Petition for Writ of Certiorari — Favreau v. United States, 124 S. Ct. 50 (2003) (No. 02-1466)

Supreme Court, U.S.

FILED

Q.2146 6 MAR 2 8 2003

No.

IN THE

Supreme Court of the United States

BERTRAND R. FAVREAU, II, ET AL.,

Petitioners,

Vv.

UNITED STATES,

Respondent. ;

On Petition for a Writ of Certiorari to the United States

Court of Appeals for the Federal Circuit

PETITION FOR A WRIT OF CERTIORARI

MICHAEL A. FELDMAN SCOTT L. NELSON

14 Lincoln Street Counsel of Record

Brunswick, ME 04011 BRIAN WOLFMAN

(207) 729-2660 PUBLIC CITIZEN LITIGATION

GROUP

1600 20th Street, N.W.

Washington, D.C. 20009

(202) 588-7724

Attorneys for Petitioners

March 28, 2003

QUESTIONS PRESENTED

Petitioners are a class of veterans who were involuntarily

separated from the armed services because they were not

successful, despite good-faith efforts, in meeting applicable

weight and fitness standards. The United States Court of Ap-

peals for the Federal Circuit held that petitioners must refund

portions of their enlistment or reenlistment bonuses to the

United States under statutes providing for recoupment of bo-

nuses from service members who “voluntarily ... d{o] not

complete the term of enlistment for which a bonus was paid”

(emphasis added). The questions presented are:

1. Is a service member who is involuntarily discharged

for not meeting weight and fitness standards obligated to re-

fund an enlistment or reenlistment bonus on the ground that

he or she has “voluntarily” failed to “complete the term of

enlistment for which a bonus was paid” within the meaning

of the governing statutes?

2. May a court disregard an agency’s published regula-

tions by (a) treating unpublished, internal agency memoranda

as legally binding “regulations” whose terms prevail over the

published regulations, and (b) granting Chevron/Mead defer-

ence to an agency’s statutory construction set forth in litiga-

tion affidavits that contradict the published regulations?

ll

RULE 14.1(b) STATEMENT

The petitioners in this Court (and plaintiffs-appellants in

the court of appeals) are: Bertrand R. Favreau, II; Jeffrey D.

Thompson; Donna Marie McCurdy; Ryan D. Mumme;

Bridgit Hallas; Scott Laberge; Thomas L. Fryer; Lee C. Mar-

shall; Joseph Tingerthal; James W. Fuller; Roger F. Sablone,

Jr.; Robert A. Bell; Brenda G. Vanness-Cnista; Patrick N.

Turner; Charles D. Wiggins; and a class of others similarly

situated.

The respondent in this Court (and defendant-appellee in

the court of appeals) is the United States of America.

ill

TABLE OF CONTENTS

PRSUEUN EMRE MG © PUREINEEEY BPSD Doss ccnsesssssenevnssvesinosoessocevessnnsseesesneces i

ERPs BO BEM D EE FAB EMEIITE sesseccvesscessvvssssnsnsssvssenssssesconseovens ll

PE Ae RE BRE BI csnscnsccevercsvsenesavescusaveenssvenscunsesses iv

as cada saninnuncrasaneesnesueseonin l

a caiclaanieninanva l

STATUTES AND REGULATIONS INVOLVED ................ 2

PUR EER GON BUEN Piel vecevessvssissovncesssscosesvesensnssbanenevee 3

A. Statutory and Regulatory Background.....................06+ 3

ich ciiudacnebintiniii 5

a oy IE CII, 665, ansevicsn snberassavenvenivosdsicesinsoenansane 9

REASONS FOR GRANTING THE WRIT............:::ceesee 11

I. THE OPINION BELOW CONFLICTS WITH

DECISIONS OF OTHER FEDERAL COURTS

THAT GIVE EFFECT TO THE PLAIN

MEANING OF THE STATUTORY TERMB................ 12

Il. THE FEDERAL CIRCUIT’S DECISION TO

GIVE UNPUBLISHED MEMORANDA AND

LITIGATION AFFIDAVITS PRECEDENCE

OVER DULY PROMULGATED AND PUB-

LISHED REGULATIONS MERITS REVIEW. ............ 15

a sananenanseniia’ 20

APPENDIX:

A. Opinion of the Court of Appeals..............c:cccceseeseeees la

B. Opinion of the Court of Federal Claims (Ad-

dendum to Opinion of the Court of Appeals) ........... 4a

C. Defense Financial Management

REE EE ed Oe eT 29a

1V

TABLE OF AUTHORITIES

Page(s)

CASES

AFGE v. Rumsfeld, 262 F.3d 649 (7th Cir. 2001)...........+00+ 19

Barnhart v. Walton, 535 U.S. 212 (2002)............cccccceessneeeees 18

Blassingame v. Secretary of the Navy, 866 F.2d

fe ne aT NTI 16

Boddie v. Department of Navy, 827 F.2d 1578

CI SE Fed rvickrnisstacncsineieatbsneribtebinibedetainenbininnsanmnbens 16

Brown v. Gardner, 513 U.S. 115 (1994)... ecessssreeeeeees 12

Chao v. Russell P. LeFrois Builder, Inc., 291

Fe ee Ge ee: ieee ceieilatamireidaeisicoinisias 19

Chevron U.S.A., Inc. v. NRDC, 467 U.S. 837

CE nsccssnsnscasuascatsnaniaamamecateuiccipniaaelatnaia tas 10-11, 18, 19

Edelman v. Lynchburg College, 535 U.S. 106

SPIE cisicsnsisnctietniaiccioniatetetaddasn Teale ahiplarenckenaeabiaited cniataeareees 19-20

Favreau v. United States, 48 Fed. Cl. 774

RR MU NF ANT ren NTS OE ENC a OEE 7

Hamlet v. United States, 63 F.3d 1097 (1995)...........ccceeeeeees 17

Hensala v. Department of the Air Force, 148 F.

UI. Zk DUS CIR BA. UE. FEI ED cicsccessnvevnecascsssercsnvnnees 14, 15

lliff v. Schlesinger, 539 F.2d 1275 (10th Cir.

DFID sssinssiepiiahsspinicinediadiaaanninaacienaineien 9, 12-13

Land v. United States, 41 Fed. Cl. 695 (1998)..........cceeesseeeee 4

Landmark Legal Found. v. IRS, 267 F.3d 1132

i Rails ED sichctssiceseiessniitdsancianiieitneecbenlbinienaxtennaniains 19

Lee v. FlightSafety Services Corp., 20 F.3d 428

OE FEE Fe recs inictmnstnnaicendcakniiieniennnmamuene 18

Lopez v. FAA, 318 F.3d 242 (D.C. Cir. 2003) ..........ceeeceeees 16

A

Vv

Matz v. Household Intern. Tax Reduction Inv.

FU, GD FO S78 CF Ge, DOT) vicseniccusctensverecieessnrcaniets 19

Morton v. Ruiz, 415 U.S. 199 (1974)... eeeseseeseseseneseesees 17

National Ass'n of Concerned Veterans v. Sec-

retary of Defense, 487 F. Supp. 192 (D.D.C.

RIT Wp ssnssccnitnainakonsnenthieiiaanedadeaanaiaaaaa 17

Service v. Duties, 354 U.S. B63 (1DST) s.ccccosesecsrvivrersossavsaveree 16

United States ex rel. Accardi v. Shaughnessy,

S5T 5 ae Ge Fe nniminnmanen 16

United States v. Gears, 835 F. Supp. 1093 (N.D.

ID. BFW) ssnkinasiensonadnicvsnsicyueniauceipienciaansla ian hianeniaaail 13

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

PF Nd wiitsisschicanninaaaaneitcileuaualaidlae 11, 18, 19, 20

STATUTES AND REGULATIONS

SSE... BF io viniinivcncinessoendcteidlndinamammianaaimiabidannaadls 17

FER iliee ib BAP sicsccsencsoninneenicinesonanabbiedainanaaimedaae 17

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BF Shan 2 nin iiiciniiiietaantpuaiateanalime aoe aee 3

OT VBA Br Mind Kniinaiaibiaes 3

Department of Defense Financial Management

I TIE i passrsncscbunictcivessnandsetrienentcanen passim

Pe SE TR Fe cis ccieiaiedmelanieniadndndenaeiapeien 18

LEGISLATIVE HISTORY

S. Rep. No. 96-850 (1980), reprinted in 1980

SFA Acts Ol viilenibienenincielinnetnchalicnplnetoctutunaniaianinn 4

PETITION FOR A WRIT OF CERTIORARI

Petitioners, representatives of a class of veterans who

were involuntarily separated from the armed services because

they did not succeed in meeting weight or fitness standards,

respectfully petition for a writ of certiorari to review the

judgment of the United States Court of Appeals for the Fed-

_eral Circuit. The decision below holds that petitioners must

reimburse the United States for portions of their enlistment or

reenlistment bonuses on the ground that they “voluntarily”

did “not complete the terms of [their] enlistment” within the

meaning of applicable statutes. This Court should grant cer-

tiorari to review the Federal Circuit’s judgment because:

(1) It conflicts with decisions of other federal courts

construing the plain statutory language, which pre-

cludes recoupment unless a service member was sepa-

rated voluntarily or on account of misconduct; and

(2) (a) It violates fundamental norms of administrative -

law by giving secret, unpublished agency memoranda

precedence over an agency’s published regulations im-

plementing the statutory terms; and (b) it further departs

from accepted administrative law principles set: forth in

this Court’s decisions by giving dispositive weight to

litigation affidavits contradicting the agency’s pub-

lished regulations.

OPINIONS BELOW

The decision of the court of appeals is published at 317

F.3d 1346 (Fed. Cir. 2002), and is reprinted in the Appendix

at la. The decision of the Court of Federal Claims is pub-

lished at 49 Fed. Cl. 635 (2001), and as an addendum to the

court of appeals’ opinion, 317 F.3d at 1349-62; it is reprinted

in the Appendix at 4a.

JURISDICTION

The court of appeals entered judgment on December 30, -

2002. This Court has jurisdiction under 28 U.S.C. § 1254(1).

STATUTES AND REGULATIONS INVOLVED

37 U.S.C. § 308(d)(1), governing reenlistment bonuses,

provides:

A member who voluntarily, or because of his miscon-

duct, does not complete the term of enlistment for

which a bonus was paid to him under this section ...

shall refund the percentage of the bonus that the unex-

pired part of his additional obligated service is of the

total reenlistment or extension period for which the bo-

nus was paid.

37 U.S.C. § 308a(b), governing enlistment bonuses, pro-

vided at relevant times:

Under regulations prescribed by the Secretary of De-

fense ... a person who voluntarily, or because of his

misconduct, does not complete the term of enlistment

for which a bonus was paid to him under this section ...

shall refund that percentage of the bonus that the unex-

pired part of his enlistment is of the total enlistment pe-

riod for which the bonus was paid.

Defense Department Financial Management Regula-

tion 090503, which is set forth more fully in the Appendix at

29a, provides in pertinent part (emphasis added):

Reasons for Recoupment. For purpose of recouping any

unearned portions of enlistment, reenlistment, or reten-

tion bonuses, the term “who voluntarily or because of

misconduct” includes (but is not limited to) members

separated ... (M) ... for the convenience of the govern-

ment upon the application and interest of the member

because of special or unusual circumstances including,

but not limited to ... (6) Overweight/obesity or lack of

physical fitness.

