author: Justice Scalia

text:
    BECK, LIQUIDATING TRUSTEE OF ESTATES OF CROWN VANTAGE, INC., et al. v. PACE INTERNATIONAL UNION ET AL.
    No. 05-1448.
    Argued April 24, 2007
    Decided June 11, 2007

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

      M. Miller Baker argued the cause for petitioner. With him on the briefs were David E. Rogers, Wilber H. Boies, and Michael T Graham.

      Matthew D. Roberts argued the cause for the United States as amicus curiae urging reversal. With him on the brief were Solicitor General Clement, Deputy Solicitor General Kneedler, Jonathan L. Snare, Edward D. Sieger, Israel Goldowitz, and Karen L. Morris.

      Julia Penny Clark argued the cause for respondents. With her on the brief were Laurence Gold, Douglas L. Greenfield, Leon Dayan, and Christian L. Raisner.

       A brief of amici curiae urging reversal was filed for the Chamber of Commerce of the United States of America et al. by W. Stephen Cannon, Raymond C. Fay, Laura C. Fentonmiller, James J. Keightley, Harold J. Ashner, and Shane Brennan.

   Justice Scalia

delivered the opinion of the Court.

We decide in this case whether an employer that sponsors and administers a single-employer defined-benefit pension plan has a fiduciary obligation under the Employee Retirement Income Security Act of 1974 (ERISA), 88 Stat. 829, as amended, 29 U. S. C. § 1001 et seq., to consider a merger with a multiemployer plan as a method of terminating the plan.

I

Crown Paper and its parent entity, Crown Vantage (the two hereinafter referred to in the singular as Crown), employed 2,600 persons in seven paper mills. PACE International Union, a respondent here, represented employees covered by 17 of Crown’s defined-benefit pension plans. A defined-benefit plan, “as its name implies, is one where the employee, upon retirement, is entitled to a fixed periodic payment.” Commissioner v. Keystone Consol. Industries, Inc., 508 U. S. 152, 154 (1993). In such a plan, the employer generally shoulders the investment risk. It is the employer who must make up for any deficits, but also the employer who enjoys the fruits (whether in the form of lower plan contributions or sometimes a reversion of assets) if plan investments perform beyond expectations. See Hughes Aircraft Co. v. Jacobson, 525 U. S. 432, 439-440 (1999). In this case, Crown served as both plan sponsor and plan administrator.

In March 2000, Crown filed for bankruptcy and proceeded to liquidate its assets. ERISA allows employers to terminate their pension plans voluntarily, see Pension Benefit Guaranty Corporation v. LTV Corp., 496 U. S. 633, 638 (1990), and in the summer of 2001, Crown began to consider a “standard termination,” a condition of which is that the terminated plans have sufficient assets to cover benefit liabilities. § 1341(b)(1)(D); id., at 638-639. Crown focused in particular on the possibility of a standard termination through purchase of annuities, one statutorily specified method of plan termination. See § 1341(b)(3)(A)(i). PACE, however, had ideas of its own. It interjected itself into Crown’s termination discussions and proposed that, rather than buy annuities, Crown instead merge the plans covering PACE union members with the PACE Industrial Union Management Pension Fund (PIUMPF), a multiemployer or “Taft-Hartley” plan. See § 1002(37). Under the terms of the PACE-proposed agreement, Crown would be required to convey all plan assets to PIUMPF; PIUMPF would assume all plan liabilities.

Crown took PACE’s merger offer under advisement. As it reviewed annuitization bids, however, it discovered that it had overfunded certain of its pension plans, so that purchasing annuities would allow it to retain a projected $5 million reversion for its creditors after satisfying its obligations to plan participants and beneficiaries. See § 1344(d)(1) (providing for reversion upon plan termination where certain conditions are met). Under PACE’s merger proposal, by contrast, the $5 million would go to PIUMPF. What is more, the Pension Benefit Guaranty Corporation (PBGC), which administers an insurance program to protect plan benefits,' agreed to withdraw the proofs of claim it had filed against Crown in the bankruptcy proceedings if Crown went ahead with an annuity purchase. Crown had evidently heard enough. It consolidated 12 of its pension plans into a single plan, and terminated that plan through the purchase of an $84 million annuity. That annuity fully satisfied Crown’s obligations to plan participants and beneficiaries and allowed Crown to reap the $5 million reversion in surplus funds.

PACE and two plan participants, also respondents here (we will refer to all respondents collectively as PACE), thereafter filed an adversary action against Crown in the Bankruptcy Court, alleging that Crown’s directors had breached their fiduciary duties under ERISA by neglecting to give diligent consideration to PACE’s merger proposal. The Bankruptcy Court sided with PACE. It found that the decision whether to purchase annuities or merge with PIUMPF was a fiduciary decision, and that Crown had breached its fiduciary obligations by giving insufficient study to the PIUMPF proposal. Rather than ordering Crown to cancel its annuity (which would have resulted in a substantial penalty payable to Crown’s annuity provider), the Bankruptcy Court instead issued a preliminary injunction preventing Crown from obtaining the $5 million reversion. It subsequently approved a distribution of that reversion for the benefit of plan participants and beneficiaries, which distribution was stayed pending appeal.

Petitioner, the trustee of the Crown bankruptcy estates, appealed the Bankruptcy-Court decision to the District Court, which affirmed in relevant part, as did the Court of Appeals for the Ninth Circuit. The Ninth Circuit acknowledged that “the decision to terminate a pension plan is a business decision not subject to ERISA’s fiduciary obligations,” but reasoned that “the implementation of a decision to terminate” is fiduciary in nature. 427 F. 3d 668, 673 (2005). It then determined that merger was a permissible means of plan termination and that Crown therefore had a fiduciary obligation to consider PACE’s merger proposal seriously, which it had failed to do. Petitioner thereafter sought rehearing in the Court of Appeals, this time with the support of the PBGC and the Department of Labor, who agreed with petitioner that the Ninth Circuit’s judgment was in error. The Ninth Circuit held to its original decision, and we granted certiorari. 549 U. S. 1177 (2007).

II

Crown’s operation of its defined-benefit pension plans placed it in dual roles as plan sponsor and plan administrator; an employer’s fiduciary duties under ERISA are implicated only when it acts in the latter capacity. Which hat the employer is proverbially wearing depends upon the nature of the function performed, see Hughes Aircraft Co., supra, at 444, and is an inquiry that is aided by the common law of trusts which serves as ERISA’s backdrop, see Pegram v. Herdrich, 530 U. S. 211, 224 (2000); Lockheed Corp. v. Spink, 517 U. S. 882, 890 (1996).

It is well established in this Court’s eases that an employer’s decision whether to terminate an ERISA plan is a settlor function immune from ERISA’s fiduciary obligations. See, e. g., ibid.; Curtiss-Wright Corp. v. Schoonejongen, 514 U. S. 73, 78 (1995). And because “decision[s] regarding the form or structure” of a plan are generally settlor functions, Hughes Aircraft Co., 525 U. S., at 444, PACE acknowledges that the decision to merge plans is “normally [a] plan sponsor decisio[n]” as well. Brief for Respondents 13-14, n. 5,20-21; see also Malia v. General Electric Co., 23 F. 3d 828, 833 (CA3 1994) (holding that employer’s decision to merge plans “d[id] not invoke the fiduciary duty provisions of ERISA”). But PACE says that its proposed merger was different, because the PIUMPF merger represented a method of terminating the Crown plans. And just as ERISA imposed on Crown a fiduciary obligation in its selection of an appropriate annuity provider when terminating through annuities, see 29 CFR §§2509.95-1, 4041.28(c)(3) (2006), so too, PACE argues, did it require Crown to consider merger.

The idea that the decision whether to merge could switch from a settlor to a fiduciary function depending upon the context in which the merger proposal is raised is an odd one. But once it is realized that a merger is simply a transfer of assets and liabilities, PACE’s argument becomes somewhat more plausible: The purchase of an annuity is akin to a transfer of assets and liabilities (to an insurance company), and if Crown was subject to fiduciary duties in selecting an annuity provider, why could it automatically disregard PIUMPF simply because PIUMPF happened to be a multiemployer plan rather than an insurer? There is, however, an antecedent question. In order to affirm, the judgment below, we would have to conclude (as the Ninth Circuit did) that merger is, in the first place, a permissible form of plan termination under ERISA. That requires us to delve into the statute’s provisions for plan termination.

ERISA sets forth the exclusive procedures for the standard termination of single-employer pension plans. § 1341(a)(1); Hughes Aircraft Co., supra, at 446. Those procedures are exhaustive, setting detailed rules for, inter alia, notice by the plan to affected parties, § 1341(a)(2), review by the PBGC, § 1341(b)(2)(A), (C), and final distribution of plan funds, § 1341(b)(2)(D), §1344. See generally E. Veal & E. Mackiewicz, Pension Plan Terminations 43-61 (2d ed. 1998) (hereinafter Veal & Mackiewicz). At issue in this case is § 1341(b)(3)(A), the provision of ERISA setting forth the permissible Tnethods of terminating a single-employer plan and distributing plan assets to participants and beneficiaries. Section 1341(b)(3)(A) provides as follows:

“In connection with any final distribution of assets pursuant to the standard termination of the plan under this subsection, the plan administrator shall distribute the assets in accordance with section 1344 of this title. In distributing such assets, the plan administrator shall—
“(i) purchase irrevocable commitments from an insurer to provide all benefit liabilities under the plan, or “(ii) in accordance with the provisions of the plan and any applicable regulations, otherwise fully provide all benefit liabilities under the plan....”

