Appoloni v. United States

JOLLY, OWEN, Before DAVIS and ment in a timely claim Fed.R.CrimP. 35(a) Judges. motion, Circuit after the district court had orally pronounced the defendants’ sen- PER CURIAM: tences. they We conclude that preserved Malcom J. Watkins Michael A. the error. See United States v. Burling, appeal Watkins from their conditional (8th 745, Cir.2005). 420 F.3d 748-49 guilty-plea convictions and sentences for preserved defendants Because possession with intent to distribute cocaine error, the Booker “[t]he Government bears methamphetamine. They argue that showing burden of that the error was the district court denying erred beyond harmless a reasonable doubt.” suppress motions to the evidence obtained Pineiro, 282, United States v. 410 police their encounter with officers at (5th Cir.2005). The Government has failed the Dallas Amtrak station. Viewing the meet burden in this case. Accord light evidence most favorable to the ingly, the defendants’ sentences are vacat Government, properly the district court ed and the cases are remanded for resen- denied their suppress motions to on the tencing. ground that the encounter did not amount AFFIRMED; CONVICTIONS SEN- to a seizure for Fourth pur Amendment VACATED; TENCES REMANDED poses. See Drayton, United States v. FOR RESENTENCING. 194, 200-01, 2105, U.S. 122 S.Ct. (2002); L.Ed.2d United States v. Cha

vez, 479, Cir.2002).

The defendants also contend that

the imposition adjustment of a firearm both of their sentences violated their Sixth APPOLONI, Sr., Donald F. Russell C. adjust

Amendment because the Bergemann, Bryce and Charles upon ments were based facts that were not Engle, Plaintiffs-Appellants, proved admitted them or a jury v. beyond a reasonable doubt. Although the America, UNITED STATES defendants waived their appeal Defendant-Appellee. sentences, their convictions or those waiv ers will not be enforced in appeal Phyllis Klender, F. B. William because Government has to in failed Rase, Roger Petri, J. voke those waivers. See United v. States Plaintiffs-Appellees, (5th Cir.2006). Story, 439 F.3d 229-31 The defendants were sentenced America, United States of before the mandatory provisions of the Defendant-Appellant. Sentencing Guidelines were modified and Nos. 05-1049. advisory by rendered the United States Supreme Court United States v. Book Appeals, United States Court of er, 543 U.S. 125 S.Ct. Sixth Circuit. (2005). Application L.Ed.2d 621 of the Argued: Jan. adjustments firearm to the defendants’ Decided Filed: June sentences violated their Sixth Amendment rights. Id. at 125 S.Ct. 738. The

defendants first raised their Sixth Amend- West,

ARGUED: John M. Bredhoff & Kaiser, D.C., Washington, for Plaintiffs. Delsole, Ellen Page Depart- United States Justice, D.C., ment of Washington, for De- West, fendant. BRIEF: ON John M. Kaiser, D.C., Bredhoff & Washington, Su- Clark, Clark, Southfield, zanne K. Lee & Michigan, for Page Plaintiffs. Ellen Del- sole, Greene, L. Kenneth United States D.C., were certified as Michigan. Both lawsuits Justice, Washington, Department only in minor re- and differ class actions Defendant. general, not relevant here. spects KENNEDY, COOK, and Before: employees of encompasses all former class GRIFFIN, Judges. Circuit post- public Michigan school districts institutions, residing secondary education of KENNEDY, J., opinion delivered (Mender) and in Eastern Western COOK, J., joined. court, in which who re- Michigan of (Appoloni) Districts - 205), a GRIFFIN, delivered (pp. J. incentive early retirement ceived in and concurring part separate opinion districts respective school and from their part. in dissenting unsuccessfully applied to Internal who (“IRS”) of for refunds Revenue Service

OPINION from those taxes withheld KENNEDY, Judge. Circuit ments. appeal, on In cases consolidated these Appoloni I. to made whether address

we Plaintiffs, Appoloni, William Donald teachers, relinquished who school public Engle, were ten- Bergemann, and Sandra resigned statutory tenure employed by public school teachers ured accepting the upon positions from their District Public School Dowagiac Union un “wages” taxable constitute payments, District”). (the All three had been “School Contribution Federal Insurance der pur- District by the School granted tenure (“FICA”). States Appoloni v. United Act Teachers’ Act Michigan suant to the District in States filed the United was Michigan; Act”) (“Tenure § Laws 38.71. Comp. Mich. District for the Western Court automatically earns a teacher Michigan, In in filed States was v. United ender Kl completing proba- a by successfully Court States District the United Laws Comp. Mich. tionary period. See In each Michigan. District Eastern teachers, Plaintiffs As tenured 38.71. case, cross-motions parties filed both employment to continued were entitled the dis Appoloni, summary judgment. districts ab- respective school with their judgment for summary granted court trict just cause” and sub- sent “reasonable and Mender, the court in government; set forth protections ject procedural Plain judgment for the summary granted Act. in the Tenure reasons, hold following we tiffs. For exchange in made that year, the 2000-2001 school During the statutorily granted early “employee District offered School “wages” taxable rights constitute (“ESP”) most senior to its plan” Thus, REVERSE FICA. we under at least ten who had Teachers teachers. Mender, in judgment court’s district District the School years of service with Ap- judgment AFFIRM the court’s we scale, pay in the high step at a and were poloni. plan. in the participate eligible to were voluntary, plan was Participation BACKGROUND if more than plan provided eligibility par- to applied, teachers eligible filed 27, 2002, taxpayers three On March the basis be ticipate would determined Michigan. District of in the Eastern suit plan seniority. purpose The taxpayers three November On layoffs and to “help prevent teacher District brought suit Western responsibility lessen the Board’s economic accepted buyout Plaintiff Klender staffing.” the area of J.A. at 77. the Pinconning Area School District of- fered during her the 1999-2000 school Participants required the ESP were year. buyout was offered to teachers 30, 2001, resign agree June and to with 20 or more of service with the providing to a waiver the teacher Any district. eligible teacher who agreed all arising “waived claims out of 30, 2000, to retire as of June would receive District, ment with the including claims $46,800 made in 72 monthly ... under Additionally, the Tenure Act.” years. installments over In exchange, six participating agreed teachers to “waive teachers required to “waive ... all ... all entitlement wage future future rights,” agree not to increases, benefit all participate apply re-employment for in the district any district sponsored plans” benefit consent, without the district’s and to agreed to not “apply reemploy- for “waive and release the District forever ment” without the School District’s con- to re-employment and from sent. at Participating J.A. teachers based, alia, claims inter on her ‘tenure equivalent received the of their 1999-2000 ” rights.’ at 47. J.A. (but salary annual base not more than Plaintiff Petri accepted “Voluntary $53,021) in monthly payments over a Teacher Severance Program” Incentive of- five-year period. J.A. at 25. by fered the Pinconning Area School Dis- The School District withheld FICA tax- trict to teachers with years ten or more es payments. from the installment Rely- service. If an eligible agreed teacher ing on Eighth Circuit’s decision in “voluntarily resign his or her North Dakota State Univ. v. United with Pinconning Area Schools [and] forfeit Cir.2001), F.3d 599 seniority rights,” all the teacher would re- taxpayers filed claims refunds of the ceive a minimum guaranteed payment of withheld, FICA taxes and when the IRS $2,000. That increased to a total claims, denied those taxpayers filed $37,500 if eligible ten or more teachers suit in the Western District Michigan. opted participate program. Plaintiff accepted Petri buyout offer on Both the government Plaintiffs and the 17,1997. February filed for summary judgment. motions Plaintiff accepted buyout Rase also granted district court government’s that was pursuant offered to an “early motion and denied the Plaintiffs’ motion. retirement” provision in a collective bar- Plaintiffs timely appeal. filed this

