Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-89-08003/USCOURTS-ca10-89-08003-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 

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PUBLISH FILED 

UNITED STATES COURT OF APPEALS Unit.ed States Court of Appeals Tenth circuit 

TENTH CIRCUIT 

No. 89-8003 

RICHARD L. MILLER and ) 

PATRICIA A. MILLER, husband ) 

and wife; PATRICIA A. LANTZ, ) 

and all others similarly ) 

situated, ) 

) 

Plaintiffs-Appellees, ) 

) 

v. ) 

) 

JAMES F. McGOVERN, in his ) 

official capacity as Secretary ) 

of the United States Air Force; ) 

et al., ) 

) 

Defendants-Appellants. ) 

JUN 2 9 1990 

ROBERT L. HOECKER 

Clerk 

Appeal from the United States District Court 

for the District of Wyoming 

(D.C. No. C87-0253-B) 

C. M. Aron (Richard A. Hennig and Patricia L. Simpson of Aron and 

Hennig, with him on the brief), Laramie, Wyoming, for PlaintiffsAppellees. 

Constance Wynn (John R. Bolton, Assistant Attorney General; Stuart 

E. Schiffer, Acting Assistant Attorney General; Richard Allen 

Stacy, United States Attorney; and John F. Cordes, with her on the 

brief), Department of Justice, Washington, D.C., for DefendantsAppellants. 

(Russell H. Putnam, Jr. of The Austin Law Firm, Columbia, South 

Carolina, for the National Association for Uniformed Services and 

Society of Military Widows, Amici Curiae.) 

Appellate Case: 89-8003 Document: 01019880682 Date Filed: 06/29/1990 Page: 1 
Before HOLLOWAY, Chief *Judge, McWILLIAMS, Circuit Judge, and 

BABCOCK, District Judge. 

MCWILLIAMS, Circuit Judge. 

* Honorable Lewis T. Babcock, United States District Judge for the 

District ·of Colorado, sitting by designation. 

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Appellate Case: 89-8003 Document: 01019880682 Date Filed: 06/29/1990 Page: 2 
Richard Miller and his wife, Patricia Miller, and Patricia 

Lantz, on behalf of themselves and all others similarly situated, 

brought suit in the United States District Court for the District 

of Wyoming against Edward Aldridge, then Secretary of the United 

States Air Force, John Marsh, Secretary of the United States Army, 

William Ball, III, Secretary of the Navy, Dorcas Hardy as 

Administrator of the Social Security Administration, Dr. Otis 

Bowen, Secretary of Health and Human Services, and others, challenging their interpretation and application of 10 u.s.c. § 

145l(e)(3), which statute is a part of the military's Survivor 

Benefit Plan (SBP), 10 U.S.C. S 1447-55. 

Count one of the complaint was for breach of contract. Count 

two sought declaratory_ judgment. Count three was denominated as 

"Violation of Constitutional Right to Uniform Application of the 

Law." Count four was denominated as "Unconstitutional Taking of 

Property without Compensation." Jurisdiction was based on the 

Constitution of the United States and various federal statutes, 

including 28 u.s.c. § 1346(a)(2). 1 

On cross-motions for summary judgment the district court 

granted plaintiffs' motion and denied the defendants' motion. In 

so doing, the district court recognized that it was granting the 

plaintiffs' motion for summary judgment on a ground which the 

plaintiffs had not themselves urged in their motion for summary 

judgment. The defendants now appeal the judgment thus entered. 

1 The defendants doubt that the district court had jurisdiction 

under 28 U.S.C. § 1346(a)(2), but believe that the district court 

had jurisdiction under 28 u.s.c. § 1331. See Bowen v. Massachusetts, 487 U.S. 879 (1988). 

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Appellate Case: 89-8003 Document: 01019880682 Date Filed: 06/29/1990 Page: 3 
As indicated, this appeal concerns the meaning of 10 u.s.c. § 

145l(e)(3), which reads as follows: 

(3) An annuity computed under this subsection 

shall be reduced by the lesser of--

(A) the amount of the survivor benefit, 

if any, to which the widow or widower or 

former spouse would be entitled under 

title II of the Social Security Act (42 

U.S.C. § 401 et seq.) based solely upon 

service by the person concerned as 

described in section 210 (1)(1) of such 

Act (42 u.s.c. 410(1)(1)) and calculated 

assuming that the person concerned lives 

to age 65; or 

(B) [Inapplicable]. 

In granting plaintiffs' summary judgment the district court 

in its order, which now appe_ars as Miller v. Aldridge, 700 F. 

