author: Mr. Justice Marshall Mr. Justice Blackmun,

text:
    BLOOMER v. LIBERTY MUTUAL INSURANCE CO.
    No. 78-1418.
    Argued December 4, 1979
    Decided March 3, 1980
    Marshall, J., delivered the opinion of the Court, in which Burger, C. J., and Brennan, Stewart, White, Powell, Rehnquist, and Stevens, JJ., joined. Blackmun, J., filed a dissenting opinion, post, p. 88.

      Alan C. Rassner argued the cause and filed briefs for petitioner.

      Douglas A. Boeckmann argued the cause and filed a brief for respondent.

       Briefs of amici curiae were filed by Paul S. Edelman, Arthur Abarbanel, and Theodore I. Koskoff for the Association of Trial Lawyers of America; and by Dennis Lindsay and Robert Babcock for the Master Contracting Stevedore Association of the Pacific Coast, Inc.

   Mr. Justice Marshall

delivered the opinion of the Court.

Under the Longshoremen’s and Harbor Workers’ Compensation Act, 44 Stat. 1424, as amended, 33 U. S. C. § 901 et seq., a longshoreman is entitled to receive compensation payments from his stevedore for disability or death resulting from an injury occurring on the navigable waters of the United States. If the longshoreman believes that his injuries warrant a recovery in excess of the compensation provided under the Act, he may also bring a negligence action against the owner of the vessel on which the injury occurred. The longshoreman’s recovery from the shipowner is subject to the stevedore’s lien in the amount of the compensation payment. The question for decision is whether the stevedore’s lien must be reduced by a proportionate share of the longshoreman’s expenses in obtaining recovery from the shipowner, or whether the stevedore is instead entitled to be reimbursed for the full amount of the compensation payment.

I

Petitioner William E. Bloomer, Jr., was injured during the course of his employment on board the vessel S. S. Pacific Breeze. He received $17,152.83 in compensation from respondent Liberty Mutual Insurance Co., the designated carrier of workers’ compensation for petitioner’s employer, Connecticut Terminal Co. Thereafter petitioner brought this diversity action against the owner of the vessel. He alleged that the shipowner had negligently created hazardous conditions on board the vessel, that the ship’s deck was slippery and dangerous, and that as a result he had fallen and incurred severe injuries.

During settlement negotiations, petitioner’s counsel gave respondent notice of the pending action and requested it to reduce its lien by a share of the costs of recovery. That share would be computed as an amount bearing the same ratio to the total cost of recovery as the compensation payments bear to the total recovery. Respondent refused petitioner’s request, asserted its right to full reimbursement, and successfully moved to intervene in the action. Soon thereafter petitioner settled with the shipowner for $.60,000. He moved for summary judgment directing that respondent’s lien on the recovery be reduced by an amount representing its proportionate share of the expenses of the suit against the shipowner. Petitioner claimed that since the recovery from the shipowner would benefit respondent, equity required that respondent bear a portion of. the expenses of obtaining that recovery.

The District Court denied petitioner’s motion, and the United States Court of Appeals for the Second Circuit affirmed. Bloomer v. Tong, 586 F. 2d 908 (1978). The Court of Appeals concluded that a stevedore should not be required to pay a share of the longshoreman’s legal expenses in a suit brought against the shipowner. We granted certiorari to resolve this recurring question, on which the Courts of Appeals have been divided. 441 U. S. 942 (1979). We affirm.

II

Petitioner’s argument amounts to an appeal to the equitable principle that when a third person benefits from litigation instituted by another, that person may be required to bear a portion of the expenses of suit. He invokes cases establishing that in certain circumstances, courts should exercise their equitable powers to charge beneficiaries with a share of the expenses of obtaining a “common fund” through litigation. See Boeing Co. v. Van Gemert, 444 U. S. 472 (1980); Alyeska Pipeline Service Co. v. Wilderness Society, 421 U. S. 240, 257-259 (1975); id., at 275-280 (Marshall, J., dissenting); Mills v. Electric Auto-Lite Co., 396 U. S. 375 (1970); Sprague v. Ticonic National Bank, 307 U. S. 161 (1939). When measured against the language, structure,, and history of the Longshoremen’s and Harbor Workers’ Compensation Act. however, petitioner’s argument must fail.

The Act provides a comprehensive scheme governing an injured longshoreman’s rights, against the stevedore and shipowner. The longshoreman is not required to make an election between the receipt of compensation and a damages action against a third person, 33 U. S. C. § 933 (a). After receiving a compensation award from the stevedore, the longshoreman is given six months within which to bring suit against the third party. 33 U. S. C. § 933 (b). If he fails to seek relief within that period, the acceptance of the compensation award operates as an assignment to the stevedore of the longshoreman’s rights against the third party. The Act makes explicit provision for the distribution of any amount obtained by the stevedore in a suit brought pursuant to that assignment. The stevedore is entitled to reimbursement of all compensation benefits paid the employee, and its costs, including attorney’s fees. Of the remainder, four-fifths is distributed to the longshoreman, and one-fifth “shall belong to the employer.” 33 U. S. C. § 933 (e).

The Act does not expressly provide for the distribution of amounts recovered in a suit brought by the longshoreman. The unambiguous provision that the stevedore shall be reimbursed for all of his legal expenses if he obtains the recovery does, however, speak with considerable force against requiring him to bear a part of the longshoreman’s costs when the longshoreman recovers on his own. There is no reason to believe that Congress intended a different distribution of the expenses of suit merely because the longshoreman has brought the action. Petitioner asserts, however, that in the absence of an explicit statutory resolution, the recovery against the shipowner represents a common fund for whose creation the stevedore may properly be charged. To evaluate this argument we turn to the history of the relevant provisions of the Act.

Ill

As originally enacted in 1927, the Act required a longshoreman to choose between the receipt of a compensation award from his employer and a damages suit against the third party. Act of Mar. 4, 1927, § 33, 44 Stat. 1440. If the. longshoreman elected to receive compensation, his right of action was automatically assigned, to his employer. In 1938, however. Congress provided that in cases in which compensation was not made pursuant to an award by a deputy commissioner (appointed by the Secretary of Labor, see 33 U. S. C. § 940), the longshoreman would not be required to choose between the compensation award and an action for damages. Under the 1938 amendments, no election was required unless compensation was paid pursuant to such an award. See Act of June 25, 1938, ch. 685, §§ 12, 13, 52 Stat. 1168.

Like the present version, the Act as amended in 1938 did not make provision for the distribution of amounts recovered from the third party in a suit brought by the longshoreman. The lower courts, however, interpreted the Act to require that the stevedore be reimbursed for his compensation payment out of the sum recovered from the third party. Congress was understood not to contemplate double recovery on the longshoreman’s part, and the stevedore did not, therefore, lose the right to reimbursement for its compensation payment. See, e. g., The Etna, 138 F. 2d 37 (CA3 1943); Miranda v. Galveston, 123 F. Supp. 889 (SD Tex. 1954); Fontana v. Pennsylvania R. Co., 106 F. Supp. 461 (SDNY 1952) (Weinfeld, J.), aff’d on opinion below sub nom. Fontana v. Grace Line, Inc., 205 F. 2d 151 (CA2), cert. denied, 346 U. S. 886 (1953).

Under the 1938 legislation the lower courts also decided that the stevedore should not be required to bear a proportionate share of the longshoreman’s legal expenses. To force the stevedore to do so, it was observed, would guarantee the longshoreman a total recovery in excess of the amount he received in his third-party action. Solely by virtue of the compensation scheme, then, the longshoreman would receive a greater sum than would be possible in an ordinary suit for damages. At the same time the stevedore would be prevented from recovering the full amount of its compensation payment. The courts concluded that these results would violate legislative purposes made manifest by the express provision that the employer may recover its legal expenses from the fund created by its own suit against the third party. See Davis v. United States Lines Co., 253 F. 2d 262 (CA3 1958); Oleszczuk v. Calmar S. S. Corp., 163 F. Supp. 370 (Md. 1958); Fontana v. Pennsylvania R. Co., supra, at 463-464.

In 1959, Congress amended the Act to delete the election-of-remedies requirement altogether. Act of Aug. 18, 1959, 73 Stat. 391. Existing law was felt to “wor[k] a hardship on an employee by in effect forcing him to take compensation under the act because of the risks involved in pursuing a lawsuit against a third party.” S. Rep. No. 428, 86th Cong., 1st Sess., 2 (1959). The result was that an injured employee “usually elects to take compensation for the simple reason that his expenses must be met immediately, not months or years after when he has won his lawsuit.” Ibid.; see H. R. Rep. No. 229, 86th Cong., 1st Sess. (1959).

