FOO v. KERRY et al
MEMORANDUM AND OPINION re 15 , 18 the parties' motions for summary judgment. Signed by Judge Tanya S. Chutkan on 3/23/2017. (lctsc2)
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
SHAR LYN FOO,
Secretary, U.S. Department of State, et al.,
Case No. 15-cv-2033 (TSC)
Plaintiff Shar Lyn Foo alleges that the State Department and the Foreign Service
Grievance Board (“FSGB”) violated the Administrative Procedure Act (“APA”), 5 U.S.C. § 706,
when they determined that she was ineligible to seek a waiver for the repayment of retirement
annuity overpayments. Plaintiff additionally asserts that the regulation Defendants relied on for
their determination, 22 C.F.R. § 17.7(a)(2), is invalid because it is not authorized by, and
conflicts with, the text of 22 U.S.C. § 4047(d). The parties have filed cross-motions for
summary judgment. 1 (ECF Nos. 15, 18). Upon consideration of the motions and the record, and
for the reasons set forth below, the parties’ cross-motions are both GRANTED IN PART and
DENIED IN PART.
This case concerns Defendants’ attempt to collect on annuity overpayments made to
Plaintiff between 1997 and 2011. Shar Lyn Foo is the daughter of Charles Foo, a former Foreign
Defendants’ motion is styled as a motion to dismiss or in the alternative motion for summary
judgment. Because the arguments raised in Defendants’ motion are primarily legal and rely
upon numerous exhibits, the court will consider the motion only as one for summary judgment.
Service officer who died in 1984. (FSGB Corrected Decision (“FSGB Decision”) at 3 (Compl.
Ex. 2)). Charles Foo received retirement annuity payments from the State Department’s Foreign
Service Retirement and Disability System until his death in 1984, when his wife Lorna Foo
began receiving those benefits as a survivor annuitant. (Id.). These annuity payments were
deposited directly into Lorna Foo’s account at First Hawaiian Bank, and in 1995 Plaintiff was
added to this account as a co-owner. (Id.; Compl. ¶ 32). After Lorna Foo’s death in November
1997, the State Department continued to deposit monthly annuity payments into this bank
account until it realized its error and ceased the payments in 2011. (FSGB Decision at 4–5;
Compl. ¶ 43). Plaintiff alleges that during the fourteen years, from 1997 to 2011, she was
unaware that the monthly deposits were survivor annuity payments that should have ceased with
her mother’s death; indeed, she was not aware of the source or nature of the payments at all.
(Compl. ¶¶ 32–36). Plaintiff states that, as her mother requested, she applied the monthly bank
deposits to Lorna Foo’s condominium mortgage, and that Lorna had instructed Plaintiff to give
the condominium to Plaintiff’s nephew when he reached adulthood and the mortgage was paid.
(Id. ¶¶ 33–38).
In May 2012, the State Department sent Plaintiff a letter informing her that Lorna Foo’s
survivor annuity account had been overpaid by $254,343.99 and that Plaintiff was required to
repay that amount. (Id. ¶ 55; Def. Ex. 1). The following month, Plaintiff’s counsel sent a letter
to the State Department requesting a waiver of the collection under 22 C.F.R. § 17.2 because
“[t]he alleged overpayment is not the result of Shar Lyn’s acts or omissions and therefore Shar
Lyn is without fault.” (Def. Ex. 2 at 4; Compl. ¶ 56). Section 17.2(a) provides that “[r]ecovery
of an overpayment . . . may be waived pursuant to [22 U.S.C. § 4047(d)] when the individual is
without fault and recovery would be against equity and good conscience or administratively
infeasible.” Nearly two years later, the State Department responded to Plaintiff’s June 2012
letter and notified her that the overpayment amount had been recalculated to $311,703.00 and
that it could not consider her waiver request because “[t]he Department is prohibited from
waiving collection of an overpayment to an estate under 22 C.F.R. 17.7(a)(2).” (Def. Ex. 3 at 1,
3; Compl. ¶¶ 59–60). 22 C.F.R. § 17.7(a)(2) states that “[w]aiver of an overpayment cannot be
granted when . . . [t]he overpayment was made to an estate.” Plaintiff subsequently appealed the
State Department’s determination to the FSGB in July 2014, primarily arguing that she was
eligible to seek a waiver because the annuity payments were deposited directly into her own
bank account, not sent to an account associated with her mother’s estate. (Def. Ex. 5; Compl.
