author: Mr. Justice Brennan Mr. Justice Blackmun, Mr. Justice Stewart,

text:
    BURKS et al. v. LASKER et al.
    No. 77-1724.
    Argued January 17, 1979
    Decided May 14, 1979

      BreNNAN, J., delivered the opinion of the Court, in which Burger, C. J., and White, Marshall, BlacicmuN, and SteveNS, JJ., joined. Blacic-mun, J., filed a concurring opinion, post, p. 486. Stewart, J., filed an opinion concurring in the judgment, in which Powell, J., joined, post, p. 487. Rehnquist, J., took no part in the consideration or decision of the case.

      Daniel A. Pollack argued the cause for petitioners. With him on the briefs were Martin I. Kaminsky, Leonard Joseph, John M. Friedman, Jr., Eugene P. Souther, and Anthony B. Mansfield.

      Joseph H. Einstein argued the cause for respondents. With him on the brief were Steven Mallis, Leonard Holland, and David J. Sweet.

      Ralph C. Ferrara argued the cause for the Securities and Exchange Commission as amicus curiae urging reversal. With him on the brief were Solicitor General McCree, Stephen M. Shapiro, and Jacob H. Stillman.

      Briefs of amici curiae urging reversal were filed by G. Duane Vieth, Paul S. Ryerson, and Meyer Eisenberg for the Investment Company Institute, and by John E. Tobin, Roger W. Rapp, and Richard H. Sayler for Investors Diversified Services, Inc.

   Mr. Justice Brennan

delivered the opinion of the Court.

The question presented in this case is whether the disinterested directors of an investment company may terminate a stockholders’ derivative suit brought against other directors under the Investment Company and Investment Advisers Acts of 1940, 15 U. S. C. § 80a-1 et seq.; 15 U. S. C. § 80b-1 et seq. To decide that question, we must determine the appropriate roles of federal and state law in such a controversy.

Respondents, shareholders of Fundamental Investors, Inc., an investment company registered under the Investment Company Act, brought this derivative suit in February 1973 in the District Court for the Southern District of New York. The action was brought against several members of the company’s board of directors and its registered investment adviser, Anchor Corp. The complaint alleged that the defendants had violated their duties under the Investment Company Act (ICA), the Investment Advisers Act (IAA), and the common law in connection with the 1969 purchase by the corporation of $20 million in Penn Central Transportation Co. commercial paper. In response to the suit, Fundamental’s board of directors determined that the five of its members who were neither affiliated with the investment adviser nor defendants in the action would decide what position the company should take in the case. On the basis of outside counsel’s recommendation and their own investigation, the five, acting as a quorum pursuant to the company’s bylaws, concluded that continuation of the litigation was contrary to the best interests of the company and its shareholders and moved the District Court to dismiss the action.

The District Court held that under the so-called “business judgment rule,” a quorum of truly disinterested and independent directors has authority to terminate a derivative suit which they in good faith conclude is contrary to the company’s best interests. 404 F. Supp. 1172 (1975). After permitting discovery on the question of the directors’ independence, the District Court entered summary judgment against respondents, finding no evidence that the directors who voted to terminate the suit had acted other than independently and in good faith. 426 F. Supp. 844 (1977). The Court of Appeals for the Second Circuit reversed, 567 F. 2d 1208, 1212 (1978), holding that as a consequence of the ICA, “disinterested directors of an investment company do not have the power to foreclose the continuation of nonfrivolous litigation brought by shareholders against majority directors for breach of their fiduciary duties.” We granted certiorari, 439 U. S. 816 (1978). We reverse.

I

A fundamental issue in this case is which law — state or federal — governs the power of the corporation’s disinterested directors to terminate this derivative suit. The first step in making that determination is to ascertain which law creates the cause of action alleged by the plaintiffs. Neither the ICA nor the IAA — the plaintiff’s two federal claims — expressly creates a private cause of action for violation of the sections relevant here. However, on the basis of District and Circuit precedent, the courts below assumed that an implied private right of action existed under each Act. Brown v. Bullock, 194 F. Supp. 207, 222-228 (SDNY), aff’d, 294 F. 2d 415 (CA2 1961) (en banc) (ICA); Abrahamson v. Fleschner, 568 F. 2d 862 (CA2 1977) (IAA); Bolger v. Laventhol, Krekstein, Horwath & Horwath, 381 F. Supp. 260 (SDNY 1974) (IAA). The two courts also sanctioned the bringing of the suit in derivative form, apparently assuming that, as we held in J. I. Case Co. v. Borak, 377 U. S. 426, 432 (1964), “[t]o hold that derivative actions are not within the sweep of the [right] would ... be tantamount to a denial of private relief.” As petitioners never disputed the existence of private, derivative causes of action under the Acts, and as in this Court all agree that the question has not been put in issue, Brief for Petitioners 28; Brief for Respondents 15, we shall assume without deciding that respondents have implied, derivative causes of action under the ICA and IAA.

Since we proceed on the premise of the existence of a federal cause of action, it is clear that “our decision is not controlled by Erie R. Co. v. Tompkins, 304 U. S. 64,” and state law does not operate of its own force. Sola Electric Co. v. Jefferson Co., 317 U. S. 173, 176 (1942). See Board of Comm’rs v. United States, 308 U. S. 343, 349-350 (1939); Deitrick v. Greaney, 309 U. S. 190, 200 (1940); C. Wright, Federal Courts 284 (3d ed. 1976); Mishkin, The Variousness of “Federal Law”: Competence and Discretion in the Choice of National and State Rules for Decision, 105 U. Pa. L. Rev. 797, 799-800 (1957); Hart, The Relations Between State and Federal Law, 54 Colum. L. Rev. 489, 529 (1954); 2 L. Loss, Securities Regulation 971 (2d ed. 1961). Rather, “[w]hen a federal statute condemns an act as unlawful, the extent and nature of the legal consequences of the condemnation, though left by the statute to judicial determination, are nevertheless federal questions, the answers to which are to be derived from the statute and the federal policy which it has adopted.” Sola Electric Co. v. Jefferson Co., supra, at 176. See Tunstall v. Locomotive Firemen & Enginemen, 323 U. S. 210, 213 (1944); Board of Comm’rs v. United States, supra. Cf. United States v. Kimbell Foods, Inc., 440 U. S. 715, 726-727 (1979); Butner v. United States, 440 U. S. 48 (1979). Legal rules which impact significantly upon the effectuation of federal rights must, therefore, be treated as raising federal questions. See Robertson v. Wegmann, 436 U. S. 584, 588 (1978) (statute of limitations) ; Auto Workers v. Hoosier Corp., 383 U. S. 696, 701 (1966) (same); J. I. Case Co. v. Borak, supra, at 435 (security for expenses statute); Sola Electric Co. v. Jefferson Co., supra, at 176 (rules of estoppel); Deitrick v. Greaney, supra, at 200 (affirmative defense to federal-claim). See generally Friendly, In Praise of Erie — and of the New Federal Common Law, 39 N. Y. U. L. Rev. 383, 408 (1964); Hill, State Procedural Law in Federal Nondiversity Litigation, 69 Harv. L. Rev. 66, 92-93 (1955). Thus, “the overriding federal law applicable here would, where the facts required, control the appropriateness of redress despite the provisions of state corporation law . . . J. I. Case Co. v. Borak, supra, at 434 (emphasis added).

II

The fact that “the scope of [respondents’] federal right is, of course, a federal question” does not, however, make state law irrelevant. De Sylva v. Ballentine, 351 U. S. 570, 580 (1956). Cf. United States v. Kimbell Foods, Inc., supra, at 727-728. It is true that in certain areas we have held that federal statutes authorize the federal courts to fashion a complete body of federal law. See Textile Workers v. Lincoln Mills, 353 U. S. 448, 451, 456-457 (1957). Corporation law, however, is not such an area.

A derivative suit is brought by shareholders to enforce a claim on behalf of the corporation. See Note, The Demand and Standing Requirements in Stockholder Derivative Actions, 44 U. Chi. L. Rev. 168 (1976). This case involves the question whether directors are authorized to determine that certain claims not be pursued on the corporation’s behalf. As we have said in the past, the first place one must look to determine the powers of corporate directors is in the relevant State’s corporation law. See Santa Fe Industries, Inc. v. Green, 430 U. S. 462, 479 (1977); Cort v. Ash, 422 U. S. 66, 84 (1975). “Corporations are creatures of state law,” ibid., and it is state law which is the font of corporate directors’ powers. By contrast, federal law in' this area is largely regulatory and prohibitory in nature — it often limits the exercise of directorial power, but only rarely creates it. Cf. Price v. Gurney, 324 U. S. 100, 107 (1945). In short, in this field congressional legislation is generally enacted against the background of existing state law; Congress has never indicated that the entire corpus of state corporation law is to be replaced simply because a plaintiff’s cause of action is based upon a federal statute. Cort v. Ash, supra; Santa Fe Industries, Inc. v. Green, supra. See United Copper Securities Co. v. Amalgamated Copper Co., 244 U. S. 261, 264 (1917). Cf. United States v. Yazell, 382 U. S. 341, 352-353 (1966) (state family law); De Sylva v. Ballentine, supra, at 580 (same); P. Bator, P. Mishkin, D. Shapiro, & H. Wechsler, The Federal Courts and The Federal System 470-471 (1973 ed.).

Federal regulation of investment companies and advisers is not fundamentally different in this respect. Mutual funds, like other corporations, are incorporated pursuant to state, not federal, law. Although the Court of Appeals found it significant that “nothing in . . . the legislation regulating investment companies and their advisers . . . suggests that.. . disinterested directors . . . have the power to terminate litigation brought by mutual fund stockholders . . . ,” 567 F. 2d, at 1210, such silence was to be expected. The ICA does not purport to be the source of authority for managerial power; rather, the Act functions primarily to “impos[e] controls and restrictions on the internal management of investment companies.” United States v. National Assn. of Securities Dealers, 422 U. S. 694, 705 n. 13 (1975) (emphasis added).

