cling to frivolous views of the law in the hope of convincing a jury of their sincerity. If that ensues, I suspect we have gone beyond the limits of common sense.

While I may not agree with every word the Court of Appeals has enunciated in its opinion, I would affirm its judgment in this case. I therefore dissent.

       Cheek did file what the Court of Appeals described as a frivolous return in 1982.

       Because petitioner filed a refund claim for the entire amount withheld by his employer in 1982, petitioner was also charged under 18 U. S. C. § 287 with one count of presenting a claim to an agency of the United States knowing the claim to be false and fraudulent.

       In March 1982, Cheek and another employee of the company sued American Airlines to challenge the withholding of federal income taxes. In April 1982, Cheek sued the Internal Revenue Service (IRS) in the United States Tax Court, asserting that he was not a taxpayer or a person for purposes of the Internal Revenue Code and that his wages were not income, and making several other related claims. Cheek and four others also filed an action against the United States and the Commissioner of Internal Revenue in Federal District Court, claiming that withholding taxes from their wages violated the Sixteenth Amendment. Finally, in 1985 Cheek filed claims with the IRS seeking to have refunded the taxes withheld from his wages in 1983 and 1984. When these claims were not allowed, he brought suit in the District Court claiming that the withholding was an unconstitutional taking of his property and that his wages were not income. In dismissing this action as frivolous, the District Court imposed costs and attorneys fees of $1,500 and a sanction under Federal Rule of Civil Procedure 11 in the amount of $10,000. The Court of Appeals agreed that Cheek’s claims were frivolous, reduced the District Court sanction to $5,000, and imposed an additional sanction of $1,500 for bringing a frivolous appeal.

       The attorney also advised that despite the Fifth Amendment, the filing of a tax return was required and that á person could challenge the constitutionality of the system by suing for a refund after the taxes had been withheld, or by putting himself “at risk of criminal prosecution.”

       “The defendant has testified as to what he states are his interpretations of the United States Constitution, court opinions, common law and other materials he has reviewed. ... He has also introduced materials which contain references to quotations from the United States Constitution, court opinions, statutes, and other sources.
      “He testified he relied on his interpretations and on these materials in concluding that he was not a person required to file income tax returns for the year or years charged, was not required to pay income taxes and that he could claim exempt status on his W-4 forms, and that he could claim refunds of all moneys withheld.” App. 75-76.
      “Among other things, Mr. Cheek contends that his wages from a private employer, American Airlines, does [sic] not constitute income under the Internal Revenue Service laws.” Id., at 81.

       A note signed by all 12 jurors also informed the judge that although the jury found petitioner guilty, several jurors wanted to express their personal opinions of the case and that notes from these individual jurors to the court were “a complaint against the narrow & hard expression under the constraints of the law.” Id., at 90. At least two notes from individual jurors expressed the opinion that petitioner sincerely believed in his cause even though his beliefs might have been unreasonable.

      The opinion stated, 882 F. 2d 1263, 1268-1269, n. 2 (CA7 1989), as follows:
      “For the record, we note that the following beliefs, which are stock arguments of the tax protester movement, have not been, nor ever will be, considered ‘objectively reasonable’ in this circuit:
      “(1) the belief that the sixteenth amendment to the constitution was improperly ratified and therefore never came into being;
      “(2) the belief that the sixteenth amendment is unconstitutional generally;
      “(3) the belief that the income tax violates the takings clause of the fifth amendment;
      “(4) the belief that the tax laws are unconstitutional;

        “(5) the belief that wages are not income and therefore are not subject to federal income tax laws;
      “(6) the belief that filing a tax return violates the privilege against self-incrimination; and
      “(7) the belief that Federal Reserve Notes do not constitute cash or income.

        “Miller v. United States, 868 F. 2d 236, 239-41 (7th Cir. 1989); Buckner,. 830 F. 2d at 102; United States v. Dube, 820 F. 2d 886, 891 (7th Cir. 1987); Coleman v. Comm’r, 791 F. 2d 68, 70-71 (7th Cir. 1986); Moore, 627 F. 2d at 833. We have no doubt that this list will increase with time.”

       Cheek recognizes that a “defendant who knows what the law is and who disagrees with it. . . does not have a bona fide misunderstanding defense,” but asserts that “a defendant who has a bona fide misunderstanding of [the law] does not ‘know’ his legal duty and lacks willfulness.” Brief for Petitioner 29, and n. 13. The Reply Brief for Petitioner, at 13, states: “We are in no way suggesting that Cheek or anyone else is immune from criminal prosecution if he knows what the law is, but believes it should be otherwise, and therefore violates it.” See also Tr. of Oral Arg. 9, 11, 12, 15, 17.

       In his opening and reply briefs and at oral argument, Cheek asserts that this case does not present the issue whether a claim of unconstitutionality would serve to negate willfulness and that we need not address the issue. Brief for Petitioner 13; Reply Brief for Petitioner 5, 11, 12; Tr. of Oral Arg. 6, 13. Cheek testified at trial, however, that “[i]t is my belief that the law is being enforced unconstitutionally.” App. 60. He also produced a letter from counsel advising him that “ ‘Finally you make a valid contention . . . that Congress’ power to tax comes from Article I, Section 8, Clause 1 of the U. S. Constitution, and not from the Sixteenth Amendment and that the [latter], construed with Article I, Section 2, Clause 3, never authorized a tax on wages and salaries, but only on gain and profit.” Id., at 57. We note also that the jury asked for “the portion [of the transcript] wherein Mr. Cheek stated he was attempting to test the constitutionality of the income tax laws,” Tr. 1704, and that the trial judge later instructed the jury that an opinion that the tax laws violate a person’s constitutional rights does not constitute a good-faith misunderstanding of the law. We also note that at oral argument Cheek’s counsel observed that “personal belief that a known statute is unconstitutional smacks of knowledge with existing law, but disagreement with it.” Tr. of Oral Arg. 5. He also opined:
      “If the person believes as a personal belief that known — law known to them [sic] is unconstitutional, I submit that that would not be a defense, because what the person is really saying is I know what the law is, for constitutional reasons I have made my own determination that it is invalid. I am not suggesting that that is a defense.
      “However, if the person was told by a lawyer or by an accountant erroneously that the statute is unconstitutional, and it’s my professional advice to you that you don’t have to follow it, then you have got a little different situation. This is not that case.” Id., at 6.
      Given this posture of the case, we perceive no reason not to address the significance of Cheek’s constitutional claims to the issue of willfulness.

