Greenhow v. Secretary of Health & Human Services

Decision Date13 May 1988
Docket NumberNo. 87-2587,87-2587
Citation863 F.2d 633
Parties, 24 Soc.Sec.Rep.Ser. 102, Unempl.Ins.Rep. CCH 14403A, Unempl.Ins.Rep. CCH 7 Tommy V. GREENHOW, Plaintiff-Appellant, v. SECRETARY OF HEALTH & HUMAN SERVICES, Defendant-Appellee.
CourtU.S. Court of Appeals — Ninth Circuit

Phillip N. Bruce, Sacramento, Cal., for plaintiff-appellant.

Michael R. Power, Asst. Regional Counsel, Dept. of Health and Human Services, San Francisco, Cal., for defendant-appellee.

Before WIGGINS, BRUNETTI and KOZINSKI, Circuit Judges.

KOZINSKI, Circuit Judge:

We consider two principal issues in this appeal: first, the extent to which, in matters submitted to a magistrate, a litigant's failure to present his contentions either to the magistrate or the district court will bar him from raising those contentions on appeal; and second, whether the conclusion of the Secretary of Health and Human Services that appellant was an employee within the meaning of Title II of the Social Security Act, 42 U.S.C. Secs. 401-433, is supported by substantial evidence.


Appellant Tommy V. Greenhow received retirement insurance benefits under section 202(a) of the Social Security Act, 42 U.S.C. Sec. 402(a) (1976), for the calendar years 1979, 1980 and 1981. Greenhow was later notified that his benefits were subject to retroactive work deductions because he had earned $12,000 in each of those years. He requested a hearing before an administrative law judge, claiming that the $12,000 figure did not reflect business expenses that he was entitled to deduct as a "commissioned employee" responsible for paying his own expenses.

The ALJ ruled against Greenhow, and the appeals council denied review. Greenhow then sought judicial review under section 205(g) of the Act, 42 U.S.C. Sec. 405(g) (1982). The district court remanded to the Secretary for an evidentiary hearing on the question whether Greenhow was an employee or an independent contractor. After a supplemental hearing was held, the ALJ found that Greenhow was indeed an employee, and the appeals council affirmed. Greenhow again sought judicial review.

Pursuant to local rule, Greenhow's case was automatically referred to a magistrate for initial consideration of the cross-motions for summary judgment. E.D.Cal.R. 302(b)(13). The magistrate concluded that the Secretary's finding was supported by substantial evidence and, accordingly, recommended that summary judgment be granted. Greenhow timely filed an objection to the magistrate's proposed findings and recommendation; the sole basis for the objection was that the regulation that prevents employees from deducting business expenses was "unreasonable." The district court, without addressing Greenhow's objection, adopted the magistrate's recommendation and granted summary judgment for the Secretary. Greenhow appeals.


A. Greenhow first claims that the Secretary's finding that he was an employee rather than an independent contractor is not supported by substantial evidence. This contention was presented to the magistrate, who recommended that it be rejected. Greenhow did not object to this recommendation in the district court. The Secretary therefore contends that Greenhow has waived his right to raise this issue on appeal.

It is clear that failure to object to proposed findings of fact entered by magistrates in matters referred to them under 28 U.S.C. Sec. 636(b)(1) (1982) waives the opportunity to contest those findings on appeal. See Britt v. Simi Valley Unified School Dist., 708 F.2d 452, 454 (9th Cir.1983). The question of whether an administrative agency's finding of fact is supported by substantial evidence is not, however, a factual issue; it is a question of law. McCall v. Andrus, 628 F.2d 1185, 1189-90 (9th Cir.1980) (quoting Dredge Corp. v. Penny, 338 F.2d 456, 462 (9th Cir.1964)), cert. denied sub nom. McCall v. Watt, 450 U.S. 996, 101 S.Ct. 1700, 68 L.Ed.2d 197 (1981).

In McCall, the magistrate found that an administrative agency's decision adverse to plaintiff was supported by substantial evidence, and recommended that the plaintiff's challenge to a rule applied by the agency be rejected. The district court adopted these recommendations. On appeal, we held that plaintiff's failure to object to either of these conclusions of law prevented him from challenging them. 628 F.2d at 1187, 1189. Under McCall, therefore, it would appear that Greenhow's failure to object to the magistrate's recommendation in the district court forecloses his raising the issue now.

