Court Opinion

ID: 8907484
Source: CourtListenerOpinion
Date Created: 2022-11-27 02:02:21.817112+00
Date Added: 2024-06-11T17:08:18.593911
License: Public Domain

WINTER, Circuit Judge,
dissenting:
Close attention to the facts in the light of the pertinent applicable law persuades me that the “lessee” oystermen 1 were the taxpayers’ employees; and as a consequence, the judgment of the district court granting tax refunds should be reversed. From the majority’s contrary conclusion, I respectfully dissent.
The appeal presents the question of whether lessees are “employees” of the taxpayers for purposes of liability on the part of the taxpayers for taxes under the Federal Insurance Contributions Act (FICA), 26 U.S.C. §§ 3101 et seq. The rules of law to be applied are not complex; the case is largely factual.2 To make the relevance of the facts more obvious, I will defer stating them until I have developed the law. But even before I proceed to a discussion of the law, I am constrained to express my complete disagreement with the method of decision employed by the district court. Were it simply that the district court was wrong in its conclusion, its method of reasoning properly could go unnoticed; but in affirming, the majority states its recognition of the “force” of the inference drawn by the district court, thus indicating, to my mind, that the majority not only approves the district court’s thesis but is influenced by it to affirm. I therefore think that comment by me is warranted.
I.
Oysters in the oyster beds leased by taxpayers and sold by them to the consuming public are not gathered by the taxpayers’ principals. They are harvested by lessees and independents from whom the taxpayers “purchase” the oysters. In the proceedings in the district court, the government conceded that, for the purposes of the case, independents were self-employed and not subject to the tax imposed by FICA on taxpayers.3 Indeed, the government had never asserted liability on the part of the taxpayers for the tax with respect to independents.
As we were told when this appeal was argued, the government took this position because the independents by self-assessment were paying the tax. Having obtain*1102ed this concession, the district court directed all of its attention to a consideration of whether the lessees’ employment status was distinguishable from that of the independents. Finding them not distinguishable, it concluded that lessees were likewise not employees.
To my mind, the district court completely missed the point. The issue before it was whether the lessees were employees for the purposes of FICA; the issue was not whether lessees should be accorded different tax treatment from the independents. The government’s concession, made for compelling practical reasons, is too insubstantial a reed on which to construct the judgment in this case.
II.
As the majority correctly observes, the question of who is an employee must be judged by maritime law. This is true because the harvesting of oysters is a traditionally maritime activity. Moore v. Hampton Roads Sanitation District Commission, 557 F.2d 1030, 1034-35 (4 Cir. 1977), (en banc) cert. denied, 434 U.S. 1012, 98 S.Ct. 725, 54 L.Ed.2d 755 (1978). United States v. Webb, Inc., 397 U.S. 179, 90 S.Ct. 850, 25 L.Ed.2d 207 (1970), holds that the status of persons engaged in maritime activities, for social security purposes, is to be determined by “maritime standards,” 397 U.S. at 190, 90 S.Ct. 850, and that “[cjontrol [of the putative employer over the putative employee] is probably the most important factor under maritime law, just as it is under the tests of land-based employment,” 397 U.S. at 192, 90 S.Ct. at 856 (footnote eliminated). More importantly for present purposes, Webb added:4
It may be true that, in most maritime relationships, the workers enjoy discretion that is unusually broad if measured by land-based standards — a discretion dictated by the seafaring nature of the activity. However, except where there is nearly total relinquishment of control through a bareboat, or demise, charter, the owner may nevertheless be considered, under maritime law, to have sufficient control to be charged with the duties of an employer. 397 U.S. at 192, 90 S.Ct. at 856.
Thus, Webb establishes that, for maritime employment, “control” is to be judged in the maritime context and that control may be found in the maritime context on facts which would be insufficient to establish control in land-based employment.
III.
The majority reads and applies Webb to compel the conclusion that the lessees are not “employees” on the theory that the lessees are bareboat charterers. I think the record shows otherwise.
