38 F.3d 1204 (Fed. Cir. 1994), 91-1440, Romero v. United States

Docket Nº:91-1440, 91-1460 and 92-1214.
Citation:38 F.3d 1204
Party Name:Pedro ROMERO, Luis R. Acosta, Juan Arnaldi, Jr., Ana Angelet, Pablo E. Blanco, Iris Bland, Maria C. Bravo, Minerva Bravo, Marshall D. Burgess, Joan R. Campbell, Escolastico Cruz, Petra G. Dearce, Benjamin Dejesus, Evelyn Cruz Del Toro, Jorge L. Dones, Alfredo Ferrer, Brenda Ferrer, Benjamin Franco, Ashton F. Jardine, James W. Keech, Ernest W. Limpe
Case Date:October 19, 1994
Court:United States Courts of Appeals, Court of Appeals for the Federal Circuit

Page 1204

38 F.3d 1204 (Fed. Cir. 1994)

Pedro ROMERO, Luis R. Acosta, Juan Arnaldi, Jr., Ana

Angelet, Pablo E. Blanco, Iris Bland, Maria C. Bravo,

Minerva Bravo, Marshall D. Burgess, Joan R. Campbell,

Escolastico Cruz, Petra G. Dearce, Benjamin Dejesus, Evelyn

Cruz Del Toro, Jorge L. Dones, Alfredo Ferrer, Brenda

Ferrer, Benjamin Franco, Ashton F. Jardine, James W. Keech,

Ernest W. Limper, Helen C. Limper, Juan G. Lugo, Aurea

McFarquhar, Jose N. Morales, Sanders Odom, Floyd Olson,

Helena Gomez Ortiz, Eugene L. Parker, Ileana Real, Pedro

Reyes, Nayda M. Richardson, Raul D. Rivera, Maria Ines

Rodriguez, Myrna Rodriguez, Valentino M. Rodriguez, Juan N.

Sanchez, Jerome F. Sicinski, Marilyn Stalzer, Julia Torres,

Norma Vega, for themselves and on behalf of all others

similarly situated, Cola Defense Committee of Puerto Rico,

Inc., Plaintiffs-Appellants,

v.

The UNITED STATES of America, Defendant/Cross-Appellant.

Lloyd BENTSEN, Secretary of the Treasury, Michael D. Serlin,

Assistant Commissioner of Field Operations of the

Financial Management Service, United

States Department of the Treasury,

and

United States Postal Service, Defendants,

v.

COMMONWEALTH OF PUERTO RICO, Third-Party Defendant/Appellee.

AMERICAN FEDERATION OF GOVERNMENT EMPLOYEES, AFL-CIO; AFGE

Locals 2408, 2608, 2614, 2698, 2837 and Faustino

James Padilla, Plaintiffs-Appellants,

v.

Lloyd BENTSEN, Secretary of the Treasury, Defendant-Appellee.

AMERICAN POSTAL WORKERS UNION, AFL-CIO; Alberto Ortiz;

Julio Blanch; Dimitre Padilla; Tomas Suarez and

Jose L. Otero, Plaintiffs-Appellants,

v.

Lloyd BENTSEN, Secretary of the Treasury,

and

Marvin Runyon, Postmaster General, Defendants-Appellees.

Nos. 91-1440, 91-1460 and 92-1214.

United States Court of Appeals, Federal Circuit

October 19, 1994

Page 1205

Alan F. Blakley, Mullendore & Watt, Missoula, MT, argued, for plaintiffs-appellants in appeal nos. 91-1440, -1460. With him on the brief, were William C. Watt and Robert C. Mullendore. Alexia Fay McCaskill, Staff

Page 1206

Counsel, American Federation of Government Employees, AFL-CIO, of Washington, DC, argued, for plaintiffs-appellants in appeal no. 92-1214. With her on the brief were Mark D. Roth, Gen. Counsel and Charles A. Hobbie, Deputy Gen. Counsel. Susan L. Catler, O'Donnell, Schwartz & Anderson, Washington, DC, argued, for plaintiffs-appellants, American Postal Workers Union, et al.

