Court Opinion

ID: 4661059
Source: CourtListenerOpinion
Date Created: 2021-02-17 21:01:52.747383+00
Date Added: 2024-06-11T08:02:10.952125
License: Public Domain

In the United States Court of Federal Claims

 THE NEW YORK AND PRESBYTERIAN
 HOSPITAL,

                   Plaintiff,                            No. 16-cv-00496

                       v.                                Filed: February 17, 2020

 THE UNITED STATES,

                   Defendant.

Boris Bershteyn, Skadden, Arps, Slate, Meagher & Flom LLP, New York, NY, argued for Plaintiff.
With him on the briefs were Maura Barry Grinalds, Jonathan J. Lerner, Mollie Kornreich, New
York, NY, and Fred T. Goldberg, Jr., Sylvia O. Tsakos, Washington, D.C.

Matthew D. Lucey, Court of Federal Claims Section, Tax Division, United States Department of
Justice, Washington, D.C. for Defendant. With him on the briefs were Richard E. Zuckerman,
Principal Deputy Assistant Attorney General, Tax Division, David I. Pincus, Chief, Court of
Federal Claims Section, United States Department of Justice, Washington, D.C.

                                MEMORANDUM AND ORDER

       Pending before the Court are the parties’ cross-motions for summary judgment. The

Plaintiff, New York and Presbyterian Hospital (Hospital), argues it is entitled to indemnification

from the United States pursuant to section 3102(b) of the Internal Revenue Code (I.R.C.).

Specifically, the Hospital seeks indemnification for a settlement of claims asserted by former

medical residents (Residents) against the Hospital in another case for the amount of Federal

Insurance Contributions Act (FICA) taxes the Hospital previously deducted and paid to the United

States on the Residents’ behalf. See generally The New York and Presbyterian Hospital’s Motion

for Summary Judgment and Memorandum of Law in Support thereof (ECF No. 49) (Pl. Mot.);

The New York and Presbyterian Hospital’s Opposition to Defendant’s Cross-Motion for Summary
                                                                                                1
Judgment (ECF No. 53) (Pl. Resp.); The New York and Presbyterian Hospital’s Reply in Support

of Its Motion for Summary Judgment (ECF No. 57) (Pl. Reply). The Hospital argues that

indemnification is mandated by the plain language of the statute. The Government contends that

the Hospital is not entitled to reimbursement for payment made pursuant to a settlement agreement

between the Hospital and its former Residents because the Residents’ suit was not a “claim or

demand” for a FICA tax refund. See generally Defendant’s Cross-Motion for Summary Judgment

Brief in Support of Cross-Motion for Summary Judgment (ECF No. 50) (Def. Mot.); Defendant’s

Opposition to Plaintiff’s Cross-Motion for Summary Judgment (ECF No. 52) (Def. Resp.);

Defendant’s Reply in Support of Defendant’s Cross-Motion for Summary Judgment (ECF No. 58)

(Def. Reply).

       For the reasons stated below, the Court GRANTS Plaintiff’s Motion for Summary

Judgment and DENIES the Government’s Cross-Motion for Summary Judgment.

                                       BACKGROUND

    I. Events Leading to the Residents’ Suit

       The Federal Insurance Contributions Act, I.R.C. §§ 3101-3128 (2012), establishes a tax

that is assessed by the Government based on wages paid to workers, and the money collected from

the FICA tax is used to fund Social Security and Medicare. See Pl. Mot. Ex. 2F (IRS Publication

on Questions and Answers about Medical Resident FICA Refund Claims (Oct. 14, 2010)) at

A130.1 Pursuant to the Act, an employer withholds a percentage of an employee's wages from the

1
        Plaintiff’s Appendix to its Motion for Summary Judgment Consists of the Declaration of
Richard Einwechter, and the Declaration of Maura Barry Grinalds, which Plaintiff identifies as
exhibit 1 and exhibit 2 respectively. The Declaration of Richard Einwechter is accompanied by
an “Exhibit A.” The Declaration of Maura Barry Grinalds is accompanied by an Exhibits A
through T. Throughout this opinion, the Court will refer to the exhibit in the Einwechter
declaration as “Pl. Mot. Ex. 1(A).” Exhibits accompanying the Grinalds declaration are referenced
as “Pl. Mot. Exs. 2(A-T).” These exhibits are consecutively paginated A1-A412, and the Court
refers to these page numbers in its pin cites.
                                                                                               2
employee's paycheck based on the applicable FICA wage rate.               See id. §§ 3101 (Tax on

Employees), 3111 (Tax on Employers). The money withheld from the employee’s paycheck is

then paid to the Government, making it, in essence, a tax paid by the employee. See id. § 3102(a).

At the same time, the employer itself pays a FICA “excise tax” that is equal in amount to the

percentage wage rate paid by the employee. Id. § 3111(a). In a traditional employer-employee

relationship, therefore, the employee pays half of the total FICA tax owed and the employer pays

the other half.

        However, under section 3121(b)(10), FICA taxes do not apply to “service performed in the

employ of . . . a school, college, or university . . . if such service is performed by a student who is

enrolled and regularly attending classes at such school, college, or university.”            I.R.C. §

3121(b)(10) (“the student exception”); Treas. Reg. § 31.3121(b)(10)–2(d). There was a long

running controversy as to whether medical residents were eligible for the student exception.

During that period, the IRS allowed employers to file “protective” refund claims to preserve claims

for a refund of the employer and employee shares of FICA taxes. See Complaint (ECF No. 1)

(Compl.) ¶¶ 14-16 (citing Treas. Reg. § 31.6402(a)–2(a)). Medical residents were also free to file

         Defendant filed an appendix to its Cross Motion for Summary Judgment and an appendix
for its Response to Plaintiff’s Motion for Summary Judgment. Throughout this opinion, the Court
will refer to the exhibits contained within the appendix accompanying Defendant’s Cross-Motion
for Summary Judgment as “Def. Mot. Exs. (1-11)” and the appendix accompanying Defendant’s
Response as “Def. Resp. Exs. (1-2).” The exhibits attached to Defendant’s Cross-Motion for
Summary Judgment are consecutively paginated App. 1-App. 291 and the exhibits attached to
Defendant’s Response are consecutively paginated App. 1- App. 95, and the Court will refer to
these page numbers in its pin cites.

