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 (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.
Texas incurred the instant debts as a result of participation in the Food Stamp Program, 78 Stat. 703, as amended,
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).
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
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 (citing Royal Indemnity Co. v. United States, 313 U.S. 289, 295-297 (1941)). In Board of Comm'rs of Jackson County v. United States, 308 U.S. 343 (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
Just as longstanding is the principle that "[s]tatutes which invade the common law . . . are to be read with a presumption favoring the 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 (1952); Astoria Federal Savings & Loan Assn. v. Solimino, 501 U.S. 104, 108 (1991). In such cases, Congress does not write upon a clean slate. Astoria, supra, at 108. 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, at 625; Milwaukee v. Illinois, 451 U.S. 304, 315 (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, 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).
The Debt Collection Act does not speak directly to the Federal Government's right to collect prejudgment interest on debts owed to it by the States. The Act states that "[t]he head of an executive or legislative agency shall charge a minimum annual rate of interest on an outstanding debt on a
The only obligation from which § 3701 exempts the States is the obligation to pay prejudgment interest in accordance with the mandatory provisions of the Act. These impose a stringent minimum interest requirement upon private persons owing money to the Federal Government. The statute is silent as to the obligation of the States to pay prejudgment interest on such debts. We agree with the Solicitor General that "Congress's mere refusal to legislate with respect to the prejudgment-interest obligations of state and local governments falls far short of an expression of legislative intent to supplant the existing common law in that area." Brief for Petitioners 16.
The evident purpose of the Debt Collection Act reinforces our reading of the plain language. The Act was designed "[t]o increase the efficiency of Government-wide efforts to collect debts owed the United States and to provide additional procedures for the collection of debts owed the United States." 96 Stat. 1749; S. Rep. No. 97-378, p. 2 (1982) (the Act responded to "increasing concern . . . expressed in Congress
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.
Part of this argument persuades; Congress in the Act tightened the screws, so to speak, on the prejudgment interest obligations of private debtors to the Government, and not on the States. It may be inferred from this fact that the former were the root of the Government's debt collection problems which inspired the Act. But it does not at all follow
As a last-ditch argument, Texas contends that its liability for losses in the mail is not a contractual debt for which it owes prejudgment interest, but rather a penalty unilaterally imposed by Congress. See Rodgers v. United States, 332 U.S. 371, 374-376 (1947) (penalties are not normally subject to prejudgment interest). This argument fails because the obligation of Texas to reimburse the Government for a portion of the stamps lost in the mail is quite different from that involved in Rodgers. There the penalties in question were unilaterally imposed by the Agricultural Adjustment Act on farmers who exceeded their production quotas; there was no suggestion that the farmers ever consented to such penalties. Here, on the other hand, Texas signed a Federal/State Agreement, the express terms of which bound the State to act in accordance with the implementing regulations. 7 CFR § 272.2(a)(2) (1986); see also n. 2, supra. Thus, 7 CFR § 274.3(c)(4) (1986), which imposed liability for mail issuance losses above a specified tolerance level, was incorporated into Texas' Federal/State Agreement. The requirement that the States reimburse the Federal Government for a certain portion of mail issuance losses is not a penalty, but a contractual obligation which the State assumed.
The judgment of the Court of Appeals to the contrary is accordingly
Justice Stevens, dissenting.
As the Court correctly notes, the requirement that private parties must pay prejudgment interest on contractual debts owed to the United States is a common-law rule of long standing. Ante, at 533. Over a century ago we recognized an equally well-established exception to that rule: The United States is not entitled to recover interest from a State unless the State's consent to pay such interest has been expressed in a statute or binding contract. United States v. North Carolina, 136 U.S. 211 (1890).
The Court is also correct in noting that we are reluctant to infer a legislative abrogation of the common law. Ante, at 534. We presume that Congress understands the legal terrain in which it operates, see Cannon v. University of Chicago, 441 U.S. 677, 698-699 (1979), and we therefore
When Congress enacted the Debt Collection Act of 1982, the question whether interest might ever be collected from a sovereign State unless explicitly authorized was undecided by this Court. We had never held that the United States could demand prejudgment interest on a debt owed to it by a State. Not until five years later, in West Virginia v. United States, 479 U.S. 305 (1987), did we hold for the first time that in some circumstances the United States may demand prejudgment interest from the States themselves. The Court therefore rewrites the history of our common law when it predicates its entire analysis of this case on what it creatively describes as "the United States' federal commonlaw right to collect prejudgment interest on debts owed to it by the States." Ante, at 530. Only through hindsight— or by crediting Congress with a prescience as to what the common law would become —can the Court find that the 97th Congress did not intend to abrogate a rule that did not then exist.
In Board of Comm'rs of Jackson County v. United States, 308 U.S. 343 (1939), the Court held that the United States, suing on behalf of a Native American, could not recover prejudgment interest from a county even though the county had improperly collected those taxes. While noting that "interest in inter-governmental litigation has no . . . roots in history," id., at 351, the Court did not rule out the possibility that in an unusual case, considerations of fairness might make it appropriate to collect such interest from a state agency, see id., at 352. Only to that small extent, therefore,
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.
Thus, even though the Court today suggests that its decision is merely an application of Board of Comm'rs and West Virginia, it actually takes a significant and independent step toward equating the Government's right to collect prejudgment interest from the States with the Government's right
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.
I respectfully dissent.