The ICA and IAA, therefore, do not require that federal law displace state laws governing the powers of directors unless the state laws permit action prohibited by the Acts, or unless “their application would be inconsistent with the federal policy underlying the cause of action . . . Johnson v. Railway Express Agency, 421 U. S. 454, 465 (1975). Cf. Robertson v. Wegmann, supra, at 590; Auto Workers v. Hoosier Corp., supra, at 706-707; Sola Electric Co. v. Jefferson Co., 317 U. S., at 176. Although “[a] state statute cannot be considered ‘inconsistent’ with federal law merely because the statute causes the plaintiff to lose the litigation,” Robertson v. Wegmann, supra, at 593, federal courts must be ever vigilant to insure that application of state law poses “no significant threat to any identifiable federal policy or interest . . . .” Wallis v. Pan American Petroleum Corp., 384 U. S. 63, 68 (1966). See Auto Workers v. Hoosier Corp., supra, at 702. Cf. Brown v. Western R. Co. of Alabama, 338 U. S. 294, 298 (1949). And, of course, this means that “unreasonable,” Wallis v. Pan American Petroleum Corp., supra, at 70, or “specific aberrant or hostile state rules,” United States v. Little Lake Misere Land Co., 412 U. S. 580, 596 (1973), will not be applied. See, e. g., Levitt v. Johnson, 334 F. 2d 815, 819-820 (CA1 1964). The “consistency” test guarantees that “[n]othing that the state can do will be allowed to destroy the federal right,” Board of Comm’rs v. United States, 308 U. S., at 350, and yet relieves federal courts of the necessity to fashion an entire body of federal corporate law out of whole cloth.

Ill

The foregoing indicates that the threshold inquiry for a federal court in this case should have been to determine whether state law permitted Fundamental’s disinterested directors to terminate respondents’ suit. If so, the next inquiry should have been whether such a state rule was consistent with the policy of the ICA and IAA. Neither the District Court nor the Court of Appeals decided the first question, apparently because neither considered state law particularly significant in determining the authority of the independent directors to terminate the action. And in that circumstance, neither court addressed the question of inconsistency between state and federal law. At least implicitly, however, the Court of Appeals did make a related determination. Its holding that nonfrivolous derivative suits may never be terminated makes manifest its view that no other rule — whether state or federal — would be consistent with the ICA. We disagree.

The Court of Appeals correctly noted, 567 F. 2d, at 1210-1211, that Congress was concerned about the potential for abuse inherent in the structure of investment companies. A mutual fund is a pool of assets, consisting primarily of portfolio securities, and belonging to the individual investors holding shares in the fund. Tannenbaum v. Zeller, 552 F. 2d 402, 405 (CA2 1977). Congress was concerned because

“[m]utual funds, with rare exception, are not operated by their own employees. Most funds are formed, sold, and managed by external organizations, [called ‘investment advisers,’] that are separately owned and operated. . .. The advisers select the funds’ investments and operate their businesses. . . .
“Since a typical fund is organized by its investment adviser which provides it with almost all management services . . . , a mutual fund cannot, as a practical matter sever its relationship with the adviser. Therefore, the forces of arm’s-length bargaining do not work in the mutual fund industry in the same manner as they do in other sectors of the American economy.” S. Rep. No. 91-184, p. 5 (1969).

As a consequence, “[t]he relationship between investment advisers and mutual funds is fraught with potential conflicts of interest,” Galfand v. Chestnutt Corp., 545 F. 2d 807, 808 (CA2 1976). See generally S. Rep. No. 91-184, supra, at 5; H. R. Rep. No. 2337, 89th Cong., 2d Sess., 9, 45-46, 64 (1966); H. R. Doc. No. 136, 77th Cong., 1st Sess., 2485-2490, 2569, 2579-2580, 2775 (1942); Hearings before a Subcommittee of the House Committee on Interstate and Foreign Commerce on H. R. 10065, 76th Cong., 3d Sess., 58-59 (1940); Securities and Exchange Commission, Report on Investment Trusts and Investment Companies, pt. 3, pp. 1-49 (1940); 15 U. S. C. § 80a-l (b) (findings and declaration of policy). Yet, while these potential conflicts may justify some restraints upon the unfettered discretion of even disinterested mutual fund directors, particularly in their transactions with the investment adviser, they hardly justify a flat rule that directors may never terminate nonfrivolous derivative actions involving co-directors. In fact, the evidence is overwhelming that Congress did not intend to require any such absolute rule.

The cornerstone of the ICA’s effort to control conflicts of interest within mutual funds is the requirement that at least 40% of a fund’s board be composed of independent outside directors. 15 U. S. C. §80a-10(a). As originally enacted, § 10 of the Act required that these 40% not be officers or employees of the company or “affiliated persons” of its adviser. 54 Stat. 806. In 1970, Congress amended the Act to strengthen further the independence of these directors, adding the stricter requirement that the outside directors not be “interested persons.” See 15 U. S. C. §§ 80a-10 (a), 80a-2 (a)(19). To these statútorily disinterested directors, the Act assigns a host of special responsibilities involving supervision of management and financial auditing. They have the duty to review and approve the contracts of the investment adviser and the principal underwriter, 15 U. S. C. § 80a-15 (c); the responsibility to appoint other disinterested directors to fill vacancies resulting from the assignment of the advisory contracts, 15 U. S. C. § 80a-16 (b); and are required to select the accountants who prepare the company’s Securities and Exchange Commission financial filings, 15 U. S. C. § 80a-31 (a).

Attention must be paid as well to what Congress did not do. Congress consciously chose to address the conflict-of-interest problem through the Act’s independent-directors section, rather than through more drastic remedies such as complete disaffiliation of the companies from their advisers or compulsory internalization of the management function. See Report of the SEC on the Public Policy Implications of Investment Company Growth, H. R. Rep. No. 2337, 89th Cong., 2d Sess., 147-148 (1966). Congress also decided not to incorporate into the 1940 Act a provision, proposed by the SEC, that would have forced investment companies to seek court approval before settling claims against “insiders” that could be the target of derivative suits. See S. 3580, 76th Cong., 3d Sess., §33 (a) (1940); Wolf v. Barkes, 348 F. 2d 994, 997 n. 4 (CA2 1965). And when Congress did intend to prevent board action from cutting off derivative suits, it said so expressly. Section 36 (b), 84 Stat. 1428, 15 U. S. C. § 80a-35 (b)(2), added to the Act in 1970, performs precisely this function for derivative suits charging breach of fiduciary duty with respect to adviser’s fees. No similar provision exists for derivative suits of the kind involved in this case.

Congress’ purpose in structuring the Act as it did is clear. It “was designed to place the unaffiliated directors in the role of 'independent watchdogs,’ ” Tannenbaum v. Zeller, 552 F. 2d, at 406, who would “furnish an independent check upon the management” of investment companies, Hearings on H. R. 10065 before a Subcommittee of the House Committee on Interstate and Foreign Commerce, 76th Cong., 3d Sess., 109 (1940). This “watchdog” control was chosen in preference to the more direct controls on behavior exemplified by the options not adopted. Indeed, when by 1970 it appeared that the “affiliated person” provision of the 1940 Act might not be adequately restraining conflicts of interest, Congress turned not to direct controls, but rather to stiffening the requirement of independence as the way to “remedy the act’s deficiencies.” S. Rep. No. 91-184, pp. 32-33 (1969). Without question, “[t]he function of these provisions with respect to unaffiliated directors '[was] to supply an independent check on management and to provide a means for the representation of shareholder interests in investment company affairs.” Id., at 32.

In short, the structure and purpose of the ICA indicate that Congress entrusted to the independent directors of investment companies, exercising the authority granted to them by state law, the primary responsibility for looking after the interests of the funds’ shareholders. There may well be situations in which the independent directors could reasonably believe that the best interests of the shareholders call for a decision not to sue — as, for example, where the costs of litigation to the corporation outweigh any potential recovery. See Note, 47 Ford. L. Rev. 568, 580 (1979); Note, 44 U. Chi. L. Rev., at 196. See, e. g., Tannenbaum v. Zeller, supra, at 418; Cramer v. General Tel. & Electronics Corp., 582 F. 2d 259, 275 (CA3 1978). In such cases, it would certainly be consistent with the Act to allow the independent directors to terminate a suit, even though not frivolous. Indeed, it would have been paradoxical for Congress to have been willing to rely largely upon “watchdogs” to protect shareholder interests and yet, where the “watchdogs” have done precisely that, require that they be totally muzzled.

IV

We hold today that federal courts should apply state law governing the authority of independent directors to discontinue derivative suits to the extent such law is consistent with the policies of the ICA and IAA. Moreover, we hold that Congress did not require that States, or federal courts, absolutely forbid director termination of all nonfrivolous actions. However, since “[w]e did not grant certiorari to decide [a question of state law],” Butner v. United States, 440 U. S. 48, 51 (1979), and since neither the District Court nor the Court of Appeals decided the point, the case is reversed and remanded for further proceedings consistent with this opinion. Butner v. United States; Wallis v. Pan American Petroleum Corp., 384 U. S., at 72.

Reversed and remanded.

Mr. Justice Rehnquist took no part in the consideration or decision of this case.

Mr. Justice Blackmun,

concurring.

I join the Court’s opinion and its judgment. In so doing, I read that opinion to hold that on remand the Court of Appeals is free to determine and, indeed, should determine what the state law in this area requires, and then whether that state law is consistent with the policies of the Investment Company and Investment Advisers Acts. This reading, of course, is at odds with the absolutist position taken by the opinion concurring in the judgment, but it seems to me that a situation could very well exist where state law conflicts with federal policy. The effectuation of that federal policy should not then be foreclosed, as the concurring opinion implies it would be.

Mr. Justice Stewart,

with whom Mr. Justice Powell joins, concurring in the judgment.

The Investment Company Act of 1940 and the Investment Advisers Act of 1940 are silent on the question whether the disinterested directors of an investment company may terminate a stockholders’ derivative suit. The inquiry thus must turn to the relevant state law. I cannot agree with the implications in the Court’s opinion, ante, at 480, 481-482, 486, that there is any danger that state law will conflict with federal policy.

