author:
Chief Justice Rehnquist
      Justice Scalia, Justice Blackmun,

text:
    DUQUESNE LIGHT CO. et al. v. BARASCH et al.
    No. 87-1160.
    Argued November 7, 1988
    Decided January 11, 1989

      Peter Buscemi argued the cause for appellants. With him on the briefs were Alan L. Reed, William E. Zeiter, John F. Stillmun III, James R. Edgerly, Stephen L. Feld, Christine A. Hansen, and Larry R. Crayne.

      Irwin A. Popowsky argued the cause for appellees and filed a brief for appellee David M. Barasch. With him on the brief were David M. Barasch, pro se, and Daniel Clear-field. Daniel P. Delaney, Bohdan R. Pankiw, and John A. Levin filed a brief for appellee Pennsylvania Public Utility Commission.

      Briefs of amici curiae urging reversal were filed for the Edison Electric Institute by Robert L. Baum and Peter B. Kelsey; and for the Pennsylvania Electric Association by Rex E. Lee, David W. Carpenter, Vincent Butler, and David T. Evrard.

      Briefs of amici curiae urging affirmance were filed for the Consumer Federation of America et al. by Scott Hempling and Roger Colton; for the National Association of Regulatory Utility Commissioners by William Paul Rodgers, Jr.; for the National Association of State Utility Consumer Advocates by Raymon E. Lark, Jr.; and for the National Governor’s Association et al. by Benna Ruth Solomon, Joyce Holmes Benjamin, Beate Bloch, and Brian J. Moline.

        H. Lee Roussell and David M. Kleppinger filed a brief for Industrial Energy Consumers of Pennsylvania et al. as amici curiae.

   Chief Justice Rehnquist

delivered the opinion of the Court.

Pennsylvania law required that rates for electricity be fixed without consideration of a utility’s expenditures for electrical generating facilities which were planned but never built, even though the expenditures were prudent and reasonable when made. The Supreme Court of Pennsylvania held that such a law did not take the utilities’ property in violation of the Fifth Amendment to the United States Constitution. We agree with that conclusion, and hold that a state scheme of utility regulation does not “take” property simply because it disallows recovery of capital investments that are not “used and useful in service to the public.” 66 Pa. Cons. Stat. § 1315 (Supp. 1988).

I

In response to predictions of increased demand for electricity, Duquesne Light Company (Duquesne) and Pennsylvania Power Company (Penn Power) joined a venture in 1967 to build more generating capacity. The project, known as the Central Area Power Coordination Group (CAPCO), involved three other electric utilities and had as its objective the construction of seven large nuclear generating units. In 1980 the participants canceled plans for construction of four of the plants. Intervening events, including the Arab oil embargo and the accident at Three Mile Island, had radically changed the outlook both for growth in the demand for electricity and for nuclear energy as a desirable way of meeting that demand. At the time of the cancellation, Duquesne’s share of the preliminary construction costs associated with the four halted plants was $34,697,389. Penn Power had invested $9,569,665.

In 1980, and again in 1981, Duquesne sought permission from the Pennsylvania Public Utility Commission (PUC) to recoup its expenditures for the unbuilt plants over a 10-year period. The Commission deferred ruling on the request until it received the report from its investigation of the CAPCO construction. That report was issued in late 1982. The report found that Duquesne and Penn Power could not be faulted for initiating the construction of more nuclear generating capacity at the time they joined the CAPCO project in 1967. The projections at that time indicated a growing demand for electricity and a cost advantage to nuclear capacity. It also found that the intervening events which ultimately confounded the predictions could not have been predicted, and that work on the four nuclear plants was stopped at the proper time. In summing up, the Administrative Law Judge found “that the CAPCO decisions in regard to the [canceled plants] at every stage to their cancellation, were reasonable and prudent.” App. to Juris. Statement 19h. He recommended that Duquesne and Penn Power be allowed to amortize their sunk costs in the project over a 10-year period. The PUC adopted the conclusions of the report. App. to Juris. Statement li.

In 1982, Duquesne again came before the PUC to obtain a rate increase. Again, it sought to amortize its expenditures on the canceled plants over 10 years. In January 1983, the PUC issued a final order which granted Duquesne the authority to increase its revenues $105,8 million to a total yearly revenue in excess of $800 million. Pennsylvania PUC v. Duquesne Light Co., 57 Pa. P. U. C. 1, 51 P. U. R. 4th 198 (1983). The rate increase included $3.5 million in revenue representing the first payment of the 10-year amortization of Duquesne’s $35 million loss in the CAPCO plants.

The Pennsylvania Office of the Consumer Advocate (Consumer Advocate) moved the PUC for reconsideration in light of a state law enacted about a month before the close of the 1982 Duquesne rate proceeding. The Act, No. 335, 1982 Pa. Laws 1473, amended the Pennsylvania Utility Code by limiting “the consideration of certain costs in the rate base.” It provided that “the cost of construction or expansion of a facility undertaken by a public utility producing . . . electricity shall not be made a part of the rate base nor otherwise included in the rates charged by the electric utility until such time as the facility is used and useful in service to the public.” 66 Pa. Cons. Stat. § 1315 (Supp. 1988). On reconsideration, the PUC affirmed its original rate order. Pennsylvania PUC v. Duquesne Light Co., 57 Pa. P. U. C. 177, 52 P. U. R. 4th 644 (1983). It read the new law as excluding the costs of canceled plants (obviously not used and useful) from the rate base, but not as preventing their recovery through amortization.

Meanwhile another CAPCO member, Penn Power, also sought to amortize its share of the canceled CAPCO power-plants over a 10-year period. The PUC granted Penn Power authority to increase its revenues by $15.4 million to a total of $184.2 million. Pennsylvania PUC v. Pennsylvania Power Co., 58 Pa. P. U. C. 305, 60 P. U. R. 4th 593 (1984). Part of that revenue increase represented $956,967 for the first year of the 10-year amortized recovery of Penn Power’s costs in the aborted nuclear plants.

The Consumer Advocate appealed both of these decisions to the Commonwealth Court, which by a divided vote held that the Commission had correctly construed § 1315. Cohen v. Pennsylvania PUC, 90 Pa. Commw. 98, 494 A. 2d 58 (1985). The Consumer Advocate then appealed to the Supreme Court of Pennsylvania, and that court reversed. Barasch v. Pennsylvania PUC, 516 Pa. 142, 532 A. 2d 325 (1987). That court held that the controlling language of the Act prohibited recovery of the costs in question either by inclusion in the rate base or by amortization. The court rejected appellants’ constitutional challenge to the statute thus interpreted, observing that “[t]he ‘just compensation’ safeguarded to a utility by the fourteenth amendment of the federal constitution is a reasonable return on the fair value of its property at the time it is being used for public service. ” Id., at 163, 532 A. 2d, at 335. Since the instant CAPCO investment was not serving the public and did not constitute an operating expense, no constitutional rights to recovery attached to it. The court remanded to the PUC for further proceedings to correct its rate order, giving effect to the exclusion required by Act 335. Duquesne and Penn Power appealed to this Court arguing that the effect of Act 335 excluding their prudently incurred costs from the rate violated the Takings Clause of the Fifth Amendment, applicable to the States under the Fourteenth Amendment. We noted probable jurisdiction. 485 U. S. 933 (1988).

II

Although the parties have not discussed it, we must first inquire into our jurisdiction to decide this case. See Jackson v. Ashton, 8 Pet. 148 (1834); Mansfield C. & L. M. R. Co. v. Swan, 111 U. S. 379 (1884). Our jurisdiction here rests on 28 U. S. C. § 1257(2), which authorizes this Court to review “[f]inal judgments or decrees rendered by the highest Court of a State in which a decision could be had . . . [b]y appeal, where is drawn in question the validity of a statute of any state on the ground of its being repugnant to the Constitution . . . and the decision is in favor of its validity.” Although this case has been remanded for further proceedings to revise the relevant rate orders, we hold that for purposes of our appellate jurisdiction the judgment of the Pennsylvania Supreme Court is final.

We have acknowledged that the words of § 1257(2) could well be interpreted to preclude review in this Court as long as any proceedings remain in state court. Radio Station WOW, Inc. v. Johnson, 326 U. S. 120, 124 (1945). In Cox Broadcasting Corp. v. Cohn, 420 U. S. 469, 477 (1975), however, we recognized that in practice the final judgment rule has not been interpreted so strictly. Cox outlined four circumstances in which the adjudication of a federal issue in a case by the highest available state court had been reviewed in this Court notwithstanding the prospect of some further state-court proceedings.

This case falls into the first of the four categories. The Pennsylvania Supreme Court has finally adjudicated the constitutionality of Act 335 in the context of otherwise completed rate proceedings and so has left “the outcome of further proceedings preordained.” Cox, supra, at 479. We do not think that the PUC might undo the effects of Act 335 on remand by allowing recovery of the disputed costs in some other way consistent with state law. The Pennsylvania Supreme Court’s interpretation of the Act does not leave its effect in doubt; the CAPCO related costs may not be “otherwise included in the rates charged.” 66 Pa. Cons. Stat. § 1315 (1986). We are satisfied that we are presented with the State’s last word on the constitutionality of Act 335 and that all that remains is the straightforward application of its clear directive to otherwise complete rate orders. We therefore have jurisdiction. See Cox, supra, at 479; Mills v. Alabama, 384 U. S. 214 (1966).

