STATE OF WEST VIRGINIA, PETITIONER V. UNITED STATES OF AMERICA

   No. 85-937

   In The Supreme Court Of The United States

   October Term, 1986

   On Writ Of Certiorari To The United States Court Of Appeals For The
Fourth Circuit

   Brief For The United States

            TABLE OF CONTENTS
   Opinions below
   Jurisdiction
   Statute involved
   Question presented
   Statement
   Summary of argument
   Argument:
       The court of appeals correctly awarded prejudgment
       interest against petitioner
       A. The availability of prejudgment interest in a
          contract action brought by the United States is
          a matter of federal law
       B. The Clearfield Trust doctrine requires
          application of a federal rule of prejudgment
          interest in this case
       C. Under the federal rule, petitioner is liable
          for prejudgment interest
   Conclusion

                            OPINIONS BELOW

   The opinion of the court of appeals (Pet. App. D1-D25) is reported
at 764 F.2d 1028.  The opinion of the district court on petitioner's
motion to dismiss and the government's cross-motion for summary
judgment (Pet. App. A1-A51) is reported at 537 F. Supp. 388.  The
opinions of the district court on liability (Pet. App. B1-B75) and
prejudgment interest (Pet. App. C1-C30) are unreported.

                             JURISDICTION

   The judgment of the court of appeals was entered on June 21, 1985.
A petition for rehearing was denied on July 31, 1985 (Pet. App.
E1-E3).  On October 25, 1985, the Chief Justice extended the time for
filing a petition for a writ of certiorari to and including November
28, 1985, a national holiday (Pet. App. F1).  The petition was filed
on November 29, 1985, and was granted on February 24, 1986, limited to
the second question presented.  The jurisdiction of this Court is
invoked under 28 U.S.C. 1254(1).  /1/

      fabricated dwellings for those who, as a result of (a) major
      disaster, require temporary housing or other emergency shelter *
      * * .  Any mobile home or readily fabricated dwelling shall be
      placed on a site complete with utilities provided by State or
      local government, or by the owner or occupant of the site who
      was displaced by the major disaster, without charge to the
      United States.  However, the Director may elect to provide other
      more economical and accessible sites at Federal expense when he
      determines such action to be in the public interest.

                           STATUTE INVOLVED

   Section 226(a) of the Disaster Relief Act of 1970, Pub. L. No.
91-606, 84 Stat. 1751-1752, repealed in part by Pub. L. No. 93-288,
Section 603, 88 Stat. 164, provided in relevant part:

         The Director (of the Office of Emergency Preparedness) is
      authorized to provide temporary housing or other emergency
      shelter, including, but not limited to, mobile homes or other
      readily

                          QUESTION PRESENTED

   Whether the court of appeals erred in awarding prejudgment interest
on petitioner's contractual obligation.

                               STATEMENT

   1. The Disaster Relief Act of 1970 (the Act), Pub. L. No. 91-606,
84 Stat. 1744 et seq., repealed in part by Pub. L. No. 93-288, Section
603, 88 Stat. 164, made provision for the federal government to
provide assistance "to State and local governments in carrying out
their responsibilities to alleviate the suffering and damage which
result from * * * disasters" (Section 101(b), 84 Stat. 1745).  The
remedial provisions of the Act were triggered by a Presidential
declaration of a "major disaster" (Section 201(a), 84 Stat. 1746).
Once triggered, the Act authorized federal authorities to provide,
among other things, temporary housing or other emergency shelter to
those left homeless by a disaster.

   Except in circumstances not relevant here, these temporary
dwellings were to be provided by federal authorities and installed at
sites prepared by the concerned state or local government.  /2/
Section 226(a) of the Act (84 Stat. 1752) thus stated:

         Any mobile home or readily fabricated dwelling shall be
      placed on a site complete with utilities provided by State or
      local government * * * without charge to the United States.
      However, the Director (of the Office of Emergency Preparedness)
      may elect to provide other more economical and accessible sites
      at Federal expense when he determines such action to be in the
      public interest.

To further the legislative scheme, regulations implementing Section
226(a) also provided that "(a)ny mobile home or readily fabricated
dwelling shall be placed on a developed site, complete with necessary
improvements and utilities to the location of each such dwelling as
provided without charge to the Federal Government by State or local
government." The regulations also indicated that "the Federal
responsibility shall be limited to connection costs to the furnished
utilities," and that "(f)ailure to provide such facilities on sites
proposed for use by owners or occupants, shall constitute a basis for
rejection of such sites." 32 C.F.R. 1710.13(c)(5) (1973).  More
generally, the regulations promulgated under the Act obligated the
concerned State to enter into an agreement with the Federal Government
offering assurances that "a reasonable amount of the funds of the
State * * * will be expended in alleviating damage caused by the
disaster." 32 C.F.R. 1710.7(a) (1973).

   2. a. On February 26, 1972, heavy rains caused a coal waste dam to
fail near Mann, West Virginia, leading to severe flooding of the
Buffalo Creek.  More than 100 people died in the disaster, and
thousands were left homeless.  Pet. App. B4, D2.  That same day, West
Virginia's Governor, Arch A. Moore, Jr., requested disaster assistance
from the federal government.  President Nixon responded favorably,
declaring the "Buffalo Creek Disaster" a "major disaster" within the
meaning of the Act.  Id. at B5-B6.  Representatives of the United
States Army Corps of Engineers (the Corps) immediately began
discussions with Governor Moore and other state officials about the
appropriate federal and state response to the damage caused by the
flooding (id. at B10-B11);  in accordance with the division of
responsibilities mandated by the Act, Governor Moore issued a
statement to the press indicating that the Federal Government would
supply trailer homes, and that the State would prepare sites and
provide electricity for the homes (C.A. App. 280).

   It soon became apparent, however, that the State would be unable to
prepare sites for the shelters, as required by the Act (C.A. App.
815-816, 907, 912, 933-936).  On February 28 or 29, 1972, Governor
Moore accordingly requested the Corps to perform the site preparation
work (Pet. App. B46, B49-B50).  This request was confirmed in a March
1, 1972 letter to the Corps from John M. Gates, the State Commissioner
of Finance and Administration and the Director of the State's Office
of Emergency Planning, which acknowledged that, "(a)s (site
preparation) is the State's responsibility, this office will be
responsible for costs incurred for this assignment" (id. at B14-B16 &
n.2, D6-D7).  Two days later, Gates sent the Corps a virtually
identical letter requesting site preparation at another location and
acknowledging the State's financial responsibility for the work (id.
at B18).

