Safeway Stores, Inc. v. Oklahoma Retail Grocers Association, Inc. – Oral Argument – May 19, 1959 (Part 1)

Media for Safeway Stores, Inc. v. Oklahoma Retail Grocers Association, Inc.

Audio Transcription for Oral Argument – May 19, 1959 (Part 2) in Safeway Stores, Inc. v. Oklahoma Retail Grocers Association, Inc.

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Earl Warren:

Number 252, Safeway Stores Incorporated, Appellant versus Oklahoma Retail Grocers Association.

Mr. Clark, you may proceed.

Ramsey Clark:

Mr. Chief Justice, may it please the Court.

This case is an appeal from the Supreme Court of the State of Oklahoma a probable jurisdiction was noted last October.

It involves the Unfair Sales Act of the State of Oklahoma.

It’s the first such Act that has come before this Court for review.

It is also the only Unfair Sales Act among the 31 in existence in the United States and the various States today that treats the right to meet competition as it is here treated.

This statute was originally the Act in 1941.

It was declared unconstitutional by the Supreme Court of Oklahoma in 1949 and before the opinion of the Supreme Court of Oklahoma had become final in less than 35 days, the new Act had gone to the legislature and had been passed removing the particular objections of the Supreme Court of the State of Oklahoma have had.

In that course to the legislature in a period of 35 days, there was added a new type of meeting competition defense.

Under the statute, a — an offense involves three elements, a sale below cost, the intent on the part of the seller by that sale to damage competition and the effect on competition by that sale of damaging competition and the market and competitors in the market.

The “meeting competition” defense in this statute says that you shall have the right to meet a competitor selling at his cost or above.

It does not say that you can meet the lawful price of a competitor.

It does not say that you can meet legal competition.

Every other Unfair Sales Act permits specifically the meeting of lawful competition, legal prices or the unqualified meeting of competition.

This statute alone prohibits the meeting of competition that is selling below its cost.

About a year after the re-enactment of the Unfair Sales Act, another condition in the market came into being which created the circumstances of this case, trading stamps, which will be described more fully here and after, arrived on the scene in Oklahoma.

In 1952, Sperry & Hutchinson, the large — the largest trading stamp company in the world had only two accounts in the State of Oklahoma.

By 1954, the time at which this case was filed, over 100 different merchants, some with numbers of stores were giving — were getting trading stamps in connection with sales of groceries in the State of Oklahoma.

Thus the statute created two problems, for the merchants in Oklahoma.This case was admittedly a test case to answer these two questions.

The questions were generally, when under this statute can the right to meet competition prevail and what can a merchant do to meet the competition of trading stamps given by a competitor in connection with his sales at cost.

Now, very briefly, what happened is this.

In the summer of 1954, the retail grocery competition in the State quickened.

Prior to that time the — the no injunction suit — only one injunction suit, excuse me only one injunction suit has ever been brought under this Act.

It’s been on the books for three years.

In 1954, competition quickened in the cities of Shawnee, Enid, Norman and Tulsa, competitors of this appellant commenced selling below their cost, their statutory cost.

Now, statutory cost is not the cost in the usual connotation.

It is invoice cost plus incidentals to placing the goods in the store such as taxes, transportation and carriage plus a proportionate part of the doing — of the cost of doing business, which is set by the statute at 6% for the cost of doing business, in the absence of proof of a different policy of doing business.

So, under any circumstances cost under the statute is 6% above the cost to the grocer of putting the merchandise on his shelf for sale.

In Oklahoma City, a brisk trading stamp war erupted and there were numerous instances by trading stamp merchants at which they gave trading stamps in connection with sales made at their statutory cost.

Ramsey Clark:

In this connection, the record shows no variation from this rule, the traffic items and the grocery stores which are those that handful of items perhaps 50 out of 7500 up to 10,000 different items sold by the store, the traffic items, the staples, the items the housewife buy each week.

The items that the housewife has, the most consciousness at the prices on, were being sold by the merchants in the State of Oklahoma at identical prices.

The trading stamp merchants envision thereto, were giving trading stamps in connection with these sales.

Appellant, Safeway Stores, reduced its prices to meet this competition.

It was enjoined by the Oklahoma Retail Grocers Association.

It was sued for an injunction and subsequently enjoined from selling below cost in violation of the Act.

Appellant filed a cross action.

Originally the cross action involve all of the retail grocers in the Association.

By stipulation it was later agreed that only Louie Speed would be involved, Louie Speed being a stamp-giving merchant.

Louie Speed in two of his stores sold strictly for cash no credit sales.

It was stipulated and the record shows without equivocation that every price violation charged to Safeway was sent to meet competition and was equal to prices set by that competition.

As to the trading stamps, the appellant calculated their value by an exhaustive survey and reduced its prices to meet the price at which each competitor sold that commodity less the value of the trading stamps.

Potter Stewart:

Now, Mr. Clark how many Safeway Stores are there?

Ramsey Clark:

I believe there are 28.

Yes, sir.

Potter Stewart:

And when you said the prices were reduced in other case owing to the (Inaudible) competition, however, let’s say a competitor in Oklahoma City by giving trading stamps (Inaudible)

Ramsey Clark:

No, sir.

Potter Stewart:

(Inaudible)

Ramsey Clark:

Only — only in the market.

Potter Stewart:

(Inaudible)

Ramsey Clark:

Yes, sir.

In what — in what was considered to be the trade area of that competitive store.

In other words, there’s nothing in the evidence that indicates that they would use a price of a competitor to reduce prices statewide.

(Inaudible)

Ramsey Clark:

Yes, sir.

They did this before they reduced any prices.

First, they notified the secretary and manager of the Oklahoma Retail Grocers Association that this particular store out here was selling at what appeared to be below cost and that if it did not raise its prices to cost, it would be necessary for Safeway to meet that price.In a number that you see there’s the manager, the secretary and the manager of this association testified that competitor raised its prices back to the statutory price, cost of price.

Did they bring a suit provided to a stock the use of trading stamps by the other grocery store?

Yes, sir.

Safeway filed a cross-action which said that the giving of trading stamps in connection with sale its cost has the effect of reducing that price below cost in violation of the Unfair Sales Act.

Now, in addition to attempting to get the people through their Association to sell at cost, a security advice of their attorneys and the record is clear on this as to their right under this law to meet the competition.

Felix Frankfurter:

I think if the local law has decided that trading stamps, giving trading stamps did not involve a reduction of the cost within the meaning of the statute.

Ramsey Clark:

Yes, sir.

