Amicus Curiae Brief — Microsoft Corp. v. Vizcaino

MOTION FILED | y .

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No. 97-854

In THE

Supreme Court of the United States

- “ OcToBER TERM, 1997

MICROSOFT CORPORATION, et al.,

- Petitioners,

DONNA VIZCAINO, et al.,

Respondents.

On Petition for Writ of Certiorari to the

United States Court of Appeals

for the Ninth Circuit

MOTION FOR LEAVE TO FILE BRIEF AMICI CURIAE

AND BRIEF OF THE CHAMBER OF COMMFRCE

OF THE UNITED STATES

AND THE ASSOCIATION OF PRIVATE PENSION

AND WELFARE PLANS AS AMICI CURIAE

IN SUPPORT OF THE PETITION

Of Counsel: ZACHARY D. FASMAN *

STEPHEN A. BOKAT ERIN M. SWEENEY

ROBIN S. CONRAD PAUL, HASTINGS, JANOFSKY

SUSSAN L. MAHALLATI & WALKER LLP

NATIONAL CHAMBER LITIGATION Tenth Floor

CENTER, INC. 1299 Pennsylvania Ave., N.W.

1615 H Street, N.W. Washington, D.C. 20004

Washington, D.C. 20062 (202) 508-9500

(202) 463-5337 Counsel for Amici Curiae

Counsel for the Chamber of

Commerce of the United States

NEIL GROSSMAN

ASSOCIATION OF PRIVATE PENSION

& WELFARE PLANS

1212 New York Avenue, N.W.

Washington, D.C. 20005

(202) 289-6700

Counsel for the Association of

Private Pension &

Welfare Plans

* Counsel of Record

WILSON - Epes PRINTING Co., INC. - 789-O096 - WASHINGTON, D.C. 20001

In THE

Supreme Court of the United States

OCTOBER TERM, 1997

No. 97-854

MICROSOFT CORPORATION, et al.,

o Petitioners,

DONNA VIZCAINO, et al.,

Respondents.

On Petition for Writ of Certiorari to the

United States Court of Appeals

for the Ninth Circuit

MOTION FOR LEAVE TO FILE BRIEF AMICI CURIAE

Pursuant to Rule 37.2(b) of the Rules of this Court,

the Chamber of Commerce of the United States (the

“Chamber”) and the Association of Private Pension

and Welfare Plans (the “APPWP”), ( collectively the

“Amici”) respectfully move this Court for leave to file

the accompanying brief as amici curiae in support of

the writ for certiorari filed by Petitioners Microsoft Cor-

poration, et al. (“Microsoft”). The written consent of

Petitioners for the submission of this brief has been filed

with the Clerk of the Court. Counsel for Respondents

refused to consent to the filing of this brief.

In support of this motion, the Amici show the following:

1. The Chamber is the world’s largest business federa-

tion representing an underlying membership of more than

three million businesses and organizations of every size,

sector, and region. Ninety-six percent of the Chamber’s

members are businesses with less than 100 employees.

The Chamber regularly advocates the interests of its mem-

bers in courts throughout the country on issues of national

concern to the business community. This case is impor-

tant to the Chamber and all of its members that supply

and use freelancers to meet critical business needs.

2. The APPWP is a broad-based, non-profit trade asso-

ciation founded in 1967 to protect and foster the growth

of this nation’s private employer-sponsored employee bene-

fit plan system. The members of the APPWP include both

small and large employer sponsors (including many For-

tune 500 companies) of employee benefit plans, as well

as numerous plan support organizations, such as consult-

ing and actuarial firms, investment firms, banks, insurers

and other professional benefit organizations. Collectively,

its more than 240 members sponsor or administer plans

covering more than 100 million plan participants. This

broad-based membership provides the APPWP with sub-

stantial expertise and experience in the entire spectrum of

issues relating to all types of benefit plans.

3. Amici have an interest in, and a familiarity with,

the issues and policy concerns presented to the Court in

this appeal, which transcend the interests of the parties

to this case.

4, A significant segment of Amici membership contract

regularly with contingent workers, independent contractors,

freelancers, and/or temporary employees (collectively

“freelancers” ), and thus have a great interest in the agree-

ments under which freelancers work. A recent study by

the Bureau of Labor Statistics estimated that 5.6 million

individuals hold jobs as freelancers in the United States.’

