source: Caselaw Access Project

author:
      Justice Marshall
      Justice White,

license: Public Domain

text:
    CARNEGIE-MELLON UNIVERSITY et al. v. COHILL, JUDGE, UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA, et al.
    No. 86-1021.
    Argued November 10, 1987
    Decided January 20, 1988

      Marshall, J., delivered the opinion of the Court, in which Brennan, Blackmun, Stevens, and O’Connor, JJ., joined. White, J., filed a dissenting opinion, in which Rehnquist, C. J., and Scalia, J., joined, post, p. 358.

      Walter P. DeForest III argued the cause and filed briefs for petitioners.

      Allan J. Opsitnick argued the cause and filed a brief for respondents.

      Briefs of amici curiae urging affirmance were filed for the State of California et al. by John K. Van de Kamp, Attorney General of California, R. H. Connett, Assistant Attorney General, and Roderick E. Walston, Deputy Attorney General, joined by the Attorneys General for their respective States as follows: Don Siegelman of Alabama, Grace Berg Schaible of Alaska, John Steven Clark of Arkansas, Warren Price III of Hawaii, James T. Jones of Idaho, Linley E. Pearson of Indiana, David L. Armstrong of Kentucky, William J. Guste, Jr., of Louisiana, Brian McKay of Nevada, Hal Stratton of New Mexico, Anthony J. Celebrezze, Jr., of Ohio, Roger A. Tellinghuisen of South Dakota, W. J. Michael Cody of Tennessee, Jim Mattox of Texas, David L. Wilkinson of Utah, Kenneth 0. Eikenberry of Washington, and Donald J. Hanaway of Wisconsin; and for the Department of Water and Power of the city of Los Angeles by Adolph Moskovitz and Janet K. Goldsmith.

   Justice Marshall

delivered the opinion of the Court.

The question before us is whether a federal district court has discretion under the doctrine of pendent jurisdiction to remand a properly removed case to state court when all federal-law claims in the action have been eliminated and only pendent state-law claims remain.

I

Respondents, William and Carrie Boyle, commenced this action by filing a complaint against petitioners, Carnegie-Mellon University (CMU) and John Kordesich, in the Court of Common Pleas of Allegheny County, Pennsylvania. CMU is William Boyle’s former employer; Kordesich is William Boyle’s former supervisor. In the complaint, William Boyle charged CMU with violation of federal and state age-discrimination laws, wrongful discharge, breach of contract, intentional infliction of emotional distress, defamation, and misrepresentation. He stated many of the same claims, as well as tortious interference with a contractual relationship, against Kordesich. Carrie Boyle claimed that these alleged wrongs had caused her to suffer a loss of consortium, loss of companionship, and loss of her husband’s household services. All of respondents’ claims arose from CMU’s discharge of William Boyle.

Petitioners removed the case from state court to the United States District Court for the Western District of Pennsylvania under 28 U. S. C. § 1441(a), which allows a defendant to remove an action that falls within the original jurisdiction of the federal district courts. Petitioners stated that the entire lawsuit fell within the original jurisdiction, and hence within the removal jurisdiction, of the District Court because the complaint stated a claim arising under the Age Discrimination in Employment Act of 1967, 81 Stat. 602, as amended, 29 U. S. C. §§621-634, and the state-law claims in the complaint were pendent to this federal-law claim. Respondents did not contest the removal.

Six months later, respondents moved to amend their complaint to delete the allegations of age discrimination and defamation and the request for damages for loss of consortium. In this motion, respondents stated that they now believed these claims were not tenable. At the same time, respondents filed a motion, conditional upon amendment of the complaint, to remand the suit to state court. Respondents noted that the amendment would eliminate their sole federal-law claim, which had provided the basis for removal of the case, and argued that a remand to state court was appropriate in these circumstances.

After granting the motion to amend, the District Court remanded the remaining claims to the state court in which respondents initially had filed the action. Boyle v. Carnegie-Mellon University, Civ. Action No. 84-2285 (Oct. 10, 1985). In its opinion, the District Court first examined whether any provision of the federal removal statute, 28 U. S. C. §§ 1441-1451, supported a remand. The court noted that two sections of the statute authorize district courts to remand after removal. Under 28 U. S. C. § 1447(c), a court shall remand any case that “was removed improvidently and without jurisdiction”; under 28 U. S. C. § 1441(c), a court may remand any claim that is both independently nonremovable and “separate and independent” of the claim providing the basis for removal of the case. The court held that § 1447(c) did not apply because the removal was jurisdictionally proper and that § 1441(c) did not apply because the remaining state-law claims in the case, although independently nonremovable, were pendent to, rather than separate and independent of, the federal-law claim that had provided the basis for removal. The District Court then stated that in Thermtron Products, Inc. v. Hermansdorfer, 423 U. S. 336 (1976), this Court had suggested that a district court could not remand a removed ease or claim without specific statutory authorization. The District Court noted, however, that a number of appellate decisions since Thermtron had approved the remand of removed pendent state-law claims when the federal-law claim providing the basis for removal had been eliminated from the suit. The court found these later decisions persuasive and consequently opted to remand respondents’ remaining state-law claims.

Petitioners filed a petition for writ of mandamus with the United States Court of Appeals for the Third Circuit, and a divided panel granted the petition. 41 PEP Cases 1046 (1986). Both the majority and the dissent agreed with the District Court’s conclusion that neither § 1447(c) nor § 1441(c) authorized a remand in this case. The majority, after noting a division among the Circuits on the question, held that under Thermtron this absence of statutory authorization precluded the District Court from ordering a remand. The dissent countered that Thermtron’s admonition against remanding removed cases to state court without specific statutory authorization did not extend to cases involving pendent jurisdiction. The dissent noted that under the pendent jurisdiction doctrine, a district court has discretion to dismiss without prejudice cases involving pendent claims, and argued that fairness, efficiency, comity, and common sense supported the authority of removal courts to remand such cases as well.

The Court of Appeals granted respondents’ petition for rehearing en banc and vacated the panel opinions and writ of mandamus. 41 FEP Cases 1888 (1986). After the rehearing, the en banc court divided evenly on the question whether the District Court had authority to remand respondents’ case to state court. Civ. Action No. 85-3619 (Nov. 24, 1986). Accordingly, the court issued an order denying petitioners’ application for a writ of mandamus. This order effectively left undisturbed the remand of respondents’ case.

We granted certiorari, 479 U. S. 1083 (1987), to resolve the split among the Circuits as to whether a district court has discretion to remand a removed case to state court when all federal-law claims have dropped out of the action and only pendent state-law claims remain. We now affirm.

II

The modern doctrine of pendent jurisdiction stems from this Court’s decision in Mine Workers v. Gibbs, 383 U. S. 715 (1966). Prior to Gibbs, this Court had recognized that considerations of judicial economy and procedural convenience justified the recognition of power in the federal courts to decide certain state-law claims involved in cases raising federal questions. See Hurn v. Oursler, 289 U. S. 238, 243-247 (1933). The test for determining when a federal court had jurisdiction over such state-law claims was murky, however, and the lower courts experienced considerable difficulty in applying it. In Gibbs, the Court responded to this confusion, and the resulting hesitancy of federal courts to recognize jurisdiction over state-law claims, by establishing a new yardstick for deciding whether a federal court has jurisdiction over a state-law claim brought in a case that also involves a federal question. The Court stated that a federal court has jurisdiction over an entire action, including state-law claims, whenever the federal-law claims and state-law claims in the case “derive from a common nucleus of operative fact” and are “such that [a plaintiff] would ordinarily be expected to try them all in one judicial proceeding.” 383 U. S., at 725. The Court intended this standard not only to clarify, but also to broaden, the scope of federal pendent jurisdiction. See ibid. (stating that the prior approach, at least as applied by lower courts, was “unnecessarily grudging”). According to Gibbs, “considerations of judicial economy, convenience and fairness to litigants” support a wide-ranging power in the federal courts to decide state-law claims in cases that also present federal questions. Id., at 726.