gaining agreement between the West Branch-Rose City Area School District II. Klender and the City West Branch-Rose Education litigation The Klender similarly involves Association. Teachers with a minimum of tenured teachers who were an years’ offered service the District and 25-29 “Employee designed Severance Plan” years’ credit Michigan under the Public induce tenured teachers to retire. In Employees’ School quali- Retirement Plan Klender, all Phyllis three F. fied for an early retirement In- incentive. Plaintiffs — Klender, Roger Petri, J. $30,00 William B. payments began centive employed Rase—were Michigan public teachers with 25 by and decreased $5,000 school teachers and granted also had been year for each additional of retire- Tenure Act. up ment credits January 29. On Inc., Dry, ty.” Ins. Co. v. Tech retire- announced his Ease Plaintiff Westfield (6th Cir.2003). ment. buyout payments making these ANALYSIS Rase, Petri, Klender, Plaintiffs im- presents This case issue of first taxes from withheld FICA districts school circuit: are pression August and Between paid. amount public districts to school made school filed all three Plaintiffs October exchange relinquish- teachers in the IRS. The IRS refunds with claims for statutorily granted of those teachers’ ment then filed claims. Plaintiffs denied the “wages” considered taxable of Mich- in the Eastern District this action under FICA? motions for filed cross igan. parties Both de- The district court summary judgment. FICA, 21 of the Chapter codified granted motion and government’s nied the Code, Sections 3101 Internal Revenue appeal This followed.

the Plaintiffs’. upon a tax through imposes Security wages to fund Social REVIEW STANDARD OF Benefits. This tax is collect- and Medicare tax employer by deducting the grant ed a district court’s We review payment. at the time of Sec- judgment de from summary of a motion Romulus, imposes matching tax on 257 tion 3111 Wojcik City v. novo. (6th Cir.2001). wages paid to the Summary employer respect 600, 608 F.3d employee. pleadings, “if the appropriate is judgment interrogatories, answers to depositions, argue that Plaintiffs file, with the together on and admissions “wages” not be considered this case should affidavits, there is no any, if show therefore, FICA, purposes for fact.” as to material genuine issue wrongly withheld FICA taxes were 56(c). is “There is no such Fed.R.Civ.P. an rely Plaintiffs payments. those fa evidence there is sufficient sue unless decision, North Dakota Eighth Circuit jury nonmoving party for

voring the States, 599 255 F.3d v. United State Univ. party.... [T]he a verdict for return (8th Cir.2001), In proposition. for this presents a the evidence inquiry is whether Dakota, made to payments were North require submis disagreement to sufficient pursuant university professors tenured it is so one-sided jury to a or whether sion court program. That early retirement matter of prevail must as a party that one not payments were held that those Inc., Lobby, Liberty law.” Anderson purposes. “wages” for FICA 106 S.Ct. 477 U.S. Da- that North government argues The (1986). fact that “The L.Ed.2d distinguishable and that is kota for sum have filed cross-motions parties easily fit within in this case ments at issue mean, course, mary judgment does “wages,” and statutory definition of for one side or summary judgment withheld. thus, properly the taxes were necessarily appropriate.” is the other Records, LaFace Parks v. I. Cir.2003). (6th reviewing <cWhen examining the definition begin by judgment, we We summary cross-motions purposes of FICA. Section “wages” for on its own mer each motion must evaluate 3121(a) de- Revenue Code of the Internal in the all facts and inferences its and view em- “all “wages” as remuneration nonmoving par- fines light most favorable ployment, including the cash value of all against admonish us holding that ‘ser- benefits) (including paid remuneration vice’ can productive be activity. any medium than cash.” Section We think that ‘service’ as used Con- 3121(a) exceptions expansive lists to this gress in this definitive phrase means not definition apply “Employ- but none here. only work actually done but the entire defined, 3121(b), § ment” is in I.R.C. employer-employee relationship service, “any nature, of whatever per- which compensation paid is to the em- (A) by formed an employee person ployee by the employer. employing him.” “Remuneration for em- added) (emphasis (quoting I.R.C. ployment,” specifically unless excepted, 3121(a)). § wages though “constitutes even at the time paid the relationship of employer and em- circuit, In this we have followed the ployee longer no exists person between the reasoning of Nierotko and have also em- in whose employ the per- services were phasized that “phrase ‘remuneration formed and individual performed who for employment’ § as it appears (a) (i). § them.” Reg Treas. 31.3121 —1 should interpreted broadly.” be Gerbec v. 31.3121(a)- explained As Reg. Treas. United 1(c), “[t]he name which the remunera- Cir.1999). Gerbec, employees were laid tion for employment designated is is im- just off qualifying before for pension bene- material”; “salaries, fees, bonuses, and fits they sued under the Employment commissions ... if paid as com- Retirement Security Income and Act of pensation for employment.” Congress, by parties settled enacting FICA, intended to impose FICA ees received to a set- taxes on a range broad remuneration agreement. tlement While we found that order to accomplish the remedial purposes some those payments constituted dam- Security the Social Act. H.R.Rep. See ages a tort-type personal injury for claim 74-615, (1935) No. (describing at the and thus exempt taxes, from FICA Act). aims of Security the Social we held that damages compensating the Both Supreme Court and this circuit plaintiffs for lost wages including back — emphasized broad, have na- inclusive wages or wages future subject —were ture of this example, definition. For in income and FICA taxes. We reasoned: Nierotko, Soc. Sec. Bd. v. 327 U.S. holding The in clearly supports Nierotko (1946), 66 S.Ct. 90 L.Ed. 718 the conclusion that representing awards Supreme Court held that pay back a in wages, wages loss both back awarded to wrongfully discharged employ- wages, future that otherwise would have ees under the National Labor Relations paid, been reflect compensation paid to Act “wages” constituted for purposes employee because of employer- Security Social Act of The employee relationship, regardless specifically Court rejected argument employee whether the actually worked that “service” as used in the Act should be during period the time question. in limited to “only productive activity” and emphasized the Thus, broad nature of the defini- Gerbec, Id. under holding in had tion of “wages”: the Plaintiffs been terminated without very ‘any words cause and thus per- service ... denied the wrongfully right

