Hendrickson v. United States
131 Fed. Cl. 489
| Fed. Cl. | 2017Background
- In 1985 William and Patricia Hendrickson settled FTCA claims with the United States by a Stipulation for Compromise Settlement: the government paid lump sums and $522,217.34 (plus $1,000) to Executive Life Insurance Company of New York (ELNY) and First Executive to purchase annuities to fund specified future monthly and lump‑sum payments to plaintiffs.
- The settlement recited that the government would "pay" the sums to ELNY/First Executive to be "used and applied to the purchase of annuities which will provide future periodic payments," and that those purchases and payments would operate as a pro tanto discharge of the government's obligations.
- ELNY paid the annuities until it became insolvent and entered a restructuring in 2012; payments were thereafter reduced by the Guaranty Association Benefit Company (GABC), producing a shortfall in amounts plaintiffs expected to receive (including a reduced June 2015 lump sum).
- Plaintiffs sued for breach of contract seeking recovery of the shortfall; both parties moved for summary judgment on liability after the case was transferred to the Court of Federal Claims.
- The court treated the settlement as unambiguous and limited the dispute to whether the government promised to guarantee the ongoing annuity payments (i.e., to make up any shortfall if the annuity issuer defaulted) or whether its obligation was satisfied by purchasing the annuities.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Settlement Agreement unequivocally guaranteed future annuity payments such that the government must make up post‑insolvency shortfalls | The Hendricksons: settlement language ("shall be guaranteed"; "payments thereunder") shows the government intended to guarantee and remain liable for the periodic and lump‑sum payments | The United States: it agreed only to pay specified sums to purchase annuities; its obligation was satisfied when it paid and purchased the annuities — it did not unambiguously promise to guarantee payments if the annuity issuer failed | Court: Agreement unambiguous — government purchased annuities to provide future payments and did not unequivocally guarantee ongoing payments; no breach by government |
| Whether plaintiffs may impose a continuing governmental obligation that would exceed the authorized settlement amount and bind the government to additional expenditures | Hendricksons: reading that retains government liability gives plaintiffs the relief intended by the settlement | United States: imposing a guaranty would bind the government beyond the $900,000 settlement authorization and exceed the authority of the official who approved the settlement; such a claim is barred absent an unequivocal promise | Court: Contract must be read to avoid creating an obligation exceeding authorized funds; plaintiffs cannot establish an express guarantee and the government could not have bound itself to additional expenditure |
Key Cases Cited
- United States v. Mitchell, 463 U.S. 206 (U.S. 1983) (limits Tucker Act jurisdiction over contracts implied in law)
- King v. United States, 395 U.S. 1 (U.S. 1969) (money‑damages requirement for Tucker Act jurisdiction)
- Massie v. United States, 166 F.3d 1184 (Fed. Cir. 1999) (interpreting settlement language regarding annuity distributions and government guarantee)
- Nutt v. United States, 837 F.3d 1292 (Fed. Cir. 2016) (settlement obligating purchase of annuity does not necessarily guarantee future payments absent unequivocal language)
- Janowsky v. United States, 133 F.3d 888 (Fed. Cir. 1998) (ratification can bind government where proper authority exists)