B-124268, OCTOBER 3, 1955, 35 COMP. GEN. 185

B-124268, OCTOBER 3, 1955, 35 COMP. GEN. 185

APPROPRIATIONS - OBLIGATION - SECTION 1311, SUPPLEMENTAL APPROPRIATION ACT, 1955 - LIABILITY UNDER PENDING LITIGATION SECTION 1311 (A) (6) OF THE SUPPLEMENTAL APPROPRIATION ACT, 1955, WHICH PROVIDES FOR THE RECORDING OF APPROPRIATION OBLIGATIONS SUPPORTED BY DOCUMENTARY EVIDENCE OF A LIABILITY RESULTING FROM PENDING LITIGATION WAS INTENDED FOR CASES WHERE THE GOVERNMENT IS DEFINITELY LIABLE FOR THE PAYMENT OF MONEY AND THE LITIGATION IS FOR PURPOSE OF DETERMINING THE AMOUNT OF LIABILITY AND, THEREFORE, THE BACK PAY SOUGHT BY FORMER EMPLOYEES IN PENDING LITIGATION SHOULD NOT BE RECORDED AS AN APPROPRIATION OBLIGATION.

TO THE ADMINISTRATOR, SMALL BUSINESS ADMINISTRATION, OCTOBER 3, 1955:

REFERENCE IS MADE TO YOUR LETTER DATED JUNE 2, 1955, ADVISING US OF THE ACTION TAKEN BY YOUR ADMINISTRATION PURSUANT TO SECTION 1311 OF THE SUPPLEMENTAL APPROPRIATION ACT, 1955, 68 STAT. 830, 31 U.S.C. 200 (A), IN RECORDING AS OBLIGATIONS AGAINST YOUR FISCAL YEAR 1954 APPROPRIATIONS CERTAIN CONTINGENT LIABILITIES OF THE UNITED STATES WHICH MAY RESULT FROM PENDING LITIGATION AND PRESENTING FOR OUR CONSIDERATION A QUESTION CONCERNING SUCH ACTION. THE OBLIGATIONS ARE ALLEGED TO HAVE ARISEN BY WAY OF SUITS FILED IN THE UNITED STATES DISTRICT COURT BY THREE FORMER EMPLOYEES OF THE SMALL DEFENSE PLANTS ADMINISTRATION WHO CLAIM THEY WERE UNLAWFULLY DISCHARGED BY THAT ADMINISTRATION DURING THE FISCAL YEAR 1954.

THE SUPPLEMENTAL APPROPRIATION ACT, 1954, 67 STAT. 418, WHICH CONTAINED YOUR AGENCY'S ADMINISTRATIVE APPROPRIATION FOR THE FISCAL YEAR 1954, PROVIDED THAT SUCH APPROPRIATION "SHALL BE AVAILABLE FOR NECESSARY EXPENSES IN CONNECTION WITH THE LIQUIDATION OF THE SMALL DEFENSE PLANTS ADMINISTRATION.'

SECTION 1311 (A) OF THE SUPPLEMENTAL APPROPRIATION ACT, 1955, 68 STAT. 830, PROVIDES, IN PART, AS FOLLOWS:

AFTER THE DATE OF ENACTMENT HEREOF NO AMOUNT SHALL BE RECORDED AS AN OBLIGATION OF THE GOVERNMENT OF THE UNITED STATES UNLESS IT IS SUPPORTED BY DOCUMENTARY EVIDENCE OF---

(6) A LIABILITY WHICH MAY RESULT FROM PENDING LITIGATION BROUGHT UNDER AUTHORITY OF LAW, * * *.

YOU STATE THAT YOUR GENERAL COUNSEL IS OF THE OPINION THAT THE CLAIMS APPEAR TO HAVE NO MERIT, BUT SINCE LIABILITY, IN THE WORDS OF SECTION 1311 (A) (6),"* * * MAY RESULT FROM PENDING LITIGATION * * *," YOUR AGENCY HAS RECORDED THE OBLIGATIONS AGAINST YOUR 1954 FISCAL YEAR APPROPRIATIONS IN THE FULL AMOUNT OF THE CLAIMED SALARIES OF THE SAID EMPLOYEES FOR THE PERIOD ENDED JUNE 30, 1954. A DECISION IS REQUESTED "AS TO WHETHER THE CLAIMS IN THE CASES CITED, IN VIEW OF OUR GENERAL COUNSEL'S QUESTION CONCERNING MERIT, CONSTITUTE LIABILITIES WHICH ARE PROPER FOR RECORDING AS OBLIGATIONS AGAINST THE 1954 APPROPRIATIONS UNDER THE PROVISIONS OF SECTION 1311 (A).'

