Source: https://supreme.justia.com/cases/federal/us/479/305/
Timestamp: 2019-04-25 17:47:36+00:00

Document:
The President declared floods that occurred in 1972 in West Virginia to be "major disasters," qualifying the affected areas for federal relief under the Disaster Relief Act of 1970 (DRA) (later repealed). Section 226(a) of the DRA provided that any mobile home or temporary housing for displaced persons was to be placed on a site provided by the State "without charge to the United States." In the aftermath of the disasters here, the Army Corps of Engineers, at the State's request, prepared sites for mobile homes and, in late 1972 and early 1973, billed the State for such services. The State acknowledged the bills, but failed to make any payment. After delaying at the State's request, the United States brought suit against the State in 1978, seeking to recover site preparation costs plus prejudgment interest. The District Court held that the State was contractually obligated to the Corps for site preparation services, but denied the United States' motion for an order of prejudgment interest on the debt. The Court of Appeals affirmed the District Court's holding that the State was contractually obligated on the debt, but reversed the determination that the State was not liable for prejudgment interest.
between the State and Federal Governments. Section 226(a) reflects the statute's allocative intent that the Federal Government not bear the cost of site preparation for temporary housing, and prejudgment interest is an element of complete compensation to the Federal Government. The State asserts no interest that would justify releasing it of its obligation to compensate the Federal Government fully. Because States have no sovereign immunity as against the Federal Government, any state rule exempting the sovereign from the payment of prejudgment interest not only does not apply of its own force to the State's obligations to the Federal Government, but also does not represent a policy that the Federal Government is obliged to further. Pp. 479 U. S. 308-313.
The issue in this case is whether the State of West Virginia is liable for prejudgment interest on a debt arising from a contractual obligation to reimburse the United States for services rendered by the Army Corps of Engineers.
was no additional loss of life, the "Gilbert Creek disaster" caused substantial property damage.
"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."
42 U.S.C. § 4436 (1970 ed.).
the outstanding debt. [Footnote 1] The District Court denied the motion. It held that the appropriate analysis required an examination of the congressional purpose underlying the DRA and the relative equities between the parties. After completing that analysis, the District Court concluded that the State should not be liable for prejudgment interest. Civ.Action No. R-78-2049 (SD W.Va. Jan. 28, 1983).
The United States Court of Appeals for the Fourth Circuit affirmed the District Court's holding that the State was contractually obligated on the debt, but reversed the determination that the State was not liable for prejudgment interest. 764 F.2d 1028 (1985). It held that the question was governed by federal law, under which prejudgment interest was allowable as a matter of right in a breach-of-contract action where the amount due was liquidated, ascertained, or agreed to. Id. at 1030-1031. The Court of Appeals rejected the District Court's conclusion that the determination whether prejudgment interest was owing depended on a balancing of equities, but held that, even if it were to apply the balancing test, the United States would prevail. Id. at 1032-1033. It remanded the case to the District Court to enter an award of prejudgment interest. We granted certiorari, limited to the question whether West Virginia was properly required to pay prejudgment interest. 475 U.S. 1009 (1986). We affirm.
Royal Indemnity Co. v. United States, 313 U. S. 289, 313 U. S. 296 (1941); see also Clearfield Trust Co. v. United States, 318 U. S. 363, 318 U. S. 366-367 (1943). While there are instances in which state law may be adopted as the federal rule of decision, see United States v. Yazell, 382 U. S. 341 (1966), this case presents no compelling reason for doing so. A single nationwide rule would be preferable to one turning on state law, and the incorporation of state law would not give due regard to the federal interest in maintaining the apportionment of responsibility Congress devised in the DRA. Finally, application of a federal rule would not "disrupt commercial relationships predicated on state law," United States v. Kimbell Foods, Inc., 440 U. S. 715, 440 U. S. 729 (1979) (footnote omitted), since state law would not of its own force govern contracts between a State and the Federal Government.
under state law, entitled to interest on tax refunds, id. at 308 U. S. 349, the Court concluded that individuals whose rights to a state tax refund arose under federal law should not be put in a better position than taxpayers whose rights arose under state law. Id. at 308 U. S. 352. The Court further reasoned that it would be inequitable to award interest because the United States had not moved for eight years to collect the money owed by the county. Ibid.
The amount sought was $6,783,098.09 through October 18, 1982, plus $2,841.26 for every day thereafter until judgment was entered. App. to Pet. for Cert. C-3, n. 2.
Prejudgment interest serves to compensate for the loss of use of money due as damages from the time the claim accrues until judgment is entered, thereby achieving full compensation for the injury those damages are intended to redress. See Comment, Prejudgment Interest: Survey and Suggestion, 77 Nw.U.L.Rev. 192 (1982).
The District Court held that whether interest had to be paid depended on a balancing of equities between the parties; the Court of Appeals rejected such approach, as do we. This is not to say that an equitable consideration such as laches cannot bar an otherwise valid claim for interest, see Board of Comm'rs of Jackson County v. United States, 308 U. S. 343, 308 U. S. 352-353 (1939).
Petitioners contend that United States v. North Carolina, 136 U. S. 211 (1890), establishes that a State may not be liable for interest, even to the United States, unless it consents either by statute or in a form authorized by statute. That case was decided before United States v. Texas, 143 U. S. 621 (1892), in which this Court held dispositively that States retain no sovereign immunity as against the Federal Government. We do not speculate as to whether the result in United States v. North Carolina could have been sustained on a rationale other than the one the Court articulated there.
West Virginia does not have a general policy against prejudgment interest. Under West Virginia law, such interest has been available by statute in contract actions between private parties since 1868. See W.Va.Code § 56-6-27 (1966) (the jury in all contract actions "shall find the aggregate of principal and interest due at the time of the trial"); W.Va.Code, Ch. 131, § 14 (1923) (same); W.Va.Code, Ch. 120, § 14 (1882) (same); W.Va.Code, Ch. 131, § 14 (1868) (same). Moreover, in 1981, W.Va.Code § 56-6-31 was amended to provide for prejudgment interest in cases other than contract actions, except where otherwise provided by law, where a judgment provided for special damages as defined in the statute, or liquidated damages. W.Va.Code § 56-6-31 (Supp. 1986).
We decline to attribute any significance for purposes of this case to the Act of Jan. 12, 1983, Pub.L. 97-452, 96 Stat. 2467. This statute prescribes the interest payable by "person[s]" to the Federal Government, 31 U.S.C. § 3717(a)(1), but excludes from the definition of "person" any "agency . . . of a State government, or of a unit of general local government." 31 U.S.C. § 3701(c). As stated in § 3717(g)(2), this statute does not apply to claims arising under contracts entered into before October 25, 1982, and therefore has no force here. We can draw no inference about Congress' comprehension of the federal common law of interest from its enactment, without any discernible legislative history, of a definitional section excluding state agencies from those "persons" statutorily required to pay interest on debts owed to the Federal Government. Moreover, we venture no opinion regarding the question whether this enactment was intended to abrogate or leave intact the federal common law governing when a State must pay interest to the Federal Government. See Pennsylvania Dept. of Public Welfare v. United States, 781 F.2d 334, 341-342 (CA3 1986); Perales v. United States, 598 F.Supp. 19, 23-24 (SDNY), aff'd, 751 F.2d 95 (CA2 1984) (per curiam).

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