source: Caselaw Access Project

author: Justice White Justice O’Connor,

license: Public Domain

text:
    WRIGHT et al. v. CITY OF ROANOKE REDEVELOPMENT AND HOUSING AUTHORITY
    No. 85-5915.
    Argued October 6, 1986
    Decided January 14, 1987

      White, J., delivered the opinion of the Court, in which Brennan, Marshall, Blackmun, and Stevens, JJ., joined. O’Connor, J., filed a dissenting opinion, in which Rehnquist, C. J., and Powell and ¿calía, JJ., joined, post, p. 432.

      Henry L. Woodward argued the cause for petitioners. With him on the briefs was Renae Reed Patrick.

      Bayard E. Harris argued the cause and filed a brief for respondent.

        David B. Bryson and Catherine M. Bishop filed a brief for the National Housing Law Project as amicus curiae urging reversal.

   Justice White

delivered the opinion of the Court.

Petitioners in this case, tenants living in low-income housing projects owned by respondent, brought suit under 42 U. S. C. §1983, alleging that respondent overbilled them for their utilities and thereby violated the rent ceiling imposed by the Brooke Amendment to the Housing Act of 1937, and the implementing regulations of the Department of Housing and Urban Development (HUD). The District Court, 605 F. Supp. 532 (WD Va. 1984), and the Court of Appeals for the Fourth Circuit, 771 F. 2d 833 (1985), concluded that petitioners did not have a cause of action under § 1983. We granted certiorari and now reverse.

I — I

Respondent is one of many public housing authorities (PHA’s) established throughout the country under the United States Housing Act of 1937, ch. 896, 60 Stat. 888, 42 U. S. C. §1401 et seq., (1970 ed.), to provide affordable housing for low-income people. In 1969, the Housing Act was amended in a fundamental respect: the Brooke Amendment, Pub. L. 91-152, §213, 83 Stat. 389, imposed a ceiling for rents charged to low-income people living in public housing projects, and, as later amended, Pub. L. 97-35, § 322, 95 Stat. 400, provides that a low-income family “shall pay as rent” a specified percentage of its income. HUD has consistently considered “rent” to include a reasonable amount for the use of utilities, which is defined by regulation as that amount equal to or less than an amount determined by the PHA to be a reasonable part of the rent paid by low-income tenants.

In their suit against respondent, petitioners alleged that respondent had overcharged them for their utilities by failing to comply with the applicable HUD regulations in establishing the amount of utility service to which petitioners were entitled. Thus, according to petitioners, respondent imposed a surcharge for “excess” utility consumption that should have been part of petitioners’ rent and deprived them of their statutory right to pay only the prescribed maximum portion of their income as rent. The District Court granted summary judgment for respondent on petitioners’ § 1983 claim, holding that a private cause of action was unavailable to enforce the Brooke Amendment. The Court of Appeals for the Fourth Circuit affirmed. Relying primarily on two of its earlier decisions, Perry v. Housing Authority of Charleston, 664 F. 2d 1210 (1981), and Phelps v. Housing Authority of Woodruff, 742 F. 2d 816 (1984), the Court of Appeals held that while the Brooke Amendment confers certain rights on tenants, these rights are enforceable only by HUD, not by the individual tenant: “[T]he situation is very analogous to the one in which a trustee [that is, HUD], not the cestui que trust, must bring suit.” 771 F. 2d, at 836.

h-I I — (

Maine v. Thiboutot, 448 U. S. 1 (1980), held that §1983 was available to enforce violations of federal statutes by agents of the State. Pennhurst State School and Hospital v. Halderman, 451 U. S. 1 (1981), and Middlesex County Sewerage Authority v. National Sea Clammers Assn., 453 U. S. 1 (1981), however, recognized two exceptions to the application of § 1983 to remedy statutory violations: where Congress has foreclosed such enforcement of the statute in the enactment itself and where the statute did not create enforceable rights, privileges, or immupities within the meaning of § 1983. In Pennhurst, a § 1983 action did not lie because the statutory provisions were thought to be only statements of “findings” indicating no more than a congressional preference — at most a “nudge in the preferred direc-tio[n],” 451 U. S., at 19, and not intended to rise to the level of an enforceable right. In Sea Clammers, an intent to foreclose resort to § 1983 was found in the comprehensive remedial scheme provided by Congress, a scheme that itself provided for private actions and left no room for additional private remedies under § 1983. Similarly, Smith v. Robinson, 468 U. S. 992, 1012 (1984), held that allowing a plaintiff to circumvent the Education of the Handicapped Act’s administrative remedies would be inconsistent with Congress’ carefully tailored scheme, which itself allowed private parties to seek remedies for violating federal law. Under these cases, if there is a state deprivation of a “right” secured by a federal statute, § 1983 provides a remedial cause of action unless the state actor demonstrates by express provision or other specific evidence from the statute itself that Congress intended to foreclose such private enforcement. “We do not lightly conclude that Congress intended to preclude reliance on § 1983 as a remedy” for the deprivation of a federally secured right. Ibid.

Here, the Court of Appeals held that the statute and the Brooke Amendment clearly manifested congressional intention to vest in HUD the exclusive power to enforce the benefits due housing project tenants and hence the intention to foreclose both a private cause of action under the Housing Act and any private enforcement under § 1983. For the Court of Appeals, the barrier was not the lack of statutory right or its quality or enforceability — “the plaintiffs under 42 U. S. C. § 1437a have certain rights,” 771 F. 2d, at 837 — but the fact that Congress had not intended tenants to have the authority themselves to sue: “HUD alone may, as quasi trustee, take legal action, for the right is explicitly tailored not to allow the beneficiaries, the low cost housing tenants, to do so.” Ibid.

We disagree with the Court of Appeals’ rather summary conclusion that the administrative scheme of enforcement foreclosed private enforcement. The Court of Appeals merely relied on one of its prior cases which had referred to HUD’s authority to enforce the annual contributions contracts between PHA’s and HUD, see 42 U. S. C. § 1437c, to conduct audits and to cut off funds. HUD undoubtedly has considerable authority to oversee the operation of the PHA’s. We are unconvinced, however, that respondent has overcome its burden of showing that “the remedial devices provided in [the Housing Act] are sufficiently comprehensive ... to demonstrate congressional intent to preclude the remedy of suits under § 1983.” Sea Clammers, supra, at 20. They do not show that “Congress specifically foreclosed a remedy under § 1983.” Smith v. Robinson, supra, at 1004-1005, n. 9. Not only are the Brooke Amendment and its legislative history devoid of any express indication that exclusive enforcement authority was vested in HUD, but there have also been both congressional and agency actions indicating that enforcement authority is not centralized and that private actions were anticipated. Neither, in our view, are the remedial mechanisms provided sufficiently comprehensive and effective to raise a clear inference that Congress intended to foreclose a §1983 cause of action for the enforcement of tenants’ rights secured by federal law.

In 1981, Congress changed the maximum percentage of income' that could be paid as “rent” from 25 percent to 30 percent. Omnibus Budget Reconciliation Act of 1981, Pub. L. 97-35, § 322, 95 Stat. 400. In making this change, Congress gave the Secretary of HUD discretion to raise tenants’ rent incrementally over a 5-year period to ease the burden on low-income tenants during the transition. § 322(i), 95 Stat. 404. To avoid a potential multitude of litigation over the way in which the Secretary implemented the phased-in rate increase, Congress specifically made the Secretary’s decisions effectuating the phase-in immune from judicial review. § 322(i)(3). At congressional hearings in which this specific and limited exception to judicial review was discussed, HUD representatives explained that this exception had no effect on tenants’ ability to enforce their rights under the Housing Act in federal court other than the limited exception concerning the phase-in. Apparently dissatisfied with even a temporary preclusion of judicial review, Congress repealed it two years later. Pub. L. 98-181, § 206(e), 97 Stat. 1181.

Also at odds with the holding that HUD has exclusive authority to enforce the Brooke Amendment is the enactment in 1985 of 42 U. S. C. § 1437d(k) (1982 ed., Supp. Ill), which directed HUD to continue its longstanding regulatory requirement that each PHA provide formal grievance, procedures for the resolution of tenant disputes with the PHA arising out of their lease or PHA regulations. These procedures, which Congress ordered continued, include informal and formal hearings and administrative appeals, conducted within each PHA by impartial decisionmakers, to consider adverse decisions taken against tenants by the PHA. Congress’ aim was to provide a “decentralized, informal, and relatively non-adversarial administrative process” for resolving tenant-management disputes. Samuels v. District of Columbia, 248 U. S. App. D. C. 128, 133, 770 F. 2d 184, 189 (1985). The procedures are open to individual grievances but not to class actions. See 24 CFR § 966.51(b) (1986). HUD itself has never provided a procedure by which tenants could complain to it about the alleged failures of PHA’s to abide by their annual contribution contracts, the Brooke Amendment, or HUD regulations; nor has it taken unto itself the task of reviewing PHA grievance procedure decisions. Moreover, § 966.57(c) of HUD’s grievance procedure regulations provides that a decision terminating a grievance proceeding shall in no way affect the rights of a tenant either to seek “trial de novo or judicial review in any judicial proceedings, which may thereafter be brought in the matter. ” HUD thus had no thought that its own supervisory powers or the grievance system that it had established foreclosed resort to the courts by tenants who claimed that a PHA was not observing the commands of the Brooke Amendment.

