B-152124, OCT. 1, 1964

B-152124, OCT. 1, 1964

TO POGUE AND NEAL:

WE REFER TO YOUR LETTER DATED AUGUST 2, 1963, AND SUBSEQUENT CORRESPONDENCE, PROTESTING A DECISION BY THE DEPARTMENT OF THE AIR FORCE TO UNILATERALLY RESCIND AN ALLEGED AGREEMENT BETWEEN ALASKA AIRLINES, INC., AND THE AIR FORCE INVOLVING THE TRANSPORTATION OF CERTAIN MILITARY PASSENGERS BETWEEN SEATTLE, WASHINGTON AND FAIRBANKS, ALASKA.

YOU CONTEND THAT AS A RESULT OF VARIOUS WRITTEN AND ORAL ASSURANCES OF ADDITIONAL TRAFFIC BETWEEN SEATTLE AND FAIRBANKS, ALASKA AIRLINES WAS INDUCED TO FILE A REDUCED CATEGORY A AND E RATE WITH THE CIVIL AERONAUTICS BOARD ON APRIL 30, 1963. THE REDUCTION IN RATE FROM 2.9 CENTS PER PASSENGER MILE TO 2.75 CENTS PER PASSENGER MILE WAS ALLEGEDLY AGREED UPON IN ANTICIPATION OF ADDITIONAL TRAFFIC IN THESE CATEGORIES OF BUSINESS. DOCUMENTARY EVIDENCE OF THIS ALLEGED AGREEMENT WE HAVE BEEN FURNISHED WITH A COPY OF A LETTER DATED APRIL 3, 1963, FROM COLONEL G. A. LESLIE, CHIEF, PROCUREMENT DIVISION, UNITED STATES AIR FORCE, WRITTEN TO MR. FRANK B. LYNOTT, EXECUTIVE VICE PRESIDENT, ALASKA AIRLINES, INC., WHICH READS AS FOLLOWS:

"1. REFERENCE IS MADE TO YOUR LETTER OF 26 MARCH 1963 IN REGARD TO THE AWARD OF FY-64 ALASKAN TRAFFIC.

"2. YOU ARE ADVISED THAT IF ALASKA AIRLINES FILES AND OBTAINS CAB APPROVAL OF A CATEGORY "A" RATE OF 2.75 CENTS PER PAX MILE BETWEEN SEATTLE AND FAIRBANKS AND CATEGORY "Z" RATE OF 2.75 CENTS PER PAX MILE BETWEEN FAIRBANKS AND ANCHORAGE ALL TRAFFIC BETWEEN THESE POINTS WHICH IS NOW CATEGORY "B" WILL GO TO ALASKA AIRLINES EFFECTIVE 1 JULY 1963. THIS METHOD OR PROCUREMENT WOULD BE MORE PROFITABLE THEN A CATEGORY "3" CONTRACT, SINCE IT WOULD BE ADDED REVENUE TO YOUR ALREADY EXISTING FLIGHTS.

"3. THE FOREGOING SHOULD ASSIST YOU IN JUSTIFYING A 2.75 CENT RATE TO THE BOARD.'

IN YOUR CORRESPONDENCE DATED NOVEMBER 18, 1963, IT IS FURTHER ALLEGED THAT SUCH VERBAL ASSURANCES AND INFORMAL COMMITMENTS FROM RESPONSIBLE MATS PERSONNEL ARE NOT ISOLATED INCIDENTS, BUT ARE ALMOST ROUTINE.

