Morey v. Doud

PETITIONER:Morey
RESPONDENT:Doud
LOCATION:Railroad Crossing

DOCKET NO.: 475
DECIDED BY: Warren Court (1957-1958)
LOWER COURT:

CITATION: 354 US 457 (1957)
ARGUED: Apr 24, 1957
DECIDED: Jun 24, 1957

Facts of the case

Question

  • Oral Argument – April 24, 1957 (Part 2)
  • Audio Transcription for Oral Argument – April 24, 1957 (Part 2) in Morey v. Doud

    Audio Transcription for Oral Argument – April 24, 1957 (Part 1) in Morey v. Doud

    Earl Warren:

    Number 475, Lloyd Morey, Auditor of Public Accounts of the State of Illinois, et al, Appellants, versus George W.Doud, et al.

    Mr. Wines.

    William C. Wines:

    May it please Your Honors.

    This case here before this Court for the second time is now before this Court’s — Court on appeal probable jurisdiction having been noted from the decision of a three-judge District Court in the Northern District of Illinois.

    The case involves the constitutionality of the Illinois Currency Exchange Act in its application to the plaintiffs in this case.

    The three-judge District Court has held the Act unconstitutional in that application for a reason that can be briefly stated and that I shall then address.

    If Your Honors please, the Illinois Currency Exchange Act regulates after defined currency exchanges.

    This much legislative history is I think prerequisite to a clear statement of the question, subsidy constitutional question, presented in this case.

    In the 1930’s with the closing of banks in Illinois, the business of currency exchanges became widespread in Illinois for a reason that I don’t know on or off the record.

    They have been very much more popular in Illinois than they have in other states.

    I don’t know why but such is the fact.

    The currency exchanges in Illinois engaged in two principle activities for —

    Felix Frankfurter:

    By currency exchanges to be more popular than elsewhere.

    You mean people to whom — places where you can exchange a lira or a gold or a —

    William C. Wines:

    No, Your Honor.

    Felix Frankfurter:

    What is it?

    William C. Wines:

    No, Your Honor.

    Felix Frankfurter:

    What is it?

    William C. Wines:

    I was just about to explain —

    Felix Frankfurter:

    I see.

    William C. Wines:

    — what the Illinois currency exchange is and how it is defined in the Act.

    Felix Frankfurter:

    Well, is that a very — is it a special conception in Illinois?

    William C. Wines:

    Yes, it’s a legislative conception.

    Felix Frankfurter:

    I see.

    William C. Wines:

    It is a legislative conception, legislatively defined and doesn’t correspond to any ordinary connotation of the phrase —

    Felix Frankfurter:

    Well, that is — well, that is —

    William C. Wines:

    –in — in power.

    Felix Frankfurter:

    — strayed by your suggestion that you had more of them than other States.

    I assume you were comparing comparables.

    I am comparing comparables but I’m talking about the kind of —

    Felix Frankfurter:

    All right.

    William C. Wines:

    — institutions that I’m now describing.

    Felix Frankfurter:

    Not these things that were ruled out here.

    They go in New York —

    William C. Wines:

    It has nothing —

    Felix Frankfurter:

    — to find a license, namely, that if a fellow wants a — a foreign exchange place, it requires a license, isn’t that correct?

    William C. Wines:

    It has nothing to do —

    Felix Frankfurter:

    All right.

    William C. Wines:

    — with foreign exchange or whatsoever.

    Felix Frankfurter:

    All right.

    William C. Wines:

    None whatsoever.

    The name is misleading and is unfortunate.

    A currency exchange in Illinois, as I shall first describe from the evidence and then advert to the definition, engages in two principle activities.

    One, with its proprietor’s own money, it cashes checks for a small fee, principally, payroll checks and federal, state, municipal, government checks, pension checks and other checks usually not more than a few hundred dollars in amount.

    Second, these currency exchanges, as I’m now using the term, write money orders.

    It’s important to explain at the outset that these currency exchanges write money orders on their proprietor’s own credit and with their proprietor’s own money.

    They are not in any sense agents or purveyors of the money orders of other institutions such as banks.

    If I were operating one of these currency exchanges, I would be using my own capital such as it might be to finance my money order based business.

    Now, abuses —

    Felix Frankfurter:

    And you — may I ask — and — and that business could be carried on in Illinois without any requirement of a license?

    William C. Wines:

    Prior to the enactment of the statute, the —

    Felix Frankfurter:

    As a free — like a grocery business?

    William C. Wines:

    Before this statute was enacted in its earliest form where — there have been amendments but the provision in question here was ingredient in the virgin text of the Act.

    Felix Frankfurter:

    Just like a grocery business?

    William C. Wines:

    Yes, I could have done it.

    I could have done it.

    Just open the money order business and that’s what actually happened.

    Felix Frankfurter:

    But I’m surprised he claimed leadership in Illinois for that field.

    William C. Wines:

    Well —

    You say that they handle only their own money orders if I walk into one of this Bondified.

    Bondified have difference.

    And with an American Express check, would they cash it on me?

    William C. Wines:

    If it was Bondified, it would not, an ordinary currency — currency exchange might cash a money order but I’m now talking about selling.

    I see.

    William C. Wines:

    So far as I know any currency exchange will cash any money order including a United States postal money order and apparently enough, you can have more trouble with that kind of money order than any other because it maybe stolen, not because it isn’t good as originally issued.

    Charles E. Whittaker:

    What section contains the exception?

    William C. Wines:

    The — the defining section, if Your Honor please, at page —

    Charles E. Whittaker:

    Section 1?

    William C. Wines:

    It’s a — it appears at the — the section begins on page 49 and the section in question appears at page 50 —

    Earl Warren:

    49 of your brief?

    William C. Wines:

    — Section 1.

    50 of our brief.

    Earl Warren:

    Yes.

    William C. Wines:

    Larger (Voice Overlap) —

    William O. Douglas:

    The exception is other than United States Post Office money orders, American Express Company money orders, Postal Telegraph Company money order or Western Union telegraph company money order.

    William C. Wines:

    That’s right, Your Honor.

    William O. Douglas:

    Is that’s the entire exception?

    William C. Wines:

    That’s the entire exception involved here, yes.

    William J. Brennan, Jr.:

    Well — now, where — where would one cash a money order of this kind?

    As I understand it ordinarily, either Western Union or American Express or that kind of money order, you go to — pay goes to the — an office of one of those organizations somewhere else, doesn’t it?

    William C. Wines:

    Not necessarily, Your Honor.

    You can cash money orders almost at any place.

    Your Honor could cash a money order almost at any place that Your Honor can cash (Voice Overlap) —

    William J. Brennan, Jr.:

    Well, I know but ordinarily don’t you take them into a Western Union office and get them cashed?

    William C. Wines:

    Ordinarily, I suppose most people cashes their money orders at — in other office of the issuing company but that is not a —

    William J. Brennan, Jr.:

    Well, no, what — what happened with these?

    How are these marketed?

    If — if one were issued, for example, in Illinois and the payee was someone in Ohio.

    William C. Wines:

    That happened all the time.

    William J. Brennan, Jr.:

    Well, then what — where would that —

    William C. Wines:

    He would —

    William J. Brennan, Jr.:

    — someone — where would the payee take it to get it cashed?

    William C. Wines:

    He would cash that money order and he could do it at any place that he could cash any other check on his own credit.

    If he could cash a personal check or a check given to him by a friend in repayment of a loan and his neighbor at his own bank, he would deposit or cash this at his bank.

    William J. Brennan, Jr.:

    But this organization maintained no offices, I gather, outside or any of these who’s outside of Illinois?

    William C. Wines:

    Most of them didn’t.

    This organization in particular has some in Indiana and some in Wisconsin and so far as I know none anywhere else.

    William J. Brennan, Jr.:

    Now, do I understand it correctly that the Postal Telegraph and Western Union that this aspect, the money order aspect to their businesses, is a regulated — are regulated by — is regulated —

    William C. Wines:

    By this Act?

    William J. Brennan, Jr.:

    No, no.

    Isn’t it generally regulated by someone either a federal agency or a state agency, perhaps both?

    William C. Wines:

    The American Express Company is not subject.

    William J. Brennan, Jr.:

    Not the American Express but what about Western Union and —

    William C. Wines:

    So far as I know that — that those exemptions aren’t involved in that — this case, but I want to reply to Your Honor’s question in the best of my knowledge.

    So far as I know, the only regulation imposed upon from Western Union and the Postal Telegraph Company is that of the various public utility commissions to which they are subjected.

    But —

    William J. Brennan, Jr.:

    Yes, but that public utilities regulation includes their money order business —

    William C. Wines:

    Oh, yes.

    William J. Brennan, Jr.:

    — doesn’t it?

