[00:00:02] Speaker 02: The next argued case is number 17, 1180, New York and Presbyterian Hospital against the United States. [00:00:10] Speaker 02: Ms. [00:00:10] Speaker 02: Grimaldi. [00:00:12] Speaker 03: Good morning, Your Honors. [00:00:13] Speaker 03: May it please the Court? [00:00:14] Speaker 03: This appeal involves a very straightforward federal statute, 26 USC 3102B, that mandates indemnification [00:00:24] Speaker 03: not just immunity, exemption, or some other form of equitable relief, in the event that an employer who has collected FICA taxes and paid those over to the government is met with claims by employees for the refund of those taxes. [00:00:39] Speaker 01: In this case... Does neither party explicitly contest any of the Court of Federal Claims factual findings? [00:00:47] Speaker 01: The only factual dispute identified in the party's brief is the government statement that the district court's order [00:00:53] Speaker 01: approving the settlement, quote, did not recognize that the square bracket district court claims could reasonably be characterized as seeking a tax refund, but rather, quote, simply recited the hospital's own assertions regarding the proper characterization of the claims. [00:01:15] Speaker 01: Do you contest any of the factual findings or any of the government's other factual statements? [00:01:21] Speaker 03: Well, on this appeal, this determination is reviewed de novo, and the government itself has withdrawn its request that the court reach the merits-based arguments that it advanced below, including the one that Your Honor just referred to, that the Southern District actually reached the decision, determined the nature of the claims in this case. [00:01:44] Speaker 03: If we were to reach that issue, notwithstanding the government's request that if jurisdiction is found, as we believe it properly should be, that question should be remanded, we would in fact disagree with that assertion. [00:01:56] Speaker 03: Because in fact, the district court in New York did not ultimately decide that issue. [00:02:05] Speaker 03: There is an interlocutory decision that is not final, that would not clatterly stop the government under the established standards for that. [00:02:13] Speaker 03: And in any event, in this settlement order, we would submit that the court recognized that the claims that were brought by the residents were claims for tax refunds, and that that was one of the reasons that the settlement was reasonable on the plaintiff's side, because they settled for pennies on the dollar, because ultimately they had a preemption problem. [00:02:35] Speaker 01: Yes, Your Honor. [00:02:36] Speaker 01: If we agree that the CFC aired [00:02:40] Speaker 01: in its interpretation of indemnify. [00:02:44] Speaker 01: Do we need to remand that issue for the CFC to consider in the first instance? [00:02:51] Speaker 03: If you agree the court erred, then you would find that this statute is reasonably amenable to an interpretation that it's money-mandating. [00:03:01] Speaker 03: That would be sufficient for Tucker Act jurisdiction. [00:03:04] Speaker 03: And in the contrarious decision of this court, this court made clear [00:03:08] Speaker 03: that once the court finds Tucker Act jurisdiction, that would apply to any subsequent remand and would not have to be revisited. [00:03:20] Speaker 05: We are based with the Anban decision in Fisher, correct? [00:03:25] Speaker 05: Yes. [00:03:26] Speaker 05: And Fisher made clear that we need to look at more than just whether or not there's a non-frivolous allegation as it relates to jurisdiction, right? [00:03:36] Speaker 03: Since Fisher, you have Mitchell and you have White Mountain Apache Tribe. [00:03:42] Speaker 03: No, White Mountain was decided before Fisher. [00:03:45] Speaker 05: Fisher actually cited White Mountain. [00:03:47] Speaker 03: Okay. [00:03:48] Speaker 03: But in terms of what you need to decide for jurisdiction, I apologize, I have the order wrong. [00:03:53] Speaker 03: You only need to determine that the statute is reasonably amenable to an interpretation. [00:04:00] Speaker 03: It's money mandating. [00:04:01] Speaker 03: and that the plaintiff falls within the class of plaintiffs who would be eligible. [00:04:06] Speaker 05: Right, but the question of how you decide whether it's reasonably amenable to this interpretation, Fisher says, has to be a lot more than you would normally be looking at if you were saying, is there, for instance, a non-frivolous allegations that get you passed a motion to dismiss, right? [00:04:27] Speaker 03: What you would do is what the court [00:04:30] Speaker 03: recognize, for example, in the Indian Harbor case and in all the cases of statutory construction, you would start with the plain, unambiguous terms of the statute. [00:04:40] Speaker 03: If they are unambiguous, you don't need to look any further. [00:04:43] Speaker 03: If the language is clear as it is here, if the word indemnification is unambiguous, that's the beginning and end of the court's inquiry. [00:04:51] Speaker 05: Well, I mean, how can we say that the word indemnify is unambiguous, given the fact that [00:05:01] Speaker 05: that the statutory scheme separately equates indemnification with absence of liability, and that there are two different potential definitions for that term. [00:05:13] Speaker 05: I mean, isn't this clearly an ambiguous term? [00:05:17] Speaker 03: I would submit that that reasoning may have the cart before the horse, because the term itself, indemnification, under every single dictionary that either party has cited, has a compensatory meaning. [00:05:30] Speaker 05: It has two meanings. [00:05:31] Speaker 03: Under all of those dictionaries, there are two