Brown, P Hamilton v. Ridge, Thomas J.

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

–————

No. 02-5193 September Term, 2002

98cv01282

Filed On: May 6, 2003

P. HAMILTON BROWN, ET AL.,

APPELLEES

v.

UNITED STATES OF AMERICA AND THOMAS J. RIDGE,

SECRETARY, DEPARTMENT OF THE TREASURY,

APPELLANTS

DISTRICT OF COLUMBIA,

APPELLEE

–————

Consolidated with 02–5194

–————

BEFORE: SENTELLE and ROGERS, Circuit Judges, and

SILBERMAN, Senior Circuit Judge

ORDER

It is, ORDERED that the court’s opinion filed on May 2,

2003, be amended as follows:

The appellants’ designation in the caption of the opinion

should read:

2

United States of America and Thomas J. Ridge, Secretary,

Department of Homeland Security

Per Curiam

FOR THE COURT:

Mark J. Langer, Clerk

BY:

Michael C. McGrail

Deputy Clerk

Notice: This opinion is subject to formal revision before publication in the

Federal Reporter or U.S.App.D.C. Reports. Users are requested to notify

the Clerk of any formal errors in order that corrections may be made

before the bound volumes go to press.

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued April 7, 2003 Decided May 2, 2003

No. 02-5193

P. HAMILTON BROWN, ET AL.,

APPELLEES

v.

UNITED STATES OF AMERICA AND

THOMAS J. RIDGE, SECRETARY, DEPARTMENT OF HOMELAND SECURITY,

APPELLANTS

DISTRICT OF COLUMBIA,

APPELLEE

Consolidated with

No. 02-5194

Appeals from the United States District Court

for the District of Columbia

(No. 98cv01282)

–————

Bills of costs must be filed within 14 days after entry of judgment.

The court looks with disfavor upon motions to file bills of costs out

of time.

2

Robert D. Kamenshine, Attorney, U.S. Department of Jus-

tice, argued the cause for appellant. With him on the briefs

were Roscoe C. Howard, Jr., U.S. Attorney, and William

Kanter, Deputy Director.

Michael J. Kator argued the cause and filed the brief for

appellees.

Before: SENTELLE and ROGERS, Circuit Judges, and

SILBERMAN, Senior Circuit Judge.

Opinion for the Court filed by Circuit Judge ROGERS.

Concurring opinion filed by Senior Circuit Judge

SILBERMAN.

ROGERS, Circuit Judge: This case concerns the Treasury

Department’s attempt to overcome the conceptual incompati-

bility of two statutes. Specifically at issue is Treasury’s

selection of a ‘‘weighted national average’’ methodology to

calculate locality pay increases under the Federal Law En-

forcement Pay Reform Act of 1990 (‘‘FLEPRA’’), incorporat-

ed as Title IV of the Federal Employees Pay Comparability

Act of 1990, Pub. L. No. 101–509, 104 Stat. 1389 (1990)

(codified at 5 U.S.C. § 5304 (2000)), for retired Uniformed

Division Secret Service agents who receive annuities under

the District of Columbia Police and Firefighters Retirement

and Disability Act (‘‘DCRA’’), D.C. Code Ann. § 5–701 et seq.

(2001). The conceptual difficulty arises because locality pay

increases are geographically fixed while the DCRA’s equaliza-

tion provision is based on the salary of an agent in active

service. Notwithstanding the fact that Secret Service agents

have postings throughout the United States and overseas,

Treasury has determined that locality pay applies to DCRA

Secret Service retirees. Hence, no issue is before the court

regarding the entitlement of those retirees to locality pay

adjustments. Rather, when Treasury determined it would

apply the ‘‘weighted national average’’ methodology, a num-

ber of DCRA Secret Service retirees filed suit, and the

district court invalidated Treasury’s methodology. Brown v.