The Supreme Court of Oklahoma has held that trading stamps constitute merely and solely a discount for cash and did not have the effect to reducing price.

Despite the fact that these merchants were not selling for credit, they were selling only for cash.

Felix Frankfurter:

If — if that through discounts you would be part of the list it has through discounts?

Ramsey Clark:

The evidence at the trial level was uniform that there’s no such thing as a cash discount in a retail sale between the whole seller and the retail, between the manufacture and the whole seller, yes.

But the retail grocery industry knows no cash discount.

Now, there are certain exemptions to that in the record, apparently.

However, the record is clear and it is stipulated that most stamp merchants sold strictly for cash, in which —

Felix Frankfurter:

Do they — do they sell (Inaudible)

Ramsey Clark:

It’s entirely fictitious.

If you don’t sell for credit how can you give a — an incentive to buy for cash?

In addition to this, they made surveys which show that trading stamps were creating a drastic diversion of their trade.

The surveys appear in the appendixes to the record here.

They reduced prices on over 200 non-traffic items.

They did not reduce these prices below cost and they advertised extensively saying we have reduced prices on 200 items and they listed the prices and they found that these did not offset the value of the trading stamps.

These prices were not below cost.

There’s no question of the violation of the Act in reducing these prices.

They made purchases at prices and the stores of their competitors that they met and they had their people go into the store and make the purchase to ascertain for sure that this is the price at which the commodity was being sold.

In the case of the — of the trading stamp, they took the cash register receipt, the commodity and the trading stamps and calculated the price.

It was from the beginning clearly designed to be a test case to test these, the rights to meet competition if they arise or to the extent that they arise under the statute.

Now, everyone at the trial level, ever quits in the grocery industry to testify agreed that a retail grocer cannot stay in business unless he can meet the price of his competitors on traffic items and, too, the people who testified to that were none other than the President of the Oklahoma Retail Grocers Association, who specifically said you go out of business if you don’t meet the price of the competitor on these traffic items and the treasurer of that association who said the same thing.

Now, the trial court after about a three-day hearing enjoined appellant from selling below its cost to meet the price of a merchant selling below his cost and from reducing its price below cost to meet the value of trading stamps refused to enjoin the appellee who was giving the trading stamps from the continuance of that practice.

The Supreme Court affirmed this ruling by the trial court.

It said that Safeway could not justify its below cost price on competitors below cost price.

With that regard to whether competitor’s below cost price was lawful or unlawful.

If that competitor’s price was below cost, below cost of the competitor, it could not be met.

This immediately created the vacuum that competitor could be selling below his cost for a lawful purpose, traffic items, a few meeting or if Safeway met him now under this injunction.

They could be enjoined by the very — very person whose prices they remit.

William O. Douglas:

That’s because he didn’t — the competitors didn’t have the unlawful intent is that it?

Ramsey Clark:

Yes, sir.

I’ll go into that more fully later on but that — that is the basis to that, yes sir.

The Supreme Court as I just mentioned further said that trading stamps do constitute a price cut — did not have the — the effect of lowering price but were merely a discount for cash.

It said and it is clear in the record that the sole purpose of Safeway in reducing its prices was to meet the prices of its competitors, the sole purpose that’s the exact language of the court below.

Felix Frankfurter:

Did you — did I not hear you say a little earlier that Safeway before reducing in response to the benefit, if I may call it that, the trading stamps figured out exactly what’s the monetary end it was, is that right?

Ramsey Clark:

Well, that is right with the exception to the use of word exactly —

Felix Frankfurter:

Well —

Ramsey Clark:

It’s not quite —

Felix Frankfurter:

That we have fairly —

Ramsey Clark:

Yes to the best of their ability, yes.

Felix Frankfurter:

I can’t say good.

Ramsey Clark:

Yes.

And there’ve been no challenge to that.

Felix Frankfurter:

That option was better than the one way of talking, but my question was whether the money value of the trading stamp is reasonably as ascertainable whether the — what it means in cents, or the accumulated cents amounting to dollars to the housewives to get (Inaudible)

Ramsey Clark:

Yes, sir.

Felix Frankfurter:

That’s acceptable has gone for that need —

Ramsey Clark:

Yes, sir.

Felix Frankfurter:

— on the basis of who — that has weight?

Ramsey Clark:

It was made at the beginning of the trial, the basis of proof and a stipulation at the, before the close in the trial.

It was stipulated that trading stamps, single trading stamps at a value of not less than 2.5% not less than that on —

Felix Frankfurter:

But the housewife trying to do was the two 2.5 cents.

Ramsey Clark:

Yes, sir.

And on double stamp they —

Felix Frankfurter:

Is this all of the purchase it would be worth 5 cents to the housewife is she gives the payment then.

Ramsey Clark:

That’s right, sir.

Felix Frankfurter:

That — that — is that common ground between you and the appellees?

Ramsey Clark:

Yes, sir.

That is a matter of stipulation in the record.

Earl Warren:

Where is it?

Ramsey Clark:

That’s on page 200, Your Honor.

It’s also Exhibit G.

I missed the (Inaudible) as they sent in Oklahoma with reading this stipulation in the record at the bottom of page 199 and also at the — at the top of page 200.

It said Speed, that’s one of the appellees, they gave double stamps with the sale of such items and on every other day of the week gave single trading stamps with the minimum priced items.

If the stamps valued at not less than 2.5%, now that’s the single stamps, had the effect of reducing the sale price at which the items were sold, then the result of sales prices were less than the minimum allowed by the Oklahoma Unfair Sales Act.

Felix Frankfurter:

Was there any evidence as to the volume of the retention of these trading stamps?

Ramsey Clark:

Well, yes, that’s a matter of tremendous controversy.

The Department of Agriculture, the Department of — of Labor and Commerce have all tried to ascertain that.

I believe that Sperry & Hutchinson sales 96% are redeemed and about the lowest figure I’ve seen is about 80%.

But as we were trying to show them, we think the economic conditions in this country show trading and as was stated by counsel for S&H stamps at trial level.

Trading stamps are worth far more as a competitive device than their actual monetary value.

Felix Frankfurter:

You’re having to — have considered how many States have forbidden trading stamps?

Ramsey Clark:

Yes, sir.

I — we have considered that a number of the District of Colombia, of course, forbids trading stamps in the old case and an old case, 1930 and this Court said that they are a lure to the impoverished.

Felix Frankfurter:

The (Inaudible) case that dedication not only one — came up with several States as I remember, that outlawed the giving of trading stamps.

