Opinion
CIVIL NO. SA-01-CA-1165-OG.
November 22, 2002.
MEMORANDUM AND RECOMMENDATION OF THE UNITED STATES MAGISTRATE JUDGE
Pursuant to the order of referral in the above-styled and numbered cause of action to the undersigned United States Magistrate Judge and consistent with the authority vested in United States Magistrate Judges under the provisions of 28 U.S.C. § 636(b)(1)(B) and rule 1(d) of the Local Rules for the Assignment of Duties to United States Magistrate Judges, effective January 1, 1994, in the Western District of Texas, the following report is submitted for your review and consideration.
Docket no. 3.
I. JURISDICTION
Plaintiffs alleged subject matter jurisdiction pursuant to 28 U.S.C. § 1331 and 1346(a).
Docket no. 8 at 3. Section 1346(a)(2), also referred to as the "Little Tucker Act," waives sovereign immunity and confers jurisdiction in federal district courts and the United States Court of Federal Claims over "[a]ny other civil action or claim against the United States, not exceeding $10,000 in amount, founded either upon the Constitution, or any Act of Congress, or any regulation of an executive department. . . ." Army and Air Force Exch. Serv. v. Sheehan., 456 U.S. 728, 734, 102 S.Ct. 2118, 2122 (1982). Section 1346(a)(1) addresses recovery of internal revenue taxes and is not argued to be applicable to this case.
II. PROCEDURAL HISTORY AND SUMMARY OF ARGUMENTS
A. Procedural HistoryOn December 21, 2001, plaintiffs filed a complaint pursuant to 28 U.S.C. § 1331 and 1346(a), naming as defendants the United States of America; the United States Department of Defense; Honorable Donald H. Rumsfeld in his official capacity as Secretary of the Department of Defense; and the United States Congress and its individual members in their official capacities. Plaintiffs allege they are: totally or partially disabled, retired military service members; retired military personnel who received early retirement with benefits due to the Force Reduction Program; legal dependents of the above; and commissioned officers of the National Oceanic and Atmospheric Administration and Public Health Services who receive retirement pay and Veteran's Administration ("VA") disability pay. In brief, plaintiffs' original complaint challenges the constitutionality of a statutory scheme that prevents military retirees from receiving both full retirement pay and veterans' benefits, alleges that the retirement scheme violates the Equal Protection Clause of the Fifth Amendment and the Americans with Disabilities Act ("ADA"), pleads equitable estoppel, and seeks declaratory and injunctive relief as well as statutory and exemplary damages.
Docket no. 1 at 2, 3.
Id. at 3.
Docket no. 1 at 4.
After service of the original complaint, but before the appearance of any defendant, on January 8, 2002, plaintiffs filed their first amended complaint. On March 26, 2002, plaintiffs filed their second amended complaint. Plaintiffs' second amended complaint is plaintiffs' "live" pleading and, therefore, is summarized in further detail.
Docket no. 2 at 3.
Docket no. 8. Plaintiffs and defendants filed a joint motion to allow plaintiffs to file an amended complaint, tendered with the motion, and to allow defendants an additional 60 days to file an answer or other responsive pleading. Docket no. 6. The Court granted this motion on March 26, 2002. Docket no. 7.
Plaintiffs challenge the retirement scheme applicable to them by which they are not permitted to receive both full longevity or disability retirement pay under Title 10, United States Code, chapters 61 and 71, and full disability compensation from the VA under Title 38, United States Code because, in order to receive VA disability compensation, a retiree is required to waive retired pay in an amount equal to any VA compensation received. Plaintiffs' second amended complaint alleges that the retirement scheme violates the Equal Protection and Due Process Clauses of the Fifth Amendment, the ADA, the Rehabilitation Act of 1973, and principles of equity. More specifically, plaintiffs allege that defendants violate the Equal Protection Clause of the Fifth Amendment of the United States Constitution by treating plaintiffs differently than other members of the class of federal employees by requiring plaintiffs to offset the amount of military retirement pay they receive by any amount of VA disability pay they receive. Plaintiffs further allege that by requiring the offset, defendants violate the Due Process Clause of the Fifth Amendment by taking plaintiffs' property rights without just compensation, and violate the ADA and the Rehabilitation Act of 1973. Plaintiffs seek a declaratory judgment that: the retirement scheme violates the Fifth Amendment's Equal Protection and Due Process Clauses; defendants have "intentionally and/or negligently inflicted emotional distress" on plaintiffs; defendants "substantially breached their fiduciary duty to plaintiffs resulting in the loss" in value of their retirement compensation; and that defendants are equitably estopped from continuing to offset plaintiffs' retirement pay with the amount of their VA disability pay. Plaintiffs also seek an award of damages "not to exceed $10,000" for each plaintiff based on the violations of the Equal Protection and Due Process Clauses of the Fifth Amendment, the ADA, the Rehabilitation Act of 1973 and "legal principles of equity."
Docket no. 8 at 5-9. Plaintiffs' second amended complaint sets forth two "counts," one for "declaratory relief" and a second for "damages." See id. at 5 and 8.
Id. at 5-8.
Id.
Id. at 7-8.
Id. at 8-9.
