United States Court of Appeals for the Federal Circuit
04-5012
STEPHEN S. ADAMS and 14,302
other similarly situated plaintiffs,
Plaintiffs-Appellants,
v.
UNITED STATES,
Defendant-Appellee.
Richard P. Bress, Latham & Watkins LLP, of Washington, DC, argued for
plaintiffs-appellants. With him on the brief was J. Scott Ballenger and Nathaniel A.
Vitan, Of counsel on the brief were Jules Bernstein and Linda Lipsett, Bernstein &
Lipsett, of Washington, DC; and Edgar James, James & Hoffman, of Washington, DC.
Shalom Brilliant, Senior Trial Counsel, Commercial Litigation Branch, Civil
Division, United States Department of Justice, of Washington, DC, argued for
defendant-appellee. With him on the brief were Peter D. Keisler, Assistant Attorney
General, and David M. Cohen, Director.
Michael E. Malamut, New England Legal Foundation, of Boston, Massachusetts,
for amicus curiae New England Legal Foundation.
Lawrence Berger, Mahon & Berger, of Garden City, New York, for amicus curiae
Federal Law Enforcement Officers Association.
Appealed from: United States Court of Federal Claims
Judge Lawrence J. Block
United States Court of Appeals for the Federal Circuit
04-5012
STEPHEN S. ADAMS, and 14,302 other similarly-situated plaintiffs,
Plaintiffs-Appellants,
v.
UNITED STATES,
Defendant-Appellee.
__________________________
DECIDED: December 9, 2004
__________________________
Before MICHEL, RADER, and PROST, Circuit Judges.
MICHEL, Circuit Judge.
Stephen S. Adams and 14,302 other similarly-situated individuals (collectively,
“Appellants”) were employed between 1984 and 1995 as GS-9, GS-11, GS-12, and
GS-13 criminal investigators in various federal law enforcement agencies, including the
Bureau of Alcohol Tobacco and Firearms (“BATF”), the Drug Enforcement Agency
(“DEA”), the Internal Revenue Service (“IRS”), the United States Customs Service
(“Customs Service”), and the United States Secret Service (“USSS”).1 They appeal
from the order of the United States Court of Federal Claims granting the Government’s
1
Several of those agencies or units thereof have since been renamed
and/or merged into the United States Department of Homeland Security. See
Homeland Security Act of 2002, Pub. L. No. 107-296 § 1502, 2002 U.S.C.C.A.N. (116
Stat. 2135, 2308 (2002)).
motion to dismiss their takings complaint for failure to state a claim upon which relief
may be granted. Adams v. United States, No. 00-447C, 2003 U.S. Claims LEXIS 238
(Fed. Cl. Aug. 11, 2003). Appellants received overtime compensation, apparently
pursuant to the Federal Employees Pay Act (“FEPA”), codified at 5 U.S.C. § 5542, at a
rate less than one-and-one-half times their regular rate of pay.2 Appellants assert
entitlement to overtime compensation at the rate specified under the Fair Labor
Standards Act (“FLSA”), codified at 29 U.S.C. §§ 201-219, which is at least
one-and-one-half times their regular rate of pay, rather than at the lower rate provided
for in the FEPA. In other words, Appellants seek to recover as damages the difference
between what they received under the FEPA versus the amount they would have
received under the FLSA (“underpaid overtime compensation”). The case was
submitted for decision after oral argument on September 7, 2004. Because Appellants
do not have a cognizable property interest in either the underpaid overtime
compensation or in an administrative claim thereto within the meaning of the Takings
Clause of the Fifth Amendment, we affirm.
I. BACKGROUND
A. Statute of Limitations Applicable to FLSA Claims
The FLSA provides overtime compensation to certain employees who work more
than forty hours per week at a rate not less than one-and-one-half times the employees’
regular rate of compensation. This statute originally did not cover federal employees.
In 1974, however, Congress extended it to federal employees, but exempted those
classified as executive, administrative, or professional. Id. § 213(a)(1).
2
The parties fail to analyze the specific provision under which Appellants
received compensation for overtime work. Nevertheless, the Government cited the
04-5012 2
To recover unpaid overtime compensation under the FLSA, a federal employee
may file either an action at law or a claim before the General Accounting Office (“GAO”).
Actions at law brought under the FLSA are subject to the statute of limitations provided
in the Portal-to-Portal Pay Act, codified at 29 U.S.C. §§ 251-262, which provides for a
two-year limitations period for cases in which the FLSA violation is
non-willful and a three-year period where the violation is willful. Id. § 255(a).
The statute of limitations for administrative claims before the GAO initially was
selected, then revised by, the Comptroller General of the United States and twice
altered by Congress. The numerous changes in the statute of limitations for claims
before the GAO, in part, create the backdrop of the instant takings claim. Therefore, it
is important to have a general understanding of the evolution of the limitations periods
involved.
In 1978, the Comptroller General ruled that the statute of limitations for FLSA
claims before the GAO was not the statutory period specific to FLSA claims, but was six
years as set forth in the more generally applicable Barring Act, codified at 31 U.S.C.
