source: Caselaw Access Project

author: Justice Brennan Justice Stevens, Justice O’Connor,

license: Public Domain

text:
    DelCOSTELLO v. INTERNATIONAL BROTHERHOOD OF TEAMSTERS et al.
    No. 81-2386.
    Argued April 25, 1983
    Decided June 8, 1983

      Brennan, J., delivered the opinion of the Court, in which Burger, C. J., and White, Marshall, Blackmun, Powell, and Rehnquist, JJ., joined. Stevens, J., post, p. 172, and O’Connor, J., post, p. 174, filed dissenting opinions.

      William H. Zinman argued the cause for petitioner in No. 81-2386. With him on the briefs was Paul A. Levy. Robert M. Weinberg argued the cause for petitioners in No. 81-2408. With him on the briefs were Michael H. Gottesman, Bernard Kleiman, Carl Frankel, and Laurence Gold.

      Bernard S. Goldfarb argued the cause for respondents in No. 81-2386 and filed a brief for respondent Anchor Motor Freight, Inc. Isaac N. Groner, by appointment of the Court, 459 U. S. 1143, argued the cause and filed a brief for respondents in No. 81-2408. Carl S. Yaller and Bernard W. Ruben-stein filed a brief for respondent Local 557, International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America in No. 81-2386.

      Together with No. 81-2408, United Steelworkers of America, AFL-CIO-CLC, et al. v. Flowers et al., on certiorari to the United States Court of Appeals for the Second Circuit.

         Steven C. Kahn and Stephen A. Bokat filed a brief for the Chamber of Commerce of the United States as amicus curiae urging reversal in both cases. Alan B. Morrison filed a brief for Teamsters for a Democratic Union as amicus curiae urging reversal in No. 81-2386.

        David Previant, Robert M. Baptiste, and Roland P. Wilder, Jr., filed a brief for the International Brotherhood of Teamsters, Chauffeurs, Ware-housemen and Helpers of America as amicus curiae urging affirmance in No. 81-2386.

        Michael L. Boylan and Teddy B. Gordon filed a brief for Gordon L. Higgins as amicus curiae in No. 81-2408.

   Justice Brennan

delivered the opinion of the Court.

Each of these cases arose as a suit by an employee or employees against an employer and a union, alleging that the employer had breached a provision of a collective-bargaining agreement, and that the union had breached its duty of fair representation by mishandling the ensuing grievance-and-arbitration proceedings. See infra, at 162; Bowen v. USPS, 459 U. S. 212 (1983); Vaca v. Sipes, 386 U. S. 171 (1967); Hines v. Anchor Motor Freight, Inc., 424 U. S. 554 (1976). The issue presented is what statute of limitations should apply to such suits. In United Parcel Service, Inc. v. Mitchell, 451 U. S. 56 (1981), we held that a similar suit was governed by a state statute of limitations for vacation of an arbitration award, rather than by a state statute for an action on a contract. We left two points open, however. First, our holding was limited to the employee’s claim against the employer; we did not address what state statute should govern the claim against the union. Second, we expressly limited our consideration to a choice between two state statutes of limitations; we did not address the contention that we should instead borrow a federal statute of limitations, namely, § 10(b) of the National Labor Relations Act, 29 U. S. C. § 160(b). These cases present these two issues. We conclude that § 10(b) should be the applicable statute of limitations governing the suit, both against the employer and against the union.

I

A

Philip DelCostello, petitioner in No. 81-2386, was employed as a driver by respondent Anchor Motor Freight, Inc., and represented by respondent Teamsters Local 557. On June 27,1977, he quit or was discharged after refusing to drive a tractor-trailer that he contended was unsafe. He took his complaint to the union, which made unsuccessful informal attempts to get DelCostello reinstated and then brought a formal grievance under the collective-bargaining agreement. A hearing was held before a regional joint union-management committee. The committee concluded that the grievance was without merit. DelCostello was informed of that decision in a letter dated August 19, 1977, forwarding the minutes of the hearing and stating that the minutes would be presented for approval at the committee’s meeting on September 20. DelCostello responded in a letter, but the minutes were approved without change. Under the collective-bargaining agreement, the committee’s decision is final and binding on all parties.

On March 16, 1978, DelCostello filed this suit in the District of Maryland against the employer and the union. He alleged that the employer had discharged him in violation of the collective-bargaining agreement, and that the union had represented him in the grievance procedure “in a discriminatory, arbitrary and perfunctory manner,” App. in No. 81-2386, p. 19, resulting in an unfavorable decision by the joint committee. Respondents asserted that the suit was barred by Maryland’s 30-day statute of limitations for actions to vacate arbitration awards. The District Court disagreed, holding that the applicable statute was the 3-year state statute for actions on contracts. 510 F. Supp. 716 (1981). On reconsideration following our decision in Mitchell, however, the court granted summary judgment for respondents, concluding that Mitchell compelled application of the 30-day statute to both the claim against the employer and the claim against the union. 524 F. Supp. 721 (1981). The Court of Appeals affirmed on the basis of the District Court’s order. 679 F. 2d 879 (CA4 1982) (mem.).

B

Donald C. Flowers and King E. Jones, respondents in No. 81-2408, were employed as craft welders by Bethlehem Steel Corp. and represented by petitioner Steelworkers Local 2602. In 1975 and 1976 respondents filed several grievances asserting that the employer had violated the collective-bargaining agreement by assigning certain welding duties to employees in other job categories and departments of the plant, with the result that respondents were laid off or assigned to noncraft work. The union processed the grievances through the contractually established procedure and, failing to gain satisfaction, invoked arbitration. On February 24, 1978, the arbitrator issued an award for the employer, ruling that the employer’s job assignments were permitted by the collective-bargaining agreement.

Respondents filed this suit in the Western District of New York on January 9, 1979, naming both the employer and the union as defendants. The complaint alleged that the company’s work assignments violated the collective-bargaining agreement, and that the union’s “preparation, investigation and handling” of respondents’ grievances were “so inept and careless as to be arbitrary and capricious,” in violation of the union’s duty of fair representation. App. in No. 81-2408, p. 10. The District Court dismissed the complaint against both defendants, holding that the entire suit was governed by New York’s 90-day statute of limitations for actions to vacate arbitration awards. The Court of Appeals reversed on the basis of its prior holding in Mitchell v. United Parcel Service, Inc., 624 F. 2d 394 (CA2 1980), that such actions are governed by New York’s 6-year statute for actions on contracts. Flowers v. Local 2602, United Steel Workers of America, 622 F. 2d 573 (CA2 1980) (mem.). We granted certiorari and vacated and remanded for reconsideration in light of our reversal in Mitchell. Steelworkers v. Flowers, 451 U. S. 965 (1981). On remand, the Court of Appeals rejected the argument that the 6-month period of § 10(b) applies. Accordingly, following our decision in Mitchell, it applied the 90-day arbitration statute and affirmed the dismissal as to the employer. As to the union, however, the court reversed, concluding that the correct statute to apply was New York’s 3-year statute for malpractice actions. 671 F. 2d 87 (CA2 1982).

C

In this Court, petitioners in both cases contend that suits under Vaca v. Sipes, 386 U. S. 171 (1967), and Hines v. Anchor Motor Freight, Inc., 424 U. S. 554 (1976), should be governed by the 6-month limitations period of § 10(b) of the National Labor Relations Act, 29 U. S. C. § 160(b). Alternatively, the Steelworkers, petitioners in No. 81-2408, argue that the state statute for vacation of arbitration awards should apply to a claim against a union as well as to one against an employer. We granted certiorari in both cases and consolidated them for argument. 459 U. S. 1034 (1982).

l-H

A

As is often the case in federal civil law, there is no federal statute of limitations expressly applicable to this suit. In such situations we do not ordinarily assume that Congress intended that there be no time limit on actions at all; rather, our task is to “borrow” the most suitable statute or other rule of timeliness from some other source. We have generally concluded that Congress intended that the courts apply the most closely analogous statute of limitations under state law. “The implied absorption of State statutes of limitation within the interstices of the federal enactments is a phase of fashioning remedial details where Congress has not spoken but left matters for judicial determination within the general framework of familiar legal principles.” Holmberg v. Armbrecht, 327 U. S. 392, 395 (1946). See, e. g., Runyon v. McCrary, 427 U. S. 160, 180-182 (1976); Chevron Oil Co. v. Huson, 404 U. S. 97, 101-105 (1971); Auto Workers v. Hoosier Cardinal Corp., 383 U. S. 696 (1966); Chattanooga Foundry v. Atlanta, 203 U. S. 390 (1906); Campbell v. Haverhill, 155 U. S. 610 (1895).

In some circumstances, however, state statutes of limitations can be unsatisfactory vehicles for the enforcement of federal law. In those instances, it may be inappropriate to conclude that Congress would choose to adopt state rules at odds with the purpose or operation of federal substantive law.

“[T]he Court has not mechanically applied a state statute of limitations simply because a limitations period is absent from the federal statute. State legislatures do not devise their limitations periods with national interests in mind, and it is the duty of the federal courts to assure that the importation of state law will not frustrate or interfere with the implementation of national policies. ‘Although state law is our primary guide in this area, it is not, to be sure, our exclusive guide.’” Occidental Life Ins. Co. v. EEOC, 432 U. S. 355, 367 (1977), quoting Johnson v. Railway Express Agency, Inc., 421 U. S. 454, 465 (1975).

