United States Court of Appeals for the Federal Circuit 

06-3154 

MICHAEL J. LUTZ, 

Petitioner, 

v. 

UNITED STATES POSTAL SERVICE, 

Respondent. 

Robert B. June, Law Offices of Robert June, P.C., of Ypsilanti, Michigan, argued 

for petitioner. 

David G. Karro, Attorney, Law Department Civil Practice, United States Postal 

Service, of Washington, DC, argued for respondent. With him on the brief were Robert 

D. McCallum, Jr., Assistant Attorney General, Commercial Litigation Branch, Civil 

Division, United States Department of Justice, of Washington, DC., and Lori J. Dym, 

Chief Counsel, Law Department Civil Practice, United States Postal Service, of 

Washington, DC. Of counsel were Franklin E. White, Jr., Assistant Director, and Sean 

McNamara, Trial Attorney, Commercial Litigation Branch, Civil Division, United States 

Department of Justice, of Washington, DC. 

Appealed from: United States Merit Systems Protection Board 
United States Court of Appeals for the Federal Circuit 

06-3154 

MICHAEL J. LUTZ, 

 

 Petitioner, 

 

v. 

UNITED STATES POSTAL SERVICE, 

 Respondent. 

 DECIDED: May 15, 2007 

Before LOURIE, SCHALL, and GAJARSA, Circuit Judges. 

SCHALL, Circuit Judge. 

Michael J. Lutz petitions for review of the final decision of the Merit Systems 

Protection Board (“Board”) that denied his petition for enforcement of a settlement 

agreement between himself and the Unites States Postal Service (“agency”). Lutz v. 

U.S. Postal Serv., No. CH-0752-03-0220-X-1 (M.S.P.B. Dec. 9, 2005) (“Final Decision”). 

We reverse and remand.
BACKGROUND 

I. 

Mr. Lutz was an EAS-15 Postmaster, employed by the agency at its Pleasant, 

Michigan, post office. In December of 2002, he was removed from the position of 

Postmaster, was demoted to the position of PS-4 Mailhandler, and was assigned to the 

Ann Arbor, Michigan, post office. This action followed the Postal District Manager’s 

review of a proposal to fire Mr. Lutz based upon charges of failure to perform his 

assigned duties and misconduct. 

Mr. Lutz appealed the agency’s action to the Board. Thereafter, on April 22, 

2003, he and the agency negotiated a settlement resolving the appeal. The settlement 

agreement, which was made part of the record for enforcement purposes, Lutz v. U.S. 

Postal Serv., No. CH-0752-03-02200-I-1 (M.S.P.B. Apr. 22, 2003), states in relevant 

part as follows: 

Within 30 days of the date this Settlement Agreement is fully executed, 

Appellant agrees to take all necessary steps to apply for disability 

retirement with [the Office of Personnel Management]. The Agency 

agrees to take all necessary steps to cooperate and facilitate the 

acceptance of Appellant’s application and agrees not to place negative 

statements in the supervisor statement. 

Settlement Agreement, ¶ 3c; Final Decision, slip op. at 2. 

In accordance with the settlement agreement, Mr. Lutz applied for disability 

retirement with the Office of Personnel Management (“OPM”). The Postmaster of the 

Ann Arbor post office submitted a supervisor’s statement to OPM in connection with the 

application. The supervisor’s statement included the following statements regarding Mr. 

Lutz: 

06-3154 2
Refused to work in his position as a mail handler. Brought in 

documentation from Dr. was sent to Fitness for Duty [(“FFD”)] and was 

found fit for duty. Refused to work still. 

. . . . 

Sent to FFD [Fitness for Duty] and was found to have no issues. He 

however refused to work and claimed an accident. 

. . . . 

He supposedly hurt his back when working on carrier routed flats. This 

then resulted in lifting restriction which we would have kept. However he 

did not return to work due to other issues with MSPB settlements. 

Supervisor’s Statement, p. 2; Final Decision, slip op. at 3. 

By letter dated February 19, 2004, OPM denied Mr. Lutz’s application for 

disability retirement. The letter stated, inter alia: 

Your supervisor documents a deficiency in your performance and 

attendance as of January 2003. He noted that you refused to work in your 

position, and that you were sent to fitness for duty and found fit for full 

duty. He also noted that you had a lifting restriction which the Post Office 

would have kept, but you have not returned to work due to other issues 

with MSPB settlements. The medical evidence submitted also does not 

establish that your medical condition warrants continued restrictions from 

performing the critical or essential duties of your position, or exclusion 

from the workplace, altogether. 

. . . . 

In summary, the evidence submitted does not establish that you have a 

disabling medical condition, and we cannot conclude from the 

documentation presented that you are disabled for useful and efficient 

service or that a continued absence from the work site is medically 

warranted. Thus, your request for disability retirement has been denied. 

