State of Minn. v. Apfel, No. 97-3141

CourtUnited States Courts of Appeals. United States Court of Appeals (8th Circuit)
Writing for the CourtBefore WOLLMAN and HANSEN; WOLLMAN
Citation151 F.3d 742
Parties128 Ed. Law Rep. 643, 57 Soc.Sec.Rep.Ser. 803 STATE OF MINNESOTA, Appellee, v. Kenneth S. APFEL, Commissioner of Social Security; Social Security Administration, Appellants.
Docket NumberNo. 97-3141
Decision Date06 July 1998

Page 742

151 F.3d 742
128 Ed. Law Rep. 643, 57 Soc.Sec.Rep.Ser. 803
STATE OF MINNESOTA, Appellee,
v.
Kenneth S. APFEL, Commissioner of Social Security; Social
Security Administration, Appellants.
No. 97-3141.
United States Court of Appeals,
Eighth Circuit.
Submitted March 12, 1998.
Decided July 6, 1998.

Page 743

Frank W. Rosenfeld, Washington, DC, argued (Frank W. Hunger, David L. Lillehaug and William Kanter, Washington, DC, on the brief), for Appellant.

Thomas W. Tinkham, Minneapolis, MN, argued (John W. Windhorst, Jr., William R. Goetz, William P. Donohue and Mark B. Rotenberg, Minneapolis, MN, on the brief), for Appellee.

Before WOLLMAN and HANSEN, Circuit Judges, and GOLDBERG, 1 Judge.

WOLLMAN, Circuit Judge.

This case involves an assessment issued by the Commissioner of Social Security against the State of Minnesota for unpaid social security contributions attributable to stipends paid to medical residents enrolled in the graduate medical education program at the University of Minnesota during 1985 and 1986. Following the issuance of the assessment, the State initiated an action seeking a redetermination of liability. The district court 2 granted summary judgment in favor of the State. We affirm.

I.

The inception of the social security system can be traced to the adoption of the Social Security Act of 1935, 49 Stat. 620, as amended, 42 U.S.C. § 301 et seq. (1982 & Supp. II 1984). 3 At that time, there was some question

Page 744

as to whether it would be constitutionally permissible for Congress to compel the states and their political subdivisions to participate in the system. For this reason, the Act initially excluded state employees from the scope of its coverage. See 42 U.S.C. § 410(a)(7). In 1950, however, Congress enacted section 418, which allows states and their political subdivisions to voluntarily participate in the system by executing an agreement with the Commissioner. See 42 U.S.C. § 418(a)(1). 4 If a state enters into a section 418 agreement, covered employees and their employing agencies become subject to the payment of social security contributions and, in return, the employees earn credit toward social security old age and disability benefits.

To a certain extent, states have the ability to define the contours of their section 418 agreements. For example, states may designate particular groups of employees for coverage. However, the provisions of the agreement may not be "inconsistent with the provisions of" section 418. See 42 U.S.C. § 418(a)(1). In addition, section 418 provides for certain coverage exclusions, some of which are mandatory and some of which are optional. Among the optional exclusions is an exclusion for "any agricultural labor, or service performed by a student, designated by the State." See 42 U.S.C. § 418(c)(5). Section 418 also provides that agreements may be modified at any time to extend coverage to additional groups of state employees. See 42 U.S.C. § 418(c)(4).

Minnesota executed a section 418 agreement in 1955. See Administrative Record (A.R.) at 1. Initially, this agreement applied to only a few limited coverage groups. Shortly following the initial agreement, a number of subsequent modifications were executed in order to extend coverage to various other groups. In 1958, the State executed a modification adding "[s]ervices performed by individuals as employees" of the University of Minnesota "as an additional coverage group." A.R. at 13. This modification listed several exclusions, one of which, consistent with section 418(c)(5), excluded "[a]ny service performed by a student." A.R. at 13.