STATEMENT OF THE CASE

A. Statutory and Regulatory Background

To encourage talented men and women to join and re-

main in what are now the all-volunteer armed services of the

United States, the services have long offered substantial bo-

nus payments for enlistment and reenlistment. To remove

any possible temptation to “take the money and run,” stat-

utes authorizing such bonuses and other similar incentives

(such as advanced education assistance) provide that a person

who “voluntarily, or because of his misconduct, does not

complete the term of enlistment” for which he or she re-

ceived the bonus or other incentive must refund a proportion-

ate amount to the government. 37 U.S.C. § 308(d)(1)

(reenlistment bonuses); former 37 U.S.C. § 308a(b) (enlist-

ment bonuses)'; see also, e.g., 10 U.S.C. § 2005(a)(3) (ad-

vanced education assistance). The statutes not only protect

the government, but also assure service members who accept

bonus contracts for enlisting or reenlisting that they will be

entitled to keep the offered inducement as long as they do not

quit or misbehave.

Because of the physical demands that the Nation’s de-

fense often places on members of the armed forces, the serv-

ices also require that soldiers, sailors, airmen, and Marines

meet physical standards, including fitness and weight re-

quirements. Members who are unsuccessful in meeting fit-

hess or weight requirements after undergoing remedial fit-

ness or weight reduction programs may, in the discretion of

the services, be involuntarily separated from the armed serv-

' Section 308a was repealed in 2000 and replaced by a new provi-

sion, 37 U.S.C. § 309, which contains identical language requiring re-

funds by members who “voluntarily, or because of [their] misconduct,

d{o] not complete the term of enlistment.” The 2000 legislation provided

that the terms of § 308a would continue to govern the terms of any bonus

provided thereunder for enlistments before October 1, 2000. See 37

U.S.C. § 309 note (“Effective and Applicability Provisions”).

4

ices. See, e.g., Land v. United States, 41 Fed. Cl. 695 (1998).

The interaction between the services’ policy of discharging

some members who fail to meet weight and fitness standards

and the statutes providing for recoupment of enlistment bo-

nuses is at the heart of this case. Whether a service member

who has been involuntarily separated for weight or fitness

reasons has “voluntarily” failed to “complete the term of

enlistment” for which he or she received a bonus is the ulti-

mate question posed by this case.

Since the 1950s Congress has repeatedly used the for-

mulation “voluntarily or because of misconduct” in describ-

ing the circumstances under which bonuses or other incen-

tives must be refunded to the government when a service

member does not complete his or her full term of service. In

1980, Congress enacted legislation using the identical stan-

dard to define when a service member who left the armed

forces early would have to refund the cost of advanced edu-

cation (for example, attendance at medical school) received

during service. See 10 U.S.C. § 2005(a)(3). The Senate Re-

port on that legislation included an explanatory memorandum

from the Under Secretary of the Air Force, which cited as

precedent for such a refund requirement the reenlistment bo-

nus recoupment provision found in 37 U.S.C. § 308(d)(1).

S.Rep. No. 96-850 at 8 (1980), reprinted in 1980

U.S.C.C.A.N. 2833, 2840. The memorandum specifically

stated that it was “not the intent of this proposal to include

situations where an individual is discharged ... because of

academic failure not deemed willful on the part of the indi-

vidual, failure to meet physical standards or hardship.” Jd.

The Department of Defense implemented the enlistment

bonus recoupment statutes in its Financial Management

Regulations (“FMRs”’), promulgated by the Under Secretary

of Defense/Comptroller and Chief Financial Officer. The

relevant FMR, entitled “Reasons for Recoupment,” has been

promulgated in substantially identical terms eight times since

1984, most recently last year. Each time the FMRs were reis-

sued, their introduction expressly stated that they “supersede

existing directives on military pay entitlement.”

-The “Reasons for Recoupment” regulation (currently

numbered FMR 090503) provides a laundry list of reasons

for separation that are considered “voluntar[y], or because of

misconduct,” including separation as a result of resignation,

court martial, writ of habeas corpus, defective or fraudulent

enlistment, misconduct, unsatisfactory performance, and drug

or alcohol abuse. As to failure to meet weight or fitness stan-

dards, the FMR provides that a separation is voluntary when

it occurs “for the convenience of the government upon the

application and interest of the member because of special or

unusual circumstances including ... [o]verweight/obesity or

lack of physical fitness.” FMR 090503(M)(6). In other

words, the only situation in which the FMR provides that a

weight or fitness separation will be considered “voluntary”

for recoupment purposes is when the service member has

asked for separation on that basis.

B. This Lawsuit

Despite the Defense Department’s 1980 statement to

Congress that “voluntarily or because of misconduct” does

not include separations based on physical standards, and its

FMR providing for recoupment only when a service member

applies for a weight or fitness discharge, the Department has

adopted a practice of recouping bonuses from members dis-

charged honorably but involuntarily for failing to meet

weight and fitness standards (despite diligent good-faith ef-

forts to do so). The Department has carried out this practice

by, among other things, setting off bonus amounts against

service members’ tax refunds and the pay due them on sepa-

? The most recent version of the FMR concerning recoupment is

available on the internet at www.dod.mil/comptroller/fmr/07a/07A09.pdf.

The most recent statement that the FMRs supersede all other directives

can be found at www.dod.mil/comptroller/fmr/07a/07aintr2.pdf.

6

ration, requiring monthly payments, and, in some cases, em-

ploying collection agencies and reporting former service

members to credit bureaus.

The named petitioners in this case are 15 men and women

who were discharged by the armed services because they did

not succeed, after remedial efforts, in meeting weight or fit-

ness standards. None requested discharge, and the govern-

ment has stipulated that each was involuntarily separated. All

were honorably discharged, and none was found to have en-

gaged in misconduct. Nor was any named petitioner found

not to have made a good-faith effort to comply with weight

or fitness standards. Indeed, the services’ current policy is to

discharge members who do not try to lose weight for unsatis-

factory performance; a discharge for weight reasons alone

thus reflects a determination that the member’s effort was not

unsatisfactory.’ In short, petitioners were discharged not be-

cause they did not try, but because they did not succeed.

All of the petitioners had received enlistment or

reenlistment bonuses ranging from $1,000 to $30,000. The

government had recouped portions of those amounts from

each of them, and, in some cases, sought interest, costs, and

penalties on the amounts claimed to be due.

Certain petitioners filed this action in the United States

District Court for the District of Maine on behalf of them-

selves and others similarly situated, seeking to recover under

the Tucker Act the amounts that were recouped from them in

violation of applicable statutes and regulations. Petitioners

also alleged that the recoupment breached their enlistment or

reenlistment contracts. The district court certified a class but,

sua sponte, transferred the case to the Court of Federal

_ Claims. There, petitioners filed an amended complaint add-

ing new plaintiffs and again sought class certification.

> Service regulations on this point were collected in the Joint Appen-

dix below at J.A. 495-96, 367-68, 371-73, 455-56.

On October 25, 2000, the Court of Federal Claims certi-

fied an opt-in class of service members who were or are in-

voluntarily discharged solely for failure to meet weight or

fitness standards and from whom the government has re-

couped (or is recouping) any bonus payments. Excluded from

the class were any members whose discharge was based on a

substantive finding of unsatisfactory performance. Favreau v.

United States, 48 Fed. Cl. 774, 780 (2000). Thus, by defini-

tion, no class member was discharged for making an insuffi-

cient effort to comply with weight or fitness standards, and

the class consists entirely of those who did not succeed de-

spite their legitimate efforts. When certification was sought,

class counsel estimated the potential size of the class to be

approximately 500 members. Over 2,300 discharged veterans

subsequently opted in to the class, and it appears based on

discovery in the case that as many as 10,000 might be eligi-

ble to join if the case were permitted to proceed.

The parties filed cross motions for summary judgment.

Petitioners relied principally on the terms of the governing

statutes and the FMR. The government took the position that

even though petitioners did not complete their terms of en-

listment because they were involuntarily separated, their fail-

ure to complete their enlistment terms should nonetheless be

considered “voluntary” because their underlying conduct —

failure to meet weight and fitness standards — was in some

sense “volitional” (even though the members made legiti-

mate efforts to meet the standards and were not discharged

for unsatisfactory effort). Thus, according to the government,

petitioners’ discharges should be considered to be “voluntary

involuntary” separations. The government relied on affida-

vits from Defense Department officials explaining the De-

partment’s practice of recouping bonuses from members dis-

charged for these reasons.

In addition, the government produced two unpublished,

internal memoranda that it contended are “regulations” with

the force of law that trump the terms of the published FMR

and require recoupment from members separated on weight

and fitness grounds. According to the government, the terms

of the published regulation were erroneous results of an

‘administrative oversight.” Accordingly, they were to be dis-

regarded to the extent they differed from the two secret

memoranda and failed to authorize recoupment from service

members involuntarily separated for weight or fitness rea-

sons.

The first of the government’s proffered memoranda,

written by then-Assistant Secretary of Defense Lawrence

Korb in 1983, is a directive that, in relevant part, states that

“convenience of the government” is to be included among

the causes of separation that give rise to recoupment. The

memorandum says nothing about separation for weight or

fitness reasons and thus, on its face, does not clearly contra-

dict the FMR on benefit recoupment, which provides that

“convenience of the government” separations (including

weight and fitness separations) are grounds for recoupment

when a member has applied for separation.

The second memorandum produced by the government,

written by then-Assistant Secretary of Defense Christopher

Jehn in March 1992, states that separation for weight control

failure is to be “treated similarly for benefit eligibility” (em-

phasis added) to separation for drug and alcohol rehabilita-

tion failure. Although drug and alcohol separations are

grounds for bonus recoupment under the FMR, the Jehn

memorandum addresses only benefit eligibility and says

nothing about recoupment of bonuses. The FMR permitting

recoupment for weight or fitness discharges only when the

member has applied for discharge has been issued or reissued

eight times without substantial change since the Korb memo-

randum and four times since the Jehn memorandum, and

each time it has expressly superseded all existing directives

concerning its subject matter.

ERT Rear nares orem

C. The Decisions Below

The Court of Federal Claims granted the government’s

motion for summary judgment on June 28, 2001. The court

acknowledged that both service usage and case law demon-

strate that a voluntary separation is one initiated by a service

member of his or her own free will. App. 18a-19a. (Indeed,

each of the services has directives that define voluntary sepa-

rations as those requested by service members, and involun-

tary separations as those initiated by the service commander.

See J.A. 394-95, 402-03, 436-37, 462-63, 764-65.) Thus, the

court recognized that petitioners’ separations were “not vol-

untary in any meaningful way.” App. 19a (emphasis added).

The court, however, drew a distinction between the sepa-

ration and the resulting failure to “complete the term of en-

listment.”’ In the court’s view, the statute did not exclude the

possibility that an involuntary separation could nonetheless

give rise to a voluntary failure to complete the term of en-

listment if “the underlying reasons prompting separation re-

late to acts of volition.” App. 20a. Thus, the court concluded

that the statutory language was “susceptible of both parties’

readings, and is thus ambiguous.” App. 20a. In holding that

the “statutory language refers to the voluntariness of the un-

derlying behavior and not the act of separation,” the court

expressly disagreed with the Tenth Circuit’s reading of the

bonus recoupment statutes in Jliff v. Schlesinger, 539 F.2d

1275 (10th Cir. 1976). App. 19a-20a n. 18.

