Richmond v. Office of Personnel Management

• Decision Date: 02 December 1988
• Docket Number: No. 88-3243,88-3243
• Citation: 862 F.2d 294
• Parties: Charles RICHMOND, Petitioner, v. OFFICE OF PERSONNEL MANAGEMENT, Respondent.
• Court: U.S. Court of Appeals — Federal Circuit

Page 294

862 F.2d 294

Charles RICHMOND, Petitioner, v. OFFICE OF PERSONNEL MANAGEMENT, Respondent.

No. 88-3243.

United States Court of Appeals, Federal Circuit.

Dec. 2, 1988.

Charles Richmond, National City, Cal., pro se.

Robert A. Reutershan, Dept. of Justice, Washington, D.C., for respondent.

Before MAYER and MICHEL, Circuit Judges, and NICHOLS, Senior Circuit Judge.

MICHEL, Circuit Judge.

The decision of the Merit Systems Protection Board (board), Docket No. SF831L8710762, affirming the Office of Personnel Management's (OPM's or the agency's) ruling that Charles Richmond is ineligible for disability annuity payments after June 30, 1987 because, in view of his income in 1986, Mr. Richmond has been restored to earning capacity, is reversed and the case is remanded. ¹

Background

The facts and the applicable statutory law are undisputed. If a person receiving a disability retirement annuity is restored to an earning capacity fairly comparable to his former position, payment of the annuity shall be terminated 180 days after the end of the calendar year in which restoration occurred. 5 U.S.C. Sec. 8337(d) (Supp.1988). Earning capacity is deemed restored if, in any single calendar year, the annuitant's earned income equals at least 80% of the current rate of pay for his former position. The agency discontinued disability annuity payments to Mr. Richmond, a retired ² welder, WG-10, Step 4, formerly employed by the United States Department of the Navy, as of June 30, 1987. The payments were discontinued because Richmond's income during calendar year 1986 exceeded 80% of his former job's current base salary. ³

Although application of the relevant statute to Richmond's case appears straightforward, Richmond argues, and indeed the board found in the face of no dispute by the agency, that Navy employee relations specialists misinformed Richmond that the measuring period for determining restoration was 2 years rather than a single calendar year. As late as January, 1986, Richmond received from the Navy written OPM notice that when, in each of 2 consecutive years, earned income equals at least 80% of the current rate of pay for the position retired from, earning capacity is deemed restored and the disability annuity is stopped. ⁴ Apparently the misrepresentation to Richmond resulted because prior to the enactment of Public Law 97-253, Sec. 302(a)(1), effective December 31, 1982, the applicable statute, 5 U.S.C. Sec. 8337(d), called for restoration to earning capacity to be determined based on earnings for "each of 2 succeeding calendar years." In reliance on the misinformation in this OPM letter, Richmond, who subsequent to his retirement was working as a bus driver, accepted additional hours of work in 1986. He believed that the additional hours of work, which he says are not normally available to him, would temporarily increase his income, but would not cause loss of his disability benefits.

In reviewing the agency's action, the board stated that "[a]lthough it is undisputed that appellant's former employer, the Department of the Navy, gave appellant misinformation upon which he relied, that agency was not the Office of Personnel Management (OPM)." Accordingly, the board held that OPM cannot be estopped from enforcing a statutorily imposed requirement for terminating disability retirement eligibility, and observed that Richmond should have sought and entertained information respecting continued eligibility only from OPM. Richmond appeals.

ISSUE

Whether on the facts and circumstances of this case the OPM is estopped from terminating Richmond's disability benefits because relying on an OPM letter he allowed his earned income in 1986 to exceed 80% of his former job's current base salary.

OPINION

We do not agree with the board's view that the agency cannot be estopped from discontinuing Richmond's disability benefits. In our view, the agency can be estopped because of the affirmative misconduct of the government in informing Richmond in writing in 1986 that his right to disability benefits would be maintained if Richmond's income did not exceed the 80% ceiling for 2 consecutive years. Richmond would have foregone the additional, temporary 1986 wages and maintained his eligibility for disability benefits had he not relied upon the out-of-date OPM letter given him by Navy employees whom he had no reason to believe were not providing him with accurate information.