§ 3702(b). In re Transp. Sys. Ctr., 57 Comp. Gen. 441 (1978). Sixteen years later, on
May 24, 1994, the Comptroller General effectively changed the statute of limitations for
FLSA claims before the GAO from six years to two years for non-willful violations and
three years for willful violations, essentially recognizing as applicable the limitations
period specifically set for FLSA claims in the Portal-to-Portal Pay Act. In re Ford, 73
Comp. Gen. 157 (1994).
Shortly thereafter, on September 30, 1994, Congress enacted the Treasury,
Postal Service and General Government Appropriations Act of 1995, Pub. L. No.
FEPA in its brief, a citation that was not contradicted in Appellants’ reply brief.
04-5012 3
103-329, 108 Stat. 2383, 2432 (1994). Section 640 of that act mandated that the
Comptroller General apply a six-year statute of limitations period to any administrative
claim under the FLSA filed prior to June 30, 1994, and a two-year statute of limitations
period to any such claim filed after June 30, 1994.
On November 19, 1995, Congress enacted the Treasury, Postal Service, and
General Government Appropriations Act of 1996, Pub. L. No. 104-52, 109 Stat. 468,
468-69 (1995), which amended Section 640 to further limit the types of FLSA claims
that may be decided by the GAO (“amended Section 640”). Amended Section 640
precluded, among other changes, application of the six-year statute of limitations
originally set forth in Section 640 to employees who had received overtime
compensation under another provision of law. Thus, those employees were limited to
the two-year statute of limitations period.
B. Appellants’ Status Under the FLSA
Pursuant to 5 C.F.R. § 551.201, the BATF, the DEA, the IRS, the Customs
Service, and the USSS independently determined, as the respective employing
agencies, that Appellants were administrative employees exempt from the FLSA and its
overtime provisions. In making this determination, the employing agencies evaluated
whether Appellants’ duties met the administrative exemption criteria set forth in
5 C.F.R. § 551.206. Significantly, Appellants were presumed to be non-exempt under
the civil service regulations, thereby requiring the employing agencies to carry the
burden of establishing that the Appellants met the criteria of § 551.206. Id.
§§ 551.202(a), (c).
Dissatisfied with this exemption determination, Appellants filed an action at law
under the Tucker Act, codified at 28 U.S.C. § 1491, against the Government in the
04-5012 4
United States Court of Federal Claims. Simultaneously, Appellants filed identical
administrative claims before the GAO. In both proceedings, Appellants alleged that
they were improperly ruled exempt from the FLSA and were entitled to damages flowing
from this misclassification. In a decision dated October 30, 1992, the Court of Federal
Claims concluded that some of the Appellants were exempt, while others were
non-exempt. Adams v. United States, 27 Fed. Cl. 5, 28-29 (Fed. Cl. 1992).
On September 23, 1998, we partially reversed the Court of Federal Claims’ ruling
in a non-precedential opinion and remanded the case for further proceedings as to
those criminal investigators held exempted from the FLSA. Adams v. United States,
No. 98-5011, 1998 U.S. App. LEXIS 23565 (Fed. Cir. Sept. 23, 1998) (Table). That case
remains pending before the Court of Federal Claims.
C. Prior Court Proceedings Leading to the Instant Appeal
On October 27, 1995, prior to the enactment of amended Section 640, Appellants
filed suit against the Government in the United States District Court for the District of
Columbia, seeking mandamus, injunctive, and declaratory relief against the GAO for its
inactivity on their administrative claims. Following the enactment of amended Section
640, Appellants twice supplemented their complaint to challenge the constitutionality of
original Section 640 and amended Section 640 under the Due Process and Takings
Clauses of the Fifth Amendment.
On October 12, 1996, the district court granted summary judgment in favor of the
Government. Adams v. Bowsher, 946 F. Supp. 37 (D.D.C. 1996). The district court
addressed Appellants’ due process arguments, ultimately concluding that neither
Section 640 nor amended Section 640 violated the Due Process Clause. As to
Appellants’ takings claim, the district court concluded that a compensable taking did not
04-5012 5
occur, based upon the three factors set forth for regulatory takings in Connolly v.
Pension Benefit Guaranty Corp., 475 U.S. 211, 224-25 (1986). Adams, 946 F. Supp. at
44. Appellants appealed that decision to the United States Court of Appeals for the
District of Columbia Circuit.
On August 28, 1998, the District of Columbia Circuit affirmed the district court’s
decision on the due process claim, but reversed its decision on Appellants’ takings
claim. Adams v. Hincher, 154 F.3d 420 (D.C. Cir. 1998). The circuit court noted that
takings claims for amounts greater than $10,000 fall within the exclusive jurisdiction of
the Court of Federal Claims pursuant to the Tucker Act. Id. at 425-426. Consequently,
the circuit court concluded that the district court might lack jurisdiction to entertain
Appellants’ takings claim and remanded the takings claim to the district court to
determine whether jurisdiction was proper under the Little Tucker Act, codified at 28
U.S.C. § 1346(a)(2), for claims of less than $10,000, which lodges concurrent
jurisdiction in the district courts.
