Petitioners Brief — Army and Air Force Exchange Service v. Sheehan

; “Supreme Court, U.S.

95 25

No. 80-1437 FILE

y nov 24 Wel

In the Supreme Court of the United States. ee

OcTOBER TERM, 1981 E. CLERK

ARMY AND AIR FoRcE EXCHANGE SERVICE,

PETITIONER

v.

ARTHUR EDWARD SHEEHAN

ON WRIT OF CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE FIFTH CIRCUIT

BRIEF FOR THE PETITIONER

REX E. LEE

Solicitor General

J. PAUL McGRATH

Assistant Attorney General

KENNETH S. GELLER

Deputy Solicitor General

SAMUEL A. ALITO, JR.

Assistant to the Solicitor General

WILLIAM KANTER

ELOISE E. DAVIES

Attorneys

Department of Justice

Washington, D.C. 20530

(202) 633-2217

— —

QUESTION PRESENTED

Whether a discharged military exchange employee

who was appointed to his position may bring a civil

action for monetary damages against the United

States under the Tucker Act, 28 U.S.C. 1346 (a) (2),

predicated upon an implied-in-fact contract.

(1)

TABLE OF CONTENTS

Page

Opinions below

Jurisdiction

Statute and regulations involved

Statement

Argument:

The district court lacked jurisdiction to entertain

respondent’s claim for money damages based upon

his allegedly wrongful discharge from an appointed

position with the Army and Air Force pascal .

Service 7

A. Introduction and summary of 3 ITS 7

B. Because respondent’s employment with the

AAFES was pursuant to appointment rather

than contract, his discharge could not have con-

stituted a breach of contract 12

C. Because respondent’s complaint was based upon

alleged violations of the Due Process Clause

and AAFES regulations, none of which waive

sovereign immunity, his claims for money dam-

ages are barred 19

D. The obligations found by the court of 3 to

have been incurred by the AAFES arose from

a “quasi-contract” or “contract implied in law,”

non = =

rather than a “contract implied * . 22

Conclusion 26

TABLE OF AUTHORITIES

Cases: ate

Algonac Manufacturing Co. v. United States, 428

F.2d 1241 23

American-Foreign Steamship Corp. v. United

States, 291 F.2d 598, cert. denied, 368 U.S. 895. 8

Aycock-Lindsey Corp. v. United States, 171 F.2d

518 24

Bailey v. United States, 201 F. Supp. 604 ................ 13

(iI)

Cases—Continued Page

Baltimore & O. R. R. v. United States, 261 U.S. 592.. 23

Bloomgarden v. Coyer, 479 F.2d 2; 23

Bode v. Department of Treasury, 582 F.2d 277.... 25

Borden v. United States, 116 F.Supp. 878 .............. 18

Butler v. Pennsylvania, 51 U.S. (10 How.) 402...... 17

Carruth v. United States, 627 F. 2d 1069 9

‘Crenshaw v. United States, 184 U.S, 999 17

Fidelity & Deposit Co. v. Harris, 860 F.2d 402........ 23

Hatzlachh Supply Co. v. United States, 444 US.

e .. 23

. Hopkins v. United States, 618 F.2d 13860 ................ 14

Kania v. United States, 650 F.2d 264, cert. denied,

No. 81-246 (Oct. 18, 1981) . 8. 17

Keetz v. United States, 168 Ct. Cl. 20 14

Kirk v. United States, 451 F.2d 690 õ ũ ũnrtrt 23

Kyer v. United States, 369 F.2d 714, cert. denied,

S e 18

Merritt v. United States, 267 U.S. 3338333 23

Morton v. Ruiz, 416 U.S. 19999 25

Munro v. United States, 808 U.S. 30 8

Porter v. United States, 496 F. 2d 6383 8

Pulaski Cab Co. v. United States, 157 F.Supp. 955. 18

Richardson v. Morris, 409 U.S. 4444 21

Richardson v. United States, 214 Ct. Cl. 757 16

Shaw v. United States, 640 F.2d 1264 17

Somali Development Bank v. United States, 508

eee 23

Spooner v. United States, 211 Ct. Cl. $12 ................ 16

Standard Oil Co. v. Johnson, 316 U.S, 481 .............. 7,12

Taylor and Marshall v. Beckham, 178 U.S. 548........ 17

United States v. Algona Lumber Co., 805 U.S. 415. 23

United States v. Caceres, 440 U.S. 7111 25

United States v. Hartwell, 73 U.S. (6 Wall.) 385.... 17

United States v. Hopkins, 427 U.S. 128......9, 11, 18, 14, 15,

16, 17, 18, 19, 22

United States v. King, 895 U.S. 8

United States v. Larionoff, 481 U.S. 86444 19

United States v. Mississippi Tax Commission, 421

e 7

Cases—Continued Page

United States v. Mitchell, 445 U.S. 588 . 7,8

United States v. Shaw, 809 U.S. 499 8

United States v. Sherwood, 812 U.S. 584 21

United States v. Testan, 424 U.S. 892......7, 8, 9, 10, 11, 19,

20, 21, 22

United States v. United States Fidelity & Guaranty

e

Urbina v. United States, 428 F. 2d 1280 17

Vitarelli v. Seaton, 8569 U.S. 68 25

Young v. United States, 498 F.2d 121111 14

Statutes and regulations:

Administrative Procedure Act, 5 U.S.C. 701-706. 5

e 6

Back Pay Act, 5 U.S.C. (& Supp. III) 5595 et seq... 10

5 U.S.C. (Supp. III) 2105 (e) . ... 10

5 U.S.C, (Supp. III) 5596 (e) ve 10

Tucker Act:

2B U.S.C. 1846 (a) (8) . . . . . . 2, 5, 8, 18, 21

— eee 12, 18, 21

Pub. L. No. 91-850, Section 1, 84 Stat. 449 .............. 18

eee eee eee 9

10 U.S.C, 8012 — 9

28 U.S.C, 1881 ; 6

28 U.S.C. 1861 nenen 5

5 C. F. R. 550.801 et seq. ae 10

AR 60-21/AFR 147-15 2, 15, 16

ene 18

ch. 5, § II, J 5-6 8

ch. 5, § II, 9 5-7. 18

ch. 5, § II, J 5-7 (b) 19

ch. 5, § II, 15-8 18

ch. 5, § II, J 5-9 8

Miscellaneous: Page

1 A. Corbin, Contracts (1968 & Supp. 1980) ........... 23

Exchange Service Bulletin No. 247 (15-52) (July 2,

1975)

H.R. Rep. No. 91-988, 91st Cong., 2d Sess. (1970).. 18

Restatement of Contracts (1982) 28, 24

S. Rep. No, 91-268, 91st Cong., Ist Sess. (1969) 18

1 Williston on Contracts (Jaeger ed. 1957 & Cum.

Supp. 1981) 28, 24, 25

In the Supreme Court of the United States

OCTOBER TERM, 1981

No. 80-1437

ARMY AND AIR FORCE EXCHANGE SERVICE,

PETITIONER

v.

ARTHUR EDWARD SHEEHAN

ON WRIT OF CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE FIFTH CIRCUIT

BRIEF FOR THE PETITIONER

OPINIONS BELOW

The opinion of the court of appeals (Pet. App.

la-16a) is reported at 619 F.2d 1182. The order of

the district court (Pet. App. 17a) is not reported.

JURISDICTION

The judgment of the court of appeals (Pet. App.

18a-19a) was entered on June 27, 1980, and a peti-

tion for rehearing was denied on September 26, 1980

(Pet. App. 20a-2 1a). The petition for a writ of

certiorari was filed, after an extension, on Febru-

ary 28, 1981, and was granted on October 5, 1981

(J.A. 48). The jurisdiction of this Court is invoked

under 28 U.S.C. 1254(1).

(1)

2

STATUTE AND REGULATIONS INVOLVED

The Tucker Act, 28 U.S.C. 1346 (a) (2), provides

in pertinent part:

(a) The district courts shall have original

jurisdiction, concurrent with the Court of Claims,

of:

* — + * —

(2) Any other civil action or claim

against the United States, not exceeding

$10,000 in amount, founded either upon the

Constitution, or any Act of Congress, or

any regulation of an executive department,

or upon any express or implied contract

with the United States, or for liquidated or

unliquidated damages in cases not sound-

ing in tort. For the purpose of this para-

graph, an express or implied contract with

the Army and Air Force Exchange Service,

Navy Exchanges, Marine Corps Exchanges,

Coast Guard Exchanges, or Exchange Coun-

cils of the National Aeronautics and Space

Administration shall be considered an ex-

press or implied contract with the United

States.

The pertinent regulations are set forth at Pet. App.

22a-35a and Br. in Opp. 2-6.

STATEMENT

In 1962, respondent was appointed, pursuant to

Army and Air Force regulations (AR 60-21/AFR

147-15) (Pet. App. 22a-25a), to a position with the

Army and Air Force Exchange Service (AAFES)

(J.A. 3, 32). He was later designated by the

AAFES commander for participation in the Serv-

ice’s Executive Management Program (EMP) (J.A.

3-4, 32), under which AAFES executive employees

enjoy certain special benefits but may be transferred

to any AAFES facility in this country or abroad.“

In 1975, while respondent was serving as a shop-

ping center manager at Fort Jackson, South Caro-

lina, local police arrested him at home and seized

quantities of amphetamine tablets; phencyclidine

hydrochloride, a chemical used in the manufacture

of LSD; methylenedioxy amphetamine; and 40 mari-

juana plants. Pursuant to a plea bargain, he pleaded

guilty to four counts of simple possession of the drugs

in question and was sentenced to 18 months’ proba-

tion and a $1.000 fine (J.A. 5, 11-12, 17, 23-24, 32).

After pleading guilty to the criminal charges, re-

spondent received advance written notice of separa-

tion for cause based upon conduct off the job that

reflected discredit upon the AAFES and rendered

his retention incompatible with the best interests of

the Service (J.A. 5, 32, 11-13). The letter notifying

respondent of his dismissal was signed by James

Stapleton, the AAFES general manager for the

Piedmont Area, but because of respondent’s partici-

pation in the Executive Management Program, prior

approval had been obtained from the AAFES com-

mander, General C. W. Hospelhorn (J.A. 5, 11, 13,

1 The Executive Management Program is intended to meet

the AAFES’s need for “highly qualified and dedicated ex-

ecutive employees” available for transfer to any AAFES

facility. AR 60-21/AF 147-15, ch. 5, § II, J 5-6 (Br. in Opp.

2-6). Nomination and designation to EMP status at appro-

priate grade levels are controlled by the AAFES commander.

EMP employees are obligated to accept transfer throughout

the worldwide AAFES but enjoy special retention, insurance,

and retirement benefits. EMP status may be withdrawn for

gross inefficiency or for cause, including conduct off the job

reflecting discredit on the AAFES. See AR 60-21/AFR

147-15, ch. 5, § II, N 5-9.

4

32). After an investigation of respondent’s conduct,

Stapleton issued a final notice of separation (J.A.

5-6, 17-19, 32). Respondent appealed, in accordance

with AAFES procedures,“ and the matter was re-

ferred to a hearing examiner (J.A. 6, 32). The

hearing examiner concluded that the actions taken

by the AAFES complied with the pertinent laws and

regulations, but he recommended that respondent be

reinstated in his former grade and transferred to an

assignment outside the Southeast Exchange Region

(J.A. 6-7, 20-30, 32-33). However, General Hospel-

horn, acting as the appellate authority, disagreed

with the hearing examiner and denied respondent’s

appeal (J.A. 7, 39; Pet. App. 4a).

Respondent then sought reconsideration in a letter

addressed to the new AAFES commander, General

Bobby W. Presley (J.A. 40-41). Respondent alleged

that his separation was contrary to AAFES rules

and regulations and that he had been denied due

process of law because his appeal had been decided

by General Hospelhorn, who had earlier approved

his dismissal (ibid.). After receiving respondent’s

letter, General Presley reope*2d the case and re-

ferred it to General Charles E. Buckingham, the

chairman of the AAFES board of directors (J.A.

