author: Justice Breyer Justice O’Connor,

text:
    ATHERTON v. FEDERAL DEPOSIT INSURANCE CORPORATION, as receiver for CITY SAVINGS, F. S. B.
    No. 95-928.
    Argued November 4, 1996
    Decided January 14, 1997

      Ronald W. Stevens argued the cause for petitioner. With him on the briefs were Gilbert C. Miller and Bruce H. Nielson.

      Richard P. Bress argued the cause for respondent. With him on the brief were Acting Solicitor General Dellinger, Deputy Solicitor General Bender, Jack D Smith, Ann S. DuRoss, and Jerome A. Madden.

      Briefs of amici curiae urging reversal were filed for the American Bankers Association et al. by John J. Gill III, Michael F. Crotty, Richard M. Whiting, and Leonard J. Rubin; for the Washington Legal Foundation et al. by Reuben B. Robertson III, Daniel J. Popeo, and Paul D. Kamenar; and for Joseph Iaria et al. by Douglas S. Eakeley and Alan S. Naar.

   Justice Breyer

delivered the opinion of the Court.

The Resolution Trust Corporation (RTC) sued several officers and directors of City Federal Savings Bank, claiming that they had violated the legal standard of care they owed that federally chartered, federally insured institution. The case here focuses upon the legal standard for determining whether or not their behavior was improper. It asks where courts should look to find the standard of care to measure the legal propriety of the defendants’ conduct — to state law, to federal common law, or to a special federal (103 Stat. 243, 12 U. S. C. § 1821(k)) that speaks of “gross negligence”? of conduct as

We conclude that long as the state standard (such as simple negligence) is stricter than that of the federal statute. The federal statute nonetheless sets a “gross negligence” floor, which applies as a substitute for state standards that are more relaxed.

H-1

In 1989, City Federal Savings Bank (City Federal), a federal savings association, went into receivership. The RTC, as receiver, brought this action in the bank’s narrie against officers and directors. (Throughout this opinion, we use the more colloquial term “bank” to refer to a variety of institutions such as “federal savings associations.”) The complaint said that the defendants had acted (or failed to act) in ways that led City Federal to make various bad development, construction, and business acquisition loans. It claimed that these actions (or omissions) were unlawful because they amounted to gross negligence, simple negligence, and breaches of fiduciary duty. to a fed-

The defendants eral statute, 12 U. S. C. § 1821 (k), that says in part that a “director or officer” of a federally insured bank “may be held personally liable for monetary damages” in an RTC-initiated “civil action ... for gross negligence” or “similar conduct... that demonstrates a greater disregard of a duty of care (than gross negligence) . . . .” (Emphasis added.) They argued that, by authorizing actions for gross negligence or more seriously culpable conduct, the statute intended to forbid actions based upon less seriously culpable conduct, such as conduct that rose only to the level of simple negligence. The District Court agreed and dismissed all but the gross negligence claims.

The Third Circuit, providing an interlocutory appeal, 28 U. S. C. § 1292(b), reversed. It interpreted the federal statute as simply offering a safeguard against state legislation that had watered down applicable state standards of care— below a gross negligence benchmark. As so interpreted, the statute did not prohibit actions resting upon stricter standard of care rules — whether those stricter standard of care rules originated in state law (which the Circuit found applicable in the case of state-chartered banks) or in federal common law (which the Circuit found applicable in the case of federally chartered banks). Resolution Trust Corp. v. Cityfed Financial Corp., 57 F. 3d 1231, 1243-1244, 1245-1249 (1995). Noting that City Federal is a federally chartered savings institution, the Circuit concluded that the RTC was free “to pursue any claims for negligence or breach of fiduciary duty available as a matter of federal common law.” Id., at 1249.

The defendants, pointing to variations in the Circuits’ interpretations of the “gross negligence” statute, sought cer-tiorari. Compare Resolution Trust Corp. v. Frates, 52 F. 3d 295 (CA10 1995) (§ 1821(k) prohibits federal common-law actions for simple negligence), with Cityfed, supra, at 1246-1249 (§ 1821(k) does not prohibit federal common-law actions for simple negligence). And we granted review.

I — I

We begin by temporarily setting the federal “gross negligence” statute to the side, and by asking whether, were there no such statute, federal common law would provide the applicable legal standard. We recognize, as did the Third Circuit, that this Court did once articulate federal common-law corporate governance standards, applicable to federally chartered banks. Briggs v. Spaulding, 141 U. S. 132 (1891). See also Martin v. Webb, 110 U. S. 7, 15 (1884) (directors must “use ordinary diligence ... and ... exercise reasonable control”); Bowerman v. the Court found its rules of decision in federal common law long before it held, in Erie R. Co. v. Tompkins, 304 U. S. 64 (1938), that “[tjhere is no federal general common law.” Id., at 78. The Third Circuit, while considering itself bound by Briggs, asked whether relevant federal common-law standards could have survived Erie. We conclude that they did not and that (except as modified in Part III, infra) state law, not federal common law, provides the applicable rules for decision. call

This Court has recently “federal common law” in the strictest sense, i. e., a rule of decision that amounts, not simply to an interpretation of a federal statute or a properly promulgated administrative rule, but, rather, to the judicial “creation” of a special federal rule of decision. See Texas Industries, Inc. v. Radcliff Materials, Inc., 451 U. S. 630, 640-643 (1981). The Court has said that “cases in which judicial creation of a special federal rule would be justified . . . are . . . ‘few and restricted.’” O'Melveny & Myers v. FDIC, 512 U. S. 79, 87 (1994) (quoting Wheeldin v. Wheeler, 373 U. S. 647, 651 (1963)). “Whether latent federal power should be exercised to displace state law is primarily a decision for Congress,” not the federal courts. Wallis v. Pan American Petroleum Corp., 384 U. S. 63, 68 (1966). Nor does the existence of related federal statutes automatically show that Congress intended courts to create federal common-law rules, for “‘Congress acts . . . against the background of the total corpus juris of the states ....’” Id., at 68 (quoting H. Hart & H. Wechsler, The Federal Courts and the Federal System 435 (1953)). Thus, normally, when courts decide to fashion rules of federal common law, “the guiding principle is that a significant conflict between some federal policy or interest and the use of state law . . . must first be specifically shown.” 384 U. S., at 68. Indeed, such a “conflict” is normally a “precondition.” O’Melveny, supra, at 87. See also United States v. Kimbell Foods, Inc., 440 U. S. 715, 728 (1979); Kamen v. Kemper Financial Services, Inc., 500 U. S. 90, 98 (1991).