   On March 4, 1972, Governor Moore signed a federal-state disaster
assistance agreement, which certified that Gates was authorized to
execute all necessary documents relating to disaster relief (Pet. App.
B17-B18).  In the weeks following execution of the agreement, Gates
sent the Corps nine additional requests for site preparation work, all
but one of which explicitly acknowledged the State's responsibility
for the costs incurred by the Corps (id. at B18-B19).  The Corps
completed the work requested by the State in approximately two months.
 In all, the Corps prepared 617 mobile home sites at 11 locations,
along with utility hookups, interior roads, and access bridges.  Gates
subsequently certified that the work had been performed
satisfactorily.  Pet. App. B20, D7.

   b. In late August 1972, West Virginia was again struck by heavy
rains and flooding.  Although no lives were lost in this so-called
"Gilbert Creek Disaster," many persons were left homeless.  On August
20, 1972, Governor Moore again asked President Nixon to provide
disaster relief;  President Nixon again responded favorably, declaring
the Gilbert Creek Disaster a "major disaster" within the meaning of
the Act.  Pet. App. B22-B23, D7.

   On August 24, 1972, Charles Steele, a special assistant to the
Governor and the State's Coordinating Officer for the Gilbert Creek
Disaster, asked the Corps to prepare a mobile home site.  Like the
letters sent to the Corps in connection with the Buffalo Creek
Disaster, this request acknowledged the State's responsibility for the
costs incurred by the Corps.  Pet. App. B23-B24, B68 & n.11.  Shortly
afterwards, Gates -- still the State's Commissioner of Finance and
Administration and Director of the State's Office of Emergency
Preparedness -- also sent the Corps a letter, requesting preparation
work at another site and again acknowledging the State's financial
responsibility (id. at B25-B26, B69).  The Corps subsequently
performed the requested work (id. at D8).

   3. In late 1972 and 1973, the Corps duly billed the State
$3,708,412.62 for work performed in connection with the Buffalo Creek
Disaster and $633,377.41 for work performed after the Gilbert Creek
Disaster (Pet. App. D7, D8).  During the years that followed, the
State never denied that the work had been performed satisfactorily or
contested the amount sought by the Corps;  to the contrary, Governor
Moore acknowledged the debt, and appeared to be taking steps towards
its payment (id. at B26-B28).  When payment was not forthcoming after
five years, however, the United States brought this action in the
United States District Court for the Southern District of West
Virginia, seeking to recover $4,341,790.03.

   In a preliminary opinion resolving pretrial motions, the district
court found jurisdiction to entertain the suit under 28 U.S.C. 1345,
rejecting the State's assertion that its sovereign immunity was a bar
to actions brought by the United States (Pet. App. A11-A23).  The
court also held that federal law should control the disposition of the
suit, both because the controversy involved a dispute between the
United States and a State (id. at A23-A25) and because "the action
involves a federal program" (id. at A25) whose uniform nationwide
application was "essential" (id. at A33).  The court declined to award
summary judgment to either side, however, finding that material facts
were in dispute (id. at A37-A42).

   After trial, the district court found the State liable for the
disputed site preparation costs (Pet. App. B1-B75), ruling that West
Virginia was contractually obligated to reimburse the United States
for the amounts expended by the Corps.  The court first rejected the
State's contention that Governor Moore and his delegates could have
committed the State to reimburse the Corps only by resorting to the
State's normal procurement process (id. at B29-B35).  /3/ The court
then held as a factual matter that the State had requested the
assistance of the Corps, and in doing so had obligated itself to pay
the expenses incurred by the United States in combatting both the
Buffalo and the Gilbert Creek Disasters (id. at B35-B56, B67-B73).
Alternatively, the court held that the State had accepted liability by
ratifying the work done by the Corps (id. at B56-B67, B73-B75).

   In a separate opinion, however, the district court denied the
United States' request for $5,783,098.09 in prejudgment interest (Pet.
App. C1-C30).  As a preliminary matter, the court again held "that
federal law, not state law, governs the right of the United States to
such interest" (id. at C9).  And the court acknowledged that an award
of prejudgment interest ordinarily is appropriate when the "obligation
is * * * a debt" (id. at C24).  The court found the application of
this principle improper here, however, "in light of (petitioner's)
sovereign status" (id. at C27).  Instead, the court concluded that it
"should examine the Congressional purpose underlying the statutory
enactment and the relative equities between the parties to the
obligation in determining whether an award of interest is appropriate"
(id. at C17).  After making this inquiry, the court concluded that,
"(a)s between the citizens of West Virginia and all the citizens of
the United States, it appears more equitable to have the latter share
in the defraying of the costs of the services rendered by the United
States Army Corps of Engineers" (id. at C29-C30).  /4/

   4. The court of appeals reversed the district court's ruling on
interest, holding the State liable for prejudgment interest from the
date that the Corps initially presented it with itemized bills (Pet.
App. D1-D25).  /5/ Like the district court, the court of appeals first
held that federal law is controlling (id. at D10-D11).  And "(u)nder
the federal rule," the court of appeals explained, "interest is
allowable as a matter of right for a breach of contract to pay when
the amount due has been liquidated, ascertained, or agreed to" (id. at
D11 (footnote omitted)).

   Alternatively, the court of appeals held that the State should be
liable for interest even under the balancing of the equities test
applied by the district court.  /6/ The court of appeals noted that
the United States had spent more than $30 million in the wake of the
Buffalo and Gilbert Creek Disasters, "several times more than the
State of West Virginia agreed to pay" (Pet. App. D19).  The court also
explained that "Congress itself engaged in certain equitable balancing
of the costs of disaster relief as between the federal government and
the state government concerned by establishing a formula for
distributing such costs," concluding that "it is not within the
province of the courts to establish a different formula for the
distribution of costs" (id. at D19-D20).  And the court noted that the
State itself had "recognized its responsibility and liability in this
matter" (id. at D20).  In these circumstances, the court held that,
"(i)f the right to prejudgment interest depends on a balancing of
equities, it is manifest beyond any doubt that the equitites weigh
overwhelmingly in favor of the United States" (id. at D22).