42-43). At General Buckingham’s request, the ad-

ministrative record was reviewed by the Air Force

Judge Advocate General, who concluded that there

was sufficient evidence showing that respondent’s

conduct reflected discredit upon the AAFES and that

his retention was incompatible with the best inter-

ests of the Service (J.A. 44-45). Acting as the

2 These procedures are set forth in Exchange Service Bulle-

tin No. 247 (15-52) (July 2, 1975) (Pet. App. 25a-35a).

appellate authority, General Buckingham then denied

respondent’s appeal (J.A. 46).

In the meantime, respondent had filed suit against

the AAFES in the United States District Court for

the Northern District of Texas, invoking the court’s

jurisdiction under the Administrative Procedure Act,

5 U.S.C. 701-706; the Tucker Act, 28 U.S.C. 1346

(a) (2); the mandamus statute, 28 U.S.C. 1361; and

the Constitution (J.A. 3). In count one of his

complaint, respondent alleged that General Hospel-

horn violated AAFES regulations and the Due Proc-

ess Clause when he decided respondent’s initial appeal

after having previously approved respondent’s dis-

missal (J.A. 3-8). In count two, respondent alleged

that the denial of his appeal was “[a]rbitrary,”

“capricious,” “an abuse of discretion,” “unsupported

by substantial evidence,” “unwarranted by the facts

of [the] case,” and in violation of unspecified laws

and constitutional provisions (J.A. 8-9). Respondent

sought injunctive relief and money damages, includ-

ing back pay (J.A. 9-10). The district court dis-

missed the action for lack of subject matter jurisdic-

tion (Pet. App. 17a).

The court of appeals reversed (Pet. App. la-16a).

It held that jurisdiction with respect to respondent’s

monetary claims was furnished by the Tucker Act,

28 U.S.C. 1346 (a) (2), which confers upon the dis-

trict courts jurisdiction over certain civi! claims

against the United States, including those not ex-

ceeding $10,000 and founded upon express or implied

contracts with the AAFES (Pet. App. 5a-9a). In

response to the government’s argument that respond-

ent had served as an appointed employee rather than

pursuant to contract, the court observed (Pet. App.

8a; emphasis in original & footnote omitted) :

Even if the regulations label the commence-

ment of Sheehan’s employment as pursuant to

“appointment,” we do not think that ends the

inquiry. Other regulations provide that an

AAFES employee may be separated for cause

only under certain conditions and provide for

administrative appeal from the separation deci-

sion. These latter regulations manifest the

understanding of the parties concerning dis-

charge procedures while Sheehan continued in

AAFES employment. Accordingly, the regula-

tions were part of a collateral implied in-fact

contract between Sheehan and the AAFES that

the AAFES would adhere to the regulations in

its dealings with him.

The court acknowledged that respondent’s complaint

made no reference to an implied contract, but

it held that [tj he allegation that [respondent’s]

discharge violated controlling regulations was * * *

equivalent to an allegation of breach of an implied-

in- fact contract” (id. at 9a).*

* The court of appeals also held that the district court had

subject matter jurisdiction over respondent’s claims for non-

monetary relief pursuant to 28 U.S.C. 1331 and that the re-

quisite waiver of sovereign immunity was provided by the

1976 amendment to the Administrative Procedure Act, 5

U.S. C. 702 (Pet. App. 10a-l5a). The government did not

seek review of that holding (Pet. 4 n. 4).

7

ARGUMENT

THE DISTRICT COURT LACKED JURISDICTION

TO ENTERTAIN RESPONDENT’S CLAIM FOR

MONEY DAMAGES BASED UPON HIS ALLEGEDLY

WRONGFUL DISCHARGE FROM AN APPOINTED

POSITION WITH THE ARMY AND AIR FORCE Ex-

CHANGE SERVICE

A. Introduction and Summary of Argument

This case concerns the jurisdiction of the federal

courts to entertain suits for money damages brought

against the military exchange services by appointed

civilian employees who claim to have been wrongfully

discharged. The military exchanges are “instru-

mentalities of the United States” and share the gov-

ernment’s sovereign immunity. United States v.

Mississippi Tax Commission, 421 U.S. 599, 606

(1975). Cf. Standard Oil Co. v. Johnson, 316 U.S.

481, 485 (1942) (military exchanges are “arms of

the Government” and “integral parts of the War

Department”). Consequently, jurisdiction with re-

spect to suits against the exchanges exists only if

sovereign immunity has been waived, for as this

Court recently reiterated in United States v. Mitchell,

445 U.S. 535, 538 (1980):

It is elementary that “[t]he United States,

as sovereign, is immune from suit save as it

consents to be sued. . ., and the terms of its

consent to be sued in any court define that

court’s jurisdiction to entertain the suit.” United

States v. Sherwood, 312 U.S. 584, 586 (1941).

* The question of sovereign immunity, which is itself juris-

dictional, and the separate question of Tucker Act jurisdiction

(see United States v. Testan, 424 U.S. 392, 398 (1976))

happen to be the same in the instant case. As noted above

(page 5, supra), a waiver of sovereign immunity may be based

upon a contract with the United States, and the court of ap-

The power to waive sovereign immunity is vested

in Congress (United States v. Testan, 424 U.S. 392,

399 (1976)), and Ja] waiver of sovereign im-

munity ‘cannot be implied but must be unequivocally

expressed... United States v. Mitchell, supra, 445

U.S. at 538, quoting United States v. King, 395 U.S.

1, 4 (1969). It follows that a valid waiver may be

found only in a constitutional provision or statute

specifically conferring the right to recover money

damages from the United States (United States v.