        Finally, the parties have submitted some duplicate exhibits. Compare Def. Mot. Ex. 2 with
Pl. Mot. Ex. 2A (Childers Complaint); compare Def. Mot. Ex. 3 with Pl. Mot. 2B (Simon
Complaint); compare Def. Mot. Ex. 4 with Pl. Mot. Ex. 2R (Hospital’s Motion to Dismiss filed in
Childers); compare Def. Mot. Ex. 8 with Pl. Mot. Ex. 2O (Order & J. in Childers). In the case of
a duplicative exhibit, the Court will cite to the exhibit contained in the appendix accompanying
Plaintiff’s Motion for Summary Judgment.
                                                                                                     3
their own protective refund claims for the employee share of FICA taxes withheld from their pay.

Compl. ¶ 14 (citing Treas. Reg. § 31.6402(a)–2(a), (b)).

       The Hospital, a not-for-profit organization under section 501(c)(3), and its predecessor by

merger, employed medical residents and fellows enrolled in Accreditation Council for Graduate

Medical Education at what is now known as the Hospital’s Weill Cornell Campus. Pl. Mot. Ex. 1

at A1-2 (¶¶ 2-3); see also Answer (ECF No. 34) ¶ 3.

       In 1999, the Hospital and the IRS entered into a Closing Agreement2 whereby the Hospital

agreed not to file refund claims before June 30, 2001 for any year for FICA taxes paid by and on

behalf of the Residents in exchange for settling certain tax issues not relevant here. See Childers

v. N.Y. & Presbyterian Hosp., 36 F. Supp. 3d 292, 300 (S.D.N.Y. 2014). The Hospital did not

seek or obtain the Residents’ consent prior to entering into the Closing Agreement, nor did the

Hospital notify the Residents that they could file their own refund claims. Id.

       In 2004, the Treasury Department issued a regulation barring medical residents from

invoking the student exemption after March 31, 2005. Treas. Reg. § 31.3121(b)(10)–2(d)(3)(i).

However, on March 2, 2010, the IRS reversed course and issued guidance stating that hospitals

and residents could obtain FICA tax refunds, but only if they had filed protective refund claims

for tax periods before April 1, 2005. Pl. Mot. Exs. 2D (I.R.S. News Release IR-2010-25 (Mar. 2,

2010)), 2E (I.R.S. Publication 4843-A (May 2010)), 2F (IRS Publication on Questions and

Answers about Medical Resident FICA Refund Claims (Oct. 14, 2010)); see also Answer ¶ 13.

2
  A closing agreement is an agreement between a taxpayer and the IRS that resolves with finality
the tax liability of a person or entity for a tax period or periods. See I.R.C. § 7121. Defendant
does not argue that the Hospital’s present action for indemnification violates the parties’ settlement
agreement.

                                                                                                    4
       However, in accordance with its Closing Agreement with the IRS, the Hospital did not file

protective claims on behalf of the medical residents affiliated with Cornell University.3

    II. Residents’ Southern District of New York Suit

       Upon discovering that they could not receive refunds for the FICA tax that the Hospital

had previously withheld, on August 2, 2013, a group of former Cornell Residents (the “Childers

Plaintiffs”), brought an action against the Hospital in the United States District Court for the

Southern District of New York for: (1) fraud; (2) constructive fraud; (3) breach of fiduciary duty;

(4) negligent misrepresentation; (5) negligence; (6) breach of contract; and (7) unjust enrichment.

See Pl. Mot. Ex. 2A (Class Action Complaint in Childers v. N.Y. & Presbyterian Hosp., 1:13-cv-

05414-LGS (S.D.N.Y. Aug. 2, 2013) (ECF No. 1)) (Childers Compl.) at A69-74 (¶¶ 46-76). On

August 21, 2013, another group of former Cornell Residents (the “Simon Plaintiffs”) brought the

second action against the Hospital for (1) breach of fiduciary duty and (2) unjust enrichment. Id.

Ex. 2B (Class Action Complaint in Simon v. N.Y. & Presbyterian Hosp., 1:13-cv- 05899-LGS

(S.D.N.Y. Aug. 21, 2013) (ECF No. 1)) (Simon Compl.) at A93-94 (¶¶ 74-82). On October 9,

2013, the two cases were consolidated for pre-trial purposes. Childers, 36 F. Supp. 3d at 301; Pl.

Mot. Ex. 2C (Consolidated Am. Complaint, Simon, 1:13-cv-05899-LGS (S.D.N.Y. Oct. 3, 2014)

(ECF No. 67)) (Consolidated Am. Compl.). The Residents alleged that the Hospital made the

decision not to seek refunds for their residents pursuant to the Hospital’s Closing Agreement with

the IRS. Consolidated Am. Compl. at A107 (¶ 45). The Residents admitted in their suit that they

did not take action to file individual refund claims on their own behalf for the FICA taxes they

sought to recover from the Hospital. See Childers Compl. at A60, A63 (¶¶ 7, 21); Simon Compl.

at A78-79, A88 (¶¶ 3, 47); Consolidated Am. Compl. at A99 (¶ 6). As relief, the Residents sought

3
  The Hospital did file protective refund claims for medical residents at the Hospital who were
affiliated with Columbia University. Childers, 36 F. Supp. 3d at 300.
                                                                                                 5
damages in the amount of the FICA tax withheld by the Hospital for the period at issue. See Pl.

Mot. Exs. 2L at A320 (Pls. Initial Disclosures, Childers, 1:13-cv- 5414-LGS (S.D.N.Y. Oct. 31,

2013) (Childers Initial Disclosures)), 2M at A326-28 (Pls. Initial Disclosures, Simon, 1:13-cv-

05899-LGS (S.D.N.Y. Oct. 31, 2013) (Simon Initial Disclosures)); see also Pl. Mot. Ex. 2K (Mem.

of Law in Support of the United States of America’s Mot. to Dismiss, Simon, 1:13-cv-05899- LGS

(S.D.N.Y. Jan. 20, 2015), ECF No. 85).

       The Hospital moved to dismiss in the district court, arguing that the Residents’ suit was a

disguised tax refund suit that needed to be filed against the Government pursuant to Internal

Revenue Code § 7422. Pl. Mot. Ex. 2R (Hospital’s Mem. of Law in Support of its Mot. to Dismiss,

Childers, 1:13-cv-05414-LGS (S.D.N.Y. Oct. 31, 2013) (ECF No. 21)) at A385-93. Alternatively,

the Hospital argued that Plaintiffs failed to state any cognizable claim (id. at A394-403) and that

the Residents’ claims were time-barred (id. at A404-06).

       The district court denied the motion to dismiss with respect to each of the Residents’

claims, aside from the Residents’ breach of contract claims. Childers, 36 F. Supp. 3d at 315.