On May 28, 2002, defendants filed a motion to dismiss plaintiffs' complaint. In brief, defendants argue that plaintiffs have failed to state a claim for relief under the Equal Protection Clause of the Fifth Amendment because such a claim arises under 28 U.S.C. § 1346(a) and the Court is bound by the decision of the Federal Circuit in Absher v. United States, which held that dual compensation-prohibiting statutes are constitutional. Defendants further argue that plaintiffs have failed to state a claim under the Due Process Clause of the Fifth Amendment because plaintiffs do not have a valid property right in the veterans' benefits. Defendants also argue that any claim for intentional and negligent infliction of emotional distress should be dismissed because plaintiffs failed to plead a jurisdictional basis for these claims. Defendants move to dismiss plaintiffs' claims based on ADA, the Rehabilitation Act of 1973 and legal principles of equity, on the ground there is no legal basis for the claims. Finally, defendants move to dismiss plaintiffs' claims against the United States Congress and its individual members, sued in their official capacities, on the ground that the claims are barred by sovereign immunity, the immunity provided by the Speech or Debate Clause, and due to plaintiffs lack of standing to sue the congressional defendants.
Docket no. 12.
Id. at 3-4.
Id. at 10-12.
Id. at 12.
Id. at 13-15.
Id. at 16-17.
Id. at 17-19.
Id. at 19 and 20.
On August 26, 2002, plaintiffs filed their opposition to defendants' motion to dismiss. Plaintiffs withdrew all claims based on any ground other than alleged violations of the Equal Protection Clause and of the Takings Clause of the Fifth Amendment. Plaintiffs oppose the dismissal of their Fifth Amendment claims, arguing that they have stated a claim and can pursue both declaratory relief and damages under the Fifth Amendment. On September 9, 2002, defendants filed their reply, asserting that plaintiffs' claims under the Equal Protection and Takings Clauses are precluded. B. Summary of the Arguments
Docket nos. 17 and 18.
Docket no. 18 at 3 n. 1 ("Plaintiffs will withdraw their claims based on grounds other than Fifth Amendment equal protection violation and the Fifth Amendment Takings Clause, and the submission of `suspect/quasi-suspect' class for the Court to decide as a case of first impression"). Therefore, only plaintiffs' claims under the Equal Protection Clause and of the Takings Clause of the Fifth Amendment are further addressed in the analysis section of this report.
Id. at 5-11.
Docket no. 19.
Plaintiffs' remaining Fifth Amendment claims are based on their assertion that the "offset requirement," that is, the requirement that they waive full longevity or disability retirement pay based on their active duty military service in an amount equal to any VA disability compensation, violates the Equal Protection Clause because it treats military retirees differently than other federal retirees and takes their property right in retirement pay without due process. Defendants' motion to dismiss presents two principal reasons why plaintiffs have failed to state a Fifth Amendment claim.
Docket no. 12 at 3-9. At the threshold, defendants note that because § 1346 operates only to waive sovereign immunity but does not create a cause of action, plaintiffs must demonstrate a substantive right to the payment of money by the United States. Id. at 3-4. When a plaintiff fails to establish a money-mandating provision, under Federal Circuit case law, the appropriate disposition is a dismissal for failure to state a claim. Palmer v. U.S., 168 F.3d 1310, 1312-14 (Fed. Cir. 1999).
With respect to the disparate treatment claims, defendants argue that under the Federal Circuit's decision in Absher v. United States, the offset requirement is constitutional. Contrary to plaintiffs' argument, pleaded as an averment in their complaints, defendants argue that rational basis review is the appropriate level of scrutiny, as held in Absher. Defendants contend that retired military members are not members of a suspect class, or even quasi-suspect class. Defendants further argue that plaintiffs have failed to compare themselves to a similarly situated group, claiming that the question is not whether veterans are a suspect class, but whether military retirees are a suspect class. Defendants contend that plaintiffs, either as veterans or military retirees, do not have a history of being subjected to purposeful, unequal treatment or of being in a position of political powerlessness that would require heightened protection. Although plaintiffs allege they are restricted in exercising First Amendment rights, many federal employees and other groups have restricted rights, yet are not considered to be members of a suspect class. Defendants also argue that no fundamental right has been impinged, claiming that there is no indication that the statutory scheme infringes upon plaintiffs' rights of travel and procreation. Therefore, because the retirement and disability benefit statutes are socio-economic in nature, rational review is the proper standard of review and defendants assert the retirement scheme satisfies rational basis review.
Id.
Id. at 4.
Id. at 5-6.
Id. at 6.
Id. at 5.
Id.
Id. at 7-8.
Id. at 6.
With respect to the takings claim, defendants argue that plaintiffs have failed to demonstrate a valid interest in property affected by the retirement scheme and, therefore, cannot claim that property has been taken without just compensation. Defendants assert that veterans' benefits are not property, but gratuities that are non-contractual and can be withdrawn at any time. Because expectation to receive benefits does not create a contractual right, defendants argue the Takings Clause claim must be dismissed.
Id. at 10-11.
Id.
Id. at 11 n. 6.
Defendants also move to dismiss plaintiffs' Fifth Amendment claims asserted against the United States Congress, as an entity, and also its individual members in their official capacities. Defendants argue that plaintiffs have not demonstrated an express waiver of sovereign immunity to allow this suit. Defendants further argue that it is well-established that Congress is not a proper party in challenging the constitutionality of a statute. Defendants also argue that plaintiffs' claims are barred by the Speech and Debate Clause which provides immunity to Congress and its members for their actions during sessions in either House. Finally, defendants argue that plaintiffs lack standing to sue congressional defendants because plaintiffs cannot show injury caused by these defendants. Defendants argue that plaintiffs have not been injured by the very existence of the statutes, but the alleged and arguable application of the statutes to them, a function performed by other government agencies. Therefore, defendants argue that Congress and its members may not be sued on plaintiffs' claims.
