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Opinion of Kennedy, J.
ployees. Brief for Respondent 18-26. See Davis, supra, at 814, 815, n. 4. The Davis Court, however, anchored its decision in precedent. We observed that in Phillips Chemical Co. v. Dumas Independent School Dist., 361 U. S. 376 (1960), "we faced th[e] precise situation" confronting us in Davis, and so Phillips Chemical controlled our holding. 489 U. S., at 815, n. 4. To be sure, Justice Stevens in dissent disagreed with these contentions and attempted to distinguish Phillips Chemical. 489 U. S., at 824-826. The Court, however, was not persuaded at the time, and I remain convinced that the Court had the better reading of Phillips Chemical. A contrary holding in Davis, in my view, would have created a clear inconsistency in our jurisprudence. Under Chevron Oil, application of precedent which directly controls is not the stuff of which new law is made.
Far from being "revolutionary," Ashland Oil Co. v. Caryl, supra, at 920, or "an avulsive change which caused the current of the law thereafter to flow between new banks," Hanover Shoe, Inc. v. United Shoe Machinery Co., 392 U. S. 481, 499 (1968), Davis was a mere application of plain statutory language and existing precedent. In these circumstances, this Court is not free to mitigate any financial hardship that might befall Virginia's taxpayers as a result of their state government's failure to reach a correct understanding of the unambiguous dictates of federal law.
Because I do not believe that Davis v. Michigan Dept. of Treasury, supra, announced a new principle of law, I have no occasion to consider Justice O'Connor's argument, post, at 131-136, that equitable considerations may inform the formulation of remedies when a new rule is announced. In any event, I do not read Part III of the Court's opinion as saying anything inconsistent with what Justice O'Connor proposes.
On this understanding, I join Parts I and III of the Court's opinion and concur in its judgment.
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