Opposition Brief — Microsoft Corp. v. Vizcaino

i.

————————————— or wea rcec 5 t

Supreme Court of the United States

-

October Term, 1997

MICROSOFT CORPORATION, et al.,

Petitioners,

VS.

DONNA VIZCAINO, et al.,

Respondents.

On Petition for a Writ of Certiorari to the

United States Court of Appeals for the Ninth Circuit

RESPONDENTS’ BRIEF IN OPPOSITION

STEPHEN K. STRONG

Counsel of Record

DAVID F. STOBAUGH

BENDiCH, STOBAUGH

& STRONG, P.C.

Attorneys for Respondents

506 Second Avenue

Of Counsel: Suite 2010

Seattle, WA 98104

CHARLES K. WIGGINS (206) 622-3536

241 Madison Avenue, North

Bainbridge Island, WA 98110

(206) 780-5033

utz

(800) 3 APPEAL + (800) 5 APPEAL « (800) BRIEF 21 at liate

Services, inc.

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QUESTIONS PRESENTED

Petitioner Microsoft asks the Court to review an en banc

decision of the Ninth Circuit, in which the court re-affirmed a

prior panel decision on a claim involving the Employee Stock

Purchase Plan (ESPP) governed by Washington state law. The

Washington State Department of Labor and Industries, in its

amicus brief supporting the panel's decision, said the Ninth

Circuit’s opinion is “consistent with existing law concerning

[the] employer-employee relationship,” Wash. State Br., p. I,

and it “merely applies recognized law and is breaking no new

ground,” id., p. 10.

Microsoft asserts the Ninth Circuit “failed even to

acknowledge state decisional law that is directly on point,” citing

(Pet., pp. i, 13), a 1978 decision by division three of the

Washington court of appeals, Daniel v. Pacific Northwest Tel.

Co., 580 P.2d 652 (Wash. App. 1978). Microsoft fails to mention

that it nowhere cited Daniel in its Appellees’ Brief in the Ninth

Circuit. In any event, Daniel has been effectively overruled by

the Washington Supreme Court. Moreover, Microsoft itself

vigorously opposed certification of any issue to the Washington

Supreme Court by the Ninth Circuit.

Accordingly, the questions presented are:

1. Is the Ninth Circuit's failure to apply the reasoning of a

1978 intermediate Washington appellate court decision, Daniel,

to the facts of this case such a far departure from the accepted

and usual course of judicial proceedings as to “call for an

exercise of this Court's supervisory power,” particularly where

Microsoft did not even cite Daniel in its Appellees’ Brief in the

Ninth Circuit?

i

2. Do the following constitute persuasive evidence that the

Washington Supreme Court would not apply to the facts of this

case the 1978 holding of division three of the Washington court

of appeals in Daniel that the “independent contractor” label used

in the contract was binding in that case?

* The Washington Supreme Court effectively overruled

the Daniel decision in 1990 when it held that extrinsic

evidence, including evidence of surrounding

circumstances and of the parties’ subsequent conduct,

is always admissible to interpret the meaning of a

contract;

¢ Decisions of division three of the Washington court of

appeals are not controlling outside of Eastern

Washington;

* Daniel was inconsistent with general Washington

contract law even when it was originally decided; and

* Daniel is factually distinguishable.

3. Does anything in the Ninth Circuit panel or en banc

decision support Microsoft's contention that the Ninth Circuit

completely based its decision on “inapplicable federal statutes”?

4. Does any rule, precedent, or policy support Microsoft's

request that this Court accept review for the purpose of certifying

State law issues to the Washington Supreme Court, particularly

where Microsoft vigorously opposed such certification below,

even after the Ninth Circuit’s panel decision in favor of the

plaintiff Workers?

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LIST OF PARTIES

Microsoft's Petition identifies the eight named plaintiffs as

Respondents. There are also others in a court-certified class,

see Pet., p. A39 n. 1, most of whom were not identified prior to

summary judgment below. The plaintiffs and members of the

class are collectively called “the Workers” herein.

iv

TABLE OF CONTENTS

Page

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B. Magistrate Judge's Report And Recommendations

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iD. . Ee PON TOOGINOR oi cise es Be ees 6

Contents

Reasons for Denying the Writ .........cccccececes

1.

Il.

The Court Should Deny Certiorari Because the

Ninth Circuit's Failure to Apply to the Facts of

this Case the Reasoning of a 1978 Intermediate

Washington State Appellate Court Decision Which

Was Not Cited in Microsoft's Appellate Brief Is

Not a Departure from the Accepted and Usual

Course of Judicial Proceedings Calling for an

Exercise of this Court’s Supervisory Power. ...

This Court Should Deny Certiorari Because There

Is Persuasive Evidence That The Washington

Supreme Court Would Not Apply to the Facts of

this Case the 1978 Holding of Division Three of

the Washington Court of Appea!s Stating That the

“Independent Contractor” Label Used in the

Contract in That Case Was Binding on Those

NO pee ee 7 Lae Ninens NOE Oat OS

A. Prior Cases Decided By A State Intermediate

Appellate Court Are Not Binding On The

Federal Courts If There Is Persuasive

Evidence That The Highest State Court Would

gg Pe er rey ere

B. Decisions Of Division Three Of The

Washington Court Of Appeals Are Not

Controlling Even In Washington. ........

C)

The Washington Supreme Court Effectively

Overruled The Daniel Decision When It Held

In 1990 That Extrinsic Evidence Is Always

Admissible To Interpret A Contract. .....

10

12

12

os

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Contents

D. The Washington Courts Would Not Follow

Daniel Because It Is Factually Distin-

| EPP ETT Speer Tree?

E. Daniel Was Inconsistent With Washington

Law Even When It Was Originally Decided.

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Ill. Neither the Panel Decision, Nor the En Banc Ninth

Circuit Decision, Is Based on “Inapplicable

Federal Statutes,” as Microsoft Claims. ......

IV. No Rule, Precedent, or Policy Supports

Microsoft's Remarkable Proposal That This Court

Should Grant Certiorari Only to Certify State Law

Issues to the Washington Supreme Court. .....

