NEW YORK AND PRESBYTERIAN HOSPITAL v. USA

Filing 92

REPORTED OPINION (reissued for publication of 90 SEALED MEMORANDUM AND ORDER granting 78 Plaintiff's Motion for Partial Summary Judgment.) Signed by Judge Eleni M. Roumel. (hb) Service on parties made.

In the United States Court of Federal Claims
THE NEW YORK AND PRESBYTERIAN
HOSPITAL,
No. 16-cv-00496
Plaintiff,
Filed Under Seal: August 5, 2022
v.

Publication: August 12, 20221

THE UNITED STATES,
Defendant.

Boris Bershteyn, Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York for Plaintiff.
With him on the briefs are Mollie Kornreich, Skadden, Arps, Slate, Meagher & Flom LLP, New
York, New York; Fred T. Goldberg, Jr., and Sylvia O. Tsakos, Skadden, Arps, Slate, Meagher &
Flom LLP, Washington, District of Columbia.
Matthew D. Lucey, United States Department of Justice, Tax Division, Court of Federal Claims
Section, Washington, District of Columbia for Defendant. With him on the briefs are David I.
Pincus, Chief, Court of Federal Claims Section; and David A. Hubber, Deputy Assistant Attorney
General, Tax Division.

MEMORANDUM AND ORDER
This Court previously held that section 3102(b) of the Internal Revenue Code requires
Defendant the United States (Government) to indemnify Plaintiff The New York and Presbyterian
Hospital (Hospital) for the Hospital’s settlement of consolidated class action claims concerning
the Hospital’s failure to file tax refund claims on the behalf of residents and fellows employed by
the Hospital. N.Y. & Presbyterian Hosp. v. United States, 152 Fed. Cl. 507, 516 (2021). Presently

1

This Memorandum and Order was filed under seal, in accordance with the Protective Order
entered in this case (ECF No. 55), and the parties consented to republication without redactions.
(ECF No. 91.) The sealed and public versions of this Memorandum and Order are identical, except
for the publication date and this footnote.

before the Court is the Hospital’s Motion for Summary Judgment on Attorneys’ Fees and Costs.
The Hospital’s Motion presents a single issue: whether the Government’s indemnification
obligation under Internal Revenue Code section 3102(b) includes attorneys’ fees and costs. The
short answer is that it does. Accordingly, for the reasons explained below, this Court GRANTS
Plaintiff’s Motion for Partial Summary Judgment on Attorneys’ Fees and Costs (ECF No. 78).
BACKGROUND
This case has a lengthy litigation history, familiarity with which is presumed.2

A

condensed summary follows. The Hospital and its predecessor by merger employed medical
residents and fellows (collectively, the Residents) enrolled in Accreditation Council for Graduate
Medical Education at a medical college currently known as the Hospital's Weill Cornell Campus.
N.Y. & Presbyterian Hosp. v. United States, 152 Fed. Cl. 507, 510 (2021). In August 2013, two
groups of Residents filed class action lawsuits against the Hospital in the United States District
Court for the Southern District of New York, alleging (i) the Hospital failed to file refund claims
with the IRS to allow the Residents to recover FICA taxes collected and paid by the Hospital on
their behalf for tax periods before April 1, 2005; and (ii) had the Hospital filed such refund claims
for the Residents, the Residents would have received refunds of such FICA taxes collected and
paid to the Government during the class period.

Id. at 511; see also Childers v. N.Y. &

Presbyterian Hosp., 36 F. Supp. 3d 292, 300 (S.D.N.Y. 2014). “As relief, the Residents sought
damages in the amount of the FICA tax withheld by the Hospital for the period at issue.” N.Y. &
Presbyterian Hosp., 152 Fed. Cl. at 511. The District Court consolidated the class actions for
pretrial purposes. Id. (citing Childers, 36 F. Supp. 3d at 301).

