| Opinion [ Souter ] | Concurrence [ Breyer ] | Syllabus | Dissent [ Rehnquist ] | Concurrence [ Scalia ] |
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No.
UNITED STATES, PETITIONER v.
on writ of certiorari to the united states court of appeals for the federal circuit
[
Justice
I join the plurality opinion because, in my view, that opinion is basically consistent with the following understanding of what the dissent and the Government call the "unmistakability doctrine." The doctrine appears in the language of earlier cases, where the Court states that
"sovereign power, even when unexercised, is an enduring presence that governs all contracts subject to the sovereign's jurisdiction, and will remain intact unless surrendered in unmistakable terms." Merrion v. Jicarilla Apache Tribe, 455 U.S. 130, 148 (1982) (emphasis added).
See also United States v. Cherokee Nation of Okla., 480 U.S. 700, 706-707 (1987); Bowen v. Public Agencies Opposed to Social Security Entrapment, 477 U.S. 41, 52-53 (1986). The Government and the dissent believe that this language normally shields the Government from contract liability where a change in the law prevents it from carrying out its side of the bargain. In my view, however, this language, while perhaps appropriate in the circumstances of the cases in which it appears, was not intended to displace the rules of contract interpretation applicable to the Government as
well as private contractors in numerous ordinary cases, and in certain unusual cases, such as this one. Primarily for reasons explained in the plurality opinion, this doctrine does not shield the Government from liability here.
Both common sense and precedent make clear that an "unmistakable" promise to bear the risk of a change in the law is not required in every circumstance in which a private party seeks contract damages from the Government. Imagine, for example, that the General Services Administration or the Department of Defense were to enter into a garden variety contract to sell a surplus commodity such as oil, under circumstances where (1) the time of shipment is critically important, (2) the parties are aware that pending environmental legislation could prevent the shipment, and (3) the fair inference from the circumstances is that if the environmental legislation occurs and prevents shipment, a private seller would incur liability for failure to ship on time.
Under ordinary principles of contract law, one would construe the contract in terms of the parties' intent, as revealed by language and circumstance. See The Binghamton Bridge, 3 Wall. 51, 74 (1866) ("All contracts are to be construed to accomplish the intention of the parties"); Restatement (Second) of Contracts §202(1) (1979) ("Words and other conduct are interpreted in the light of all the circumstances, and if the principal purpose of the parties is ascertainable it is given great weight"). If the language and circumstances showed that the parties intended the seller to bear the risk of a performance defeating change in the law, the seller would have to pay damages. See id., §261 (no liability where "a party's performance is made impracticable without his fault by the occurrence of an event [i.e., the new environmental regulation] the non occurrence of which was a basic assumption on which the contract was made . . . unless the language or the circumstances indicate the contrary.") (emphasis added).
The Court has often said, as a general matter, that the "rights and duties" contained in a government contract "are governed generally by the law applicable to contracts between private individuals." Lynch v. United States, 292 U.S. 571, 579 (1934); see Perry v. United States, 294 U.S. 330, 352 (1935) (same); Sinking Fund Cases, 99 U.S. 700, 719 (1879) ("The United States are as much bound by their contracts as are individuals. If they repudiate their obligations, it is as much repudiation, with all the wrong and reproach that term implies, as it would be if the repudiator had been a State or a municipality or a citizen"); United States v. Klein, 13 Wall. 128, 144 (1872) (same); United States v. Gibbons, 109 U.S. 200, 203-204 (1883) (where contract language "susceptible of two meanings," government's broader obligation was "sufficiently plain" from "the circumstances attending the transaction"); see also, e.g., Russell v. Sebastian, 233 U.S. 195, 205 (1914) (public grants to be given a "fair and reasonable" interpretation that gives effect to what it "satisfactorily appears" the government intended to convey).
The Court has also indicated that similar principles apply in certain cases where courts have had to determine whether or not a government seller is liable involving contracts resembling the ones before us. In Lynch, supra, for example, the Court held that the Federal Government must compensate holders of "war risk insurance" contracts, the promises of which it had abrogated through post-contract legislation. In the "gold clause" case, Perry, supra, the Court held that subsequent legislation could not abrogate a government bond's promises to pay principal and interest in gold. In neither case did the Court suggest that an "unmistakable" promise, beyond that discernible using ordinary principles of contract interpretation, was necessary before liability could be imposed on the Government.