At the same time, however, Gibbs drew a distinction between the power of a federal court to hear state-law claims and the discretionary exercise of that power. The Gibbs Court recognized that a federal court’s determination of state-law claims could conflict with the principle of comity to the States and with the promotion of justice between the litigating parties. For this reason, Gibbs emphasized that “pendent jurisdiction is a doctrine of discretion, not of plaintiff’s right.” Ibid. Under Gibbs, a federal court should consider and weigh in each case, and at every stage of the litigation, the values of judicial economy, convenience, fairness, and comity in order to decide whether to exercise jurisdiction over a case brought in that court involving pendent state-law claims. When the balance of these factors indicates that a case properly belongs in state court, as when the federal-law claims have dropped out of the lawsuit in its early stages and only state-law claims remain, the federal court should decline the exercise of jurisdiction by dismissing the case without prejudice. Id., at 726-727. As articulated by Gibbs, the doctrine of pendent jurisdiction thus is a doctrine of flexibility, designed to allow courts to deal with cases involving pendent claims in the manner that most sensibly accommodates a range of concerns and values.

In the case before us, respondents’ complaint stated a single federal-law claim and a number of state-law claims. The state-law claims fell within the jurisdiction of the District Court to which the action was removed because they derived from the same nucleus of operative fact as the federal-law claim: CMU’s dismissal of William Boyle. Under the pendent jurisdiction doctrine set forth in Gibbs, however, the District Court had to consider throughout the litigation whether to exercise its jurisdiction over the case. When the single federal-law claim in the action was eliminated at an early stage of the litigation, the District Court had a powerful reason to choose not to continue to exercise jurisdiction. The question that this case presents is whether the District Court could relinquish jurisdiction over the case only by dismissing it without prejudice or whether the District Court could relinquish jurisdiction over the case by remanding it to state court as well.

This Court’s crafting of the pendent jurisdiction doctrine in Gibbs strongly supports the conclusion that when a district court may relinquish jurisdiction over a removed case involving pendent claims, the court has discretion to remand the case to state court. Gibbs itself does not directly address this issue; because the plaintiff in Gibbs filed his suit in federal court, remand was not an option in the case, and the Court spoke only of dismissal. But Gibbs establishes that the pendent jurisdiction doctrine is designed to enable courts to handle cases involving state-law claims in the way that will best accommodate the values of economy, convenience, fairness, and comity, and Gibbs further establishes that the Judicial Branch is to shape and apply the doctrine in that light. Because in some circumstances a remand of a removed case involving pendent claims will better accommodate these values than will dismissal of the case, the animating principle behind the pendent jurisdiction doctrine supports giving a district court discretion to remand when the exercise of pendent jurisdiction is inappropriate.

As many lower courts have noted, a remand generally will be preferable to a dismissal when the statute of limitations on the plaintiff’s state-law claims has expired before the federal court has determined that it should relinquish jurisdiction over the case. In such a case, a dismissal will foreclose the plaintiff from litigating his claims. This consequence may work injustice to the plaintiff: although he has brought his suit in timely manner, he is time barred from pressing his case. Equally important, and more easily overlooked, the foreclosure of the state-law claims may conflict with the principle of comity to States. The preclusion of valid state-law claims initially brought in timely manner in state court undermines the State’s interest in enforcing its law. The operation of state statutes of limitations thus provides a potent reason for giving federal district courts discretion to remand, as well as to dismiss, removed pendent claims.

Even when the applicable statute of limitations has not expired, a remand may best promote the values of economy, convenience, fairness, and comity. Both litigants and States have an interest in the prompt and efficient resolution of controversies based on state law. Any time a district court dismisses, rather than remands, a removed case involving pendent claims, the parties will have to refile their papers in state court, at some expense of time and money. Moreover, the state court will have to reprocess the case, and this procedure will involve similar costs. Dismissal of the claim therefore will increase both the expense and the time involved in enforcing state law. Under the analysis set forth in Gibbs, this consequence, even taken alone, provides good reason to grant federal courts wide discretion to remand cases involving pendent claims when the exercise of pendent jurisdiction over such cases would be inappropriate.

Petitioners argue that the federal removal statute prohibits a district court from remanding properly removed cases involving pendent claims. This argument is based not on the language of Congress, but on its silence. Petitioners note that the removal statute explicitly authorizes remands in two situations. By failing similarly to provide for remands of removed cases involving pendent claims, petitioners assert, Congress intended to preclude district courts from remanding such cases.

We cannot accept petitioners’ reasoning. We do not dispute that Congress could set a limitation of this kind on the federal courts’ administration of the doctrine of pendent jurisdiction. But Congress has not done so, expressly or otherwise, in the removal statute. The principal flaw in petitioners’ argument is that it fails to recognize that the removal statute does not address specifically any aspect of a district court’s power to dispose of pendent state-law claims after removal: just as the statute makes no reference to a district court’s power to remand pendent claims, so too the statute makes no reference to a district court’s power to dismiss them. Yet petitioners concede, as they must, that a federal court has discretion to dismiss a removed case involving pendent claims. Given that Congress’ silence in the removal statute does not negate the power to dismiss such cases, that silence cannot sensibly be read to negate the power to remand them.

Indeed, one section of the removal statute strongly suggests that had Congress decided to address the proper disposition of removed cases involving pendent claims, Congress would have authorized the district courts to remand them. In 28 U. S. C. § 1441(c), Congress dealt with the situation in which a claim that would be removable if sued upon alone is joined with one or more “separate and independent” claims that are not themselves removable. The section provides that the entire case may be removed and that the district court, in its discretion, may either adjudicate all claims in the suit or remand the independently nonremovable claims. See n. 3, supra. This section is not directly applicable to suits involving pendent claims, because pendent claims are not “separate and independent” within the meaning of the removal statute. See American Fire & Casualty Co. v. Finn, 341 U. S. 6, 12-14 (1951) (interpreting the “separate and independent” clause). The section, however, clearly manifests a belief that when a court has discretionary jurisdiction over a removed state-law claim and the court chooses not to exercise its jurisdiction, remand is an appropriate alternative. Thus, the removal statute, far from precluding district courts from remanding pendent state-law claims, actually supports such authority.

As petitioners point out, this Court’s opinion in Thermtron Products, Inc. v. Hermansdorfer, 423 U. S. 336 (1976), contains some language that could be read to support the opposite conclusion. In Thermtron, a District Court remanded a properly removed ease to state court on the ground that the federal docket was overcrowded. This Court held that the remand was improper. In so doing, the Court stated several times that a district court may not remand a case to a state court on a ground not specified in the’removal statute. See id., at 345. See also id., at 345, n. 9 (“Lower federal courts have uniformly held that cases properly removed from state to federal court within the federal court’s jurisdiction may not be remanded for discretionary reasons not authorized by the controlling statute”); id., at 351 (“[W]e are not convinced that Congress ever intended to extend carte blanche authority to the district courts to revise the federal statutes governing removal by remanding cases on grounds that seem justifiable to them but which are not recognized by the controlling statute”). Petitioners, again noting that the removal statute does not explicitly authorize the remand of cases involving pendent state-law claims, argue that Thermtron thus compels a holding that such remands are impermissible.

