author: Justice Scalia

text:
    GILBERT, PRESIDENT, EAST STROUDSBURG UNIVERSITY, et al. v. HOMAR
    No. 96-651.
    Argued March 24, 1997
    Decided June 9, 1997

      Gwendolyn T. Mosley, Senior Deputy Attorney General of Pennsylvania, argued the cause for petitioners. With her on the brief were D. Michael Fisher, Attorney General, Calvin R. Koons, Senior Deputy Attorney General, and John G. Knoor III, Chief Deputy Attorney General.

      Ann Hubbard argued the cause for the United States as amicus curiae in support of petitioners. On the brief were Acting Solicitor General Dellinger, Assistant Attorney General Hunger, Deputy Solicitor General Waxman, Deputy Assistant Attorney General Preston, David C. Frederick, William Kanter, Jeffrica Jenkins Lee, Lorraine P. Lewis, and Mary S. Mitchelson.

      James V. Fareri argued the cause for respondent. With him on the brief was Jennifer Harlacher Sibum.

      Gregory O’Duden argued the cause for the National Treasury Employees Union as amicus curiae urging affirmance. With him on the brief were Elaine Kaplan and Barbara A. Atkin

       Briefs of amici curiae urging reversal were filed for the State of Alabama et al. by Julio A. Brady, Attorney General of the Virgin Islands, W. Bartlett Ary, Assistant Attorney General, and Dan Schweitzer, and by the Attorneys General for their respective States as follows: Bill Pryor of Alabama, Grant Woods of Arizona, Winston Bryant of Arkansas, Daniel E. Lungren of California, M. Jane Brady of Delaware, Robert A. Butter-worth of Florida, Michael J. Bowers of Georgia, Margery S. Bronster of Hawaii, Alan G. Lance of Idaho, Carla J. Stovall of Kansas, Scott Harsh-barger of Massachusetts, Hubert H. Humphrey III of Minnesota, Mike Moore of Mississippi, Joseph P. Mazwrek of Montana, Don Stenberg of Nebraska, Frankie Sue Del Papa of Nevada, Dennis C. Vacco of New York, Michael F. Easley of North Carolina, Betty D. Montgomery of Ohio, W. A. Drew Edmondson of Oklahoma, Hardy Myers of Oregon, Jeffrey B. Pine of Rhode Island, Charles W. Burson of Tennessee, Dan Morales of Texas, and Jan Graham of Utah; and for the International City-County Management Association et al. by Richard Ruda and James I. Crowley.

      Briefs of amici curiae urging affirmance were filed for the National Association of Police Organizations, Inc., by William J. Johnson; for the National Education Association by Robert H. Chanin and John M. West; for the Pennsylvania State Lodge, Fraternal Order of Police, by Gary M. Lightman; and for the Southern States Police Benevolent Association by J. Michael McGuinness.

   Justice Scalia

delivered the opinion of the Court.

This case presents the question whether a State violates the Due Process Clause of the Fourteenth Amendment by failing to provide notice and a hearing before suspending a tenured public employee without pay.

I

Respondent Richard J. Homar was employed as a police officer at East Stroudsburg University (ESU), a branch of Pennsylvania’s State System of Higher Education. On August 26, 1992, when respondent was at the home of a family friend, he was arrested by the Pennsylvania State Police in a drug raid. Later that day, the state police filed a criminal complaint charging respondent with possession of marijuana, possession with intent to deliver, and criminal conspiracy to violate the controlled substance law, which is a felony. The state police notified respondent’s supervisor, University Police Chief David Marazas, of the arrest and charges. Chief Marazas in turn informed Gerald Levanowitz, ESU’s Director of Human Resources, to whom ESU President James Gilbert had delegated authority to discipline ESU employees. Levanowitz suspended respondent without pay effective immediately. Respondent failed to report to work on the day of his arrest, and learned of his suspension the next day, when he called Chief Marazas to inquire whether he had been suspended. That same day, respondent received a letter from Levanowitz confirming that he had been suspended effective August 26 pending an investigation into the criminal charges filed against him. The letter explained that any action taken by ESU would not necessarily coincide with the disposition of the criminal charges.

Although the criminal charges were dismissed on September 1, respondent’s suspension remained in effect while ESU continued with its own investigation. On September 18, Levanowitz and Chief Marazas met with respondent in order to give him an opportunity to tell his side of the story. Respondent was informed at the meeting that the state police had given ESU information that was “very serious in nature,” Record, Doc. No. 26, p..48, but he was not informed that that included a report of an alleged confession he had made on the day of his arrest; he was consequently unable to respond to damaging statements attributed to him in the police report.

In a letter dated September 23, Levanowitz notified respondent that he was being demoted to the position of groundskeeper effective the next day, and that he would receive backpay from the date the suspension took effect at the rate of pay of a groundskeeper. (Respondent eventually received backpay for the period of his suspension at the rate of pay of a university police officer.) The letter maintained that the demotion was being imposed “as a result of admissions made by yourself to the Pennsylvania State Police on August 26, 1992 that you maintained associations with individuals whom you knew were dealing in large quantities of marijuana and that you obtained marijuana from one of those individuals for your own use. Your actions constitute a clear and flagrant violation of Sections 200 and 200.2 of the [ESU] Police Department Manual.” App. 82a. Upon receipt of this letter, the president of respondent’s union requested a meeting with President Gilbert. The requested meeting took place on September 24, at which point respondent had received and read the police report containing the alleged confession. After providing respondent with an opportunity to respond to the charges, Gilbert sustained the demotion.

Respondent filed this suit under Rev. Stat. § 1979, 42 U. S. C. § 1983, in the United States District Court for the Middle District of Pennsylvania against President Gilbert, Chief Marazas, Levanowitz, and a Vice President of ESU, Curtis English, all in both their individual and official capacities. He contended, inter alia, that petitioners’ failure to provide him with notice and an opportunity to be heard before suspending him without pay violated due process. The District Court entered summary judgment for petitioners. A divided Court of Appeals reversed the District Court’s determination that it was permissible for ESU to suspend respondent without pay without first providing a hearing. 89 F. 3d 1009 (CA3 1996). We granted certiorari. 519 U. S. 1052 (1997).

II

The protections of the Due Process Clause apply to government deprivation of those perquisites of government employment in which the employee has a constitutionally protected “property” interest. Although we have previously held that public employees who can be discharged only for cause have a constitutionally protected property interest in their tenure and cannot be fired without due process, see Board of Regents of State Colleges v. Roth, 408 U. S. 564, 578 (1972); Perry v. Sindermann, 408 U. S. 593, 602-603 (1972), we have not had occasion to decide whether the protections of the Due Process Clause extend to discipline of tenured public employees short of termination. Petitioners, however, do not contest this preliminary point, and so without deciding it we will, like the District Court, “[a]ssum[e] that the suspension infringed a protected property interest,” App. to Pet. for Cert. 59a, and turn at once to petitioners’ contention that respondent received all the process he was due.

A

In Cleveland Bd. of Ed. v. Loudermill, 470 U. S. 532 (1985), we concluded that a public employee dismissable only for cause was entitled to a very limited hearing prior to his termination, to be followed by a more comprehensive post-termination hearing. Stressing that the pretermination hearing “should be an initial check against mistaken decisions — essentially, a determination of whether there are reasonable grounds to believe that the charges against the employee are true and support the proposed action,” id., at 545-546, we held that pretermination process need only include oral or written notice of the charges, an explanation of the employer’s evidence, and an opportunity for the employee to tell his side of the story, id., at 546. In the course of our assessment of the governmental interest in immediate termination of a tenured employee, we observed that “in those situations where the employer perceives a significant hazard in keeping the employee on the job, it can avoid the problem by suspending with pay.” Id., at 544-545 (emphasis added; footnote omitted).