The PBGC’s regulations impose in substance the same requirements. See 29 CFR § 4041.28(c)(1). Title 29 U. S. C. §1344, which is referred to in § 1341(b)(3)(A), sets forth a specific order of priority for asset distribution, including (under certain circumstances) reversions of excess funds to the plan sponsor, see § 1344(d)(1).

The parties to this case all agree that § 1341(b)(3)(A)(i) refers to the purchase of annuities, see 29 CFR §4001.2 (defining “irrevocable commitment”), and that § 1341(b)(3)(A)(ii) allows for lump-sum distributions at present discounted value (including rollovers into individual retirement accounts). As PACE concedes, purchase of annuity contracts and lump-sum payments are “by far the most common distribution methods.” Brief for Respondents 45; see also Veal & Mackiewicz 72-73 (“The basic alternatives are the purchase of annuity contracts or some form of lump-sum cashout”). To affirm the Ninth Circuit, we would have to decide that merger is a permissible method as well. *3 And we would have to do that over the objection of the PBGC, which (joined by the Department of Labor) disagrees with the Ninth Circuit, taking the position that § 1341(b)(3)(A) does not permit merger as a method of termination because (in its view) merger is an alternative to (rather than an example of) plan termination. See Brief for United States as Amicus Curiae 8, 17-30. We have traditionally deferred to the PBGC when interpreting ERISA, for “to attempt to answer these questions without the views of the agencies responsible for enforcing ERISA, would be to embar[k] upon a voyage without a compass.” Mead Corp. v. Tilley, 490 U. S. 714, 722, 725-726 (1989) (internal quotation marks omitted); see also LTV Corp., 496 U. S., at 648, 651. In reviewing the judgment below, we thus must examine “whether the PBGC’s policy is based upon a permissible construction of the statute.” Id., at 648.

We believe it is. PACE has “failed to persuade us that the PBGC’s views are unreasonable,” Mead Corp., supra, at 725. At the outset, it must be acknowledged that the statute, with its general residual clause in § 1341(b)(3)(A)(ii), is potentially more embracing of alternative methods of plan termination (whatever they may be) than longstanding ERISA practice, which appears to have employed almost exclusively annuities and lump-sum payments. But we think that the statutory text need not be read to include mergers, and indeed that the PBGC offers the better reading in excluding them. Most obviously, Congress nowhere expressly provided for merger as a permissible means of termination. Merger is not mentioned in § 1341(b)(3)(A), much less in any of § 1341’s many subsections. Indeed, merger is expressly provided for in an entirely separate set of statutory sections (of which more in a moment, see infra, at 108-110). PACE nevertheless maintains that merger is clearly covered under § 1341(b)(3)(A)(ii)’s residual clause, which refers to a distribution of assets that “otherwise fully provide^] all benefit liabilities under the plan.” By PACE’s reasoning, annuities are covered under § 1341(b)(3)(A)(i); annuities are — by virtue of the word “otherwise” — an example of a means by which a plan may “fully provide all benefit liabilities under the plan,” § 1341(b)(3)(A)(ii); and therefore, “at the least,” any method of termination that is the “legal equivalent” of annuitization is permitted, Brief for Respondents 23. Merger, PACE argues, is such a legal equivalent.

We do not find the statute so clear. Even assuming that PACE is right about “otherwise” — that the word indicates that annuities are one example of satisfying the residual clause in § 1341(b)(3)(A)(ii) — we still do not find mergers covered with the clarity necessary to disregard the PBGC’s considered views. Surely the phrase “otherwise fully provide all benefit liabilities under the plan” is not without some teeth. And we think it would be reasonable for the PBGC to determine both that merger is not like the purchase of annuities in its ability to “fully provide all benefit liabilities under the plan,” and that the statute’s distinct treatment of merger and termination provides clear evidence that one is not an example of the other. Three points strike us as especially persuasive in these regards.

First, terminating a plan through purchase of annuities (like terminating through distribution of lump-sum payments) formally severs the applicability of ERISA to plan assets and employer obligations. Upon purchasing annuities, the employer is no longer subject to ERISA’s multitudinous requirements, such as (to name just one) payment of insurance premiums to the PBGC, § 1307(a). And the PBGC is likewise no longer liable for the deficiency in the event that the plan becomes insolvent; there are no more benefits for it to guarantee. The assets of the plan are wholly removed from the ERISA system, and plan participants and beneficiaries must rely primarily (if not exclusively) on state contract remedies if they do not receive proper payments or are otherwise denied access to their funds. Further, from the standpoint of the participants and beneficiaries, the risk associated with an annuity relates solely to the solvency of an insurance company, and not the performance of the merged plan’s investments.

Merger is fundamentally different: It represents a continuation rather than a cessation of the ERISA regime. If Crown were to have merged its pension plans into PIUMPF, the plan assets would have been combined with the assets of the multiemployer plan, where they could then be used to satisfy the benefit liabilities of participants and beneficiaries other than those from the original Crown plans. Those assets would remain within ERISA’s purview, the PBGC would maintain responsibility for them, and if Crown continued to employ the plan participants it too would remain subject to ERISA. Finally, plan participants and beneficiaries would have their recourse not through state contract law, but through the ERISA system, just as they had prior to merger.

Second, in a standard termination ERISA allows the employer to (under certain circumstances) recoup surplus funds, § 1344(d)(1), (3), as Crown sought to do here. But ERISA forbids employers to obtain a reversion in the absence of a termination: “A valid plan termination is a prerequisite to a reversion of surplus plan assets to an employer.” App. to Brief in Opposition 15a (PBGC Opinion Letter 85-25 (Oct. 11, 1985)); see also Veal & Mackiewicz 164-165. Crown could not simply extract the $5 million surplus from its plans, nor could it have done so once those assets had transferred to PIUMPF. This would have run up against ERISA’s anti-inurement provision, which prohibits employers from misappropriating plan assets for their own benefit. See § 1103(c). Consequently, we think the PBGC was entirely reasonable in declining to recognize as a form of termination a mechanism that would preclude the receipt of surplus funds, which is specifically authorized upon termination.

Third, the structure of ERISA amply (if not conclusively) supports the conclusion that § 1341(b)(3)(A)(ii) does not cover merger. As noted above, merger is nowhere mentioned in § 1341, and is instead dealt with in an entirely different set of statutory sections setting forth entirely different rules and procedures. Compare §1058 (general merger provision), §1411 (mergers between multiemployer plans), and §1412 (mergers between multiemployer and single-employer plans) with §1341 (termination of single-employer plans), § 1341a (termination of multiemployer plans); see generally Veal & Mackiewicz 31-40 (describing merger as an alternative to plan termination). Section 1058, the general merger provision, in fact quite clearly contemplates that merger and termination are not one and the same, forbidding merger “unless each participant in the plan would (if the plan then terminated) receive a benefit immediately after the merger ... which is equal to or greater than the benefit he would have been entitled to receive immediately before the merger ... (if the plan had then terminated).” (Emphasis added.)

As for the different rules and procedures governing termination and merger: Most critically, plans seeking to terminate must provide advance notice to the PBGC, as well as extensive actuarial information. § 1341(b)(2)(A). The PBGC has the authority to halt the termination if it determines that plan assets are insufficient to cover plan liabilities. § 1341(b)(2)(C). Merger, by contrast, involves considerably less PBGC oversight, and the PBGC has no similar ability to cancel, see Brief for United States as Amicus Curiae 24. And the rules governing notice to the PBGC are either different or nonexistent. Section 1412, the provision governing merger between a single and multiemployer plan (the form of merger contemplated by PACE’s proposal) makes no mention of early notice to the PBGC. And while mergers between multiemployer plans do require, 120-days advance notice, § 1411(b)(1), this still differs from the general notice provision for termination of single-employer plans, which requires notice to the PBGC “[a]s soon as practicable” after notice is given to affected parties, § 1341(b)(2)(A). Belatedly, § 1341(a)(2) also requires that, in a standard termination, written notice to plan participants and beneficiaries include “any related additional information required in regulations of the [PBGC].” Those regulations require, among other things, that the plan inform participants and beneficiaries that upon distribution, “the PBGC no longer guarantees . . . plan benefits.” 29 CFR § 4041.23(b)(9). (This requirement of eourse has no relevance to a merger, because after a merger the PBGC continues to guarantee plan benefits.)

PACE believes that these procedural differences can be ironed over rather easily. It insists:

“Many plan mergers take place without intent to terminate a plan; in those cases, the requirements for plan merger can be followed without consulting the requirements for plan termination. Conversely, many plan terminations take place without an associated merger; in those cases there is no need to consult the requirements for mergers. But if a plan sponsor intends to use merger as a method of implementing a plan termination, it simply must follow the rules for both merger and termination.” Brief for Respondents 36.