The language from Thermtron that petitioners cite, viewed in isolation, is admittedly far-reaching, but it loses controlling force when read against the circumstances of that case. The Thermtron decision was a response to a clearly impermissible remand, of a kind very different from that at issue here. In Thermtron, the District Court had no authority to decline to hear the removed case. The court had diversity jurisdiction over the case, which is not discretionary. Thus, the District Court could not properly have eliminated the case from its docket, whether by a remand or by a dismissal. In contrast, when a removed case involves pendent state-law claims, a district court has undoubted discretion to decline to hear the case. The only remaining issue is whether the district court may decline jurisdiction through a remand as well as through a dismissal. The Thermtron opinion itself recognized this distinction by stating that federal courts have no greater power to remand cases because of an overcrowded docket than they have to dismiss cases on that ground. Id., at 344. The implication of this statement, which is confirmed by common sense, is that an entirely different situation is presented when the district court has clear power to decline to exercise jurisdiction. Thermtron therefore does not control the decision in this case.

Petitioners also argue that giving district courts discretion to remand cases involving pendent state-law claims will allow plaintiffs to secure a state forum through the use of manipulative tactics. Petitioners’ concern appears to be that a plaintiff whose suit has been removed to federal court will be able to regain a state forum simply by deleting all federal-law claims from the complaint and requesting that the district court remand the case. Brief for Petitioners 18-20. This concern, however, hardly justifies a categorical prohibition on the remand of cases involving state-law claims regardless of whether the plaintiff has attempted to manipulate the forum and regardless of the other circumstances in the case. A district court can consider whether the plaintiff has engaged in any manipulative tactics when it decides whether to remand a case. If the plaintiff has attempted to manipulate the forum, the court should take this behavior into account in determining whether the balance of factors to be considered under the pendent jurisdiction doctrine support a remand in the case. The district courts thus can guard against forum manipulation without a blanket rule that would prohibit the remand of all cases involving pendent state-law claims.

We conclude that a district court has discretion to remand to state court a removed case involving pendent claims upon a proper determination that retaining jurisdiction over the case would be inappropriate. The discretion to remand enables district courts to deal with cases involving pendent claims in the manner that best serves the principles of economy, convenience, fairness, and comity which underlie the pendent jurisdiction doctrine. Such discretion is precluded neither by the removal statute nor by our decision in Thermtron. We therefore affirm the decision below denying the petition for a writ of mandamus.

It is so ordered.

Justice White,

with whom The Chief Justice and Justice Sc alia join, dissenting.

The Court today discovers an inherent power in the federal judiciary to remand properly removed cases to state court for reasons of “economy, convenience, fairness, and comity.” Ante, at 351. Because I continue to believe that cases may be remanded only for reasons authorized by statute, see Thermtron Products, Inc. v. Hermansdorfer, 423 U. S. 336, 342 (1976), I dissent.

I

Respondents William and Carrie Boyle brought suit in Pennsylvania state court against William Boyle’s former employer and supervisor, petitioners Carnegie-Mellon University and William Kordesich, stating claims under both state law and the federal Age Discrimination in Employment Act (ADEA), 29 U. S. C. § 626(c)(1). The case was removed to the United States District Court for the Western District of Pennsylvania pursuant to 28 U. S. C. § 1441 on the basis of the federal ADEA claim. The Boyles did not contest the removal or move to remand at that time.

After some six months of discovery, the Boyles moved to delete their age discrimination claim and to remand the case to state court, explaining that their age discrimination claim had proved to be “not tenable.” Apparently, the Boyles had only then discovered that their failure to file a timely age discrimination charge with a federal or state agency precluded them from asserting a claim under the ADEA. See 29 U. S. C. §§ 626(d), 633(b). Counsel for the Boyles explained before this Court that his principal reason for seeking the remand was to avoid a prompt trial on the state claims. Tr. of Oral Arg. 28-29. He perceived that the opportunities for extracting a favorable settlement from Carnegie-Mellon would be greater if the case were remanded, because the state court dockets in Allegheny County were considerably more congested than the federal court dockets in the Western District of Pennsylvania.

The Federal District Court granted the Boyles’ motions to amend and to remand. The court recognized that neither 28 U. S. C. § 1447(c) nor 28 U. S. C. § 1441(c), the two statutory provisions authorizing remand, was applicable in this case. The court nonetheless held that, because it could dismiss an action from which all federal claims had been deleted, see Mine Workers v. Gibbs, 383 U. S. 715, 725-727 (1966), it could also remand such an action to state court.

Carnegie-Mellon then petitioned for a writ of mandamus from the Court of Appeals for the Third Circuit. A divided panel granted the petition and directed the District Court to vacate its remand order. The panel concluded that the District Court was foreclosed by this Court’s decision in Therm-tron from remanding cases to state courts for reasons not specified in a federal statute.

The Court of Appeals reheard the matter en banc. An equally divided court denied Carnegie-Mellon’s petition for a writ of mandamus.

II

This Court has now affirmed. The Court holds that the pendent jurisdiction doctrine set forth in Gibbs allows federal judges to remand a properly removed case to state court whenever all federal claims have been deleted. There is no statutory basis for this holding. But the Court discovers an inherent authority to remand whenever a federal judge decides that “the values of economy, convenience, fairness, and comity” would thereby be served. This result is inconsistent with Congress’ understanding of the federal courts’ remand authority as well as with the precedents of this Court.

Congress has enacted two statutory provisions governing remands from federal court to state court: 28 U. S. C. § 1447(c), which requires the remand of cases removed “improvidently and without jurisdiction,” and 28 U. S. C. § 1441 (c), which permits the remand of “separate and independent” claims that are “not otherwise within [the district court’s] original jurisdiction.” The latter provision does not apply to pendent claims such as those asserted here. There would have been little reason for Congress to have enacted either § 1447(c) or § 1441(c) had Congress perceived the federal courts to possess an inherent authority to remand claims that might better be decided by the state courts. The Court thus renders § 1441(c) wholly superfluous in contravention of the prevailing rule that courts “should not and do not suppose that Congress intended to enact unnecessary statutes.” Jackson v. Kelly, 557 F. 2d 735, 740 (CA10 1977) (en banc); see also United States v. Menasche, 348 U. S. 528, 538-539 (1955); Sutton v. United States, 819 F. 2d 1289, 1295 (CA5 1987) (citing United States v. American Trucking Assns., Inc., 310 U. S. 534 (1940)); Ziegler Coal Co. v. Kleppe, 175 U. S. App. D. C. 371, 379, 536 F. 2d 398, 406 (1976).

The Court rejects the foregoing argument on the ground that Congress has provided no express statutory authority for the dismissal of pendent claims. See ante, at 354. This ignores the very different origins of the power to dismiss and the power to remand. Courts have historically possessed an inherent power to dismiss suits for discretionary reasons such as failure to prosecute. See, e. g., Link v. Wabash R. Co., 370 U. S. 626, 629-631 (1962). The courts have not heretofore been recognized to possess any inherent power to remand.

In Thermtron, we held that a Federal District Judge had exceeded his authority in remanding a properly removed diversity action “on grounds not permitted by the controlling statute,” 423 U. S., at 345, namely, that the case would be adjudicated more quickly in state court than in federal court. In support of this holding, we observed that “[ljower federal courts have uniformly held that cases properly removed from state to federal court within the federal court’s jurisdiction may not be remanded for discretionary reasons not authorized by the controlling statute.” Id., at 345, n. 9 (citing Romero v. ITE Imperial Corp., 332 F. Supp. 523, 526 (PR 1971); Isbrandtsen Co. v. District 2, Marine Engineers Beneficial Assn., 256 F. Supp. 68, 77 (EDNY 1966); Davis v. Joyner, 240 F. Supp. 689, 690 (EDNC 1964); Vann v. Jackson, 165 F. Supp. 377, 381 (EDNC 1958)). Moreover, in holding that a remand on grounds not specified in the statute was reviewable on mandamus notwithstanding the prohibition on appellate review of remand orders contained in 28 U. S. C. § 1447(d), we expressed skepticism that “Congress ever intended to extend carte blanche authority to the district courts to revise the federal statutes governing removal by remanding cases on grounds that seem justifiable to them but which are not recognized by the controlling statute.” 423 U. S., at 351. Nevertheless, the Court itself grants the district courts virtual carte blanche to remand pendent claims for the amorphous reasons of “economy, convenience, fairness, and comity” that may seem justifiable to the majority but that have not been recognized by Congress. This action cannot be reconciled with the holding in Thermtron that cases cannot be remanded for nonstatutory reasons.

