Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_06-cv-00362/USCOURTS-caed-1_06-cv-00362-5/pdf.json

Nature of Suit Code: 120
Nature of Suit: Marine Contract Actions
Cause of Action: 46:741 Shipping

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The information contained in this factual background 1

section is gleaned from the entire record, including various

declarations submitted by the parties. 

1

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

LT. RICHARD T. GENGLER and

LT. DANIEL S. McSEVENEY,

 Plaintiffs,

 v. 

UNITED STATES OF AMERICA THROUGH

ITS DEPARTMENT OF DEFENSE AND

NAVY; and SECRETARY DONALD C.

WINTER, 

 Defendant.

1:06-CV-00362 OWW LJO

MEMORANDUM DECISION AND

ORDER RE: DEFENDANTS’ MOTION

TO DISMISS (DOC. 31)

I. INTRODUCTION

Before the court for decision is Defendants’ motion to

dismiss for lack of subject matter jurisdiction, Fed. R. Civ.

Pro. 12(b)(2), and for failure to state a claim, Fed. R. Civ. P.

12(b)(6). (Doc. 31, filed Aug. 3 2006.) 

II. BACKGROUND/PROCEDURAL HISTORY1

Plaintiffs Richard T. Gengler and Lt. Daniel S. McSeveney

are Naval Officers and Aviators who are currently stationed with

the Operational Test Evaluation Squadron Nine (VX-9) in China

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Although the Agreement also contains language requiring 2

Plaintiffs to serve eight years as Reserve Officer upon

acceptance of a commission, that language appears not to be an

issue here.

The so-called “winging” orders do not appear in the 3

record, but Defendant acknowledged during oral argument that the

documents were not signed by Plaintiffs. 

2

Lake, California. They are assigned as Operational Test

Directors for the F/A-18C-F weapons system programs and currently

are on “detachment” in Key West, Florida, performing operational

tests on a radar system. (Doc. 16 at 1; Pltfs’ Decls. at ¶7;

Gunter Decl. at 3.)

Plaintiffs both entered the Navy in April 1996, after

signing separate “Aviation Officer Candidate Program Service

Agreements (the “Service Agreements”). The Service Agreements

were drafted by the Navy and signed on the Navy’s behalf by

another Naval Officer. Among other things, the Service

Agreements state that each consented to “serve on active duty as

a commissioned officer for a period of seven years from date of

designation as a Naval Aviator.” (Pltfs’ Decls. Ex A, at ¶2.) 

2

Plaintiffs successfully completed their flight training and

were designated as Naval Aviators in February 1999 (Gengler) and

April 1999 (McSeveney), respectively. The Navy asserts that

Plaintiffs confirmed their eight year term of duty when

Plaintiffs were given their “winging orders,” a document both

Plaintiffs received in 1999. (Doc. 25, Gunter Decl. at ¶2).3

Plaintiffs assert, however, that the seven year commitment term

contained in their Service Agreements was confirmed orally by a

“Student Control Officer” in April 1999. (Plaintiffs’ Decls. at

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Plaintiffs’ counsel suggested at oral argument that the 4

Student Control Officer directly responded to the contents of

Plaintiffs’ winging orders and, essentially, told them “not to

worry about it.” This representation, however, is not evidence. 

Plaintiffs’ own declarations make no direct link between the

winging orders and the representations made by the “Student

Control Officer.” For example, Lt. Gengler states:

On April of 1999 I received orders to report to my next

command, Strike Fighter Squadron 125, for follow-on

training in the F-18 Hornet. Shortly thereafter, I

spoke to the Student Control Officer at my training

squadron’s administration department (VT-22, NAS

Kingsville, TX), who verbally reaffirmed the seven year

term contained in the Agreement. 

(Doc. 17 ¶6.) 

3

¶6.) 

4

It is undisputed that Plaintiffs have served with

distinction since 1999. Each logged more than 150 hours in

combat situations and each received numerous medals for valor

during combat. (Doc. 16 at 4.) 

When their contractual seven-year term of active duty

approached its end, both Plaintiffs notified their Commanding

Officers that they would be requesting release from active duty

(“RAD”). (Pltfs’ Decls. at ¶8.) The Navy denied Plaintiffs’

requests. (Id.) Plaintiffs appealed the denial to (a) their

Commanding Officer, (b) the Naval Personnel Department, (c) the

Board for Correction of Naval Records (“BCNR”), and (c) the

Secretary of the Navy. (Id. at ¶¶9-13 & Ex. I-S.) All these

appeals were rejected, and the Navy informed Plaintiffs that

their administrative remedies had been exhausted. (Id. at Ex.

E.) 

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The seven year termination dates for Plaintiffs Gengler and

McSeveney were April and February 2006, respectively. Plaintiffs

assert that being required to serve beyond the seven-year

contractual term constitutes irreparable harm in and of itself. 

Plaintiffs also point out that there is the potential for even

more severe hardships if they are deployed outside the

Continental United States. At the time the habeas petition in

this case was filed, Plaintiffs’ were on “shore duty” assigned to

a “non-deployable” unit in California. Plaintiffs believe that

it is likely that their status will change. According to Lt.

McSeveney:

The Navy gives orders to its sailors and officers in

approximately three-year blocks, typically alternating

between “sea duty” and “shore duty.” A sea tour

typically lasts 36 months, while a shore tour lasts 33

months. During a sea tour, Navy personnel are assigned

to an operational unit such as an aircraft squadron,

destroyer or submarine, and are expected to deploy

either on a set schedule or as needed, dictated by

operational necessity. While on a shore tour,

personnel are assigned to a non-deployable unit, such

as a training squadron, test unit or recruiting office,

and are not expected to deploy in an operational

capacity. This alternating rotation is designed to

ensure that Navy sailors and officers are able to spend

adequate time with their families away from the

stresses of operational duty. By refusing to honor my

contract and delaying the administrative process for

two years, the Navy has put me in an administrative

limbo between shore duty and sea duty. According to my

contract, my time in the Navy should have been complete

last month, February 2006. My current set of orders

for shore duty end[ed] March 2006. Since the Navy is

attempting to keep me in for an eighth year, this will

leave me with eleven months of service to complete. 

The Navy will not issue Permanent Change of duty

station (PCS) orders for members with less than twelve

months of service remaining since the cost of moving an

entire family is prohibitive for that small amount of

time, so my current shore tour orders will be extended. 

The effect of that eleven-month extension, however, is

to change my duty status from non-deployable to

deployable to locations outside the Continental United

States (“CONUS”). Like many active duty Navy personnel

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 Plaintiffs claim that the same deployment framework 5

applies to Gengler, except that his shore duty ended in May 2006. 

(Gengler Decl. at ¶15.) 

5

on sea duty with a limited amount of time remaining in

their service, it is highly likely that this change in

status will result in my being deployed to Iraq, where

I will augment U.S. ground forces in hard-to-fill

billets. In other words, the Navy is not attempting to

keep me in service to take advantage of my extensive

training and tactical expertise as a strike fighter

pilot, but simply to use me as a body to fill the

position of an Army officer the Army failed to recruit

or entice to stay in the service. The navy has never

made a request of me to serve any extra time in my

trained capacity as a strike fighter pilot. in fact,

the Navy currently has a surplus of officers as

evidenced by the Involuntary Release from Active Duty

(IRAD) policy, which resulted in the released of more

than 400 officers in December 2003 and another 120 in

May of 2004. 

(McSeveney Decl. at ¶15.)5

According to Lieutenant Commander Jeremy W. Gunter,

assignment of Plaintiffs overseas is “unlikely at this point”

I am [] responsible for filling Individual Augmentee

(IA) assignments for six to twelve month deployments to

Iraq, Afghanistan, and other places where additional

manpower for the Global War on Terror may be needed. 

These billets are located all over the world and

included some in the Continental United States. While

I do not have overall control of the selection process

for officers who fill IA billets, I do coordinate the

orders for officers under my assignment who are

selected for such deployments. Neither LT Gengler nor

LT McSeveney is currently under orders to deploy as an

IA. While it is possible that their Commanding Officer

may select one or both of them for such an assignment

if he were asked to provide officers, it is my opinion

that it is unlikely at this point. 

(Gengler Decl. at ¶4.)

Plaintiffs highlight several other aspects of their personal

situations. First, Lt. McSeveney recently purchased a home in

Denver, Colorado, which his family planned to occupy in December

2005. (McSeveney Decl. at ¶16.) Instead, the house sits empty

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“and the mortgage payment is rapidly eating into [his family]

savings.” (Id.) He has also been forced to cancel numerous

aviation-related job interviews pending the outcome of this case. 

