King v. Office of Pers. Mgmt.

• Decision Date: 13 September 2013
• Docket Number: No. 2012–3061.,2012–3061.
• Parties: Kathryn KING, Petitioner, v. OFFICE OF PERSONNEL MANAGEMENT, Respondent, and Diana M. King, Intervenor.
• Court: U.S. Court of Appeals — Federal Circuit

730 F.3d 1342

Kathryn KING, Petitioner,

v. OFFICE OF PERSONNEL MANAGEMENT, Respondent,andDiana M. King, Intervenor.

No. 2012–3061.

United States Court of Appeals, Federal Circuit.

Sept. 13, 2013.

Matthew J. Dowd, Wiley Rein LLP, of Washington, DC, argued for Petitioner. With him on the brief was Floyd B. Chapman.

Nicholas J. Jabbour, Trial Attorney, Commercial Litigation Branch, Civil Division, United States Department of Justice, of Washington, DC, argued for respondent. With him on the brief were Stuart F. Delery, Acting Assistant Attorney General, Jeanne E. Davidson, Director, and Todd M. Hughes, Deputy Director. Of counsel on the brief was Jessica S. Johnson, Attorney Advisor, Office of General Counsel, Office of Personnel Management, of Washington, DC.

Diana M. King, of Meridian, ID, pro se.

Before RADER, Chief Judge, O'MALLEY, and REYNA, Circuit Judges.

REYNA, Circuit Judge.

Kathryn King (“Kathryn”) appeals the November 10, 2011 final order of the Merit Systems Protection Board (“Board”) that she was not entitled to a waiver of recovery of survivor annuity benefits. We reverse the Board's decision denying a waiver of recovery because the Board failed to credit substantial evidence demonstrating, in accordance with 5 C.F.R. § 831.1403, that Kathryn detrimentally relied on the overpayment of survivor annuity funds.

Background

This appeal is bound up with the marital history of former United States Forest Service employee Don King (“Don”) with two separate women, both of whom claimed to be his wife, and both of whom claimed federal survivor benefits upon his death. Don first married Diana King (“Diana”) in 1967. Don and Diana later divorced in 1980 and remarried in 1981. A year and a half later, their second marriage again ended in divorce, but Don and Diana continued their relationship and shared a home with their two children. Although Don and Diana filed separate tax returns and listed their marital status as “single,” they held themselves out to the community as husband and wife, including sharing household duties, maintaining joint credit card accounts, and celebrating anniversaries of their original marriage.

In 2002, Don moved out of the home he shared with Diana and married the appellant, Kathryn, in a civil ceremony. During Don's marriage to Kathryn, he was treated for cancer, and Kathryn incurred the costs for Don's medical bills and end-of-life treatment. Don passed away from cancer on May 26, 2004, but prior to his death he designated Kathryn to receive his lump-sum accrued federal annuity.

Kathryn and Diana both claimed to be Don's legal wife at the time of his death. Specifically, Kathryn believed she had married Don in a civil ceremony in 2002. Diana maintained that she was the common law wife of Don at the time he married Kathryn. Prior to Don's death, Diana had initiated legal proceedings in the Montana Twenty–First Judicial District Court (“the Montana court”) to dissolve her common law marriage to Don. After Don's death, the case in the Montana court evolved into extensive litigation over the division of Don's estate including, as relevant here, the allocation of his federal annuity from the Civil Service Retirement and Disability Fund. In August 2004, Kathryn became a party to the litigation and moved to dismiss Diana's petition for dissolution of a common law marriage on the basis that Kathryn was Don's legal wife.

On June 15, 2004, with the marriage issue still unresolved, Kathryn and Diana executed a handwritten settlement agreement (“the 2004 Settlement Agreement”) in which Kathryn stipulated to Diana's claim that Diana and Don had a common law marriage and further agreed to assign to Diana any rights Kathryn had in Don's retirement and insurance policies. J.A. 68. Specifically, paragraph 4 stated: “If Kathy should receive any retirement disbursements from Don's retirement, then such payments shall be the property of Diana or returned to the government for disbursement to Diana.” Id. (emphasis added). In turn, Diana agreed to pay Kathryn $50,000 and to assume Don's outstanding medical and funeral expenses. Id.; J.A. 216.

After signing the 2004 Settlement Agreement, Kathryn changed her mind and requested that the Montana court vacate the agreement as unconscionable and unenforceable. Diana responded by seeking to enforce the agreement and seeking damages for breach of contract. During the pendency of the litigation over the 2004 Settlement Agreement, Kathryn filed an application with the Office of Personal Management (“OPM”) for survivor annuity funds as Don's lawful wife. OPM commenced payment of the survivor annuity funds to Kathryn for a period beginning on May 27, 2004, and continued to make these payments until late February 2007.

