Donald F. APPOLONI, Sr., Russell C. Bergemann, and Sandra Engel, indi╜vidually and as representatives of all similarly-situated individuals. Plain╜tiffs, v. UNITED STATES of America, Defendant., United States District Court, W.D. Michigan, Southern Division., 333 F.Supp.2d 624, No. 5:02-CV-176., July 21, 2004

Donald F. APPOLONI, Sr., Russell C. Bergemann, and Sandra Engel, indi╜vidually and as representatives of all similarly-situated individuals. Plain╜tiffs, v. UNITED STATES of America, Defendant.

United States District Court, W.D. Michigan, Southern Division.

333 F.Supp.2d 624

No. 5:02-CV-176.

July 21, 2004.

Suzanne Krumholz Clark, Amberg, Fire╜stone & Lee, P.C., Southfield, MI, for plaintiffs.

Thomas P. Cole, U.S. Department of Justice, Tax Division, Washington, DC, for defendant.

OPINION

QUIST, District Judge.

In this class action, Plaintiffs and class representatives, Donald F. Appoloni, Sr., Russell C. Bergemann, and Sandra Engel, are retired public school teachers who al╜lege that they exchanged their property rights of tenure under Michigan law in exchange for payments of money by their employer. Plaintiffs' employer withheld taxes on those payments under the Feder╜al Insurance Contributions Act ("FICA"), and Plaintiffs filed claims for refunds of the FICA tax. On November 21, 2002, after the Internal Revenue Service ("IRS") denied Plaintiffs' administrative claims, Plaintiffs filed this action on behalf of themselves and all others similarly situat╜ed in the Western District of Michigan against the United States ("Government") for refund of the FICA taxes assessed on the payments they received in exchange for their property rights. By Order dated June 18, 2003, as amended by Order dated October 16, 2003, the Court granted Plain╜tiffs' motion for class certification and cer╜tified a class pursuant to Fed.R.Civ.P. 23(b)(3). Now before the Court are the parties' cross motions for summary judg╜ment.

I. Facts

Plaintiffs were formerly employed as public school teachers by the Dowagiac Union School District (the "District") and were all tenured employees under the Michigan Teachers' Tenure Act (the "Ten╜ure Act"), M.C.L. ╖╖ 38.71 to 38.191. Un╜der the Tenure Act, a teacher is granted tenure after satisfactorily completing a four-year (formerly two-year) probationary period of employment. M.C.L. ╖ 38.81. A teacher who has received tenure may be discharged or demoted "only for reason╜able and just cause and only as provided in [the Tenure Act]." M.C.L. ╖ 38.101. Plain╜tiff Appoloni obtained tenure in 1990, Plaintiff Bergemann obtained tenure in 1970, and Plaintiff Engel obtained tenure in 1975.

In 2001, the District offered certain teachers a monetary incentive to take ear╜ly retirement under the Employee Sever╜ance Plan ("ESP"). Eligible teachers who elected early retirement under the ESP would receive one year of salary (up to $53,021) to be paid in monthly installments over five years. The ESP was incorporat╜ed into the Master Contract Agreement between the District and the Van Buren County Education Association and the Dowagiac Education Association. The purpose of the ESP was "to help prevent teacher layoffs and to lessen the Board's economic responsibility in the area of staff╜ing." (Master Contract Agreement at 45, Cole Decl. Ex. 1.) The ESP was entirely voluntary, was available to only the first thirty teachers who applied, and required a minimum of fifteen applicants in order to trigger the District's obligations under the ESP. To be eligible, a teacher had to have ten years of service with the District and be at the top of the pay scale. In addition, an interested teacher was required to de╜clare his or her intention to participate in the ESP by January 9, 2001, and to contin╜ue teaching until no later than June 2001. Applicants were also required to complete an Indication of Interest Form, a Release and Waiver of Claims Agreement, a Notice of Enrollment, and a Designation of Bene╜ficiary Form. (ESP Plan Description ╤ 5, Cole Decl. Ex.2.) The Release and Waiver of Claims Agreement contained a broad waiver, pursuant to which the employee waived all claims arising out of employ╜ment with the District, including claims that the employee was improperly forced to resign, claims or grievances based upon breach of the Master Contract Agreement, age discrimination claims, claims under state and federal civil rights laws, and claims under the Tenure Act. (Release & Waiver of Claims Agreement ╤ 3, Pl.'s Br. Supp. Mot. Ex. E.)