meanings. [00:05:34] Speaker 03: And one of them, the dominant one, and the one that was in effect in Black's law dictionary at the time, is to compensate. [00:05:44] Speaker 05: All of the case law recognizes... Wait, are you telling me that when I look at a statute, that to decide if it's ambiguous, I'm only allowed to look at a dictionary? [00:05:52] Speaker 05: No, but... Ambiguity has to be assessed based on the entirety of the scheme, right? [00:05:59] Speaker 03: That would be true. [00:06:00] Speaker 03: I would urge the court to be careful not to confuse the test for Tucker Act jurisdiction with the test for an initial waiver of sovereign immunity, which we would agree would allow ambiguities to be resolved in favor of the government. [00:06:17] Speaker 03: In the case of Tucker Act jurisdiction, all that has to be shown is that the statute be fairly amenable to an interpretation that it's money-mandating. [00:06:26] Speaker 05: Right, so you've got to do the interpreting, right? [00:06:28] Speaker 05: Right. [00:06:29] Speaker 05: And in that, it doesn't say that as long as one side says it should be interpreted one way, that that's enough. [00:06:38] Speaker 03: Right. [00:06:39] Speaker 03: And we're not submitting that. [00:06:41] Speaker 03: We're saying that on the plain language, the court is required to interpret terms according to their common, ordinary, and contemporary meaning. [00:06:49] Speaker 03: That's the test, again, in the Indian Harbor case, which Your Honor authored. [00:06:56] Speaker 03: To the extent there is any ambiguity, [00:06:59] Speaker 03: It would be appropriate to look to other sources, but we would suggest that that meaning of indemnification, which has universally been recognized to involve compensation, is sufficient to show it's fairly amenable to an interpreter. [00:07:15] Speaker 04: I just don't see how you square this with Fisher and with what we're told to do in the on-box decision in Fisher. [00:07:24] Speaker 03: In the event, looking at all of the evidence that [00:07:28] Speaker 03: the court could look at, the plain meaning of the statute, the dictionary definitions in effect at the time. [00:07:36] Speaker 03: Even if the court were to go to legislative history, I would suggest that the reference... How about the rest of the statutory scheme? [00:07:44] Speaker 03: And the rest of the statutory scheme, they all support the interpretation of this provision as meaning compensation in money damages. [00:07:52] Speaker 03: And that's because we know that a statute is to be interpreted as written. [00:07:59] Speaker 03: This court, instead of interpreting this statute as written, referred to other statutes and to the headings of other statutes, which is prohibited. [00:08:09] Speaker 03: The relevant legislative history, the only legislative history... [00:08:14] Speaker 05: prohibited to look at the entirety of a statutory scheme when you're trying to decide if part of that statutory scheme is ambiguous? [00:08:23] Speaker 03: Well, again, you would start with each provision, and you could look to the whole scheme, but you would also accept that when Congress uses certain words in certain provisions in an integrated scheme and not in other provisions, that it acts intentionally. [00:08:37] Speaker 03: That's the Sebelius case. [00:08:38] Speaker 03: And what the court did here was it ignored that [00:08:42] Speaker 03: cardinal rule, and it said in other instances, Congress has used the language shall not be liable. [00:08:48] Speaker 03: It meant the same thing when it used shall be indemnified. [00:08:52] Speaker 03: That was a liberty that violates basic rules of statutory construction. [00:08:57] Speaker 03: So we start with it ignored the plain meaning under every dictionary. [00:09:01] Speaker 03: It ignored the case law that universally recognizes the word indemnified to be compensating by money damages. [00:09:09] Speaker 03: improperly looked to legislative history of other statutes, but did not give proper weight to the only relevant legislative history, which was of 3102B itself. [00:09:20] Speaker 03: Because that history said that that statute was enacted to protect employers. [00:09:27] Speaker 01: Let me take you to the fair interpretation standard. [00:09:31] Speaker 01: The government cites Navajo Nation. [00:09:34] Speaker 01: And in a footnote, in the gray brief, you describe [00:09:39] Speaker 01: You serve, well, you call it inapposite, because it's under the Indian Tucker Act. [00:09:47] Speaker 01: But much of the Supreme Court precedent, including White Mountain, involves claims under the Indian Tucker Act. [00:09:56] Speaker 01: And the Supreme Court's analysis under the two statutes doesn't seem to differ. [00:10:03] Speaker 01: You aren't actually suggesting we can't rely on cases arising out of the Indian Tucker Act. [00:10:08] Speaker 03: I think that that's a fair statement. [00:10:12] Speaker 03: In fact, what we said was even applying the analysis the government set out, we would need it. [00:10:18] Speaker 03: All that is required is that we identify the money mandated statute. [00:10:24] Speaker 01: Don't talk when a judge talks. [00:10:31] Speaker 01: Navajo Nation can be distinguished based on the fact that it involves a breach of trust. [00:10:36] Speaker 01: Both hurdles that Navajo Nation discusses involve specific fiduciary and other duties. [00:10:44] Speaker 01: Why don't you try and explain why trust cases arising out of the Indian Tetra actor distinguishable? [00:10:51] Speaker 03: Well, I would say that the issue in that line of cases is whether it was a bare trust or a trust that created fiduciary duties. [00:11:00] Speaker 03: And we know in the Apache, White Mountain Apache case, the court found [00:11:06] Speaker 03: that it wasn't merely a bare trust, reversing the court of claims and affirming this court. [00:11:11] Speaker 03: And that trust relationship gave rise to obligations that were enforceable through a remedy of money damages. [00:11:21] Speaker 03: Note, the government in that case argued as the government in this case that the sole remedy was injunctive. [00:11:29] Speaker 03: And the Supreme Court made clear that that would not be [00:11:33] Speaker 03: dictated by the law and would not make the tribe whole, nor would it deter the government from conduct that could injure the tribe. [00:11:46] Speaker 03: We would suggest that that reasoning applies here as well. [00:11:50] Speaker 03: If this court were to construe indemnification in an unprecedented way solely to mean immunity, then the government would not be required to make the hospital whole who's out of pocket [00:12:02] Speaker 03: over six million dollars nor would the government be incentivized to step in early and even adhere to its own interpretation of the statute as an immunity statute. [00:12:14] Speaker 02: If in fact with the statute explicitly says shall indemnify, this seems to be a significant distinction. [00:12:27] Speaker 02: I'll ask the government the question who they expect [00:12:31] Speaker 02: under the statute to provide the indemnification if it's not the government. [00:12:36] Speaker 03: Yes, Your Honor. [00:12:36] Speaker 03: And in fact, there's the payee in that same provision of 3102B is not defined. [00:12:44] Speaker 03: That is, the employer pays over the taxes and shall be indemnified. [00:12:49] Speaker 03: It's obvious it's paying the taxes to the government [00:12:52] Speaker 03: And the indemnitor has to be the government, because there are only three parties in that transaction, the employer, the employee, and the government. [00:13:00] Speaker 02: But the district court, nonetheless, and this is an argument on the other side, did not simply refund it. [00:13:09] Speaker 02: They paid them over as damages. [00:13:11] Speaker 02: Isn't that right? [00:13:11] Speaker 02: As tort damages. [00:13:14] Speaker 03: In the Southern District case? [00:13:16] Speaker 03: Yes. [00:13:17] Speaker 03: They were sought as damages and ultimately [00:13:20] Speaker 02: they were paid in part of a settlement where the hospital... They were settled but they requested damages and this was the measure of the damages was the amount of the payment that should have been treated differently. [00:13:33] Speaker 02: It was exactly dollar for dollar the taxes that they claimed... It was dollar for dollar but it was still damages and then this is other than that the fact that the statute says shall indemnify and it's clear that the indemnification under the statute is intended to come [00:13:49] Speaker 02: from the government to reconcile that with the district court judgment? [00:13:55] Speaker 03: Yes. [00:13:55] Speaker 03: And I would suggest that the- But why did you appeal the district court judgment? [00:14:00] Speaker 03: Well, actually we- Because you argued that you couldn't be sued, right? [00:14:04] Speaker 03: We went through great lengths. [00:14:05] Speaker 03: We sought mandamus, early mandamus. [00:14:08] Speaker 03: The government was asked to participate in the mandamus, refused to participate. [00:14:14] Speaker 03: I mean, at this point, the hospital is out twisting in the wind all by itself. [00:14:18] Speaker 05: Twisting in the wind, but I mean, the allegations is you're twisting in the wind because you didn't make a request for a refund. [00:14:26] Speaker 03: It's never been contended by the government that the hospital acted improperly. [00:14:31] Speaker 03: The hospital complied fully with the Internal Revenue Code. [00:14:34] Speaker 03: The allegation is, in fact... Well, you don't have to ask for a refund. [00:14:37] Speaker 03: Exactly. [00:14:38] Speaker 05: But you did for your other residents. [00:14:40] Speaker 05: You just chose not to do it for these people. [00:14:43] Speaker 03: And you certainly knew how to do it. [00:14:45] Speaker 03: And again, there was no obligation to do that. [00:14:48] Speaker 03: But that still is a disguised refund claim that should have been preempted under 7422. [00:14:53] Speaker 03: The government admits that. [00:14:56] Speaker 03: and also was covered by 3102B, the government admits that. [00:15:00] Speaker 05: Under your theory, then the government would have to indemnify you regardless of what you choose to pay and regardless of what the theory was. [00:15:10] Speaker 05: I mean, these were tort theories. [00:15:12] Speaker 05: They had nothing to do with the tax refund. [00:15:15] Speaker 05: They said that you actually engaged in a charade [00:15:22] Speaker 05: reduce your own tax liability and to not protect your residence. [00:15:26] Speaker 05: That's a tort theory. [00:15:28] Speaker 05: It was not a refund theory. [00:15:29] Speaker 03: Well, under Clintwood Elkhorn, it doesn't matter that any type of theory whatsoever. [00:15:35] Speaker 03: A taxpayer claim to get a refund of taxes is preempted under 7422. [00:15:39] Speaker 03: So you could have appealed. [00:15:41] Speaker 03: That's right. [00:15:41] Speaker 03: And there was a judgment made when the hospital left without the support of the government facing millions and millions of dollars in class-wide damages [00:15:51] Speaker 03: told by the district court to attend a settlement conference, managed to reduce its liability to a fraction of what it would have been. [00:15:59] Speaker 03: This is a not-for-profit institution that doesn't have the funds. [00:16:03] Speaker 03: The funds are in the coffers of the government. [00:16:06] Speaker 03: It