6 Binding The Federal Government

Transcription

1 6 Binding The Federal Government PART A: UNAUTHORIZED REPRESENTATIONS BY GOVERNMENT EMPLOYEES EQUITABLE ESTOPPEL 6.01 INTRODUCTION TO THE QUESTION OF EQUITABLE ESTOPPEL AGAINST THE FEDERAL GOVERNMENT Justice Oliver Wendell Holmes admonished nearly a hundred years ago that [m]en must turn square corners when they deal with the Government. 1 But it is impossible to turn squarely unless one learns where those corners are. And when a government agent purports to offer a map to negotiate those curves, that turns out to be false because the agent lacked authority and was speaking out of bounds, the sharp edges of those corners hurt all the more. Yet if a court were to afford a plaintiff a means to escape erroneous governmental advice, especially when the agent s advice exceeded statutory or regulatory boundaries, the result might undermine the rule of law or discourage the government from offering informational services. Before inquiring whether the federal government may be subject to equitable estoppel in the same manner as a private party, we first must understand the basic nature of this common-law theory for imposing liability. A leading administrative law treatise explains the elements of the private law of equitable estoppel in this way: When Jones makes a representation to Smith, who reasonably relies to his detriment on that representation, Jones is then estopped to deny the truth of that representation. In this general form, estoppel includes elements of reasonable reliance on a representation and detrimental change in position caused by this reliance. 2 1 Rock Island, Ark. & La. R.R. Co. v. United States, 254 U.S. 141, 143, (1920) (Holmes, J.). 2 ALFRED C. AMAN, JR. & WILLIAM T. MAYTON,ADMINISTRATIVE LAW , at (West Group, 2d ed. 2001). 399

2 400 Litigation With The Federal Government 6.01 The classic government estoppel case involves an alleged misstatement by a government employee about the rules governing the process to apply for, or the rules governing eligibility for, a government program. The claimant or putative beneficiary relies upon this statement, but then discovers it is mistaken, to his or her detriment. For example, the person may decide not to apply for the program, based upon mistaken advice by a government employee that he or she was not eligible, thereby forgoing valuable benefits for a period of time. Or an individual may rely upon program coverage to which he or she has been assured by a government employee, only to later find that the coverage is not there when he or she really needs it, owing to mistaken advice about eligibility for or the scope of the program. The archetypal scenario is that which framed the background to the landmark Supreme Court decision in Federal Crop Insurance Corp. v. Merrill. 3 In Merrill, a farmer applied for crop insurance and was assured by the government agent that his entire crop qualified for insurance. After the farmer s crop was lost, it was discovered that the agent s advice concerning coverage was mistaken, because some of the crop was reseeded wheat, which was ineligible for coverage under the applicable crop insurance regulations. The Supreme Court acknowledged that the farmer had acted in reliance upon the agent s representation and had suffered a hardship as a consequence. Nonetheless, the Court held that the regulation must be followed and coverage denied, notwithstanding the agent s unauthorized and erroneous representations: Whatever the form in which the Government functions, anyone entering into an arrangement with the Government takes the risk of having accurately ascertained that he who purports to act for the Government stays within the bounds of his authority. The scope of this authority may be explicitly defined by Congress or be limited by delegated legislation, properly exercised through the rule-making power. And this is so even though, as here, the agent himself may have been unaware of the limitations upon his authority. The result in Merrill, thus, was rather different from what would have followed had private parties been involved and had the misrepresentation pertained to a private transaction. Yet, despite the hardship suffered by the plaintiff, the Merrill result was, as will be seen, the typical disposition of such claims in the federal courts. While the door to an alternative outcome in an unusually egregious case has never been sealed shut, a presumption against U.S. 380, (1947).

3 6.02 Binding The Federal Government 401 estoppel of the government, which rises to an apparently absolute prohibition in money cases, prevails THE PRESUMPTION AGAINST ESTOPPEL OF THE FEDERAL GOVERNMENT The Supreme Court long has refused to allow equitable estoppel to lie against the federal government, while always leaving open the possibility that an unusually egregious case might arise in which such a remedy would be warranted. The Court rather consistently over the decades has held that the federal government may not be equitably estopped from insisting upon compliance with legal requirements, stated in statute or regulation, notwithstanding that private parties may, as a result, suffer hardship in a particular case. The rule precluding estoppel of the government has been applied to misrepresentations of law; 4 misrepresentations of fact; 5 oral misrepresentations; 6 written representations; 7 misrepresentations in the form of longstanding administrative rulings; 8 and off-hand remarks by government employees. 9 In fact, although there are a couple of ambiguous cases that could be characterized as involving estoppel, the Supreme Court has never forthrightly imposed the doctrine against the United States. And yet, while refusing to apply equitable estoppel in each and every case that has come before it, the Court has declined to hold that the government may never be estopped. 10 The Court has suggested that it is at least possible that a case of serious affirmative misconduct by the government might arise in which equitable estoppel would be appropriately levied against the United States. Nonetheless, as the Supreme Court s latest commentary confirms, this hypothetical possibility must be placed against the background of a general, and rather strong, presumption against application of estoppel against the federal government. In 1990, the Supreme Court decided Office of Personnel Management v. Richmond, 11 the latest and most significant in the long line of government 4 Schweiker v. Hansen, 450 U.S. 785 (1981). 5 Lee v. Munroe & Thornton, 11 U.S. (7 Cranch.) 366 (1813). 6 Heckler v. Community Health Services, Inc., 467 U.S. 51 (1984). 7 Lee v. Munroe & Thornton, supra. 8 Automobile Club v. Commissioner, 353 U.S. 180 (1957). 9 Montana v. Kennedy, 366 U.S. 308 (1961). 10 Heckler, 467 U.S. at U.S. 414, (1990).

