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Fontana v. Caldera

September 5, 2001

JOHN FONTANA, ET AL. PLAINTIFFS
v.
LOUIS CALDERA, ET AL., DEFENDANTS



The opinion of the court was delivered by: Emmet G. Sullivan United States District Judge

MEMORANDUM OPINION

Plaintiffs John Fontana and Kevin Murphy filed motions for preliminary and permanent injunction, seeking to prevent enforcement of a decision of the Army Board for Correction of Military Records ("ABCMR"), endorsing the Army's calculation of their separation from service date. Defendants filed a motion for summary judgment. After filing stipulations, the Magistrate Judge treated the party's filings as cross-motions for summary judgment, and found in favor of the plaintiffs. Before the court is the Magistrate Judge's Report and Recommendation, defendant's objections thereto, and plaintiffs' reply. Defendants' motion for summary judgment is GRANTED; plaintiffs' motion for preliminary injunction or summary judgment is DENIED; plaintiff Fontana's motion for temporary restraining order is DENIED.

I. Background

Plaintiffs are lieutenant colonels currently serving on active duty in the Army as medical doctors at Walter Reed Medical Center ("WRMC"). They commenced their military careers at the United States Military Academy at West Point ("West Point") in 1979, when they signed an agreement to complete an Active Duty Service Obligation ("ADSO") in return for their undergraduate education ("West Point Service Agreement"). After graduating in 1983, plaintiffs signed another agreement upon entering the Uniform Services University of Health Sciences ("USUHS"), incurring additional ADSOs, in exchange for medical training that ultimately resulted in both obtaining medical degrees ("USUHS Service Agreement").

Though plaintiffs performed some active duty after graduating from USUHS independent of their graduate education, they also completed an internship, a residency, and a fellowship, all pursuant to separate ADSO agreements with the Army. Each of those graduate ADSO agreements provided an anticipated separation from service date, and additional conditions on the service of the new ADSOs incurred. *fn1 Though they signed these agreements, plaintiffs submitted written protests regarding both the separation from service date and the additional conditions.

Plaintiffs also allege that the Army's interpretation of their separation from service dates has been inconsistent.

In May of 1999, plaintiffs submitted their resignations. Though each plaintiff's commanding officer recommended approval, the Department of Army Personnel Command refused to accept the resignations. Plaintiffs filed applications for correction of their personnel records with the Army Board for Correction of Military Records in November 1999, and both applications were denied in May and June of 2000.

Plaintiffs dispute the manner in which the Army has calculated their ADSOs. The parties do not dispute the aggregate of ADSOs incurred, but only when and if those ADSOs were fulfilled. Plaintiffs contend that the West Point ADSOs were fulfilled during their required active duty service at USUHS. Defendants dispute this interpretation of the two service agreements and related statutes and regulations, arguing that both preclude concurrent service of the ADSO while plaintiffs attended USUHS.

Plaintiffs further contend that the service agreements they signed at the inception of their internships, residencies, and fellowships, barring the toll of ADSOs for the duration of each, were in conflict with relevant statutes and cannot be enforced. The defendants dispute this interpretation, and further argues that the letters the plaintiffs sent regarding the unenforceability of the service agreements are not relevant and should not affect the court's holding. Plaintiffs contend they had fulfilled their ADSOs on the date they submitted their resignations. However, according to the Army, Lt. Fontana is not due to be released from service until April 1, 2005, and Lt. Murphy is not due for release until March 29, 2006.

After the case was referred to Magistrate Judge John Facciola, pursuant to Federal Rule of Civil Procedure 72(b) and Local Rule 72,3(a), the Magistrate Judge obtained stipulated facts from the parties on critical issues and subsequently treated plaintiffs' motion for preliminary injunction as a cross-motion for summary judgment. The Magistrate Judge filed his Report and Recommendations on May 14, 2001, defendants filed their objections on May 29, 2001, and plaintiffs filed their reply on June 11, 2001.

Plaintiff Fontana filed a motion for Temporary Restraining Order on May 25, 2001, asking the court to restrain the Army from executing a permanent change of duty station order, removing him to Fort Bragg in North Carolina. Defendant agreed to stay the execution of the order pending a decision by the court on the merits of the pending issues.

II. Discussion

A. Standard of Review

1. Magistrate Judge's Report and Recommendation Must Be Reviewed De Novo on All Dispositive Issues Raised by the Opposing Party in Their Objections.