Responding to this inequity, the 1959 amendment provided that even when compensation was paid pursuant to an award of the deputy commissioner, the longshoreman’s right of action would not be assigned to the stevedore until six months from the date of the award. The legislative history demonstrates that Congress did not intend to alter the rule allowing the stevedore to recover the full amount of its lien from the long- . shoreman’s third-party recovery. An employee “would not be entitled to double compensation,” for “an employer must be reimbursed for any compensation paid to the employee out of the net proceeds of the recovery.” S. Rep. No. 428, supra, at 2. During the hearings on the 1959 amendments, the rule that an employer would not be required to bear a proportionate share of the longshoreman’s cost of recovery was specifically drawn to Congress’ attention, and one witness suggested that it should be abandoned. Instead, Congress elected not to disturb the existing rule. Recognizing that no change had been contemplated, the courts continued to hold that a stevedore would not be required to bear a proportionate share of the longshoreman’s legal expenses. See Haynes v. Rederi A/S Aladdin, 362 F. 2d 345 (CA5 1966); Ashcraft & Gerel v. Liberty Mutual Ins. Co., 120 U. S. App. D. C. 51, 343 F. 2d 333 (1965); Petition of Sheffield Tankers Cory., 222 F. Supp. 441 (ND Cal. 1963).

In 1972, Congress enacted more extensive Amendments to the Act, see Edmonds v. Compagnie Oenerale Transatlantique, 443 U. S. 256, 262 (1979), and it is these Amendments that according to petitioner, justify a change in the rule with respect to attorney’s fees. Concerned that compensation benefits had been far too low, Congress altered the benefit structure of the Act so as to increase both maximum and minimum benefits substantially. These increases were linked to two provisions designed to reduce litigation and to ensure that stevedores would have sufficient funds to pay the additional compensation. First, Congress abolished the unseaworthiness remedy for longshoremen, recognized in Seas Shipping Co. v. Sieracki, 328 U. S. 85 (1946), and limited the longshoreman’s action against the shipowner to one based on negligence. Second, Congress eliminated the third-party action by the shipowner against the stevedore, recognized-in Ryan Stevedoring Co. v. Pan-Atlantic S. S. Corp., 350 U. S. 124 (1956). In that case the Court held that a shipowner could obtain damages from the stevedore when it showed that the stevedore had breached its warranty to the shipowner of workmanlike service. As the House Report notes, the consequence was that “a stevedore-employer is indirectly liable for damages to an injured longshoreman who utilizes the technique of suing the vessel,” with the result “that much of the financial resources which could better be utilized to pay improved compensation benefits were now being spent to defray litigation costs.” H. R. Rep. No. 92-1441, p. 5 (1972); see S. Rep. No. 92-1125, p. 9 (1972). Indeed, there was considerable testimony during the hearings that third-party actions had resulted in congested courts and that the primary beneficiaries had been lawyers, not injured longshoremen. The Senate Report stated that "[t]he social costs of these law suits, the delays, crowding of court calendars and the need to pay for lawyers’ services have seldom resulted in a real increase in actual benefits for injured workers.” Id., at 4. The elimination of the shipowner’s cause of action against the stevedore was intended to reduce litigation, immunize stevedores and their insurers from liability in third-party actions, and assure conservation of stevedore resources for compensation awards to longshoremen.

Witnesses also brought to the attention of Congress the longstanding rule that an employer could recover the full amount of its compensation award from the longshoreman’s recovery against the shipowner. Congress did not, however, enact any legislation concerning that rule.

Petitioner argues that the 1972 Amendments so altered the equities as to compel a holding that a stevedore must pay a proportionate share of the longshoreman’s expenses in a third-party action brought against the shipowner. He observes that before the Amendments, the longshoreman and the stevedore had adverse interests in the third-party action: if the longshoremán were successful in that suit, the shipowner frequently would attempt to require the stevedore to make payment of amounts due the longshoreman. With the abolition of the shipowner’s cause of action, the stevedore and the longshoreman had a common interest in the longshoreman’s recovery against the shipowner. Petitioner concludes that the common-fund doctrine should be available to permit the employee to recover from the stevedore a proportionate share of the expenses of suit.

In light of the Act and its legislative history, however, we are unable to accept petitioner’s argument. It is of course true that the stevedore and longshoreman now have a common interest in the longshoreman’s recovery against the shipowner, but it does not follow that the stevedore should be required to pay a share of the longshoreman’s legal expenses. Congress has not modified 33 U. S. C. §933 (e), providing that the stevedore is not required to pay its legal expenses in cases in which it has recovered against the shipowner pursuant to an assignment from the longshoreman. Moreover, in 1972 Congress was informed of, but did not alter, the uniform rule that the longshoreman’s legal fees would be paid by the longshoreman alone. In these circumstances we are reluctant to take steps to change that rule on our own. See Edmonds v. Compagnie Generole Transatlantique, 443 U. S., at 273.

In addition, to the extent that the 1972 Amendments offer guidance, they strongly suggest that the rule for payment of attorney’s fees, was not intended to be altered. The legal expenses incurred by stevedores in connection with third-party actions were understood to be a major obstacle to the funding of increased compensation payments. Numerous witnesses testified that third-party actions frequently inured to the benefit of lawyers, depleting the stevedore’s resources and congesting.the courts without aiding the injured employee. It would be ironic indeed if statutory amendments designed to eliminate the stevedore’s liability in connection with third-party actions were interpreted to give birth to an entirely new liability in the form of a charge for the longshoreman’s legal expenses. We are unwilling to attribute to Congress an intention to allow creation of a new liability irreconcilable with its general desire to reduce litigation and to ensure conservation of the legal expenses of stevedores and their insurers.

Finally, we return to the original basis for the rule that a stevedore would not be required to pay a portion of the longshoremen’s expenses in his suit against the shipowner. The compensation award was intended to be an immediate and readily available payment to the injured longshoreman. By receiving this payment, the longshoreman was not foreclosed from pursuing an action against the shipowner. At the same time, he was not entitled to double recovery, and the stevedore would be reimbursed in full for his compensation payment, The result we reach enables the longshoreman to recover an amount no less than that which he would receive through an ordinary negligence action, and also immunizes the stevedore from liability in connection with the third-party action. If we were to accept petitioner’s view, an injured longshoreman would ultimately receive a sum equal to the full amount of his recovery against the shipowner and, in addition, a supplement consisting of the stevedore’s contribution to the longshoreman’s legal expenses. This supplement would represent a windfall in excess of the amount the longshoreman received as compensation for the injuries he has suffered. The stevedore would not obtain reimbursement for the full amount of its compensation payment, but would instead have that amount reduced by a possibly substantial legal fee. This result would be contrary to the allocation of attorney’s fees expressly provided by Congress for suits brought by the stevedore pursuant to an assignment from the longshoreman. In these circumstances we do not believe that the Act and its legislative history can fairly be read to support the distribution proposed by petitioner.

The judgment of the Court of Appeals is

Affirmed.

Mr. Justice Blackmun,

dissenting.

The Court’s approach in this case strikes me as somewhat crabbed. By tilting with the specter of “double recovery,” the Court adopts a construction of the Longshoremen’s and Harbor Workers’ Compensation Act, 33 U. S. C. § 901 et seq., that relegates the injured longshoreman’s welfare to secondary status, well behind the interest of his stevedore-employer in conserving resources.

Under the Court’s rule, the stevedore has everything to gain and nothing to lose. The longshoreman takes the risk and the worry of the litigation and, if he gains enough, the stevedore is home free. This result does not seem to me to square with the Court’s recent recognition that the Act should be construed with the beneficent purpose of worker protection foremost in mind. Northeast Marine Termintil Co. v. Caputo, 432 U. S. 249, 268 (1977). Nor does it entirely square with the modern concept that the costs of industrial accidents are expenses to be borne by the industrial enterprise and not by the injured workman. It also fails to do equity where equity is due. Since I cannot agree that Congress has required us so to deviate from the principles of equity and the governing purposes of the Act, I respectfully dissent.

The Court recognizes, ante, at 79, that although Congress has provided a detailed scheme for the distribution of the amount recovered in a third-party action initiated by the stevedore, it has never fixed by statute the details of distribution when it is the longshoreman who brings suit. The Court, nonetheless, discovers and espouses a settled judicial rule for division of the recovery in an action by the longshoreman, and it transforms that rule into a statutory mandate by pronouncing that we should not presume to change what the Court thinks Congress, by inaction, apparently has left in force. Ante, at 85-86. I feel the Court has oversimplified the variegated history of the judicial “rule,” has overdrawn the clarity of congressional approval of it, and has failed to estimate the degree to which the rationale for exonerating the stevedore from bearing a portion of the attorney’s fees was undermined by the 1972 Amendments to the Act.

