# Petition for Writ of Certiorari — Schism v. United States

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition for Writ of Certiorari
- **Published:** January 1, 2003
- **Citation:** 539 U.S. 910

## Text

FILED |

0212.26 Jan 24

oo @rrse OF THE @.ERK

(H)

No.

2003

IN THE

Supreme Court of the Anited States

WILLIAM O. SCHISM and ROBERT L. REINLIE,
Petitioners,
V.

UNITED STATES,
Respondent.

Petition for a Writ of Certiorari to the
United States Court of Appeals
for the Federal Circuit

PETITION FOR A WRIT OF CERTIORARI

GEORGE E. DAY *

TIMOTHY I. MEADE

HENRY MARK HOLZER

DAY & MEADE, P.A.

32 Beal Parkway, SW

Ft. Walton Beach, Florida 32548
* Counsel of Record (850) 243-1234

WILSON-EPES PRINTING Co., INC. — (202) 789-0096 -— WASHINGTON, D.C. 20001

QUESTIONS PRESENTED

1. Whether the Federal Circuit—having characterized as
“pay” Petitioners’ receipt of contractually-based, govern-
ment-provided, post-retirement, free lifetime medical care—
correctly held that this Court’s decision in Bell v. United
States, 366 U.S. 393 (1961) created a “military benefits”
exception to the 28 U.S.C. 1346(a)(2) (Little Tucker Act)
creation of a cause of action against the government for
breach of an implied contract.

2. Whether, if there is no such exception, 5 U.S.C. 301—
“The head of an Executive department or military department
may prescribe regulations for the government of his
department, the conduct of its employees, the distribution and
performance of it business . . . ."—authorized World War II
and Korean War Executive Branch military departments,
through recruiters and their superiors, to offer post-retirement
free lifetime medical care to military personnel who served at
least twenty years.

3. Whether the Commanders-in-Chief possessed the power
to authorize World War II and Korean War military depart-
ments, through recruiters and their superiors, to promise post-
retirement free lifetime medical care to military personnel
who served at least twenty years, and, if they did, whether the
Anti-Deficiency Act can be applied retroactively to abrogate
the contracts made and performed as a result of those offers.

(i)

TABLE OF CONTENTS

Page
QUESTIONS PRESENTED.........:scsssssssssesereenenensseneess i
TABLE OF AUTHORITIES ..........:cssceseesreeseseeseensensenes iv
OPINIONS BELOW...........:csccsssessseseeeseteseesensesseenneneees I
JURISDICTION .........:scssscessesssssseseeesnenseeersssssenseeeenseenees 2
STATUTORY PROVISIONS INVOLVED..........:::0+++ 2
STATEMENT OF THE CASE..........:ccsccsseesseeeereeeeeeenees 3
REASONS FOR GRANTING THE PETITION........... 7
CONCLUSION .........cccccssssssssssvsssesecersensenssssnsnsssensensesnes 13
APPENDICES
A. Court of Appeals en banc Opinion ..........-.+s++0++ la
B. Court of Appeals en banc Order ...........:seeeeee 9la
C. Court of Appeals panel Opinion ............-:e0e 93a
D. District court opinion on motion for summary

JUAQMENt ...........ccccecesseesenteseerenssssntensneenentenennensens 112a

iV

TABLE OF AUTHORITIES
CASES Page
Barker v. Kansas, 503 U.S. 594 (1992).......scceesees 8
Bell v. United States, 366 US. 393
ERDBD) senercisncsersconsnerriqvennncsesiptbabiaepinastats i, 4, 5, 7, 8, 13
Chrysler Corp. v. Brown, 441 U.S. 281 (1979)..... 10, 11
Georgia v. United States, 411 U.S. at 526
CBWE sccsesnccsisorsnnnsntineiagiinsaseenesienabamennninesinisliatinntatt 11,12
King v. St. Vincent’s Hospital, 502 U.S. 215
CRIB Y ) csnnsccisinscsicscnsnibianeisiiiiiteripsiakannsanennamnnsnicontiies 8

Schism and Reinlie v. United States, et ano., 972
F.Supp. 1398 (N.D., Fla, 1997) (Opinion on
SenRR eae BP GRIT ooscscsvsccenccecvcarcencnsescesenseonseccsene i, 1,4

Schism and Reinlie v. United States, et ano., 19
F.Supp. 2d 1287 (N.D., Fla., 1998) (Opinion
on motion for summary judgment..............0++ i, 1,4,5

Schism and Reinlie v. United States, 239 F.3d
1280 (C.A. Fed. (Fla.), 2001) (Panel opinion)... 2, 4, 5

Schism and Reinlie v. United States, 252 F.3d.

1354 (C.A. Fed. (Fla.), 2001) (En banc

Schism and Reinlie v. United States, __ F.3d _ ,
2002 WL 31549178 (C.A. Fed. (Fla.), 2002)

(En banc opinion) ............. 2, 4, 5,6,7,8,9,10, 11, 12, 13
Youngstown Sheet & Tube Co. v. Sawyer, 343

as SF 0 Be acsaiicetincsrensalacicecaocincesbalpeaptunsdelions 12

STATUTORY PROVISIONS

5 EEA. Se tarctictencncens i, 2, 6, 7, 9, 10, 11, 12, 13
FE Be Fe whee ncsesticreseriiiiieinicninraentinine 2
FE UES Bene TE CN cn ecenntnincesincnnisantonntinconens 2
28 U.S.C. Sec. 1346(a)(2).............0000 2343.66 3

31 U.S.C. Section 1341(a)(1)(B) ............ccccceeeeseeees 3, 6, 13

IN THE

Supreme Court of the United States

No.

WILLIAM O. SCHISM and ROBERT L. REINLIE,
Petitioners,
V.

UNITED STATES,
Respondent.

Petition for a Writ of Certiorari to the
United States Court of Appeals
for the Federal Circuit

PETITION FOR A WRIT OF CERTIORARI

OPINIONS BELOW

The opinion of the District Court (App. “D”, infra, 1i2a-
128a), granting surimary judgment for the United States, is
reported at 19 F.Supp. 2d 1287 (N.D. Fla., 1998). '

' Prior to the District Court granting summary judgment for the United
States, its motion to dismiss the complaint was granted in part and denied
in part. (See, App. “E,” infra, 129a-146a). The court’s opinion is reported
at 972 F.Supp. 1398 (N.D., Fla, 1997).

2

The panel decision of the United States Court of Appeals
for the Federal Circuit (App. “C”, infra, 93a-1 11a) is reported
at 239 F.3d 1280 (C.A. Fed. (Fla.), 2001).

The en banc opinion of the Court of Appeals (App. “A”,
infra, 1a-90a) is reported at F.3d __, 2002 WL 31549178
(C.A., Fed. (Fla.), 2002).

JURISDICTION

The Court of Appeals Order/Opinion was entered on
November 18, 2002.

The jurisdiction of the District Court was invoked under 28
U.S.C. 1346(a)(2) [Little Tucker Act].

The jurisdiction of the Court of Appeals was invoked under
28 U.S.C. 1295(a)(2).

The jurisdiction of this Court was invoked under 28 U.S.C.
Section 1254(1).

STATUTORY PROVISIONS INVOLVED

5 U.S.C. 301

The head of an Executive department or military depart-
ment may prescribe regulations for the government of
his department, the conduct of its employees, the
distribution and performance of its business, and the
custody, use, and preservation of its records, papers, and
property. This section does not authorize withholding
information from the public or limiting the availability
of records to the public.

? The government’s application for en banc review was granted, and
the panel decision was withdrawn. See, App. “B,” infra, 91a-92-a, and
252 F.3d. 1354 (C.A. Fed. (Fla.), 2001). ;

3
28 U.S.C. Section 1346(a)(2) [Little Tucker Act])

United States as defendant

(a) The district courts shall have original jurisdiction,
concurrent with the United States Court of Federal
Claims, of:

(2) Any other civil action or claim against the United
States, not exceeding $10,000 in amount, founded
either upon . . . any express or implied contract with
the United States ....

31 U.S.C. 1341(a)(1)(B)

An officer or employee of the United States Government or
of the District of Columbia government may not involve
either government in a contract or obligation for the payment
of money before an appropriation is made unless authorized
by law.

STATEMENT OF THE CASE

[T]o induce people to join the armed services during
the World War II and Korean War era and make it a
career, military recruiters, under the direction of
superiors, orally promised recruits that if they served on
active duty for at least 20 years, upon retirement they
would receive free lifetime medical care for themselves
and their dependents. The government concedes such
promises were made in good faith and relied upon.
[Petitioners] allege that they were fulfilled until 1995
when, [Petitioners] assert, the government breached
these implied-in-fact contracts by effectively denying
them free care so they had to purchase Medicare Part B
insurance in order to be treated by civilian doctors or
obtain medications without paying fees because space
was no longer available in military facilities where care

4

and medications were free. We must decide whether the
government is bound by those promises. ’

This case raises two important related questions affecting
perhaps as many as a million-and-a-half elderly World War II
and Korean War veterans. It involves the meaning of one
of this Court’s decisions, the construction of two federal
statutes, and the retroactive effect of another.

The Court of Appeals (after characterizing as “pay” Peti-
tioners’ receipt of contractually-based, government-provided,
post-retirement, free lifetime medical care) interpreted this
Court’s decision in Bell v. United States* as carving a “mili-
tary benefits” exception into the Little Tucker Act’s creation
of a cause of action against the government for its breach of
an implied contract—in this case, the contract for that
medical care.

The Court of Appeals also held, in the alternative, that even
if there was no such Bell-basead “military benefits” exception,
5 U.S.C. Section 301 did not authorize offers’ by military
recruiters of free lifetime medical care for personnel serving
at least twenty years.

* |a-2a. Emphasis added. It should be noted that Petitioners’ claim has
always been that they were deprived of free lifetime medical care not
“because space was no longer available in military facilities where cave
and medications were free,” but because under the 1995 TRICARE
program once becoming 65 years old they would not be treated at such
facilities even if space was available. See Schism and Reinlie v. United
States, 972 F.Supp. 1398, 1400 (1997).

* E.g., Ila.
> 366 U.S. 393 (1961).

° Although the District Court and both the Court of Appeals panel and
en banc opinions referred to the recruiters’ offers as “promises,” Peti-
tioners shall use the terms “ offer” and “offers” because they are more apt
in the context of the Little Tucker Act contract issues presented here.

5

Among those who had accepted the government’s offers
were World War II veterans Schism and Reinlie, Petitioners
here, each of whom served their country for at least the
requisite 20 years. For its part, the government lived up to its
bargain, providing post-retirement free medical care for
Schism and Reinlie and their dependents.

Until 1995. Then, the government forced all veteran-
offerees over 65 years of age to join the Medicare pro-
gram—which, with its deductibles, co-pays and premiums, is
not free.

Aggrieved, Petitioners sued under the Little Tucker Act.
Their theory was that the recruiters’ offers of post-retirement
free lifetime medical care had been accepted by the veterans’
performance, that an implied contract was thus formed, that
the contract was breached when the government ceased to
provide free medical care, and that the Little Tucker Act gave
them a statutory cause of action against the government for
breach of that contract.

The District Court granted summary judgment for the
government. Petitioners appealed to the Court of Appeals,
where initially a three-judge panel ruled unanimously in their
favor.’ The government sought and was granted en banc
review, and the panel decision was withdrawn. ®

A 9-4 decision of the en banc Court of Appeals then
affirmed the District Court. °

Even though the en banc majority recognized that the
recruiters’ offers had actually been made, that those offers
were made at the behest of superiors, that the offers were
made in good faith, that the offers were relied on through
enlistment (or reenlistment), and that the offerees performed
by serving in the military for at least 20 years, still, the Court

” See, App. “C,” infra, 93a-! 11a.

* See, App. “B,” infra, 91a-92a. It is from the en banc decision of the
Federal Circuit that this Petition for a Writ of Certiorari is sought.

* See, App “A”, infra, la-90a.

SL ER IN SIT
6

of Appeals affirmed the District Court.'° It did so by hold-
ing that:
(1) This Court’s Bell decision had carved a “military
benefits” exception into the Little Tucker Act,

(2) There was no statutory authority under 5 U.S.C.
Section 301 for the recruiters’or their superiors’ offers
under 5 U.S.C. Section 301, and

(3) Even if the Commanders-in-Chief possessed the
power to authorize World War II and Korean War
military departments, through recruiters and_ their
superiors, to offer post-retirement free lifetime medi-
cal care to military personnel who served at least
twenty years, the Anti-Deficiency Act!’ could be applied
retroactively to abrogate the contracts made and
performed as a result of those offers.

However, notwithstanding its decision, the en banc
majority concluded its opinion with these words:

We cannot more readily imagine more sympathetic
plaintiffs than the retired officers of the World War II
and Korean War era involved in this case. They served
their country for at least 20 years with the understanding
that when they retired they and their dependents would
receive full free health care for life. The promise of such
health care was made in good faith and relied upon.

'° A colloquy during the panel oral argument captures the govern- i
ment’s and the en banc majority’s position: |
Judge Pauline Newman: “You’re not telling us that these promises |

were not made [you’re] just saying they don’t have to be kept?”

