Appendix — United States v. Hatter

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No. VAFICE OF nieaeeta

Jn the Supreme Court of the Gnited States

UNITED STATES OF AMERICA, PETITIONER

JUDGE TERRY J. HATTER, JR., ET AL.

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE FEDERAL CIRCUIT

APPENDIX TO THE

PETITION FOR A WRIT OF CERTIORARI

SETH P. WAXMAN

Solicitor General

Counsel of Record

DAVID W. OGDEN

Acting Assistant Attorney

General

EDWIN S. KNEEDLER

Deputy Solicitor General

PAUL R. Q. WOLFSON

Assistant to the Solicitor

General

DAVID M. COHEN

DOUGLAS N. LETTER

JEANNE E. DAVIDSON

KATHLEEN MORIARTY MUELLER

ANNE MURPHY

Attorneys

Department of Justice

Washington, D.C. 20530-0001

(202) 514-2217

TABLE OF CONTENTS

Appendix A (opinion of en banc court of appeals,

Feb. 9, 2000)

Appendix B (opinion of United States Claims Court,

Nov. 9, 1990)

Appendix D (opinion of Court of Federal Claims,

June 22, 1994)

Appendix F (order of court of appeals denying re-

hearing and rehearing en banc, Dec. 26, 1995)

Appendix G (order of Supreme Court affirming

for lack of quorum, Oct. 7, 1996)

Appendix H (opinion of Court of Federal Claims,

June 6, 1997)

Appendix J (order of court of appeals granting and

denying petitions for rehearing and rehearing

en banc and vacating panel decision, Dec. 20,

Appendix L (list of other cases and judges challeng-

ing OASDI and HI taxes)

= es

APPENDIX A

UNITED STATES COURT OF APPEALS

FOR THE FEDERAL CIRCUIT

No. 97-5093

JUDGE TERRY J. HATTER, JR., MARY MARTIN ARCENEAUX,

ON BEHALF OF THE LATE JUDGE GEORGE ARCENEAUX,

JR., JUDGE PETER H. BEER, JUDGE DUDLEY H. BOWEN,

JR., DOLORES LEE BURCIAGA, EXECUTRIX OF THE ESTATE

OF CHIEF JUDGE JUAN G. BURCIAGA, JUDGE AJ.

MCNAMARA, JUDGE HARRY PREGERSON, JUDGE RAUL A.

RAMIREZ, JUDGE NORMAN C. ROETTGER, JR., CHIEF

JUDGE THOMAS A. WISEMAN, JR., CHIEF JUDGE TERENCE

T. EVANS, JUDGE HENRY A. MENTZ, JR., CHIEF JUDGE

WILBUR D. OWENS, JR., JUDGE HENRY R. WILHOIT, JR..,

JUDGE HAROLD A. BAKER AND CHIEF JUDGE MICHAEL M.

MIHM, PLAINTIFFS-APPELLANTS

UNITED STATES, DEFENDANT-APPELLEE

ORDER

[Feb. 9, 2000]

Before: MAYER, Chief Judge, NEWMAN, Circuit Judge,

ARCHER, SENIOR CIRCUIT JUDGE, MICHEL, PLAGER,

LOURIE, CLEVENGER, RADER, SCHALL, BRYSON, and

GAJARSA, Circuit Judges.

IT IS ORDERED THAT:

(la)

The judgment of the court entered on August 5, 1999

be reinstated. The opinion reported at 185 F.3d 1356

(Fed. Cir. 1999) remains in effect as to parts 1 and 2.

The opinion of the court en banc issued today super-

cedes part 3 of that opinion.

PLAGER, Circuit Judge.

On August 5, 1999, this court issued its opinion and

judgment in Hatter v. United States, 185 F.3d 1356

(Fed. Cir. 1999) (Hatter VII ).' In Hatter VII we were

called upon to review the decision of the Court of

Federal Claims regarding the measure of damages to

be awarded to the plaintiff judges who had been sub-

jected to a previously-declared, see Hatter v. United

States, 64 F.3d 647 (Fed. Cir. 1995) (Hatter IV),

unconstitutional diminution in compensation, and to

review the ruling by the Court of Federal Claims

regarding the application of the statute of limitations to

these damages claims, see Hatter v. United States, 38

Fed. Cl. 166 (1997) (Hatter VJ).

Subsequently both parties petitioned for rehearing

by the panel which issued Hatter VII, and, failing that,

for rehearing by the court en banc. By Order dated

December 20, 1999, we reported the denial of both peti-

tions for rehearing by the panel. With regard to the

1 The history of this case now involves the following seven

decisions: Hatter v. United States, 21 Cl. Ct. 786 (1990) (Hatter I ),

Hatter v. United States, 953 F.2d 626 (Fed. Cir. 1992) (Hatter !D),

Hatter v. United States, 31 Fed. Cl. 486 (1994) (Hatter II], Hatter

v. United States, 64 F.3d 647 (Fed. Cir. 1995) (Hatter IV), United

States v. Hatter, 519 U.S. 801, 117 S. Ct. 39, 186 L.Ed2d 3 (1996)

(Hatter V), Hatter v. United States, 38 Fed. Cl. 166 (1997) (Hatter

VI, and Hatter v. United States, 185 F.3d 1356 (Fed. Cir. 1999)

(Hatter VII).

petitions for rehearing en banc, the court en banc

granted the petition of the appellants, Terry J. Hatter,

Jr., et al., and denied the petition of the appellee, the

United States. In the Order, the judgment of the court

in Hatter VII was vacated, and the opinion of the court

accompanying the judgment was withdrawn with

respect to part 3 thereof.

Part 3 of the court’s opinion in Hatter VII addressed

the statute of limitations issue. The question was

whether the moneys wrongfully withheld from the

judges’ monthly paychecks constituted a “continuing

claim,” as that term is understood in the jurisprudence

of this court. In Hatter VII, the court concluded that it

did not. After full consideration of the petition by the

plaintiffs/appellants and the Government’s response,

the court en banc concluded that, with regard to the

statute of limitations issue, the opinion in Hatter VII

did not give adequate weight to this court’s precedents;

accordingly, part 3 of the opinion in Hatter VII was

withdrawn. Following is the en bane court’s opinion

and judgment regarding that issue.

* * * * * x

As explained in this court’s opinion of August 5, 1999,

(Hatter VII), the judgment of the trial court must be

reversed and the matter must be returned to the Court

of Federal Claims for determination of damages consis-

tent with that opinion. There remains a disputed issue

that needs resolving regarding the application of the

statute of limitations. Under the law, a claim against

2 The disposition of the vacated judgment in Hatter VII is dealt

with in a separate Order of the court, issued this date.

the Government for money damages must be filed

within six years of the time the claim first accrues. 28

U.S.C. § 2501. Failure to file within the time period im-

posed by the statute of limitations means that the Gov-

ernment may raise the statute as an affirmative de-

fense. The six years begins to run when the cause of

action accrues.

The judges argue that this case is controlled by what

is known as the continuing claim doctrine. Under that

doctrine, each time moneys are deducted from the

judges’ pay and paid into the Treasury of the United

States, a new cause of action accrues. Thus, any judge

whose salary was or is subject to the unconstitutional

imposition can file a claim for each deduction within six

years from the time the deduction is made; claims for

deductions made longer ago than six years from the

time suit is filed would be barred.

The Government argued, and the trial court agreed,

that the continuing claim doctrine did not apply to this

case. On appeal, this court in its August 5th opinion

held with the Government, and affirmed that part of the

trial court’s judgment. See Hatter VII, 185 F.3d. at

1363. As we indicated earlier, on further review and

after considering appellants’ petition for rehearing and

the Government’s brief in opposition, the court is of the

view that the original opinion did not give sufficient

weight to our precedents, and that the Government’s

arguments are unsound in this respect.

In a 1962 seminal opinion, this court’s predecessor,

the Court of Claims, addressed the question of how to

apply the six year statute of limitations to claims

against the Government when the claims involve pay-

ments from the Government that were to be made in a

series or periodically. See Friedman v. United States,

159 Ct. Cl. 1, 310 F.2d 381 (1962). Judge Davis,

writing for a unanimous court, examined the governing

policies and precedents at length, citing over a hundred

cases that had been reviewed. Though admitting that

not every case was fully consistent in language, and

occasionally in outcome, the court identified two basic

— of cases that emerged from its jurispru-

ence.

The first was those cases in which the repeated gov-

ernment action (or failure to act) resulted in repeated

causes of action. The court described those cases as

having the following characteristics: (1) the case turned

on pure issues of law, or on specific issues of fact which

the court was to decide for itself; (2) Congress had not

interposed an administrative agency or officer charged

with the duty of determining the claimant’s eligibility

for the money claimed (i.e., there was no discretionary

administrative decision at issue), and (3) if fact issues

were involved, they were “sharp and narrow.” Jd. 310

F.2d at 384-85.

The cases the court had in mind were the pay

cases—those in which the claimant was suing “for ad-

ditional pay at a higher grade, or claiming greater

compensation (under a statute or regulation) than the

claimant was receiving, or seeking special statutory

increments or allowances, etc.” Jd. at 384. In such a

case, when “no administrative agency has been set up

to decide the claim, and the court passes de novo on all

issues of law and fact—the ‘continuing claim’ doctrine is

$ We are of course bound by the decisions of our predecessor

court, until modified or overruled by this court en banc. See

Newell Cos. v. Kenney Mfg. Co., 864 F 2d 757, 765 (Fed. Cir. 1988).

wholly appropriate and in accord with the general

jurisprudence in this country on the statute of limita-

tions.” Jd. at 385. The court went on to note that

“Cujnder those general principles the cause of action for

pay or compensation accrues as soon as the payor fails

or refuses to pay what the law (or the contract)

requires; . . . [aJnd where the payments are to be

made periodically, each successive failure to make pro-

per payment gives rise to a new claim upon which suit

can be brought.” Jd.

The court contrasted those cases with the cases in

the second category, cases “in which the cause of action

does not accrue until after a determination entrusted by

Congress to an administrative official. . . In those in-

stances, the claim does not accrue until the executive

body has acted (if seasonably asked to act) or declines

to act.” Id. The general rule here is that “in appro-

priate cases conditions precedent to the accrual of a

cause of action can be established by statute, contract,

or common law, and that where such a condition prece-

dent has been created the claim does not ripen until the

condition is fulfilled.” Jd. at 386. The kinds of cases the

court listed here typically involved those in which a

statute required a demand upon an executive official

before payments were due. See id. at 386.

As the court saw it, the touchstone between the two

categories was that “‘continuing claims’. . . are inde-

pendent of administrative determination[,] and those

other claims [are] dependent on prior administrative

evaluation.” Jd. at 387. Applying this principle to the

case before it, the court concluded that a claim for en-

titlement to disability retirement pay, of the type re-

quiring discretionary action by a board or executive

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tee,

official, is not a continuing claim, but accrues as a whole,

once it accrues. On the other hand, other types of pay

claims not dependent on a discretionary finding—

including claims for increased retirement pay because

of new legislation, etc.—are continuing claims. See id.

at 396.

In the case before us, suit was brought not as a class

action but on behalf of the individually named judges.

In that regard, there are distinct causes of action aris-

ing under two different statutes. The Tax Equity and

Fiscal Responsibility Act of 1982, Pub. L. No. 97-248,

imposed the Hospital Insurance portion of the Social

Security tax on federal judges effective January 1, 1983;

the Old Age and Survivors Disability Insurance portion

of the Social Security tax was imposed on federal

judges by the Social Security Amendments of 1983,

Pub. L. No. 98-21, and was effective January 1, 1984.

In both cases, each month after the Acts became ef-

fective the Government automatically deducted from

the judges’ salary checks the amount, calculated by

formula, that was due under the tax. No administrative

officer or tribunal was given discretion to decide

whether the judges were entitled not to pay the tax, or

whether the judges had to pay only some of it. The

question of whether the monthly tax deduction would

occur was determined as a pure issue of law—all judges

were to pay; and the only factual issue was to deter-

mine the judges’ gross salary as provided by Congress

from time to time, against which the formula would be

applied. Under the analysis given to us by the Court of

Claims in Friedman, there is merit to the argument of

the judges that these periodic deductions, which have

been ruled to have been unlawful, should be treated as

a continuing claim.

The Government, in its Opposition to Appellants’

Petition for Rehearing En banc, argues that the con-

tinuing claim doctrine does not apply since plaintiffs’

claims are not inherently susceptible to being divided

into a series of independent and distinct wrongs. This

is because the continued withholding of these taxes

from plaintiffs’ judicial salaries “is simply the ongoing

‘damages resulting from the single earlier alleged

[constitutional] violation by the government.’” Opposi-

tion at 4, quoting Brown Park Estates-Fairfield Dev.

Co. v. United States, 127 F.3d 1449, 1457 (Fed. Cir.

1997).

The Government relies heavily on Brown Park, as

well as another recent case in this court, Hart v. United

States, 910 F.2d 815 (Fed. Cir. 1990). Brown Park in-

volved a suit by low-income housing providers against

the Department of Housing and Urban Development

(“HUD”), alleging breach of their housing assistance

payments contract with HUD. The plaintiffs com-

plained that HUD had failed to make rent adjustments

in accordance with their contracts. Their main conten-

tion was that “HUD has breached its contracts with the

Plaintiffs because, in the absence of any comparability

studies, it failed to pay full rental adjustments based on

the [Automatic Annual Adjustment Factor in the

contracts].” Brown Park at 1453.

The question on appeal was whether plaintiffs could

ward off the bar of the six year statute of limitations by

relying on the continuing claim doctrine. This court

cited the Court of Claims decision in Friedman, and

pointed out the distinction drawn there between claims

eS nt Re ee. a _b.

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which fall within the continuing claim doctrine, such as

periodic pay claims, and claims which do not. See id. at

1456.

In describing the latter category, this court spoke in

terms of “a single distinct event, which may have ill

effects later on,” as a wrong that does not qualify under

the continuing claim doctrine. Jd. Seizing upon that

language, and the language above quoted, the Govern-

ment argues that the imposition of the taxes at issue in

1983 and 1984 constituted such a single distinct event,

even though the events continued to have ill effects

over the years since.

But that language from Brown Park is simply

descriptive of the type of case that falls outside the

continuing claim doctrine. To determine whether a case

falls inside or outside of that description, we return, as

we must, to the governing considerations set out in

Friedman, specifically, has Congress entrusted an ad-

ministrative officer with the determination of the

claimant’s entitlement (in Brown Park Congress had so

entrusted the determination to HUD); does the case

involve significant factual determinations, or does it

turn on pure issues of law or specific facts which the

court is to decide for itself (in Brown Park the facts in

dispute involved complex calculations of area market

rents that were within the expertise of HUD); and does

the case call upon the court to address broad concepts

rather than resolve sharp and narrow factual issues

(Brown Park’s resolution turned on such issues as the

“material differences between the rents charged for as-

sisted and comparable unassisted units”). This court

concluded, consistent with governing precedent, that

Brown Park did not involve a continuing claim for

a naan

10a

statute of limitations purposes; the case thus lends no

support to the Government’s case here.

Similarly, the other case on which the Government

places heavy reliance, Hart v. United Staies, is inap-

posite. Hart involved a claim by the widow of a retired

military member, in which she alleged that her

deceased husband’s election not to participate in the

survivors benefit program was invalid because she had

not been given notice as required by statute. She sued

for annuity benefits, but filed her claim more than six

years after her husband’s death, the event under which

her entitlement vested.

This court held that “[bJecause all events necessary

to her benefits claim had occurred when her husband

died, we conclude that plaintiff’s claim for . . . annuity

benefits is not a ‘continuing’ claim.” Hart, 910 F.2d at

818. Again, it is readily apparent that this was a case in.

which Congress has charged an administrative agency

with making a determination whether she qualified for

an annuity, and how much, and the case did not turn on

an issue of law but on disputed facts as to whether and

when she received notice. The court correctly dis-

cerned that under the Friedman precedent, this case

fell over the line into the second category, that of non-

continuing claim cases.

Neither Brown Park nor Hart questioned the autho-

rity of Friedman, nor could they, since neither was de-

cided by this court en bane. We find the analysis pro-

vided by Judge Davis in the Friedman opinion to be a

useful and effective mechanism for distinguishing be-

tween cases when the Government has failed to make a

series of payments claimed to be due (or, as here, has

deducted or withheld pay), and the question is whether

ee le

lla

there is a seminal event that constitutes one cause of

action, or whether each wrongful deduction or refusal

to pay constitutes a separate cause of action. State-

ments such as “all necessary events had occurred,” or

“the claim must be inherently susceptible to being

broken down into a series of independent and distinct

events or wrongs,” may be accurate ways of describing

the events after-the-fact, but they do not contribute to

the analysis. The Government’s reliance on such state-

ments, rather than focusing on the Friedman factors,

leaves us unpersuaded that the Government’s view

should prevail. We conclude that, for the reasons

stated above, the case before us falls comfortably on the

side of the line governed by the continuing claim doc-

trine.

CONCLUSION

The judgment of the trial court with regard to the

application of the statute of limitations issue must be,

and is, reversed. The matter is remanded to the trial

court for further proceedings consistent with this

opinion.

REVERSED AND REMANDED.

12a

APPENDIX B

UNITED STATES CLAIMS COURT

No. 705-89 C

TERRY J. HATTER, JR., ET AL., PLAINTIFFS

UNITED STATES OF AMERICA, DEFENDANT

[Filed: Nov. 9, 1990]

OPINION AND ORDER

TURNER, Judge.

Plaintiffs are ten Article III* federal judges serving

on various United States district courts and on one

United States court of appeals. They bring this action

pursuant to U.S. Const. art. III, § 1 (Compensation

Clause) claiming that their compensation has been di-

minished by reason of the Social Security Amendments

of 1983, Pub. L. 98-21, § 101, 97 Stat. 65, 68 (codified as

* The designation stems from Article III, Section 1, of the

United States Constitution which provides:

The judicial Power of the United States, shall be vested in one

supreme Court, and in such inferior Courts as the Congress

may from time to time ordain and establish. The Judges, both

of the supreme and inferior Courts, shall hold their Offices

during good Behaviour, and shall, at stated Times, receive or

their Services a Compensation, which shall not be diminished

during their Continuance in Office. [Emphasis added. ]

13a

amended in scattered sections of 26 U.S.C. and 42

U.S.C.). Piaintiffs seek damages in the amount of the

Social Security taxes withheld from their salaries from

January 1, 1984 to the present.

