UNITED STATES OF AMERICA, APPELLANT V. SPERRY CORPORATION AND SPERRY WORLD TRADE, INC. No. 88-952 In The Supreme Court Of The United States October Term, 1988 On Appeal From The United States Court Of Appeals For The Federal Circuit Reply Brief For The Appellant 1. Appellees ask this Court to affirm summarily the court of appeals' holding that Section 502 of the Foreign Relations Authorization Act for Fiscal Years 1986 and 1987 results in a taking of property for public use without just compensation. Section 502 requires the deduction of a modest fee from awards made to United States claimants by the Iran-United States Claims Tribunal, in order to reimburse the United States Government for expenses incurred in connection with the arbitration of claims of United States nationals against Iran and the maintenance of the Security Account out of which Tribunal awards to successful United States claimants are paid. It is evident, however, that the court of appeals' ruling cannot be reconciled with the decisions of this Court, and that the decision below holding an Act of Congress unconstitutional therefore warrants plenary review by this Court. a. Appellees' principal submission on the taking issue is that Section 502 is designed to require a few United States citizens to pay the costs of accomplishing the foreign policy goals of the United States -- costs that appellees believed should be borne by the Nation as a whole. See Mot. to Dis. or Aff. 14-19, 22-23. Contrary to appellees' contention (Mot. to Dis. or Aff. 15, 16, 22), however, their claim against Iran was not sacrificed as a "bargaining chip" to obtain the release of the hostages at the American Embassy in Tehran. The President of course would have had the power under the International Emergency Economic Powers Act (IEEPA), 50 U.S.C. 1701-1706 (1976 & Supp. III 1979), to transfer all frozen Iranian assets in the United States directly to Iran in order to obtain the release of the hostages, without assuring the availability of any of those assets to pay the claims of United States nationals against Iran and without furnishing any mechanism for the resolution of those claims. But the President instead negotiated an agreement with Iran that both fully protected the interests of United States claimants and secured the release of the hostages. Under that agreement, $1 billion of the frozen assets were placed in the Security Account to pay the meritorious claims of United States nationals and the Claims Tribunal was established at The Hague to provide a forum for the resolution of those claims, unimpeded by the various obstacles to recovery that many claimants faced in their suits against Iran in United States courts. See J.S. 4-7, 23; Dames & Moore v. Regan, 453 U.S. 654, 687 (1981). The 1 1/2% fee imposed by Section 502 -- which appellees concede (Mot. to Dis. or Aff. 14, 17, 19) is "modest()," "minimal," and a "small percentage()" of the Tribunal's awards to successful claimants -- serves to reimburse the United States for some of the costs it incurred in implementing that portion of the agreement with Iran that redounded to the particular benefit of appellees and other successful claimants. See J.S. 9. The Fifth Amendment does not require the public treasury to bear these costs of resolving and paying private claims. /1/ Appellees concede that the Constitution does not bar Congress from imposing a reasonable charge on persons who utilize specific governmental services (Mot. to Dis. or Aff. 19) and that they made "use of the Tribunal's procedures in disposing of (their) claim against Iran" (Mot. to Dis. or Aff. 6). These concessions are sufficient to support the modest user fee that was deducted from their award pursuant to Section 502. b. Appellees contend (Mot. to Dis. or Aff. 13, 16-17, 20 n.34), however, that Congress could not "diminish" their Tribunal awrd, even by a mere 1 1/2% to cover expenses, because appellees previously had a right to litigate their claim against Iran in United States courts without paying a comparable fee and because they had obtained pre-judgment attachments of Iranian assets in July 1980 to secure payment of that claim. This contention is without merit. Appellees had no property interest in having any particular forum, or a cost-free forum, for the adjudication of their claim. Statutes governing jurisdiction and judicial procedure, like those governing the assessment of taxes and fees and other regulatory measures, are subject to revision by Congress. Compare Bowen v. Public Agencies Opposed To Social