Reply Brief — South Dakota v. SDDS, Inc.

| Supreme Court, U.s.

FIEED

APR 29 1993

| MERICE OF THR pan

Jn the Supreme Court of the Qnited States

OCTOBER TERM, 1997

No. 97-1378

STATE OF SOUTH DAKOTA; WILLIAM J. JANKLOW,

as Governor; JOYCE HAZELTINE, as Secretary of State;

and MARK BARNETT, as Attorney General,

i Petitioners

SDDS, INc.,

Respondent.

On Petition for a Writ of Certiorari to the

Supreme Court of South Dakota

PETITIONER’S REPLY BRIEF

MARK W. BARNETT CHARLES ROTHFELD

Attorney General Counsel of Record

ROXANNE GIEDD MONICA B. GOLDBERG

Office of the Attorney Mayer, Brown & Platt

General 2000 Pennsylvania Avenue, N.W.

500 East Capitol Washington, D.C. 20006

Pierre, SD 57501 (202) 778-0616

GON) <AE eae BARRY FRIEDMAN

MICHAEL J. SCHAFFER DEBORAH PATTERSON

SANDRA K. HOGLAND Wyatt, Tarrant & Combs

Davenport, Evans, Hurwitz Citizens Plaza

& Smith, LLP Louisville, KY 40202

513 South Main Avenue (502) 589-5235

Sioux Falls, SD 57101-1030 (212) 998-6384

(605) 336-2880

WILLIAM P. FULLER

Woods, Fuller, Shultz &

Smith, P.C.

300 South Phillips Ave.,

Suite 300

Sioux Falls, SD 57117-5027

(605) 336-3890

TABLE OF CONTENTS

Page

A. The Court Has Jurisdiction To Hear This Case .... 2

B. The Court Below Decided The Federal Question

Eo ss Wack 40's dS koe SR Se 6

C. The Eighth Circuit’s Decision In Lenetree IV Was

Void For Lack Of Jurisdiction ............... 7

D. A State Court May Not Be Bound By A Federal-

Court Decision Issued In Violation Of The Eleventh

Si OR eg a gr 9

il

TABLE OF AUTHORITIES

Page

Cases

Atascadero State Hosp. v. Scanlon, 473 U.S. 234

CER eka k ee ak ba el ea ee 4

Bullington v. Missouri, 451 U.S. 430 (1981) ........ 4

Cox Broadcasting Corp. v. Cohn, 420 U.S. 469

CR eRe 355s nek ae eee ead 4 ck eA were

Durfee v. Duke, 375 U.S. 106 (1963) ........... 9, 10

Ex parte Young, 209 U.S. 123 (1908) ........... 2, 8

Ford Motor Co. v. Department of Treasury,

Rae ee ee EE 8a koe ee ea ees 8

Goodyear Atomic Corp. v. Miller, 486 U.S. 174

RUE eho n ks kek Re RR Ee a ee 3, 6

Hudson Distributors v. Eli Lilly & Co., 377 U.S.

5 er rr ty er ae agree eee s ame 2,4

Jefferson v. City of Tarrant, 118 S. Ct. 481

CReeEE ap eee hawk EER RRL ee 5

Kalb v. Feuerstein, 308 U.S. 433 (1940) ......... 9-10

Local No. 48, Construction & General Laborers’

Union v. Curry, 341 U.S. 542 (1963) .......... 3

Mercantile Nat’l Bank v. Langdeau, 371 U.S. 555

CE re a es Re ee re ee 5, 6

Mississippi Power & Light Co. v. Mississippi ex rel.

Mone, GET Ua. 358 CAFR) a a wie se ee ae 6

North Dakota Pharmacy Board v. Snyder’s Stores, |

OG Se ee RED sia cw Ec oer e ks ox 4,5 |

Puerto Rico Aqueduct & Sewer Auth. v. Metcalf &

Gale. Bat, Foe SB. 198 Fd ak sc See et 4

|

ill

TABLE OF AUTHORITIES — Continued

Page

wees ¥. Ge, 300 1.8. 425 19 SL Ss 6

Republic Gas Co. v. State of Oklahoma, 334 U.S.

RNR EKA eo ae ce, 5

San Diego Gas & Elec. Co. v. City of San Diego,

One Se Od EE on oc ck a ee 5

United States v. United States Fidelity & Guar.