There is other evidence clearly indicating that in HUD’s view tenants have the right to bring suit in federal court to challenge housing authorities’ calculations of utility allowances. Among HUD’s 1982 proposed regulations was § 865.476(d), 47 Fed. Reg. 35249, 35254 (1982), which would have confined tenant utility-allowance challenges to the procedures available in state court. The final regulation, however, contained no such limitation and contemplated that tenants could challenge PHA actions in federal as well as state courts. 24 CFR § 965.473(e) (1985). As the comment accompanying the final regulation explained, the proposal to limit challenges to state-court actions had been abandoned. The final “provision does not preclude Federal court review.” 49 Fed. Reg. 31403 (1984). HUD’s opinion as to available tenant remedies under the Housing Act is entitled to some deference by this Court. See Jean v. Nelson, 472 U. S. 846, 865 (1985); Chevron U. S. A. Inc. v. Natural Resources Defense Council, Inc., 467 U. S. 837, 844 (1984).

In both Sea Clammers and Smith v. Robinson, the statutes at issue themselves provided for private judicial remedies, thereby evidencing congressional intent to supplant the § 1983 remedy. There is nothing of that kind found in the Brooke Amendment or elsewhere in the Housing Act. Indeed, the only private remedy provided for is the local grievance procedures which the Act now requires. These procedures are not open to class grievances; and even if tenants may grieve about a PHA’s utility allowance schedule, which petitioners dispute, the existence of a state administrative remedy does not ordinarily foreclose resort to § 1983. See Patsy v. Board of Regents of Florida, 457 U. S. 496, 516 (1982).

The Court of Appeals and respondents rely on HUD’s authority to audit, enforce annual contributions contracts, and cut off federal funds. But these generalized powers are insufficient to indicate a congressional intention to foreclose § 1983 remedies. Cf. Cannon v. University of Chicago, 441 U. S. 677, 704-707 (1979); Rosado v. Wyman, 397 U. S. 397, 420 (1970). HUD has the authority to audit, but it does not do so frequently and its own Handbook requires audits only every eight years. There are no other mechanisms provided to enable HUD to effectively oversee the performance of the some 3,000 local PHA’s across the country. The statute does not require and HUD has not provided any formal procedure for tenants to bring to HUD’s attention alleged PHA failures to abide by the Brooke Amendment and HUD regulations. Hence, there will be little occasion to exercise HUD’s power to sue PHA’s to enforce the provisions of the annual contributions contracts. Respondent asserts PHA’s must annually file their utility allowance schedules with HUD and that HUD must approve them, but the final regulations eliminated HUD’s duty to approve these schedules before their effective date. 24 CFR § 965.473(d) (1986). Review of the schedules would be done in the course of audits or reviews of PHA operations.

Lastly, it is said that tenants may sue on their lease in state courts and enforce their Brooke Amendment rights in that litigation. Perhaps they could, but the state-court remedy is hardly a reason to bar an action under § 1983, which was adopted to provide a federal remedy for the enforcement of federal rights.

In sum, we conclude that nothing in the Housing Act or the Brooke Amendment evidences that Congress intended to preclude petitioners’ § 1983 claim against respondent.

HH HH I — I

Although the Court of Appeals read the Brooke Amendment as extending to housing project tenants certain rights enforceable only by HUD, respondent asserts that neither the Brooke Amendment nor the interim regulations gave the tenants any specific or definable rights to utilities, that is, no enforceable rights within the meaning of § 1983. We perceive little substance in this claim. The Brooke Amendment could not be clearer: as further amended in 1981, tenants could be charged as rent no more and no less than 30 percent of their income. This was a mandatory limitation focusing on the individual family and its income. The intent to benefit tenants is undeniable. Nor is there any question that HUD interim regulations, in effect when this suit began, expressly required that a “reasonable” amount for utilities be included in rent that a PHA was allowed to charge, an interpretation to which HUD has adhered both before and after the adoption of the Brooke Amendment. HUD’s view is entitled to deference as a valid interpretation of the statute, and Congress in the course of amending that provision has not disagreed with it.

Respondent nevertheless asserts that the provision for a “reasonable” allowance for utilities is too vague and amorphous to confer on tenants an enforceable “right” within the meaning of § 1983 and that the whole matter of utility allowances must be left to the discretion of the PHA, subject to supervision by HUD. The regulations, however, defining the statutory concept of “rent” as including utilities, have the force of law, Chrysler Corp. v. Brown, 441 U. S. 281, 294-295 (1979), they specifically set out guidelines that the PHAs were to follow in establishing utility allowances, and they require notice to tenants and an opportunity to comment on proposed allowances. In our view, the benefits Congress intended to confer on tenants are sufficiently specific and definite to qualify as enforceable rights under Pennhurst and § 1983, rights that are not, as respondent suggests, beyond the competence of the judiciary to enforce.

The judgment of the Court of Appeals is accordingly

Reversed.

Justice O’Connor,

with whom The Chief Justice, Justice Powell, and Justice Scalia join, dissenting.

As the Court’s opinion acknowledges, there must be a deprivation “of a ‘right’ secured by a federal statute” before 42 U. S. C. § 1983 provides a remedial cause of action. Ante, at 423. Petitioners’ claim of a federally enforceable “right” raises three distinct questions. The first question is whether the Brooke Amendment to the Public Housing Act of 1937, Pub. L. 91-152, §213, 83 Stat. 389 (1969), itself has created an enforceable right to utilities. The second is whether, in the absence of any indication of congressional intent to create a right to utilities, administrative regulations can create such a right. The third is whether, assuming administrative regulations alone could create a right enforceable in a § 1983 action, the regulations at issue in this case have established standards capable of judicial interpretation and application.

Whether a federal statute confers substantive rights is not an issue unique to § 1983 actions. In implied right of action cases, the Court also has asked, since Cort v. Ash, 422 U. S. 66, 78 (1975), whether “the statute create[s] a federal right in favor of the plaintiff.” In determining whether a statute creates enforceable rights, the “key to the inquiry is the intent of the Legislature.” Middlesex County Sewerage Authority v. National Sea Clammers Assn., 453 U. S. 1, 13 (1981). We have looked first to the statutory language, to determine whether it is “phrased in terms of the persons benefited,” Cannon v. University of Chicago, 441 U. S. 677, 692, n. 13 (1979), and is cast in mandatory rather than preca-tory terms. See Pennhurst State School and Hospital v. Halderman, 451 U. S. 1, 18 (1981). We then have reviewed the legislative history of the statute and other traditional aids of statutory interpretation to determine congressional intent to create enforceable rights. See Sea Clammers, supra, at 13.

Petitioners in this case assert that the Brooke Amendment creates an enforceable right to have “reasonable utilities” included in the limitation on the “rent” they may be charged by a public housing authority (PHA). The Brooke Amendment, as amended, Pub. L. 97-35, § 322, 95 Stat. 400, provides that a low-income family “shall pay as rent” a specified percentage of its monthly income for publicly assisted housing. The Court concludes that the statute’s language satisfies the standards we have used in ascertaining an intent to create substantive rights: it is phrased in mandatory and not merely precatory terms, and it places an unmistakable focus on the benefited class. Ante, at 430. The statute also is phrased using right-creating language rather than being framed “simply as a general prohibition or a command to a federal agency.” University Research Assn. v. Coutu, 450 U. S. 754, 772 (1981).

Assuming, as the Court finds, that Congress intended to create an enforceable right to a limitation on the amount PHA’s may charge “as rent,” the question remains whether petitioners’ claim to reasonable utilities comes within the scope of the right that Congress intended to confer. On the face of the statute, there is nothing to suggest that Congress intended that utilities be included within the statutory entitlement. “Rent” in ordinary usage simply means consideration paid for the use or occupation of property, and the statute does not suggest congressional intent to adopt a broader construction of the term.

The legislative history of the Brooke Amendment, far from indicating an intent to create a statutory right to utilities, shows that Congress was presented with, and ultimately rejected, a proposal to create an enforceable right to “reasonable utilities.” As originally reported out of the Senate, Senator Brooke’s bill enumerated a range of shelter costs in addition to “rent” that were to be subject to the statutory rent limit. The Senate bill provided that the term “rental” was to include “the proportionate share attributable to the unit of the total shelter costs to be borne by the tenants in a low-rent housing project, including any separate charges to a tenant for reasonable utility use and for public services and facilities.” 115 Cong. Rec. 26726 (1969) (emphasis added). In the bill reported out of Conference, however, this reference to utilities was deleted. The Conference Report stated that the substitute bill “retain[ed] the basic concept” of the Senate bill by “generally limiting rents that may be charged to no more than 25% of [the tenant’s] income,” but it included no reference to the utilities charges provided for in the Senate bill. See H. R. Conf. Rep. No. 91-740, p. 30 (1969). In adopting the Brooke Amendment, therefore, Congress deliberately refrained from including “charges to a tenant for reasonable utility use and for public services and facilities” within the statutory entitlement.

