Funding of State Department Settlements of Foreign Tort
                              Claims

B ecause 22 U S.C. § 2669(f) expressly authorizes the Secretary o f State to pay settlem ents o f foreign
    to rt claim s from funds appropriated fo r the activities included in the S tate D epartm ent Basic
    A uth o rities A ct o r from funds “ otherw ise available,” the paym ent o f such settlem ents is “ other­
    w ise provided fo r” w ithin the m eaning o f 31 U.S.C. § 1304(a), and therefore the Judgm ent Fund
    is not av ailab le fo r the paym ent of such settlem ents.


                                                                                                              June 18, 1997

               M   em o ran d u m   O p in io n   fo r th e       A s s is t a n t A t t o r n e y G e n e r a l
                                                  C   iv i l   D i v is io n


   You have asked whether the Judgment Fund, 31 U.S.C. § 1304 (1994 & Supp.
II 1996), is available to pay for settlements of tort claims arising in foreign coun­
tries pursuant to 22 U.S.C. § 2669(f) (1994). The Torts Branch of the Civil Divi­
sion has concluded that such settlements are payable from the State Department’s
agency appropriation and that the Judgment Fund is therefore not available.1 The
State Department, relying on a 1980 opinion of the Comptroller General, con­
cludes that its agency funds are not available for the payment of such settlements
and that the Judgment Fund is available.2 Because § 2669 expressly authorizes
the Secretary of State to pay settlements of foreign tort claims from funds appro­
priated for the activities included in the State Department Basic Authorities Act,
ch. 841, §2, 70 Stat. 890 (1956), or from funds “ otherwise available,” we have
concluded that the Judgment Fund is not available for the payment of such settle­
ments.

                                                  I. B ackground

  A. The Judgment Fund
  In 1956, Congress established a permanent and indefinite appropriation to pay
certain final judgments, compromise settlements, and interest and costs. Supple­
mental Appropriation Act, ch. 748, § 1302, 70 Stat. 678, 694 (1956). This “ Judg­
ment Fund” is the proper source o f payment for a particular judgment or settle­
ment under three conditions. First, the payment may not be “ otherwise provided
for,” i.e., there must be no other appropriation that lawfully can be used for pay­
ment. Second, the payment must be certified by the Director of the Office of

  1Memorandum for Dawn Johnsen, Acting Assistant Attorney General, Office of Legal Counsel, from Frank W.
Hunger, Assistant Attorney General, Civil Division, Re Funding o f Stale Department Settlements o f Foreign Tort
Claims (Jan 16, 1997)
  2See Letter for Frank W Hunger, Assistant Attorney General, Civil Division, from Michael J Matheson, Acting
Legal Adviser, Department of State, Enclosure 2 at 4 ( “ State Analysis” )

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                      F unding o f State D epartm ent Settlem ents o f Foreign Tort C laim s


Management and Budget (“ OMB” ).3 Finally, the judgment or settlement must
be payable under one of several listed statutes or under a decision of a board
of contract appeals. 31 U.S.C. § 1304(a)(3) (1994).4
  Agency operating appropriations are not generally available to pay judgments
and compromise settlements. Thus, prior to the creation of the Judgment Fund,
most agencies had to seek a specific appropriation from Congress to pay any judg­
ment imposed on them. This cumbersome process led to undue delay in payment,
resulting in excess charges for interest. The Judgment Fund was designed to
address this problem by eliminating the need for Congress to pass specific appro­
priations bills for the payment of judgments that were not “ otherwise provided
for.” 5 When an agency has specific and express statutory authority to pay judg­
ments and settlements out of its own revenues, however, judgments continue to
be payable out of those funds rather than the Judgment Fund.

   B. State Department Authority to Pay Settlements Under § 2669(f)

  The Federal Tort Claims Act ( “ FTCA” ) authorizes the head of each federal
agency to adjust, compromise or settle any tort claim for money damages against
the United States caused by the negligence of its employees while acting within
the scope of their office or employment. 28 U.S.C. §2672 (1994). Settlements
of less than $2500 are paid by the head of the agency from available agency
appropriations. Awards of more than $2500 are paid “ in a manner similar to judg­
ments and compromises in like causes.” 