       In United States v. Murdock, 290 U. S. 389 (1933), discussed supra, at 200, the defendant Murdock was summoned to appear before a revenue agent for examination. Questions were put to him, which he refused to answer for fear of self-incrimination under state law. He was indicted for refusing to give testimony and supply information contrary to the pertinent provisions of the Internal Revenue Code. This Court affirmed the reversal of Murdock’s conviction, holding that the trial court erred in refusing to give an instruction directing the jury to consider Murdock’s asserted claim of a good-faith, actual belief that because of the Fifth Amendment he was privileged not to answer the questions put to him. It is thus the case that Murdock’s asserted belief was grounded in the Constitution, but it was a claim of privilege not to answer, not a claim that any provision of the tax laws were unconstitutional, and not a claim for which the tax laws provided procedures to entertain and resolve. Cheek’s position at trial, in contrast, was that the tax laws were unconstitutional as applied to him.

       Cheek argues that applying to him the Court of Appeals' standard of objective reasonableness violates his rights under the First, Fifth, and Sixth Amendments of the Constitution. Since we have invalidated the challenged standard on statutory grounds, we need not address these submissions.


source: Caselaw Access Project

author: Justice White

license: Public Domain

text:
    MOBIL OIL EXPLORATION & PRODUCING SOUTHEAST, INC., et al. v. UNITED DISTRIBUTION COS. et al.
    No. 89-1452.
    Argued November 5, 1990
    Decided January 8, 1991

      White, J., delivered the opinion of the Court, in which all other Members joined, except Kennedy, J., who took no part in the decision of the cases.

      Rex E. Lee argued the cause for petitioners in No. 89-1452. With him on the briefs were Eugene R. Elrod, Carter G. Phillips, Jay G. Martin, Charles M. Darling IV, William H. Emerson, Stephen A. Herman, David G. Norrell, Mario

      M. Garza, R. Gordon Gooch, Harris S. Wood, Harry E. Barsh, Jr., David J. Evans, Ernest J. Altgelt III, C. Roger Hoffman, Douglas W. Rasch, Toni D. Hennike, Robert C. Murray, ■ Thomas G. Johnson, John K. McDonald, John L. Williford, Robert A. Miller, Jr., John J. Wolfe, Michael L. Pate, Thomas G. Johnson, Thomas B. Deal, Dee H. Richardson, Ernest L. Kubosh, and Ralph J. Pearson. Edwin S. Kneedler argued the cause for petitioners in No. 89-1453. With him on the brief were Solicitor General Starr, Deputy Solicitor General Wallace, William S. Scherman, Jerome M. Feit, and Robert H. Solomon.

      Roberta Lee Halladay argued the cause for respondents in both cases. With her on the brief were Peter Buscemi, C. William Cooper, and Ronald D. Jones

      Together with No. 89-1453, Federal Energy Regulatory Commission v. United Distribution Cos. et al., also on certiorari to the same court.

      Briefs of amici curiae urging reversal were filed for the State of New Mexico et al. by Hal Stratton, Attorney General of New Mexico, Randall W. Childress, Deputy Attorney General, and Craig W. Hulvey, Kevin M. Sweeney, and George C. Garikes, Jim Mattox, Attorney General of Texas, William J. Guste, Attorney General of Louisiana, and David B. Robinson, Robert H. Henry, Attorney General of Oklahoma, and Joseph B. Meyer, Attorney General of Wyoming; for the Interstate Oil Compact Commission by Robert J. Woody, Philip F. Patman, W. Timothy Dowd, and Richard C. Byrd; and for the Washington Legal Foundation by Daniel J. Popeo and Richard A. Samp.

   Justice White

delivered the opinion of the Court.

These cases involve the validity of two orders, No. 451 and No. 451-A, promulgated by the Federal Energy Regulatory Commission (Commission) to make substantial changes in the national market for natural gas. On petitions for review, a divided panel of the Court of Appeals for the Fifth Circuit vacated the orders as exceeding the Commission’s authority under the Natural Gas Policy Act of 1978 (NGPA), 92 Stat. 3352, 15 U. S. C. §3301 et seq. 885 F. 2d 209 (1989). In light of the economic interests at stake, we granted certiorari and consolidated the cases for briefing and oral argument. 496 U. S. 904 (1990). For the reasons that follow, we reverse and sustain the Commission’s orders in their entirety.

I

The Natural Gas Act of 1938 (NGA), 62 Stat. 821, 15 U. S. C. §717 et seq., was Congress’ first attempt to establish nationwide natural gas regulation. Section 4(a) mandated that the present Commission’s predecessor, the Federal Power Commission, ensure that all rates and charges requested by a natural gas company for the sale or transportation of natural gas in interstate commerce be “just and reasonable.” 15 U. S. C. §717c(a). Section 5(a) further provided that the Commission order a “just and reasonable rate, charge, classification, rule, regulation, practice, or contract” connected with the sale or transportation of gas whenever it determined that any of these standards or actions were “unjust” or “unreasonable.” 15 U. S. C. §717d(a).

