Cort v. Ash – Oral Argument – March 18, 1975

Media for Cort v. Ash

Audio Transcription for Opinion Announcement – June 17, 1975 in Cort v. Ash

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Warren E. Burger:

We’ll hear arguments next in 73-1908, Cort against Ash.

Mr. Rome, you may proceed whenever you’re ready.

Edwin P. Rome:

Mr. Chief Justice and may it please the Court.

This case is here on writ of certiorari to the United States Court of Appeals for the Third Circuit.

A three-judge panel of which in a divided opinion, reversed the grant of summary judgment which have been entered by Judge Troutman of the United States District Court for the Eastern District of Pennsylvania on behalf of the defendants, the petitioners here.

Chief Judge Seitz writing for himself and also for Judge Hastie reversed the grant of summary judgment.

Judge Aldisert wrote a dissent.

The factual background of the case is the following.

Mr. Ash filed a complaint just a little bit more than five weeks before the presidential election of November 1972 asserting a claim against Bethlehem Steel Corporation and 12 of its directors and senior executive officers claiming on behalf of himself as voter citizen and stockholder and derivatively on behalf of Bethlehem Steel Corporation itself, claiming a violation of 18 U.S.C. Section 610 on the basis of a charged plan by the defendants to violate 610 by utilizing the resources of Bethlehem Steel Corporation including the expenditure of corporate funds to bring about a republican victory in 1972.

More specifically, there was asserted by the plaintiff below that corporate funds were expended for ads which appeared in magazines of national circulation and also, in newspapers which appeared in 19 towns where the company had plans which ads were said to be blatantly partisan.

The ad in question only one which was attached to the complaint appears at A16 of the record and also reproduced at the end of the petitioner’s brief here.

There was also a second count under which pending jurisdiction was asserted based on an assertion of ultra vires and illegality under Delaware law.

Going back again to the same element of expenditure of corporate funds.

Injunctive relief including the corrective advertising to be placed at the expense of the individual defendants, compensatory in punitive damages as well as Attorney’s fees and cause were sought.

A temporary restraining order was sought which appears at page 17 of the record in which there was sought a prohibition against Bethlehem Steel Corporation from purchasing or paying for advertising, identical to or substantially similar to Exhibit A, that was refused and thereafter there was an application made for preliminary injunctive relief and I would invite and request Your Honors attention to the language of the prayer for preliminary injunction which appears 826 of the record because there the plaintiff sort to prohibit the individual defendants from causing Bethlehem to purchase or pay for any advertising in connection with any federal election.

Including but not limited to advertisement, identical or substantially similar to Exhibit A.

Prohibiting Bethlehem from purchasing or paying for any advertising in connects with any federal election including but not limited to advertisements identical to or substantially similar to Exhibit A.

Directing Bethlehem Steel to cancel all advertising previously ordered in connection with any federal election including but not limited to advertisements identical to or substantially similar to Exhibit A.

William H. Rehnquist:

Mr. Rome, the Court of Appeals didn’t in its opinion necessarily approve that form of relief, did it?

Edwin P. Rome:

I believe sir.

The necessary consequence of the majority opinion is indeed not only to approve the form of relief but in actuality to sanction injunctive relief as a preferred remedy contrasting with the criminal remedy set out in the statute itself.

And this thereby in our contention Mr. Justice Rehnquist, at once creating an entire problem of prior restraint because my purpose in reading this language to the Court is to show that there was in actuality, a prior restraint not only of the particular ad but indeed of ad that had not yet been prepared or published.

William H. Rehnquist:

Well, didn’t the respondent seek damages also?

Edwin P. Rome:

Yes, Your Honor.

Damages both compensatory and punitive were sought and the majority of the Court of Appeals below held that there was an implied rate of action on behalf not only of stockholders but also on behalf of all voters as a result of which in our submission there is an unparalleled implication of a private right of action in this case going far beyond anything which to our knowledge has ever occurred before.

Most particularly, the majority paneled below concluded that it was not bound by this Court’s decision in Amtrak but turned rather to Borak and although it held under Borak that the implication of a private remedy was appropriate to use Chief Judge Seitz words.

He went on to conclude that it was appropriate for a variety of reasons including the availability of a more expeditious remedy, including the possibility of some sort of partisanship on the part of governmental authorities charged with the enforcement of the Act and also because it was appropriate and necessary to carry out the purposes of the statute.

Judge Aldisert dissented based upon this Court’s ruling in Amtrak saying indeed that the majority had defied this Court’s ruling in Amtrak.

The trial judge who was reversed by the majority panel had concluded on the basis of the advertising which was presented to him that there was not an implied right of action.

That 610 had to be narrowly construed in order to avoid a constitutional infringement of the First Amendment and that as so construed the expenditures here involved did not come within active electioneering which would come within the prohibition of the Act.

Edwin P. Rome:

And he also said that to enjoin the expenditures here would raise the gravest constitutional issues under the First Amendment.

Following the reversal, there was — following the grant of denial of the preliminary injunction.

There was an appeal to the Third Circuit which affirmed the denial of the preliminary injunction.

Thereafter, there was an application for security for expenses below as the result of which the state pendent jurisdiction count was dropped out by my friends.

And thereafter, there was a motion for summary judgment filed before Judge Troutman, on the basis of the fact that there is no implied private right action under 610.

That 610 is inapplicable as a matter of law and that 610 is unconstitutional.

There was a motion for evidentiary hearing which was denied because Judge Troutman found that on the basis of the language of the Act on the basis of the congressional history and the purpose of the Act.

There was no implied right of action and he could rule that as a matter of law and summary judgment was then granted without opinion.

