# Appendix — United States v. Hatter

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Appendix
- **Published:** January 1, 2001
- **Citation:** 532 U.S. 557

## Text

. 2upreme Court, U.S, . :

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No. VAFICE OF nieaeeta
Jn the Supreme Court of the Gnited States

UNITED STATES OF AMERICA, PETITIONER
v.
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

v.
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)

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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).

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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

3.

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.

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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

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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).

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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

Pt me

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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

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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.

bs keel

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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

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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

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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.

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APPENDIX B

UNITED STATES CLAIMS COURT

No. 705-89 C

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

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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

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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.

II
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

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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”).

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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

v.
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.

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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.

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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

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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

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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,

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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.

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APPENDIX D
UNITED STATES COURT OF FEDERAL CLAIMS

No. 705-89 C

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

Il
A

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.

A

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-

© See Jefferson County v. Acker, 850 F. Supp. 1536, 1548 (N.D.
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.

1

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.

© Plaintiffs posit a scenario (first rhetorical] raised in Atkins
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.

Cc

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.

1

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.

D

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

1

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.
2

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.

IV

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.

Vv

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).
I.

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

v.
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

v.
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.

I

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 .

IT

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.

A

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.)

B

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.

IV

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

A

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.

B

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.

1

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.

2

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.
3

We next explore the concept that Congress has no
enforceable obligation to raise the salaries of judge

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385014_0380%3A03. Public record. Not legal advice.