Ill

As public utilities, both Duquesne and Penn Power are under a state statutory duty to serve the public. A Pennsylvania statute provides that “[e]very public utility shall furnish and maintain adequate, efficient, safe, and reasonable service and facilities” and that “[s]uch service also shall be reasonably continuous and without unreasonable interruptions or delay.” 66 Pa. Cons. Stat. § 1501 (1986). Although their assets are employed in the public interest to provide consumers of the State with electric power, they are owned and operated by private investors. This partly public, partly private status of utility property creates its own set of questions under the Takings Clause of the Fifth Amendment.

The guiding principle has been that the Constitution protects utilities from being limited to a charge for their property serving the public which is so “unjust” as to be confiscatory. Covington & Lexington Turnpike Road Co. v. Sandford, 164 U. S. 578, 597 (1896) (A rate is too low if it is “so unjust as to destroy the value of [the] property for all the purposes for which it was acquired,” and in so doing “practically deprive[s] the owner of property without due process of law”); FPC v. Natural Gas Pipeline. Co., 315 U. S. 575, 585 (1942) (“By long standing usage in the field of rate regulation, the ‘lowest reasonable rate’ is one which is not confiscatory in the constitutional sense”); FPC v. Texaco Inc., 417 U. S. 380, 391-392 (1974) (“All that is protected against, in a constitutional sense, is that the rates fixed by the Commission be higher than a confiscatory level”). If the rate does not afford sufficient compensation, the State has taken the use of utility property without paying just compensation and so violated the Fifth and Fourteenth Amendments. As has been observed, however, “[h]ow such compensation may be ascertained, and what are the necessary elements in such an inquiry, will always be an embarrassing question.” Smyth v. Ames, 169 U. S. 466, 546 (1898). See also Permian Basin Area Rate Cases, 390 U. S. 747, 790 (1968) (“[Njeither law nor economics has yet devised generally accepted standards for the evaluation of rate-making orders”).

At one time, it was thought that the Constitution required rates to be set according to the actual present value of the assets employed in the public service. This method, known as the “fair value” rule, is exemplified by the decision in Smyth v. Ames, supra. Under the fair value approach, a “company is entitled to ask ... a fair return upon the value of that which it employs for the public convenience,” while on the other hand, “the public is entitled to demand . . . that no more be exacted from it for the use of [utility property] than the services rendered by it are reasonably worth.” 169 U. S., at 547. In theory the Smyth v. Ames fair value standard mimics the operation of the competitive market. To the extent utilities’ investments in plants are good ones (because their benefits exceed their costs) they are rewarded with an opportunity to earn an “above-cost” return, that is, a fair return on the current “market value” of the plant. To the extent utilities’ investments turn out to be bad ones (such as plants that are canceled and so never used and useful to the public), the utilities suffer because the investments have no fair value and so justify no return.

Although the fair value rule gives utilities strong incentive to manage their affairs well and to provide efficient service to the public, it suffered from practical difficulties which ultimately led to its abandonment as a constitutional requirement. In response to these problems, Justice Brandéis had advocated an alternative approach as the constitutional minimum, what has become known as the “prudent investment” or “historical cost” rule. He accepted the Smyth v. Ames eminent domain analogy, but concluded that what was “taken” by public utility regulation is not specific physical assets that are to be individually valued, but the capital prudently devoted to the public utility enterprise by the utilities’ owners. Missouri ex rel. Southwestern Bell Telephone Co. v. Public Service Comm’n, 262 U. S. 276, 291 (1923) (dissenting opinion). Under the prudent investment rule, the utility is compensated for all prudent investments at their actual cost when made (their “historical” cost), irrespective of whether individual investments are deemed necessary or beneficial in hindsight. The utilities incur fewer risks, but are limited to a standard rate of return on the actual amount of money reasonably invested.

Forty-five years ago in the landmark case of FPC v. Hope Natural Gas Co., 320 U. S. 591 (1944), this Court abandoned the rule of Smyth v. Ames, and held that the “fair value” rule is not the only constitutionally acceptable method of fixing utility rates. In Hope we ruled that historical cost was a valid basis on which to calculate utility compensation. 320 U. S., at 605 (“Rates which enable [a] company to operate successfully, to maintain its financial integrity, to attract capital, and to compensate its investors for the risk assumed certainly cannot be condemned as invalid, even though they might produce only a meager return on the so called ‘fair value’ rate base”). We also acknowledged in that case that all of the subsidiary aspects of valuation for ratemaking purposes could not properly be characterized as having a constitutional dimension, despite the fact that they might affect property rights to some degree. Today we reaffirm these teachings of Hope Natural Gas: “[I]t is not theory but the impact of the rate order which counts. If the total effect of the rate order cannot be said to be unreasonable, judicial inquiry ... is at an end. The fact that the method employed to reach that result may contain infirmities is not then important.” Id, at 602. This language, of course, does not dispense with all of the constitutional difficulties when a utility raises a claim that the rate which it is permitted to charge is so low as to be confiscatory: whether a particular rate is “unjust” or “unreasonable” will depend to some extent on what is a fair rate of return given the risks under a particular rate-setting system, and on the amount of capital upon which the investors are entitled to earn that return. At the margins, these questions have constitutional overtones.

Pennsylvania determines rates under a slightly modified form of the historical cost/prudent investment system. Neither Duquesne nor Penn Power alleges that the total effect of the rate order arrived at within this system is unjust or unreasonable. In fact the overall effect is well within the bounds of Hope, even with total exclusion of the CAPCO costs. Duquesne was authorized to earn a 16.14% return on common equity and an 11.64% overall return on a rate base of nearly $1.8 billion. See Pennsylvania PUC v. Duquesne Light Co., 57 Pa. P. U. C., at 51, 51 P. U. R. 4th, at 243. Its $35 million investment in the canceled plants comprises roughly 1.9% of its total base. The denial of plant amortization will reduce its annual allowance by 0.4%. Similarly, Penn Power was allowed a charge of 15.72% return on common equity and a 12.02% overall return. Its investment in the CAPCO plants comprises only 2.4% of its $401.8 million rate base. See Pennsylvania PUC v. Pennsylvania Power Co., 58 Pa. P. U. C., at 331-332, 60 P. U. R. 4th, at 618. The denial of amortized recovery of its $9.6 million investment in CAPCO will reduce its annual revenue allowance by only 0.5%.

Given these numbers, it appears that the PUC would have acted within the constitutional range of reasonableness if it had allowed amortization of the CAPCO costs but set a lower rate of return on equity with the result that Duquesne and Penn Power received the same revenue they will under the instant orders on remand. The overall impact of the rate orders, then, is not constitutionally objectionable. No argument has been made that these slightly reduced rates jeopardize the financial integrity of the companies, either by leaving them insufficient operating capital or by impeding their ability to raise future capital. Nor has it been demonstrated that these rates are inadequate to compensate current equity holders for the risk associated with their investments under a modified prudent investment scheme.

Instead, appellants argue that the Constitution requires that subsidiary aspects of Pennsylvania’s ratemaking methodology be examined piecemeal. One aspect which they find objectionable is the constraint Act 335 places on the PUC’s decisions. They urge that such legislative direction to the PUC impermissibly interferes with the PUC’s duty to balance consumer and investor interest under Permian Basin, 390 U. S., at 792. Appellants also note the theoretical inconsistency of Act 335, suddenly and selectively applying the used and useful requirement, normally associated with the fair value approach, in the context of Pennsylvania’s system based on historical cost. Neither of the errors appellants perceive in this case is of constitutional magnitude.

It cannot seriously be contended that the Constitution prevents state legislatures from giving specific instructions to their utility commissions. We have never doubted that state legislatures are competent bodies to set utility rates. And the Pennsylvania PUC is essentially an administrative arm of the legislature. See, e. g., Barasch v. Pennsylvania PUC, 516 Pa., at 171, 532 A. 2d, at 339 (“The Commission is but an instrumentality of the state legislature for the performance of [ratemaking]”); Minnesota Rate Cases, 230 U. S. 352, 433 (1913) (“The rate-making power is a legislative power and necessarily implies a range of legislative discretion”). We stated in Permian Basin that the commission “must be free, within the limitations imposed by pertinent constitutional and statutory commands, to devise methods of regulation capable of equitably reconciling diverse and conflicting interests.” 390 U. S., at 767 (emphasis added). This is not to say that any system of ratemaking applied by a utilities commission, including the specific instructions it has received from its legislature, will necessarily be constitutional. But if the system fails to pass muster, it will not be because the legislature has performed part of the work.

Similarly, an otherwise reasonable rate is not subject to constitutional attack by questioning the theoretical consistency of the method that produced it. “It is not theory, but the impact of the rate order which counts.” Hope, 320 U. S., at 602. The economic judgments required in rate proceedings are often hopelessly complex and do not admit of a single correct result. The Constitution is not designed to arbitrate these economic niceties. Errors to the detriment of one party may well be canceled out by countervailing errors or allowances in another part of the rate proceeding. The Constitution protects the utility from the net effect of the rate order on its property. Inconsistencies in one aspect of the methodology have no constitutional effect on the utility’s property if they are compensated by countervailing factors in some other aspect.