   The court added that its conclusion was not inconsistent with
principles of federalism.  To the contrary, the court held that
"federalism would be thwarted by a denial of the use of the normal
incidents of suit in connection with the breach of an agreement
between two sovereigns" (Pet. App. D22).  "(W)here there was clear
jurisdiction and implied consent to suit," the court concluded, "it
would seem elementary that a court, in adjudicating the rights of the
parties, has the power to enter a decree and judgment with the usual
incidents such as the recovery of prejudgment interest" (id. at
D23-D24).

                          SUMMARY OF ARGUMENT

   It is beyond dispute that the interpretation of contracts to which
the United States is a party is a matter of federal law.  It is
equally well-established that the availability of prejudgment interest
in contract actions brought by the United States generally is
determined by the application of federal rules, rather than through
the incorporation into federal law of the state rule of decision.  The
question here is whether this otherwise general principle is wholly
inapplicable -- and thus whether state immunity law must provide the
federal rule of decision -- when the defendant in the Federal
Government's contract action is a State.  Answering this question
turns on an application of the doctrine first formulated in Clearfield
Trust Co. v. United States, 318 U.S. 363 (1943), which sets out the
criteria that must be taken into account in determining whether
federal courts should borrow state standards rather than develop their
own rules in cases governed by federal law.

   1. Here, the first set of Clearfield Trust considerations -- the
frustration of federal policy that would follow from the application
of state law -- is dispositive.  The Disaster Relief Act did not
obligate the United States to shoulder the entire financial burden of
combatting a disaster;  to the contrary, the Act clearly divided
federal and state responsibilities, while placing a number of precise
limits on the permissible level of federal expenditures.  Thus,
Section 226(a) of the Act, along with its implementing regulations,
expressly required that site preparation for temporary housing be
provided by the concerned State "without charge to the United States"
(84 Stat. 1752).  The contracts at issue here were consummated to
implement this Section of the Act.

   The "no-interest rule" urged by petitioner, however, is flatly
inconsistent with the specific apportionment of costs undertaken by
Congress in Section 226(a).  The real value of the State's payment for
the services performed by the Corps obviously is diminished by delay
in receipt.  As a result, if the State escapes liability for interest,
the United States will have contributed a substantial subsidy towards
West Virginia's site preparation.  In these circumstances, West
Virginia hardly could claim to have completed its site preparation
responsibilities "without charge" to the Federal Government -- or even
to have recompensed the United States for any portion of the cost, if
the time value of money is properly considered (since accumulated
interest now exceeds the principal).  Similarly, if local liability
rules applied in actions like this one, the Federal Government would
effectively subsidize some States while charging the others full
freight.  That sort of disuniformity plainly would be inappropriate in
an area where evenhanded treatment is essential.

   2. Even apart from its inconsistency with the federal program that
gave rise to the contracts here, the nature of the state rule that
petitioner seeks to apply makes its application in this case
inappropriate.  The State's "no-interest rule," like identical rules
often applied to benefit other governmental entities, is nothing more
than an element of the State's sovereign immunity.  And while
petitioner insists that use of this rule is necessary to accord due
respect to the State's place in the constitutional structure, the
Court has made it quite clear that constitutional values are not
furthered by the assertion of a State's sovereign immunity against the
Federal Government.  Indeed, the States are deemed to have waived
their sovereign immunity vis-a-vis the United States at the time that
they were "admitted into the Union upon an equal footing in all
respects with the other States." United States v. Texas, 143 U.S. 621,
646 (1892).  As a general matter, then, there are no legitimate state
interests that compel federal courts to refer to state sovereign
immunity rules -- or that make use of those rules presumptively
appropriate -- in actions brought by the United States.

   This is not to say, of course, that there are no circumstances in
which state "no-interest rules" might be relevant in cases governed by
federal law.  In Board of County Commissioners v. United States, 308
U.S. 343, 351 (1939), the Court -- while ultimately applying the
federal interest rule -- indicated that federal courts, in appropriate
cases, may fashion interest rules with a "due regard" for local law.
And in United States v. North Carolina, 136 U.S. 211 (1890), the Court
applied this principle, looking to state law in holding that
postmaturity interest was unavailable on state bonds purchased by the
United States.

   North Carolina, however, also illustrates the limits on the
applicability of state law.  The bonds at issue in that case had been
purchased by the United States as part of a commercial transaction in
the ordinary marketplace;  the State's interest in the uniform
administration of its bond program dictated use of a single state
interest rule in suits involving attempts to collect on those bonds.
Here, in contrast, the claim for interest does not grow out of an
ordinary commercial relationship or affect the administration of a
state program.  Petitioner thus has no interest in the use of state
law apart from its interest in asserting sovereign immunity.  And with
the principle of North Carolina inapplicable, there is no reason in
this case to depart from the Court's usual approach of applying a
federal rule to determine liability for interest.

   3. Under the federal rule, prejudgment interest is awarded in
contract actions for a sum certain as a matter of course.  While
interest may be denied in extraordinary cases where considerations of
equity make an award inappropriate, this manifestly is not such a
case.  The United States made the expenditures that gave rise to this
suit upon the express request of the State, after receiving repeated
assurances that the State would assume financial responsibility for
the Corps' site preparation activities.  The Corps performed the
requested work expeditiously and satisfactorily.  The United States
made prompt and repeated demands for payment.  Indeed, the Federal
Government spent more than $30 million to relieve the effects of the
Buffalo and Gilbert Creek Disasters, almost ten times the amount that
the Corps sought to collect from the State in this suit.  The Corps'
attempt to be made whole for the relatively small portion of this
expenditure devoted to activities that were the State's responsibility
from the outset hardly can be deemed inequitable.

