author: Mr. Justice Stevens

text:
    BUTNER v. UNITED STATES et al.
    No. 77-1410.
    Argued November 27, 1978
    Decided February 21, 1979

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

      J. Steven Brackett argued the cause for petitioner. With him on the brief were J. Richardson Rudisill, Jr., and William E. Butner, pro se.

      Allan A. Ryan, Jr., argued the cause for the United States. On the brief were Solicitor General McCree, Assistant Attorney General Ferguson, Stuart A. Smith, Crombie J. D. Garrett, and Carleton D. Powell. Joe N. Cagle, pro se, argued the cause for respondents Cagle et al. With him on the brief were J. Carroll Abernethy, Jr., and James M. Gaither, Jr.

   Mr. Justice Stevens

delivered the opinion of the Court.

A dispute between a bankruptcy trustee and a second mortgagee over the right to the rents collected during the period between the mortgagor’s bankruptcy and the foreclosure sale of the mortgaged property gave rise to the question we granted certiorari to decide. 436 U. S. 955. That question is whether the right to such rents is determined by a federal rule of equity or by the law of the State where the property is located.

On May 14, 1973, Golden Enterprises, Inc. (Golden), filed a petition for an arrangement under Chapter XI of the Bankruptcy Act. 11 U. S. C. §§ 701-799. In those proceedings, the bankruptcy judge approved a plan consolidating various liens on North Carolina real estate owned by Golden. As a result, petitioner acquired a second mortgage securing an indebtedness of $360,000. Petitioner did not, however, receive any express security interest in the rents earned by the property.

On April 18, 1974, the bankruptcy judge granted Golden's motion to appoint an agent to collect the rents and to apply them as directed by the court. The order of appointment provided that the money should be applied to tax obligations, payments on the first mortgage, fire insurance premiums, and interest and principal on the second mortgage. There is no dispute about the collections or payments made pursuant to that order.

The arrangement plan was never confirmed. On February 14, 1975, Golden was adjudicated a bankrupt, and the trustee in bankruptcy was appointed. At that time both the first and second mortgages were in default. The trustee was ordered to collect and retain all rents “to the end that the same may be applied under this or different or further orders of [the bankruptcy] [c]ourt.” App. 342a-343a.

After various alternatives were considered, and after the District Court refused to confirm a first sale, the properties were ultimately sold to petitioner on November 12, 1975, for $174,000. That price was paid by reducing the estate’s indebtedness to petitioner from $360,000 to $186,000.

As of the date of sale, a fund of $162,971.32 had been accumulated by the trustee pursuant to the February 14 court order that he collect and retain all rents. On December 1, 1975, petitioner filed a motion claiming a security interest in this fund and seeking to have it applied to the balance of the second mortgage indebtedness. The bankruptcy judge denied the motion, holding that the $186,000 balance due to petitioner should be treated as a general unsecured claim.

The District Court reversed. It recognized that under North Carolina law, a mortgagor is deemed the owner of the land subject to the mortgage and is entitled to rents and profits, even after default, so long as he retains possession. But the court viewed the appointment of an agent to collect rents during the arrangement proceedings as tantamount to the appointment of a receiver. This appointment, the court concluded, satisfied the state-law requirement of a change of possession giving the mortgagee an interest in the rents; no further action after the adjudication in bankruptcy was required to secure or preserve this interest.

The Court of Appeals reversed and reinstated the disposition of the bankruptcy judge. Golden Enterprises, Inc. v. United States, 566 F. 2d 1207. The court acknowledged that the agent appointed to collect rents before the bankruptcy was equivalent to a state-court receivership, but held that the adjudication terminated that relationship. Because petitioner had made no request during the bankruptcy for a sequestration of rents or for the appointment of a receiver, petitioner had not, in the court’s view, taken the kind of action North Carolina law required to give the mortgagee a security interest in the rents collected after the bankruptcy adjudication. One judge dissented, adopting the position of the District Court. Id, at 1211.

I

We did not grant certiorari to decide whether the Court of Appeals correctly applied North Carolina law. Our concern is with the proper interpretation of the federal statutes governing the administration of bankrupt estates. Specifically, it is our purpose to resolve a conflict between the Third and Seventh Circuits on the one hand, and the Second, Fourth, Sixth, Eighth, and Ninth Circuits on the other, concerning the proper approach to a dispute of this kind.

The courts in the latter group regard the question whether a security interest in property extends to rents and profits derived from the property as one that should be resolved by reference to state law. In a few States, sometimes referred to as “title States,” the mortgagee is automatically entitled to possession of the property, and to a secured interest in the rents. In most States, the mortgagee’s right to rents is dependent upon his taking actual or constructive possession of the property by means of a foreclosure, the appointment of a receiver for his benefit, or some similar legal proceeding. Because the applicable law varies from State to State, the results in federal bankruptcy proceedings will also vary under the approach taken by most of the Circuits.

The Third and Seventh Circuits have adopted a federal rule of equity that affords the mortgagee a secured interest in the rents even if state law would not recognize any such interest until after foreclosure. Those courts reason that since the bankruptcy court has the power to deprive the mortgagee of his state-law remedy, equity requires that the right to rents not be dependent on state-court action that may be precluded by federal law. Under this approach, no affirmative steps are required by the mortgagee — in state or federal court — to acquire or maintain a right to the rents.

II

We agree with the majority view.

The. constitutional authority of Congress to establish “uniform Laws on the subject of Bankruptcies throughout the United States” would clearly encompass a federal statute defining the mortgagee’s interest in the rents and profits earned by property in a 'bankrupt estate. But Congress has not chosen to exercise its power to fashion any such rule. The Bankruptcy Act does include provisions invalidating certain security interests as fraudulent, or as improper preferences over general creditors. Apart from these provisions, however, Congress has generally left the determination of property rights in the assets of a bankrupt’s estate to state law.

Property interests are created and defined by state law. Unless some federal interest requires a different result, there is no reason why such interests should be analyzed differently simply because an interested party is involved in a bankruptcy proceeding. Uniform treatment of property interests by both state and federal courts within a State serves to reduce uncertainty, to discourage forum shopping, and to prevent a party from receiving “a windfall merely by reason of the happenstance of bankruptcy.” Lewis v. Manufacturers National Bank, 364 U. S. 603, 609. The justifications for application of state law are not limited to ownership interests; they apply with equal force to security interests, including the interest of a mortgagee in rents earned by mortgaged property.

The minority of courts which have rejected state law have not done so because of any congressional command, or because their approach serves any identifiable federal interest. Rather, they have adopted a uniform federal approach to the question of the mortgagee’s interest in rents and profits because of their perception of the demands of equity. The equity powers of the bankruptcy court play an important part in the administration of bankrupt estates in countless situations in which the judge is required to deal with particular, individualized problems. But undefined considerations of equity provide no basis for adoption of a uniform federal rule affording mortgagees an automatic interest in the rents as soon as the mortgagor is declared bankrupt.

In support of their rule, the Third and Seventh Circuits have emphasized that while the mortgagee may pursue various state-law remedies prior to bankruptcy, the adjudication leaves the mortgagee “only such remedies as may be found in a court of bankruptcy in the equitable administration of the bankrupt’s assets.” Bindseil v. Liberty Trust Co., 248 F. 112, 114 (CA3 1917). It does not follow, however, that “equitable administration” requires that all mortgagees be afforded an automatic security interest in rents and profits when state law would deny such an automatic benefit and require the mortgagee to take some affirmative action before his rights are recognized. What does follow is that the federal bankruptcy court should take whatever steps are necessary to ensure that the mortgagee is afforded in federal bankruptcy court the same protection he would have under state law if no bankruptcy had ensued. This is the majority view, which we adopt today.

The rule of the Third and Seventh Circuits, at least in some circumstances, affords the mortgagee rights that are not his as a matter of state law. The rule we adopt avoids this inequity because it looks to state law to define the security interest of the mortgagee. At the same time, our decision avoids the opposite inequity of depriving a mortgagee of his state-law security interest when bankruptcy intervenes. For while it is argued that bankruptcy may impair or delay the mortgagee’s exercise of his right to foreclosure, and thus his acquisition of a security interest in rents according to the law of many States, a bankruptcy judge familiar with local practice should be able to avoid this potential loss by sequestering rents or authorizing immediate state-law foreclosures. Even though a federal judge may temporarily delay entry of such an order, the loss of rents to the mortgagee normally should be no greater than if he had been proceeding in a state court: for if there is a reason that persuades a federal judge to delay, presumably the same reason would also persuade a state judge to withhold foreclosure temporarily. The essential point is that in a properly administered scheme in which the basic federal rule is that state law governs, the primary reason why any holder of a mortgage may fail to collect rent immediately after default must stem from state law.

Ill

Recognizing that the bankruptcy frustrated petitioner’s right to take possession of the mortgaged property and thereby to establish his right to rents as a matter of North Carolina law, the Court of Appeals assumed that a request to the bankruptcy judge for sequestration of rents, for the appointment of a receiver, or for permission to proceed with a state-court foreclosure would have satisfied the state-law requirement. Since none of these steps was taken during the bankruptcy, the Court of Appeals held that petitioner had no right to the rents.