I would urge Your Honors to examine the material that was published by Bethlehem admittedly which is attached to the brief and in the record.

In our submission, an examination of that material was showed that it is not to be identified with any anti-social conduct.

This kind of political speech, we submit, ought not to be characterized as a crime.

It cannot be said to come from a corrupt or corrupting source.

As a matter of fact, in our urgent submission to this Court, it comes within the language of Justice Reed and the CIO case if the earlier Provision 313 were construed to prohibit the publication by corporations in the regular cause of conducting their affairs.

A periodical’s advising their members, stockholders, and customers of danger or advantage to their interest from the adoption of measures or the election to offices of men espousing such measures, the gravest doubt would arise in our minds as to its constitutionality.

In our contention here, the advertising the material that is before the Court represents nonpartisans sponsorship of issue oriented advertising, contrary to the viewed taking by Chief Judge Seitz for the majority below.

We say there are an abundance of countervailing reasons why this Court should not conclude that the implication of a private right of action is necessary here.

As Your Honors are aware, the Government has far than amicus brief in this case.

It has not contended that the implication of a private right of action is necessary.

Its here simply to support the constitutionality of Section 610, as a matter of fact the implication of a private right of action in our view would come within the bond suggested by the Nashville Milk case that such private right of action is subjected to great potential abuse because here we have as the result of the opinion by the Third Circuit.

An ability on the part of the all of the voters of the United States, all of the stockholders of corporations to bring actions for injunctive relief and damages and what this would mean by way of an engulfment of the Court’s throughout the country is plain to be seen because it lends itself to the possibility of conflicting judgments coming out of different courts on the same ads, a multitude of litigation coming through out the country, ultimately coming to this Court.

Moreover, it is admitted in this case that there is nothing in the con — the congressional history of the litigation which shows any intention on the part of the Congress to imply a private right of action.

On the contrary as Your Honors are aware, this is legislation which has for over 50 years evoked the continuing repeated concern and attention of the Congress.

It has been as Your Honors are aware recently amended not only in 71 but also in 74 and then our view, one of the countervailing reasons that militate against the implication of a private remedy is the fact that in the Amendment of 1974, although there was an Amendment which created a private right of action under Title 3 of the Act, there was no change by the Congress of that which appears in Title 2 of the Act and this comes within what Mr. Justice Stewart wrote in Amtrak with regard to the application of exclusio unius.

In addition, there is nothing in the language of the Act itself which speaks or hints in terms of the implication of the private right of action and as a matter of fact, this legislation shows a carefully devised program elaborated by the Congress which now has set up a Federal Election Commission as the result of which there are procedures of available for remedies including criminal remedies as well as specific civil remedies.

Under Mr. Justice Brennan’s reference to the cross light in the Pipefitters case, we say that this kind of cross light is capable of being brought to bear upon Section 610 as the result of which it ought not to be held to imply a private right of action.

In addition, normal principles of statutory construction, we suggest dictate the denial of the private right of action because there has to the best of our research and knowledge Your Honors, never had been a situation in which there has been the suggested implication of a private right of action which at once runs counter to First Amendment rights of the defendants, the petitioners here and carries with it inevitably, inescapably the possibility.

The inevitability of prior restraint because I repeat, Chief Judge Seitz for the majority below literarily said that there was a much more expeditious remedy to be found particularly in the form of injunctive relief by the implication of a private right of action and how that could occur or come about without necessarily at ones leading to a prior restraint as its evidence by the nature of the language of the motion for preliminary injunction that was originally sort here is something that really belies reality.

Now in addition to that, we have the situation that the rules laid down by this Court particularly in areas that impinge or intrude upon First Amendment rights call for a narrow construction, a restrictive construction in order to avoid or save the constitutional issue.

But on the contrary, that which the Court below has done has been to produce the most expanded kind of interpretation of expenditure.

Your Honors we’ll recall that the rational back of the congressional legislation had to do with the thought of undue influence emanating from aggressions of wealth whether by corporations or unions, and a desire to protect the minority interest within corporations or labor unions.

Edwin P. Rome:

The reality of it is that the Expenditure Clause in 610 as interpreted by 591 which the court below did runs in the face of that kind of understanding for the reason that the interpretation means that the expenditure of one dollar even though, it had the consent unanimous consent of the stockholders or of members of a labor union would nevertheless come within the band of the statute.

Moreover, our contention is that the ads on their face, the ad, the speech, the folder cannot be construed as representing active electioneering.

They cannot be held because they do not mention the name of a single candidate nor that they mention the name of a political party.

They cannot be held therefore to come within the language that Mr. Justice Frankfurter used in the UAW case as something that was intended to influence the public at large to vote for a particular candidate or a particular party.

Byron R. White:

Does your argument here, your making a constitutional argument now or your making a statutory construction on you?

Edwin P. Rome:

It runs both ways Mr. Justice White for the reason that in our contention their ought not to be an implication of a private right of action when constitutional infringement occurs and in addition, there is the constitutional argument in on of itself.

Byron R. White:

Yes.

Well, but if the statute plainly covers these kinds of expenditures then you would reached your constitutional argument, —

Edwin P. Rome:

Yes, sir.

Byron R. White:

But, but — now, how about –did do — does involve here in Section 591 I gather —

Edwin P. Rome:

610 and 591 both come into —

Byron R. White:

You don’t disagree — you don’t disagree that 591 standards are relevant to 610?

Edwin P. Rome:

Oh!

No.

No, sir I do not disagree.

On the contrary, we say that 610 has to be interpreted and defined by reason of 591.

Byron R. White:

And so, you’re saying that these expenditures are plainly covered by either Section?