No one doubts the power of Congress to legislate rules for deciding cases like the one before us. Indeed, Congress has enacted related legislation. Certain federal statutes specify, for example, how to form “national banks” (i e., a federally chartered bank), how to amend the articles of association, how shareholders are to vote, directors’ qualifications, the form of a bank’s “organization certificate,” minimum capital requirements, and a list of corporate powers. See 12 U. S. C. § 21 et seq. Other federal statutes regulate the activities of federally chartered savings associations in various ways. E. g., 12 U. S. C. '§ 1464(b) (various regulations on savings associations, such as interest rate on loans). No one argues, however, that either these statutes, or federal regulations validly promulgated pursuant to statute, set forth general corporate governance standards of the sort at issue applicable to a federally chartered savings association such as City Federal. Cf. 61 Fed. Reg. 4866 (1996) (to be codified in 12 CFR § 7.2000) (discussed infra, at 224) (describing governance procedures applicable to federally chartered national banks, but not federal savings associations). Consequently, we must decide whether the application of state-law standards of care to such banks would conflict with, and thereby significantly threaten, a federal policy or interest.

We have examined each of the basic arguments that the respondent implicitly or explicitly raises. In our view, they do not point to a conflict or threat that is significant, and we shall explain why. (The respondent, by the way, is now the Federal Deposit Insurance Corporation — the FDIC — which has replaced the RTC pursuant to a new federal statute. 12 U.S. C. § 1441a(b)(4)(A).)

First, the FDIC invokes the need for “uniformity.” Federal common law, it says, will provide uniformity, but “[superimposing state standards of fiduciary responsibility over standards developed by a federal chartering authority would . . . 'upset the balance’ that the 'may strike . . . Brief for Respondent 23 (quoting Kamen, supra, at 103). To invoke the concept of “uniformity,” however, is not to prove its need. Cf. Kimbell Foods, supra, at 730 (rejecting “generalized pleas for uniformity”); O’Melveny, supra, at 88 (same). insured banks is

For one thing, about equally divided between federally chartered and state-chartered banks, Federal Deposit Insurance Corporation, 1 Statistics on Banking: A Statistical History of the United States Banking Industry, p. B-9 (Aug. 1995) (Table SI-9) (showing that, in 1989, there were 1,595 federally chartered institutions and 1,492 state-chartered ones); and a federal standard that increases uniformity among the former would increase disparity with the latter. has thrived

For another, our despite disparities in matters of corporate governance. Consider, for example, the divergent state-law governance standards applicable to banks chartered in different States, e. g., Ind. Code § 23-l-35-l(e)(2) (1994) (directors not liable unless conduct constitutes at least “willful misconduct or recklessness”); Iowa Code §524.605 (1995) (providing ordinary negligence standard), as well as the different ways in which lower courts since 1891 have interpreted Briggs’ “federal common law” standard. Compare Federal Deposit Insurance Corporation v. Mason, 115 F. 2d 548, 551-552 (CA3 1940) (applying standard similar to simple negligence), with Washington Bancorporation v. Said, 812 F. Supp. 1256, 1266 (DC 1993) (Briggs did not apply “simple negligence” standard of care). See R. Stevens & B. Nielson, The Standard of Care for Directors and Officers of Federally Chartered Depository Institutions: It’s Gross Negligence Regardless of Whether Section 1821(k) Preempts Federal Common Law, 13 Ann. Review Banking L. 169, 172 (1994) (in part because of “widely varying results, the federal common law standard of care is neither fully developed, nor well settled”). See also infra, at 223 (citing cases in which state governance law has been applied to national banks). Indeed, the Comptroller of the Currency, acting through regulation, permits considerable disparity in the standard of care applicable to federally chartered banks other than savings banks (which are under the jurisdiction of the Office of Thrift Supervision (OTS), 12 U. S. C. §§ 1462a, 1463(a)). See 61 Fed. Reg. 4866 (1996) (to be codified in 12 CFR § 7.2000) (permitting banks, within broad limits, “to follow the corporate governance procedures of the law of the state in which the main office of the bank is located ... [or] the Delaware General Corporation Law ... or the [Model Business Corporation Act]”).

Second, the FDIC at times suggests that courts must apply a federal common-law standard of care simply because the banks in question are federally chartered. This argument, with little more, might have seemed a strong one during most of the first century of our Nation’s history, for then state-chartered banks were the norm and federally chartered banks an exception — and federal banks often encountered hostility and deleterious state laws. See B. Klebaner, American Commercial Banking: A History 4-11 (1990) (tracing the origin of the dual banking system to the 1780 Philadelphia Bank and discussing proposals of a then-young Alexander Hamilton); B. Hammond, Banks and Politics in America: From the Revolution to the Civil War 41-66 (1957) (describing the controversial, but successful, Federalist proposals for the first and second federally chartered Bank of the United States).

After President Madison helped to create the second Bank of the United States, for example, many States enacted laws that taxed the federal bank in an effort to weaken it. This Court held those taxes unconstitutional. McCulloch v. Maryland, 4 Wheat. 316, 431 (1819) (“[T]he power to tax involves the power to destroy”). See also Osborn v. Bank of United States, 9 Wheat. 738 (1824) (federal marshals acted lawfully in seizing funds from a state tax collector who had hurdled the counter at the Chilicothe Branch of the Bank of the United States and taken $100,000 from the vault). Still, 10 years later President Andrew Jackson effectively killed the bank. His Secretary of the Treasury Roger Taney (later Chief Justice), believing state banks fully able to serve the Nation, took steps to “ushe[r] in the era of expansive state banking.” A. Pollard, J. Passaic, K. Ellis, & J. Daly, Banking Law in the United States 16 (1988). See also Briscoe v. Bank of Kentucky, 11 Pet. 257 (1837) (permitting state banks to issue paper money in certain circumstances).