On March 30, 2000, the district court issued an opinion answering the
jurisdictional question posed by the circuit court. Adams v. Walker, No. 95-2015
(D.D.C. Mar. 30, 2000). The district court noted that Appellants sought to amend their
complaint to allege an amount in controversy in excess of $10,000. The district court
stated that the circuit court “essentially rejected [Appellants’] claim for injunctive relief
and viewed it instead as a claim for money damages.” Id., slip op. at 5. Hence, the
district court concluded that justice required it to allow Appellants to amend their
complaint and, therefore, to transfer the case to the Court of Federal Claims. Id., slip.
op. at 6. The district court thus vacated its ruling concerning Appellants’ takings claim
04-5012 6
and ordered the case transferred to the Court of Federal Claims pursuant to the transfer
provision in 29 U.S.C. § 1631. Id., slip. op. at 9.
D. The Court of Federal Claims Decision
On August 4, 2000, after transfer from the district court to the Court of Federal
Claims, Appellants’ complaint claimed that three separate governmental actions
effected a taking of their property under the Fifth Amendment: (1) the Comptroller
General’s Ford decision that retroactively applied a two- or three-year statute of
limitations to their administrative claims instead of the six-year statute of limitations;
(2) the GAO’s failure and refusal in the intervening year to apply the original Section 640
to their administrative claims; and (3) Congress’s amendment of Section 640 in late
1995 restricting restoration of the six-year limitations period to situations where no
overtime was paid at all. In response, the Government asserted that Appellants’ case is
merely a standard FLSA entitlement case disguised as a Fifth Amendment takings
claim. Put differently, the Government argued that Appellants’ claim is one for statutory
entitlement under the FLSA because the only property allegedly taken was FLSA
overtime compensation. The Government also argued that a claim to FLSA overtime
compensation is not “property” within the meaning of the Takings Clause, and
subsequently moved to dismiss the complaint under Court of Federal Claims Rule
12(b)(6) for failure to state a claim upon which relief can be granted and Court of
Federal Claims Rule 12(b)(1) for lack of jurisdiction over the subject matter of the case.
The trial court distilled the parties’ arguments to a single issue: whether
Appellants’ claim involves “property” within the meaning of the Takings Clause of the
Fifth Amendment. Adams, 2003 U.S. Claims LEXIS 238 at *20. To address that issue,
the trial court considered Appellants’ claim for underpaid overtime compensation
04-5012 7
separate from Appellants’ administrative claim. Relying on Commonwealth Edison Co.
v. United States, 271 F.3d 1327 (Fed. Cir. 2001) (en banc), the trial court held that a
governmental obligation to pay money pursuant to a statute is not a protected “property”
interest under the Takings Clause. Adams, 2003 U.S. Claims LEXIS 238 at *20. In
reaching that holding, the trial court focused its analysis on the identification of a true
property interest but concluded that “[a]ll the [appellants] have identified is a
run-of-the-mill claim for liability.” Id. at *27. Additionally, the court reasoned that even if
a statutory right to payment could be considered “property,” the Government had not
“taken” Appellants’ money for its own use; it simply did not pay them because it
determined after analysis that they were exempt from the FLSA. Id. at *30.
As for Appellants’ administrative claim, the court observed that the abolition of a
cause of action may rise to the level of a taking, but only if the cause of action secures a
“legally protected interest.” Id. at *40. For that reason, the court concluded that
Appellants’ administrative claim also must fail, since the interest underlying this claim is
not cognizable as a property right protected by the Takings Clause of the Fifth
Amendment. Id. Moreover, the court noted that the district court and District of
Columbia Circuit already had rejected Appellants’ due process claims. Id. The court
concluded, therefore, that no cause of action to protect Appellants’ property or
procedural rights had been unconstitutionally taken from them. Id. at *41. Accordingly,
the Court of Federal Claims granted the Government’s motion to dismiss and ordered
entry of final judgment in favor of the Government.
Appellants timely appealed, arguing that the Court of Federal Claims erred in
deciding that they did not have a property interest in either FLSA overtime
compensation, or an administrative claim thereto, cognizable under the Takings Clause.
04-5012 8
We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(3) because the appeal is from a
final judgment of the Court of Federal Claims.
II. DISCUSSION
A. Standard of Review
The Court of Federal Claims did not explicitly state whether the motion to dismiss
was granted under Rule 12(b)(1) or under Rule 12(b)(6) of the Rules of the Court of
Federal Claims. Nevertheless, it appears that the Government did not present an
exclusively jurisdictional argument, which would invoke Rule 12(b)(1). Additionally, the
Court of Federal Claims focused on the merits of Appellants’ case in its opinion.