Edwin P. Rome:

We say that, the Sections were never intended to cover this kind of issue oriented non-partisan advertising or communication because —

Byron R. White:

And if not?

I gather if you’re correct in that, then the constitutional argument you make need not be — they disappear?

Edwin P. Rome:

That’s right sir.

If there is no —

Byron R. White:

But you’re using the constitutional arguments as a reason for giving in the construction this expenditure argument?

Edwin P. Rome:

Yes, sir.

Which is what has been done before a narrowed construction of expenditures, so as to avoid running counter to the constitutional principles that are —

William H. Rehnquist:

And then you wouldn’t have to decide whether there was a private right of action either if your narrow construction there’s term expenditures is right?

Edwin P. Rome:

It would then reach the conclusion Mr. Justice Rehnquist that the complaint does not state the cause of action on its face because it does not then come within the band of expenditure as use in 610 and 591.

William H. Rehnquist:

But the criminal sanctions wouldn’t be applicable on that?

Edwin P. Rome:

It would not be applicable because there would have been no wrongdoing committed by Bethlehem or the defendants.

Byron R. White:

Now, the courts of the Court of Appeals just to claim disagreed with you that as a matter of fact these particular expenditures were partisan?

Edwin P. Rome:

It held only Mr. Justice White that there was a disputed issue of fact as the result of which the grant of summary judgment was reversed and the case was remanded to the District Court for a trial with regard to that, although —

Byron R. White:

Oh!

I see.

So, —

Edwin P. Rome:

The earlier situation, excuse me sir.

Byron R. White:

Yes, I —

Edwin P. Rome:

The earlier situation was one in which the trial judge himself as a matter of law had concluded that there was not a partisanship —

Byron R. White:

I gather, yes.

Edwin P. Rome:

In the publications.

One additional point that also emerges in this factual context is a denial by of equal protection of the laws because 610 is applicable only to corporations and labor unions and obviously, is not applicable to any of the other numerous groups that are as much capable of being permitted.

And have the same rights to express there views so that the electorate may hear their views because that is where also the First Amendment right goes as well as on the part of the defendants, the petitioners here, to express their views.

And Your Honors will recall that Mr. Justice Douglas in his dissenting opinion in UAW speaks in terms of unions, associations of manufacturers, retail and wholesale trade groups, consumer leagues, farmer’s unions, religious groups, and every other association representing a segment of American life as having a First Amendment right to communicate their ideas and the electorate in turn having a right to hear those idea —

William H. Rehnquist:

That was a dissenting opinion?

Edwin P. Rome:

Yes, sir.

It was.

It was indeed Mr. Justice Rehnquist.

But it serves to point up the fact that in the face of repeated expressions by this Court raising red flags at least as to the constitutionality of Section 610.

The court below instead of adopting a restricted interpretation of expenditure and the language of 610 for the purpose of influencing the nomination for election or the election to federal office, on the contrary, took a very expanded view so that there is no expenditure of any kind that could possibly come without the bond of the Act and the definition given by the majority of the court below.

Our view is, that in actuality there is a denial of the equal protection of the laws because beyond mere problems of corporate aggregations of wealth.

As Your Honors, I believe our well aware, there are some 50 entities that are not corporations which are traded to on the New York’s stock exchange and there are all these other entities that are equally involved in the robust vigorous discussion that Your Honors have said was necessary in order to protect First Amendment rights.

Byron R. White:

A moment Mr. Rome.

Edwin P. Rome:

Yes, sir.

Byron R. White:

If we were to disagree with your view of the scope of expenditures but agree that there was no implied right of action.

What happens to the constitutional question here?

Edwin P. Rome:

It is not then reached Your Honor.

If there is no implied right of action here —

Byron R. White:

That ends this lawsuit.

Edwin P. Rome:

Yes, it ends this lawsuit.

Yes, sir.

Byron R. White:

And you say the constitutional idea to some criminal prosecutions here?

Edwin P. Rome:

Except Your Honor, may I bring to your attention in that regard, the fact that the Amendment to the FECA of 1974 has created the Federal Election Commission which is intending to get under way.

We had a presidential election coming up and this comes within the language of Your Honor’s decision in the Cox Broadcasting case.

There are enormously important First Amendment rights which invite Your Honor’s determination now, rather than the fact which has been the case that for 18 years there has been a miasmic cloud over this entire subject as the result of which.

It is difficult for us to conclude other than that there is an extremely chilling effect on the right of free speech not only of corporation but all other entities as —

Byron R. White:

What is law as the — there is administrative agency that —

Edwin P. Rome:

Yes, sir.

Byron R. White:

Possibility for enforcing —

Edwin P. Rome:

There —

Byron R. White:

This law?

Edwin P. Rome:

This law Your Honor — the — as amended by 1974 made up of —

Byron R. White:

Is that — this have cease and desist power, they didn’t have to go court or what?

Edwin P. Rome:

It has the ability to bring civil action and there is also the continuing criminal remedy available.

The Commission is made up of six members, the clerk of the Senate, the secretary of the Senate, the clerk of the House, and then four others.

Byron R. White:

Do you think that under the new law there would be an argument about there being obliged, don’t they?

Edwin P. Rome:

I would think Your Honor that there is bound to be because this case in itself repre —

Byron R. White:

There’s nothing in the new statute that says, whatever this agency may do that it what may do is exclusive.

Edwin P. Rome:

It — it —

Byron R. White:

Well, but if Congress has it oppose the — I don’t remember that this — agency which has civil remedies available?

Edwin P. Rome:

But that comes within Title 3 of the Act, Section 610 comes within Title 2 of the Act, sir.

And this is why we say that, the cross-like to be brought to bear here indicates that Congress quite knowingly never intended that there be the implied private right of action because this is not the kind of statute that is just one’s treated by the Congress.

