UNITED STATES COURT OF APPEALS
FOR THE FEDERAL CIRCUIT
JUDGE TERRY J. HATTER, JR., JUDGE GEORGE ARCENEAUX, JR., JUDGE PETER H.
BEER, CHIEF JUDGE JUAN G. BURCIAGA, JUDGE A.J. MCNAMARA, JUDGE HARRY PREGERSON
JUDGE RAUL A. RAMIREZ AND CHIEF JUDGE THOMAS A. WISEMAN, JR., PLAINTIFFS-APPELLANTS
THE UNITED STATES, DEFENDANT-APPELLEE
[Filed: Jan. 16, 1992]
Before: ARCHER, PLAGER and RADER, Circuit Judges.
RADER, Circuit Judge.
Terry J. Hatter, Jr., et al., life-tenured federal judges, appeal the dismissal
of their complaint by the United States Claims Court. Hatter v. United States,
21 Cl. Ct. 786 (1990). The judges allege that imposition of social security
taxes diminished their compensation in violation of the United States Constitution.
The Claims Court dismissed their complaint for lack of jurisdiction. Because
the Tucker Act gives the Claims Court jurisdiction over claims of salary
diminution under Article III of the Constitution, this court reverses and
In 1983, Congress passed the Social Security Amendments of 1983. See 42
U.S.C. § 410(a)(5)(C)-(G) (1988). This Act extended social security
coverage to many Government employees, including federal court of appeals
and district court judges.* Previously, federal judges were exempt from
paying social security taxes.
On January 1, 1984, the Social Security Amendments imposed Federal Insurance
Contributions Act ("FICA") taxes on federal judges. From 1984
to 1989, plaintiffs each paid the following amounts in FICA taxes:
On December 29, 1989, plaintiffs filed a complaint in the Claims Court.
In count I, plaintiffs contend that the 1983 Amendments "unlawfully
diminished and continues to diminish plaintiffs' compensation in violation
of Article III, Section 1, of the Constitution of the United States."
Under this count, plaintiffs sought monetary damages to compensate for their
diminished wages. Count II claims that plaintiffs have an employment contract
with the Government which protects them against diminishment of their compensation.
Again, plaintiffs seek damages for breach of contract.
The Government moved to dismiss the complaint for lack of jurisdiction because
plaintiffs did not file an administrative claim for a tax refund. See 26
U.S.C. § 7422(a) (1988). The Claims Court granted the Government's
motion. Plaintiffs appealed.
This court must decide whether appellants have stated a case within the
Claims Court's jurisdiction under 28 U.S.C. § 1491 (1988) (Tucker Act).
Under the Tucker Act, the United States has waived sovereign immunity for
suits in the Claims Court:
The United States Claims Court shall have jurisdiction to render judgment
upon any claim against the United States founded either upon the Constitution,
or any Act of Congress or any regulation of an executive department, or
upon any express or implied contract with the United States, or for liquidated
or unliquidated damages in cases not sounding in tort.
28 U.S.C. § 1491(a)(1).
The Tucker Act alone, however, does not create a substantive right to collect
money damages from the United States. United States v. Testan, 424 U.S.
392, 398, 96 S. Ct. 948, 953, 47 L.Ed.2d 114 (1976); Eastport S.S. v. United
States, 372 F.2d 1002, 1007-1009, 178 Ct. Cl. 599 (1967). Rather, the Act
empowers the Claims Court to award damages for the violation of substantive
rights embodied in the Constitution, federal statutes, executive regulations,
or federal contracts. United States v. Mitchell, 463 U.S. 206, 216-17, 103
S. Ct. 2961, 2967-68, 77 L.Ed.2d 580 (1983).
Thus, to invoke Tucker Act jurisdiction, claimants must show that their
claim arises under an independent source of federal law. Moreover, the federal
law or contract, fairly interpreted, must provide a damages remedy for violations.
Id. In sum, appellants must show their claim arises from a federal constitutional,
statutory, regulatory, or contractual provision that provides damages its
Appellants base their Tucker Act claim on Article III, Section 1, of the
United States Constitution:
The Judges, both of the supreme and inferior Courts, shall hold their Offices
during good Behaviour, and shall, at stated Times, receive for their Services,
a Compensation, which shall not be diminished during their Continuance in
U.S. Const. art. III, § 1. Appellants thus invoke the Constitution
as an independent source of federal law providing for the payment of money.