The Court does not find that the statute’s language or legislative history supports its conclusion that Congress intended to create a statutory entitlement to reasonable utilities. Instead, the Court concludes that the Department of Housing and Urban Development (HUD) has so interpreted the statute, and that “HUD’s view is entitled to deference as a valid interpretation” of the Brooke Amendment. Ante, at 430. In my view, HUD’s treatment of utilities since enactment of the Brooke Amendment will not bear the construction that the Court places upon it. Before passage of the Brooke Amendment, HUD’s Local Housing Authority Management Handbook, pt. 2, § 9, Controlling Utility Consumption and Costs (1963), which provided guidelines for PHA’s to use in calculating utility allowances, had established “no mandatory Federal standards, leaving the establishment of Allowances entirely to local discretion.” 45 Fed. Reg. 59502 (1980). After enactment of the Brooke Amendment, HUD did not immediately promulgate new regulations fixing the amount of utilities that should be provided under the statute. Instead, the Handbook remained in effect for the next 11 years, until 1980, with the PHA’s retaining complete discretion in the establishment of utilities allowances. Thus, HUD viewed the amount of utilities to be included under the Brooke Amendment’s rental limitation as a question for local housing authorities — it was not a matter of federal entitlement.

The 1980 interim regulations on which petitioners rely do not reflect a different understanding on the part of the agency. The reason given for adopting a uniform federal rule was administrative: it would be in “the best interests of the program” because it would “alleviate confusion and controversy” arising under the nonmandatory regime. 45 Fed. Reg. 59502 (1980). Noting that “many PHAs have been establishing utility allowances based on the HUD Guide,” the agency sought to develop a uniform standard following “the general concepts” of the 1963 Handbook. Ibid. However, the uniform standards promulgated in the interim regulations came under severe criticism, see 47 Fed. Reg. 35249, 35250 (1982), and, less than two years after adoption of the interim regulations, HUD enacted proposed regulations designed to return “broad administrative latitude” to the PHA’s in setting utility allowances. See id., at 35252. The proposed regulations retained a general standard of “reasonable consumption of utilities by an energy-conservative household of modest circumstances consistent with the requirements of a safe, sanitary, and healthful living environment.” Id., at 35251. In light of HUD’s experience with the interim regulations, however, HUD deemed it “inadvisable” to “attempt to prescribe more restrictively the means by which individual PHAs must realize the general standards for allowances described above.” Id., at 35251-35252. HUD also indicated that the mandatory standards in the interim regulations may have been “inconsistent with the general imperative of the United States Housing Act of 1937, to Vest in local public housing agencies the maximum amount of responsibility in the administration of their housing program.’” Id., at 35252.

In 1984, HUD enacted its final utilities regulations, which follow the approach of the proposed regulations and replace the more specific requirements of the interim regulations with a “reasonable utilities” standard. In establishing allowances, PHA’s should consider a host of factors such as climatic location; air temperature to be maintained in the dwelling unit; the temperature of domestic hot water measured at the tap; and the physical condition of the housing project. See 24 CFR § 965.476(d) (1986). Apart from these general guidelines, the regulations “ves[t] full responsibility for setting and revising allowances in accordance with the prescribed standards in the [PHA’s].” 49 Fed. Reg. 31399, 31400 (1984). Thus, HUD currently chooses to give the PHA’s wide discretion in setting utilities allowances; from 1980-1984, it gave the PHA’s somewhat less discretion; and from 1969-1980, it left the issue entirely in the hands of the PHA’s. The reasons HUD has given for these changes are ministerial, not interpretive. HUD’s treatment of utilities since enactment of the Brooke Amendment shows that the agency does not view the statute as creating an enforceable right to an ascertainable amount of utilities: the degree to which utilities are fixed by regulation has been a matter of agency discretion, not statutory entitlement.

In the absence of any indication in the language, legislative history, or administrative interpretation of the Brooke Amendment that Congress intended to create an enforceable right to utilities, it is necessary to ask whether administrative regulations alone could create such a right. This is a troubling issue not briefed by the parties, and I do not attempt to resolve it here. The Court’s questionable reasoning that, because for four years HUD gave somewhat less discretion to the PHA’s in setting reasonable utilities allowances, HUD understood Congress to have required enforceable utility standards, apparently allows it to sidestep the question. I am concerned, however, that lurking behind the Court’s analysis may be the view that, once it has been found that a statute creates some enforceable right, any regulation adopted within the purview of the statute creates rights enforceable in federal courts, regardless of whether Congress or the promulgating agency ever contemplated such a result. Thus, HUD’s frequently changing views on how best to administer the provision of utilities to public housing tenants becomes the focal point for the creation and extinguishment of federal “rights.” Such a result, where determination of § 1983 “rights” has been unleashed from any connection to congressional intent, is troubling indeed.

Even assuming that agency regulations of the sort at issue here could create rights enforceable in a § 1983 action, the temporary regulations involved in this case are not capable of judicial enforcement. The provisions remained subject to the exercise of wide discretion by the local housing authorities, thereby rendering it difficult or impossible to determine whether a violation occurred. Moreover, the regulations were cast as overall standards rather than as a method for determining the utilities rates for particular tenants, making it impossible to fashion appropriate relief for individual plaintiffs. Thus, under the interim regulations PHAs were to establish allowances which could “reasonably be expected” to meet the requirements of “about 90%” of the dwelling units in a particular “dwelling unit category.” In making this calculation, the housing authorities were to exclude from consideration cases of “unusual individual circumstances,” “wasteful practices,” or use of major appliances. Adjustments also could be made, “if warranted,” for “abnormal weather conditions or other changes in circumstances affecting utility consumption.” See 24 CFR §865.477 (1981). The housing authorities were to revise their utility allowances if more than 25% of the tenants in a particular dwelling unit category were being surcharged, if there was “no reason of a non-recurring nature (such as weather extremes) to account for this” and if it was otherwise “appropriate.” § 865.480(b). Provisions such as these, which provide no basis for calculating an individual tenant’s utility allowance or for providing a remedy if there is a violation, simply defy judicial enforcement.

The Court’s only response to the legislative and regulatory history of the utility regulations is to suggest that other actions taken by Congress and HUD show that they were of the view that low-income tenants could resort to federal courts when claiming that a PHA violated the utility regulations. See ante, at 424-427, 480, n. 11. That is simply not the case. The three actions by Congress and HUD identified in the Court’s opinion are the congressional hearings preceding the Omnibus Budget Reconciliation Act of 1981, Pub. L. 97-35, §322, 95 Stat. 400; the 1985 enactment of 42 U. S. C. §1437d(k) (1982 ed., Supp. Ill) and HUD’s implementing regulations, 24 CFR §966.50 et seq. (1986); and HUD’s comments accompanying its final utilities regulations, 49 Fed. Reg. 31399 (1984). The hearings preceding the 1981 Act merely address the effect of that legislation on tenants’ general ability to enforce their rights under the Housing Act; they provide no assistance in determining whether those rights include reasonable utilities. As for the enactment of §1437d(k), HUD has consistently taken the view, as the Court acknowledges, that “the grievance mechanism is not available for challenges to the general utility allowance schedules.” Ante, at 427, n. 8. HUD’s comments in 1986 in connection with proposing new grievance hearing regulations do not suggest that HUD believes low-income tenants have an enforceable right to reasonable utilities:

“PHA action or non-action concerning general policy issues or class grievances (including determination of the PHA’s schedules of allowances for PHA-furnished utilities or of allowances for Tenant-purchased utilities) does not constitute adverse action by the PHA, and the PHA is not required to provide the opportunity for a hearing to consider such issues or grievances.” 51 Fed. Reg. 26528 (1986).

Moreover, HUD’s. proposed utilities regulations in 1982 stated that a PHA’s determination of utilities allowances was subject to review “pursuant to such procedures as may be available under State or local law.” 47 Fed. Reg. 35249, 35254. In 1984, responding to comments challenging its “power ... to divest Federal courts of jurisdiction,” 49 Fed. Reg. 31399, 31403, HUD amended the provision to state that PHA allowance determinations are valid unless found to be arbitrary, capricious, an abuse of discretion, “or otherwise not in accordance with law.” 24 CFR § 965.473(e) (1986). The agency’s explanation for this change was that “the Department’s power to preclude access to Federal court is doubtful.” 49 Fed. Reg. 31403 (1984). Thus, HUD did not express the view that there is a right to reasonable utilities enforceable in federal courts; it simply recognized that it lacked authority to determine federal jurisdiction. Indeed, the regulations indicate that while it did not have the authority finally to resolve the question, HUD viewed utilities determinations as a matter for state rather than federal courts.

In my view, petitioners do have a remedy in seeking to secure utilities from respondent: they may sue on their leases. Pursuant to its authority to ensure the lower rental character of publicly assisted housing, see 42 U. S. C. §§ 1437c and 1437d (1982 ed. and Supp. III), HUD requires PHA’s to set forth in their leases that they will “supply running water and reasonable amounts of hot water and reasonable amounts of heat at appropriate times of the year (according to local custom and usage),” 24 CFR § 966.4(e)(7) (1986), and will “maintain in good and safe working order and condition electrical, plumbing, sanitary, heating, ventilating, and other facilities and appliances, including elevators, supplied or required to be supplied by the PHA.” § 966.4(e)(5). HUD has developed a standard lease reflecting these requirements, see HUD Circular RHM 7465.8 (Feb. 22, 1971), which respondent’s leases closely follow. Thus, respondent is contractually obligated to furnish, “as reasonably necessary,” “hot and cold water, gas for cooking, and electricity for lighting and general household appliances and heat at appropriate times of the year, and also range and refrigerator.” If respondent fails to fulfill these obligations, petitioners may, like any other tenants, bring suit for breach of contract.