formed ... they for his employer,’ gave up in this case—the purpose the Social Security Act in continued “for employment cause” —those mind import breadth coverage. They “front wages pay” subject would have been States, This is Fund v. United 64 F.3d taxation. See id. to FICA Cir.1995); conclusion Coop., to the erroneous Associated Elec. Inc. contrast Klender, illegal States, (Fed. de- “[t]he court district 226 F.3d United rights would have privation States, [Plaintiffs’] Cir.2000); Abrahamsen v. United damages, of action for given rise to a cause (Fed.Cir.2000). We not be damages those recovered would consistently pay have held that where a reasoning the Sixth Circuit’s taxable under ment arises out rela Klender v. United in Gerbec.” tionship, and is conditioned on a minimum (E.D.Mich.2004). 754, 767 F.Supp.2d service, years of pay number of such a wages. Both Nierotko and Gerbec demon ment constitutes FICA way in which courts have broad strate the Metal, example, For Sheet we ad- “wages” the definition of ly interpreted whether distributions dressed The dissent indicates purposes of FICA.1 Supplemental Unemployment ees from a “largely ordained” our that our result is pur- Benefit Fund were for FICA broadly. statute choice to define this Metal, 64 poses. Sheet 250. The a construction of we maintain such While solely distributions were derived from em- find a proper, statute is we broad contributions, eligibility ployer necessary, is not as we hold construction contingent those distributions was on an easily fit presented the facts within the employee’s length of service. We evaluat- “wages,” following rea definition whether those were “remu- ed. sons. employment”

neration for and stated that “eligibility requirements provide A. the most pay- accurate test to determine whether a First, eligibility requirements truly ment is consideration for services.” payment for a teacher qualifying —-that added); (emphasis at 251 see also As- a minimum number of served —indi- Inc., Coop., sociated Elec. 226 F.3d at 1328 per- were for services cate (noting comput- that while the method of rather than for the formed payments, including the ing severance determining rights. whether rate, length pay of service and were not have wages, constitutes courts the method is “a relevant “dispositive,” eligibility requirements, specifi- looked determining factor whether cally longevity, important as an factor. Abrahamsen, ”); ‘wages’ ments constitute Sup- Metal Workers Local

See Sheet HI (finding at that severance Trust 228 F.3d plemental Unemployment Benefit that, finding very 'any Compa- previous words "[t]he that in Rowan 1. The dissent claims States, nies, performed employer,' service ... ... for his Inc. v. United 452 U.S. (1981), Security purpose of the Social Act in L.Ed.2d 814 the Su- with the S.Ct. Nierotko, import coverage.” preme rejected "any § 3121 mind breadth of Court notion that (emphasis broadly.” (emphasis 66 S.Ct. 637 interpreted 327 U.S. should be added). added). that we have no holding We further note the in Rowan—nor Neither principle disagreement with the that courts passage quoted by the from Row- dissent language to the of a statute when proposition. The Court in should look an—stands for this statute; however, empha- we persuaded by interpreting a that it was not Rowan stated way Congress size that courts also should look argument that intended "remunera- Supreme Court and our court range which both the tion” to include a broad of remunera- case, included, interpreted— payment have indicated a statute is to be in that tion which "wages,” that's lodging. in the case of FICA The Court did not cite and of meals and Nierotko, purport broadly. it to alter its nor did payments wages constituted FICA based necessarily Plaintiffs had have tenure in part employer fact that the eligible used to be buyout. However, a departing “formula on the longevity based key tenure —was the factor —not service”); salary years ee’s for determining and Cohen eligibility because these States, early F.Supp.2d payments United retirement were offered to (C.D.Cal.1999) (finding encourage high the severance teachers at a pay rate to Thus, payment subject was' retire. payments FICA tax where it at issue in this case, Metal, only like those in available Sheet with twen- arose out of ty employment years relationship, or more of continuous service and were noting conditioned on a minimum that courts “look to the eligibility number of years service. requirements determining whether the services”); compensation are Hemelt v. United B. (4th Cir.1997) (“[K]ey factors determin- ing Plaintiffs the amounts of each make much award were of the fact they gave length up their employee’s of each as tenured teach- tenure with ers continued employment Continental the salary just he absent received [Bjecause cause for They Continental.... termination. argue that because ments from were in exchange to taxpayers Continental right, other class of that members arose out not “wages” taxable under relationship, they fit within FICA. This leads us to our statutory point: next regulatory definition of just because a relinquishes teacher right a wages, and FICA taxes properly were when accepting early awards.”). retirement does not withheld from the convert what would be into case, In this the severance payments something else. were upon conditioned having teacher served a certain number years- —ex- Plaintiffs maintain that the school ceeding that of obtaining tenure under districts were “buying” rights. their tenure Michigan law—with the school district. point This greatly also influences the dis In Appoloni, the school district offered a Yet, sent. a court must not look simply at severance payment to teachers who had at what being relinquished is point at the years least ten of service with the School offered, rather, is but District and who were at a high step in how relinquished was earned. pay Klender, Similarly, scale. the Thus, we cannot impor understate the severance payments offered to tance of the fact that a teacher earns those teachers who had served for a cer- successfully completing a proba tain number of in excess of that (Mich. period tionary Comp. Laws required to achieve tenure: ac- Klender 38.71). In other words, a teacher does cepted a buyout requiring 20 or more not obtain tenure at the onset of employ years of district; service with the Petri ment; it is a right that is earned any like accepted a package severance requiring job other benefit. Admittedly, grant the ten or years service; more of and Rase right guaranteed this is protected accepted a buyout that was offered to by statute. But we fail to see how the fact teachers with a minimum of that right this protected by is statute takes service. away point from the that it still must be plaintiffs tax where subject to FICA meats employer.2 to the services through earned package accepted severance voluntarily issue at event, payments the any In so, rights against all and, waived doing in tenure solely for the exchange in not were employment). future to the defendant the exchange in they were rights; Electric, the in Associated Similarly, such, and, retirement, early teachers’ severance argued plaintiff-taxpayers We payments. severance essentially were the because “wages” not were payments from other different this is how fail to see employees to union made payments were a “ten- just because packages severance i.e., the rights, exchange for valuable “in In almost all exchanged. was right ure” strike, and thus not to promise union’s up gives employee an packages performed.” Associ- services not for were distin- a hard time we have something, and Like the Electric, at ated similar cases from case this guishing that Abrahamsen, found the court in court a sever- employee, an where motivations “were employer’s the because exchange. rights in up package, gives ance unrest,” the pay- avoid labor solely to not sever- consistently held that have Courts “wages.” Id. constituted FICA ments relinquishment ance payments district’s motiva- case, the school In this employment course of in the rights rights tenure buy not to was tion —the fact, we wages. In FICA relationship are at teachers to induce those motivation case, the than a other to find a loss are at early.3 to retire highest pay scales the decision, other- to hold Circuit’s Eighth was sim- of tenure Relinquishment wise. ac- part and incidental necessary a ply Abrahamsen, severance in example, For words, in buyout. cepting employees conditioned were payments buyout, the teachers to offer order the em- against claims future waiving all they give ask that had to districts school Abrahamsen, F.3d 1360. ployer. right future up their —the Thus, “in- were noted court package any severance as with same employees leave to induce both tended district’s the school light of especially any claims settle pay- offering these severance purpose Id. at 1364. IBM.” against had may have differentiate no ments, we reason see though found even However, the court relinquishment this benefits relinquishing of other were employment, this employer offered during course though earned and even suit, rights asso- bring or right to plaintiffs waived like part, because payment, seniority. wage- with change the ciated did this right, this the severance like character C. subject and those govern Cohen, Finally, agree we Id.; also see tax. applicable most position ment’s (finding severance at 1135 F.Supp.2d Abraham- FICA. under rights are taxable such provide fails to dissent note that 2. We sen, grant of 228 F.3d 1360. why fact the explanation for is im- protected statute rights is Many bestowed pur- benefits case. portant in this the stated example, Appoloni, 3. For protected statute —for upon employees "help prevent teacher plan was to pose of the courts bring suit—but right to example, the economic the Board's to lessen layoffs and any import point to be of not found have staffing." J.A. in the area responsibility packages ex- holding that severance when 77. relinquishment of part, for the change, 194 ruling