Hence, in some cases we have declined to borrow state statutes but have instead used timeliness rules drawn from federal law — either express limitations periods from related federal statutes, or such alternatives as laches. In Occidental, for example, we declined to apply state limitations periods to enforcement suits brought by the Equal Employment Opportunity Commission under Title VII of the 1964 Civil Rights Act, reasoning that such application might unduly hinder the policy of the Act by placing too great an administrative burden on the agency. In McAllister v. Magnolia Petroleum Co., 357 U. S. 221 (1958), we applied the federal limitations provision of the Jones Act to a seaworthiness action under general admiralty law. We pointed out that the two forms of claim are almost invariably brought together. Hence, “with an eye to the practicalities of admiralty personal injury litigation,” id., at 224, we held inapplicable a shorter state statute governing personal injury suits. Again, in Holmberg, we held that state statutes of limitations would not apply to a federal cause of action lying only in equity, because the principles of federal equity are hostile to the “mechanical rules” of statutes of limitations. 327 U. S., at 396.

Auto Workers v. Hoosier Cardinal Corp. was a straightforward suit under § 301 of the Labor Management Relations Act, 29 U. S. C. § 185, for breach of a collective-bargaining agreement by an employer. Unlike the present cases, Hoosier did not involve any agreement to submit disputes to arbitration, and the suit was brought by the union itself rather than by an individual employee. We held that the suit was governed by Indiana’s 6-year limitations period for actions on unwritten contracts; we resisted the suggestion that we establish some uniform federal period. Although we recognized that “the subject matter of § 301 is ‘peculiarly one that calls for uniform law/” 383 U. S., at 701, quoting Teamsters v. Lucas Flour Co., 369 U. S. 95, 103 (1962), we reasoned that national uniformity is of less importance when the case does not involve “those consensual processes that federal labor law is chiefly designed to promote — the formation of the collective agreement and the private settlement of disputes under it,” 383 U. S., at 702. We also relied heavily on the obvious and close analogy between this variety of § 301 suit and an ordinary breach-of-contract case. We expressly reserved the question whether we would apply state law to § 301 actions where the analogy was less direct or the relevant policy factors different:

“The present suit is essentially an action for damages caused by an alleged breach of an employer’s obligation embodied in a collective bargaining agreement. Such an action closely resembles an action for breach of contract cognizable at common law. Whether other §301 suits different from the present one might call for the application of other rules on timeliness, we are not required to decide, and we indicate no view whatsoever on that question. See, e. g., Holmberg v. Armbrecht, 327 U. S. 392 ....” 383 U. S., at 705, n. 7.

Justice Stewart, who wrote the Court’s opinion in Hoosier, took this caution to heart in Mitchell. He concurred separately in the judgment, arguing that the factors that compelled adoption of state law in Hoosier did not apply to suits under Vaca and Hines, and that in the latter situation we should apply the federal limitations period of § 10(b). 451 U. S., at 65-71. As we shall explain, we agree.

B

It has long been established that an individual employee may bring suit against his employer for breach of a collective-bargaining agreement. Smith v. Evening News Assn., 371 U. S. 195 (1962). Ordinarily, however, an employee is required to attempt to exhaust any grievance or arbitration remedies provided in the collective-bargaining agreement. Republic Steel Corp. v. Maddox, 379 U. S. 650 (1965); cf. Clayton v. Automobile Workers, 451 U. S. 679 (1981) (exhaustion of intraunion remedies not always required). Subject to very limited judicial review, he will be bound by the result according to the finality provisions of the agreement. See W. R. Grace & Co. v. Rubber Workers, 461 U. S. 757, 764 (1983); Steelworkers v. Enterprise Corp., 363 U. S. 593 (1960). In Vaca and Hines, however, we recognized that this rule works an unacceptable injustice when the union representing the employee in the grievance/arbitration procedure acts in such a discriminatory, dishonest, arbitrary, or perfunctory fashion as to breach its duty of fair representation. In such an instance, an employee may bring suit against both the employer and the union, notwithstanding the outcome or finality of the grievance or arbitration proceeding. Vaca v. Sipes, 386 U. S. 171 (1967); Hines v. Anchor Motor Freight, Inc., 424 U. S. 554 (1976); United Parcel Service, Inc. v. Mitchell, 451 U. S. 56 (1981); Bowen v. USPS, 459 U. S. 212 (1983); Czosek v. O’Mara, 397 U. S. 25 (1970). Such a suit, as a formal matter, comprises two causes of action. The suit against the employer rests on § 301, since the employee is alleging a breach of the collective-bargaining agreement. The suit against the union is one for breach of the union’s duty of fair representation, which is implied under the scheme of the National Labor Relations Act. “Yet the two claims are inextricably interdependent. ‘To prevail against either the company or the Union, . . . [employee-plaintiffs] must not only show that their discharge was contrary to the contract but must also carry the burden of demonstrating breach of duty by the Union.’” Mitchell, supra, at 66-67 (Stewart, J., concurring in judgment), quoting Hines, supra, at 570-571. The employee may, if he chooses, sue one defendant and not the other; but the case he must prove is the same whether he sues one, the other, or both. The suit is thus not a straightforward breach-of-contract suit under §301, as was Hoosier, but a hybrid § 301/fair representation claim, amounting to “a direct challenge to ‘the private settlement of disputes under [the collective-bargaining agreement].”’ Mitchell, supra, at 66 (Stewart, J., concurring in judgment), quoting Hoosier, 383 U. S., at 702. Also unlike the claim in Hoosier, it has no close analogy in ordinary state law. The analogies suggested in Mitchell both suffer from flaws, not only of legal substance, but more important, of practical application in view of the policies of federal labor law and the practicalities of hybrid § 301/fair representation litigation.

In Mitchell, we analogized the employee’s claim against the employer to an action to vacate an arbitration award in a commercial setting. We adhere to the view that, as between the two choices, it is more suitable to characterize the claim that way than as a suit for breach of contract. Nevertheless, the parallel is imperfect in operation. The main difference is that a party to commercial arbitration will ordinarily be represented by counsel or, at least, will have some experience in matters of commercial dealings and contract negotiation. Moreover, an action to vacate a commercial arbitral award will rarely raise any issues not already presented and contested in the arbitration proceeding itself. In the labor setting, by contrast, the employee will often be unsophisticated in collective-bargaining matters, and he will almost always be represented solely by the union. He is called upon, within the limitations period, to evaluate the adequacy of the union’s representation, to retain counsel, to investigate substantial matters that were not at issue in the arbitration proceeding, and to frame his suit. Yet state arbitration statutes typically provide very short times in which to sue for vacation of arbitration awards. Concededly, the very brevity of New York’s 90-day arbitration limitations period was a major factor why, in Mitchell, we preferred it to the 6-year statute for breach of contract, 451 U. S., at 63-64; but it does not follow that because 6 years is too long, 90 days is long enough. See also Hoosier, swpra, at 707, n. 9. We conclude that state limitations periods for vacating arbitration awards fail to provide an aggrieved employee with a satisfactory opportunity to vindicate his rights under § 301 and the fair representation doctrine.

Moreover, as Justice Stevens pointed out in his opinion in Mitchell, analogy to an action to vacate an arbitration award is problematic at best as applied to the employee’s claim against the union:

“The arbitration proceeding did not, and indeed, could not, resolve the employee’s claim against the union. Although the union was a party to the arbitration, it acted only as the employee’s representative; the [arbitration panel] did not address or resolve any dispute between the employee and the union .... Because no arbitrator has decided the primary issue presented by this claim, no arbitration award need be undone, even if the employee ultimately prevails.” 451 U. S., at 73 (opinion concurring in part and dissenting in part) (footnotes omitted).

Justice Stevens suggested an alternative solution for the claim against the union: borrowing the state limitations period for legal malpractice. Id., at 72-75; see post, at 174 (Stevens, J., dissenting);post, at 175 (O’Connor, J., dissenting). The analogy here is to a lawyer who mishandles a commercial arbitration. Although the short limitations period for vacating the arbitral award would protect the interest in finality of the opposing party to the arbitration, the misrepresented party would retain his right to sue his lawyer for malpractice under a longer limitations period. This solution is admittedly the closest state-law analogy for the claim against the union. Nevertheless, we think that it too suffers from objections peculiar to the realities of labor relations and litigation.

The most serious objection is that it does not solve the problem caused by the too-short time in which an employee could sue his employer under borrowed state law. In a commercial setting, a party who sued his lawyer for bungling an arbitration could ordinarily recover his entire damages, even if the statute of limitations foreclosed any recovery against the opposing party to the arbitration. The same is not true in the § 301/fair representation setting, however. vWe held in Vaca, and reaffirmed this Term in Bowen, that the union may be held liable only for “increases if any in [the employee’s] damages caused by the union’s refusal to process the grievance.” 386 U. S., at 197-198; 459 U, S., at 223-224; see Czosek, 397 U. S., at 29. Thus, if we apply state limitations periods, a large part of the damages will remain uncollectible in almost every case unless the employee sues within the time allotted for his suit against the employer.

Further, while application of a short arbitration period as against employers would endanger employees’ ability to recover most of what is due them, application of a longer malpractice statute as against unions would preclude the relatively rapid final resolution of labor disputes favored by federal law — a problem not present when a party to a commercial arbitration sues his lawyer. In No. 81-2408, for example, the holding of the Court of Appeals would permit a suit as long as three years after termination of the grievance proceeding; many States provide for periods even longer. What we said in Mitchell about the 6-year contracts statute urged there can as easily be said here:

“It is important to bear in mind the observations made in the Steelworkers Trilogy that ‘the grievance machinery under a collective bargaining agreement is at the very heart of the system of industrial self-government. . . . The processing . . . machinery is actually a vehicle by which meaning and content are given to the collective bargaining agreement.’ Steelworkers v. Warrior & Gulf Navigation Co., 363 U. S. 574, 581 (1960). Although the present case involves a fairly mundane and discrete wrongful-discharge complaint, the grievance and arbitration procedure often processes disputes involving interpretation of critical terms in the collective-bargaining agreement affecting the entire relationship between company and union.... This system, with its heavy emphasis on grievance, arbitration, and the ‘law of the shop,’ could easily become unworkable if a decision which has given ‘meaning and content’ to the terms of an agreement, and even affected subsequent modifications of the agreement, could suddenly be called into question as much as [three] years later.” 451 U. S., at 63-64.