Other studies estimate that between 1980 and 1993, free-

lancers made up approximately 25-30% of the United

States work force, and that the number of freelancers grew

1 Bureau of Labor Statistics, Contingent and Alternative Employ-

ment Arrangements, 1 February 1997 (1997).

approximately 40-75% faster than the overall workforce

during that period, with 40-55% of the jobs created in

that time period consisting of freelance positions.? Some

estimate that temporary work has grown ten times faster

than overall employment since 1982.* According to one

commentator, “[iJt is expected that [freelancers] will com-

prise one-half of the labor force by the year 2000.*

5. This case raises grave concerns about the ability of

businesses to contract with freelancers without embracing

unknown and potentially crippling additional costs arising

through subsequent litigation. Amici’s membership con-

tract with freelancers to supply important skills which

businesses cannot replicate without the substantial costs

of hiring and training their own employees. Flexible free-

lance arrangements also allow the Amici membership to

provide services in situations where employment costs

would be prohibitive. At the same time, working on a

temporary or part-time freelance basis brings more work-

ers into the marketplace by allowing them the freedom

and flexibility to structure their own lives, and to reap

important tax advantages available only to independent

businesspeople. Both businesses and freelancers should

remain free to create their own mutually acceptable

bargains, which may include—as in this case—an agree-

ment to forego employee benefits in exchange for higher

compensation. Where knowingly and deliberately arranged,

such agreements should be respected and not subject to

ex post facto revision through litigation.

6. The issue raised by the Petition—whether individuals

who execute written freelance agreements specifically

“Richard S. Belous, The Rise of the Contingent Work Force:

The Key Challenges and Opportunities, 52 Wash. & Lee L. Rev.

863, 867-868 (1995).

3 Jonathan P. Hiatt, Policy Issues Concerning the Contingent

Work Force, 52 Wash. & Lee L. Rev. 739, 741 (1995).

* Patricia Schroeder, Does the Growth in the Contingent Work

Force Demand a Change in Federal Policy?, 52 Wash. & Lee L.

Rev. 731, 732 (1995).

acknowledging that they are not entitled to employee

benefits subsequently may sue for such benefits by claim-

ing that they are common law employees—is of direct and

immediate interest to the Amici and their members. Amici

and their members wish to preserve their right to contract

with freelancers on mutually advantageous terms, which

may include agreements concerning the availability of

benefits. The decision below threatens this freedom, and

thereby jeopardizes the stability of this large segment of

the American workforce.

WHEREFORE, for the reasons stated, the Amici re-

spectfully request that the Court grant it leave to file the

accompanying brief as amici curiae.

Respectfully submitted,

Of Counsel: ZACHARY D. FASMAN *

STEPHEN A. BOKAT ERIN M. SWEENEY

ROBIN S. CONRAD PAUL, HASTINGS, JANOFSKY

SuSSAN L. MAHALLATI & WALKER LLP

NATIONAL CHAMBER LITIGATION Tenth Floor

CENTER, INC. 1299 Pennsylvania Ave., N.W.

1615 H Street, N.W. Washington, D.C. 20004

Washington, D.C. 20062 (202) 508-9500

(202) 463-5337 Counsel for Amici Curiae

Counsel for the Chamber of

Commerce of the United States

NEIL GROSSMAN

ASSOCIATION OF PRIVATE PENSION

& WELFARE PLANS

1212 New York Avenue, N.W.

Washington, D.C. 20005

(202) 289-6700

Counsel for the Association of

Private Pension &

Welfare Plans * Counsel of Record

QUESTION PRESENTED

May an individual who executes a written freelance

agreement specifically acknowledging that he is not en-

titled to employee benefits subsequently sue for: such

benefits by claiming that he is a common law employee?

(i)

TABLE OF CONTENTS

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REASONS FOR GRANTING THE WRIT ....................

I. THE DECISION BELOW CREATES A FED-

ERAL RULE OF LAW WHICH THREATENS

THE STABILITY OF THE WORKPLACE

AND GRANTS A PRIVATE RIGHT OF

ACTION TO ENFORCE THE INTERNAL

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A. The Decision Below Creates a Federal Rule

of Law Which Threatens the Stability of the

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B. The Decision Below Grants Respondents a

Private Right of Action to Enforce the Pro-

visions of the Internal Revenue Code ............

