First Virginia Bank v. Vera Randolph, United States of America and U.S. Department of State

Citations: 110 F.3d 75; 324 U.S. App. D.C. 29Docket: 96-5205

Court: Court of Appeals for the First Circuit; June 12, 1997; Federal Appellate Court

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A judgment creditor, First Virginia Bank, sought damages against the U.S. government for its failure to garnish the wages of Vera Randolph, a government employee who was a judgment debtor. The case arose after the State Department began garnishing Randolph's wages in March 1994, following a writ of attachment obtained by the Bank. Under the Hatch Act Reform Amendments of 1993, federal employees' pay is subject to garnishment similarly to private employees. However, in November 1994, after Randolph filed a motion to quash the writ, the State Department ceased garnishment, citing D.C. law which mandates that an employer stop payments upon receiving notice of a court proceeding challenging the attachment. Randolph subsequently retired, leading the Superior Court to declare the challenge moot due to the cessation of wage garnishment.

The Bank filed a motion against the State Department to recover the withheld wages it would have received if garnishment had continued. The government removed the case to federal district court, where the district court ruled that the State Department had improperly stopped garnishing Randolph's wages. The court determined that D.C. law only relieved the agency of the obligation to pay garnished wages to the creditor, not the duty to continue withholding those wages. The government chose not to contest this ruling.

The Bank sought a monetary award from the State Department for not withholding part of Randolph's wages, relying on D.C. Code § 16-575, which allows judgment against an employer for failure to pay garnished wages. The government claimed sovereign immunity, but the district court ruled that the Hatch Act amendment waived this immunity by holding the federal government to the same standards as private employers. Consequently, the court awarded the Bank $385.71, consisting of $75.71 in principal and $310.00 in costs. The appellate jurisdiction was questioned, particularly whether the appeal fell under the little Tucker Act, which allows district courts and the Court of Federal Claims to handle claims against the United States up to $10,000. The Federal Circuit has exclusive jurisdiction over appeals where the district court's jurisdiction was partly based on the little Tucker Act. Both parties believe the appeal is properly before the court but for different reasons. The government argued that the little Tucker Act could not apply because the substantive law (Hatch Act Reform Amendments) does not mandate compensation from the government. The court noted that determining this issue would involve the merits of the case and opted to avoid it. Additionally, it emphasized that for jurisdiction to exist, the government must consent to the suit due to sovereign immunity, making this consent a prerequisite for jurisdiction. Thus, the little Tucker Act provides both subject matter jurisdiction for specific claims and waives sovereign immunity, allowing the district courts to hear such cases.

Litigants aiming to recover damages from the United States for statutory violations often rely on the little Tucker Act unless the substantive statutes involved waive sovereign immunity. In some cases, plaintiffs choose to pursue claims under different federal laws that provide governmental consent to suit, thus not involving the little Tucker Act at all. Such cases are processed in regional courts of appeals rather than the Federal Circuit. Jurisdiction in these instances must still be established, typically under 28 U.S.C. 1331, which grants district courts authority over federal law cases. 

In this instance, the Bank's lawsuit is based on the Hatch Act Reform Amendments, which the district court recognized as waiving the government's sovereign immunity. The Bank's case met both jurisdictional requirements—subject matter jurisdiction under 28 U.S.C. 1331 and a waiver of sovereign immunity from a source other than the little Tucker Act—thereby confirming that its action was not based on the Tucker Act, as it was not referenced during proceedings. Consequently, the appellate jurisdiction lies with the current court. 

The merits of the case hinge on two potential issues: whether the Hatch Act amendments provide the Bank with a cause of action against the government and whether these amendments waive sovereign immunity regarding the Bank's damage claims. These issues are distinct, as discussed in Supreme Court precedents, where the absence of a federal mandate for compensation would negate the need to address sovereign immunity.

The government is presumed to have failed to argue against the continued withholding of a portion of Randolph's wages, as mandated by D.C. CODE 16-575, which holds private employers strictly liable for not paying a judgment creditor the garnishable wages of an employee. However, this does not automatically make the federal government liable under 5 U.S.C. 5520a(b), which states that an agency's payment to an employee is subject to legal process like that of a private individual. This section pertains specifically to the employee's pay, and since Randolph is no longer employed by the government, there is no pay available to be garnished. Any recovery by the Bank would not come from Randolph's salary but from a general fund designated for satisfying judgments against the United States. The district court's award of $385.71 to the Bank was not a directive to withhold part of Randolph's pay but rather a separate damages payment. Moreover, the Bank's claim, characterized as wrongful conversion, does not fit the definition of garnishment outlined in 5520a(a)(3)(B), reinforcing that the statute does not expose the United States to liability for damages claimed by judgment creditors.

Interpretation of 5520a(b) aligns with the precedent established in Loftin v. Rush, 767 F.2d 800, 808-09 (11th Cir. 1985), which the district court used to grant damages to the Bank. Loftin involved a different statute that allowed for the garnishment of government employees' wages for unpaid child support and alimony. In that case, Pamela Loftin had served a garnishment summons to the Navy, her ex-husband's employer, due to significant child support arrears. After the Navy failed to respond within the statutory timeframe, Loftin secured a default judgment against it for the full amount owed. The appellate court's main concern was whether the child support statute imposed liability on the government for the judgment. It concluded that only funds owed to a federal employee at the time of service of the garnishment are subject to state garnishment laws, thus indicating that Congress allowed the government to act as a collection agent in certain scenarios but did not create a right of action against it for debts owed by its employees to third parties. Similarly, under 5520a(b), the interpretation is that the Bank cannot recover damages from the United States for failing to garnish its employees' wages, and thus the issue of sovereign immunity waiver is not relevant.

A regulation from the Office of Personnel Management allows an agency to correct its initial decision not to honor legal process if it determines the decision was erroneous. If the agency corrects an error or is mandated to do so, it is not liable for more than what it would have paid had it initially honored the legal process. The regulation does not clarify its interpretation of 5 U.S.C. § 5520a(b) and is considered ambiguous, possibly allowing an agency to recover amounts it failed to withhold by deducting from the employee's future pay. The Bank claims it could pursue an action against the United States under the Federal Tort Claims Act if government negligence caused the failure to garnish wages. Both parties acknowledge the possibility of remedies under the Act, but no opinion is provided on this matter. Additionally, it is noted that there is no evidence the Bank exhausted its administrative remedies before seeking recovery. The Loftin court instructed the government to pay the amounts that should have been withheld from February to June 1984, implying that the government could offset future paychecks for recoupment. However, this approach is not applicable here as Randolph is no longer employed by the State Department.