I’m just curious to know how wide-spread the restriction of the — of traffic — all —

Ramsey Clark:

We should —

Felix Frankfurter:

— this happened — mostly it happened?

Ramsey Clark:

No, sir.

They do not.

Felix Frankfurter:

I know.

Ramsey Clark:

They have — I know this, that in 1957, 40 States had legislative sessions and 37 States had bills either outlawing or taxing trading stamps.

Now, under the Fair Trade Laws I think 22 states have put in what they call anti-concession clauses which specifically prohibit you from giving trading stamps in connection with their fair traded items.

Are there any circumstances under which a holder of trading stamps can redeem them for cash?

Ramsey Clark:

The ordinary trading stamp is not redeemable for cash.

There is nothing in this injunction here which prohibit and in fact the injunction permits Safeway to give trading stamps, cash register receipts, or other evidences of credit to meet as a cash discount, is what they say, not to meet competition it’s a cash discount.

Now, cash register receipts are ordinarily redeemed in either cash or the commodities that the purchaser is giving them — of the self giving them, I’m sorry.

Hugo L. Black:

Does the record show whether Safeway may or could use that —

Ramsey Clark:

The record shows that Safeway can use stamps if Safeway does not desire to use stamps, if Safeway by virtue of the injunction below has been forced to use stamps since the effective date of the injunction to meet competition.

Hugo L. Black:

Suppose the State had set the law which required all of the scope of the use of trading stamp, would you say that was unconstitutional?

Ramsey Clark:

We think that if a State, after serious legislative study, undertook to so regulate the business and — and unless they could show some policy which we have not been able to conceive, we don’t think that it could require a merchant to give, in addition to that which he wishes to sell something else.

Now, ordinarily these trading stamps are this way, 70% of the trading stamp industry is in the hands of 10 companies.

They are tremendous companies.

They sell their stamps by books which under contract, to various merchants over the country.

This contract requires the merchant to give trading stamps to the costumers as they make purchases.

As an illustration which is shown clearly in this record, Sperry & Hutchinson required you to give a trading stamp for this ten cents of purchase.

The trading stamp is worth two mills or rather the trading stamp costs the grocer two mills.

The record clearly shows that a merchant giving trading stamps, Sperry & Hutchinson trading stamps which predominate in this record, pays 2% of his gross sales to the trading stamp company.

The record always or also shows and it’s an incredible fact that that is twice the net profit of the industry leaders.

That is twice the net profit of the industry leaders.

There’s only one way that you can give trading stamps and make money on them and that is to increase your volume tremendously, ordinarily about 33%, I think Sperry & Hutchinson figure is that if you don’t increase your volume 20% with the use of trading stamps, then you’re going to lose money on because they‘re costing you 2% of your gross sales and in this — in this grocery industry, you don’t make much on your gross sales.

I think there’s some Department of Commerce statistics in the record that say that these large independent supermarkets make about 2.5% on the gross sales, but A&P, Kroger, Safeway, the — the national, the big chains they equate in 26 States, I believe, they make less than 1% ordinarily.

Now, four Justices on the Oklahoma Supreme Court dissented.

I said they dissented on the trading stamp issue.

I said that there’s — there’s no — there’s no — there’s nothing in the statute that says you can give a cash discount.

They weren’t giving a cash discount.

And the trading stamps have — have other purposes anyway and that they in any effect reduced the price below statutory cost.

Now, as construed and applied, this Act prohibits absolutely the meeting of below cost prices whether they’re lawful or unlawful.

And the question is, this first question is, whether this so — so arbitrary and unreasonable as to violate due process.

Hugo L. Black:

Aren’t you — it didn’t you quite say that it does have absolute —

Ramsey Clark:

That it does —

Hugo L. Black:

(Voice Overlap)

Ramsey Clark:

— what, Mr. Justice —

Hugo L. Black:

(Voice Overlap) very indefinitely trade stamps to finally get back to lots of other — the State can require the use of trading stamps.

Ramsey Clark:

Well, where is that —

Hugo L. Black:

It’s not the same as it is though they had set at some stores must sell it at a lower price than others.

Ramsey Clark:

No.

Hugo L. Black:

Or can sell at a lower price than the others.

Ramsey Clark:

Well.

Hugo L. Black:

It gets back to the question of whether they can require to use trading stamps that —

Ramsey Clark:

Now the — the dilemma that Safeway faces here is not caused by the statute.

It is caused by the Supreme Court’s decision which does not go to the intention of the legislature but says merely that trading stamps as a matter of law are cash discounts and do not reduce prices.

This is not a thing that was ever before the legislature or ever considered by the legislature.

They had no — there’s nothing about trading stamps for legislature.

Felix Frankfurter:

But you’re driven — you are driven from your point of view that had the allowability (Inaudible) how that Oklahoma say that trading stamps are not the kind of reduction of cost has enabled the competitor to meet that reduction because now that the Oklahoma Supreme Court has given that meaning for that statute it doesn’t show that in the — by the legislation and you must take it at that, is that right?

Ramsey Clark:

Well, it is to a limited degree.

Certainly, you don’t become involved in the considerations for Nebbia v. New York in a situation like that — like this where Justice Roberts talked a great length about the legislative history, about the purpose, the emergency, the temporary nature of the — of the thing.

Felix Frankfurter:

I’m not — I didn’t suggest that therefore it is valid.

I’m merely suggesting therefore, whether the Supreme Court of Oklahoma to make the complete even arbitrary construction of the statute is not for us to say.

There it is and for (Inaudible) it is as though it had been spelled out by the legislature, the way the Supreme Court has now spelled it out then if you take the problem that you put to us mainly is a statute.

Would that (Inaudible) of the allowable freedom of merchants to deal with one another through competition?

Ramsey Clark:

With — with the qualification and as I tried to make that is — could in fact in our brief we said that this is exactly as though the state legislature have said that you can give a discount for cash by way of trading stamps, cash register receipts or other evidences of credit provided that you cannot give one in any other way.

On the other hand, the reason — the reason for upholding a legislative act, the reason for giving validity to the wisdom of the legislature is because it has not acted arbitrarily but it has exercised its discretion and here you have no exercise of discretion.

The Supreme Court of Oklahoma doesn’t contend that there has been an exercise of discretion, an attempt to meet a problem by the legislature of the State of Oklahoma.

This is merely a case of an interpretation of the State and the Supreme Court of Oklahoma without any legislative investigation or —

Felix Frankfurter:

That should get you to believe —

Ramsey Clark:

— study.