Defendant filed a motion to dismiss the complaint

pursuant, inter alia, to RUSCC 12(b)(1). It alleges that

this a tax refund suit over which the Claims Court cur-

rently lacks subject matter jurisdiction because the

plaintiffs failed to file an administrative claim for refund

with the Internal Revenue Service as required by 26

U.S.C. § 7422(a). Hearing concerning defendant’s mo-

tion was conducted on November 9, 1990 in Washing-

ton, D.C.

For reasons stated below, we conclude that the

Claims Court lacks subject matter jurisdiction over the

complaint at this time. Although plaintiffs characterize

their claims as ones for damages other than a tax re-

fund, we conclude that, in essence, their claims are for

tax refunds which much be brought first before the

IRS. 26 U.S.C. § 7422(a).

Prior to January 1, 1984, the salaries of Article III

judges were not subject to withholding for Social

Security taxes. Effective January 1, 1984, Congress

amended the Social Security Act, 42 U.S.C.

§ 401(a)(5)(E) (1988), and the Internal Revenue Code of

1954, 26 U.S.C. § 3121(b)(5)(E) (1988), extending Social

Security coverage to many previously exempt civilian

government employees, including judges of the United

States district courts and courts of appeals. Pursuant

to this statute, the plaintiffs in this case had the

l4a

following amounts withheld from their salaries during

the years 1984 through 1989:

Year Amount Withheld

1984 $2,532.60

1985 $2,791.80

1986 $3,003.00

1987 $3,131.70

1988 $3,379.50

1989 $3,604.80

All of the plaintiffs were appointed and took office

prior to January 1, 1984, the effective date of the a-

mendments. At the time of their respective appoint-

ments, the only mandatory deductions from their sala-

ries were for federal and state income taxes. No man-

datory deductions were made for retirement or for

Social Security benefits. Plaintiffs now seek to recover

as damages the amounts withheld for Social Security

taxes.

Title 26 U.S.C. § 7422(a) provides in pertinent part:

No suit or proceeding shall be maintained in any

court for the recovery of any internal revenue tax

alleged to have been erroneously or illegally

assessed or collected . . . or of any sum alleged to

have been excessive or in any manner wrongfully

collected, until a claim for refund or credit has been

duly filed with the Secretary, according to the

lba

provisions of law in that regard, and the regula-

tions of the Secretary established in pursuance

thereof. [Emphasis added.]

Plaintiffs concede that if the court determines that

their claims are for tax refunds, then they must file an

administrative refund claim with the IRS before suit

may be brought in this court. See 26 U.S.C. § 7422(a).

They argue, however, that this is not a tax refund suit

but rather a claim for damages based on the diminution

in compensation caused by withholding the Social

Security tax from their salaries. To support their

position, plaintiffs rely on the Court of Claims opinion in

Atkins v. United States, 556 F.2d 1028, 214 Ct. Cl. 196

(1977), cert. denied, 434 U.S. 1009, 98 S. Ct. 718, 54

L.Ed. 751 (1978). They argue that since, according to

Atkins, the court would have great flexibility in

fashioning a remedy for a violation of the Compensation

Clause, their claim is somehow distinguished from an

ordinary tax refund suit. Plaintiffs argue that the court

could provide a remedy by awarding damages or by

ordering an appropriate increase in their salaries to

counteract the effect of the Social Security deductions.

The possibility of alternative relief, according to plain-

tiffs, demonstrates that defendant’s characterization of

their claim as one for a tax refund is mistaken.

Defendant argues that this is a tax refund suit,

relying primarily on the Court of Claims opinion in

King v. United States, 390 F.2d 894, 896, 182 Ct. Cl. 631,

633-34 (1968), rev'd on other grounds, 395 U.S. 1, 2, 89S.

Ct. 1501, 1501-02, 23 L.Ed.2d 52 (1969). In King, the

plaintiff was a retired Army colonel who claimed that

by misclassifying his armed services retirement status,

the government caused him to pay federal income taxes

16a

which he was not legally obligated to pay. King as-

serted that he should be allowed to maintain his claim

even though he had not filed a refund claim with the

IRS. The Court of Claims held that this monetary

claim was barred because he did not file an admini-

strative refund claim but granted him relief in the form

of a declaratory judgment and was later reversed on

this ground. 395 U.S. at 5, 89 S. Ct. at 1503.

Although King did not involve a diminution claim

based on the Compensation Clause, we conclude that it

is more analogous to the present case than Atkins.

Plaintiffs attempt to distinguish their case from King

on the ground that, unlike King, they do not challenge

the government’s authority to deduct Social Security

contributions from their wages. Plaintiffs argue that if

they are legally obligated to pay the Social Security

taxes, then the diminution which results must be

rectified. Putting aside semantics, we find that this is a

tax refund suit. Like the plaintiff in King, plaintiffs

here are asserting that they should be allowed to

maintain their claim in this court even though they

have not filled a refund claim with the IRS. For juris-

dictional purposes, plaintiffs’ position is identical to the

plaintiff in King and we find it controlling.

The fact that the plaintiffs in Atkins brought a claim

for damages is of no help to the plaintiffs in this case.

The claim in Atkins was for a violation of the Compen-

sation Clause based on alleged diminution in salary

caused by inflation and by the failure of Congress to

raise judicial salaries. Since Atkins did not involve al-

leged diminution by taxation, it did not present a juris-

dictional problem for the court similar to the one

addressed in King.

17a

The issue of whether taxes withheld from Article III

judicial salaries constitute a diminution in violation of

the Compensation Clause is not new. It was first

brought before the United States Supreme Court in

1920 in a case involving income taxes. Evans v. Gore,

253 U.S. 245, 40 S. Ct. 550, 64 L.Ed. 887 (1920). There-

after, each time the “diminution” issue has arisen in the

context of income taxes, the claim originated as one

against the IRS. See Miles v. Graham, 268 U.S. 501, 45

S. Ct. 601, 69 L.Ed. 1067 (1925), overruled by O’Malley

v. Woodrough, 307 U.S. 277, 59 S. Ct. 838, 83 L.Ed. 1289

(1939). In O’Malley, the Supreme Court described the

suit below as “an action at law to recover a tax on

income claimed to have been illegally exacted.” 307

U.S. at 278, 59 S. Ct. at 838. The Court further noted

that the suit had been brought against the Collector of

Internal Revenue and the plaintiffs claim for refund

had been rejected. 307 U.S. at 279, 59 S. Ct. at 838-39.

None of the claims for violation of the Compensation

Clause brought after O’Malley was based on taxes. See

United States v. Will, 449 U.S. 200, 101 S. Ct. 471, 66

L.Ed.2d 392 (1980); Duplantier v. United States, 606

F.2d 654 (5th Cir. 1979), cert. denied, 449 U.S. 1076, 101

S. Ct. 854, 66 L.Ed.2d 798 (1981); Atkins v. United

States, 556 F.2d 1028, 214 Ct. Cl. 186 (1977), cert.

denied, 434 U.S. 1009, 98 S. Ct. 718, 54 L.Ed.2d 751

(1978).

We conclude that there is no logical reason to view a

claim for diminution based on Social Security taxes dif-

ferently from one based on income taxes. In order to

obtain a refund of either, the claim must be brought

before the IRS prior to filing a complaint in this court.

Manifestly, however, artfully characterized, plaintiffs

18a

seek recovery of Social Security taxes which have been

deducted from their salaries since January 1, 1984.

Based on the Supreme Court’s interpretation of diminu-

tion claims involving income taxes as claims for a tax

refund rather than damages, the Court of Claims

opinion in King, and the face of 26 U.S.C. § 7422(a), we

conclude that plaintiffs’ claims are for tax refunds over

which this court lacks subject matter jurisdiction at this

time.

III

Defendant’s motion to dismiss filed on May 15, 1990,

to the extent that it asserts this court’s current lack of

jurisdiction, see RUSCC 12(b)(1), is GRANTED. It is

ORDERED that judgment be entered dismissing the

complaint for lack of jurisdiction.

Each party shall bear its own costs. See Johns-

Manville Corp. v. United States, 893 F.2d 324, 328

(Fed. Cir. 1989) (“the Claims Court has no power to

award costs in cases over which is has no .

jurisdiction”).

19a

APPENDIX C

UNITED STATES COURT OF APPEALS

FOR THE FEDERAL CIRCUIT

No. 91-5039

JUDGE TERRY J. HATTER, JR., JUDGE GEORGE

ARCENEAUX, JR., JUDGE PETER H. BEER, CHIEF JUDGE

JUAN G. BURCIAGA, JUDGE A.J. MCNAMARA, JUDGE

HARRY PREGERSON JUDGE RAUL A. RAMIREZ AND CHIEF

JUDGE THOMAS A. WISEMAN, JR., PLAINTIFFS-

APPELLANTS

THE UNITED STATES, DEFENDANT-APPELLEE

[Filed: Jan. 16, 1992]

Before: ARCHER, PLAGER and RADER, Circuit

Judges.

RADER, Circuit Judge.

Terry J. Hatter, Jr., et al., life-tenured federal

judges, appeal the dismissal of their complaint by the

United States Claims Court. Hatter v. United States,

21 Cl. Ct. 786 (1990). The judges allege that imposition

of social security taxes diminished their compensation

in violation of the United States Constitution. The

Claims Court dismissed their complaint for lack of juris-

diction. Because the Tucker Act gives the Claims

Court jurisdiction over claims of salary diminution un-

der Article III of the Constitution, this court reverses

and remands.

20a

BACKGROUND

In 1983, Congress passed the Social Security Amend-

ments of 1983. See 42 U.S.C. § 410(a)(5)(C)-(G) (1988).

‘This Act extended social security coverage to many

Government employees, including federal court of ap-

peals and district court judges.” Previously, federal

judges were exempt from paying social security taxes.

On January 1, 1984, the Social Security Amendments

imposed Federal Insurance Contributions Act

(“FICA”) taxes on federal judges. From 1984 to 1989,

plaintiffs each paid the following amounts in FICA

taxes:

YEAR TAX

1984 $2,532.60

1985 $2,791.80

1986 $3,003.00

1987 $3,131.70

1988 $3,379.50

1989 $3,604.80

On December 29, 1989, plaintiffs filed a complaint in

the Claims Court. In count I, plaintiffs contend that the

1983 Amendments “unlawfully diminished and con-

tinues to diminish plaintiffs’ compensation in violation

of Article III, Section 1, of the Constitution of the

No member of this panel was an Article III judge in 1984.

Therefore, no panel member suffered an alleged diminution in

salary when the 1983 Amendments took effect.

2la

United States.” Under this count, plaintiffs sought

monetary damages to compensate for their diminished

wages. Count II claims that plaintiffs have an employ-

ment contract with the Government which protects

them against diminishment of their compensation.

Again, plaintiffs seek damages for breach of contract.

The Government moved to dismiss the complaint for

lack of jurisdiction because plaintiffs did not file an

administrative claim for a tax refund. See 26 U.S.C.

§ 7422(a) (1988). The Claims Court granted the Govern-

ment’s motion. Plaintiffs appealed.

DISCUSSION

This court must decide whether appellants have

stated a case within the Claims Court’s jurisdiction

under 28 U.S.C. § 1491 (1988) (Tucker Act). Under the

Tucker Act, the United States has waived sovereign

immunity for suits in the Claims Court:

The United States Claims Court shall have

jurisdiction to render judgment upon any claim

against the United States founded either upon the

Constitution, or any Act of Congress or any

regulation of an executive department, or upon any

express or implied contract with the United States,

or for liquidated or unliquidated damages in cases

not sounding in tort.

28 U.S.C. § 1491(a)(1).

The Tucker Act alone, however, does not create a

substantive right to collect money damages from the

United States. United States v. Testan, 424 U.S. 392,

398, 96 S. Ct. 948, 953, 47 L.Ed.2d 114 (1976); Eastport

22a

S.S. v. United States, 372 F.2d 1002, 1007-1009, 178 Ct.

Cl. 599 (1967). Rather, the Act empowers the Claims

Court to award damages for the violation of substantive

rights embodied in the Constitution, federa! statutes,

executive regulations, or federal contracts. United

States v. Mitchell, 463 U.S. 206, 216-17, 103 S. Ct. 2961,

2967-68, 77 L.Ed.2d 580 (1983).

Thus, to invoke Tucker Act jurisdiction, claimants

must show that their claim arises under an independent

source of federal law. Moreover, the federal law or con-

tract, fairly interpreted, must provide a damages rem-

edy for violations. Jd. In sum, appellants must show

their claim arises from a federal constitutional, statu-

tory, regulatory, or contractual provision that provides

damages its breach.

Appellants base their Tucker Act claim on Article

III, Section 1, of the United States Constitution:

The Judges, both of the supreme and inferior

Courts, shall hold their Offices during good Be-

haviour, and shall, at stated Times, receive for their

Services, a Compensation, which shall not be dimi-

nished during their Continuance in Office.

U.S. Const. art. III, § 1. Appellants thus invoke the

Constitution as an independent source of federal law

providing for the payment of money.

This provision of the Constitution, fairly interpreted,

mandates the payment of money in the event of a pro

hibited compensation diminution. This provision states,

in mandatory and unconditional terms, that judges’

salaries “shall not be diminished during their Contin-

uance in Office.” This language presupposes damages

23a

as the remedy for a governmental act violating the com-

pensation clause. Only a timely restoration of lost com-

pensation would prevent violation of the Constitution’s

prohibition against diminution of judicial salaries.

Thus, the Constitution mandates that federal judges

must receive, “during their Continuance in Office,”

compensation for their services which may not be less

than their compensation upon assuming office. In the

event of a violation of this clause, the Constitution itself

provides a remedy—compensation. In sum, by forbid-

ding any diminution of judicial compensation, the

Constitution itself requires repayment of prohibited re-

ductions in compensation to Article III judicial officers.

The history of the compensation clause supports this

court’s reading that a violation of the clause mandates

repayment or compensatory damages. According to

James Madison’s notes, the delegates to the Philade-

phia Convention discussed the compensation clause on

July 18, 1787. 2 Max Farrand, The Records of the

Federal Convention of 1787, 44-45 (1911). Gouverneur

Morris proposed wording the compensation clause to

prevent “any improper dependence in the Judges. ” Id.

James Madison, in response, shared Morris’s view that

the Constitution should reduce any dependence by the

judicial branch on the other branches for compensation.

Jd. at 45. Alexander Hamilton, too, explained the

compensation clause:

Next to permanency in office, nothing can con-

tribute more to the independence of the judges

than a fixed provision for their support .. . . In

the general course of human nature, a power over a

man's subsistence amounts to a power over his

will. And we can never hope to see realized in

24a

practice the complete separation of the judicial

from the legislative power, in any system which

leaves the former dependent for pecuniary re-

sources on the occasional grants of the latter.

The Federalist No. 79, at 472 (Alexander Hamilton)

(emphasis in original) (Clinton Rossiter ed., 1961).

These framers of the Constitution shared a common

vision of the undiminishable compensation clause.

These observations by the framers of the compen-

sation clause underscore its importance to the preser-

vation of judicial independence in a system of separated

powers. These comments also suggest that judicial

officers deprived of full compensation need not rely on

legislative or executive action for a remedy. To require

further legislative or executive actions to enforce the

compensation clause would frustrate Article III’s pur-

pose of judicial independence. The purpose of Article

III, § 1, as well as its language, embraces a self-

executing compensatory remedy.

The Supreme Court has also considered whether an

alleged violation of the compensation clause provides

Tucker Act jurisdiction. United States v. Will, 449 U.S.

200, 101 S. Ct. 471, 66 L.Ed.2d 392 (1980). In Will,

several federal judges sought review of four statutes

purporting to stop or reduce cost-of-living increases for

judges. The Court concluded that two of the four

statutes purported to roll back judicial salary increases

already in effect. These statutes violated Article III,

§ 1. Id. at 226, 230, 101 S. Ct. at 486, 488. Any legis-

lative attempt to rescind those effective salary in-

creases would diminish judges’ compensation. The

Court upheld the other two statutes because they

affected salary increases not yet in effect. Id. at 229,

25a

101 S. Ct. at 487. Therefore, those two statutes did not

diminish judicial salaries. The case was remanded to

the trial court to determine money damages. Jd. at 230-

31, 101 S. Ct. at 488.

To reach these substantive results, the Court neces-

sarily examined the jurisdiction of the trial courts to

enforce the compensation clause. The Court stated that

both the Court of Claims, the predecessor to the Claims

Court’s trial jurisdiction, and district courts had juris-

diction to determine whether the four statutes violated

Article III, § 1. The Court stated:

[Tjhere is no doubt whatever as to this Court’s

jurisdiction under 28 U.S.C. § 1252 or that of the

District Court under 28 U.S.C. § 1346(a)(2) (1976

ed., Supp. III).

Id. at 210-11, 101 S. Ct. at 478 (footnote omitted). “Jur-

isdiction being clear,” id. at 211, 101 S. Ct. at 479, the

Court proceeded to the next inquiry.

The Court felt jurisdiction was “clear” based on 28

U.S.C. § 1346(a)(2). In a footnote, the Court explained:

This provision confers on the district courts and

the Court of Claims concurrent jurisdiction over

actions against the United States based on the

Constitution when the amount in controversy does

not exceed $10,000.

Id. at 211, n. 10, 101 S. Ct. at 478, n. 10. Section

1346(a)(2) of title 28, also known as the Little Tucker

Act, mirrors the Tucker Act. It provides district courts

concurrent jurisdiction with the Claims Court to handle

claims against the United States, “not exceeding

26a

$10,000 in amount, founded either upon the Constitu-

tion, or any Act of Congress.” The Supreme Court

found jurisdiction in the district court for the Will

plaintiffs under the Little Tucker Act.

The only jurisdictional difference between the appel-

lants in Will and the plaintiffs in this case is the amount

in controversy. Plaintiffs in this case seek more than

$10,000 in damages. The Supreme Court found juris-

diction under the Little Tucker Act in the district court

for the Will plaintiffs. The Tucker Act provides juris-

diction in the Claims Court for the plaintiffs in this case.