Ca, Fae Sos ee CA is No 2 9, 10

Statutes

Ba Oke Ss Ee ES SE ORO EEE RR 2

Miscellaneous

18 Moore’s Federal Practice

Ce RePEc o5 = Ser as ee Sa eae 10

RESTATEMENT (SECOND) OF CONFLICT OF LAWS

a IE To ok 5 ion pane oie Bors Ce ee 10

RESTATEMENT (SECOND) OF CONFLICT OF LAWS

Pa Ses a a ee Fe ee 10

RESTATEMENT, CONFLICT OF LAws § 451(2)

EE eed cee te ee oe. 9

R. Stern, E. Gressman, S. Shapiro, & K. Geller,

SUPREME COURT PRACTICE (7th ed. 1993) .... 3, 5,6

Respondent’s brief in opposition confirms the extraordi-

nary nature of the proceedings in this case. SDDS does not

deny that the Lonetree IV litigation was brought in federal

court for the sole purpose of imposing retroactive monetary

liability on the State of South Dakota. Respondent also does

not take issue with our observation that the questions pre-

sented in the petition about the propriety of giving force to the

Lonetree IV decision raise important and recurring issues of

federal law. And SDDS appears to recognize that the proceed-

ings here offer plaintiffs across the Nation a blueprint for

circumventing the Eleventh Amendment by converting actions

brought under Ex parte Young, 209 U.S. 123 (1908), into

vehicles for obtaining money damages from States. Because

the arguments that respondent does offer lack merit — and

because the holding below cannot be reconciled with this

Court’s decisions — further review accordingly is warranted.

A. The Court Has Jurisdiction To Hear This Case

While SDDS initially contends (at Opp. 9-12) that the

Court lacks jurisdiction to consider this case, the finality rule

upon which respondent relies has “not been administered in

such a mechanical fashion.” Cox Broadcasting Corp. v.

Cohn, 420 U.S. 469, 477 (1975). To the contrary, several

considerations make plain that this case falls squarely within

the category of proceedings in which “[t]he fact that separate

and unresolved issues are pending in the [state] courts and are

subject to ‘further proceedings’ therein * * * does not render

the judgment of the [state] Supreme Court on the issue here

considered * * * nonfinal or unappealable within the meaning

of 28 U.S.C. § 1257.” Hudson Distributors v. Eli Lilly &

Co., 377 U.S. 386, 389 n.4 (1964).

To begin with, the fourth category of judgments identified

as final in Cox includes those

where [1] the federal issue has been finally decided in the

state courts [2] with further proceedings pending in which

the party seeking review here might prevail on the merits

on nonfederal grounds, thus rendering unnecessary review

of the issue by this Court, and [3] where reversal of the

2

state court on the federal issue would be preclusive of any

further litigation on the relevant cause of action rather

than merely controlling the nature and character of, or

determining the admissibility of evidence in, the state

proceedings still to come. [4] In these circumstances, if a

refusal immediately to review a state court decision might

seriously erode federal policy, the Court has entertained

and decided the federal issue, which itself has been finally

determined by the state courts for purposes of the state

litigation.

420 U.S. at 482-483.

All of these factors are present here. (1) The court below

finally decided the dispositive federal questions: whether the

Eighth Circuit’s decision in Lonetree IV was void for lack of

jurisdiction, and whether that void federal judgment may bind

a state court in a suit for money damages against a State. (2)

The State could prevail on nonfederal grounds on remand,

precluding review of the federal issue.' (3) Reversal of the

decision below would effectively dispose of the litigation

since, as we have explained (at Pet. 6-7), the South Dakota

Supreme Court indicated that it was inclined to rule for the

State on the takings claim were it free to do so. (4) Delaying

review would “present a real danger of some irreparable injury

to federal policies or constitutional concerns” embodied in the

Eleventh Amendment (R. Stern, E. Gressman, S. Shapiro, &

K. Geller, SUPREME COURT PRACTICE 99 (7th ed. 1993)) by

requiring the State to stand trial at the behest of a federal

court. See generally Goodyear Atomic Corp. v. Miller, 486

U.S. 174, 179-180 (1988); Cox, 420 U.S. at 485-486; Local

No. 48, Construction & General Laborers’ Union v. Curry,

341 U.S. 542, 550 (1963).

Among other things, on remand the State will argue that it

should prevail on state-law grounds of judicial estoppel, failure to

provide statutory notice, and failure to mitigate damages.