Over the years the Commission adopted a number of different approaches in applying the NGA’s “just and reasonable” standard. See Public Serv. Comm’n of N. Y. v. Mid-Louisiana Gas Co., 463 U. S. 319, 327-331 (1983). Initially the Commission, construing the NGA to regulate gas sales only at the downstream end of interstate pipelines, proceeded on a company-by-company basis with reference to the historical costs each pipeline operator incurred in acquiring and transporting gas to its customers. The Court upheld this approach in FPC v. Hope Natural Gas Co., 320 U. S. 591 (1944), explaining that the NGA did not bind the Commission to “any single formula or combination of formulae in determining rates.” Id., at 602.

The Commission of necessity shifted course in response to our decision in Phillips Petroleum Co. v. Wisconsin, 347 U. S. 672 (1954). Phillips interpreted the NGA to require that the Commission regulate not just the downstream rates charged by large interstate pipeline concerns, but also upstream sales rates charged by thousands of independent gas producers. Id., at 682. Faced with the regulatory burden that resulted, the Commission eventually opted for an “area rate” approach for the independent producers while retaining the company-by-company method for the interstate pipelines. First articulated in 1960, the area rate approach established a single rate schedule for all gas produced in a given region based upon historical production costs and rates of return. See Statement of General Policy No. 61-1, 24 F. P. C. 818 (1960). Each area rate schedule included a two-tiered price ceiling: the lower ceiling for gas prices established in “old” gas contracts and a higher ceiling for gas prices set in “new” contracts. Id., at 819. The new two-tiered system was termed “vintage pricing” or “vintaging.” Vili-taging rested on the premise that the higher ceiling price for new gas production would provide incentives that would be superfluous for old gas already flowing because “price could not serve as an incentive, and since any price above average historical costs, plus an appropriate return, would merely confer windfalls.” Permian Basin Area Rate Cases, 390 U. S. 747, 797 (1968). The balance the Commission hoped to strike was the development of gas production through the “new” gas ceilings while ensuring continued protection of consumers through the “old” gas price limits. At the same time the Commission anticipated that the differences in price levels would be “reduced and eventually eliminated as subsequent experience brings about revisions in the prices in the various areas.” Statement of General Policy, supra, at 819. We upheld the vintage pricing system in Permian Basin, holding that the courts lacked the authority to set aside any Commission rate that was within the “‘zone of reasonableness.’” 390 U. S., at 797 (citation omitted).

By the early 1970’s, the two-tiered area rate approach no longer worked. Inadequate production had led to gas shortages which in turn had prompted a rapid rise in prices. Accordingly, the Commission abandoned vintaging in favor of a single national rate designed to encourage production. Just and Reasonable National Rates for Sales of Natural Gas, 51 F. P. C. 2212 (1974). Refining this decision, the Commission prescribed a single national rate for all gas drilled after 1972, thus rejecting an earlier plan to establish different national rates for succeeding biennial vintages. Just and Reasonable National Rates for Sales of Natural Gas, 52 F. P. C. 1604, 1615 (1974). But the single national pricing scheme did not last long either. In 1976 the Commission reinstated vin-taging with the promulgation of Order No. 770. National Rates for Jurisdictional Sales of Natural Gas, 56 F. P. C. 509. At about the same time, in Order No. 749, the Commission also consolidated a number of the old vintages for discrete areas into a single nationwide category for all gas already under production before 1973. Just and Reasonable National Rates for Sales of Natural Gas, 54 F. P. C. 3090 (1975), aff’d sub nom. Texaco Oil Co. v. FERC, 571 F. 2d 834 (CA5), cert. dism’d, 439 U. S. 801 (1978). Despite this consolidation, the Commission’s price structure still contained 15 different categories of old gas, each with its own ceiling price. Despite all these efforts, moreover, severe shortages persisted in the interstate market because low ceiling prices for interstate gas sales fell considerably below prices the same gas could command in intrastate markets, which were as yet unregulated.

Congress responded to these ongoing problems by enacting the NGPA, the statute that controls this controversy. See Mid-Louisiana Gas Co., supra, at 330-331. The NGPA addressed the problem of continuing shortages in several ways. First, it gave the Commission the authority to regulate prices in the intrastate market as well as the interstate market. See Transcontinental Gas Pipe Line Corp. v. State Oil and Gas Bd. of Miss., 474 U. S. 409, 420-421 (1986) (Transco). Second, to encourage production of new reserves, the NGPA established higher price ceilings for new and hard-to-produce gas as well as a phased deregulation scheme for these types of gas. §§ 102, 103, 105, 107 and 108; 15 U. S. C. §§ 3312, 3313, 3315, 3317, 3318. Finally, to safeguard consumers, §§ 104 and 106 carried over the vintage price ceilings that happened to be in effect for old gas when the NGPA was enacted while mandating that these be adjusted for inflation. 15 U. S. C. §§3314 and 3316. Congress, however, recognized that some of these vintage price ceilings “may be too low and authorized] the Commission to raise [them] whenever traditional NGA principles would dictate a higher price.” Mid-Louisiana Gas, 463 U. S., at 333. In particular, §§ 104(b)(2) and 106(c) provided that the Commission “may, by rule or order, prescribe a maximum lawful ceiling price, applicable to any first sale of any natural gas (or category thereof, as determined by the Commission) otherwise subject to the preceding provisions of this section.” 15 U. S. C. §§ 3314(b)(2) and 3316(c). The only conditions that Congress placed on the Commission were, first, that the new ceiling be higher than the ceiling set by the statute itself and, second, that it be “just and reasonable” within the meaning of the NGA. §§ 3314(b)(1), 3316(a).