Supp. 1565, 1570 (D. Wyo. 1988), well described the respective 

positions of the parties with the following example: 

An example might help illustrate the positions of 

the parties. Assume H[usband] is retiring from the Army 

and elects to participate in the SBP. His retirement 

pay is one thousand dollars ($1,000.00) per month. Per 

the terms of the SBP, H will pay the SBP ten percent 

(10%) of his retirement pay, or one hundred dollars 

($100.00) per month. 

H dies and is survived by W[ife], aged 63. W has 

worked many years, and has contributed to the Social 

Security system. Consequently, based on her own earnings, Wis entitled to two hundred dollars ($200.00) per 

month in Social Security old age benefits. 

If W were to receive Social Security widow's 

benefits, she would receive one hundred dollars 

($100.00) per month. Eighty dollars ($80.00) of this 

amount would be due- to H's military earnings, twenty 

dollars ($20.00) of this amount would be due to jobs H 

worked outside the military. However, Wis not entitled 

to receive the widow's benefit as her old-age benefit 

($200.00) exceeds the widow's benefit ($100.00) she 

would otherwise qualify for. 

Under the government's reading of§ 1451, ·w would 

be given four hundred and seventy dollars ($470.00) per 

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Appellate Case: 89-8003 Document: 01019880682 Date Filed: 06/29/1990 Page: 4 
month in SBP benefits. The government would calculate 

this as follows: W would receive a base SBP monthly 

annuity in the amount of five hundred and fifty dollars 

($550.00), or fifty-five percent (55%) of H's one 

thousand dollars ($1,000.00) per month retirement pay. 

From this amount the government would subtract eighty 

dollars ($80.00), the portion of the widow's benefit 

attributable to H's military earnings, leaving four 

hundred and seventy dollars ($470.00). The government 

argues that under§ 1451, it is to make this reduction 

even though W receives no widow's benefit [because her 

old-age benefit exceeds the widow's benefit she would 

otherwise qualify for]. 

Under the plaintiffs' reading of§ 1451, because W 

receives no widow's benefit, no offset would be applied 

to W's SBP benefit. Thus, in this example, according to 

plaintiffs, W would be entitled to five hundred and 

fifty dollars ($550.00) from the SBP. 

Plaintiffs' motion for summary judgment merely stated that 

there was no genuine issue of material fact as to any of its four 

claims for relief and that they were entitled to judgment as a 

matter of law on each claim based on the r~asons advanced in their 

brief in support of the motion. We do not find that brief in the 

record on appeal. Be that as it may, it would appear from the 

district court's order granting plaintiffs' motion for summary 

judgment that plaintiffs did not claim in their motion for summary 

judgment that they were entitled to summary judgment on a "plain 

reading" of 10 u.s.c. § 145l(e)(3). Rather, in its published 

order, the district court noted that the plaintiffs claimed they 

were entitled to summary judgment under two theories: (1) breach 

of contract by the government, and (2) the government was subject 

to equitable estoppel. 

The district court in its order granting plaintiffs' motion 

for summary judgment stated that it "must determine whether it can 

grant summary judgment relief on a ground that was not raised .... " 

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The district court concluded that it could and stated that the 

district court "can, and hereby doe_s, sua sponte, make a motion 

for summary judgment in favor of the plaintiffs based on the 

language of the statutory provisions in question." The district 

court then proceeded to grant the motion on that ground, holding 

that the "plain meaning" of 10 u.s.c. § 145l(e)(3) precluded the 

government from interpreting that statute as it had been doing, 

i.e., reducing the SBP benefits paid to the surviving spouse of a 

military retiree by the amount of Social Security survivor 

benefits based on the military service of the decedent even though 

the surviving spouse under Social Security law was not entitled to 

receive Social Security survivor benefits because the surviving 

spouse was on her own account entitled to Social Security old-age 

·retirement benefits which exceeded the Social Security survivor 

benefits to which she was otherwise entitled. 

The district court opined that having concluded that the 

government has not been paying benefits under the military SBP in 

a "manner consistent with the statutory scheme creating the SBP," 

it was "tempted to stop at this point." However, the district 

court elected "not to stop" and went on to hold that the 

plaintiffs "had a contract with the government for SBP benefits" 

consistent with its understanding of the plain meaning of 10 

u.s.c. § 145l(e)(3). Under such circumstances, the district court 

did not find it necessary to deal with plaintiffs' estoppel claim. 

Accordingly, we are not concerned on appeal with the equitable 

estoppel argument. 

