source: Caselaw Access Project

author: Justice Souter Justice Scalia,

license: Public Domain

text:
    KIRCHER et al. v. PUTNAM FUNDS TRUST et al.
    No. 05-409.
    Argued April 24, 2006
    Decided June 15, 2006

      David C. Frederick argued the cause for petitioners. With him on the briefs were Scott K. Attaway, Robert L. King, and Flint L. Bruno.

      Mark A. Perry argued the cause for respondents. With him on the brief were Miguel A. Estrada, Amanda M. Rose, John D. Donovan, Jr., Thomas B. Smith, Steven B. Feirson, Stephen J. McConnell, Nory Miller, Christopher P. Hall, Todd D. Brody, Dale R. Harris, Phil C. Neal, Mark A. Rabinowitz, John W. Rotunno, Kenneth E. Rechtoris, James R. Carroll, David S. Clancy, Charles F. Smith, Lee P. Garner, and Robert Y. Sperling

      Briefs of amici curiae urging affirmance were filed for the Chamber of Commerce of the United States of America by Charles A. Rothfeld, Robin S. Conrad, and Amar D. Sarwal; for the Securities Industry Association et al. by Carter G. Phillips and Richard D. Bernstein; and for the Washington Legal Foundation by W. Reece Bader, James A. Meyers, Michael C. Tu, and Daniel J. Popeo.

        Brian Wolfman and Arthur R. Miller filed a brief for Law Professors et al. as amici curiae.

   Justice Souter

delivered the opinion of the Court.

Title 28 U. S. C. § 1447(d) limits appellate review of a district court order remanding a ease from federal to state court. The question here is whether an order remanding a case removed under the Securities Litigation Uniform Standards Act of 1998 is appealable, notwithstanding § 1447(d). We hold it is not.

I

The Private Securities Litigation Reform Act of 1995 (Reform Act), 109 Stat. 787, targeted “perceived abuses of the class-action vehicle in litigation involving nationally traded securities,” Merrill Lynch, Pierce, Fenner & Smith Inc. v. Dabit, ante, at 81, and put limits on federal securities class actions. But Congress soon discovered that “[r]ather than face the obstacles set in their path by the Reform Act, plaintiffs and their representatives [were] bringing class actions under state law, often in state court,” ante, at 82. To block this bypass of the Reform Act, Congress enacted the Securities Litigation Uniform Standards Act of 1998 (Act), 112 Stat. 3227; see Dabit, ante, at 81-82.

The Act has a preclusion provision and a removal provision: it provides that private state-law “covered” class actions alleging untruth or manipulation in connection with the purchase or sale of a “covered” security may not “be maintained in any State or Federal court,” 112 Stat. 3228 (codified at 15 U. S. C. § 77p(b)), and it authorizes removal to federal district court of “[a]ny covered class action brought in any State court involving a covered security, as set forth in subsection (b),” 112 Stat. 3228 (codified at § 77p(c)). “A 'covered class action’ is a lawsuit in which damages are sought on behalf of more than 50 people. A 'covered security’ is one traded nationally and listed on a regulated national exchange.” Dabit, ante, at 83 (footnotes omitted).

Petitioners are eight groups of investors holding mutual fund shares, who filed separate actions in Illinois state courts, each group seeking to represent a class of investors allegedly injured by devaluation of their holdings by respondents (mutual funds, investment advisors, and an insurance company) (hereinafter collectively the funds). The eight complaints asserted only state-law claims, such as negligence and breach of fiduciary duty.

The funds filed notices of removal to federal district court in each ease stating, among other things, that the actions were removable under and precluded by the Act. Once in the District Court, however, the investors argued that the cases should be remanded for lack of subject-matter jurisdiction, and in separate orders the District Court for the Southern District of Illinois remanded each case to state court on the ground that the District Court lacked subject-matter jurisdiction on removal because the Act did not preclude the investors’ claims. Since the investors were said to have been injured as “holders” of mutual fund shares, not purchasers or sellers, the District Court reasoned, their claims did not satisfy the “in connection with the purchase or sale” requirement of the Act’s preclusion provision, § 77p(b), and the claims could therefore proceed in state court. The District Court did not decide whether the claims otherwise met the Act’s conditions for preclusion.

The funds filed notices of appeal from the remand orders, and in one of the cases, 373 F. 3d 847 (2004), the Seventh Circuit issued an opinion addressing the threshold question of its appellate jurisdiction. The Court of Appeals acknowledged that 28 U. S. C. § 1447(d) bars review of district court orders remanding for lack of subject-matter jurisdiction, 373 F. 3d, at 849 (citing Gravitt v. Southwestern Bell Telephone Co., 430 U. S. 723 (1977) (per curiam)), but decided that the District Court had the last word neither on the characterization of its decision as jurisdictional nor on the correctness of its conclusion that remand was required, see 373 F. 3d, at 849.

The Court of Appeals considered all covered class actions involving covered securities, whether precluded or not, to be removable under the Act, and for that reason thought the preclusion issue to be distinct from the jurisdictional issue of whether the case belonged in federal court at all. Id., at 849-850. In the view of the Court of Appeals, if the District Court remanded because, for example, the class comprised too few investors to make the case a covered class action, that would be a jurisdictional decision that the case had been removed improperly, and the order would therefore be unreviewable in accordance with § 1447(d). Id., at 849. But the court held that orders remanding “properly removed” suits as not precluded by the Act are substantive, “unaffected by § 1447(d),” id., at 851, and therefore subject to appellate jurisdiction in the normal course.

As the Court of Appeals put it, once the District Court had made that substantive decision of no preclusion in this case, it was time for the court to bow out, not because it had lacked “adjudicatory competence” to begin with but because it had completed its work: “Once a court does all that the statute authorizes, there is no adjudicatory competence to do more. That is not the ‘lack of subject-matter jurisdiction’ that authorizes a remand. Otherwise every federal suit, having been decided on the merits, would be dismissed ‘for lack of jurisdiction’ because the court’s job was finished.” Id., at 850. This remand, the court concluded, was therefore not for want of jurisdiction, and review was not barred by § 1447(d).

To satisfy itself that its decision made “practical sense,” the court proposed that the Act reserves to the Federal Judiciary the exclusive authority to make the preclusion decision. Ibid. Treating remand orders in this context as immunized from appeal by § 1447(d) would thus mean that “a major substantive issue in the case [would] escape review,” since it would not be open to resolution in the state court subject to review by this Court. Ibid.

The Seventh Circuit subsequently consolidated the funds’ appeals and decided, on the merits, that the Act does preclude the investors’ claims. 403 F. 3d 478 (2005). We granted certiorari to resolve a split of authority on the question whether § 1447(d) bars review of remand orders in cases removed under the Act, 546 U. S. 1085 (2006), and we now vacate for want of jurisdiction on the part of the Court of Appeals.

II

The policy of Congress opposes “interruption of the litigation of the merits of a removed cause by prolonged litigation of questions of jurisdiction of the district court to which the cause is removed,” United States v. Rice, 327 U. S. 742, 751 (1946), and nearly three years of jurisdictional advocacy in the cases before us confirm the congressional wisdom. For over a century now, statutes have accordingly limited the power of federal appellate courts to review orders remanding cases removed by defendants from state to federal court, see id., at 748-752; Thermtron Products, Inc. v. Hermansdorfer, 423 U. S. 336, 346-348 (1976). The current incarnation is 28 U. S. C. § 1447(d), which provides that an “order remanding a case to the State court from which it was removed is not reviewable on appeal or otherwise.” In Thermtron, we held that the bar of § 1447(d) applies only to remands based on the grounds specified in § 1447(c), that is, a defect in removal procedure or lack of subject-matter jurisdiction. 423 U. S., at 343-345; see also Things Remembered, Inc. v. Petrarca, 516 U. S. 124, 127-128 (1995). So, we have approved appellate review of a remand expressly based on the District Court’s crowded docket, see Thermtron, supra, at 340-341, and one based on abstention under Burford v. Sun Oil Co., 319 U. S. 315 (1943), see Quackenbush v. Allstate Ins. Co., 517 U. S. 706, 710-712 (1996). But we have relentlessly repeated that “any remand order issued on the grounds specified in § 1447(c) [is immunized from all forms of appellate review], whether or not that order might be deemed erroneous by an appellate court.” Thermtron, 423 U. S., at 351; see also id., at 343 (“If a trial judge purports to remand a case on the ground that it was removed ‘improvidently and without jurisdiction,’ his order is not subject to challenge in the court of appeals” (quoting § 1447(c) (1970 ed.))).

