ST. LUKE'S HOSP. ASSOC. OF CLEVELAND, OHIO v. United States

• Citation: 333 F.2d 157
• Decision Date: 18 June 1964
• Docket Number: No. 15393.,15393.
• Parties: ST. LUKE'S HOSPITAL ASSOCIATION OF CLEVELAND, OHIO, OF the METHODIST CHURCH, a non-profit corporation, Plaintiff-Appellee, v. UNITED STATES of America, Defendant-Appellant.
• Court: U.S. Court of Appeals — Sixth Circuit

333 F.2d 157 (1964)

ST. LUKE'S HOSPITAL ASSOCIATION OF CLEVELAND, OHIO, OF the METHODIST CHURCH, a non-profit corporation, Plaintiff-Appellee, v. UNITED STATES of America, Defendant-Appellant.

No. 15393.

United States Court of Appeals Sixth Circuit.

June 18, 1964.

Argued by Frederick E. Youngman, Dept. of Justice, Washington, D. C., Louis F. Oberdorfer, Asst. Atty. Gen., Lee A. Jackson, David O. Walter, Fred E. Youngman, Attys., Dept. of Justice, Washington, D. C., on the brief, Merle M. McCurdy, U. S. Atty., Bernard J. Stuplinski, Asst. U. S. Atty., Cleveland, Ohio, for appellant.

Argued by Timothy F. McMahon, Cleveland, Ohio, Thompson, Hine & Flory, William H. Wallace, Cleveland, Ohio, on the brief for appellee.

Before MILLER, PHILLIPS and EDWARDS, Circuit Judges.

EDWARDS, Circuit Judge.

Plaintiff-Appellee — a Cleveland hospital — filed suit in the United States District Court for the Northern District of Ohio to recover $19,301.39 from Defendant-Appellant, United States of America. This amount represents Federal Insurance Contributions Act (Social Security) taxes and interest thereon assessed against the hospital and paid by it under protest. The assessment was based upon the employment by the hospital of "residents." The hospital claimed these residents were "doctors-in-training" and as such were exempt under an amendment to the Federal Insurance Contributions Act which, in its terms, exempted "interns" from the statutory definition of "employment."

The language of the exemption relied on by the hospital follows:

"(13) service performed as a student nurse in the employ of a hospital or a nurses\' training school by an individual who is enrolled and is regularly attending classes in a nurses\' training school chartered or approved pursuant to State law; and service performed as an intern in the employ of a hospital by an individual who has completed a 4 years\' course in a medical school chartered or approved pursuant to State law;" Title 26 U.S.C. § 3121 (b) (13).

The basic facts were stipulated. The most pertinent portion of them we set out below:

"The taxpayer filed a timely claim for refund of the additional employment taxes and interest paid by it in the sum of $19,301.39 which subsequently was denied by the Commissioner of Internal Revenue prior to the commencement of this action. Such additional taxes were computed upon the allowances made by the taxpayer to those graduate physicians who, having completed a year of internship, were taking their second year or a subsequent year of in-hospital training in one of the approved programs conducted by St. Luke\'s Hospital for training in a medical specialty."

At the trial before a Federal District Judge the hospital produced a number of doctor witnesses who testified to the fact that since 1939, when Congress exempted "interns," that the program of use of "residents" had expanded rapidly. The tenor of their testimony was to the effect that interns of a one-year variety and "residents-in-training" for two to four years were all doctors-in-training and should, for purposes of exemption from the Act, be considered "interns." The District Judge gave an accurate summary of this testimony:

"Plaintiff\'s principal witnesses were men of the medical profession. They testified that at or around the year 1939 the ordinary and accepted meaning of the word `intern\' was the same as the ordinary and accepted meaning of the word `resident,\' or `resident-in-training,\' and that they were both understood to be graduates of a medical school who were in residence in the hospital for additional education and training without regard as to whether it was the first or subsequent years of such training; that the generally accepted meaning of the word `intern\' included a `resident\' or `resident-in-training.\' These doctors admitted that within the medical profession a distinction was made between an intern and a resident (in 1939 plaintiff hospital had different applications for the positions of intern and resident), but stated that the public failed to have, or understand, that delineation." St. Luke\'s Hospital Association of Cleveland, Ohio v. United States, 212 F.Supp. 387, 390 (N.D.Ohio 1962).

The government called one witness, a Doctor Weiskotten, who testified in relation to the situation prevailing in 1939 or earlier:

"Q. Do you have, Doctor, an opinion as to what was the generally accepted meaning of the word `intern\' when used in the context of a hospital internship?