The dissenting judge in the Court of Appeals, as well as the District Judge, felt that the action taken during the arrangement proceedings, coupled with informal requests for abandonment of the property during the bankruptcy, was sufficient to comply with North Carolina law. Neither of these judges, however, based his analysis on the federal rule followed in the Third and Seventh Circuits. They merely disagreed with the majority about the requirements of North Carolina law.

In this Court the parties have argued the state-law question at great length, each stressing different aspects of the record. We decline to review the state-law question. The federal judges who deal regularly with questions of state law in their respective districts and circuits are in a better position than we to determine how local courts would dispose of comparable issues.

The judgment is affirmed.

It is so ordered.

       Originally, the second mortgage was held by petitioner along with Robert L. McKaughn, Jr., and Jack Sipe Construction Co. Subsequently, McKaughn and the Sipe Construction Co. assigned all of their rights in the indebtedness and deeds of trust to petitioner, thus making him the sole second mortgagee.

       See In re Brose, 254 F. 664, 666 (CA2 1918) (“ 'The general rule is that the mortgagee is not entitled to the rents and profits of the mortgaged premises until he takes actual possession, or until possession is taken, in his behalf, by a receiver, ... or until, in proper form, he demands and is refused possession.’ This general rule the federal courts will follow, except in cases where it appears that the law of the state where the premises are situated applies a different rule”) (quoting Freedman’s Savings & Trust Co. v. Shepherd, 127 U. S. 494, 502-503); Tower Grove Bank & Trust Co. v. Weinstein, 119 F. 2d 120, 122 (CA8 1941) (“In this circuit the law is settled that the construction of mortgages is governed by local state law”); In re Hotel St. James Co., 65 F. 2d 82 (CA9 1933); In re American Fuel & Power Co., 151 F. 2d 470, 481 (CA6 1945). See also Fidelity Bankers Life Ins. Co. v. Williams, 506 F. 2d 1242, 1243 (CA4 1974). See generally 4A W. Collier, Bankruptcy ¶ 70.16, pp. 157-165 (14th ed. 1975); Hill, The Erie Doctrine in Bankruptcy, 66 Harv. L. Rev. 1013 (1953).

       In some title States, the mortgagee’s right to rents and profits may be exercised even prior to default, see Me. Rev. Stat. Ann., Tit. 33, § 502 (1964); in all events, the right at least attaches upon default, see Uvalda Naval Stores Co. v. Cullen, 165 Ga. 115, 117, 139 S. E. 810, 811 (1927). See generally R. Kratovil, Modern Mortgage Law and Practice § 294, p. 204 (1972); Comment, The Mortgagee’s Right to Rents and Profits Following a Petition in Bankruptcy, 60 Iowa L. Rev. 1388, 1390-1391 (1975).
      North Carolina has been classified as a “title” State, Comment, The Mortgagee’s Right to Rents After Default, 50 Yale L. J. 1424, 1425 n. 6 (1941), although it does not adhere to this theory in its purest form. Under its case law, a mortgagee is entitled to possession of the mortgaged property upon default, and need not await actual foreclosure. Such possession might be secured either with the consent of the mortgagor or by an action in ejectment. But so long as the mortgagor does remain in possession, even after default, he — not the mortgagee — appears to be entitled to the rents and profits. See Brannock v. Fletcher, 271 N. C. 65, 155 S. E. 2d 532 (1967); Gregg v. Williamson, 246 N. C. 356, 98 S. E. 2d 481 (1957); Kistler v. Development Co., 205 N. C. 755, 757, 172 S. E. 413, 414 (1934) (“In the absence of a stipulation to the contrary a mortgagor of real property who is permitted to retain possession is entitled to the rents and profits. Credle v. Ayers, 126 N. C., 11. As between the mortgagor and the mortgagee equity makes the mortgage a charge upon the rents and profits when the mortgagor is insolvent and the security is inadequate . . . but the prevailing rule is that a mortgagee is not entitled to rents until entry is made or a suit for foreclosure is begun”).

       See Tower Grove Bank & Trust Co. v. Weinstein, supra; Central States Life Ins. Co. v. Carlson, 98 F. 2d 102 (CA10 1938); 4A Collier, supra n. 2, at 157-158.

       See Bindseil v. Liberty Trust Co., 248 F. 112 (CA3 1917); In re Pittsburgh-Duquesne Development Co., 482 F. 2d 243 (CA3 1973); In re Wakey, 50 F. 2d 869 (CA7 1931).

       See, e. g., Central Hanover Bank & Trust Co. v. Philadelphia & Reading Coal & Iron Co., 99 F. 2d 642, 645 (CA3 1938):
      “It is settled in this circuit that in a bankruptcy proceeding a mortgage creditor is entitled without prior demand to the net income of the mortgaged property from the date of adjudication if it is needed to pay the amount due him. . . . This is because the bankruptcy proceeding has taken from the Debtor the possession of his property and in so doing has deprived the mortgage creditor of his ordinary remedy to reach the property mortgaged and its income. It, therefore, follows upon equitable principles, as Judge Woolley pointed out in Bindseil v. Liberty Trust Co., supra, . . . ‘that after insolvency has taken the debtor’s property out of his hands, its income or product belongs to the lien creditor, who has thus become its virtual owner; and that such income or product issuing from mortgaged property, should not be diverted from the mortgage creditor who has a lien to general creditors who have no lien.’ ”

       U. S. Const., Art. I, § 8, cl. 4.

       See 11 U. S. C. §§ 96 (a) and (b) (authorizing trustee to void as preferences certain transfers made by the bankrupt within four months of bankruptcy); §§ 107 (a) and (d) (invalidating certain liens obtained through judicial proceedings within four months of bankruptcy and certain fraudulent transfers made within one year of bankruptcy); § 110 (c) (authorizing trustee to strike down secret liens and transfers); § 110 (e) (invalidating any transfer deemed fraudulent under federal or state law). See generally 3 Collier, supra n. 2, ¶ 60.01, pp. 743-746.

         “The Federal Constitution, Article I, § 8, gives Congress the power to establish uniform laws on the subject of bankruptcy throughout the United States. In view of this grant of authority to the Congress it has been settled from an early date that state laws to the extent that they conflict with the laws of Congress, enacted under its constitutional authority, on the subject of bankruptcies are suspended. While this is true, state laws are thus suspended only to the extent of actual conflict with the system provided by the Bankruptcy Act of Congress. Sturges v. Crownin-shield, 4 Wheat. 122; Ogden v. Saunders, 12 Wheat. 213.
      “Notwithstanding this requirement as to uniformity the bankruptcy acts of Congress may recognize the laws of the State in certain particulars, although such recognition may lead to different results in different States. For example, the Bankruptcy Act recognizes and enforces the laws of the States affecting dower, exemptions, the validity of mortgages, priorities of payment and the like. Such recognition in the application of state laws does not affect the constitutionality of the Bankruptcy Act, although in these particulars the operation of the act is not alike in all the States.” Stellwagen v. Clum, 245 U. S. 605, 613.

       Conversely, the federal statutory basis for voiding fraudulent and preferential transfers in order to protect general creditors applies to both security interests and other interests in property.

       See also Centred Hanover Bank & Trust Co. v. Philadelphia & Reading Coal & Iron Co., supra; In re Wakey, supra.

       See The Tungus v. Skovgaard, 358 U. S. 588, 596; United New York & New Jersey Pilots Assn. v. Halecki, 358 U. S. 613, 615. See also Bishop v. Wood, 426 U. S. 341, 345-346.


source: Caselaw Access Project

author: Mr. Justice Stewart

license: Public Domain

text:
    CALIFORNIA v. ARIZONA et al.
    No. 78,
    Orig.
    Argued January 9, 1979
    Decided February 22, 1979
    Stewart, J., delivered the opinion for a unanimous Court.

      Allan J. Goodman, Deputy Attorney General of California, argued the cause for plaintiff. On the motion for leave to file a complaint were Evelle J. Younger, Attorney General, N. Gregory Taylor, Assistant Attorney General, and Bussell Iungerich, Deputy Attorney General, and on the reply to the brief in opposition and response to the motion were Messrs. Younger, Taylor, and Goodman.

      Russell A. Kolsrud, Assistant Attorney General, argued the cause for defendant State of Arizona. With him on the briefs were John A. LaSota, Jr., Attorney General, and Anthony B. Ching, Assistant Attorney General.

      Louis F. Claiborne argued the cause for the United States. On the response to the motion was Solicitor General McCree.

   Mr. Justice Stewart

delivered the opinion of the Court.

