Williams v. Metzler

• Decision Date: 30 December 1997
• Docket Number: No. 97-3127,97-3127
• Citation: 132 F.3d 937
• Parties: 13 IER Cases 978 Bert WILLIAMS, Petitioner, v. Cynthia METZLER, Acting Secretary, U.S. Department of Labor and Public Service Electric and Gas Company, Respondents.
• Court: U.S. Court of Appeals — Third Circuit

Page 937

132 F.3d 937

13 IER Cases 978

Bert WILLIAMS, Petitioner, v. Cynthia METZLER, Acting Secretary, U.S. Department of Labor and Public Service Electric and Gas Company, Respondents.

No. 97-3127.

United States Court of Appeals, Third Circuit.

Argued Oct. 30, 1997.

Decided Dec. 30, 1997.

David R. Culp (argued), Berry and Culp, P.C., Philadelphia, PA, for Petitioner.

Ellen R. Edmond (argued), William J. Stone, United States Department of Labor, Washington, DC, for Secretary of Labor.

Robert M. Rader (argued), Winston & Strawn, Washington, DC, for Public Service Electric and Gas Company.

Before: NYGAARD, McKEE and WEIS, Circuit Judges.

OPINION OF THE COURT

WEIS, Circuit Judge.

In this case, we hold that the Secretary of Labor does not have the authority, even with the consent of the parties, to enforce a settlement agreement resolving a retaliation claim brought by an employee/whistleblower against his employer under the Energy Reorganization Act. We also conclude that, as a matter of law, the Secretary misconstrued the agreement when he found no breach of the agreement by the employer. Accordingly, we will grant the petition for review and remand for further proceedings.

Petitioner Bert Williams filed a complaint with the Department of Labor under the Energy Reorganization Act pursuant to 42 U.S.C. § 5851. He alleged that his employer, Public Service Electric and Gas Company ("the company"), had retaliated against him for raising a nuclear safety violation that ultimately resulted in an $80,000 penalty against the company. A preliminary investigation by the Regional Office of the Department favored Williams. The company sought an administrative hearing, but before the retaliation claim reached an ALJ, Williams and the company arrived at a settlement.

Williams was 62 years of age at the time of the settlement, and it was decided that Williams would take an early retirement. The agreement recited that he would immediately receive benefits as if he had continued to work until normal retirement at age 65. The Secretary approved this settlement on June 8, 1994 and dismissed the complaint with prejudice.

When the company began sending monthly payments in amounts less than Williams anticipated, he asserted a breach of the settlement agreement. He prepared and filed a "Motion for Sanctions and to Enforce Settlement" with the ALJ to whom the original complaint had been assigned in which he asked the Secretary to enforce the agreement or, in the alternative, bring an enforcement action in the district court on his behalf.

The parties agree that the company had purchased an annuity policy from an insurance company to fund its obligations under the settlement agreement and that, on its face, the policy would have paid the required amount per month. However, because of the way the company structured the annuity, withholding taxes reduced the monthly payments substantially below the amount specified in the agreement. It appears that the company unilaterally selected the method of providing the retirement benefits, but in defending its action, the company asserted that the funding had been complicated by the Employee Retirement Income Security Act, 29 U.S.C. § 1001 et seq., (ERISA) and the withholding provisions of the Internal Revenue Code.

When presented with Williams' motion, the ALJ ruled that he no longer had jurisdiction because the case had previously been forwarded to the Secretary. Williams then asked the Secretary either to remand the matter to the ALJ "for enforcement of the terms of the Agreement and Order or initiate, or join in, an action in the District Court to enforce your Order."

The then Secretary, Robert Reich, rejected the company's argument that enforcement "must be sought in the United States District Court" and found that he had authority to consider enforcement under the agreement's express provision that "the Department of Labor shall retain jurisdiction of this matter for purposes of enforcement of this Agreement." Moreover, the agreement gave Williams the "right to seek enforcement of the Agreement through the Department of Labor" in the event of a material breach by the company.

Remarking that "[i]t is clear that [the company] has not paid Williams the agreed amount reflecting an annuity with a survivor benefit," the Secretary questioned "whether [the company] was required to make all the [tax] deductions up front." He therefore remanded to an ALJ to "receive evidence regarding the appropriate tax treatment of the annuity and whether [the company] breached the Agreement."