PACE similarly explains that while the PBGC does not approve “ordinary merger[s],” PBGC approval would be necessary when a merger is designed to terminate a plan. Id:, at 37. The confusion invited by PACE’s proposed framework is alone enough to condemn it. How could a plan be sure that it was in one box rather than the other? To avoid the risk of liability, should it simply follow both sets of rules all of the time? PACE’s proposal is flawed for another reason as well: It has no apparent basis in the statute. The separate provisions governing termination and merger quite clearly treat the two as wholly different transactions, with no exception for the case where merger is used for termination.

For all of the foregoing reasons, we believe that the PBGC’s construction of the statute is a permissible one, and indeed the more plausible. Crown did not breach its fiduciary obligations in failing to consider PACE’s merger proposal because merger is not a permissible form of termination. Even from a policy standpoint, the PBGC’s choice is an eminently reasonable one, since termination by merger could have detrimental consequences for plan beneficiaries and plan sponsors alike. When a single-employer plan is merged into a multiemployer plan, the original participants and beneficiaries become dependent upon the financial well-being of the multiemployer plan and its contributing members. Assets of the single-employer plan (which in this case were capable of fully funding plan liabilities) may be used to satisfy commitments owed to other participants and beneficiaries of the (possibly underfunded) multiemployer plan. The PBGC believes that this arrangement creates added risk for participants and beneficiaries of the original plan, particularly in view of the lesser guarantees that the PBGC provides to multiemployer plans, compare § 1322 with § 1322a. See Brief for United States as Amicus Curiae 29, and n. 11. For employers, the ill effects are demonstrated by the facts of this very case: By diligently funding its pension plans, Crown became the bait for a union bent on obtaining a surplus that was rightfully Crown’s. All this after Crown purchased an annuity that none dispute was sufficient to satisfy its commitments to plan participants and beneficiaries.

* * *

We hold that merger is not a permissible method of terminating a single-employer defined-benefit pension plan. 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.

       Crown's various other pension plans are not at issue in this case.

       PACE now suggests that it would have been willing to agree to a merger in which Crown kept its surplus funds. Brief for Respondents 17, n. 7. But this is belied not only by the terms of the proposed merger agreement, but by the fact that PACE actively sought and obtained a preliminary injunction freezing Crown’s $5 million reversion. The Bankruptcy Court having rejected PACE’s request to undo the annuity contract, PACE has provided no reason for pursuing this litigation other than to obtain the $5 million that remained after Crown satisfied its benefit commitments. Moreover, as PACE concedes, whether the parties would have agreed to a merger arrangement that did not include the $5 million is “speculation.” Tr. of Oral Arg. 42.

       We would not have to decide that question of statutory interpretation if Crown's pension plans disallowed merger. Any method of termination permitted by § 1341(b)(3)(A)(ii) must also be one that is “in accordance with the provisions of the plan.” Crown thus could have drafted its plan documents to limit the available methods of termination, so that merger was not permitted. Petitioner argued below that Crown had done just that. Though the District Court concluded that the plan terms allowed for merger, App. to Pet. for Cert. 47, the Ninth Circuit declined to consider the plan language because it held that petitioner had failed to preserve the argument in the Bankruptcy Court. Petitioner did not seek certiorari on the factbound issues of waiver and plan interpretation, and we accordingly do not address them here.

       PACE argues that the PBGC took an inconsistent approach in several opinion letters from the 1980’s concerning the applicability of certain joint guidelines for asset reversions during complex termination transactions. See App. to Brief in Opposition 6a-9a (Opinion Letter 85-11 (May 14, 1985)); id,., at 10a-13a (Opinion Letter 85-21 (Aug. 26, 1985)); id., at 14a-16a (Opinion Letter 85-25 (Oct. 11, 1985)). But insofar as the PBGC’s consistency is even relevant to whether we should accord deference to its presently held views, none of those letters so much aé hints that the PBGC treated merger as a permissible form of plan termination. In fact, to the extent they even speak to the question, they clearly show the opposite. In Opinion Letter 85-25, for example, the PBGC explained that the joint guidelines for asset reversions did not apply to “a transfer [of assets and liabilities] from a single-employer plan to an ongoing multiemployer plan followed by the termination of the single-employer plan.” Id., at 15a (emphasis added). By characterizing the proposed transaction as one that took place in two separate steps (merger and then termination), this letter fully contemplated that merger was not an example of plan termination.

       This inability to recover surplus funds through a merger could not be remedied, as PACE now suggests, by structuring the transaction so that Crown provided to PIUMPF only assets sufficient to cover plan liabilities (effectively creating a spinoff from Crown’s plans and merging that spinoff plan with PIUMPF). Under that arrangement, Crown could indeed obtain the $5 million reversion — not, however, by reason of the merger-called-termination, but only by subsequent termination of the residual plan. See, e.g., id., at 14a-16a (PBGC Opinion Letter 85-25 (Oct. 11, 1985)) (describing such a sequence of transactions). This falls short of rendering the merger a termination permitting recovery of surplus funds. That a transfer of assets can occur in anticipation of a future termination does not render that transfer itself a termination.


source: Caselaw Access Project

author:
Justice Scalia Justice Stevens,
      Justice Breyer,

license: Public Domain

text:
    FRY v. PLILER, WARDEN
    No. 06-5247.
    Argued March 20, 2007
    Decided June 11, 2007

      Scalia, J., delivered the opinion for a unanimous Court as to all but footnote 1 and Part II-B. Roberts, C. J., and Kennedy, Thomas, and Alito, JJ., joined that opinion in full; Stevens, Souter, and Ginsburg, JJ., joined it as to all but Part II-B; and Breyer, J., joined as to all but footnote 1 and Part II-B. Stevens, J., filed an opinion concurring in part and dissenting in part, in which Souter and Ginsburg, JJ., joined, and in which Breyer, J., joined in part, post, p. 122. Breyer, J., filed an opinion concurring in part and dissenting in part, post, p. 126.

      Victor S. Haltom, by appointment of the Court, 549 U. S. 1165, argued the cause for petitioner. With him on the briefs was John R. Duree, Jr.

      Ross C. Moody, Deputy Attorney General of California, argued the cause for respondent. With him on the brief were Edmund G. Brown, Jr., Attorney General, Dane R. Gillette, Chief Assistant Attorney General, Manuel M. Medeiros, State Solicitor General, Gerald A. Engler, Senior Assistant Attorney General, Donald E. de Nicola, Deputy Solicitor General, and Peggy S. Ruffra, Supervising Deputy Attorney General.

      Patricia A. Millett argued the cause for the United States as amicus curiae urging affirmance. On the brief were Solicitor General Clement, Assistant Attorney General

      Fisher, Deputy Solicitor General Dreeben, Jonathan L. Marcus, and Joel M. Gershowitz.

        Lori R. E. Ploeger, Maureen P Alger, and Matthew D. Brown filed a brief for the Innocence Network as amicus curiae urging reversal.
      Briefs of amici curiae urging affirmance were filed for the State of Missouri et al. by Jeremiah W. (Jay) Nixon, Attorney General of Missouri, James R. Layton, State Solicitor, and Heidi C. Doerhojf and Ronald S. Ribaudo, Assistant Attorneys General, and by the Attorneys General for their respective States as follows: Troy King of Alabama, Terry Goddard of Arizona, Dustin McDaniel of Arkansas, John W. Suthers of Colorado, Joseph R. Biden III of Delaware, Mark J. Bennett of Hawaii, Lisa Madigan of Illinois, Steve Carter of Indiana, Tom Miller of Iowa, Gregory D. Stumbo of Kentucky, Michael A Cox of Michigan, Jim Hood of Mississippi, Mike McGrath of Montana, Wayne Stenehjem of North Dakota, TV A Drew Edmondson of Oklahoma, Henry D. McMaster of South Carolina, Lawrence E. Long of South Dakota, Greg Abbott of Texas, Mark L. Shurtlejf of Utah, and Darrell V. McGraw, Jr., of West Virginia; and for the Criminal Justice Legal Foundation by Kent S. Scheidegger.

   Justice Scalia

delivered the opinion of the Court.

We decide whether a federal habeas court must assess the prejudicial impact of constitutional error in a state-court criminal trial under the “substantial and injurious effect” standard set forth in Brecht v. Abrakamson, 507 U. S. 619 (1993), when the state appellate court failed to recognize the error and did not review it for harmlessness under the “harmless beyond a reasonable doubt” standard set forth in Chapman v. California, 386 U. S. 18 (1967).

I

After two mistrials on account of hung juries, a third jury convicted petitioner of the 1992 murders of James and Cynthia Bell. At trial, petitioner sought to attribute the murders to one or more other persons. To that end, he offered testimony of several witnesses who linked one Anthony Hurtz to the killings. But the trial court excluded the testimony of one additional witness, Pamela Maples, who was prepared to testify that she had heard Hurtz discussing homicides bearing some resemblance to the murder of the Bells. In the trial court’s view, the defense had provided insufficient evidence to link the incidents described by Hurtz to the murders for which petitioner was charged.