Since the admission of California to the Union in 1850, the southeastern boundary of the State has been the middle of the channel of the Colorado River. Act of Sept. 9, 1850, 9 Stat 452. Neither the Gadsden Purchase in 1853 nor the admission of Arizona to statehood in 1912 changed the location of this 229-mile border. The location of the river did change, however, from causes both natural and artificial. These shifts created confusion about the location of the political boundary between California and Arizona. This problem was resolved through an interstate compact, ratified by the Congress in 1966. The Compact fixed the boundary by stations of longitude and latitude, divorced from the continuing shifts of the Colorado River.

California has taken the position, however, that the Compact settled only questions of political jurisdiction, not questions of ownership of real property, since, under the “equal-footing doctrine,” California holds title to all lands beneath the navigable waters within its boundaries at the time of its admission to the Union. Pollard’s Lessee v. Hagan, 3 How. 212, 219. See Oregon ex rel. State Land Bd. v. Corvallis Sand & Gravel Co., 429 U. S. 363. In the early 1970’s the California State Lands Commission made a study of a stretch of 11.3 miles along the river to determine what land California owns. Both Arizona and the United States have a direct interest in such a determination. Arizona, of course, has the same rights under the equal-footing doctrine as does California. The United States is the principal riparian owner in this region, and determination of the width and location of the old riverbed thus will necessarily affect its property interests. California has presented the determinations of its Lands Commission to both Arizona and the United States; neither has acquiesced in the Commission’s conclusions.

California seeks to invoke the Court’s original jurisdiction in this suit to quiet title to the lands it claims, and thus resolve its dispute with Arizona and the United States. To ■sue Arizona, it relies on 28 U. S. C. § 1251 (a), which confers on this Court “original and exclusive jurisdiction of . . . [a] 11 controversies between two or more States.” To sue the United States, it relies on 28 U. S. C. § 1251 (b), which confers on this Court “original but not exclusive jurisdiction of ... [a] 11 controversies between the United States and a State.” Both these heads of original jurisdiction find their source in Art. Ill, §2, of the Constitution: “In all Cases ... in which a State shall be Party, the supreme Court shall have original Jurisdiction.”

It is undisputed that both Arizona and the United States are indispensable parties to this litigation, and it is California’s need to sue both Arizona and the United States that creates the problem before us. Specifically, Arizona and the United States contend that the United States has not agreed to be a defendant in a quiet-title action in this Court Yet this is the only federal court in which California can sue Arizona, because Congress has conferred upon it “original and exclusive jurisdiction” (emphasis added) over controversies between States. 28 U. S. C. § 1251 (a)(1).

It is settled that the United States must give its consent to be sued even when one of the States invokes this Court’s original jurisdiction:

“It does not follow that because a State may be sued by the United States without its consent, therefore the United States may be sued by a State without its consent. Public policy forbids that conclusion.” Kansas v. United States, 204 U. S. 331, 342.

See Oregon v. Hitchcock, 202 U. S. 60; Minnesota v. Hitchcock, 185 U. S. 373, 387 (dicta). But cf. United States v. Texas, 143 U. S. 621. Yet the Court has recognized that an action in equity cannot be maintained without the joinder of indispensable parties. Shields v. Barrow, 17 How. 130; Mallow v. Hinde, 12 Wheat. 193. Thus, if the United States has not consented to be sued in an action such as this, California’s motion for leave to file a complaint • must be denied. “A bill of complaint will not be entertained which, if filed, could only be dismissed because of the absence of the United States as a party.” Arizona v. California, 298 U. S. 558, 572. See Texas v. New Mexico, 352 U. S. 991; but see Florida v. Georgia, 17 How. 478, 494-496 (Taney, C. J.).

The suit, then, could not be maintained in any court. This Court could not hear the claims against the United States because it has not waived its sovereign immunity, and a district court could not hear the claims against Arizona, because this Court has exclusive jurisdiction over such claims. To resolve this asserted dilemma, the Solicitor General has made an undertaking on behalf of the United States. He has agreed that, if California is granted leave to file its complaint in this Court against Arizona, the United States will intervene with respect to the controversy over part of the area in question. Because, however, we have concluded that the United States has already waived its sovereign immunity to suit in this case, we need not assess the wisdom or validity of the Solicitor General's suggestion.

In 1972 Congress passed Pub. L. 92-562, 86 Stat. 1176. The Act made two relevant changes in Title 28 of the United States Code. First, it created a new § 2409a.’ Subsection (a) of this new section provides:

“The United States may be named as a party defendant in a civil action under this section to adjudicate a disputed title to real property in which the United States claims an interest, other than a security interest or water rights. . .

The remainder of the section defines the procedures to be followed in such suits. Second, the Congress amended 28 U. S. C. § 1346 to add a new subsection (f). That subsection provides:

“The district courts shall have exclusive original jurisdiction of civil actions under section 2409a to quiet title to an estate or interest in real property in which an interest is claimed by the United States.”

It is thus clear that the United States has waived its immunity to suit in actions brought against it to quiet title to land. The question is whether suits brought under that waiver may be heard in this Court. The Solicitor General argues that they may not, that § 1346 (f) operates both to confer original jurisdiction over such a case on the federal district courts and simultaneously to withdraw the original jurisdiction of this Court. If this contention were accepted, a grave constitutional question would immediately arise. That question, quite simply, is whether Congress can deprive this Court of original jurisdiction conferred upon it by the Constitution.

The original jurisdiction of the Supreme Court is conferred not by the Congress but by the Constitution itself. This jurisdiction is self-executing, and needs no legislative implementation. Kentucky v. Dennison, 24 How. 66, 96; Florida v. Georgia, 17 How., at 492; Martin v. Hunter’s Lessee, 1 Wheat. 304, 332. It is clear, of course, that Congress could refuse to waive the Nation’s sovereign immunity in all cases or only in some cases but in all courts. Either action would bind this Court even in the exercise of its original jurisdiction. It is similarly clear that the original jurisdiction of this Court is not constitutionally exclusive — that other courts can be awarded concurrent jurisdiction by statute. Börs v. Preston, 111 U. S. 252; Ames v. Kansas ex rel. Johnston, 111 U. S. 449. But once Congress has waived the Nation’s sovereign immunity, it is far from clear that it can withdraw the constitutional jurisdiction of this Court over such suits.

The constitutional grant to this Court of original jurisdiction is limited to cases involving the States and the envoys of foreign nations. The Eramers seem to have been concerned with matching the dignity of the parties to the status of the court:

“The evident purpose [of the grant of original jurisdiction] was to open and keep open the highest court of the nation for the determination, in the first instance, of suits involving a State or a diplomatic or commercial representative of a foreign government. So much was due to the rank and dignity of those for whom the provision was made . . . Id., at 464.

See The Federalist No. 81, pp. 507-509 (H. Lodge ed. 1888) (A. Hamilton). Elimination of this Court’s original jurisdiction would require those sovereign parties to go to another court, in derogation of this constitutional purpose. Congress has broad powers over the jurisdiction of the federal courts and over the sovereign immunity of the United States but it is extremely doubtful that they include the power to limit in this manner the original jurisdiction conferred upon this Court by the Constitution.

Happily, we need not decide this constitutional question, for the statute in question can readily be construed in such a way as to obviate it. In so construing the statute, we no more than follow the long practice of the Court to forgo the resolution of constitutional issues except when absolutely necessary. “When the validity of an act of the Congress is drawn in question, and even if a serious doubt of constitutionality is raised, it is a cardinal principle that this Court will first ascertain whether a construction of the statute is fairly possible by which the question may be avoided.” Crowell v. Benson, 285 U. S. 22, 62.

The legislative history of § 1346 (f) is sparse, but the intent of Congress seems reasonably clear. The congressional purpose was simply to confine jurisdiction to the federal courts and to exclude the courts of the States, which otherwise might be presumed to have jurisdiction over quiet-title suits against the United States, once its sovereign immunity had been waived. Charles Dowd Box Co. v. Courtney, 368 U. S. 502; Claflin v. Houseman, 93 U. S. 130, 136. The legislative history shows no intention to divest this Court of jurisdiction over quiet-title actions against the United States in cases otherwise within our original jurisdiction. We find, therefore, that § 1346 (f), by vesting “exclusive original jurisdiction” of quiet-title actions against the United States in the federal district courts, did no more than assure that such jurisdiction was not conferred upon the courts of any State.

For these reasons we conclude that there is no bar to this original suit in the Supreme Court between California as plaintiff, and Arizona and the United States as defendants. Accordingly, the motion of California for leave to file its complaint is granted, and the defendants are allowed 45 days in which to answer or otherwise respond.

It is so ordered.

       Interstate Compact Defining the Boundary Between the States of Arizona and California, 80 Stat. 340.

       California points out that other title questions may arise along the entire stretch of the Califomia-Arizona border. It urges the Court to retain jurisdiction of this case for adjudication of these potential additional controversies. We leave that suggestion for a later date.