The business decisions of a corporation are normally entrusted to its board of directors. A decision whether or not a corporation will sue an alleged wrongdoer is no different from any other corporate decision to be made in the collective discretion of the disinterested directors. E. g., Swanson v. Traer, 354 U. S. 114, 116; United Copper Securities Co. v. Amalgamated Copper Co., 244 U. S. 261, 263; McKee v. Rogers, 18 Del. Ch. 81, 156 A. 191 (1931); Rice v. Wheeling Dollar Savings & Trust Co., 130 N. E. 2d 442 (Ohio Ct. Com. Pleas 1954); Goodwin v. Castleton, 19 Wash. 2d 748, 144 P. 2d 725 (1944).

On remand, the issue will be whether the state law here applicable recognizes this generally accepted principle and thereby empowers the directors to terminate this stockholder suit. Since Congress intended disinterested directors of mutual funds to be “independent watchdogs,” ante, at 484, I can see no possible conflict between this generally accepted principle of state law and the federal statutes in issue.

       § 13 (a) (3), 54 Stat. 811, as amended, 15 U. S. C. § 80a-13 (a) (3), and former § 36, 54 Stat. 841, 15 U. S. C. § 80a-35 (1964 ed.).

       § 206, 54 Stat. 852, as amended, 15 U. S. C. § 80b-6.

       The complaint alleged, inter alia, that “Anchor breached its statutory, contractual and common law fiduciary duties by relying exclusively upon the representations of Goldman, Sachs & Co. (a seller of commercial paper), rather than independently investigating the quality and safety of the Penn Central 270-day notes purchased by the Fund. It is further alleged that the defendant directors knew or should have known of Anchor’s failure to meet its responsibility; that they violated their . . . duties as corporate fiduciaries by acquiescing in Anchor’s omissions; that the financial condition of the Penn Central steadily worsened during the period from November 28, 1969 to June 21, 1970, the date that it filed for reorganization; and that during this period of decline all of the defendants failed to investigate and review the financial condition of the Penn Central and the quality and safety of its commercial paper.” 426 F. Supp. 844, 847 (1977).

       The five were “disinterested” within the meaning of the ICA (see 567 F. 2d 1208, 1209 (CA2 1978)) which provides:
      “No registered investment company shall have a board of directors more than 60 per centum of the members of which are persons who are interested persons of such registered company.” 15 U. S. C. § 80a-10 (a).
      The definition of “interested person” is found at 15 U. S. C. § 80a-2 (a) (19). See n. 12, infra.

      Of the remaining six directors, five were defendants in the Lasker suit, and one was a director of the investment adviser. 404 F. Supp. 1172, 1175 (1975).

       The question whether a cause of action exists is not a question of jurisdiction, and therefore may be assumed without being decided. Cf. Mt. Healthy City Board of Ed. v. Doyle, 429 U. S. 274, 279 (1977) ; Bell v. Hood, 327 U. S. 678, 682 (1946). Other Courts of Appeals have agreed with the Second Circuit that the ICA and IAA create private causes of action. As to the ICA, see Moses v. Burgin, 445 E. 2d 369, 373 (CA1 1971); Esplin v. Hirschi, 402 F. 2d 94, 103 (CA10 1968). See also Herpich v. Wallace, 430 F. 2d 792, 815 (CA5 1970); Taussig v. Wellington Fund, Inc., 313 F. 2d 472, 476 (CA3 1963). Compare Greater Iowa Corp. v. McLendon, 378 F. 2d 783, 793 (CA8 1967), with Brouh v. Managed Funds, Inc., 286 F. 2d 901 (CA8 1961), vacated as moot, 369 U. S. 424 (1962). As to the IAA, see Lewis v. Transamerica Corp., 575 F. 2d 237 (CA9), cert. granted sub nom. Transamerica Mortgage Advisors, Inc. v. Lewis, 439 U. S. 952 (1978); Wilson v. First Houston Investment Corp., 566 F. 2d 1235 (CA5 1978).

       This is not a situation where federal policy requires uniformity and, therefore, where the very application of varying state laws would itself be inconsistent with federal interests. In enacting the ICA and IAA, Congress did declare that “the activities of such companies, extending over many States, . . . make difficult, if not impossible, effective State regulation of such companies . . . 15 U. S. C. § 80a-1 (a) (5). But as long as private causes of action are available in federal courts for violation of the federal statutes, this enforcement problem is obviated. The real concern, therefore, is not that state laws be uniform, but rather that the laws applied in suits brought to enforce federal rights meet the standards necessary to insure that the “prohibition of [the] federal statute . . . not be set at naught,” Sola Electric Co. v. Jefferson Co., 317 U. S. 173, 176 (1942). The “consistency” requirement described in text guarantees that state laws failing to meet these standards will be precluded.

       See 567 F. 2d 1208 (CA2 1978); 404 F. Supp. 1172 (SDNY 1975).

       The Court of Appeals did not undertake any separate analysis of the policy behind the ICA’s companion statute, the IAA.

       See also Tannenbaum v. Zeller, 552 F. 2d 402, 405 (CA2 1977); Radmer, Duties of the Directors of Investment Companies, 3 J. Corp. L. 61, 63 (1977); Note, 47 Ford. L. Rev. 568 (1979).

       See, e. g., § 36 of the ICA, 54 Stat. 841, as amended, 15 U. S. C. § 80a-35, and § 206 of the IAA, 54 Stat. 852, as amended, 15 U. S. C. § 80b-6, imposing minimum standards on the behavior of investment company directors and advisers which presumably apply as much to their decisions regarding litigation as to the other decisions they may be called upon to make. See Santa Fe Industries, Inc. v. Green, 430 U. S. 462, 471 n. 11 (1977) (“Congress intended the Investment Advisers Act to establish federal fiduciary standards for investment advisers”); SEC v. Capital Gains Research Bureau, 375 U. S. 180, 191-192 (1963); Cramer v. General Tel. & Electronics Corp., 582 F. 2d 259, 275 (CA3 1978); Tannenbaum v. Zeller, supra, at 418-419.

       Under certain circumstances, independent directors must constitute a majority rather than 40% of the board. See 15 U. S. C. § 80a-10 (b).

       Title 15 U. S. C. §80a-2 (a)(19) defines an “'interested person’ of another person . . . when used with respect to an investment company,” as
      “(i) any affiliated person of such company,
      “(ii) any member of the immediate family of any natural person who is an affiliated person of such company,
      “(iii) any interested person of any investment adviser of or principal underwriter for such company,
      “(iv) any person or partner or employee of any person who at any time since the beginning of the last two fiscal years of such company has acted as legal counsel for such company,
      “(v) any broker or dealer registered under the Securities Exchange Act of 1934 or any affiliated person of such a broker or dealer, and
      “(vi) any natural person whom the Commission by order shall have determined to be an interested person by reason of having had, at any time since the beginning of the last two fiscal years of such company, a material business or professional relationship with such company or with the principal executive officer of such company or with any other investment company having the same investment adviser or principal underwriter or with the principal executive officer of such other investment company.”
      Title 15 U. S. C. § 80a-2 (a) (2) states that “ ‘[a]ffiliated company’ means a company which is an affiliated person,” and 15 U. S. C. § 80a-2 (a) (3) defines “ ‘affiliated person’ of another person” as
      “(A) any person directly or indirectly owning, controlling, or holding with power to vote, 5 per centum or more of the outstanding voting securities of such other person; (B) any person 5 per centum or more of whose outstanding voting securities are directly or indirectly owned, controlled, or held with power to vote, by such other person; (C) any person directly or indirectly controlling, controlled by, or under common control with, such other person; (D) any officer, director, partner, copartner, or employee of such other person; (E) if such other person is an investment company, any investment adviser thereof or any member of an advisory board thereof; and (F) if such other person is an unincorporated investment company not having a board of directors, the depositor thereof.”

         See also § 16 (b) of the Securities Exchange Act of 1934, 15 U. S. C. § 78p (b), which authorizes shareholder suits to recover insider “short swing” profits on behalf of the company notwithstanding the decision of the board of directors not to sue.

       See n. 12, supra.

       As an adjunct to its main argument which rested upon the structure of the ICA, the Court of Appeals was also of the view that mutual fund directors can never be truly disinterested in suits involving their co-directors. 567 F. 2d, at 1212. While lack of impartiality may or may not be true as a matter of fact in individual cases, it is not a conclusion of law required by the ICA. Congress surely would not have entrusted such critical functions as approval of advisory contracts and selection of accountants to the statutorily disinterested directors had it shared the Court of Appeals’ view that such directors could never be “disinterested” where their codirectors or investment advisers were concerned. In fact, although it was speaking only of the statutory definition, Congress declared in the second section of the Act that “no person shall be deemed to be an interested person of an investment company solely by reason of . . . his being a member of its board of directors or advisory board . . . .” 15 U. S. C. § 80a-2 (a) (19). See also 15 U. S. C. § 80a-2 (a)(9) (“A natural person shall be presumed not to be a controlled person within the meaning of this subchapter”).

       As an alternative ground in support of the judgment below, respondents urge that Fed. Rule Civ. Proc. 23.1 prohibits termination of this derivative action. That Rule states that a derivative action “shall not be dismissed or compromised without the approval of the court . . . .” However, as Judge Friendly noted with respect to former Rule 23 (c), those words apply only to voluntary settlements between derivative plaintiffs and defendants, and were intended to prevent plaintiffs from selling out their fellow shareholders. They do not apply where the plaintiffs’ action is involuntarily dismissed by a court, as occurred in this case. Wolf v. Barkes, 348 F. 2d 994, 996-997 (CA2 1965). The same is true of the identically worded Rule 23.1. See C. Wright & A. Miller, Federal Practice and Procedure § 1839, pp. 427, 435, 436 (1972); 3B J. Moore, Federal Practice ¶23.1.24 [2], App. p. 23.1-131 (1978).

       In this Court, the parties hotly dispute the content of the correct state rule. Compare Brief for Petitioners 36-38 with Brief for Respondents 35-39.


source: Caselaw Access Project

author: Mr. Justice White Mr. Justice Powell, Me. Justice Blackmun,

license: Public Domain

text:
    FORD MOTOR CO. (CHICAGO STAMPING PLANT) v. NATIONAL LABOR RELATIONS BOARD et al.
    No. 77-1806.
    Argued February 28, 1979
    Decided May 14, 1979

      White, J., delivered the opinion of the Court, in which BURGER, C. J., and BreNNAN, Stewart, Marshall, Powell, RehNquist, and SteveNS, JJ., joined. Powell, J., filed a concurring opinion, post, p. 503. BlacK-müN, J., filed an opinion concurring in the result, post, p. 504.