Following his conviction, petitioner appealed to the California Court of Appeal, arguing (among other things) that the trial court’s exclusion of Maples’ testimony deprived him of a fair opportunity to defend himself, in violation of Chambers v. Mississippi, 410 U. S. 284 (1973) (holding that a combination of erroneous evidentiary rulings rose to the level of a due process violation). Without explicitly addressing petitioner’s Chambers argument, the state appellate court held that the trial court had not abused its discretion in excluding Maples’ testimony under California’s evidentiary rules, adding that “no possible prejudice” could have resulted in light of the “merely cumulative” nature of the testimony. People v. Fry, No. A072396 (Ct. App. Cal., 1st App. Dist., Mar. 30, 2000), App. 97, n. 17. The court did not specify which harmless-error standard it was applying in concluding that petitioner suffered “no possible prejudice.” The Supreme Court of California denied discretionary review, and petitioner did not then seek a writ of certiorari from this Court.

Petitioner next filed a petition for writ of habeas corpus in the United States District Court for the Eastern District of California, raising the aforementioned due process claim (among others). The case was initially assigned to a Magistrate Judge, who ultimately recommended denying relief. He found the state appellate court’s failure to recognize error under Chambers to be “an unreasonable application of clearly established law as set forth by the Supreme Court,” App. 180, and disagreed with the state appellate court’s finding of “no possible prejudice.” But he nevertheless concluded that “there ha[d] been an insufficient showing that the improper exclusion of the testimony of Ms. Maples had a substantial and injurious effect on the jury’s verdict” under the standard set forth in Brecht. App. 181-182. The District Court adopted the Magistrate Judge’s findings and recommendations in full, and a divided panel of the United States Court of Appeals for the Ninth Circuit affirmed. We granted certiorari. 549 U. S. 1092 (2006).

II

A

In Chapman, supra, a case that reached this Court on direct review of a state-court criminal judgment, we held that a federal constitutional error can be considered harmless only if a court is “able to declare a belief that it was harmless beyond a reasonable doubt.” Id., at 24. In Brecht, supra, we considered whether the Chapman standard of review applies on collateral review of a state-court criminal judgment under 28 U. S. C. § 2254. Citing concerns about finality, comity, and federalism, we rejected the Chapman standard in favor of the more forgiving standard of review applied to nonconstitutional errors on direct appeal from federal convictions. See Kotteakos v. United States, 328 U. S. 750 (1946). Under that standard, an error is harmless unless it “‘had substantial and injurious effect or influence in determining the jury’s verdict.’” Brecht, supra, at 631 (quoting Kotteakos, supra, at 776). The question in this case is whether a federal court must assess the prejudicial impact of the unconstitutional exclusion of evidence during a state-court criminal trial under Brecht even if the state appellate court has not found, as the state appellate court in Brecht had found, that the error was harmless beyond a reasonable doubt under Chapman.

We begin with the Court’s opinion in Brecht The primary reasons it gave for adopting a less onerous standard on collateral review of state-court criminal judgments did not turn on whether the state court itself conducted Chapman review. The opinion explained that application of Chapman would “underminfe] the States’ interest in finality,” 507 U. S., at 637; would “infring[e] upon [the States’] sovereignty over criminal matters,” ibid.; would undercut the historic limitation of habeas relief to those “ ‘grievously wronged,’ ” ibid.; and would “impos[e] significant ‘social costs,’ ” ibid. (quoting United States v. Mechanik, 475 U. S. 66, 72 (1986)). Since each of these concerns applies with equal force whether or not the state court reaches the Chapman question, it would be illogical to make the standard of review turn upon that contingency.

The opinion in Brecht clearly assumed that the Kotteakos standard would apply in virtually all §2254 cases. It suggested an exception only for the “unusual case” in which “a deliberate and especially egregious error of the trial type, or one that is combined with a pattern of prosecutorial misconduct, . . . infect[s] the integrity of the proceeding.” 507 U. S., at 638, n. 9. This, of course, has nothing to do with whether the state court conducted harmless-error review. The concurring and dissenting opinions shared the assumption that Kotteakos would almost always be the standard on collateral review. The former stated in categorical terms that the “Kotteakos standard” “will now apply on collateral review” of state convictions, 507 U. S., at 643 (Stevens, J., concurring). Justice White’s dissent complained that under the Court’s opinion Kotteakos would apply even where (as in this case) the state court found that “no violation had occurred,” 507 U. S., at 644; and Justice O’Connor’s dissent stated that Chapman would “no longer appl[y] to any trial error asserted on habeas,” 507 U. S., at 651. Later cases also assumed that Brechfs applicability does not turn on whether the state appellate court recognized the constitutional error and reached the Chapman question. See Penry v. Johnson, 532 U. S. 782, 795 (2001); Calderon v. Coleman, 525 U. S. 141, 145 (1998) (per curiam).

Petitioner’s contrary position misreads (or at least exaggerates the significance of) a lone passage from our Brecht opinion. In that passage, the Court explained:

“State courts are fully qualified to identify constitutional error and evaluate its prejudicial effect on the trial process under Chapman, and state courts often occupy a superior vantage point from which to evaluate the effect of trial error. For these reasons, it scarcely seems logical to require federal habeas courts to engage in the identical approach to harmless-error review that Chapman requires state courts to engage in on direct review.” 507 U. S., at 636 (citation omitted).

But the quoted passage does little to advance petitioner’s position. To say (a) that since state courts are required to evaluate constitutional error under Chapman it makes no sense to establish Chapman as the standard for federal habeas review is not at all to say (b) that whenever a state court fails in its responsibility to apply Chapman the federal habeas standard must change. It would be foolish to equate the two, in view of the other weighty reasons given in Brecht for applying a less onerous standard on collateral review— reasons having nothing to do with whether the state court actually applied Chapman.

Petitioner argues that, if Brecht applies whether or not the state appellate court conducted Chapman review, then Brecht would apply even if a State eliminated appellate review altogether. That is not necessarily so. The federal habeas review rule applied to the class of case in which state appellate review is available does not have to be the same rule applied to the class of case where it is not. We have no occasion to resolve that hypothetical (and highly unrealistic) question now. In the case before us petitioner did obtain appellate review of his constitutional claim; the state court simply found the underlying claim weak and therefore did not measure its prejudicial impact under Chapman. The attempted analogy — between (1) eliminating appellate review altogether and (2) providing appellate review but rejecting a constitutional claim without assessing its prejudicial impact under Chapman — is a false one.

Petitioner contends that, even if Brecht adopted a categorical rule, post-Brecht developments require a different standard of review. Three years after we decided Brecht, Congress passed, and the President signed, the Antiterrorism and Effective Death Penalty Act of 1996 (AEDPA), under which a habeas petition may not be granted unless the state court’s adjudication “resulted in a decision that was contrary to, or involved an unreasonable application of, clearly established Federal law, as determined by the Supreme Court of the United States . . . .” 28 U.S.C. § 2254(d)(1). In Mitchell v. Esparza, 540 U. S. 12 (2003) (per curiam), we held that, when a state court determines that a constitutional violation is harmless, a federal court may not award habeas relief under §2254 unless the harmlessness determination itself was unreasonable. Petitioner contends that § 2254(d)(1), as interpreted in Esparza, eliminates the requirement that a petitioner also satisfy Brechts standard. We think not. That conclusion is not suggested by Esparza, which had no reason to decide the point. Nor is it suggested by the text of AEDPA, which sets forth a precondition to the grant of habeas relief (“a writ of habeas corpus ... shall not be granted” unless the conditions of § 2254(d) are met), not an entitlement to it. Given our frequent recognition that AEDPA limited rather than expanded the availability of habeas relief, see, e. g., Williams v. Taylor, 529 U. S. 362, 412 (2000), it is implausible that, without saying so, AEDPA replaced the Brecht standard of “‘actual prejudice,”’ 507 U. S., at 637 (quoting United States v. Lane, 474 U. S. 438, 449 (1986)), with the more liberal AEDPA /Chapman standard which requires only that the state court’s harmless-beyond-a-reasonable-doubt determination be unreasonable. That said, it certainly makes no sense to require formal application of both tests (AEUTA/Chapman and Brecht) when the latter obviously subsumes the former. Accordingly, the Ninth Circuit was correct to apply the Brecht standard of review in assessing the prejudicial impact of federal constitutional error in a state-court criminal trial.