revenue ee, indicates the severance under a general contract, “acquired payments “wages.” are FICA Revenue both the security to in his employ- rulings are not entitled to degree the same ment and to additional pay or recog-. however, deference accorded a statute nition for longevity” based on years his degree some of deference is appropriate service to employer. Rev. Rul. 75-44 depending upon “the thoroughness evident added). (emphasis In exchange for the consideration, in its the validity of its rea employee’s agreement to refrain from as- soning, its consistency with earlier and serting either his seniority rights job or pronouncements, later and all those factors security rights, the employee received a give which power persuade, it to if lacking lump sum payment. The IRS held that power to control.” Skidmore v. & Swift because employee “had acquired his Co., 134, 140, U.S. S.Ct. relinquished employment rights through (1944); L.Ed. Aeroquip-Vickers, Inc. previous his performance services,” Comm’r, v. (6th Cir. 2003) constituted remuneration for ser- (finding revenue rulings receive vices deference); under the Ammex, Skidmore Railroad but Retirement Inc. Act c.f. (the United counterpart of FICA for railroad em- Cir.2004) (finding revenue rulings get the ployees). agree We govern- same deference Treasury Regulations). ment and find Revenue 75^44 Ruling to be Consideration of all of these factors leads the most analogous ruling. revenue us to conclude that some deference is due In Revenue Ruling the employee to Ruling Revenue 58-301 and Revenue granted, at the employment, time of Ruling 75-44. contractual right for five argue Plaintiffs this case is most analo- years. contrast, In the Plaintiffs received gous 58-301,4 Ruling Revenue the reve- their statutorily-granted af- ruling nue relied on Eighth Circuit ter a certain requisite number of in North Dakota. In Revenue Ruling 58- service. As previously emphasized, an employee with a five-year contract Michigan, tenure is automatically granted, to employment agreed to relinquish that right statute, to a during year the second after a teacher com- ex- change for lump sum payment. pletes a probationary The period. IRS We see this payments concluded that relinquish- case as one where the teacher earned ten- ment of rights under a contract are not ure through “previous performance his/her “wages” under FICA. of services.” Rev. Rul. Thus, 75^44. most government analogous

The revenue ruling, contends this case Revenue presents Ruling 75-44, an issue more closely related to also indicates that the sever- Ruling 75-44, Revenue an employ- where payments ance at issue are wages. governments points recently to a issued district opinions courts issued Appolo- both ruling, revenue Rev. pur- Rul.2004-110 which ni and Klender. Ruling Revenue 2004- ports supercede Rulings Revenue 58-301 the IRS stated it apply would not (which and 55-520 Rev. Rul. 58-301 relied employer made prior to Janu- on). Ruling explains Revenue ary 2004-110 large Because a portion of the those rulings earlier "erred analysis in their to which were entitled un- by failing apply regulations the Code and buyout agreements der the prior made appropriately question date, of whether the to this and because we hold Reve- made cancellation of the Ruling nue analogous 75-44 is to the facts of However, ment wages.” case, contract were Reve- rely we decline to on Revenue Rul- nue Ruling 2004-110 was issued ing after the making 2004-110 in our decision.

195 kind&emdash;job in previously paid rights were II. in being paid cash. are security&emdash;and now reli- and our holding, our recognize We summarize, it of find of we To differs Ruling on Revenue ance rights tenure at that the significance great in held Eighth Circuit what from through service earned issue were Dakota; believe we however North First, reasons. This is two employer. As result.5 correct reached have we tenure to differentiate reason no we see Inc. v. United Corp. in CSX stated employee an any other rights (Ct.Fed.C1.2002), where 208 Fed.Cl. any employer. service to through earns of Claims Federal Court States United relin discussed, found the have courts As Dako- North in holding disagreed with rights, rights seniority of quishment ta: rights in types of suit, and other bring layoff pay, pay, sick to vacation [R]ights consti payment for a severance exchange of part seniority&emdash;constituted pay, and Abrahamsen, e.g. wages. See tute FICA pack- compensation total employee’s (severance condi F.3d 1360 wages. hence, and, constituted age waiving all future employees upon tioned bene- job-related Therefore, these when Associated employer); against the claims lump- of in favor relinquished fits are (severance pay Elec., at simply transaction payment, sum pay “wages” because not ments were cash, paid in redemption, ato amounts in to union made ments were in kind. paid previously wage amounts of not to promise union’s for the exchange simply is payment separation Because Cohen, at F.Supp.2d strike); values, what equivalent exchange of subject (court severance found wages at remain at the start wages voluntarily tax where to FICA the end. and, doing in severance accepted added). For the rea- (emphasis at the defendant against so, rights all waived discussed, agree we previously sons Secondly, because employment). to future doing in CSX. the court reasoning of service through earned rights were these of definition Congress’ give effect to so we time at the contracted rather than “all remuneration 75-44 Rev. Rul. suggests this employment, all re- cash value ment, including the 58-301.6 Rul. than Rev. point on is more benefits) paid (including muneration emphasize again want We also I.R.C. cash.” than any medium principal district’s school of the added). importance Tenure 3121(a) (emphasis a sce- presented with Notably, we not factually is Dakota that North We note also is ex- Dakota, though where a even nario North distinguishable. In rights con- changed individuals monetary amount of length determined, employment. We partially, least the time was for at tracted service, Dakota rights in North we need emphasize out point this at the single made by a contract were created Rul- recently Revenue issued rely not Dako- relationship. North decision; of the onset ta, making this ing 2004-110 moreover, Tenure, at 601. whether, thus, about to comment we decline automatic; Board Dakota the North ruling, a sever- recently issued light factors several considered Higher Education granted exchange for payment ance determinations, "including making tenure time at the employee to an dis- to a teaching, contribution scholarship in wages. constitutes research, other through cipline profession or activities, ser- professional scholarly or society." Id. the institution vice to in purpose offering these pay- severance ance (“FICA”), Contributions Act I.R.C. ments. The school purpose district’s §§ here 3101-3128. I Accordingly, would af- was not to tenure “buy” rights. It was to grant firm the of summary judgment in induce highest those at the pay scales to plaintiffs favor of in Klender and reverse voluntarily early. retire Relinquishment grant of summary judgment in favor of rights tenure was incidental to the ac- the United States in Appoloni. ceptance of the payment. severance A