The earliest cases mentioned by the Court, The Etna, 138 F. 2d 37 (CA3 1943), and Fontana v. Pennsylvania R. Co., 106 F. Supp. 461 (SDNY 1952), aff’d mem. sub nom. Fontana v. Grace Line, Inc., 205 F. 2d 151 (CA2), cert. denied, 346 U. S. 886 (1953), chiefly concerned the broad question, not at issue here, whether the stevedore is entitled to any recoupment from the longshoreman’s recovery against the shipowner. These cases established that the stevedore is entitled to recoupment, and thus that the longshoreman is not to receive the “double recovery” of full statutory compensation plus full damages in an action at law. No one, at this juncture, doubts the validity of this holding or its approval by Congress. See 33 U. S. C. § 933 (f); S. Rep. No. 428, 86th Cong., 1st Sess., 2 (1959). The question we presently face is a much narrower one that a general dislike for any double recovery does not at all resolve.

To be sure, Fontana, supra, and Davis v. United States Lines Co., 253 F. 2d 262 (CA3 1958), held, as the Court does today, that attorney’s fees for a third-party action must be borne in their entirety by the longshoreman. These cases drew support for this conclusion from both the statutory division of recovery when the stevedore brings suit and the view that the “expense of securing the recovery is, as in equity it should be, a first charge against the fund itself.” Fontana v. Pennsylvania R. Co., 106 F. Supp., at 464. As a review of subsequent case law demonstrates, however, this reasoning never has achieved the broad acceptance that the Court’s opinion implies. In the Fourth and the Fifth Circuits, and perhaps even in the Second Circuit, alternative approaches to the problem have been advocated and applied.

In Ballwanz v. Jarka Corp., 382 F. 2d 433 (1967), the Fourth Circuit adopted an entirely different rationale. The court recognized that Ryan Stevedoring Co. v. Pan-Atlantic S. S. Corp., 350 U. S. 124 (1956), which permitted shipowners to bring indemnity actions against stevedores, produced a “rotary situation” in which the stevedore was effectively aligned with the shipowner against the third-party suit. 382 F. 2d, at 434. As a result, recoupment of the stevedore’s compensation lien from the longshoreman’s recovery involved “no more than a transfer of the charge in that amount from its [insurer’s] loss as compensation carrier to its loss as liability carrier.” Id., at 435. It was the contrariety of interests and lack of true benefit to the stevedore, and not the arguments advanced in Fontana and Davis, that led the court to refuse proration of fees.

In the Fifth Circuit, the proper distribution of recoveries in third-party actions initiated by longshoremen has been the subject of continuing debate. Strachan Skipping Co. v. Melvin, 327 F. 2d 83 (1964), applied Fontana’s conclusion that attorney’s fees are a “first charge” against the recovery in a case where the recovery was so small that nothing was left for the longshoreman. The decision provoked a vigorous dissent, which proposed a different reading of Fontana and Davis that would give the compensation lien priority over the fees. Id., at 87-89. This alternative appears to have been applied in Haynes v. Rederi A/S Aladdin, 362 F. 2d 345, 351 (1966), cert. denied, 385 U. S. 1020 (1967), albeit on the ground that the stevedore was represented in the action by its own counsel. Eventually, however, both readings of the Fontana-Davis “rule” were displaced in the Fifth Circuit by an approach that, in certain circumstances, required the longshoreman and the stevedore to “pay attorney’s fees and litigation expenses in proportion to their recoveries.” Chouest v. A & P Boat Rentals, Inc., 472 F. 2d 1026, 1035-1036, cert. denied sub nom. Travelers Ins. Co. v. Chouest, 412 U. S. 949 (1973).

In the Second Circuit, Fontana’s approach has not been uniformly followed. Landon v. Lief Hoegh & Co., 521 F. 2d 756, 761 (1975), cert. denied sub nom. A/S Arcadia v. Gulf Ins. Co., 423 U. S. 1053 (1976), treated the compensation lien as an “express trust for the benefit of the employer” with the longshoreman as statutory trustee. In the District Courts, moreover, both the “conflict” theory developed in Ballwanz and the approach advocated by the Strachan dissent gained some currency. See, e. g., Spano v. N. V. Stoomvaart Maatschappij “Nederland” 340 F. Supp. 1194 (SDNY 1971); Russo v. Flota Mercante Grancolombiana, 303 F. Supp. 1404, 1407 (SDNY 1969). These cases were subsequently disapproved in Valentino v. Rickners Rhederei, G. M. B. H., SS Etha, 552 F. 2d 466 (CA2 1977), which reinstated the Fon-tana rationale.

I mention these variations and counterpoints to the Fon-tana-Davis theme not to challenge the Court’s assertion that, prior to the 1959 and 1972 amendments to the Act, stevedores generally were exonerated from bearing a portion of attorney’s fees incurred in longshoreman-initiated actions, but rather to suggest that the Court errs when it implies that the case law presented a settled judicial construction of the Act for Congress to approve. Indeed, the situation was even more complicated than this brief exposition illustrates, since the various rationales employed by the courts led them into disarray over the handling of attorney’s fees in cases where the third-party recovery was insufficient to satisfy both the fees and the stevedore’s compensation lien in their entirety. See Valentino v. Rickners Rhederei, G. m. B. H., SS Etha, 417 F. Supp. 176, 177-179 (EDNY 1976), aff’d on other grounds, 552 F. 2d 466 (CA2 1977). The legislative history relied upon by the Court, ante, at 80-81, 84, fails to show that Congress delved into the intricacies of this judicial debate, or indeed that it did more than barely scratch the surface in consideration of fee allocations in actions brought by longshoremen. The most that can be gleaned from this history is that Congress intended not to interfere with judicial developments in this sphere.

As a result, I think that the Court informs congressional inaction with the wrong meaning, and that it draws an analogy to the statutory allocation of stevedore-initiated recoveries where none, in fact, exists. Had Congress intended rote application of the allocation scheme in 33 U. S. C. § 933 (e) to recovery in a longshoreman-initiated action, specification of this result would have been a simple task, and one would have expected Congress to say so. Instead, despite the obvious prevalence of such suits, Congress left the matter to the judicial process. Although it is somewhat precarious to find significance in a congressional omission, I view the absence of action in this case as a clear signal that Congress regarded the allocation of a recovery in a suit by a longshoreman as a more fluid and complicated matter than allocation in a suit by a stevedore, and that it left the courts free to balance the equities instead of commanding adherence to a strict “arithmetic ranking” of liens. See Mitchell v. Scheepvaart Maatschappij Trans-Ocean, 579 F. 2d 1274, 1279 (CA5 1978).

Adaptation of the statutory framework, of course, might be desirable if it achieved an equitable result. But it does not. Indeed, the analogy to the division of a recovery under § 933 (e) itself is flawed. When the stevedore brings the lawsuit, its own recovery comes first after expenses and costs of litigation have been paid; the longshoreman, as nonparticipating beneficiary, receives only a portion of the remainder. In contrast, under the Court’s ruling, the longshoreman who brings suit must wait in line until the nonparticipating stevedore’s interests have been satisfied in full. Under the statute, then, the party who takes the risk of loss receives priority of treátment. Under the Court’s ruling, he does not. The apparent symmetry of a strict analogy to the statutory formula thus produces, for the longshoreman, an asymmetrical result. Considerations of equity surely do not require that approach.

As I weigh the equities, the most persuasive reason heretofore for exonerating the stevedore from bearing a proportionate share of attorney’s fees has been the stevedore’s contingent liability for indemnity of the shipowner under Ryan Stevedoring Co. v. Pan-Atlantic S. S. Corp., 350 U. S. 124 (1956). That liability, of course, was eliminated by the 1972 Amendments to the Act. See Edmonds v. Compagnie Generate Transatlantique, 443 U. S. 256, 262 (1979); Northeast Marine Terminal Co. v. Caputo, 432 U. S., at 261-262. Thus, it is now clear from the outset of each longshoreman’s suit that the attorney’s efforts serve the interests of the stevedore as well as those of the longshoreman. If the action is successful, the stevedore obtains recoupment of the compensation benefits it has paid, without risk, without the jeopardy to customer relations that might arise if the stevedore or its insurer brought the suit, and without adjustment for the possibility that the stevedore itself is partly responsible for the injury. The amount of the stevedore’s recoupment ordinarily depends directly on the lawyer’s skill in proving both the shipowner’s negligence and damages. This direct pecuniary interest in the outcome of the litigation justifies, in my view, an equitable allocation of the costs of bringing suit in proportion to recovery from the common fund. See Sprague v. Ticonic National Bank, 307 U. S. 161, 166-167 (1939). Without that allocation, the longshoreman must bear all the risk for only a limited part of the benefit.