                               ARGUMENT

 THE COURT OF APPEALS CORRECTLY AWARDED PREJUDGMENT INTEREST AGAINST
PETITIONER

 A. The Availability Of Prejudgment Interest In A Contract Action
Brought By The United States Is A Matter Of Federal Law

   The basic principles governing the controversy in this case are
straightforward and well-established.  This Court has long held that
the interpretation of contracts "through which the United States is
exercising its constitutional functions," as well as "the rights and
obligations of the parties" to such contracts, are matters of federal
law.  United States v. Allegheny County, 322 U.S. 174, 183 (1944).
Because such contracts are "entered into pursuant to authority
conferred by federal statute and, ultimately, by the Constitution"
(United States v. Seckinger, 397 U.S. 203, 209-210 (1970) (footnote
omitted)), "the Constitution or Acts of Congress 'require' otherwise
than that state law govern of its own force." United States v. Little
Lake Misere Land Co., 412 U.S. 580, 592-593 (1973).  See United States
v. Kimbell Foods, Inc., 440 U.S. 715, 726-727 (1979);  United States
v. Standard Oil Co., 332 U.S. 301, 305-310 (1947);  Clearfield Trust
Co. v. United States, 318 U.S. 363, 366-367 (1943).  Petitioner
seemingly accepts this fundamental proposition (see Br. 41).

   It is equally clear -- as petitioner also at least implicitly
acknowledges (Br. 16) -- that the availability of prejudgment interest
in contract actions brought by the United States generally is
determined by the application of federal rules, rather than through
the incorporation into federal law of the state rule of decision.  As
the Court has explained:

         (T)he interest to be recovered as damages for delayed payment
      of a contractual obligation to the United States is not
      controlled by state statute or local common law.  In the absence
      of an applicable federal statute, it is for the federal courts
      to determine, according to their own criteria, the appropriate
      measure of damage, expressed in terms of interest, for
      non-payment of the amount found to be due.

Royal Indemnity Co. v. United States, 313 U.S. 289, 296 (1941)
(emphasis added).  See Rodgers v. United States, 332 U.S. 371, 373
(1947).  The question here is whether this otherwise general principle
is wholly inapplicable when the defendant in the government's contract
action is a State.

 B. The Clearfield Trust Doctrine Requires Application Of A Federal
Rule Of Prejudgment Interest In This Case

   1. In answering this question, petitioner insists that federal
courts must look to the state law governing the availability of
interest when a State is the defendant in the Federal Government's
contract action.  The validity of this contention, as petitioner seems
to recognize (see Br. 28-29, 41), turns on an application of what has
come to be known as the Clearfield Trust doctrine.  In that case, and
in a series of subsequent decisions, the Court set out the criteria
that determine whether the federal courts should borrow state
standards rather than develop their own rules of decision in cases
governed by federal law.

   Thus, when application of state rules either would disrupt
necessary uniformity in the administration of federal programs or
"would frustrate specific objectives of the federal programs," the
Court has concluded that federal courts "must fashion special rules
solicitous of those federal interests." Kimbell Foods, 440 U.S. at 728
(footnote omitted).  Conversely, courts may take into account "the
extent to which application of a federal rule would disrupt commercial
relationships predicated on state law." Id. at 729 (footnote omitted);
 see id. at 739-740;  United States v. Brosnan, 363 U.S. 237, 242
(1960).  Courts also may gauge the "state's interest in the
preservation of its control over local interests, particularly
traditional interests such as family law and real property
transactions." Georgia Power Co. v. 54.20 Acres of Land, 563 F.2d
1178, 1185-1190 (5th Cir. 1977) (Wisdom, J.), cert. denied, 440 U.S.
907 (1979).  See generally Little Lake Misere Land Co., 412 U.S. at
595.  In this case, each of these factors supports the conclusion that
the federal interest rule, and not the law of West Virginia, should
apply.  Together, they comple that conclusion.

   2. At the outset, the first set of Clearfield Trust considerations
-- the nature of the federal interest -- is itself dispositive.
Petitioner of course is correct in stating (Br. 19-20, 39) that the
Disaster Relief Act was intended to provide assistance to the States.
But the Act plainly was not, as petitioner seems to suggest (Br. 31),
intended to make the Federal Government responsible for assuming all
of the costs of combatting a disaster.  Instead, it was in large part
intended to assist the States in "carrying out their responsibilities"
(Section 101(b), 84 Stat. 1745) by "coordinat(ing) disaster relief and
recovery efforts of all appropriate Federal, State and local
authorities." S. Rep. 91-1157, 91st Cong., 2d Sess. 2 (1970);  see id.
at 25.  The Act thus put great weight on the formulation of state
disaster relief plans.  See Section 206, 84 Stat. 1749.  And the Act's
implementing regulations mandated the commitment of a significant
level of state funds prior to the expenditure of any federal resources
on disaster relief.  32 C.F.R. 1710.7(a) (1973).

   The Act, moreover, clearly divided federal and state
responsibilities.  In a number of areas, it placed precise limits on
the permissible level of federal expenditures.  See Section 203(a)(4),
84 Stat. 1747;  Section 252(a) and (b), 84 Stat. 1757.  Cf. Section
224(b), 84 Stat. 1751.  And in Section 226(a), the provision of the
Act that is controlling here, Congress directed that site preparation
for temporary housing be provided by the State "without charge to the
United States" (84 Stat. 1752).  There is no reason to doubt that
Congress meant this limitation to be read literally.  See H.R. Conf.
Rep. 91-1752, 91st Cong., 2d Sess. 26 (1970);  S. Rep. 91-1157, supra,
at 16, 29;  H.R. Rep. 91-1524, 91st Cong., 2d Sess. 11 (1970).  To the
contrary, the regulations implementing Section 226(a) emphasized that
"(a)ny mobile home or readily fabricated dwelling shall be placed on a
developed site, complete with necessary improvements and utilities to
the location of each such dwelling as provided without charge to the
Federal Government by State or local government";  the regulations
further specified that "the Federal responsibility shall be limited to
connection costs to the furnished utilities." Indeed, the implementing
regulations made a State's failure to perform adequate site
preparation "a basis for rejection of such sites." 32 C.F.R.
1710.13(c)(5) (1973) (emphasis added).  /7/

   The contracts at issue in this case were consummated to implement
Section 226(a) of the Act.  The "no-interest rule" contended for by
petitioner, however, is flatly inconsistent with the specific
apportionment of costs undertaken by Congress in that Section.  The
real value of the State's payment for the services performed by the
Corps obviously is diminished by delay in receipt;  prejudgment
interest accordingly is necessary to make the United States whole, and
to put it "in as good a position as (it) would have been in" had the
State paid for the services promptly.  General Motors Corp. v. Devex
Corp., 461 U.S. 648, 655-656 (1983).  Thus, unless interest is
provided to compensate the United States for the "loss of value due to
delay" (Library of Congress v. Shaw, No. 85-54 (July 1, 1986), slip
op. 12 n.7), the Federal Government will have contributed a
substantial subsidy towards West Virginia's site preparation.  This
effect is graphically demonstrated by the record here, where the
length of the State's delay prior to payment, in combination with the
effects of inflation, means that the interest award actually is larger
than the principal amount in dispute.  If the State escapes liability
for interest, it hardly can claim to have completed its site
preparation responsibilities "without charge" to the United States --
or even to have recompensed the United States for any portion of the
cost (if the time value of money is properly considered).  The
resulting incentive for any future delays in state payments, including
the accomplishment of delay by prolonging litigation, would be
obvious.  Cf. General Motors Corp., 461 U.S. at 656 n.10.

