Nutt v. United States

United States Court of Appeals
for the Federal Circuit
______________________
CYNTHIA G. NUTT, INDIVIDUALLY AS
SURVIVING SPOUSE AND AS THE EXECUTRIX OF
THE ESTATE OF JAMES N. NUTT, SR.,
DECEASED, JAMES N. NUTT, JR., INDIVIDUALLY,
Plaintiffs-Appellants
v.
UNITED STATES,
Defendant-Appellee
______________________
2015-5118
______________________
Appeal from the United States Court of Federal
Claims in No. 1:14-cv-00282-SGB, Judge Susan G.
Braden.
______________________
Decided: September 12, 2016
______________________
ANDREW J. MALONEY III, Kreindler & Kreindler LLP,
New York, NY, argued for plaintiffs-appellants.
RYAN MAJERUS, Commercial Litigation Branch, Civil
Division, United States Department of Justice, Washing-
ton, DC, argued for defendant-appellee. Also represented
by DEBORAH A. BYNUM, ROBERT E. KIRSCHMAN, JR.,
BENJAMIN C. MIZER, ALEXANDER ORLANDO CANIZARES.
______________________
2 NUTT v. US
Before DYK, MAYER, and STOLL, Circuit Judges.
STOLL, Circuit Judge.
Cynthia Nutt and her son, James Nutt, Jr., (collec-
tively, “Appellants” or “Plaintiffs”) appeal a decision of the
United States Court of Federal Claims granting the
Government’s motion for summary judgment that it did
not breach an agreement to pay a claim arising under the
Federal Tort Claims Act (“FTCA”). Nutt v. United States
(Summary Judgment Order), 121 Fed. Cl. 579 (Fed. Cl.
2015). For the reasons below, we affirm.
BACKGROUND
James Nutt, Sr. was hit and killed by a United States
Army soldier driving an Army truck in 1983. Mr. Nutt’s
wife, Cynthia Nutt—on behalf of herself as surviving
spouse, the estate, and the couple’s son, James Nutt, Jr.—
filed a claim against the Government pursuant to 28
U.S.C. § 2674 of the FTCA. The parties entered into a
settlement agreement (“the Agreement”) in 1985, in which
Appellants received payments “in full satisfaction and
final settlement of all claims.” Joint Appendix (“J.A.”) 25.
The Agreement provided for payments resulting from the
Government’s purchase of an annuity to benefit the Nutt
family, as well as lump-sum payments from the Govern-
ment to the family and its attorneys.
In particular, the Agreement set forth two obligations
for the Government. First, in section I, it stated that the
Government “agrees to purchase annuities which will pay
the following amounts:” (a) $60,000 per year “commencing
30 days from the date of purchase of the annuity” to
Cynthia Nutt, (b) lump-sum payments on specified “anni-
versaries of the purchase of the annuity” to Cynthia Nutt,
and (c) lump-sum payments on specified “anniversaries of
the purchase of the annuity” to James Nutt, Jr. Sum-
mary Judgment Order, 121 Fed. Cl. at 581–82; J.A. 25–
NUTT v. US 3
26. Second, in section II, the Agreement stated that the
Government “[a]s soon as practicable after approval of
this agreement . . . agrees to pay the sum of” $240,000 to
Cynthia Nutt and “twenty percent of the total cost to the
United States of the entire settlement” to the Nutts’
attorneys. J.A. 26–27. The next paragraph of the Agree-
ment provided that “[t]he payments by the United States
set forth above shall operate as full and complete dis-
charge of all payments to be made to and of all claims
which might be asserted.” Summary Judgment Order,
121 Fed. Cl. at 582; J.A. 27.
In accordance with the Agreement, the Government
purchased a structured annuity from Executive Life
Insurance Company of New York (“ELNY”) in 1985.
