United States v. American Freightways Co. – Oral Argument – January 23, 1957

Media for United States v. American Freightways Co.

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Earl Warren:

Number 265, United States of America, Appellant, versus American Freightways Company, a partnership composed of Allan J. Resler and Norman Forman.

Mr. Spritzer.

Ralph S. Spritzer:

Mr. Chief Justice, may it please the Court.

This case comes here on a direct appeal from a judgment entered in the Southern District of New York.

Judge Newman sitting, dismissing an information, charging a violation of 18 U.S.C. 835, a provision of the Criminal Code which relates generally to the safe transportation of explosives by common carriers.

I shall come back to the specific language of that statute in a few moments.

The sole ground of the dismissal is stated in a two-sentence memorandum opinion which appears at record 23.

The — the ground there stated in brief is that a partnership cannot be held criminally liable.

Felix Frankfurter:

What is that?

Ralph S. Spritzer:

I think so.

I think it’s fair to state that the decision does not rest on a construction of the particular statutes involved because Judge Newman states, Your Honors will note, that regardless of the wording of the relevant statutes which he cites and despite various cases which he says were cited by the Government dealing with criminal responsibility attaching to unincorporated associations.

And I’m quoting directly now.

“It is the opinion of this Court that a partnership is not a legal entity for purposes of criminal liability herein.”

Well, I think it was Judge Newman’s view that the very nature of a partnership was such that it had no spaces to be a defendant.

Felix Frankfurter:

(Voice Overlap) —

Ralph S. Spritzer:

Pardon me?

Felix Frankfurter:

(Voice Overlap) — what do you mean?

Ralph S. Spritzer:

Well, he certainly is stating that he is deciding for purposes of this case that there is no jurisdiction, but I think his language that regardless of the wording of the statutes, there is no jurisdiction.

Implies that he was troubled by common law of concepts of partnership, which of course are to the effect that a partnership is only an aggregated individuals and has no status as an entity.

On the question of their power of Congress to provide that a partnership shall be for particular regulatory purposes treated as a person or as an entity, we feel that that is clearly settled.

We think that Congress were purposes of regulatory statutes may do and has time and again done it in many regulatory statutes.

It may do what some states have done for particular purposes.

That is to provide that an entity, concept of partnership shall be the prevailing rule.

That’s most federal regulatory statutes.

I think it’s fair to say contained definition sections which provide that for purposes of the particular regulatory scheme of the word “person” shall include partnership, corporation, association and so forth.

On the question of the power of Congress to do that, the reason that we feel that might as well settled is that this Court, more than 40 years ago, had substantially the same problem before it in the case of United States against Adams Express.

In that case, the defendant, the Adams Express Company was an unincorporated association.

It was tried in a criminal proceeding for a misdemeanor, also one relating to transportation, namely, that it had departed from its tariffs on file with the Interstate Commerce Commission.

Adams’ defense in that case was that it was not suable, that it was an association, not — not a corporation, not an actual person and not reachable sued qua company.

Justice Holmes, speaking for a unanimous court said that it was inconceivable to the Court that the Interstate Commerce Act was intended in its requirements to reach only common carriers’ organized incorporate form and not to reach carriers organized in other form.

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Ralph S. Spritzer:

We’ve quoted from the language of that opinion at page 8 of our opening brief and I’d like to advert to a single sentence of it in which Justice Holmes states, “That the constitutionality of the statute as against corporations is established,” citing the Court’s earlier New York Central decision.

And no reason is suggested why Congress has no equal power to charge the partnership assets with a liability and to personify the company, so far as to collect a fine by proceeding against it by the company name.

With that background then, let me turn if I may to the particular statutes which are the basis of the indictment or rather the information in this case.

They appear —

Felix Frankfurter:

Before the elements — before the elements of that in such certain case, it’s certainly not present to this case.

Ralph S. Spritzer:

Well, it was an association as distinguished from a partnership.

Felix Frankfurter:

(Voice Overlap) kind of a collective value and the Express Company for reasoning into the statute, the only Express Company brought in this kind of things.

Ralph S. Spritzer:

Well, I think that is certainly correct.