See also Hoosier, 383 U. S., at 706-707; Machinists v. NLRB, 362 U. S. 411, 425 (1960).

These objections to the resort to state law might have to be tolerated if state law were the only source reasonably available for borrowing, as it often is. In this case, however, we have available a federal statute of limitations actually designed to accommodate a balance of interests very similar to that at stake here — a statute that is, in fact, an analogy to the present lawsuit more apt than any of the suggested state-law parallels. We refer to § 10(b) of the National Labor Relations Act, which establishes a 6-month period for making charges of unfair labor practices to the NLRB.

The NLRB has consistently held that all breaches of a union’s duty of fair representation are in fact unfair labor practices. E. g., Miranda Fuel Co., 140 N. L. R. B. 181 (1962), enf. denied, 326 F. 2d 172 (CA2 1963). We have twice declined to decide the correctness of the Board’s position, and we need not address that question today. Even if not all breaches of the duty are unfair labor practices, however, the family resemblance is undeniable, and indeed there is a substantial overlap. Many fair representation claims (the one in No. 81-2386, for example) include allegations of discrimination based on membership status or dissident views, which would be unfair labor practices under § 8(b)(1) or (2). Aside from these clear cases, duty of fair representation claims are allegations of unfair, arbitrary, or discriminatory treatment of workers by unions — as are virtually all unfair labor practice charges made by workers against unions. See generally R. Gorman, Labor Law 698-701 (1976). Similarly, it may be the case that alleged violations by an employer of a collective-bargaining agreement will also amount to unfair labor practices. See id., at 729-734.

At least as important as the similarity of the rights asserted in the two contexts, however, is the close similarity of the considerations relevant to the choice of a limitations period. As Justice Stewart observed in Mitchell:

“In § 10(b) of the NLRA, Congress established a limitations period attuned to what it viewed as the proper balance between the national interests in stable bargaining relationships and finality of private settlements, and an employee’s interest in setting aside what he views as an unjust settlement under the collective-bargaining system. That is precisely the balance at issue in this case. The employee’s interest in setting aside the ‘final and binding’ determination of a grievance through the method established by the collective-bargaining agreement unquestionably implicates ‘those consensual processes that federal labor law is chiefly designed to promote — the formation of the . . . agreement and the private settlement of disputes under it.’ Hoosier, 383 U. S., at 702. Accordingly, ‘[t]he need for uniformity’ among procedures followed for similar claims, ibid., as well as the clear congressional indication of the proper balance between the interests at stake, counsels the adoption of § 10(b) of the NLRA as the appropriate limitations period for lawsuits such as this.” 451 U. S., at 70-71 (opinion concurring in judgment) (footnote omitted).

We stress that our holding today should not be taken as a departure from prior practice in borrowing limitations periods for federal causes of action, in labor law or elsewhere. We do not mean to suggest that federal courts should eschew use of state limitations periods anytime state law fails to provide a perfect analogy. See, e. g., Mitchell, 451 U. S., at 61, n. 3. On the contrary, as the courts have often discovered, there is not always an obvious state-law choice for application to a given federal cause of action; yet resort to state law remains the norm for borrowing of limitations periods. Nevertheless, when a rule from elsewhere in federal law clearly provides a closer analogy than available state statutes, and when the federal policies at stake and the practicalities of litigation make that rule a significantly more appropriate vehicle for interstitial lawmaking, we have not hesitated to turn away from state law. See Part II-A, swpra. As Justice Goldberg cautioned: “[I]n this Court’s fashioning of a federal law of collective bargaining, it is of the utmost importance that the law reflect the realities of industrial life and the nature of the collective bargaining process. We should not assume that doctrines evolved in other contexts will be equally well adapted to the collective bargaining process.” Humphrey v. Moore, 375 U. S. 335, 358 (1964) (opinion concurring in result).

Ill

In No. 81-2408, it is conceded that the suit was filed more than 10 months after respondents’ causes of action accrued. The Court of Appeals held the suit timely under a state 3-year statute for malpractice actions. Since we hold that the suit is governed by the 6-month provision of § 10(b), we reverse the judgment.

The situation is less clear in No. 81-2386. Depending on when the joint committee’s decision is thought to have been rendered, the suit was filed some seven or eight months afterwards. Petitioner DelCostello contends, however, that certain events operated to toll the running of the statute of limitations until about three months before he filed suit. Since the District Court applied a 30-day limitations period, it expressly declined to consider any tolling issue. 524 F. Supp., at 725. Hence, the judgment is reversed, and the case is remanded for further proceedings consistent with this opinion.

It is so ordered.

Justice Stevens,

dissenting.

For the past century federal judges have “borrowed” state statutes of limitations, not because they thought it was a sensible form of “interstitial law making,” but rather because they were directed to do so by the Congress of the United States.

Today the Court holds that the Rules of Decision Act does not determine the result in these cases, because it believes that a separate federal law, growing out of “the policies and requirements of the underlying cause of action,” ante, at 159, n. 13, “otherwise require[s] or provide[s].” The Court’s opinion sets forth a number of reasons why it may make good sense to adopt a 6-month statute of limitations, but nothing in that opinion persuades me that the Constitution, treaties, or statutes of the United States “require or provide” that this particular limitations period must be applied to this case.

Congress has given us no reason to depart from our settled practice, grounded in the Rules of Decision Act, of borrowing analogous state statutes of limitation in cases such as this. For the reasons set forth in my separate opinion in United Parcel Service, Inc. v. Mitchell, 451 U. S. 56, 71 (1981), I believe that in a suit for a breach of the duty of fair representation, the appropriate “laws of the several states” are the statutes of limitations governing malpractice suits against attorneys. I would apply those laws to resolve the worker-union disputes in these two cases. And I would continue to abide by our holding in Mitchell in resolving the employee-employer dispute presented in No. 81-2886.

For these reasons, I respectfully dissent.

Justice O’Connor,

dissenting.

As the Court recognizes, “resort to state law [is] the norm for borrowing of limitations periods.” Ante, at 171. When federal law is silent on the question of limitations, we borrow state law in the belief that, given our longstanding practice and congressional awareness of it, we can safely assume, in the absence of strong indications to the contrary, that Congress intends by its silence that we follow the usual rule. In Auto Workers v. Hoosier Cardinal Corp., 383 U. S. 696 (1966), we applied the “norm” to a suit under §301 of the Labor Management Relations Act, 29 U. S. C. § 185.. I see no reason in these cases to depart from our usual practice of borrowing state law, for we have no contrary indications strong enough to outweigh our ordinary presumption that Congress’ silence indicates a desire that we follow the ordinary rule. As a result, I would look to state law for a limitations period. For the reasons given by Justice Stevens in his separate opinion in United Parcel Service, Inc. v. Mitchell, 451 U. S. 56, 72-74 (1981), I think that a malpractice action against an attorney provides the closest analogy to an employee’s suit against his union for breach of the duty of fair representation, and I would apply the State’s statute of limitations for such an action here. In DelCostello’s action against his employer, I, like Justice Stevens, would follow Mitchell.

       Only the employer sought certiorari in Mitchell. Hence, the case did not present the question of what limitations period should be applied to the employee’s claim against the union. See 451 U. S., at 60; id,., at 71-75, and n. 1 (Stevens, J., concurring in part and dissenting in part).

       49 Stat. 453. That section provides in pertinent part:
      “Provided... no complaint shall issue based upon any unfair labor practice occurring more than six months prior to the filing of the charge with the Board and the service of a copy thereof upon the person against whom such charge is made . . . .”
      The petition for certiorari in Mitchell presented only the question of which state statute of limitations should apply. The parties did not contend in this Court or below that a federal limitations period should be used instead of analogous state law. Only an amicus suggested that it would be more appropriate to use § 10(b); moreover, application of § 10(b) rather than the state arbitration statute of limitations would not have changed the outcome of the case. Hence, we declined to address the issue. 451 U. S., at 60, n. 2.
      Justice Stewart, concurring in the judgment, would have reached the issue and would have applied § 10(b) rather than any state limitations period. Id., at 65-71. See also id., at 64-65 (Blackmun, J., concurring); but see id., at 75-76, and nn. 8, 9 (Stevens, J., concurring in part and dissenting in part).

       The employer contends that DelCostello’s refusal to perform his work assignment was a “voluntary quit”; DelCostello contends that he was wrongfully discharged. The joint grievance committee upheld the employer’s view.

       Md. Cts. & Jud. Proc. Code Ann. § 3-224 (1980).

       §5-101.

       Respondents argue that DelCostello did not raise the argument below that the applicable limitations period is the 6-month period of § 10(b). He did raise the § 10(b) point perfunctorily in opposition to respondents’ motion for reconsideration, however, App. in No. 81-2386, p. 264, and he briefed it more thoroughly in the Court of Appeals, id., at 282-290. Respondents likewise addressed the § 10(b) issue fully on the merits in the Court of Appeals; they did not raise any contention that DelCostello had waived the assertion. Brief for Appellees in No. 81-2086 (CA4), pp. 41-45.

       The other petitioner is the United Steelworkers of America, with which the Local is affiliated. The two labor organizations will be treated as one party for purposes of this case. Bethlehem Steel Corp. was a defendant below but is not before this Court in the present proceeding.

       N. Y. Civ. Prac. Law § 7511(a) (McKinney 1980).

       §213(2).

       §214(6).

       DelCostello (petitioner in No. 81-2386) also contends that, if we decide that application of state law is appropriate, our decision in Mitchell should not be applied retroactively. We need not reach this contention.

