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

Office - Supreme Co

* FILE aag

No. 80-1437 FEB il 1982

ALEXANDER lL. STEVAS

sé | . CLERK

In the Supreme Court of the Unite

Ocroser TERM, 1981

ARMY AND AIR FoRCE EXCHANGE SERVICE

PETITIONER

Vv.

ARTHUR EDWARD SHEEHAN

ON WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

REPLY BRIEF FOR THE PETITIONER

Rex E. LEE

Solicitor General

Department of Justice

Washington, D.C. 20530

(202) 633-2217

TABLE OF AUTHORITIES

Cases: Page

Augusta Aviation, Inc. Vv. United States, 500

F.Supp. 785 7

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

SOU saccioshdibisbadioacacsielalblsciindatpecaepacnidatas 6, 7

Bodek v. Department of the Treasury, 5382 F.2d

277 6

Escude Cruz v. Ortho Pharmaceutical Corp., 619

PN ccinssiciicnii ertuieiendabecdinintashianbaapeiaaemaidanade 3

Familia De Boom v. Arosa Mercantil, S.A., 629

F.2d 1134, cert. denied, No. 80-1322 (May 18,

1981)

Gibbs v. Buck, 307 U.S. 66

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

460 4

Hopkins v. United States, 513 F.2d 1860 ................ 10

Land v. Dollar, 380 U.S. 731 3

McNutt v. General Motors Acceptance Corp., 298

U.S, 178 2,3

Schultz v. Cally, 528 F.2d 470 2

Tanzumore Vv. Bethlehem Stcel Corp., 457 F.2d

1320 3

3

Trager V. New Rochelle Hospital Medical Center,

458 F.Supp. 516 ........................-00

United States v. Hopkins, 427 U.S. 128 .............. 8-9, 10, 11

United States v. Mitchell, 445 U.S. 585 .............-...... 2

United States V. Testan, 424 U.S. 392 ...............-...--. 6,7,9

Vorachek v. United States, 337 F.2d 799 ................ 2

Wolak v. United States, 366 F.Supp. 1106 .............. 6

Statutes, regulation and rule:

Soil Conservation and Domestic Allotment Act, 16

U.S.C. 590a et seq. 6

88 U.S.C. 1651 et seq. 7

AR 60/20/AFR 147-14 00........-.ccccccccceeeeee 10

Fed, R. Civ. P. 8(a) 2

Miscellaneous:

2A Moore’s Federal Practice (2d ed. 1981) ............ 2

Iu the Supreme Cont of the United States

OCTOBER TERM, 1981

No. 80-1437

ARMY AND AIR FoRCE EXCHANGE SERVICE,

PETITIONER

Vv.

ARTHUR EDWARD SHEEHAN

ON WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

REPLY BRIEF FOR THE PETITIONER

Respondent does not take issue with our statement

of the general principles applicable to this case. The

AAFES is an instrumentality of the United States

and therefore shares the government’s sovereign

immunity. The doctrine of sovereign immunity bars

any suit against the government unless the govern-

ment has consented to be sued, and such consent may

not be implied but must be unequivocally expressed.

Accordingly, a suit against the government for money

damages may not be maintained unless founded upon

a constitutional provision, sta.ute, or regulation ex-

pressly conferring the right to recover such damages

from the United States or upon a lawful contract

(1)

2

obligating the government to pay money. See Pet.

Br. 7-8.

In our opening brief, we argued that respondent’s

action was not based upon any such constitutional

provision, statute, regulation, or contract and that his

suit had therefore been properly dismissed for lack of

subject matter jurisdiction. Respondent’s brief does

not contend that the requisite waiver of sovereign

immunity may be found in a constitutional provision,

statute, or regulation. Instead, he claims only that

his action was based upon an express or implied-in-

fact contract with the AAFES. Respondent’s argu-

ment, however, clearly lacks merit, not only because

it is apparent that no such contract was made, but

also because he failed to satisfy his burdes of plead-

ing and proving the existence of such a contract when

his case was in the district court.

1. Under Fed. R. Civ. P. 8(a), every complaint

must contain “a short and plain statement of the

grounds upon which the court’s jurisdiction depends.”