Summers, 201 F. Supp. 2d 60, 63–64 (D.D.C. 2002). Trea-

sury, joined by the United States and the District of Colum-

3

bia, appeals that judgment and contends that in light of the

conceptually difficult task of calculating locality pay increases

for retirees that track those of active agents, Treasury’s

methodology is fair and valid. We hold, first, that Treasury –

as opposed to the District of Columbia – is the proper locus of

decisionmaking for calculating the amount of locality pay for

Secret Service retirees who have opted to retire under the

DCRA. We hold second, that whether viewed as filling a gap

in the DCRA’s equalization clause or as resolving an ambigui-

ty arising from the confluence of two statutes, Treasury’s

methodology is entitled to deference under Skidmore v. Swift

& Co., 323 U.S. 134, 139 (1944). Accordingly, we reverse.

I.

In Floyd v. District of Columbia, 129 F.3d 152, 154 (D.C.

Cir. 1997), the court recounted Congress’ determination that,

in light of the Secret Service’s unique ties to the District of

Columbia Metropolitan Police Department, Secret Service

agents who performed non-clerical duties related to the pro-

tection of the President for ten or more years could convert

their retirement from the Federal Employee Retirement

System, 5 U.S.C. § 8401 et seq. (2000), to the higher-paying

plan governed by the DCRA, D.C. Code Ann. § 5–701 et seq.

See D.C. Code Ann. § 5–703. Unlike the federal system,

which provides for cost-of-living adjustments, 5 U.S.C.

§ 8462, the DCRA contains an ‘‘equalization clause’’ that

automatically increases retired agents’ pensions each time

active agents receive salary increases. The equalization pro-

vision provides:

Each individual retired from active service and entitled

to receive a pension relief allowance or retirement com-

pensation under subchapter I of this chapter shall be

entitled to receive, without making application therefor,

with respect to each increase in salary, granted by any

law which takes effect after the effective date of the

District of Columbia Police and Firemen’s Salary Act

Amendments of 1972, to which he would be entitled if he

were in active service, an increase in his pension relief

4

allowance or retirement compensation computed as fol-

lows: His pension relief allowance or retirement compen-

sation shall be increased by an amount equal to the

product of such allowance or compensation and the per

centum increase made by such law in the scheduled rate

of compensation to which he would be entitled if he were

in active service on the effective date of such increase in

salary.

D.C. Code Ann. § 5–745(c) (emphasis added).

Locality pay for Secret Service agents was first authorized

by Congress when it enacted FLEPRA in 1990. Under

FLEPRA, federal law enforcement officials, including active

members of the Secret Service, are paid a percentage of

‘‘basic pay’’ in addition to their rate of pay under the General

Schedule to reflect the higher cost of living in specified

geographic areas. Since 1994, employees in twenty-eight

cities have received locality pay increases, which the Office of

Personnel Management (‘‘OPM’’) adjusts annually. 5 U.S.C.

§ 5304 and note.

In May 1998, certain retired Secret Service agents, who

were employed as criminal investigators at the time of their

retirement and whose annuities are governed by the DCRA,

filed suit against Treasury, the United States, and the Dis-

trict of Columbia (collectively ‘‘the government’’), claiming

that locality adjustments awarded to active agents pursuant

to FLEPRA were ‘‘increases in salary’’ subject to the

DCRA’s equalization clause. The district court dismissed the

case without prejudice in December 1998, subject to reopen-

ing within six months, when Treasury agreed to include

locality pay increases in the retirees’ annuities. Letter of

December 9, 1998, from Nancy Killefer, Assistant Secretary,

Dep’t of Treasury, to Earl Cabbell, Interim Chief Financial

Officer, District of Columbia (‘‘the Killefer letter’’), reprinted

in Joint Appendix (‘‘J.A.’’) at 110–15. The case was reopened

in July 1999, when the retirees had not received locality pay

increases.

Treasury subsequently determined it would award each

retiree locality pay increases based on a ‘‘weighted national

5

average’’ of locality adjustments for active Secret Service

agents since 1991. The calculation under this methodology

was based on the locality pay increases paid to active Secret

Service agents throughout the United States, weighted to

reflect the number of agents actually serving in each locality

receiving increases. Treasury then awarded lump sum back

payments to all DCRA Secret Service retirees, and used the

‘‘weighted national average’’ method to adjust annuity bene-

fits for 1999 and each subsequent year. Although this meth-

od benefitted some retirees, others would have fared better

had the locality pay increase been determined by the location

of their last post of duty. In January 2000, the district court

granted the motion of plaintiff retirees’ counsel to withdraw

due to the ‘‘irreconcilable’’ conflict of interest between the

retirees.