Therefore, the Court of Federal Claims can best be described as having granted the
motion to dismiss under Rule 12(b)(6) of the Court of Federal Claims for failure to state
a claim on which relief can be granted.3
Dismissal for failure to state a claim under Rule 12(b)(6) of the Federal Rules of
Civil Procedure is proper only when a plaintiff “‘can prove no set of facts in support of
his claim which would entitle him to relief.’” Leider v. United States, 301 F.3d 1290,
1295 (Fed. Cir. 2002) (quoting Conley v. Gibson, 355 U.S. 41, 45-46 (1957)). In
reviewing the Court of Federal Claims’ grant of a Rule 12(b)(6) motion, we must assume
that all well-pled factual allegations in the complaint are true and draw all reasonable
inferences in favor of the non-movant. See Leider, 301 F.3d at 1295. Whether the
Court of Federal Claims properly dismissed Appellants’ complaint for failure to state a
claim upon which relief can be granted is a question of law which we review de novo.
See id. (citing Boyle v. United States, 200 F.3d 1369, 1372 (Fed. Cir. 2000)).
3
Rule 12 of the Court of Federal Claims mirrors Rule 12 of the Federal
Rules of Civil Procedure.
04-5012 9
B. The Takings Clause
The Takings Clause of the Fifth Amendment provides, in pertinent part: “nor shall
private property be taken for public use, without just compensation.” U.S. Const.
amend. V, cl. 4. A claimant under the Takings Clause must show that the government,
by some specific action, took a private property interest for a public use without just
compensation. Hodel v. Va. Surface Mining & Reclamation Ass’n, 452 U.S. 264, 294
(1981). In evaluating a takings claim, we have developed a two-step approach. First,
we determine whether the claimant possessed a cognizable property interest in the
subject of the alleged taking for purposes of the Fifth Amendment, i.e., whether the
claimant possessed a “stick in the bundle of property rights.” Karuk Tribe of Cal. v.
Ammon, 209 F.3d 1366, 1374 (Fed. Cir. 2000) (internal citation omitted). Second, once
we have determined that such a property interest exists, we decide “whether the
governmental action at issue constituted a taking of that ‘stick.’” Id. (citing M & J Coal
Co. v. United States, 47 F.3d 1148, 1154 (Fed. Cir. 1995)).
In this case, our analysis focuses on the threshold requirement of a recognized
property interest, i.e., whether Appellants possessed any cognizable property interests
within the meaning of the Takings Clause in either FSLA overtime compensation or in
an administrative claim thereto. The Constitution itself neither creates nor defines the
property interests that if taken by the government are compensable under the Fifth
Amendment. Bd. of Regents of State Colls. v. Roth, 408 U.S. 564, 577 (1972). Rather,
“existing rules or understandings that stem from an independent source,” such as state,
federal, or common law, create and define the dimensions of property interests for
purposes of establishing a cognizable right and hence a potential taking. Lucas v. S.C.
Coastal Council, 505 U.S. 1003, 1030 (1992). We have observed:
04-5012 10
Property interests are about as diverse as the human mind can conceive.
Property interests may be real and personal, tangible and intangible,
possessory and nonpossessory. They can be defined in terms of
sequential rights to possession (present interests — life estates and
various types of fees — and future interests), and in terms of shared
interests (such as those of a mortgagee, lessee, bailee, adverse
possessor), and there are interests in special kinds of things (such as
water, and commercial contracts). And property interests play across the
entire range of legal ideas.
Fla. Rock Indus., Inc. v. United States, 18 F.3d 1560, 1572 n.32 (Fed. Cir. 1994). In
light of the complex nature of property interests and associated rights, we must identify
the precise nature of Appellants’ takings claim on appeal. Appellants argue, as they did
before the Court of Federal Claims, that two specific property interests are implicated,
namely, an interest in payment of underpaid overtime compensation according to FLSA
rates and an interest in an administrative claim thereto before the GAO. We consider
each of these alleged property interests in turn.
i. Do Appellants Possess a Cognizable Property Interest in Their
Asserted Right to Underpaid Overtime Compensation
According to FLSA Rates?
Appellants argue that as of November 18, 1995, they possessed a valid claim
against the Government for six years of underpaid overtime compensation. Appellants
contend that when Congress amended Section 640 on November 19, 1995, reducing
the limitations period for certain claims from six to two years, the Government
confiscated via a per se taking four years of their claim for underpaid overtime
compensation under the FLSA without just compensation.
Appellants assert that vested property rights may be created by either statute or
contract, proceeding on both theories in the alternative. Focusing first on statutory
grounds, Appellants contend that they acquired property rights in underpaid overtime
compensation under the FLSA for six previous years because such rights vested at the
04-5012 11
end of each pay period during which they worked hours of overtime, and the statute of
limitations was six years. Appellants assert that the Government was obligated as a
matter of law to pay them for these overtime hours at the FLSA rate (i.e., at least one-
and-one-half times their regular rate), not at any lesser rate under the FEPA or any
other statute. As examples of cases that recognize property interests and derivative
rights created by statute, Appellants cite United States v. Larionoff, 431 U.S. 864
(1977), Zucker v. United States, 758 F.2d 637 (Fed. Cir. 1985), and Kizas v. United
States, 707 F.2d 524 (D.C. Cir. 1983).
