source: Caselaw Access Project

author: Justice Scalia Justice Marshall,

license: Public Domain

text:
    FORT STEWART SCHOOLS v. FEDERAL LABOR RELATIONS AUTHORITY ET AL.
    No. 89-65.
    Argued January 10, 1990
    Decided May 29, 1990

      Scalia, J., delivered the opinion for a unanimous Court. Marshall, J., filed a concurring opinion, post, at p. 657.

      Christopher J. Wright argued the cause for petitioner. With him on the briefs were Acting Solicitor General Rob

      erts, Assistant Attorney General Gerson, Deputy Solicitor General Shapiro, William Ranter, and Jacob. M. Lewis.

      William E. Persina argued the cause for respondents. With him on the brief for respondent Federal Labor Relations Authority was Jill A. Griffin. Richard J. Him and Ronald R. Austin filed a brief for respondent Fort Stewart Association of Educators.

      Briefs of amici curiae urging affirmance were filed for the American Federation of Labor and Congress of Industrial Organizations et al. by Jeremiah A. Collins, Laurence Gold, Mark D. Roth, Kevin M. Grile, and Lawrence A. Poltrock; and for the National Treasury Employees Union by Gregory O’Duden and Kerry L. Adams.

   Justice Scalia

delivered the opinion of the Court.

In this case we review the decision of the Federal Labor Relations Authority that petitioner Fort Stewart Schools, a Federal Government employer, is required to bargain with the labor union representing its employees over a proposal -relating to wages and fringe benefits.

I

Respondent Fort Stewart Association of Educators (Union), is the collective-bargaining representative of the employees of two elementary schools at Fort Stewart, a United States military facility in Georgia. The schools, petitioner here, are owned and operated by the United States Army under authority of 64 Stat. 1107, 20 U. S. C. § 241(a), which directs the Secretary of Health and Human Services to “make such arrangements ... as may be necessary to provide free public education” for children living on federally owned property. The present controversy arose when, during the course of collective-bargaining negotiations, the Union submitted to the schools proposals relating to mileage reimbursement, various types of paid leave, and a salary increase. Petitioner declined to negotiate these matters, claiming that they were not subject to bargaining under Title VII of the Civil Service Reform Act of 1978, sometimes referred to as the Federal Service Labor-Management Relations Statute, 5 U. S. C. §7101 et seq. (FSLMRS or Statute). The Union sought the aid of the Federal Labor Relations Authority pursuant to §§ 7105(a)(2)(D) and (E) and the Authority held that the Union’s proposals were negotiable. Fort Stewart Assn. of Educators, 28 F. L. R. A. 547 (1987). Upon a petition for review by petitioner and cross-petitions for enforcement by the Authority and the Union, the Court of Appeals for the Eleventh Circuit upheld the Authority’s decision, 860 F. 2d 396 (1988), and we granted certiorari, 493 U. S. 807 (1989).

II

The FSLMRS requires a federal agency to negotiate in good faith with the chosen representative of employees covered by the Statute, 5 U. S. C. § 7114(a)(4), and makes it an unfair labor practice to refuse to do so, § 7116(a)(5). The scope of the negotiating obligation is set forth in §7102, which confers upon covered employees the right, through their chosen representative, “to engage in collective bargaining with respect to conditions of employment.” §7102(2). Section 7103(a)(14) defines “conditions of employment” as follows:

“‘conditions of employment’ means personnel policies, practices, and matters, whether established by rule, regulation, or otherwise, affecting working conditions, except that such term does not include policies, practices, and matters —
“(A) relating to political activities prohibited under subchapter III of chapter 73 of this title;
“(B) relating to the classification of any position; or
“(C) to the extent such matters are specifically provided for by Federal statute . . . .”

In construing these provisions, and the other provisions of the FSLMRS at issue in this case, the Authority was interpreting the statute that it is charged with implementing, see § 7105. We must therefore review its conclusions under the standard set forth in Chevron U. S. A. Inc. v. Natural Resources Defense Council, Inc., 467 U. S. 837 (1984). If, upon examination of “the particular statutory language at issue, as well as the language and design of the statute as a whole,” K mart Corp. v. Cartier, Inc., 486 U. S. 281, 291 (1988), it is clear that the Authority’s interpretation is incorrect, then we need look no further, “for the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress.” Chevron, 467 U. S., at 842-843. If, on the other hand, “the statute is silent or ambiguous” on the point at issue, we must decide “whether the agency’s answer is based' on a permissible construction of the statute.” Ibid.

The Authority concluded that the Union’s proposals related to “conditions of employment,” following its decision in American Federation of Government Employees, AFL-CIO, Local 1897, 24 F. L. R. A. 377, 379 (1986) (AFGE). 28 F. L. R. A., at 550-551. Petitioner claims that this was error because §7103(a)(14) defines “conditions of employment” as matters affecting “working conditions,” and because the latter term most naturally connotes “the physical conditions under which an employee labors,” Brief for Petitioner 17. The difficulty here, of course, is that the word “conditions” has two common meanings. It can mean matters “established or agreed upon as a requisite to the doing ... of something else”; and it can also mean “attendant circumstances,” or an “existing state of affairs.” Webster’s Third New International Dictionary 473 (1961). Whereas the term “conditions of employment” in § 7102 seems to us equally susceptible of both meanings, petitioner is correct that the term “working conditions” in the defining provision of § 7103(a)(14) more naturally refers, in isolation, only to the “circumstances” or “state of affairs” attendant to one’s performance of a job. See Department of Defense Dependents Schools v. FLRA, 274 U. S. App. D. C. 299, 301, 863 F. 2d 988, 990 (1988) (“The term ‘working conditions’ ordinarily calls to mind the day-to-day circumstances under which an employee performs his or her job”), rehearing en banc granted, No. 87-1733 (Feb. 6, 1989). Even if, however, it could not reasonably be interpreted to bear the other meaning in isolation, here it is not in isolation, but forms part of a paragraph whose structure, as a whole, lends support to the Authority’s broader reading.