3

In addition, entirely apart from the technical elements of

Cox’s fourth category, the nature of the Eleventh Amendment

principle at stake here requires immediate review. In response

to the Eighth Circuit’s judgment, the court below subjected the

State to burdensome remand proceedings that otherwise would

not have taken place. That injury to the State’s “dignitary

interests” (Puerto Rico Aqueduct & Sewer Auth. v. Metcalf &

Eddy, Inc., 506 U.S. 139, 146 (1993)) cannot be remedied in

the future. The “fundamental constitutional protection”

afforded by the Eleventh Amendment is designed both to

insure that “States not be unduly burdened by litigation” and

to “prevent the indignity of subjecting a State to the coercive

process of judicial tribunals’” (id. at 145, 146 (citation

omitted)) — and it is a crucial element of the immunity that

States may identify not only whether but where they may be

sued. Atascadero State Hosp. v. Scanlon, 473 U.S. 234, 241

(1985). Delaying review thus would make vindication of the

State’s constitutional interests impossible. Cf. Metcalf &

Eddy, 506 U.S. at 146; Bullington v. Missouri, 451 U.S. 430,

437 n.8 (1981). And that is particularly so because the

federal-court injunction may effectively preclude the State

from raising federal issues relating to its liability in the future.

In such circumstances, immediate review plainly is in order.

See generally North Dakota Pharmacy Board v. Snyder’s

Stores, 414 U.S. 156, 163-164 (1973).

In arguing to the contrary, SDDS pointedly does not deny

that the elements of the various Cox tests are satisfied here.

Instead, it contends only that, under Cox, finality is absent

whenever additional federal questions may be addressed on

remand. Br. in Opp. 11. But the Court in Cox did not purport

to set down any such hard-and-fast rule. Nor could it have:

in at least one of the cases relied upon in Cox (420 U.S. at

484 n.11, citing Hudson Distributors), a federal issue was

prominently featured among those to be considered on

remand. See Hudson Distributors, 377 U.S. at 388 & n2

EO

4

(noting that case had been remanded to address Sherman Act

claim).

The other finality holdings cited by SDDS (at Br. in Opp.

10-11) are simply inapposite here. SDDS thus asserts that

there is no finality when a petition for certiorari presents the

question whether a taking has occurred in circumstances where

the case has been remanded for a determination of damages.

The cases cited by SDDS, however, explain that finality is

absent in such a situation “because ‘the federal constitutional

question embraces not only a taking, but a taking on payment

of just compensation. A state judgment is not final unless it

covers both aspects of that integral problem.’” San Diego Gas

& Elec. Co. v. City of San Diego, 450 U.S. 621, 633 (1980),

quoting Snyder’s Drug Stores, 414 U.S. at 163 (emphasis

added).? Here, in contrast, the petition raises no substantive

takings issue at all, instead presenting questions about the

binding effect of a federal judgment in a case seeking money

damages from a State. In this setting, the issue presented here

is “not enmeshed in the factual and legal issues comprising the

plaintiff's cause of action.” Mercantile Nat’l Bank v.

Langdeau, 371 U.S. 555, 558 (1963). See Cox, 420 U.S. at

484. The federal question offered in the petition thus is in no

2 Even in the circumstances of those cases, the Court did not state

an absolute rule rejecting finality whenever the petition presents a

takings issue and the amount of compensation remains

undetermined. See, e.g., Republic Gas Co. v. State of Ok'ahoma,

334 U.S. 62, 67 (i948) (emphasis added) (no finality in takings

case, “particularly when the property will not change hands until

after the award of compensation”); R. Stern, E. Gressman,

S. Shapiro, & K. Geller, supra, at 101 (emphasis added) (judgment

that taking occurred, when amount of compensation is not yet set,

“is not usually considered final, especially where the property will

not change hands until after the award of compensation”).

5

sense an “integral” part of the issues that remain to be decided

on remand.?

SDDS’s challenge to the Court’s jurisdiction therefore

lacks substance. “The critical federal question * * * has * * *

already been answered by the State Supreme Court.” Missis-

sippi Power & Light Co. v. Mississippi ex rel. Moore, 487

U.S. 354, 370 n.11 (1988). The legal issue that has been

decided — which relates to the binding effect of the federal-

court judgment — involves a “separate and independent

matter” from the questions to be considered on remand.

Langdeau, 371 U.S. at 558. And any delay in review will

“seriously erode federal policy” (Goodyear Atomic Corp., 486

U.S. at 179) and irreparably damage the State’s dignitary

interests. The judgment below accordingly is “ripe for

review.” Mississippi Power, 487 U.S. at 370 n.11.

