Written by James Lister

In a case involving the intersection of government contracts law, personal injury law, and bankruptcy law, Birch Horton Bittner & Cherot (BHBC) client Trevor Langkamp set an important precedent by winning an appeal against the United States Government in the U.S. Court of Appeals for the Federal Circuit.   In a bluntly worded opinion, the Court of Appeals required the Government to abide by a 1984 Settlement Agreement in a personal injury case that required periodic payments to Trevor over the course of his lifetime.   The Court rejected the Government’s argument that all it had to do was purchase an annuity to make the payments, even if the annuity issuer later went bankrupt and did not actually make the promised payments:  “The Government resorts to linguistic contortions in its effort to circumvent the plain language of the Settlement Agreement.”  Langkamp v. United States, 943 F.3d 1346, 1352 (Fed. Cir. 2019).

Trevor has been burned twice at the hands of the Government.  As a toddler, Trevor was severely scalded in 1980 in an accident on U.S. Government property.   Trevor’s parents filed an injury lawsuit that the Government settled in 1984 by agreeing to “pay … a structured settlement” consisting of periodic payments lasting the remainder of Trevor’s life.   Although the settlement agreement did not include a clause stating that the Government could complete its obligations by purchasing annuities, the Government chose to buy annuities from Executive Life of New York (ELNY) to fund the future payments.   ELNY made the required payments for thirty years, but then in 2014 cut the payments by 60%, due to its bankruptcy.   Trevor was burned a second time when the Government refused to pay to Trevor the resulting shortfalls.

Trevor’s prior law firm sued the Government to enforce the 1984 settlement agreement in the Court of Federal Claims in Washington, D.C., a specialized court that hears all larger breach of contract lawsuits against the Government (the injury case settlement agreement is a contract).   The trial judge ruled for the Government in February, 2016, holding that the reference to “structured settlement” in the settlement agreement was a term of art that meant that all the Government was required to do was purchase an annuity, not guaranty that the annuity would actually result in payment to Trevor.  Just when things seemed that they could not get any worse for Trevor, they did – the attorney handling the case at Trevor’s prior law firm passed away.

Facing a difficult situation, Trevor turned to BHBC’s Washington D.C. office for help.   Attorney Jim Lister filed an appeal in the U.S. Court of Appeals for the Federal Circuit.  This case faced an uphill battle.  Before the Federal Circuit decided Trevor’s case, it had decided four other cases involving claimants who had settled injury lawsuits in the early 1980s, received settlement payments through an annuity the Government purchased from ELNY, and then faced a cut in settlement payments after ELNY went broke.  The Federal Circuit had decided the last three cases in favor of the Government (Shaw in 2018, Henderickson in 2018, and Nutt in 2016).   The only prior win by a claimant was twenty years ago (Massie).

In briefing Trevor’s appeal, BHBC zeroed in on the trial court’s pivotal conclusion that the phrase in the 1984 Agreement requiring that the Government “pay … a structured settlement” was a term of art allowing the Government to escape all further liability by purchasing an annuity.   BHBC showed that “structured settlement” refers more generically to any agreement to settle a personal injury lawsuit in exchange for payments over time, not specifically to agreements involving purchases of annuities, or to agreements in which the injury case defendant satisfies all settlement obligations by buying an annuity to make the payments.

On November 27, 2019, the Court of Appeals ruled for Trevor on the proper interpretation of the term “structured settlement,” rejecting the Government’s argument as “linguistic contortions.”   “Because we conclude that the court erred in holding that the United States had no continuing liability for the future monthly and periodic lump-sum payments specified in the agreement, we reverse and remand.”   943 F.3d at 1347. 1352.  On January 13, 2020, the deadline for the Government to move for reconsideration passed, so the case returns to the trial court, where BHBC will help Trevor establish his damages.

The case was made more difficult by special considerations involving suits to enforce government contracts, which include injury case settlement agreements, and the relationship between the Government and the bankrupt insurance company ELNY.   Thus, BHBC drew upon its experience in government contracts matters as well as bankruptcy matters.

One technical argument by the Government was that the Assistant U.S. Attorney who signed the settlement agreement in 1984 supposedly had sufficient settlement authority to pay the premium needed to purchase annuities to make the promised future payments, but insufficient settlement authority to promise that the Government would itself make the future payments.   The Government contended that its attorneys have less authority to settle cases than attorneys for private parties.   BHBC utilized a “present value” analysis in responding to that argument.  The Federal Circuit held that the Assistant U.S. Attorney had sufficient authority.

Another technical argument by the Government was that it supposedly can only pay “final” settlements, which purportedly must have a specific dollar and cents amount, and that there was no final settlement in Trevor’s case, because the total aggregate dollar amount of the monthly payments to Trevor won’t be known until it is known how long Trevor lives.  BHBC responded by briefing the law of the Judgment Fund Act, which is not as hyper-technical as the Government portrays.   The Court of Appeals swept away this and other Government arguments: “We have considered the government’s remaining arguments but do not find them to be persuasive.”

For more information, please contact Jim Lister in BHBC’s Washington, D.C. office at 202-659-5800 or jlister@dc.bhb.com.