Turning to the agency’s construction of the statute, the

court further rejected the petitioners’ argument that the FMR

— that is, the agency’s published recoupment regulation —

supported the view that recoupment was permissible in a

weight or fitness separation only when it was the result of the

service member’s own application. The court held that the

Korb and Jehn memoranda are binding regulations, and it -

accepted the government’s argument that the terms of the

repeatedly published FMRs amounted to a scrivener’s error

and could not be given effect to the extent that they differed

10

from the unpublished memoranda or reflected a “less-than-

faithful rendition” of the memoranda. App. 16a. *

The court acknowledged, however, that even the Korb

and Jehn memoranda (which it repeatedly mischaracterized

as “regulations’”’) do not clearly address whether bonus re-

coupment is permissible in weight and fitness separations —

because, as noted above, the Korb memorandum says nothing

about weight or fitness, and the Jehn memorandum says

nothing about bonuses or recoupment. As the court put it,

“by themselves the regulations are insufficient to understand

the agency’s interpretation.” App. 20a. ;

Accordingly, the court placed its reliance on the affida-

vits submitted by the government in this case that set forth

the agency’s purported construction of the statutes as

authorizing recoupment “if the conduct that resulted in the

separation was voluntary, i.e., within the service-member’s

control.” App. 10a.° Concluding that the interpretation of the

statute set forth in the agency’s affidavits was entitled to def-

erence under Chevron U.S.A., Inc. v. NRDC, 467 U.S. 837

* The court accepted the government’s assertion that the FMR was

drafted by the Defense Finance and Accounting Service, which lacked

authority to deviate from the Korb and Jehn memoranda. App. 16a. Curi-

ously, the court overlooked that the FMR was promulgated under the

signature of the Under Secretary of Defense/Comptroller and Chief Fi-

nancial Officer. Neither the court nor the government cited anything to

indicate that the Under Secretary lacked authority to promulgate the

FMR. Indeed, even after the Court of Federal Claims’ decision asserting

that the FMR was a “less-than-faithful rendition” of the Korb and Jehn

memoranda, the Under Secretary again promulgated it in 2002 without

material change, and again stated that it superseded all prior directives.

The current Under Secretary, of course, is not a subordinate of Assistant

Secretaries Korb and Jehn, who long ago left office, and any assertion

that he lacks authority to promulgate the FMR is incredible.

° The court did not explain how a failure to satisfy weight or fitness

standards despite good-faith effort was “within the service member’s

control” where the service member was not discharged for unsatisfactory

effort and there was no evidence of lack of effort.

11

(1984), and United States v. Mead Corp., 533 U.S. 218

(2001), the court held that the government’s recoupment of

bonuses from the petitioners was lawful. Ironically, the court

recognized that affidavits prepared for litigation purposes are

normally not entitled to deference (App. 23a), but it held that

here deference was warranted in light of the fact that the

Korb and Jehn memoranda, which the affidavits purported to

explain, were themselves regulations — even though it had

already stated that, viewed as regulations, they were insuffi-

cient to clarify the agency’s view of the statute. °

Petitioners appealed, and, on December 30, 2002, the

Court of Appeals for the Federal Circuit affirmed. After

briefly reciting the facts, the court of appeals’ per curiam

opinion stated: “For the reasons well stated in its opinion ...,

which we adopt and set out here in an attachment, the judg-

ment of the Court of Federal Claims is affirmed.” App. 3a.

REASONS FOR GRANTING THE WRIT

The reason petitioners did not complete their terms of

enlistment was that they were involuntarily discharged. To

say that their failure to complete their terms was “voluntary”

because the services’ decision to discharge them was related

to conduct that was somehow “volitional” makes a mockery

of the statutory language. It renders another key statutory

term — “misconduct” — superfluous, because, under the

lower courts’ reading of the statute, any member discharged

for “misconduct,” which is by definition “volitional,” has

also “voluntarily” failed to complete his term of enlistment.

In any event, petitioners’ conduct was hardly “volitional”:

° The court also briefly alluded to language from a 1951 Senate Re-

port concerning an earlier version of enlistment bonus recoupment legis-

lation, but the cited language does not specifically address the issue, and

the lower courts’ interpretation depends on an unwarranted inference that

in using the statutory language, Congress intended to adopt a totally dif-

ferent formulation proposed by the Bureau of the Budget. See App. 24a.

12

The undisputed facts are that they were not discharged be-

cause they did not try to meet the services’ standards, let

alone because they intended to fail, but only because their

failure was not the result of a medical condition. That is a far

cry from a “voluntary” failure. Finally, the reading of the

statute adopted below is contrary to the one piece of legisla-

tive history that directly addresses the issue and that supports

the plain, common-sense reading of the statute: namely, the

1980 Senate Report, discussed above, indicating that Con-

gress was told and understood that the statutory language

does not extend to discharge for “failure to meet physical

standards.”

The lower courts’ gross misreading of an important fed-

eral statute affecting thousands of service members itself

merits review by this Court. Cf Brown v. Gardner, 513 U.S.

115 (1994) (reviewing Federal Circuit’s construction of vet-

eran’s benefit statute and rejecting government’s interpreta-

tion as “implausible”). But more is at stake here than error

correction. First, the decisions below conflict with decisions

of other federal courts construing the same or related statutes.

Second, and more importantly, the lower courts’ decision to

subordinate a clear published regulation to vague unpub-

lished memoranda and litigation affidavits interpreting them

is a clear departure from established principles of adminis-

trative law and the ordinary course of judicial proceedings.

I. THE OPINION BELOW CONFLICTS WITH DE-

CISIONS OF OTHER FEDERAL COURTS THAT

GIVE EFFECT TO THE PLAIN MEANING OF

THE STATUTORY TERMS. -

The Federal Circuit’s rejection of petitioners’ straight-

forward reading of the statute conflicts with decisions of

three other federal courts, including another federal court of

appeals. First, in Jliff v. Schlesinger, 539 F.2d 1275, the

Tenth Circuit, in a case brought by a conscientious objector

claiming his resignation was not “voluntary,” rejected a

reading of the recoupment statutes under which the determi-

13

nation of “voluntariness” turned on the volitional nature of

the service member’s action. Instead, the //iff court — at the

express urging of the government —adopted a clear and sim-

ple reading of the statute: A member “voluntarily” does not

complete his or her term of enlistment when he or she asks to

be discharged. The courts in this case expressly rejected the

Tenth Circuit’s reading of the statute. App. 19a-20a n.18.

Second, in United States v. Gears, 835 F. Supp. 1093

(N.D. Ind. 1993), the district court, in an action brought by

the United States under 10 U.S.C. § 2005(a) to recover edu-

cational expenses from a Naval Academy midshipman dis-

charged for failure to meet weight standards, rejected the

government’s argument that a service member “voluntarily”

failed to complete a tour of duty whenever his failure to meet

weight standards was “volitional in that it was not caused by

disease or physical defect.” Jd. at 1098. The court reasoned:

As to volition, the court does not believe that the statu-

tory term “voluntarily” can be so construed. Congress

plainly intended to limit the reimbursement obligation

to a class of persons, and the government’s interpreta-

tion would remove any such limits: only those

drummed out of the service for non-volitional — invol-

untary — acts would be spared the reimbursement obli-

gation. ... [T]he court believes that such a reading

would cast a far wider net than is consistent with the

‘Congressional intent evident from the plain language of

[the statute].’

_ Id. The government did not appeal its loss in Gears.

” The Gears court went on to say the statute required, “at the least,

either an intent to produce a separation or an awareness that a chosen

course of conduct will produce such a result.” Jd. at 1099. Neither stan-

dard would permit recoupment against petitioners, as none of them in-

tended to leave the armed services, nor was their lack of success in

meeting weight or fitness requirements a “chosen course of conduct.”

14

Third, in Hensala v. Department of the Air Force, 148 F.

Supp. 2d 988 (N.D. Cal. 2001), the court considered an ac-

tion by a discharged Air Force officer seeking to enjoin the

government’s decision to recoup funds expended on his

medical education. The Air Force had discharged him for

violating the “don’t ask, don’t tell” sexual orientation policy

by declaring that he was a homosexual. The government

contended that it was entitled to recoupment under 10 U.S.C.

§ 2005(a)(3) because the officer had “voluntarily” failed to

complete his tour of duty.

The court held that the government’s decision to seek re-

coupment was lawful, but not because the officer’s declara-

tion, which resulted in his discharge, was a volitional act.

Rather, the court held that for the officer’s failure to complete

his term of service to be voluntary, he had to have made his

declaration of homosexuality “for the purpose of obtaining

separation.” 148 F. Supp. 2d at 998. The court then con-

cluded that the Air Force’s determination that the officer had

“decided not to serve” and made his declaration in order to

bring about his own discharge was supported by the record.

Id. at 999. By contrasf, under the standard adopted by the

Hensala court, none of the petitioners in this case could be

found to have voluntarily failed to complete his or her term

of enlistment, because none took action for the purpose of

bringing about his or her discharge. Indeed, the class in this

case excludes any service member who was determined to

have made insufficient effort to meet standards and was dis-

charged for substantive unsatisfactory performance; hence,

the military itself has determined that petitioners did not de-

liberately bring about their own separation.

These divergent readings of the same or identical statu-

tory language not only underscore the incorrectness of the

decision below, but also show a need for direction from this

Court concerning the meaning of statutes that are important

to the armed services and also affect the vital interests of

thousands of men and women who have served or are serving

15

our country in the military. The decisions also demonstrate

that this case, unlike many cases within the Federal Circuit’s

jurisdiction, is not one where the Federal Circuit effectively

has the last word, rendering conflicts among the courts im-

possible. Rather, in cases concerning these statutes, the Fed-

eral Circuit has appellate jurisdiction only when former

service members bring Tucker Act actions to recover

amounts wrongfully recouped from them. The district courts

and the regional courts of appeals, on the other hand, retain

jurisdiction when the United States brings an action against a

discharged veteran to recoup bonus payments or other mon-

ies or when the former service member brings an action (as

in Hensala) that prospectively challenges the government’s

decision to seek recoupment. Thus, the disparate readings of

the statutory language that have emerged create the possibil-

ity of divergent results depending not only on where suit is

brought, but also on who brings it and what relief is sought.

II. THE FEDERAL CIRCUIT’S DECISION TO GIVE

UNPUBLISHED MEMORANDA AND LITIGA-

TION AFFIDAVITS PRECEDENCE OVER DULY

PROMULGATED AND PUBLISHED REGULA-

TIONS MERITS REVIEW.

The Federal Circuit’s decision also merits review for an-

other equally important reason: Its decision to give ambigu-

ous, unpublished memoranda priority over an agency’s duly

(and repeatedly) promulgated and published regulations, and

then to defer to affidavits purporting to interpret or explain ~

those memoranda, is a fundamental and disquieting departure

from well established principles of administrative law.

A. To begin with, the result below cannot be squared

with the published FMR (which expressly supersedes all

other directives, a point curiously ignored by the courts), and

neither the government nor the lower courts made any seri-

ous effort to do so. Indeed, the construction accepted by the

lower courts renders superfluous the FMR’s provision that

recoupment is permissible only when a service member is

16

separated on his own application for obesity or lack of fit-

ness, since the lower courts’ reading provides for recoupment

for a weight of fitness discharge without regard to whether it

results from the service member’s own application.® The

published regulation, on its face, is thus flatly inconsistent

with the agency’s proffered construction of the statute.

The courts have long recognized that agencies are bound

by the terms of their own regulations. See, e.g., United States

ex rel. Accardi v. Shaughnessy, 347 U.S. 260 (1954); Service

v. Dulles, 354 U.S. 363 (1957); Lopez v. FAA, 318 F.3d 242

(D.C. Cir. 2003). This principle is as applicable to the De-

partment of Defense and the armed services as to other agen-

cies. Blassingame v. Secretary of the Navy, 866 F.2d 556 (2d

Cir. 1989); Boddie v. Department of Navy, 827 F.2d 1578

(Fed. Cir. 1987). Under this well-settled principle, the terms

of the repeatedly published FMR, which provide for bonus

recoupment for a weight or fitness separation only when the

separation results from the application of the service mem-

ber, are legally binding on the agency.