I also would submit to the Court that the principle which was declared in that opinion that it is within the power of Congress to personify a company is equally applicable —

Felix Frankfurter:

Do you suppose that —

Ralph S. Spritzer:

— to our case.

Felix Frankfurter:

(Voice Overlap) in 1957 that Congress wouldn’t have that power?

Ralph S. Spritzer:

Well, I certainly intend to turn immediately to the question whether assuming Congress has the power.

If we do, it has effectively exercised it here.

Felix Frankfurter:

I think the question that you stated is the one we’re dealing.

Ralph S. Spritzer:

The latter question —

Felix Frankfurter:

Yes.

Ralph S. Spritzer:

— presents, Your Honor.

Felix Frankfurter:

You stated it and what the question is that I think is the precise question, namely, this company is interfering in the light of the whole background of partnership, et cetera, et cetera.

Ralph S. Spritzer:

Yes.

Well, in — I would like to turn to meet that question to the particular statute.

Felix Frankfurter:

I don’t mean to say and that there may not be a question under the due process clause that the property should remain in the (Inaudible) of a certain crime and the (Inaudible) knowledge to this factually in fact, proving innocence of knowledge of — of their knowledge.

Well, this Court has gone very far, I mean in regard to that issue in the — in the opening case.

Ralph S. Spritzer:

Yes.

Well, we think we have no great trouble on that score because we are dealing here with a purely regulatory statute, not with a true crime.

Felix Frankfurter:

You know what that is.

Your job (Inaudible) that I should think if he was to plan to argue, but Congress has its power.

Ralph S. Spritzer:

Well, I passed that and turn to the question —

Felix Frankfurter:

(Inaudible)

Ralph S. Spritzer:

Yes, because I — I have concluded with that right, Your Honor.

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Ralph S. Spritzer:

I would like to call the Court’s attention to the particular statute in order to go forward with our argument that Congress had intended to exercise that power.

On page 2 of our brief, we have set forth 18 U.S.C. 835 which Your Honors will note.

“It provides in substance that the ICC shall formulate regulations for the safe transportations of — transportation of explosives which shall be binding upon all common carriers.

Now, that language which shall be binding upon all carriers is in expressed terms what Justice Holmes was inferring when he stated that Congress certainly must have intended the Interstate Commerce Act to be binding upon all types of carriers.

The word, “whoever,” in the next paragraph where Congress says, “Whoever knowingly violates shall be punished as follows,” is not defined in 18 U.S.C. 835 itself.

So, as far as the four corners of the statute are concerned, we place primarily reliance upon the expressed purpose of Congress to make the regulations binding upon all common carriers.

William J. Brennan, Jr.:

Did you say how they are operating license was an issue?

Ralph S. Spritzer:

This is a common carrier by motor, Your Honor.

William J. Brennan, Jr.:

Yes, but they have to get a permission to operate it?

Ralph S. Spritzer:

Oh yes, they are certificated carrier and many —

William J. Brennan, Jr.:

And they’re certificated as a partnership —

Ralph S. Spritzer:

Well, the certificate does not require a carrier to operate in a particular form of business organization.

The application would disclose that the applicant was a partnership or a corporation of course.

William J. Brennan, Jr.:

Does the record show that?

Ralph S. Spritzer:

No, no.

I — I’m merely stating that on the basis of the general procedures in the Interstate Commerce Commission.

I think the Court can take notice of the fact that there are partnership, motor carriers and corporate motor carriers.

William J. Brennan, Jr.:

Just to have no doubt, I’m just wondering how — how this particular partnership got the right to operate.

Ralph S. Spritzer:

Its — there’s no question that it’s a certificated carrier by the ICC.

Yes, sir.

William J. Brennan, Jr.:

As a partnership?

Ralph S. Spritzer:

Well, in the partnership, its application would be and its grant would be in the partnership name.

Yes, sir.

William J. Brennan, Jr.:

Were there some reason why the Government preferred not to precede against the partners rather than the partnership?

Ralph S. Spritzer:

Yes, the Government initially proceeded against the individual partners and the motion for a bill of particulars was made at the opening of that proceeding.

And the Government in an oral bill of particulars told the district judge that it would not be able to prove and knowing violation by the individual partners, and that case was thereupon dismissed.