determine the proper source
of payment for the settlement of a claim of more than $2500, one must determine
the proper source of payment for a judgment arising from a similar claim. If a
judgment for a similar tort claim would be payable from the Judgment Fund,
the settlement of the claim also will be payable from the Judgment Fund. If, how­
ever, a judgment for a similar claim would be payable from agency funds, the
agency must use its available funds to pay the settlement.
  While tort claims arising in a foreign country generally are excluded from the
provisions of the FTCA, 28 U.S.C. § 2680(k) (1994), Congress has granted certain
agencies the authority to settle such claims. Section 2 of the State Department
Basic Authorities Act of 1956, 70 Stat. 890, as amended, authorizes the Secretary

   3 Section 1304(a) provides for certification by the Comptroller General. As of June 30, 1996, however, this function
was transferred to the Director o f OMB. Legislative Branch Appropriations Act, 1996, Pub L No 104-53, §211,
 109 Stat 514, 535 (1995) (codified at 31 U S C §501 note (1994)) *
   * Editor’s Note* On October 19, 1996, § 1304(a) was amended again, this time to provide for certification by
the Secretary of the Treasury. See General Accounting Office Act of 1996, Pub L No 104-316, tit II, §202(m),
 110 Stat 3826, 3843 (codified at 31 U .SC . § 1304(a) (Supp II 1996))
   4The statutes include §§2414, 2517, 2672, and 2677 o f title 28, 31 U S C . §3723, and certain other specified
acts
   5 See Availability o f the Judgment Fund fo r the Payment o f Judgments or Settlements in Suits Brought Against
the Commodity Credit Corporation Under the Federal Tort Claims Act, 13 Op O L C 362, 363 (1989), 3 Office
of the General Counsel, United Slates General Accounting Office, Principles o f Federal Appropriations Law 14-
24 to 14-26 (2d ed. 1994) ( “ GAO Principles” )


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of State to “ use funds appropriated or otherwise available to the Secretary” for
several functions, including to

          pay tort claims, in the manner authorized in the first paragraph of
          section 2672, as amended, of title 28, when such claims arise in
          foreign countries in connection with Department of State operations
          abroad.

22 U.S.C. § 2669(f).6 In 1996, Congress appropriated $1.7 billion “ [f]or necessary
expenses of the Department of State and the Foreign Service not otherwise pro­
vided for, including expenses authorized by the State Department Basic Authori­
ties Act of 1956, as amended.” Department of State and Related Agencies Appro­
priations Act, 1997, Pub. L. No. 104-208, 110 Stat. 3009, 3009^6 (1996).

   C. Source o f Funds fo r Settlements Made Pursuant to § 2669(f)

   The Torts Branch maintains that under the plain language of § 2669, an appro­
priation for that section is available to pay settlements of foreign tort claims under
paragraph (f). If that agency appropriation is available, the settlements are “ other­
wise provided for” within the meaning of 31 U.S.C. § 1304, and the Judgment
Fund is therefore not available.
   The State Department contends that the Civil Division’s analysis does not con­
sider the full text of § 2669(f) and the legislative history of § 2672 of the FTCA,
which is specifically referenced in paragraph (f). The State Department points
to a 1980 opinion of the Comptroller General that considered whether settlements
of foreign tort claims over $2500 under paragraph (f) were, like settlements for
the same amount under the FTCA, payable from the Judgment Fund. See State
Analysis at 2-5 (discussing Administrative Settlements of Tort Claims Arising
in Foreign Countries, B-199449.0M, 

(C.G. Aug. 7, 1980)
(“ GAO Opinion” )). That opinion concluded that when Congress enacted para­
graph (f) and authorized the Secretary to pay settlements of foreign tort claims,
Congress intended for those settlements to be paid in the same manner as domestic
claims settled under § 2672 of the FTCA rather than paid in the manner of the
other activities listed in § 2669, GAO Opinion at *3. Because FTCA claims over
$2500 presently are payable from the Judgment Fund, the State Department con­
cludes that settlements of more than $2500 made pursuant to § 2669(f) are payable
from the Judgment Fund rather than from its operating appropriation. See State
Analysis at 9-10.
   Without expressing a view on the correctness of the GAO’s interpretation of
the law as it existed in 1980, the Torts Branch rejects the State Department’s
   6 Section 2669 also authorizes the Secretary to provide for printing and binding outside of the United States;
to settle claims o f less than $15,(MX) presented by foreign governments; to obtain contract services abroad, to provide
for official functions and courtesies, and to procure goods for use at Foreign Service posts. 22 U.S C § 2669