The Claims Court erred by recharacterizing plain-

tiffs’ action as solely a request for a tax refund. Plain-

tiffs’ complaint sought damages for violation of the com-

pensation clause. Nonetheless, the Claims Court read

their claim as a tax refund suit. The Claims Court er-

red by imposing a single legal theory on the plaintiffs’

complaint.

The Federal Rules of Civil Procedure permit parties

to pursue their claim on any viable legal theory. Fed.

R. Civ. P. 8(e)(2). In this case, plaintiffs could have pur-

sued a tax refund. If they had, as the Claims Court

noted, title 26 would have required a prior admini-

strative claim. See, 26 U.S.C. § 7422(a). Plaintiffs, how-

ever, did not pursue a tax refund. Instead they sought

damages for violation of Article III, § 1—an action

which is within the Tucker Act jurisdiction of the

Claims Court.

By requiring prior filing of an administrative claim

with the Internal Revenue Service for a compensation

clause violation, the Claims Court overlooked the lan-

27a

guage and purpose of Article III, § 1. Conditioning

redress of an alleged compensation clause breach on

executive branch actions would frustrate the purpose of

Article III, § 1. The Constitution provides a compen-

satory remedy without need for reliance on other

branches.

The Claims Court based its recharacterization of

plaintiffs’ action on two cases, O’Malley v. Woodrough,

307 U.S. 277, 59 S. Ct. 838, 83 L.Ed. 1289 (1939), and

King v. United States, 390 F.2d 894, 182 Ct. Cl. 631

(1968), rev'd on other grounds, 395 U.S. 1, 89 S. Ct.

1501, 23 L.Ed.2d 52 (1969). In O’Malley, the plaintiffs

challenged the validity of federal income taxes because

withholding revenues allegedly diminished federal

judges’ salaries. The Court determined that Article III

did not bar Congress from imposing a non-discrimina-

tory income tax on federal judges. O’Malley, 307 U.S.

at 282, 59 S. Ct. at 840. O’Malley, however, does not

affect the jurisdiction of the Claims Court. Contrary to

the Claims Court’s statement, Hatter, 21 Cl. Ct. at 789,

the Supreme Court did not recast O’Malley’s plaintiffs’

diminution claims as tax refund actions. The O’Malley

plaintiffs elected to sue the Collector of Internal Reve-

nue for a refund, rather than seeking damages. The

O’Malley plaintiffs’ election in the 1930s, however,

hardly binds the Hatter plaintiffs in the 1990s. As

noted earlier, the Tucker Act provides plaintiffs an

independent action for damages based on a purported

violation of Article ITI, § 1.

By improperly recharacterizing plaintiffs’ action, the

Claims Court also foreclosed an issue to be determined

on the merits. O’Malley determined that federal in-

come taxes do not have a discriminatory impact on

28a

federal judges. Plaintiffs have had no opportunity to

demonstrate whether the social security tax is dis-

criminatory. The Claims Court erred in foreclosing this

issue without full consideration of the merits. On

remand, the Claims Court will have an opportunity to

examine whether social security taxes have a dis-

criminatory effect on federal judges.

The Claims Court also erred in viewing King as

identical to this case for jurisdictional purposes. Hatter,

21 Cl. Ct. at 788. King was an Army Colonel who

claimed that he had paid too much federal income tax

because the Government misclassified his retirement

status. The Court of Claims dismissed Colonel King’s

tax refund claim for failure to file a prior administrative

claim with the Internal Revenue Service. King, 390

F.2d at 896. In equating the Hatter plaintiffs with

Colonel King, the Claims Court overlooked pertinent

distinctions.

First, plaintiffs in this case have an independent

jurisdictional basis for their claim. Colonel King had no

choice except to seek a tax refund. Second, unlike

Colonel King, plaintiffs here do not challenge the

United States’ authority to impose a tax. Plaintiffs

merely seek compensation to ensure that imposition of

a tax does not diminish their salary. In sum, plaintiffs

do not seek tax refunds, but compensation to ensure

compliance with Article Ili, § 1. The Tucker Act pro-

vides the Claims Court jurisdiction to adjudicate this

action.

CONCLUSION

Appellants’ claim for relief states a claim within the

jurisdiction of the Claims Court. Therefore, the de-

29a

cision of the Claims Court is reversed and this case is

remanded for a hearing on the merits.

REVERSED AND REMANDED.

30a

APPENDIX D

UNITED STATES COURT OF FEDERAL CLAIMS

No. 705-89 C

JUDGE TERRY J. HATTER, JR., ET AL., PLAINTIFFS

UNITED STATES OF AMERICA, DEFENDANT

(Filed: June 22, 1994]

OPINION AND ORDER

TURNER, Judge.

This opinion addresses plaintiffs’ motion for summary

judgment filed September 2, 1993 and defendant’s

cross-motion for summary judgment filed October 1,

1993. Oral argument was heard on November 16, 1993.

The parties agree that there are no material disputed

facts. We conclude that defendant’s cross-motion

should be granted.

Plaintiffs are federal district and circuit court judges

who took office prior to January 1, 1983. On that date,

all federal judges for the first time became subject to

the Hospital Insurance (Medicare) portion of the Social

Security tax. Tax Equity and Fiscal Responsibility

Act, Pub. L. No. 97-248, § 278(a) 96 Stat. 324, 559 (1982)

(codified as amended at 26 U.S.C. (I.R.C.) § 3121(u)

3la

(1988)). One year later, judges became subject to the

Old Age Survivors and Disability Insurance portion of

the Social Security tax, and since January 1, 1984, all

federal judges have been fully subject to Social Security

taxes. Social Security Amendments of 1983, Pub. L.

No. 98-21, § 101(a)(1), (b)(1) and (d), 97 Stat. 65, 68,

69 (codified as amended at 26 U.S.C. (I.R.C.)

§ 3121(b)(5)(E) (1988) and 42 U.S.C. § 410(a)(5)(E)

(1988)). Social Security taxes have therefore been duly

withheld from plaintiffs’ monthly compensation since

the effective dates of these acts.

Plaintiffs all serve pursuant to Article III of the Con-

stitution, which in pertinent part provides that federal

judges “shall, at stated Times, receive for their Serv-

ices, a Compensation, which shall not be diminished

during their Continuance in Office.” U.S. Const. art.

III, § 1 (hereafter the “Compensation Clause”).

Plaintiffs contend that because they were already

judges when the withholding of Social Security taxes

from their pay began, their compensation was dimin-

ished in violation of the Compensation Clause. In the

alternative, plaintiffs claim a contract right to undimini-

shed compensation. Plaintiffs seek a refund of all Social

Security taxes collected thus far.

After a review of Compensation Clause law in part

II, we consider plaintiffs’ four main constitutional argu-

ments in part III, and then address plaintiffs’ contract

claim in part IV.

An income tax on judges was first imposed in 1862

and was collected for several years. Act of July 1, 1862,

ch. 119, § 86, 12 Stat. 432, 472 (1862). This law occa-

sioned the Supreme Court’s first pronouncement on the

constitutionality of taxing judges. It came as an

extraordinary 1863 protest against the tax issued in the

form of a letter from Chief Justice Taney to the Treas-

ury Secretary. This remarkable document, officially

recorded and published by the Court’ and resembling

nothing so much as an unsolicited advisory opinion, was

echoed several years later by an opinion from the

Attorney General that the income tax was unconstitu-

tional as applied to judges. 13 Op.A.G. 161 (1869). Asa

consequence, all taxes which had been collected on

judicial compensation were refunded in 1873. Wayne v.

United States, 26 Ct. Cl. 274, 290, 1800 WL 1765 (1891).

But these two seemingly non-binding opinions had an

even more powerful effect: the courts came to consider

the matter of judicial taxation closed without ever

actually addressing the issue. E.9., Wayne, 26 Ct. Cl. at

290.

The courts finally addressed the matter when, sub-

sequent to ratification of the 16th Amendment in 1913/7

1 The letter is found at 157 U.S. 701. There was a 22-year lapse

between the 1863 order of the Court recording the letter and its

publication.

2 “The Congress shall have power to lay and collect taxes on

incomes, from whatever source derived, without apportionment

among the several states, and without regard to any census or

enumeration.” U.S. Const. amend. XVI (emphasis added).

33a

Congress in 1919 made its second serious attempt to

tax federal judges. Revenue Act of 1918, ch. 18, § 213,

40 Stat. 1057, 1065 (1919). Thus the first Compensation

Clause case of precedential significance does not appear

until Evans v. Gore, 253 U.S. 245, 40 S. Ct. 550, 64

L.Ed. 887 (1920). In Evans, a federal judge who had

taken office in 1899 challenged the Revenue Act of

1918, arguing that the income tax was an unconstitu-

tional diminution of his salary.

Over a vigorous dissent by Justice Holmes, joined by

Justice Brandeis, the Court agreed with the plaintiff

judge, holding that an income tax on judges was an

impermissible diminution in compensation, and that the

Compensation Clause continued to prohibit taxation of

judicial salaries even after the 16th Amendment.

Holmes’s position in dissent, since adopted by the Court

as will be seen, was that an income tax on judges would

be valid so long as it did not single out judicial com-

pensation but rather applied with like force to the in-

come of all citizens. 253 U.S. at 264-267, 40 S. Ct. at

557-558.

The taxing authorities refused to give in so easily. In

Miles v. Graham, 268 U.S. 501, 45 S. Ct. 601, 69 L.Ed.

1067 (1925), the government sought to limit the Evans

rule, arguing that the tax protection of the Compen-

sation Clause shielded only judges appointed before the

tax became law (hereafter “prior judges”). According

to the government, prior judges stood in contrast to

judges taking office after the tax (hereafter “new

judges”): taxation would not diminish the compensation

8 Plaintiffs here are all prior judges, since they took office

before the Social Security tax extended to the judiciary.

34a

of new judges, since they would never have received

their salary untaxed. In Miles, the plaintiff was a new

judge who argued, in essence, that the Compensation

Clause’s protection extended to judicial compensation

as an entity or institution, without regard to whether

the recipient judge took office before or after enact-

ment of the tax.

The Court in Miles agreed with the plaintiff, firmly

rejecting the government’s attempt to limit the Evans

tax exemption to prior judges. (Brandeis, but not

Holmes, dissented without comment.) Relying heavily

on Evans, Miles made explicit the simple rule inferable

from Evans: under the constitution, all judicial com-

pensation provided for by Congress was tax-free. 268

U.S. at 509, 45 S. Ct. at 602.

In a familiar pattern, it was not long before the ini-

tially rejected Holmes-Brandeis formulation (calling for

judicia] salary to be treated the same for tax purposes

as income earned by any citizen) was, in effect, adopted

by the Court. This development came after Congress in

1932 made its third attempt to tax the judiciary, im-

posing another income tax limited to new judges.

Revenue Act of 1932, ch. 209, § 22(a), 47 Stat. 169, 178

(1932). Predictably, a new judge challenged this tax

based on the rule of Miles. O’Malley v. Woodrough, 307

U.S. 277, 59 S. Ct. 888, 88 L.Ed. 1289 (1939) (Frank-

furter, J.).

For the tax collectors, the third time proved the

charm: the Court reversed course, issuing its first

rejection of a judge’s Compensation Clause challenge to

a tax. The Court held that judicial compensation could

be taxed, approving Congress’s “position that a non-

discriminatory tax laid generally on net income is

35a

not . . . a diminution [of a federal judge’s) salary

within the prohibition” of the Compensatior Clause.

307 U.S. at 282, 59 S. Ct. at 840. According to the

Court, the constitution did not excuse judges from the

obligations of citizenship. Jd. O’Malley left Miles effec-

tively overruled.‘

Justice Frankfurter in O’Malley also sharply criti-

cized Evans, but in a characteristic exercise of judicial

restraint was careful to note that only the question of

tax immunity for new judges was properly at bar,

whereas the plaintiff in Evans had been a prior judge.

O’Malley, 307 U.S. at 281-82, 59 S. Ct. at 839-40. As

will be seen, O’Malley remains the most important

precedent in the area of taxation of federal judges.

A generation after O’Malley, the Court of Claims’

thoroughly reviewed Compensation Clause law in

Atkins v. United States, 214 Ct. Cl. 186, 556 F.2d 1028

(1977) (en banc), cert. denied, 434 U.S. 1009, 98 S. Ct.

718, 54 L.Ed.2d 751 (1978). This review was occasioned

by the suit of a group of federal judges who claimed

that their compensation, though nominally unchanged

* The court’s language is to some degree unclear as to the fate

of Miles: “But to the extent that what the Court now says is

inconsistent with what was said in Miles v. Graham, 268 U.S. 501,

45 S. Ct. 601, the latter cannot survive.” 307 U.S. at 282-83, 59 S.

Ct. at 840.

5 In 1982 the Court of Claims and the Court of Customs and

Patent Appeals were abolished. Judges of those two courts be-

came judges on the new Court of Appeals for the Federal Circuit.

See Federal Courts Improvement Act of 1982, Pub. L. No. 97-164,

tit. I, § 165, 96 Stat. 25, 50 (1982) (codified as amended at 28 U.S.C.

§ 44 (1988)). Court of Claims decisions constitute precedent for

this court to the same extent as decisions of the Federal Circuit.

South Corp. v. United States, 690 F.2d 1368 (Fed. Cir. 1982).

36a

since 1969, had in fact been unconstitutionally eroded

by inflation. In rejecting this claim, the Court of Claims

gave valuable guidance on the import of O’Malley and

its predecessors.

In analyzing the Supreme Court’s holding in

O'Malley, the Court of Claims in Atkins stated that

both Evans ard Miles are “no longer good law,” id., 214

Ct. Cl. at 213, 556 F.2d at 1043. According to the Court

of Claims, O’Malley “overruled Miles, and by force of

reasoning overruled a good deal of Evans,” id. at 215,

556 F.2d at 1044.°

Atkins fleshes out the distinction between indirect

and direct diminution first alluded to by the Supreme

Court in Evans, 253 U.S. at 254, 40 S. Ct. at 5538. A

direct diminution is a reduction in the number of dollars

authorized by Congress for a judge’s salary, while an

indirect reduction, for instance “by virtue of a tax,”

lowers the take-home pay of a judge but not the

statutory salary. Atkins, 214 Ct. Cl. at 215, 556 F.2d at

1044. Given that “the purpose of the Compensation

Clause is to preclude a financially based attack on

judicial independence,” id. at 222, 556 F.2d at 1048,

cases of indirect diminution are to be handled dif-

ferently from cases of direct diminution. The Court of

Claims explained that while the Supreme Court’s Com-

pensation Clause cases uniformly agreed that direct

diminutions were always prohibited, after O’Malley

“{iJndirect, nondiscriminatory diminishments [like

taxes] . . . which do not amount to an assault on the

§ Also interesting in this regard is Justice Butler’s dissent in

O’Malley itself, which states that the majority in O’Malley

“intend [ed] to destroy the decision in Evans v. Gore.” 307 U.S. at

297, 59 S. Ct. at 846.

37a

independence of the third branch . . . [are not

prohibited by] the Compensation Clause,” id. at 216,

556 F.2d at 1045.

The 1977 Atkins decision is in full accord with the

later Supreme Court Compensation Clause case of

United States v. Will, 449 U.S. 200, 101 S. Ct. 471, 66

L.Ed.2d 392 (1980), which dealt with a direct diminu-

tion. In Will, scheduled increases in judicial, congres-

sional, and top-level executive pay were withdrawn for

four years running, twice just before the raises took

hold, and twice just after. Upon a suit by federal

judges, the Court held that while the political branches

may cancel a prospective judicial salary increase, any

increase allowed to become effective even for less than

a day is permanent for Article III judges. 449 U.S. at

224-26, 101 S. Ct. at 485-486.

The Will decision buttresses the implication of the

Court of Claims in Atkins that all direct reductions of

judicial compensation are invalid regardless of congres-

sional intent: speaking of direct diminutions, the Court

said “the Constitution makes no exceptions for ‘nondis-

criminatory’ reductions.” 449 U.S. at 226, 101 S. Ct. at

486. As to indirect diminutions, not at issue in Will, the

Court was not quite so clear. Still, Will gives some

guidance on indirect diminutions like taxes: the Court

discussed O’Malley with apparent approval, noting that

O'Malley validated income taxation of judicial salaries

and “recognized that the Compensation Clause does not

forbid everything that might adversely affect [the

finances of] judges.” Jd. at 227 n.31, 101 S. Ct. at 486 n.

31. In fact, Will may have left open the possibility that

even a congressional intent to pressure the judiciary

might not invalidate an indirect diminution: “[w]e need

38a

not address the question of whether evidence of an

intent to influence the Judiciary would invalidate a

statute that on its face does not directly reduce judicial

compensation.” Jd. at 226 n. 30, 101 S. Ct. at 486 n. 30.’

Of course, in the absence of facts showing bad legis-

lative intent, this legal question is moot. Atkins, 214

Ct. Cl. at 216, 228, 235, 556 F.2d at 1045, 1051, 1055.

The following two rules and one corollary emerge

from the foregoing review of the Compensation Clause

ease law.’ First, direct diminution of the salary

authorized for federal judges is absolutely forbidden, no

matter how innocent the intent of Congress is. Second,

so-called indirect diminishments, and specifically

income taxes, are permissible even if they result in a

reduction in take-home pay for federal judges, at least

so long as they are not part of an assault on judicial

independence. This rule’s corollary is that if there is no

evidence of legislative intent to influence the judiciary,

’ The Court of Claims, albeit also in dicta, took a firmer stand

on this issue, indicating that an indirect diminution which discrimi-

nated against judges would be remediable by the courts. Atkins,

214 Ct. Cl. at 222-23, 556 F.2d at 1048.

8 Atkins as it applies to this case is primarily dicta, since

Atkins dealt with the impact of inflation on judicial buying power

rather than with an impact caused by congressional action. Will is

likewise not on all fours here, dealing as it does with a direct

diminution rather than a tax. O’Malley, however, is almost di-

rectly on point, with the only arguable distinction being that it

does not overtly deal with the problem of taxation of prior judges.

Still, as we demonstrate, the dicta from Atkins and Will, read

together with the all-important holding in O’Malley, form a consis-

tent and common-sensical body of law governing the instant case.

39a

taxes of general applicability are valid as to Article ITI

judges.

Thus the question in this case is not whether the

plaintiffs’ compensation has been reduced by Social

Security taxes, for at least in terms of take-home pay it

has been, but rather whether this indirect reduction is

of the type forbidden by the Compensation Clause.’ As

will be shown below, under O’Malley and subsequent

cases, the answer is no.