IT HAS BEEN INFORMALLY ASCERTAINED FROM YOUR ADMINISTRATION THAT THESE EMPLOYEES HAVE FILED AN ACTION FOR JUDGMENT DECLARING THEIR SEPARATION TO BE UNLAWFUL AND VOID AND ASKING FOR RESTORATION TO THEIR POSITIONS. APPEARS THAT THEY ALLEGE THEIR RIGHTS UNDER THE VETERANS PREFERENCE ACT OF 1944, AS AMENDED, 5 U.S.C. 851-869, HAVE BEEN VIOLATED. UNDER THE ACT OF AUGUST 24, 1912, AS AMENDED BY THE ACT OF JUNE 10, 1948, 5 U.S.C. 652, A SEPARATED EMPLOYEE WHO IS REINSTATED OR RESTORED TO DUTY ON THE GROUND THAT SUCH SEPARATION WAS UNWARRANTED OR UNJUSTIFIED IS ENTITLED TO ,BACK PAY" FOR THE PERIOD OF THE SEPARATION.

SUBSECTION 6 WAS INCLUDED IN SECTION 1311 (A) FOR THE PURPOSE OF PERMITTING OBLIGATIONS TO BE RECORDED IN THE CASE OF LAND CONDEMNATION PROCEEDINGS UNDER THE DECLARATION OF TAKING ACT, 40 U.S.C. 258, AND SIMILAR CASES. SEE THE DEPARTMENT OF DEFENSE'S SECTION BY SECTION ANALYSIS OF SECTION 111 (THE PRESENT SECTION 1311) OF H.R. 9936, 83RD CONGRESS, AS PASSED BY THE HOUSE OF REPRESENTATIVES ON PAGE 994, HEARINGS BEFORE THE COMMITTEE ON APPROPRIATIONS, UNITED STATES SENATE, 83D CONGRESS, 2ND SESSION ON H.R. 9936. IN LAND CONDEMNATION AND SIMILAR CASES, A LIABILITY OF THE GOVERNMENT HAS BEEN ESTABLISHED, THE ONLY QUESTION BEING AN EXACT DETERMINATION OF THE AMOUNT OF THE LIABILITY. INTENT TO PERMIT OBLIGATIONS TO BE RECORDED IN EVERY CASE WHERE LITIGATION IS PENDING AGAINST THE GOVERNMENT, WHICH MAY OR MAY NOT RESULT IN A LIABILITY, CANNOT POSSIBLY BE IMPUTED TO THE CONGRESS. IN VIEW THEREOF AND SINCE THE OVERALL PURPOSE OF SECTION 1311 WAS TO RESTRICT THE AMOUNTS RECORDED AS OBLIGATIONS, IT IS OUR VIEW THAT OBLIGATIONS MAY BE RECORDED UNDER SECTION 1311 (A) (6) ONLY IN THOSE CASES WHERE THE GOVERNMENT IS DEFINITELY LIABLE FOR THE PAYMENT OF MONEY OUT OF AVAILABLE APPROPRIATIONS AND THE PENDING LITIGATION IS FOR THE PURPOSE OF DETERMINING THE AMOUNT OF THE GOVERNMENT'S LIABILITY. IN THE CASES MENTIONED IN YOUR LETTER, WHETHER OR NOT THE EMPLOYEES ARE ENTITLED TO BE REINSTATED ON ACCOUNT OF BEING WRONGFULLY DISCHARGED, WITH RESULTING ENTITLEMENT TO "BACK PAY," HAS NOT BEEN DETERMINED AND NO DEFINITE LIABILITY ON THE PART OF THE GOVERNMENT HAS BEEN ESTABLISHED.

ACCORDINGLY IT MUST BE HELD THAT THE AMOUNTS OF "BACK PAY" WHICH MAY BECOME DUE THESE EMPLOYEES FOR FISCAL YEAR 1954 AS RESULT OF THE PENDING LITIGATION MAY NOT BE CONSIDERED AS CONSTITUTING LIABILITIES WHICH ARE PROPER FOR RECORDING AS OBLIGATIONS UNDER SECTION 1311 (A) (6). COURSE, IN CASES WHERE IT IS BELIEVED THAT THE CLAIMS ARE MERITORIOUS, IT MAY BE DESIRABLE TO RESERVE ADMINISTRATIVELY SUFFICIENT AMOUNTS TO COVER THE CONTINGENT LIABILITY IN ORDER TO AVOID A POSSIBLE VIOLATION OF SECTION 3679, REVISED STATUTES, AS AMENDED, 31 U.S.C. 665.