      Theophil C. Kammholz argued the cause for petitioner. With him on the briefs were Stanley R. Strauss and William J. Rooney.

      Norton J. Come argued the cause for respondent National Labor Relations Board. With him on the brief were Solicitor General McCree, Deputy Solicitor General Wallace, and John S. Irving. John A. Fillion argued the cause for respondent United Automobile Workers Local 588. With him on the brief were M. Jay Whitman, Irving M. Friedman, and Jerome Schur

        P. Kevin Connelly filed a brief for the National Automatic Merchandising Assn, as amicus curiae urging reversal.

        J. Albert Woll, Robert Mayer, and Laurence Gold filed a brief for the American Federation of Labor and Congress of Industrial Organizations as amicus curiae urging affirmance.

   Mr. Justice White

delivered the opinion of the Court.

The principal question in this case is whether prices for in-plant cafeteria and vending machine food and beverages are “terms and conditions of employment” subject to mandatory collective bargaining under §§ 8 (a)(5) and 8 (d) of the National Labor Relations Act. 49 Stat. 452, as amended, 29 U. S. C. §§ 158 (a)(5) and 158 (d).

I

Petitioner, Ford Motor Co., operates an automotive parts stamping plant in Chicago Heights, Ill., employing 3,600 hourly rated production employees. These employees are represented in collective bargaining with Ford by the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America, and by its administrative component, Local 588, a respondent here.

For many years, Ford has undertaken to provide in-plant food services to its Chicago Heights employees. These services, which include both cafeterias and vending machines, are managed by an independent caterer, ARA Services, Inc. Under its contract with Ford, ARA furnishes the food, management, machines, and personnel in exchange for reimbursement of all direct costs and a 9% surcharge on net receipts. Ford has the right to review and approve the quality, quantity, and price of the food served.

Over the years, Ford and the Union have negotiated about food services. The National Labor Relations Board (Board) found:

“Since 1967, the local contract has included provisions dealing with vending and cafeteria services. The contracts have covered the staffing of service lines, adequate cafeteria supervision, restocking and repairing vending machines, and menu variety. The 1974 local agreement also states, 'the Company recognized its continuing responsibility for the satisfactory performance of the caterer and for the expeditious handling of complaints concerned with such performance.’ ” Ford Motor Co. (Chicago Stamping Plant), 230 N. L. R. B. 716 (1977), enf’d, 571 F. 2d 993 (CA7 1978).

Ford, however, has always refused to bargain about the prices of food and beverages served in its in-plant facilities.

On February 6, 1976, Ford notified the Union that cafeteria and vending machine prices would be increased shortly by unspecified amounts. The Union requested bargaining over both price and services and also asked for information relevant to Ford’s involvement in food services in order to assist bargaining. These requests were refused by Ford, which took the position that food prices and services are not terms or conditions of employment subject to mandatory bargaining.

The Union then filed an unfair labor practice charge with the Board, alleging a refusal to bargain contrary to § 8 (a) (5). The Board sustained the charge, ordering Ford to bargain on both food prices and services and to supply the Union with the relevant information requested. Ford Motor Co. (Chicago Stamping Plant), supra. In doing so, the Board reaffirmed its position, expressed in several prior cases, that prices of in-plant-supplied food and beverages are generally mandatory bargaining subjects, a position that had not been accepted by reviewing courts. The Board also noted that the circumstances of this case made it a particularly strong one for invoking the duty to bargain.

The case came before the Court of Appeals for the Seventh Circuit on Ford’s petition for review and the Board’s cross-petition for enforcement. That court, while adhering to its prior decision in NLRB v. Ladish Co., 538 F. 2d 1267 (1976), which had refused enforcement of a Board order to bargain about in-plant food prices, enforced the Board’s order here because, “under the facts and circumstances of this case, in-plant cafeteria and vending machine food prices and services materially and significantly affect and have an impact upon terms and conditions of employment and therefore are mandatory subjects of bargaining.” 571 F. 2d, at 1000. The court was particularly influenced by the lack of reasonable eating alternatives for employees, declaring that “[t]he food one must pay for and eat as a captive customer within the employer’s plant can be viewed as a physical dimension of one’s working environment.” Ibid.

Because of the importance of the issue and the apparent conflict between the decision below and decisions of other Circuits, see n. 6, supra, we granted certiorari. 439 U. S. 891 (1978). We affirm the judgment of the Court of Appeals for the Seventh Circuit enforcing the Board’s order to bargain.

II

The Board has consistently held that in-plant food prices are among those terms and conditions of employment defined in § 8 (d) and about which the employer and union must bargain under §§8(a)(5) and 8(b)(3). See n. 6, supra. Because it is evident that Congress assigned to the Board the primary task of construing these provisions in the course of adjudicating charges of unfair refusals to bargain and because the “classification of bargaining subjects as ‘terms or conditions of employment’ is a matter concerning which the Board has special expertise,” Meat Cutters v. Jewel Tea Co., 381 U. S. 676, 685-686 (1965), its judgment as to what is a mandatory bargaining subject is entitled to considerable deference.

Section 8 (a) (5) of the National Labor Relations Act, as originally enacted, declared it an unfair practice for the employer to refuse to bargain collectively. Act of July 5, 1935, 49 Stat. 453. Although the Act did not purport to define the subjects of collective bargaining, § 9 (a) made the union selected by a majority in a bargaining unit the exclusive representative of the employees for bargaining about “rates of pay, wages, hours of employment, or other conditions of employment.” Under these provisions, the Board was left with the task of identifying on a case-by-case basis those “other conditions of employment” over which management was required to bargain.

In 1947, the Taft-Hartley Act amended the National Labor Relations Act to obligate unions as well as management to bargain; and § 8 (d) explicitly defined the duty of both sides to bargain as the obligation to “meet at reasonable times and confer in good faith with respect to wages, hours, and other terms and conditions of employment. .. .” 61 Stat. 142, now codified at 29 U. S. C. § 158 (d). The original House bill had contained a specific listing of the issues subject to mandatory bargaining, H. R. 3020, 80th Cong., 1st Sess., § 2 (11) (1947); H. R. Rep. No. 245, 80th Cong., 1st Sess., 22-23, 49 (1947), but this attempt to “strait-jacke[t]” and to “limit narrowly the subject matters appropriate for collective bargaining,” id., at 71 (minority report); see also 93 Cong. Rec. 3446-3447 (1947) (remarks of Rep. Klein), was rejected in conference in favor of the more general language adopted by the Senate and now appearing in § 8 (d). S. 1126, 80th Cong., 1st Sess., § 8 (d) (1947); see 93 Cong. Rec. 6444 (1947) (summary report of Sen. Taft); cf. H. R. Conf. Rep. No. 510, 80th Cong., 1st Sess., 8, 34 (1947). It is thus evident that Congress made a conscious decision to continue its delegation to the Board of the primary responsibility of marking out the scope of the statutory language and of the statutory duty to bargain. This case, therefore, is one of those situations in which we should “recognize without hesitation the primary function and responsibility of the Board . . . ,” NLRB v. Insurance Agents, 361 U. S. 477, 499 (1960), which is that “of applying the general provisions of the Act to the complexities of industrial life ... and of ‘[appraising] carefully the interests of both sides of any labor-management controversy in the diverse circumstances of particular cases’ from its special understanding of ‘the actualities of industrial relations.’ ” NLRB v. Erie Resistor Corp., 373 U. S. 221, 236 (1963), quoting NLRB v. Steelworkers, 357 U. S. 357, 362-363 (1958).

Of course, the judgment of the Board is subject to judicial review; but if its construction of the statute is reasonably defensible, it should not be rejected merely because the courts might prefer another view of the statute. NLRB v. Iron Workers, 434 U. S. 335, 350 (1978). In the past we have refused enforcement of Board orders where they had “no reasonable basis in law,” either because the proper legal standard was not applied or because the Board applied the correct standard but failed to give the plain language of the standard its ordinary meaning. Chemical & Alkali Workers v. Pittsburgh Plate Glass Co., 404 U. S. 157, 166 (1971). We have also parted company with the Board’s interpretation where it was “fundamentally inconsistent with the structure of the Act” and an attempt to usurp “major policy decisions properly made by Congress.” American Ship Building Co. v. NLRB, 380 U. S. 300, 318 (1965). Similarly, in NLRB v. Insurance Agents, supra, at 499, we could not accept the Board’s application of the Act where we were convinced that the Board was moving “into a new area of regulation which Congress had not committed to it.”

The Board is vulnerable on none of these grounds in this case. Construing and applying the duty to bargain and the language of § 8 (d), “other terms and conditions of employment,” are tasks lying at the heart of the Board’s function. With all due respect to the Courts of Appeals that have held otherwise, we conclude that the Board’s consistent view that in-plant food prices and services are mandatory bargaining subjects is not an unreasonable or unprincipled construction of the statute and that it should be accepted and enforced.

It is not suggested by petitioner that an employee should work a full 8-hour shift without stopping to eat. It reasonably follows that the availability of food during working hours and the conditions under which it is to be consumed are matters of deep concern to workers, and one need not strain to consider them to be among those “conditions” of employment that should be subject to the mutual duty to bargain. By the same token, where the employer has chosen, apparently in his own interest, to make available a system of in-plant feeding facilities for his employees, the prices at which food is offered and other aspects of this service may reasonably be considered among those subjects about which management and union must bargain. The terms and conditions under which food is available on the job are plainly germane to the “working environment,” Fibreboard Paper Products Corp. v. NLRB, 379 U. S. 203, 222 (1964) (Stewart, J., concurring). Furthermore, the company is not in the business of selling food to its employees, and the establishment of in-plant food prices is not among those “managerial decisions, which lie at the core of entrepreneurial control.” Id., at 223 (Stewart, J., concurring). The Board is in no sense attempting to permit the Union to usurp managerial decisionmaking; nor is it seeking to regulate an area from which Congress intended to exclude it.