Security Entrapment, 477 U.S. 41, 55 (1986); National Railroad Passenger Corp. v. Atchison, T. & S.F.R.R., 470 U.S. 451, 465-470 (1985); Bradley v. Richmond School Bd., 416 U.S. 696 (1974); United States v. Kras, 409 U.S. 434, 448-449 (1973). Accordingly, the court of appeals' holding that the 1 1/2% fee deducted from appellees' Tribunal award constituted a taking of their property without just compensation because appellees would not have been charged a user fee in federal district court (see J.S. App. 8a) squarely conflicts with this Court's precedents. A fortiori, appellees' request that this Court summarily affirm that holding is without merit. Similarly, appellees had no property interest, as against the United States, in their pre-judgment attachments of Iranian assets. Those attachments were obtained pursuant to a general license issued by the Treasury Department after all Iranian assets in the United States had been frozen (J.S. 3-4). Although appellees still do not acknowledge the point, this Court specifically held in Dames & Moore that such attachments were "revocable," "contingent," and "in every sense subordinate to the President's power under the IEEPA" (453 U.S. at 673 & n.5, 674 n.6) and that a claimant therefore "did not acquire any 'property' interest in its attachments of the sort that would support a constitutional claim for compensation" (id. at 674 n.6). Accordingly, the court of appeals' holding that Section 502 results in a taking of private property because appellees previously had secured attachments (see J.S. App. 7a-8a) squarely conflicts with Dames & Moore and, for this reason alone, a summary affirmance would be inappropriate. c. Contrary to appellees' further assertion (Mot. to Dis. or Aff. 18-19), this Court's conclusion in Webb's Fabulous Pharmacies, Inc. v. Beckwith, 449 U.S. 155, 164 (1980), that a taking had occurred under the "narrow circumstances" of that case does not support the same conclusion here. The finding of a taking in Webb's expressly rested on the premise that the county's retention of the interest earned on the deposited funds "was not a fee for services," because "any services obligation to the county was paid for and satisfied by the substantial fee charged pursuant to (Fla. Stat. Ann.) Section 28.24 and described specifically in that statute as a fee 'for services' by the clerk's office" (id. at 162 (emphasis added)). See id. at 164-165. Here, by contrast, the 1 1/2% deduction mandated by Section 502 explicitly is a fee for services, and there is no other statute under which such a fee is separately assessed. Thus, by acknowledging the validity of a fee charged for services rendered by a judicial tribunal, Webb's in fact strongly supports the constitutionality of Section 502. 2. Appellees argue (Mot. to Dis. or Aff. 23-25) that Section 502 violates the Due Process Clause because it "retroactively" imposes the fee on past Tribunal awards. As appellees acknowledge (Mot. to Dis. or Aff. 23), however, the standard for determining whether retroactive economic legislation comports with the Due Process Clause is whether Congress had a rational basis for the retroactive application. See, e. g., Pension Benefit Guaranty Corp. v. R.A. Gray & Co., 467 U.S. 717, 730 (1984). Here, the statutorily authorized fee was intended to remedy certain technical defects that the Claims Court's non-final decision had identified in the user fee that had been imposed by the Secretary of the Treasury under the Independent Offices Appropriation Act (IOAA), 31 U.S.C. 9701. See J.S. 8; J.S. App. 35a-41a. /2/ Such curative legislation is well within Congress's power. See, e.g., Charlotte Harbor & Northern R.R. v. Welles, 260 U.S. 8, 11-12 (1922); United States v. Heinszen & Co., 206 U.S. 370 (1907). /3/ 3. Appellees also err in contending (Mot. to Dis. or Aff. 25-28) that Section 502 violates the equal protection component of the Due Process Clause because no fee is charged to unsuccessful claimants. Where, as here, heightened scrutiny is not required, "'(a) statutory discrimination will not be set aside if any state of facts reasonably may be conceived to justify it.'" Bowen v. Gilliard, No. 86-509 (June 25, 1987), slip op. 13, quoting Dandridge v. Williams, 397 U.S. 471, 485 (1970). Here, the legislative history unquestionably reveals a state of facts reasonably justifying imposition of a fee only on successful claimants. The State Department advised Congress that if claimants would be charged a flat fee even if they did not ultimately prevail, claimants might be discouraged from seeking to settle their claims through the Tribunal in the first place. Moreover, Congress rationally could conclude that only successful claimants actually realize a sufficiently concrete benefit from the Tribunal's work to justify assessment of the fee, and only successful claimants utilize the special payment mechanism furnished by the Security Account and the Federal Reserve Bank of New York. See J.S. 17-18. 