Three years after McCall, however, another panel of this court reached a directly contrary conclusion, holding that "failure to file objections does not waive the right to appeal the district court's conclusions of law." Britt, 708 F.2d at 454 (citing Lorin Corp. v. Goto & Co., 700 F.2d 1202, 1207 (8th Cir.1983) and Nettles v. Wainwright, 677 F.2d 404, 405 (5th Cir. Unit B 1982) (en banc)). While Britt cited McCall for the proposition that failure to object to factual finding constitutes a waiver, 708 F.2d at 454, it failed to acknowledge McCall's equally clear holding as to legal issues. Since then we have applied the rule in Britt on three occasions, each time without mentioning the contrary rule established in McCall. See Shiny Rock Mining Corp. v. United States, 825 F.2d 216, 218 n. 1 (9th Cir.1987); U.S. Dominator, Inc. v. Factory Ship Robert E. Resoff, 768 F.2d 1099, 1102-03 (9th Cir.1985); United States v. Bernhardt, 840 F.2d 1441, 1445 (9th Cir.1988). No prior panel of this court has noted the conflict between McCall and Britt, and there has been no attempt to harmonize the two opinions. Having studied these opinions carefully, we find ourselves unable to reconcile them. 1

An intra-circuit conflict can only be resolved by the court en banc. See Fed.R.App. P. 35(a); see also Tornay v. United States, 840 F.2d 1424, 1427 n. 3 (9th Cir.1988) ("the appropriate forum for resolving intra-circuit conflicts is the limited en banc court"). Until the en banc court is able to address the issue, we must make the unsatisfactory choice between two opposing lines of authority, neither of which has an unimpaired claim to being the law of the circuit. Under one view, McCall, having come first, remains the law of the circuit, because only an en banc panel or the Supreme Court has the authority to overrule a panel decision. Moreover, to allow subsequent panels to unilaterally reverse controlling precedent undermines the principle of stare decisis. On the other hand, Britt has been followed in three subsequent Ninth Circuit opinions. Despite Britt's failure to follow McCall, it has successfully posed as the law of the circuit for long enough to be relied upon by parties, including the plaintiff, who appear before magistrates. To avoid surprise and the unjust forfeiture of rights believed to have been established by Britt, we follow Britt and hold that plaintiff's failure to object to the magistrate's recommended conclusions of law does not constitute a waiver of those claims on appeal.

B. We review de novo the district court's legal conclusion that the Secretary's decision was supported by substantial evidence. Brawner v. Secretary of Health & Human Servs., 839 F.2d 432, 433 (9th Cir.1988) (per curiam). Substantial evidence is " 'such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.' " Taylor v. Heckler, 765 F.2d 872, 875 (9th Cir.1985) (quoting Richardson v. Perales, 402 U.S. 389, 401, 91 S.Ct. 1420, 1427, 28 L.Ed.2d 842 (1971)).

Pursuant to section 210(j)(2) of the Social Security Act, the existence of an employer-employee relationship is to be determined "under the usual common law rules." 42 U.S.C. Sec. 410(j)(2) (1982). The Secretary has promulgated a nonexclusive list of factors to be considered in determining whether an individual is an employee. 20 C.F.R. Sec. 404.1007(b) (1987). Among the factors that may indicate employee status are the following:

(1) The person you work for may fire you.

(2) The person you work for furnishes you with tools or equipment and a place to work.

(3) You receive training from the person you work for or are required to follow that person's instructions.

(4) You must do the work yourself.

(5) You do not hire, supervise, or pay assistants (unless you are employed as a foreman, manager, or supervisor).

(6) The person you work for sets your hours of work, requires you to work full-time, or restricts you from doing work for others.

(7) The person you work for pays your business or traveling expenses.

(8) You are paid by the hour, week or month.


Greenhow worked for a radio station as a sales representative for advertising time and as a talk-show host. The evidence revealed that: (1) Greenhow could be terminated at any time by Knox LaRue, the owner of the station; (2) the station provided him with a desk, office space and some broadcasting equipment, but he furnished some of his broadcasting equipment as well as an automobile for his calls on prospective purchasers of advertising time; (3) he was subject to supervision by LaRue, and if he was unable to call on a client someone else could be assigned to the call; (4) Greenhow did his work himself, although there is no evidence of any express requirement that he do so; (5) he did not have any assistants, and the station provided him with clerical support (although Greenhow preferred to rely on his wife to assist him instead); (6) while he did not have fixed hours of work, he felt obligated to put in a fairly uniform number of hours over a given period of time, although he was apparently permitted to do some free-lance work in his spare time; (7) the station advanced him $150 per month for expenses, and he also was reimbursed for some, but not all, additional expenses for which he submitted statements; and (8) he was paid a monthly salary that was...

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