John J. McCarthy, Atty., Dept. of Justice, of Washington, DC, argued, for defendant/cross-appellant. With him on the brief were Shirley D. Peterson, Asst. Atty. Gen., Gary R. Allen, David English Carmack, and James A. Bruton, Acting Asst. Atty. Gen. Of counsel was Kathryn A. Bleecker, Atty., Dept. of Justice.

Reina Colon DeRodriguez, Jorge E. Perez-Diaz and Anabelle Rodriguez-Rodriguez, of San Juan, PR, represented the third-party defendant/appellee, Com. of Puerto Rico.

Before ARCHER, Chief Judge, 1 and FRIEDMAN, Senior Circuit Judge, and PLAGER, Circuit Judge.

ARCHER, Chief Judge.

Pedro Romero et al. (Romero), the American Federation of Government Employees, AFL-CIO, et al. (AFGE), and the American Postal Workers Union, AFL-CIO, et al. (APWU), appeal from the summary judgment of the United States District Court for the District of Puerto Rico, Civil Nos. 89-0412(JAF), 90-1117(JAF) and 90-1173(JAF) (May 28, 1991). The district court upheld the validity of an agreement between the Secretary of the Treasury and the Commonwealth of Puerto Rico to withhold Puerto Rico income tax from the pay of federal employees, and dismissed claims for refund of pay alleged to have been withheld unlawfully pursuant to the agreement. We reverse and remand.

I.

Under 5 U.S.C. Sec. 5517 (1988), the Secretary of the Treasury is authorized to enter into an agreement with a "State" to withhold State income tax from the pay of federal employees subject to the tax. 2 For purposes of Sec. 5517, the statute defines "State" to "mean[ ] a State or territory or possession of the United States." 5 U.S.C. Sec. 5517(c).

In 1988, the Commonwealth of Puerto Rico requested that the Secretary enter into a withholding agreement under 5 U.S.C. Sec. 5517, and on November 29, 1988, the Secretary and Puerto Rico entered for the first time into such an agreement. The appellants (plaintiffs below) are federal employees performing their duties in Puerto Rico whose Puerto Rico income taxes have been withheld from their federal pay according to the agreement.

On March 29, 1989, Romero and forty-one others jointly sued the United States in the Puerto Rico District Court seeking class certification, declaratory and injunctive relief, and back pay for amounts alleged to have been withheld unlawfully. Romero v. Brady, 764 F.Supp. 227 (D.P.R.). The United States impleaded the Commonwealth of Puerto Rico by third-party complaint dated September 13, 1989, seeking indemnification for any amounts determined to have been wrongfully withheld and that were passed on to Puerto Rico.

Page 1207

On April 10, 1989, AFGE, five of its affiliated locals, and three individuals jointly sued the Secretary in the United States District Court for the District of Columbia concerning the withholding of Puerto Rico income taxes from the pay of AFGE's bargaining unit members employed in the Commonwealth of Puerto Rico. American Fed'n of Gov't Employees v. Brady, Civil Action No. 89-0960 (D.D.C.) (AFGE ). APWU and five individuals filed a similar suit in the same district court on June 1, 1989. American Postal Workers Union, AFL-CIO v. Brady, Civil Action No. 89-1590 (D.D.C.) (APWU ). By separate orders, the District of Columbia District Court transferred the cases to the Puerto Rico District Court. The latter court consolidated the AFGE, APWU, and Romero cases.

