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UNITED STATES v. COMMODITIES CORP.
In 1944 the War Department requisitioned a quantity of whole black pepper, as to which a ceiling price had been established by the Office of Price Administration under authority of the Emergency Price Control Act. In a suit by the owner to recover just compensation, the Court of Claims fixed as just compensation a price in excess of the ceiling price. Held: On the record in this case, the ceiling price of the pepper at the time it was requisitioned was the proper measure of just compensation. Pp. 122-131.
1. The congressional purpose and the necessities of a wartime economy require that ceiling prices be accepted as the measure of just compensation, so far as that can be done consistently with the objectives of the Fifth Amendment. Pp. 123-125.
2. Neither the Fifth Amendment nor the Emergency Price Control Act's provision that the Act shall not be construed to compel an owner to sell his property requires that, in determining the amount of just compensation, there be added to the ceiling price a "retention value" - i. e., an allowance for the price the owner could have obtained had he been permitted to hold the commodity until after price restrictions had been removed. Pp. 125-128.
3. The owner failed to sustain the burden of proving special conditions and hardships peculiarly applicable to it; wherefore the ceiling price of the pepper, fair and just to the trade generally, must be accepted as the maximum measure of compensation for the taking. Pp. 128-131.
(a) The fact that the owner was an "investor" in pepper rather than a "trader" did not entitle it to "retention value," a value based on speculation concerning the price it might have obtained for pepper after the war and after price controls were removed. Pp. 128-129.
(b) The fact that the particular pepper delivered to the Government cost the owner more than the ceiling price is no basis [339 U.S. 121, 122] for excepting the owner from application of the ceiling price as the proper measure of just compensation. Pp. 129-130.
(c) The Fifth Amendment does not require the Government to compensate an owner of requisitioned goods for potential profits lost because of war and the consequent price controls. P. 130.
113 Ct. Cl. 244, 83 F. Supp. 356, reversed.
[ Footnote * ] Together with No. 163, Commodities Trading Corp. et al. v. United States, also on certiorari to the same court.
In a suit to recover just compensation for a quantity of whole black pepper requisitioned in 1944 by the War Department, the Court of Claims awarded an amount in excess of the O. P. A. ceiling price but less than the amount claimed. 113 Ct. Cl. 244, 83 F. Supp. 356. This Court granted cross-petitions for certiorari. 338 U.S. 857 . Reversed and remanded, p. 131.
Oscar H. Davis argued the cause for the United States. With him on the brief were Solicitor General Perlman, Assistant Attorney General Morison, Paul A. Sweeney and Melvin Richter.
Edward L. Blackman argued the cause and filed a brief for Commodities Trading Corp. et al.
Commodities Trading Corporation brought this suit in the Court of Claims to recover "just compensation" for about 760,000 pounds of whole black pepper requisitioned by the War Department in 1944 from Commodities' stock of 17,000,000 pounds. The United States contended that the OPA ceiling price of 6.63 cents per pound was just compensation. Commodities denied this, claiming 22 cents per pound. It argued that Congress did not and could not constitutionally fix the ceiling price as a measure for determining what is just compensation under the Constitution. Commodities also contended that, for reasons peculiar to its own situation, application of the ceiling price in this instance would be particularly unjust. The Court of Claims fixed "just [339 U.S. 121, 123] compensation" at 15 cents per pound. In so doing, that court took into consideration what it terms "retention value," explained as an allowance for the price Commodities "undoubtedly could have secured for its pepper had it been permitted to hold it until after restrictions had been removed . . . ." The court also considered how much the precise pepper requisitioned cost Commodities, the prices at which that company sold pepper after the government requisition, subsequent OPA ceiling prices, and the average price of pepper for the past 75 years. 113 Ct. Cl. 244, 83 F. Supp. 356. We granted the petitions of both parties for certiorari. 338 U.S. 857 .
The word "just" in the Fifth Amendment evokes ideas of "fairness" and "equity," and these were the primary standards prescribed for ceiling prices under the Emergency Price Control Act. 2 As assurance that prices fixed under its authority by the administrative agency would be "generally fair and equitable," Congress provided that price regulations could be subjected to judicial review. All legitimate purchases and sales had to be made at or below ceiling prices. And most businessmen were compelled to sell because, for example, their goods were perishable or their businesses depended on continuous sales. Thus ceiling prices of commodities held for sale represented not only market value but in fact the only value that could be realized by most owners. Under these circumstances they cannot properly be ignored in deciding what is just compensation.
The extent to which ceiling prices should govern courts in such a decision is another matter. Congress did not expressly provide that prices fixed under the Price Control Act should constitute the measure of just compensation for property taken under the Fifth Amendment. 3 And 4 (d) provides that the Act shall not be construed as requiring any person to sell. But 1 (a) declared the Act's purposes "to assure that defense appropriations are not dissipated by excessive prices" and to "prevent hardships . . . to the Federal, State, and local governments, which would result from abnormal increases in prices . . . ." Congress thus plainly contemplated that these governments should be able to buy goods [339 U.S. 121, 125] fulfilling their wartime needs at the prices fixed for other purchasers. The crucial importance of this in the congressional plan for a stabilized war economy to limit inflation and prevent profiteering is shown by the fact that during the war approximately one-half of the nation's output of goods and services went to federal, state and local governments. 4 And should judicial awards of just compensation be uniformly greater in amount than ceiling prices, expectations of pecuniary gains from condemnations might prompt many owners to withhold essential materials until the Government requisitioned them. We think the congressional purpose and the necessities of a wartime economy require that ceiling prices be accepted as the measure of just compensation, so far as that can be done consistently with the objectives of the Fifth Amendment.
In enacting that provision Congress merely refused to take from owners their long-existing "right to hold" until they wanted to sell. It did not create a new "right to hold" as against a constitutional Government taking, or engraft added values of any kind on property which happens to be requisitioned at a time when prices are fixed by law. We cannot justifiably stretch this provision into a command that the Government pay owners a "retention value" for property taken.
Nor can we construe the Fifth Amendment as supporting the Court of Claims "retention value" rule. In peacetime when prices are not fixed, the normal measure of just compensation has been current market value; retention value has never been treated as a separate and essential factor. True, current market value may sometimes be higher because a buyer anticipates future rises in prices. And exceptional circumstances can be conceived which would justify resort to evidential forecasts of potential future values in order to determine present market value. But the general constitutional rule declared and applied by the Court of Claims did not rest on exceptional circumstances.
A persuasive reason against the general rule declared by the Court of Claims is the highly speculative nature of proof to show possible future prices on which "retention value" must depend. In this case, for instance, no one [339 U.S. 121, 127] knew how long the war would last nor how long economic conditions due to war might lead Congress to continue price-fixing legislation. Predictions on these subjects were guesses, not informed forecasts. And even if such predictions were reasonably certain, there remained other unknowns. How much more than the ceiling price would a speculative purchaser have paid for property at the time of seizure? To what extent, if at all, would the lifting of war controls raise prices above the controlled ceilings? And as of what date should future value be estimated? The Court of Claims opinion indicates how haphazard such calculations must be: its figure of 15 cents per pound appears to be a rough judicial compromise between the ceiling price and the 22 cents claimed, not a weighted average drawn from the varied assortment of doubtful factors considered by the court. Moreover, that figure seems completely divorced from the conjectured postwar price, a factor crucially significant in the court's "retention value" concept.
An equally forceful objection to the "retention value" rule is the discrimination it would breed. Only a limited group of owners could take advantage of the rule: those who have nonperishable products so essential for war purposes that refusal to sell would result in governmental requisition. And many of these would be financially unable to withhold their goods on such a gamble. Thus owners able to hold essential nonperishable goods until requisition would become a favored class at the expense of other owners not so fortunate. Moreover, even within that favored class the "retention value" rule would create discrimination against owners impelled by a sense of duty to sell their goods to the Government at ceiling prices without waiting for requisition. A premium would be placed on recalcitrance in time of war.
A rule so difficult to apply and leading to such discriminatory and unjust results cannot be required by [339 U.S. 121, 128] the Fifth Amendment's command for payment of "just compensation."
