The opinion of the court was delivered by: GREEN
In 1989, defendant Legal Services Corporation ("LSC") hired plaintiff David Wilkinson ("Wilkinson") to be its first Inspector General ("IG"). Wilkinson's tenure was fraught with internal dissension and managerial gridlock, and, in February 1991, LSC notified Wilkinson that his employment contract would not be renewed. Wilkinson sued in three counts. One of the counts raised an important and undecided constitutional issue concerning the Board's authority to fire him, which, along with a second count, has been finally resolved.
Although not previously apparent, the remaining Count III also raises an important question of first impression concerning the obligations of "private" corporations that have been created by Congress to follow their own rules.
This novel issue arises from Wilkinson's claim that he was wrongfully discharged because LSC failed to comply with its personnel manual before it notified him that his contract would not be renewed. On its face, such a claim is hardly new. When brought against a private employer, a discharged employee's claim based on a personnel manual is generally styled as breach of contract, alleging that the manual is binding on the employer because it incorporates the terms of an express or implied agreement.
If the claim is brought against a government agency, a discharged employee may argue that the personnel manual gave rise to a "property" interest in continued employment that was deprived without due process of law or that the manual set forth internal regulations that the agency was bound to follow under the Accardi doctrine.
The novelty in this case arises from Wilkinson's exclusive reliance on the Due Process Clause and the Accardi doctrine, both of which apply only to public agencies, even though Congress has declared that LSC "shall not be considered a department, agency, or instrumentality, of the Federal Government," 42 U.S.C. § 2996d(e)(1).
Consequently, this case now presents two threshold questions:
1) Can a congressionally-created, private corporation be sued for violation of the Due Process Clause?
2) Can a congressionally-created, private corporation be sued for violating its own rules under the Accardi doctrine?
For constitutional claims, the Court must independently determine whether LSC is a public or private agency, notwithstanding the disclaimer of governmental identity in § 2996d(e)(1). See Lebron v. National RR Passenger Corp., 513 U.S. 374, 392, 130 L. Ed. 2d 902, 115 S. Ct. 961 (1995). As to the Accardi claim, even if LSC is a public agency for constitutional purposes, the Court also must address whether Wilkinson's Accardi claim derives from the Constitution or from a lesser source. See id. Although this and other courts deciding administrative law cases routinely invoke the Accardi doctrine as a "well settled" or "familiar" principle, e.g., Fort Stewart Schools v. Federal Labor Relations Auth., 495 U.S. 641, 654, 109 L. Ed. 2d 659, 110 S. Ct. 2043 (1990); Woerner v. United States Small Business Admin., 739 F. Supp. 641, 646 (D.D.C. 1990) (Green, J.), the principle has become "well settled" only by judicial repetition; its origins are quite obscure.
Consequently, this Opinion relates two stories: the story of how Wilkinson came to join and then leave LSC, and the story of how the Supreme Court came to announce and apply the Accardi doctrine, on which Wilkinson so heavily relies. For those who wish to forgo the narrative journey, the Court has come to the following conclusions.
With respect to the threshold legal issues, the Court holds that LSC is a public agency subject to the Due Process Clause. The Court also must reach Wilkinson's alternative Accardi claim and holds that the Accardi doctrine derives from the Due Process Clause's obligation that government agencies follow the law, even if that "law" is a procedural regulation by which the agency has gratuitously limited its otherwise unfettered discretion. This rule-of-law requirement is a necessary founding principle implicated in any suit against the government for its violations of law. But the constitutional stature of this founding principle does not make every agency's violation of its own rules into a constitutional violation. Unless the agency has violated an independent constitutional provision, a lawsuit based on the Accardi doctrine relies on the predicate requirement that government agents are bound by law, but, for jurisdictional purposes such a claim arises under the regulation claimed to be violated, not the Due Process Clause.
Applying this holding to the instant case, the Due Process Clause creates a presumption that judicial review of an Accardi claim against a government-created "private" corporation is available where Congress has given the corporation the power to make regulations that have the force and effect of law. Where, however, Congress has not given lawmaking power to such a corporation, the Accardi doctrine does not apply; the corporation's personnel policies are no more public "law" than those of any other private employer.