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We first deal with 10 u.s.c. § 145l(e}(3). Plaintiffs argue 

that the ''plain meaning" of that statutory provision is the exact 

opposite of the "plain meaning" given the statute by the district 

court. Some background is in order. 

Congress created the SBP in 1972 as a mechanism to provide 

income to the surviving spouses of members of the military service 

who die after becoming eligible to retire. S. Rep. No. 92-1089, 

92d Cong., 2d Sess. 1, reprinted in 1972 U.S. Code Cong. & Admin. 

News 3288, 3289. The SBP was designed to "build upon the incomemaintenanc~ foundation'' of benefits provided by Title II of the 

Social Security Act. s. Rep. No. 92-1089, 92d Cong., 2d. Sess. 

29, reprinted in 1972 U.S. Code Cong. & Admin. News 3288, 3304. 

In particular, Congress wanted to fill the gap in Title II Social 

Security coverage that existed in the case of wives of military 

retirees who were widowed at too young an age to begin receiving 

Social Security survivor benefits. Id.; see also H.R. Rep. No. 

99-81, 99th Cong., 1st Sess. 250-51, reprinted in 1985 U.S. Code 

Cong. & Admin. News 472, 527. 

Under the terms of the SBP, a member of the military who 

reaches retirement age is automatically a participant in the SBP 

even though he does not take retirement. As long as the 

individual remains on active duty, he makes no payment to the 

program. And if the service member should die, and his widow is 

under 62 years of age, she will receive a monthly annuity in the 

amount of 55% of the pay received by the decedent. 

When the service member who is eligible for retirement actually retires, he has a choice of whether he will be a participant 

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Appellate Case: 89-8003 Document: 01019880682 Date Filed: 06/29/1990 Page: 7 
in the SBP. However, unless he "opts out," he is deemed a 

participant in the SBP and he then contributes 10% of his retirement pay to the program. When the retired service member dies, 

his widow, if under 62 years of age, will receive a monthly annuity equal to 55% of the deceased service member's retirement pay. 

When the annuitant reaches 62 years of age, or if the annuitant is 62 at the time of the spouse's death, the annuitant is 

not entitled to a monthly annuity equal to 55% of the deceased 

service member's retirement pay. Rather, the SBP annuity, i.e., 

55% of the pay received by the deceased, is reduced by that portion of the Survivor Benefit under Title II of the Social Security 

Act to which the annuitant would be entitled on account of the 

military service of the decedent. 2 This reduction is referred to 

as the "Social Security offset," and appears as 10 U.S.C. § 

145l(e)(3). 3 

A military SBP annuitant who is 62 years of age, or over, is 

conceivably entitled to Title II Social Security benefits. 4 Under 

the current version of Title II, an individual is entitled to old2 Military personnel accrue credit toward "fully insured'' status 

under Title II in the same manner as do other occupational groups. 

As a result, military personnel, by virtue of their military 

service, may become eligible for Title II old age insurance 

benefits, and their widows and widowers may become eligible for 

Title II survivor benefits. 

3 In 1985, Congress eliminated the Social Security offset, and now 

an annuitant who is 62 years of age, or older, receives 35% of 

decedent's retirement pay. However, the 1985 amendments do not 

apply to this proceeding. 

4 While individuals become entitled at age 60 to widow's and 

survivor benefits under Title II, 42 u.s.c. § 402(e)(l) & (f)(l), 

the statutory integration of SBP annuities with survivor benefits 

begins (and has always begun) at age 62. The reason for this 

discrepancy is not clear. 

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age benefits if he or she is ''fully insured" within the meaning of 

Title II and has attained the age of 62. Also, under the current 

version of Title II, the surviving spouse of an individual who is 

"fully insured'' at the time of his death is entitled to survivor 

benefits. 

Under Title II, a person may be entitled to old-age insurance 

benefits and also to survivor benefits. However, that person is 

not entitled to the aggregate of both sets of benefits. Instead, 

the amount of monthly survivor benefits is reduced, but not to 

less than zero, by the amount of monthly old~age benefits. In 

practical effect, then, an individual who is entitled to both oldage benefits and survivor benefits under Social Security receives 

only the single greater amount of the two sets of benefits. 

Although the complaint stated that this was to be a class 

action, no motion for class certification was filed. Accordingly, 

we are here concerned with the three named individual plaintiffs. 

Patricia Lantz is the widow of Major Alfred Lantz. On 

December 17, 1959, Major Lantz retired from the United States 

Army. When the SBP was created in 1972, Major Lantz chose to 

participate in the SBP and, thereafter, paid into the SBP the 

required percent of his retirement pay until his death on December 

23, 1985. 