Plaintiffs were qualified for the ESP, and their applications were accepted by the District. Plaintiffs Appoloni and En╜gel retired in June 2001 and Plaintiff Ber╜gemann retired in August 2001. Plaintiffs began receiving their ESP payments upon retirement. The District withheld FICA taxes from Plaintiffs' ESP payments. Each Plaintiff filed a claim for refund of the employee's portion of the FICA taxes on the basis that the ESP payments are not wages but instead are payments in exchange for Plaintiffs' property rights. Plaintiffs filed this action after the IRS denied their claims for a refund.

II. Summary Judgment Standard

Summary judgment is appropriate if there is no genuine issue as to any materi╜al fact and the moving party is entitled to a judgment as a matter of law. Fed. R.Civ.P. 56. Material facts are facts which are defined by substantive law and are necessary to apply the law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). A dispute is genuine if a reasonable jury could return judgment for the non-moving party. Id.

The court must draw all inferences in a light most favorable to the non-moving party, but may 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." Agristor Finan╜cial Corp. v. Van Sickle, 967 F.2d 233, 236 (6th Cir.1992) (quoting Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986)).

III. Discussion

The sole issue presented in this case is whether the ESP payments Plain╜tiffs are receiving are wages for purposes of FICA. Plaintiffs contend that the ESP payments are not wages but instead con╜stitute payment for Plaintiffs' surrender of their tenure rights. Plaintiffs rely heavily upon the Eighth Circuit's decision in North Dakota State University v. United States, 255 F.3d 599 (8th Cir.2001). The Government contends that the ESP pay╜ments are wages subject to FICA tax be╜cause regardless of whether the payments are for a property right, the payments are for a right that arose out of the employ╜ment relationship. The Government con╜tends that the Sixth Circuit's decision in Gerbec v. United States, 164 F.3d 1015 (6th Cir.1999), is controlling in this case. Both parties agree that Plaintiffs' right to ten╜ure is a protected property right subject to due process protections. See Tomiak v. Hamtramck Sch. Dist., 426 Mich. 678, 700, 397 N.W.2d 770, 780 (1986). ¹

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^1. ═ Property interests protected by the Due Pro╜cess Clause of the Fourteenth Amendment to the United States Constitution do not arise under the constitution but rather "are created and defined by independent sources, such as state law." Hamilton v. Myers, 281 F.3d 520, 529 (6th Cir.2002).

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FICA is a tax imposed upon the wages of employees to fund Social Security pro╜grams such as Old-age, Survivors, and Dis╜ability Insurance, as well as Medicare In╜surance. 26 U.S.C. ╖ 3101; see Rowan Cos., Inc. v. United States, 452 U.S. 247, 249 n. 2, 101 S.Ct. 2288, 2290 n. 2, 68 L.Ed.2d 814 (1981). The employer and the employee pay an equal portion of the tax. 26 U.S.C. ╖╖ 3101, 3111. The em╜ployee's share of the tax is collected by the employer through deductions from the em╜ployee's wages. 26 U.S.C. ╖ 3102. FICA defines "wages" as "all remuneration for employment, including the cash value of all remuneration (including benefits) paid in any medium other than cash," subject to certain exemptions not relevant here. 26 U.S.C. ╖ 3121(a). The term "employ╜ment" is defined as "any service, of what╜ever nature, performed . . . by an employ╜ee for the person employing him." 26 U.S.C. ╖ 3121(b).

The Supreme Court interprets the phrase "remuneration for employment" broadly. Soc. Sec. Bd. v. Nierotko, 327 U.S. 358, 365, 66 S.Ct. 637, 641, 90 L.Ed. 718 (1946); see also Gerbec v. United States, 164 F.3d 1015, 1026 (6th Cir.1999) (stating that "[t]he phrase 'remuneration for employment' as it appears in ╖ 3121 should be interpreted broadly"). Similar╜ly, Treasury Regulations define "wages" broadly. Regardless of the name given to the payment, any remuneration for em╜ployment constitutes "wages." 26 C.F.R. ╖ 31.3121(a)-1(c). Also, "the basis upon which the remuneration is paid is immate╜rial in determining whether the remunera╜tion constitutes wages." 26 C.F.R. ╖ 31.3121(a)-1(d). However, the Supreme Court has said that while all wages under FICA are "income" for purposes of in╜come-tax withholding, the converse is not true, because " 'wages' is a narrower con╜cept than 'income.' " Rowan Cos., 452 U.S. at 254, 101 S.Ct. at 2293 (citing Cent. Ill. Pub. Serv. Co. v. United States, 435 U.S. 21, 25, 98 S.Ct. 917, 919, 55 L.Ed.2d 82 (1978)). Thus, " '[w]ages usually are income, but many items qualify as income and yet clearly are not wages.' " Rowan Cos. , 452 U.S. at 254, 101 S.Ct. at 2293 (quoting Cent. Ill. Pub. Service Co., 435 U.S. at 25, 98 S.Ct. at 919). ²