For the reasons given above, however, in my view petitioners do not also have a statutory entitlement enforceable in federal courts by virtue of 42 U. S. C. § 1983. Neither the Brooke Amendment’s language, nor its legislative history, nor its interpretation by HUD supports the conclusion that Congress intended to create an entitlement to reasonable utilities when it enacted the statute; and even if agency regulations, standing alone, could create such a right, the temporary regulations relied upon by petitioners in this case are not susceptible of judicial enforcement. On that basis, I believe that the judgment of the Court of Appeals for the Fourth Circuit should be affirmed. Accordingly, I respectfully dissent.

       “[42 U. S. C.] § 1983. Civil action for deprivation of rights:
      “Every person who, under color of any statute, ordinance, regulation, custom, or usage, of any State or Territory, subjects, or causes to be subjected, any citizen of the United States or other person within the jurisdiction thereof to the deprivation of any rights, privileges, or immunities secured by the Constitution and laws, shall be liable to the party injured in an action at law, suit in equity, or other proper proceeding for redress.”

       The Brooke Amendment in its present form reads as follows:
      “§ 1437a. Rental payments
      “(a) Families included; amount
      “Dwelling units assisted under this chapter shall be rented only to families who are lower income families at the time of their initial occupancy of such units. Reviews of family income shall be made at least annually. A family shall pay as rent for a dwelling unit assisted under this chapter (other than a family assisted under section 1437f(o) of this title) the highest of the following amounts, rounded to the nearest dollar:
      “(1) 30 per centum of the family’s monthly adjusted income;
      “(2) 10 per centum of the family’s monthly income; or
      “(3) if the family is receiving payments for welfare assistance from a public agency and a part of such payments, adjusted in accordance with the family’s actual housing costs, is specifically designated by such agency to meet the family’s housing costs, the portion of such payments which is so designated.” 42 U. S. C. § 1437a (1982 ed. and Supp. III).
      The language of the original Brooke Amendment required that low-income tenant’s rent “may not exceed one-fourth of the family’s income, as defined by the Secretary.”

       The complaint was filed December 8, 1982. The regulations in effect at that time defined “contract rent,” that is, the amount actually charged to low-income tenants, as follows:
      “Contract rent means the rent charged a tenant for the use of the dwelling accommodation and equipment (such as ranges and refrigerators but not including furniture), services, and reasonable amounts of utilities determined in accordance with the PHA’s [public housing authority’s] schedule of allowances for utilities supplied by the project. Contract rent does not include charges for utility consumption in excess of the public housing agency’s schedule of allowances for utility consumption, or other miscellaneous charges . . . .” 24 CFR § 860.403 (1982).
      The relevant regulations were originally promulgated as an interim rule on September 9,1980. 45 Fed. Reg. 59502 (1980). As there noted, HUD had previously regulated the way in which utility charges were dealt with in HUD’s Local Housing Authority Management Handbook, pt. 2, §9, Controlling Utility Consumption and Costs (1963). Ibid. On August 13, 1982, HUD published a proposed rule to amend the interim regulations, commenting as follows with respect to the inclusion of utilities in the calculation of rent:
      “In administering the low-income public housing program under the United States Housing Act of 1937, as amended, HUD historically has considered ‘rent’ to include shelter cost plus a reasonable amount for utilities. As a result, even prior to adoption of the ‘Brooke Amendment’ in 1969 (limiting the amount of ‘rent’ chargeable to public housing tenants to a stated percentage of income, then 25 percent), HUD provided for a system under which allowances were established as part of the rent schedule showing the amounts of electricity in kilowatt-hours to which tenants were entitled.” 47 Fed. Reg. 35249-35250 (1982).
      The regulation was finally amended on August 7, 1984. 49 Fed. Reg. 31399 (1984). The Supplementary Information section of the published regulation contains a discussion which underscores the fact that HUD has traditionally treated “rent” to include a reasonable amount of utility usage. Id., at 31400. That section also provides an overview of the development of the utility regulations at issue here.
      The dissent may have a different view, but to us it is clear that the regulations gave low-income tenants an enforceable right to a reasonable utility allowance and that the regulations were fully authorized by the statute.

       The applicable regulations, 24 CFR §865.470 et seq. (1983), require housing authorities like respondent to, inter alia, recalculate their utility allowances on the basis of current data, to set the allowances in such a fashion that 90 percent of a particular authority’s dwelling units do not pay surcharges, and to review tenant surcharges quarterly and consider revision of the allowances if more than 26 percent of any category of units are being surcharged.

       The complaint also contained a claim against respondent for breach of paragraph 4 of the standard lease agreement providing:
      “Utilities: Management Agent agrees to furnish at no charge to the Resident the following utilities as reasonably necessary: hot and cold water, gas for cooking, and electricity for lighting and general household appliances and heat at appropriate times of the year, and also range and refrigerator. Resident will be required to pay for all excess consumption of utilities above the monthly allocated amount as developed by the Authority and determined by the individual check meter servicing the leased unit. The schedule of allocations and charges for excess consumption is posted on the bulletin board of each Housing Development office.” Record, Exh. H.
      The original complaint asked for both injunctive relief and recovery of whatever amount respondent allegedly overcharged petitioners. Pursuant to new HUD regulations, respondent revised its allowances for reasonable utility use. Petitioners are now seeking only recovery of alleged past improper charges. Brief for Petitioners 8.
      Petitioners asserted that while their right to sue on the lease derives from state law, the lease claim is controlled by federal law and hence is within the jurisdiction of the federal courts under 28 U. S. C. § 1331.

       The court acknowledged that its conclusion that the Brooke Amendment created no enforceable rights in petitioners conflicted with the See-ond Circuit’s decision in Beckham v. New York City Housing Authority, 755 F. 2d 1074 (1985). The court stated, however, that this decision “must yield to the authority of Perry and Phelps, supra, from our own circuit.” 771 F. 2d, at 837, n. 8.

       In response to a question by Congressman Vento concerning the reason for the exception to judicial review, a representative of HUD explained that this limited exception had no effect on tenants’ ability to protect their rights other than limiting their right to challenge the Secretary’s actions in implementing the phase-in:
      “Mr. Vento. Well, has this been a special problem? Usually we don’t exempt people from going to the district court unless there has been some problem that has developed. Has there been that type of a problem in the past?
      “Mr. Hovde. I will call upon Mr. Hipps for a response.
      “Mr. Hipps. In direct answer to your question, yes, we have had a lot of litigation involving tenants rights over the past several years. The provision that you have raised a question about is addressed only at the 5-year phase in of the increase, and is not intended, as I understand, to eliminate any tenants rights beyond that point.” Hearings on Housing and Community Development Amendments before the Subcommittee on Housing and Community Development of the House Committee on Banking, Finance and Urban Affairs, 97th Cong., 1st Sess., pt. 1, p. 654 (1981).

       Petitioners assert that the grievance mechanism is not available for challenges to the general utility allowance schedules. They rely on HUD statements to this effect, the first in 1984 in connection with the issuance of formal regulations, 49 Fed. Reg. 31407:
      “Some legal services organizations recommended that grievance procedures should apply to the utility allowance provisions. Grievance procedures under former Part 866 (now Part 966) apply to individual, not class, grievances so that challenges to the general utility allowance schedules would be precluded. The Department believes that procedures to be followed on claims for individual relief under § 965.479 should be left to PHA determination.”
      The second statement by HUD was in connection with proposing new grievance hearing regulations in 1986, 51 Fed. Reg. 26528:
      “(a) Purpose of informal hearing. (1) The grievance procedure shall provide the Family an opportunity for an informal hearing to review proposed PHA adverse action. The purpose of the informal hearing shall be to review whether the proposed adverse action by the PHA is in accordance with, the lease, or with the law, HUD regulations or PHA rules.
      “(2) PHA action or non-action concerning general policy issues or class grievances (including determination of the PHA’s schedules of allowances for PHA-furnished utilities or of allowances for Tenant-purchased utilities) does not constitute adverse action by the PHA, and the PHA is not required to provide the opportunity for a hearing to consider such issues or grievances.”

       United States Dept, of Housing and Urban Development, Field Office Monitoring of Public Housing Agencies (PHAs) 6-1 (Handbook 7460.7, Rev. Sept. 9, 1985).

       HUD explained, 49 Fed. Reg. 31403 (1984), as follows:
      “In a related issue, legal service organizations expressed concern about the absence of any HUD review of the PHA’s allowance determination.
      “HUD’s regulatory reform goals include the removal of unnecessary reviews and approvals of actions by responsible parties having equal or greater information at hand. This is particularly appropriate in the case of public housing in view of the ’37 Act’s injunction that ‘[I]t is the policy of the United States to vest in the local public housing agencies the maximum amount of responsibility in the administration of their housing programs.’ 42 U. S. C. 1437. The Department believes that the definition of standards in § 965.476, combined with the record and notice provisions added to § 965.473, should adequately assure the reasonableness of PHA determinations so as to obviate the necessity or usefulness of HUD review and approval before implementation of PHA-determined allowances.”