In May 2000, retirees who were disadvantaged by the

‘‘weighted national average’’ methodology appeared before

the district court with new counsel, who filed an amended

complaint claiming that the locality pay increases reflected in

their DCRA retirement benefits should be computed on the

basis of the locality pay in effect at their last post of duty.

The district court denied the government’s motion to dismiss,

and ruled, on cross-motions for summary judgment, that

Treasury’s ‘‘weighted national average’’ methodology was not

entitled to judicial deference under Chevron U.S.A., Inc. v.

Natural Res. Def. Council, Inc., 467 U.S. 837, 843 (1984), or

Skidmore, 323 U.S. at 139. Brown, 201 F. Supp at 62–63.

The court concluded that the District of Columbia, rather

than Treasury, is responsible for DCRA’s implementation,

and that the plain language of DCRA’s equalization clause

‘‘requires individualized calculations based on factors individu-

al to each retiree.’’ Id. The court invalidated Treasury’s

method, but declined to replace it with the ‘‘last post of duty’’

method, explaining that the latter ‘‘is without any specific

support in the language of the statute,’’ and that the ‘‘plain-

tiffs’ way is not the only way to comply with the statute’s

mandate of individualized determinations.’’ Id. at 63. The

court entered partial summary judgment for the retirees and

remanded the case to Treasury and the District of Columbia

6

to ‘‘fashion a method that complies with the statute.’’ Id. at

63–64.

II.

On appeal, the government contends, as it did in the

district court, that Treasury’s ‘‘weighted national average’’

methodology deserves deference under Chevron, 467 U.S. at

843, or alternatively, deference equal to its power to persuade

under Skidmore, 323 U.S. at 139. Either position requires

the court to determine whether (1) Treasury – as opposed to

the District of Columbia – is the locus of decisionmaking with

regard to locality pay for DCRA Secret Service retirees, and

(2) the DCRA plainly prohibits the use of a ‘‘weighted nation-

al average’’ to calculate locality pay increases for such retir-

ees.

Although a remand order does not usually signify a final

decision for purposes of conferring jurisdiction on this court

under 28 U.S.C. § 1291 (2000), NAACP v. United States

Sugar Corp., 84 F.3d 1432, 1436 (D.C. Cir. 1996), the court

may exercise jurisdiction ‘‘where the agency to which the case

is remanded would have no opportunity to appeal after the

proceedings on remand.’’ Los Angeles v. Shalala, 192 F.3d

1005, 1012 (D.C. Cir. 1999) (quoting Occidental Petroleum

Corp. v. SEC, 873 F.2d 325, 330 (D.C. Cir. 1989), cert. denied,

530 U.S. 1204 (2000)). Because the district court invalidated

Treasury’s method for calculating locality adjustments, and

remanded with instructions to select a new methodology,

which Treasury views as ‘‘a new choice from among what [it

has] considered to be less desirable alternatives,’’ Appellant’s

Br. at 4, Treasury contends, and we agree, that this appeal

represents its only opportunity to challenge the district

court’s ruling. Therefore, the court has jurisdiction under

the exception recognized in Shalala, 192 F.3d at 1012, and

Occidental Petroleum, 873 F.2d at 330.

A.

In Floyd, the court left open the question of whether the

United States or the District of Columbia is responsible for

7

making substantive decisions about Secret Service annuity

adjustments under the DCRA. Floyd, 129 F.3d at 156.

Then, as now, the District of Columbia asserted that ‘‘the

United States makes all substantive decisions about Secret

Service pensions under the DCRA and that the District

serves as a mere conduit for federal pension monies.’’ Id.

The court in Floyd noted, however, that it found nothing in

the DCRA or the record explicitly limiting the District of

Columbia to a passive role. Id. By contrast, the record in

the instant case indicates that the District of Columbia does

not make substantive decisions about Secret Service annuities

under the DCRA, but instead has a role that is ‘‘purely

ministerial, not discretionary.’’ D.C.’s Mem. in Supp. of

Motion to Dismiss. Although the District of Columbia issues

annuity payments to Secret Service retirees under the

DCRA, it has no financial stake in the amount of those

payments, which are determined by the United States and

reimbursed to the District of Columbia by the United States.

