Schism v. U. S.

• Decision Date: 08 February 2001
• Citation: 239 F.3d 1280
• Parties: (Fed. Cir. 2001) WILLIAM O. SCHISM and ROBERT L. REINLIE, Plaintiffs-Appellants, v. UNITED STATES, Defendant-Appellee. 99-1402 DECIDED:
• Court: U.S. Court of Appeals — Federal Circuit

Page 1280

239 F.3d 1280 (Fed. Cir. 2001)

WILLIAM O. SCHISM and ROBERT L. REINLIE, Plaintiffs-Appellants, v. UNITED STATES, Defendant-Appellee.

99-1402

United States Court of Appeals for the Federal Circuit

DECIDED: February 8, 2001

Appealed from: United States District Court for the Northernment of District of Florida

Chief Judge C. Roger Vinson

[Copyrighted Material Omitted] George E. Day, Day and Meade, P.A., of Fort Walton Beach, Florida, argued for plaintiffs-appellants.

E. Roy Hawkens, Attorney, Appellate Staff, Civil Division, Department of Justice, of Washington, DC, argued for defendant-appellee. With him on the brief was Barbara C. Biddle.

Before MAYER, Chief Judge, NEWMAN, Circuit Judge, and PLAGER, Senior Circuit Judge^*

MAYER, Chief Judge.

William O. Schism and Robert L. Reinlie (the retirees) appeal the grant of summary judgment of the United States District Court for the Northern District of Florida in favor of the government that they are not entitled to free, lifetime health care, and the denial of summary judgment to the retirees. The district court also denied their motion for certification of a class of all military retirees, aged 65 and over, who are receiving social security, are enrolled in Medicare Part B, and who began their service or made service career decisions before 1956, which they do not appeal. See Schism v. United States, 19 F. Supp. 2d 1287 (N.D. Fla. 1998). Because the district court erroneously concluded as a matter of law that the retirees did not prove an implied-in-fact contract with the government, we reverse and remand for determination of damages.

Background

Schism and Reinlie are retired veterans over 65 years of age, who each had more than twenty years of active military service. They began their service in 1943 and 1942 and retired in 1979 and 1968, respectively. The retirees contend that the government induced service in the military with the promise that, upon retirement, service members and their dependents would be entitled to free, lifetime health care. They argue that having fulfilled their part of the bargain by serving for twenty or more years, they have a contractual right, as well as a property right under the Fifth Amendment arising from their contractual right, to free, lifetime health care. The retirees contend that the government reneged on its promise and failed to provide the promised health care benefits without cost.

In rejecting the retirees' claims, the district court observed that "[i]t is obvious . . . [that] recruiters made promises to potential recruits that they could obtain lifetime medical care for themselves and their dependents by joining the armed forces and fulfilling certain service obligations," id. at 1294, and "[t]here is no question that factual representations were made . . . . The issue simply is whether those representations are contractually binding." id. at 1292. The government admits that the "recruiters made good faith representations to potential recruits that, upon retirement, they and their dependents would receive free, lifetime medical care . . .," and that Congress has acknowledged a moral obligation to "provide health care to military retirees who believed they were promised lifetime health care in exchange for a lifetime of military service." S. Rep. No. 105-29, at 295 (1997). The district court held, however, that the government's representations were not contractually binding because they were in conflict with the military regulations that determined the health care benefits of the retirees and their dependents.

Prior to 1956, the military departments¹ regulated medical benefits for retired members and their dependents pursuant to 5 U.S.C. § 301 which provides that "[t]he head of an Executive department or military department may prescribe regulations for the government of his department, the conduct of its employees, the distribution and performance of its business, and the custody, use, and preservation of its records, papers, and property." 5 U.S.C. § 301 (1994); see also Chrysler Corp. v. Brown, 441 U.S. 281, 309 (1979) ("The antecedents of § 301 go back to the beginning of the Republic, when statutes were enacted to give heads of early Government departments authority to govern internal departmental affairs."). With regard to the regulations of the different military departments in which the retirees served, the district court said:

In 1943, the year Schism enlisted in the Navy, health care for retired Navy personnel was governed by United States Navy Regulations ("NAVREGS") from 1920. Article 1830 of the NAVREGS provided:

Authority for admission to an Army and Navy general hospital may be obtained by all persons of the Navy and Marine Corps, on the active and retired lists, from the Surgeon General of the Navy on the report of a board of medical survey or, when that is impracticable, on the certificate of a naval medical officer, clearly stating the applicant's disability . . . . The length of treatment in hospital will be determined by the medical officer in command thereof. [Article 1832 NAVREGS (1920).]