ELNY went into receivership in 1991. In 2011, the New
York State Liquidation Bureau informed Appellants that
“[d]ue to the liquidation, at this time it is anticipated that
the amount of your benefit payments will ultimately be
reduced.” Summary Judgment Order, 121 Fed. Cl. at 583.
In 2013, Appellants began receiving payments reduced to
approximately 45% of their expected benefits. Appellants
were also informed that, as of 2015, they would not be
receiving the anniversary payments.
In 2014, Appellants filed a complaint in the Court of
Federal Claims alleging that the Government “breached
its agreement to pay plaintiffs’ scheduled annuity pay-
ments and refused to pay future periodic and lump sum
payments pursuant to the terms of the 1985 Settlement
Agreement.” J.A. 20. The parties then cross moved for
partial summary judgment on liability. Appellants ar-
gued that the Agreement “states that the future payments
‘shall be paid’ thereby rendering the future payments
mandatory.” Summary Judgment Order, 121 Fed. Cl. at
585. The Government maintained that the Agreement
only required it to purchase the annuity, not to guarantee
the annuity’s future payments. Id. at 586.
4 NUTT v. US
The court granted summary judgment in the Gov-
ernment’s favor, determining that “[b]ased on the four
corners of the Agreement, . . . the Government was obli-
gated to pay certain fixed sums to Plaintiffs and pay for
an annuity.” Id. at 590. The court further concluded that
the Government “was not obligated to guarantee or insure
that annuity; its obligation ended at the initial purchase
of the ELNY annuity.” Id. at 590–91. The court denied
Appellants’ summary judgment motion and dismissed the
complaint. The Nutts appealed to this court, and we have
jurisdiction under 28 U.S.C. § 1295(a)(3).
DISCUSSION
“Summary judgment is appropriate when, drawing all
justifiable inferences in the nonmovant’s favor, there is no
genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law.” Amergen Energy
Co. v. United States, 779 F.3d 1368, 1372 (Fed. Cir. 2015)
(internal citations and quotation marks omitted). We
review the Court of Federal Claims’ grant of summary
judgment de novo, applying the same standard applied by
the court below. Barseback Kraft AB v. United States, 121
F.3d 1475, 1479 (Fed. Cir. 1997).
I.
As a threshold issue, we first address the Govern-
ment’s argument regarding alleged limits on how FTCA
settlements may be paid by the Government. According
to the Constitution’s Appropriations Clause, “funds may
be paid out [by the Treasury] only on . . . the express
terms of a specific statute.” OPM v. Richmond, 496 U.S.
414, 432 (1990); see U.S. Const. art. I, § 9, cl. 7. The
Government contends that the FTCA constitutes a limited
waiver of the Government’s sovereign immunity and, as
such, only Congress can set the terms for paying claims
that fall within that waiver of sovereign immunity. The
Government argues that, in this settlement, it did not
NUTT v. US 5
have authority from Congress to pay or guarantee future
periodic payments under the FTCA.
The FTCA “waive[s] the sovereign immunity of the
United States for certain torts committed by federal
employees,” FDIC v. Meyer, 510 U.S. 471, 475 (1994), but
restricts the type of remedy a court may order for injuries
to a private person caused by the negligent or wrongful
act of a Government employee. The FTCA states that
federal district courts “have exclusive jurisdiction of civil
actions on claims against the United States, for money
damages.” 28 U.S.C. § 1346(b)(1) (emphasis added). The
Government argues in this case that a court may only
award money damages under the FTCA in the form of a
lump-sum payment. The Government insists that cases
from other circuits dictate that “[a]bsent an additional
waiver of sovereign immunity or specific statutory author-
ity granted by Congress, no authority exists for payment
of damages in future installments under the FTCA.”
Gov’t Br. 36–37. Several of the cases the Government
relies on to support its position, however, reject its narrow
interpretation of the FTCA and specifically acknowledge
Appellants’ argument here that parties can agree to
structure a damages plan to include future installment
payments.
