McDonald v. Southern Farm Bureau Life Ins. Co., No. 01-15648.

• Citation: 291 F.3d 718
• Decision Date: 13 May 2002
• Docket Number: No. 01-15648.
• Parties: Craig McDONALD, individually and on behalf of all others similarly situated, Plaintiff-Appellant, v. SOUTHERN FARM BUREAU LIFE INSURANCE COMPANY, Southern Farm Bureau & Adopting Companies 401(K), et al., Defendants-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (11th Circuit)

291 F.3d 718

Craig McDONALD, individually and on behalf of all others similarly situated, Plaintiff-Appellant, v. SOUTHERN FARM BUREAU LIFE INSURANCE COMPANY, Southern Farm Bureau & Adopting Companies 401(K), et al., Defendants-Appellees.

No. 01-15648.

United States Court of Appeals, Eleventh Circuit.

May 13, 2002.

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Robert Kirtley Finnell, The Finnell Firm, Rome, GA, Steven Nelson Williams, Monts & Ware, Dallas TX, for Plaintiff-Appellant.

Franklin G. Burt, Jorden, Burt, Berenson & Johnson, LLP, Washington, DC, Robert M. Brinson, Brinson, Askew, Berry, Seigler, Richardson & Davis, LLP, Rome, GA, for Defendants-Appellees.

Appeal from the United States District Court for the Northern District of Georgia.

Before BARKETT and MARCUS, Circuit Judges, and SCHLESINGER^*, District Judge.

MARCUS, Circuit Judge:

Plaintiff Craig McDonald appeals from the district court's order dismissing for failure to state a claim his lawsuit against Defendants Southern Farm Bureau Life Insurance Company, et al. ("SFBL") alleging, inter alia, a violation of the Federal Insurance Contributions Act ("FICA"), 26 U.S.C. § 3101, et seq. Because FICA is silent as to whether an employee can sue his employer for the proper payment of FICA taxes, and because nothing in the language, structure, or legislative history of FICA creates by implication a private cause of action, we conclude that the district court properly dismissed McDonald's action and therefore affirm.

I.

FICA establishes a tax that is assessed by the federal government based on wages paid to workers, and the money collected from the FICA tax is used to fund the Social Security Trust Fund. Under a traditional employer-employee relationship, an employer withholds from the employee's paycheck a percentage of the employee's wages based on the applicable FICA wage rate. The money withheld from the employee's paycheck is then paid to the government, making it, in essence, a tax paid by the employee. At the same time, the employer itself pays a FICA "excise tax" that is equal in amount to the percentage wage rate paid by the employee. In a traditional employer-employee relationship, therefore, the employee pays half of the total FICA tax owed and the employer pays the other half. For independent contractors and other self-employed workers, however, there is no separate employer to pay half of the tax. As a result, the self-employed worker pays both the employee's tax and the employer's tax, adding up to the full 100 percent of the money due under FICA. An employer who hires independent contractors does not have to pay any excise taxes for these workers.

From 1988 to 1998, McDonald worked as an insurance agent and agency manager in the Rome, Georgia office of SFBL. Under his arrangement with the company, McDonald was classified as an "independent contractor," and his employment agreement stated that "nothing contained herein shall be construed to create the relationship of employee and employer between you and the Company." McDonald contends, however, that he was in truth a common law employee because SFBL exercised substantial control over his activities by regulating his hours, dictating the manner in which he sold insurance products, providing him with an office, supplies, and secretarial support, and regulating his advertising. Because SFBL classified McDonald as an independent contractor, it did not pay any excise taxes. Instead, McDonald himself was responsible for 100 percent of his FICA tax, paying both the employee's share and the employer's share.

On July 10, 2000, McDonald filed a class action lawsuit against SFBL in the United States District Court for the Northern District of Georgia on behalf of himself and all other workers wrongfully classified as "independent contractors." The complaint included five state common law causes of action as well as two federal claims. The first of these federal claims alleged that SFBL violated FICA, stating that "[b]y misclassifying McDonald and the members of the Plaintiff Class, SFBL failed to pay its portion of McDonald's and the Plaintiff Class members' FICA taxes as required by federal law," and that "SFBL's improper classification caused McDonald and the members of the Plaintiff Class to pay additional FICA taxes that they would not have paid had SFBL properly classified them as employees rather than as independent contractors." The other federal claim sought a declaratory judgment under 28 U.S.C. § 2201 ("the Declaratory Judgment Act") declaring that McDonald and his fellow class members were common law employees of SFBL and therefore liable for only the employee portion of the FICA tax. The state law claims included equitable estoppel, breach of contract, unjust enrichment, money had and received, and negligent and fraudulent misrepresentation through standardized forms and policies.

