United States Court of Appeals for the Federal Circuit

           

 

 

 

       99-1402

 

 

 

 

  WILLIAM O. SCHISM and ROBERT L. REINLIE,

 

Plaintiffs‑Appellants,

 

                   v.

 

 

         UNITED STATES,

 

Defendant‑Appellee.

 

 

            George E. Day, Day and Meade, P.A., of Ft. Walton Beach, Florida, argued for plaintiffs-appellants.  With him on the brief was Timothy I. Meade.  Of counsel was Henry M. Holzer, of Santa Fe, New Mexico.

 

            E. Roy Hawkens, Attorney, Appellate Staff, Civil Division, Department of Justice, of Washington, DC, argued for defendant-appellee.  With him on the brief were Robert D. McCallum, Jr., Assistant Attorney General; and Barbara C. Biddle, Attorney.

 

            John A. Dragseth, Fish & Richardson, P.C., P.A., of Minneapolis, Minnesota, for amici curiae Disabled American Veterans, et al.  With him on the brief was Richard J. Anderson.

 

            Jonathan S. Williams, of Goldsboro, North Carolina, for amicus curiae The Alliance of Retired Military, etc. 

 

 

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

 

Chief Judge C. Roger Vinson

United States Court of Appeals for the Federal Circuit

                                   

99-1402

 

WILLIAM O. SCHISM and ROBERT REINLIE,

 

Plaintiffs-Appellants,

v.

 

UNITED STATES,

 

Defendant-Appellee.

__________________________

 

DECIDED:  November 18, 2002

__________________________

 

Before MAYER, Chief Judge, NEWMAN and MICHEL, Circuit Judges, PLAGER, Senior Circuit Judge, LOURIE, CLEVENGER, RADER, SCHALL, BRYSON, GAJARSA, LINN, DYK, and PROST, Circuit Judges.

 

Opinion for the court filed by Circuit Judge MICHEL, in which Circuit Judges LOURIE, CLEVENGER, RADER, SCHALL, BRYSON, LINN, DYK, and PROST join. 

 

Dissenting opinion filed by Chief Judge MAYER, in which Circuit Judge NEWMAN, Senior Circuit Judge PLAGER, and Circuit Judge GAJARSA join. 

 

Dissenting opinion filed by Senior Circuit Judge PLAGER.

 

MICHEL, Circuit Judge.

 

To induce people to join the armed services during the World War II and Korean War era and make it a career, military recruiters, under the direction of superiors, orally promised recruits that if they served on active duty for at least 20 years, they would receive free lifetime medical care for themselves and their dependents.  The government concedes such promises were made in good faith and relied upon.  Plaintiffs allege that they were fulfilled until 1995 when, plaintiffs assert, the government breached these implied-in-fact contracts by effectively denying them free care so they had to purchase Medicare Part B insurance in order to be treated by civilian doctors or obtain medications without paying fees because space was no longer available in military facilities where care and medications were free.  We must decide whether the government is bound by those promises. 

Plaintiffs Schism and Reinlie appeal from a summary judgment by the United States District Court for the Northern District of Florida holding that because the promises were not authorized they are not enforceable.  Schism v. United States, 19 F. Supp. 2d 1287, 1295 (N.D. Fla. 1998).  The district court concluded that because no statute authorized these promises, no valid contract was formed between the government and plaintiffs (or other similarly-situated military retirees, i.e., those who entered service prior to 1956 and by 1995 were 65 or more years of age).  See id.

Plaintiffs allege they were "promised full post retirement medical care for themselves and their dependents in military hospitals," First Amended Complaint at 2, and that because for decades Congress funded such free care this promise gave rise to an implied-in-fact contract.  They claim the government breached these promises of lifetime free medical care in 1995 by promulgating regulations to implement Tricare (a program that offered government-funded health care by civilian doctors to retirees under age 65), codified at 32 C.F.R. § 199.17.[1]  See Reply Brief at 2.  Indeed, plaintiffs state that "the government forced [them] to go to Medicare and pay for their own medical care."  Id.  Nothing in the Tricare implementing regulation, however, requires retirees 65 or older to elect Medicare Part B coverage; rather plaintiffs here freely elected to do so, despite the fact that they were still entitled to receive free medical care at military facilities on a space-available basis.  See 32 C.F.R. § 199.17(f)(1).  Plaintiffs presumably purchased additional medical coverage under Medicare Part B because while they remained entitled to space-available treatment in military facilities, as a practical matter, such space was less often available than before.[2]  As a result, plaintiffs complain that, whereas in the past they nearly always received complete free care, they now had to pay Medicare Part B premiums in order to receive less care without paying fees.[3]  Accordingly, the plaintiffs' claim implies that either Congress was obligated to maintain military medicine sufficient for their treatment, or in the alternative, to make them eligible for free health insurance coverage (such as Tricare) enjoyed by retirees under 65.  And the damages they seek represent the monthly Medicare fees plaintiffs have paid since 1995.  They sued under the Little Tucker Act.  See 28 U.S.C § 1346(a)(2) (2000). 

The principal question before us is whether the promises made to the plaintiffs, older Air Force retirees, were within the authority of the Air Force Secretary under 5 U.S.C. § 301 in view of annual congressional appropriations for military medicine, as the plaintiffs assert.  Because 5 U.S.C. § 301 at most authorizes space-available treatment, and not free health insurance for life, we hold that the Air Force Secretary lacked the authority in the 1950s when plaintiffs joined to promise free and full medical care. 

Further, under long-standing Supreme Court precedent, "common-law rules governing private contracts have no place in the area of military pay," Bell v. United States, 366 U.S. 393, 401 (1961), or pensions and hospital privileges, see Lynch v. United States, 292 U.S. 571, 577 (1934) (citing United States v. Teller, 107 U.S. 64, 68 (1883) for the proposition that the grant of pensions and such privileges creates no vested right in the recipient and can be withdrawn or redistributed by Congress at any time).  Thus military retiree compensation, including free military medical care and government-provided insurance, is controlled exclusively by statute, and so an action for breach of an implied-in-fact contract cannot lie.  See id. 

Accordingly, we must affirm the district court's judgment and can do no more than hope Congress will make good on the promises recruiters made in good faith to plaintiffs and others of the World War II and Korean War era -- from 1941 to 1956, when Congress enacted its first health care insurance act for military members, excluding older retirees.  Although these retirees were made eligible for free insurance effective in 2002, such relief was prospective only, leaving them uncompensated for insurance expenses incurred from 1995-2001, the subject of the relief they request here.

Background

The essential facts in this case are undisputed.  For an extensive treatment of all the facts, see the opinion of the district court.  Schism, 19 F. Supp. 2d at 1288-89.  The present opinion will treat only the facts relevant to our analysis.

Schism and Reinlie each accumulated 20 years of active duty in the Armed Services.  Schism enlisted in the United States Navy in April 1943, and was honorably discharged in February 1946.  In 1951, he received an indefinite appointment in the Air Force.  In 1956, he began active service, which continued until his retirement in 1979.  Thus, his Air Force service alone entitled him to retirement benefits.

Reinlie enlisted in the United States Army in 1942 and served on active duty until October 1945.  He entered the Air Force in 1951 and, in 1953, he received an indefinite term appointment.  Reinlie served continuously until he retired from the Air Force in 1967.   While the precise dates of Reinlie's service are not in the record before us, he apparently had sufficient retirement credits between his World War II service and his subsequent Air Force service to total 20 years.  The government has indicated that the relevant start of service dates for plaintiffs are 1951 for Schism and 1953 for Reinlie, the dates of their indefinite appointments.  The retirees do not dispute this fact, so we deem these to be the relevant dates.  Therefore, the only promises that matter are those of the Air Force recruiters in 1951 and 1953.