(Id.) Finally, McSeveney states that his wife scheduled an invitro fertilization attempt for this summer and that these plans

would be disrupted if the Navy chooses to deploy him. (Id.)

Lt. Gengler has been accepted for admission to the

University of Chicago Business School. His acceptance, however,

is contingent upon his attending classes in August 2006. 

Additionally, Gengler believes that his ability to obtain a

deferment of admission may be adversely affected by his age. He

is currently 33 years old and the oldest student accepted at

Chicago Business school this year was 35. (See Gengler Decl. at

¶16.)

Plaintiffs allege that the Navy approved the discharge

requests of as many as eight other fixed-wing jet pilots with the

same Service Agreements as Plaintiffs after they served only

seven years of active duty. The Navy responded to this

allegation at oral argument by explaining that those pilots had

less exemplary service records and were selected for discharge on

those grounds. However, the Navy has yet to produce any evidence

regarding these eight other pilots.

In a supplemental declaration filed on July 25, 2006, Lt.

Gengler describes a recently enacted reduction in force policy

issued by the Navy. Specifically, Gengler asserts that Navy has

acknowledged it is “overmanned with pilots and is looking to

remove 300 of them by September 30, 2006 presumably in advance of

the next fiscal year.” (Doc. 21.) 

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7

Because the pilots in question have not

volunteered to retire, the Navy would have to pay them

a severance package to force them out. I believe this

severance package basically equates to two years salary

by law. 

In a cost saving effort, the Navy has decided to

implement the [Voluntary Separation Pay] program (see

attached Exhibit A). They have identified some target

population within each different job type that they

want to reduce, and have offered those candidates the

opportunity to participate. This target group consists

of more than the actual number of candidates [than] the

Navy is looking for, in order to allow for competition

among the candidates. 

The concept is simple and works as follows: Each

participant is allowed to bid on an amount that they

would be willing to take to leave the Navy by September

30, 2006. The Navy will then grant separation,

starting with the lowest bidders and working higher,

until they have reached their desired level of

separations. In our community (pilots), the number of

individuals they are looking to separate is

approximately 300. In fact, one of our friends, who

left our squadron about one year ago, is a candidate

even though he does not want to separate from the Navy. 

He is an F/A 18 pilot just like co-plaintiff McSeveney

and myself, and could do any job for the Navy that

either McSeveney or I could do. The Navy will

literally pay him money to separate prior to September

30, 2006, while at the same time refusing [to let us]

leave. 

(Id.)

III. PROCEDURAL HISTORY

On March 31, 2006, Plaintiffs filed their complaint, which

contains five causes of action. The first is a breach of

contract action brought pursuant to the Contracts Disputes Act

and Suits in Admiralty Act. (Doc. 1, at ¶¶25-32.) The second is

a claim for equitable estoppel based on the allegation that the

Navy made “misrepresentations regarding the applicable [service]

period to invoke Plaintiffs’ reliance.” (Id. at ¶¶33-40.) The

third is a claim brought under the Administrative Procedures Act,

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alleging that the Navy’s rejection of Plaintiffs’ discharge

requests was “arbitrary and capricious, an abuse of discretion,

or otherwise contrary to law...” (Id. at ¶¶41-42.) The fourth

claim is a petition for a writ of habeas corpus, requesting

discharge from the Navy. (Id. at ¶¶43-48.) Finally, the fifth

cause of action is for declaratory relief and requests, among

other things, a declaration that “Defendant’s position throughout

this dispute was not substantially justified...” and that

“Plaintiffs [are] prevailing parties entitled to costs and

attorneys fees accrued throughout this dispute as allowed by the

Equal Access to Justice Act.” (Id. at ¶¶49-50.) Plaintiffs seek

specific performance of the seven year term in their Service

Agreements and attorneys fees and costs. (Id. at ¶¶51-52.) 

On the same day the complaint was filed, Plaintiffs filed an

ex parte motion for a temporary restraining order, requesting the

entry of an order “preventing Defendants from changing

Plaintiffs’ status from non-deployable to deployable or otherwise

sending them to Iraq or any location outside [the Continental

United States.” (Doc. 2 at 2, filed March 31, 2006.) A few days

later, the parties reached an agreement as to the requested

injunctive relief. The Navy promised that Plaintiffs would

remain on non-deployable status until July 10, 2006 in exchange

for Plaintiffs withdrawing their request for a temporary

restraining order. On June 1, 2006, the parties extended the

duration of the agreement until August 9, 2006, pending further

internal discussion by the Navy regarding Plaintiffs’ discharge

requests. Subsequently, the Navy notified Plaintiffs that they

would not be discharged. Plaintiffs filed an ex parte motion for

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a temporary restraining order on July 25, 2006. (Doc. 15.) 

Defendants were afforded an opportunity to oppose on July 27,

2006. (Docs. 24 & 25.) After a hearing on the motion, held

August 4, 2006, the request for a temporary restraining order was

denied, although the Navy was ordered to give Plaintiffs’ at

least twenty (20) days notice prior to changing their status from

non-deployable to deployable. (Doc. 37.) 

The United States moved to dismiss on August 3, 2006. (Doc.

31.) Plaintiffs opposed (Doc. 39), and the United States replied

(Doc. 47). 

IV. STANDARD OF REVIEW

A. Motion to Dismiss for Lack of Subject Matter

Jurisdiction (Fed. R. Civ. Pro 12(b)(1)).

“Federal courts are courts of limited jurisdiction. They

possess only that power authorized by Constitution and

statute....It is to be presumed that a cause lies outside this

limited jurisdiction, and the burden of establishing the contrary

rests upon the party asserting jurisdiction.” Kokkonen v.

Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994)(internal

citations omitted); see also Tosco Corp. v. Communities for a

Better Environment, 236 F.3d 495, 499 (9th Cir. 2001)(plaintiff

bears the burden of proving subject matter jurisdiction).

A motion to dismiss on jurisdictional grounds can be “either

facial or factual.” White v. Lee, 227 F.3d 1214, 1242 (9th Cir.

2000). In a facial attack, a court must “take all of the

allegations of material fact stated in the complaint as true and

construe them in the light most favorable to the nonmoving

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party.” See Rodriguez v. Panayiotou, 314 F.3d 979, 983 (9th Cir.

2002). In a factual challenge, “a court may look beyond the

complaint to matters of public record without having to convert

the motion into one for summary judgment...It also need not

presume the truthfulness of the plaintiffs’ allegations.” White,

227 F.3d at 1243.

B. Motion to Dismiss for Failure to State a Claim (Fed. R.

Civ. Pro 12(b)(6)).

A complaint may be dismissed for failure to state a claim

pursuant to Federal Rule of Civil Procedure 12(b)(6) if it

“appears beyond doubt that the non-movant can prove no set of

facts to support its claims.” Simpson v. AOL Time Warner Inc.,

452 F.3d 1040, 1046 (9th Cir. 2006). Alternatively, dismissal

can be based on the lack of a cognizable legal theory. SmileCare

Dental Group v. Delta Dental Plan of Cal., Inc., 88 F3d 780, 783

(9th Cir. 1996). In evaluating such a motion “[a]ll allegations

and reasonable inferences are taken as true, and the allegations

are construed in the light most favorable to the non-moving

party, but conclusory allegations of law and unwarranted

inferences are insufficient to defeat a motion to dismiss.” 

Simpson, 452 F.3d at 1046. 

//

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 Counsel for the United States informed Lord via email 6

at 11:30 a.m. on Monday August 14, 2006 of the government’s

intent to withdraw the argument. Nevertheless, Plaintiffs

address the service issue in their opposition, filed several

hours later, stating “Counsel for Defendants’ steadfast refusal

to acknowledge the frivolousness of the service allegation

continues to waste both this Court’s and plaintiffs’ valuable

time and resources. As such, Plaintiffs request this court

immediately dismiss the allegations and take note of its

continued presentation by Defendants counsel, especially in the

face of her personal attacks on the undersigned’s alleged sharp

litigation tactics.” (Doc. 39 at 2.) 

11

V. DISCUSSION

A. Service of Process.

In its opposition to the motion for a temporary restraining

order an its opening memorandum in support of its motion to

dismiss, the United States asserted that Plaintiffs did not

properly serve Defendants. The United States withdrew this

objection upon receipt of the supplemental declaration of

Plaintiffs’ counsel Timothy Lord (“Lord”). 

6

B. Timeliness of Opposition.

The United States also complains that Plaintiffs’ opposition

was not timely filed. The scheduling conference order (Doc. 38)

required Plaintiffs’ opposition to be filed by 5:00 p.m. on

August 14, 2006. According to the online service receipt,

Plaintiffs’ points and authorities in support of the motion to

dismiss was filed at 5:20 p.m. (See Doc. 39.) Although

Plaintiffs offer no explanation for the technically untimely

filings, the government does not explain how it was prejudiced in

any way by this half hour delay. The opposition will be

considered. 