2

See N.Y. & Presbyterian Hosp. v. United States, 881 F.3d 877 (Fed. Cir. 2018); N.Y. &
Presbyterian Hosp. v. United States, 152 Fed. Cl. 507 (2021); N.Y. Presbyterian Hosp. v. United
States, 128 Fed. Cl. 363 (2016).
2

The Residents eventually entered into a settlement agreement with the Hospital to resolve
the consolidated class actions. Id. at 512 (citations omitted). Under the settlement, the Hospital
agreed to pay $6,632,000 to settle the Residents’ claims. Id. at 513 (citing Order & Judgment,
Childers, 1:13-cv-05414-LGS (Nov. 23, 2015)). The District Court approved the class action
settlement and dismissed the two consolidated cases. Id.
Following settlement of the class actions, the Hospital filed suit in this Court seeking
indemnification from the Government for, inter alia, the “full amount of any money paid by the
Hospital stemming from the claims and demands made in the [Class] Actions” and “attorneys’
fees, costs, and other expenses incurred by the Hospital in defending against the ‘claims and
demands’ of the [Residents] for ‘the amount of’ FICA taxes demanded in the [Class] Actions.”
Plaintiff’s Complaint (ECF No. 1) (Compl.) at 7. The Government filed a motion to dismiss, and
the Honorable Nancy B. Firestone granted the Government's motion, “holding that section 3102(b)
is not a money-mandating source of substantive law, as is required for the Court of Federal Claims
to have jurisdiction pursuant to the Tucker Act.” N.Y. & Presbyterian Hosp., 152 Fed. Cl. at 514.
The Hospital appealed, and the United States Court of Appeals for the Federal Circuit
(Federal Circuit) reversed. Id. (citing N.Y. & Presbyterian Hosp., 881 F.3d at 882). The Federal
Circuit “held that section 3102(b) was reasonably amenable to a money-mandating reading for
Tucker Act jurisdiction.” Id. Relevant to the present Motion, in reaching its holding the Federal
Circuit examined several dictionaries published around the time of section 3102’s enactment and
concluded “that indemnified means ‘reimburse.’” Id. (citing N.Y. & Presbyterian Hosp., 881 F.3d
at 877, 884 n.9). The Government unsuccessfully petitioned for rehearing en banc, and the case
was remanded to this Court for further proceedings. Id. at 515 (citing Order, N.Y. & Presbyterian
Hosp. v. United States, No. 17-1180 (Fed. Cir. June 19, 2018)).

3

On remand, the parties filed cross-motions for summary judgment on the Hospital’s
entitlement to indemnification under Internal Revenue Code § 3102(b) for the Residents’ claims
in the settled class action suits. See Plaintiff’s Motion for Summary Judgment (ECF No. 49);
Defendant’s Cross-Motion for Summary Judgment (ECF No. 50). After the action was transferred
to the undersigned judge, this Court granted the Hospital’s motion for summary judgment and denied
the Government’s cross-motion for summary judgment. N.Y. & Presbyterian Hosp., 152 Fed. Cl. at

509. In doing so, it held “that the Residents’ suit was a suit for a FICA tax refund; therefore, the
Hospital is entitled to indemnification under section 3102(b).” Id. at 516. The parties’ motions
left for a later date resolution of how much the Government would owe the Hospital. See id.
at 521.
On June 2, 2021, the parties filed a joint status report with this Court indicating that they
were discussing two categories of damages under section 3102(b): (1) the amount the Hospital
paid to settle the claims asserted in the class actions; and (2) the attorneys’ fees and costs the
Hospital incurred in defending the class actions. Joint Status Report, dated June 2, 2021 (ECF No.
75) at 2. The parties jointly expressed a belief that the latter category of damages presented a
unique question of law and accordingly requested the opportunity to present briefing concerning
whether attorneys’ fees and costs the Hospital incurred in defending against the class actions are
recoverable under section 3102(b). Id. at 2-3. Accordingly, this Court ordered the Hospital to file
a motion for partial summary judgment “concerning whether attorneys’ fees and costs incurred in
the [class] actions are recoverable in this action.” Order dated June 3, 2021 (ECF No. 76). The
Hospital timely filed its Motion for Partial Summary Judgment, and this Court conducted oral
argument on the pending Motion. See Transcript of Oral Argument (ECF No. 88) (Tr.).

