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Hatter v. United States

August 05, 1999

JUDGE TERRY J. HATTER, JR., MARY MARTIN ARCENEAUX, ON BEHALF OF THE LATE JUDGE GEORGE ARCENEAUX, JR., JUDGE PETER H. BEER, JUDGE DUDLEY H. BOWEN, JR., DOLORES LEE BURCIAGA, EXECUTRIX OF THE ESTATE OF CHIEF JUDGE JUAN G. BURCIAGA, JUDGE A.J. MCNAMARA, JUDGE HARRY PREGERSON, JUDGE RAUL A. RAMIREZ, JUDGE NORMAN C. ROETTGER, JR., CHIEF JUDGE THOMAS A. WISEMAN, JR., CHIEF JUDGE TERENCE T. EVANS, JUDGE HENRY A. MENTZ, JR., CHIEF JUDGE WILBUR D. OWENS, JR., JUDGE HENRY R. WILHOIT, JR., JUDGE HAROLD A. BAKER AND CHIEF JUDGE MICHAEL M. MIHM, PLAINTIFFS-APPELLANTS,
v.
UNITED STATES, DEFENDANT-APPELLEE.



Before Plager, Circuit Judge, Archer, Senior Circuit Judge, and Rader, Circuit Judge.

The opinion of the court was delivered by: Plager, Circuit Judge.

Appealed from: United States Court of Federal Claims Judge James T. Turner

Terry J. Hatter, Jr., et al. appeal the damages calculation of the Court of Federal Claims, Hatter v. United States, 38 Fed. Cl. 166 (1997) (Hatter VI), on remand from this court's decision in Hatter v. United States, 64 F.3d 647 (Fed. Cir. 1995) (Hatter IV). *fn1 In Hatter IV, we held that the Compensation Clause of the United States Constitution, art. III, § 1, forbids diminishment of the compensation of Article III Judges once in office and that the imposition of social security taxes on a Judge's pay after taking office unconstitutionally diminishes the Judge's compensation. Because the Court of Federal Claims improperly calculated the damages award due to the diminution, we reverse and remand the matter for further proceedings.

BACKGROUND

The facts of this case have been discussed in detail in our previous two decisions, Hatter IV and Hatter II. The pertinent facts are that the Hospital Insurance (HI) tax (i.e., Medicare) was imposed upon federal Judges for the first time on January 1, 1983, pursuant to the Tax Equity and Fiscal Responsibility Act of 1982, Pub. L. No. 97-248, § 278(a), 96 Stat. 324, 559 (1982) (codified as amended at 26 U.S.C. (I.R.C.) § 3121(u) (1988)). The Old Age Survivors and Disability Insurance tax (OASDI) was first imposed upon federal Judges on January 1, 1984, pursuant to the Social Security Amendments of 1983, Pub. L. No. 98-21, § 101(a)(1), (b)(1) and (d), 97 Stat. 65, 68, 69 (codified as amended at 26 U.S.C. (I.R.C.) § 3121(b)(5)(E) (1988) and 42 U.S.C. § 410(a)(5)(E) (1988)). The plaintiff Judges asserted that their compensation was diminished in violation of the Compensation Clause, U.S. Const., art. III, § 1.

In Hatter I, the Court of Federal Claims dismissed the Judges' claim for lack of jurisdiction, viewing it as a tax refund claim. We reversed in Hatter II, holding that the Judges' claim was under the Compensation Clause for money damages. On remand, the Court of Federal Claims in Hatter III again dismissed the Judges' claim, holding that there was no constitutional diminution because the taxes imposed were nondiscriminatory and generally applicable to the public. We reversed that judgment in Hatter IV. We held that the Judges' compensation had been unconstitutionally diminished by taxes imposed after they took office and remanded the case for calculation of damages for sums improperly withheld. The Supreme Court granted certiorari; our judgment was affirmed in Hatter V due to lack of a quorum. *fn2

On remand, the Court of Federal Claims awarded damages only to the eight original Judges *fn3 who were parties to the original complaint filed on December 29, 1989. Moreover, damages were limited to the amount of OASDI taxes withheld in January 1984 for services rendered in December 1983, before the period covered by the retroactive 1984 salary increase. The 1984 and subsequent pay raises of the Judges were determined by the court to be more than sufficient to offset the OADSI taxes imposed in subsequent years. All other claims for damages, i.e., the OASDI claim of the later-filing Judges and the later-filed HI claim of all the Judges, were denied.

The Court of Federal Claims determined that the continuing claim doctrine did not apply to the Judges' salary payments and, as a result, the OASDI claims of the later-filing Judges and the HI claims of all the Judges were barred by the statute of limitations. The court also determined that, even if the continuing claim doctrine could be applied to the Judges' salary payments, salary increases had more than offset any compensation diminution caused by the imposition of OASDI and HI taxes during the six-year limitations period.

DISCUSSION

As a preliminary matter, the Judges assert that Hatter VI "did not implement [the] mandate" of Hatter IV because the Court of Federal Claims reconsidered the question of whether the social security taxes effected a diminution in salary. In Hatter IV, we stated:

"Social Security taxes diminish the compensation of Article III Judges who took office prior to enactment of the taxes. This court therefore reverses and remands the case for tax refunds or recoveries for the sums improperly withheld from the claimants' salaries." Hatter IV, 64 F.3d at 653 (emphasis added). That language is clear. We determined that a new tax on a sitting Article III Judge effected an unlawful diminution of that Judge's compensation. Having decided the liability question, the remand was for the purpose of ascertaining the damages for that violation, i.e., "for the sums improperly withheld."

The controlling question in this appeal is whether the Government is correct that an unconstitutional diminution in the compensation of a group of Judges, resulting from a tax unlawfully applied, may be fully offset by any and all future salary increases generally granted to the judiciary. The Government's position was adopted by the trial court.

We conclude that the Government's argument is fundamentally flawed, and results in a trivialization of the constitutional protection accorded Judges by Article III, § 1, the Compensation Clause. *fn4 The consequence of the Government's argument subverts the very ...


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