On the contrary, —

Byron R. White:

But if your – it’s certain if you, if you think you have strong argument under the old statute, it certainly has gone —

Edwin P. Rome:

Indeed, Your Honor and this is one reason why since the matter is here and certiorari has been granted that covers because we did indeed raise the constitutional question.

We hope and request that Your Honors would give consideration to the constitutional issue because it has ongoing enormous impact and inevitably there will be other cases that will follow or attempt to follow the President of the Third Circuit.

With Your Honors’ permission unless there are other questions, I would reserved my time —

Potter Stewart:

What would you think the law means when it says, the Commission has primary jurisdiction with respect to the civil enforcement of such provisions and such provisions includes 610, doesn’t it?

Edwin P. Rome:

Yes, sir.

I think —

Potter Stewart:

What does that mean?

Edwin P. Rome:

I think that there was an intent by Congress to create an administrative commission that would bring uniformity and a growing body of expertise to this problem.

Edwin P. Rome:

And thereby not intending to create a private right of action which would lead to a variety or diverse inevitably conflicting opinions because every District Court in the country would be engulfed by the possibility that every voter within that district as well as every shareholder of any corporation within that district would be able to go into Court and would not be barred by the fact that somebody else is going in on that same ad or material that is substantially identical to —

Byron R. White:

I think if you petition for a — you’ve raised questions here besides the Constitution —

Edwin P. Rome:

Yes, sir.

Byron R. White:

But you don’t want to subside it?

Edwin P. Rome:

Oh!

I would hope that Your Honor would give consideration to all the issues that we have right —

Byron R. White:

You have counter-elect on to win as long as you live?

Edwin P. Rome:

I want desperately to win Your Honor. [Laughter]

Unless there other questions sir, I would reserve my time.

Warren E. Burger:

You may reserve the balance.

Mr. Berger.

David Berger:

Mr. Chief Justice, may it please the Court.

May I first answer Mr. Justice Stewart’s question to respondent, to petitioner’s counsel.

It is true sir that the new Act uses the phrase “primary jurisdiction” and that is going to be a keystone of my argument.

To the extent of which the new Act sheds any light cross or cross-eyed on this problem, it is in favor of the position which I advocate here today because as the Joint Committee Conference Report says and I’ve quoted it on page 35 of my brief.

This was for the purpose of assuring that private citizens would exhaust their administrative remedies and as Congressman Bradimus (ph) put it first, which means of course, as a precondition to bringing a private right of action or cause of action.

Now, may it please the Court?

I disagree with my friend’s characterization of what the lower court did here.

The petitioner’s argument proceeded it seemed to me as though the Court of Appeals for the Third Circuit had granted summary judgment in favor of the plaintiff below respondent here.

It did no such thing.

The Court of and may I say on the constitutional point as a footnote, the district judge never even mention the constitutionality much less passed on it or addressed the question.

The Court of Appeals did not address the constitutional question so that there is before this Honorable Court now a decision which merely set remands the case to the trial court for a trial.

There’s not only is there an insufficient record with respect to the constitutional question, there’s no record.

May I further point out Your Honors that the posture of a case is extremely significant in addition to what I have just said, “My friend has correctly told you that the complaint averred a plan on the part of the defendants, Bethlehem Steel Corporation and its directors to use the vast resources of that corporation for the specific partisan political purpose of influencing the 1972 election for one of the candidates.

That’s what the complaint alleged and it said, using the good old lawyer’s English inter alia, the actions taken pursuant to the plan included the ad which the petitioner have referred to.

That ad was widely published throughout the United States.

Pamphlets of Mr. Cort’s speech, pamphlets were distributed and reprints of the speech were very widely distributed.

It happens therefore, that because of the motion for preliminary injunction.

We have not only the averments of the complaint but we also have admissions by the defendants of certain facts included within which are these publications which I have described.

But I would put before Your Honors, the issue as follows.

David Berger:

The first question is whether or not the complaint states a valid cause of action for violation of Section 610 of the Act.

Secondly, whether the facts averting the complaint and already admitted make out a prima facie of a violation of Section 610; and thirdly, if Your Honor agrees — if Your Honors agree with me on those first two questions, whether the Act Section 610 is unconstitutional facially or as applied by the Third Circuit.

Your Honor, Mr. Justice Rehnquist was entirely correct in observing that the court below did not grant any relief nor did it emanate that whatever kind of relief that was requested by the plaintiffs in the District Court whether by way of injunction or otherwise was proper and correct and should be granted, all it said was let the matter go back to Judge Troutman for a full trial.

I —

Lewis F. Powell, Jr.:

Mr. Berger.

David Berger:

Yes, sir.

Lewis F. Powell, Jr.:

You mentioned and emphasized the size of Bethlehem Steel.

Does not the Act apply to any corporation of any size?

David Berger:

Yes, sir.

I emphasized that may I please Your Honor Justice Powell because I’m about to turn to the underlying policy of the statute and that is to prevent the application of vast resources improperly to influence the federal electoral process, that’s why I emphasized.

Lewis F. Powell, Jr.:

Would the statute apply to the small one-man corporation with assets of a $1,000.00?

David Berger:

Yes, sir.

Lewis F. Powell, Jr.:

Would it apply to a nonprofit corporation?

David Berger:

I do not believe so.

Lewis F. Powell, Jr.:

Why?

Is there any exception?

David Berger:

I don’t find any exception but I find that this Court has put a gloss upon the interpretation that Mr. Justice Frankfurter has said in the UAW case.

It’s got to be active electioneering.

I’m unaware of any nonprofit corporation which correctly could actively electioneer.