4

APPLICABLE LEGAL STANDARD
A court may grant summary judgment if the pleadings, affidavits, and evidentiary materials
filed in a case reveal that “there is no genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law.” Rules of the United States Court of Federal Claims
(RCFC or Rule(s)) 56(a). The moving party bears the initial burden to demonstrate the absence of
any genuine issue of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). A
genuine factual dispute exists when “the evidence is such that a reasonable jury could return a
verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The
court may only grant summary judgment when “the record taken as a whole could not lead a
rational trier of fact to find for the non-moving party.” Matsushita, Elec. Indus. Co., Ltd. v. United
States, 475 U.S. 574, 587 (1986) (quoting First Nat. Bank of Ariz. v. Cities Serv. Co., 391 U.S.
253, 289 (1968)). Summary judgment is especially appropriate when “the only disputed issues
[are] issues of law.” Dana Corp. v. United States, 174 F.3d 1344, 1347 (Fed. Cir. 1999).
DISCUSSION
The Hospital contends “that, as a matter of law, the Government’s obligation to indemnify
the Hospital pursuant to I.R.C. section 3102(b) includes reimbursing it for attorneys’ fees and costs
it incurred in defending the claims and demands asserted against it in the [class] actions.”
Plaintiff’s Motion for Partial Summary Judgment (ECF No. 78) (Pl.’s Mot.) at 6.3

The

Government argues that the statute’s “unambiguous language” limits the Hospital’s
reimbursement to “the FICA tax it withheld, and no more.” Defendant’s Response in Opposition
to Plaintiff’s Motion for Partial Summary Judgment (ECF No. 82) (Def.’s Response) at 8. It
further argues, inter alia, that the Hospital’s interpretation is inconsistent with broad legal
3

Citations throughout this Memorandum and Order reference the ECF-assigned page numbers,
which do not always correspond to the pagination within the document.
5

principles related to payment of attorneys’ fees, the Federal Circuit’s previous decision in this case,
and section 7430 of the Internal Revenue Code. See id. at 10-11. This Court agrees with the
Hospital that the plain text of section 3102(b) includes reimbursement of its attorneys’ fees and
costs as part of the Government’s indemnity obligation.
I.

The Statute’s Plain Text and the Ordinary Meaning of “Indemnified” Require the
Government to Reimburse the Hospital’s Attorneys’ Fees and Costs
The Court’s “inquiry begins with the statutory text, and ends there as well if the text is

unambiguous.” BedRoc Ltd. v. United States, 541 U.S. 176, 183 (2004). Section 3102(b) of the
Internal Revenue Code states, “Every employer required so to deduct the tax shall be liable for the
payment of such tax, and shall be indemnified against the claims and demands of any person for
the amount of any such payment made by such employer.” 26 U.S.C. § 3102(b). The Hospital
argues that (i) the plain meaning of “indemnified” in section 3102(b) covers attorneys’ fees and
costs, and (ii) “there is a presumption that indemnification encompasses attorneys’ fees and costs”
absent express language to the contrary, which section 3102(b) lacks. Pl.’s Mot. at 11-13;
Plaintiff’s Reply in Support of Its Motion for Partial Summary Judgment (ECF No. 83) (Pl.’s
Reply) at 7-13.

The Government contends that the statute’s plain language limits the

Government’s indemnity obligation “to reimbursement for . . . the employer’s payment of the
FICA tax imposed on the employee.” Def.’s Response at 12. This Court agrees with the Hospital
that the plain meaning of the statute encompasses indemnity of both the settlement amount and the
costs and fees incurred in defending against the claims and demands asserted in the underlying
cases. Indeed, section 3102(b) unambiguously enumerates the type of claims for which the
Government must indemnify employers, and “indemnity” was understood to include attorneys’
fees and costs when Congress enacted the predecessor to section 3102(b).

6

A. “For the Amount of Any Such Payment Made by Such Employer” Modifies
“Claims and Demands of Any Person”
The Government argues that “[t]he plain language of § 3102(b) limits the indemnification
to ‘the amount of any such payment made by such employer.’” Def.’s Response at 12 (emphasis
in original). In other words, the Government argues that “an employer’s recovery from the
government, if triggered, is limited to reimbursement for ‘the amount of any such payment,’ which
is the employer’s payment of the FICA tax imposed on the employee.” Id. It further contends that
“[t]he phrase ‘such payment’ in § 3102(b) is an internal limitation on the extent of indemnity
provided by the statute.” Id. The Hospital argues in response that the Government’s interpretation
of § 3102(b) improperly reads the phrase “such payment” out of context. Pl.’s Reply at 8.
According to the Hospital, section “3102(b) does not limit indemnification to the amount of FICA
tax paid to the government; instead the government is required to indemnify the Hospital ‘against
the claims and demands of any person for the amount of any such payment made by [the
Hospital].’” Id. (emphasis in original). The Hospital’s interpretation offers the most natural
reading and “give[s] effect to every word in the statutory text.” Deckers Outdoor Corp. v. United
States, 714 F.3d 1363, 1371 (Fed. Cir. 2013).
The prepositional phrase “for the amount of any such payment made by such employer”
modifies “the claims and demands.”