Third. While there is no constitutional obstacle to treating "generally fair and equitable" ceiling prices as the normal measure of just compensation for commodities held for sale, there must be room for special exceptions to such a general rule. For unfair hardship may be inflicted on a particular dealer by valid ceiling prices which are "generally" fair. Bowles v. Willingham, 321 U.S. 503, 516 -518. But the ceiling price of pepper, fair and just to the trade generally, should be accepted as the maximum measure of compensation unless Commodities has sustained the burden of proving special conditions and hardships peculiarly applicable to it. 6 Cf. Marion & Rye Valley R. Co. v. United States, 270 U.S. 280, 285 .
Commodities contends that it proved the existence of such conditions. It points to the statement of the Court of Claims that the "so-called `retention value' is particularly applicable in this case" because Commodities was an "investor" in pepper rather than a "trader." The company accumulated its large supply at intervals during the 1933-1941 period, expecting to hold it to sell when the price went up. The court found that Commodities could reasonably expect this rise: the nature of production was such that periods of abundance and scarcity were bound to alternate, and during the preceding 75 years the price of pepper had shown marked fluctuations in fairly regular cycles. Most of Commodities' pepper was bought when prices were low. It is argued that as an "investor" Commodities should not be deprived of the [339 U.S. 121, 129] pecuniary benefits which future high prices would have afforded but for the Government's taking.
Under this state of facts the situation of Commodities differed only in degree, if at all, from that of myriad other commodity owners who quite naturally wished to hold their goods for higher prices. Postwar inflationary influences are common and generally expected. Price cycles, seasonal and otherwise, are also well-recognized economic phenomena. Doubtless owners of steel, textiles, foodstuffs, and other goods could produce evidence similar to that offered in regard to pepper to show cyclical fluctuations in their prices. Nor would there be much difficulty in showing that a great many owners had bought, produced, or manufactured their various merchandise with the idea of withholding from markets to await expected higher prices. Many lost anticipated profits due to price control or requisition. Sacrifices of this kind and others far greater are the lot of a people engaged in war. That a war calls for sacrifices is of course no reason why an unfair and disproportionate burden should be borne by Commodities. But the facts here show no such burden on Commodities. Commodities, just like other traders in pepper and other products, bought pepper with the intention of ultimately selling on the market. No more than any other owner is Commodities entitled to "retention value," a value based on speculation concerning the price it might have obtained for pepper after the war and after price controls were removed.
Another contention is that the particular pepper turned over to the Government cost Commodities more than the ceiling price, and that this is a special circumstance sufficient to preclude use of the ceiling price here. The Court of Claims did find that the average cost to Commodities of the precise pepper taken, including labor costs, storage, interest, insurance, taxes and other expenses, [339 U.S. 121, 130] was 12.7 cents per pound. The Government challenges these findings and also claims that Commodities selected its high-cost pepper for delivery under the requisition. Pointing out that pepper is fungible and that the only relevant cost figure is the average cost to Commodities of all its pepper, the Government asserts that this average cost was less than the ceiling price.
We do not consider these contentions of the Government because we think that the cost of the pepper delivered provides no sufficient basis for specially excluding Commodities from application of the ceiling price. The general rule has been that the Government pays current market value for property taken, the price which could be obtained in a negotiated sale, whether the property had cost the owner more or less than that price. Vogelstein & Co. v. United States, 262 U.S. 337, 340 . The reasons underlying the rule in cases where no government-controlled prices are involved also support its application where value is measured by a ceiling price. In neither instance should the Government be required to make good any losses caused by the fact that the owner purchased goods at a price higher than market value on the date of taking. Especially is this true where the resulting loophole in wartime regulation would be available only to dealers in essential nonperishable commodities who have enough funds and storage space to withhold goods until the Government is forced to requisition them.
The judgment of the Court of Claims is reversed and the cause is remanded with directions to enter an appropriate judgment based on the maximum ceiling price of the pepper at the time it was taken.
[ Footnote 1 ] See, e. g., United States v. Miller, 317 U.S. 369 ; Olson v. United States, 292 U.S. 246 .
[ Footnote 2 ] 56 Stat. 23, 50 U.S.C. App. 901.
[ Footnote 3 ] Had Congress prescribed a rule that prices fixed under the Act should constitute the measure of constitutional "just compensation," courts upon proper challenges would have been faced with responsibility of determining whether that rule satisfied the requirements of the Fifth Amendment. Marbury v. Madison, 1 Cranch 137. Compare Monongahela Navigation Co. v. United States, 148 U.S. 312, 327 .
[ Footnote 4 ] Eighth Report of the Director of War Mobilization and Reconversion, October 1, 1946, H. R. Doc. No. 45, 80th Cong., 1st Sess. p. 7.
[ Footnote 5 ] Pertinent parts of the Court of Claims discussion of "retention value" were: "We have several times held that, in determining just compensation, we must take into account the plaintiff's right to hold its property until restrictions on its disposition are removed. Seven-Up Bottling [339 U.S. 121, 126] Co. v. United States, 107 C. Cls. 402; Kaiser v. United States, 108 C. Cls. 47; Adler Metal Products Co. v. United States, 108 C. Cls. 102; Pantex Pressing Machine Co. v. United States, 108 C. Cls. 735. "The Government in time of war has the undoubted right to say to the citizen, if you want to sell your property you must not sell it for more than a certain price; but the Government has no right to take the property and pay for it no more than this fixed price, unless that price justly compensates the owner, taking into consideration his right to hold his property until he can get for it whatever anyone is willing to pay." 113 Ct. Cl. 259-260, 83 F. Supp. 357.
[ Footnote 6 ] Commodities had petitioned the Price Administrator in 1943 to amend the applicable regulation so as to permit higher prices for pepper by allowances for storage expenses. This petition was denied. Nothing in the record indicates that the Emergency Court of Appeals was ever asked to consider ceiling prices for pepper.
By 1938 Commodities had accumulated 25,000,000 pounds; by December, 1941, it had disposed of about 8,000,000 pounds. The rest it withheld from the market until the requisition here in controversy was made by the War Department, in May, 1944. December, 1941, is a significant date because a ceiling price on pepper was then established. The price at which it was pegged - 6.75 cents per pound, amended shortly thereafter to 6.50 cents plus limited carrying charges - approximated the [339 U.S. 121, 132] market price at the time the free market in pepper came to an end. This free market price was responsive to the then unusually large inventory of pepper in the country, amounting to from 78,000,000 to 100,000,000 pounds, a three-year supply. The Government forbade importation of high-priced pepper from India, and the other sources of supply were cut off by the Japanese invasion. As a result, stocks rapidly declined, the fall being accelerated after the imposition of ceiling prices by a desire on the part of many importers to avoid additional carrying charges. By September, 1943, only about 28,000,000 pounds were in the hands of importers. Of this Commodities held, as we have seen, 17,000,000. From about the middle of 1942 activity had steadily shrunk and by early 1944 pepper was not for sale.
In May, 1944, the War Department requisitioned from Commodities about 760,000 pounds of black pepper. Commodities rejected the Government's offer of compensation at the ceiling price and this suit to recover "just compensation" followed.
On the basis of its "special findings of fact" the Court of Claims held that the ceiling price was not the measure of just compensation for the requisitioned pepper. It deemed the right to withhold from sale nonperishable goods until after price control terminated a value of substance to be included in ascertaining just compensation. The inclusion of this "retention value" in the present circumstances was especially appropriate, so the Court of Claims reasoned, because Commodities was not a trader but a long-term investor. After the controls were removed in 1946, pepper sold at 50 to 60 cents a pound and upward and the Court of Claims deemed these free market values relevant in determining the just compensation for the pepper requisitioned in 1944. In giving an award above the ceiling price, that court was further influenced by the fact that the cost of the pepper it attributed to [339 U.S. 121, 133] Commodities - 12.7 cents per pound - exceeded the ceiling. Taking all the factors it deemed relevant into account, 15 cents per pound was found by that court to be just compensation for the pepper taking.
I. The "just compensation" required by the Bill of Rights when "private property [is] taken for public use" has a way of attracting far-flung contentions. So here, extreme positions are taken regarding the relevance of ceiling prices to "just compensation." On the one hand it is urged that ceiling prices are to be treated as though they represent value determined by a free market. On the other hand it is insisted that since it would be unjust for the Government itself to fix the compensation for what it takes, ceiling prices should be ignored. I agree with what I understand to be the Court's view in rejecting both these absolutes.