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^2. ═ Plaintiffs argued in their brief in opposition to the Government's motion and again at oral argument that the Central Illinois case, and not Nierotko, is the governing authority on what constitutes wages for employment tax purposes. Plaintiffs further argue that in Central Illinois the Court refused to extend Nierotko's rationale for breadth of coverage from the social security benefits area to the employment tax area. The Court disagrees with Plaintiffs' assessment of Central Illinois. The issue in Central Illinois was whether an employer was required to withhold federal income tax on payments it made to its em╜ployees for reimbursement of lunch expenses. The Court held that the employer was not required to do so because there was no regulation requiring withholding on such pay╜ments and prior cases had maintained the distinction between "wages" and "income." Central Ill., 435 U.S. at 30-32, 98 S.Ct. at 922-23. E ssentially, the Court refused to equate "wages" with "income" for purposes of income tax withholding because "wages" is a narrower concept than "income." The Court did not, as Plaintiffs suggest, reject Nierotko's observation that the definition of "wages," "employment," and "any service" are worded so as to "import breadth of cover╜age" with regard to the determination of whether payments made in the employment context are subject to employment tax. Nier╜otko, 327 U.S. at 365, 66 S.Ct. at 641.

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The Sixth Circuit addressed the issue of wages for purposes of FICA in Gerbec v. United States, 164 F.3d 1015 (6th Cir. 1999). There, the plaintiffs were part of a class of employees who received settle╜ment payments in a class action against their former employer. The plaintiffs in the class action alleged that their employer violated Section 510 of the Employment Retirement Income Security Act of 1974 by discharging a large number of workers shortly before they were eligible to vest in the employer's pension and health plans. The funds were distributed to class mem╜bers based upon a Basic Award compo╜nent, which was designed to compensate for the loss of dignity resulting from the alleged discrimination based upon age and years of service, and an Earnings Impair╜ment Additur component, which was de╜signed to compensate for loss in earnings capacity and to approximate long-term loss in employment prospects. The issues be╜fore the court in Gerbec were whether the plaintiffs' settlement awards were exempt from federal income tax under 26 U.S.C. ╖ 104(a)(2), which at that time excluded amounts of damages " 'received . . . on ac╜count of personal injuries or sickness, " id. at 1018 (quoting 26 U.S.C. ╖ 104(a)(2)), and whether their settlement awards were subject to FICA tax. With regard to the income tax issue, the court held that the compensatory damages aspect of the set╜tlement agreement fell within the exclusion under ╖ 104(a)(2) but that non-tort amounts for back pay and future lost wages would be subject to taxation. Id. at 1023-25. With regard to the FICA issue, the court held that amounts for back pay and future lost wages were wages subject to FICA taxation. Id. at 1026. The court reached this conclusion even though the plaintiffs did not actually perform services for the payments they received. Noting that "[t]he phrase 'remuneration for em╜ployment' as it appears in ╖ 3121 should be interpreted broadly," the court conclud╜ed that " 'remuneration for employment' includes certain compensation in the em╜ployer-employee relationship for which no actual services were performed." Id. at 1026 (footnote omitted). As support for its conclusion, the court cited Social Security Board v. Nierotko, 327 U.S. 358, 66 S.Ct. 637, 90 L.Ed. 718 (1946), in which the Supreme Court held that an award of back pay qualified as wages under the Social Security Act of 1935 for purposes of credit╜ing the worker's Old Age and Survivor's Insurance account. The Supreme Court reasoned that "service" as used in the Social Security Act "means not only work actually done but the entire employer-em╜ployee relationship for which compensation is paid to the employee by the employer." Nierotko, 327 U.S. at 365-66, 66 S.Ct. at 637. Based upon Nierotko, the Gerbec court concluded "that awards representing a loss in wages, both back wages and future wages, that otherwise would have been paid, reflect compensation paid to the employee because of the employer-employ╜ee relationship, regardless of whether the employee actually worked during the time period in question." Gerbec, 164 F.3d at 1026. The court noted that those amounts would have been subject to FICA taxation if the plaintiffs had actually worked for the employer during the periods covered by the back pay and future wage loss compo╜nents of the award. Id .