This provision requires that the complaint allege all

facts necessary to show that jurisdiction exists. See,

e.g., McNutt v. General Motors Acceptance Corp., 298

U.S. 178, 189 (1936) ; Schultz v. Cally, 528 F.2d 470,

474 (3d Cir. 1975); 2A Moore’s Federal Practice

{ 8.07[1], at 8-48 & n.5 (2d ed. 1981). Since courts

lack jurisdiction to entertain a suit barred by sovereign

immunity (United States v. Mitchell, 445 U.S. 535,

538 (1980)), a complaint against the United States

or an agency or instrumentality that shares its sov-

ereign immunity must allege all facts necessary to

show a valid waiver of sovereign immunity. See

Vorachek v. United States, 387 F.2d 797, 799 (8th

Cir. 1964).

Not only must the plaintiff include such allegations

in his complaint but, more important, if jurisdic-

tion is challenged by the defendant or the court sua

sponte, the plaintiff bears the burden of proving that

jurisdiction exists. See, eg., McNutt v. General

Motors Acceptance Corp., supra, 298 U.S. at 189;

Familia De Boom vy. Arosa Mercantil, S.A., 629 F.2d

1134, 1138 (5th Cir. 1980), cert. denied, No. 80-1322

(May 18, 1981); Escude Cruz v. Ortho Pharmaceuti-

cal Corp., 619 F.2d 902, 904 (1st Cir. 1980). The

method or form of proof required is a matter within

the discretion of the district court. See, e.g., Gibbs

v. Buck, 307 U.S. 66, 71-72 (1939); Tanzymore v.

Bethlehem Steel Corp., 457 F.2d 1820, 1823-1324 (3d

Cir. 1972). The court need not conduct an evidentiary

hearing but “may inquire, by affidavits or otherwise,

into the facts as they exist.” Land v. Dollar, 330

U.S. 731, 785 n.4 (1947). See also, e.g., Tanzymore

v. Bethlehem Steel, supra, 457 F.2d at 1822-1324;

Trager v. New Rochelle Hospital Medical Center, 453

F.Supp. 516, 519 n.1 (S.D.N.Y. 1978).

In the present case, respondent utterly failed to dis-

charge his burden of pleading and proving jurisdic-

tion. His complaint made no reference whatsoever

to a contract with the AAFES (J.A. 3-10). Even after

the AAFES moved to dismiss his complaint for lack of

subject matter jurisdiction and noted that he had

been “an appointed (non-contract) employee,”’ re-

spondent did not seek to amend his complaint to allege

that he had been employed pursuant to contrac’. Nor

did he submit an affidavit or any other proof. He

merely submitted a memorandum of law in opposi-

tion to the motion to dismiss, and even there he failed

to mention any facts showing that he had been em-

1 Memorandum of Points and Authorities in Support of

Defendant’s Motion to Dismiss or in the Alternative for

Summary Judgment at 8.

ployed under contract.2 Indeed, his memorandum

stopped short of asserting that such a contract had

been made.’ After receiving respondent’s submission,

the district court dismissed his complaint.

The court of appeals attempted to rescue respond-

ent from his procedural default by holding that

“Tt}he allegation [in respondent’s complaint] that

[his] discharge violated controiling regulations was

* * * equivalent to an allegation of breach of an

implied-in-fact contract” (Pet. App. 9a). But since

there were no allegations or proof in the record con-

cerning such a “contract,” the court was forced to

infer its existence and terms solely from AAFES per-

sonnel regulations. The court concluded (id. at 8a;

emphasis in original) :

These latter regulations manifest the under-

standing of the parties concerning discharge

procedures while Sheehan continued in AAFES

employment. Accordingly, the regulations were

part of a collateral implied in-fact contract be-

tween Sheehan and the AAFES that the AAFES

would adhere to the regulations in its dealings

with him.