War conditions drastically change the economic environment in which a free market has its justification. The purpose of government controls is to terminate such a distorted free market. Since ceiling prices are required by law to be "generally fair and equitable" 1 and govern voluntary sales of property, they are not irrelevant in assessing just compensation. The value of private property is not immutable; especially is it not immune from the consequences of governmental policies. In the exercise of its constitutional powers, Congress by general enactments may in diverse ways cause even appreciable pecuniary loss without compensation. "Government hardly could go on if to some extent values incident to property could not be diminished without paying for every such change in the general law. . . . When [the diminution] reaches a certain magnitude, in most if not in all cases there must be an exercise of eminent domain [339 U.S. 121, 134] and compensation to sustain the act. So the question depends upon the particular facts." Pennsylvania Coal Co. v. Mahon, 260 U.S. 393, 413 . See also Hudson County Water Co. v. McCarter, 209 U.S. 349, 355 ; Pipe Line Cases, 234 U.S. 548, 561 ; Jackman v. Rosenbaum Co., 260 U.S. 22, 31 .
It does not follow that controlled prices automatically meet the requirements for just compensation in the forcible taking of property simply because they replaced free market prices which could no longer be relied on to reflect the normal play of free economic forces. A system of price controls which is "generally fair and equitable" may give rise to individual instances of hardship in the requisitioning of property no matter how conscientiously and competently administered. See Bowles v. Willingham, 321 U.S. 503, 516 -18. The hardship may reach such magnitude in an individual instance as to make a taking by the public at a ceiling price unjust compensation. Of course war means burdens, and there is no calculus by which they can be fairly distributed. From any point of view the ultimate sacrifices are uncompensable. But these considerations are not relevant in carrying out the Fifth Amendment. When there is a taking of property for public use, whether in war or in peace, the burden of the taking is the community's burden. The owner should be requited by that which satisfies prevailing standards of justice. This limitation upon the power of eminent domain has throughout our history been left for judicial application. We would be faced with a new problem had Congress specified that the ceiling prices should be the limit of just compensation. Such a statute would call for the usual respect to be accorded to the judgment of Congress in passing on the validity of legislation when the power of Congress to legislate is limited by broad standards and not by restrictions almost technical in their nature. We are relieved from a consideration [339 U.S. 121, 135] of any such question because Congress chose not to make ceiling price the measure of "just compensation." It is therefore an inescapable judicial duty to explore the elements relevant to just compensation even for the taking of property which, as to voluntary transactions, is subject to price control. The standard of just compensation is not mechanically to be replaced by ceiling prices.
On the present record only two issues need to be faced. In arriving at just compensation did the Court of Claims properly take into account (1) a "retention value" and (2) the cost of the pepper to Commodities.
II. The Court of Claims appears to have recognized as a component of just compensation the right of a property owner to withhold his property for some future opportunity of enhanced realization, even though he be in the same boat with all other owners for whom the ceiling price is a fair measure. In its bearing upon our immediate problem, recognition of such a "retention value" as part of the contemporaneous value of what was taken would have required the power to "divine prophetically" the war's end and the lifting of controls by Congress as well as the state of the pepper market thereafter. This is "to exact gifts that mankind does not possess." International Harvester Co. v. Kentucky, 234 U.S. 216, 223 , 224. To allow such wild imagination to enter into the practical determination of what is just [339 U.S. 121, 136] compensation would merely sanction unbridled drafts on the Treasury. It would encourage every property owner to hold his goods off the market and to force the Government to requisition rather than purchase. That, by such retention, profits might be realized in the distant future is not an interest which the Constitution protects.
III. The Court of Claims found that the cost to Commodities of the requisitioned pepper was 12.7 cents per pound compared with the ceiling price of 6.5 cents. The Government challenges the cost figures. It points out that Commodities kept its cost records on the basis of specific bags of pepper, each bag being recorded at its invoice cost and the applicable carrying charges. Commodities selected the bags of pepper delivered to the Government. Apparently it chose the bags which had the highest invoice cost and the greatest carrying charges, the pepper bought in 1933-1936. Assuming that costs higher than ceiling prices may affect just compensation, the Court of Claims should have considered whether the high cost of the pepper turned over to the Government was due to Commodities' accounting system. Since pepper is fungible and does not have age value, for all that appears Commodities' method of computing costs may have been unfair to the Government. "Just compensation" is not a function of a seller's theory of accounting.
The Court's opinion, however, holds that whatever the costs they are irrelevant in assessing just compensation. [339 U.S. 121, 137] Thereby the Court disregards in the concrete the principle which it avows in the abstract - namely, that ceiling prices are not to be deemed as though they were values arrived at in a free market and that individual instances of hardship may properly receive individual consideration. The Court urges that high costs would be irrelevant in peacetime when an uncontrolled market determines value. Compare Vogelstein & Co. v. United States, 262 U.S. 337 . But a controlled market is not an uncontrolled market. Only by treating a controlled market as the equivalent of an uncontrolled market can ceiling prices be made the equivalent of market value and thereby the measure of just compensation.
Costs, unlike "retention value," do not yield inherently speculative results. Including costs in computing just compensation does not give the condemnee a "war profit" nor make inroads on the system of price controls. Such inclusion is a safeguard against discriminating hardships resulting from a formula which is generally fair but which by its nature cannot be fair to each individual. By the terms of the Price Control Act the only standard which Congress laid down for price fixing was that the ceiling price be "generally fair and equitable." The Act itself made no provision for individual relief from the general price. The administrative discretion for enforcing the Act vested in the Price Administrator no doubt authorized him to qualify the prices he fixed by procedure for individual relief therefrom. As to many commodities the maximum price schedules did include such provisions. The price regulation regarding the pepper requisitioned from Commodities contained no such provision. There was no way, therefore, by which Commodities could have had relief from any unfairness of the maximum price affecting its pepper by reason of the high cost which, on the basis of legitimate business considerations, it paid.
It is significant that Congress provided in 4 (d) of the Emergency Price Control Act that "Nothing in this Act shall be construed to require any person to sell any commodity . . . ." 56 Stat. 28, 50 U.S.C. App. 904 (d). This protective provision is peculiarly applicable to sellers who had acquired nonperishable property by way of reasonable investment at costs above the ceiling price. Under 4 (d) they were not required to take a loss. But today's decision withdraws that statutory protection from those subjected to the exercise of the Government's power of condemnation. It may be that, despite 4 (d), certain sellers with high costs would have had to sell in the private market because of economic factors. There is considerable difference, however, between [339 U.S. 121, 139] hardships resulting from the impersonal workings of a general regulation and the personal operation of the power of eminent domain, under which Government officials have complete discretion to select the individual who shall give up his property at a loss for the public good.
We need not decide whether costs exceeding the ceiling price are always relevant to just compensation or the extent to which they may qualify the ceiling price. It is enough to hold that, if Commodities' costs, fairly measured, were greater than the ceiling price for pepper, it is fair to take them into account. We are not dealing here with a hoarder or with one who bought property at recklessly high costs in the expectation that, in any event, the Government would reimburse him. Commodities did not suddenly shift from "seller" to "holder" upon imposition of controls in 1941; while it reduced its total stocks between 1938 and 1941, the Court of Claims found that it was essentially a "holder" from 1933 on. Nor did Commodities make substantial sales to private persons at the ceiling price, and hold out against the Government. It merely exercised its statutory right to refuse to sell, a decision ethically justified if by selling it would incur an honest loss.
IV. The error of the Court of Claims in applying the doctrine of "retention value" requires reversal of its judgment. That court should reexamine Commodities' costs and if, under a fair accounting theory, those costs prove to be higher than ceiling, they should be considered in the computation of just compensation.
[ Footnote 1 ] Emergency Price Control Act 2 (a), 56 Stat. 24, 50 U.S.C. App. 902 (a).
When Congress enacted the Emergency Price Control Act, it provided that "Nothing in this Act shall be construed to require any person to sell any commodity . . . ." 56 Stat. 28, 4 (d), 50 U.S.C. App. 904 (d). Of course, Congress did not thereby surrender the Government's [339 U.S. 121, 140] right to requisition any goods it might want under the usual eminent domain powers and for "just compensation." Why then this provision?
"It is hard to see how just compensation can be the legal equivalent of a controlled price, unless a controlled price is also always required to equal just compensation. It never has been held that in regulating a commodity price the Government is bound to fix one that is adequately compensatory in the constitutional sense, so long as the owner is free to keep his property or to put it on the market as he chooses. If the Government were required to do so, the task of price regulation would be considerably, if not disastrously, complicated and retarded. It seems quite indispensable to the Government itself, for the long-range success of price controls, that fixed prices for voluntary sales be not identified with the just compensation due under the Constitution to one who is compelled to part with his property." 334 U.S. at 651.
