West Virginia v. United States, 479 U.S. 305 (1987)

West Virginia v. United States

No. 85-937

Argued November 10, 1986
Decided January 13, 1987
479 U.S. 305

CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR

THE FOURTH CIRCUIT

Syllabus

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"major disasters," qualifying the affected areas for federal relief under the Disaster Relief Act of 1970 (DRA) (later repealed).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.

Held: West Virginia is liable for prejudgment interest on the debt arising from the contractual obligation to reimburse the United States for services rendered by the Corps. The rule governing the interest to be recovered as damages for delayed payment of a contractual obligation to the United States is not controlled by state law. While there are instances in which state law may be adopted as the federal rule of decision, this case presents no compelling reason for doing so. A single nationwide rule is preferable, 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. Before applying to a State the usual federal rule that private parties owing debts to the Federal Government must pay prejudgment interest where the underlying claim is a contractual obligation to pay money, Royal Indemnity Co. v. United States, 313 U.S. 289, a federal court should consider the interests of the two governments involved. Board of Comm’rs of Jackson County v. United States, 308 U.S. 343, 350. Here, federal policy plainly calls for an award of interest. The DRA’s purpose was not to relieve States of the entire burden of disaster relief, but to apportion that responsibility 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. 308-313.

764 F.2d 1028, affirmed.

MARSHALL, J., delivered the opinion for a unanimous Court.