Stathis v. United States, 120 Fed. Cl. 552

Background

In 1985 the United States settled an FTCA medical-malpractice claim involving Christina Stathis and agreed to pay specified periodic amounts by purchasing an annuity; the agreement stated the annuity “will result in a distribution on behalf of the UNITED STATES” and that $90,000/year would be paid commencing 26 years after purchase for Christina’s life.
The government purchased an annuity from Executive Life Insurance Company of New York (ELNY) in 1986 and retained ownership; plaintiffs received the scheduled payments from 1987 through January 15, 2013.
The settlement was amended in 2000 to redirect future payments to a Special Needs Trust; the amendment preserved the parties’ obligations and left the government as annuity owner.
ELNY was liquidated in 2012; its guaranty successor (GABC) reduced the 2014 payment to $38,151, creating a $51,849 shortfall for that year. Plaintiffs notified the government and sued in the Court of Federal Claims for breach of the settlement agreement.
Both parties moved for partial summary judgment on contract liability; the central dispute was whether the government’s obligation was satisfied by purchasing the annuity or whether it had a continuing duty to ensure the agreed periodic payments.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the Government’s purchase of the annuity discharged its obligation to pay the scheduled future amounts	Stathis: the settlement’s mandatory language (“will be paid”) created a continuing government obligation to make the specified payments if the annuity failed	United States: purchase of the annuity fulfilled its obligation; it did not guarantee future payments if the insurer failed	Held for Stathis: per contract language and binding Massie precedent, government retained continuing obligation to ensure payments
Effect of the settlement language “will result in distributions” / “will be paid”	Stathis: language is mandatory and guarantees recipients the specified payments	United States: language describes the annuity to be purchased, not a government guarantee of amounts	Court: language is unambiguously mandatory; interpretation must give effect to these provisions
Whether FTCA statutory/payment rules bar enforcement of periodic payment obligations (sovereign immunity / judgment-format concerns)	Stathis: the FTCA’s payment-similarity clause does not prohibit structured settlements agreed by parties; settlement is a contract and enforceable	United States: FTCA requires payments be made similar to judgments/compromises and precludes government-guaranteed future periodic obligations beyond purchasing an annuity	Court: statutory arguments do not override the written settlement; parties voluntarily contracted for structured future payments and that contract is enforceable against the United States
Damages and mitigation (ELNY Hardship Fund) — scope of relief	Stathis: seeks make-whole for shortfall plus present value of future shortfalls, subject to any offset from hardship fund	United States: disputes liability and thus damages; argues no government obligation to top up annuity	Court: liability established for breach; parties directed to determine whether plaintiffs received Hardship Fund payments and submit net damages calculation to court (no double recovery)

Key Cases Cited

Massie v. United States, 166 F.3d 1184 (Fed. Cir.) (government remains responsible for payments specified in a settlement annuity; delegation to insurer does not absolve government)
United States v. Seckinger, 397 U.S. 203 (U.S. 1970) (contra proferentem — ambiguous contract provisions construed against drafter)
Hull by Hull v. United States, 971 F.2d 1499 (10th Cir. 1992) (discusses limits on structuring judgments as continuing obligations)
Cibula v. United States, 664 F.3d 428 (4th Cir. 2012) (addresses periodic payment concerns under FTCA)
Turner Constr. Co. v. United States, 367 F.3d 1319 (Fed. Cir.) (rule that ambiguous contract terms are construed against drafter)