The Court today nullifies the congressional policy that no one is compelled to sell under the Act by using the condemnation power to compel the sale and this Act to fix the price. It also makes the constitutional provision for just compensation meaningless, since the Government [339 U.S. 121, 141] may first fix the price, as if no sales were compelled, and then compel the sales at the prices so fixed. I think the constitutional power to fix prices for voluntary sale in interstate commerce is much less confined than the power to fix prices for taking property. But hereafter, the price fixed may have to be tested by whether it would be just compensation for a compulsory sale.
I agree that the court below erred in its theory of "retention value." It did so by making the same basic error this Court is making: that of combining two separate systems - price fixing and condemnation. It considered that because the Emergency Price Control Act said a claimant was not required to sell under the Act, he might retain his property for some future rise in market. But it is not that Act which makes him sell. It is under the power of eminent domain that the Government expropriates this pepper. And under that power he has no right of delay and hence no retention value. He must part with his property on demand, and the issue is what is just compensation at that time.
At the time of this expropriation there was, insofar as market prices were concerned, a controlled market in the United States - controlled by the Government that was doing the expropriating. There was also a world market, with far higher market prices, to which the Government would have had recourse had not these parties earlier imported a large supply. Moreover, while the ceiling price on whole pepper was kept at a low figure, the price on ground pepper to the public showed what seems to be an unaccountably large spread. The problem of combining all relevant considerations that go to a valuation is a difficult one.

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Section 225.010 Litter in Public Places.
Section 225.020 Manner of Depositing Litter.
Section 225.030 Sweeping Litter Into Public Places.
Section 225.040 Burning Litter, Leaves, Etc., Prohibited.
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Rehearing Denied May 10, 1943. See 319 U.S. 780 , 63 S.Ct. 1154, 87 L.Ed. --. [318 U.S. 629, 630] Paul M. Niebell, of Washington, D.C., for petitioners.
Mr. Archibald Cox, of Washington, D.C., for respondent.
These actions were originally brought in 1926 under special jurisdictional acts of 1924, which gave the Court of Claims jurisdiction over claims under 'any treaty or agreement between the United States' and these tribes. 1 [318 U.S. 629, 631] The actions were based on a contention that the United States had breached its obligation as a guardian of its Indian wards in failing to collect the sums described below. The Court of Claims sustained a demurrer to the first complaint on the ground that the special jurisdictional acts permitted actions brought on specific statutory or treaty pledges only, and not actions brought on a wardship theory. 75 Ct.Cl. 873. The petitioners subsequently amended their complaints to comply with the requirements of the jurisdictional acts, alleging that the United States in specific statutes and treaties guaranteed to repay the Indians for the losses claimed to have been suffered. The Court of Claims sustained a demurrer to the second amended complaint on the ground that it did not state a cause of action, 97 Ct.Cl. 591, and we granted certiorari, 317 U.S. 614 , 63 S.Ct. 71, 87 L.Ed. --, because of the importance of the questions raised in the administration of Indian affairs. The cases present the question whether the United States has assumed treaty or statutory obligations which require it to indemnify the Creek and Seminole nations for injuries alleged to have been suffered by them as a result of the seizure and use of their land by private railroad companies.
By the treaties of 1866,2 the Creeks and Seminoles granted a right of way to railroads which the United States might later authorize to construct and operate routes across their lands. They agreed to permit the railroads to buy strips up to three miles in width on each side of the track. In the succeeding thirty-six years, Congress, by a series of special acts, authorized the construction and operation of railroads,3 and in 1902 it passed a [318 U.S. 629, 632] general statute concerning future railroad construction in the Indian territory. 4 The 1902 Act included a provision, 16, that railroads should pay a fixed annual sum per mile to the Secretary of the Interior for the benefit of the tribes.
The Indians allege that the railroads have not complied with the terms of the treaties and statutes in that they have taken and held certain station reservations unnecessary for railroad purposes for their own benefit, that they have received rents and profits from the use of these lands, and that they have failed to pay the annual mileage charge. 5 They ask that the government indemnify them for the value of the lands allegedly wrongfully taken, for rents and profits accruing to the railroads from their use of those lands, and for the mileage charge.
The petitioners contend that the government failed to prevent the railroads from taking and holding station reservations later found to be unnecessary for railroad purposes, and that it thus became liable to the petitioners for breach of the guarantee of 'quiet possession'.
The Court of Claims concluded that the guarantee of quiet possession applied only to protection from hostilities by other tribes. Such a conclusion receives support from a consideration of the circumstances of the time, for inter-tribal warfare was a dominant danger. Some of the tribes had fought on each side in the Civil War, and strange new tribes were about to be settled on adjacent land. The turmoil of reconstruction called for military protection.
We conclude that, whether or not the guarantee is limited to military protection, this language did not obli- [318 U.S. 629, 634] gate the United States to compensate the tribes for encroachments by railroads acting under color of right. Keeping the peace and protecting the Indians was a difficult, and at times almost impossible, task,6 and we cannot assume that the government meant to guarantee reparations for breach of quiet possession without a single explicit word in the Treaty to that effect. Where reparations were planned, clear language was used. Thus in the section quoted above hostile tribes, and not the government, were explicitly made liable for the tribe's depredations. There is no such provision putting a similar liability for lossees of any sort on the United States. 7 A promise by the a similar liability for losses of any sort government to try to keep the peace is not equivalent to a promise to make payments if the peace is not kept; 'and, before any judgment should be rendered binding the United States, it is familiar and settled law that the statute claimed to justify such judgment should be clear, and not open to debate.' Leighton v. United States, 161 U.S. 291, 296 , 297 S., 16 S.Ct. 495, 497.
This conclusion does not mean that the United States in signing the treaty made an empty promise. The government undertook to use its military power to protect the Indians against military aggression, and in addition it un- [318 U.S. 629, 635] dertook through its administrative and legislative policy to aid the tribes to hold possession of their lands. In view of the pressures of the time, it appears to have treated its obligation with real care. The acts providing for the construction of the railroads, for example, provided for payment to the Indians for the land taken,8 attempted to restrict the amount granted to that necessary,9 and usually provided for reversion of title to the Indians upon discontinuance of the road. 10 In 1871, upon appeal of the tribes, the Secretary of the Interior refused to permit a road to enter the territory because of a claimed violation of the treaty. 11 The guarantee of quiet possession called for a [318 U.S. 629, 636] series of legislative, administrative, and military judgments, but was not a pledge of monetary reparation.
Section 16 provides that 'where a railroad is constructed under the provisions of this Act there shall be paid by the railroad company to the Secretary of the Interior, for the benefit of the particular tribe or nation through whose lands any such railroad may be constructed, an annual charge of fifteen dollars per mile ....' Petitioner contends that this direction to the Secretary to accept these payments made the government an insurer of their collection.
Variants of this statutory phase were used generally in acts authorizing railroad construction after 1884. The Act of 1902, as has been noted, was the successor to the general railroad authorization act of 1899, which in 30 Stat. 990, 5, required 'such an annual charge as may be prescribed by the Secretary of the Interior, not less than fifteen dollars for each mile.' Other acts of the period varied in that the Secretary was directed to apportion the sum collected among several tribes according to their interests. 13 Some of the earlier acts mentioned no specific sum, giving the Secretary complete discretion as to the [318 U.S. 629, 637] amount to be collected and the method of allocating it. 14 This device of assessment of an annual charge payable to the Secretary was also used in authorizing construction of telephone and telegraph lines across Indian lands, 25 U.S.C. 319, 25 U.S.C.A. 319.
By the time of the adoption of the 1902 Act, the verbal formula used in 16 was so familiar that it required no discussion in Congress. The clause seems first to have been used in an act of 1884, 23 Stat. 69, 5, authorizing the Gulf, Colorado, and Santa Fe Railway to cross the Indian territory. The $15.00 charge was considered a tax, approximately equal to the taxes charged by neighboring states. 15 No word was said indicating that the United States, acting as a voluntary tax collector for the tribes, meant to guarantee to the tribes that the taxpayers would make their payments when due.
