Court Opinion

ID: 211009
Source: CourtListenerOpinion
Date Created: 2011-03-13 08:22:33+00
Date Added: 2024-06-11T17:28:04.162475
License: Public Domain

United States Court of Appeals for the Federal Circuit

                                       06-3059

                                   ERIC R. ALLEN,

                                                            Petitioner,

                                           v.

                        UNITED STATES POSTAL SERVICE,

                                                            Respondent.

       Donald G. Gilpin, Gilpin & Keefe, P.C., of Albuquerque, New Mexico, argued for
Petitioner.

       Stephen D. Lobaugh, Attorney, Appellate Division, United States Postal Service,
of Washington, DC, argued for respondent. With him on the brief were Peter D. Keisler,
Assistant Attorney General, Commercial Litigation, Civil Division, United States
Department of Justice, of Washington, DC, and Lori J. Dym, Chief Counsel, Appellate
Division, Law Department Civil Practice, United States Postal Service, of Washington,
DC. Of counsel were David M. Cohen, Director, Brian M. Simkin, Assistant Director,
and Tara K. Hogan, Trial Attorney, Commercial Litigation, Civil Division, of Washington,
DC.

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

                                            06-3059

                                         ERIC R. ALLEN,

                                                               Petitioner,

                                               v.

                            UNITED STATES POSTAL SERVICE,

                                                               Respondent.

                                  _________________________

                                   DECIDED: October 20, 2006
                                  _________________________

Before MICHEL, Chief Judge, DYK and PROST, Circuit Judges.

MICHEL, Chief Judge.

         Eric R. Allen appeals the final decision of the Merit Systems Protection Board

("Board") affirming his dismissal from the position of United States Postal Service

("USPS") Customer Service Supervisor at the Coronado Postal Station in Santa Fe,

New Mexico. Allen v. USPS, No. DE-0752-01-0289-B-1 (M.S.P.B. Sept. 21, 2005).

When the full Board denied his petition for review, the decision of the administrative

judge ("AJ"), Allen v. USPS, No. DE-0752-01-0289-B-1 (M.S.P.B. Mar. 25, 2005)

("Allen II"), became the final decision of the Board.

         We agree with Allen that the Board erred in sustaining a charge of misuse of

Postal    Service   funds    in    the   amount     of   the    outstanding   balance   on   his

government-issued credit card ("GICC"). We nonetheless sustain the charge of misuse
of funds in part, in a lesser amount than the outstanding balance on the GICC. We

further hold that Allen received adequate notice of and an opportunity to respond to the

second charge stated in the Notice of Proposed Removal—i.e., failing to timely pay his

GICC—for which his culpability is undisputed. Because the penalty of removal is not

unconscionably disproportionate to the sustainable charges, we affirm.

                                             I.

       Allen applied for a lateral transfer within the United States Postal Service from

Toledo, Ohio to Santa Fe, New Mexico. He was selected for the position, which entitled

him to receive relocation benefits. To facilitate the cross-country move, the USPS gave

Allen a $2,500 cash advance for miscellaneous expenses and arranged for him to

receive a GICC issued by Citibank, which, pursuant to the General Services

Administration contract with Citibank, was to be used solely for temporary housing and

other official travel-related expenses.

       As a precondition to receiving the GICC, Allen was required to sign a

cardmember account agreement with Citibank. By signing this document, Allen agreed

to pay in full the outstanding card balance no later than 25 calendar days from the billing

statement closing date. Implicit in this agreement, as testified to by the deciding official,

Albuquerque Postmaster Edward Schierberl, is that an employee is responsible for

paying the Citibank bill even if the USPS has not yet reimbursed the employee for

travel-related expenses.

       Allen used the GICC beginning on September 16, 1999.                 His first billing

statement, for October 1999, showed an outstanding balance due of $2,595.03; he did

not remit any payment. Allen continued to use the GICC, and his November 1999

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billing statement indicated a total outstanding balance of $6,446.47. Allen did not make

any payment toward the card balance until late March 2000—five months after receiving

his October billing statement and four months after the due date of the additional

charges contained in the November billing statement. In May 2000, Citibank cancelled

Allen's card and referred his account to a collection agency. Allen made another small

payment in June 2000 and did not pay off the remaining balance until September 2000.

      Allen explains that his failure to timely pay his GICC stemmed initially from

"procrastination" in submitting his request for reimbursement. Allen submitted a first

reimbursement request to the USPS on November 6, 1999, in the amount of $2,245.76,

and a second reimbursement request, dated January 6, 2000, for $3,062.40. Because

the $5,308.16 for which Allen sought reimbursement qualified as taxable income, the

USPS deducted income taxes in accordance with Allen's previous instructions, reflected

in his submission of a federal W-4 income tax withholding form. Accordingly, the USPS

reimbursed Allen $4,744.26 and submitted the remaining $563.90 to the Internal

Revenue Service ("IRS") on Allen's behalf.       Although the AJ found that a single

reimbursement check was issued on February 11, 2000, Allen did not deposit the check

into his bank account until six weeks later, on March 24, 2000.1       Allen's wife then

immediately wrote a $4,700.00 check to Citibank, which cleared his checking account

on March 30.