In North, Dakota State University v. United States, 255 F.3d 599 (8th Cir.2001) ("NDSU "), the Eighth Circuit held in a case of first impression at the appellate level that payments made to tenured facul╜ty members in exchange for their tenure rights were not wages subject to FICA taxation. The court reasoned that the payments were for relinquishment of con╜tractual and constitutionally-protected rights and not as remuneration for ser╜vices to the university. The tenure system in that case provided that tenure could be granted to a faculty member after success╜ful completion of a six-year probationary period. In certain cases tenure could be granted earlier or even perhaps upon an employee's hire. However, tenure was not automatic and required the employee to demonstrate a certain level of academic achievement, such as scholarship in teach╜ing, contribution to a discipline or profes╜sion through research, other scholarly or professional activities, and service to the university and society. Id. at 601. The court pointed out that in contrast to se╜niority rights, which are attained solely through completion of service, a professor could receive tenure only by demonstrat╜ing qualities that merited tenure. Id . at 605. The court summed up its analysis as follows:

Under the terms of the Early Retire╜ment Program, the tenured faculty re╜ceived a negotiated amount of money in exchange for giving up their constitu╜tional and contractual rights to tenure. In other words, they relinquished their tenure rights. They did not receive what they were entitled to under their contracts, which was continued employ╜ment absent fiscal constraints or ade╜quate cause for termination. Rather they gave up those rights ... in ex╜change for the relinquishment of their contractual and constitutionally-protect╜ed tenure rights rather than as remu╜neration for services to NDSU.

Id . at 607.

As part of its analysis in NDSU, the court considered three Revenue Rulings addressing whether lump-sum payments to employees constituted wages subject to taxation under FICA or other similar en╜actments. ³ In Revenue Ruling 58-301, the taxpayer was employed under a written contract with a five-year term. In the second year of the contract, the taxpayer and his employer agreed to cancel the remaining term of the contract, and the taxpayer agreed to accept a lump-sum payment as consideration for the cancella╜tion of his contract rights. The majority of the ruling was devoted to the issue of whether the payment constituted a capital gain or was ordinary income. After con╜cluding that the payment was ordinary income, the IRS concluded in one sen╜tence, without explanation, that the lump sum payment was not subject to FICA tax. See Revenue Ruling, Rev. Rul. 58-301, 1958-1 C.B. 23, 1958 WL 10630 (1958). In Revenue Ruling 74-252, the employee had a three-year employment contract which permitted the employer to terminate the employment relationship at any time pro╜vided the employer paid the employee an amount equal to six months salary. The employer terminated the contract and be╜gan making payments. Citing regulations pertaining to income tax withholding, the IRS concluded that the payment was wages under both FICA and the Federal Unemployment Tax Act. The IRS distin╜guished the payments from the lump-sum payment in Revenue Ruling 58-301 on the basis that the instant payments were made by the employer upon the employee's in╜voluntary separation and were in the na╜ture of dismissal payments, whereas the payment in Revenue Ruling 58-301 was made as consideration for the employee's relinquishment of his interest in his em╜ployment contract-an interest in the na╜ture of property. See Rev. Rul. 74-252, 1974-1 C.B. 287, 1974 WL 34867 (1974). Finally, in Revenue Ruling 75-44, a rail╜road employee had acquired rights to secu╜rity in his employment and to additional pay or other recognition for longevity based upon his past service under a gener╜al contract of employment with the rail╜road. The employee entered into an agreement with his employer to perform a different type of work and to refrain from asserting the employment rights he had previously acquired in exchange for a lump sum payment from the employer. The IRS determined that the lump sum pay╜ment was wages for purposes of income tax withholding because the employee had acquired his relinquished employment rights through his prior performance of services to the employer. The IRS also distinguished the payment from the pay╜ment in Revenue Ruling 58-301, noting that the present case did not involve the cancellation of an employment contract which, from the outset, bound the parties to a specified period of time. See Rev. Rul. 75-44, 1975-1 C.B. 15, 1975 WL 34658 (1975). The NDSU court determined that the facts in that case were most analogous to those in Revenue Ruling 58-301 because the faculty members received the pay╜ments in exchange for relinquishing their contractual and constitutionally-protected tenure rights. NDSU, 255 F.3d at 607.

