Reply Brief — Sanger-Harris v. Richards

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supreme Uourt, U

2s ee

JUL 161987

JOSEPH F. SPANIOL. JR.

0.

)

IN THE

Supreme Court of the United States

OcTOBER TERM, 1986

No. 86-1937 \5)

SANGER-HARRIS, A Division of Federated Department

Stores, Inc.,

Petitioner,

v.

ANN RICHARDS, Treasurer of the State of Texas,

Respondent.

On Petition for a Writ of Certiorari

To the United States Court of Appeals

for the Fifth Circuit

PETITIONER’S REPLY TO RESPONDENT'S BRIEF

IN OPPOSITION TO PETITION FOR A

WRIT OF CERTIORARI

.

CHARLES J. SULLIVAN

Counsel of Record

5005 Woodway

P.O. Box 2482

Houston, Texas 77252

(713) 871-1185

ANTHONY J. SADBERRY

5005 Woodway

P.O. Box 2482

Houston, Texas 77252

(713) 871-1185

Attorneys for Petitioner

-—-

Bee Acana ia ae

TABLE OF CONTENTS

eee ES ie a hr i

I 50 ooh rl 8 a Nie a Es cal ii

Petitioner’s Response to Respondent’s Reasons for

EE ons heed aay a ee ek A Whee ey a 3

**

TABLE OF AUTHORITIES

PAGE

Cafeteria and Restaurant Workers Unions v. McElroy,

367 US. Wb, 6 (0) .. ikke 5

Ex parte Pennsylvania Co., 137 U.S. 451 (1890) ...... 3, 4, 6

Getty Oil Co. v. Richards, No. C-85-335, (S.D.Tex.

pS | er Be et Sit Re 6

Gravitt v. Southwestern Bell Telephone Co., 430 US.

Pci 0) 2 | Pn wer eT eeereN Ey errs Poe 3, 4, 6

Heniford v. American Motor Sales Corp., 47\ F.Supp.

Salk, Bae CER. TOPO on cs cn ica nen beeen 4, 5,6

Joint Anti-Fascist Refugee Committee v. McGrath, 34}

U.S. 123, 162 (1951) (Frankfurter, J., concurring) .. 5

McVeigh v. United States, 78 U.S. (11 Wall) 259, 267

BRO rarest ah ea 7

Marketing Showcase, Inc. v. Alberto-Culver Co., 445

F Supp. 755, 760 (S.D. N.Y. 1978) ..........5.05. 4,6

Matthews v. Eldridge, 424 U.S. 319 (1976) .......... 5

Morrissey v. Brewer, 408 U.S. 471, 481 (1972) ....... 5

Silverthorne Lumber Co. v. United States, 251 US.

Se See COPD ook CROKE eee 7

Thermtron Products, Inc. v. Hermansdorfer, 423 U.S.

SUID 656 eek Wc ink 6 eae 3, 4, 6

Volvo Corporation of America v. Schwarzer, 429 U.S.

SROs COW OE. oa occ enccakdseaku eee eee 3, 4, 6

Wong Sun v. United States, 371 U.S. 471, 484 (1963) . 7

CONSTITUTIONAL PROVISIONS

fh Geo. ARN mine! ee 4

STATUTES

TEX. REV. CIV. STAT. ANN. Article 3272a (Vernon

WED 66 kek het wa eC ee l

TEXAS PROP. CODE ANN,., §§ 71-75 ............. 2

Re Oe |} ee ee te ot 4,5

IN THE

Supreme Qourt of the United States

OCTOBER TERM, 1986

36-19

No. 97. 76 ie ar me

SANGER-HARRIS, A Division of Federated Department

Stores, Inc.,

Petitioner,

V.

ANN RICHARDS, Treasurer of the State of Texas,

Respondent.

PETITIONER’S REPLY TO RESPONDENT?’S BRIEF

IN OPPOSITION TO PETITION FOR A WRIT OF

CERTIORARI TO THE UNITED STATES COURT OF

APPEALS FOR THE FIFTH CIRCUIT

TO THE HONORABLE JUSTICES OF THE

SUPREME COURT:

NOW COMES Sanger-Harris, a Division of Federated

Department Stores, Inc., Petitioner, by and through its attorney,

Charles J. Sullivan, and files this Response to the Respondent’s

Brief in Opposition to Petition for a Writ of Certiorari to the

United States Court of Appeals for the Fifth Circuit.