The bar of § 1447(d) applies equally to cases removed under the general removal statute, §1441, and to those removed under other provisions, see Things Remembered, supra, at 128, and the force of the bar is not subject to any statutory exception that might cover this case. Ostensibly, then, § 1447(d) stands in the way of reviewing the District Court’s orders of remand in the present cases. The District Court said that it was remanding for lack of jurisdiction, an unreviewable ground, and even if it is permissible to look beyond the court’s own label, the orders are unmistakably premised on the view that removal jurisdiction under 15 U. S. C. § 77p(c) is limited to cases precluded by § 77p(b); on the District Court’s understanding that “holder” claims are not subject to preclusion under §77p(b), the court had no subject-matter jurisdiction. Since there was no indication that removal jurisdiction might exist on some ground other than §77p(c) (complete diversity, for example), the remand orders were necessarily based on the trial court’s conclusion that jurisdiction under § 77p(c) was wanting. And “[wjhere the order is based on one of the [grounds enumerated in 28 U. S. C. § 1447(c)], review is unavailable no matter how plain the legal error in ordering the remand,” Briscoe v. Bell, 432 U. S. 404, 413-414, n. 13 (1977).

The Court of Appeals did not, of course, overlook the cases holding that even a remand premised on an erroneous conclusion of no jurisdiction is unappealable; it relied instead on cases like Kontrick v. Ryan, 540 U. S. 443 (2004), and Scarborough v. Principi, 541 U. S. 401 (2004), which observed that some rulings loosely called jurisdictional are patently not jurisdictional in the strict sense, see 373 F. 3d, at 849 (citing Kontrick, supra; Scarborough, supra). The appeals court saw this as such a case; it understood that a district court had removal jurisdiction over any covered action under subsection (c), with the consequence that a subsequent order dismissing because of preclusion under subsection (b), or remanding because the action was not precluded, rested simply on an application of substantive law under subsection (b), law that was not jurisdictional at all.

We think, however, that the District Court was correct in understanding its remand order to be dictated by its finding that it lacked removal jurisdiction. Unlike the Court of Appeals, we read authorization for the removal in subsection (c), on which the District Court’s jurisdiction depends, as confined to cases “set forth in subsection (b),” §77p(c), namely, those with claims of untruth, manipulation, and so on. The quoted phrase immediately follows the subsection (c) language describing removable cases as covered class actions involving covered securities, and the language has no apparent function unless it limits removal to covered class actions involving claims like untruth or deception. And legislative history tends to show that this was just what Congress understood. See S. Rep. No. 105-182, p. 8 (1998) (§ 77p(c) “provides that any class action described in Subsection (b) that is brought in a State court shall be removable to Federal district court, and may be dismissed pursuant to the provisions of subsection (b)”); H. R. Rep. No. 105-640, p. 16 (1998) (same).

The funds argue that removal jurisdiction is broader by emphasizing the adjective that introduces subsection (c): “Any” covered action. § 77p(c). But that suggestion would be persuasive only if we stopped reading right there, and we do not stop there; we do not read statutes in little bites. And, as just noted, if we did read the removal power that broadly there would be no point to the phrase “as set forth in subsection (b),” for subsection (b) cases would be removable anyway as a subset of covered class actions. Ibid. The funds purport to counter this objection with their argument that on our reading the last phrase of subsection (c) is redundant in providing that removed cases “shall be subject to subsection (b),” since subsection (b) cases would in any event be so subject. Ibid. The funds are in fact right about that redundancy, but the point does not count for their side, because the phrase is redundant on their reading, too: any subsection (b) case removed as falling within the broad category of covered class actions would be treated in accordance with subsection (b) if the subsection applied to that case. In sum, we see no reason to reject the straightforward reading: removal and jurisdiction to deal with removed cases is limited to those precluded by the terms of subsection (b).

Once removal jurisdiction under subsection (c) is understood to be restricted to precluded actions defined by subsection (b), a motion to remand claiming the action is not precluded must be seen as posing a jurisdictional issue. If the action is precluded, neither the district court nor the state court may entertain it, and the proper course is to dismiss. If the action is not precluded, the federal court likewise has no jurisdiction to touch the case on the merits, and the proper course is to remand to the state court that can deal with it. In either event, as the Court of Appeals said, the district court’s order comes because its adjudicatory power has been exercised and its work is done. But its adjudicatory power is simply its authority to determine its own jurisdiction to deal further with the case, see United States v. Shipp, 203 U. S. 563, 573 (1906) (opinion for the Court by Holmes, J.) (A federal court “necessarily ha[s] jurisdiction to decide whether the case [is] properly before it”). The work done is jurisdictional, as is the conclusion reached and the order implementing it.

III

We have yet to deal with one objection to our application of § 1447(d), which if well taken would be a serious one. The Seventh Circuit’s reading of subsection (c) so as to treat the application of the preclusion rule as nonjurisdictional was in part motivated by its assumption that the Act gives federal courts exclusive jurisdiction to decide the preclusion issue. If that is so, and § 1447(d) applies, a remand order based on a finding that an action is not precluded would arguably be immune from review. This is what the funds in effect contend here when they say that a district court’s finding of no subsection (b) preclusion would collaterally estop the state court on remand; the district court would have the last word. And of course the funds’ discomfort is made acute by our recent decision in Dabit, which expressly disavows the district court’s limited view of the scope of subsection (b) preclusion.

But a district court does not have the last word on preclusion under the Act, for nothing in the Act gives the federal courts exclusive jurisdiction over preclusion decisions. A covered action is removable if it is precluded, and a defendant can enlist the Federal Judiciary to decide preclusion, but a defendant can elect to leave a case where the plaintiff filed it and trust the state court (an equally competent body, see Missouri Pacific R. Co. v. Fitzgerald, 160 U. S. 556, 583 (1896)) to make the preclusion determination.

And what a state court could do in the first place it may also do on remand; in this case, the funds can presently argue the significance of Dabit and ask for dismissal on grounds of preclusion when they return to the state court. Collateral estoppel should be no bar to such a revisitation of the preclusion issue, given that § 1447(d) prevents the funds from appealing the District Court’s decision. See Standefer v. United States, 447 U. S. 10, 23 (1980) (“[Contemporary principles of collateral estoppel . . . strongly militat[e] against giving an [unreviewable judgment] preclusive effect” (citing Restatement (Second) of Judgments § 68.1 (Tent. Draft No. 3, 1976))); see also Restatement (Second) of Judgments § 28(1) (1980) (“Although an issue is actually litigated and determined by a valid and final judgment, and the determination is essential to the judgment, relitigation of the issue in a subsequent action between the parties is not precluded [when t]he party against whom preclusion is sought could not, as a matter of law, have obtained review of the judgment in the initial action”). While the state court cannot review the decision to remand in an appellate way, it is perfectly free to reject the remanding court’s reasoning, as we explained over a century ago in Missouri Pacific R. Co.: “[A]s to applications for removal on the ground that the cause arose under the Constitution, laws, or treaties of the United States,” the finality accorded remand orders is appropriate because questions of this character “if decided against the claimant” in state court are “open to revision .. ., irrespective of the ruling of the [federal court] in that regard in the matter of removal.” 160 U. S., at 583. Nor is there any reason to see things differently just because the remand’s basis coincides entirely with the merits of the federal question; it is only the forum designation that is conclusive. Here, we have no reason to doubt that the state court will duly apply Dabit’s holding that holder claims are embraced by subsection (b), but any claim of error on that point can be considered on review by this Court. See Franchise Tax Bd. of Cal. v. Construction Laborers Vacation Trust for Southern Cal., 463 U. S. 1, 12, n. 12 (1983) (“If the state courts reject a claim of federal pre-emption, that decision may ultimately be reviewed on appeal by this Court” (citing Fidelity Fed. Sav. & Loan Assn. v. De la Cuesta, 458 U. S. 141 (1982))).

IV

We hold that the Act does not exempt remand orders from 28 U. S. C. § 1447(d) and its general rule of nonappealability. We therefore vacate the judgment of the Court of Appeals and remand the case with instructions to dismiss the appeal for lack of jurisdiction.

It is so ordered.

Justice Scalia,

concurring in part and concurring in the judgment.

I join the judgment of the Court, and Parts I, III, and IV of the Court’s opinion; I do not join Part II for the reasons set forth below.

The District Court ordered these cases remanded to state court for want of jurisdiction. We know this because the orders say so: “Because the Court lacks subject matter jurisdiction, the Court REMANDS this action to the Madison County, Illinois Circuit Court.” App. to Pet. for Cert. 27a; see also id., at 30a, 40a, 46a, 51a, 57a, 64a. Even if those decisions were incorrect, the Court of Appeals lacked jurisdiction to review them because 28 U. S. C. § 1447(d) bars appellate review of remand orders based on lack of subject-matter jurisdiction. See, e. g., Things Remembered, Inc. v. Petrarca, 516 U. S. 124, 127-128 (1995). The Court correctly concludes that the Seventh Circuit’s review of the remand orders overstepped its appellate authority. I disagree with the Court’s reasoning in Part II, however, because it holds only that the Court of Appeals’ recharacterization was incorrect, and not (as I believe) that recharacterization — being a form of review — is categorically forbidden.

