United States Court of Appeals for the Federal Circuit 

2006-5113 

TED A. BRODOWY, DIRK G. BROWN, CAROLYN M. GANDY, 

RON D. GANDY, TRACY JENSON, KENNETH B. KARNATH, 

JONATHAN A. MENDELSON, CLYDE A. SMITH, 

SHARON WILKINS, and MARILYN YAMAMOTO, 

Plaintiffs-Appellants, 

v. 

UNITED STATES, 

Defendant-Appellee. 

Malcolm S. Young, Thompson Hine LLP, of Cincinnati, Ohio, argued for plaintiffsappellants. 

Joan M. Stentiford, Trial Attorney, Commercial Litigation Branch, Civil Division, 

United States Department of Justice, of Washington, DC, argued for defendant-appellee. 

With her on the brief were Peter D. Keisler, Assistant Attorney General, David M. Cohen, 

Director, and Kathryn A. Bleecker, Assistant Director. 

Appealed from: United States Court of Federal Claims 

Judge Lawrence M. Baskir 
United States Court of Appeals for the Federal Circuit

2006-5113 

TED A. BRODOWY, DIRK G. BROWN, CAROLYN M. GANDY, 

RON D. GANDY, TRACY JENSON, KENNETH B. KARNATH, 

JONATHAN A. MENDELSON, CLYDE A. SMITH, 

SHARON WILKINS, and MARILYN YAMAMOTO, 

Plaintiffs-Appellants, 

v. 

UNITED STATES, 

Defendant-Appellee. 

__________________________ 

 DECIDED: April 12, 2007 

___________________________ 

Before NEWMAN, Circuit Judge, CLEVENGER, Senior Circuit Judge, and BRYSON, 

Circuit Judge. 

BRYSON, Circuit Judge. 

This is a pay conversion case. The appellants are ten current or former Federal 

Aviation Administration air traffic controllers who are seeking to recover pay lost due to 

the government’s failure to provide them with a two-step pay increase when they 

transferred to higher level airport facilities. The United States Court of Federal Claims 

dismissed their complaint for lack of jurisdiction. Although we hold that the trial court 

had jurisdiction over the claim, we affirm the dismissal because the appellants failed to 

state a claim for which relief can be granted. 
2006-5113 2 

 

I 

This case arises out of the decision of the Federal Aviation Administration 

(“FAA”) in the early 1990s to privatize many of its control tower operations and a 

subsequent agreement between the FAA and the air traffic controllers’ union, the 

National Air Traffic Controllers Association (“NATCA”), to alter the compensation 

scheme for controllers at the remaining facilities. The present dispute stems from the 

fact that the new compensation scheme was implemented before the privatization plan 

had been completed. 

The appellants were employed by the FAA as air traffic controllers at facilities 

designated as “Level 1” towers. The FAA classified control towers by the complexity 

and volume of their air traffic, ranging from Level 1 (least traffic) to Level 5 (most traffic). 

All controllers were compensated under the General Schedule (“GS”) system,1

 with 

their pay grade being a function of the level of the facility where they worked. The pay 

grades ranged from GS-10 for Level 1 controllers to GS-15 for Level 5 controllers. 

Beginning in 1994, the FAA began to implement a plan to privatize all Level 1 facilities. 

It offered controllers in those towers the option to transfer to a higher level facility or to 

retire or resign from federal service. The appellants elected to transfer, and they were 

scheduled to move to higher level facilities in August 1998. 

1

 The GS system is the compensation scheme commonly used for employees 

of the federal government in administrative, professional, and technical positions. In 

1995 and 1996, Congress enacted legislation authorizing the FAA Administrator to 

implement a new personnel management system for FAA employees, including fixing 

the compensation and benefits of employees and officers. See Pub. L. No. 104-50, 

§ 347, 109 Stat. 460 (1995); 49 U.S.C. §§ 106(l), 40122(a). Pursuant to that 

authorization, the Administrator promulgated the FAA Personnel Management System, 
2006-5113 3 

In March 1998, however, the United States District Court for the Northern District 

of Ohio ruled that the FAA had failed to conduct the required procedural analysis before 

initiating the privatization program. See Nat’l Air Traffic Controllers Ass’n v. Sec’y of the

Dep’t of Transp., 997 F. Supp. 874, 885 (N.D. Ohio 1998). The effect of the court’s 

ruling was to temporarily halt the implementation of the privatization plan. 

During the period that the privatization plan was halted, the FAA and the NATCA 

entered into a collective bargaining agreement that established a new compensation 

scheme for air traffic controllers. The new scheme was referred to as the Air Traffic 

Controller (“ATC”) system. 