Felix Frankfurter:

— that is if reading of the Oklahoma statute has —

Ramsey Clark:

That is —

Felix Frankfurter:

— has any (Voice Overlap)

Ramsey Clark:

— an effect of the three.

Felix Frankfurter:

I dare say before that Court if you argue (Inaudible) isn’t that right?

Ramsey Clark:

Well, certainly it is.

Felix Frankfurter:

Yes.

Ramsey Clark:

That’s exactly right.

Felix Frankfurter:

We think that the — we have no choice.

That’s supposed the way the Court — the statement has no choice, did you have a choice?

Ramsey Clark:

They didn’t —

Felix Frankfurter:

That’s what it means.

Ramsey Clark:

They didn’t say that we must read it that way.

Ramsey Clark:

They said that this is as a matter of law, a cash discount.

Earl Warren:

Mr. Clark is there anything in your — in the injunction against Safeway that would prevent them from giving a cash discount up to the value of trading stamps if they desire to do it?

Ramsey Clark:

That is — I’m certainly glad that you raised that question, Mr. Chief Justice Warren.

We have been operating under the presumption that there is not.

In its brief, for the first time to my knowledge, after at least I have said that there’s nothing in there to prevent you from giving a cash discount in cash.

Now, if they are right, they have two peculiarities about the situation.

First of all, the injunction didn’t say so.

The injunction said only this, in — not in mandatory language but in specific language it said, “You can give a cash discount in these ways.

You can give them by trading stamps, that was the first listed by cash register receipts or by other evidences of credit.

No other way.

No other way it was mentioned and what we were prohibited from doing in the first place was netting our price.

In other words, instead of taking a dollar on a purchase of 10-pound purchase of sugar, we netted the price to 97 cents or 98 cents.

We set the price at the competitor price less the value of trading stamps.

Now the question is, could we have said it — your question is, under the injunction can we sell it for a dollar and then give two cents back?

Earl Warren:

Yes.

That’s my point.

Ramsey Clark:

We would certainly fear contempt of court if we did that because we were enjoined from netting in the first place.

We see no difference at all between the two.

And in the second place, we were told that we can give cash discounts in these ways and those ways it did not include money.

There — there is further a — there was an effort by counsel for Sperry &Hutchinson at the — at the trial level to show that a trading stamps had an advantage over a return of cash.

They were trying to put on evidence by Mr. William Sperry Beinecke, general counsel and Vice President of Sperry & Hutchinson Trading Company and the Court refused yet sustained objections to the introduction of the evidence.

Mr. Lane who — who said on the trial court that he was there on behalf of Sperry & Hutchinson and who will argue here, said, “I would like to show for the record what Mr. Beinecke, general counsel and vice president, my company would have said.”

And on page 375, he said, “In integrated family retail accounts they — speaking of trading stamps provide an inducement which a discount in cash purely would not provide.

In other words —

Earl Warren:

It provides what —

Ramsey Clark:

An inducement to a —

Earl Warren:

(Voice Overlap)

Ramsey Clark:

— customer to come here and buy —

Earl Warren:

Yes inducement (Inaudible)

Ramsey Clark:

Yes.

Earl Warren:

— and then it gets to work.

Ramsey Clark:

Now —

Felix Frankfurter:

Was that an issue the correctness of that claim or is that relevant to — to the problem that you have here?

Ramsey Clark:

It’s relevant to this problem.

Felix Frankfurter:

Well —

Ramsey Clark:

At that time we were talking —

Felix Frankfurter:

If I — does that indicate that — that you may call it a discount but a money discount is something else than a trading stamp discount rather to have this psychological element, do you agree or disagree with that?

Ramsey Clark:

We disagree, it’s a different thing.

Felix Frankfurter:

Do you think it’s just dollars — or just cents?

Ramsey Clark:

No, I don’t believe that that would correctly state our position.

We believe that there is a difference.

Felix Frankfurter:

There is a difference.

Ramsey Clark:

There is a difference —

Felix Frankfurter:

You mean —

Ramsey Clark:

— between (Inaudible) cash and giving a trading stamp.

Felix Frankfurter:

Well, then — then merely needing — merely needing a trading stamp as money — with money differential doesn’t meet the province of it.

Ramsey Clark:

Not the money differential.

No, sir.

I was speaking in terms of returning the cash.

Felix Frankfurter:

So returning the cash, would that meet it?

Ramsey Clark:

No, sir.

Felix Frankfurter:

So that (Voice Overlap)

Ramsey Clark:

That would not meet it that — that is the claim that the Sperry & Hutchinson make —

Felix Frankfurter:

Okay, I understand.

Ramsey Clark:

— that is ready.

Felix Frankfurter:

But I’m very —

Ramsey Clark:

They now say that we can do that, by the way.

Felix Frankfurter:

They turn it around the other way.

If they can stand to have factors that are not measurable by cents and therefore a dollar, then you got a different ingredient having to do with your problem and then the question comes that the legislature, because that’s the way I take the decision of the court, a failure of the construction of the statute then your Supreme Court, the Oklahoma Supreme Court rather has made a difference between money inducement and — and calls illogical inducement.

Ramsey Clark:

That — that is true.

Ramsey Clark:

The question is if you want to put it on the legislative level whether the legislature can relegate competition to the area of trading stamps.

Who gives the best trading stamps?

They — that — that could be one way of looking at the question.

In other words when we compete in a retail grocery industry in Oklahoma for now on, it’s not where you can get the most for money.

It’s where you can get the best trading stamps.

That is the area of competition.

Felix Frankfurter:

And that is not — and that is not a consideration relevant to the problem before us, Mr. Clark?

That issue is not here on this record?

Ramsey Clark:

That issue is not before the court below.

I definitely think it is below this Court.

The court below is involved within — with the interpretation as to the below-cost provision and what in the world trading stamps are as to —

Felix Frankfurter:

And they said —

Ramsey Clark:

— trading stamps.

Felix Frankfurter:

— that this is not within the below-cost, specific.

They say this is not — you are not allowed under the Fair Trading Act of Oklahoma to take account of the fact that they give trading stamp.

You would be able to take account of the fact that they give back to the cents wouldn’t you, under this statute?

Ramsey Clark:

That — that is — is questionable.

I don’t know if — if there would be any difference between the two cents and the — and the trading stamps.

If they said the trade — that the two cents is a varied discount of cash, the customer in a way of giving a discount of cash is by a net price, although there’s no costumer at the retail level because there’s no practice at the retail level.

That’s what we do.

We get — if — if it could be said that this is meeting cash discounts then we meant a person giving cash discounts by giving cash discounts in the customary way by netting the price not by giving him a green piece of paper.