This provision of the Constitution, fairly interpreted, mandates the payment
of money in the event of a prohibited compensation diminution. This provision
states, in mandatory and unconditional terms, that judges' salaries "shall
not be diminished during their Continuance in Office." This language
presupposes damages as the remedy for a governmental act violating the compensation
clause. Only a timely restoration of lost compensation would prevent violation
of the Constitution's prohibition against diminution of judicial salaries.
Thus, the Constitution mandates that federal judges must receive, "during
their Continuance in Office," compensation for their services which
may not be less than their compensation upon assuming office. In the event
of a violation of this clause, the Constitution itself provides a remedy-compensation.
In sum, by forbidding any diminution of judicial compensation, the Constitution
itself requires repayment of prohibited reductions in compensation to Article
III judicial officers.
The history of the compensation clause supports this court's reading that
a violation of the clause mandates repayment or compensatory damages. According
to James Madison's notes, the delegates to the Philadephia Convention discussed
the compensation clause on July 18, 1787. 2 Max Farrand, The Records of
the Federal Convention of 1787, 44-45 (1911). Gouverneur Morris proposed
wording the compensation clause to prevent "any improper dependence
in the Judges." Id. James Madison, in response, shared Morris's view
that the Constitution should reduce any dependence by the judicial branch
on the other branches for compensation. Id. at 45. Alexander Hamilton, too,
explained the compensation clause:
Next to permanency in office, nothing can con- tribute more to the independence
of the judges than a fixed provision for their support . . . . In the general
course of human nature, a power over a man's subsistence amounts to a power
over his will. And we can never hope to see realized in practice the complete
separation of the judicial from the legislative power, in any system which
leaves the former dependent for pecuniary resources on the occasional grants
of the latter.
The Federalist No. 79, at 472 (Alexander Hamilton) (emphasis in original)
(Clinton Rossiter ed., 1961). These framers of the Constitution shared a
common vision of the undiminishable compensation clause.
These observations by the framers of the compensation clause underscore
its importance to the preservation of judicial independence in a system
of separated powers. These comments also suggest that judicial officers
deprived of full compensation need not rely on legislative or executive
action for a remedy. To require further legislative or executive actions
to enforce the compensation clause would frustrate Article III's purpose
of judicial independence. The purpose of Article III, § 1, as well
as its language, embraces a self-executing compensatory remedy.
The Supreme Court has also considered whether an alleged violation of the
compensation clause provides Tucker Act jurisdiction. United States v. Will,
449 U.S. 200, 101 S. Ct. 471, 66 L.Ed.2d 392 (1980). In Will, several federal
judges sought review of four statutes purporting to stop or reduce cost-of-living
increases for judges. The Court concluded that two of the four statutes
purported to roll back judicial salary increases already in effect. These
statutes violated Article III, § 1. Id. at 226, 230, 101 S. Ct. at
486, 488. Any legislative attempt to rescind those effective salary increases
would diminish judges' compensation. The Court upheld the other two statutes
because they affected salary increases not yet in effect. Id. at 229, 101
S. Ct. at 487. Therefore, those two statutes did not diminish judicial salaries.
The case was remanded to the trial court to determine money damages. Id.
at 230-31, 101 S. Ct. at 488.
To reach these substantive results, the Court necessarily examined the jurisdiction
of the trial courts to enforce the compensation clause. The Court stated
that both the Court of Claims, the predecessor to the Claims Court's trial
jurisdiction, and district courts had jurisdiction to determine whether
the four statutes violated Article III, § 1. The Court stated:
[T]here is no doubt whatever as to this Court's jurisdiction under 28 U.S.C.
§ 1252 or that of the District Court under 28 U.S.C. § 1346(a)(2)
(1976 ed., Supp. III).
Id. at 210-11, 101 S. Ct. at 478 (footnote omitted). "Jurisdiction
being clear," id. at 211, 101 S. Ct. at 479, the Court proceeded to
the next inquiry.
The Court felt jurisdiction was "clear" based on 28 U.S.C. §
1346(a)(2). In a footnote, the Court explained:
This provision confers on the district courts and the Court of Claims concurrent
jurisdiction over actions against the United States based on the Constitution
when the amount in controversy does not exceed $10,000.
Id. at 211, n. 10, 101 S. Ct. at 478, n. 10. Section 1346(a)(2) of title
28, also known as the Little Tucker Act, mirrors the Tucker Act. It provides
district courts concurrent jurisdiction with the Claims Court to handle
claims against the United States, "not exceeding $10,000 in amount,
founded either upon the Constitution, or any Act of Congress." The
Supreme Court found jurisdiction in the district court for the Will plaintiffs
under the Little Tucker Act.