See D.C. Code §§ 5–703, 5–732. As the District of Columbia

told the district court, it ‘‘simply acts as an administrator’’ of

the annuity program, ‘‘and is, at most, a conduit for those

federal funds, paying them out as the federal government

directs.’’ D.C.’s Mem. in Supp. of Motion to Dismiss. Trea-

sury agrees with this position, and the District of Columbia

filed a statement in this appeal that its ‘‘interest is adequately

served by the United States.’’ None of the parties suggest

that a federal agency other than Treasury is the proper locus

of decisionmaking or is responsible for funding annuities for

DCRA Secret Service retirees.

The Killefer letter, relied on by the retirees, is not to the

contrary. Indeed, the letter emphasizes the extent to which

Treasury controls decisionmaking related to DCRA annuities

for Secret Service retirees. Noting that ‘‘questions have been

raised TTT concerning annuities’’ under the DCRA, Treasury

advised the District of Columbia of its conclusion that ‘‘locali-

ty pay TTT is sufficiently akin to salary that it should be

included in the calculation of retirees’ annuity increases.’’

The letter further requests that ‘‘the District [of Columbia]

not alter any current practice with respect to implementation

8

of this retirement system without prior discussions with

[Treasury],’’ and explains that Treasury will ‘‘assist the Dis-

trict of Columbia in determining how best to calculate in-

creased annuities based on locality pay.’’ If the District of

Columbia were making substantive decisions about Secret

Service annuities under the DCRA, as the retirees contend, it

would be illogical for the District of Columbia to require

Treasury’s authorization before changing its practices with

regard to annuity payments. The Killefer letter thus sub-

stantiates that Treasury – as opposed to the District of

Columbia – makes substantive decisions about Secret Service

annuity adjustments under the DCRA.

While there may be joint actions by the United States and

the District of Columbia to ensure that DCRA Secret Service

retirees receive their benefits, and this is likely to entail

cooperative arrangements, the financial control and the sub-

stantive determination, based on an interpretation of a sepa-

rate federal law such as FLEPRA, rests with the United

States – in this case Treasury – not the District of Columbia.

When Congress authorized certain Secret Service agents to

opt into the DCRA, it neither required the District of Colum-

bia to assume the costs of paying the benefits for these

additional annuitants, nor authorized the District of Columbia

to determine the amount of those benefits arising under

separate federal statutes. See D.C. Code §§ 703, 732. What

the parties’ conduct demonstrates is consistent with the Dis-

trict of Columbia having neither a regulatory role nor a

financial stake in the determination of locality pay increases

for DCRA Secret Service retirees. This, in turn, is consistent

with Congress’ decision to afford a generous retirement op-

tion for certain agents at federal expense. D.C. Code

§ 5–703. The district court erred in finding otherwise.

B.

This court is not presented with the question of whether,

pursuant to the DCRA’s equalization clause, federal DCRA

annuitants are entitled to FLEPRA locality adjustments. In

Lanier v. District of Columbia, 871 F. Supp. 20 (D.D.C.

9

1994), the district court ruled that under the equalization

clause, DCRA Secret Service retirees are eligible for locality

pay increases given to active agents receiving such adjust-

ments under FLEPRA. Id. at 24; see also District of

Columbia v. Tarlosky, 675 A.2d 77, 80–81 (D.C. 1996). That

the government did not appeal the decision in Lanier does

not alone prove its acquiescence in the judgment. Hastings

v. Earth Satellite Corp., 628 F.2d 85, 94 n.27 (D.C. Cir. 1980).

Nor, inasmuch as the instant appeal arises from a different

lawsuit, is Treasury barred by law of the case or waiver from

challenging eligibility. Crocker v. Piedmont Aviation, Inc.,

49 F.3d 735, 739–40 (D.C. Cir. 1995). Rather, its subsequent

determination in the Killefer letter represents Treasury’s

position that Secret Service DCRA annuitants are entitled to

locality pay adjustments, as the Lanier court ruled; it is on

that determination that Treasury, as well as the United

States and the retirees, relies in the instant case. Hence, the

government has waived any challenge to the entitlement of

DCRA Secret Service agents to locality pay.