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TABLE OF AUTHORITIES

Cases Page

Allied Structural Steel Co. v. Spannaus, 438 U.S.

I CIE csesiidoninicthicecevateabibdiciatllbi ie cenea lean ecient 5

American Airlines, Inc. v. Wolens, 115 S. Ct. 817

4: RACER OSLeGAR AraRC e SN oe eaten ARMS Pk a HAIN LYASE 5

Barlow v. Marriott Corp., 328 F. Supp. 624 (D.

By UE OD fsacintliinisinienchbaciha de trhg iat la se 9

Cannon v. University of Chicago, 441 U.S. 677

9, 2 FORNARINA RV tare cS NR PDI SARUM TO 8

Cort v. Ash, 422 U.S. 66 (1976) ......2....0..202..2..-.000 8

Cowan v. Keystone Employee Profit Sharing Fund,

686 F.2d 888 (ist Cir. 1978) —.........0................. 8,9

NLRB v. United Ins. Co. of Am., 390 U.S. 254

EE) RT RI SACO ME Let Rp Met Oe NEN ARN. BT eS BAe 6

Reklau v. Merchants Nat’l Corp., 808 F.2d 628

CTI Tai, UO « iclocciicinevescskige olaaidiesaneicob sie tad Reietocdiaaiaes 8

Salazar v. Brown, 940 F. Supp. 160 (W.D. Mich.

RIED cehesiatetentinditinceestiainn PEERING M GELS OL 9

Touche Ross & Co. v. Redington, 442 U.S. 560

REID ciiecshsdc a uniseboubitinndidadacuidbiaaai: surcabcasenu cased 8

Wiesner v. Romo Paper Prods. Corp. Employees’

Retirement Plan, 514 F. Supp. 289 (E.D.N.Y.

TOBE D ai Ae ah a ee 9

In re Witwer, 148 B.R. 980 (C.D. Cal. 1992), aff’d

without opinion, 163 B.R. 614 (9th Cir. 1994)... 8,9

Statutes

Be Sai we APB IE cin nepcnisceiysiaeo seu consienenmiacinpcineiahen staemosie 8,9

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SP BELA OF MINED icine weoncdseccbsndaricnccainsegecinokenisedioedten i

29 U.S.C. § 10028 (2) .....-.....-...20ne0-c0s icdelaliisdideiesiiieeten 1

Miscellaneous

Department of Labor Advisory Opinion 90-17A

CSU Ti EE: vicchorensstisicsa iciahicdenchclcatenanbenbdendtaniesss 2

James E. Merritt, Understanding and Mitigating

the Consequences of Reclassification of Workers

from Independent Contractors to Employees, 43

Major Tax Planning {| 1200 et seq. (1991) ........... 6

BRIEF OF THE CHAMBER OF COMMERCE OF THE

UNITED STATES AND THE ASSOCIATION OF

PRIVATE PENSION AND WELFARE PLANS

AS AMICI CURIAE IN SUPPORT OF THE PETITION

This Brief is submitted by the Chamber of Commerce

of the United States and the Association of Private

Pension and Welfare Plans (collectively, the “Amici”) as

amici curiae in support of Petitioners’ request for writ of

certiorari.

INTEREST OF AMICI CURIAE'!

The interest of the amici curiae is fully set forth in the

accompanying motion for leave to file this brief.

STATEMENT OF FACTS

Petitioner Microsoft (“Microsoft”) established an Em-

ployee Stock Purchase Plan (“ESPP”) in 1986. Petition

Appendix (“Pet. App.”) at A42. The ESPP currently

provides benefits to Microsoft employees. Pet. App. at

Al7. The ESPP is a qualified employee stock purchase

plan under § 423 of the Internal Revenue Code of 1986

as amended, (the “Code”).” Pet. App. at AS. The ESPP

is a contract governed by state law, and is not subject to

the Employee Retirement Income Security Act of 1974,

as amended, (“ERISA”) because it does not provide the

type of benefits provided by ERISA plans. Pet. App. at

AS. See also 29 U.S.C. §§ 1002(1) & 1002(2) (listing

the types of benefits provided by employee welfare benefit

1 No counsel for any party authored any part of this brief, and

no person other than amici curiae, their members, or their counsel

made any monetary contribution to the preparation or submission

of the brief.