The nearest-reasonable referent canon compels this

conclusion.4 Under that canon, postpositive modifiers apply “only to the nearest reasonable
referent” where the statute’s “syntax involves something other than a parallel series of nouns or

The Hospital argues that “the rule of the last antecedent” compels this conclusion. Pl.’s Reply at
8. “Strictly speaking, the applicable rule in this case is not the rule of the last antecedent but the
nearest-reasonable-referent canon — while pronouns have ‘antecedents,’ phrases such as ‘[for the
amount of any such payment made by such employer]’ do not.” Hall v. U.S. Dep’t of Agric., 984
F.3d 825, 837-38 (9th Cir. 2020). The rules are, however, substantively identical. Id. at 838 (citing
Antonin Scalia & Bryan A. Garner, Reading Law: The Interpretation of Legal Texts 152 (2012)).
4

7

verbs.” Hall v. U.S. Dep’t of Agric., 984 F.3d 825, 838 (9th Cir. 2020) (quoting Antonin Scalia &
Bryan A. Garner, Reading Law: The Interpretation of Legal Texts 152 (2012)). Here, the nearest
reasonable referent is “the claims and demands of any person.” 26 U.S.C. § 3102(b). Thus, the
term “for the amount of any such payment made by such employer” conscribes the types of “claims
and demands” that raise an indemnity obligation. To read section 3102(b) otherwise would
obligate the Government to indemnify employers for a limitless variety of suits that have nothing
to do with the employer’s role as a tax collector. As the phrase “for the amount of any such
payment made by such employer” defines the classes of “claims and demands” against which the
Government must indemnify employers but does not expressly define the types of expenses that
indemnity obligation encompasses, the Court must next examine the meaning of “shall be
indemnified” in section 3102(b).
B. “Indemnification” Encompasses Attorneys’ Fees
The Government argues that section 3102(b)’s use of the phrase “shall be indemnified,”
alone does not require payment of attorneys’ fees and costs. See Def.’s Response at 9-10 (“The
government is not liable for attorneys’ fees unless there is an unequivocal, express statutory
provision allowing them”), 16 (arguing section 3102(b) “lacks the type of indemnity language that
courts have found to allow for payment of attorneys’ fees absent an express inclusion of attorneys’
fees”). As noted, the Hospital responds that (i) the plain meaning of “indemnified” covers
attorneys’ fees and costs, and (ii) “that there is a presumption that indemnification encompasses
attorneys’ fees and costs.” Pl.’s Mot. at 12.; Pl.’s Reply at 13. This Court need not resolve whether
the United States Court of Federal Claims has a practice or presumption regarding the scope of
indemnification, as the plain meaning of “indemnified” clearly encompasses attorneys’ fees
and costs.

8

“‘It is a fundamental canon of statutory construction that . . . words will be interpreted as
taking their ordinary, contemporary, common meaning,’ which may be derived from
‘[d]ictionaries from the era of [the statutory provision]'s enactment.’” N.Y. & Presbyterian Hosp.,
881 F.3d at 882 (quoting Sandifer v. U.S. Steel Corp., 571 U.S. 220, 227 (2014)). Dictionaries
published around the original enactment of section 3102(b)5 indicate that “indemnified” means to
be made whole by compensating expenses incurred defending a suit. See Indemnify, THE OXFORD
ENGLISH DICTIONARY (1933) (“To compensate (a person, etc.) for loss suffered, expenses incurred,
etc.” (emphasis in original)); Indemnify, BOUVIER’S LAW DICTIONARY (Baldwin’s Students
Edition 1934) (“To secure or save harmless against loss or damage, of a specified character, which
may happen in the future. To compensate or reimburse one for a loss previously incurred.”);
Indemnify, WEBSTER’S NEW INTERNATIONAL DICTIONARY

OF THE

ENGLISH LANGUAGE (1932)

(“To make restitution or compensation to, as for loss, damage, etc.; to make whole; to reimburse;
to compensate; also, to make good (a loss).”); Indemnify, THE CENTURY DICTIONARY
CYCLOPEDIA (1911) (“To make good to; reimburse; remunerate.”).