At the time the retirees joined the Air Force, recruiters allegedly promised free lifetime medical care for them and their dependents in exchange for serving 20 years.  Plaintiffs contend that their acceptance of this offer and the government's subsequent practice of providing free medical care formed an implied-in-fact contract.  In 1995, however, the government implemented TRICARE, a program that essentially modeled the availability of health care benefits for retirees along the lines of a health maintenance organization ("HMO").  See 32 C.F.R. § 199.17.  Retired service members who qualify for Medicare under the Social Security Act, however, are not eligible for TRICARE benefits.  But TRICARE does allow military retirees over age 65 to maintain the military health coverage that they had previously received for free by paying a monthly Medicare fee, which is deducted from their social security benefit payments.[4]  On December 11, 1996, plaintiffs brought a Little Tucker Act action[5] alleging that the government had breached its implied-in-fact contracts by requiring them to pay for Medicare coverage.[6]  

            Before the district court, the retirees sought "an order requiring the United States to cease deducting payments from their retired pay and to provide [them] and their dependents the unlimited free medical care for which they allegedly contracted."  Schism, 19 F. Supp. 2d at 1289.  The retirees argued that the recruiters' authority to make promises of full free lifetime medical care had multiple sources, the clearest being the broad language of 5 U.S.C. § 301 (1958).  Under that and other statutes, the military departments promulgated for decades regulations that governed the eligibility of retirees for health care, including Army Regulation AR 40-505 ¶2(b)(2) (1934) (allowing use of Army hospitals to Army retirees “provided sufficient accommodations are available for their treatment”), Army Regulation AR 40-590 ¶6(b)(1) (1935) (limiting availability of care from Army hospitals to “retired personnel on inactive status” who will benefit “by hospitalization for a reasonable time,” not those who “merely” require “domiciliary care by reason of age or chronic invalidism”), and Air Force Regulation AFR 160-73 ¶14(h) (1951) (limiting hospitalization of retired Air Force personnel to those "who will be benefited by hospitalization for a reasonable length of time").  In addition, the 1943 edition of the Navy's Manual of the Medical Department ("MEDMAN") also states: "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 by naval medical officers when available upon application. . . ."   1943 MEDMAN § 3168.  Plaintiffs cite and rely on all these sources.

In further support for their position, the retirees pointed to a 1945 letter written by James Forrestal, then-Secretary of the Navy, to "Naval Reserve and Temporary USN Officers."  The letter encourages reserve officers to transfer to the Regular service.  Attached to this letter was a recruitment brochure indicating that retired Navy personnel would receive free medical care.  The retirees asserted that this letter explicitly authorized the recruiters' oral promises of free lifetime health care.  In a similar vein, they contended that because Congress later expressly authorized certain plans for some retired service members and their dependents, e.g., “CHAMPUS” (Civilian Health and Medical Program of the United States), 10 U.S.C. § 1086 (1966), it also necessarily authorized recruiters’ earlier oral promises of free lifetime medical care.  Citing the repeated appropriations of funds then used to pay for military medical care, including the care given to retirees, Schism alternatively argued that Congress later ratified the recruiters' promises.[7] 

The government responded that none of the military services' regulations in place before 1956 promised free unconditional lifetime medical care for retirees and, moreover, that 5 U.S.C. § 301 did not authorize promises of such care even if the regulations did conditionally authorize care under certain circumstances.  Further, the government argued, Congress did not ratify the recruiters' oral promises because it never explicitly appropriated funds for an entitlement to free lifetime medical care for retirees.

On August 31, 1998, the district court rejected the retirees' claim, holding that as a matter of law neither the relevant statutes nor the regulations authorized the recruiters' promises of full free lifetime medical care.  See Schism, 19 F. Supp. 2d at 1295.  In reaching this conclusion, the court explained that while "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," those promises conflicted with the regulations then in place.  Id.  Accordingly, the court concluded, because the recruiters lacked the requisite authority to make promises binding on the government, no valid contracts between the retirees and the relevant service branches were formed.  Id.  Summary judgment was therefore granted in favor of the government.

            On February 8, 2001, a panel of this court reversed, stating "[t]here is nothing in the regulations or law prior to 1956 that would have prohibited recruiters from making [the promises of full free lifetime medical care]; indeed those regulations appear to authorize them.  At the least, there is no inconsistency between them."  Schism v. United States, 239 F.3d 1280, 1288 (Fed. Cir. 2001) (vacated).  The full court then granted the government's petition for a rehearing en banc, and, by order dated June 13, 2001, asked the parties to rebrief the appeal, addressing (among other things) the following issues: (1) whether promises of free medical care for life are enforceable in general and in particular under 5 U.S.C. § 301; (2) whether congressional appropriations had ratified those promises; and (3) the relevance, if any, of the new TRICARE for Life Bill, enacted in December 2000, Pub. L. No. 106-398, § 712 (2000), the conference report of which states that it "provides permanent lifetime TRICARE eligibility for Medicare-eligible military retirees and their families beginning in fiscal year 2002," 146 Cong. Rec. H9642 (daily ed. Oct. 11, 2000).  Schism v. United States, 252 F.3d 1354 (Fed. Cir. 2001).

            On appeal, the retirees contend "the government forced [them] to go on Medicare and pay for their own medical care."  Citing the "unavailability of care under Medicare," the retirees explained that they had to pay for Medicare Part B and supplemental insurance.  Asserting that paying these fees violated their contract with the government, the retirees are seeking damages.  While the nature and extent of these damages are not explained in detail in the briefs, the logical conclusion is that the retirees seek the costs they allegedly have been "forced" to pay "to get less medical care than they were receiving at no cost before [the alleged breach]."  Indeed, these are the only damages that the retirees discuss in any detail.

Schism also appeals the district court's order granting the government's motion for a protective order that denied additional discovery until after the court had ruled on the government’s summary judgment motion.   Adopting the government's assertion that the requested discovery was not necessary to respond to this motion, the district court concluded "the burden and expense of the subject discovery outweighs its likely benefit at this stage of the proceedings."  Schism v. United States, No. 3:96cv349/RV, Order at 1 (N.D. Fla. Sept. 19, 1997).  The district court did indicate, however, that if the government's motion for summary judgment was denied, the government would need to timely respond to the unfulfilled discovery requests.  Id. at 1-2.

As noted earlier, the plaintiffs' contract claim was brought under the Little Tucker Act, which provides concurrent jurisdiction in the United States district courts and the United States Court of Federal Claims for money claims against the United States founded on (among other sources of law) "any express or implied contract with the United States" that does not exceed $10,000.  28 U.S.C. § 1346(a)(2). 

Plaintiffs filed a timely notice of appeal.  We have exclusive subject matter jurisdiction under 28 U.S.C. § 1295(a)(2) and now affirm. 

Discussion

We review a district court's grant of summary judgment de novo.  See T & M Distribs., Inc. v. United States, 185 F.3d 1279, 1282 (Fed. Cir. 1999).  Summary judgment is proper only if the record "show[s] that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law."  Fed. R. Civ. P. 56(c).  For the purposes of this appeal, the government concedes that recruiters made the good faith representation to potential recruits that, upon retirement, they and their dependents would receive free, lifetime medical care. 

I.            Retirement Benefits for Military Personnel, as for Civilian Federal Employees, Are Governed Exclusively by Statute and Therefore May Not Be Granted by Contract

 

Benefits for retired military personnel -- and for civilian retired federal employees, for that matter -- depend upon an exercise of legislative grace, not upon principles of contract, property, or "takings" law.  See Zucker v. United States, 758 F.2d 637, 640 (Fed. Cir. 1985) (explaining that federal workers' "entitlement to retirement benefits must be determined by reference to the statute[s] and regulations governing these benefits, rather than to ordinary contract principles"); see also Bell v. United States, 366 U.S. 393, 401 (1961) ("A soldier's entitlement to pay is dependent upon statutory right."); Kania v. United States, 650 F.2d 264, 267-68 (Ct. Cl. 1981) ("Thus it has long been held that the rights of civilian and military public employees against the government do not turn on contract doctrines but are matters of legal status even where compacts are made."); Shaw v. United States, 640 F.2d 1254, 1260 (Ct. Cl. 1981) (stating "the law is well settled that, 'public employment does not, * * * give rise to a contractual relationship in the conventional sense'") (citations omitted).  In other words, Congress -- and only Congress -- can authorize the benefits that a retired federal employee, whether civilian or military, is entitled to receive.  See Frisbie v. United States, 157 U.S. 160, 166 (1895) ("Pensions are the bounties of the government, which [C]ongress has the right to give, withhold, distribute, or recall at its discretion.  Congress, being at liberty to give or withhold pensions, may prescribe who shall receive, and determine all the circumstances and conditions under which any application therefore shall be prosecuted.  No man has a legal right to a pension . . . .  The whole control of that matter is within the domain of congressional power." (citations omitted)).