Id. at 15.
Id. at 16-17.
Id. at 15.
Id. at 17.
Id. at 19.
Id. at 20.
Plaintiffs oppose dismissal of their Fifth Amendment claims. Plaintiffs agree that § 1346 confers jurisdiction but does not create a cause of action, but argue that there are additional sources of law conferring a substantive right to permit a claim of money damages, specifically, the Equal Protection Clause and Takings Clause of the Fifth Amendment to the United States Constitution and statutes governing military retirement pay. Plaintiffs analogize their case to Hamlet v. United States, in which the Federal Circuit reversed the dismissal of plaintiffs' suit for lack of subject matter jurisdiction, and argue that the Court has jurisdiction to consider their constitutional challenges.
Docket no. 18 at 4; 10 U.S.C. § 1201-1221, 1401-1412.
873 F.2d 1414 (Fed. Cir. 1989), cert. denied, 517 U.S. 1155, 116 S.Ct. 1542 (1996).
With respect to their disparate treatment claims, plaintiffs argue that they are entitled to a heightened level of review as a suspect or quasi-suspect class because the military is restricted in exercising First Amendment rights and is "disenfranchised from the political process." Alternatively, should the Court apply a rational basis standard of review, plaintiffs argue there is no rational relation between the classification and the objective, arguing that military retirees should not be prohibited from receiving both retirement pay and disability benefits when other veterans employed by the federal government are not prohibited from receiving both monies. Plaintiffs note that Congress' decision in 2002 to repeal partially offset requirement should be considered in assessing whether there continues to be a sufficient justification for the classification, but acknowledge that Congress did not fund any repeal. Plaintiffs further argue that and continuing justification for the offset based on "fiscal restraint" should be "closely examined" in light of findings by the GAO that the Department of Defense suffers from weak financial management. Without an accurate accounting of the financial state of the military retirement fund, plaintiffs assert that it is "virtually impossible" to determine that the offset provision is fiscally responsible. Further, although the Claims Court inAbsher addressed the legislative history underlying the dual compensation and offset requirements at the time they were implemented, "the record before the Claims Court was scarce in evidence concerning the current justification for the statutory prohibition." Plaintiffs contend that their allegations of being similarly situated to other federal employees must be taken as true, and plaintiffs may compare themselves to other federal employees because equal protection requires equal treatment of "similarly, and not identically, situated groups."
Docket no. 18 at 6. Plaintiffs have attached to their response information regarding alleged defects in the voting process for military personnel. See id., attachment A. Plaintiffs include information regarding statements made by Captain Samuel F. Wright, a judge advocate in the Naval Reserve, who is Co-Chairman of the Uniformed Services Voting Rights Committee for the Reserve Officers Association of the United States to the Personnel Subcommittee, House Committee on Armed Services, on May 9, 2002, concerning on-going attempts to reform the absentee voting process for those in the uniformed services.
Docket no. 18 at 7.
See National Defense Authorization Act, found at 10 U.S.C. § 1414.
Docket no. 18 at 8-9.
Docket no. 18 at 8 and attachment B.
Id. at 9.
Id. at 8 (emphasis in original).
Id. at 9.
With respect to their claim of wrongful taking, plaintiffs argue that Congress has determined retirement pay to be considered "property" through its 1982 enactment of the Uniformed Services Former Spouses' Protection Act. Plaintiffs contend that this legislation was enacted in response to the Supreme Court's decision in McCarty v. McCarty, which held that the retirement pay of uniformed service retirees is not "property," and the statute is evidence of Congress' intent that retirement pay be considered as property. Plaintiffs further argue that for equitable reasons, the Court should find that the expectation of retirement pay is property. Plaintiffs maintain that the reduction of retirement pay in an amount equal to the tax-free veterans' disability compensation is a taking of their property interest in the retirement pay without just compensation.
Docket no. 18 at 10; 10 U.S.C. § 1408.
453 U.S. 210, 101 S.Ct. 2728 (1981).
See id. at 235-36.
Docket no. 18 at 10.
Id.
Id. at 10-11.
Defendants' reply notes that plaintiffs have failed to respond to defendants' arguments regarding the dismissal of Congress and its members, a concession that these defendants should be dismissed. Defendants also argue that plaintiffs' arguments regarding Congress' failure to fund the partial repeal of the offset provision is precluded by the doctrine of sovereign immunity.
Docket no. 19 at 1 n. 1.
Id.
III. ISSUE
Whether plaintiffs have stated a claim upon which relief may be granted for declaratory judgment and money damages under the Equal Protection Clause and/or the Takings Clause of the Fifth Amendment to the United States Constitution.IV. STANDARD
Under Rule 12(b)(6) of the Federal Rules of Civil Procedure, plaintiff must state a claim upon which relief can be granted or the complaint may be dismissed with prejudice as a matter of law. A motion to dismiss under Rule 12(b)(6) "is viewed with disfavor and is rarely granted." When considering a motion to dismiss for failure to state a claim, "all factual allegations in the complaint must be taken as true and construed favorably to the plaintiff." The United States Supreme Court has elaborated:
Kaiser Aluminum Chem. Sales, Inc. v. Avondale, 677 F.2d 1045, 1050 (5th Cir. 1982), cert. denied, 459 U.S. 1105, 103 S.Ct. 729 (1982), quoted in Capital Parks, Inc. v. Southeastern Advertising Sales Sys., Inc., 864 F. Supp. 14, 15 (W.D. Tex. 1993), aff'd, 30 F.3d 627 (5th Cir. 1994).