The new incentives for production of new and hard-to-produce gas transformed the gas shortages of the 1970’s into gas surpluses during the 1980’s. One result was serious market distortions. The higher new gas price ceilings prevented the unexpected oversupply from translating into lower consumer prices since the lower, vintage gas ceilings led to the premature abandonment of old gas reserves. App. 32-36. Accordingly, the Secretary of Energy in 1985 formally recommended that the Commission issue a notice of proposed rulemaking to revise the old gas pricing system. 50 Fed. Reg. 48540 (1985). After conducting two days of public hearings and analyzing approximately 113 sets of comments, the Commission issued the two orders under dispute in this case: Order No. 451, promulgated in June 1986, 51 Fed. Reg. 22168 (1986); and Order No. 451-A, promulgated in December 1986, which reaffirmed the approach of its predecessor while making certain modifications. 51 Fed. Reg. 46762 (1986).

The Commission’s orders have three principal components. First, the Commission collapsed the 15 existing vintage price categories of old gas into a single classification and established an alternative maximum price for a producer of gas in that category to charge, though only to a willing buyer. The new ceiling was set at $2.57 per million Btu’s, a price equal to the highest of the ceilings then in effect for old gas (that having the most recent, post-1974, vintage) adjusted for inflation. 51 Fed. Reg. 22183-22185 (1986); see 18 CFR §271.402(c)(3)(iii) (1986). When established the new ceiling exceeded the then-current market price for old gas. The Commission nonetheless concluded that this new price was “just and reasonable” because, among other reasons, it generally approximated the replacement cost of gas based upon the current cost of finding new gas fields, drilling new wells, and producing new gas. See Shell Oil Co. v. FPC, 520 F. 2d 1061 (CA5 1975) (holding that replacement cost formula appropriate for establishing “just and reasonable” rates under the NGA), cert. denied, 426 U. S. 941 (1976). In taking these steps, the Commission noted that the express and unambiguous terms of §§ 104(b)(2) and 106(c) gave it specific authorization to raise old gas prices so long as the resulting ceiling met the just and reasonable requirement. 51 Fed. Reg., at 22179.

The second principal feature of the orders establishes a “Good Faith Negotiation” (GFN) procedure that producers must follow before they can collect a higher price from current pipeline customers. 18 CFR §270.201 (1986). The GFN process consists of several steps. Initially, a producer may request a pipeline to nominate a price at which the pipeline would be willing to continue purchasing old gas under any existing contract. § 270.201(b)(1). At the same time, however, this request is also deemed to be an offer by the producer to release the purchaser from any contract between the parties that covers the sale of old gas. § 270.201(b)(4). In response, the purchaser can both nominate its own price for continuing to purchase old gas under the contracts specified by the purchaser and further request that the producer nominate a price at which the producer would be willing to continue selling any gas, old or new, covered under any contracts specified by the purchaser that cover at least some old gas. If the parties cannot come to terms, the producer can either continue sales at the old price under existing contracts or abandon its existing obligations so long as it has executed a new contract with another purchaser and given its old customer 30 days’ notice. §§ 157.301, 270.201(c)(1), (e)(4). The Commission’s chief rationale for the GFN process was a fear that automatic collection of the new price by producers would lead to market disruption given the existence of numerous gas contracts containing indefinite price-escalation clauses tied to whatever ceiling the agency established. 51 Fed. Reg., at 22204. The Commission further concluded that NGA § 7(b), which establishes a “due hearing” requirement before abandonments could take place, did not prevent it from promulgating an across-the-board rule rather than engage in case-by-case adjudication. 15 U. S. C. § 717f(b).

Finally, the Commission rejected suggestions that it undertake completely to resolve the issue of take-or-pay provisions in certain natural gas contracts in the same proceeding in which it addressed old gas pricing. The Commission explained that it was already addressing the take-or-pay problem in its Order No. 436 proceedings. It further pointed out that the GFN procedure, in allowing the purchaser to propose new higher prices for old gas in return for renegotiation of take-or-pay obligations, would help resolve many take-or-pay disputes. The Commission also reasoned that the expansion of old gas reserves resulting from its orders would reduce new gas prices and thus reduce the pipelines’ overall take-or-pay exposure. 51 Fed. Reg., at 22174-22175, 22183, 22196-22197, 46783-46784.

A divided panel of the Court of Appeals for the Fifth Circuit vacated the orders on the ground that the Commission had exceeded its statutory authority. The court first concluded that Congress did not intend to give the Commission the authority to set a single ceiling price for old gas under §§ 104(b)(2) and 106(c). The court also dismissed the ceiling price itself as unreasonable since it was higher than the spot market price when the orders were issued and so amounted to “de facto deregulation.” 885 F. 2d, at 218-222. Second, the court rejected the GFN procedure on the basis that the Commission lacked the authority to provide for across-the-board, preauthorized abandonment under §7(b). Id., at 221-222. Third, the court chided the Commission for failing to seize the opportunity to resolve the take-or-pay issue, although it did acknowledge that the Commission was addressing that matter on remand from the District of Columbia Circuit’s decision in Associated Gas Distributors v. FERC, 263 U. S. App. D. C. 1, 824 F. 2d 981 (1987), cert. denied, 485 U. S. 1006 (1988). The dissent disagreed with all three conclusions, observing that the majority should have deferred to the Commission as the agency Congress delegated to regulate natural gas. 885 F. 2d, at 226-235 (Brown, J., dissenting). We granted certiorari, 496 U. S. 904 (1990), and now reverse and sustain the Commission’s orders.

II

Section 104 (a) provides that the maximum price for old gas should be computed as provided in § 104(b). The general rule under § 104(b)(1) is that each category of old gas would be priced as it was prior to the enactment of the NGPA, but increased over time in accordance with an inflation formula. This was the regime that obtained under the NGPA until the issuance of the orders at issue here. Section 104(b)(2), however, plainly gives the Commission authority to change this regulatory scheme applicable to old gas:

“The Commission may, by rule or order, prescribe a maximum lawful ceiling price, applicable to any first sale of any natural gas (or category thereof, as determined by the Commission) otherwise subject to the preceding provisions of this section, if such price is —
“(A) higher than the maximum lawful price which would otherwise be applicable under such provisions; and
“(B) just and reasonable within the meaning of the Natural Gas Act [15 U. S. C. 717 et seq.].” 15 U. S. C. §§ 3314(b)(2) and 3316(c).