school district could not offer an early I. retirement payment permit and the teach- Both cases are certified class actions er to keep tenure and remain em- his/her encompassing former employees of Michi- ployed. relinquishment of these ten- gan school districts public and post-sec- rights ure the —like ondary educational residing institutions in in Abrahamsen and Associated the Western (Appoloni) and Eastern necessary Electric —was accepting {Klender) Districts of Michigan who re- payment. severance early ceived retirement incentive Thus, we find that from their employers and unsuccessfully ments at easily issue fall within the defini- applied to the Internal Revenue Service tion of as “all remuneration (“IRS”) for refunds of FICA taxes with- for employment.” 3121(a). § I.R.C. on such payments held during previous years. two The facts in each of the cases

CONCLUSION are not in dispute. key Because facts For foregoing my affect disagreement reasons we AFFIRM with the majority’s the district court’s judgment analysis conclusion, in Appoloni and I briefly will recite and we REVERSE the district the facts my crucial to court’s resolution.

judgment in Klender and remand in- Appoloni A. v. United

structions States to enter summary judgment for the government. The representative plaintiffs, Donald Appoloni, Bergemann, William and Sandra GRIFFIN, Circuit Judge, concurring in Engle, public are former school teachers part and dissenting part. the Dowagiac Union School District I concur the result regarding plaintiff (“Dowagiac”) possessed who However, William B. Rase. I respectfully to the Michigan Teachers’ Ten- dissent as to the (“plain- (the ure Act Act”), “Tenure Mich. Comp. tiffs”). On significant tax question §§ for Laws 38.71 to 38.191. A public school which “[ujniformity among the circuits is teacher obtains tenure after satisfactorily especially important in tax cases to ensure completing a four-year (formerly two-year) equal and certain administration of tax probationary period of employment, Mich. system,” Comm’r, Nickell Comp. § 38.81, Laws may thereafter Cir.1987), I would follow the be discharged or only demoted “for rea- persuasive authority of North Dakota just sonable and cause provid- State University v. United 255 ed Act],” in [the Tenure Mich. Comp. Laws (8th Cir.2001). F.3d so, In doing § I 38.101. Tenure status also entitles would hold that the payments issue, teacher to a probationary shorter period in with the exception of any other Michigan school district. Mich. plaintiff Rase, William do not constitute Comp. Laws 38.92. Appoloni obtained “wages” for purposes of the Federal Insur- tenure in Bergemann obtained ten- plans. Plaintiff William ent severance Engle obtained ure Branch- by the employed Rase was West (“West City Area School Rose District opt- all Engle Bergemann, Appoloni, Branch-Rose”). appli- The features of the Employee Sever- in the participate to ed below. plans outlined cable severance (“ESP”). is described plan The ance Plan as follows: by plaintiffs Phyllis 1. Klender (a) had at who plan, teachers the Under Pinconning also created Dowagiac, Like with School years’ service least ten (“ESP”) de- Plan Employee an Severance (b) step District, highest were at to long-term employees signed to induce scale, eligible pay applicable were to jobs. plan The was available leave by plan in the participate to to elect twenty years or more who had teachers a window during their intent indicating 30, Pinconning as of June service 13, to Janu- from period November accepted the ESP All teachers who 9, plan provided The 2001.... ary $46,800 if same amount: paid were applied, teachers eligible than 30 if more 30, 2000; $43,200 if retired June would be determined participation uniform 2001. The by June retired if fewer seniority, and that the basis arbitrary amount was ESP can- would be plan applied than 15 to an relationship it no bore sense celled. wages. loss of actual individual teacher’s were buyout plan in the Participants agreed to Pinconning employees also employment from resign to required in- rights, up all give future as of June District with the School existing in cluding “any and all claims employ- ... all to future “waive law federal state or law under equity to future rights, all entitlement ment any right to to policy pertaining or board increases, rights to all wage and benefits by virtue reappointment or tenure any district-sponsored participate oral un- agreements or any expressed ap- to “agree not and to plans,” benefit further re- derstandings.” The without reemployment” ply for against suit any right bring to linquished In consid- consent.... District’s School of the under “Title VII the school district to up giving these eration 1964 or Act of Rights U.S. Civil teach- participating employment, future statute, or common provision constitutional equivalent to receive ers were employment, theory law related (but salary annual base their 1999-2000 separation or ment discrimination his/her monthly $53,021), in 60 no more than “Age and under employment” five-year period. over Act of 1967 Employment Discrimination buy-out in the participation Teachers’ Act of Older Workers Protection and the voluntary. entirely plan was 1990.” States B. Klender United Klender, eligi- a tenured teacher Phyllis participate agreed plan, ble Klender are sub- facts of The material sign- after effective June Appoloni. retired facts of stantially similar Pincon- releases. After ing requisite Petri Roger Phyllis Klender and Plaintiffs from subse- taxes Pinconning ning deducted employed both were distributed plan payments quent al- (“Pineonning”), District Area School claim timely filed a Klender, Klender different slightly they retired though January On the IRS. for a refund with in differ- participated times and therefore 2002, the IRS denied Blender’s claim for a plan give qualified teachers a fixed refund. sum in exchange for the agree- teachers’ ment to retire early. The West Branch-