In addition to eliminating the only sound reason for refusing an allocation on equitable grounds, the 1972 Amendments also show clearly that congressional concern was primarily for the workman and not for the stevedore-employer or for the shipowner. The chief purpose of the Amendments was to benefit the longshoreman. Congress’ desire to reduce excessive litigation and thus to conserve stevedore resources, of which the Court makes so much, was incidental and secondary to this purpose. When, for example, Congress eliminated the litigation merry-go-round produced by the indemnity and unseaworthiness actions created in Ryan Stevedoring Co. v. Pan-Atlantic S. S. Corp., supra, and Seas Shipping Co. v. Sieracki, 328 U. S. 85 (1946), see ante, at 82-83, it did so not out of naked solicitude for shipowners and stevedores, but because this layering of recoveries failed to produce “a real increase in .actual benefits for injured workers.” S. Rep. No. 92-1125, p. 4 (1972), quoted ante, at 84. Yet the Court now advances this secondary purposé .to justify a reduction of the longshoreman’s recovery in the jbhird-party negligence action that Congress retained primarily for his benefit; and it does so because proration of attorney’s fees would result in a “real increase” in the longshoreman’s, total compensation. I cannot avoid the suspicion that congressional intent has been stood on its head.

The Court also makes much of the putative “windfall” a longshoreman would receive if petitioner prevailed. Ante, at 87. The longshoreman would receive no windfall. Any costs or fees he must pay reduce his net. recovery below the amount of his adjudicated injuries. This deficit would be alleviated, but never exceeded, if the stevedore were charged with a proportionate share of the attorney’s fees. The longshoreman, of course, would be better off than if he had to depend either on the statutory compensation or on the negligence suit alone. But Congress long ago eliminated the necessity of electing a remedy, and an increase in total recovery accomplished by resort to both methods of redress is fully consistent with the statutory scheme. So long as the longshoreman’s total compensation remains less than his actual damages, there is no true “double recovery.”

To use the Court’s own adjective, ante, at 85, it is “ironic” that from this litigation petitioner will receive, by today’s ruling, only $2,779.57 more than the attorney’s fees of $19,932.40. The Court thus acts to ensure that third-party actions will remain, as they were before the 1972 Amendments, a litigation playground for others instead of a method by which the injured longshoreman realistically may hope to recover for losses that are not covered by the statutory compensation scheme. I shall be interested to see whether the Court adheres to its present logic when presented with a case where the third-party recovery is so small that virtually nothing is left for the longshoreman. Where the recovery against the shipowner is less than the stevedore’s lien and the expenses of the suit, see ante, at 86-87, n. 13, it is to be hoped that the injured longshoreman will not be required to disgorge part of his compensation payments. Yet such disgorgement would not be inconsistent with the gloss on congressional priorities that the Court imposes today.

       For convenience we shall use the term “stevedore” to refer to both the employer and its insurer.

       The District Court’s distribution was as follows:
      Recovery $60,000.00
      less expenses (202.80)
      balance for distribution 59,797.20
      less attorney’s fee of one-third (19,932.40)
      balance 39,864.80
      less lien of respondent (17,152.83)
      net to petitioner 22,711.97
      Under this distribution scheme, petitioner received a total of $39,864.80 from the stevedore and shipowner, an amount equivalent to the full $60,000 recovery minus expenses.
      Petitioner sought to have the fund distributed in the following manner:
      Recovery $60,000.00
      less expenses (202.80)
      balance for distribution 59,797.20
      less attorney’s fee of one-third (19,932.40)
      balance 39,864.80
      lien of respondent 17,152.83
      less proportionate share of fees and expenses (.3355866 X $17,152.83) (5,756.26)
      11,396.57 (11,396.57)
      net to petitioner 28,468.23
      Under this distribution, petitioner would receive a total of $45,621.06, $5,756.26 over and above the amount representing his $60,000 damages recovery minus expenses.

       The Ninth and Fourth Circuits have held that the stevedore should be charged with a share of the longshoremen’s legal expenses, Bachtel v. Mammoth Bulk Carriers, Ltd., 605 F. 2d 438 (CA9 1979); Swift v. Bolten, 517 F. 2d 368 (CA4 1975). The First Circuit, like the Second, has disallowed apportionment, Celia v. Partenreederei MS Ravenna. 529 F. 2d 15 (1975), cert. denied, 425 U. S. 975 (1976). The Fifth Circuit has adopted a third approach calling for an individualized inquiry into whether apportionment is fair in the particular case, Mitchell v. Scheepvaart Maatschappij Trans-Ocean, 579 F. 2d 1274 (1978).

       That section provides:
      “Any amount recovered by such employer on account of such assignment, whether or not as the result of a compromise, shall be distributed as follows:
      “(1) The employer shall retain an amount equal to—
      “(A) the expenses incurred by him in respect to such proceedings or compromise (including a reasonable attorney's fee as determined by the deputy commissioner or Board);
      “(B) the cost of all benefits actually furnished by him to the employee under section 907 of this title;
      “(C) all amounts paid as compensation;
      “(D) the present value of all amounts thereafter payable as compensation, . . . and the present value of the cost of all benefits thereafter to be furnished under section 907 of this title . . . ; and
      “(2) The employer shall pay any excess to the person entitled to compensation or to the representative, less one-fifth of such excess which shall belong to the employer.”

       See Hearings on Bills Relating to the Longshoremen’s and Harbor Workers’ Compensation Act before a Special Subcommittee of the House Committee on Education and Labor, 84th Cong., 2d Sess., 51-58 (1956) (discussing difference between New York law, which allowed an employer to receive full reimbursement of its workmen’s compensation payment, and New Jersey law, which required proportionate payment of expenses); see also id,., at 38. Indeed, the 1959 bill was largely modeled after the New York workmen’s compensation provisions, see S. Rep. No. 428, 86th Cong., 1st Sess., 3 (1959), and under New York law it was well established that the longshoreman would be required to pay his own legal fees. See Kussack v. Ring Constr. Corp., 1 App. Div. 2d 634, 153 N. Y. S. 2d 646 (1956) , aff’d, 4 N. Y. 2d 1011, 152 N. E. 2d 540 (1958); Hobbs v. Dairymen’s League Co-op Assn., 258 App. Div. 836, 15 N. Y. S. 2d 694 (1939), appeal dism’d, 282 N. Y. 710, 26 N. E. 2d 823 (1940).

       That rule was expressly approved on the floor of the Senate:
      “Mr. BUTLER. ... I understand that the bill merely amends section 33 of the Longshoremen’s and Harbor Workers’ Act, so as to permit an-employee to bring a third-party liability suit without forfeiting his right to compensation under the act. It is my further understanding that the courts have consistently held that the present section 33 of the act gives the employer a lien on the employee’s third party recovery for the compensation and benefits paid by the employer.
      “Is it the Senator’s understanding, then, that the passage of this measure would'in no way affect the present construction of the act with respect to the employer’s lien on the employee’s third-party recovery for compensation and benefits paid by the employer?
      “Mr. BARTLETT. The distinguished Senator from Maryland is correct.
      “In further explanation on this point, I ask unanimous consent to have printed at this point in the Record a brief statement from the Committee on Labor and Public Welfare . . . :
      “ ‘There is no necessity for a provision giving the employer a lien on the employee’s third-party recovery for the compensation and benefits paid by the employer, inasmuch as the courts have construed the present section 33 as providing such lien. In addition, as a result of judicial construction of the existing section, the employee is entitled to deduct his expenses incurred in third-party proceedings,”' 105 Cong. Rec.'12674 (1959) (emphasis added).
      The express statement that the employee should deduct his expenses from the recovery is, of course, a plain indication that those expenses would not be borne' by- the stevedore. Cf. n. 13, infra.

      The House version of the amendment would have provided: “[T]he carrier liable for the payment of . . . compensation shall have a lien on the proceeds of any recovery from [a] third person, whether by judgment, settlement, or otherwise, after the deduction of the reasonable and necessary expenditures, including attorney’s fees, incurred in effecting such recovery, to the extent of the total amount of compensation awarded under, or provided, or estimated, by this Act . . . .” H. R. Rep. No. 229, 86th Cong., 1st Sess., 6 (1959). The House passed this version of the amendment, 105 Cong. Rec. 5561-5562 (1959), but later concurred in the Senate version on the evident assumption that the Senate version also adopted existing judicial practice. See id., at 15343.

       Before the Amendments, the maximum weekly compensation payment was $70; after the Amendments, the maximum is 200% of the national average weekly wage, to be determined annually by the Secretary of Labor. Before the Amendments, the minimum weekly payment was $18; the Amendments provide for a minimum in the amount of the lesser of the employee’s full average weekly wage or 50% of the national average weekly wage. The Amendments increased or improved benefits in other ways not material here. See 33 U. S. C. §§ 906-910.

       See Hearings on S. 2318 et al. before the Subcommittee on Labor of the Senate Committee on Labor and Public Welfare, 92d Cong., 2d Sess., 33, 38-39, 244, 258, 263, 271, 290, 304, 416, 431, 621-623, 632, 642, 661, 725, 730 (1972); Hearings on H. R. 247 et al. before the Select Subcommittee on Labor of the House Committee on Education and Labor, 92d Cong., 2d Sess., 47-48, 60, 85-86, 176 (1972).