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Page

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TABLE OF AUTHORITIES

Cases Cited:

Berg v. Hudesman, 801 P.2d 222 (1990) .......... 16, 17, 22

Bernhardt v. Polygraphic Co., 350 U.S. 198 (1956) ... 13, 15

Black v. Evergreen Land Devel., 450 P.2d 470 (1969) . 22

Boggs v. Whitaker, 784 P.2d 1273 (Wash. App. 1990) .. 21

Burnside v. Simpson Paper Co., 864 P.2d 937 (1994) .. 16

Cook vy. Vennigerholz, 269 P.2d 824 (1954) .......... 22

Daniel v. Pacific Northwest Tel. Co., 580 P.2d 652, review

denied, 90 Wa.28 1025 CIGTB) 2. ccc cc enccceess

Be a ater bas 10, 15, 16, 17, 18, 19, 20, 21, 22, 23

Denny's Restaurants, Inc. v. Security Union Title Ins. Co.,

OP aE GI ID ke bhi oc hye sh tdee cinta a saes 20

DeWater v. State, 921 P.2d 1059 (Wash. 1996) ....... 19

Dopps v. Alderman, 121 P.2d 388 (Wash. 1942) ..... 21

Ebling v. Gove’s Cove, 663 P.2d 132 (Wash. App. 1983)

erp TE SON ur re pe se Te pra a 19

Erie RR v. Tompkins, 304 U.S. 64 (1938) ..........+- 12

vill

Page

Fed. Finance Co. v. Humiston, 404 P.2d 465 (1965) ... 22

Fidelity Union Trust Co. v. Field, 311 U.S. 169 (1940)

saint Laon eA RN ee ESAS be ke ae CR 12, 13, 14

Hollingberry v. Dunn, 411 P.2d 431 (Wash. 1966) ... 19, 20

In re Salvini's Estate, 397 P.2d 811 (Wash. 1964) .... 11

Jacoby v. Grays Harbor Chair & Mfg., 468 P.2d 666

CUP TOY iiin bi sk 5 ERR ESR ee eee a

King v. Order of United Travelers of America, 333 U.S.

SSS CEDGR «i a 0 ek OG cee eee Le eas 14, 15

Leavitt v. Jane L., 116 S. Ct. 2068 (1996) ........... 14

Lehman Brothers v. Schein, 416 U.S. 386 (1974) .....- 25

Leonard vy. Pay‘n Save Stores, 880 P.2d 61 (Wash. App.

POOG) 8 ok iad en bee Pe ee EY 15

Marquis v. Spokane, 922 P.2d 43 (Wash. 1996) ....... 19

Multicare Medical Ctr. v. DSHS, 790 P.2d 124 (Wash.

| | see eae g eye SRO a Sgt emmy me wee Fs 6

Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318

Ok Oe ai ae Pen Rs fare EE 2 hy 2 21

Rho Co. v. Dept. of Rev., 782 P.2d 986 (Wash. 1989) .. 19, 20

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Page

Scott v. Pettett, 816 P.2d 1229 (1991) ...........5-5. 20

St. Yves v. Mid State Bank, 757 P.2d 1384 (1988) ..... 16, 17

State v. Turner, 665 P.2d 923 (Wash. App. 1983) ..... 15

Swanson vy. Liquid Air Corp., 826 P.2d 664 (1992) .... 16

West v. AT. & T., 311 U.S. 223 (ISAO) 2. cecccevees > Me

Wilson v. Westinghouse Elec. Corp., 530 P.2d 298 (1975)

Gd VED CERES EEA ES bOD ESSE HOES UREN TAHA EERS 20

Statutes Cited:

Te Ce. © SPIO 6 hao d pach en bees oe eeKe Keng ]

ees OC ROOEED sh cee kcdccce) Va Sheek dR Ose mec l

Internal Revenue Code § 423 ............. b, di Ip tos Oh OO

Rev. Code Wash. 2.06.020 .....cccccsecccvvsceses 14

United States Constitution Cited:

PM 8 iy RESTS eT oP eee Peer ene eT Tee e l

Rules Cited:

i Sr NE BO iv i nc ee bh cer thouss (ese kesweks teens 12

eee | Bepererrreecriretrr rites

Washington Rules of Appellate Procedure 4.1(b) .....

Other Authorities Cited:

Restatement (2d) of Agency § 1 ....... 20-0000 e eee

Restatement (2d) of Agency § 220(2) ..........-545-

Restatement (2d) of Agency § 220(2)(g) .......--.--

Restatement (2d) of Contracts § 214(c) ...........-.

Rev. Rul. 87-41, 1987-1 Cum. Bul. 296 .............

Treasury Reg. § 31.3401(c)-I(e) .............2405-

Stern, et al., Supreme Court Practice (7th ed. 1993) ..

Wiggins, What You Should Know Before Seeking Review

in the Washington Supreme Court, 40 Wash. St. Bar

DR Fr NEUE a beth ch cat Wuaween cies cens

15

]

OPINIONS AND ORDERS BELOW

The Ninth Circuit’s opinions are reported at 97 F.3d 1187

(9th Cir. 1996) and 120 F.3d 1006 (9th Cir. 1997) (en banc) and

reprinted in the Petitioner's appendix. The portion of the district

court order relating to the ESPP is at pp. A76-A77 of the

appendix and the portion of the magistrate judge’s report and

recommendation relating to the ESPP is at pp. A102-A109 of

that appendix.

STATUTES AND REGULATIONS

Microsoft’s citation to the Constitution, Art. III, § 2,

indicates this is a diversity case. It is not. This case was brought

in a Washington state court against Microsoft, a company with

its principal place of business in Washington. Microsoft removed

it under 28 U.S.C. § 1441(b) because the complaint also included

federal ERISA claims. The district court asserted jurisdiction

over the Washington contract law claims pursuant to 28 U.S.C.

§ 1367(a).

The decisions by the Ninth Circuit involved application of

Internal Revenue Code § 423 and accompanying Treasury

Regulations because Microsoft’s Employee Stock Purchase Plan

(ESPP) explicitly incorporated these two provisions (ER' 83):

[I]t is the intention of the Company to have the Plan

qualify as an “employee stock purchase plan” under

Section 423 of the Internal Revenue Code of 1954.

The provisions of the Plan shall, accordingly, be

construed so as to extend and limit participation in a

manner consistent with the requirements of that

section of the Code.

1. “ER” refers to the Excerpt of Record in the Ninth Circuit.

2

The Treasury Regulations under IRC § 423, incorporated into

the ESPP by the provision quoted above, were identified and

quoted in part by the Ninth Circuit. 97 F.3d at 1197-98 and n.10,

11 and 13 (Pet., pp. AS5-A57).

STATEMENT OF THE CASE

Microsoft's discussion of the facts is replete with errors.