B

Petitioner argues that, even if Brecht provides the standard of review, we must still reverse the judgment below because the exclusion of Maples’ testimony substantially and injuriously affected the jury’s verdict in this case. That argument, however, is not fairly encompassed within the question presented. We granted certiorari to decide a question that has divided the Courts of Appeals — whether Brecht or Chapman provides the appropriate standard of review when constitutional error in a state-court trial is first recognized by a federal court. Compare, e. g., Bains v. Cambra, 204 F. 3d 964, 976-977 (CA9 2000), with Orndorff v. Lockhart, 998 F. 2d 1426, 1429-1430 (CA8 1993). It is true that the second sentence of the question presented asks: “Does it matter which harmless error standard is employed?” Pet. for Cert. I. But to ask whether Brecht makes any real difference is not to ask whether the Ninth Circuit misapplied Brecht in this particular case. Petitioner seems to have understood this. Only in a brief footnote of his petition did he hint that the Ninth Circuit erred in its application of the Brecht standard. Pet. for Cert. 23, n. 19. Indeed, if application of the Brecht standard to the facts of this case were encompassed within the question presented, so too would be the question of whether there was constitutional error in the first place. After all, it would not “matter which harmless error standard is employed” if there were no underlying constitutional error. Unlike the dissenting Justices, some of whom would reverse the decision below on the ground that the error was harmful under Brecht, and one of whom would vacate the decision below on the ground that it is unclear whether there was constitutional error in the first instance, we read the question presented to avoid these tangential and factbound questions, and limit our review to the question whether Chapman or Brecht provides the governing standard.

* * *

We hold that in §2254 proceedings a court must assess the prejudicial impact of constitutional error in a state-court criminal trial under the “substantial and injurious effect” standard set forth in Brecht, supra, whether or not the state appellate court recognized the error and reviewed it for harmlessness under the “harmless beyond a reasonable doubt” standard set forth in Chapman, 386 U. S. 18. Since the Ninth Circuit correctly applied the Brecht standard rather than the Chapman standard, we affirm the judgment below.

It is so ordered.

Justice Stevens,

with whom Justice Souter and Justice Gins burg join, and with whom Justice Breyer joins in part, concurring in part and dissenting in part.

While I join all of the Court’s opinion except Part II-B, I am persuaded that we should also answer the question whether the constitutional error was harmless under the standard announced in Brecht v. Abrahamson, 507 U. S. 619 (1993). The parties and the Solicitor General as amicus curíete fully briefed and argued the question, presumably because it appears to fit within the awkwardly drafted question that we agreed to review. Moreover, our answer to the question whether the error was harmless would emphasize the important point that the Brecht standard, as more fully explained in our opinion in Kotteakos v. United States, 328 U. S. 750 (1946), imposes a significant burden of persuasion on the State.

Both the history of this litigation and the nature of the constitutional error involved provide powerful support for the conclusion that if the jurors had heard the testimony of Pamela Maples, they would at least have had a reasonable doubt concerning petitioner’s guilt. Petitioner was not found guilty until after he had been tried three times. The first trial ended in a mistrial with the jury deadlocked 6 to 6. App. 121. The second trial also resulted in a mistrial due to a deadlocked jury, this time 7 to 5 in favor of conviction. Ibid. In the third trial, after the jurors had been deliberating for 11 days, the foreperson advised the judge that they were split 7 to 5 and “ ‘hopelessly deadlocked.’ ” Id., at 74-75. When the judge instructed the jury to continue its deliberations, the foreperson requested clarification on the definition of “reasonable doubt.” Id., at 75. The jury deliberated for an additional 23 days after that exchange — a total of five weeks — before finally returning a guilty verdict.

It is not surprising that some jurors harbored a reasonable doubt as to petitioner’s guilt weeks into their deliberations. The only person to offer eyewitness testimony, a disinterested truckdriver, described the killer as a man who was 5'7" to 5'8" tall, weighed about 140 pounds, and had a full head of hair. Tr. 4574 (Apr. 26, 1995). Petitioner is 6'2" tall, weighed 300 pounds at the time of the murder, and is bald. Record, Doc. No. 13, Exh. L (arrest report); ibid., Exh. M (petitioner’s driver’s license). Seven different witnesses linked the killings to a man named Anthony Hurtz, some testifying that Hurtz had admitted to them that he was in fact the killer. App. 60-64, 179. Each of those witnesses, unlike the truckdriver, was impeached by evidence of bias, either against Hurtz or for petitioner. Id., at 61-64, 73, 179-180.

However, Pamela Maples, a cousin of Hurtz’s who was in all other respects a disinterested witness, did not testify at either of petitioner’s first two trials. During the third trial, she testified out of the presence of the jury that she had overheard statements by Hurtz that he had committed a double murder strikingly similar to that witnessed by the truck-driver. As the Magistrate Judge found, the exclusion of Maples’ testimony for lack of foundation was clear constitutional error under Chambers v. Mississippi, 410 U. S. 284 (1973), and the State does not argue otherwise. Cf. Skipper v. South Carolina, 476 U. S. 1, 8 (1986) (“The testimony of more disinterested witnesses . . . would quite naturally be given much greater weight by the jury”).

Chambers error is by nature prejudicial. We have said that Chambers “does not stand for the proposition that the defendant is denied a fair opportunity to defend himself whenever a state or federal rule excludes favorable evidence.” United States v. Scheffer, 523 U. S. 303, 316 (1998). Rather, due process considerations hold sway over state evidentiary rules only when the exclusion of evidence “undermine[s] fundamental elements of the defendant’s defense.” Id., at 315. Hence, as a matter of law and logical inference, it is well-nigh impossible for a reviewing court to conclude that such error “did not influence the jury, or had but very slight effect” on its verdict. Kotteakos, 328 U. S., at 764; see also O’Neal v. McAninch, 513 U. S. 432, 445 (1995) (“[W]hen a habeas court is in grave doubt as to the harmlessness of an error that affects substantial rights, it should grant relief”).

It is difficult to imagine a less appropriate case for an exception to that commonsense proposition. We found in Parker v. Gladden, 385 U. S. 363 (1966) (per curiam), that 26 hours of juror deliberations in a murder trial “indieat[ed] a difference among them as to the guilt of petitioner.” Id., at 365. Here, the jury was deprived of significant evidence of third-party guilt, and still we measure the length of deliberations by weeks, not hours. In light of the jurors’ evident uncertainty, the prospect of rebutting the near-conclusive presumption that the Chambers error did substantial harm vanishes completely.

We have not been shy in emphasizing that federal habeas courts do not lightly find constitutional error. See Carey v. Musladin, 549 U. S. 70 (2006). It follows that when they do find an error, they may not lightly discount its significance. Rather, a harmlessness finding requires “fair assurance, after pondering all that happened without stripping the erroneous action from the whole, that the judgment was not substantially swayed by the error.” Kotteakos, 328 U. S., at 765. Given “all that happened” in this case, and given the nature of the error, I cannot agree with the Ninth Circuit’s conclusion that the erroneous exclusion of Maples’ testimony was harmless under that standard.

Accordingly, I would reverse the judgment of the Court of Appeals.

Justice Breyer,

concurring in part and dissenting in part.

I agree with the Court that Brecht v. Abrahamson, 507 U. S. 619 (1993), sets forth the proper standard of review. Cf. id., at 643 (Stevens, J., concurring). At the same time, I agree with Justice Stevens that we should consider the application of the standard, that the error was not harmless, and that “Chambers error is by nature prejudicial.” Ante, at 124 (opinion concurring in part and dissenting in part) (citing Chambers v. Mississippi, 410 U. S. 284 (1973)). Cf. Kyles v. Whitley, 514 U. S. 419, 435 (1995) (similar statement as to errors under Brady v. Maryland, 373 U. S. 83 (1963)). Nonetheless, I would remand this case rather than reversing the Court of Appeals.

My reason arises out of the fact that here, for purposes of deciding whether Chambers error exists, the question of harm is inextricably tied to other aspects of the trial court’s determination. The underlying evidentiary judgment at issue involved a weighing of the probative value of proffered evidence against, e. g., its cumulative nature, its tendency to confuse or to prejudice the jury, or the likelihood that it will simply waste the jury’s time. See App. 96-97; Cal. Evid. Code Ann. §352 (West 1995); cf. Fed. Rule Evid. 403. In this context, to find a Chambers error a court must take account both of the way in which (and extent to which) the trial court misweighed the relevant admissibility factors and of the extent to which doing so harmed the defendant. Moreover, to find this kind of error harmless, as the Court of Appeals found it, should preclude the possibility of a Chambers error; but to find this kind of error harmful does not guarantee the contrary. A garden-variety nonharmless misapplication of evidentiary principles normally will not rise to the level of a constitutional, Chambers, mistake. Cf., e. g., United States v. Scheffer, 523 U. S. 303, 308 (1998).

All this, it seems to me, requires reconsideration by the Court of Appeals of its Chambers determination. I would not consider the question whether that exclusion of evidence amounted to Chambers error because that question is not before us, see ante, at 116-117, n. 1 (opinion of the Court). But the logically inseparable question of harm is before us; and that, I believe, is sufficient.

I would remand the case to the Ninth Circuit so that, taking account of the points Justice Stevens raises, ante, at 122-125, it can reconsider whether there was an error of admissibility sufficiently serious to violate Chambers. I therefore join the Court’s opinion except as to footnote 1 and Part II-B, and I join Justice Stevens’ opinion in part.