Importantly, the cost of treatment at a military hospital was deducted from the patient's pension. See Article 1832. Additional guidance was provided by the Navy's Bureau of Medicine and Surgery, which published the Manual of the Medical Department of the United States Navy ("MEDMAN"). Under Section 3168 of the 1943 MEDMAN:

Retired officers and enlisted men, inactive, are not entitled to civilian medical and hospital treatment at Government expense. They are entitled to treatment in naval hospitals and by naval medical officers when available upon application, but no expenses for travel in connection with such treatment may be allowed. [§ 3168 MEDMAN (1943).]

Section 4132.1 of the 1945 MEDMAN provided that "[a] retired officer of the Regular Navy or Marine Corps not on active duty shall, if in need of hospital care, be admitted to any naval hospital upon the application of the individual and presentation of suitable identification." In 1952, the MEDMAN was revised to provide that retirees:

"[M]ay be, upon request, furnished required medical and dental care and adjuncts thereto in any medical facility of a uniformed service . . . subject to mission requirements and the availability of space, facilities, and capabilities of the medical staff or dental staff as determined by the local medical or dental authorities." (§ 20-6, MEDMAN 1952)

In 1942, when plaintiff Reinlie enlisted in the United States Army, health care for retired soldiers was governed by Army Regulations ("AR") 40-505 and 40-590. Paragraph 2(b)(2) of AR 40-505 provided that "the Army will, usually through its own facilities, provide medical attendance to . . . [p]ersons who are on the retired list of the Regular Army and who report in person at any Army dispensary or hospital, provided sufficient accommodations are available for their treatment." [] Paragraphs 6 and 6(b)(1) of AR 40-590 provided:

When suitable facilities for hospitalization are available, sick and injured persons as enumerated in (b) below may be admitted to Army hospitals . . . .

* * * * * *

(b)(1) Officers, Army nurses, warrant officers, cadets of the United States Military Academy, pay clerks, and enlisted men in the Army; also contract surgeons serving full time. The admission of retired personnel on inactive status will be limited to cases which in the judgment of the commanding officer of the hospital will be benefited by hospitalization for a reasonable time. Those requiring merely domiciliary care by reason of age or chronic invalidism will not be admitted . . . . [AR 40-590 ¶¶ 6, 6b(1) (1935).]

AR 40-505 and AR 40-590 were still in effect in essentially the same form at the time Schism entered the Army in 1947.

The Air Force followed Army regulations from its formation in 1947 until Air Force Regulation ("AFR") 160-73 was promulgated in 1951. See National Security Act of 1947, P.L. No. 253, 61 Stat. 495 (1947). Paragraph (14)(h) of AFR 160-73, which was in effect up until Schism entered continuous active service in 1956, provided:

The hospitalization of retired inactive Armed Forces personnel listed below will be limited to cases which in the judgment of the hospital commander will be benefited by hospitalization for a reasonable length of time. Persons desiring medical care must furnish evidence of eligibility satisfactory to the hospital commander concerned. Those requiring merely domiciliary-type care because of age or chronic invalidism will not be admitted. [AFR 160-73 ¶ 14(h) (1951).]

Schism, 19 F. Supp. 2d at 1292-94. In 1947, the MEDMAN was amended to replace a section which provided that retirees "may" be admitted to Navy hospitals with a provision stating that Naval retirees "shall" be entitled to admittance to Naval hospital provided they demonstrate a need for hospital care. MEDMAN §§ 5132.1, 4132.2 (1945) (as amended June 1947).

"[I]t is those pre-1956 statutes and regulations that affect the viability of the plaintiffs' claims, rather than Section 1074(b)." Schism, 19 F. Supp. 2d at 1291 (rejecting the government's argument that the Dependents' Medical Care Act, Pub. L. No. 84-569, 70 Stat. 250 (codified in relevant part at 10 U.S.C. § 1074(b)), precludes the retirees' contractual claim).

In addition to the regulatory scheme, the district court examined other publications which reiterate some of the same factual representations, and provide an historical overview of the actions of the government, with regard to retired member's health care. The government arranged for care of sick and disabled seamen beginning as early as 1798, with the creation of the Naval Hospital Fund. See § 21-1 MEDMAN (1922). In 1832, Congress appointed the Secretary of the Navy as sole trustee of this fund and authorized him to prescribe regulations for naval hospitals. See Schism, 19 F. Supp. 2d at 1294 n.4. Because the amounts credited to...