On September 4, 2001, the district court granted SFBL's motion to dismiss the case pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure for failure to state a claim, holding that no private right of action exists under FICA. Without the FICA claim, the district court explained, there was no federal jurisdiction because the Declaratory Judgment Act does not provide an independent source of jurisdiction and the state law claims could not be heard in federal court in the absence of proper federal claims. McDonald then appealed to this Court, arguing that a private right of action does in fact exist under FICA.

II.

The central issue before us is a simple one: whether the text, structure, or legislative history of FICA creates by implication a private cause of action. Because both parties agree, and there can be no dispute, that FICA itself is silent as to whether an employee can sue his employer for proper payment of FICA taxes, the sole question is whether a private cause of action can be implied under the statute. We analyze de novo the legal propriety of the district court's dismissal of the case on the ground that no such cause of action can be implied. See ABATE of Georgia, Inc. v. Georgia, 264 F.3d 1315, 1315 (11th Cir.2001).

In Cort v. Ash, 422 U.S. 66, 95 S.Ct. 2080, 45 L.Ed.2d 26 (1975), the Supreme Court established a four-part test for "determining whether a private remedy is implicit in a statute not expressly providing one." Id. at 78, 95 S.Ct. at 2088.

First, is the plaintiff "one of the class for whose especial benefit the statute was enacted" — 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 basically the concern of the States, so that it would be inappropriate to infer a cause of action based solely on federal law?

Id. (quoting Texas & Pac. Ry. Co. v. Rigsby, 241 U.S. 33, 39, 36 S.Ct. 482, 484, 60 L.Ed. 874 (1916)) (additional citations omitted).

Since Cort, the Supreme Court has clarified that the first three factors listed are all factors "traditionally relied upon in determining legislative intent." Touche Ross & Co. v. Redington, 442 U.S. 560, 576, 99 S.Ct. 2479, 2489, 61 L.Ed.2d 82 (1979). Indeed, the "central inquiry" in the Cort analysis is "whether Congress intended to create, either expressly or by implication, a private cause of action." Id. at 575, 99 S.Ct. at 2489. As the Supreme Court recently explained, "[l]ike substantive federal law itself, private rights of action to enforce federal law must be created by Congress. The judicial task is to interpret the statute Congress has passed to determine whether it displays an intent to create not just a private right but also a private remedy." Alexander v. Sandoval, 532 U.S. 275, 286, 121 S.Ct. 1511, 1519, 149 L.Ed.2d 517 (2001) (citations omitted). When a court conducts this analysis, "[s]tatutory intent ... is determinative. Without it, a cause of action does not exist and courts may not create one, no matter how desirable that might be as a policy matter, or how compatible with the statute." Id. at 286-87, 121 S.Ct. at 1519-20.

The bar for showing legislative intent is high. "Congressional intent to create a private right of action will not be presumed. There must be clear evidence of Congress's intent to create a cause of action." Baggett v. First Nat'l Bank of Gainesville, 117 F.3d 1342, 1345 (11th Cir. 1997). Although courts cannot "require evidence that Members of Congress, in enacting the statute, actually had in mind the creation of a private cause of action," the Supreme Court has said that "[t]he intent of Congress remains the ultimate issue, ... and `unless this congressional intent can be inferred from the language of the statute, the statutory structure, or some other source, the essential predicate for implication of a private remedy simply does not exist.'" Thompson v. Thompson, 484 U.S. 174, 179, 108 S.Ct. 513, 516, 98 L.Ed.2d 512 (1988) (quoting Northwest Airlines v. Transp. Workers, 451 U.S. 77, 94, 101 S.Ct. 1571, 1582, 67 L.Ed.2d 750 (1981)). Legislative history can be taken into account where relevant, but the central focus of judicial inquiry must be the "text and structure" of the statute itself. Sandoval, 532 U.S. at 288, 121 S.Ct. at 1520. Indeed, courts "have never accorded dispositive weight to context shorn of text. In determining whether statutes create private rights of action, as in interpreting statutes generally, legal context matters only to the extent it clarifies text." Id. (citation omitted).

An analysis of the Cort factors makes it abundantly clear that no private cause of action may be implied from the language, structure, or legislative history of FICA. First, there is no basis on which to conclude that FICA was enacted for...