The lower courts in this case, and the government, side-

stepped this principle by asserting that the agency’s pub-

lished regulation is not controlling; rather, in their view, the

governing law is contained in two unpublished memoranda

that were never available to petitioners or the public before

this litigation. But the idea that unpublished, internal agency

documents prevail over the terms of published regulations

repeatedly promulgated by the agency turns normal rules of

* Indeed, the “volitional conduct” theory accepted below renders

nearly all of the subparagraphs of FMR 090503(M) superfluous. Subsec-

tion (M) provides for recoupment for ten specified grounds of separation

“for the convenience of the government” if the service member applies

for discharge. Eight of those ten grounds (which include such items as

enlistment in another service, running for public office, and becoming

pregnant) involve volitional conduct and thus would be “voluntary” under

the lower courts’ reading of the statute regardless of whether the service

member applied for discharge.

17

administrative law on their heads. Although, as the lower

courts pointed out, the APA may not require that regulations

governing the matters at issue here be promulgated through

the notice-and-comment procedure of 5 U.S.C. § 553 (see

App. 22a), they remain subject to the more basic requirement ©

that any regulation purporting to bind members of the public

must be published, and it may not be enforced against per-

sons who lack notice of it if it has not been published.

5 U.S.C. § 552(a); Morton v. Ruiz, 415 U.S. 199 (1974).?

Here, the agency has done more than simply attempt to

enforce an unpublished regulation in the absence of a pub-

lished regulation that directly addresses a matter, as in Mor-

ton and similar cases. It has repudiated its published regula-

tions in favor of unpublished internal directives (directives

that the published regulations expressly repealed). No deci-

sions of this Court authorize such an extraordinary result.

The lower courts were unable to cite any precedent holding

that unpublished regulations supersede published ones, to the

detriment of members of the public, when an agency is dis-

satisfied with its own published rules or when it contends that

its internal memoranda indicate that some agency officials

may have preferred that different regulations be issued.’°

Indeed, the normal remedy when an agency is unhappy

with its regulations is for the agency to amend them. As the

Eleventh Circuit has put it:

* The publication principle of § 552(a) is fully applicable to military

regulations concerning discharge of service members. See, e.g., National

Ass'n of Concerned Veterans v. Secretary of Defense, 487 F. Supp. 192

(D.D.C. 1979).

'° The one case cited by the lower courts, Hamlet v United States, 63

F.3d 1097 (Fed. Cir. 1995), concerns the different issue of when an af-

fected person can hold an agency to rules set forth in its unpublished

documents. That is a different question from whether the agency can

subject individuals to rules that it has not published. Congress has spe-

cifically outlawed the latter practice in 5 U.S.C. § 552(a).

18

[J}udicial rewriting of regulations is improper. A court

should presume regulations mean what they say. If the

executive branch wishes to reconsider them, it is free to

do so. Judicial assistance is not required.

Lee v. FlightSafety Services Corp., 20 F.3d 428, 433 (11th

Cir. 1994). The Federal Circuit’s decision to bypass this

principle by giving secret regulations priority over published

ones “has so far departed from the accepted and usual course

of judicial proceedings, or sanctioned such a departure by a

lower court, as to call for an exercise of this Court’s supervi-

sory power.” S. Ct. R. 10(a).

B. The lower courts compounded their error in giving

unpublished directives precedence over published regulations

when, recognizing that even the unpublished “regulations”

did not clearly address the issue at hand, they granted Chev-

ron deference to a construction of the statutes set forth not in

the supposed “regulations” themselves, but in the govern-

ment’s litigation affidavits. This Court has recently empha-

sized that Chevron deference is limited to formal exercises

by agencies of regulatory authority delegated by Congress —

typically in the form of notice-and-comment rulemaking, see

United States v. Mead Corp., 533 U.S. at 229-31, or some

comparable exercise of agency lawmaking power, e.g.,

Barnhart v. Walton, 535 U.S. 212 (2002) (agency interpreta-

tion set forth repeatedly in published Social Security rulings

and manuals and ultimately in a regulation). Mead’s premise

is that Chevron deference is called for only when Congress

has delegated to an agency the power to take action “with the

effect of law” and when the agency has done so through “a

relatively formal administrative procedure tending to foster

the fairness and deliberation that should underlie a pro-

nouncement of such force.” 533 U.S. at 230.

In this case, the agency’s formal expression of its statu-

tory interpretation — the FMR — provides no support for the

agency’s position. Indeed, the regulation supports precisely

the opposite reading of the statute. And even the unpublished

19

memoranda that the agency and lower courts said were the

true “regulations” are, as the courts acknowledged, “insuffi-

cient to understand the agency’s interpretation.” App. 20a.

The sources the courts turned to — affidavits prepared for

litigation— fall far short of demonstrating that “the agency

interpretation claiming deference was promulgated in the ex-

ercise of ... authority” delegated by Congress “to make rules

carrying the force of law,” as Mead requires. 533 U.S. at

526-27. The affidavits demonstrate only the truism that the

agency has a practice of recoupment (which of course is un-

disputed and is the reason for this case), not that that practice

stemmed from an exercise of rulemaking authority satisfying

Mead. Other courts have consistently rejected the notion that

materials such as those relied on by the lower courts here

qualify for deference in light of Mead. See, e.g., Chao v. Rus-

sell P. LeFrois Builder, Inc., 291 F.3d 219, 227 (2d Cir.

2002) (agency position set forth in litigation documents not

entitled to Chevron/Mead deference); Landmark Legal

Found. v. IRS, 267 F.3d 1132, 1136 (D.C. Cir. 2001) (inter-

pretation set forth in agency’s litigation submissions not en-

titled to Chevron/Mead deference); Matz v. Household In-

tern. Tax Reduction Inv. Plan, 265 F.3d 572 (7th Cir. 2001)

(agency position set forth in litigation documents with sup-

port from agency handbooks and rulings not entitled to Chev-

ron/Mead deference); AFGE v. Rumsfeld, 262 F.3d 649, 658

& n.10 (7th Cir. 2001) (internal Army memoranda not enti-

tled to Chevron/Mead deference).

That the Federal Circuit has diverged from other circuits’

post-Mead precedents regarding the types of agency pro-.

nouncements entitled to deference by itself warrants this

Court’s attention. Review is particularly appropriate given

the current lingering uncertainty over Mead’s full reach.

Compare Edelman v. Lynchburg College, 535 U.S. 106, 114

(2002) (noting Mead does not “necessarily” limit deference

to notice-and-comment rulemaking), with id. at 123-24

(O’Connor, J., concurring) (procedural-regulation that is le-

20

gally binding and is published in Code of Federal Regula-

tions is “sufficiently formal” to merit Mead deference).

Review here is also called for because the combined ef-

fect of the lower courts’ reliance on unpublished memoranda

and its deference to litigation affidavits purporting to explain.

those memoranda is to subject petitioners to “regulations”

the terms of which were not only unknown to them but in-

herently unknowable: Not only were the unpublished memo-

randa that the lower courts elevated to the status of regula-

tions unavailable to petitioners, but even if petitioners had

stumbled upon the memoranda, they could not have sus-

pected that the published regulations, which expressly super-

seded prior directives, would be subordinated to the memo-

randa. And even if they had by some chance anticipated that

the memoranda and not the published regulations would gov-

ern, they still could not have understood the agency’s inter-

pretation without the affidavits that were newly created for

purposes of this litigation. The lower courts’ holding thut

such secret “regulations” should prevail over the terms of an

agency’s duly promulgated and published regulations is a

novel and dangerous distortion of administrative law princi-

ples that requires review and correction by this Court.

CONCLUSION

The lower courts’ holding directly affects thousands of

former servicemen and women who honorably served their

country, engaged in no misconduct, and were discharged

against their will because they did not succeed in meeting

fitness or weight standards. Whether they and others like

them should be required to return bonus payments offered as

an inducement for their service — under a statute designed to

apply only to service members who engage in misconduct or

voluntarily leave the service before their enlistment expires

—is an issue of substantial importance.

The application of the lower courts’ novel decisional

principles is particularly unfair in this case because of the

21

significant reliance interests at stake. When petitioners (some

of whom already had weight problems) accepted the gov-

ernment’s offer of a bonus and signed their enlistment or

reenlistment contracts, they were entitled to rely on the pub-

lished rule assuring them that they could keep their bonuses

unless they engaged in misconduct or quit the service volun-

tarily. Having lived up to their end of the bargain by making

good-faith (albeit unsuccessful) efforts to meet the services’

standards, petitioners should not now be subject to govern-

ment exactions based on covert “regulations” contradicting

both the statute and the agency’s own rules.

The petition for a writ of certiorari should be granted.

Respectfully submitted,

Michael A. Feldman Scott L. Nelson

14 Lincoln Street Counsel of Record

Brunswick, ME 04011 Brian Wolfman

(207) 729-2660 Public Citizen Litigation Group

1600 20th Street, N.W.

Washington, D.C. 20009

(202) 588-1000

Attorneys for Petitioners

Date: March 28, 2003

APPENDIX A

UNITED STATES COURT OF APPEALS,

FEDERAL CIRCUIT.

Bertrand R. FAVREAU, II, Jeffrey D. Thompson, Donna

Marie McCurdy, Ryan D.

Mumme, Bridgit Hallas, Scott Laberge, Thomas L. Fryer,

Lee C.

Marshall, Joseph Tingerthal, James W. Fuller, Roger F.

Sablone, Jr., Robert A.

Bell, Brenda G. Vanness Crista, Patrick N. Turner, and

Charles D. Wiggins,

Plaintiffs-Appellants,

v.

UNITED STATES, Defendant-Appellee.

No. 01-5140.

Dec. 30, 2002.

Michael A. Feldman, of Brunswick, Maine, argued for Plain-

tiffs- Appellants.

Alan J. Lo Re, Trial Attorney, Washington, DC, with him on

the brief were Robert D McCallum, Jr., Assistant Attorney

General; David M. Cohen, Director; and Bryant G. Snee, As-

sistant Director. Of counsel on the brief was Cdr. Robert

Schapler, Department of the Navy, Office of the Judge Ad-

vocate General, of Washington, DC, for Defendant-Appellee.

Before MAYER, Chief Judge, NEWMAN and CLEVEN-

GER, Circuit Judges.

PER CURIAM.

This is a class action suit brought by former members of

the armed forces whose enlistment or reenlistment bonuses

were recouped by the United States after they were separated

2a

from the armed forces for failing to comply with applicable

weight control or physical fitness standards. Upon enlisting

or reenlisting, each service-member received a monetary bo-

nus, which served as additional compensation to be earned on

a pro rata basis during the term of enlistment or reenlistment.

While the facts applicable to each service-member differ

slightly, military records uniformly reflect that they: (1) re-

ceived dietary counseling and participated in remedial weight

or fitness programs; (2) were warned that failure to meet

service standards might result in discharge; and (3) failed to

comply with weight or fitness standards for non-medical rea-

sons.

Between the time of enlistment or reenlistment and dis-

charge the Defense Department issued two memoranda ad-

dressing separation categories. In April of 1983, Assistant

Secretary of Defense Lawrence Korb, under authority dele-

gated by the Secretary of Defense, promulgated a list of sepa-

ration categories that would result in recoupment. The Korb

memorandum was later submitted to the Military Pay and

Allowance Committee in a proposal to revise paragraph

10942 of the Department of Defense Pay Manual. On March

10, 1992, Assistant Secretary of Defense Christopher Jehn

issued a memorandum creating a new separation category

called “weight control failure” and directed use of this cate-

gory by all of the armed forces. The Jehn memorandum

stated that the “weight control failure” category was created

to resolve disparity among service separation policies and

provide for equitable treatment.

In 1998, Favreau was separated from the Army for failure

to comply with weight control standards. The Army recouped

the unearned portion of his reenlistment bonus. Favreau initi-

ated a civil action in the District Court for the District of

Maine challenging the recoupment, and the case was trans-

ferred to the United States Court of Federal Claims. Count

one of the complaint alleged that the government breached

enlistment or reenlistment contracts. Count two alleged that

3a

the recoupment of the unearned portion of bonuses was an

illegal exaction because it violated the Department of De-

fense Financial Management Regulations and provisions of

the Military Pay and Allowance Act, 37 U.S.C. §§ 308 and

former 308a.!