E. Roy Hawkens, Esq.: “That’s correct, your honor.” |

Mr. Hawkens represented the United States of America, on behalf
of the Department of Justice. See, page 5 of [unofficial] transcript
of March 7, 2006 oral argument.

''31 U.S.C. Section 1341(a)(1)(B): “An officer or employee of the
United States Government or of the District of Columbia government may
not involve either government in a contract or obligation for the payment
of money before an appropriation is made unless authorizec by law.”

7

* * * Perhaps Congress will consider using its legal
power to address the moral claims raised by [Petitioners]
Schism and Reinlie on their own behalf, and indirectly
for other affected retirees. '?

REASONS FOR GRANTING THE PETITION

Review by this Court of the Court of Appeals en banc
decision is compelling and important not only because it has
affected perhaps as many as a million-and-a-half World War
II and Korean War veterans,’? not only because that decision
has saved the government billions of dollars,'* and not only
because, as the Court of Appeals noted, “The Supreme Court
has not explicitly applied the [Bell] principles to compre-
hensive medical benefit entitlements for military retirees or
(as in this case) to an asserted implied-in-fact contract
grounded on the conceded promises of full free lifetime medi-

'? 69a-70a. This was not the first place the Court of Appeals’s en banc
majority opinion expressed discomfit with its own decision. Early in its
opinion the court stated that “[a]cccordingly, we must affirm the district
court’s judgment and can do no more than hope Congress will make good
on the promises recruiters made in good faith to plaintiffs and others of
the World War II and Korean War era... .” 4a.

The dissent—which rejected the majority’s Bell-based “military bene-
fits” exception to the Little Tucker Act, and found adequate authority in 5
U.S.C. Section 301 for the recruiters’ offers—likened Petitioners Schism
and Reinlie to Rudyard Kipling’s discarded soldier, once the need for his
service has passed. 70a-7 la.

A separate dissent, noted that “[w]Jhen an individual, at the behest of
the government acting through its authorized representatives, devotes
essentially his or her productive lifetime to the defense of the rest of us,
undertakes training that itself is inherently more dangerous than the
typical civilian occupation, and stands ready to go in harm’s way so
that others need not, it ill behooves us—either the Executive or the
Judiciary—to display the kind of public ingratitude that this case does.”
89a.

° Cf Lynch v. United States, 292 U.S. 571 (1934).

'* See, Respondent’s Combined Petition for Panel Rehearing and
Rehearing En Banc, at 1. ;

8

cal care.”'” Review is compelling and important because of
the Court of Appeal’s amendment of the Little Tucker Act, by
carving a supposed Bell-based “military benefits” exception
out of that statute when neither its text nor any decision of
this Court has ever done so.

Moreover, since the Court of Appeals is the sole appellate
forum for all Little Tucker Act cases, the Bell-based “military
benefits” exception to every implied contract case against the
government will henceforth govern those litigations, and no
pay, pension, deferred compensation, or similar claim brought
by a member of the uniformed services will any longer sur-
vive a motion to dismiss or a motion for summary judg-
ment.'® With one decision, the Federal Circuit has eliminated
all Little Tucker Act implied contract cases brought by every
active and retired member of the United States military
having to do with all forms of military benefits—unless suit is
brought under a specific federal statute.'’

'S 20a. Cf, Barker v. Kansas, 503 U.S. 594 (1992).

'© This is especially unfortunate in view of “the canon that provisions
for benefits to members of the Armed Services are to be construed in the
beneficiaries’ favor. Fishgold v. Sullivan Drydock and Repair Corp., 328
U.S. 275, 285 . . . .” (King v. St. Vincent’s Hospital, 502 U.S. 215, 221,
n.9 (1991)).

'7 One could say that the Little Tucker Act is such a statute, but the
Federal Circuit rejected that idea in favor of requiring a specific federal
statute as in Bell, where the plaintiffs sued under both the 1814 “Act for
the better organizing, paying, and supplying the army of the United
States” and the later Missing Persons Act.

It is not a little ironic that in its decision the Federal Circuit has held
that a member of the United States military cannot sue the government
under the Little Tucker Act for breach of an implied contract for military
benefits, but can sue if he or she can find another statute—even one which
has nothing to do with contract, implied or otherwise—if such a statute
does have to do with military benefits.

9

As noted above, after its lengthy elaboration of why “mili-
tary health care benefits as a form of compensation have long
been exclusively a creature of statute, not contract,” and thus
why “[ojn this basis alone, we could dispose of this appeal,”
the majority apparently believed it necessary to rule in the
alternative that “[e]ven assuming a contract law analysis were
proper, plaintiffs still do not have a valid contract because the
recruiters lacked actual authority to negotiate entitlements for
full, free lifetime health care benefits.” '®

This ruling was the en banc majority’s 5 U.S.C. 301 point.
That section provides:

The head of an Executive department or military depart-
ment may prescribe regulations for the government of
his department, the conduct of its employees, the
distribution and performance of its business, and
the custody, use, and preservation of its records, papers,
and property. (“Sentence One”] This section does not
authorize withholding information from the public or
limiting the availability of records to the public.
[“Sentence Two”](5 U.S.C. 301; emphasis added).

Petitioners had argued in the Court of Appeals that
Sentence One of this statute provided adequate authority for
the heads of the military departments to delegate, down
through the chain of command to military recruiters, the
power to offer free lifetime medical care.!°

The government disagreed, and the Court of Appeals held
that this Court has “made clear that the sole statute relied
on by the [Petitioners], 5 U.S.C. 301, authorizes only
‘housekeeping’ matters like internal policies and procedures;

8 26a.

? It is noteworthy that the Court of Appeals expressly recognized that
“[t]he government admits that 5 U.S.C. Section 301 and ‘its precursors
authorized appropriate military officials to prescribe rules that allowed
retirees and their dependents to receive free medical care in existing mili-
tary facilities on a space available basis.” Emphasis in original. 35a.

19

it thus cannot authorize the creation of a benefit entitlement
via contracts.”””

The case in this Court to which the Court of Appeals
referred, and upon which the en banc majority rested its
conclusion, is Chrysler Corp. v. Brown.”"

However, in the Chrysler case, this Court did not have
before it 5 U.S.C. 301’s Sentence One, but rather Sentence
Two. In other words, Chrysler did not address, let alone
decide, anything concerning the substantive reach of 5 U.S.C.
301. This Court, neither in Chrysler nor in any other case,
has ever expressly decided what the two core statutory
terms—‘“‘government” and “performance”—mean in Sentence
One of 5 U.S.C. 301.

Chrysler involved a “reverse FOIA” suit. As a government
contractor, the company had to submit considerable data
about its business to the Department of Defense. Regulations
of the Secretary of Labor provided that much of that data
could be reached by third parties under FOIA. Third parties
tried, and in the course of resolving that dispute, this Court
had occasion to address 5 U.S.C. 301. In doing so, while this
Court referred to Section 301 as a “housekeeping statute” it
held only that in the context of the FOIA issue presented in
Chrysler, “[g]iven this long and relatively uncontroversial
history [of Section 301] of the statute itself, it seems to be
simply a grant of authority to the agency to regulate its own
affairs. What is clear from the legislative history of the 1958
[Sentence Two”] amendment to Section 301 is that this

2 97a.

2! 441 U.S. 281 (1979).

2 This nickname apparently derived from a passing reference in a
single House Report. See, 441 U.S. at 308, fn. 39.

> “This section does not authorize withholding information from the
public or limiting the availability of records to the public.”

11

section was not intended to provide authority for limiting the
scope of Section 1905.””4

Thus, Chrysler—the lynchpin of the en banc majority’s
rejection of Section 301 as statutory authority for the
recruiters’ offers—only involved Sentence One, and never
interpreted the statute’s two core (Sentence One) terms,
“government” and “performance.”

The only modern interpretation of Section 301’s Sentence
One—which stands ‘n stark contrast to the interpretation
given it by the en banc majority—is this Court’s decision in
Georgia v. United States.” There, the Attorney General of
the United States “[b]y way of implementing the performance
of his obligation to pass on state submissions under [Section 5
of the Voting Rights Act] . . . promulgated .. . certain
administrative regulations . . . .7°

Georgia had claimed that the Attorney General’s regu-
lations were without federal legislative authorization. In
answer to that argument, this Court—while not expressly
interpreting Section 301’s Sentence One terms “government”
and “performance” — held that Section 301 was adequate to
authorize the Attorney General’s regulations:

It is true . . . that Section 5 [of the Voting Rights Act]
does not authorize the Attorney General to promulgate
any regulations. But Section 5 is also silent as to the
procedures the Attorney General is to employ in
deciding whether or not to object to state submissions, as
to the standards governing the contents of those sub-
missions, and as to the meaning of the 60-day time
period in which the Attorney General is to object, if at
all. Rather than reading the statute to grant him ur-
fettered discretion as to procedures, standards, and

** Chrysler Corp. v. Brown, 441 U.S. at 309. Emphasis added.
5 411 U.S. 526 (1973).
*° Georgia v. United States, 411 U.S. at 536. Emphasis added.

12

administration in this sensitive area, the Attorney Gen-
eral has chosen instead to formulate and publish objec-
tive ground rules. If these regulations are reasonable and
do not conflict with the Voting Rights Act itself, then 5
U.S.C. Section 301, which gives to “[t]he head of and
Executive Department” the power to “prescribe regu-
lations for the government of his department, . . . [and]
the distribution and performance of its business. . .,”’ is
surely ample legislative authority for the regulations.”’

Given the truly uncountable regulations issued by federal
administrative and other agencies, given that the Court of
Appeals’s erroneous reliance on Chrysler has clouded every
Little Tucker Act implied contract case that will ever be
brought (not just those involving military benefits), and given
that this Court’s decision in Georgia v. United States did not
expressly interpret Section 301’s Sentence One core term
“government” and only implicitly interpreted its other core
term, “performance,” it is compellingly important that this
petition for a writ of certiorari be granted.

Petitioners also argued below that as Commanders-in-
Chief, the American presidents of the time had the power,
down through the chain of command, to authorize their
military recruiters to make the free lifetime medical care
offers. Petitioners’ argument was rooted in the Youngstown ”*®
analysis found in Justice Jackson’s concurrence, by now a
staple of this Court’s Article II jurisprudence. Essentially,
they contended that since Congress had never curtailed the
Commanders-in-Chiefs’ power to spend funds appropriated
for the military on recruitment offers, and on the later medical
care those accepted offers required, under the Youngstown
analysis the Commanders-in-Chief acted at the height of their
powers in authorizing their recruiters to make the free
lifetime medical care offers.

2” Georgia v. United States, 411 U.S. at 536. Emphasis added.
8 Youngstown Sheet & Tube Co. v. Sawyer, 343 U.S. 579 (1952).

13

The Court of Appeals rejected this argument, ruling that
the Commanders-in-Chief lacked the power because their
expenditure of funds for that medical care would violate the
Anti-Deficiency Act. That Act, however, was passed long
after the contracts for free lifetime medical care were made
and performed,” yet the Court of Appeals failed to provide
any authority for the proposition that, even if the Act did
restrict a Commander-in-Chief’s power, it could be applied
retroactively.

Accordingly, because the related questions of whether the
Commanders-in-Chief possessed the power to authorize the
Little Tucker Act contracts at issue here, and whether those
contracts could retroactively be abrogated by the Anti-
Deficiency Act, are compellingly important to the many
private parties to those agreements, the petition for a writ of
certiorari should be granted.

CONCLUSION

Because of this case’s compelling importance to countless
American veterans, to the national treasury, to the
interpretation of this Court’s decision in Bell v. United States,
to the scope of 5 U.S.C. 301 and 28 U.S.C. 1346(a)(2), to the
scope of Commander-in-Chief power, and to the retroactivity
of the Anti-Deficiency Act, the petition for a writ of certiorari
should be granted.

Respectfully submitted,

GEORGE E. DAY *

TIMOTHY I. MEADE

HiNRY MARK HOLZER

DAY & MEADE, P.A.

32 Beal Parkway, SW

Ft. Walton Beach, Florida 32548
* Counsel of Record (850) 243-1234

”” See, Pub. L. 97-258, Sept. 17, 1982, 96 Stat. 923.

APPENDICES

la
APPENDIX A

UNITED STATES COURT OF APPEALS
FOR THE FEDERAL CIRCUIT

99-1402

WILLIAM O. SCHISM and ROBERT L. REINLIE,
Plaintiffs-Appellants,
v.
UNITED STATES,

Defendant-Appellee.

November 18, 2002, Decided

OPINION

Before MAYER, Chief Judge, NEWMAN and MICHEL,
Circuit Judges, PLAGER, Senior Circuit Judge, LOURIE,
CLEVENGER, RADER, SCHALL, BRYSON, GAJARSA,
LINN, DYK, and PROST, Circuit Judges.

MICHEL, Circuit Judge.

