Court Opinion

ID: 9476377
Source: CourtListenerOpinion
Date Created: 2023-08-05 05:54:26.718216+00
Date Added: 2024-06-11T17:45:17.078998
License: Public Domain

BECKER, Circuit Judge,
concurring and dissenting.
I join in all of the majority’s opinion except for Part II. Although Dr. Bills’ situation is not terribly sympathetic, I decline to join in Part II because I do not believe that Congress intended a treble damage remedy to apply to a breach of the scholarship contract prior to appointment to the National Health Service Corps (“Corps”).
I.
A.
Damages for breach of the scholarship contract is dealt with in 42 U.S.C. § 254o. As I read this section, the extent of damage liability as a result of breach of the scholarship contract hinges upon whether breach of the contract occurs before or after appointment to the Corps. Subsection (a) of § 254o deals with breaches which occur prior to appointment to the National Health Services Corps, as a result of such matters as failure to maintain academic standing, dismissal from institution, voluntary termination or failure to accept payment.1 In contrast, subsection (b) deals with breaches that occur as a result of an individual’s failure to “begin ... or to compíete [his or her] service obligation.” 42 U.S.C. § 254o (b)(1) (emphasis added). Because § 254m(c)(l) provides that the service obligation begins on the date an individual is appointed to the Corps, subsection (b) of § 254o obviously deals with breach of the scholarship agreement after appointment. Damages for this type of breach are trebled.2
In my view, the breach which occurred in this case (failure to secure an approved deferment) is more properly understood as a subsection (a) form of breach. In each of the forms of breach delineated in subsection (a), the scholarship recipient, through some purposeful action or inaction, fails to meet the requirements for service in the Corps. That is true here. Furthermore, in each situation under subsection (a) appointment to the Corps has not occurred. That is also true here. Dr. Bills has never been appointed to the Corps, and he continues to maintain that it has always been his intention to satisfy his obligation to the program. In accordance with the plain language of the statute, therefore, Dr. Bills has not committed a breach that permits treble damages.
As a matter also of policy, Dr. Bills’ breach is not as egregious as a “treble damages breach” where the recipient has had the benefit of having his education financed, has been appointed to the Corps, and then fails to commence or complete service. Drawing a line at the time of appointment in my view intelligently distin*381guishes a breach involved in a scholarship recipient’s preparation for service from the breach involved when a recipient pointedly refuses to serve.
B.
The majority does not assert that the statute alone authorizes treble damages for Dr. Bills’ breach. Instead, the majority contends that treble damages are appropriate because of the regulations at 42 C.F.R. Part 62, with which Dr. Bills’ contract bound him to comply. Section 62.10(c) of Part 62 provides:
If a participant fails to begin or complete the period of obligated service ..., including failing to comply with the applicable terms and conditions of a deferment ..., [then treble damages are calculated].
(emphasis added).
Despite the incorporation of this regulation into the contract, the majority agrees that the regulation does not bind Dr. Bills if it is contrary to the statutory provisions or in excess of statutory authority. Maj.Op. at 377-378. See Chrysler Corp. v. Brown, 441 U.S. 281, 304-08, 99 S.Ct. 1705, 1718-20, 60 L.Ed.2d 208 (1979); United States v. Larionoff 431 U.S. 864, 873, 97 S.Ct. 2150, 2156, 53 L.Ed.2d 48 (1976). The majority claims that the regulation is consistent with the statute solely on the grounds that “[inadequate preparation for assignment effectively prevents the medical school graduate from serving his obligation in the practice areas that were the object of Congressional concern.” This need for preparation convinces the majority that “[t]he deferment regulations further the aims of the program and fall within the ambit of the statute.” Typescript Opinion at 11.
In my view, the majority’s reasoning does not properly address the question of single or treble damages. Certainly “inadequate preparation for assignment” by failure to begin an approved internship undermines the usefulness of a medical graduate. But any breach of the contract listed in § 254o prevents the aid recipient from fulfilling his or her service obligations to the government. The question before us is only whether Congress has authorized the punishment of this breach with treble or single damages.
The statutory language is clear that only breaches following “appointment” to the service may be punished with treble damages. Thus, in my view, the regulation authorizing treble damages for breach of the conditions of deferment is invalid and cannot be the basis for a treble damages award in this case.
II.
I might be concerned about my reading of the statute and regulations if I believed that it rendered the Secretary remediless. As I see it, however, the Secretary has two powerful options where a scholarship recipient fails to secure an “approved” deferment.
First, he may recover “single damages” —the amount of money paid to the recipient under the program. Under the facts in this case, upon notification of Dr. Bills’ non-confirming deferment in September of 1980, the Secretary could have declared Dr. Bills in default and demanded payment of all monies paid to him — $24,528.3 This remains a viable option.
*382Second, I believe that the Secretary, instead of suing for damages, may opt to waive the “approved” deferment requirement and appoint the defaulting scholarship recipient to the Corps to begin obligated service. In Dr. Bills’ case this option would lead to the following result. By statute the Secretary was required to appoint Dr. Bills to the Corps upon completion of his medical school training unless he requested a deferment of three years or less.4 As. Dr. Bills requested n one-year deferment, the Secretary was required to defer his appointment to the Corps until completion of the one year of training (whether or not this training included the primary care rotation). At the end of that deferment, in June of 1981, the Secretary could have appointed Dr. Bills to the Corps to begin his service obligation. I see nothing to preclude the Secretary from appointing Dr. Bills to the Corps at this time and assigning him to a manpower shortage area in accordance with 42 U.S.C. § 254m(d)5 If following his appointment to the Corps and upon assignment to a manpower shortage area, Dr. Bills “fails to begin or complete” the obligated service, he is then in breach of his contract and treble damages are determined in accordance with 42 U.S.C. § 254o (b)(1).
For the foregoing reasons I respectfully dissent from Part II of the majority’s opinion and the affirmance of the award of treble damages.