Admittedly, the impact of certain rates can only be, evaluated in the context of the system under which they are imposed. One of the elements always relevant to setting the rate under Hope is the return investors expect given the risk of the enterprise. Id., at 603 (“[Rjeturn to the equity owner should be commensurate with returns on investments in other enterprises having corresponding risks”); Bluefield Water Works & Improvement Co. v. Public Service Comm’n of West Virginia, 262 U. S. 679, 692-693 (1923) (“A public utility is entitled to such rates as will permit it to earn a return . . . equal to that generally being made at the same time and in the same general part of the country on investments in other business undertakings which are attended by corresponding risks and uncertainties”). The risks a utility faces are in large part defined by the rate methodology because utilities are virtually always public monopolies dealing in an essential service, and so relatively immune to the usual market risks. Consequently, a State’s decision to arbitrarily switch back and forth between methodologies in a way which required investors to bear the risk of bad investments at some times while denying them the benefit of good investments at others would raise serious constitutional questions. But the instant case does not present this question. At all relevant times, Pennsylvania’s rate system has been predominantly but not entirely based on historical cost and it has not been shown that the rate orders as modified by Act 335 fail to give a reasonable rate of return on equity given the risks under such a regime. We therefore hold that Act 335’s limited effect on the rate order at issue does not result in a constitutionally impermissible rate.

Finally we address the suggestion of the Pennsylvania Electric Association as amicus that the prudent investment rule should be adopted as the constitutional standard. We think that the adoption of any such rule would signal a retreat from 45 years of decisional law in this area which would be as unwarranted as it would be unsettling. Hope clearly held that “the Commission was not bound to the use of any single formula or combination of formulae in determining rates.” 320 U. S. at 602. More recently, we upheld the Federal Power Commission’s departure from the individual producer cost-of-service (prudent investment) system. In Wisconsin v. FPC, 373 U. S. 294 (1963), the FPC had concluded after extensive hearings that “the individual company cost-of-service method, based on theories of original cost and prudent investment, was not a workable or desirable method for determining the rates of independent producers and that the ‘ultimate solution’ lay in what has become to be known as the area rate approach: ‘the determination of fair prices . . . based on reasonable financial requirements of the industry.’” Id., at 298-299. In upholding the FPC’s area rate methodology against the argument that the individual eompany prudent investment rule was constitutionally required, the Court observed:

“[T]o declare that a particular method of rate regulation is so sanctified as to make it highly unlikely that any other method could be sustained would be wholly out of keeping with this Court’s consistent and clearly articulated approach to the question of the Commission’s power to regulate rates. It has repeatedly been stated that no single method need be followed by the Commission in considering the justness and reasonableness of rates.” Id., at 309 (collecting cases).

See also FPC v. Texaco Inc., 417 U. S. at 387-390.

The adoption of a single theory of valuation as a constitutional requirement would be inconsistent with the view of the Constitution this Court has taken since Hope Natural Gas, supra. As demonstrated in Wisconsin v. FPC, circumstances may favor the use of one ratemaking procedure over another. The designation of a single theory of ratemaking as a constitutional requirement would unnecessarily foreclose alternatives which could benefit both consumers and investors. The Constitution within broad limits leaves the States free to decide what ratesetting methodology best meets their needs in balancing the interests of the utility and the public.

Affirmed.

Justice Scalia,

with whom

Justice White and Justice O’Connor join, concurring.

I join the Court in reaffirming our established rule that no single ratemaking methodology is mandated by the Constitution, which looks to the consequences a governmental authority produces rather than the techniques it employs. See, e. g., FPC v. Texaco Inc., 417 U. S. 380, 387-390 (1974); Wisconsin v. FPC, 373 U. S. 294, 309 (1963); FPC v. Hope Natural Gas Co., 320 U. S. 591, 602 (1944). I think it important to observe, however, that while “prudent investment” (by which I mean capital reasonably expended to meet the utility’s legal obligation to assure adequate service) need not be taken into account as such in ratemaking formulas, it may need to be taken into account in assessing the constitutionality of the particular consequences produced by those formulas. We cannot determine whether the payments a utility has been allowed to collect constitute a fair return on investment, and thus whether the government’s action is confiscatory, unless we agree upon what the relevant “investment” is. For that purpose, all prudently incurred investment may well have to be counted. As the Court’s opinion describes, that question is not presented in the present suit, which challenges techniques rather than consequences.

Justice Blackmun,

dissenting.

The Court, I fear, because of what it regards as the investment of time in having this case argued and briefed, is strong-arming the finality concept and finding a Cox exception that does not exist. We have jurisdiction, under 28 U. S. C. § 1257, only if there is a “final judgment” by the “highest court of a State” in which a decision could be had. To be sure, we have interpreted § 1257 somewhat flexibly to the effect that the finality requirement is satisfied in four discrete situations despite the need of further proceedings in the state courts: Cox Broadcasting Corp. v. Cohn, 420 U. S. 469, 477 (1975).

The Court here concludes that this case falls within the first of the four Cox exceptions (“the outcome of further proceedings preordained,” id., at 479). With all respect, I disagree, for this case concerns rates, and there is no rate order whatsoever before this Court. The Supreme Court of Pennsylvania invalidated the rate orders set by the Pennsylvania Commission, and remanded the cases for further ratemaking. The Court deludes itself when it speaks of preordination of the Commission’s further action. New rates will be set, based upon factors we do not as yet know, and only then will a final judgment possibly emerge in due course.

I therefore would dismiss the appeal for want of the final judgment that § 1257 requires.

       The PUC exercises a legislative grant of power to enforce the Pennsylvania public utilities laws. 66 Pa. Cons. Stat. § 501 (1986). “[T]he authority of the Commission must arise either from the express words of the pertinent statutes or by strong and necessary implication therefrom.” Philadelphia v. Philadelphia Electric Co., 504 Pa. 312, 317, 473 A. 2d 997, 999 (1984) (collecting cases).

       Act 335 amended the Pennsylvania Utility Code by adding 66 Pa. Cons. Stat. § 1315. The relevant parts of Act 335 read as follows:
      “AN ACT
      “Amending Title 66 (Public Utilities) of the Pennsylvania Consolidated Statutes, providing a limitation on the consideration of certain costs in the rate base for electric public utilities.
      “Section 1. Title 66 ... is amended by adding a section to read:

        “§ 1315. Limitation on consideration of certain costs for electric utilities.
      “Except for such nonrevenue producing, nonexpense reducing investments as may be reasonably shown to be necessary to improve environmental conditions at existing facilities or improve safety at existing facilities or as may be required to convert facilities to the utilization of coal, the cost of construction or expansion of a facility undertaken by a public utility producing, generating, transmitting, distributing or furnishing electricity shall not be made a part of the rate base nor otherwise included in the rates charged by the electric utility until such time as the facility is used and useful in service to the public. Except as stated in this section, no electric utility property shall be deemed used and useful until it is presently providing actual utility service to the customers.

      “Section 2. This act shall be applicable to all proceedings pending before the Public Utility Commission and the courts at this time. Nothing contained in this act shall be construed to modify or change existing law with regard to rate making treatment of investment in facilities of fixed utilities other than electric facilities.
      “Section 3. This act shall take effect immediately.

      “APPROVED — The 30th day of December, A. D. 1982.” (Emphasis added.)

       On October 10, 1985, too late to affect this case, the Pennsylvania Legislature enacted Act 1985-62 which added 66 Pa. Cons. Stat. § 520 (Supp. 1988) to the state utility code. Under § 520, the PUC is now authorized to permit amortized recovery of prudently incurred investment in canceled generating units.

       As a result of recent legislation, this Court will not long have appellate jurisdiction over cases of the instant type. Public L. 100-352, 102 Stat. 662, effective September 25, 1988, and applicable to judgments rendered on or after that date, eliminates substantially all of our appellate jurisdiction, including § 1257(2). Persons aggrieved by state-court judgments should now file a petition for certiorari, rather than appeal. See S. Rep. No. 100-300 (1988); H. R. Rep. No. 100-660 (1988); B. Boskey & E. Gressman, The Supreme Court Bids Farewell to Mandatory Appeals, 109 S. Ct. LXXXI (1988).

       Perhaps the most serious problem associated with the fair value rule was the “laborious and baffling task of finding the present value of the utility.” Missouri ex rel. Southwestern Bell Telephone Co. v. Public Service Comm’n, 262 U. S. 276, 292-294 (1923) (Brandeis, J. dissenting). The exchange value of a utility’s assets, such as powerplants, could not be set by a market price because such assets were rarely bought and sold. Nor could the capital assets be valued by the stream of income they produced because setting that stream of income was the very object of the rate proceeding. According to Brandéis, the Smyth v. Ames test usually degenerated to proofs about how much it would cost to reconstruct the asset in question, a hopelessly hypothetical, complex, and inexact process. 262 U. S., at 292-294.

       The system avoids the difficult valuation problems encountered under the Smyth v. Ames test because it relies on the actual historical cost of investments as the basis for setting the rate. The amount of a utility’s actual outlays for assets in the public service is more easily ascertained by a ratemaking body because less judgment is required than in valuing an asset.