A            Congress Has Exercised Its Plenary Authority Over the Military in the Realm of Health Care for Present and Former Military Members and Their Dependents Since 1884 and Has Never Authorized the Secretaries of the Military Departments to Contract With Recruits for Benefits Not Provided for By Statute

 

In a similar vein, Congress has since 1884 repeatedly exercised its authority by enacting statutes that defined the breadth of health care authorized for members of the military and their dependents.  See 23 Stat. 112 (1884) (authorizing spending for medical care for the dependents of active duty Army personnel when "practicable").  In 1929, for example, Congress authorized medical care for Navy retirees at non-naval hospitals.  See 45 Stat. 1090 ("[T]he Secretary of the Navy may provide for the care and treatment of naval patients on the active or retired list . . . entitled to treatment in naval hospitals in other government hospitals when appropriate naval hospital facilities are not available and the government agencies having control of such other hospitals consent thereto.").  In addition, in 1943, Congress acted so as to limit the hospitalization of dependents of active duty Navy members.  See 57 Stat. 80, 81 (1943) (authorizing hospitalization for dependents of Navy and Marine Corps personnel "only for acute medical and surgical conditions, exclusive of nervous, mental, or contagious diseases or those requiring domiciliary care").

In 1956, Congress began a series of legislative acts that have formed the basis for modern-day retired military medical care.  The three-fold purpose of the medical care program for retirees is best explained by the Department of Defense:

To provide incentives for armed forces personnel to undertake military service and remain in that service for a full career; to help ensure the availability of physically acceptable and experienced personnel in time of national emergency; and to provide military physicians and dentists exposure to the total spectrum of demographically diverse morbidity necessary to support professional training programs and ensure professional satisfaction for a medical service career.

 

Office of the Secretary of Defense.  United States Department of Defense,  Military Compensation Background Papers:  Compensation Elements and Related Manpower Cost Items.  Their Purposes and Legislative Backgrounds at 609 (5th ed. 1996).  The Dependents' Medical Care Act of 1956, 70 Stat. 250, 253 (1956), ("the 1956 Act") was intended in part "to provide a uniform and improved program of medical care for the dependents of members of the uniformed services."  H.R. Rep. No. 84-1805 at 1 (1956).  This Act expressly included conditional health care for retirees:  "a member or former member of a uniformed service who is entitled to retired . . . pay may, upon request, be given medical and dental care in any facility of any uniformed service subject to the availability of space and facilities and the capabilities of the medical and dental staff."  10 U.S.C. § 1074(b) (1956) (emphases added).  Thus, military retirees and their dependents were given "a contingent right to care in military medical facilities . . . .  10 U.S.C. § 1074(b) (retirees) and § 1076(b) (dependents or survivors of retired members)."  Military Compensation Background Papers at 609 (emphasis added). 

            A mere ten years later, in 1966, Congress revisited the issue of retiree medical care when it amended the provisions of Title 10 dealing with health care for (among others) retirees and their dependents.  In so doing, Congress granted the authority to the Department of Defense to contract for the provision of civilian health care for these groups (resulting in the Civilian Health and Medical Program for the Uniformed Services -- CHAMPUS).  Id.  Indeed, in recommending this amendment, the Secretary of Defense explained the need for the legislation in view of there being insufficient space available care for retirees in military facilities: 

The purpose of the proposed legislation is to provide a program of health benefits equally available to all retired members of the uniformed services and their dependents.  Such a program is required to provide equitable benefits to our rapidly increasing retired population.  In future years, these benefits must increasingly be provided by civilian institutions due to the declining coverage of space-available care in military facilities.

 

H.R. Rep. No. 89-1407, at 27 (emphasis added).  The House Committee on Armed Services echoed this concern, emphasizing the "moral obligation of the government to provide care in retirement to the military man and his family."  Id. at 23.  Indeed, as recognition of this moral obligation, the Committee substantially agreed with the conclusion of a study commissioned by the Department of Defense that while "the Government has no absolute legal obligation to provide [health care in military facilities,] . . . stated and implied promises of medical care following retirement, both written and oral, . . . were for many years a standard part of personnel recruitment and retention efforts."  Military Hospital Construction and Utilization Policies. Report of the Special Subcommittee on Construction of Military Hospital Facilities of the House Committee on Armed Services at 10362 (Sept. 30, 1964) (emphasis added).  Thus, Congress was concerned with keeping the promise to provide medical care for retirees and felt that it did so by authorizing a program such as CHAMPUS, which would bring retirees under an insurance program while retaining the concept of space-available care in military facilities for retirees.

            CHAMPUS guaranteed retirees who were not yet entitled to Medicare benefits access to authorized health services from civilian sources as an alternative to care from military facilities.  Military Compensation Background Papers, at 609-10.  Of significance is that CHAMPUS was not a "free" program:

By law, CHAMPUS is a cost-sharing program with the retiree responsible, in the case of outpatient services, for a deductible [which increases over time] . . . together with [a percentage] of all allowed charges for "inpatient care."  The Government pays the balance of the allowed charges for authorized care, i.e., 75 percent of the allowed charges, provided that a retiree or a retiree's family group of two or more persons may not be required to pay a total of [an amount which increases over time] for health care received under CHAMPUS during any fiscal year.

10 U.S.C. § 1086(b)(4).

 

Id. (footnote omitted).  Thus, because the very program Congress enacted in part for the retirees' benefit was never "free," it is clear that Congress never intended health care for retired career personnel to be without cost to the retirees.

            Following yet another examination of health care for retirees, in 1986, Congress enacted 10 U.S.C. §§1097, 1099 to further improve the health care system for service members.  This legislation provided the authority for the military's eventual implementation of TRICARE in the early 1990s, which offered CHAMPUS-eligible beneficiaries (retirees under 65 years of age) a choice among a health maintenance organization-type program, a preferred provider network program, and CHAMPUS benefits.  See  10 U.S.C. §§ 1097, 1099 (1986).  In order to stimulate enrollment in TRICARE Prime, Congress amended section 1097 in 1996, to provide that "the Secretary shall, as an incentive for enrollment, establish reasonable preferences for services in facilities of the uniformed services for covered beneficiaries enrolled in any program established under, or operating in connection with, any contract under this section."  10 U.S.C. § 1097(c) (Supp. II 1996).  Because TRICARE Prime was limited to CHAMPUS-eligible beneficiaries, the priority access requirement had the effect of reducing space-available care for Medicare-eligible (65 years and over) retirees and their dependents.  Congress then took steps to ameliorate this effect.  For example, in 1997, it enacted the "Medicare subvention demonstration project for military retirees," which provided for Medicare funding of a Department of Defense-sponsored program similar to TRICARE Prime.  See 42 U.S.C. § 1395ggg (Supp. III 1994).  Then, in 1998, Congress acted again, adopting demonstration projects for Medicare-eligible Department of Defense beneficiaries.  See National Defense Authorization Act for Fiscal Year 1999, Pub. L. No. 105-261, §§ 721-723.  These projects were the Federal Employees Health Benefits Program Demonstration Project; TRICARE as a Supplement to Medicare; and the Pharmacy Redesign Implementation.  Most recently, of course, Congress exercised its authority over health care for retired military members by introducing TRICARE For Life, which provides a pharmacy services program for Medicare-eligible beneficiaries and authorizes Medicare-eligible beneficiaries who enroll in Medicare Part B to participate in CHAMPUS.  See Pub. L. No. 106-398, § 712 (2000).

While Congress has legislated extensively in the realm of military health care, as the history above indicates, not once has it statutorily authorized the secretaries of the military departments to contract with recruits for health benefit entitlements.  Compare, e.g., California v. United States, 271 F.3d 1377 (Fed. Cir. 2001) (wherein Congress granted the Secretary of the Interior the express authority to contract with the State of California regarding certain water projects); 48 C.F.R. § 1.601 (vesting the “agency head” with express “authority and responsibility to contract for authorized supplies and services” and mandating that only contracting officers may enter into contracts on behalf of the government).  Of course, had Congress legislated that the military secretaries could contract with recruits for specific health care benefits, the situation would be different.  However, because Congress (1) has enacted statutes for over 100 years that govern the level and availability of health care benefits for active and retired members of the armed services and their dependents; and (2) has never provided funds for contracts made by the secretary with recruits to grant health care, the inescapable conclusion is that Congress simply did not intend to delegate its authority over health care benefits for military members.  Rather, it intended to occupy the entire field. In that context, one cannot reasonably infer that by empowering service secretaries to run their respective departments, Congress was silently authorizing them to grant health care benefits via oral promises to recruits by the service's recruiters.