Relying on this dictum, which it read as “strongly suggesting] that suspension without pay must be preceded by notice and an opportunity to be heard in all instances,” 89 F. 3d, at 1015 (emphasis added), and determining on its own that such a rule would be “eminently sensible,” id., at 1016, the Court of Appeals adopted a categorical prohibition: “[A] governmental employer may not suspend an employee without pay unless that suspension is preceded by some kind of pre-suspension hearing, providing the employee with notice and an opportunity to be heard.” Ibid. Respondent (as well as most of his amici) makes no attempt to defend this absolute rule, which spans all types of government employment and all types of unpaid suspensions. Brief for Respondent 8,12-13. This is eminently wise, since under our precedents such an absolute rule is indefensible.

It is by now well established that “‘due process,’ unlike some legal rules, is not a technical conception with a fixed content unrelated to time, place and circumstances.” Cafeteria & Restaurant Workers v. McElroy, 367 U. S. 886, 895 (1961). “[D]ue process is flexible and calls for such procedural protections as the particular situation demands.” Morrissey v. Brewer, 408 U. S. 471, 481 (1972). This Court has recognized, on many occasions, that where a State must act quickly, or where it would be impractical to provide pre-deprivation process, postdeprivation process satisfies the requirements of the Due Process Clause. See, e. g., United States v. James Daniel Good Real Property, 510 U. S. 43, 53 (1993); Zinermon v. Burch, 494 U. S. 113, 128 (1990) (collecting cases); Barry v. Barchi, 443 U. S. 55, 64-65 (1979); Dixon v. Love, 431 U. S. 105, 115 (1977); North American Cold Storage Co. v. Chicago, 211 U. S. 306, 314-320 (1908). Indeed, in Parratt v. Taylor, 451 U. S. 527 (1981), overruled in part on other grounds, Daniels v. Williams, 474 U. S. 327 (1986), we specifically noted that “we have rejected the proposition that [due process] always requires the State to provide a hearing prior to the initial deprivation of property.” 451 U. S., at 540. And in FDIC v. Mallen, 486 U. S. 230 (1988), where we unanimously approved the Federal Deposit Insurance Corporation’s (FDIC’s) suspension, without prior hearing, of an indicted private bank employee, we said: “An important government interest, accompanied by a substantial assurance that the deprivation is not baseless or unwarranted, may in limited cases demanding prompt action justify postponing the opportunity to be heard until after the initial deprivation.” Id., at 240.

The dictum in Loudermill relied upon by the Court of Appeals is of course not inconsistent with these precedents. To say that when the government employer perceives a hazard in leaving the employee on the job it “can avoid the problem by suspending with pay” is not to say that that is the only way of avoiding the problem. Whatever implication the phrase “with pay” might have conveyed is far outweighed by the clarity of our precedents which emphasize the flexibility of due process as contrasted with the sweeping and categorical rule adopted by the Court of Appeals.

B

To determine what process is constitutionally due, we have generally balanced three distinct factors:

“First, the private interest that will be affected by the official action; second, the risk of an erroneous deprivation of such interest through the procedures used, and the probable value, if any, of additional or substitute procedural safeguards; and finally, the Government’s interest.” Mathews v. Eldridge, 424 U. S. 319, 335 (1976).

See also, e. g., Mallen, supra, at 242; Logan v. Zimmerman Brush Co., 455 U. S. 422, 434 (1982).

Respondent contends that he has a significant private interest in the uninterrupted receipt of his paycheck. But while our opinions have recognized the severity of depriving someone of the means of his livelihood, see, e. g., Mallen, supra, at 243; Loudermill, 470 U. S., at 543, they have also emphasized that in determining what process is due, account must be taken of “the length” and “finality of the deprivation,” Logan, supra, at 434 (emphasis added). Unlike the employee in Loudermill, who faced termination, respondent faced only a temporary suspension without pay. So long as the suspended employee receives a sufficiently prompt post-suspension hearing, the lost income is relatively insubstantial (compared with termination), and fringe benefits such as health and life insurance are often not affected at all, Brief for United States as Amicus Curiae 18; Record, Doe. No. 19, p. 7.

On the other side of the balance, the State has a significant interest in immediately suspending, when felony charges are filed against them, employees who occupy positions of great public trust and high public visibility, such as police officers. Respondent contends that this interest in maintaining public confidence could have been accommodated by suspending him with pay until he had a hearing. We think, however, that the government does not have to give an employee charged with a felony a paid leave at taxpayer expense. If his services to the government are no longer useful once the felony charge has been filed, the Constitution does not require the government to bear the added expense of hiring a replacement while still paying him. ESU’s interest in preserving public confidence in its police force is at least as significant as the State’s interest in preserving the integrity of the sport of horse racing, see Barry v. Barchi, supra, at 64, an interest we “deemed sufficiently important... to justify a brief period of suspension prior to affording the suspended trainer a hearing,” Mallen, 486 U. S., at 241.

The last factor in the Mathews balancing, and the factor most important to resolution of this case, is the risk of erroneous deprivation and the likely value of any additional procedures. Petitioners argue that any presuspension hearing would have been worthless because pursuant to an Executive Order of the Governor of Pennsylvania a state employee is automatically to be suspended without pay “[a]s soon as practicable after [being] formally charged with ... a felony.” 4 Pa. Code § 7.173 (1997). According to petitioners, supervisors have no discretion under this rule, and the mandatory suspension without pay lasts until the criminal charges are finally resolved. See Tr. of Oral Arg. 20. If petitioners’ interpretation of this order is correct, there is no need for any presuspension process since there would be nothing to consider at the hearing except the independently verifiable fact of whether an employee had indeed been formally charged with a felony. See Codd v. Velger, 429 U. S. 624, 627-628 (1977) (per curiam). Cf. Loudermill, supra, at 543. Respondent, however, challenges petitioners’ reading of the Code, and contends that in any event an order of the Governor of Pennsylvania is a “mere directiv[e] which do[es] not confer a legally enforceable right.” Brief for Respondent 20. We need not resolve this disputed issue of state law because even assuming the Code is only advisory (or has no application at all), the State had no constitutional obligation to provide respondent with a presuspension hearing. We noted in Loudermill that the purpose of a pre-termination hearing is to determine “whether there are reasonable grounds to believe that the charges against the employee are true and support the proposed action.” 470 U. S., at 545-546. By parity of reasoning, the purpose of any pre-suspension hearing would be to assure that there are reasonable grounds to support the suspension without pay. Cf. Mallen, 486 U. S., at 240. But here that has already been assured by the arrest and the filing of charges.

In Mallen, we concluded that an “ex parte finding of probable cause” such as a grand jury indictment provides adequate assurance that the suspension is not unjustified. Id., at 240-241. The same is true when an employee is arrested and then formally charged with a felony. First, as with an indictment, the arrest and formal charges imposed upon respondent “by an independent body demonstrate] that the suspension is not arbitrary.” Id., at 244. Second, like an indictment, the imposition of felony charges “itself is an objective fact that will in most cases raise serious public concern.” Id., at 244-245. It is true, as respondent argues, that there is more reason to believe an employee has committed a felony when he is indicted rather than merely arrested and formally charged; but for present purposes arrest and charge give reason enough. They serve to assure that the state employer’s decision to suspend the employee is not “baseless or unwarranted,” id., at 240, in that an independent third party has determined that there is probable cause to believe the employee committed a serious crime.

Respondent further contends that since (as we have agreed to assume) Levanowitz had discretion not to suspend despite the arrest and filing of charges, he had to be given an opportunity to persuade Levanowitz of his innocence before the decision was made. We disagree. In Mallen, despite the fact that the FDIC had discretion whether to suspend an indicted bank employee, see 64 Stat. 879, as amended, 12 U. S. C. § 1818(g)(1); Mallen, supra, at 234-235, and n. 5, we nevertheless did not believe that a presuspension hearing was necessary to protect the private interest. Unlike in the case of a termination, where we have recognized that “the only meaningful opportunity to invoke the discretion of the decisionmaker is likely to be before the termination takes effect,” Loudermill, supra, at 543, in the case of a suspension there will be ample opportunity to invoke discretion later — and a short delay actually benefits the employee by allowing state officials to obtain more accurate information about the arrest and charges. Respondent “has an interest in seeing that a decision concerning his or her continued suspension is not made with excessive haste.” Mallen, 486 U. S., at 243. If the State is forced to act too quickly, the decisionmaker “may give greater weight to the public interest and leave the suspension in place.” Ibid.

