author: Justice Ginsburg

text:
    UNUM LIFE INSURANCE CO. OF AMERICA v. WARD
    No. 97-1868.
    Argued February 24, 1999
    Decided April 20, 1999

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

      William J. Kayatta, Jr., argued the cause for petitioner. With him on the briefs were David L. Bacon, Charles M. Dyke, Barbara H. Furey, Brian G. Kanner, Tamarra T. Rennick, Lesley C. Green, and Russell G. Petti.

    argued the cause for the United States as amicus curiae urging reversal. With him on the briefs were Solicitor General Waxman, James A. Feldman, Judith E. Kramer, Allen H. Feldman, Nathaniel I. Spiller, and Elizabeth Hopkins.

      Jeffrey Isaac Ehrlich argued cause With him on the briefs were Brian Stuart Koukoutchos, Janice Mazur, Brooks Iler, and Arthur M. Palkowitz.

      Briefs of amid curiae urging reversal were filed for the American Council of Life Insurance et al. by Robert N. Eccles, Karen M. Wahle, Jeffrey L. Gabardi, and Phillip E. Stano; for the Association of California Life and Health Insurance Companies by James H. Fleming; for the Association of Private Pension and Welfare Plans et al. by Michael E. Mala-mut, Loretta M. Smith, Jan Amundson, Quentin Riegel, and Stephen A Bokat; and for the Business Roundtable by Charles Rothfeld and Lawrence S. Robbins.

      Briefs Texas et al. by John Comyn, Attorney General of Texas, and David C. Mattax, Eliot Spitzer, Attorney General of New York, Peter Schiff, Acting Solicitor General, Patricia Smith, Assistant Attorney General, and Dan Schweitzer, and by the Attorneys General for their respective jurisdictions as follows: Bill Pryor of Alabama, Janet Napolitano of Arizona, Winston Bryant of Arkansas, Bill Lockyer of California, Gale A Norton of Colorado, Richard Blumenthal of Connecticut, M. Jane Brady of Delaware, Robert A Butterworth of Florida, Thnrbert E. Baker of Georgia, Margery S. Bronster of Hawaii, Alan G. Lance of Idaho, James E. Ryan of Illinois, Jeffrey A Modisett of Indiana, Thomas J. Miller of Iowa, Richard P. Ieyoub of Louisiana, Andrew Ketterer of Maine, J. Joseph Curran, Jr., of Maryland, Scott Harshbarger of Massachusetts, Jennifer M. Granholm of Michigan, Mike Hatch of Minnesota, Jeremiah W. (Jay) Nixon of Missouri, Joseph P. Mazurek of Montana, Frankie Sue Del Papa of Nevada, Peter Vemiero of New Jersey, Patrida A Madrid of New Mexico, Michael F. Easley of North Carolina, Heidi Heitkamp of North Dakota, Betty D. Montgomery of Ohio, W. A Drew Edmondson of Oklahoma, Hardy Myers of Oregon, Mike Fisher of Pennsylvania, Jose Fuentes-Agostini of Puerto Rico, Sheldon Whitehouse of Rhode Island, Charles M. Condon of South Carolina, Paul G. Summers of Tennessee, Jan Graham of Utah, William H. Sorrell of Vermont, Christine 0. Gregoire of Washington, Darrell V. McGrow of West Virginia, and Gay Woodhouse of Wyoming; for the Council of State Governments et al. by Richard Ruda and Steven H. Goldblatt; for the National Association of Insurance Commissioners by Sally B. Sur-

        ridge; and for the National Employment Lawyers Association by Daniel M. Feinberg and Paula A. Brantmr.

      and Melvin Radowitz filed a brief for the American Association of Retired Persons as amicus curiae.

   Justice Ginsburg

delivered the opinion of the Court.

This case, brought under § 502(a) of the Employee Retirement Income Security Act of 1974 (ERISA), 88 Stat. 891, as amended, 29 U. S. C. § 1132(a), concerns ERISA’s preemption and saving clauses. The preemption clause, § 514(a), 29 U. S. C. § 1144(a), broadly states that ERISA provisions “shall supersede... State laws” to the extent that those laws “relate to any employee benefit plan.” The saving clause, § 514(b)(2)(A), 29 U. S. C. § 1144(b)(2)(A), phrased with similar breadth, exempts from preemption “any law of any State which regulates insurance.” The key words “regulates insurance” in § 514(b)(2)(A), and “relate to” in § 514(a), once again require interpretation, for their meaning is not “plain”; sensible construction of ERISA, our decisions indicate, requires that we measure these words in context. See Pilot Life Ins. Co. v. Dedeaux, 481 U. S. 41, 47 (1987) (noting that repeated calls for interpretation are not surprising in view of “the wide variety of state statutory and decisional law arguably affected” by ERISA’s preemption and saving clauses).

The context here is a suit to recover disability benefits under an ERISA-governed insurance policy issued by defendant-petitioner UNUM Life Insurance Company of America (UNUM). Plaintiff-respondent John E. Ward submitted his proof of claim to UNUM outside the time limit set in the policy, and UNUM therefore denied Ward’s claim.

and reversing the District Court’s summary judgment for UNUM, the Court of Appeals for the Ninth Circuit relied on decisional law in California, the State in which Ward worked and in which his employer operated. The Ninth Circuit’s judgment rested on two grounds. That court relied first on California’s “notice-prejudice” rule, under which an insurer cannot avoid liability although the proof of claim is untimely, unless the insurer shows it was prejudiced by the delay. The notice-prejudice rule is saved from preemption, the Court of Appeals held, because it is “law ... which regulates insurance.” See Ward v. Management Analysis Co. Employee Disability Benefit Plan, 135 F. 3d 1276, 1280 (1998).

The Court of Appeals announced a further reversing the District Court’s judgment for UNUM, one that would come into play if the insurer proved prejudice due to the delayed notice. Under California’s decisions, the Ninth Circuit said, the employer could be deemed an agent of the insurer in administering group insurance policies. Ward’s employer knew of his disability within the time the policy allowed for proof of claim. The Ninth Circuit held that the generally applicable agency law reflected in the California eases does not “relate to” employee benefit plans, and therefore is not preempted. See id., at 1281-1283, 1287-1288.

We granted the Court of Appeals’ first disposition, and reverse the second. California’s notice-prejudice rule, we agree, is a “law ... which regulates insurance,” and is therefore saved from preemption by ERISA. California’s agency law, we further hold, does “relate to” employee benefit plans, and therefore does not occupy ground outside ERISA’s preemption clause.

I

UNUM issued a long-term group disability policy to Management Analysis Company (MAC) as an insured welfare benefit plan governed by ERISA, effective November 1, 1983. The policy provides that proofs of claim must be furnished to UNUM, at the latest, one year and 180 days after the onset of disability.

Ward was employed by MAC from 1983 Throughout this period, premiums for the disability policy were deducted from Ward’s paycheck. Under the admitted facts of the case, Ward became permanently disabled with severe leg pain on the date of his resignation, May 5, 1992. See 135 F. 3d, at 1280.

Ward’s condition was diagnosed as diabetic neuropathy in December 1992. In late February or early March 1993, he qualified for state disability benefits and thereupon informed MAC of his disability and inquired about continuing health insurance benefits. In July 1993, Ward received a determination of eligibility for Social Security disability benefits and forwarded a copy of this determination to MAC’S human resources division. See id., at 1279. In April 1994, Ward discovered among his papers a booklet describing the long-term disability plan and asked MAG whether the plan covered his condition. When MAC told him he was covered, Ward completed an application for benefits and forwarded it to MAC. In turn, and after filling in the employer information section, MAC forwarded the application to UNUM. UNUM received proof of Ward’s claim on April 11, 1994. See ibid. This notice was late under the terms of the policy, which required submission of proof of claim by November 5, 1993. See id., at 1280. By letter dated April 13, 1994, UNUM advised Ward that his claim was denied as untimely. See id., at 1279.

In September 1994, Ward filed suit against the MAC plan under §502 of ERISA, 29 U. S. C. § 1132, to recover the disability benefits provided by the plan. UNUM appeared as a defendant and answered on behalf of itself and the plan. See 135 P. 3d, at 1279. To the District Court, Ward argued that under Elfstrom v. New York Life Ins. Co., 67 Cal. 2d 503, 512, 432 P. 2d 731, 737 (1967) (en banc), a California employer that administers an insured group health plan should be deemed to act as the agent of the insurance company. Therefore, Ward asserted, his notice of permanent disability to MAC, in February or March 1993, sufficed to supply timely notice to UNUM. See App. to Pet. for Cert. 30a. The District Court rejected this argument, concluding that the agency rule announced in Elfstrom “relate[s] to” ERISA plans; hence it is preempted under § 514(a), 29 U. S. C. § 1144(a). See App. to Pet. for Cert. 30a. The District Court further held that the Elfstrom rule is not saved from preemption as a law that “regulates insurance” within the compass of ERISA’s insurance saving clause, § 514(b)(2)(A), 29 U. S. C. § 1144(b)(2)(A). App. to Pet. for Cert. 31a. Accordingly, the court rendered summary judgment in UNUM’s favor. See id., at 33a.

The Court of tifying two grounds on which Ward might prevail. First, following the Ninth Circuit’s recent decision in Cisneros v. UNUM Life Ins. Co., 134 F. 3d 939 (1998), the appeals court held that California’s notice-prejudice rule is saved from ERISA preemption as a law that “regulates insurance”; under the notice-prejudice rule, Ward’s late notice would not preclude his ERISA claim absent proof that the insurer suffered actual prejudice because of the delay. See 135 F. 3d, at 1280. Second, and contingently, the Ninth Circuit held that the Elfstrom rule, under which the employer could be deemed an agent of the insurer, does not “relate to” employee benefit plans, and therefore is not preempted by reason of ERISA. See 135 F. 3d, at 1287 (internal quotation marks omitted). The court accordingly remanded the case to the District Court for a determination whether UNUM suffered actual prejudice on account of the late submission of Ward’s notice of claim; and if so, whether, under the reasoning of Elfstrom, Ward could nevertheless prevail because he had timely filed his claim. See 135 F. 3d, at 1289.