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^3. ═ The Sixth Circuit has held that a revenue ruling is not entitled to the same degree of deference accorded a statute or a Treasury Regulation but that some deference is appro╜priate depending upon " 'the thoroughness evident in its consideration, the validity of its reasoning, its consistency with earlier and later pronouncements, and all those factors which give it power to persuade, if lacking power to control.' " Aeroquip-Vickers, Inc. v. Comm'r , 347 F.3d 173, 181 (6th Cir.2003) (quoting United States v. Mead Corp., 533 U.S. 218, 228, 121 S.Ct. 2164, 2172, 150 L.Ed.2d 292 (2001)) (quoting Skidmore v. Swift & Co., 323 U.S. 134, 140, 65 S.Ct. 161, 164, 89 L.Ed. 124 (1944)).

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NDSU appears to be the lone authority regarding the specific issue of whether a payment received in exchange for tenure rights constitutes wages. However, one court, finding NDSU factually indistin╜guishable with regard to the type of pay╜ment at issue, has declined to follow NDSU. See CSX Corp. v. United States, 52 Fed. Cl. 208 (2002). In CSX , the plaintiff railroads made substantial organizational changes to effectuate major reductions in force which resulted in a reduction of ap╜proximately twenty thousand railroad em╜ployees. The plaintiffs accomplished the reductions in force through several means, including permanent separations of some employees. All affected employees re╜ceived some form of payment, and employ╜ees who ended their employment received monthly or lump sum payments. The plaintiffs paid the employer's share of FICA and other employment taxes and withheld and remitted the employees' shares of those taxes and subsequently filed claims for refunds. The majority of the court's opinion in CSX was devoted to the plaintiffs' primary argument, not rele╜vant here, that the payments were "sup╜plemental unemployment compensation benefits" and therefore were not wages subject to FICA. After concluding that most of the payments did not qualify as supplemental unemployment compensation benefits, the court turned to the plaintiffs' last argument, which was that the separa╜tion payments did not constitute wages because they did not represent compensa╜tion for services. The plaintiffs argued that, among other things, the separation payments were not wages because the payments constituted a buy-out of the plain╜tiffs' contractual employment rights. The court found that the plaintiffs' arguments construed the definition of wages too nar╜rowly. Id. at 220. The court observed that the value of the benefits the plaintiffs held in their positions, including rights to vacation pay, sick pay, layoff pay, and seniority, were part of the plaintiffs' entire employment package and therefore were wages. Id. at 221. Thus, the court found that the plaintiffs' exchange of those rights for a lump sum payment "simply amount[ed] to a redemption, paid in cash, of wage amounts previously paid in kind. Because a separation payment is simply an exchange of equivalent values, what were wages at the start remain wages at the end." Id. The court declined to apply NDSU, even though it found no basis to distinguish between the tenure rights at issue in NDSU and the contract rights in the case before it-in both cases the em╜ployees surrendered "enforceable rights to future earnings in return for a present sum." Id. The court concluded that such payments must be considered wages be╜cause the rights surrendered were "part and parcel of the job protections and job benefits to which the employee may lay claim in return for his or her labor." Id.

Based upon the foregoing discus╜sion, the Court determines the issue of whether the ESP payments were wages by answering the following questions: (1) Did Plaintiffs receive the payments because of their employment relationship with the District?; and (2) Were Plaintiffs' tenure rights a benefit Plaintiffs earned through prior service to the District? The answer to the first question is yes. Even though Plaintiffs did not actually perform any ser╜vices for the District in exchange for the payments, Nierotko and Gerbec both teach that a payment may be "remuneration for employment" even where no actual services were performed. The purpose of the ESP was to provide the District a mecha╜nism for controlling its fiscal outlay for staffing by encouraging a group of teach╜ers with high seniority and at the top of the pay scale to terminate their employ╜ment relationship with the District. In exchange for the payments, Plaintiffs gave up their rights to continued employment with the District, as well as any other incidental benefits arising out of their em╜ployment relationship with the District. As in Gerbec, the payments to Plaintiffs represent at least part of the compensation Plaintiffs would have otherwise received had they continued to work for the Dis╜trict. See Greenwald v. United States, No. 98 Civ. 3439(DC), 2000 WL 16939, at *4, 2000 U.S. Dist. LEXIS 102, at *10 (S.D.N.Y. Jan. 6, 2000) (finding that a lump sum payment in exchange for the employee's relinquishment of future salary and bonus was a "substitute for future 'wages' "). Further support for this con╜clusion is found in the releases that Plain╜tiffs were required to sign in order to participate in the program. The releases covered a broad spectrum of potential claims arising out of the employment con╜text. As Plaintiffs note, there is no evi╜dence that Plaintiffs had any claims to release other than claims for payment for their tenure rights. However, the absence of other claims covered by the release does not undermine the conclusion that the pay╜ments were made to compensate for the employer-employee relationship. See Abrahamsen v. United States, 228 F.3d 1360, 1364-65 (Fed.Cir.2000). "Because the rights . . . surrendered [were] integral to the employment relationship-they are part and parcel of the job protections and job benefits to which the employee may claim in return for his or her labor-they must be considered wages." CSX Corp. , 52 Fed. Cl. at 221.