THE RECORD SHOWS THAT ON DECEMBER 4, 1962, MR. CHARLES F. WILLIS, JR., PRESIDENT AND GENERAL MANAGER FOR ALASKA AIRLINES CONTACTED THE ASSISTANT SECRETARY OF THE AIR FORCE AND SUGGESTED THAT THE AIR FORCE IMPLEMENT A POLICY WHEREBY ALL SEATTLE-FAIRBANKS MILITARY TRAFFIC BE REQUIRED TO MOVE ON LESS EXPENSIVE CATEGORY A AND Z SERVICE RATHER THAN USE THE MORE EXPENSIVE CATEGORY B OR CHARTER SERVICE. IT WAS POINTED OUT THAT THE DEPARTMENT OF DEFENSE WOULD SAVE APPROXIMATELY $10.00 PER ONE-WAY PASSENGER SERVICE BY USING ALASKA AIRLINES' REGULARLY SCHEDULED DAILY JET CATEGORY A OR Z CATEGORY B SERVICE. ALSO POINTED OUT WAS THE FACT THAT ALASKA AIRLINES HAD MORE THAN ENOUGH AVAILABLE CAPACITY TO ACCOMODATE ADDITIONAL TRAFFIC IN THESE TWO CATEGORIES. IN HIS AFFIDAVIT MR. LYNOTT STATES THAT ON JANUARY 7 AND 8, 1963, HE MET WITH MR. ED DRISCOLL, DEPUTY OF TRANSPORTATION AND COMMUNICATION, OFFICE OF THE ASSISTANT SECRETARY, DEPARTMENT OF THE AIR FORCE, REGARDING THE USE OF CATEGORY A AND Z SERVICE AND THAT MR. DRISCOLL AGREED THAT IT WOULD BE PREFERABLE TO USE THESE CATEGORIES OF SERVICE IF ALASKA OBTAINED LOWER RATES. AT A SUBSEQUENT MEETING HELD ON APRIL 3, 1963, COLONEL LESLIE INFORMALLY AGREED THAT THE AIR FORCE WOULD STOP USING CATEGORY B SERVICE IF ALASKA AIRLINES REDUCED THEIR RATES AS SUGGESTED.

BY LETTER DATED FEBRUARY 12 AND MARCH 5, 1963, ALASKA AIRLINES AGAIN OFFERED TO FILE REDUCED CATEGORY A AND Z RATES WITH THE CIVIL AERONAUTICS BOARD IN RETURN FOR ADEQUATE ASSURANCES OF A MINIMUM 1,500 PASSENGERS. A JOINT MEETING ON APRIL 3, 1963, MR. LYNOTT REITERATED THAT HE WAS NOT INTERESTED IN REDUCING THE EXISTING RATE UNLESS HE HAD A GUARANTEED INCREASE IN TRAFFIC. ALTHOUGH ALASKA AIRLINES WANTED THE AIR FORCE TO GUARANTEE A MINIMUM NUMBER OF PASSENGERS, NO EVIDENCE HAS BEEN INTRODUCED SHOWING THAT THE AIR FORCE INTENDED TO GUARANTEE ANY SUCH MINIMUM. THE LETTER OF APRIL 3, PREVIOUSLY QUOTED, WAS THEREUPON PREPARED AND SIGNED BY COLONEL LESLIE. SUBSEQUENT TO APPROVAL OF THE NEW RATES PAN AMERICAN AIRLINES ALSO FILED AND OBTAINED A REDUCED RATE FOR THIS SAME CATEGORY OF SERVICE AND IS NOW IN COMPETITION WITH ALASKA AIRLINES.

CONTRARY TO YOUR ASSERTION, THE AIR FORCE MAINTAINS THAT THE LETTER OF APRIL 3, 1963, WAS NOT INTENDED TO GIVE RISE TO ANY BINDING AGREEMENT OR COMMITMENT, NOR WAS IT INTENDED TO SERVE AS A BASIS FOR ANY SUBSEQUENT AGREEMENT IN WHICH ALASKA AIRLINES WAS TO BE GIVEN EXCLUSIVE RIGHT TO ALL TRAFFIC BETWEEN SEATTLE AND WASHINGTON. IN HIS STATEMENT DATED JANUARY 30, 1964, COLONEL LESLIE STATES THAT THE LETTER IN QUESTION WAS DELIVERED TO ALASKA AIRLINES AT THEIR REQUEST IN ORDER TO ASSIST THE AIRLINE IN OBTAINING A COMPETITIVE CATEGORY A RATE. WE UNDERSTAND THAT SIMILAR LETTERS HAVE BEEN PREPARED FOR OTHER AIRLINES OVER THE YEARS. COLONEL LESLIE FURTHER STATES THAT NEGOTIATIONS FOR FISCAL YEAR 1964 WERE HELD AT A LATER DATE AND THAT ALL VERBAL AGREEMENTS WERE LATER FORMALIZED IN WRITING. THE AIR FORCE ALSO CATEGORICALLY DENIES THAT INFORMAL COMMITMENTS OF THE TYPE ALLEGED ARE ROUTINE. THEIR POSITION ON THIS POINT APPEARS AS FOLLOWS:

"* * * THE SPECIFIC ALLEGATION IS STATED IN THE SECOND PARAGRAPH OF PAGE 8 OF ALASKA AIRLINES' LETTER OF 18 NOVEMBER 1963 STATING THAT INFORMAL COMMITMENTS FROM RESPONSIBLE MATS PERSONNEL ARE NOT ISOLATED BUT HAPPEN SO FREQUENTLY AS TO BE THE ROUTINE METHOD OF CONDUCTING BUSINESS. THIS ALLEGATION IS COMPLETELY UNFOUNDED IN THAT NO CONTRACTS ARE MADE BY AND CONSUMMATED BY MATS PROCUREMENT PERSONNEL ON AN INFORMAL COMMITMENT BASIS. POSSIBLY, ALASKA AIRLINES COULD BE REFERRING TO THE METHOD BY WHICH MATS MAKES ADDITIONAL EXPANSION AWARDS UNDER EXISTING FISCAL YEAR CONTRACTS. IN THE AWARD OF EXPANSION BUSINESS FOR WHICH REQUIREMENTS GENERALLY ARISE UPON SHORT NOTICE, INFORMATION IS NORMALLY OBTAINED BY TELEPHONE CONVERSATION WITH CARRIER REPRESENTATIVES AND AWARD INFORMATION IS INITIALLY TRANSMITTED TO THE CARRIER IN THE SAME MANNER. HOWEVER, AT THE TIME THE INITIAL AWARD INFORMATION IS FURNISHED THE CARRIER, A SPECIFIC SERVICE ORDER NUMBER IS GIVEN TO THE CARRIER REPRESENTATIVE AND A WRITTEN SERVICE ORDER ISSUED FORTHWITH. A SERVICE ORDER IS THE FINAL CONTRACTUAL DOCUMENT FOR AWARDS OF ADDITIONAL BUSINESS UNDER EXISTING FIXED CONTRACTS.'

WE UNDERSTAND THAT IN THE SPRING OF 1963, CATEGORY A SERVICE WAS ESTABLISHED AT 2.9 CENTS PER PASSENGER MILE AS OPPOSED TO A CATEGORY B RATE OF 2.75 CENTS, AND THAT CATEGORY A TRAFFIC IS PARTICULARLY BENEFICIAL TO THE AIRLINES SINCE PASSENGERS ARE PLACED IN SEATS THAT WOULD OTHERWISE BE EMPTY ON SCHEDULED COMMERCIAL FLIGHTS. IN OTHER WORDS, CATEGORY A BUSINESS MEANS ADDED REVENUE WITH LITTLE ADDED OPERATING COST. AFTER APPROVAL OF THE NEW RATE THE AIR FORCE DID NOT ENTER INTO ANY CATEGORY B CONTRACT FOR SERVICE BETWEEN SEATTLE AND FAIRBANKS.