 

B         The Supreme Court Has Ruled that Military Pay and Benefit Entitlements are Controlled by Statute, Not Contract, as Has Our Court, and These Rulings are Based in Sound and Consistent Logic

 

The Supreme Court has recognized the irrelevance of contract law for members of the military many times, stating, for example, that "common-law rules governing private contracts have no place in the area of military pay."  Bell v. United States, 366 U.S. 393, 401 (1961).  This is true even though recruiter and recruit may each sign an enlistment contract agreeing to its contents; the recruit's entitlement to basic pay is simply not governed by this contract, but by statute.  See id.  Accordingly, in Bell, the Supreme Court determined that even though an enlisted soldier captured in the war had espoused communism, called the President a "traitor," aided his captors as a prisoner of war and thereby allegedly "breached" his enlistment contract, he was still entitled to his basic pay for as long as he was a member of the military.  Id. at 401-02.  In short, the Court reasoned, the pre-existing statute -- not the enlistment contract -- governed the soldier's right to basic pay.  Id. at 402.  And so even though a solider "may violate his contract obligations, his status as a soldier is unchanged"; consequently, as a "soldier," he was entitled to all the benefits prescribed by statute, including his statutorily-mandated basic pay.  Id.; see also United States v. Larionoff, 431 U.S. 864, 869 (1977) (stating in a bonus pay case that, "the rights of the affected service members must be determined by reference to the [relevant statutes and regulations] rather than to ordinary contract principles").

The doctrine that statutes are the exclusive source of law governing the compensation rights of members of the military for pensions as well as pay appears in Court opinions as early as 1856.  In Walton v. Cotton, 60 U.S. 355, 357 (1856), the Court explained that to determine who qualifies as beneficiaries of a deceased revolutionary war captain's pension "the case turns upon the construction of [the] statutes" pertaining to the pensions and not upon any other source of law.  This understanding also prevails in subsequent cases, with the Court quoting Walton as the source for the rule that only congressional acts determine compensation of soldiers.  United States v. Teller, 107 U.S. 64, 68 (1883) ("[military p]ensions are the bounties of the government, which [C]ongress has the right to give, withhold, distribute, or recall at its discretion").[8]  See also Frisbie v. United States, 157 U.S. 160, 166 (1895) (quoting the same rule as the basis for its analysis that statute, not contract law, governs the entire administration of military pensions, and further holding that statute supercedes even where third party agents have contracted independently with pension beneficiaries).  While the post-Walton cases do not offer any independent justification for the doctrine, they are explicit about the statutory source for their decisions and the rejection of other legal bases in their analysis. 

As mentioned above, this principle that compensation is controlled by statute has been applied specifically to pensions and hospitalization benefits for soldiers, thus, illustrating not only the exclusive role of statutes in determining military personnel's  compensation rights, but also touching on rights akin to those claimed by the plaintiffs in this case.  In Lynch v. United States, 292 U.S. 571, 577 (1934), the Supreme Court explained that "[p]ensions, compensation allowances, and privileges are gratuities.  They involve no agreement of parties; and the grant of them creates no vested right.  The benefits conferred by gratuities may be redistributed or withdrawn at any time in the discretion of Congress."  Id.  In so doing, the Court opined that while war-risk insurance resembled pensions, hospitalization and other privileges statutorily afforded to former members of the military, the war-risk insurance differed in that its policies arose not from statutes, but from written contracts.  The authority for the program was set forth in congressional action separate from the government's role as the commanding power of the armed forces ("[w]ar risk insurance was devised in the hope that it would, in large measure, avoid the necessity of granting pensions").  Id. at 576 n.2.  It was only because of this difference that the war-risk insurance contracts created vested rights, whereas pensions and hospital privileges were mere statutory gratuities, not vested contract rights, so Congress could revoke or expand them at any time.  See id. at 577; United States v. Teller, 107 U.S. 64, 68 (1883) ("No pensioner has a vested legal right to his pension").  Another way to understand why the government's position with respect to obligations incurred by enlistment contracts differs from the contracts at issue in Lynch is that, as the Court in Bell explains, "[e]nlistment is a contract; but it is one of those contracts which changes in status; *** [and a soldier's] relations to the State and the public are changed."  366 U.S. at 402.  In Bell the soldiers' potential breach was at issue but the rule that the enlistment contract gives rise to a relationship not governed by contract or that the contract somehow merges with the applicable statutes is stated generally and fits with the Lynch concept that compensation of soldiers is different from other contracts in which a soldier and the government happen to be contracting parties, but their roles as contracting parties are not relevant to the enlistment or military service context.  Bell, 366 U.S. at 402

The Supreme Court has not explicitly applied these principles to comprehensive medical benefit entitlements for military retirees or (as in this case) to an asserted implied-in-fact contract grounded on the conceded promises of full free lifetime medical care.  In our view, however, full free lifetime medical care is merely a form of pension, a benefit received as deferred compensation upon retirement in lieu of additional cash.  See Black's Law Dictionary 1134 (6th ed.) (defining "pension" as a "[r]etirement benefit paid regularly (normally monthly), with the amount of such based generally on length of employment and amount of wages or salary of pensioner.  Deferred compensation for services rendered.").  We see no meaningful difference between the retirement benefits that the Supreme Court has identified as beyond the reach of contracts and the full free medical care at issue in this case and, as a result, will apply the doctrine that was the basis for the earlier Supreme Court cases.  The plaintiffs are implicitly claiming not only that the recruiters promised them lifetime, free medical care, and that everyone involved assumed that there would be enough military hospitals and clinics to serve the servicemen at any age, retired or not, but also that there was a contingent promise that if there would ever be an insufficient number of medical facilities, the government would buy civilian health insurance for the servicemen to make up for the deficiency.  In other words, the plaintiffs claim a right to comprehensive benefits.  Moreover, even if one were to consider the asserted medical benefit entitlement more as bargained-for, direct compensation for services rendered rather than gratuities, because the plaintiffs are military personnel, the vesting of any rights would be governed by statute, rather than by contract as the plaintiffs argue.  See Larionoff, 431 U.S. at 869 n.7 (referring to the limitation that the soldiers' rights to reenlistment bonuses only vested because the statute in question made the soldiers eligible for the statutory bonuses and caused the rights to vest, not because of contract principles.  Contract principles would have engendered a right to a specific amount of money, whereas a statutory bonus is calculated according to a statute and may be more flexible and dependent on multiple variables).  The case law shows that where Congress has legislated military pay or benefits, a service secretary cannot contract (even if it may be true that in the absence of congressional action, and with congressional authority, a secretary could have contracted with respect to the pay or benefits).  So we must conclude that there were no valid contracts in this case. 

This conclusion also accords with our own prior decisions and thus preserves stability.  Our case law has reiterated the Supreme Court's language that Congress "may prospectively reduce the pay of members of the Armed Forces, even if that reduction deprived members of benefits they had expected to be able to earn."  Wyatt v. United States, 2 F.3d 398, 401 (Fed. Cir. 1993) (citations omitted); cf. Andrews v. United States, 175 Ct. Cl. 561, 563 (1966) (recognizing the "strong authority for the counter-proposition that officers have no vested or contractual right to any particular amount of retired pay") (citing Bell, 366 U.S. at 401).  Indeed, we have stated that

[federal employees'] entitlement to retirement benefits must be determined by reference to the statute and regulations governing these benefits, rather than to ordinary contract principles.  [And] [a]pplying th[is] doctrine  . . . courts have consistently refused to give effect to government-fostered expectations that, had they arisen in the private sector, might well have formed the basis for a contract or an estoppel.