C

Much of respondent’s argument is dedicated to the proposition that he had a due process right to a presuspension hearing because the suspension was open-ended and he “theoretically may not have had the opportunity to be heard for weeks, months, or even years after his initial suspension without pay.” Brief for Respondent 23. But, as respondent himself asserts in his attempt to downplay the governmental interest, “[b]ecause the employee is entitled, in any event, to a prompt post-suspension opportunity to be heard, the period of the suspension should be short and the amount of pay during the suspension minimal.” Id., at 24-25.

Whether respondent was provided an adequately prompt post-suspension hearing in the present case is a separate question. Although the charges against respondent were dropped on September 1 (petitioners apparently learned of this on September 2), he did not receive any sort of hearing until September 18. Once the charges were dropped, the risk of erroneous deprivation increased substantially, and, as petitioners conceded at oral argument, there was likely value in holding a prompt hearing, Tr. of Oral Arg. 19. Cf. Mal-len, supra, at 243 (holding that 90 days before the agency hears and decides the propriety of a suspension does not exceed the permissible limits where coupled with factors that minimize the risk of an erroneous deprivation). Because neither the Court of Appeals nor the District Court addressed whether, under the particular facts of this case, petitioners violated due process by failing to provide a sufficiently prompt postsuspension hearing, we will not consider this issue in the first instance, but remand for consideration by the Court of Appeals.

* * *

The judgment of the Court of Appeals is reversed, and the case is remanded for further proceedings consistent with this opinion.

It is so ordered.

      It is true, as respondent contends, that in Mallen we did not expressly state whether the bank president’s suspension was with or without pay. But the opinion in Mallen recites no order from the FDIC, if it had authority to issue such an order, that the bank pay its president; only an order that the bank suspend its president’s participation in the bank’s affairs. Our opinion in Mallen certainly reflects the assumption that the suspension would be without pay. For example, in discussing the private interest at stake we considered “the severity of depriving someone of his or her livelihood.” 486 U. S., at 243 (citing eases). And, Mallen argued to this Court that “denial of an income stream to underwrite these extraordinary expenses can be crucial, not only to Mallen’s financial condition in general, but to his ability to pay for his criminal defense.” Brief for Appellee in FDIC v. Mallen, O. T. 1987, No. 87-82, pp. 7-8.


source: Caselaw Access Project

author: Per Curiam. Justice Stevens,

license: Public Domain

text:
    VEY v. CLINTON, PRESIDENT OF THE UNITED STATES, et al.
    No. 96-8796.
    Decided June 9, 1997
   Per Curiam.

Pro se petitioner Eileen Vey seeks leave to proceed in forma pauperis so that she may file a petition for certiorari from a decision of the Third Circuit dismissing her appeal as frivolous under 28 U. S. C. § 1915(e)(2)(B)(i) (1994 ed., Supp. II). Her underlying claims below, various alleged civil rights and Racketeer Influenced and Corrupt Organizations Act violations by the President of the United States, the First Lady, and numerous Senators, judges (including The Chief Justice), foreign officials, and private citizens, are patently frivolous. In the past 6% years, she has filed 26 submissions in this Court, all of which have been denied. Just eight weeks ago, we went even further, instructing the Clerk of the Court not to accept any further petitions for extraordinary writs from her unless she first paid the required fees. See In re Vey, ante, p. 303 (per curiam). Since that order has proved insufficient to deter petitioner’s abusive conduct, we again deny her motion to proceed in forma pauperis and now instruct the Clerk not to accept any further petitions for cer-tiorari from petitioner in noncriminal matters unless she first complies with this Court’s Rules. Petitioner is allowed until June 30, 1997, within which to pay the docketing fees required by Rule 38 and to submit her petition in compliance with Rule 33.1.

We enter the order barring future in forma pauperis filings for the reasons discussed in Martin v. District of Columbia Court of Appeals, 506 U. S. 1 (1992) (per curiam).

It is so ordered.

The Chief Justice took no part in the decision of this case.

Justice Stevens,

dissenting.

For reasons previously stated, see Martin v. District of Columbia Court of Appeals, 506 U. S. 1, 4 (1992) (Stevens, J., dissenting), and cases cited, I respectfully dissent.


author: Justice Thomas

text:
    HUGHES AIRCRAFT CO. v. UNITED STATES ex rel. SCHUMER
    No. 95-1340.
    Argued February 25, 1997
    Decided June 16, 1997

      Kenneth W. Starr argued the cause for petitioner. With him on the briefs were Christopher Landau, John J. Higgins, John T. Kuelbs, and Daniel R. Allemeier.

      Laurence Gold argued the cause for respondent. With him on the brief were David Silberman and Leon Dayan.

      Deputy Solicitor General Waxman argued the cause for the United States as amicus curiae urging affirmance. On the brief were Acting Solicitor General Dellinger, Assistant Attorney General Hunger, Deputy Assistant Attorney General Preston, Malcolm L. Stewart, Michael F. Hertz, Douglas Letter, and Joan Hartman

      Briefs of amici curiae urging reversal were filed for the Aerospace Industries Association of America, Inc., by Mac S. Dunaway and Gary E. Cross; for the Association of American Medical Colleges et al. by John T. Boese, Richard A. Sauber, Kirk B. Johnson, Michael L. lie, John E. Steiner, Jr., and Joseph A. Keyes, Jr.; for the Chamber of Commerce of the United States of America et al. by Clarence T. Kipps, Jr., Alan I. Horowitz, Peter B. Hutt II, Alvaro I. Anillo, Stephen A. Bokat, Robin S. Conrad, and Franklin W. Losey; for FMC Corp. by Allan J. Joseph, Martin Quinn, and David F. Innis; for Lockheed Martin Corp. by James J. Gallagher, Mark R. Troy, Barbara J. Bacon, and Lester W. Schiefelbein, Jr.; for Northrop Grumman Corp. by Brad D. Brian, Kristin A. Linsley, and Daniel P. Collins; and for the Washington Legal Foundation by Stuart M. Gerson, Daniel J. Popeo, and Paul D. Kamenar.

      Briefs of amici curiae urging affirmance were filed for the National Employment Lawyers Association by James B. Helmer, Jr., Frederick M. Morgan, Jr., and Julie Webster Popham; for the National Health Law Program, Inc., by William J. Blechman; for the Project on Government Oversight by Charles Tiefer; and for Taxpayers Against Fraud, The False Claims Act Legal Center, by Priscilla R. Budeiri.

   Justice Thomas

delivered the opinion of the Court.

The qui tarn provision of the False Claims Act (FCA or Act), 31 U. S. C. § 3730(b), permits, in certain circumstances, suits by private parties on behalf of the United States against anyone submitting a false claim to the Government. Prior to 1986, such suits were barred if the information on which they were based was already in the Government’s possession. At issue in this case is whether a 1986 amendment to the FCA partially removing that bar applies retroactively to qui tarn suits regarding allegedly false claims submitted prior to its enactment and, if so, whether this particular action meets the requirements of the amended Act. We hold that the 1986 amendment does not apply to this action and therefore that this action should have been dismissed, as required by the 1982 version of the Act.

I

In December 1981, the Northrop Corporation awarded petitioner Hughes Aircraft Company a subcontract to design and develop a radar system for the B-2 bomber, which Northrop was then constructing under contract with the Air Force. Both Northrop’s subcontract with Hughes and the Air Force’s contract with Northrop were “cost-plus” contracts, which provided that the subcontractor and the contractor, respectively, were to be reimbursed for all costs properly incurred plus a reasonable profit. Several months after Hughes was awarded the B-2 subcontract, the McDonnell-Douglas Corporation awarded Hughes a “fixed-price” subcontract to design and develop an upgraded radar system for the F-15 fighter aircraft, which McDonnell-Douglas was then building for the Air Force. (Under the fixed-price contract, Hughes was to receive a set price, regardless of costs.) When it became apparent to Hughes that the projects overlapped in significant respects, Hughes adopted two internal “commonality agreements” allocating between its F-15 and B-2 divisions various costs that were common to the two projects.