The company’s discussion of the proceedings below is generally

the exact opposite of what actually happened. Microsoft

particularly emphasizes its argument that the Ninth Circuit

“failed to apply governing state contract law,” Pet., p. 2,

“disregarding state contract law in favor of inapposite reasoning

developed in ERISA cases,” id., p. 3, and “[rjelying on an ERISA

case from the Eleventh Circuit,” id., p. 10. In fact, the precise

Opposite is true — the two Ninth Circuit opinions in favor of

the plaintiff Workers, by the Ninth Circuit panel majority and

the en banc majority (8-3), relied on many Washington state

decisions in deciding the ESPP claim under Washington state

contract law. Pet., pp. Al1,A16-A17, A54, A58-A59, A61. From

the magistrate judge to the en banc majority, the opinions below

were all in favor of the Workers’ ESPP claims, with one

exception — the district court’s order — and only that district

court decision favoring Microsoft relied exclusively on federal

cases, cases that were cited by Microsoft. Pet., pp. A76-A77.

Thus, Microsoft's strenuous argument against reliance on federal

cases in a decision on the ESPP applies, very strongly, to the

only decision in its favor.

A. Background

Plaintiffs worked at Microsoft starting in 1987. Some are

still working for Microsoft, as are other Workers. Pet., pp. A39-

A40. Microsoft misclassified the Workers as “independent

contractors” and “temporary agency employees,” although they

3

are employees as defined in the common law. The record shows,

and Microsoft concedes, that the Workers were not independent

contractors, but in fact employees of Microsoft. Pet., pp. A6,

A46 and n.4, ASO and n.9.

The Workers were employed full-time in Microsoft's

company offices, under the direction and control of Microsoft

supervisors. As software testers, production editors, formatters,

and proofreaders, their work is within the core of Microsoft's

software business. Pet., p. A3.

Microsoft fully integrated [the Workers] into its

workforce: they often worked on teams along with

regular employees, sharing the same supervisors,

performing identical functions, and working the

same core hours. Because Microsoft required that

they work on-site, they received admittance card

keys, office equipment and supplies from the

company.

Id. The Workers were not temporary or short-term, working for

Microsoft for several years. Pet., pp. A39-A40.

In 1987, Microsoft became concerned that the Workers

could be considered employees by the IRS because of their work

situation, making it liable for back employment taxes. Pet., p.

A3; CR 69, pp. 4102-04. Microsoft identified over 100 full-time

in-house “contractors” working on software products who met

the common-law standards applied by the IRS for defining an

employee. Jd. In an attempt to avoid a problem with the IRS,

Microsoft tried to superficially strengthen its position by making

the Workers sign an “Independent Contractor Copyright

Assignment and Nondisclosure Agreement” (ICCA). CR 86 at

4; CR 90 at 4. The ICCA focuses on proprietary information

and also states that the Worker is an “independent contractor.”

4

ER 67. Notwithstanding these ICCA forms, the IRS found the

Workers were employees and it established their employee status

for tax purposes. ER 51-52; 70-76. Microsoft agreed to pay

employer taxes and issue retroactive W-2 forms to these

employees. CR 70 at 4321, 4290-91.

The company converted some Workers into recognized

Microsoft employees. CR 70, pp. 7639 et seq. For most Workers,

Microsoft continued to treat them as “contractors” while making

payroll tax deductions. Microsoft arranged with some “payroll

service” agencies to issue checks to the Workers using Microsoft

funds, from which the agencies make deductions for taxes. ER

99. The “payroll service” agencies had no connection with the

employees excepi check processing and paperwork. ER 99, 129-

30; CR 69, p. 203214. Microsoft retained control over every

material element of employment — recruitment, training, wages,

work assignments, scheduling, supervision, offices, equipment,

etc. ER 128-130, 99-100. Thus, the Workers’ situation remained

the same, except for the company name on their checks. Pet., p.

A42.

Workers who were assigned to “payroll service” agencies

had to sign new “independent contractor” forms. ER 54, 59-63.

These forms stated that the Worker will “perform services for

Microsoft Corporation” and identified the Worker’s Microsoft

supervisor. ER 61, 63. Even though IRS had just determined

these Workers were employees of Microsoft, not “contractors,”

the forms continued to say the Worker “is an independent

contractor for Microsoft and nothing in this agreement shall be

construed as creating an employer-employee relationship.” ER

61. After their reclassification as Microsoft employees for tax

purposes, plaintiffs submitted claims for benefits. The claims

were rejected by Microsoft, which disregarded the facts about

their employment and maintained that the employees were

“independent contractors” for benefit purposes, even though they

were employees for tax purposes. ER 2, 13-15. This case ensued.

5

B. Magistrate Judge’s Report And Recommendations

Summary judgment motions were referred to a magistrate

judge, who recommended that the Workers’ motion be granted

on the ESPP. By its express terms, the ESPP is open to “any

employee” who meets certain service requirements. ER 84.

Microsoft admitted the Workers are “employees” within the

meaning of the ESPP and that they had sufficient service. The

magistrate judge explained his recommendation on the ESPP as

follows (Pet., pp. A106-A107):

. Plaintiffs do not contend that [IRC] §423, per

se, provides them with a private right of enforcement.

What they do contend is that Microsoft expressly

incorporated §423's terms into its ESPP, thereby

making an offer to its employees, including its

“common law employees,” a classification in which

they belonged.

7 * *

Microsoft concedes that the tax qualification

requirements of §423 “permit tax qualification only

for plans that extend participation to all common-

law employees.” (Def. Opp. Pl. Mot. re: ESPP at 19).

And Microsoft expressly indicated in all versions of

its ESPP plan before the Court, that it intended that:

The provisions of the Plan shall,

accordingly, be construed so as to extend

and limit participation in a manner

consistent with the requirements of that

Section [§423] of the Code.

Microsoft does not really contend at this point

that Plaintiffs were not “common law employees,”

6

as found by the IRS for tax purposes, and such a

contention, were it to be made, would fly in the face

of all of the material facts concerning Plaintiffs’ work

at Microsoft, the existence of which Microsoft

acknowledges. Since Microsoft expressly created an

ESPP intended to comply with §423, and in fact

expressly embraced the coverage extended by §423,

and since §423 permits a company to exclude

common law employees only by reason of factors

not applicable to Plaintiffs, Plaintiffs were entitled

to participate in the ESPP.

C. District Court Order

The district court did not accept the magistrate judge's

recommendation and it dismissed the Workers’ ESPP claim. In

deciding the ESPP issues and ruling in favor of Microsoft, the

district court relied only on federal cases, not citing or discussing

a single Washington decision. Pet., pp. A76-A77.

D. The Panel Decision

The Ninth Circuit panel noted, citing Multicare Medical

Ctr. v. DSHS, 790 P.2d 124, 133 (Wash. 1990), that Washington

follows the “ ‘objective manifestation theory of contracts,’ which

requires us to ‘impute an intention corresponding to the

reasonable meaning of a person’s words and acts.’ " The panel

found that

[t]}hrough its incorporation of the tax code provision

into the plan, Microsoft manifested an objective

intent to make all common-law employees, and hence

the plaintiffs, eligible for participation.