made the rational decision after consulting and inviting the government to participate to settle to mitigate damages. [00:16:12] Speaker 03: But if that is a defense to indemnification, there are many, whether it's notice, whether it's the reasonableness of the settlement, [00:16:19] Speaker 03: Those can be heard later, back before the court of claims, as merits arguments that the government itself has said that it's not raising at this stage on appeal. [00:16:30] Speaker 02: Let's hear from the government, and we'll save you rebuttal time. [00:16:33] Speaker 02: Thank you, Your Honor. [00:16:38] Speaker 02: Mr. Christensen. [00:16:42] Speaker 02: And I'll ask you the same question. [00:16:44] Speaker 02: The statute says, shall indemnify who, in your theory, [00:16:48] Speaker 02: does the statute contemplate to provide the indemnification, if not the IRS, not the United States? [00:16:56] Speaker 00: Your Honor, what the statute says is that the employer who remits the tax shall be indemnified. [00:17:03] Speaker 02: Shall be indemnified, yes. [00:17:05] Speaker 00: Who do you expect to provide that indemnification? [00:17:09] Speaker 00: Well, Congress provided the indemnification. [00:17:11] Speaker 00: What Congress did when it enacted. [00:17:13] Speaker 02: They should get it from Congress, say, please give us the money, Congress. [00:17:17] Speaker 00: No, Congress indemnified the employer by providing the employer with immunity against any claim. [00:17:25] Speaker 02: They didn't say shall be immune from paying the money back. [00:17:29] Speaker 02: They say that if you made a mistake, let's say it was a mistake, it doesn't matter, that you shall be indemnified. [00:17:38] Speaker 02: Who did the statute expect under that statute? [00:17:42] Speaker 02: Who in the government's theory [00:17:44] Speaker 02: was expected to provide the indemnification. [00:17:47] Speaker 02: We know that the money wrongfully was withheld, given to the United States. [00:17:53] Speaker 02: You're saying, nonetheless, the United States can keep this wrongful exaction? [00:17:59] Speaker 00: Your Honor, the reason the statute does not identify an indemnitor is because Congress, in providing that employers shall be indemnified against the claims of their employees, was providing immunity [00:18:14] Speaker 01: Are you familiar with 802A of the Social Security Act? [00:18:19] Speaker 00: I may be. [00:18:20] Speaker 01: It's the predecessor to 3102B? [00:18:23] Speaker 00: Yes. [00:18:24] Speaker 01: Okay. [00:18:25] Speaker 01: So, are you familiar with the legislative history of this statute? [00:18:30] Speaker 01: Did you look? [00:18:32] Speaker 00: My recollection, Your Honor, is that the legislative history didn't... The House report on 802A says [00:18:40] Speaker 01: To protect the employer, he is indemnified against any and all claims and demands with respect to the part of the wages of the employer which he withheld. [00:18:50] Speaker 01: So you're good, right? [00:18:51] Speaker 00: Right. [00:18:52] Speaker 01: Yes, thank you. [00:18:52] Speaker 01: Up to the correct amount withheld and paid to the United States. [00:18:57] Speaker 01: Because the House report contemplates indemnification up to the correct amount, Congress understood indemnification to include the payment of money, did it not? [00:19:09] Speaker 00: I don't think that's correct, Your Honor. [00:19:11] Speaker 01: So they're just indemnified from being sued up to the correct amount. [00:19:15] Speaker 00: Is that what you're telling me? [00:19:16] Speaker 00: What I'm saying, Your Honor, is that the term amount in the statute, in fact, it doesn't modify the term indemnified in the statute. [00:19:27] Speaker 01: I'm talking about the legislative history, though. [00:19:29] Speaker 00: Yes. [00:19:30] Speaker 00: Well, as enacted, the actual language that was enacted doesn't [00:19:34] Speaker 00: say up to the correct amount. [00:19:36] Speaker 00: Instead, it's language similar to what we have here that... But that's a separate question, isn't it? [00:19:41] Speaker 02: That if we resolve the principle of what entity the statute intended to provide the indemnification, we then get to the question of the correct amount. [00:19:55] Speaker 00: Is that right? [00:19:57] Speaker 00: No, Your Honor, because this is providing immunity... The district court decided the correct amount. [00:20:02] Speaker 02: You say we don't have to decide that because the district court decided it. [00:20:06] Speaker 00: No, because the statute is not capping indemnification at a specific amount. [00:20:12] Speaker 00: And let me just be clear. [00:20:14] Speaker 00: The word amount, as used in the statute, does not modify indemnified. [00:20:19] Speaker 00: It says, shall be indemnified against the claims and demands of any person for the amount. [00:20:25] Speaker 00: The term amount is modifying claims and demands. [00:20:28] Speaker 00: So the employer is indemnified, is immune, [00:20:32] Speaker 00: against the claims and demands of an employee for the amount that the employer has permitted. [00:20:38] Speaker 01: But if they ask for more than the correct amount, they're not indemnified? [00:20:41] Speaker 00: No. [00:20:42] Speaker 00: Well, it says the employer, in other words, so if their claim is for... Let's say that they're not interns. [00:21:00] Speaker 01: the hospital employees say, well, you paid the government, incorrectly paid the government $10,000, but we want a million. [00:21:12] Speaker 01: So they're indemnified against the first $10,000, but the other $990,000, they can go ahead and pursue it? [00:21:21] Speaker 00: No, Your Honor. [00:21:22] Speaker 00: The employer would be indemnified against any claims or demands