Brock v. Washington Metropolitan Area Transit Authority

• Decision Date: 18 July 1986
• Docket Number: No. 85-5969,85-5969
• Citation: 796 F.2d 481
• Parties: William E. BROCK, Secretary of Labor v. WASHINGTON METROPOLITAN AREA TRANSIT AUTHORITY, Appellant.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 481

796 F.2d 481

254 U.S.App.D.C. 190

William E. BROCK, Secretary of Labor v. WASHINGTON METROPOLITAN AREA TRANSIT AUTHORITY, Appellant.

No. 85-5969.

United States Court of Appeals, District of Columbia Circuit.

Argued May 27, 1986.

Decided July 18, 1986.

Appeal from the United States District Court for the District of columbia.

Carol A. Sigmond, with whom Sara E. Lister and Mark R. Pohl, Washington, D.C., were on brief, for appellant.

Joshua T. Gillelan, II, with whom Donald S. Shire, Associate Solicitor, Dept. of Labor, Washington, D.C., was on brief, for appellee.

Before ROBINSON, Chief Judge, GINSBURG, Circuit Judge, and EDWARD D. RE, ^* Chief Judge, United States Court of International Trade.

Opinion for the Court filed by Circuit Judge GINSBURG.

GINSBURG, Circuit Judge:

Under the District of Columbia's workers' compensation regime, all employers (or their compensation carriers) contribute to a Special Fund from which the Secretary of WMATA initially resisted the Secretary's suit on the ground that the Special Fund obligation is a tax against which WMATA is insulated by the compact that created it. See WMATA Compact Sec. 78, Pub.L. No. 89-774, 80 Stat. 1324, 1350 (1966), codified at D.C. Code Sec. 1-2431(78). Before this court, WMATA adds the argument that the constitutional doctrine of intergovernmental tax immunity (here, state immunity from federal taxation) shelters it from liability for Special Fund contributions.

Labor (Secretary) makes a variety of payments to injured workers. See 33 U.S.C. Sec. 944. The Washington Metropolitan Area Transit Authority (WMATA), in 1983, stopped contributing to the Fund. WMATA asserted that its tax exempt status immunized it from the obligation to make Fund payments. The Secretary sued WMATA to collect arrearages; on cross-motions for summary judgment, the district court held for the Secretary. We affirm.

We hold that WMATA enjoys neither constitutional nor compact immunity from the obligation to make payments to the Fund. As to the intergovernmental tax immunity doctrine, under Massachusetts v. United States, 435 U.S. 444, 98 S.Ct. 1153, 55 L.Ed.2d 403 (1978), the obligation is properly characterized as a user fee, not a proscribed tax. Under the WMATA Compact as well, the Fund contribution obligation does not qualify as a tax from which WMATA is spared; instead, the obligation is most appropriately regarded as a fee attendant to regulation. Cf. South Carolina v. Block, 717 F.2d 874 (4th Cir.1983).

I. BACKGROUND

The District of Columbia Workmen's Compensation Act of 1928 (DCWCA or the Act), Pub.L. No. 70-419, 45 Stat. 600, formerly codified at D.C. Code Secs. 36-501-502 (1973), extended the workers' compensation protection of the Longshoremen's and Harbor Workers' Compensation Act (LHWCA), 33 U.S.C. Secs. 901-950, to employees in the District of Columbia until 1982, when the DCWCA was superseded by new legislation, D.C.Code Sec. 36-301 et seq. (1979 & Supp.1984). ¹ WMATA acknowledges its direct liability to employees for work-related injuries under the DCWCA, see Brief for Appellant at 7, and we have found WMATA liable for such injuries in the past. See, e.g., Durrah v. WMATA, 760 F.2d 322 (D.C.Cir.1985).

While WMATA recognizes the DCWCA's governance of compensation claims filed by its employees, WMATA disclaims liability for contributions to the DCWCA Special Fund, a resource created in its present form in 1972, see Pub.L. No. 92-576, 86 Stat. 1251, codified at 33 U.S.C. Sec. 944. Administered by the Department of Labor, the Fund is kept separate from all other government funds. It is drawn upon for several kinds of workers' compensation payments. Currently, about ninety percent of the Fund's expenditures are "second injury" payments under Section 8(f) of the LHWCA, 33 U.S.C. Sec. 908(f). That section provides that when a worker who is already partially disabled suffers a second injury that permanently disables him, and the extent of that permanent disability is greater than it would have been but for the preexisting disability, the Special Fund, in lieu of the employer (or its compensation carrier), will pay a portion of the disability compensation. ² The arrangement is intended to enhance employment prospects for the handicapped by alleviating employer fears that workers' existing disabilities will The amount each employer must contribute to the Fund is determined by a formula set out in 20 C.F.R. Sec. 702.146. The formula first calculates the ratio of two amounts: 1) the direct DCWCA payments made during the previous year by each self-insured employer or insurer for an employer subject to DCWCA; and 2) the total direct DCWCA payments made by all employers and insurers during the same period. The contribution of each self-insured employer or insurer to the Special Fund is then set as the same fraction of the total estimated Fund liabilities for the upcoming year. Each employer thus bears the same share of the Special Fund liabilities as that employer's share of the total direct compensation liabilities.

lead to inordinate compensation liabilities in the event of a later accident.