Including within § 8 (d) the prices of in-plant-supplied food and beverages would also serve the ends of the National Labor Relations Act. “The object of this Act was not to allow governmental regulation of the terms and conditions of employment, but rather to insure that employers and their employees could work together to establish mutually satisfactory conditions. The basic theme of the Act was that through collective bargaining the passions, arguments, and struggles of prior years would be channeled into constructive, open discussions leading, it was hoped, to mutual agreement.” H. K. Porter Co. v. NLRB, 397 U. S. 99, 103 (1970). As illustrated by the facts of this case, substantial disputes can arise over the pricing of in-plant-supplied food and beverages. National labor policy contemplates that areas of common dispute between employers and employees be funneled into collective bargaining. The assumption is that this is preferable to allowing recurring disputes to fester outside the negotiation process until strikes or other forms of economic warfare occur.

The trend of industrial practice supports this conclusion. In response to increasing employee concern over the issue, many contracts are now being negotiated that contain provisions concerning in-plant food services. In this case, as already noted, local agreements between Ford and the Union have contained detailed provisions about nonprice aspects of in-plant food services for several years. Although not conclusive, current industrial practice is highly relevant in construing the phrase "terms and conditions of employment.”

III

Ford nevertheless argues against classifying food prices and services as mandatory bargaining subjects because they do not “vitally affect” the terms and conditions of employment within the meaning of the standard assertedly established by Chemical & Alkali Workers v. Pittsburgh Plate Glass Co., 404 U. S., at 176, and because they are trivial matters over which neither party should be required to bargain.

There is no merit to either of these aguments. First, Ford has misconstrued Pittsburgh Plate Glass. That case made it clear that while § 8 (d) normally reaches “only issues that settle an aspect of the relationship between the employer and employees[,] matters involving individuals outside the employment relationship ... are not wholly excluded.” 404 U. S., at 178. In such instances, as in Teamsters v. Oliver, 358 U. S. 283 (1959), and Fibreboard Paper Products Corp. v. NLRB, 379 U. S. 203 (1964), the test is not whether the “third-party concern is antagonistic to or compatible with the interests of bargaining-unit employees, but whether it vitally affects the ‘terms and conditions’ of their employment.” 404 U. S., at 179. Here, however, the matter of in-plant food prices and services is an aspect of the relationship between Ford and its own employees. No third-party interest is directly implicated, and the standard of Pittsburgh Plate Glass has no application.

As for the argument that in-plant food prices and service are too trivial to qualify as mandatory subjects, the Board has a contrary view, and we have no basis for rejecting it. It is also clear that the bargaining-unit employees in this case considered the matter far from trivial since they pressed an unsuccessful boycott to secure a voice in setting food prices. They evidently felt, and common sense also tells us, that even minor increases in the cost of meals can amount to a substantial sum of money over time. In any event, we accept the Board’s view that in-plant food prices and service are conditions of employment and are subject to the duty to bargain.

Ford also argues that the Board’s position will result in unnecessary disruption because any small change in price or service will trigger the obligation to bargain. The problem, it is said, will be particularly acute in situations where several unions are involved, possibly requiring endless rounds of negotiations over issues as minor as the price of a cup of coffee or a soft drink.

These concerns have been thought exaggerated by the Board. Its position in this case, as in all past cases involving the same issue, is that it is sufficient compliance with the statutory mandate if management honors a specific union request for bargaining about changes that have been made or are to be made. Ford Motor Co. (Chicago Stamping Plant), 230 N. L. R. B., at 718; Westinghouse Electric Corp., 156 N. L. R. B. 1080, 1081, enf'd, 369 F. 2d 891 (CA4 1966), rev’d en banc, 387 F. 2d 542 (1967). The Board apparently assumes that, as a practical matter, requests to bargain will not be lightly made. Moreover, problems created by constantly shifting food prices can be anticipated and provided for in the collective-bargaining agreement. Furthermore, if it is true that disputes over food prices are likely to be frequent and intense, it follows that more, not less, collective bargaining is the remedy. This is the assumption of national labor policy, and it is soundly supported by both reason and experience.

Finally, Ford asserts that to require it to engage in bargaining over in-plant food service prices would be futile because those prices are set by a third-party supplier, ARA. It is true that ARA sets vending machine and cafeteria prices, but under Ford’s contract with ARA, Ford retains the right to review and control food services and prices. In any event, an employer can always affect prices by initiating or altering a subsidy to the third-party supplier such as that provided by Ford in this case, and will typically have the right to change suppliers at some point in the future. To this extent the employer holds future, if not present, leverage over in-plant food services and prices.

We affirm, therefore, the Court of Appeals’ judgment upholding the Board’s determination in this case that in-plant food services and prices are “terms and conditions of employment” subject to mandatory bargaining under §§ 8 (a) (5) and 8 (d) of the National Labor Relations Act.

So ordered.

Mr. Justice Powell,

concurring.

The Court today holds that prices for in-plant cafeteria and vending machine food and beverages are “terms and conditions of employment” subject to mandatory collective bargaining under the National Labor Relations Act. Although this view of the Act has been taken consistently by the National Labor Relations Board, none of the courts of appeals has agreed with the absolute approach of the Board. Rather, these courts in general have taken the position that whether bargaining with respect to in-plant food service was required depends upon the facts and circumstances of each case. Although the Court of Appeals for the Seventh Circuit enforced the Board’s order in this case, it did so on a “facts and circumstances” basis.

I had thought that the case-by-case approach was more likely to be fair to both employer and union than is the mandatory bargaining rule adopted today. The conditions and circumstances under which in-plant food service is provided can and do vary widely among the thousands of enterprises subject to the Act. Yet, curiously enough, neither petitioner nor respondent union in this case supports the “facts and circumstances” approach of the Court of Appeals. On balance, I suppose there is merit in having a “bright line” with respect to this issue. This does put the parties to all collective bargaining on prior notice, with a reasonable expectation that the issue usually will be resolved in advance at the bargaining table. I am, therefore, persuaded to join the Court’s opinion.

Me. Justice Blackmun,

concurring in the result.

I am in accord with much — indeed with most — of what the Court pronounces in its opinion, and I join its judgment.

My concern is with the last two sentences of the penultimate paragraph of the Court’s opinion. Ante, at 503. The Court there says that “[i]n any event” an employer, by initiating or altering a subsidy to a third-party supplier, “can always affect prices” and “will typically have the right to change suppliers at some point in the future.” Thus, to this extent, “the employer holds future, if not present, leverage over in-plant food services and prices.” To me, this language seems to say that Ford’s control over prices under the facts of this case is really irrelevant to the “mandatory subject” inquiry, and seems to imply that an employer must bargain about prices even if he has no actual control over them at all. Any employer, of course, could achieve some measure of future control over prices, by initiating a subsidy or by changing suppliers. That future possibility, however, should not be enough.

If the employer has no control over prices, bargaining about them is futile. If the employer rents space in a corner of the plant to a restaurateur, and thereafter maintains a “hands off” attitude and has no input into the food operation, it is difficult for me to see how bargaining about food prices makes any sense. The employer has no more control over prices by virtue of its landlord status than it has over prices charged at the hamburger shop across the street. If the employer really has no control over prices, moreover, it is not obvious that the prices charged “settle an aspect of the relationship between the employer and employees,” Chemical & Alkali Workers v. Pittsburgh Plate Glass Co., 404 U. S. 157, 178 (1971), a precondition for mandatory bargaining status. The pertinent relationship is then between the restaurateur and the employees. If the employer has no control over prices and services whatsoever, and if he nevertheless is required to bargain about them because in the future he might be able to exercise some control over them, the employer's “managerial decision making” may well be usurped, and we are close to the basic concern of the concurrence in Fibreboard Paper Products Corp. v. NLRB, 379 U. S. 203, 222 (1964).

I think it is unwise to go out of our way to hold — if the Court does so here — that an employer with no present actual influence or control over food prices should be forced to bargain about them because'of the mere possibility that he might have “future leverage.” That situation is not presented in this case, and I see no need for the Court to decide it. For now, I prefer only a general rule that food prices are manda-torily bargainable so long as the employer, as here, has some measure of actual influence over the prices charged.

I thus join the Court in the result it reaches in this case. I would reserve other situations for another day.

       The National Labor Relation Board’s order at issue here directed petitioner to bargain with respondent Union “with respect to food services and changes in food prices in [petitioner’s in-plant] vending machines and cafeteria. . . .” Ford Motor Co. (Chicago Stamping Plant), 230 N. L. R. B. 716, 719 (1977), enf’d, 571 F. 2d 993 (CA7 1978). The duty to bargain over nonprice aspects of in-plant food services is thus also at issue here. The Board’s order also obligated petitioner to supply respondent Union with the information necessary for bargaining. 230 N. L. R. B., at 719. It seems agreed that if food prices and service are mandatory bargaining subjects, the order to furnish information should stand. See Detroit Edison Co. v. NLRB, 440 U. S. 301, 303 (1979).

       The relevant provisions of the National Labor Relations Act are as follows:
      “Sec. 8. (a) It shall be an unfair labor practice for an employer—
      “(5) to refuse to bargain collectively with the representatives of his employees, subject to the provisions of section 9 (a).
      “(d) For the purposes of this section, to- bargain collectively is the performance of the mutual obligation of the employer and the representative of the employees to meet at reasonable times and confer in good faith with respect to wages, hours, and other terms and conditions of employment, or the negotiation of an agreement, or any question arising thereunder, and the execution of a written contract incorporating any agreement reached if requested by either party, but such obligation does not compel either party to agree to a proposal or require the making of a concession ....
      “Sec. 9. (a) Representatives designated or selected for the purposes of collective bargaining by the majority of the employees in a unit appropriate for such purposes, shall be the exclusive representatives of all the employees in such unit for the purposes of collective bargaining in respect to rates of pay, wages, hours of employment, or other conditions of employment. . ..” As amended, 61 Stat. 140,142,143.
      As originally enacted, the Wagner Act did not define the subjects of §8 (a)(5)’s obligation to bargain, although §9 (a), which was contained in the Wagner Act, made reference to “rates of pay, wages, hours of employment, or other conditions of employment.” Section 8 (d) was added by the Taft-Hartley amendments to the Act in 1947, and expressly defined the scope of the duty to bargain as including “wages, hours, and other terms and conditions of employment.” The relevant details of this development are discussed infra, at 495-496.