This approach is unsurprising, for in practical terms it ensures that the Government is able to obtain needed goods and services from parties who might otherwise, quite rightly, be unwilling to undertake the risk of government contracting. See, e.g., Detroit v. Detroit Citizens' Street R. Co., 184 U.S. 368, 384 (1902) (rejecting as "hardly . . . credible" the city's suggestion that the fare rate agreed on with railroad company, which "amounted to a contract," would be "subject to change from time to time" at the city's pleasure); Murray v. Charleston, 96 U.S. 432, 445 (1878) (a government contract "should be regarded as an assurance that [a sovereign right to withhold payment] will not be exercised. A promise to pay, with a reserved right to deny or change the effect of the promise, is an absurdity"); New Jersey v. Yard, 95 U.S. 104, 116-117 (1877) (same). This is not to say that the Government is always treated just like a private party. The simple fact that it is the Government may well change the underlying circumstances, leading to a different inference as to the parties' likely intent--say, making it far less likely that they intend to make a promise that will oblige the government to hold private parties harmless in the event of a change in the law. But to say this is to apply, not to disregard, the ordinary rule of contract law.
This approach is also consistent with congressional intent, as revealed in Congress' determination to permit, under the Tucker Act, awards of damages and other relief against the United States for "any claim . . . founded . . . upon any express or implied contract." 28 U.S.C. § 1491(a)(1). The thrifts invoked this provision in their complaints as the basis for jurisdiction to adjudicate their claims in the lower courts, see App. 8 (Winstar), 137 (Statesman), and 546 (Glendale); and, as the majority explains, ante, at 18, the lower courts held that each proved the existence of an express promise by the Government to grant them particular regulatory treatment for a period of years. For my purposes, the provision is relevant only to show that Congress clearly contemplated the award of damages for breach against the Government in some contexts where the Government's promises are far from "unmistakable" as the Government defines that term. While in this case, the lower courts found the promises to be "express", this Court has in other cases interpreted §1491(a)(1) to permit claims for relief based on an "implied in fact" promise, which can be a promise "founded upon a meeting of minds, which, although not embodied in an express contract, is inferred, as a fact, from conduct of the parties showing, in the light of the surrounding circumstances, their tacit understanding." Baltimore & Ohio R. Co. v. United States, 261 U.S. 592, 597 (1923); see Hercules, Inc. v. United States, 516 U. S. -- (1996) (slip op., at 6-7). These interpretations, as well as the statutory language, lend further support to the view that ordinary government contracts are typically governed by the rules applicable to contracts between private parties.
There are, moreover, at least two good reasons to think that the cases containing special language of "unmistakability" do not, as the Government suggests, impose an additional "clear statement" rule, see Brief for Petitioner 19, that shields the Government from liability here. First, it is not clear that the "unmistakability" language was determinative of the outcome in those cases. In two of the three cases in which that language appears (and several of the older cases from which it is derived), the private parties claimed that the sovereign had effectively promised not to change the law in an area of law not mentioned in the contract at issue. In Merrion v. Jicarilla Apache Tribe, 455 U. S., at 148, for example, the contracts were leases by a sovereign Indian Tribe to private parties of rights to extract oil and gas from tribal lands. The private party claimed that the leases contained an implicit waiver of the power to impose a severance tax on the oil and gas. The Court pointed out that the leases said nothing about taxes, thereby requiring an inference of intent from "silence." Ibid. Though the opinion contains language of "unmistakability," the Court was not called upon in Merrion to decide whether a sovereign's promise not to change the law (or to pay damages if it did) was clear enough to justify liability, because there was no evidence of any such promise in the "contracts" in that case. Yet, that is the effect the Government asks us to give the "unmistakability" language in Merrion here.
The Court in Merrion cited Home Building & Loan Assn. v. Blaisdell, 290 U.S. 398 (1934), and St. Louis v. United Railways Co., 210 U.S. 266 (1908), which in turn referred to a line of cases in which the Court held that a government's grant of a bank charter did not carry with it a promise not to tax the bank unless expressed "in terms too plain to be mistaken." Jefferson Branch Bank v. Skelly, 1 Black 436, 446 (1862). These cases illustrate the same point made above: where a state granted charter, or franchise agreement, did not implicate a promise not to tax, the Court held that no such promise was made. See Providence Bank v. Billings, 4 Pet. 514, 560, 561 (1830) (promise not to tax "ought not to be presumed" where "deliberate purpose of the state to abandon" power to tax "does not appear"); St. Louis, supra, at 274 (right to tax "still exists unless there is a distinct agreement, clearly expressed, that the sums to be paid are in lieu of all such exactions"). But, where the sovereign had made an express promise not to tax, the Court gave that promise its intended effect. See Jefferson, supra, at 450; Piqua Branch of State Bank of Ohio v. Knoop, 16 How. 369, 378 (1854) (same); New Jersey v. Yard, supra, at 115-117 (same).
Similarly, in the second "unmistakability" case, United States v. Cherokee Nation of Okla., 480 U. S., at 706-707, a government treaty granted the Tribe title to a riverbed, but it said nothing about the Government's pre-existing right to navigate the river. The Court held that it was most unlikely that a treaty silent on the matter would have conveyed the Government's navigational rights to the Tribe, particularly since "[t]he parties . . . clearly understood that the [Government's] navigational" rights were "dominant no matter how the question of riverbed ownership was resolved." Id., at 706.
