West Virginia v. United States
Headline: Disaster-relief ruling allows the Federal Government to collect prejudgment interest from West Virginia for Army Corps site-preparation costs, affirming states must fully repay federal disaster expenses when they contract for relief.
Holding: We hold that West Virginia may be held liable to pay prejudgment interest to the United States on the Army Corps’ site-preparation contract debt under federal law, rather than state law.
- Makes states responsible for prejudgment interest on federal disaster relief site-preparation costs.
- Helps the Federal Government recover full costs when it provides contracted disaster assistance.
- Directs claims about fairness or hardship to Congress, not the courts.
Summary
Background
In 1972 heavy rains caused the Buffalo Creek dam collapse and later storms caused flooding and mudslides in the same region of West Virginia. The President declared both events "major disasters" under the Disaster Relief Act (DRA). Section 226(a) of the Act said states, local governments, or displaced owners should prepare sites with utilities for temporary housing, and the Federal Government would not normally pay those costs. West Virginia could not prepare sites and asked the Army Corps of Engineers to do the work. The Corps billed the State; the State acknowledged the bills but did not pay. The United States sued in 1978 to recover site-preparation costs and prejudgment interest; the District Court found the State contractually obligated but denied prejudgment interest, the Fourth Circuit reversed on interest, and the Supreme Court granted review limited to that question.
Reasoning
The Court considered whether federal or state law governs prejudgment interest when the United States sues a State on a contract debt. The Court held federal common law controls and that prejudgment interest is part of full compensation for money owed for a breach of contract. It rejected a balancing-of-equities test used below and relied on the DRA’s allocation of disaster costs to show federal policy favors complete reimbursement. West Virginia’s argument that its state law or limited consent barred interest was rejected because a State does not have sovereign immunity against the Federal Government for this obligation.
Real world impact
The ruling means states that contract with the Federal Government for disaster relief can be required to pay interest on overdue federal costs, helping the Government recover full expenses. The Court acknowledged possible hardship for state citizens but said any change in that apportionment must come from Congress rather than the courts.
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