McMasters v. Tennessee Valley Authority (TV2)
Filing
11
MEMORANDUM OPINION; TVA's Motion to Dismiss 5 will be GRANTED, plaintiff's claims will be DISMISSED, and the Clerk of Court will be DIRECTED to CLOSE this case. An appropriate order will be entered. Signed by District Judge Thomas A Varlan on 2/15/12. (ADA) (Main Document 11 replaced on 2/15/2012) (ADA, ).
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF TENNESSEE
AT KNOXVILLE
GREG McMASTERS,
Plaintiff,
v.
TENNESSEE VALLEY AUTHORITY,
Defendant,
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No.:
3:11-CV-454
(VARLAN/SHIRLEY)
MEMORANDUM OPINION
This civil action is before the Court on the Motion to Dismiss [Doc. 5], submitted by
defendant, the Tennessee Valley Authority (“TVA”), in which TVA moves, pursuant to Rule
12(b)(6) of the Federal Rules of Civil Procedure, for dismissal of all claims asserted by
plaintiff. Plaintiff, Greg McMasters, has submitted a response in opposition [Doc. 8]. TVA
has submitted a reply [Doc. 9]. The motion is ripe for determination. For the reasons set
forth herein, TVA’s motion to dismiss [Doc. 5] will be GRANTED, plaintiff’s claims in this
case will be DISMISSED, and this case will be CLOSED.
I.
Facts
Plaintiff applied for a position at TVA’s Sequoyah Nuclear Plant as an
Instrumentation and Controls Systems Engineer, Senior Level (the “position”) [Doc. 1, ¶¶
9, 10, 17, 20]. TVA offered plaintiff the position via a letter dated June 2, 2010 [Id. ¶ 10].
Plaintiff accepted TVA’s offer and submitted a notice of resignation to his employer at the
time [Id., ¶ 20]. Plaintiff alleges that he was told by a TVA employee that his anticipated
start date for the TVA position would be November 15, 2010 [Id., ¶ 23]. Plaintiff alleges that
beginning at the end of October 2010, and continuing thereafter, he attempted to contact
TVA to confirm this start date, but received no response [Id., ¶¶ 24, 25]. On November 22,
2010, TVA sent plaintiff an email rescinding its offer of a position because plaintiff’s
educational degree did not satisfy the minimal educational requirement for the position [Id.,
¶¶ 26, 27; Doc. 1-4].
Plaintiff then filed the instant complaint against TVA, alleging that by rescinding the
offer, TVA’s actions constituted a breach of contract under Tennessee law [Doc. 1, ¶ 35].
Plaintiff also alleges that he is entitled to damages under a theory of promissory estoppel
because he relied, to his detriment, on TVA’s promise or representation that it would hire
plaintiff to the position [Id., ¶ 44].
TVA brought the instant motion to dismiss.
II.
Standard of Review
A party may move to dismiss for failure to state a claim pursuant to Federal Rule of
Civil Procedure Rule 12(b)(6). In order to survive a Rule 12(b)(6) motion to dismiss for
failure to state a claim, a complaint must contain allegations supporting all material elements
of the claims. Bishop v. Lucent Techs., Inc., 520 F.3d 516, 519 (6th Cir. 2008). In
determining whether to grant a motion to dismiss, all well-pleaded allegations must be taken
as true and must be construed most favorably toward the non-movant. Trzebuckowski v. City
of Cleveland, 319 F.3d 853, 855 (6th Cir. 2003). Detailed factual allegations are not
required, but a party’s “obligation to provide the ‘grounds’ of his ‘entitle[ment] to relief’
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requires more than labels and conclusions and a formulaic recitation of a cause of action’s
elements will not do.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). Nor will
an “unadorned, the-defendant-unlawfully harmed-me accusation.” Ashcroft v. Iqbal, 556 U.S.
662, 129 S. Ct. 1937 (2009). Rather, a pleading must “contain either direct or inferential
allegations respecting all the material elements to sustain a recovery under some viable legal
theory.” Scheid v. Fanny Farmer Candy Shops, Inc., 859 F.2d 434, 436-37 (6th Cir. 1988)
(quoting Car Carriers, Inc. v. Ford Motor Co., 745 F.2d 1101, 1106 (7th Cir. 1984)).