During and after the reemerged. Moved in part by war-related financing needs, Treasury Secretary (later Chief Justice) Salmon P. Chase proposed, and Congress enacted, laws providing for federally chartered banks, Act of Feb. 20, 1863, ch. 43, 12 Stat. 655, and encouraging state banks to obtain federal charters. Act of June 3, 1864, ch. 106, 13 Stat. 99 (only federally chartered banks can issue national currency). See also Veazie v. Fenno, 8 Wall. 533 (1869) (opinion of Chase, C. J.) (upholding constitutionality of federal taxation of state banks). Just before World War I, Congress created the federal reserve system. Act of Dec. 23,1913, ch. 6,38 Stat. 251. After that war, it created several federal banking agencies with regulatory authority over both federal and state banks. Act of June 16, 1933, ch. 89, 48 Stat. 162. And in 1933, it provided for the federal chartering of savings banks. Act of June 13, 1933, ch. 62, 48 Stat. 128.

This latter history is relevant ter this Court held that federally chartered banks are subject to state law. See National Bank v. Commonwealth, 9 Wall. 353, 361 (1870). In National Bank the Court distinguished McCulloch by recalling that Maryland’s taxes were “used ... to destroy,” and it added that federal banks

“are subject to the laws of the State, and are governed in their daily course of business far more by the laws of the State than of the nation. All their contracts are governed and construed by State laws. Their acquisition and transfer of property, their right to collect their debts, and their liability to be sued for debts, are all based on State law. It is only when the State law incapacitates the banks from discharging their duties to the government that it becomes unconstitutional.” 9 Wall., at 362.

The Court subsequently found numerous state laws applicable to federally chartered banks. See, e. g., Davis v. Elmira Savings Bank, 161 U. S. 275, 290 (1896) (“Nothing, of course, in this opinion is intended to deny the operation of general and undiscriminating state laws on the contracts of national banks, so long as such laws do not conflict with the letter or the general objects and purposes of Congressional legislation”); First Nat. Bank in St. Louis v. Missouri, 263 U. S. 640, 656 (1924) (national banks “are subject to the laws of a State in respect of their affairs unless such laws interfere with the purposes of their creation, tend to impair or destroy their efficiency as federal agencies or conflict with the paramount law of the United States”); Wichita Royalty Co. v. City Nat. Bank of Wichita Falls, 306 U. S. 103 (1939) (applying state law to tort claim by depositor against directors of a national bank); Anderson Nat. Bank v. Luckett, 321 U. S. 233, 248 (1944) (“[Njational banks are subject to state laws, unless those laws infringe the national banking laws or impose an undue burden on the performance of the banks’ functions”); California Fed. Sav. & Loan Assn. v. Guerra, 479 U. S. 272 (1987) (applying state employment discrimination law to federally chartered savings and loan association).

purposes, consequence is the following: To point to a federal charter by itself shows no conflict, threat, or need for “federal common law.” It does not answer the critical question.

Third, the FDIC refers to a conflict of laws principle called the “internal affairs doctrine” — a doctrine that this Court has described as

“a conflict of laws principle which recognizes that only one State should have the authority to regulate a corporation’s internal affairs — matters peculiar to the relationships among or between the corporation and its current officers, directors, and shareholders — because otherwise a corporation could be faced with conflicting demands.” Edgar v. MITE Corp., 457 U. S. 624, 645 (1982).

States normally look to the State of a business’ incorporation for the law that provides the relevant corporate governance general standard of care. Restatement (Second) Conflict of Laws §309 (1971). And by analogy, it has been argued, courts should look to federal law to find the standard of care governing officers and directors of federally chartered banks. See Resolution Trust Corporation v. Chapman, 29 F. 3d 1120, 1123-1124 (CA7 1994). this

To find a justification for ment, however, is to substitute analogy or formal symmetry for the controlling legal requirement, namely, the existence of a need to create federal common law arising out of a significant conflict or threat to a federal interest. O’Melveny, 512 U. S., at 85, 87. The internal affairs doctrine shows no such need, for it seeks only to avoid conflict by requiring that there be a single point of legal reference. Nothing in that doctrine suggests that the single source of law must be federal. See Chapman, supra, at 1126-1127 (Posner, C. J., dissenting). In the absence of a governing federal common law, courts applying the internal affairs doctrine could find (we do not say that they will find) that the State closest analogically to the State of incorporation of an ordinary business is the State in which the federally chartered bank has its main office or maintains its principal place of business. Cf. 61 Fed. Reg. 4866 (1996) (to be codified in 12 CFR § 7.2000) (federally chartered commercial banks may “follow the corporate governance procedures of the law of the state in which the main office of the bank is located”). So to apply state law, as we have said, would tend to avoid disparity between federally chartered and state-chartered banks (that might be next door to each other). And, of course, if this approach proved problematic, Congress and federal agencies acting pursuant to congressionally delegated authority remain free to provide to the contrary.

Fourth, the FDIC points to statutes that provide the OTS, a federal regulatory agency, with authority to fine, or to remove from office, savings bank officers and directors for certain breaches of fiduciary duty. The FDIC adds that in “the course of such proceedings, the OTS, applying the ordinary-care standard [of Briggs,] . . . has spoken authoritatively respecting the duty of care owed by directors and officers to federal savings associations.” Brief for Respondent 23-25 (citations omitted). The FDIC does not claim, however, that these OTS statements, interpreting a pre-existing judge-made federal common-law standard (i. e., that of Briggs) themselves amounted to an agency effort to promulgate a binding regulation pursuant to delegated congressional authority. Nor have we found, in our examination of the relevant OTS opinions, any convincing evidence of a relevant, significant conflict or threat to a federal interest.

Finally, we note that here, as in O’Melveny, the FDIC is acting only as a receiver of a failed institution; it is not pursuing the interest of the Federal Government as a bank insurer — an interest likely present whether the insured institution is state, or federally, chartered.