HH

California’s notice-prejudice rule prescribes:

“[A] defense based on an insured’s failure to give timely notice [of a claim] requires the insurer to prove that it suffered substantial prejudice. Prejudice is not presumed from delayed notice alone. The insurer must show actual prejudice, not the mere possibility of prejudice.” Shell Oil Co. v. Winterthur Swiss Ins. Co., 12 Cal. App. 4th 715, 760-761, 15 Cal. Rptr. 2d 815, 845 (1st Dist. 1993) (citations omitted).

The parties agree that the notice-prejudice rule falls under ERISA’s preemption clause, § 514(a), as a state law that “relate[s] to” an employee benefit plan. Their dispute hinges on this question: Does the rule “regulat[e] insurance” and thus escape preemption under the saving clause, § 514(b)(2)(A).

Our precedent provides a framework for resolving whether a state law “regulates insurance” within the meaning of the saving clause. First, we ask whether, from a “common-sense view of the matter,” the contested prescription regulates insurance. Metropolitan Life Ins. Co. v. Massachusetts, 471 U. S. 724, 740 (1985); see Pilot Life, 481 U. S., at 48. Second, we consider three factors employed to determine whether the regulation fits within the “business of insurance” as that phrase is used in the McCarran-Ferguson Act, 59 Stat. 33, as amended, 15 U. S. C. § 1011 et seq.: “first, whether the practice has the effect of transferring or spreading a policyholder’s risk; second, whether the practice is an integral part of the policy relationship between the insurer and the insured; and third, whether the practice is limited to entities within the insurance industry.” Metropolitan Life, 471 U. S., at 743 (emphasis, citations, and internal quotation marks omitted); see also Pilot Life, 481 U. S., at 48-49.

A

The Ninth Circuit concluded that California’s notice-prejudice rule “regulates insurance” as a matter of common sense. See Cisneros, 134 E 3d, at 945. We do not normally disturb an appeals court’s judgment on an issue so heavily dependent on analysis of state law, see Runyon v. McCrary, 427 U. S. 160, 181-182 (1976), and we lack cause to do so here. The California notice-prejudice rule controls the terms of the insurance relationship by “requiring the insurer to prove prejudice before enforcing proof-of-claim requirements.” Cisneros, 134 F.3d, at 945. As the Ninth Circuit observed, the rule, by its very terms, “is directed specifically at the insurance industry and is applicable only to insurance contracts.” Ibid.; see Brief for United States as Amicus Curiae 12 (“[0]ur survey of California law reveals no cases where the state courts apply the notice-prejudice rule as such outside the insurance area. Nor is this surprising, given that the rule is stated in terms of prejudice to an ‘insurer’ resulting from untimeliness of notice.”). The rule thus appears to satisfy the common-sense view as a regulation that homes in on the insurance industry and does “not just have an impact on [that] industry.” Pilot Life, 481 U. S., at 50.

UNUM and its urge cuit’s common-sense conclusion that the notice-prejudice rule is merely an industry-specific application of the general principle that “disproportionate forfeiture should be avoided in the enforcement of contracts.” See Brief for American Council of Life Insurance et al. as Amici Curiae 13; Brief for Association of California Life and Health Insurance Companies as Amicus Curiae 5 (“[Njotice-prejudice is merely a branch of the broad doctrine of harmless error.”). Given the tenet from which the notice-prejudice rule springs, UNUM maintains, the rule resembles the Mississippi law at issue in Pilot Life; under that law, punitive damages could be sought for “bad faith” in denying claims without any reasonably arguable basis for the refusal to pay. See 481 U. S., at 50. We determined in Pilot Life that although Mississippi had “identified its law of bad faith with the insurance industry, the roots of this law are firmly planted in the general principles of Mississippi tort and contract law.” Ibid. “Any breach of contract,” we observed, “and not merely breach of an insurance contract, may lead to liability for punitive damages under [the Mississippi common law of bad faith].” Ibid. Accordingly, we concluded, the Mississippi law did not “regulate] insurance” within the meaning of ERISA’s saving clause. Ibid.

We do not find it fair to bracket California’s notice-prejudice rule for insurance contracts with Mississippi’s broad gauged “bad faith” claim for relief. Insurance policies like UNUM’s frame timely notice provisions as conditions precedent to be satisfied by the insured before an insurer’s contractual obligation arises. See 1 B. Witkin, Summary of California Law, Contracts § 726, p. 657 (9th ed. 1987); Zurn Engineers v. Eagle Star Ins. Co., 61 Cal. App. 3d 493, 499, 132 Cal. Rptr. 206, 210 (2d Dist. 1976). Ordinarily, “failure to comply with conditions precedent.. . prevents an action by the defaulting party to enforce the contract.” 14 Cal. Jur. 3d, Contracts §245, p. 542 (3d ed. 1974). A recent California decision, Platt Pacific Inc. v. Andelson, 6 Cal. 4th 307, 862 P. 2d 158 (1993) (en bane), is illustrative. In that case, the California Supreme Court adhered to the normal course: It refused to excuse a plaintiff’s failure to comply with a contractual requirement to timely demand arbitration, although there was no allegation that the defendant had been prejudiced by the plaintiff’s lapse. The plaintiff had forfeited the right to pursue arbitration, the court concluded, for “the condition precedent [of a timely demand] was neither legally excused nor changed by modification of the parties’ written agreement.” Id., at 321, 862 P. 2d, at 167. “A contrary conclusion,” the court stated, “would undermine the law of contracts by vesting in one contracting party the power to unilaterally convert the other contracting party’s conditional obligation into an independent, unconditional obligation notwithstanding the terms of the agreement.” Id., at 314, 862 P. 2d, at 162.

It is no doubt true that out the maxim that “law abhors a forfeiture” and that the notice-prejudice rule is an application of that maxim. But it is an application of a special order, a rule mandatory for insurance contracts, not a principle a court may pliably employ when the circumstances so warrant. Tellingly, UNUM has identified no California authority outside the insurance-specific notice-prejudice context indicating that as a matter of law, failure to abide by a contractual time condition does not work a forfeiture absent prejudice. Outside the notice-prejudice context, the burden of justifying a departure from a contract’s written terms generally rests with the party seeking the departure. See, e. g., American Bankers Mortgage Corp. v. Federal Home Loan Mortgage Corp., 75 F. 3d 1401, 1413 (CA9 1996); CQL Original Products, Inc. v. National Hockey League Players’ Assn., 39 Cal. App. 4th 1347, 1357-1358, n. 6, 46 Cal. Rptr. 2d 412, 418, n. 6 (4th Dist. 1995). In short, the notice-prejudice rule is distinctive most notably because it is a rule firmly applied to insurance contracts, not a general principle guiding a court’s discretion in a range of matters.

California’s insistence that insurers show prejudice before they may deny coverage because of late notice is grounded in policy concerns specific to the insurance industry See Brief for Council of State Governments et al. as Amici Curiae 10-14. That grounding is key to our decision. Announcing the notice-prejudice rule in Campbell v. Allstate Ins. Co., 60 Cal. 2d 303, 384 P. 2d 155 (1963) (en banc), the California Supreme Court emphasized the “public policy of this state” in favor of compensating insureds. Id., at 307, 384 P. 2d, at 157; see ibid, (weighing the relative burdens of notice-prejudice on insurers and insureds). Subsequent notice-prejudice rulings have likewise focused on insurance industry policy and governance. See, e. g., Hanover Ins. Co. v. Carroll, 241 Cal. App. 2d 558, 570, 50 Cal. Rptr. 704, 712 (1st Dist. 1966) (public policy respecting compensation of insured injured parties); Northwestern Title Security Co. v. Flack, 6 Cal. App. 3d 134, 143-144, 85 Cal. Rptr. 693, 698 (1st Dist. 1970) (extending notice-prejudice rule to “elaims-type” policies, rejecting contention that sound public policy required limitation of rule to “occurrence-type” policies); Pacific Employers Ins. Co. v. Superior Court, 221 Cal. App. 3d 1348,1359-1360, 270 Cal. Rptr. 779, 784-785 (2d Dist. 1990) (evaluating insurance industry public policy considerations in reaching the opposite conclusion). Decisions of courts in other States similarly indicate that the notice-prejudice rule addresses policy concerns specific to insurance. See, e.g., Cooper v. Government Employees Ins. Co., 51 N. J. 86, 94, 237 A. 2d 870, 874 (1968) (failure to adopt notice-prejudice would “disserve the public interest, for insurance is an instrument of a social policy that the victims of negligence be compensated”); Great American Ins. Co. v. C. G. Tate Construction Co., 303 N. C. 387, 395, 279 S. E. 2d 769, 774 (1981) (“The [notice-prejudice] rule we adopt today has the advantages of promoting social policy and fulfilling the reasonable expectations of the purchaser while fully protecting the ability of the insurer to protect its own interests.”); Alcazar v. Hayes, 982 S. W. 2d 845, 851-853 (Tenn. 1998) (surveying the “compelling public policy justifications” that support departing from traditional contract interpretation in favor of notice-prejudice).

In sum, the Ninth Circuit properly concluded that notice-prejudice is a rule of law governing the insurance relationship distinctively. We reject UNUM’s contention that the rule merely restates a general principle disfavoring forfeitures and conclude instead that notice-prejudice, as a matter of common sense, regulates insurance.

B

We next consider the criteria used to determine whether a state law regulates the “business of insurance” within the meaning of the McCarran-Ferguson Act. Preliminarily, we reject UNUM’s assertion that a state regulation must satisfy all three McCarran-Ferguson factors in order to “regulate insurance” under ERISA’s saving clause. Our precedent is more supple than UNUM conceives it to be. We have indicated that the McCarran-Ferguson factors are “considerations [to be] weighed” in determining whether a state law regulates insurance, Pilot Life, 481 U. S., at 49, and that “[n]one of these criteria is necessarily determinative in itself,” Union Labor Life Ins. Co. v. Pireno, 458 U. S. 119, 129 (1982). In Metropolitan Life, the case in which we first used the McCarran-Ferguson formulation to assess whether a state law “regulates insurance” for purposes of ERISA’s saving clause, we called the McCarran-Ferguson factors “relevant”; we did not describe them as “required.” See 471 U. S., at 743; O’Connor v. UNUM Life Ins. Co. of America, 146 F. 3d 959, 963 (CADC 1998) (“That the factors are merely ‘relevant’ suggests that they need not all point in the same direction, else they would be ‘required.’”). As the Ninth Circuit correctly recognized, Metropolitan Life asked first whether the law there in question “fit a common-sense understanding of insurance regulation,” Cisneros, 134 F. 3d, at 945, and then looked to the McCarran-Ferguson factors as cheeking points or “guideposts, not separate essential elements . . . that must each be satisfied” to save the State’s law, id., at 946.