    William C. Wines:

    They were to —

    William J. Brennan, Jr.:

    Now, American Express is not regulated by any agency, federal or state.

    William C. Wines:

    In — in Illinois, American Express Company is not regulated by anything except the ordinary laws against embezzlement (Voice Overlap) —

    Felix Frankfurter:

    So it’s regulated by the federal legislation, the American Express Company?

    William C. Wines:

    In general, so far as I know, it is not.

    I’ll come to the utmost that I’ve been able to find out about that —

    Felix Frankfurter:

    You mean he doesn’t have to file tax and things?

    You have to get a permission of Congress to allow consolidation.

    William C. Wines:

    I’m not sure that’s the same American Express Company, Your Honor.

    We’ve looked for that statute.

    Your Honor mentioned it when the case was argued here before and we have —

    Felix Frankfurter:

    I understand.

    William C. Wines:

    — not been able to find it.

    William J. Brennan, Jr.:

    Well, on this record then, is this a problem of a statute which regulates some of these money order concerns but omits to regulate the American Express, which itself is unregulated in this business.

    William C. Wines:

    That’s correct.

    William J. Brennan, Jr.:

    Is that it?

    William C. Wines:

    That is correct.

    I don’t want to dissemble or minimize that fact at all.

    And so this — this question emerges.

    We had in the Illinois and still have this business and I am using now the statutorily sophisticated term, community currency exchange, and not any conventional term and having to do with foreign exchange, which cashes checks not or almost — are not necessarily it’s own for a fee and also sells money orders on the capital or credit of the individual or occasionally corporate proprietors.

    The American Express Company of course has been in business for many years, in fact, since the year 1882.

    The Community Currency Exchange Act of Illinois defines community exchange.

    Mr. Chief Justice, may I read a few lines —

    Earl Warren:

    Yes, of course.

    William C. Wines:

    — that I think where the text is crucial.

    For the purpose of this Act, I’m reading from page 50 of the appellant’s brief, should any member of the Court care to follow me as each, for the purpose of this Act, “Community currency exchange means any person, firm, association, partnership or corporation, except banks incorporated under the laws of the State and National Banks organized pursuant to the laws of the United States, engaged at a fixed and permanent place of business, in the business or service of, and providing facilities for, cashing checks, drafts, money orders or any other evidences of money acceptable to such community currency exchange, for a fee or service charge or other consideration, or engaged in the business of selling or issuing money orders under his or their or its name, or any other money orders other than United States Postal Office money orders, American Express money orders, Postal Telegraph Company money orders, or Western Union Telegraph Company money orders, or engaged in both such businesses, or engaged in performing any one or more of the foregoing services.”

    End of the quotation, end of the exemption.

    Mr. Justice Douglas, I said that was a complete exemption that I now appear that I forgot to inform you that mentioning state banks are also exempt to the course.

    Now, Your Honors will note that the American Express Company is exempted by name.

    Now, the plaintiff —

    Charles E. Whittaker:

    Well, is this the company exempted by name or does it just prohibit any (Inaudible) ordinance?

    William C. Wines:

    The effect of the text of the statute, Your Honor, as understood by everybody, the plaintiffs, the defendant, the lower courts in this case and the Illinois regulatory authorities in the industry is — is an exemption by name of the American Express Company.

    That is the sense of the — of the statute.

    Well, I see the textual problem that prompted Your Honor’s question.

    Now, the plaintiffs, who are three individuals, residents of Illinois, partners and a fourth individual, who was at one time and seeks again to be an agent of the other three plaintiffs’ partnership, filed this suit in the United States District Court asserting that they desire to go into the business of selling money orders with their own capital, and I shall come to the extent of their capital in a few moments, and engage in competition with the American Express Company, but charge that they are inhibited from engaging in that desired enterprise by the admonitions of public officials that such business would violate the Act and that they would be subject to penalties.

    Thereupon, they filed this suit assailing the Act in its application to them and they contend that the exemption of the American Express Company, they do not advert to the expression of the — exemption of the telegraph companies or, of course, the United States Post Office, but the exemption of the American Express Company by name and not by some standard of definition or statutorily enacted their norm is an invidious discrimination against them.

    They rely, I believe, principally on the Equal Protection Clause, although, they mentioned the due process too and not to misquote —

    William J. Brennan, Jr.:

    That — has there ever been a state court interpretation of that exemption?

    William C. Wines:

    Yes, sir, there has been a state —

    William J. Brennan, Jr.:

    Well, has there been one —

    William C. Wines:

    — court discussion of it.

    William J. Brennan, Jr.:

    — has there — has there been one, which has said that the statute is — that the exemption is valid?

    William C. Wines:

    Yes, sir, there has on a different state of facts, an entirely different record.

    But when the Act was first attacked, it was — its constitutionality was considered on direct appeal by the Supreme Court of Illinois and the — one of the onslaughts on the Act was based upon the explicit exemption not only of the American Express but in that case of the two telegraph company cases.

    And the Supreme Court of Illinois held that the statute including the exemption was valid and further declared, and I will come to the import and the declaration on this entirely different record later, but the Court in that case did declare that the legislature would not have passed the Act but for the exemption and that is, I think, response with Your Honors question.

    Now —

    William J. Brennan, Jr.:

    Well, what I — what I had in mind was whether the statute might otherwise stand that the exemption was stricken down but I gather —

    William C. Wines:

    We think —

    William J. Brennan, Jr.:

    — you tell me the Supreme Court of Illinois has —

    William C. Wines:

    The Supreme Court of Illinois said so.

    I will discuss that opinion later, Your Honor —

    William J. Brennan, Jr.:

    Well, don’t —

    William C. Wines:

    — and I will —

    William J. Brennan, Jr.:

    — do not let me interrupt you.

    William C. Wines:

    Well, I’m happy to be interrupted but I will urge with a little more factual background that the language was, if not a dictum and I really don’t think it was a dictum, nevertheless, proceeded from a record so different from this that it should not have been regarded as binding by the federal court.

    Now, the District Court referred question of its jurisdiction, the propriety of the exercise of that jurisdiction to the merits, and first entered a decision of judgment in which it declared that it was without jurisdiction to decide the case and Your Honors noted probable jurisdiction.

    Your Honors heard this case last year and Your Honors reversed the case without consideration and — or at least certainly without intimation or advertence to any matter of the merits, held that the District Court had abdicated the jurisdiction that it did possess but made it clear that Your Honors were not telling the Court whether it should exercise that jurisdiction or remit the parties to the state court for a consideration of the — both the federal constitutional questions and (Inaudible) of several ability.

    Pursuant to that order of remandment on the part of Your Honors, the District Court, which is I have explained, had previously — actually heard the case on the evidence, entered an opinion without further argument or hearing in which they held that they regarded it, this Illinois expression in the McDougall case to which I — which I mentioned in answer to Mr. Justice Brennan’s question as rendering it unnecessary for the plaintiffs to repair the state court for recourse to the federal courts, reached the subsidy of constitutional question on the merits, held the exemption, held the Act of discriminatory as to the — in its application to the plaintiffs.

    It did not undertake to invalidate it in total and entered a declaratory judgment and a permanent injunction restraining the state officers from the Act.

    The substantive question that emerges, which I shall I address first is — well, I think maybe the fairest way to state it is if I may just read three lines from the conclusion of — not our brief but the appellee’s brief.

    The appellee says this, its appellee’s own language in — in their conclusion at page 23 of their brief, the inclusion and the definition of the term “community and currency exchange” of one who is “engaged in the business of selling or issuing money orders“ coupled with the exemption by name of a concerned and engaged in that very business renders a statute discriminatory and unconstitutional.

    Question – Is that contention stated in appellee’s own language, one that should prevail on this appeal?

    That is the subsidy of constitutional question.

    Now, the — I shall come — and when I deemed to be inappropriate time in my argument, unless requested to come sooner by question from some member of the Court to the United States Supreme Court decisions on which we rely as vindicating the general proposition that exemptions by name of private corporations are proper where the exception itself is appropriate and not discriminatory.

    But first, with Your Honor’s indulgence, I should like to compare or I should more preferably say contest the activities and operations of the American Express Company with the operation of the plaintiffs and then I shall come to the matter of the authorities that sanction and exemption by particular names.

    The American Express Company, the record is replete with evidence of the very great distinctions other than those of sides alone between the American Express Company and the business that the plaintiffs aspired to conduct in Illinois and in fact do conduct in Illinois and Wisconsin.

    Cardinal among those distinctions are these signally differentiated events.

    American Express Company was founded in 1882.

    Plaintiff’s business was not either born or conceived in Illinois when this Act was passed, circumstances that might have warranted an exception by the principle of the grandfather clause but that’s not primarily relied on here.