Now, under the reasoning of Justice Brandeis in — in the Oklahoma Ice case that the arbitrary nature of a statute is dependent entirely upon the relevant facts as to which it operates.

We think that it is incumbent upon us to show to the Court facts as to trading stamps and the effect of trading stamps.

What they have done and what they are.

Trading stamps are an incredible phenomena on the American scene.

They have swept through the retail grocery industry and other industries.

The retail grocery industry in 1957 paid two trading stamp companies, one half of 1% of its gross income.

30% of the retail brochures in the United States were found by the Department of Agriculture to be giving trading stamps and these were the big operators.

It was found also by the Department of Agriculture that the giving of stamps tended to hasten the elimination policy of the small merchant because he cannot compete with the stamps.

Now, here are some examples of — of what has happened in the trading stamp wars that have been created across the country.

Ramsey Clark:

This is the type of thing that a legislature would have to consider.

This is the type of the — of thing that this Court have to consider in determining whether there is something unconstitutionally arbitrary about the imposition on the retail grocery — grocery industry in Oklahoma, are relegating it to the giving of trading stamps insofar as competition is concerned.

Why — why Oklahoma wanted to do that when we have a right to say they could (Inaudible) suppose they wanted to recognize for one reason or another the trade stamps and say have (Inaudible) got to use it.

Why — why should we have a right to set that aside?

Ramsey Clark:

Because we feel that it would be arbitrary and unreasonable and demonstrably irrelevant to any purpose that the legislature could have.

Hugo L. Black:

Well, they might have the purpose of reaching the conclusion wrongfully perhaps and a fine thing for the State to have trading stamps, for everybody to have them since so many have them.

Ramsey Clark:

Well, the — that is certainly the effect that this has had in Oklahoma because the market is today saturated with stamps Safeway finds that all of its competitors are giving stamps and it has to give stamps.

Hugo L. Black:

I really asked you that question because it seems to me like, finally perhaps, we get down to the question as to whether a State has to finally do this.

Ramsey Clark:

Well, I — I think that if you say that there’s no difference between a consideration of a problem by the legislature and the — the capricious effect overruling by a court —

Hugo L. Black:

Don’t we have to do that.

Now, that’s it.

If such this, the Supreme Court has held that’s what the statute means don’t we have to accept that for what it is?

And how can we say that the State Supreme Court’s wrong in saying that’s what the legislature meant to do.

Ramsey Clark:

If that is the case, then we have come along way from Nebbia v. New York where we — where the very — the very life of the opinion was based upon the intensive and exhaustive studies made of the milk problem.

Of course, that was only milk and, of course, also they set the price as uniformly on milk.

One person didn’t sell below another person and enjoined the other person for meeting it.

If — if that is so, then — then we have come a long way.

Certainly, there is nothing like that indicated in the opinion Nebbia v. New York, or in the dissents of Justice Stone in Tyson & Brother v. Banton or Justice Brandeis in the Liebmann case, the Oklahoma Ice case.

Here are some illustrations of what stamps have done because I’m going to sit down, I see the red light just went and I’ve reserved 20 minutes and will sit down and take the rest of my time later.

Earl Warren:

You may.

Mr. Lane.

Samuel M. Lane:

Mr. Chief Justice, may it please the Court.

This becomes more of a trading stamp case every minute.

I really think that when it was tried in the State of Oklahoma it wasn’t nearly as much on this trading stamp question as it has become right here in this oral argument.

Perhaps, because of the interest that the Court has shown in trading stamps or I should go back over some of the ground that Mr. Clark covered particularly I think Mr. Justice Frankfurter to answer the questions would you put to Mr. Clark about the nature and extent of the trading stamps business because surely you should have a clear understanding of it, since as I say that it appears now to become a trading stamp case.

The trading stamps have been in general use through out the United States at least since 1896.

Like every other promotional device this being a device to promote sales through the giving of trading stamps which effect a cash discount for business has gone through swings of prosperity and declined.

But the Sperry & Hutchinson Company has been in that business continually since 1896, never defaulting on any of its obligations.

You are all, I am sure, aware of the increase since World War II in the volume of trading stamps or that has come about particularly through the use of trading stamps in the supermarket.

Trading stamps have not, as my brother Clark has indicated, caused the demise of the independent.

Samuel M. Lane:

As a matter of fact, trading stamps have been traditionally the bulwark of the independent against the great chain for their enormous purchasing power.

The specific trading stamps are now prohibited in just two States, plus the District of Columbia.

The District of Columbia as a matter of fact has a so-called Gift Enterprise Act which bars the use of trading stamps and manufacturer’s coupons and soap wrap and everything of that kind and it’s honored only in the breach except as to trading stamps.

So, your wives can go into any of the stores in the District of Columbia and get manufacturer’s coupons with whatever they buy notwithstanding this law but she can’t get trading stamps because the trading stamp companies haven’t wanted to provoke an issue on that question.

Kansas prohibits trading stamps and the State of Wyoming prohibits trading stamps.

As a matter of fact, we are right now trying to touch the constitutionality of that Act and we have a case pending in Wyoming for the purpose.

Mr. Clark said that — I think at the 1957 session of the State Legislatures, there were some 30 or 40 bills for hospitals had trading stamps.

Mr. Clark wants to know because the Safeway Company largely backs those bills and this argument which you are now hearing is only an incident or perhaps a collateral one in the attempt of the Safeway Company to do away with trading stamps.

It seems to me —

Felix Frankfurter:

At the times of, Mr. Lane, at the times of the trading stamps cases were here and minute.

Samuel M. Lane:

1918, they were here.

There were three cases —

Felix Frankfurter:

I hear that.

Samuel M. Lane:

— Your Honor.

Felix Frankfurter:

Maybe it’s not fair to call that minute but there were — there were more than two States or three States then that outlawed it, is that true?

Isn’t that true?

Samuel M. Lane:

It has waxed and waned.

That is all —

Felix Frankfurter:

And —

Samuel M. Lane:

— I have said.

Felix Frankfurter:

(Inaudible)

Samuel M. Lane:

It’s very interesting that you read the body of the law.

It’s quite a — esoteric group of cases but you see that the — and –and you will not be surprised that it’s a trading stamp’s uses, those who use them are most widely enthusiastic about them and conversely those who don’t get them are bitterly opposed and the opposition to the trading stamps has come in waves from decade to decade.

In the beginning, there were statutes which sought absolutely to prohibit trading stamps.

They were called Gift Enterprise Laws.