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                     Funding o f State D epartm ent Settlem ents o f Foreign Tort Claims


present reliance on the 1980 GAO opinion because §2669 has since been
amended.7 In 1980, §2669 provided that “ [t]he Secretary of State, when funds
are appropriated therefor, may . . . (f) pay tort claims, in the manner authorized
in the first paragraph of section 2672, as amended, of title 28, when such claims
arise in foreign countries in connection with Department of State operations
abroad.” 22 U.S.C. §2669 (1976) (emphasis added). The authorization for the
activities in § 2669 was thus conditioned on Congress making a specific appropria­
tion.
   In 1985, however, Congress replaced the conditional authorization with a perma­
nent authorization, and made available additional funds to cover § 2669 activities.
See Foreign Relations Authorization Act, Fiscal Years 1986 and 1987, Pub. L.
No. 99-93, § 114, 99 Stat. 405, 411 (1985). The amended statute provides that
“ [t]he Secretary of State may use funds appropriated or otherwise available to
the Secretary to . . . (f) pay tort claims, in the manner authorized in the first
paragraph of section 2672, as amended, of title 28, when such claims arise in
foreign countries in connection with Department of State operations abroad.” 22
U.S.C. § 2669 (emphasis added). The Torts Branch contends that the statute now
permits the Secretary to pay for settlements without a specific appropriation, and
that the Judgment Fund therefore is not available.

                                                II. Analysis

   Whether the Judgment Fund is available for payment of foreign tort claims
under § 2669(f) turns on whether the payment of those claims is ‘‘otherwise pro­
vided for” within the meaning of 31 U.S.C. § 1304. Whether a payment is other­
wise provided for is a question of legal availability rather than actual funding
status. GAO Principles at 14—26. If any of the State Department’s agency appro­
priations are lawful sources of payment for settlements under paragraph (f), pay­
ment is “ otherwise provided for” and the Judgment Fund is not available.
   We begin with the text of § 2669. That section states that funds appropriated
for the specific purposes listed in §2669 and funds “ otherwise available to the
Secretary” are available to pay settlements of foreign tort claims “ in the manner
authorized in the first paragraph of section 2672, as amended, of title 28.” 22
U.S.C. § 2669(f). The first paragraph of § 2672, in turn, requires the Secretary
to obtain the approval of the Attorney General for settlements of more than
$25,000 and authorizes the Secretary to use arbitration. 28 U.S.C. §2672.8 The
  7See Memorandum for Jeffrey Axelrad, Director, Torts Branch, Civil Division, from Tess Finnegan, Law Clerk,
Re: Use o f State Department Funds to Settle Foreign Tort Claims, Reply M emorandum (Dec 1996)
  8 The first paragraph of § 2672, in relevant part, states
     The head of each Federal agency . . , in accordance with regulations prescribed by the Attorney General,
     may consider, ascertain, adjust, determine, compromise, and settle any claim for money damages against
     the United States for [torts committed by Federal employees]' Provided, That any award, compromise,
     or settlement in excess of $25,000 shall be effected only with the pnor written approval of the Attorney
                                                                                                        Continued