In sum, we can find no significant conflict with, or threat to, a federal interest. The federal need is far weaker than was present in what the Court has called the “ Tew and restricted’ instances,” Milwaukee v. Illinois, 451 U. S. 304, 313 (1981), in which this Court has created a federal common law. Consider, for example, Hinderlider v. La Plata River & Cherry Creek Ditch Co., 304 U. S. 92 (1938) (controversy between two States regarding apportionment of streamwater); Boyle v. United Technologies Corp., 487 U. S. 500 (1988) (Federal Government contractors and civil liability of federal officials); United States v. Standard Oil Co. of Cal., 332 U. S. 301, 305 (1947) (relationship between Federal Government and members of its Armed Forces); Howard v. Lyons, 360 U. S. 593, 597 (1959) (liability of federal officers in the course of official duty); Banco Nacional de Cuba v. Sabbatino, 376 U. S. 398, 425 (1964) (relationships with other countries). See also Texas Industries, Inc. v. Radcliff Materials, Inc., 451 U. S. 630, 641 (1981) (“[A]bsent some congressional authorization to formulate substantive rules of decision, federal common law exists only in such narrow areas as those concerned with the rights and obligations of the United States, interstate and international disputes implicating the conflicting rights of States or our relations with foreign nations, and admiralty cases”). Indeed, the interests in many of the cases where this Court has declined to recognize federal common law appear at least as strong as, if not stronger than, those present here. E. g., Wallis v. Pan American Petroleum Corp., 384 U. S. 63 (1966) (applying state law to claims for land owned and leased by the Federal Government); Kimbell Foods, 440 U. S., at 726, 732-738 (applying state law to priority of liens under federal lending programs). enun-

We conclude that the ciated in cases such as Briggs did not survive this . Court’s later decision in Erie v. Tompkins. There is no federal common law that would create a general standard of care applicable to this case.

Ill

We now turn to a further question: Does federal statutory law (namely, the federal “gross negligence” statute) supplant any state-law standard of care? The relevant parts of that statute read as follows:

“A director or officer of an insured depository institution may be held personally liable for monetary damages in any civil action by, on behalf of, or at the request or direction of the Corporation ... acting as conservator or receiver ... for gross negligence, including any similar conduct or conduct that demonstrates a greater disregard of a duty of care (than gross negligence) including intentional tortious conduct, as such terms are defined and determined under applicable State law. Nothing in this paragraph shall impair or affect any right of the Corporation under other applicable law.” 12 U. S. C. § 1821(k) (emphasis added).

Lower courts have taken different positions about whether this statute, in stating that directors and officers “may be held personally liable” for conduct that amounts to “gross negligence” or worse, immunizes them from liability for conduct that is less culpable than gross negligence such as simple negligence. Federal Deposit Insurance Corporation v. McSweeney, 976 F. 2d 532, 537, n. 5 (CA9 1992), cert. denied, 508 U. S. 950 (1993); Federal Deposit Insurance Corporation v. Canfield, 967 F. 2d 443, 446, n. 3 (CA10) (en banc), cert. dism’d, 506 U. S. 993 (1992); Federal Deposit Insurance Corporation v. Swager, 773 F. Supp. 1244 (Minn. 1991). See also Pet. for Cert, i (“The questions presented for review are: 1. Whether Section 1821(k) supplants ‘federal common law’ and constitutes the exclusive standard of liability in a civil damage action brought by the Resolution Trust Corporation ...”); Brief for American Bankers Association et al. as Amici Curiae 7-8.

In our view, the statute’s “gross negligence” standard provides only a floor — a guarantee that officers and directors must meet at least a gross negligence standard. It does not stand in the way of a stricter standard that the laws of some States provide.

For one thing, the language of the statute contains a saving clause that, read literally, preserves the applicability of stricter state standards. It says “[njothing in this paragraph shall impair or affect any right of the Corporation under other applicable law.” 12 U. S. C. § 1821(k) (emphasis added). The petitioner, in contending places federal common law, says that “any right” means only a right created elsewhere in the same Act of Congress, for example, by various regulatory enforcement provisions. E. g., § 1818(b) (cease-and-desist provision). But that is not what the Act says nor does its language compel so restrictive a reading. That language, read naturally, suggests an interpretation broad enough to save rights provided by other state, or federal, law. a

For another thing, Congress background of failing savings associations, see 135 Cong. Rec. 121 (1989) (statement of Rep. Roth); 135 Cong. Rec. 1760 (1989) (statement of Sen. Graham), large federal payments to insured bank depositors, and recent changes in state law designed to limit pre-existing officer and director negligence liability. See, e. g., Fla. Stat. § 607.0831 (1993) (“recklessness or an act or omission . . . committed in bad faith or with malicious purpose”); Ohio Rev. Code Ann. § 1701.59(D) (1994) (“deliberate intent to cause injury to the corporation or undertaken with reckless disregard for the best interests of the corporation”). The state-law changes would have made it more difficult for the Federal Government to recover, from negligent officers and directors, federal funds spent to rescue failing savings banks and their depositors. And the background as a whole supports a reading of the statute as an effort to preserve the Federal Government’s ability to recover funds by creating a standard of care floor.

The legislative history, as this conclusion. Members of Congress repeatedly referred to the harm that liability-relaxing changes in state law had caused the Federal Government, hence the taxpayer, as federal banking agencies tried to recover, from negligent officers and directors, some of the money that federal insurers had to pay to depositors in their failed banks. E. g., 135 Cong. Rec. 7150-7151 (1989) (statement of Sen. Riegle) (“[T]he establishment of a Federal standard of care is based on the overriding Federal interest in protecting the soundness of the Federal Deposit Insurance Corporation fund and is very limited in scope. It is not a wholesale preemption of longstanding principles of corporate governance . . To have pre-empted state law with a uniform federal “gross negligence” standard would have cured the problem in some instances (where state law was weaker) but would have aggravated it in others (where state law was stronger).

history says more. The relevant Senate Report addresses the point specifically. It says:

“This subsection does not prevent the FDIC from pursuing claims under State law or under other applicable Federal law, if such law permits the officers or directors of a financial institution to be sued (1) for violating a lower standard of care, such as simple negligence.” S. Rep. No. 101-19, p. 318 (1989).