       Federal Rule Civ. Proc. 19 (a) provides that a person is to be joined in an action if
      “(1) in his absence complete relief cannot be accorded among those already parties, or (2) he claims an interest relating to the subject of the action and is so situated that the disposition of the action in his absence may (i) as a practical matter impair or impede his ability to protect that interest or (ii) leave any of the persons already parties subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations by reason of his claimed interest.”
      Rule 19 (b) provides that when a person described by Rule 19 (a) cannot be joined, “the court shall determine whether in equity and good conscience the action should proceed among the parties before it, or should be dismissed, the absent person being thus regarded as indispensable.”
      Rule 9 (2) of this Court provides:
      “The form of pleadings and motions in original actions shall be governed, so far as may be, by the Federal Rules of Civil Procedure, and in other respects those rules, where their application is appropriate, may be taken as a guide to procedure in original actions in this court.”
      This Court has dismissed cases in its original jurisdiction for want of an indispensable party, Arizona v. California, 298 U. S. 558, 572; California v. Southern Pacific Co., 157 U. S. 229, 256. Here, all three parties have agreed that their interests in the land in question are inextricably linked.

       The Solicitor General maintains that the Government has a valid statute of limitations defense as to that part of this controversy that concerns the northern 2.7 miles of the 11.3-mile stretch of original riverbed in controversy. He has undertaken to intervene, therefore, only with respect to the remainder of the tract.

       The Act also included a venue provision, codified at 28 U. S. C. § 1402(d).

       Title 28 U. S. C. § 2409a reads:
      “(a) The United States may be named as a party defendant in a civil action under this section to adjudicate a disputed title to real property in which the United States claims an interest, other than a security interest or water rights. This section does not apply to trust or restricted Indian lands, nor does it apply to or affect actions which may be or could have been brought under sections 1346, 1347, 1491, or 2410 of this title, sections 7424, 7425, or 7426 of the Internal Revenue Code of 1954, as amended . . . or section 208 of the Act of July 10, 1952 ....
      "(b) The United States shall not be disturbed in possession or control of any real property involved in any action under this section pending a final judgment or decree, the conclusion of any appeal therefrom, and sixty days; and if the final determination shall be adverse to the United States, the United States nevertheless may retain such possession or control of the real property or of any part thereof as it may elect, upon payment to the person determined to be entitled thereto of an amount which upon such election the district court in the same action shall determine to be just compensation for such possession or control.
      “(c) The complaint shall set forth with particularity the nature of the right, title, or interest which the plaintiff claims in the real property, the circumstances under which it was acquired, and the right, title, or interest claimed by the United States.
      “(d) If the United States disclaims all interest in the real property or interest therein adverse to the plaintiff at any time prior to the actual commencement of the trial, which disclaimer is confirmed by order of the court, the jurisdiction of the district court shall cease unless it has jurisdiction of the civil action or suit on ground other than and independent of the authority conferred by section 1346 (f) of this title.
      “(e) A civil action against the United States under this section shall be tried by the court without a jury.
      “(f) Any civil action under this section shall be barred unless it is commenced within twelve years of the date upon which it accrued. Such action shall be "deemed to have accrued on the date the plaintiff or his predecessor in interest knew or should have known of the claim of the United States.
      “(g) Nothing in this section shall be construed to permit suits against the United States based upon adverse possession.”

       This legislation resulted from a title dispute between the United States and landowners along the Snake River in Idaho. In 1971 the Senators from Idaho introduced three bills in response to this dispute. One of the bills, S. 216, waived the Government’s immunity to suit in quiet-title actions. As originally drafted, the bill would have created a new section, 28 U. S. C. § 2408a, providing:
      “The United States may be named a party in any civil action brought by any person to quiet title to lands claimed by the United States.”
      Hearing before the Subcommittee on Public Lands of the Senate Committee on Interior and Insular Affairs on S. 216, 92d Cong., 1st Sess., 1 (1971).
      At the hearing the administration opposed S. 216 but offered to propose an acceptable substitute. The promised changes were set forth in a letter from the Attorney General to the Senate Committee in October 1971. S. Rep. No. 92-575, pp. 5-7 (1971). Most of the changes were concerned with the waiver section and now make up subsections (b) through (g) of § 2409a. The administration also suggested a change in the bill’s jurisdictional section. Rather than simply confer “original jurisdiction” on the federal district courts to hear quiet-title actions against the United States, as the original bill had provided, the administration suggested that the bill confer upon the district courts “exclusive original jurisdiction” (emphasis added). The Attorney General’s letter explained the requested change as follows:
      “Since we believe it is the better policy to litigate questions of the Government’s title in the Federal courts, the draft bill provides for .exclusive jurisdiction of suits under the statute in the U. S. district courts.” S. Rep. No. 92-575, supra, at 7.
      The administration’s suggestions were, for the most part, accepted. There was no discussion of the jurisdictional section in the Report of either the House Committee, H. R. Rep. No. 92-1559 (1972), or the Senate Committee, supra. Nor was that provision the subject of any debate on the floor of either House. 117 Cong. Rec. 46380-46381 (1971) (passage by the Senate); 118 Cong. Rec. 35530-35531 (1972) (passage by the House of Representatives); id., at 35993 (concurrence by the Senate in the amendments made by the House).

       Arizona argues that this is not an appropriate case for this Court’s original jurisdiction, both because of its factual complexity and because it involves only title to land rather than the location of a political boundary. Such considerations are hardly relevant to the exercise of this Court’s original and exclusive jurisdiction, and the fact is that several cases decided by the Court under its original jurisdiction have involved complicated questions of title to land. In Massachusetts v. New York, 271 U. S. 65, for example, the Court decided that Massachusetts did not have title to lands within New York along and within Lake Ontario. In Minnesota v. Hitchcock, 185 U. S. 373, and Wisconsin v. Lane, 245 U. S. 427, the Court decided bills brought by States to quiet title against the United States. The Congress had expressly waived sovereign immunity for those suits. Cases in which the Court has entertained actions by the United States to quiet title to lands claimed by the States include United States v. Utah, 279 U. S. 816; United States v. Oregon, 282 U. S. 804; United States v. Alabama, 313 U. S. 274; United States v. Wyoming, 333 U. S. 834; United States v. California, 332 U. S. 19; United States v. Louisiana, 339 U. S. 699; and United States v. Texas, 339 U. S. 707.


author: Mr. Justice Stewart Mr. Justice White, Mr. Justice Marshall,

text:
    GREAT ATLANTIC & PACIFIC TEA CO., INC. v. FEDERAL TRADE COMMISSION
    No. 77-654.
    Argued December 4, 1978
    Decided February 22, 1979

      Stewart, J., delivered the opinion of the Court, in which Burger, C. J., and Brennan, Blackmun, Powell, and Rehnquist, JJ., joined, and in Parts I, II, and III of which White, J., joined. White, J., filed an opinion concurring in part and dissenting in part, post, p. 85. MARSHALL, J., filed an opinion dissenting in part, post, p. 85. Stevens, J., took no part in the consideration or decision of the case.

      Denis Mclnerney argued the cause for petitioner. With him on the briefs were Raymond L. Falls, Jr., and William T. Lifland.

      Deputy Solicitor General Easterbrook argued the cause for respondent. With him on the brief were Solicitor General McCree, Michael N. Sohn, Gerald P. Norton, W. Dennis Cross, and Jerold D. Cummins.

        Thomas A. Bothwell and Arthur H. Brendtson filed a brief for the Small Business Legislative Council as amicus curiae.

   Mr. Justice Stewart

delivered the opinion of the Court.

The question presented in this case is whether the petitioner, the Great Atlantic & Pacific Tea Co. (A&P), violated § 2 (f) of the Clayton Act, 38 Stat. 730, as amended by the Robinson-Patman Act, 49 Stat. 1526, 15 U. S. C. § 13 (f), by knowingly inducing or receiving illegal price discrimina-tions from the Borden Co. (Borden).

The alleged violation was reflected in a 1965 agreement between A&P and Borden under which Borden undertook to supply “private label” milk to more than 200 A&P stores in a Chicago area that included portions of Illinois and Indiana. This agreement resulted from an effort by A&P to achieve cost savings by switching from the sale of “brand label” milk (milk sold under the brand name of the supplying dairy) to the sale of “private label” milk (milk sold under the A&P label).

To implement this plan, A&P asked Borden, its longtime supplier, to submit an offer to supply under private label certain of A&P’s milk and other dairy product requirements. After prolonged negotiations, Borden offered to grant A&P a discount for switching to private-label milk provided A&P would accept limited delivery service. Borden claimed that this offer would save A&P $410,000 a year compared to what it had been paying for its dairy products. A&P, however, was not satisfied with this offer and solicited offers from other dairies. A competitor of Borden, Bowman Dairy, then submitted an offer which was lower than Borden's.

At this point, A&P’s Chicago buyer contacted Borden’s chain store sales manager and stated: “I have a bid in my pocket. You [Borden] people are so far out of line it is not even funny. You are not even in the ball park.” When the Borden representative asked for more details, he was told nothing except that a $50,000 improvement in Borden’s bid “would not be a drop in the bucket.”