We disagree that Appellants own any Fifth Amendment property interest
pursuant to the FLSA statute. Appellants confuse a property right cognizable under the
Takings Clause of the Fifth Amendment with a due process right to payment of a
monetary entitlement under a compensation statute.4 Larionoff, Zucker, and Kizas are
inapposite because each involves enforcing a statutory entitlement to compensation for
employment, not recognizing the predicate for a takings claim. In Larionoff, the
Supreme Court considered a soldier’s entitlement to a reenlistment bonus under the
statutory Variable Reenlistment Bonus Program. 431 U.S. at 866. Similarly, in Zucker,
we decided civil servant retirees’ entitlement to cost-of-living-adjustments under the Civil
Service Retirement Act, while in Kizas, the United States Court of Appeals for the
District of Columbia Circuit addressed FBI agents’ entitlement to a “special preference”
4
Generally, entitlements are considered to be government conferred
benefits, safeguarded exclusively by procedural due process. See Bd. of Regents v.
Roth, 408 U.S. 564, 577 (1972). In light of this, entitlements are often referred to as
“property interests” within the meaning of the Due Process Clause in cases decided
under that clause, but such references have no relevance to whether they are “property”
under the Takings Clause.
04-5012 12
as an element of compensation under Title 5 of the United States Code. Zucker, 758
F.2d at 639-40; Kizas, 707 F.2d at 534-38.
Appellants alternatively contend that the assertedly applicable FLSA rate of
overtime compensation became a contractual right once the work was completed.
Appellants rely on a passage from Fisk v. Jefferson Police Jury, 116 U.S. 131 (1885), to
support that contention: “But after the services have been rendered, under a law,
resolution, or ordinance which fixes the rate of compensation, there arises an implied
contract to pay for the services at that rate. This contract is a completed contract.” Id.
at 133-34. Pursuing a contract theory, Appellants contend that they acquired vested
property rights to the underpaid overtime compensation via an implied contract with the
Government formed when they completed the overtime work. For support, Appellants
cite to selected cases, such as Lynch v. United States, 292 U.S. 571 (1934), wherein
courts have found that sometimes rights arising out of a contract can be protected by
the Takings Clause of the Fifth Amendment.
Appellants’ contract theory is without merit. At the outset, Appellants
mischaracterize Fisk. The plaintiff in Fisk served as a Louisiana parish district attorney
by appointment, and a municipal law fixed his salary. When the Parish of Jefferson
failed to pay his salary for four years, plaintiff sued in state court for recovery,
requesting a writ of mandamus to compel the parish to assess and collect a tax for the
payment of his salary. The Supreme Court of Louisiana denied the writ based upon a
provision of the Louisiana Constitution limiting the power to levy a tax. The plaintiff
sought review in the United States Supreme Court, arguing that the Louisiana
constitutional provision impaired the obligation of his contract as guaranteed by the
04-5012 13
Contract Clause of the United States Constitution. Fisk, 116 U.S. at 133. The United
States Supreme Court agreed, concluding that
[the plaintiff’s] appointment as district attorney was lawful and was a
request made to him by the proper authority to render the services
demanded of that office. He did render these services for the parish, and
the obligation of the police jury to pay for them was complete. Not only
were the services requested and rendered, and the obligation to pay for
them perfect, but the measure of compensation was also fixed by the
previous order of the police jury. There was here wanting no element of a
contract.
Id. at 134. Thus, Fisk involved an unconstitutional provision of state law and was
decided under the Contracts Clause, not the Takings Clause.
Appellants cite no case law to show that either the United States Supreme Court
or this court would view a takings claim against the United States in the same light. Like
all federal employees, Appellants served by appointment. The terms of their
employment and compensation, consequently, were governed exclusively by statute,
not contract. They had not, and could not have, entered into any separate agreement
with the Government, express or implied, for additional overtime compensation beyond
that to which they were entitled by the applicable statute. Hence, contrary to Appellants’
characterization of their entitlement to underpaid overtime compensation as based on
an implied contract, Appellants had nothing more than a unilateral expectation to
receive FLSA, rather than FEPA, overtime compensation for their hours of overtime
work. Indeed, the District of Columbia Circuit previously recognized that
federal workers serve by appointment, and their rights are therefore a
matter of legal status even where compacts are made. In other words,
their entitlement to pay and other benefits must be determined by
reference to the statutes and regulations governing [compensation], rather
than to ordinary contract principles. Though a distinction between
appointment and contract may sound dissonant in a regime accustomed
to the principle that the employment relationship has its ultimate basis in
contract, the distinction nevertheless prevails in government service.
04-5012 14
Applying these doctrines, courts have consistently refused to give effect to
government-fostered expectations that, had they arisen in the private
sector, might well have formed the basis for a contract or an estoppel.
These cases have involved, inter alia, promises of appointment to a
particular grade or step level, promises of promotion upon satisfaction of
certain conditions, promises of extra compensation in exchange for extra
services, and promises of other employment benefits.