This Report was not published until two weeks after Congress enacted the law. But, as petitioner elsewhere concedes, the Report was circulated within Congress several weeks before Congress voted. In fact Senator Riegle, the Banking Committee Chairman, read the statement, on his own behalf and that of Senator Garn, six weeks before Congress voted on the law. 135 Cong. Rec. 12374 (1989). Contrast Clarke v. Securities Industry Assn., 479 U. S. 388, 407 (1987) (refusing to “attach substantial weight” to a Representative’s statement made 10 days after the enactment of the law).

The history is not all on one side. The Congressional Record contains one statement that suggests a competing congressional purpose, namely, to protect bank officers and directors from too strict a liability standard. 135 Cong. Rec. 7150 (1989) (statement of Sen. Sanford) (supporting “provisions relating to State laws affecting the liability of officers and directors of financial institutions” because “these changes are essential if we are to attract qualified officers and directors to serve in our financial have not found other such statements. And that statement is inconsistent with the language of the Senate Report. It suggests an interpretation of the statute largely rejected in the lower courts, namely, that it pre-empts stricter state law as applied to state-chartered, as well as to federally chartered, institutions. See, e. g., McSweeney, 976 F. 2d, at 540-541 (rejecting the interpretation as applied to state-chartered banks); Canfield, 967 F. 2d, at 448-449 (same). alternative

The petitioner, in ground in this Court, made a final complicated argument to explain why 12 U. S. C. § 1821(k) displaces federal common law. He points to the universally conceded fact that the “gross negligence” statute applies to federal, as well as to state, banks. He then assumes, for sake of the argument, that in the absence of the statute, federal common law would determine liability for federal banks. He then asks why Congress would have applied the “gross negligence” statute to federal banks unless it wanted that statute to set an absolute standard, not a floor. After all, on the assumption that, without the statute, federal common law would hold federal directors and officers to a standard as strict, or stricter, there would have been no need for the statute unless (as applied to federal banks) it intended to set a universal standard, freeing officers and directors from the potentially less strict standard of the common law, and not what, given the assumptions, would be a totally unnecessary floor. This argument, taken to its logical conclusion, would also suggest that state standards of simple negligence would be displaced by the federal gross negligence statute. lies

One obvious short answer in the fact that our conclusion in Part II runs contrary to the argument’s critical assumption, namely, that federal common law sets the standard of liability applicable to federal banks. State law applies. Without that assumption, the need for a “gross negligence” floor in the ease of federally chartered banks is identical to the need in the case of state-chartered banks. In both instances, the floor is needed to limit state efforts to weaken liability standards; in both instances a floor serves that purpose; and the reasons for believing the statute only sets such a floor are equally strong.

A more thorough answer lies in the fact that Congress nowhere separated its consideration of federally chartered, from that of state-chartered, banks. Congress did not ask whether- one looked to federal common law or to state law to find the liability standard applicable to federally chartered banks. Nor did it try to determine the content of federal common law. One can reconcile congressional silence on the matter with a “gross negligence” statute, the language of which brings all banks (federal- and state-chartered) within its scope, simply by assuming that Congress, when enacting the statute, wanted to leave other law, including the law applicable to federally chartered banks, exactly where Congress found it. That, after all, is what the statute says. And the saving clause language taken at face value permits Congress to achieve its basic objective (providing a “gross negligence” floor) without having to unravel the arcane intricacies of federal common law. In our view, this understanding of congressional intent better explains the statute’s language and history than the petitioner’s interpretation, imputing to Congress an intent to apply a uniform “gross negligence” standard to federally chartered, but not state chartered, institutions.

For these reasons, the judgment of the Court of Appeals is vacated, and the case is remanded for proceedings consistent with this opinion.

It is so ordered.

Justice O’Connor,

with whom Justice Scalia and Justice Thomas join,

concurring in part and concurring in the judgment.

I join all of the Court’s opinion, except to the extent that it relies on the notably unhelpful legislative history to 12 U. S. C. § 1821(k). Ante, at 228-230. As the Court correctly points out, the most natural reading of the saving clause in §1821(k) covers both state and federal rights. Ante, at 228. With such plain statutory language in hand, there is no reason to rely on legislative history that is, as the majority recognizes, “not all on one side.” Ante, at 229.


source: Caselaw Access Project

author: Per Curiam.

license: Public Domain

text:
    GRIMMETT, trustee for the BANKRUPTCY ESTATE OF SIRAGUSA, et al. v. BROWN et al.
    No. 95-1723.
    Argued January 6, 1997
    Decided January 14, 1997

      Richard A. Sauber argued the cause for petitioners. With him on the briefs were Michael L. Waldman, David B.„ Smith, Erven T. Nelson, and Randall M. Rumph.

      Philip A. Lacovara argued the cause for respondents. On the brief for respondents Beckley et al. were Niels L. Pearson, Rex A. Jemison, and Daniel F. Polsenberg. On the brief for respondents Brown et al. were Peter M. Angulo and Don F. Shreve, Jr

       Briefs of amid curias urging reversal were filed for the Executive Committee, MDL No. 1069, et al. by Richard B. McNamara, Gregory A. Holmes, Stephanie A. Bray, Michael M. Bay Ison, Martin J. Oberman, Alice IE Ballard, Charles Barnhill, Jr., Judson Miner, and Edward R. Garvey; and for the National Association of Securities and Commercial Law Attorneys by Kevin P. Roddy, G. Robert Blakey, and Jonathan IE Cuneo.

        Michael A Cardozo and Steven C. Krane filed a brief for the National Hockey League as amicus curiae urging affirmance.

        Andrew L. Frey, Philip A. Lacovara, and Evan M. Tager filed a brief for the American Honda Motor Co. as amicus curiae.

   Per Curiam.

The writ of certiorari in this case is dismissed as improvidently granted.


author:
Justice Ginsburg
      Justice Stevens,

text:
    BABBITT, SECRETARY OF THE INTERIOR, et al. v. YOUPEE et al.
    No. 95-1595.
    Argued December 2, 1996
    Decided January 21, 1997

      James A. Feldman argued the cause for petitioners. With him on the briefs were Acting Solicitor General Del-linger, Assistant Attorney General Schiffer, Deputy Solicitor General Kneedler, Anne S. Almy, Robert L. Klarquist, and Andrew C. Mergen.

      Rene A. Martell argued the cause for respondents. With him on the brief were Daniel L. Minnis and D. Michael Eakin.