After costs in the B-2 program escalated, Northrop requested a Government audit of Hughes’ accounting practices to ascertain whether Hughes had improperly shifted costs from the fixed-price F-15 subcontract to the cost-plus B-2 subcontract. The Air Force initially concluded, in a June 1986 preliminary classified audit report, that Hughes had improperly billed the B-2 program for certain development costs that should have been charged solely to the F-15 program. Between October 1986 and September 1988, the Defense Contract Audit Agency prepared a series of unclassified audit reports similarly concluding that Hughes had misallocated costs between the two programs, and also concluding that Hughes had not adequately disclosed the company’s commonality accounting practices in a Cost Accounting Standards report it had submitted to the Government in 1984. Based on those audits, the Government directed Northrop to withhold $15.4 million in B-2 contract payments from Hughes.

On January 20, 1989, respondent William J. Schumer, formerly the Division Contracts Manager for Hughes’ B-2 Division, commenced this action against Hughes pursuant to 81 U. S. C. § 3730(b), the qui tam provision of the FCA that authorizes private individuals, “relators,” to bring claims on behalf of the United States against any person who knowingly presented false or fraudulent claims to the United States in violation of §3729. Schumer’s complaint alleged that Hughes knowingly mischarged Northrop — and through it the United States — for certain radar development costs that should have been allocated to the fixed-price F-15 subcontract with McDonnell-Douglas instead of to the cost-plus B-2 subcontract with Northrop. App! 72-80. Schumer’s amended complaint alleged that Hughes’ accounting practices resulted in a $50 million net overcharge, and sought treble damages in the amount of $150 million. Id., at 102.

Hughes moved to dismiss Schumer’s action, contending that the 1986 FCA amendment was not retroactive and that the qui tam provision in effect when Hughes engaged in its allegedly wrongful conduct precluded qui tam suits based on information already possessed by the Government. See 31 U. S. C. § 3730(b)(4) (1982 ed.). Hughes argued in the alternative that the suit was barred even under the 1986 version of the Act because it was “based upon the public disclosure of allegations ... in a[n]... administratiye ... audit,” within the meaning of 31 U. S. C. § 3730(e)(4)(A). The District Court denied Hughes’ motion.

Hughes then moved for summary judgment on the merits, contending that it had fully disclosed the basis of its cost accounting system to all of its customers and had complied with all applicable contractual and regulatory requirements relating to cost allocation. After full briefing, the District Court concluded that Hughes had allocated some costs between the F-15 and B-2 programs consistent with disclosures Hughes made to Northrop, App. to Pet. for Cert. 46a, had allocated other costs to the fixed-price F-15 contract that could have been charged to the cost-plus B-2 contract alone (thereby benefiting the Government), id., at 50a, and had properly disclosed the contents of the commonality agreements to Northrop and the Air Force, id., at 46a-48a, 56a. Accordingly, the District Court held that “Sehumer has not shown that Hughes violated the False Claims Act.” Id., at 64a.

Sehumer appealed from the grant of summary judgment against him, and Hughes cross-appealed from the denial of its motion to dismiss. The Ninth Circuit rejected Hughes’ cross-appeal, holding that the 1986 amendment removing certain defenses to qui tam suits should be applied retroactively to suits based on pre-1986 conduct because the amendment involved only the “subject matter jurisdiction” of courts to hear qui tam claims and did not affect the substantive liability of qui tam defendants. 63 F. 3d 1512, 1517 (1995). The court further determined that the action was not barred under the 1986 version of the Act because no “public disclosure” of .information possessed by the Government had been made. Id., at 1518. Finally, the court reversed in part and remanded for further consideration on the merits, holding that a material factual dispute existed as to whether Hughes had made misleading and incomplete disclosures about its commonality agreements, whether or not the allegedly incomplete disclosures resulted in any harm to the public fisc. Id., at 1522-1525.

We granted the petition for certiorari to consider whether the 1986 amendment is applicable to pre-1986 conduct and, if so, whether the Government’s release of its audits to Hughes employees constituted a public disclosure bar under the 1986 amendment and whether harm to the public fisc is an essential element of a qui tam action under the amended Act. 519 U. S. 926 (1996). Because we conclude that the lower courts should not have applied the 1986 amendment and therefore that this action should have been dismissed, we express no opinion as to the Ninth Circuit’s “public disclosure” and “public fisc” holdings, or as to the merits of respondent’s factual contentions.

II

The allegedly false claims at issue in this case were submitted by Hughes between 1982 and 1984. At that time, the FCA required a district court to “dismiss [a qui tam] action . . . based on evidence or information the Government had when the action was brought.” 31 U. S. C. § 3730(b)(4) (1982 ed.). The Ninth Circuit accepted, and respondent does not dispute, that because “the government was aware of [respondent’s] allegations before he filed his suit, the [1982 provision] would bar his claim,” were it applicable. 63 F. 3d, at 1517.

Congress amended the FCA in 1986, however, to permit qui tarn suits based on information in the Government’s possession, except where the suit was based on information that had been publicly disclosed and was not brought by an original source of the information. See 81 U. S. C. § 3730(e)(4) (A). Because the 1986 amendment became effective before this suit was commenced, respondent contends that it, rather than the 1982 qui tarn provision, controls. We disagree.

We have frequently noted, and just recently reaffirmed, that there is a “presumption against retroactive legislation [that] is deeply rooted in our jurisprudence.” Landgraf v. USI Film Products, 511 U. S. 244, 265 (1994). “The ‘principle that the legal effect of conduct should ordinarily be assessed under the law that existed when the conduct took pláce has timeless and universal appeal.’” Ibid, (quoting Kaiser Aluminum & Chemical Corp. v. Bonjorno, 494 U. S. 827, 855 (1990) (Scalia, J., concurring)). Accordingly, we apply this time-honored presumption unless Congress has clearly manifested its intent to the contrary. 511 U. S., at 268.

Nothing in the 1986 amendment evidences a clear intent by Congress that it be applied retroactively, and no one suggests otherwise. Thus, under the analysis the Court adopted in Landgraf, if the 1986 amendment has a retroactive effect, then we presume it will not apply to the conduct alleged in this case, which occurred prior to its effective date.

Respondent argues that the 1986 amendment has no retroactive effect because it does not fit within Justice Story’s “influential definition” of impermissibly retroactive legislation, which we quoted with approval in Landgraf:

“‘[Ejvery statute, which takes away or impairs vested rights acquired under existing laws, or creates a new obligation, imposes a new duty, or attaches a new disability, in respect to transactions or considerations already past, must be deemed retrospective.’ ” 511 U. S., at 269 (quoting Society for Propagation of the Gospel v. Wheeler, 22 F. Cas. 756, 767 (No. 13,156) (CC NH 1814) (Story, J.)).

To the extent respondent contends that only statutes with one of these effects are subject to our presumption against retroactivity, he simply misreads our opinion in Landgraf. The language upon which he relies does not purport to define the outer limit of impermissible retroactivity. Rather, our opinion in Landgraf, like that of Justice Story, merely described that any such effect constituted a sufficient, rather than a necessary, condition for invoking the presumption against retroactivity. Indeed, we recognized that the Court has used various formulations to describe the “functional conceptio[n] of legislative ‘retroactivity,’ ” and made no suggestion that Justice Story’s formulation was the exclusive definition of presumptively impermissible retroactive legislation. 511 U. S., at 269.