The first McCarran-Ferguson factor asks whether the at issue “has the effect of transferring or spreading a policyholder's risk.” Metropolitan Life, 471 U. S., at 743 (internal quotation marks omitted). The Ninth Circuit determined that the notice-prejudice rule does not satisfy that criterion because it “does not alter the allocation of risk for which the parties initially contracted, namely the risk of lost income from long-term disability.” Cisneros, 134 F. 3d, at 946. The United States as amicus curiae, however, suggests that the notice-prejudice rule might be found to satisfy the McCarran-Ferguson “risk-spreading” factor: “Insofar as the notice-prejudice rule shifts the risk of late notice and stale evidence from the insured to the insurance company in some instances, it has the effect of raising premiums and spreading risk among policyholders.” Brief for United States as Ami-cus Curiae 14. We need not pursue this point, because the remaining McCarran-Ferguson factors, verifying the common-sense view, are securely satisfied.

Meeting as “an integral part of the policy relationship between the insurer and the insured.” Metropolitan Life, 471 U. S., at 743. California’s rule changes the bargain between insurer and insured; it “effectively creates a mandatory contract term” that requires the insurer to prove prejudice before enforcing a timeliness-of-elaim provision. Cisneros, 134 F. 3d, at 946. As the Ninth Circuit stated: “The [notice-prejudice] rule dictates the terms of the relationship between the insurer and the insured, and consequently, is integral to that relationship.” Ibid.

The third McCarran-Ferguson factor — which asks whether the rule is limited to entities within the insurance industry— is also well met. As earlier explained, see supra, at 368-373, California’s notice-prejudice rule focuses on the insurance industry. The rule “does not merely have an impact on the insurance industry; it is aimed at it.” FMC Corp. v. Holliday, 498 U. S. 52, 61 (1990).

HH

UNUM and its amici assert that even if the notice-prejudice rule is saved under 29 U. S. C. § 1144(b)(2)(A), it is nonetheless preempted because it conflicts with substantive provisions of ERISA in three ways. UNUM first contends that the notice-prejudice rule, by altering the notice provisions of the insurance contract, conflicts with ERISA’s requirement that plan fiduciaries act “in accordance with the documents and instruments governing the plan.” § 1104(a)(1)(D). According to UNUM, § 1104(a)(1)(D) preempts any state law contrary to a written plan term. See Brief for Petitioner 32-33; Tr. of Oral Arg. 8.

UNUM’s “contra plan term” argument overlooks controlling precedent and makes scant sense. We have repeatedly held that state laws mandating insurance contract terms are saved from preemption under § 1144(b)(2)(A). See Metropolitan Life, 471 U. S., at 758 (“Massachusetts’ mandated-benefit law is a ‘law which regulates insurance’ and so is not pre-empted by ERISA as it applies to insurance contracts purchased for plans subject to ERISA.”); FMC Corp., 498 U. S., at 64 (“[I]f a plan is insured, a State may regulate it indirectly through regulation of its insurer and its insurer’s insurance contracts.”). Under UNUM’s interpretation of § 1104(a)(1)(D), however, States would be powerless to alter the terms of the insurance relationship in ERISA plans; insurers could displace any state regulation simply by inserting a contrary term in plan documents. This interpretation would virtually “rea[d] the saving clause out of ERISA.” Metropolitan Life, 471 U. S., at 741.

UNUM next vision, § 502(a), 29 U. S. C. § 1132(a), preempts any action for plan benefits brought under state rules such as notice-prejudice. Whatever the merits of UNUM’s view of § 502(a)’s preemptive force, the issue is not implicated here. Ward sued under § 502(a)(1)(B) “to recover benefits due . . . under the terms of his plan.” The notice-prejudice rule supplied the relevant rule of decision for this § 502(a) suit. The case therefore does not raise the question whether § 502(a) provides the sole launching ground for an ERISA enforcement action.

Finally, we reject UNUM’s suggestion that the notice-prejudice rule conflicts with §503 of ERISA, 29 U. S. C. § 1133, which requires plans to provide notice and the opportunity for review of denied claims, or with Department of Labor regulations providing that “[a] claim is filed when the requirements of a reasonable claim filing procedure ... have been met,” 29 CFR §2560.503-1(d) (1998). By allowing a longer period to file than the minimum filing terms mandated by federal law, the notice-prejudice rule complements rather than contradicts ERISA and the regulations. See Brief for United States as Amicus Curiae 19, n. 9.

IV

Ward successfully maintained in the Ninth Circuit that MAG had timely notice of his disability and that his notice to MAG could be found to have served as notice to UNUM on the theory that MAC, as administrator of the group policy, acted as UNUM’s agent. The policy itself provides otherwise:

“For all purposes of this policy, the policyholder [MAC] acts on its own behalf or as agent of the employee. Under no circumstances will the policyholder be deemed the agent of the Company [UNUM] without a written authorization.” App. to Pet. for Cert. 44a.

California law rendered that policy provision ineffective, the Ninth Circuit appeared to conclude, because under the rule stated in Elfstrom v. New York Life Ins. Co., 67 Cal. 2d, at 512, 432 P. 2d, at 737, “the employer is the agent of the insurer in performing the duties of administering group insurance policies.” Thus, the Ninth Circuit instructed that, on remand, if UNUM was found to have suffered actual prejudice on account of Ward’s late notice of claim, the District Court should then determine whether the claim was timely under Elfstrom. 135 F. 3d, at 1289.

Ward does not argue in this Court as comprehended by the Ninth Circuit, is a law that “regulates insurance.” See Brief for Respondent 35 (the Ninth Circuit applied “general principles of agency law,” not a rule determining when “employers who administer insured plans are agents of the insurer as a matter of law”). Indeed, it is difficult to tell from the Court of Appeals opinion precisely what rule or principle that court derived from Elfstrom. See Brief for Respondent 35 (“[T]he court below did not actually apply the Elfstrom rule in this case.”); 135 F. 3d, at 1283, and n. 6 (endorsing the reasoning of Paulson v. Western Life Ins. Co, 292 Ore. 38, 636 P. 2d 935 (1981), an Oregon Supreme Court decision that purported to reconcile Elf-strom with an apparently conflicting body of case law). Whatever the contours of Elfstrom may be, the Ninth Circuit held that the state law emerging from that case does not “relatfe] to” an ERISA plan within the meaning of § 1144(a), and therefore escapes preemption. See 135 F. 3d, at 1287.

In this determination, the Ninth Circuit was The Court of Appeals stated, without elaboration, that Elf-strom does not dictate “the manner in which the plan will be administered,” and therefore is consistent with this Court’s ERISA preemption precedent. Ibid.; see New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U. S. 645, 657-658 (1995) (identifying among laws that “relat[e] to” employee benefit plans those that “mandat[e] employee benefit structures or their administration”). The Ninth Circuit’s statement is not firmly grounded.

As persuasively urged by the United States in its amicus curiae brief, deeming the policyholder-employer the agent of the insurer would have a marked effect on plan administration. It would “fore[e] the employer, as plan administrator, to assume a role, with attendant legal duties and consequences, that it has not undertaken voluntarily”; it would affect “not merely the plan’s bookkeeping obligations regarding to whom benefits checks must be sent, but [would] also regulat[e] the basic services that a plan may or must provide to its participants and beneficiaries.” Brief 27. Satisfied that the Elfstrom rule “relate[s] to” ERISA plans, we reject the Ninth Circuit’s contrary determination.

* * *

For the reasons stated, the judgment of the Court of Appeals is affirmed in part and reversed in part, and the case is remanded for further proceedings consistent with this opinion.

It is so ordered.

       Common-law rules developed by decisions of state courts are “State law” under ERISA. See 29 U. S. C. § 1144(c)(1) (“The term ‘State law' includes all laws, decisions, rules, regulations, or other State action having the effect of law.”).

      State laws that purport to regulate insurance by “deemfingF a plan to be an insurance company are outside the saving clause and remain subject to preemption. See § 1144(b)(2)(B). Self-insured ERISA plans, therefore, are generally sheltered from state insurance regulation. See Metropolitan Life Ins. Co. v. Massachusetts, 471 U. S. 724, 747 (1985). Because this case does not involve a self-insured plan, this limitation on state regulatory authority is not at issue here.

       UNUM cites a handful of California cases of this genre. They do not cast doubt on our disposition. In Conservatorship of Rand, 49 Cal. App. 4th 835, 57 Cal. Rptr. 2d 119 (4th Dist. 1996), the court found that a county court rule governing notice to a conservatee of potential liability for fees and coste did not comply with statutory notice requirements, but excused the defective notice because the conservatee had suffered no prejudice. See id., at 838-841, 57 Cal. Rptr. 2d, at 121-123. Rand was not a contract case at all; it concerned the consequences of a court’s violation of a state-created notice provision in the context of a judicial proceeding. Industrial Asphalt Inc. v. Garrett Corp., 180 Cal. App. 3d 1001, 226 Cal. Rptr. 17 (2d Dist. 1986), concerned the notice requirements imposed by California’s mechanics lien law and turned on principles of statutory rather than contract interpretation. See id., at 1005-1006, 226 Cal. Rptr., at 18-19. In Industrial Asphalt, moreover, the complaining party had received actual notice of the claim underlying the lien. Ibid. Neither ease suggests that California courts are generally unwilling or reluctant to enforce time conditions in private contracts as written.
      The older decisions on which UNUM relies are no more instructive. The contract at issue in Ballard v. MacCallum, 15 Cal. 2d 439, 101 P. 2d 692 (1940) (en banc), contained contradictory clauses, some appearing to provide for forfeiture in the event of default, others appearing to contemplate an opportunity to cure. See id., at 442, 101 P. 2d, at 694. The court invoked a general presumption against forfeitures only to resolve the conflict. See id., at 444, 101 P. 2d, at 695. Finally, in Henck v. Lake Hemet Water Co., 9 Cal. 2d 136, 69 P. 2d 849 (1937) (en banc), a water supplier attempted to escape the terms of a long-term delivery contract on the ground that the water recipient had not timely made annual payment. The California Supreme Court rejected the supplier’s plea, observing that “in a proper case,” equity permits a court to excuse a lapse like the recipient’s in order to avoid forfeiture. See id., at 141, 142, 69 P. 2d, at 852. The Henck court carefully weighed the competing interests of the parties and relied in part on the water supplier’s fault in inducing the late payment. See id., at 144-145, 69 P. 2d, at 853; c£ Restatement (Second) of Contracts §229, Comment c, Reporter’s Note (1979) (courts are likely to excuse obligor’s failure strictly to adhere to a performance timetable where obligee has induced the failure).
      These decisions support the uncontested propositions that the law disfavors forfeitures and that in case-specific circumstances California courts will excuse the breach of a time or notice provision in order to avoid an inequitable forfeiture. None of the decisions even remotely suggests that failures to comply with contractual notice periods are excused as a matter of law absent prejudice; none, therefore, suggests that the notice-prejudice rule is merely a routine application of a general antiforfeiture principle.

