Chu v. Schweiker, s. 1390

• Decision Date: 01 October 1982
• Docket Number: Nos. 1390,D,1391,s. 1390
• Citation: 690 F.2d 330
• Parties: Brian CHU, M.D., James R. Goss, D.O., Khadijah Hamdallah, M.D., Staley Jackson, M.D., David O. King, D.O., Mitchell Koffler, M.D., Gregory Lower, D.O., Rukhsana Rahman, M.D. and Judith L. Shoner, M.D., Plaintiffs-Appellants, v. Richard SCHWEIKER, Secretary, Department of Health and Human Services; Dr. Edward Brandt, Jr., Assistant Secretary of Health, United States Public Health Service; John H. Kelso, Acting Administrator, Health Services Administration; Dr. John E. Marshall, Associate Administrator for Operations, Health Services Administration; Dr. Leonard Bachman, Acting Director, Bureau of Medical Services; United States Department of Health and Human Services; United States Public Health Services; United States Health Services Administration and Bureau of Medical Services, Defendants-Appellees. ockets 82-6103, 82-6113.
• Court: U.S. Court of Appeals — Second Circuit

Page 330

690 F.2d 330

Brian CHU, M.D., James R. Goss, D.O., Khadijah Hamdallah M.D., Staley Jackson, M.D., David O. King, D.O., Mitchell Koffler, M.D., Gregory Lower, D.O., Rukhsana Rahman, M.D. and Judith L. Shoner, M.D., Plaintiffs-Appellants, v. Richard SCHWEIKER, Secretary, Department of Health and Human Services; Dr. Edward Brandt, Jr., Assistant Secretary of Health, United States Public Health Service; John H. Kelso Acting Administrator, Health Services Administration; Dr John E. Marshall, Associate Administrator for Operations Health Services Administration; Dr. Leonard Bachman, Acting Director, Bureau of Medical Services; United States Department of Health and Human Services; United States Public Health Services; United States Health Services Administration and Bureau of Medical Services, Defendants-Appellees.

Nos. 1390, 1391, Dockets 82-6103, 82-6113.

United States Court of Appeals, Second Circuit.

Argued June 18, 1982.

Decided Oct. 1, 1982.

Jane E. Bloom, Asst. U. S. Atty., New York City (John S. Martin, Jr., U. S. Atty. for the S. D. New York, Peter C. Salerno, Asst. U. S. Atty., New York City, of counsel), for defendants-appellees.

Whitney North Seymour, Jr., New York City (Simpson, Thacher & Bartlett, Jean E. Ericson, Michael D. Nathan, New York City, of counsel), for plaintiffs-appellants.

Before NEWMAN and PIERCE, Circuit Judges, and CANNELLA, Senior District Judge. ^*

CANNELLA, District Judge:

Plaintiffs, medical residents at the now-closed United States Public Health Service ("PHS") hospital in Staten Island, commenced this action seeking an order directing the Secretary of Health and Human Services (the "Secretary") either to place them in private or other federal residency programs or to support them in mutually acceptable residency programs. The District Court, Charles L. Brieant, Judge, consolidated the hearing on plaintiffs' motion for a preliminary injunction with a trial on the merits. In a decision dated February 5, 1982, Judge Brieant held that plaintiffs had a constitutionally protected property interest in continuing their respective residency programs at the expense of the Secretary and on March 5, 1982, issued a declaratory judgment to that effect. Judge Brieant declined, however, to grant plaintiffs the injunctive relief they requested and instead transferred the action to the Court of Claims pursuant to 28 U.S.C. § 1406(c) (1976) for a determination of damages. Defendants appeal from the declaratory judgment, and plaintiffs cross-appeal from the District Court's refusal to issue an injunction obligating defendants to place or support plaintiffs in residency programs.

FACTS

Plaintiffs are either commissioned officers or civil service employees of the PHS appointed to serve as residents at the PHS hospital in Staten Island. ¹ None of the plaintiffs, however, will be able to complete their training at the hospital because it was closed on October 31, 1981.

In early 1981, President Reagan proposed to close all PHS hospitals as part of his plan to reduce federal spending. Subsequently, a Task Force within PHS was created to oversee and coordinate the closing of PHS's hospitals and clinics. The Task Force initially assumed that all hospitals would be closed on June 30, 1981. Accordingly, PHS advised all hospital directors on March 18, 1981, "not to make commitments to train people after July 1st and ... to tell (residents) that they needed to understand that there was some likelihood that there would be no hospitals and ... no training after that point of time." J.App. at 135. Because several directors expressed their concern whether in the absence of medical residents PHS hospitals could properly serve eligible patients if the PHS remained in operation after June 30, 1981, PHS sent another memorandum to all hospital directors on March 27. In contrast to the prior memorandum, this memorandum stated that incoming residents would "be supported in an approved program mutually acceptable to the trainees and the (PHS)." J.Exh.App. at 102. Nevertheless, on May 19, 1981, all incoming residents and interns were informed that the Secretary had submitted legislation to Congress providing for the "termination of the PHS hospital and clinical system effective September 30, 1981." Moreover, incoming residents were told that "if the legislation ... is enacted, the (Secretary) will be under no legal obligation to provide you with graduate education. Any contrary information you may have previously received was incorrect and should not be relied upon." Id. at 104.