In any event, even applying Justice Story’s formulation, we reject respondent’s contention that the 1986 amendment lacks retroactive effect. Respondent first argues that the 1986 amendment does not “ ‘impose new duties with respect to transactions already completed’ ” because, since 1863, “the FCA has made it unlawful to knowingly submit a false claim for payment to the United States.” Brief for Respondent 15 (quoting Landgraf, supra, at 280). The same argument was made, and rejected, in Landgraf There, we noted that the provision of the Civil Rights Act of 1991 authorizing compensatory damages “does not make unlawful conduct that was lawful when it occurred,” but we “[njonetheless” held that “the new compensatory damages provision would operate ‘retrospectively’ if it were applied to conduct occurring before” its effective date. 511 U. S., at 281-282; see also Rivers v. Roadway Express, Inc., 511 U. S. 298, 303 (1994) (holding that an increase in monetary liability could not be applied retroactively even though the “normative scope of Title VII’s prohibition on workplace discrimination” was not altered).

Respondent next contends that “the 1986 Amendments to the qui tam bar do not create a new cause of action where there was none before, change the substance of the extant cause of action, or alter a defendant’s exposure for a false claim by even a single penny [and] thus d[o] not ‘increase a party’s liability for past conduct.’ ” Brief for Respondent 15 (quoting Landgraf, supra, at 280). See also Brief for United States as Amicus Curiae 13-14. Again, respondent is mistaken. While we acknowledge that the monetary liability faced by an FCA defendant is the same whether the action is brought by the Government or by a qui tam relator, the 1986 amendment eliminates a defense to a qui tam suit— prior disclosure to the Government — and therefore changes the substance of the existing cause of action for qui tam defendants by “‘attaching] a new disability, in respect to transactions or considerations already past.’” Landgraf, supra, at 269 (quoting Wheeler, supra, at 767); see also Brief for United States as Amicus Curiae 14, n. 6 (“[PJroof that the government had the information when suit was brought was ... a jurisdictional defense to an action brought by a qui tam relator” (internal quotation marks omitted)); cf. Collins v. Youngblood, 497 U. S. 37, 49 (1990) (“A law that abolishes an affirmative defense” violates the Ex Post Facto Clause); Beazell v. Ohio, 269 U. S. 167, 169-170 (1925) (“[A]ny statute . . . which deprives one charged with crime of any defense available according to law at the time when the act was committed, is prohibited as ex post facto”).

Nor is it the case that the 1986 amendment does not “create a new cause of action.” As respondent himself recognizes, “as a result of the 1986 Amendments, the federal courts are open to an FCA action brought by a private relator on behalf of the United States,” whereas “[p]rior to 1986, once the United States learned of a false claim, only the Government could assert its rights under the FCA against the false claimant.” Brief for Respondent 16; see also Brief for United States as Amicus Curiae 14 (recognizing that the 1986 amendment “expanded the circumstances under which qui tam relators may pursue actions to enforce” a false claimant’s liability to the Government).

The extension of an FCA cause of action to private parties in circumstances where the action was previously foreclosed is not insignificant. As a class of plaintiffs, qui tam relators are different in kind than the Government. They are’ motivated primarily by prospects of monetary reward rather than the public good. As we have previously recognized:

‘[Qui tam statutes are] passed upon the theory, based on experience as old as modern civilization, that one of the least expensive and most effective means of preventing frauds on the Treasury is to make the perpetrators of them liable to actions by private persons acting, if you please, under the strong stimulus of personal ill will or the hope of gain. Prosecutions conducted by such means compare with the ordinary methods as the enterprising privateer does to the slow-going public vessel.’ ” United States ex rel. Marcus v. Hess, 317 U. S. 537, 541, n. 5 (1943) (quoting United States v. Griswold, 24 F. 361, 366 (Ore. 1885)).

Qui tam relators are thus less likely than is the Government to forgo an action arguably based on a mere technical noncompliance with reporting requirements that involved no harm to the public fisc.

In permitting actions by an expanded universe of plaintiffs with different incentives, the 1986 amendment essentially creates a new cause of action, not just an increased likelihood that an existing cause of action will be pursued. See, e. g., Winfree v. Northern Pacific R. Co., 227 U. S. 296, 302 (1913). Prior to the 1986 amendment, respondent’s qui tam action was completely barred because of Hughes’ disclosure to the Government of information about its claim submissions. The 1986 amendment would revive that action, subjecting Hughes to previously foreclosed qui tam litigation, much like extending a statute of limitations after the pre-existing period of limitations has expired impermissibly revives a moribund cause of action, see, e. g., Chenault v. U S. Postal Service, 37 F. 3d 535, 537, 539 (CA9 1994) (relying on Landgraf in concluding that “a newly enacted statute that lengthens the applicable statute of limitations may not be applied retroactively to revive a plaintiff’s claim that was otherwise barred under the old statutory scheme because to do so would alter the substantive rights of a party and increase a party’s liability” (internal quotation marks omitted)). This is true even if a cause of action remained open to some other party. It is simply not the case that, as respondent asserts, the elimination of a prior defense to qui tam actions does not “create a new cause of action” or “change the substance of the extant cause of action.”

Finally, respondent contends that the 1986 amendment is jurisdictional, and hence that it is an exception to the general Landgraf presumption against retroactivity. Indeed, the Ninth Circuit went further, holding that, absent a clear statement of congressional intent, there is a strong presumption in favor of retroactivity for jurisdictional statutes. 63 F. 3d, at 1517. The Ninth Circuit simply misread our decision in Landgraf, for the only “presumption” mentioned in that opinion is a general presumption against retroactivity. The fact that courts often apply newly enacted jurisdiction-allocating statutes to pending cases merely evidences certain limited circumstances failing to meet the conditions for our generally applicable presumption against retroactivity, not an exception to the rule itself, as the United States recognizes. See Brief for United States as Amicus Curiae 15, and n. 8. As we stated in Landgraf:

“Application of a new jurisdictional rule usually ‘takes away no substantive right but simply changes the tribunal that is to hear the case.’ Present law normally governs in such situations because jurisdictional statutes ‘speak to the power of the court rather than to the rights or obligations of the parties.’ ” 511 U. S., at 274 (emphasis added; citations omitted).

Statutes merely addressing which court shall have jurisdiction to entertain a particular cause of action can fairly be said merely to regulate the secondary conduct of litigation and not the underlying primary conduct of the parties. Cf. id., at 275; id., at 291 (Scalia, J., concurring). Such statutes affect only where a suit may be brought, not whether it may be brought at all. The 1986 amendment, however, does not merely allocate jurisdiction among forums. Rather, it creates jurisdiction where none previously existed; it thus speaks not just to the power of a particular court but to the substantive rights of the parties as well. Such a statute, even though phrased in “jurisdictional” terms, is as much subject to our presumption against retroactivity as any other.

III

In sum, whether we consider the relevant conduct to be Hughes’ disclosure to the Government or its submission of the allegedly false claim, disclosure of information about the claim to the Government constituted a full defense to a qui tam action prior to 1986. If applied in this case, the legal effect of the 1986 amendment would be to deprive Hughes of that defense. Given the absence of a clear statutory expression of congressional intent to apply the 1986 amendment to conduct completed before its enactment, we apply our presumption against retroactivity and hold that, under the relevant 1982 version of the FCA, the District Court was obliged to dismiss this action because it was “based on evidence or information the Government had when the action was brought." 31 U. S. C. § 3730(b)(4) (1982 ed.). We therefore vacate the judgment below, and remand the case for further proceedings consistent with this opinion.

It is so ordered.

       The Government ultimately reversed its preliminary determination, concluding that the commonality agreements had actually benefited the Government by charging costs to the fixed-price F-15 program that otherwise would have been borne solely by the cost-plus B-2 program. Accordingly, the Government withdrew its earlier finding of noncompliance, determined that any noneompliance with accounting disclosure requirements was immaterial, and directed that Hughes be paid the $15.4 million previously withheld on the B-2 project. App. 136-137; App. to Pet. for Cert. 68a.

       The Government chose not to intervene in the action, as it was entitled to do under 31 U. S. C. § 3730(b)(2), nor did it move to dismiss the action, as it was likewise entitled to do, see § 3730(c)(2)(A).