Specifically, the court held that section 7422 did not bar the Residents' claims because the

Residents' claims did “not arise out of the Hospital's collection of taxes . . . but from later,

independent actions and omissions, such as agreeing in the Settlement not to file protective refund

claims on behalf of Plaintiffs, keeping the Settlement secret from Plaintiffs, not filing refund

claims on behalf of Plaintiffs and not informing Plaintiffs that they should file refund claims for

themselves.” Childers, 36 F. Supp. 3d at 303. Moreover, the Residents were not seeking to hold

the “Hospital liable for any action that the IRS required the Hospital to take, or that the Hospital

reasonably could have believed it was required to take. Id. at 303-04. Instead, Plaintiffs seek to

hold the Hospital liable for completely distinct allegedly unlawful conduct.” Id. at 304. The

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district court also found that “Plaintiffs are not seeking to recover the FICA taxes withheld, but

the amount by which the Hospital benefited at Plaintiffs’ expense by entering into the Settlement.”

Id. at 305.

        The Hospital then sought reconsideration and certification for interlocutory appeal of the

district court’s orders denying its motion to dismiss, which the court summarily denied. Id. at 317-

20. In its supplemental opinion, the district court responded to the Hospital’s arguments arguing

that the court failed to recognize the jurisdictional bar set by section 7422 stating, “the Hospital’s

alleged wrongdoing was not its decision to refrain from filing FICA refund claims in the first

instance, but its decision to enter into the 1999 tax settlement with the IRS . . . thereby gaining

valuable consideration in exchange for—in effect—compromising Plaintiffs’ refund claims.” Id.

at 317-18.

        On August 19, 2014, the Hospital filed in the United States Court of Appeals for the Second

Circuit (Second Circuit) a petition for a writ of mandamus to redress the district court’s allegedly

erroneous expansion of its jurisdiction. Pl. Mot. Ex. 2H (The Hospital’s Petition for a Writ of

Mandamus, In re the N.Y. & Presbyterian Hosp., No. 14-2958 (2d Cir. Aug. 19, 2014) (ECF No.

1-1)) (Pet. for Mandamus). The Hospital argued that the district court lacked jurisdiction over the

Residents' claims on the grounds that the court had ignored the plain language of section 7422.

Pet. for Mandamus at A157-58, A167-68 (citing, among other authorities, United States v.

Clintwood Elkhorn, 553 U.S. 1, 4, 7, 9 (2008)). The Hospital asked the Government if it wished

to join the petition, but the Government declined. See Pl. Mot. Ex. 2T (E-mail from B. John

Williams Jr. to Gilbert S. Rothenberg dated August 27, 2014) (Williams E-mail). The Second

Circuit denied the Hospital's mandamus petition on October 22, 2014. See Pl. Mot. Ex. 2I (Order

denying the Hospital’s Petitions for a Writ of Mandamus, In re the N.Y. & Presbyterian Hosp.,

                                                                                                    7
No. 14-2958 (2d Cir. Oct. 22, 2014), (ECF No. 21)).

       Thereafter, on October 24, 2014, the Hospital filed a third-party complaint in the district

court against the United States seeking “indemnification” under section 3102(b). See Pl. Mot. Ex.

2J (Third Party Complaint, Simon, 1:13-cv-05899-LGS (S.D.N.Y. Oct. 24, 2014) (ECF No. 72))

(Third Party Compl.) at A297 (¶¶ 46-47). The Government moved to dismiss the third-party

complaint, contending that, inter alia, the district court lacked subject-matter jurisdiction because

section 3102(b) did not waive sovereign immunity. See Pl. Mot. Ex. 2K (Mem. of Law in Support

of the Government’s Mot. to Dismiss, Simon, 1:13-cv-05899-LGS (S.D.N.Y. Jan. 20, 2015) (ECF

No. 85)) at A308-13. Alternatively, the Government argued that, even if the court did have

jurisdiction, the Government was nevertheless still not liable to the Hospital. See id. at A313-16.

       While the Government’s motion to dismiss was pending, the Hospital entered into

mediation with the Residents. The Hospital invited the Government to participate in the mediation,

but the Government declined. See Pl. Mot. Ex. 2N (E-mail from Monica Folch to Robert Dunn,

copying Maura Barry Grinalds, dated March 23, 2015) (Folch E-mail). The district court then

stayed discovery; and, on May 15, 2015, the Hospital and the named plaintiffs in Childers and

Simon entered into a proposed settlement agreement providing certain monetary relief for the

medical resident class members. Def. Mot. Ex. 5 (Unexecuted Joint Stipulation of Settlement &

Release, Childers, No. 13-5414 & Simon, No. 13-5899, May 15, 2015 (ECF No. 107-1)); Def.

Mot. Ex. 6 (Memorandum of Law in Support of Proposed Settlement, Childers, No 13-5414, May

15, 2015 (ECF No. 106)); Def. Mot. Ex. 7 (Brinckerhoff Declaration, Childers, No. 13-5414, May

15, 2015 (ECF No. 107)).

       On June 11, 2015, prior to the district court’s acceptance of the proposed settlement, the

Hospital voluntarily dismissed its third-party claim against the Government for indemnification.

                                                                                                   8
See Notice of Voluntary Dismissal, Childers, No. 13-cv-5414-LGS (S.D.N.Y. June 11, 2015)

(ECF No. 114). On July 6, 2015, the district court preliminarily approved the proposed Settlement

Agreement and suspended all proceedings except those necessary to carry out the settlement. See

Order, Childers, No. 13-cv-5414 (S.D.N.Y. July 6, 2015) (ECF No. 119).

       On November 23, 2015, after a fairness hearing conducted pursuant to Rule 23 of the

Federal Rules of Civil Procedure, the district court issued an Order approving the class action

settlement, including the approval of class certification and attorneys’ fees awards. Its Order

recognized that the Residents’ claims “could reasonably be characterized as seeking a tax refund.”

Pl. Mot. Ex. 2O (Order & Judgment, Childers, 1:13-cv-05414-LGS (Nov. 23, 2015) (ECF No.

135)) (Order & J.) at A340. In that Order, the district court also held that the “[c]ommon issues

of fact and law [in the case] include[d]:

       (a) the terms of Defendant’s 1999 Closing Agreement with the IRS that is the
       factual basis for the Consolidated Actions and

       (b) whether Defendant owed a duty to consider and protect Plaintiffs’ interests in
       negotiating the Closing Agreement and, if so, whether Defendant breached said
       duty.