       We thus reject respondent’s argument that the Brooke Amendment’s rent ceiling applies only to the charge for shelter and that the HUD definition of rent as including a reasonable charge for utilities is not authorized by the statute.
      The dissent misconstrues our discussion of the Omnibus Budget Reconciliation Act of 1981 and the enactment of the grievance procedures as codified at 42 U. S. C. § 1437d(k) (1982 ed., Supp. III). Our conclusion that low-income tenants have a right to a reasonable amount of utilities does not come from these two congressional Acts. Rather, these Acts and their history show that Congress did not close the courthouse door to low-income tenants by establishing an alternative enforcement mechanism.
      The dissent is also quite wrong in concluding that HUD’s “regulations indicate that while it did not have the authority finally to resolve the question, HUD viewed utilities determinations as a matter for state rather than federal courts.” Post, at 440. It is true that the 1982 proposed regulations would have confined review of PHA utility allowances to state forums, but it was never indicated that the governing law was state rather than federal law; and in the final regulations, even the provision making PHA determinations final unless overturned in state courts was deleted. HUD thus abandoned any attempt to foreclose resort to federal courts and surely negated any conclusion that PHA determinations were not judicially re viewable. The Supplemental Information section to HUD’s final regulations contains the following revealing discussion, 49 Fed. Reg. 31403 (1984):

        “C. Review of PHA Decisions by State Courts

      “The National Housing Law Project and other legal service groups challenged, as illegal, proposed § 865.476(d) which would make PHA determinations of allowances and revisions thereof final unless found, upon review pursuant to such procedures as may be available under State or local law, to be arbitrary or capricious.
      “The commenters challenged HUD’s power .(1) to prescribe a standard of review for State courts, and (2) to divest Federal court of jurisdiction over cases involving questions of compliance with Federal statutes and regulations.
      “State procedures for review of actions by administrative bodies created under State law frequently have provided a forum for review of agency determinations that involve questions of Federal law. Such State law proceedings may be more accessible to public housing tenants in some localities than a Federal court. Moreover, the Department believes that State courts are fully competent to review determinations by authorities created under State law.
      “Nevertheless, the Department also recognizes that some plaintiffs may prefer to challenge PHA determinations in Federal rather than State court and that the Department’s power to preclude access to Federal court is doubtful. The Department also recognizes that not all States may have adopted procedures providing for judicial review of administrative action. Accordingly, this provision (transferred to § 965.473(e)) has been revised (i) to expand the standard of review to ‘arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law’ (compare Section 706 of the Administrative Procedure Act, 5 U. S. C. 706(2)), and (ii) to state that such standard of review will govern ‘except where a different standard of review is applicable in review procedures governed by applicable State law.’ This provision does not preclude Federal court review.”

       Petitioners also argue that the District Court has subject-matter jurisdiction to consider their breach-of-lease claims given the federal nature of the rights contained in their leases. In light of our decision that petitioners have a § 1983 claim, the District Court can certainly exercise pendent jurisdiction over petitioners’ breach-of-lease claims. We offer no opinion as to whether the District Court has jurisdiction to consider only their breach-of-lease claims irrespective of their § 1983 claim.

       The interim regulations provided:
      “§ 865.477. Standards for allowances for PHA-furnished utilities.
      “The Allowances for PHA-Furnished Utilities for each dwelling unit category and unit size shall be established in terms of consumption units, sufficient to meet the requirements of about 90% of the dwelling units in the category. Conversely, the Allowances should be such as are likely to result in surcharges for about 10% of the dwelling units. The basic method of determining the Allowances should be as follows:
      “(a) The dwelling unit consumption data for all units within each dwelling unit category and unit size should be listed in order from low to high consumption for each billing period.
      “(b) The PHA should determine whether there are any unusually high instances of consumption which might be due to unusual individual eircum-stances,, wasteful practices, or use of the Utility for tenant-supplied major appliances. The PHA should exclude such cases from consideration in calculating the amount of the allowance.
      “(c) Where the available data covers two or more years, averages should be computed and adjustments made, if warranted, by reason of abnormal weather conditions or other changes in circumstances affecting utility consumption.
      “(d) The Allowances should then be established at the level which can reasonably be expected to meet the requirements of 90% of the dwelling units in the category.” 24 CFR § 865.477 (1981).

       Paragraph 4 of respondent’s standard lease provides:
      “Utilities: Management Agent agrees to furnish at no charge to the Resident the following utilities as reasonably necessary: hot and cold water, gas for cooking, and electricity for lighting and general household appliances and heat at appropriate times of the year, and also range and refrigerator. Resident will be required to pay for all excess consumption of utilities above the monthly allocated amount as developed by the Authority and determined by the individual check meter servicing the leased unit. The schedule of allocations and charges for excess consumption is posted on the bulletin board of each Housing Development office.” Record, Exh. H.


author: Chief Justice Rehnquist

text:
    JERSEY SHORE STATE BANK v. UNITED STATES
    No. 85-1736.
    Argued December 8, 1986
    Decided January 20, 1987

      Rehnquist, C. J., delivered the opinion for a unanimous Court.

      Martin A. Flayhart argued the cause and filed briefs for petitioner.

      Alan I. Horowitz argued the cause for the United States. With him on the brief were Solicitor General Fried, Assistant Attorney General Olsen, Deputy Solicitor General Lau-ber, Wynette J. Hewett, and Bruce R. Ellisen.

      Briefs of amici curiae urging reversal were filed for First Alabama Bank by Brock B. Gordon and Alan C. Christian; and for the American Bankers Association by John J. Gill III and Michael F. Crotty.

   Chief Justice Rehnquist

delivered the opinion of the Court.

Subtitle C of the Internal Revenue Code of 1954, 26 U. S. C. § 3101 et seq. (Code), imposes a number of employment taxes, among which are the income tax withheld from an employee’s wages and the Social Security tax. The Code divides the burden of the Social Security tax between the employer and the employee, but imposes the income tax on the employee alone. The employer has responsibility, however, for both paying its share of the Social Security tax and withholding from the employee’s wages the income tax and the employee’s share of the Social Security tax. If the employer fails to pay over the withheld Social Security and income taxes to the Government, the employer is liable for their payment. Within 60 days of making an assessment of unpaid taxes against an employer, the Government is required, under § 6303(a) of the Code, to provide the employer with notice of the assessment and demand for payment. In some instances, a person other than the employer, such as a lender, may directly or indirectly pay the employee’s wages. Section 3505 of the Code provides that such a person may be personally liable if the employee’s Social Security and income taxes are not withheld and paid to the Government. This case presents the question whether § 6303(a) requires the Government to proyide notice and demand for payment to a lender before bringing a civil suit against the lender to collect sums for which it is liable under § 3505. We hold that it does not.

The United States brought the present action against Jersey Shore State Bank in the United States District Court for the Middle District of Pennsylvania, seeking a determination that Jersey Shore was personally liable under §3505 for amounts reflecting unpaid taxes required to be withheld from the wages of the employees of Pennmount Industries. The Government claimed that Jersey Shore paid wages directly to Pennmount employees during the fourth quarter of 1977 through the first quarter of 1980, thereby making it liable under § 3505(a) for a sum equal to the full amount of the unpaid withholding taxes for that period. In the alternative, the complaint alleged that, for the same period, Jersey Shore supplied funds to Pennmount for the wages of Penn-mount employees “with actual notice and knowledge” that Pennmount “did not intend or would not be able to make timely payment or desposits [sic] of the . . . taxes required to be deducted and withheld” from the wages. App. to Pet. for Cert. 40a-41a. Based on this latter allegation, the Government asserted that Jersey Shore was liable under § 3505(b) for 25 percent of the amount of funds supplied to Pennmount.

The District Court granted summary judgment in favor of Jersey Shore, holding that § 6303(a) requires the Government to send notice of an assessment against an employer to a third-party lender liable under §3505. 628 F. Supp. 15 (MD Pa. 1985). Because the United States conceded that it had not provided Jersey Shore with notice of the assessments against Pennmount pursuant to § 6303(a), the court concluded that the suit against Jersey Shore was barred. The Court of Appeals for the Third Circuit reversed. 781 F. 2d 974 (1986). We granted certiorari to resolve the intercircuit conflict over the issue decided by the Court of Appeals. 476 U. S. 1157 (1986). We now affirm.

Section 6303(a) requires notice of an assessment to “each person liable for the unpaid tax.” According to Jersey Shore, this phrase clearly describes a third-party lender liable under §3505 for unpaid withholding taxes assessed against an employer. The relationship between § 3505 and § 6303(a), however, is not as clear as Jersey Shore maintains. Section 3505 does not declare that a lender is “liable for the unpaid tax.” Instead, the section imposes liability on the lender for all or part of “a sum equal to the taxes.” §§ 3505(a),(b).

