Case Name: ROY C. HOPKINS v. THE UNITED STATES
Court: United States Court of Claims
Jurisdiction: United States
Decision Date: 1975-03-19
Citations: 206 Ct. Cl. 303
Docket Number: No. 342-72
Parties: ROY C. HOPKINS v. THE UNITED STATES
Judges: Before CoweN, Chief Judge, Davis, SkeltoN, Nichols, Kashtwa, KtjNzig, and BeNNett, Judges.
Reporter: United States Court of Claims Reports
Volume: 206
Pages: 303–329

Head Matter:
513 F. 2d 1360
ROY C. HOPKINS v. THE UNITED STATES
[No. 342-72.
Decided March 19, 1975]
Thomas H. McGrail, attorney of record for plaintiff.
Thomas W. Petersen, with whom was Acting Assistant Attorney General Irving Jafe, for defendant.
Before CoweN, Chief Judge, Davis, SkeltoN, Nichols, Kashtwa, KtjNzig, and BeNNett, Judges.
Defendant’s petition for certiorari grtmteS, October 6, 1975.

Opinion:
KuNzig, Judge,
delivered the opinion of the court:
The issue presented in this case of first impression is whether we have jurisdiction to grant a money judgment against the United States for an alleged improper discharge of an employee by a nonappropriated fund instrumentality of the United States. We hold that the 1970 amendment to the Tucker Act (Pub. L. 91-350) confers jurisdiction on this court over the claim asserted by plaintiff.
Plaintiff was discharged on August 6,1968 from his position as a civilian employee of the European Exchange System of the Army and Air Force Exchange Service (AAFES), a nonappropriated fund instrumentality. He was discharged for alleged acts of misconduct incompatible with continued employment. Plaintiff seeks by this suit to recover from the United States back pay and appropriate allowances for the period following his alleged improper discharge. His action is grounded on the claim that his separation was arbitrary and capricious, was a breach of his contract of employment, and was in violation of due process and of prescribed regulations and procedures.
The United States has moved to have the petition dismissed on the procedural ground that no claim is stated within the jurisdiction of this court. For the reasons given below, we deny defendant's motion.
LEGAL BACKGROUND
The doctrine of sovereign immunity precludes suits against the Federal Government unless such immunity has been specifically waived by an act of Congress. United States v. Clarke, 33 U.S. (8 Pet.) 436, 443 (1834). In this court, under the Tucker Act, 28 U.S.C. § 1491 (1970), only suits against the United States are permitted. Therefore, our jurisdiction exists only where such immunity has been waived. Prior to 1970, no act of Congress had waived sovereign immunity with respect to contracts of nonappropriated fund instrumentalities.
In 1942 the Supreme Court decided Standard Oil Co. v. Johnson, 316 U.S. 481 (1942). It held that a state statute which imposed a tax on the distribution of motor vehicle fuel would be unconstitutional if it was meant to apply to the Army's post exchanges. The exchanges, the Court said, "are arms of the Government deemed by it essential for the performance of governmental functions. They are integral parts of the War Department However, the Court also stated that the "Government assumes none of the financial obligations of the exchange." 316 U.S. at 485.
This latter statement in Johnson, supra, has served as the basis for a series of decisions of this court holding that we lack jurisdiction over disputes involving claims against non-appropriated fund activities. The first such case was Borden v. United States, 126 Ct. Cl. 902, 116 F. Supp. 873 (1953). Borden had contracted with the Army Exchange Service to be a senior accountant for a 2-year period. The issue raised was whether the United States could be sued on this employment contract with a nonappropriated fund instrumentality. We held the United States could not be sued because, as the Supreme Court held in Johnson, supra, if the Government assumed none of the Army Exchange Service's financial obligations, then no consent had been given by the Government to such suits. A similar result was reached in Pulaski Cab Co. v. United States, 141 Ct. Cl. 160, 157 F. Supp. 955 (1958), wherein plaintiff company had a contract with an exchange to provide cab services. Again, in G. L. Christian and Assoc. v. United States, 160 Ct. Cl. 1, 312 F. 2d 418 (1963), cert. denied, 375 U.S. 954 (1963), we said in dictum, "[T]he contracts of such agencies [post exchanges, et al.] although made by Government officers, do not bind appropriated funds, do not create a debt of the United States, and may not be vindicated in this court." 160 Ct. Cl. at 14, 312 F. 2d at 425. More recently, in Kyer v. United States, 177 Ct. Cl. 747, 369 F. 2d 714 (1966), cert denied, 387 U.S. 929 (1967), we arrived at the same result with regard to a sales commission contract with a nonappropriated fund agency other than a post exchange.