    American Express Company does business, and if my memory serve me correctly, 55 foreign countries as well as throughout the entire United States, the record doesn’t show to what extent the American Express Company is in fact subjected to what might be called an official type of scrutinizing regulation in all of these 55 foreign countries.

    But it does show that the American Express Company comporting itself and has for about three quarters of a century comported itself in such a manner as to satisfy not only the regulatory authorities of the United States and 55 other countries but the established business institutions that depend on it.

    William C. Wines:

    The record shows, if Your Honors please, that the American Express Company has on many occasions and in many respects acted as the fiscal agent for the United States Government.

    The record shows that the American Express Company has a wholly owned subsidiary banking corporation, which is regulated and subject to the supervision of the banking laws of the State of New York.

    It also shows that bank is federally insured and therefore is, of course, subject to the surveillance of the federal authorities.

    Earl Warren:

    Is there any question as to the solvency or the good business practices or anything else of the American Express?

    William C. Wines:

    No.

    Earl Warren:

    Is that — that isn’t in the case?

    William C. Wines:

    No, sir.

    The plaintiffs concede, the trial court found, the evidence shows and the legislature recognized that it is solvent.

    The statement isn’t challenged in the brief and it’s never defaulted on obligation and there is no question as to the features of the American Express Company’s business contained in or suggested by the Chief Justice’s question.

    Now, we come to the business of the — it’s briefly sketched in our brief and I’m not going to read from the brief, of course, but I shall use it to request my recollections.

    Harold Burton:

    Is money orders issued by the subsidiary banking incorporation or by —

    William C. Wines:

    I’m sorry —

    Harold Burton:

    — money orders that they are considering?

    Are they issued by that subsidiary banking corporation that you referred to or they’re not?

    William C. Wines:

    I don’t think they are.

    Harold Burton:

    Well, this is not a banking corporation?

    William C. Wines:

    No, no, that’s not the — that’s not the reliance at all.

    Felix Frankfurter:

    Well, with — of which enterprise is the — does the United States make it a depository?

    William C. Wines:

    The American Express Company, the parent company.

    Felix Frankfurter:

    This very — the thing we have before us?

    William C. Wines:

    Yes.

    Felix Frankfurter:

    And might you infer that the United States makes of an enterprise a depository without any oversight?

    William C. Wines:

    No, sir, not at all.

    Felix Frankfurter:

    Well, that’s what I — that’s why it puzzles me so in saying this is like a grocery store, unregulated, free.

    William C. Wines:

    I didn’t —

    Felix Frankfurter:

    Well, then I must have —

    William C. Wines:

    — intend.

    Felix Frankfurter:

    — misunderstood you.

    William C. Wines:

    I did not intend to say that at all, Your Honor.

    I understood you rather to ask a different question.

    William C. Wines:

    I understood Your Honor to ask whether the typical Illinois currency exchange before the Act could be operated like —

    Felix Frankfurter:

    Oh, I understood that —

    William C. Wines:

    — a grocery store —

    Felix Frankfurter:

    — because your answer is clear.

    William C. Wines:

    — and whether as far as the Illinois law was concerned, the American Express Company —

    Felix Frankfurter:

    Yes, I — you were quite clear about that but I was puzzled by evidence, they got the impression that the American Express Company is not subject to scrutiny for its transaction —

    William C. Wines:

    Oh, I did not —

    Felix Frankfurter:

    — and that was a great shock to me.

    William C. Wines:

    If I — if I gave that impression, Your Honor, I’m very sorry.

    I misunderstood Your Honor’s question.

    I understood Your Honor to ask about the typical Illinois —

    Felix Frankfurter:

    I understand that.

    William C. Wines:

    — currency exchange and the American Express too, so far as Illinois is concerned.

    Felix Frankfurter:

    I understand all that.

    William O. Douglas:

    Where is the Illinois law governing — regulating the American Express, is it printed here?

    William C. Wines:

    There is none, except the general laws against forgery or any fire ordinances or doing business with intent to defraud or confidence game, the criminal codes.

    William O. Douglas:

    When — when you say it’s regulated, you mean it’s regulated by some other states?

    William C. Wines:

    Its subsidiary is regulated by the State of New York.

    To what extent the Federal Government regulates it, I don’t know.

    William J. Brennan, Jr.:

    Well, do you know specifically whether its money order business is regulated?

    William C. Wines:

    I don’t know of any law anywhere that regulates the American Express Company’s money order business in the sense that a bank is regulated or a building loan systems, directly .

    I don’t want to —

    Felix Frankfurter:

    I’m sorry.

    I’m responsible for all this — this derailment if it is that.

    William C. Wines:

    It isn’t derailment.

    Felix Frankfurter:

    My inquiry —

    William C. Wines:

    It’s very much to the point.

    Felix Frankfurter:

    — is directed.

    My inquiry was directed towards this curiosity, namely, if the State of Illinois take out some whimsical exception, some favorite of some politician or something that had no relation to the actualities of American finance and if — is that a fair description of the American Express Company and it shocked me to — to elect to infer that that is so.

    I suppose —

    William C. Wines:

    No.

    Felix Frankfurter:

    — that this is one of the most powerful responsible of organization.

    William C. Wines:

    Such is the fact and such is —

    Felix Frankfurter:

    And I don’t mean to suggest it was regulated by Illinois.

    I meant to suggest that it isn’t a whimsical choice.

    William C. Wines:

    That is — that is the whole question.

    Earl Warren:

    But the question was asked and I am not quite sure yet but the answer is — or whether the Federal Government regulates the American Express in these transactions.

    William C. Wines:

    So far as I know it does not.

    Earl Warren:

    All right.

    That’s all.

    William C. Wines:

    I’m sorry, Your Honor, my associates are whispering and distracting my attention.

    I wish you could keep still.

    Now, we address the business of the — of the plaintiffs.

    The plaintiffs are three individuals who have formed a partnership and a corporation and they do business in Indiana and in Illinois.

    They imitate the methods of the American Express Company to this extent and to this extent only.

    We can see the similarities before we address the vital differences.

    They, like the American Express Company, have agents working in grocery stores or drugstores.

    These agents are empowered to sign the names of the plaintiffs or their firm as the author and responsible maker of money orders and they keep a bank account.

    Any American Express does and company does all of those things and the plaintiffs do all of those things.

    But now, we don’t rely on the size alone but let’s take size.

    Impressing figures are recapitulated on page — at pages 12 and — and 13 of the briefs.

    The plaintiffs sell a type of money order, and now when I say sell, I mean do sell in Indiana and Wisconsin, and have sold in test cases and seek to sell regularly in Illinois money orders, which are called Bondified.

    That’s a coined name, Bondified money orders.

    They represent to the public that they are licensed and Bondified.

    Actually, when you take their depositions and asked them what license they hold, community currency exchanges in Illinois are licensed, they say that the license they hold is not from the State of Illinois, the State of Wisconsin, the State of Indiana or any other states but it is a trade name license to use the trade name Bondified which is a registered trade-mark or trade name and who owns the registration and grants this license, which is not like a license to drive an automobile but it’s like a license from me to come on my property.

    A company or known as checks incorporated whose principle business is to own this trade-mark or trade name, license its use, permit the licensees to represent to the public that they are licensed would we say the clear connotation that it’s some kind of a governmental license.

    Is there a picture of one of this Bondified money orders?

    William C. Wines:

    Yes, there are a number of them in the record.

    Earl Warren:

    Page 258, there’s one.

    It says Bondified money order.

    William C. Wines:

    Yes.

    Tom C. Clark:

    257?

    Earl Warren:

    258, I see it.

    William C. Wines:

    And on page 244A.

    Charles E. Whittaker:

    444.

    William C. Wines:

    444, no, just 44A, Justice Whittaker.

    Earl Warren:

    Well, Mr. Wines, does this have anything to do with the determination of the constitutional question we have here?

    William C. Wines:

    To this — I’m sorry.

    Earl Warren:

    Go ahead.

    No, go ahead.

    William C. Wines:

    To this extent, Your Honor, we are concerned with whether there is a valid basis for differentiating between the American — way the American Express Company does business and the way the plaintiffs do business.

    Mind you —

    Earl Warren:

    Well, is the — is the way these plaintiffs happen to be transacting their business at the present time as compared with the American Express the important thing or is the statutory requirement of their — of their license the important thing in determining the constitutional question?

    William C. Wines:

    My — that, of course, is really a statement of the only subsidy of constitutional question here and this is my answer Mr. Chief Justice and if Your Honors please.

    We say that the distinction is vindicated by the actualities of the business and not by the mere words of the statute.