The FSGB issued its decision in May 2015, followed by a corrected decision in early
June 2015. (Compl. Exs. 1, 2). It found that Plaintiff had failed to proffer substantial evidence
that the annuity payments were not made to Lorna Foo’s estate and therefore determined that
Plaintiff was ineligible for a waiver under 22 C.F.R. § 17.7(a)(2). (Id. at 10–17). Plaintiff
subsequently brought this suit challenging the FSGB’s decision.
On a motion for summary judgment in a suit seeking APA review, the court must set
aside any agency action that is “arbitrary, capricious, an abuse of discretion, or otherwise not in
accordance with law.” 5 U.S.C. § 706(2). The court’s review is “highly deferential” and begins
with a presumption that the agency’s actions are valid. Envtl. Def. Fund, Inc. v. Costle, 657 F.2d
275, 283 (D.C. Cir. 1981). The court is “not empowered to substitute its judgment for that of the
agency,” Citizens to Pres. Overton Park, Inc. v. Volpe, 401 U.S. 402, 416 (1971), but instead
must consider only “whether the agency acted within the scope of its legal authority, whether the
agency has explained its decision, whether the facts on which the agency purports to have relied
have some basis in the record, and whether the agency considered the relevant factors.”
Fulbright v. McHugh, 67 F. Supp. 3d 81, 89 (D.D.C. 2014) (quoting Fund for Animals v. Babbitt,
903 F. Supp. 96, 105 (D.D.C. 1995)). The plaintiff bears the burden of establishing the
invalidity of the agency’s action. Id.
A. Ultra Vires Challenge to the State Department’s Estate Rule
In Count II of her Complaint, Plaintiff alleges that the State Department acted ultra vires
and exceeded its authority when it promulgated 22 C.F.R. § 17.7(a)(2), which prohibits the
waiver of repayment for an overpayment made to an estate, and further that the FSGB acted ultra
vires in concluding that the estate rule was valid. (Compl. ¶¶ 98–104). Plaintiff argues that this
estate rule is contrary to the text of the enabling statute, 22 U.S.C. § 4047(d), which provides the
authority for discretionary waivers of overpayment collections. Defendants contend that the
estate rule was lawfully promulgated as a valid and reasonable interpretation of the statute.
The parties agree that in order to evaluate Plaintiff’s claim that the estate rule is contrary
to the statute, the court must “begin [its] analysis with the first step of the two-part framework
announced in Chevron . . . and ask whether Congress has ‘directly addressed the precise question
at issue.’” Mayo Found. for Med. Educ. & Research v. United States, 562 U.S. 44, 52 (2011)
(quoting Chevron, U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 843 (1984)).
Under step one of Chevron, the court first examines “whether the intent of Congress is clear,”
and if it is then “that is the end of the matter; for the court, as well as the agency, must give effect
to the unambiguously expressed intent of Congress.” Chevron, 467 U.S. at 842–43. If the
statute is “silent or ambiguous,” then the analysis proceeds to step two, where “the question for
the court is whether the agency’s answer is based on a permissible construction of the statute.”
Id. at 843.
Chevron Step One
The first step of the Chevron framework begins with an evaluation of the statute’s text
using “the traditional tools of statutory construction in order to discern whether Congress has
spoken directly to the question at issue.” Eagle Broad. Grp., Ltd. v. FCC, 563 F.3d 543, 552
(D.C. Cir. 2009) (citing Chevron, 467 U.S. at 842–43). The court “looks to the text, structure,
and the overall statutory scheme, as well as the problem Congress sought to solve.” Fin.
Planning Ass’n v. SEC, 482 F.3d 481, 487 (D.C. Cir. 2007). “If this ‘search for the plain
meaning of the statute . . . yields a clear result, then Congress has expressed its intention as to the
question, and deference is not appropriate,’” ending the court’s analysis. Eagle Broad. Grp., 563
F.3d at 552 (quoting Bell Atl. Tel. Cos. v. FCC, 131 F.3d 1044, 1047 (D.C. Cir. 1997)).
The State Department’s estate rule was promulgated under 22 U.S.C. § 4047, which
provides for annuity payments under the Foreign Service Retirement and Disability System.
Section 4047(d) states: “Recovery of overpayments under this part may not be made from an
individual when, in the judgment of the Secretary of State, the individual is without fault and
recovery would be against equity and good conscience or administratively infeasible.” 22 U.S.C.
§ 4047(d). This section of the statute also provides for payment of the retirement annuity to a
survivor annuitant, but states that “no annuity shall be due or payable to his or her estate.” 22
U.S.C. § 4047(b). Unlike other terms used in this section, such as “annuitant,” Congress did not
define “individual.” See 22 U.S.C. § 4044 (definitions).
