Ayers v. U.S. Dep't of Def.
| Decision Date | 30 August 2019 |
| Docket Number | Civil Action No. 7:18-cv-00032 |
| Court | U.S. District Court — Western District of Virginia |
| Parties | KATHERINE ELIZABETH RUTH AYERS, Appellant, v. UNITED STATES DEPARTMENT OF DEFENSE and UNITED STATES DEPARTMENT OF THE TREASURY, Appellees. |
ON APPEAL FROM THE UNITED STATES BANKRUPTCY COURT FOR THE WESTERN DISTRICT OF VIRGINIA ROANOKE DIVISION
Case Nos. BK 17-70928, AP 17-07035
MEMORANDUM OPINIONIn 2008, appellant Katherine Elizabeth Ruth Ayers was discharged from the Air Force Reserve Officer Training Corps (ROTC) after advising her commander that she was a lesbian. The United States Air Force commenced recoupment proceedings to recover funds expended on her behalf under the ROTC program and a scholarship program known as SOAR.
In an adversary proceeding in bankruptcy court, Ayers brought claims for judicial review under the Administrative Procedure Act (APA), 5 U.S.C. § 706, alleging that the pursuit of recoupment by the United States Department of Defense (DOD) and the United States Department of the Treasury (DOT) (collectively the government) is arbitrary and capricious because she is being treated differently than other similarly situated former ROTC participants. Ayers also alleged that recoupment violates her right to due process and equal protection under the Fifth Amendment of the Constitution. The bankruptcy court granted the government's motion to dismiss, and Ayers appealed.
The court agrees with the bankruptcy court that Ayers' claims accrued in 2008, and as a result, they are barred by the six-year limitations period set forth in 28 U.S.C. § 2401. Therefore, and for the reasons stated below, the bankruptcy court's order is affirmed.
Ayers enlisted in the Air Force in July 2002. At the time, the law referred to as "Don't Ask, Don't Tell" (DADT) was in effect. See 10 U.S.C. § 654 (2006), repealed by Don't Ask, Don't Tell Repeal Act of 2010, Pub. L. No. 111-321, 124 Stat. 3515. Under this law, individuals who engaged in homosexual activities were prohibited from serving in the military but would not be denied entry or discharged unless "the member . . . stated that he or she is a homosexual or bisexual, or words to that effect." 10 U.S.C. § 654(b)(2). The implementing directive applicable to the Air Force ROTC was DOD 1304.26 ("Qualification Standards for Enlistment, Appointment, and Induction"). This Directive provided that the military will not ask about an applicant's sexual orientation because sexual orientation "is considered a personal and private matter, and is not a bar to service entry or continued service unless manifested by homosexual conduct." (Appellant's App'x 100037, Dkt. No. 12.)1
In 2005, Ayers applied for and was accepted into a scholarship program to become a commissioned officer. On August 19, 2005, Ayers signed the ROTC contract, which set forth the terms and conditions of her participation in the Air Force ROTC program and the benefits she would receive. In signing the contract, Ayers understood and agreed that to remain in the Air Force ROTC program, she had to "meet or exceed all military, academic, and medical retention standards prescribed by law and Air Force instructions." (Appellant's App'x 100046.) Further, the contract expressly stated that "homosexual conduct is grounds for disenrollment from AFROTC" and that if she was disenrolled from the Air Force ROTC as a result of homosexual conduct, she would be "required to repay all educational expenses expended on my behalf to the maximum extent permitted by law." (Id. at 100047.)
On April 2, 2008, in a memorandum with the subject line "Admission of Homosexuality," Ayers advised the commander of her detachment that she was a lesbian and that she was willing to finish her ROTC commitment, earn her commission as a second lieutenant, and serve on active duty. (Id. at 100052.)2 On April 4, 2008, Ayers received a "Student Status Statement of Understanding" which outlined the possible consequences if she were disenrolled from the Air Force ROTC program. (Id. at 100053.) On April 28, 2008, Ayers was disenrolled from the Air Force ROTC program for failure to "maintain military retentionstandards when she admitted to homosexual ideations." (Id. at 100055.) She was honorably discharged from the Air Force Reserves on June 11, 2008.