The Court of Appeals rejected the District Court’s description of its orders because it believed the District Court had been too loose in its use of the term “jurisdiction.” 373 F. 3d 847, 849-850 (2004). What the District Court actually did, the Court of Appeals concluded, was to remand on nonjurisdietional grounds (not subject to the appellate-review bar of § 1447(d)) after deciding that petitioners’ suits were not precluded. Such recharacterization seems to me flatly inconsistent with § 1447(d). Under that section, an “order remanding a case to the State court from which it was removed is not reviewable on appeal or otherwise.” Ibid. (emphasis added). But appellate review is exactly what is involved in looking behind the face of an order to determine its true basis: In order to reject a district court’s own characterization, a court of appeals must decide, as the Seventh Circuit did here, that the district court was wrong. We have therefore held, in language that makes plain the correct outcome here, that “[i]f a trial judge purports to remand a case on the ground that it was removed 'improvidently and without jurisdiction,’ his order is not subject to challenge in the court of appeal, by mandamus, or otherwise.” Thermtron Products, Inc. v. Hermansdorfer, 423 U. S. 336, 343 (1976) (quoting § 1447(c) (1970 ed.); emphasis added). Whether the District Court was right or wrong — even if it was so badly mistaken that it misunderstood the true basis for its orders — it purported to remand for lack of jurisdiction, and § 1447(d) bars any further review.

Review of the sort engaged in by the Court of Appeals threatens to defeat the purpose of § 1447(d). As we recognized in Thermtron Products, the appellate-review bar was enacted “to prevent delay in the trial of remanded cases by protracted litigation of jurisdictional issues.” Id., at 351. Such delay can be created just as easily by asking whether the district court correctly characterized the basis for its order as it can by asking whether that basis was correct— which even the Court of Appeals recognized was beyond its jurisdiction, 373 F. 3d, at 849. See also Thermtron Products, supra, at 343 (noting that § 1447(d) “prohibits review of all remand orders [based on lack of subject-matter jurisdiction] whether erroneous or not”). The remand orders in these cases date back to early 2004; over two years later, federal courts are still engaged in appellate review.

The Court should end this delay by holding that appellate courts cannot look behind the stated basis for the district court’s remand order. Instead, it concludes that “the District Court was correct in understanding its remand order to be dictated by a finding that it lacked removal jurisdiction.” Ante, at 642 (emphasis added). It seems to me no more within our authority to declare the District Court’s views correct than it was within the Court of Appeals’ authority to reject them. Either decision is an exercise of appellate review barred by the plain terms of § 1447(d).

       “No covered class action based upon the statutory or common law of any State or subdivision thereof may be maintained in any State or Federal court by any private party alleging—
      “(1) an untrue statement or omission of a material fact in connection with the purchase or sale of a covered security; or
      “(2) that the defendant used or employed any manipulative or deceptive device or contrivance in connection with the purchase or sale of a covered security.” 112 Stat. 3228 (codified at 15 U. S. C. § 77p(b)).
      The preclusion provision is often called a preemption provision; the Act, however, does not itself displace state law with federal law but makes some state-law claims nonactionable through the class-action device in federal as well as state court. See Merrill Lynch, Pierce, Fenner & Smith Inc. v. Dabit, ante, at 87 (“The Act does not deny any individual plaintiff, or indeed any group of fewer than 50 plaintiffs, the right to enforce any state-law cause of action that may exist”).

       “Any covered class action brought in any State court involving a covered security, as set forth in subsection (b) of this section, shall be removable to the Federal district court for the district in which the action is pending, and shall be subject to subsection (b) of this section.” 112 Stat. 3228 (codified at 15 U. S. C. §77p(c)).

       The Act amends “in substantially identical ways,” Dabit, ante, at 82, n. 6, both the Securities Act of 1933, 48 Stat. 74, and the Securities Exchange Act of 1934, 48 Stat. 881. For the sake of simplicity, the Seventh Circuit relied exclusively on the amendments to the Securities Act of 1933, and for ease of reference we will do the same.

       The investors claim that the funds facilitated the practice of “market timing,” whereby traders of mutual fund shares exploit brief discrepancies between the stock prices used to calculate the shares’ value once a day, and the prices at which those stocks are actually trading in the interim. Brief for Petitioners 6. The investors say that market timing is harmful to long-term holders of mutual fund shares and that the funds negligently or recklessly failed to adopt procedures to protect the value of the investors’ long-term investments.

       As discussed in Part III, infra, we have since rejected this reasoning, see Dabit, ante, at 88-89.

       Compare 373 F. 3d 847 (CA7 2004) (case below) with Spielman v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 332 F. 3d 116 (CA2 2003); Abada v. Charles Schwab & Co., 300 F. 3d 1112 (CA9 2002); Williams v. AFC Enterprises, Inc., 389 F. 3d 1185 (CA11 2004).

       Title 28 U. S. C. § 1447(d) specifically excepts certain civil rights actions from its bar; ef. § 1443.

       “Absent a clear statutory command to the contrary, we assume that Congress is aware of the universality of th[e] practice of denying appellate review of remand orders when Congress creates a new ground for removal,” Things Remembered, 516 U. S., at 128 (internal quotation marks omitted), like 15 U. S. C. § 77p(c). Congress has, when it wished, expressly made 28 U. S. C. § 1447(d) inapplicable to particular remand orders. See, e.g., § 1447(d); 12 U. S. C. § 1441a(Z)(3)(C); § 1819(b)(2)(C); 25 U.S.C. § 487(d); cf. n. 7, supra. There is no such “clear statutory command” here, and that silence tells us we must look to 28 U. S. C. § 1447(d) to determine the reviewability of remand orders under the Act.

       We take a pass on Justice Scalia’s position that we may not look beyond the label, see post, at 650 (opinion concurring in part and concurring in judgment); the result here is the same whether we look near or far.

       These eases raise exclusively state-law claims seeking damages insufficient to satisfy the amount-in-controversy requirement of 28 U. S. C. § 1332; in those instances in which the funds asserted diversity as a basis for subject-matter jurisdiction, the District Court determined that no named plaintiff had a claim that met § 1332’s $75,000 threshold. See, e. g., Parthasarthy v. T. Rowe Price Int’l Funds, Inc., No. 03-CV-0673-DRH (SD Ill., Jan. 30, 2004), App. to Pet. for Cert. 34a-37a; Spurgeon v. Pacific Life Ins. Co., No. 04-CV-0355-MJR (SD Ill., June 24, 2004), id., at 59a-60a.

       Like the Court of Appeals here, we said in Dabit that a “key provision of the [Act] makes all ‘covered class actions’ filed in state court removable.” Ante, at 83, n. 7 (quoting 112 Stat. 3230). We sketched the removal provision in broad strokes then because the question of its scope was not before us. Now that it is, we speak more cautiously.

       The funds argue 15 U. S. C. § 77p confers jurisdiction greater than that necessary to render the preclusion decision, analogizing § 77p(c) to the federal officer removal statute, 28 U. S. C. § 1442(a). If there is any colorable claim that an action is precluded, the argument goes, the district court can keep the case for adjudication, even after concluding on the merits that the state-law claims are not precluded; but because it has discretion to keep the case or remand to state court, a remand is not jurisdictional and hence is reviewable. The argument is flawed for two reasons. The District Court here did not indicate it thought there was any basis to keep the ease for further development; right or wrong, it understood that it was making a jurisdictional ruling. Nor is the analogy with federal officer cases sound.
      Section 1442(a) is an exception to the “well-pleaded complaint” rule, under which (absent diversity) “a defendant may not remove a case to federal court unless the plaintiff’s complaint establishes that the case ‘arises under’ federal law.” Franchise Tax Bd. of Cal. v. Construction Laborers Vacation Trust for Southern Cal., 463 U. S. 1, 10 (1983) (emphasis deleted). The federal officer removal statute allows “suits against federal officers [to] be removed despite the nonfederal east of the complaint,” Jefferson County v. Acker, 527 U. S. 423, 431 (1999), and reflects a congressional policy that “federal officers, and indeed the Federal Government itself, require the protection of a federal forum,” Willingham v. Morgan, 395 U. S. 402, 407 (1969). An officer’s federal defense need be only color-able to assure the federal court that it has jurisdiction to adjudicate the ease, see Acker, supra, at 431.
      The funds assert that a preclusion defense need be only colorable as well, but the Act is different. It avails a defendant of a federal forum in contemplation not of further litigation over the merits of a claim brought in state court, but of termination of the proceedings altogether, and a merely colorable claim of preclusion does not satisfy a district court that it may dismiss a case as precluded by the Act. There is no room for such a case to exist in a limbo of colorable preclusion; if a claim is precluded, it “may [not] be maintained,” 15 U. S. C. § 77p(b), and if the claim is not, the federal courts no longer have any business being involved, as there is no longer any federal question on which to moor the district court’s jurisdiction. Nor has Congress expressed in the Act, as it did with 28 U. S. C. § 1442(a), any policy of having particular suits tried in a federal court; there is no indication whatsoever in the Act that, apart from its purpose to preclude certain vexing state-law class actions, Congress intended to add other state-law cases to the federal dockets, and there is no apparent federal interest in spending time on such cases akin to the interest in adjudicating suits against federal officers.