At the time of her husband's death, Patricia Lantz was 68 

years old. From 1942 to 1981, Patricia Lantz worked as a 

registered nurse and for that period of time contributed to the 

Social Security system. Due to her contributions to Social 

Security, Ms. Lantz receives $362.00 per month in Social Security 

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old-age benefits. But for the fact that Ms. Lantz receives oldage benefits based on her own work history, she would also receive 

a Social Security survivor benefit based on her deceased husband's 

contribution to the Social Security plan. However, Ms. Lantz is 

not entitled to receive a Social Security survivor benefit because 

the old-age benefit which she is receiving as a result of her own 

work exceeds the survivor benefit, and under the Social Security 

Act she is not entitled to both. 

Since her husband's death, Ms. Lantz has been receiving a 

monthly annuity from the SBP, in addition to her Social Security 

old-age benefit, but the annuity from the SBP has been reduced by 

the Social Security offset, and it is this ''offset" which is at 

issue in her case. 5 

The remaining plaintiffs are Richard and Patricia Miller, 

husband and wife, who are both living. In 1981, Richard Miller 

retired from the United States Air Force and upon his retirement 

he elected to participate in the .SBP and has since been making 

monthly contributions to the SBP. Mrs. Miller is a schoolteacher 

and is herself "fully insured" under Social Security. Should 

Richard Miller predecease Patricia Miller, Patricia does not 

5 A hypothetical may help to put the issue in better focus. If 

Ms. Lantz did not have a work history of her own which qualified 

her as "fully insured" under the Social Security Act, she, of 

course, would not have qualified for old-age insurance benefits, 

in which event she would have been eligible to receive and would 

have received the survivor benefit under the Social Security Act, 

which would include the benefits based on her deceased husband's 

military employment and any non-military employment. However, 

under the Social Security offset provision of the military's SBP, 

that part of the Social Security survivor benefit based on her 

deceased husband's military employment would be deducted from 

survivor benefits otherwise payable under the SBP. 

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anticipate that she will be entitled to survivor benefits under 

Social Security because her old-age benefits under Social Security 

would be greater than the survivor benefits. The Millers are 

plaintiffs in this action, according to the district court, 

because "they fear what has happened to Ms. Lantz with regard to 

Social Security offset will happen to Mrs. Miller'' should she 

outlive her husband. Richard Miller also sought a declaration 

that he be given the opportunity to opt out of the SBP and receive 

a refund of contributions previously paid. 

The district court in denying a motion to dismiss concluded, 

inter alia, that Richard Miller had standing to sue the defendants 

because he was a party to a contract, and that Mrs. Miller and Ms. 

Lantz had standing to sue because they were third party 

beneficiaries. The district court found subject matter jurisdiction under 28 U.S.C. § 1346(a)(2). 

After stating the ''plain meaning" of 10 U.S.C. § 145l(e)(3), 

the district court entered judgment for Ms. Lantz in the sum of 

$4,788.40, said sum representing the underpayment to Ms. Lantz 

resulting from the Social Security offset which had been applied 

to her SBP benefit. The district court further ordered that 

future payments to Ms. Lantz should be "consistent with its 

opinion," and that should Mrs. Miller outlive her husband, 

military survivor benefits paid to her should be "in a manner 

consistent with this opinion." The district court disallowed 

Richard Miller'a claim for refund of his contributions to the SBP. 

10 u.s.c. § 145l(e)(3) provides that the SBP survivor annuity 

will be reduced at age 62 by: 

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[T]he amount of survivor benefit, if any, to 

which the widow or widower or former spouse 

would be entitled under title II of the Social 

Security Act (42 U.S.C. 401 et seq.) based 

solely upon service by the person concerned as 

described in section 210 (1)(1) of such Act 

(42 u.s.c. 410(1)(1)) and calculated assuming 

the person concerned lives to age 65; .•. 

(emphasis added). 

The critical language in the statute is "would be entitled" 

and "based solely upon the service by [the deceased spouse]." 

Under Title II of the Social Security Act, a person is not 

ordinarily entitled to survivor benefits if the person's own oldage benefits exceed the amount of the survivor benefits. However, 

solely for the purpose of determining the amount of the offset, 

the statute mandates that the amount be determined by looking to 

the. Social Security survivor benefit that "would be" payable to 

the surviving spouse based on the military service of the 

decedent. The statute says that the SBP annuity shall be reduced 

by the amount of the Social Security survivor benefit to which the 

spouse "would be entitled" resulting from the military service of 

the decedent. "Would be entitled." is not the equivalent of "is 

entitled" and the former is sufficiently broad to include the 

situation where a person would otherwise be entitled to a Title II 

survivor benefit but because of the triggering of another 

statutory provision will not actually be eligible to receive, nor 

will he, or she, actually receive payment of the benefit. The 

Social Security offset is concerned with how the offset will be 

calculated, not the actual entitlement for Title II survivor 

benefits. 

