United States v. State of California

• Decision Date: 12 November 1974
• Docket Number: 9-14.,No. 9-13,9-13
• Citation: 504 F.2d 750
• Parties: UNITED STATES of America, Plaintiff-Appellee, v. The STATE OF CALIFORNIA et al., Defendants-Appellants. and James Coan and the California State Employees' Association, Intervenors-Appellants.
• Court: U.S. Temporary Emergency Court of Appeals Court of Appeals

504 F.2d 750

UNITED STATES of America, Plaintiff-Appellee, v. The STATE OF CALIFORNIA et al., Defendants-Appellants. and James Coan and the California State Employees' Association, Intervenors-Appellants.

Nos. 9-13, 9-14.

Temporary Emergency Court of Appeals.

September 19, 1974.

Rehearing Denied November 12, 1974.

Talmadge R. Jones, Deputy Atty. Gen. of Cal., Sacramento, Cal. (Evelle J. Younger, Atty. Gen., and Willard A. Shank, Asst. Atty. Gen., with him on the brief), for defendants-appellants.

Loren E. McMaster, California State Employees' Assn., Sacramento, Cal., for intervenors-appellants.

William C. White, Dept. of Justice, Washington, D. C. (Carla A. Hills, Asst. Atty. Gen., Department of Justice, New York City, with him on the brief), for plaintiff-appellee.

Before CARTER, CHRISTENSEN and ESTES, Judges.

ESTES, Judge.

This is an appeal under Section 211 of the Economic Stabilization Act of 1970, as amended (the Act), by defendants from an order of the United States District Court for the Eastern District of California granting plaintiff, the United States of America, a preliminary injunction forbidding defendant California to pay wage and salary increases which were disallowed by order of the Cost of Living Council (CLC) issued August 29, 1973 during the existence of the Economic Stabilization Program.¹

On June 30, 1973 the Governor of the State of California signed into law the California State Budget Act of 1973,² which was to become effective on July 1, 1973. This legislation provided for pay increases varying from 6.8 to 11.3 percent for various state employees for the period of July 1973 through June 1974. The CLC challenged the amount of the increases and, after receiving submissions from the parties and holding a hearing, on August 29, 1973 issued its decision and order allowing the 6.8 percent increases but limiting the other increases to seven percent. A formal request for review was filed by defendant State of California and denied by the CLC on February 1, 1974. Throughout these proceedings California and its officials have refrained from paying out the disallowed portions of the legislated increases.³

On July 12, 1973 defendants-intervenors James Coan and the California State Employees' Association (CSEA) sued California in the California Supreme Court, seeking a writ of mandate which would direct the state officials to pay the entire increases. On April 19, 1974 the California Supreme Court filed its decision directing the state officials to comply with the State Budget Act. Coan v. State of California, 11 Cal.3d 286, 113 Cal.Rptr. 187, 520 P.2d 1003 (1974). That decision became final and effective on May 19, 1974. The Economic Stabilization Program ended on April 30, 1974, except as saved by Section 218 of the Economic Stabilization Act or by the general saving statute, 1 U.S.C. § 109. See infra.

On May 8, 1974 the United States filed its complaint in federal court⁴ seeking injunctive relief to enjoin California from implementing the State Budget Act in disregard of the August 29, 1973 order of the CLC. After permitting James Coan and CSEA to intervene as parties defendant, the district court on May 17, 1974 issued its order granting the preliminary injunction sought. On June 17, 1974 the defendants filed with this Court separate notices of appeal, which were consolidated for appellate consideration.

Appellants first argue that the Economic Stabilization Act was not intended by Congress to be applied to states, and that even if such intention is found, the Act cannot be applied to the states under the Commerce Clause so as to regulate the exercise of powers reserved to the states under the Tenth Amendment, when such exercise has no rational connection with interstate commerce. Appellants would thus have this Court adopt the reasoning of Coan v. State of California, supra, and Fry v. Ferguson, 34 Ohio St.2d 252, 298 N.E.2d 129 (1973). This Court has, however, resolved these issues in favor of Congress' intent and power to regulate wages paid and charges received by states. Murphy v. O'Brien, 485 F.2d 671 (Em.App.1973) ; United States v. State of Ohio, 487 F.2d 936 (Em.App. 1973), cert. granted sub nom. Fry v. United States, 415 U.S. 912, 94 S.Ct. 1406, 39 L.Ed.2d 466 (1974).

