Source: https://supreme.justia.com/cases/federal/us/507/529/
Timestamp: 2019-04-20 02:17:09+00:00

Document:
UNITED STATES ET AL. v. TEXAS ET AL.
States participating in the Food Stamp Program receive from the United States Department of Agriculture coupons that they distribute to qualified individuals and households. If they distribute the coupons through the mail, they must reimburse the Federal Government for part of the replacement cost for any coupons that are lost or stolen. Texas, which contractually bound itself to comply with all federal regulations governing the program, incurred substantial mail issuance losses and was informed that prejudgment interest would begin to accrue on its debt unless payment was made within 30 days. Mter being denied administrative relief, Texas filed suit against the United States, arguing, inter alia, that the Debt Collection Act of 1982 (Act) abrogated the United States' common-law right to collect prejudgment interest on debts owed to it by the States. The District Court granted summary judgment in favor of the United States, but the Court of Appeals reversed.
Held: The Act left in place the States' federal common-law obligation to pay prejudgment interest on debts owed to the Federal Government. Pp.533-539.
(a) It is a longstanding rule that a party owing debts to the Federal Government must pay prejudgment interest where the underlying claim is a contractual obligation to pay money. Also longstanding is the principle that statutes invading the common law are to be read with a presumption favoring retention of existing law except when a statutory purpose to the contrary is evident. This presumption is not limited to state common law or federal maritime law. Pp. 533-534.
ity-reinforces this reading of its plain language. Texas' proposed reading, however, would give delinquent States less incentive to pay their debts. Neither the fact that the Food Stamp Act has a mechanism to collect debts nor the fact that Congress did not see the States as the root of the debt collection problem when it passed the Debt Collection Act indicates that Congress meant to relieve the States of their common-law obligation. Texas incorrectly argues that the reimbursement requirement is not subject to prejudgment interest because it is a penalty rather than a contractual obligation. Rodgers v. United States, 332 U. S. 371, 374-376, distinguished. pp. 534-539.
REHNQUIST, C. J., delivered the opinion of the Court, in which WHITE, BLACKMUN, O'CONNOR, SCALIA, KENNEDY, SOUTER, and THOMAS, JJ., joined. STEVENS, J., filed a dissenting opinion, post, p. 539.
Thomas G. Hungar argued the cause for petitioners.
With him on the briefs were Solicitor General Starr, Acting Solicitor General Bryson, Assistant Attorney General Gerson, Deputy Solicitor General Roberts, William Kanter, and Bruce G. Forrest.
James C. Todd argued the cause for respondents. With him on the brief were Dan Morales, Attorney General of Texas, Will Pryor, First Assistant Attorney General, Mary F. Keller, Deputy Attorney General, Edwin N. Horne and Christopher Johnsen, Assistant Attorneys General, and Jorge Vega.
In this case we decide the question left open in West Virginia v. United States, 479 U. S. 305, 312-313, n. 5 (1987): whether Congress intended the Debt Collection Act of 1982 to abrogate the United States' federal common-law right to collect prejudgment interest on debts owed to it by the States. We hold that it did not.
1 The regulatory tolerance level in place for the mail issuance losses in this case was 0.5% of each reporting area's total mail issuances for each calendar quarter. 7 CFR § 274.3(c)(4)(i) (1986).
"The basic components of the State Plan of Operation are the Federal/ State Agreement, the Budget Projection Statement, and the Program Activity Statement .... The Federal/State Agreement is the legal agreement between the State and the Department of Agriculture. This Agreement is the means by which the State elects to operate the Food Stamp Program and to administer the program in accordance with the Food Stamp Act of 1977, as amended, regulations issued pursuant to the Act and the FNSapproved State Plan of Operations."
Subsection (b)(1) sets out the exact wording of the preprinted Federal!
losses, in part because United States Postal employees stole food stamps that had been mailed by the Texas Department of Human Services to qualified households. Because those losses exceeded the applicable tolerance level, Texas was bound to reimburse the Federal Government for the excess losses. The FNS notified Texas of its debt in the amount of $412,385, and informed it that prejudgment interest would begin to accrue on the balance unless payment was made within 30 days.