Order & J. at A338-39 (¶ 2). Additionally, the district court held that the “predominate” issues in

the class action were whether the Hospital “had a duty to not act contrary to the Class Members’

interests when it negotiated the Closing Agreement” and whether the “Closing Agreement (and

NYP’s failure to disclose them) violated that duty.” Id. at A338 (¶ 3). The settlement agreement

provided for a gross settlement amount of $6,632,000, which the Hospital agreed to pay to class

members to settle the consolidated actions. Id. at A335. Of the $6,632,000 awarded, the

Residents’ attorneys were awarded $1,938,824.65 in attorneys’ fees (over 29 percent of the

settlement). Id. at A337. The district court also awarded $43,508.69 in costs, $33,000 in

administration fees, and $90,000 in “service awards” to the named plaintiffs. Id. at A337-38. An

                                                                                                 9
additional $1,691.46 was paid to a charitable organization, Doctors Without Borders, as a cy pres

distribution from the settlement fund. Def. Mot. Ex. 9 (Letter Regarding Donation to Doctors

Without Borders) at App. 252.

       The executed Settlement Agreement explicitly acknowledged that:

       The Parties agree that Class Members’ Settlement Awards can be appropriately
       characterized as a refund for the amount of FICA taxes previously withheld by the
       Hospital from the Class Members.

Pl. Mot. Ex. 1A (Joint Stip. of Settlement & Release, Childers, 1:13-cv-05414-LGS (S.D.N.Y.

Oct. 8, 2015) (ECF No. 125-1) (Executed Joint Stip. of Settlement & Release) at A24 (¶ 50.A);

see also id. at A25 ¶ 51 (releasing claims “arising out of, in connection with or relating to FICA

taxes paid . . . or withheld by [Hospital] on [Resident’s] behalf during the [class period].”). The

Residents’ awards under the Settlement Agreement were explicitly based on the amount of FICA

tax the Hospital withheld from that Resident and paid to the Government, minus the amount of

any FICA refund that Resident already received from the Government for years during the Class

Period. Executed Joint Stip. of Settlement & Release at A12, A24 (¶¶ 34, 49). Residents making

claims for their share of the settlement were also required to submit a “Declaration of Previous

Refund” disclosing the amount of any FICA refunds already received for years during the Class

Period. Id. at A17-18 (¶ 40).

       Upon approving the Settlement Agreement, the district court dismissed the Residents’

claims. Order, Childers, 1:13-cv-05414-LGS (S.D.N.Y. Jan. 15, 2016) (ECF No. 137); Order,

Simon, No. 1:13-cv-05899-LGS (S.D.N.Y. Jan. 15, 2016) (ECF No. 148).

                                                                                                10
    III. Indemnity Suit in the Court of Federal Claims

       On April 20, 2016,4 the Hospital filed suit in the Court of Federal Claims against the

Government arguing that section 3102(b) indemnified the Hospital for the Residents’ claims and

seeking, inter alia, reimbursement of the “full amount of any money paid by the Hospital stemming

from the claims and demands made in the SDNY Actions . . . .” Compl. at 7. The Government

moved to dismiss, arguing: (1) section 3102(b) did not waive sovereign immunity, (2) section

3102(b) is not money-mandating, and (3) the Residents’ action was not a FICA refund action but

rather an action grounded in tort. Mot. of the United States to Dismiss the Compl. (ECF No. 8)

(Def. MTD) at 12-29. Specifically, the Government argued that the term “indemnified” in section

3102(b) is properly read to mean that employers are “immune from . . . employees’ claims and

demands,” and not that the United States will “compensate[]” employers for payment made in

response to those claims and demands. Id. at 13. The Honorable Nancy Firestone granted the

Government’s Motion to Dismiss, 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. See New York & Presbyterian Hosp. v. United States, 128 Fed. Cl. 363, 370-73

(2016), rev'd, 881 F.3d 877 (Fed. Cir. 2018). In dismissing the case, Judge Firestone reasoned that

“the word ‘indemnified’ did not necessarily mean a right to ‘reimbursement’” and that the “better

reading” of the word “indemnify” was “exemption from liability.” Id. at 370 (citation omitted).

4
 The Hospital originally filed the pending case in the Court of Federal Claims on June 10, 2015
(ECF No. 1 in Case No. 15-593T), prior to the district court’s dismissal of the Hospital's claim
against the United States. On April 18, 2016, this Court dismissed the Hospital's complaint without
prejudice for lack of jurisdiction pursuant to 28 U.S.C. § 1500 (ECF No. 28 in Case No. 15-593T),
on the ground that at the time the Hospital filed the action on June 10, 2015, its third-party
complaint against the Government was still pending before the district court.
                                                                                                11
IV. Appeal to the Federal Circuit

          The Hospital appealed the dismissal to the United States Court of Appeals for the Federal

Circuit (Federal Circuit). The sole issue on appeal was whether section 3102(b)’s “shall be

indemnified” language is a money-mandating source of substantive law. New York & Presbyterian

Hosp. v. United States, 881 F.3d 877, 882 (Fed. Cir. 2018). The Federal Circuit reversed the Court

of Federal Claims and held that section 3102(b) was reasonably amenable to a money-mandating

reading for Tucker Act jurisdiction. Id. at 882.5 The Federal Circuit began its analysis by

interpreting the plain language of section 3102(b). In addition to citing a number of dictionaries

for the proposition that indemnified means “reimburse,” the Federal Circuit also cited the

Restatement (First) of Restitution with approval, indicating it believes the restatement accurately

captures the common law concepts of indemnification at the time Congress enacted section

3102(b). See id. at 877, 884 n.9 (citing Restatement (First) of Restitution § 80 (Am. Law Inst.

1937)). The Federal Circuit rejected the Government’s primary argument that section 3102(b)’s

“shall be indemnified” language refers to immunity from liability rather than reimbursement. Id.

at 886.

