B-236958, Oct 3, 1989, Office of General Counsel

B-236958, Oct 3, 1989, Office of General Counsel

APPROPRIATIONS/FINANCIAL MANAGEMENT - Judgment Payments - Interest - Appeals DIGEST: GAO has long maintained that 31 U.S.C. Sec. 1304 is only a conditional appropriation of funds to pay certain judgments, along with interest (both pre- and post-judgment) as otherwise authorized by law against the United States, and that the reference in that law to "interest ... specified in the judgments payable from that appropriation" refers to pre-judgment interest on the claim under some other statutory or contractual provision, rather than post-judgment interest on the court's order. GAO therefore recommends the Justice Department take an appeal from a district court judgment holding that, where no other statutory or contractual waiver of sovereign immunity applies, the provisions of section 1304, in and of themselves, waive federal sovereign immunity from interest awards and give district courts discretion to include in their orders post-judgment interest awards payable from that appropriation.

Mr. Stuart E. Schiffer

Acting Assistant Attorney General

Civil Division

Department of Justice

Washington, D.C. 20530

Re: Banks v. Secretary of the Navy, CIV-88-83-1086-EJG CA-87-1513 (9th Cir.)

Mr. Schiffer:

This responds to your letter of September 12, 1989, requesting our views on whether the United States should appeal the district court's ruling in the captioned case awarding post-judgment interest against the government on certain back pay and attorney fee awards. For the reasons given below, we recommend that an appeal be taken.

Pursuant to Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. Sec. 2000e (1982), Mr. Banks won awards of back pay and attorney fees against the Navy. Those awards were appealed unsuccessfully to the Court of Appeals for the 9th Circuit. Although the judgment as presented to GAO for certification did not so provide, the record indicates that the court would have specifically included interest in its judgment, but for the representations of the Assistant United States Attorney. /1/ When the court learned that GAO's Claims Group had certified the awards for payment, but had not certified the payment of interest on the awards, the district court issued new orders directing the United States to pay interest on the back pay award and two attorney fee awards. /2/ Those orders require the government to pay the plaintiff and his attorneys interest on approximately $41,000 at the so-called "T-Bill Rate" /3/ for the period from March 4, 1987 to December 6, 1988.

The district court's new orders appear to conflict with the Supreme Court's ruling in Library of Congress v. Shaw, 478 U.S. 310 (1986), holding that interest cannot be recovered against the federal government pursuant to Title VII of the Civil Rights Act of 1964, as amended. similar conclusion was reached in Thompson v. Kennickell, 797 F.2d 1015 (D.C. Cir. 1986). See also B-195809-O.M., Mar. 30, 1981. The Banks ruling does not mention Shaw, despite the fact that it appears to be the leading case on this issue. It seems unlikely that the district court was unfamiliar with Shaw, however, since so much of Banks was devoted to rebuttal of the Kennickell decision, which itself relies significantly upon Shaw. See 797 F.2d at 1016-17, 1021, 1024, 1026.

Presumably, the district court would rest its deviation from Shaw upon the rationale that the Supreme Court focused its unsuccessful search for authority to award interest upon the provisions of Title VII itself, and never focused on the provisions of 31 U.S.C. Sec. 1304 (1982), as amended. As explained in the Banks ruling, the district court maintains that the "plain language" of section 1304 affords ample authority for a district court to award interest against the government in any matter pending before it, including actions for back pay and attorney fees under Title VII of the Civil Rights Act. /4/

In the court's view, the language "necessary amounts are appropriated to pay final judgments ... and interest ... specified in the judgment" constitutes a waiver of the federal government's sovereign immunity from interest assessments. In effect, the court concludes that this language waives the government's sovereign immunity from interest whenever a district court specifies in its order that the principal award shall accrue post-judgment interest. The district court explicitly rejected the Kennickell decision and inferentially the Shaw decision because the decision failed to persuasively explain why this language does not have this effect. June 5, 1989, Slip Op. at 6 7.