by the employers for- Can you say they don't get anything? [00:21:30] Speaker 02: There's no indemnification. [00:21:32] Speaker 00: The indemnification is the immunity that Congress provided. [00:21:35] Speaker 05: It doesn't say immunity. [00:21:36] Speaker 05: Let's go back to that statutory argument. [00:21:39] Speaker 05: So your argument is that as many or more, or even the more prevalent definitions, said that indemnification means immunity at the time that the act was passed. [00:21:50] Speaker 00: That's correct, Your Honor. [00:21:52] Speaker 05: But you can see that there are some other definitions that would refer to indemnification in the way that we now think of it. [00:22:00] Speaker 05: Right? [00:22:01] Speaker 05: Yes. [00:22:01] Speaker 05: So one of the problems I had was that you tried to argue that the statute unambiguously on its face because it used the word indemnification and because those dictionaries do support you as well as the other side, that it was unambiguous. [00:22:18] Speaker 05: But isn't it really an ambiguous statute that we then have to interpret using other principles of interpretation? [00:22:26] Speaker 00: I agree that the term indemnified in and of itself [00:22:30] Speaker 00: is ambiguous and is susceptible to both meanings at the time that Congress enacted the statute. [00:22:36] Speaker 05: Your position really is not that it's unambiguously provides for immunity. [00:22:43] Speaker 05: It's that the ambiguity can be reasonably resolved. [00:22:48] Speaker 00: That's correct. [00:22:49] Speaker 00: When it's placed in context of the entire code and the refund scheme and the cases that have held that there is no private cause of action, [00:22:59] Speaker 00: for an employee to sue its employer for collecting FICA taxes. [00:23:03] Speaker 00: I do want to go back to this. [00:23:04] Speaker 01: But there are statutes that unambiguously prevent a lawsuit against employers from claims by employees. [00:23:16] Speaker 01: And they're different language, right? [00:23:18] Speaker 00: Those statutes, when they were originally enacted, used the same term, indemnified. [00:23:24] Speaker 00: The fact that subsequent Congresses in later years modified that language, perhaps updated that language with more modern language, doesn't impact what the 1935 Congress meant. [00:23:36] Speaker 01: But then we go back and look at the ledge history, right? [00:23:39] Speaker 01: And the ledge history talks about payment of money. [00:23:46] Speaker 01: It says, up to the correct amount withheld and paid to the United States. [00:23:52] Speaker 00: I interpret that legislative history to be providing protection for the employers against any claims or demands of their employees by providing immunity. [00:24:04] Speaker 05: With respect to the private right of action under 3102B, there's very little [00:24:16] Speaker 05: case law out there. [00:24:17] Speaker 05: I mean, do people just stop trying to make these claims? [00:24:20] Speaker 05: Or, you know, you've got the cases don't even go into it in much detail. [00:24:28] Speaker 05: There's nothing else out there? [00:24:30] Speaker 00: I mean, we've cited the district court cases and the circuit court cases from the Third Circuit and 11th Circuit. [00:24:35] Speaker 05: Most of those cases that you cite don't actually, there's really only one or two that mention 3102B. [00:24:41] Speaker 05: Most of them just mention FICA generally. [00:24:43] Speaker 00: Right. [00:24:44] Speaker 00: There's no private cause of action under FICA, which would include our statute. [00:24:48] Speaker 05: Right. [00:24:49] Speaker 05: But all I'm saying is that it's a very sparse caseload. [00:24:53] Speaker 00: I would agree. [00:24:53] Speaker 05: Only two circuits. [00:24:54] Speaker 05: And one of them didn't say much. [00:24:56] Speaker 05: So my question is, there has not been more development of this issue? [00:25:02] Speaker 00: Not that I'm aware of. [00:25:06] Speaker 00: And again, reading the provision as a reimbursement provision would be inconsistent with the holdings in those cases. [00:25:12] Speaker 00: that there is no private cause of action for an employee to sue its employer. [00:25:16] Speaker 00: I do want to come back to the standard used in applying or in deciding Tucker Act jurisdiction, because the hospital misinterprets how the fair interpretation rule is to be implied. [00:25:30] Speaker 00: The question is not whether the word indemnified can be fairly interpreted to include a right of reimbursement. [00:25:38] Speaker 00: Rather, the first step is to decide what rights and duties are, in fact, imposed under the statute. [00:25:45] Speaker 00: And then the Fair Interpretation Rule applies in deciding whether a breach of those rights or duties is compensable through damages. [00:25:54] Speaker 00: So again, the Fair Interpretation Rule asks whether a statute can fairly be interpreted to mandate compensation as a result of a breach of the rights or duties it imposes. [00:26:05] Speaker 00: But the preliminary question as to what rights or duties are actually created by the statute, what does indemnification mean, that must be based on a correct interpretation of the statute itself. [00:26:19] Speaker 00: And that's the pattern that the Supreme Court has followed in its decisions. [00:26:23] Speaker 00: In the Mitchell cases, it first decided what fiduciary obligations were created by the relevant statutes. [00:26:30] Speaker 00: And after it had defined those obligations, only then did it reach [00:26:33] Speaker 00: the fair interpretation analysis to decide whether, given those obligations, the statute could be fairly interpreted to require damages as a result of a breach of those obligations