SINCE YOUR POSITION APPEARS PREDICATED UPON THE EXISTENCE OF AN "IMPLIED CONTRACT" WE BELIEVE IT PERTINENT TO FIRST POINT OUT THAT A DISTINCTION MUST BE DRAWN BETWEEN CONTRACTS "IMPLIED IN LAW" AND CONTRACTS "IMPLIED IN FACT.' AS DISTINGUISHED FROM CONTRACTS IMPLIED IN LAW OR QUASI CONTRACTS, A CONTRACT IMPLIED IN FACT IS ESSENTIALLY BASED ON THE PARTIES' INTENTIONS AND ARISES WHERE THE SURROUNDING FACTS AND CIRCUMSTANCES DISCLOSE THAT THE PARTIES INTENDED TO MAKE A CONTRACT, BUT FOR THE SAME REASON FAILED TO ARTICULATE THEIR PROMISE. 17 C.J.S. CONTRACTS SEC. 4; AM. LAW INST. RESTATEMENT, CONTRACTS, VOL. 1 SEC. 5; WILLISTON, CONTRACTS, 3RD EDITION, SEC. 3. UNDER THE TUCKER ACT (28 U.S.C.A. SEC. 1346 (A) (2) ( ACTIONS AGAINST THE UNITED STATES ON IMPLIED CONTRACTS ARE LIMITED TO THOSE ACTIONS PREDICATED ON AN IMPLIED IN FACT CONTRACT. ALLIANCE ASSURANCE COMPANY V. UNITED STATES, 252 F.2D 529; ROXFORT HOLDING COMPANY V. UNITED STATES, 176 F.SUPP. 587.

TO SUPPORT THE CONCLUSION THAT THERE WAS AN IMPLIED IN FACT CONTRACT IT MUST BE FOUND THAT BOTH PARTIES INTENDED SUCH AN AGREEMENT. AS SUGGESTED, ANY BINDING AGREEMENT DOES NOT DEPEND ALONE ON WHAT ALASKA AIRLINES MAY HAVE ASSUMED OR INTENDED, BUT WHETHER THERE WAS MUTUAL ASSENT. SOCIETE COTONNIERE DU TONKIN V. UNITED STATES, 171 F.SUPP. 951, CERTIORARI DENIED 80 S.CT. 594, 361 U.S. 965. THE RULE IS WELL ESTABLISHED THAT IF MANIFESTATIONS OF EITHER PARTY ARE UNCERTAIN OR AMBIGUOUS AND THAT PARTY HAS NO REASON TO KNOW THAT THE OTHER PARTY MAY ATTACH A DIFFERENT MEANING THERETO, HIS MANIFESTATIONS ARE OPERATIVE IN THE FORMATION OF A CONTRACT ONLY TO THE EXTENT THAT THE OTHER PARTY ATTACHES THE SAME MEANING. AM.LAW.INST. RESTATEMENT, CONTRACTS, VOL. 1 SEC. 71.

WE HAVE BEEN ADVISED BY THE AIR FORCE THAT COLONEL LESLIE WAS NOT AT THE TIME AT ISSUE OR SUBSEQUENTLY AUTHORIZED TO ENTER INTO CONTRACTS ON BEHALF OF THE GOVERNMENT. IN YOUR LETTER OF NOVEMBER 18, 1963, YOU STATE THAT EVEN ASSUMING THE ABSENCE OF ACTUAL AUTHORITY ON THE PART OF COLONEL LESLIE, THE GOVERNMENT, UNDER THE DOCTRINE OF EQUITABLE ESTOPPEL, IS PRECLUDED FROM DENYING THAT A VALID AGREEMENT EXISTED. SPECIFICALLY YOU STATE:

"WITH REGARD TO ANY POSSIBLE CONTENTION THAT COLONEL LESLIE LACKED ACTUAL AUTHORITY TO BIND THE GOVERNMENT, AND THUS THAT THE LETTER OF APRIL 3RD IS VOID AS AN ACT IN EXCESS OF HIS AUTHORITY, IT SHOULD ONLY BE NOTED (AS THE AUGUST 12, 1963 LYNOTT AFFIDAVIT POINTS OUT) THAT COLONEL LESLIE IS AND HAS BEEN AT ALL TIMES RELEVANT HERETO, THE CHIEF OF THE PROCUREMENT DIVISION, HEADQUARTERS, MILITARY AIR TRANSPORT SERVICE. SINCE HE SUPERVISES THE ACTS OF MATS' CONTRACTING OFFICERS, AND PLAYS A KEY ROLE IN THE DEVELOPMENT AND IMPLEMENTATION OF MATS CIVIL AIRLIFT POLICIES, IT IS INCONCEIVABLE TO ALASKA AIRLINES THAT THE AIR FORCE CAN SERIOUSLY AND IN GOOD FAITH ADVANCE THE ARGUMENT THAT THE APRIL 3RD LETTER IS VOID BECAUSE COLONEL LESLIE LACKED THE REQUISITE AUTHORITY TO SIGN IT AND THUS BIND MATS. EVEN IF THIS OVERWORKED AND INFLEXIBLE DOCTRINE OF AGENCY IS FOUND TO OTHERWISE BE APPLICABLE HERE, ALASKA AIRLINES SUBMITS THAT THE GOVERNMENT SHOULD BE ESTOPPED FROM RAISING IT. ESTOPPEL IS JUSTIFIED HERE BECAUSE APPLICATION OF THE AGENCY DOCTRINE DOES NOT SERVE ANY PUBLIC PURPOSE; COLONEL LESLIE OBVIOUSLY HAS AS MUCH IF NOT MORE "AUTHORITY" IN THE SENSE THAT THIS WORD IS USED IN APPLICABLE REGULATIONS AND DIRECTIVES, AND ALASKA AIRLINES RELIED TO ITS SUBSTANTIAL DETRIMENT--- IT NOW FINDS--- UPON COLONEL LESLIE'S VERBAL AND WRITTEN REPRESENTATIONS. UNITED STATES V. CERTAIN PARCELS OF LAND, 131 F.SUPP. 65 (S.D.CAL. 1955).'

WE ARE UNABLE TO AGREE THAT THE CITED CASE IN ANY WAY SUPPORTS YOUR POSITION IN THIS MATTER. IN THAT CASE, CERTAIN GOVERNMENT AGENTS WERE SPECIFICALLY AUTHORIZED TO ACCEPT AN OFFER WHICH CALLED FOR THE TRANSFER OF TITLE TO CERTAIN IMPROVEMENTS TO THE SUB-LESSOR IN RETURN FOR RELEASING THE GOVERNMENT FROM THE OBLIGATION OF REMOVING THE SAID IMPROVEMENTS. THE COURT POINTED OUT, HOWEVER, THAT LACK OF AUTHORITY IS FATAL TO A CLAIM OF ESTOPPEL AND ALL WHO DEAL WITH ANY AGENT OF THE UNITED STATES ARE CHARGED WITH NOTICE OF HIS LAWFUL AUTHORITY. IN BYRNE ORGANIZATION, INC. V. UNITED STATES, 287 F.2D 582, 586, THE COURT STATED:

"PLAINTIFFS NEXT CONTEND THEY ARE ENTITLED TO RECOVER AN EQUAL SUM OF MONEY, MEASURED NOT ON THE TERMS OF THE DEFINITIVE NON-EXECUTED CONTRACT, BUT MEASURED AS THE REASONABLE VALUE OF THEIR SERVICES RENDERED BY RELYING ON LETTERS OF INTENT ISSUED BY THE EXECUTIVE VICE CHAIRMAN OF THE COMMISSION. PLAINTIFFS CLAIM, AND THE COURTS AGREE, THAT IT IS CLEAR FROM AN EXAMINATION OF THE LEGISLATION CREATING THE COMMISSION THAT CONGRESS AUTHORIZED THE COMMISSION TO ENTER INTO CONTRACTS ON BEHALF OF THE UNITED STATES. BUT IT DOES NOT FOLLOW THAT AN AGREEMENT SIGNED BY AN AGENT OR OFFICER OF THE COMMISSION IS BINDING ON THE COMMISSION OF THE GOVERNMENT. ACTUALLY THE CONVERSE IS TRUE. NO OFFICER OF THE GOVERNMENT HAS THE POWER TO BIND THE UNITED STATES, IN THE ABSENCE OF CONGRESSIONAL AUTHORITY. GEORGE H. WHIKE CONSTRUCTION COMPANY V. UNITED STATES, 1956, 140 F.SUPP. 560, 135 CT.CL. 126, 131. TO HOLD A CONTRARY RESULT COULD CONCEIVABLY CREATE A SITUATION WHERE TWO COLLUSIVE PEOPLE COULD EFFECT A DRAIN OF THE PUBLIC TREASURY. SINCE THE EARLY HISTORY OF THIS COURT, IT HAS BEEN CONSISTENTLY HELD THAT THE GOVERNMENT IS NOT BOUND BY THE ACTS AND DECLARATIONS OF ITS AGENT, UNLESS IT APPEARS THAT HE ACTED WITHIN THE SCOPE OF HIS AUTHORITY. WHITESIDE V. UNITED STATES, 1876, 93 U.S. 247, 257, 23 L.ED. 882. THESE CASES CONFORM WITH THE BASIC PRINCIPLES OF AGENCY THAT ONE DEALING WITH AN AGENT MUST LOOK TO HIS AUTHORITY. PERSONS DEALING WITH THE GOVERNMENT MUST TAKE NOTICE OF THE EXTENT OF THE AUTHORITY WHICH THE GOVERNMENT HAS GIVEN ITS AGENTS. HAWKINS V. UNITED STATES, 1877, 96 U.S. 689, 24 L.ED. 607; RIETHMILLER V. UNITED STATES, 1944, 101 CT.CL. 495.'