B. The Court Below Decided The Federal Question

Presented Here

SDDS’s next contention (at Br. in Opp. 12-14) — that the

federal issue was not raised or passed upon below — is

wholly insubstantial. In fact, the state supreme court expressly

decided the question presented here. That court found that the

Eighth Circuit “had jurisdiction over th[e] federal constitu-

tional matter presented in Lonetree IV.” Pet. App. 12a. And

the court below explicitly endorsed and quoted the Eleventh

Amendment analysis used in Lonetree IV in support of the

* Jefferson v. City of Tarrant, 118 S. Ct. 481 (1997), cited by

SDDS at Br. in Opp. 9-10, also is inapposite. Resolution of the

federal question would not have disposed of that case; because the

petitioners also had state-law claims that would have to be resolved

on remand in any event, the case “present[ed] the typical situation

in which the state courts have resolved some but not all of the

petitioners’ claims.” 118 S. Ct. at 487. And unlike the South

Dakota court’s holding here, the interlocutory decision in Jefferson

did not threaten significant frustration of federal policies.

6

state court’s holding that it was “bound by the recent judg-

ment of the Eighth Circuit.” Ibid. See id. at 12a-13a. In these

circumstances, there of course “can be no question as to the

proper presentation of a federal claim when the highest state

court passes on it.” Raley v. Ohio, 360 U.S. 423, 436-437

(1959). See R. Stern, E. Gressman, S. Shapiro, & K. Geller,

supra, at 131 (citing cases).

While that is enough to dispose of SDDS’s argument, it

may be added that respondent exhibits a certain gall in

faulting the State for failing to submit argument on the

significance of Lonetree IV. While SDDS blithely chides the

State because it “declined even to file a brief or submit oral

argument” on the point (Br. in Opp. 6; see id. at 12-13), the

State made clear that it took that course — and that it

refrained from presenting its Eleventh Amendment arguments

in a rehearing petition — because it believed that it was

constrained by the federal-court injunction to withhold any

argument bearing on its takings liability. See Appellees’

Motion to Remove Proceeding From Oral Argument Calendar

(Feb. 26, 1997); Pet. for Rehearing 1. And far from suggest-

ing that the State could make supplemental argument on the

point, SDDS threatened the State with contempt sanctions if

it failed to withdraw the brief that it had filed in the South

Dakota Supreme Court prior to the decision in Lonetree IV.

See Letter to Attorney General Mark W. Barnett from Edward

T. Lyons, Jr. (May 22, 1997) (reprinted in the addendum to

this brief). The State therefore can hardly be thought to have

surrendered its rights by failing to argue the issue below.

C. The Eighth Circuit’s Decision In Lonetree IV Was

Void For Lack Of Jurisdiction

It is perhaps understandable that SDDS is so imaginative

in its procedural arguments against review, because its defense

of the judgment below is entirely unavailing. In arguing that

the federal judgment found binding by the South Dakota court

was not void, SDDS’s principal contention is that the State

an ee —- a - é & = Seas ies:

7

waived its Eleventh Amendment immunity. This assertion,

however, rests on a remarkable misreading of the record.

SDDS premises its waiver argument on § 24 of the state

defendants’ answer to SDDS’s federal complaint. See Br. in

Opp. 4, 15-16. But that paragraph states:

As a{n] * * * affirmative defense, Defendants assert that

Plaintiff's claim fails on the doctrine of sovereign immu-

nity and, to the extent it can be construed to involve a

claim for monetary relief, is barred by the Eleventh

Amendment to the United States Constitution.

Far from being a case in which “the State of South Dakota

consented” to suit (Br. in Opp. 14 (emphasis in original)), the

State thus asserted its immunity to the fullest degree possible.‘

Nor does SDDS obtain any additional mileage from its

observation (at Br. in Opp. 4-5, 16) that the state defendants

participated in the Lonetree III litigation challenging the

constitutionality of the Referendum. The State has never

denied that Lonetree III, as a suit seeking prospective relief

against an ongoing (asserted) violation of federal law, could

proceed against state officials under the doctrine of Ex Parte

Young. But that cannot serve to justify the Lonetree IV

proceeding, which was commenced long after any violation of

federal law had ended, which was directed against the State

rather than state officials, which was brought for the sole

purpose of obtaining monetary relief against the State — and

CP ee,

) * In addition, SDDS is wrong in contending (at Br. in Opp. 15-

16) that a State’s appearance to defend a suit on the merits bars the

State from asserting its Eleventh Amendment immunity at a later

point in the litigation. In fact, it has long been settled that the

Amendment may be raised at any time — and, indeed, that

immunity may be asserted for the first time in this Court. See. e.g.,

Ford Motor Co. v. Department of Treasury, 323 U.S. 459, 467

(1945).