       As this case comes to the Court, we assume (without deciding) that the state appellate court’s decision affirming the exclusion of Maples’ testimony was an unreasonable application of Chambers v. Mississippi, 410 U. S. 284, 302 (1973). We also assume that the state appellate court did not determine the harmlessness of the error under the Chapman standard, notwithstanding its ambiguous conclusion that the exclusion of Maples’ testimony resulted in “no possible prejudice.”

       We do not agree with petitioner’s amicus that Brecht’s concerns regarding the finality of state-court criminal judgments and the difficulty of retrying a defendant years after the crime “have been largely alleviated by [AEDPA],” which “sets strict time limitations on habeas petitions and limits second or successive petitions as well.” Brief for Innocence Network 7. Even cases governed by AEDPA can span a decade, as the nearly 12-year gap between petitioner’s conviction and the issuance of this decision illustrates.

       The question presented included one additional issue: “[I]f the Brecht standard applies, does the petitioner or the State bear the burden of persuasion on the question of prejudice?” Pet. for Cert. I. We have previously held that, when a court is “in virtual equipoise as to the harmlessness of the error” under the Brecht standard, the court should “treat the error ... as if it affected the verdict . . . .” O’Neal v. McAninch, 513 U. S. 432, 435 (1995). The majority opinion below did not refer to O’Neal, presumably because the majority harbored no grave doubt as to the harmlessness of the error. Neither did the dissenting judge refer to O’Neal, presumably because she did not think the majority harbored grave doubt as to the harmlessness of the error. Moreover, the State has conceded throughout this §2254 proceeding that it bears the burden of persuasion. Thus, there is no basis on which to conclude that the court below ignored O’Neal.

       In Brecht itself the application of the standard of Kotteakos v. United States, 328 U. S. 750 (1946), to the facts of the case was not even arguably encompassed within the question presented. We nonetheless found it appropriate to rule on whether the error was harmless under that standard. See Brecht, 507 U. S., at 638 (“All that remains to be decided is whether petitioner is entitled to relief”).

       According to data compiled by the National Center for State Courts, the average length of jury deliberations for a capital murder trial in California is 12 hours. See Judge and Attorney Survey (California), State of the States — Survey of Jury Improvement Efforts (2007), online at http:// www.ncsconline.org/D_research/cjs/xls/SOSJAData/CA_JA_State.xls (as visited June 8, 2007, and available in Clerk of Court’s case file). Three days before the jury reached a verdict in this noncapital case, the trial judge speculated that it was perhaps the longest deliberation in the history of Solano County. Tr. 5315 (June 5,1995).

       As the Magistrate Judge remarked, “[j]ust how many double execution style homicides involving a female driver shot in the head and a male passenger also shot in a parked car could there be in a community proximate to the victims’ murder herein?” App. 179.

       See United States v. Fields, 483 F. 3d 313, 379 (CA5 2007) (Benavides, J., dissenting from. Part II-A-1 and dissenting in part from the judgment) (“Courts often have been unwilling to find error harmless where the record, as in this case, affirmatively shows that the jurors struggled with their verdict”); Kennedy v. Lockyer, 379 F. 3d 1041, 1056, n. 18 (CA9 2004) (“From the fact that the first trial ended in a mistrial, as well as the fact that the jury deliberated for a considerable amount of time in the second trial, we infer that the question as to [the defendant’s] guilt or innoeence was a close one in both trials”); Powell v. Collins, 332 F. 3d 376, 401 (CA6 2003) (finding prejudicial error in a habeas case.in part because the jury at one point told the court that it was “‘at a stalemate’”); United States v. Varoudakis, 233 F. 3d 113, 127 (CA1 2000) (noting, in weighing harmlessness, that “the jury’s ‘impasse’ note reveals uncertainty about [the defendant’s] guilt”); United States v. Ottersburg, 76 F. 3d 137, 140 (CA7 1996) (“The length of the jury’s deliberations makes clear that this case was not an easy one”); Medina v. Barnes, 71 F. 3d 363, 369 (CA10 1995) (basing prejudice determination in a habeas case in part on the fact that “at one point during their deliberations, the jurors indicated that they might be unable to reach a unanimous verdict”).


author: Justice Thomas

text:
    UNITED STATES v. ATLANTIC RESEARCH CORP.
    No. 06-562.
    Argued April 23, 2007
    Decided June 11, 2007

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

      Deputy Solicitor General Hungar argued the cause for the United States. With him on the brief were Solicitor General Clement, Acting Assistant Attorney General McKeown, Kannon K. Shanmugam, Ronald M. Spritzer, and Ellen J. Durkee.

      Owen Thomas Armstrong, Jr., argued the cause for respondent. With him on the brief was Frank L. Steeves.

      Jay D. Geck, Deputy Solicitor General of Washington, argued the cause for the State of Washington et al. as amici curiae urging affirmance. With him on the brief were Robert M. McKenna, Attorney General, Maureen Hart, Solicitor General, and Michael L. Dunning, Assistant Attorney General, Linda Singer, Acting Attorney General of the District of Columbia, Salvador J. Antonetti Stutts, Solicitor General of Puerto Rico, and the Attorneys General for their respective States as follows: Troy King of Alabama, Talis J. Colberg of Alaska, Dustin McDaniel of Arkansas, John W. Suthers of Colorado, Richard Blumenthal of Connecticut, Bill McCollum of Florida, Thurbert E. Baker of Georgia, Mark J. Bennett of Hawaii, Lawrence G. Wasden of Idaho, Lisa Madigan of Illinois, Steve Carter of Indiana, Tom Miller of Iowa, Gregory D. Stumbo of Kentucky, Charles C. Foti, Jr., of Louisiana, Steven Rowe of Maine, Douglas F. Gansler of Maryland, Martha Coakley of Massachusetts, Michael A. Cox of Michigan, Lori Swanson of Minnesota, Jim Hood of Mississippi, Jeremiah W. Nixon of Missouri, Mike McGrath of Montana, Catherine Cortez Masto of Nevada, Kelly A. Ayotte of New Hampshire, Stuart Rabner of New Jersey, Gary K. King of New Mexico, Andrew M. Cuomo of New York, Roy Cooper of North Carolina, Wayne Stenehjem of North Dakota, Marc Dann of Ohio, Hardy Myers of Oregon, Patrick Lynch of Rhode Island, Robert E. Cooper, Jr., of Tennessee, Greg Abbott of Texas, Mark L. Shurtleff of Utah, William H. Sorrell of Vermont, and J. B. Van Hollen of Wisconsin.

       Briefs of amici curiae urging reversal were filed for Cooper Industries, LLC, et al. by Dale E. Stephenson, Allen A Kacenjar, Jay N. Varón, and G. Michael Halfenger; and for the Huron Valley Steel Corp. by Jack D. Shumate and Karen Pilat.

      Briefs of amici curiae urging affirmance were filed for the City of New York by Michael A Cardozo, Leonard J. Koemer, and Daniel Greene; for the Association of California Water Agencies et al. by Paul S. Weiland, Frederic A Fudacz, and Alfred E. Smith; for Aviall Services, Inc., by Richard Faulk, Jeffrey M. Gaba, and Stacy R. Obenhaus; for E. I. Du Pont de Nemours and Co. et al. by Mark I. Levy and William H. Hyatt, Jr.; for Ford Motor Co. et al. by John McGahren; for Consolidated Edison Co. of New York, Inc., by Carter G. Phillips, Angus Macbeth, Stephen B. Kinnaird, Woody N. Peterson, Richard W Babinecz, and Peter P. Garam; for Lockheed Martin Corp. by Miguel A. Estrada, Michael K. Murphy, Amir C. Tayrani, and James R. Buckley; for the Metropolitan Water Reclamation District of Greater Chicago by Harvey M. Sheldon, Joel D. Bertocchi, Stephen R. Swofford, and Frederick M. Feldman; for the Natural Resources Defense Council et al. by Jerry S. Phillips; for the Superfund Settlements Project et al. by Michael W Steinberg; for the United States Conference of Mayors by Paul E. Gutermann and Thomas C. Goldstein; and for Former Administrator of the United States Environmental Protection Agency Carol M. Browner et al. by Joel M. Gross.

      Briefs of amici curiae were filed for Reading Co. by James C. Martin; and for James Kotrous by Jacqueline L. McDonald and Michael E. Vergara.

   Justice Thomas

delivered the opinion of the Court.

Two provisions of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA) — §§ 107(a) and 113(f) — allow private parties to recover expenses associated with cleaning up contaminated sites. 42 U. S. C. §§ 9607(a), 9613(f). In this case, we must decide a question left open in Cooper Industries, Inc. v. Aviall Services, Inc., 543 U. S. 157, 161 (2004): whether § 107(a) provides so-called potentially responsible parties (PRPs), 42 U. S. C. §§9607(a)(l)-(4), with a cause of action to recover costs from other PRPs. We hold that it does.