Fernandez-Montez v. Allied Pilots Assoc., 987 F.2d 278 (5th Cir. 1993). See also Capital Parks. Inc., 30 F.3d at 629 ("A court's decision to dismiss for failure to state a claim may be upheld `only if it appears that no relief could be granted under any set of facts that could be proven consistent with the allegations.' Baton Rouge Bldg. and Constr. Trades Council AFL-CIO v. Jacobs Constructors. Inc., 804 F.2d 879, 881 (5th Cir. 1986).") See also O'Quinn v. Manuel, 773 F.2d 605, 608 (5th Cir. 1985).
Nothing in Rule 12(b)(6) confines its sweep to claims of law which are obviously insupportable. On the contrary, if as a matter of law "it is clear that no relief could be proved consistent with the allegations," Hishon, supra, 467 U.S. at 73, 104 S.Ct. at 2232, a claim must be dismissed, without regard to whether it is based on an outlandish legal theory or on a close but ultimately unavailing one.
Neitzke v. Williams, 490 U.S. 319, 327, 109 S.Ct. 1827, 1832 (1989).
V. ARGUMENTS AND CONCLUSIONS OF LAW
As noted, plaintiffs, through their responsive brief, have withdrawn all claims except their claims based on alleged violations of the Equal Protection and Taking Clauses of the Fifth Amendment to the United States Constitution, asserting subject matter jurisdiction over claims for money damages under § 1346(a)(2) and over claims for declaratory and injunctive relief under § 1331. Defendants have moved to dismiss plaintiffs' Fifth Amendment claims for failure to state a claim upon which relief may be granted.A. Equal Protection Clause
Defendants argue, in sum, that plaintiffs' claim of disparate treatment in violation of the Equal Protection Clause should be rejected based in part on the Federal Circuit's decision inAbsher v. United States. Relying on Absher, defendants argue that the appropriate level of scrutiny is rational basis review and that the statutory scheme satisfies a rational basis scrutiny. Plaintiffs argue, in sum, that Absher either is out-dated and distinguishable and that a heightened scrutiny applies.
9 Cl. Ct. 223 (1985), aff'd, 805 F.2d 1025 (Fed. Cir. 1986).
Docket no. 18 at 5-6.
As a threshold matter, the Court agrees that Federal Circuit law is binding precedent to the extent provided in 28 U.S.C. § 1295(a)(2) and that the Federal Circuit's decision inAbsher v. United States is directly on point. In Absher, 2,048 disabled veterans retired from the uniformed services of the United States who were required to waive at least a portion of their longevity retirement pay in order to receive disability compensation from the VA challenged the constitutionality of the statutory scheme under the Equal Protection and Due Process Clauses of the Fifth Amendment. The United States Claims Court reviewed the legislative history of the limitation on benefits, noting that "in 1891 Congress prohibited the payment of what it regarded as `dual compensation'" of both military retirement pay and disability pay, requiring henceforth a disabled veteran to elect between military retirement pay or disability benefits, and in 1941 Congress "eased the prohibition" by allowing retirees to waive as much of their retirement as they receive in VA disability benefits. The Claims Court held that a rational basis standard of review applied, since the statutory scheme was socio-economic legislation which did "not impermissibly interfere with a fundamental right or operate to the peculiar disadvantage of a traditionally suspect classification such as race, religion or alienage." The Court found that the legislative purposes for the statutory scheme — "to restrain spending," "to limit the amount of compensation certain classes of individuals could receive as a result of military or uniformed service," to be concerned "with the rising cost of pensions and a belief that dual compensation was excessive and improper" — were "legitimate" congressional objectives and "proper object[s] of congressional concern." Further, the Claims Court found that there was a sufficient basis for treating the class of military retirees differently from other retirees from the federal government who might also be veterans and who are not required to waive any portion of their retirement benefits to receive VA disability benefits. Given the other "special benefits accorded retirees of the uniformed services," the Claims Court held that "Congress may well have decided that prohibiting this class from receiving both disability pensions and retirement pay was warranted" such that "there is a rational basis for limiting the amount of compensation the plaintiffs receive" and "the class identified in the challenged legislation is rationally related to the purposes advanced" by Congress. Accordingly, summary judgment was granted for the government.
See also U.S. v. Hohri, 482 U.S. 64, 72-73, 107 S.Ct. 2246, 2252 (1987) (claims brought under 28 U.S.C. § 1346(a)(2) are appealable only to the Federal Circuit, so long as the claims are not related to federal taxes). Both parties agree that Federal Circuit law applies to assess plaintiffs' Fifth Amendment claims brought under § 1346(a)(2), the Little Tucker Act. See e.g., docket no. 18 at 5 n. 3 ("Absher applies because the Federal Circuit has exclusive appellate jurisdiction over nontax cases based `in whole or in part' on the Little Tucker Act. . . ."); docket no. 12 at 3-4 (defendants note that this Court is bound by the decisions of the United States Court of Appeals for the Federal Circuit, since, as a general rule, cases brought under § 1346 come under the review of the Federal Circuit).