       Pennsylvania values property in the rate base according to its historical cost. As provided by 66 Pa. Cons. Stat. § 1311(b) (1986), “[t]he value of the property of the public utility included in the rate base shall be the original cost of the property when first devoted to the public service less the applicable accrued depreciation.” Accordingly, the PUC declared in Duquesne’s rate proceeding that “we shall adopt as the fair value of the respondent’s rate base, the original cost measure of value.” Pennsylvania PUC v. Duquesne Light Co., 57 Pa. P. U. C. 1, 5, 51 P. U. R. 4th 198, 202 (1983). It held likewise in Penn Power’s case. See Pennsylvania PUC v. Pennsylvania Power Co., 58 Pa. P. U. C. 305, 310, 60 P. U. R. 4th 593, 597 (1984) (same).
      Having adjusted the historical cost in various ways to account for such things as depreciation and working capital, the PUC proceeds to set a rate of return based largely on the cost of capital to the enterprise. The cost of each component of the utility’s capital is considered, i. e., “the cost of debt, the cost of preferred stock, and the cost of common stock[,] [t]he latter being determined by the return required to sell such stock upon reasonable terms in the market.” Pennsylvania PUC v. Duquesne Light Co., supra, at 42, 51 P. U. R. 4th, at 235; Bluefield Water Works & Improvement Co. v. Public Service Comm’n of West Virginia, 262 U. S. 679, 692-693 (1923). It then exercises “informed judgment” to set the total rate of return based on these component costs of capital. Ibid. See also Pennsylvania PUC v. Pennsylvania Power, supra, at 325-326, 60 P. U. R. 4th, at 611-621.
      The bulk of the rate based on capital, then, represents a return (set by costs of capital) on a rate base (determined by historical cost). These are features of the historical cost/prudent investment system. Pennsylvania has modified the system in several instances, however, when prudent investments will never be used and useful. For such occurrences, it has allowed amortization o/the capital lost, but does not allow the utility to earn a return on that investment. See, e. g., Pennsylvania PUC v. Metropolitan Edison Co., 55 Pa. P. U. C. 478, 486 (1982) (amortization of company’s investment in contaminated Three Mile Island Unit 2); Philadelphia Electric Co. v. Pennsylvania PUC, 61 Pa. Commw. 325, 433 A. 2d 620 (1981) (excluding from the rate base a portion of a utility’s generating plant that was excess capacity, but allowing recovery of the operating expenses, including depreciation charges on the entire plants); UGI Corp. v. Pennsylvania PUC, 49 Pa. Commw. 69, 410 A. 2d 923 (1980) (permitting amortization of terminated feasibility studies); Pennsylvania PUC v. Philadelphia Electric Co., 46 Pa. P. U. C. 746, 750 (1973) (10-year amortization of unusual expenses caused by tropical storm). The loss to utilities from prudent but ultimately unsuccessful investments under such a system is greater than under a pure prudent investment rule, but less than under a fair value approach. Pennsylvania’s modification slightly increases the overall risk of investments in utilities over the pure prudent investment rule. Presumably the PUC adjusts the risk premium element of the rate of return on equity accordingly.

      Duquesne’s embedded cost of debt was 9.42%. Pennsylvania PUC v. Duquesne Light Co., 57 Pa. P. U. C., at 44, 51 P. U. R. 4th, at 237. Penn Power’s debt service was at 10.25%. Pennsylvania PUC v. Pennsylvania Power Co., 58 Pa. P. U. C., at 332, 60 P. U. R. 4th, at 618.

      Indeed, the issue of constitutional concern has usually been just the reverse of appellants’ objection. Challenges to state and federal laws have been raised on the ground that the legislatures have delegated too much authority and discretion. See J. W. Hampton, Jr., & Co. v. United States, 276 U. S. 394 (1928) (federal delegation of authority to set import tariff rates); York R. Co. v. Driscoll, 331 Pa. 193, 200 A. 864 (1938) (PUC’s authorization to exempt utility securities from reporting and registration requirements an unconstitutional delegation of legislative povrer under Pennsylvania Constitution because it allowed the utility to nullify the statutory reporting requirements).

       For example, rigid requirement of the prudent investment rule would foreclose hybrid systems such as the one Pennsylvania used before the effective date of Act 335 and now uses again. See n. 4, supra. It would also foreclose a return to some form of the fair value rule just as its practical problems may be diminishing. The emergent market for wholesale electric energy could provide a readily available objective basis for determining the value of utility assets.


source: Caselaw Access Project

author: Justice Brennan Justice Scalia, Justice White,

license: Public Domain

text:
    REED v. UNITED TRANSPORTATION UNION et al.
    No. 87-1031.
    Argued November 2, 1988
    Decided January 11, 1989

      John W. Gresham argued the cause for petitioner. With him on the brief was Jonathan Wallas.

      Clinton J. Miller III argued the cause and filed a brief for respondents.

      Briefs of amici curiae urging reversal were filed for the United States by Solicitor General Fried, Deputy Solicitor General Ayer, Glen D. Nager, George R. Salem, Allen H. Feldman, Mary-Helen Mautner, and Ellen L. Beard; and for the Association for Union Democracy et al. by Paul Alan Levy, Arthur L. Fox II, and Alan B. Morrison.

        David Silberman and Laurence Gold filed a brief for the American Federation of Labor and Congress of Industrial Organizations as amicus curiae urging affirmance.

   Justice Brennan

delivered the opinion of the Court.

We are called upon in this case to decide what statute of limitations governs a claim by a union member under § 101 (a)(2) of Title I of the Labor-Management Reporting and Disclosure Act of 1959 (LMRDA), Pub. L. 86-257, 73 Stat. 522, 29 U. S. C. § 411(a)(2), alleging that the union violated its member’s right to free speech as to union matters. Congress enacted no statute of limitations expressly applicable to § 101 actions.

Petitioner Reed, the Secretary and Treasurer of Local 1715 (Local) of respondent United Transportation Union (Union), received reimbursement from the Local for “time lost” carrying out his union duties. After an audit the Union’s president, respondent Hardin, disallowed these payments. Hardin ruled that petitioner was not entitled to the payments because he had failed to obtain approval for them prior to doing the tasks that caused him to lose time, and because his salary as an officer of the Local was intended to cover all his official duties. When petitioner subsequently attempted to enforce a policy that reimbursements required prior approval — denying unapproved claims by the president and other officers of the Local — Hardin overruled these decisions. Petitioner thereupon unsuccessfully sought reinstatement of his disallowed payment. In a series of letters to Hardin, the last dated August 2, 1983, petitioner alleged that more stringent standards had been applied to his reimbursement claims because he had been critical of the Local’s president. Threatening suit, he asserted that the disallowance amounted to harassment for expressing his views on union matters and violated LMRDA § 101. Petitioner did not file this action in the Western District of North Carolina against the Union and various of its officers, however, until August 2, 1985.

Respondents moved for summary judgment, arguing that petitioner had filed his suit out of time. Respondents maintained that on the reasoning of DelCostello v. Teamsters, 462 U. S. 151 (1983), petitioner’s § 101 claim should be governed by the statute of limitations that applies to the filing of charges with the National Labor Relations Board alleging unfair labor practices defined in § 8 of the National Labor Relations Act (NLRA), 29 U. S. C. § 158. Section 10(b) of the NLRA, 29 U. S. C. § 160(b), provides that such charges must be filed within six months. The District Court denied summary judgment, holding that petitioner’s action was more akin to a civil rights claim than an unfair labor practice charge, and hence was governed by North Carolina’s 3-year statute of limitations for personal injury actions in accordance with the rule this Court established in Wilson v. Garcia, 471 U. S. 261 (1985). 633 F. Supp. 1516 (1986).

The Court of Appeals for the Fourth Circuit reversed, construing DelCostello to require that petitioner’s § 101(a)(2) claim be governed by NLRA § 10(b). 828 F. 2d 1066 (1987). We granted certiorari, 485 U. S. 933 (1988), to settle a conflict among Courts of Appeals as to the statute of limitations applicable to § 101(a)(2) actions. We now reverse the Fourth Circuit’s decision, and hold that § 101(a)(2) claims are governed by state general or residual personal injury statutes, which are to be identified in conformity with our decision this Term in Owens v. Okure, ante, p. 235.

I

Congress not infrequently fails to supply an express statute of limitations when it creates a federal cause of action. When that occurs, “[w]e have generally concluded that Congress intended that the courts apply the most closely analogous statute of limitations under state law.” DelCostello, supra, at 158. See, e. g., Agency Holding Corp. v. Malley-Duff & Associates, Inc., 483 U. S. 143, 147 (1987) (noting that the Rules of Decision Act usually requires that a state statute be borrowed, and also that “[gjiven our longstanding practice of borrowing state law, and the congressional awareness of this practice, we can generally assume that Congress intends by its silence that we borrow state law”); Auto Workers v. Hoosier Cardinal Corp., 383 U. S. 696, 703-705 (1966); Holmberg v. Armbrecht, 327 U. S. 392, 395 (1946).

“State legislatures do not devise their limitations periods with national interests in mind,” however, “and it is the duty of the federal courts to assure that the importation of state law will not frustrate or interfere with the implementation of national policies.” Occidental Life Ins. Co. of California v. EEOC, 432 U. S. 355, 367 (1977). Thus, on the assumption that Congress would not choose “to adopt state [limitations] rules at odds with the purpose or operation of federal substantive law,” DelCostello, supra, at 161, we have recognized a closely circumscribed exception to the general rule that statutes of limitation are to be borrowed from state law. We decline to borrow a state statute of limitations only “when a rule from elsewhere in federal law clearly provides a closer analogy than available state statutes, and when the federal policies at stake and the practicalities of litigation make that rule a significantly more appropriate vehicle for interstitial lawmaking.” DelCostello, supra, at 172. See Agency Holding Corp., supra (adopting federal statute of limitations for civil RICO claims); Occidental Life Ins. Co., supra (federal limitations period applied to EEOC enforcement actions); McAllister v. Magnolia Petroleum Co., 357 U. S. 221 (1958) (federal limitations period applied to unseaworthiness actions); Holmberg v. Armbrecht, supra (refusing to apply state statute to action to enforce federally created equitable right). This is a narrow exception to the general rule. As we made clear in DelCostello, “in labor law or elsewhere,” application of a federal statute will be unusual, and “resort to state law remains the norm for borrowing of limitations periods.” 462 U. S., at 171. Respondents urge in this case that petitioner’s § 101(a)(2) claim that he was penalized for exercising his right as a union member to speak freely as to union matters falls within the narrow exception requiring application of a federal statute of limitations, rather than within the general rule that we borrow an analogous state statute. We cannot agree.