With respect to Wilkinson's claims, the Court finds that although they are not barred as a matter of law, the evidence supports neither claim. With respect to his Due Process claim, the Court finds that Wilkinson was not guaranteed that he would be discharged only for cause by either the 1978 or the 1990 manual, and therefore he had no property interest in staying on. With respect to the Accardi claim, the Court further finds that on the present record the 1990 Manual did come into force and that the provisions of the manual on which Wilkinson relies do not qualify as binding regulations and, even if they did, they do not apply to the LSC Inspector General. Finally, it is clear that even if LSC had been obliged to give Wilkinson periodic job evaluations, its failure to do so was harmless because Wilkinson's contract would not have been renewed in any event. What follows are the Court's findings of fact and conclusions of law as required by Rule 52(a) of the Federal Rules of Civil Procedure.
A. The Legal Services Corporation
The Legal Services Corporation is a non-profit, tax-exempt corporation established by the Legal Services Corporation Act of 1974 ("LSC Act"), codified at 42 U.S.C. § 2996b et seq. (1994). LSC provides financial support for legal assistance in certain noncriminal proceedings to persons throughout the United States who cannot otherwise afford legal assistance. LSC generally does not provide legal services to the indigent directly but does so through a series of grants to local organizations. See 42 U.S.C. § 2996e(c)(1). During the time relevant to this case, LSC distributed funds to approximately 300 grantees. See Trial Transcript ("Tr.") at 187-88 (Testimony of former Board member, Howard H. Dana, Jr.).
By law, LSC is governed by an eleven-member Board of Directors ("Board"). See 42 U.S.C. § 2996c(a). Board members are appointed by the President of the United States with the advice and consent of the Senate and serve a specific term of years. Id. § 2996c(a), (b). However, certain members of the Board have served under recess appointments made by the President without the advice and consent of the Senate. See Stipulations of Fact ("Stip.") P 3. Although the Board is composed wholly of political appointees, the LSC Act declares that its members shall not be full-time employees of the United States, id. § 2996c(a), and that Board members "shall not, by reason of such membership, be deemed officers or employees of the United States." Id. § 2996c(c).
The LSC Act also provides that LSC is to be managed by a President, who is elected by the Board and serves as chief executive officer subject to the Board's supervision. See 42 U.S.C. § 2996d(a). The Board may also appoint "such other officers as [it] determines to be necessary." Id. As with the Board, Congress has directed that
Except as otherwise specifically provided in this subchapter, officers and employees of the Corporation shall not be considered officers or employees, and the Corporation shall not be considered a department, agency, or instrumentality, of the Federal Government.
42 U.S.C. § 2996d(e)(1). Rather, LSC is to have the powers of a non-profit corporation under District of Columbia law. See 42 U.S.C. § 2996e(a).
LSC, however, is not like most non-profit corporations. Not only is it controlled entirely by presidential appointees, but also -- like numerous other agencies and unlike most non-profit corporations -- LSC has been required to have an Inspector General who reports to Congress since 1988.
Although for some agencies, the IG is nominated by the President and confirmed by the Senate,
when Congress amended the IG Act in 1988, it gave the "designated federal entities" such as LSC six months from October 18, 1988 to establish an Office of Inspector General and authorized the "head" of LSC to recruit an individual to fill the position. See 5 U.S.C. App. 3 § 8G(b), (c).
B. Wilkinson's Tenure at LSC
In 1989, to comply with the IG Act, LSC established its Office of Inspector General ("OIG"). LSC selected Wilkinson to be its first Inspector General. Wilkinson is an attorney licensed to practice in Utah who, prior to joining LSC, had served as that State's Attorney General for eight years. See Tr. 74, 117 (Wilkinson). When Wilkinson arrived at LSC, he had no prior experience as an Inspector General, and LSC had no prior experience working with an IG. Wilkinson's place in the LSC bureaucracy was made somewhat uncertain by the IG Act, which provides that
Each Inspector General shall report to and be under the general supervision of the head of the designated Federal entity. The head of the designated Federal entity shall not prevent or prohibit the Inspector General from initiating, carrying out, or completing any audit or investigation . . .
A certain degree of confusion and, perhaps, tension could be expected in such a situation. Indeed, almost immediately, friction and concern over "turf", developed between Wilkinson, LSC staff, and certain members of the LSC Board. See, e.g., Tr. 155-58 (Testimony of LSC's former Director of the Office of Human Resources, Alice Dickerson), 189 (Dana); 210 (Testimony of former Board member, Luis Guinot). In April 1990, the LSC President who had hired Wilkinson, Terrance J. Wear ("Wear"), called a meeting to identify and resolve contentious issues between Wilkinson and LSC staff, but that meeting bore no fruit. See Tr. at 154-59 (Dickerson).