AND

Based on these

contemporaneous dictionaries, the plain meaning of “indemnify” at the time of the statute’s
enactment clearly included compensation from all expenses incurred in defending against a
lawsuit. To rule otherwise would prevent plaintiffs like the Hospital from being “made whole.”
II.

This Court’s Interpretation of Section 3102 Does Not Present the Inconsistencies Alleged
by the Government
Notwithstanding the plain and ordinary meaning of the term “indemnify,” the Government

argues that interpreting section 3102(b) to include attorneys’ fees and costs conflicts with several
bodies of law. See Def.’s Response at 3-4. The Government contends that awarding the Hospital

“Section 3102(b) originally was enacted in 1935 as § 802(a) of the Social Security Act.” N.Y. &
Presbyterian Hosp., 881 F.3d at 883 n.8.
5

9

attorneys’ fees and costs under section 3102(b) violates the American Rule regarding attorneys’
fees. Id. at 15-16. It further argues that the Hospital’s interpretation of section 3102(b) conflicts
with the Internal Revenue Code’s mechanism for awarding litigation costs and with the Federal
Circuit’s interpretation of section 3102(b) in this case.

Id. at 13-14, 31-34.

Finally, the

Government argues that Congress would not have adopted a statute that would permit “openended” liability, as it asserts the Hospital’s interpretation might permit.

Id. at 18.

The

Government’s concerns are misplaced.
A. The Hospital’s Interpretation of Section 3102(b) Is Consistent with the Federal
Circuit’s Decision in This Case
The Government argues that because the Federal Circuit relied in part on legislative history
in holding that section 3102(b) was money-mandating, this Court should apply such legislative
history to the question of whether indemnification includes attorneys’ fees and costs. Def.’s
Response at 13-14 (citing N.Y. & Presbyterian Hosp., 881 F.3d at 887-88). Specifically, the
Government urges the Court to consider a House Report concerning the predecessor statute to
section 3102(b); it contends the House Report suggests section 3102(b) was intended to indemnify
employers “up to the correct amount withheld and paid to the United States.” H.R. Rep. No. 74615, at 30 (1935); see Def.’s Response at 13-14. However, in cases like this one where the statute
is unambiguous, it is well-established that “reference to legislative history is inappropriate.” Dep't
of Housing & Urban Dev. v. Rucker, 535 U.S. 125, 132 (2002). Indeed, reference to any legislative
history here is unnecessary to the resolution of this Motion.
However, even if this Court were to set aside fundamentals of statutory interpretation and
consider such legislative history, the Government’s argument would still fail. The Government
slices the Federal Circuit’s holding too thin and misconstrues the cited legislative history. The
Federal Circuit did not elevate statutory purpose above the text; it merely noted that “[t]he
10

