U.S. v. McInnes

• Decision Date: 23 June 1977
• Docket Number: Nos. 76-1771 and 76-1812,s. 76-1771 and 76-1812
• Citation: 556 F.2d 436
• Parties: UNITED STATES of America et al., Appellants, v. Colin C. McINNES et al., Appellees and Cross-Appellants (Two Cases).
• Court: U.S. Court of Appeals — Ninth Circuit

Page 436

556 F.2d 436

UNITED STATES of America et al., Appellants, v. Colin C. McINNES et al., Appellees and Cross-Appellants (Two Cases).

Nos. 76-1771 and 76-1812.

United States Court of Appeals Ninth Circuit.

June 23, 1977.

Jerome F. McCarthy, Gordon, Thomas Honeywell, Malanca, Peterson & O'Hern, Tacoma, Wash., for cross-appellant/appellees (McInnes, et al).

Frederic D. Cohen, Robert E. Kopp, Attys., App. Section, Civ. Div., Dep. of Justice, Washington, D.C., for appellees/cross-appellants (USA).

Appeal from the United States District Court, Western District of Washington.

Before WRIGHT, KILKENNY and ANDERSON, Circuit Judges.

KILKENNY, Circuit Judge:

Colin McInnes and a group of other federal employees (appellees) sought an award of back pay following a change of their pay schedules. Judgment was ultimately entered against the government. The government appeals from this adverse judgment in No. 76-1771, and the appellees cross-appeal from the denial of a motion for summary judgment in No. 76-1812. We affirm.

FACTS

The appellees are radiation control monitors employed by the Navy at the Puget Sound Naval Shipyard in Bremerton, Washington. Prior to December 24, 1972, they worked on rotating 90-day shifts; each employee spent one-third of his time on the day shift, one-third on the swing shift, and a final third on the graveyard shift. While working on the swing and graveyard shifts, each employee received, in addition to his regular wage, a "night differential" amounting to 71/2% (swing) and 10% (graveyard) of the regular wage.

This action arises out of the December 24, 1972, conversion of the appellees' pay system from the above described "Prevailing In an amended complaint, the appellees alleged jurisdiction on the basis of 28 U.S.C. §§ 1346(a)(2), 1361, and sought back pay and an order declaring 5 CFR § 539.203 invalid insofar as it did not comply with the equal pay for equal work principles within the Classification Act, 5 U.S.C. § 5101 et seq.

Rate" (5 U.S.C. § 5341 et seq.) system to the "General Schedule" (5 U.S.C. § 5332 et seq.) pay system. With the guidance of the Civil Service Commission Regulations, 5 CFR § 539.203, the Navy had to convert an employee's "basic pay" under the PR system into a corresponding rate under the GS system. Though the basic pay of a PR employee is defined so as to include the night differentials, 5 U.S.C. § 5343(f), the Navy interpreted the regulation so as to mandate inclusion of a differential only if the employee was actually working a non-day shift on December 24, 1972. It multiplied each employee's hourly rate on December 24, 1972, times 2080 to obtain an annual rate which was then converted into the corresponding rate in the GS system. Thus, employees working on swing and graveyard shifts were credited with their night differentials whereas the appellees, who were working the day shift on December 24, 1972, received no similar credit. The appellees thus received salaries in the GS system lower than their fellow employees. This proceeding was commenced in the district court to recover the differential and thereby bring about salary parity with those employees who did receive credit for the differential.

Prior to trial, the parties engaged in extensive negotiations regarding settlement of the back pay claims. The pertinent facts will be stated below, but suffice it to say that the court denied the appellees' summary judgment motion alleging that the government breached a binding settlement agreement.

At the close of the trial, however, the district court did grant the appellees their requested relief. It found the Civil Service Commission regulation invalid as against equal pay for equal work principles, ordered that the appellees' wages be increased to where they would have been if credited with a 10% differential on December 24, 1972, and based an award of back pay upon 28 U.S.C. § 1346(a)(2).