Seeing the failure by other litigants to obtain relief under a contract theory, one plaintiff attempted to recover via a different route. In Keetz v. United States, 168 Ct. Cl. 205 (1964), the plaintiff sued to recover back pay on the ground that his separation from the AAFES as an employee was illegal. Rather than to assert a contract of employment, Keetz alleged that civilian employees of post exchanges were Federal employees and relied on the violation of regulations of the executive department as a jurisdictional basis for his suit. We denied recovery, holding that plaintiff was not a Federal employee. No elaboration was made, but the Keetz court cited Gradall v. United States, 161 Ct. Cl. 714, 329 F. 2d 960 (1963), in which it was held that plaintiff's employment in the AAFES did not constitute a civilian "office or position under the United States Government" within the meaning of the dual compensation provision, § 212(a) of the Economy Act of 1932. In Gradall, the court reasoned:
The trend of the pertinent decisions, statutes and regulations has generally been to establish that employees of Exchanges are not Federal employees, except for the purpose of unemployment compensation. However, this trend does not supply a definitive answer to what is meant by holding a position "under the United States Government" under the [Economy] Act of 1932. The Government contends that the logical and reasonable test is whether the services performed in the position constitute "Federal service" because performed for a Federal instrumentality, and not whether the person who holds the position is compensated by appropriated or nonappropriated funds. To accept this test as determinative merely because plaintiff performed services for a Federal instrumentality would be to accept an unrealistic and nebulous view of the actual "position" of both plaintiff and the instrumentality. For example, the American Red Cross, the United Service Organizations, the national banks, and several other institutions are "instrumentalities" of the Government. However, their employees are not subject to the dual compensation restrictions of the Act of 1932. No one has ever contended that they hold a position "under the United States Government" under the Act.
Gradall at 720-21, 329 F. 2d at 964.
In summary, the decisions of this court prior to the enactment of Pub. L. 91-350 (1970) have held that no jurisdiction has been granted to hear claims against the United States where a nonappropriated fund agency is involved since (1) the United States did not obligate itself on contracts of such agencies, and (2) employees of such agencies do not qualify as Federal employees.
ENACTMENT OE PUBLIC LAW 91-350
While this court recognized a lack of jurisdiction over claims against nonappropriated fund activities, we also rec ognized the harshness of the result which effectively; precluded alleged injured plaintiffs from obtaining a forum in which the merits of their claims could be aired. In Keetz, supra, we stated:
We are aware that plaintiff is placed in somewhat of a difficult position in that if he seeks redress of his claim in a Federal District Court directly against the Exchange Service his claim might be dismissed. However, we believe that in these situations (especially where the question of the waiver of sovereign immunity is involved) it is up to Congress to remedy this apparent harsh result, and the courts should refrain from legislating by judicial fiat.
Id. at 207.
The injustice and inequity worked by this jurisdictional "loophole" was again identified in Kyer, supra, where we stated:
We are mindful of the fact that the result reached spells an unduly harsh result. Plaintiff has searched in vain for a forum in which the merits of his claim might be aired. We add, though perhaps of little comfort, that the lack of jurisdiction which plaintiff has faced at every turn is a matter which sorely needs congressional correction.
Id. at 754, 369 F. 2d at 719.
It was within this setting that Congress, in 1970, enacted Public Law 91-850. The Tucker Act was amended in order to remove the sovereign immunity of the United States with respect to contracts of post exchange operations conducted within the military and the National Aeronautics and Space Administration. See H. R. Rep. No. 91-933, 91st Cong., 2d Sess. 3 (1970).
By this act, both 28 U.S.C. § 1346(a) (2) and 28 U.S.C. § 1491 were amended to include the following new sentence:
For the purpose of this paragraph, an express or implied contract with the Army and Air Force Exchange Service, Navy Exchanges, Marine Corps Exchanges, Coast Guard Exchanges, or Exchange Councils of the National Aeronautics and Space Administration shall be considered an express or implied contract with the United States.
Thus, for the first time, Congress expressly waived sovereign immunity to claims arising from post exchange contracts, thereby bringing such actions within our jurisdiction under the Tucker Act.