III.
Analysis
In support of its motion to dismiss, TVA argues that no breach of contract action can
lie against TVA for rescission of an offer of employment because employment at TVA is
prescribed by statute and is “by appointment.” TVA also argues that an action to recover
damages under a theory of promissory estoppel cannot be brought against TVA because
employment appointments are made to carry out the business of TVA and are authorized by
the TVA Act. In response, plaintiff contends that TVA is not entitled to sovereign immunity
by virtue of the “sue and be sued” clause in the TVA Act and because TVA’s ability to hire
and discharge employees is a commercial function. Plaintiff asserts, therefore, that TVA
cannot claim immunity from plaintiff’s claims because there is no grave interference with a
governmental function in the hiring and discharging of employees.
A.
Breach of Contract Claim
As noted by both parties, the TVA Act designates TVA “an instrumentality and
agency of the Government of the United States[.]” 16 U.S.C. § 831r. The United States
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Supreme Court has recognized TVA’s status as a federal agency, see Ashwander v. TVA, 297
U.S. 288, 315 (1936) (referring to TVA as “an agency of the federal government”), as has
the United States Court of Appeals for the Sixth Circuit. See Matheny v. TVA, 557 F.3d 311,
320 (6th Cir. 2009) (stating that “TVA is a ‘wholly-owned corporate agency and
instrumentality of the United States’”) (quoting Edwards v. TVA, 255 F.3d 318, 322-23 (6th
Cir. 2001) (quoting Hill v. United States, 65 F.3d 1331, 1333 (6th Cir. 1995))). The Sixth
Circuit has also recognized that those who work for TVA are employees of the federal
government. See Jones v. TVA, 948 F.2d 258, 262 (6th Cir. 1991); see also McNabb v. TVA,
754 F. Supp. 118, 120 (E.D. Tenn. 1990).
This Court recognizes that the “sue and be sued” clause in the TVA Act constitutes
a “broad waiver of sovereign immunity” because “in certain limited situations the TVA is
exempt from liability arising out of the exercise of wholly governmental functions, where the
TVA acts solely as the Government’s agent and where the United States itself would not be
liable.” Edwards, 255 F.3d at 322 (quoting Queen v. TVA, 689 F.2d 80, 86 (6th Cir. 1982),
cert. denied, 460 U.S. 1082 (1983)). The Sixth Circuit has also stated that TVA’s nonliability is “not an incident of immunity but the result of the entitlement of the TVA, when
it acts solely as a governmental entity, to assert as well established substantive principle of
nonliability which the Government itself would be entitled to assert and which the
Government has not otherwise waved.” Queen, 689 F.2d at 86. This exemption from
liability for certain “wholly governmental functions” has been analyzed pursuant to the same
analysis as that applied to the immunity resulting from the discretionary function doctrine of
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the Federal Tort Claims Act. See, e.g., Edwards, 255 F.3d at 322 (applying the discretionary
function doctrine to TVA); Sligh v. TVA, 532 F. Supp. 168 (D.C. Tenn. 1980) (same).
The motion to dismiss, however, is not based on principles of federal immunity.
Rather, TVA’s motion is premised on the statutory basis for the employment of TVA
employees and the nature and implication of their status as federal employees.
It is “presumed that ‘absent specific legislation, federal employees derive the benefits
and emoluments of their positions from appointment rather than from any contractual or
quasi-contractual relationship with the government.” Piper v. United States, 90 Fed. Cl. 498,
503 (Fed. Cl. 2009) (quoting Chu v. United States, 773 F.2d 1226, 1229 (Fed. Cir. 1985)).
Consequently, if an individual’s “employment was by ‘appointment,’ a breach of contract
action against the government would be precluded.” Hamlet v. United States, 873 F.2d 1414,
1417 n.5 (Fed. Cir. 1989). In other words, a federal employee’s “relationship with the
Government cannot be simultaneously governed by both an appointment and a contract.”
Collier v. United States, 56 Fed. Cl. 354, 356 (Fed. Cl. 2003), aff’d, 379 F.3d 1330 (Fed. Cir.