A

We have upon previous occasions considered the history of Title I of the LMRDA, and have concluded that “Congress modeled Title I after the Bill of Rights, and that the legislators intended § 101(a)(2) to restate a principal First Amendment value — the right to speak one’s mind without fear of reprisal.” Steelworkers v. Sadlowski, 457 U. S. 102, 111 (1982). Indeed, the amendments that eventually were enacted as Title I were introduced under the heading of “Bill of Rights of Members of Labor Organizations.” See Finnegan v. Leu, 456 U. S. 431, 435 (1982). Congress considered the protection afforded by Title I to free speech and assembly in the union context necessary to bring an end to abuses by union leadership that had curtailed union democracy. It “adopted the freedom of speech and assembly provision in order to promote union democracy . . . [and] recognized that democracy would be assured only if union members are free to discuss union policies and criticize the leadership without fear of reprisal.” Sadlowski, supra, at 112. See also Finnegan, supra, at 436 (Title I was “necessary to further the [LMRDA’s] primary objective of ensuring that unions would be democratically governed and responsive to the will of their memberships”). Thus the core purpose of § 101(a)(2) is to protect free speech and assembly rights because these are considered “vital to the independence of the membership and the effective and fair operation of the union as the representative.” Hall v. Cole, 412 U. S. 1, 8 (1973).

As a preliminary matter, consideration of this core purpose suggests that “all claims arising out of [§ 101(a)(2)] ‘should be characterized in the same way.’” Agency Holding Corp., supra, at 147, quoting Wilson v. Garcia, 471 U. S. 261, 268 (1985). Though § 101(a)(2) creates personal rights, a union member vindicating those rights also serves public goals, in that he “necessarily render[s] a substantial service to his union as an institution and to all of its members,” contributing to the improvement or preservation of democracy within the union. Hall, supra, at 8. Time-consuming litigation as to the collateral question of the appropriate statute of limitations for a § 101 claim would likely interfere with Congress’ aim that actions to enforce free speech and association rights should in fact enhance union democracy. Such litigation creates uncertainty as to the time available for filing, and it would not be surprising if the prospect of perhaps prolonged litigation against the union before ever the merits are reached were to have a deterrent effect on would-be § 101(a)(2) plaintiffs. The diversion of resources to collateral statute-of-limitations litigation would be foreign to the central purposes of § 101(a)(2), and thus we are persuaded that all claims under that provision should be characterized in the same way. Determining exactly how they should be characterized does not appear to us to be a difficult task, given a proper understanding of the narrow scope of the DelCostello exception to our standard borrowing rule, and of the nature and purpose of § 101(a)(2).

Because § 101(a)(2) protects rights of free speech and assembly, and was patterned after the First Amendment, it is readily analogized for the purpose of borrowing a statute of limitations to state personal injury actions. We find it unnecessary to detail here the elements of this analogy. We have previously considered possible analogies between federal civil rights actions under 42 U. S. C. § 1983 (which lacks an express statute of limitations) and various state-law claims, and have held that §1983 actions are governed by state general or residual personal injury statutes of limitations. Owens v. Okure, ante, p. 235; Wilson v. Garcia, supra. See also Goodman v. Lukens Steel Co., 482 U. S. 656 (1987) (applying state personal injury statute to federal civil rights action against a private party brought under 42 U. S. C. § 1981). Since § 101(a)(2) has evident similarities to § 1983, which prohibits the infringement of First Amendment rights by persons acting under color of state law, it is apparent that § 101(a)(2) actions also are analogous to state personal injury claims, and under our usual borrowing rule would take their statutes of limitations. Moreover, these state personal injury statutes are of sufficient length, see Owens, ante, at 248, nn. 9 and 10, to accommodate the practical difficulties faced by § 101(a)(2) plaintiffs, which include identifying the injury, deciding in the first place to bring suit against and thereby antagonize union leadership, and finding an attorney. See Doty v. Sewall, 784 F. 2d 1, 9 (CA1 1986). As a result, no practicalities of litigation compel us to search beyond state law for a more analogous statute of limitations. Cf. Agency Holding Corp., 483 U. S., at 147-148; DelCostello, 462 U. S., at 165-166, 167-168 (and see n. 4, infra); Burnett v. Grattan, 468 U. S. 42, 50-51 (1984). In light of the analogy between § 101(a)(2) and personal injury actions, and of the lack of any conflict between the practicalities of § 101(a)(2) litigation and state personal injury limitations periods, we are bound to borrow state personal injury statutes absent some compelling demonstration that “the federal policies at stake” in § 101(a)(2) actions make a federal limitations period “a significantly more appropriate vehicle for interstitial lawmaking.” DelCostello, supra, at 172.

B

Respondents argue that the same federal labor policies that led us in DelCostello to borrow the NLRA § 10(b) statute of limitations for hybrid § 301/fair representation claims likewise require that we borrow § 10(b) for LMRDA §101 (a)(2) actions. This argument lacks merit. It fails to take seriously our admonition that analogous state statutes of limitations are to be used unless they frustrate or significantly interfere with federal policies. More importantly, it entirely ignores the core federal interest furthered by § 101(a)(2) — the interest in union democracy promoted by free speech and assembly rights of union members — instead urging that we select a statute of limitations to serve federal policies that might merely be implicated by tangential and contingent effects of some § 101(a)(2) litigation.

We declined in DelCostello to apply state statutes of limitations for vacation of an arbitration award or for legal malpractice to an employee’s hybrid § 301/fair representation action. Such hybrid suits formally comprise two causes of action. First, the employee alleges that the employer violated §301 of the Labor Management Relations Act, 1947 (LMRA), 61 Stat. 156, 29 U. S. C. § 185, by breaching the collective-bargaining agreement. Second, the employee claims that the union breached its duty of fair representation, which this Court has implied from the scheme of the NLRA, by mishandling the ensuing grievance-and-arbitration proceedings. See DelCostello, supra, at 164, and n. 14. We held in DelCostello that, having regard to “the policies of federal labor law and the practicalities of hybrid § 301/fair representation litigation,” 462 U. S., at 165, § 10(b) of the NLRA, with its 6-month limitations period for unfair labor practice charges, provided the closest analogy for hybrid § 301/fair representation actions.

Respondents argue, and the Court of Appeals held, that the § 10(b) 6-month limitations period must be applied to § 101(a)(2) actions in order to further the federal policy that calls for “‘rapid resolution of internal union disputes’” in order “‘to maintain . . . stable bargaining relationships.’” 828 F. 2d, at 1069, quoting Local Union 1397, United Steelworkers of America, AFL-CIO v. United Steelworkers of America, AFL-CIO, 748 F. 2d 180, 184 (CA3 1984). It is true that in DelCostello we held that use of a long malpractice statute of limitations for hybrid §301/fair representation actions would conflict with the federal policy favoring “the relatively rapid final resolution of labor disputes. ” 462 U. S., at 168. The specific focus of our comparison between unfair labor practice charges governed by § 10(b) and hybrid §301/fair representation claims was their effects upon the formation and operation of the collective-bargaining agreement between the employer and the bargaining representative, and upon the private settlement of disputes under that agreement through grievance-and-arbitration procedures. We noted that the § 10(b) period was “ ‘attuned to . . . the proper balance between the national interests in stable, bargaining relationships and finality of private settlements, and an employee’s interest in setting aside what he views as an unjust settlement under the collective-bargaining system.’” Id., at 171, quoting United Parcel Service, Inc. v. Mitchell, 451 U. S. 56, 70 (1981) (Stewart, J., concurring in judgment). Those same interests, we held, are implicated by hybrid § 301/fair representation claims against union and employer, because such claims constitute a direct challenge to private dispute settlement under the collective-bargaining agreement. DelCostello, supra, at 165.

Insofar as interests in stable bargaining relationships and in private dispute resolution under collective-bargaining agreements are implicated by § 101(a)(2) claims, however, the relationship will generally be tangential and remote — as in the present case, which involves an internal union dispute not directly related in any way to collective bargaining or dispute settlement under a collective-bargaining agreement. To be sure, the Court of Appeals stated:

“Internal union disputes, if allowed to fester, may erode the confidence of union members in their leaders and possibly cause a disaffection with the union, thus weakening the union and its ability to bargain for its members. Such prolonged disputes may also distract union officials from their sole purpose — representation of union members in their relations with their employer. These probable effects of protracted disputes may be destabilizing to labor-management relations.” 828 F. 2d, at 1070.