9 Cl. Ct. at 225.
Id.
Id. at 226.
For example, the Claims Court noted that retirees of the uniformed services are entitled to "commissary, recreational, travel and health benefits" which "are not generally available to disabled veterans retired under other public or private retirement programs;" military retirees "have no minimum retirement age; members can retire after twenty years service regardless of their age;" and military retirees "are likely to receive benefits for longer periods of time." 9 Cl. Ct. at 226-27.
Id. at 227.
Id.
The Federal Circuit affirmed the decision of the Claims Court to reject plaintiffs' challenge based on the Fifth Amendment. The Federal Circuit also affirmed the application of a rational basis standard of review, by which the statutes are presumed to be constitutional and the burden is on plaintiffs to identify a similarly situated group and to demonstrate that they are being treated disparately without rational justification. The Federal Circuit held that the purposes of the statutes — "to save money" and "fiscal restraint" — were legitimate congressional objectives, stating, "It has long been held proper for Congress to place a ceiling on the total compensation which an individual can receive from the government." Further, the Federal Circuit held there was a legitimate and rational basis for the classification decision it has drawn between military retirees, who must waive military retirement pay equal to the amount of any tax-free VA disability compensation received, and other classes of federal retirees who may receive both types of benefits. The Court stated:
Id.
Id.
Id.
For nearly a century Congress has held to the consistent view that there was no entitlement to both retired pay and a disability pension for the same period of military service. For over 40 years it has allowed retirees to elect which benefit they wish to accept, through exercise of the waiver provisions of 38 U.S.C. § 3105. The balance it has thus struck is not only rational, it bears a demonstrably fair and substantial relation to legitimate legislative objectives and does so without denying equal protection.
Id. at 227. See U.S. R.R. Ret. Bd. v. Fritz, 449 U.S. 166, 174, 101 S.Ct. 459 (1980); Disabled Am. Veterans v. U.S. Dept. of Veterans Affairs, 962 F.2d 136,141 (2d Cir. 1992) ("When Congress legislates in the area of economics and social welfare, review by the courts generally is limited to determining whether there is a rational basis for the classifications drawn.").
Plaintiffs argue that Absher, "a fourteen-year-old decision," is distinguishable based on "recent developments that support their equal protection claim." Although plaintiffs argue that Absher is out-dated, distinguishable, and should not be followed given "recent developments," the only "recent developments" cited by plaintiffs would appear to be the United States Supreme Court's 1996 decision in Romer, alleged problems experienced by active duty members of the uniformed services "over the past 15 years" when stationed abroad and voting absentee, and, arguably, the underlying premise of plaintiffs' argument, that military retirees deserve to receive full military retirement and full VA disability payments. The Court cannot find that these reasons are sufficient to distinguish Absher, in which the Federal Circuit held that the statutory scheme in question is socio-economic, to which a rational basis standard of review applies, and that the statutory scheme satisfies rational basis scrutiny.
Docket no. 18 at 5-6. Defendants note in their reply brief that Absher is approximately 16 years old. Docket no. 19 at 2 n. 3.
Docket no. 18 at 6.
As the Federal Circuit found in Absher, it is well-established that Congress may limit the compensation an individual receives from the government. 805 F.2d at 1026. When individuals belonging to a class affected by a statute possess distinguishing characteristics relevant to the government's interests, "the courts have been very reluctant . . . to closely scrutinize legislative choices as to whether . . . and to what extent those interests should be pursued." City of Cleburne v. Cleburne Living Ctr., 473 U.S. 432, 441, 105 S.Ct. at 3255 (1985); see also Mass. Bd. of Ret. v. Murgia, 427 U.S. 307, 314-15, 96 S.Ct. 2562, 2567-68 (1976).
One of the proffered grounds for distinguishing Absher concerns the "unique circumstances" of disabled military retirees — for the "reason that military personnel are disenfranchised from the political process" — which "invoke some characteristics of suspect or quasi-suspect classification" such that a heightened standard of review should be applied. Traditionally, suspect class status is applied to a class that has been "saddled with such disabilities, or subjected to such a history of purposeful unequal treatment, or relegated to such a position of political powerlessness as to command extraordinary protection from the majoritarian political process." In addition, quasi-suspect class status is traditionally applied to classifications based on gender or illegitimacy. Plaintiffs allege that they are a suspect class because of the alleged problems experienced by active duty (that is, not retired) members of the uniformed services "over the past 15 years" when stationed abroad and voting absentee. But, plaintiffs do not contend that active duty or retired members of the military do not have a right to vote, a factor that may be considered in determining a suspect class. Nor does this case concern the right to vote or the proper counting of votes cast in any election. Plaintiffs' second amended complaint also alleges that the statutory scheme impedes their rights to travel and procreation due to "diminished financial resources;" but plaintiffs cite no case that establishes that the government is required to provide the financial means to exercise rights such as the right to travel and procreate. Plaintiffs cite no case that holds that disabled military retirees are a suspect or quasi-suspect class for purposes of a federal equal protection analysis. To the contrary, in Absher the Federal Circuit considered that precise question and applied a rational basis standard of review in affirming the Claims Court's decision that military retirees are not of "a traditionally suspect classification such as race, religion, or alienage."