If the language of section 1304 is divorced from its context and historical purposes, it is easy to understand how it might be misinterpreted to constitute a broad waiver of sovereign immunity from interest. However, we are not aware of any basis for this interpretation either in the purposes served by this statute or its legislative history. Congress enacted section 1304 hereafter referred to as the "Judgment Fund" to expedite the payment of judgments against the United States and to reduce interest paid by the United States thereon. As you know, agency operating funds generally were and still are not available to pay judgments against the United States. E.g. 34 Comp.Gen. 221 (1954); 55 Comp.Gen. 1447, 1449 (1976). Instead, Congress separately appropriated funds to pay judgments against the government. /5/ Congress enacted the Judgment Fund statute to eliminate the need for separate congressional appropriations to pay each and every judgment against the United States. Among the major benefits that Congress anticipated from the establishment of the Judgment Fund were quicker payment of judgments and significant reductions in interest expenses to the government that would follow from elimination of the delay inherent in the need to seek separate appropriations. B-191028, Mar. 27, 1978; Hearings on Supplemental Appropriation Bill, 1957, Before Subcommittee of House Committee on Appropriations, 84th Cong., 2d Sess., at 883-885 (1956) (hereafter cited as the 1956 Hearings). Cf., e.g., Reminga v. United States, 695 F.2d 1000, 1002 (6th Cir. 1982). Thus, section 1304 established a permanent indefinite appropriation for the payment of judgments which were themselves authorized by other statutes. Cf. B-191028, Mar. 27, 1978; Reminga, 695 F.2d at 1002; Rooney v. United States, 694 F.2d 582, 583 (9th Cir. 1982); DeLucca v. United States, 670 F.2d 843, 846 (9th Cir. 1982).

GAO has long considered the language of section 1304 upon which Banks relies to be a reference to any pre-judgment interest that might be awarded by a court. In B-163682, Mar. 18, 1968, GAO advised a private attorney:

"While section 1304 appropriates money for the payment of judgments against the United States, 'together with such interest and costs as may be specified in such judgments' it is obvious that this provision of itself does not authorize the inclusion of interest on judgments against the United States, but merely renders money available to pay such interest where interest is properly included in a judgment pursuant to a specific statute or contract. Also, it appears from the legislative history of section 1304 that the language with reference to interest specified in the judgment was intended to pertain to interest on the claim itself, as distinguished from interest on the judgment."

We then referred the private attorney to the following passage found on page 885 of the 1956 Hearings:

"Section 1304 would not affect the payment of interest on the claim itself as distinguished from interest on the judgment when so specified in the judgment itself. This is now specifically provided for by law in certain Court of Claims cases (28 U.S.C. Sec. 2516(a)), and is expressly recognized in language currently used to make appropriations for the payment of judgments."

GAO routinely advised judgment creditors of its position on this issue for a number of years by means of a form attachment to GAO certificates of settlement denying interest on judgments against the government. Presumably, this longstanding interpretation by GAO as the agency charged with primary responsibility for implementation of section 1304 is entitled to considerable deference in the courts. E.g., Chemical Manufacturers Ass'n v. Natural Resources Defense Council, 470 U.S. 116, 125 (1985).

In the 33 years which have passed since it was enacted, GAO has never construed section 1304 to authorize interest whenever it is specified in the judgment. Nor, until now in Banks, has any court decision of which we are aware ever reached that conclusion. On the other hand, at least two circuit courts have concluded that section 1304 does not constitute a waiver of sovereign immunity. Kennickell, 797 F.2d at 1020-21, n.1; Arvin v. United States, 742 F.2d 1301, 1304 05 (11th Cir. 1984). If, as suggested in Banks, this question may easily be resolved by reference to the plain language of section 1304, then one must wonder why the Supreme Court chose to devote so much effort to the review of the language and history of the Civil Rights Act, when it was clearly aware of section 1304 and its provisions. See 478 U.S. at 318 n.6. Perhaps one reason why the Supreme Court chose not to turn to the passage emphasized by the district court is that the Banks approach would have the anomalous result of rendering superfluous all of the many statutes enacted both before and after section 1304 specifically providing for the assessment of post- judgment interest on district court judgments in a variety of situations. Cf. Holly v. Chasen, 639 F.2d 795, 797-98 (D.C. Cir. 1981); Kennickell, 797 F.2d at 1026.