Considering 16 in its relation to the other statutes of the period, many of which through minor variations gave wide discretion to the Secretary of the Interior, we conclude that the words of this section were a direction to the Secretary to make the facilities of his office available for the payment of a form of tax. It provides that the railroads shall pay the tax to the Secretary, but puts no mandatory duty on the Secretary to do the work of collecting. We cannot suppose from any evidence before us either of legislative history or administrative practice that the United States repeatedly assumed obligations to in- [318 U.S. 629, 638] demnify the Indian tribes for charges which railroad companies, telephone companies, and telegraph companies constructing lines across Indian lands may have failed to pay. Cf. United States v. Algoma Lumber Co., 305 U.S. 415, 421 , 59 S.Ct. 267, 270.
Third. The Act of 1906, 34 Stat. 137. Congress at one time planned to terminate the existence of the Five Civilized Tribes in 1906, and the Act of 1906 was introduced into the House of Representatives with the object of preserving Indian interests after tribal dissolution. In the course of discussion, Congress determined to continue the tribal existence, and the Act was amended to that effect before passage. The petitioners' final reliance is on section 11 and 18 of this Act.
The petitioner contends that under this section the government is liable for rents and profits on the station reservations allegedly wrongfully taken and wrongfully used by the railroads.
This language, like that of 16 of the 1902 Act which it so closely resembles, does not make the government a guarantor that sums owing will be paid. The claim asserted is in essence one of damages for trespass, and assuming that the proceeds of a trespass action are to be considered 'revenue', the Secretary was surely entitled to discretion as to which trespass actions he might consider worth bringing. In so far as the petitioner contends that the railroads wrongfully took lands under pretense of right in their original grants under the statutes, the administrative machinery provided by the acts gave the tribes adequate redress through the courts at the time the land [318 U.S. 629, 639] was taken. 16 As to trespasses which may have been committed by the railroads without compliance with the forms of the authorizing Acts, or as to holdings, once proper, which the railroads may have retained after the rights to them had expired, we find no absolute duty on the Secretary to obtain compensation.
The petitioners contend that under this section the Secretary was obligated to bring suit for all damages suffered by the tribes for failure to pay sums owing under 15 and 16 of the 1902 Act, for trespass and mileage taxes, for any breach of the treaty, and for rents and profits collected by the railroads. But the use of the word 'authorized' in this context necessarily reserved to the Secretary the right to determine his own course of action. It must be remembered that the Secretary was traditionally given wide discretion in the handling of Indian affairs17 and that discretion would seldom be more necessary than in determining when to institute legal proceedings. For example, a railroad might have become bankrupt or reorganized before a failure to make proper payments was discovered,18 making recovery impossible; and [318 U.S. 629, 640] we can not suppose that the Secretary might not compromise difficult cases without bringing suit.
We are asked here to impose a liability on the government to these Indians for wrongs allegedly committed against the Indians by others. Appreciating the desire of Congress to recognize the 'full obligation of this nation to protect the interests of a dependent people,' Tulee v. State of Washington, 315 U.S. 681, 685 , 62 S.Ct. 862, 864, we are unable to find in the words of the treaties or statutes upon which this action rests any such prodigal assumption by the government of other people's liabilities as that for which the petitioners contend here.
Each railway company whose road was constructed under the Act of 1902 2 was required by 16 of that Act to pay to the Secretary of the Interior, for the benefit of the particular tribe through whose lands the road passed, an annual charge of fifteen dollars for each mile of road constructed. By the Act of 1906 it was provided that all revenues accruing to the Five Civilized Tribes 'shall ... be collected by an officer appointed by the Secretary of the Interior', and the Secretary was authorized to bring suit in the name of the United States for the use of any one of the five tribes to collect any moneys claimed by it. 3 For failure of the Secretary of the Interior to collect these mileage charges for the Creek and Seminole tribes, among other things, this action is brought under jurisdictional acts4 which authorize the Court of Claims to hear and [318 U.S. 629, 642] determine all legal and equitable claims arising under or growing out of any treaty or agreement between the United States and those tribes, or out of any act of Congress relating to Indian affairs.
We have held that the Government in its relations with the Indian tribes occupies the position of a fiduciary, that the relationship is similar to that of guardian and ward, and that the duties and responsibilities of the United States toward its wards require a generous interpretation. 5 If it is the duty of a guardian or trustee, as I conceive it to be, to exercise diligence to conserve and protect the interests of his trust, and collect moneys due to the estate of his ward, then such a duty may well have arisen under 16 of the Act of 1902, a duty which, it is alleged, the Secretary of the Interior failed to discharge. In other words, if the railroads failed to pay to the Secretary the required annual charges for each mile of road constructed, it was the Secretary's duty to act to protect the Indian beneficiaries who should not be expected to assume the burden of acting on their own behalf, especially when the payments were to be made to the Secretary and not to them. Cf. United States v. Creek Nation, 295 U.S. 103, 110 , 55 S.Ct. 681, 684. To read the Act of 1902 otherwise is to take too restricted a view of the obligations of the United States toward a dependent people. But if there were any doubt, the duty of the Secretary of the Interior to collect the mileage charges was made plain and unmistakable by the Act of 1906 which required him to collect all revenues accruing to the tribes and specifically authorized him to bring suit on their behalf. The present claim to mileage charges undoubtedly is an equitable one arising out of those statutes and is therefore within the scope and purpose of the jurisdictional acts. [318 U.S. 629, 643] In my opinion the petitioners state a cause of action with respect to these mileage claims and the judgment of the Court of Claims should accordingly be reversed.
Mr. Justice FRANKFURTER agrees with these views.
[ Footnote 1 ] 43 Stat. 133, 43 Stat. 139. See also the jurisdictional act of 1937, 50 Stat. 650.
[ Footnote 2 ] 14 Stat. 755 (Seminole), 785 (Creeks). The treaties are sufficiently similar so that hereafter reference will be made to the Creek treaty only.
[ Footnote 3 ] The treaty was originally interpreted as permitting the construction of only two railroads through the territory. Letter of the Secretary of the Interior to the President, May 21, 1870, approved by him May 23, 1870, referred to at 13 O.A.G. 285 (1870). In the 1880's Congress began, in a series of special acts, to authorize construction of railroads through the Indian territory on a theory of eminent domain. Cherokee Nation v. Southern Kan. R. Co., 135 U.S. 641 , 10 S.Ct. 965. See e.g. the Committee Report and discussion of the bill granting a right of way to the Gulf, Colorado, and Sante Fe Railway, 15 Cong.Rec. 4711 et seq. (1884). Approximately one half of the railroads involved in the instant case appear to have been authorized by special acts and to have been constructed prior to the general act of 1902, 32 Stat. 43. For a general history of railroads in Oklahoma see Bulletin No. 60, The Railway and Locomotive Historical Society, 'The Railroads of Oklahoma', published through the Baker Library of the Harvard Business School (1943).
[ Footnote 4 ] An Act regulating general construction of railroads through Indian lands was first adopted in 1899, 30 Stat. 990, 25 U.S.C.A. 312 et seq. The 1902 Act was more particularly directed at construction through the territory of the Five Civilized Tribes, of which petitioners are two.
[ Footnote 5 ] Under an opinion of the Secretary of the Interior the obligation to make this payment terminated upon the admission of Oklahoma as a state in 1907. 38 Decisions of Secretary of the Interior (Public Lands) 414.
[ Footnote 6 ] 'The treaties of 1866, and other treaties also, guarantee to the five civilized tribes the possession of their lands; but, without the moral and physical power which is represented by the Army of the United States, what are these treaties worth as a protection against the rapacious greed of the homeless people of the States who seek homesteads within the borders of the Indian Territory? If the protecting power of this Government were withdrawn for thirty days, where would the treaties be, and the laws of the Indians and the Indians themselves?' Report of the Commissioner of Indian Affairs in 1 Report, Secretary of the Interior ( 1886), 81.
[ Footnote 7 ] The only instance which has been called to our attention in which the United States specifically guaranteed to bring civil actions for the benefit of a tribe and insured payment for trespasses is the Treaty of May 24, 1834, with the Chickasaws, 7 Stat. 450.
[ Footnote 9 ] Note, for example, in the Congressional discussion of the bill authorizing construction of the Gulf, Colorado and Santa Fe Railway, an Oklahoma railroad not directly involved here, the debate over the amount of land necessary for sidings. 15 Cong.Rec. 4715-4718 (1884).