       §229 of the Restatement (Second) of Contracts (1979), and urges that the notice-prejudice rule fits within its compass. Section 229 provides that “[t]o the extent that the non-occurrence of a condition would cause disproportionate forfeiture, a court may excuse the nonoccurrence of that condition unless its occurrence was a material part of the agreed exchange.” The notice-prejudice rule, however, is mandatory rather than permissive; it requires California courts to excuse a failure to provide timely notice whenever the insurer cannot carry the burden of showing actual prejudice, and it allows no argument over the materiality of the time prescription.

       We reject UNUM’s suggestion that because the notice-prejudice rule regulates only the administration of insurance policies, not their substantive terms, it cannot be an integral part of the policy relationship. See Metropolitan Life, 471 U. S., at 728, n. 2 (including laws regulating claims practices and requiring grace periods in catalog of state laws that regulate insurance).

       We recognize that applying the States’ varying insurance regulations creates disuniformities for “national plans that enter into local markets to purchase insurance.” Metropolitan Life, 471 U. S., at 747. As we have observed, however, “[s]ueh disuniformities ... are the inevitable result of the congressional decision to ‘save’ local insurance regulation.” Ibid.

       We discussed this issue in Pilot Life Ins. Co. v. Dedeaux, (1987). That ease concerned Mississippi common law creating a cause of action for bad-faith breach of contract, law not specifically directed to the insurance industry and therefore not saved from ERISA preemption. In that context, the Solicitor General, for the United States as amicus curiae-, urged the exclusivity of § 502(a), ERISA’s civil enforcement provision, and observed that § 502(a) was modeled on the exclusive remedy provided by §301 of the Labor Management Relations Act, 1947 (LMRA), 29 U. S. C. §185. The Court agreed with the Solicitor General’s submission. 481 U.S., at 52-56.
      In the instant case, the cus curiae, has endeavored to qualify the argument advanced in Pilot Life. See Brief20-25. Noting that “LMRA Section 301 does not contain any statutory exception analogous to ERISA’s insurance savings provision,” the Solicitor General now maintains that the discussion of § 502(a) in Pilot Life “does not in itself require that a state law that ‘regulates insurance,’ and so comes within the terms of the savings clause, is nevertheless preempted if it provides a state-law cause of action or remedy.” Brief 25; see also id., at 23 (“[T]he insurance savings clause, on its face, saves state law conferring causes of action or affecting remedies that regulate insurance, just as it does state mandated-benefits laws.”)* We need not address the Solicitor General’s current argument, for Ward has sued under § 502(a)(1)(B) for benefits due, and seeks only the application of saved state insurance law as a relevant rule of decision in- his § 502(a) action.


source: Caselaw Access Project

author: Justice Kennedy Justice Stevens,

license: Public Domain

text:
    UNITED STATES v. HAGGAR APPAREL CO.
    No. 97-2044.
    Argued January 11, 1999
    Decided April 21, 1999

      Kennedy, J., delivered the opinion for a unanimous Court with respect to Parts I, II, and III, and the opinion of the Court with respect to Part IV, in which Rehnquist, C. J., and O’Connor, Scaua, Souter, Thomas, and Beeyer, JJ., joined. Stevens, J., filed an opinion concurring in part and dissenting in part, in which Ginsburg, J., joined, post, p. 395.

      Kent L. Jones argued the cause for the United States. With him on the briefs were Solicitor General Watcman, Assistant Attorney General Hunger, Deputy Solicitor General Wallace, William Kanter, and Bruce G. Forrest.

      Carter G. Phillips argued the cause for respondent. With him on the briefs were Mark E. Haddad, Ronald W. Gerdes, Gilbert Lee Sandler, Edward M. Joffe, and Marc W. Joseph.

      Briefs of amid curiae urging affirmance were filed for Anhydrides & Chemicals, Inc., et al. by Richard C. King; and for the Customs and International Trade Bar Association by Terence P. Stewart, Bernard J Babb, Munford Paige Hall II, Rufus E. Jarman, Jr., William D. Outman II, Christopher E. Pey, Melvin Schwechter, David Seiko, Sidney N. Weiss, and Sandra Liss Friedman.

   Justice Kennedy

delivered the opinion of the Court.

This case concerns regulations relating to the customs classification of certain imported goods. The regulations were issued by the United States Customs Service with approval of the Secretary of the Treasury. The question is whether these regulations, deemed controlling by the Treasury, are entitled to judicial deference in a refund suit brought in the Court of International Trade. Contrary to the position of that court and the Court of Appeals for the Federal Circuit, we hold the regulation in question is subject to the analysis required by Chevron U. S. A. Inc. v. Natural Resources Defense Council, Inc., 467 U. S. 837 (1984), and that if it is a reasonable interpretation and implementation of an ambiguous statutory provision, it must be given judicial deference.

I

Respondent Haggar Apparel Co. designs, manufactures, and markets apparel for men. This matter arises from a refund proceeding for duties imposed on men’s trousers shipped by respondent to this country from an assembly plant it controlled in Mexico. The fabric had been cut in the United States and then shipped to Mexico, along with the thread, buttons, and zippers necessary to complete the garments. App. 37-38. There the trousers were sewn and reshipped to the United States. If that had been the full extent of it, there would be no dispute, for if there were mere assembly without other steps, all agree the imported garments would have been eligible for the duty exemption which respondent claims.

Respondent, one other step at the Mexican plant: permapressing. Per-mapressing is designed to maintain a garment’s crease in the desired place and to avoid other creases or wrinkles that detract from its proper appearance. There are various methods and sequences by which permapressing can be accomplished, and one of respondent’s contentions is that the Treasury’s categorical approach fails to take these differences into account.

For the permapressed ent purchased fabric in the United States that had been treated with a chemical resin. Id., at 37. After the treated fabric had been cut in the United States, shipped to Mexico, and sewn and given a regular pressing there, respondent baked the garments in an oven at the Mexican facility before tagging and shipping them to the United States. The baking operation took some 12 to 15 minutes. Id., at 38. With the right heat, the preapplied chemical was activated and the permapress quality was imparted to the garment. If it had delayed baking until the articles returned to the United States, respondent would have had to take extra, otherwise unnecessary steps in the United States before shipping the garments to retailers. Id., at 127-128; App. to Pet. for Cert. 20a~21a. In addition, respondent maintained below, there would have been a risk that during shipping unwanted creases and wrinkles might have developed in the otherwise finished garments. Ibid.

The Customs process in addition to assembly, and denied a duty exemption; respondent claimed the baking was simply part of the assembly process, or, in the words of the controlling statute, an “operatio[n] incidental to the assembly process.” Subheading 9802.00.80, Harmonized Tariff Schedule of the United States (HTSUS), 19 U. S. C. § 1202; Item 807.00, Tariff Schedule of the United States (TSUS), 19 U. S. C. § 1202 (1982 ed.). Respondent's case was made more difficult by a regulation, to be discussed further, that deems all perma-pressing operations to be an additional step in manufacture, not part of or incidental to the assembly process. See 19 CFR § 10.16(c) (1998). The issue before us is the force and effect of the regulation in subsequent judicial proceedings.

sought for the perma-pressed articles, respondent brought suit for refund in the Court of International Trade. The court declined to treat the regulation as controlling. 938 F. Supp. 868, 874-875 (1996). In making its determination, the court relied on a detailed analysis stemming from United States v. Mast Industries, Inc., 668 F. 2d 501 (CCPA 1981), a leading precedent on this duty exemption from the predecessor to the Court of Appeals for the Federal Circuit. Mast Industries, in fact, involved garment fabrication and assembly, though the Court of International Trade drew also on cases involving other assembly operations. E. g., 938 F. Supp., at 872 (citing General Motors Corp. v. United States, 976 F. 2d 716 (CA Fed. 1992) (painting of sheet metal component parts used in motor vehicles)). The court ruled in favor of respondent. 938 F. Supp., at 875. On review, the Court of Appeals for the Federal Circuit declined to analyze the regulation under Chevron, and affirmed. 127 F. 3d 1460, 1462 (1997). We granted certiorari, 524 U. S. 981 (1998), and we now vacate the judgment of the Court of Appeals and remand the case for further proceedings.

>*H HH

The statute on which respondent relies provides importers a partial exemption from duties otherwise imposed. The exemption extends to:

"Articles . . . assembled abroad in whole or in part of fabricated components, the product of the United States, which . . . (c) have not been advanced in value or improved in condition abroad except by being assembled and except by operations incidental to the assembly process such as cleaning, lubricating and painting.” Subheading 9802.00.80, HTSUS, 19 U. S. C. §1202.