The decision today is also difficult to reconcile with St. Paul Mercury Indemnity Co. v. Red Cab Co., 303 U. S. 283 (1938), which held that a properly removed diversity action should not have been remanded to state court when the damages at issue later appeared to be less than the jurisdictional amount. In concluding that the status of the case at the time of removal was controlling, the Court reasoned:

“If the plaintiff could, no matter how bona fide his original claim in the state court, reduce the amount of his demand to defeat federal jurisdiction the defendant’s supposed statutory right of removal would be subject to the plaintiff’s caprice. The claim, whether well or ill founded in fact, fixes the right of the defendant to remove, and the plaintiff ought not to be able to defeat that right and bring the cause back to the state court at his election.” Id., at 294.

To permit a plaintiff to “bring the cause back to the state court at his election” by voluntarily dismissing his federal claims, as the Court does today, will likewise subject “the defendant’s supposed statutory right of removal ... to the plaintiff’s caprice.” The Court has thereby provided a new tactical weapon to plaintiffs like the Boyles who may be less interested in securing a prompt trial on the merits than in causing the litigation to become so burdensome to the defendants that they will accede to a favorable settlement.

Nothing in Gibbs justifies the result reached today. The majority acknowledges that no “direc[t]” authority for today’s holding can be found in Gibbs, which involved an action that had been filed initially in federal court. See ante, at 351. The Gibbs opinion did not even suggest any inherent power in the federal courts to remand pendent claims rather than to retain such claims or to dismiss them without prejudice. And no case here either before or after Gibbs provides any stronger support for today’s holding.

The Court’s decision has the peculiar result of treating plaintiffs who bring suit in federal court less favorably than plaintiffs who bring suit in state court. If the Boyles had commenced this suit in federal court and their federal claims were later dismissed, the Federal District Judge could only have dismissed the remaining pendent claims or decided those claims himself. Because the Boyles instead commenced this suit in state court, however, the District Judge had the additional option of ordering a remand. The principal advantage to plaintiffs of this third option is that their state claims are less likely to be dismissed as time barred. Accordingly, plaintiffs with claims arising under both federal and state law now will be encouraged to bring suit in state court, even when the state courts are as overburdened as those in Allegheny County are alleged to be, rather than in the federal courts that have been described as the “primary guardians” of federal rights. Steffel v. Thompson, 415 U. S. 452, 463 (1974). In addition, defendants who are able to afford the costs and delays associated with a one-way trip to federal court but not the additional costs and delays associated with a round trip may now be discouraged from exercising their statutory right to removal in cases involving both federal and state claims.

There is some incongruity in the Court’s invocation of federal-state “comity” in support of a holding whose principal effect will be to relieve plaintiffs from state statutes of limitations. See ante, at 352. It seems unnecessary for this Court to protect plaintiffs whose federal claims prove “not tenable” from the operation of state statutes of limitations when the States have shown themselves capable of achieving the same result through saving clauses similar to that enacted by Pennsylvania. See 42 Pa. Cons. Stat. § 5535(a) (1982). Neither the parties nor the courts below have suggested that the Boyles would not have been protected by the Pennsylvania saving clause had their federal claims been dismissed involuntarily rather than at their own behest.

In sum, because I believe that any authority to remand properly removed pendent claims must come from Congress, I respectfully dissent.

       Section 1441(a) provides:
      “Except as otherwise expressly provided by Act of Congress, any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants, to the district court of the United States for the district and division embracing the place where such action is pending.”

       Section 1447(e) provides, in pertinent part:
      “If at any time before final judgment it appears that the case was removed improvidently and without jurisdiction, the district court shall remand the case, and may order the payment of just costs.”

       Section 1441(c) provides:
      “Whenever a separate and independent claim or cause of action, which would be removable if sued upon alone, is joined with one or more otherwise non-removable claims or causes of action, the entire case may be removed and the district court may determine all issues therein, or, in its discretion, may remand all matters not otherwise within its original jurisdiction.”

       Petitioners also appealed the District Court’s decision. The Court of Appeals, however, dismissed the appeal on the ground that 28 U. S. C. § 1447(d) bars appeals from remands to state courts with a single exception not applicable to this case.

       Compare In re Romulus Community Schools, 729 F. 2d 431 (CA6 1984), Fox v. Custis, 712 F. 2d 84 (CA4 1983), and Hofbauer v. Northwestern National Bank of Rochester, 700 F. 2d 1197 (CA8 1983) (approving remand of remaining pendent state-law claims when all federal claims were eliminated from ease), with Cook v. Weber, 698 F. 2d 907 (CA7 1983), and In re Greyhound Lines, Inc., 598 F. 2d 883 (CA5 1979) (disapproving such remands).

       The test established in Hurn v. Oursler provided that if a plaintiff presented “two distinct grounds,” one state and one federal, “in support of a single cause of action,” the federal court had jurisdiction over the entire action, but that if the plaintiff’s assertions amounted to “two separate and distinct causes of action,” the federal court had jurisdiction only over the federal “cause of action.” 289 U. S., at 246. The difficulty with this test, as many commentators noted, was that it centered on the inherently elusive concept of a “cause of action.” See, e. g., Shulman & Jaegerman, Some Jurisdictional Limitations on Federal Procedure, 45 Yale L. J. 393, 397-410 (1936).

       In Gibbs, the Court stated that “if the federal claims are dismissed before trial. . . the state claims should be dismissed as well.” 383 U. S., at 726. More recently, we have made clear that this statement does not establish a mandatory rule to be applied inflexibly in all cases. See Rosado v. Wyman, 397 U. S. 397, 403-405 (1970). The statement simply recognizes that in the usual case in which all federal-law claims are eliminated before trial, the balance of factors to be considered under the pendent jurisdiction doctrine — judicial economy, convenience, fairness, and comity-will point toward declining to exercise jurisdiction over the remaining state-law claims.
      The Court in Gibbs also indicated that these factors usually will favor a decision to relinquish jurisdiction when “state issues substantially predominate, whether in terms of proof, of the scope of the issues raised, or of the comprehensiveness of the remedy sought.” 383 U. S., at 726.

       See, e. g., In re Romulus Community Schools, 729 F. 2d, at 439; Kaib v. Pennzoil Co., 545 F. Supp. 1267, 1271 (WD Pa. 1982).

       Moreover, if a plaintiff bringing suit in state court knows that, notwithstanding the expiration of a statute of limitations, a federal court to which a case is removed must dismiss the case upon deciding that the exercise of pendent jurisdiction would be inappropriate, the plaintiff may well decline to allege any federal-law claims. By forgoing all federal-law claims, the plaintiff can insulate himself from the risk that the combination of removal, dismissal under the pendent jurisdiction doctrine, and the expiration of a statute of limitations will foreclose him from litigating his state-law claims. Such protection will appear especially attractive to a plaintiff who has any doubt about the validity of his federal-law claims, because he will know that if the district court dismisses these claims on the merits prior to trial, the court may well decide that the rest of the case is unsuitable for resolution in a federal court and therefore dismiss the remaining claims. Thus, a rule that would require federal courts to dismiss a removed case that is not suitable for resolution in a federal court would operate not only to foreclose some plaintiffs from litigating their state-law claims, but also to chill other plaintiffs from bringing their federal-law claims.