Texas sought administrative relief in the form of a waiver of liability. After the Food Stamp Appeals Board denied the requested relief, Texas sued the United States in the United States District Court for the Western District of Texas. In addition to challenging the Appeals Board's refusal to grant a waiver of liability, Texas argued that the Debt Collection Act precluded the imposition of prejudgment interest on any amount it owed the Federal Government. The District Court granted summary judgment in favor of the United States on both issues. With respect to the prejudgment interest issue, the District Court adopted the approach taken by the Court of Appeals for the Tenth Circuit in Gallegos v. Lyng, 891 F.2d 788 (1989), which held that the Government's common-law right to prejudgment interest on debts owed to it by the States survived enactment of the Debt Collection Act. See Civ. Action Nos. A-87-CA-774, A-88-CA-820 (WD Tex., Nov. 13, 1990).
and FNS (USDA) further agree to fully comply with any changes in Federallaw and regulations. This agreement may be modified with the mutual written consent of both parties.
"The State agrees to: 1. Administer the program in accordance with the provisions contained in the Food Stamp Act of 1977, as amended, and in the manner prescribed by regulations issued pursuant to the Act; and to implement the FNS-approved State Plan of Operation." 7 CFR § 272.2(b)(1) (1992).
3 The Tenth Circuit holds that the Debt Collection Act of 1982 did not abrogate the Federal Government's common-law right to collect prejudgment interest against the States. Gallegos v. Lyng, 891 F.2d 788 (1989). The Second, Third, and Eighth Circuits all hold to the contrary. See Perales v. United States, 751 F.2d 95 (CA2 1984) (per curiam); Pennsylvania Dept. of Public Welfare v. United States, 781 F.2d 334 (CA3 1986); Arkansas by Scott v. Block, 825 F.2d 1254 (CA8 1987).
Comm'rs in West Virginia, supra, and upheld the assessment of prejudgment interest on a debt owed by West Virginia to the United States.
Texas argues that this presumption favoring retention of existing law is appropriate only with respect to state common law or federal maritime law. Although a different standard applies when analyzing the effect of federallegislation on state law, id., at 316-317, there is no support in our cases for the proposition that the presumption has no application to federal common law, or for a distinction between general federal common law and federal maritime law in this regard. We agree with Texas that Congress need not "affirmatively proscribe" the common-law doctrine at issue. Brief for Respondents 3-4; see Milwaukee, supra, at 315. But as we stated in Astoria, supra, "courts may take it as a given that Congress has legislated with an expectation that the [common law] principle will apply except 'when a statutory purpose to the contrary is evident.''' 501 U. S., at 108 (quoting Isbrandtsen, supra, at 783).
United States Government claim owed by a person. " 31 U. S. C. § 3717(a)(1) (emphasis added). Section 3701, in turn, provides that the term "'person' does not include an agency of the United States Government, of a State government, or of a unit of general local government." § 3701(c). Texas argues that this exemption clearly establishes Congress' intent to relieve the States of their common-law obligation to pay prejudgment interest. We disagree.
4 Both Texas and the Court of Appeals rely on Congress' authority to impose interest obligations on the States through specific statutes, such as the Medicaid Act, 42 U. S. C. § 1396b(d)(5), and the Social Security Act, 42 U. S. C. § 418(j) (1982 ed.), to support the proposition that the Debt Collection Act extinguished the Federal Government's common-law right to collect prejudgment interest. Both statutes, however, codified and made mandatory the common-law right to collect prejudgment interest at a specified interest rate. Like the Debt Collection Act, these statutes changed the common law. Congress' obvious desire to enhance the common law in specific, well-defined situations does not signal its desire to extinguish the common law in other situations.
Our conclusion that the States remain subject to commonlaw prejudgment interest liability is supported by the fact that the Debt Collection Act is more onerous than the common law. Section 3717(a) requires federal agencies to collect prejudgment interest against persons and specifies the interest rate.5 The duty to pay prejudgment interest under the common law, however, is by no means automatic. Before imposing prejudgment interest, the courts must weigh the competing federal and state interests. West Virginia, 479 U. S., at 309-311; Board of Comm'rs, 308 U. S., at 350. And instead of imposing a preestablished rate of interest, the district courts retain discretion to choose the appropriate rate in a given case. Unlike the common law, § 3717 also imposes processing fees and penalty charges, 31 U. S. C. §§ 3717(e)(1), (e)(2). Given these differences, it is logical to conclude that the Act was intended to reach only one subset of potential debtors-persons-and to leave the other subset alone. It is reasonable to apply more stringent requirements to debts owed by private persons and to keep the more flexible common law in place for debts owed by state and local governments.
the Medicaid Act and the Social Security Act provisions, the Food Stamp Act of 1977 did not merely codify the common law without change. Rather, it contains a mandatory provision requiring prejudgment interest at a specified rate.