       Contrary to Mr. Justice BlackmuN’s suggestion, see post, at 92, that the somewhat divergent rationales adopted by the lower courts demonstrate that there was no settled rule prior to the 1972 Amendments, we have been unable to find a single case, and none is cited in the dissenting opinion, in which a court held that a stevedore would be required to pay a share of the longshoreman’s legal expenses. The uniform rule was to the contrary, and it is that rule of which Congress was informed in 1959 and 1972 and which it approved in 1959. See n. 6, supra.

       See Hearings on S. 2318 et al., supra n. 8, at 160, 371, 720; Hearings on H. R. 247 et al., supra n. 8, at 119, 157-158, 295.

       The dissenting opinion suggests that the “chief” purpose of the 1972 Amendments was to benefit longshoremen, and that the distribution we approve would disserve this purpose in favor of the merely “incidental” intention to conserve stevedore expenses. Post, at 94-95. The attempted separation of the two legislative purposes is unpersuasive. Congress found it necessary to eliminate stevedore liability in connection with third-party actions precisely in order to assure that stevedores would have sufficient funds to pay vastly increased compensation benefits to longshoremen. In these circumstances it is for Congress, not this Court, to determine whether a requirement of proportional payment of legal expenses would ultimately benefit injured longshoremen, or instead longshoremen’s lawyers, who were found to have been the primary beneficiaries of third-party actions in the past. See supra, at 82-84.

       Petitioner suggests that a requirement of proportional payment would ultimately aid stevedores by encouraging third-party suits and thus making it more likely that stevedores will receive reimbursement for the compensation payment. The Act, however, contains special incentives designed to encourage the stevedore to bring suit on its own if the longshoreman elects not to do so. See n. 4, supra.

       Respondent does not challenge the approach adopted in Fontana v. Pennsylvania B. Co., 106 F. Supp. 461, 463-464 (SDNY 1952), aff’d on opinion below sub nom. Fontana v. Grace Line, Inc., 205 F. 2d 151 (CA2), cert. denied, 346 U. S. 886 (1953), under which the expenses of suit, including attorney’s fees, represent the first charge on the recovery against the third party. See S. Rep. No. 428, 86th Cong., 1st Sess., 2 (1959); n. 6, supra. Under this view, if the recovery against the shipowner is less than the sum of the lien and the expenses of suit, the longshoreman will receive the full amount of his expenses even if the remainder is insufficient to reimburse the stevedore for its lien. See Valentino v. Rickners Rhederei, G. M. B. H., SS Etha, 552 F. 2d 466 (CA2 1977). We do not today address the Valentino situation, and contrary to the implication of the dissent, nothing in our decision suggests that the stevedore’s lien has priority over the longshoreman’s expenses.

       See n. 2, supra, illustrating that petitioner’s distribution scheme would result in a recovery of $5,756.26 in excess of the amount he would receive if there were a simple negligence action and no compensation scheme.
      The Act explicitly allows attorney’s fees in cases in which an employer declines to pay compensation, 33 U. S. C. § 628, and in cases in which the employer brings suit pursuant to an assignment from the longshoreman. These provisions reinforce the conclusion that if Congress had intended to allow proportionate sharing of legal expenses, it would have done so expressly.
      Petitioner suggests that the distribution we approve will result in a $5,756.26 windfall to the respondent, since it is in effect permitted to recover its lien without contributing to the costs of the recovery. But as explained in the text, our review of the Act and its legislative history persuades us that Congress intended the stevedore to recover the full amount of its lien, regardless of who brings the action.

       Nothing we say today is intended to affect the established power of a court of equity to charge beneficiaries with a proportionate share of the costs of creating a common fund through litigation. See Dawson, Lawyers and Involuntary Clients: Attorney Fees From Funds, 87 Harv. L. Rev. 1597 (1974). Nor are we presented the question whether that power would be properly exercised in the setting of a workers’ compensation scheme if the particular Act and its legislative history were ambiguous on the subject. For disparate results in the state courts, compare Burt v. Hartford Acc. & Indem. Co., 252 Ark. 1236, 483 S. W. 2d 218 (1972); Liberty Mut. Ins. Co. v. Western Cas. & Sur. Co., Ill Ariz. 259, 527 P. 2d 1091 (1974); Commercial Union Ins. Co. v. Scott, 116 Ga. App. 633, 158 S. E. 2d 295 (1967); Tucker v. Nason, 249 Iowa 496, 87 N. W. 2d 547 (1958), with Quinn v. State, 15 Cal. 3d 162, 539 P. 2d 761 (1975); Security Ins. Co. of Hartford v. Norris, 439 S. W. 2d 68 (Ky. 1969); Broussard, Broussard & Moresi, Ltd. v. State Auto & Cas. Underwriters Co., 287 So. 2d 544 (La. App. 1973), cert. denied, 290 So. 2d 908 (La. 1974); Carter v. Wooley, 521 P. 2d 793 (Okla. 1974). See generally 2A A. Larson, Workmen’s Compensation §74.32 (1976 and 1979 Supp.).
      A number of States have required proportional sharing of legal expenses by statute. See, e. g., Idaho Code § 72-223 (1973); Ill. Rev. Stat., ch. 48, § 138.5 (1977); Mich. Comp. Laws Ann. § 418.827 (Supp. 1978); N. Y. Work. Comp. Law § 29 (McKinney Supp. 1979); Pa. Stat. Ann., Tit. 77, §671 (Purdon Supp. 1979); Va. Code §65.1-43 (1973); Wash. Rev. Code Ann. §51.24.010 (Supp. 1978). See generally Larson, supra; Atle-son, Workmen’s Compensation: Third Party Actions and the Apportionment of Attorney’s Fees, 19 Buffalo L. Rev. 515 (1970). That route, of course, remains available to Congress.

       See J. Boyd, The Law of Compensation for Injuries to Workmen 10 (1913); H. Somers & A. Somers, Workmen’s Compensation 26 (1954).

       See Valentino v. Richners Rhederei, G. M. B. H., SS Etha, 552 F. 2d 466, 469 (CA2 1977), where the court took notice that “stevedores do not, as a practical matter, pursue these lawsuits — presumably for fear of antagonizing their customers.”


source: Caselaw Access Project

author: Mr. Justice Powell

license: Public Domain

text:
    CALIFORNIA RETAIL LIQUOR DEALERS ASSN. v. MIDCAL ALUMINUM, INC., et al.
    No. 79-97.
    Argued January 16, 1980
    Decided March 3, 1980

      Powell, J., delivered the opinion of the Court, in which all other Members joined, except BeeNNAN, J., who took no part in the consideration or decision of the case.

      William T. Chidlaw argued the cause and filed briefs for petitioner.

      Jack B. Owens argued the cause for respondent Midca! Aluminum, Inc. With him on the brief were Elliot S. Kap-lan and Frank C. Damrell, Jr.

      George J. Roth, Deputy Attorney General of California, argued the cause for the State of California as amicus curiae urging reversal. With him on the brief was George Deuk-mejian, Attorney General.

         W. Curtis Sewell filed a brief for the Virginia Beer Wholesalers Association as amicus curiae urging reversal.
      Briefs of amici curiae urging affirmance were filed by Solicitor General McCree, Assistant Attorney General Shenefield, Deputy Solicitor General Wallace, Elinor Hadley Stillman, Barry Grossman, Ron M. Landsman, and
        Michael N. Sohn for the United States; and by A. Kirk McKenzie for Consumers Union of United States, Inc.

   Mr. Justice Powell

delivered the opinion of the Court.

In a state-court action, respondent Midcal Aluminum, Inc., a wine distributor, presented a successful antitrust challenge to California’s resale price maintenance and price posting statutes for the wholesale wine trade. The issue in this case is whether those state laws are shielded from the Sherman Act by either the “state action” doctrine of Parker v. Brown, 317 U. S. 341 (1943), or § 2 of the Twenty-first Amendment.

I

Under § 24866 (b) of the California Business and Professions Code, all wine producers, wholesalers, and rectifiers must file fair trade contracts or price schedules with the State. If a wine producer has not set prices through a fair trade contract, wholesalers must post a resale price schedule for that producer’s brands. § 24866 (a). No state-licensed wine merchant may sell wine to a retailer at other than the price set “either in an effective price schedule or in an effective fair trade contract. ...” § 24862 (West Supp. 1980).

The State is divided into three trading areas for administration of the wine pricing program. A single fair trade contract or schedule for each brand sets the terms for all wholesale transactions in that brand within a given trading area. §§24862, 24864, 24865 (West Supp. 1980). Similarly, state regulations provide that the wine prices posted by a single wholesaler within a trading area bind all wholesalers in that area. Midcal Aluminum, Inc. v. Rice, 90 Cal. App. 3d 979, 983-984, 153 Cal. Rptr. 757, 760 (1979). A licensee selling below the established prices faces fines, license suspension, or outright license revocation. Cal. Bus. & Prof. Code Ann. § 24880 (West Supp. 1980). The State has no direct control over wine prices, and it does not review the reasonableness of the prices set by wine dealers.