that were imposed. [00:26:47] Speaker 00: So the court should construe the word indemnified not with a deferential standard. [00:26:54] Speaker 01: Using standard statutory construction canons. [00:26:58] Speaker 01: But there are some awfully good arguments, Sutherland-type arguments, [00:27:03] Speaker 01: that defeat you on that. [00:27:07] Speaker 01: And your friend cited some of them. [00:27:10] Speaker 01: Shouldn't you say Sutherland? [00:27:13] Speaker 00: I think there are strong arguments based on the statutory language of the statute itself that confirm that it is solely an immunity provision. [00:27:24] Speaker 00: For example, the statute says shall be indemnified against [00:27:29] Speaker 00: the claims. [00:27:29] Speaker 00: That would be awkward wording if what Congress meant was that they will be reimbursed for claims. [00:27:37] Speaker 00: The use of the word against makes that awkward. [00:27:40] Speaker 00: Also, the thrust of the statute is to make employers liable for the payment of... If I find another statute that uses against in the other context, do you lose? [00:27:51] Speaker 00: No, Your Honor. [00:27:52] Speaker 00: It's indicia that's contained in this statute of Congress's intent. [00:27:57] Speaker 00: Like I said, [00:27:58] Speaker 00: You know, the thrust of the statute also is that employers shall be liable for the payment of the tax. [00:28:04] Speaker 00: So if we read the very next clause to allow them to pay claims and demands of their employees and then turn around and be entitled to reimbursement from the United States, it undermines the thrust of the statute itself. [00:28:19] Speaker 00: And again, as the Court of Federal Claims held the law, [00:28:22] Speaker 00: reading the statute as a reimbursement provision is inconsistent with the refund scheme established by the code, which requires employees seeking a refund of tax to do so directly with the IRS. [00:28:34] Speaker 01: So was the answer no? [00:28:37] Speaker 00: To which question, Your Honor? [00:28:38] Speaker 00: I'm sorry. [00:28:39] Speaker 01: The question you were answering all that time, which was, if I find another statute which uses that language exactly in the opposite context, you lose. [00:28:48] Speaker 01: And you launched off saying, well, we have to look at this statute alone. [00:28:53] Speaker 00: No, Your Honor, that wouldn't result in a government loss here. [00:28:57] Speaker 00: The court needs to consider the statute in its entire context, the surrounding statutory language, as well as its context within the internal revenue. [00:29:08] Speaker 01: Well, you were telling me that the use of the word against is a strong indicia. [00:29:13] Speaker 00: What I said was that it would make [00:29:16] Speaker 01: I think I quoted you, actually. [00:29:19] Speaker 00: It would make for an awkward reading if what Congress was doing was providing for reimbursement. [00:29:24] Speaker 00: Again, the government's interpretation of this statute doesn't just benefit the United States in this case, but it's beneficial for employers in general because it provides them with a more valuable tool of immunity, which is a more valuable tool to protect employers than a reimbursement would, a reimbursement provision. [00:29:45] Speaker 01: Did the United States mention that when the hospital approached it? [00:29:51] Speaker 00: It certainly did. [00:29:52] Speaker 00: In fact, the United States went on record when it moved to dismiss the hospital's third party complaint. [00:29:57] Speaker 00: The United States went on record that its interpretation of the statute was that it was an immunity provision. [00:30:04] Speaker 00: And that's contained in the United States motion to dismiss, as well as the reply brief, which has a greater detailed discussion of the United States position that the statute was an immunity provision. [00:30:16] Speaker 02: So when the statute was enacted, with the participation, one assumes, of the United States of the Revenue Service. [00:30:24] Speaker 02: And it was enacted saying indemnified rather than immune. [00:30:29] Speaker 02: We assume that our Congress people don't know how to write statutes, or the Revenue Service, or anyone else, to include something that you tell us is at least ambiguous, if not wrong. [00:30:46] Speaker 00: The court must construe terms based on the ordinary contemporary meaning of the terms. [00:30:52] Speaker 00: And at that time, as we've illustrated, indemnified men to immunize. [00:30:56] Speaker 02: How long ago was this statute written? [00:30:59] Speaker 02: In Old English or what? [00:31:01] Speaker 02: That indemnify means immune. [00:31:03] Speaker 00: Yes, in 1935, Your Honor. [00:31:06] Speaker 00: And the dictionaries established that that usage had both had a longer history and was not obsolete in 1935. [00:31:15] Speaker 00: And that's established through the dictionary definition. [00:31:18] Speaker 02: So they meant immune, and they wrote indemnify. [00:31:21] Speaker 00: Because they mean the same thing, Your Honor. [00:31:23] Speaker 00: That's what Congress meant when it said the employer shall be indemnified. [00:31:28] Speaker 02: But the legislative history of which Judge Wallach has reminded you says otherwise. [00:31:34] Speaker 00: I don't interpret the legislative history to be placing a cap on the amount of indemnification. [00:31:42] Speaker 00: Rather, it's providing protection for employers [00:31:44] Speaker 00: against all claims and demands that an employee may make for the amount that the employer has paid. [00:31:51] Speaker 02: So therefore, this employer is not protected as a result. [00:31:56] Speaker 02: That's the intention. [00:31:57] Speaker 02: That's our government's