 

Zucker v. United States, 758 F.2d 637, 640 (Fed. Cir. 1985).  Our court again followed this line of precedent in Sebastain v. United States, 185 F.3d 1368 (Fed. Cir. 1999).[9]   There, elderly military retirees, comparable to plaintiffs here, sought just compensation under the Fifth Amendment's Takings Clause for the government's failure to provide promised free lifetime medical care.  See id. at 1370.  Adopting the settled principle that the right to military pay "must be determined by reference to the [governing] statutes and regulations . . . rather than to ordinary contract principles," and applying it to retirement benefits, including medical care, our analysis "look[ed] to the governing statutes and regulations to ascertain whether the Retirees have an unconditional right to lifetime free medical care."  Id. at 1371 (citations omitted) (emphasis added); see also Goodley v. United States, 441 F.2d 1175, 1178 (Ct. Cl. 1971) (explaining that for a Navy reservist "there is no vested or contractual right to retired pay, which is dependent upon statutory right rather than upon common law rules governing private contracts"); Pate v. United States, 78 Ct. Cl. 395, 400 (1933) ("Retirement pay and compensation for injuries received in line of duty, like pensions are bounties of the Government, which Congress has the right to give, withhold, distribute, or recall, at its discretion.") (citations and internal quotation marks omitted). 

In addition, Congress could hardly have intended a contract regime for military health benefits because that would have been inconsistent with the entire system for compensating all federal employees.  Federal employees, both military and civilian, serve by appointment, not contract, and their rights to compensation are a matter of "legal status" even where recruitment agreements are made.  See Zucker, 758 F.2d at 640; see also Chu v. United States, 773 F.2d 1226, 1227-28 (Fed. Cir. 1985) (discussing the plight of Reserve Officers in the Commissioned Corps of the Public Health Service who alleged a breach of contract by the government of its agreement to provide residency training at its expense and stating "[it is a] well-established principle that, absent specific legislation, federal employees derive the benefits and emoluments of their positions from appointment rather than from any contractual or quasi-contractual relationship with the government").  "In other words, [federal employees'] entitlement to retirement benefits must be determined by reference to the statute and regulations governing these benefits rather than to ordinary contract principles."  Zucker, 758 F.2d at 640.  This logically follows from the well-established principle that 

"public employment does not, *** give rise to a contractual relationship in the conventional sense."  Therefore, plaintiff may not base his theory of recovery on contract law since he was a federal employee.  Federal officials who by act or word generate expectations in the persons they employ, and then disappoint them, do not ipso facto create a contract liability running from the Federal Government to the employee, as they might if the employer were not the government.

 

Shaw v. United States, 640 F.2d 1254, 1260 (Ct. Cl. 1981) (citations omitted).

Adhering to our own long-standing precedent and clear guidance from Supreme Court decisions, then, the plaintiffs' claim for breach of an implied-in-fact contract for retirement health benefits is defeated by the principle that statutes govern entitlement to these benefits, not any contracts between the recruit and the government.[10] 

C         Cases Finding an Enforceable Contract Between the Service and a Recruit, e.g., a Promise for Specific Military Training, Are Inapplicable to Retirement Health Care Entitlements

 

            While the Supreme Court has made clear that "common-law rules governing private contracts have no place in the area of military pay," Bell, 366 U.S at 401, our predecessor court enforced contract claims based on enlistment agreements specifying non-pay benefits promised in writing to recruits.  See, e.g., Grulke v. United States, 228 Ct. Cl. 720 (1981); DeCrane v. United States, 231 Ct. Cl. 951 (1982).  In these cases, the recruits alleged that the government breached the written and signed enlistment agreements which promised them specific training or duty assignment.  In contrast to Bell, these cases do not involve military pay or retirement benefits.  Thus, Grulke and DeCrane are not in conflict with established Supreme Court case law that military pay and pay-related benefits cannot ever be a matter of contract, but must be governed exclusively by statutes and regulations.

In Grulke, the plaintiff-nurse enlisted in the Army pursuant to regulations that allowed her to select the nature and duration of the specialized medical training she wanted following her basic military training.  She chose training as an operating room specialist.  Subsequently, however, Grulke exercised her option to receive a voluntary discharge after becoming pregnant, thus prematurely concluding her military service.  She later sued, alleging that the six weeks of training she received as an operating room specialist was short of the 18 weeks of training promised to her in her enlistment agreement that was based on and authorized by the regulations.  Grulke, 228 Ct. Cl. at 721-22.  Finding that Grulke's enlistment contract was enforceable, the Court of Claims took pains to distinguish her case from those in which the plaintiff claimed a "right to payment for military services rendered which would be governed by statute or regulation."  Id. at 722.  The court explained that rather than seeking pay afforded by statute but withheld, Grulke was actually claiming a right "for 'actual, compensatory, special and punitive damage,' for breach of contract."  Id.

            In DeCrane, our predecessor court again found that contract law could govern in the context of executed enlistment agreements when former servicemen sought damages based on the government's failure to give them the training they had been promised upon enlistment.  231 Ct. Cl. at 952.  The court's terse, two-page opinion largely adopted the analysis of Grulke.  See id. ("In at least three prior cases we have rejected the government's argument that we have no jurisdiction over a suit claiming that the government breached an enlistment contract because it failed to provide the training it allegedly promised the serviceman he would receive. We discussed the issue fully in Grulke.") (citations omitted).

            Accordingly, Congress' authority and the various courts' (i.e., the Supreme Court, our court, and our predecessor court) consistent interpretation thereof demonstrate that military health care benefits as a form of compensation have long been exclusively a creature of statute, not contract.  Consequently, the discussions with recruiters could not have formed binding contracts with the government at the time Schism and Reinlie joined the Air Force.  Their claim for breach of an implied-in-fact contract that would give them both an entitlement to lifetime free medical care at military facilities and an entitlement to civilian health insurance for any insufficiency in those military facilities must fail as a matter of law. 

            On this basis alone, we could dispose of this appeal.  To respond to the plaintiffs' contract-based arguments, however, we address below why their claim must fail even assuming that contracts could govern the asserted entitlement to medical benefits for military retirees and their dependents. 

II.         Even Assuming a Contract Law Analysis Were Proper, Plaintiffs Still Do Not Have a Valid Contract Because the Recruiters Lacked Actual Authority to Negotiate Entitlements for Full, Free Lifetime Health Care Benefits

 

As explained above, the retirees' claim is foreclosed by the principle, well established by Supreme Court precedent, that federal retirement benefits such as health care are creatures strictly of legislative grace and thus cannot be granted by contract.  Even assuming that a contract analysis were appropriate, however, the retirees' claim still cannot withstand summary judgment because the Supreme Court has likewise made clear that the sole statute relied on by the plaintiffs, 5 U.S.C. § 301, authorizes only “housekeeping” matters like internal policies and procedures; it thus cannot authorize the creation of a benefit entitlement via contracts. 

As stated earlier, plaintiffs seek to recover solely upon a theory alleging breach of an implied-in-fact contract, asserting that the necessity they pay Medicare and premiums, along with those for supplemental insurance in order to have full health care coverage, breached the promise of full and free lifetime healthcare.[11]

Despite the thorough briefing in this case, plaintiffs never specify exactly what was included within the broad promise to them.  Both sides agree that the retirees were promised "free lifetime medical care."  See, e.g., Complaint at 2 ("That all of the World War II and Korean class veterans were promised full post retirement medical care for themselves and their dependents in military hospitals.) (emphasis added); Appellants' Brief at 1 ("[T]he recruiters promised them free lifetime medical care if they served at least twenty years."); Appellee's Brief at 2 ("Plaintiffs . . . filed an action contending that the government induced them to serve in the military with the promise that, upon retirement, they and their dependents would be entitled to free, lifetime medical care."); Appellants' Reply Brief at 2 ("By instituting Tri-Care, the government breached its implied contract to provide Schism and Reinlie with free medical care for life.").  What that promise encompasses, however, the retirees never explicitly articulate.  Several times the retirees have referred to seeking care only in military facilities.  See, e.g., First Amended Complaint at 2.  If this was the extent of the promise, we fail to see how it was breached at all.  Indeed, retired military members, regardless of age, were still entitled to free medical treatment at military facilities on a space-available basis after the implementation of Tricare in 1995.  See  32 C.F.R. § 199.17(f)(1) (1995) ("Military Treatment Facility (MTF) care.  All nonenrollees (including beneficiaries not eligible to enroll) continue to be eligible to receive care in military treatment facilities on a space available basis.") Military Compensation Background Papers at 613 ("Even after they become eligible for Social Security hospital insurance benefits, retirees, their dependents, and survivors may receive treatment at military medical facilities on a space-available basis."); Tricare Demonstrations Manual 1992 ("These dual-eligible beneficiaries [eligible for both Medicare and Military Health Services] do not have a Civilian Health and Medical Program of the Uniformed Services (CHAMPUS) entitlement, but are eligible for care in a [Military Treatment Facility] on a space-available basis.").  Retirees were not required to purchase Medicare Part B in order to continue to receive medical treatment from military facilities on a space-available basis.  Because medical care remains available at military facilities on a space available basis, the only logical conclusion is that the promised "full," free lifetime medical care meant that if space was no longer available at base hospitals, as alleged, then Congress was bound by the contracts to pay for health insurance coverage for care by civilian doctors.  That is, "free care" meant the retirees, even when over 65 years of age and entitled only to hospitalization insurance coverage under Medicare Part A (unpaid), would not have to spend their own money to pay for care from civilian doctors. Similarly, as to medications, once they were no longer provided free at base hospitals and clinics, then Congress was bound to pay for insurance coverage so that when ordered at civilian pharmacies, the medications would be free.