The court granted the government’s motion to dismiss

count one of the complaint, holding that the duty to pay

service-members their bonuses is not contractual. It granted

the government’s motion for summary judgment as to count

two, holding that the Department of Defense’s interpretation

of the statutory provisions that permit recoupment when

service-members fail to maintain weight control or physical

fitness standards was reasonable and consistent with congres-

sional intent. The court also denied Favreau’s cross-motion

for summary judgment, holding that the Department of De-

fense’s interpretation of the statutory provisions to permit

recoupment when service-members fail weight or physical

fitness standards was reasonable and that Department of De-

fense Financial Management Regulations are not inconsistent

with sections 308 and former 308a. The court also said the

armed forces’ recoupment practice did not violate Depart-

ment of Defense Financial Management Regulations.

For the reasons well stated in its opinion reported at 49

Fed. Cl. 635 (2001), which we adopt and set out here in an

attachment, the judgment of the Court of Federal Claims is

affirmed.

AFFIRMED.

' Effective October 1, 2000, 37 U.S.C. § 308a was repealed by

amendments made to subsection (b) of 37 U.S.C. § 309.

4a

APPENDIX B

ATTACHMENT

Bertrand R. FAVREAU, II., et al., Plaintiffs,

v.

The UNITED STATES, Defendant.

No. 99-339C.

United States Court of Federal Claims

June 28, 2001.

Michael A. Feldman, Brunswick, Me., for plaintiffs.

Alan J. Lo Re, Commercial Litigation Branch, Civil Divi-

sion, Department of Justice, argued for defendant. With

whom on the brief were Reid Prouty, Trial Attorney, Com-

mercial Litigation Branch, Civil Division, Department of

Justice, Bryant G. Snee, Assistant Director, Stuart E. Schif-

fer, Acting Assistant Attorney General, David M. Cohen, Di-

rector, and LCDR John Hannink, Office of the Judge Advo-

cate General, Department of Navy.

OPINION

BRUGGINK, Judge.

This is a class action brought by former members of the

United States Armed Forces who were separated from their

respective services’ because they failed to meet weight

and/or physical fitness standards. Plaintiffs do not challenge

their separations but instead challenge the services’ recoup-

ment of bonuses to which they became entitled at the time

they agreed to enlist or re-enlist in the services.

There are two causes of action. Count One alleges that

the government breached plaintiffs’ enlistment or

' The term “services” refers to the Army, Navy, Air Force, and Ma-

rine Corps.

5a

reenlistment contracts. Count Two alleges that recoupment

was an illegal exaction because it violated provisions of the

Military Pay and Allowances Act which authorize the pay-

ment and recoupment of bonuses? and the Department of De-

fense Financial Management Regulations (“FMR”).° Pend-

ing are defendant’s motion to dismiss and plaintiffs’ motion

for summary judgment with respect to Count One.* Also

pending are cross motions for summary judgment with re-

spect to Count Two. The motions have been fully briefed and

orally argued. For the reasons discussed below, we grant de-

fendant’s motion to dismiss Count One and grant defendant’s

motion for summary judgment with respect to Count Two.

BACKGROUND

Each service has the authority to determine the standards

that individuals must meet to remain a member of the United

States Armed Forces. See 10 U.S.C. § 1169 (1994). It is un-

disputed that the representative plaintiffs failed to satisfy

such requirements with respect to weight control or physical

fitness. This was the underlying reason for their discharges. It

is undisputed, moreover, that plaintiffs’ failures to meet

_ weight or fitness standards were not caused by medical con-

ditions. Nor were they separated until they had received

counseling, had participated in remedial weight or physical

fitness programs, and had been warmed that failure to meet

standards might result in discharge. Plaintiffs did not ask to

be separated, however.

When a service member is separated for failing these or

any other standards, a reason for the separation is assigned

237 U.S.C. §§ 308 and 308a (1994 & Supp. IV 1998).

3 DoD FMR Vol.7a, Ch.9, Special Pay: Enlistment and Reenlistment

Bonus-Enlisted Members, 4] 0901-090406 (2000).

* In defendant’s initial dispositive motion, it moved to dismiss plain-

tiffs’ contract claim pursuant to 12(b)(1) for a lack of subject matter ju-

risdiction.

6a

pursuant to directives of the Secretary of Defense. DoD Di-

rective 1332.14 4 E.2 (Dec. 21, 1993). This Directive sets out

guidelines for the separation of service-members and estab-

lishes certain grounds for discharge, although the services in

their individual regulations may create additional reasons.”

Directive 1332.14, Pt. 1, § P. The precise separation catego-

ries assigned with respect to plaintiffs thus varied by service

and depending on when they were discharged. When the un-

derlying reason for separation was weight control failure or

failure of physical standards, one of three separation catego-

* Navy regulations, for example, provide for the following:

Expiration of Service Obligation

Selected Changes in Service Obligation

Convenience of the government Disability

Defective Enlistments and Inductions

Entry Level Performance and Conduct

Unsatisfactory Performance

Homosexual Conduct

Drug Abuse Rehabilitation Failure

Alcohol Abuse Rehabilitation Failure

Misconduct

Separation in Lieu of Trial by Court Martial

Security

Unsatisfactory Participation in the Ready Reserve

Weight Control Failure

Secretary of the Navy Instruction (“SECNAVINST”) 1910.4B (29 May

1996). The services may alter the name somewhat or may choose to com-

bine certain categories. For instance, the Air Force combines the alcohol

and drug abuse rehabilitation failure under one category called “substance

abuse treatment failure.” See Air Force Instruction (“AFI”) 36-3208, Ch.

5, Section F (14 October 1994). For the most part, the other services’

regulations contain substantially the same reasons for separation. See

Army Reg. 635-200 (26 July 1996); AFI 36-3208 (14 Oct. 1994); Marine

Corps Order (“MCO”) P1900.16E (18 Aug. 1995).

es eeeeeeeenerereneennereneneemniemiiineeaiineiianiaiiiel

7a

ries® were used: unsatisfactory performance,’ convenience of

the government, and, after 1992, weight control failure.*

' “Unsatisfactory performance” and “convenience of the govern-

ment” can be considered separation categories in that they can embrace

more than one type of underlying cause. For example, in the Air Force, a

member can be separated under the category “unsatisfactory perform-

ance” for failing “to meet minimum fitness standards,” for failing to

“maintain standards of dress and personal appearance ...,” for failing to

“progress in on-the-job training ...,” or for “irresponsibility in the man-

agement of personal finances.” See AFI 36-3208, Ch.5, 5.26, 26.2, 26.3,

26.4. Similarly, a member can be separated under the category “conven-

ience of the government” in order to, among other things, further his or

her education, because he or she is a sole surviving son or daughter, or a

conscientious objector. See AFI 36-3208, Ch. 3, Section B, ¥ 3.18, J 3.12,

{ 3.16 (14 October 1994).

” Until March 10, 1992, the Air Force and Marine Corps separated

members who failed weight standards under the category “unsatisfactory

performance.” All of the services, except the Navy, currently separate

members who fail fitness standards under that category as well. See Army

Reg. 635-200 Ch. 13-2(f) (stating that separation proceeding for unsatis-

factory performance is required for soldiers without medical conditions

who fail Army Physical Fitness Test two consecutive times); Air Force

Instruction 36-3208 (14 Oct. 1994) (stating that failure to meet minimum

fitness standards for reasons not related to disability is a possible basis for

separation under the category for unsatisfactory performance); Marine

Corps Sep. and Ret’t Man. P1900.16E (18 Aug. 95) P6206 at 6-19 (inter-

preting the failure of fitness tests to be “[p]erformance of assigned tasks

and duties in a manner that is not contributory to wnit readiness and/or

mission accomplishment...” which is one of the general criteria for an

“unsatisfactory performance” separation). The Navy, because it has a

combined weight and physical fitness program, separates members who

fail either weight or fitness standards under the same category, “weight

control failure.”

* The Army and Navy are the only services to have separated mem-

bers who fail weight or fitness standards under the category for “the con-

venience of the government.” The Navy separated members who failed

weight and fitness standards under this category until March 3, 1993, and

the Army separated members who failed weight standards under this

category until June 11, 1993. These services stopped using the category

in response to the Jehn memo, see infra p. 11. Since the Jehn meio was

issued, a service-member who fails weight standards _is separated for

(Footnote continued)

8a

It is also undisputed that when one of these separation

categories was assigned due to underlying issues of weight

control failure or lack of physical fitness, the services each

recouped unearned portions of the service member’s enlist-

ment or re-enlistment bonus. Hence this litigation.

There are two code provisions governing recoupment,

one dealing with enlistment bonuses and the other with

reenlistment bonuses. They provide in pertinent part:

(d)(1) A member who voluntarily, or because of his

misconduct, does not complete the term of enlistment

for which a bonus was paid to him under this section ...

shall refund the percentage of the bonus that the unex-

pired part of his additional obligated service is of the

total reenlistment or extension period for which the bo-

nus was paid.

37 U.S.C. § 308(d)(1)(emphasis added).

(b) Under regulations prescribed by the Secretary of

Defense ... a person who voluntarily, or because of his

misconduct, does not complete the term of enlistment

for which a bonus was paid to him under this section ...

shall refund that percentage of the bonus that the unex-

pired part of his enlistment is of the total enlistment pe-

riod for which the bonus was paid.

37 U.S.C. § 308a(b)(emphasis added).

The Secretary of Defense is granted explicit authority to

implement these provisions through regulations, and has

done so. Those regulations are considered below. A complete

understanding of the services’ interpretation of these code

sections requires examination of additional sources, however:

specifically, the separation directive referenced above,

memoranda, and several affidavits unique to the litigation.

~

“weight control failure.” The Army uses “failure to meet body fat stan-

dards.” See Army Reg. 635-200, Ch. 18, p.69 (26 June 1996).

9a

The court will assume for the moment that it can rely on

these affidavits for the purpose of setting out the Secretary’s

interpretation of the statutory and regulatory language.

Bonuses are not offered to all personnel. Rather they are

used as incentives to recruit or keep individuals with certain

specialties. The representative’s enlistment “contracts” con-

tain, for example, such language as the following: “I fully

understand that continued entitlement to the Enlistment Bo-

nus may be terminated and a »ro-rata portion of my Enlist-

ment Bonus may be recouped if I am considered not techni-

cally qualified in the bonus specialty ... because (a) I am no

longer classified in that NEC ... for any of the following rea-

sons within my control: ... loss of any other mandatory quali-

fication for effective performance ... when such ... loss is

voluntary....”" Def.’s Summ. J. and Mot. to Dismiss App. II at

345.

Insofar as relevant here, recoupment is only possible with

respect to those who “voluntarily” do not complete their

term of service.’ The Department of Defense’s (DoD) inter-

pretation of the term “voluntarily” was furnished by Colonel

Bobby A. Little in his affidavit. Colonel Little is Director,

Officer/Enlisted Personne] Management in the Office of the

Secretary of Defense (OSD). He explains that the Director of

Officer/Enlisted Personnel Management (OEPM) with the

OSD is delegated authority for, among other things, recoup-

ment practices and policies service-wide. OEPM is also re-

sponsible for implementing directives of the Secretary of De-

fense or the Secretary’s designees. OEPM, according to

Colonel Little, has

* Although the statutes provide that recoupment is also appropriate

when a service member fails to complete a term because of misconduct,

defendant justifies the government’s recoupment based on its interpreta-

tion that the plaintiffs have failed to complete their terms voluntarily.

~

eee ne

. 10a

determined that the question whether an individual has

failed to complete a term of enlistment “voluntarily”

depends on whether the service-member was separated

for engaging in conduct that is within the control of the

service-member but incompatible with military service.