For example, in Reilly v. United States, 863 F.2d 149
(1st Cir. 1988), it was the Government that proposed a
damages structure where the award would be payable
over time in periodic installments, much like the damages
plan Appellants seek in this case. In that case, the First
Circuit stated that “[p]eriodic damage awards are permis-
sible in lieu of lump sums in certain situations,” such as
“if a controlling statute permits.” Id. at 169 n.16 (internal
citations omitted). Relevant here, it also specified that
“[s]uch an outcome can also be achieved by agreement of
the parties in interest . . . or where a trust, annuity, or
other prophylactic arrangement is necessary to ensure
that the injured party will in fact receive his due.” Id.
6 NUTT v. US
(emphasis added) (internal citations omitted). Put anoth-
er way, the First Circuit recognized that “[w]hen a tort-
feasor loses at trial, then—absent a statute or the parties’
contrary agreement, . . .—it must pay the judgment in one
fell swoop.” Id. at 170 (emphasis added).
In Vanhoy v. United States, 514 F.3d 447, 454
(5th Cir. 2008), the Fifth Circuit “refuse[d] to deviate from
a conventional lump-sum award” by ordering that the
district court create a reversionary trust. The Fifth
Circuit, however, expressly recognized that “particular
circumstances,” including “agreement of the parties in
interest,” could warrant periodic damage awards. Id. at
454 & n.34 (quoting Reilly, 863 F.2d at 169 n.16). The
propriety of periodic damage awards when agreed to by
the parties is explicitly contemplated by our sister cir-
cuits, but notably left out of the Government’s discussion
of these cases here. Gov’t Br. 36–37. The Government’s
persistence in this case—that no authority exists for
paying damages in periodic installments—fails to account
for circumstances where the parties expressly agree to
such payments. Like the FTCA cases from the First and
Fifth Circuits, we reiterate that periodic damage awards
under the FTCA may be permissible in lieu of lump-sum
payments with one of the recognized exceptions, including
by agreement of the parties. See Reilly, 863 F.2d at 169
n.16; Vanhoy, 514 F.3d at 454.
II.
We next turn to the language of the Agreement itself,
which both parties argue is unambiguous in supporting
their respective positions. Appellants argue that the
terms of the Agreement “unambiguously obligate the
Government to ensure full payment of all annual pay-
ments and periodic lump sums it promised.” Appellant
Br. 11. The Government argues that the terms of the
Agreement “unambiguously require[] only the purchase of
annuities.” Gov’t Br. 18. Where the language is unam-
NUTT v. US 7
biguous, as the court determined, the “inquiry ends and
the plain language of the Agreement controls,” so extrin-
sic evidence need not be considered. Coast Fed. Bank,
FSB v. United States, 323 F.3d 1035, 1041 (Fed. Cir.
2003). We thus determine whether the plain language of
the Agreement is unambiguous, and if so, which party’s
position it supports.
The relevant provisions of the Agreement state as fol-
lows:
[3] As soon as practicable after approval of this
settlement, the United States of America agrees to
purchase annuities which will pay the following
amounts:
I.
[4] 1. a. [$60,000 per year] to Cynthia G. Nutt,
her estate or designated beneficiary for as long as
[she] shall live or for thirty (30) years certain,
whichever is later.
[5] b. On each of the following anniversaries
of the purchase of the annuity, the following speci-
fied lump sum payments shall be paid to Cynthia
G. Nutt, her estate or designated beneficiary:
[listing anniversaries and amounts]
[6] 2. On each of the following anniversaries of
the purchase of the annuity, the following speci-
fied lump sum payments shall be paid to James N.
Nutt, Jr., his guardian, his estate or designated
beneficiary.
[listing anniversaries and amounts]
***
8 NUTT v. US
II.