Borden was thus faced with the problem of deciding whether to rebid. A&P at the time was one of Borden’s largest customers in the Chicago area. Moreover, Borden had just invested more than $5 million in a new dairy facility in Illinois. The loss of the A&P account would result in underutilization of this new plant. Under these circumstances, Borden decided to submit a new bid which doubled the estimated annual savings to A&P, from $410,000 to $820,000. In presenting its offer, Borden emphasized to A&P that it needed to keep A&P’s business and was making the new offer in order to meet Bowman’s bid. A&P then accepted Borden’s bid after concluding that it was substantially better than Bowman’s.

I

Based on these facts, the Federal Trade Commission filed a three-count complaint against A&P. Count I charged that A&P had violated § 5 of the Federal Trade Commission Act by misleading Borden in the course of negotiations for the private-label contract, in that A&P had failed to inform Borden that its second offer was better than the Bowman bid. Count II, involving the same conduct, charged that A&P had violated § 2 (f) of the Clayton Act, as amended by the Robinson-Patman Act, by knowingly inducing or receiving price dis-criminations from Borden. Count III charged that Borden and A&P had violated § 5 of the Federal Trade Commission Act by combining to stabilize and maintain the retail and wholesale prices of milk and other dairy products.

An Administrative Law Judge found, after extended discovery and a hearing that lasted over 110 days, that A&P had acted unfairly and deceptively in accepting the second offer from Borden and had therefore violated § 5 of the Federal Trade Commission Act as charged in Count I. The Administrative Law Judge similarly found that this same conduct had violated § 2 (f). Finally, he dismissed Count III on the ground that the Commission had not satisfied its burden of proof.

On review, the Commission reversed the Administrative Law Judge’s finding as to Count I. Pointing out that the question at issue was what amount of disclosure is required of the buyer during contract negotiations, the Commission held that the imposition of a duty of affirmative disclosure would be “contrary to normal business practice and, we think, contrary to the public interest.” Despite this ruling, however, the Commission held as to Count II that the identical conduct on the part of A&P had violated § 2 (f), finding that Borden had discriminated in price between A&P and its competitors, that the discrimination had been injurious to competition, and that A&P had known or should have known that it was the beneficiary of unlawful price discrimination. The Commission rejected A&P’s defenses that the Borden bid had been made to meet competition and was cost justified.

A&P filed a petition for review of the Commission’s order in the Court of Appeals for the Second Circuit. The court held that substantial evidence supported the findings of the Commission and that as a matter of law A&P could not successfully assert a meeting-competition defense because it, unlike Borden, had known that Borden’s offer was better than Bowman’s. Finally, the court held that the Commission had correctly determined that A&P had no cost-justification defense. 557 F. 2d 971. Because the judgment of the Court of Appeals raises important issues of federal law, we granted certiorari. 435 U. S. 922.

II

The Robinson-Patman Act was passed in response to the problem perceived in the increased market power and coercive practices of chainstores and other big buyers that threatened the existence of small independent retailers. Notwithstanding this concern with buyers, however, the emphasis of the Act is in §2 (a), which prohibits price discriminations by sellers. Indeed, the original Patman bill as reported by Committees of both Houses prohibited only seller activity, with no mention of buyer liability. Section 2 (f), making buyers liable for inducing or receiving price discriminations by sellers, was the product of a belated floor amendment near the conclusion of the Senate debates.

As finally enacted, § 2 (f) provides:

“That it shall be unlawful for any person engaged in commerce, in the course of such commerce, knowingly to induce or receive a discrimination in price which is prohibited by this section.” (Emphasis added.)

Liability under § 2 (f) thus is limited to situations where the price discrimination is one “which is prohibited by this section.” While the phrase “this section” refers to the entire § 2 of the Act, only subsections (a) and (b) dealing with seller liability involve discriminations in price. Under the plain meaning of § 2 (f), therefore, a buyer cannot be liable if a prima facie case could not be established against a seller or if the seller has an affirmative defense. In either situation, there is no price discrimination “prohibited by this section.” The legislative history of § 2 (f) fully confirms the conclusion that buyer liability under § 2 (f) is dependent on seller liability under § 2 (a) .

The derivative nature of liability under § 2 (f) was recognized by this Court in Automatic Canteen Co. of America v. FTC, 346 U. S. 61. In that case, the Court stated that even if the Commission has established a prima facie case of price discrimination, a buyer does not violate § 2 (f) if the lower prices received are either within one of the seller’s defenses or not known by the buyer not to be within one of those defenses. The Court stated:

“Thus, at the least, we can be confident in reading the words in § 2 (f), 'a discrimination in price which is prohibited by this section/ as a reference to the substantive prohibitions against discrimination by sellers defined elsewhere in the Act. It is therefore apparent that the discriminatory price that buyers are forbidden by § 2 (f) to induce cannot include price differentials that are not forbidden to sellers in other sections of the Act .... For we are not dealing simply with a ‘discrimination in price’; the ‘discrimination in price’ in § 2 (f) must be one ‘which is prohibited by this section.’ Even if any price differential were to be comprehended within the term ‘discrimination in price,’ § 2 (f), which speaks of prohibited discriminations, cannot be read as declaring out of bounds price differentials within one or more of the ‘defenses’ available to sellers, such as that the price differentials reflect cost differences, fluctuating market conditions, or bona fide attempts to meet competition, as those defenses are set out in the provisos of §§ 2 (a) and 2 (b).” 346 IT. S., at 70-71 (footnotes omitted).

The Court thus explicitly recognized that a buyer cannot be held liable under § 2 (f) if the lower prices received are justified by reason of one of the seller’s affirmative defenses.

Ill

The petitioner, relying on this plain meaning of § 2 (f) and the teaching of the Automatic Canteen case, argues that it cannot be hable under § 2 (f) if Borden had a valid meeting-competition defense. The respondent, on the other hand, argues that the petitioner may be liable even assuming that Borden had such a defense. The meeting-competition defense, the respondent' contends, must in these circumstances be judged from the point of view of the buyer. Since A&P knew for a fact that the final Borden bid beat the Bowman bid, it was not entitled to assert the meeting-competition defense even though Borden may have honestly believed that it was simply meeting competition. Recognition of a meeting-competition defense for the buyer in this situation, the respondent argues, would be contrary to the basic purpose of the Robinson-Patman Act to curtail abuses by large buyers.

A

The short answer to these contentions of the respondent is that Congress did not provide in § 2 (f) that a buyer can be liable even if the seller has a valid defense. The clear language of § 2 (f) states that a buyer can be liable only if he receives a price discrimination “prohibited by this section.”' If a seller has a valid meeting-competition defense, there is simply no prohibited price discrimination.

A similar attempt to amend the Robinson-Patman Act judicially was rejected by this Court in FTC v. Simplicity Pattern Co., 360 U. S. 55. There the Federal Trade Commission had found that a manufacturer of dress patterns had violated § 2 (e) of the Clayton Act, as amended by the Robinson-Patman Act, by providing its larger customers services and facilities not offered its smaller customers. The manufacturer attempted to defend against this charge by asserting that there had been no injury to competition and that its dis-criminations in services were cost justified. Since liability under § 2 (e), unlike § 2 (a), does not depend upon competitive injury or the absence of a cost-justification defense, the manufacturer’s primary argument was that “it would be 'bad law and bad economics’ to make discriminations unlawful even where they may be accounted for by cost differentials or where there is no competitive injury.” 360 U. S., at 67 (footnote omitted). The Court rejected this argument. Recognizing that “this Court is not in a position to review the economic wisdom of Congress,” the Court stated that “[w]e cannot supply what Congress has studiously omitted.” Ibid. (footnote omitted). The respondent’s attempt in the present case to rewrite § 2 (f) to hold a buyer liable even though there is no discrimination in price “prohibited by this section” must be rejected for the same reason.

B

In the Automatic Canteen case, the Court warned against interpretations of the Robinson-Patman Act which “extend beyond the prohibitions of the Act and, in so doing, help give rise to a price uniformity and rigidity in open conflict with the purposes of other antitrust legislation.” 346 U. S., at 63. Imposition of § 2 (f) liability on the petitioner in this case would lead to just such price uniformity and rigidity.

In a competitive market, uncertainty among sellers will-cause them to compete for business by offering buyers lower prices. Because of the evils of collusive action, the Court has held that the exchange of price information by competitors violates the Sherman Act. United States v. Container Corp., 393 U. S. 333. Under the view advanced by the respondent, however, a buyer, to avoid liability, must either refuse a seller’s bid or at least inform him that his bid has beaten competition. Such a duty of affirmative disclosure would almost inevitably frustrate competitive bidding and, by reducing uncertainty, lead to price matching and anticompetitive cooperation among sellers.