       It is difficult for employees to eat away from the plant during their shifts. The lunch period is 30 minutes, and the few restaurants in the vicinity are all over a mile away, in an area heavily saturated with industrial plants employing thousands of workers. As a result, very few of the 3,600 workers leave the plant during the lunch period. Two 22-minute rest breaks are also provided during the shifts, but employees are not permitted to leave the plant then.
      Some workers bring food to work. No refrigerated storage facilities are provided, however, and spoilage and vermin are a problem, particularly in the summer.

       If receipts exceed ARA's cost plus the 9% surcharge, Ford is entitled to the excess. If revenues do not meet the costs of the operation plus the surcharge, the company is obligated to pay ARA up to $52,000 a year. In recent years, deficits have occurred often. In meeting the deficits, Ford has thereby subsidized employee meals and indirectly influenced the price of the food sold.

       The Union also began a boycott of food services in which more than half of the employees participated. The boycott ended slightly more than three months later without any reductions in prices.

         Westinghouse Electric Corp., 156 N. L. R. B. 1080, 1081, enf d, 369 F. 2d 891 (CA4 1966), rev’d en banc, 387 F. 2d 542 (1967); McCall Corp., 172 N. L. R. B. 540 (1968), enf. denied, 432 F. 2d 187 (CA4 1970); Package Machinery Co., 191 N. L. R. B. 268 (1971), enf. denied, 457 F. 2d 936 (CA1 1972); Ladish Co., 219 N. L. R. B. 354 (1975), enf. denied, 538 F. 2d 1267 (CA7 1976).

       See Ford Motor Co. (Chicago Stamping Plant), 230 N. L. R. B., at 717-718, n. 11:
      “We note that the instant case, on its facts, is in many respects a stronger case than Ladish for adhering to our position. Unlike Ladish, where the respondent had no input on prices, the Respondent in this case retains influence over cafeteria and vending machine prices by its right to review prices and its leverage of the subsidy agreement. In addition, there also exists the possibility for the Respondent to make a profit on the food service operation. Also, since 1967, the parties in this case have bargained over in-plant food services. No such bargaining history was present in Ladish. Moreover, in Ladish, the court implied that ‘brown-bagging’ is a viable alternative to purchasing lunch from the commercial food service. However, in this case, employees have complained about spoilage of food stored in their lockers until lunch, as well as unsanitary conditions in the locker room (wherein the Respondent has found it necessary on occasion to exterminate). Additionally, the employees have apparently been so concerned with the food pricing that over half of them participated in a boycott of the Respondent’s food service operations. There was no such labor strife involved in Ladish. Lastly, in Ladish the employees were represented by seven unions. The court therein projected that each time the food prices were raised 'the Company could be compelled to engage in seven rounds of negotiations.’ 538 F. 2d at 1272. This fact, the court declared, ‘provides a good example of a situation in which bargaining could be both disruptive of stable relations and economically wasteful.’ Id. In the instant case, however, the employees are represented by a single union. While we adhere to the view that the number of unions representing employees at a single plant is not a factor in resolving this issue, we nevertheless note that, even in the court’s view, there is no potential for conflicting union demands in this case.”

       The Report declared:
      “The appropriate scope of collective bargaining cannot be determined by a formula; it will inevitably depend upon the traditions of an industry, the social and political climate at any given time, the needs of employers and employees, and many related factors. What are proper subject matters for collective bargaining should be left in the first instance to employers and trade unions, and in the second place, to any administrative agency skilled in the field and competent to devote the necessary time to a study of industrial practices and traditions in each industry or area of the country, subject to review by the courts. It cannot and should not be straitjacketed by legislative enactment.” H. R. Rep. No. 245, 80th Cong., 1st Sess., 71 (1947) (minority report).

       See also Chemical & Alkali Workers v. Pittsburgh Plate Glass Co., 404 U. S. 157, 178 (1971) (“Section 8 (d) of the Act, of course, does not immutably fix a list of subjects for mandatory bargaining”); East Bay Union of Machinists v. NLRB, 116 U. S. App. D. C. 198, 201, 322 F. 2d 411, 414 (1963) (Burger, J.) (“The use of this language was a reflection of the congressional awareness that the act covered a wide variety of industrial and commercial activity and a recognition that collective bargaining must be kept flexible without precise delineation of what subjects were covered so that the Act could be administered to meet changing conditions”), aff’d sub nom. Fibreboard Paper Products Corp. v. NLRB, 379 U. S. 203 (1964).

       We should not be understood as holding that whether in-plant food services are to be provided where such services do not already exist is a mandatory bargaining subject. That issue is not involved here.

       See, e. g., 2 Bureau of National Affairs, Collective Bargaining (Negotiation and Contracts) 95:421-95:424 (1976). See also the following arbitration decisions construing collective-bargaining agreements to cover the cost of employer-supplied food as a condition of employment: Universal Form Clamp Co., 68 Lab. Arb. 1223 (Miller, 1977) (cost of coffee); Hilton Hotels Corp., 42 Lab. Arb. 1267, 1270-1272 (Hanlon, 1964) (cost and type of meals); Greater Los Angeles Zoo Assn., 60 Lab. Arb. 838 (Christopher, 1973) (employer may not discontinue practice of providing free meals to zoo food venders when contract provided that there would be no reduction of employee benefits); Alpena General Hospital, 50 Lab. Arb. 48 (Jones, 1967), and Lutheran Medical Center, 44 Lab. Arb. 107 (Wolf, 1964) (free meals are working condition).
      A survey conducted by the Bureau of National Affairs’ Personnel Policies Forum found that 54% of the responding companies provided food services for employees using a lunchroom with vending machines; 43% of the companies provided cafeterias; and 15% provided vending machines with snackbar service. BNA, Labor Policy and Practice Series (Personnel Management) 245:201-245:204 (1976). The National Industrial Conference Board in 1964 reported that 47% of the manufacturing companies that responded to a survey provided cafeteria services, and 55% of the companies subsidized the operation. Only 8% of the companies reported that they were trying to operate the cafeterias at a profit. NICB, Personnel Practices in Factory and Office: Manufacturing, Personnel Policy Study No. 194, pp. 76-77 (1964). Cf. Fisher, Operating Your Firm’s Dining Area — Profitably, Administrative Management, Oct. 1966, pp. 66-67; Scheer, The Company Cafeteria, 45 Personnel J. 85-86 (1966); Feeding the Big Captive Customers, Business Week, Oct. 27, 1975, pp. 46-54.
      Although the decision below by the Seventh Circuit was the first to uphold the Board's order to bargain about the prices of in-plant-supplied food services, other aspects of food services have been found to be covered by §8(d). These include improvement in lunchroom equipment and supplies, Preston Products Co., 158 N. L. R. B. 322 (1966), aff’d in relevant part, 129 U. S. App. D. C. 196, 392 F. 2d 801 (1967), cert. denied, 392 U. S. 906 (1968); coffeebreak scheduling and service of free coffee, Missourian Pub. Co., 216 N. L. R. B. 175, 180 (1975); D & C Textile Corp., 189 N. L. R. B. 769, 771, 783 (1971); Fleming Mfg. Co., 119 N. L. R. B. 452, 455 (1957); free meal policy, O’Land, Inc., d/b/a Ramada Inn South, 206 N. L. R. B. 210, 214-215 (1973); cancellation of catering truck service, Bralco Metals, Inc., 214 N. L. R. B. 143, 146-150 (1974); meal areas, Hasty Print, Inc., d/b/a Walker Color Graphics, 227 N. L. R. B. 455, 461 (1976); and cleanup of lunchroom areas by employees, Cosmo Graphics, Inc., 217 N. L. R. B. 1061, 1066 (1975).
      And, where no in-plant facilities exist, employers are still obligated to bargain about meal hours and coffee breaks. See, e. g., Fibreboard Paper Products Corp. v. NLRB, 379 U. S., at 222 (Stewart, J., concurring) ; Meat Cutters v. Jewel Tea Co., 381 U. S. 676, 691 (1965).

       “While not determinative, it is appropriate to look to industrial bargaining practices in appraising the propriety of including a particular subject within the scope of mandatory bargaining. Labor Board v. American Nat. Ins. Co., 343 U. S. 395, 408. Industrial experience is not only reflective of the interests of labor and management in the subject matter but is also indicative of the amenability of such subjects to the collective bargaining process.” Fibreboard Paper Products Corp. v. NLRB, supra, at 211.

       This factor is essentially irrelevant to the determination in this case. The definition of a mandatory collective-bargaining subject does not depend on the number of unions within the bargaining unit. Westinghouse Electric Corp., 156 N. L. R. B., at 1089; McCall Corp., 172 N. L. R. B., at 547.

       See, e. g., Fibreboard Paper Products Corp. v. NLRB, supra, at 211 (“The Act was framed with an awareness that refusals to confer and negotiate had been one of the most prolific causes of industrial strife”) ; Westinghouse Electric Corp. v. NLRB, 369 F. 2d, at 895 (“The underlying philosophy of the Labor Act is that discussion of issues between labor and management serves as a valuable prophylactic by removing grievances, real or fancied, and tends to improve and stabilize labor relations”); see also Cox, The Duty to Bargain in Good Faith, 71 Harv. L. Rev. 1401, 1412 (1958): “Participation in debate often produces changes in a seemingly fixed position either because new facts are brought to light or because the strengths and weaknesses of the several arguments become apparent. Sometimes the parties hit upon some novel compromise of an issue which has been thrashed over and over. Much is gained even by giving each side a better picture of the strength of the other’s convictions. The cost is so slight that the potential gains easily justify legal compulsion to engage in the discussion.”

       In-plant food services provided by third parties are not unlike other kinds of benefits, such as health insurance, implicating outside suppliers. In each case, the employer contracts with a third party to provide a benefit to employees and, during the term of the contract, is unable to change the price at which that benefit is available to the employee except by employee subsidies.


author: Mr. Justice Marshall Mr. Justice White,

text:
    UNITED STATES v. 564.54 ACRES OF LAND, MORE OR LESS, SITUATED IN MONROE AND PIKE COUNTIES, PENNSYLVANIA, et al.
    No. 78-488.
    Argued March 27, 1979
    Decided May 14, 1979

      Marshall, J., delivered the opinion of the Court, in which all other Members joined except Powell, J., who took no part in the consideration or decision of the case. White, J., filed a concurring opinion, post, p. 517.