Testan, supra, 424 U.S. at 401-402) ; in a regulation

specifically granting such a right (ibid.) and promul-

gated pursuant to a statute expressly authorizing

the waiver (see United States v. United States

Fidelity & Guaranty Co., 309 U.S. 506, 513 (1940);

United States v. Shaw, 309 U.S. 495, 500-501 (1940);

Munro v. United States, 303 U.S. 36, 41 (1938)); or

in a contract with the United States entered into by

an entity or person possessing “specific authority

* * * to make an agreement obligating the United

States to pay money * * *.” Kania v. United States,

650 F.2d 264, 268 (Ct. Cl. 1981), cert. denied, No.

81-246 (Oct. 13, 1981). See also, eg., Porter v.

United States, 496 F.2d 583, 587 (Ct. Cl. 1974);

American-Foreign Steamship Corp. v. United States,

291 F.2d 598, 607 (2d Cir.), cert. denied, 368 U.S.

895 (1961).

peals relied upon the existence of such a contract, The Tucker

Act confers jurisdiction on the district courts (if the amount

in controversy does not exceed $10,000) and on the Court of

Claims for claims “founded * * * upon any express or implied

contract with the United States.” 28 U.S.C. 1346 (a) (2).

Thus, if no such contract exists, as we maintain, jurisdiction

is lacking both because sovereign immunity has not been

waived and because the terms of the Tucker Act have not

been met.

In the present case, the court of appeals failed to

identify any constitutional provision, statute, or reg-

ulation containing the requisite waiver, and it seems

clear that none exists. Respondent, claimed (J.A. 7,

8) that his discharge violated the Due Process Clause,

but that provision does not waive the government’s

immunity from damages liability. In United States

v. Testan, supra, 424 U.S. at 400, this Court rejected

the argument that “the Tucker Act fundamentally

waives sovereign immunity with respect to any claim

invoking a constitutional provision.” Later that Term,

in United States v. Hopkins, 427 U.S. 123 (1976), a

former AAFES civilian employee who alleged that

he was wrongfully discharged contended that his due

process claims were enforceable under the Tucker

Act (id. at 130), but this Court noted that Testan

foreclosed that contention (ibid.). Thus, Testan and

Hopkins conclusively establish that the Due Process

Clause itself does not waive the government’s sover-

eign immunity from damages liability. See Carruth

v. United States, 627 F.2d 1068, 1081 (Ct. Cl. 1980).

Respondent also alleged (J.A. 7, 8-9) that his dis-

charge violated AAFES regulations, but neither the

regulations governing employment in the AAFES nor

the statutes pursuant to which those regulations were

promulgated create a right to monetary relief. The

statutes (10 U.S.C. 3012, 8012) authorize the Secre-

taries of the Army and Air Force to conduct the

affairs of their respective departments but do not

empower them to waivé sovereign immunity. The

regulations (AR 60-21/AFR 147-15) (Pet. App.

22a-25a) specify discharge procedures but do not

create a right to damages for wrongful discharge.

This Court considered those very regulations in

Hopkins (427 U.S. at 127-128) and implicitly held

that they do not waive sovereign immunity. Indeed,

10

not only do the statutes and regulations governing

employment in the AAFES fail to create a right to

money damages for wrongful discharge, but in 5

U.S.C. (Supp. III) 2105(c), Congress explicitly

denied that right to exchange service personnel by

excluding them from the coverage of laws adminis-

tered by the Office of Personnel Management, includ-

ing the Back Pay Act, 5 U.S.C. (& Supp. IIT) 5595

et seg. As the Court remarked in United States v.

Testan, supra, 424 U.S. at 404, in response to the

claim of federal employees that implicit waivers of

sovereign immunity could be found in various federal

employment statutes:

[I]f the respondents were correct in their claims

* * * many of the federal statutes—such as the

Back Pay Act—that expressly provide money

damages as a remedy against the United States

in carefully limited circumstances would be ren-

dered superfluous.

Nor can a right to damages in this case be founded

upon an express or implied contract. Respondent did

not allege the existence of a contractual relationship

in his complaint (J.A. 3-10). Nonetheless, the court

of appeals based its holding upon “a collateral implied

in-fact contract between [respondent] and the

AAFES that the AAFES would adhere to [its regu-

lations concerning discharge * in its deal-

ings with him“ (Pet. App. 8a).

6 The Back Pay Act is administered by the Office of Per-

sonnel Management (see 5 U.S.C. (Supp. III) 5696 (e)). The

Act permits an employee to recover wages lost due to “an

unjustified or unwarranted personnel action which has resulted

in the withdrawal or reduction of all or part” of the com-

pensation to which he was otherwise entitled. 5 U.S.C.

(Supp. III) 5596(b). See also 5 C.F.R. 550.801 et seq.

11

The decision below cannot be squared with this

Court’s decisions in Hopkins and Testan. In Hopkins,

an action for money damages filed by a discharged

AAFES employee, the Court carefully analyzed the

exchange service regulations and drew a sharp dis-

tinction between two separate categories of exchange

service employees: “ordinary” employees, who are

appointed to their positions, and outside contractors

who perform jobs such as window cleaning and jani-

torial services. The Court’s implicit holding—that

only employees in the latter category could sue for

money damages—is irreconcilable with the court of

appeals’ ruling, which finds that respondent (and

presumably all other exchange service appointees)

entered at the time of appointment into an implied-

in-fact contract under which the exchanges agreed

to abide by their regulations. Moreover, respondent,

who held an executive position with the AAFES, has

not claimed (and the court below did not find) that

he was employed under one of the service contracts

described in Hopkins.

Similarly, in Testan, federal employees asserted

violations of the Classification Act, 5 U.S.C. 5101

et geg., and invoked the jurisdiction of the Court of

Claims under the Tucker Act, 28 U.S.C. 1491. This

Court held that their claims against the United

States for money damages were barred by sovereign

immunity because there was no provision of law

expressly creating a right to monetary relief. Under

the reasoning of the court below, however, those em-

ployees would have been entitled to maintain their

suit by virtue of an implied-in-fact contract under

which their employer agreed to follow the statutes in

question.