       Petitioners argue that the federal courts do not need discretion to remand because they can retain jurisdiction over any case in which the statute of limitations has expired. See Brief for Petitioners 20. At least one Court of Appeals has made the identical argument. See Cook v. Weber, 698 F. 2d, at 909. This solution to the problem of an expired statute of limitations, however, is far from satisfying. Under petitioners’ suggested approach, district courts would retain jurisdiction over eases that apart from the statute-of-limitations concern properly belong in state courts. There is no reason to compel or encourage district courts to retain jurisdiction over such cases when the alternative of a remand is readily available.
      In similar vein, the dissent argues that federal courts do not need discretion to remand because some States have saving clauses that alleviate the statute-of-limitations problem arising from the dismissal of cases. But the existence of such clauses in some States, while diminishing the reason for remand in particular eases, hardly reverses our general conclusion that the balance of factors to be weighed under Gibbs, considered in light of the range of state statutes of limitations, supports giving federal district courts the authority to remand eases involving pendent claims.

       The dissent’s claim that our decision renders superfluous the two provisions of the removal statute that authorize remands is unjustified. The remand power that we recognize today derives from the doctrine of pendent jurisdiction and applies only to cases involving pendent claims. Sections 1441(e) and 1447(c), as the dissent recognizes, do not apply to eases over which a federal court has pendent jurisdiction. Thus, the remand authority conferred by the removal statute and the remand authority conferred by the doctrine of pendent jurisdiction overlap not at all.

       The dissent’s reliance on St. Paul Mercury Indemnity Co. v. Red Cab Co., 303 U. S. 283 (1938), is misplaced for a similar reason. In St. Paul, the defendant removed a diversity case to federal court, and the plaintiff later reduced the amount of damages claimed to a figure below the jurisdictional amount. The District Court remanded the ease to state court, but this Court held that the remand was impermissible. The Court stated that “events occurring subsequent to removal which reduce the amount recoverable ... do not oust the district court’s [diversity] jurisdiction.” Id., at 293. The Court then held that because the District Court continued to have diversity jurisdiction over the case, the court could not relinquish the case, whether through a dismissal or through a remand. See id., at 296. The argument cited by the dissent, focusing on forum manipulation concerns, provided an auxiliary policy consideration supporting the Court’s determination that the District Court’s remand was inappropriate. We agree that forum manipulation concerns are legitimate and serious. See infra, at 357. We do not think, however, that St. Paul fairly, or even plausibly, can be read to suggest that these concerns necessitate a blanket prohibition on remands when the federal district court’s jurisdiction over a case is inherently discretionary.

       A federal court might logically be assumed to have greater inherent authority to transfer a case to another federal court than to a state court. Yet, Congress has also delineated by statute or rule the circumstances in which a case may be transferred from one federal court to another. See, e. g., 28 U. S. C. §§ 1404(a), 1406(a), 2241; Fed. Rule Crim. Proc. 21.

       While the majority contends that the use of remands rather than dismissals will save time and money for the state courts, the record contains no support for this assertion. I would think that the costs to the state courts of processing a new case are not appreciably different from the costs of processing a remanded case. Furthermore, to the extent that the federal courts will now remand pendent claims that they previously would have retained, today’s holding may result in increased costs for the state courts.

       Section 5535(a) provides, in pertinent part, that “[i]f a civil action or proceeding is timely commenced and is terminated, a party . . . may . . . commence a new action or proceeding upon the same cause of action within one year after the termination.” This provision is inapplicable to proceedings terminated by “a voluntary nonsuit, a discontinuance, a dismissal for neglect to prosecute the action or proceeding, or a final judgment upon the merits.”

       The majority largely ignores the availability of state saving clauses in seeking to justify today’s result on the ground that plaintiffs like the Boyles would otherwise protect themselves against “the combination of removal, dismissal under the pendent jurisdiction doctrine, and the expiration of a statute of limitations” by forgoing their federal-law claims. Ante, at 352, n. 9.


author: Justice Scalia

text:
    UNITED SAVINGS ASSOCIATION OF TEXAS v. TIMBERS OF INWOOD FOREST ASSOCIATES, LTD.
    No. 86-1602.
    Argued December 1, 1987
    Decided January 20, 1988

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

      H. Miles Cohn argued the cause and filed briefs for petitioner.

      Leonard H. Simon argued the cause for respondent. With him on the brief were Daphne Levey and Timothy J. Henderson.

      Briefs of amici curiae urging reversal were filed for the United States by Solicitor General Fried, Assistant Attorney General Willard, and Deputy Solicitor General Cohen; for the California League of Savings Institutions et al. by John A. Graham; for the National Commercial Finance Association by A. Bruce Schimberg, Rex E. Lee, J. Ronald Trost, Shalom L. Kohn, and Frank R. Kennedy; and for Thomas H. Jackson, pro se.

      Briefs of amici curiae urging affirmance were filed for Global Marine Inc. by Harvey R. Miller, D. J. Baker, and Martin J. Bienenstock; and for the National Association of Credit Management et al. by Richard Levin and Kenneth N. Klee.

        Raymond T. Nimmer, pro se, and Edward L. Ripley, pro se, filed a brief for themselves as amici curiae.

   Justice Scalia

delivered the opinion of the Court.

Petitioner United Savings Association of Texas seeks review of an en banc decision of the United States Court of Appeals for the Fifth Circuit, holding that petitioner was not entitled to receive from respondent debtor, which is undergoing reorganization in bankruptcy, monthly payments for the use value of the loan collateral which the bankruptcy stay prevented it from possessing. In re Timbers of Inwood Forest Associates, Ltd., 808 F. 2d 363 (1987). We granted certiorari, 481 U. S. 1068 (1987), to resolve a conflict in the Courts of Appeals regarding application of §§361 and 362(d)(1) of the Bankruptcy Code, 11 U. S. C. §§361 and 362(d)(1) (1982 ed. and Supp. IV). Compare Grundy Nat. Bank v. Tandem Mining Corp., 754 F. 2d 1436, 1440-1441 (CA4 1985); In re American Mariner Industries, Inc., 734 F. 2d 426, 432-435 (CA9 1984); see also In re Briggs Transp. Co., 780 F. 2d 1339, 1348-1351 (CA8 1985).

I

On June 29, 1982, respondent Timbers of Inwood Forest Associates, Ltd., executed a note in the principal amount of $4,100,000. Petitioner is the holder of the note as well as of a security interest created the same day in an apartment project owned by respondent in Houston, Texas. The security interest included an assignment of rents from the project. On March 4, 1985, respondent filed a voluntary petition under Chapter 11 of the Bankruptcy Code, 11 U. S. C. § 101 et seq. (1982 ed. and Supp. IV), in the United States Bankruptcy Court for the Southern District of Texas.

On March 18, 1985, petitioner moved for relief from the automatic stay of enforcement of liens triggered by the petition, see 11 U. S. C. § 362(a), on the ground that there was lack of “adequate protection” of its interest within the meaning of 11 U. S. C. § 362(d)(1). At a hearing before the Bankruptcy Court, it was established that respondent owed petitioner $4,366,388.77, and evidence was presented that the value of the collateral was somewhere between $2,650,000 and $4,250,000. The collateral was appreciating in value, but only very slightly. It was therefore undisputed that petitioner was an undersecured creditor. Respondent had agreed to pay petitioner the postpetition rents from the apartment project (covered by the after-acquired property clause in the security agreement), minus operating expenses. Petitioner contended, however, that it was entitled to additional compensation. The Bankruptcy Court agreed and on April 19, 1985, it conditioned continuance of the stay on monthly payments by respondent, at the market rate of 12% per annum, on the estimated amount realizable on foreclosure, $4,250,000 — commencing six months after the filing of the bankruptcy petition, to reflect the normal foreclosure delays. In re Bear Creek Ministorage, Inc., 49 B. R. 454 (1985) (editorial revision of earlier decision). The court held that the postpetition rents could be applied to these payments. See id., at 460. Respondent appealed to the District Court and petitioner cross-appealed on the amount of the adequate protection payments. The District Court affirmed but the Fifth Circuit en banc reversed.