2004). To determine how an individual is employed by the federal government, a court must
analyze the relevant statutes and regulations in light of the other evidence presented. Piper,
90 Fed. Cl. at 504.
The TVA Act provides that “[t]he chief executive officer shall appoint, with the
advice and consent of the Board, and without regard to the provisions of the civil service
laws applicable to officers and employees of the United States, such . . . employees . . . as are
necessary for the transaction of the business of the Corporation.” 16 U.S.C. § 831b(a).
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Plaintiff has not alleged that his employment was not by appointment. Thus, absent any
other evidence and given the express language of § 831b(a), the Court concludes that TVA’s
offer of employment to plaintiff arose as an appointment.
In a similar situation, in Piper v. United States, the United States Court of Federal
Claims considered a claim for breach of contract made by a plaintiff who was hired by the
Transportation Security Administration (the “TSA”) and who, after he was hired, claimed
that his retirement annuity as a former army officer should not be deducted from his pay. Id.,
90 Fed. Cl. at 500. The Court of Federal Claims dismissed the plaintiff’s breach of contract
claim, holding that the plaintiff’s employment was by appointment under the relevant statute
and the other evidence, and therefore the plaintiff had no valid contract with the TSA under
which he could bring a claim for a breach. Id. at 505-05.1
Similar to Piper, because employment with TVA is by appointment and TVA’s
relationship with its employees is not governed by contract, plaintiff did not have a contract
with TVA from which he can now bring a claim for breach of contract. See, e.g., Chapman
v. TVA, No. 2:95-CV-250, slip op. at 3-4 (E. D. Tenn. Oct. 24, 1995) (J. Hull) (finding
TVA’s argument that its employees have no contractual right to employment to be “well-
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The Piper court noted that the relevant statute in the TSA permitted it to both “employ” and
“appoint” employees. Id., 90 Fed. Cl. at 504-05. Thus, the Piper court noted that it is possible for
a contract between the federal government and a federal employee to lie when it is “specifically
spelled out as a contract” and “made by a person having authority” to make such a contract. Id. at
503. Here, the TVA Act only provides that employment with TVA is by appointment. See 16
U.S.C. § 831b(a). Plaintiff has also not alleged that his offer was specifically designated a contract
of employment rather than an appointment or that it was made by a person with authority to make
a contract rather than an appointment.
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taken”). Accordingly, the Court finds that because plaintiff’s offer of a position with TVA
was prescribed by statute and was by “appointment” rather than by contract, plaintiff cannot
establish one of the essential elements of a breach of contract claim. That is, that a valid
contract existed between the parties. See Pryor v. United States, 85 Fed. Cl. 97, 104 (Fed.
Cl. 2008) (giving the elements of a breach of contract claim).
Thus, because there was no valid contract, plaintiff’s claim for breach of contract will
be DISMISSED.
B.
Promissory Estoppel
TVA asserts that plaintiff’s claim under a theory of promissory estoppel should also
be dismissed because no such cause of action may be brought against the federal government.
In response, plaintiff argues that he has stated a claim under a theory of promissory estoppel
because TVA has no sovereign immunity when it acts pursuant to its commercial and not its
governmental function, and that TVA’s actions in the hiring and discharging of employees
falls within TVA’s commercial function.
To prevail on a claim for promissory estoppel, a plaintiff must prove:
[F]irst, that there was a promise or representation made, second, that the
promise or representation was relied upon by the party asserting the
estoppel in such a manner as to change his position for the worse, and
third, that the promisee’s reliance was reasonable and should have been
reasonably expected by the promisor.
Steinberg v. United States, 90 Fed. Cl. 435, 443 (Fed. Cl. 2009) (citation omitted). Once
these elements are met, the promise will be binding if justice so requires. Id. However, as
TVA points out, “[a]s a general proposition of federal law, there is no cause of action in
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promissory estoppel against the federal government.” See Hoke Co., Inc. v. TVA, 661 F.