CLARIFICATION OF FACTUAL CONTENTIONS

OF THE PARTIES

A. The Petitioner has offered to make available for audit

books and records of the Petitioner for relevant time

periods.

Texas enacted its statute pertaining to the escheat of personal

property in 1961, ie., TEX. REV. CIV. STAT. ANN. Article

3272a (Vernon 1961). The Petitioner timely filed the reports

required under Texas’ escheat laws, which reports were accepted

2

as filed or not examined by the State of Texas. In 1986 the

Respondent, citing Sections 71-75 of the Texas Property Code,

which became effective September |, 1985, requested permission

to have an unlimited audit of the Petitioner’s books and records,

i.e., books and records back to 1961. The Petitioner declined to

make available for audit its books and records for periods prior

to September 1, 1981,' which fact the Respondent acknowledged

in Paragraph IV of her declaratory judgment action filed on

July 15, 1986 in the district court of Travis County, Texas.’

B. Other.

On July 28, 1986 the United States District Court for the

Southern District of Texas — Houston Division denied a tempo-

rary restraining order/preliminary injunction in Federated

Department Stores v. Ann Richards, Cause No. H-86-2759 filed

on July 19, 1986 and issued its confirmatory written order on

August 7, 1986. The Court thereafter dismissed Cause No.

H-86-2759 on March 25, 1987.

‘ The dormancy period under the Texas Escheat Act was seven years

until September 1, 1985 at which time the dormancy period

became three years. The decisions in Southern Pacific Transport

Co. v. Texas, 380 S.W.2d 123 (Tex.Civ.App.-Houston 1964, writ

ref'd) and Shell Oil Co. v. Texas, 442 S.W.2d 457 (Tex.Civ.App.-

Houston [14th Dist.] 1969, writ refd. n.r.e.) established the rule of

law that claims against a debtor that were barred by a statute of

limitations shorter than the seven year dormancy period of the

Texas Escheat Act were not subject to escheat to Texas for the

reason that Texas’ escheat claim against the debtor was unenforce-

able just as the original creditor’s claim was unenforceable.

? The filing date reference to footnote No. 2 in the Petition for Certi-

orari in respect to Richards v. Sanger-Harris, No. 400,639, 126th

District Court of Texas was incorrectly stated as October 3, 1984.

The correct filing date is July 15, 1986.

3

PETITIONER’S RESPONSE TO RESPONDENT’S

REASONS FOR DENYING WRIT

J. The Respondent seeks to ignore the due process guaranty of

the Fifth Amendment.

The Respondent in her Brief in Opposition ignores:

1) the fact that it was the Respondent’s actions that caused

the absence of notice to the Petitioner and the denial to the

Petitioner of an opportunity to be heard in respect ty the

remand motion; and

2) the due process consequences of the absence of notice to

and opportunity for the Petitioner to be heard in respect to

the remand motion.

The Respondent’s election to avoid addressing the due process

issue in her Brief in Opposition, is not dispositive of the due

process issue. It constitutes an implied confession and avoidance,

i.€., an admission that there is a problem and an attempt to avoid

it under a “no new question” and a “no discretionary review”

standard.

2. The issuance of a remand order upon the motion of a party

without notice/hearing te the opposing party is a remand

question not previously addressed by the Court.

The Respondent urges this Court to deny the petition for writ

of certiorari on the grounds that no new question has been

presented to the Court for resolution. The due process issue of

absence of notice and the granting of a hearing to the opposing

party in a removal/remand situation was not presented to or

decided by this Court in Ex parte Pennsylvania Co., 137 US.

451 (1890); Thermtron Products, Inc. v. Hermansdorfer, 423

U.S. 336 (1976); Volvo Corporation of America v. Schwarzer,

429 U.S. 1331 (1976); or Gravitt v. Southwestern Bell Tele-

phone Co., 430 U.S. 723 (1977).