We granted certiorari to determine whether undersecured creditors are entitled to compensation under 11 U. S. C. § 362(d)(1) for the delay caused by the automatic stay in foreclosing on their collateral.

II

When a bankruptcy petition is filed, § 362(a) of the Bankruptcy Code provides an automatic stay of, among other things, actions taken to realize the value of collateral given by the debtor. The provision of the Code central to the decision of this case is § 362(d), which reads as follows:

“On request of a party in interest and after notice and a hearing, the court shall grant relief from the stay provided under subsection (a) of this section, such as by terminating, annulling, modifying, or conditioning such stay—
“(1) for cause, including the lack of adequate protection of an interest in property of such party in interest; or
“(2) with respect to a stay of an act against property under subsection (a) of this section, if—
“(A) the debtor does not have an equity in such property; and
“(B) such property is not necessary to an effective reorganization.”

The phrase “adequate protection” in paragraph (1) of the foregoing provision is given further content by § 361 of the Code, which reads in relevant part as follows:

“When adequate protection is required under section 362 ... of this title of an interest of an entity in property, such adequate protection may be provided by—
“(1) requiring the trustee to make a cash payment or periodic cash payments to such entity, to the extent that the stay under section 362 of this title . . . results in a decrease in the value of such entity’s interest in such property;
“(2) providing to such entity an additional or replacement lien to the extent that such stay . . . results in a decrease in the value of such entity’s interest in such property; or
“(3) granting such other relief... as will result in the realization by such entity of the indubitable equivalent of such entity’s interest in such property.”

It is common ground that the “interest in property” referred to by § 362(d)(1) includes the right of a secured creditor to have the security applied in payment of the debt upon completion of the reorganization; and that that interest is not adequately protected if the security is depreciating during the term of the stay. Thus, it is agreed that if the apartment project in this case had been declining in value petitioner would have been entitled, under § 362(d)(1), to cash payments or additional security in the amount of the decline, as § 361 describes. The crux of the present dispute is that petitioner asserts, and respondent denies, that the phrase “interest in property” also includes the secured party’s right (suspended by the stay) to take immediate possession of the defaulted security, and apply it in payment of the debt. If that right is embraced by the term, it is obviously not adequately protected unless the secured party is reimbursed for the use of the proceeds he is deprived of during the term of the stay.

The term “interest in property” certainly summons up such concepts as “fee ownership,” “life estate,” “co-ownership,” and “security interest” more readily than it does the notion of “right to immediate foreclosure.” Nonetheless, viewed in the isolated context of § 362(d)(1), the phrase could reasonably be given the meaning petitioner asserts. Statutory construction, however, is a holistic endeavor. A provision that may seem ambiguous in isolation is often clarified by the remainder of the statutory scheme — because the same terminology is used elsewhere in a context that makes its meaning clear, see, e. g., Sorenson v. Secretary of Treasury, 475 U. S. 851, 860 (1986), or because only one of the permissible meanings produces a substantive effect that is compatible with the rest of the law, see, e. g., Pilot Life Ins. Co. v. Dedeaux, 481 U. S. 41, 54 (1987); Weinberger v. Hynson, Westcott & Dunning, Inc., 412 U. S. 609, 631-632 (1973); Jarecki v. G. D. Searle & Co., 367 U. S. 303, 307-308 (1961). That is the case here. Section 362(d)(1) is only one of a series of provisions in the Bankruptcy Code dealing with the rights of secured creditors. The language in those other provisions, and the substantive dispositions that they effect, persuade us that the “interest in property” protected by § 362(d)(1) does not include a secured party’s right to immediate foreclosure.

Section 506 of the Code defines the amount of the secured creditor’s allowed secured claim and the conditions of his receiving postpetition interest. In relevant part it reads as follows:

“(a) An allowed claim of a creditor secured by a lien on property in which the estate has an interest... is a secured claim to the extent of the value of such creditor’s interest in the estate’s interest in such property,. . . and is an unsecured claim to the extent that the value of such creditor’s interest ... is less than the amount of such allowed claim. . . .
“(b) To the extent that an allowed secured claim is secured by property the value of which ... is greater than the amount of such claim, there shall be allowed to the holder of such claim, interest on such claim, and any reasonable fees, costs, or charges provided for under the agreement under which such claim arose.”

In subsection (a) of this provision the creditor’s “interest in property” obviously means his security interest without taking account of his right to immediate possession of the collateral on default. If the latter were included, the “value of such creditor’s interest” would increase, and the proportions of the claim that are secured and unsecured would alter, as the stay continues — since the value of the entitlement to use the collateral from the date of bankruptcy would rise with the passage of time. No one suggests this was intended. The phrase “value of such creditor’s interest” in § 506(a) means “the value of the collateral.” H. R. Rep. No. 95-595, pp. 181, 356 (1977); see also S. Rep. No. 95-989, p. 68 (1978). We think the phrase “value of such entity’s interest” in §361(1) and (2), when applied to secured creditors, means the same.

Even more important for our purposes than § 506’s use of terminology is its substantive effect of denying undersecured creditors postpetition interest on their claims — just as it denies oversecured creditors postpetition interest to the extent that such interest, when added to the principal amount of the claim, will exceed the value of the collateral. Section 506(b) provides that “[t]o the extent that an allowed secured claim is secured by property the value of which ... is greater than the amount of such claim, there shall be allowed to the holder of such claim, interest on such claim.” (Emphasis added.) Since this provision permits postpetition interest to be paid only out of the “security cushion,” the undersecured creditor, who has no such cushion, falls within the general rule disallowing postpetition interest. See 11 U. S. C. § 502(b)(2). If the Code had meant to give the undersecured creditor, who is thus denied interest on his claim, interest on the value of his collateral, surely this is where that disposition would have been set forth, and not obscured within the “adequate protection” provision of § 362(d)(1). Instead of the intricate phraseology set forth above, § 506(b) would simply have said that the secured creditor is entitled to interest “on his allowed claim, or on the value of the property securing his allowed claim, whichever is lesser.” Petitioner’s interpretation of § 362(d)(1) must be regarded as contradicting the carefully drawn disposition of § 506(b).

Petitioner seeks to avoid this conclusion by characterizing § 506(b) as merely an alternative method for compensating oversecured creditors, which does not imply that no compensation is available to undersecured creditors. This theory of duplicate protection for oversecured creditors is implausible even in the abstract, but even more so in light of the historical principles of bankruptcy law. Section 506(b)’s denial of postpetition interest to undersecured creditors merely codified pre-Code bankruptcy law, in which that denial was part of the conscious allocation of reorganization benefits and losses between undersecured and unsecured creditors. “To allow a secured creditor interest where his security was worth less than the value of his debt was thought to be inequitable to unsecured creditors.” Vanston Bondholders Protective Committee v. Green, 329 U. S. 156, 164 (1946). It was considered unfair to allow an undersecured creditor to recover interest from the estate’s unencumbered assets before unsecured creditors had recovered any principal. See id., at 164, 166; Ticonic Nat. Bank v. Sprague, 303 U. S. 406, 412 (1938). We think it unlikely that § 506(b) codified the pre-Code rule with the intent, not of achieving the principal purpose and function of that rule, but of providing over-secured creditors an alternative method of compensation. Moreover, it is incomprehensible why Congress would want to favor undersecured creditors with interest if they move for it under § 362(d)(1) at the inception of the reorganization process — thereby probably pushing the estate into liquidation — but not if they forbear and seek it only at the completion of the reorganization.