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C. Subject Matter Jurisdiction.

Plaintiffs suggest several bases for subject matter

jurisdiction over their claims, alleging in the complaint:

Plaintiffs are authorized to bring this suit and this

Court has jurisdiction pursuant to § 603 of the

Contracts Dispute Act of 1978..., 41 U.S.C. §§ 601-603;

Suits in Admiralty Act, 46 U.S.C. §§ 741-752;

Administrative Procedures Act, 5 U.S.C. §§ 702-706; 

Declaratory Judgment, 28 U.S.C. § 2201; and Tucker Act,

28 U.S.C. § 1491. 

(Compl. at ¶2.) The United States asserts that none of these

statutes provide a basis for jurisdiction in this case. 

Plaintiffs’ fourth claim for relief is entitled “petition

for habeas corpus.” The United States does not dispute that a

petition for habeas corpus is the proper means by which a member

of the armed services can challenge a military service

obligation. However, the government does rase several procedural

and substantive challenges to the viability of Plaintiffs’ habeas

claim, which are discussed in Part V.D. 

1. Burden of Proof

As a threshold matter, Plaintiffs assert in their opposition

that the United States’ jurisdictional objections should fail

because “Defendants fail to cite to applicable precedent

regarding admiralty contract jurisdiction.” (Doc. 39 at 2.) 

Plaintiffs misunderstand the applicable burden of proof. The

non-moving party bears the burden of proving subject matter

jurisdiction in response to a Rule 12(b)(1) motion. Tosco Corp.,

236 F.3d at 499. 

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2. Admiralty Jurisdiction

As a general rule, pursuant to the Tucker Act, 28 U.S.C. 

§ 1491, the Court of Federal Claims has jurisdiction over claims

brought against the United States or any of its agencies,

including the United States Navy, “founded either upon the

Constitution...any Act of Congress or any regulation of an

executive department, or upon any express or implied contract

with the United States, or for liquidated or unliquidated damages

in cases not sounding in tort.” 28 U.S.C. § 1491. The Little

Tucker Act, 28 U.S.C. § 1346, grants district courts

jurisdiction, concurrent with the Court of Federal Claims, over

any Tucker Act-type claim where the amount in controversy does

not exceed $10,000. However, the Contracts Disputes Act carves

out a limited exception to the Tucker Act, giving jurisdiction

over suits “arising out of maritime contracts” to the district

courts without any amount in controversy cap. See 41 U.S.C. §

603; 46 U.S.C. § 741 et seq.; Southwest Marine, Inc. v. United

States, 43 F.3d 420, 424 (9th Cir. 1994); Southwest Marine Inc.

v. United States, 926 F. Supp. 142, 143-44 (N.D. Cal. 1995). 

Accordingly, if Plaintiffs’ Service Agreement is a “maritime

contract,” the Contracts Disputes Act provides for jurisdiction

in district court. 

The United States Supreme Court has recognized that “the

boundaries of admiralty jurisdiction over contracts-as opposed to

torts or crimes-being conceptual rather than spatial, have always

been difficult to draw.” Norfolk Southern Railway Co. v. Kirby,

543 U.S. 14, 23 (2004)(citing Kossick v. United Fruit Co., 365

U.S. 731, 735 (1961)). 

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 The United States suggests that the focus of the 7

inquiry is on whether the objective of the contract is “maritime

commerce,” in an apparent attempt to minimize Kirby’s reference

to “maritime service.” (See Doc. 31 at 6.) But, “[w]ithout

doubt a contract for hire either of a ship or of the sailors and

officers to man her is within the admiralty jurisdiction.” 

Kossick, 365 U.S. at 735.

14

To ascertain whether a contract is a maritime one, we

cannot look to whether a ship or other vessel was

involved in the dispute, as we would in a putative

maritime tort case. Nor can we simply look to the place

of the contract's formation or performance. Instead,

the answer “depends upon...the nature and character of

the contract,” and the true criterion is whether it has

“reference to maritime service or maritime

transactions.”

Kirby, 543 U.S. at 23-24 (emphasis added). The question then 7

becomes whether Plaintiffs’ Service Agreement is such a contract. 

Without citing any relevant legal authority or pointing to

relevant language in the Service Agreements, Plaintiffs argue:

By almost any measure, it would be difficult to

conclude that Plaintiffs’ service agreements that call

for seven-years of service in the United States Navy

aboard ships in the ocean and in flight over it are,

although more than this, at least in the nature of a

“maritime transaction.”

(Doc. 39.) However, an examination of the Service Agreements

themselves reveals no reference to service on ships, service in

the ocean, or service in airplanes that fly over the ocean. The

closest language to that effect is contained within the paragraph

that sets forth the disputed seven-year service commitment:

I consent to serve on active duty as a commissioned

officer for a period of seven years from date of

designation as a Naval Aviator (unless sooner released

to inactive duty or discharged by the Chief of Naval

Personnel). 

(Service Agreement at (g)(2).) Plaintiffs’ theory demands that

the words “Naval Aviator” be read to necessarily require that

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Plaintiffs also suggest that it would be enough for 8

them to have consented to serve in airplanes over the ocean, but

Plaintiffs offer no authority that suggests admiralty

jurisdiction would extend to such a service contract. 

15

Plaintiffs will serve aboard ships in the ocean. Although, 8

assuredly, many Naval Aviators are deployed aboard aircraft

carriers for portions of their years in service, this contract

does not specifically commit Plaintiffs to any particular time

aboard a vessel. 

Plaintiffs’ counsel urges the court to consider Plaintiffs’

affidavits, which explain that Navy personnel are required to

spend substantial portions of their years in service assigned to

“sea duty”:

The Navy gives orders to its sailors and officers in

approximately three-year blocks, typically alternating

between “sea duty” and “shore duty.” A sea tour

typically lasts 36 months, while a shore tour lasts 33

months. During a sea tour, Navy personnel are assigned

to an operational unit such as an aircraft squadron,

destroyer or submarine, and are expected to deploy

either on a set schedule or as needed, dictated by

operational necessity. While on a shore tour,

personnel are assigned to a non-deployable unit, such

as a training squadron, test unit or recruiting office,

and are not expected to deploy in an operational

capacity. 

(Gengler Decl., at ¶15.) Specifically, Lt. Gengler states that

he has “made two full deployments on an aircraft carrier (the USS

Constellation), one lasting six months (March 2001 to September

2001) and the other eight (October 2002 to June 2003), as well as

numerous shorter detachments.” (Id. at ¶7.) But, this factual

evidence also indicates that Plaintiffs spend extended nondeployable periods of time on shore. Moreover, according to

Plaintiffs’ evidence, Naval Aviators may even be deployable to

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fill various billets on land, including particularly dangerous

Army billets in Iraq. (Id. at ¶15.) Critically, the Plaintiffs’

Service Agreements do not call for Naval Aviators to spend a

single day aboard a navy vessel or on the ocean. The fact that

Plaintiffs were indeed deployed to sea duty pursuant to other

orders does not turn the Service Agreement into a maritime

contract.

Even if the use of the term Naval Aviator in the Service

Agreement could be read as impliedly committing Plaintiffs to

serve some portion of their years in service aboard a Navy ship,

this is not be enough to justify assertion of admiralty

jurisdiction. “Ordinarily, a contract must be wholly maritime in

nature to be cognizable in admiralty.” Simon v. Intercontinental

Transport (ICT) B.V., 882 F.2d 1435, 1442 (9th Cir. 1989). There

are two exceptions to this general rule:

First, admiralty may take jurisdiction of an entire

contract if the nonmaritime obligations are merely

incidental to the primary maritime nature of the

contract. Second, if the nonmaritime obligations are

substantial, admiralty may take jurisdiction over any

maritime obligations that can be severed from the

nonmaritime obligations and separately adjudicated

without prejudice to the parties.

Id. A contract that does not directly provide for service aboard

a Navy vessel cannot be said to be primarily maritime in nature,

nor is their any reasonable way to sever the maritime obligations

from the non-maritime. 

//

//

//

//

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As discussed, the Tucker Act, 28 U.S.C. § 1491, grants 9

jurisdiction to the Court of Federal Claims over claims brought

against the United States or any of its agencies, including the

United States Navy, “founded either upon the Constitution...any

Act of Congress or any regulation of an executive department, or

upon any express or implied contract with the United States, or

for liquidated or unliquidated damages in cases not sounding in

tort.” 28 U.S.C. § 1491. The Little Tucker Act, 28 U.S.C. §

1346, grants district courts jurisdiction, concurrent with the

Court of Federal Claims, over any Tucker Act claim where the

amount in controversy does not exceed $10,000. 