As to the Compensation Clause claims, (Second

Am.Cplit. Counts I-II at 7-8), four basic themes, some of

them related, emerge from plaintiffs’ briefs and oral

argument. First, plaintiffs contend that in overruling

Miles but not Evans, the Supreme Court meant to limit

the original broad holding of Evans to the following still

vital rule: “[E]ven a tax of general applicability cannot

be imposed upon [prior] judges who were appointed

* For the purpose of resolving the motions at bar, we accept

plaintiffs’ assumption that inclusion in Social Security represents a

reduction in judicial pay. But this proposition is by no means

settled. If plaintiffs were to prevail in this litigation, and all

affected judges were effectively taken out of Social Security and

refunded their Social Security taxes, Compensation Clause claims

by judges who felt their compensation had been decreased would

surely result. For instance, though plaintiffs here claim Social Se-

curity coverage reduces their compensation, in Robinson v. Sulli-

van, 905 F.2d 1199 (8th Cir. 1990) (Wollman, J.), a senior judge who

was retroactively denied Social Security credit for service during a

brief window of Social Security coverage for senior judges chal-

lenged the denial as a Compensation Clause diminution. This argu-

ment was rejected on the grounds that his temporary coverage

under Social Security was “not a direct increase” in compensation.

905 F.2d at 1202 (emphasis added).

40a

. . . before the tax became law.” Pl. Br. at 29. To some

extent linked with this reading of Evans is plaintiffs’

second contention that no taxation of judges is permis-

sible if it makes judicial service relatively less attrac-

tive than it was when a judge took office. Pl. Br. at 20-

21; Pl. Reply at 12-13. Plaintiffs’ third argument is that

the Social Security tax at issue here is not even an

income tax of general applicability such as was per-

mitted to be laid on judges by O’Malley. Pl. Br. at 25-

26; Pl. Reply at 25-26; Tr. 15-16. Somewhat related to”

this argument is plaintiffs’ last main point: that the

scheme designed to bring federal employees under

Social Security coverage discriminated against the

plaintiff judges compared to other federal workers. PI.

Br. at 37-8, 40, 43; Tr. at 16-17, 19, 72-74. We discuss

these four themes in turn.

Plaintiffs’ first contention is that the factually similar

Evans case (discussed above in part IF A) controls here,

and thus that new taxes cannot be imposed on prior

judges even if all other citizens are included in the new

tax. Pl. Br. at 28-29. While it is true that the Supreme

Court has never expressly overruled Evans, subse-

quent Court of Claims and Supreme Court cases con-

vince us it would be irresponsible to dispose of this con-

troversy on that ground. The Supreme Court itself

long ago criticized the Evans case, O’Malley, 307 U.S.

at 280-82, 59 S. Ct. at 839-40 (1939), and more recently

confirmed that Evans has been “undermine{d],” Will,

449 U.S. at 227 n. 31, 101 S. Ct. at 486 n. 31, Addition-

ally in Will, the Supreme Court reversed a trial judge

who expressly relied on Evans, albeit in a factually

4la

distinguishable case. Will, 449 U.S. at 227, 101 S. Ct. at

486-487.

Such negative Supreme Court guidance certainly dis-

courages automatic reliance on Evans. But in addition,

the Will and O’Malley decisions at the very least

strongly suggest that a tax or other statute which

indirectly reduces judicial pay is permissible absent evi-

dence of a congressional intent to influence the judi-

ciary. Will, 449 U.S. at 226-27 & nn.30-31, 101 S. Ct. at

486-87 & nn.30-31; O’Malley, 307 U.S. at 282, 59 S. Ct.

at 840. Moreover, the Court of Claims stated that the

Supreme Court has effectively overruled Evans “at

least as regards [new] judges,” Atkins, 214 Ct. Cl. at

215, 556 F.2d at 1044 (emphasis added).

Even in the face of this negative treatment, plaintiffs

persist in their claim that though the broad rationale of

Evans has certainly been narrowed by subsequent case

law, the fact that Evans has never been expressly

overruled means that some part of the holding survives.

Pl. Br. at 28. According to plaintiffs, the surviving rule

of Evans is that under the Compensation Clause, prior

judges have more tax protection than new judges: you

can’t charge a prior judge new taxes. Pl. Br. at 28-29.

Adopting this distinction between new and prior judges

would require us to read much into Evans, because that

case nowhere suggested such a difference. In fact the

Court in Evans broadly defined the issue in that case as

the taxability of the “compensation of federal judges in

general,” 253 U.S. at 247, 40 S. Ct. at 551 (emphasis

added). We understand that the distinction between

prior and new judges was arguably drawn by omission

in O’Malley when the Court expressly limited its

holding to new judges. 307 U.S. at 281-82, 59 S. Ct. at

42a

839-40. But unlike the Court in O’Malley, here we are

squarely addressed with the question of whether new

judges have less tax protection than prior ones under

the constitution. O’Malley’s failure to expressly ad-

dress the propriety of new taxes on prior judges is

typical of the judicial restraint that Justice Frankfurter

was known for, and is not a ruling against such taxa-

tion.’

Only the quite proper use of judicial restraint in

O’Malley and later in Will prevented the Supreme

Court from overruling Evans. Now that the question of

whether prior judges should be afforded more Compen-

sation Clause protection than new judges is at bar for

the first time since the discredited Miles decision,

reaching back to the 1920 Evans case to resolve the

question in plaintiffs’ favor would require us to willfully

ignore the intervening, and uniformly critical, case his-

tory. This we decline to do, although because this his-

tory developed in factually distinguishable situations,

the question in a narrow technical sense will arguably

remain open until the Supreme Court addresses the

point. As discussed above, the more recent Supreme

Court and Court of Claims cases on the Compensation

Clause counsel reliance on the dissenting view of

Holmes in Evans rather than on the majority." There-

Ala. 1994) (indicating in dicta that new judges would be entitled to

the same Compensation Clause protection as the prior judges who

were plaintiffs in the case).

" Plaintiffs agree that the Court of Claims in Atkins read the

Supreme Court decision in O’Malley to adopt Holmes’s dissent in

Evans. Pi. Br. at 33. (A district judge evaluating O’Malley re-

cently came to the same conclusion. Acker, 850 F. Supp. at 1546.)

Though plaintiffs argue that the Atkins and Holmes rule allowing

43a

fore, we hold that judicial salary, like other components

of a judge’s income, is taxable. Will, 449 U.S. at 227

n.31, 101 S. Ct. at 486 n.31 (citing with approval

O'Malley, 307 U.S. 277, 59 S. Ct. 888 (1939)); Evans, 253

U.S. at 265-266, 40 S. Ct. at 557 (Holmes, J., dissenting);

Atkins, 214 Ct. Cl. at 216, 556 F.2d at 1044-45.

Given that we decline to rely on Evans, plaintiffs, in

the alternative, claim that the statutes in question vio-

late the Compensation Clause by wiping out a tax ad-

vantage prior judges enjoyed relative to other citizens,

a situation plaintiffs contend to be different from that

presented in Evans. Plaintiffs argue that in Evans, a

new tax was imposed on both judges and other citizens

“at the same time;”” in contrast, plaintiffs here were

judicial salaries to be taxed is incompatible with the Will approach

banning any diminution in gross judicial pay, Tr. at 70-71, we

disagree. As we explained above in part II A, in actuality Atkins

and Will are complementary because they deal with different facts.

Will expressed the absolute Compensation Clause protection

which exists when judicial pay is directly diminished, while the

more flexible rule developed in Atkins indicates that in cases of

indirect, take-home pay diminution like taxation, an inquiry into

congressional intent is needed.

” Pl. Reply at 16 n. 7. It is unclear what plaintiffs mean by “at

the same time.” While it certainly is true that the Revenue Act of

1918 (which was at issue in Evans) did for the first time tax the

income of judges, § 213, 40 Stat. at 1065, it is also true that the

Revenue Acts of 1916 and 1917 had already imposed broad-ranging

income taxes, although exempting judges already in office, ch. 468,

§ 4, 39 Stat. 756, 759 (1916); ch. 68, § 1200, 40 Stat. 300, 329 (1917).

Thus, the income tax was imposed on the public years before

judges were included. Only by artificially viewing each successive

year’s income tax statute in isolation can it be said that the

Revenue Act of 1918 imposed a tax on the public and on judges “at

44a

subjected to the extension of an old tax they had es-

caped by becoming judges, thereby unconstitutionally

costing sitting judges an advantage they held relative

to non-judges. Pl. Reply 16 n.7. As we will show,

plaintiffs’ attempt to distinguish their case from Evans

fails.

Plaintiffs argue that to be valid, any new tax on prior

judges must be simultaneous with taxation of the

public. Pl. Reply at 16 n.7; Tr. at 9-10. This is so be-

cause as long as an identical burden is simultaneously

laid on the public and the judiciary, not even prior

judges have suffered a diminution relative to other

citizens” and so their judicial independence is not

potentially threatened. Tr. at 9-10; see Pl. Br. at 16, 35-

37; Pl. Reply at 19, 21. On the other hand, reason

plaintiffs, the taking away of a tax ex nption or other

advantage held by prior judges relative to other

citizens does potentially threaten judicial independence

because it singles out judges.“ See P1.Br. at 20-21, 34;

Pl. Reply at 16 n.7, 19.

Looking past the terms of plaintiffs’ seemingly novel

relativity argument to its substance, it appears plain-

tiffs’ position at bottom is nothing more remarkable

than that a new tax laid wholesale on prior judges and

the same time.” But for purposes of this discussion only, we accept

plaintiffs’ characterization.

8 Hereafter, we may refer to this as the “simultaneity require-

ment.”

4 Hereafter, we may refer to this as plaintiffs’ “relativity”

argument or analysis.

45a

the public is not discriminatory.” While this may be

true, it provides no support for plaintiffs’ further impli-

cation that a tax placed on the public and only later

extended piecemeal to prior judges automatically vio-

lates the Compensation Clause as a potential threat to

the independence of prior judges.

Plaintiffs have pointed to no good reason why

Congress in taxing judges has the power to accomplish

wholesale what it cannot do pi See, e.g., Pl. Br.

at 34; Pl. Reply at 2-3, 9-10, 12-13, 16 n.7. Plaintiffs

equate comparative tax advantages enjoyed by judges

every momentary tax exemption enjoyed by sitting

judges relative to the public; its purpose is rather to

protect the independence of the judicial branch by

insuring that judges are shielded from attempts by the

political branches to impose economic duress. O’Mal-

ley, 307 U.S. at 282, 59 S. Ct. at 840; Evans, 253 U.S. at

265-67, 40 S. Ct. at 557-58 (Holmes, J., dissenting); see

Atkins, 214 Ct. Cl. at 228, 556 F.2d at 1048-49. This

underlying purpose leads to the simple rule of thumb

which governs this case: in general, if judges are

treated like other citizens by the tax laws, no threat to

judicial independence arises, and so the Compensation

Clause is not implicated. Congress always has the

power to place judges in tax parity with other citizens.

214 Ct. Cl. at 228, 556 F.2d at 1048) in which an enormous tae 12

laid across the land and then all other federal workers or citizens

except judges get a raise or some other kind of relief. Pl. Br. at 36

n. 22. Suffice it to say that we do not here prejudge such a case.

46a

Plaintiffs profess not to rely on Evans in deriving the

simultaneity requirement for the taxation of prior

judges. But plaintiffs’ simultaneity requirement leads

inescapably to the conclusion that the Compensation

Clause provides the class of prior judges more tax

protection than it does to new judges. This is the very

conclusion that we rejected in refusing to rely on Evans

above in part A. The new packaging does not yield a

different result. Barring some sort of targeted discrim-

ination, the finances of one individual judge or even a

class of judges is not the concern of the Compensation

Clause. * There is no requirement that prior judges be

treated any differently from new judges for tax pur-

poses: a judge escapes neither the present nor the

future obligations of citizenship by taking the oath of

office.

Plaintiffs go on to claim that even with the above

arguments conceded Social Security is not a tax of

general applicability like the one which was held proper

as to judges in O’Malley. Pl. Reply at 24-25; Tr. at 15-

16, 72-73. In this vein, plaintiffs first contend that

16 The proper constitutional focus is on the interaction between

the branches of government, not on the appointment dates of indi-

vidual judges. (It might be said that plaintiffs’ analysis neglects

the constitutional dimension of this case in favor of the astronomi-

cal.) The Compensation Clause is “not a private grant of privilege

[to judges) but a limitation intended to benefit the public at large,”

Atkins, 214 Ct. Cl. at 223, 556 F.2d at 1049. The same idea is ex-

pressed in Will, 449 U.S. at 217, 101 S. Ct. at 481-82 and

O'Donoghue v. United States, 289 U.S. 516, 583, 53 S. Ct. 740, 744,

77 L.Ed. 1356 (1933).

47a

Social Security is not an income tax, but is rather a

contributory public benefit plan. E.g. Pl. Br: at 26-27.

In addition, plaintiffs maintain that Social Security

taxes are not a truly general obligation of citizenshi

because the plan is not universal. Jd.; Tr. at 72-73.

A close reading of plaintiffs’ arguments shows that

they do not seriously contend that Social Security is a

contractual benefit plan rather than an income tax. In

fact, plaintiffs themselves note that Social Security

benefits are by no means guaranteed, and that the

Congress could limit or cancel benefits under the

program. Tr. at 10-11 (citing Bowen v. Public Agencies

Opposed to Soc. Secur. Entrapment, 477 U.S. 41, 51-52,

106 S. Ct. 2390, 2396-97, 91 L.Ed.2d 35 (1986)). We

agree. Of course, the taking of money by the federal

government with no specific return obligation is typical

of tax schemes, including income taxes. And, in fact,

Social Security has long been treated as an income tax

by courts. Helvering v. Davis, 301 U.S. 619, 634-35, 57

S. Ct. 904, 905-06, 81 L.Ed. 1307 (1937). It is plain that

Social Security imposes an income tax.

At the heart of plaintiffs’ argument that Social

Security is not a tax of general applicability is the

contention that the Social Security income tax is not

sufficiently widespread. See Pl. Br. at 26, 36-37; Tr. at

72. We disagree. Social Security is a tax of general

applicability, and so can be applied to federal judges.

The parties have stipulated to the following facts:

during 1984, the percentage of the paid civilian labor

force covered by Social Security climbed from 91

48a

percent to 93 percent, Jt. Stip. ¢ 18 (Appendix C to PI.

Br.), even while the paid civilian labor force increased

from 102.2 million workers to 105.5 million, Jt. Stip.

q 27 (Table 4).

This amounts to effectively universal coverage of the

nation’s work force." Given the web of exemptions and

deductions allowed by Congress in virtually all areas of

taxation, it is doubtful if any federal tax is of general

applicability in the sense of applying to 100 percent of

the possible taxpayers. We do not need to decide the

boundaries of the term “a tax of general applicability”

today. It is enough to say that the Social Security

income tax, which at all times relevant to this litigation

covered over 90 percent of paid civilian workers, is a

tax of general applicability like that held valid as to

judges by the Supreme Court in O’Malley.

Plaintiffs’ last main Compensation Clause contention,

somewhat linked to the idea that Social Security is not a

tax of general applicability, is that the plaintiff judges

were discriminated against as compared to the other

federal employees affected by the same Social Security

amendments. Pl. Br. at 37-38, 40, 43; Pl. Reply at 24;

Tr. at 12, 15-17, 19, 22-23, 72-74. Plaintiffs contend that

a Compensation Clause violation arises because judges,

unlike all other federal employees, faced a mandatory

reduction in take-home pay. Pl. Br. at 40, 43; Tr. at 74-

75.

17 In September 1988, there were over 2.7 million federal

employees. Jt. Stip. P 19.

49a

However, using federal employees instead of the

general public as the Compensation Clause benchmark

to determine the validity of a tax does not help plain-

tiffs in this case, since for purposes of this discussion

the two groups have historically been treated alike.

Most federal employees have long been required to

contribute to retirement plans in order to obtain retire-

ment benefits. See 5 U.S.C. §§ 8331-48 (1988). This

does not apply to Article III judges, whose basic retire-

ment plan is free, and provides for lifetime full pay

when certain age and length of service requirements

are met. 28 U.S.C. § 371 (1988). By the acts challenged

here, Congress expanded Social Security to cover most

federal positions, including Article III judgeships, for

the first time. Jt. Stip. { 20. Speaking generally, Con-

gress reduced or offset the contribution federal em-

ployees were required to make to their retirement plan

by the amount of any newly required Social Security

tax. Pl. Proposed Findings of Uncontroverted Fact

{ 11 (““PPUF”). The retirement plan benefits of

federal employees were correspondingly reduced to ac-

count for any newly expected Social Security benefits.

E.g., Federal Employees’ Retirement Contribution

Temporary Adjustment Act of 1983, Pub. L. 98-168,

§ 206(c)(2), 97 Stat. 1106, 1109-10 (1983) (codified as

amended in a note after 5 U.S.C. § 8331 (1988)). The net

result of inclusion in Social Security for most federal

workers thus was no change in take-home pay or

benefits. It is plainly the view of Congress that the

Social Security tax is fungible with the other retire-

ment payments required of federal employees. Thus,

both before and after the acts in question, almost all

50a

judici ike over 90 percent of

non-judicial federal employees, | \

the nation’s civilian workers, paid Social Security taxes

or a mandatory equivalent.

dges, with no retirement plan contributions to

aa unique among federal employees in seeing

their take-home pay necessarily decrease by the

amount of the Social Security tax. PPUF q 12. But —

happened only because judges, unlike other rony

employees and citizens, were never before —

pay into Social Security or a retirement plan equivalen

to Social Security. There is no reason that tax y ree

equivalent to those long required of other oe

employees and working citizens cannot be exten = )

judges. See supra, part B(1). Here, the omagers “4

pensation Clause taxation rule has not been vio eo

judges are being treated no worse than other fede

employees and citizens.

n if we were to assume that the Social Security

aan issue here did hurt judges compared to other

federal workers, plaintiffs’ Compensation Clause claim

would not succeed. This is because in cases of indirect

reduction in judicial compensation, it Is an open

question whether evidence of Congressional intent to

pressure the judiciary would be enough to rer A

statute. Will, 449 U.S. at 226 n. 30, 101 S. Ct. at

n.30. At any rate, without evidence of such an ony

this legal question is moot. Atkins, 214 Ct. Cl. at 216,

228, 235, 556 F.2d at 1045, 1051, 1055.