From 1974 until 1982, WMATA was a self-insured employer and made its contributions to the Special Fund without protest. ³ Throughout that same period, WMATA now claims, its contributions to the Fund were considerably greater than the benefit it received from the Fund, i.e., the Fund's payouts to WMATA employees. WMATA refused to pay the second half of its 1983 contribution and all of its 1984 contribution. The Secretary of Labor therefore commenced this action to collect the unpaid assessments. WMATA counterclaimed for a refund of all its past Special Fund contributions, urging that the payments it once made without protest were taxes from which WMATA is totally exempt under its Compact.

The district court ruled that WMATA is not exempt from the Special Fund assessments. First, the court held that the assessments fall outside the Compact's exemption because they are "used to supply a specific fund with a specific purpose--in this case providing supplemental benefits in second injury cases," and "do not in a general sense finance the public expense." Donovan v. WMATA, 614 F.Supp. 1419, 1421 (D.D.C.1985) (WMATA). The court also observed that WMATA's tax exemption is limited to taxes on property, activities, and revenue, and held that the Special Fund assessments, even if they could be typed "taxation," would not qualify as taxes on property, activities, or revenue. See id. at 1421-23. ⁴ WMATA now appeals this determination.

II. DISCUSSION

WMATA advances two related contentions. First, it offers an argument that it did not present to the district court: WMATA is spared from the obligation to contribute to the Special Fund by the constitutional doctrine of intergovernmental tax immunity. In support of this contention, WMATA cites Massachusetts v. United States, 435 U.S. 444, 98 S.Ct. 1153, 55 L.Ed.2d 403 (1978), which assumes, without deciding the point, that the state-federal tax immunity doctrine retains "present vitality," id. at 454, 98 S.Ct. at 1160, and then holds that "taxes that operate as user fees," id. at 463, 98 S.Ct. at 1165, are not proscribed by the doctrine. Second, WMATA maintains that it is immune from the Special Fund obligation under Section 78 of the WMATA Compact. Here again, WMATA cites the Massachusetts precedent, which it reads as defining a proscribed tax in the manner intended by the Compact provision. ⁵

We hold that the Special Fund obligation qualifies as a user fee, not a proscribed tax, under the Massachusetts definition; therefore, both of WMATA's arguments fail. We further hold, however, that the analysis most appropriate for determining whether the Fund payment obligation constitutes a tax exempt under WMATA Compact Sec. 78 is the one employed in South Carolina v. Block, 717 F.2d 874 (4th Cir.1983). Under that delineation, the Special Fund obligation is properly regarded not as a tax from which the Compact exempts WMATA, but as a fee attendant to regulation.

A. Constitutional Immunity

In the hoary case of Collector v. Day, 78 U.S. (11 Wall.) 113, 20 L.Ed. 122 (1871), the Supreme Court declared that states and state instrumentalities are constitutionally immune from federal taxes on certain state functions because otherwise, by invoking its awesome taxing power, the federal government would be positioned to destroy state sovereignty. Collector v. Day held salaries paid to state judges immune from federal tax and that holding itself has been overruled. See Graves v. New York ex rel. O'Keefe, 306 U.S. 466, 59 S.Ct. 595, 83 L.Ed. 927 (1939). Moreover, the reach of the constitutional immunity doctrine has been so restricted that its "present vitality" is open to question. See Massachusetts, 435 U.S. at 454, 98 S.Ct. at 1160. ⁶ Assuming arguendo that the doctrine survives, albeit shrunken in size, the scope of the immunity plainly has been restricted both with respect to the activities sheltered and the kinds of financial obligations covered. The Supreme Court has instructed, most recently, that no immunity attaches to an obligation properly typed as a user fee. See Massachusetts, supra. Such obligations, the Court has indicated, do not threaten state sovereignty, regardless of the nature of the state activities on which they are laid.

We turn now to an explanation of our holding that the Special Fund assessment The parties centrally disagree on whether the Special Fund obligation bears the third characteristic of user fees: such fees recover only a "fair approximation of each beneficiary's share of the cost." 435 U.S. at 460, 98 S.Ct. at 1164; see id. at 465-66, 98 S.Ct. at 1166. WMATA, now seeking to avoid contributions entirely, argues that it has historically paid into the Fund more than its fair share of the Fund's costs; its assessments, WMATA contends, have been significantly higher than the Fund's payouts to WMATA employees....