To induce people to join the armed services during the
World War II and Korean War era and make it a career,
military recruiters, under the direction of superiors, orally
promised recruits that if they served on active duty for at least
20 years, they would receive free lifetime medical care for
themselves and their dependents. The government concedes
such promises were made in good faith and relied upon.
Plaintiffs allege that they were fulfilled until 1995 when,
plaintiffs assert, the government breached these implied-in-

2a

fact contracts by effectively denying them free care so they
had to purchase Medicare Part B insurance in order to be
treated by civilian doctors or obtain medications without
paying fees because space was no longer available in military
facilities where care and medications were free. We must
decide whether the government is bound by those promises.

Plaintiffs Schism and Reinlie appeal from a summary
judgment by the United States District Court for the Northern
District of Florida holding that because the promises were not
authorized they are not enforceable. Schism v. United States,
19 F. Supp. 2d 1287, 1295 (N.D. Fla. 1998). The district court
concluded that because no statute authorized these promises,
no valid contract was formed between the government and
plaintiffs (or other similarly-situated military retirees, i.e.,
those who entered service prior to 1956 and by 1995 were 65
or more years of age). See id.

Plaintiffs allege they were “promised full post retirement
medical care for themselves and their dependents in military
hospitals,” First Amended Complaint at 2, and that because
for decades Congress funded such free care this promise gave
rise to an _ implied-in-fact contract. They claim the
government breached these promises of lifetime free medical
care in 1995 by promulgating regulations to implement
Tricare (a program that offered government-funded health
care by civilian doctors to retirees under age 65), codified at
32 C.F.R. § 199.17.' See Reply Brief at 2. Indeed, plaintiffs
state that “the government forced [them] to go to Medicare
and pay for their own medical care.” /d. Nothing in the

' We note at the outset that neither Tricare in 1995 nor CHAMPUS
before it provided for any health care insurance coverage paid for by the
government for retirees who were “Medicare eligible,” i.e., over 65.
See 32 C.F.R. § 199.4(eX3)(vi) (1995) (CHAMPUS), 32 C.F.R.
§ 199.17(c\3\i) (1995) (Tricare). Thus, it would seem the breach, if any,
first occurred in 1956 as well as 1966 and 1986 when Congress enacted
programs that failed to include retirees who were 65 or older.

3a

Tricare implementing regulation, however, requires retirees
65 or older to elect Medicare Part B coverage; rather
plaintiffs here freely elected to do so, despite the fact that
they were still entitled to receive free medical care at military
facilities on a space-available basis. See 32 C.F.R.
§ 199.17(f)(1). Plaintiffs presumably purchased additional
medical coverage under Medicare Part B because while they
remained entitled to space-available treatment in military
facilities, as a practical matter, such space was less often
available than before.” As a result, plaintiffs complain that,
whereas in the past they nearly always received complete free
care, they now had to pay Medicare Part B premiums in order
to receive less care without paying fees.” Accordingly, the
plaintiffs’ claim implies that either Congress was obligated to
maintain military medicine sufficient for their treatment, or in
the alternative, to make them eligible for free health insurance
coverage (such as Tricare) enjoyed by retirees under 65. And
the damages they seek represent the monthly Medicare fees
plaintiffs have paid since 1995. They sued under the Little
Tucker Act. See 28 U.S.C § 1346(a)(2) (2000).

The principal question before us is whether the promises
made to the plaintiffs, older Air Force retirees, were within
the authority of the Air Force Secretary under 5 U.S.C. § 301
in view of annual congressional appropriations for military
medicine, as the plaintiffs assert. Because 5 U.S.C. § 301 at
most authorizes space-available treatment, and not free health

? This was due to the combined effect of Congress downsizing military
medical facilities and the 1995 regulations which continued to place
retirees 65 or older at the bottom of the preference list of all groups
entitled to military medical care. See 32 C.F.R. § 199.17(d)(1).

> Medicare Part B provides for medical insurance (as opposed to
hospitalization insurance) and helps pay for doctors’ services, outpatient
care, and various other medical services that Medicare Part A (hospital
insurance) does not cover. However, while Part A is free, under Part B
beneficiaries must pay premiums, co-pays, and deductibles.

.: Acacia iii i

4a

insurance for life, we hold that the Air Force Secretary lacked
the authority in the 1950s when plaintiffs joined to promise
free and full medical care.

Further, under long-standing Supreme Court precedent,
“common-law rules governing private contracts have no place
in the area of military pay,” Bell v. United States, 366 U.S.
393, 401, 6 L. Ed. 2d 365, 81 S. Ct. 1230 (1961), or pensions
and hospital privileges, see Lynch v. United States, 292 U.S.
571, 577, 78 L. Ed. 1434, 54 S. Ct. 840 (1934) (citing United
States v. Teller, 107 U.S. 64, 68, 27 L. Ed. 352, 2 S. Ct. 39
(1883) for the proposition that the grant of pensions and such
privileges creates no vested right in the recipient and can be
withdrawn or redistributed by Congress at any time). Thus
military retiree compensation, including free military medical
care and government-provided insurance, is controlled
exclusively by statute, and so an action for breach of an
implied-in-fact contract cannot lie. See id.

Accordingly, we must affirm the district court’s judgment
and can do no more than hope Congress will make good on
the promises recruiters made in good faith to plaintiffs and
others of the World War II and Korean War era—from 1941
to 1956, when Congress enacted its first health care insurance
act for military members, excluding older retirees. Although
these retirees were made eligible for free insurance effective
in 2002, such relief was prospective only, leaving them
uncompensated for insurance expenses incurred from 1995-
2001, the subject of the relief they request here.

Background

The essential facts in this case are undisputed. For an
extensive treatment of all the facts, see the opinion of the
district court. Schism, 19 F. Supp. 2d at 1288-89. The present
opinion will treat only the facts relevant to our analysis.

Schism and Reinlie each accumulated 20 years of active
duty in the Armed Services. Schism enlisted in the United

5a

States Navy in April 1943, and was honorably discharged in
February 1946. In 1951, he received an indefinite
appointment in the Air Force. In 1956, he began active
service, which continued until his retirement in 1979. Thus,
his Air Force service alone entitled him to retirement benefits.

Reinlie enlisted in the United States Army in 1942 and
served on active duty until October 1945. He entered the Air
Force in 1951 and, in 1953, he received an indefinite term
appointment. Reinlie served continuously until he retired
from the Air Force in 1967. While the precise dates of
Reinlie’s service are not in the record before us, he apparently
had sufficient retirement credits between his World War II
service and his subsequent Air Force service to total 20 years.
The government has indicated that the relevant start of
service dates for plaintiffs are 1951 for Schism and 1953 for
Reinlie, the dates of their indefinite appointments. The
retirees do not dispute this fact, so we deem these to be the
relevant dates. Therefore, the only promises that matter are
those of the Air Force recruiters in 1951 and 1953.

At the time the retirees joined the Air Force, recruiters
allegedly promised free lifetime medical care for them and
their dependents in exchange for serving 20 years. Plaintiffs
contend that their acceptance of this offer and the
government’s subsequent practice of providing free medical
care formed an implied-in-fact contract. In 1995, however,
the government implemented TRICARE, a program that
essentially modeled the availability of health care benefits for
retirees along the lines of a health maintenance organization
(“HMO”). See 32 C.F.R. § 199.17. Retired service members
who qualify for Medicare under the Social Security Act,
however, are not eligible for TRICARE benefits. But
TRICARE does allow military retirees over age 65 to
maintain the military health coverage that they had previously
received for free by paying a monthly Medicare fee, which is

— _

6a

deducted from their social security benefit payments.’ On
December 11, 1996, plaintiffs brought a Little Tucker Act
action” alleging that the government had breached its
implied-in-fact contracts by requiring them to pay for
Medicare coverage.°

Before the district court, the retirees sought “an order
requiring the United States to cease deducting payments from
their retired pay and to provide [them] and their dependents
the unlimited free medical care for which they allegedly
contracted.” Schism, 19 F. Supp. 2d at 1289. The retirees
argued that the recruiters’ authority to make promises of full
free lifetime medical care had multiple sources, the clearest
being the broad language of 5 U.S.C. § 301 (1958). Under
that and other statutes, the military departments promulgated
for decades regulations that governed the eligibility of retirees

* Medicare Part B is the specific plan that these retirees elected so as to
also receive certain physicians’ services, home health service, laboratory
services, and other services. See 42 U.S.C. § 1395k (2000) (explaining
Medicare Part B services). It appears the monthly fee paid by the retirees
in 1995 was about $ 45 per person. :

> The Little Tucker Act states:

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 sounding in tort, except that the district courts shall not have
jurisdiction of any civil action or claim against the United States
founded upon any express or implied contract with the United States
or for liquidated or unliquidated damages in cases not sounding in
tort which are subject to sections 8(g\(1) and 10(a)(1) of the
Contract Disputes Act of 1978.

28 U.S.C. § 1346(a)(2) (2000).

° The plaintiffs also brought a motion for class certification that was
denied by the district court as moot in view of its grant of summary
judgment in favor of the government.

ee ee ee ee ee Pe NG

Ta

for health care, including Army Regulation AR 40-505
P2(b)(2) (1934) (allowing use of Army hospitals to Army
retirees “provided sufficient accommodations are available
for their treatment”), Army Regulation AR 40-590 P6(b)(1)
(1935) (limiting availability of care from Army hospitals to
“retired personnel on inactive status” who will benefit “by
hospitalization for a reasonable time,” not those who
“merely” require “domiciliary care by reason of age or
chronic invalidism”), and Air Force Regulation AFR 160-73
P14(h) (1951) (limiting hospitalization of retired Air Force
personnel to those “who will be benefited by hospitalization
for a reasonable length of time”). In addition, the 1943 edition
of the Navy’s Manual of the Medical Department
(““MEDi!AN”) also states: “Retired officers and enlisted
men, inactive, are not entitled to civilian medical and hospital
treatment at government expense. They are entitled to
treatment in naval hospitals by naval medical officers when
available upon application... .” 1943 MEDMAN § 3168.
Plaintiffs cite and rely on all these sources.

In further support for their position, the retirees pointed to
a 1945 letter written by James Forrestal, then-Secretary of the
Navy, to “Naval Reserve and Temporary USN Officers.” The
letter encourages reserve officers to transfer to the Regular
service. Attached to this letter was a recruitment brochure
indicating that retired Navy personnel would receive free
medical care. The retirees asserted that this letter explicitly
authorized the recruiters’ oral promises of free lifetime health
care. In a similar vein, they contended that because Congress
later expressly authorized certain plans for some retired
service members and their dependents, e.g., “CHAMPUS”
(Civilian Health and Medical Program of the United States),
10 U.S.C. § 1036 (1966), it also necessarily authorized
recruiters’ earlier oral promises of free lifetime medical care.
Citing the repeated appropriations of funds then used to pay
for military medical care, including the care given to retirees,

8a

Schism alternatively argued that Congress later ratified the
recruiters’ promises.

The government responded that none of the military
services’ regulations in place before 1956 promised free
unconditional lifetime medical care for retirees and,
moreover, that 5 U.S.C. § 301 did not authorize promises of
such care even if the regulations did conditionally authorize
care under certain circumstances. Further, the government
argued, Congress did not ratify the recruiters’ oral promises
because it never explicitly appropriated funds for an
entitlement to free lifetime medical care for retirees.

On August 31, 1998, the district court rejected the retirees’
claim, hoiding that as a matter of law neither the relevant
statutes nor the regulations authorized the recruiters’
promises of full free lifetime medical care. See Schism, 19 F.
Supp. 2d at 1295. In reaching this conclusion, the court
explained that while “recruiters made promises to potential
recruits that they could obtain lifetime medical care for
themselves and their dependents by joining the armed forces

” An authorization act is passed every year by both chambers of
Congress. In this act, the Congress enumerates, or “authorizes,” the
activities that may be carried-out by each department. (Other activities
may be authorized by permanent legislation.) An appropriations bill, on
the other hand, explicitly provides the amount of funding each such
activity will receive for that Fiscal Year. In the present case, the retirees
cite to authorization and appropriations statutes that provide (among
other things):

Army Authorizations:
“. . . for medical care and treatment of patients when entitled

thereto by law, regulation, or contract . . . except when elective
treatment has been obtained in civilian hospitals . . . .” 58 Stat. 583
(1944).

‘*... medical and dental care of personnel entitled thereto by law
or regulation, and other measures necessary to protect the health of
the Army ... .” 83 Stat. 472 (1969).

[a7 MP oe ee ee See) ae eee ee ee

9a

and fulfilling certain service obligations,” those promises
conflicted with the regulations then in place. Id. Accordingly,
the court concluded, because the recruiters lacked the
requisite authority to make promises binding on the
government, no valid contracts between the retirees and the
relevant service branches were formed. Jd. Summary
judgment was therefore granted in favor of the government.