As set forth above, § 7103(a)(14) specifically excepts from the definition of “conditions of employment” (and thus suggests are covered by the term “working conditions”) “policies, practices, and matters . . . relating to political activities prohibited under subchapter III of chapter 73 of this title.” The subchapter referred to contains restrictions on partisan political activities of federal employees and protects them from being required or coerced to engage in political activity. It is barely conceivable, but most unlikely, that this provision of § 7103(a)(14) was meant to exclude from collective-bargaining proposals that would somehow infect with politics the “physical conditions” of the workplace; it seems much more plausibly directed at “conditions of employment” in the sense of qualifications demanded of, or obligations imposed upon, employees. And the second exception set forth in § 7103(a)(14), as set forth above, unquestionably assumes that “conditions of employment” (and hence “working conditions”) bears this broader meaning. The exception of “policies, practices, and matters . . . relating to the classification of any position” would be utterly unnecessary if petitioner’s interpretation of “working conditions” were correct.

It might reasonably be argued, of course, that these two exceptions are indeed technically unnecessary, and were inserted out of an abundance of caution — a drafting imprecision venerable enough to have left its mark on legal Latin (ex abundanti cautela). But petitioner does not make this argument. Indeed, in its reply brief petitioner claims that it is “a serious distortion of [its] position,” Reply Brief for Petitioner 2, to characterize it, as respondent Union does, as asserting that “negotiations over ‘working conditions’ are limited to the physical conditions under which an employee labors.” Brief for Respondent Union 11. Petitioner asserts that, to the contrary, it “recognize[s] that the phrase ‘conditions of employment’ is no doubt susceptible of diverse interpretations,” including an interpretation whereby it would embrace “any subject which is insisted upon as a prerequisite for continued employment,” Reply Brief for Petitioner 2 (internal quotations omitted); and petitioner even acknowledges, with apparent approval, that the phrase in the present statute “has been extended beyond the purely physical conditions of the workplace,” ibid. The textual argument is thus abandoned. Petitioner seeks to persuade us, not (as respondent Union does) that the term “conditions of employment” (as defined to include only “working conditions”) bears one, rather than the other, of its two possible meanings; but rather to persuade us that it bears some third meaning no one has ever conceived of, so that it includes other insisted-upon prerequisites for continued employment, but does not include the insisted-upon prerequisite par excellence, wages. And this new unheard-of meaning, petitioner contends, is so “unambiguously expressed,” Chevron, supra, at 843, that we must impose it upon the agency initially responsible for interpreting the statute, despite the deference otherwise accorded under Chevron. To describe this position is sufficient to reject it, but we nonetheless examine briefly the elements petitioner sets forth to establish that “conditions of employment” clearly has a meaning here that it bears nowhere else.

Petitioner points to the National Labor Relations Act, 49 Stat. 449, as amended, 29 U. S. C. §151 et seq., which authorizes bargaining over “wages, hours, and other terms and conditions of employment,” § 158(d), and to the Postal Reorganization Act, 39 U. S. C. §1201 et seq., which grants postal workers the right to bargain over “wages, hours, and working conditions.” Note following §1201. Because each of these statutes specifically refers to wages, the argument runs, we must infer from the absence of such a reference in the FSLMRS that Congress did not mean to include them. But those other statutes deal with labor-management relations in entirely different fields of employment, and the FSLMRS contains no indication that it is to be read in pari materia with them. The first of those provisions does (perhaps) show that the term “conditions of employment” can be used to refer only to physical circumstances of employment; and the second of them does (perhaps) show that “working conditions” is more naturally used to mean that — but those are points we have already conceded.

Petitioner discusses at great length the legislative history of the Statute, from which it has culled a formidable number of statements suggesting that certain members and committees of Congress did not think the duty to bargain would extend to proposals relating to wages and fringe benefits. A Senate Report, for example, states unequivocally that “[t]he bill permits unions to bargain collectively on personnel policies and practices, and other matters affecting working conditions within the authority of agency managers. ... It excludes bargaining on economic matters . . . .” S. Rep. No. 95-969, pp. 12-13 (1978). A House Report recounts that the bill “does not permit . . . bargaining on wages and fringe benefits____” H. R. Rep. No. 95-1403, p. 12 (1978). To like effect are numerous floor statements by both sponsors and opponents.

The trouble with these statements, to the extent they are relevant to our inquiry, is that they may have been wrong. The wages and fringe benefits of the overwhelming majority of Executive Branch employees are fixed by law, in accordance with the General Schedules of the Civil Service Act, see 5 U. S. C. § 5332, and are therefore eliminated from the definition of “conditions of employment” by the third exception in §7103(a)(14) set forth above — which excludes “matters . . . specifically provided for by Federal statute.” 5 U. S. C. § 7103(a)(14)(C). Employees of schools established under §241 are among a miniscule minority of federal employees whose wages are exempted from operation of the General Schedules. Title 20 U. S. C. § 241(a) provides that an agency establishing such a school may fix “the compensation, tenure, leave, hours of work, and other incidents of the employment relationship” of its employees “without regard to the Civil Service Act and rules.” Ibid. See also AFGE, 24 F. L. R. A., at 378. The legislative materials to which petitioner refers display no awareness of this exception. To the contrary, numerous statements, many from the same sources to which petitioner points, display the erroneous belief that the wages and fringe benefits of all Executive Branch em- -- ployees were set by statute. See H. R. Rep. No. 95-1403, p. 12 (1978) (“Federal pay will continue to be set in accordance with the pay provisions of title 5, and fringe benefits, including retirement, insurance, and leave, will continue to be set by Congress”); id., at 44 (“Rates of overtime pay are not bargainable, because they are specifically provided for by statute”). Thus, all of the statements to which petitioner refers may have rested upon the following syllogism: The wages and fringe benefits of all federal employees are specifically provided for by federal statute; “conditions of employment” subject to the duty to bargain do not include “matters . . . specifically provided for by Federal statute”; therefore “conditions of employment” subject to the duty to bargain do not include the wages and fringe benefits of all federal employees. Since the premise of that syllogism is wrong, so may be its expressed conclusion. There is no conceivable persuasive effect in legislative history that may reflect nothing more than the speakers’ incomplete understanding of the world upon which the statute will operate. Cf. Yellow Freight System, Inc. v. Donnelly, 494 U. S. 820, 824 (1990) (expectation by Members of Congress that all Title VII suits would be tried in federal court, “even if universally shared,” does not establish that the statute requires such suits to be brought in federal court).