       The funds suggest, in the alternative, that appellate jurisdiction in this case was proper under Waco v. United States Fidelity & Guaranty Co., 293 U. S. 140 (1934). Without passing on the continued vitality of that case in light of § 1447(d), we note that on its own terms it is distinguishable.
      In Waco, a case was removed to federal court on an invocation of diversity jurisdiction, id., at 141, and the District Court thereafter “entered a single decree embodying . .. separate orders,” id., at 142. In one order, the District Court dismissed a cross-complaint against one party. In another, the District Court concluded that because of the dismissal there was no diversity of citizenship and it thus lacked jurisdiction, and so it remanded the ease to state court. An appeal was taken from the order of dismissal. This Court determined that the appeal would lie, because “the decree of dismissal preceded that of remand,” and because the District Court’s order of dismissal was conclusive upon the parties. Id., at 143. We noted that a “reversal [of the dismissal] cannot affect the order of remand, but it will at least, if the dismissal . . . was erroneous, remit the entire controversy, with the [previously dismissed party] still a party, to the state court for ... further proceedings.” Id., at 143-144.
      The order appealed in Waco was not a remand order; the order here is, and thus falls within § 1447(d)’s bar on appeals of “[a]n order remanding a case” to state court. Moreover, the funds do not explain how to reconcile their argument with Waco’s acknowledgment that the order of remand “cannot [be] affect[ed]” notwithstanding any reversal of a separate order, id., at 143. The District Court’s remand order here cannot be disaggregated as the Waco orders could, and if the Seventh Circuit’s preclusion decision stands, there is nothing to remand to state court.

      Modern usage calls for the descriptive term, “issue preclusion,” in place of “collateral estoppel.” But we are backsliders out of pity for the tired reader; “preclusion” by statutory fiat is enough preclusion for one opinion.

       The parties further dispute whether the investors’ claims satisfy the other 15 U. S. C. § 77p(b) preclusion prerequisites, particularly the allegation of fraud; the investors take issue with the Seventh Circuit’s characterization of their claims as charging fraud or manipulation, not mismanagement. Because the Court of Appeals lacked appellate jurisdiction, its reading of the investors’ litigation position is not binding in future proceedings and is open to consideration on remand.

      To say that we cannot recharacterize the District Court’s remand for lack of jurisdiction is not to say that the basis for the remand is forever insulated from review. Part III of the Court’s opinion makes clear that the underlying legal issue of preclusion remains open in state court, and need not be resolved in accordance with the (unreviewable) views of the District Court.


author: Justice Ginsburg Justice Kennedy,

text:
    HOWARD DELIVERY SERVICE, INC., et al. v. ZURICH AMERICAN INSURANCE CO.
    No. 05-128.
    Argued March 21, 2006
    Decided June 15, 2006

      Paul F. Strain argued the cause for petitioners. On the briefs were Richard M. Francis, Heather G. Harlan, Lawrence A. Katz, and Mitchell Y. Mirviss.

      Donald B. Verrilli, Jr., argued the cause for respondent. With him on the brief were William M. Hohengarten, Elaine J. Goldenberg, Barbara S. Steiner, Daniel R. Murray, Margaret M. Anderson, Hugh S. Balsam, and Karen Lee Turner.

        Donald J. Capuano and John M. Mclntire filed a brief for the National Coordinating Committee for Multiemployer Plans as amicus curiae urging reversal.

        G. Eric Brunstad, Jr., Rheba Rutkowski, and William C. Heuer filed a brief for the American Home Assurance Co. et al. as amici curiae urging affirmance.

   Justice Ginsburg

delivered the opinion of the Court.

The Bankruptcy Code accords a priority, among unsecured creditors’ claims, for unpaid “wages, salaries, or commissions,” 11 U. S. C. § 507(a)(4)(A), and for unpaid contributions to “an employee benefit plan,” § 507(a)(5). It is uncontested here that § 507(a)(5) covers fringe benefits that complete a pay package — typically pension plans, and group health, life, and disability insurance — whether unilaterally provided by an employer or the result of collective bargaining. This case presents the question whether the § 507(a)(5) priority also encompasses claims for unpaid premiums on a policy purchased by an employer to cover its workers’ compensation liability. We hold that premiums owed by an employer to a workers’ compensation carrier do not fit within § 507(a)(5).

Workers’ compensation laws ensure that workers will be compensated for work-related injuries whether or not negligence of the employer contributed to the injury. To that extent, arrangements for the payment of compensation awards might be typed “employee benefit plants].” On the other hand, statutorily prescribed workers’ compensation regimes do not run exclusively to the employees’ benefit. In this regard, they differ from privately ordered, employer-funded pension and welfare plans that, together with wages, remunerate employees for services rendered. Employers, too, gain from workers’ compensation prescriptions. In exchange for no-fault liability, employers gain immunity from tort actions that might yield damages many times higher than awards payable under workers’ compensation schedules. Although the question is close, we conclude that premiums paid for workers’ compensation insurance are more appropriately bracketed with premiums paid for other liability insurance, e.g., motor vehicle, fire, or theft insurance, than with contributions made to secure employee retirement, health, and disability benefits.

In holding that claims for workers’ compensation insurance premiums do not qualify for § 507(a)(5). priority, we are mindful that the Bankruptcy Code aims, in the main, to secure equal distribution among creditors. See Kothe v. R. C. Taylor Trust, 280 U. S. 224, 227 (1930); Kuehner v. Irving Trust Co., 299 U. S. 445, 451 (1937). We take into account, as well, the complementary principle that preferential treatment of a class of creditors is in order only when clearly authorized by Congress. See Nathanson v. NLRB, 344 U. S. 25, 29 (1952); United States v. Embassy Restaurant, Inc., 359 U. S. 29, 31 (1959).

I

Petitioner Howard Delivery Service, Inc. (Howard), for many years owned and operated a freight trucking business. Howard employed as many as 480 workers and operated in about a dozen States. Each of those States required Howard to maintain workers’ compensation coverage to secure its employees’ receipt of health, disability, and death benefits in the event of on-the-job accidents. Howard contracted with Zurich to provide this insurance for Howard’s operations in ten States.

On January 30, 2002, Howard filed a Chapter 11 bankruptcy petition. Zurich filed an unsecured creditor’s claim in that proceeding, seeking priority status for some $400,000 in unpaid workers’ compensation premiums. In an amended proof of claim, Zurich asserted that these unpaid premiums qualified as “[(Contributions to an employee benefit plan” entitled to priority under § 507(a)(5). App. 32a. The Bankruptcy Court denied priority status to Zurich’s claim, reasoning that the overdue premiums do not qualify as bargained-for benefits furnished in lieu of increased wages, hence they fall outside § 507(a)(5)’s compass. App. to Pet. for Cert. 51a-57a. The District Court affirmed, similarly determining that unpaid workers’ compensation premiums do not share the priority provided for unpaid contributions to employee pension and health plans. Id., at 39a-50a.

The Court of Appeals for the Fourth Circuit reversed 2 to 1 in a per curiam opinion. 403 F. 3d 228 (2005). The judges in the majority, however, disagreed on the rationale. Judge King concluded that § 507(a)(5) unambiguously accorded priority status to claims for unpaid workers’ compensation premiums. Id., at 237. Judge Shedd, concurring in the judgment, found the § 507(a)(5) phrase “employee benefit plan” ambiguous. Looking to legislative history, he concluded that Congress likely intended to give past due workers’ compensation premiums priority status. Id., at 238-239. In dissent, Judge Niemeyer, like Judge King, relied on the “plain meaning” of § 507(a)(5), but read the provision unequivocally to deny priority status to an insurer’s claim for unpaid workers’ compensation premiums. Id., at 241-244.

We granted certiorari, 546 U. S. 1002 (2005), to resolve a split among the Circuits concerning the priority status of premiums owed by a bankrupt employer to a workers’ compensation carrier. Compare In re Birmingham-Nashville Express, Inc., 224 F. 3d 511, 517 (CA6 2000) (denying priority status to unpaid workers’ compensation premiums), In re Southern Star Foods, Inc., 144 F. 3d 712, 717 (CA10 1998) (same), and In re HLM Corp., 62 F. 3d 224, 226-227 (CA8 1995) (same), with Employers Ins. of Wausau v. Plaid Pantries, Inc., 10 F. 3d 605, 607 (CA9 1993) (according priority status), and 403 F. 3d, at 229 (case below) (same).