          The Federal Circuit also rejected the Government’s policy arguments, which are similar to

the policy arguments the Government continues to make in the pending motion. On appeal, the

Government argued that “the Hospital's reading of § 3102(b) as a reimbursement provision cannot

be squared with the first clause of the statute because it would make little sense to read the very

next clause of the statute as authorizing employers who have so collected and paid FICA taxes to

the IRS to turn around and, at their own whim, pay the claims and demands of their employees

5
  The Government continues to disagree with the Federal Circuit’s interpretation that section
3102(b) is a reimbursement provision and not an immunity provision. See Def. Mot. at ii n.1. This
Court is bound by the Federal Circuit’s interpretation and will not reconsider its ruling.
                                                                                                12
and then be entitled to full reimbursement from the United States for doing so.” New York &

Presbyterian Hosp., 881 F.3d at 885 (internal quotations omitted). The Government also noted

that such an interpretation would undermine Congress’s refund scheme laid out in section 7422

because employees could just seek refunds from their employers and then the employers could just

turn around and sue the Government. Id. at 880. In rejecting these policy arguments, the Federal

Circuit compared the language of section 3102(b) to, inter alia, section 7422. Id. at 886-87. The

Federal Circuit found that section 3102(b)’s “shall be indemnified” language extends beyond

section 7422 because a contrary interpretation would render section 3102(b) superfluous. Id. at

886. The Federal Circuit also recognized that the statutes’ different wording is evidence that the

statutes were designed to accomplish different tasks. Id. at 887. The Federal Circuit added that it

is the role of the court to interpret the plain language of the statute to see if “some other approach

might accord with good policy.” Id. at 887 n.15 (quoting Sandifer v. U.S. Steel Corp., 571 U.S.

220, 231 (2014) (internal quotation marks and citation omitted)). The Federal Circuit also rejected

its sister courts’ interpretations of section 3102(b) as not creating a private right of action. See id.

at 885 n.12 (disagreeing with Umland v. PLANCO Fin. Servs., Inc., 542 F.3d 59, 67-68 (3d Cir.

2008) and McDonald v. S. Farm Bureau Life Ins. Co., 291 F.3d 718, 724-25 (11th Cir. 2002)).

       Although the Federal Circuit’s majority was not persuaded by these policy arguments,

Judge Kathleen M. O’Malley found these arguments persuasive in her dissent. New York &

Presbyterian Hosp., 881 F.3d at 892 (O’Malley, J., dissenting). Specifically, the dissent explained

its view that the majority’s interpretation of section 3102(b) would lead to an absurd result because

it undermines the comprehensive refund scheme articulated in section 7422 by permitting suits for

tax refunds: (1) against employers (in contravention of section 7422(f)), (2) that would otherwise

be time-barred (in contravention of section 6511), and (3) that have not exhausted administrative

                                                                                                     13
remedies. Id. at 892-93.

       The Federal Circuit also distanced itself from the district court’s opinion in Childers,

finding that the district court should have dismissed the Residents’ class action. See New York &

Presbyterian Hosp., 881 F.3d at 887 (“the District Court should have interpreted § 7422 so that

the Hospital was immunized from the District Court Plaintiffs' Complaint and dismissed their

claims”). The Federal Circuit also held, and significantly this Court is bound by the holding, that

the Government had conceded that the Residents’ complaint should have been dismissed under

section 7422. New York & Presbyterian Hosp., 881 F.3d at 887 (citing J.A. 399).

       On April 18, 2018, the Government filed a petition for rehearing en banc, which the Federal

Circuit denied. See Pl. Mot. Ex. 2Q (Order, New York & Presbyterian Hosp. v. United States, No.

17-1180 (Fed. Cir. June 19, 2018)). The case was remanded to this Court for further proceedings.

Following this remand, the parties cross-moved for summary judgment.

       Subsequently, on February 27, 2020, this action and the underlying motions were

transferred to the undersigned judge. (ECF No. 65.) On June 2, 2020, this Court held oral

argument on the motions. (ECF No. 69.)

                                         DISCUSSION

       Summary judgment is appropriate only if “there is no genuine issue as to any material fact

and . . . the moving party is entitled to a judgment as a matter of law.” United States Court of

Federal Claims Rule 56(a); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-49 (1986).

The moving party carries the burden of establishing that no genuine issue of material fact exists.

Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). A “genuine” dispute is one that “may

reasonably be resolved in favor of either party.” Anderson, 477 U.S. at 250. A material fact is

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one that “might affect the outcome of the suit under the governing law.” Id. at 248. In considering

the existence of a genuine issue of material fact, a court must draw all inferences in the light most

favorable to the non-moving party. Matsushita Elec. Indus. v. Zenith Radio Corp., 475 U.S. 574,

587 (1986). If no rational trier of fact could find for the non-moving party, a genuine issue of

material fact does not exist and the motion for summary judgment may be granted. Id. at 588.

With respect to cross-motions for summary judgment, each motion is evaluated on its own merits

and reasonable inferences are resolved against the party whose motion is being considered.

Mingus Constructors, Inc. v. United States, 812 F.2d 1387, 1391 (Fed. Cir. 1987). To the extent

there is a genuine issue of material fact, both motions must be denied. See id.

       It is important to note at the outset that this Court is not deciding this case on a blank slate.

Section 7422(a) of the I.R.C. generally precludes any court from considering an employee’s claim

for the recovery of any FICA taxes paid until the employee files a claim with the IRS. Such a suit

“may be maintained only against the United States.” I.R.C. § 7422(f)(1). The “expansive reach”

of section 7422 ensures “that taxpayers seeking refunds of unlawfully assessed taxes must comply

with the Code’s refund scheme before bringing suit, including the requirement to file a timely

administrative claim.” Clintwood Elkhorn Min. Co., 553 U.S. at 7-8. The case before this Court

deals with the rare instance where, because of the complex procedural history, the relationship

between section 7422 and section 3102(b) is effectively severed. As noted, Federal Circuit has

already engaged in an extensive analysis of section 3102(b)’s indemnity provision; this Court is

bound by that decision and will not entertain relitigation of such issues here. New York &

Presbyterian Hosp., 881 F.3d at 885-87. All that is left for this Court to decide is whether section

3102(b) mandates reimbursement on the facts before the Court.

                                                                                                     15
       To recap, section 3102(b) provides that “[e]very employer required so to deduct the [FICA]

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.” I.R.C. §

3102(b). A plain reading of section 3102(b) makes clear that the right to indemnification is limited

to “claims and demands . . . for the amount of any such payment made by such employer.” Id.

The phrase “such payment” clearly refers to payment of the FICA tax over to the Government.

Accordingly, the employer is indemnified only from claims and disputes for the payment of FICA

taxes it pays to the Government. See New York & Presbyterian Hosp., 881 F.3d at 882 n.6 (“the

only reasonable interpretation of § 3102(b) is that it mandates the Government to reimburse FICA

taxes paid to an employer”). The parties agree that if the Residents’ suit was a suit for a FICA tax

refund then the Hospital is entitled to indemnity. Transcript of June 2, 2020 Oral Argument (OA)

at 22-23, 38-39 (ECF No. 69). Conversely, if the Residents’ suit sounded in tort, then the Hospital

would not be entitled to indemnity.

       This Court holds that the Residents’ suit was a suit for a FICA tax refund; therefore, the

Hospital is entitled to indemnification under section 3102(b).