5 The interest rate required under § 3717 is "the average investment rate for the Treasury tax and loan accounts for the 12-month period ending on September 30 of each year, rounded to the nearest whole percentage point." 31 U. S. C. § 3717(a)(1).
gress and elsewhere over the increasing backlog of unpaid debts owed the federal government"). This suggests that Congress passed the Act in order to strengthen the Government's hand in collecting its debts. Yet under the reading proposed by Texas and the Court of Appeals, the Act would have the anomalous effect of placing delinquent States in a position where they had less incentive to pay their debts to the Federal Government than they had prior to its passage.
The Court of Appeals reasoned that the States would not have an incentive to delay payment of their debts because the Food Stamp Act makes state agencies liable for actual losses caused by coupon shortages or unauthorized issuances, and permits the Federal Government to recover these debts through an administrative offset procedure. 951 F. 2d, at 650. But the Debt Collection Act applies to all federal agencies, not just the FNS. Thus, the existence of a mechanism in the Food Stamp Act allowing the FNS to collect its debts does nothing to encourage prompt payment of debts governmentwide. That the FNS may have already possessed adequate sanctions to compel payment is not a reason to conclude that the generic language in the Debt Collection Act was meant to abrogate the existing common-law obligation of the States generally.
Texas concedes that Congress intended to enhance the Government's debt collection efforts by passing the Act. It argues, however, that Congress was concerned primarily with debts owed by private persons. Accordingly, runs the argument, Congress meant to relieve the States of their duty to pay interest because the States were not the root of the debt collection problem.
low that because Congress did not tighten the screws on the States, it therefore intended that the screws be entirely removed. The more logical conclusion is that it left the screws in place, untightened.
For these reasons, we hold that the Debt Collection Act left in place the federal common law governing the obligation of the States to pay prejudgment interest on debts owed to the Federal Government.
created, the rule in Pennhurst does not apply. See Bell v. New Jersey, 461 U. S. 773, 790, n. 17 (1983).
1 "Interest, when not stipulated for by contract, or authorized by statute, is allowed by the courts as damages for the detention of money or of property, or of compensation, to which the plaintiff is entitled; and, as has been settled on grounds of public convenience, is not to be awarded against a sovereign government, unless its consent to pay interest has been manifested by an act of its legislature, or by a lawful contract of its executive officers. United States v. Sherman, 98 U. S. 565; Angarica v. Bayard, 127 U. S. 251, 260, and authorities there collected; In re Gosman, 17 Ch. D. 771." United States v. North Carolina, 136 U. S., at 216.
2 The individual States retain no sovereign immunity against the Federal Government. United States v. Texas, 143 U. S. 621 (1892).
amount recovered. It accrues only after the recovery has been had. Moreover, whenever interest is allowed either by statute or by common law, except in cases where there has been a contract to pay interest, it is allowed for delay or default of the debtor. But delay or default cannot be attributed to the government. It is presumed to be always ready to pay what it owes." United States v. Sherman, 98 U. S. 565, 567-568 (1879) (emphasis added). See also United States v. North American Transportation & Trading Co., 253 U. S. 330, 336 (1920).
4 See n. 3, supra.
5 See, e. g., Attorney General v. Cape Fear Navigation Co., 37 N. C. 444, 454 (1843) ("[T]he general rule is, that the State never pays interest, unless she expressly engages to do so"); State v. Thompson, 10 Ark. 61 (1849).
6 Title 31 U. S. C. § 3717(a) requires the appropriate government official to charge interest "on an outstanding debt on a United States Government claim owed by a person," but 31 U. S. C. § 3701(c) provides that for purposes of this section the term "'person' does not include an agency of the United States Government, of a State government, or of a unit of general local government."
expect Congress to state clearly any intent to reshape that terrain. Before we can apply this reluctance to infer legislative abrogations of the common law, however, we must determine what that terrain was-or at least how it might have been perceived-when Congress acted; Congress cannot think it necessary, and we should not expect it, to state clearly an intent to abrogate a common-law rule that does not exist.
on a "clean slate," ante, at 534, when it decided to exclude the State from its definition of the class of persons who must pay interest on debts to the United States. There was no occasion for Congress to specifically abrogate a principle that it had no reason to think stood in its way.
ings before the House Committee on the Judiciary during the House's consideration of the Debt Collection Act of 1981, H. R. 4614.