Both parties assert that the court’s analysis can be resolved at step one. Plaintiff argues
that Congress has already addressed the issue of when the State Department may and may not
recover an overpayment in the text of 22 U.S.C. § 4047(d). According to Plaintiff, Congress
expressly prohibited recovery of an overpayment only where the individual who received the
overpayment is without fault such that recovery would be “against equity and good conscience or
administratively infeasible.” 22 U.S.C. § 4047(d). Plaintiff further contends that Congress
intended “an individual” to be a broad term meaning any individual, because in other provisions
of this section and in the preceding section of the statute Congress used specific terms such as
“participant,” “survivor,” “eligible individual,” and “individual entitled to an annuity.” 22
U.S.C. §§ 4047, 4046. Defendant argues that the plain text of the statute supports its
interpretation because under 22 U.S.C. § 4047(b) the State Department is prohibited from
making annuity payments to an estate and therefore payments made to estates cannot be
encompassed by the term “an individual” in 22 U.S.C. § 4047(d).
Neither party’s reading of this statutory section satisfies the court that Congress has
directly addressed the issue of whether an estate is eligible for an overpayment waiver. While
Plaintiff is correct that Congress did not define the term “an individual,” nothing in the statute
suggests that Congress intended this term to be so broad as to include any individual or entity,
including an estate. A review of dictionary definitions offers no support for Plaintiff’s argument.
While Black’s Law Dictionary does not define “individual” as a noun, Merriam-Webster defines
“individual” as “a particular person” and the Oxford English Dictionary defines it as “[a] single
human being as distinct from a group.” 2 However, while it is not clear that Congress intended
“an individual” to include estates, the court is also not convinced that the statute’s bar on making
annuity payments to survivors’ estates directly addresses the separate issue of whether an estate
Individual, Merriam-Webster, https://www.merriam-webster.com/dictionary/individual;
Individual, Oxford English Dictionary, https://en.oxforddictionaries.com/definition/individual.
may qualify for a waiver if it mistakenly receives an annuity payment. The prohibition on
payments to estates is just one of many statutory restrictions on annuity payments. By providing
for the collection of overpayments generally, as well as the waiver of collection in certain
circumstances, Congress clearly envisioned that the State Department might make errors in
dispersing annuity payments, and nothing in the statute indicates that Congress specifically
intended for all erroneous recipients of overpayments except estates to be eligible for a waiver.
Because Congress assigned no specific definition to the term “an individual,” and further
expressly provided that an overpayment waiver should be made “in the judgment of the
Secretary of State,” the court concludes that Congress delegated authority, both explicitly and
implicitly, to the agency to answer the question of when recovery of an overpayment “would be
against equity and good conscience or administratively infeasible.” This analysis therefore must
proceed to step two.
Chevron Step Two
Under step two of the Chevron framework, “[i]f Congress has explicitly left a gap for the
agency to fill, there is an express delegation of authority to the agency to elucidate a specific
provision of the statute by regulation. Such legislative regulations are given controlling weight
unless they are . . . manifestly contrary to the statute.” Chevron, 467 U.S. at 843–44. If,
however, “the legislative delegation to the agency is ‘implicit rather than explicit,’ [the court]
will uphold any ‘reasonable interpretation made by the administrator’ of the agency.” Eagle
Broad Grp., 563 F.3d at 551 (quoting Chevron, 467 U.S. at 844); see also Am. Library Ass’n v.
FCC, 406 F.3d 689, 699 (D.C. Cir. 2005) (at step two, “the agency’s statutory interpretation is
entitled to deference, as long as it is reasonable”). Here, it appears that Congress explicitly
granted the State Department authority to determine, using its own discretion, whether a waiver
“would be against equity and good conscience or administratively infeasible”, and implicitly
granted the agency discretion to interpret the scope of “individual,” which the statute left
Under this deferential standard, the court finds that the State Department’s interpretation
of “an individual” is reasonable, and thus its rule is permissible and lawful. As stated above,
while the statute does not expressly state that estates should not be permitted to keep any annuity
payments made in error, it does state that payments may not be made to estates. 22 U.S.C.
§ 4047(b). When considered in light of the common meaning of “individual” as relating to a
person, the State Department’s interpretation that this waiver provision should exclude estates
appears to the court to be a reasonable one. Moreover, the text of § 4047(d) expressly delegates
to the State Department the authority to determine in its discretion when collection of an
overpayment is against equity and good conscience. Therefore, the State Department is
permitted to conclude that collecting an overpayment from an estate would never be against
equity and thus promulgate the estate rule, because such an interpretation is not “manifestly
contrary to the statute,” Chevron, 467 U.S. at 844.