In August 1990, the LSC Board was designated as LSC's "head," giving it supervisory responsibilities over Wilkinson. This change did nothing to abate the tensions with Wilkinson. The Board decided to create an Inspector General Oversight Committee because of the amount of attention Wilkinson required. Tr. at 186 (Dana), 210 (Guinot). The weight of the evidence demonstrates that the friction between Wilkinson and the LSC staff and Board went beyond that inherent in the circumstances. Wilkinson's focus on establishing and protecting the independence and prerogatives of the OIG at the expense of establishing a working relationship with his supervisor (the Board) and LSC staff emerged as a constant source of friction.
A small but telling example is found in the testimony of two former Board members -- testifying more than eight years after certain events had transpired -- who credibly and vividly recalled the inordinate attention Wilkinson gave to obtaining his own letterhead. See Tr. at 187, 189-90 (Dana), 211 (Guinot); see also Def.'s Ex. 11 (Tr. of Jan. 28, 1991 Board Meeting) at 54, 60.
More fundamentally, Wilkinson's view of his role under the IG Act conflicted materially with that of the Board and the LSC President. In the normal course of operations, LSC's grantees were required to have an annual, independent audit by a Certified Public Accountant. Part of the responsibility of LSC staff was to ensure compliance with that requirement. Wilkinson initially believed that his office should audit all of LSC's grantees. See Tr. at 187-89 (Dana); Def.'s Ex. 11 (Tr. of Jan. 28, 1991 Exec. Sess.) at 49-53. The Board did not agree. Id.
Another source of frustration to Wilkinson, the LSC Board, and the LSC President was the fact that Wilkinson had not hired auditors to assist him in carrying out his duties -- even those on which he and the Board agreed. The IG Act provided Wilkinson with hiring authority, although less expansive than that given to IG's of executive agencies. Compare 5 U.S.C. App. 3 § 8G(g)(1), (2) with id. § 6(a)(7), (8). Wilkinson had authority to
select, appoint, and employ such officers and employees as may be necessary for carrying out the functions, powers, and duties of the Office of Inspector General and to obtain the temporary or intermittent services of experts or consultants or an organization thereof, subject to the applicable laws and regulations that govern such selections, appointments, and employment, and the obtaining of such services, within the designated Federal entity.
Id. § 8G(g)(2). Wilkinson did not exercise that authority to hire auditors. He testified that Wear would not authorize funding to hire auditors, and that Wear's successor, Martin, did not rapidly authorize the hiring of auditors. See Tr. at 2-23, 2-24 (Wilkinson). LSC Board members viewed the responsibility for the stalemate as Wilkinson's. Id. at 189-90, 201-02 (Dana), 212 (Guinot); see also Def.'s Ex. 11 (Tr. of Jan. 28, 1991 LSC Board meeting) at 59-60. In any event, it is undisputed that Wilkinson hired no auditors. Tr. at 2-23.
Finally, the issue of hiring other staff for the OIG was an ongoing tug-of-war between Wilkinson and Alice Dickerson, former Director of LSC's Office of Human Resources. Again, some tension is to be expected from the structure of the IG Act, which makes the IG's hiring authority subject to LSC's personnel regulations. But Wilkinson's highly formal approach to mediating that tension by negotiating a detailed Memorandum of Understanding ("MOU") exacerbated the problem.
In early 1991, the cumulative dissatisfaction with Wilkinson came to a head. Under the terms of Wilkinson's letter agreement, he was to serve in office for an initial two-year term, which would automatically extend for subsequent one-year terms unless either party gave timely notice of nonrenewal. Stip. P 7. The deadline for giving notice was March 5, 1991. Id.
On January 28, 1991, the Board met in executive session to consider a number of matters. During that meeting, the Board discussed whether Wilkinson's contract should be renewed. A fairly strong, though informal, consensus against renewing the contract emerged. See Def.'s Ex. 11 at 50-65. Subsequently, Wilkinson himself indicated frustration, contemplating that he would not wish to renew the contract absent certain guarantees. See Def.'s Ex. 13 (Feb. 22, 1991 Mem. from Wilkinson to LSC Board) at 10 ("Without MOUs or their equivalent being in place, I for one do not care to remain IG for my "option" (third) year under my personal services contract.").
The next executive session was scheduled for February 22, 1991, the final opportunity for the Board to act before the March 5 deadline. In advance of that meeting, on February 12, Guinot sent Wilkinson a letter requesting by February 22, "a memorandum from you describing your activities as Inspector General pursuant to §§ 4, 6 and 7 of The Inspector General Act of 1978, as amended. . . . The memorandum need have only sufficient detail so as to reasonably inform the [Oversight] Committee of the progress of the office under your direction, and need not identify any individuals by name." Pl.'s Ex. 19 (Feb. 12, 1991 letter from Guinot to Wilkinson).