Second, petitioner’s interpretation of § 362(d)(1) is structurally inconsistent with 11 U. S. C. § 552. Section 552(a) states the general rule that a prepetition security interest does not reach property acquired by the estate or debtor postpetition. Section 552(b) sets forth an exception, allowing postpetition “proceeds, product, offspring, rents, or profits” of the collateral to be covered only if the security agreement expressly provides for an interest in such property, and the interest has been perfected under “applicable non-bankruptcy law.” See, e. g., In re Casbeer, 793 F. 2d 1436, 1442-1444 (CA5 1986); In re Johnson, 62 B. R. 24, 28-30 (CA9 Bkrtcy. App. Panel 1986); cf. Butner v. United States, 440 U. S. 48, 54-56 (1979) (same rule under former Bankruptcy Act). Section 552(b) therefore makes possession of a perfected security interest in postpetition rents or profits from collateral a condition of having them applied to satisfying the claim of the secured creditor ahead of the claims of unsecured creditors. Under petitioner’s interpretation, however, the undersecured creditor who lacks such a perfected security interest in effect achieves the same result by demanding the “use value” of his collateral under § 362. It is true that § 506(b) gives the oversecured creditor, despite lack of compliance with the conditions of § 552, a similar priority over unsecured creditors; but that does not compromise the principle of § 552, since the interest payments come only out of the “cushion” in which the oversecured creditor does have a perfected security interest.

Third, petitioner’s interpretation of § 362(d)(1) makes nonsense of § 362(d)(2). On petitioner’s theory, the under-secured creditor’s inability to take immediate possession of his collateral is always “cause” for conditioning the stay (upon the payment of market rate interest) under § 362(d)(1), since there is, within the meaning of that paragraph, “lack of adequate protection of an interest in property.” But § 362(d)(2) expressly provides a different standard for relief from a stay “of an act against property,” which of course includes taking possession of collateral. It provides that the court shall grant relief “if . . . (A) the debtor does not have an equity in such property [i. e., the creditor is undersecured]; and (B) such property is not necessary to an effective reorganization.” (Emphasis added.) By applying the “adequate protection of an interest in property” provision of § 362(d)(1) to the alleged “interest” in the earning power of collateral, petitioner creates the strange consequence that § 362 entitles the secured creditor to relief from the stay (1) if he is under-secured (and thus not eligible for interest under § 506(b)), or (2) if he is undersecured and his collateral “is not necessary to an effective reorganization.” This renders § 362(d)(2) a practical nullity and a theoretical absurdity. If § 362(d)(1) is interpreted in this fashion, an undersecured creditor would seek relief under § 362(d)(2) only if his collateral was not depreciating (or it was being compensated for depreciation) and he was receiving market rate interest on his collateral, but nonetheless wanted to foreclose. Petitioner offers no reason why Congress would want to provide relief for such an obstreperous and thoroughly unharmed creditor.

Section 362(d)(2) also belies petitioner’s contention that undersecured creditors will face inordinate and extortionate delay if they are denied compensation for interest lost during the stay as part of “adequate protection” under § 362(d)(1). Once the movant under § 362(d)(2) establishes that he is an undersecured creditor, it is the burden of the debtor to establish that the collateral at issue is “necessary to an effective reorganization.” See § 362(g). What this requires is not merely a showing that if there is conceivably to be an effective reorganization, this property will be needed for it; but that the property is essential for an effective reorganization that is in prospect. This means, as many lower courts, including the en banc court in this case, have properly said, that there must be “a reasonable possibility of a successful reorganization within a reasonable time.” 808 F. 2d, at 370-371, and nn. 12-13, and cases cited therein. The cases are numerous in which § 362(d)(2) relief has been provided within less than a year from the filing of the bankruptcy petition. And while the bankruptcy courts demand less detailed showings during the four months in which the debtor is given the exclusive right to put together a plan, see 11 U. S. C. §§ 1121(b), (c)(2), even within that period lack of any realistic prospect of effective reorganization will require § 362(d)(2) relief.

III

A

Petitioner contends that denying it compensation under § 362(d)(1) is inconsistent with sections of the Code other than those just discussed. Petitioner principally relies on the phrase “indubitable equivalent” in § 361(3), which also appears in 11 U. S. C. § 1129(b)(2)(A)(iii). Petitioner contends that in the latter context, which sets forth the standards for confirming a reorganization plan, the phrase has developed a well-settled meaning connoting the right of a secured creditor to receive present value of his security — thus requiring interest if the claim is to be paid over time. It is true that under § 1129(b) a secured claimant has a right to receive under a plan the present value of his collateral. This entitlement arises, however, not from the phrase “indubitable equivalent” in § 1129(b)(2)(A)(iii), but from the provision of § 1129(b)(2)(A)(i)(II) that guarantees the secured creditor “deferred cash payments ... of a value, as of the effective date of the plan, of at least the value of such [secured claimant’s] interest in the estate’s interest in such property.” (Emphasis added.) Under this formulation, even though the undersecured creditor’s “interest” is regarded (properly) as solely the value of the collateral, he must be rendered payments that assure him that value as of the effective date of the plan. In § 361(3), by contrast, the relief pending the stay need only be such “as will result in the realization... of the indubitable equivalent” of the collateral. (Emphasis added.) It is obvious (since §§361 and 362(d)(1) do not entitle the secured creditor to immediate payment of the principal of his collateral) that this “realization” is to “result” not at once, but only upon completion of the reorganization. It is then that he must be assured “realization ... of the indubitable equivalent” of his collateral. To put the point differently: similarity of outcome between § 361(3) and § 1129 would be demanded only if the former read “such other relief ... as will give such entity, as of the date of the relief, the indubitable equivalent of such entity’s interest in such property.”

Nor is there merit in petitioner’s suggestion that “indubitable equivalent” in §361(3) connotes reimbursement for the use value of collateral because the phrase is derived from In re Murel Holding Corp., 75 F. 2d 941 (CA2 1935), where it bore that meaning. Murel involved a proposed reorganization plan that gave the secured creditor interest on his collateral for 10 years, with full payment of the secured principal due at the end of that term; the plan made no provision, however, for amortization of principal or maintenance of the collateral’s value during the term. In rejecting the plan, Murel used the words “indubitable equivalence” with specific reference not to interest (which was assured), but to the jeopardized principal of the loan:

“Interest is indeed the common measure of the difference [between payment now and payment 10 years hence], but a creditor who fears the safety of his principal will scarcely be content with that; he wishes to get his money or at least the property. We see no reason to suppose that the statute was intended to deprive him of that in the interest of junior holders, unless by a substitute of the most indubitable equivalence.” Id., at 942.

Of course Murel, like § 1129, proceeds from the premise that in the confirmation context the secured creditor is entitled to present value. But no more from Murel than from § 1129 can it be inferred that a similar requirement exists as of the time of the bankruptcy stay. The reorganized debtor is supposed to stand on his own two feet. The debtor in process of reorganization, by contrast, is given many temporary protections against the normal operation of the law.

Petitioner also contends that the Code embodies a principle that secured creditors do not bear the costs of reorganization. It derives this from the rule that general administrative expenses do not have priority over secured claims. See §§ 506(c), 507(a). But the general principle does not follow from the particular rule. That secured creditors do not bear one kind of reorganization cost hardly means that they bear none of them. The Code rule on administrative expenses merely continues pre-Code law. But it was also pre-Code law that undersecured creditors were not entitled to post-petition interest as compensation for the delay of reorganization. See supra, at 373; see also infra, at 381.' Congress could hardly have understood that the readoption of the rule on administrative expenses would work a change in the rule on postpetition interest, which it also readopted.