Pet., p. A55. The panel emphasized the ESPP itself expressly

Stated this intention, quoting the ESPP (Pet., p. A55):

7

It is the intention of the Company to have the Plan

qualify as an “employee stock purchase plan” under

Section 423 of the Internal Revenue Code of 1954.

The provisions of the Plan shall, accordingly, be

construed so as to extend and limit participation in

a manner consistent with the requirements of that

Section of the Code.

(Emphasis by the panel.) The panel explained that IRC § 423,

incorporated into the ESPP, requires the company to allow

participation in the ESPP by all common-law employees who

are not within one of the express statutory exceptions (Pet., p.

AS55):

The requirements of §423 dictate that “options are

to be granted to all employees of any corporation

whose employees are granted any of such options

by reasons of their employment by such

corporation.” 26 U.S.C. §423(b)(4). Because the

term “employees” in §423 is construed to refer to

“common-law employees,” the ESPP, when

construed in a manner consistent with the

requirements of §423, extends participation to all

common-law employees not covered by one of the

express exceptions set forth in the plan.

The panel rejected Microsoft’s argument that its

“independent contractor” forms override the express provisions

of the ESPP. The panel found that the pertinent Treasury

Regulations for IRC § 423 explicitly make such agreements not

controlling. Pet., p. A57. It also noted that interpreting the

agreements as disqualifying Workers who are in fact not

independent contractors, but are in reality common-law

employees, would be inconsistent with the terms of the ESPP,

would defeat its stated intent to qualify for favorable tax

8

treatment, and be contrary to the ESPP’s expressly stated rule

of construction. Pet., pp. AS7-A58.

E. The En Banc Decision

The Ninth Circuit adopted the panel decision on the ESPP

claim by an 8 to 3 majority, in an opinion by Circuit Judge

Fernandez.’ The en banc opinion emphasizes that “[i]}t is

important to recognize that there is no longer any question that

the Workers were employees of Microsoft.” Pet., p. A6. The

Workers’ status is not in question because Microsoft “concede[s]

that the Workers were common-law employees. That is to say,

they were employees of Microsoft.” Jd. With respect to

Microsoft's “contractor” forms, the en banc opinion noted that

these statements in these forms were in fact not true (Pet., p. A7):

We now know beyond peradventure that most of this

was not, in fact, true because the Workers actually

were employees rather than independent contractors.

What are we to make of that?

The en banc majority elected to construe the agreements as

though they were the result of a “simple mistake.” Pet., p. A9.

Accordingly, the en banc opinion explained Microsoft's

agreements only apprised the Workers of their responsibilities

if they were in fact independent contractors, and did not

independently operate to deny them benefits to which they would

be entitled if they were employees covered by the plans. Pet.,

p. Al0.

The en banc majority noted that, under Washington law,

the contract forms would be reformed to reflect the Workers’

true status, but this would be unnecessary here (Pet., p. All):

2. The en banc opinion also remanded an ERISA claim. Neither

side seeks review of that portion of the Ninth Circuit's decision.

9

But Microsoft saved us and the Workers the trouble

of applying reformation doctrine when it agreed that

the Workers were, in fact, not independent

contractors. Thus, the label became meaningless, as

did the explication of what would follow from that

label — no withholding, no benefits.

The en banc opinion explains that Microsoft agreed in oral

argument that this “is not a waiver case” (Pet., p. A12) and thus

the Workers had not knowingly and intentionally given up

participation in the ESPP under Washington law (id.).

Having decided that the mistaken statements in Microsoft

forms do not foreclose ESPP participation for the Workers, the

en banc court addressed the ESPP. The en banc majority agreed

with the magistrate judge and the panel opinion (Pet., p. Al6):

The ESPP was a plan adopted for the purpose of

taking advantage of the benefits conferred under 26

U.S.C. §423. It was approved by the board of

directors and by the shareholders of Microsoft. Their

action was an offer to employees, as that term is

defined in §423. As we have already suggested, we

doubt that the corporate officers set out to withdraw

the offer from some employees, even if they could

have done that. The Workers knew about the fact of

that offer, even if they were not aware of its precise

terms.

The en banc majority rejected Microsoft's arguments, citing

several Washington Supreme Court cases holding that, under

Washington law, the Workers accept the ESPP offer by their

work even if they do not know the precise terms of the ESPP.

Pet., p. Al6. Thus, the en banc majority concluded the Workers

are entitled to participate in the ESPP under Washington law.

Pet., p. Al7.

10

REASONS FOR DENYING THE WRIT

I.

THE COURT SHOULD DENY CERTIORARI BECAUSE

THE NINTH CIRCUIT’S FAILURE TO APPLY TO THE

FACTS OF THIS CASE THE REASONING OF A 1978

INTERMEDIATE WASHINGTON STATE APPELLATE

COURT DECISION WHICH WAS NOT CITED IN

MICROSOFT’S APPELLATE BRIEF IS NOT A

DEPARTURE FROM THE ACCEPTED AND USUAL

COURSE OF JUDICIAL PROCEEDINGS CALLING FOR

AN EXERCISE OF THIS COURT’S SUPERVISORY

POWER.

Respondent Workers respectfully submit that this case fails

to satisfy any of the compelling reasons justifying review by

this Court. The sole reason offered by Microsoft is that the Ninth

Circuit en banc “so far departed from the accepted and usual

course of judicial proceedings ... as to call for an exercise of

this Court’s supervisory power” under S. Ct. Rule 10(a). Pet.,

pp. 17-18. The only “far departure” alleged by Microsoft is that

the Ninth Circuit en banc failed to apply to the facts of this case

the reasoning by a 1978 intermediate state appellate court

decision and that “the court of appeals’ decision casts doubt on

the enforceability of similar agreements between companies and

independent contractors throughout the country.” /d.

Microsoft cannot possibly claim that the panel that decided

this case “departed from the accepted and usual course of judicial

proceedings” by failing to follow Daniel v. Pacific Northwest

Tel. Co., 580 P.2d 652, review denied, 90 Wn.2d 1025 (1978),

because Microsoft never even cited Daniel in its Brief of

Appellees to the Ninth Circuit, arguing it first on appeal only in

its petition for rehearing.

_

:

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+

1]

Given the judicial resources already devoted to this issue,

it is difficult to credit Microsoft's argument that one magistrate

judge at the district court level, two judges at the panel level,

and eight judges at the en banc rehearing, have all so greatly

“departed from the accepted and usual course of judicial

proceedings.” The reality is that this case involves a large

company that has a controversial employment practice, not that

the majority of judges in the panel and the en banc rehearing

have run amok, heedless of Washington state precedents.