As we noted in our opening brief (Pet. Br. 24),

the court of appeals plainly confused a contract im-

plied in fact with a quasi-contract or contract im-

plied in law. And since the Tucker Act does not

furnish jurisdiction for claims founded upon quasi-

contracts or contracts implied in law (Hatzlachh Sup-

ply Co. v. United States, 444 U.S. 460, 465 n.5

2 See Memorandum of Authorities in Opposition to Defend-

ants’ Motion to Dismiss or in the Alternative, for Summary

Judgment.

5 See id, at 5-6,

(1980)), the “contract” found by the court of ap-

peals provided no basis for invoking the jurisdic-

tion of the federal courts.

Respondent contends (Resp. Br. 19) that the court

of appeals could not have made the elementary mis-

take of confusing a contract implied in law or a

quasi-contract with a contract implied in fact. But

the court of appeals relied solely upon provisions of

law—AAFES regulations—in concluding that the

AAFES had contracted with respondent. The court

made no reference to any facts bearing upon the

actual understanding of the parties. Accordingly, it

is abundantly clear that the “contract” identified by

the court could only be a contract implied in law or

a quasi-contract. See Pet. Br. 23-24. Moreover, be-

cause the record is devoid of allegations or proof con-

cerning the parties’ understanding or intent, there

was no rational basis for concluding that the parties

had entered into an actual agreement in the form of

an implied-in-fact contract. Indeed, as far as the

record reveals, both respondent and the AAFES

might have expressly acknowledged that respondent

was to be employed pursuant to appointment, rather

than contract.

The potential implications of the court of appeals’

erroneous decision are far-reaching. Because the

court relied solely upon AAFES personnel regulations

rather than any special facts concerning respondent’s

case, the court’s decision presumably means that all

AAFES employees work pursuant to contract. In

addition, the court’s reasoning provides no basis for

distinguishing the AAFES regulations at issue here

from other AAFES regulations affecting employees’

rights. Thus, if the former regulaticas “manifest the

understanding” of the AAFES and its employees

6

(Pet. App. 8a), the same is presumably true of the

latter. Furthermore, the logic of the court’s decision

would appear to extend beyond the AAFES and to

encompass virtually all federal employees and vir-

tually all federal regulations that bear upon their

rights. As a result, according to the court’s reason-

ing, sovereign immunity would not bar any suit

against the government for money damages brought

by an employee claiming a violation of any such reg-

ulations. In short, the court’s reasoning would lead to

the elimination of a large portion of the government’s

sovereign immunity.* Moreover, as noted in our open-

* Respondent relies (Resp. Br. 16-18, 20-22) upon four cases

to demonstrate the correctness of the decision below, but all

are readily distinguishable. In Bodek v. Department of the

Treasury, 582 F.2d 277, 279 n.7 (2d Cir. 1976), and Wolak v.

United States, 366 F.Supp. 1106 (D. Conn. 1973), the courts

stated that Treasury regulations governing the redemption

of United States Savings Bonds and the replacement of stolen

bonds form part of the express contract between bondholders

and the government. Since there was no express contract

between respondent and his employer, those cases have no

application here,

In Aycock-Lindsey Corp. Vv. United States, 171 F.2d 518

(5th Cir. 1948), a producer of naval stores brought suit

against the government for money allegedly due under the Soil

Conservation and Domestic Allotment Act, 16 U.S.C. 590a

et seq. Under that Act, subsidies are paid to eligible producers

who comply with certain requirements. The court held that

sovereign immunity did not bar the suit for two reasons.

First, the court held that since the action was based upon

federal statutes and regulations, the Tucker Act waived sov-

ereign immunity. That portion of the decision was overruled

by the holding in United States v. Testan, 424 U.S. 392, 398

(1976), that the Tucker Act does not waive sovereign im-

munity but merely furnishes jurisdiction for suits to which the

government has consented. The court in Aycock-Lindsey Corp.