Other portions of the text of § 6303(a) further demonstrate a lack of connection between that section and § 3505. Section 6303(a) not only provides that the Government shall give notice of an assessment “to each person liable for the unpaid tax,” but it also requires notice “stating the amount” assessed and “demanding payment thereof.” §6303(a). Notice complying with these latter two requirements may have little meaning for a third-party lender. In the first place, the assessment against the employer may include the employer’s share of unpaid Social Security taxes for which the lender is not liable. See § 3505; H. R. Rep. No. 1884, 89th Cong., 2d Sess., 21 (1966) (a lender “is not liable for the employer’s portion of payroll taxes”); S. Rep. No. 1708, 89th Cong., 2d Sess., 23 (1966) (same). Even where the assessment does not include such taxes, the lender’s liability could equal the amount stated in the notice only if the lender provided payroll financing throughout the time period reflected in the assessment. Moreover, the chances are slim that the notice amount would be accurate for lenders liable only under § 3505(b), which limits a lender’s exposure to 25 percent of the funds supplied to the employer. Accordingly, if sent to a lender, the notice required under § 6303(a) is likely to demand payment of an amount different from that for which the lender is liable. We find it improbable that Congress intended such a result. Reading the two sections together, we agree with the Court of Appeals that § 6303(a) is most logically read not to apply where the Government seeks to collect from a lender under § 3505.

In arguing to the contrary, Jersey Shore urges that it would be fundamentally unfair not to require the Government to provide lenders with § 6303(a) notice. Jersey Shore first maintains that, because employers and lenders are similarly situated under the Code, the procedural requirements applicable to employers also must be accorded to lenders. But even assuming that § 6303(a) notice would provide lenders with meaningful information, we are unpersuaded by this contention. Under the collection mechanism's established by the Code, employers and lenders are in very different positions. While employers are subject to the Government’s summary collection procedures soon after unpaid employment taxes are assessed, see, e. g., §§6321, 6322, 6331, 6335, the legislative history of § 3505 makes clear that the Government may forcibly collect against a lender only by filing a civil suit. See H. R. Rep. No. 1884, 89th Cong., 2d Sess., 66 (1966) (where a third-party does not voluntarily satisfy the liability imposed by §3505, “the United States may collect such liability by appropriate civil proceeding”). An employer therefore has a far greater need for an assessment notice than third-party lenders, who are not subject to summary collection procedures.

We also reject Jersey Shore’s related contention that a third-party lender is unfairly prejudiced by lack of an assessment notice because of the effect of an assessment on the statute of limitations for collection suits. Under the general rule set forth in § 6501(a), “the amount of any tax imposed . . . shall be assessed within 3 years after the return was filed . . . and no proceeding in court without assessment for the collection of such tax shall be begun after the expiration of such period. ” Nevertheless, where a proper assessment has been made, the unpaid tax generally “may be collected by levy or by a proceeding in court. . . begun. . . within 6 years after the assessment.” § 6502(a)(1). Under Jersey Shore’s reading of these provisions, the Government enjoys an additional 6-year limitations period for collecting against a lender if it makes an assessment against the employer within three years after the corresponding employment tax return is filed. Jersey Shore submits that Congress could not have intended the Government to benefit from this longer statute of limitations when it seeks to collect against a lender without also requiring the Government to provide the lender with notice of the assessment against the employer.

Assuming, without deciding, that Jersey Shore’s reading of the statute of limitations provisions is correct, we are not convinced that they render our construction of § 6303(a) implausible. A lender is not liable under §3505 unless it either “pays wages directly” to an employee or supplies funds for the wages with “actual notice or knowledge” that the employer is either unable to make timely payment of the required withholding taxes or has no intention of doing so. The lender is deemed to have such actual notice or knowledge from the time the lender, in the exercise of due diligence, would have been aware that the employer would not or could not make timely payment. § 6323(i)(l). Accordingly, a prudent lender could be alerted to its liability under § 3505 at the time it engaged in what the Government describes as “net payroll financing,” a practice whereby the lender provides funds for payment of employees’ net wages, but not funds for payment of withholding taxes. Thus, even without § 6303(a) notice, such a lender could take steps to protect itself against the possibility of a future §3505 suit. The Committee Reports concerning §3505 demonstrate that Congress considered precautions third parties could take to protect themselves:

“[S]ureties can protect themselves against any losses attributable to withholding taxes by including this risk of liability in establishing their premiums, and lenders by including the amounts in their loans and taking adequate security.” S. Rep. No. 1708, 89th Cong., 2d Sess., 23 (1966); H. R. Rep. No. 1884, 89th Cong., 2d Sess., 22 (1966).

As the Court of Appeals recognized, this passage suggests that “Congress envisioned a system in which third parties would take their potential liability under section 3505 into consideration at the time they entered into the transaction exposing them to liability under the statute.” 781 F. 2d, at 982.

For the foregoing reasons, we conclude that Congress did not intend to require the Government to provide a lender with notice under § 6303(a) before bringing a civil suit to collect under § 3505. The judgment of the Court of Appeals for the Third Circuit is therefore

Affirmed.

       Section 3506(a) provides, in pertinent part:
      “[I]f a lender, surety, or other person, who is not an employer . . . with respect to an employee,. . . pays wages directly to such an employee . . . , such lender, surety, or other person shall be liable in his own person and estate to the United States in a sum equal to the taxes (together with interest) required to be deducted and withheld . . . .”

       Section 350503) provides, in pertinent part:
      “If a lender, surety, or other person supplies funds to ... an employer for the specific purpose of paying wages of the employees of such employer, with actual notice or knowledge . . . that such employer does not intend to or will not be able to make timely payment or deposit of the amounts of tax required ... to be deducted and withheld by such employer . . . , such lender, surety, or other person shall be liable in his own person and estate to the United States in a sum equal to the taxes (together with interest) which are not paid over to the United States by such employer. However, . . . the liability of such lender, surety, or other person shall be limited to an amount equal to 25 percent of the amount so supplied to . . . such employer for such purpose.”

       Section 6303(a) provides, in pertinent part:
      “Where it is not otherwise provided by this title, the Secretary shall, as soon as practicable, and within 60 days, after the making of an assessment of a tax pursuant to section 6203, give notice to each person liable for the unpaid tax, stating the amount and demanding payment thereof.”

       One judge dissented from the majority opinion, arguing that the plain language of § 6303(a) required that the Government provide notice to the lender.

       In addition to the Court of Appeals for the Third Circuit, four other Circuits have addressed whether the Government must provide § 6303(a) notice to third parties liable under § 3506. See United States v. Messina Builders & Contractors Co., 801 F. 2d 1029 (CA8 1986) (§ 6303(a) notice required), cert. pending, No. 86-1007; United States v. Hunter Engineers & Constructors, Inc., 789 F. 2d 1436 (CA9 1986) (§ 6303(a) notice not required), cert. pending, No. 86-209; United States v. Merchants National Bank of Mobile, 772 F. 2d 1522 (CA11 1985) (§ 6303(a) notice required), cert. pending, No. 85-1480; United States v. Associates Commercial Corp., 721 F. 2d 1094 (CA7 1983) (§ 6303(a) notice required); see also United States v. Friedman, 739 F. 2d 252 (CA7 1984) (failure to provide notice within 60 days of assessment will not bar suit where Government has provided notice before assessment to person liable under § 3505).

       Jersey Shore argues that this passage does not relate to §3505, but instead refers only to an amendment to the Miller Act concerning the requirements for performance bonds on public works. It is true that the passage appears in each Committee Report under subheadings referencing the Miller Act. In both Reports, however, the passage immediately follows a discussion of lenders, sureties, and other persons liable under § 3505 and is prefaced with the phrase “[i]n the cases discussed above.” Thus, the context of the passage makes clear that it relates to § 3505.


author: Justice Stevens

text:
    INTERSTATE COMMERCE COMMISSION v. TEXAS et al.
    No. 85-1222.
    Argued December 10, 1986
    Decided January 20, 1987

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

      Richard G. Taranto argued the cause for petitioner in No. 85-1222. With him on the briefs were Solicitor General Fried, Deputy Solicitor General Cohen, Robert H. Klonoff, Robert S. Burk, Henri F. Rush, and H. Glenn Scammel. Michael E. Roper argued the cause for petitioners in No. 85-1267. With him on the briefs were Robert B. Batchelder and Hugh L. McCulley. ■

      Fernando Rodriguez, Assistant Attorney General of Texas, argued the cause for respondents. With him on the brief were Mary F. Keller, Executive Assistant Attorney General, Larry J. Laurent, Special Assistant Attorney General, and Douglas Fraser, Assistant Attorney General.

      Together with No. 85-1267, Missouri-Kansas-Texas Railroad Co. et al. v. Texas et al., also on certiorari to the same court.

   Justice Stevens

delivered the opinion of the Court.