Ironically, the Commission itself, in dismissing the charge under § 5 of the Federal Trade Commission Act in this case, recognized the dangers inherent in a duty of affirmative disclosure:

“The imposition of a duty of affirmative disclosure, applicable to a buyer whenever a seller states that his offer is intended to meet competition, is contrary to normal business practice and, we think, contrary to the public interest.
“We fear a scenario where the seller automatically attaches a meeting competition caveat to every bid. The buyer would then state whether such bid meets, beats, or loses to another bid. The seller would then submit a second, a third, and perhaps a fourth bid until finally he is able to ascertain his competitor’s bid.” 87 F. T. C. 1047, 1050-1051.

The effect of the finding that the same conduct of the petitioner violated § 2 (f), however, is to impose the same duty of affirmative disclosure which the Commission condemned as anticompetitive, “contrary to the public interest,” and “contrary to normal business practice,” in dismissing the charge under § 5 of the Federal Trade Commission Act. Neither the Commission nor the Court of Appeals offered any explanation for this apparent anomaly.

As in the Automatic Canteen case, we decline to adopt a construction of § 2 (f) that is contrary to its plain meaning and would lead to anticompetitive results. Accordingly, we hold that a buyer who has done no more than accept the lower of two prices competitively offered does not violate § 2 (f) provided the seller has a meeting-competition defense.

IY

Because both the Commission and the Court of Appeals proceeded on the assumption that a buyer who accepts the lower of two competitive bids can be liable under § 2 (f) even if the seller has a meeting-competition defense, there was not a specific finding that Borden did in fact have such a defense. But it quite clearly did.

A

The test for determining when a seller has a valid meeting-competition defense is whether a seller can “show the existence of facts which would lead a reasonable and prudent person to believe that the granting of a lower price would in fact meet the equally low price of a competitor.” FTC v. A. E. Staley Mfg. Co., 324 U. S. 746, 759-760. “A good-faith belief, rather than absolute certainty, that a price concession is being offered to meet an equally low price offered by a competitor is sufficient to satisfy the § 2 (b) defense.” United States v. United States Gypsum Co., 438 U. S. 422, 453. Since good faith, rather than absolute certainty, is the touchstone of the meeting-competition defense, a seller can assert the defense even if it has unknowingly made a bid that in fact not only met but beat his competition. Id., at 454.

B

Under the circumstances of this case, Borden did act reasonably and in good faith when it made its second bid. The petitioner, despite its longstanding relationship with Borden, was dissatisfied with Borden’s first bid and solicited offers from other dairies. The subsequent events are aptly described in the opinion of the Commission:

“Thereafter, on August 31, 1965, A&P received an offer from Bowman Dairy that was lower than Borden’s August 13 offer. On or about September 1, 1965, Elmer Schmidt, A&P’s Chicago unit buyer, telephoned Gordon Tarr, Borden’s Chicago chain store sales manager, and stated, T have a bid in my pocket. You [Borden] people are so far out of line it is not even funny. You are not even in the ball park.’ Although Tarr asked Schmidt for some details, Schmidt said that he could not tell Tarr anything except that a $50,000 improvement in Borden’s bid 'would not be a drop in the [bucket].’ Contrary to its usual practice, A&P then offered Borden the opportunity to submit another bid.” 87 F. T. C., at 1048 (Footnotes and record citations omitted.)

Thus, Borden was informed by the petitioner that it was in danger of losing its A&P business in the Chicago area unless it came up with a better offer. It was told that its first offer was “not even in the ball park” and that a $50,000 improvement “would not be a drop in the bucket.” In light of Borden’s established business relationship with the petitioner, Borden could justifiably conclude that A&P’s statements were reliable and that it was necessary to make another bid offering substantial concessions to avoid losing its account with the petitioner.

Borden was unable to ascertain the details of the Bowman bid. It requested more information about the bid from the petitioner, but this request was refused. It could not then attempt to verify the existence and terms of the competing offer from Bowman without risking Sherman Act liability. United States v. United States Gypsum Co., supra. Faced with a substantial loss of business and unable to find out the precise details of the competing bid, Borden made another offer stating that it was doing so in order to meet competition. Under these circumstances, the conclusion is virtually inescapable that in making that offer Borden acted in a reasonable and good-faith effort to meet its competition, and therefore was entitled to a meeting-competition defense.

Since Borden had a meeting-competition defense and thus could not be liable under § 2 (b), the petitioner who did no more than accept that offer cannot be liable under § 2 (f).

Accordingly, the judgment is reversed.

It is so ordered.

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

Mr. Justice White,

concurring in part and dissenting in part.

I concur in Parts I, II, and III of the Courtis opinion, but dissent from Part IV. Because it was thought the issue was irrelevant where the buyer knows that the price offered is lower than necessary to meet competition, neither the Commission nor the Court of Appeals decided whether Borden itself would have had a valid meeting-competition defense. The Court should not decide this question here, but should remand to the Commission, whose job it is initially to consider such matters.

For the reason stated by the Commission and the Court of Appeals, I am also convinced that the United States made a sufficient, unrebutted showing that Borden would not have a cost-justification defense to a Robinson-Patman Act charge.

Mr. Justice Marshall,

dissenting in part.

I agree with the Court that the Federal Trade Commission and the Court of Appeals applied the wrong legal standard in assessing A&P’s liability under the Robinson-Patman Act. However, I cannot join the Court’s interpretation of § 2 (f) as precluding buyer liability under this Act unless the seller could also be found liable for price discrimination. Neither the language nor the sparse legislative history of § 2 (f) justifies this enervating standard for the determination of buyer liability. To the contrary, the Court’s construction disregards the congressional purpose to curtail the coercive practices of chainstores and other large buyers. Having formulated a new legal standard, the Court then applies it here in the first instance rather than remanding the case to the Commission. Given the numerous ambiguities in the record, 1 believe the Court thereby improperly arrogates to itself the role of the trier of fact.

I

Section 2 (f) provides that “[i]t shall be unlawful for any person . . . knowingly to induce or receive a discrimination in price which is prohibited by this section.” (Emphasis added.) The Court interprets the italicized language as “plainly meaning” that a buyer can be found liable for knowingly inducing price discrimination only if his seller is first proved liable under §§ 2 (a) and 2 (b). Ante, at 76,81. Under this construction, proceedings involving only the Commission and a buyer will turn upon proof of a seller’s liability, and whenever a seller could successfully claim the meeting-competition defense, the buyer must be exonerated.

In my view, the language of § 2 (f) does not compel this circuitous method of establishing buyer liability. Sections 2 (a) and 2 (b) of the Act define the elements of price discrimination and the affirmative defenses available to sellers. When Congress extended liability to buyers who encourage price discrimination, a ready means of defining the prohibition was to rely on the elements and defenses already delineated in §§ 2 (a) and 2 (b). Thus, the phrase “which is prohibited by this section” in § 2 (f) incorporates these elements and defenses by reference, making them applicable to buyers. So construed, § 2 (f) simply means that the same elements of a prima facie case must be established and the same basic affirmative defenses available, whether buyer or seller liability is in issue. The section does not require that another party actually satisfy all of the conditions of §§2(a) and 2(b) before buyer liability can even be considered. Determining buyer and seller liability independently, I believe, places less strain on the “plain meaning” of the language of § 2 (f) than does the absolutely derivative standard the majority announces today.

In construing § 2 (f), the Court relies on Congress’ delay in adding the section to the final bill and on a remark by Representative Utterback during the legislative debates. Ante, at 75-77, and n. 10. The delay provides little logical justification for the Court’s interpretation; rather, it more likely reflects Congress’ late realization that halting the abusive practices of buyers could not be accomplished solely through imposition of liability on sellers. Representative Utterback’s statement, 80 Cong. Rec. 9419 (1936), amounts to a slight paraphrase of § 2 (f) and in no way supports the Court’s derivative standard.

I agree with the Court’s suggestion, ante, at 80, that we must resolve the dilemma confronting a buyer who properly invites a seller to meet a competitor’s price and then fortuitously obtains a lower bid. Congress could not have expected the buyer to choose between asking the seller to increase the bid to a specific price or accepting the lower bid and facing liability under § 2 (f). Rather, it must have intended some accommodation for buyers who act in good faith yet receive bids that beat competition. This does not mean, however, that a buyer should be liable under § 2 (f) only if his seller also would be liable. That solution to the buyer’s dilemma would enable him to manufacture his own defense by misrepresenting to a seller the response needed to meet a competitor’s bid and then allowing the seller to rely in good faith on incorrect information. The Court purports to reserve this “lying buyer” issue, ante-, at 81-82, n. 15, but the derivative standard it adopts today belies the reservation. If “prohibited by this section” means that a buyer’s liability depends on that of the seller, then absent seller liability, the buyer’s conduct and bad faith are necessarily irrelevant.

