Watts v. Office of Personnel Management

• Decision Date: 01 April 1987
• Docket Number: No. 85-2435,85-2435
• Citation: 814 F.2d 1576
• Parties: Roy F. WATTS, Petitioner, v. OFFICE OF PERSONNEL MANAGEMENT, Respondent. Appeal
• Court: U.S. Court of Appeals — Federal Circuit

Page 1576

814 F.2d 1576

Roy F. WATTS, Petitioner, v. OFFICE OF PERSONNEL MANAGEMENT, Respondent.

Appeal No. 85-2435.

United States Court of Appeals Federal Circuit.

April 1, 1987.

Bernard Fensterwald, III, Fensterwald, Alcorn & Bowman, P.C., of Arlington, Va., argued for petitioner.

Robert A. Reutershan, Asst. Director, Commercial Litigation Branch, Dept. of Justice, Washington, D.C., argued for respondent. With him on brief were Richard K. Willard, Asst. Atty. Gen., David M. Cohen, Director and Carol N. Park-Conroy. Also on brief were Hugh Hewitt, Gen. Counsel, Thomas F. Moyer, Asst. Gen. Counsel and Earl A. Sanders, Atty., of counsel.

Before DAVIS, Circuit Judge, NICHOLS, Senior Circuit Judge, and ARCHER, Circuit Judge.

NICHOLS, Senior Circuit Judge.

Roy F. Watts appeals the decision of the Merit Systems Protection Board (MSPB or board) Docket No. DC08318110229 affirming the conclusion of the Office of Personnel Management (OPM) that Watts is not entitled to civil service retirement benefits pursuant to 5 U.S.C. Sec. 8332 for his employment with proprietary corporations of the Central Intelligence Agency (CIA). We affirm.

Background

Watts was employed as a pilot between April 12, 1947, and April 28, 1967, by various CIA "proprietary" corporations, defined as entities owned by the CIA while operating ostensibly as ordinary commercial enterprises. The first position Watts held was with the China National Relief and Rehabilitation Administration (CNRRA) Air Transport. CNRRA, originally Chennault Air Transport, was a private partnership created at the end of World War II to fly relief supplies throughout postwar China and to assist the anti-communist effort in China. The CIA used the services of CNRRA, later the Civil Air Transport (CAT), on a contract basis from 1947 until 1950. In 1950 the CIA purchased the company. In 1959 CAT was renamed Air America, Inc.

Watts was employed by Air America and its predecessor companies from April 12, 1947, to July 10, 1961. At the time Watts signed an employment contract with the first company, CNRRA, it was privately owned and not a CIA proprietary. Watts' original contract was with CNRRA only, and he did not execute any agreement with the CIA. The terms of Watts' original contract with CNRRA were assumed by each successor to CNRRA and the contract was not altered after the CIA purchased CAT, as then named. Watts has stated that he perceived no change, formal or informal, in the nature of his duties after the CIA acquired CAT. The duties assigned Watts were a mix of ordinary and covert operations.

Watts was later employed between October 1, 1962, and December 17, 1966, for Intermountain Aviation, Inc. (Intermountain), another CIA proprietary. When first hired by Intermountain, Watts was not aware of its connection with the CIA, although sometime after he was hired he learned that Intermountain was also a CIA proprietary. In 1966, Watts, about to leave Intermountain, was offered a GS-13 career appointment as a federal employee. He declined the offer and resigned from Intermountain in December 1966. Watts makes no claim to retirement benefits beyond December 1966. In January 1974, Watts petitioned the CIA for recognition of his work and claimed retirement benefits, beginning the various proceedings leading to the current appeal to this court. A United States District Judge held he should have a "full and fair hearing" before the "appropriate arm of the CSC" (Civil Service Commission), to which the MSPB succeeded.

The Administrative Law Judge (ALJ) of the MSPB disregarded all asserted facts but those which were undisputed. He considered summary judgment was permissible because the case arose before the Civil Service Reform Act of 1978, Pub.L. No. 95-454, which seems to disallow this useful device in adjudication of employee appeals. He cited 5 C.F.R. Sec. 772.31 (1978). He granted OPM's motion for summary judgment on the grounds that Watts was not "appointed in the civil service" as required by 5 U.S.C. Sec. 2105, which sets out the current statutory definition of an employee eligible for civil service retirement benefits. The ALJ, in reaching this conclusion, considered Watts' testimony and concluded that it is "abundantly clear" that Watts never considered himself a federal employee and neither was he considered an employee by the CIA. There was no intent on either side, according to the ALJ, to effectuate an appointment to the civil service. The full board, by order on January 11, 1985, declined to review this initial decision and therefore adopted the decision. Watts' appeal to this court followed, delayed by a stay by this court pending the outcome of the court's decision in Horner v. Acosta, 803 F.2d 687 (Fed.Cir.1986).