      Briefs of amici curiae urging affirmance were filed for the Allottees Association and Affiliated Tribes and Bands of the Quinault Reservation et al. by Joel Jasperse and Thomas E. Luebben; and for the Pacific Legal Foundation by James S. Burling.

   Justice Ginsburg

delivered the opinion of the Court.

In this case, we consider for a second time the constitutionality of an escheat-to-tribe provision of the Indian Land Consolidation Act (ILCA). 96 Stat. 2519, as amended, 25 U. S. C. § 2206. Specifically, we address § 207 of the ILCA, as amended in 1984. Congress enacted the original provision in 1983 to ameliorate the extreme fractionation problem attending a century-old allotment policy that yielded multiple ownership of single parcels of Indian land. Pub. L. 97-459, §207, 96 Stat. 2519. Amended §207 provides that certain small interests in Indian lands will transfer — or “escheat” — to the tribe upon the death of the owner of the interest. Pub. L. 98-608, 98 Stat. 3173. In Hodel v. Irving, 481 U. S. 704 (1987), this Court held that the original version of §207 of the ILCA effected a taking of private property without just compensation, in violation of the Fifth Amendment to the United States Constitution. Id., at 716-718. We now hold that amended § 207 does not cure the constitutional deficiency this Court identified in the original version of §207.

I

In the late Nineteenth Century, Congress initiated an Indian land program that authorized the division of communal Indian property. Pursuant to this allotment policy, some Indian land was parcelled out to individual tribal members. Lands not allotted to individual Indians were opened to non-Indians for settlement. See Indian General Allotment Act of 1887, eh. 119, 24 Stat. 388. Allotted lands were held in trust by the United States or owned by the allottee subject to restrictions on alienation. On the death of the allottee, the land descended according to the laws of the State or Territory in which the land was located. 24 Stat. 389. In 1910, Congress also provided that allottees could devise their interests in allotted land. Act of June 25, 1910, ch. 431, §2, 36 Stat. 856, codified as amended, 25 U. S. C. § 373.

The allotment policy “quickly proved disastrous for the Indians.” Irving, 481 U. S., at 707. The program produced a dramatic decline in the amount of land in Indian hands. F. Cohen, Handbook of Federal Indian Law 138 (1982) (hereinafter Cohen). And as allottees passed their interests on to multiple heirs, ownership of allotments became increasingly fractionated, with some parcels held by dozens of owners. Lawson, Heirship: The Indian Amoeba, reprinted in Hearing on S. 2480 and S. 2663 before the Senate Select Committee on Indian Affairs, 98th Cong., 2d Sess., 77 (1984) (hereinafter Lawson). A number of factors augmented the problem: Because Indians often died without wills, many interests passed to multiple heirs, H. R. Rep. No. 97-908, p. 10 (1982); Congress’ allotment Acts subjected trust lands to alienation restrictions that impeded holders of small interests from transferring those interests, Lawson 78-79; Indian lands were not subject to state real estate taxes, Cohen 406, which ordinarily serve as a strong disincentive to retaining small fractional interests in land. The fractionation problem proliferated with each succeeding generation as multiple heirs took undivided interests in allotments.

The administrative difficulties associated with multiple undivided ownership in allotted lands gained official attention as early as 1928. See L. Meriam, Institute for Government Research, The Problem of Indian Administration 40-41 (1928). Governmental administration of these fractionated interests proved costly, and individual owners of small undivided interests could not make productive use of the land. Congress ended further allotment in 1934. See Indian Reorganization Act, ch. 576, 48 Stat. 984, 25 U. S. C. § 461 et seq. But that action left the legacy in place. As most owners had more than one heir, interests in lands already allotted continued to splinter with each generation. In the 1960’s, congressional studies revealed that approximately half of all allotted trust lands were held in fractionated ownership; for over a quarter of allotted trust lands, individual allotments were held by more than six owners to a parcel. See Irving, 481 U. S., at 708-709 (citing Senate Committee on Interior and Insular Affairs, Indian Heirship Land Survey, 86th Cong., 2d Sess., pt. 2, p. x (Comm. Print 1960-1961)).

In 1983, Congress adopted-the fractionated ownership of allotted lands. Pub. L. 97-459, tit. II, 96 Stat. 2517. Section 207 of the ILCA — the “escheat” provision — prohibited the descent or devise of small fractional interests in allotments. 96 Stat. 2519. Instead of passing to heirs, such fractional interests would escheat to the tribe, thereby consolidating the ownership of Indian lands. Congress defined the targeted fractional interest as one that both constituted 2 percent or less of the total acreage in an allotted tract and had earned less than $100 in the preceding year. Section 207 made no provision for the payment of compensation to those who held such interests.

Hodel v. Irving, this Court invalidated §207 on the ground that it effected a taking of property without just compensation, in violation of the Fifth Amendment. 481 U. S., at 716-718. The appellees in Irving were, or represented, heirs or devisees of members of the Oglala Sioux Tribe. But for §207, the appellees would have received 41 fractional interests in allotments; under § 207, those interests would escheat to the Tribe. Id., at 709-710. This Court tested the legitimacy of §207 by considering its economic impact, its effect on investment-backed expectations, and the essential character of the measure. See id., at 713-718; see also Penn Central Transp. Co. v. New York City, 438 U. S. 104, 124 (1978). Turning first to the economic impact of §207, the Court in Irving observed that the provision’s income-generation test might fail to capture the actual economic value of the land. 481 U. S., at 714. The Court next indicated that § 207 likely did not interfere with investment-backed expectations. Id., at 715. Key to the decision in Irving, however, was the “extraordinary” character of the Government regulation. Id., at 716. As this Court noted, §207 amounted to the “virtual 1] abrogation of the right to pass on a certain type of property.” Ibid. Such a complete abrogation of the rights of descent and devise could not be upheld. Id., at 716-717.