Kizas, 707 F.2d at 535 (citations and internal quotations omitted).
Furthermore, Appellants’ reliance on Lynch is misplaced. In Lynch, despite the
government having duly issued the insured a lawful insurance policy, Congress
abrogated by legislation all such policies in force. Here, unlike in Lynch, the
Government did not enter into any private agreement with Appellants regarding the
terms or rates of Appellants’ overtime compensation, and Congress did not abrogate
any such contract. The Government, in fact, could not have contracted to pay
Appellants for overtime work at a rate of at least one-and-one-half their regular rate of
pay because, like all government employees, Appellants’ compensation is governed
exclusively by statute. Consequently, as previously stated, Appellants cannot be
contractually entitled to overtime compensation at the rate specified under the FLSA or
any other pay statute. When the Government and private parties contract, as in Lynch,
the private party usually acquires an intangible property interest within the meaning of
the Takings Clause in the contract. The express rights under this contract are just as
concrete as the inherent rights arising from ownership of real property, personal
property, or an actual sum of money. Here, no contract established in Appellants a
property interest in overtime compensation at a particular rate under the FLSA.
Because Appellants cannot show that they had a contract with the Government, they
are not entitled to Takings Clause protection under Lynch.
04-5012 15
Extending its contract theory, Appellants particularly equate the Government’s
alleged statutory obligation to pay them overtime compensation at the FLSA rate with a
debt owed by a debtor to a lender. They use the word “debt” repeatedly, but they distort
the meaning of this word. That is, Appellants claim that when they performed the
overtime work, the Government incurred a debt commensurate with paying them for
their labor at the FLSA rate, not a lesser rate under an alternative overtime pay statute.
Appellants contend, in turn, that paying this “debt” is akin to paying the insurance policy
proceeds in Lynch or the gold standard bonds in Perry v. United States, 294 U.S. 330
(1935).
Appellants’ argument is wholly unpersuasive. In Lynch, an insured purchased a
war insurance policy from the United States, effectively lending money to the
Government in exchange for future payment on the value of the policy at the time of the
insured’s death. 292 U.S. at 574-75. Likewise, in Perry, the bond owner purchased a
gold bond from the United States, also in effect lending money to the Government in
exchange for payment of the principal amount of the bond plus interest in gold coins.
294 U.S. at 346-47. In both cases, the Government agreed with the lenders, i.e., the
insured and the bond owner, to make future payment of either the policy amount in the
case of a war insurance policy or the bond principal plus interest in the case of the gold
bond in exchange for the immediate use of their money. Also, the Government’s “debt”
to the insured and the bond owner was evidenced in a legal instrument issued by the
Government to acknowledge and create the debt, respectively an insurance policy and
a bond certificate. Here, as stated above, the Government and Appellants did not, and
could not have, agreed that the Appellants would “loan” their underpaid overtime
compensation to the Government in exchange for a “debt” owed by the Government to
04-5012 16
them. Additionally, the Government issued no underlying legal instrument evidencing
the Government’s agreement to a loan. The only legal instrument, the Form 50, rather
than acknowledging Appellants’ right to be paid for overtime at the rate specified in the
FLSA, instead indicated that the FLSA did not apply to them. Thus, Appellants are not
in the same position as the insured and bond holder in Lynch and Perry, but instead are
in the opposite position. Accordingly, as the Government argues, Appellants are not
owed a debt; they have nothing more than a bald allegation that they are owed
underpaid overtime compensation by the Government.
Lastly, Appellants argue that the Court of Federal Claims misunderstood and
misapplied our Commonwealth Edison decision. Appellants assert that this court in
Commonwealth Edison did not intend to suggest by using the phrase “specific fund of
money”5 that the Takings Clause applies only when a particular sum or account is at
stake. Rather, Appellants contend that this court used the phrase merely to distinguish
between an obligation imposed by the Government to pay money to achieve a
regulatory objective, as in that case, and confiscation of specific money by the
Government, as in a classic per se taking, which Appellants argue occurred here.
5
The phrase “fund of money” as used in Commonwealth Edison derives
from Justice Breyer’s dissent in Eastern Enterprises v. Apfel, 524 U.S. 498 (1998).
Justice Breyer stated: “But the monetary interest at issue there [referring to Webb’s
Fabulous Pharmacies, Inc. v. Beckwith, 449 U.S. 155 (1980)] arose out of the operation
of a specific, separately identifiable fund of money.” E. Enters., 524 U.S. at 555
(emphasis added).
04-5012 17
New England Legal Foundation (“NELF”), as amicus curiae,6 advances a similar
argument, going so far as to assert that the alleged underpaid overtime compensation is
a “fund of money.” NELF reaches this position by advocating that “[t]he key to
a ‘fund of money’ is that it must be ‘specific’ and ‘separately identifiable,’ not that it be
kept in a separate account.” In other words, NELF appears to claim that as long as the
money allegedly owed is both “specific” and “separately identifiable,” then it qualifies as
a protected “fund of money.” NELF contends that Appellants theoretically could
calculate the amount of underpaid overtime compensation by multiplying the total
number of overtime hours by the applicable overtime rate under the FLSA. Accordingly,
NELF asserts that the amount of underpaid overtime compensation due to Appellants is
both “specific” and “separately identifiable,” even if it is not maintained in a separate
account by the Government.