That it shall be unlawful to engage in the gift enterprise in which something should be given when something’s purchased and those laws were struck down as unconstitutional, that is to say, a deprivation of right to freedom to contract and to sell for what you want to.

Felix Frankfurter:

You mean in the States?

Samuel M. Lane:

In — in the States, they were struck down over and over.

That’s just from let’s say 1900 to 1910.

Then the next wave that followed that was a series of decisions in which the States sought to tax the stamps out of existence and the Court said it is the same thing.

Samuel M. Lane:

We’ll treat it the same way.

It’s a discriminatory tax and banned.

Then in 1918, you had three cases that reached this Court.

One from the State of Florida and two from the State of Washington and Pitney against Washington was the trading stamp case and in that case, this Court said, “we will look at this tax on trading stamps redeemable in merchandise for what it really is.

It’s a prohibitive tax, so we will consider that the State of Washington has prohibited the use of trading stamps redeemable in merchandise.

And as to that, we will sustain it because there is something so indefinite about stamps redeemable in merchandise, but perhaps an ignorant person with the attraction of trading stamps might be led — might be misled rather to pay her money unwisely but this Court pointed out that if trading stamps were redeemable in cash about which there could be no uncertainty.

So then this Court would not sustain a prohibition whether it was couched as a tax or not.

And consequently, from that day to this, trading stamps have been used in the State of Washington but in that State, they are redeemable only in cash and the consequence in substance to the people of Washington is that they don’t get as great a value for their stamps as they would otherwise because naturally, the trading stamp company can’t give as large a value in cash as they would in merchandise since their great purchasing power enables them to give a better value in merchandise than in cash.

So, in fact we come down to the case at bar because I think the case at bar is really quite different than —

(Inaudible)

Potter Stewart:

I mean, I think you told us about only one.

Did the other cases go —

Samuel M. Lane:

Well the other two, one was something about Rolly or —

Felix Frankfurter:

Well, that’s the Rast against Van Deman.

Samuel M. Lane:

Rast against Van Deman was a case involving manufacturer’s coupon, State against Pitney involved trading stamps and the Tanner against Little involved the coupons that came in United Tobacco Cigarettes or something of that kind.

Felix Frankfurter:

It’s the — the Rast case or one of these that the opinion by Mr. Justice McKenna’s, I cherish for having cut out the diagram of one of the most important observations on constitutional adjudication that we should go from judgment by speculation to judgment by securing.

Samuel M. Lane:

Well, I may say then, Your Honor, you probably mean by that because I find that running through your opinions time and time again that this field that were talking about is an empirical field and not a pragmatic or purely logical field.

I think actually on the (Inaudible) of this case when we come to it.

And I would say, too, as I leave those cases Mr. Justice Stewart, they were imperative in three decisions which came down right after them.

One at Kansas, one in Maryland I can’t recall where the other one was.

But after that and as early as 1921, no Court has ever followed this Court.

No state court, in upholding the prohibition of trading stamps and back to Massachusetts where Mr. Justice Frankfurter and I come from.

It has been repeatedly held by the Court.

One decision I recall by Justice Holmes that this would be a violation of due process.

Now, what are we —

Potter Stewart:

Just before a State to —

Earl Warren:

Yes.

Potter Stewart:

Then what would be (Inaudible)

Samuel M. Lane:

To — to what a — a — to ban the use of trading stamps, it being a perfectly legitimate business, which brings me Mr. Justice Black, to what you have asked several times of my opponent.

I don’t know what the answer to that question would be today.

Samuel M. Lane:

It would seem to me that in the light of recent decisions on the Fourteenth Amendment, perhaps today, the decision might go the other way.

I think what we’re dealing with here in this case is one of state power and if the State adopts a policy which is either favorable to or hostile to this particular economic device, now I respectfully suggest that it’s not up to this Court to strike that down.

Hugo L. Black:

What about Morey versus Doud?

Samuel M. Lane:

Morey against Doud as I recall it is the only case in this Court in the last 25 years which has struck down under the due process or Equal Protection Clause of the Fourteenth Amendment a state regulatory statute and that I suggest was a most extreme case and that it doesn’t I think represent so much a split in this Court on the law as it does in the interpretation of the facts.

I think the very strong dissent indicated that there was in fact, economic justification for exempting the American Express Company imposed of telegraph and the Western Union and then when the facts changed then the law might change.

But as the facts stood, the law was constitutional.

The majority have crossed, took the other view but compare that case to this case, when you — as I hope you will do understand the fact and this then is a very much easier case to decide.

Now, may I come back —

Felix Frankfurter:

Do you give for Justice Black’s opinion?

Samuel M. Lane:

Easier for both Justice Black —

Felix Frankfurter:

[Laughs]

Samuel M. Lane:

— Black and yourself.[Laughter]

Now, may I come down to this case because we — we shouldn’t be discussing this thing here in — in vacuo it seems to me.

What happened here was that in July 1954, the Safeway Company deliberately went out for a larger share of the business in Oklahoma.

I think there were 18, not 28 Safeway Stores in Oklahoma City and they enjoyed at that time 17% of the total volume of the grocery business in Oklahoma.

There were about 400 competing stores there.

The record shows that Safeway operated by quotas.

Hugo L. Black:

Say what?

Samuel M. Lane:

Quotas.

Hugo L. Black:

Quotas.

Samuel M. Lane:

That it had an objective to reach the quota for Oklahoma City was 20% now they’re only — enjoyed 17%.

So in July 1954, it cut prices on the — on — on a handful of traffic items like sugar and lard and shortening and things like that which were all selling at about the same price in the Oklahoma market.

The effect of that was, of course, immediate.

There was a price war which started immediately.

And in order to nip that price war in the bud, the Oklahoma Grocers Association applied for a restraining order and a temporary injunction.

There was a two-day trial and the temporary injunction was granted.

All during that trial in those two days, the questions about trading stamps were discussed at length.

The effect of trading stamps was discussed at length leading mandate of the statutes which says that the remedy here is by injunction was discussed at length and Safeway’s position was not successful.

Now it isn’t — opening in the grocery’s business likes to sue one another, obviously, and when the Oklahoma Retail Grocers Association had secured this temporary injunction and made their point, they then discontinued the action.

Two weeks later, Safeway came back and hit them again, this time with price cuts not only in Oklahoma City but also in Enid, Shawnee, Tulsa and Norman without pretending at all that in Enid, Shawnee, Norman and Tulsa they were matching trading stamp prices.