       In some instances, of course, there may be some direct indication in the legislative history suggesting that Congress did in fact intend that state statutes should apply. More often, however, Congress has not given any express consideration to the problem of limitations periods. In such cases, the general preference for borrowing state limitations periods could more aptly be called a sort of fallback rule of thumb than a matter of ascertaining legislative intent; it rests on the assumption that, absent some sound reason to do otherwise, Congress would likely intend that the courts follow their previous practice of borrowing state provisions. See also Auto Workers v. Hoosier Cardinal Corp., 383 U. S. 696, 703-704 (1966).
      Justice Stewart pointed out in Mitchell that this line of reasoning makes more sense as applied to a cause of action expressly created by Congress than as applied to one found by the courts to be implied in a general statutory scheme — especially when that general statutory scheme itself contains a federal statute of limitations for a related but separate form of relief. 451 U. S., at 68, n. 4 (opinion concurring in judgment); see also McAllister v. Magnolia Petroleum Co., 357 U. S. 221, 228-229 (1958) (Brennan, J., concurring). The suits at issue here, of course, are amalgams, based on both an express statutory cause of action and an implied one. See infra, at 164-165, and n. 14. We need not address whether, as a general matter, such cases should be treated differently; even if this action were considered as arising solely under § 301 of the Labor Management Relations Act, 29 U. S. C. § 185, the objections to use of state law and the availability of a well-suited limitations period in § 10(b) would call for application of the latter rule.

       Respondents in No. 81-2386 argue that the Rules of Decision Act, 28 U. S. C. § 1652, mandates application of state statutes of limitations whenever Congress has provided none. The argument begs the question, since the Act authorizes application of state law only when federal law does not “otherwise require or provide.” As we recognized in Hoosier, supra, at 701, the choice of a limitations period for a federal cause of action is itself a question of federal law. If the answer to that question (based on the policies and requirements of the underlying cause of action) is that a timeliness rule drawn from elsewhere in federal law should be applied, then the Rules of Decision Act is inapplicable by its own terms. As we said in United States v. Little Lake Misere Land Co., 412 U. S. 580 (1973):
      “There will often be no specific federal legislation governing a particular transaction . . . ; here, for example, no provision of the . . . Act guides us to choose state or federal law in interpreting . . . agreements under the Act. . . . But silence on that score in federal legislation is no reason for limiting the reach of federal, law .... To the contrary, the inevitable incompleteness presented by all legislation means that interstitial federal lawmaking is a basic responsibility of the federal courts. ‘At the very least, effective Constitutionalism requires recognition of power in the federal courts to declare, as a matter of common law or “judicial legislation,” rules which may be necessary to fill in interstitially or otherwise effectuate the statutory patterns enacted in the large by Congress. In other words, it must mean recognition of federal judicial competence to declare the governing law in an area comprising issues substantially related to an established program of government operation.’” Id., at 598, quoting Mishkin, The Variousness of “Federal Law”: Competence and Discretion in the Choice of National and State Rules for Decision, 105 U. Pa. L. Rev. 797, 800 (1957).
      See also Westen & Lehman, Is There Life for Erie After the Death of Diversity?, 78 Mich. L. Rev. 311, 352-359, and nn. 122 and 142, 368-370, 377-378, 380, n. 207, 381-385 (1980); n. 21, infra.

      Respondents in No. 81-2386 rely on a few turn-of-the-century cases suggesting that the Rules of Decision Act compels application of state limitations periods. See also post, at 173, n. 1 (Stevens, J., dissenting). These cases, however, predate our recognition in Erie R. Co. v. Tompkins, 304 U. S. 64 (1938), that “the purpose of the section was merely to make certain that, in all matters except those in which some federal law is controlling, the federal courts exercising jurisdiction in diversity of citizenship cases would apply as their rules of decision the law of the State, unwritten as well as written.” Id., at 72-73 (footnote omitted); see also Warren, New Light on the History of the Federal Judiciary Act of 1789, 37 Harv. L. Rev. 49, 81-88 (1923). Since Erie, no decision of this Court has held or suggested that the Act requires borrowing state law to fill gaps in federal substantive statutes. Of course, we have continued since Erie to apply state limitations periods to many federal causes of action; but we made clear in Holmberg v. Armbrecht, 327 U. S. 392, 394-395 (1946), that we do so as a matter of interstitial fashioning of remedial details under the respective substantive federal statutes, and not because the Rules of Decision Act or the Erie doctrine requires it. “The considerations that urge adjudication by the same law in all courts within a State when enforcing a right created by that State are hardly relevant for determining the rules which bar enforcement of [a] . . . right created not by a State legislature but by Congress.” 327 U. S., at 394; see also Guaranty Trust Co. v. York, 326 U. S. 99, 101 (1945); Board of Comm’rs v. United States, 308 U. S. 343, 349-352 (1939); Hoosier, 383 U. S., at 703-704; id., at 709 (White, J., dissenting); Employees v. Westinghouse Corp., 348 U. S. 437, 463 (1955) (Reed, J., concurring).
      We do not suggest that the Erie doctrine is wholly irrelevant to all federal causes of action. On the contrary, where Congress directly or impliedly directs the courts to look to state law to fill in details of federal law, Erie will ordinarily provide the framework for doing so. See, e. g., Commissioner v. Estate of Bosch, 387 U. S. 456, 463-465 (1967) (applying Erie rules as to the proper source of state law in a tax case); 1A J. Moore, W. Taggart, A. Vestal, & J. Wicker, Moore’s Federal Practice ¶ 0.325 (2d ed. 1982); 19 C. Wright, A. Miller, & E. Cooper, Federal Practice and Procedure § 4515 (1982); Westen & Lehman, supra. But, as Holmberg recognizes, neither Erie nor the Rules of Decision Act can now be taken as establishing a mandatory rule that we apply state law in federal interstices. Indeed, the contrary view urged by respondents cannot be reconciled with the numerous cases that have declined to borrow state law, see infra, at 162-163, nor with our suggestion in Hoosier that we might not apply state limitations periods in a different case, 383 U. S., at 705, n. 7, 707, n. 9.

       The duty of fair representation exists because it is the policy of the National Labor Relations Act to allow a single labor organization to represent collectively the interests of all employees within a unit, thereby depriving individuals in the unit of the ability to bargain individually or to select a minority union as their representative. In such a system, if individual employees are not to be deprived of all effective means of protecting their own interests, it must be the duty of the representative organization “to serve the interests of all members without hostility or discrimination toward any, to exercise its discretion with complete good faith and honesty, and to avoid arbitrary conduct.” Vaca v. Sipes, 386 U. S. 171, 177 (1967). See generally Steele v. Louisville & N. R. Co., 323 U. S. 192 (1944); Ford Motor Co. v. Huffman, 345 U. S. 330, 337 (1953); Syres v. Oil Workers, 350 U. S. 892 (1955); Humphrey v. Moore, 375 U. S. 335, 342 (1964); R. Gorman, Labor Law 695-728 (1976). The duty stands “as a bulwark to prevent arbitrary union conduct against individuals stripped of traditional forms of redress by the provisions of federal labor law.” Vaca, supra, at 182.

       The majority of States require filing within 90 days (22 States and the District of Columbia) or 3 months (7 States). See also 9 U. S. C. § 12. Only two States have longer periods — one for one year, the other for 100 days. Other statutes allow 30 days (6 States), 20 days (3 States), or 10 days (2 States). The remainder of the States either impose time limits based on terms of court or have no statutory provision on point.

       Besides its brevity, use of an arbitration limitations period raises knotty problems of categorization and consistency. Application of an arbitration statute seems straightforward enough when a grievance has run its full course, culminating in a formal award by a neutral arbitrator. But the union’s breach of duty may consist of a wrongful failure to pursue a grievance to arbitration, as in Vaca and Bowen, or a refusal to pursue it through even preliminary stages. The parallel to vacation of an arbitral award seems tenuous at best in these situations; it is doubtful that many state arbitration statutes would themselves cover such a case in a commercial setting. Yet if it were thought necessary to apply different state rules to these different possibilities, the result would be radical variation in the treatment of cases that are not significantly different with regard to the principles of Vaca, Hines, and Mitchell. Moreover, the difficulty of de-teeting and mustering evidence to show the union’s breach of duty may be even greater in these situations, and it may not be an easy task to ascertain when the cause of action accrues — obviously a matter of great importance when the statute of limitations may be as short as 30 days.

       Inability to sue the employer would also foreclose use of such equitable remedies as an order to arbitrate. See Vaca, 386 U. S., at 196.

       One State’s limitations period for legal malpractice is 10 years. Other statutes allow six years (10 States); five years .[4 States); four years (5 States); three years (10 States and the District of Columbia); two years (16 States); and one year (4 States).

       The solution proposed by Justice Stevens also has the unfortunate effect of establishing different limitations periods for the two halves of a § 301/fair representation suit. A very similar consideration led us to reject borrowing of a state statute in McAllister v. Magnolia Petroleum Co., 357 U. S. 221 (1958). See also Vaca, supra, at 186-188, and n. 12; Clayton v. Automobile Workers, 451 U. S. 679, 694-695 (1981).

       This is not to say that the sole options available are a federal statute of limitations or a state one. As Holmberg and Occidental show, see supra, at 161,162, we have sometimes concluded that Congress’ intention can best be carried out by imposing no predefined limitations period at all.

       Justice Stevens suggested in Mitchell that use of § 10(b) is inappropriate because there is no indication in its language or history that Congress intended the section to be applied in the present context. 451 U. S., at 75-76, and nn. 8, 9 (opinion concurring in part and dissenting in part). With all respect, we think that this observation, while undoubtedly correct, is beside the point. The same could be said with equal or greater accuracy about the intent of the New York and Maryland Legislatures when they enacted their respective arbitration or malpractice statutes of limitations. See Occidental Life Ins. Co. v. EEOC, 432 U. S. 355, 367 (1977); n. 12, supra. In either situation we are applying a statute of limitations to a different cause of action, not because the legislature enacting that limitations provision intended that it apply elsewhere, but because it is the most suitable source for borrowing to fill a gap in federal law. See also Mitchell, 451 U. S., at 61, n. 3; n. 13, supra.