The ATC system created a set of “Pay and Reclassification Rules” to replace the 

grades and steps of the GS system. Under the new scheme, controllers were assigned 

an ATC level and pay band (akin to GS grade and step levels). The collective 

bargaining agreement also contained a conversion rule (“Rule 35”) for transferring air 

traffic controllers at Level 2 through Level 5 facilities from the GS system to the ATC 

system. It provided a formula for determining a controller’s ATC level and pay band, 

which was based solely on the controller’s prior GS grade and step. However, Rule 35 

did not call for controllers at Level 1 facilities to be transferred into the ATC system, as 

those towers were still slated for privatization. Instead, the Note to Rule 35 stated that 

Level 1 facilities would be “treated in accordance with current pay policies with the 

exception that their base pay will be increased by 5% in the first year.” 

 

which kept the GS compensation system in effect for an interim period beginning on 

April 1, 1996, until the new pay system could be developed and fully implemented. 
2006-5113 4 

The ATC pay scheme took effect in October 1998. Controllers at Level 2 through 

Level 5 facilities converted to the ATC system, while controllers at Level 1 facilities 

continued to be paid under the GS system. When the appellants eventually transferred 

from Level 1 facilities to higher level facilities in late 1999, the FAA determined their 

ATC level and pay band by applying the conversion formula to the GS level and step 

they held while working at the Level 1 towers. 

The source of the appellants’ complaint is that air traffic controllers who 

transferred to higher level towers prior to October 1998 were promoted to higher pay 

grades to correspond to the higher level of their new jobs within the GS system. Those 

air traffic controllers transferred within the GS system; because their transfer to a higher 

level facility was accompanied by a grade increase under the GS system, they were 

entitled under 5 U.S.C. § 5334(b) to be paid at a step level within the higher grade that 

was two steps above the level at which they were being paid in the lower rated facility. 

Because the appellants transferred from the Level 1 facilities after October 1998, they 

transferred from the GS system directly into the ATC pay system. They therefore did 

not receive the benefit of the statutory two-step increase that they would have received 

if they had been transferred at a time when the GS system was still in effect for the 

facilities to which they transferred. As a result, the appellants were assigned a lower 

ATC level and pay band than similarly situated controllers who transferred from Level 1 

facilities before the ATC system took effect. The appellants allege that the FAA’s failure 

to promote them within the GS system before converting them to the ATC system 

caused them to lose the two-step increase guaranteed by section 5334(b). 
2006-5113 5 

II 

The appellants contend that, upon their transfer to the higher level towers, they 

were entitled to a pay increase under section 5334(b). That statute provides in relevant 

part as follows: 

An employee who is promoted or transferred to a position in a higher 

grade is entitled to basic pay at the lowest rate of the higher grade which 

exceeds his existing rate of basic pay by not less than two step-increases 

of the grade from which he is promoted or transferred. 

5 U.S.C. § 5334(b). The effect of section 5334(b) is to ensure that all employees who 

are promoted to a higher GS grade receive an increase in pay, not a reduction. 

Because the pay associated with high steps in one grade is often greater than the pay 

associated with low steps in the next higher grade, a promotion from, for example, GS10, step 10, to GS-11, step 1, would entail a loss of pay if it were not for the operation of 

section 5334(b). 

While section 5334(b) ensures that grade promotions within the GS system do 

not result in a loss of pay, the case law makes clear that section 5334(b) applies only to 

employees who transfer from one position in the GS system to another position that is 

also within the GS system. See United States v. Clark, 454 U.S. 555, 561 (1982) 

(holding that section 5334(b) does not apply to a transfer from a non-GS system 

position into a GS system position); Libretto v. United States, 230 Ct. Cl. 790, 791 

(1982) (holding that section 5334(b) does not apply to a transfer from a GS system 

position into a non-GS system position). The question presented by this case is 

whether the appellants’ transfers from Level 1 towers to higher level facilities were 

transfers within the GS system or transfers from the GS system into a non-GS system. 
2006-5113 6 

 The appellants rest their claim on the theory that each of their transfers consisted 

of two steps: first, a promotion from a Level 1 facility to a higher level facility within the 

GS system (thus triggering section 5334(b)); and second, a conversion from the GS 

system into the ATC system by operation of Rule 35 of the collective bargaining 

agreement. Although the appellants characterize the two-step conversion process as a 

question of fact, they point to no factual evidence in dispute. Indeed, the existence of a 

first GS-to-GS step is contradicted by the allegations in the appellants’ own complaint. 

As they assert repeatedly, by the time they transferred to higher level facilities, those 

facilities had already transitioned to the ATC system. Thus, at the time they actually 

received their promotions, their new positions fell outside the GS system. All of the 

appellants’ arguments to the contrary are conclusory; they offer no proof beyond the 

fact that air traffic controller positions at those facilities had previously been classified 

within the GS system. As the complaint acknowledges, air traffic controller positions at 

Level 2 through Level 5 facilities were within the GS system prior to October 1998 and 

within the ATC system thereafter. At the time the appellants moved to higher level 

facilities in 1999, they were moving from GS positions to non-GS positions. Under 

those circumstances, section 5334(b) is inapplicable. 