   I. The Residents’ Suit was a FICA Tax Refund Suit

       The Government argues that the settlement payment was made for common law tort claims

“stem[ming] not from its collection of FICA taxes, but from later, independent actions and

omissions.” Def. Mot. at ii (quoting Childers, 36 F. Supp. 3d at 303); see also Def. Mot at 6-7.

The Government argues section 3102(b)’s indemnity provision is only applicable when an

employee, the Residents in this instance, makes a claim or demand challenging the employer’s

withholding or collection of tax and payment of the tax over to the Government. Def. Mot. at iii,

6-7, 14-19; Def. Resp. at 2-13; Def. Reply at 1-3. Moreover, Defendant argues that the Hospital’s

                                                                                                 16
agreement with the Residents to calculate each Resident’s settlement as the amount of FICA tax

withheld by the Hospital does not transform the nature of the Residents’ underlying tort claims.

Def. Mot. at 8, 20-24; Def. Resp. at 2-4, 11.

       The Hospital argues the Residents’ suit was within the scope of section 3102(b) because it

was a “claim and demand for the amount of” FICA taxes the Hospital collected and paid over to

the Government. Pl. Mot. at 17-19, 27; see also Pl. Resp. at 3-8; Pl. Reply at 12. To support this

assertion, the Hospital points to statements made in the Residents’ complaints, the Residents’

initial disclosures, the parties’ settlement agreement, and the district court’s order approving the

settlement. Pl. Mot. at 20-22 (citing e.g., Childers Compl. ¶¶ 6, 7, 38; Simon Compl. ¶¶ 44, 52;

Consolidated Am. Compl. ¶¶ 6, 45-48, 52, 56; Childers Initial Disclosures at A320; Simon Initial

Disclosures at A326-28; Executed Joint Stip. of Settlement & Release at A9; Order & J. at A340;

see also Pl. Reply at 7-9). The Hospital notes further that the legal theory behind the claims and

demands or the reason(s) for withholding the FICA taxes or not seeking a refund is inapposite

because the statute focuses on the funds withheld, not the theory entitling the employee to the

money withheld, and not the cause of action. Pl. Mot. 28-29; Pl. Reply at 15-16.

       Contrary to Defendant’s assertions, the cause action underlying of the Residents’ claims

for FICA tax refunds is immaterial. Here, the Residents’ claims sounded in tort and sought to

divest the Hospital of what “amounted to a ‘de facto’ FICA refund.” See Consolidated Am. Compl.

at A99-100. However, this “de facto” characterization of the FICA tax refund does not remove

the Residents’ suit beyond the purview of section 3102(b)’s indemnity provision. See Clintwood

Elkhorn Mining Co., 553 U.S. at 7, 9 (stating that section 7422 bars any claim seeking the recovery

of any internal revenue tax “whatever the source of the cause of action”); Reuss v. Orlando Health,

Inc., 140 F. Supp. 3d 1299 (M.D. Fla. 2015) (dismissing claim nearly identical to Childers). For

                                                                                                 17
purposes of the section 3102(b), the appropriate inquiry is simply whether the Residents’ suit was

“for the amount of” FICA tax collected. I.R.C. § 3102(b).

       A review of the Residents’ complaints, initial disclosures, and settlement with the Hospital

all support the finding that the Residents’ suit was a suit for a FICA tax refund. In their complaints,

the Residents sought as “damages” the amount of the tax refunds—dollar-for-dollar—they claimed

they overpaid in FICA taxes because refund claims were not filed for them. See, e.g., Simon

Compl. at A 82 (¶ 16) (seeking “[t]he amount of FICA due to each resident had Defendant filed

FICA Protective Refund Claims”). In their initial disclosures, the Simon plaintiffs go through the

exact FICA tax each Resident paid for each tax year spanning the class period, and they state these

calculations as their “[a]ctual and compensatory damages.” Simon Initial Disclosures at A326-

329; see also Childers Initial Disclosures at A320 (“Plaintiffs will compute their damages by

totaling the amount of FICA taxes withheld by [the Hospital] during the class period . . . .”).

Furthermore, the Residents claimed they are entitled to interest on tax payments “in accordance

with 26 U.S.C. §§ 6611(a); 6621(a), and any other applicable statute.” Simon Initial Disclosures

at A326-329. Sections 6611(a) and 6621(a) concern interest for the over payment of tax. I.R.C.

§§ 6611(a) (“Interest shall be allowed and paid upon any overpayment in respect of any internal

revenue tax at the overpayment rate established under section 6621.”); 6621(a)(1) (establishing the

method for determining the rate of interest on the overpayment of taxes). Accordingly, reference

to these statutes would be appropriate if the Residents’ claims were claims for a tax refund but

would not be appropriate if the Residents’ claims were tort claims.

       Next, the settlement agreement at issue explicitly acknowledged that, “[t]he Parties agree

that Class Members’ Settlement Awards can be appropriately characterized as a refund for the

amount of FICA taxes previously withheld by the Hospital from the Class Members.” Executed

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Joint Stip. of Settlement & Release at A24 (¶ 50.A). Per the terms of the settlement, the Class

Members were also required to submit a “Declaration of Previous Refund” disclosing the amount

of any FICA tax refunds already received during the Class Period. Id. at A17 (¶ 40). The Notice

of Proposed Settlement also indicates that the Residents’ suit was one for FICA taxes withheld by

the Hospital by informing class members that “[o]nce you return the Declaration of Previous

Refund, . . . you will no longer be able to sue NYP about any claims relating to FICA taxes withheld

by NYP on your behalf during the period from January 1, 1995 through June 30, 2001.” Id. at

A42. And the district court itself recognized this much in its Order when it characterized the

Hospital’s settlement with the Residents as “seeking a tax refund.” Order & J. at A340. Thus, the

Residents’ suit was one for FICA tax refunds and fell squarely within the purview of section

3120(b)’s indemnity provision.

       Defendant relies on Mikulski v. Centerior Energy Corp., 501 F.3d 555, 565 (6th Cir. 2007)

and Bancroft v. Indemnity Insurance Co., 203 F. Supp. 49 (W.D. La.), aff’d, 309 F.2d 959 (5th

Cir. 1962) for the proposition that the Residents’ suit is not converted into a suit for a tax refund

simply because the Residents chose to measure of damages in terms of the amount they paid in

FICA taxes. However, these cases are inapposite. In Mikulski, investors sued a corporation for

mishandling its own tax liability, which inflated the shareholders’ tax liability. 501 F.3d at 558.