Defendants argue that the Magistrate Judge's Report and Recommendation must be reviewed de novo by this Court. The district court judge "shall make a de novo determination of those portions of a magistrate judge's findings and recommendations to which objection is made . . ." L.Cv.R. 72.3(c) (2001); See also Fed. R. Civil P. 72 (2001); Aikens v. Shallala, 956 F. Supp. 14, 19 (D.D.C. 1997) (objections to a report and recommendation of a magistrate judge on an SSA claim must be reviewed de novo). Defendants raised objections to the standard of review applied by the Magistrate Judge, as well as the Magistrate Judge's application and interpretation of the relevant service agreements, 10 U.S.C. § 4348, 10 U.S.C. § 2114, Army Regulation 350-100, and D.O.D. Directive 6000.2. All issues raised by the defendants in their objections shall be reviewed de novo by this Court.

2. ABCMR's Determination is Based on Statutory and Regulatory Interpretation to Which Considerable Deference Should be Given Instead of the De Novo Standard of Review Applied in the Magistrate's Order.

The Army Board for Correction of Military Records is composed of civilians who evaluate service-members' claims of error or injustice in their military records. See Dickson v. Secretary of Defense, 68 F.3d 1396, 1399 (D.C. Cir. 1995). The ABCMR derives its authority, as do similar boards in the other military branches, from 10 U.S.C. §1552(a)(1), which states:

The Secretary of a military department may correct any military record of the Secretary's department when the Secretary considers it necessary to correct an error or remove an injustice... [S]uch corrections shall be made by the Secretary acting through boards of civilians of the executive part of that military department. 10 U.S.C. §1552(a)(1) (2000).

Under the statute, the Secretary has discretion to correct military records when he "considers it necessary to correct an error," but is not automatically required to correct a record when there is an error. Id. Despite this grant of discretion, courts have held that a decision by the ABCMR to correct or not to correct a military record pursuant to this authority is a reviewable agency action under the APA. *fn2 Frizelle v. Slater, 111 F.3d 172, 176 (D.C. Cir. 1997) (ABCMR decision that failed to respond to two of plaintiff's arguments for recession of Officer Effectiveness Report is arbitrary capricious and contrary to law under the APA); Dickson v. Secretary of Defense, 68 F.3d 1396, 1404 (D.C. Cir. 1995) (ABCMR decision not to grant waiver of three year limitation on applications for review is arbitrary and capricious under the APA); Kreis v. Secretary of Air Force, 866 F.2d 1508, 1514 (D.C. Cir. 1989).

Decisions of the ABCMR are reviewable under § 706 of the APA. 5 U.S.C. § 706 (2)(A) (2000). Section 706 provides that a reviewing court should overturn agency action it finds to be

"arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." Id. The Supreme Court has explained that this language does not require the same standard of review to be applied to all types of agency decisions in all contexts. Rather, in reviewing agency decisions under §706, the standard of review to be applied depends on whether the question decided by the agency was one of fact, law, or the application of law to facts and whether the agency was interpreting a statute or rule. See, e.g., Christensen v. Harris County, 529 U.S. 576, 120 S. Ct. 1655 (2000) (clarifying scope of Chevron); Auer v. Robbins, 519 U.S. 452, 117 S. Ct. 905 (1997) (articulating standard for rule interpretation); Chevron v. Natural Res. Def. Council, 467 U.S. 837, 104 S. Ct. 2778 (1984) (explaining standard for statutory interpretation). Determining the proper standard to be applied to the ABCMR's decision by this Court requires a close analysis of exactly what issues are in dispute here.

The issues in dispute in this case are questions of law, not fact. Plaintiffs and defendants have stipulated to the basic facts of this case. See Joint Stipulation and Statement of Material Facts and Issues. The parties disagree as to the proper interpretation of the applicable statutes, Army regulations, and the Service Agreements between plaintiffs and the Army. Thus, this Court must apply the appropriate standard of review for agency interpretations of statutes and regulations that occur in a decision-making process such as the one employed by the ABCMR.

a. Chevron Applies to the ABCMR's Statutory Interpretation.

The Plaintiffs challenge the ABCMR's statutory interpretation here, arguing that the ABCMR did not correctly interpret the applicable statutes, 10 U.S.C. § 4348 and § 2114, in determining that plaintiffs' West Point ADSOs were not satisfied during their time at the USUHS. Because it appears that Congress generally delegated to the ABCMR the power to make decisions carrying the force of law, the appropriate standard of review for the ABCMR's statutory interpretation is the Chevron standard. Chevron, 467 U.S. at 842-43 (1984); United States v. Mead, __ U.S.__, 121 S.Ct. 2164, 2171 (2001).

Despite several recent cases discussing the scope of the Chevron doctrine, the Supreme Court has not directly decided the issue of whether Chevron deference should apply per se to informal as well as formal adjudication. *fn3 See Mead, 121 S.Ct. 2164, 2179, 2183 (Scalia, J., dissenting)(pointing out that majority decision does not clarify whether Chevron applies to informal adjudication). While Chevron itself involved a formal rule-making process under the APA, the Supreme Court has since held that courts should apply Chevron to agency interpretations of law that occur during the adjudication of claims as well. See De Bartolo Corp. v. Florida Gulf Coast Bldg. & Const. Trades Council, 485 U.S. 568, 108 S. Ct. 1392 (1988) (Chevron applies to questions of law in agency adjudications as well as rule-making).

