Cosme Nieves v. Deshler, 85-1095

• Decision Date: 18 March 1986
• Docket Number: No. 85-1095,85-1095
• Parties: 27 Wage & Hour Cas. (BN 990, 104 Lab.Cas. P 34,764 Angel M. COSME NIEVES, et al., Plaintiffs, Appellants, v. Col. Robert C. DESHLER, etc., et al., Defendants, Appellees.
• Court: U.S. Court of Appeals — First Circuit

Page 445

786 F.2d 445

27 Wage & Hour Cas. (BN 990, 104 Lab.Cas. P 34,764

Angel M. COSME NIEVES, et al., Plaintiffs, Appellants, v. Col. Robert C. DESHLER, etc., et al., Defendants, Appellees.

No. 85-1095.

United States Court of Appeals First Circuit.

Argued May 6, 1985.

Decided March 18, 1986.

Samuel C. Vazquez Matias with whom Hector L. Marquez was on brief, for appellants.

Richard K. Willard, Asst. Atty. Gen., David M. Cohen, Director, and Robert A. Reutershan, Asst. Director, on supplemental brief, for U.S.

Vincent E. Reilly, Office of the Judge Advocate Gen., with whom Francisco A. Besosa, Asst. U.S. Atty., and Daniel F. Lopez Romo, U.S. Atty., were on brief, for appellees.

Before CAMPBELL, Chief Judge, COFFIN and TORRUELLA, Circuit Judges.

LEVIN H. CAMPBELL, Chief Judge.

Plaintiffs-appellants Angel M. Cosme Nieves, Secundino Machado, Tomas Garcia, and Lorraine Gorski, all employees of defendant-appellee Fort Buchanan Installation Club System ("FBICS"), brought an action for back pay and damages under the Fair Labor Standards Act ("FLSA"), 29 U.S.C. Sec. 201 et seq. (1982), and the labor laws of Puerto Rico. They now appeal from the district court's dismissal of their action for want of jurisdiction and for failure to state a claim upon which relief could be granted. Cosme Nieves v. Deshler, 601 F.Supp. 100 (D.P.R.1985). Plaintiffs also appeal from the district court's denial of their motion to remand the case to the Commonwealth courts. Cosme Nieves v. Deshler, 561 F.Supp. 1173 (D.P.R.1983).

I.

Defendant FBICS operates the Commissioned Officers' Open Mess, the Non-Commissioned Officers' Open Mess, and the Package Beverage Branch at the Fort Buchanan military base in Puerto Rico. ¹ All parties agree that FBICS is a non-appropriated fund instrumentality ("NAFI") of the Government of the United States; that is, its monies do not come from congressional appropriation but rather primarily from its own activities, services, and product sales. See United States v. Hopkins, 427 U.S. 123, 125 n. 2, 96 S.Ct. 2508, 2510 n. 2, 49 L.Ed.2d 361 (1976) (per curiam); Perez v. Army & Air Force Exchange Service, 680 F.2d 779, 780-81 (D.C.Cir.1982). It is also undisputed that FBICS is under the jurisdiction of the Armed Forces. ²

On October 13, 1982, plaintiffs filed the present action in the Superior Court of Puerto Rico seeking back pay in the amount of $58,508.66 and liquidated damages in an equal amount, as well as interest, costs, expenses, and attorneys' fees. Each plaintiff seeks from FBICS damages in excess of $10,000 for failure to have paid proper wages and overtime, in alleged violation of section 18 of the FLSA, 29 U.S.C. Sec. 218 (1982), and also of certain supposedly more beneficial provisions of the laws of Puerto Rico, P.R.Laws Ann. tit. 29, Sec. 245 et seq. & Sec. 271 et seq. (1985).

Defendants removed the case to the United States District Court for the District of Puerto Rico on February 4, 1983. The district court denied plaintiffs' motion for remand to the superior court, and retained jurisdiction, finding that it had original jurisdiction of the action under 28 U.S.C. Sec. 1337 (1982), ³ that removal had been proper under 28 U.S.C. Sec. 1441(a) (1982), ⁴ and that there was no express provision prohibiting removal. On August 22, 1983, this court denied plaintiffs' petition for a writ of mandamus.

On January 14, 1985, the district court on defendants' motion dismissed the case for lack of jurisdiction and for failure to state a claim upon which relief could be granted. The court reasoned that the Government of the United States was plaintiffs' actual "employer," and hence was the only proper defendant in a suit brought under the FLSA. Moreover, the court found that because plaintiffs' individual claims each exceeded $10,000, federal jurisdiction over their claims lay exclusively in the United States Claims Court under 28 U.S.C. Sec. 1491 (1982). ⁵ The court also determined that plaintiffs did not have a claim under section 18(a) of the FLSA and the Puerto Rico laws. This appeal followed.

