# Opposition Brief — Microsoft Corp. v. Vizcaino

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URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386013_1773%3A2

## Record

- **Collection:** Supreme Court brief
- **Document type:** Opposition Brief
- **Published:** January 1, 1998
- **Citation:** 522 U.S. 1098

## Text

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.

i
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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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

15

vi

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.

eseeooaoneaesBeeseee eae ese eoaeeseweaeseaecen eee 6 6.88

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

17

18

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Page

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

—

ix

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.

_
:
Y
+

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

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386013_1773%3A2. Public record. Not legal advice.