II

Adjoining subsections of the Bankruptcy Code, § 507(a)(4) and (5), are centrally involved in this case. Subsections 507(a)(4) and (5) currently provide:

“(a) The following expenses and claims have priority in the following order:
“(4) Fourth, allowed unsecured claims ... for—
“(A) wages, salaries, or commissions, including vacation, severance, and sick leave pay earned by an individual....
“(5) Fifth, allowed unsecured claims for contributions to an employee benefit plan—
“(A) arising from services rendered within 180 days before the date of the filing of the [bankruptcy] petition or the date of the cessation of the debtor’s business, whichever occurs first. . . .” 11 U. S. C. §507.

Two decisions of this Court, United States v. Embassy Restaurant, Inc., 359 U. S. 29 (1959), and Joint Industry Bd. of Elec. Industry v. United States, 391 U. S. 224 (1968), prompted the enactment of § 507(a)(5). Embassy Restaurant concerned a provision of the 1898 Bankruptcy Act that granted priority status to “wages” but said nothing of “employee benefits plans” or anything similar. 11 U. S. C. § 104(a)(2) (1952 ed., Supp. V; repealed 1978). We held that a debtor’s unpaid contributions to a union welfare plan — which provided life insurance, weekly sick benefits, hospital and surgical benefits, and other advantages — did not qualify within the priority for unpaid “wages.” 359 U. S., at 29-35. In Joint Industry Bd., we followed Embassy Restaurant and held that an employer’s bargained-for contributions to an employees’ annuity plan did not qualify as “wages” entitled to priority status. 391 U. S., at 228-229.

To provide a priority for fringe benefits of the kind at issue in Embassy Restaurant and Joint Industry Bd., Congress added what is now § 507(a)(5) when it amended the Bankruptcy Act in 1978. See H. R. Rep. No. 95-595, p. 187 (1977) (hereinafter H. R. Rep.) (explaining that the amendment covers “health insurance programs, life insurance plans, pension funds, and all other forms of employee compensation that [are] not in the form of wages”); S. Rep. No. 95-989, p. 69 (1978). Notably, Congress did not enlarge the “wages, salaries, [and] commissions” priority, § 507(a)(4), to include fringe benefits. Instead, Congress created a new priority for such benefits, one step lower than the wage priority. The new provision, currently contained in § 507(a)(5), allows the provider of an employee benefit plan to recover unpaid premiums — albeit only after the employees’ claims for “wages, salaries, or commissions” have been paid. § 507(a)(4).

Beyond genuine debate, the main office of § 507(a)(5) is to capture portions of employee compensation for services rendered not covered by § 507(a)(4). Cf. Embassy Restaurant, 359 U. S., at 35; Joint Industry Bd., 391 U. S., at 228-229 (both emphasizing Congress’ prerogative in this regard). The current Code’s juxtaposition of the wages and employee benefit plan priorities manifests Congress’ comprehension that fringe benefits generally complement, or “substitute” for, hourly pay. See H. R. Rep., at 357 (noting “the realities of labor contract negotiations, under which wage demands are often reduced if adequate fringe benefits are substituted”); id., at 187 (“[T]o ignore the reality of collective bargaining that often trades wage dollars for fringe benefits does a severe disservice to those working for a failing enterprise.”); In re Saco Local Development Corp., 711 F. 2d 441, 449 (CA1 1983) (majority opinion of Breyer, J.) (substitution of fringe benefits for wages “can normally be assumed, unless the employer is a philanthropist”).

Congress tightened the linkage of subsections (a)(4) and (a)(5) by imposing a combined cap on the two priorities, currently set at $10,000 per employee. See § 507(a)(5)(B). Because (a)(4) has a higher priority status, all claims for wages are paid first, up to the $10,000 limit; claims under (a)(5) for contributions to employee benefit plans can be recovered next up to the remainder of the $10,000 ceiling. No other subsections of §507 are joined together by a common cap in this way.

Putting aside the clues provided by Embassy Restaurant, Joint Industry Bd., and the textual ties binding § 507(a)(4) and (5), we recognize that Congress left undefined the § 507(a)(5) terms: “contributions to an employee benefit plan ... arising from services rendered within 180 days before the date of the filing of the [bankruptcy] petition.” (Emphasis added.) Maintaining that subsection (a)(5) covers more than wage substitutes of the kind at issue in Embassy Restaurant and Joint Industry Bd., Zurich urges the Court to borrow the encompassing definition of employee benefit plan contained in the Employee Retirement Income Security Act of 1974 (ERISA), 88 Stat. 829, as amended, 29 U. S. C. § 1001 et seq. (2000 ed. and Supp. III). See §1002(1) (term “employee welfare benefit plan” means, inter alia, “any plan, fund, or program [that provides] its participants or their beneficiaries, through the purchase of insurance or otherwise, . . . benefits in the event of sickness, accident, disability, death or unemployment”); § 1002(3) (term “employee benefit plan . . . means an employee welfare benefit plan or an employee pension benefit plan or a plan which is both an employee welfare benefit plan and an employee pension benefit plan”); cf. § 1003(b)(3) (excluding plans “maintained solely for the purpose of complying with applicable workers’] compensation laws or unemployment compensation or disability insurance laws”). The dissent endorses this borrowing. See post, at 676.

Federal courts have questioned whether ERISA is appropriately used to fill in blanks in a Bankruptcy Code provision, and the panel below parted ways on this issue. See 403 F. 3d, at 235, n. 9 (King, J., concurring in judgment) (“declin[ing] to rely upon the ERISA definition”); id., at 239-241 (Shedd, J., concurring in judgment) (reading legislative history to indicate that Congress intended “‘employee benefit plan’ in the bankruptcy priority provision to have the same meaning that [the term] has in ERISA”); id., at 245 (Niemeyer, J., dissenting) (maintaining that ERISA definition is inapt in Bankruptcy Code priority context); cf. Birmingham-Nashville Express, 224 F. 3d, at 516-517 (noting division of opinion but concluding that decisions rejecting incorporation of ERISA’s “employee benefit plan” definition into § 507(a)(5) “ha[ve] the better of the argument”); HLM Corp., 62 F. 3d, at 226 (“[T]he ERISA definition and associated court guidelines were designed to effectuate the purpose of ERISA, not the Bankruptcy Code.” (internal quotation marks omitted)); Southern Star Foods, 144 F. 3d, at 714 (same). Compare Brief for American Home Assurance Company et al. as Amici Curiae 17-25 (legislative history suggests Congress intended to incorporate ERISA definition) with Brief for National Coordinating Committee for Multiemployer Plans as Amicus Curiae 22-27, and n. 21 (legislative history suggests Congress did not intend to incorporate ERISA definition).

ERISA’s omnibus definition does show, at least, that the term “employee welfare benefit plan” is susceptible of a construction that would include workers’ compensation plans. That Act’s signals are mixed, however, for 29 U. S. C. § 1003(b)(3) specifically exempts from ERISA’s coverage the genre of plan here at issue, i. e., one “maintained solely for the purpose of complying with applicable workers’] compensation laws.” The § 1003(b)(3) exemption strengthens our resistance to Zurich’s argument. We follow the lead of an earlier decision, United States v. Reorganized CF&I Fabricators of Utah, Inc., 518 U. S. 213, 219 (1996), in noting that “[h]ere and there in the Bankruptcy Code Congress has included specific directions that establish the significance for bankruptcy law of a term used elsewhere in the federal statutes.” Id., at 219-220. No such directions are contained in § 507(a)(5), and we have no warrant to write them into the text.

This case turns, we hold, not on a definition borrowed from a statute designed without bankruptcy in mind, but on the essential character of workers’ compensation regimes. Unlike pension provisions or group life, health, and disability insurance plans — negotiated or granted as pay supplements or substitutes — workers’ compensation prescriptions have a dominant employer-oriented thrust: They modify, or substitute for, the common-law tort liability to which employers were exposed for work-related accidents. See 6 A. Larson & L. Larson, Workers’ Compensation Law §100.01[1], pp. 100-2 to 100-3 (2005) (hereinafter Larson & Larson); 4 J. Lee & B. Lindahl, Modern Tort Law: Liability and Litigation §43:25, pp. 43-45 to 43-46 (2d ed. 2003). As typically explained:

“The invention of workers compensation as it has existed in this country since about 1910 involves a classic social trade-off or, to use a Latin term, a quid pro quo. . . . What is given to the injured employee is the right to receive certain limited benefits regardless of fault, that is, even in cases in which the employee is partially or entirely at fault, or when there is no fault on anyone’s part. What is taken away is the employee’s right to recover full tort damages, including damages for pain and suffering, in cases in which there is fault on the employer’s part.” P. Lencsis, Workers Compensation: A Reference and Guide 9 (1998) (hereinafter Lencsis).