, ; _

In this case, there is absolutely no evidence 0

intent to influence the judiciary. This conclusion is not

disputed by plaintiffs, Pl. Br. at 21-22: see Pl. Reply at

5la

2; rather, plaintiffs’ by-now familiar argument is that

any reduction in take-home pay should be handled like a

direct reduction in salary, that is to say it is prohibited

by the Compensation Clause regardless of congres-

sional intent. Pl. Br. at 21-23; Pl. Reply at 2, 10, 12; Tr.

at 69, 71-72.

As indicated above, plaintiffs’ conclusion ignores two

related rules of Compensation Clause jurisprudence.

First, in case of an indirect diminution of judicial com-

pensation, it is at least arguable that judges seeking

relief under the Compensation Clause for an indirect

reduction in pay must show not just a discriminatory

effect but an intent to influence the judiciary. See Will,

449 U.S. at 226 n.30, 101 S. Ct. at 486 n.30; Atkins, 214

Ct. Cl. at 233, 556 F.2d at 1054. Second and more im-

portant to the instant case, it is clear that if the indirect

diminution is due to a tax of general applicability and

the possibility of discriminatory legislative intent has

been ruled out, the tax is valid under the Compensation

Clause. O’Malley, 307 U.S. at 282, 59 S. Ct. at 840;

Atkins, 214 Ct. Cl. at 216, 556 F.2d at 1044-45. That is

the case here.

Plaintiffs claim that if their constitutional argument

fails, they still may be able to prevail on a contract

theory. Second Am. Cplt. Count III at 8-9. Defendant

has moved for summary judgment on the contract

claim, maintaining that judges serve pursuant to

appointment, not contract. Def. Br. at 38-41.

Plaintiffs are unable to cite any convincing authority

for the proposition that judges are contract employees.

See, e.g., Pl. Reply at 27-29; Tr. at 31-38. Plaintiffs point

52a

chiefly to Embry v. United States, 100 U.S. 680, 25

L.Ed. 772 (1879), wherein the Supreme Court made the

following statement: “No officer except the President

or a judge of a court of the United States can claim a

contract right to any particular amount of unearned

sompensation.” 100 U.S. at 685. While this isolated

sentence may be in plaintiffs’ favor, the case it comes

from is not. The holding of Embry is not that judges

have a contract right to compensation while in office; in

fact, the case is not about judges at all, nor even about

incumbent officeholders. Instead, Embry holds that

non- judicial federal officers such as postmasters do not

have a contract right to compensation while suspended

from office. 100 U.S. at 685. Since judges can only be

impeached, not suspended, Embry has no relevance

here. At any rate, the sentence relied un by plaintiffs,

besides being taken out of context, is wholly unneces-

sary to the holding of the case and thus a textbook

example of dicta.

Plaintiffs claim that even if Embry is distinguishable,

this case falls squarely under the rule of Johnson v.

United States, 111 Ct. Cl. 750, 79 F. Supp. 208 (1948).

Tr. at 66. Again, we disagree. Johnson involved a

judge who resigned from office. The Court of Claims

found that such a judge has a contract or property right

to his retirement pay. 111 Ct. Cl. at 756, 79 F. Supp. at

211. Without assessing the validity of this Johnson

holding today, we note that a judge who resigns (as the

plaintiff did in Johnson) is no longer a federal office-

holder. Booth v. United States, 291 U.S. 339, 348-50, 54

S. Ct. 379, 380-81, 78 L.Ed. 836 (1934). At best for

plaintiffs, Johnson holds that judges who resign from

office in reliance on future retirement payments may

have a contract remedy. The Johnson case has no

53a

applicability to cases involving compensation for sittin

Article III judges.” wn ,

Plaintiffs have cited no controlling authority indica-

ting a possible contract claim. Pl. Reply at 27-29; Tr. at

31-37, 65-66. In our view, no such claim exists.

Plaintiffs’ contention that the extension of Social

Security taxes to sitting Article III judges violated the

Compensation Clause is a pure question of constitu-

tional law. There are no material facts in dispute.

Therefore, defendant is entitled to judgment on Counts

I and II, (Second Am. Cplt. at 7-8), as a matter of law.

RCFC 56(c).

Plaintiffs’ contention that they have a contract right

to compensation is likewise a pure question of law in-

volving no disputed material facts. Therefore, defen-

dant is entitled to judgment on the contract claim,

(Count III, Second Am. Cplt. at 8-9), as a matter of law.

RCFC 56(c).

Based on the foregoing, plaintiffs’ motion for sum-

mary judgment is DENIED, and defendant’s cross-

motion for summary judgment is GRANTED. Accord-

ingly, judgment shall be entered in favor of defendant.

Each party shall bear its own costs.

8 This conclusion is strengthened by the fact that the Court of _

Claims in Johnson did not once cite the dicta from Embry which, if

read in isolation, indicates that sitting judges have a contract right

to compensation.

54a

APPENDIX E

UNITED STATES COURT OF APPEALS

FOR THE FEDERAL CIRCUIT

No. 94-5139

JUDGE TERRY J. HATTER, JR., MARY MARTIN

ARCENEAUX, ON BEHALF OF THE LATE JUDGE GEORGE

ARCENEAUX, JR., JUDGE PETER H. BEER, JUDGE

DUDLEY H. BOWEN, JR., CHIEF JUDGE JUAN G.

BURCIAGA, JUDGE A.J. MCNAMARA, JUDGE HARRY

PREGERSON, JUDGE RAUL A. RAMIREZ, JUDGE

NORMAN C. ROETTER, JR., CHIEF JUDGE THOMAS A.

WISEMAN, JR., CHIEF JUDGE TERENCE T. EVANS,

JUDGE HENRY A. MENTZ, JR., CHIEF JUDGE WILBUR

D. OWENS, JR., JUDGE HENRY R. WILHOIT, JR., JUDGE

HAROLD A. BAKER, AND CHIEF JUDGE MICHAEL M.

MIHM, PLAINTIFFS-APPELLANTS

Uv.

THE UNITED STATES, DEFENDANT-APPELLEE

(Filed: Aug. 30, 1995]

Before: ARCHER, Chief Judges, PLAGER, and

RADER, Circuit Judges.

RADER, Circuit Judge.

Sixteen federal judges challenged the withholding of

Social Security taxes from their judicial salaries as a

violation of the Compensation Clause of the United

55a

States Constitution, Article III, section 1. Accordingly,

they sought a tax refund or recovery of their dimin-

ished compensation. The United States Court of Fed-

eral Claims granted the Government summary judg-

ment. Hatter v. United States, 31 Fed. Cl. 436 (1994).

Because the Compensation Clause forbids diminish-

ments in the compensation of Article III judges after

they have taken office, and because the trial court did

not determine whether a diminution in fact occurred,

this court reverses and remands.

BACKGROUND

Until 1983, judges appointed under Article III of the

Constitution, like most federal employees, did not parti-

- ¢ipate in the Social Security program. Most legislative

and executive federal employees acquired a retirement

annuity by contributing to the Civil Service Retirement

System. 5 U.S.C. §§ 8331-51 (1994). After meeting age

and service requirements, however, Article III judges

receive a retirement annuity equal to their judicial sala-

ries without making additional payments. 28 U.S.C.

§ 371(a) (1988 & Supp. V 1993).

In the early 1980s, Congress ordered withholding of

certain components of the Social Security tax from the

salaries of most federal employees, including Article III

judges. Withholding of the Hospital Insurance portion

began on January 1, 1983. Tax Equity and Fiscal Re-

sponsibility Act of 1982, Pub. L. No. 97-248, § 278(a), 96

Stat. 324, 559, 562 (codified as amended at 26 U.S.C.

§ 3121(u) (1988)). Withholding of the Old Age and Sur-

vivors Disability Insurance portion began on January 1,

1984. Social Security Amendments of 1983, Pub. L. No.

98-21, § 101(a)(1),(b)(1) & (d), 97 Stat. 65, 67-70 (codified

as amended at 26 U.S.C. § 3121(b)(5)(E) (1988 & Supp.

56a

V 1993) and 42 U.S.C. § 410(a)(5)(E) (1988 & Supp. V

1993)).

n Article III judges—all appointed before

Phen 1983—sued in the Court of Federal Claims

for a refund of these Social Security taxes or recovery

of their diminished compensation. The judges claimed

that the taxation diminished their judicial compensation

in violation of the Compensation Clause of the Constitu-

tion. The trial court granted the Government summary

judgment that the Compensation Clause does not pro-

hibit application of the tax to sitting Article III judges.

Hatter, 31 Fed. Cl. at 445-47. The claimants appealed.

DISCUSSION

' by

This court reviews a grant of summary judgment

the Court of Federal Claims de novo. Cohen v. United

States, 995 F.2d 205, 207 (Fed. Cir. 1993).

The Constitution’s Compensation Clause states:

The Judges, both of the supreme and inferior

Courts, shall hold their Offices during good Be-

haviour, and shall, at stated Times, receive for

their Services a Compensation, which shall not be

diminished during their Continuance in Office.

S. Const. art. III, § 1 (emphasis added). This con-

pra nn language protects one of the most remark-

able innovations of the 1787 document: a judicial branch

sufficiently independent to enforce constitutional limi-

tations on all branches of Government. The Supreme

Court acknowledged:

57a

The Compensation Clause has its roots in the

longstanding Anglo-American tradition of an in-

dependent Judiciary. A Judiciary free from con-

trol by the Executive and Legislature is essential

if there is a right to have claims decided by

judges who are free from potential domination by

other branches of government.

United States v. Will, 449 U.S. 200, 217-18, 101 S. Ct.

471, 482, 66 L.Ed.2d 392 (1980). Alexander Hamilton,

writing in The Federalist No. 79, explained the Fram-

ers’ reasoning for this means of protecting the separa-

tion of powers: “In the general course of human nature,

4 power over a man’s subsistence amounts to a power

over his will.” The Federalist No. 79, at 472 (Clinton

Rossiter ed., 1961) (emphasis omitted).

To provide a judiciary with sufficient independence

to protect constitutional rights against any incursion,

the Framers adopted an unrestricted protection for ju-

dicial compensation. Judicial independence, Alexander

Hamilton prophetically noted, would prove “the citadel

of the public justice and the public security.” The

Federalist No. 78, at 466 (Clinton Rossiter ed., 1961).

Thus, as the Supreme Court concluded:

[T]he prohibition against diminution was not to

benefit the judges, but, like the clause in respect of

tenure, to attract good and competent men to the

bench and to promote that independence of action

and judgment which is essential to the maintenance

of the guaranties, limitations, and pervading princi-

ples of the Constitution and to the administration of

justice without respect to persons and with equal

concern for the poor and the rich.

58a

Evans v. Gore, 253 U.S. 245, 253, 40 S. Ct. 550, 553, 64

L.Ed. 887 (1920). For these reasons, the Constitution’s

language broadly prohibits any diminution in judicial

compensation during a judge’s continuance in office.

This case raises the question whether imposition of

new taxes on judges after they have taken office uncon-

stitutionally diminishes their compensation. The Su-

preme Court addressed this very issue in Evans. In

Evans, the Court held that the Compensation Clause

prohibited imposition of the newly enacted income tax

on sitting judges. Examining the broad constitutional

protection for judicial independence, the Court wrote:

The prohibition is general, contains no excepting

words and appears to be directed against all diminu-

tion, whether for one purpose or another; and the

reasons for its adoption . . . make with impelling

force for the conclusion that the fathers of the Con-

stitution intended to prohibit diminution by taxation

as well as otherwise,—that they regard>d the inde-

pendence of the judges as of far greater importance

than any revenue that could come from taxing their

salaries.

Id. at 255, 40 S. Ct. at 553; see also id. at 249-52, 40 S.

Ct. at 553.

When the judges in Evans first assumed office,

Congress had not charged them with the duty of paying

income taxes. Thus, the imposition of these taxes on

their salaries acted as a reduction in their salary. As

the Court observed:

59a

Here the Constitution expressly forbids diminution

of the judge’s compensation, meaning, as we have

shown, diminution by taxation or otherwise .. .

[Tyhe compensation suffers a diminution to the

extent that it is taxed.

Id. at 264. The Court therefore invalidated application

of a income tax to judges who had taken office prior

to the tax.

Evans controls this case. The claimants here are

Article III judges who took office prior to imposition of

the Social Security taxes in question. Federal law did

not charge the claimants with the duty of paying Social

Security taxes when they first assumed office. Sub-

sequent imposition of the taxes reduced the claimants’

salaries, as in Evans.

The subsequent Supreme Court case of O’Malley v.

Woodrough, 307 U.S. 277, 59 S. Ct. 838, 83 L.Ed. 1289

(1939), does not affect this analysis. In that case, the

Court held that newly appointed Article III judges

must continue to pay income taxes just as they had

prior to appointment:

To subject them to a general tax is merely to recog-

nize that judges are also citizens, and that their

particular function in government does not generate

an immunity from sharing with their fellow citizens

the material burden of the government whose Con-

stitution and laws they are charged with administer-

ing.

Id. at 282, 59 S. Ct. at 840.

60a

Because the claimants in O’Malley took office after

Congress had made income taxes applicable to judges

salaries, those judicial claimants suffered no diminish-

ment in compensation after taking office. The tax was a

pre-existing obligation factored into the new —

compensation. On this basis O'Malley is distinguishab :

from Evans and the facts of this case. In Evans an

this case, the claimants were already judges when the

Social Security taxes took effect. The taxes therefore

affected the claimants’ established compensation. Thus,

Congress’s imposition of the Social Security tax on the

claimants triggered scrutiny under the Compensation

Clause.

The Supreme Court has stated that O’Malley “under-

mined the reasoning of Evans.” United States v. Will,

449 U.S. 200, 227 n.31, 101 S. Ct. 471, 487 n.31, 66

L.Ed.2d 392 (1980). This court’s predecessor has =

the same point. See Atkins v. United States, 556 F 2

1028, 1044, 214 Ct. Cl. 186 (1977) (en bane), cert. denied,

434 U.S. 1009, 98 S. Ct. 718, 54 L.Ed2d 751 (1978).

Neither of these pronouncements, however, are suffi-

cient to overrule Evans. Had changes in judicial _

ctrine in fact “removed or weakened the concept

underpinnings” of Evans, the Court itself would have

overruled the case. Patterson v. McLean Credit 2

491 US. 164, 173, 109 S. Ct. 2363, 2370-71, 105 L.Ed

132 (1989). It has not done so. Further, as the Supreme

Court recently stated:

If a precedent of this Court has direct application

i jected in

in a case, yet appears to rest on reasons re}

some other line of decisions, the Court of Appeals

should follow the case which directly controls,

6la

leaving to this Court the prerogative of overruling

its own decisions.

Rodriguez de Quijas v. Shearson/American Express,

Inc., 490 U.S. 477, 484, 109 S. Ct. 1917, 1921-22, 104

L.Ed.2d 526 (1989). Again, the Supreme Court has

never overruled Evans. Evans governs this case more

directly than O’Malley.

The trial court erred by upholding the imposition of

Social Security taxes on the claimants on the grounds

that such taxation was both “generally applicable” and

“non-discriminatory.” See O’Malley, 307 U.S. at 282, 59

S. Ct. at 840; see also Atkins, 556 F.2d at 1045. The

trial court holding thus interprets the Constitution’s

Compensation Clause to forbid only discriminatory

taxes which single out the federal judiciary. In other

words, the trial court in effect read the term “compen-

sation” as synonymous with “salary,” and “diminished”

as Synonymous with “intentionally reduced.” This read-

ing limited the protections for judicial independence to

discriminatory attacks on the judiciary in the form of

direct reductions in salary.

The words of the Constitution are not so limited, nor

are its protections for judicial independence. “Compen-

sation” embraces all forms of remuneration, not merely

salary. “Diminished” embraces all means of decreasing,

regardless of the intent or target of the reduction.

Thus, the Constitution protects judicial compensation

against all forms of diminishment.

The Constitution’s enactment history supports this

reading of the Compensation Clause. On June 13, 1787,

the Constitutional Convention’s Committee of the

Whole drafted a resolution prohibiting Congress from

62a

either increasing or decreasing the compensation of

judges. Clinton Rossiter, 1787: The Grand Convention

365 (1966). Gouveneur Morris opposed the prohibition

on increases, as he believed that Congress should have

the power to augment judicial compensation “as circum-

stances might require” to avoid “any improper depen-

dence in the judges.” 2 Max Farrand, Records of the

Federal Convention of 1787 at 44 (1911). Benjamin

Franklin agreed and specified two circumstances—

increases in workload and inflation of the currency—

which would justify an increase. Jd. at 44-45.

James Madison favored retaining the ban on in-

creases in compensation. He feared that judges might

unduly defer to Congress during legislative considera-

tion of pay raises. Jd. at 45. In other words, the

Convention was unanimous on the overriding concern

of protecting the judicial branch against meddling with

its compensation. Further, the Convention voiced

grave concerns about potential compromises in judicial

independence if judges faced the prospect of seeking

legislative redress of compensation concerns. In sum,

the Convention perceived only mischief in the prospect

of judges approaching the legislative branch to seek

proper compensation. Ultimately, on a vote of 6-2, with

one state absent, the Convention permitted increases

and forbade all decreases in judicial compensation. Jd.

at 45.

Alexander Hamilton later explained this result:

It will readily be understood that the fluctuations

in the value of money and in the state of society

rendered a fixed rate of compensation in the Con-

stitution inadmissible. What might be extrava-

gant today might in half a century become penuri-

63a

ous and inadequate. It was therefore n essary

leave it to the discretion of the sre treme to ~ a

its provisions in conformity to the variations in

circumstances, yet under such restrictions as to

put it out of the power of that body to change the

condition of the individual [judge] for the worse.

The Federalist No. 79, at 473 (Alexander Hamil

(Clinton Rossiter ed., 1961). According to Hamilton,

= rer ae as term “diminished” forbids

y action which changes the “condition of the individ-

ual [judge] for the worse.” Jd. —

James Madison concurred in Hamilton’s analysis and

extended the coverage of the term “compensation” to

all “emoluments” of the judicial office:

[Mjembers of each department should be as little

dependent as possible on those of the others for

the emoluments annexed to their offices. Were

the executive magistrate, or the judges, not inde-

pendent of the legislature in this particular, their

independence in every other would be nominal.