Samuel M. Lane:

They merely contended that as to those cities, one or more of their competitors was selling at a price below cost and that was what they said permitted them under this Act to cut the price of the same articles against all their competitors whether or not the other competitors cut the price.

It was only in Oklahoma City that they claim to be doing this as a defense against trading stamps.

The trial court on to hearing all of the elements made the following finding of fact which appears on the record at page 447.

“The court finds that on the dates alleged in plaintiff’s petition the defendant Safeway without legal justification willfully and intentionally reduced its prices in an effort to increase its volume to the detriment of the other grocers.”

The significance of that will be readily apparent to you, because in this Court, what the appellant is arguing is that it has been denied the right in good faith to meet the lower cost of its competitors.

It cut, I submit, even claimed the right to meet the lower prices of its competitors unless it proceeds in good faith.

I know that if it were here under the Robinson-Patman Act instead of under the Oklahoma Sales Act, it would not be heard to say that it has the right in bad faith to meet the lower cost of its competitors which costs also are illegal costs.

Here is a finding of fact against the appellant on the question of good faith and it seems to me —

Hugo L. Black:

What page is this?

Samuel M. Lane:

That is on page 447 at the top of the page.

It seems to me that having been found on the facts in a hotly contested trial to have acted in bad faith, we’re left with nothing but a hypothetical as to what the situation would be had the company acted in good faith.

The Court also or rather the Court of the — the Supreme Court in affirming the lower court had this to say.

Felix Frankfurter:

If — may I interrupt you, Mr. Lane?

Samuel M. Lane:

Yes, sir.

Felix Frankfurter:

That same stipulation is supposed to be certain without legal justification, does — does that phraseology is that accusation — include testing by the very act which is in controversy?

Samuel M. Lane:

That it seems to me is one phase of it.

The Court — this trial court had a good deal to say on that.

If Your Honor would look at the bottom of page 442, you will see what the trial judge said after that.

He said, “Gentlemen, to attempt to handle these problems in any other manner”, that is to say, “in any manner other than by the orderly process of an injunction couldn’t have any other effect than to bring chaos for Safeway sets a price, Blakemore and my district reduces it.”

Safeway says, “They’re going to meet it.”

The Red (Inaudible) Stores then reduced their price and there we go.

“It has nothing but chaos gentlemen.

One violation just brings about another.

I say to handle it in any other manner except in the orderly manner as provided by the statute will only bring chaos in the grocery business and have the net results of ruining hundreds if not thousands of small independent merchants,” and that’s the only logical conclusion the Court can come to here.

Felix Frankfurter:

What I’m asking is whether to include the lack of legal justification by assuming that they litigate the statute.

Samuel M. Lane:

I’m probably stupid.

I’m not sure.

I think your question is a very easy one but I don’t follow it.

It seems to me that there is —

Felix Frankfurter:

(Voice Overlap)

Samuel M. Lane:

— a question of fact here of the — the statute says that you can in good faith meet the price of your competitor who is selling at cost to him.

Now, there are several questions there of fact.

The first is when you meet his price, do you really believe that the price you’re meeting is his cost to him or do you know in fact that he’s selling below his cost and in violation of the statute?

Felix Frankfurter:

That I can understand but if he is meeting competition, on the assumption that giving away trading stamps enables him to do what he does and then the argument is, no, giving away of trading stamps is in fact, that implicates configuration of the scope and validity of the statute, that’s my question.

Samuel M. Lane:

Well, but in the first place, he lost as a question of fact as to what he was trying to do.

Felix Frankfurter:

Well —

Samuel M. Lane:

They found as the question of fact that this wasn’t his purpose at all.

Felix Frankfurter:

Well, why would he do that?

Samuel M. Lane:

The purpose was to grab more of the business.

Now —

Felix Frankfurter:

But that’s what all business may do and they’re —

Samuel M. Lane:

Yes.

Felix Frankfurter:

— forbidden.

Samuel M. Lane:

That’s right.

Felix Frankfurter:

Unless there’s some either a statutory —

Samuel M. Lane:

That’s right.

Felix Frankfurter:

— or decisional limitation of findings.

Samuel M. Lane:

That’s right, Mr. Justice —

Felix Frankfurter:

And my only —

Samuel M. Lane:

— Frankfurter.

Felix Frankfurter:

— question is that I dare say this and maybe you need to answer that.

My only question was what is wrapped up in this place without legal justification and I was wondering whether there was also wrapped up in it that under the statute, without we can’t meet trading stamps accepting distribution in the way which he has because a trading stamp is not anything that affects price but it’s just a psychologically inducement.

That’s my question.

Samuel M. Lane:

Well, I assume that — that could fall under this phrase that we read without legal justifications but that’s only one of a number of things.

Look at this business about whether trading stamps do or don’t cut prices.

It’s been decided by the highest courts in California, in Pennsylvania.

I would say in New Jersey, Mr. Justice Brennan that trading stamps do not have the effect of cutting price because they are a method of giving a discount for the payment of cash and a discount for the payment of cash relates to the terms of sales and doesn’t alter the price.

Felix Frankfurter:

I didn’t mean to reject the argument.

I understand —

Samuel M. Lane:

Yes, but I’m trying to tell you what the frame of reference is when they made this attack that they made.

Samuel M. Lane:

Now, they knew about that body of the law.

They knew in addition to that that the Attorney General of Oklahoma in an opinion in 1950 when asked whether or not trading stamps given with — in the — in the dry cleaning business have the effect of violating the price minimums established there.

They knew that the Attorney General had ruled that trading stamps do not have the effect of cutting prices.

On top of that, they knew when they started, when they cut here in this — this case, they’ve been all through it.

Just six weeks before, they’d had their noses rubbed in it and still they came back and cut prices.

Felix Frankfurter:

I’m suggesting that the argument of Mr. Clark here, that to make such legal determination or such statutory prohibitions against trading stamp is beyond the power of the State.

I’m suggesting —

Samuel M. Lane:

All right.

Felix Frankfurter:

And that’s a very different argument —

Samuel M. Lane:

Yes.

Felix Frankfurter:

— from that stage in —

Samuel M. Lane:

Yes.

Felix Frankfurter:

— in the way in which the modern cases —

Samuel M. Lane:

Yes.

Felix Frankfurter:

— say —

Samuel M. Lane:

Yes.

Felix Frankfurter:

— that this man can’t cut —

Samuel M. Lane:

Yes.

Felix Frankfurter:

— the prices, not through a competition but because he hates the other fellow and wants to drive him out of business.

Samuel M. Lane:

Let me come to that.