Finally, the court of appeals’ decision is contrary

to basic principles of contract law. That decision

12

confuses an implied-in-fact contract with a quasi-

contract or contract implied in law. An implied-in-

fact contract is an actual agreement between the

contracting parties, inferred from the parties’ words

and conduct. By contrast, a quasi-contract or con-

tract implied in law is not an agreement between the

parties but an obligation imposed by a court for

equitable reasons and without reference to the

parties’ intent. Since the court below made no ref-

erence to the parties’ intent in finding that a “con-

tract” existed between respondent and the AAFES,

it is clear that the court was relying upon a quasi-

contract or contract implied in law. The Tucker

Act, however, does not provide jurisdiction for claims

predicated upon such obligations, and therefore the

district court lacked jurisdiction with respect to re-

spondent’s claims for money damages.

B. Because Respondent’s Employment with the AAFES

was Pursuant to Appointment Rather Than Con-

tract, His Discharge Could Not Have Constituted a

Breach of Contract

Before 1970, it was settled that the federal courts

lacked jurisdiction to entertain civil actions against

the United States based upon express or implied

contracts with the military exchanges. Then, as now,

the Tucker Act conferred jurisdiction with respect

to civil actions against the United States “founded

either upon the Constitution, or any Act of Congress,

or any regulation of an executive department, or

upon any express or implied contract with the

United States, or for liquidated or unliquidated dam-

ages in cases not sounding in tort.” 28 U.S.C. 1491.

However, in Standard Oil Co. v. Johnson, 316 U.S.

481, 485 (1942), this Court stated that although the

Army Post exchanges were “arms of the Government

13

deemed by it essential for the performance of gov-

ernmental functions” and “integral parts of the War

Department,” the Government had assumed “none of

the financial obligations of the exchange.” Relying

upon that observation, the Court of Claims and some

district courts had held that claims against the ex-

change services were not claims against the United

States and that jurisdiction under the Tucker Act

was therefore lacking. See, e.g., Kyer v. United

States, 369 F.2d 714 (Ct. Cl. 1966), cert. denied, 387

U.S. 929 (1967); Bailey v. United States, 201 F.

Supp. 604 (D. Alaska 1962); Pulaski Cab Co. v.

United States, 157 F.Supp. 955 (Ct. Cl. 1958); Bor-

den v. United States, 116 F.Supp. 873 (Ct. Cl. 1953).

In 1970, Congress amended the Tucker Act to re-

move this perceived inequitable “loophole.”* The

following identical language was added both to 28

U.S.C. 1491, which confers jurisdiction upon the

Court of Claims, and 28 U.S.C. 1346 (a) (2), which

confers concurrent jurisdiction upon the district

courts for claims not exceeding $10,000 (Pub. L. No.

91-350, Section 1, 84 Stat. 449) :

For the purpose of this paragraph, an express

or implied contract with the Army and Air

Force Exchange Service, Navy Exchanges, Ma-

rine Corps Exchanges, Coast Guard Exchanges,

or Exchange Councils of the National Aeronau-

tics and Space Administration shall be consid-

ered an express or implied contract with the

United States.

In United States v. Hopkins, supra, the Court

considered the effect of this amendment on monetary

claims advanced by discharged military exchange em-

*See S. Rep. No. 91-268, 91st Cong., Ist Sess. 2 (1969);

H.R. Rep. No. 91-983, 91st Cong., 2d Sess. 2 (1970).

14

ployees. Hopkins, a former employee of the AAFES

who claimed to have been wrongfully discharged, in-

voked the 1970 amendment and sued in the Court of

Claims for back pay and allowances. Relying upon

a Court of Claims decision holding that an AAFES

civilian employee was not a “Federal employee”

(Keetz v. United States, 168 Ct. Cl. 205 (1964)),

Hopkins contended that his relationship with the

AAFES was therefore “contractual,” just like the

relationship between employers and employees in the

private sector. Hopkins v. United States, 513 F.2d

1360 (Ct. Cl. 1975). The government maintained,

on the other hand, that exchange employees served

by appointment rather than by contract and that

consequently Hopkins’ wrongful discharge claim was

not within the purview of the Tucker Act amend-

ment. The Court of Claims accepted Hopkins’ argu-

ment, reasoning that “since [he was] not a Federal

employee his relationship with the AAFES [was]

governed by contract principles” (513 F.2d at 1366).

This Court granted certiorari to resolve the conflict

between the decision of the Court of Claims and the

Fifth Circuit’s holding in Young v. United States,

498 F.2d 1211 (1974), that the 1970 amendment was

not intended to extend Tucker Act jurisdiction to em-

ployee discharge cases but was meant solely for the

benefit of commercial contractors who did business

with the exchanges. United States v. Hopkins, supra,

427 U.S. at 124.

This Court rejected the reasoning of both lower

courts. Disagreeing with the Fifth Circuit, the Court

held that the amended statute “is applicable to em-

ployment contracts as well as those for goods or other

services” (427 U.S. at 126). But the Court also re-

jected the Court of Claims’ “determination that

AAFES employees could never serve by appointment”

15

(id. at 180; emphasis in original). After carefully

analyzing the statutes and regulations governing the

AAFES,’ the Court observed that the Service’s “ordi-

nary employees are deemed employees of an instru-

mentality of the United States, and hold their posi-

tions by appointment” (id. at 127; emphasis in

original). The Court added, however, that a separate

regulation (AR 60-20/AFR 147-14, ch. 4, §§ II

and III (Mar. 21, 1974)) provided for a “process

under which a person may be employed by contract”

(427 U.S. at 128-129). Such service contracts, the

Court noted, could pertain to “services performed off

a military installation and ‘direct services such as

janitorial and window cleaning service“ (id. at 129,

quoting AR 60-20/AFR 147-14, App. A, { A-6e).

Noting that a regulation in effect at the time of Hop-

kins’ discharge forbade the exchanges from entering

into service contracts with exchange employees, the

Court added that the regulatory scheme “clearly dis-

tinguished between employment pursuant to appoint-

ment and employment pursuant to contract” (id. at

129).