Docket no. 18 at 6. Plaintiffs' response refers to ¶ 18 of their second amended complaint. Id.
San Antonio Indep. Sch. Dist. v. Rodriguez, 411 U.S. 1, 28, 93 S.Ct. 1278, 1294 (1973).
Cleburne Living Ctr., 473 U.S. at 440-41, 105 S.Ct. at 3254-55.
Docket no. 18 at 6.
Docket no. 8 at 7 ("prayer").
See, e.g., Chavez. v. Il. State Police, 251 F.3d 612, 649 (7th Cir. 2001) (right to travel requires direct impairment of right to move between the states).
See Velasquez v. Frapwell, 160 F.3d 389,391 (7th Cir. 1998), vacated on other grounds, 165 F.3d 593 (7th Cir. 1999) ("Military personnel are no more a discrete or insular minority than police or firemen."); Rumsey v. N.Y. State Dept. of Corr. Svs., 19 F.3d 83, 92 (2d Cir. 1994) ("We find no case law supporting the assertion that a class of military reservists is either a suspect class entitled to strict scrutiny or even a quasi-suspect class entitled to immediate scrutiny.").
9 Cl. Ct. at 225. See Disabled Am. Veterans, 962 F.2d at 141, 142.
Alternatively, relying on Romer v. Evans, plaintiffs argue that even if the rational basis standard approved inAbsher is applied, the statutory scheme is not rational since "there is no reason to prohibit military retirees from receiving both retirement and VA disability benefits when veterans serving in other branches of the federal government face no such prohibition." In Romer, a case that does not address the military retiree offset or address the conclusions ofAbsher, the United States Supreme Court reviewed an equal protection challenge to an amendment to the Colorado State Constitution which restricted the ability of homosexuals to obtain legislation protecting them from discrimination. The Colorado Supreme Court found that the amendment violated the Equal Protection Clause under a strict scrutiny standard of review; the Supreme Court affirmed, but did so under a rational basis standard of review. The Court determined that a rational basis standard of review was appropriate, since the amendment did not infringe on a fundamental right or target a suspect class. Under the rational basis standard, the Court examined whether there was a link between the classification and the objective of the amendment and held that the classification created through the amendment did not bear a rational relation to the asserted legitimate legislative ends:
The primary rationale the State offers for Amendment 2 is respect for other citizens' freedom of association, and in particular the liberties of landlords or employees who have personal or religious objections to homosexuality. Colorado also cites its interest in conserving resources to fight discrimination against other groups. The breadth of the amendment is so far removed from these particular justifications that we find it impossible to credit them. We cannot say that Amendment 2 is directed to any identifiable legitimate purpose or discrete objective. It is a status-based enactment divorced from any factual context from which we could discern a relationship to legitimate state interests; it is a classification of persons undertaken for its own sake, something the Equal Protection Clause does not permit.
517 U.S. 620, 116 S.Ct. 1620 (1996).
Docket no. 18 at 7 (emphasis added).
Id. at 631-32, 116 S.Ct. at 1624.
Id. at 631, 116 S.Ct. at 1627.
Id. at 632, 116 S.Ct. at 1627.
Id. at 635, 116 S.Ct. at 1629.
Plaintiffs argue that, as in Romer, there is no link between the classification and the objective of the statutes because "there is no reason to prohibit military retirees from receiving both retirement and VA disability benefits when veterans serving in other branches of the federal government face no such prohibition." This argument ignores the stated goal of fiscal restraint, as examined more fully in the Claims Court's and Federal Circuit's review of the legislative history underlying the dual compensation and offset provisions. Plaintiffs do not contest that the military offset requirement saves the government money or that saving money can be a permissible goal of Congressional enactments. Plaintiffs do not challenge the premise that clearly it is less expensive to pay one set of benefits than to pay two. Plaintiffs also do not contest that military retirees receive benefits that all classes of other federal retirees do not. Plaintiffs have not overcome the presumption of constitutionality that applies to this statutory scheme. Congress reasonably could have concluded that there is a rational justification for requiring military retirees to waive their right to receive military retirement pay up to the amount of tax-free VA benefits received, given the total package of retirement benefits available to military retirees. The Court cannot conclude that the offset requirement is "utterly lacking in rational justification" or that there is no direct connection between the offset requirement and the goal of saving money. As noted in Absher, Romer and numerous other court decisions considering constitutional challenges to socioeconomic legislation, it is a political and policy question for Congress, not a court, to decide whether the offset requirement should be implemented. Even though it may be true that the government could save even more money by requiring all federal retirees to waive retirement benefits equal to the amount of tax-free VA disability pay, that Congress chose to require the offset of military retirees but not veterans serving in other branches of the federal government does not mean there is "no reason" for the balance Congress has struck.
Docket no. 18 at 7.
See 9 Cl. Ct. at 226-27 and 805 F.2d at 1026 ("it is hard to imagine a more rational basis for congressional action than fiscal restraint").
See 9 Cl. Ct. at 227 n.* (in 1985, the offset was estimated to save more than 2 billion dollars per year).
See Romer, 517 U.S. at 631, 116 S.Ct. at 1627 ("[W]e will uphold the legislative classification so long as it bears a rational relation to some legitimate end"); Vance v. Bradley, 440 U.S. 93, 97, 99 S.Ct. 939, 943 (1979) ("[W]e will not overturn such a statute unless the varying treatment of different groups or persons is so unrelated to the achievement of . . . legitimate purposes that we can only conclude that the legislature's actions were irrational.").