On May 26, 1981, the Sailors' Union of the Pacific, AFL/CIO, filed suit in the Northern District of California seeking to enjoin the Secretary from reducing the level of services offered by PHS hospitals. On June 4, 1981, the district court issued a preliminary injunction precluding PHS from proceeding with its planned closings and reductions in services. See Sailors' Union of the Pacific, AFL/CIO v. Schweiker, No. C. 81-2079 (N.D.Cal. June 4, 1981), vacated and remanded, No. 81-4295 (9th Cir. June 24, 1981) ("Sailors' Union "). To avoid being held in contempt of the Sailors' Union injunction, the PHS advised all incoming residents that they could report to PHS hospitals for training on July 1, 1981. Incoming residents were reminded that they could be released from their medical training programs if Congress agreed to terminate funding for the operation of PHS's hospitals. On June 24, 1981, the Ninth Circuit vacated the injunction issued by the district court. See Sailors Union of the Pacific, AFL/CIO v. Schweiker, No. 81-4295 (9th Cir. June 24, 1981).

On August 27, 1981, PHS advised all residents that subject to Congressional approval funds were being made available "to support interns and residents through June 30, 1982, whether these post-graduate educational positions (are) in PHS hospitals or transferred to private facilities." J.Exh.App. at 106-07. On September 18, 1981, plaintiffs were notified that their positions had been officially abolished, and on October 9, 1981, PHS was authorized to execute contracts covering residents' salaries through June 30, 1982.

Beginning in the spring of 1981, PHS attempted to place plaintiffs and other residents in other accredited residency programs. PHS was able to find positions for three plaintiffs-Drs. Jackson, Goss and Hamdallah. Drs. Jackson and Goss were placed in accredited orthopedic programs at Lincoln Hospital in New York, while Dr. Hamdallah was offered but did not accept a residency at Westchester County Medical Center. The PHS paid for Drs. Jackson's and Goss's training in accordance with the August 27 memorandum.

Plaintiffs Chu, Goss, Jackson and Lower were appointed as probationary commissioned officers in the reserve corps of the PHS. As such, their commissions could be terminated "at any time, as the President may direct." 42 U.S.C. § 209(a)(2) (1976). In addition, the regulations promulgated by the Secretary governing the termination of such reserve officers provide:

All individuals called to active duty in the PHS reserve corps are required to a. Abolishment of an officer's position as a result of personnel/budgetary limitations ....

serve a three-year probationary period. During this period, the officer may be separated from active duty without cause, i.e., without entitlement to review by a board of officers, for reasons including, but not limited to, the following:

Dep't of Health & Human Services, Commissioned Corps Personnel Manual, Subchapter CC 23.7, Instruction 1, § D(1)(a) (1981). Plaintiff Hamdallah is a PHS civil service employee in a position excepted from the competitive service. See 5 U.S.C. §§ 7501(1), 7511(b)(2)(A) (1976); 5 C.F.R. § 213.3116(b) (1981).

The District Court, relying on Board of Regents v. Roth, 408 U.S. 564, 92 S.Ct. 2701, 33 L.Ed.2d 548 (1972), Perry v. Sindermann, 408 U.S. 593, 92 S.Ct. 2694, 33 L.Ed.2d 570 (1972), and Bivens v. Six Unknown Named Agents, 403 U.S. 388, 91 S.Ct. 1999, 29 L.Ed.2d 619 (1971), determined that plaintiffs had a property interest "within the protection of the Fifth Amendment" in continuing their respective residencies. The District Court further determined that plaintiffs' claims exceeded $10,000 ² and that they had a status or contract right in their respective appointments for a term of years based on mutually explicit understandings. Because he nevertheless decided that it would be inappropriate to grant plaintiffs injunctive relief, Judge Brieant issued a declaratory judgment in plaintiffs' favor invoking the general federal-question jurisdiction of district courts. 28 U.S.C. § 1331(a) (1976); see Davis v. Passman, 442 U.S. 228, 234, 99 S.Ct. 2264, 2271, 60 L.Ed.2d 846 (1979). ³ Recognizing that "by reason of the Tucker Act, 28 U.S.C. § 1346(a), adjudication of plaintiffs' money damages must of necessity take place in the United States Court of Claims," the case was transferred to the Court of Claims pursuant to 28 U.S.C. § 1406(c).

DISCUSSION

To claim a property interest in continued federal employment, plaintiffs must demonstrate a specific entitlement to their positions. See Arnett v. Kennedy, 416 U.S. 134, 152, 94 S.Ct. 1633, 1643, 40 L.Ed.2d 15 (1974); Cafeteria Workers v. McElroy, 367 U.S. 886, 896-97, 81 S.Ct. 1743, 1749, 6 L.Ed.2d 1230 (1961); Mazaleski v. Treusdell, 562 F.2d 701, 709 n.23 (D.C.Cir.1977); Smith v. Lehman, 533 F.Supp. 1015, 1019 (E.D.N.Y.), aff'd, 689 F.2d 342 (2d Cir. 1982). Entitlements are not created by the Constitution, but rather, are derived from the applicable statutes, regulations or contracts. See Goss v. Lopez, 419 U.S. 565, 572-73, 95 S.Ct. 729, 735, 42 L.Ed.2d 725 (1975); Bollow v. Federal Reserve Bank of San Francisco, 650 F.2d 1093, 1098 (9th Cir. 1981), cert. denied, --- U.S. ----, 102 S.Ct. 1449, 71 L.Ed.2d 662 (1982). This principle applies equally to plaintiffs Chu, Jackson, Goss and Lower, as probationary commissioned officers in the reserve corps...