See also Local Union 1397, supra, at 184 (“[Dissension within a union naturally affects that union’s activities and effectiveness in the collective bargaining arena”). These observations have some plausibility. But they are not enough to persuade us that federal policy requires that § 10(b) govern claims under § 101(a)(2) of the LMRDA, for they establish no more than that § 101(a)(2) actions may sometimes have “some impact on economic relations between union and employer and on labor peace.” Brief for Respondents 22. This is substantially less immediate and less significant an impact on bargaining and private dispute settlement than that which led us to apply the § 10(b) statute to hybrid § 301/fair representation claims, which directly challenge both the employer’s adherence to the collective-bargaining agreement and the union’s representation of the employee in grievance-and-arbitration procedures. As the Court of Appeals for the First Circuit noted in Doty v. Sewall, 784 F. 2d, at 7, a Title I suit does not directly

“challeng[e] the ‘stable relationship’ between the employer and the union. It does not affect any interpretation or effect any reinterpretation of the collective bargaining agreement and so, unlike the hybrid actions, a Title I claim does not attack a compromise between labor and management. . . . There is no erosion of the finality of private settlements, for in the free standing LMRDA cases the union member is not attempting to attack any such settlement.”

See also Davis v. United Automobile, Aerospace and Agriculture Implement Workers of America, 765 F. 2d 1510, 1514 (CA11 1985). Thus the federal interests in collective bargaining and in the resolution of disputes under collective-bargaining agreements, which require application of a 6-month statute of limitations to unfair labor practice charges and hybrid § 301/fair representation claims, simply are not directly involved in § 101(a)(2) actions.

There is another and more important reason why we cannot conclude in this case, as we did in DelCostello, that § 10(b) provides “a federal statute of limitations actually designed to accommodate a balance of interests very similar to that at stake here.” 462 U. S., at 169. Section 101(a)(2) implements a federal policy — to guarantee free speech and association rights in order to further union democracy — that simply had no part in the design of a statute of limitations for unfair labor practice charges. Indeed, Title I of the LMRDA was a response to a perception that the NLRA, including the § 8(b) provisions defining unfair labor practices by labor organizations, had failed to provide the necessary protection for the free speech and other rights of union members that Congress considered essential to the democratic operation of unions. See, e. g., Steelworkers v. Sadlowski, 457 U. S., at 102, 108-110. Hence while § 10(b) was “ ‘attuned to . . . the . . . balance between national interests in stable bargaining relationships and finality of private settlements’” on the one hand, and “‘an employee’s interest in setting aside [a] settlement under the collective-bargaining system’” on the other, DelCostello, supra, at 171, quoting Mitchell, supra, at 70, the relevant balance in the case of § 101(a)(2) actions is quite different. The second element in the § 10(b) balance is replaced in § 101(a)(2) cases by

“a union member’s interest in protection against the infringement of his rights of free speech[, which] rises to a national interest, as embodied in section 101(a)(2) of the LMRDA, . . . and thus seems of greater importance than an employee’s interest in setting aside an individual settlement under a collective bargaining agreement.” Davis, supra, at 1514.

The 6-month § 10(b) statute of limitations was crafted to accommodate federal interests in stable bargaining relationships and in private dispute resolution that are not squarely implicated in LMRDA § 101(a)(2) actions; and it was not adopted with the distinct federal interest in the free speech of union members in mind. Hence it is not the case that “the federal policies at stake” in § 101(a)(2) actions make the § 10(b) statute of limitations “a significantly more appropriate vehicle for interstitial lawmaking” than the analogous state statute of limitations that our established borrowing rule favors.

II

Because § 101(a)(2) of the LMRDA is modeled on the First Amendment to our Constitution, there is an analogy between § 101(a)(2) claims, § 1983 claims, and state personal injury actions. Indeed, we have already held that 42 U. S. C. § 1983, which like § 101(a)(2) protects the exercise of First Amendment rights, is governed by state general or residual personal injury statutes of limitations. Owens v. Okure, ante, p. 235. The well-established rule that statutes of limitations for federal causes of action not supplied with their own limitations periods will be borrowed from state law thus requires that state general or residual personal injury statutes be applied to § 101(a)(2) suits. None of the exceptions to that rule apply, for § 10(b) of the NLRA does not supply a more analogous statute; its 6-month limitations period is not better suited to the practicalities of § 101(a)(2) litigation; and it was not designed to accommodate federal policies similar to those implicated in § 101(a)(2) actions. The judgment of the Court of Appeals is reversed, and the case is remanded for further proceedings consistent with this opinion.

It is so ordered.

Justice Scalia,

concurring in the judgment.

I remain of the view that the Court should apply the appropriate state statute of limitations (if any at all) when a federal statute lacks an explicit limitations period. See Agency Holding Corp. v. Malley-Duff & Associates, Inc., 483 U. S. 143, 170 (1987) (Scalia, J., concurring in judgment). Accordingly, I concur in the judgment.

Justice White,

dissenting.

I am persuaded that the 6-month statute of limitations prescribed by § 10(b) of the National Labor Relations Act, 29 U. S. C. § 160(b), should govern this action brought under § 101 of Title I of the Labor-Manangement Reporting and Disclosure Act of 1959, 29 U. S. C. § 411. Title I was part of a statute the purpose of which was to require that unions and employers adhere to high standards of responsibility and ethical conduct in order to protect employee rights to organize and bargain collectively. Title I was thus necessary to eliminate or prevent improper practices on the part of labor unions and employers that “distort and defeat” the policies of the labor laws. §§401(a)-(c). It is not readily apparent to me that Congress was simply moving to enforce the First Amendment rather than to ensure that unions were truly and effectively the representatives of their members for the purpose of collective bargaining. I therefore do not think that the 42 U. S. C. § 1983 rule furnishes a closer analogy than does § 10(b); neither does it serve the policies of the labor laws nor further the interests of consistency and repose that are involved in the early settlement of disputes between unions and their members.

Undeniably, Congress made it an unfair labor practice for a union to restrain or coerce employees in the exercise of their organizational and collective-bargaining rights, 29 U. S. C. § 158(a), thus seeking to protect the same interests furthered by Title I, yet insisting that such charges be aired and decided in prompt fashion. Furthermore, there can be no doubt that a great many alleged violations of Title I could be filed with the Board as unfair labor practices subject to the 6-month limitations period of § 10(b). I find nothing of real substance in the Court’s opinion to justify borrowing the much longer state statute that was not designed with the interests of the federal labor laws in mind.

Respectfully, I dissent.

       Section 101(a)(2) of the LMRDA provides:
      “Freedom of speech and assembly.
      “Every member of any labor organization shall have the right to meet and assemble freely with other members; and to express any views, arguments, or opinions; and to express at meetings of the labor organization his views, upon candidates in an election of the labor organization or upon any business properly before the meeting, subject to the organization’s established and reasonable rules pertaining to the conduct of meetings: Provided, That nothing herein shall be construed to impair the right of a labor organization to adopt and enforce reasonable rules as to the responsibility of every member toward the organization as an institution and to his refraining from conduct that would interfere with its performance of its legal or contractual obligations.” 73 Stat. 522.
      This section is enforceable by private right of action. 29 U. S. C. § 412.

       Section 10(b) states in pertinent part that “no complaint shall issue based upon any unfair labor practice occurring more than six months prior to the filing of the charge with the Board.”

       The Court of Appeals for the Fourth Circuit’s holding conflicts with Rodonich v. House Wreckers Union Local 95, 817 F. 2d 967 (CA2 1987), and Doty v. Sewall, 784 F. 2d 1 (CA1 1986) (applying state personal injury limitations periods to Title I claims). It is in accord, however, with Clift v. International Union, United Automobile, Aerospace & Agricultural Implement Workers of America, 818 F. 2d 623 (CA7 1987), cert. pending No. 87-42; Davis v. United Automobile, Aerospace and Agriculture Implement Workers of America, 765 F. 2d 1510 (CA11 1985), cert. denied, 475 U. S. 1057 (1986); and Local Union 1397, United Steelworkers of America, AFL-CIO v. United Steelworkers of America, AFL-CIO, 748 F. 2d 180 (CA3 1984) (applying § 10(b) statute of limitations).

       The practical concerns that we held made state limitations periods unsuitable for hybrid § 301/fair representation claims are not implicated in LMRDA § 101(a)(2) actions. We reasoned in DelCostello that the suggestion that § 301/fair representation claims be governed by state limitations periods for actions to vacate an arbitration award suffered from “flaws . . . of practical application.” DelCostello v. Teamsters, 462 U. S., at 165. These limitations periods, typically between 10 and 90 days, id., at 166, n. 15, were too short “to provide an aggrieved employee with a satisfactory opportunity to vindicate his rights under § 301 and the fair representation doctrine,” because in hybrid actions the employee “is called upon, within the limitations period, to evaluate the adequacy of the union’s representation, to retain counsel, to investigate substantial matters that were not at issue in the [grievance] proceeding, and to frame his suit.” Id., at 166. No such “flaws ... of practical application” arise from the application of state general personal injury statutes of limitation to § 101(a)(2) suits, as noted in the text, supra, at 327.
      An additional factor considered important to our analysis in DelCostello but absent here is that a hybrid § 301/fair representation action yokes together interdependent claims that could only very impractically be treated as governed by different statutes of limitations. 462 U. S., at 164-165. Cf. McAllister v. Magnolia Petroleum Co., 357 U. S. 221 (1958) (applying a federal statute to seaworthiness actions under general admiralty law that are almost invariably brought in tandem with federal Jones Act claims). Departure from the normal practice of borrowing state statutes of limitations is more likely to be necessary where distinct actions are combined, making the possibility of finding a single analogous state statute more remote. See DelCostello, supra, at 166-167.