[10]As soon as practicable after approval of this
agreement, the United States of America further
agrees to pay [$240,000.00] to Cynthia G. Nutt . . .
and a sum equal to twenty percent of the total
cost to the United States of the entire settlement
distributed to the [Plaintiffs’ attorneys].
[11]The payments by the United States set forth
above shall operate as full and complete discharge
of all payments to be made to and of all claims
which might be asserted on behalf of [Plaintiffs,]
. . . provided, however, that if the insurance com-
pany hereinafter referred to defaults in the per-
formance of its obligations under the annuity
agreement with the United States, [Plaintiffs] . . .
shall have standing to sue the said insurance
company for breach of contract. In such event, the
United States shall assist [Plaintiffs], their heirs
or personal representatives, in the prosecution of
said suit to the extent permitted by applicable
laws and regulations.
[12]The United States represents to [Plaintiffs]
that the insurance company it selects for the pur-
chase of the annuities will be one which is gener-
ally regarded as very sound in the insurance
industry and to be among the class or group of in-
surance companies which are rated Excellent or
better by Best’s Guide to Life Insurance Compa-
nies, 1982 Edition, published by A.M. Best Com-
pany, Oldwick, New Jersey 07830.
***
[14]The United States will furnish to [Plaintiffs]
. . . a certificate of insurance or other evidence of
the purchase by the United States of annuities in
an amount sufficient to satisfy those obligations of
NUTT v. US 9
the United States under this Settlement Agree-
ment which are to be satisfied by the purchase of
the annuities.
J.A. 25–27.
At the outset, the Agreement provides that “the Unit-
ed States of America agrees to purchase annuities which
will pay [certain periodic amounts].” J.A. 25 ¶ 3. We
agree with the Court of Federal Claims that the “fairest
reading” of this provision is that the Government did not
agree to pay future sums, but agreed only to purchase
annuities. Summary Judgment Order, 121 Fed. Cl. at
588. As the sentence’s syntax dictates, the phrase “which
will pay” modifies “annuities,” signaling that the annui-
ties (and not the Government) will pay the future
amounts.
Appellants point to paragraph 11 of the Agreement,
which states that the “payments by the United States set
forth above shall operate as full and complete discharge of
all payments to be made.” J.A. 27. Appellants argue that
this reference to “payments by the United States” covers
the future sums of paragraphs 4–6, meaning that the
Government promised to guarantee the payments result-
ing from the annuities. Appellants’ reading of paragraph
11, however, conflicts with the overall framework and
context of the Agreement.
First, the provision “payments by the United States
set forth above” more naturally refers to the purchase of
the annuity referenced in paragraph 3 and the lump-sum
payments in paragraph 10. These two paragraphs desig-
nate that “the United States of America agrees to pur-
chase annuities” and “the United States of America
further agrees to pay” the lump sums. J.A. 25–27. The
Agreement does not provide for any other “payments” by
the United States. The future payments set out in sec-
tion 1, paragraphs 4–6, are specified as being paid by the
annuity, and the Agreement does not indicate that the
10 NUTT v. US
United States agreed to guarantee these future payments.
J.A. 25–26. The United States is not mentioned in the
paragraphs specifying the future payments to be paid out
by the annuity. In contrast, section 2 of the Agreement
sets out an obligation to pay, requiring the Government to
“pay” certain lump-sum payments directly to Appellants.
It is the fulfillment of the Government’s obligation to
perform in section 1 and the obligation to pay in section 2
that discharge the Government’s responsibility under the
Agreement, as evident by interpreting these provisions
together.
Appellants’ view that “payment by the United States”
includes the future sums paid out by the annuity conflicts
with other provisions of the Agreement. Paragraph 11,
for example, provides that if the insurance company
defaults, Appellants have standing to sue the insurance
company, and the Government will assist Appellants in
such suit. J.A. 27. If “payments by the United States”
referred to the future sums, making the Government a
guarantor of the insurance company, it would be nonsen-
sical for the Government to agree to assist Appellants in a
suit against the insurance company. Similarly, the Gov-
ernment agreed in paragraph 12 to select a “very sound”
insurance company rated “excellent or better.” Id. The
Government’s agreement to select an insurance company
of a certain quality, at minimum, suggests that Appel-
lants sought to reduce their risk by having the Govern-
ment select a “very sound” insurance company, rather
than requiring that the Government act as a guarantor.