4

A non-resident defendant’s statutory right to remove a case

from state court is a substantial right and privilege to secure a

presumably unprejudiced forum. Heniford v. American Motor

Sales Corp., 471 F.Supp. 328, 335 (D.S.C.-1979); Marketing

Showcase Inc. v. Alberto-Culver Co., 445 F.Supp. 755, 760 }

(S.D. N.Y. 1978).

The Respondent has not challenged the Petitioner's contention

that the remand order was issued at the Respondent's request

without the Petitioner having notice of the Respondent's remand

motion or being extended an opportunity to be heard in respect

to such motion. The Respondent has neither assumed, nor dis-

Claimed responsibility for the unfair consequences of her failure

to comply with the service requirement of FED.R.CIV.P. S(a),

but instead has adopted the position that the issuance of the

remand order is a fait accompli which falls within the ambit of

this Court’s prior decisions in the Pennsylvania, Thermtron.,

Volvo and Gravitt cases.

The Respondent's “new question” argument does not address

the question of the overriding effect of the Fifth Amendment's

guaranty of due process. Since its adoption on December 15,

1791, the Fifth Amendment to the United States Constitution

with its guaranty of due process has been a limitation applicable

to every statute and a legal beacon relied upon by this Court in

delineating permissible and impermissible conduct. The Respon-

dent does not suggest that the due process requirement of notice

and hearing in removal/remand cases is new. Instead the

Respondent stresses the teachings of remand cases which did not

involve due process notice and hearing questions.

The due process issue in this case is the fact that the Petitioner |

was not extended due process at a//. The issue simply stated is \

“Was the Petitioner denied due process when the trial court

terminated the removal of the case upon the motion of the

Respondent who failed to give the Petitioner notice of the filing

aaa sincacianaitith es neaemaniniiiiaiaatiiiitile

of the remand motion and did not seek a hearing at which the

Petitioner could be heard?”

The due process concerns in this case do not revolve around a

“technical conception with a fixed context unrelated to time,

place and circumstance™ or the fashioning of flexible “proce-

dural protections as the particular situation demands.” Joint

Anti-Fascist Refuge Committee v. McGrath, 341 US. 123, 162

(1951) (Frankfurter, J. concurring); Cafeteria and Restaurant

Workers Unions v. McElroy, 367 U.S. 886, 895 (1961);

Morrissey \¥. Brewer, 408 U.S. 471, 481 (1972)

At some future date if the Fifth Circuit's decision remains

unchanged, the courts may be confronted with questions as to

whether there had been deception and an intentional failure to

serve notice on the opposing party pursuant to FED.R.CIV.P

5(a) on the premise that remand orders were not reviewable.

By her citation of Matthews v. Eldridge, 424 US. 319

* (1976), the Respondent indicates her understanding that the

Petitioner was entitled to notice and a fair hearing. It is not

clear, however, how the Respondent can in a “mistake or inad-

vertence”™ situation’, adopt a fait accompli attitude and cite as

justification for her position rules developed in cases that did not

involve a due process notice/hearing issuc.

The question before the Court is not whether the failure to

give notice and extend an opportunity for hearing is the result of

intentional, inadvertent or mistaken conduct, but instead is

whether a remand order issued at the behest of a party is fatally

defective when notice to and an opportunity for the opposing

party to be heard is absent. The latter question is new and has

not been encompassed in this Court's prior decisions.

* The Petitioner has accepted and acted upon the proposition that the

false/incorrect certification as to service of the remand motion

upon the Petitioner was the result of “mistake or inadvertence” and

not the result of crafty trial tactics. Heniford at 338.

6

3. Discretionary review is not only appropriate but is essen-

tial to the on-going functioning of our legal processes.

The Respondent suggests that there is no special or important

reason why this Court should exercise its discretion and grant its

writ of certiorari.

The proper application of the due process guaranty in and of

itself is a special responsibility. The guaranty is neither tentative

nor discretionary. The gua~anty is part of the fundamental fab-

ric of our legal system.

The Fifth Circuit has held in this case that a constitutionally

deficient remand order is not reviewable pursuant to the prohibi-

tions outlined in the Thermtron case. It is important in light of

the Fifth Circuit’s decision that this Court exercise its super-

visory jurisdiction tc make it clear that the decisions in the Penn-

sylvania, Thermtron, Volvo and Gravitt cases did not exclude

due process requirements from removal/remand cases or create

a due process exception for removal/remand cases.