legislative history of § 3102(b) further supports [its] conclusion that § 3102(b) is reasonably
amenable to an interpretation that it is money-mandating.” See N.Y. & Presbyterian Hosp., 881
F.3d at 887-88 (emphasis added). The Federal Circuit’s examination of the legislative history was
an analysis “to determine whether a clear intent contrary to the plain meaning exists,” not a holding
that the legislative history dictate all future questions regarding section 3102(b). Glaxo Operations
UK Ltd. v. Quigg, 894 F.2d 392, 395 (Fed. Cir. 1990). Here, the legislative history cited by the
Government does not demonstrate a “clear intent contrary to the plain meaning.” Id. at 396. As
explained below, at most, the legislative history reflects that Congress sought to place a monetary
cap on the Government’s indemnity obligation. See infra pp. 15-17. A monetary cap does not
“provide an ‘extraordinary showing of contrary intentions’” that would lead this Court to conclude
that section 3102(b) excludes attorneys’ fees and costs. Glaxo Operations UK Ltd., 894 F.2d
at 396.
B. Awarding Attorneys’ Fees Under Section 3102(b) Does Not Conflict with I.R.C.
Section 7430
The Government next argues that the Hospital’s interpretation of section 3102(b) conflicts
with section 7430 of the Internal Revenue Code. Def.’s Response at 31-34. Section 7430 provides,
“In any administrative or court proceeding which is brought by or against the United States in
connection with the determination, collection, or refund of any tax, interest, or penalty under this
title, the prevailing party may be awarded . . . reasonable litigation costs incurred in connection
with such court proceeding.” 26 U.S.C. § 7430(a). Section 7430 “was designed to grant attorney's
fees ‘to a taxpayer who prevails in any tax case in any Federal court.’” Smith v. Brady, 972 F.2d
1095, 1099 (9th Cir. 1992) (quoting H.R. Conf. Rep. No. 99–841, 99th Cong., 2d Sess., reprinted
in 1986 U.S.C.C.A.N. 4075, 4887, 4888 (emphasis added)). When section 7430 applies, it is the
exclusive remedy for attorneys’ fees. See id; United States v. McPherson, 840 F.2d 244, 246 (4th
11

Cir. 1988). Defendant argues that Plaintiff’s indemnity action is a tax case, and accordingly that
Plaintiff may not obtain litigation costs outside of section 7430. Def.’s Response at 32-33. This
case, however, does not implicate section 7430.
First, the facts do not fit within the statute’s framework. While the Federal Circuit noted
that the Hospital’s settlement agreement with the Residents “can be appropriately characterized as
a refund for the amount of FICA taxes previously withheld by the Hospital,” N.Y. & Presbyterian
Hosp., 881 F.3d at 880 (citation omitted), the consolidated actions leading to that settlement were
not “brought by or against the United States.” 26 U.S.C. § 7430(a). Inversely, while the present
case is “against the United States,” it is not a case “in connection with the determination, collection,
or refund of any tax.” Id. Instead, it is an indemnity action where the Hospital is asserting its
“statutory right to indemnity from the United States pursuant to 26 U.S.C. § 3102(b).” Compl.
¶ 2. As its prerequisites are not met, section 7430 lacks any relevance to the present Motion.
Second, even if this Court were to amalgamate the facts of this case with the facts of the
Residents’ consolidated class actions to fulfill the requirements of section 7430, section 7430 still
would not preclude recovery of attorneys’ fees and costs because the Hospital does not seek to
recover expenses as a prevailing party in the present case. Section 7430 provides attorneys’ fees
qua attorneys’ fees to litigants who prevail against the Government on a tax issue. See, e.g., Smith,
972 F.2d at 1096 (addressing fee award in plaintiffs’ suit against the IRS “seeking to have a letter
expunged from [the plaintiffs’] files and to prevent the IRS from using such a letter in the future”);
McPherson, 840 F.2d at 244 (addressing award of attorneys’ fees under section 7430 “to an
attorney who appeared pro se in a tax case in which the government’s position was determined to
be unreasonable”); Canada v. United States, 3:17-cv-2465-S-BN, 2018 WL 4732467, at *2, *22
(N.D. Tex. June 21, 2018) (addressing plaintiff’s request for attorneys’ fees in connection with