. Section 254o reads as follows:
(a) An individual who has entered into a written contract with the Secretary under section 2541 of this title and who—
(1) fails to maintain an acceptable level of academic standing in the educational institution in which he is enrolled (such level determined by the educational institution under regulations of the Secretary),
(2) is dismissed from such educational institution for disciplinary reasons,
(3) voluntarily terminates the training in such an educational institution for which he is provided a scholarship under such contract, before the completion of such training, or
(4) fails to accept payment, or instructs the educational institution in which he is enrolled not to accept payment, in whole or in part, of a scholarship under such contract, in lieu of any service obligation arising under such contract, shall be liable to the United States for the amount which has been paid to him, or on his behalf, under the contract.

. Section 254o provides, inter alia, as follows:
Except as provided in paragraph (2), if an individual breaches his written contract by failing (for any reason not specified in subsection (a) of this section or section 254q(b) of this title) either to begin such individual’s service obligation in accordance with section 254m or 254n of this title or to complete such service obligation, the United States shall be entitled to recover from the individual an amount determined in accordance with the [treble damages] formula ...

. The Secretary might argue that “single" damages are not enough of a deterrence to a scholarship recipient’s securing an unapproved deferment. It is true that a recipient could perhaps manipulate the program. For example, a medical student could misrepresent his intention of becoming a "primary care giver” in his application. After receipt of the scholarship funds and graduation from school, he could intentionally secure a “nonconforming” deferment, force an action by the Secretary for return of the scholarship funds advanced and thereby have his medical education financed by the government. However, repayment of the full amount, usually some $25,000, may be sought by the Secretary. In my view that is quite a bit of money for a resident to pay given the notoriously low salaries of first year residents. Furthermore, the debt cannot be discharged in bankruptcy until five years after the date repayment is required. 42 U.S.C. § 254o (c)(3). In my view the potential financial liability is sufficient incentive for a student to incorporate the primary care rotation into his/her residency.

. See 42 U.S.C. § 254m(b)(5)(A) and (c).

. Of course, the amount of service which Dr. Bills owes to the program is only one year since the Secretary is statutorily required to accept Dr. Bills’ service under the National Research Service Award Program. See Majority Opinion, Part III.