Workers’ compensation regimes thus provide something for employees — they ensure limited fixed payments for on-the-job injuries — and something for employers — they remove the risk of large judgments and heavy costs generated by tort litigation. See 6 Larson & Larson §100.03[1], at 100-11 (“[Workers’ compensation] relieves the employer not only of common-law tort liability, but also of statutory liability under virtually all state statutes, as well as of liability in contract and in admiralty, for an injury covered by the compensation act.” (footnote omitted)); Lubove, Workmen’s Compensation and the Prerogatives of Voluntarism, 8 Lab. Hist. 254, 258-262 (Fall 1967) (workers’ compensation programs were adopted by nearly every State in large part because employers anticipated significant benefits from the programs; other programs workers’ groups sought to make mandatory — notably, health insurance — were not similarly embraced). No such tradeoff is involved in fringe benefit plans that augment each covered worker’s hourly pay.

Employer-sponsored pension plans, and group health or life insurance plans, characteristically insure the employee (or his survivor) only. In contrast, workers’ compensation insurance, in common with other liability insurance in this regard, e. g., fire, theft, and motor vehicle insurance, shield the insured enterprise: Workers’ compensation policies both protect the employer-policyholder from liability in tort, and cover its obligation to pay workers’ compensation benefits. See In re HLM Corp., 165 B. R. 38, 41 (Bkrtcy. Ct. Minn. 1994). When an employer fails to secure workers’ compensation coverage, or loses coverage for nonpayment of premiums, an affected employee’s remedy would not lie in a suit for premiums that should have been paid to a compensation carrier. Instead, employees who sustain work-related injuries would commonly have recourse to a state-maintained fund. See, e. g., Minn. Stat. § 176.183, subd. 1 (2004); N. Y. Work. Comp. Law Ann. § 26-a (West Supp. 2006). Or, in lieu of the limited benefits obtainable from a state fund under workers’ compensation schedules, the injured employee might be authorized to pursue the larger recoveries successful tort litigation ordinarily yields. See, e. g., id., § 11 (West 2005); W. Va. Code §23-2-8 (Lexis 2005); Lencsis 67.

Further distancing workers’ compensation arrangements from bargained-for or voluntarily accorded fringe benefits, nearly all States, with limited exceptions, require employers to participate in their workers’ compensation systems. See, e. g., Ill. Comp. Stat., ch. 820, § 305/4 (West 2004); Minn. Stat. § 176.181, subd. 2 (2004); U. S. Dept, of Labor, Office of Workers’ Compensation, State Workers’ Compensation Laws, Table 1: Type of Law and Insurance Requirements for Private Employment (2005), online at http://www.dol.gov/esa/ regs/statutes/owcp/stwclaw/tables-pdf/tablel.pdf (as visited June 13, 2006, and available in Clerk of Court’s case file). An employer who fails to secure the mandatory coverage is subject to substantial penalties, even criminal liability. We do not suggest, as the dissent hypothesizes, see post, at 674, that a compensation carrier would gain § 507(a)(5) priority for unpaid premiums in States where workers’ compensation coverage is elective. Nor do we suggest that wage surrogates or supplements, e. g., pension and health benefits plans, would lose protection under § 507(a)(5) if a State were to mandate them. We simply count it a factor relevant to our assessment that States overwhelmingly prescribe and regulate insurance coverage for on-the-job accidents, while commonly leaving pension, health, and life insurance plans to private ordering.

We note that when the Fourth Circuit confronted a claim for workers’ compensation premiums owed not to a private insurer but to a state fund, that court ranked the premiums as “excise taxes” qualifying for bankruptcy priority under what is now § 507(a)(8)(E). See New Neighborhoods, Inc. v. West Virginia Workers’ Comp. Fund, 886 F. 2d 714, 718-720 (1989). See also In re Suburban Motor Freight, Inc., 998 F. 2d 338, 342 (CA6 1993) (“Where a State ‘compels] the payment’ of ‘involuntary exactions, regardless of name,’ and where such payment is universally applicable to similarly situated persons or firms, these payments are taxes for bankruptcy purposes.” (quoting New Neighborhoods, 886 F. 2d, at 718-719; alteration in original)); LeRoy et al., Workers’ Compensation in Bankruptcy: How Do the Parties Fare? 24 Tort & Ins. L. J. 593, 623-624 (1989) (describing disagreement among courts on whether payments to state-run workers’ compensation funds qualify as excise taxes under § 507(a)(8)). We express no view on the § 507(a)(8)(E) issue presented in New Neighborhoods. We venture only this observation: It is common for Congress to prefer Government creditors over private creditors, see Birmingham-Nashville Express, 224 F. 3d, at 517-518; it would be anomalous, however, to advance Zurich’s claim to level (a)(5) while leaving state-fund creditors at level (a)(8).

Zurich argues that according its claim an (a)(5) priority will give workers’ compensation carriers an incentive to continue coverage of a failing enterprise, thus promoting rehabilitation of the business. It may be doubted whether the projected incentive would outweigh competing financial pressure to pull the plug swiftly on an insolvent policyholder, and thereby contain potential losses. An insurer undertakes to pay the scheduled benefits to workers injured on the job while the policy is in effect. In the case of serious injuries, however, benefits may remain payable years after termination of coverage. See 1 Larson & Larson §§ 10.02-10.03, at 10-3 to 10-7; Lencsis 51-52. While cancellation relieves the insurer from responsibility for future injuries, the insurer cannot escape the obligation to continue paying benefits for enduring maladies or disabilities, even though no premiums are paid by the former policyholder. An insurer would likely weigh in the balance the risk of incurring fresh obligations of long duration were it to continue insuring employers unable to pay currently for coverage. That consideration might well be controlling even with an assurance of priority status, for there is no guarantee that creditors accorded preferred positions will in fact be paid. See Tr. of Oral Arg. 31-32 (“[A]s soon as they smell bankruptcy, they’re going to pull the plug anyway.” (SCALIA, J.)); LeRoy, supra, at 596 (noting “general reluctance on the part of private insurers to provide debtors with the necessary Workers’ Compensation coverage”).

Rather than speculating on how workers’ compensation insurers might react were they to be granted an (a)(5) priority, we are guided in reaching our decision by the equal distribution objective underlying the Bankruptcy Code, and the corollary principle that provisions allowing preferences must be tightly construed. See Kothe, 280 U. S., at 227 (“The broad purpose of the Bankruptcy Act is to bring about an equitable distribution of the bankrupt’s estate ....”); Nathanson, 344 U. S., at 29 (“The theme of the Bankruptcy Act is 'equality of distribution’ . . . ; and if one claimant is to be preferred over others, the purpose should be clear from the statute.” (quoting Sampsell v. Imperial Paper & Color Corp., 313 U. S. 215, 219 (1941))); H. R. Rep., at 186; 2 Collier Bankruptcy Manual ¶ 507.01, p. 507-4 (rev. 3d ed. 2005) (“[P]riorities under the Code are to be narrowly construed.”).

Every claim granted priority status reduces the funds available to general unsecured creditors and may diminish the recovery of other claimants qualifying for equal or lesser priorities. See Joint Industry Bd., 391 U. S., at 228-229. “To give priority to a claimant not clearly entitled thereto is not only inconsistent with the policy of equality of distribution; it dilutes the value of the priority for those creditors Congress intended to prefer.” In re Mammoth Mart, Inc., 536 F. 2d 950, 953 (CA1 1976). Cases like Zurich’s are illustrative. The Bankruptcy Code caps the amount recoverable for contributions to employee benefit plans. See supra, at 659-660. Opening the (a)(5) priority to workers’ compensation carriers could shrink the amount available to cover unpaid contributions to plans paradigmatically qualifying as wage surrogates, prime among them, pension and health benefit plans.

In sum, we find it far from clear that an employer’s liability to provide workers’ compensation coverage fits the § 507(a)(5) category “contributions to an employee benefit plan ... arising from services rendered.” Weighing against such categorization, workers’ compensation does not compensate employees for work performed, but instead, for on-the-job injuries incurred; workers’ compensation regimes substitute not for wage payments, but for tort liability. Any doubt concerning the appropriate characterization, we conclude, is best resolved in accord with the Bankruptcy Code’s equal distribution aim. We therefore reject the expanded interpretation Zurich invites. Unless and until Congress otherwise directs, we hold that carriers’ claims for unpaid workers’ compensation premiums remain outside the priority allowed by § 507(a)(5).

* * *

For the reasons stated, the judgment of the United States Court of Appeals for the Fourth Circuit is reversed, and the case is remanded for further proceedings consistent with this opinion.

It is so ordered.

Justice Kennedy,

with whom

Justice Souter and Justice Alito join, dissenting.

The Court of Appeals for the Fourth Circuit held that payments for workers’ compensation coverage are “contributions to an employee benefit plan . .• . arising from services rendered.” li U. S. C. § 507(a)(5). In reversing that judgment the Court’s opinion relies on the premise that “statutorily prescribed workers’ compensation regimes do not run exclusively to the employees’ benefit.” Ante, at 655. This rationale, however, does not suffice to justify the Court’s holding. It does not accord, moreover, with the text or purpose of the bankruptcy priority defined in § 507(a)(5). These are the main points of this respectful dissenting opinion.

