No. 00-203 

In the Supreme Court of the United States 

UNITED STATES OF AMERICA, PETITIONER 

v. 

CLEVELAND INDIANS BASEBALL COMPANY, 
A LIMITED PARTNERSHIP 

ON PETITION FOR A WRIT OF CERTIORARI 
TO THE UNITED STATES COURT OF APPEALS 
FOR THE SIXTH CIRCUIT 

REPLY BRIEF FOR THE UNITED STATES 

SETH P. WAXMAN 

Solicitor General 

Counsel of Record 
Department of Justice 
Washington, D.C. 20530-0001 
(202)514-2217 

TABLE OF AUTHORITIES 

Cases: 

Algie v. RCA Global Communications, Inc., No. 89 

CIV 5471, 1995 WL 606096 (S.D.N.Y. Oct. 12, 1995) ...... 

5 

Bowman v. United States, 824 F.2d 528 (6th Cir. 

1987) ......................................................................................... 1 

Cohen v. United States, 63 F. Supp. 2d 1131 (C.D. 

Cal. 1999) ................................................................................. 

5 

Hemelt v. United States, 122 F.3d 204 (4th Cir. 

1997) ......................................................................................... 

2, 3 

Mazur v. Commissioner, 986 F. Supp. 752 (W.D. 

N.Y. 1997) ............................................................................... 

5 

Social Sec. Bd. v. Nierotko, 327 U.S. 358 (1946) .............. 

3 

Tungseth v. Mutual of Omaha Ins. Co., 43 F.3d 406 

(8th Cir. 1994) ......................................................................... 

4 

Walker v. United States, 202 F.3d 1290 (10th Cir. 

2000) ......................................................................................... 3 

Miscellaneous: 

K. Gideon, Lawsuits and Settlements (1995) ....................... 5 

(I) 

In the Supreme Court of the United States 

No. 00-203 

UNITED STATES OF AMERICA, PETITIONER 

v. 

CLEVELAND INDIANS BASEBALL COMPANY, 
A LIMITED PARTNERSHIP 

ON PETITION FOR A WRIT OF CERTIORARI 
TO THE UNITED STATES COURT OF APPEALS 
FOR THE SIXTH CIRCUIT 

REPLY BRIEF FOR THE UNITED STATES 

1. Respondent errs in claiming (Br. in Opp. 2-8) that 
there is no conflict among the circuits on the question 
presented in this case. Both of the courts below 
acknowledged that this conflict exists. The district 
court, which was bound to apply the Sixth Circuit’s de- 
cision in Bowman v. United States, 824 F.2d 528 (1987), 
noted that “at least one court has disagreed with Bow- 
man since that decision was issued, instead applying 
the allocation the government urges here.” Pet. App. 
10a-11a. The court of appeals was also frank in 
acknowledging that “cases from our sister circuits 

* * * are at odds with our Bowman holding.” Id. at 5a. 
Contrary to respondent’s claim, the decision in this case 

(1) 

2 

thus involves an acknowledged circuit conflict on an 
issue of recurring importance. 

Respondent nonetheless attempts to parse these 
conflicting decisions in an effort to construct distinc- 
tions among them. For example, respondent argues 
that Hemelt v. United States, 122 F.3d 204 (4th Cir. 
1997), does not conflict with the decision in this case for 
two reasons: (i) because “Hemelt does not even cite 
Bowman” and (ii) because, in reaching a decision in 
Hemelt on “the question presented here” that directly 
conflicts with the result reached in Bowman, the analy- 
sis of the court in Hemelt “was perfunctory” (Br. in 
Opp. 3). Neither rationale supports the proposition that 
these two decisions are not in conflict. 

As we explain in the petition (Pet. 18-19), although 
the taxpayers in Hemelt expressly relied on Bowman, 
the court of appeals concluded that the reasoning 
applied in that case was “meritless.” 122 F.3d at 210. 
While the Fourth Circuit in Hemelt did not cite Bow- 
man in stating that its reasoning was “meritless,” these 
two decisions are squarely in conflict—as both the 
district court and the court of appeals acknowledged in 
this case. Pet. App. 5a, 10a. Indeed, respondent has 
itself grudgingly acknowledged the existence of this 
conflict. Respondent admits (Br. in Opp. 3) that the 
court in “Hemelt took up the question presented here” 
and that its decision on that question is inconsistent 
with the decision reached in Bowman. 

Respondent nonetheless contends that, in deciding 
“the question presented here” in a manner that conflicts 
with Bowman, the Hemelt court employed “little dis- 
cussion” and only a “perfunctory” legal analysis. Br. in 
Opp. 3. Respondent suggests (ibid.) that the “con- 
clusory” reasoning of Hemelt is insufficient to establish 
a “conflict” among the circuits. 