There, the United States Court of Appeals for the Sixth Circuit specifically noted in Mikulski that

“[the corporation] was not acting as a collection agent for or on behalf of the IRS.” Id. at 564-65.

Likewise, Bancroft involved a suit for professional negligence of a public accountant, and the

accountant was not acting on behalf of the government. In sum, neither defendant in Mikulski or

Bancroft was acting as an agent of the government or pursuant to any government agreement.

                                                                                                  19
       Unlike those decisions, the Hospital acted in accordance with federal law and IRS

directives when it entered into its Closing Agreement with the IRS, and subsequently did not seek

a FICA tax refund for its residents. The Government does not contend the Hospital committed

any wrong in not seeking a FICA refund for its employees. OA at 16:10-21 (“[Defendant is] not

saying that the hospital is actually guilty of any of the torts that the residents assert against them.

That’s not our position.”). The Government does not allege (1) that the Hospital failed to fulfill

its duties under I.R.C. §§ 3101-3128 by properly collecting and paying over to the Government

the employee’s share of FICA taxes, (2) that the Hospital had a duty to seek FICA refunds for its

residents when the Hospital did not seek a FICA refund for itself, (3) that the Hospital violated

any IRS directives by entering into a settlement agreement, or (4) that the Hospital bargained away

the Residents’ abilities to seek their own individual tax refunds.

       There is no allegation that the Hospital violated any internal revenue laws by failing to seek

a refund for its employees. OA at 16:3-21. The Hospital acted in accordance with Treasury

Regulations which do not impose a duty on an employer to seek FICA tax refunds for its Residents

except when the Hospital seeks a FICA refund for itself. See Treas. Reg. § 31.6402(a)-2(a)(ii).

The Hospital did not violate any IRS directives by entering into a closing agreement. In fact, if

the Hospital was bound by its agreement with the IRS not to seek FICA refunds for its Residents,

then the Government would have in some sense condoned the Hospital’s actions. Thus, it is

difficult to imagine how entering into a valid closing agreement with the Government or any

actions taken pursuant to such a valid agreement can operate to remove the Hospital from the

protections of section 3102(b)’s indemnity provision. Finally, the Hospital did not bargain away

the Residents’ abilities to seek their own individual tax refunds. Each Resident was free to seek

an individual refund notwithstanding the Hospital’s agreement with the IRS. See Childers Compl.

                                                                                                    20
A60, A63 (¶¶ 7, 21); Simon Compl. A78-79, A88 (¶¶ 3, 47); Consolidated Am. Compl. A99 (¶ 6).

       Because the Residents’ suit was “for the amount of” FICA tax—which the Hospital

properly collected on behalf of the government and in accordance with federal tax laws—the

Hospital is not excluded from the coverage of section 3102(b)’s indemnity provision. I.R.C. §

3102(b).

   II. Collateral Estoppel Does Not Bar this Court from Determining
       that the Residents’ Suit Was a Suit for a FICA Tax Refund

       The Government argues that the Hospital is collaterally estopped from disputing the district

court’s holding in Childers that the “claims and disputes” in that case were not for FICA tax

refunds. See Def. Mot. at ii, 7, 10-14; Def. Resp. at 3, 7-8; Def. Reply at 3-8. Moreover, the

Government asserts the district court’s decision should be treated as final, because it was the

Hospital’s own decision to settle the Residents’ suit that precluded them from appealing any final

judgment on the merits. Def. Mot. at 13.

       The Hospital counters that none of the elements of collateral estoppel are met here. Pl.

Resp. at 17-23. The Hospital also notes that the Federal Circuit on appeal has disagreed with the

district court to the extent the district court found that the Resident’s claims were not FICA refund

claims. Pl. Resp. at 3-4. This Court agrees with the Hospital.

       “Collateral estoppel . . . has the dual purpose of protecting litigants from the burden of

relitigating an identical issue with the same party or his privy and of promoting judicial economy

by preventing needless litigation.” Parklane Hosiery Co. v. Shore, 439 U.S. 322, 326 (1979). The

use of collateral estoppel, unlike res judicata, is a discretionary decision. See id. at 331. Under

the doctrine of collateral estoppel, “once a court has decided an issue of fact or law necessary to

its judgment, that decision is conclusive in a subsequent suit based on a different cause of action

involving a party to the prior litigation.” Copar Pumice Co., Inc. v. United States, 112 Fed. Cl.

                                                                                                  21
515, 530 (2013) (citing United States v. Mendoza, 464 U.S. 154, 158 (1984)). For collateral

estoppel to bar an issue that was litigated in an earlier action, the following four requirements must

be satisfied:

        (1) the issue at stake is identical to the one involved in the prior proceeding; (2) the
        issue was actually litigated in the prior proceeding; (3) the determination of the
        issue in the prior litigation must have been a critical and necessary part of the
        judgment in the first action; and (4) the party against whom collateral estoppel is
        asserted must have had a full and fair opportunity to litigate the issue in the prior
        proceeding.

Dana v. E.S. Originals, Inc., 342 F.3d 1320, 1323 (Fed. Cir. 2003) (internal quotation marks

omitted) (citing Pleming v. Universal-Rundle Corp., 142 F.3d 1354, 1359 (11th Cir. 1999)).

Moreover, collateral estoppel may apply even where a court did not technically reach a final

judgment if that court makes a determination that is “sufficiently firm to be accorded conclusive

effect” and is not “avowedly tentative.” Dana., 342 F.3d at 1323 (citing Restatement (Second) of

Judgments § 13 (1982)). “The relevant question is whether the issue has been resolved in the prior

action so that the Court has no good reason to permit it to be litigated again.” In re Cenco Inc.

Securities Litigation, 529 F. Supp. 411, 416 n.5 (N.D. Ill. 1982) (citing Miller Brewing Co. v. Jos.

Schlitz Brewing Co., 605 F.2d 990, 996 (7th Cir. 1979)); but see Fin. Acquisition Partners LP v.

Blackwell, 440 F.3d 278, 285 (5th Cir. 2006) (holding that when a case is subsequently settled, a

decision denying the motion to dismiss “cannot be given preclusive effect” because settlement

agreements are generally not given preclusive effect and because the denial was not a final

judgment on the merits).

        Collateral estoppel does not apply here because the district court’s decision in Childers was

“avowedly tentative.” See Block v. U.S. Int'l Trade Comm'n, 777 F.2d 1568, 1572-3, n.7-8 (Fed.