Ill

Petitioner next argues that, even if the Union’s proposals relate to “conditions of employment” subject to bargaining under § 7102, they are exempted from the statutory duty to bargain by § 7106, which provides that “nothing in this chapter shall affect the authority of any management official of any agency ... to determine the . . . budget ... of the agency . . . .” 5 U. S. C. §7106. The Authority rejected that claim by applying the test established in its decision in American Federation of Government Employees, AFL-CIO, 2 F. L. R. A. 604 (1980), enf’d on other grounds sub nom. Department of Defense v. FLRA, 212 U. S. App. D. C. 256, 659 F. 2d 1140 (1981), cert. denied, 455 U. S. 945 (1982):

“To establish that a proposal directly interferes with an agency’s right to determine its budget under section 7106(a)(1) of the Statute, an agency must make a substantial showing that the proposal requires the inclusion of a particular program or amount in its budget or that the proposal will result in significant and unavoidable increases in cost not affected [sic: offset] by compensating benefits.” 28 F. L. R. A., at 551 (emphasis added).

Because petitioner did not contend that the Union’s proposal required “the inclusion of a particular program or amount in its budget,” the only question for the Authority was whether petitioner had made out its case under the underscored standard. The Authority held that it had not, finding that petitioner had shown neither that its costs would be significantly and unavoidably increased were it to accept the proposals offered by the Union, nor that “any increased costs . . . would not be offset by compensating benefits.” Id., at 552.

The parties initially dispute which entity is the relevant “agency” for purposes of determining whether the Union’s proposals would “affect the authority of any management official of any agency ... to determine the . . . budget... of the agency. ...” 5 U. S. C. § 7106(a). The Authority concluded only that petitioner had not satisfied § 7106(a) with respect to its own budget, i. e., that of the schools at the Fort Stewart Army base. The Court of Appeals upheld the Authority’s decision, but did so by reference to the budget of the Army as a whole, which it noted “includes bases, troops, weapons, vehicles, other equipment, salaries for all other officers, and expenses for its eight other schools.” 860 F. 2d, at 405-406. We cannot, however, uphold the Authority’s decision on that basis, for it is elementary that if an agency’s decision is to be sustained in the courts on any rationale under which the agency’s factual or legal determinations are entitled to deference, it must be upheld on the rationale set forth by the agency itself. SEC v. Chenery Corp., 318 U. S. 80, 93-95 (1943). Because petitioner does not challenge, as a ground for reversing the Authority’s decision, its determination to look only to petitioner’s budget, we assume without deciding that that determination was correct.

Petitioner does not take issue with the Authority’s premise that § 7106 does not make a proposal nonnegotiable simply because it “imposes a cost upon the agency which requires the expenditure of appropriated agency funds.” See 28 F. L. R. A., at 607. Rather, petitioner argues that “the application of the FLRA’s rule here — particularly the conclusion that the proposal calling for a 13.5% pay raise would not significantly affect the agency’s budget — is plainly flawed.” Brief for Petitioner 28. Petitioner also claims that “the other aspect of the FLRA’s rule — requiring management to show that a significant increase in costs would not be offset by compensating benefits — is not reasonable or consistent with the statute, because it negates management’s right to set the agency budget.” Ibid.

The latter observation has some force if the Authority’s definition of “compensating benefits” is as petitioner describes it. Petitioner claims that, in order to prove that the cost of a given proposal is not outweighed by “compensating benefits,” an agency must disprove'not only monetary benefits, but also nonmonetary “intangible” benefits such as the positive effects that a proposed change might have on employee morale. Although counsel for the Authority agreed with petitioner’s statement of its test at oral argument before this Court, it is not entirely clear from the Authority’s cases that the “benefits” side of the calculus is as all embracing as petitioner suggests. Cf. International Association of Fire Fighters Local F-61, 3 F. L. R. A. 438, 452 (1980) (rejecting agency’s claim of no “compensating benefits” where “the agency has made no substantial demonstration that the increased costs . . . will not be offset by increased employee performance, reduced turnover, fewer grievances and the like”). Indeed, it is difficult to see how the Authority could possibly derive a test measured by nonmonetary benefits from a provision that speaks only to the agency’s “authority ... to determine . . . [its] budget,” a phrase that can only be understood to refer to the allocation of funds within the agency.

We need not dwell on this point, however, because the Authority’s first ground for its decision is supported by substantial evidence. Petitioner has challenged neither the Authority’s requirement that an agency show a significant and unavoidable increase in its costs, nor the Authority’s finding that petitioner failed to submit any evidence on that point in this case. Rather, it asks us to hold that a proposal calling for a 13.5% salary increase would necessarily result in a “significant and unavoidable” increase in the agency’s overall costs. We cannot do that without knowing even so rudimentary a fact as the percentage of the agency’s budget attributable to teachers’ salaries. Under the Authority’s precedents, petitioner had the burden of proof on this point, but it placed nothing in the record to document its total costs or even its current total teachers’ salaries. The Authority reasonably determined that it could not conclude from an increase in one budget item of indeterminate amount whether petitioner’s costs as a whole would be “significantly] and unavoidably]” increased.

IV

Petitioner’s final argument rests upon 20 U. S. C. §241, which directs the agency establishing a school thereunder to “ensure that the education provided pursuant to such arrangement is comparable to free public education provided for children in comparable communities in the State,” § 241 (a), and to limit expenditures “[t]o the maximum extent practicable” to “an amount per pupil which will not exceed the per pupil cost of free public education provided for children in comparable communities in the State,” § 241(e). In implementing this provision, the Army has promulgated a regulation stating that education provided under §241 “will be considered comparable to free public education offered by selected communities of the State” when 10 specified factors, including “[s]alary schedules” are, “to the maximum extent practicable, equal.” Army Reg. 352-3, 1 — 7(h) (1980). Petitioner claims — and we assume for purposes of this discussion — that in order to accept the Union’s proposals, it would have to contravene this regulation because the proposed salaries would exceed those of employees of the local school systems.

It is a familiar rule of administrative law that an agency must abide by its own regulations. Vitarelli v. Seaton, 359 U. S. 535, 547 (1959); Service v. Dulles, 354 U. S. 363, 388 (1957). That says nothing, however, about whether an agency can be compelled to negotiate about a change in its regulations. The latter question is addressed by 5 U. S. C. § 7117(a)(2), which provides, insofar as applicable to the regulation here, that “[t]he duty to bargain in good faith shall, to the extent not inconsistent with Federal law or any Government-wide rule or regulation, extend to matters which are the subject of any agency rule or regulation . . . only if the Authority has determined under subsection (b) of this section that no compelling need (as determined under regulations prescribed by the Authority) exists for the rule or regulation,(Emphasis added.) Section 7117(b) sets out the procedures by which the Authority is to make its “compelling need” determination, see generally FLRA v. Aberdeen Proving Ground, Department of Army, 485 U. S. 409 (1988), and § 7105(a)(2)(D) instructs the Authority to “prescribe criteria” for that determination.