Analysis

I

The legal issue on appeal is whether an employee of a CIA proprietary is "appointed in the civil service" and, therefore, entitled to civil service retirement benefits solely on the basis of the CIA's ownership of the corporation. As is explained below, Section III, the requirement that the "employee" be "appointed" excludes one whose services are retained merely by contract.

The value of Watts' work is not denied or questioned, but Congress clearly did not intend to award retirement benefits to all persons who might be thought to deserve them. It can, itself, add to the entitlements it has created when it deems it right to do so. The importance of this case is its extraordinary implications for the civil service. The position urged by Watts would create a new category of employees who, without formal appointment or even awareness of the government's role when employed, would become "appointed" civil servants, in numbers unknown, and without thought as to their effect on actuarial soundness of the retirement fund. The implications of Watts' position might extend further to cover employees of corporations, privately owned, yet primarily producing goods or services for the government. We conclude that, in the absence of formal or even intended appointment, Watts is not an "employee" for the purposes of the civil service system.

The provisions of 5 U.S.C. Sec. 8332 establish that service as an "employee" is creditable for civil service purposes. The term "employee" by cross reference is defined in 5 U.S.C. Sec. 2105(a) as follows:

(a) For the purpose of this title, "employee", except as otherwise provided by this section or when specifically modified, means an officer and an individual who is--

(1) appointed in the civil service by one of the following acting in an official capacity--

* * *

* * *

(2) engaged in the performance of a Federal function under authority of law or an Executive act; and

(3) subject to the supervision of an individual named by paragraph (1) of this subsection while engaged in the performance of the duties of his position.

5 U.S.C. Sec. 2105(a).

In Acosta, this court concluded that an individual must satisfy all three elements of section 2105(a) to be considered a federal employee and that the requirements for these elements are strictly construed. Acosta, 803 F.2d at 691-92.

The question of the nature of "appointment" was at the heart of the case in Acosta as it is here. The board had held that the contract executed between the Navy and the employees was sufficient to establish "appointment." Judge Archer writing for the court rejected this argument and noted that:

The established rule is that one is not entitled to the benefit of a [government] position until he has been duly appointed to it. * * * The precedents binding on this court have required that there be a significant degree of formality in the appointment process.

Acosta, 803 F.2d at 692.

These principles were derived in part from Baker v. United States, 614 F.2d 263, 268 (Ct.Cl.1980) (concluding that "an individual cannot hold a government position * * * nor receive the salary and other benefits pertaining thereto, until he or she has been appointed to that position by a person authorized to make that appointment") and Costner v. United States, 665 F.2d 1016, 1020, 229 Ct.Cl. 87 (1981) ("[a]n abundance of federal function and supervision will not make up for lack of an appointment" ).

In concluding that the respondent employees were not "appointed" in the civil service, Judge Archer examined the indicia of appointment such as whether the employees were paid through the civil service system, given an oath of office, or asked to sign an SF 50 or 52. Acosta, 803 F.2d at 694. As noted in a footnote, another indication of civil service status was that one was not subject to Social Security withholding. The court concluded, in the absence of these indicia or a clear and unequivocal document of appointment, that there was no appointment to the civil service within the meaning of 5 U.S.C. Sec. 2105(a). Id.

Although the parties in Acosta stipulated that each of the respondents was engaged in the performance of a federal function and was supervised by a federal official, thereby eliminating two of the section 2105(a) tests from the court's scrutiny, we read Acosta to mean that the question of appointment, by itself, controls the question of whether an individual is an "employee" for the purpose of civil service retirement. Accord Baker, 614 F.2d at 266.

II

We now address, in light of the opinion in Acosta, the question of whether Watts was "appointed" to the civil service by virtue of his employment with a CIA proprietary. As a preliminary matter, we note that Watts' argument that different standards apply to pre-title 5 claims for retirement was directly rejected in Costner. In that case, the court found that:

Section 2105(a) was first enacted in 1966 in the wholesale revision of title 5. * * * The legislative history is quite clear, however, that its provisions represented existing law and made no changes in the substantive requirements imposed on the plaintiff [to establish that he is an "employee"]. * * * The commission [Civil Service...