       Hughes also raised several constitutional challenges to the qui tam provisions of the Act that are not presently before us. See 519 U. S. 926 (1996) (limiting grant of certiorari to the nonconstitutional questions presented by the petition).

       Because both the allegedly false claim submission and the disclosure to the Government of information about that submission occurred prior to the effective date of the 1986 amendments, we need not address which of these two events constitutes the relevant conduct for purposes of our retroactivity analysis.

       That a qui tam suit is brought by a private party “on behalf of the United States,” see Brief for Respondent 17, does not alter the fact that a relator’s interests and the Government’s do not necessarily coincide. Moreover, as the statute specifies, qui tam actions are brought both “/or the person and for the United States Government.” 31 U. S. C. § 3730(b)(1) (emphasis added).


author:
Justice Ginsburg
      Justice Stevens,

text:
    ASSOCIATES COMMERCIAL CORP. v. RASH et ux.
    No. 96-454.
    Argued April 16, 1997
    Decided June 16, 1997

      Carter G. Phillips argued the cause for petitioner. With him on the briefs were Shalom L. Kohn, David M. Schiff-man, Ben L. Aderholt, and Raymond J. Blackwood.

      Kent L. Jones argued the cause for the United States as amicus curiae urging reversal. With him on the brief were Acting Solicitor General Dellinger, Assistant Attorney General Argrett, Deputy Solicitor General Wallace, and Gary D. Gray.

      John J. Durkay argued the cause and filed a brief for respondents.

      Briefs of amici curiae urging reversal were filed for NationsBank, N. A., et al. by John H. Culver III; and for the Washington Legal Foundation by David, R. Kuney, Daniel J. Popeo, and Penelope K. Shapiro.

      Briefs of amici curiae urging affirmance were filed for the National Association of Chapter 13 Trustees by Henry E. Hildebrand and Christopher M. Minton; for the National Association of Consumer Bankruptcy Attorneys, Inc., by Norma L. Hammes and James J. Gold; and for Donald and Madelaine Taffi by A. Lavar Taylor.

        Jan T. Chilton and Phillip D. Brady filed a brief for the American Automobile Manufacturers Association, Inc., et al. as amici curiae.

   Justice Ginsburg

delivered the opinion of the Court.

We resolve in this case a dispute concerning the proper application of § 506(a) of the Bankruptcy Code when a bankrupt debtor has exercised the “cram down” option for which Code § 1325(a)(5)(B) provides. Specifically, when a debtor, over a secured creditor’s objection, seeks to retain and use the creditor’s collateral in a Chapter 13 plan, is the value of the collateral to be determined by (1) what the secured creditor could obtain through foreclosure sale of the property (the “foreclosure-value” standard); (2) what the debtor would have to pay for comparable property (the “replacement-value” standard); or (3) the midpoint between these two measurements? We hold that § 506(a) directs application of the replacement-value standard.

I

In 1989, respondent Elray Rash purchased for $73,700 a Kenworth tractor truck for use in his freight-hauling business. Rash made a downpayment on the truck, agreed to pay the seller the remainder in 60 monthly installments, and pledged the truck as collateral on the unpaid balance. The seller assigned the loan, and its lien on the truck, to petitioner Associates Commercial Corporation (ACC).

In March 1992, Elray and Jean Rash filed a joint petition and a repayment plan under Chapter 13 of the Bankruptcy Code (Code), 11 U. S. C. §§1301-1330. At the time of the bankruptcy filing, the balance owed to ACC on the truck loan was $41,171. Because it held a valid lien on the truck, ACC was listed in the bankruptcy petition as a creditor holding a secured claim. Under the Code, ACC’s claim for the balance owed on the truck was secured only to the extent of the value of the collateral; its claim over and above the value of the truck was unsecured. See 11 U. S. C. § 506(a).

To qualify for confirmation under Chapter 13, the Rashes’ plan had to satisfy the requirements set forth in § 1325(a) of the Code. The Rashes’ treatment of ACC’s secured claim, in particular, is governed by subsection (a)(5). Under this provision, a plan’s proposed treatment of secured claims can be confirmed if one of three conditions is satisfied: The secured creditor accepts the plan, see 11 U. S. C. § 1325(a)(5) (A); the debtor surrenders the property securing the claim to the creditor, see § 1325(a)(5)(C); or the debtor invokes the so-called “cram down” power, see § 1325(a)(5)(B). Under the cram down option, the debtor is permitted to keep the property over the objection of the creditor; the creditor retains the lien securing the claim, see § 1325(a)(5)(B)(i), and the debtor is required to provide the creditor with payments, over the life of the plan, that will total the present value of the allowed secured claim, i. e., the present value of the collateral, see § 1325(a)(5)(B)(ii). The value of the allowed secured claim is governed by § 506(a) of the Code.

The Rashes’ Chapter 13 plan invoked the cram down power. It proposed that the Rashes retain the truck for use in the freight-hauling business and pay ACC, over 58 months, an amount equal to the present value of the truck. That value, the Rashes’ petition alleged, was $28,500. ■ ACC objected to the plan and asked the Bankruptcy Court to lift the automatic stay so ACC could repossess the truck. ACC also filed a proof of claim alleging that its claim was fully secured in the amount of $41,171. The Rashes filed an objection to ACC’s claim.

The Bankruptcy Court held an evidentiary hearing to resolve the dispute over the truck’s value. At the hearing, ACC and the Rashes urged different valuation benchmarks. ACC maintained that the proper valuation was the price the Rashes would have to pay to purchase a like vehicle, an amount ACC’s expert estimated to be $41,000. The Rashes, however, maintained that the proper valuation was the net amount ACC would realize upon foreclosure and sale of the collateral, an amount their expert estimated to be $31,875. The Bankruptcy Court agreed with the Rashes and fixed the amount of ACC’s secured claim at $31,875; that sum, the court found, was the net amount ACC would realize if it exercised its right to repossess and sell the truck. See In re Rash, 149 B. R. 430, 431-432 (Bkrtcy. Ct. ED Tex. 1993). The Bankruptcy Court thereafter approved the plan, and the United States District Court for the Eastern District of Texas affirmed.

A panel of the Court of Appeals for the Fifth Circuit re: versed. In re Rash, 31 F. 3d 325 (1994). On rehearing en banc, however, the Fifth Circuit affirmed the District Court, holding that ACC’s allowed secured claim was limited to $31,875, the net foreclosure value of the truck. In re Rash, 90 F. 3d 1036 (1996).

In reaching its decision, the Fifth Circuit highlighted, first, a conflict it perceived between the method of valuation ACC advanced, and the law of Texas defining the rights of secured creditors. See id., at 1041-1042 (citing Tex. Bus. & Com. Code Ann. §§ 9.504(a), (c), 9.505 (1991)). In the Fifth Circuit’s view, valuing collateral in a federal bankruptcy proceeding under a replacement-value standard — thereby setting an amount generally higher than what a secured creditor could realize pursuing its state-law foreclosure remedy— would “chang[e] the extent to which ACC is secured from what obtained under state law prior to the bankruptcy filing.” 90 F. 3d, at 1041. Such a departure from state law, the Fifth Circuit said, should be resisted by the federal forum unless “clearly compelled]” by the Code. Id., at 1042.

The Fifth Circuit then determined that the Code provision governing valuation of security interests, § 506(a), does not compel a replacement-value approach. Instead, the court reasoned, the first sentence of § 506(a) requires that collateral be valued from the creditor’s perspective. See id., at 1044. And because “the creditor’s interest is in the nature of a security interest, giving the creditor the right to repossess and sell the collateral and nothing more[,] . . . the valuation should start with what the creditor could realize by exercising that right.” Ibid. This foreclosure-value standard, the Fifth Circuit found, was consistent with the other relevant provisions of the Code, economic analysis, and the legislative history of the pertinent provisions. See id., at 1045-1059. Judge Smith, joined by five other judges, dissented, urging that the Code dictates a replacement-value standard. See id., at 1061-1075.