         Vaca, supra, at 186; Humphrey, 375 U. S., at 344; see Mitchell, 451 U. S., at 67-68, n. 3 (Stewart, J., concurring in judgment).

       In 1789 the First Congress enacted the Rules of Decision Act (Act), Rev. Stat. § 721, 1 Stat. 92, plainly stating:
      “That the laws of the several states, except where the constitution, treaties or statutes of the United States shall otherwise require or provide, shall be regarded as rules of decision in trials at common law in the courts of the United States in cases where they apply.”
      In 1895, construing that Act, we held that state statutes of limitations provided the relevant rules of decision in patent infringement actions, explaining:
      “That this section [Rev. Stat. § 721] embraces the statutes of limitations of the several States has been decided by this court in a large number of cases, which are collated in its opinion in Bauserman v. Blunt, 147 U. S. 647 .... Indeed, to no class of state legislation has the above provision been more steadfastly and consistently applied than to statutes prescribing the time within which actions shall be brought within its jurisdiction.” Campbell v. Haverhill, 155 U. S. 610, 614.
      Accord, McClaine v. Rankin, 197 U. S. 154 (1905). In response to the suggestion that the Act was not intended to govern nondiversity cases raising federal questions — such as patent suits or suits under the National Labor Relations Act — we bluntly observed that “[t]he section itself neither contains nor suggests such a distinction.” 155 U. S., at 616.

       When the Court recognized the cause of action in Vaca v. Sipes, 386 U. S. 171 (1967), the majority explained: “We cannot believe that Congress, in conferring upon employers and unions the power to establish exclusive grievance procedures, intended to confer upon unions. . . unlimited discretion to deprive injured employees of all remedies for breach of contract.” Id., at 186. But nothing in the language, structure, or legislative history of the National Labor Relations Act compels the further conclusion that Congress intended the federal judiciary to abandon the traditional practice of borrowing state statutes of limitations when no federal statute directly applies. Saying that a statute impliedly creates a cause of action is not the same thing as saying that it impliedly commands the courts to abandon the standard procedure for choosing limitations periods and instead to borrow a period that Congress established for a different purpose.

       I believe, basically for the reasons given by the Court, ante, at 159-161, n. 13, that our practice of borrowing state periods of limitations depends largely on this general guide for divining congressional intent. See, e. g., Auto Workers v. Hoosier Cardinal Corp., 383 U. S. 696, 704 (1966); Holmberg v. Armbrecht, 327 U. S. 392, 395(1946). I agree with the Court that the Rules of Decision Act, 28 U. S. C. § 1652, only puts the question, for it simply requires application of state law unless federal law applies. See ante, at 159-161, n. 13. Therefore, I am unable to join Justice Stevens’ dissent. My disagreement with the Court arises because I do not think that federal law implicitly rejects the practice of borrowing state periods of limitations in this situation.

       It is quite appropriate to apply Mitchell retroactively. Mitchell did not represent a “clear break” with past law, see Mitchell, 451 U. S., at 61-62, application of its rule in this case would further the goal of promoting early finality for arbitral awards, id., at 63, and there is no inequity in applying the rule here. See Lawson v. Truck Drivers, Chauffeurs & Helpers, 698 P. 2d 250, 254 (CA6 1983); see generally Chevron Oil Co. v. Huson, 404 U. S. 97 (1971).


author: Justice Marshall

text:
    EXXON CORP. et al. v. EAGERTON, COMMISSIONER OF REVENUE OF ALABAMA, et al.
    No. 81-1020.
    Argued February 22, 1983
    Decided June 8, 1983

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

      Rae M. Crowe argued the cause for appellants in No. 81-1268. With him on the briefs was Euel A. Screws, Jr. C. B. Arendall, Jr., argued the cause for appellants in No. 81-1020. With him on the briefs was Louis E. Braswell.

      John J. Breckenridge, Jr., argued the cause for appellees in both cases. With him on the briefs were Charles A. Grad-dick and Herbert I. Burson, Jr.

      Together with No. 81-1268, Exchange Oil & Gas Corp. et al. v. Eagerton, Commissioner of Revenue of Alabama, also on appeal from the same court.

         Solicitor General Lee, Elliott Schulder, David A. Engels, and Jerome M. Feit filed a brief for the United States et al. as amici curiae urging reversal.

   Justice Marshall

delivered the opinion of the Court.

These cases concern an Alabama statute which increased the severance tax on oil and gas extracted from Alabama wells, exempted royalty owners from the tax increase, and prohibited producers from passing on the increase to their purchasers. Appellants challenge the pass-through prohibition and the royalty-owner exemption under the Supremacy Clause, the Contract Clause, and the Equal Protection Clause.

I

Since 1945 Alabama has imposed a severance tax on oil and gas extracted from wells located in the State. Ala. Code § 40-20-1 et seq. (1975). The tax “is levied upon the producers of such oil or gas in the proportion of their ownership at the time of severance, but. . . shall be paid by the person in charge of the production operations.” §40-20-3(a). The person in charge of production operations is “authorized, empowered and required to deduct from any amount due to producers of such production at the time of severance the proportionate amount of the tax herein levied before making payments to such producers.” §40-20-3(a). The statute defines a “producer” as “[a]ny person engaging or continuing in the business of oil or gas production,” including

“the owning, controlling, managing, or leasing of any oil or gas property or oil or gas well, and producing in any manner any oil or gas . . . and . . . receiving money or other valuable consideration as royalty or rental for oil or gas produced. §40-20-1(8).

In 1979 the Alabama Legislature enacted Act 79-434, which increased the severance tax from 4% to 6% of the gross value of the oil and gas at the point of production. Whereas the severance tax had previously fallen on royalty owners in proportion to their interests in the oil or gas produced, the amendment specifically exempted royalty owners from the tax increase:

“Any person who is a royalty owner shall be exempt from the payment of any increase in taxes herein levied and shall not be liable therefor.” 1979 Ala. Acts, No. 79-434, p. 687, §1, as amended, Ala. Code §40-20-2(d) (1982).

The amendment also prohibited producers from passing the tax increase through to consumers:

“The privilege tax herein levied shall be absorbed and paid by those persons engaged in the business of producing or severing oil or gas only, and the producer shall not pass on the costs of such tax payments, either directly or indirectly, to the consumer; it being the express intent of this act that the tax herein levied shall be borne exclusively by the producer or severer of oil or gas.” 1979 Ala. Acts, No. 79-434, p. 687, § 1(e).

The amendment became effective on September 1, 1979. The pass-through prohibition was repealed on May 28, 1980. 1980 Ala. Acts, No. 80-708, p. 1438.

Appellants in both No. 81-1020 and No. 81-1268 have working interests in producing oil and gas wells located in Alabama. They drill and operate the wells and are responsible for selling the oil and gas extracted. Appellants are obligated to pay the landowners a percentage of the sale proceeds as royalties, the percentage depending upon the provisions of the applicable lease. Within any given production unit, there may be tracts of land which the owners of the land have leased to non working interests, who are also entitled to a share of the sale proceeds. Appellants were parties to contracts providing for the allocation of severance taxes among themselves, the royalty owners, and any nonworking interests in proportion to each party’s share of the sale proceeds. Appellants were also parties to sale contracts that required the purchasers to reimburse them for any and all severance taxes on the oil or gas sold.

After paying the 2% increase in the severance tax under protest, appellants and eight other oil and gas producers filed suit in the Circuit Court of Montgomery County, Ala., seeking a declaratory judgment that Act 79-434 was unconstitutional and a refund of the taxes paid under protest. The Circuit Court ruled in favor of appellants, concluding that both the royalty-owner exemption and the pass-through prohibition violate the Equal Protection Clause and the Contract Clause, and that the pass-through prohibition is also preempted by the Natural Gas Policy Act of 1978 (NGPA), 15 U. S. C. §3301 et seq. (1976 ed., Supp. V). Although Act 79-434 contained a severability clause, the court held the entire Act invalid and ordered appellee Commissioner of Revenue of the State of Alabama to refund the taxes paid under protest. The Supreme Court of Alabama reversed, holding Act 79-434 valid in its entirety. 404 So. 2d 1 (1981).

Appellants appealed to this Court under 28 U. S. C. §1257(2). We noted probable jurisdiction. 456 U. S. 970 (1982). We now affirm in part, reverse in part, and remand for further proceedings not inconsistent with this opinion.

HH HH

We deal first with appellants’ contention that the application of the pass-through prohibition to gas was pre-empted by federal law. The applicable principles of pre-emption were recently summarized in Pacific Gas & Electric Co. v. State Energy Resources Conservation & Development Comm’n, 461 U. S. 190, 203-204 (1983):

“Absent explicit pre-emptive language, Congress’ intent to supersede state law altogether may be found from a '“scheme of federal regulation ... so pervasive as to make reasonable the inference that Congress left no room for the States to supplement it,” because “the Act of Congress may touch a field in which the federal interest is so dominant that the federal system will be assumed to preclude enforcement of state laws on the same subject,” or because “the object sought to be obtained by the federal law and the character of obligations imposed by it may reveal the same purpose.” ’ Fidelity Federal Savings & Loan Assn. v. De la Cuesta, 458 U. S. 141, 153 (1982), quoting Rice v. Santa Fe Elevator Corp., 331 U. S. 218, 230 (1947). Even where Congress has not entirely displaced state regulation in a specific area, state law is pre-empted to the extent that it actually conflicts with federal law. Such a conflict arises when ‘compliance with both federal and state regulations is a physical impossibility,’ Florida Lime & Avocado Growers, Inc. v. Paul, 373 U. S. 132, 142-143 (1963), or where state law ‘stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.’ Hines v. Davidowitz, 312 U. S. 52, 67 (1941).”