Based on her disenrollment from ROTC, the Air Force initiated scholarship recoupment procedures against Ayers on June 4, 2008. Ayers appealed the Air Force's decision to recoup ROTC scholarship costs, arguing that her prior enlistment time satisfied her debt obligation. On October 15, 2008, Ayers' appeal was denied based on the contract she signed upon entering the Air Force ROTC program and because her "prior enlistment was a fulfillment of a previous obligation and [had] nothing to do with her AFROTC contract." (Id. at 100060.) The denial letter explained that Ayers' "scholarship was paid towards [her] education in anticipation of commissioning as an officer," not as a "reward for . . . enlisted performance." (Id.)
Ayers continued her education, earning her Bachelor's degree in 2009 from Miami University and her Master's Degree in 2011 from the University of North Carolina-Greensboro. She worked as a journalist until 2014, when she was accepted into the Doctoral program in Sociology at Virginia Polytechnic Institute and State University.
On October 20, 2014, DOT issued a garnishment order against Ayers' wages from Virginia Tech. On June 3, 2015, Virginia Tech sent an "Employer Certification" to DOT confirming that Ayers' employment had ended at the end of the school year. Virginia Tech also provided a garnishment worksheet showing the amounts deducted from Ayers' salary during the 2014-15 school year. The garnishment order was terminated on June 12, 2015.
On August 21, 2015, Ayers requested debt forgiveness due to financial hardship. The record does not reflect that there was any response to this request, and debt forgiveness was not granted.
On October 2, 2015, Ayers received a print out from the Defense Finance and Accounting Service (DFAS) indicating that she owes $34,237.92 for the Air Force ROTC debt. On October 29, 2015, Performant Recovery, Inc. sent a letter stating that the debt she owes the Department of Defense totals $42,683.67.3
On February 29, 2016, a new wage garnishment order was issued to Virginia Tech.
On April 26, 2016, DOT advised Ayers that under the tax refund offset program, her tax refund of $742.00 for calendar year 2015 was being withheld and applied to the ROTC/SOAR debt.
Ayers filed her adversary complaint on September 12, 2017. In count one, Ayers requests a declaration that the government's "decision to recoup the ROTC/SOAR expenses" from her is arbitrary and capricious because she is "being treated differently than other similarly situated former ROTC participants" without explanation for the differential treatment. (Appellant's App'x 100022.) In count two, Ayers seeks a declaration that the government's decision to recoup is arbitrary and capricious because it is based solely on her sexual preference in violation of her due process and equal protection rights under the Fifth Amendment to the Constitution. In count three, Ayers requests discharge of her debt pursuant to 11 U.S.C. § 727. In count four, Ayers requests an undue hardship discharge pursuant to 11 U.S.C. § 523(a)(8). She also asks the court to "permanently enjoin DOD from recoupment of Plaintiff's ROTC/SOAR expenses." (Id. at 100022-25.)
The government moved to dismiss pursuant to Rule 12(b)(1) and 12(b)(6) of the Federal Rules of Civil Procedure. Ayers responded and moved for leave to amend the complaint. In the proposed amended complaint, Ayers included a count five, which sought a declaration that the government's "decisions to continue attempting to recoup" the ROTC debt "are based solely on her sexual preference and in violation of her rights to due process and equal protection" under the Fifth Amendment. (Appellant's App'x 100145-46.)
In a memorandum opinion dated January 8, 2018, the bankruptcy court found with respect to counts one and two (and count five of the proposed amended complaint) that the Air Force's October 15, 2008 denial of Ayers' appeal of the decision to commence recoupment proceedings was the "final agency action" and the date Ayers' claim accrued. In re Ayers, 581 B.R. 168, 179-80 (Bankr. W.D. Va. 2018). The bankruptcy court then found that the "subsequent collection activity neither constituted separate and distinct final agency actions, nor established continuing violations." Ayers, 581 B.R. at 180. Therefore, the court held that counts one and two were barred by the six-year limitations period set forth in 28 U.S.C. § 2401(a).4 Id. at 182. The bankruptcy court also held that count three should be dismissed as duplicative because "the dischargeability of this debt can be fully addressed within the scope of Count Four." Id. at 183-84. Finally, the bankruptcy court stated that Ayers "made only the thinnest of undue hardship allegations" in count four and stated that it would grant leave to "file an amended complaint specifying in further detail the facts she contends that would meet" the test for unduehardship within 21 days. Id. at 184-85. Thus, the court granted in part and denied in part the motion to dismiss.5
Ayers filed a timely notice of appeal from the bankruptcy court's order granting in part and denying in part the government's motion to dismiss. See Fed. R. Bankr. 8002(a)(1) (). The district court's appellate jurisdiction over bankruptcy orders is governed by 28 U.S.C. § 158(a), which provides, as...
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