United States v. Texas

• Decision Date: 05 April 1993
• Docket Number: No. 91-1729,91-1729
• Citation: 113 S.Ct. 1631,123 L.Ed.2d 245,507 U.S. 529
• Parties: UNITED STATES, et al., Petitioners v. TEXAS et al
• Court: U.S. Supreme Court

507 U.S. 529

113 S.Ct. 1631

123 L.Ed.2d 245

UNITED STATES, et al., Petitioners

v TEXAS et al.

No. 91-1729.

Argued March 1, 1993.

Decided April 5, 1993.

Syllabus ^*

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. After 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. ____.

(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. ____.

(b) The Act is silent as to the States' obligations to pay prejudgment interest. That the Act applies only to debts owed by a "person" establishes only Congress' intent to exempt the States from the obligation to pay interest in accordance with the Act's mandatory provisions, not an intent to relieve them of their common law obligation. Given the differences between the Act which requires federal agencies to collect prejudgment interest at a pre-established rate—and the common law —which gives federal courts flexibility in determining whether to impose interest and the appropriate rate—it is logical to conclude that the Act was intended to reach only private debtors and to leave the States alone. The Act's purpose—to enhance the Government's debt collection ability—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, 68 S.Ct. 5, 7-8, 92 L.Ed. 3, distinguished. Pp. ____.

951 F.2d 645 (CA 5 1992), reversed.

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.

Thomas G. Hungar, Los Angeles, CA, for petitioners.

James C. Todd, Austin, TX, for respondents.

Chief Justice REHNQUIST delivered the opinion of the Court.

In this case we decide the question left open in West Virginia v. United States, 479 U.S. 305, 312-313, n. 5, 107 S.Ct. 702, 707, n. 5, 93 L.Ed.2d 639 (1987): whether Congress intended the Debt Collection Act of 1982 (Act) 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.

Texas incurred the instant debts as a result of participation in the Food Stamp Program, 78 Stat. 703, as amended, 7 U.S.C. § 2011 et seq. Under that program, the Food and Nutrition Service (FNS) of the United States Department of Agriculture provides food stamp coupons to participating States, and the States then distribute the coupons to qualified individuals and households. §§ 2013(a), 2014. Regulations implementing the Food Stamp Program permit participating States to distribute the coupons either over-the-counter or through the mail. 7 CFR § 274.3(a) (1986); 7 CFR § 274.3(a)(3) (1992). While mail issuance generally is cheaper and more convenient, States that choose to use that distribution method must reimburse the Federal Government for a portion of the replacement cost for any lost or stolen coupons. 7 U.S.C. § 2016(f). Specifically, a State must reimburse the Government for all such losses above a "tolerance level" set by regulation.¹

Texas, through its Department of Human Services, contractually bound itself to comply with all federal regulations governing the program. See 7 CFR §§ 272.2(a)(2), 272.2(b)(1) (1986).² Texas incurred substantial mail issuance 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).

The Court of Appeals for the Fifth Circuit affirmed the District Court's decision concerning waiver, but reversed its decision concerning prejudgment interest. 951 F.2d 645 (1992). Relying on the language of the Debt Collection Act, the Court held that the "Act is not silent concerning whether or not state obligations should be subject to prejudgment interest. The Act specifically excludes states from the payment of interest." Id., at 651. Because Congress did not impose interest through the specific provisions of the Food Stamp Act "during the time period relevant in this case, the Courts are not free to 'supplement' Congress' enactment." Ibid. (quoting Mobil Oil Corp. v. Higginbotham, 436 U.S. 618, 625, 98 S.Ct. 2010, 2015, 56 L.Ed.2d 581 (1978)). The Court rejected the argument that abrogation is inconsistent with the Act's purpose of enhancing the Government's ability to collect its debts. In the Court's view, the Federal Government could enforce its claims for unpaid mail issuance losses through the offset procedures built into the Food Stamp Act. Because of a split among the Courts of Appeals on this question, we granted certiorari, 506 U.S. ----, 113 S.Ct. 50, 121 L.Ed.2d 20 (1992), and now reverse.³

It is a "longstanding rule that parties owing debts to the Federal Government must pay prejudgment interest where the underlying claim is a contractual obligation to pay money." West Virginia v. United States, 479 U.S., at 310, 107 S.Ct., at 706 (citing Royal Indemnity Co. v. United States, 313 U.S. 289, 295-297, 61 S.Ct. 995, 997-998, 85 L.Ed. 1361 (1941)). In Board of Comm'rs of Jackson County v. United States, 308 U.S. 343, 60 S.Ct. 285, 84 L.Ed. 313 (1939), we held that this common law right extends to debts owed by state and local governments, but cautioned that a federal court considering the question in an individual case should weigh the federal and state interests involved. We reaffirmed Board of Comm'rs in West Virginia, supra, and upheld the assessment of prejudgment interest on a debt owed by West Virginia to the United States.

Just as longstanding is the principle that "[s]tatutes which invade the common law . . . are to be read with a presumption favoring thr retention of long-established and familiar principles, except when a statutory purpose to the contrary is evident." Isbrandtsen Co. v. Johnson, 343 U.S. 779, 783, 72 S.Ct. 1011, 1014, 96 L.Ed. 1294 (1952); Astoria Federal Savings & Loan Assn. v. Solimino, 501 U.S. ----, ----, 111 S.Ct. 2166, 2168-2170, 115 L.Ed.2d 96 (1991). In such cases, Congress does not write upon a clean slate. Astoria, supra, at ----, 111 S.Ct., at 2167-2168. In order to abrogate a common law principle, the statute must "speak directly" to the question addressed by the common law. Mobil Oil Corp. v. Higginbotham, supra, 436 U.S., at 625, 98 S.Ct., at 2015; Milwaukee v. Illinois, 451 U.S. 304, 315, 101 S.Ct. 1784, 1791, 68 L.Ed.2d 114 (1981).

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 federal legislation on state law, Milwaukee, supra, at 316-317, 101 S.Ct., at 1792-1793, there is no support in our cases for the proposition that the presumption has no application to federal common law, or for a distinction...