Pursuant to this last provision, the Authority has adopted the following regulation:

“A compelling need exists for an agency rule or regulation concerning any condition of employment when the agency demonstrates that the rule or regulation meets any one or more of the following illustrative criteria:
“(a) The rule or regulation is essential, as distinguished from helpful or desirable, to the accomplishment of the mission or the execution of functions of the agency ... in a manner which is consistent with the requirements of an effective and efficient government.
“(b) The rule or regulation is necessary to insure the maintenance of basic merit principles.
“(c) The rule or regulation implements a mandate to the agency . . . under law or other outside authority, which implementation is essentially nondiscretionary in nature.” 5 CFR §2424.11 (1989).

Before the Authority, petitioner rested its entire case upon the assertion that the last of these criteria was satisfied by the provision of Army Regulation 352-3 which requires salaries equal to those of local schools, since that provision “implements the mandate” of § 241(a). The Authority disagreed, following its decision in Fort Knox Teachers Assn., 27 F. L. R. A. 203, 215, 216 (1987), which said that no “compelling need” for Army Regulation 352-3 exists because § 241 does not require the agency “to match exactly the conditions of employment of teachers in local school districts” or “to restrict the Agency’s discretion as to the particular employment practices which could be adopted.”

Petitioner argues that, although “[sjection 241 does not specifically provide that teachers’ salaries . . . must be set by comparison with those at local public schools,” Brief for Petitioner 32, it does state that “[f]or the purpose of providing such comparable education,” teachers’ salaries and benefits “may be fixed without regard to the [General Schedules set out in the] Civil Service Act,” 20 U. S. C. § 241(a). According to petitioner, “it is a fair reading of [§ 241] to conclude that Congress excepted [wages and fringe benefits] from the civil service laws so that they would be set by comparison with those at public schools.” Brief for Petitioner 33. That is not so. All that can reasonably be deduced from the exclusion of the General Schedules is that Congress expected teachers’ wages and benefits to be one of the elements that the federal agency could adjust in order to render per pupil expenditure comparable to that in local public schools. But to be able to adjust is not to be required to make equal. The statute requires equivalence (“[t]o the maximum extent practicable”) in total per pupil expenditure, not in each separate element of educational cost. An agency may well decide to pay teachers more or less than teachers in local schools, in order that it may expend less or more than local schools for other needs of the educational program. It is thus impossible to say that the requirement of Army Reg. 352-3 that teachers’ salaries be “to the maximum extent practicable, equal” was “essentially nondiscretionary in nature” within the meaning of § 2424.11(c).

Petitioner insists, however, that reading §2424.11 this strictly renders that regulation in violation of the Statute, which never requires bargaining over any matter covered by a regulation except “to the extent not inconsistent with Federal law.” See § 7117(a)(2); see also § 7117(a)(1). Thus, to recognize a compelling need for a regulation “only if it implements a statutory mandate that leaves an agency absolutely no room for discretion,” Brief for Petitioner 33, n. 23, is to render the “compelling need” exception of § 7117(a)(2) a nullity, for bargaining over such a regulation would be “inconsistent with Federal law” anyway. We may assume, without deciding, that petitioner is correct that any rule that meets the §2424.11(c) “essentially nondiscretionary” standard as interpreted by the Authority would necessarily be a rule required by law. There is some support for that equivalency in the Authority’s cases. See, e. g., Fort Knox Teachers Assn., 25 F. L. R. A. 1119 (1987). But see National Border Patrol Council, American Federation of Government Employees, AFL-CIO, 23 F. L. R. A. 106 (1986); National Federation of Federal Employees, Local 1153, 26 F. L. R. A. 505 (1987). Even so, the Authority’s regulation does not eliminate the “compelling need” exception. Petitioner’s argument ignores the existence of subsections (a) and (b) of § 2424.11, which provide alternative methods of proving “compelling need.” In this case, to be sure, petitioner chose not to assert a claim that Army Regulation 352-3 was either “essential ... to the accomplishment of the mission or the execution of functions of the agency,” 5 CFR §2424.11(a) (1989), or “necessary to insure the maintenance of basic merit principles,” § 2424.11(b). But, those alternatives were available and suffice to give the regulation for which there is a “compelling need” an existence quite independent of the regulation whose elimination would be inconsistent with law.

For the foregoing reasons, the judgment of the Court of Appeals for the Eleventh Circuit is

Affirmed.

Justice Marshall,

concurring.

I write separately to emphasize that management’s prerogative to “determine . . . the . . . budget... of the agency,” 5 U. S. C. § 7106(a)(1), is reasonably, and perhaps necessarily, subject to a narrower reading than the one adopted by the Federal Labor Relations Authority. The Authority presently interprets that prerogative as exempting from the duty to bargain proposals that either (1) require the inclusion of a particular program or operation in the agency’s budget or prescribe the amount to be allocated to them in the budget, or (2) result in significant and unavoidable increases in costs not offset by compensating benefits. American Federation of Govt. Employees, AFL-CIO (AFGE), 2 F. L. R. A. 604, 608 (1980), enf’d on other grounds sub nom. Department of Defense v. FLRA, 212 U. S. App. D. C. 256, 659 F. 2d 1140 (1981). Section 7106(a)(1) is more naturally read, however, as withdrawing from mandatory bargaining only those proposals addressed to the budget per se, not those that would result in significantly increased expenditures by the agency.

As the Authority stated in formulating its test, “ ‘budget’ means a statement of the financial position of a body for a definite period of time based on detailed estimates of planned or expected expenditures during the period and proposals for financing them.” AFGE, supra, at 608 (citing Webster’s Third New International Dictionary (1966)). To “determine the budget,” then, means to calculate in advance the funds available to the agency and the allocation of those funds among the agency’s programs and operations. See AFGE, supra, at 608. The language of the statute thus exempts from the duty to bargain only those proposals that would involve the union in the budget process itself. This interpretation also accords more closely with Congress’ intent that the management prerogatives in §7106 be construed narrowly. See, e. g., 124 Cong. Rec. 29183 (1978) (statement by Rep. Udall, author of the language in §7106) (§7106 is “to be treated narrowly as an exception to the general obligation to bargain over conditions of employment”); id., at 29187 (statement of Rep. Clay) (“[I]t is essential that only those proposals that directly and integrally go to the specified management rights be barred from the negotiations”); H. R. Rep. No. 95-1403, p. 44 (1978) (“The committee intends that section 7106 ... be read to favor collective bargaining whenever there is doubt as to the negotiability of a subject or a proposal”).

