Skip to main content

B-212222, Sep 3, 1987, Office of General Counsel

B-212222 Sep 03, 1987
Jump To:
Skip to Highlights

Highlights

This case represents the fourth time that a federal appellate court has considered this issue. /1/ Three of these cases (including the present one) have gone against the government. The only one to favor the government (that of the 6th circuit) - is unreported. The following comments are intended to supplement our earlier letter. The statutory language at issue here is part of the Federal Claims Collection Act of 1966 (FCCA). /2/ As was recently observed in Commonwealth Edison v. Since GAO and Justice are charged by law with interpreting and implementing the FCCA (including those portions added in 1982 by the DCA). Their views of that act are entitled to "significant deference" from the courts.

View Decision

B-212222, Sep 3, 1987, Office of General Counsel

APPROPRIATIONS/FINANCIAL MANAGEMENT - Claims By Government - Past due accounts - Interest - State/local governments DIGEST: GAO urges the Justice Department to seek rehearing or appeal (as necessary) of the decision in Arkansas v. Block, Nos. 86-2018 & 86-2060 (8th Cir. Aug. 4, 1987) which held that the definition of "person" contained in section 11 of the Debt Collection Act of 1982, Pub.L. No. 97-365, codified at 31 U.S.C. 3717 (1982), abrogated the government's common law right to assess interest on delinquent debts owed by units of state and local government.

The Honorable Richard K. Willard:

This letter responds to an informal inquiry from Mr. Bruce Forrest of your staff concerning GAO's position on whether to seek rehearing or appeal of the recent decision in Arkansas v. Block, Nos. 86-2018 and 86 2060, slip op. (8th Cir. Aug. 4, 1987). That decision concerns the liability of the State of Arkansas for food stamps lost in the mail. Although the court affirmed the state's liability in this regard, it also concluded that the government could not assess interest against Arkansas' debt. The court interpreted language from section 11 of the Debt Collection Act of 1982 (DCA), Pub.L. No. 365, 97th Cong., 2d Sess., 96 Stat. 1749, 1756, 31 U.S.C. Sec. 3701(c), which provides that "for the purposes of this subsection, the term 'person' does not include any agency of the United States or any state or local government." In the court's view, that provision destroyed the government's common law authority to assess interest against state and local governments. We strongly disagree and urge rehearing or appeal (as necessary and appropriate) on this aspect of the decision.

As you know, this case represents the fourth time that a federal appellate court has considered this issue. /1/ Three of these cases (including the present one) have gone against the government, and the fourth-- the only one to favor the government (that of the 6th circuit) - is unreported. In February, 1986, we wrote to urge Justice to seek rehearing or appeal of the third circuit's decision on this issue. See B-212222, Feb. 11, 1986. Our previous correspondence explored in some detail our analysis of the decisions issued as of that date. We believe that analysis remains relevant to the present case. Consequently, the following comments are intended to supplement our earlier letter.

First, as you know, the statutory language at issue here is part of the Federal Claims Collection Act of 1966 (FCCA). /2/ As was recently observed in Commonwealth Edison v. NRC, 819 F.2d 750, 763 (7th Cir. 1987), since GAO and Justice are charged by law with interpreting and implementing the FCCA (including those portions added in 1982 by the DCA), their views of that act are entitled to "significant deference" from the courts. Despite this, the decision in Arkansas neither mentions, nor appears to give any weight to the relevant regulations, opinions, and expertise of GAO and Justice. /3/

Second, in Arkansas the court notes that, since there is no legislative history to guide its decision, the court can only consider the "plain meaning" of the language at issue. The decision then states: "By enacting a statute that explicitly denies the federal government authority to charge interest on debts owed it by the states, Congress abrogated any pre -existing common law right." Slip op. at 8. This is the only discussion presented in the decision of the court's analysis of the "plain meaning" of the language at issue. In our view, the courts' analysis of the provision at issue is incorrect and actually assumes the issue to be decided. In our view, the Supreme Court has more aptly summarized this provision as "a definitional section excluding state agencies from those 'persons' statutorily required to pay interest on debts owed to the Federal Government." West Virginia v. United States, 107 S.Ct. 703, 707 n.6 (1987). In other words, rather than deny (explicitly or otherwise) to the government the authority to assess interest against states, this provision merely exempts the states from the operation of an otherwise mandatory statute.

Third, in West Virginia, the Supreme Court commented that, although the provision at issue here did not apply to the case then before it (for reasons not relevant here), it could "draw no inference about Congress's comprehension of the federal common law of interest from its enactment, without any discernable legislative history, of this provision." The Court then cited the decisions of the 2d and 3rd circuits. Id. In our view, the Supreme Court's footnote comment in West Virginia suggests that the Court would be willing to consider this issue, and that the government should not allow the contrary decisions of the 2d and 3rd circuits (the decision in Arkansas had not yet been issued) to discourage it from bringing a case forward.

For these reasons and the reasons presented in our February 1986 letter, we strongly recommend that Justice seek rehearing or appeal (as appropriate) of the decision in Arkansas. If you or your staff have any questions regarding our position in this matter, please feel free to contact Mr. Neill Martin-Rolsky of my staff, at (202) 275-5544.

/1/ The other three circuit cases (copies of which are enclosed with this letter) are: Pennsylvania v. United States, 781 F.2d 334 (3rd Cir. 1986); Perales v. United States, 751 F.2d 98 (2d Cir. 1984) (per curiam), aff'g 598 F.Supp. 19 (S.D.N.Y.); and County of St. Clair, Michigan v. United States, No. 83-3546, slip op. (6th Cir. Dec. 7, 1984) (unpublished at the court's order).

/2/ See DCA, Sec. 11, 96 Stat. at 1756. (The FCCA is codified in 31 U.S.C. ch. 37 (1982).)

/3/ Although cited to the court in the government's briefs, no mention is made in Arkansas of the Federal Claims Collection Standards, 4 C.F.R. Secs. 102.13(i), 102.3(b)(4) (1987) (joint GAO-Justice regulations); 49 Fed.Reg. 8889, 8891, 8894 (1984) (Supplementary Information Statement). A number of decisions of the Comptroller General were also cited to the court. See B-209669, Dec. 17, 1982, to the Attorney General; B-212222, Aug. 23, 1983, to the Department of Agriculture; B-212222, Jan. 5, 1984, to Senator Percy.

GAO Contacts

Office of Public Affairs