Midcal Aluminum, Inc., is a wholesale distributor of wine in southern California. In July 1978, the Department of Alcoholic Beverage Control charged Midcal with selling 27 cases of wine for less than the prices set by the effective price schedule of the E. & J. Gallo Winery. The Department also alleged that Midcal sold wines for which no fair trade contract or schedule had been filed. Midcal stipulated that the allegations were true and that the State could fine it or suspend its license for those transgressions. App. 19-20. Midcal then filed a writ of mandate in the California Court of Appeal for the Third Appellate District asking for an injunction against the State’s wine pricing system.

The Court of Appeal ruled that the wine pricing scheme restrains trade in violation of the Sherman Act, 15 U. S. C. § 1 et seq. The court relied entirely on the reasoning in Rice v. Alcoholic Beverage Control Appeals Bd., 21 Cal. 3d 431, 579 P. 2d 476 (1978), where the California Supreme Court struck down parallel restrictions on the sale of distilled liquors. In that case, the court held that because the State played only a passive part in liquor pricing, there was no Parker v. Brown immunity for the program.

“In the price maintenance program before us, the state plays no role whatever in setting the retail prices. The prices are established by the producers according to their own economic interests, without regard to any actual or potential anticompetitive effect; the state’s role is restricted to enforcing the prices specified by the producers. There is no control, or 'pointed re-examination,’ by the state to insure that the policies of the Sherman Act are not ‘unnecessarily subordinated’ to state policy.” 21 Cal. 3d, at 445, 579 P. 2d, at 486.

L

Rice also rejected the claim that California’s liquor pricing policies were protected by § 2 of the Twenty-first Amendment, which insulates state regulation of intoxicating liquors from many federal restrictions. The court determined that the national policy in favor of competition should prevail over the state interests in liquor price maintenance — the promotion of temperance and the preservation of small retail establishments. The court emphasized that the California system not only permitted vertical control of prices by producers, but also frequently resulted in horizontal price fixing. Under the program, many comparable brands of liquor were marketed at identical prices. Referring to congressional and state legislative studies, the court observed that resale price maintenance has little positive impact on either temperance or small retail stores. See infra, at 112-113.

In the instant case, the State Court of Appeal found the analysis in Rice squarely controlling. 90 Cal. App. 3d, at 984, 153 Cal. Rptr., at 760. The court ordered the Department of Alcoholic Beverage Control not to enforce the resale price maintenance and price posting statutes for the wine trade. The Department, which in Rice had not sought certiorari from this Court, did not appeal the ruling in this case. An appeal was brought by the California Retail Liquor Dealers Association, an intervenor. The California Supreme Court declined to hear the case, and the Dealers Association sought certiorari from this Court. We granted the writ, 444 U. S. 824 (1979), and now affirm the decision of the state court.

II

The threshold question is whether California’s plan for wine pricing violates the Sherman Act. This Court has ruled consistently that resale price maintenance illegally restrains trade. In Dr. Miles Medical Co. v. John D. Park & Sons Co., 220 U. S. 373, 407 (1911), the Court observed that such arrangements are “designed to maintain prices . . . , and to prevent competition among those who trade in [competing goods].” See Albrecht v. Herald Co., 390 U. S. 145 (1968) ; United States v. Parke, Davis & Co., 362 U. S. 29 (1960); United States v. A. Schrader’s Son, Inc., 252 U. S. 85 (1920). For many years, however, the Miller-Tydings Act of 1937 permitted the States to authorize resale price maintenance. 50 Stat. 693. The goal of that statute was to allow the States to protect small retail establishments that Congress thought might otherwise be driven from the marketplace by large-volume discounters. But in 1975 that congressional permission was rescinded. The Consumer Goods Pricing Act of 1975, 89 Stat. 801, repealed the Miller-Tydings Act and related legislation. Consequently, the Sherman Act’s ban on resale price maintenance now applies to fair trade contracts unless an industry or program enjoys a special antitrust immunity.

California’s system for wine pricing plainly constitutes resale price maintenance in violation of the Sherman Act. Schwegmann Bros. v. Calvert Corp., 341 U. S. 384 (1951); see Albrecht v. Herald Co., supra; Kiefer-Stewart Co. v. Joseph E. Seagram, & Sons, 340 U. S. 211 (1951); Dr. Miles Medical Co. v. John D. Park & Sons Co., supra. The wine producer holds the-power to prevent price competition by-dictating the prices charged by wholesalers. As Mr. Justice Hughes pointed out in Dr. Miles, such vertical control destroys horizontal competition as effectively as if wholesalers “formed a combination and endeavored to establish the same restrictions ... by agreement with each other.” 220 U. S., at 408. Moreover, there can be no claim that the California program is simply intrastate regulation beyond the reach of the Sherman Act. See Sehwegmann Bros. v. Calvert Corp., supra; Burke v. Ford, 389 U. S. 320 (1967) (per curiam).

Thus, we must consider whether the State’s involvement in the price-setting program is sufficient to establish antitrust immunity under Parker v. Brown, 317 U. S. 341 (1943). That immunity for state regulatory programs is grounded in our federal structure. “In a dual system of government in which, under the Constitution, the states are sovereign, save only as Congress may constitutionally subtract from their authority, an unexpressed purpose to nullify a state’s control over its officers and agents is not lightly to be attributed to Congress.” Id., at 351. In Parker v. Brown, this Court found in the Sherman Act no purpose to nullify state powers. Because the Act is directed against “individual and not state action,” the Court concluded that state regulatory programs could not violate it. Id., at 352.

Under the program challenged in Parker, the State Agricultural Prorate Advisory Commission authorized the organization of local cooperatives to develop marketing policies for the raisin crop. The Court emphasized that the Advisory Commission, which was appointed by the Governor, had to approve cooperative policies following public hearings: “It is the state which has created the machinery for establishing the prorate program. . . . [I]t is the state, acting through the

Commission, which adopts the program and enforces it. . . .” Ibid. In view of this extensive official oversight, the Court wrote, the Sherman Act did not apply. Without such oversight, the result could have been different. The Court expressly noted that “a state does not give immunity to those who violate the Sherman Act by authorizing them to violate it, or by declaring that their action is lawful. . ..” Id., at 351.

Several recent decisions have applied Parker’s analysis. In Goldfarb v. Virginia State Bar, 421 U. S. 773 (1975), the Court concluded that fee schedules enforced by a state bar association were not mandated by ethical standards established by the State Supreme Court. The fee schedules therefore were not immune from antitrust attack. “It is not enough that . . . anticompetitive conduct is 'prompted’ by state action; rather, anticompetitive activities must be compelled by direction of the State acting as a sovereign.” Id., at 791. Similarly, in Cantor v. Detroit Edison Co., 428 U. S. 579 (1976), a majority of the Court found that no antitrust immunity was conferred when a state agency passively accepted a public utility’s tariff. In contrast, Arizona rules against lawyer advertising were held immune from Sherman Act challenge because they “reflected] a clear articulation of the.State’s policy with regard to professional behavior” and were “subject to pointed re-examination by the policymaker — the Arizona Supreme Court — in enforcement proceedings.” Bates v. State Bar of Arizona, 433 U. S. 350, 362 (1977).

Only last Term, this Court found antitrust immunity for a California program requiring state approval of the location of new automobile dealerships. New Motor Vehicle Bd. of Cal. v. Orrin W. Fox Co., 439 U. S. 96 (1978). That program provided that the State would hold a hearing if an automobile franchisee protested the establishment or relocation of a competing dealership. Id., at 103. In view of the State’s active role, the Court held, the program was not subject to the Sherman Act. The “clearly articulated and affirmatively expressed” goal of the state policy was to “displace unfettered business freedom in the matter of the establishment and relocation of automobile dealerships.” Id., at 109.

These decisions establish two standards for antitrust immunity under Parker v. Brown. First, the challenged restraint must be “one clearly articulated and affirmatively expressed as state policy”; second, the policy must be “actively supervised” by the State itself. City of Lafayette v. Louisiana Power & Light Co., 435 U. S. 389, 410 (1978) (opinion of Brennan, J.). The California system for wine pricing satisfies the first standard. The legislative policy is forthrightly stated and clear in its purpose to permit resale price maintenance. The program, however, does not meet the second requirement for Parker immunity. The State simply authorizes price setting and enforces the prices established by private parties. The State neither establishes prices nor reviews the reasonableness of the price schedules; nor does it regulate the terms of fair trade contracts. The State does not monitor market conditions or engage in any “pointed reexamination” of the program. The national policy in favor of competition cannot be thwarted by casting such a gauzy cloak of state involvement over what is essentially a private price-fixing arrangement. As Parker teaches, “a state does not give immunity to those who violate the Sherman Act by authorizing them to violate it, or by declaring that their action is lawful_” 317 U. S., at 351.