Supp. 740, 745 (W.D. Ky. 1987) (dismissing a plaintiff’s claim for damages under a theory
of promissory estoppel), aff’d on other grounds, Hoke Co., Inc. v. TVA, 854 F.2d 820 (6th
Cir. 1988); see also McCauley v. Thygerson, 732 F.2d 978, 980-81 (D.C. Cir. 1984) (finding
that a claim for promissory estoppel has a limited scope when it is alleged against the federal
government). As explained in McCauley:
Principles of promissory estoppel apply less broadly against the federal
government than they might in situations involving only private actors.
Kizas v. Webster, 707 F.2d 524, 535 (stating that “courts have
consistently refused to give effect to government-fostered expectations
that, had they arisen in the private sector, might well have formed the
basis for a contract or an estoppel”); Shaw v. United States, 640 F.2d
1254, 1260 (Ct. Cl.1981) (“Federal officials who by act or word
generate expectations in the persons they employ, and then disappoint
them, do not ipso facto create a contract liability running from the
Federal Government to the employee, as they might if the employer
were not the government”). This limited scope of estoppel is a
consequence of the basic principle that federal government employees
serve by appointment, not contract, and their employment rights “must
be determined by reference to the statutes and regulations governing
[terms of employment] rather than to ordinary contract principles.”
United States v. Larionoff, 431 U.S. 864, 869 (1977).
Id., 732 F.2d at 980-981.
As noted supra, the “sue and be sued” clause in the TVA Act constitutes a broad
waiver of sovereign immunity and courts have held that actions for tort liability may lie
against TVA in certain circumstances. However, as the Sixth Circuit recognized in Queen
v. TVA, a government-owned corporate entity, public policy dictates that when TVA is
engaged in matters authorized by statute, it is entitled to the immunity from suit which would
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be afforded the federal government were it in TVA’s situation. Id., 689 F.2d at 85-87. The
analysis of Hoke is persuasive on this point. In Hoke, the district court rejected an argument
similar to plaintiff’s, that TVA was acting in a proprietary, non-governmental, fashion in
regard to a failed contract negotiation over which the plaintiff had brought claims for breach
of contract and promissory estoppel. Id., 661 F. Supp. at 745. The district court rejected the
plaintiff’s argument, relying on the Sixth Circuit’s holding in Queen v. TVA and concluding
that because the actions at issue by TVA were “within its statutorily set functions,” the
United States would be entitled to immunity from a suit on the same theory if it were in
TVA’s position. Id. at 746.
As explained above, the TVA Act provides that “[t]he chief executive officer shall
appoint, with the advice and consent of the Board . . . employees . . . as are necessary for the
transaction of the business of the Corporation.” 16 U.S.C. § 831b(a). Similar to Hoke,
TVA’s employment appointment decisions are matters authorized by the TVA Act and thus
within TVA’s “statutorily set functions,” Hoke, 661 F. Supp. at 746, to carry out the business
of TVA. Given the general proposition that claims for promissory estoppel cannot be
asserted against the federal government, and given the express provision in the TVA Act
providing for employment by appointment only, the Court finds that plaintiff’s claim under
a theory of promissory estoppel should also be DISMISSED.
In addition, the Court notes that although plaintiff asserts in his complaint that he
“reasonably rel[ied] to his detriment, on the gratuitous promise or representation of TVA,”
[Doc. 1, ¶ 44], plaintiff alleges no specific oral or written representation, upon which he
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relied, that a contractual relationship and not an appointment relationship had been created.
Plaintiff also has not alleged that any TVA agent with whom he communicated regarding the
position possessed the authority to create a contractual relationship rather than an
appointment relationship. Furthermore, there is no allegation nor indication that any agent
of TVA possessed such authority. See, e.g., McCauley, 732 F.2d at 981 (noting the
plaintiff’s failure to allege similar allegations against another government corporation, the
Federal Home Mortgage Corporation).
IV.
Conclusion
For the reasons given above, TVA’s Motion to Dismiss [Doc. 5] will be GRANTED,
plaintiff’s claims will be DISMISSED, and the Clerk of Court will be DIRECTED to
CLOSE this case. An appropriate order will be entered.
ORDER ACCORDINGLY.
s/ Thomas A. Varlan
UNITED STATES DISTRICT JUDGE
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