      Deputy Solicitor General Barnett argued the cause for the United States. With him on the briefs were Solicitor General McCree, Assistant Attorney General Moorman, Deputy Assistant Attorney General Liotta, Sara Sun Beale, Peter R. Steenlmd, Jr., Raymond N. Zagone, and John J. Zimmerman.

      H. Ober Hess argued the cause for respondent Southeastern Pennsylvania Synod of the Lutheran Church in America. With him on the brief was Arthur Makadon.

   Mr. Justice Marshall

delivered the opinion of the Court.

At issue in this case is the proper measure of compensation when the Government condemns property owned by a private nonprofit organization and operated for a public purpose. In particular, we must decide whether the Just Compensation Clause of the Fifth Amendment requires payment of replacement cost rather than fair market value of the property taken.

I

Respondent, the Southeastern Pennsylvania Synod of the Lutheran Church in America, operates three nonprofit summer camps along the Delaware River. In June 1970, the United States initiated a condemnation proceeding to acquire respondent's land for a public recreational project. Before trial, the Government offered to pay respondent $485,400 as the fair market value of its property. Respondent rejected the offer and demanded approximately $5.8 million, the asserted cost of developing functionally equivalent substitute facilities at a new site. This substantial award was necessary, respondent contended, because the new facilities would be subject to financially burdensome regulations from which existing facilities were exempt under grandfather provisions.

In a pretrial ruling, the District Court held that the “substitute facilities,” or replacement cost, measure of compensation was available only to governmental condemnees, and that respondent therefore was entitled only to the fair market value of its property. App. 38-48. On interlocutory appeal, the Court of Appeals for the Third Circuit reversed. 506 F. 2d 796 (1974). Relying on other appellate decisions, the Court of Appeals determined that in condemnations of property belonging to States or their subdivisions, the Fifth Amendment requires an award of replacement cost “so that the functions carried out by or on behalf of members of the community may be continued.” Id., at 799-800. Since the Fifth Amendment refers expressly to private but not to public property, the court reasoned that the Framers could not have “intended to impose a greater obligation of indemnification” toward public entities than toward private owners. Id., at 801. Accordingly, the Court of Appeals applied standards governing condemnations of publicly owned property, and held that substitute-facilities compensation was available to private nonprofit owners if there was no “ready market” for the condemned property and if the facilities were “reasonably necessary to public welfare.” Id., at 800. The case was remanded to the District Court for consideration of whether respondent’s property met this test.

After a 10-day trial, the District Court instructed the jury regarding the prerequisites of a substitute-facilities award. Specifically, the court charged that there was no “ready market” for respondent’s facilities if “the fair market value of the condemned property [was] substantially less than the cost of constructing functionally equivalent substitute facilities.” See 576 F. 2d 983, 992 n. 9 (1978). The District Court further instructed that the property was “reasonably necessary to public welfare” if it “fulfilled] a community need or purpose.” See id., at 995 n. 16. The jury found that respondent was not entitled to substitute-facilities compensation, and after considering additional evidence, awarded $740,000 as the fair market value of the property.

A different panel of the Court of Appeals reversed. Id., at 996. Although the court found that the jury instructions on the ready-market issue were not fundamentally in error, it disagreed with the District Court’s interpretation of the reasonable-necessity requirement. Under the Court of Appeals’ theory, this test was met if the facility “provide [d] a benefit to the community that [would] not be as fully provided after the facility [was] taken.” Id., at 995. Because the jury instruction had been framed in terms of necessity rather than community benefit, the court concluded that a new trial was required. One judge, concurring, agreed that the trial court’s charge had not been consistent with the Court of Appeals’ interlocutory decision, but argued that the prior opinion, although controlling, was incorrect. Id., at 996-1000. The third member of the panel dissented on the ground that the District Court had adhered to the principles previously enunciated in the interlocutory opinion. Id., at 1001-1010.

We granted certiorari, 439 U. S. 978 (1978), and now reverse.

II

A

In giving content to the just compensation requirement of the Fifth Amendment, this Court has sought to put the owner of condemned property “in as good a position pecuniarily as if his property had not been taken.” Olson v. United States, 292 U. S. 246, 255 (1934). However, this principle of indemnity has not been given its full and literal force. Because of serious practical difficulties in assessing the worth an individual places on particular property at a given time, we have recognized the need for a relatively objective working rule. See United States v. Miller, 317 U. S. 369, 374 (1943); United States v. Cors, 337 U. S. 325, 332 (1949). The Court therefore has employed the concept of fair market value to determine the condemnee’s loss. Under this standard, the owner is entitled to receive “what a willing buyer would pay in cash to a willing seller” at the time of the taking. United States v. Miller, supra, at 374; accord, City of New York v. Sage, 239 U. S. 57, 61 (1915); United States v. Virginia Electric & Power Co., 365 U. S. 624, 633 (1961); Almota Farmers Elevator & Warehouse Co. v. United States, 409 U. S. 470, 474 (1973).

Although the market-value standard is a useful and generally sufficient tool for ascertaining the compensation required to make the owner whole, the Court has acknowledged that such an award does not necessarily compensate for all values an owner may derive from his property. Thus, we have held that fair market value does not include the special value of property to the owner arising from its adaptability to his particular use. United States v. Miller, supra, at 374-375; United States v. Cors, supra, at 332. As Mr. Justice Frankfurter wrote for the Court in Kimball Laundry Co. v. United States, 338 U. S. 1, 5 (1949):

“The value of property springs from subjective needs and attitudes; its value to the owner may therefore differ widely from its value to the taker. Most things, however, have a general demand which gives them a value transferable from one owner to another. As opposed to such personal and variant standards as value to the particular owner whose property has been taken, this transferable value has an external validity which makes it a fair measure of public obligation to compensate the loss incurred by an owner as a result of the taking of his property for public use. In view, however, of the liability of all property to condemnation for the common good, loss to the owner of nontransferable values deriving from his unique need for property or idiosyncratic attachment to it, like loss due to an exercise of the police power, is properly treated as part of the burden of common citizenship.”

See 1 L. Orgel, Valuation Under the Law of Eminent Domain § 14 (2d ed. 1953). In short, the concept of fair market value has been chosen to strike a fair “balance between the public’s need and the claimant’s loss” upon condemnation of property for a public purpose. United States v. Toronto, Hamilton & Buffalo Nav. Co., 338 U. S. 396, 402 (1949); see also United States ex rel. TVA v. Powelson, 319 U. S. 266, 280 (1943).

But while the indemnity principle must yield to some extent before the need for a practical general rule, this Court has refused to designate market value as the sole measure of just compensation. For there are situations where this standard is inappropriate. As we held in United States v. Commodities Trading Corp., 339 U. S. 121, 123 (1950):

“[W]hen market value has been too difficult to find, or when its application would result in manifest injustice to owner or public, courts have fashioned and applied other standards. . . . Whatever the circumstances under which such constitutional questions arise, the dominant consideration always remains the same: What compensation is ‘just’ both to an owner whose property is taken and to the public that must pay the bill?”

See also United States v. Cors, supra, at 332; United States v. Toronto, Hamilton & Búfalo Nav. Co., supra, at 402; United States v. Miller, supra, at 374. Hence, we must determine whether application of the fair-market-value standard here would be impracticable or whether an award of market value would diverge so substantially from the indemnity principle as to violate the Fifth Amendment.

B

The instances in which market value is too difficult to ascertain generally involve property of a type so infrequently traded that we cannot predict whether the prices previously paid, assuming there have been prior sales, would be repeated in a sale of the condemned property. See United States v. Toronto, Hamilton & Buffalo Nav. Co., supra, at 402; cf. United States v. Miller, supra, at 374-375. This might be the case, for example, with respect to public facilities such as roads or sewers. But respondent’s property does not fall in this category. There was a market for camps, albeit not an extremely active one. The Government’s expert witness presented evidence concerning 11 recent sales of comparable facilities in the vicinity, and estimated that respondent’s camps could have been sold within six months to a year after they were offered for sale. Tr. 256-258, 263-264, 269-276. Indeed, respondent’s own expert testified that he had prepared an appraisal of the camps’ fair market value as of the date of the taking. App. 143-144. And the Court of Appeals implicitly acknowledged that the market value of nonprofit property is ordinarily ascertainable since application of the court’s “ready market” criterion requires assessment of fair market value. See n. 4, supra. Thus, it seems clear that respondent’s property had a readily discernible market value. The only remaining inquiry is whether such an award would im-permissibly deviate from the indemnity principle.

Emphasizing that the primary value of the condemned property lies in the use to which it is put, respondent argues that compensating only for market value would be unjust in the present context. Because new facilities would bear financial burdens imposed by regulations to which the existing camps were not subject, an award of market value would preclude continuation of respondent’s use. Brief for Respondent 5. Respondent therefore concludes that such a recovery would be insufficient to indemnify for its loss. See 506 F. 2d, at 798.

However, it is not at all unusual that property uniquely adapted to the owner’s use has a market value on condemnation which falls far short of enabling the owner to preserve that use. Such a situation may often arise, for example, where a family home has been built to the owner’s tastes, but is old and deteriorated, or where property, like respondent’s camps, is exempt from regulations applicable to new facilities. Cf. 1 L. Orgel, supra, § 37, pp. 172-173. Yet the Court has previously determined that nontransferable values arising from the owner’s unique need for the property are not compensable, and has found that this divergence from full indemnification does not violate the Fifth Amendment. See supra, at 511— 512.

We are unable to discern why a different result should obtain here. That respondent is a nonprofit organization may provide some basis for distinguishing it from business enterprises, since the uses to which commercial property is put can often be valued in terms of the capitalized earnings produced. See 506 F. 2d, at 799; 1 L. Orgel, supra, at § 157. Cf. United States v. Toronto, Hamilton & Buffalo Nav. Co., 338 U. S., at 403. But there is no reason to treat respondent differently from the many private homeowners and other noncommercial property owners who neither derive earnings from their property nor hold it for investment purposes. Unless the Just Compensation Clause mandates a Government subsidy for nonprofit organizations, a proposition we find patently implausible, respondent’s nonprofit status does not require us to reject application of the fair-market-value standard.