    Felix Frankfurter:

    Are you saying that the company — the kind of business which the plaintiffs are conducting is — as a matter of classification, I’m not using legal connotations in term, as a matter of differentiation that what the plaintiffs are doing represents the business that is different from the kind of business of these accepted —

    William C. Wines:

    With —

    Felix Frankfurter:

    Is that what you’re saying?

    William C. Wines:

    Yes, with respect to the need for —

    Felix Frankfurter:

    Now, let me ask you this.

    William C. Wines:

    — particular regulation.

    Felix Frankfurter:

    Suppose the exception weren’t made, suppose that there were no exception, will the American Express Company be within the statute?

    William C. Wines:

    Yes, sir.

    Felix Frankfurter:

    And then, there must be an identification between the class to which the plaintiff belongs and — and what the Express Company belongs?

    William C. Wines:

    Yes, sir.

    William J. Brennan, Jr.:

    Well, Mr. Wines —

    Felix Frankfurter:

    Did you do reach the question that the Chief Justice quotes?

    Namely, that an exception is carved out from a class as to which it is claimed.

    The accepted — the accepted item or the accepted units are of the same category as the included units.

    William C. Wines:

    We —

    Felix Frankfurter:

    Is that right?

    William C. Wines:

    I’m not quite sure, Your Honor —

    Felix Frankfurter:

    Well, then — then —

    William C. Wines:

    — that I understand.

    Felix Frankfurter:

    But you’ve just said that if there weren’t that exception, they would be included.

    William C. Wines:

    I did say that and I meant that.

    Felix Frankfurter:

    Well, then they must be the same class.

    I don’t understand it otherwise.

    William C. Wines:

    Well, Your Honor, it’s sad that Your Honor wasn’t using classification in the legal —

    Felix Frankfurter:

    That is —

    William C. Wines:

    (Voice Overlap) and if —

    Felix Frankfurter:

    — precisely what I’m not doing —

    William C. Wines:

    — and if —

    Felix Frankfurter:

    — and not meaning to do that.

    William C. Wines:

    Well, I don’t want to —

    Felix Frankfurter:

    If you say class A is — is forbidden to do all people in class, they are forbidden to do something except Jones and Company.

    I cannot help but conclude, forgetting all about law, that if that weren’t to accept Jones and Company, the Jones and Company would be included.

    William C. Wines:

    That’s true and these — and the plaintiffs and the American Express Company are, of course, in the same class or there’d be no need for the —

    Felix Frankfurter:

    Then, you have to address yourself with the legal question whether the kind of circle that’s drawn around giving sanctity to what the American Express Company is doing, although the same as the prohibited proscribed facts have some reason in all.

    William C. Wines:

    That’s right.

    That’s correct —

    Felix Frankfurter:

    Well, it’s a problem, isn’t it?

    William C. Wines:

    — and if I give — if I — yes, sir.

    And if I gave a (Voice Overlap) —

    William J. Brennan, Jr.:

    Well, Mr. Wines, suppose — suppose Bondified were an exact duplicate of American Express.

    William C. Wines:

    In every respect?

    William J. Brennan, Jr.:

    In every respect.

    William C. Wines:

    This statute would be —

    William J. Brennan, Jr.:

    Would the statute apply?

    William C. Wines:

    — discriminatory.

    William J. Brennan, Jr.:

    Would the statute apply?

    William C. Wines:

    It would be — it would — the statute would — if — if Bondified were an exact duplicate, a complete replica of American Express Company, the statute would apply to Bondified, it would not apply to American Express Company.

    And therefore, it would be discriminatory and unconstitutional and we would not say otherwise.

    Earl Warren:

    Now, what do you mean by complete replica?

    Do you mean —

    William C. Wines:

    Doing business.

    Earl Warren:

    — having the same financial background?

    William C. Wines:

    Exactly.

    Earl Warren:

    The same historical background?

    William C. Wines:

    Exactly.

    Earl Warren:

    The same — the same — that security —

    William C. Wines:

    That’s what I understood —

    Earl Warren:

    — and all of that?

    William C. Wines:

    That’s what I understood Mr. Chief Justice Brennan to mean and I see him nodding.

    Earl Warren:

    Yes.

    You don’t mean just the method of —

    William C. Wines:

    Oh, that’s the whole point.

    Earl Warren:

    — doing this?

    William C. Wines:

    They are certainly in the same class to this extent.

    They’re both selling money orders with their own cash.

    Earl Warren:

    Yes.

    William C. Wines:

    They’re both doing it through agents in grocery stores, drugstores, department stores and I don’t know what other kind of places.

    Now, to that extent they are in the same class and if that is what Mr. Justice Frankfurter meant by the same class, certainly what I meant.

    William J. Brennan, Jr.:

    Well now, suppose tomorrow American Express would’ve carry on business just the way you say Bondified is carrying it on.

    William C. Wines:

    You mean with its same financial apparatus?

    William J. Brennan, Jr.:

    No, suppose that we’re doing exactly what Bondified is doing all right with the same financial apparatus.

    In other words, suppose the tables were turned here, would American Express have the benefit of the exemption under this statute?

    William C. Wines:

    I say, no.

    I say the —

    William J. Brennan, Jr.:

    It would not?

    William C. Wines:

    No.

    William J. Brennan, Jr.:

    Even though the statute expressly says that American Express —

    William C. Wines:

    They would have it except for this fact, except for this fact.

    If the statute were given its — its effect, now, here’s where — here’s where I misunderstood you.

    Felix Frankfurter:

    Well, if you forgive me for cutting in —

    William C. Wines:

    I wish you would.

    Felix Frankfurter:

    — but — but so far as this argument goes, this isn’t the place to determine this.

    You can’t — you can’t, unless the Supreme Court of Illinois has spoken on this question and except insofar as we do from time to time give a great weight to what the Attorney General of a State says.

    You can’t answer categorically Justice Brennan’s question if that hasn’t as a matter of statutory construction and passed on.

    What you’re telling us now is that as a matter of fact, as a matter of construction of the statute to — an answer to his question, it would — it would not be included, isn’t that what you’re saying?

    William C. Wines:

    If Your Honor please, I understand —

    Felix Frankfurter:

    How can we — how can we sit here and determine that question?

    William J. Brennan, Jr.:

    My question is simple.

    William C. Wines:

    Yes.

    William J. Brennan, Jr.:

    I’d like you to answer it.

    The exception is for American Express.

    William C. Wines:

    Yes.

    William J. Brennan, Jr.:

    Now, if American Express Company were carrying on business the way Bondified is carrying on business, precisely the same way, would this exception apply?

    William C. Wines:

    But if the Act were given its effect, it would still apply.

    But we say, and this is vital and crucial to the argument, that until the time comes when the exception becomes unfounded in reality, the exception is valid.

    Suppose if I understand your — I understood something about tables that are being reversed.

    Suppose that overnight, American Express were to shrink to a duplicate of what Bondified is now and over the same night Bondified were to expand to American Express, the hypothesis is grotesque but it does make the — the — it does point up to the problem.

    The statute we say would still contain an exception in favor of American Express Company, would contain none for Bondified but would, thereupon, become discriminatory and unconstitutional and we would not suggest otherwise.

    Felix Frankfurter:

    And — and am I wrong in inferring that the Act you just made necessarily involved a construction of the statutes?

    William C. Wines:

    I don’t think so, Your Honor.

    Felix Frankfurter:

    What?

    William C. Wines:

    I don’t this so, Your Honor.

    Felix Frankfurter:

    Well, you think — you don’t think what?

    William C. Wines:

    That involves a construction of the statute.

    William O. Douglas:

    Is you’re — you’re —

    William C. Wines:

    I think it’s so plain, Your Honor.

    Felix Frankfurter:

    I know but (Voice Overlap) —

    William C. Wines:

    If it’s not plain — if it’s not plain, then it involves the construction of the question but Mr. Justice Brennan asked me to give him my response.

    Felix Frankfurter:

    But I’m not — — I’m not — I think — I’m not parley with the fact that you gave an answer.

    I’m merely suggesting that when you say a statute excepts by name — exempts by name, an enterprise, and you go on to say, but if that enterprise did something else than merely being the American Express Company would or wouldn’t be within the statute, you’re construing the statute.

    William C. Wines:

    Possibly, you’re right.

    Earl Warren:

    Well, Mr. Wines, in order to bring it to realities as you have spoken of, would it be — would it be essential in order to equate the business of these two companies that they both be of the same size, that they both be of the same age, that they both operate in foreign countries, that they both have the same amount of capital or might there not be other factors that would — that would enter, namely, the amount of business they are doing and where they do it — do it in order to equate the business from a standpoint of safety?

    William C. Wines:

    I’ll answer your question — Your Honor’s question as I — as best I understand it and as best I can.