28 U.S.C. § 1491(b)(2) provides: 10

To provide an entire remedy and to complete the relief

afforded by the judgment, the court may, as an incident

of and collateral to any such judgment, issue orders

directing restoration to office or position, placement

in appropriate duty or retirement status, and

17

3. Neither the Administrative Procedure Act Nor the

Tucker Act Waive Sovereign Immunity for the Relief

Sought by Plaintiffs in this Case. 

Alternatively, Plaintiffs assert both the Administrative

Procedure Act and the Little Tucker Act as bases for subject

matter jurisdiction. But, neither statutory scheme authorizes

the form of relief requested here. Plaintiffs seek specific

performance of their service contracts, which is an equitable

remedy. See United States v. Georgia-Pacific Co., 421 F.2d 92,

103-04 (9th Cir. 1970) (citing Pope Mfg Co. v. Gormully, 44 U.S.

224, 232 (1892)). 

a. Tucker Act.

First, both the Tucker Act and the Little Tucker Act

impliedly forbid equitable relief in contract actions against the

United States. It is well-settled law that, subject to very 9

narrow (and wholly inapplicable) exceptions set forth in 28

U.S.C. 1491(b)(2), the Court of Claims has no power to grant 10

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correction of applicable records, and such orders may

be issued to any appropriate official of the United

States. In any case within its jurisdiction, the court

shall have the power to remand appropriate matters to

any administrative or executive body or official with

such direction as it may deem proper and just. The

Court of Federal Claims shall have jurisdiction to

render judgment upon any claim by or against, or

dispute with, a contractor arising under section

10(a)(1) of the Contract Disputes Act of 1978,

including a dispute concerning termination of a

contract, rights in tangible or intangible property,

compliance with cost accounting standards, and other

nonmonetary disputes on which a decision of the

contracting officer has been issued under section 6 of

that Act.

18

nonmonetary equitable relief, such as specific performance, under

the Tucker Act. First Hartford Corp. v. United States, 194 F.3d

1279, 1294 (Fed. Cir. 1999); Ruttenberg v. United States, 65 Fed.

Cl. 43, 50 (2005)(refusing to grant specific performance). 

Similarly, the Little Tucker Act impliedly forbids district

courts from issuing equitable relief in contract cases against

the United States. Sharp v. Weinberger, 798 F.2d 1521, 1523-24

(D.C. Cir. 1986) (“We know of no case in which a court has

asserted jurisdiction either to grant a declaration that the

United States was in breach of its contractual obligations or to

issue an injunction compelling the United States to fulfill its

contractual obligations.”). 

b. APA.

The waiver of sovereign immunity in the APA incorporates

limitations contained within other statutes:

A person suffering legal wrong because of agency

action, or adversely affected or aggrieved by agency

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action within the meaning of a relevant statute, is

entitled to judicial review thereof...Nothing

herein...confers authority to grant relief if any other

statute that grants consent to suit expressly or

impliedly forbids the relief which is sought.

5 U.S.C. § 702. Interpreting this language, an en banc panel of

the Ninth Circuit held in North Star that the APA did not waive

sovereign immunity for declaratory or injunctive relief if the

claim was grounded in contract, rather than statute, because

other statutes, namely the Tucker Act and Little Tucker Act,

impliedly forbid such relief in contract cases.

Generally speaking, the Tucker Act does not permit the

claims court to grant equitable or declaratory relief

in a contract dispute case. [citations] Similarly, the

Little Tucker Act does not specifically authorize the

district court to grant declaratory or equitable relief

against the United States in contract cases. Price, 894

F.2d at 324; [citations] However, the district court

does have jurisdiction to hear claims for equitable

relief which “rest [ ] at bottom on statutory rights.” 

9 F.3d 1430, 1432 (9th Cir. 1993)(en banc)(emphasis added). The

en banc panel then remanded the case to the three judge panel to

determine whether the claim was grounded in contract or statute. 

Id.

The three judge panel held that:

If a plaintiff's claim is concerned solely with rights

created within the contractual relationship and has

nothing to do with duties arising independently of the

contract the claim is founded upon a contract with the

United States’ and is therefore within the Tucker Act

and subject to its restrictions on relief.

14 F.3d at 37. 

Plaintiffs do not assert that their claim is grounded in

statute. In fact, they seek to impose a contractual obligation

on the government despite contrary statutory language. Instead,

Plaintiffs respond to North Star by broadly asserting that that

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“it is well-established that the APA waives sovereign immunity

for claims of equitable relief,” citing Bowen v. Massachusetts,

487 U.S. 879, 887 (1988). In that case, the United States

Supreme Court reviewed a decision by the Department of Health and

Human Services (“DHHS”) to disallow reimbursement for certain

services under the Medicaid program. Specifically, the State of

Massachusetts filed suit under the APA, arguing that DHHS’s

disallowance determination violated provisions of the Social

Security Act and implementing regulations. The district court

agreed with Massachusetts on the merits and issued an order

“setting aside” DHHS’s decision to disallow reimbursement of

$6,414,964.00. See id. at 888. This order had the effect of

requiring DHHS to reimburse Massachusetts this sum of money. The

United States challenged the order, arguing that the district

court lacked jurisdiction to issue money damages, citing APA 

§ 702, which waives sovereign immunity for claims brought by “a

person suffering legal wrong because of agency action, or

adversely affected or aggrieved by agency action...” so long as

the action seeks “relief other than money damages.” The Supreme

Court disagreed, reasoning that 

The State's suit to enforce § 1396b(a) of the Medicaid

Act, which provides that the Secretary “shall pay”

certain amounts for appropriate Medicaid services, is

not a suit seeking money in compensation for the damage

sustained by the failure of the Federal Government to

pay as mandated; rather, it is a suit seeking to

enforce the statutory mandate itself, which happens to

be one for the payment of money.

Id. at 900. Separately, the court rejected the government’s

argument that the district court lacked jurisdiction to set aside

the disallowance decision because “monetary relief against the

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United States is available in the Claims Court under the Tucker

Act,” reasoning that “the availability of any review...in the

Claims Court is doubtful” because the provision of the Social

Security Act in question could not be fairly interpreted as

mandating compensation by the government for a “past wrong.” Id.

at 906-07 & n.42. 

The differences between this case and Bowen are myriad, but

need not be enumerated in great detail here because the Ninth

Circuit in North Star expressly refused to apply Bowen and a

parallel Ninth Circuit case in cases grounded in contract: 

North Star argues that the district court cannot refuse

jurisdiction if there is no alternative forum available

to hear North Star's claim. In support, North Star

cites Bowen v. Massachusetts, 487 U.S. 879, 901 (1988)

... and Marshall Leasing, Inc. v. United States, 893

F.2d 1096, 1101 (9th Cir. 1990).

Both Bowen and Marshall, however, involve

interpretations of § 704 of the APA which requires

judicial review of “final agency action for which there

is no other adequate remedy in a court.” Bowen could

be interpreted as taking a more expansive view of

district court jurisdiction under the APA than we have

previously recognized. Describing the forms of monetary

relief that were not “money damages” and thus were

within the scope of § 702, the Bowen Court includes “

‘equitable actions for monetary relief under a

contract.’ ” Bowen, 487 U.S. at 895.... This suggests

that contract actions seeking equitable relief could be

heard in district court under the APA. Bowen, however,

did not involve a contract and it did not address the

“impliedly forbids” limitation on the APA's waiver of

sovereign immunity. We therefore agree with the

D.C.Circuit that “[w]ithout more certain direction from

the Supreme Court, we decline to overrule this Court's

very specific holdings that the APA does not waive

sovereign immunity for contract claims seeking

[equitable] relief.” Transohio Sav. Bank v. Director,

OTS, 967 F.2d 598, 613 (D.C. Cir.1992). We also note

that it would make little sense to grant jurisdiction

over a claim pursuant to § 704 on the ground that

jurisdiction for that same claim is expressly or

impliedly forbidden under § 702. See id. at 608-09.

North Star, 14 F.3d at 38 (internal citations omitted).

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See also Chemung County v. Dole, 781 F.2d 963, 971 (2d. 11

Cir. 1986)(“To the extent [plaintiff’s] complaint sought specific

performance of the contract...requiring the [agency] to execute

the [contract]...the district court lacked jurisdiction to

entertain or grant such relief.”)