Nothing in these provisions prevents the Commission from either increasing the ceiling price for multiple old gas vintages or from setting the ceiling price applicable to each vintage at the same level. To the contrary, the statute states that the Commission may increase the ceiling price for “any natural gas (or category thereof, as determined by the Commission).” (Emphasis added.) Likewise, § 104(b)(2) allows the Commission to “prescribe a ceiling price” applicable to any natural gas category. Insofar as “any” encompasses “all,” this language enables the Commission to set a single ceiling price for every category of old gas. As we have stated in similar contexts, “[i]f the statute is clear and unambiguous, ‘that is the end of the matter, for the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress.’” Sullivan v. Stroop, 496 U. S. 478, 482 (1990) (quoting K mart Corp. v. Cartier, Inc., 486 U. S. 281, 291 (1988)).

Respondents counter that the structure of the NGPA points to the opposite conclusion. Specifically, they contend that Congress could not have intended to allow the Commission to collapse all old gas vintages under a single price where the NGPA created detailed incentives for new and hard-to-produce gas on one hand, yet carefully preserved the old gas vintaging scheme on the other. Brief for Respondents 33-37. We disagree. The statute’s bifurcated approach implies no more than that Congress found the need to encourage new gas production sufficiently pressing to deal with the matter directly, but was content to leave old gas pricing within the discretion of the Commission to alter as conditions warranted. The plain meaning of § 104(b)(2) confirms this view.

Further, the Commission’s decision to set a single ceiling fully accords with the two restrictions that the NGPA does establish. With respect to the first, the requirement that a ceiling price be “higher than” the old vintage ceilings carried over from the NGA does nothing to prevent the Commission from consolidating existing categories and setting one price equivalent to the highest previous ceiling. 15 U. S. C. §§ 3314(b)(2)(A) and 3316(c)(1). With respect to the second, collapsing the old vintages also comports with the mandate that price ceilings be “just and reasonable within the meaning of the Natural Gas Act.” 15 U. S. C. §§3314(b)(2)(B) and 3316(c)(2).

Far from binding the Commission, the “just and reasonable” requirement accords it broad ratemaking authority that its decision to set a single ceiling does not exceed. The Court has repeatedly held that the just and reasonable standard does not compel the Commission to use any single pricing formula in general or vintaging in particular. FPC v. Hope Natural Gas Co., 320 U. S. 591, 602 (1944); FPC v. Natural Gas Pipeline Co., 315 U. S. 575, 586 (1942); Permian Basin, 390 U. S., at 776-777; FPC v. Texaco Inc., 417 U. S. 380, 386-389 (1974); Mobil Oil Corp. v. FPC, 417 U. S. 283, 308 (1974). Courts of Appeals have also consistently affirmed the Commission’s use of a replacement-cost-based method under the NGA. E. g., Shell Oil Co. v. FPC, 520 F. 2d 1061, 1082-1083 (CA5 1975), cert. denied, 426 U. S. 941 (1976); American Public Gas Assn. v. FPC, 567 F. 2d 1016, 1059 (CADC 1977), cert. denied, 435 U. S. 907 (1978). By incorporating the “just and reasonable” standard into the NGPA, Congress clearly meant to preserve the pricing flexibility the Commission had historically exercised under the NGA. See Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Curran, 456 U. S. 353, 378-382 (1982). In employing a replacement cost formula, the Commission did no more than what it had previously done under the NGA: collapse vintage categories together because the replacement cost for natural gas is the same regardless of when it was placed in production. See Order No. 749, Just and Reasonable National Rates for Sales of Natural Gas, 54 F. P. C. 3090 (1975).

Respondents contend that even if the statute allows the Commission to set a single old gas ceiling, the particular ceiling it has set is unjustly and impermissibly high. They first argue that the Commission conceded that actual collection of the new price would not be just and therefore established the GFN procedures as a requisite safeguard. The Commission correctly denies having made any such concession. In its orders, in its briefs, and at oral argument, the agency has been at pains to point out that its ceiling price, which was no higher than the highest of the ceilings then applicable to old gas, falls squarely within the “zone of reasonableness” mandated by the NGA. See Permian Basin, supra, at 767. What the agency has acknowledged is that automatic collection of prices up to the ceiling under the escalator clauses common to industry contracts would produce “inappropriate” market distortion, especially since the market price remains below the ceiling. Reply Brief for Petitioner in No. 89-1453, p. 12. In consequence the Commission instituted the GFN process to mitigate too abrupt a transition from one pricing regime to the next. Respondents have not sought to challenge (and we do not today consider) the Commission’s authority to require this process, but they assert that the requiring of it amounts to an acknowledgment by the Commission that the new ceiling price is in fact unreasonable. We disagree. There is nothing incompatible between the belief that a price is reasonable and the belief that it ought not to be imposed without prior negotiations. We decline to disallow an otherwise lawful rate because additional safeguards accompany it.

We likewise reject respondents’ more fundamental objection that no order “deregulating” the price of old gas can be deemed just and reasonable. The agency’s orders do not deregulate in any legally relevant sense. The Commission adopted an approved pricing formula, set a maximum price, and expressly rejected proposals that it truly deregulate by eliminating any ceiling for old gas whatsoever. App. 170-171. Nor can we conclude that deregulation results simply because a given ceiling price may be above the market price. United Gas Pipe Line Co. v. Mobile Gas Serv. Corp., 350 U. S. 332, 343 (1956); FPC v. Sierra Pacific Power Co., 350 U. S. 348, 353 (1956); FPC v. Texaco Inc., 417 U. S. 380, 397 (1974).