At the February 22 executive session, the Board formally considered whether it should renew Wilkinson's contract. The discussion of that topic took place before the Board had received Wilkinson's report as requested by Guinot's February 12 letter; however the report's absence was deemed to be immaterial. See Def.'s Ex. 14 (Tr. of Feb. 22, 1991 Exec. Sess) at 31-32. At the conclusion of the discussion, ten of the Directors voted not to renew Wilkinson's contract, with one Director abstaining. Stip. P 12. On or about February 27, LSC President Martin personally delivered to Wilkinson a February 25, 1991 letter signed by the Chairman of the Board giving Wilkinson notice that the term of his employment contract would not be extended. Stip. P 13.
On April 23, 1991, while Wilkinson remained a LSC employee, he sued LSC alleging that it had violated the Government in the Sunshine Act, 5 U.S.C. § 552b, by conducting certain portions of its meetings in executive session. See Wilkinson v. Legal Services Corp., 1991 U.S. Dist. LEXIS 12502, Civ. No. 91-0889 (Order of Sept. 5, 1991). In August of that year, Wilkinson added two counts, including one for wrongful discharge. On the eve of his September 5, 1991 departure from LSC, he unsuccessfully sought injunctive relief. Id. After this Court denied Wilkinson's request for an order requiring LSC to keep him on, he pressed his claim for wrongful discharge. This Court previously ruled in Wilkinson's favor on Counts I and II, deciding that the LSC Board had violated the Sunshine Act, and that the Board -- appointed by President Bush while the Congress was in recess -- lacked the authority to decide not to renew Wilkinson's contract. See Wilkinson I, 865 F. Supp. at 896, 902. The United States, which had intervened as of right in this action, appealed the recess appointments issue. The Court of Appeals did not disagree with this Court's conclusion that the Board had been improperly appointed. Rather, in reliance on its intervening decision in Robertson v. FEC, 310 U.S. App. D.C. 185, 45 F.3d 486 (D.C. Cir. 1995), the Court of Appeals reversed and remanded, holding that Wilkinson, as a beneficiary of continued employment and cost-of-living wage increases under the Board, was barred by the doctrine of constitutional estoppel from challenging the Board's authority to act. Wilkinson II, 317 U.S. App. D.C. 59, 80 F.3d 535 at 539.
The case was remanded so that this Court could consider Wilkinson's "claim that the termination of his employment violated the LSC by-laws and Act . . . . This claim is not a categorical, structural challenge to all the recess appointments Board's action but rather focuses on the legality of the specific action which resulted in Wilkinson's termination." Wilkinson II, 317 U.S. App. D.C. 59, 80 F.3d 535 at 539.
Against this backdrop, we now turn to the facts directly pertinent to Count III. Wilkinson alleges that LSC did not have the discretion to discharge him as it did, and the relevant sources that may have limited LSC's discretion are the LSC Act, the IG Act, Wilkinson's employment agreement, and LSC's personnel manual(s).
Although Count III is phrased in terms of alleged violations of the LSC Act, Wilkinson did not rely directly on that Act at trial. The reason is self-evident; the LSC Act provides: "All officers shall serve at the pleasure of the Board." 42 U.S.C. § 2996c(a) (emphasis added). In addition, the LSC President, "subject to general policies established by the Board, may appoint and remove such employees of the Corporation as he determines necessary to carry out the purposes of the Corporation." Id. § 2996d(b)(1).
The Inspector General Act is of no more assistance to Wilkinson. The IG Act does not restrict the Board's authority to discharge the IG, adding only the requirement that:
If an Inspector General is removed from office or is transferred to another position or location within a designated Federal entity, the head of the designated Federal entity shall promptly communicate in writing the reasons for any such removal or transfer to both Houses of the Congress.
Other than a seasonable notice requirement, Wilkinson's two-year employment agreement also left LSC free not to renew the contract for any reason. After LSC had chosen Wilkinson as its IG-designate, LSC President Wear sent Wilkinson a three-page letter agreement, dated August 17, 1989, outlining the proposed terms of employment. Wilkinson could have negotiated the terms, but he declined that opportunity. See Tr. at 117. By signing the agreement, Wilkinson accepted the IG position on the terms LSC had offered. Id. Among these was a provision that the agreement would be governed by the law of the District of Columbia. Wilkinson did no research regarding legal presumptions covering employment contracts in the District of Columbia, including the presumption that employees are at-will unless the contract evidences a contrary intent. See id. at 101.