   In this setting, where "the rights of the United States are at
issue in a contract to which it is a party and 'the issue's outcome
bears some relationship to a federal program, no rule may be applied
which would not be wholly in accord with that program.'" Little Lake
Misere Land Co., 412 U.S. at 604 (quoting Mishkin, The Variousness of
"Federal Law":  Competence and Discretion in the Choice of National
and State Rules for Decision, 105 U. Pa. L. Rev. 797, 805-806 (1957)).
 See generally Friendly, in Praise of Erie -- and of the New Federal
Common Law, 39 N.Y.U.L. Rev. 383, 410 (1964).  The West Virginia rule
plainly fails to satisfy this standard.  As a result, even if
petitioner is correct in asserting (Br. 29, 32, 41) that the federal
interest rule may be used against a State only when required by clear
congressional policy -- and, as we explain below (pages 21-28, infra),
that proposition is doubtful -- the federal rule should be applied in
this case.  /8/

   Petitioner's contention founders as well on the requirement that a
federal rule be formulated "where uniformity is indicated as more
appropriate." Standard Oil, 332 U.S. at 309.  The agreements at issue
here were not isolated commercial contracts;  they facilitated a
nationwide program in which Congress imposed generous -- but precise
-- limits on federal disaster contributions.  If local liability rules
applied in actions like this one, the Federal Government would
effectively subsidize some States while charging the others full
freight.  Such a result plainly would be inappropriate in an area
where evenhanded treatment is essential.

   2. Even apart from its inconsistency with the federal program that
gave rise to the contracts in this case, the nature of the state
"no-interest rule" that petitioner seeks to apply makes the use of
that rule "singularly inappropriate here." Clearfield Trust, 318 U.S.
at 367.  This is not a case in which widespread public reliance and
settled expectations would be disrupted by disregarding the state rule
of decision.  Similarly, the proffered state rule does not regulate
private relationships involving "inten(sively) local interests" such
as "family and family-property arrangements." United States v. Yazell,
382 U.S. 341, 349, 352 (1966).  Instead, the state "no-interest" law
proffered by petitioner is a narrow rule that, like identical rules
often applied to benefit other governmental entities, is nothing more
than an element of the State's sovereign immunity.  See State ex rel.
State Building Comm'n v. Moore, 155 W. Va. 212, 236-237, 184 S.E.2d
94, 108 (1971);  Guaranty Trust Co. v. West Virginia Turnpike Comm'n,
144 W. Va. 266, 275-276, 107 S.E.2d 792, 798 (1959).  See generally,
Shaw, slip op. 5;  Miller v. Robertson, 266 U.S. 243, 257 (1924);
United States v. Sherman, 98 U.S. 565, 568 (1878);  Note, Interest in
Judgments Against the Federal Government:  The Need for Full
Compensation, 91 Yale L.J. 297, 302-303 (1981).  /9/

   a. Petitioner insists (Br. 17) that use of this sovereign
immunity-based rule is necessary to accord due respect to the State's
sovereign place in the constitutional structure.  Almost a century
ago, however, the Court made it quite clear that constitutional values
are not furthered by the assertion of a State's sovereign immunity
against the United States.  This conclusion, the Court emphasized,
"does no violence to the inherent nature of sovereignty." United
States v. Texas, 143 U.S. 621, 646 (1892).  To the contrary, the
States are deemed to have waived their sovereign immunity as a defense
in actions brought by the United States at the time that they were
"admitted into the Union upon an equal footing in all respects with
the other States" (ibid.).  See United States v. Louisiana, 339 U.S.
699, 701-702 (1950);  Kansas c. United States, 204 U.S. 331, 342
(1907);  United States v. California, 328 F.2d 729, 732 (9th Cir.),
cert. denied, 379 U.S. 817 (1964).

   As a general matter, then, there are no legitimate state interests
that compel federal courts to refer to state sovereign immunity rules
-- or that make use of those rules presumptively appropriate -- in
actions brought by the United States.  This certainly is no less true
of subsidiary aspects of a State's sovereign immunity, such as the
"no-interest rule" at issue here, than it is of the State's basic
immunity from suit.  The Court has held, for example, that others of
the normal incidents of sovereignty, such as exemption from statutes
of limitations, do not attach to the States in litigation with the
Federal Government.  See, e.g., Block v. North Dakota, 461 U.S. 273,
288-289 (1983).  Compare United States v. Minnesota, 270 U.S. 181, 196
(1926) (state statutes of limitations do not bar suits by the United
States).  See also Block, 461 U.S. at 289 n.25 (citation omitted)
("this Court has never 'recognized sovereign prerogatives of other
governmental units as bars to defenses asserted by the United
States'").  /10/ And the courts of appeals have had no difficulty
concluding that, absent contrary direction from Congress, federal
common law rules relating to the award of interest are fully
applicable in suits by the Federal Government against the States.  See
Pennsylvania v. United States, 781 F.2d 334, 341 (3d Cir. 1986);
United States v. California State Board of Equalization, 650 F.2d
1127, 1132 (9th Cir. 1981), aff'd, 456 U.S. 901 (1982).  /11/ Compare
United States v. California, 655 F.2d 914, 918-919 (9th Cir. 1980)
(United States required to satisfy state claim filing provisions,
because satisfaction of those provisions was an element of the cause
of action rather than of the State's sovereign immunity).  "(I)n light
of our Constitution, which makes the federal law ultimately supreme,
these holdings should not have been surprising." Block, 461 U.S. at
289 (footnote omitted).