Second, appellants state that the subject matter jurisdiction of the district court and this Court is the principal inquiry on this appeal. This action was filed on May 8, 1974, one week after the expiration of economic controls. Section 218 of the Economic Stabilization Act provides as follows:

The authority to issue and enforce orders and regulations under this title expires at midnight April 30, 1974, but such expiration shall not affect any action or pending proceedings, civil or criminal, not finally determined on such date, nor any action or proceeding based upon any act committed prior to May 1, 1974.

The August 29, 1973 decision and order of the CLC forbids the state to pay a wage and salary increase in excess of seven percent for the period in question. However, by the explicit terms of Section 218, the CLC and the courts have lost their authority to enforce the order on April 30, 1974, unless one of the two stated exceptions of Section 218 is applicable, or unless such authority is extended by the general saving statute, 1 U.S. C. § 109.

Before discussing in detail the specific arguments of the Government as to how these exceptions might be held to apply, it is helpful to consider the judicial interpretation of "saving clauses" other than Section 218. In Talbot v. Woods, 164 F.2d 493 (Em.App.1947), the Emergency Court of Appeals considered Section 1(b) of the Emergency Price Control Act of 1942, which read in pertinent part as follows:

The provisions of this Act, and all regulations, orders, price schedules, and requirements thereunder, shall terminate on June 30, 1947 * * *; except that as to offenses committed, or rights or liabilities incurred, prior to such termination date, the provisions of this Act and such regulations, orders, price schedules, and requirements shall be treated as still remaining in force for the purpose of sustaining any proper suit, action, or prosecution with respect to any such right, liability, or offense.

Judge Magruder, writing for a unanimous court, observed that Section 1(b), permitting "suit, action, or prosecution" to be maintained, "obviously refers to civil and criminal enforcement proceedings predicated upon past violations alleged to have been committed while the Act and regulations thereunder were still in effect . . .." 164 F.2d at 496 (emphasis added). Since it was undisputed that there was no pending civil or criminal enforcement action based on a past violation of an order, a judgment was entered ordering the dismissal of the complaint for lack of jurisdiction. In accord, see Standard Kosher Poultry v. Clark, 163 F.2d 430 (Em.App.1947).

In Stanolind Oil & Gas Co. v. Freehill, 205 F.2d 305 (Em.App.1953), Stanolind and others sought review of an order of the Director of Price Stabilization which fixed the ceiling price of natural gas produced from an oil field in which the plaintiffs held an interest. Subsequent to the filing of the complaint, the Director issued an order exempting sales of natural gas from price ceilings. The Emergency Court of Appeals, interpreting the Defense Production Act of 1950,⁵ held that the complaint would be dismissed because the plaintiffs made "no claim that they have violated any of the provisions of the regulations or orders at issue in suit, or that they are subject to enforcement action therefor; nor that there is any enforcement suit pending or contemplated for any such violation." 205 F.2d at 306 (emphasis added).

In Allen v. Grand Central Aircraft Co., 347 U.S. 535, 74 S.Ct. 745, 98 L.Ed. 933 (1953), the United States Supreme Court considered the saving clauses of the Stabilization Act of 1942 and the Defense Production Act of 1950. The Court found the provisions to be without any material difference,⁶ and held that the language of the 1950 statute "should receive the same construction now that was placed on similar language in the Stabilization Act of 1942." 347 U.S. at 551, 74 S.Ct. at 754. In addition, the Court applied the general saving statute, 1 U.S.C. § 109, which provided in pertinent part as follows:⁷

The expiration of a temporary statute shall not have the effect to release or extinguish any penalty, forfeiture, or liability incurred under such statute, unless the temporary statute shall so expressly provide, and such statute shall be treated as still remaining in force for the purpose of sustaining any proper action or prosecution for the enforcement of such penalty, forfeiture, or liability.

The Court decided that the "precise object of the general savings statute is to prevent the expiration of a temporary statute from cutting off appropriate measures to enforce the expired statute in relation to violations of it, or of regulations issued under it, occurring before its expiration." 347 U.S. at 554-555, 74 S.Ct. at 756 (emphasis added).

In response to this consistent line of authority, the Government is able to cite no cases which would permit it to bring this suit after the expiration date of the Act to enjoin California from now taking the action it properly refrained from taking during the existence of the Act. Nevertheless, the Government argues that this case can be brought within the exceptions to Section 218. This contention must be considered in light of two important rules of statutory construction: 1) jurisdictional statutes are to be strictly construed. "In construing a definite procedural provision we do well to stick close to the text and not import argumentative qualifications from broad, unexpressed claims of policy." Utah Junk Co. v. Porter, 328 U.S. 39, 44, 66 S.Ct. 889, 892, 90 L.Ed. 1071 (1946); 2) exceptions to the general provisions of a statute are also to be strictly...