Plaintiff offers several arguments for why the State Department’s estate rule is not a
reasonable interpretation of the statute. First, Plaintiff points to the Office of Personnel
Management (“OPM”) agency guidance for 5 U.S.C. § 5584, which applies to overpayments
“arising out of an erroneous payment of pay or allowances . . . or arising out of an erroneous
payment of travel, transportation or relocation expenses and allowances, to an employee of an
agency.” OPM’s guidance, in the form of a Fact Sheet on its website, provides that “an
employee’s . . . estate that is liable for repayment of an erroneous payment directed to the
employee . . . may also seek a waiver.” Fact Sheet: Waiving Overpayments, OPM.gov,
https://www.opm.gov/policy-data-oversight/pay-leave/pay-administration/fact-sheets/waivingoverpayments. But the court is not persuaded that OPM’s differing interpretation of a similar
statute, which applies to government overpayments of salary or reimbursements rather than to
retirement annuities, demonstrates that the State Department’s interpretation is unreasonable.
Next, Plaintiff cites King v. OPM, 730 F.3d 1342 (Fed. Cir. 2013), which involved a
waiver request under an analogous overpayments statute to § 4047(d). However, King did not
involve overpayments to an estate, and therefore it is unclear to the court how it is relevant to the
reasonableness of the State Department’s rule. Finally, Plaintiff argues that Congress intended
the waiver provision to apply broadly, and so a rule against estate waivers would frustrate
Congressional intent. In the court’s view, Plaintiff’s arguments reflect reasonable alternative
interpretations that the State Department could have chosen. However, the agency was only
required to choose a permissible and reasonable interpretation. Having done so, the State
Department did not act ultra vires in promulgating the estate rule, and the court finds that the
agency’s estate rule was promulgated lawfully. The court therefore GRANTS Defendant’s
motion and DENIES Plaintiff’s cross-motion as to Count II.
B. APA Challenge to Defendants’ Application of the Estate Rule
In Count I of her Complaint, Plaintiff alleges that the FSGB violated the APA and acted
arbitrarily, capriciously, and contrary to law when it found that Plaintiff was ineligible to request
a waiver under 22 U.S.C. § 4047(d) because the overpayments were made to an estate. As noted
above, the court’s review of agency actions under the APA is “[h]ighly deferential” and
“presumes the validity of agency decisions.” Overton Park, 401 U.S. at 416. Having determined
that the State Department’s estate rule is valid, the court now considers under this deferential
standard whether the FSGB lawfully applied the rule to Plaintiff’s appeal.
The State Department’s regulations require that the FSGB apply a “substantial evidence”
standard of review in considering an appellant’s claim. See 22 C.F.R. § 17.8(b) (“The recipient
of an overpayment must establish by substantial evidence that he or she is eligible for waiver or
an adjustment in the recovery schedule.”). In its 2015 decision, the FSGB purported to apply
this standard and found that Plaintiff “ha[d] failed to carry her burden of showing by substantial
evidence that [22 C.F.R. § 17.7(a)(2)] does not apply, and that she is therefore eligible to have
her waiver request considered by the Secretary on the merits.” (FSGB Decision at 10).
The primary factual dispute that the FSGB sought to resolve was whether the bank
account into which the State Department mistakenly deposited monthly annuity payments was a
part of Lorna Foo’s estate or was instead owned by Plaintiff. In her administrative appeal,
Plaintiff argued to the FSGB that she and her mother were co-owners of the account beginning in
1995, and that under Hawaiian law Plaintiff became the owner of the account upon Lorna Foo’s
death. Therefore, Plaintiff argued, all subsequent annuity payments deposited into the account
were given to her, not to her mother’s estate. As support, Plaintiff provided the FSGB with four
monthly bank statements listing both Plaintiff’s and her mother’s names on the account,
approximately twenty cancelled checks, and a letter from a First Hawaiian Bank Credit
Operations Officer stating that “SharLyn Foo was added to her mother’s account as a co-owner
on November 6, 1995.” Plaintiff also cited Haw. Rev. Stat. § 560:6-104(a), which states that
“[s]ums remaining on deposit [in a joint account] at the death of a party to a joint account belong
to the surviving party or parties as against the estate of the decedent unless there is clear and
convincing evidence of a different intention at the time the account is created.” The FSGB
discredited all of Plaintiff’s submissions. With respect to the bank statements, it found that “the
account statements and checks fail to provide any evidence that the account was owned
jointly.” (FSGB Decision at 11). The FSGB also discredited the bank letter because it
concluded that the letter lacked foundation and was not in the form of an affidavit. (Id. at 13).