Lewis F. Powell, Jr.:

Are you familiar with League of Women’s Voters?

David Berger:

To a certain extent, I am sir.

Lewis F. Powell, Jr.:

It may or may not be a corporation but it could be and if there large foundations in United States it might very well urge the public together to vote, would you considered that to come within the statute?

David Berger:

I would say that, if the League of Women Voters assuming it were a corporation and it sent these messages out to its own stockholders.

If that what’s Your Honors are telling me, then that is explicitly accepted by the Act, sir.

Lewis F. Powell, Jr.:

Suppose it ran an ad in the same publications?

David Berger:

If it could be arguably urge that that would violate, that’s not this case.

We do not have that case here Your Honor and I’m not asking Your Honors to make a decision on anything except the averments in this case.

It may very well be that in that kind of case came up.

There would be a reason for concluding that the Act, it was not within the Act’s coverage but that’s not this case.

Warren E. Burger:

To what extent is the content of the exhibits relevant to the case in its present posture in your view?

David Berger:

Only Mr. Chief Justice to the extent that they constitute admissions already of record but in my view of the case, it’s the averments of the complaint that count.

And these averments laid ad substance to these admissions add substance to the averments in the complaint.

I must say, I quite agree with the opinion of the court below that taken in the context in which these ads, this speech, reprint of the speech, and the pamphlets appear that under all the circumstances, a jury and this was a request for a jury trial.

A jury could reasonably conclude that this constituted act of electioneering for one of the candidates.

Now, the argument made by the defendants in the court below proceeded on the theory that simply because the name of a name candidate was not mentioned there could be no violation of the Act.

Nothing could be further from correct because as Chief Judge Seitz pointed out in the Third Circuit, you have to look at all the circumstances and if a reader of this material of average intelligence would perceive or could perceive that it was indeed a partisan proclamation on behalf of one of the two candidates, then simply because neither candidates name was mentioned would give no immunity from the violation of the Act or the coverage of the Act.

Warren E. Burger:

Would it be relevant to go and perhaps this from your point of view.

We haven’t reached this stage, yet.

But would it be relevant at all that to inquire whether this content would be appropriate in a lecture of a political science professor?

David Berger:

Your Honors, anybody can say what was in these materials.

Mr. Cort could say it.

The corporation can say it.

The shareholders can say it.

The directors can say it.

The officers can say that.

All of this Act whose constitutionality you’re asked to destroy today, thus, is to say that if they want to exercise that freedom of speech, let them use your own money and not the money of the shareholders.

That’s all this Act does.

Now, may I proceed with Your Honor’s permission —

Warren E. Burger:

With the same — the same might be said with reference to the lecture that I was suggesting by hypothetically that if the professor wants to make a particular speech.

He can make it anywhere he wants but he can’t make it — he can’t make it as professor in the lecture hall at the state supported university, is that —

David Berger:

That maybe.

But if the — if — if he will require to use of a different room and/or let say, if he — if he had to make his speech on his own time instead among the school’s time.

I don’t think that would call into play the First Amendment.

Warren E. Burger:

I take it your point is now that the content of this is really irrelevant in spite of what you said about its getting some support to your position?

David Berger:

Well, I wouldn’t call it entirely irrelevant.

I say two things about it.

I say first, the case must be considered on the basis of the averments and the complaint, and the aver very clearly, and plainly, and give notice to the defendants under the federal rules that what is charged is precisely what this Court has said in Pipefitters for example, by Mr. Justice Brennan and Mr. Justice Powell, I believe agreed it to that extent would constitute a violation of Section 610.

Now, what was admitted for the purpose of the preliminary injunction motion is relevant in showing that the complaint was not just something that was frivolous or thought up in somebody’s head.

There was serious basis for the averments.

I may say another thing that in the posture of the procedure.

David Berger:

In my judgment, what brought about the confusion here is that the lower court was under the impression.

I’m talking now about the District Court that simply because the district judge denied the motion for preliminary injunction which was based essentially on the stipulation of facts which they admitted to that that foreclose the plaintiff from proving the whole case.

As a matter of fact, pending before the Court of Appeals and still pending is the issue of the right of the plaintiff for full discovery and an evidentiary hearing.

The district judge and the one paragraph order on page 887 denied the right to trial, denied the right to discovery, denied the right to evidentiary hearing, and simply summarily dismissed the case.

Now, all the Third Circuit did was sent it back for trial.

Now with Your Honor’s permission, I would like to address the private cause of action point because I agree with Mr. Justice Brennan.

That might be an easy way out but this Court has never been known to take the easy way out.

Warren E. Burger:

We’ll, it’s rarely —

Lewis F. Powell, Jr.:

Do you —

Warren E. Burger:

It’s rarely known to decide constitutional questions from the —

David Berger:

That’s right and I would not ask Your Honors to decide it.

I don’t think it has to be decided today or in this record.

Lewis F. Powell, Jr.:

Constitutionally?

David Berger:

Need not be decided on this issue.

All I ask —

Byron R. White:

Assume we disagree with the other side on — in private action —

David Berger:

I think you should disagree with them or not —

Byron R. White:

I know but —

David Berger:

And in that event, I think you should agree with me that the averments of the complaint and the record as it is showing off to go the fact finder to determine whether there’s been a violation of Section 610.

And that kind of interpretation of the Act is not unconstitutional because it amounts to say that the Act is unconstitutional on its face.

Byron R. White:

Oh!

Yes.

But to solicit the — I gather this Third Circuit held that if you prove what you claim, you can prove —

David Berger:

Right.

Byron R. White:

That the 610 may prevent it.

David Berger:

I think that’s correct.