    I don’t say that for this exemption to become discriminatory that a competitor would have to duplicate it exactly in all particulars of course.

    But I would have to say that they would have to be so substantially comparable that it would appear captious and arbitrary law that would distinguish between.

    Now, let me put it this way, if Your Honors please, I don’t want to misrepresent the appellee’s position and if I misapprehend their briefs, which is plausible, I think, I want them to correct it.

    But as I understand them, their only argument and certainly their chief argument is that if you have enacted a set of standards in generic terms, any corporation, I would say you’d have to get all of these factors in but get cardinal features in, engaged in the international business of writing money orders, having a half a billion dollars in free assets, which American Express Company does, having been in business for 50 years, American Express Company’s history is longer than that.

    And perhaps adding other ingredients, which I don’t think would be necessary.But he put in generic terms, so that if American Express Company withers and its assets fall below this half a billion or a quarter of a billion or whatever amount, put an amount many times or anything that the — that the plaintiffs have or them, American Express Company, would automatically be excluded because it would now have ceased to comply like the taverns.

    They open after hours or the bank whose assets become invariable.

    On the other hand, Bondified could achieve the quarter of a billion assets or half a billion assets or whatever figure was taken could achieve 50 years or 20 years of continuous business, could do so that it would be a matter of definition.

    What they object to principally if not exclusively is the exempting of American Express Company by name.

    They argued that we don’t know no matter what American Express Company’s virtues maybe today.

    I go and sell them to big company’s hand.

    It — it may fail or at least may verge upon themselves.

    They say that it has been baptized and salvation is there no matter what it does from now on and that’s the way we — they read the statute.

    William J. Brennan, Jr.:

    Well, Mr. Wines, tell me, is there any relation to the problem of Sections 4.1 and 4.2 at page 54, which is as I read them, do not permit the location of one of these exchanges, except as an affirmative determination by the licensing authority whether that location in terms of the needs of the community for such exchanges is needed in the interest — public interest or convenience, I think, the statutory language is?

    Now, do I read this correctly that the American Express Company can locate any number of offices or any number of community —

    William C. Wines:

    That’s true.

    William J. Brennan, Jr.:

    — without a determination whether there’s any need for that office —

    William C. Wines:

    That’s true in the community.

    William J. Brennan, Jr.:

    — whereas none of these exchanges may, except as this been that determination?

    William C. Wines:

    That’s true.

    Earl Warren:

    Mr. Wines, may I ask you this question and I suppose this rule of yours would apply to — to any business serving to regulation by the State or the police power?

    William C. Wines:

    Mr. Chief Justice, I — I have to confess I didn’t — I didn’t understand your question.

    Earl Warren:

    Well, let’s take — let’s take a business like the liquor business.

    Earl Warren:

    Is that subject to regulation as — as this business is?

    Now, suppose the legislature said, we must regulate the liquor traffic but we have absolute confidence in X Liquor Company, an old established company that’s thoroughly sound financially and treats its customers all right and we will require all of the liquor concerns in the State to be regulated except this one company.

    Suppose you have the same thing with a — with a pawnbroker or any of the other kinds of businesses that have to be licensed, could you do the same thing there that you can do in this business?

    William C. Wines:

    To answer Your Honor’s question as candidly as I can, I think in the manner of the liquor business, you couldn’t because they just can’t imagine an actual state of affairs where a — a — when — when liquor is concern, it could be so prepotent in its — in its soundness as to justify it.

    Earl Warren:

    Take a pawnbroker’s business then.

    William C. Wines:

    — If you could.A pawnbroker’s business, I can imagine a — a pawnbroker’s business so well established of dimensions of the size, I will put it this way.

    If you could cast a statutory concept which would exempt this from regulation at all, you could do it by name and wouldn’t have to do it by — by standards.

    For instance, banks in New York and I may be wrong about this, but at least it was a law at one time that certain types of banks that didn’t take deposits of less than $7000 were free from most of the New York banking regulations.

    Now, if there had been only one such bank and you would pick it out by name, I would say it makes no difference whether you do it by using the name or by using some euphemistic artifice of — of classification.

    Now, that is the whole crux and point of the case, Mr. Chief Justice and Your Honors.

    I think you have done it.

    But pursuing Your Honors question, I can tell you some — I could give you some examples where they have done that but not quite the liquor and maybe not what you either would call a pawnshop.

    But the Illinois Blue Sky law, which has not been passed upon by this Court, but which has reaches far beyond Illinois in its effect, although, exempts by name from its very vigorous application, all securities listed on the New York Stock Exchange.

    The New York Stock Exchange is a private organization, it isn’t even incorporated and Illinois can’t even send an inspector to the New York Stock Exchange to see if they’re complying with fire laws because it isn’t in New York.

    We have no control over it, not even the control that we have over zoning ordinances.

    Yet, nobody questions, nobody challenges the exemption from the Illinois Blue Sky law of securities of private corporations, I’m not talking about public offerings from the Illinois Blue Sky law as long as they’re listed on the New York Stock Exchange.

    Oh, I think there are few restrictions even as —

    William O. Douglas:

    Would those securities have a more basic regulate — regulation and (Voice Overlap) —

    William C. Wines:

    Yes, but it isn’t by the State and it isn’t —

    William O. Douglas:

    — not the State.

    William C. Wines:

    And — but my point is it’s by name.

    If there’s an exchange in California that’s just as highly regulated, there is no exemption for it.

    There is for a few other exchanges, including the Illinois Board of Trade.

    I think maybe — I think the Boston Stock Exchange is exempted too.

    I know several stock exchanges are exempt and they are exempt by name.

    Now — but I would like before I conclude to — to call Your Honors attention very briefly to some very important cases in which exemption by name has been upheld.

    Felix Frankfurter:

    May I ask Mr. Wines by in reply to the Chief Justice’s question, you didn’t suggest the scope of the Slaughter-House Cases?

    William C. Wines:

    Well, Your Honor, perhaps I didn’t —

    William O. Douglas:

    I noticed your Supreme Court said in your McDougall case that the law wouldn’t have been passed if the — American Express had been subjected to regulation.

    William C. Wines:

    Yes, they said that.

    William C. Wines:

    We say that they said it on a different record.

    My time is running and the record in this case makes a very convincing demonstration from this plaintiff’s own evidence that this law is necessary and a court considering that same question in light of the record in this case might have very well concluded and the Supreme Court of Illinois, I think, might very well conclude on this record that there’s such urgency for the regulation of money order business in Illinois that if they have to subject American Express Company to the same regulation, they subject plaintiff’s and other currency exchange operators, they would have done so.

    And one of the points that’s urged in this brief and I urge it not for less strongly because I urge it briefly.

    It’s very simply argued then there’s no use in spending the Court’s in my time —

    Felix Frankfurter:

    Before you leave your record, when you appealed to the record, your legislature doesn’t say, except however such corporation which can make out a case, it named.

    It didn’t go on the record.

    You have to defend this statute on the statute precisely and not by convincing this Court that it might — that the leverage present is very difficult and that any other corporation is equally different, has equal rights.

    That isn’t what your legislature did.

    It did — it had its own record or as I understand.

    William C. Wines:

    I think, Your Honor — with all due respect to Your Honor, I think that even though I can vindicate Illinois, the reasonableness of Illinois legislation on facts that they couldn’t possibly have known if it is in fact reasonable.

    Felix Frankfurter:

    That’s right, but you can’t —

    William C. Wines:

    That that —

    Felix Frankfurter:

    — but you can’t thereby change the fact that they carved out the exception not as a class but by name, candid by named individuals.

    William C. Wines:

    That’s right.

    Now, we say that the question of severability, although it was — it was the subject of an expression by the Supreme Court of Illinois, is one that when you read the lower court, the lower court says, and this is important, but the Supreme Court of Illinois had to have before the materials that we have and they — they were talking not about reasonableness but about severability.

    And they said, the question is a different one on this record from what it was in the Illinois record and if that’s so I think it ought to go back to the Supreme Court of Illinois from the logic of the very opinion that’s appealed from here.

    I don’t think the plaintiff’s should be allowed to have it both ways to argue as they did successfully, not only persuasively but successfully.

    The Illinois Supreme Court didn’t have Your Honors or Mr. District Judge’s in Illinois the materials that we have before it.

    If they had, they would have reached a different conclusion.

    But nevertheless —

    Felix Frankfurter:

    I don’t — I don’t follow it.

    You mean that the Supreme Court of Illinois might sustain the prohibition and drop out the exception on the severability theory.

    William C. Wines:

    They might —

    Felix Frankfurter:

    Is that it?

    William C. Wines:

    Yes.

    Felix Frankfurter:

    Well, what — what have we got to do with that?