       Thus, in DelCostello we distinguished Auto Workers v. Hoosier Cardinal Corp., 383 U. S. 696 (1966), where we held that a straightforward § 301 suit by a union against management for breach of a collective-bargaining agreement, involving no agreement to submit disputes to arbitration, was governed by Indiana’s 6-year limitations period for actions on an unwritten contract. The action at issue in Hoosier had not involved either the formation of a collective-bargaining agreement or the private settlement of disputes under a collective-bargaining agreement, and had not called for application of a uniform federal statute of limitations. DelCostello, supra, at 162-163.

       One class of Title I actions may have a more direct effect on collective bargaining. Union members may attempt to challenge a collective-bargaining agreement by alleging that the union denied them the proper opportunity “to participate in the deliberations and voting” to ratify the agreement, in violation of LMRDA § 101(a)(1). See, e. g., Adkins v. International Union of Electrical, Radio & Machine Workers, AFL-CIO, 769 F. 2d 330, 335 (CA6 1985); Linder v. Berge, 739 F. 2d 686, 690 (CA1 1984) (both applying the § 10(b) statute of limitations). We have no occasion in this case, which involves a § 101(a)(2) free speech claim, to decide what statute of limitations applies to other Title I actions. We note, nevertheless, that however direct an effect some Title I claims may have on the collective-bargaining agreement or on private dispute resolution, Title I claims all serve the core function of enhancing union democracy through enforcement of the rights of union members, not of protecting the integrity of collective bargaining or of grievance-and-arbitration procedures. See text infra this page and 333.

       Respondents also argue that the § 10(b) statute of limitations should be applied to § 101(a)(2) claims because these bear a “family resemblance” to, and overlap with, unfair labor practices charges and claims that a union has breached its duty of fair representation. Brief for Respondents 24-26. In support of borrowing § 10(b) for hybrid § 301/fair representation claims, we noted in DelCostello that “the family resemblance [between breaches of the duty of fair representation and unfair labor practices] is undeniable, and indeed there is a substantial overlap,” because the NLRB treats breaches of the duty as unfair labor practices. 462 U. S., at 170. Even were it the ease, however, that Title I violations may constitute unfair labor practices and breaches of the duty of fair representation — questions we need not delve into today and upon which we express no opinion — we would still hold this resemblance inconclusive as regards the question whether § 101 actions should be governed by a state statute of limitations or by NLRA § 10(b). In contrast to the situation in DelCostello, an overlap between Title I violations and unfair labor practices or breaches of the duty of fair representation would not be attributable to similar federal policies underlying each of these areas of protection, for the policies behind Title I, on the one hand, and NLRA § 8(b) and the implied duty of fair representation on the other, are quite different. See supra, at 331.


author: Chief Justice. Rehnquist

text:
    ALLEGHENY PITTSBURGH COAL CO. v. COUNTY COMMISSION OF WEBSTER COUNTY, WEST VIRGINIA
    No. 87-1303.
    Argued December 7, 1988
    Decided January 18, 1989

      E. Barrett Pretty man, Jr., argued the cause for petitioners in both cases. With him on the briefs were John G. Roberts, Jr., and William James Murphy.

      C. William Ullrich, Chief Deputy Attorney General of West Virginia, argued the cause for respondent. With him on the brief were Charles G. Brown, Attorney General, and Jack Alsop.

      Together with No. 87-1310, East Kentucky Energy Corp. et al. v. County Commission of Webster County, West Virginia, also on certiorari to the same court.

      Briefs of amici curiae urging reversal were filed for the National Association of Realtors by Laurene K. Janik; and for the National Taxpayers Union by Gale A. Notion.

        Benna Ruth Solomon and Eugene J. Comey filed a brief for the National Association of Counties et al. as amici curiae urging affirmance.
      Briefs of amici curiae were filed for the Pacific Legal Foundation et al. by Ronald A. Zumbrun, Anthony T. Caso, and Jonathan M. Coupal; and for the International Association of Assessing Officers by James F. Gossett.

   Chief Justice. Rehnquist

delivered the opinion of the Court.

The West Virginia Constitution guarantees to its citizens that, with certain exceptions, “taxation shall be equal and uniform throughout the State, and all property, both real and personal, shall be taxed in proportion to its value . . . .” Art. X, § 1. The Webster County tax assessor valued petitioners’ real property on the basis of its recent purchase price, but made only minor modifications in the assessments of land which had not been recently sold. This practice resulted in gross disparities in the assessed value of generally comparable property, and we hold that it denied petitioners the equal protection of the laws guaranteed to them by the Fourteenth Amendment.

Between 1975 and 1986, the tax assessor for Webster County, West Virginia, fixed yearly assessments for property within the county at 50% of appraised value. She fixed the appraised value at the declared consideration at which the property last sold. Some adjustments were made in the assessments of properties that had not been recently sold, although they amounted to, at most, 10% increases in 1976, 1981, and 1983 respectively.

In 1974, for example, Allegheny Pittsburgh Coal Company (Allegheny) purchased fee, surface, and mineral interests in certain properties for a stated price somewhat in excess of $24 million, and during the tax years 1976 through 1983 its property was assessed annually at half of this figure. In 1982 Allegheny sold the property to East Kentucky Energy Corp. (Kentucky Energy) for a figure of nearly $30 million, and the property thereafter was annually assessed at a valuation just below $15 million. Oneida Coal Company and Shamrock Coal Company participated in similar transactions in Webster County, and the property they purchased or sold was assessed in a similar manner.

Each year, petitioners pursued relief before the County Commission of Webster County sitting as a review board. They argued that the assessment policy of the Webster County assessor systematically resulted in appraisals for their property that were excessive compared to the appraised value of similar parcels that had not been recently conveyed. Each year the county commission affirmed the assessments, and each year petitioners appealed to the State Circuit Court. A group of these appeals from Allegheny and its successor in interest, Kentucky Energy, were consolidated by the West Virginia Circuit Court and finally decided in 1985. App. to Pet. for Cert, in No. 87-1303, p. 15a. Another group of appeals from Shamrock and Oneida were consolidated and decided by the West Virginia Circuit Court early the next year. App. to Pet. for Cert, in No. 87-1310, p. 49a.

The judge in both of these cases concluded that the system of real property assessment used by the Webster County assessor systematically and intentionally discriminated against petitioners in violation of the West Virginia Constitution and the Fourteenth Amendment’s Equal Protection Clause. He ordered the county commission to reduce the assessments on petitioners’ property to the levels recommended by the state tax commissioner in his valuation guidelines published for use by local assessors. Underlying the judge’s conclusions were findings that petitioners’ tax assessments over the years were dramatically in excess of those for comparable property in the county. He found that “the assessor did not compare the various features of the real estate to which the high assessment was applied with the various features of land assessed at a much lower rate.” App. to Pet. for Cert, in No. 87-1303, p. 29a; App. to Pet. for Cert, in No. 87-1310, p. 59a. “The questioned assessments were not based upon the presence of economically minable or removable coal, oil, gas or harvestable timber in or upon petitioners’ real estate, as compared to an absence of the same in or upon [neighboring] properties.” Ibid. Nor were they “based upon present use or immediately foreseeable economic development of petitioners’ real estate.” Ibid. Rather, “[t]he sole basis of the assessment of petitioners’ real estate was, according to the assessor, the consideration declared in petitioners’ deeds.” Ibid.

This approach systematically produced dramatic differences in valuation between petitioners’ recently transferred property and otherwise comparable surrounding land. For the years 1976 through 1982, Allegheny was assessed and taxed at approximately 35 times the rate applied to owners of comparable properties. After purchasing that land, Kentucky Energy was assessed and taxed at approximately 33 times the rate of similar parcels. From 1981 through 1985, the county assessed and taxed the Shamrock-Oneida property at roughly 8 to 20 times that of comparable neighboring coal tracts. These disparities existed notwithstanding the adjustments made to the assessments of land not recently conveyed. In the case of the property held by Allegheny and Kentucky Energy, the county’s adjustment policy would have required more than 500 years to equalize the assessments.

On appeal, the Supreme Court of Appeals of West Virginia reversed. It found that the record did not support the trial court’s ruling that the actions of the assessor and board of review constituted “intentional and systematic” discrimination. It held that “assessments based upon the price paid for the property in arm’s length transactions are an appropriate measure of the ‘true and actual value’ of . . . property.” In re 1975 Tax Assessments against Oneida Coal Co., - W. Va.-,-, 360 S. E. 2d 560, 564 (1987). That other properties might be undervalued relative to petitioners’ did not require that petitioners’ assessments be reduced: “‘Instead, they should seek to have the assessments of other taxpayers raised to market value.’” Id., at-, 360 S. E. 2d, at 565 (quoting Killen v. Logan County Comm’n, - W. Va. -, -, 295 S. E. 2d 689, 709 (1982)). We granted certiorari to decide whether these Webster County tax assessments denied petitioners the equal protection of the law and, if so, whether petitioners could constitutionally be limited to the remedy of seeking to raise the assessments of others. 485 U. S. 976 (1988).

We agree with the import of the opinion of the Supreme Court of Appeals of West Virginia that petitioners have no constitutional complaint simply because their property is assessed for real property tax purposes at a figure equal to 50% of the price paid for it at a recent arm’s-length transaction. But their complaint is a comparative one: while their property is assessed at 50% of what is roughly its current value, neighboring comparable property which has not been recently sold is assessed at only a minor fraction of that figure. We do not understand the West Virginia Supreme Court of Appeals to have disputed this fact. We read its opinion as saying that even if there is a constitutional violation on these facts, the only remedy available to petitioners was an effort to have the assessments on the neighboring properties raised by an appropriate amount. We hold that the assessments on petitioners’ property in this case violated the Equal Protection Clause of the Fourteenth Amendment to the United States Constitution, and that petitioners may not be remitted to the remedy specified by the Supreme Court of Appeals of West Virginia.