2. Roger Petri differed, plan however, Rose because it Pineonning Roger offered included in Petri a similar “Master Agreement;” is, plan in All teachers with a contract minimum between the school service ten district eligible chapter and the receive the teacher’s $37,500, the uniform sum of union that represented irrespective district’s teach- ers, an individual’s including loss of actual wages. Rase. The Like sum actual plan, Klender’s employee Petri’s plan ESP required dependent received was upon him to relinquish the number of the continued em- teacher was in- ployment. Although volved agreement Michigan public employees’ specifically did not plan list retirement rights, par- varied between $10,000 ticipating employees $30,000. agreed Unlike the other ESPs, there was no admissible fully waive, evidence completely discharge, presented that the teachers who chose to release and hold Pinconning Area participate in early plan retirement Schools and the Pinconning Area Edu- were required contractually cation to release Association ... harmless statutory rights any to receive the claims, and all severance liability, charges, de- payments. Nevertheless, claims, by Rase mands causes of action any and/or way affidavit, that the payments kind ... whatsoever including, but not contingent upon to, limited of his claims for breach contract, in exchange deprivation ESP rights, constitutional payments. qualified Rase early claims of wrongful discharge and/or plan retirement because he was employed claims of discrimination.... by West Branch-Rose as a teacher since The agreement further “acknowledge^ 1979 and achieved tenure 1981. After that the Program benefit constitutes com- Rase committed plan 2001, to the in early pensation which the Teacher would not West Branch-Rose subsequently deducted be otherwise entitled to.” FICA taxes from the payments to Rase. Having obtained tenure in Roger Like plaintiffs, the other Rase unsuccess- Petri qualified for the program fully filed a claim for a with refund and, accordingly, accepted buy-out of- IRS. fer, which included document, the release in February of 1997. Klender, As with I concur in the result reached Pinconning deducted FICA taxes from the majority with respect to William Rase. I ESP Petri received. August On hold would the claim by Rase fails 29, 2001, Petri filed a claim for a refund when confronted by government’s mo- with the IRS for FICA taxes on withheld tion for summary judgment because there the payments received, and, he on October was no obligation by Rase to relinquish his 23, 2001, the IRS denied Petri’s claim for a statutory tenure rights. Although Rase refund. proffered subjective his opinion, by affida- vit, that the payment was contingent upon

3. William Rase his relinquishment of claims William Rase worked in the West Michigan Act, Tenure no factual evi- Branch-Rose School District. Like the supports dence this eonclusory assertion. districts, West Branch-Rose 56(e). devised fed. R. Crv.P. I Accordingly, concur meant; legislature we ask what majority that Rase’s ESP with the means.”29 statute taxes. subject to FICA ments were Frankfurter, Some Felix Reflections II. Statutes, Reading 47 Colum. L.Rev. (1947). of statuto- an issue present cases These Holmes, Legal Collected Oliver Wendell regard, inqui- In this ry construction. (1920), quoted Schwegmann Papers purpose of the fundamental ry begins with Corp., Calvert Distillers 341 U.S. Bros. v. (1951) statutes, which is to L.Ed. 1035 71 S.Ct. judicial construction (Jackson, J., concurring). original give effect ascertain Interpreta- by Congress: used the words Scalia, meaning of A MatteR Of Antonin 22-23 And The Law Federal tion: Courts understanding begin [W]e (1997). what it “says in a statute Congress what it in a statute and means means “all “wages” defines remu- The FICA there,” Bank v. Nat. says Connecticut employment, including neration for 249, 254, Germain, 112 S.Ct. 503 U.S. (including of all remuneration cash value (1992). As we benefits) 117 L.Ed.2d 391 medium other than paid cash_” construing an 3121(a) noted previously have (emphasis § 26 U.S.C. 506, “the stat § when provision added). is further defined “Employment” ‘the sole function language plain, is service, nature, ute’s per- whatever “any as where the dis courts’ ”—at least of the employee person ... for the by formed 3121(b) (em- is not ab by the text position required §at him....” employing according to its it added). Thus, ‘is to enforce surd —“ plain the statute’s phasis ” Pair v. Ron United States terms.’ the issue of whether the language raises 235, 241, Inc., 109 489 U.S. Enterprises, their ESP remuneration plaintiffs received (1989) 1026, 103 (quot L.Ed.2d 290 by S.Ct. for performed them “any for service” States, 242 U.S. ing v. United Caminetti employer. 192, 442

470, 485, 61 L.Ed. 37 S.Ct. here, Where, statutory definitions no as (1917)). exist, may dictionary defini- courts refer Ins. Co. v. Union Underwriters discerning plain guidance tions for Hartford Bank, N.A., 1, 6, 120 530 U.S. Planters language. United meaning of a statute’s (2000). 1942, 147 1 L.Ed.2d Sons, S.Ct. 384 F.3d Rose & v. Edward States (6th Cir.2004); City Cleveland 263 further elaborated: has As Justice Scalia (9th Cir.2005); L.A., 989 law, it is the text is the The text v. Am. Tel. & Corp. see MCI Telecomm. I with agree that must be observed. 218, 225-29, Co., 114 S.Ct. 512 U.S. Tel. remark, ap- quoted Holmes’s Justice (1994) (using dictio- L.Ed.2d 182 in his Frankfurter provingly Justice the word interpret nary definitions of statutes: article on the construction “modify”). counsel day ago or two “Only a —when meaning of the common ordinary, I legislature, a intention of talked of the variety of act or a is “[a]n I word “services” say don’t enough was indiscreet others, especially pay.” for I work done was. their intention care what Dictionary Heritage mean.”28 Amerioan what the words The En- want to know Of ed.2000). glish Language Other re- Holmes’s other agree And I are to language dictionaries major English mark, by Justice quoted approvingly the same effect: inquire what “We do Jackson: “An act serving; duty piece or separate, adequate consideration” ex- work done for a superior. master or changed for the relinquishment plain- English http:// Dictionary, OxfoRD tiffs’ vested and bona statutory fide (enter www.oed. “service”)”; com term to tenure. “the performed by work one that serves <good b: service> useful labor that III. - produce