Plaintiffs also argue that Absher may be distinguished because "[a]ny claim of fiscal restraint" should be closely examined given Congress' decision to partially repeal the prohibition on the concurrent receipt of military retirement pay and VA disability benefits, even though Congress has not funded that partial repeal. But, plaintiffs characterize the enacted provision as only a "partial repeal" of the offset requirement and acknowledge that the partial repeal was "without effect" because Congress included no funding in the bill. In other words, at the very time Congress expressed an intention to reexamine the offset and repeal or partially repeal the requirement, it determined not to fund any further benefits required by a repeal. Therefore, it remains true today, what the Claims Court observed in 1985: "Apparently Congress is still satisfied that this legislation represents sound fiscal policy." Whether it is good policy to have the partial offset provision is a matter for Congress to decide at the outset, not a court.
Id. at 2, 8.
Docket no. 18 at 2-3.
9 Cl. Ct. at 227.
Plaintiffs argue that they seek "to develop and present evidence concerning the rationality of Congress' continuing stance [in not funding a partial repeal or repeal of the offset requirement] in this case." Docket no. 18 at 9. Plaintiffs have not demonstrated that this is not a political question and is a justiciable claim. As the Claims Court stated in Absher, "If plaintiffs believe they are not adequately compensated and wish to have their compensation package reviewed, the proper forum for such review is Congress, not this Court." Absher, 9 Cl. Ct. at 227; see also Abbott v. U.S., 200 Ct. Cl. 384, 390 (1973), cert. denied, 414 U.S. 1024, 94 S.Ct. 448 (1973),reh'g denied, 414 U.S. 1138, 94 S.Ct. 885 (1974) ("to get any relief, it must come from Congress, as this is not within our jurisdiction"). In any event, for purposes of a rational basis equal protection analysis, Congress' decision not to fund the partial repeal statute certainly furthers the purpose of conserving money.
Relatedly, plaintiffs also argue that "the record before the Claims Court [in Absher] was scarce in evidence concerning the current justification for the statutory prohibition." To the extent this argument may be read to be a challenge to the adequacy of the record reviewed in Absher, of course, that appeal is closed and that judgment is final. To the extent this argument may be read to be a challenge to the sufficiency of the policy reasons in support of the offset requirement, again, such matters are for Congress and not a court, which, pursuant to the rational basis standard, determines if the legislation uses "a rational means to serve a legitimate end." Plaintiffs' arguments that military retirees are deserving of full military retirement pay and full tax-free VA benefits, however forceful, are not sufficient to rebut the presumption of constitutionality that applies to Congress' decision to require an offset.
Docket no. 18 at 8 (emphasis in original).
Cleburne Living Ctr., 473 U.S. at 442, 105 S.Ct. at 3255.
In sum, because the offset requirement does not burden a fundamental right or a suspect class, rational basis review is the appropriate standard. Pursuant to Absher, defendant's motion to dismiss plaintiffs' equal protection claim should be granted and the claim should be dismissed.
B. Takings Clause
With respect to plaintiffs' claim under the Takings Clause of the Fifth Amendment, defendants argue, in sum, that the claim must be dismissed on the ground that plaintiffs have no property interest at stake and, therefore, cannot state a claim for its alleged deprivation. Plaintiffs oppose dismissal of their claim under the Takings Clause, arguing that: "some retirement pay is now to be considered `property'" in a divorce pursuant to the Uniformed Services Former Spouses' Protection Act ("USFSPA"); retirement pay should not be considered property in some contexts but not others; and the denial of retirement pay to the extent of receipt of tax-free VA disability benefits is taking of property.
In order for plaintiffs to state a claim under the Takings Clause, they must first show a valid interest in the property at issue. Plaintiffs argue that under the USFSPA, retirement benefits are "property." But, neither the USFSPA nor the case it overruled, McCarty v. McCarty, deal with the Takings Clause. The USFSPA and McCarty address whether benefits are treated as community property in a divorce. The USFSPA provides, in sum, that the federal government will recognize a state court order that treats retired pay as property to be divided between the retiree and the spouse in a divorce if state law would treat the retired pay as marital property. There is no indication that a recognition that state law may consider retired pay to be property and that federal law will defer to such a state law determination indicates that retired pay is property within the meaning of the Fifth Amendment. Furthermore, the United States Supreme Court has held that veterans benefits are in the nature of "gratuities" and "the grant of them creates no vested right" since "gratuities may be redistributed or withdrawn at any time in the discretion of Congress."
See Karuk Tribe of Cal. v. Ammon, 209 F.3d 1366, 1374 (Fed. Cir. 2000), cert. denied, 532 U.S. 941, 121 S.Ct. 1402 (2001) ("A takings claim calls for a two-step analysis. First, a court determines whether the plaintiff possesses a valid interest in the property.").
453 U.S. 210, 101 S.Ct. 2728 (1981).
See id. at 235-36, 101 S.Ct. at 2742-43 (state courts are precluded by federal law from dividing military retired pay according to a state's community property laws in the dissolution of a marriage).
See 10 U.S.C. § 1408.