4 402 Litigation With The Federal Government 6.02 estoppel cases to come before the Court. In Richmond, a former government employee, had taken a disability retirement. One of the restrictions upon his eligibility for the disability annuity was a statutory limitation on earnings; if a recipient earned more than the limit, he or she would lose eligibility for benefits. The disabled former government employee took a part-time job, which generally produced earnings below the statutory limits. (Although not relevant to the legal issues in the case, it is curious to note that the individual had been granted a disability retirement by reason of impaired eyesight and yet still was able to secure part-time work transporting school children as a bus driver!) He then had the opportunity to earn more by working overtime. Quite understandably and properly, the former government employee contacted the appropriate federal government office whose employees were responsible for advising on personnel-related matters to inquire how much more he could earn without losing eligibility for the annuity. Relying upon an earlier version of the statute (since superseded), the government agent gave the former employee incorrect advice. The former employee took the overtime work, earned the extra income, and, as a consequence, lost six months of benefits by exceeding the statutory limit. He appealed the denial of benefits to the Merit Systems Protection Board (MSPB), arguing that his reliance on the erroneous advice should estop the government from holding him ineligible under the statute. 12 The MSPB ruled that the government could not be estopped from enforcing a statutorily imposed requirement. The United States Court of Appeals for the Federal Circuit reversed, holding that while the government may not ordinarily be estopped, the agent s reliance on a defunct statute was affirmative misconduct that should bind the government under these circumstances. The Supreme Court reversed in Richmond and refused to estop the United States from enforcing a statutory limit upon payments of money from the public treasury, indeed finding a constitutional prohibition against doing so. 13 The Court labeled the purported affirmative misconduct exception to the prohibition on government estoppel as dicta, saying that this proposition had taken on something of a life of its own in the lower courts. 14 In rather admonitory language, the Court observed that the courts of appeals have taken our statements as an invitation to search for an appropriate case in which to apply estoppel against the Government, yet [the Supreme Court has] reversed every finding of estoppel that [it has] re- 12 Id. at See infra Richmond, 496 U.S. at

5 6.03 Binding The Federal Government 403 viewed. In sum, the Court sent a strong signal to the lower federal courts that equitable estoppel is strongly disfavored and reminded them that the Supreme Court has never approved its application. Nonetheless, as in prior cases, the Court in Richmond stopped short of saying, unambiguously and without exception, that equitable estoppel simply cannot apply to the United States. 15 While characterizing the government s arguments for an absolute no-estoppel rule as substantial, the Court put the issue off for another day, finding it unnecessary to the resolution of this case. Instead of articulating a clear rule on estoppel of the government in general, the Richmond Court stated that [a] narrower ground of decision is sufficient to address the type of suit presented here, a claim for payment of money from the Public Treasury contrary to a statutory appropriation. As discussed next, the Court broadly precluded the application of equitable estoppel against the federal government when it would effectively disburse funds contrary to congressional restrictions on the use of appropriations THE PROHIBITION ON ESTOPPEL OF THE FEDERAL GOVERNMENT IN STATUTORY MONEY CASES In Office of Personnel Management v. Richmond, 16 the Supreme Court suggested that equitable estoppel against the federal government is generally disfavored, as discussed above, 17 and then emphatically barred estoppel claims that seek payments from the public treasury contrary to statutory limitations on the use of appropriate funds. The Appropriations Clause of the United States Constitution provides that: No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law. 18 In Richmond, the Court cited the Appropriations Clause as precluding waiver of the statutory limitations on payment of disability benefits when the claimant had earned excessive outside income, even though the claimant had relied upon erroneous government advice. 19 The Court held that mistaken advice given by a government employee to a benefits claimant may not estop the government from denying benefits which are not otherwise permitted by law. Writing for the Court in Richmond, Justice Kennedy emphasized the straightforward and explicit command of the Appropriations Clause of the 15 Id. at U.S. 414 (1990). 17 See supra U.S. CONST., art. I, 9, cl Richmond, 496 U.S. at 424.