Earl B. Collins, and Cross-Appellants v. Donald H. Rumsfeld, and Cross-Appellees and Other Consolidated Cases

These are cases in which the not unreasonable expectations of the plaintiffs must be disappointed in order to serve the common good as perceived by Congress. This provides little comfort to the plaintiffs who are enlisted naval personnel, but our recognition of this perception of Congress extinguishes any power on our part to intervene.

In brief, the cases amount to this. The plaintiffs, while on active duty in the Navy, entered into agreements to extend their enlistments for an additional two or three years, which additional terms were to commence on various dates, all subsequent to June 1,1974, the effective date of the Armed Forces Enlisted Personnel Bonus Revision Act of 1974.1 At the time these agreements to extend enlistments were executed the law and applicable regulations authorized the payment of certain bonuses designated as Variable Reenlistment Bonuses (VRB’s). Each plaintiff was induced to agree to extend his enlistment by the prospect of receiving in due course a VRB. Prior to the commencement of a period of extended enlistment with respect to any plaintiff, the applicable law was changed by the Bonus Revision Act of 1974. Each of the plaintiffs, either before or after the effective date of the 1974 Act, completed the training which was necessary to qualify for a VRB. The 1974 Act abolished the VRB’s and substituted therefor Selective Reenlistment Bonuses (SRB’s) for which each plaintiff might qualify but for which he was not then, nor has he become, qualified. The plaintiffs contend that notwithstanding the 1974 Act they are entitled to VRB’s upon qualification therefor and commencement of their reenlistment periods. We hold to the contrary and reverse the holdings of the trial courts.

I.

To justify our holding we turn to the agreements to extend enlistments executed by the plaintiffs. Each agreed to extend his enlistment “in consideration of the pay, allowances, and benefits which will accrue to me during the continuances of my service.” (Italics added). No one contends that entitlement to a VRB accrued at the time the reenlistment agreement was executed. This is acknowledged even though each trial court found that the plaintiffs were induced to extend their enlistments because of the prospect of VRB’s. Moreover, this acknowledgment is considered compatible with the fact that the Navy during the time VRB’s were available used the program to induce the reenlistment of personnel having “critical skills” and instructed its personnel concerned with obtaining extensions of enlistments to stress the advantages of early reenlistments.

This recognition that an entitlement to a VRB did not accrue on execution of the reenlistment agreement is consistent with the applicable legislative history of the 1974 Act. In the deliberations leading to that Act the Navy expressed “great concern” that the bill “might be interpreted to require it to abrogate an understanding it had with enlistees.” Conf.Rep. No. 93-985, 93d Cong., 2d Sess. 4 (1974) U.S.Code Cong. & Admin.News 1974, p. 2998. The Conference Report contains this response to the Navy’s concern:

The Navy expressed great concern that the language of the bill might be interpreted to require it to abrogate an understanding it had with enlistees and would operate in such a way as to cause serious retention problems in its most critical career field. The conferees, therefore, want it understood that while it normally does not expect bonuses to be paid for services for which there was an existing obligation, it is consistent with the conferees’ understanding that full entitlement to SRB will be authorized for personnel who have already agreed to an extension period prior to the enactment of the legislation if they subsequently cancel this extension prior to its becoming operative and reenlist for a period of at least two years beyond the period of the cancelled extension. Nothing in the bill should operate to deny the Chief of Naval Operations the authority to extend SRB entitlement to nuclear-power operators, if they subsequently can cancel any outstanding extension period prior to its becoming operative and reenlist for a period of at least two years beyond the period of the cancelled extension.

The above “understanding” of the conferees is completely at odds with the notion that the enlistees about whom the Navy was concerned already has accrued rights to VRB’s. Such enlistees, among whom are the plaintiffs, were extended an opportunity to qualify for SRB’s, but not VRB’s.

Had Congress intended to maintain that opportunity VRB’s would have been treated similar to Regular Reenlistment Bonuses (RRB’s) which were preserved for every enlisted member on active duty on the effective date of the 1974 Act. This preservation was provided to prevent those entitled from “losing their $2,000 reenlistment entitlement which by law they expected to receive.” H.Rep. No. 93-857, 93d Cong., 2d Sess. 6 (1974), U.S.Code Cong. & Admin. News 1974, p. 2984. No comparable provision applicable to VRB’s was enacted.

II.

Having held that entitlement to a VRB did not accrue on the date an agreement to extend an enlistment was executed, we confront the issue whether Congress immediately thereafter had the power to alter, or abolish entirely, the VRB. We believe it did because bonuses are a form of pay entitlement to which, in the words of Bell v. United States, 366 U.S. 393, 401, 81 S.Ct. 1230, 6 L.Ed.2d 365 (1961), “is dependent upon statutory right” and not “common law rules governing private contracts.” When the statute upon which the right to an unaccrued bonus rests is altered, any right to such bonus is also altered. We construe Carini v. United States, 528 F.2d 738 (4th Cir. 1975) to so hold and we agree.

The appeal of the plaintiffs’ cases lies in the fact that Congress deferred abolishing the VRB’s for a significant period of time following the execution of the reenlistment agreements. Expectations aged and, to the reenlistees, became no less than practical certainties. Nonetheless, entitlement thereto remained a “statutory right” subject to Congress’ power to alter or abolish.

It may well be that, upon accrual of the right to a VRB, the power of Congress to alter or abolish is more limited. See Lynch v. United States, 292 U.S. 571, 577, 54 S.Ct. 840, 78 L.Ed. 1434 (1934).2 Such an issue, however, is not before us because we are convinced, and so hold, that at no time prior to commencement of the reenlistment period did a right to VRB’s accrue.33

The reenlistment agreements clearly contemplated the possibility of pay, allowances and benefits being altered during either the enlistment or reenlistment periods. The words “which will accrue to me during the continuances of my service” focus on the future and are inconsistent, at least in flavor, with the view that the agreements incorporated and made a part thereof the entire statutory and regulatory provisions pertaining to VRB’s as they existed on the date such agreements were executed. It is unlikely the plaintiffs would differ with this had Congress increased the value of VRB’s to which they might become entitled rather than abolishing them.

We express no opinion on the manner in which a VRB should be computed had the plaintiffs entered upon their reenlistment period prior to June 1, 1974, the effective date of the 1974 Act. This issue confronted the court in Larionoff v. United States, 175 U.S.App.D.C. 32, 533 F.2d 1167 (1976). We recognize, of course, that the court in Larionoff also held that a reenlistee who entered upon his reenlistment period subsequent to the effective date of the 1974 Act was entitled to a VRB. As already indicated we disagree with that holding and, in so doing, align ourselves with Carini v. United States, supra.

REVERSED.