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Neither the Tucker Act, the Little Tucker Act, or the

Administrative Procedure Act provide a basis for Subject Matter

Jurisdiction in this case.11

4. Declaratory Judgment Act.

The Declaratory Judgment Act does not provide an independent

basis for jurisdiction. The Declaratory Judgment Act states, “In

a case of actual controversy within its jurisdiction...any court

of the United States...may declare the rights and other legal

relations of any interested party seeking such declaration.” 28

U.S.C. § 2201(a). The Ninth Circuit has “long held that the

district court must first inquire whether there is an actual case

or controversy within its jurisdiction.” See Principal Life Ins.

Co. v. Robinson, 394 F.3d 665, 669 (9th Cir. 2004). Where habeas

corpus is the only basis for jurisdiction, an aggrieved person

may not instead seek a declaratory judgment. LoBue v.

Christopher, 82 F.3d 1081, 1082 (9th Cir. 1996). 

D. Habeas Corpus.

The United States does not dispute that habeas corpus is the

appropriate means by which an individual who claims to be

“unlawfully retained” by the armed services may seek relief. See

Parisi v. Davidson, 405 U.S. 34, 39 (19 72).

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1. The Government’s Procedural Objections. 

The United States asserts that Plaintiffs improperly

advanced their habeas claim within the context of a general civil

complaint, to circumvent various Habeas Corpus rules of

procedure. For example, Habeas Corpus Rule 2 sets forth various

requirements regarding the form of a Habeas Corpus petition; Rule

5 provides that the government is not required to answer the

petition until ordered to do so by a court; Rule 6 requires leave

of court for discovery; and Rule 8 provides that petitioner is

not entitled to a trial and the court determines whether an

evidentiary hearing is warranted. 

Nevertheless, the United States acknowledges that the fourth

cause of action is “fashioned” as a petition for a writ of habeas

corpus. There is authority suggesting that it is appropriate to

treat Plaintiffs’ claim as a properly filed petition for a writ

of habeas corpus. See Rooney v. Secretary of the Army, 405 F.3d

1029, 1031 (D.C. Cir. 2005) (treating suit for declaratory

judgment brought by soldier whose discharge had been revoked

without a hearing as a petition for habeas petition). The

government does not explain how it has been prejudiced by the

incorporation of Plaintiffs’ habeas petition into a standard

civil complaint. The remaining claim will be treated as a

petition for habeas corpus and will proceed according to the

Habeas Corpus Rules. 

2. Plaintiffs’ Evidentiary Objections.

Plaintiffs suggest that Defendants have improperly cited to

evidence outside the complaint. Specifically, Plaintiffs

complain that Defendants have referenced evidence “contained in

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the Declarations of Plaintiffs attached to the pleadings filed in

their Motion for injunctive relief.” (See Doc. 39 at 5.) The

only such evidence Defendants appear to have relied upon are the

Service Agreements. This is entirely proper. Under the

“incorporation by reference doctrine,” a district court may

consider documents “whose contents are alleged in a complaint and

whose authenticity no party questions, but which are not

physically attached to the [plaintiff's] pleading.” Knievel v.

ESPN, 393 F.3d 1068, 1076 (9th Cir. 2005). The Ninth Circuit has

also extended the application of this doctrine “to situations in

which the plaintiff's claim depends on the contents of a

document, the defendant attaches the document to its motion to

dismiss, and the parties do not dispute the authenticity of the

document, even though the plaintiff does not explicitly allege

the contents of that document in the complaint.” Id. 

3. Failure to State a Claim. 

The government correctly notes that “Plaintiffs craft their

habeas claim as a request for specific performance of a []

contract.” (Doc. 31.) Specifically, Plaintiffs allege that by

the terms of their Agreement, they should only be required to

serve seven years of active duty. (See Docs. 4 & 5, Ex. A,

Agreement ¶ 2.) The United States maintains that Plaintiffs have

failed to state a claim, because, as a matter of law, 10 U.S.C. 

§ 653(a), which provides that fixed wing jet pilots such as

Plaintiffs have a minimum service obligation of eight years of

active duty, trumps any contrary terms in Plaintiffs Service

Agreement. 

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First, the government emphasizes a line of cases which warn

courts to be cautious and deferential when addressing challenges

to military policy. See e.g., Orloff v. Willoughby, 345 U.S. 83,

93-94 (“Orderly government requires that the judiciary be

scrupulous not to interfere with legitimate [military] matters as

the [military] must be scrupulous not to interfere with judicial

matters”); Sebra v. Neville, 801 F.2d 1135, 1142 (9th Cir.

1986)(“Even if this court were to review [a] claim for damages

flowing from the alleged violations of applicable [military]

regulations, it would do so cautiously and with deference.”). 

The government then argues that federal statutes always

supercede the terms of service agreements, citing many of the

same cases it raised in opposition to Plaintiffs’ motion for a

temporary restraining order. For example, the government relies

upon Antonuk v. United States, 445 F.2d 592 (6th Cir. 1971), a

case in which an Army Reservist was ordered to serve on active

duty pursuant to 10 U.S.C. § 673a (now 10 U.S.C. § 12303) as a

sanction for having more than five unexcused absences from

scheduled training drills over a one-year period. Id. at 593-94. 

Title 10 U.S.C. § 673a (now § 12303) provides that any Reservist

who is not assigned to or participating satisfactorily in his

reserve unit may be assigned to active duty for 24 months. 

Antonuk claimed that this statute did not apply because his

enlistment terms stated that if he failed to perform

satisfactorily, he would only have to serve 45 days on active

duty. Antonuk, 445 F.2d at 598. The court found that

“reservists may be activated pursuant to 10 U.S.C. § 673a,

notwithstanding clauses in their enlistment contract to the

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contrary.” Id. at 599. To a certain extent, Plaintiffs’

situation is distinguishable from that in Antonuk. Antonuk

enlisted on February 4, 1965. Id. at 553. Congress first

enacted the operative statue as part of the Department of Defense

Appropriation Act of 1967, 80 Stat. 980, § 101(a), and made the

provision permanent by the Military Selective Service Act of

1967, Pub. L. 90-40. Accordingly, the enlistment contract

preceded the statute. The Antonuk court held that Congress,

under its constitutional power to raise armies, could abrogate

the terms of its Reserve enlistment contracts. Id. at 599. 

Here, in contrast, Plaintiffs’ service Agreements explicitly

contradict a pre-existing statute and there is no indication that

the Navy (or Congress) acted to abrogate the terms of Plaintiffs’

service agreements subsequent to their formation.

The government also cites United States v. Larionoff, 431

U.S. 864 (1977), and Beckering v. United States, 22 Cl. Ct. 30

(1990) for the proposition that service members are subject to

all applicable federal law, whether or not set forth in their

service agreement. In Larionoff, seven Navy plaintiffs sued for

their re-enlistment bonus money, which was denied to them after

they re-enlisted. 431 U.S. at 865. Congress passed a statute

that provided a bonus for these plaintiffs, but this statute was

later repealed. Id. at 866-68. The United States Supreme Court

recognized that “a soldier’s entitlement to pay is dependent upon

statutory right.” Id. at 869 (citing Bell v. United States, 366

U.S. 393, 401 (1961)). Thus, statute, not ordinary contract

principles, should govern situations involving entitlement to

pay. Id. Beckering v. United States similarly held that

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10 U.S.C. § 12305 provides in pertinent part: 12

Notwithstanding any other provision of law, during any

period members of a reserve component are serving on active

duty pursuant to an order to active duty under authority of

section 12301, 12302, or 12304 of this title, the President

may suspend any provision of law relating to promotion,

27

“benefits owing to a military service member are governed by

statutes and regulations, and not by general principles of

contract law.” Beckering, 22 Cl. Ct. at 32 (citing Larionoff,

431 U.S. at 869).

But, the subject matter -- military pay and benefits -- at

issue in Larionoff and Beckering is an exception to the general

rule that service agreements are subject to traditional

principles of contract law. Santiago, 425 F.3d at 554 n.4

(noting that exceptions to the general rule have been carved out

for the areas of military pay or benefits due to the “unique

nature and characteristics of military service”); see also Bell,

366 U.S. at 401 (“common-law rules governing private contracts

have no place in the area of military pay”). Here, Plaintiffs

are not seeking benefits or pay, but rather specific performance

of the durational terms of their service agreements and

obligations to perform eight years on active duty. The

government does not provide an exception to the general rule that

traditional contract principles should apply to the service

obligation.

The United States next cites Doe v. Rumsfeld, 435 F.3d 980

(9th Cir. 2006), which concerned a conflict between an enlistment

contract and a Presidential “stop-loss” order issued pursuant to

10 U.S.C. § 12305. In Doe, the plaintiff had enlisted for a 12

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retirement, or separation applicable to any member of the

armed forces who the President determines is essential to

the national security of the United States.