The bank letter also stated that Plaintiff and her mother were “co-owners of the account,” which
the FSGB distinguished without explanation from being “parties to a joint account.” (Id.).
Ultimately, the FSGB relied heavily on the fact that Plaintiff “believed that the First
Hawaiian Bank checking account was in Lorna’s name only, and that she (appellant) ‘only had
signing authority on the account. [She] believed it was her mother’s individual account because
only Lorna’s name appeared on the checks.’” (Id. at 10). As a result, the FSGB construed
Plaintiff’s evidence, including that she was listed on the bank statements, to comport with
Plaintiff’s own subjective belief about ownership of the account—specifically that she was not
an owner but rather only had signing authority for her mother’s checks. (Id. at 10–11). The
FSGB also declined to analyze Haw. Rev. Stat. § 560:6-104(a), the provision cited by Plaintiff,
and instead considered only Haw. Rev. Stat. § 560:6-103, which states that a joint account
“belongs, during the lifetime of all parties, to the parties in proportion to the net contributions by
each to the sums on deposit.” Because the FSGB found that there was no evidence that Plaintiff
had “made her own independent contributions to the account during Lorna’s lifetime,” it
concluded that Plaintiff was not an owner of a joint account. (FSGB Decision at 12).
While the FSGB’s decision must be given deference under APA review, the court finds
that it erred in finding that Plaintiff had not put forth substantial evidence that she owned the
account into which the State Department made its deposits. Under the evidentiary standard the
FSGB was required to apply, Plaintiff had to provide only “‘such relevant evidence as a
reasonable mind might accept as adequate to support a conclusion.’” Butler v. Barnhart, 353
F.3d 992, 999 (D.C. Cir. 2004) (quoting Richardson v. Perales, 402 U.S. 389, 401 (1971)). The
test “requires more than a scintilla, but can be satisfied by something less than a preponderance
of the evidence.” Fla. Mun. Power Agency v. FERC, 315 F.3d 362, 365–66 (D.C. Cir. 2003)
(internal quotation omitted); see also 33 Wright & Miller, Fed. Prac. & Proc. Judicial Review
§ 8333 (1st ed.) (“Substantial evidence is less than a preponderance but enough so that a
reasonable mind might find it adequate to support the conclusion.”). Here, Plaintiff provided the
FSGB with a letter from the bank explaining that she and her mother were “co-owners,” and with
bank statements that listed both her and her mother on the account. Hawaiian law, as quoted
above, provides that when one co-owner of a bank account dies, the surviving co-owner becomes
the outright owner. See Haw. Rev. Stat. § 560:6-104(a). While Plaintiff may have presented the
FSGB with stronger evidence, such as the specific document(s) used to add her to Lorna’s
account in 1995, or an affidavit instead of a letter from a bank official, Plaintiff was only
required to prove her ownership by substantial evidence, not by a preponderance of the evidence.
In the court’s view, the FSGB erred in determining that Plaintiff had not provided substantial
evidence to establish her ownership by placing greater emphasis on Plaintiff’s subjective beliefs
about her mother’s ownership of the account than on the documentary evidence she submitted,
and by distinguishing without explanation between a “co-owner” and a “joint owner,” and by
disregarding without mention or explanation the provision of Hawaiian law, Haw. Rev. Stat.
§ 560:6-104(a), used by Plaintiff to show that she was the owner of the account.
In sum, the court concludes that the FSGB erred by applying an evidentiary standard
higher than the “substantial evidence” standard required under 22 C.F.R. § 17.8(b) and by
disregarding Plaintiff’s relevant and competent evidence offered to establish that she owned the
bank account into which the State Department mistakenly deposited annuity payments.
Therefore, the court concludes that the FSGB further erred in determining that these annuity
payments were made to an estate under 22 C.F.R. § 17.7(a)(2). Because Plaintiff provided
substantial evidence that the payments were made to her account, rather than to her mother’s
estate, then the FSGB should have considered the merits of Plaintiff’s waiver request, rather than
concluding that the estate rule barred such consideration. The court GRANTS Plaintiff’s crossmotion and DENIES Defendants’ motion as to Count I.
For the foregoing reasons, Defendants’ motion is granted in part and denied in part, and
Plaintiff’s cross-motion is also granted in part and denied in part. The court will remand the case
to the FSGB for consideration of the merits of Plaintiff’s waiver request. A corresponding Order
will issue separately.
Date: March 23, 2017
Tanya S. Chutkan
TANYA S. CHUTKAN
United States District Judge
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