With regard to the second question, whether Plaintiffs acquired their tenure rights as a result of past service for the District, the answer is also yes. The rights Plaintiffs possessed under the Ten╜ure Act essentially boil down to the right to continued just cause employment, albeit in this case a right subject to due process protections. Plaintiffs acquired this right through performance of services for the District for the specked probationary pe╜riod. After the successful completion of the probationary period, Plaintiffs received their statutory right to continued just cause employment. The circumstances in this case are thus more akin to those in Revenue Ruling 75-44 than to those in Revenue Ruling 58-301, because Plaintiffs acquired their rights through past per╜formance of services, as in the former case, rather than at the beginning of the em╜ployment relationship, as in the latter case. "A payment arising from services ren╜dered in the past clearly constitutes 'wages.' " Greenwald, 2000 WL 16939, at *4, 2000 U.S. Dist. LEXIS 102, at *11 (citing Nierotko ). Therefore, the Court concludes that the ESP payments Plain╜tiffs received in exchange for their tenure rights were wages subject to FICA taxa╜tion.

Plaintiffs argue that tenure is much more than recognition for past services, as was the case in NDSU. Plaintiffs point out that in order to obtain tenure, a teacher must not only meet all of the requirements imposed by the State of Michigan, but must also meet any standards or require╜ments imposed by the local school board. One example Plaintiffs cite is the require╜ment that they maintain their teaching certificates, including the continuing edu╜cation requirement. Plaintiffs also con╜tend that the purposes of tenure under the Tenure Act, "to maintain an adequate and competent teaching staff, free from politi╜cal and personal interference and to protect teachers from arbitrary and capricious employment practices of school boards," Tomiak , 426 Mich. at 686-87, 397 N.W.2d at 774 (citations omitted), are almost iden╜tical to the purposes of the tenure at issue in NDSU. While all of that may be true, the fact remains that under the Tenure Act, successful completion of the proba╜tionary period, i.e., past service, is an im╜portant, if not the primary, requirement for obtaining tenure. ⁴ In fact, in contrast to the tenure requirements in NDSU, the grant of tenure in this case is complete and automatic upon a teacher's successful com╜pletion of the probation; there is no sepa╜rate application process. See M.C.L. ╖ 38.83 (providing that the controlling school board's failure to provide the proba╜tionary teacher with a written statement regarding whether the teacher's work is satisfactory "shall be considered as conclu╜sive evidence that the teacher's work is satisfactory"). Thus, regardless of what╜ever requirements may be imposed upon teachers after they receive tenure, the granting of tenure remains tied exclusively to the employee's performance of past sat╜isfactory services. The Court finds NDSU distinguishable from the instant case, and to the extent that it is not, the Court declines to follow NDSU.

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^4. ═ At oral argument Plaintiffs' counsel stressed that tenure rights are granted by the State of Michigan rather than by the individual school district. Even so, the fact remains that tenure rights are granted in significant part because of the employee's past service to the employ╜er.

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Plaintiffs also make much of the fact that their tenure rights are property rights. Yet, they fail to cite any basis for treating their payments differently from payments made for mere seniority rights not subject to due process protections with regard to the issue of FICA tax. While Plaintiffs' tenure rights had value to Plain╜tiffs, they had value only to the extent that Plaintiff continued to exercise them in the context of their employment relationship with the District. In this regard, a pur╜chase of Plaintiffs' tenure rights cannot be distinguished from the purchase of other similar rights, such as seniority rights, at least with regard to the issue of whether the payment for such rights constitutes wages.

IV. Conclusion

For the foregoing reasons, the Court concludes that the payments Plaintiffs re╜ceived in exchange for their tenure rights are wages subject to FICA taxation. Ac╜cordingly, the Court will grant the Govern╜ment's motion for summary judgment and deny Plaintiffs' motion for summary judg╜ment.

An Order consistent with this Opinion will be entered.

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