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one-year term in the National Guard. Doe, 435 F.3d at 983. 

During his second one-year enlistment, Doe’s unit was ordered to

active duty for a period that was eleven months longer than his

enlistment contract provided. Id. Doe’s contract contained the

express provisions that (1) future enacted statutes and

regulations could affect the terms of his contract and that (2)

in times of national emergency, the President may order Doe to

active duty and extend his enlistment. Id. at 983. In Doe’s

case, the contract provision regarding times of national

emergency was triggered by the President’s use of his authority

under § 12305 to extend Doe’s enlistment. See id. at 984-85. 

Doe filed a habeas corpus petition which was denied. Id. at 983. 

The Ninth Circuit upheld the lower court’s decision, citing to

Santiago v. Rumsfeld as governing in the Doe case. Id. at 988-

89.

Santiago involved a very similar conflict between an

enlistment contract and a stop-loss order. Santiago enlisted in

the National Guard on June 28, 1996 for an eight-year term. 

Santiago, 425 F.3d at 553. Shortly before his term was about to

expire, his enlistment was extended by a stop-loss order when his

unit received a mobilization alert prior to being ordered to

active service. Id. Santiago filed a writ of habeas corpus,

which was denied by the district court. Id. at 554. The Ninth

Circuit affirmed. Id. at 552.

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The Ninth Circuit first held that enlistment contracts are

subject to general contract law, with exceptions not relevant in

Santiago. Id. at 554. The court found that Santiago’s contract

contained terms that specifically anticipated and allowed for the

application of current and future statutes. One section

contained a passage stating:

Many laws, regulations and military customs will

govern my conduct and require me to do things a

civilian does not have to do. The following

statements are not promises or guarantees of any kind. 

They explain some of the present laws affecting the

Armed Forces which I cannot change but which Congress

can change at any time.

Santiago, 425 F.3d at 555. The Ninth Circuit interpreted this

term to mean that the parties understood and intended that

“subsequently enacted, as well as pre-existing, law would

apply.” Id. Because § 12305(a) was enacted in 1983, it was one

of the federal laws to which Santiago’s enlistment was subject

when he enlisted in 1996. Id. Santiago’s contract contained

another term that explicitly stated:

Laws and regulations that govern military personnel

may change without notice to me. Such changes may

affect my status, pay, allowances, benefits, and

responsibilities as a member of the Armed Forces

REGARDLESS of the provisions of this

enlistment/reenlistment document.

Id. The stop-loss order which authorized suspension of

separation laws qualified as a change in the law. Id. at 555-

56. By the provisions of Santiago’s enlistment contract,

Santiago’s enlistment was properly extended. See also Winters

v. United States, 412 F.2d 140, 144 & n.6 (holding Marine’s

enlistment contract could be abrogated by subsequent enactment

of statute and reviewing other cases holding the same).

The government maintains that 10 U.S.C. § 653 (requiring

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fixed-wing pilots to serve eight years in active duty) likewise

trumps any contrary contractual terms. But, unlike in Doe and

Santiago, where the contracts both incorporated pre-existing law

and provided for modification of the contract terms by

subsequent orders in times of national emergency, Plaintiffs’

service Agreements contain no such provision. Gengler and

McSeveney’s Agreements do have a clause that makes applicable

subsequent changes in law to apply to their pre-existing service

Agreements. (Doc. 4 & 5, Ex. A, Agreement ¶ 1(g).)

 That federal statutes and pertinent regulations

applicable to personnel in the United States Navy may

change without notice and that such changes may affect

my status as an Aviation Officer Candidate or a

commissioned officer and obligations to serve as such.

(Agreement at g (emphasis added)). This is an express agreement

that future changes in federal law may affect Plaintiffs’

obligation to serve as aviation officer candidates or

commissioned officers. However, unlike Doe and Santiago,

Plaintiffs’ Agreements do not provide that pre-existing laws

trump the terms of their service agreements, nor has the United

States pointed to any caselaw that so holds, absent language to

that effect in the service agreement. Here, the pre-existing

law, 10 U.S.C. § 653, expressly provides a minimum eight-year

term of active duty for pilots like Plaintiffs. This directly

conflicts with paragraph 2 of their service Agreements, which

provides for Plaintiffs to serve a seven year term of active

duty. 

Although the cases cited by the government are

distinguishable, Plaintiffs have still not cited to a single

case that is directly on point, nor have they pointed to any

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authority in which the relief they seek was granted. Instead,

Plaintffs point to cases standing for unremarkable and largely

undisputed principles of law, such as “claims of breach of an

enlistment contract are decided under traditional notions of

contract law,” and “[s]pecific performance is a traditional

equitable contract remedy which compels the breaching party to

perform its obligations under the contract.” (Doc. 39 at 6.) 

Pointing to a line of cases that is more on point,

Plaintiffs assert that specific performance may be an

appropriate remedy in a habeas cases. For example, in Riggs v.

Fairman, The Ninth Circuit recently held that

Once a determination has been made that habeas relief

is warranted, the district court has considerable

discretion in fashioning a remedy tailored to the

injury suffered....The Supreme Court has instructed

that “[f]ederal habeas corpus practice, as reflected

by the decisions of this Court, indicates that a court

has broad discretion in conditioning a judgment

granting habeas relief. Federal courts are authorized,

under 28 U.S.C. § 2243, to dispose of habeas corpus

matters ‘as law and justice require.’” Hilton v.

Braunskill, 481 U.S. 770, 775 (1987)...When

ineffective assistance of counsel has deprived a

defendant of a plea bargain, a court may choose to

vacate the conviction and return the parties to the

plea bargaining stage. See United States v. Gordon,

156 F.3d 376, 381-82 (2d Cir. 1998). A court may also

order the government to reinstate its original plea

offer to the defendant or release the defendant within

a reasonable amount of time. See Nunes, 350 F.3d at

1056-57 (9th Cir.2003). In deciding the proper remedy,

a court must consider the unique facts and

circumstances of the particular case. See Morrison,

449 U.S. at 364.

399 F.3d 1179, 1183 (9th Cir. 2005) (emphasis added)(parallel

citations omitted). Plaintiffs place particular emphasis on the

language from Riggs that requires a court to “consider the

unique facts and circumstances of the particular case” when

deciding upon the proper remedy. Plaintiffs maintain that this

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Moreover, Plaintiffs’ reading of Riggs would eviscerate 13

all motions to dismiss in habeas cases, regardless of the legal

merit of the underlying claim. 

32

instruction requires a court to go beyond the pleading to “the

merits of the case by analyzing the evidence.” (Doc. 39 at 7.) 

But, Plaintiffs confuse the question of determining an

appropriate remedy with the issue of whether they have a legally

cognizable claim. Whether specific performance might be an 13

appropriate legal remedy is an entirely separate inquiry from

whether Plaintiffs’ claim will survive this motion to dismiss. 

Plaintiffs do cite a few cases, all from the Federal

Circuit, in support of the merits of their contract claim. 

First, in AT&T Co. v. United States, 177 F.3d 1368, 1373-74

(Fed. Cir. 1999), the Federal Circuit considered a fixed-price

contract for research and development between AT&T and the

United States Navy, the terms of which violated a statutory

prohibition against fixed-price contracts in excess of $10

million. AT&T sought to have the contract declared void for

violating the statute. The Federal Circuit refused to do so,

reasoning that the agency’s noncompliance with the statute did

not necessarily require invalidation. Id. at 1373-74. To

support its conclusion, the Federal Circuit relied on United

States v. Mississippi Valley Generating Co., 364 U.S. 520, 563

(1961), where the Supreme Court explained that when a statute

“does not specifically provide for the invalidation of contracts

which are made in violation of [the statute’s provisions],” a

court shall determine “whether the sanction on nonenforcement is

consistent with and essential to effectuating the public policy

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embodied in [the statute].” After analyzing the applicable

statute and legislative history, which revealed an express

reluctance on Congress’ part to use the statute “as the basis

for litigating the propriety of an otherwise valid statute,” the

Federal Circuit determined that Congress did not intend for the

statute to “terminate fully performed contracts because of []

flawed compliance” by an agency. 177 F.3d at 1375. 

Here, by contrast, the plain language of 10 U.S.C. § 653(a)

is unambiguous:

The minimum service obligation of any member who

successfully completes training in the armed forces as

a pilot shall be 8 years, if the member is trained to

fly fixed-wing jet aircraft, or 6 years, if the member

is trained to fly any other type of aircraft.

A review of the legislative history reveals no relevant

discussion of the substance of the provision, let alone any

discussion concerning the impact of the provision on thenexisting or subsequent service agreements. See House Report No.