Courts of Appeals have adopted three different standards for valuing a security interest in a bankruptcy proceeding when the debtor invokes the cram down power to retain the collateral over the creditor’s objection. In contrast to the Fifth Circuit’s foreclosure-value standard, a number of Circuits have followed a replacement-value approach. See, e. g., In re Taffi, 96 F. 3d 1190, 1191-1192 (CA9 1996) (en banc), cert. pending sub nom. Taffi v. United States, No. 96-881; In re Winthrop Old Farm Nurseries, Inc., 50 F. 3d 72, 74-75 (CA1 1995); In re Trimble, 50 F. 3d 530, 531-532 (CA8 1995). Other courts have settled on the midpoint between foreclosure value and replacement value. See In re Hoskins, 102 F. 3d 311, 316 (CA7 1996); cf. In re Valenti, 105 F. 3d 55, 62 (CA2 1997) (bankruptcy courts have discretion to value at midpoint between replacement value and foreclosure value). We granted certiorari to resolve this conflict among the Courts of Appeals, see 519 U. S. 1086 (1997), and we now reverse the Fifth Circuit’s judgment.

II

The Code provision central to the resolution of this case is § 506(a), which states:

"An allowed claim of a creditor secured by a lien on property in which the estate has an interest ... is a secured claim to the extent of the value of such creditor’s interest in the estate’s interest in such property, . . . and is an unsecured claim to the extent that the value -of such creditor’s interest ... is less than the amount of such allowed claim. Such value shall be determined in light of the purpose of the valuation and of the proposed disposition or use of such property . . . .” 11 U.S. C. § 506(a).

Over ACC’s objection, the Rashes’ repayment plan proposed, pursuant to § 1325(a)(5)(B), continued use of the property in question, i. e., the truck, in the debtor’s trade or business. In such a “cram down” case, we hold, the value of the property (and thus the amount of the secured claim under § 506(a)) is the price a willing buyer in the debtor’s trade, business, or situation would pay to obtain like property from a willing seller.

Rejecting this replacement-value standard, and selecting instead the typically lower foreclosure-value standard, the Fifth Circuit trained its attention on the first sentence of § 506(a). In particular, the Fifth Circuit relied on these first sentence words: A claim is secured “to the extent of the value of such creditor’s interest in the estate’s interest in such property.” See 90 F. 3d, at 1044 (emphasis added) (citing § 506(a)). The Fifth Circuit read this phrase to instruct that the “starting point for the valuation [is] what the creditor could realize if it sold the estate’s interest in the property according to the security agreement,” namely, through “repossess[ing] and sell[ing] the collateral.” Ibid.

We do not find in the § 506(a) first sentence words — “the creditor’s interest in the estate’s interest in such property”— the foreclosure-value meaning advanced by the Fifth Circuit. Even read in isolation, the phrase imparts no valuation standard: A direction simply to consider the “value of such creditor’s interest” does not expressly reveal how that interest is to be valued.

Reading the first sentence of § 506(a) as a whole, we are satisfied that the phrase the Fifth Circuit considered key is not an instruction to equate a “creditor’s interest” with the net value a creditor could realize through a foreclosure sale. The first sentence, in its entirety, tells us that a secured creditor’s claim is to be divided into secured and unsecured portions, with the secured portion of the claim limited to the value of the collateral. See United States v. Ron Pair Enterprises, Inc., 489 U. S. 235, 238-239 (1989); 4 L. King, Collier on Bankruptcy ¶ 506.02[l][a], p. 506-6 (15th ed. rev. 1996). To separate the secured from the unsecured portion of a claim, a court must compare the creditor’s claim to the value of “such property,” i. e., the collateral. That comparison is sometimes complicated. A debtor may own only a part interest in the property pledged as collateral, in which case the court will be required to ascertain the “estate’s interest” in the collateral. Or, a creditor may hold a junior or subordinate lien, which would require the court to ascertain the creditor’s interest in the collateral. The § 506(a) phrase referring to the “creditor’s interest in the estate’s interest in such property” thus recognizes that a court may encounter, and in such instances must evaluate, limited or partial interests in collateral. The full first sentence of § 506(a), in short, tells a court what it must evaluate, but it does not say more; it is not enlightening on how to value collateral.

The second sentence of § 506(a) does speak to the how question. “Such value,” that sentence provides, “shall be determined in light of the purpose of the valuation and of the proposed disposition or use of such property.” § 506(a). By deriving a foreclosure-value standard from § 506(a)’s first sentence, the Fifth Circuit rendered inconsequential the sentence that expressly addresses how “value shall be determined.”

As we comprehend § 506(a), the “proposed disposition or use” of the collateral is of paramount importance to the valuation question. If a secured creditor does not accept a debt- or’s Chapter 13 plan, the debtor has two options for handling allowed secured claims: surrender the collateral to the creditor, see § 1325(a)(5)(C); or, under the cram down option, keep the collateral over the creditor’s objection and provide the creditor, over the life of the plan, with the equivalent of the present value of the collateral, see § 1325(a)(5)(B). The “disposition or use” of the collateral thus turns on the alternative the debtor chooses — in one case the collateral will be surrendered to the creditor, and in the other, the collateral will be retained and used by the debtor. Applying a foreclosure-value standard when the cram down option is invoked attributes no significance to the different consequences of the debtor’s choice to surrender the property or retain it. A replacement-value standard, on the other hand, distinguishes retention from surrender and renders meaningful the key words “disposition or use.”

Tying valuation to the actual “disposition or use” of the property points away from a foreclosure-value standard when a Chapter 13 debtor, invoking cram down power, retains and uses the property. Under that option, foreclosure is averted by the debtor’s choice and over the creditor’s objection. From the creditor’s perspective as well as the debt- or’s, surrender and retention are not equivalent acts.

When a debtor surrenders the property, a creditor obtains it immediately, and is free to sell it and reinvest the proceeds. We recall here that ACC sought that very advantage. See supra, at 957. If a debtor keeps the property and continues to use it, the creditor obtains at once neither the property nor its value and is exposed to double risks: The debtor may again default and the property may deteriorate from extended use. Adjustments in the interest rate and secured creditor demands for more “adequate protection,” 11 U. S. C. § 361, do not fully offset these risks. See 90 F. 3d, at 1066 (Smith, J., dissenting) (“vast majority of reorganizations fail ... leaving creditors with only a fraction of the compensation due them”; where, as here, “collateral depreciates rapidly, the secured creditor may receive far less in a failed reorganization than in a prompt foreclosure” (internal cross-reference omitted)); accord, In re Taffi, 96 F. 3d, at 1192-1193.

Of prime significance, the replacement-value standard accurately gauges the debtor’s “use” of the property. It values “the creditor’s interest in the collateral in light of the proposed [repayment plan] reality: no foreclosure sale and economic benefit for the debtor derived from the collateral equal to . . . its [replacement] value.” In re Winthrop Old Farm Nurseries, 50 F. 3d, at 75. The debtor in this case elected to use the collateral to generate an income stream. That actual use, rather than a foreclosure sale that will not take place, is the proper guide under a prescription hinged to the property’s “disposition or use.” See ibid.

The Fifth Circuit considered the replacement-value standard disrespectful of state law, which permits the secured creditor to sell the collateral, thereby obtaining its net foreclosure value “and nothing more.” See 90 F. 3d, at 1044. In allowing Chapter 13 debtors to retain and use collateral over the objection of secured creditors, however, the Code has reshaped debtor and creditor rights in marked departure from state law. See, e.g., Uniform Commercial Code §§ 9— 504, 9-505, 3B U. L. A. 127, 352 (1992). The Code’s cram down option displaces a secured creditor’s state-law right to obtain immediate foreclosure upon a debtor’s default. That change, ordered by federal law, is attended by a direction that courts look to the “proposed disposition or use” of the collateral in determining its value. It no more disrupts state law to make “disposition or use” the guide for valuation than to authorize the rearrangement of rights the cram down power, entails.

