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News from the Federal Circuit: Court Retains Jurisdiction for Settlement Breach

News from the Federal Circuit: In Cunningham v. United States, No. 2013-5055 (4/9/14), the U.S. Court of Appeals for the Federal Circuit held that the Court of Federal Claims had jurisdiction over breach of a settlement agreement claims, and can award money damages to the claimant, despite other avenues for redress of the breach.

Eric Cunningham worked for the Office of Personnel Management (OPM) from February 2004 until his termination in January 2005. He appealed his termination to the MSPB.  At the MSPB, OPM and Cunningham entered into a settlement agreement. The agreement contained a confidentiality provision prohibiting both parties from disclosing the terms of the agreement. The agreement required OPM to remove his termination letter from his personnel file and designated an OPM human resource director as the contact point for reference inquiries.

Subsequently, Cunningham was hired by a government contractor, USIS, and passed USIS' background investigation.  Cunningham was informed that he would be working on a USIS contract with OPM, and that OPM would conduct its own background investigation. Less than a week later, Cunningham was suspended at the direction of OPM's security office, and was terminated by USIS in February 2008.

Cunningham learned that his OPM file contained a document showing that two OPM employees--neither the human resources director--had disclosed Cunningham's termination and MSPB appeal to OPM's background investigator.  Cunningham filed a petition to enforce the settlement agreement with the MSPB. In July 2008, an MSPB Administrative Judge found OPM had breached the settlement agreement. The MSPB, however, lacked authority to award money damages for OPM's breach. Cunningham then filed a breach of contract action in the US Court of Federal Claims. The court found that it had jurisdiction under the Tucker Act, but dismissed the suit because the case had already been heard by the MSPB (under the legal doctrine of res judicata). Cunningham then appealed to the Federal Circuit.

The Federal Circuit agreed that the Court of Federal Claims had jurisdiction over the action. The Federal Circuit explained that a settlement agreement is a contract under the Tucker Act.  Since the Court of Federal Claims has jurisdiction to hear breach of contract claims against the government, it had jurisdiction over Cunningham's breach of settlement agreement case. 

Cunningham sought money damages for his lost USIS income.  Although MSPB can enforce compliance with the terms of a settlement agreement, it cannot award monetary damages for a breach. The Federal Circuit held that the doctrine of res judicata did not bar Cunningham's breach of contract claim because he was seeking a form of relief (money damages) unavailable at the MSPB. The Federal Circuit remanded the case to the Court of Federal Claims for further proceedings.

If you are a federal employee with a breached settlement and are in need of assistance, consider requesting an initial consultation with one of Passman & Kaplan's attorneys.

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