8

in which the State expressly asserted its Eleventh Amendment

immunity. See Lonetree IV, 97 F.5d at 1032.

SDDS’s related argument (at Br. in Opp. 17-19) that the

Lonetree IV injunction is permissible “ancillary” relief is

flawed for similar reasons. The Eleventh Amendment

decisions cited by SDDS in support of this proposition all

involved circumstances in which the challenged relief was

necessary to terminate an ongoing violation of federal law.

But that manifestly is not the case here. The decision in

Lonetree III — which is hardly rendered “precatory” (Br. in

Opp. 19) under the State’s theory — invalidated the Referen-

dum and terminated any violation of federal law. The

Lonetree IV litigation concededly was intended simply to

obtain monetary relief from the State, and no decision of this

Court justifies such a proceeding under the Eleventh Amend-

ment.

D. A State Court May Not Be Bound By A Federal-

Court Decision Issued In Violation Of The Elev-

enth Amendment

SDDS also advances no substantial reason to deny review

when it contends that the court below was bound by the

Eighth Circuit’s judgment. Respondent does not even attempt

to defend the state court’s holding that it was bound by the

Eighth Circuit’s injunction, maintaining instead that the

decision below was based exclusively on res judicata and

collateral estoppel principles. Br. In Opp. 21. Yet SDDS

cannot show that application of those principles in this case is

reconcilable with this Court’s decisions — and it entirely fails

to establish that the Eleventh Amendment ever permits use of

a federal court judgment to bind a State in an action for

money damages.

To the contrary, SDDS acknowledges (at Br. in Opp. 20)

this Court’s recognition that “the general rule of finality of

jurisdictional determinations is not without exceptions” and

may be overcome by “[d]octrines of federal pre-emption or

.

Ne ie ol Ce ee rn

9

sovereign immunity.” Durfee v. Duke, 375 U.S. 106, 114

(1963), citing United States v. United States Fidelity & Guar.

Co, 309 U.S. 506 (1940), Kalb v. Feuerstein, 308 U.S. 433

(1940), and RESTATEMENT, CONFLICT OF LAWS § 451(2)

(Supp. 1948). And SDDS’s attempt to distinguish United

States Fidelity & Guar. and Kalb have no merit at all.

Respondent’s principal argument (at Br. in Opp. 20) appears

to be that the state defendants’ failure to file a petition in this

Court challenging the Lonetree IV decision makes the doctrine

of United States Fidelity & Guar. and Kalb inapplicable here.

But that plainly is not so: the decisions that were denied res

judicata and collateral estoppel effect in those cases also had

not been challenged on direct appeal. See United States

Fidelity & Guar., 309 U.S. at 510; Kalb, 308 U.S. at 435-436

(defendant did not seek to stay or otherwise challenge

judgment of foreclosure that later was collaterally attacked).

SDDS’s remaining contentions are equally insubstantial.

It attempts (at Br. in Opp. 20-21) to distinguish United States

Fidelity & Guar. on the ground that (in asserted contrast to

this case) the sovereign immunity claim there had not been

raised and litigated in the court in which judgment first was

entered. We explained in the petition (at 20 n.1 1), however,

that the immunity issue may in fact have been litigated in the

first forum in United States Fidelity & Guar., and that this

Court evidently did not regard the matter as significant; SDDS

makes no response to that point. In addition, as we also noted

in the petition (at 19), both the RESTATEMENT (SECOND) OF

CONFLICT OF LAws (hereinafter “RESTATEMENT”) (at § 96,

cmt. a) and leading commentators (see 18 Moore’s Federal

Practice § 130.04[3] (3d ed. 1997)) read United States Fidelity

& Guar. as an exception to the usual rule that gives res

judicata effect to a “finding by a court that it has * * *

jurisdiction over the defendant.” RESTATEMENT § 96 cmt. a

(emphasis added). Again, SDDS makes no response. The

rule of United States Fidelity & Guar. thus generally is

understood to apply in cases where the issue of jurisdiction

10

has been litigated; at worst, the issue whether sovereign

immunity strips a judgment of collateral effect in such

circumstances is an open question that should be settled by

this Court. Cf. Durfee, 375 U.S. at 114 & n.12.