Byron R. White:

Well, then they said that that’s constitutional for —

David Berger:

I did know that they didn’t pass on —

Byron R. White:

No.

The reason —

David Berger:

The Third Circuit didn’t reach that point.

They said, we’re sending the whole thing back to Judge Troutman.

Byron R. White:

Because they’ll be able — they said it’s not unconstitutional on its face?

David Berger:

They didn’t reach the constitutional point Your Honor with the due deference, sir.

Byron R. White:

Well, what about it?

How, how about the question of just overbreadth on it?

David Berger:

They didn’t get into that.

They got into the — the real gist of it was the private cause of action, may it please the Court.

And they said that the complaint avers a valid cause of action under 610.

Byron R. White:

Suppose you’re right about all that?

David Berger:

Yes.

Byron R. White:

Sometime the constitutional question has got to be decided?

David Berger:

Well, I pretty know they didn’t.

Byron R. White:

If we were to agree with you that they were right as far as they went.

At least, shouldn’t we sent it back and say, “Now, you address the constitutional questions?”

David Berger:

I think —

Byron R. White:

Before you go trial?

David Berger:

I think —

Byron R. White:

Because isn’t there a facial claim?

David Berger:

Well, then I’m prepared to argue that it is constitutional.

Byron R. White:

I would think you would?

David Berger:

And I would like very briefly with Your Honor’s permission, first, to cover their private cause of action.

I heard the Government lawyer this morning gave his analysis of the cases.

I’m relying on the same cases and they began with Texas and Rigsby.

And Mr. Justice Stewart wanted to know when that was decided.

It was 1916 Your Honor.

Yes, sir.

241 U.S.

Potter Stewart:

The Safety Appliance Act?

David Berger:

Yes, sir.

David Berger:

And my analysis of these cases going right on through case in Borak, Wyandotte, Bivens, and T.I.M.E. and Amtrak is this.

It goes back to what Mr. Justice Pitney said in the Rigsby case, that where there is a federal statute and where has been a violation of that federal statute which imposes standards of conduct.

This Court will fashion a remedy to write that wrong and there’s nothing more, nothing startling about that.

That’s the old common law and indeed Judge Kirkpatrick in the Garden case, the Eastern District of Pennsylvania.

In 1946, decided the Landmark decision on whether or not a private person could bring a private cause of action for violation of Section 10 (b).

Now, that’s heavily in grand denial law.

But he addressed that question and went right back to Rigsby and cited the restatement of Torts.

That’s all it’s involved and —

William H. Rehnquist:

But aren’t the federal court’s jurisdiction isn’t to really create common law, the way the state courts says?

David Berger:

No, quite aggrieve Mr. Justice Rehnquist.

But this is base on a violence of federal statute’s act.

William H. Rehnquist:

But you referred to it just like the common law.

It isn’t just like —

David Berger:

No.

The principle of the common law that where there is a violation which causes a wrong a corporal fashion and remedy, that’s all I meant.

Now, as I analyze these cases, they come down to this that the allowance that the Court will allow the person harmed by conduct which violates a federal statute which imposes standards of conduct.

If the allowance of the private cause of action will effectuate the underlying purpose of the statute and there’s nothing in the statute or the legislative history to preclude that.

That’s my analysis.

Now, —

Warren E. Burger:

Even if that means that you got to between 4 and 500 district judges who might be dealing separately and independently with the question?

David Berger:

I believe sir that the federal judicial system is capable of bringing uniformity in that kind of situation.

And I think that’s one of the basic reasons why the private right of action should be recognized.

Warren E. Burger:

Well ultimately, we bring the uniformity here, don’t we?

David Berger:

Exactly.

Yes, sir.

Now, —

Warren E. Burger:

I think that’s quite a lot of expended effort before it happens.

David Berger:

Your Honor Chief Justice, a lot less effort than if you let it just go to 50 states.

Now in CIO in 335 U.S. 1948, this Court told us what the policy of the Congress was and what the purposes of the Act 610 and its predecessors are.

And there are twofold of an equal importance.

David Berger:

The first is to protect the federal electoral process and the second equally important, to protect the shareholder or later a union member against the use of the company’s funds which he contributed toward the union or those for partisan political purposes without the consent of the shareholder or the union member.

Those are two congressional purposes which are involved.

I —

Potter Stewart:

Suppose, it wouldn’t be hard to either discern from legislative history or to infer from one’s reasoning processes that the purpose of almost any federal criminal statute and of which there are hundreds if not thousands.

And I — it seem to me that tests that you told us, you submitted to us is appropriate test would result in a private cause of action based on almost every criminal statute in 18 United States Code?

David Berger:

I — Your Honor, I — with all due deference I disagree.

First, —

Potter Stewart:

I hope you do.

But I — tell me about —

David Berger:

First, we — we’re deciding this case that I’m going on a basis of the cases that came before this Court.

It is not every criminal statute.

It is a particular criminal statute had come here and I only analyze then.

Potter Stewart:

Yes.

But let’s apply your test.

You have this very broad test of yours, you can’t find anything a legislative history to the — to the contrary that would militate against —

David Berger:

Well, let me — let me explain why —

Potter Stewart:

A civil — being a civil cause of action.

Well, then why isn’t they want to —

David Berger:

Because in most instances the criminal penalty is adequate.

In this, it is not.

Potter Stewart:

But who’s to judge that?

David Berger:

This Court.

Potter Stewart:

You mean if it’s if one dollar — one year penitentiary offense is not adequate but if it is 10 years it is and then there’s no civil cause of action?

David Berger:

Well, I mean that — I mean what the specific right is that’s violated.