Lynch v. U.S., 292 U.S. 571, 577, 54 S.Ct. 840, 842 (1934) ("[t]he benefits conferred by gratuities may be redistributed or withdrawn at any time in the discretion of Congress"); Milliken v. Gleason, 332 F.2d 122, 123 (1st Cir. 1964) ("veterans' benefits are gratuities and establish no vested right in the recipients so that they may be withdrawn by Congress at any time and under such conditions as Congress may impose"), cert. denied, 379 U.S. 1002, 85 S.Ct. 723 (1965).
An expectation of the receipt of benefits is not sufficient to create a contractual right to continued receipt of benefits. The Federal Circuit has held that there is no property interest in future retirement benefits, stating there is "no legitimate claim . . . to benefits which are subject to lawful change."
Zucker v. U.S., 758 F.2d 637, 638 (Fed. Cir. 1985),cert. denied, 474 U.S. 842, 106 S.Ct. 129 (1985) ("potential retirees have no protected property interest in any particular level of retirement benefits as they have no legitimate claim of entitlement to benefits which are subject to lawful change").
Even if plaintiffs were to establish that there is an existing property interest in military retirement pay, they must also show that the government action at issue constitutes a taking by the government. Plaintiffs argue that because they must waive retirement pay in exchange for the "gratuity" of receiving VA benefits, and because they have a property interest in retirement pay, the retirement pay is being taken by the government without just compensation.
See Karuk Tribe of Cal., 209 F.3d at 1374 ("If a plaintiff possesses a compensable property right, a court proceeds to t he second step. Under that second step, a court determines whether the governmental action at issue constituted a taking. . . .").
Plaintiffs do not contest that VA disability benefits are gratuities. Docket no. 18 at 10 ("Plaintiffs do not argue that the VA disability compensation is not a gratuity. . . .").
Under the statutory scheme, plaintiffs may choose to keep their retirement pay rather than to waive that pay in exchange for VA benefits. Filing the waiver is voluntary. Should plaintiffs choose to file a waiver, they will give up VA benefits, which plaintiffs agree are gratuities and may be withdrawn at any time by Congress. Because plaintiffs are not forced to waive their military retirement pay, a voluntary decision to waive such pay in order to receive some level of VA disability benefits cannot be considered a taking by the government.
See 38 U.S.C. § 5304, 5305.
In sum, the statutory scheme does not effect a taking, because plaintiffs have not demonstrated that they have a property right in continued military retirement pay or the receipt of VA disability benefits and because plaintiffs elect to waive a corresponding amount of their retirement pay in order to receive tax-free VA disability benefits.
C. Congress
Plaintiffs' second amended complaint also brings claims against Congress as an entity and individual members of Congress. Plaintiffs' response to the motion to dismiss indicates that plaintiffs are withdrawing all claims other than their Fifth Amendment claims; the notice of withdrawal does not expressly address claims against Congress and members of Congress. Defendants' reply notes that plaintiffs' response to the motion to dismiss does not present substantive arguments to oppose dismissal of these defendants or to show that their Fifth Amendment claims against Congress should be not be dismissed. Therefore, to the extent that plaintiffs have not withdrawn all claims, including claims based on the Fifth Amendment, brought against Congress and its members, defendants' motion to dismiss claims against Congress as an entity and its members in their official capacities should be granted as un-opposed.
Docket no. 18 at 3 n. 1.
VIII. RECOMMENDATION
Based on the foregoing, it is recommended that the United States's motion to dismiss should be GRANTED: Plaintiffs' claims under the Equal Protection and Takings Clause of the Fifth Amendment should be dismissed for failure to state a claim as discussed in this report; plaintiffs' Fifth Amendment claims against Congress as an entity and its members in their official capacities should be dismissed as unopposed; plaintiffs' other claims should be dismissed on the ground that plaintiffs withdrew the claims in their response to the motion to dismiss. Any other pending requests for relief should be denied as moot.
Docket no. 9.
Docket no. 18 at 3 n. 1.
IX. INSTRUCTIONS FOR SERVICE AND NOTICE OF RIGHT TO OBJECT/APPEAL
The United States District Clerk shall serve a copy of this Report and Recommendation on each and every party either (1) by certified mail, return receipt requested, or (2) by facsimile if authorization to do so is on file with the Clerk. According to Title 28 U.S.C. § 636(b)(1) and Rule 72(b), FED. R. Civ. P., any party who desires to object to this report must serve and file written objections to the Report and Recommendation within 10 days after being served with a copy unless this time period is modified by the District Court. A party filing objections must specifically identify those findings, conclusions or recommendations to which objections are being made and the basis for such objections; the District Court need not consider frivolous, conclusive or general objections. Such party shall file the objections with the Clerk of the Court, and serve the objections on all other parties and the Magistrate Judge. A party's failure to file written objections to the proposed findings, conclusions and recommendations contained in this report shall bar the party from a de novo determination by the District Court. Additionally, any failure to file written objections to the proposed findings, conclusions and recommendations contained in this Report and Recommendation within 10 days after being served with a copy shall bar the aggrieved party, except upon grounds of plain error, from attacking on appeal the unobjected-to proposed factual findings and legal conclusions accepted by the district court.
See Thomas v. Arn, 474 U.S. 140, 150, 106 S.Ct. 466,472 (1985).
Acuna v. Brown Root Inc., 200 F.3d 335, 340 (5th Cir. 2000); Douglass v. United Services Auto. Ass'n., 79 F.3d 1415, 1428 (5th Cir. 1996).