In July 2005, the Montana court ruled that the 2004 Settlement Agreement was a valid and enforceable contract that deprived Kathryn of a right to contest the common law marriage of Don and Diana. In November 2006, Diana filed for survivor annuity funds from OPM, attaching to her application an affidavit attesting to the validity of her common law marriage to Don, a copy of the 2004 Settlement Agreement, and a copy of the Montana court's determination that the agreement was valid and enforceable. Based on Diana's filings, OPM revoked payment of survivor annuity funds to Kathryn and awarded the benefits to Diana.

Thereafter, Kathryn and Diana entered into a second settlement agreement on February 1, 2008 (“the 2008 Settlement Agreement”). Under the terms of the 2008 Settlement Agreement, Kathryn released any claim to any payment due to her under the 2004 Settlement Agreement—including reimbursement for the cost of Don's medical and funeral expenses—and similarly waived any claim for reimbursement of payments made by Kathryn to Diana, including Don's pension benefits or insurance proceeds. J.A. 72. Diana also waived certain rights, including all claims for attorneys' fees from the earlier proceedings and “all claims to any future pension payment that Kathryn King may receive from the U.S. Government.” Id.

To determine whether Kathryn or Diana were entitled to Don's survivor annuity benefits, OPM requested a declaration from the Montana court on Don's marital status at the time of his death. On February 7, 2008, pursuant to stipulated findings of fact, the Montana court decreed that Diana was “the lawful common law wife of Donald C. King ... from approximately 1984 to the time of his death on May 26, 2004.” J.A. 188. The Montana court declared that Don's marriage to Kathryn was “void as a matter of law,” and found that Diana was entitled “to all rights, benefits, and privileges commensurate with her status as Don's lawful spouse.” Id. On April 13, 2009, the Montana court dismissed the action between Kathryn and Diana with prejudice.

Upon receiving the Montana decree, OPM made a final determination that Diana was eligible for the survivor annuity benefits and it paid Diana the full annuity amount (less taxes).¹ By then, Kathryn had transferred to Diana the survivor annuity funds that she received from OPM, believing this to be in accordance with the provisions in the 2004 Settlement Agreement and the 2005 ruling of the Montana court. Specifically, between January 2005 and March 2007, Kathryn deposited a total of $42,442.29 into a trust account for the benefit of Diana. J.A. 321–27.

Procedural History

Based on the 2008 Montana decree, OPM determined that Diana was Don's survivor and that the money paid to Kathryn was an overpayment. As a result, it sought to recover $41,939.13 from Kathryn.

Kathryn, through her representative, did not dispute that she received annuity payments, but she challenged OPM's effort to recover the money on the basis that she had transferred the monies received to Diana. Kathryn submitted court documentsin support of her assertion that the transfer of funds occurred pursuant to court order, and she argued that OPM should seek refund of the overpayment from Diana. After treating Kathryn's submissions as a request for reconsideration, OPM affirmed its overpayment decision and further determined that collection of the $41,939.13 would not cause Kathryn financial hardship.

Kathryn appealed OPM's decision to the Board. On March 24, 2009, an Administrative Judge issued an initial decision affirming OPM's findings regarding the overpayment because Kathryn did not meet the definition of the term “widow” under the Civil Service Retirement Act, 5 U.S.C. § 8341(a)(1), and had not proved by substantial evidence that she was entitled to waiver for the overpayment. The Administrative Judge acknowledged that Kathryn was without fault in causing the overpayment, but was not satisfied that recovery would be against equity and good conscience. In denying waiver of the overpayment, the Administrative Judge rejected both a theory of detrimental reliance and unconscionability.

The full Board reviewed the Administrative Judge's initial decision and reopened the appeal on its own motion to consider the newly-augmented record. ²See King v. Office of Pers. Mgmt., 114 M.S.P.R. 181, 187 (2010). The Board remanded the case for the Administrative Judge to evaluate whether supplemental evidence demonstrated that the money Kathryn paid into trust for Diana represented the funds Kathryn received from OPM for the time period at issue, and whether exceptional circumstances warranted waiver of repayment. See id. at 191–92.

On remand, the Administrative Judge conducted an accounting of the survivor annuity funds OPM paid to Kathryn and Diana. The Administrative Judge found that Kathryn transferred to Diana $33,563.94 ³ of the $41,939.13 she received from OPM, which resulted in Diana receiving both OPM survivor annuity funds and additional monies paid to her by Kathryn. Notwithstanding the transfer of funds to Diana, the Administrative Judge ruled that Kathryn was not entitled to a waiver of recovery of the overpayment because Kathryn had not...