does not a tangible commodity Rowan, Prior a plausible argument < usually in plural used charge pro- could be made that >[,] the term “wages” fessional services Merriam-Webster used in the FICA http://www.m-w.com should be “broadly con- Dictionary, Online (enter “service”)”; Nierotko, term “The strued.” See perform- U.S. 355- ance work or duties superior for a S.Ct. or 637. Relying on Nierotko as a .... servant 4. a. Work done obiter dictum from our decision in others as an occupation business,” Gerbec, or (“ 164 F.3d. at 1015 ‘remuneration http://dictionary. refer- DiCtionary.Com, for employment’ as it appears in [26 (enter “service”)”. term ence.com/ U.S.C.] interpreted should be broadly”), the majority reaches a result my After review of these common defini which largely is ordained its choice of tions and Security Social Board v. Nierot rule statutory ko, construction. U.S. 66 S.Ct. 90 L.Ed. 718 (1946), which held the term “service” my view, issue, the statute at like all is not “productive limited to activity,” but statutes, should not be construed “broad- compensation includes of actu loss ly,” “narrowly,” “strictly,” or “liberally,” wages, conclude, al I consistent with the but fairly rather and reasonably. In this Circuit, Eighth the United States District regard, agree I with Justice Scalia that Court for the Pennsyl Western District of “[a] text should not be construed strictly, vania, and the States United District Court and it should not be construed leniently; it for the Eastern District of Michigan, that should be construed reasonably, to contain ESP were made in exchange all that fairly it means.” A Matter Soalia, for relinquishment of plaintiffs’ statu Interpretation at 23. Of tory and constitutionally-protected tenure Furthermore, notion that rights, 3121 rather than remuneration for “ser be interpreted should broadly, rather vices” to the than school districts. Similar to fairly and reasonably, rejected the was of meals1 and lodging Supreme Rowan, Court in 263, Rowan 452 Companies, States, Inc. U.S. at v. United 101 Rowan, 452 S.Ct. U.S. 2288. the govern- S.Ct. 68 L.Ed.2d (1981), ment unsuccessfully argued and the release of that the tort claim hold- damages States, ing Gerbec v. Central United Illinois should apply not F.3d Cir.1999), “wages” term the ESP as contained payments, although arising in FICA. Id. at employ 101 S.Ct. 2288.2 The ment setting, not government were remuneration for contended that the definition “any service” performed by plaintiffs. “wages” for purposes of the FICA Rather, the ESP “clear, were a should given be a broader and more ex- 1. See also Cent. Ill. Pub. Serv. Co. v. government United repeats The this discredited ar- 435 U.S. 98 S.Ct. 55 L.Ed.2d gument appellate in its in Klender. brief (1978) (holding reimbursements to em ployees for expenses qualify did not as "wages”). differing regulatory treatment allowing govern- The Id. interpretation. pansive tax with- the Su- of income purposes for rejected “wages” was position ment’s treasury regulation Court, FICA, inter- and the “broad preme holding invalid. declared at issue “wages” for of the definition pretation” its summarized The Court 101 S.Ct. has been restored. purposes FICA holding as follows: in a statute at construing the issue After Reg. Treas. that We conclude manner, consistent reasonable fair and 31.3306(b)-l(f) 31.3121(a)-l(f) and §§ I would by Congress, used with the words statutory defini- implement the fail to plaintiff that, exception with or rea- hold in a consistent “wages” tion of language plain Rase, The the ESP manner. William sonable relevant histories and-legislative exchange made its Congress intended Acts indicate constitutionally statutory and plaintiffs’ same in the interpreted to be definition rather than rights, protected FUTA as FICA and manner to the school for services remuneration Treasury withholding. The income-tax districts.4 the Government on which Regulations so, their inconsis- to do relies fail IV. application under- unexplained tent and Congress contention mine the authority from circuits weight of Con- them. As endorsed nonetheless In Ger- position. plaintiffs’ supports also interpreta- intend a consistent did gress successfully bec, sued definition, Treasury these its tion of arising from damages employer inconsistent are also Regulations arose violations, question ERISA Illi- reasoning in Central the Court’s sub- resulting payments were whether nois. taxes. and income ject FICA Regulations that the hold therefore We damages at- “any heldWe at 1026. erred the Service invalid, and that have [plaintiffs] would tributable com- in the to include them relying upon wrongly termi- they had not been received value of “wages” the putation subject also provid- nated should be petitioner lodging that meals wages those paid to its on they own convenience would have ed for taxes its judgment The rigs. offshore oil terminated.” wrongly on ees not been they had is Appeals reversed. the Court also held we Significantly, 1026-27. Id. at not damages were plaintiffs’ tort that the short, Id. In subject to FICA taxation. 26 U.S.C. Congress amended Although com- damages that Roivan, of the portion thus the 3121(a)3 to response § rule of employ a result-oriented we to following addi- Were Congress added construction, any be 3121(a): doubt should statutory § language to 26 U.S.C. tional taxpayer, not the in favor of prescribed for resolved regulations [Njothing in the See Hassett tax (relating government to collector. income chapter 24 purposes of Welch, provides an exclu- 58 S.Ct. withholding) U.S. which tax chapter ("[I]f "wages" (1938) used in such as to as doubt exists from sion L.Ed. require statute, a similar ex- taxing construed doubt shall be aof construction regulations "wages” in the taxpayer clusion of the in favor be resolved should chapter. of this purposes prescribed for ....”). Security Pub.L. Amendments Social (1983). 327(b)(1) 97 Stat. No. pensated plaintiffs for the loss of actual there is no correlation between the amount wages5 was taxable to FICA. Id. of the payments ESP and the teachers’ individual employment circumstances that majority

The acknowledges this distinc- would support lend majority’s to the theo- tion, holding that awards representing a ry that the ESP payments constitute wages loss in dis- that otherwise would have cretely subject been earned for paid purposes are of in- FICA taxes. Yet question there is no come tax that withholding the FICA. As payments holds, would have paid not been had Gerbec remuneration for actual plaintiffs relinquished not their loss, tenure wage future, past and subject is rights. itWere not for statutory their However, FICA taxation. payment in ex- rights, plaintiffs tenure would be at-will change for the relinquishment of other employees, subject to discharge without vested and bona fide claims such as tort cause or consideration. generally See statutory subject are not Shield, Toussaint v. Blue Cross-Blue 408 FICA taxation. (Mich.1980). Mich. 292 N.W.2d 880 majority persuaded The is that the ESP

Indeed, this is similarly evidenced situ- payments were not made in exchange for employees ated who worked the same plaintiffs forfeiting their number of and were entitled to the by the fact eligibility participate same salary levels plaintiffs, who did the ESP was upon not conditioned receive the payments. ESP teacher The ESP working fór payments specific This, therefore were duration. not made in ex- change any majority concludes, important, “service” that anis if not performed or dispositive, wrongfully prevented factor determining whether from performing, but, rather, in exchange “arise” from an employment re- separate of a statu- lationship purposes of FICA taxation. tory right. Accordingly, majority’s I agree proposition with the that where an conclusion damages arising from employment past contract and service to a lawsuit following illegal deprivation employer constitute the consideration of the would be taxable under for the payment, such is indeed Gerbec is not correct. inextricably tied to “services” rendered employer. However, the present cir-

The uniformity in the amount of the yield cumstances do not a similar conclu- ESP' is further evidence that sion. majority’s The rationale that consideration was not the sum of each ESP payments individual were made in teacher’s consideration loss of wages. actual plaintiffs’ of the past years ESP tailored, service is neither a case-by-case belied basis, the fact similarly recipient’s em- situated ployment record nor to who did recipient’s relinquish cur- wage Moreover, rent rate. rights pay- the ESP nothing. received The ma- ments equivalent are not jority to each ignores further teacher’s the critical fact that loss of earning capacity because age of relinquished by plaintiffs each teacher sum, varies considerably. In stemmed from entirely separate grant Michigan, plaintiff may struction, sue (2006), in tort for 50.06 http://courts.mi.gov earning loss of capacity, rather than loss of /mcji/MCJI.htm. Damages recovered for loss Lott, wages. actual Prince v. 369 Mich. earning of capacity subject not are to FICA (Mich. 1963); 120 N.W.2d 780 Michigan Su States, taxation. Dotson v. United 87 F.3d preme Court Jury Committee on Model Civil 1996). 682 Cir. Instructions, Michigan Jury Standard Civil In-