A binding implied-in-fact contract arises between a private party and the government upon proof by the person of:  (1) mutuality of intent to contract; (2) consideration; (3) an unambiguous offer and acceptance, and (4) "actual authority" on the part of the government's representative to bind the government.  City of Cincinnati v. United States, 153 F.3d 1375, 1377 (Fed. Cir. 1998).  As to “actual authority,” the Supreme Court has recognized that any private party entering into a contract with the government assumes the risk of having accurately ascertained that he who purports to act for the government does in fact act within the bounds of his authority.  Fed. Crop Ins. Corp. v. Merrill, 332 U.S. 380, 384 (1947); accord CACI, Inc. v. Sec’y of the Army, 990 F.2d 1233, 1236 (Fed. Cir. 1993) (“A contractor who enters into an arrangement with an agent of the government bears the risk that the agent is acting outside the bounds of his authority, even when the agent himself was unaware of the limitations on his authority.”).  In this case, the thrust of the parties’ arguments is that under § 301 the Air Force recruiters had actual authority to bind the government with their oral promises.  See, e.g., Fed. Crop Ins. Corp. at 384 (explaining that a government representative's authority can be "explicitly defined by Congress or be limited by delegated legislation, properly exercised through the rule-making power.").  We hold they did not.

A            Plaintiffs' Written Enlistment Contracts Preclude Implied-in-Fact Contracts Based on Oral Promises

 

We note at the outset that the retirees' implied-in-fact contract argument fails to take into account their written enlistment agreements.  It is well settled that the existence of an express contract precludes the existence of an implied-in-fact contract dealing with the same subject matter, unless the implied contract is entirely unrelated to the express contract.  E.g., Atlas Corp. v. United States, 895 F.2d 745, 754-55 (Fed. Cir. 1990).  Along those same lines, no citation is necessary to support the vitality of the parol evidence rule:  barring certain limited exceptions (e.g., fraud), a party to a written contract cannot supplement or interpret that agreement with oral or parol statements that conflict with, supplant, or controvert the language of the written agreement itself.

As discussed above, Reinlie and Schism agreed in an express, written contract to be bound by military regulations and statutes.  Those regulations and statutes expressly address health care for military retirees, and provide expressly that retirees and their dependents were not entitled to full free lifetime medical care.  Accordingly, the retirees' contract claim is foreclosed because an "implied-in-fact contract cannot exist if an express contract already covers the same subject matter."  Trauma Servs. Group v. United States, 104 F.3d 1321, 1326 (Fed. Cir. 1997). 

B            5 U.S.C. § 301 Did Not Authorize the Secretary to Grant an Entitlement to Full Free Lifetime Medical Care for Retirees

 

            Even assuming that retirement benefits for veterans did not depend on legislative grace, Schism’s argument that 5 U.S.C. § 301 supplied the requisite authority for these health care entitlements still cannot avoid summary judgment.  Plaintiffs argue that the broad language of 5 U.S.C. § 301 conferred authority on the secretaries of the military departments to control recruitment in their departments, which included directing recruiters to promise free lifetime medical care.  The government responds that 5 U.S.C. § 301 is merely a "housekeeping" statute that does not authorize the creation of a substantive right such as an "entitlement to free lifetime medical care."  Accordingly, the issue turns on whether 5 U.S.C. § 301 impliedly authorized military recruiters to promise free lifetime health care at the time.  We agree with the government's interpretation of the statute and hold that it does not.

5 U.S.C. § 301 states in relevant part:

Departmental regulations

The 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.

 

This statute is discussed in greatest detail in Chrysler Corp. v. Brown, 441 U.S. 281, 309 (1979), where the Supreme Court described it as a "housekeeping statute."  The key point about this understanding of § 301 is that it predates the recruitment period of the early 1950s.  The Court recognized that 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.  Those laws were consolidated into one statute in 1874, even though the current version of the statute was enacted in 1958."  Id. at 309.  And so, said the Court, "[g]iven this long and relatively uncontroversial history, and the terms of the statute itself, [5 U.S.C. § 301] seems to be simply a grant of authority to the agency to regulate its own affairs. *** It is indeed a 'housekeeping statute,' authorizing what the APA terms 'rules of agency organization procedure or practice' as opposed to 'substantive rules.'"  Id. at 309-10 (emphases added).  See also Sebastain v. United States, 185 F.3d 1368, 1371 (Fed. Cir. 1999) (noting the Supreme Court's view of 5 U.S.C. § 301 as merely a "housekeeping statute" and concluding that the statute did not authorize the government to promise and provide free lifetime medical care for retired veterans); United States v. McDonnell Douglas Corp., 132 F.3d 1252, 1255 (8th Cir. 1998) (noting that Congress had looked carefully at § 301 in 1958 and the subcommittee had "'unanimously agreed that [§ 301] originally was adopted in 1789 to provide for the day-to-day office housekeeping in the Government departments,' and that attempts to construe it as something more was 'misuse' that 'twisted' the statute") (quoting H.R. Rep. No. 85-1461, at 7 (1958); United States v. Am. Prod. Indus., Inc., 58 F.3d 404, 407 (9th Cir. 1995) ("5 U.S.C. § 301, has been deemed by the Supreme Court to be a 'housekeeping statute'"); Smith v. Cromer, 159 F.3d 875, 878 (4th Cir. 1998) (same); United States v. Henson, 123 F.3d 1226, 1237 (9th Cir. 1997) (same); Houston Bus. Journal, Inc. v. Office of the Comptroller of Currency, United States Dep't of Treasury, 86 F.3d 1208, 1210 (D.C. Cir. 1996) (same); General Motors Corp. v. Marshall, 654 F.2d 294, 295 (4th Cir. 1981) (same); Parkridge Hosp., Inc. v. Califano, 625 F.2d 719, 721 (6th Cir. 1980) (same); In re Bankers Trust Co., 61 F.3d 465, 470 (6th Cir. 1995) (same); Davis Enters. v. United States Envt'l Prot. Agency, 877 F.2d 1181, 1184 (3d Cir. 1989) ("The EPA's authority to govern its internal affairs is derived from 5 U.S.C. § 301 . . . ."); Chasse v. Chasen, 595 F.2d 591, 563 (1st Cir. 1979) (opining that three statutes, including 5 U.S.C. § 301, did not provide "statutory authority to issue a policy pronouncement . . . which would create a right enforceable in federal court"); H.R. Rep. No. 85-1416, at 1 (1958) ("The law has been called an office 'housekeeping' statute, enacted to help General Washington get his administration underway by spelling out the authority for executive officials to set up offices and file government documents"); United States v. George, 228 U.S. 14, 20 (1913) (concluding that a group of statutes, including a predecessor to 5 U.S.C. § 301, "confer administrative power only").

Therefore, not only does § 301 merely authorize "housekeeping," but also there is no way that it could have been reasonably believed at that time that it did more than that.  A reasonable lawyer advising the Secretary of Defense or any of the service secretaries at the time could not have claimed that § 301 created the right to make promises of lifetime health care (beyond space available care) because there were other statutes controlling retiree care at the time.  See 23 Stat. 112 (1884) (authorizing spending for medical care for the dependents of active duty Army personnel when "practicable"); 45 Stat. 1090 (1929) (authorizing medical care for Navy retirees at non-naval hospitals when naval hospital facilities are not available and the relevant government agencies consent); 57 Stat. 80, 81 (1943) (authorizing hospitalization for dependents of Navy and Marine Corps personnel "only for acute medical and surgical conditions, exclusive of nervous, mental, or contagious diseases or those requiring domiciliary care").