I would hold that under § 2 (f), the Robinson-Patman Act defenses must be available to buyers on the same basic terms as they are to sellers. To be sure, some differences in the nature of the defenses would obtain because of the different bargaining positions of sellers and buyers. With respect to the meeting-competition defense at issue here, a seller can justify a price discrimination by showing that his lower price was offered in “good faith” to meet that of a competitor. Ante, at 82-83; United States v. United States Gypsum, Co., 438 U. S. 422, 450-455 (1978). In my view, a buyer should be able to claim that defense — independently of the seller — if he acted in good faith to induce the seller to meet a competitor’s price, regardless of whether the seller’s price happens to beat the competitor’s. But a buyer who induces the lower bid by misrepresentation should not escape Robinson-Patman Act liability. See Kroger Co. v. FTC, 438 F. 2d 1372 (CA6) (Clark, J.), cert. denied, 404 U. S. 871 (1971). This definition of the meeting-competition defense both extricates buyers from an impossible dilemma and respects the congressional intent to prevent buyers from abusing their market power to gain competitive advantage.

Automatic Canteen Co. of America v. FTC, 346 U. S. 61 (1953), is entirely consistent with this interpretation of §2 (f). The issue there concerned the allocation of “the burden of coming forward with evidence under § 2 (f) of the Act,” 346 U. S., at 65, not the precise contours of the elements and defenses that determine the scope of buyer liability. Automatic Canteen’s general discussion of § 2 (f)’s substantive requirements, quoted ante, at 77-78, merely explains that the affirmative defenses “available to sellers” must also be available to buyers. Far from pronouncing that buyer liability is derivative, Automatic Canteen began with the observation that § 2 (f) is “roughly the counterpart, as to buyers, of sections of the Act dealing with discrimination by sellers.” 346 U.S., at 63 (emphasis added).

II

In my judgment, the numerous ambiguities in the record dictate that this case be remanded to the Commission. The Court, however, avoids a remand by concluding in the first instance that A&P's seller necessarily had a meeting-competition defense. In so doing, the Court usurps the factfinding function best performed by the Commission. Neither the Administrative Law Judge, the Commission, nor the Court of Appeals determined that Borden would have been entitled to claim the meeting-competition defense. Indeed, the Administrative Law Judge suggested the opposite, 87 F. T. C. 962, 1021 (1976), and the Commission stated:

“We believe that it is very probable that Borden did not have such a defense. To have a meeting competition defense, the record must demonstrate the existence of facts which would lead a reasonable and prudent person to conclude that the lower price would, in fact, meet the competitor’s price. As noted, Borden had serious doubts concerning whether the competing bid was legal. Specifically, it believed that the other bid only considered direct costs. It should have asked A&P for more information about the competing bid. By not making the request, it was not acting prudently. As the record clearly indicates, A&P had knowledge of Borden’s belief that other-dairies might submit bids that did not include all costs.” 87 F. T. C. 1047, 1057 n. 19 (1976) (citations omitted; emphasis in original).

Furthermore, if the Court truly intends to avoid deciding the “lying buyer” issue,-then it should remand the case for determination of whether the exception applies here. Testimony before the Administrative Law Judge directly raised the possibility that A&P misled Borden to believe a still lower price was necessary than Borden had offered when it first responded to the Bowman bid. App. 117a-118a, 123a-124a, 141a-142a. Both the Administrative Law Judge and the Commission credited that testimony, see 87 F. T. C., at 979, 1021-1022; 87 F. T. C., at 1049 n. 3, but since evidence of misrepresentation was not material under the standard they applied, there were no clear findings of fact on the point. Under these circumstances, this Court should not attempt to elide such testimony by the unsubstantiated conclusion that Borden's final bid was unaffected by any misrepresentation. Ante, at 81-82, n. 15; see n. 6, supra.

Accordingly, I dissent from the Court's adoption of a derivative standard for determining buyer liability and its resolution of disputed factual issues without a remand.

       Title 15 U. S. C. § 13 (f) provides:
      “It shall be unlawful for any person engaged in commerce, in the course of such commerce, knowingly to induce or receive a discrimination in price which is prohibited by this section.”
      Title 15 U. S. C. §§ 13 (a) and (b) provide in pertinent part:
      “(a) ... It shall be unlawful for any person engaged in commerce, in the course of such commerce, either directly or indirectly, to discriminate in price between different purchasers of commodities of like grade and quality, where either or any of the purchases involved in such discrimination are in commerce, where such commodities are sold for use, consumption, or resale within the United States or any Territory thereof or the District of Columbia or any insular possession or other place under the jurisdiction of the United States, and where the effect of such discrimination may be substantially to lessen competition or tend to create a monopoly in any line of commerce, or to injure, destroy, or prevent competition with any person who either grants or knowingly receives the benefit of such discrimination or with customers of either of them: Provided, That nothing herein contained shall prevent differentials which make only due allowance for differences in the cost of manufacture, sale, or delivery resulting from the differing methods or quantities in which such commodities are to such purchasers sold or delivered ....
      “(b) . . . Upon proof being made, at any hearing on a complaint under this section, that there has been discrimination in price or services or facilities furnished, the burden of rebutting the prima-facie case thus made by showing justification shall be upon the person charged with a violation of this section, and unless justification shall be affirmatively shown, the Commission is authorized to issue an order terminating the discrimination: Provided, however, That nothing herein contained shall prevent a seller rebutting the prima-facie case thus made by showing that his lower price or the furnishing of services or facilities to any purchaser or purchasers was made in good faith to meet an equally low price of a competitor, or the services or facilities furnished by a competitor.”

       The Bowman bid would have produced estimated annual savings of approximately $737,000 for A&P as compared with the first Borden bid, which would have produced estimated annual savings of $410,000.

       Section 5 (a) of the Federal Trade Commission Act, 38 Stat. 719, as amended, 15 U. S. C. §45 (a), provides in relevant part:
      “(1) Unfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce, are declared unlawful.”

       The Commission also found that the interstate commerce requirement of § 2 (f) was satisfied.

       Under §§ 2 (a) and (b) of the Act, a seller who can establish either that a price differential was cost justified or offered in good faith to meet competition has a complete defense to a charge of price discrimination under the Act. Standard Oil Co. v. FTC, 340 U. S. 231. See n. 1, supra.

      With respect to the meeting-competition defense, the Commission stated that even though Borden as the seller might have had a meeting-competition defense, A&P as the buyer did not have such a defense because it knew that the bid offered was, in fact, better than the Bowman bid. With respect to the cost-justification defense, the Commission found that Commission counsel had met the initial burden of going forward as required by this Court’s decision in Automatic Canteen Co. of America v. FTC, 346 U. S. 61, and that A&P had not then satisfied its burden of showing that the prices were cost justified, or that it did not know that they were not.
      The Commission upheld the Administrative Law Judge’s dismissal of Count III of the complaint.

       The Court of Appeals, like the Commission, relied on Kroger Co. v. FTC, 438 F. 2d 1372 (CA6), for the proposition that a buyer can be liable under § 2 (f) of the Act even if the seller has a meeting-competition defense. The Kroger case involved a buyer who had made deliberate misrepresentations to a seller in order to induce price concessions. While the Court of Appeals in this case did not find that A&P had made any affirmative misrepresentations, it viewed the distinction between a “lying buyer” and a buyer who knowingly accepts the lower of two bids as without legal significance. See n. 15, infra.

      H. R. 8442, 74th Cong., 1st Sess. (1935); S. 3154, 74th Cong., 1st Sess. (1935).

      F. Rowe, Price Discrimination Under the Robinson-Patman Act 423 (1962). Section 2 (f) has been described by commentators as an “afterthought.” Id., at 421; J. McCord, Commentaries on the Robinson-Patman Act 96 (1969).

       Commentators have recognized that a finding of buyer liability under § 2 (f) is dependent on a finding of seller liability under § 2 (a). McCord, supra, at 96 (“[Section] 2 (f) cannot be enforced if a prima facie case could not be established against the seller on the basis of the transaction in question under Section 2 (a) or if he could sustain an affirmative defense thereto”,); Rowe, supra, at 421 (“the legal status of the buyer is derivative from the seller’s pricing legality under the Act”); H. Shniderman, Price Discrimination in Perspective 136 (1977) (a buyer can be liable under § 2 (f) only if the price received “cannot be excused by any defenses provided to the seller”).

       In presenting the Conference Report to the House, Representative Utterback summarized the meaning of § 2 (f) by stating: “This paragraph makes the buyer liable for knowingly inducing or receiving any discrimination in price which is unlawful under the first paragraph [§2 (a)] of the amendment.” 80 Cong. Rec. 9419 (1936).

         Section 2 (e) provides:
      “It shall be unlawful for any person to discriminate in favor of one purchaser against another purchaser or purchasers of a commodity bought for resale, with or without processing, by contracting to furnish or furnishing, or by contributing to the furnishing of, any services or facilities connected with the processing, handling, sale, or offering for sale of such commodity so purchased upon terms not accorded to all purchasers on proportionally equal terms.” 15 U. S. C. § 13 (e).

       Contrary to the respondent’s suggestion, this interpretation of § 2 (f) is in no way inconsistent with congressional intent. “[T]he buyer whom Congress in the main sought to reach was the one who, knowing full well that there was little likelihood of a defense for the seller, nevertheless proceeded to exert pressure for lower prices.” Automatic Canteen Co. of America v. FTC, 346 U. S., at 79. Here, by contrast, we conclude that a buyer is not liable if the seller does have a defense under § 2 (b).