Ill

Petitioner contends that even if California’s system of wine pricing is not protected state action, the Twenty-first Amendment bars application of the Sherman Act in this case. Section 1 of that Amendment repealed the Eighteenth Amendment’s prohibition on the manufacture, sale, or transportation of liquor. The second section reserved to the States certain power to regulate traffic in liquor: “The transportation or importation into any State, Territory, or possession of the United States for delivery or use therein of intoxicating liquors, in violation of the laws thereof, is hereby prohibited.” The remaining question before us is whether §2 permits California to countermand the congressional policy — adopted under the commerce power — in favor of competition.

A

In determining state powers under the Twenty-first Amendment, the Court has focused primarily on the language of the provision rather than the history behind it. State Board v. Young’s Market Co., 299 U. S. 59, 63-64 (1936). In terms, the Amendment gives the States control over the “transportation or importation” of liquor into their territories. Of course, such control logically entails considerable regulatory power not strictly limited to importing and transporting alcohol. Ziffrin, Inc. v. Reeves, 308 U. S. 132, 138 (1939). We should not, however, lose sight of the explicit grant of authority.

This Court’s early decisions , on the Twenty-first Amendment recognized that each State holds great powers over the importation of liquor from other jurisdictions. Young’s Market, supra, concerned a license fee for interstate imports of alcohol; another case focused on a law restricting the types of liquor that could be imported from other States, Mahoney v. Joseph Triner Corp., 304 U. S. 401 (1938); two others involved “retaliation” statutes barring imports from States that proscribed shipments of liquor from other States, Joseph S. Finch & Co. v. McKittrick, 305 U. S. 395 (1939); Indianapolis Brewing Co. v. Liquor Control Comm’n, 305 U. S. 391 (1939). The Court upheld the challenged state authority in each case, largely on the basis of the States’ special power over the “importation and transportation” of intoxicating liquors. Yet even when the States had acted under the explicit terms of the Amendment, the Court resisted the contention that § 2 “freed the States from all restrictions upon the police power to be found in other provisions of the Constitution.” Young’s Market, supra, at 64.

Subsequent decisions have given “wide latitude” to state liquor regulation, Joseph E. Seagram & Sons, Inc. v. Hostetter, 384 U. S. 35, 42 (1966), but they also have stressed that important federal interests in liquor matters survived the ratification of the Twenty-first Amendment. The States cannot tax imported liquor in violation of the Export-Import Clause. Department of Revenue v. James Beam Co., 377 U. S. 341 (1964). Nor can they insulate the liquor industry from the Fourteenth Amendment’s requirements of equal protection, Craig v. Boren, 429 U. S. 190, 204-209 (1976), and due process, Wisconsin v. Constantineau, 400 U. S. 433, 436 (1971).

More difficult to define, however, is the extent to which Congress can regulate liquor under its interstate commerce power. Although that power is directly qualified by § 2, the Court has held that the Federal Government retains some Commerce Clause authority over liquor. In William Jameson & Co. v. Morgenthau, 307 U. S. 171 (1939) (per curiam), this Court found no violation of the Twenty-first Amendment in a whiskey-labeling requirement prescribed by the Federal Alcohol Administration Act, 49 Stat. 977. And in Ziffrin, Inc. v. Reeves, supra, the Court did not uphold Kentucky’s system of licensing liquor haulers until it was satisfied that the state program was reasonable. 308 U. S., at 139.

The contours of Congress' commerce power over liquor were sharpened in Hostetter v. Idlewild Liquor Corp., 377 U. S. 324, 331-332 (1964).

“To draw a conclusion . . . that the Twenty-first Amendment has somehow operated to ‘repeal’ the Commerce Clause wherever regulation of intoxicating liquors is concerned would, however, be an absurd oversimplification. If the Commerce Clause had been pro tanto ‘repealed,’ then Congress would be left with no regulatory power over interstate or foreign commerce in intoxicating liquor. Such a conclusion would be .patently bizarre and is demonstrably incorrect.”

The Court added a significant, if elementary, observation: “Both the Twenty-first Amendment and the Commerce Clause are parts of the same Constitution. Like other provisions of the Constitution, each must be considered in the light of the other, and in the context of the issues and interests at stake in any concrete case.” Id., at 332. See Craig v. Boren, supra, at 206.

This pragmatic effort to harmonize state and federal powers has been evident in several decisions where the Court held liquor companies liable for anticompetitive conduct not mandated by a State. See Kiefer-Stewart Co. v. Joseph E. Seagram & Sons, Inc., 340 U. S. 211 (1951); United States v. Frankfort Distilleries, Inc., 324 U. S. 293 (1945). In Schwegmann Bros. v. Calvert Corp., 341 U. S. 384 (1951), for example, a liquor manufacturer attempted to force a distributor to comply with Louisiana’s resale price maintenance program, a program similar in many respects to the California system at issue here. The Court held that because the Louisiana statute violated the Sherman Act, it could not be enforced against the distributor. Fifteen years later, the Court rejected a Sherman Act challenge to a New York law requiring liquor dealers to attest that their prices were “no higher than the lowest price” charged anywhere in the United States. Joseph E. Seagram, & Sons, Inc. v. Hostetter, supra. The Court concluded that the statute exerted “no irresistible economic pressure on the [dealers] to violate the Sherman Act in order to comply,” but it also cautioned that “[n]othing in the Twenty-first Amendment, of course, would prevent enforcement of the Sherman Act” against an interstate conspiracy to fix liquor prices. Id., at 45-46. See Burke v. Ford, 389 U. S. 320 (1967) (per curiam).

These decisions demonstrate that there is no bright line between federal and state powers over liquor. The Twenty-first Amendment grants the States virtually complete control over whether to permit importation or sale of liquor and how to structure the liquor distribution system. Although States retain substantial discretion to establish other liquor regulations, those controls may be subject to the federal commerce power in appropriate situations. The competing state and federal interests can be reconciled only after careful scrutiny of those concerns in a “concrete case.” Hostetter v. Idlewild Liquor Corp., supra, at 332.

B

The federal interest in enforcing the national policy in favor of competition is both familiar and substantial.

“Antitrust laws in general, and the Sherman Act in particular, are the Magna Carta of free enterprise. They are as important to the preservation of economic freedom and our free-enterprise system as the Bill of Rights is to the protection of our fundamental personal freedoms.” United States v.. Topeo Associates, Inc., 405 U. S. 596, 610 (1972).

See Northern Pacific R. Co. v. United States, 356 U. S. 1, 4 (1958). Although this federal interest is expressed through a statute rather than a constitutional provision, Congress “exercis[ed] all the power it possessed” under the Commerce Clause when it approved the Sherman Act. Atlantic Cleaners & Dyers v. United States, 286 U. S. 427, 435 (1932); see City of Lafayette v. Louisiana Power & Light Co., 435 U. S., at 398. We must acknowledge the importance of the Act’s procompetition policy.

The state interests protected by California’s resale price maintenance system were identified by the state courts in this case, 90 Cal. App. 3d, at 983, 153 Cal. Rptr., at 760, and in Rice v. Alcoholic Beverage Control Appeals Bd., 21 Cal. 3d, at 451, 579 P. 2d, at 490. Of course, the findings and conclusions of those courts are not binding on this Court to the extent that they undercut state rights guaranteed by thé Twenty-first Amendment. See Hooven & Allison Co. v. Evatt, 324 U. S. 652, 659 (1945); Creswill v. Knights of Pythias, 225 U. S. 246, 261 (1912). Nevertheless, this Court accords "respectful consideration and great weight to the views of the state’s highest court” on matters of state law, Indiana ex rel. Anderson v. Brand, 303 U. S. 95, 100 (1938), and we customarily accept the factual findings of state courts in the absence of “exceptional circumstances.” Lloyd A. Fry Roofing Co. v. Wood, 344 U. S. 157, 160 (1952).

The California Court of Appeal stated that its review of the State’s system of wine pricing was “controlled by the reasoning of the [California] Supreme Court in Rice [supra]." 90 Cal. App. 3d, at 983, 153 Cal. Rptr., at 760. Therefore, we turn to that opinion’s treatment of the state interests in resale price maintenance for distilled liquors.

In Rice, the State Supreme Court found two purposes behind liquor resale price maintenance: “to promote temperance and orderly market conditions.” 21 Cal. 3d, at 451, 579 P. 2d, at 490. The court found little correlation between resale price maintenance and temperance. It cited a state study showing a 42% increase in per capita liquor consumption in California from 1950 to 1972, while resale price maintenance was in effect. Id., at 457-458, 579 P. 2d, at 494, citing California Dept. of Finance, Alcohol and the State: A Reappraisal of California’s Alcohol Control Policies, xi, 15 (1974). Such studies, the court wrote, “at the very least raise a doubt regarding the justification for such laws on the ground that they promote, temperance.” 21 Cal. 3d, at 457-458, 579 P. 2d, at 494.