The Federalist No. 51, at 321 (James Madison) (Clin

.ol, ton

Rossiter ed., 1961). In sum, the Convention considered

judicial independence a core value of the Constitution

and adopted a broad protection for it. See Will, 449

U.S, at 217-21, 101 S. Ct. at 481-84;

252-55, 40 S. Ct. at 552-54. | REE, Se Oa, a

The text and history of the Compensation Cla

not support the test applied by the trial court. The

Supreme Court itself suggested as much in Will where

in considering Congress’s rescission of judicial pay

raises, the Court stated: “the Constitution makes no

64a

exceptions for ‘nondiscriminatory’ reductions.” Will,

449 U.S. at 226, 101 S. Ct. at 486.

The Government’s attempt to limit this statement in

Will to ‘direct diminutions’ is unpersuasive. O'Malley,

distinguished by the Will Court as applying a nondis-

crimination test, held that nondiscriminatory taxation

of a judge who took office after the tax went into effect

does not violate the Compensation Clause. In such

circumstances, the taxation formed part of that judge’s

compensation scheme from the outset of his tenure. See

O’Malley, 307 U.S. at 282, 59 S. Ct. at 838.

Nor does Atkins provide support for application of a

nondiscrimination test to the taxes imposed in this case.

In Atkins, the United States Court of Claims found that

Congress’ failure to raise judicial salaries during a

period of high inflation was not an actionable diminu-

tion under the Compensation Clause, because the plain-

tiff judges could not show that Congress intended an

attack on the judiciary’s independence.

However appropriate it may be to consider whether

inflation diminishes judicial compensation in a discrimi-

natory fashion, as in Atkins, or applies taxes of general

applicability to judges taking office after such taxes are

effective, as in O’Malley, neither the Compensation

Clause nor Supreme Court precedent supports applying

a non-discrimination test to the imposition of a new tax,

even though generally applicable, on sitting judges. As

indicated above, the controlling Supreme Court prece-

dent, Evans, instructs otherwise. Evans, 253 US. at

254-55, 40 S. Ct. at 553-54. Under Evans, only judges

who took office prior to the imposition of the new Social

Security taxes suffered a diminution.

65a

Il.

The trial court did not determine whether th

Security taxes in this case in fact diminished the on

ants compensation. Although noting that inclusion in

Social Security might not result in an overall reduction

of compensation, Hatter, 31 Fed. Cl. at 441 n.9, the trial

court assumed a reduction, noting the decrease at least

in take-home pay, for the purpose of resolving the

summary judgment motions before it and

the constitutional issue. a

As noted, the term “compensation” extends

mere salary, and includes all forms of Bont gg

tached to the judicial office. Therefore, the claimants’

new Social Security retirement benefits, if any, are part

of their compensation. These future benefits, however

are not vested in any manner. They thus do not give

the claimants a certain entitlement to any offsetting

sum. In addition, innumerable individual scenarios

could eliminate a claimant’s potential Social Security

benefit, or greatly reduce the amount of the potential

benefit. Because of all the variables that would have to

be taken into account in arriving at even a rough esti-

mate of a current discounted value for Social Security

eels ea = sat — in the future, it is im-

cura weigh th i

taxes withheld - the ies i. ices

. It is certain, however, that the Social Security taxes

diminished the claimants’ salaries by specific po meron

The reduction was concrete, while the potential future

benefit is entirely speculative. A speculative, incalcu-

lable future benefit cannot offset a concrete, present

66a

reduction.” The Social Security taxes therefore >

ished the claimants’ compensation in violation of the

Compensation Clause.

CONCLUSION

i imini tion of

Social Security taxes diminish the compensa

Article III judges who took office prior to enactment of

the taxes. This court therefore reverses and remands

the case for tax refunds or recoveries for the sums im-

properly withheld from the claimants salaries.

COSTS

Each party shall bear its own costs.

REVERSED and REMANDED.

. e and marketable, how-

If the future benefits were caleulabl

ever, an unconstitutional diminution in compensation would sono

when a present reduction exceeded the present value of the future

benefits minus reasonable transaction costs in marketing them.

67a

APPENDIX F

UNITED STATES COURT OF APPEALS

FOR THE FEDERAL CIRCUIT

No. 94-5139

JUDGE TERRY J. HATTER, JR., MARY MARTIN

ARCENEAUX, ON BEHALF OF THE LATE JUDGE GEORGE

ARCENEAUX, JR., JUDGE PETER H. BEER, JUDGE

DUDLEY H. BOWEN, JR., CHIEF JUDGE JUAN G.

BURCIAGA, JUDGE A.J. MCNAMARA, JUDGE HARRY

PREGERSON, JUDGE RAUL A. RAMIREZ, JUDGE

NORMAN C. ROETTGER, JR., CHIEF JUDGE THOMAS A.

WISEMAN, JR., CHIEF JUDGE TERENCE T. EVANS,

JUDGE HENRY A. MENTZ, JR., CHIEF JUDGE WILBUR

D. OWENS, JR., JUDGE HENRY R. WILHOIT, J R., JUDGE

HAROLD A. BAKER, AND CHIEF JUDGE MICHAEL M.

MIHM, PLAINTIFFS-APPELLANTS

THE UNITED STATES, DEFENDANT-APPELLEE

[Filed: Dec. 26, 1995]

ORDER

A combined petition for rehearing and suggestion for

rehearing in banc having been filed by the APPELLEE,

and a response thereto having been invited by the court

and filed by the APPELLANT, and the petition for

rehearing having been referred to the panel that heard

68a

the appeal, and thereafter the suggestion for rehearing

in bane and response having been referred to the circuit

judges who are in regular active service,

UPON CONSIDERATION THEREOF, it is

ORDERED that the petition for rehearing be, and the

same hereby is, DENIED and it is further

ORDERED that the suggestion for rehearing in banc

be, and the same hereby is DECLINED.

The mandate of the court will issue on January 2,

1996.

FOR THE COURT,

FRANCIS X. GINDHART, CLERK

Dated: December 26, 1995

/s) By DIANE M. FRYE

DIANE M. FRYE

Chief Deputy Clerk

69a

APPENDIX G

SUPREME COURT OF THE UNITED STATES

October 7, 1996

Affirmed for Absence of Quorum

No. 95-1733. UNITED STATES v. HATTER, JUDGE,

UNITED STATES DISTRICT COURT FOR THE CEN-

TRAL DISTRICT OF CALIFORNIA, ET AL., C.A. Fed.

Cir. Because the Court lacks a quorum, 28 U.S.C. § 1,

and since a majority of the qualified Justices are of

the opinion that the case cannot be heard and deter-

mined at the next Term of the Court, the judgment

is affirmed under 28 U.S.C. § 2109, which provides

that under these circumstances the Court shall enter

its order affirming the judgment of the court from

which the case was brought for review with the same

effect as upon affirmance by an equally divided Court.

JUSTICE STEVENS, JUSTICE O’CONNOR, JUSTICE

GINSBURG, and JUSTICE BREYER took no part in the

consideration or decision of this petition. Reported

below: 64 F.3d 647.

70a

APPENDIX H

UNITED STATES COURT OF FEDERAL CLAIMS

No. 705-89 C

JUDGE TERRY J. HATTER, JR., MARY MARTIN

ARCENEAUX, ON BEHALF OF THE LATE JUDGE GEORGE

ARCENEAUX, JR., JUDGE PETER H. BEER, JUDGE

DUDLEY H. BOWEN, JR., DOLORES LEE BURCIAGA,

EXECUTIX OF THE ESTATE OF CHIEF JUDGE JUAN G.

BURCIAGA, DECEASED, JUDGE A.J. MCNAMARA, JUDGE

HARRY PREGERSON, JUDGE RAUL A. RAMIREZ, JUDGE

RAUL A. RAMIREZ, JUDGE NORMAN C. ROETTGER, JR.,

CHIEF JUDGE THOMAS A. WISEMAN, JR., CHIEF JUDGE

TERENCE T. EVANS, JUDGE HENRY A. MENTZ, JR.,

CHIEF JUDGE WILBUR D. OWENS, JR., JUDGE HENRY

R. WILHOIT, JR., JUDGE HAROLD A. BAKER AND CHIEF

JUDGE MICHAEL M. MIHM, PLAINTIFFS

THE UNITED STATES OF AMERICA, DEFENDANT

[June 6, 1997]

OPINION AND ORDER

TURNER, Judge.

This opinion addresses all damages issues related to

claims by 16 federal judges that their compensation was

7Tla

unlawfully diminished by imposition of Social Security

taxes. There are no material facts in dispute.’

For reasons stated below, we conclude that eight of

the plaintiffs are entitled to refunds of a portion of

Social Security taxes withheld from salary in January

1984, together with compound interest. We further

conclude, however, that any additional recovery is

either barred by the applicable statute of limitations or

offset by salary increases and that, consequently, the

bulk of plaintiffs’ claims for damages must be denied.

Plaintiffs are 16 federal district and circuit judges’

who took office prior to January 1, 1983. On that date,

all federal judges for the first time became subject to

the Hospital Insurance (Medicare) (hereafter HI) por-

tion of the Social Security tax.’ Tax Equity and Fiscal

Responsibility Act, Pub. L. No. 97-248, § 278(a), 96 Stat.

324, 559 (1982) (codified as amended at 26 U.S.C.

(1.R.C.) § 3121(u) (1988)). One year later, judges

1 Procedurally, the case stands on three dispositive motions:

plaintiffs’ motion filed November 12, 1996 for summary judgment

and defendant’s pair of motions filed December 18, 1996, one a

cross-motion for summary judgment and the other a motion to

dismiss-in-part on ‘\yaitations grounds. Oral argument was con-

ducted on March 7, 1997. The order in Part IX of this opinion

resolves all three dispositive motions.

2 In two instances, a current plaintiff is the legal successor in

interest to an original plaintiff. Further, Judge Raul A. Ramirez

resigned effective as of January 1, 1990.

8 The Hospital Insurance tax (HI) funds Medicare Part A and

is imposed upon employees by 26 U.S.C. § 3101(b). During 1983

the HI tax was 1.3 percent of the first $35,700 of compensation.

Def. Br. (12/18/96), p. 7.

72a

became subject to the Old Age Survivors and Disability

Insurance (hereafter OASDI) portion of the Social

Security tax, and since January 1, 1984, all federal

judges have been fully subject to Social Security taxes.‘

Social Security Amendments of 1983, Pub. L. No. 98-21,

§ 101(a)(1), (b)(1) and (d), 97 Stat. 65, 68, 69 (codified as

amended at 26 U.S.C. (I.R.C.) § 3121(b)(5)(E) (1988) and

42 U.S.C. § 410(a)(5)(E) (1988)). Social Security taxes

have been duly withheld from plaintiffs’ monthly com-

pensation since the effective dates of these acts.

Since the original plaintiffs filed their complaint on

December 29, 1989, there have been four prior pub-

lished opinions regarding this case. Chronologically,

they are Hatter v. United States, 21 Cl. Ct. 786 (1990)

(Hatter I, Hatter v. United States, 953 F.2d 626 (Fed.

Cir.1992) (Hatter ID, Hatter v. United States, 31 Fed.

Cl. 436 (1994) (Hatter III), and Hatter v. United States,

64 F.3d 647 (Fed. Cir.1995) (Hatter IV), aff'd by a

divided court, —— U.S. ——, 117 S. Ct. 39, 1386 L.Ed.2d

3 (1996).

In Hatter I, this court dismissed plaintiffs’ claim for

lack of jurisdiction, concluding that the plaintiffs were

seeking a tax refund and had failed to observe statutory

prerequisites to suit. Hatter I, 21 Cl. Ct. at 789. The

Federal Circuit reversed, holding that plaintiffs were

not seeking tax refunds, but rather were asserting

damage claims arising directly under the Constitution

which mandates the payment of money. Hatter II, 953

F.2d at 630. The case was remanded to this court for a

determination on the merits.

4 Pursuant to 26 U.S.C. §§ 3101 and 3121(a) and section 230 of

the Social Security Act (42 U.S.C. § 430), the 1984 OASDI tax was

5.4 percent of the first $87,800 of compensation.

73a

In Hatter III, 31 Fed. Cl. at 447, this court dismissed

plaintiffs’ claims on the merits. We held that although

Social Security taxes caused a reduction in the judges’

take-home pay, imposition of the taxes did not violate

the Compensation Clause of the Constitution, since the

Social Security taxes imposed were nondiscriminatory

and generally applicable to the public.

The Federal Circuit reversed, holding that the im-

position of Social Security taxes on sitting judges

diminished their compensation. Hatter IV, 64 F.3d at

652-53. The Federal Circuit remanded the case for

award of “tax refunds or recoveries for the sums

—-* withheld from the claimants’ salaries.” Id.

at .

In this damages proceeding, plaintiffs seek recovery

of the total amount of HI and OASDI taxes withheld

from their salaries from 1983 to the present, plus inter-

est compounded annually. In total, plaintiffs request an

prem in the amount of $1,059,675.59 (as of January 15,

Plaintiffs take the position that the court’s task is

limited to calculating the precise amounts of HI and

OASDI taxes withheld from their salaries and making

an award of those amounts with compound interest.

Plaintiffs say with respect to principal that the remand

directions of the Federal Circuit in Hatter IV are not

subject to any other reasonable interpretaticn.

Defendant argues that all plaintiffs’ claims are time-

barred to the extent they seek to recover for any

amounts withheld prior to January 1, 1984. Similarly,

74a

defendant argues that claims by those judges added to

the case in 1992 are time-barred at least for years 1984,

1985, and part of 1986 because those claims had accrued

more than six years before these judges or new claims

were added to the current action.

Defendant further argues that salary increases

beginning as of January 1, 1984 more than offset the

amount of any Social Security tax deductions from the

plaintiffs’ salaries for services during and after 1984.

Finally, defendant asserts that the plaintiffs are not

entitled to an award of interest on any recovery of

principal.

III

The history of claim presentation and appearance of

plaintiffs in this litigation provides a useful beginning

for resolution of damages issues.

The original complaint was filed on December 29,

1989 by ten judges. The complaint was specifically

limited to OASDI taxes withheld on and after January

1, 1984. The complaint did not object to or otherwise

address imposition of HI taxes which had become

effective on January 1, 1983 and did not request any

damages for taxes withheld during 1983.

After the remand instructing this court to resolve the

merits of the case, Hatter II, 953 F.2d at 630, a First

Amended Complaint was filed on June 25, 1992. This

pleading, submitted more than nine years after imposi-

75a

tion of HI taxes, added four new plaintiffs’ and set forth

an alternative claim for tax refunds but, like the

original complaint, expressed no objection to imposition

of 4. taxes and made no request for damages suffered

in ‘

A Second Amended Complaint was presented on

December 11, 1992 (filed on January 11, 1998). This

pleading added two new plaintiffs (bringing the total to

the current 16) and, for the first time, asserted a right

to damages resulting from imposition of HI taxes on

January 1, 1983.°

As is clear from the foregoing, all 16 plaintiffs first

presented a claim for recovery of HI taxes more than

nine (almost ten) years after the tax was imposed.

Although the original complaint presented OASDI

claims, only eight of the current plaintiffs were in the

case on the first remand in 1992. In June 1992, two

original plaintiffs reasserted and four new plaintiffs

asserted for the first time claims related to OASDI

taxes; in December 1992, two additional new plaintiffs

. After the first judgment by this court dismissing the claims

for failure of jurisdictional prerequisites, see Hatter J, 21 Cl. Ct. at

789, only eight of the original ten plaintiffs appealed from the

judgment, and consequently only eight plaintiffs were in the case

upon the first remand. The First Amended Complaint filed on

June 25, 1992 actually added six plaintiffs, but two of them (Judges

Bowen and Roettger) were original plaintiffs who had not appealed

from the first judgment.

® In the original complaint, { 16 at p. 5, and in the First

Amended Complaint, { 21 at pp. 5-6, plaintiffs in those pleadings

asserted that the imposition of OASDI taxes on January 1, 1984

represented the first time that Social Security deductions were

withheld from judges’ compensation.

76a

asserted for the first time claims related to OASDI

taxes.

(For ease of reference, we hereafter designate the

eight original plaintiffs who prosecuted the first appeal

and were part of the case upon the first remand as the

“original” plaintiffs and the remaining eight plaintiffs

who first joined or rejoined the suit after the first

remand as the “later-filing” plaintiffs.)

In the remainder of this opinion, we first address the

OASDI claims of the “original” plaintiffs.

Thereafter, we address (1) the OASDI claims of the

eight “later-filing” plaintiffs and (2) the claims of all

plaintiffs based on imposition of HI taxes. Resolution of

these claims involves application of statutes of limita-

tions together with related issues including the

“relation-back” doctrine and the “continuing claim”

doctrine.

Finally, we address the issue of interest on damages

awards for Compensation Clause violations.

In Hatter IV, 64 F.3d at 653, the Federal Circuit

remanded “for tax refunds or recoveries for the sums

improperly withheld from the claimants’ salaries.”

Remand was necessary because “the trial court did not

determine whether the Social Security taxes in this

case in fact diminished the claimants’ compensation.”

Id. at 652 (emphasis added).

77a

At all material times, the salaries of federal judges

have been paid in monthly installments as of the first

day of each calendar month for services during the

preceding calendar month. Hence, the salary payments

to plaintiffs on or about January 1, 1984 were for ser-

vices during December 1983, and OASDI taxes with-

held from such salary installment, although assessed

with respect to and extracted from salary paid in 1984,

had the effect of reducing compensation earned in

December 1983.

Defendant concedes, in light of Hatter IV, that eight

of the plaintiffs’ are entitled to damages for the amount

of OASDI taxes withheld from salary payments made

in January 1984 for services in December 1983. That

amount is $328.95 for seven of the original plaintiffs

who were district judges on January 1, 1984, and

$347.85 for the original plaintiff who was a circuit judge

on January 1, 1984. Def. Br. (2/25/97), p. 4.

. Because no salary increase which first became effec-

tive on or after January 1, 1984 was retroactive to De-

cember 1983, there has been no possible cure of diminu-

tion which occurred with respect to income accrued for

December 1983. Therefore, we agree with defendant

that the eight plaintiffs indicated are entitled to recover

the amount equal to OASDI taxes withheld from salary

payments in January 1984.