(The HTSUS became law on January 1, 1989, replacing the provisions of the former TSUS. See 19 U. S. C. §3004. Item 807.00 of the TSUS, the previous statute which governs some of the shipments at issue in this case, is identical to HTSUS Subheading 9802.00.80.)

spect to permapressed articles provides as follows:

“Any significant process, or other than assembly whose primary purpose is the fabrication, completion, physical or chemical improvement of a component, or which is not related to the assembly process, whether or not it effects a substantial transformation of the article, shall not be regarded as incidental to the assembly and shall preclude the application of the exemption to such article. The following are examples of operations not considered incidental to the assembly ...:
“(4) Chemical treatment of components or assembled articles to impart new characteristics, such as shower-proofing, permapressing, sanforizing, dying or bleaching of textiles.” 19 CFR § 10.16(c) (1998).

The regulation was adopted in 1975 by the Commissioner of Customs upon approval by the Treasury Department, after notice-and-comment rulemaking. See 39 Fed. Reg. 24651 (1974) (proposed regulation); 40 Fed. Reg. 43021 (1975) (final regulation).

In contending that the purview of the Chevron framework, respondent advances two sets of arguments. First, citing the terms of the regulation and its enabling statutes, respondent contends the regulation is limited in application to customs officers themselves and is not intended to govern the adjudication of importers’ refund suits in the Court of International Trade. Second, in reliance on the authority and jurisdiction of the Court of International Trade, respondent argues that even if the Treasury Department did intend the regulation to bear on the determination of refund suits, the Court of International Trade is empowered to interpret the tariff statute without giving the usual deference to regulations issued by the administering agency.

to the first set of arguments, respondent says the regulation binds Customs Service employees when they classify imported merchandise under the tariff schedules but does not bind the importers themselves. The statutory scheme does not support this limited view of the force and effect of the regulation. The Customs Service (which is within the Treasury Department) is charged with the classification of imported goods under the proper provision of the tariff schedules in the first instance. There is specific statutory direction to this effect: “The Customs Service shall, under rules and regulations prescribed by the Secretary [of the Treasury,] ... fix the final classification and rate of duty applicable to” imported goods. 19 U. S. C. § 1500(b). In addition, the Secretary is directed by statute to “establish and promulgate such rules and regulations not inconsistent with the law ... as may be necessary to secure a just, impartial and uniform appraisement of imported merchandise and the classification and assessment of duties thereon at the various ports of entry.” § 1502(a). See also General Headnote 11, TSUS, 19 U. S. C. § 1202 (1982 ed.) (authorizing the Secretary “to issue rules and regulations governing the admission of articles under the provisions” of the tariff schedules); General Note 20, HTSUS, 19 U. S. C. § 1202 (same). The Secretary, in turn, has delegated to the Commissioner of Customs the authority to issue generally applicable regulations, sub-jeet to the Secretary’s approval. Treasury Dept. Order No. 165, T. D. 53160 (Dec. 15,1952).

tary to make rules of classification for “the various ports of entry” to argue that the statute authorizes promulgation of regulations that do nothing more than ensure that customs officers in field offices around the country classify goods according to a similar and consistent scheme. The regulations issued under the statute have no bearing, says respondent, on the rights of the importer. We disagree. The phrase in question is explained by the simple fact that classification decisions must be made at the port where goods enter. We shall not assume Congress was concerned only to ensure that customs officials at the various ports of entry make uniform decisions but that it had no concern for uniformity once the goods entered the country and judicial proceedings commenced. The tariffs do not mean one thing for customs officers and another for importers. It is of course possible, even common, for agencies to give instructions or legal opinions to their officers and employees in one form or another, without intending to bind the public. Cf. Crandon v. United States, 494 U. S. 152, 177 (1990) (Scalia, J., concurring in judgment). The statutory authorization for the regulations in this case, we conclude, was not limited in this way. Like other regulations which help to define the legal relations between the Government and regulated entities, customs regulations were authorized by Congress at least in part to clarify the rights and obligations of importers.

Our conclusion is not United States Trade Representative (USTR), by delegation from the President, and the International Trade Commission (ITC) have certain responsibilities for recommending and proclaiming changes in the HTSUS. See 19 U. S. C. §§ 3004(c), 3005,3006; 3 CFR 443 (1992). These powers pertain to changing or amending the tariff schedules themselves; the Treasury Department and the Customs Service are charged with administering the adopted schedules applicable on the date of importation. This also is the position of the Government, for it acknowledged at oral argument that it is for the Treasury Department and the Customs Service, not for the USTR or ITC, to issue regulations entitled to judicial deference in the interpretation of the tariff schedules. Tr. of Oral Arg. 14.

Respondent further cites a portion of the regulation and argues that the Customs Service itself views its regulatory authority as limited to controlling its own agents’ classification decisions, without affecting the course of later proceedings. It cites subsection (a) of 19 CFR § 10.11 (1998), which introduces §10.16 and the other classification regulations adopted at the same time. Section 10.11(a) provides that “[t]he definitions and regulations that follow are promulgated to inform the public of the constructions and interpretations that the United States Customs Service shall give to relevant statutory terms and to assure the impartial and uniform assessment of duties upon merchandise claimed to be partially exempt from duty ... at the various ports of entry.” It further provides that “[n]othing in these regulations purports or is intended to restrict the legal right of importers or others to a judicial review of the matters contained therein.” Ibid.

This language, in our view, does not suffice to displace the usual rule of Chevron deference. Subsections (a) and (b) of § 10.11 together serve to introduce the two kinds of regulations which follow. Section 10.11(b) advises that a refund claimant must comply with both the substantive terms of the statute and with certain “documentary requirements” set forth in §10.24. If the importer fails to comply with the documentary requirements, it is foreclosed from judicial review of the classification decision. § 10.11(b). In contrast, subsection (a) recites that nothing in the substantive classification regulations “purports or is intended to restrict the legal right... to a judicial review of the matters contained therein.” Assuming an importer complies with the documentary requirements of § 10.24, the disclaimer in § 10.11(a) is applicable, and the importer is entitled to bring a refund suit challenging Customs’ decision in federal court.

Apart from tive rules and documentary requirements, the quoted language from § 10.11(a) may be thought surplusage in that it merely confirms the existence of judicial review. Even if the language is thought to be unnecessary, however, we do not view it as a tacit instruction for courts to disregard the substantive regulations. Particularly in light of the fact that the agency utilized the notice-and-comment rulemaking process before issuing the regulations, the argument that they were not intended to be . entitled to judicial deference implies a sufficient departure from conventional contemporary administrative practice that we ought not to adopt it absent a different statutory structure and more express language to this effect in the regulations themselves.

Ill

For the reasons we have given, the statutes authorizing customs classification regulations are consistent with the usual rule that regulations of an administering agency warrant judicial deference; and nothing in the regulation itself persuades us that the agency intended the regulation to have some lesser force and effect. We turn to respondent’s second major contention, that the statutes governing the reviewing authority of the Court of International Trade in classification cases displace this customary framework.

In support of the argument cable, both respondent and the Court of Appeals rely on 28 U. S. C. §2643. It provides:

“If the Court of International Trade mine the correct decision on the basis of the evidence presented in any civil action, the court may order a retrial or rehearing for all purposes, or may order such further administrative or adjudicative procedures as the court considers necessary to reach the correct decision.”

The authority of the Court of International Trade to order additional proceedings to reach the correct decision, as well as its duty to “make its determinations upon the basis of the record made before the court,” §2640(a), and its authority to consider new grounds not advanced to the agency, §2638, are said to be inconsistent with deference to an agency’s regulation.

A central theme in respondent’s argument is that the trial court proceedings may be, as they were in this case, de novo, and hence the court owes no deference to the regulation under Chevron principles. Brief for Respondent 16-28. The conclusion does not follow from the premise. Valid regulations establish legal norms. Courts can give them proper effect even while applying the law to newfound facts, just as any court conducting a trial in the first instance must conform its rulings to controlling statutes, rules, and judicial precedents. Though Congress might have chosen to direct the court not to pay deference to the agency’s views, we do not find that directive in these statutes. Cf. Scalia, Judicial Deference to Administrative Interpretations of Law, 1989 Duke L. J. 511, 515-516 (suggesting that “[i]f. . . Congress had specified that in all suits involving interpretation or application of [a statute] the courts were to give no deference to the agency’s views, but were to determine the issue de novo,” Chevron deference would be inappropriate). De novo proceedings presume a foundation of law. The question here is whether the regulations are part of that controlling law. Deference can be given to the regulations without impairing the authority of the court to make factual determinations, and to apply those determinations to the law, de novo.

The Court of Appeals held in this case, and in previous cases presenting the issue, that these regulations were not entitled to deference because the Court of International Trade is charged to “ ‘reach the correct decision’ ” in determining the proper classification of goods. 127 F. 3d, at 1462; see also Rollerblade, Inc. v. United States, 112 F. 3d 481, 483 (CA Fed. 1997); Universal Elecs. Inc. v. United States, 112 F. 3d 488, 491-493 (CA Fed. 1997). The whole point of regulations such as these, however, is to ensure that the statute is applied in a consistent and proper manner. Deference to an agency’s expertise in construing a statutory command is not inconsistent with reaching a correct decision.

The analysis of a regulation’s any ease, of course, may disclose an imprecise or imperfect implementation of the statute. “One can doubtless imagine questionable applications of the regulation that test the limits of the agency’s authority.” Babbitt v. Sweet Home Chapter, Communities for Great Ore., 515 U. S. 687, 714 (1995) (O’Connor, J., concurring). In the process of considering a regulation in relation to specific factual situations, a court may conclude the regulation is inconsistent with the statutory language or is an unreasonable implementation of it. In those instances, the regulation will not control. Under Chevron, if a court determines that “Congress has directly spoken to the precise question at issue,” then “that is the end of the matter; for the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress.” 467 U. S., at 842-843. If, however, the agency’s statutory interpretation “fills a gap or defines a term in a way that is reasonable in light of the legislature’s revealed design, we give [that] judgment ‘controlling weight.’” NationsBank of N. C., N. A. v. Variable Annuity Life Ins. Co., 513 U. S. 251, 257 (1995) (quoting Chevron, supra, at 844).