OPM Determination Letter, pp. 2-3 (Feb. 19, 2004). 

II. 

Mr. Lutz petitioned for enforcement of the settlement agreement, claiming that 

the agency was in breach of the agreement by including negative remarks in the 

supervisor’s statement submitted to OPM in support of the application for disability 

06-3154 3
retirement.1

 On May 6, 2004, the administrative judge (“AJ”) assigned to the case 

determined that the agency had breached the settlement agreement by including 

negative remarks in the supervisor’s statement. The AJ recommended that the Board 

order rescission of the settlement agreement and remand the case to the AJ for an 

adjudication of the agency’s removal/demotion action. Lutz v. U.S. Postal Serv., No. 

CH-0752-03-02200-C-1 (M.S.P.B. May 6, 2004) (“AJ’s Decision”).2 

The government filed a brief disagreeing with the AJ’s recommendation, urging 

that the AJ erred when she found that the agency’s breach was material. The Board 

agreed, holding that even if the agency had breached the settlement agreement by 

including negative remarks in the supervisor’s statement—a determination the Board 

found it unnecessary to reach—any breach by the agency was not material because it 

did not affect the award of disability retirement benefits. Final Decision, slip. op at 3-4. 

The Board concluded that OPM’s denial of Mr. Lutz’s application was based on his 

failure to supply OPM with any relevant and credible medical records establishing his 

 1

 Mr. Lutz petitioned for enforcement on January 5, 2004, before OPM’s 

denial of his disability application. 

2

 The Board has jurisdiction to enforce a settlement agreement if the 

underlying appeal is within the Board’s jurisdiction and the settlement was entered into 

the record. See 5 C.F.R. §§ 1201.181-.183; Rivas v. U.S. Postal Serv., 72 M.S.P.R. 

383, 388 (1996). When one party breaches a settlement agreement, the other party is 

entitled to have the Board either enforce the agreement or rescind the agreement and 

reinstate its original claim. Murphy v. U.S. Postal Serv., 54 M.S.P.R. 202, 206 (1992). 

On a petition for enforcement of a settlement agreement, if the AJ finds that the alleged 

noncomplying party has failed to take an action required under the agreement, he or 

she will issue a recommendation containing findings, a statement of the actions required 

by the party to be in compliance with the agreement, and a recommendation that the 

Board enforce the agreement. See 5 C.F.R. § 1201.183(a)(5). The Board will consider 

the AJ’s recommendation, the submissions of the parties, and additionally may hold a 

hearing, prior to issuing a final decision on the petition for enforcement. Id. 

§ 1201.183(b). 

06-3154 4
disability, and that OPM would have denied the application regardless of any allegedly 

negative remarks contained in the supervisor’s statement. Id. at 4. Accordingly, the 

Board dismissed the petition for enforcement. Id.

Mr. Lutz now appeals the decision of the Board. We have jurisdiction pursuant to 

28 U.S.C. § 1295(a)(9). 

DISCUSSION 

I. 

Our scope of review in an appeal from a decision of the Board is limited. 

Specifically, we must affirm the Board’s decision unless we find it to be arbitrary, 

capricious, an abuse of discretion, or otherwise not in accordance with law; obtained 

without procedures required by law, rule, or regulation having been followed; or 

unsupported by substantial evidence. 5 U.S.C. § 7703(c); Yates v. Merit Sys. Prot. Bd., 

145 F.3d 1480, 1483 (Fed. Cir. 1998). 

Mr. Lutz argues that the statements in the supervisor’s statement were clearly 

negative and that their inclusion in the statement was a breach of the settlement 

agreement. He further argues that the Board abused its discretion by holding that the 

agency’s breach was not material. He urges that the materiality of the negative 

statements is evident from the fact that OPM cited the statements in support of its denial 

of his application for disability retirement. The government counters that the Board was 

entitled to find that OPM rejected Mr. Lutz’s application because he failed to provide 

evidence that he was disabled. Therefore, the government argues, the statements in 

the supervisor’s statement were immaterial because they did not affect the success of 

Mr. Lutz’s application. Finally, the government urges that if the Board is held to have 

06-3154 5
erred in finding the remarks in the supervisor’s statement immaterial, the case must be 

remanded to the Board for it to consider the question it bypassed—whether the 

statements constituted a breach of the agreement. 

II. 

“A settlement agreement is a contract, and its construction is a question of law 

which this court reviews de novo.” Lary v. U.S. Postal Serv., 472 F.3d 1363, 1367 (Fed. 

Cir. 2006) (quoting Conant v. Office of Pers. Mgmt., 255 F.3d 1371, 1376 (Fed. Cir. 