” District Judges Hatter, Arceneaux, Beer, Burciaga,

McNamara, Ramirez, and Wiseman (or their successors in interest)

and Circuit Judge Pregerson.

78a

We address in Part VIII below plaintiffs’ claims of

entitlement to interest on damages.

Defendant contends that pay increases in 1984 and

subsequent years have offset the diminution of plain-

tiffs’ salaries caused by all OASDI taxes (in fact, ali So-

cial Security taxes) withheld from salary payments af-

ter January 1, 1984. Even though the Federal Circuit

held in Hatter IV, 64 F.3d at 652, that “the Social Secu-

rity taxes diminished the claimants’ salaries by specific

amounts,” it did not have occasion to consider whether

a simultaneous or subsequent retroactive increase could

offset or cure the diminution in Article III compensa-

tion® resulting from the Social Security tax deductions.

The issue is one of first impression.

In resolving the issue, we start with a straight-

forward application of arithmetic and logic to the ques-

tion whether a simultaneous or subsequent pay raise

can cure prospectively any diminution resulting from

the imposition of a new tax. We then apply two con-

cepts gleaned from legislation and case law, to wit, (1)

that taxation of judges’ compensation does not, per se,

constitute an unlawful diminution, rather it is imposi-

tion of a new tax on sitting judges which results in a

prohibited diminution, and (2) that Congress has no

8 The Compensation Clause in the United States Constitution

provides: “The Judges, both of the supreme and inferior Courts,

shall hold their offices during good Behaviour, and shall, at stated

Times, receive for their Services, a Compensation, which shall not

be diminished during their Continuance in Office.” U.S. Const. art.

ITI, § 1.

79a

enforceable duty to raise the salaries of judges, rather

any increase is a matter of legislative discretion.

At the outset, one would suppose that there could be

no dispute that if, simultaneously with the imposition of

a new tax, Congress granted an increase in salary

which equaled or exceeded the tax, no diminution in the

level of compensation just prior to imposition of the tax

would have occurred. The mathematical result is the

same as if the judge received either no salary increase

or an increase in the amount of any excess of the raise

over the tax. An increase subsequent to imposition of a

new tax would have a similar effect prospectively.

Case law applying the Compensation Clause, U.S.

Const. art. III, § 1, makes plain that Article III does not

prohibit taxation of judges per se but only imposition of

new taxes on sitting judges, Hatter IV, 64 F.3d at 650.

In O’Malley v. Woodrough, 307 U.S. 277, 59 S. Ct.

838, 83 L.Ed. 1289 (1939), the Supreme Court held that

a federal circuit judge who was appointed after federal

income taxes had become effective may be taxed by

Congress, and that such taxation did not violate the

a Clause. O’Malley, 307 U.S. at 282, 59 S.

. at 340.

The Federal Circuit recognized, Hatter IV, 64 F.3d at

650, that all taxes on federal judges are not unconsti-

tutional:

Because the claimants in O’Malley took office

after Congress had made income taxes applicable to

80a

judges’ salaries, those judicial claimants suffered no

diminishment in compensation after taking office.

The tax was a pre-existing obligation factored into

the new judges’ compensation.

Plaintiffs concede that a general increase in federal

income tax rates would not constitute a diminution for

any judges currently in office.

We next explore the concept that Congress has no

enforceable obligation to raise the salaries of judges

and, consequently, whether judges receive any increase

in compensation is a matter within the discretion of

Congress.

In the Constitutional Convention of 1787 which

drafted Article III, proposals were made and serious

consideration given to prohibiting Congress from mak-

ing any increase to the compensation of a judge once

appointed. For discussions of various positions con-

sidered at the convention, see United States v. Will, 449

U.S. 200, 219-20, 101 S. Ct. 471, 482-83, 66 L.Ed.2d 392

(1980); Atkins v. United States, 214 Ct. Cl. 186, 217-221,

556 F.2d 1028 (1977), and Hatter IV, 64 F.3d at 651.

Indeed, such a prohibition on increases as well as

decreases in compensation was adopted with respect to

the President. U.S. Const. art. II, § 1, cl. 6 (“The Presi-

dent shall . . . receive . . . a Compensation, which

shall neither be increased nor diminished during the

Period for which he shall have been elected. . . .”).

It is reasonable to suppose that the Founders—who

seriously debated whether any increase in the salaries

of sitting judges should be permitted and agreed that

8la

there should be none for a President between elec-

tions—assumed that Congress would be under no

enforceable duty or obligation to raise judicial salaries.

Rather, Congress was left with discretion to increase

salaries when, in its wisdom, it chose to do so. The

same Convention drafted and proposed simultaneously

the Appropriations Clause, U.S. Const. art. I, § 9, ¢l.7

(“No money shall be drawn from the Treasury, but in

Consequence of Appropriations made by Law. . . .”).

The Supreme Court held in Will, 449 U.S. at 226-

101 S. Ct. at 486-88, that Congress may te ot

judicial salary increase provided in a statute so long as

it does so before the increase becomes effective. “The

Constitution delegated to Congress the discretion to fix

salaries and of necessity placed faith in the integrity

pow — oe yt elected representatives to

increases when iti P

Sant tek ce enor ging conditions demand.” Jd.

Earlier, the Court of Claims in Atkins v.

States, 214 Ct. Cl. 186, 221-28, 556 F.2d 1028 aor. ont

denied., 434 U.S. 1009, 98 S.Ct. 718, 54 L.Ed.2d 751

(1978), rejecting assertions by judges that their com-

pensation had been unconstitutionally diminished by

economic inflation, recognized that Congress has discre-

tion to increase judicial salaries or to refrain from doing

so if the absence of increases is not the result of an

intent to discriminate against the judiciary. No such

discriminatory intent is alleged in the instant case.

Congress has provided concerning judicial compensa-

tion, § 140 of Public Law No. 97-92, $5 Stat. 1183, 1900,

rayon ban 1981, that federal judges are not entitled

oO any increases “except as may be specifi

authorized by Act of Congress.” F —

82a

In sum, applying the concepts under discussion, we

conclude that when unlawful diminution of judicial

compensation results from imposition of a new tax, as

found by the Federal Circuit in Hatter IV, 64 F.3d at

653, that diminution is subject to setoff or cure by

simultaneous or subsequent salary increases which

Congress may, in its discretion, enact, it being under no

enforceable obligation to grant any increase. Thus, if

Congress mandates that federal judges pay a certain

amount in a new tax but, at the same time, gives those

judges a salary increase in an amount equal to or

greater than the amount of the tax, then any diminution

within the meaning of the Compensation Clause is

immediately cured. This is what occurred with respect

to plaintiffs.

The order of compensation events is obviously quite

important. If Congress increased judicial salaries and

thereafter took action (either a direct reduction in

nominal salary or imposition of a new tax) resulting in a

diminution of compensation, the earlier increase would

have become part of constitutionally protected compen-

sation adversely affected by the diminution. This is the

essence of Will, 449 U.S. at 200, 101 S. Ct. at 473-74. On

the other hand, if an increase in nominal salary occurred

simultaneously with or subsequent to such a diminu-

tion, the simultaneous or subsequent increase accom-

plishes a cure to the extent of such increase. As illus-

trated below, this is the situation in this case with

respect to CASDI taxes withheld for 1984 and sub-

sequent years.

83a

. The first Hatter panel in the Federal Circuit implic-

itly recognized that Congress may restore any diminu-

tion that may have occurred. The court reasoned that

“only a timely restoration of lost compensation would

prevent violation of the Constitution’s prohibition

against diminution of judicial salaries.” Hatter II, 953

F.2d at 628.

Similarly, in Will, the judge claimants apparently

recognized a prospective cure after an unlawful

reduction was restored. Will, 449 U.S. at 206, n.3, 101

S. Ct. at 476, n.3. There, in the first of four years at

issue, Congress had made a retroactive direct reduction

to nominal annual judicial salaries already in effect as of

October 1, 1976, but then, effective on March 1, 1977,

increased the salaries to a level which exceeded the

October 1, 1976 level. Jd. at 206, 101 S. Ct. at 476. The

= eres ans Be see apparently assumed that the

earlier ction was cured prospectivel

the March 1, 1977 restoration. we dail

Plaintiffs’ position on damages is exactly the same as

it would be if there had been no increase in nominal

salary since December 31, 1983. In plaintiffs’ analysis,

the government gets no credit for any part of the

increase in salary over the years. Neither does it get

any credit for the Social Security benefit.

It is consistent with plaintiffs’ position that if Con-

gress awarded all judges a pay raise of $1,000,000 per

year retroactive to January 1, 1983 but not specifically

or expressly related to the Social Security taxes

84a

imposed in 1983 and 1984, it would not cure the diminu-

tion resulting from imposition of the taxes. Under

plaintiffs’ theory, all Social Security taxes withheld

must be refunded to plaintiffs and there can absolutely

be no cure by subsequent increases in salary. Plaintiffs

insist that only a payment specifically designated as a

refund of or damages for the Social Security taxes

withheld can satisfy the unconstitutional diminution

found by the Federal Circuit.’

Plaintiffs’ current position on cure represents a

change of position for them. In both the original com-

plaint, ¢ 18 at 5, and in the First Amended Complaint,

q 21 at 6, plaintiffs, after reciting imposition of OASDI

taxes beginning on January 1, 1984, stated: “Either as

a result of these deductions, or as a result of defen-

dant’s failure to increase plaintiffs’ salaries by the

amount of these deductions, defendant has diminished

plaintiffs’ compensation.” (Emphasis added.) In the .

Second Amended Complaint, 4 23 at 6, plaintiffs made

the identical statement concerning cure with respect to

both OASDI taxes and HI taxes.

® At oral argument on damages issues conducted on March 7,

1997, the following colloquy occurred:

THE COURT [to plaintiffs’ counsel): You do take the

position that if the judges this year got a staggering raise, but

no reasons [were] assigned for it, it would not stop the running

of this diminution?

[PLAINTIFFS’ COUNSEL): Absolutely. That is our

position.

Transcript (3/7/97) at 10.

85a

Plaintiffs argue that Evans v. Gore, 253 U.S. 245, 264,

40 S. Ct. 550, 556-57, 64 L.Ed. 887 (1920), which the

Federal Circuit has held controlling in Hatter IV, 64

F.3d at 650, effectively precludes application of a cure

concept as just discussed. Evans held that imposition

of federal income taxes on federal judges constituted a

diminution in violation of the Compensation Clause.

Plaintiffs point out that the day after the income tax

was enacted, Congress increased the compensation of

federal judges by $1500, an amount significantly higher

than the income tax withheld from the judges’ salary.

Plaintiffs thus assert that “there was no argument that

the subsequent pay increase ‘cured’ this diminution.”

Pl. Reply Br. (1/16/97) at 8-9.

There are two defects in plaintiffs’ assertion that the

facts of Evans preclude cure as a matter of law. First,

there was no discussion whatever of this issue in the

Evans opinion. The Court made no mention of any

salary increase subsequent to imposition of the tax on

1918 income by an Act of Congress adopted in 1919.

Second, and more importantly, the facts of Evans

involved income tax for the single year 1918, while the

1919 salary increase referred to by plaintiffs was not

effective until March 1, 1919 and was prospective only.

Pl. Reply Br. (1/16/97) at A19-A21. We would agree, on

the Evans facts, that an unlawful reduction of income

with respect to one calendar year is not cured by a non-

retroactive salary increase, however large, in the next

calendar year.

86a

In calculating the diminution which resulted from the

imposition of Social Security taxes, the fundamental

first step is establishment of the compensation level

entitled to protection from diminution. (Because, as

explained below, all plaintiffs are time-barred from

contesting the withholding of HI taxes in 1983, we

address only the compensation level entitled to pro-

tection immediately prior to January 1, 1984, the effec-

tive date of the imposition of OASDI taxes.)

As of December 31, 1983, the nominal annual salary”

of district judges was $73,100, and the nominal annual

salary of circuit judges was $77,300. Consequently,

pursuant to the Federal Circuit’s holding in Hatter IV,

those were the compensation levels entitled to protec-

tion from diminution by imposition of the OASDI tax on

January 1, 1984.

Having determined that subsequent pay raises may

cure prospectively a Social Security tax withholding for

the same year to the extent the salary increase is equal

to or larger than the Social Security tax withholding,

we turn to the calculation of any actual diminution in

plaintiffs’ compensation.

For calendar year 1984, effective as of (retroactive

to) January 1, district judges received an increase in

1 In this context, “nominal annual salary” designates the

stated lawful salary before deduction of federal and state income

taxes, Social Security taxes and voluntary items such as life and

health insurance premiums and survivor annuity premiums.

87a

nominal annual salary of $2,900; circuit judges received

a corresponding increase of $3,100.

The OASDI tax imposed on each plaintiff for calen-

dar year 1984 was $2,041.20. Thus, the salary increase

for each plaintiff over the 1983 compensation base more

than offset the OASDI tax for 1984. (Although not

relevant for present purposes, the 1984 salary increase

— than offset the total of both OASDI and HI taxes

or 1984.)

For calendar year 1985, effective as of January 1,

district judges received an additional increase in nomi-

nal annual salary of $2,700 resulting in a cumulative

adjustment of $5,600 over the base protected from

diminution by OASDI taxes; circuit judges received a

corresponding increase of $2,800 resulting in a cumu-

lative adjustment of $5,900.

The OASDI tax imposed on each plaintiff for calen-

dar year 1985 was $2,257.20. Thus, the cumulative

salary increase over the 1983 base more than offset the

OASDI tax for 1985. (Although not relevant for pre-

sent purposes, the cumulative salary increase more

— offset the total of both OASDI and HI taxes for

1985.)

As illustrated in the immediately preceding subpart,

by calendar year 1985, the cumulative increase in nomi-

nal annual salary for both district and circuit judges

exceeded the base protected from diminution by

OASDI taxes by more than $4,000; these increases have

88a

remained in effect. In contrast, the total of OASDI tax

imposed on each plaintiff has never exceeded $4,000 in

any calendar year. Thus, the cumulative salary in-

crease over the 1983 base has more than offset the

OASDI tax for each year from 1984 through 1996.

For 1986, although no increase to the nominal anrual

salary of any of the plaintiffs became effective, the

cumulative increase over the protected base remained

in effect, i.e., $5,600 for district judges and $5,900 for

circuit judges. The OASDI tax imposed on each plain-

tiff for calendar year 1986 was $2,394. Thus, the

cumulative salary increase over the 1983 base more

than offset the OASDI tax for 1986. (Although not rele-

vant for present purposes, the cumulative increase

more than offset the total of both OASDI and HI taxes

for 1986.)

For calendar year 1987, district judges received an

increase in nominal annual salary of $2,400 effective on

January 1 and an additional increase of $8,400 effective

on March 1, resulting in a cumulative adjustment of

$16,400 over the base protected from diminution by

OASDI taxes; circuit judges received corresponding

increases of $2,500 and $9,300, resulting in a cumulative

adjustment of $17,700.

The OASDI tax imposed on each plaintiff for

calendar year 1987 was $2,496.60. Thus, the cumulative

salary increase over the 1983 base more than offset the

OASDI tax for 1987. (Although not relevant for pre-

89a

sent purposes, the cumulative increase more than offset

the total of both OASDI and HI taxes for 1987.)

As illustrated in the immediately preceding subpart,

by calendar year 1987, the cumulative increase in nomi-

nal annual salary for both district and circuit judges far

exceeded $6,000; these increases have remained in

effect. In contrast, the total of Social Security taxes

(OASDI and HI taxes) imposed on each plaintiff has

never exceeded $6,000 in any calendar year. See Sched-

ules A through D, Def.Br. (2/25/97) and Appendices B &

C, Pl. Br. (11/12/96). Thus, the cumulative salary in-

crease over the 1983 base has more than offset the total

of both OASDI and HI taxes for each year from 1984

through 1996, and, consequently, no unlawful diminu-

tion in judicial compensation occurred during those

years.

There were additional salary increases for both

district and circuit judges effective on February 1, 1990

and on January 1 of 1991, 1992 and 1993." As of Jan-

uary 1, 1993, the total nominal annual salary of district

judges was (and remains) $133,600, and the correspond-

ing salary of circuit judges was (and remains) $141,700.

These most recent salary levels reflect a cumulative

increase in nominal annual salary over the 1983 base

protected from diminution by OASDI taxes ($73,100 for

11 The increases in nominal annual salary for district judges

were in the amount of $7,500 in 1990, $28,500 in 1991, $4,400 in 1992

and $4,100 in 1998. For circuit judges the increases were $7,100 in

1990, $30,200 in 1991, $4,600 in 1992 and $4,400 in 1993.

90a

district judges and $77,300 for circuit judges) in the

amount of $60,500 for district judges and $64,400 for

circuit judges. These annual sums are more than ten

times higher than the total of Social Security taxes

withheld during any calendar year.

We next address (1) the OASDI claims of the eight

later-filing plaintiffs and (2) the claims of all plaintiffs

based on imposition of HI taxes.

Resolution of these claims involves application of

statutes of limitations together with two related issues:

(1) whether the “relation-back” doctrine applies to

claims of the later-filing judges and to new claims by

the “original plaintiffs” first asserted in 1992, and (2)

whether the “continuing claim” doctrine is applicable to

the claims asserted in this case. Alternatively, applica-

tion of the concept of cure discussed in Parts IV and V

above has potential application to a complete resolution

of these remaining claims.

Reference is made to Part I of this opinion for des-

ignation of the two statutes which resulted in imposi-

tion of Social Security taxes on federal judges and the

effective date of each. Suffice it to say at this juncture

that HI taxes became effective and were first withheld

from judicial compensation on January 1, 1983, and that

OASDI taxes became effective and were first withheld

from judicial compensation on January 1, 1984.

Reference is further made to Subpart III A above for

a statement of the timing of claim presentation and

9la

appearance of plaintiffs in this litigation. Suffice it to

say for limitations purposes that the eight later-filing

judges first presentec (or reasserted) their claims

based on OASDI taxes in June and December 1992

(more than eight years after imposition of OASDI taxes

on judges) and that all plaintiffs first presented claims

based on imposition of HI taxes in December 1992

(more than nine years after imposition of HI taxes on

judges).