In that regard, we have not limited recoupment to sepa-

rations granted at the request of the service-member;

rather, even where the military service initiates the

separation, we have concluded that recoupment is ap-

propriate if the conduct that resulted in the separation

was voluntary, i.e., within the service-member’s con-

trol.

... The [separation] codes that trigger recoupment are

agreed upon by the services and my office ....

DoD thus interprets the term “voluntarily” to refer to

whatever the service member did or did not do to prompt

separation. So long as there is counseling and an opportunity

to overcome deficiencies, and so long as persons with medi-

cally-diagnosed problems that interfere with weight reduction

or maintaining physical fitness may not be separated for

weight control failure or lack of physical fitness, the failure

to meet standards is deemed volitional. The focus is thus not

on the characterization of the separation itself but on the

service member’s actions or inactions leading to separation.

Colonel Little goes on to explain that, in order to imple-

ment its interpretation of the recoupment statutes, DoD has

designated certain separation categories for use when the un-

derlying reason for separation is weight control failure or

lack of physical fitness. These have -varied over time and by

service, but they consist of the three categories used to sepa-

rate plaintiffs in this case: weight control failure, unsatisfac-

tory performance, and convenience of the government. The

DoD has also directed that when these categories are used

lla

due to weight control failure or lack of physical fitness, cer-

tain codes which relate to the category trigger recoupment.’?

This explanation is consistent with what happened to

plaintiffs here. They failed weight control or physical fitness

standards; they had been afforded the opportunity to meet

those standards; they did not have medical problems pre-

venting compliance; they were separated under one of the

three triggering separation codes; and their bonuses were re-

couped.

Portions of this practice can be traced directly to the sepa-

ration directives and to memoranda that will be examined

below. The critical connection between DoD practice and the

phrase “voluntarily ... fails to complete the term of service,”

however, is only drawn in writing by Col. Little’s affidavit.

The underlying rationale is not captured in the regulations

governing financial matters, including those dealing with re-

coupment.

The connection between recoupment and separation cate-

gories is established in two memoranda. The first is an April

13, 1983 memo from Assistant Secretary of Defense, Law-

rence Korb,'' with respect to when the services were to re-

coup bonuses. In pertinent part, the Korb memo provides:

'° The affidavit of Erwin J. Wybenga, Deputy Director of the De-

fense Joint Military Pay System of the Defense Finance and Accounting

Service (DFAS) amplifies Little’s explanation.

'' The Korb memo is a regulation entitled to the force and effect of

law. See Hamlet v. United States, 63 F.3d 1097, 1105 (1995) (setting out

four part test to determine if agency publication is entitled to force and

effect of law). Assistant Secretary of Defense Korb had the authority to

issue the memorandum. Under the recoupment provisions, the Secretary

of Defense is granted the authority to prescribe regulations to carry out

recoupment. 37 U.S.C. §§ 308(f) and 308a(b). The Secretary of Defense

has delegated this grant of authority to the Assistant Secretary of Defense.

In 1984, this delegation was to the Assistant Secretary of Defense for

Manpower, Reserve Affairs, and Logistics, (MRA & L) Lawrence Korb.

DoD Directive 5124.1 | F.1 (July 26, 1982). Pursuant to this delegation,

(Footnote continued)

12a

The purpose of this memorandum is to ... standardize

the reasons for which recoupment of bonuses is re-

quired.

Attached is a list of reasons from the Enlisted Separa-

tions Directive (DoDD 1332.14) ... for which we will

recoup enlisted bonuses. In order to complete the stan-

dardization process, request you [sic] furnish this office

a complete list of separations reasons ... used each

Service. Please annotate on the Service’s list the rea-

sons/does that correspond to the attached list of separa-

tion reasons ....

After review, these lists will be provided to the OSD

Comptroller for incorporation in the DoD Pay Manual.

Def’s. Suppl. Br.App. at 1.

Attached to the Korb memo was a list of separation cate-

gories entitled “Enlisted Bonus Recoupment Reasons.””? In-

Korb was granted the authority to “issue instructions and one-time direc-

tive-type memoranda ... which carry out the policies approved by the Sec-

retary of Defense in assigned fields of responsibility.” DoD Directive

5124.1 | F.1 (July 26, 1982). Included in his responsibilities was the

compensation of service-members. See DoD Directive 5124.1 J D.9 (July

26, 1982).

'2 Gloria D. Harris, the individual responsible for implementing the

laws, regulations, and policies related to the payment of personnel in all

of the services, stated in her affidavit that:

The “reasons” for separation set forth in the [FMR] list ...

were taken from the categories of separation contained within the

DoD Directive and/or Service regulations that deal with the sepa-

ration of enlisted personnel.

When a member’s conduct results in separation under a par-

ticular category of separation contained within the separation

regulations of that member’s service, that category of separation is

used to make the recoupment determination.

(Footnote continued)

13a

cluded on the list were “Convenience of the Government”

and “Unsatisfactory Performance.” Not included on the list,

because it was not yet a separation category, was “Weight

Control Failure.” The memo says nothing about limiting re-

coupment to those service members who request separation.

The reference in the Korb memo to the DoD Pay Manual

was to what was later to become the FMR. Responsibility for

incorporation of directives such as the Korb memo into the

FMR fell to the Military Pay and Allowances Committee

(“MPAC”), later renamed the Defense Finance and Ac-

counting Service (“DFAS”). This organization has responsi-

bility for drafting and maintaining financial regulations. In

addition, at the direction of the Under Secretary of Defense

Comptroller/Chief Financial Officer, it also has responsibility

for executing recoupments. Although DFAS maintains the

relevant recoupment regulations, according to Nelson Toye,

the Deputy Chief Financial Officer for DoD, the substance of

the regulations must come from directives of the Assistant

Secretary of Defense for Force Management Policy, in this

case, Korb.

After the Korb memo DFAS amended existing recoup-

ment regulations, in pertinent part, as follows:

Reasons for Recoupment. For purposes of recoupment

of any unearned portions of enlistment or reenlistment

bonuses, the term “who voluntarily or because of mis-

conduct” includes (but is not limited to) members sepa-

rated for the reasons listed below:

A. Transfer to Fleet Reserve, Fleet Marine Corps Re-

serve, or the Army or Air Force Reserve ... with release

In other words, the category of separation under which a

member was separated provides the proper point of entry into

paragraph 090403 when making the recoupment determination.

Def’s Opp. and Reply App. at 95-96.

14a

to inactive duty before expiration of the number of

years’ service for which a bonus was paid.

B. Marriage--female member.

C. Resignation-separation by reason of acceptance of

member’s resignation ....

D. As a result of a writ of habeas corpus

E. Reduction to permanent grade member voluntarily

separated, or transferred to a Reserve Component if re-

quired by law, following reduction to a lower perma-

nent grade from a higher temporary grade in which the

member was erroneously reenlisted.

F. Disability not in the line of duty.

G. Approved sentence of court-martial or conviction by

a civil court.

H. Misconduct.

I. Homosexuality

J. Defective enlistment (includes erroneous and

fraudulent enlistments).

K. Entry level performance and conduct.

L. Unsatisfactory Performance.

M. Drug and alcohol rehabilitation failure.

N. As Directed by the Secretary of the Military Service

concermed in individual cases. Includes ... for the con-

venience of the government upon the application and

interest of the member because of special or unusual

circumstances including, but not limited to, the follow-

ing:

4. Sole surviving family member.

6. Overweight/obesity or lack of physical fitness.

15a

DoDPM 4 10942.'? This new version of the recoupment

regulation was intended to “incorporate[ ] the contents of the

[Korb] memorandum of 13 April 1983.” Def.’s Suppl. App.

at 39.

The Korb memo was followed in March 1992 by a memo

from Assistant Secretary of Defense Christopher Jehn. Jehn

directed the creation of a new separation category for

“weight control failure.” He also directed that this category

be treated the same for benefit eligibility purposes as separa-

tion for “drug and alcohol abuse rehabilitation failure.” '*

Pursuant to the Korb memo, the services had been directed to

recoup from members separated for drug or alcohol abuse

failure. The FMR provisions with respect to recoupment have

not been amended in light of the Jehn memo.

The preamble to the FMR provision refers to reasons for

separation, and the ones listed are very similar to comparable

categories of separation. In one notable respect, however,

there is a difference. Subdivision N of J 090403 references

separations for the “convenience of the government,” but

refers to the “application and interest of the member” and

lists, among other convenience separations, “over-

weight/obesity or physical fitness.” § 090403(N)(6). This

gives rise to plaintiffs’ argument that the services could only

'’ Paragraph 10942 of the DoDPM was renumbered as q 090403

when the FMR was created.

'* The Jehn memo provides, in pertinent part, as follows:

To resolve the disparity among Service separation policies and

to provide for more equitable treatment of our members, I am es- '

tablishing a new separation category in DoDD 1332.14, called

“Weight Control Failure.” When the sole reason for separation is

failure to meet weight standards and the member’s performance

and conduct otherwise comport with established standards, the

member will be separated under this category. This category is

similar to existing categories of separation for Drug and Alcohol

Abuse Rehabilitation Failure and will be treated similarly for bene-

fit eligibility.

16a

recoup pursuant to subdivision N and only from individuals

who requested separation.

During the relevant time only the Army and the Navy

used the separation category “for the convenience of the

government” for members who failed to meet weight or

physical fitness standards. Unlike other convenience separa-

tions, those regulations made no provision for members “ap-

plying for” or showing an “interest in” separation when the

underlying reason was weight control or physical fitness fail-

ure. See Navy Personnel Manual, Article 3620200 (15 Aug.

1991); Army Reg. 635-200, Ch. 5, J 5-15 (15 Oct. 1985);

Army Reg. 635-200, Ch.2, Section II, Notification Proce-

dure, J 2-2 (17 Oct. 1990).

Defendant calls attention to the fact that the preamble to

the recoupment regulation states that the list is not intended

to be exhaustive. It recites that “[T]he term ‘who voluntarily

or because of misconduct’ includes (but is not limited to)

members separated for the reasons listed below ....” {

090403.

In response to the court’s request for supplemental brief-

ing, defendant filed the Nelson Toye affidavit addressed to

the apparent inconsistency between the separation categories

developed in response to DoD Directive 1332.14 and the list

of separation categories in J 090403 of the FMR. In his affi-

davit, Nelson Toye acknowledges that the FMR may be a

less-than-faithful rendition of the Korb and Jehn memos, but

he emphasizes that the FMR does not have the authority to

deviate from the substance of the Korb and Jehn memos. It

would be beyond the purview of DFAS to write them in that

way. Its function is purely that of codifier. Defendant fur-

nishes the relevant delegations to illustrate the respective dif-

ferences of authority between DFAS and the Assistant Sec-

retaries of Defense (for Manpower, Reserve Affairs, and Lo-

17a

gistics as of 1983; for Force Management and Personnel as of

1992).

It is undisputed that the services have, without exception,

applied the FMR in a manner consistent with the govern-

ment’s explanation, i.e., they have not limited recoupment to

personnel discharged for the convenience of the government,

nor have they conditioned recoupment on “the application

and interest of the member,” even for discharges for the con-

venience of the government. Moreover, they have imposed

limitations on recoupment that are consistent with DoD’s po-

sition that most weight control or physical fitness failures are

volitional, i.e., recoupment did not occur until an opportunity

for improvement was afforded and there was no recoupment

if there were medical reasons for failure.

DISCUSSION

I. PLAINTIFFS’ BREACH OF CONTRACT CLAIM

Count One of the complaint alleges that recoupment

breached plaintiffs’ enlistment and/or re-enlistment contracts.

Plaintiffs base their contract claim on the following language

in their enlistment and re-enlistment documents: “As a mem-

ber of the Armed Forces of the United States, I will be: ... (5)

Entitled to receive pay, allowances, and other benefits as

provided by law and regulation.” D/D Form 4/1, C, 9(a)(5).