Appellants contend that the pass-through prohibition was in conflict with § 110(a) of the NGPA, 92 Stat. 3368, 15 U. S. C. § 3320(a) (1976 ed., Supp. V), which provides in pertinent part as follows:

“[A] price for the first sale of natural gas shall not be considered to exceed the maximum lawful price applicable to the first sale of such natural gas under this part if such first sale price exceeds the maximum lawful price to the extent necessary to recover—
“(1) State severance taxes attributable to the production of such natural gas and borne by the seller . . .

We agree with the Supreme Court of Alabama that the pass-through prohibition did not conflict with this provision. On its face § 110(a) of the NGPA does not give any seller the affirmative right to include in his price an amount necessary to recover state severance taxes. It simply provides that a seller who does include such an amount in his price shall not be deemed to have exceeded the federal price ceiling if he would not have exceeded it had that amount not been included. Nothing in the legislative history of the NGPA has been called to our attention to indicate that § 110(a) was intended to have a greater effect than its language would indicate.

Although the pass-through prohibition thus was not in conflict with § 110(a) of the NGPA, we nevertheless conclude that it was pre-empted by federal law insofar as it applied to sales of gas in interstate commerce. To that extent, the pass-through prohibition represented an attempt to legislate in a field that Congress has chosen to occupy. The Natural Gas Act (Gas Act), 52 Stat. 821, as amended, 15 U. S. C. §§717-717w (1976 ed. and Supp. V), was enacted in 1938 “to provide the Federal Power Commission, now the FERC, with authority to regulate the wholesale pricing of natural gas in the flow of interstate commerce from wellhead to delivery to consumers.” Maryland v. Louisiana, 451 U. S. 725, 748 (1981). As we have previously recognized, e. g., Phillips Petroleum Co. v. Wisconsin, 347 U. S. 672, 682-683 (1954); id., at 685-687 (Frankfurter, J., concurring), the Gas Act was intended to occupy the field of wholesale sales of natural gas in interstate commerce, a field which had previously been left largely unregulated as a result of the absence of federal action and decisions of this Court striking down state regulation of sales of natural gas in interstate commerce. The Committee Reports on the bill that became the Gas Act clearly evidence this intent:

“[S]ales for resale, or so-called wholesale sales, in interstate commerce (for example, sales by producing companies to distributing companies)... have been considered to be not local in character and, even in the absence of Congressional action, not subject to State regulation. The basic purpose of the present legislation is to occupy this field in which the Supreme Court has held that the States may not act.” H. R. Rep. No. 709, 75th Cong., 1st Sess., 1-2 (1937); S. Rep. No. 1162, 75th Cong., 1st Sess., 2 (1937) (citations omitted) (emphasis added).

The Alabama pass-through prohibition trespassed upon FERC’s authority over wholesale sales of gas in interstate commerce, for it barred gas producers from increasing their prices to pass on a particular expense — the increase in the severance tax — to their purchasers. Whether or not producers should be permitted to recover this expense from their purchasers is a matter within the sphere of FERC’s regulatory authority. See FPC v. United Gas Pipe Line Co., 386 U. S. 237, 243 (1967) (emphasis added):

“One of [the FPC’s] statutory duties is to determine just and reasonable rates which will be sufficient to permit the company to recover its costs of service and a reasonable return on its investment. Cost of service is therefore a major focus of inquiry. Normally included as a cost of service is a proper allowance for taxes . . . .”

Here, as in Maryland v. Louisiana, the state statute “interfere[d] with the FERC’s authority to regulate the determination of the proper allocation of costs associated with the sale of natural gas to consumers.” 451 U. S., at 749. Just as the statute at issue in Maryland v. Louisiana was preempted because it effectively “shift[ed] the incidence of certain expenses ... to the ultimate consumer of the processed gas without the prior approval of the FERC,” id., at 750, Alabama’s pass-through prohibition was pre-empted, insofar as it applied to sales of gas in interstate commerce, because it required that certain expenses be absorbed by producers.

We reach a different conclusion with respect to the application of the pass-through prohibition to sales of gas in intrastate commerce. Although § 105(a) of the NGPA extended federal authority to control prices to the intrastate market, 15 U. S. C. § 3315(a) (1976 ed., Supp. V), Congress also provided that this extension of federal authority did not deprive the States of the power to establish a price ceiling for intrastate producer sales of gas at a level lower than the federal ceiling. Section 602(a) of the NGPA, 92 Stat. 3411, as set forth in 15 U. S. C. §3432(a) (1976 ed., Supp. V), states that

“[n]othing in this chapter shall affect the authority of any State to establish or enforce any maximum lawful price for the first sale of natural gas produced in such State which does not exceed the applicable maximum lawful price, if any, under subchapter I of this chapter.”

See Energy Reserves Group, Inc. v. Kansas Power & Light Co., 459 U. S. 400, 420-421 (1983) (in enacting the NGPA, "Congress explicitly envisioned that the States would regulate intrastate markets in accordance with the overall national policy”).

Since a State may establish a lower price ceiling, we think it may also impose a severance tax and forbid sellers to pass it through to their purchasers. For sellers charging the maximum price allowed by federal law, a state tax increase coupled with a pass-through prohibition will not differ in practical effect from a state tax increase coupled with the imposition of a state price ceiling that maintains the price ceiling imposed by federal law prior to the tax increase. In both cases sellers are required to absorb expenses that they might be able to pass through to their customers absent the state restrictions. Given the absence of any express pre-emption provision in the NGPA and Congress’ express approval of one form of state regulation, we do not think it can fairly be inferred that Congress contemplated that the general scheme created by the NGPA would preclude another form of state regulation that is no more intrusive.

We conclude that the pass-through prohibition was preempted by federal law insofar as it applied to sales of gas in interstate commerce, but not insofar as it applied to producer sales of gas in intrastate commerce.

h-i hH

We turn next to appellants’ contention that the royalty-owner exemption and the pass-through prohibition impaired the obligations of contracts in violation of the Contract Clause.

A

Appellants’ Contract Clause challenge to the royalty-owner exemption fails for the simple reason that there is nothing to suggest that that exemption nullified any contractual obligations of which appellants were the beneficiaries. The relevant provision of Act 79-434 states that “[a]ny person who is a royalty owner shall be exempt from the payment of any increase in taxes levied and shall not be liable therefor.” On its face this portion of the Act provides only that the legal incidence of the tax increase does not fall on royalty owners, i. e., the State cannot look to them for payment of the additional taxes. In contrast to the pass-through prohibition, the royalty-owner exemption nowhere states that producers may not shift the burden of the tax increase in whole or in part to royalty owners. Nor is there anything in the opinion below to suggest that the Supreme Court of Alabama interpreted the exemption to have this effect. We will not strain to reach a constitutional question by speculating that the Alabama courts might in the future interpret the royalty-owner exemption to forbid enforcement of a contractual arrangement to shift the burden of the tax increase. See Ashwander v. TVA, 297 U. S. 288, 346-347 (1936) (Brandeis, J., concurring).

B

Unlike the royalty-owner exemption, the pass-through prohibition did restrict contractual obligations of which appellants were the beneficiaries. Appellants were parties to sale contracts that permitted them to include in their prices any increase in the severance taxes that they were required to pay on the oil or gas being sold. The contracts were entered into before the pass-through prohibition was enacted and their terms extended through the period during which the prohibition was in effect. By barring appellants from passing the tax increase through to their purchasers, the pass-through prohibition nullified pro tanto the purchasers’ contractual obligations to reimburse appellants for any severance taxes.

While the pass-through prohibition thus affects contractual obligations of which appellants were the beneficiaries, it does not follow that the prohibition constituted a “Law impairing the Obligations of Contracts” within the meaning of the Contract Clause. See United States Trust Co. v. New Jersey, 431 U. S. 1, 21 (1977). “Although the language of the Contract Clause is facially absolute, its prohibition must be accommodated to the inherent police power of the State ‘to safeguard the vital interests of its people.’” Energy Reserves Group, Inc. v. Kansas Power & Light Co., 459 U. S., at 410, quoting Home Bldg. & Loan Assn. v. Blaisdell, 290 U. S. 398, 434 (1934). This Court has long recognized that a statute does not violate the Contract Clause simply because it has the effect of restricting, or even barring altogether, the performance of duties created by contracts entered into prior to its enactment. See Allied Structural Steel Co. v. Spannaus, 438 U. S. 234, 241-242 (1978). If the law were otherwise, “one would be able to obtain immunity from state regulation by making private contractual arrangements.” United States Trust Co. v. New Jersey, supra, at 22.

The Contract Clause does not deprive the States of their “broad power to adopt general regulatory measures without being concerned that private contracts will be impaired, or even destroyed, as a result.” United States Trust Co. v. New Jersey, supra, at 22. As Justice Holmes put it: “One whose rights, such as they are, are subject to state restriction, cannot remove them from the power of the State by making a contract about them. The contract will carry with it the infirmity of the subject matter.” Hudson Co. v. McCarter, 209 U. S. 349, 357 (1908). Thus, a state prohibition law may be applied to contracts for the sale of beer that were valid when entered into, Beer Co. v. Massachusetts, 97 U. S. 25 (1878), a law barring lotteries may be applied to lottery tickets that were valid when issued, Stone v. Mississippi, 101 U. S. 814 (1880), and a workmen’s compensation law may be applied to employers and employees operating under pre-existing contracts of employment that made no provision for work-related injuries, New York Central R. Co. v. White, 243 U. S. 188 (1917).