On February 8, 2001, a panel of this court reversed, stating
“there is nothing in the regulations or law prior to 1956 that
would have prohibited recruiters from making [the promises
of full free lifetime medical care]; indeed those regulations
appear to authorize them. At the least, there is no
inconsistency between them.” Schism v. United States, 239
F.3d 1280, 1288 (Fed. Cir. 2001) (vacated). The full court
then granted the government’s petition for a rehearing en
banc, and, by order dated June 13, 2001, asked the parties to
rebrief the appeal, addressing (among other things) the
following issues: (1) whether promises of free medical care
for life are enforceable in general and in particular under 5
U.S.C. § 301; (2) whether congressional appropriations had
ratified those promises; and (3) the relevance, if any, of the
new TRICARE for Life Bill, enacted in December 2000, Pub.
L. No. 106-398, § 712 (2000), the conference report of which
States that it “provides permanent lifetime TRICARE
eligibility for Medicare-eligible military retirees and their
families beginning in fiscal year 2002,” 146 Cong. Rec.
H9642 (daily ed. Oct. 11, 2000). Schism v. United States,
252 F.3d 1354 (Fed. Cir. 2001).

On appeal, the retirees contend “the government forced
[them] to go on Medicare and pay for their own medical
care.” Citing the “unavailability of care under Medicare,” the
retirees explained that they had to pay for Medicare Part B
and supplemental insurance. Asserting that paying these fees
viclated their contract with the government, the retirees are
seeking damages. While the nature and extent of these

10a

damages are not explained in detail in the briefs, the logical
conclusion is that the retirees seek the costs they allegediy
have been “forced” to pay “to get less medical care than they
were receiving at no cost before [the alleged breach).”’
Indeed, these are the only damages that the retirees discuss in
any detail.

Schism also appeals the district court’s order granting the
government’s motion for a protective order that denied
additional discovery until after the court had ruled on the
government’s summary judgment motion. Adopting the
government’s assertion that the requested discovery was not
necessary to respond to this motion, the. district court
concluded “the burden and expense of the subject discovery
outweighs its likely benefit at this stage of the proceedings.”
Schism v. United States, No. 3:96cv349/RV, Order at 1 (N.D.
Fla. Sept. 19, 1997). The district court did indicate, however,
that if the government’s motion for summary judgment was
denied, the government would need to timely respond to the
unfulfilled discovery requests. /d. at 1-2.

As noted earlier, the plaintiffs’ contract claim was brought
under the Little Tucker Act, which provides concurrent
jurisdiction in the United States district courts and the United
States Court of Federal Claims for money claims against the
United States founded on (among other sources of law) “any
express or implied contract with the United States” that does
not exceed $ 10,000. 28 U.S.C. § 1346(a)(2).

Plaintiffs filed a timely notice of appeal. We have
exclusive subject matter jurisdiction under 28 U.S.C.
§ 1295(a)(2) and now affirm.

"ee

lla
Discussion

We review a district court’s grant of summary judgment de
novo. See T & M Distribs., Inc. v. United States, 185 F.3d
1279, 1282 (Fed. Cir. 1999). Summary judgment is proper
only if the record “shows that there is no genuine issue as to
any material fact and that the moving party is entitled to a
judgment as a matter of law.” Fed. R. Civ. P. 56(c). For the
purposes of this appeal, the government concedes that
recruiters made the good faith representation to potential
recruits that, upon retirement, they and their dependents
would receive free, lifetime medical care.

I. Retirement Benefits for Military Personnel, as for
Civilian Federal Employees, Are Governed
Exclusively by Statute and Therefore May Not Be
Granted by Contract

Benefits for retired military personnel—and for civilian
retired federal employees, for that matter—depend upon an
exercise of legislative grace, not upon principles of contract,
property, or “takings” law. See Zucker v. United States, 758
F.2d 637, 640 (Fed. Cir. 1985) (explaining that federal
workers’ “entitlement to retirement benefits must be
determined by reference to the statutes and regulations
governing these benefits, rather than to ordinary contract
principles”); see also Bell v. United States, 366 U.S. 393, 401,
6 L. Ed. 2d 365, 81 S. Ct. 1230 (1961) (“A soldier’s
entitlement to pay is dependent upon statutory right.”); Kania
v. United States, 227 Ct. Cl. 458, 650 F.2d 264, 267-68 (Ct.
Cl. 1981) (“Thus it has long been held that the rights of
civilian and military public employees against the
government do not turn on contract doctrines but are matters
of legal status even where compacts are made.”); Shaw v.
United States, 226 Ct. Cl. 240, 640 F.2d 1254, 1260 (Ct. Cl.
1981) (stating “the law is well settled that, ‘public
employment does not, * * * give rise to a contractual
relationship in the conventional sense’) (citations omitted).

12a

In other words, Congress—and only Congress—can authorize
the benefits that a retired federal employee, whether civilian
or military, is entitled to receive. See Frisbie v. United
States, 157 U.S. 160, 166, 39 L. Ed. 657, 15 S. Ct. 586 (1895)
(“Pensions are the bounties of the government, which
Congress has the right to give, withhold, distribute, or recall
at its discretion. Congress, being at liberty to give or
withhold pensions, may prescribe who shall receive, and
determine all the circumstances and conditions under which
any application therefore shall be prosecuted. No man has a
legal right to a pension . . .. The whole control of that matter
is within the domain of congressional power.” (citations
omitted)).

A Congress Has Exercised Its Plenary Authority Over the
Military in the Realm of Health Care for Present and Former
Military Members and Their Dependents Since 1884 and Has
Never Authorized the Secretaries of the Military Departments
to Contract With Recruits for Benefits Not Provided for By
Statute

In a similar vein, Congress has since 1884 repeatedly
exercised its authority by enacting statutes that defined
the breadth of health care authorized for members of the
military and their dependents. See 23 Stat. 112 (1884)
(authorizing spending for medical care for the dependents
of active duty Army personnel when “practicable”). In
1929, for example, Congress authorized medical care for
Navy retirees at non-naval hospitals. See 45 Stat. 1090
(“The Secretary of the Navy may provide for the care and
treatment of naval patients on the active or retired list ...
entitled to treatment in naval hospitals in other
government hospitals when appropriate naval hospital
facilities are not available and the government agencies
having control of such other hospitals consent thereto.”’).
In addition, in 1943, Congress acted so as to limit the
hospitalization of dependents of active duty Navy

13a

members. See 57 Stat. 80, 81 (1943) (authorizing
hospitalization for dependents of Navy and Marine Corps
personnel “only for acute medical and surgical conditions,
exclusive of nervous, mental, or contagious diseases or
those requiring domiciliary care”).

In 1956, Congress began a series of legislative acts that
have formed the basis for modern-day retired military
medical care. The three-fold purpose of the medical care
program for retirees is best explained by the Department
of Defense:

To provide incentives for armed forces personnel to
undertake military service and remain in that service for a full
career; to help ensure the availability of physically acceptable
and experienced personnel in time of national emergency; and
to provide military physicians and dentists exposure to the
total spectrum of demographicall diverse morbidity necessary
to support professional training programs and ensure
professional satisfaction for a medical service career.

Office of the Secretary of Defense. United States
Department of Defense, Military Compensation Background
Papers: Compensation Elements and Related Manpower Cost
Items. Their Purposes and Legislative Backgrounds at 609
(Sth ed. 1996). The Dependents’ Medical Care Act of 1956,
70 Stat. 250, 253 (1956), (“the 1956 Act”) was intended in
part “to provide a uniform and improved program of medical
care for the dependents of members of the uniformed
services.” H.R. Rep. No. 84-1805 at 1 (1956). This Act
expressly included conditional health care for retirees:
“a member or former member of a uniformed service who is
entitled to retired . . . pay may, upon request, be given
medical and dental care in any facility of any uniformed
service subject to the availability of space and facilities and
the capabilities of the medical and dental staff.” 10 U.S.C.
§ 1074(b) (1956) (emphases added). Thus, military retirees
and their dependents were given “a contingent right to care in

l4a

military medical facilities .... 10 U.S.C. § 1074(b) (retirees)
and § 1076(b) (dependents or survivors of retired members).”
Military Compensation Background Papers at 609 (emphasis
added).

A mere ten years later, in 1966, Congress revisited the
issue of retiree medical care when it amended the provisions
of Title 10 dealing with health care for (among others)
retirees and their dependents. In so doing, Congress granted
the authority to the Department of Defense to contract for the
provision of civilian health care for these groups (resulting in
the Civilian Health and Medical Program for the Uniformed
Services—CHAMPUS). /d. Indeed, in recommending this
amendment, the Secretary of Defense explained the need for
the legislation in view of there being insufficient space
available care for retirees in military facilities:

The purpose of the proposed legislation is to provide a
program of health benefits equally available to all retired
members of the uniformed services and their dependents.
Such a program is required to provide equitable benefits
to our rapidly increasing retired population. In future
years, these benefits must increasingly be provided by
civilian institutions due to the declining coverage of
space-available care in military facilities.

H.R. Rep. No. 89-1407, at 27 (emphasis added). The
House Committee on Armed Services echoed this concern,
emphasizing the “moral obligation of the government to
provide care in retirement to the military man and his
family.” Jd. at 23. Indeed, as recognition of this moral
obligation, the Committee substantially agreed with the
conclusion of a study commissioned by the Department of
Defense that while “the Government has no absolute legal
obligation to provide [health care in military facilities,] . . .
stated and implied promises of medical care following
retirement, both written and oral, . . . were for many years 2
standard part of personnel recruitment and retention efforts.”

lSa

Military Hospital Construction and Utilization Policies.
Report of the Special Subcommittee on Construction of
Military Hospital Facilities of the House Committee on
Armed Services at 10362 (Sept. 30, 1964) (emphasis added).
Thus, Congress was concerned with keeping the promise to
provide medical care for retirees and felt that it did so by
authorizing a program such as CHAMPUS, which would
bring retirees under an insurance program while retaining the
concept of space-available care in military facilities for
retirees.

CHAMPUS guaranteed retirees who were not yet entitled
to Medicare benefits access to authorized health services from
civilian sources as an alternative to care from military
facilities. Military Compensation Background Papers, at 609-
10. Of significance is that CHAMPUS was not a “free”
program:

By law, CHAMPUS is a cost-sharing program with the
retiree responsible, in the case of outpatient services, for a
deductible [which increases over time] . . . together with
[a percentage] of all allowed charges for “inpatient care.” The
Government pays the balance of the allowed charges for
authorized care, i.e., 75 percent of the allowed charges,
provided that a retiree or a retiree’s family group of two or
more persons may not be required to pay a total of [an
amount which increases over time] for health care received
under CHAMPUS during any fiscal year. 10 U.S.C.

§ 1086(b)(4).

Id. (footnote omitted). Thus, because the very program
Congress enacted in part for the retirees’ benefit was never
“free,” it is clear that Congress never intended health care for
retired career personnel to be without cost to the retirees.

Following yet another examination of health care for
retirees, in 1986, Congress enacted 10 U.S.C. §§ 1097, 1099
to further improve the health care system for service

l6a

members. This legislation provided the authority for the
military’s eventual implementation of TRICARE in the early
1990s, which offered CHAMPUS-eligible beneficiaries
(retirees under 65 years of age) a choice among a health
maintenance organization-type program, a preferred provider
network program, and CHAMPUS benefits. See 10 U.S.C.
§§ 1097, 1099 (1986). In order to stimulate enrollment in
TRICARE Prime, Congress amended section 1097 in 1996, to
provide that “the Secretary shall, as an incentive for
enrollment, establish reasonable preferences for services in
facilities of the uniformed services for covered beneficiaries
enrolled in any program established under, or operating in
connection with, any contract under this section.” 10 U.S.C.
§ 1097(c) (Supp. II 1996). Because TRICARE Prime was
limited to CHAMPUS-eligible beneficiaries, the priority
access requirement had the effect of reducing space-available
care for Medicare-eligible (65 years and over) retirees and
their dependents. Congress then took steps to ameliorate this
effect. For example, in 1997, it enacted the “Medicare
subvention demonstration project for military retirees,” which
provided for Medicare funding of a Department of Defense-
sponsored program similar to TRICARE Prime. See 42
U.S.C. § 1395ggg (Supp. III 1994). Then, in 1998, Congress
| acted again, adopting demonstration projects for Medicare-
eligible Department of Defense beneficiaries. See National
Defense Authorization Act for Fiscal Year 1999, Pub. L. No.
105-261, §§ 721-723. These projects were the Federal
Employees Health Benefits Program Demonstration Project;
TRICARE as a Supplement to Medicare; and the Pharmacy
Redesign Implementation. Most recently, of course, Congress
exercised its authority over health care for retired military
members by introducing TRICARE For Life, which provides
a pharmacy services program for Medicare-eligible
beneficiaries and authorizes Medicare-eligible beneficiaries
who enroll in Medicare Part B to participate in CHAMPUS.
See Pub. L. No. 106-398, § 712 (2000).

LED S LL REM Te

17a

While Congress has legislated extensively in the realm of
military health care, as the history above indicates, not once
has it statutorily authorized the secretaries of the military
departments to contract with recruits for health benefit
entitlements. Compare, e.g., California v. United States, 271
F.3d 1377 (Fed. Cir. 2001) (wherein Congress granted the
Secretary of the Interior the express authority to contract with
the State of California regarding certain water projects);
48 C.F.R. § 1.601 (vesting the “agency head” with express
“authority and responsibility to contract for authorized
supplies and services” and mandating that only contracting
officers may enter into contracts on behalf of the
government). Of course, had Congress legislated that the
military secretaries could contract with recruits for specific
health care benefits, the situation would be different.
However, because Congress (1) has enacted statutes for over
100 years that govern the level and availability of health care
benefits for active and retired members of the armed services
and their dependents; and (2) has never provided furids for
contracts made by the secretary with recruits to grant health
care, the inescapable conclusion is that Congress simply did
not intend to delegate its authority over health care benefits
for military members. Rather, it intended to occupy the entire
field. In that context, one cannot reasonably infer that by
empowering service secretaries to run_ their respective
departments, Congress was silently authorizing them to grant
health care benefits via oral promises to recruits by the
service’s recruiters.