101-121 (1989), House Conference Report No. 101-331 (1989);

House Report No. 101-665 (1990), House Conference Report No.

101-923 (1990); House Report No. 102-527 (1992), House

Conference Report No. 102-966 (1992). 

Although the AT&T court refused to void the contract, it

left open the question of what the appropriate remedy would be:

When a contract or a provision thereof is in violation

of law but has been fully performed, the courts have

variously sustained the contract, reformed it to

correct the illegal term, or allowed recovery under an

implied contract theory; the courts have not, however,

simply declared the contract void ab initio. 

Id. at 1376. 

Plaintiffs next cite Beta Systems Inc. v. United States,

838 F.2d 1179, 1181-82 (Fed. Cir. 1988), for the proposition

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specifically notes that the Defense Acquisition Regulations

specifically provide that “[a] contract may be amended or

modified to correct or mitigate the effect of a mistake,

34

that “the risk of unintentional failure of a contract term to

comply with a legal requirement does not fall solely on the

contractor.” Plaintiffs quote Beta Systems out of context. In

that case, like in AT&T, Beta Systems entered into a contract

with the government which incorporated a price index that did

not comply with a legal requirement. Specifically, a Defense

Acquisition Regulation required indexes to be “structured to

encompass a large sample of relevant items yet bear a logical

relationship to the type of contract costs being measured.” See

Id. at 1185. Beta Systems asserted that the price index used in

the contract at issue did not track the price of aluminum, which

was the major construction material used for the contract. The

government asserted that “Beta [Systems] knew or should have

know that this index might not track the price of aluminum.” 

Id. The Federal Circuit rejected this argument, reasoning that

The risk of unintentional failure of a contract term

to comply with a legal requirement does not fall

solely on the contractor. If the [] index that was

selected does not comply with [the regulatory

requirement] even approximately, it is not controlling

whether or not Beta or the government foresaw, or

accepted the risk of failing to foresee, this defect

in the index. In Polarad Electronics, Inc., ACAB No.

1116, 2 ECR ¶ 134 (1971), on facts substantially

identical to the present case, the Board held that

inclusion of an “inappropriate and inadequate...price

index in the escalation clause” constituted mutual

mistake of a material fact, requiring correction by

substitution of a proper index.

Id. (emphasis added). Suggesting that correction of the

mistaken term might be appropriate, the Federal Circuit remanded

the case for determination of an appropriate remedy.14

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including...a mutual mistake as to a material fact.” Id. at 1185

(citing DAR 17-204.4 (1981)).

35

Considered in context, the proposition for which Plaintiffs cite

Beta Systems is inapplicable. The government has not asserted

here that Plaintiffs should have known of the statute imposing

an eight-year term at the time they signed the contract. 

Finally, Plaintiffs cite Urban Data Systems Inc. v. United

States, 699 F.2d 1147 (Fed. Cir. 1983), for the proposition that

a “contract price term contrary to law did not invalidate a

fully performed contract.” While Urban Data Systems did

decline to invalidate the entire contract, it also found that

the illegal price terms were invalid. Id. at 1154. Instead,

the Urban Data Systems court suggested that the plaintiff would

be entitled to reimbursement on a “quantum valebant basis for

the reasonable value in the marketplace of the supplies and

concomitant services.” Id. 

In short, none of the cases cited by Plaintiffs, all of

which concern commercial price terms contained within government

contracts, support the existence of a legally cognizable

contact-based claim in this case. In none of the cases did a

party successfully obtain specific enforcement of an unlawful

contract term against the government. Plaintiffs have not yet

provided any legal support for such a remedy, nor has research

disclosed any supportive cases. 

Essentially, Plaintiffs seek specific enforcement of the

Service Agreement, which contains an erroneous term of service,

while the United States argues that the seven year service term

cannot be enforced because it is contrary to statute. Many

cases have held that unlawful contracts (or unlawful contract

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terms) may not be enforced. See Fomby-Denson v. Dept. of Army,

247 F.3d 1366, 1374 (Fed. Cir. 2001)(reviewing the “wellsettled” “principle[] of general contract law that courts may

not enforce contracts that are contrary to public policy”). The

Supreme Court in Hurd v. Hodge, 344 U.S. 24, 34-35 (1948), held

that 

The power of the federal courts to enforce the terms

of private agreements is at all times exercised

subject to the restrictions and limitations of the

public policy of the United Sates as manifested in the

Constitution, treaties, federal statutes, and

applicable legal precedents. Where the enforcement of

private agreements would be violative of that policy,

it is the obligation of courts to refrain from such

exertions of judicial power.

Id. A long line of cases from federal labor law has applied

this “public policy doctrine” in determining whether to enforce

agreements. See e.g., W.R. Grace & Co. v. Local Union, 759,

Intern. Union of Un. Rubber, Cork, Linoleum and Plastic Workers

of Am., 461 U.S. 757, 766-67 (1983)(refusing to bar enforcement

of collective bargaining agreement because it did not compromise

public policy); Kaiser Steel Corp. v. Mullins, 455 U.S. 72, 79

(1982)(refusing to command contracting party to perform under

contract, as that would “command conduct that assertedly renders

the promise an illegal undertaking under the federal

statutes.”).

Whether a contract is unlawful is determined by referencing

“laws and legal precedents and not from general considerations

of supposed public interests.” W.R. Grace, 461 U.S. at 766

(quoting Muschany v. United States, 324 U.S. 49, 66-67 (1945)). 

However, “good faith contracts of the United States should not

be lightly invalidated.” 

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Only dominant public policy would justify such action.

In the absence of a plain indication of that policy

through long governmental practice or statutory

enactments, or of violations of obvious ethical or

moral standards, this Court should not assume to

declare contracts of the War Department contrary to

public policy. The courts must be content to await

legislative action.

Muschany, 324 U.S. at 66-67.

The Restatement (Second) of Contracts, section 178,

concerns the enforceability of bargains that violate public

policy. It provides:

(1) A promise or other term of an agreement is

unenforceable on grounds of public policy if

legislation provides that it is unenforceable or the

interest in its enforcement is clearly outweighed in

the circumstances by a public policy against the

enforcement of such terms.

(2) In weighing the interest in the enforcement of a

term, account is taken of

(a) the parties' justified expectations,

(b) any forfeiture that would result if

enforcement were denied, and

(c) any special public interest in the

enforcement of the particular term.

(3) In weighing a public policy against enforcement of

a term, account is taken of

(a) the strength of that policy as manifested by

legislation or judicial decisions,

(b) the likelihood that a refusal to enforce the

term will further that policy,

(c) the seriousness of any misconduct involved

and the extent to which it was deliberate, and

(d) the directness of the connection between that

misconduct and the term.

(emphasis added.)

The United States Supreme Court relied upon this provision

to evaluate whether public policy was violated by a plea

agreement providing for dismissal of criminal charges in

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exchange for a waiver of the defendant’s right to file a civil

rights action. Town of Newton v. Rumery, 480 U.S. 386, 392 n.2

(1987). More recently, the Court of Federal Claims relied upon

this provision to reject the government’s argument that a

contractor should be strictly liable for the unlawful acts of

its subcontractors. Transfair Int’l, Inc., v. United States, 54

Fed. Cl. 78 (2002). The government in Transfair argued that a

contract should be declared void because a subcontractor

performed the contract in an unlawful manner (by employing an

Iranian airliner to deliver goods), even though the contractor

argued that it had no knowledge of the unlawful performance. 

Following similar decisions from other circuits, including the

Seventh Circuit case, Northern Indiana Public Service Co. v.

Carbon County Coal Co., 799 F.2d 265 (7th Cir. 1986), the

Transfair court reasoned that “the defense of illegality, being

in character if not origins an equitable and remedial doctrine,

is not automatic but requires...a comparison of the pros and

cons of enforcement.” Transfair, 54 Fed. Cl. at 85 (quoting

Carbon County, 799 F.2d at 273). The Transfair court denied the

United States’ motion to dismiss the contractors’ suit for

payment. Its reasoning is instructive:

This court is mindful of the vital foreign policy

concerns at issue and the result here is in no way

intended to denigrate those concerns. But, the short

of the matter is that while it is highly relevant that

legal requirements, tied to those concerns, were

apparently violated here, that fact alone is not

decisive. Rather, this court must determine, first,

whether, under the circumstances, plaintiff is

responsible for the illegal performance of its

subcontractor and, then, applying the balancing test

of the Restatement, consider whether the nature of

that illegality was such as to warrant the forfeiture

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of all compensation. As fact issues lurk beneath both

considerations, this court must deny defendant's

motion. 

Here, although the contract directly conflicts with a

federal statute, the legislation does not explicitly state that

any contract made in violation of the statute is unenforceable. 