    William C. Wines:

    Just this, the question arises as to whether or not this Court or the District Court should have decided it at all or should have remitted the parties to the state courts under the teachings of the —

    William O. Douglas:

    We held in their earlier case when it was here that the District Court should be —

    William C. Wines:

    Have been here, Your Honor?

    William O. Douglas:

    We sent the case back to the District Court holding that — that it should hear the case on the ground.

    William C. Wines:

    No, sir.

    Oh, no.

    Your Honor didn’t — Your Honor’s memory is — is at (Inaudible)

    William O. Douglas:

    It might fall on that.

    William C. Wines:

    Certainly, you — you expressly said that they — they had jurisdiction but that you were not telling them whether to decide it on the merits or remit it to the — the state court.

    Now, just — just a second here.

    William O. Douglas:

    And Justice (Voice Overlap) —

    The last sentence.

    William C. Wines:

    What?

    The last sentence.

    William C. Wines:

    The last sentence in — the judgment below was reversed and the cause remanded the District Court for further proceedings not — inconsistent with this opinion.

    Felix Frankfurter:

    What we said earlier in that opinion that the mere fact that the Supreme Court of Illinois hadn’t passed on it doesn’t preclude jurisdiction.

    That was the point of the (Voice Overlap) —

    William C. Wines:

    That’s right.

    Your Honor said there was jurisdiction but now look.

    May I — may I — Mr. Justice Douglas, we need not decide the extent of the District Court’s discretionary power to deny remission since in any event, that’s remission to the state court, since in any event, we think there was no occasion for its exercise here.

    The very purpose of proscribing in detail in this statute of type of inquiry made is to avoid uncertainty over the extent of investigation necessarily for the next — that’s — that’s the law.

    It’s not dead.

    Felix Frankfurter:

    But in any event, your point — if your point and validity, Mr. Wines, we would have to decide that the exception is unconstitutional.

    You might be right in saying that that was done in Dorchy against Kansas as I remember that there might be — some of it might be saved but before you get to saving, you must destroy.

    William C. Wines:

    I think that’s —

    Felix Frankfurter:

    Isn’t that right?

    William C. Wines:

    Well, the question is —

    Felix Frankfurter:

    You can’t just say send it back to the Supreme Court of Illinois and then if they cut this out, we wouldn’t have a problem.

    William C. Wines:

    I think that’s what Your Honors can do and —

    Felix Frankfurter:

    Then, we wouldn’t have a problem.

    It’s too difficult to decide.

    William C. Wines:

    Well, you have a state —

    Felix Frankfurter:

    And maybe they’ll save us from trouble?

    William C. Wines:

    — have a state question.

    William C. Wines:

    Mr. Justice Douglas, I did read the wrong language but the language I meant to read was this.

    We hold that the District Court had jurisdiction of this cause.

    It was error to dismiss the complaint for lack of jurisdiction.

    The judgment of the District Court is vacated and the cause is remanded to what we do not now decide what procedure it is the Court should follow on remand.

    I take that to mean, Your Honor, that it was at large just so they weren’t under the misapprehension that they couldn’t act.

    May I reserve any time that I —

    Earl Warren:

    You have no more time.

    Mr. Yowell.

    G. Kent Yowell:

    Mr. Chief Justice, may it please the Court.

    Earl Warren:

    Yes.

    G. Kent Yowell:

    I would like to address myself to the constitutional issue and the issue of clean hands, which has been adverted to.

    And my father will touch on the severability and the irreparable injury issue that is presented here.

    He also —

    Earl Warren:

    Do you consider the question of clean hands important in — in the —

    G. Kent Yowell:

    I —

    Earl Warren:

    — decision of this matter?

    G. Kent Yowell:

    I don’t.

    Earl Warren:

    No wonder then that the constitutional question isn’t a thing —

    G. Kent Yowell:

    That is —

    Earl Warren:

    — that we’re interested then.

    G. Kent Yowell:

    — that is the thing.

    Yes, sir.

    Earl Warren:

    It hasn’t been argued seriously here but clean hands is just the difference between financial responsibility as they stated of — of the American Express and the — the appellees here.

    But if you want to —

    G. Kent Yowell:

    Well, I — I could only say that that is a question of fact which has been decided in our favor by the District Court and it — it does not clearly drawn here.

    Earl Warren:

    Just if.

    G. Kent Yowell:

    Mr. Justice Whittaker asked Mr. Wines about the — the way this exemption comes in.

    And I think Mr. Wines said that was a textual distinction but I think it is more than that.

    The American Express Company is not exempted, except insofar as it engages solely in the business of selling its money orders.

    Banks, on the other hand, are exempted whether they sell money orders or cash checks.

    G. Kent Yowell:

    The statute is directed towards the local person, the outlet of the money order company.

    We have a partnership which is engaged in establishing outlets through retail establishments in Illinois, local drugstores and grocery stores.

    That is the same manner that American Express Company establishes outlets but the — and the American Express Company can get an outlet without having their outlet pay a license fee or be regulated or be prohibited from selling over the counter in retail stores.

    William J. Brennan, Jr.:

    Well, they can also get it, I gather, without this determination whether that outlet will or will not promote the convenience that that is in the community, is that right?

    G. Kent Yowell:

    Yes, Your Honor.

    They are absolutely out of the Act by definition.

    They are the people —

    William J. Brennan, Jr.:

    Does that mean this for example that they may move in and establish outlets and then Bondified assuming it could otherwise qualify for a license, might yet be denied a license for a particular location in a given community because where so many American Express outlets are already operating there?

    G. Kent Yowell:

    Yes, Your Honor, even though Bondified satisfied the State Auditor that it was financially responsible, paid all the investigative fees and licenses.

    It — that — that one thing could keep it out if the — the community were saturated with American Express Company outlets.

    Earl Warren:

    There’s no regulation — there would be no regulation at all as to how many — how many outlets the American Express could have.

    G. Kent Yowell:

    There is — there is none.

    Earl Warren:

    No?

    G. Kent Yowell:

    There is none.

    Earl Warren:

    In other words, it could swamp.

    It could swamp anybody who is undertaking to come in to the community by putting so many outlets in that there wouldn’t be any — any necessity for any others, is that right?

    G. Kent Yowell:

    Well, yes, Your Honor.

    Except the — the profit motive may have it — be more particular as to where it establishes agencies.

    It wouldn’t want to have its own agencies swamp each other.

    Earl Warren:

    Well, it might — nor to get rid of all competition and then have it to itself and do as it please.

    That — that is —

    G. Kent Yowell:

    Yes, it could do it.

    There’s nothing —

    Earl Warren:

    — monopolistic practices —

    G. Kent Yowell:

    — to prevent it.

    Earl Warren:

    — it seems to me.

    G. Kent Yowell:

    Now, Mr. Wines indicated that this — the history of this went back to the 30’s.

    Actually, the — the money order business has been going on at least as long as the American Express Company has been selling money orders since 1882.

    So the business of selling money orders and not engaging in cash and check is an old business.

    The Bondified systems do not cash checks and that is the distinction between this case and McDougall versus Lueder.

    G. Kent Yowell:

    And that is the — the Illinois case upholding the constitutionality of the statute of the — that distinction was recognized in the three-judge court in Wisconsin, Currency Services versus Matthews.

    They said that a class of people that cash checks and sell money orders is different than a class that just sells money orders.

    Here, however, and in the Wisconsin case, we have only one class, the class of people who sell money orders through retail establishments.

    That one class is all that is involved and the outlets of the American Express Company are exempted.

    What would you say if the statute is provided that any concern selling money orders had a capital of a hundred million dollars or over would be exempted from the Act, would that be unconstitutional —

    G. Kent Yowell:

    No, Your Honor.

    That would be — that may have —

    — to your right?

    G. Kent Yowell:

    — a reasonable relationship to the legislative purpose.

    But if you name an outlet that has those characteristics is bad?

    G. Kent Yowell:

    Well, I — if they were having a capital, having assets exceeding liabilities by a million dollars is — bears a reasonable relationship to the legislative purpose and that I think is the question that — that has to be decided.

    Well, you must take judicial notice that the American Express Company was a tremendous organization.

    G. Kent Yowell:

    Yes –

    But you can attribute that to the legislature — legislative without violating its right?

    G. Kent Yowell:

    But does that authorize the exemption of these local people?

    Do they have to — why are they exempt?

    They are the — in other words, why do they have to — to satisfy the State Auditor that they are morally and financially responsible?

    Why do they have to have a performance bond and a certain amount of cash on hand?

    Because they haven’t got a hundred million dollars.

    G. Kent Yowell:

    Well, neither do the people who sell American Express Company money orders that are the local people.

    William J. Brennan, Jr.:

    Are you suggesting that the locations also have to be licensed under this Act?