B The Supreme Court Has Ruled that Military Pay and
Benefit Entitlements are Controlled by Statute, Not Contract,
as Has Our Court, and These Rulings are Based in Sound and
Consistent Logic

The Supreme Court has recognized the irrelevance of
contract law for members of the military many times, Stating,
for example, that “common-law rules governing private

18a

contracts have no place in the area of military pay.” Bell v.
United States, 366 U.S. 393, 401, 6 L. Ed. 2d 365, 81 S. Ct.
1230 (1961). This is true even though recruiter and recruit
may each sign an enlistment contract agreeing to its contents;
the recruit’s entitlement to basic pay is simply not governed
by this contract, but by statute. See id. Accordingly, in Bell,
the Supreme Court determined that even though an enlisted
soldier captured in the war had espoused communism, called
the President a “traitor,” aided his captors as a prisoner of war
and thereby allegedly “breached” his enlistment contract, he
was still entitled to his basic pay for as long as he was a
member of the military. /d. at 401-02. In short, the Court
reasoned, the pre-existing statute—not the enlistment
contract—governed the soldier’s right to basic pay. /d. at
402. And so even though a solider “may violate his contract
obligations, his status as a soldier is unchanged”;
consequently, as a “soldier,” he was entitled to all the benefits
prescribed by statute, including his statutorily-mandated basic
pay. /d.; see also United States v. Larionoff; 431 U.S. 864,
869, 53 L. Ed. 2d 48, 97 S. Ct. 2150 (1977) (stating in a
bonus pay case that, “the rights of the affected service
members must be determined by reference to the [relevant
statutes and regulations] rather than to ordinary contract
principles”).

The doctrine that statutes are the exclusive source of law
governing the compensation rights of members of the military
for pensions as well as pay appears in Court opinions as early
as 1856. In Walton v. Cotton, 60 U.S. 355, 357, 15 L. Ed. 658
(1856), the Court explained that to determine who qualifies as
beneficiaries of a deceased revolutionary war captain’s
pension “the case turns upon the construction of [the!
statutes” pertaining to the pensions and not upon any other
source of law. This understanding also prevails in subsequent
cases, with the Court quoting Walton as the source for the
rule that only congressional acts determine compensation of
soldiers. United States v. Teller, 107 U.S. 64, 68, 27 L. Ed.

ee a ee a ee Se ee ee ee ee ee

em Pe ee ee

ee REE TS SA, SOR |

er ee er nr ae

19a

352, 2 S. Ct. 39 (1883) (“military pensions are the bounties of
the government, which Congress has the right to give,
withhold, distribute, or recall at its discretion”).® See also
Frisbie v. United States, 157 U.S. 160, 166, 39 L. Ed. 657, 15
S. Ct. 586 (1895) (quoting the same rule as the basis for its
analysis that statute, not contract law, governs the entire
administration of military pensions, and further holding that
statute supercedes even where third party agents have
contracted independently with pension beneficiaries). While
the post-Walton cases do not offer any independent
justification for the doctrine, they are explicit about the
statutory source for their decisions and the rejection of other
legal bases in their analysis.

As mentioned above, this principle that compensation is
controlled by statute has been applied specifically to pensions
and hospitalization benefits for soldiers, thus, illustrating not
only the exclusive role of statutes in determining military
personnel’s compensation rights, but also touching on rights
akin to those claimed by the plaintiffs in this case. In Lynch vy.
United States, 292 U.S. 571, 577, 78 L. Ed. 1434, 54 S. Ct.
840 (1934), the Supreme Court explained that “pensions,
compensation allowances, and privileges are gratuities. They
involve no agreement of parties; and the grant of them creates
no vested right. The benefits conferred by gratuities may be
redistributed or withdrawn at any time in the discretion of
Congress.” Jd. In so doing, the Court opined that while war-
risk insurance resembled pensions, hospitalization and other
privileges statutorily afforded to former members of the
military, the war-risk insurance differed in that its policies

* The case held that a pensioner was deemed not to be entitled to a

| general statutory pension in addition to an earlier-created pension (solely

for the particular pensioner’s benefit by a special act of Congress) because

| the second, more general statute would supercede the first statute; no

vested rights could be retained from the first statute if the second statute
applied).

20a

arose not from statutes, but from written contracts. The
authority for the program was set forth in congressional
action separate from the government’s role as_ the
commanding power of the armed forces (“war risk insurance
was devised in the hope that it would, in large measure, avoid
the necessity of granting pensions”). /d. at 576 n.2. It was
only because of this difference that the war-risk insurance
contracts created vested rights, whereas pensions and hospital
privileges were mere statutory gratuities, not vested contract
rights, so Congress could revoke or expand them at any time.
See id. at 577; United States v. Teller, 107 U.S. 64, 68, 27 L.
Ed. 352, 2 S. Ct. 39 (1883) (“No pensioner has a vested legal
right to his pension’). Another way to understand why the
government’s position with respect to obligations incurred by
enlistment contracts differs from the contracts at issue in
Lynch is that, as the Court in Bell explains, “enlistment is a
contract; but it is one of those contracts which changes in
status; * * * [and a soldier’s] relations to the State and the
public are changed.” 366 U.S. at 402. In Bell the soldiers’
potential breach was at issue but the rule that the enlistment
contract gives rise to a relationship not governed by contract
or that the contract somehow merges with the applicable
statutes is stated generally and fits with the Lynch concept
that compensation of soldiers is different from other contracts
in which a soldier and the government happen to be
contracting parties, but their roles as contracting parties are
not relevant to the enlistment or military service context.
Bell, 366 U.S. at 402

The Supreme Court has not explicitly applied these
principles to comprehensive medical benefit entitlements for
military retirees or (as in this case) to an asserted implied-in-
fact contract grounded on the conceded promises of full free
lifetime medical care. In our view, however, full free lifetime
medical care is merely a form of pension, a benefit received
as deferred compensation upon retirement in lieu of
additional cash. See Black’s Law Dictionary 1134 (6th ed.)

2la

(defining “pension” as a “retirement benefit paid regularly
(normally monthly), with the amount of such based generally
on length of employment and amount of wages or salary of
pensioner. Deferred compensation for services rendered.”).
We see no meaningful difference between the retirement
benefits that the Supreme Court has identified as beyond the
reach of contracts and the full free medical care at issue in
this case and, as a result, will apply the doctrine that was the
basis for the earlier Supreme Court cases. The plaintiffs are
implicitly claiming not only that the recruiters promised them
lifetime, free medical care, and that everyone involved
assumed that there would be enough military hospitals and
clinics to serve the servicemen at any age, retired or not, but
also that there was a contingent promise that if there would
ever be an insufficient number of medical facilities, the
government would buy civilian health insurance for the
servicemen to make up for the deficiency. In other words, the
plaintiffs claim a right to comprehensive benefits. Moreover,
even if one were to consider the asserted medical benefit
entitlement more as bargained-for, direct compensation for
services rendered rather than gratuities, because the plaintiffs
are military personnel, the vesting of any rights would be
governed by statute, rather than by contract as the plaintiffs
argue. See Larionoff, 431 U.S. at 869 n.7 (referring to the
limitation that the soldiers’ rights to reenlistment bonuses
only vested because the statute in question made the soldiers
eligible for the statutory bonuses and caused the rights to
vest, not because of contract principles. Contract principles
would have engendered a right to a specific amount of
money, whereas a statutory bonus is calculated according to a
Statute and may be more flexible and dependent on multiple
variables). The case law shows that where Congress has
legislated military pay or benefits, a service secretary cannot
contract (even if it may be true that in the absence of
congressional action, and with congressional authority, a
secretary could have contracted with respect to the pay or

22a

benefits). So we must conclude that there were no valid
contracts in this case.

This conclusion also accords with our own prior decisions
and thus preserves stability. Our case law has reiterated the
Supreme Court’s language that Congress “may prospectively
reduce the pay of members of the Armed Forces, even if that
reduction deprived members of benefits they had expected to
be able to earn.” Wyatt v. United States, 2 F.3d 398, 401 (Fed.
Cir. 1993) (citations omitted); cf. Andrews v. United States,
175 Ct. Cl. 561, 563 (1966) (recognizing the “strong authority
for the counter-proposition that officers have no vested or
contractual right to any particular amount of retired pay’)
(citing Bell, 366 U.S. at 401). Indeed, we have stated that
[federal employees’] entitlement to retirement benefits must
be determined by reference to the statute and regulations
governing these benefits, rather than to ordinary contract
principles. [And] applying this doctrine . . . courts have
consistently refused to give effect to government-fostered
expectations that, had they arisen in the private sector, might
well have formed the basis for a contract or an estoppel.

Zucker v. United States, 758 F.2d 637, 640 (Fed. Cir.
1985). Our court again followed this line of precedent in
Sebastain v. United States, 185 F.3d 1368 (Fed. Cir. 1999). 4
There, elderly military retirees, comparable to plaintiffs here,
sought just compensation under the Fifth Amendment’s
Takings Clause for the government’s failure to provide
promised free lifetime medical care. See Sebastain, 185 F.3d
at 1370. Adopting the settled principle that the right to
military pay “must be determined by reference to the
[governing] statutes and regulations . . . rather than to

” While the theory of recovery in this case differs from the theory of
recovery advanced in Sebastain, we emphasize that the panel’s analysis
concerning the inapplicability of contract law was the same and, we think,
correct.

23a

Ordinary contract principles,” and applying it to retirement
benefits, including medical care, our analysis “looked to the
governing statutes and regulations to ascertain whether the
Retirees have an unconditional right to lifetime free medical
care.” Sebastain, 185 F.3d at 137] (citations omitted)
(emphasis added); see also Goodley v. United States, 194 Ct.
Cl. 829, 441 F.2d 1175, 1178 (Ct. Cl. 1971) (explaining that
for a Navy reservist “there is no vested or contractual right to
retired pay, which is dependent upon Statutory right rather
than upon common law rules governing private contracts’’):
Pate v. United States, 78 Ct. Cl. 395, 400 (1933)
(“Retirement pay and compensation for injuries received in
line of duty, like pensions are bounties of the Government,
which Congress has the right to give, withhold, distribute, or
recall, at its discretion.”) (citations and internal quotation
marks omitted).

In addition, Congress could hardly have intended a contract
regime for military health benefits because that would have
been inconsistent with the entire system for compensating all
federal employees. [HN7] Federal employees, both military
and civilian, serve by appointment, not contract, and their
rights to compensation are a matter of “legal status” even
where recruitment agreements are made. See Zucker, 758
F.2d at 640; see also Chu v. United States, 773 F.2d 1226,
1227-28 (Fed. Cir. 1985) (discussing the plight of Reserve
Officers in the Commissioned Corps of the Public Health
Service who alleged a breach of contract by the government
of its agreement to provide residency training at its expense
and stating “{it is a] well-established Principle that, absent
specific legislation, federal employees derive the benefits and
emoluments of their positions from appointment rather than
from any contractual or quasi-contractual relationship with
the government”). “In other words, [federal employees’ ]

24a

758 F.2d at 640. This logically follows from the well-
established principle that “public employment does not, * * *
give rise to a contractual relationship in the conventional
sense.” Therefore, plaintiff may not base his theory of
recovery on contract law since he was a federal employee.
Federal officials who by act or word generate expectations in
the persons they employ, and then disappoint them, do not
ipso facto create a contract liability running from the Federal
Government to the employee, as they might if the employer
were not the government.

Shaw v. United States, 226 Ct. Cl. 240, 640 F.2d 1254,
1260 (Ct. Cl. 1981) (citations omitted).

Adhering to our own long-standing precedent and clear
guidance from Supreme Court decisions, then, the plaintiffs’
claim for breach of an implied-in-fact contract for retirement
health benefits is defeated by the principle that statutes
govern entitlement to these benefits, not any contracts
between the recruit and the government.”

C Cases Finding an Enforceable Contract Between the
Service and a Recruit, e.g., a Promise for Specific Military
Training, Are Inapplicable to Retirement Health Care
Entitlements

While the Supreme Court has made clear that “common-
law rules governing private contracts have no place in the
area of military pay,” Bell, 366 U.S at 401, our predecessor
court enforced contract claims based on_ enlistment
agreements specifying non-pay benefits promised in writing
to recruits. See, e.g., Grulke v. United States, 228 Ct. Cl. 720
(1981); DeCrane v. United States, 231 Ct. Cl. 951 (1982).
In these cases, the recruits alleged that the government
breached the written and signed enlistment agreements which

'° The principle of the Bell line of Supreme Court cases may also be
one of the principles reflected in 5 U.S.C. § 70. See note 12, infra.