A claim against the United States for damages is

barred unless the complaint is filed within six years

after the claim first accrued. 28 U.S.C. §§ 2401(a) &

2501." A cause of action accrues “when all the events

have occurred which fix the liability of the Government

and entitle the claimant to institute an action,” Oceanic

S.S. Co. v. United States, 165 Ct. Cl. 217, 225 (1964), and

“the plaintiff was or should have been aware of their

existence,” Hopland Band of Pomo Indians v. United

States, 855 F.2d 1573, 1577 (Fed. Cir.1988). “A constitu-

tional claim can become time-barred just as any other

claim can. . . . Nothing in the Constitution requires

otherwise.” Block v. North Dakota ex rel. Board of

University & School Lands, 461 U.S. 273, 292, 103 S.

Ct. 1811, 1822, 75 L.Ed.2d 840 (1988). See Lunaas v.

2 Title 28 U.S.C. § 2401(a) provides in pertinent part:

“{E}very civil action commenced against the United States shall be

barred unless the complaint is filed within six years after the right

of action first accrues.”

Title 28 U.S.C. § 2501 provides in pertinent part: “Every claim

of which the United States Court of Federal Claims has jurisdic-

tion shall be barred unless the petition thereon is filed within six

years after such claim first accrues.”

92a

United States, 936 F.2d 1277, 1279-80 (Fed. Cir.1991),

cert. denied, 502 U.S. 1072, 112 S. Ct. 967, 117 L.Ed.2d

132 (1992) (applying Block to bar suit based on Article

VI of Constitution brought more than six years after

accrual of claim).

The Supreme Court has stated that the “limitations

and conditions upon which the Government consents to

be sued must be strictly observed and exceptions

thereto are not to be implied.” Soriano v. United

States, 352 U.S. 270, 276, 77 S. Ct. 269, 273, 1 L.Ed.2d

306 (1957).

Based on this law, the critical initial matters for

determination are the dates on which plaintiffs’ claims

for the two new taxes first accrued. Plainly, those

dates are January 1, 1983 for HI taxes and January 1,

1984 for OASDI taxes, the effective dates of imposition

of the taxes and the respective dates on which each tax

was first withheld from plaintiffs’ salaries.

A comparison of these claim accrual dates with the

initial claim-presentation dates significantly exceeding

six years from claim accrual leads inescapably to the

conclusion that unless the claims can be deemed to

relate back to a date within six years of initial accrual,”

the claims are barred under the two controlling statutes

of limitations.

18 Unless the claims are deemed to relate back to a time within

six years of first accrual or unless they are deemed to be “con-

tinuing claims,” the six-year statutes of limitations would have run

on HI claims on January 1, 1989 and on OASDI claims on January

1, 1990.

93a

Plaintiffs argue that the claims of the later-filing

judges asserted in the first and second amended com-

plaints (June and December 1992) relate back to the

claims in the original complaint (December 29, 1989)

pursuant RCFC 15(c) and thus are timely. RCFC 15(c)

provides: “Whenever the claim or defense asserted in

the amended pleading arose out of the conduct, transac-

tion, or occurrence set forth or attempted to be set

forth in the original pleadiig, the amendment relates

back to the date of the original pleading.”

The relation-back issue concerning OASDI taxation

is different from the issue concerning HI taxation:

(a) To the extent of their OASDI claims, the

later-filing plaintiffs were asserting the same cause

of action as that set forth in the original complaint.

Therefore, while there can be no question that the

OASDI “claim .. . asserted in the amended

pleading arose out of the . . . occurrence set forth

. . . in the original” complaint, the relation-back

problem of the later-filing judges is that they were

not the same as the original plaintiffs. Though

similarly situated, their position in the case is no

different than it would be if each later-filing plaintiff

had filed his own separate suit.

(b) To the extent of the HI claims first pre-

sented in the Second Amended Complaint, all plain-

tiffs are asserting a claim which did not arise “out of

the conduct, transaction, or occurrence set forth or

attempted to be set forth in the original pleading.”

94a

“The general rule . . . is that the rule of relation-

back does not extend to amendments that add new

parties or causes of action.” Snoqualmie Tribe of

Indians v. United States, 178 Ct. Cl. 570, 588, 372 F.2d

951, 961 (1967). We address these two relation-back

issues separately.

The matter of potential relation back of HI claims

may be dealt with succinctly. When these claims were

broached by all plaintiffs in the Second Amended Com-

plaint submitted almost ten years after first accrual,

they were totally new diminution claims.

The diminution claims set forth in the original and

the first amended complaints were emphatically and

specifically based on imposition of OASDI taxes pur-

suant to legislation adopted in 1983. Although at the

time of filing of the original complaint the HI tax

(imposed pursuant to legislation adopted in 1982) had

been in effect for almost one year, it was not mentioned.

Consequently, the HI claims of all plaintiffs did not

arise “out of the conduct, transaction, or occurrence set

forth or attempted to be set forth in the original plead-

ing,” RCFC 185(c), and do not relate back to any date

prior to December 11, 1992.

Interestingly, even if the HI tax claims of all plain-

tiffs were deemed to relate back to the original case

filing date, those claims wo 1d still be time barred since

the original filing date (December 29, 1989) was more

than six years after the claims for HI taxes first

accrued (January 1, 1983). Further, even if all HI taxes

withheld from the salary of each judge during 1983 are

viewed as having been withheld on the last salary

95a

payment date for judges during calendar year 1983,

that day would be December 1, 1983. Thus, in any

event, the HI claims would still have been presented

more than six years after they first accrued.

We address in Part VII below whether plaintiffs’ HI

claims are continuing claims not time barred to the

extent of taxes withheld after December 11, 1986, the

commencement of the six-year period preceding

presentation of the Second Amended Complaint. (How-

ever, alternatively, even if the claims are deemed con-

tinuing claims, any portion of such claim accruing after

December 11, 1986 has been offset by salary increases,

as explained in Parts IV and V above.)

14 Plaintiffs suggest that the cause of action for diminution

resulting from HI taxes did not first accrue until April 15, 1984.

Pl.Br. (1/16/97) at 21-23; Transcript (3/7/97) at 16-21. Their position

is grounded on 26 U.S.C. (I.R.C.) § 6513(c) which provides that for

purposes of 26 U.S.C. § 6511, Social Security taxes with respect to

one calendar year, if paid before April 15 of the following calendar

year, are deemed paid and the corresponding returns are deemed

filed on April 15 of such succeeding year. But 26 U.S.C. (I.R.C.)

§ 6511 establishes deadlines (“3 years from the time the return was

filed or 2 years from the time the tax was paid”) for administrative

refund claims which must precede any court suit for tax refunds.

See 26 U.S.C. (1.R.C.) § 7422(a).

Plaintiffs’ position concerning accrual of HI claims is meritless

for two reasons. First, the Federal Circuit has determined that

the claims asserted in this litigation are not formal tax refund

claims, Hatter I], 953 F.2d at 630; consequently sections 6511 and

6513(a) of the Internal Revenue Code simply have no application.

Second if these tax code provisions controlled the accrual of plain-

tiffs’ claim, the limitations period would have expired not later

than April 15, 1987 (three years after the deemed return date for

1983 taxes), years before the filing date of the original complaint.

96a

We next address the relation-back issue with respect

to assertion of OASDI claims by the later-filing plain-

tiffs. As stated in Subpart VI D above, the issue with

respect to OASDI taxes is whether or under what cir-

cumstances new parties may be added to a case and

obtain the benefit of the original filing date. The

general rule is that amendments which add new parties

do not relate back. We must explore whether the later-

filing plaintiffs qualify for an exception to the rule.

A recent circuit court of appeals pronouncement on

amendments seeking to add parties to a complaint

asserting a claim on which the controlling statute of

limitations has expired is as follows:

An amendment adding a party plaintiff relates back

to the date of the original pleading only when:

1) the original complaint gave the defendant ade-

quate notice of the claims of the newly proposed

plaintiff; 2) the relation back does not unfairly

prejudice the defendant; and 3) there is an identity

of interests between the original and newly pro-

posed plaintiff.

In re Syntex Corp. Securities Litigation, 95 F.3d 922,

935 (9th Cir. 1996) (citing Bestg v. Dolphin Boating &

Swimming Club, 683 F.2d 1271, 1278-79 (9th Cir.

1982)).

Court of Claims case law makes plain that in suits

against the United States, the “identity of interests”

requirement depends on representational relationships

among the original and newly proposed parties, not on

97a

merely being similarly situated with respect to the

claim in the original pleading.

Here, even if it could be said that the original timely

complaint gave the government adequate notice of the

OASDI claims of the later-filing judges, and even if it

could further be said that relation back of the OASDI

claims of the later-filing plaintiffs would not unfairly

prejudice the government, the later-filing judges do not

share the requisite “identity of interests” with the

original plaintiffs.

This issue was addressed by the Court of Claims in

Snoqualmie Tribe of Indians, 178 Ct. Cl. at 585-89, 372

F.2d at 959-61. In that case, the Snoqualmie Tribe

brought an action against the United States based upon

alleged inequity in a treaty with various Indian tribes.

After suit was filed, the Snoqualmie Tribe realized that

the original petition should have included a claim on

behalf of the Skykomish Tribe, since it appeared that

the Skykomish tribe either had been a subgroup of the

Snoqualmie Tribe at the time the treaty was made or

had merged with the Snoqualmie Tribe thereafter

through intermarriage. Jd. at 574, 372 F.2d at 953. The

Snoqualmie plaintiff sought to amend its complaint to

include a claim on behalf of the by then extinct

Skykomish Tribe, but the five-year limitations period

had expired. Jd. at 585, 372 F.2d at 959. Thus, the

court was required to resolve whether the amendment

would be allowed to relate back to the original pleading,

avoiding the statute of limitations.

After first announcing the general rule that the

doctrine of relation-back does not extend to amend-

ments that add new parties, Jd. at 588, 372 F.2d at 961,

the Court of Claims found that there existed a unique

98a

connection between the Snoqualmie Tribe and the

Skykomish Tribe, the former being the “corporate re-

presentative” of the latter in that case. Id. at 582, 372

F 2d at 958. Thus, the court held that the Skykomish

claim could relate back to the original Snoqualmie

claim. Id. at 588-89, 372 F.2d at 961. The court rea-

soned that “on our theory of representation there is no

new party added by amendment. The Snoqualmie

Tribe is the only claimant; it is simply an entity serving

in two representative capacities.” Id. at 588, 372 F.2d

at 961. The court further explained that “we would

have greater difficulty allowing the amendment if we

thought it was brought by an entirely unrelated party

even though it arose out of the same transaction.” Id.

at 589, 372 F.2d at 961.

This requirement of representative relationship in

order for an amendment adding new parties to relate

back was reaffirmed by the Court of Claims in Baldwin

Park Community Hospital v. United States, 231 Ct. Cl.

1011, 1982 WL 25837 (1982). In that case, an original

hospital plaintiff filed an amended petition in which

thirty-six hospital plaintiffs with similar claims were

added several months after the original petition was

filed. Jd. 231 Ct. Cl. at 1011. (It does not appear

whether a limitations period had expired in the interim,

but the court treated the difference in filing dates as

significant.) The defendant argued that the new plain-

tiffs should not enjoy the benefit of the original peti-

tion’s filing date pursuant to a relation-back rule

identical to RCFC 15(c). The Court of Claims found

that the new plaintiffs were operated and owned either

directly or through subsidiary corporations by the

original plaintiff, or by a company to which the original

plaintiff was the legal successor in interest. On the

99a

basis of this representative relationship (common

corporate ownership of the hospitals), the court allowed

the new plaintiffs to relate their similar claims back to

the original complaint’s filing date. Jd. at 1012. The

requisite “identity of interests” was satisfied in that cir-

cumstance. See generally, Custer v. United States, 224

Ct. Cl. 140, 154-55, 622 F.2d 554, 563, cert. denied, 449

US. 1010, 101 S. Ct. 565, 66 L.Ed.2d 468 (1980) (deny-

ing relation back to original filing date by a new party

alleging same claim).

Recently, this court applied Court of Claims prece-

dent concerning the relation-back doctrine to facts

similar to those in the case at bar. Creppel v. United

States, 33 Fed. Cl. 590 (1995). In 1991, shortly before

expiration of the six-year statute of limitations, land-

owners filed several related suits (consolidated by the

court) alleging takings. After the limitations period had

expired, the original plaintiffs moved to add 43 new

plaintiffs who owned land affected by the alleged

takings. The court found that, even assuming that the

claims of the new plaintiffs arose out of the same

transaction or occurrence that gave rise to the original

complaints, there was no corporate or other legal

relationship between the new and the original plaintiffs.

Creppel, 33 Fed. Cl. at 596. The court stated:

The identity of interest between the original and

proposed new plaintiffs is limited to geographic

proximity—the fact that all landowners, at the time

of the alleged taking, owned property within [the

affected site). The geographic proximity of a dis-

crete parcel of land to property owned by plaintiffs

asserting a takings claim is not enough.

100a

Id. Finding no “formal connection” between the

original plaintiffs and the proposed new plaintiff, the

court held that the new plaintiffs could not relate their

claims back to the filing date of the original complaints.

Thus, their claims were barred by the statute of limita-

tions.

Turning to the case at bar, there is no formal con-

nection or representational relationship among the

original and the later-filing judges. In essence, each

judge is suing individually for diminution of his per-

sonal compensation.

Plaintiffs’ interpretation of the relation-back doctrine

would allow unrelated parties, after expiration of the

limitations period, to obtain the benefit of a timely filed

complaint so long as the same governmental action

caused their damages. Under this approach, plaintiffs

with common grievances could evade the statute of

limitations as a matter of course by merely adding

themselves to a timely filed complaint at any time after

the expiration of the statute of limitations. We do not

believe that this would be consistent with congressional

intent and controlling precedent dealing with statutes

of limitation and relation back.

It would be anomalous if the later-filing judges in this

civil action were deemed timely by application of the

relation-back rule when other judges who filed a sepa-

rate suit on the same day alleging an identical cause of

action for diminution would be deemed untimely.

Based on the foregoing, we conclude that the OASDI

claims of the later-filing judges, all first presented more

than six years after first accrual, do not relate back to

10la

the timely filing date of the original complaint and that,

consequently, those claims are barred.

We address in Part VII below whether the later-

filing plaintiffs’ OASDI claims are continuing claims not

time barred to the extent of taxes withheld after June

and December 1986, the commencement months of the

six-year periods preceding presentation of the First

and Second Amended Complaints. (However, alterna-

tively, even if the claims are deemed continuing claims,

any portion of such claim accruing after June 1986 has

been offset by salary increases, as explained in Parts IV

and V above.)

Vil

. The next issue for resolution is whether the diminu-

tion claims are “continuing claims” so that even if some

were not presented within six years of the time of first

accrual, they may nonetheless be maintained with re-

spect to damages accruing within the six-year period

preceding presentation. (The issue was raised by de-

fendant in connection with HI taxes, Def. Br. (2/25/97),

p. 6 n.3, presumably because no plaintiff submitted a

timely claim for HI taxes. The issue is equally applica-

ble to OASDI claims of the later-filing plaintiffs.)

The continuing claim doctrine provides that when the

government owes a plaintiff a continuing, recurring

duty to make payments of money, a new cause of action

arises with each breach of that duty. Tabbee v. United

States, 30 Fed. Cl. 1, 5 (1998) and cases therein cited.

See generally Friedman v. United States, 159 Ct. Cl. 1,

310 F.2d 381 (1962), cert. denied sub nom. Lipp v.

102a

United Sv. es, 373 U.S. 932, 83 S. Ct. 1540, 10 L.Ed.2d

691 (1963I~“See especially Acker v. United States, 23 Cl.

Ct. 803, 804-06 (1991), for history and analysis of the

doctrine. Under that doctrine, each incident of with-

holding an installment of an obligation to make continu-

ing payments gave rise to a new claim for damages.

The continuing claim doctrine prevented a statute of

limitations from shielding an offender in an ongoing

wrongdoing, and protected recurring claims that might

otherwise be barred if based upon events occurring

more than six years prior to suit.

However, application of the continuing claim doctrine

was rejected by the Federal Circuit in Hart v. United

States, 910 F.2d 815 (Fed. Cir. 1990). There the widow

of a military retiree filed suit seeking to recover

Survivor Benefit Plan annuity payments due after her

husband’s death. The suit was filed more than six years

after the death of her husband, upon which date she

became eligible to receive the benefits. Jd. at 816.

Even though her suit was filed more than six years

after her husband’s death, plaintiff in Hart urged the

court to apply the continuing claim doctrine. She

argued that she had a new claim each month for an

annuity installment payment and that her claim as to

that amount “first accrued” on the first day of each

month. Jd. at 818. The Federal Circuit rejected her

argument. The court reasoned that applying the con-

tinuing claim doctrine would mean that “the statute of

limitations would never run in a claim such as this one,

with respect to the six years of benefits preceding the

filing of suit and thereafter.” Jd. The court continued:

“Because all events necessary to her benefits claim had

103a

occurred when her husband died, we conclude that

plaintiffs claim for . . . annuity benefits is not a

‘continuing’ claim.” Jd.

The Federal Circuit reasoned: “Exceptions cannot

be engrafted on the statute of limitations so as to allow

claims to be asserted beyond the six year time limit set

forth in Section 2501. . . . Only Congress can lengthen

the time period for bringing suit against the United

States.” Jd. at 817. “Congress has not chosen to extend

the time limit for suits such as this one.” Jd. at 819. See

Sankey v. United States, 22 Cl. Ct. 748, 746 ( 1991),

affd, 951 F.2d 1266 (Fed. Cir. 1991) (stating, based on

Hart, 910 F.2d 815: “this court no longer recognizes the

continuing claim doctrine”); but see Acker, 23 Cl. Ct. at

804-06 (recognizing that the continuing claim doctrine

“may be analytically suspect” and “is not readily recon-

ciled with the wording of the statute of limitations,” but

holding that Hart “cannot be interpreted to invalidate

the continuing claim doctrine” because Hart was not an

en banc decision that could overrule Court of Claims

precedent).

Likewise, in a more recent case, Fallini v. United

States, 56 F.3d 1378 (Fed. Cir. 1995), cert. denied, 517

U.S. 1243, 116 S. Ct. 2496, 185 L.Ed.2d 189 (1996), the

Federal Circuit refused to apply the continuing

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