Microsoft exaggerates the significance of one federal circuit

court’s interpretation of one contract drafted by one company

under the common law of one of the fifty states. This decision

binds no one but Microsoft and the Workers. It is not controlling

even in Washington courts. Jn re Salvini’s Estate, 397 P.2d 811,

813-14 (Wash. 1964). Granting certiorari on a matter of

Washington state common law would not in any way increase

the significance of this case involving a sing'e contract of a

particular employer.

12

Il.

THIS COURT SHOULD DENY CERTIORARI BECAUSE

THERE IS PERSUASIVE EVIDENCE THAT THE

WASHINGTON SUPREME COURT WOULD NOT APPLY

TO THE FACTS OF THIS CASE THE 1978 HOLDING OF

DIVISION THREE OF THE WASHINGTON COURT OF

APPEALS STATING THAT THE “INDEPENDENT

CONTRACTOR” LABEL USED IN THE CONTRACT IN

THAT CASE WAS BINDING ON THOSE PARTIES.

A. Prior Cases Decided By A State Intermediate Appellate

Court Are Not Binding On The Federal Courts If There Is

Persuasive Evidence That The Highest State Court Would

Rule Otherwise.

Microsoft's sole ground for certiorari is that the Ninth

Circuit allegedly failed to follow the company’s interpretation

of a decision by division three of Washington's intermediate

court of appeals. In 1980, however, the Court eliminated from

Rule 10 conflict with applicable state law as a ground for

certiorari. Stern, et al., Supreme Court Practice (7th ed. 1993),

p. 183. Lacking support in Rule 10, Microsoft relies on cases

decided over 50 years ago when this Court was fleshing out the

consequences of the doctrine of Erie RR v. Tompkins, 304 U.S.

64 (1938). Fidelity Union Trust Co. v. Field, 311 U.S. 169 (1940);

West v. A.T. & T., 311 U.S. 223 (1940), cited in Pet., pp. i, 15-

17. Fidelity Union and West were apparently reviewed by this

Court in order to correct the practice then of circuit courts

disagreeing freely with decisions of intermediate state courts

of appeals, a practice that undermined the Erie doctrine.

Neither Fidelity Union nor West held that a federal circuit

court must slavishly duplicate the holding of an intermediate

13

state appellate court. To the contrary, West expressly held that a

rule of law announced by an intermediate state appellate court

[i]s a datum for ascertaining state law which is not

to be disregarded by a federal court unless it is

convinced by other persuasive data that the highest

court of the state would decide otherwise.

311 U.S. at 237.

This Court later negatively pointed out some of the

“persuasive data” that might dissuade a federal court from

following an earlier state court decision, describing the lack of

such factors in the case before it:

[T}here appears to be no confusion in the Vermont

decisions, no developing line of authorities that casts

a shadow over the established ones, no dicta, doubts

or ambiguities in the opinions of Vermont judges on

the question, no legislative development that

promises to undermine the judicial rule.

Bernhardt v. Polygraphic Co., 350 U.S. 198, 205 (1956).

The Court has also observed that the nature and jurisdiction

of the intermediate state court is also an important factor to

consider, explaining why the Court had held in Fidelity Union

that the federal circuit court should have followed two four-

year-old decisions of the New Jersey Court of Chancery:

It had state-wide jurisdiction. Its standing on the

equity side was comparable to that of New Jersey's

intermediate appellate courts on the law side. A

uniform ruling by the Court of Chancery over a

course of years was seldom set aside by the state’s

highest court.

14

King v. Order of United Travelers of America, 333 U.S. 153,

159 (1948).

In the 57 years since Fidelity Union and its three companion

cases, this Court has rarely found it necessary or appropriate to

grant certiorari to simply correct an alleged conflict between a

federal circuit court decision and that of an intermediate state

court of appeals. Applying to this case the factors described

above, certiorari is not appropriate here.’

B. Decisions Of Division Three Of The Washington Court

Of Appeals Are Not ControHing Even In Washington.

The Court considered the geographic jurisdiction of the state

court in considering the weight to be afforded the state court's

prior decisions in King, supra. Washington’s intermediate court

of appeals is divided into three divisions, each having jurisdiction

over certain counties. Rev. Code Wash. 2.06.020. The Daniel

decision was made by Division Three of the court of appeals,

with jurisdiction over only Eastern Washington. Washington

Rules of Appellate Procedure 4.1(b). Decisions by one division

of the court of appeals do not control the decisions of the other

two divisions of the court of appeals, and the divisions

periodically disagree expressly with one another’s decisions.

3. Microsoft also claims (Pet., p. 14) that this Court should grant

review here because “the alternative is allowing blatant federal-court

nullification of state law,” quoting Leavitt v. Jane L., 116 S. Ct. 2068,

2072 (1996). Leavitt had nothing to do with applying an intermediate

State court decision on a matter of common law to a private contract

dispute. Rather, this Court granted certiorari in Leavitt based on a

declaration of legislative intent in the statute itself and the impact of

invalidating part of the statute under federal constitutional principles.

The key factor motivating certiorari in Leavitt appears to have been “the

total invalidation of a state-wide law” when only part of that statute

violated the federal Constitution, id., a concern which is conspicuously

absent from this case.

EE SAE OR

15

E.g., Leonard v. Pay‘n Save Stores, 880 P.2d 61, 63-64 (Wash.

App. 1994). Even panels of the same appellate division disagree

with one another. E.g., State v. Turner, 665 P.2d 923 (Wash. App.

1983) (division one panel disagreed with different panel of the

same division).

This case originated in Western Washington, in King County.

Had it not been removed by Microsoft from King County

Superior Court to the United States District Court for Western

Washington, the Daniel case could not have controlled this case

anyway (even if it were completely on point).

Finally, unlike decisions of the New Jersey Court of

Chancery, which this Court characterized as “seldom set aside

by the state’s highest court,” King, supra, 333 U.S. at 159, the

Washington Supreme Court reverses over half of the decisions

of the Washington courts of appeals accepted for discretionary

review.*

C. The Washington Supreme Court Effectively Overruled

The Daniel Decision When It Held In 1990 That Extrinsic

Evidence Is Always Admissible To Interpret A Contract.

In deciding the effect of a prior decision of a state

intermediate court, a federal court should consider whether there

has been “no developing line of authorities that casts a shadow

over the established ones, no dicta, doubts or ambiguities in the

opinions of [state court] judges on the question . . .” Bernhardt,

supra, 350 U.S. at 205. Recent Washington decisions have not

just cast a shadow over Daniel — they have totally eclipsed it.