* According to § 421(a) of the Code, “[i]f a share of stock is

transferred to an individual in a transfer in respect of which the

requirements of section ... 423(a) are met [,] no income shall result

at the time of the transfer of such share to the individual upon his

exercise of the option with respect to such share...” (enumeration

omitted).

2

plans and employee pension benefit plans); Department of

Labor Advisory Opinion 90-17A (June 25, 1990) (stat-

ing that an employee stock purchase plan is not covered

by ERISA).

Each Respondent executed a contract with Microsoft

expressly acknowledging that he or she was an independ-

ent contractor and agreeing that, as an independent con-

tractor, he or she would “be responsible for all federal

and state taxes, withholding, social security, insurance

and other benefits.” Pet. App. at A27 (emphasis added).

Each further agreed that “as an Independent Contractor

to Microsoft, you are self-employed and are responsible

to pay all your own insurance and benefits.” Pet. App. at

A27 (emphasis added). Each individual knew and volun-

tarily accepted the position under the conditions offered,

which included higher compensation in lieu of employee

benefits. Pet. App. at A64-A67.

Despite these specific agreements, in 1989 the Internal

Revenue Service (the “Service”) in a tax audit concluded

that Respondents should be characterized as employees

rather than independent contractors for withholding and

employment tax purposes. Pet. App. at A86. The Service

did not invalidate the underlying contracts between Re-

spondents and Microsoft, nor did it make any determi-

nation regarding Respondents’ participation in the ESPP

or other employee benefit plans available to Microsoft

workers. Pet. App. at A87.

Following the Service’s determination, Respondents

brought suit, claiming that their status as common law

“employees” for withholding and employment tax pur-

poses entitled them to participate in the ESPP regardless

of the express terms of their contracts.* Pet. App. at A74.

The District Court held that each Respondent knew, either

at the time he began providing services or shortly there-

3 They also claimed eligibility to participate in other Microsoft

employee benefit plans, including a 401(k) Savings Plus Plan

(“SPP”), which is governed by ERISA. Pet. App. at A2; A65.

3

after, that he was not entitled to employee benefits but

nonetheless continued providing services to Microsoft

under the contract. Pet. App. at A74-A75. Accordingly,

the District Court determined that as a matter of state

contract law, the specific terms of Respondents’ contracts

controlled, and granted summary judgment to Microsoft.

Pet. App. at A73-A77.

A Ninth Circuit panel reversed. Over the dissent of

Judge Trott, the panel concluded that because the ESPP

was intended as a tax qualified plan under the Code and

because the Code requires that qualified employee stock

purchase plans offer stock purchase benefits to all common

law employees, Respondents were entitled to participate

despite their express agreements to the contrary.* Pet.

App. at A54-A61. Rejecting Microsoft’s argument that

Respondents were seeking a private right of action to en-

force provisions of the Code, the panel concluded that by

promulgating an employee stock purchase plan designed

to qualify under the Code, Microsoft intended to extend

stock purchase benefits to all individuals deemed common

law employees regardless of any specific agreements to the

contrary. Pet. App. at A54-A61.

A divided court affirmed en banc.’ The majority again

concluded that Respondents were eligible for stock pur-

chase benefits because the plan was designed to comply

with the Code, and because § 423 of the Code requires

that all employees be allowed to participate in employee

*The panel further found that Respondents were entitled to

participate in the SPP under ERISA because they were “on the

United States payroll of the employer’, even though they were paid

as independent contractors and not payroll employees throughout

their tenure. Pet. App. at A45-A54.

5 The en banc majority remanded Respondents’ eligibility for

benefits under the ERISA-governed SPP to the plan administrator

for consideration, although concluding that the plan administrator’s

apparent reason for denying benefits to Respondents (that Respond-

ents waived the benefits) was “arbitrary and capricious” as a mat-

ter of law. Pet. App. at A13-A16.