25a

promised them specific training or duty assignment. In
contrast to Bell, these cases do not involve military pay or
retirement benefits. Thus, Grulke and DeCrane are not in
conflict with established Supreme Court case law that
military pay and pay-related benefits cannot ever be a matter
of contract, but must be governed exclusively by statutes and
regulations.

In Grulke, the plaintiff-nurse enlisted in the Army pursuant
to regulations that allowed her to select the nature and
duration of the specialized medical training she wanted
following her basic military training. She chose training as an
operating room specialist. Subsequently, however, Grulke
exercised her option to receive a voluniary discharge after
becoming pregnant, thus prematurely concluding her military
service. She later sued, alleging that the six weeks of training
she received as an operating room specialist was short of the
18 weeks of training promised to her in her enlistment
agreement that was based on and _ authorized by the
regulations. Grulke, 228 Ct. Cl. at 721-22. Finding that
Grulke’s enlistment contract was enforceable, the Court of
Claims took pains to distinguish her case from those in which
the plaintiff claimed a “right to payment for military services
rendered which would be governed by statute or regulation.”
Id. at 722. The court explained that rather than seeking pay
afforded by statute but withheld, Grulke was actually
claiming a right “for ‘actual, compensatory, special and
punitive damage,’ for breach of contract.” /d.

In DeCrane, our predecessor court again found that
contract law could govern in the context of executed
enlistment agreements when former servicemen sought
damages based on the government’s failure to give them the
training they had been promised upon enlistment. 231 Ct. Cl.
at 952. The court’s terse, two-page opinion largely adopted
the analysis of Grulke. See id. (“In at least three prior cases
we have rejected the government’s argument that we have no

26a

jurisdiction over a suit claiming that the government breached
an enlistment contract because it failed to provide the training
it allegedly promised the serviceman he would receive. We
discussed the issue fully in Grulke.”) (citations omitted).

Accordingly, Congress’ authority and the various courts’
(i.e., the Supreme Court, our court, and our predecessor court)
consistent interpretation thereof demonstrate that military
health care benefits as a form of compensation have long
been exclusively a creature of statute, not contract.
Consequently, the discussions with recruiters could not have
formed binding contracts with the government at the time
Schism and Reinlie joined the Air Force. Their claim for
breach of an implied-in-fact contract that would give them
both an entitlement to lifetime free medical care at military
facilities and an entitlement to civilian health insurance for
any insufficiency in those military facilities must fail as a
matter of law.

On this basis alone, we could dispose of this appeal. To
respond to the plaintiffs’ contract-based arguments, however,
we address below why their claim must fail even assuming
that contracts could govern the asserted entitlement to
medical benefits for military retirees and their dependents.

II]. Even Assuming a Contract Law Analysis Were
Proper, Plaintiffs Still Do Not Have a Valid Contract
Because the Recruiters Lacked Actual Authority to
Negotiate Entitlernents for Full, Free Lifetime Health
Care Benefits

As explained above, the retirees’ claim is foreclosed by the
principle, well established by Supreme Court precedent, that
federal retirement benefits such as health care are creatures
strictly of legislative grace and thus cannot be granted by
contract. Even assuming that a contract analysis were
appropriate, however, the retirees’ claim still cannot
withstand summary judgment because the Supreme Court has

OO ee Oe ea ee

27a

likewise made clear that the sole statute relied on by the
plaintiffs, 5 U.S.C. § 301, authorizes only “housekeeping”
matters like internal policies and procedures: it thus cannot
authorize the creation of a benefit entitlement via contracts.

As stated earlier, plaintiffs seek to recover solely upon a
theory alleging breach of an implied-in-fact contract,
asserting that the necessity they pay Medicare and premiums,
along with those for supplemental insurance in order to have
full health care coverage, breached the promise of full and
free lifetime healthcare. ''

Despite the thorough briefing in this case, plaintiffs never
specify exactly what was included within the broad promise
to them. Both sides agree that the retirees were promised
“free lifetime medical care.” See, e.g., Complaint at 2 (“That
all of the World War II and Korean class veterans were
promised full post retirement medical care for themselves and
their dependents in military hospitals.) (emphasis added);
Appellants’ Brief at 1 (“The recruiters promised them free
lifetime medical care if they served at least twenty years.”’);
Appellee’s Brief at 2 (“Plaintiffs . . . filed an action
contending that the government induced them to serve in the
military with the promise that, upon retirement, they and their
dependents would be entitled to free, lifetime medical care.”);
Appellants’ Reply Brief at 2 (“By instituting Tri-Care, the
government breached its implied contract to provide Schism
and Reinlie with free medical care for life.”). What that
promise encompasses, however, the retirees never explicitly
articulate. Several times the retirees have referred to seeking

” Specifically, the plaintiffs allege that the United States breached its
contract with the plaintiffs “by revoking or limiting access to military
hospitals, in-patient and out-patient care, and medicines to plaintiffs and
those elderly retired veterans to the point that Plaintiffs have no care, or
are denied the care and free medications they were promised,” First
Amended Complaint at 3, and they did not surrender this position in their
briefs to this court or at oral argument. —

LT

28a

care only in military facilities. See, e.g., First Amended
Complaint at 2. If this was the extent of the promise, we fail
to see how it was breached at all. Indeed, retired military
members, regardless of age, were still entitled to free medical
treatment at military facilities on a space-available basis after
the implementation of Tricare in 1995. See 32 C.F.R.
§ 199.17(f)(1) (1995) (“Military Treatment Facility (MTF)
care. All nonenrollees (including beneficiaries not eligible to
enroll) continue to be eligible to receive care in military
treatment facilities on a space available basis.”) Military
Compensation Background Papers at 613 (“Even after they
become eligible for Social Security hospital insurance
benefits, retirees, their dependents, and survivors may receive
treatment at military medical facilities on a space-available
basis.””); Tricare Demonstrations Manual 1992 (“These dual-
eligible beneficiaries [eligible for both Medicare and Military
Health Services] do not have a Civilian Health and Medical
Program of the Uniformed Services (CHAMPUS)
entitlement, but are eligible for care in a [Military Treatment
Facility] on a space-available basis.”). Retirees were not
required to purchase Medicare Part B in order to continue to
receive medical treatment from military facilities on a space-
available basis. Because medical care remains available at
military facilities on a space available basis, the only logical
conclusion is that the promised “full,” free lifetime medical
care meant that if space was no longer available at base
hospitals, as alleged, then Congress was bound by the
contracts to pay for health insurance coverage for care by
civilian doctors. That is, “free care” meant the retirees, even
when over 65 years of age and entitled only to hospitalization
insurance coverage under Medicare Part A (unpaid), would
not have to spend their own money to pay for care from
civilian doctors. Similarly, as to medications, once they were
no longer provided free at base hospitals and clinics, then
Congress was bound to pay for insurance coverage so that

™ Se ee eee Se ee oe eS ee eS a ee

29a

when ordered at civilian pharmacies, the medications would
be free.

A binding implied-in-fact contract arises between a private
party and the government upon proof by the person of: (1)
mutuality of intent to contract; (2) consideration; (3) an
unambiguous offer and acceptance, and (4) “actual authority”
on the part of the government’s representative to bind the
government.

City of Cincinnati v. United States, 153 F.3d 1375, 1377
(Fed. Cir. 1998). As to “actual authority,” the Supreme Court
has recognized that any private party entering into a contract
with the government assumes the risk of having accurately
ascertained that he who purports to act for the government
does in fact act within the bounds of his authority. Fed. Crop
Ins. Corp. v. Merrill, 332 U.S. 380, 384, 92 L. Ed. 10, 68 S.
Ct. 1 (1947); accord CACTI, Inc. v. Stone, 990 F.2d 1233, 1236
(Fed. Cir. 1993) (“A contractor who enters into an
arrangement with an agent of the government bears the risk
that the agent is acting outside the bounds of his authority,
even when the agent himself was unaware of the limitations
on his authority.”). In this case, the thrust of the parties’
arguments is that under § 301 the Air Force recruiters had
actual authority to bind the government with their oral
promises. See, e.g., Fed. Crop Ins. Corp., 332 U.S. at 384
(explaining that a government representative’s authority can
be “explicitly defined by Congress or be limited by delegated
legislation, properly exercised through the rule-making
power.”). We hold they did not.

A Plaintiffs’ Written Enlistment Contracts Preclude
Implied-in-Fact Contracts Based on Oral Promises

We note at the outset that the retirees’ implied-in-fact
contract argument fails to take into account their written
enlistment agreements. It is well settled that the existence of
an express contract precludes the existence of an implied-in-

30a

fact contract dealing with the same subject matter, unless the
implied contract is entirely unrelated to the express contract.
E.g., Atlas Corp. v. United States, 895 F.2d 745, 754-55 (Fed.
Cir. 1990). Along those same lines, no citation is necessary to
support the vitality of the parol evidence rule: barring certain
limited exceptions (e.g., fraud), a party to a written contract
cannot supplement or interpret that agreement with oral or
parol statements that conflict with, supplant, or controvert the
language of the written agreement itself.

As discussed above, Reinlie and Schism agreed in an
express, written contract to be bound by military regulations
and statutes. Those regulations and statutes expressly address
health care for military retirees, and provide expressly that
retirees and their dependents were not entitled to full free
lifetime medical care. Accordingly, the retirees’ contract
claim is foreclosed because an “implied-in-fact contract
cannot exist if an express contract already covers the same
subject matter.” Trauma Servs. Group v. United States, 104
F.3d 1321, 1326 (Fed. Cir. 1997).

B 5 U.S.C. § 301 Did Not Authorize the Secretary to Grant
an Entitlement to Full Free Lifetime Medical Care for
Retirees

Even assuming that retirement benefits for veterans did not
depend on legislative grace, Schism’s argument that 5 U.S.C.
§ 301 supplied the requisite authority for these health care
entitlements still cannot avoid summary judgment. Plaintiffs
argue that the broad language of 5 U.S.C. § 301 conferred
authority on the secretaries of the military departments to
control recruitment in their departments, which included
directing recruiters to promise free lifetime medical care. The
government responds that 5 U.S.C. § 301 is merely a
“housekeeping” statute that does not authorize the creation of
a substantive right such as an “entitlement to free lifetime
medical care.” Accordingly, the issue turns on whether
5 U.S.C. § 301 impliedly authorized military recruiters to

3la

promise free lifetime health care at the time. We agree with
the government’s interpretation of the statute and hold that it
does not.

5 U.S.C. § 301 states in relevant part:
Departmental regulations

The head of an Executive department or military department
may prescribe regulations for the government of his
department, the conduct of its employees, the distribution and
performance of its business, and the custody, use, and
preservation of its records, papers, and property.

This statute is discussed in greatest detail in Chrysler Corp.
v. Brown, 441 U.S. 281, 309, 60 L. Ed. 2d 208, 99 S. Ct. 1705
(1979), where the Supreme Court described it as a
“housekeeping _ statute.” The key point about _ this
understanding of § 301 is that it predates the recruitment
period of the early 1950s. The Court recognized that the
“antecedents of § 301 go back to the beginning of the
Republic, when statutes were enacted to give heads of early
Government departments authority to govern internal
departmental affairs. Those laws were consolidated into one
Statute in 1874, even though the current version of the statute
was enacted in 1958.” /d. at 309. And so, said the Court,
“given this long and relatively uncontroversial history, and
the terms of the statute itself, [5 U.S.C. § 301] seems to be
simply a grant of authority to the agency to regulate its own
affairs. * * * [t is indeed a ‘housekeeping statute,’ authorizing
what the APA terms ‘rules of agency organization procedure
or practice’ as opposed to ‘substantive rules.“ /d. at 309-10
(emphases added). See also Sebastain v. United States, 185
F.3d 1368, 1371 (Fed. Cir. 1999) (noting the Supreme
Court’s view of 5 U.S.C. § 301 as merely a “housekeeping
statute” and concluding that the statute did not authorize the
government to promise and provide free lifetime medical care
for retired veterans); United States v. McDonnell Douglas

32a

. Corp., (noting that Congress had looked carefully at § 301 in
1958 and the subcommittee had “‘unanimously agreed that [
§ 301] originally was adopted in 1789 to provide for the day-
to-day office housekeeping in the Government departments,’
and that attempts to construe it as something more was
‘misuse’ that ‘twisted’ the statute”) (quoting H.R. Rep. No.
85-1461, at 7 (1958); United States v. Am. Prod. Indus., Inc.,
58 F.3d 404, 407 (9th Cir. 1995) (“ 5 U.S.C. § 301, has been
deemed by the Supreme Court to be a ‘housekeeping
statute’); Smith v. Cromer, 159 F.3d 875, 878 (4th Cir. 1998)
(same); United States v. Henson, 123 F.3d 1226, 1237 (9th
Cir. 1997) (same); Houston Bus. Journal, Inc. v. Office of the
Comptroller of Currency, United States Dep’t of Treasury,
318 U.S. App. D.C. 214, 86 F.3d 1208, 1210 (D.C. Cir. 1996)
(same); General Motors Corp. v. Marshall, 654 F.2d 294, 295
(4th Cir. 1981) (same); Parkridge Hosp., Inc. v. Califano, 625
F.2d 719, 721 (6th Cir. 1980) (same); In re Bankers Trust
Co., 61 F.3d 465, 470 (6th Cir. 1995) (same); Davis Enters. v.
United States Envt’l Prot. Agency, 877 F.2d 1181, 1184 (3d
Cir. 1989) (“The EPA’s authority to govern its internal affairs
is derived from 5 U.S.C. § 301... .”); Chasse v. Chasen, 595
F.2d 591, 593 (Ist Cir. 1979) (opining that three statutes,
including 5 U.S.C. § 301, did not provide “statutory authority
to issue a policy pronouncement . . . which would create a
right enforceable in federal court”); H.R. Rep. No. 85-1416,
at 1 (1958) (“The law has been called an office
‘housekeeping’ statute, enacted to help General Washington
get his administration underway by spelling out the authority
for executive officials to set up offices and file government
documents”); United States v. George, 228 U.S. 14, 20, 57 L.
Ed. 712, 33 S. Ct. 412 (1913) (concluding that a group of
statutes, including a predecessor to 5 U.S.C. § 301, “confer
administrative power only”).