II

In 1984, while Irving was still pending in the Court of Appeals for the Eighth Circuit, Congress amended §207. Pub. L. 96-608, § 1(4), 98 Stat. 3173. Amended §207 differs from the original escheat provision in three relevant respects. First, an interest is considered fractional if it both constitutes 2 percent or less of the total acreage of the parcel and “is incapable of earning $100 in any one of the five years [following the] decedent’s death” — as opposed to one year before the decedent’s death in the original § 207. 25 U. S. C. § 2206(a). If the interest earned less than $100 in any one of five years prior to the decedent’s death, “there shall be a rebuttable presumption that such interest is incapable of earning $100 in any one of the five years following the death of the decedent.” Ibid. Second, in lieu of a total ban on devise and descent of fractional interests, amended § 207 permits devise of an otherwise escheatable interest to “any other owner of an undivided fractional interest in such parcel or tract” of land. 25 U. S. C. § 2206(b). Finally, tribes are authorized to override the provisions of amended §207 through the adoption of their own codes governing the disposition of fractional interests; these codes are subject to the approval of the Secretary of the Interior. 25 U. S. C. § 2206(c). In Irving, “[w]e expressed] no opinion on the constitutionality of §207 as amended.” 481 U. S., at 710, n. 1.

§207, the interests in this case would escheat to tribal governments. The initiating plaintiffs, respondents here, are the children and potential heirs of William Youpee. An enrolled member of the Sioux and Assiniboine Tribes of the Fort Peck Reservation in Montana, William Youpee died testate in October 1990. His will devised to respondents, all of them enrolled tribal members, his several undivided interests in allotted trust lands on various reservations in Montana and North Dakota. These interests, as the Ninth Circuit reported, were valued together at $1,239. 67 F. 3d 194,199 (1995). Each interest was devised to a single descendant. Youpee’s will thus perpetuated existing fractionation, but it did not splinter ownership further by bequeathing any single fractional interest to multiple devisees.

In 1992, in a proceeding to determine the heirs to, and claims against, William Youpee’s estate, an Administrative Law Judge (ALJ) in the Department of the Interior found that interests devised to each of the respondents fell within the compass of amended § 207 and should therefore escheat to the tribal governments of the Fort Peck, Standing Rock, and Devils Lake Sioux Reservations. App. to Pet. for Cert. 27a-40a. Respondents, asserting the unconstitutionality of amended § 207, appealed the ALJ’s order to the Department of the Interior Board of Indian Appeals. The Board, stating that it did not have jurisdiction to consider respondents’ constitutional claim, dismissed the appeal.

Respondents then filed Court for the. District of Montana, naming the Secretary of the Interior as defendant, and alleging that amended § 207 of the ILCA violates the Just Compensation Clause of the Fifth Amendment. The District Court agreed with respondents and granted their request for declaratory and in-junctive relief. 857 F. Supp. 760, 766 (1994).

The Court of Appeals F. 3d 194 (1995). That court carefully inspected the 1984 revisions to §207. Hewing closely to the reasoning of this Court in Irving, the Ninth Circuit determined that amended § 207 did not cure the deficiencies that rendered the original provision unconstitutional. In particular, the Ninth Circuit observed that amended § 207 “continue[d] to completely abolish one of the sticks in the bundle of rights [constituting property] for a class of Indian landowners.” 67 F. 3d, at 200. The Ninth Circuit noted that “Congress may pursue other options to achieve consolidation of . . . fractional interests,” including Government purchase of the land, condemnation for a public purpose attended by payment of just compensation, or regulation to impede further fractionation. Ibid. But amended §207 could not stand, the Ninth Circuit concluded, for the provision remained “an extraordinary and impermissible regulation of Indian lands and effected] an unconstitutional taking without just compensation.” Ibid.

On the petition of the United States, we granted certiorari, 517 U. S. 1232 (1996), and now affirm.

HH h — I HH

In determining whether the 1984 amendments to § 207 render the provision constitutional, we are guided by Irving. The United States maintains that the amendments, though enacted three years prior to the Irving decision, effectively anticipated the concerns expressed in the Court’s opinion. As already noted, amended § 207 differs from the original in three relevant respects: It looks back five years instead of one to determine the income produced from a small interest, and creates a rebuttable presumption that this income stream will continue; it permits devise of otherwise escheatable interests to persons who already own an interest in the same parcel; and it authorizes tribes to develop their own codes governing the disposition of fractional interests. These modifications, according to the United States, rescue amended §207 from the fate of its predecessor. The Government maintains that the revisions moderate the economic impact of the provision and temper the character of the Government’s regulation; the latter factor weighed most heavily against the constitutionality of the original version of § 207.

The narrow revisions Congress made to § 207, without benefit of our ruling in Irving, do not warrant a disposition different from the one this Court announced and explained in Irving. Amended § 207 permits a five-year window rather than a one-year window to assess the income-generating capacity of the interest. As the Ninth Circuit observed, however, argument that this change substantially mitigates the economic impact of §207 “misses the point.” 67 F. 3d, at 199. Amended §207 still trains on income generated from the land, not on the value of the parcel. The Court observed in Irving that “[e]ven if . . . the income generated by such parcels may be properly thought of as de minimis,” the value of the land may not fit that description. 481 U. S., at 714. The parcels at issue in Irving were valued by the Bureau of Indian Affairs at $2,700 and $1,816, amounts we found “not trivial.” Ibid. The value of the disputed parcels in this case is not of a different order; as the Ninth Circuit reported, the value of decedent Youpee’s fractional interests was $1,289. 67 F. 3d, at 199. In short, the economic impact of amended § 207 might still be palpable.

Even if the economic nificantly less than the impact of the original provision, the United States correctly comprehends that Irving rested primarily on the “extraordinary” character of the governmental regulation. Irving stressed that the original §207 “amount[ed] to virtually the abrogation of the right to pass on a certain type of property — the small undivided interest — to one’s heirs.” 481 U. S., at 716; see also id., at 717 (“both descent and devise are completely abolished”). The Irving Court further noted that the original §207 “effectively abolish[ed] both descent and devise [of fractional interests] even when the passing of the property to the heir might result in consolidation of property.” Id., at 716. As the United States construes Irving, Congress cured the fatal infirmity in § 207 when it revised the section to allow transmission of fractional interests to successors who already own an interest in the allotment.