4

stock purchase plans as a condition of receiving favorable

tax treatment. Pet. App. at A16-A17. The majority held

that the express contracts between Respondents and Micro-

soft were not controlling, but instead constituted mere

“helpful disclosure[s]”. Pet. App. at A9. Instead, the ma-

jority concluded that the ESPP itself constituted a binding

offer of a contract for stock purchase benefits under state

law extended to all common law employees of Microsoft,

and that Respondents accepted this offer by working for

Microsoft, albeit pursuant to individual contracts which

specifically negated any eligibility for employee benefits.

Pet. App. at Al6-A17. Three circuit judges dissented,

relying upon state contract law precedent premised upon

the actual rather than the legally presumed intentions of

the parties. Pet. App. at A25-A36.

REASONS FOR GRANTING THE WRIT

I. THE DECISION BELOW CREATES A FEDERAL

RULE OF LAW WHICH THREATENS THE STA-

BILITY OF THE WORKPLACE AND GRANTS A

PRIVATE RIGHT OF ACTION TO ENFORCE THE

INTERNAL REVENUE CODE.

A. The Decision Below Creates a Federal Rule of Law

Which Threatens the Stability of the Workplace.

The decision below, while purporting to interpret state

law, in fact creates a uniform federal common law rule

that every employee stock purchase plan which seeks to

qualify under the Code (which includes every such plan)*°

must be construed to extend benefits to every common

law employee, and that specific agreements to the con-

trary are unavailing and unenforceable as a matter of

® Stock purchase plans normally are qualified under the Code to

defer taxation of income to employees. Employers, may, however,

establish non-qualified stock purchase programs for their employees,

in which case the employee’s receipt of employer stock is a taxable

event.

5

law.” That rule creates grave risks to essential attrib-

utes of freedom of contract which govern the burgeoning

freelancer workforce throughout the United States. The

Ninth Circuit’s rule will also engender broad-scale class

litigation on behalf of workers who accepted the benefits

of freelance status but seek to revise their bargain through

subsequent litigation.

The Court long has understood the primacy of freedom

of contract, noting that the contract clause in the Con-

stitution embodies

the high value the Framers placed on the protection

of private contracts. Contracts enable private indi-

viduals to order their personal and business affairs

according to their particular needs and interests.

Once arranged, those rights and obligations are bind-

ing under the law, and the parties are entitled to rely

on them.

Allied Structural Steel Co. v. Spannaus, 438 U.S. 234,

245 (1978). Indeed, “[mJarket efficiency requires effec-

tive means to enforce private agreements.” American

Airlines, Inc. v. Wolens, 115 S. Ct. 817, 824 ( 1995).

Yet the decision below not only ignores express private

agreements regarding the availability of employee benefits,

but finds those agreements insufficient as a matter of law

to overcome a legal presumption (based upon federal tax

laws) that every employee stock purchase plan which

seeks tax qualified status necessarily intends to extend

benefits to every person found to be a common law em-

ployee. If the Ninth Circuit is correct, the availability of

employee benefits will always be governed by whether an

individual is a common law employee, and the stability

and predictability afforded by private contracts specifically

7 The en banc majority did not specifically endorse such a blanket

rule for ERISA plans, although it did state that a decision denying

benefits to common law employees under such plans on the grounds

that the individuals waived the benefits was arbitrary and capricious

as a matter of law. Pet. App. at Al3.

6

defining whether an individual is entitled to benefits must

be disregarded.

Basing benefit eligibility solely and exclusively upon

common law employee status without regard to specific

private agreements places businesses at serious risk of

dramatically enhanced costs and broad-scale benefit litiga-

tion. The Court has noted many times that the distinction

between an independent contractor and a common law

employee is imprecise at best:

[T]here is no shorthand formula or magic phrase

that can be applied to find the answer, but all of the

incidents of the relationship must be assessed and

weighed with no one factor being decisive. What is

important is that the total factual context is assessed

in light of the pertinent common-law agency

principles.