 While it may be that the parties to the collective bargaining agreement should 

have anticipated that some controllers would lose the benefit of section 5334(b) if they 

did not transfer into a higher level facility until after the conversion to the ATC pay 

system, the agreement did not provide a remedy for those employees, and federal law 

does not provide a remedy, either. It may be that the collective bargaining process can 

rectify the problem, at least for the future. But what is clear from the collective 
2006-5113 7 

bargaining agreement and section 5334(b) is that when the appellants transferred to 

their new facilities, they transferred out of the GS pay system and into the ATC pay 

system; they never transferred to a higher grade within the GS system and thus were 

not entitled to the benefits of the two-step increase in pay received by controllers who 

transferred at a time when the GS system was in effect for all the facilities. 

Although our legal analysis of the plaintiffs’ claim under section 5334(b) tracks 

that of the Court of Federal Claims, that court dismissed the case for lack of jurisdiction 

and not on the merits. In that respect, we disagree with the court’s disposition. The trial 

court agreed that section 5334(b) is a “money-mandating statute” and that if the 

appellants had been able to show they were persons entitled to the benefits of that 

statute, they would have been entitled to relief from the Court of Federal Claims. Where 

plaintiffs have invoked a money-mandating statute and have made a non-frivolous 

assertion that they are entitled to relief under the statute, we have held that the Court of 

Federal Claims has subject-matter jurisdiction over the case. See Fisher v. United 

States, 402 F.3d 1167, 1175-76 (Fed. Cir. 2005); see also Doe v. United States, 463 

F.3d 1314, 1323-26 (Fed. Cir. 2006); In re United States, 463 F.3d 1328, 1335 (Fed. 

Cir. 2006). 

An unusual quirk in this case is that at the time of their transfer from the Level 1 

facilities, the plaintiffs were not technically being paid pursuant to the GS schedule set 

forth in title 5 of the U.S. Code, but instead were being paid pursuant to the FAA’s 

Personnel Management System, the administrative order that adopted the GS pay 

system for the interim period pending conversion of the air traffic controllers to the ATC 

system. The statute that authorized the Administrator to implement a compensation 
2006-5113 8 

scheme for the agency in 1996 also provided that the portions of title 5 containing the 

GS system would no longer apply to FAA employees. See 49 U.S.C. § 40122. After 

April 1, 1996, FAA employees such as the plaintiffs were therefore being paid in 

accordance with the GS compensation system, but because of administrative order, not 

because of statutory direction. 

That unusual feature does not alter our analysis of the jurisdictional issue, 

however, because the Court of Federal Claims has jurisdiction over money claims 

founded not only on statutes, but also on “any regulation of an executive department.” 

28 U.S.C. § 1491. An agency directive dealing with personnel policy qualifies as such a 

regulation if (1) the agency was authorized to issue the regulation; (2) the agency 

conformed to all procedural requirements in promulgating the regulation; (3) the agency 

intended the regulation to create a binding rule; and (4) the provision does not 

contravene a statute. Hamlet v. United States, 63 F.3d 1097, 1105 (Fed. Cir. 1995). 

The FAA’s adoption of the GS pay system in the 1996 Personnel Management 

System clearly qualifies as a regulation under that test. It was specifically authorized by 

statute and is not in conflict with the GS system compensation provisions or any other 

law; it was promulgated by the Administrator as directed by Congress; as a regulation 

dealing with “a matter relating to agency management or personnel,” formal rulemaking 

was not required, 5 U.S.C. § 553(a)(2); and the agency’s statement, in mandatory 

language, of its intention to continue to pay employees under the GS scale plainly 

reflects an intention to be bound by the compensation policy set forth in the regulation. 

See Hamlet, 63 F.3d at 1105-06 & n.6. Treating the references to section 5334(b) in 

the complaint as directed to the Administrator’s regulatory adoption of the standards of 
2006-5113 9 

that statute as well as the other portions of the GS statutory scheme, we hold that the 

Personnel Management System was a binding, money-mandating regulation and that 

the Court of Federal Claims had jurisdiction over the plaintiffs’ claim on that basis. The 

dismissal in this case therefore should have been for failure to state a claim upon which 

relief can be granted, not for lack of jurisdiction. Because the distinction between the 

two forms of dismissal has no apparent practical effect in this case, however, we need 

not remand for purposes of correcting the judgment in that respect. See Lewis v. United 

States, 70 F.3d 597, 603-04 (Fed. Cir. 1995); see also Doe v. United States, 463 F.3d 

at 1325 (dismissal of claim for want of jurisdiction was error, but error was harmless 

because action should have been dismissed on the merits); Moden v. United States, 

404 F.3d 1335, 1340-41 (Fed. Cir. 2005) (same). Instead, we merely note that for any 

possible future effect that the judgment in this case may have, the dismissal should be 

regarded as a dismissal on the merits rather than for want of jurisdiction. 

Each party shall bear its own costs for this appeal. 

AFFIRMED.