The Benches Are Turned: Federal judges win big precedent and small awards after an eight-year battle over Social Security taxesAuthor(s): TERRY CARTERSource: ABA Journal, Vol. 83, No. 8 (AUGUST 1997), p. 32Published by: American Bar AssociationStable URL: http://www.jstor.org/stable/27839956 .

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NEWS

The Benches Are Turned Federal judges win big precedent and small awards after an eight-year battle over Social Security taxes

BY TERRY CARTER

It

was a matter of principle and money for Terry Hatter when he

led a group of federal judges who sued the United States in 1989.

The Los Angeles judge believed Congress violated the Constitution's compensa tion clause by forcing him and other sitting judges to begin paying Social Secur ity taxes in 1984. And he

was concerned about having three of his four children in college on a judge's salary.

Now Hatter has won the case on principle but lost it in a big pecuniary way.

While he and seven other judges were awarded back taxes improperly withheld from their pay, the amount is paltry.

A Pinball Path The award came in a

June 6 decision, Hatter v. United States, No. 705-89, by U.S. Court of Federal Claims Judge James Turner. It fol lowed nearly eight years of the case bouncing back and forth between the claims court and the Federal Circuit Court of Appeals, with an unusual carom off the Su preme Court's docket. Dur

ing that time, Hatter's kids have graduated from college, but the loans live on.

The principle was confirmed in October, when the U.S. Supreme Court let stand a Federal Circuit opinion that said imposing the tax was an unconstitutional pay cut under Article III. It bars diminu tion of judges' compensation while they are in office.

In ruling on the money issue, Turner held that all but one month of the Social Security withholding was more than offset by raises the judges received at the same time.

Turner gave awards to only eight of the 16 judges who sued for an aggregate of more than $1 mil lion. Hatter and six other district judges got $330 each, plus interest,

and a circuit judge got $348. The claims of the eight other plaintiffs were time-barred, the judge ruled.

Hatter, who had sought $80,000, says the group will appeal. The out come could also affect more than

one hundred other similarly situat ed judges who later filed claims.

The Hatter case raised serious constitutional questions. A 1920 decision that was the backbone for Hatter's claim, Evans v. Gore, 253 U.S. 245, held that the compensa tion clause barred Congress from applying the new federal income tax to sitting judges.

Subsequent cases made Evans ripe for overturning, according to Supreme Court scholar Herman Schwartz of American University's law school. Among the cases he cites is O'Malley v. Woodrough, 307 U.S. 277 (1939), which held that newly appointed judges must con tinue to pay income taxes. The Supreme Court in that case said

judges do not have "an immunity from sharing with their federal cit izens the material burden of the government."

But the Supreme Court did not decide Hatter because it failed to reach a quorum. Four justices re cused themselves, apparently be cause they could possibly have a fi nancial stake in the outcome.

In the past, the High Court transferred a case to the 2nd U.S. Circuit Court of Appeals when it couldn't reach a quorum. United

States v. Aluminum Compa ny of America, 322 U.S. 716 (1944). And state courts have sent cases with appearance problems to the federal courts.

"This massive r?cusai [in Hatter] was clearly wrong on the part of the Supreme Court/' Schwartz insists. "Mass r?cusai is clearly a stupid idea and the Court should change it."

The case likely will show up on the Supreme Court's steps again. Turner's ruling that pay raises can offset withholding was one of first impression. So, too, was his decision that interest can be recovered on a compensation clause claim.

From the first hearing in 1990, Turner has adopted a strict reading of the law. A former federal magistrate in the no-nonsense "rocket docket" of the Eastern Dis trict of Virginia, he has seen two of his rulings reversed by the Federal Circuit.

In the first, Turner told the plaintiff judges to ex

haust their administrative reme dies by filing for a tax refund. In his second, he ruled that the tax was constitutional because it did not target judges only. He noted that Congress also had put itself and other high-level government em

ployees into the Social Security sys tem at the same time.

Hatter says he turned to the courts for the same reason so many others do. The Federal Judges As sociation, which he calls the judges' "union," declined to force the issue of Social Security withholding, he says. Its officers "thought they could work with Congress on it and that Congress would do the fair thing. And in these many years [the legislators] haven't."

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32 ABA JOURNAL / AUGUST 1997 abaj/jim caccavo

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