In their original appellate briefs, and in oral argument before this court, defendants, represented by the office of the Judge Advocate General of the Department of the Army, urged us to affirm the district court's ruling that the United States was the proper defendant and that the Claims Court had exclusive jurisdiction over the suit. They further contended that exclusive jurisdiction over this appeal lay solely in the United States Court of Appeals for the Federal Circuit under 28 U.S.C. Sec. 1295(a)(2) (1982) because the district court allegedly based its jurisdiction on 28 U.S.C. Sec. 1346(a)(2) (1982).

Because it was unclear to us whether arguments being made on behalf of defendants on these arcane jurisdictional issues reflected the settled views of the federal government, rather than of simply the Department of the Army, we requested the Solicitor General to file a supplemental brief. ⁶ On December 13, 1985, the Department of Justice submitted on behalf of the United States a comprehensive brief which concedes, as plaintiffs have argued all along, that the NAFI is a proper defendant under the FLSA, and that the district court rather than the Claims Court has jurisdiction over this suit. Defendants have subsequently advised us that they now accept this position as their own. Hence the only issues remaining in contention between the parties are whether the case was properly removed from the Superior Court of Puerto Rico to the federal district court, and whether certain rulings by the district court on the merits of plaintiffs' claims should be sustained.

II.

A. Jurisdictional Issues

While defendants no longer argue that this case should have been brought in the Claims Court as an action exclusively against the United States or that the Federal Circuit Court of Appeals has sole jurisdiction over this appeal, we must, of course, decide these issues for ourselves, since the parties cannot, by consent, confer jurisdiction on a court. See, e.g., Sosna v. Iowa, 419 U.S. 393, 398, 95 S.Ct. 553, 556, 42 L.Ed.2d 532 (1975). After reviewing the government's supplemental brief and the relevant authorities with care, we accept the Attorney General's position on these issues. Accordingly, we reverse the district court's dismissal of plaintiffs' FLSA claims for lack of jurisdiction. We hold also that this appeal is properly before this court.

The district court found, in keeping with the contentions then being urged by defendants, that the action was in effect a "claim against the United States founded ... upon ... [an] Act of Congress," and must therefore be presented to the Claims Court under the Tucker Act, since the claims exceeded $10,000 in amount. 28 U.S.C. Sec. 1491(a). ⁷ At first blush, this analysis might seem to be correct. NAFIs, after all, are " '[a]rms of the federal government deemed by it essential for the performance of governmental functions' "; ⁸ and a claim for money damages against a federal instrumentality acting within its statutory authority is usually treated as an action against the United States, since the judgment, if any, must be paid from the public treasury. See Dugan v. Rank, 372 U.S. 609, 620, 83 S.Ct. 999, 1006, 10 L.Ed.2d 15 (1963); Butz Engineering v. United States, 499 F.2d 619, 621-23 (Ct.Cl.1974) (citing cases). Moreover, because the FLSA defines the term "employee" as including "any individual employed by the Government of the United States" in, inter alia, a "nonappropriated fund instrumentality," 29 U.S.C. Sec. 203(e)(2)(A)(iv) (1982), ⁹ the district court could believe, as it did, that the "real" employer under the FLSA was the United States rather than the NAFI by and for whom the employees were actually hired to work.

But while we can appreciate the district court's reasoning, we believe it was erroneous insofar as it was based on the premise that a district court lacks jurisdiction to entertain a FLSA action against a NAFI itself and its nonappropriated funds (which is the kind of action we construe this to be). Because NAFIs are supported by "nonappropriated" funds rather than monies from the public treasury, they constitute a special breed of federal instrumentality, which cannot be fully analogized to the typical federal agency supported by appropriated funds.

First, it has long been held that, absent special legislation, the federal government does not assume the financial obligations of a NAFI, as it does those of a federal agency funded in the usual way from congressional appropriations. See United States v. Hopkins, 427 U.S. 123, 127, 96 S.Ct. 2508, 2511, 49 L.Ed.2d 361 (1976) (per curiam); Standard Oil Co. v. Johnson, 316 U.S. 481, 485, 62 S.Ct. 1168, 1170, 86 L.Ed.2d 1611 (1942). As a consequence, because judgments rendered by the Claims Court can be paid only from appropriated funds, 28 U.S.C. Sec. 2517(a) (1982), the Claims Court has held that it lacks jurisdiction to grant judgments against the United States in favor of NAFI plaintiffs except in those instances where Congress has made special provision. ¹⁰

Second, NAFIs are also special in that they are revenue-producing entities that take in and disburse funds generated by their own activities (here, we are told, primarily through the sale of food and beverages). Congress, in fact, has clearly expressed its intention that no appropriated funds be used to support NAFI activities, and thus that their "nonappropriated" funds be severed from general federal revenues. See Hopkins, 427 U.S. at 125; Swiff-Train Co. v. United States, 443 F.2d 1140, 1141 (1971). ¹¹ Because NAFI funds, therefore, have an identity apart from that of treasury funds, NAFIs may be subject to claims directly against them and their nonappropriated assets, as distinct from claims against the United States and the public fisc. See Rivera v. Installation Club System, 623 F.Supp. 269 (D.P.R.1985) (permitting suit against NAFI...