2001)). In order to prevail, Mr. Lutz must show material non-compliance by the agency 

with the terms of the settlement agreement. See Gilbert v. Dep’t of Justice, 334 F.3d 

1065, 1071 (Fed. Cir. 2003) (“A party breaches a contract when it is in material noncompliance with the terms of the contract.”). While the question of whether a breach of 

contract is material is a mixed question of law and fact, where, as here, the facts are 

undisputed the determination of whether there has been material non-compliance with 

the terms of a contract necessarily reduces to a question of law. Lary, 472 F.3d at 1367 

(citing Gilbert, 334 F.3d at 1071-72).3 

The agency explicitly agreed “not to place negative statements in the supervisor 

statement.” Settlement Agreement, ¶ 3c. However, the statements the agency 

included in the supervisor’s statement are indisputably negative in tone, asserting that 

Mr. Lutz “refused” to work his position. Furthermore, the statements are rife with 

innuendo, stating that Mr. Lutz “claimed” an accident and “supposedly” hurt his back. In 

short, they imply that Mr. Lutz has no medical issues and was less than truthful in his 

 3

 Thus, a remand to determine whether the supervisor’s statements 

constituted a material breach of the settlement agreement is not necessary. 

06-3154 6
disability claims. Under the terms of the settlement agreement, the agency was 

foreclosed from employing such a negative tone in the supervisor’s statement and from 

including statements that insinuated that Mr. Lutz faked an injury in order to refuse to 

work. The agency agreed to “take all necessary steps to cooperate and facilitate the 

acceptance of Appellant’s application.” Settlement Agreement, ¶ 3c. The negative 

statements included in the supervisor’s statement did not “facilitate the acceptance” of 

Mr. Lutz’s application and were more likely to impede and prejudice the application than 

facilitate its acceptance. In short, the agency breached its obligation under the 

settlement agreement. 

The remaining question is whether the Board correctly concluded that the breach 

was immaterial. “A breach is material when it relates to a matter of vital importance, or 

goes to the essence of the contract.” Thomas v. Dep’t of Housing & Urban Dev., 124 

F.3d 1439, 1442 (Fed. Cir. 1997); see also Lary, 472 F.3d at 1367. In Conant, we held 

that the Internal Revenue Service breached its obligation under a settlement agreement 

when it agreed to use its best efforts to effectuate an employee’s application for 

disability retirement benefits, but instead, in response to the employee’s disability 

application, submitted documents stating that the employee had no documented 

medical condition and repeated the charges that had led to the initial removal 

proceeding. 255 F.3d at 1376-77. We held the breach material because the 

documents and statements submitted to OPM prejudiced the disability proceedings. Id. 

The essential purpose of ¶ 3c in the settlement agreement here was to 

accommodate Mr. Lutz’s application for disability retirement. As in Conant, the negative 

statements contained in the supervisor’s statements prejudiced the disability 

06-3154 7
proceedings. OPM explicitly relied on the supervisor’s statements as one of two factors 

in denying the request for disability retirement, the other factor being a lack of medical 

evidence to establish a disabling medical condition. This is evident from OPM’s 

recitation of the supervisor’s statements that Mr. Lutz refused to work in his position; 

that he was sent for a fitness for duty examination and found fit for duty; and that he had 

a lifting restriction the agency would have honored, but that it could not because he 

never returned to duty. While it is impossible to know precisely to what extent these 

statements colored the analysis of OPM, it is clear that the statements did discourage 

OPM’s acceptance of Mr. Lutz’s disability retirement application. Therefore, the breach 

was not immaterial, and the Board erred in dismissing Mr. Lutz’s petition for 

enforcement. Accordingly, the Board’s decision to the contrary is reversed. 

III. 

Typically, in cases where an agency breaches a settlement agreement, the 

agreement is rescinded and the original claim on appeal to the Board is reinstated for 

adjudication. This was the remedy recommended by the AJ. AJ’s Decision, slip op. at 

4. On appeal, Mr. Lutz requests that we adopt the recommendation of the AJ that the 

Board (i) order rescission of the settlement agreement and (ii) remand the case to the 

AJ for adjudication of his challenge to the agency’s removal/demotion action. In the 

alternative, Mr. Lutz requests that we remand the case to the Board for a further remand 

to OPM for a redetermination of his disability retirement claim based on a clean record, 

devoid of the negative remarks contained in the supervisor’s statement previously 

submitted to OPM. We believe the best approach is to remand the case to the Board 

and to allow the Board to decide how to proceed, after giving the parties the opportunity 

06-3154 8
to express their views, including their views on a remand to OPM should Mr. Lutz 

request that. 

CONCLUSION 

For the foregoing reasons, the decision of the Board denying Mr. Lutz’s petition 

for enforcement is reversed. The case is remanded to the Board, which is instructed to 

conduct further proceedings consistent with this opinion. 

REVERSED and REMANDED

06-3154 9