NLRB vy. United Ins. Co. of Am., 390 U.S. 254, 258

(1968).*

A rule which places businesses at multi-million dollar

class action risk from misclassification of independent con-

tractors under the common law agency test has nothing to

recommend it. Indeed, such a rule sacrifices the stability

and predictability essential for American business, which

is constantly faced with decisions about staffing and work-

force development which involve, inter alia, comparative

costs for employees and independent contractors. Busi-

nesses which decide to have particular tasks performed by

individuals who freely agree they are engaged as inde-

8 The complexity of this inquiry was described by the General

Accounting Office as follows:

{[Mjany employers struggle in making the [employee/

independent contractor] classification decision because of the

unclear rules. Until the classification rules are clarified, we

are not optimistic that the confusion over who is an independ-

ent contractor and who is an employee can be avoided.

Pet. App. at A67-68 & n.1; and see James E. Merritt, Understand-

ing and Mitigating the Consequences of Reclassification of Work-

ers from Independent Contractors to Employees, 43 Major Tax

Planning { 1200 et seg. (1991).

7

pendent contractors and reap the benefits thereof ° should

not be placed at huge financial risk through subsequent

litigation based upon the inherently unclear common law

distinction between independent contractors and employ-

ees. Absent action by the Court, these risks are certain

to grow dramatically as the number of freelance workers

continues to increase and more lawsuits like this one are

brought.

B. The Decision Below Grants Respondents a Private

Right of Action to Enforce the Provisions of the

Internal Revenue Code.

Not only does the decision below threaten to disrupt

the workplace; it is legally flawed because it grants Re-

spondents an unprecedented private right of action to

enforce provisions of the Code. The majority below rea-

soned that Respondents were entitled to prevail in their

suit for benefits because the ESPP was designed to qualify

for the tax advantages provided by the Code. Yet behind

the majority’s facade of contractual intent under state

law lies the proposition that a stated desire to comply

with the federal tax laws necessarily means that individ-

uals who would benefit from a particular construction

may enforce compliance with those laws through lawsuits

such as this.

That does not follow as a matter of logic, and certainly

does not follow as a matter of law. Logically, Microsoft

may have jeopardized the tax qualified status of its plan

by its specific agreements with Respondents. If so, it is

responsible for the consequences. But its clear decision

to do so, manifested by its specific agreements with Re-

spondents, cannot be set aside by Respondents in this

lawsuit designed to compel compliance with the tax laws.

® As independent contractors, Respondents paid federal and state

taxes on a far more favorable basis than employees, and were able

to take deductions for contributions to Individual Retirement Ac-

counts (“IRAs”) and business expenses such as travel, meals,

entertainment, welfare benefits and depreciation of equipment used

in their business without regard to the two percent floor on deduc-

tion of business expenses applicable to employees.

8

The Court repeatedly has noted that “the fact that a

federal statute has been violated and some person harmed

does not automatically give rise to a private cause of

action in favor of that person.” Cannon v. University of

Chicago, 441 U.S. 677, 688 (1979).

In determining whether a private remedy is implicit

in a statute not expressly providing one, several fac-

tors are relevant. First, is the plaintiff “one of the

class for whose especial benefit the statute was en-

acted,”—that is, does the statute create a federal

right in favor of the plaintiff? Second, is there any

indication of legislative intent, explicit or implicit,

either to create such a remedy or to deny one? Third,

is it consistent with the underlying purposes of the

legislative scheme to imply such a remedy for the

plaintiff? And finally, is the cause of action one

traditionally relegated to state law, in an area ba-

sically the concern of the States, so that it would be

inappropriate to infer a cause of action based solely

on federal law?

Cort v. Ash, 422 U.S. 66, 78 (1975) (citations omitted).

The Court refined the Cort test in Touche Ross & Co. v.

Redington, 442 U.S. 560 (1979):

It is true that in Cort v. Ash, the Court set forth four

factors that it considered “relevant” in determining

whether a private remedy is implicit in a statute not

expressly providing one. But the Court did not de-

cide that each of these factors is entitled to equal

weight. The central inquiry remains whether Con-

gress intended to create, either expressly or by impli-

cation, a private cause of action.

Id. at 575.