For more than thirty years after execution of the 1958 modification, the University did not withhold social security contributions from stipends paid to medical residents at its teaching hospital; nor did it pay the employer's share of contributions. This practice was consistent with the University's belief that medical residents were not included in the coverage group identified by the 1958 modification. In 1989, the Social Security Administration (SSA) initiated an investigation of the treatment of medical residents under the State's section 418 agreement. On September 13, 1990, the SSA issued a formal notice of statutory assessment asserting that the State was liable for unpaid social security contributions totaling nearly $8 million and that such contributions were attributable to stipends paid to medical residents during the years 1985 and 1986. The State sought review of this assessment on administrative appeal, and the assessment was affirmed without modification on December 8, 1993.

The State then filed a civil action in district court pursuant to 42 U.S.C. § 418(t), 5 seeking a redetermination of the assessment. Both the State and the Commissioner filed motions for summary judgment. In addition, each party stipulated that the correct amount of the assessment, if valid, was approximately $4.7 million. 6 The district court granted the State's motion for summary judgment and overturned the assessment. In doing so, the court relied upon alternative grounds. First, it held that the medical residents were not "employees" of the University within the meaning of the 1958 modification. Second, it

Page 745

concluded that, even if the residents were employees under the terms of the modification, they were excluded from coverage under the modification's student exclusion. The Commissioner now appeals.

II.

We review a grant of summary judgment de novo, applying the same standard as that employed by the district court. See Rose-Maston v. NME Hospitals, Inc., 133 F.3d 1104, 1107 (8th Cir.1998). Summary judgment is proper if the evidence, viewed in the light most favorable to the nonmoving party, demonstrates the absence of any genuine issue of material fact so that the moving party is entitled to judgment as a matter of law. See id.; Fed.R.Civ.P. 56(c).

Generally, an administrative agency has considerable discretion in carrying out the mandates of statutes it is entrusted to administer. See Mausolf v. Babbitt, 125 F.3d 661, 667 (8th Cir.1997), cert. denied, --- U.S. ----, 118 S.Ct. 2366, 141 L.Ed.2d 735 (1998). We must defer to the agency's decision so long as it "is not 'arbitrary, capricious, an abuse of discretion, or otherwise not supported by law.' " Reder v. Administrator of Fed. Aviation Admin., 116 F.3d 1261, 1263 (8th Cir.1997) (quoting Trans-Allied Audit Co., Inc. v. Interstate Commerce Comm'n, 33 F.3d 1024, 1030 (8th Cir.1994)).

The State, noting that section 418(t) provided for a "redetermination" of the assessment, urges us to disregard this deferential standard in favor of a more probing review. Whatever the merits of this argument, we conclude that the Commissioner's decision to uphold the assessment finds no support in law or fact and consequently fails to survive even the most deferential standard of review.

A.

The first of the district court's alternative holdings was that the residents were not "employees" of the University as that term is used in the 1958 modification. The court reasoned that the 1958 modification was a contract and that its terms must be interpreted by giving effect to the intent of the parties. The court further concluded that uncontroverted evidence demonstrated that when the parties executed the modification, they did not intend to extend coverage to the medical residents 7 and that this intent was controlling regardless of post-1958 case law holding that medical residents are employees. 8

The Commissioner does not seriously dispute the district court's conclusion that the parties did not contemplate extending coverage to residents when they executed the 1958 modification. Rather, he contends that the modification is not contractual in nature and that the parties' intent in 1958 is irrelevant. In support of this proposition, the Commissioner relies on the Supreme Court's decision in Bowen v. Public Agencies Opposed to Soc. Sec. Entrapment, 477 U.S. 41, 106 S.Ct. 2390, 91 L.Ed.2d 35 (1986). Bowen involved a section 418 agreement executed in 1951 by the State of California. See id. at 48, 106 S.Ct. 2390. The agreement contained a provision, authorized by section 418(g), permitting California...