Cir. 1985) (finding ITC’s decision to terminate its investigation under 19 U.S.C. § 1337(c) was

avowedly tentative where ITC decision was not “firm and stable” as evidence by ITC’s statements

                                                                                                   22
that there was still a possibility that ITC would investigate plaintiff’s claims). In Childers, the

district court held that the Residents’ claims did “not arise out of the Hospital’s collection of taxes

. . . but from later, independent actions and omissions, such as agreeing in the Settlement not to

file protective refund claims on behalf of Plaintiffs, keeping the Settlement secret from Plaintiffs,

not filing refund claims on behalf of Plaintiffs, and not informing Plaintiffs that they should file

refund claims for themselves.” Childers, 36 F. Supp. 3d at 303. Moreover, the district court stated

that the Residents were not seeking to hold the “Hospital liable for any action that the IRS required

the Hospital to take, or that the Hospital reasonably could have believed it was required to take. .

. . Instead, Plaintiffs [sought] to hold the Hospital liable for completely distinct allegedly unlawful

conduct.” Id. at 303-04. The district court also found that “Plaintiffs [were] not seeking to recover

the FICA taxes withheld, but the amount by which the Hospital benefited at Plaintiffs’ expense by

entering into the Settlement.”      Id. at 305.    The Hospital then sought reconsideration and

certification for interlocutory appeal of the district court orders denying its motion to dismiss

which the district court summarily denied. Id. at 317-20. In its Supplemental Opinion, the district

court responded to the Hospital’s arguments that it failed to recognize the jurisdictional bar set by

section 7422 stating, “the Hospital’s alleged wrongdoing was not its decision to refrain from filing

FICA refund claims in the first instance, but its decision to enter into the 1999 tax settlement with

the IRS . . . thereby gaining valuable consideration in exchange for—in effect—compromising

Plaintiffs’ refund claims.” Id. at 317-18. However, later, in accepting the parties’ settlement

agreement the district court held the Residents’ claims “could reasonably be characterized as

seeking a tax refund.” Order & J. at A340.

       These statements are irreconcilable. This Court has no reason to choose one statement as

preclusive of the other. The Government bears the burden of proof as the party seeking to invoke

                                                                                                    23
collateral estoppel and has failed to carry that burden with respect to the finality or firmness of the

district court’s judgment with respect to its characterization of the claims. See RF Delaware, Inc.

v. Pacific Keystone Technologies, Inc., 326 F.3d 1255, 1261-62 (Fed. Cir. 2003) (finding that

where the parties had settled the issues themselves, without a final order approving the settlement

from the court, two interlocutory orders preceding that settlement were not sufficiently firm to

support a claim of collateral estoppel).

       Moreover, the Federal Circuit has voiced its disapproval of the district court’s decision in

Childers, specifically holding that “the District Court should have interpreted § 7422 so that the

Hospital was immunized from the District Court Plaintiffs' Complaint and dismissed their claims

. . . .” See New York & Presbyterian Hosp., 881 F.3d at 887. Such an interpretation of section

7422 would lead to dismissal only if the Residents’ suit was characterized as one for a tax refund.

See Clintwood Elkhorn Mining Co., 553 U.S. at 7, 9. And even if the Federal Circuit’s statement

is dicta, as a subordinate court, this Court should follow carefully considered statements regarding

the characterization of the Resident’s claims against the Hospital. See DaimlerChrysler Corp. v.

United States, 361 F.3d 1378, 1385 n.3 (Fed. Cir. 2004) (citing Ins. Co. of the West v. United

States, 243 F.3d 1367, 1372 (Fed. Cir. 2001)); Stone Container Corp. v. United States, 229 F.3d

1345, 1349-50 (Fed. Cir. 2000)).6 Thus, to the extent the issue was resolved at all, it was resolved

in favor of the Hospital.

       For these reasons, the Hospital is not collaterally estopped from arguing that the Residents’

suit was for a FICA tax refund.

6
 Additionally, since the Childers decision was issued, courts have disagreed with its reasoning.
See, e.g., Reuss v. Orlando Health, Inc., 140 F. Supp. 3d 1299 (M.D. Fla. 2015) (finding medical
Residents’ suit for breach of fiduciary duty for failure to seek a FICA refund preempted by section
7422).
                                                                                                    24
   III. The Government Must Indemnify the Hospital Notwithstanding the I.R.C. § 6511(a)’s
        Time Bar or any other Defense the Government May Have Had Against the Residents’
        Suit

       Finally, Defendant argues that if the Residents were to try to bring a tax suit against the

Government, the Residents would be time barred in bringing such a suit. Def. Mot. at iii; 27-31

(citing I.R.C. § 6511(a) (mandating that a claim for credit or refund generally be filed “within 3

years from the time the return was filed or 2 years from the time the tax was paid, whichever of

such periods expires the later . . .”)); Treas. Reg. § 301.6511(a)-1(a)(1); Clintwood Elkhorn, 553

U.S. at 8-9; Commissioner v. Lundy, 516 U.S. 235, 240 (1996); Brockamp v. United States, 519

U.S. 347, 350 (1997); United States v. Dalm, 494 U.S. 596, 602 (1990); United States v. A.S.

Kreider Co., 313 U.S. 443, 447-48 (1941); RadioShack Corp. v. United States, 566 F.3d 1358,

1362 (Fed. Cir. 2009).

       The Government had ample opportunity to assert this and any other defense it may have

had to the Residents’ suit before the district court but affirmatively chose not to do so. Prior to the

Hospital’s settlement with the Residents, the Government had notice of the claims and was invited

to participate in the Hospital’s writ of mandamus.          See Williams E-mail.       Moreover, the

Government was invited to participate in the settlement discussions between the Residents and

Hospital. See Folch E-mail. Yet, the Government refused to participate in those negotiations. Id.

Accordingly, the Government cannot at this late date assert defenses against the Residents’ FICA

refund claims that it could have asserted during the underlying dispute. See Restatement (First) of

Restitution § 76 cmt. f (Am. Law Inst. 1937) (stating that an indemnitor may be liable to

indemnitee if the indemnitor “is notified and given an opportunity to defend[ ] but fails to conduct

the defense”).

                                                                                                    25
                                         CONCLUSION

       For the foregoing reasons, the Court GRANTS Plaintiff’s Motion for Summary Judgment

(ECF No. 49) and DENIES the Government’s Cross-Motion for Summary Judgment

(ECF No. 50). The parties have reserved briefing on damages. The parties are DIRECTED to

file a joint status report by March 3, 2021, proposing a schedule for further proceedings.

        IT IS SO ORDERED.

                                                                  s/Eleni M. Roumel
                                                                 ELENI M. ROUMEL
                                                                     Chief Judge

February 17, 2020
Washington, D.C.

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