The county argues that its assessment scheme is rationally related to its purpose of assessing properties at true current value: when available, it makes use of exceedingly accurate information about the market value of a property — the price at which it was recently purchased. As those data grow stale, it periodically adjusts the assessment based on some perception of the general change in area property values. We do not intend to cast doubt upon the theoretical basis of such a scheme. That two methods are used to assess property in the same class is, without more, of no constitutional moment. The Equal Protection Clause “applies only to taxation which in fact bears unequally on persons or property of the same class.” Charleston Fed. Savings & Loan Assn. v. Alderson, 324 U. S. 182, 190 (1945) (collecting cases). The use of a general adjustment as a transitional substitute for an individual reappraisal violates no constitutional command. As long as general adjustments are accurate enough over a short period of timé to equalize the differences in proportion between the assessments of a class of property holders, the Equal Protection Clause is satisfied. Just as that Clause tolerates occasional errors of state law or mistakes in judgment when valuing property for tax purposes, see Sunday Lake Iron Co. v. Wakefield, 247 U. S. 350, 353 (1918); Coulter v. Louisville & Nashville R. Co., 196 U. S. 599 (1905), it does not require immediate general adjustment on the basis of the latest market developments. In each case, the constitutional requirement is the seasonable attainment of a rough equality in tax treatment of similarly situated property owners. Allied Stores of Ohio v. Bowers, 358 U. S. 522, 526-527 (1959),. and cases there cited; cf. FPC v. Hope Natural Gas Co., 320 U. S. 591, 602 (1944) (noting, in the ratemaking context, that “[i]t is not theory, but the impact . . . that counts”).

But the present action is not an example of transitional delay in adjustment of assessed value resulting in inequalities in assessments of comparable property. Petitioners’ property has been assessed at roughly 8 to 35 times more than comparable neighboring property, and these discrepancies have continued for more than 10 years with little change. The county’s adjustments to the assessments of property not recently sold are too small to seasonably dissipate the remaining disparity between these assessments and the assessments based on a recent purchase price.

The States, of course, have broad powers to impose and collect taxes. A State may divide different kinds of property into classes and assign to each class a different tax burden so long as those divisions and burdens are reasonable. Allied Stores, supra, at 526-527 (“The State may impose different specific taxes upon different trades and professions and may vary the rate of excise upon various products”). It might, for example, decide to tax property held by corporations, including petitioners, at a different rate than property held by individuals. See Lehnhausen v. Lake Shore Auto Parts Co., 410 U. S. 356 (1973) (Illinois ad valorem tax on personalty of corporations). In each case, “[i]f the selection or classification is neither capricious nor arbitrary, and rests upon some reasonable consideration of difference or policy, there is no denial of the equal protection of the law.” Brown-Forman Co. v. Kentucky, 217 U. S. 563, 573 (1910).

But West Virginia has not drawn such a distinction. Its Constitution and laws provide that all property of the kind held by petitioners shall be taxed at a rate uniform throughout the State according to its estimated market value. There is no suggestion in the opinion of the Supreme Court of Appeals of West Virginia, or from any other authoritative source, that the State may have adopted a different system in practice from that specified by statute; we have held that such a system may be valid so long as the implicit policy is applied evenhandedly to all similarly situated property within the State. Nashville C. & S. L. R. Co. v. Browning, 310 U. S. 362, 368-369 (1940). We are not advised of any West Virginia statute or practice which authorizes individual counties of the State to fashion their own substantive assessment policies independently of state statute. See Salsburg v. Maryland, 346 U. S. 545 (1954). The Webster County assessor has, apparently on her own initiative, applied the tax laws of West Virginia in the manner heretofore described, with the resulting disparity in assessed value of similar property. Indeed, her practice seems contrary to that of the guide published by the West Virginia Tax Commission as an aid to local assessors in the assessment of real property.

“[I]ntentional systematic undervaluation by state officials of other taxable property in the same class contravenes the constitutional right of one taxed upon the full value of his property.” Sunday Lake Iron Co., supra, at 352-353; Sioux City Bridge Co. v. Dakota County, 260 U. S. 441, 445-446 (1923); Cumberland Coal Co. v. Board of Revision of Tax Assessments in Greene County, Pa., 284 U. S. 23, 28-29 (1931). “The equal protection clause . . . protects the individual from state action which selects him out for discriminatory treatment by subjecting him to taxes not imposed on others of the same class.” Hillsborough v. Cromwell, 326 U. S. 620, 623 (1946). We have no doubt that petitioners have suffered from such “intentional systematic undervaluation by state officials” of comparable property in Webster County. Viewed in isolation, the assessments for petitioners’ property may fully comply with West Virginia law. But the fairness of one’s allocable share of the total property tax burden can only be meaningfully evaluated by comparison with the share of others similarly situated relative to their property holdings. The relative undervaluation of comparable property in Webster County over time therefore denies petitioners the equal protection of the law.

A taxpayer in this situation may not be remitted by the State to the remedy of seeking to have the assessments of the undervalued property raised. “The [Equal Protection Clause] is not satisfied if a State does not itself remove the discrimination, but imposes on him against whom the discrimination has been directed the burden of seeking an upward revision of the taxes of other members of the class.” Hillsborough, supra, at 623, citing Sioux City Bridge Co., supra, 445-447; Iowa-Des Moines Nat’l Bank v. Bennett, 284 U. S. 239, 247 (1931); Cumberland Coal Co., supra, at 28-29. The judgment of the Supreme Court of Appeals of West Virginia is accordingly reversed, and the case is remanded for further proceedings not inconsistent with this opinion.

It is so ordered.

       Petitioners contend that the adjustments to the assessments for property not recently transferred were uneven at best. According to petitioners, a study of the assessed value of all coal tracts in Webster County from 1983 to 1984 was introduced at trial and demonstrated that the assessment of 35% of the tracts was unchanged during that period. The courts below do not appear to have made specific factual findings accepting or rejecting this study or petitioners’ conclusions drawn from it. For the purposes of argument, we will accept the county’s figures since we find that, even accepting those figures, the adjustments do not dispel the constitutional flaw in the assessment system.

       After each of these primary decisions adjudicating the validity of the assessments to the lands in question, petitioners obtained a number of other orders applying the findings in the primary decisions to their specific cases and to other appeals not consolidated in the primary decisions. See App. to Pet. for Cert, in No. 87-1310, pp. 79a, 83a, and 86a.

      Respondent argues in this Court that petitioners’ land was not truly comparable to that of the surrounding properties. It points to the fact that one of the parcels held by Allegheny, and then by Kentucky Energy, comprising 4,287 acres, allegedly contains 32 million tons of low-sulfur coal recoverable by strip mining. This unusually valuable parcel skews the average value of all the properties, as well as serving as a basis for higher valuation of this parcel than those surrounding it.
      Petitioners make a number of answers: First, they rely on respondent’s stipulations that “[t]he properties surrounding the property owned by . . . Petitioner, . . . are comparable properties in that they are substantially the same geologically as the properties of the Petitioner . . . .” Record 1319-1320, 1085. Next, they point to the factual findings of the West Virginia Circuit Court, never rejected by the West Virginia Supreme Court of Appeals, that “[although the real estate of each of these petitioners is not identical to that of all other real estate in Webster County, it appears that petitioners’ real estate is substantially similar to the real estate of the others in topography, location, access, development, mineral content and forestation, and that the petitioners’ real estate is substantially similar to adjacent and contiguous tracts and parcels of real estate owned by others.” App. to Pet. for Cert, in No. 87-1303, p. 16a; App. to Pet. for Cert, in No. 87-1310, p. 50a. Finally, they note that the court’s findings were founded on the testimony of Kentucky Energy’s expert witness, the one who testified to the estimated 32 million tons of coal under Kentucky Energy’s land, that the surrounding properties were equally promising. On direct examination he said:
      “As far as comparing this area with the surrounding property, geologically, those same seams are present on all the other properties [suggested as comparable]. The same coal seams are present there. . . . [T]he coal is there and I know that the chances of them being mineable are just as good there as they are on the [Kentucky Energy] properties.
      “. . . There may be some variations, depending on which individual seam is mineable from one property to the other, but in the long run they are very similar properties located within the same area and there is no geological reason that they should not be comparable.” Brief in Opposition in No. 87-1303, pp. 10a-lla.
      We think that petitioners’ submissions justify the conclusion on the record presented to us that their properties were, in aspects relevant to valuation and assessment, comparable to surrounding property valued and assessed at markedly lower amounts.

         We need not and do not decide today whether the Webster County assessment method would stand on a different footing if it were the law of a State, generally applied, instead of the aberrational enforcement policy it appears to be. The State of California has adopted a similar policy as Article XIIIA of its Constitution, popularly known as “Proposition 13.” Proposition 13 generally provides that property will be assessed at its 1975-1976 value, and reassessed only when transferred or constructed upon, or in a limited manner for inflation. Cal. Const., Art. XIIIA, §2 (limiting inflation adjustments to 2% per year). The system is grounded on the belief that taxes should be based on the original cost of property and should not tax unrealized paper gains in the value of the property.