Like the laws upheld in these cases, the pass-through prohibition did not prescribe a rule limited in effect to contractual obligations or remedies, but instead imposed a generally applicable rule of conduct designed to advance “a broad societal interest,” Allied Structural Steel Co., supra, at 249: protecting consumers from excessive prices. The prohibition applied to all oil and gas producers, regardless of whether they happened to be parties to sale contracts that contained a provision permitting them to pass tax increases through to their purchasers. The effect of the pass-through prohibition on existing contracts that did contain such a provision was incidental to its main effect of shielding consumers from the burden of the tax increase. Cf. Henderson Co. v. Thompson, 300 U. S. 258, 266 (1937); Beer Co. v. Massachusetts, supra, at 32.

Because the pass-through prohibition imposed a generally applicable rule of conduct, it is sharply distinguishable from the measures struck down in United States Trust Co. v. New Jersey, supra, and Allied Structural Steel Co. v. Spannaus, supra. United States Trust Co. involved New York and New Jersey statutes whose sole effect was to repeal a covenant that the two States had entered into with the holders of bonds issued by The Port Authority of New York and New Jersey. Similarly, the statute at issue in Allied Structural Steel Co. directly “‘adjusted] the rights and responsibilities of contracting parties.’” 438 U. S., at 244, quoting United States Trust Co. v. New Jersey, supra, at 22. The statute required a private employer that had contracted with its employees to provide pension benefits to pay additional benefits, beyond those it had agreed to provide, if it terminated the pension plan or closed a Minnesota office. Since the statute applied only to employers that had entered into pension agreements, its sole effect was to alter contractual duties. Cf. Worthen Co. v. Kavanaugh, 295 U. S. 56 (1935) (statute which drastically limited the remedies available to mortgagees held invalid under the Contract Clause).

Alabama’s power to prohibit oil and gas producers from passing the increase in the severance tax on to their purchasers is confirmed by several decisions of this Court rejecting Contract Clause challenges to state rate-setting schemes that displaced any rates previously established by contract. In Midland Realty Co. v. Kansas City Power & Light Co., 300 U. S. 109 (1937), it was held that a party to a long-term contract with a utility could not invoke the Contract Clause to obtain immunity from a state public service commission’s imposition of a rate for steam heating that was higher than the rate established in the contract. The Court declared that “the State has power to annul and supersede rates previously established by contract between utilities and their customers.” Id., at 113 (footnote omitted). In Union Dry Goods Co. v. Georgia Public Service Cory., 248 U. S. 372 (1919), the Court rejected a Contract Clause challenge to an order of a state commission setting the rates that could be charged for supplying electric light and power, notwithstanding the effect of the order on pre-existing contracts. Accord, Stephenson v. Binford, 287 U. S. 251 (1932) (upholding law which barred private contract carriers from using the highways unless they charged rates which might exceed those they had contracted to charge).

Producers Transportation Co. v. Railroad Comm’n of California, 251 U. S. 228 (1920), is particularly instructive for present purposes. In that case the Court upheld an order issued by a state commission under a newly enacted statute empowering the commission to set the rates that could be charged by individuals or corporations offering to transport oil by pipeline. The Court rejected the contention of a pipeline owner that the statute could not override preexisting contracts:

“That some of the contracts ... were entered into before the statute was adopted or the order made is not material. A common carrier cannot by making contracts for future transportation or by mortgaging its property or pledging its income prevent or postpone the exertion by the State of the power to regulate the carrier’s rates and practices. Nor does the contract clause of the Constitution interpose any obstacle to the exertion of that power.” Id., at 232.

There is no material difference between Producers Transportation Co. and the cases before us. If a party that has entered into a contract to transport oil is not immune from subsequently enacted state regulation of the rates that may be charged for such transportation, parties that have entered into contracts to sell oil and gas likewise are not immune from state regulation of the prices that may be charged for those commodities. And if the Contract Clause does not prevent a State from dictating the price that sellers may charge their customers, plainly it does not prevent a State from requiring that sellers absorb a tax increase themselves rather than pass it through to their customers. If one form of state regulation is permissible under the Contract Clause notwithstanding its incidental effect on pre-existing contracts, the other form of regulation must be permissible as well.

i — i

Finally, we reject appellants’ equal protection challenge to the pass-through prohibition and the royalty-owner exemption. Because neither of the challenged provisions adversely affects a fundamental interest, see, e. g., Dunn v. Blumstein, 405 U. S. 330, 336-342 (1972); Shapiro v. Thompson, 394 U. S. 618, 629-631 (1969), or contains a classification based upon a suspect criterion, see, e. g., Graham v. Richardson, 403 U. S. 365, 372 (1971); McLaughlin v. Florida, 379 U. S. 184, 191-192 (1964), they need only be tested under the lenient standard of rationality that this Court has traditionally applied in considering equal protection challenges to regulation of economic and commercial matters. See, e. g., Western & Southern Life Ins. Co. v. State Board of Equalization, 451 U. S. 648, 668 (1981); Minnesota v. Clover Leaf Creamery Co., 449 U. S. 456, 461-463 (1981); Kotch v. Board of River Pilot Comm’rs, 330 U. S. 552, 564 (1947). Under that standard a statute will be sustained if the legislature could have reasonably concluded that the challenged classification would promote a legitimate state purpose. See, e. g., Western & Southern Life Ins. Co., supra, at 668; Clover Leaf Creamery Co., supra, at 461-462, 464.

We conclude that the measures at issue here pass muster under this standard. The pass-through prohibition plainly bore a rational relationship to the State’s legitimate purpose of protecting consumers from excessive prices. Similarly, we think the Alabama Legislature could have reasonably determined that the royalty-owner exemption would encourage investment in oil or gas production. Our conclusion with respect to the royalty-owner exemption is reinforced by the fact that that provision is solely a tax measure. As we recently stated in Regan v. Taxation with Representation of Washington, 461 U. S. 540, 547 (1983), “[legislatures have especially broad latitude in creating classifications and distinctions in tax statutes.” See Lehnhausen v. Lake Shore Auto Parts Co., 410 U. S. 356, 359 (1973); Allied Stores of Ohio v. Bowers, 358 U. S. 522, 526-527 (1959).

V

For the foregoing reasons, we conclude that the application of the pass-through prohibition to sales of gas in interstate commerce was pre-empted by federal law, but we uphold both the pass-through prohibition and the royalty-owner exemption against appellants’ challenges under the Contract Clause and the Equal Protection Clause. Since the sever-ability of the pass-through prohibition from the remainder of the 1979 amendments is a matter of state law, we remand to the Supreme Court of Alabama for that court to determine whether the partial invalidity of the pass-through prohibition entitles appellants to a refund of some or all of the taxes paid under protest. See n. 6, supra. Accordingly, the judgment of the Supreme Court of Alabama is affirmed in part and reversed in part, and the case is remanded for further proceedings not inconsistent with this opinion.

It is so ordered.

       The amount of tax that is due and payable constitutes “a first lien upon any of the oil or gas so produced when in the possession of the original producer or any purchaser of such oil or gas in its unmanufactured state or condition.” §40-20-3(a).

       Appellants in No. 81-1020 are Exxon Corp., Gulf Oil Corp., and the Louisiana Land and Exploration Co. Appellants in No. 81-1268 are Exchange Oil and Gas Corp., Getty Oil Co., and Union Oil Co. of California.

       The Supremacy Clause of the Constitution provides that “[t]his Constitution, and the Laws of the United States which shall be made in Pursuance thereof. . . shall be the supreme Law of the Land . . . any Thing in the Constitution or Laws of any State to the contrary notwithstanding.” Art. VI, cl. 2.
      Although appellants in No. 81-1268 also contend that the application of the pass-through prohibition to oil was pre-empted by the Emergency Petroleum Allocation Act of 1973 (EPAA), 16 U. S. C. § 751 et seq. (1976 ed. and Supp. V), and the regulations promulgated thereunder, we conclude that we have no jurisdiction to consider this contention. The decision below does not discuss this issue, and when “ ‘the highest state court has failed to pass upon a federal question, it will be assumed that the omission was due to want of proper presentation in the state courts, unless the aggrieved party in this Court can affirmatively show the contrary.’ ” Fuller v. Oregon, 417 U. S. 40, 50, n. 11 (1974), quoting Street v. New York, 394 U. S. 576, 582 (1969). No such showing has been made here. Although appellants in No. 81-1268 have represented to this Court that the trial court held the pass-through prohibition to be pre-empted by the EPAA, Juris. Statement 3, an examination of the trial court opinion reveals that in fact the court made no mention of the EPAA.. Nor does anything in the record before us indicate that this issue was raised in the trial court. Appellants did address the EPAA in their brief before the Supreme Court of Alabama, Brief for Appellees Exchange Oil and Gas Corp., Getty Oil Co., Placid Oil Co., Union Oil Co. of California in No. 79-823, pp. 51-53, but that court did not pass on the issue. Under these circumstances we have no jurisdiction to consider whether the EPAA pre-empted the application of the pass-through prohibition to oil, for it does not affirmatively appear that that issue was decided below. Bailey v. Anderson, 326 U. S. 203, 206-207 (1945). The general practice of the Alabama appellate courts is not to consider issues raised for the first time on appeal. See, e. g., State v. Newberry, 336 So. 2d 181, 182 (Ala. 1976); State v. Graf, 280 Ala. 71, 72, 189 So. 2d 912, 913 (1966); Burton v. Burton, 379 So. 2d 617, 618 (Civ. App. 1980); Crews v. Houston County Dept. of Pensions & Security, 358 So. 2d 451, 455 (Civ. App.), cert. denied, 358 So. 2d 456 (Ala. 1978).
      Appellants in No. 81-1268 have also burdened this Court with a labored argument that they were denied due process by the Supreme Court of Alabama’s refusal to consider the legislative history of the 1979 amendments to the state severance tax, a history which, according to appellants, shows that those amendments were intended to apply only to certain wells located in one county in the State and not to apply statewide. Suffice it to say that the weight to be given to the legislative history of an Alabama statute is a matter of Alabama law to be determined by the Supreme Court of Alabama.