also held that the government had entered into an implied

7

ing brief (Pet. Br. 21-22), that reasoning is funda-

mentally inconsistent with United States v. Testan,

424 U.S. 392 (1976).

contract with the producer because it had “published bulletins

and promulgated rules” expressly promising to pay eligible

producers who complied with certain requirements (171 F.2d

at 521). In the present case, by contrast, the AAFES did not

promise expressly or impliedly to pay damages to wrongfully

discharged employees. On the contrary, by excluding such em-

ployees from the coverage of the Back Pay Act, Congress ex-

pressly stated that no such payments would be made. In addi-

tion, Aycock-Lindsey Corp. did not involve the relationship

between the government or a governmental instrumentality

and its employees—an area in which appointment, rather than

contract, has been the traditional mode of employment (see

Pet. Br. 17). For that reason and because the nature of the

relationship between the government and its appointed em-

ployees has no analog in the government’s dealings with pri-

vate businesses, facts that might justify inferring a contrac-

tual relationship in the latter field may not suffice in the

former.

Augusta Aviation, Inc. v. United States, 500 F.Supp. 785

(S.D. Ga. 1980), involved statutes expressly granting educa-

tional benefits to eligible veterans enrolled in approved train-

ing. See 38 U.S.C. 1651 et seq. The Veterans’ Administration

first notified a schocl providing such training that a particular

veteran was entitled to substantial benefits but later, after

the training was completed, informed the school that the

veteran was actually entitled to much less. The school brought

suit, and the court held that the Veterans’ Administration

had impliedly agreed to pay the amount initially indicated.

Augusta Aviation is distinguishable from this case not only

because it arose outside the area of government employment

and concerned statutes expressly promising to pay money, but

also because it involved a communication that may be con-

strued as an express promise to pay a certain amount to the

veteran in question. Moreover, unlike respondent, the plain-

tiff there adduced substantial evidence to support its contract

claim.

2. Respondent contends (Resp. Br. 11-15, 19-23)

that even if the court of appeals’ reasoning is un-

sound, its decision nevertheless may be affirmed on

two other grounds. First, respondent urges (Resp.

Br. 14, 15, 16, 18-19) this Court ‘to find that he en-

tered into a contract with the AAFES when he was

accepted into the Executive Management Program.

However, as we pointed out in our opening brief

(Pet. Br. 18-19), it is apparent from the face of the

regulations concerning that program that partici-

pants are not employed under contract but are ap-

pointed like the vast majority of AAFES and federal

employees. Moreover, even if such a contract had

been made, respondent’s failure to mention it in

his district court filings was surely fatal. As noted,

respondent had the burden of pleading and proving

jurisdiction in the district court.

3. Finally, respondent maintains (Resp. Br. 11-

15) that the district court erred in dismissing his

complaint for lack of subject matter jurisdiction

without conducting an evidentiary hearing. As we

have noted, however (see page 3, supra), a district

court is not obligated to hold such a hearing but may

adjudicate the question of jurisdiction using any rea-

sonable method it chooses. In this case, where re-

spondent failed to plead or offer any evidence proving

necessary jurisdictional facts, there was plainly no

need for an evidentiary hearing. It makes no sense

to suggest that the district court was required to con-

duct such a hearing to determine whether respondent

had entered into a contract with his employer when

respondent did not even allege that such a contract

existed.

Respondent relies upon United States v. Hopkins,

427 U.S. 123 (1976), but his reliance is clearly mis-

placed. In Hopkins, a discharged AAF'ES employee

brought suit for money damages in the Court of

5 Respondent’s treatment of United States v. Testan, 424

U.S. 392 (1976), is equally unpersuasive. In our opening

brief, we contended (Pet. Br. 19-22) that the decision below

cannot be reconciled with Testan, in which claims brought

against the United States for money damages by federal em-

ployees were held to be barred by sovereign immunity. We

noted that the complaint in Testan, like that here, alleged

violations of provisions of law dealing with personnel mat-

ters and that neither complaint contained allegations concern-

ing a contract of employment. We reasoned that if an implied-

in-fact contract could be inferred in the present case, a similar

inference presumably should have been drawn in Testan.

In answer to our argument, respondent quotes (Resp. Br.

14) this Court’s statement in Testan that the plaintiffs “ [did]

not rest their claims upon a contract” (424 U.S. at 399) and

the statement that their action “is not one concerning a

wrongful discharge or a wrongful suspension” (id. at 402). He

then concludes (Resp. Br. 15):

[T]he implication is clear that a claim upon a contract

and a claim for wrongful discharge * * * are substantive

rights enforceable against the United States for mone-

tary damages under the Tucker Act.