      After being alerted by Citibank to the cancellation of Allen's account, the USPS

commenced an internal investigation. Allen's supervisor, Jose Trujillo, interviewed Allen

      1
              Allen argues that he received the reimbursement check in mid-March and
deposited it promptly. However, the AJ found that Allen was paid on February 11, 2000,
and Allen has not offered sufficient evidence to overcome this factual finding.

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on September 21, 2000 and placed him on paid administrative leave the following day.

Based on the results of the internal investigation, Trujillo issued a Notice of Proposed

Removal on January 8, 2001.        The heading of the Notice of Proposed Removal

indicated a single charge of "Misuse of Postal Service Funds", based on Allen's

submission of reimbursement requests totaling, and reimbursement in the amount of,

$5,308.16.2 The remainder of the Notice of Proposed Removal, however, explained

that Allen had violated the terms of his Citibank cardholder account agreement by

remitting his initial Citibank payment over 120 days late, leading to cancellation of his

account.    Trujillo likened Allen's GICC balance to "an interest free loan" and

characterized Allen's behavior as "a serious violation of the trust given to [him]." The

Notice of Proposed Removal indicated that Allen's actions violated section 661.3 of the

Employee and Labor Relations Manual, which provides:

      Employees must avoid any action, whether or not specifically prohibited by
      this Code, which might result in or create the appearance of:
             a. Using the Postal Service for private gain.

      Allen and his representatives submitted a response, in which Allen suggested

that the USPS was negligent in failing to issue reimbursement checks promptly. On

May 2, 2001, Schierberl issued a Letter of Decision sustaining removal, in which he

responded as follows:

      I find that if anyone was negligent it was you when you failed to provide
      the information requested of you during your investigative interview dated
      September 21, 2001 [sic] that showed that you had paid this amount off.
      You did not provide this information to me until the meeting of February 1,
      2001. . . . I waited for you to present this evidence to me for close to 11

      2
              The Notice of Proposed Removal also contained three additional
specifications. At the outset of the initial Board hearing, the agency stipulated that
those specifications did not constitute misuse of Postal Service funds.

06-3059                                    4
      weeks and when you failed to produce the evidence you left me no
      alternative but to issue the proposed removal.3

Allen appealed his removal to the Board, and the AJ affirmed. Allen v. USPS, No.

DE-0752-01-0289-I-1 (M.S.P.B. Apr. 30, 2002) ("Allen I"). After the full Board denied

Allen's petition for review, Allen v. USPS, No. DE-0752-01-0289-I-1 (M.S.P.B. June 19,

2003), Allen appealed to this court. We vacated and remanded to the Board for a

determination of whether Allen was actually charged, in violation of due process, with

failing to cooperate with the agency investigation into the cancellation of his GICC.

Allen v. USPS, 99 Fed. App'x 924, 928 (Fed. Cir. 2004).

      On remand, Schierberl explained that the language in the removal letter

referencing Allen's failure to provide the agency with proof of full payment was intended

only to rebut Allen's assertion that the agency had been negligent in failing to reimburse

him promptly.    Schierberl further testified that he would have terminated Allen's

employment regardless of whether Allen provided proof of full payment. The AJ again

affirmed Allen's removal, Allen II, and the full Board again denied Allen's petition for

review. This appeal followed. We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(9).

                                            II.

      We must affirm a Board decision unless we find it to be "(1) arbitrary, capricious,

an abuse of discretion, or otherwise not in accordance with law; (2) obtained without

procedures required by law, rule, or regulation having been followed; or (3) unsupported

      3
             The Notice of Proposed Removal erroneously stated that Allen had an
outstanding balance at the time of the letter. Allen had paid his account in full as of
September 2000 and had informed Trujillo of this during the investigative interview.
However, because Allen did not follow up on Trujillo's request for substantiating
documentation, Trujillo concluded that Allen "did not have the information that [he]
claimed."

06-3059                                     5
by substantial evidence."     5 U.S.C. § 7703(c).        On appeal, Allen argues that the

sustained charge of misuse of Postal Service funds is unsupported by substantial

evidence. He also argues that he was additionally charged with failing to timely pay his

GICC, in violation of due process, because the latter charge was not listed in the

heading of the Notice of Proposed Removal. Accordingly, argues Allen, the penalty of

removal cannot stand.

                                              A.