In addition, paragraph 14 of the Agreement provides
clear support for the court’s interpretation of “payments
by the United States.” Id. It states that the Government
will furnish to Appellants “a certificate of insurance or
other evidence of the purchase by the United States of
annuities in an amount sufficient to satisfy those obliga-
tions under the settlement agreement which are to be
satisfied by the purchase of the annuities.” Id. (emphases
NUTT v. US 11
added). This provision shows that the Government’s
obligations with respect to the future sums that were to
be made by the annuities were satisfied “by the purchase
of the annuities.” Id.
The plain language of the Agreement makes clear
that the Government agreed to purchase annuities and
pay certain lump-sum payments to Appellants, not to
make future payments or guarantee that the future
payments be made if the insurance company defaulted.
Under the Agreement’s terms, the Government’s obliga-
tions were satisfied upon making the lump-sum payments
and purchasing the annuity. Furthermore, the Court of
Federal Claims’ interpretation of the Agreement and its
analysis of the principle of sovereign immunity are in line
with the FTCA cases discussed above. The court properly
concluded that, in addition to the Agreement’s plain
language, the “principle [of sovereign immunity] further
compels a finding that the Agreement did not obligate the
Government to guarantee future payments, because it did
not unequivocally promise to do so.” Summary Judgment
Order, 121 Fed. Cl. at 590 (emphasis added). Because the
terms of the Agreement unambiguously show that the
Government agreed to purchase annuities, not to guaran-
tee future periodic payments, we need not address the
parties’ arguments on extrinsic evidence. See Coast Fed.
Bank, 323 F.3d at 1040–41.
III.
Finally, we address the effect of Massie v. United
States, 166 F.3d 1184 (Fed. Cir. 1999), on this case. In
Massie, this court reversed the Court of Federal Claims’
grant of summary judgment that the Government did not
breach an agreement to pay a claim made under the
Military Claims Act (“MCA”). We concluded that the
Agreement “requires [the Government] to guarantee all
the annuity disbursements,” pointing to language that the
annuity “will result in distributions” and that the pay-
12 NUTT v. US
ments were “guaranteed” and “shall be paid.” Id. at
1190–91. The court in this case determined that Massie
did not control because it involved an MCA claim, where-
as this case involves an FTCA claim. Summary Judg-
ment Order, 121 Fed. Cl. at 588. We are not persuaded
that this distinction makes a difference in the applicabil-
ity of Massie.
Nonetheless, we distinguish Massie on different
grounds. In Massie, the agreement expressly stated that
the “deferred lump-sum payments . . . are guaranteed”
and the annuity payments “are guaranteed for fifteen (15)
years.” 166 F.3d at 1186–87. With these express guaran-
tee provisions, we reversed the trial court’s holding that
the Government did not agree to guarantee the annuity
payments. But the Agreement here does not have similar
guarantee language. Moreover, unlike the Massie settle-
ment agreement, the Agreement here contemplates that
in the event of a default by the insurance company, the
plaintiffs “shall have standing to sue the said insurance
company for breach of contract” and “the United States
shall assist . . . in the prosecution of said suit.” J.A. 27.
The Agreement says nothing about the Government’s
obligations to pay the annuity in the event of a default.
As such, we decline to extend Massie to the facts of this
case, where the Agreement’s language does not unambig-
uously show that the Government agreed to guarantee
the future payments by the annuity.
CONCLUSION
For the reasons above, we affirm the judgment of the
Court of Federal Claims.
AFFIRMED
COSTS
No Costs