Breach of Settlement Agreement May Lead to Monetary Damage Award

The federal appeals court has sent a case back to the Court of Federal Claims, disagreeing with that court’s holding that it was barred from considering a former fed’s monetary claim because the same matter had been ruled upon by the Merit Systems Protection Board. (Cunningham v. United States (CAFC No. 2013-5055, 4/9/14))

Plaintiff Cunningham worked as a criminal investigator for the Office of Personnel Management. For reasons not spelled out in the court decision, Cunningham was terminated. On appeal to the MSPB, the parties settled. Cunningham got $50,000 in return for withdrawal of his appeal; his personnel file was purged of the removal documentation; and both parties agreed to keep the settlement agreement confidential. The agreement also contained a specific process to follow for any job reference inquiries concerning Mr. Cunningham that were to come to OPM in the future: the Director of OPM’s HR office was designated as the agency’s sole contact point for such inquiries, and that official, in response to any reference inquiry, was to disclose only dates of Cunningham’s employment as a criminal investigator with OPM and the years of his service—no more. (Opinion p. 3)

Several months later Cunningham was offered a job with the USIS (United States Investigation Service), a private contractor that conducts background investigations for federal agencies. He had to undergo a background investigation and was told to report for required training. He was told that the company was going to receive a new contract from OPM and that OPM would be conducting its own background investigation on him.

Yep, you guessed it. After only a few days of his initial training, Cunningham was suspended without pay on orders of OPM’s security office. A few months later USIS terminated Mr. Cunningham. (pp. 3-4)

When Cunningham obtained a copy of his personnel file from OPM he found that two OPM employees had spilled to OPM’s background investigator the details of Cunningham’s termination by OPM and the appeal to MSPB. (p. 4)

Cunningham petitioned MSPB to enforce his settlement agreement with OPM. The Board found that OPM had materially breached its agreement with Cunningham; however it could not award damages. The best it could do was order up a cancellation of the settlement and reinstate his original appeal to the Board, which would also mean reimbursing the $50,000 payment Cunningham got as part of the settlement.

Cunningham informed the Board that he did not want their remedy, rather he wanted cash damages for the breach. He then filed a breach-of-contract suit in the claims court. That court found it did indeed have jurisdiction under the Tucker Act to consider breach of such a settlement agreement. However, the court dismissed the case based on MSPB having taken jurisdiction of the dispute. (p. 5)

The appeals court now holds that yes, the claims court did have jurisdiction, but, no, because the MSPB cannot award monetary damages for breach of a settlement agreement then the proper forum for Cunningham to remedy the breach is with the claims court.

The court brushes aside the government’s argument that MSPB had exclusive jurisdiction over this case. The whole point of the settlement concerning expunging Cunningham’s personnel record and limiting what OPM could say to prospective employers was to “prevent [him] from being denied future employment based on his record as …maintained…prior to the agreement.” (p. 9) Cunningham’s claim is that by breaching their agreement, OPM has damaged his future employment prospects. The court therefore held, “Mr. Cunningham’s suit for money damages under the Tucker Act falls within the Claims Court’s jurisdiction.” (p. 12)

As for the second government argument that Cunningham’s claims court suit is barred by res judicata, the appeals court holds it is not and sends the case back to the claims court for further proceedings. Because the MSPB has no authority to award monetary damages for OPM’s breach of the settlement agreement, Cunningham could not get complete relief from that direction. “Although Mr. Cunningham is suing the same party for the same breach of contract, he is entitled to seek a form of relief—money damages—that was unavailable to him before the MSPB due to limits on the agency’s remedial jurisdiction.” (pp. 16-17.

Bottom line–this case is going back to the claims court and Mr. Cunningham will have the chance to spell out the monetary damages he believes he is entitled to because of OPM’s breach of its settlement agreement.

This precedential decision by the Federal Circuit Court of Appeals represents a painful lesson for an agency that is not careful about strictly adhering to the terms it has agreed to in order to settle a personnel removal case. It is ironic that it comes at the expense of OPM, the agency that oversees the federal personnel system.

Cunningham v. US

© 2016 Susan McGuire Smith. All rights reserved. This article may not be reproduced without express written consent from Susan McGuire Smith.

About the Author

Susan McGuire Smith spent most of her federal legal career with NASA, serving as Chief Counsel at Marshall Space Flight Center for 14 years. Her expertise is in government contracts, ethics, and personnel law.

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