       We agree with Allen that the charge of misuse of Postal Service funds in the

amount of the outstanding GICC balance is unsupported by substantial evidence. The

AJ adopted Trujillo's explanation that because Allen's ability to charge items on the

GICC was "due entirely to an agreement reached between the Postal Service and

Citibank", "any charges or cash advances made against the appellant's card involved

use of Postal Service funds." Allen I, slip op. at 6. The AJ explained that, by failing to

promptly pay his GICC balance, "the appellant had personal use of Postal Service's

funds for an extended period of time." Id., slip op. at 9. On remand, the AJ adopted the

characterization of the outstanding GICC balance as "an interest-free loan at the

agency's expense." Allen II, slip op. at 4.

       It is important to understand that Allen's card expenditures involve funds loaned

by Citibank, not by the Postal Service. Although it is true that Allen was eligible for the

GICC only by virtue of his Postal Service employment, this does not change the

underlying financial mechanisms at play.           As the card's outstanding balance stood

unpaid in violation of the cardholder agreement, Allen could only have been misusing

Citibank funds. Thus, the proper starting place for analysis of the charge of misuse of

06-3059                                       6
Postal Service funds is the point at which Allen first came into possession of Postal

Service funds: the issuance of a reimbursement check on February 11, 2000.

      Allen waited nearly six weeks before depositing the reimbursement check into his

account in late March 2000. During that six-week time period, Allen might be said to

have misused the full $5,308.16, but on balance, we think Allen could not be charged

with misusing funds until he actually had use of the funds through the deposit of the

check in his account. Once Allen deposited the reimbursement check, his wife promptly

paid Citibank $4,700.00. At that point, then, Allen was misusing Postal Service funds

representing the difference between the reimbursement amount and the payment made,

i.e., $608.16.4   In June 2000, Allen submitted another payment to Citibank in the

amount of $400.00. Thus, beginning in June, Allen was misusing Postal Service funds

in the remaining amount of $208.16. This misuse continued until final payment was

remitted in September 2000.

      In sum, we hold that the charge of misuse of Postal Service funds is only

sustainable in part, in the amounts of $608.16 for the three months between March and

June 2000 as well as $208.16 for the three months thereafter.

                                          B.

      Allen also argues that he was charged with paying his GICC late, in violation of

due process, because that charge was not listed explicitly in the heading of the Notice

of Proposed Removal. An agency "must notify the employee of the conduct with which

      4
              We agree with the USPS that because the $563.90 difference between
the reimbursement request and reimbursement check was earmarked for (and
transferred to) the IRS pursuant to Allen's instructions in his federal W-4 income tax
withholding form, those funds were also "misused"—a point Allen's counsel disputed at
oral argument. The fact that the funds were paid to the IRS on Allen’s behalf did not
relieve Allen of his obligation to pay Citibank the full amount of his reimbursement.

06-3059                                   7
he is charged 'in sufficient detail to permit the employee to make an informed reply.'"

Lachance v. MSPB, 147 F.3d 1367, 1371 (Fed. Cir. 1998) (quoting Pope v. USPS, 114

F.3d 1144, 1148 (Fed. Cir. 1997)). As explained in Lachance, Allen's exclusive focus

on the heading of the Notice of Proposed Removal is misplaced, as charged offenses

are to be gleaned from the Notice of Proposed Removal as a whole, particularly the

specification(s) supporting the heading. Id. at 1372 ("[T]he agency must prove what it

charges; where the specification contains the only meaningful description of the charge,

Nazelrod supports the Board's conclusion that the agency must prove what it has

alleged in the specification.") (discussing King v. Nazelrod, 43 F.3d 663 (Fed. Cir.

1994)).

      Although here, both the agency and the AJ mistakenly conflated misuse of Postal

Service funds with failure to timely pay a GICC each month, which are in actuality quite

distinct charges, the elements of each are set forth clearly in the Notice of Proposed

Removal.    The specification in the Notice of Proposed Removal incorporates by

reference the Citibank cardholder agreement, in which Allen agreed to pay his

outstanding balance in full within 25 calendar days of the billing statement closing date.

It informs Allen that he "did not pay [his] credit card as [he] agreed to" and documents

Allen's payment activity: an initial payment more than 120 days late, card cancellation

by Citibank, and an additional payment several months later. The Notice of Proposed

Removal concludes that Allen's actions violate the USPS Standards of Conduct

prohibiting employees from "[u]sing the Postal Service for private gain." On its face the

specification appears to provide sufficient notice as to late payment. In any event, Allen

testified at the remand hearing that although the "actual charge" in the heading of the

06-3059                                     8
Notice of Proposed Removal was "misuse of Postal Service funds", he understood the

USPS' primary concern to be with his "credit card being late" and responded to both

charges. This admission is unsurprising in view of the clarity of the specification.