I

Before commencing a more detailed discussion of the central issue, certain preliminary matters must be addressed. To begin with, the Court states a background rule of construction that, when we interpret the Bankruptcy Code, “provisions allowing preferences must be tightly construed.” Ante, at 667. The Court links this rule with a general objective in the Code for equal distribution. Ibid. That objective, it is true, is acknowledged by our precedents, and we have said that a Code provision must indicate a clear purpose to prefer one claim over another before a priority will be found. See Nathanson v. NLRB, 344 U. S. 25, 29 (1952). This is different, though, from establishing an interpretive principle of strict construction when the Code addresses priorities, for strict construction can be in tension with the objective of “equality of distribution for similar creditors.” Small Business Administration v. McClellan, 364 U. S. 446, 452 (1960). The bankruptcy priorities, then, should not be read simply to give priorities to as few creditors as possible. They should be interpreted in accord with the principle of equal treatment of like claims. In any event the priority provisions should not be read so narrowly as to conflict with their plain meaning.

In accord with these principles the Court does not seem to dispute that the payments at issue here are “contributions” that “aris[e] from services rendered,” § 507(a)(5). There seems little doubt that both these statutory requirements are met. Petitioner Howard Delivery Service, Inc. (Howard), argues that a contribution must be voluntary; and it says that because the workers’ compensation payments in this case are mandatory, they cannot be contributions. In some situations — for example, in discussing charitable contributions — it is possible to read “contributions” as Howard suggests. See Webster’s Third New International Dictionary 496 (1971) (defining “contribution” as “a sum or thing voluntarily contributed”). In the context of employer payments, however, the voluntariness requirement does not accord with the usual meaning of the word. See ibid, (defining “contribution” alternatively as “a sum paid by an employer to an unemployment or group-insurance fund”). Many federal statutes and this Court’s own eases expressly refer to “mandatory contributions” when discussing payments by employers and employees. See, e. g., 26 U. S. C. § 411(a)(3)(D); 29 U. S. C. § 1053(a)(3)(D); § 1054(c)(2)(C); § 1344; Hughes Aircraft Co. v. Jacobson, 525 U. S. 432, 435 (1999); General Building Contractors Assn., Inc. v. Pennsylvania, 458 U. S. 375, 394 (1982); United States v. Lee, 455 U. S. 252, 258 (1982). Even for pension and health benefit plans, which undeniably fall within the § 507(a)(5) priority, the payments are rarely if ever voluntary in the charitable sense that Howard invokes. The mandatory nature of most workers’ compensation coverage, then, fails to establish that the payments are not contributions.

Howard’s argument that the workers’ compensation payments here do not “aris[e] from services rendered,” § 507(a)(5), is also unpersuasive. This phrase, according to Howard, does not cover payments to insurance companies because those payments are made in exchange for the services of the insurance company, not the services of the employees. The Court seems to accept that insurance payments can receive the priority, see ante, at 659, 661-662, and this is part of the statute’s necessary operation. Even if the payments may go to the insurance company, they are predicated nonetheless on the employees’ performing services for the employer. They therefore “aris[e] from services rendered” in the same manner as do payments to a pension, health, or disability plan. From a practical standpoint, moreover, “[t]o allow the insurer to obtain its premiums through the priority would seem the surest way to provide the employees with the policy benefits to which they are entitled.” In re Saco Local Development Corp., 711 F. 2d 441, 449 (CA1 1983) (majority opinion by Breyer, J.).

II

The question that remains — and my main point of disagreement with the Court — is whether workers’ compensation insurance qualifies as an “employee benefit plan.” The answer, one would think, depends on whether workers’ compensation plans provide benefits to employees. It is clear that they do, as the employer’s contributions enable the insurer to give out substantial payments to employees.

Even assuming that the benefit the employer provides must be a net benefit, this condition is easily satisfied. It is true that, in return for receiving workers’ compensation, employees give up some of the common-law tort remedies they otherwise could have pursued. See ante, at 662-663. The common-law remedies, though, typically required the employer to be at fault; and they were further limited by the defenses of contributory negligence, assumption of risk, and the fellow-servant doctrine. See 1 A. Larson & L. Larson, Workers’ Compensation Law § 2.03 (2005). As a result, only a small percentage of injured workers received any recovery. Ibid. Workers’ compensation plans, even considering the tort claims relinquished, thus are generally a benefit to employees. See id., §2.03, at 2-6 (noting the “helplessness which characterized the position of the injured worker of the precompensation era”). Even where an employee might have received greater damages in a tort suit, the greater speed and certainty of payment in workers’ compensation is often worth the tradeoff. In many States, moreover, the employee has a choice to opt out of the workers’ compensation system, leaving him or her with traditional tort remedies. See, e. g., Ariz. Rev. Stat. Ann. § 23-906 (West 1995); Cal. Lab. Code Ann. § 4154 (West 2003); Ky. Rev. Stat. Ann. §342.395 (West 2005); Mass. Gen. Laws, ch. 152, §24 (West 2004); N. D. Cent. Code Ann. §65-07.1-03 (Lexis 2003); Pa. Stat. Ann., Tit. 77, § 1402(b) (Purdon 2002); R. I. Gen. Laws § 28-29-17 (Supp. 2005). When the employee chooses workers’ compensation, it plainly should be considered a benefit. For these reasons, workers’ compensation plans, on the whole, are a benefit to employees; and indeed, the Court does not suggest otherwise.

Instead, the Court holds that workers’ compensation is not an “employee benefit plan” largely because it also benefits employers. Ante, at 663. The text of the statute does not refer to whether the plan benefits employers, nor would it make sense to do so. Since the goal of the priority is to protect the benefits of employees, there is little reason to suppose that employees should lose that protection based on the additional fact that employers may gain something as well. Employers rarely make large payments to employee funds out of altruism, and surely the Court should not hold that employee benefits provide no benefit to the employer. In the case of health benefits, for example, the employer may receive tax breaks, good will, a healthy work force, and the leverage to pay lower wages. Workers’ compensation cannot be distinguished on this basis from pension, health, or disability plans, all of which the Court recognizes as covered by the priority.

The Court’s three other bases for treating workers’ compensation differently also find no support in the Bankruptcy Code. First, the Court maintains, based on the purpose and structure of the “employee benefit plan” priority in relation to the wage priority of § 507(a)(4), that only wage substitutes are covered. Ante, at 657-660. Even assuming this proposition were correct, it would not lead to the Court’s conclusion. That is because workers’ compensation plans, as a matter of economic realities, are wage substitutes. The Court made this precise point in one of the first cases addressing a workers’ compensation scheme: “[J]ust as the employee’s assumption of ordinary risks at common law presumably was taken into account in fixing the rate of wages, so the fixed responsibility of the employer, and the modified assumption of risk by the employee under the new system, presumably will be reflected in the wage scale.” New York Central R. Co. v. White, 243 U. S. 188, 201-202 (1917). Recent empirical studies confirm that employers pass on the cost of workers’ compensation to employees in the form of lower wages. See Fishback & Kantor, Did Workers Pay for the Passage of Workers’ Compensation Laws? 110 Q. J. Econ. 713 (1995); Gruber & Krueger, The Incidence of Mandated Employer-Provided Insurance: Lessons from Workers’ Compensation Insurance, 5 Tax Policy and the Economy 111 (D. Bradford ed. 1991); Viscusi & Moore, Workers’ Compensation: Wage Effects, Benefit Inadequacies, and the Value of Health Losses, 69 Rev. Econ. & Statistics 249 (1987).

Second, the mandatory nature of most workers’ compensation plans does not change the applicability of the priority. The benefit to employees is real and significant regardless of whether the government has mandated the benefit. While States generally “prescribe and regulate” workers’ compensation and leave other benefits “to private ordering,” ante, at 665, the presence of bargaining has no bearing on whether contributions should receive priority. See Saco, supra, at 448-449. Indeed, it is difficult to imagine that if States began to mandate other kinds of benefits, those benefits would promptly fall outside § 507(a)(5). This would amount to saying that whenever some form of protection for employees comes to be accepted as so necessary for their welfare that it is mandated as an employer responsibility it is no longer a benefit.

While the Court says the general practice among the States of making workers’ compensation mandatory is just one factor in the analysis, ante, at 665, presumably the Court does not suggest that an optional workers’ compensation scheme is an “employee benefit plan” simply because other States have mandatory schemes. Assuming, then, that a given optional workers’ compensation scheme might receive the priority, the Court’s approach will create uncertainty about application of the priority to the relevant payments. Only a few States have wholly permissive regimes, see, e. g., Tex. Lab. Code Ann. §406.002 (West 2006), but many more offer exemptions for particular kinds of employers, see, e. g., Tenn. Code Ann. §50-6-106(5) (2005); Mich. Comp. Laws §418.118(2) (1979). Not only will application of the priority depend on varying state laws, but also multistate workers’ compensation plans may have to be segmented for purposes of determining bankruptcy priorities. There is nothing in § 507(a)(5) to suggest an intent to cause this kind of disuniformity.

