316 F.3d 1259 (Fed. Cir. 2002), 99-1402, Schism v. U.S.

Docket Nº:99-1402
Citation:316 F.3d 1259
Party Name:Schism v. U.S.
Case Date:November 18, 2002
Court:United States Courts of Appeals, Court of Appeals for the Federal Circuit

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316 F.3d 1259 (Fed. Cir. 2002)

William O. SCHISM and Robert Reinlie, Plaintiffs-Appellants,


UNITED STATES, Defendant-Appellee

No. 99-1402.

United States Court of Appeals, Federal Circuit

November 18, 2002

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George E. Day, Day and Meade, P.A., of Ft. Walton Beach, FL, argued for plaintiffs-appellants. With him on the brief was Timothy I. Meade. Of counsel was Henry M. Holzer, of Santa Fe, NM.

E. Roy Hawkens, Attorney, Appellate Staff, Civil Division, Department of Justice, of Washington, DC, argued for defendant-appellee. With him on the brief were Robert D. McCallum, Jr., Assistant Attorney General; and Barbara C. Biddle, Attorney.

John A. Dragseth, Fish & Richardson, P.C., P.A., of Minneapolis, MN, for amici curiae Disabled American Veterans, et al. With him on the brief was Richard J. Anderson.

Jonathan S. Williams, of Goldsboro, NC, for amicus curiae The Alliance of Retired Military, etc.

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

Opinion for the court filed by Circuit Judge MICHEL, in which Circuit Judges LOURIE, CLEVENGER, RADER, SCHALL, BRYSON, LINN, DYK, and PROST join.

Dissenting opinion filed by Chief Judge MAYER, in which Circuit Judge NEWMAN, Senior Circuit Judge PLAGER, and Circuit Judge GAJARSA join.

Dissenting opinion filed by Senior Circuit Judge PLAGER.

MICHEL, Circuit Judge.

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

Plaintiffs Schism and Reinlie appeal from a summary judgment by the United States District Court for the Northern District of Florida holding that because the promises were not authorized they are not enforceable. Schism v. United States, 19 F.Supp.2d 1287, 1295 (N.D.Fla.1998).

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The district court concluded that because no statute authorized these promises, no valid contract was formed between the government and plaintiffs (or other similarly-situated military retirees, i.e., those who entered service prior to 1956 and by 1995 were 65 or more years of age). See id.

Plaintiffs allege they were "promised full post retirement medical care for themselves and their dependents in military hospitals," First Amended Complaint at 2, and that because for decades Congress funded such free care this promise gave rise to an implied-in-fact contract. They claim the government breached these promises of lifetime free medical care in 1995 by promulgating regulations to implement Tricare (a program that offered government-funded health care by civilian doctors to retirees under age 65), codified at 32 C.F.R. § 199.17.1 See Reply Brief at 2. Indeed, plaintiffs state that "the government forced [them] to go to Medicare and pay for their own medical care." Id. Nothing in the Tricare implementing regulation, however, requires retirees 65 or older to elect Medicare Part B coverage; rather plaintiffs here freely elected to do so, despite the fact that they were still entitled to receive free medical care at military facilities on a space-available basis. See 32 C.F.R. § 199.17(f)(1). Plaintiffs presumably purchased additional medical coverage under Medicare Part B because while they remained entitled to space-available treatment in military facilities, as a practical matter, such space was less often available than before.2 As a result, plaintiffs complain that, whereas in the past they nearly always received complete free care, they now had to pay Medicare Part B premiums in order to receive less care without paying fees.3 Accordingly, the plaintiffs' claim implies that either Congress was obligated to maintain military medicine sufficient for their treatment, or in the alternative, to make them eligible for free health insurance coverage (such as Tricare) enjoyed by retirees under 65. And the damages they seek represent the monthly Medicare fees plaintiffs have paid since 1995. They sued under the Little Tucker Act. See 28 U.S.C § 1346(a)(2) (2000).

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

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

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

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


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

Schism and Reinlie each accumulated 20 years of active duty in the Armed Services. Schism enlisted in the United States Navy in April 1943, and was honorably discharged in February 1946. In 1951, he received an indefinite appointment in the Air Force. In 1956, he began active service, which continued until his retirement in 1979. Thus, his Air Force service alone entitled him to retirement benefits.

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

At the time the retirees joined the Air Force, recruiters allegedly promised free lifetime medical care for them and their dependents in exchange for serving 20 years. Plaintiffs contend that their acceptance of this offer and the government's subsequent practice of providing free medical care formed an implied-in-fact contract. In 1995, however, the government implemented TRICARE, a program that

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essentially modeled the availability of health care benefits for retirees along the lines of a health maintenance organization ("HMO"). See 32 C.F.R. § 199.17. Retired service members who qualify for Medicare under the Social Security Act, however, are not eligible for TRICARE benefits. But TRICARE does allow military retirees over age 65 to maintain the military health coverage that they had previously received for free by paying a monthly Medicare fee, which is deducted from their social security benefit payments.4 On December 11, 1996, plaintiffs brought a Little Tucker Act action5 alleging that the government had breached its implied-in-fact contracts by requiring them to pay for Medicare coverage.6

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

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