The Supreme Court in Christensen v. Harris County made clear that Chevron applies in the context of formal adjudication under the APA. 529 U.S. at 1662 (holding that Chevron applies to statutory constructions announced in formal adjudication and notice-and-comment rule-making). The Christensen Court held that Chevron deference is not warranted for "opinion letters," "policy statements, agency manuals, and enforcement guidelines, all of which lack the force of law..." 529 U.S. at 1662. The majority in Christensen left open the question of whether Chevron deference applies to an agency's interpretation of law that occurs in an informal adjudication. Lower courts have applied Chevron to agency statutory interpretation that occurs in informal adjudications. See, e.g., Mountain Side Mobile Estates P'ship v. Secretary of HUD, 56 F.3d 1243, 1247 (10th Cir. 1995)(holding that the Chevron standard is the same regardless of whether the agency interpretation is performed through rule-making or informal adjudication); City of Kansas City, Missouri v. Dep't of Hous. and Urban Dev., 923 F.2d 188, 192 (D.C. Cir. 1991)(recognizing in dicta that Chevron applies to agency statutory interpretation in informal adjudication); see also Kenneth C. Davis and Richard J. Pierce, Jr., Administrative Law Treatise, Cumulative Supplement §3.5 (3d ed. 2000). In addition, this Court has held that "an agency's interpretation of a statute is entitled to deference, even in the informal adjudicatory setting." Modern Muzzleloading, Inc. v. Magaw, 18 F.Supp.2d 29, 34 (D.D.C. 1998); see also, e.g., Seafarers Int'l Union v. United States, 891 F. Supp. 641, 646 (D.D.C. 1995) (assuming the applicability of Chevron by applying it to informal adjudication); Atochem North America, Inc. v. EPA, 759 F. Supp. 861, 867-68 (D.D.C. 1991) (same).

However, in United States v. Mead, the Supreme Court recently clarified the applicability of the Chevron doctrine to informal agency decision-making processes. The Mead Court held that the applicability of Chevron turns not on a category of decision-making process such as informal adjudication, but rather on the extent of the authority delegated by Congress in the statute authorizing the agency decision:

We hold that administrative implementation of a particular statutory provision qualifies for Chevron deference when it appears that Congress delegated authority to the agency generally to make rules carrying the force of law, and that the agency interpretation claiming deference was promulgated in the exercise of that authority. 121 S.Ct. at 2171.

According to the Mead Court, sufficient delegation of authority will be clear where the adjudication or rule-making occurs according to formal procedures, but in the case of informal processes, the delegation may be shown "by some other indication of a comparable congressional intent." 121 S. Ct. at 2171. While the Court did not elaborate further on these other indications, the Court in Mead refused to apply Chevron deference to a tariff classification ruling by the United States Customs Service, when the authorizing statute expressly provided for review of these decisions by the Court of International Trade, the Customs Services did not treat these rulings as binding on third parties, and other importers were warned against assuming any right of reliance on these decisions. 121 S. Ct. at 2174.

Applying the same totality of the circumstances test to the authorizing statute in this case, 10 U.S.C. § 1552, it is clear that Congress intended for the ABCMR's decisions to have the force of law. As discussed above, 10 U.S.C. § 1552(a)(1) grants discretion to the Secretary of a military department to correct any military record "when the Secretary considers it necessary to correct an error or remove an injustice." § 1552(a)(1). These corrections are to be made "under procedures established by the Secretary concerned. § 1552(a)(3). Most importantly, "[e]xcept when procured by fraud, a correction under this section is final and conclusive on all officers of the United States." § 1552(a)(4).

Because unlike in Mead, Congress' intent here to delegate conclusive decision-making authority to the departments of the military is clear from Subsection (a)(4), this Court should apply Chevron deference to the ABCMR's statutory interpretation.

Under Chevron, in reviewing an agency interpretation of law, a court applies a two-step analysis: first, if Congress has directly spoken on the issue, a court must give effect to unambiguously expressed intent of Congress; second, if statutory gaps remain, a court must give effect to the agency's interpretation unless it is arbitrary and capricious or manifestly contrary to statute. Chevron, 467 U.S. at 842-43; Nat'l Pub. Radio v. FCC, 254 F.3d 226, 228 (D.C. Cir. 2001). Thus, here, this Court must determine whether or not the ABCMR's decision that plaintiffs' West Point ADSOs did not toll during their USUHS medical education is contrary to the ...


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