Ill

We further hold that Order No. 45l’s abandonment procedures fully comport with the requirements set forth in §7(b) of the NGA. 15 U. S. C. §717f(b). In particular, we reject the suggestion that this provision mandates individualized proceedings involving interested parties before a specific abandonment can take place.

Section 7(b), which Congress retained when enacting the NGPA, states:

“No natural-gas company shall abandon all or any portion of its facilities subject to the jurisdiction of the Commission, or any service rendered by means of such facilities, without the permission and approval of the Commission first had and obtained, after due hearing, and a finding by the Commission that the available supply of natural gas is depleted to the extent that the continuance of service is unwarranted, or that the present or future public convenience or necessity permit such abandonment.” 15 U. S. C. §717f(b).

As applied to this case § 7(b) prohibits a producer from abandoning its contractual service obligations to the purchaser unless the Commission has, first, granted its “permission and approval” of the abandonment; second, made a “finding” that “present or future public convenience or necessity permit such abandonment”; and, third, held a “hearing” that is “due.” The Commission has taken each of these steps.

First, Order No. 451 permits and approves the abandonment at issue. That approval is not specific to any single abandonment but is instead general, prospective, and conditional. These conditions include: failure by the purchaser and producer to agree to a revised price under the GFN procedures; execution of a new contract between the producer and a new purchaser; and 30-days’ notice to the previous purchaser of contract termination. 18 CFR § 270.201(c)(1) (1986). Neither respondents nor the Court of Appeals holding directly questions the Commission’s orders for failing to satisfy this initial requirement. As we have previously held, nothing in § 7(b) prevents the Commission from giving advance approval of abandonment. FPC v. Moss, 424 U. S. 494, 499-502 (1976). See Permian Basin, 390 U. S., at 776.

Second, the Commission also made the necessary findings that “present or future public interest or necessity” allowed the conditional abandonment that it prescribed. 51 Fed. Reg., at 46785-46787. Reviewing “all relevant factors involved in determining the overall public interest,” the Commission found that preauthorized abandonment under the GFN regime would generally protect purchasers by allowing them to buy at market rates elsewhere if contracting producers insisted on the new ceiling price; safeguard producers by allowing them to abandon service if the contracting purchaser fails to come to terms; and serve the market by releasing previously unused reserves of old gas. See Felmont Oil Corp. and Essex Offshore, Inc., 33 FERC ¶61,333, p. 61,657 (1985), rev’d on other grounds sub nom. Consolidated Edison Co. of N. Y. v. FERC, 262 U. S. App. D. C. 222, 823 F. 2d 630 (1987). At bottom these findings demonstrate the agency’s determination that the GFN conditions make certain matters common to all abandonments. Contrary to respondents’ theory, § 7(b) does not compel the agency to make “specific findings” with regard to every abandonment when the issues involved are general. As we held in the context of disability proceedings under the Social Security Act, “general factual issue[s] may be resolved as fairly through rulemaking” as by considering specific evidence when the questions under consideration are “not unique” to the particular case. Heckler v. Campbell, 461 U. S. 458, 468 (1983).

Finally, it follows from the foregoing that the Commission discharged its §7(b) duty to hold a “due hearing.” Before promulgating Order No. 451, the agency held both a notice and comment hearing and an oral hearing. As it correctly concluded, § 7(b) required no more. Time and again, “[t]he Court has recognized that even where an agency’s enabling statute expressly requires it to hold a hearing, the agency may rely on its rulemaking authority to determine issues that do not require case-by-case consideration.” Heckler v. Campbell, supra, at 467; Permian Basin, supra, at 774-777; FPC v. Texaco Inc., 377 U. S. 33, 41-44 (1964); United States v. Storer Broadcasting Co., 351 U. S. 192, 205 (1956). The Commission’s approval conditions establish, and its findings confirm, that the abandonment at issue here is precisely the type of issue in which “[a] contrary holding would require the agency continually to relitigate issues that may be established fairly and efficiently in a single rulemaking proceeding.” Heckler v. Campbell, supra, at 467. See Panhandle Eastern Pipe Line Co. v. FERC, 285 U. S. App. D. C. 115, 907 F. 2d 185, 188 (1990); Kansas Power & Light Co. v. FERC, 271 U. S. App. D. C. 252, 256-259, 851 F. 2d 1479, 1483-1486 (1988); Associated Gas Distributors v. FERC, 263 U. S. App. D. C. 1, 35, n. 17, 824 F. 2d 981, 1015, n. 17 (1987), cert. denied, 485 U. S. 1006 (1988).

Neither the Court of Appeals nor respondents have uncovered a convincing rationale for holding otherwise. Relying on United Gas Pipe Line Co. v. McCombs, 442 U. S. 529 (1979), the panel majority held that Order No. 451’s prospective approval of abandonment was impermissible given the “practical” control the GFN process afforded producers. 885 F. 2d, at 221-223. McCombs, however, is inapposite since that case dealt with a producer who attempted to abandon with no Commission approval, finding, or hearing whatsoever. Nor can respondents object that the Commission made no provision for individual determinations under its abandonment procedures where appropriate. Under Order No. 451, a purchaser who objects to a given abandonment on the grounds that the conditions the agency has set forth have not been met may file a complaint with the Commission. See 18 CFR §385.206 (1986).