"A. Yes. That is, the internship was an approved educational and experience program to better prepare a man to initiate the practice of medicine following his four years as a student in a medical college.

"Q. Doctor, do you have an opinion as to what was the generally accepted definition of the word `resident\' when used in the context of the medical field?

"A. Yes. A resident was a man who took special hospital training of varying periods of time following an internship, to prepare him as a specialist in a particular field of medicine.

* * * * * *

"Q. Doctor, in your opinion, was there a sharp distinction in 1939 between those persons referred to as `interns,\' and those persons referred to as `residents\'?

"A. Oh, yes.

"Q. Would you please explain, once again, what that distinction was?

"A. I believe, as I stated before, that the internship was a training period, usually of one-year duration, following the four-year course in a medical school, to prepare a man to initiate a career in medicine. Now he might initiate that career in medicine by simply going out into independent practice, or he might initiate that career in medicine thereafter by taking a residency and becoming a specialist.

"Q. In other words, what you are saying is that the internship was a pre-condition to the general practice of medicine?

"A. To anyone who entered into the practice of medicine."

The District Judge gave a judgment for the hospital. His careful and well-reasoned opinion argued that the word "intern" in the applicable statute should be construed as encompassing "residents-in-training." He based this conclusion first on the fact that although the terms "intern" and "resident" had totally different meanings in medical and hospital circles in 1939 when the amendment excluding interns was passed, this was not true in relation to the usage of the terms in the public vocabulary. And he held that it was the congressional intent to apply the public rather than the specialized meaning.

His opinion indicates that he was influenced to this conclusion in part by two amendments affecting the Federal Insurance Contributions Act passed in 1947 which exempted from the FICA definition of "employment" services performed by certain individuals.

The language he referred to follows:

"(iv) by any individual as an employee included under section 2 of the Act of August 4, 1947 (relating to certain interns, student nurses, and other student employees of hospitals of the Federal Government; 5 U.S.C., sec. 1052);" Title 26 U.S.C. § 3121 (b) (6) (C) (iv).

"§ 1052. Student-employees exempt from Classification Act of 1923

"The Classification Act of 1923, as amended and extended, shall not apply to student nurses, medical or dental interns, residents-in-training, student dietitians, student physical therapists, and student occupational therapists, assigned or attached to a hospital, clinic, or medical or dental laboratory operated by any department, agency, or instrumentality of the Federal Government, or by the District of Columbia, and any other student-employees, assigned or attached to any such hospital, clinic, or laboratory primarily for training purposes, who may be designated by the head of such department, agency, or instrumentality, or by the Commissioners of the District of Columbia, as the case may be, with the approval of the Civil Service Commission." Title 5 U.S.C. § 1052.

Noting that the terms "intern" and "resident-in-training" in § 1052 were used separately, he nonetheless reasoned that both were included under the single term "intern" in the reference language of § 3121(b) (6) (C) (iv).

He also noted that doctors in private practice were exempted and stated:

"The span of most residency programs is from one to four years. It is most difficult to accept an interpretation of the statute which would result in exemption of the medical graduate for his first year of in-hospital training and during his entire professional life as a self-employed physician, and yet include him within the scope of the Social Security Act for the interim period of his residency." St. Luke\'s Hospital Association of Cleveland, Ohio v. United States, supra 212 F.Supp. at 393.

The District Judge also held that the amounts paid by the hospital to its residents-in-training were wages within the meaning of the Federal Insurance Contributions Act and not "gratuities" as contended by plaintiff-appellee hospital.

Defendant-appellant, United States of America, appealed to this court claiming that the District Judge's decision represented an erroneous interpretation of the language of the FICA quoted above.

With the District Judge's last finding we are in agreement. Residents on this record clearly perform very valuable services, and the sums paid them are "wages" and are not "gratuities." See United States v. Silk, 331 U.S. 704, 67 S.Ct. 1463, 91 L.Ed. 1757 (1947).

As to the interpretation of the 1939 amendment, we are unable to agree — albeit we recognize that reasonable minds could easily differ on issues of interpretation as finely spun as these.

It is clear to us from this record that there have been major changes in the nature and extent of the resident-in-training programs between 1939 and the present.

But we agree with the District Judge that proper rules of interpretation require us to view the language of this 1939 statutory amendment in the light of 1939 facts and meanings. Platt v. Union Pacific R. R. Co., 99 U.S. 48, 64 (1878); ...