Daniel said the plaintiff in that case was bound by the

contract recitation that he was an independent contractor and

4. Wiggins, What You Should Know Before Seeking Review in the

Washington Supreme Court, 40 Wash. St. Bar News 25 (Feb. 1986).

16

the plaintiff could not introduce any extrinsic evidence to contradict

that factual recitation. 580 P.2d at 653-54. The Washington Supreme

Court overruled this premise in 1990, holding that the court can

consider all extrinsic evidence and other agreements between the

parties, including the “entire circumstances under which the contract

was made, as an aid to ascertaining the parties’ intent.” Berg v.

Hudesman, 801 P.2d 222, 229 (1990). The Washington Supreme

Court held in Berg that “subsequent conduct of the parties” and

“{a]greements and negotiations prior to or contemporaneous with

the adoption of a writing are admissible in evidence to establish. . . .

the meaning of the writing, whether or not integrated . . .” 801 P.2d

at 229 (quoting, in part, Restatement (2d) of Contracts § 214(c)).

The Court expressly overruled prior cases to the contrary:

We thus reject the theory that ambiguity in the meaning

of contract language must exist before evidence of the

surrounding circumstances is admissible. Cases to the

contrary are overruled.

801 P.2d at 230.

The principles in Berg were applied to employment contracts

in Swanson v. Liquid Air Corp., 826 P.2d 664, 670, 672 (1992).

There, the Court held that the nature of an employment contract,

and its interpretation, raise questions of fact and, under Berg,

“extrinsic evidence is admissible as to the entire circumstances” of

the employment contract to determine the parties’ real intent. See

also Burnside v. Simpson Paper Co., 864 P.2d 937, 943-44 (1994).

Daniel's refusal to allow the plaintiff to raise a question of fact

concerning the “independent contractor” designation through

submission of extrinsic evidence of the circumstances and the

parties’ conduct is thus directly contrary to Berg.*

5. Berg's impact on Daniel is shown by St. Yves v. Mid State Bank,

757 P.2d 1384 (1988), one of the decisions expressly overruled in Berg,

(Cont'd)

ap ley ELSIE Ty RADNOR GEER REE MNE INN IMP a a

17

Applying Berg to the facts of this case, it would have been

error to limit the analysis to the ICCA alone. Rather, the ICCA

is read together with the ESPP, the ESPP’s incorporation of IRC

§ 423, the circumstances of the Workers’ employment at

Microsoft, and Microsoft’s concession in this case that the

Workers are common-law employees. That is exactly what the

original Ninth Circuit panel did in its decision, concluding that

the Workers are entitled to the benefits of the ESPP. Pet., pp.

A54-A61. The eight-judge en banc majority similarly read the

ICCA together with the ESPP and concluded that the Workers

are employees entitled to enjoy the benefits of the ESPP. Pet.,

pp. A7-Al3, A1l6-A17. To the extent that Daniel might have

precluded consideration of such extrinsic evidence, Daniel was

overruled by the Washington Supreme Court in Berg v.

Hudesman.

D. The Washington Courts Would Not Follow Daniel

Because It Is Factually Distinguishable.

Even if Daniel were still good law, there is a persuasive

reason to conclude that the Washington Supreme Court would

not follow Daniel because Daniel is easily distinguished on its

(Cont'd)

801 P.2d at 228, 230. In St. Yves, an employee claimed he was wrongfully

discharged in violation of a personnel manual. Sz. Yves held, reasoning

as in Daniel, that because the written employment contract unambiguously

permitted the discharge, his contract would be enforced exactly as written.

The plaintiff in St. Yves could not introduce any extrinsic evidence,

including the personnel manual, to raise a question of fact concerning

his contract rights. St. Yves, 757 P.2d at 1386-87. Berg cited St. Yves as

an example of a case mistakenly requiring ambiguity on the face on a

written contract before extrinsic evidence will be admitted. Berg, 801

P.2d at 228. Berg expressly overruled this theory, holding evidence is

always admissible without any showing of ambiguity in the contract.

801 P.2d at 230. Daniel was effectively overruled by Berg for the same

reason St. Yves was expressly overruled.

18

facts. In Daniel, a dispute actually existed whether the plaintiff

was an independent contractor or an employee. 580 P.2d at 653-

54. In this case, there is no factual dispute, as the Ninth Circuit

noted in its en banc decision (Pet., p. A6):

[Bjoth Microsoft and the SPP have conceded for

purposes of this appeal that the Workers were

common law employees. In fact, they have asserted

that the Workers’ status is a “nonissue” because they

concede that the Workers were common law

employees. That is to say, they were employees of

Microsoft.

In Daniel, the telephone company had no power to control

the manner in which Daniel performed his work, it had no power

to assign anyone to assist in the work, and it had no power to

hire or fire anyone participating in the work. 580 P.2d at 653-

54. Daniel hired his own employees, insured his own employees,

and controlled his own employees. /d. By contrast, in this case

the Workers are integrated into Microsoft's workforce, are

supervised by Microsoft personnel, may not assign their work

to others, and are required to work on-site at Microsoft. Pet., p.

A40. Daniel itself recognized that such a contract would not be

binding where it is the product of “overreaching” by an employer.

580 P.2d at 654.

In short, the contract in Daniel mirrored reality; Daniel

appeared for all intents and purposes truly to be an independent

contractor.

E. Daniel Was Inconsistent With Washington Law Even

When It Was Originally Decided.

Additional persuasive evidence establishes that the

Washington Supreme Court would not follow Daniel. Daniel is

SR PET eae TP ae ee ee Vee

CES eT

19

thoroughly inconsistent with other Washington decisions on the

common law of agency and on the effect of contractual

recitations of a worker’s status as an employee or independent

contractor.

Washington follows the general common law of agency.

Hollingberry v. Dunn, 411 P.2d 431, 435-36 (Wash. 1966); Rho

Co. v. Dept. of Rev., 782 P.2d 986, 990-91 (Wash. 1989); Ebling

v. Gove’s Cove, 663 P.2d 132, 134 (Wash. App. 1983). Daniel's

holding that the plaintiff could not submit extrinsic evidence to

disprove his characterization as an “independent contractor” is

contrary to the common law of agency, under which the parties’

belief that they either are, or are not, creating an employee

relationship is only one factor and is not conclusive. See

Hollingberry v. Dunn, supra, 411 P.2d at 435-36, adopting

Restatement (2d) of Agency § 220(2)(g), under which the

intention of the parties is a factor, but is not dispositive. Whether

the worker is actually an employee or an independent contractor

depends on whether the worker is subject to the employer's right

of control. Hollingberry, 411 P.2d at 435-36. Recent Washington

Supreme Court cases affirm that Washington follows the general

common law in determining “employee” status. Marquis v.