Felix Frankfurter:

As I understand that — as I understand modern law of thought even in my day, way back in the law school, even way back as a student, there’s already emerging disaster whether mankind exercises property rights merely out of custom.

Samuel M. Lane:

That’s right.

Felix Frankfurter:

Now, that isn’t but the suggestion here isn’t that kind question in service.

Samuel M. Lane:

Now, what we’re coming down to now is, could — can the State make a distinction between trading stamps and discounts for cash in cash for example.

I would love to talk about that in Mr. Clark’s argument.

Now, it seems to me that they not only can but they did in this case and the distinction is sustained by the record.

Felix Frankfurter:

I understand that but I don’t understand pinning on it the label, “therefore, it was in bad faith.”

Samuel M. Lane:

I don’t think that they did for that reason.

I wouldn’t say —

Felix Frankfurter:

You’re right.

Samuel M. Lane:

— what was in —

Felix Frankfurter:

All right.

Samuel M. Lane:

— their mind.

I can’t say but I wouldn’t pin the label on for that reason.

Now, may I come, Your Honors to what the question is, that was in fact presented here.

Earl Warren:

Mr. Lane, before you get to that, would you mind answering a question that I asked —

Samuel M. Lane:

(Voice Overlap)

Earl Warren:

— Mr. Clark, the one whether there is anything in this injunction that would prevent Safeway from giving a cash discount.

Samuel M. Lane:

Not a single point.

Earl Warren:

The equivalent of —

Samuel M. Lane:

Not at all.

Earl Warren:

There is none.

Samuel M. Lane:

No.

No, Your Honor, but the point is that Mr. Clark says that the net to price was to take a 3% discount for example.

He says that Safeway can cut a dollar item to 97 cents and that what it’s done is to give a cash discount.

No, I say that’s not a cash discount.

A discount for cash is something that’s done for cash, not to sell tomatoes.

If you mark tomatoes down from a dollar to 97 cents, you haven’t given a discount.

You’ve have cut the price three cents for the Safeway who wanted to adopt its own cash discount system in cash.

It could say we’re in the cash business, we want to encourage cash trade in order to encourage cash trade, we will give a discount of 2% in cash and then when the housewife comes through the check out counter, if she has a $10.00 charge to pay, they give her back 20 cents and there’s nothing under this injunction or under this law which would forbid it, but that’s quite definitely not what Safeway did.

What Safeway did was to take two-page ads and say, who is selling tomatoes at 97 cents when it knew that everybody else was selling them at a dollar and that’s what started the price war and that’s why trading stamps are so different from what Safeway’s price cuts were and that’s why we say there’s a perfectly valid distinction between how Safeway’s practices should be treated under this law and how the trading stamps should be treated under this law and please bear in mind that trading stamps had been used in Oklahoma for 45 years and there’s no evidence in this record at all that they ever provoked a price war in Oklahoma nor is there anything in this record to sustain Mr. Clark’s statement that there was “a brisk trade war provoked by the trading stamps at the time this litigation began.”

The price war that was provoked was provoked by Safeway’s price cuts and not by the trading stamps.

All was peaceful before the price cuts.

Now, may I really try to emphasize what the question was — that was presented in the answer to the petition.

Paragraph 9 which appears on page 56 of the record and this is a petition for the injunction.

The question raised had to do with the Fourteenth and the Fifth Amendment.

I think the Fifth Amendment has — something that just crept in there but what I’m trying to tell you is that when issue was joined, so far as due process and equal protection or any federal question is concerned, it was pitched solely on the Fourteenth Amendment.

Then when the Safeway lost in the trial court and petition to the Supreme Court of Oklahoma as appears from page 4, paragraph 21 of the record, again, it was only the Fourteenth Amendment and the Fifth Amendment and no other federal question.

Then when Safeway lost in the Oklahoma Supreme Court and petitioned for a rehearing the record shows at page 648 and 649, the assignments of — of the petition in error again speaks only of the Fourteenth and the Fifth Amendments.

Then when the Safeway Company came here in its notice of appeal which appears on pages 693, 694 and 695, there are four grounds or sub-grounds in paragraph III for appealing to this Court and in each case, the appeal is for violation of the due process and Equal Protection Clauses of the Fourteenth Amendment.

Samuel M. Lane:

And finally, when you come to the jurisdictional statement, again it’s only the Fourteenth Amendment which is said to present a federal question.

Now, in this Court, in the — in the brief in this Court, Safeway now claims that there is, a question of the federal supremacy, presented.

I suppose really now that I’ve reached this point that is perhaps carrying coals to Newcastle to argue the non-availability of a federal question not raised in the state court and not preserved in the notice of appeal and in the jurisdictional statement, but even at the risk of carrying some coals to Newcastle, I would suggest that in McGoldrick against Compagnie Generale Transatlantique, 309 U.S. 430, which I am embarrassed to say I did not cite in my brief contains the complete answer to the attempt to raise in this Court a question which was never presented nor litigated in the State Court having been present at the trial.

I can assure this Court that there wasn’t a word of oral argument on that point nor was there a written word in any of the briefs and you will search in vain through the record to find that the federal supremacy question was ever raised at all and it seems to me that the reason why this Court should not attempt to pass upon a federal question not raised in the Court below is pretty obvious that the State Court should have its own opportunity to so construe its statute as to bring it within constitutional requirements before this Court should attempt itself to pass upon it and in the McGoldrick against the Compagnie Generale —

Potter Stewart:

What volume and page is that again?

Samuel M. Lane:

309 U.S.430 —

Potter Stewart:

Thank you.

Samuel M. Lane:

— Mr. Justice Stewart.

Potter Stewart:

Thank you very much.

Samuel M. Lane:

The rule was cited as follows.I paraphrase it.

“In an appeal to this Court from a three-man federal court, the appellee may sustain for judgment which he secured below on additional ground, not raised below.

The appellant may do so in extraordinary cases.”

I don’t know what the extraordinary cases would be, but on appeal to this Court from the Court of last resort of a State, neither the appellee to support his judgment nor the appellant to attack it.

They refer to federal questions not raised in the lower court.

If — am I out of order by suggesting that there are other cases not mentioned in the brief which I could give you just very quickly that you might like to look at on that same point such as New York ex rel. Cohn against Graves which is in 300 U.S. 308, Lynch against New York ex Rel. Pierson in 293 U.S. 52.

I think there’s no doubt on the rule and since I believe it so strongly, I won’t take any further time with it unless the Court wishes it.

Earl Warren:

We’ll recess —

Samuel M. Lane:

Thank you.