Trailer-on-flatcar (TOFC or “piggyback”) service, a form of mixed train and truck transportation, enables a carrier to transport a trailer and its contents over rail on a flatcar and then to haul the trailer on the highway. The goods need not be unloaded and reloaded when they move from the rail mode to the truck mode; the shipment remains within the trailer or container during the entire journey. Various forms of TOFC and container-on-flatcar (COFC) service have been offered to the public by railroads, motor carriers, and freight forwarders since the 1930’s. These cases concern the extent of the State of Texas’ jurisdiction over what is known as “Plan II TOFC/COFC service,” which has long been defined as follows:

“Plan II (All-Rail):
“Door-to-door service performed by the railroad, which moves its own trailers or containers on flatcars under open tariffs usually similar to those of truckers.” See American Trucking Assns., Inc. v. Atchison, T. & S. F. R. Co., 387 U. S. 397, 403 (1967).

The ICC’s statutory authority includes jurisdiction to grant exemptions from regulation as well as to regulate. In 1980, Congress enacted the Staggers Rail Act, 94 Stat. 1895, 49 U. S. C. §10101 et seq., which authorizes the ICC to exempt from state regulation “transportation that is provided by a rail carrier as a part of a continuous intermodal movement.” See § 10505(f). It is undisputed that the ICC may grant an exemption from regulation to interstate TOFC/ COFC transportation provided by a rail carrier. The question presented is whether the grant of authority to the ICC under § 10505(f) encompasses the motor freight portion of a Plan II TOFC/COFC shipment entirely within the State of Texas.

HH

In 1981, the Commission adopted a regulation exempting Plan II service from state regulation. The regulation unambiguously covers both the motor portion and the rail portion of Plan II service. In a separate case involving interstate Plan II shipments, the Court of Appeals for the Fifth Circuit upheld the regulation, specifically rejecting an argument that, the Commission had no authority to exempt the motor portion of the intermodal service. It held that “rail-owned truck TOFC/COFC service is ‘transportation that is provided by a rail carrier.’” American Trucking Assns., Inc. v. ICC, 656 F. 2d 1115, 1120 (1981).

On September 27, 1982, Missouri-Kansas-Texas Railroad Company, Missouri Pacific Railroad Company, and Southern Pacific Transportation Company (Railroads) petitioned the Railroad Commission of Texas (RCT) to apply the ICC’s exemption to their Texas intrastate TOFC/COFC traffic. App. 7-10. The RCT took the position that it retained the authority to regulate the motor carrier segment of intrastate transportation provided by an interstate rail carrier. The Staggers Rail Act provides that a state commission may regulate intrastate transportation provided by a rail carrier, but only to the extent that it conforms with the federal Act and only if the ICC determines that the State’s proposed regulatory standards and procedures are consistent with federal standards and procedures. The RCT granted a partial exemption which covered the rail but not the pre-rail and post-ex-rail truck service portions of the intrastate TOFC/COFC service. Id., at 11-12.

The Railroads petitioned the ICC under 49 U. S. C. § 11501(c) to review the RCT’s decision and to grant the full TOFC/COFC exemption. The ICC held that the State Commission’s assertion of regulatory jurisdiction over “incidental pre-rail and ex-rail over-the-road movements” of Plan II TOFC/COFC service was inconsistent with the federal standards contained in its 1981 regulation. The State of Texas sought review of the ICC’s order in the Court of Appeals for the Fifth Circuit. The Railroads intervened as respondents. That court reversed, holding that the truck portion of the intrastate movements at issue was not “transportation . . . provided by a rail carrier” within the meaning of § 10505(f) but rather was “transportation provided by a motor carrier” within the meaning of § 10521(b)(1). Texas v. United States, 770 F. 2d 452 (1985). The Court of Appeals distinguished American Trucking Assns., Inc. v. ICC, supra, as limited to TOFC/COFC shipments that at some point in their journey crossed a state boundary. When the service is purely intrastate, the Court of Appeals held, the motor portions of TOFC/ COFC service by railroad-owned trucks constitute transportation provided by a motor carrier under § 10521(b)(1) and for that reason are expressly reserved for state regulation. We granted the petitions for certiorari of the ICC and the Railroads, 476 U. S. 1157 (1986). We are persuaded that the Court of Appeals erred.

II

It is undisputed that the Commission’s power to grant these exemptions from state regulation is coextensive with its own authority to regulate, or not to regulate, these inter-modal movements by rail carriers. We therefore focus our review on the extent of the Commission’s jurisdiction over the trucking segment of intrastate TOFC/COFC activities. Since all of the railroads interested in this proceeding are engaged in interstate commerce, the Commission has authority over the intrastate transportation, as well as the interstate transportation, provided by such carriers. All of the elements of the Plan II TOFC/COFC service at issue are provided on equipment owned and operated by a rail carrier over which the ICC has jurisdiction. Thus, the plain language of § 10505(f) unambiguously supports the ICC’s position.

It is true, of course, that the text of § 10521(b)(1) can be read to support the contrary result because it is possible to regard the rail carrier as a “motor carrier” during the truck portion of the intermodal movement. We believe, however, that the correct, and certainly the more natural, reading of the statute is that all of the TOFC/COFC service provided by interstate rail carriers on equipment which they own is “transportation provided by a rail carrier” subject to the jurisdiction of the ICC.

The position urged by respondents encounters three serious difficulties. First, it is inconsistent with the agency’s historical treatment of Plan II TOFC/COFC service as “provided by a railroad.” In Ex parte 230, Substituted Service-Charges and Practices of For-Hire Carriers and Freight Forwarders (Piggyback Service), 322 I. C. C. 301, 304-305, 309-312 (1964), the Commission stated:

“Under plan II, the railroad holds out to provide a complete door-to-door service under a single bill of lading. Neither the shipper nor the consignee intervenes in any way in the overall transportation activities or does anything beyond tendering the shipment to the railroad at origin or at the shipper’s loading dock.” Id., at 311.

The Commission .recognized that the distinctive element of Plan II service was not the use of trailers or containers to offer door-to-door pickup and delivery service via rail and highway, but rather the identity of the carrier offering this service:

“[A]ll three — rail carrier, motor carrier, and freight forwarder — are even today providing, through the use of piggyback, services which in physical characteristics are substantially similar. Any one of the three can offer a transportation service which includes door-to-door pickup and delivery, movement of loaded trailers between a shipper’s premises and a rail yard, and line-haul transportation of the loaded trailers by rail. The railroad does this under its plan II TOFC tariff; the trucker does it under plan I, in which it is encouraged by the railroads . . . and the freight forwarder does it through use of plans III and IV rail tariffs.” Id., at 330.

In none of the plans was a rail carrier treated either as a hybrid, or as a motor carrier, during the truck segment of the intermodal movement. Presumably, in enacting § 10505, Congress was aware of the Commission’s consistent practice of regulating railroads as “rail carriers” even when they performed Plan II intermodal service.

Second, the State’s interpretation of § 10521(b)(1) would make that section authorize state regulation of TOFC/COFC services in areas where it has already been rejected. The term “intrastate transportation provided by a motor carrier” must refer either to the intrastate motor portion of any TOFC/COFC movement or to the entire intrastate movement when a portion of it is performed by truck service. If the term refers only to the motor portion, the State’s reading of the statute would preserve the State’s power to regulate the intrastate motor portion of an interstate Plan II TOFC/ COFC shipment. But Texas acknowledges that it has no such power. Alternatively, if the term refers to every intrastate shipment that includes a motor segment, the railroad must be regarded as a “motor carrier” even during the rail portion of the intermodal movement, and the RCT would retain the power to regulate the entire intrastate movement. Again, Texas does not claim that authority. We think it clear that the only way to square the words of the statute with those aspects of the ICC’s jurisdiction that the State does accept is to hold that the ICC’s authority over intrastate transportation provided by an interstate rail carrier encompasses the entire movement, even when it includes a truck segment under Plan II.

Third, the special statutory authority of the Commission to determine the proper interrelationship of different modes of transportation supports its interpretation of the Staggers Rail Act. The statute was a response to the concern that differing state and federal standards applying to the industry and excessive governmental regulation by both federal and state authorities had contributed to the financial difficulties of major railroads. In its statement of rail transportation policy, Congress unambiguously expressed its interest in allowing free competition, to the maximum extent possible, to govern the financial health of the railroad industry. The importance of that policy is confirmed by the fact that the statement of general transportation policy applicable to' all types of carriers, which generally prescribes the impartial regulation of all competing modes of transportation, is introduced by an exception providing that the special policy statement endorsing competition in railroad transportation shall prevail when transportation policy has an impact on rail carriers. Even if the question of the extent to which § 10521(b)(1) restricts the Commission’s power under § 10505 in these cases were in doubt, the statutory statement of policy priorities would lead us to agree with the ICC’s view that the ambiguity should be resolved in favor of competition, rather than partial state regulation of Plan II TOFC/COFC service.

The judgment of the Court of Appeals is reversed.

It is so ordered.

       The petitions for certiorari include both TOFC and COFC service. Pet. for Cert. in No. 85-1222, p. I; Pet. for Cert. in No. 85-1267, p. i. A container, unlike a trailer, cannot itself be hauled on the highway by a tractor rig; it must first be placed on a suitable truck trailer. For the purposes of this opinion, however, there are no relevant differences between TOFC and COFC service.
      “TOFC service is inherently bimodal in that its basic characteristic is the combination of the inherent advantages of rail and motor transportation: the railroad’s ability to provide efficient line-haul transportation of huge volumes of freight for great distances at high speed; and the motor carrier’s ability to provide door-to-door, and if necessary job- or farm-site, pickup and delivery.” Ex parte No. 230, Substituted Service-Charges and Practices of For-Hire Carriers and Freight Forwarders (Piggyback Service), 322 I. C. C. 301, 329 (1964).