[ Footnote 10 ] The experience of one of the first of the two roads authorized under the treaty is revealing of the manner in which the use of the Indian lands was supervised: The Atlantic and Pacific Railroad was authorized to build a line by an 1866 act, 14 Stat. 292. In 1871, after small parts of the line had been completed, it was ordered to cease work by the Secretary of the Interior and was not allowed to continue until it had posted a bond for the protection of Indian interests. See discussion at Atlantic & P.R. Co. v. Mingus, 165 U.S. 413, 417 , 17 S.Ct. 348, 349. Failure to complete the road resulted in an 1886 Act taking the lands previously granted back into the public domain, 24 Stat. 123, and the road was ultimately completed by the St. Louis and Oklahoma City Ry. Co. under an 1896 special act, 29 Stat. 69. Section 2 of that Act provides for reversion to the tribes of lands not used for railroad purposes.
[ Footnote 11 ] Letter, Secretary of the Interior, May 21, 1870, supra, note 3.
[ Footnote 12 ] Whether added obligations in connection with this section were assumed by the United States in the 1906 Act is considered below.
[ Footnote 13 ] See, e.g., the act authorizing construction of the Kansas and Arkansas Valley Railroad, 24 Stat. 73, 5 (1886), or the act authorizing construction of a branch of the St. Louis and San Francisco Railroad, 29 Stat. 80, 5 (1896).
[ Footnote 14 ] The act authorizing construction of a railroad through the Papago ( Arizona) reservation provided: 'Such compensation as may be fixed by the Secretary of the Interior be paid to him by the said railroad company, to be expended by him for the benefit of the said Indians.' 22 Stat. 299 ( 1882).
[ Footnote 15 ] See discussion in the House of Representatives, 15 Cong.Rec. 4723- 4727. For an analysis of the nature of this tax see the Opinion of the Secretary of the Interior, supra, note 5.
[ Footnote 16 ] See for example 15 of the 1902 Act.
[ Footnote 17 ] Cohen, Handbook of Federal Indian Law, 'The Range of Administrative Powers', 100 et seq.
[ Footnote 18 ] The Oklahoma properties of the St. Louis and San Francisco Railway Co. were held by 25 different corporations between 1866 and 1916. The Atchison, Topeka, and Santa Fe, not directly involved in this action, is the descendant of 64 railroads with Oklahoma holdings. Approximately 150 railroads have existed in Oklahoma. See 'The Railroads of Oklahoma', supra, note 3, pp. 28-77.
[ Footnote 19 ] Cherokee Nation v. Southern Kan. R. Co., 135 U.S. 641 , 10 S.Ct. 965; Cherokee Nation v. Hitchcock, 187 U.S. 294 , 23 S.Ct. 115; Lone Wolf v. Hitchcock, 187 U.S. 553 , 23 S.Ct. 216. Cf. Lane v. Pueblo of Santa Rosa, 249 U.S. 110 , 39 S.Ct. 185, and United States v. Candelaria, 271 U.S. 432 , 46 S.Ct. 561.
[ Footnote 20 ] Cf. Heckman v. United States, 224 U.S. 413, 446 , 32 S.Ct. 424, 434; United States v. Board of Com'rs of Osage County, 251 U.S. 128 , 40 S.Ct. 100; Sunderland v. United States, 266 U.S. 226 , 45 S.Ct. 64.
[ Footnote 1 ] Choctaw Nation v. United States, 119 U.S. 1, 27 , 28 S., 7 S.Ct. 75, 90; Seminole Nation v. United States, 316 U.S. 286, 296 , 297 S., 62 S.Ct. 1049, 1054.
[ Footnote 2 ] Act of February 28, 1902, 32 Stat. 43.
[ Footnote 3 ] 11 and 18 of the Act of April 26, 1906, 34 Stat. 137, 141, 144.
[ Footnote 4 ] Act of May 20, 1924, 43 Stat. 133 (Seminole), and Act of May 24, 1924, 43 Stat. 139 (Creek).
[ Footnote 5 ] See Note 1, ante.

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As many lenders who participate in the SBA’s 7(a) loan program are aware, each holder of at least 20% of the borrower, operating company, or eligible passive company must guarantee an SBA loan. If either the borrower, eligible passive company, or operating company is a trust or limited partnership, in many cases the lender will be required by SBA regulations to have the trustor (or settlor) or general partner guarantee the loan and execute SBA’s Form 148 Unlimited Guarantee. In the context of an SBA loan for which California real estate is pledged as collateral, the enforceability of the guarantee of a trustee of a California revocable trust or the general partner of a California limited partnership may present complex questions involving a complicated intersection of California law and SBA regulations.
California law is notoriously complex in the context of pursuing remedies against borrowers or guarantors when California real property is taken as collateral, especially if a lender elects to pursue a nonjudicial foreclosure. Section 726 of the California Code of Civil Procedure (the “One Action Rule”), Sections 580(a), 580(b), and 580(d) of the California Code of Civil Procedure (which contain California’s anti-deficiency laws), contain provisions related to the enforcement of obligations secured by real property, including provisions that relate to and specify the procedures for the sale of encumbered property, the application of proceeds, and the calculation, availability and procedures for obtaining a deficiency judgment. In many cases, California law provides for statutory waivers by guarantors of the rights and defenses in California Civil Code Sections 2787 to 2855 as well as rights which a guarantor may have because the Loan is secured by real property, including any rights or defenses based upon Section 580(a), 580(b), 580(d), or 726 of the California Code of Civil Procedure. In fact, the 7(a) Loan Authorization Boilerplate includes a form waiver of those rights as a requirement for inclusion in any guarantee where the guarantor is a resident of California.
Unfortunately, these statutory waivers have been found to be unenforceable where the guarantor is considered subject to “unlimited liability” for the underlying debt because of its status as the “alter ego” of another obligor. In such cases, courts have found there to be no “true guarantor” and have considered the guarantee a “sham guarantee.” Where the general partner of a limited partnership guarantees a loan either extended to or guaranteed by the limited partnership either the above-referenced waivers or the guaranty itself, or both, may be unenforceable. Riddle v. Lushing, 203 Cal.App.2d 831, 832-34 (1962). In addition, California courts have held that where an individual guarantor was also the trustor (or settlor), and beneficiary of a California trust which was also the borrower, the guarantee was found to be unenforceable on the grounds that the rights and defenses referenced above could not be effectively waived as the guarantor was the alter-ego of the borrower. Torrey Pines Bank v. Hoffman, 231 Cal.App.3d 308 (1991).
On the other hand, California’s One Action Rule, as well California’s anti-deficiency and other laws which could limit the enforceability of a guarantee, might be subject to federal preemption in the context of an SBA loan. A series of federal case law opinions, including U.S. v. Yazell, 382 US 341 (1966), U.S. v. Stewart, 523 F.2d 1070 (1975), U.S. v. MacKenzie, 510 F.2d 39 (9th Cir. 1975), U.S. v. Gish, 559 F.2d 572 (1977), United States v. Kimbell Foods, 440 U.S. 715 (1979), provides little consistent guidance on the question of whether or not a 7(a) lender seeking to pursue remedies against a California guarantor who is the general partner of a limited partnership, or the trustor (or settlor) of a revocable trust, may be prohibited from enforcing the guarantee if the lender has already pursued other remedies. It is worth noting that federal law at 13 CFR 101.106(d) currently states that “[n]o person, corporation, or organization that applies for and receives any benefit or assistance from SBA, or that offers any assurance or security upon which SBA relies for the granting of such benefit or assistance, is entitled to claim or assert any local or state law to defeat the obligation incurred in obtaining or assuring such Federal benefit or assistance.” Furthermore, the following language is included in all documents evidencing or securing the obligations under an SBA loan: “When SBA is the holder, the Note and this Guarantee will be construed and enforced under federal law, including SBA regulations. Lender or SBA may use state or local procedures for filing papers, recording documents, giving notice, foreclosing liens, and other purposes. By using such procedures, SBA does not waive any federal immunity from state or local control, penalty, tax, or liability. As to this Guarantee, Guarantor may not claim or assert any local or state law against SBA to deny any obligation, defeat any claim of SBA, or preempt federal law.” Accordingly, lenders should be mindful of the fact that enforcement of its California guarantees may be subject to challenge in certain circumstances; lenders should always seek the guidance of SBA-experienced counsel when closing, servicing, and liquidating an SBA loan, in addition to engaging experienced local counsel when pursuing any remedies under the terms of the relevant loan documents.