intention that this employer is not protected. [00:32:02] Speaker 00: Your Honor, this employer ought to have asserted section 3102, immunity under section 3102, [00:32:09] Speaker 00: to begin with. [00:32:10] Speaker 00: That is what Congress intended, to provide the employers with that. [00:32:14] Speaker 01: Well, didn't they do that? [00:32:15] Speaker 01: I thought that both sides were pretty much in accord that the district court erred in its determination. [00:32:21] Speaker 00: They never asserted this statute immunity under this statute, even though the hospital was aware that the government interpreted this statute to be an immunity provision. [00:32:31] Speaker 00: Instead, they never raised it, but they later settled the medical residence claims. [00:32:38] Speaker 00: But the government had gone on record in its papers filed in connection with its motion to dismiss that this was an immunity provision. [00:32:46] Speaker 00: And yet, being aware of that, the hospital still went ahead, never raised immunity as a defense in the district court litigation, but instead settled the medical residents' claims. [00:32:56] Speaker 01: My recollection was the other way. [00:32:59] Speaker 01: So I'm going to ask your opposing counsel about it. [00:33:01] Speaker 00: Yeah. [00:33:01] Speaker 00: And the government's filings on the motion to dismiss, unfortunately, are not [00:33:05] Speaker 00: in the record in this case, but they're public filings of which the court can take judicial notice. [00:33:11] Speaker 00: There's a motion to dismiss, and there's a reply brief that the government filed, which goes into further discussion of this. [00:33:18] Speaker 05: Those who were filed in the Southern District? [00:33:20] Speaker 00: That's correct. [00:33:22] Speaker 00: And they weren't included in the proceedings below as part of the record by either party. [00:33:26] Speaker 00: But the court can take judicial notice of those. [00:33:29] Speaker 02: Any more questions for Mr. Christensen? [00:33:32] Speaker 02: Thank you, Mr. Christensen. [00:33:36] Speaker 01: I came away from the record under the impression that that allegation of immunity was raised before the district court. [00:33:51] Speaker 01: Was it not? [00:33:53] Speaker 03: Your Honor, in the district court in New York, the government specifically argued that 3102B did not apply and protect the hospital. [00:34:04] Speaker 03: And I would refer, Your Honors, [00:34:07] Speaker 03: to the government's reply brief, which I agree that- Did the hospital argue that it did? [00:34:14] Speaker 03: The hospital did not argue that it did, but that shouldn't make a difference because the government itself- But the hospital did argue that it could not be sued because of 7422, right? [00:34:26] Speaker 03: Exactly. [00:34:27] Speaker 03: And the government's position is that 3102B, for an employer, is coterminous. [00:34:32] Speaker 03: But in the district court, the government stated [00:34:36] Speaker 03: By its plain language, Section 3102B protects employers from claims alleging wrongful collection of FICA taxes. [00:34:44] Speaker 03: There's a sick there. [00:34:45] Speaker 03: Quote, it does not protect the hospital from common law claims based on its independent tortious conduct against former employees. [00:34:52] Speaker 03: That's at page four of the reply brief. [00:34:55] Speaker 05: I mean, that's a given, right? [00:34:56] Speaker 05: I mean, you would agree with that interpretation of the statute. [00:34:59] Speaker 05: You disagree with the district court's interpretation of what those common law claims asserted. [00:35:05] Speaker 03: I actually don't believe that I would agree that disguised refund claims characterized as tax, I'm sorry, disguised refund claims [00:35:16] Speaker 03: are outside the scope of 7422 or 3102. [00:35:19] Speaker 05: You have to argue to the district court that they really are just disguised brief run claims. [00:35:25] Speaker 05: She didn't buy that. [00:35:26] Speaker 03: Well, there isn't a final ruling, but yes, that's true. [00:35:29] Speaker 03: I will say that the government has, before the Court of Claims, reversed its position after the hospital was out of pocket and then said that 3102B would apply to these claims and that the government [00:35:45] Speaker 03: should have asserted 3102B as an immunity. [00:35:51] Speaker 03: Although, when in the district court, the government took the position that 3102B did not apply or protect the hospital. [00:35:59] Speaker 05: But it didn't say it didn't apply. [00:36:00] Speaker 05: The government couldn't decide what the claims really meant. [00:36:04] Speaker 05: It just said, if it is a refund claim, essentially, you're immune. [00:36:08] Speaker 05: But if you've done some other independent tortious act, you wouldn't be immune. [00:36:13] Speaker 03: Well, in the court of claims below, the government at Appendix 399 stated that it believed that 3102B should have applied to these claims, and that 7422 should have preempted them, regardless of how they were styled before the court below, which is the correct interpretation, because that's what Clintwood warns against. [00:36:41] Speaker 03: that clever plaintiffs will characterize what were quintessentially tax refund claims as tort claims in order to evade 7422's preemption. [00:36:50] Speaker 05: And we're providing to just make that argument to the district court. [00:36:53] Speaker 03: We did. [00:36:53] Speaker 03: And the court erred. [00:36:54] Speaker 03: And no court has agreed with the Southern District's ruling in the Childer's case. [00:36:59] Speaker 03: In fact, the district court below, I'm sorry, the court of claims below expressly disagreed with the district court's