The only jurisdictional difference between the appellants in Will and the
plaintiffs in this case is the amount in controversy. Plaintiffs in this
case seek more than $10,000 in damages. The Supreme Court found jurisdiction
under the Little Tucker Act in the district court for the Will plaintiffs.
The Tucker Act provides jurisdiction in the Claims Court for the plaintiffs
in this case.
The Claims Court erred by recharacterizing plaintiffs' action as solely
a request for a tax refund. Plaintiffs' complaint sought damages for violation
of the compensation clause. Nonetheless, the Claims Court read their claim
as a tax refund suit. The Claims Court erred by imposing a single legal
theory on the plaintiffs' complaint.
The Federal Rules of Civil Procedure permit parties to pursue their claim
on any viable legal theory. Fed. R. Civ. P. 8(e)(2). In this case, plaintiffs
could have pursued a tax refund. If they had, as the Claims Court noted,
title 26 would have required a prior administrative claim. See, 26 U.S.C.
§ 7422(a). Plaintiffs, however, did not pursue a tax refund. Instead
they sought damages for violation of Article III, § 1-an action which
is within the Tucker Act jurisdiction of the Claims Court.
By requiring prior filing of an administrative claim with the Internal Revenue
Service for a compensation clause violation, the Claims Court overlooked
the language and purpose of Article III, § 1. Conditioning redress
of an alleged compensation clause breach on executive branch actions would
frustrate the purpose of Article III, § 1. The Constitution provides
a compensatory remedy without need for reliance on other branches.
The Claims Court based its recharacterization of plaintiffs' action on two
cases, O'Malley v. Woodrough, 307 U.S. 277, 59 S. Ct. 838, 83 L.Ed. 1289
(1939), and King v. United States, 390 F.2d 894, 182 Ct. Cl. 631 (1968),
rev'd on other grounds, 395 U.S. 1, 89 S. Ct. 1501, 23 L.Ed.2d 52 (1969).
In O'Malley, the plaintiffs challenged the validity of federal income taxes
because withholding revenues allegedly diminished federal judges' salaries.
The Court determined that Article III did not bar Congress from imposing
a non-discriminatory income tax on federal judges. O'Malley, 307 U.S. at
282, 59 S. Ct. at 840. O'Malley, however, does not affect the jurisdiction
of the Claims Court. Contrary to the Claims Court's statement, Hatter, 21
Cl. Ct. at 789, the Supreme Court did not recast O'Malley's plaintiffs'
diminution claims as tax refund actions. The O'Malley plaintiffs elected
to sue the Collector of Internal Revenue for a refund, rather than seeking
damages. The O'Malley plaintiffs' election in the 1930s, however, hardly
binds the Hatter plaintiffs in the 1990s. As noted earlier, the Tucker Act
provides plaintiffs an independent action for damages based on a purported
violation of Article III, § 1.
By improperly recharacterizing plaintiffs' action, the Claims Court also
foreclosed an issue to be determined on the merits. O'Malley determined
that federal income taxes do not have a discriminatory impact on federal
judges. Plaintiffs have had no opportunity to demonstrate whether the social
security tax is discriminatory. The Claims Court erred in foreclosing this
issue without full consideration of the merits. On remand, the Claims Court
will have an opportunity to examine whether social security taxes have a
discriminatory effect on federal judges.
The Claims Court also erred in viewing King as identical to this case for
jurisdictional purposes. Hatter, 21 Cl. Ct. at 788. King was an Army Colonel
who claimed that he had paid too much federal income tax because the Government
misclassified his retirement status. The Court of Claims dismissed Colonel
King's tax refund claim for failure to file a prior administrative claim
with the Internal Revenue Service. King, 390 F.2d at 896. In equating the
Hatter plaintiffs with Colonel King, the Claims Court overlooked pertinent
First, plaintiffs in this case have an independent jurisdictional basis
for their claim. Colonel King had no choice except to seek a tax refund.
Second, unlike Colonel King, plaintiffs here do not challenge the United
States' authority to impose a tax. Plaintiffs merely seek compensation to
ensure that imposition of a tax does not diminish their salary. In sum,
plaintiffs do not seek tax refunds, but compensation to ensure compliance
with Article III, § 1. The Tucker Act provides the Claims Court jurisdiction
to adjudicate this action.
Appellants' claim for relief states a claim within the jurisdiction of the
Claims Court. Therefore, the decision of the Claims Court is reversed and
this case is remanded for a hearing on the merits.
REVERSED AND REMANDED.
* No member of this panel was an Article III
judge in 1984. Therefore, no panel member suffered an alleged diminution
in salary when the 1983 Amendments took effect.