Plaintiffs claim that recoupment constitutes a failure to pro-

vide the pay, allowances, and other benefits as provided by

'S MPAC did not have the authority to “reject” Secretary Korb’s di-

rections and thereby establish agency recoupment policy. See DoD Di-

rective 5154.13 (Feb. 11, 1980). It was required to refer all “matters re-

quiring personnel policy resolution” to the Assistant Secretary of Defense

(MRA & L), who, at the time, was Lawrence Korb. Jd. He was the only

individual with the authority necessary to change the agency’s recoup-

ment policy. The Korb memo is in fact listed as one of the sources in the

bibliography to the FMR’s pay provisions. See DoD FMR Vol. 7A, Bib-

liography, B-10 (July 1996).

18a

law and thus constitutes a breach of their enlistment or

reenlistment contracts.

The duty to pay the servicemen their bonuses is not con-

tractual, however, and the mere reference to the “entitlement

to pay, allowances, and other benefits” in their enlistment

and/or re-enlistment contracts does not transform it into a

duty which, if violated, gives rise to contractual damages. See

United States v. Larionoff, 431 U.S. 864, 869, 97 S.Ct. 2150,

53 L.Ed.2d 48 (1977). It is well-established that “a soldier’s

entitlement to pay is dependent upon statutory right.” See

Bell v. United States, 366 U.S. 393, 401, 81 S.Ct. 1230, 6

L.Ed.2d 365. Count One, in short, fails to state a claim upon >

which relief can be granted. See Wyatt v. United States, 2

F.3d 398, 402 (Fed.Cir.1993). The appropriate way to evalu-

ate the merits of plaintiffs’ claim is by examining the statu-

tory and regulatory provisions. —

II. CROSS-MOTIONS FOR SUMMARY JUDGMENT

ON COUNT TWO

Does DoD’s Interpretation Violate Statutory Provisions?

In Count Two plaintiffs contend that the recoupment stat-

utes and regulations do not allow for recovery of their bo-

nuses. Therefore, recoupment constitutes an illegal exaction,

which is grounds for recovery under the Tucker Act. See 28

U.S.C. § 1491(a)(1) (1994 & Supp. V 1999); Eastport S.S.

Corp. v. United States, 178 Ct.Cl. 599, 605-606, 372 F.2d

1002 (1967).

Plaintiffs’ first argument is that the agency’s practice of

recoupment is at odds with the clear meaning of the language

of the recoupment statutes themselves. They contend that the

failure of a service member to “complete the term of enlist-

ment” has obvious reference to the administrative act of

separation. In that context, the term “voluntarily” allegedly

has a well-established meaning, namely, that the service

19a

member has applied for separation.'® Under certain circum-

stances not applicable here, the member can indeed request

separation and it is common to refer to requested separations

as voluntary and non-requested separations as involuntary.

Plaintiffs also rely on the dictionary definition of volun-

tary: “in a voluntary manner, of one’s own free will.” Web-

ster’s Unabridged Dictionary at 2049 (1979). Pointing to the

separations themselves, plaintiffs contend that they were

clearly not separated “in a voluntary manner.” They were

never asked if they agreed to their discharges.

Plaintiffs’ definition, however, and indeed their entire

approach, begs the question, “Is what voluntary?” It is true

that the administrative act of separation itself was not volun-

tary in any meaningful way. Indeed defendant has stipulated

that it “involuntarily separated plaintiffs.” The term “sepa-

ration,” however, is not used in the recoupment provisions. '”

The relevant phrase is, “complete the term of enlistment.”'®

'° Plaintiffs also argue that the use of “misconduct” as an alternative

ground for recoupment means that the term “voluntarily” cannot involve

any “conduct.” We disagree. Assuming that the actions and inactions of

plaintiffs can be characterized as “conduct,” it does not follow that the

alternative grounds for recoupment are inconsistent. “Conduct,” of neces-

sity, is a broader concept than “misconduct,” which, in any event has

been given special meaning as grounds for separation. See, e.g., Do

Directive 1332.14, Pt. 1, | K.1 (a)(1)-(4) (listing the following as reasons

for separation for misconduct: minor disciplinary infractions, a pattern of

misconduct consisting of (a) discreditable involvement with civil or

military authorities or (b) conduct prejudicial to good order and disci-

pline, commission of a serious offense, or civilian conviction.).

'’ This is what distinguishes the present case from those relied on by

plaintiffs which deal with involuntariness in the narrow context of deter-

mining whether the court has jurisdiction, which depends in tum, on

whether the cessation of pay, i.e. separation, was involuntary. See, e.g.,

Canonica v. United States, 41 Fed.Cl. 516 (1998); West v. United States,

35 Fed.Cl. 226 (1996); McIntyre v. United States, 30 Fed.Cl. 207 (1993).

'® Because we find the statutory language refers to the voluntariness

of the underlying behavior and not the act of separation, we respectfully

(Footnote continued)

20a

The actor in the case of separation is the agency; in the case

of non-completion of the term of service, it is the service

member. What the government contends is that, because the

underlying reasons prompting separation relate to acts of vo-

lition and because these actions were known by the service

members to lead to separation, the early termination of the

enlistment is also voluntary.'”

Plaintiffs argue that the statutory language is plain on its

face. We disagree. The statutory provisions do not make it

clear whether only those who request separation voluntarily

come to the end of their enlistment. No part of the phrase

“voluntarily ... does not complete the term of enlistment” is

defined in this context in the code itself. The language, in

short, is susceptible of both parties’ readings, and is thus am-

biguous.

The DoD is given explicit authority to adopt interpretive

regulations, and it has done so. An examination of those

regulations would normally be the next step in applying the

statutes. As explained above, however, by themselves the

regulations are insufficient to understand the agency’s inter-

pretation. What has been offered by way of explanation in

disagree with the court in /liff v. Schlessinger, 539 F.2d 1275 (10th

Cir.1976).

'? We recognize, as will be discussed in connection with whether the

agency violated its own regulations, that the agency used separation cod-

ing as the device to trigger recoupment. This confused the briefing, as did

the government’s quixotic insistence that the court should only be con-

cerned with separation categories. Fortunately for the government, neither

argument is inconsistent with the agency’s interpretation of the term

“voluntarily.” The critical initial link in the agency’s practice and expla-

nation is that the failure of weight or physical fitness standards, rather

than the separation, is seen as volitional. Only as a matter of a¢ininistra-

tive shorthand do the recoupment memoranda and regulatiors then clas-

sify certain separation codes as subject to recoupment, but only because

the agency has already determined that the action or inaction was voli-

tional and known to lead to discharge.

2la

this case consists of directives relating to separation, memo-

randa relating to recoupment, DoD’s financial regulations,

and actual agency practice; all knit together by the affidavit

of Col. Little. It is only by considering this package that one

could discern the relevant unifying interpretation: DoD views

a failure to meet weight and fitness standards, under most

circumstances, as volitional, and separations resulting there-

from mean that the service members “voluntarily” failed to

coinplete their term of service. It is immaterial to this view

that the service members did not request separation. -

Determining whether this interpretation carries out the

intent of the statute depends in part on whether the agency

view is entitled to any deference. The court’s guidelines in

this respect are drawn from Chevron U.S.A., Inc. v. Natural

Resources Defense Council, Inc., 467 U.S. 837, 104 S.Ct.

2778, 81 L.Ed.2d 694 (1984). In general terms, if Congress

has not spoken to the question at issue, and there is an “ex-

press delegation of authority to the agency to elucidate a spe-

cific prov:sion of the statute by regulation,” the court will

defer to the agency’s interpretation so long as it is not “arbi-

trary, capricious, or manifestly contrary to the statute.”

Chevron U.S.A., 467 U.S. at 843-44, 104 S.Ct. 2778. We

cannot disturb the Secretary’s construction of the statute “if

it reflects a plausible construction of the plain language of the

statute and does not otherwise conflict with Congress’ ex-

. pressed intent.” Rust v. Sullivan, 500 U.S. 173, 184, 111

S.Ct. 1759, 114 L.Ed.2d 233 (1991) (citing Chevron U.S.A.,

467 U.S. at 842-43, 104 S.Ct. 2778).

Although there has been an express delegation of author-

ity here, the issue is clouded by the fact that the agency’s in-

terpretation is not artfully expressed. Indeed, one of the

plaintiffs’ arguments is that the interpretation offered in the

affidavits, which admittedly is consistent with practice, is

inconsistent with the FMR.

The degree of deference to which less formal expressions

of agency interpretation, such as administrative practice, are

22a

entitled was addressed recently by the Supreme Court in

United States v. Mead Corp., 121 S.Ct. 2164, 2168 (2001).

The Court held that “administrative implementation of a par-

ticular statutory provision qualifies for Chevron deference

when it appears that Congress delegated authority to the

agency generally to make rules carrying the force of law, and

that the agency interpretation claiming deference was prom-

ulgated in the exercise of that authority.” Jd. at 2170-71.One

of the indicia of entitlement to deference is the conclusive-

ness with which Congress has invested the agency with in-

terpretive powers. /d. at 2172.In Mead, the Court found that

thé delegation to the United States Customs Service was less

than conclusive, and thus its interpretive rulings were not en-

titled to the full weight of Chevron deference.” Jd. at 2173-

75.

The indicia that the agency’s construction here is entitled

to Chevron deference are considerably greater than in Mead.

First, the delegation of interpretive regulatory authority here

is explicit. Second, the Korb and Jehn memoranda are of

considerably more gravitas than the approximately 10,000

annual individual letter rulings of Customs’ 46 regional of-

fices. Here, the Assistant Secretary was the delegee for an-

nouncing service-wide what DoD’s interpretation of the re-

coupment statute would be. Korb’s memorandum instantly

bound all the services to a single practice. Although neither

memoranda was subject to public notice and comment, that

fact does not bar the application of Chevron. Mead, at 2173;

see generally 5 U.S.C. § 553(a)(2) (1994) (exceptions to the

Administrative Procedure Act for matters “relating to agency

management or personnel.”); cf Hamlet, 63 F.3d at 1105

2° Customs’ rulings were, however, potentially entitled to some def-

erence under Skidmore v. Swift & Co., 323 U.S. 134, 65 S.Ct. 161, 89

L.Ed. 124 (1944), based on the agency’s presumed special expertise. Slip

op. at 15.

23a

(Fed.Cir.1995) (explaining that unpublished agency regula-

tions can be entitled to the force and effect of law).

Moreover, the affidavits offered by defendant as evidence

of agency practice are more than mere post-hoc rationaliza-

tion. See Parker v. OPM, 974 F.2d 164, 166 (Fed.Cir.1992)

(refusing to rely on affidavit produced for litigation as evi-

dence of long-standing agency practice where there had been

no official agency interpretation of the statute); Felzien v.

OPM, 930 F.2d 898, 902-03 (1991) (refusing to grant defer-

ence to long-standing agency practice of ignoring regula-

tion’s language). The practice explained in the affidavits is

consistent with the regulations and statutes governing re-

coupment and the agency’s interpretation of them. Moreover,

the agency’s practice of recoupment for certain types of dis-

charges irrespective of “application and interest” has not

varied. This is a critical factor to consider in determining

whether to assign weight to the agency’s interpretation. See

Smiley v. Citibank, 517 U.S. 735, 740, 116 S.Ct. 1730, 135

L.Ed.2d 25 (1996) (“To be sure, agency interpretations that

are of long standing come before us with a certain credential

of reasonableness, since it is rare that error would long per-

sist.”); Rosete v. OPM, 48 F.3d 514, 518-19 (1995) (defer-

ring to agency’s “consistent, long-standing regulatory inter-

pretation of the statute so long as it is reasonable.”’).