Third, the existence of state funds to compensate employees when their employers fail to provide workers’ compensation benefits has little relevance. Once again, it is unclear how much weight the Court places on this factor, and it seems doubtful that the Court would remove health plans from the priority simply because a State created a fallback public health system. In any event state fallback funds do not change the fact that the employer is providing a benefit; a fallback fund simply indicates the employee could have received the benefit from somewhere else. Were it otherwise, pension plans would also fall outside the priority, since it appears they must provide benefits even if the employer has defaulted on its contributions. See Central States, Southeast & Southwest Areas Pension Fund v. Central Transport, Inc., 472 U. S. 559, 567, n. 7 (1985) (citing Department of Labor advisory opinion). As a practical matter, moreover, most large multiemployer plans effectively guarantee compensation (unless all the employers happen to go bankrupt at the same time), and the Pension Benefit Guaranty Corporation ensures payment of at least some of the promised benefits. The exclusion of these plans from the priority, however, would accord with neither the text of the provision nor the commonsense notion that protecting the insurer— whether it be a private company, a multiemployer plan, or a government fund — is the best way to protect the employees. See Saco, 711 F. 2d, at 449. Simply put, harm to the insurer will be passed along to the employees, either by rendering the insurer unable to pay or causing it to charge higher rates for the same coverage.

Finally, even if the language of § 507(a)(5) were ambiguous, the definition of “employee benefit plan” in the Employee Retirement Income Security Act of 1974 (ERISA), 88 Stat. 829, as amended, 29 U. S. C. § 1001 et seq. (2000 ed. and Supp. Ill), would lend considerable support to respondent’s view. ERISA defines “employee benefit plan” as including an “employee welfare benefit plan,” §1002(3), which in turn “mean[s] any plan, fund, or program which . . . was established or is maintained for the purpose of providing for its participants or their beneficiaries, through the purchase of insurance or otherwise,... benefits in the event of sickness, accident, disability, death or unemployment,” § 1002(1). The definition of a term in one statute does not necessarily control the interpretation of that term in another statute, for where the purposes or contexts are different the terms may take on different meanings. See United States v. Reorganized CF&I Fabricators of Utah, Inc., 518 U. S. 213, 219-224 (1996). Where no conflicting purpose or context is apparent, though, other statutes may provide at least some evidence of Congress’ understanding. See Securities Industry Assn. v. Board of Governors, FRS, 468 U. S. 137, 150-151 (1984); see also ante, at 661-662.

The ERISA definition is of particular relevance here given that “employee benefit plan” is not a generic phrase but something closer to a term of art, with a meaning that seems unlikely to change based on statutory context. Also, neither Howard nor the Court cites any source for a definition of “employee benefit plan” that would exclude workers’ compensation. The Court attempts to minimize the significance of the ERISA definition by noting that ERISA exempts from its coverage any plan “maintained solely for the purpose of complying with applicable workmen’s compensation laws.” § 1003(b)(3); see ante, at 661-662. Congress exempted these plans from coverage, but it did not exclude them from its definition, and this is the relevant consideration. Indeed, the language of the exclusion confirms that workers’ compensation is an employee benefit plan. See § 1003(b) (“The provisions of this subchapter shall not apply to any employee benefit plan if... such plan is maintained solely for the purpose of complying with applicable workmen’s compensation laws”). The exemption also belies the Court’s position because it shows that mandatory workers’ compensation plans were not included in the definition for any purpose particular to ERISA. Instead, since they were exempted from coverage, the most plausible reason for their inclusion (only to be then excluded) is that Congress was simply giving the ordinary definition of the term. There is no indication in § 507(a)(5) that Congress chose to depart from that ordinary definition. By contrast, when Congress wanted a particular provision of the Bankruptcy Code to narrow the ordinary definition to exclude mandatory workers’ compensation, it did so expressly by referring to those plans covered by ERISA. See 11 U. S. C. § 541(b)(7).

An “employee benefit plan,” whether viewed as a term of art or in accordance with its plain meaning, includes workers’ compensation. These are the reasons for my respectful dissent.

       All references to provisions of the Bankruptcy Code use the current numbering. At the time respondent Zurich American Insurance Company (Zurich) claimed priority treatment for unpaid workers’ compensation premiums, the relevant subsections were numbered (a)(3) (wages) and (a)(4) (employee benefit plans). The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Pub. L. 109-8, §212(2), 119 Stat. 51, altered the priority list so that (a)(3) became (a)(4), and (a)(4) became (a)(5). The only other statutory change relevant here concerns the dollar amount accorded priority status under current § 507(a)(4) and (a)(5). When Zurich filed its proof of claim, the total sum allowed under those two subsections was $4,650 for each employee, see note following 11 U. S. C. § 104 (2000 ed., Supp. III). That ceiling has since been raised, pursuant to § 104, to $10,000 per employee, 11 U. S. C. A. § 507(a)(5)(B)® (Supp. 2006).

       In its initial proof of claim, Zurich did not check the box marked “Contributions to an employee benefit plan,” but instead checked a box marked “Other,” and wrote in “Administrative Expense — Insurance Premiums.” App. 22a, 30a. Zurich does not argue here that the workers’ compensation premiums owed by Howard qualify as administrative expenses entitled to priority under § 507(a)(2).

       We have jurisdiction of this case, as did the Court of Appeals, because the District Court’s ruling qualifies as a final decision under 28 U. S. C. § 158(d). See 403 F. 3d, at 231, and n. 6 (District Court’s ruling effectively concluded the dispute between Zurich and Howard, for the adverse decision rendered Zurich’s claim valueless and Zurich agreed to withdraw the claim if it failed to prevail on appeal). See also In re Saco Local Development Corp., 711 F. 2d 441, 444 (CA1 1983) (majority opinion of Breyer, J.) (“Congress has long provided that orders in bankruptcy cases may be immediately appealed if they finally dispose of discrete disputes within the larger case — and in particular, it has long provided that orders finally settling creditors’ claims are separately appealable.”).

       Section 507(a)(5)(B) provides:
      “(a) The following expenses and claims have priority in the following order:

        “(5) Fifth, allowed unsecured claims for contributions to an employee benefit plan—
      “(B) for each such plan, to the extent of—
      “(i) the number of employees covered by each such plan multiplied by $10,000; less
      “(ii) the aggregate amount paid to such employees under paragraph (4) of this subsection, plus the aggregate amount paid by the estate on behalf of such employees to any other employee benefit plan.” 11 U.S. C. §507.

       Congress also excluded most workers’ compensation benefits from the purview of the Davis-Baeon Act, 40 U. S. C. § 3141(2) (2000 ed., Supp. III), a measure that fixes a floor under wages on Government projects. The Davis-Baeon Act incorporates “bona fide fringe benefits,” broadly defined, into prevailing wage determinations, but specifically excludes benefits contractors are required to provide under federal, state, or local law. § 3141(2)(B).

       Providing health care to workers fosters a healthy and happy work force, and a contented work force benefits employers. The dissent suggests this as a reason to rank workers’ compensation insurance with health and pension plans for bankruptcy priority purposes. See post, at 672. But the benefit employers gain from providing health and pension plans for their employees is of a secondary order; indeed, under the dissent’s logic, wages could be said to “benefit” the employer because they ensure that employees come to work, can afford transportation to the jobsite, etc. These benefits redound to the employer reflexively, as a consequence of the benefit to the employee. Workers’ compensation insurance, by contrast, directly benefits insured employers by eliminating their tort liability for workplace accidents.

       Saco Local Development Corp., 711 F. 2d, at 448-449, we note, is not at odds with our conclusion that unpaid workers’ compensation premiums do not qualify for priority status. The First Circuit held in Saco that a group life, health, and disability insurance plan fit within § 507(a)(5), though the benefit package was unilaterally provided by the employer, and not installed pursuant to collective bargaining. Wage surrogates, then-Judge Breyer explained, need not be negotiated to qualify under § 507(a)(5) as “employee benefit plants],” for “Congress’ object in enacting [that subsection] was to extend the 1898 Act’s wage priority to new forms of compensation, such as insurance and other fringe benefits.” Id., at 449. Saco did not involve workers’ compensation regimes, and the First Circuit expressed no opinion on them.

       The state fund in New Neighborhoods, it appears, did not urge that claims for unpaid workers’ compensation premiums qualify for the higher (a)(5) priority. The Fourth Circuit’s opinion in that case, however, suggests that the court assumed a private compensation carrier would be accorded no priority. See 886 F. 2d, at 720 (under court’s holding, “a state agency is given, as an insurer, priority in bankruptcy when a private insurer is not”).

       The dissenting opinion nowhere homes in on the reality that including amounts owed to workers’ compensation carriers risks diminishing funds available to cover contributions to workers’ pension and "health-care plans.