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56 practice notes
  • Friends of Boundary Waters Wilderness v. Dombeck, Nos. 97-3282
    • United States
    • United States Courts of Appeals. United States Court of Appeals (8th Circuit)
    • January 7, 1999
    ..."so long as it is not arbitrary, capricious, an abuse of discretion, or otherwise not supported by law." State of Minnesota v. Apfel, 151 F.3d 742, 745 (8th Cir.1998) (internal quotations omitted); see 5 U.S.C. § 706(2)(a). "Whether an agency's action is arbitrary and capricious depends on ......
  • Cruz v. Colvin, CIVIL ACTION FILE NO. 1:14-cv-03308-AJB
    • United States
    • United States District Courts. 11th Circuit. United States District Courts. 11th Circuit. Northern District of Georgia
    • March 29, 2016
    ...construction of an ambiguous provision of the Act or the agency's regulations, we usually defer to the SSR."); Minnesota v. Apfel, 151 F.3d 742, 748 (8th Cir. 1998) ("Social Security Rulings, although entitled to deference, are not binding or conclusive."); Pass v. Chater, 65 F.3d 1200, 120......
  • U.S. v. Memorial Sloan-Kettering Cancer Center, Docket No. 07-0926-cv(L).
    • United States
    • United States Courts of Appeals. United States Court of Appeals (2nd Circuit)
    • March 25, 2009
    ...that residents were eligible to apply for a similarly worded student exception under 42 U.S.C. § 410(a)(10), see Minnesota v. Apfel, 151 F.3d 742, 747-48 (8th Cir.1998), AMC filed a refund application for the FICA taxes it had paid on resident monies between 1995 and 1999. The total amount ......
  • Mayo Found. for Med. Educ. & Research v. United States, No. 09–837.
    • United States
    • United States Supreme Court
    • January 11, 2011
    ...exclude residents from student status, given that its regulations provided for a case-by-case approach. See Minnesota v. Apfel, 151 F.3d 742, 747–748. Following that decision, the Internal Revenue Service received more than 7,000 claims seeking FICA tax refunds on 562 U.S. 50the ground that......
  • Request a trial to view additional results
55 cases
  • Friends of Boundary Waters Wilderness v. Dombeck, Nos. 97-3282
    • United States
    • United States Courts of Appeals. United States Court of Appeals (8th Circuit)
    • January 7, 1999
    ..."so long as it is not arbitrary, capricious, an abuse of discretion, or otherwise not supported by law." State of Minnesota v. Apfel, 151 F.3d 742, 745 (8th Cir.1998) (internal quotations omitted); see 5 U.S.C. § 706(2)(a). "Whether an agency's action is arbitrary and capricious depends on ......
  • Cruz v. Colvin, CIVIL ACTION FILE NO. 1:14-cv-03308-AJB
    • United States
    • United States District Courts. 11th Circuit. United States District Courts. 11th Circuit. Northern District of Georgia
    • March 29, 2016
    ...construction of an ambiguous provision of the Act or the agency's regulations, we usually defer to the SSR."); Minnesota v. Apfel, 151 F.3d 742, 748 (8th Cir. 1998) ("Social Security Rulings, although entitled to deference, are not binding or conclusive."); Pass v. Chater, 65 F.3d 1200, 120......
  • U.S. v. Memorial Sloan-Kettering Cancer Center, Docket No. 07-0926-cv(L).
    • United States
    • United States Courts of Appeals. United States Court of Appeals (2nd Circuit)
    • March 25, 2009
    ...that residents were eligible to apply for a similarly worded student exception under 42 U.S.C. § 410(a)(10), see Minnesota v. Apfel, 151 F.3d 742, 747-48 (8th Cir.1998), AMC filed a refund application for the FICA taxes it had paid on resident monies between 1995 and 1999. The total amount ......
  • Mayo Found. for Med. Educ. & Research v. United States, No. 09–837.
    • United States
    • United States Supreme Court
    • January 11, 2011
    ...exclude residents from student status, given that its regulations provided for a case-by-case approach. See Minnesota v. Apfel, 151 F.3d 742, 747–748. Following that decision, the Internal Revenue Service received more than 7,000 claims seeking FICA tax refunds on 562 U.S. 50the ground that......
  • Request a trial to view additional results

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