ruling. [00:37:07] Speaker 05: So you had the right to appeal that. [00:37:09] Speaker 03: And again, if the failure to appeal rather than reasonably straddle to avoid many millions of dollars of exposure is a defense to indemnification, the proper time to address that would be on remand. [00:37:23] Speaker 02: We review a certain amount of second guessing here. [00:37:25] Speaker 02: In the district court, the physicians could not have sued the United States on the district court. [00:37:32] Speaker 02: So they had to bring it toward action against the hospitals. [00:37:38] Speaker 02: So to argue the issues that you violated the law by making this deduction. [00:37:48] Speaker 02: And doesn't that end? [00:37:51] Speaker 02: I mean, I'm reluctant to say that the district court made a lot of mistakes when there was no way the United States could have been a party to that action. [00:38:02] Speaker 03: The case law is very clear and was briefed before the court, following Clinton with Elkwood. [00:38:10] Speaker 03: Private employers are equally immunized under 7422 from taxpayer claims. [00:38:16] Speaker 03: It's true. [00:38:17] Speaker 02: They're equally immunized, but they could not have been a defendant. [00:38:21] Speaker 02: And they could not have been asked for restoration, whatever word you want to use, in the district court. [00:38:30] Speaker 03: But both the government and the employer should have been immune to claims that were as late as these claims were brought. [00:38:36] Speaker 03: The court, again, in an unprecedented decision, which just tells you how rare this circumstance is, failed to properly enforce 7422, leaving the private employer exposed to these class-wide damages. [00:38:49] Speaker 03: And we submit it's for that specific but obviously rare instance [00:38:54] Speaker 03: that the indemnification under 3102B exists. [00:38:58] Speaker 03: Now, the Umland and McDonald cases, which found no private right of action, they merely say that there isn't a private right of action. [00:39:06] Speaker 03: That's true. [00:39:07] Speaker 03: We agree. [00:39:07] Speaker 03: But that doesn't mean that the extra protection for employers in the rare case a court lets a case go through vanishes. [00:39:15] Speaker 03: I mean, we have very commonly indemnification statutes for directors and officers. [00:39:21] Speaker 03: The underlying claims may be frivolous. [00:39:23] Speaker 03: The fact that [00:39:24] Speaker 03: indemnification exists is not a basis to allow a frivolous claim to proceed. [00:39:31] Speaker 03: But the converse is not true. [00:39:32] Speaker 03: Just because a frivolous claim should be stopped at the doorstop of the court doesn't deprive the employer or director or officer of indemnification if and when such a frivolous claim proceeds. [00:39:49] Speaker 03: That's what happened here. [00:39:51] Speaker 03: Everybody agrees. [00:39:52] Speaker 03: The government agrees. [00:39:53] Speaker 03: The court below agrees. [00:39:55] Speaker 03: Obviously, the hospital. [00:39:56] Speaker 05: Well, the court below didn't agree. [00:39:57] Speaker 05: The court below said taking the hospital's allegations as true, and your allegation was that it was nothing more than a disguised refund claim. [00:40:08] Speaker 05: So the court below said if it was a disguised refund claim, then it could not go forward under 3102. [00:40:15] Speaker 05: But it did not say we disagree with the district court whether it was a disguised refund claim. [00:40:22] Speaker 03: If the court actually did hold, there's a big body of law in disguised refund claims. [00:40:27] Speaker 03: I'm sure your honor is aware. [00:40:28] Speaker 03: The court below did hold that the childer's case had been criticized by other courts, other precedents, and that the court did not, the court of claims believed the district court did not have jurisdiction because of 7422. [00:40:42] Speaker 03: And it chose not to follow the childer's decision. [00:40:48] Speaker 03: So I would respectfully submit that the court did [00:40:51] Speaker 03: expressly disagree with the district court's finding under 7422, without adopting the characterization of the claims. [00:41:00] Speaker 03: I mean, that is the problem with artfully-fed claims. [00:41:04] Speaker 02: Just a very, I know that... Would you be it's time to wrap it up, one final statement? [00:41:10] Speaker 03: Okay. [00:41:10] Speaker 03: We would respectfully submit, Your Honor, that this is the case, albeit a rare one, where it's appropriate to [00:41:20] Speaker 03: enforce the express terms, the unambiguous terms of the statute and provide indemnification to the hospital that's out of pocket. [00:41:30] Speaker 03: It is fully consistent with the overall scheme that is in the internal revenue code. [00:41:39] Speaker 03: The hospital complied with its obligations. [00:41:43] Speaker 03: It is out of pocket. [00:41:45] Speaker 03: If this is not enforced as written, [00:41:48] Speaker 03: The government will have no incentive to intervene in these types of cases to ensure that 7422 preemption is properly applied by the courts. [00:41:59] Speaker 03: And the private employer who is out of funds will be left exposed to huge claims, and itself will have- Counsel, you ought to run for the Senate. [00:42:14] Speaker 01: You're really doing well on a filibuster. [00:42:16] Speaker 03: OK. [00:42:17] Speaker 03: In any event. [00:42:18] Speaker 03: Your honors, we respectfully submit that the decision below was clear error and should be reversed. [00:42:24] Speaker 02: Thank you. [00:42:25] Speaker 02: Thank you. [00:42:25] Speaker 02: Thank you both. [00:42:26] Speaker 02: The case is taken under submission. [00:42:29] Speaker 00: All rise.