       Likewise, the AJ's opinion makes clear that the AJ recognized that Allen was also

charged with failing to timely pay his GICC. The AJ noted Schierberl's testimony that

Allen "fail[ed] to pay as required by the contractual agreement between Citibank and the

appellant." Allen II, slip op. at 9. The AJ also explained that, at the time the disciplinary

action was taken, Allen's card "had already been canceled for violations of the credit

card agreement." Id., slip op. at 10. The AJ concluded that the agency's decision to

remove Allen turned on Allen's "fail[ure] to comply with the terms of the GICC

agreement when he received reimbursement of funds owed to Citibank . . . .              That

agreement required payment of the amount due in full within 25 days of the closing date

of the billing statement in which the charge(s) appeared." Id., slip op. at 13. Although

this latter statement conflates the charges by mistakenly linking Allen's obligation to pay

Citibank with his receipt of reimbursement from the Postal Service, it nonetheless

recognizes independent misconduct in the late payment.5

       As Schierberl testified, the agency requires its employees to pay the Citibank

account in full regardless of when the employee receives reimbursement. Thus, Allen's

reimbursement requests are irrelevant to the charge clearly set forth in the specification:

       5
               This conclusion is unaffected by Schierberl's testimony on remand that
Allen's only offense was misuse of Postal Service funds and that Allen was not charged
with failing to timely pay his GICC. The charges must be gleaned from the Notice of
Proposed Removal. Schierberl's testimony merely highlights the agency's ongoing
confusion in separating the two distinct charges. Since interpretation of the Notice of
Proposed Removal is a legal conclusion, we are not bound by the opinion of
Mr. Schierberl.

06-3059                                      9
failing to timely pay the GICC. Allen does not dispute the outstanding balances due on

his GICC beginning with the October 1999 billing statement. He disputes neither that

his initial payment was submitted over 120 days late nor that an outstanding balance

remained on his card until September 2000. Therefore, the evidence before the Board

unquestionably supports sustaining the charge of failure to timely pay the GICC.

                                           III.

      We must defer to the agency's determination of disciplinary action unless the

penalty is "so harsh and unconscionably disproportionate to the offense that it amounts

to an abuse of discretion." Villela v. Dep't of the Air Force, 727 F.2d 1574, 1576 (Fed.

Cir. 1984) (citation omitted). Here, that is not the case. The agency considered the

relevant Douglas factors and provided a thorough explanation of why the penalty of

removal was appropriate.      See Douglas v. Veterans Admin., 5 M.S.P.R. 280, 306

(1981).     Schierberl noted the appellant's satisfactory performance since joining the

Postal Service in 1994, but explained that this factor was offset by Allen's position as a

supervisor and failure to accept responsibility for the cancelled card.        Schierberl

explained to Allen that he had demonstrated an attitude that it was "ok to follow the

rules when you get around to it or to blame other[s] for your actions" and that Allen's

"misconduct destroyed [his] credibility and trust" so removal was the only appropriate

sanction.

      There can be no doubt that Allen's behavior violated section 661.3 of the

Employee and Labor Relations Manual, with which he was charged. But for Allen's

employment with the Postal Service, he would not have been eligible to receive the

GICC. He failed to pay Citibank in accordance with his cardmember agreement. Even

06-3059                                    10
after he had been reimbursed, Allen failed to timely pay the amount due on his GICC.

This behavior clearly constitutes Allen's "[u]sing the Postal Service for private gain."

       We reject Allen's alternative argument that a remand to the agency is appropriate

in light of the parties' stipulation to dismiss three of the four original specifications

contained in the Notice of Proposed Removal. The dismissed specifications involved

other expense reimbursements, which the USPS conceded did not constitute misuse of

Postal Service funds. However, voluntary dismissal of these specifications would not

have changed the agency's choice of penalty, as the explanation of wrongdoing in the

remaining specification in the Notice of Proposed Removal focuses solely on the

$5,308.16 reimbursement request and corresponding late payments to Citibank.

                                             IV.

       In sum, the agency and Board erred in conflating the charges of misuse of Postal

Service funds and failing to timely pay the GICC.         The evidence does not support

sustaining a charge of misuse of Postal Service funds for the full outstanding GICC

balance. Instead, it supports a charge of misuse of Postal Service funds only from the

time that the USPS reimbursed Allen's travel-related expenses and only for the smaller

amounts representing the difference between the reimbursed amount and the

sequential payments remitted to Citibank. The evidence certainly supports a conclusion

that Allen violated USPS policy and his GICC cardholder agreement by failing to timely

pay his GICC.     We further hold that the Notice of Proposed Removal as a whole

provided Allen with adequate notice of and an opportunity to respond to both charges;

Allen did in fact respond to both charges. Finally, we hold that the penalty of removal is

not unconscionably disproportionate to the sustainable charges and that it clearly would

06-3059                                      11
have been chosen by the agency even if the amounts had been correctly set forth as we

do above. Therefore, we affirm.

                                    AFFIRMED.

06-3059                                  12