       More than once the Court has stated that the Robinson-Patman Act should be construed consistently with broader policies of the antitrust laws. United States v. United States Gypsum Co., 438 U. S. 422; Automatic Canteen Co. of America v. FTC, supra, at 74.

       A duty of affirmative disclosure might also be difficult to enforce. In cases where a seller offers differing quantities or a different quality product, or offers to serve the buyer in a different manner, it might be difficult for the buyer to determine when disclosure is required.

       In Kroger Co. v. FTC, 438 F. 2d 1372, the Court of Appeals for the Sixth Circuit held that a buyer who induced price concessions by a seller by making deliberate misrepresentations could be hable under § 2 (f) even if the seller has a meeting-competition defense.
      This case does not involve a “lying buyer” situation. The complaint issued by the FTC alleged that “A&P accepted the said offer of Borden with knowledge that Borden had granted a substantially lower price than that offered by the only other competitive bidder and without notifying Borden of this fact.” The complaint did not allege that Borden’s second bid was induced by any misrepresentation. The Court of Appeals recognized that the Kroger case involved a “lying buyer,” but stated that there was no meaningful distinction between the situation where “the buyer lies or merely keeps quiet about the nature of the competing bid.” 557 F. 2d 971, 983.
      Despite this background, the respondent argues that A&P did engage in misrepresentations and therefore can be found liable as a “lying buyer” under the rationale of the Kroger case. The misrepresentation relied upon by the respondent is a statement allegedly made by a representative of A&P to Borden after Borden made its second bid which would have resulted in annual savings to A&P of $820,000. The A&P representative allegedly told Borden to “sharpen your pencil a little bit because you are not quite there.” But the Commission itself referred to this comment only to note its irrelevance, and neither the Commission nor the Court of Appeals mentioned it in considering the § 2 (f) charge against A&P. This is quite understandable, since the comment was allegedly made after Borden made its second bid and therefore cannot be said to have induced the bid as in the Kroger case.
      Because A&P was not a “lying buyer,” we need not decide whether such a buyer could be liable under § 2 (f) even if the seller has a meeting-competition defense.

       Recognition of the right of a seller to meet a lower competitive price in good faith may be the primary means of reconciling the Robinson-Patman Act with the more general purposes of the antitrust laws of encouraging competition between sellers. As the Court stated in Standard Oil Co. v. FTC, 340 U. S., at 249:
      “We need not now reconcile, in its entirety, the economic theory which underlies the Robinson-Patman Act with that of the Sherman and Clayton Acts. It is enough to say that Congress did not seek by the Robinson-Patman Act either to abolish competition or so radically to curtail it that a seller would have no substantial right of self-defense against a price raid by a competitor.”

       The facts of this case are thus readily distinguishable from Corn Products Co. v. PTC, 324 U. S. 726, and FTC v. A. E. Staley Mfg. Co., 324 U. S. 746, in both of which the Court held that a seller had failed to establish a meeting-competition defense. In the Corn Products case, the only evidence to rebut the prima facie case of price discrimination was testimony by witnesses who had no personal knowledge of the transactions in question. Similarly, in the Staley Mfg. Co. case, unsupported testimony from informants of uncertain character and reliability was insufficient to establish the defense. In the present case, by contrast, the source of the information was a person whose reliability was not questioned and who had personal knowledge of the competing bid. Moreover, Borden attempted to investigate by asking A&P for more information about the competing bid. Finally, Borden was faced with a credible threat of a termination of purchases by A&P if it did not make a second offer. All of these factors serve to show that Borden did have a valid meeting-competition defense. See United States v. United States Gypsum Co., 438 U. S., at 454.

       Because we hold that the petitioner is not liable under §2 (f), we do not reach the question whether Borden might also have had a cost-justification defense under § 2 (a).

       See S. Rep. No. 1502, 74th Cong., 2d Sess. (1936); H. R. Rep. No. 2287, 74th Cong., 2d Sess., 3-7, 17 (1936); H. R. Conf. Rep. No. 2951, 74th Cong., 2d Sess. (1936); FTC, Final Report on the Chain-Store Investigation, S. Doc. No. 4, 74th Cong., 1st Sess. (1935); FTC v. Henry Broch & Co., 363 U. S. 166, 168-169 (1960); W. Patman, Complete Guide to the Robinson-Patman Act 7-10 (1963); F. Rowe, Price Discrimination Under the Robinson-Patman Act 8-14 (1962). See generally Hearings on Price Discrimination (S. 4171) before a Subcommittee of the Senate Committee on the Judiciary, 74th Cong., 2d Sess. (1936); Hearings on H. R. 8442, H. R. 4995, and H. R. 5062 before the House Committee on the Judiciary, 74th Cong., 1st Sess. (1935).

       See S. Rep. No. 1502, 74th Cong., 2d Sess., 3-4, 7 (1936); H. R. Rep. No. 2287, 74th Cong., 2d Sess., 3-7, 14^17 (1936); Patman, supra, at 7-10, 148-151; Rowe, supra, at 8-23.
      The Court recently noted in United States v. United States Gypsum Co., 438 U. S. 422, 455 n. 30 (1978), that “[i]t may also turn out that sustained enforcement of § 2 (f) ... will serve to bolster the credibility of buyers’ representations and render reliance thereon by sellers a more reasonable and secure predicate for a finding of good faith under § 2 (b).” (Citation omitted.) But if neither a buyer nor a seller can be liable when the seller relies in good faith on the buyer’s misrepresentations, then enforcement of § 2 (f) will not “bolster the credibility” of buyers. Thus, the derivative standard of liability adopted by the Court today is inconsistent with the premise underlying the Court’s suggestion in United States Gypsum, see Note, The Supreme Court, 1977 Term, 92 Harv. L. Rev. 57, 288, 291-294 (1978), and it eliminates one means of reassuring sellers that they may rely on buyer representations.

       Given this preface to Automatic Canteen, language in that opinion provides little support for the Court’s adoption today of a derivative standard with respect to the buyer’s meeting-competition defense. Moreover, to the extent the majority believes its resort to literal construction of § 2 (f) forecloses further inquiry, it ignores the broader teaching of Automatic Canteen. That case adopted a common-sense approach for interpreting the often ambiguous Robinson-Patman Act, tempering a “merely literal reading of the language” with considerations of “fairness and convenience” when necessary to achieve Congress’ purpose. 346 U. S., at 79, and n. 23. On that basis, Automatic Canteen allocated to the Commission the burden of production regarding a- buyer’s cost-justification defense, even though the Commission does not bear that burden in a proceeding against a seller. Id., at 75-76; FTC v. Morton Salt Co., 334 U. S. 37, 44-45 (1948). Indeed, the Court’s interpretation of § 2 (f) today, which places buyers in the litigating position of their sellers, may also be incompatible with Automatic Canteen’s specific holding on the burden of production.

       Because the Court reverses the judgment without remanding for further consideration and does not expressly reach the merits of the cost-justification issue raised by A&P, ante, at 85 n. 18, I need not address that issue either.

       Considering the recent admonition in United States Gypsum, supra, at 456 n. 31, that “[t]he case-by-case interpretation and elaboration of the § 2 (b) defense is properly left to the other federal courts and the FTC in the context of concrete fact situations,” the Court’s action is particularly inappropriate.
      While I question the Court’s decision to undertake resolution of this factual question, without even determining which party bore the burden of persuasion, I do not understand Part IV of its opinion as purporting to modify in any sense what was said last Term in United States Gypsum about the scope of the meeting-competition defense for sellers.

       The Court’s opinion creates the impression that Borden submitted only two proposals, ante, at 81-82, n. 15, 83-84. In fact, A&P induced Borden to make a third proposal, even though the second was already more favorable than Bowman’s.
      When Borden initially responded to Bowman’s bid, the A&P representative rejected Borden’s offer on the ground that it included milk sold in glass gallon containers, whereas other bidders supposedly had not included that item. Actually, Bowman’s bid had included glass gallons and A&P had subsequently decided against using glass containers. 87 F. T. C. 962, 979 (1976); App. 73a-74a, 116a-118a, 257a-260a, 774a-775a. The effect of forcing Borden to delete milk sold in glass gallons from the proposal without raising the overall bid, was to increase the savings to A&P on other products stiE covered because part of the promised savings had been derived from the sale of the cheaper glass gaEons. See 87 F. T. C., at 979-980. In addition, whEe Borden was preparing a third proposal to reflect the deletion, A&P suggested that Borden make further price reductions, saying “ ‘sharpen your pencil a little bit because you are not quite there.' ” App. 118a. As a result, Borden reduced its prices still further to yield additional savings of approximately $5,000 to $8,000. The bid finally accepted by A&P incorporated these price reductions as well as those attributable to the deletion of glass gallons. See id., at 117a-118a, 123a-124a, 141a-142a.