A statute may be ambiguous, analysis, without being inartful or deficient. The present ease exemplifies the familiar proposition that Congress need not, and likely cannot, anticipate all circumstances in which a general policy must be given specific effeet. Here Congress has authorized the agency to issue rules so that the tariff statutes may be applied to unforeseen situations and changing circumstances in a manner consistent with Congress’ general intent. The statute under which respondent claims an exemption gives direction not only by stating a general policy (to grant the partial exemption where only assembly and incidental operations were abroad) but also by determining some specifies of the policy (finding that painting, for example, is incidental to assembly). For purposes of the Chevron analysis, the statute is ambiguous nonetheless, ambiguous in that the agency must use its discretion to determine how best to implement the policy in those cases not covered by the statute’s specific terms. Those specifics are instructive to the agency as to the general congressional purpose, and the agency’s rules as to instances not covered by the statute should be parallel, to the extent possible, with the specific cases Congress did address.

respondent and a supporting amicus contend Chevron deference is inconsistent with the historical practice in customs cases. Brief for Respondent 1-6; Brief for Customs and International Trade Bar Association as Amicus Curiae 6-11. This history, suffice it to say, is not so uniform and clear as to convince us that judicial deference would thwart congressional intent. As early as 1809, Chief Justice Marshall noted in a customs case that “[i]f the question had been doubtful, the court would have respected the uniform construction which it is understood has been given by the treasury department of the United States upon similar questions.” United States v. Vowell, 5 Cranch 368, 372. See also P. Reed, The Role of Federal Courts in U. S. Customs & International Trade Law 289 (1997) ('‘Consistent with the Chevron methodology, and as has long been the rule in customs cases, customs regulations are sustained if they represent reasonable interpretations of the statute”); cf. Zenith Radio Corp. v. United States, 437 U. S. 443, 450 (1978) (deferring to the Treasury Department’s “longstanding and consistent administrative interpretation” of the countervailing duty provision of the Tariff Act).

IV

A

The customs regulations may not be disregarded. Application of the Chevron framework is the beginning of the legal analysis. Like other courts, the Court of International Trade must, when appropriate, give regulations Chevron deference. Cf. Atlantic Mut. Ins. Co. v. Commissioner, 523 U. S. 382, 389 (1998) (when a term in the Internal Revenue Code is ambiguous, “the task that confronts us is to decide, not whether the Treasury regulation represents the best interpretation of the statute, but whether it represents a reasonable one”). The expertise of the Court of International Trade, somewhat like the expertise of the Tax Court, guides it in making complex determinations in a specialized area of the lav;; it is well positioned to evaluate customs regulations and their operation in light of the statutory mandate to determine if the preconditions for Chevron deference are present.

B

In addition to the applicability of the Chevron framework in general, we also granted certiorari on a second question, asking whether 19 CFR § 10.16(c) (1998) met the preconditions for Chevron deference as a reasonable interpretation of the statutory phrase “operations incidental to the assembly process,” Subheading 9802.00.80, HTSUS, 19 U. S. C. § 1202, and Item 807.00, TSUS, 19 U.S.C. §1202 (1982 ed.). Because the Court of Appeals determined the Chevron framework was not applicable, it did not go on to consider whether the regulation ultimately warrants deference under that framework.

Respondent has made various arguments turning on the details mid facts of its manufacturing process, including substantial arguments challenging the regulation’s interpretation of the statutory language as well as the application of the regulation to the particular process and goods at issue here. For instance, the Customs Service granted the exemption for trousers made from a pure synthetic fabric, which were apparently pressed in the Mexico facility. App. 33,37; Brief for Respondent 47. Yet it denied the exemption when ovenbaking was used for 12 to 15 minutes after some pressing, notwithstanding the fact that the permapress characteristics could have been achieved on the trousers involved here by pressing them for an additional period of time in lieu of ovenbaking. TV. 79-87. Moreover, though the regulation refers to the “[c]hemical treatment of components, . . . such as ... permapressing,” 19 CFR § 10.16(e)(4) (1998), it is undisputed that the chemical resin was applied to the trousers in the United States. App. 37.

It will be open to respondent on remand to argue that the baking of the garments in quantity is, from the standpoint of the statute or the regulation itself, no less incidental to the assembly process which the statute permits, or no more within the regulation’s reference to permapressing, than is a pressing-only operation. We conclude that these and similar arguments, which raise the difficult question of how the regulation at issue fares under the Chevron framework, are best addressed in the first instance to the Court of Appeals for the Federal Circuit or to the Court of International Trade. Declining to reach the second question on which certiorari was granted, we remand the case to the Court of Appeals.

case remanded for further proceedings consistent with this opinion.

It is so ordered.

Justice Stevens,

with whom Justice Ginsburg joins, concurring in part and dissenting in part.

explicates, the Customs Service regulation at issue begins with a generally applicable standard for a duty exemption, and concludes with relatively specific examples that indicate how that standard should be interpreted. See Subheading 9802.00.80, Harmonized Tariff Schedule of the United States, 19 U. S. C. § 1202 (listing operations taking place abroad that meet the standard); Item 807.00, Tariff Schedule of the United States, 19 U.S.C. §1202 (1982 ed.) (same); 19 CFR § 10.16(c) (1998) (listing such operations that do not meet the standard). Surely the agency’s effort to enumerate “significant” and common operations not to be considered incidental to the assembly process was both permissible and sensible. Nothing in the statute or its history convinces me otherwise; in my opinion, the regulation is clearly valid.

Respondent’s Customs Service is that the Service has misinterpreted and misapplied one of its excluded examples: “Chemical treatment ... to impart new characteristics, such as . .. perma-pressing.” 19 CFR § 10.16(c)(4) (1998). With respect to the entries denied a duty exemption in this case, the fabric was resin treated in the United States at the textile mill, but pressed and ovenbaked in Mexico after assembly. Yet the Service apparently granted a duty exemption for trousers respondent assembled from synthetic fabric; these trousers did not require ovenbaking or resin treatment, but they were pressed in Mexico after assembly. See App. to Pet. for Cert. 8a-9a, 15a-16a; App. 33-r34,37-38. Respondent contends that the Service cannot treat pressing-plus-ovenbaking, but not pressing alone, as a species of chemical treatment that is not incidental to the assembly process.

There is a rather obvious answer can certainly discern a meaningful difference between merely pressing a synthetic fabric, on the one hand, and using ovenbaking (or perhaps extended pressing) to treat a fabric to which another substance has been added. Based on that difference, the Service could logically conclude, in accord with its understanding of its own regulation, that only the latter is a form of “chemical treatment” excluded from a duty exemption. Indeed, distinguishing these two operations in this fashion is the product of the kind of line-drawing decisions that must be made by agencies to which Congress has delegated the job of administering legislation that contains ambiguous terms. When lines must be drawn to determine whether a particular facility is a "stationary source” of air pollution, see Chevron U. S. A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), or whether an operation performed abroad was “incidental to the assembly process,” there will always be cases on opposite sides of the line that are almost identical. That consequence, however, does not necessarily compromise the integrity of the line that the agency has drawn or the manner in which the rule was applied.

before us is a reasonable elaboration of the statute, and the Customs Service’s denial of a duty allowance in this case was consistent with its regulation and well within the scope of its eongressionally delegated authority. If we had not granted certiorari to decide the reasonableness of the regulation, I would agree with the Court’s disposition of the case. See Kumho Tire Co. v. Carmichael, 526 U. S. 137, 159 (1999) (Stevens, J., concurring in part and dissenting in part). But since we did direct the parties to enlighten us on these issues, and since I think the answer is clear, I would simply reverse the judgment of the Court of Appeals. I do, however, join Parts I, II, and III of the Court’s well-reasoned opinion.


author: Justice Scalia

text:
    UNITED STATES v. SUN-DIAMOND GROWERS OF CALIFORNIA
    No. 98-131.
    Argued March 2, 1999
    Decided April 27, 1999

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

      Robert W. Ray argued the cause for the United States. With him on the briefs were Donald C. Smaltz, Charles M. Kagay, and Stephen R. McAllister.

      Eric W. Bloom argued cause him on the brief were Richard A. Hibey and Charles B. Klein

      Briefe of amici curiae urging affirmance were filed for the American League of Lobbyists by Samuel J. Buffone and Thomas M. Susman; and for the National Association of Criminal Defense Lawyers by Carter G. Phillips, Thomas C. Green, Mark D. Hopson, and Lisa B. Kemler. Robinson,

        Solicitor Deputy Solicitor General Dreeben, and Malcolm L. Stewart filed a brief for the United States Department of Justice as amicus curiae.

   Justice Scalia

delivered the opinion of the Court.

Talmudic sages believed that judges who accepted bribes would be punished by eventually losing all knowledge of the divine law. The Federal Government, dealing with many public officials who are not judges, and with at least some judges for whom this sanction holds no terror, has constructed a framework of human laws and regulations defining various sorts of impermissible gifts, and punishing those who give or receive them with administrative sanctions, fines, and incarceration. One element of that framework is 18 U. S. C. § 201(c)(1)(A), the “illegal gratuity statute,” which prohibits giving “anything of value” to a present, past, or future public official “for or because of any official act performed or to be performed by such public official.” In this ease, we consider whether conviction under the illegal gratuity statute requires any showing beyond the fact that a gratuity was given because of the recipient’s official position.

I

Respondent is a trade association that engaged in marketing and lobbying activities on behalf of its member cooperatives, which were owned by approximately 5,000 individual growers of raisins, figs, walnuts, prunes, and hazelnuts. Petitioner United States is represented by Independent Counsel Donald Smaltz, who, as a consequence of his investigation of former Secretary of Agriculture Michael Espy, charged respondent with, inter alia, making illegal gifts to Espy in violation of § 201(c)(1)(A). That statute provides, in relevant part, that anyone who

“otherwise than as provided by law for the proper discharge of official duty . . . directly or indirectly gives, offers, or promises anything of value to any public official, former public official, or person selected to be a public official, for or because of any official act performed or to be performed by such public official, former public official, or person selected to be a public official... shall be fined under this title or imprisoned for not more than two years, or both.”