The large majority of LSC employees did not have letter agreements setting out their terms of employment. At most, the LSC President and perhaps three or four other senior staff had written agreements. Tr. at 103 (Wilkinson Test.); see also Def.'s Ex. 11 (Tr. of Jan. 28, 1991 Exec. Sess.) at 67.
Two provisions of Wilkinson's agreement cover the termination of his employment:
5. Your employment in the capacities outlined above may be terminated by the [LSC] President
prior to September 6, 1991, upon the happening of any of the following events:
(b) Failure to discharge your obligations under this contract;
(c) Illegal or immoral conduct by you;
(d) Thirty (30) days after you send written notice to the President or his designee (or if there is no President, to the Chairman or a member of the Board) stating your intention to terminate your employment; or
(e) Thirty (30) days after the President notifies you in writing that he is terminating your employment for any reason other than those specified in subparagraphs (a) through (d).
6. The [LSC] President shall have the option of extending your appointment for increments of one year, beginning on September 5, 1991. In the event either party shall not desire such an extension, notice must be given to the other party by March 5, 1991, or by the 5th of March of each succeeding year in which this contract shall be in effect.
Def.'s Ex. 2 (Aug. 17, 1989 letter from Terrance J. Wear to David Wilkinson).
At trial, Wilkinson effectively conceded that Paragraph 6 imposes no restrictions on LSC's decision whether to exercise its renewal option, but he argued that the provisions of LSC's personnel manual applied to Wilkinson and independently limited LSC's discretion. See Tr. at 24-25.
C. LSC's Personnel Manual(s)
In 1978, LSC adopted its first personnel manual to set forth its policies and procedures vis-a-vis its employees. See Stip. P 4; Pl's. Ex. 9 (Personnel Procedures Manual) [hereafter "the 1978 Manual"]. The procedure for adopting the 1978 Manual was ad hoc. The 1978 Manual was written by LSC Staff. The Board had created a Personnel and Facilities Committee, which informally reviewed the proposed manual as it took shape. When the 1978 Manual was complete, that Committee determined that no formal motion or approval of the Committee recommending the 1978 Manual to the Board was necessary because matters addressed by the 1978 Manual were primarily administrative. See Pls. Exs. 1 (Minutes of Sept. 25, 1978 Meeting of LSC Board's Personnel and Facilities Comm.) and 3 (Oct. 4, 1978 Mem. from LSC Pres. to LSC Board). The manual was assembled as a looseleaf binder to allow for periodic revision. See Pl.'s Ex. 4 (Tr. of Oct. 19, 1978 Board Meeting) at 280.
As anticipated, LSC staff continuously revised the 1978 Manual without oversight by the Board, and by 1985 the 1978 Manual had become "badly outdated" and was not distributed to employees. Tr. at 167-68 (Dickerson).
When Wilkinson joined LSC in 1989 he did not receive a copy of the 1978 Manual. In fact, he did not become aware of its existence until well into the pendency of this litigation. See Tr. at 82-83.
From 1986 to 1990, Ms. Dickerson was the principal draftsperson for a new, updated personnel manual. Id. at 135. Working with her on the revisions to the personnel manual were other senior LSC employees and outside counsel. Id. at 138. When the revisions were complete, the group researched whether the Board would have to approve the revised personnel manual before it took effect, and they concluded that Board approval was not required. Id.
In or about March 1990, approximately six months after Wilkinson arrived, LSC issued the revised personnel manual. Stip. P 8. The Board did not consider or discuss the revisions. See Tr. at 193-96 (Dana). Although the 1978 Manual and 1990 Manual differ in organization and tone, they are substantially similar in many respects relevant to this case. Both provide that LSC employees are to receive a performance evaluation from their supervisor 90 days after employment has commenced, and that employees are to be evaluated on an annual basis thereafter. Both versions also provide that if a supervisor finds an employee's performance to be lacking in some respect, the employee is to be placed on a performance improvement plan. Compare Pl.'s Ex. 9 (1978 Manual) at I-18, III-20-21, V-4-5 with Pl.'s Ex. 14 (1990 Manual) at 10, 16, 47-48.
There are three significant differences. First, the 1990 Manual contains provisions explicitly stating that LSC is an employer-at-will and that LSC employees are provided no enforceable rights under the 1990 Manual.
For example, the new introduction to the 1990 Manual reads in pertinent part:
This Personnel Policy Manual consists of personnel policies, practices and procedures of the Corporation. It is intended to standardize the administration of personnel policies and is presented as a matter of information only. None of the benefits or policies in this manual are intended by reason of their publication to confer any rights or privileges ...