Nor is it relevant in this case whether respondent’s camps were reasonably necessary to the public welfare. In condemnations of property owned by public entities, lower courts have applied the reasonable-necessity standard to determine if the entity has an obligation to continue providing the facilities taken. See, e. g., 506 F. 2d, at 800; United States v. Streets, Alleys & Public Ways in Stoutsville, 531 F. 2d 882, 886 (CA8 1976); United States v. Certain Property in Borough of Manhattan, 403 F. 2d 800 (CA2 1968). This duty may be legally compelled or arise from necessity; “the distinction has little practical significance in public condemnation.” Id., at 803. If the condemnee has such a duty to replace the property, these courts have reasoned that only an award of the costs of developing requisite substitute facilities will compensate for the loss.

Whatever the merits of this reasoning with respect to public entities, see n. 3, supra, it does not advance analysis here. For respondent is under no legal or factual obligation to replace the camps, regardless of their social worth. As a private entity, respondent is free to allocate its resources to serve its own institutional objectives, which may or may not correspond with community needs. Awarding replacement cost on the theory that respondent would continue to operate the camps for a public purpose would thus provide a windfall if substitute facilities were never acquired, or if acquired, were later sold or converted to another use.

Finally, that the camps may have benefited the community does not warrant compensating respondent differently from other private owners. The community benefit which the camps conferred might provide an indication of the public's loss upon condemnation of the property. But we cannot accept the Court of Appeals’ conclusion that this loss is relevant to assessing the compensation due a private entity. The court noted that “[o]ne rationale for the substitute facilities measure is to indemnify not only the owner of the condemned facilities, but those who have an interest in the continuing existence of the facilities, in this case, according to the Synod, the general public.” 576 F. 2d, at 989 n. 4. The guiding principle of just compensation, however, is that the owner of the condemned property “must be made whole but is not entitled to more.” Olson v. United States, 292 U. S., at 255. Respondent did not hold its property as the public’s trustee and thus is not entitled to be indemnified for the public’s loss. Moreover, many condemnees use their property in a manner that confers a benefit on the community, and there is no sound basis for considering this factor only in condemnations of property owned by nonprofit organizations. And to make the measure of compensation depend on a jury’s subjective estimation of whether a particular use “benefits” the community would conflict with this Court’s efforts to develop relatively objective valuation standards.

In sum, we find no circumstances here that require suspension of the normal rules for determining just compensation. Respondent, like other private owners, is not entitled to recover for nontransfer able values arising from its unique need for the property. To the extent denial of such an award departs from the indemnity principle, it is justified by the necessity for a workable measure of valuation. Allowing respondent the fair market value of its property is thus consistent with the “basic equitable principles of fairness,” United States v. Fuller, 409 U. S. 488, 490 (1973), underlying, the Just Compensation Clause.

The judgment of the Court of Appeals is

Reversed.

Mr. Justice Powell took no part in the consideration or decision of this case.

Mr. Justice White,

concurring.

The Court rejects the claim that the measure of compensation in this case is the cost of substitute facilities rather than the fair market value of the taken property, here camps owned by a private, nonprofit corporation. I am in full agreement. The substitute-facilities doctrine is unrelated to fair market value and does not depend on whether fair market value is readily ascertainable; rather, it unabashedly demands additional compensation over and above market value in order to allow the replacement of the condemned facility. In those cases where it has been applied, primarily where public facilities have been condemned, the basic premise is that the con-demnee is under some obligation to continue the functions performed on the taken property. But I do not understand how a duty to replace the condemned facility justifies paying more than market value. Obviously, replacing the old with a new facility will cost more than the value of the old, but the new facility itself will be more valuable and last longer. This is true with respect to condemnation of any facility, whether or not there is an obligation to reproduce it, and I had not understood the Just Compensation Clause to guarantee subsidies to either private or public projects. Similarly, if more demanding building codes or other regulations will enhance the cost of replacement, it is reasonable to assume that compliance itself will be of some benefit to the owner and hence need not be financed by the condemnor.

It may be that a condemnee’s obligation to continue the function performed on the condemned property and hence to replace the facility taken will result in loss of value in that the condemnee does not have the option of investing his fair-market-value award in a project that will provide the con-demnee with greater net benefits than would replacement of the taken facility. But the existing law imposing the obligation presumably embodies the policy judgment that alternative projects, from which the condemnee might or might not derive more benefits, should not be made available to the condemnee. Even if some incremental loss due to legal constraints on the obligated condemnee’s options is thus imposed, it is sheer speculation to assume that this loss will be equal to the full increase in cost of the facility to be reproduced or replaced. It seems to me that the argument for enhanced compensation to the obligated condemnee is nothing more than a particularized submission that the award should exceed fair market value because of the unique uses to which the property has been put by the condemnee or because of the unique value the property has for it.

I thus agree with the Court that the Just Compensation Clause does not require payment of the cost of a substitute facility where the condemnee is a private organization, even if it could be said that such an owner is in some sense obligated to replace the property or that the public has a stake in the continuance of the function that is being conducted on the taken property. I also have substantial doubt that the Clause should be any differently construed and applied where public property is condemned, whether or not the function conducted on the property must be continued at another location. That issue, however, is not before the Court and is expressly put aside for another day.

       The Fifth Amendment of the Constitution provides in pertinent part: “nor shall private property be taken for public use, without just compensation.”

       See, e. g., United States v. Certain Property in Borough of Manhattan, 403 F. 2d 800 (CA2 1968); United States v. Board of Education of Mineral County, 253 F. 2d 760 (CA4 1958); Washington v. United States, 214 F. 2d 33 (CA9), cert. denied, 348 U. S. 862 (1954); Fort Worth v. United States, 188 F. 2d 217 (CA5 1951).

       This Court has not passed on the propriety of substitute-facilities compensation for public eondemnees. Although the Court of Appeals cited Brown v. United States, 263 U. S. 78 (1923), as "the genesis of the substitution of facilities method of measuring fair compensation,” 506 F. 2d, at 802, that case addressed the scope of the Government’s condemnation power, not the compensation requisite under the Fifth Amendment. In light of our disposition of this case, we express no opinion on the appropriate measure of compensation for publicly owned property.

       The Court of Appeals, however, did seek to clarify the ready-market criterion, holding that “regardless of whether the Synod could have sold the camps, and regardless of whether the camps had fair market value, this condition ... is met if the Synod could not have replaced the camps’ facilities in the marketplace for a cost roughly equivalent to the fair market value of the camps.” 576 F. 2d, at 991.

       Accord, Monongahela Navigation Co. v. United States, 148 U. S. 312, 326 (1893); United States v. Miller, 317 U. S. 369, 373 (1943); United States v. Virginia Electric & Power Co., 365 U. S. 624, 633 (1961); United

        States v. Reynolds, 397 U. S. 14, 16 (1970); Almota Farmers Elevator & Warehouse Co. v. United States, 409 U. S. 470, 473-474 (1973).

       The standard is most accurate with respect to readily salable articles such as merchandise, because the value of such property is ordinarily what it can command in the marketplace. See United States v. Toronto, Hamilton & Buffalo Nav. Co., 338 U. S. 396, 404 (1949).

       To be sure, the issue in these cases was whether the asserted market value exceeded the compensation necessary to indemnify the condemnees. But “the principle, as stated in the Commodities Trading opinion, must work both ways.” In re Valuation Proceedings, 445 F. Supp. 994, 1031 (Sp. Ct. R. R. R. A.) (Friendly, J.), appeals dism’d without prejudice sub nom. Blanchette v. U. S. Railway Assn., 434 U. S. 993 (1977).

       The jury’s determination that the camps had a market value of $740,000 does not resolve the issue whether market value was in fact ascertainable. That issue depends on whether evidence could feasibly be obtained to present a jury question on the appropriate market value. Such an inquiry is related to the one an appellate court would undertake in reviewing the sufficiency of the evidence to support a jury’s market-value determination. However, in the latter circumstance, the issue would be whether evidence was in fact presented from which the jury could rationally arrive at its result.

       See 576 F. 2d 983, 991 (CA3 1978), quoted ante, at 510 n. 4; United States v. Streets, Alleys & Public Ways in Stoutsville, 531 F. 2d 882 (CA8 1976); United States v. Certain Property in Borough of Manhattan, 403 F. 2d 800 (CA2 1968); United States v. Certain Land in Borough of Brooklyn, 346 F. 2d 690 (CA2 1965); United States v. Board of Education of Mineral County, 253 F. 2d 760 (CA4 1958); National Conference of Commissioners on Uniform State Laws, Uniform Eminent Domain Code, §1004 (b).

       See, e. g., United States v. Certain Land in Borough of Brooklyn, supra, at 694; 576 F. 2d, at 992-995.

       The substitute-facilities measure applied by the Court of Appeals in this case appears to contemplate payment of reproduction costs, not replacement costs, see id., at 999, and n. 2 (Stern, J., concurring); 506 F. 2d 796, 799-800 (CA3 1974). As noted in United States v. Certain Property in Borough of Manhattan, supra, at 804, courts applying the substitute-facilities measure have taken different positions regarding whether depreciation should be deducted from the cost of a new facility.

       The Court states that respondent “is under no legal or factual obligation to replace the camps. . . .” Ante, at 515. Although respondent, which is subject to the Pennsylvania Nonprofit Corporation Act of 1972, 15 Pa. Cons. Stat. §7549 (1975), apparently is not legally obliged to replace its camps, other private, nonprofit enterprises may be under a legal obligation — imposed by their own articles of incorporation, by the terms under which gifts are made to them, or directly by state law — to continue financing of certain facilities or functions. Indeed, private organizations operated for profit may be under contractual or other legal obligation to replace a condemned facility.

       For purposes of deciding whether an obligation to replace requires a condemnation award greater than market value, it is seemingly irrelevant to whom the benefits of ownership may be said to accrue, be this the “public” or private entities.

       Of course, even if this is the proper interpretation of the Just Compensation Clause, Congress could enact legislation providing for compensation under the substitute-facilities approach in those situations in which the United States condemns public property.