The Government seeks to refute Appellants’ and NELF’s positions, arguing that
the Court of Federal Claims was correct that an ordinary statutory obligation to pay
money can never constitute property for purposes of the Takings Clause. The
Government asserts that Appellants and NELF plainly ignore the holding in
Commonwealth Edison and attempt to distinguish that case based on differences
between the facts there and those here that are immaterial. Additionally, the
Government claims that NELF fails to explain how the alleged underpaid overtime
compensation is any more a “fund of money” than the obligation to pay money in
Commonwealth Edison. Indeed, the Government further contends the allegedly
6
The Federal Law Enforcement Officers’ Association (“FLEOA”) also
presented an amicus curiae brief in support of Appellants’ position. However, the
FLEOA did not address the substance of a takings analysis, but instead focused
primarily on the unfairness of not granting Appellants’ relief.
04-5012 18
underpaid overtime compensation here is even less a “specific” and “separately
identifiable” fund than the monetary obligation in Commonwealth Edison.
Like the Government, we do not read Commonwealth Edison in the same light as
either Appellants or NELF. In Commonwealth Edison, Congress imposed a monetary
assessment in the Energy Policy Act of 1992, Pub. L. No. 102-486, 106 Stat. 2776
(codified as amended in various sections of 42 U.S.C.), on all domestic utilities such as
Commonwealth Edison that used uranium re-processing facilities operated on their
behalf by the United States Department of Energy. Under the Energy Policy Act, the
Government was to use the revenue generated by the assessment to fund part of the
cost of environmental remediation of its contaminated re-processing facilities. We held
that Congress did not effect a taking within the meaning of the Fifth Amendment by
imposing a statutory obligation to pay money on the utility companies. Commonwealth
Edison, 271 F.3d at 1340. In reaching this conclusion, we followed the views of a
majority7 of the justices of the Supreme Court in Eastern Enterprises. Id. at 1338. In
that case, the Supreme Court addressed the constitutionality of the Coal Industry
Retiree Health Benefit Act of 1992, codified at 26 U.S.C. §§ 9701-9722 (the “Coal Act”).
The Coal Act required certain coal mine operators to fund future health benefits
of former coal mine employees of defunct companies, even though the paying, extant
companies never employed them. Writing for the plurality, Justice O’Connor, joined by
Chief Justice Rehnquist and Justices Scalia and Thomas, concluded that the retroactive
impact of the Coal Act as applied to Eastern Enterprises was an unconstitutional taking
7
Notably, there was not a majority opinion of the Supreme Court in Eastern
Enterprises. By referring to “a majority” view herein, we mean those views expressed in
04-5012 19
because it placed a “severe, disproportionate and extremely retroactive burden” on the
extant coal operators. E. Enters., 524 U.S. at 538. While concurring in the result,
Justice Kennedy disagreed with the plurality’s conclusion that an obligation to pay
money can support a taking, because
[the Coal Act] does not operate upon or alter an identified property
interest, and it is not applicable to or measured by a property interest. The
Coal Act does not appropriate, transfer, or encumber an estate in land
(e.g., a lien on a particular piece of property), a valuable interest in an
intangible (e.g., intellectual property), or even a bank account or accrued
interest. The law simply imposes an obligation to perform an act, the
payment of benefits.
Id. at 540. Indeed, the four dissenters, namely, Justices Stevens, Souter, Ginsburg,
and Breyer, specifically “agreed that the Takings Clause was not implicated because
‘the private property upon which the [Takings] Clause traditionally has focused is a
specific interest in physical or intellectual property. . . . This case involves not an interest
in physical or intellectual property, but an ordinary liability to pay money.’” Id. at 554.
We thus held in Commonwealth Edison that “the mere imposition of an obligation to pay
money, as here, does not give rise to a claim under the Takings Clause of the Fifth
Amendment.” Commonwealth Edison, 271 F.3d at 1340. Given the precise language
found in Justice Kennedy’s concurrence and the dissent, we premised our holding in
Commonwealth Edison not on whether the statutory obligation was imposed for
purposes of regulation or confiscation as suggested by Appellants, but rather on the
nature of the interest in dispute (i.e., a legally-recognized property interest such as one
in real estate, personal property, or intellectual property, versus an ordinary obligation to
the concurring opinion of Justice Kennedy together with those expressed in the
dissenting opinion of Justices Stevens, Souter, Ginsburg, and Breyer.
04-5012 20
pay money). The former is protected as property under the Takings Clause, whereas
the latter is not because it lacks any foundation in property law.