The due process issue in this case is not one involving the

adequacy of due process at the state court level. The issue is

whether the complete absence of notice to the Petitioner with the

resultant denial to the Petitioner of the right to be heard in

respect to the remand motion resulted in the denial to the Peti-

tioner of a substantial statutory right and privilege, that is, the

right, as a non-resident defendant, of having its case heard in a

presumably impartial, unprejudiced tribunal. Heniford at 335;

Marketing Showcase at 760.

Just as the non-resident Plaintiffs in the Getty case concluded

that trial of their challenge to Texas’ escheat laws would be best

heard in federal court, the Petitioner, a non-resident defendant,

determined that the resolution of its dispute with the Respon-

dent about the Respondent’s audit rights would be best accom;

plished in federal court. After the Petitioner elected to avail

itself of its statutory right of removal, the Respondent, through

mistake or inadvertence failed to give notice to the Petitioner of

the filing of the remand motion which placed in operation the

judicial processes which resulted in the remanding of the case

without the non-resident Petitioner being heard in respect to the

removal/remand situation

The failure by the Respondent to give the Petitioner notice of

the filing of the remand motion accompanied by the trial court's

action on such motion without giving the Petitioner an opportu-

nity to be heard violated “the first principle of the social com-

pact and of the right administration of justice.” McVeigh v.

United States, 78 U.S. (11 Wall) 259, 267 (1870).

The double lament of the Respondent that there has been

delay in the resolution of the issue raised by the Respondent's

declaratory judgment action and that “it is not time for the

Respondent to have her day in court” ignores the fact that the

problem arose because of the Respondent's false/incorrect certi-

fication that her remand motion had been served upon the Peti-

tioner. The Respondent’s fait accompli reliance upon the

issuance of a remand order is not justification for excluding due

process considerations from or for carving out a due process

exception in a removal/remand case. Just as evidence obtained

in a constitutionally deficient manner must be excluded to pre-

vent the use of the “fruits of the agents’ unlawful action’, the

remand order in this case obtained pursuant to a constitutionally

deficient process should be reviewable and should be reversed.

Silverthorne Lumber Co. v. United States, 251 U.S. 385, 392

(1920), Wong Sun v. United States, 371 U.S. 471, 484 (1963).

CONCLUSION

There can be no due process for a litigant in the absence of

notice and an opportunity for a meaningful hearing.

This case should not be allowed to stand in its present form. If

the Fifth Circuit’s decision is allowed to stand without change or

modification, the foundation will have been laid for future due

8

process attacks to the effect that since there is a known

removal/remand exception to the due process guaranty, there

must be other exceptions which are simply awaiting

identification.

In situations involving improper practices there will be the

unsavory problem of proving that the due process guaranty may

have been compromised by fraud, deception, etc.

WHEREFORE, it is prayed that this Court exercise its super-

visory authority, reverse the decisions of the Fifth Circuit and

the trial court and require the trial court to conduct a hearing in

respect to the remand motion.

Dated July 4, 1987.

Respectfully submitted,

CHARLES J.

Counsel of Record for Petitioner

5005 Woodway

P.O. Box 2482

Houston, Texas 77252

(713) ny Ke Sa

ANTHONY J. : by <$

5005 W

P.O. Box 2482

Houston, Texas 77252

(713) 871-1185

WILLIAM F. HENRI

SULLIVAN, KING & SABOM,

a professional corporation

5005 Woodway

P.O. Box 2482

Houston, Texas 77252

(713) 871-1185

Of Counsel

CERTIFICATE OF SERVICE

| hereby certify that service of the Petitioner’s Reply to

Respondent's Brief in Opposition to Petition for a Writ of Certi-

orari to the United States Court of Appeals for the Fifth Circuit

has been made on opposing counsel by mailing a copy, certified

mail, return receipt requested, to Mr. Jerry L. Benedict and to

Mr. Patrick J. Wiseman, Office of the Attorney General, P.O.

Box 12548, Austin, Texas 78711-2548 this /Z.~ day of July,

Chile

CHARLES J.