Of course, the language explaining § 301 merely begs the question: what does a “housekeeping” statute authorize?  Whatever else it may allow, the Supreme Court made clear in Chrysler that § 301 does not alone provide for the creation of rights, consistent with the principles discussed above that only statutes may determine a federal employee’s pay and benefits.  Chrysler involved a "reverse" Freedom of Information Act ("FOIA") claim where a private party sought to enjoin agency disclosure of confidential records on the ground that it conflicted with the FOIA and the Trade Secrets Act.   441 U.S. at 285.  Section 301 was relevant to the case because in order for employees of a government agency to avoid criminal sanctions for disclosing certain classes of information submitted to a government agency, including trade secrets and confidential statistical data, the disclosure must be "authorized by law."  18 U.S.C. § 1905.  The agency argued in Chrysler that § 301 was the requisite authorization by law that permitted them to disclose what would otherwise have fallen under the Trade Secrets Act. 441 U.S. at 308-09.  The Supreme Court directly contradicted the argument and said § 301 provided no such authority because § 301 authorized no substantive rulemaking.  Id. at 310.  While the decision focused on the second sentence of § 301 ("This section does not authorize withholding information from the public or limiting the availability of records to the public."), the Court did not limit its analysis to that sentence only.  To the contrary, the Court consistently referred to the statute as a whole in its analysis.  See id. at 281. 

            It seems clear to us that § 301 merely empowers an agency, in this case a military department, to regulate its day-to-day internal operations.  But a housekeeping statute that authorizes rules of agency organization, procedure or practice and not substantive rules cannot confer a right to, or otherwise authorize the promise of a right or entitlement to, free lifetime medical care.  Indeed, the Court stated in Chrysler that “substantive” rules referred to rules “affecting individual rights and obligations.”  Id. at 302.  So, saying that § 301 could by itself vest service secretaries and their recruiters with the authority to make binding promises of lifetime free medical care would in effect mean that, contrary to the Supreme Court’s interpretation, § 301 could alone serve as the basis, for the creation of such substantive rights.  As more fully explained below, we simply cannot read § 301 as conferring that authority.

1          Despite § 301's Role In Earlier Health Care for Retirees, It Cannot Authorize Service Secretaries to Grant Full Free Lifetime Medical Care

 

Plaintiffs assert that because the government has conceded that § 301 is the statute that authorized early health care plans for military retirees, those which require space availability in order for a retiree to receive health care, it logically follows that § 301 also authorizes a guarantee of full free lifetime medical care as an inducement to recruits.   According to the retirees, there is no basis for a distinction between the authority necessary for the two types of medical care programs.

            The government admits that 5 U.S.C. § 301 and "its precursors authorized appropriate military officials to prescribe rules that allowed retirees and their dependents to receive free medical care in existing military facilities on a space available basis."  (emphases added).  See AR 40-505 ¶2(b)(2) (1934) (allowing use of Army hospitals to Army retirees “provided sufficient accommodations are available for their treatment”); AR 40-590 ¶6(b)(1) (1935) (limiting availability of care from Army hospitals to “retired personnel on inactive status” who will benefit “by hospitalization for a reasonable time,” not those who “merely” require “domiciliary care by reason of age or chronic invalidism”); Air Force Regulation AFR 160-73 ¶14(h) (1951) (limiting hospitalization of retired Air Force personnel to those "who will be benefited by hospitalization for a reasonable length of time"); 1943 MEDMAN § 3168 (stating "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 by naval medical officers when available upon application . . . .").  But we agree with the government that a crucial difference exists between the conditional care that § 301 and derivative regulations actually provided for and the entitlement that the retirees assert.  Simply put, the earlier health care programs for retirees provided free health care only on a space-available basis.  By contrast, the asserted absolute promise of free lifetime medical care would create an entitlement to health care.  While § 301 authorizes a military department to prescribe administrative "regulations for the government of [its] department[s] . . . and the custody [and] use . . . of . . . [its] property,"  5 U.S.C. § 301, that language plainly does not encompass the power to grant an entitlement -- an unconditioned, non-discretionary legal right to money.  See Black's Law Dictionary 532 (6th ed. 1990) (defining "entitlement" as a "[right] to benefits, income or property which may not be abridged without due process").

            We consider sympathetically the veterans’ position that, because § 301 authorizes one type of health care, it necessarily authorizes another.  But that position ultimately fails because of the important distinction between what each health care plan guarantees a retired veteran, as well as the additional statutory authority explicitly providing for conditional medical care.  First, we agree with the government that 5 U.S.C. § 301 did not independently authorize CHAMPUS-type benefits for retirees.  Rather, 10 U.S.C. § 1086, enacted in 1966, provided the Department of Defense with broad, explicit, and exclusive authority for providing these benefits to retirees.  See 10 U.S.C. § 1086 (establishing the authority for the Department of Defense to contract for health insurance for retirees under the same basis established ten years earlier for active duty dependents by 10 U.S.C. § 1079 and further providing that a person who was entitled to Medicare insurance would not be eligible for the insurance program established for retirees, except for those benefits established under the Department of Defense programs that were not covered by Medicare).  Thus, the government's argument continues, § 301's function is to provide supplemental authority in recognition of the agency's decision to implement CHAMPUS through the Code of Federal Regulations, rather than solely through the statutory authority to contract for health care services.  Indeed, such reliance on 5 U.S.C. § 301 is not obscure, as it is often cited in the Code of Federal Regulations, frequently in conjunction with other statutes, as authority for regulations appearing in the C.F.R.  See, e.g., 19 C.F.R. § 351 (identifying  5 U.S.C. § 301 (among other statutes) as the source of the regulation’s authority).  This position is also consistent with the Supreme Court's interpretation of § 301 as discussed above. 

            Even if we accepted the position that 5 U.S.C. § 301 alone provided statutory authority for health care insurance for retirees on a space-available basis, we still would reach the same conclusion:  5 U.S.C. § 301 does not authorize full free lifetime health care for retirees.  First, § 301 never mentions health care benefits at all.  Second, § 301 only deals with an agency's internal governance.  Permitting retirees to seek health care from a pre-existing facility with available and otherwise unengaged staff is simply managing an agency's existing resources.  On the other hand, granting a lifetime entitlement to health care obligates an agency to call in additional staff or to create additional space whenever a retiree seeks care, or to pay for civilian care.  In other words, it goes beyond mere internal or housekeeping matters and creates substantive entitlements giving rise to judicially enforceable rights.  Thus, with the earlier health care plans and regulations, the government guaranteed nothing as a matter of right; a retiree only received care on a space-available basis and, even then only if the commander of the hospital approved it.  Under the promises made by the recruiters, however, the retirees claim a right to free treatment regardless of the availability of money, space, or medical personnel.  The two scenarios are distinct:  one is contingent and the other is absolute.  An entitlement is an unconditional grant; it is a permanent, non-discretionary right.  The differences between the two types of health care programs are clear, and they are dispositive.

            A further indicator that 5 U.S.C. § 301 did not authorize full free medical care for military retirees is Congress' treatment of the subject.  If § 301 contained the requisite authority for health care for military retirees, no further legislation would have been necessary.  As explained above, however, Congress has repeatedly legislated -- including in 1956, 1966, and 1986 -- to provide health care insurance coverage for retired military members.  Even more important to the present case, every time that Congress dealt with the retirees (starting in 1960), it enacted legislation that authorized only conditional health care coverage for retirees -- that is, care provided only on a space-available basis.  See, e.g., 10 U.S.C. § 1086 (1966).  Given that Congress repeatedly legislated for conditional health care, it would be illogical to conclude that § 301 would cover full health care absent further congressional action. 