Congress’ creation of an equipped to receive fractional interests by devise does not suffice, under a fair reading of Irving, to rehabilitate the measure. Amended §207 severely restricts the right of an individual to direct the descent of his property. Allowing a decedent to leave an interest only to a current owner in the same parcel shrinks drastically the universe of possible successors. And, as the Ninth Circuit observed, the “very limited group [of permissible devisees] is unlikely to contain any lineal descendants.” 67 F. 3d, at 199-200. Moreover, amended § 207 continues to restrict devise “even in circumstances when the governmental purpose sought to be advanced, consolidation of ownership of Indian lands, does not conflict with the further descent of the property.” Irving, 481 U. S., at 718. William Youpee’s will, the United States acknowledges, bequeathed each fractional interest to one heir. Giving effect to Youpee’s directive, therefore, would not further fractionate Indian land holdings.

also contends that amended § 207 satisfies the Constitution’s demand because it does not diminish the owner’s right to use or enjoy property during his lifetime, and does not affect the right to transfer property at death through nonprobate means. These arguments did not persuade us in Irving and they are no more persuasive today. See id., at 716-718.

The third alteration made in amended §207 also fails to bring the provision outside the reach of this Court’s holding in Irving. Amended §207 permits tribes to establish their own codes to govern the disposition of fractional interests; if approved by the Secretary of the Interior, these codes would govern in lieu of amended § 207. See 25 U. S. C. § 2206(c). The United States does not rely on this new provision to defend the statute. Nor does it appear that the United States could do so at this time: Tribal codes governing disposition of escheatable interests have apparently not been developed. See Tr. of Oral Arg. 42-43.

* * *

For the reasons stated, the judgment of the Court of Appeals for the Ninth Circuit is

Affirmed.

Justice Stevens,

dissenting.

Section 207 of the Indian Land Consolidation Act, U. S. C. § 2206, did not, in my view, effect an unconstitutional taking of William Youpee’s right to make a testamentary disposition of his property. As I explained in Hodel v. Irving, 481 U. S. 704, 719-720 (1987) (opinion concurring in judgment), the Federal Government, like a State, has a valid interest in removing legal impediments to the productive development of real estate. For this reason, the Court has repeatedly “upheld the power of the State to condition the retention of a property right upon the performance of an act within a limited period of time.” Texaco, Inc. v. Short, 454 U. S. 516, 529 (1982). I remain convinced that “Congress has ample power to require the owners of fractional interests in allotted lands to consolidate their holdings during their lifetimes or to face the risk that their interests will be deemed to be abandoned.” Hodel, 481 U. S., at 732 (Stevens, J., concurring in judgment). The federal interest in minimizing the fractionated ownership of Indian lands — and thereby paving the way to the productive development of their property — is strong enough to justify the legislative remedy created by §207, provided, of course, that affected owners have adequate notice of the requirements of the law and an adequate opportunity to adjust their affairs to protect against loss. See ibid. notice and

In my opinion, opportunity. With regard to notice, the requirements of § 207 are set forth in the United States Code. “Generally, a legislature need do nothing more than enact and publish the law, and afford the citizenry a reasonable opportunity to familiarize itself with its terms and to comply. ... It is well established that persons owning property within a [jurisdiction] are charged with knowledge of relevant statutory provisions affecting the control or disposition of such property.” Texaco, 454 U. S., at 531-532. Unlike the landowners in Hodel, Mr. Youpee also had adequate opportunity to comply. More than six years passed from the time § 207 was amended until Mr. Youpee died on October 19, 1990 (this period spans more than seven years if we count from the date § 207 was originally enacted). During this time, Mr. Youpee could have realized the value of his fractional interests (approximately $1,239) in a variety of ways, including selling the property, giving it to his children as a gift, or putting it in trust for them. I assume that he failed to do so because he was not aware of the requirements of § 207. This loss is unfortunate. But I believe Mr. Youpee’s failure to pass on his property is the product of inadequate legal advice rather than an unconstitutional defect in the statute.

I respectfully dissent.

       As originally enacted, §207 provided:
      “No undivided fractional interest in any tract of trust or restricted land within a tribe’s reservation or otherwise subjected to a tribe’s jurisdiction shall descedent [sic] by intestacy or devise but shall escheat to that tribe if such interest represents 2 per centum or less of the total acreage in such tract and has earned to its owner less than $100 in the preceding year before it is due to escheat.” 96 Stat. 2519.

       In 1990, Congress enacted minor revisions to §207 that are not relevant here. Pub. L. 101-644, § 301,104 Stat. 4666-4667. Amended §207, codified at 25 U. S. C. §2206, provides:
      “(a) Escheat to tribe;
      “No undivided interest held by a tract of trust land or restricted land within a tribe’s reservation or outside of a reservation and subject to such tribe’s jurisdiction shall descend by intestacy or devise but shall escheat to the reservation’s recognized tribal government, or if outside of a reservation, to the recognized tribal government possessing jurisdiction over the land if such interest represents 2 per centum or less of the total acreage in such tract and is incapable of earning $100 in any one of the five years from the date of the decedent’s death. Where the fractional interest has earned to its owner less than $100 in any one of the five years before the decedent’s death, there shall be a rebuttable presumption that such interest is incapable of earning $100 in any one of the five years following the death of the decedent.
      “(b)
      “Nothing in this section shall fractional interest to any other owner of an undivided fractional interest in such parcel or tract of trust or restricted land.
      “(c) Adoption of Indian
      “Notwithstanding the provisions Indian tribe may, subject to the approval of the Secretary, adopt its own code of laws to govern the disposition of interests that are escheatable under this section, and such codes or laws shall take precedence over the escheat provisions of subsection (a) of this section, provided, the Secretary shall not approve any code or law that fails to accomplish the purpose of preventing further descent or fractionation of such escheatable interests.”

       In Irving we relied on Penn Central Transp. Co. v. New York City, 438 U. S. 104 (1978). Because we find Irving dispositive, we do not reach respondents’ argument that amended § 207 effects a “categorical” taking, and is therefore subject to the more stringent analysis employed in Lucas v. South Carolina Coastal Council, 505 U. S. 1003 (1992).

      Whether his heirs might have had a right to some relief from the author of Mr. Youpee’s will if the Court had upheld the statute is not before us. Though not constitutionally required, it would certainly seem prudent for the Government or Mr. Youpee’s lawyer to have notified him of § 207’s requirements.