We are aware of the long-established rule that ordinarily the government may not be estopped because of erroneous or unauthorized statements of government employees when the asserted estoppel would nullify a requirement prescribed by Congress, see, e.g., Schweiker v. Hansen, 450 U.S. 785, 788, 101 S.Ct. 1468, 1470, 67 L.Ed.2d 685 (1981) (per curiam) ⁵ and that generally "those who deal with the Government are expected to know the law and may not rely on the conduct of Government agents contrary to law." Heckler v. Community Health Services of Crawford, 467 U.S. 51, 63, 104 S.Ct. 2218, 2225, 81 L.Ed.2d 42 (1984). However, the Supreme Court has clearly left open the possibility that estoppel may be invoked against government agencies in some particular circumstances. In Community Health Services the Supreme Court specifically declined an invitation to announce a flat rule that "estoppel may not in any circumstances run against the Government." Id. at 60, 104 S.Ct. at 2224. Instead the Court said:

Though the arguments the Government advances for the rule [that estoppel may never run against the Government] are substantial, we are hesitant, when it is unnecessary to decide this case, to say that there are no cases in which the public interest in ensuring that the Government can enforce the law free from estoppel might be outweighed by the countervailing interest of citizens in some minimum standard of decency, honor, and reliability in their dealings with their Government.

Id. at 60-61, 104 S.Ct. at 2224 (emphasis in original) (footnote omitted).

Since the Supreme Court's decision in Community Health Services, courts of appeals have determined whether, on the facts of a given case, estoppel should be applied against the government. Certain cases have determined that estoppel should apply. In Fano v. O'Neill, 806 F.2d 1262 (5th Cir.1987), Fano had asserted before the district court that the government was estopped from denying him permanent resident status since when he filed he met all requirements and was denied permanent residency only because the government had "recklessly and negligently" delayed processing his application and in the meantime, he became ineligible as over 21 years of age. Id. at 1265. The processing delay was in direct contradiction to the Service's Operations Instruction on which Fano had relied in filing his application just prior to his 21st birthday, and according to which such applications were to receive urgent processing. Id. at 1263. The district court granted summary judgment rejecting Fano's estoppel argument.

The court of appeals stated that, according to Supreme Court cases, in order for estoppel to apply, Fano had to show some sort of "affirmative misconduct" on the part of the government. Id. at 1265. The court further observed that "to state a cause of action for estoppel against the government, a private party must allege more than mere negligence, delay, in action or failure to follow an internal agency guideline." Id. In the court's view, Fano's allegations of reckless and negligent, and possibly even willful and wanton delay, could establish affirmative misconduct. Accordingly, the district court was required to allow Fano to develop his case through discovery since, if proven, his charges could support estoppel. Id. at 1266. The causes for the delay presented genuine issues of material fact possibly showing affirmative misconduct and giving rise to an estoppel. ⁶

Our own decisions have also recognized the viability of government estoppel. In USA Petroleum Corp. v. United States, 821 F.2d 622 (Fed.Cir.1987), we stated "[t]he equitable defense of estoppel is available to parties contracting with the government and requires a case-by-case determination designed to avoid injustice." Id. at 625. In that case we made note of the traditional elements of estoppel as set out by the lower court:

1. The party to be estopped must know the facts;

2. he must intend that his conduct shall be acted on or must so act that the party asserting the estoppel has a right to believe it is so intended;

3. the latter must be ignorant of the true facts; and

4. he must rely on the former's conduct to his injury.

Id. We concluded that these elements of estoppel had been established by the contractor. Specifically, we observed that the government failed to conform quantities of oil it reported for payment purposes to the actual quantities it knew were delivered by the contractor. As a result of these discrepancies, the government overpaid the contractor for the oil, and the contractor in turn made unrecoverable overpayments to its suppliers. Id. at 623.

Additionally, the government waited for 6 months after it knew of the discrepancies to notify the contractor of the overpayments. Id. at 625. Based on these facts, we determined that the government was estopped from seeking restitution from the contractor. We pointed out that our result in USA Petroleum was not inconsistent with Community Health Services, which declined to apply estoppel against the government because there the contractor failed to ascertain legal requirements from "the correct channels" and in writing. Id. at 626. Our overall conclusion was that the contractor's right to rely on the government's continued written representations as to oil deliveries justified application of estoppel.

More recently, we discussed the application of equitable principles (although not explicitly "estoppel") to government action in National Corn Growers Association v. Baker, 840 F.2d...