I

A

Courts have frequently grappled with whether and how PRPs may recoup CERCLA-related costs from other PRPs. The questions lie at the intersection of two statutory provisions — CERCLA §§ 107(a) and 113(f). Section 107(a) defines four categories of PRPs, 94 Stat. 2781, 42 U. S. C. §§9607(a)(l)-(4), and makes them liable for, among other things:

“(A) all costs of removal or remedial action incurred by the United States Government or a State or an Indian tribe not inconsistent with the national contingency plan; [and]
“(B) any other necessary costs of response incurred by any other person consistent with the national contingency plan.” §§ 9607(a)(4)(A)-(B).

Enacted as part of the Superfund Amendments and Reauthorization Act of 1986 (SARA), 100 Stat. 1613, § 113(f) authorizes one PRP to sue another for contribution in certain circumstances. 42 U. S. G. § 9613(f).

Prior to the advent of § 113(f)’s express contribution right, some courts held that § 107(a)(4)(B) provided a cause of action for a private party to recover voluntarily incurred response costs and to seek contribution after having been sued. See Cooper Industries, supra, at 161-162 (collecting cases); Key Tronic Corp. v. United States, 511 U. S. 809, 816, n. 7 (1994) (same). After SARA’s enactment, however, some Courts of Appeals believed it necessary to “direc[t] traffic between” §§ 107(a) and 113(f). 459 F. 3d 827, 832 (CA8 2006) (case below). As a result, many Courts of Appeals held that § 113(f) was the exclusive remedy for PRPs. See Cooper Industries, supra, at 169 (collecting cases). But as courts prevented PRPs from suing under § 107(a), they expanded § 113(f) to allow PRPs to seek “contribution” even in the absence of a suit under § 106 or § 107(a). Aviall Servs., Inc. v. Cooper Industries, Inc., 312 F. 3d 677, 681 (CA5 2002) (en banc).

In Cooper Industries, we held that a private party could seek contribution from other liable parties only after having been sued under § 106 or § 107(a). 543 U. S., at 161. This narrower interpretation of § 113(f) caused several Courts of Appeals to reconsider whether PRPs have rights under § 107(a)(4)(B), an issue we declined to address in Cooper Industries. Id., at 168. After revisiting the issue, some courts have permitted § 107(a) actions by PRPs. See Consolidated Edison Co. of N. Y. v. UGI Utilities, Inc., 423 F. 3d 90 (CA2 2005); Metropolitan Water Reclamation Dist. of Greater Chicago v. North American Galvanizing & Coatings, Inc., 473 F. 3d 824 (CA7 2007). However, at least one court continues to hold that § 113(f) provides the exclusive cause of action available to PRPs. E. I. DuPont de Nemours & Co. v. United States, 460 F. 3d 515 (CA3 2006). Today, we resolve this issue.

B

In this ease, respondent Atlantic Research leased property at the Shumaker Naval Ammunition Depot, a facility operated by the Department of Defense. At the site, Atlantic Research retrofitted rocket motors for petitioner United States. Using a high-pressure water spray, Atlantic Research removed pieces of propellant from the motors. It then burned the propellant pieces. Some of the resultant wastewater and burned fuel contaminated soil and ground water at the site.

Atlantic Research cleaned the site at its own expense and then sought to recover some of its costs by suing the United States under both §§ 107(a) and 113(f). After our decision in Cooper Industries foreclosed relief under § 113(f), Atlantic Research amended its complaint to seek relief under § 107(a) and federal common law. The United States moved to dismiss, arguing that § 107(a) does not allow PRPs (such as Atlantic Research) to recover costs. The District Court granted the motion to dismiss, relying on a case decided prior to our decision in Cooper Industries, Dico, Inc. v. Amoco Oil Co., 340 F. 3d 525 (CA8 2003).

The Court of Appeals for the Eighth Circuit reversed. Recognizing that Cooper Industries undermined the reasoning of its prior precedent, 459 F. 3d, at 830, n. 4, the Court of Appeals joined the Second and Seventh Circuits in holding that § 113(f) does not provide “the exclusive .route by which [PRPs] may recover cleanup costs.” Id., at 834 (citing Consolidated Edison Co., supra). The court reasoned that § 107(a)(4)(B) authorized suit by any .person other than the persons permitted to sue under § 107(a)(4)(A). 459 F. 3d, at 835. Accordingly, it held that § 107(a)(4)(B) provides a cause of action to Atlantic Research. To prevent perceived conflict between §§ 107(a)(4)(B) and 113(f)(1), the Court of Appeals reasoned that PRPs that “have been subject to §§ 106 or 107 enforcement actions are still required to use §113, thereby ensuring its continued vitality.” Id., at 836-837. We granted certiorari, 549 U. S. 1177 (2007), and now affirm.

II

A

The parties' dispute centers on what “other person[s]” may sue under § 107(a)(4)(B). The Government argues that “any other person" refers to any person not identified as a PRP in §§107(a)(1)-(4). In other words, subparagraph (B) permits suit only by non-PRPs and thus bars Atlantic Research’s claim. Atlantic Research counters that subparagraph (B) takes its cue from subparagraph (A), not the earlier paragraphs (1M4). In accord with the Court of Appeals, Atlantic Research believes that subparagraph (B) provides a cause of action to anyone except the United States, a State, or an Indian tribe — the persons listed in subparagraph (A). We agree with Atlantic Research.

Statutes must “be read as a whole.” King v. St Vincent’s Hospital, 502 U. S. 215, 221 (1991). Applying that maxim, the language of subparagraph (B) can be understood only with reference to subparagraph (A). The provisions are adjacent and have remarkably similar structures. Each concerns certain costs that have been incurred by certain entities and that bear a specified relationship to the national contingency plan. Bolstering the structural link, the text also denotes a relationship between the two provisions. By using the phrase “other necessary costs,” subparagraph (B) refers to and differentiates the relevant costs from those listed in subparagraph (A).

In light of the relationship between the subparagraphs, it is natural to read the phrase “any other person” by referring to the immediately preceding subparagraph (A), which permits suit only by the United States, a State, or an Indian tribe. The phrase “any other person” therefore means any person other than those three. See 42 U. S. C. § 9601(21) (defining “person” to include the United States and the various States). Consequently, the plain language of subparagraph (B) authorizes cost-recovery actions by 'any private party, including PRPs. See Key Tronic, 511 U. S., at 818 (stating in dictum that § 107 “impliedly authorizes private parties to recover cleanup costs from other PRP[s]” (emphasis added)).

The Government’s interpretation makes little textual sense. In subparagraph (B), the phrase “any other necessary costs” and the phrase “any other person” both refer to antecedents — “costs” and “person[s]” — located in some previous statutory provision. Although “any other necessary costs” clearly references the costs in subparagraph (A), the Government would inexplicably interpret “any other person” to refer not to the persons listed in subparagraph (A) but to the persons listed as PRPs in paragraphs (l)-(4). Nothing in the text of § 107(a)(4)(B) suggests an intent to refer to antecedents located in two different statutory provisions. Reading the statute in the manner suggested by the Government would destroy the symmetry of §§ 107(a)(4)(A) and (B) and render subparagraph (B) internally confusing.

Moreover, the statute defines PRPs so broadly as to sweep in virtually all persons likely to incur cleanup costs. Hence, if PRPs do not qualify as “any other person” for purposes of § 107(a)(4)(B), it is unclear what private party would. The Government posits that § 107(a)(4)(B) authorizes relief for “innocent” private parties — for instance, a landowner whose land has been contaminated by another. But even parties not responsible for contamination may fall within the broad definitions of PRPs in §§ 107(a)(l)-(4). See 42 U. S. C. § 9607(a)(1) (listing “the owner and operator of a ... facility” as a PRP); see also United States v. Alcan Aluminum Corp., 315 F. 3d 179, 184 (CA2 2003) (“CERCLA §9607 is a strict liability statute”). The Government’s reading of the text logically precludes all PRPs, innocent or not, from recovering cleanup costs. Accordingly, accepting the Government’s interpretation would reduce the number of potential plaintiffs to almost zero, rendering § 107(a)(4)(B) a dead letter. See Louisville & Nashville R. Co. v. Mottley, 219 U. S. 467, 475 (1911) (“We must have regard to all the words used by Congress, and as far as possible give effect to them”).

According to the Government, our interpretation suffers from the same infirmity because it causes the phrase “any other person” to duplicate work done by other text. In the Government’s view, the phrase “any other necessary costs” “already precludes governmental entities from recovering under” § 107(a)(4)(B). Brief for United States 20. Even assuming the Government is correct, it does not alter our conclusion. The phrase “any other person” performs a significant function simply by clarifying that subparagraph (B) excludes the persons enumerated in subparagraph (A). In any event, our hesitancy to construe statutes to render language superfluous does not require us to avoid surplusage at all costs. It is appropriate to tolerate a degree of surplus-age rather than adopt a textually dubious construction that threatens to render the entire provision a nullity.

B

The Government also argues that our interpretation will create friction between §§ 107(a) and 113(f), the very harm courts of appeals have previously tried to avoid. In particular, the Government maintains that our interpretation, by offering PRPs a choice between §§ 107(a) and 113(f), effectively allows PRPs to circumvent §113(f)’s shorter statute of limitations. See 42 U. S. C. §§ 9613(g)(2)-(3). Furthermore, the Government argues, PRPs will eschew equitable apportionment under § 113(f) in favor of joint and several liability under § 107(a). Finally, the Government contends that our interpretation eviscerates the settlement bar set forth in § 113(f)(2).