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text of the first paragraph of § 2672 in no way Limits or excepts the authorization
to use funds appropriated under § 2669 to pay for settlements of foreign tort
claims. Because § 2669 expressly makes those State Department appropriations
available to pay foreign tort claims, the settlements are “ otherwise provided for”
and the Judgment Fund is not available.
  We have considered the State Department’s argument that, notwithstanding
§ 2669(f)’s direction that the Secretary pay foreign tort claims “ in the manner
authorized in the first paragraph o f section 2672 , as amended, of title 28,” 22
U.S.C. § 2669(f) (emphasis added), Congress intended to incorporate all of the
paragraphs and all subsequent amendments to §2672 into § 2669(f). See State
Analysis at 2-9 (citing GAO opinion). Because the third paragraph of § 2672 has
been amended and now permits agencies to pay certain domestic tort claim settle­
ments of more than $2500 from the Judgment Fund,9 the State Department main­
tains that similar foreign tort settlements of this amount also are payable from
the Judgment Fund.
   We do not find this argument persuasive. First, when interpreting a statute of
specific reference like § 2669(f), “ only the appropriate parts of the statute referred
to are considered.” 2B Norman J. Singer, Sutherland Statutes and Statutory
Construction §51.08, at 192 (5th ed. 1992). By restricting the reference in para­
graph (f) to the first paragraph of §2672, Congress presumably intended to
exclude the other paragraphs from application to payment of § 2669(f) settlements.
   Nor do we agree that because Congress had amended the third but not the first
paragraph of 28 U.S.C. §2672 at the time it enacted § 2669(f), Congress nec­
essarily intended to incorporate the amendments to the third paragraph of § 2672
into the payment of § 2669(f) claims. There is another, more plausible explanation
for Congress’s inclusion of the phrase “ as amended” in § 2669(f). A statute of
specific reference “ incorporates the provisions referred to from the statute as of
the time of adoption without subsequent amendments, unless the legislature has
expressly or by strong implication shown its intention to incorporate subsequent
amendments with the statute.” 2B Norman J. Singer, Sutherland Statutes and
Statutory Construction §51.08, at 192 (5th ed. 1992). By specifically referring
to the first paragraph of §2672, “ as amended ,” Congress provided that any
amendments to the first paragraph would be incorporated into § 2669(f). Had Con­
   General .       . N otwithstanding the proviso contained in the preceding sentence, any award, compromise,
   or settlem ent may be effected without the p n o r written approval of the Attorney General . . . to the
   extent that the A ttorney General delegates to the head o f the agency the authority to make such award,
   com prom ise, o r settlement. Such delegations m ay not exceed the authority delegated by the Attorney G en­
   eral to the United States attorneys to settle claims for money damages against the United Slates Each
   Federal agency m ay use arbitration, or other [specified] alternative means of dispute resolution . . . to
   settle any tort claim against the United States, to the extent o f the agency’s authority to award, compromise,
   or settle such claim without the p nor written approval o f the Attorney G e n e ra l. . . .
 9The third paragraph o f § 2672 states, in relevant part,
      Payment o f any award, compromise, or settlement in an amount in excess of $2,500 made pursuant
   to this section       . shall be paid in a m anner similar to judgments and compromises in like causes and
   appropriations o r funds available for the paym ent of such judgments and compromises are hereby made
   available for the payment o f awards, compromises, or settlements under this chapter.


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                     Funding o f State D epartm ent Settlem ents o f F oreign Tort Claim s


gress not included the phrase “ as amended,” § 2669(f) would have been inter­
preted as incorporating the $1000 cap on agency settlement authority contained
in the first paragraph of §2672 in 1956, rather than incorporating any subsequent
amendments to the dollar cap or the other payment provisions in paragraph one.
  Finally, we note that the GAO’s interpretation of § 2669(f) fails to give any
effect to the words “ first paragraph.” In the normal case, every word Congress
uses in a statute should be given effect. See, e.g., Feist Publications, Inc. v. Rural
Telephone Serv. Co., 

, 358-59 (1991); United States v. Menasche,

, 538-39 (1955). Congress had no reason to specify “ the first para­
graph” of §2672 if it intended for all of the paragraphs of §2672 to apply to
payments under § 2669(f). We thus conclude that § 2669(f) incorporates only the
provisions of the first paragraph of §2672, and that the provisions of the third
paragraph authorizing payment from the Judgment Fund for certain settlements
do not apply to the State Department’s settlement of foreign tort claims.
   The State Department has advised us that because it has not budgeted funds
to cover these settlements, it is likely that the Secretary of State will cease to
settle foreign tort claims. See Letter for Frank W. Hunger, Assistant Attorney
General, Civil Division, from Michael J. Matheson, Acting Legal Adviser, Depart­
ment of State at 1-2 (Jan. 6, 1997). The State Department is concerned that this
will be an irritant in the United States’ relations with foreign countries, and will
likely result in an increase in the number of suits filed against the United States
in foreign courts. 

are sensitive to these policy implications, we believe that, in light
of the plain language of § 2669, the concerns the State Department expresses must
be addressed to Congress.10 In this regard, the Department may wish to consider
working with the State Department to propose legislation that would make the
Judgment Fund available for settlements of foreign tort claims under § 2669(f).

                                              III. Conclusion

  Because funds appropriated to the State Department for the activities listed in
section 2 of the State Department Basic Authorities Act of 1956 and funds other­
wise available to the Secretary are lawful sources of payment for settlements of
foreign tort claims made pursuant to § 2669(f), the Judgment Fund is not available.
The Secretary of State must comply with the first paragraph of 28 U.S.C. § 2672



   10 We also note that our conclusion is not entirely inconsistent with past practice After reviewing its records,
the Office of the Legal Adviser informed us that the Secretary used agency appropriations to pay for two foreign
tort settlements in the late 1970’s


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when settling such claims, but they are to be paid from State Department appro­
priations.

                                                             RICHARD L. SHIFFRIN
                                                       Deputy Assistant Attorney General
                                                           Office o f Legal Counsel