"In response to these concerns, on September 27, 1982, I proposed an amendment to S. 1249. This amendment, UP amendment 1299, amended provisions in Sections 10 and 11 of the Act, stating that 'the term "person" does not include any agency of the United States, or any state or local government.' This provision effectively took federal agencies, states and local governments out of the Act, but retained sufficient flexibility to permit Congress to legislatively pick and choose according to circumstances, those situations in which the government might assess interest against those entities exempted by the Act. As enacted, the Debt Collection Act of 1982 appears clear on this point. It was not anticipated that federal agencies would attempt to invoke common law authority, which, if it exists with respect to interest assessment and administrative offset against states and local governments, was abrogated by sections 10(e)(2) and 11(e)(8) of the Act." Letter of Nov. 21, 1983, from Senator Charles H. Percy to the Comptroller General (emphasis added). See Texas v. United States, 951 F.2d 645, 649-650 (CA5 1992); Pennsylvania Dept. of Public Welfare v. United States, 781 F.2d 334, 341, n. 10 (CA3 1986). Of course, the significance of a comment by an individual legislator is discounted when made" 'after passage of the Act,'" see Bread Political Action Committee v. FEC, 455 U. S. 577, 582, n. 3 (1982). This Court's use of the 1987 opinion in the West Virginia case to describe the state of the common law in 1982 should be similarly discounted.
was any aspect of our decision in Board of Comm'rs "reaffirmed," ante, at 533, in West Virginia, supra.
In fact, in West Virginia, we rejected the balancing of equities that Board of Comm'rs had suggested might be the only basis for charging a State with prejudgment interest.8 There, the State of West Virginia had refused to reimburse the Federal Government for costs advanced to it under the Disaster Relief Act of 1970. The Court held that "any rule exempting a 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, cf. Library of Congress v. Shaw, 478 U. S. 310 (1986), but also does not represent a policy the federal courts are obliged to further." 479 U. S., at 311-312 (footnotes omitted). This was the first statement by this Court suggesting that the States might be generally liable for prejudgment interest on the contractual claims brought by the Federal Government. And, even though we came close to saying in West Virginia that such interest is generally available, we did not go that far. Even in 1987-five years after the Debt Collection Act was passed-it was not clear to us, to Congress, or to the States that the obligation of a State to pay prejudgment interest to the Government would extend to a typical contract claim.
8 "The cases teach that interest is not recovered according to a rigid theory of compensation for money withheld, but is given in response to considerations offairness. It is denied when its exaction would be inequitable. United States v. Sanborn, 135 U. S. 271, 281; Billings v. United States, 232 U. S. 261." Board of Commr's of Jackson County v. United States, 308 U. S. 343,352 (1939). In 1987 the Court rejected the argument that "whether interest had to be paid depended on a balancing of equities between the parties." West Virginia v. United States, 479 U. S., at 311, n.3.
to demand prejudgment interest from all private parties in every case.9 Even if such an equation were well advised, which it may well be, it would say nothing about whether Congress had any reason to know in 1982 that the common law was moving in that direction, much less that it had already arrived there. Yet the Court supports today's decision because the 97th Congress did not clearly state its intention to abrogate a rule that we now make clear for the first time.
My point, in sum, is not that the States had an absolute common-law immunity from a claim for prejudgment interest in 1982; it is only that the State's obligation to pay such interest was so much less than a confirmed rule that we cannot say that the 1982 enactment "left [it] in place," ante, at 539. "[F]avoring the retention of long-established and familiar principles," Isbrandtsen Co. v. Johnson, 343 U. S. 779, 783 (1952), does not mean favoring the retention of rules that have not yet fallen into place.
9Whatever it says about reserving discretion about when interest should be imposed, and at what rate, ante, at 536, the Court has tacitly authorized an extension of the rule on which we relied in West Virginia by affirming its application to a claim for prejudgment interest on a strict liability, loss-spreading provision of the Food Stamp Program.

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