Therefore, not only does § 301 merely authorize
“housekeeping,” but also there is no way that it could have
been reasonably believed at that time that it did more than

i
|

ai
¥.
*

33a

that. A reasonable lawyer advising the Secretar y of Defense
or any of the service secretaries at the time could not have
claimed that § 301 created the right to make promises of
lifetime health care (beyond space available care) because
there were other statutes controlling retiree care at the time.
See 23 Stat. 112 (1884) (authorizing spending for medical
care for the dependents of active duty Army personnel when
“practicable”); 45 Stat. 1090 (1929) (authorizing medical care
for Navy retirees at non-naval hospitals when naval hospital
facilities are not available and the relevant government
agencies consent); 57 Stat. 80, 81 (1943) (authorizing
hospitalization for dependents of Navy and Marine Corps
personnel “only for acute medical and surgical conditions,
exclusive of nervous, mental, or contagious diseases or those
requiring domiciliary care’).

Of course, the language explaining § 301 merely begs the
question: what does a “housekeeping” statute authorize?
Whatever else it may allow, the Supreme Court made clear in
Chrysler that § 301 does not alone provide for the creation of
rights, consistent with the principles discussed above that
only statutes may determine a federal employee’s pay and
benefits. Chrysler involved a “reverse” Freedom of
Information Act (“FOIA”) claim where a private party sought
to enjoin agency disclosure of confidential records on the
ground that it conflicted with the FOIA and the Trade Secrets
Act. Chrysler,441 U.S. at 285. Section 301 was relevant to
the case because in order for employees of a government
agency to avoid criminal sanctions for disclosing certain
classes of information submitted to a government agency,
including trade secrets and confidential statistical data, the
disclosure must be “authorized by law.” 18 U.S.C. § 1905.
The agency argued in Chrysler that § 301 was the requisite
authorization by law that permitted them to disclose what
would otherwise have fallen under the Trade Secrets Act.
Chrysler, 441 U.S. at 308-09. The Supreme Court directly
contradicted the argument and said § 301 provided no such

34a

authority because § 301 authorized no_ substantive
rulemaking. /d. at 310. While the decision focused on the
second sentence of § 301 (“This section does not authorize
withholding information from the public or limiting the
availability of records to the public.”’), the Court did not limit
its analysis to that sentence only. To the contrary, the Court
consistently referred to the statute as a whole in its analysis.
See id. at 281.

It seems clear to us that § 301 merely empowers an agency,
in this case a military department, to regulate its day-to-day
internal operations. But a housekeeping statute that authorizes
rules of agency organization, procedure or practice and not
substantive rules cannot confer a right to, or otherwise
authorize the promise of a right or entitlement to, free lifetime
medical care. Indeed, the Court stated in Chrysler that
“substantive” rules referred to rules “affecting individual
rights and obligations.” /d. at 302. So, saying that § 301 could
by itself vest service secretaries and their recruiters with the
authority to make binding promises of lifetime free medical
care would in effect mean that, contrary to the Supreme
Court’s interpretation, § 301 could alone serve as the basis,
for the creation of such substantive rights. As more fully
explained below, we simply cannot read § 301 as conferring
that authority.

1 Despite § 301’s Role In Earlier Health Care for Retirees,
It Cannot Authorize Service Secretaries to Grant Full Free
Lifetime Medical Care

Plaintiffs assert that because the government has conceded
that § 301 is the statute that authorized early health care plans
for military retirees, those which require space availability in
order for a retiree to receive health care, it logically follows
that § 301 also authorizes a guarantee of full free lifetime
medical care as an inducement to recruits. According to the
retirees, there is no basis for a distinction between the

35a

authority necessary for the two types of medical care
programs.

The government admits that 5 U.S.C. § 301 and “its
precursors authorized appropriate military officials to
prescribe rules that allowed retirees and their dependents to
receive free medical care in existing military facilities on a
space available basis.” (emphases added). See AR 40-505
P2(b)(2) (1934) (allowing use of Army hospitals to Army
retirees “provided sufficient accommodations are available
for their treatment”); AR 40-590 P6(b)(1) (1935) (limiting
availability of care from Army hospitals to “retired personnel
on inactive status” who will benefit “by hospitalization for a
reasonable time,” not those who “merely” require
“domiciliary care by reason of age or chronic invalidism”);
Air Force Regulation AFR 160-73 P14(h) (1951) (limiting
hospitalization of retired Air Force personnel to those “who
will be benefited by hospitalization for a reasonable length of
time”); 1943 MEDMAN § 3168 (stating “Retired officers and
enlisted men, inactive, are not entitled to civilian medical and
hospital treatment at Government expense. They are entitled
to treatment in naval hospitals by naval medical officers when
available upon application . . . .”). But we agree with the
government that a crucial difference exists between the
conditional care that § 301 and derivative regulations actually
provided for and the entitlement that the retirees assert.
Simply put, the earlier health care programs for retirees
provided free health care only on a space-available basis. By
contrast, the asserted absolute promise of free lifetime
medical care would create an entitlement to health care.
[HN15] While § 301 authorizes a military department to
prescribe administrative “regulations for the government of
[its] departments . . . and the custody [and] use... of . . . [its]
property,” 5 U.S.C. § 301, that language plainly does not
encompass the power to grant an_ entitlement—an
unconditioned, non-discretionary legal right to money. See
Black’s Law Dictionary 532 (6th ed. 1990) (defining

36a

“entitlement” as a “[right] to benefits, income or property
which may not be abridged without due process”).

We consider sympathetically the veterans’ position that,
because § 301 authorizes one type of health care, it
necessarily authorizes another. But that position ultimately
fails because of the important distinction between what each
health care plan guarantees a retired veteran, as well as the
additional statutory authority explicitly providing for
conditional medical care. First, we agree with the government
that 5 U.S.C. § 301 did not independently authorize
CHAMPUS-type benefits for retirees. Rather, 10 U.S.C.
§ 1086, enacted in 1966, provided the Department of Defense
with broad, explicit, and exclusive authority for providing
these benefits to retirees. See 10 U.S.C. § 1086 (establishing
the authority for the Department of Defense to contract for
health insurance for retirees under the same basis established
ten years earlier for active duty dependents by 10 U.S.C.
§ 1079 and further providing that a person who was entitled
to Medicare insurance would not be eligible for the insurance
program established for retirees, except for those benefits
established under the Department of Defense programs that
were not covered by Medicare). Thus, the government’s
argument continues, § 30i’s function is to provide
supplemental authority in recognition of the agency’s
decision to implement CHAMPUS through the Code of
Federal Regulations, rather than solely through the statutory
authority to contract for health care services. Indeed, such
reliance on 5 U.S.C. § 301 is not obscure, as it is often cited
in the Code of Federal Regulations, frequently in conjunction
with other statutes, as authority for regulations appearing in
the C.F.R. See, e.g., 19 C.F.R. § 351 (identifying 5 U.S.C.
§ 301 (among other statutes) as the source of the regulation’s
authority). This position is also consistent with the Supreme
Court’s interpretation of § 301 as discussed above.

37a

Even if we accepted the position that 5 U.S.C. § 301 alone
provided statutory authority for health care insurance for
retirees on a space-available basis, we still would reach the
same conclusion: 5 U.S.C. § 301 does not authorize full free
lifetime health care for retirees. First, § 301 never mentions
health care benefits at all. Second, § 301 only deals with an
agency’s internal governance. Permitting retirees to seek
health care from a pre-existing facility with available and
otherwise unengaged staff is simply managing an agency’s
existing resources. On the other hand, granting a lifetime
entitlement to health care obligates en agency to call in
additional staff or to create additional space whenever a
retiree seeks care, or to pay for civilian care. In other words,
it goes beyond mere internal or housekeeping matters and
creates substantive entitlements giving rise to judicially
enforceable rights. Thus, with the earlier health care plans
and regulations, the government guaranteed nothing as a
matter of right; a retiree only received care on a space-
available basis and, even then only if the commander of the
hospital approved it. Under the promises made by the
recruiters, however, the retirees claim a right to free treatment
regardless of the availability of money, space, or medical
personnel. The two scenarios are distinct:

one is contingent and the other is absolute. An entitlement
is an unconditional grant; it is a permanent, non-discretionary
right. The differences between the two types of health care
programs are clear, and they are dispositive.

A further indicator that 5 U.S.C. § 301 did not authorize
full free medical care for military retirees is Congress’
treatment of the subject. If § 301 contained the requisite
authority for health care for military retirees, no further
legislation would have been necessary. As explained above,
however, Congress has repeatedly legislated—including in
1956, 1966, and 1986—to provide health care insurance
coverage for retired military members. Even more important

38a

to the present case, every time that Congress dealt with the
retirees (starting in 1960), it enacted legislation that
authorized only conditional health care coverage for
retirees—that is, care provided only on a space-available
basis. See, e.g., 10 U.S.C. § 1086 (1966). Given that Congress
repeatedly legislated for conditional health care, it would be
illogical to conclude that § 301 would cover full health care
absent further congressional action.

Similarly, interpreting § 301 to authorize the recruiters’
promises of full free lifetime medical care would be
unreasonable when viewed in light of other statutes. For
example, 5 U.S.C. § 70’? and the Anti-Deficiency Act!?
placed preconditions on obligating or spending appropriated
funds. In effect, these two statutes limited both what the
recruiter could promise and what the military member could
receive. The recruiter, an officer or employee of the United
States government, arguably could not obligate the
government to spend monies that had not yet been

'2'5 U.S.C. § 70 (1946) (now codified as amended at 5 U.S.C. § 5536
(2000), § 70 at the time relevant to this case) concerns the receipt of any
pay, extra allowance, or other compensation by a federal employee in
exchange for any service in addition to his fixed salary, pay, or
emoluments:

§ 70. Extra Allowances

'? Later known as the Anti-Deficiency Act, the Act of Sept. 6, 1950,
Pub. L. No. 81-759, ch. 896 § 1211, 64 Stat. 595, 765 (amending R.S.
§ 3679 (1878)) (now codified as amended as the Anti-Deficiency Act, 31
U.S.C. § 1341 (2000)), provided, inter alia, at the time of the alleged
promises in this case that:

(a) No officer or employee of the United States shall make or
authorize an expenditure from or create or authorize an obligation
under any appropriation or fund in excess of the amount available
therein; nor shall any such officer or employee involve the
Government in any contract or other obligation, for the payment of
money for any purpose, in advance of appropriations made for such
purpose, unless such contract or obligation is authorized by law... .

39a

appropriated unless such contract or obligation was
authorized by law. And retired military members, because
their salary, pay or emoluments were fixed by statute or
regulation, could not receive any additional pay or other
additional compensation unless it was both authorized by law
and the appropriation therefore explicitly states that it is for
such additional pay, extra allowance, or compensation. To
decide this appeal, we need not define the exact contours of
5 U.S.C. § 301. What is clear is that its scope is not broad
enough to have provided authority to contract with recruits to
the military for free lifetime medical care so as to bind both
the Department of Defense and the Congress. And while we
do not independently base our decision in this case on 5
U.S.C. § 70 or the Anti-Deficiency Act, we note plaintiffs’
interpretation of § 301 as broad enough to have authorized the
recruiters to create a binding contract is in considerable
tension, if not conflict, with the language of 5 U.S.C. § 70
and the Anti-Deficiency Act. So although we need not and do
not decide the independent applicability of 5 U.S.C. § 70 or
the Anti-Deficiency Act, we do decide that, in light of those
two statutes, § 301 cannot be construed as broadly as the
plaintiffs argue.

No officer in any branch of the public service, or any other
person whose salary, pay or emoluments are fixed by law or
regulations, shall receive any additional pay, extra allowance,
or compensation, in any form whatever, for the disbursement
of public money, or for any other service or duty whatever,
unless the same is authorized by law, and the appropriation
therefore explicitly states that it is for such additional pay,
extra allowance, or compensation.

5 U.S.C. § 70 (1946) (emphases added). It should be noted
that we do not purport to decide whether § 70 would provide
independent grounds for our holding in this case although it
appears that § 70 may do so. We confine our decision to
relying on § 301 because our interpretation of § 301 compels

40a

our holding and the applicability of § 70 was neither relied on
by the district court, nor briefed to us by either party.