203 ” and, Nickell, (quoting state statute of another circuit.’ authority created 1270)). thus, specific relinquishment of F.2d at required For statutorily protected rights. Dakota, In addition to North the Dis- reasons, I hold that it was these would trict Court for the Western District of years not the of ser- relinquishment, this Pennsylvania recently early held that re-

vice, paid. the school for which districts payments tirement incentive made to ten- Dakota, Eighth In North Circuit faculty ured at administrators materially indistinguishable set examined a University Pittsburgh subject were not facts, at 599.6 Faced with the to FICA taxes. Pittsburgh Univ. presentation correspondingly of a similar United No. 2005 WL issue, the North Dakota court differentiat (W.D.Pa. 2005) Oct.18, (magistrate faculty ed the tenured from the non-ten decision), adopted, November administrators, stating that “the ad ured Analyzing virtually indistinguishable cir- not academic ministrators who were on the cumstances, the court found the rationale than anything staff were at-will [not] persuasive, holding of North Dakota that: entitled to extended notice (1) no “service” was in exchange rendered Id. at 608. Accord before termination.” payments, thus rendering ingly, employees’ the non-tenured sever exchange ments an “relinquishment subject ance were tax payments FICA protected property *11- rights,” id. at es, corresponded to payments because the (2) 12; faculty non-tenured members worked rather than the number payments subject offered the same process right. the forfeiture of a due taxation, they possessed only tenure-qualification process at While “expectation continuing employment,” rigorous, issue was more id. at Michi id. at *12. gan similarly recognizes law tenure as a Finally, appeal, in this the district court property right provides procedural opinion in Klender offers a well-reasoned safeguards, qualifications, protections analysis support of its conclusion that public for the tenure school subject the contested are not teachers. See Tomiak v. Hamtramck Sch. Klender, F.Supp.2d FICA taxation. at Dist., 426 Mich. 397 N.W.2d 760-67. Klender, (Mich.1986); see also F.Supp.2d (discussing at 765-67 laws that V.

govern process Michigan). of tenure in Although majority Rulings North Dakota is not control- relies on Revenue Circuit, ling authority the decision to buttress its conclusion ESP subject is entitled to considerable deference. See to FICA taxation. Comm’r, However, issue, Rulings Inc. v. the Revenue Aeroquip-Vickers, (6th Cir.2003) (“ best, authority at do ‘Uniformity persuasive which are especially important the conclusion that the sub- among preclude the circuits is equal ject pursu- are not taxable in tax cases to ensure and certain ESP Inc., system. Aeroquip-Vickers, tax ant to administration of the We FICA. See ral- reject (holding would therefore hesitate to the view 347 F.3d at 180 revenue indistinguishable. Although majority attempts materially is ev- the to distin- eases This facts, Eighth guish particularly distinction be- the on the issue of ident from the Circuit's tenure, statutorily protect- the salient fact —a tween tenured non-tenured years of process ed due the who had the same number of service. consideration —renders ings are entitled to Chevron deference 1974-1 C.B. 1974 WL 34867. The (i.e. non-arbitrary when agency regula- a Ruling distinguished by 58-301 noting controls)) tion but are that, reviewed under the 74-252, the employee pay- received (i.e. regulations Skidmore standard have pursuant ment to an already-present em- power the to persuade, they as are the ployment contract. Id. official interpretation, IRS but do not con- In case, the instant I would hold that the

trol); Dakota, North 255 F.3d at 604 n. 6 ESP are most like (“[Rjevenue rulings do not have the force 58-301, in Ruling they as did not arise law, they are to respectful entitled [but] from employment Indeed, contract. ....”) (internal quotation consideration ESP ultimately distin- omitted). guishable from either Ruling, they were parties cite four Rulings— Revenue made in exchange entirely for an separate 58-301, 74-252, 75-44, and 2004-110—as statutory right. relevant to this case. The courts in North Finally, in the case the majority Pittsburgh Dakota and relied on three of finds persuasive, most Ruling Revenue 75- 74-252, these rulings 58-301, and 75-44. — 44 held that a lump-sum payment given to Although Ruling generally 2004-110 sup- employee railroad buy-out to his seniori- ports government’s position, plaintiffs ty rights earned a general to contend it promulgated that was in antici- employment contract was taxable under pation litigation.7 (FICA’s the Railroad Retirement Tax Act In 58-301, Revenue Ruling de- IRS counterpart for railroad employees). 1975 termined that FICA taxes were not owed 15,1975 C.B. WL 34658. noting After on a lump-sum payment by received an employee an at-will employee, employee as early consideration for the but higher pay received as a result of his termination of five-year his seniority rights, IRS concluded that contract. 1958-1 C.B. 1958 WL 10630. this remuneration compensated the em- The IRS further determined that the em- ployee exclusively past services earned. ployee received lump-sum payment However, Id. Ruling 75-44 is distinguish- exchange the relinquishment of his able present from the case because plain- (i.e., rights contractual employed be tiffs’ in this case arise not from their years) the full five and therefore not sub- employment contract, but rather ject to FICA taxation. Indeed, state law. of the because contrast, however, IRS concluded bestowed Comp. 38.101, Mich. Laws Ruling 74-252, Revenue that payments possessed an alternative source made to an employee unilaterally consideration, and, termi- accordingly, three-year nate his school employment contract districts had an alternative basis for were taxable as FICA wages providing payments. because the ESP gave contract employer VI. time,

terminate the contract at any long so as the employer paid employee an For foregoing reasons, with the ex- additional six-month which salary, it did. ception Rase, of William I would hold that Ruling Plaintiffs specifi- note 2004-110 Ruling, large portion plaintiffs' payments cally states that it apply would not would remain unaffected because the ESP employer ments prior made January payments predate (Rev. applicability. its Rul. 12, 2005. Plaintiffs’ observation is well-tak- 960, 962). I.R.B. 2004-50 en; even if the Court were persuaded by this Michigan teach- the ESP “wages” purposes

ers do not constitute I affirm the Accordingly, would

of FICA. summary judgment favor of

grant of grant in Klender and reverse the in favor of the Unit- summary judgment in Appoloni.

ed States America, STATES of

UNITED

Plaintiff-Appellee, LAND IN THE

CERTAIN SITUATED DETROIT,

CITY OF WAYNE COUN

TY, Michigan; Sog P. Nash State

oian; City Detroit, Treasurer of

Defendants, Bridge

The Detroit International

Company, Defendant-

Appellant, Export Company, a Mich

Commodities

igan Corporation; H. and Walter

Lubienski, Intervenors.

No. 04-1052. Appeals,

United States Court of

Sixth Circuit.

Argued: Nov. 8, 2006.

Decided and Filed: June

Case Details

Case Name: Appoloni v. United States

Court Name: Court of Appeals for the Sixth Circuit

Date Published: Jun 7, 2006

Citation: 450 F.3d 185

Docket Number: 04-2068, 05-1049

Court Abbreviation: 6th Cir.