SDDS’s discussion of Kalb (at Br. in Opp. 21), mean-

while, is simply mystifying. Respondent reports that Kalb

“merely held that the state court proceedings giving rise to the

appeals could be collaterally attacked in the federal bankruptcy

court.” In fact, the collateral attack in Kalb occurred in state

court. But more fundamentally, SDDS evidently acknowl-

edges the holding in Kalb that a determination of jurisdiction

need not be given res judicata or collateral estoppel effect.

The Court thus explained in Kalb that the lack of jurisdiction

in the court issuing the first judgment rendered its decisions

“nullities subject to collateral attack,” and that this was so

“whether the issue of jurisdiction was actually contested in the

[first] Court, or whether it could have been contested.” 308

U.S. at 439, 444 (footnote omitted). As we explained in the

petition (at 20), Kalb thus stands for the proposition that,

while a court’s determination of its subject matter ordinarily

is not subject to collateral challenge, a state court may not

apply that “rule of res judicata when to do so would conflict

with an important federal policy.” RESTATEMENT § 97, cmt.

c. We also noted that the Eleventh Amendment states just

such a federal policy. Again, SDDS makes no response to

these points. Review of the decision below therefore plainly

is in order.

For the foregoing reasons and the reasons stated in the

petition, the petition for a writ of certiorari should be granted.

Respectfully submitted.

— a

MARK W. BARNETT

Attorney General

ROXANNE GIEDD

Office of the Attorney

General

500 East Capitol

Pierre, SD 57501

(605) 773-3215

MICHAEL J. SCHAFFER

SANDRA K. HOGLAND

Davenport, Evans, Hurwitz

& Smith, LLP

513 South Main Avenue

Sioux Falls, SD 57101-1030

(605) 336-2880

WILLIAM P. FULLER

Woods, Fuller, Shultz &

Smith, P.C.

300 South Phillips Ave.,

Suite 300

Sioux Falls, SD 57117-5027

(605) 336-3890

APRIL 1998

11

CHARLES ROTHFELD

Counsel of Record

MONICA B. GOLDBERG

Mayer, Brown & Platt

2000 Pennsylvania Avenue, N. W.

Washington, D.C. 20006

(202) 778-0616

BARRY FRIEDMAN

DEBORAH PATTERSON

Wyatt, Tarrant & Combs

Citizens Plaza

Louisville, KY 40202

(502) 589-5235

(212) 998-6384

ADDENDUM

May 22, 1997

VIA FACSIMILE (605) 773-4106

AND U.S. MAIL

Hon. Mark W. Barnett

Attorney General

State of South Dakota

500 East Capitol

Pierre, SD 57501-3215

Re: SDDS. Inc., v. State of South Dakota, et. al.

South Dakota Supreme Court, No. 19555

Dear Attorney General Barnett:

The State Defendants’ motion requesting the Supreme Court

to remove this case from the oral argument calendar explicitly

acknowledged that the Eighth Circuit’s decision in In re SDDS

Inc., 97 F.3d 1030 (8th Cir. 1996), together with the federal

court injunction entered thereon, effectively “constrain” the

State Defendants from presenting any “meaningful” oral

argument in the case. This is understandable, of course, because

the precise arguments that the State Defendants had previously

used in this case to resist liability for the consequences of the

unconstitutional referendum are now foreclosed by the decision

and injunction entered in the federal courts.

But simply refraining from reasserting these arguments orally

is not enough. In order to comply with the injunction, SDDS

believes that it was also incumbent on the State Defendants to

withdraw the brief in which these same arguments remain on

display in this case. SDDS expressly questioned why this had

not been done — and whether the failure to do so would violate

the injunction — when it responded in writing to the State

Defendants’ motion to dispense with oral argument. This

cautionary indication has been ignored. The State Defendants

Hon. Mark W. Barnett

May 22, 1997

Page 2

have instead apparently determined to take their chances that in

possible further proceedings in federal court, their token

compliance of foregoing oral argument will be deemed suffi-

cient to avoid any imposition of sanctions. SDDS disagrees and

respectfully suggests that the State Defendants are proceeding

at considerable peril.

In the event that its prior admonition was not understood,

SDDS wants at this time to make it unmistakably clear to the

State Defendants that, as SDDS understands the mandate and

injunction of the federal courts, the brief of the State Defendants

should be withdrawn immediately.

Very truly yours,

Edward T. Lyons, Jr.

Attorney for SDDS, Inc.

cc: SDDS, Inc.