IV

We turn, finally, to the problem of “take-or-pay” contracts. A take-or-pay contract obligates a pipeline to purchase a specified volume of gas at a specified price and, if it is unable to do so, to pay for that volume. A plausible response to the gas shortages of the 1970’s, this device has created significant dislocations in light of the oversupply of gas that has occurred since. Today many purchasers face disastrous take-or-pay liability without sufficient outlets to recoup their losses. The Court of Appeals cited this problem as a further reason for invalidating Order No. 451. Specifically, the court chastised the Commission for its “regrettable and unwarranted” failure to address the take-or-pay problem in the rulemaking under consideration. 885 F. 2d, at 224.

Exactly what the court held, however, is another matter. The dissent viewed the majority’s discussion as affirmatively ordering the Commission “once and for all to solve” the entire take-or-pay issue. 885 F. 2d, at 234 (Brown, J., dissenting). Respondents more narrowly characterize the holding as that the Commission should have addressed the take-or-pay problem at least to the extent that Order No. 451 exacerbated it. Brief for Respondents 67-70. We have no need to choose between these interpretations because the Court of Appeals erred under either view.

The court clearly overshot the mark if it ordered the Commission to resolve the take-or-pay problem in this proceeding. An agency enjoys broad discretion in determining how best to handle related, yet discrete, issues in terms of procedures, Vermont Yankee Nuclear Power Corp. v. Natural Resources Defense Council, Inc., 435 U. S. 519 (1978), and priorities, Heckler v. Chaney, 470 U. S. 821, 831-832 (1985). We have expressly approved an earlier Commission decision to treat the take-or-pay issue separately where a different proceeding would generate more appropriate information and where the agency was addressing the question. FPC v. Sunray DX Oil Co., 391 U. S. 9, 49-51 (1968). The record in this case shows that approximately two-thirds of existing take-or-pay contracts do not involve old gas. We are satisfied that the agency could compile relevant data more effectively in a separate proceeding. We are likewise satisfied that “the Commission itself has taken steps to alleviate take-or-pay problems.” Id., at 50. In promulgating Order No. 451, the agency explained that it had chosen not to deal with the take-or-pay matter directly primarily because it was addressing the matter on remand from the D. C. Circuit. Associated Gas Distributors v. FERC, supra.

The court likewise erred if it meant that the Commission should have addressed the take-or-pay problem insofar as Order No. 451 “exacerbated” it. This rationale does not provide a basis for invalidating the Commission’s orders. As noted, an agency need not solve every problem before it in the same proceeding. This applies even where the initial solution to one problem has adverse consequences for another area that the agency was addressing. See Vermont Yankee, supra, at 543-544 (agencies are free to engage in multiple rulemaking “[a]bsent constitutional constraints or extremely compelling circumstances”). Moreover, the agency articulated rational grounds for concluding that Order No. 451 would do more to ameliorate the take-or-pay problem than worsen it. 51 Fed. Reg., at 22196, 46783-46784. The agency reasoned that the GFN procedures would encourage the renegotiation of take-or-pay provisions in contracts involving the sale of old gas or old gas and new gas together. Id,., at 22196-22197. The agency further noted that the release of old gas would reduce the market price for new gas and thus reduce the pipelines’ aggregate liability. We are neither inclined nor prepared to second-guess the agency’s reasoned determination in this complex area. See Motor Vehicle Mfrs. Assn. of United States, Inc. v. State Farm Mut. Automobile Ins. Co., 463 U. S. 29, 43 (1983).

V

We disagree with the Court of Appeals that the Commission lacked the authority to set a single ceiling price for old gas; possessed no power to authorize conditional preauthor-ized abandonment of producers’ obligations to provide old gas; or had a duty to address the take-or-pay problem more fully in this proceeding. Accordingly, we reverse the judgment of the Court of Appeals and sustain Orders Nos. 451 and 451-A in their entirety.

So ordered.

Justice Kennedy took no part in the decision of these cases.

       The term “Commission” will refer to both the Federal Energy Regulatory Commission and its predecessor, the Federal Power Commission.

       Order No. 451 shall refer to both orders where the distinction is not relevant.

       A take-or-pay clause requires a purchasing pipeline to take a specified volume of gas from a producer or, if it is unable to do so, to pay for the specified volume. See Transco, 474 U. S. 409, 412 (1986).

       Section 104 in its entirety reads:
      “Ceiling price for sales of natural gas dedicated to interstate commerce.
      “(a) Application. — In the case of natural gas committed or dedicated to interstate commerce on [November 8, 1978,] and for which a just and reasonable rate under the Natural Gas Act [15 U. S. C. §717 et seq.] was in effect on such date for the first sale of such natural gas, the maximum lawful price computed under subsection (b) shall apply to any first sale of such natural gas delivered during any month.
      “(b) Maximum lawful price. —
      “(1) General rule. —The maximum lawful price under this section for any month shall be the higher of—
      “(A)(i) the just and reasonable rate, per million Btu’s, established by the Commission which was (or would have been) applicable to the first sale of such natural gas on April 20, 1977, in the case of April 1977; and
      “(ii) in the case of any month thereafter, the maximum lawful price, per million Btu’s, prescribed under this subparagraph for the preceding month multiplied by the monthly equivalent of the annual inflation adjustment factor applicable for such month, or
      “(B) any just and reasonable rate which was established by the Commission after April 27, 1977, and before [November 9, 1978,] and which is applicable to such natural gas.
      “(2) Ceiling prices may be increased if just and reasonable. —The Commission may, by rule or order, prescribe a maximum lawful ceiling price, applicable to any first sale of any natural gas (or category thereof, as determined by the Commission) otherwise subject to the>preceding provisions of this section, if such price is —
      “(A) higher than the maximum lawful price which would otherwise be applicable under such provisions; and
      “(B) just and reasonable within the meaning of the Natural Gas Act [15 U. S. C. 717 et seq.].”
      Section 106(c) deals in almost identical language with the ceiling prices for sales under “rollover” contacts, which the NGPA defines as contracts entered into on or after November 8, 1978, for the first sale of natural gas that was previously subject to a contract that expired at the end of a fixed term specified in the contract itself. 15 U. S. C. § 3301(12). A reference to § 104(b)(2) is here used to refer to both provisions.