   Nor, despite petitioner's assertions to the contrary (Br. 35-36),
is there anything anomalous in recognizing both the Federal
Government's ability to obtain interest from the States and its right
to assert sovereign immunity as a defense to claims for interest by
the States.  The sovereign immunity of the state and federal
governments is not symmetrical;  "(i)t does not follow that because a
State may be sued by the United States without its consent, therefore
the United States may be sued by a State without its consent.  Public
policy forbids that conclusion." Kansas c. United States, 204 U.S. at
342.  The States -- "like all other entities" (Block, 461 U.S. at 280)
-- thus may not bring an action against the Federal Government "in the
absence of an express waiver of (sovereign) immunity by Congress." See
California v. Arizona, 440 U.S. 59, 61-62, 65 (1979);  Minnesota v.
United States, 305 U.S. 382, 387 (1939);  United States v. Minnesota,
270 U.S. at 195.  Because immunity from liability for interest is an
aspect of a government's sovereign immunity, the asymmetry in the
application of federal and state "no-interest rules" is a necessary
consequence of federal supremacy.

   b. This is not to say, of course, that there are no circumstances
in which state or local "no-interest rules" might be relevant in cases
governed by federal law.  In Board of County Commissioners v. United
States, 308 U.S. 343 (1939), the Court -- while emphasizing that
"whatever (interest) rule we fashion is ultimately attributable to the
Constitution, treaties or statutes of the United States, and does not
owe its authority to the law-making agencies of (a State)" (id. at
349-350) -- recognized that the federal courts, in fashioning interest
rules, are "free to take into account appropriate considerations of
'public convenience,'" among a "due regard for local institutions and
local interests" (id. at 351).  /12/ And the Court applied this
principle in United States v. North Carolina, 136 U.S. 211 (1890),
holding that grounds of "public convenience" (id. at 216) dictated the
withholding of postmaturity interest on state bonds purchased by the
United States.  See Board of County Commissioners, 308 U.S. at 352.

   North Carolina, however, also illustrates the limits on this
principle.  That case involved the Federal Government's claim for
postmaturity interest on bonds that it had purchased from North
Carolina in the ordinary marketplace.  See 136 U.S. at 215.  The
United States had assumed the status of a commercial enterprise in the
transaction;  its purchase was no different from purchases made by
private entities, and the bonds it obtained were in fact freely
transferable to other parties (see id. at 221).  In these
circumstances, the State's interest in the uniform administration of
its bond program -- in not, for example, having its liability on a
given, transferable instrument turn on the identity of the party
holding the instrument at the time of suit -- dictated use of a single
state interest rule.  Cf. Clearfield Trust, 318 U.S. at 367 (noting
the federal government's interest in uniform treatment of its
commercial paper).  The Court therefore looked to North Carolina law
in holding interest unavailable (136 U.S. at 218-219, 221-222).  /13/

   Here, in contrast, the claim for interest does not grow out of an
ordinary commercial relationship or affect the administration of a
state program;  it arises, instead, "in the context of a specific
(federal) * * * statutory provision." Little Lake Misere Land Co., 412
U.S. at 592.  West Virginia thus has no interest in the use of state
law apart from its interest in asserting sovereign immunity.  /14/ As
both courts below recognized, the decision in North Carolina
accordingly is inapposite here.  /15/ And with the principle of North
Carolina inapplicable, there is no reason in this case to depart from
the Court's usual approach of applying a federal rule to determine
liability for interest.

 C. Under The Federal Rule, Petitioner Is Liable For Prejudgment
Interest

   The federal rule on the availability of prejudgment interest is
grounded on "the historic judicial principle that one for whose
financial advantage an obligation was assumed or imposed, and who has
suffered actual money damages by another's breach of that obligation,
should be fairly compensated for the loss thereby sustained." Rodgers,
332 U.S. at 373.  Because prejudgment interest is "a component of full
compensation" (General Motors Corp., 461 U.S. at 656 n.10), it
generally is awarded in federal contract actions as a matter of
course, at least where the amount due is liquidated or readily
ascertainable.  See, e.g., Rodgers, 332 U.S. at 373;  Royal Indemnity
Co., 313 U.S. at 296-297;  Miller, 266 U.S. at 257;  Pennsylvania, 781
F.2d at 341;  United States v. Dollar Rent A Car Systems, Inc., 712
F.2d 938, 941 (4th Cir. 1983);  Bituminous Casualty Corp. v. Lynn, 503
F.2d 636, 645 (6th Cir. 1974);  United States v. L.N. White & Co., 359
F.2d 703, 714 (2d Cir. 1966).  See generally General Motors Corp., 461
U.S. at 655-656.  The claim here, which seeks interest from the date
that itemized bills for a sum certain were submitted to the State (see
Pet. App. D25), plainly falls into this category.

   It is true, as petitioner suggests (Br. 34), that interest may be
denied even under the federal rule in extraordinary cases where
considerations of equity make an award inappropriate.  See General
Motors Corp., 461 U.S. at 656-657;  Board of County Commissioners, 308
U.S. at 350;  Ambromovage v. United Mine Workers, 726 F.2d 972,
981-982 (3d Cir. 1984).  But this manifestly is not such a case.
Here, the United States made the expenditures that gave rise to this
suit upon the express request of the State, after receiving repeated
assurances that the State would assume financial responsibility for
the Corps' site preparation activities.  State officials acknowledged
that the requested work was performed expeditiously and
satisfactorily;  Governor Moore actually commended the Corps for
"'providing housing for the thousands of homeless'" at his request
(Pet. App. B21-B22).  And the United States did not sleep on its
rights:  it billed the State promptly, made repeated attempts to
collect, and brought suit -- after delaying at the request of the
State (see id. at D8) -- when it became apparent that the State had no
intention of meeting its obligations (see id. at B26-B29).

   In arguing the equities, petitioner disregards all of these
considerations.  Its contention, instead, essentially reduces to the
claim that the funds in dispute mean more to West Virginia than they
do to the United States (see Pet. Br. 36-38).  /16/ Even if accurate,
however, /17/ this assertion is wholly irrelevant.  The relative size
of the parties never has been held to bear on the propriety of an
award of interest.  Indeed, were the rule otherwise, the United States
-- as well as the States, in virtually all of their litigation --
never would be entitled to interest.  Instead, courts may
appropriately withhold interest on equitable grounds only when the
improper behavior of the claimant or the unusual nature of the claim
indicates that the award of full compensation would be inappropriate.
See generally, General Motors Corp., 461 U.S. at 656-657 & n.11;
Board of County Commissioners, 308 U.S. at 352-353.  That is not the
case here.