Spokane, 922 P.2d 43, 50 (Wash. 1996); DeWater v. State, 921

P.2d 1059, 1064-65 (Wash. 1996).

In Rho v. Dep’t of Revenue, 782 P.2d 986, 991 (1989), the

Washington Supreme Court explained that the language in a

party’s contract is not controlling in establishing an agency

relationship (id.):

Determination of an agency relationship is not

controlled by the manner in which the parties

contractually describe their relationship.

* = =

20

In this regard, agency is a legal concept that

depends on the manifest conduct of the parties; it

“does not depend upon the intent of the parties to

create it, nor their belief that they have done so... .

[A]n agency exists although the parties did not call

it agency and did not intend the legal consequences

of the relation to follow.” Restatement (Second) of

Agency §1, comment b (1958), ... It follows that

an agency can be implied, if the facts so warrant,

not only if the contracts are silent as to agency, but

even if the parties execute contracts expressly

disavowing the creation of an agency relationship.

(Citation omitted).

Under the Washington common law of agency, therefore, it

is the facts concerning employment that determine employee

status, not the words of the contract alone. Daniel's statement

that the plaintiff could not introduce extrinsic evidence to show

that his relationship was not that of an independent contractor,

but instead that of an employee, is erroneous under the common

law of agency. Thus, under Washington law, Microsoft's forms

cannot control if Workers were in fact employees. Microsoft

conceded that the Workers were actually its empioyees (Pet.,

p. A6), and, thus, the form’s boilerplate language to the contrary

is immaterial. Rho, supra, 782 P.2d at 991; Restatement (2d) of

Agency § 220(2), discussed in Hollingberry, supra, 411 P.2d at

435-36.

Also, under Washington law a contract may be reformed to

correct a mutual mistake of either fact or law, as the Ninth

Circuit's en banc opinion noted, citing Wilson v. Westinghouse

Elec. Corp., 530 P.2d 298, 301-02 (1975); Denny’s Restaurants,

Inc. v. Security Union Title Ins. Co., 859 P.2d 619, 629-30 (1993),

and Scott v. Pettett, 816 P.2d 1229, 1234-35 (1991). Pet., p. All.

[

:

|

ANG ES Met i nbsh al Le A apeak 2 NO

ees R ik Medes TS

21

Accordingly, because the contract would be reformed under

Washington law to correct the parties’ mutual mistake in

describing the employment relationship, Daniel's logic could

not apply here. The en banc opinion said that reformation is

unnecessary here only because

Microsoft saved us and the Workers the trouble of

applying the reformation doctrine when it agreed that

the Workers were, in fact, not independent

contractors. Thus, the label became meaningless, as

did the explication of what would follow from the

label — no withholding, no benefits.

Pet., p. All.

Under Washington law, moreover, a statute affecting

“construction” of a contract “is incorporated into” and “becomes

a part” of the contract. Dopps v. Alderman, 121 P.2d 388, 391

(Wash. 1942); Boggs v. Whitaker, 784 P.2d 1273, 1274-75 (Wash.

App. 1990). Thus, even if the ESPP did not expressly incorporate

the eligibility requirements of IRC § 423 and even if the ESPP

did not expressly state that “[t]he provisions of the Plan shall,

accordingly, be construed so as to extend and limit participation

in a manner consistent with the requirements of that Section

[423] of the Code,” Washington law would nonetheless construe

the ESPP in that way. Under the pertinent Treasury Regulations

for IRC § 423, any agreement that incorrectly states that the

Worker is an independent contractor is “immaterial” and of “no

consequence.” Treasury Reg. § 31.3401(c)-1(e); Rev. Rul. 87-

41, 1987-1 Cum. Bul. 296, 298.° Thus, the Ninth Circuit held

that the regulation would render Microsoft's “contractor” forms

6. The Court cited this IRS Revenue Ruling as a source for the

general common law of agency when adopting the common-law definition

of “employee” for purposes of ERISA in Nationwide Mut. Ins. Co. v.

Darden, 503 U.S. 318, 324 (1992).

22

inoperative with respect to participation in the ESPP because

Microsoft agreed that the Workers are in fact employees. Pet.,

p. A57.

Moreover, interpreting the ICCAs as precluding the

Workers’ participation in the ESPP would cause the plan to lose

its tax-qualified status, a status which it is the ESPP’s intent to

achieve. The Washington Supreme Court recognizes the

importance of tax-qualified status of a plan and it said that a

plan's tax qualification tends to show the plan is an enforceable

unilateral contract, not a discretionary gratuity. Jacoby v. Grays

Harbor Chair & Mfg., 468 P.2d 666, 669 (1970). Thus, under

Washington law the ESPP is enforceable and the ICCAs do not

exclude the Workers from participation in the ESPP where they

are in fact employees, as Microsoft concedes they are.

When Daniel was decided, it was also well established that

a party to a contract “is not bound by a false recital of fact, and

parol evidence is admissible to show the true state of affairs.”

Cook v. Vennigerholz, 269 P.2d 824, 827 (1954); Fed. Finance

Co. v. Humiston, 404 P.2d 465, 467-68 (1965) (written contract

recited delivery of consideration which had not been provided);

Black v. Evergreen Land Devel., 450 P.2d 470, 476 (1969)

(written contract said there were no oral agreements, while

evidence showed the parties intended one). Thus, when decided,

Daniel was mistaken in refusing to permit use of extrinsic

evidence to show a written contract is factually wrong (i.e., that

he was not an “independent contractor” outside the employer’s

control, 580 P.2d at 653-54).

In short, Daniel was wrongly decided in 1978, is no longer

good law after the Washington Supreme Court’s Berg decision

in 1990, is factually distinguishable, and would not control this

case even if the case had remained in state court in King County.

As the Washington State Department of Labor and Industries

23

stated, the Ninth Circuit decision is “consistent with existing

law” and “merely applies recognized law.” Wash. State Amicus

Br., pp. 1, 10. Microsoft’s request that this Court grant certiorari

to decide the current vitality of Daniel, Pet. p. 18, is thus

insupportable.

lil.

NEITHER THE PANEL DECISION, NOR THE EN BANC

NINTH CIRCUIT DECISION, IS BASED ON

“INAPPLICABLE FEDERAL STATUTES,” AS

MICROSOFT CLAIMS.