DoD’s construction is also not inconsistent with the small

amount of legislative history on point. The first section of the

1951 Senate Report that accompanied the bill that amended

the bonus statutes to provide for recoupment states as fol-

lows:”"

2! Plaintiffs argue that the version of the reenlistment bonus statute

that was amended in 1951 is “substantially different” from the current

reenlistment bonus provision, 37 U.S.C. §§ 308 and 308a. We do not dis-

cer any material difference. Compare Career Compensation Act of

1949, Pub.L.81-351, § 207, 63 Stat. 811 (Oct. 12, 1949), with 38 U.S.C.

§§ 308 and 308a.

24a

The Bureau of the Budget believes that a provision

should be added to the bill which would provide for the

recoupment of unearned bonus money when separation

prior to completion of enlistment takes place if such

separation is not due to physical disability incurred in

the line of duty or otherwise occasioned by circum-

stances beyond the control of the individual.

See S.Rep. No. 82-935 (1951), reprinted in 1951

U.S.C.C.A.N. 2464, 2466. (emphasis added). The second

section, entitled “Discussion of the Bill,” uses different lan-

guage to describe the circumstances for which recoupment

would be appropriate. The section states:

Another provision of the bill, not heretofore contained

in law, permits the recovery of any part of unearned

reenlistment bonuses paid where the persons serving in

such reenlistment voluntarily, or as a result of their own

misconduct, do not complete their term of enlistment.

This provision was gdded to the bill at the suggestion of

the Bureau of the Budget.

Id. at 2465 (emphasis added). The committee’s acknowledg-

ment that the provision was added at the suggestion of the

Bureau of the Budget suggests that the committee meant to

adopt the characterization of voluntariness in the Bureau of

Budget’s version, namely, that it refers to volitional behavior.

In sum, the agency’s practice and its explanation of the

rationale for that practice are fully consistent. See Bowen v.

Georgetown Univ. Hosp., 488 U.S. 204, 212-13, 109 S.Ct.

468, 102 L.Ed.2d 493 (1988). DoD’s interpretation of the

statutory provisions is thus entitled to substantial deference in

determining the meaning of the recoupment statutes. An

agency’s interpretation of its own regulations must be upheld

unless it is “plainly erroneous or inconsistent with the regu-

lation.” Martin v. Occupational Safety & Health Review

Comm'n, 499 U.S. 144, 150-51, 111 S.Ct. 1171, 113 L.Ed.2d

117 (1991). To strike down DoD’s interpretation in this cir-

cumstance would require us to hold as a matter of law, either

25a

that the agency had to treat failure to satisfy weight and fit-

ness standards as non-volitional, or that it had to impose a

requirement that the subsequent separation be at the service

member’s request. Neither holding is dictated by the statu-

tory language or by reason.”” The agency’s contrary determi-

nations are within the range of reasonable interpretations of

ambiguous code provisions.”°

Did the Services Violate the Recoupment Regulation?

A related but alternative argument plaintiffs make is that

"the services can only recoup from service members dis-

charged for failure to meet weight or fitness standards under

subdivision N of ¥ 090403 of the recoupment regulations,

i.e., for the convenience of the government. Moreover, be-

cause this subdivision permits recoupment for service mem-

bers “upon application and interest,” and because none of the

plaintiffs requested their separation, plaintiffs maintain that

the FMR was violated. The practice, in short, was inconsis-

tent with the literal wording of the regulations, according to

” In construing an analogous code provision dealing with recoup-

ment of education costs, the district court in Hensala v. Department of the

Air Force, No. C00-01793 WHA, 2001 U.S. Dist. LEXIS 7398 (N.D.Cal.

May 25, 2001), found that the circumstances surrounding a service mem-

ber’s failure to conceal his homosexuality was conduct calculated to lead

to separation. /d, at *28. The court held that there was substantial evi-

dence to support the service’s decision that the member had thus “volun-

tarily ... fail[ed] to complete the period of active duty ...” as required in

the recoupment statute at issue, 10 U.S.C. § 2005(a)(3). Jd. United States

v. Gears, 835 F.Supp. 1093, 1095 (N.D.Ind.1993), dealing with the same

statute, came to a different result. That case involved a midshipman who

was discharged for, among other things, non-compliance with weight

standards. Although the court appears to reject the government’s broad

reading of the term “voluntary,” it specifically pointed to confusion about

the physical standards applicable to Gears and the absence of evidence

that Gears knew that his particular weight would result in discharge

where he met requirements for maximum percentage of fat. Jd. at 1098-

99.

> Accord Scott v. Lehman, Slip Op. at 13-15 (D.S.C. June 23, 1987).

26a

plaintiffs. This is a legitimate alternative argument. See Fel-

zien, 930 F.2d at 902-03. :

According to defendant, the error in the argument lies in

the incorrect assumption that DoD can only recoup from

members who fail weight or physical fitness standards under

subdivision N. It is undisputed that service members failing

weight or fitness standards could be separated for reasons

other than “convenience of the government.” It was possible

to discharge them for unsatisfactory performance, or, later,

“weight control failure” or its equivalent. Defendant con-

tends, therefore, that recoupment could occur so long as the

service member was discharged for any one of the reasons

listed in J 090403. We agree.

With respect to discharges based on unsatisfactory per-

formance, defendant’s construction is telling. Each of the

listed categories in § 090403 is in the alternative. It is appar-

ent that the references to “Overweight/obesity” or “lack of

physical fitness” in subdivision N merely modify or are ex-

amples of circumstances in which the service may have dis-

charged someone for its own convenience. They cannot rea-

sonably be construed to bar recoupment when the separation

is characterized in some other way.

As to weight control failure, which is not listed as its own

separation category, defendant points out that the regulation

is not limited to listed categories and that the FMR was, in

any event, out of date. It had not been amended in light of the

Jehn memo, which had created a separation category called

weight control failure and had instructed the services to treat

it as equivalent to drug rehabilitation failure for recoupment

purposes. We agree with defendant. The Jehn memo is con-

trolling,’* and the FMR must be read in its light. This means

4 Similar to the Korb memo, the Jehn memo is entitled to the force

and effect of law. See Hamlet, 63 F.3d at 1105. Assistant Secretary Jehn

was acting pursuant to authority delegated to him by the Secretary of De-

fense when he issued the memorandum. See DoD Directive 5124.2 | F.1

(Footnote continued)

27a

that all the categories under which plaintiffs were separated-

convenience of the government, weight control failure, and

unsatisfactory performance-were covered by the recoupment

regulation and thus available as grounds for recoupment.

Plaintiffs’ remaining argument is that, with respect only

to “convenience” terminations,”> J 090403 adds a require-

ment unique to recoupment, namely that the termination had

to be the subject of the service member’s application and in-

terest. We disagree with plaintiffs’ reading of subdivision N.

Weight control failure and lack of physical fitness are among

the reasons that one could be discharged for the convenience

of the government. Invoking that ground for separation is not

contingent upon the “application and interest” of the mem-

ber. That is, however, a concept that applies to other types of

“convenience of the government” separations, for example,

surviving sons or daughters, early release to further educa-

tion, or pregnancy or childbirth.”°

As defendant points out, reading the “application and in-

terest” language as applicable to plaintiffs here would be

anomalous in that, during the time weight control failure was

(Jan. 26, 1990). The Jehn memo appears to be substantive in that it pro-

vides the services with the right to recoup for “weight control failure”

without any prerequisite that the service member request separation.

Moreover, the language of the Jehn memo is mandatory and does not

merely advise the services to take certain action.

>> These separations, insofar as they were predicated on weight con-

trol or physical fitness failure, stopped after the Jehn memo.

**'See Army Reg. 635-200, Ch. 5, Separation for Convenience of the

Government, Section III, Surviving Sons or Daughters, | 5-4 (26 June

1996); SECNAVIST 1910.4B, Enlisted Administrative Separations, Per-

sonnel Separations, Pt.1, Reasons for Separation, | C, Convenience of the

Government, Section 4(a), Early release to further education (29 May

1996); AFI 36-3208, Administrative Separation of Airmen, Ch.3, Volun-

tary Separation Prior to Expiration of Term of Service, Section B, Rea-

sons for Voluntary Convenience of the Government (COG) Separation,

3.17, Pregnancy or Childbirth (14 Oct. 1994).

28a

processed for separation under the “convenience of the gov-

ernment” rubric, it was not possible for service members to

apply or express their interest to initiate such a separation.

The “application and interest” language, in short, merely de-

scribes those circumstances where a service member can ap-

ply for separation under the category “for the convenience of

the government.” It was not intended to nor could it have

imposed an additional element of a separation for conven-

ience.

CONCLUSION

The applicable statutory provisions and the FMR leave

something to be desired in terms of clarity. Recoupment of

plaintiffs’ bonuses did not violate either, however. DoD’s

interpretation of the statutory provisions to permit recoup-

ment when service members failed weight or physical fitness

standards was reasonable. While the FMR recoupment provi-

sions are dated, and, on their face, confusing, when read in

light of current practice and the binding memoranda of the

Assistant Secretaries of Defense, they become coherent. The

FMR is not a violation of the statutory provisions nor did

agency practice violate the FMR. Accordingly, defendant’s

motion to dismiss count I is granted; defendant’s motion for

summary judgment as to count II is granted; and plaintiffs’

cross motion for summary judgment is denied. The Clerk is

directed to enter judgment accordingly. Costs to each party.

29a

APPENDIX C

Defense Department Financial Management Regula-

tion 090503, provides:

Reasons for Recoupment. For purpose of recouping any

unearned portions of enlistment, reenlistment, or reten-

tion bonuses, the term “who voluntarily or because of

misconduct” includes (but is not limited to) members

separated for the reasons listed below:

A. Transfer to Fleet Reserve, Fleet Marine Corps Re-

serve, or the Army or Air Force Reserve ... with release

to inactive duty before expiration of the number of

years’ service for which a bonus was paid. Retirement

for disability is excluded.

B. Marriage - female member.

C. Resignation-separation by reason of acceptance of

member's resignation ....

* D. As a result of a writ of habeas corpus.

E. Voluntary separation, or transfer to a Reserve Com-

ponent, if required by law, following reduction to a

lower permanent grade from a higher temporary grade

in which the member was erroneously reenlisted.

F. Disability not in the line of duty.

G. Approved sentence of court-martial or conviction by

a civil court.

H. Misconduct.

I.. Defective enlistment (includes erroneous and

fraudulent enlistments).

J. Entry level performance and conduct.

K. Unsatisfactory performance.

L. Drug and alcohol rehabilitation failure.

M. As directed by the Secretary of the Military De-

partment concerned (or designee) in individual cases.

30a

Includes voluntary separation, or transfer to a Reserve

Component if required by law; and for the convenience

of the government upon the application and interest of

the member because of special or unusual circum-

stances including, but not limited to, the following:

1. To permit attendance at a civilian school.

2. To permit enlistment in another Military Service.

3. To permit enlistment of aliens in the armed forces

of their country.

4. Sole surviving family member.

5. Conscientious objection.

6. Overweight/obesity or lack of physical fitness.

7. Pregnancy. Recoupment is required only where

member is voluntarily separated, not when preg-

nancy causes loss of qualification in bonus skill.

8. Public office.

9. Parenthood.

10. Personality Disorder. Recoupment is required

for administrative discharges. Recoupment is not

required when member is medically discharged with

a physical disability.

EXCEPTIONS: Hardship and dependency separations

are considered involuntary for the purposes of this

paragraph and do not require recoupment of unearned

portions of a bonus.

O. Reasons established by Military Departments (rea-

sons will be approved by ASD (FMP)). The decision to

recoup will be made by DASD (MPP).

P. See the cognizant Military Services’ procedural

instructions for lists of separation reasons and the

corresponding separation program designator (SPD)

codes.