The remaining case, Bowen v. Public Agencies Opposed to Social Security Entrapment, 477 U.S. 41 (1986), concerned an alleged promise closely related to the subject matter of the contract. A State and several state agencies claimed that Congress, in enacting a statute that gave States flexibility to include or withdraw certain employees from a federal social security program, promised not to change that "withdrawal" flexibility. But in Bowen, the statute itself expressly reserved to Congress the right to "alter, amend, or repeal" any of the statute's provisions. See id., at 55. Hence, it is not surprising to find language in Bowen to the effect that other circumstances would have to be "unmistakable" before the Court could find a congressional promise to the contrary.
A second reason to doubt the Government's interpretation of the "unmistakability" language is that, in all these cases, the language was directed at the claim that the sovereign had made a broad promise not to legislate, or otherwise to exercise its sovereign powers. Even in the cases in which damages were sought (e.g., Bowen, Cherokee Nation), the Court treated the claimed promise as a promise not to change the law, rather than as the kind of promise more normally at issue in contract cases, including this one--namely, a promise that obliges the government to hold a party harmless from a change in the law that the government remains free to make. See, e.g., Bowen, supra, at 52 (lower court decision "effectively . . . forbid[s] Congress to amend a provision of the Social Security Act"); Cherokee Nation, supra, at 707 (refusing to conclude that the Tribe "gained an exemption from the [government's navigational] servitude simply because it received title to the riverbed interests"). It is difficult to believe that the Court intended its "unmistakability" language in these unusual cases to disable future courts from inferring, from language and circumstance under ordinary contract principles, a more narrow promise in more typical cases--say, a promise not to abrogate, or to restrict severely through legislation and without compensation, the very right that a sovereign explicitly granted by contract (e.g., the right to drill for oil, or to use the riverbed.)
The Government attempts to answer this objection to its reading of the "unmistakability" language by arguing that any award of "substantial damages" against the government for breach of contract through a change in the law "unquestionably carries the danger that needed future regulatory action will be deterred," and thus amounts to an infringement on sovereignty requiring an "unmistakable" promise. Brief for Petitioner 21. But this rationale has no logical stopping point. See, e.g., United States Trust Co. of N.Y. v. New Jersey, 431 U.S. 1, 24 (1977) ("Any financial obligation could be regarded in theory as a relinquishment of the State's spending power, since money spent to repay debts is not available for other purposes. . . . Notwithstanding these effects, the Court has regularly held that the States are bound by their debt contracts"). It is difficult to see how the Court could, in a principled fashion, apply the Government's rule in this case without also making it applicable to the ordinary contract case (like the hypothetical sale of oil) which, for the reasons explained above, are properly governed by ordinary principles of contract law. To draw the line--i.e., to apply a more stringent rule of contract interpretation--based only on the amount of money at stake, and therefore (in the Government's terms) the degree to which future exercises of sovereign authority may be deterred, seems unsatisfactory. As the Government acknowledges, see Brief for Petitioner 41, n. 34, this Court has previously rejected the argument that Congress has "the power to repudiate its own debts, which constitute `property' to the lender, simply in order to save money." Bowen, supra, at 55 (citing Perry, 294 U. S., at 350-351, and Lynch, 292 U. S., at 576-577).
In sum, these two factors, along with the general principle that the government is ordinarily treated like a private party when it enters into contracts, means that the "unmistakability" language might simply have underscored the special circumstances that would have been required to convince the Court of the existence of the claimed promise in the cases before it. At most, the language might have grown out of unique features of sovereignty, believed present in those cases, which, for reasons of policy, might have made appropriate a special caution in implying the claimed promise. But, I do not believe that language was meant to establish an "unmistakability" rule that controls more ordinary contracts, or that controls the outcome here.
The Government attempts to show that such special circumstances, warranting application of an unmistakability principle, are present in this case. To be sure, it might seem unlikely, in the abstract, that the Government would have intended to make a binding promise that would oblige it to hold the thrifts harmless from the effects of future regulation (or legislation) in such a high risk, highly regulated context as the accounting practices of failing savings and loans. But, as the plurality's careful examination of the circumstances reveals, that is exactly what the Government did. The thrifts demonstrate that specific promises were made to accord them particular regulatory treatment for a period of years, which, when abrogated by subsequent legislation, rendered the Government liable for breach of contract. These promises affect only those thrifts with pre-existing contracts of a certain kind. They are promises that the banks seek to infer from the explicit language of the contracts, not ones they read into contracts silent on the matter. And, there is no special policy reason related to sovereignty which would justify applying an "unmistakability" principle here. For these reasons, I join the plurality opinion.