The term of the lessees’ right to use taxpayers’ boats is not fixed nor is their use of the boats unrestricted. Ordinarily a demise or bareboat charter gives the boat user the right to use the boat for á fixed period without any interference from the boat owner. In the instant case, while the lessees generally use their assigned boat for the whole of the oyster season, their lease is terminable by the owner at any time for any cause. Even while the lease is extant, the lessee cannot use his boat in an unrestricted manner. First, he must harvest oysters only from the beds leased by the taxpayer or from unleased state lands. Second, he is towed to and from the place of harvest by towboats owned and operated by taxpayers. Third, he must sell the oysters that he harvests to the taxpayer from which he rents the boat unless that taxpayer consents to a contrary disposition; otherwise, the taxpayer will cancel the lease. Fourth, if a lessee decides not to harvest on a particular day, taxpayers will assign his boat to someone else.
The rent paid by a lessee for the use of his boat is more indicative of an employee relationship with taxpayers than it is of a bareboat charter. Lessees, with rare exeep*1103tion, must and do sell their oysters to the taxpayer from which they obtain their boat. They pay “rent” of 10<t per bushel of oysters harvested, not exceeding $10 per week. No rent money ever actually changes hands. The rent is simply deducted from the amounts for oysters paid by taxpayers to the lessees.
Overall, the following picture emerges from this record: Taxpayers own and operate oyster houses. They sell oysters to the consuming public at wholesale and at retail. To conduct their business they require a steady supply of oysters throughout the oyster season. As to the lessees, they largely own or control the means of production, i. e. the oyster beds and the boats needed to harvest them. They depend upon the lessees for the manpower necessary to harvest the oysters. True, taxpayers exercise no over-the-shoulder supervision with regard to how the lessees perform their function. The nature of the task makes such supervision impractical even if taxpayers were disposed to undertake it. But from their control of the means of production and the restrictions placed on the lessees’ use of those means, i. e. where to harvest, to whom to sell, etc., coupled with the fact that the “rent” for the boats is a function of the volume of production, I find myself in agreement with the Fifth Circuit in Bishop v. United States, 476 F.2d 977, 980 (5 Cir.), cert. denied, 414 U.S. 911, 94 S.Ct. 284, 38 L.Ed.2d 149 (1973), that
[the lessees] are really a part of the owner’s enterprise and all of the various parts of the arrangements are simply a means of calculating compensation.
The so-called independence of these masters from detailed orders on how to perform their work is beguiling. But this is not unique to the arrangement. This inheres in the calling of those who go down to the sea in ships. On the most obscure of vessels the master is the Lord of the Quarter Deck.
See also Anderson v. United States, 450 F.2d 567 (5 Cir. 1971), cert. denied, 406 U.S. 906, 92 S.Ct. 1608, 31 L.Ed.2d 816 (1972); Kirkconnell v. United States, 347 F.2d 260, 171 Ct.Cl. 43 (1965).
Thus, I think that “control” in the maritime sense exists and is exercised. I would conclude that the lessees are “employees” within the meaning of FICA.

. As the majority opinion sets out, oysters are harvested by oystermen, some of whom lease boats and motors from taxpayers and others of whom own their own boats and motors. I shall refer to the former as “lessees” and the latter as “independents.”

. The term “employee” for purposes of FICA is defined in 26 U.S.C. § 3121(d). The administrative gloss can be found in 26 C.F.R. § 31.-3121(d) — 1(c). While helpful, none of this definitional material is dispositive of the largely factual question before us.

. This is not to say, however, that the independents are not covered by the Social Security Act and that they escape payment of tax. By virtue of 26 U.S.C. § 1401(a), persons with income from self-employment must pay a tax similar in nature to that imposed by FICA (26 U.S.C. § 3101). One may speculate that had the lessee oysterman complied with § 1401(a), the government would not have made an assessment under FICA, and this litigation would not have followed.

. I note that, in quoting from Webb, the majority eliminates the first sentence in the quotation which follows in my text. To my mind, the majority’s failure to appreciate its significance is the foundation of the majority’s erroneous conclusion.