We have previously recognized that §§ 107(a) and 113(f) provide two “clearly distinct” remedies. Cooper Industries, 543 U. S., at 163, n. 3. “CERCLA provide[s] for a right to cost recovery in certain circumstances, § 107(a), and separate rights to contribution in other circumstances, §§ 113(f)(1), 113(f)(3)(B).” Id., at 163 (emphasis added). The Government, however, uses the word “contribution” as if it were synonymous with any apportionment of expenses among PRPs. Brief for United States 33, n. 14 (“Contribution is merely a form of cost recovery, not a wholly independent type of relief”); see also, e. g., Pinal Creek Group v. Newmont Mining Corp., 118 F. 3d 1298, 1301 (CA9 1997) (“Because all PRPs are liable under the statute, a claim by one PRP against another PRP necessarily is for contribution”). This imprecise usage confuses the complementary yet distinct nature of the rights established in §§ 107(a) and 113(f).

Section 113(f) explicitly grants PRPs a right to contribution. Contribution is defined as the “tortfeasor’s right to collect from others responsible for the same tort after the tortfeasor has paid more than his or her proportionate share, the shares being determined as a percentage of fault.” Black’s Law Dictionary 353 (8th ed. 2004). Nothing in § 113(f) suggests that Congress used the term “contribution” in anything other than this traditional sense. The statute authorizes a PRP to seek contribution “during or following” a suit under §106 or § 107(a).. 42 U.S.C. § 9613(f)(1). Thus, § 113(f)(1) permits suit before or after the establishment of common liability. In either case, a PRP’s right to contribution under § 113(f)(1) is contingent upon an inequitable distribution of common liability among liable parties.

By contrast, § 107(a) permits recovery of cleanup costs but does not create a right to contribution. A private party may recover under § 107(a) without any establishment of liability to a third party. Moreover, § 107(a) permits a PRP to recover only the costs it has “incurred” in cleaning up a site. 42 U. S. C. § 9607(a)(4)(B). When a party pays to satisfy a settlement agreement or a court judgment, it does not incur its own costs of response. Rather, it reimburses other parties for costs that those parties incurred.

Accordingly, the remedies available in §§ 107(a) and 113(f) complement each other by providing causes of action “to persons in different procedural circumstances.” Consolidated Edison, 423 F. 3d, at 99; see also E. I. DuPont de Nemours, 460 F. 3d, at 548 (Sloviter, J., dissenting). Section 113(f)(1) authorizes a contribution action to PRPs with common liability stemming from an action instituted under § 106 or § 107(a). And § 107(a) permits cost recovery (as distinct from contribution) by a private party that has itself incurred cleanup costs. Hence, a PRP that pays money to satisfy a settlement agreement or a court judgment may pursue § 113(f) contribution. But by reimbursing response costs paid by other parties, the PRP has not incurred its own costs of response and therefore cannot recover under § 107(a). As a result, though eligible to seek contribution under § 113(f)(1), the PRP cannot simultaneously seek to recover the same expenses under § 107(a). Thus, at least in the case of reimbursement, the PRP cannot choose the 6-year statute of limitations for cost-recovery actions over the shorter limitations period for § 113(f) contribution claims.

For similar reasons, a PRP could not avoid § 113(f)’s equitable distribution of reimbursement costs among PRPs by instead choosing to impose joint and several liability on another PRP in an action under § 107(a). The choice of remedies simply does not exist. In any event, a defendant PRP in such a § 107(a) suit could blunt any inequitable distribution of costs by filing a § 113(f) counterclaim. 459 F. 3d, at 835; see also Consolidated Edison, supra, at 100, n. 9 (collecting cases). Resolution of a § 113(f) counterclaim would necessitate the equitable apportionment of costs among the liable parties, including the PRP that filed the § 107(a) action. 42 U. S. C. § 9613(f)(1) (“In resolving contribution claims, the court may allocate response costs among liable parties using such equitable factors as the court determines are appropriate”).

Finally, permitting PRPs to seek recovery under § 107(a) will not eviscerate the settlement bar set forth in § 113(f)(2). That provision prohibits § 113(f) contribution claims against “[a] person who has resolved its liability to the United States or a State in an administrative or judicially approved settlement . . . .” 42 U. S. C. § 9613(f)(2). The settlement bar does not by its terms protect against cost-recovery liability under § 107(a). For several reasons, we doubt this supposed loophole would discourage settlement. First, as stated above, a defendant PRP may trigger equitable apportionment by filing a § 113(f) counterclaim. A district court applying traditional rules of equity would undoubtedly consider any prior settlement as part of the liability calculus. Cf. 4 Restatement (Second) of Torts §886A(2), p. 337 (1977) (“No tortfeasor can be required to make contribution beyond his own equitable share of the liability”)- Second, the settlement bar continues to provide significant protection from contribution suits by PRPs that have inequitably reimbursed the costs incurred by another party. Third, settlement carries the inherent benefit of finally resolving liability as to the United States or a State.

Ill

Because the plain terms of § 107(a)(4)(B) allow a PRP to recover costs from other PRPs, the statute provides Atlantic Research with a cause of action. We therefore affirm the judgment of the Court of Appeals.

It is so ordered.

       Section 113(f)(1) permits private parties to seek contribution during or following a civil action under §106 or § 107(a). 42 U. S. C. § 9613(f)(1). Section 113(f)(3)(B) permits private parties to seek contribution after they have settled their liability with the Government. § 9613(f)(3)(B).

       CERCLA § 107(a) lists four broad categories of persons as PRPs, by definition liable to other persons for various costs:
      “(1) the owner and operator of a vessel or a facility,
      “(2) any person who at the time of disposal of any hazardous substance owned or operated any facility at which such hazardous substances were disposed of,
      “(3) any person who by contract, agreement, or otherwise arranged for disposal or treatment, or arranged with a transporter for transport for disposal or treatment, of hazardous substances owned or possessed by such person, by any other party or entity, at any facility or incineration vessel owned or operated by another party or entity and containing such hazardous substances, and
      “(4) any person who accepts or accepted any hazardous substances for transport to disposal or treatment facilities, incineration vessels or sites selected by such person, from which there is a release, or a threatened release which causes the incurrence of response costs, of a hazardous substance, shall be liable for [various costs].” 42 U. S. C. §§ 9607(a)(1)-(4).

       “The national contingency plan specifies procedures for preparing and responding to contaminations and was promulgated by the Environmental Protection Agency. . . .” Cooper Industries, Inc. v. Aviall Services, Inc., 543 U. S. 157, 161, n. 2 (2004) (citing 40 CFR pt. 300 (2004)).

       Congress amended the statute in 2002 to exempt some bona fide prospective purchasers (BFPPs) from liability under. § 107(a). See 42 U. S. C. § 9607(r)(l) (2000 ed., Supp. IV). The Government claims that these persons are non-PRPs and therefore qualify as “any other person” under its interpretation of § 107(a)(4)(B). Prior to 2002, however, the statute made this small set of persons liable as PRPs. Accordingly, even if BFPPs now give some life to the Government’s interpretation of § 107(a)(4)(B), it would be implausible at best to conclude that § 107(a)(4)(B) lay dormant until the enactment of § 107(r)(l) in 2002.

       Similarly, § 113(f)(3)(B) permits a PRP to seek contribution after it “has resolved its liability to the United States or a State... in an administrative or judicially approved settlement____” 42 U. S. C. § 9613(f)(3)(B).

       We do not suggest that §§ 107(a)(4)(B) and 113(f) have no overlap at all. Key Tronic, Corp. v. United States, 511 U. S. 809, 816 (1994) (stating the statutes provide “similar and somewhat overlapping remedies]”)For instance, we recognize that a PRP may sustain expenses pursuant to a consent decree following a suit under § 106 or § 107(a). See, e. g., United Technologies Corp. v. Browning-Ferris Industries, Inc., 33 F. 3d 96, 97 (CA1 1994). In such a case, the PRP does not incur costs voluntarily but does not reimburse the costs of another party. We do not decide whether these compelled costs of response are recoverable under § 113(f), § 107(a), or both. For our purposes, it suffices to demonstrate that costs incurred voluntarily are recoverable only by way of § 107(a)(4)(B), and costs of reimbursement to another person pursuant to a legal judgment or settlement are recoverable only under § 113(f). Thus, at a minimum, neither remedy swallows the other, contrary to the Government’s argument.

       We assume without deciding that § 107(a) provides for joint and several liability.

       Because § 107(a) expressly permits PRPs to seek cost recovery, we need not address the alternative holding of the Court of Appeals that § 107(a) contains an additional implied right to contribution for PRPs who are not eligible for relief under § 113(f). Cf. Cooper Industries, 543 U. S., at 171 (citing Texas Industries, Inc. v. Radcliff Materials, Inc., 451 U. S. 630 (1981); Northwest Airlines, Inc. v. Transport Workers, 451 U. S. 77 (1981)).