Finally, petitioner contends that failure to interpret § 362 (d)(1) to require compensation of undersecured creditors for delay will create an inconsistency in the Code in the (admittedly rare) case when the debtor proves solvent. When that occurs, 11 U. S. C. § 726(a)(5) provides that postpetition interest is allowed on unsecured claims. Petitioner contends it would be absurd to allow postpetition interest on unsecured claims but not on the secured portion of undersecured creditors’ claims. It would be disingenuous to deny that this is an apparent anomaly, but it will occur so rarely that it is more likely the product of inadvertence than are the blatant inconsistencies petitioner’s interpretation would produce. Its inequitable effects, moreover, are entirely avoidable, since an undersecured creditor is entitled to “surrender or waive his security and prove his entire claim as an unsecured one.” United States Nat. Bank v. Chase Nat. Bank, 331 U. S. 28, 34 (1947). Section 726(a)(5) therefore requires no more than that undersecured creditors receive postpetition interest from a solvent debtor on equal terms with unsecured creditors rather than ahead of them — which, where the debtor is solvent, involves no hardship.

B

Petitioner contends that its interpretation is supported by the legislative history of §§361 and 362(d)(1), relying almost entirely on statements that “[s]ecured creditors should not be deprived of the benefit of their bargain.” H. R. Rep. No. 95-595, at 339; S. Rep. No. 95-989, at 53. Such generalizations are inadequate to overcome the plain textual indication in §§ 506 and 362(d)(2) of the Code that Congress did not wish the undersecured creditor to receive interest on his collateral during the term of the stay. If it is at all relevant, the legislative history tends to subvert rather than support petitioner’s thesis, since it contains not a hint that § 362(d)(1) entitles the undersecured creditor to postpetition interest. Such a major change in the existing rules would not likely have been made without specific provision in the text of the statute, cf. Kelly v. Robinson, 479 U. S. 36, 47 (1986); it is most improbable that it would have been made without even any mention in the legislative history.

Petitioner makes another argument based upon what the legislative history does not contain. It contends that the pre-Code law gave the undersecured creditor relief from the automatic stay by permitting him to foreclose; and that Congress would not have withdrawn this entitlement to relief without any indication of intent to do so in the legislative history, unless it was providing an adequate substitute, to wit, interest on the collateral during the stay.

The premise of this argument is flawed. As petitioner itself concedes, Brief for Petitioner 20, the undersecured creditor had no absolute entitlement to foreclosure in a Chapter X or XII case; he could not foreclose if there was a reasonable prospect for a successful rehabilitation within a reasonable time. See, e. g., In re Yale Express System, Inc., 384 F. 2d 990, 991-992 (CA2 1967) (Chapter X); In re Nevada Towers Associates, 14 Collier Bankr. Cas. (MB) 146, 151-156 (Bkrtcy. Ct. SDNY 1977) (Chapter XII); In re Consolidated Motor Inns, 6 Collier Bankr. Cas. (MB) 18, 31-32 (Bkrtcy. Ct. ND Ga. 1975) (same). Thus, even assuming petitioner is correct that the undersecured creditor had an absolute entitlement to relief under Chapter XI, Congress would have been faced with the choice between adopting the rule from Chapters X and XII or the asserted alternative rule from Chapter XI, because Chapter 11 of the current Code “replaces chapters X, XI and XII of the Bankruptcy Act” with a “single chapter for all business reorganizations.” S. Rep. No. 95-989, at 9; see also H. R. Rep. No. 95-595, at 223-224. We think § 362(d)(2) indicates that Congress adopted the approach of Chapters X and XII. In any event, as far as the silence of the legislative history on the point is concerned, that would be no more strange with respect to alteration of the asserted Chapter XI rule than it would be with respect to alteration of the Chapters X and XII rule.

Petitioner’s argument is further weakened by the fact that it is far from clear that there was a distinctive Chapter XI rule of absolute entitlement to foreclosure. At least one leading commentator concluded that “a Chapter XI court’s power to stay lien enforcement is as broad as that of a Chapter X or XII court and that the automatic stay rules properly make no distinctions between the Chapters.” Countryman, Real Estate Liens in Business Rehabilitation Cases, 50 Am. Bankr. L. J. 303, 315 (1976). Petitioner cites dicta in some Chapter XI cases suggesting that the undersecured creditor was automatically entitled to relief from the stay, but the-courts in those cases uniformly found in addition that reorganization was not sufficiently likely or was being unduly delayed. See, e. g., In re Briec of America, Inc., 4 Collier Bankr. Cas. (MB) 34, 39-40 (Bkrtcy. Ct. MD Fla. 1975); In re O. K. Motels, 1 Collier Bankr. Cas. (MB) 416, 419-420 (Bkrtcy. Ct. MD Fla. 1974). Moreover, other Chapter XI cases held undersecured creditors not entitled to foreclosure under reasoning very similar to that used in Chapters X and XII cases. See In re Coolspring Estates, Inc., 12 Collier Bankr. Cas. (MB) 55, 60-61 (Bkrtcy. Ct. ND Ind. 1977); In re The Royal Scot, Ltd., 2 Bankr. Ct. Dec. (CRR) 374, 376-377 (Bkrtcy. Ct. WD Mich. 1976); In re Mesker Steel, Inc., 1 Bankr. Ct. Dec. (CRR) 235, 236-237 (Bkrtcy. Ct. SD Ind. 1974). The at best divided authority under Chapter XI removes all cause for wonder that the alleged departure from it should not have been commented upon in the legislative history.

The Fifth Circuit correctly held that the undersecured petitioner is not entitled to interest on its collateral during the stay to assure adequate protection under 11 U. S. C. § 362(d)(1). Petitioner has never sought relief from the stay under § 362(d)(2) or on any ground other than lack of adequate protection. Accordingly, the judgment of the Fifth Circuit is

Affirmed.

       See, e. g., In re Findley, 76 B. R. 547, 555 (Bkrtcy. Ct. ND Miss. 1987) (6½ months); In re Efcor, Inc., 74 B. R. 837, 843-845 (Bkrtcy. Ct. MD Pa. 1987) (4½ months); In re Belton Inns, Inc., 71 B. R. 811, 818 (Bkrtcy. Ct. SD Iowa 1987) (1 year); In re Louden, 69 B. R. 723, 725-726 (Bkrtcy. Ct. ED Mo. 1987) (10 months); In re Playa Development Corp., 68 B. R. 549, 556 (Bkrtcy. Ct. WD Tex. 1986) (7½ months); In re Cablehouse, Ltd., 68 B. R. 309, 313 (Bkrtcy. Ct. SD Ohio 1986) (11½ months); In re Pacific Tuna Corp., 48 B. R. 74, 78 (Bkrtcy. Ct. WD Tex. 1985) (9 months); In re Development, Inc., 36 B. R. 998, 1005-1006 (Bkrtcy. Ct. Haw. 1984) (6 months); In re Boca Development Associates, 21 B. R. 624, 630 (Bkrtcy. Ct. SDNY 1982) (7½ months); In re Sundale Associates, Ltd., 11 B. R. 978, 980-981 (Bkrtcy. Ct. SD Fla. 1981) (5 months); In re Clark Technical Associates, Ltd., 9 B. R. 738, 740-741 (Bkrtcy. Ct. Conn. 1981) (9 months).

       See, e. g., In re Anderson Oaks (Phase I) Limited Partnership, 77 B. R. 108, 109, 110-113 (Bkrtcy. Ct. WD Tex. 1987) (“immediately after the bankruptcy filings”); In re New American Food Concepts, Inc., 70 B. R. 254, 262 (Bkrtcy. Ct. ND Ohio 1987) (3 months); In re 6200 Ridge, Inc., 69 B. R. 837, 843-844 (Bkrtcy. Ct. ED Pa. 1987) (3 months); In re Park Timbers, Inc., 58 B. R. 647, 651 (Bkrtcy. Ct. Del. 1985) (2 months); In re Bellina’s Restaurants II, Inc., 52 B. R. 509, 512 (Bkrtcy. Ct. SD Fla. 1985) (1 month); In re Anchorage Boat Sales, Inc., 4 B. R. 635, 641 (Bkrtcy. Ct. EDNY 1980) (4 months); In re Terra Mar Associates, 3 B. R. 462, 466 (Bkrtcy. Ct. Conn. 1980) (2 months).