    G. Kent Yowell:

    Oh, that is all it is, Your Honor.

    The —

    William J. Brennan, Jr.:

    That is the local drugstore has to be licensed?

    G. Kent Yowell:

    That is what this Act licenses, the local —

    William J. Brennan, Jr.:

    And the —

    G. Kent Yowell:

    — operator.

    William J. Brennan, Jr.:

    — the American Express outlet, drugstore, for example, would not have to get a license.

    G. Kent Yowell:

    That is it.

    William J. Brennan, Jr.:

    Whereas the Bondified drugstore might be a better drugstore, bigger drugstore and more responsible and everything else it has to know.

    G. Kent Yowell:

    Yes, Your Honor.

    Charles E. Whittaker:

    Now, is that question open here?

    G. Kent Yowell:

    I — I believe it is, Your Honor.

    Charles E. Whittaker:

    Then, if it is open, then does not the statute make a classification of a particular type of security that is exempted?

    That was the significance of my original question to Mr. Wines.

    If it’s true, as the statute says, it is not American Express Company by name that it’s exempt but that’s a standard to use to identify a particular security that is need not be registered, that’s exempt.

    Now, I’m not sure I’m making myself clear to you.

    Does the State of Illinois have the right to establish a class — a kind of security which it may exempt?

    G. Kent Yowell:

    Well, the — Your Honor, the — the securities themselves are not the subject of the regulation here.

    It is the person selling those securities.

    Charles E. Whittaker:

    Yes.

    G. Kent Yowell:

    I might point out that one of the appellees in this case is the local agent of the partnership.

    He is a druggist named, Derek.

    Now, under the statute, he has to be licensed and, as a matter of fact, he is prohibited from —

    Felix Frankfurter:

    License to do — would you mind stating license to do what?

    G. Kent Yowell:

    License — he has to be licensed to be a community currency exchange —

    Felix Frankfurter:

    Meaning by that if I go in there, he will give me — he will give me a piece of paper behind which stands his solvency and his credit, is that right?

    G. Kent Yowell:

    The credit of a partnership.

    Felix Frankfurter:

    A credit for them.

    Now, as against the drugstore, it’s much smaller that — and I go in there and what do I get there?

    G. Kent Yowell:

    You can buy an American Express Company.

    Felix Frankfurter:

    But who’s behind that piece of paper when I get it for the — I give a $100 and I get a piece of paper.

    What does that $100 piece of paper represent?

    G. Kent Yowell:

    That — it would be the American Express Company.

    It would be behind that.

    Felix Frankfurter:

    Well, it doesn’t make much difference whether it’s a small drugstore or a big drugstore if the piece of paper and the security that’s behind it, that’s the differentiating factors.

    G. Kent Yowell:

    Unless you are concerned with what this local agent might do if he is careless with the — with the paper if he is — if he is careless with the American Express money orders.

    If he is —

    Felix Frankfurter:

    He might be a forger.

    He might (Inaudible)

    G. Kent Yowell:

    He might do that and then American Express money — Company would not pay those money orders.

    And that’s in the record, Your Honor, that the — the only money orders that there is any evidence in the record of not having been paid are American Express Company money orders.

    Felix Frankfurter:

    No, there have been — but — but banks tellers before could chase National Bank, if a National City Bank, that in the basis on which legislation we’ve had on.

    The American Express Company is going to — that there’d be a flood of forgery issued in it.

    Can’t the legislature of Illinois assume that on the whole that is not the normal thing?

    G. Kent Yowell:

    Yes.

    They — they can assume that.

    Felix Frankfurter:

    And mustn’t we assume that they did assume that?

    G. Kent Yowell:

    But are they — have they — are they given the — the — are they thinking of the American Express Company and making that a reasonable — does that have a reasonable relation to the legislative purpose of license — licensing the local person?

    Felix Frankfurter:

    I — I didn’t understand that argument but I don’t — I — I must start with differentiating between a — a drugstore no matter how big and solvent in and of itself issuing money orders and the American Express Company issuing (Voice Overlap).

    G. Kent Yowell:

    I — I’d like to talk about the American Express Company because we have said it is of large organization.

    It is a joint stock association.

    William J. Brennan, Jr.:

    Well, excuse me.

    Before you get to that, would you mind telling me at page 53 of the appellant’s brief dealing with the application, which has to be filed for a license, he has to contain certain information.

    Am I right that the local drugstore that wants to sell money order would have to file an application if he’s within the Act, that is selling anything but American Express money order?

    G. Kent Yowell:

    Yes, Your Honor and he couldn’t do it (Voice Overlap) —

    William J. Brennan, Jr.:

    Is that right?

    And he has to include in it in the application whether he’s ever been involved in any civil or criminal — criminal litigation and material facts whether he has ever been committed to any people or institution or admitted to an institution for the care and treatment of mentally ill person, is that right?

    G. Kent Yowell:

    That is correct.

    William J. Brennan, Jr.:

    Now, if in fact, he is selling American Express money orders —

    G. Kent Yowell:

    It doesn’t make any —

    William J. Brennan, Jr.:

    — even if he has been involved in civil or criminal litigation, even if he has been committed to a penal institution or to an insane asylum, he may sell it, is that it?

    G. Kent Yowell:

    That is correct.

    And that is the legislative purpose.

    Hugo L. Black:

    Suppose Illinois had concluded, turned over all this business, do they — this company, whether they — would they be forbidden (Inaudible) by the Constitution?

    Suppose they’d decided to select them to carry on that business.

    G. Kent Yowell:

    I — I don’t think so, Your Honor, if they — if they had intended to do that.

    I — maybe Your Honors are thinking of the Slaughter-House Cases.

    Hugo L. Black:

    That’s what I’m thinking about.

    G. Kent Yowell:

    In that case, the people challenging the statute, of course, with the butchers, but they weren’t prevented from carrying on their butchering occupation because the statute creating the — the Slaughter-House, a state corporation, the charter, provided that those — they had to maintain a place for those butchers to carry on their business.

    G. Kent Yowell:

    But —

    Hugo L. Black:

    You mean you do not think that the State could select one company to do all of its business, to do all these kind of business?

    G. Kent Yowell:

    Well, business for States —

    Hugo L. Black:

    But I’m not talking about — for the States.

    Suppose they decided that after investigation that there’s a lot of trouble in having a number of these companies, some of them were to fly by night, they might make one thing or another and they decided — number one, they decided the State to do it, could they do that?

    You didn’t think to forbid them in the Federal Constitution from running the business themselves that they won’t do in the State — by the State?

    G. Kent Yowell:

    I don’t think so, Your Honor.

    Felix Frankfurter:

    In Frazier against Green decided that about warehouses and everything else, knows the Court of ones you do in the (Inaudible) case.

    Hugo L. Black:

    Well, then — then suppose it simply wanted to turn over — turn it all over to one business.

    It might be pretty bad.

    G. Kent Yowell:

    Well, I —

    Hugo L. Black:

    Could they do that?

    G. Kent Yowell:

    I — I think they really could, Your Honor.

    I don’t think they did that here.

    They — they —

    Hugo L. Black:

    You think they’ve left it open apparently and somehow discriminated invidiously?

    G. Kent Yowell:

    I think it’s perfectly clear because if they had intended to give the American Express Company which had no relationship to the State of Illinois in anyway, no licensing, no regulation, does not carry on an express business in Illinois, which would have brought into the regulation.

    If they had intended to do that, they would have exempted the American Express Company along with the banks.

    But the American Express Company is not exempt along with the banks because if it sells in the other money orders or if it carries on any other business or if its agents carry on any other business, check-cashing business, they must be licensed.

    Hugo L. Black:

    Suppose they had provided that no company should do that kind of business unless it has $5 million paid in capital stock.

    G. Kent Yowell:

    No company should engage in the business —

    Hugo L. Black:

    In this type of business.

    G. Kent Yowell:

    — of issuing money orders through retail establishments.

    I — I think that might have a reasonable relationship to the legislative purpose of protecting the public.

    Hugo L. Black:

    Then, it gets down to the fact that they have exempted this one company which — suppose theydid it, suppose they’d made a finding, I don’t think much of legislative finding to serve as a rule.

    Suppose they’ve made a finding that they did it because they had reached the conclusion that this company was reliable, be more trouble in expense and cost to supervise them then they wanted to pay out.

    They were satisfied with them anyhow.

    They were going to subject everybody else in the State to the control and regulation except that one company.

    Would that have made any difference?

    G. Kent Yowell:

    I think — I think it might have if they had gone that far.

    G. Kent Yowell:

    I would — I — the point I’m —

    Hugo L. Black:

    Well, I thought — I thought it’s pretty plain from the Act, maybe I missed your view on it.