I can’t take it on —

Potter Stewart:

Let the Congress to say what the penalty, if it’s criminal penalty —

David Berger:

That’s right.

That Congress has done so —

Potter Stewart:

And having done so?

David Berger:

And this Court —

Potter Stewart:

By definition, it’s adequate because that’s what Congress has said?

David Berger:

Only to that extent.

But if the underlying purpose of Congress can — will be served only if you allow a private cause of action.

That’s when you allow it and that’s what I’m arguing for.

And I would like to explain why in this case you have to allow it.

The criminal penalties here at $10,000.00 fine, that’s not going to help the shareholder.

That’s a fine levied against its own corporation.

I submit that the way you’re going to satisfy the second purpose.

Which by the way goes back to 1906, when President Theodore Roosevelt send his message to Congress and asking for the first of these statutes, and then this had been uniformly recognized by the three co-equal Branches of our Government, the co — the Executive, the Legislative, and this Court itself.

And I say that, the only way you can effectuate this very important purpose.

We’re not here dealing with this — with just an ordinary run-of-the-mill criminal statute.

The very foundation of our democracy, our Government has it exist depends on the purity of the federal electoral process.

The very foundation of our system of an enterprise and business depends upon the recognition of what this Court has said is the moral right that officials of a corporation should not misuse the money of the corporation for purely partisan political purposes.

That is the reason why I submit that in this case it was correct to have a private right of action, not only correct but absolutely necessary.

Now, may I —

Warren E. Burger:

Let’s assume for a moment right on that that a corporate officer is found guilty of violating statute on 11 counts and the district judge imposes an $110,000.00 maximum penalty available.

Do you suggest —

David Berger:

The Government —

Warren E. Burger:

Do you suggest that the stockhold — a stockholder would not have a remedy to bring suit against him to make him reimburse the corporation for the fine imposed for his misconduct?

David Berger:

This is what we’re doing in this case.

Warren E. Burger:

Well —

David Berger:

We’re saying right now, Your Honor —

Warren E. Burger:

Not quite.

David Berger:

Well, but do that —

Warren E. Burger:

You went cir — you went to short circuit that process?

David Berger:

No, with due deference Chief Justice.

We’re saying, let the criminal process proceed but while that proceeds, let the stockholder make the people who violated at the law make restitution to the corporation.

Warren E. Burger:

At whose instance are you suggesting the criminal process proceed?

David Berger:

That’s up to the Attorney General.

Warren E. Burger:

Well, but you wanted to go back to the district judge and —

David Berger:

No, not for the criminal process sir.

All I want for — the —

Warren E. Burger:

The present process?

David Berger:

Well, that’s the district judge is the forum in which this will be tried.

Warren E. Burger:

I’m addressing my question to you on the basis of saying your statement that there is no remedy for the stockholder.

There’s quite a good remedy ultimately, isn’t there?

David Berger:

Only, if Your Honors will agree with the Third Circuit that there — this is an appropriate case to say that the private cause of action exist.

It’s just like in case in Borak.

The SEC is the expert commission.

There were criminal penalties Your Honor provided in the Securities in Exchange Laws, but in case in Borak, in Deckert, in the Affiliated Ute case, and the Superintendent Banking.

This Court has constantly recognized that private stockholders have the right to bring actions for damages and indeed, if I could refer you to the brief that was argued this morning by the SEC itself.

They recognized the validity of the principle I’m arguing for and they said that, where you have a kind of statutes such as this which prescribes standards of conduct.

Its appropriate to have — to recognize a private cause of action because that will stimulate the enforcement and this quarters repeatedly held that the private access by private stockholders is one of the most effective means of getting enforcement of that law.

William H. Rehnquist:

But what about the statute that makes it a crime to rob a federally insured bank.

Do you think that bank has a civil action in the District Court under federal question jurisdiction to recover the money that was taken?

David Berger:

I would have to reveal that it might very well, but I’d have to reveal the entire history of the Act and see what the underlying purpose was.

Now, —

Lewis F. Powell, Jr.:

Mr. Berger.

David Berger:

Yes, sir.

Lewis F. Powell, Jr.:

The Third Circuit found that this right to be implied to register voters as well as to stockholders.

David Berger:

I don’t think we have to go that far Mr. Justice Powell.

Lewis F. Powell, Jr.:

Well, I won’t — I would like to know your view of the statute.

David Berger:

Well —

Lewis F. Powell, Jr.:

There are 75 to 90 million registered voters so the Third Circuit’s opinion, it says that that many people could bring this suit?

David Berger:

Well, Mr. Justice Powell, I say and my position is that we only have to sustain Mr. Ash’s right because he is a stockholder and stockholders have not drawn out to federal courts yet.

Lewis F. Powell, Jr.:

You would say that —

David Berger:

Sec — second, excuse me sir.

I’m sorry.

Lewis F. Powell, Jr.:

You’re defending here only the stockholders, right?

David Berger:

At this point, I say Your Honors.

David Berger:

I only had to uphold that.

We’re not — you don’t have to confront the issue of registered voters.

If you ask me personally, my candor would compel me to say that I think they do have the vote but you’ve got nothing to worry about because they do have a right cause of action.

You have nothing to worry about.

Your Honors are well aware of the tremendous cause of federal litigation and if you think that suddenly 200 million voters are going to rise to the federal courts and bring suits, believe me that’s not going to happen in the real world.

Byron R. White:

If you had recovered any recovery from these people in the state courts?

David Berger:

I think that there is that possibility but I don’t think that’s —

Byron R. White:

Can you go into your state courts and say these people have violated the federal statute in giving away this money?

And that we want to recover it from them?