Applying this new amendment, plaintiff has asserted Ms claim can now be heard in this court. Belying on Keetz, supra, i.e., exchange employees are not Federal employees, plaintiff argues that his relationship with the AAFES is contractual, the same as employees in the private sector. He further argues that Congress intended to afford exchange employees relief when it enacted Pub. L. 91-350. Defendant, on the other hand, argues that Pub. L. 91-350 does not confer jurisdiction over plaintiff's claim. This position is based on defendant's characterization of exchange personnel as serving 'by "appointment" rather than by contract. Defendant also relies on the failure of Congress to expressly include exchange personnel in the 1970 amendment as evidence of the lack of intent to waive sovereign immunity in the instant case.
We agree with plaintiff.
Defendant's assertion that employment with the AAFES does not arise out of a contractual relationship is unfounded. Defendant relies on the fact that employees of the Federal Government generally serve by "appointment" rather than by virtue of a contractual relationship. As early as 1850, the Supreme Court has held that public officers do not have contracts of employment, but are appointed to office. Butler v. Pennsylvania, 51 U.S. (10 How.) 402 (1850). This "ap pointment" status has been extended by law to include employees of the United States who are subject to the laws administered by the Civil Service Commission. See 5 U.S.C. § 2104, 2105, 3105 (1970). However, defendant's reliance on the "appointed" rationale begs the fundamental question of whether employees of nonappropriated fund instrumentalities are, in fact, Federal employees. If exchange employees are not Federal employees, their status is not controlled by the "appointment" rationale. And, indeed, we have stated in Keetz, supra, and reaffirm here, that "an employee of the Exchange Service is not an employee of the United States." Keetz, supra, at 207. See also Gradall, supra; Brummitt v. United States, 165 Ct. Cl. 78, 80, 329 F. 2d 966, 967 (1964).
The employment status of non-Federal employees is governed by the same rules of law applicable to private employer-employee relationships. It is hornbook law that such a relationship is contractual in nature. Fleming v. A. H. Belo Corp., 121 F. 2d 207, 214 n. 9 (5th Cir. 1941), aff'd. 316 U.S. 624 (1942), reh. denied, 317 U.S. 706 (1942); 53 Am. Jur. 2d, Master and Servant, § 14, 66 (1970). "It is a fundamental principle of law that the relationship of employer and employee is a relation created by contract, either express or implied." Ward v. Atlantic Coast Line Railroad Co., 265 F. 2d 75, 83 (5th Cir. 1959), rev'd on other grounds, 362 U.S. 396 (1960). See also New Amsterdam Gas. Co. v. Soileau, 167 F. 2d 767 (5th Cir. 1948), cert. denied, 335 U.S. 822 (1948). It would thus seem clear that plaintiff's employment with the AAFES must be viewed as arising from either an express or implied contract, and we hold accordingly.
Defendant concedes that Pub. L. 91-350 confers jurisdiction over claims concerning exchange type operations founded on contracts. However, defendant argues exchange employee contracts are not the kind of contracts to be covered by the new Act. It maintains that Congress, in determining that jurisdiction should be granted, did not consider whether civilian exchange employees should be permitted to sue for their back pay. Relying on the principle that waivers of sovereign immunity are to be strictly and conservatively construed, the Government argues that the absence of a clear expression of legislative intent to waive immunity against suits by exchange employees is fatal to plaintiff. We find the legislative intent less silent than defendant asserts.
While it is true that no such specific reference can be found, a reading of both the House and Senate Reports accompanying S. 980 clearly reveals that employment cases were considered when both houses spoke of removing a "loophole" [H. R. Rep. No. 91-933, 91st Cong., 2d Sess. 2 (1970)] and "filling a gap" [S. Rep. No. 268, 91st Cong., 1st Sess. 2 (1969)] in the Tucker Act's waiver of immunity. In both reports, Kyer, supra; Pulaski Cab Co., supra; Keetz, supra, and Borden, supra, were cited as illustrative of the "loophole" or "gap" to be closed. All four cases relate to claims for pay or personal services as distinguished from claims of supply or construction contractors. We are convinced that correction of the harsh result imposed by the above cases was clearly within the intent of Pub. L. 91-350.
Although this case is one of first impression regarding the effect of Pub. L. 91-350 on exchange activity employee pay cases, we are persuaded that our previous decisions in Keels, supra, and Gradall, supra, regarding exchange employees' failure to qualify as Federal employees, coupled with the clear intent of Congress to close the jurisdictional "loophole" in the Tucker Act as it affects exchange employees, mandates denial of defendant's motion to dismiss for want of jurisdiction.
We realize that our holding is in conflict with the recent opinion of Judge Wisdom in Young v. United States, 498 F. 2d 1211 (5th Cir. 1974). The Young court held that Public Law 91-350 does not confer jurisdiction under the Tucker Act to hear exchange employee cases. This result was reached by construing the legislative intent as not "extending] Tucker Act jurisdiction to the sort of 'contract' plaintiff asserts existed in this case." Young, supra, at 1217.