Count One of the indictment charged Sun-Diamond with giving Espy approximately $5,900 in illegal gratuities: tickets to the 1993 U. S. Open Tennis Tournament (worth $2,295), luggage ($2,427), meals ($665), and a framed print and crystal bowl ($524). The indictment alluded to two matters in which respondent had an interest in favorable treatment from the Secretary at the time it bestowed the gratuities. First, respondent’s member cooperatives participated in the Market Promotion Plan (MPP), a grant program administered by the Department of Agriculture to promote the sale of U. S. farm commodities in foreign countries. The cooperatives belonged to trade organizations, such as the California Prune Board and the Raisin Administrative Committee, which submitted overseas marketing plans for their respective commodities. If their plans were approved by the Secretary of Agriculture, the trade organizations received funds to be used in defraying the foreign marketing expenses of their constituents. Each of respondent’s member cooperatives was the largest member of its respective trade organization, and each received significant MPP funding. Respondent was understandably concerned, then, when Congress in 1998 instructed the Secretary to promulgate regulations giving small-sized entities preference in obtaining MPP funds. Omnibus Budget Reconciliation Act of 1998, Pub. L. 103-66, § 1302(b)(2)(A), 107 Stat. 330-331. If the Secretary did not deem respondent’s member cooperatives to be small-sized entities, there was a good chance they would no longer receive MPP grants. Thus, respondent had an interest in persuading the Secretary to adopt a regulatory definition of “small-sized entity” that would include its member cooperatives.

Second, respondent had an ernment’s regulation of methyl bromide, a low-cost pesticide used by many individual growers in respondent’s member cooperatives. In 1992, the Environmental Protection Agency announced plans to promulgate a rule to phase out the use of methyl bromide in the United States. The indictment alleged that respondent sought the Department of Agriculture’s assistance in persuading the EPA to abandon its proposed rule altogether, or at least to mitigate its impact. In the latter event, respondent wanted the Department to fund research efforts to develop reliable alternatives to methyl bromide.

Although describing these two matters before the Secretary in which respondent had an interest, the indictment did not allege a specific connection between either of them— or between any other action of the Secretary — and the gratuities conferred. The District Court denied respondent’s motion to dismiss Count One because of this omission. 941 F. Supp. 1262 (DC 1996). The court stated:

“[T]o sustain a charge under the gratuity statute, it is not necessary for the indictment to allege a direct nexus between the value conferred to Secretary Espy by Sun-Diamond and an official act performed or to be performed by Secretary Espy. It is sufficient for the indictment to allege that Sun-Diamond provided things of value to Secretary Espy because of his position.” Id., at 1265.

At trial, the District Court instructed the jury along these same lines. It read § 201(c)(1)(A) to the jury twice (along with the definition of “official act” from § 201(a)(3)), but then placed an expansive gloss on that statutory language, saying, among other things, that “[i]t is sufficient if Sun-Diamond provided Espy with unauthorized compensation simply because he held public office,” and that “[t]he government need not prove that the alleged gratuity was linked to a specific or identifiable official act or any act at all.” App. to Pet. for Cert. 85a, 87a. The jury convicted respondent on, inter alia, Count One (the only subject of this appeal), and the District Court sentenced respondent on this count to pay a fine of $400,000.

The Court of Appeals reversed the conviction on Count One and remanded for a new trial, stating:

“Given that the Tor or because of any official act’ language in § 201(c)(1)(A) means what it says, the jury instructions invited the jury to convict on materially less evidence than the statute demands — evidence of gifts driven simply by Esp/s official position.” 138 F. 3d 961, 968 (CADC 1998).

In rejecting respondent’s attack on the indictment, however, the court stated that the Government need not show that a gratuity was given “for or because of” any particular act or acts: “That an official has an abundance of relevant matters on his plate should not insulate him or his benefactors from the gratuity statute — as long as the jury is required to find the requisite intent to reward past favorable acts or to make future ones more likely.” Id., at 969.

We granted certiorari. 525 U. S. 961 (1998).

II.

Initially, it will be helpful to place § 201(c)(1)(A) within the context of the statutory scheme. Subsection (a) of § 201 sets forth definitions applicable to the section — including a definition of “official act,” § 201(a)(3). Subsections (b) and (c) then set forth, respectively, two separate crimes — or two pairs of crimes, if one counts the giving and receiving of unlawful gifts as separate crimes — with two different sets of elements and authorized punishments. The first crime, described in § 201(b)(1) as to the giver, and § 201(b)(2) as to the recipient, is bribery, which requires a showing that something of value was corruptly given, offered, or promised to a publie official (as to the giver) or corruptly demanded, sought, received, accepted, or agreed to be received or accepted by a public official (as to the recipient) with intent, inter alia, “to influence any official act” (giver) or in return for “being influenced in the performance of any official act” (recipient). The second crime, defined in § 201(c)(1)(A) as to the giver, and in § 201(c)(1)(B) as to the recipient, is illegal gratuity, which requires a showing that something of value was given, offered, or promised to a publie official (as to the giver), or demanded, sought, received, accepted, or agreed to be received or accepted by a publie official (as to the recipient), “for or because of any official act performed or to be performed by such public official.”

The distinguishing feature of each ment. Bribery requires intent “to influence” an official act or “to be influenced” in an official act, while illegal gratuity requires only that the gratuity be given or accepted “for or because of” an official act. In other words, for bribery there must be a quid pro quo — a specific intent to give or receive something of value in exchange for an official act. An illegal gratuity, on the other hand, may constitute merely a reward for some future act that the public official will take (and may already have determined to take), or for a past act that he has already taken. The punishments prescribed for the two offenses reflect their relative seriousness: Bribery may be punished by up to 15 years’ imprisonment, a fine of $250,000 ($500,000 for organizations) or triple the value of the bribe, whichever is greater, and disqualification from holding government office. See 18 U. S. C. §§ 201(b) and 3571. Violation of the illegal gratuity statute, on the other hand, may be punished by up to two years’ imprisonment and a fine of $250,000 ($500,000 for organizations). See §§ 201(e) and 3571.

in this case, in differentiating between a bribe and an illegal gratuity, correctly noted that only a bribe requires proof of a quid pro quo. The point in controversy here is that the instructions went on to suggest that § 201(c)(1)(A), unlike the bribery statute, did not require any connection between respondent’s intent and a specific official act. It would be satisfied, according to the instructions, merely by a showing that respondent gave Secretary Espy a gratuity because of his official position— perhaps, for example, to build a reservoir of goodwill that might ultimately affect one or more of a multitude of unspecified acts, now and in the future. The United States, represented by the Independent Counsel, and the Solicitor General as amicus mriae, contend that this instruction was correct. The Independent Counsel asserts that “section 201(c)(1)(A) reaches any effort to buy favor or generalized goodwill from an official who either has been, is, or may at some unknown, unspecified later time, be in a position to act favorably to the giver’s interests.” Brief for United States 22 (emphasis added). The Solicitor General contends that § 201(e)(1)(A) requires only a showing that a “gift was motivated, at least in part, by the recipient’s capacity to exercise governmental power or influence in the donor’s favor” without necessarily showing that it was connected to a particular official act. Brief for United States Dept, of Justice as Amicus Curiae 17 (emphasis added).

In our view, this interpretation with die statutory text, which prohibits only gratuities given or received “for or because of any official act performed or to be performed” (emphasis added). It seems to us that this means “for or because of some particular official act of whatever identity” — just as the question “Do you like any composer?” normally means “Do you like some particular composer?” It is linguistically possible, of course, for the phrase to mean “for or because of official acts in general, without specification as to which one” — -just as the question “Do you like any composer?” could mean “Do you like all composers, no matter what their names or music?” But the former seems to us the more natural meaning, especially given the complex structure of the provision before us here. Why go through the trouble of requiring that the gift be made “for or because of any official act performed or to be performed by such public official,” and then defining “official act” (in § 201(a)(3)) to mean “any decision or action on any question, matter, cause, suit, proceeding or controversy, which may at any time be pending, or which may by law be brought before any public official, in such official’s official capacity,” when, if the Government’s interpretation were correct, it would have sufficed to say “for or because of such official’s ability to favor the donor in executing the functions of his office”? The insistence upon an “official act,” carefully defined, seems pregnant with the requirement that some particular official act be identified and proved.

Besides thinking that this is the more § 201(c)(1)(A), we are inclined to believe it correct because of the peculiar results that the Government’s alternative reading would produce. It would criminalize, for example, token gifts to the President based on his official position and not linked to any identifiable act — such as the replica jerseys given by championship sports teams each year during ceremonial White House visits, see, e. g., Gibson, Masters of the Game, Lexington Herald-Leader, Nov. 10,1998, p. Al. Similarly, it would criminalize a high school principal’s gift of a school baseball cap to the Secretary of Education, by reason of his office, on the occasion of the latter’s visit to the school. That these examples are not faneiful is demonstrated by the fact that counsel for the United States maintained at oral argument that a group of farmers would violate § 201(c)(1)(A) by providing a complimentary lunch for the Secretary of Agriculture in conjunction with his speech to the farmers concerning various matters of USDA policy— so long as the Secretary had before him, or had in prospect, matters affecting the farmers. Tr. of Oral Arg. 26-27. Of course the Secretary of Agriculture always has before him or in prospect matters that affect farmers, just as the President always has before him or in prospect matters that affect college and professional sports, and the Secretary of Education matters that affect high schools.

It might be said in reply to this that the more narrow interpretation of the statute can also produce some peculiar results. In fact, in the above-given examples, the gifts could easily be regarded as having been conferred, not only because of the official’s position as President or Secretary, but also (and perhaps principally) “for or because of” the official acts of receiving the sports teams at the White House, visiting , the high school, and speaking to the farmers about USDA policy, respectively. The answer to this objection is that those actions — while they are assuredly “official acts” in some sense — are not “official acts” within the meaning of the statute, which, as we have noted, defines “official act” to mean “any decision or action on any question, matter, cause, suit, proceeding or controversy, which may at any time be pending, or which may by law be brought before any public official, in such official’s official capacity, or in such official’s place of trust or profit.” 18 U. S. C. § 201(a)(3). Thus, when the violation is linked to a particular “official act,” it is possible to eliminate the absurdities through the definition of that term. When, however, no particular “official act” need be identified, and the giving of gifts by reason of the recipient’s mere tenure in office constitutes a violation, nothing but the Government’s discretion prevents the foregoing examples from being prosecuted.