Nor are we persuaded that the split-the-difference approach adopted by the Seventh Circuit provides the appropriate solution. See In re Hoskins, 102 F. 3d, at 316. Whatever the attractiveness of a standard that picks the midpoint between foreclosure and replacement values, there is no warrant for it in the Code. Section 506(a) calls for the value the property possesses in light of the “disposition or use” in fact “proposed,” not the various dispositions or Uses that might have been proposed. Cf. BFP v. Resolution Trust Corporation, 511 U. S. 531, 540 (1994) (court-made rule defining, for purposes of Code’s fraudulent transfer provision, “reasonably equivalent value” to mean 70% of fair market value “represents] [a] policy determination that the Bankruptcy Code gives us no apparent authority to make”). The Seventh Circuit rested on the “economics of the situation,” In re Hoskins, 102 F. 3d, at 316, only after concluding that the statute suggests no particular valuation method. We agree with the Seventh Circuit that “a simple rule of valuation is needed” to serve the interests of predictability and uniformity. Id., at 314. We conclude, however, that § 506(a) supplies a governing instruction less complex than the Seventh Circuit’s “make two valuations, then split the difference” formulation.

In sum, under § 506(a), the value of property retained because the debtor has exercised the § 1325(a)(5)(B) “cram down” option is the cost the debtor would incur to obtain a like asset for the same “proposed . . . use.”

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

It is so ordered.

Justice Stevens,

dissenting.

Although the meaning of 11 U. S. C. § 506(a) is not entirely clear, I think its text points to foreclosure as the proper method of valuation in this case. The first sentence in § 506(a) tells courts to determine the value of the “creditor’s interest in the estate’s interest” in the property. 11 U. S. C. § 506(a) (emphasis added). This language suggests that the value should be determined from the creditor’s perspective, i. e., what the collateral is worth, on the open market, in the creditor’s hands, rather than in the hands of another party.

The second sentence explains that “[s]uch value shall be determined in light of the purpose of the valuation and of the proposed disposition or use of such property.” Ibid. In this context, the “purpose of the valuation” is determined by 11 U. S. C. § 1325(a)(5)(B). Commonly known as the Bankruptcy Code’s “cram down” provision, this section authorizes the debtor to keep secured property over the creditor’s objections in a Chapter 13 reorganization, but, if he elects to do so, directs the debtor to pay the creditor the “value” of the secured claim. The “purpose” of this provision, and hence of the valuation under § 506(a), is to put the creditor in the same shoes as if he were able to exercise his lien and foreclose.

It is crucial to keep in mind that § 506(a) is a provision that applies throughout the various chapters of the Bankruptcy Code; it is, in other words, a “utility” provision that operates in many different contexts. Even if the words “proposed disposition or use” did not gain special meaning in the cram down context, this would not render them surplusage because they have operational significance in their many other Code applications. In this context, I also think the foreclosure standard best comports with economic reality. Allowing any more than the foreclosure value simply grants a general windfall to undersecured creditors at the expense of unsecured creditors. Cf. In re Hoskins, 102 F. 3d 311, 320 (CA7 1996) (Easterbrook, J., concurring in judgment). As Judge Easterbrook explained in rejecting the split-the-difference approach as a general rule, see id., at 318-320, a foreclosure-value standard is also consistent with the larger statutory scheme by keeping the respective recoveries of secured and unsecured creditors the same throughout the various bankruptcy chapters.

Accordingly, I respectfully dissent.

      Justice Scalia joins all but footnote 4 of this opinion.

       Section 1325(a)(5) states:
      “(a) Except as provided in subsection (b), the court shall confirm a plan if—
      “(5) with respect to each allowed secured claim provided for by the plan—
      “(A) the holder of such claim has accepted the plan;
      “(B)(i) the plan provides that the holder of such claim retain the lien securing such claim; and
      “(ii) the value, as of the effective date of the plan, of property to be distributed under the plan on account of such claim is not less than the allowed amount of such claim; or

        “(C) the debtor surrenders the property securing such claim to such holder.”

       In In re Taffi, the Ninth Circuit contrasted replacement value with fair-market value and adopted the latter standard, apparently viewing the two standards as incompatible. See 96 F. 3d, at 1192. By using the term “replacement value,” we do not suggest that a creditor is entitled to recover what it would cost the debtor to purchase the collateral brand new. Rather, our use of the term replacement value is consistent with the Ninth Circuit’s understanding of the meaning of fair-market value; by replacement value, we mean the price a willing buyer in the debtor’s trade, business, or situation would pay a willing seller to obtain property of like age and condition. See also infra, at 965, n. 6.

       On this matter, amici curiae supporting ACC contended: “ ‘Adequate protection’ payments under 11 U. S. C. §§361, 362(d)(1) typically are based on the assumption that the collateral will be subject to only ordinary depreciation. Hence, even when such payments are made, they frequently fail to compensate adequately for the usually more rapid depreciation of assets retained by the debtor.” Brief for American Automobile Manufacturers Association, Inc., et al. as Amici Curiae 21, n. 9.

       We give no weight to the legislative history of § 506(a), noting that it is unedifying, offering snippets that might support either standard of valuation. The Senate Report simply repeated the phrase contained in the second sentence of § 506(a). See S. Rep. No. 95-989, p. 68 (1978). The House Report, in the Fifth Circuit’s view, rejected a “ ‘replacement cost’ ” valuation. See In re Rash, 90 F. 3d 1036, 1056 (CA5 1996) (quoting H. Rep. No. 95-595, p. 124 (1977)). That Report, however, appears to use the term “replacement cost” to mean the cost of buying new property to replace property in which a creditor had a security interest. See ibid. In any event, House Report excerpts are not enlightening, for the provision pivotal here — the second sentence of § 506(a) — did not appear in the bill addressed by the House Report. The key sentence originated in the Senate version of the bill, compare H. R. 8200, 95th Cong., 1st Sess., § 506(a) (1977), with S. 2266, 95th Cong., 1st Sess., § 506(a) (1977), and was included in the final text of the statute after the House-Senate conference, see 124 Cong. Rec. 83997 (1978).

       As our reading of § 506(a) makes plain, we also reject a ruleless approach allowing use of different valuation standards based on the facts and circumstances of individual eases, Cf. In re Valenti, 105 F. 3d 55, 62-63 (CA2 1997) (permissible for bankruptcy courts to determine valuation standard case-by-ease).

       Our recognition that the replacement-value standard, not the foreclosure-value standard, governs in cram down cases leaves to bankruptcy courts, as triers of fact, identification of the best way of ascertaining replacement value on the basis of the evidence presented. Whether replacement value is the equivalent of retail value, wholesale value, or some other value will depend.on the type of debtor and the nature of the property. We note, however, that replacement value, in this context, should not include certain items. For example, where the proper measure of the replacement value of a vehicle is its retail value, an adjustment to that value may be necessary: A creditor should not receive portions of the retail price, if any, that reflect the value of items the debtor does not receive when he retains his vehicle, items such as warranties, inventory storage, and reconditioning. Cf. 90 F. 3d, at 1051-1052. Nor should the creditor gain from modifications to the property — e. g., the addition of accessories to a vehicle — to which a creditor’s lien would not extend under state law.

      The Court states that “surrender and retention are not equivalent acts” from the creditor’s perspective because he does not receive the property and is exposed to the risk of default and deterioration. Ante, at 962. I disagree. That the creditor does not receive the property is irrelevant because, as § 1325(a)(5)(B)(ii) directs, he receives the present value of his security interest. Present value includes both the underlying value and the time value of that interest. The time-value component similarly vitiates the risk concern. Higher risk uses of money must pay a higher premium to offset the same opportunity cost. In this case, for instance, the creditor was receiving nine percent interest, see In re Rash, 90 F. 3d 1036, 1039 (CA5 1996) (en banc), well over the prevailing rate for an essentially risk-free loan, such as a United States Treasury Bond. Finally, the concern with deterioration is addressed by another provision of the Code, 11 U. S. C. § 361, which authorizes the creditor to demand “adequate proteetion,” including increased payments, to offset any derogation of his security interest during a cram down.