The conceptual difficulty underlying Treasury’s contention

that the court should defer to its selection of a payment

methodology underscores, however, that DCRA’s equalization

provision hardly appears to have been designed with locality

pay in mind. Congress enacted the DCRA in 1916, and

amended it in 1957 to allow participation by retired Secret

Service agents. See Pub. L. No. 85–157 § 12(b), 71 Stat. 391,

392 (1957). Neither enactment indicates that Congress antic-

ipated the adoption of FLEPRA in 1990 or the incorporation

of locality pay increases into the DCRA. Nor did this change

with enactment of the District of Columbia Retirement Pro-

tection Act of 1997, which provided a cost-of-living adjustment

for retired D.C. Metropolitan Department police officers and

D.C. firefighters under the DCRA, but expressly declined to

amend the DCRA as it applied to Secret Services retirees.

Compare Pub. L. No. 105–33, 111 Stat. 251, § 11013 (1997),

with id. at § 11084(c).

The district court in Lanier aptly stated that there is a

‘‘clash of two worthwhile principles,’’ one to ensure retirees

are treated fairly in their retirement and one to provide

10

locality pay incentives to ensure adequate public protection.

871 F. Supp. at 23. The equalization clause provides that

each Secret Service retiree shall receive an increase in his

annuity equal to any increase in salary ‘‘to which he would be

entitled if he were in active service.’’ D.C. Code § 5–745(c)

(emphasis added). Because active Secret Service agents

move frequently, and sometimes to less desirable postings

justifying additional salary incentives, any individual retiree’s

locality pay adjustment is by necessity a fictitious extrapola-

tion of what ‘‘he would be entitled [to] if he were in active

service.’’ Id. The district court here recognized that if a

DCRA retiree ‘‘is receiving a percentage increase equal to

what he or she would have received as an active agent today,

[ ] it is merely by coincidence.’’ Brown, 201 F. Supp. 2d at

63.

Given the strange gap in the DCRA, a gap that Congress

may not have intended to leave but one the court must

address in light of Treasury’s determination to award locality

pay increases to DCRA Secret Service retirees, the court is

unable to conclude that the DCRA’s plain language prohibits

Treasury’s ‘‘weighted national average’’ methodology, much

less that it requires only ‘‘individual determinations,’’ as the

district court ruled. Any sense that the DCRA was intended

to include locality adjustments is betrayed by the fact that,

because of the movement of Secret Service agents’ duty

assignments to over one hundred offices throughout the

United States and overseas, no methodology can provide

every retiree with the exact locality adjustment he would

have received as an active agent. Indeed, to the extent the

district court ruled that individualized locality adjustments

were required, the government points out that:

there is no way to ascertain the locality increase that the

agent would actually receive if currently employed.

Thus, all methods of adjustment are inherently flawed in

terms of the ‘‘individualized’’ determination envisioned by

the district court. And no method of approximation, no

matter its merits, will be equally advantageous to all

retirees.

11

Appellant’s Br. at 14. Further, there is no merit to the

retirees’ attempt to distinguish between ‘‘room for applica-

tion’’ and ‘‘ambiguity’’ arising from the confluence of the two

statutes so far as the extension of deference to Treasury’s

methodology. In either circumstance, the DCRA must be

construed to permit the exercise of reasonable judgment in

closing the gap or resolving the ambiguity.

C.

The question remains whether Treasury’s ‘‘weighted na-

tional average’’ methodology is entitled to judicial deference.

The government challenges the district court’s ruling that

Chevron deference is unavailable where, as here, Treasury’s

methodology was promulgated informally during the course

of litigation, without notice-and-comment rulemaking.

Brown, 201 F. Supp. at 62. Because we hold that Treasury’s

methodology satisfies the requirements for Skidmore defer-

ence, however, 323 U.S. at 139, we need not reach the

question of Chevron deference.

Under Skidmore, the court grants an agency’s interpreta-

tion only as much deference as its persuasiveness warrants.