The Government insists that only one that gives effect to all of the statutory language. Specifically, it claims that the “official position” construction is the only way to give effect to § 201(c)(l)(A)’s forward-looking prohibition on gratuities to persons who have been selected to be public officials but have not yet taken office. Because, it contends, such individuals would not know of specific matters that would come before them, the only way to give this provision effect is to interpret “official act” to mean “official position.” But we have no trouble envisioning the application of § 201(c)(1)(A) to a selectee for federal office under the more narrow interpretation. If, for instance, a large computer company that has planned to merge with another large computer company makes a gift to a person who has been chosen to be Assistant Attorney General for the Antitrust Division of the Department of Justice and who has publicly indicated his approval of the merger, it would be quite possible for a jury to find that the gift was made “for or because of” the person’s anticipated decision, once he is in office, not to challenge the merger. The uncertainty of future action seems to us, in principle, no more an impediment to prosecution of a selectee with respect to some future official act than it is to prosecution of an officeholder with respect to some future official act.

Our refusal to read given by reason of the donee’s office is supported by the fact that when Congress has wanted to adopt such a broadly prophylactic criminal prohibition upon gift giving, it has done so in a more precise and more administrable fashion. For example, another provision of Chapter 11 of Title 18, the chapter entitled “Bribery, Graft, and Conflicts of Interest,” criminalizes the giving or receiving of any “supplementation” of an Executive offlciars salary, without regard to the purpose of the payment. See 18 U. S. C. § 209(a). Other provisions of the same chapter make it a crime for a bank employee to give a bank examiner, and for a bank examiner to receive from a bank employee, “any loan or gratuity,” again without regard to the purpose for which it is given. See §§212-213. A provision of the Labor Management Relations Act makes it a felony for an employer to give to a union representative, and for a union representative to receive from an employer, anything of value. 29 U. S. C. § 186 (1994 ed. and Supp. III). With clearly framed and easily administrable provisions such as these on the books imposing gift-giving and gift-receiving prohibitions specifically based upon the holding of office, it seems to us most implausible that Congress intended the language of the gratuity statute — “for or because of any official act performed or to be performed” — to pertain to the office rather than (as the language more naturally suggests) to particular official acts.

a prohibition is more compatible with the fact that § 201(c)(1)(A) is merely one strand of an intricate web of regulations, both administrative and criminal, governing the acceptance of gifts and other self-enriching actions by public officials. For example, the provisions following §201 in Chapter 11 of Title 18 make it a crime to give any compensation to a federal employee, or for the employee to receive compensation, in consideration of his representational assistance to anyone involved in a proceeding in which the United States has a direet and substantial interest, §203; for a federal employee to act as “agent or attorney” for anyone prosecuting a claim against the United States, § 205(a)(1); for a federal employee to act as “agent or attorney” for anyone appearing before virtually any Government tribunal in connection with a matter in which the United States has a direct and substantial interest, § 205(a)(2); for various types of federal employees to engage in various activities after completion of their federal service, §207; for an Executive employee to participate in any decision or proceeding relating to a matter in which he has a financial interest, §208; for an employee of the Executive Branch or an independent agency to receive “any contribution to or supplementation of salary . . . from any source other than the Government of the United States,” §209; and for a federal employee to accept a gift in connection with the “compromise, adjustment, or cancellation of any farm indebtedness,” §217. A provision of the Internal Revenue Code makes it criminal for a federal employee to accept a gift for the “compromise, adjustment, or settlement of any charge or complaint” for violation of the revenue laws. 26 U. S. C. § 7214(a)(9).

And the tory iceberg. In 5 U. S. C. § 7353, which announces broadly that no “employee of the executive, legislative, or judicial branch shall solicit or accept anything of value from a person . . . whose interests may be substantially affected by the performance or nonperformance of the individual’s official duties,” § 7353(a)(2), Congress has authorized the promulgation of ethical rules for each branch of the Federal Government, § 7353(b)(1). Pursuant to that provision, each branch of Government regulates its employees’ acceptance of gratuities in some fashion. See, e. g., 5 CFR § 2635.202 et seq. (1999) (Executive employees); Rule XXXV of the Standing Rules of the Senate, Senate Manual, S. Doe. No. 104-1 (rev. July 18, 1995) (Senators and Senate Employees); Rule XXVI of the Rules of the House of Representatives, 106th Cong. (rev. Jan. 7, 1999) (Representatives and House employees); 1 Research Papers of the National Commission on Judicial Discipline & Removal, Code of Conduct for U. S. Judges, Canon 5(C)(4), pp. 925-927 (1993) (federal judges).

All of the regulations, and some of the statutes, described above contain exceptions for various kinds of gratuities given by various donors for various purposes. Many of those exceptions would be snares for the unwary, given that there are no exceptions to the broad prohibition that the Government claims is imposed by § 201(c)(1). In this regard it is interesting to consider the provisions of 5 CFR §2635.202 (1999), issued by the Office of Government Ethics (OGE) and binding on all employees of the Executive Branch and independent agencies. The first subsection of that provision, entitled “General prohibitions,” makes unlawful approximately (if not precisely) what the Government asserts § 201(c)(1)(B) makes unlawfiil: acceptance of a gift “[f]rom a prohibited source” (defined to include any person who “[h]as interests that may be substantially affected by performance or nonperformance of the employee’s official duties,” 5 CFR § 2635.203(d)(4) (1999)) or “[gjiven because of the employee’s official position,” § 2635.202(a)(2). The second subsection, entitled “Relationship to illegal gratuities statute,” then provides:

“Unless accepted in violation of paragraph (c)(1) of this section [banning acceptance of a gift ‘in return for being influenced in the performance of an official act’], a gift accepted under the standards set forth in this sub-part shall not constitute an illegal gratuity otherwise prohibited by 18 U.S.C. §201(c)(1)(B).” §2635.202(b) (emphasis added).

We are unaware of any law empowering OGE to decriminalize acts prohibited by Title 18 of the United States Code. Yet it is clear that many gifts “accepted under the standards set forth in [the relevant] subpart” will violate 18 U. S. C. § 201(c)(1)(B) if the interpretation that the Government urges upon us is accepted. The subpart includes, for example — as § 201(c)(1)(B) does not — exceptions for gifts of $20 or less, aggregating no more than $50 from a single source in a calendar year, see 5 CFR § 2635.204(a) (1999), and for certain public-service or achievement awards and honorary degrees, see § 2635.204(d). We are frankly not sure that even our more narrow interpretation of 18 U. S. C. § 201(e)(1)(B) will cause OGE’s assurance of nonviolation if the regulation is complied with to be entirely accurate; but the misdirection, if any, will be infinitely less.

More important for present purposes, regulation, and the numerous other regulations and statutes littering this field, demonstrate that this is an area where precisely targeted prohibitions are commonplace, and where more general prohibitions have been qualified by numerous exceptions. Given that reality, a statute in this field that can linguistically be interpreted to be either a meat axe or a scalpel should reasonably be taken to be the latter. Absent a text that clearly requires it, we ought not expand this one piece of the regulatory puzzle so dramatically as to make many other pieces misfits. As discussed earlier, not only does the text here not require that result; its more natural reading forbids it.

Ill

As an alternative means of preserving the jury’s verdict on Count One, the Government contends that the District Court’s mistaken instruction concerning the scope of § 201(c)(1)(A) constituted harmless error. As described earlier, the District Court twice read the text of §§ 201(c)(1)(A) and 201(a)(3), but it then incorrectly explained the meaning of that statutory language by essentially substituting the term “official position” for “official act.” More specifically, the court instructed the jury as follows:

“The essence of the crime is the official’s position [as] the receiver of the payment not whether the official agrees to do anything in particular, that is, not whether the official agrees to do any particular official act in return. Therefore ... to prove that a gratuity offense has been committed, it is not necessary to show that the payment is intended for a particular matter then pending before the official. It is sufficient if the motivating factor for the payment is just to keep the official happy or to create a better relationship in general with the official.
“It is sufficient if Sun-Diamond provided Espy with unauthorized compensation simply because he held public office.
“In order for you to convict Sun-Diamond of violating the gratuity statute, you must find beyond a reasonable doubt that Sun-Diamond gave the gifts to Mr. Espy for or because of Mr. Espy’s official government position and not solely for reasons of friendship or social purpose.
'With respect to official acts, the government has to prove that Sun-Diamond Growers of California gave knowingly and willingly Secretary Espy things of value while it had issues before the United States Department of Agriculture.
“Now, the government must prove that the gratuity was knowingly and willingly given for or because of an official act performed or to be performed by the Secretary of Agriculture, Michael Espy. That means that the government must prove that Sun-Diamond Growers of California . .. knowingly and willingly gave the gratuities, at least in part, because of the Secretary’s position in appreciation of Sun-Diamond Growers of California’s relationship with him as a public official or in anticipation of the continuation of its relationship with him as a public official. The government need not prove that the alleged gratuity was linked to a specific or identifiable official act or any act at all” App. to Pet. for Cert. 84a-86a, 87a~88a.

The Government contends pursuant to these instructions necessarily included a finding that respondent’s gratuities were given and received “for or because of” an official act or acts. Upon closer examination, however, this argument is revealed to be nothing more than a restatement of the same flawed premise that permeated the instructions themselves and that we have just rejected: “By returning a guilty verdict, the jury necessarily rejected respondent’s theory of defense and found beyond a reasonable doubt that the gifts were motivated by the fact that the Secretary of Agriculture exercised regulatory authority over respondent’s business.” Brief for United States 44. The Court of Appeals tersely rejected this claim of harmless error, 138 F. 3d, at 968, and we do the same.

* * *

We hold that, in order to establish a violation of 18 U. S. C. § 201(c)(1)(A), the Government must prove a link between a thing of value conferred upon a public' official and a specific “official act” for or because of which it was given. We affirm the judgment of the Court of Appeals, which remanded the case to the District Court for a new trial on Count One. Our decision today casts doubt upon the lower courts’ resolution of respondent’s challenge to the sufficiency of the indictment on Count One — an issue on which certiorari was neither sought nor granted. We leave it to the District Court to determine whether that issue should be reopened on remand.

It is so ordered.

      Respondent was also sentenced to serve five years’ probation on this and the other counts of which it stood convicted. Insofar as that element of the sentence was concerned, the Court of Appeals remanded for resen-tencing because the probation included impermissible reporting requirements. 138 F. 3d 961, 977 (CADC 1998). That issue is not before us.