While vacating the portion of the Court of Claims’

judgment “deciding that [Hopkins] held his employ-

ment position by virtue of an express or implied con-

tract, rather than by appointment” (427 U.S. at 130-

7 The regulations to which the Court referred are AR 60-

21/AFR 147-15, the same regulations that governed re-

spondent’s employment with the AAFES (Pet. App. 7a-8a &

n.8, 22a-25a).

This regulation is still in effect. The Court also observed

that when Congress amended the Tucker Act in 1970 it did not

change any of the provisions of the United States Code dealing

with exchange employees or require that the exchanges employ

all persons pursuant to contract. 427 U.S. at 129.

16

131), the Court held that Hopkins’ “allegation that

his discharge constituted a breach of a contract of

employment was sufficient to withstand the

Government’s motion to dismiss the complaint on the

grounds of lack of jurisdiction in the Court of

Claims” (id. at 180). The case was therefore re-

manded to the Court of Claims with instructions that

“the question of whether [Hopkins] was employed by

virtue of a contract or by appointment” “depends

upon an analysis of the statutes and regulations pre-

viously described in light of whatever evidence is ad-

duced on remand as to plaintiff’s particular status

in this case” (ibid.).

The decision in Hopkins leaves no room for the

decision of the court of appeals in the present case.

Hopkins drew a sherp distinction between two dis-

crete classes of exchange service employees: “ordi-

nary employees,” who are appointed to their posi-

tions, and employees who work under service con-

tracts. The plain implication of the Court’s opinion

is that if Hopkins were found on remand to be an

“appointed” employee, rather than a contract em-

ployee, there would be no contractual relationship on

which to base Tucker Act jurisdiction, and Hopkins’

action would have to be dismissed. In the present

case, respondent has never claimed—and the court

below did not hold—that he worked pursuant to one

of the service contracts authorized by AAFES regu-

Hopkins“ suit was settled on remand, and therefore no

further inquiry was made into his employment status. In

subsequent cases, horvever, the Court of Claims has held that

AAFES employees appointed pursuant to the regulations

(AR 60-21/AFR 147-15) considered in Hopkins cannot bring

suit under the Tucker Act for wrongful discharge. See, e. g.,

Richardson v. United States, 214 Ct. Cl. 757 (1977) ; Spooner

v. United States, 211 Ct. Cl. 312 (1976).

17

lations and discussed in Hopkins. Furthermore, it is

apparent that respondent’s position, which entailed

managerial and supervisory responsibilities, was of

an entirely different kind from those of service con-

tract employees, who provide janitorial, window-

cleaning, and other services commonly furnished by

outside contractors.

In addition, the decision below blurs the clear dis-

tinction noted in Hopkins between “appointed” and

contract“ employees. According to the court of ap-

peals, even if respondent were appointed to his posi-

tion with the AAFES (as he clearly was), he simul-

taneously entered into an implied contract with the

Service “concerning discharge procedures while [he]

continued in AAFES employment” (Pet. App. 8a;

emphasis in original). Such a hybrid cannot exist

under the regulatory scheme that this Court ana-

lyzed and described in Hopkins and that remains in

effect today. Nor is it compatible with the long line

of authority holding that ordinary government em-

ployees do not work under “contract.” See, e. g.,

Taylor and Marshall v. Beckham, 178 U.S. 548, 577

(1900); Crenshaw v. United States, 134 U.S. 99,

104-108 (1890); United States v. Hartwell, 73 U.S.

(6 Wall.) 385, 393 (1867); Butler v. Pennsylvania,

51 U.S. (10 How.) 402, 416-418 (1851); Kania v.

United States, supre, 650 F.2d at 268; Shaw v.

United States, 640 F.2d 1254, 1260 (Ct. Cl. 1981);

Urdina v. United States, 428 F.2d 1280, 1284 (Ct.

Cl. 1970).

Indeed, if the decision below were correct, an im-

plied-in-fact contract similar to that found in the

present case must have existed in Hopkins as well.

The implied contract identified by the court of ap-

peals was not found to have arisen because of any

18

special agreement made between respondent and the

AAFES or because of any facts peculiar to respond-

ent’s case. Instead, it was found to have been created

solely by virtue of the AAFES regulations governing

discharge procedures (see Pet. App. 8a-9a). It would

seem to follow, therefore, that every other AAFES

appointee, including Hopkins, was a party to a simi-

lar contract. But if that were true, the terms of this

Court’s remand in Hopkins would be inexplicable.

And this inconsistency cannot be explained on the

ground that the question of such an implied contract

was not before this Court in Hopkins but was pre-

sented to the court below. Hopkins, unlike respond-

ent, at least alleged in his complaint that he had

entered into a contract with the AAFES.

Respondent has sought (Br. in Opp. 6, 12, 13) to

distinguish his case from Hopkins by pointing out

that he participated in the AAFES Executive Man-

agement Program. That distinction, however, is of

no significance for present purposes, and the court of

appeals placed no reliance upon it. The regulations

governing the Executive Management Program are

part of the regulations governing appointed AAFES

employees (AR 60-21/AFR 147-15, ch. 5, § II), and

there is nothing in those regulations to suggest that

an appointed employee is converted into a contract

employee upon entry into the program. To the con-

trary, employees in the program are “nominated,

“selected,” and “designated” for participation (AR

60-21/AFR 147-15, ch. 5, § II, 5-7, 5-8) (Br. in

Opp. 2)—hardly the terms usually employed when

referring to the formation of a contract.

To be sure, a participant in the Executive Manage-

ment Program must acknowledge “in writing that he

understands and accepts the conditions of the EMP,

19

as prescribed by the Commander, AAFES.” AR 60-

21/AFR 147-15, ch. 5, § II, 7 5-7(b) (Br. in Opp.

2). But analogous written acknowledgments must

be executed by many government employees who do

not work under contract, including persons who enlist

in the military. See United States v. Larionoff, 431

U.S. 864, 869 (1977). The signing of such an ac-

knowledgment is not proof of a contractual relation-

ship.