      Even had we concluded that §§ 104(b)(2) and 106(c) failed to speak unambiguously to the ceiling price question, we would nonetheless be compelled to defer to the Commission’s interpretation. It follows from our foregoing discussion that the agency’s view cannot be deemed arbitrary, capricious, or manifestly contrary to the NGPA. See Chevron U. S. A. Inc. v. Natural Resources Defense Council, Inc., 467 U. S. 837, 843-844 (1984); K mart Corp. v. Cartier, Inc., 486 U. S. 281, 292 (1988).

      The Court of Appeals for the D. C. Circuit has since invalidated the Commission’s principal attempt at solving the problem. Associated Gas Distributors v. FERC, 283 U. S. App. D. C. 265, 899 F. 2d 1250 (1990). See also American Gas Assn. v. FERC, 286 U. S. App. D. C. 142, 912 F. 2d 1496 (1990) (approving other aspects of the Commission’s take-or-pay proceedings), cert. pending sub nom. Willcox v. FERC,
        No. 90-806. Nothing in our holding today precludes interested parties from petitioning the Commission for further rulemaking should it become apparent that the agency is no longer addressing the take-or-pay problem. See Panhandle Eastern Pipe Line Co. v. FERC, 281 U. S. App. D. C. 318, 890 F. 2d 435 (1989).


author: Per Curiam.

text:
    IN RE BERGER
    No.-.
    Decided January 14, 1991
   Per Curiam.

Petitioner Vivian Berger, appointed to represent a capital defendant in proceedings before this Court pursuant to this Court’s Rule 39.7, has filed a motion requesting compensation for such services well in excess of the statutory maximum of $2,500 permitted under present practice by the Criminal Justice Act of 1964 (CJA), 18 U. S. C. § 3006A(d)(2). Although it has been the practice of this Court to adhere to the limits of §3006A(d)(2), petitioner argues that this statutory cap for capital cases recently has been lifted by a provision of the Anti-Drug Abuse Amendments Act of 1988, 102 Stat. 4312, 21 U. S. C. §801 et seq., which permits the Court to award compensation in an amount “reasonably necessary” to ensure competent representation. §848(q)(10).

The relevant statutory language is this:

“Notwithstanding the rates and maximum limits generally applicable to criminal cases and any other provision of law to the contrary, the court shall fix the compensation to be paid to attorneys appointed under this subsection and the fees and expenses to be paid for investigative, expert, and other reasonably necessary services authorized under paragraph (9), at such rates or amounts as the court determines to be reasonably necessary to carry out the requirements of paragraphs (4) through (9).”

The language of this section by its terms authorizes federal courts to compensate attorneys appointed to represent capital defendants under the CJA in an amount exceeding the $2,500 limit of 18 U. S. C. § 3006A(d)(2). Guidelines developed by the Judicial Conference to assist courts in interpreting and applying the mandate of § 848(q) support this interpretation. 7 Guidelines for Administration of Criminal Justice Act (Apr. 1990). Section 6.02(A) of the Guidelines, entitled “Inapplicability of CJA Hourly Rates and Compensation Máximums,” provides that counsel “shall be compensated at a rate and in an amount determined exclusively by the presiding judicial officer to be reasonably necessary to obtain qualified counsel to represent the defendant, without regard to CJA hourly rates or compensation máximums.” Section 6.02(B) recommends that counsel be compensated “at a rate and in an amount sufficient to cover appointed counsel’s general office overhead and to ensure adequate compensation for representation provided.” That section also recommends that courts “limit the hourly rate for attorney compensation in federal capital prosecutions and in death penalty federal habeas corpus proceedings between $75 and $125 per hour for in-court and out-of-court time.” Ibid.

We adopt this general approach, and therefore turn to the question of what level of compensation is “reasonably necessary” to ensure that capital defendants receive competent representation in proceedings before this Court. Our Rules provide that “[i]n a case in which certiorari has been granted or jurisdiction has been noted or postponed, this Court may appoint counsel to represent a party financially unable to afford an attorney to the extent authorized by the Criminal Justice Act of 1964, as amended, 18 U. S. C. §3006A.” Rule 39.7. It has been our practice to award appointed counsel in both capital and noncapital cases the amount of compensation requested, up to the $2,500 cap of §3006A(d)(2). We note that this practice has served both the Court and the parties well. Under existing practice, the level of representation by appointed counsel in capital cases has almost invariably been of high quality and the administrative ease by which requests for fees are disposed of under the bright-line rule of §3006A(d)(2) assists in conserving the limited resources of the institution.

It could be reasonably argued, on the basis of our practice to date, that there is no need to award attorney’s fees in an amount greater than the $2,500 cap in order to induce capable counsel to represent capital defendants in this Court. But we think this argument is outweighed by the possibility that the cap of $2,500 may, at the margins, deter otherwise willing and qualified attorneys from offering their services to represent indigent capital defendants. Given the rising costs of practicing law today, we believe that appointed counsel in capital cases should be able to receive compensation in an amount not to exceed $5,000, twice the limit permitted under our past practice. We decline to accept petitioner’s request that we adopt an individual case-by-case approach to counsel fees. Such an inquiry is time consuming, its result necessarily imprecise, and it would lead us into an area in which we have little experience. It would not be a wise expenditure of this Court’s limited time and resources to deal with fee applications such as those of petitioner on an individualized basis.

We therefore grant the motion of petitioner Vivian Berger for fees in the amount of $5,000.

It is so ordered.

      Berger was appointed to represent Robyn Leroy Parks in this Court. See Saffle v. Parks, 494 U. S. 484 (1990).