The Young court viewed the absence of any specific mention of exchange employees in the 1970 amendment as a bar to jurisdiction. The court reasoned that since, on other occasions, Congress had enacted legislation which dealt with exchange employees, in very direct and specific terms, the absence of such language is evidence of an exclusionary intent.
We respectfully differ.
The Yowng court completely overlooked the reference in both the House and Senate reports to cases decided by this court involving exchange employees and the harsh result of our lack of jurisdiction. This specific reference to Keetz, supra; Pulaski Cab Co., supra; Kyer, supra, and Borden, supra, in our mind, negates any argument that Congress did not intend to cover exchange employee contracts when it enacted Pub. L. 91-350.

We hold that since plaintiff is not a Federal employee, his relationship with the AAFES is governed by contract principles. Thus, this court, by virtue of the 1970 amendment to the Tucker Act, has jurisdiction to grant a money judgment against the United States for an alleged improper discharge of an employee of a nonappropriated fund exchange type instrumentality.
Accordingly, defendant's motion to dismiss is denied, and the case is remanded to the trial division for decision on the merits.
Judge Skelton, In Ms carefully considered dissent, suggests sua sponte that "plaintiff has not alleged a cause of action even under the theory of the majority and his petition should be dismissed." While this suggestion is interesting, it is premature at this time to decide this issue. Defendant has neither asked nor even suggested that the petition be dismissed on the ground that no claim is stated on which relief could be granted. Rather, defendant has moved to have the petition dismissed solely on the question of jurisdiction. By our decision today we do not foreclose the possibility of a future dismissal on the substantive ground the dissenting judge suggests. We merely hold that this court does have jurisdiction over the claim asserted.
Pub. L. 91-350 was originally passed by the Senate as S. 980. The Senate version would have completely removed the sovereign immunity of the united States with respect to contracts of all nonappropriated fund activities. See S. Rep. No. 268, 91st Cong., 1st Sess 4 — 5 (1969). This bill was amended in the House of Representatives to remove immunity only from contracts of Exchange operations. The reason for this limitation was to insure that immunity would be waived with respect to nonappropriated fund instrumen-talities which have sufficient assets to pay their own way. The amended act also added the requirement that the united States be reimbursed by the exchange instrumentality in the event any judgment against an exchange is paid by the United States. The intent of the House amendment was to eliminate any costs to the taxpayers of this expanded jurisdiction. See H.R. Rep. No. 91-933, 91st Cong., 2d Sess. 3 (1970). The Senate agreed to the House amendments on July 14, 1970.
Concurrent jurisdiction granted to the united States District Courts.
General jurisdictional grant to the United States Court of Claims.
The rationale for this "appointed" status is that the Government must have the power to change the agents who carry out the public duties, as well as the terms under which they work. Butler v. Pennsylvania, 51 U.S. (10 How.) 402, 416-17 (1850). See also Taylor v. Beckham, 178 U.S. 548 (1900); Crenshaw v. United States, 134 U.S. 99 (1890); United States v. Hartwell, 73 U.S. (6 Wall.) 385 (1868); and Urbina v. United States, 192 Ct. Cl. 875, 428 F. 2d 1280 (1970).
In fact, the Government In Keetz v. United States, 168 Ct. Cl. 205 (1964), argued that an AAFES employee had a contract of employment. We find it a bit ironic that in the instant case, the Government argues just the opposite. We can only assume that this inconsistency has occurred because the enactment of Pub. L. 91-350 now grants jurisdiction for exchange contract claims. We held the Government's contract theory in Keetz to be correct and see no reason to change in the instant case.
King v. United States, 395 U.S 1 (1969) ; Soriano r. United States, 352 U.S. 270 (1957) ; United States v. Sherwood, 312 U.S. 584 (1941).
Although this issue -was raised in Travis v. United States, 199 Ct. Cl. 67 (1972), we deferred decision on this difficult jurisdictional question since it was clear in Travis that plaintiff had no case on the merits. See Travis, supra, n. 1 at 70.
The court in Young v. United States, 498 F. 2d 1211 (5th Cir. 1974) stated:
"Nowhere in the history of the amendments is there any direct reference to the relationship between the instrumentalities and their employees, much less any language that would support an inference that Congress intended these amendments as a vehicle for redressing grievances of employees of these instrumentalities as well as settling claims of third parties with whom the instrumentalities contract for goods and services."
Young, supra, at 1215.