We also took care in Commonwealth Edison to distinguish the specific funds
implicated in Phillips v. Washington Legal Foundation, 524 U.S. 156 (1998), and Webb’s
Fabulous Pharmacies, Inc. v. Beckwith, 449 U.S. 155 (1980), as legitimate property
interests from statutory obligations to pay money. 271 F.3d at 1338. Particularly, we
noted that each contributor’s share of interest income generated by funds held in a
specific, consolidated Interest on Lawyers Trust Account, commonly known as an
IOLTA account, is the private property of that contributor for purposes of the Takings
Clause. See Phillips, 524 U.S. at 160. Similarly, we observed that each contributor’s
share of interest generated from deposits into a specific, consolidated interpleader
account is a property interest of that contributor within the meaning of the Takings
Clause. See Webb’s Fabulous Pharmacies, 449 U.S. at 164-65. In light of our use of
the term “specific” to mean an actual sum of money representing interest derived from
ownership of particular deposits in an established account, as opposed to some
abstract sum of money capable of being calculated, NELF’s argument cannot stand.
While it may be debatable to what extent the precise holding in Commonwealth
Edison controls the instant case, this decision certainly provides the principle for
determining how to treat the instant claim of a statutory entitlement to money under the
Takings Clause. Both the Government and the Court of Federal Claims correctly noted
that Commonwealth Edison clearly suggests that no statutory obligation to pay money,
even where unchallenged, can create a property interest within the meaning of the
Takings Clause. Here, in Appellants’ claim that the Government is obligated to pay
underpaid overtime compensation under the FLSA, we are faced with a statutory
04-5012 21
obligation to pay money, just as was implicated in Commonwealth Edison. Hence,
based upon the principle of Commonwealth Edison, Appellants do not possess a
property interest under the Takings Clause.
What is more, we conclude that a statutory right to be paid money, at least in the
context of federal employee compensation and benefit entitlement statutes, is not a
property interest for purposes of the Takings Clause. Appellants have neither cited, nor
are we independently aware of, any appellate court decision recognizing a statutory
obligation to be paid money as a property interest grounded in property law. We decline
to treat a statutory right to be paid money as a legally-recognized property interest, as
we would real property, physical property, or intellectual property. Instead, we view it as
nothing more than an allegation that money is owed. We thus conclude that Appellants
cannot prove any set of facts that could support granting their requested relief.
ii. Do Appellants Possess a Cognizable Property Interest in an
Administrative Claim to Underpaid Overtime Compensation
Before the GAO?
Appellants argue, but only in a cursory fashion, that as of November 18, 1995,
they owned a valid administrative claim before the GAO to recover their unpaid overtime
compensation.8 They contend that when Congress amended Section 640 on November
19, 1995, the Government entirely extinguished their administrative claim to underpaid
overtime compensation, effecting a per se taking of their private property without just
compensation. Appellants rely on Alliance of Descendants of Texas Land Grants v.
United States, 37 F.3d 1478 (Fed. Cir. 1984), to support their argument that their GAO
claim, like certain causes of action, is “property” within the meaning of the Takings
04-5012 22
Clause. What is more, Appellants maintain that it was immaterial that their claim had
not yet been decided by the GAO when Section 640 was amended.
Although we agree with Appellants that sometimes a cause of action may fall
within the definition of property recognized under the Takings Clause, we observe, like
the Court of Federal Claims, that precedent has limited the application of the Takings
Clause to cases in which the cause of action protects a legally-recognized property
interest. See, e.g., Cities Serv. Co. v. McGrath, 342 U.S. 330 (1952) (holding that
seizure by Alien Property Custodian of interest represented by bond or debenture
without seizure of instrument itself is unconstitutional taking of obligor's property unless
he is assured that he has claim against United States for recoupment in the event of
subsequent recovery against him in foreign court by holder in due course of debenture).
Such is not the case here because, as discussed in detail above, the underlying subject
matter of Appellants’ alleged administrative claim fails to qualify as a recognized
property interest under the Takings Clause. Appellants’ reliance on Alliance of
Descendants is utterly misplaced because the cause of action there was to recover
compensation for an interest in land, a property interest cognizable under established
takings jurisprudence because land is, beyond question, property under state and
common law. Alliance of Descendants, 37 F.3d at 1481. Appellants have not cited any
precedent finding such a property interest in a claim of Government liability before an
administrative agency. Hence, we conclude that Appellants do not possess a
cognizable property interest in any part of their administrative claim before the GAO.
iii. Per Se Takings Argument
8
Appellants devoted little attention to this issue, discussing it only in a
handful of paragraphs in their opening and reply briefs. Consequently, we view it as a
secondary argument and treat it accordingly in this opinion.
04-5012 23
Because we agree with the Court of Federal Claims that Appellants do not
possess any cognizable property interest within the meaning of the Takings Clause, we
necessarily hold that the Government could not commit a per se taking without just
compensation any more than it could commit a regulatory or any other kind of taking.
III. CONCLUSION
The order of the Court of Federal Claims granting the Government’s motion to
dismiss and the resulting judgment for the Government are
AFFIRMED.
04-5012 24
Adams v. United States
Court: Court of Appeals for the Federal Circuit
Date filed: 2004-12-09
Citations: 391 F.3d 1212
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