            Similarly, interpreting § 301 to authorize the recruiters’ promises of full free lifetime medical care would be unreasonable when viewed in light of other statutes.  For


example, 5 U.S.C. § 70[12] and the Anti-Deficiency Act[13] placed preconditions on obligating or spending appropriated funds. In effect, these two statutes limited both what the recruiter could promise and what the military member could receive.  The recruiter, an officer or employee of the United States government, arguably could not obligate the government to spend monies that had not yet been appropriated unless such contract or obligation was authorized by law.  And retired military members, because their salary, pay or emoluments were fixed by statute or regulation, could not receive any additional pay or other additional compensation unless it was both authorized by law and the appropriation therefore explicitly states that it is for such additional pay, extra allowance, or compensation.  To decide this appeal, we need not define the exact contours of 5 U.S.C. § 301.  What is clear is that its scope is not broad enough to have provided authority to contract with recruits to the military for free lifetime medical care so as to bind both the Department of Defense and the Congress.  And while we do not independently base our decision in this case on 5 U.S.C. § 70 or the Anti-Deficiency Act, we note plaintiffs' interpretation of § 301 as broad enough to have authorized the recruiters to create a binding contract is in considerable tension, if not conflict, with the language of 5 U.S.C. § 70 and the Anti-Deficiency Act.  So although we need not and do not decide the independent applicability of 5 U.S.C. § 70 or the Anti-Deficiency Act, we do decide that, in light of those two statutes, § 301 cannot be construed as broadly as the plaintiffs argue.

            Finally, the plaintiffs have submitted evidence showing that the promises of free lifetime health care were made by recruiters and that the recruiters were, in fact, encouraged by superiors to tell potential recruits of this benefit.  See, e.g., Pentecost Aff. at 1 (Oct. 21, 1997).  The plaintiffs also provided excerpts from the Bluejackets Manual and the Soldier's Guide handbooks given to the members of the United States Navy and Army, for example, as well as various recruitment brochures from the military departments, including one attached to the earlier-mentioned letter from Secretary Forrestal.  This evidence, plaintiffs argue, implies that retired members with 20 or more years' active duty did have and do have the unconditional right to receive free lifetime health care. 

            In our view, the evidence showing that recruiters had made these promises in good faith to retirees like Schism would likely be sufficient to avoid summary judgment -- if the Congress had granted the authority to make these promises in the first place.  Unfortunately for plaintiffs, however, Congress has never authorized these promises.[14]  While we are sympathetic to the plaintiffs' position and acknowledge the likelihood that plaintiffs believed these promises and relied on them, the government is not legally bound to abide by them.  The recruiters lacked actual authority, meaning the parties never formed a valid, binding contract.  Cf. Office of Pers. Mgmt. v. Richmond, 496 U.S. 414, 416-17 (1990) (holding that erroneous advice given to a federal employee by OPM personnel did not create an estoppel when finding to the contrary would violate the principle "that payments of money from the Federal Treasury are limited to those authorized by statute."). 

2           Air Force and Other Military Regulations Promulgated Under § 301 Did Not Create an Entitlement to Free Lifetime Medical Care; On the Contrary, They Clearly Call for Only Space-Available Military Medical Care for Retirees and Made No Provision for Insurance

 

The plaintiffs also argue that the regulations in force at the time they joined the Air Force authorized the recruiters' promises of free lifetime medical care.   The implication of this argument seems to be that the regulations themselves provided for the grant of an entitlement to free lifetime medical care.  We disagree. 

First and foremost, a regulation promulgated under the auspices of 5 U.S.C. § 301 cannot convey or authorize an entitlement unless that statute clearly so provided, for example, by delegating power to the secretary of the military departments to contract any type of health care for retirees.  Simply put, an agency cannot do by regulation what the applicable statute itself does not authorize.  See, e.g., Larionoff, 431 U.S. at 873 (stating that "in order to be valid[,] [regulations] must be consistent with the statute under which they are promulgated" and holding that even though the agency's interpretation of the relevant regulations governing military bonuses was reasonable, because the regulations were contrary to the purposes of Congress in enacting the bonus statute itself, the regulations were invalid).

Putting aside for the moment that 5 U.S.C. § 301 did not authorize these promises, directly or by delegation, and also whether they could be extended solely by force of regulation, we address the specific regulations promulgated by the Secretary of the Air Force that dealt with health care for retired members.  It is clear from the language of these regulations that they are consistent only with the conclusion that plaintiffs were never granted an entitlement.  Indeed, the regulations themselves expressly provided for medical care for military retirees only as space was available. 

Plaintiffs in this case served in more than one branch of the Armed Forces, but both Schism's and Reinlie's last and dispositive service was in the Air Force.  It is the plaintiffs' indefinite appointments to the Air Force that led to their service in the military for more than 20 years.  Accordingly, as the government argues (and the plaintiffs do not dispute), the date of each retiree's indefinite appointment is the critical date for determining what was promised.  Thus, the regulations pertinent to these veterans are the 1951 Air Force regulations for Schism and the 1953 Air Force regulations for Reinlie.  Because whatever promises they were made relevant to this recruitment resulted in their continued service until they performed at least 20 years' active duty, any promise, regulation or material after this time is irrelevant.[15]

            In his affidavit, Schism described what he was told regarding free lifetime medical care in the Air Force:

I learned that the USAF [United States Air Force] made the same promises as the Navy [that he was entitled to] lifetime free medical [care] after retirement.  I received official briefing in the Air Force from my commanders or superiors on lifetime medical care, and learned that free lifetime care was common knowledge and 'gospel' in the Air Force.

 

(Schism Aff. ¶¶ 2, 5.)  He also explained that he decided on a career in the Air Force because "it was the best offer around . . . .  [A]nd free medical care then and in the future had a significant value to me just as it does now."  (Id. at ¶ 6.)  Reinlie recalls similar briefings and reliance thereon from that time period as well:

I hear[d] recruiting promises of 20 year retirement and lifetime free medical care from . . . the U.S. Air Force after 1948. . . .  During the transition from the active reserve to active duty status I was briefed on the conditions of my being recalled and of the benefits of making the U.S. Air Force a career.  Stress was placed equally of [sic] my promotional prospects and the retirement program with its free medical benefits. . . . [About one year later] I was briefed [again] on the advantages of making the service a career . . . [and again] my promotional advantages plus the 20 years or more retirement and the free medical treatment available to me and my dependents [were stressed equally].  Already, I had two children and could clearly visualize the advantages of making the Air Force a career.  My civilian employer had neither a retirement or medical program.  Inasmuch as I enjoyed my work, making the decision to stay was quite easy.

 

(Reinlie Aff. 1-2.)  As explained earlier, the government conceded for the purposes of the present summary judgment motion that the asserted promises were made by plaintiffs' recruiters, made in good faith, and relied upon.  But even if the Secretary of the Air Force himself had said to the recruiters that they could and should promise free lifetime medical care to aid in recruitment, those promises would be a nullity because, as shown below, the pertinent regulation provided to the contrary:  the retirees claim they were promised an "entitlement," but the regulations provided for space-available care only.  See AFR 160-73; see also Hercules, Inc. v. United States, 516 U.S. 417, 429-30 (1996) (explaining that if there existed an implied agreement that the government would indemnify the suppliers of Agent Orange, that agreement would render unnecessary the entire class of statutes and regulations that set forth the conditions in which a government contracting officer could enter into an indemnity agreement; the Court would "not interpret [the contract] so as to render those statutes and regulations superfluous").

Air Force regulation AFR 160-73 was in effect from 1951 when Schism received his indefinite appointment until after Reinlie received his appointment in 1953.  The language of this regulation makes clear that medical care for Air Force retirees was contingent, just as the government argues:  "[t]he hospitalization of retired inactive Armed Forces personnel . . . will be limited to cases in which in the judgment of the hospital commander 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."  AFR 160-73 ¶6(h) (emphasis added).  The care is subject to two express conditions.  Free medical care for retirees therefore cannot be an absolute entitlement under this regulation.  Thus, even viewing the pertinent regulation in isolation, the recruiters' promises of free lifetime medical care were inconsistent with the regulation.  As such, the government is not bound by those promises.  See Federal Crop Ins. Corp. v. Merrill, 332 U.S. at 384 (explaining that the government cannot be bound by statements made by its representative if those statements are outside the bounds of the authority that the Congress conferred).

Likewise, even if regulations from other service branches were relevant, which they are not, no regulations in place when the plaintiffs joined the Air Force provided for an entitlement to free lifetime medical care; the regulations provide only for contingent care, principally based on availability.  Moreover, the manuals and brochures did not describe an entitlement, either.  For example, the 1942 and 1943 editions of the Navy's MEDMAN, relied on by plaintiffs, state "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 by na