   Petitioner also is incorrect in suggesting that an award of
interest would be inconsistent with the purposes of the Disaster
Relief Act.  As explained above (pages 16-20, supra), the Act
specifically allocated certain costs to the States;  because Congress
intended the States to hold the United States harmless for the costs
of site preparation, the congressional purpose plainly would be
furthered by awarding interest on a State's reimbursement of federal
site preparation expenditures.  In any event, the United States spent
more than $30 million to relieve the effects of the Buffalo and
Gilbert Creek Disasters (Pet. App. D19), almost 10 times the amount
that the Corps sought to collect from the State in this suit.  /18/
The Corps' attempt to be made whole for the relatively small portion
of its expenditure devoted to activities that were the State's
responsibility from the outset can hardly be deemed inconsistent with
congressional intent.  In these circumstances, the court of appeals'
correctly concluded that it is "manifest beyond any doubt that the
equities weigh overwhelmingly in favor of the United States" (id. at
D22).

                              CONCLUSION

   The judgment of the court of appeals should be affirmed.

   Respectfully submitted.

   CHARLES FRIED

      Solicitor General

   RICHARD K. WILLARD

      Assistant Attorney General

   LAWRENCE G. WALLACE

      Deputy Solicitor General

   CHARLES A. ROTHFELD

      Assistant to the Solicitor General

   WILLIAM KANTER

   BRUCE G. FORREST

      Attorneys

   JULY 1986

   /1/ Petitioner also erroneously invokes this Court's original
jurisdiction (Br. 2-3).  While this Court has original jurisdiction
over controversies between the United States and a State (see 28
U.S.C. 1251(b)), that jurisdiction is not exclusive.  Under 28 U.S.C.
1345, the federal district courts also have jurisdiction to entertain
suits brought by the United States against a State.  See, e.g., United
States v. California, 328 F.2d 729 (9th Cir.), cert. denied, 379 U.S.
817 (1964).  The United States brought this suit in the district
court, and the case is now before this Court on a writ of certiorari
to the court of appeals.

   /2/ The Act also made provision for the sites to be provided and
prepared by "the owner or occupant of the site who was displaced by
the major disaster" (Section 226(a), 84 Stat. 1752).

   /3/ The district court found it "inconceivable * * * that before
such work could have begun competitive bids would have been required,
detailed written contracts executed, and the approval of no less than
three State officials obtained" (Pet. App. B32-B33).

   /4/ The court found that the primary purpose of the Act was to
provide relief to the victims of natural disasters (Pet. App.
C27-C28).  Against that background, the court held that the equities
favored the State, explaining that the State had not incurred its
obligations through "a truly 'voluntary' act" (id. at C28) and that an
award of interest "would provide an additional and unwarranted burden
or penalty on people who have suffered enough" (id. at C29).

   /5/ The court of appeals affirmed the district court's holding that
the State was bound by its contract (Pet. App. D9-D10).  This Court
limited its grant of certiorari to exclude the State's challenge to
that holding.

   /6/ The court of appeals noted the State's concession that it did
not "'enjoy( ) absolute immunity from prejudgment interest'";  the
State instead argued that "'federal courts are permitted, at least
within the context of a major disaster, to exercise discretion on
whether or not to award prejudgment interest against a state which has
not expressly agreed to pay it'" (Pet. App. D17).

   /7/ Section 226(a) and its implementing regulations authorized
federal authorities to reject the sites proffered by the State and to
perform site preparation work elsewhere at federal expense "(i)f the
Regional Director (of the Office of Emergency Preparedness)
determine(d) it (was) in the public interest to use more economical
and accessible sites" (32 C.F.R. 1710.13(c)(5) (1973);  see 84 Stat.
1752).  No such determination was made in this case, however;  the
sites improved by the Corps were the ones chosen by the State.

   /8/ Petitioner's argument (Br. 21-23) that an award of interest is
barred by Pennhurst State School & Hospital v. Halderman, 451 U.S. 1
(1981), is entirely without merit.  Pennhurst stands for the
proposition that new or unanticipated conditions cannot be attached to
a state's receipt of federal grant funds when doing so "would * * *
impose( ) a 'massive' and 'largely indeterminate' financial obligation
on the States." Bennett v. Kentucky Department of Education, No.
83-1798 (Mar. 19, 1985), slip op. 8 (quoting Pennhurst, 451 U.S. at
24).  See Bell v. New Jersey, 461 U.S. 773, 790 n.17 (1983);
Pennhurst, 451 U.S. at 17.  Pennhurst thus insisted that state
obligations under federal grant programs be interpreted in a
quasi-contractual manner.  Here, of course, the State's obligation is
a contract, which the court of appeals subjected to the usual rules of
contract interpretation.  In any event, whether the State looked
either to its contractual undertaking to reimburse the United States
or to its obligation under Section 226(a) to hold the United States
"without charge," it had reason to anticipate its liability for
interest:  interest is an expected part of a debt liability, rather
than an unanticipated term attached to receipt of funds.  Cf. Kentucky
Department of Education, slip op. 8 (emphasis in original) ("Pennhurst
does not suggest that the Federal Government may recover misused
federal funds only if every improper expenditure has been specifically
identified and proscribed in advance");  Bell, 461 U.S. at 790 n.17
(contrasting the imposition of new conditions on a grant recipient
"with the remedies available against a noncomplying State").

   /9/ This is not a case where the State is seeking to apply either
its general contract law or general rules regarding the availability
of interest;  in the absence of the sovereign immunity barrier that
petitioner seeks to apply here, state law makes prejudgment interest
freely available in West Virginia.  See, e.g., Bell v. Inland Mutual
Insurance Co., 332 S.E.2d 127, 137 (W. Va. 1985), cert. denied, No.
85-380 (Nov. 4, 1985);  Kirk v. Pineville Mobile Homes, Inc., 310
S.E.2d 210 (W. Va. 1983);  Ilosky v. Michelin Tire Corp., 307 S.E.2d
603, 615 (W. Va. 1983).  See also W. Va. Code Section 56-6-27 (1966).

   /10/ The courts also may apply appropriate ancillary remedies
against the States, such as an accounting, when necessary to provide
complete relief to the United States.  See United States v. Louisiana,
339 U.S. 699, 701, 706 (1950).