4. Appellees' final contention (Mot. to Dis. or Aff. 28-30) -- that Section 502 violates the Origination Clause of the Constitution -- is equally insubstantial. The Origination Clause provides: "All Bills for raising Revenue shall originate in the House of Representatives; but the Senate may propose or concur with Amendments as on other Bills" (Art. I, Section 7). As this Court has explained, "the practical construction of the Constitution and the history of the origin of the constitutional provision in question proves that revenue bills are those that levy taxes in the strict sense of the word, and are not bills for other purposes which may incidentally create revenue." Twin City Bank v. Nebeker, 167 U.S. 196, 202 (1897); Millard v. Roberts, 202 U.S. 429, 436-437 (1906). The purpose of the Foreign Relations Authorization Act as a whole was to authorize appropriations for the Department of State and related agencies for fiscal years 1986 and 1987. Title V of the Act (99 Stat. 437), of which Section 502 was a part, addressed several issues bearing on the adjudication of claims of United States nationals against Iran. 131 Cong. Rec. 12515-12516 (1985) (remarks of Sen. Evans). Moreover, the purpose of Section 502, even if considered alone, is to charge a fee for (and thereby defray the expenses of) particular governmental services, not to raise revenues to support the operation of the government generally. Compare Twin City Bank v. Nebeker, 167 U.S. at 203; Millard v. Roberts, 202 U. S. at 435-437. /4/ Section 502 therefore plainly does not "levy taxes in the strict sense of the word" (Twin City Bank v. Nebeker, 167 U.S. at 202), and in fact appellees elsewhere insist (Mot. to Dis. or Aff. 14) that "Congress never even purported to exercise its taxing power." Accordingly, Section 502 does not constitute a "Bill() for raising Revenue" within the meaning of the Origination Clause. For the foregoing reasons and those stated in the jurisdictional statement, it is respectfully submitted that probable jurisdiction should be noted. WILLIAM C. BRYSON Acting Solicitor General FEBRUARY 1989 /1/ This conclusion is reinforced by the fact that the claims of United States nationals against Iran had adverse consequences for the Nation as a whole, which rendered them especially amenable to regulation by the federal government. Cf. Miller v. Schoene, 276 U.S. 272 (1928); Hadacheck v. Sebastian, 239 U.S. 394 (1915). This Court recognized in Dames & Moore that "outstanding claims by nationals of one country against the government of another country are 'sources of friction' between the two sovereigns" (453 U.S. at 679, quoting United States v. Pink, 315 U.S. 203, 225 (1942)). The agreement that the President negotiated with Iran brought about a comprehensive process for the resolution of several "sources of friction," including the pendency of claims by appellees and other United States nationals against Iran. /2/ Congress not only has authorized Executive agencies to impose fees under the IOAA for services that benefit United States nationals, it also has repeatedly authorized the deduction of percentage fees from awards made to United States nationals in settlement of their claims against foreign sovereigns, as reimbursement to the United States for costs it incurred in settling those claims. See, e.g., 22 U.S.C. 1626( b), 1641a(a), 1644g. /3/ In addition, if Congress had applied the fee only prospectively, small claimants would have borne an undue burden because Iran insisted that the Tribunal hear large claims first. Iran Claims Legislation: Hearing Before the Senate Comm. on Foreign Relations, 99th Cong., 1st Sess. 120 (1985). /4/ The instant case was distinguished on this basis in United States v. Munoz-Flores, No. 86-5236 (9th Cir. Dec. 12, 1988), slip op. 15162-15163. The Ninth Circuit there held that the statutory authorization for a special assessment of $25 against an individual convicted of a misdemeanor (18 U.S.C. 3013(a)(1)(A) (Supp. IV 1986)) is unconstitutional under the Origination Clause. The United States has filed a petition for rehearing en banc in Munoz-Flores.