Before the ALJ, Williams contended that the company had promised him full retirement benefits payable at age 62 rather than at age 65, and therefore he should pay taxes in the same manner as other retirees. He said that he had never applied for an annuity policy, nor had he been given the option for a lump sum payment as is customary with such contracts. To combat any suggestion that the company's action had been dictated by applicable law, Williams submitted an expert's report that explored alternative means for funding that would have yielded the agreed upon monthly benefits without running afoul of ERISA or the Internal Revenue Code.

In defense, the company first explained the tax consequences of purchasing a lump sum annuity. Next, the company said it chose to buy an annuity policy rather than make monthly payments from company funds because that method might have subjected future payments to the risk of the company's insolvency. The company never submitted that option or any others, however, to Williams for his consideration.

The ALJ concluded that the company had not breached the agreement and denied Williams' motion. The Administrative Review Board, authorized by the Secretary to issue final decisions, affirmed. ¹

I.

Since resolution of many of the issues raised by this appeal turns on the nature of the proceedings that occurred before the agency, we think it helpful to begin by observing that the record is subject to two characterizations. Williams asked the Secretary to enforce the agreement, or in the alternative, to "initiate, or join in" an action in the district court. At various points in our discussion, we consider whether the Secretary asserted authority to enforce the agreement himself or held a preliminary fact-finding proceeding simply to inform his decision whether to pursue enforcement on Williams' behalf. Overall, either characterization raises concerns about the nature of the Secretary's action in this case.

With this clarification, we preliminarily raise, sua sponte, the issue of subject matter competence--that is, the authority of the Secretary of Labor to enforce a settlement agreement. The Act provides that either the Secretary or a party may seek enforcement of a settlement in the district court. 42 U.S.C. § 5851(d),(e). See also 24 C.F.R. § 24.8. There is, however, no language authorizing the Secretary to enforce without resorting to the district court.

In Macktal v. Secretary of Labor, 923 F.2d 1150, 1153 (5th Cir.1991), the court recognized that the Act authorizes the Secretary to act in one of three ways--to grant or deny the relief sought in a complaint, or to approve a settlement. The Court explicitly rejected proffered analogies to civil litigation in determining the extent of the Secretary's jurisdiction: "[w]hile such analogies may be helpful, an analogy cannot give the Secretary authority withheld by the words of the statute, nor can analogies deprive the Secretary of authority provided by the words of the statute." Id. Thus, the Court held that the Secretary is authorized to approve or disapprove a settlement by the parties, but cannot modify its terms without their consent. Id. at 1154.

Like the court in Macktal, we are faced with an action by the Secretary beyond the scope of his statutorily prescribed authority. Unlike in Macktal, however, the parties here do not question the Secretary's authority to assert jurisdiction. The question is whether the matter is of any consequence. We think that it is.

A suit for breach of contract is a common law action of ancient vintage and is properly cognizable in Article III courts. In Commodity Futures Trading Commission v. Schor, 478 U.S. 833, 106 S.Ct. 3245, 92 L.Ed.2d 675 (1986), the Supreme Court held that Congress could authorize an administrative agency to adjudicate a common law claim between two individuals in connection with a regulatory proceeding. The Court noted that a litigant having a personal right to an impartial and independent federal court adjudication could waive that right. Id. at 848, 106 S.Ct. at 3255. In Schor, the record demonstrated that the complainant had elected to seek relief before the agency rather than proceeding to judgment in a state or federal court on his claim. Id. at 849-50, 106 S.Ct. at 3255-56.

Despite the waiver, however, the court discussed whether the Commodities Exchange Act violated the Separation of Powers Doctrine, which prevents "the encroachment or aggrandizement of one branch at the expense of the other." Id. at 850, 106 S.Ct. at 3256, quoting Buckley v. Valeo, 424 U.S. 1, 122, 96 S.Ct. 612, 683-84, 46 L.Ed.2d 659 (1976) (per curiam ). In this context, the Court observed, "[t]o the extent that this structural principle is implicated in a given case, the parties cannot by consent cure the constitutional difficulty for the same reason that the parties by consent cannot confer on federal courts subject-matter jurisdiction beyond the limitations imposed by Article III, § 2." Id. at 850-51, 106 S.Ct. at 3256-57.

In this case, the parties are attempting to vest consensual jurisdiction in the Secretary to perform a function that Congress has explicitly placed in the district court. The issue is thus based on a statutory allocation of powers rather than a constitutional one. We believe, however, that Schor provides the guiding principle in these circumstances. Allowing the...