Portmann v. U.S., 81-1390

CourtUnited States Courts of Appeals. United States Court of Appeals (7th Circuit)
Writing for the CourtBefore CUMMINGS, Chief Judge, CUDAHY, Circuit Judge, and CAMPBELL; CUDAHY
Citation674 F.2d 1155
PartiesMichele PORTMANN, doing business as Grafica, an individual, Plaintiff-Appellant, v. UNITED STATES of America, Defendant-Appellee.
Docket NumberNo. 81-1390,81-1390
Decision Date24 March 1982

Page 1155

674 F.2d 1155
Michele PORTMANN, doing business as Grafica, an individual,
UNITED STATES of America, Defendant-Appellee.
No. 81-1390.
United States Court of Appeals, Seventh Circuit.
Argued Nov. 4, 1981.
Decided March 24, 1982.

Page 1156

Andrew W. Brainerd, Brainerd & Bridges, Chicago, Ill., for plaintiff-appellant.

Robert B. Breisblatt, Asst. U. S. Atty., Dan K. Webb, U. S. Atty., Chicago, Ill., for defendant-appellee.

Before CUMMINGS, Chief Judge, CUDAHY, Circuit Judge, and CAMPBELL, Senior District Judge. *

CUDAHY, Circuit Judge.

The primary issue in this appeal is whether the doctrine of equitable estoppel may be invoked against the United States Postal Service on the basis of representations made by a postal employee to a potential "Express Mail" customer. The district court, on cross motions for summary judgment, held that estoppel was unavailable against the federal government as a matter of law, and granted summary judgment in favor of the Postal Service on that basis. We reverse and remand for further proceedings.


On January 15, 1980, plaintiff-appellant Michele Portmann, a free lance graphic arts designer, paid the United States Postal Service thirty-one dollars to transport three small packages containing color film separations, taken from photographs of the works of Salvador Dali, from Highland Park, Illinois, to New York City. Portmann alleges that at the time of the mailing, she stated to the Postal Service that her packages contained color separation film of great value, which could not easily be reproduced, and that safe insured carriage was therefore imperative. Portmann further alleges that the postal clerk on duty assured her that by paying $31 for "Express Mail" and special "Document Reconstruction Insurance," Portmann could guarantee that her packages would be "fully insured against loss up to $50,000." Verified Complaint at

Page 1157

P 5. 1 Relying on this representation, Portmann paid the required "Express Mail" fee and designated the value of package # 1 as $1,000, package # 2 as $2,000 and package # 3 as $3,000.

Package # 3 was never delivered. Upon discovering the loss, Portmann promptly filed an application for indemnity with the Postal Service. In her application, Portmann claimed indemnity for the package in the amount of $3,874, a sum which she claimed represented the cost of reconstructing the lost film. The Postal Service reviewed Portmann's application and determined that the film was "merchandise" as distinguished from "nonnegotiable documents" under the applicable postal regulations, and that Postal Service liability was therefore limited to $500. 2 After unsuccessfully pursuing an administrative appeal, Portmann filed the instant suit in federal district court seeking damages of $7,500. 3

On October 10, 1980, Portmann filed a Motion for Summary Judgment in the district court, then verifying the contents of her complaint under oath. In her motion, Portmann argued first, that the film separations constituted "documents" rather than "merchandise" under a proper interpretation of the applicable postal regulations, and second that Portmann's reliance on the postal clerk's oral assurances that her packages would be insured up to $50,000 should preclude the government from now limiting coverage to $500, regardless of the actual provisions of the postal regulations. The Government responded with its own Motion for Summary Judgment on November 3, 1980, arguing that Portmann's film separations had been correctly characterized by the Postal Service as "merchandise" rather than nonnegotiable documents and that coverage was therefore limited to $500. In addition, although not expressly admitting the factual allegations upon which Portmann's estoppel claim was based, the Government argued that such allegations, even if true, would not entitle Portmann to relief since " 'estoppel cannot be set up against the Government on the basis of an unauthorized representation of an officer or employee ....' " Defendant's Motion for Summary Judgment at 2, quoting Abbott v. Harris, 610 F.2d 563, 564 (8th Cir. 1979).