       See 404 So. 2d, at 6:
      “Nowhere in that section [§ 110(a) of the NGPA] is it stated that the oil companies are entitled to ‘pass-through’ increases on state severance taxes. Rather, the Act merely provides that the lawful ceiling on the first sale at the wellhead may be raised if a severance tax is imposed by the states. The two Acts are aimed at entirely different purposes. In other words, although it would be perfectly permissible for the oil and gas companies to raise the price for the first sale of natural gas, subject to the limitations of the Natural Gas Policy Act, all that Act No. 79-434 requires is that the increase in severance tax mandated by that Act be borne by the producer or severer of the oil or gas.”
      Relying on this passage, appellee Commissioner of Revenue contends that the pass-through prohibition did not bar a producer from increasing its price by an amount equal to the increase in the severance tax, provided that the producer did not label that increase a tax:
      “The Commissioner believes that the seller may include in the lawful maximum price an amount equal to Alabama’s severance taxes borne by the seller resulting from the production of natural gas. The Commissioner believes that it was the intent of the Alabama Legislature in adopting the pass-through prohibition that it did not want to be perceived as levying an additional tax on the consumer. Therefore it prohibited anyone from passing along the increase levied by Act 79-434 as a tax.” Brief for Appellee Eagerton 16-17 (emphasis in original).
      We do not agree with appellee that the Supreme Court of Alabama interpreted the pass-through prohibition to leave sellers free to pass through the tax increase so long as they did not tell their customers that that is what they were doing. The statute contains no language that would suggest this limitation, and as we understand the opinion below, the point of the passage relied upon by appellee was only that the pass-through prohibition did not conflict with federal law.

       Although the United States and the Federal Energy Regulatory Commission (FERC) in their amicus brief point to the statement in the Conference Report that “[a]Il ceiling prices under this Act are exclusive of State severance taxes borne by the seller . . . H. R. Conf. Rep. No. 95-1752, p. 90 (1978), we do not see how this statement supports their position that the pass-through prohibition was in conflict with § 110(a).

       The parties stipulated that a substantial portion of the gas extracted by appellants was sold in interstate commerce. App. in No. 81-1020, pp. 78, 184-185. Because the trial court concluded that the pass-through prohibition was in conflict with § 110(a) of the NGPA, it did not determine how much of the taxes at issue in this case were levied on gas sold in intrastate and interstate commerce. If, on remand, when the Supreme Court of Alabama inquires into the question of severability, see infra, at 196-197, that court holds that the Alabama Legislature would have intended to impose the tax increase on the severance of gas if and only if the increase could not be passed through to consumers when the gas is sold, such a determination may have to be made.

       We note that these cases do not involve any attempt by a State to prohibit gas producers from passing through the cost of a factor of production such as labor or machinery. Such a prohibition might raise additional considerations not present here because of the inducement it would create for producers to shift away from the factor of production to which the pass-through prohibition applied.

       The Contract Clause provides that “No State shall . . . pass any . . . Law impairing the Obligation of Contracts . . . .” U. S. Const., Art. I, § 10, cl. 1.

       The contracts into which appellants had entered appear to entitle them to reimbursement from the royalty owners for a share of any severance tax paid by appellants in proportion to the royalty owners’ interest in the oil or gas, regardless of whether state law imposes that tax on the producer or on the royalty owner. Appellants cite the following contractual provisions as typical of the agreements which they contend are impaired by the royalty-owner exemption:
      “Lessor shall bear and pay, and there shall be deducted from the royalties due hereunder, Lessor’s proportionate royalty share of:
      “(a) All applicable severance, production and other such taxes levied or imposed upon production from the leased premises.” App. in No. 81-1020, pp. 76-77.
      “LESSOR AND LESSEE shall bear in proportion to their respective participation in the production hereunder, all taxes levied on minerals covered hereby or any part thereof, or on the severance or production thereof, and all increases ... in taxes on the lease premises or any part thereof.” Id., at 184.
      These provisions would seem to entitle appellants to recover from the royalty owners a portion of the tax increase in proportion to the royalty owners’ interests in the proceeds of the oil or gas sold by appellants, regardless of the legal incidence of the tax increase.
      Even if these contractual provisions were to be interpreted to entitle appellants to reimbursement only for that portion of the severance tax which state law itself imposes on the royalty owners, appellants would still have no objection under the Contract Clause. In that event, the increase in the severance tax would be absorbed by appellants not because the State has nullified any contractual obligation, but simply because the provisions as so interpreted would impose no obligation on the royalty owners to reimburse appellants for the tax increase.
      Since appellants have not shown that the royalty-owner exemption affects anything other than the legal incidence of the tax increase, their contention that the exemption is pre-empted by the Gas Act and the NGPA is plainly without merit.

       For example, appellant Union Oil Co. was a party to a contract concerning oil under which the purchaser was required to reimburse it for “100 percent of the amount by which any severance taxes paid by seller are in excess of the rates of such taxes levied as of April 1, 1976.” Ibid.

         This point was aptly stated in an early decision holding that a statute prohibiting the issuance of notes by unincorporated banking associations did not violate the Contract Clause by preventing the performance of existing contracts entered into by members of such associations:
      “[I]t is said that the members had formed a contract between themselves, which would be dissolved by the stoppage of their business. And what then? Is that such a violation of contracts as is prohibited by the constitution of the United States? Consider to what such a construction would lead. Let us suppose, that in one of the states there is no law against gaming, cock-fighting, horse-racing, or public masquerades, and that companies should be formed for the purpose of carrying on these practices. And suppose, that the legislature of that state, being [seriously] convinced of the pernicious effect of these institutions, should venture to interdict them: will it be seriously contended, that the constitution of the United States has been violated?” Myers v. Irwin, 2 Serg. & Rawle 368, 372 (Pa. 1816).

       See generally Home Bldg. & Loan Assn. v. Blaisdell, 290 U. S. 398, 436-437 (1934); id., at 475-477 (Sutherland, J., dissenting); Dillingham v. McLaughlin, 264 U. S. 370, 374 (1924) (“The operation of reasonable laws for the protection of the public cannot be headed off by making contracts reaching into the future”) (Holmes, J.); Manigault v. Springs, 199 U. S. 473, 480 (1905) (“parties by entering into contracts may not estop the legislature from enacting laws intended for the public good”); Ogden v. Saunders, 12 Wheat. 213, 291 (1827) (when “laws are passed rendering that unlawful, even incidentally, which was lawful at the time of the con-tractu it is the government that puts an end to the contract, and yet no one ever imagined that it thereby violates the obligation of a contract”); Hale, The Supreme Court and the Contract Clause: II, 57 Harv. L. Rev. 621, 671-674 (1944).

       The statutes under review in United States Trust Co. also implicated the special concerns associated with a State’s impairment of its own contractual obligations. See 431 U. S., at 26-28; Energy Reserves Group, Inc. v. Kansas Power & Light Co., 459 U. S. 400, 412-413, and n. 14 (1983).

       Our conclusion is buttressed by the fact that appellants operate in industries that have been subject to heavy regulation. See Energy Reserves Group, Inc. v. Kansas Power & Light Co., supra, at 416 (“Price regulation existed and was foreseeable as the type of law that would alter contract obligations”); Veix v. Sixth Ward Bldg. & Loan Assn., 310 U. S. 32, 38 (1940) (“When he purchased into an enterprise already regulated in the particular to which he now objects, he purchased subject to further legislation upon the same topic”).
      With respect to gas, see supra, at 184-186; Energy Reserves Group, Inc. v. Kansas Power & Light Co., supra, at 413-416. During the time the pass-through prohibition was in effect, the Federal Government controlled the prices of crude oil under the EPAA, 15 U. S. C. § 751 et seq. (1976 ed. and Supp. V). Regulations promulgated under the EPAA established maximum prices for most categories of crude oil. 10 CFR Part 212, Subpart D — Producers of Crude Petroleum, § 212.71 et seq. (1975).
      Appellants’ reliance on Barwise v. Sheppard, 299 U. S. 33 (1936), is misplaced. In Barwise the owners of royalty interests challenged a Texas statute that imposed a new tax on oil production, which was to be borne “ratably by all interested parties including royalty interests. ” The statute authorized the producers to pay the tax and withhold from any royalty owners their proportionate share of the tax. The royalty owners in Barwise were parties to contracts that entitled them to specified shares of the oil produced by their lessee and required the lessee to deliver the oil-“free of cost.” Id,., at 35. They contended that the statute, by authorizing the lessee to deduct their portion of the tax from any payments due them, impermissibly impaired the lessee’s obligation to deliver the oil “free of cost.” This Court concluded that the statute did not run afoul of the Contract Clause:
      “[T]he lease was made in subordination to the power of the State to tax the production of oil and to apportion the tax between the lessors and the lessee. ... Plainly no stipulation in the lease can be of any avail as against the power of the State to impose the tax, prescribe who shall be under a duty to the State to pay it, and fix the time and mode of payment. And this is true even though it be assumed to be admissible for the lessors and lessee to stipulate as to who, as between themselves, shall ultimately bear the tax.” Id., at 40.
      We reject appellants’ assertion that the last sentence of this quotation was meant to indicate that the statute would have violated the Contract Clause if, instead of simply specifying the legal incidence of the tax, it had nullified an agreement as to who would ultimately bear the burden of the tax. We think the thrust of the sentence was simply that even though the law left the lessors and the lessee free to allocate the ultimate burden of the tax as they saw fit, no agreement between them could limit the State’s power to decide who must pay the tax and to specify the time and manner of payment.

        Barwise is relevant to these cases only insofar as it confirms Alabama’s power to decide that no part of the legal incidence of the increase in the severance tax would fall on owners of royalty interests. See Part III-A, supra.