Finally, even were we to assume arguendo, that the District Court is correct in its treatment of section 1304, there would still be the need to comply with the conditions set forth in that section, as implicitly admitted in Banks. In this regard, please be advised that GAO has no record of filing of the judgment for back pay as opposed to the judgment for attorney fees prior to the issuance of the 9th Circuit's mandate of affirmance. /6/ Thus, while interest would be required under the district court's theory on the attorney fees judgment, interest would not be allowable on the back pay award itself. Cf., e.g., B-191028, Mar. 27, 1978; Rooney, 694 F.2d at 582-83.

To our knowledge, Banks is the first decision in the country to clearly and explicitly conclude that section 1304 constitutes a waiver of the federal government's sovereign immunity from interest awards. If adopted by the courts, the Banks construction of section 1304 would "undo" the requirement of an express statutory or contractual waiver of sovereign immunity from interest. Indeed, if section 1304 qualifies as an express waiver of sovereign immunity from interest, then the subtle, unexplicated and, to the present, undiscovered congressional waiver of the no-interest rule appears tantamount to a standardless delegation to the district courts to obligate the United States to pay post-judgment interest by simply and routinely including it in their orders. Such a result flies in the face of the settled rule of statutory construction requiring express and unequivocal waivers of sovereign immunity. Shaw, above and Kennickell, above. Nor will the impact of this case be limited to the federal district courts.

Cf. 31 U.S.C. Sec. 1304(a)(3).

Clearly, the cost of prosecuting an appeal of Banks may well exceed the additional amount that would be paid for interest in this case, if Banks remains undisturbed. However, the resulting increase in interest expenses incurred by the Treasury in the future will be far from insignificant, should other courts adopt the Banks approach. Consequently, we recommend that an appeal be taken in this matter. Should you or your staff have any questions in this matter, please feel free to contact myself or Mr. Neill Martin-Rolsky of my staff, at 275 5644.

/1/ We note in passing that when the conditions of 31 U.S.C. Sec. 1304 (1982), as amended, are satisfied, post-judgment interest attaches by force and operation of law. There is no need for the judgment to expressly award interest. E.g., Campbell v. United States, 809 F.2d 563, 570 (9th Cir. 1987).

/2/ Interest was neither sought by the plaintiff nor ordered by the court on a third attorney fee included in a stipulation between the parties after the Court of Appeals affirmed the award of back pay and the other attorney fees.

/3/ See Campbell v. United States, 809 F.2d 563 (9th Cir. 1987) (retroactive application of increase in the applicable interest rate mandated by the Federal Court Improvement Act, Sec. 302, Pub. L. No. 97 164, 96 Stat 25, (1982). Cf., e.g., Brooks v. United States, 757 F.2d 734 (5th Cir. 1985).

/4/ Section 1304, title 31, United States Code, provides: "(a) Necessary amounts are appropriated to pay final judgments, awards, compromise settlements, and interest and costs specified in the judgments or otherwise authorized by law when-- "(1) payment is not otherwise provided for; "(2) payment is certified by GAO; and "(3) the judgment, award, or settlement is payable-- "(A) under section 2414, ... of Title 28; ***** "(b)(1) Interest may be paid from the appropriation made by this section-- "(A) on a judgment of a district court, only when the judgment becomes final after review on appeal or petition by the United States Government, and then only from the date of filing of the transcript of the judgment with the Comptroller General through the day before the date of the mandate of affirmance; ****

/5/ CF. Glidden v. Zdanok, 370 U.S. 530, 570 (1962) (citing a 1933 study listing 15 instances in 70 years where Congress refused to appropriate funds to pay judgments).

/6/ CF. June 5, 1989, Slip Op. at 6-7 ("Plaintiff's counsel claims she filed the transcript of the judgment with GAO.")