       See generally id., at 305-309 (describing growth of TOFC service).

       See 49 CFR § 1039.13 (1986). See also Improvement of TOFC/COFC Regulation, 364 I. C. C. 731, aff’d, American Trucking Assns., Inc. v. ICC, 656 F. 2d 1115 (CA5 1981).

       The exemption encompasses “[r]ailroad and truck transportation provided by a rail carrier as part of a continuous intermodal movement.” 49 CFR § 1039.13 (1986) (emphasis added). In some plans, the motor portion of an intermodal movement is performed by a trucking company, freight forwarder, or shipper. See American Trucking Assns., Inc. v. Atchison, T. & S. F. R. Co., 387 U. S. 397, 403 (1967). In such plans, the exemption applies only to the rail portion of the intermodal service.

       See 49 U. S. C. § 11501. At the time it issued the decision at issue in this case, the Railroad Commission of Texas had provisional certification to regulate intrastate transportation provided by a rail carrier. The Commission no longer has this statutory authority to regulate intrastate rail rates, classification, rules, and practices of interstate carriers because it was denied certification by the ICC in Ex parte No. 388 (Sub-No. 31), State Intrastate Rail Rate Authority — Texas, 11. C. C. 2d 26 (1984), aff’d, Railroad Comm’n of Texas v. United States, 246 U. S. App. D. C. 352, 765 F. 2d 221 (1985).

       See ICC No. 39627, Petition Under 49 U. S. C. 11501(c) by Missouri-Kansas-Texas Railroad Company, et al., for Review of an Order of the Railroad Commission of Texas, decided Jan. 19, 1984 (Service Date Jan. 23,1984); ICC, No. 39704, Petition of Road-Rail Transportation Company, Inc., Under 49 U. S. C. 11501(c) for Review of an Order of the Railroad Commission of Texas, decided Apr. 11, 1984 (Service Date Apr. 13, 1984).

      Section 10505(f) provides:
      “The Commission may exercise its authority under this section to exempt transportation that is provided by a rail carrier as a part of a continuous intermodal movement.”

       Section 10521(b)(1) provides:
      “(b) This subtitle does not—
      “(1) except as provided in sections 10922(c)(2), 10935, and 11501(e) of this title, affect the power of a State to regulate intrastate transportation provided by a motor carrier.”
      Sections 10922, 10935, and 11501(e) are not relevant to the issue.

       The ICC found that the Railroad Commission of Texas’ refusal to apply the entire TOFC/COFC exemption violated federal standards and procedures binding upon the State Commission, and authorized the Railroads “to establish any rate, classification, rule, or practice pertaining to intrastate rail or motor transportation provided by a rail carrier as part of a continuous intermodal movement within the State of Texas, to the same extent and in the same manner that they establish rates, classifications, rules, or practices for similar interstate movements.” App. to Pet. for Cert, in No. 85-1222, pp. 21a-22a. The Court of Appeals stated:
      “The thrust of the argument of the State of Texas is that the I. C. C. lacks jurisdiction over the trucking segment of the totally intrastate TOFC activities of the intrastate [sic] rail carriers. Without this jurisdiction, Texas maintains, the I. C. C. could not exempt the intrastate highway transportation from state regulation. We are constrained to agree.” Texas v. United States, 770 F. 2d 452, 453 (CA5 1985) (emphasis added).
      This quotation reveals an incompleteness in the Court of Appeals’ reasoning. If the rail carriers were “intrastate rail carriers,” the ICC would not have had jurisdiction over either the rail or the motor portion of their intrastate movements. But this conclusion does not necessarily extend to the rail and motor portions of intrastate movements by all other rail carriers, specifically those that operate across state boundaries. In fact, the Railroads in this proceeding are all interstate rail carriers, and the ICC has consistently exercised jurisdiction over their intrastate, as well as their interstate, movements. See n. 14, infra. Nevertheless, the Court of Appeals did not err in its underlying conclusion that the ICC’s authority to grant an exemption from federal regulation coincides with its authority to grant an exemption from state regulation. In its argument in this case, the State of Texas also recognizes that the scope of the ICC’s authority over exemptions from state regulation is coextensive with its own jurisdiction either to impose federal regulation or to grant an exemption from federal regulation. Thus, although this case involves the ICC’s effort to grant exemptions from regulation, the same legal question would be presented if the ICC were trying to regulate the rates for an interstate rail carrier’s intrastate movements, and the carrier asserted that only the state commission had such power.

       See 49 U. S. C. §§ 10501 and 11501. The Commission does not assert jurisdiction over wholly intrastate carriers; nor does it assert the authority to exempt such carriers from state regulation.

       See n. 7, supra.

       Our holding that the ICC’s jurisdiction under § 10505(f) includes the intrastate portions of Plan II TOFC/COFC service applies whether or not a State has been certified under 49 U. S. C. § 11501. Because the Railroad Commission of Texas is not now certified to regulate railroads, the statute independently places the truck portion of intra-Texas TOFC/COFC service within the jurisdiction of the ICC:
      “Any intrastate transportation provided by a rail carrier in a State which may not exercise jurisdiction over an intrastate rate, classification, rule, or practice of that carrier due to a denial of certification under this subsection shall be deemed to be transportation subject to the jurisdiction of the Commission under [§ 10501 et seq.V’ 49 U. S. C. § 11501(b)(4)(B).

       And of course the Fifth Circuit so held in American Trucking Assns., Inc. v. ICC, 656 F. 2d 1115 (1981). The reason why Texas does not have that power is that the statute plainly authorized the ICC either to regulate, or to exempt from regulation, such continuous interstate movements. We think it clear that the ICC’s authority over intrastate rail transportation by an interstate rail carrier encompasses the entire movement, even when it includes a truck segment. This conclusion was at least implicit in the Fifth Circuit’s opinion in American Trucking Assns., Inc. v. ICC, supra, at 1120:
      “[R]ail-owned truck TOFC/COFC service is ‘transportation that is provided by a rail carrier.’ Had Congress intended to limit the Commission’s exemption authority to rail transportation, it could easily have done so by using that language. Instead, it chose the broad ‘transportation-that-is-provided-by-a-rail-earrier’ language and presumably did so with knowledge that it previously had defined ‘transportation’ to include the movement of passengers or property by motor vehicle.” (Citations omitted; footnotes omitted.)

       The Court of Appeals based its conclusion that “transportation provided by a rail carrier” should be defined more narrowly for intrastate traffic than for interstate commerce on the “potential mischief” of exempting intrastate rail travel from regulation. The Court of Appeals focused on the hypothetical example of a small intrastate rail carrier that provides minimal rail service within a city and extensive truck service to convey goods to and from the city, and is exempt from state regulation. See 770 F. 2d, at 454-455. This scenario could only occur, however, if the ICC had authority to exempt such transportation from regulation. But because the hypothetical railroad is only an intrastate carrier, the ICC would not have any jurisdiction over it, and the speculative potential for mischief would not exist. In this case, by contrast, the Railroads are interstate carriers whose TOFC/COFC services include some segments entirely within Texas. See Guide to Piggyback Routes, Distribution 190, 196 (July 1982) (route diagrams for TOFC/COFC service). See also n. 9, supra.

       “[W]e cannot accept arguments based upon arguable inference from nonspecific statutory language, limiting the Commission’s power to adopt rules which, essentially, reflect its judgment in light of current facts as to the proper interrelationship of several modes of transportation with respect to an important new development.” American Trucking Assns., Inc. v. Atchison, T. & S. F. R. Co., 387 U. S., at 410. The reading of the Act proposed by respondents impermissibly limits the ICC’s power to implement national transportation policy in the evolving area of intermodal transportation.

       See H. R. Rep. No. 96-1035, pp. 38, 61, 128-130 (1980); H. R. Conf. Rep. No. 96-1430, p. 79 (1980).

       Section 10101a “establishes a specific rail transportation policy to guide the Commission in its duties in regulation of the railroad industry.” H. R. Conf. Rep. No. 96-1430, supra, at 80. Section 10101a provides, in part:
      “10101a. Rail transportation policy

        “In regulating the railroad industry, it is the policy of the United States Government—
      “(1) to allow, to the maximum extent possible, competition and the demand for services to establish reasonable rates for transportation by rail;

      “(4) to ensure the development and continuation of a sound rail transportation system with effective competition among rail carriers and with other modes, to meet the needs of the public and the national defense;
      “(5) to foster sound economic conditions in transportation and to ensure effective competition and coordination between rail carriers and other modes;

      “(7) to reduce regulatory barriers to entry into and exit from the industry.”

       Section 10101 provides in part:
      “(a) Except where policy has an impact on rail carriers, in which case the principles of section 10101a of this title shall govern, to ensure the development, coordination, and preservation of a transportation system that meets the transportation needs of the United States, including the United States Postal Service and national defense, it is the policy of the United States Government to provide for the impartial regulation of the modes of transportation . . .