§ 1211, 64 Stat. at 765 (emphases added).

Finally, the plaintiffs have submitted evidence showing |

that the promises of free lifetime health care were made by
recruiters and that the recruiters were, in fact, encouraged by
superiors to tell potential recruits of this benefit.

See, e.g., Pentecost Aff. at | (Oct. 21, 1997). The plaintiffs
also provided excerpts from the Bluejackets Manual and the
Soldier’s Guide handbooks given to the members of the
United States Navy and Army, for example, as well as
various recruitment brochures from the military departments,
including one attached to the earlier-mentioned letter from
Secretary Forrestal. This evidence, plaintiffs argue, implies
that retired members with 20 or more years’ active duty did
have and do have the unconditional right to receive free
lifetime health care.

In our view, the evidence showing that recruiters had made
these promises in good faith to retirees like Schism would
likely be sufficient to avoid summary judgment—if the
Congress had granted the authority to make these promises in
the first place. Unfortunately for plaintiffs, however,
Congress has never authorized these promises.'* While we
are sympathetic to the plaintiffs’ position and acknowledge
the likelihood that plaintiffs believed these promises and
relied on them, the government is not legally bound to abide
by them. The recruiters lacked actual authority, meaning the
parties never formed a valid, binding contract.

14

In Sebastain, our court likewise examined 5 U.S.C.
§ 301 and determined that because it “stated nothing about health care,”
185 F.3d 1368, 1371, it could not provide authorization for the recruiters’
promises of free lifetime medical care.

4la

Cf. Office of Pers. Mgmt. v. Richmond, 496 U.S. 414, 416-
17, 110 L. Ed. 2d 387, 110 S. Ct. 2465 (1990) (holding that
erroneous advice given to a federal employee by OPM
personnel did not create an estoppel when finding to the
contrary would violate the principle “that payments of money
from the Federal Treasury are limited to those authorized by
statute.”’).

2 Air Force and Other Military Regulations Promulgated
Under § 301 Did Not Create an Entitlement to Free Lifetime
Medical Care; On the Contrary, They Clearly Call for Only
Space-Available Military Medical Care for Retirees and
Made No Provision for Insurance

The plaintiffs also argue that the regulations in force at the
time they joined the Air Force authorized the recruiters’
promises of free lifetime medical care. The implication of this
argument seems to be that the regulations themselves
provided for the grant of an entitlement to free lifetime
medical care. We disagree.

First and foremost, a regulation promulgated under the
auspices of 5 U.S.C. § 301 cannot convey or authorize an
entitlement unless that statute clearly so provided, for
example, by delegating power to the secretary of the military
departments to contract any type of health care for retirees.
Simply put, an agency cannot do by regulation what the
applicable statute itself does not authorize. See, e.g.,
Larionoff, 431 U.S. at 873 (stating that “in order to be valid|,]
[regulations] must be consistent with the Statute under which
they are promulgated” and holding that even though the
agency’s interpretation of the relevant regulations governing
military bonuses was reasonable, because the regulations
were contrary to the purposes of Congress in enacting the
bonus statute itself, the regulations were invalid).

Putting aside for the moment that 5 U.S.C. § 301 did not
authorize these promises, directly or by delegation, and also

42a

whether they could be extended solely by force of regulation,
we address the specific regulations promulgated by the
Secretary of the Air Force that dealt with health care for
retired members. It is clear from the language of these
regulations that they are consistent only with the conclusion
that plaintiffs were never granted an entitlement. Indeed, the
regulations themselves expressly provided for medical care
for military retirees only as space was available.

Plaintiffs in this case served in more than one branch of the
Armed Forces, but both Schism’s and Reinlie’s last and
dispositive service was in the Air Force. It is the plaintiffs’
indefinite appointments to the Air Force that led to their
service in the military for more than 20 years. Accordingly, as
the government argues (and the plaintiffs do not dispute), the
date of each retiree’s indefinite appointment is the critical
date for determining what was promised. Thus, the
regulations pertinent to these veterans are the 1951 Air Force
regulations for Schism and the 1953 Air Force regulations for
Reinlie. Because whatever promises they were made relevant
to this recruitment resulted in their continued service until
they performed at least 20 years’ active duty, any promise,
regulation or material after this time is irrelevant.'°

In his affidavit, Schism described what he was told
regarding free lifetime medical care in the Air Force:

I learned that the USAF [United States Air Force]
made the same promises as the Navy [that he was

'S This, obviously, includes the 1945 one-page letter signed by the
Secretary of the Navy that was addressed to “Reserve and Temporary
USN Officers.” This letter was not only drafted too early to apply to the
veterans in this case, but it also applied to a class of people which did not
include the plaintiffs: the plaintiffs were never temporary or reserve Naval
officers. Further, none of the various other military publications submitted
by the retirees, such as the Navy’s Blue Jacket Manual; the Army’s
Soldier’s Guide; and general recruiting brochures, state that an Air Force
retiree was to receive full, free, lifetime health care in 1951 and 1953.

43a

entitled to] lifetime free medical [care] after retirement.
I received official briefing in the Air Force from my
commanders or superiors on lifetime medical care, and
learned that free lifetime care was common knowledge
and ‘gospel’ in the Air Force.

(Schism Aff. PP 2, 5.) He also explained that he decided on
a career in the Air Force because “it was the best offer around
. . » » And free medical care then and in the future had a
Significant value to me just as it does now.” (/d. at P 6.)
Reinlie recalls similar briefings and reliance thereon from that
time period as well:

1 heard recruiting promises of 20 year retirement and
lifetime free medical care from . . . the U.S. Air Force after
1948. . . . During the transition from the active reserve to
active duty status I was briefed on the conditions of my being
recalled and of the benefits of making the U.S. Air Force a
career. Stress was placed equally of [sic] my promotional
prospects and the retirement program with its free medical
benefits. . . . [About one year later] | was briefed [again] on
the advantages of making the service a career . . . [and again]
my promotional advantages plus the 20 years or more
retirement and the free medical treatment available to me and
my dependents [were stressed equally]. Already, I had two
children and could clearly visualize the advantages of making
the Air Force a career. My civilian employer had neither a
retirement or medical program. Inasmuch as | enjoyed my
work, making the decision to stay was quite easy.

(Reinlie Aff. 1-2.) As explained earlier, the government
conceded for the purposes of the present summary judgment
motion that the asserted promises were made by plaintiffs’
recruiters, made in good faith, and relied upon. But even if
the Secretary of the Air Force himself had said to the
recruiters that they could and should promise free lifetime
medical care to aid in recruitment, those promises would be a
nullity because, as shown below, the pertinent regulation

44a

provided to the contrary: the retirees claim they were
promised an “entitlement,” but the regulations provided for
space-available care only. See AFR _ 160-73; see also
Hercules, Inc. v. United States, 516 U.S. 417, 429-30, 134 L.
Ed. 2d 47, 116 S. Ct. 981 (1996) (explaining that if there
existed an implied agreement that the government would
indemnify the suppliers of Agent Orange, that agreement
would render unnecessary the entire class of statutes and
regulations that set forth the conditions in which a
government contracting officer could enter into an indemnity
agreement; the Court would “not interpret [the contract] so as
to render those statutes and regulations superfluous”).

Air Force regulation AFR 160-73 was in effect from 1951
when Schism received his indefinite appointment until after
Reinlie received his appointment in 1953. The language of
this regulation makes clear that medical care for Air Force
retirees was contingent, just as the government argues: “the
hospitalization of retired inactive Armed Forces personnel . . .
will be limited to cases in which in the judgment of the
hospital commander will be benefited by hospitalization for a
reasonable time. . . . Those requiring merely domiciliary care
by reason of age or chronic invalidism will not be admitted.”
AFR 160-73 P6(h) (emphasis added). The care is subject to
two express conditions. Free medical care for retirees
therefore cannot be an absolute entitlement under this
regulation. Thus, even viewing the pertinent regulation in
isolation, the recruiters’ promises of free lifetime medical
care were inconsistent with the regulation. As such, the
government is not bound by those promises. See Federal
Crop Ins. Corp. v. Merrill, 332 U.S. at 384 (explaining that
the government cannot be bound by statements made by its
representative if those statements are outside the bounds of
the authority that the Congress conferred).

Likewise, even if regulations from other service branches
were relevant, which they are not, no regulations in place

45a

when the plaintiffs joined the Air Force provided for an
entitlement to free lifetime medical care; the regulations
provide only for contingent care, principally based on
availability. Moreover, the manuals and brochures did not
describe an entitlement, either. For example, the 1942 and
1943 editions of the Navy’s MEDMAN, relied on by
plaintiffs, state “Retired officers and enlisted men, inactive,
are not entitled to civilian medical and hospital treatment at
Government expense. They are entitled to treatment in naval
hospitals by naval medical officers when available upon
application. . . .” 1943 MEDMAN § 3168 (emphases
added).'® This language clearly does not recognize a true
entitlement; on the contrary, it acknowledges that retired
Navy personnel may receive free military medical care only if
space is available.

The Army and Air Force regulations in effect before 1951
similarity contained conditional language. For example,
former Army Regulation 40-505 P2(b)(2) stated “The Army
will, usually through its own facilities, provide medical
attendance to . . . persons who are on the retired list of the
Regular Army and who report in person at any Army
dispensary or hospital, provided sufficient accommodations
are available for their treatment. AR 40-505 P2(b)(2)
(emphasis added). And Army Regulation 40-590 P6(b)(1)
limited “the admission of retired personnel on inactive status
. . . to cases in which in the judgment of the commanding
officer of the hospital will be benefited by hospitalization for

'° The 1945 and 1947 editions of the MEDMAN contain broader
language, including that a naval retiree “may be admitted to any naval
hospital upon application,” 1945 MEDMAN § 4132, and that naval
retirees “shall, if in need of hospital care, be admitted,” 1947 MEDMAN
§ 4132. In this case, however, neither of the plaintiffs-appellants joined
the Navy on active duty during this time frame. But even if they had, the
conclusion that 5 U.S.C. § 301 does not authorize the promise of free
lifetime medical care would still control.

46a

a reasonable time. Those requiring merely domiciliary care
by reason of age or chronic invalidism will not be admitted
....” AR 40-590 P6(b)(1) (emphasis added).

Plaintiffs have directed us to no regulation that describes
an entitlement to free lifetime medical care. In fact, the
regulations the retirees point to are inconsistent with such an
entitlement. As a result, even assuming that the health care
statutes granted the agency discretion, the recruiters’
promises still cannot bind the government. See Broadcasting
Sys., Inc. v. United States, 316 U.S. 407, 422, 86 L. Ed. 1563,
62 S. Ct. 1194 (1942) (explaining that an agency’s
regulations are binding on it).

Despite the momentary setting aside of 5 U.S.C. § 30] for
purposes of this discussion, done solely for the purpose of
responding to plaintiffs’ brief, it is important to remember
that regulations cannot be promulgated in a vacuum. The
regulations “must be consistent with the statute under which
they are promulgated.” See Larionoff, 431 U.S. at 873. The
statutes applicable do not authorize entitlement to medical

care.'’
Sebastain, 185 F.3d at 1372.

'’ Our court has previously examined the relevant regulations to see if
they authorized recruiters to promise free lifetime medical care, and
concluded they did not:

Nothing in these regulations [including AR 40-590, P 6(b)1, AFR 160-
73 P 14, and MEDMAN § 3168] provided for unconditional lifetime free
medical care or authorized recruiters to promise such care as an
inducement to joining or continuing in the armed forces . . . . In any event,
in view of the general pattern of the military regulations that provides
medical care to retirees only when facilities and personnel were available,
we decline to read into the [Navy] Manual the creation of such an
enduring and broad right to unconditional free lifetime medical care.

ERR REA IRIE TORN LT IRR sce: cence tN Ur eater amRNRNCN ae ce anabnainRe atte cin ont ean reine

47a

C Neither the Commander-In-Chief’s Inherent Authority
Nor Any Statute Directed Towards the Functions of the
Service Secretaries Is Sufficient to Authorize Promises of
Free Lifetime Medical Care for Retirees

The plaintiffs also assert that the Commander-in-Chief’s
inherent power in combination with 10 U.S.C. §§ 3013, 5013,
and 8013—which authorize the positions and enumerate the
duties of the Secretaries of the Army, Navy, and Air Force
respectively—authorized the recruiters’ promises. The
government counters that the plaintiffs had not raised this
argument before appeal, implying that they had therefore
waived the argument. We need not address waiver, however,
because on the merits we find that neither the Commander-in-
Chief’s inherent authority nor the statutes directed toward the
functions of the service secretaries is sufficient to authorize
the promises of free lifetime medical care for retirees.

As Commander-in-Chief, the President does not have the
constitutional authority to make promises about entitlements
for life to military personnel that bind the government
because such powers would encroach on Congress’
constitutional prerogative to appropriate funding. Under
Article I, § 8, only Congress has the power of the purse. To
say that the Executive Branch could p

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386015_1174%3A1. Public record. Not legal advice.