There are fact inquiries that must precede any reasoned

application of the restatement factors, including the strength

of the public policy that underlies the statutory eight year

service provision; the government’s interest in a return on its

investment in training Navy fixed-wing jet pilots; the impact

upon Plaintiffs that would result if relief was denied; and the

nature of any misrepresentations and/or mistakes that have

occurred as a result of the Navy’s negligence in drafting the

service contracts. 

The motion to dismiss the contract-based habeas corpus

claim is DENIED WITHOUT PREJUDICE, although Plaintiffs will be

required to re-plead this claim. 

4. Equitable Estoppel.

Plaintiffs’ second claim is for equitable estoppel,

essentially arguing that the government should not be permitted

to advance its illegality defense. The government moves to

dismiss this claim on the ground that it fails as a matter of

law. 

Equitable estoppel “precludes a party from claiming the

benefits of a contract while simultaneously attempting to avoid

the burdens that contract imposes.” Comer v. Micor, Inc., 436

F.3d 1098, 1101 (9th Cir. 2006). “[T]he party claiming estoppel

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must have relied on his adversary’s [misleading] conduct in such

a manner as to change his position for the worse, and that

reliance must have been reasonable in that the party claiming

the estoppel did not know nor should it have known that its

adversary’s conduct was misleading.” River City Ranches #1 Ltd

v. Comm’r Internal Revenue, 401 F.3d 1136 (9th Cir. 2005). The

Ninth Circuit applies a two-prong test to determine when it is

appropriate to apply equitable estoppel against the government. 

First Plaintiffs must demonstrate “affirmative conduct [by the

government] going beyond mere negligence,” Purcell v. United

States, 1 F.3d 932 (9th Cir. 1993); and second that the

“government’s wrongful act will cause a serious injustice, and

the public’s interest will not suffer undue damage” if the

requested relief is granted, United States v. Hatcher, 922 F.2d

1402, 1411 n.12 (9th Cir. 1991). 

In the context of ruling on an equitable estoppel claim

brought against the government, the Ninth Circuit held that

“[n]either the failure to inform an individual of his or her

legal rights nor the negligent provision of misinformation

constitute affirmative misconduct.” Suilt v. Schiltgen, 213

F.3d 449, 454 (9th Cir. 2000). Plaintiffs assert, however, that

the Navy’s conduct went beyond mere negligence, citing Watkins

v. United States Army, 875 F.2d 699 (9th Cir. 1989), for the

proposition that the government’s conduct in this case is

actually affirmative misconduct. In Watkins, the Army was well

aware from the time of Watkins’ initial enlistment in 1967 that

he had “homosexual tendencies,” to which he admitted on several

occasions. At that time, engaging in homosexual acts with other

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servicemen was considered a crime under military law. Watkins

was investigated several times by the Army for allegedly

committing sodomy and his fitness for duty was questioned on

several other occasions. But, until 1981, he was always cleared

of all wrongdoing and allowed to reenlist on several separate

occasions because of his excellent performance. Id. at 702. In

1981, the Army promulgated a regulation which mandated the

discharge of homosexuals regardless of merit. Soon thereafter

an Army Board convened and determined that Watkins should be

discharged. Id. 

The Ninth Circuit held that equitable estoppel could be

invoked against the government in Watkins because the Army

repeatedly represented over a 14-year period that Watkins was

qualified for reenlistment. Although acknowledging the general

principle that “persons dealing with the government assume the

risk that government agents may exceed their authority and

provide misinformation,” the Watkins court noted that the

government “acted affirmatively in admitting, reclassifying,

reenlisting, retaining, and promoting Watkins.” Id. at 708. 

Furthermore, the defendant’s conduct “involve[d] ongoing active

misrepresentations by Army officials acting well within their

scope of authority.” Id. Consequently, the Ninth Circuit found

the Army’s conduct to be “affirmative misconduct.” Id. 

Plaintiffs conclusorily allege that ongoing

misrepresentation occurred when the Navy drafted Plaintiffs’

Agreements, presented the Agreements to Plaintiffs, signed the

Agreements (through a Lieutenant in 1996), and then, in 1999

again represented to Plaintiffs that the seven-year term

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In declarations attached to their motion for temporary 15

injunctive relief, Plaintiffs assert that a “Student Control

Officer” orally confirmed Plaintiffs seven year commitment in

April 1999, shortly after Plaintiffs received their “winging

orders,” which indicated an eight-year service obligation. 

(Plaintiffs’ Decls. at ¶6.) This evidence is not admissible,

however, for purposes of a 12(b)(6) motion to dismiss.

42

applied. (See Doc. 16 at 12.) The United States argues that

“the allegations in the instant case do not even approach the

level of affirmative misconduct set forth in Watkins.” (Doc. 47

at 15.) In other words, the United States asserts that

Plaintiffs have failed to allege that the Navy’s conduct was

anything other than negligence (i.e., a mistake). 

The Complaint alleges that:

35. Defendants knew that the Agreements contained a

seven-year enlistment period;

36. Defendants knew that at the time of [sic] the

Agreements were signed, Congress had passed a law

containing an eight-year enlistment periods [sic]

applicable to Plaintiffs

37. At the time the Agreements were signed and

thereafter, Defendants made misrepresentations

regarding the applicable enlistment period to

invoke Plaintiffs reliance

38. At the time the Agreements were signed and

thereafter, Plaintiffs were unaware of the nature

of Defendants misrepresentations

39. Plaintiffs relied on Defendants’

misrepresentations to their detriment.

40. Defendants breach act will cause a serious

injustice to Plaintiffs and the public interest

will not suffer undue damage by the requested

estoppel.

(Doc. 1 at 6.) 

15

The government contends that Plaintiffs must plead

affirmative misconduct in accordance with the heightened

pleading standard set forth in Federal Rule of Civil Procedure

9(b), citing Miscellaneous Service Workers Drivers & Helpers v.

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The United States also makes the less persuasive 16

argument that equitable estoppel is never appropriate where the

requested relief would violate a statute, citing I.N.S v.

Pangilinan, 486 U.S. 875, 885 (1988)(“Neither by application of

the doctrine of estoppel, nor by invocation of equitable powers,

nor by any other means does a court have power to confer

citizenship in violation of [Congressional] limitations.”), and

Office of Personnel Management v. Richmond, 496 U.S. 414, 420-21

(1990). In, Richmond, the United States Supreme Court recognized

earlier cases which held that “not even the temptations of a hard

case will provide a basis for ordering recovery contrary to the

terms of [a] regulation, for to do so would disregard the duty of

all courts to observe the conditions defined by Congress...” Id. 

However, the Richmond court went on to limit this holding to

claims for “payment of money from the Public Treasury contrary to

a statutory appropriation,” leaving open the question of whether

a plaintiff could ever bring an estoppel suit to compel the

government to act contrary to a statute. Id. at 423-24. 

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Philco-Ford Corp., 661 F.2d 776, 782 (9th Cir. 1981), in which

pleading pursuant to Rule 9 was required for a claim that

alleged affirmative misrepresentation. This is consistent with 16

the law that estoppel only operates against the government when

misconduct is affirmative and more than mere negligence. 

Plaintiffs complaint is insufficient to state a claim for

equitable estoppel. Paragraph 32 is conclusory as it fails to

describe what misrepresentations about Plaintiffs’ service term

were made, when, or by whom. Intentional misrepresentation is

not alleged, nor do Plaintiffs allege a pattern of affirmative

misrepresentations like those in Watkins. Negligence is not

enough. 

VI. CONCLUSION

For the reasons set forth above, 

(1) Defendants’ motion to dismiss for lack of subject

matter jurisdiction pursuant to Fed. R. Civ. Pro.

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12(b)(6) is GRANTED IN PART AND DENIED IN PART. The

contract, Administrative Procedure Act, and

declaratory relief claims are DISMISSED WITH

PREJUDICE. The only valid basis for jurisdiction in

this case is habeas corpus, all other bases advanced

by Plaintiffs are legally insufficient. 

(2) Defendants’ motion to dismiss for failure to state a

claim pursuant to Fed. R. Civ. Pro. 12(b)(6) is

GRANTED IN PART AND DENIED IN PART. As to the

contract-based habeas corpus claim, the motion to

dismiss is DENIED WITHOUT PREJUDICE, subject to

repleading. As to the equitable estoppel claim, the

motion to dismiss is GRANTED WITH LEAVE TO AMEND. 

Plaintiffs shall file a petition for habeas corpus and

must re-plead their estoppel claim with greater

specificity.

SO ORDERED.

DATED: August 24, 2006

 /s/ Oliver W. Wanger 

OLIVER W. WANGER

United States District Judge

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