The government complied with the prospective portion of the district court's order by increasing the appellees' pay to the rates they would have been receiving had they been credited with the 10% differential on December 24, 1972, the date of conversion. The government also provided the appellees with back pay from the date that their wages were properly increased to the date of the filing of the court's opinion on December 1, 1975. It refused, however, to provide any back pay for the period from December 24, 1972, through December 1, 1975. It contends that such an award is barred by the doctrine of sovereign immunity. In support, the government relies principally upon United States v. Testan, 424 U.S. 392, 96 S.Ct. 948, 47 L.Ed.2d 114 (1976), a case decided after the district court's decision. Appellees, on the other hand, maintain that Testan is distinguishable and that the retroactive award of back pay can be supported by the Back Pay Act, 5 U.S.C. § 5596.

As an alternative means of upholding the district court's award of back pay, the appellees maintain (in their cross-appeal) that the government breached the settlement agreement which provided for such. The government argues, inter alia, that no agreement was ever reached.

From Testan, it is clear that the district court erroneously considered the Classification Act as creating a substantive right enforceable against the United States. 424 U.S. at 398-405, 96 S.Ct. 948. Though the Back Pay Act did not apply to the factual situation in Testan, the Supreme Court noted that under certain circumstances, it (the Back Pay Act) could form the basis for the creation of such a substantive right. Even though the district court here did not construe the Back Pay Act, the government argues that the facts of Testan are essentially the same as the facts here and that we must similarly reverse.

While we must acknowledge the superficial similarity between Testan and the facts here, there are many reasons why it should not control, including, but not limited to, the fact that Testan involved wrongful classification claims where there had been no reduction in pay. Here, faced with an action for back pay growing out of the conversion of an employee's "basic pay" under the "Prevailing Rate System" into a corresponding rate under the "General Schedule System", we think that there has been a reduction in pay as required under the Supreme Court's construction of the statute. While affirmance on this theory, with some modification, would appear to be justified, we need not reach a decision on that question.

ISSUE

In light of our ultimate conclusion, the only issue we decide is whether the district court should have allowed the appellees' motion for summary judgment on the basis of a valid settlement agreement.

DISCUSSION

In the early stages of the proceedings, the appellees moved the court for a summary judgment on the ground that the parties had agreed to compromise and settle the controversy and that the agreement should be enforced.

The uncontroverted facts presented to the court on the motion reveal that McCarthy, the appellees' attorney, received a call in March of 1975 from the government's attorney, Thomas B. Russell, soliciting (at the request of his superiors in Washington, D. C.) proposals for settlement of all of the appellees' claims, including back pay. Prior to that time, on November 1, 1974, the government was confronted with an adverse decision of the Court of Claims on the interpretation of the Classification Act. See Testan v. United States, 499 F.2d 690, 205 Ct.Cl. 330 (1974), in which the court employed the Tucker Act and the Classification Act to hold that it would be empowered to award back pay in the event that the Civil Service Commission made an appropriate determination. We must assume that the adverse decision in Testan had something to do with the opening of settlement negotiations by the government.

During the entire period of settlement negotiations and thereafter to the repudiation on September 17, 1975, the Court of Claims' Testan decision was in full force and effect, although certiorari had been granted by the Supreme Court on February 18, 1975. The grant of certiorari, of course, was no indication of victory in the Supreme Court; it meant only that four justices had concluded that it was time for the court to construe the Classification Act. Obviously, that was the position of the government in that it did not solicit proposals for a settlement here until March of 1975, some time after the grant of certiorari. Our case, however, had been pending for over one year at the time the government opened the settlement negotiations and had been pending several months prior to the Court of Claims' decision in Testan, which favored the position of the appellees. All of this demonstrates the anxiety of the government to bring this litigation to a close.

In any event, following through on the government's proposal for settlement, McCarthy discussed the subject with his clients and on March 24, 1975, directed a letter to the United States Attorney offering three alternative proposals for settlement. McCarthy received a call from Russell in mid or late April, 1975, in which he was informed that Russell's superiors had authorized him to accept Proposal # 3. This provided for an increase in wages and back pay computed as "the precise dollar difference between the amount of wages earned and the amount of wages which would have been earned if the individual plaintiff had been credited with the 10% differential. . . ." On numerous occasions between April and May, McCarthy was assured by Russell that everything was settled and that he was just waiting to receive the back pay checks and the judgment pursuant to stipulation which was being prepared in Washington, D. C.

In early May of 1975, McCarthy spoke several times with the Justice Department Attorney (Carol Freeman) in Washington, D. C. who was handling the case; he was again assured that the parties had a binding settlement and that all that...