For more information on this and other issues related to SBA rules, policies, and regulations, contact the author at cevans@starfieldsmith.com or 215-542-7070.

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Here, in Decatur, Georgia, and for that matter in the Atlanta metropolitan area generally, kids start school very early and end very early. In Decatur’s case, they start school the first Monday in August and end right before Memorial Day. So, next week my daughter starts summer vacation. She is in for a pretty busy summer, lots of fun camps and her bat mitzvah. So, I thought I would get ahead of next week, which she has off, and get a blog entry up to cover next week.
Today’s blog entry talks about how much notice from an employee is necessary for triggering the interactive process. I have previously talked about it in some way in this blog entry. As mentioned in that blog entry, preventive law is an excellent way to go about it because getting a handle on the specific notice required is very difficult to do. As usual, the blog entry is divided into categories: Valdivia v. Township High School District 214; Ruggiero v. Mount Nittany Medical Center; and takeaways. The reader is free to focus on any or all of the sections.
Where an employee is unaware she suffers from a serious medical condition or is unable to communicate her illness to her employer, the notice requirement may be met indirectly. So, clear abnormalities in the employee’s behavior can constitute constructive notice of a serious health condition.
Observable changes in an employee’s condition or uncharacteristic or unusual conduct at work may provide an employer with adequate notice of a serious medical condition and eliminate the need for an express request for medical leave.
Plaintiff alleged that in July 2016, one month after transferring due to harassment at another school, she became extremely distraught and began crying regularly and uncontrollably at work. She cried uncontrollably multiple times to her supervisor who had known her since 2012. She also told her supervisor that she was overwhelmed, afraid, not sleeping or eating, and unsure if she could continue to work. Further, she also cried uncontrollably to two other employees at the high school telling them she was unsure whether she could continue to work for the defendant. The response of her supervisor was to tell her to decide whether or not to resign. After she resigned, she was hospitalized for four days and diagnosed with depression, anxiety disorder, panic disorder, and insomnia. Accordingly, plaintiff plausibly alleged the defendant was on notice that she may have been suffering from a serious health condition at the time she was asked to decide whether to resign, particularly since the supervisor had known the plaintiff for several years and would/should have realized that her behavior was a dramatic departure from her normal behavior. Regardless of the prior relationship, the behavior of the plaintiff was unusual for any employee.
Relying on a Seventh Circuit case involving depression, The fact that plaintiff did not know of her medical condition at the time of her resignation is not fatal to her FMLA claim. A plaintiff can be excused from giving direct notice where her medical condition prevents her from communicating the nature of her illness.
Just because a plaintiff conveys a healthcare professional’s initial findings of a medical impairment, that does not support an inference that the defendant was aware of a disability.
Simply informing the employer of a particular condition, is not the same thing as providing to the employer knowledge that the employee is substantially limited in some major life activity.
Vague and conclusory statements revealing an unspecified incapacity are not sufficient to put an employer on notice of its obligations under the ADA.
It is up to the employee to show that the employer knew of the employee’s substantial physical or mental limitations resulting from the diagnosed impairments.
For purposes of proving ADA discrimination, a distinction must be made between the employer’s knowledge of an employee’s disability versus an employer’s knowledge of any limitations experienced by the employee as a result of that disability. This distinction is critical because the ADA requires employers to reasonably accommodate limitations, not disabilities.
The determination of whether an individual has a disability is not necessarily based upon the name or diagnosis of the impairment the person has, but rather on the effect that impairment has on the life of the individual.
The hospital had good reasons, based upon a large body of medical evidence, for requiring the vaccination of all healthcare personnel.
Although the ADA does not explicitly refer to an interactive process, the Third Circuit has endorsed that concept as a means of furthering the ADA’s purposes because the interactive process allows the employee to consider accommodations he or she may not otherwise be aware of while simultaneously allowing the employer to better understand the potential range of jobs the employee can do.
Making out a prima facie case for a breakdown in the interactive process under the ADA involves showing: 1) the employer knew about the employee’s disability; 2) the employee requested accommodations or assistance for his or her disability; 3) the employer did not make a good faith effort to assist the employee in seeking accommodation; and 4) the employee could have been reasonably accommodated but for the employer’s lack of good faith.
In a footnote, the court noted that a claim brought under failure to accommodate does not require any evidence or inference of intentional discrimination. Therefore, McDonnell-Douglas (see this blog entry), is not used to evaluate failure to accommodate claims.
All that is required when it comes to the interactive process is that the employers make a good-faith effort to seek accommodations.
The facts show that the employer was willing to exempt the plaintiff from the vaccination requirement if she had provided evidence her alleged disability precluded her from obtaining the vaccine due to the medical contraindications indicated by the manufacturer. Had she furnished such evidence, the employer would have made an exception to the vaccination requirement.
The law does not mandate an employer or labor organization accommodate what amounts to a purely personal preference.
In a footnote, the court noted that the letter from the plaintiff’s doctor explained the plaintiff was worried about the side effects of the vaccine. That letter did not say that either her anxiety or her eosinophilic esophagitis were the medically-based reasons she could not take the vaccine. So, the court said plaintiff failed to appreciate the nature of the restriction required to qualify as a person with a disability under the ADA. After all, most people in the general population would agree that they feel the same discomfort as plaintiff when it comes to vaccines.
The interactive process does not demand that any particular accommodation be made by the employer.
The ADA was not intended to provide a way for a court to establish conditions of a person’s employment.
Congress intended that persons with disabilities have the same opportunities available to them as are available to persons without disabilities.
If it turns out that there is no existing job that the employee can perform with or without reasonable accommodations, then under the ADA, the company cannot be held liable.
Courts for years have struggled with just what is necessary for an employee to do in order to give the employer notice of his or her disability and trigger the interactive process. The decisions are difficult to get a handle on and are a bit all over the place.
Preventive law is critical. An employer is better off erring on the side that they have been put on notice rather than waiting for something more explicit. After all, magic words, as we have discussed here and here, are not necessary to trigger the interactive process.
Valdivia has not been the rule for courts when dealing with whether a person with a disability has presented sufficient information to trigger the interactive process. I also don’t think Valdivia will be persuasive when it comes to future ADA cases because it goes against the weight of previous ADA authority and because Valdivia involves the FMLA and not the ADA. Also, despite the reasoning of the court, plenty of facts exist so that an employer could reasonably be said to have been aware of a serious health condition/disability.
Interactive process cases break down into different ways. There are Circuits where the interactive process is a separate cause of action, but there are also Circuits where the interactive process is not a separate cause of action. If you are faced with such a case, be sure to check the approach your Circuit uses.
Where a job contains a prerequisite, such as a vaccination requirement, it is always helpful on the employer side if you have bona fide reasons backing up the need for that requirement.
Judge Brann raised a really important point when he said that the ADA requires employees to reasonably accommodate limitations and not disabilities. I must confess I hadn’t thought of it that way before, but it makes a great deal of sense. After all, the definition of a disability is a physical or mental impairment that substantially limits one or more of life’s major activities, and both parts have to be true for a disability to exist under the ADA.
When it comes to interactive process cases, remember it is the party that breaks down the interactive process that bears the consequences.
Personal preferences are not obligations imposed by the ADA.
While the amendment to the ADA have made it much easier to be considered a person with a disability, even those amendments go beyond the realm of simple discomfort/simple anxiety associated with various activities.
An employer must be on notice for both the disability and the substantial limitation on a major life activity before the obligation to start the interactive process is triggered.
This is an update to the blog entry that I previously posted. I am revising it because upon further review, it is NFL season after all (Go Falcons!; Go Cubs too!), I realized that confusion was created over when the amendments to the ADA went into effect versus when the final regulations of the ADA went into effect and what that all means. So, what appears below is a revised blog entry taking into account all of that. I have divided the blog entry into categories: introduction; initial thoughts on the complaint; let’s have some fun; moving away from the hypothetical, confusion still exists; other thoughts; and concluding thoughts. I am not sure how the reader of this blog entry could only read certain categories and not the whole thing (excepting III maybe), but the reader may find the categories helpful for understanding the structure of the entry.