The first part of the Authority’s test accords with the plain meaning of the budget provision. The second part, however, is at best a stretch of the statutory language. Proposals that impose “significant” and “unavoidable” costs on the agency do not interfere with the agency’s prerogative to determine which programs and operations to include in its budget and how to allocate funds among them. Such proposals may of course affect budgetary decisions, but to remove them from bargaining would eliminate bargaining over many important matters altogether, without any indication that Congress intended to do so.

The Union’s proposals in this case would clearly not fall within the agency’s budget prerogative because they do not require union involvement in the budget process. Because the Union’s proposals are negotiable even under the agency’s “significant cost” test, we need not decide whether that test is inconsistent with the statute. The Court’s opinion, however, does not foreclose a future challenge to that test.

       See 124 Cong. Rec. 25716, 29182 (1978) (remarks of Rep. Udall) (“We do not permit bargaining over pay and fringe benefits, but on other issues relating to an employee’s livelihood”) (“There is not really any argument in this bill or in this title about Federal collective bargaining for wages and fifinge benefits and retirement”); id., at 24286, 25720 (remarks of Rep. Clay) (“[E]mployees still. . . cannot bargain over pay”) (“I. . . want to assure my colleagues that there is nothing in this bill which allows Federal employees the right... to negotiate over pay and money-related fringe benefits”); id., at 27549 (remarks of Sen. Sasser) (“[Exclusive representatives of Federal employees may not bargain over pay or fringe benefits”).

       Statements from the floor are to like effect. See id., at 25721, 25722 (remarks of Rep. Ford) (“[N]o matters that are governed by statute (such as pay, money-related fringe benefits, retirement, and so forth) could be altered by a negotiated agreement") (“It is not the intent of this provision to interfere with the current system of providing the employees in question with retirement benefits, life insurance benefits, health insurance benefits, and workmen’s compensation. Those benefits would not become negotiable and would continue to be paid to those employees exclusively pursuant to the Federal statutes in effect”); id,., at 29182 (remarks of Sen. Udall) (“All these major regulations about wages and hours and retirement and benefits will continue to be established by law through congressional action”); id., at 29174 (remarks of Rep. Collins) (criticizing the bill as too broad because it excluded from the scope of bargaining only “matter[s] relating to discrimination, political activities, and those few specifically prescribed by law — for example, pay and benefits”).

       Because petitioner loses under the standard set out in the second part of the Authority’s test, and because neither party challenges that standard, we need not reach the question discussed in Justice Marshall’s opinion, viz., whether the Authority’s interpretation of the phrase “to determine the . . . budget” in § 7106 is too generous to the Government.


author: Justice Kennedy Chief Justice Rehnquist, Justice Stevens,

text:
    CITIBANK, N. A. v. WELLS FARGO ASIA LTD.
    No. 88-1260.
    Argued March 19, 1990
    Decided May 29, 1990

      Kennedy, J., delivered the opinion of the Court, in which Rehnquist, C. J., and Brennan, White, Marshall, Blackmun, O’Connor, and Scalia, JJ., joined. Rehnquist, C. J., filed a concurring opinion, post, p. 674. Stevens, J., filed a dissenting opinion., post, p. 674.

      Robert H. Bork argued the cause for petitioner. With him on the briefs were Arnold M. Lerman, David Westin, Kenneth S. Getter, and Mark I. Levy.

      Deputy Solicitor General Merritt argued the cause for the United States as amicus curiae urging reversal. With him on the brief were Solicitor General Starr, Assistant Attorney General Gerson, Jeffrey P. Minear, Abraham D.. Sofaer, J. Virgil Mattingly, and Robert B. Serino.

      Darryl Snider argued the cause for respondent. With him on the brief were George A. Cumming, Jr., Thomas M. Peterson, and Edwin E. Me Amis

        John L. Warden, Michael M. Wiseman, Michael S. Straus, and Norman R. Nelson filed a brief for the New York Clearing House Association et al. as amici curiae urging reversal.

        Dennis G. Lyons filed a brief for the Bank of Montreal et al. as amici curiae urging affirmance.

   Justice Kennedy

delivered the opinion of the Court.

At issue here is whether the home office of a United States bank is obligated to use its general assets to repay a Eurodollar deposit made at one of its foreign branches, after the foreign country’s government has prohibited the branch from making repayment out of its own assets.

I

The case arises from a transaction in what is known in the banking and financial communities as the Eurodollar market. As the District Court defined the term, Eurodollars are United States dollars that have been deposited with a banking institution located outside the United States, with a corresponding obligation on the part of the banking institution to repay the deposit in United States dollars. See App. to Pet. for Cert. 42a; P. Oppenheim, International Banking 243 (5th ed. 1987). The banking institution receiving the deposit can be either a foreign branch of a United States bank or a foreign bank.

A major component of the Eurodollar market is interbank trading. In a typical interbank transaction in the Eurodollar market, the depositing bank (Bank A) agrees by telephone or telex, or through a broker, to place a deposit denominated in United States dollars with a second bank (Bank X). For the deposit to be a Eurodollar deposit, Bank X must be either a foreign branch of a United States bank or a foreign bank; Bank A, however, can be any bank, including one located in the United States. To complete the transactions, most banks that participate in the interbank trading market utilize correspondent banks in New York City, with whom they maintain, directly or indirectly, accounts denominated in United States dollars. In this example, the depositor bank, Bank A, orders its correspondent bank in New York (Bank B) to transfer United States dollars from Bank A’s account to Bank X’s account with Bank X’s New York correspondent bank (Bank Y). The transfer of funds from Bank B to Bank Y is accomplished by means of a wire transfer through a clearing mechanism located in New York City and known as the Clearing House Interbank Payments System, or “CHIPS.” See Scanlon, Definitions and Mechanics of Eurodollar Transactions, in The Eurodollar 16, 24-25 (H. Prochnow ed. 1970); Brief for New York Clearing House Association et al. as Amici Curiae 4. Repayment of the funds at the end of the deposit term is accomplished by having Bank Y transfer funds from Bank X’s account to Bank B, through the CHIPS system, for credit to Bank A’s account.