No court, aside from the Ninth Circuit below, has held

that the tax qualification provisions of the Code create

a private right of action.” It is hornbook law that “[t]he

10 Reklau v. Merchants Nat'l Corp., 808 F.2d 628, 631 (7th Cir.

1986) (“[{wle hold that the district court’s refusal to find an implied

cause of action under § 401 of the I.R.C. was proper”); Cowan v.

crneneneessetiiaiiaciaiiiiaiaiiiiteiiaiiiiiliiiaiied

9

provisions of I.R.C. § 401(a) relate solely to the criteria

for tax qualification under the Internal Revenue Code

... LR.C. § 401(a) does not appear to create any sub-

stantive rights that a beneficiary or participant of a quali-

fied retirement trust can enforce.” In re Witwer, 148

B.R. 930, 937 (C.D. Cal. 1992) aff'd without opinion,

163 B.R. 614 (9th Cir. 1994). Microsoft may have mis-

classified Respondents and jeopardized the tax qualifica-

tion of its ESPP. It does not follow that Microsoft’s

intention that Respondents not participate in the ESPP,

and the correlative clear written intention of Respondents

based upon their contracts, should be set aside.

While Respondents (and the majority below) admit

that they cannot enforce the Code, they contend that “they

can enforce the ESPP, which expressly incorporates the

requirements of [Code] § 423.” Appellants Opening

Brief at 14.° This claim, and the majority’s conclusion

Keystone Employee Profit Sharing Fund, 586 F.2d 888, 890 n.3

(1st Cir. 1978) (“Cowan has also argued that he has a cause of

action under I.R.C. § 401. He has not spelled out any plausible

theory supporting this position, however, and we can think of none

This section does not appear to create any substantive rights that

a beneficiary of a qualified retirement trust can enforce”) ; Wiesner

v. Romo Paper Prods. Corp. Employees’ Retirement Plan, 514

F. Supp. 289, 291 n.2 (E.D.N.Y. 1981) (“[t]here is no merit in

plaintiff's repeated arguments that federal jurisdiction is available

because the defendants’ conduct assertedly entails violations of

Internal Revenue Code provisions governing pension plans. The

sections relied on . . . do not create a substantive right that a bene-

ficiary, participant or fiduciary could enforce’); Barlow v. Marriott

Corp., 328 F. Supp. 624, 631 (D. Md. 1971) (“[{i]n sum, the

Congress created neither explicitly nor implicitly any right in any

employee under section 401(a)(4)”); see also Salazar v. Brown,

940 F. Supp. 160, 166 (W.D. Mich. 1996) (“the Sixth Circuit would

clearly find it persuasive that Congress has passed thousands of

amendments to . . . the Internal Revenue Code, virtually on a

yearly basis, without once creating a private right of action’).

11 Code §401(a) sets forth the requirements for qualified pen-

sion, profit-sharing and stock bonus plans.

72 A copy of Appellants’ Opening Brief as filed in the Ninth

Circuit has been lodged with the Clerk’s office.

10

on this point, simply overlooks the practical effect of Re-

spondents’ claim. Despite their careful word-smithing,

Respondents are seeking to force Microsoft to comply

with the tax qualification provisions of the Code by sug-

gesting that the ESPP should be construed to include

them because inclusion would “effectuate[] the plan’s in-

tent to be tax-qualified and avoid[] adverse tax conse-

quences.” Appellants’ Opening Brief at 15. “Effectuating”

the plan’s intentions in this way, however, is nothing more

than allowing individuals to enforce the federal tax laws

under the guise of state contract law. The Court should

grant the writ to reverse this transparent effort.

CONCLUSION

For all the foregoing reasons, Amici respectfully request

that the Court grant the petition for writ of certiorari.

Respectfully submitted,

Of Counsel: ZACHARY D. FASMAN *

STEPHEN A. BOKAT ERIN M. SWEENEY

ROBIN S. CONRAD PAUL, HASTINGS, JANOFSKY

SUSSAN L. MAHALLATI & WALKER LLP

NATIONAL CHAMBER LITIGATION Tenth Floor

CENTER, INC. 1299 Pennsylvania Ave., N.W.

1615 H Street, N.W. Washington, D.C. 20004

Washington, D.C. 20062 (202) 508-9500

(202) 463-5337 Counsel for Amici Curiae

Counsel for the Chamber of

Commerce of the United States

NEIL GROSSMAN

ASSOCIATION OF PRIVATE PENSION

& WELFARE PLANS

1212 New York Avenue, N.W.

Washington, D.C. 20005

(202) 289-6700

Counsel for the Association of

Private Pension &

Welfare Plans * Counsel of Record