Authority

Army Lawyer, Jan, 2008 by Michael L. Norris

"That's The Way We Do It" does not necessarily constitute authority to bind the government

In one case this fiscal year, the Court of Federal Claims (COFC) provided a textbook examination of the authority of a Government representative to bind the government and clarified the circumstances under which a government representative has implied actual authority. In SGS-92-X003 v. United States, (1) the Assistant Special Agent in Charge (ASAC) of a Drug Enforcement Agency (DEA) district office had promised a confidential informant also known as "Princess" a 25% commission on the value of seizures made as a result of information she provided to the DEA, up to $250,000 per seizure. (2) Princess proved to be an extraordinarily effective confidential informant, resulting in "unparalleled" success by the agency in prosecutable cases against major Columbian drug traffickers and the seizure of drug proceeds. (3) While Princess received several payments for her services totaling approximately $2 million, the proceeds of the seized assets were considerably more than that, leading to her suit for nearly $34 million in damages for breach of the alleged oral implied-in-fact contract. (4) The Government moved for summary judgment, arguing that the ASAC lacked authority to bind the Government and that nobody with contracting authority ever ratified the promise to pay the informant. (5)

Because actual authority to bind the government is a necessary element of any implied-in-fact contract with the government, (6) the court examined each theory under which the ASAC might have possessed that actual authority or whether the promise was ratified by someone with such authority. Starting by searching for express actual authority, the court observed that the statute governing the Asset Forfeiture Fund did not authorize the ASAC to promise to pay the informant a commission. (7) The court quoted from the DEA Manual, which expressly provided that "DEA can pay an informant a commission based upon some percentage of the value of cases he provides." (8) However, the DEA Manual did not specify which particular DEA officials were authorized to pay such a commission. (9) The court explained that this vagueness as to whether the ASAC was authorized to make the promise to the informant, "certainly did not constitute an unambiguous grant of express actual authority to bind the Government even if the [c]ourt were to accept the DEA Manual as a 'regulation.'" (10)

Finding no unambiguous statute or regulation which granted the ASAC express actual authority to bind the government, (11) the court then turned to whether the ASAC possessed implied actual authority to enter into such a contract. A government official has implied actual authority to bind the government "when such authority is considered to be an integral part of the duties assigned to a government employee." (12) That authority is deemed an "integral" part of an official's duties when the official "cannot perform his assigned tasks without such authority and when the relevant agency's regulations do not grant the authority to other agency employees." (13)

Application of that standard normally results in a finding that law enforcement officers do not have inherent authority to make binding promises of compensation to informants, because "such officers can obtain authority from higher ranking officers via established procedures to pay informants and witnesses for their services, with the result that contracting authority is not needed for the agents to perform their jobs." (14) But unlike prior decisions of the court in which DEA agents were summarily found to lack this authority, (15) the court in this case found a genuine issue of material fact as to whether the ASAC had implied actual authority to make a binding promise to pay the informant a commission. (16) The record was not clear on the extent of the ASAC's duties as the head of a DEA office, but the ASAC believed that his actions were consistent with "accepted practices in these situations" and his authority as head of the district office. (17) Frequent meetings with high level DEA and Department of Justice (DOJ) officials regarding "Operation Princess," and the grant of an "Attorney General's exemption" to spend proceeds from undercover operations for expenses of the operation, further muddled the question as to whether the ASAC had this authority. (18) The court was unable to determine whether the authority to contract was an integral part of the ASAC's duties because "the 'procedures' for promising and paying Princess appear to have been anything but 'established'" for the ASAC in this case. (19) The court therefore denied the cross-motions for summary judgment on the issue of implied actual authority. (20)

If the ASAC lacked implied actual authority to bind the government to ASAC's promise to pay the informant a commission, there is also the question of whether someone with actual authority subsequently ratified ASCA's promise. The court found genuine issues of material fact as to this question as well. (21) Ratification requires that the person possessing actual authority have "full knowledge of all the facts" before ratifying the unauthorized act. (22) The ASAC believed that the high level DEA and DOJ officials who attended the frequent meetings on Operation Princess knew and approved of the promise. (23) However, those officials testified that they did not recall hearing about it. (24) Knowledge of the unauthorized promise is also a key requirement for institutional ratification, which "occurs when the Government seeks and receives the benefits from an otherwise unauthorized contract." (25) Because there were genuine issues of material fact as to whether DEA or DOJ officials with authority to contract knew about the promise, the court was unable to grant summary judgment on the issue of individual or institutional ratification. (26)