The transaction at issue here follows this pattern. Respondent Wells Fargo Asia Limited (WFAL) is a Singapore-chartered bank wholly owned by Wells Fargo Bank, N. A., a bank chartered by the United States. Petitioner Citibank, N. A. (Citibank), also a United States-chartered bank, operates a branch office in Manila, Philippines (Citibank/Manila). On June 10, 1983, WFAL agreed to make two $1 million time deposits with Citibank/Manila. The rate at which the deposits would earn interest was set at 10%, and the parties agreed that the deposits would be repaid on December 9 and 10, 1983. The deposits were arranged by oral agreement through the assistance of an Asian money broker, which made a written report to the parties that stated, inter alia:

“‘Pay: Citibank, N. A. New York Account Manila
“‘Repay: Wells Fargo International, New York Account Wells Fargo Asia Ltd., Singapore Account #003-023645.”’ 852 F. 2d 657, 658-659 (CA2 1988).

The broker also sent WFAL a telex containing the following “ ‘[^Instructions’ ”:

“‘Settlement — Citibank NA NYC AC Manila
“‘Repayment — Wells Fargo Bk Inti NYC Ac Wells Fargo Asia Ltd Sgp No 003-023645.’” Id., at 659.

That same day, the parties exchanged telexes confirming each of the two deposits. WFAL’s telexes to Citibank/ Manila read:

“‘We shall instruct Wells Fargo Bk Int’l New York our correspondent please pay to our a/c with Wells Fargo Bk Int’l New York to pay to Citibank NA customer’s correspondent USD 1,000,000.’” Ibid.

The telexes from Citibank/Manila to WFAL read:

“‘Please remit US Dir 1,000,000 to our account with Citibank New York. At maturity we remit US Dir 1,049,444.44 to your account with Wells Fargo Bank Inti Corp NY through Citibank New York.’” Ibid.

A few months after the deposit was made, the Philippine government issued a Memorandum to Authorized Agent Banks (MAAB 47) which provided in relevant part:

“ ‘Any remittance of foreign exchange for repayment of principal on all foreign obligations due to foreign banks and/or financial institutions, irrespective of maturity, shall be submitted to the Central Bank [of the Philippines] thru the Management of External Debt and Investment Accounts Department (MEDIAD) for prior approval.’” Ibid.

According to the Court of Appeals, “[a]s interpreted by the Central Bank of the Philippines, this decree prevented Citibank/Manila, an ‘authorized agent bank’ under Philippine law, from repaying the WFAL deposits with its Philippine assets, i. e., those assets not either deposited in banks elsewhere or invested in non-Philippine enterprises.” Ibid. As a result, Citibank/Manila refused to repay WFAL’s deposits when they matured in December 1983.

WFAL commenced the present action against Citibank in the United States District Court for the Southern District of New York, claiming that Citibank in New York was liable for the funds that WFAL deposited with Citibank/Manila. While the lawsuit was pending, Citibank obtained permission from the Central Bank of the Philippines to repay its Manila depositors to the extent that it could do so with the non-Philippine assets of the Manila branch. It paid WFAL $934,000; the remainder of the deposits, $1,066,000, remains in dispute. During the course of this litigation, Citibank/ Manila, with the apparent consent of the Philippine government, has continued to pay WFAL interest on the outstanding principal. See App. to Pet. for Cert. 48a.

After a bench trial on the merits, the District Court accepted WFAL’s invitation to assume that Philippine law governs the action. The court saw the issue to be whether, under Philippine law, a depositor with Citibank/Manila may look to assets booked at Citibank’s non-Philippine offices for repayment of the deposits. After considering affidavits from the parties, it concluded (1) that under Philippine law an obligation incurred by a branch is an obligation of the bank as a whole; (2) that repayment of WFAL’s deposits with assets booked at Citibank offices other than Citibank/Manila would not contravene MAAB 47; and (3) that Citibank therefore was obligated to repay WFAL, even if it could do so only from assets not booked at Citibank/Manila. Id., at 31a-35a. It entered judgment for WFAL, and Citibank appealed.

A panel of the United States Court of Appeals for the Second Circuit remanded the case to the District Court to clarify the basis for its judgment. The Second Circuit ordered the District Court to make supplemental findings of fact and conclusions of law on the following matters:

“(a) Whether the parties agreed as to where the debt could be repaid, including whether they agreed that the deposits were collectible only in Manila.
“(b) If there was an agreement, what were its essential terms?
“(c) Whether Philippine law (other than MAAB 47) precludes or negates an agreement between the parties to have the deposits collectible outside of Manila.
“(d) If there is no controlling Philippine law referred to in (c) above, what law does control?” Id., at 26a.

In response to the first query, the District Court distinguished the concepts of repayment and collection, defining repayment as “referring] to the location where the wire transfers effectuating repayment at maturity were to occur,” and collection as “refer[ring] to the place or places where plaintiff was entitled to look for satisfaction of its deposits in the event that Citibank should fail to make the required wire transfers at the place of repayment.” Id., at 14a. It concluded that the parties’ confirmation slips established an agreement that repayment was to occur in New York, and that there was neither an express agreement nor one that could be implied from custom or usage in the Eurodollar market on the issue of where the deposits could be collected. In response to the second question, the court stated that “[t]he only agreement relating to collection or repayment was that repayment would occur in New York.” Id., at 18a. As to third query, the court stated that it knew of no provision of Philippine law that barred an agreement making WF AL’s deposits collectible outside Manila. Finally, in response to the last query, the District Court restated the issue in the case as follows:

“Hence, the dispute in this case . . . boils down to one question: is Citibank obligated to use its worldwide assets to satisfy plaintiff’s deposits? In other words, the dispute is not so much about where repayment physically was to be made or where the deposits were collectible, but rather which assets Citibank is required to use in order to satisfy its obligation to plaintiff. As we have previously found that the contract was silent on this issue, we interpret query (d) as imposing upon us the task ... of deciding whether New York or Philippine law controls the answer to that question.” Id., at 19a.