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We believe the meaning which we find in 10 u.s.c. § 

145l(e)(3) is consistent with legislative history. The Senate 

Report prepared by the Armed Services Committee, under the heading 

of "Rationale for Including Social Security Offset in Survivors 

Benefit Plan,'' states that "the proposed survivor benefit program 

is designed to build upon the income-maintenance foundation of the 

social security system. Thus, the benefits are integrated with 

social security benefits." s. Rep. No. 92~1089, 92 Cong., 2nd 

Sess. 29, reprinted in 1972 U.S. Code Cong. and Admin. News 3288, 

3304. The Senate Committee then illustrated the actual effect of 

the offset provision to an SBP beneficiary, stating that "when a 

widow reaches age 62, her [SBP] annuity based on her husband's 

military retirement pay would be offset by the equivalent of the 

Social Security payment which is attributable to her husband's 

military service." 

The defendants argue, alternatively, that if the interpretation they have given 10 U.S.C. § 145l(e)(3) is not mandated by the 

"plain meaning" of that statute, their interpretation is nonetheless a "permissible" interpretation and should be afforded 

substantial deference by a reviewing court. Although we believe 

that the defendants' interpretation follows the "plain meaning" of 

the statute, certainly it is, at a minimum, a "permissible one" 

under Chevron, U.S.A., Inc. v. Natural Resources Defense Council, 

Inc., 467 U.S. 837 (1984). In that case, the Supreme Court at pp. 

842-44 spoke as follows: 

When a court reviews an agency's construction of 

the statute which it administers, it is confronted with 

two questions. First, always, is the question whether 

Congress has directly spoken to the precise question at 

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issue. If the intent of Congress is clear, that is the 

end of the matter; for the court, as well as the agency, 

must give effect to the unambiguously expressed intent 

of Congress. If, however, the court determines Congress 

has not directly addressed the precise question at is~ 

sue, the court does not simply impose its own construction on the statute, as would be necessary in the 

absence of an administrative interpretation. Rather, if 

the statute is silent or ambiguous with respect to the 

specific issue, the question for the court is whether 

the agency's answer is based on a permissible construction of the statute. 

"The power of an administrative agency to 

administer a congressionally created . program 

necessarily requires the formulation of policy and the 

making of rules to fill any gap left, implicitly or 

explicitly, by Congress." Morton v. Ruiz, 415 u. S. 

199, 231, 94 S. Ct. 1055, 1072, 39 L.Ed.2d 270 (1974). 

If Congress has explicitly left a gap for the agency to 

fill, there is an express delegation of authority to the 

agency to elucidate a specific provision of the statute 

by regulation. Such legislative regulations are given 

controlling weight unless they are arbitrary, capricious, or manifestly contrary to the statute. Sometimes 

the legislative delegation to an agency on a particular 

question is implicit rather than explicit. In such a 

case,~ court may not substitute its own construction of 

a statutory prov1sion for a reasonable interpretation 

made by the administrator of an agency. 

As indicated, the district court also held that plaintiffs 

had a "contract" with the government. In the district court, the 

plaintiffs suggested that the "terms" of the "contract" were set 

forth in various government pamphlets and brochures describing the 

SBP, and that the government should be held to those terms. The 

district judge rejected that suggestion and held that the ''terms" 

of the ''contract" were the statutes and, in particular, the meaning which he found in 10 u.s.c. § 145l(e)(3). In other words, the 

government's failure to apply 10 u.s.c. § 145l(e)(3) in accord 

with the district court's reading of the statute was itself a 

breach of contract. Having now held that the meaning which the 

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district court gave 10 u.s.c. § 145l(e)(3) is erroneous, any 

"contract" which plaintiffs conceivably had with the government 

would now be subject to the meaning we have given that statute. 

All of which is, of course, no comfort to the plaintiffs. Accordingly, we need not determine here whether there was a 

"contract,'' in the strict legal sense, with the government. 

Defendants concede that Ms. Lantz has standing to maintain 

the present action, but argued in the district court, and here, 

that the Millers do not. In view of our reading of 10 U.S.C. § 

145l(e)(3), we deem it unnecessary to explore this matter. 

Judgment reversed. 

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