In its May 28, 1994, opinion and order the district court dismissed the third-party complaint of the United States against the Commonwealth of Puerto Rico for lack of subject matter jurisdiction under the Butler Act, 48 U.S.C. Sec. 872; dismissed all claims under the Back Pay Act, 5 U.S.C. Sec. 5596, for lack of subject matter jurisdiction; granted summary judgment to the Secretary on all remaining causes of action; and denied the summary judgment motion of the plaintiffs. AFGE and APWU jointly appealed from the May 28, 1991 order; Romero filed a separate appeal from the order, and also appealed the district court's earlier order of December 26, 1989, denying Romero's motion for class certification. Because the appeals raise common issues, we have consolidated them for our disposition.

II.

In passing, the government initially argues that this court has no jurisdiction over the appeal, and that we should transfer it back to the First Circuit. The First Circuit transferred the appeal to this court under 28 U.S.C. Sec. 1631, holding that appellants' claim for a "refund" of monies wrongfully withheld from their pay stated at least in part a non-frivolous cause of action under the Back Pay Act, 5 U.S.C. Sec. 5596, with jurisdiction founded on the Little Tucker Act, 28 U.S.C. Sec. 1346(a)(2).

Where a district court's jurisdiction is based in whole or in part on a non-frivolous claim under the Little Tucker Act, exclusive jurisdiction of an appeal lies in this court. 28 U.S.C. Sec. 1295(a)(2); Banks v. Garrett, 901 F.2d 1084, 1088 (Fed.Cir.1990). The First Circuit's transfer decision was therefore plausible, and we will not transfer the case back to the First Circuit. See Christianson v. Colt Indus. Operating Corp., 486 U.S. 800, 819, 108 S.Ct. 2166, 2179, 100 L.Ed.2d 811 (1988). Our jurisdiction having properly been invoked, we may review all other claims in this appeal including claims not based on the Little Tucker Act. United States v. Hohri, 482 U.S. 64, 75-76, 107 S.Ct. 2246, 2253, 96 L.Ed.2d 51 (1987); Banks, 901 F.2d at 1088.

III.

The principal issue is whether the Commonwealth of Puerto Rico may be considered a "State or territory or possession of the United States" for purposes of 5 U.S.C. Sec. 5517, such that the Secretary of the Treasury is authorized to enter into a withholding agreement with Puerto Rico. This issue involves statutory construction, a matter of law which we review de novo. See Madison Galleries, Ltd. v. United States, 870 F.2d 627, 629 (Fed.Cir.1989).

Section 5517 authorizes the Secretary to enter into a withholding agreement with a "State," which is defined to mean "a State or territory or possession of the United States." 5 U.S.C. Sec. 5517(c). Puerto Rico technically is none of these. It is a "Commonwealth," a status "unique ... in our federal system." Puerto Rico Dep't of Consumer Affairs v. Isla Petroleum Corp., 485 U.S. 495, 499, 108 S.Ct. 1350, 1352, 99 L.Ed.2d 582 (1988). Yet the district court held and the United States argues that because the statutory definition of "State" is broad and the historical treatment of Puerto Rico for purposes of federal law is somewhat imprecise, Sec. 5517 is broad enough to encompass the Commonwealth of Puerto Rico. The district court relied on cases where Puerto Rico has been held to be a "state." E.g., Calero-Toledo v. Pearson Yacht Leasing Co., 416 U.S. 663, 670-75, 94

Page 1208

S.Ct. 2080, 2085-87, 40 L.Ed.2d 452 (1974) (defining Puerto Rico as a state for purposes of the Three-Judge Court Act); Tenoco Oil Co. v. Department of Consumer Affairs, 876 F.2d 1013, 1017 n. 9 (1st Cir.1989) (defining Puerto Rico as a state for purposes of the Takings Clause of the Fifth Amendment); Cordova & Simonpietri Ins. Agency, Inc. v. Chase Manhattan Bank N.A., 649 F.2d 36, 41 (1st Cir.1981) (defining Puerto Rico as a state for purposes of the Sherman Anti-Trust Act and holding that whether Puerto Rico can be considered a "state" varies according to the particular statute).

Based on precedent, the unique...

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