Previously, I had commented upon the EEOC regulations dealing with accommodating pregnancy. After that blog entry, the United States Supreme Court weighed in on that with Young v. UPS . You can find that blog entry as well as a mention of Young v. UPS in the comments section associated with that blog entry here. I then came across this case, which Robin Shea then wrote a great blog entry on, which can be found here (I sent a blurb about the case along to Robin, but the complaint itself I got from Robin’s blog entry). Robin’s blog entry is great as usual, but I thought I would share some of my own thoughts as well (especially since Robin convinced me that people might be interested in me doing so). So here goes.
1. According to the complaint, Landis Communities and Landis Homes Retirement Community are an integrated enterprise maintaining interrelated operations, common management, centralized control of labor relations, as well as common ownership and financial control. They are an organization that manages three senior housing communities and provide eldercare services in Lancaster County Pennsylvania.
2. The occurrences occurred in April 2010 and in March 2011. This seems strange for a couple of reasons (Robin also thought it strange). First, before someone can go to court to file a claim for disability discrimination in employment, they have to exhaust administrative remedies first. That means, they have to file a claim with the EEOC or an equivalent state agency. If there is no equivalent state agency, the claims have to be filed within 180 days of the occurrence. If there is an equivalent state agency (which Pennsylvania apparently is), the deadline gets extended to considerably longer, 300 days. In either event, the right to sue letter was issued by the EEOC in 2015. As Robin points out, something is off here.
1. If the incidents had occurred in 2008 and 2009, the analysis would go like this: First, the ADAAA didn’t go into effect until January 2009. Second, Young v. UPS is a recent case. So, the first question is with respect to a hypothetical occurrence in 2008, would the plaintiff have a disability? Since our hypothetical occurrence occurred in 2008, the rules would be analyzed under the rules in effect prior to the ADAAA. That would mean analyzing whether the plaintiff has a physical or mental impairment that substantially limits a major life activity as it was then analyzed. That in turn, means analyzing whether the plaintiff was prevented or severely restricted from performing a major life activity per Toyota Motor Manufacturing Kentucky v. Williams. It also means asking per that same case whether the major life activity was of central importance to most people’s daily lives. In this particular case, the plaintiff had an incompetent cervix (Robin has an excellent link to what that condition is in her blog entry, which I am posting here for reference).
2. We know from Bragdon v. Abbott, which can be found here, that reproduction is a major life activity. From reading a description of incompetent cervix, it is pretty clear that without surgical intervention, such a condition would prevent or severely restrict a person from becoming pregnant. So, prior to January 2009, a good argument exists that the plaintiff with a hypothetical occurrence in 2008 had a disability under the ADA as it was defined prior to the amendments. But here’s the thing: she requested the accommodation after she had surgery relating to repairing the incompetent cervix. Prior to the amendments to the ADA, the Supreme Court had said in Sutton v. United Airlines , here,that mitigating measures must be factored into the analysis as to whether a person had a disability. So, with respect to a hypothetical occurrence in 2008, the question would become whether she was severely prevented or restricted from reproducing after the surgery? Sutton also talks about how temporary disabilities are not protected by the ADA. In short, with respect to a claim involving the occurrence before January 2009, whether a plaintiff on these facts had a disability is a bit of a nightmare. It means asking whether she was prevented or severely restricted from performing a major life activity (assuming that is the standard that would apply since Toyota explicitly focused on manual tasks. Even so, most courts were extending this definition across disabilities), in this case reproduction, after the surgery since there appeared to be no issue prior to the surgery. It also means asking whether the lifting restriction she requested was for a temporary disability as it was then defined.
1. Even though the ADA, the amendment to the ADA went into effect January 2009, the facts of this case still have plenty of confusion to deal with. The reason being that the EEOC took over two years to publish the final regulations implementing the amendments to the ADA. Those regulations were published on March 25, 2011 and effective May 24, 2011.
2. If you look at the time frame of the occurrences in the complaint, the first occurrence occurred on April 26, 2010, a little more than one full year before the final regulations were published. The second and third occurrences (the advice of the termination already having happened and the date she was actually terminated), occurred on April 12, 2011, and on March 31, 2011, respectively. The 2011 dates dates are after the final regulations were published, but before they became effective. That means, for all of the dates, you are still left with the question of just how the definitional terms would be defined because the final regulations were either not published or not in effect. Absolutely, you have to start with the amendment to the ADA itself but since the regulations were either not published or not in effect, you arguably would only have the statute to go by. That means you would know that mitigating measures are not factored in. You would also know that reproduction would be a major life activity. However, you would not know what it means to be substantially limited in a major life activity. You also would not know how temporary disabilities might be handled. Therefore, because of the timing of the federal regulation, it is possible that the defense could argue that the EEOC final regulations do not apply in this case and that a court would have to look at the statute itself with respect to determining what the definitional terms mean.
1. The complaint does say that the defendant had a policy or practice of accommodating lifting restrictions of non-pregnant employees similar in their ability or inability to work. However, this policy was in effect long before the decision came down from the Supremes in Young v. UPS. Hard for me to believe that Young would be retroactive.
2. If the final regulations issued by the EEOC do not apply to this case because of the timing of the occurrences, an argument can be made that the plaintiff did not have a disability as defined by the ADA as amended, however, she doesn’t need a disability if she is alleging that she was retaliated against for asserting rights under the ADA. The complaint alleges that the employer placed the plaintiff on an unpaid, indefinite leave of absence on the same day that she submitted her reasonable accommodation request. If that is true, it certainly opens up the employer to a retaliation claim regardless of whether the plaintiff had a disability. Of course, assuming a retaliation claim, whether the plaintiff is able to get compensatory and punitive damages is a completely different question as we discussed in this blog entry.
3. The complaint alleges that starting in April 2010, the plaintiff attempted to engage in the interactive process with the defendants regarding her ability to continue working with reasonable accommodations, but the defendants rebuffed those efforts and failed to offer any reasonable, effective alternative that would allow her to continue working. This also opens up the employer to a failure to engage in an interactive process claim, which depending upon the Circuit a person is in can be a separate cause of action. Regardless of whether such a separate cause of action exists, it also opens up the employer to a claim of terminating the interactive process and subjecting them to liability that way as well. That is, the employer has the obligation to engage in the interactive process once the person with a disability makes that request. The general rule is that the party stopping the interactive process bears the consequences.
4. In April 2010, the complaint alleges that the defendant told the plaintiff to reapply for her old positions after she gave birth and was able to return to work without restrictions. If this allegation is true, the employer has a problem because 100% return to work policies are not kosher. For that matter, that was my view prior to the amendment to the ADA as well (many editions of my book, Understanding the ADA, prior to the amendments act stated as much. Also, readers may want to check out this blog entry on 100% return to work policies).
5. The complaint alleges that in March 2011, the plaintiff applied for a staff nurse and a nurse supervisor position. One month later, the defendants advised her that she had been terminated effective March 31, 2011. Furthermore, she was told by the defendant that they would not consider her for the for the positions which she applied because defendants had no notice that the previous lifting restrictions had ended.
6. The employer told the plaintiff that she was terminated effective March 31, 2011, but she was being given that information on April 12, 2011, that the employer would not reconsider her for position for which she applied because they had no notice that the lifting restrictions had ended. The key here is that she was terminated and now because she was terminated and she has an application in after her termination, she is no longer an employee of the company. That means, the argument is created, which is an argument being made by the EEOC in this complaint, that the employer is making a prohibited pre-employment medical/disability related inquiry. If she had not been terminated, the employer might have been able to argue that the inquiry was job-related and consistent with business necessity, concepts we discussed in this blog entry, but the termination preceded being told the information about the lifting restrictions not being lifted and that such lifting was a necessity prior to being considered for any job that she had applied for. Another item raised by this is whether every job that the plaintiff was applying for had as their essential functions lifting more than 25 pounds, and whether if so, whether that particular essential function could be done with or without reasonable accommodations.
1. In short, the length of time between when the occurrence happened and when the EEOC is stepping in is a bit problematic.
2. Also, even assuming no issue there with respect to the filing of the EEOC charge, the fact that the adverse employment actions occurred before the final regulations of the EEOC were either published or went into effect makes things a bit of a nightmare as that means the meaning of the definitional terms with respect to this case is uncertain.
3. A retaliation claim would seem to be a distinct possibility as is a claim dealing with prohibited pre-employment disability related inquiries.
3. Finally, this case becomes incredibly complex as befitting the complicated law that the ADA is. There would seem to be good reasons, based upon what we have discussed in this blog entry, why both sides would want to settle this case. It will be interesting to follow developments.

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