Id. In making its determination, the court must examine

‘‘the thoroughness evident in [the agency’s] consideration, the

validity of its reasoning, its consistency with earlier and later

pronouncements, and all those factors which give it power to

persuade, if lacking power to control.’’ Id. at 140; cf. Chris-

tensen v. Harris County, 529 U.S. 576, 587 (2000). Trea-

sury’s methodology for calculating locality pay increases satis-

fies the requirements for Skidmore deference.

The record demonstrates that Treasury examined five dif-

ferent methods for calculating locality pay increases before

choosing the ‘‘weighted national average’’ methodology: (1)

the annuitant’s last post of duty; (2) the annuitant’s resi-

dence; (3) the average of all locality pay rates across the

country; (4) the locality pay rate in the District of Columbia;

and (5) the ‘‘weighted national average.’’ Treasury analyzed

the various outcomes of each methodology, and noted, for

example, that if the last post of duty was used, as the retirees

12

urged before the district court, ‘‘annuitants who retired from

certain localities would not have received any locality pay

increase.’’ Treasury officials also consulted the OPM and

engaged in discussions with the District of Columbia to devise

appropriate procedures for effecting the increases before

making its selection.

Moreover, Treasury’s choice of the ‘‘weighted national aver-

age’’ method reflects its reasoned attempts to choose a calcu-

lation that mirrors the actual career experiences of agents

moving from one locality to another. Although the govern-

ment concedes that the use of averaging reduces the adminis-

trative burden associated with other methods, the affidavits

from various Treasury officials, including the Supervisory

Personnel Management Specialist and the Deputy Assistant

Secretary for Human Resources, demonstrate that the princi-

pal reason for choosing that technique is that it is the ‘‘most

equitable approach because all annuitants would receive some

increase each year, regardless of where they might happen to

have last worked or where they presently live.’’ Treasury

further explained that it ‘‘did not consider using more than

one method of calculating locality pay increases for annui-

tantsTTTT [because it] believes that the equalization provision

and basic fairness require that a single method be applied to

all annuitants.’’ Moreover, Treasury noted, the use of a

single annual percentage increase across the board is similar

to across-the-board increases under many other retirement

systems.

Finally, Treasury has ‘‘specialized experience’’ in calculat-

ing annuities, particularly those under the administratively

complex DCRA. United States v. Mead Corp., 533 U.S. 218,

234–35 (2001) (internal citation omitted). The Killefer letter

indicates that Treasury regularly evaluates how other federal

statutory schemes effect the DCRA annuity system, and often

makes decisions about what national law requires.

In light of the fact that no locality adjustment can give the

retirees exactly what they would be paid as active agents,

Treasury’s ‘‘weighted national average’’ methodology is a

13

persuasive solution to an unforeseen problem, and for all of

the above reasons, it is entitled to Skidmore deference.

Accordingly, we reverse the judgment of the district court

invalidating Treasury’s methodology.

1

SILBERMAN, Senior Circuit Judge, concurring: I think

Judge Rogers has ably analyzed the case before us, and I

concur in the court’s opinion. I write separately because I

would go a step further and conclude the statute does not

even cover locality pay. As such, the only possible challenge

appellees could make under the APA to Treasury’s determi-

nation that locality pay should be averaged for these Secret

Service retirees is that the Treasury was arbitrary and

capricious. They did not do so, and I do not see how such a

challenge could have been successful.

I agree with the majority that it is certainly not open to us

to hold that locality pay is not available to Secret Service

Agents who chose to receive annuities under the DCRA. The

Treasury Department acquiesced in the district court’s ruling

in Lanier v. District of Columbia, 871 F. Supp. 20 (D.D.C.

1994), to the effect that those retirees were entitled to locality

pay increases under the equalization clause–as it was entitled

to do. Accordingly, the government sought to accommodate

that ruling by adopting the weighted average methodology.

It did not even suggest in this case that the locality pay

statute does not apply to appellees.

Still, we are not obliged, for purposes of this case, to accept

the Lanier district court construction of the locality pay

statute. It seems rather obvious to me, as the majority

suggests, that the very fact that no one can even propose a

persuasive methodology, including the district judge below,

by which locality pay would apply to appellees demonstrates

that Congress never intended locality pay to cover them.

That is why the statute is silent on the issue.