In our view, half of respondent’s conclusion is illogical and

incorrect and the rest is beside the point. First, simply be-

cause the suit in Testan was not one for wrongful discharge

or suspension, it does not follow that the Tucker Act would

furnish jurisdiction for such a suit. On the contrary, the

teaching of Testan is that such a suit would be barred unless

predicated upon a provision of law containing an express

waiver of sovereign immunity. Second, while it is true that

sovereign immunity would not bar an action founded upon a

lawful contract obligating the United States to pay money,

that proposition neither answers our argument based upon

Testan nor disposes of this case. The issue presented by the

decision below is whether any such contract may be properly

“found based upon the record in this case, and in our opening

brief we maintained that inferring the existence of such of

contract based solely upon provisions of law concerning per-

sonnel matters was inconsistent with the result in Testan.

10

Claims and alleged that he had been employed pur-

suant to contract. Citing precedent holding that

AAFES employees are not federal employees (who

generally serve by appointment), Hopkins argued

that his relationship with the AAFES was therefore

contractual, just like the relationship between em-

ployers and employees in the private sector. The

Court of Claims accepted his argument (Hopkins v.

United States, 513 F.2d 1860 (1975), thus ob-

viating the need for him to submit any proof con-

cerning the nature of his employment relationship

with the AAFES. This Court reviewed the denial of

the AAFES’ pretrial motion to dismiss and rejected

the lower court’s reasoning. It concluded that most

AAFES employees, like most federal employees, are

appointed to their positions (427 U.S. at 127-128).

However, the Court noted that certain AAFES regu-

lations authorize a small category of employment

or “service contract[s]” for “services performed off a

military installation and ‘direct services such as jani-

torial and window cleaning service’” (id. at 129,

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

Holding 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 * * *” (427 U.S. at 130), the Court re-

manded the case to the Court of Claims with instruc-

tions that “the question of whether [Hopkins] was

employed by virtue of a contract or by appointment”

“depends upon an analysis of the statutes and reg-

ulations previously described in light of whatever

evidence is adduced on remand as to plaintiff’s par-

ticular status in this case” (ibid.).

Although respondent contends that this Court

should dispose of his case as it did Hopkins, there is

ll

no justification for similar treatment here. First,

whereas Hopkins’ complaint alleged that his dis-

charge constituted a breach of contract, respondent’s

complaint contains no such allegation. Second and

more important, Hopkins, unlike respondent, had not

failed to discharge his responsibility of proving

essential jurisdictional facts at the trial level. Be-

cause the Court of Claims accepted Hopkins erroneous

argument that he had been a contract employee sim-

ply because he had not been a federal employee, Hop-

kins had no occasion to offer whatever proof he might

have possessed showing that he was a contract em-

ployee in a more conventional sense. Conceivably

Hopkins might have possessed a written “service con-

tract” of the type described by this Court. However

unlikely it appeared that Hopkins could adduce such

proof, the Court obviously felt that it would be unfair

to require the dismissal of his suit without at least

affording him the opportunity to submit whatever

evidence he had.

Respondent, on the other hand, had a full oppor-

tunity to plead and prove essential jurisdictional facts

but failed to do so. Moreover, respondent had the

benefit of this Court’s decision in Hopkins explaining

the nature of employment by the AAFES and the

effect of the doctrine of sovereign immunity upon

suits such as his. There is consequently no justifica-

tion for giving respondent a second chance to do what

he should have done long ago. In addition, respond-

ent’s failure, even at this late date, to refer to any

facts substantiating the existence of his alleged con-

tract with the AAFES strongly suggests that he has

no such proof and that remanding this case for an

evidentiary hearing would be a pointless gesture.

12

For the reasons stated above and in our opening

brief, it is respectfully submitted that 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 jurisdiction, those portions of

the complaint seeking monetary relief.

Rex E. Lee

Solicitor General

FEBRUARY 1982

WU. 8. CovennmanT Paintine orice, 1002 366000 700