Respondent has also suggested (Complaint, ſ 5;

(J.A. 4) that his entry into the Executive Manage-

ment Program was pursuant to contract because he

obtained certain special benefits in exchange for in-

curring certain special obligations. Again, however,

many appointed positions, in all branches of govern-

ment, involve a similar trade-off. If this factor were

sufficient to convert the status of a government em-

ployee to one serving pursuant to a contract, the

distinction recognized in Hopkins between appointed

and contract employees would disappear.

C. Because Kespondent’s Complaint Was Based Upon

Alleged Violations of the Due Process Clause and

AAFES Regulations, None of Which Waive Sover-

eign Immunity, His Claims For Money Damages

Are Barred

The decision of the court of appeals is also incom-

patible with this Court’s decision in United States

v. Testan, supra. In Testan two civilian trial attor-

neys with the Department of Defense whose positions

were subject to the Classification Act, 5 U.S.C. 5101

et seq., filed suit in the Court of Claims alleging that

they had been misclassified at the GS-13 rather than

the GS-14 level. They sought reclassification and

money damages for the period of their allegedly

wrongful classification.

This Court held that the United States had not

waived sovereign immunity with respect to the plain-

tiffs’ suit and consequently ordered its dismissal.

The Court first rebuffed the suggestion that the

Tucker Act provided the requisite waiver, stating

that the Act “is itself only a jurisdictional statute;

it does not create any substantive right enforceable

against the United States for money damages” (424

U.S. at 398). For similar reasons, the Court also

found no merit in a variation of the same argument,

i.e., that the Tucker Act “waives sovereign immunity

with respect to any claim invoking a constitutional

provision or a federal statute or regulation” (id. at

400). The Court specifically rejected “the argument

* * * that all substantive rights of necessity create

a waiver of sovereign immunity such that money

damages are available to redress their violation” (id.

at 401) and the argument that “the violation of any

statute or regulation relating to federal employment

automatically creates a cause of action against the

United States for money damages (ibid.).

The Court refused “to tamper with [the] established

principles” requiring that a constitutional provision,

statute, or lawful regulation expressly confer the

right to obtain monetary relief (id. at 400). Finally,

the Court concluded that the requisite waiver could

not be found in the Classification Act (id. at 398-

405). Noting that the Classification Act contains

“substantive standards for grading particular posi-

tions” and procedural rules “to ensure that those

standards are met” (id. at 399), the Court held that

the Classification Act did not waive sovereign immu-

nity because it did not expressly make the United

States liable for pay lost through allegedly improper

classifications (id. at 399-400).

21

The court of appeals’ analysis cannot be reconciled

with these established principles. In both Testan and

the present case, aggrieved federal employees brought

suit against the United States for money damages

claiming violations of laws dealing with personnel

matters. In both cases, jurisdiction with respect to

the monetary claims depended upon the Tucker Act.

In neither case was there a constitutional provision,

statute, or regulation expressly granting a right to

monetary relief. Accordingly, this Court’s decision

in Testan that sovereign immunity had not been

waived dictates a similar result here.

Of course, Testan differs from the present case in

several particulars, but none is controlling for pres-

ent purposes. First, the employees in Testan alleged

violations of the Classification Act and regulations

promulgated thereunder, whereas respondent claimed

violations of AAFES personnel regulations. What

is significant, however, is that in neither case did

the provisions allegedly violated expressly grant a

right to recover money damages. Second, the em-

ployees in Testan brought suit in the Court of Claims

under 28 U.S.C. 1491, whereas respondent filed his

action in the district court under 28 U.S.C. 1346 (a)

(2). In both cases, however, jurisdiction of the

claims for money damages depended upon provisions

conferring jurisdiction with respect to civil actions

against the United States “founded either upon the

Constitution, or any Act of Congress, or any regula-

tion of an executive department, or upon any express

or implied contract with the United States *.” It

is settled that the jurisdictional grants contained in

those provisions are identical, except for the $10,000

limit contained in 28 U.S.C. 1346 (a) (2). Richard-

son v. Morris, 409 U.S. 464, 466 (1973); United

States v. Sherwood, 312 U.S. 584, 591 (1941).

22

Finally, the employees in Testan did not “rest their

claims upon a contract” (424 U.S. at 400), whereas

the court of appeals construed respondent’s com-

plaint as alleging the breach of an implied-in-fact

contract (Pet. App. 9a). However, this apparent

distinction between the two cases is illusory. As

previously noted, respondent’s complaint did not al-

lege a breach of contract, but the court of appeals

held that “[t]he allegation that the discharge vio-

lated controlling regulations was * * * equivalent to

an allegation of breach of an implied-in-fact con-

tract” (ibid.). By that reasoning, the complaint in

Testan, which alleged violations of the governing

statutes and regulations, must have alleged a simi-

lar breach of contract. Instead, the court of ap-

peals’ analysis would convert virtually every fed-

eral employee claim based on a violation of employ-

ment statutes or regulations into a contract claim.

This result would evade the long-settled restriction

on waivers of sovereign immunity reiterated in

Testan and would render statutes such as the Back

Pay Act superfluous. See 424 U.S. at 404.

D. The Obligations Found By the Court of Appeals

To Have Been Incurred by the AAFES Arose

From a “Quasi-Contract” or “Contract Implied in

Law,” Rather than a “Contract Implied in Fact”

Not only is the decision of the court of appeals

in conflict with Hopkins and Testan, but it does

violence to rudimentary principles of contract law.

The decision below confuses a “quasi-contract” or a

contract “implied in law” with a contract “implied

in fact.” The Tucker Act does not confer jurisdiction

with respect to “quasi-contracts” or contracts “im-

plied in law.” Hatzlachh Supply Co. v. United States,

444 U.S. 460, 465 n.5 (1980); Merritt v. United

States, 267 U.S. 338, 341 (1925); United States v.

Algona Lumber Co., 305 U.S. 415, 418 (1939).