    G. Kent Yowell:

    I thought it’s pretty plain from the Act whatever they said or whatever that language they may have used for the purpose of — to some extent concealing that they wanted the American Express to be free from this regulation.

    In this conclusion, they didn’t want them to be regulated.

    They want to regulate everybody else.

    Is that’s what —

    Well, that’s — that’s where the —

    Hugo L. Black:

    (Voice Overlap) —

    G. Kent Yowell:

    — Illinois Supreme Court had used it.

    It — the Illinois Supreme Court said, “Here we have the local currency operator on the one hand and the American Express Company, a large solvent organization on the other hand.

    “They obviously didn’t want to bring that company into the regulative picture but that opinion overlooked the fact that this is a statute directed to the local person selling the — the money orders.

    Felix Frankfurter:

    Suppose the States — a State — a State have — talked about other businesses, suppose the State had gone into the — establishes a corporation, a state defense resistant and through that corporation (Inaudible) in New Hampshire or South Carolina or suburb states, dispenses this liquor business —

    G. Kent Yowell:

    Yes, Your Honor.

    Felix Frankfurter:

    — but also allows private enterprise to be in competition with the State.

    But as to this private people, it makes very stringent group, the kind that Justice Brennan read a little while ago, qualifications of all the employees, they must have a pristine of absently pure record, not even a traffic violation.

    Would that be discrimination because it doesn’t make similar regulations or reference to employees in its dispensary corporation?

    G. Kent Yowell:

    I was — I was going to suggest that — that its own dispensary corporation would be regulated by it.

    Felix Frankfurter:

    Well, but it doesn’t — it chooses not regulate it.

    It has such confident in the — in the Civil Service Commission of the State or whatever the personnel selection bodies call and it doesn’t make any regulation except the choice of officials.

    You think that would be discrimination?

    G. Kent Yowell:

    We have public officers carrying on the —

    Felix Frankfurter:

    Well, public office means that you have confidence by means other than you’ll have with a case of people from whom you require certain qualification.

    And the legislature couldn’t make that distinction, couldn’t make a judgment that if it is behind it is to make certain regulations or it doesn’t make them whereas if other people want to engage in that business, it doesn’t make regulation.

    Would that be violative of the Discrimination Clause of the Fourteenth Amendment?

    I can’t imagine.

    Earl Warren:

    Well, I suppose you would say though that if they picked out one liquor dealer from among these private enterprisers and said, “Well, we like you and we have confidence in you and you don’t have to be regulated but everyone — everyone else does.”

    Suppose you’d say that — that, would you?

    G. Kent Yowell:

    Yes, Your Honor and I’m reminded of Chief Justice Rutledge’s comparison in the New Orleans Pilot case in his dissent, which I’m not — I don’t rely on but I — I just think it’s a good illustration where he said that —

    Hugo L. Black:

    A very good — a very good dissent, I was on the other side.

    It’s a very good dissent.

    G. Kent Yowell:

    Well, I don’t know that — Mr. Justice Black, if you would have dissented from this illustration and that is that suppose that New Orleans decided that — that the only — the members of John Smith’s family could be river pilots, officers of the State of New Orleans.

    And suppose further that those members have been pilots for generations that would be an invidious discrimination.

    Felix Frankfurter:

    Then you introduce the adjective invidious.

    Therefore, it turns on whether a thing is invidious and because you pick out one doesn’t necessarily make it invidious.

    G. Kent Yowell:

    No, no, Your Honor.

    Felix Frankfurter:

    It says the reason that seems to be one that legislature may in good conscience entertain.

    G. Kent Yowell:

    Yes, sir.

    Felix Frankfurter:

    And the fact that you’ve got a responsible corporation of worldwide significance may be a reason that may appeal to the legislatures and not be denominated constitutionally invidious.

    That’s the whole point about this discriminatory — the application of the Fourteenth Amendment.

    But you can’t argue from something — something very close to it which maybe bad.

    That doesn’t make the other thing bad.

    G. Kent Yowell:

    I — I didn’t intend to do that.

    I meant to — to make an illustration Mr. —

    Felix Frankfurter:

    I think we would have all agreed that that vindication, the Pilot case.

    G. Kent Yowell:

    The — the Pilots law will assume that they had — they were fine pilots and they’ve been pilots for generations.

    Felix Frankfurter:

    Yes, but if they had to take one family because we like them and you’ve got other families around that might — might have a very different case.

    William O. Douglas:

    That’s your whole point of view.

    G. Kent Yowell:

    Oh, we — we recognize that a — an exemption by name alone is not bad.

    You — you can exempt a railroad from taxation and that has a reasonable relation to a legislative purpose because the railroads — one railroad runs in a different place and another railroad or maybe that railroad is in financial difficulty and you need to maintain it.

    The point — the presumption, of course, is that the legislative determination was reasonable but this record shows that it was unreasonable.

    Felix Frankfurter:

    This record?

    G. Kent Yowell:

    Yes, Your Honor.

    Felix Frankfurter:

    Well —

    G. Kent Yowell:

    Because there was no relationship —

    Felix Frankfurter:

    I thought Mr. Wines has no business to have the record prove it and I don’t think you have any business, unless you can show that no legislature conscientiously dealing with this problem can say, we find security for our people in an organization that has the kind of solvency that the most respectable and most reliable drugstore hasn’t got.

    You think that’s so outrageous that honest legislators mindful merely of the public interest can’t think of those terms?

    G. Kent Yowell:

    Well, Your Honor, the American Express Company maybe large but it is not in Illinois.

    It is not licensed from Illinois and the government surveillance is only in relation to its foreign operations where the — where the money is deposited in —

    Felix Frankfurter:

    May I suggest that Illinois is a part of the United States and it may take note of the fact that although it’s not in Illinois.

    If it does business in Illinois, it carries certain guarantee and having a government official examined the papers or the books isn’t the only guarantee in this world for reliability.

    G. Kent Yowell:

    I’d like to have my father pursue the argument.

    You — you may, Mr. Yowell.

    John J. Yowell:

    May it please the Court.

    Earl Warren:

    Mr. Yowell.

    John J. Yowell:

    I would like to discuss briefly the questions of — first of severability.

    In the record at page 532, one of the questions presented, the second question presented in this case is this.

    If the exemption of American Express Company money orders from the Act is an unconstitutional provision, should the District Court have held that the provision was severable.

    And in the appellant’s brief at page 5, they have substantially the same statement as a question presented to this Court, whether or not the District Court should have determined that this exemption was severable.

    In other words, the question is presented to this Court was at error for the District Court not to determine that it was severable.

    However, we find no argument in this brief to this Court that the exemption is severable.

    Now, that is a very important question because if this exemption is severable, then this law applies to the American Express Company and the appellees and everybody else.

    That would be the effect of holding this exemption unconstitutional but severable.

    The only thing in the appellant’s brief along that line, they don’t pursue the question presented in their assignment of error and their notice of appeal, but the end on page 25 with the conclusion that severability is a question that might be more appropriately left for adjudication to the Illinois Supreme Court citing Liggett against Lee.

    Now, as our brief shows when the question of severability comes up — when a case comes up from a federal court, the lower federal court, the question of severability may be determined by the lower federal court and by this Court.

    It is when a case comes from a state court that this Court says the question of severability is more appropriately determined by the state court.

    That was held in two cases in the 238 U.S.

    The first one was the Guinn case.

    The Guinn case came up from the lower federal court.

    It involved the validity of some regulations as to the right to vote and the statute had a grandfather clause in it and also a literacy test.

    And this Court held that the grandfather clause was a discriminatory and a depravation of the equal protection of the laws.

    It found that the literacy test was not invalid but it said they are so interwoven in the statute that we can’t say they would have passed the one without the other and so they said it is not severable.

    And they said having come up for the lower federal court, we can and will decide it and they did.

    The other case was the Myers case.

    I think they’re right together in 238.

    Later on, there was the Dorchy case that we cited.

    However, it was a state — a case from the state court and they stated the law, cited the Guinn case, Myers case, I think perhaps another one and they said it is more appropriate when the case comes from the state court or the state court to determine that.

    However, whether it is victim or whether it is not, certainly, the statement of the Supreme Court of Illinois that the legislature surely would not had passed this statute without the exemption in it is to say at least entitled to considerable weight.

    Now, there’s another reason why we submit that this exemption provision is not severable and that is this.

    It is in the definition of currency exchanges, the term currency exchanges occurs in 17 sections of the statute, some 60 times, I believe, and when you change the definition, you change the meaning of 17 sections in the statute, which we submit is a reason why the — it is not severable.

    Is my time up?

    Earl Warren:

    No.

    No, we’ll just recess.

    John J. Yowell:

    Oh, I beg your pardon.