12

“[a] contested matter objecting to the IRS’s penalty claim”). Instead, the Hospital seeks to recover
attorneys’ fees incurred in a separate action that did not involve the Government. Indemnity
obligations, such as the Government’s under section 3102(b), are distinct from laws authorizing
fee shifting of “attorneys' fees qua attorneys' fees.” Noritake Co., Inc. v. M/V Hellenic Champion,
627 F.2d 724, 730 n. 5 (5th Cir.1980); see also Sweet v. United States, 63 Fed. Cl. 591, 599 (2005)
(rejecting the Government’s reliance on portions of the Price-Anderson Act providing for payment
of attorneys’ fees where the attorneys’ fees at issue were “the attorneys' fees incurred by an
indemnitee, as part of the cost of defending claims for public liability”). Accordingly, section
7430 does not alter the Government’s stand-alone indemnity obligation under section 3102(b).
C. The American Rule is Not Implicated
For related reasons, this Court is unpersuaded that the American Rule has any relevance to
interpreting section 3102(b). The Government contends that section 3102(b) lacks the “specific
and explicit” language required to deviate from the American Rule and award attorneys’ fees.
Def.’s Response at 15. “The American Rule provides that ‘each litigant pays his own attorney's
fees, win or lose, unless a statute or contract provides otherwise.’” Id. at 8. (quoting Baker Botts
L.L.P. v. ASARCO LLC, 576 U.S. 121, 126 (2015)). The general rule is “that attorney fees are not
recoverable in litigation, absent some specific statutory or contractual exception.” Jarvis v. United
States, 45 Fed. Cl. 19, 20 (Fed. Cl. 1999) (citation omitted).
This rule is inapplicable here. As the cases cited by the Government demonstrate, the
American Rule governs fee shifting among parties in litigation as opposed to payment under a
statutory indemnity provision. See Def.’s Response at 15-16; Baker Botts L.L.P., 576 U.S. at 124
(addressing “whether § 330(a)(1) [of the Bankruptcy Code] permits a bankruptcy court to award
attorney’s fees for work performed in defending a fee application in court”); Alyeska Pipeline Serv.
Co. v. Wilderness Soc’y, 421 U.S. 240, 241-43, 245 (1975) (addressing the propriety of attorneys’
13

fees award to environmental organizations in litigation against pipeline company when no
statutory basis existed for such an award); Nantkwest, Inc. v. Iancu, 898 F.3d 1177, 1186-96 (Fed.
Cir. 2018) (addressing whether § 145 of the Patent Act requires patent applicants to pay the U.S.
Patent and Trademark Office’s attorneys’ fees in certain cases), aff’d sub nom. Peter v. Nantkwest,
Inc., 140 S. Ct. 365 (2019). The Hospital does not seek to shift fees to the Government because
the Hospital prevailed over the Government; it merely seeks to enforce the indemnity provision to
the full extent enacted by Congress. Accordingly, this case does not implicate the American Rule.
D. The Government is Not Exposed to Unlimited Liability
Finally, the Government warns that the Hospital’s interpretation of section 3102(b) could
subject the Government to “open-ended” liability. Def.’s Response at 18. According to the
Government, interpreting this statute to include attorneys’ fees “would be an elephant in a
mousehole because it would be an unlimited governmental liability untethered to . . . the actual
statute.” Tr. at 22:8-11. This Court rejects the Government’s contention that such an interpretation
would convert the federal fisc into an unsupervised, public piggy bank. That Congress saw fit to
authorize “open-ended” liability is unsurprising to this Court, as Congress decided to leave its
purse open “permanently and indefinitely” for the payment of judgments in any case approved by
this Court. H.R. Rep. No. 95-68, at 184 (1977); see also 28 U.S.C. § 2517; S. Rep. No. 95-64, at
173 (1977). In doing so, Congress ended the oversight it maintained over this Court’s predecessor
for more than 120 years. See Slattery v. United States, 635 F.3d 1298, 1301-04 (Fed. Cir. 2011)
(reviewing the Tucker Act’s history and the progressive diminution of Congress’ role in finally
deciding claims over the period of 1855-1977). This Court is mindful of the responsibility
bestowed upon it by Congress, and scrupulously evaluates claims to ensure that only “legitimate
claims against the sovereign” prevail. Tucker v. United States, 142 Fed. Cl. 697, 707 (2019). But
it is also ultimately this Court’s responsibility to ensure that the Government “render[s] prompt
14

justice against itself” where appropriate. Id. Justice in this case means enforcing the plain text of
Internal Revenue Code section 3102(b); here, the Government’s indemnity obligation includes the
Hospital’s attorneys’ fees and costs.
III.

Even if This Court Agreed That the Phrase “Such Payment” Limits the Extent of Indemnity
Rather Than Defines “Claims and Demands,” the Hospital Would Still be Entitled to
Summary Judgment Because the Government’s Interpretation at Most Caps the Value of
Its Indemnity Obligation
According to the Government, the text of section 3102(b), “in the context of the Federal