An implied-in-fact contract is an agreement

“founded upon a meeting of minds, which, although

not embodied in an express contract, is inferred,

as a fact, from conduct of the parties showing,

in the light of the surrounding circumstances,

their tacit understanding.” Baltimore & O. R.R.

v. United States, 261 U.S. 592, 597 (1923). “An

implied-in-fact contract is a true contract, containing

all necessary elements of a binding agreement; it

differs from other contracts only in that it has not

been committed to writing or stated orally in express

terms, but rather is inferred from the conduct of the

parties in the milieu in which they dealt.” Bloom-

garden v. Coyer, 479 F.2d 201, 208 (D.C. Cir. 1973)

(footnote omitted). See also, e.g., Somali Develop-

ment Bank v. United States, 508 F.2d 817, 822 (Ct.

Cl. 1974); Algonac Manufacturing Co. v. United

States, 428 F.2d 1241, 1255 (Ct. Cl. 1970); Kirk v.

United States, 451 F.2d 690, 695 (10th Cir. 1971);

1 A. Corbin, Contracts §18 (1963 & Supp. 1980);

1 Williston Contracts §3 (Jaeger ed. 1957 & Cum.

Supp. 1981); Restatement of Contracts §5, Com-

ment (1932).

By contrast, a contract implied in law or a quasi-

contract “is not a contract at all.“ Bloomgarden v.

Coyer, supra, 479 F.2d at 208. “[I]t is an obliga-

tion that is created by the law without regard to

expressions of assent by either words or acts.” 1

A. Corbin, Contracts §19, at 44 (1963). See also,

e.g., Algonac Manufacturing Co. v. United States,

supra, 428 F.2d at 1255; Fidelity & Deposit Co. v.

Harris, 360 F.2d 402 (9th Cir. 1966); 1 Williston

24

on Contracts 8 3A (Jaeger ed. 1957 & Cum. Supp.

1981); Restatement of Contracts 8 5, Comment

(1932). “Quasi contractual obligations are imposed

by the law for the purpose of bringing about justice

without reference to the intention of the parties.”

1Williston on Contracts §3A, at 13 (Jaeger ed.

1957).

In the present case, it is clear that what was labeled

by the court of appeals as an implied-in-fact contract

was, at best, a contract implied in law or quasi-con-

tract. Respondent’s complaint did not allege and the

court of appeals did not find that there had been an

actual agreement or meeting of the minds between

the parties. Nor did respondent’s complaint make

any reference to his actual understanding of the

terms of his employment when he was initially ap-

pointed to a position with the AAFES or when he

was later designated for participation in the Execu-

tive Management Program. Instead, respondent

merely alleged that his termination violated due proc-

ess and the AAFES regulations governing discharge

procedures, and the court of appeais found that a

“con ” existed solely by virtue of those regula-

tions and “the well-established legal principle that a

federal agency is bound to follow its regulations

where the rights of individuals are affected” (Pet.

App. 9a).

10 Neither of the two cases cited by the court below (Pet.

App. 8a) supports its holding that the AAFES regulations

governing discharge procedures gave rise to an implied-in-fact

contract with its appointees. In Aycock-Lindsey Corp. v.

United States, 171 F.2d 518 (5th Cir. 1948), which was de-

cided prior to Testan, the regulation in question expressly pro-

vided for the payment of subsidies to individuals who complied

with certain provisions of the Federal Soil Conservation and

Domestic Allotment Act. The court did not suggest that a

Tucker Act remedy on an implied-in-fact contract theory

25

Thus, the obligation that the AAFES was found

to have incurred by the court of appeals was one

“imposed by the law for the purpose of bringing

about justice without reference to the intention of

the parties“ (1 Williston Contracts 8 3A, at 13

(Jaeger ed. 1957)). Such an obligation is a “quasi-

contract” or contract “implied in law.” Because the

Tucker Act does not confer jurisdiction with respect

to claims founded upon a quasi-contract or contract

implied in law, respondent’s claims for monetary re-

lief should have been dismissed.”

could be based on an agency’s failure to abide by regulations

that made no reference to money payments. In Bodek v. De-

partment of Treasury, 582 F.2d 277, 279 n.7 (2d Cir. 1976),

the court merely stated that certain “Treasury regulations are

considered an implied part of the contract between the United

States and a purchaser of its bonds.” Obviously, holding that

regulations are considered an implied part of an express con-

tract is far different from holding that regulations thems ves

give rise to an implied-in-fact contract.

By the same token, cases such as Morton v. Ruiz, 415 U.S.

199 (1974), and Vitarelli v. Seaton, 359 U.S. 535 (1959), on

which the court of appeals relied (Pet. App. 9a), merely state

a rule of administrative law and do not suggest that the

government’s failure to abide by its regulations constitutes a

breach of contract giving rise to a claim for damages. See

United States v. Caceres, 440 U.S. 741, 754 (1979).

u Although sovereign immunity bars respondent’s claims

for monetary relief, he is hardly left remediless. The court

of appeals held that jurisdiction exists with respect to his

claims for nonmonetary relief, including reinstatement, ac-

crued vacation time, and sick leave. That holding is not

challenged here. See page 6, note 3, supra. Moreover,

respondent’s discharge has already been subjected to detailed

administrative review at several levels. However, monetary

relief for wrongfully discharged AAFES employees must

await congressional action. Should Congress wish to provide

for such relief, it could do so simply by including AAFES

employees within the coverage of the Back Pay Act.

CONCLUSION

The judgment of the court of appeals should be

reversed, and the case should be remanded to that

court with directions to dismiss, for lack of jurisdic-

tion, those portions of the complaint seeking mone-

tary relief.

Respectfully submitted.

REx E. LEE

Solicitor General

J. PAUL McGRATH

Assistant Attorney General

KENNETH S. GELLER

Deputy Solicitor General

SAMUEL A. ALITO, JR.

Assistant to the Solicitcr General

WILLIAM KANTER

ELOIsE E. DAVIES

Attorneys

NOVEMBER 1981

r v. 6. coveenmant paimtine orrice; 1981 358304 694