The District Court held that, under either New York or federal choice-of-law rules, New York law should be applied. After reviewing New York law, it held that Citibank was liable for WFAL’s deposits with Citibank/Manila, and that WFAL could look to Citibank’s worldwide assets for satisfaction of its deposits.

The Second Circuit affirmed, but on different grounds. Citing general banking law principles, the Court of Appeals reasoned that, in the ordinary course, a party who makes a deposit with a foreign branch of a bank can demand repayment of the deposit only at that branch. In the court’s view, however, these same principles established that this “normal limitation” could be altered by an agreement between the bank and the depositor: “If the parties agree that repayment of a deposit in a foreign bank or branch may occur at another location, they authorize demand and collection at that other location.” 852 F. 2d, at 660. The court noted that the District Court had found that Citibank had agreed to repay WFAL’s deposits in New York. It concluded that the District Court’s finding was not clearly erroneous under Federal Rule of Civil Procedure 52(a), and held that, as a result, WFAL was entitled “to collect the deposits out of Citibank assets in New York.” 852 F. 2d., at 661.

We granted certiorari. 493 U. S. 990 (1989). We decide that the factual premise on which the Second Circuit relied in deciding the case contradicts the factual determinations made by the District Court, determinations that are not clearly erroneous. We vacate the judgment and remand the case to the Court of Appeals for further consideration of the additional legal questions in the case.

II

Little need be said respecting the operation or effect of the Philippine decree at this stage of the case, for no party questions the conclusion reached by both the District Court and the Court of Appeals that Philippine law does not bar the collection of WFAL’s deposits from the general assets of Citibank in the State of New York. See 852 F. 2d, at 660-661; App. to Pet. for Cert. 18a. The question, rather, is whether Citibank is obligated to allow collection in New York, and on this point two principal theories must be examined. The first is that there was an agreement between the parties to permit collection in New York, or indeed at any place where Citibank has assets, an agreement implied from all the facts in the case as being within the contemplation of the parties. A second, and alternative, theory for permitting collection is that, assuming no such agreement, there is a duty to pay in New York in any event, a duty that the law creates when the parties have not contracted otherwise. See 3 A. Corbin, Contracts §561, pp. 276-277 (1960).

The Court of Appeals appears to have relied upon the first theory we have noted, adopting the premise that the parties did contract to permit recovery from the general assets of Citibank in New York. Yet the District Court had made it clear that there is a distinction between an agreement on “repayment,” which refers to the physical location for transacting discharge of the debt, and an agreement respecting “collection,” which refers to the location where assets may be taken to satisfy it, and in quite specific terms, it found that the only agreement the parties made referred to repayment.

The Court of Appeals, while it said that this finding was not clearly erroneous, appears to have viewed repayment and collection as interchangeable concepts, not divisible ones. It concluded that the agreement as to where repayment could occur constituted also an agreement as to which bank assets the depositor could look to for collection. The strongest indication that the Court of Appeals was interpreting the District Court’s findings in this manner is its answer to the argument, made by the United States as amicus curiae, that the home office of a bank should not bear the risk of foreign restrictions on the payment of assets from the foreign branch where a deposit has been placed, unless it makes an express agreement to do so. The court announced that “[o]ur affirmance in the present case is based on the district court's finding of just such an agreement." 852 F. 2d, at 661 (emphasis added).

That the Court of Appeals based its ruling on the premise of an agreement between the parties is apparent as well from the authorities upon which it relied to support its holding. The court cited three cases for the proposition that an agreement to repay at a particular location authorizes the depositor to collect the deposits at that location, all of which involve applications of the act of state doctrine: Allied Bank International v. Banco Credito Agricola de Cartago, 757 F. 2d 516 (CA2), cert. dism’d, 473 U. S. 934 (1985); Garcia v. Chase Manhattan Bank, N. A., 735 F. 2d 645, 650-651 (CA2 1984); and Braka v. Bancomer, S. N. C., 762 F. 2d 222, 225 (CA2 1985). Each of these three cases turns upon the existence, or nonexistence, of an agreement for collection. In Garcia and Allied Bank, the agreement of the parties to permit collection at a location outside of the foreign country made the legal action of the foreign country irrelevant. See Garcia, 735 F. 2d, at 646 (agreement between the parties was that “Chase’s main office in New York would guarantee the certificate [of deposit] and that [the depositors] could be repaid by presenting the certificate at any Chase branch worldwide”); id., at 650 (purpose of the agreement was “to ensure that, no matter what happened in Cuba, including seizure of the debt, Chase would still have a contractual obligation to pay the depositors upon presentation of their CDs”); Allied Bank, supra, at 522 (agreement between the parties was that Costa Rican banks’ obligation to repay various loans in New York “would not be excused in the event that Central Bank [of Costa Rica] failed to provide the necessary United States dollars for payment”). In Braka, the agreement between the parties was that repayment and collection would be permitted only in the foreign country, and so the foreign law controlled. See 762 F. 2d, at 224-225 (specifically distinguishing Garcia on the ground that the bank had not guaranteed repayment of the deposits outside of Mexico). By its reliance upon these cases, the Court of Appeals, it seems to us, must have been relying upon the existence of an agreement between Citibank and WFAL to permit collection in New York. As noted above, however, this premise contradicts the express finding of the District Court.

Under Federal Rule of Civil Procedure 52(a), the Court of Appeals is permitted to reject the District Court’s findings only if those findings are clearly erroneous. As the Court of Appeals itself acknowledged, the record contains ample support for the District Court’s finding that the parties agreed that repayment, defined as the wire transfers effecting the transfer of funds to WFAL when its deposits matured, would take place in New York. The confirmation slips exchanged' by the parties are explicit: The transfer of funds upon maturity was to occur through wire transfers made by the parties’ correspondent banks in New York. See supra, at 664.

As to collection, the District Court found that neither the parties’ confirmation slips nor the evidence offered at trial with regard to whether “an agreement concerning the place of collection could be implied from custom and usage in the international banking field” established an agreement respecting collection. See App. to Pet. for Cert. 16a-17a. Upon review of the record, we hold this finding, that no such implied agreement existed based on the intent of the parties, was not clearly erroneous. The confirmation slips do not indicate an agreement that WFAL could collect its deposits from Citibank assets in New York; indeed, Citibank/Manila’s confirmation slip, stating that “[a]t maturity we remit US Dir 1,049,444.44 to your account with Wells Fargo Bank Intl Corp NY through Citibank New York,” see supra, at 664 (emphasis added), tends to negate the existence of any such agreement. The telexes from the money broker who arranged the deposits speak in terms of repayment, and indicate no more than that repayment was to be made to WFAL’s account with its correspondent bank in New York; they do not indicate any agreement about where WFAL could collect its deposits in the event that Citibank/Manila failed to remit payment upon maturity to this account.