The Rice opinion identified the primary state interest in orderly market conditions as “protect [ing] small licensees from predatory pricing policies of large retailers.” Id., at 456, 579 P. 2d, at 493. In gauging this interest, the court adopted the views of the Appeals Board of the Alcoholic Beverages Control Department, which first ruled on the claim in Rice. The state agency “rejected the argument that fair trade laws were necessary to the economic survival of small retailers. . . .” Ibid. The agency relied on a congressional study of the impact on small retailers of fair trade laws enacted under the Miller-Tydings Act. The study revealed that “states with fair trade laws had a 55 percent higher rate of firm failures than free trade states, and the rate of growth of small retail stores in free trade states between 1956 and 1972 was 32 per cent higher than in states with fair trade laws.” Ibid., citing S. Rep. No. 94-466, p. 3 (1975). Pointing to the congressional abandonment of fair trade in the 1975 Consumer Goods Pricing Act, see supra, at 102, the State Supreme Court found no persuasive justification to continue “fair trade laws which eliminate price competition among retailers.” 21 Cal. 3d, at 457, 579 P. 2d, at 494. The Court of Appeal came to the same conclusion with respect to the wholesale wine trade. 90 Cal. App. 3d, at 983, 153 Cal. Rptr., at 760.

We have no basis for disagreeing with the view of the California courts that the asserted state interests are less substantial than the national policy in favor of competition. That evaluation of the resale price maintenance system for wine is reasonable, and is supported by the evidence cited by the State Supreme Court in Rice. Nothing in the record in this case suggests that the wine pricing system helps sustain small retail establishments. Neither the petitioner nor the State Attorney General in his amicus brief has demonstrated that the program inhibits the consumption of alcohol by Californians. We need not consider whether the legitimate state interests in temperance and the protection of small retailers ever could prevail against the undoubted federal interest in a competitive economy. The unsubstantiated state concerns put forward in this case simply are not of the same stature as the goals of the Sherman Act.

We conclude that the California Court of Appeal correctly decided that the Twenty-first Amendment provides no shelter for the violation of the Sherman Act caused by the State's wine pricing program. The judgment of the California Court of Appeal, Third Appellate District, is

Affirmed.

Mr. Justice Brennan did not take part in the consideration or decision of this case.

      The statute provides:
      “Each wine grower, wholesaler licensed to sell wine, wine rectifier, and rectifier shall:
      “(a) Pqst-a schedule of selling prices of wine to retailers or consumers for which his resale price is not governed by a fair trade contract made by the person who owns or controls the brand.
      “(b) Make and file a fair trade contract and file a schedule of resale prices, if he owns or controls a brand of wine resold to retailers or consumers.” Cal. Bus. & Prof. Code Ann. §24866 (West 1964).

       Licensees that sell wine below the prices specified in fair trade contracts or schedules also may be subject to private damages suits for unfair competition. §24752 (West 1964).

       The court cited record evidence that in July 1976 five leading brands of gin each sold in California for $4.89 for a fifth of a gallon, and that five leading brands of Scotch whiskey sold for either $8.39 or $8.40 a fifth. Rice v. Alcoholic Beverage Control Appeals Bd., 21 Cal. 3d, at 454, and nn. 14, 16, 579 P. 2d, at 491-492, and nn. 14, 16.

       The State also did not appeal the decision in Capiscean Corp. v. Alcoholic Beverage Control Appeals Bd., 87 Cal. App. 3d 996, 151 Cal. Rptr. 492 (1979), which used the analysis in Rice to invalidate California’s resale price maintenance scheme for retail wine sales to consumers.

       The California Retail Liquor Dealers Association, a trade association of independent retail liquor dealers in California, claims over 3,000 members.

       The congressional Reports accompanying the Consumer Goods Pricing Act of 1975 noted that repeal of fair trade authority would not alter whatever power the States hold under the Twenty-first Amendment to control liquor prices. S. Rep. No. 94-466, p. 2 (1975); H. R. Rep. No. 94-341, p. 3, n. 2 (1975). We consider the effect of the Twenty-first Amendment on this case in Part III, infra.

       In Rice, the California Supreme Court found direct evidence that resale price maintenance resulted in horizontal price fixing. See supra, at 101, and n. 3. Although the Court of Appeal made no such specific finding in this ease, the court noted that the wine pricing system “cannot be upheld for the same reasons the retail price maintenance provisions were declared invalid in Rice.” Midcal Aluminum, Inc. v. Rice, 90 Cal. App. 3d 979, 983, 153 Cal. Rptr. 757, 760 (1979).

       See Norman’s On the Waterfront, Inc. v. Wheatley, 444 F. 2d 1011, 1018 (CA3 1971); Asheville Tobacco Bd. v. FTC, 263 F. 2d 502, 509-510 (CA4 1959); Note, Parker v. Brown Revisited: The State Action Doctrine After Goldfarb, Cantor, and Bates, 77 Colum. L. Rev. 898, 916 (1977).

       The California program contrasts with the approach of those States that completely control the distribution of liquor within their boundaries. E. g., Va. Code §§4-15, 4-28 (1979). Such comprehensive regulation would be immune from the Sherman Act under Parker v. Brown, since the State would “displace unfettered business freedom” with its own power. New Motor Vehicle Bd. of Cal. v. Orrin W. Fox Co., 439 U. S. 96, 109 (1978); see State Board v. Young’s Market Co., 299 U. S. 59, 63 (1936).

       The approach is supported by sound canons of constitutional interpretation and demonstrates a wise reluctance to wade into the complex currents beneath the congressional proposal of the Amendment and its ratification in the state conventions. The Senate sponsor of the Amendment resolution said the purpose of § 2 was “to restore to the States . . . absolute control in effect over interstate commerce affecting. intoxicating liquors. . . .” 76 Cong. Rec. 4143 (1933) (remarks of Sen. Blaine). Yet he also made statements supporting Midcal’s claim that § 2 was designed only to ensure that “dry” States could not be forced by the Federal Government to permit the sale of liquor. See 76 Cong. Rec., at 4140-4141. The sketchy records of the state conventions reflect no consensus on the thrust of § 2, although delegates at several conventions expressed their hope that state regulation of liquor traffic would begin immediately. E. Brown, Ratification of the Twenty-first Amendment to the Constitution 104 (1938) (Wilson, President of Idaho Convention); id., at 191-192 (Darnall, President of Maryland Convention); id., at 247 (Gaylord, Chairman of Missouri Convention); id., at 469-473 (resolution adopted at Washington Convention calling for state action “to regulate the liquor traffic”). See generally Note, The Effect of the Twenty-first Amendment on State Authority to Control Intoxicating Liquors, 75 Colum. L. Rev. 1578, 1580 (1975); Note, Economic Localism in State Alcoholic Beverage Laws — Experience Under the Twenty-First Amendment, 72 Harv. L. Rev. 1145, 1147 (1959).

       In Nippert v. Richmond, 327 U. S. 416 (1946), the Court commented in a footnote:
      “[E]ven the commerce in intoxicating liquors, over which the Twenty-first Amendment gives the States the highest degree of control, is not altogether beyond the reach of the federal commerce power, at any rate when the State’s regulation squarely conflicts with regulation imposed by Congress. . .” Id., at 425, n. 15.

         As the unusual posture of this case reflects, the State of California has shown less than an enthusiastic interest in its wine pricing system. As we noted, the state agency responsible for administering the program did not appeal the decision of the California Court of Appeal. See supra, at 101-102; Tr. of Oral Arg. 20. Instead, this action has been maintained by the California Retail Liquor Dealers Association, a private intervenor. But neither the intervenor nor the State Attorney General, who filed a brief amicus curiae in support of the legislative scheme, has specified any state interests protected by the resale price maintenance system other than those noted in the state-court opinions cited in text.

       The California Court of Appeal found no additional state interests in the instant ease. 90 Cal. App. 3d, at 984, 153 Cal. Rptr., at 760-761. That court rejected the suggestion that the wine price program was designed to protect the State’s wine industry, pointing out that the statutes “do not distinguish between California wines and imported wines.” Ibid.

       See Joseph E. Seagram & Sons, Inc. v. Hostetter, 384 U. S. 35, 39 (1966) (citing study concluding that resale price maintenance in New York State had “no significant effect upon the consumption of alcoholic beverages”).

       The California Supreme Court also stated that orderly market conditions might “reduce excessive consumption, thereby encouraging temper-anee.” 21 Cal. 3d, at 456, 579 P. 2d, at 493. The concern for temperance, however, was considered by the court as an independent state interest in resale price maintenance for liquor.

       Since Midcal requested only injunctive relief from the state court, there is no question before us involving liability for damages under 15 U. S. C. § 15.