3 

We of course disagree with respondent’s derogatory 
description of the reasoning applied by the Fourth 
Circuit in the Hemelt decision. That court’s conclusion 
that the FICA tax applies to wages when “received” 
rather than “to the years to which [wages] are attri- 
butable” (122 F.3d at 210) is squarely supported by the 
clear text and history of the statute and its imple- 
menting regulations. See also Pet. 8-18. It is, in any 
event, evident (as respondent concedes) that the 
Hemelt court in fact did rule upon “the question pre- 
sented here” and, in doing so, did reach a result that 
conflicts precisely with the decision in Bowman (and 
therefore with the decision in the present case). As a 
published decision, Hemelt is no less binding precedent 
in the Fourth Circuit than Bowman is in the Sixth 
Circuit.1 

1 Respondent also argues (Br. in Opp. 5) that Walker v. United 
States, 202 F.3d 1290 (10th Cir. 2000), does not conflict with the 
decision in this case because Walker involved the self-employment 
taxes imposed under Subtitle A of the Internal Revenue Code 
instead of the FICA employment taxes imposed under Subtitle C 
of the Code. Although respondent suggests that this means the 
underlying statutory issues are only “superficially similar” (Br. in 
Opp. 7), there is in fact no analytical difference: the self- 
employment tax is imposed on income from self-employment; the 
FICA tax is imposed on income from employment by others. In 
holding that the self-employment tax applies to wages at the time 
they are paid, rather than at the time when the services for which 
the compensation is made were performed, the court in Walker 
expressly rejected the contrary conclusion of the Sixth Circuit in 
Bowman as “unpersuasive.” 202 F.3d at 1293. The court in 
Walker also concluded, in agreement with our position (and 
contrary to respondent’s), that the decision in Social Security 
Board v. Nierotko, 327 U.S. 358 (1946), is “inapposite” to the issue 
in this case. Compare Pet. 14-16 with Br. in Opp. 9-10. 

4 

Even in situations in which courts do not write ex- 
tensively to set forth their reasoning, if they have 
reached differing conclusions on the same question of 
law, the result is that litigants will be subject to 
different rules in different circuits. For example, due to 
the conflicting decisions on the question presented in 
this case, taxpayers in some circuits will pay different 
amounts of taxes than will be paid by similarly situated 
taxpayers elsewhere. It is precisely that sort of conflict 
among the circuits that frustrates the uniform appli- 
cation of national rules of law and therefore warrants 
resolution by this Court. 

2. Respondent is wrong in asserting (Br. in Opp. 8-9) 
that the question presented in this case lacks recurring 
importance. As we describe in the petition, the 
settlement agreement involved in this case has already 
led to litigation in nine separate suits filed in four 
separate circuits (First, Third, Eighth and Ninth). See 
Pet. 23. An additional 17 suits stemming from this 
settlement may yet be filed in additional circuits. See 
ibid. 

The question presented here arises routinely when- 
ever taxpayers receive (or pay) back wage awards. See 
Pet. 22. Of course, the amount of back wages awarded 
to the baseball players involved in this litigation ex- 
ceeds the amount ordinarily at issue in such cases. The 
taxpayer’s incentive to litigate the issue is accordingly 
greater here than is ordinarily the case. Nonetheless, 
as respondent acknowledges (Br. in Opp. 8), this same 
issue has been litigated in the past in several reported 
(and unreported) cases. See also Tungseth v. Mutual of 
Omaha Ins. Co., 43 F.3d 406, 409 (8th Cir. 1994) (noting 
that “there is a split of authority whether back wages 
are subject to FICA taxation in the years to which the 
back pay relates or in the year in which the award is 

5 

received”); Cohen v. United States, 63 F. Supp. 2d 1131, 
1135 (C.D. Cal. 1999) (declining to apply Bowman and 
concluding that severance payments were taxable when 
paid, not when earned); Mazur v. Commissioner, 986 F. 
Supp. 752, 754 (W.D.N.Y. 1997) (expressly rejecting 
Bowman and holding that FICA applies to wages 
when received rather than when earned); Algie v. 
RCA Global Communications, Inc., No. 89 CIV 5471, 
1995 WL 606096 (S.D.N.Y. Oct. 12, 1995). Moreover, 
the frequency of such disputes is likely to be enhanced 
by the decision in the present case. 

3. Respondent devotes the largest portion of its 
brief to an effort to defend the Bowman decision on the 
merits. The contentions aired in respondent’s brief are 
incorrect for the reasons we have explained in the 
petition. See Pet. 8-18. Respondent’s contentions are, 
moreover, precisely the same as those rejected by the 
courts of appeals in the Hemelt and Walker cases. In 
short, respondent’s claim that “Bowman got it right” 
(Br. in Opp. 9) is wrong.2 Until this Court addresses 
and resolves the conflict that exists among the circuits 
on the question presented in this case, however, the 
“Bowman rule” (ibid.) will continue to apply in the 

2 Respondent fails to address the statutory text, legislative 
history and regulations that govern the question presented in this 
case. See Pet. 8-18. Instead, respondent relies upon general, 
unfounded contentions such as the notion that the government’s 
position has the effect of “punish[ing]” employees “for being 
victims.” Br. in Opp. 10. Of course, the government’s position 
seeks to punish no one. The government seeks only to enforce the 
statute in the manner that Congress has directed. Moreover, as 
we point out in the petition, the position advocated by respondent 
would often cause taxpayers to pay more taxes. Pet. 17-18. Not 
only is “Bowman * * * expensive for most taxpayers, it also 
imposes substantial administrative burdens on the IRS.” K. 
Gideon, Lawsuits and Settlements § 1101.4, at 263 n.42 (1995). 

6 

Sixth Circuit and taxpayers will continue to be treated 
differently based solely upon the geographical happen- 
stance of the circuit in which they reside. For the 
reasons stated here and in the petition, the petition for 
a writ of certiorari should be granted. 

Respectfully submitted. 

SETH P. WAXMAN 

Solicitor General 

SEPTEMBER 2000