Nor does the evidence contradict the District Court’s conclusion that the parties, in this particular case, failed to establish a relevant custom or practice in the international banking community from which it could be inferred that the parties had a tacit understanding on the point. Citibank’s experts testified that the common understanding in the banking community was that the higher interest rates offered for Eurodollar deposits, in contrast to dollar deposits with United States banks, reflected in part the fact that the deposits were not subject to reserve and insurance requirements imposed on domestic deposits by United States banking law. This could only be the case, argues Citibank, if the deposits were “payable only” outside of the United States, as required by 38 Stat. 270, as amended, 12 U. S. C. § 461(b)(6), and 64 Stat. 873, as amended, 12 U. S. C. § 1813(1)(5). It argues further that higher rates reflected the depositor’s assumption of foreign “sovereign risk,” defined as the risk that actions by the foreign government having legal control over the foreign branch and its assets would render the branch unable to repay the deposit. See, e. g., App. 354-367 (testimony of Ian H. Giddy).

WFAL’s experts, on the other hand, testified that the identical interest rates being offered for Eurodollar deposits in both Manila and London at the time the deposits were made, despite the conceded differences in sovereign risk between the tWo locations, reflected an understanding that the home office of a bank was liable for repayment in the event that its foreign branch was unable to repay for any reason, including restrictions imposed by a foreign government. See, e. g., id., at 270-272 (testimony of Gunter Dufey).

A fair reading of all of the testimony supports the conclusion that, at least in this trial, on the issue of the allocation of sovereign risk there was a wide variance of opinion in the international banking community. We cannot say that we are left with “the definite and firm conviction” that the District Court’s findings are erroneous. United States v. United States Gypsum Co., 333 U. S. 364, 395 (1948). Because the Court of Appeals’ holding relies upon contrary factual assumptions, the judgment for WFAL cannot be affirmed under the reasoning used by that court.

Given the finding of the District Court that there was no agreement between the parties respecting collection from Citibank’s general assets in New York, the question becomes whether collection is permitted nonetheless by rights and duties implied by law. As is its right, see Dandridge v. Williams, 397 U. S. 471, 475-476, and n. 6 (1970), WFAL seeks to defend the judgment below on the ground that, under principles of either New York or Philippine law, Citibank was obligated to make its general assets available for collection of WFAL’s deposits. See Brief for Respondent 18, 23, 30-49. It is unclear from the opinion of the Court of Appeals which law it found to be controlling; and we decide to remand the case for the Court of Appeals to determine which law applies, and the content of that law. See Thigpen v. Roberts, 468 U. S. 27, 32 (1984); Dandridge, supra, at 475-476, and n. 6.

One of WFAL’s contentions is that the Court of Appeals’ opinion can be supported on the theory that it is based upon New York law. We do not think this is a fair or necessary construction of the opinion. The Court of Appeals placed express reliance on its own opinion in Garcia v. Chase Manhattan Bank, N. A., 735 F. 2d 645 (CA2 1984), without citing or discussing Perez v. Chase Manhattan Bank, N. A., 61 N. Y. 2d 460, 463 N. E. 2d 5 (1984). In that case, the New York Court of Appeals was explicit in pointing out that its decision was in conflict with that reached two days earlier by the Second Circuit in Garcia, supra, a case that the Perez court deemed “similar on its facts.” See 61 N. Y. 2d, at 464, n. 3, 463 N. E. 2d, at 9, n. 3. Given this alignment of authorities, we are reluctant to interpret the Court of Appeals’ decision as resting on principles of state law. The opinion of the Court of Appeals, moreover, refers to “general banking law principles” and “United States law,” 852 F. 2d, at 660; whether this is the semantic or legal equivalent of the law of New York is for the Court of Appeals to say in the first instance.

Alternatively, if the Court of Appeals, based upon its particular expertise in the law of New York and commercial matters generally, is of the view that the controlling rule is supplied by Philippine law or, as Citibank would have it, by a federal common-law rule respecting bank deposits, it should make that determination, subject to any further review we deem appropriate. In view of our remand, we find it premature to consider the other contentions of the parties respecting the necessity for any rule of federal common law, or the pre-emptive effect of federal statutes and regulations on bank deposits and reserves. See 12 U. S. C. §§ 461(b)(6), 1813(l)(5)(a); 12 CFR §204.128(c) (1990). All of these matters, of course, may be addressed by the Court of Appeals if necessary for a full and correct resolution of the case.

The judgment of the Court of Appeals is vacated, and the case is remanded for further proceedings consistent with this opinion.

It is so ordered.

Chief Justice Rehnquist,

concurring.

Upon reading the opinion of the Court in this case, one may fairly inquire as to why certiorari was granted. The opinion decides no novel or undecided question of federal law, but simply recanvasses the same material already canvassed by the Court of Appeals and comes to a different conclusion than that court did. I do not believe that granting plenary review in a case such as this is a wise use of our limited judicial resources. But the Court by its grant of certiorari has decided that the case should be considered on the merits. See Ferguson v. Moore-McCormack Lines, Inc., 362 U. S. 521, 559 (1957) (Harlan, J., dissenting). I join the opinion of the Court.

Justice Stevens,

dissenting.

The Court wisely decides this case on a narrow ground. Its opinion, however, ignores an aspect of the case that is of critical importance for me.

The parties agree that Citibank assumed the risk of loss caused by either the insolvency of its Manila branch, or by an act of God. Citibank argues that only the so-called “sovereign risk” is excluded from its undertaking to repay the deposit out of its general assets. In my opinion such a specific exclusion from a general undertaking could only be the product of an express agreement between the parties. The District Court’s finding that no such specific agreement existed is therefore dispositive for me.

Accordingly, I would affirm the judgment of the Court of Appeals.

        E. g., Brief for Petitioner 16, n. 26; Brief for Respondent 15, 39-40; Tr. of Oral Arg. 10, 16 (petitioner); id., at 31-32 (United States as amicus curiae in support of petitioner).