Microsoft incorrectly alleges in its “questions presented”

that the Ninth Circuit erred “by following decisional law under

inapplicable federal statutes ...” Pet., p. i. Microsoft explains

that it bases this allegation on the fact that the panel majority,

having engaged in a detailed common law contract analysis,

also mentioned (in a footnote) that “[a] similar approach obtains

with respect to plans that require compliance with the provisions

of ERISA.” Pet., pp. 8-9, referring to the panel decision at p.

AS56. Footnotes aside, the panel majority decision is based

entirely on Washington state cases, the ESPP’s explicit

incorporation of IRC § 423, and other states’ decisions.’ Pet.,

pp. A54-A6l.

Microsoft greatly misstates the en banc decision when it

accuses the majority of “[rjelying on an ERISA case from the

Eleventh Circuit ...” Pet., p. 10. The en banc majority held

that the “independent contractor” label “was a mere error,” citing

Washington cases that would support reformation of the ICCA

to correct this mistake, but concluding that “Microsoft saved us

7. The panel majority discussed Microsoft's reliance on a Ninth

Circuit case, but that case also applied Washington law, not federal law.

Pet., pp. AS8-A59.

24

and the Workers the trouble of applying the reformation doctrine

when it agreed that the Workers were, in fact, non independent

contractors.” Pet., p. All. The en banc majority then noted “[a]

similar case from the Eleventh Circuit lends support to our

conclusion.” Pet., p. All. Citing an ERISA case for additional

support after analyzing Washington law does not constitute

“following decisional law under inapplicable federal statutes

and disregarding state decisional law.” Pet., p. i. In any event,

this section of the en banc opinion (p. Al1) explicitly dealt with

certain matters that affected claims under both federal law

(ERISA) and Washington contract law. Pet., pp. AS-A6.

If any doubt remains whether the en banc majority applied

Washington law, rather than federal law, to the ESPP, that doubt

is quickly dispelled by reading the two pages of the en banc

opinion deciding the ESPP issues. The majority cites only

Washington cases, not a single federal case. Pet., pp. Al6-A17.

In sharp contrast, when the district court accepted Microsoft's

position, it cited only federal cases. Pet., p. A76.

IV.

NO RULE, PRECEDENT, OR POLICY SUPPORTS

MICROSOFT’S REMARKABLE PROPOSAL THAT THIS

COURT SHOULD GRANT CERTIORARI ONLY TO

CERTIFY STATE LAW ISSUES TO THE WASHINGTON

SUPREME COURT.

The Court should reject Microsoft’s remarkable proposal

that this Court should grant certiorari only to vacate the Ninth

Circuit’s en banc decision and remand to certify to the

Washington Supreme Court an incomplete and biased question

of state law. Microsoft's proposal is all the more cynical because

Microsoft vigorously resisted certification while the case was

25

pending in the Ninth Circuit.* Pet., p. 10.4. Microsoft’s position

was that the Ninth Circuit should not certify any issue to the

state court unless there was some prospect that Microsoft might

lose. Jd. It is not this Court’s responsibility to rescue a litigant

from the consequences of its tactical decision.

Microsoft’s plea for summary vacation of the Ninth Circuit’s

en banc decision gains no support from Lehman Brothers v.

Schein, 416 U.S. 386 (1974), cited in the Pet., p. 19. There, the

Court remanded to reconsider the possibility of certification,

but, as the concurring opinion noted, certification entails both

delay and expense and rests within “the considerable discretion

of the federal court in going about the decisionmaking process

..- 416 U.S. at 394-95 (Rehnquist, J., concurring). Moreover,

Lehman Brothers differs critcally from this case in a key respect

— there the party asking this Court to certify to the state court

had previously, but unsuccessfully, sought certification in the

circuit court, 416 U.S. at 392-93 (Rehnquist, J., concurring),

while here the opposite is true.

Nor does Microsoft's position find support in this Court’s

other cases discussing certification. Pet., p. 19 n.9. Each of those

cases challenged the constitutionality of a state statute and this

Court held that it would have been preferable if the circuit courts

certified the construction of the state statute to the state’s highest

court to obtain an authoriiative construction of the statute,

possibly avoiding an unneccessary federal constitutional

analysis.

When the Workers suggested the possibility of certification

to the Washington Supreme Court if the issues of Washington

8. The Workers said the Ninth Circuit should certify a question to

the Washington Supreme Court if the matter were “unclear” (Appellants’

Motion, p. 9) and Microsoft strongly opposed any certification. The Ninth

Circuit thus decided the Washington common law issues.

26

law were “unclear” — after the Ninth Circuit panel decision

and prior to the en banc decision — Microsoft argued it was too

late then to request certification (Opposition, pp. 7-8):

[C]ertification in late stages of litigation is disfavored

for the obvious reason that parties should not be

allowed a “second chance at victory” after an adverse

decision, Jn re McLinn, 744 F.2d 677, 681 (9th Cir.

1984) (“particularly compelling reasons must be

shown when certification is requested for the first

time on appeal by a movant who lost on the issue

below”); see Perkins v. Clark Equipment Co., 823

F.2d 207, 210 (8th Cir. 1987) (allowing a request for

certification in the late stages of litigation may.

convert the federal court decision into “nothing but

a gamble with certification sought only after an

adverse decision”).

Only now, because the en banc Ninth Circuit rejected Microsoft's

position again, has Microsoft changed its mind. Its request for

certification should be rejected.

Finally, Microsoft argues that this Court should accept

review and certify the case to the Washington Supreme Court

because the issues in this case are likely to recur frequently,

quoting newspaper articles saying the decision could impact

employers “across the country.” Pet., p. 20. As noted above, the

Ninth Circuit’s decision does not control even future cases in

Washington State, let alone the remaining 49 states. Because

such cases are not governed by federal law, it is the responsibility

of the state courts to resolve future employer/worker disputes

arising under the common law of contracts of the several states.

For the reasons stated above, the Court should deny the

petition. In the words of the Washington State Department of

Labor and Industries, amicus below, the Ninth Circuit decision

is “consistent with existing law concerning [the] employer-

employee relationship,” and “merely applies recognized law and

27

CONCLUSION

is breaking no new ground.” Wash. St. Br., pp. 1, 10.

Of Counsel:

Respectfully submitted,

STEPHEN K. STRONG

Counsel of Record

DAVID F. STOBAUGH

BENDICH, STOBAUGH

& STRONG, P.C.

Attorneys for Respondents

506 Second Avenue

Suite 2010

Seattle, WA 98104

(206) 622-3536

CHARLES K. WIGGINS

241 Madison Avenue, North

Bainbridge Island, WA 98110

(206) 780-5033