THE ABOVE RULE IS FOR APPLICATION EVEN WHERE THE AGENT HIMSELF MAY HAVE BEEN UNAWARE OF THE LIMITATIONS UPON HIS AUTHORITY. GAY STREET CORPORATION OF BALTIMORE V. UNITED STATES, 127 F.SUPP. 585, 589. ASIDE FROM THE ISSUE OF AUTHORITY WE ARE UNABLE TO AGREE THAT THERE WAS ANY AGREEMENT, EITHER EXPRESSED OR IMPLIED, ON THE PART OF THE AIR FORCE TO REQUIRE ALL PASSENGERS TO FLY WITH ALASKA AIRLINES. THE FACT THAT NO ATTEMPT WAS EVER MADE TO FORMALIZE THE ALLEGED AGREEMENT, WHILE NOT CONCLUSIVE, DOES TEND TO SUPPORT THE AIR FORCE POSITION ESPECIALLY SINCE AGREEMENTS OF THIS NATURE USUALLY APPEAR IN WRITING. MOREOVER, WE THINK IT UNLIKELY THAT YOU COULD HAVE EXPECTED THE AIR FORCE TO ENTER INTO A CONTRACT WHEREBY THE GOVERNMENT WOULD GUARANTEE ALASKA AIRLINES ALL TRAFFIC OVER THE SEATTLE-FAIRBANKS ROUTE, WITH ALASKA AIRLINES ONLY BEING OBLIGATED TO MOVE TRAFFIC ON A STANDBY BASIS. AT MOST, THE EVIDENCE DOES SHOW THAT THE AIR FORCE INFORMALLY AGREED NOT TO INSIST UPON USING CATEGORY B SERVICE IF OTHER ACCEPTABLE SERVICE WERE AVAILABLE AT THE 2.75 CENT RATE. AS PREVIOUSLY POINTED OUT, THE AIR FORCE DID NOT ENTER INTO ANY CATEGORY B CONTRACT FOR THE CONTEMPLATED SERVICE AFTER APPROVAL OF THE NEW RATES. AS A PRACTICAL NECESSITY WE HAVE ADOPTED A RULE OF LONG STANDING THAT IN THE ABSENCE OF SUFFICIENT EVIDENCE TO OVERCOME THE PRESUMPTION OF THE CORRECTNESS OF THE FACTS AS ADMINISTRATIVELY REPORTED, THOSE FACTS WILL BE ACCEPTED AS CORRECT WHERE THEY CONFLICT WITH THE STATEMENT OF FACTS SUBMITTED BY THE CLAIMANT. B-147254, SEPTEMBER 28, 1961; B-142758, MAY 17, 1960.

ON THE BASIS OF THE FOREGOING, WE CANNOT FIND THAT AN AGREEMENT BINDING UPON THE GOVERNMENT EVER CAME INTO EXISTENCE. ACCORDINGLY, THE CLAIM IS DENIED.