William J. Brennan, Jr.:

In other words, knowing violation that you would prove would be violated, an employee I think.

Ralph S. Spritzer:

We could — we — our theory would be that on remand, we can prove that an agent or an employee of the partnership was guilty of a knowing violation.

William J. Brennan, Jr.:

That’s the agent or the employee I get as not being a partner.

Ralph S. Spritzer:

Yes, sir.

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Ralph S. Spritzer:

That of course is a quite common problem that the Government can establish that a violation has occurred in a large organization.

Perhaps, it can also establish quite clearly that a particular minor employee was the violator.

Now, as a matter of enforcement policy, the Government frequently deems it important to proceed against the business because as we conceive it under these regulatory statutes, the primary responsibility for appointing employees with requirements seeing that they observed requirements, supervising, training, policing must necessarily rest upon the heads of the business.

And as we also think, the very purpose in these regulatory statutes of defining a person to include partnership, association, corporation and so forth is to make the business as such, the heads of the business, responsible for implementing as best as they can, the many regulatory requirements which the regulatory statute may impose.

But we state quite frankly to this Court as we did below that we were preceding against the partnership because we didn’t think that we could prove a case against the individual partners, but thought that the sanction should run against the business in the event that this — that this charged violations of state deregulation were approved to have taken place.

Felix Frankfurter:

That — that — let me hear (Inaudible) to this problem when a statute makes it a penal offense knowingly, not doing something and knowingly do something whether a thought of it having the permission it had generally speaking in the law, whether knowingly a criminal statute defense by — by the only — law of agency applicable to civil cases.

Ralph S. Spritzer:

Well, that question certainly alerts in — in the case and our —

Felix Frankfurter:

(Inaudible) before the defense on how you construe the applicability of whoever with that which the law normally regards and brought the individuals to unite it together —

Ralph S. Spritzer:

Yes.

Felix Frankfurter:

— and that’s forming illegal personality.

Ralph S. Spritzer:

Yes, and our argument on — on that point is that where Congress has regularly, in regulatory statutes, chose them to define person to include partnership.

Felix Frankfurter:

You mean general suspendatory provision of the Section 1?

Ralph S. Spritzer:

Yes.

I hadn’t stated that provision to the Court.

I am just coming to it.

1 U.S.C. 1, a general definition provision of the United States Code states that in determining the meaning of any active Congress, unless the contexts indicate otherwise, the words “person” and “whoever” include corporations, companies, associations, firms, partnerships and so forth.

Now, we say in this case that the context is far from indicating otherwise has the same indications because of the language that the regulation shall be binding upon all common carriers.

William J. Brennan, Jr.:

Is this issue of knowingly ever been raise and despite from seeing against the corporation?

Ralph S. Spritzer:

Yes.

It — it’s well said and I think by this Court’s decisions that under many criminal statutes that the knowledge of the corporation in a criminal proceeding under a regulatory statute may be established by proving the knowledge of its agents, officers or employees.

Indeed, but in otherwise, we could not proceed against the corporations that it cannot act same through its agents.

Felix Frankfurter:

You don’t have to rely on the generality because it contends to with the reference to construe the Interstate Commerce Act under —

Ralph S. Spritzer:

Yes, New York Central case 50 years — so years ago was such a case.

Now, I think it is also relevant in dealing with the question whether Congress meant as we think its language quite clearly imports to create a partnership as a responsible entity.

It’s relevant to look at what the Interstate Commerce Act generally provides.

It is I think a historical accident that this particular provision relating to the transportation of explosives appears in the Criminal Code rather than in the Interstate Commerce Act.

The reason for it is that Congress, as early as 1866, first became concerned about the transportation of explosives and attached the statute in that year relating to the carriage of T.N.T. by vessels which also carry passengers for hire.

So, Congress dealt with this subject long before there was an Interstate Commerce Act.

And the successor statutes relating to the same subject of transportation by — of explosives by common carriers have all followed the manner and the mold of the first statute, though the more reason statutes delegate the matter of prescribing the standards to the Interstate Commerce Commission.

Now, of course, the Interstate Commerce Act imposes a multitude of requirements upon carriers.