   /11/ The court of appeals in Pennsylvania v. United States, supra,
ultimately held that the collection of interest from Pennsylvania was
foreclosed by the Debt Collection Act of 1982, 31 U.S.C. (& Supp. II)
3701 et seq., a statute that is inapplicable here because the
contracts giving rise to petitioner's liability were consummated prior
to that Act's effective date.  See 31 U.S.C. 3717(g)(2).  Petitioner
nevertheless suggests (Br. 23-24 & n.3) that Pennsylvania and the Debt
Collection Act both reflect "the national policy of not awarding
prejudgment interest against states" (Br. 24 n.3).  In fact, however,
the court in Pennsylvania concluded that nonstatutory federal law --
which concededly is controlling in this case -- provides "'that when
the damages resulting from a breach of contract are ascertainable with
mathematical precision, prejudgment interest is awardable as of
right'";  the court added that "(a) similar rule applies in claims by
the United States against state entities" (781 F.2d at 341).  The
court held interest unavailable only because it concluded that the
Debt Collection Act "abrogate(d) the common law" (id. at 341 n.10;
(emphasis added);  see id. at 342).  See Also Perales v. United
States, 598 F. Supp. 19 (S.D.N.Y.), aff'd, 751 F.2d 95 (2d Cir. 1984).
 And even this conclusion (which, given the inapplicability of the
Debt Collection Act here, is of no help to petitioner), is open to
question:  the Comptroller General and the Justice Department, the
agencies charged with administering the Debt Collection Act, have
promulgated joint regulations interpreting it to preserve the Federal
Government's common law authority to seek interest from the states.  4
C.F.R. 102.13(i).

   /12/ Petitioner, however, places more weight on Board of County
Commissioners than that case can bear.  Petitioner's assertions to the
contrary (Br. 28-29) notwithstanding, the Court did not apply a state
"no-interest rule" in that case.  While the Court discussed the
propriety of looking to state law (308 U.S. at 351-352), it ultimately
applied the federal common law interest rule, holding on the facts
before it that an award of interest against the local government
defendant would be inequitable because the United States delayed
unreasonably in bringing suit (id. at 352-353).  See General Motors
Corp., 461 U.S. at 657 n.11 (citing Board of County Commissioners for
the proposition that interest may be unavailable when the delay in
bringing suit is unreasonable).  Nor does even the reasoning of Board
of County Commissioners indicate whether state "no-interest rules"
should be used in contract actions brought by the United States (see
Pet. Br. 28).  That case involved a suit initiated by the United
States on behalf of an Indian whose land had been improperly subjected
to local taxes (see 308 U.S. at 348-349).  In considering the
availability of interest, the Court found it relevant that the rights
asserted by the United States were those of an individual rather than
of the Federal government, expressing its "concern( ) with the
interplay between the rights of Indians under Federal guardianship and
the local repercussion of those rights" (id. at 351).  See id. at
350-351;  id. at 353-354 (opinion of Black, J.) (footnote omitted)
(noting that congressional "policy has progressively subjected Indians
to the laws under which all other citizens must live in the Indians'
States of residence," so that "(t)he failure of Congress to stipulate
that a State -- as here -- must pay interest to an Indian when the
State law permits interest to no one, is entirely consistent with the
congressional policy of steadily extending the operation of the
States' laws over their resident Indians").  The principles announced
in Board of County Commissioners accordingly provide little guidance
for suits brought by the federal government on its own behalf.

   /13/ The Court also cited general law on sovereign immunity,
including cases recognizing the Federal Government's immunity from
liability for interest (136 U.S. at 216-218), in making the
observation that interest "is not to be awarded against a sovereign
government" (id. at 216;  see id. at 221).  To the extent that this
analysis was intended to recognize the assertion of a State's
sovereign immunity against the United States, it cannot be reconciled
with this Court's subsequent decisions.  See pages 22-24, supra.

   /14/ In contrast, United States v. Yazell, supra, upon which
petitioner largely relies (Br. 29-33), involved the assertion of state
coverture rules as a defense to the Federal Government's attempts to
collect on a Small Business Administration loan.  These rules, the
Court explained, involved "the inten(sively) local interests of family
property and the protection * * * of married women" (382 U.S. at 349;
see id. at 352, 353).  Indeed, the contract at issue in Yazell was
"negotiated with specific reference to (State) law" (id. at 345-346);
when it entered into the contract, the Federal Government evidently
had no expectation that the coverture defense would be inapplicable
(id. at 347-348).  The United States in Yazell -- like petitioner here
-- thus was attempting to avoid the consequences of its bargain.

   /15/ The court of appeals noted that "(i)t would have been unfair
and anomalous (in North Carolina) * * * to have allowed interest to
the United States on its small ownership of bonds, acquired * * * in
an open bond market, when, under the North Carolina law, all other
bond holders would have been barred from recovery of interest" (Pet.
App. D15;  see also id. at C12-C13).

   /16/ Petitioner also suggests (Br. 35-36) that it is inequitable
for the United States to seek interest from the States when the
Federal Government is not liable for interest to the States.  As we
explain above (pages 24-25, supra), however, this situation is a
function of the United States' sovereign immunity.  In any event, if a
government's immunity to claims for interest by the other party to the
lawsuit made it "inequitable" within the meaning of the federal rule
for that government to receive interest, neither the United States nor
the States ever would obtain interest in suits against private
parties.  That plainly is not the law.  We also note that the United
States has obligated itself to make prompt payments on its contracts
(see the Prompt Payments Act, 31 U.S.C. (& Supp. II) 3901 et seq.),
and to provide interest when it is found liable for disputed contract
amounts (see the Contract Disputes Act, 41 U.S.C. 611;  see also 31
U.S.C. (& Supp. II) 3902).

   /17/ As the court of appeals noted, "the United States has been
without the money due it by the State and, because of deficits in its
revenue over expenditures, the United States during the period of the
State's delinquency has been forced to borrow at high rates of
interest" (Pet. App. D21-D22).

   /18/ In contrast, as the court of appeals explained, West Virginia
"had not, prior to this suit, made any contribution" (Pet. App. D19).
To the contrary, the State received approximately $1 million in
settlement of a suit against a private firm for damages caused by
collapse of the Buffalo Creek coal dam (id. at D21).