David Berger:

I think that is an arguable position Mr. Justice White but I believe sir that that —

Byron R. White:

Well, is that —

David Berger:

That would not be adequate.

Byron R. White:

You’re an exp — I didn’t mention my question to you.

My question to you, you’re an experienced —

David Berger:

Yes, sir.

Byron R. White:

Pennsylvanian lawyer —

David Berger:

Yes, sir.

Byron R. White:

I just wondered if you would want —

David Berger:

I would have to say that under Delaware law sir, that the doctor of ultra vires would permit such a state suit.

But I don’t think that —

Byron R. White:

Now, that’s an ultra vires?

David Berger:

Yes, sir.

Byron R. White:

Does that dependent at all on the application of federal statute?

David Berger:

It would — it does.

Byron R. White:

It does, yes.

David Berger:

Yes, sir.

Byron R. White:

And so, there is a remedy in the state courts under the state law to vindicate his right.

David Berger:

Possible but it’s inadequate in my submission that —

Byron R. White:

Well, it’s not only possible but you just said that its there.

You —

David Berger:

Well, I said that I believe that the state law could remedy it to a certain degree but I also agree suggests that you’re not going to get uniformity.

This involves a question of federal law and the expertise of a federal judiciary should be employed.

In addition to which, you have a very serious problem that in most states, judges are elected.

They’re subject to the political process.

One word if I may on Amtrak, I believe Amtrak and time fall on the other side of the line on private cause of action.

I agree with Your Honors decision on Amtrak.

In Amtrak, you did not have a statute which provided for recognized standards of conduct.

You had a completely new scheme, a concept for running a written — a National Rail — Passenger Railroad.

Now, in that context, not only with it not effectuate the purposes of the statute to give passengers the right to get discontinuances.

It would have defeated the purposes of the Act.

Because if every passenger could run in and get an injunction against the discontinuance, the –you would not be able to achieve that kind of rational rail passenger service including rational discontinuances.

That is the reason why Amtrak falls outside of the line of cases without different from them, without overruling them, and why it is consistent.

It’s just totally distinguishable.

Finally, I suggest that the case on its face, the statute on its face is constitutional.

There is no restriction contrary to what Mr. Rome said on any free speech whether be the corporation and in our brief, we have pointed out how very carefully this statute was drawn.

This Act, the 1971 which we’re dealing with follows Your Honors’ opinion in Pipefitters, Mr. Justice Brennan.

Its and it codifies precisely what the Court has said on the traditional and constitutional limits.

The federal government has very broad power to regulate federal elections particularly of the President and members of Congress.

In doing so, the only question is — was — were reasonable means employed.

I submit that when you have a narrowly drawn statute which allows the corporation to say anything it wants to its own stockholders and their families, including partisan political thing which allows the corporation to use its money, to solicit funds, and to administer separate segregated fund.

And which allows nonpartisan, get out the vote and all that sort of thing but says that if you want to engage in active electioneering, you have to use your own money or get the segregated funds from voluntary contributions of shareholders.

That doesn’t present this horrendous picture which the petitioners try —

Lewis F. Powell, Jr.:

That — that’s your answer to the constitutional argument?

David Berger:

Yes, sir.

Lewis F. Powell, Jr.:

That’s you ought to do?

David Berger:

Yes, sir.

And I say on the Fifth Amendment that everything that was done here has a rational basis to apply to the great aggregation of wealth of the corporation and the unions, and that there is no necessity to include all these other elements like the League of Women Voters and others in the coverage of the Act.

I don’t think there’s any violation of Fifth Amendment at all.

We submit that the Court of Appeals should be affirmed no matter go back to the District Court for full trial.

Thank you, Your Honor.

Warren E. Burger:

Thank you, Mr. Berger.

Mr. Rome.

Edwin P. Rome:

With Your Honors’ permission, I would bring to your attention the fact that Judge Aldisert had earlier commented in the same way that Mr. Justice Stewart has suggested to imply a private right of action here he says, is to suggest that for every written volume of Title 18 United States Code.

There is an unwritten volume of Title 28.

In actuality, contrary to what Mr. Berger has said, the congressional history of this legislation shows that the Chairman of the House Conferees, Mr. Hay and this appears on page 32 and 33 of our brief, pointed out that there was an intention to assure that civil suits are not misuse in a partisan manner and that the complex and sensitive rights and duties stated in the Act are administered expertly and uniformly.

And therefore, the private civil action was created via the Commission under Title 3 but not in Title 2.

In actuality also, I urge upon Your Honors the recognition that what has been the heart of this case from the beginning has been, the speech, the ad, and the folder and that alone.

There has been no doubt or dispute about that even to the point that my friends on the other side sought to have the Third Circuit rule as a matter of law on summary judgment that those documents in and of themselves constituted a violation.

They weren’t seeking to bring in any other plan or any other activity on the part of the defendants.

I would also point out that to the extent that there is discovery sought here.

I think that that is a blatant intrusion into First Amendment areas because you would — under those circumstances the inquiring of the defe — individual defendants here about their political ideas, their views, their party membership which in our submission is absolutely impermissible under the First Amendment.

And in actuality, it is the fact that the district judge avoided coming to the constitutional issue only because he said, “that there was a mandate to narrowly restrict the interpretation and the definition of the expenditure so as to avoid that result.

To enjoin the expenditures made by Bethlehem in connection with the advertisement, the speech, and the folder would prevent a corporation from seeking an honest campaign in election which is adverse to its interest.

Thereby giving rise to grave First Amendment issues.

That is what happened in the District Court and also the Court of Appeals touched upon the constitutional issue that and that appears at page 108 of the record.

Thank you very much, sirs.

Warren E. Burger:

Thank you gentlemen.

The case is submitted.