The district court found for the Government on both issues. First, it confirmed the Postal Service's determination that Portmann's film separations were merchandise, subject to an indemnity limit of $500, rather than nonnegotiable documents, eligible for "Document Reconstruction Insurance" of up to $50,000. Second, the district court determined, as a matter of law, that the Postal Service could not be bound by the erroneous representation of a postal employee. Noting that it was "not without appreciation of the fact that plaintiff may have relied, to her detriment, on the representations of a Postal Service employee," the district court concluded that

... the facts that plaintiff reasonably believed her package to be covered by document reconstruction insurance and that recovery could presumably be had against a private company in these circumstances, unfortunately are irrelevant.... The Postal Service regulations define the parameters of package insurance and cannot be changed by a misunderstanding

Page 1158

on plaintiff's part, however induced.

Dist.Ct.Op. at 4. This appeal followed.


At the outset, we reject Portmann's contention that the contents of package # 3 qualified as "nonnegotiable documents" within the meaning of the applicable Postal Service regulations. Section 294.21 of the Domestic Mail Manual provides that "nonnegotiable documents" sent by Express Mail "are insured against loss, damage, or delay while in transit," for up to $50,000 per mailing unit. 4 Section 294.22 of that Manual states that nonnegotiable documents "include commercial papers, documents, and such written instruments as are used in the conduct and operation of banks and banking institutions that have not been made negotiable or which cannot be negotiated or converted into cash by unauthorized persons without resort to forgery." Nonnegotiable documents also include "valuable records, audit media, and other business records." Such records "may be in conventional hard copy form, data processing cards, tapes, film, microfilm, or other forms of data storage." Domestic Mail Manual § 294.22.

Portmann argues that her color separations should be treated as nonnegotiable documents because they are film and because they have no intrinsic value apart from their message-carrying capacity. This argument, however, misconstrues the import of the word "film" in Section 294.22. Film, in the context of the Domestic Mail Manual, refers only to the medium upon which a business record or other commercial data is carried. It does not purport to classify as nonnegotiable documents all photographic reproductions or transparencies. Plaintiff's film separations, although both "reproductive" and "information carrying," are not valuable solely as a means by which commercial information is carried. We thus agree with the district court's conclusion that "(p) laintiff's goods, while in film form and certainly valuable, do not fit within the limited definition given to nonnegotiable documents (in the Domestic Mail Manual)." Dist.Ct.Op. at 3.

We believe, however, that this conclusion involves a fairly technical question of regulatory interpretation, and that a layperson reading these regulations as they existed as of January, 1980, might reasonably conclude that film separations such as Ms. Portmann's were eligible for Document Reconstruction Insurance. 5 Although we reject this interpretation as legally incorrect, we consider its plausibility relevant to our analysis of plaintiff's estoppel claim. See Section IV infra.


The doctrine of equitable estoppel precludes a litigant from asserting a claim or defense which might otherwise be available to him against another party who has detrimentally altered her position in reliance on the former's misrepresentation or failure to disclose some material fact. See 3 J. Pomeroy, Equity Jurisprudence § 804 at 189 (5th ed. 1941); Note, Equitable Estoppel of the Government, 47 Brooklyn L.Rev. 423, 424 (1981). In the United States, the traditional view has been that equitable estoppel will not lie against the

Page 1159

Government or any of its agencies. 6 Originally, this view rested largely on considerations of sovereign immunity. United States v. Georgia-Pacific Co., 421 F.2d 92, 99 (9th Cir. 1970). Once it was conceded that the government could not be held liable for the wrongful acts of its agents, it followed, as a logical corollary, that the government could not be estopped by the misrepresentations or material omissions of its employees. 7

As the doctrine of sovereign immunity eroded, it became necessary to offer other justifications for the government's exemption from equitable estoppel. One such justification invoked a separation of powers rationale; proponents argued that permitting equitable estoppel against the government would, in effect, allow government employees to "legislate" by misinterpreting or ignoring an applicable statute or regulation. Judicial validation of such unauthorized "legislation," it was claimed, would infringe upon Congress' exclusive constitutional authority to make law. 8 Although this rationale has some logical appeal, applied literally and generally, it would seem to preclude any application of estoppel against the government including its use in areas such as government procurement contracts and legal proceedings-areas in which the government has long been held subject to estoppel principles. 9 Moreover, such a rigid separation of powers analysis contrasts sharply with the more realistic and flexible judicial approach to separation of powers problems in other areas such as legislative delegation. In any event, reliance on a separation of powers rationale to preclude estoppel against the government is considerably less persuasive where only an agency's own regulations are at stake than it...

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