Circuit’s holding,” limits the Government’s indemnification obligation to “the amount of any such
payment made by such employer.” Def.’s Response at 12 (quoting 26 U.S.C. § 3102(b)) (emphasis
in original). Defendant focuses primarily on the Federal Circuit’s reference to House Report No.
74-615 in its analysis of whether section 3102(b) is money-mandating. Id. at 13-14. Specifically,
the Government contends the House Report, as analyzed by the Federal Circuit, “leaves no room
for indemnification of amounts outside ‘the correct amount of FICA tax withheld and paid to the
United States.’” Def.’s Response at 14 (quoting N.Y. & Presbyterian Hosp., 881 F.3d at 888).
The Government further reasons that the Hospital cannot recover attorneys’ fees here because
those fees “could never be properly considered to be included in the correct amount of FICA tax.”
Id. This Court disagrees. To the extent the legislative history of section 3102(b)’s predecessor
offers any guidance on the question before this Court, it at most sets a quantitative cap, not a
qualitative bar.
The Federal Circuit briefly addressed legislative history after it already concluded, based
on exhaustive analysis of the statute’s plain language and its relationship to other provisions of the
Internal Revenue Code, that section 3102(b) is money mandating. See N.Y. & Presbyterian Hosp.,
881 F.3d at 887-88. The parties presented only a single House Report to the Federal Circuit. Id.
at 887-88. The Report relates to section 802(a) of the Social Security Act, section 3102(b)’s
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predecessor, and states that an employer, “is indemnified against any claims and demands with
respect to that part of the wages of the employee which he withheld, up to the correct amount
withheld and paid to the United States.” H.R. Rep. No. 74-615, at 30 (1935) (emphasis added);
see also N.Y. & Presbyterian Hosp., 881 F.3d at 887-88.
The House Report’s clear import is that employers may not recover quantitatively more
from the Government than the value of the FICA taxes that employer withheld. The House
Report’s “up to” language is consistent with the implementation of a monetary cap. See Studio
Frames Ltd. v. Standard Fire Ins. Co., 483 F.3d 239, 249 (4th Cir. 2007) (“The words “up to a
total amount ... of $500,000 for each structure” suggest an aggregate cap on the insurance available
on each structure.”). Thus, the Federal Circuit concluded that reading “indemnification” in section
3102(b) to mean anything other than the payment of money “would allow an employer to sue for
more than the correct amount.” N.Y. & Presbyterian Hosp., 881 F.3d at 888 (emphasis added).
While the Federal Circuit’s interpretation of the legislative history suggests in an indemnity suit a
party cannot recover more than the quantitative amount of FICA tax withheld, it does not place
any qualitative limits on what expenses the Government must indemnify if the total amount sought
is less than the amount of FICA tax withheld.
Here, the Hospital seeks indemnity for a sum far less than the amount of FICA taxes it
withheld. See Pl.’s Reply at 12. The Hospital withheld from the Residents, and paid to the
Government, approximately $9.1 million. Id.; Def.’s Response at 33. However, the Hospital only
seeks indemnification for approximately $8.3 million — approximately $6.6 million for the
settlement funds paid to the Residents and approximately $1.7 million in attorneys’ fees and costs
incurred in litigating the claims and defenses in the consolidated class actions. Def.’s Resp. at 26
(noting the Residents alleged that “the total FICA tax withheld from the class [R]esidents during

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the class period was approximately $9.1 million”); N.Y. & Presbyterian Hosp., 152 Fed. Cl. at 513
(noting the Hospital paid $6,632,000.00 to settle Residents’ claims); Pl.’s Mot. at 10 (seeking
$1,703,582.02 in attorneys’ fees and costs). Thus, as the Hospital is seeking nearly $800,000 less
than any such monetary cap that the Government contends exists, the Hospital does not seek “more
than the correct amount.” N.Y. & Presbyterian Hosp., 881 F.3d at 888.
CONCLUSION
For the reasons discussed above, the Court GRANTS Plaintiff’s Motion for Partial
Summary Judgment (ECF No. 78). The parties are ORDERED to (1) FILE a Joint Notice by
August 12, 2022, attaching a proposed public version of this Sealed Memorandum and Order, with
any competition-sensitive or otherwise protected information redacted; and (2) FILE within 30
days of this Sealed Memorandum and Order a Joint Status Report indicating whether they consent
to a value of judgment or, if the parties do not reach agreement, providing a schedule for future
proceedings.

IT IS SO ORDERED.

Eleni M. Roumel
ELENI M. ROUMEL
Judge

August 5, 2022
Washington, D.C.

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