The opinion of the court was delivered by: Conti, District Judge.
ORDER RE MOTIONS FOR SUMMARY JUDGMENT
In the above-captioned case, Plaintiff San Francisco Baseball
Associates L.P. (the "Giants") brings an action against Defendant
United States of America (the "Government") for the refund of
employment taxes paid by the Giants in the 1995 calendar year.
The dispute arises out of payments made to seven former Giants
baseball players from a $280 million settlement of three
grievances filed by the Major League Baseball Players'
Association (the "Players' Association") against 26 Major League
Baseball Clubs (the "Clubs") for the violation of a collective
bargaining agreement. The Giants contend that these payments are
damages rather than wages, and thus are not subject to taxation
pursuant to the Federal Insurance Contribution Act ("FICA") and
the Federal Unemployment Tax Act ("FUTA"). The Giants also
contend that, even if the payments are wages, they should be
allocated to the 1986 and 1987 calendar years to which the
payments relate rather than to the 1995 calendar year during
which the payments were actually made. Now before the Court are
both parties' motions for summary judgment.
The Giants, along with 25 other Clubs, entered into a
collective bargaining agreement with the Players' Association
called the Basic Agreement, which became effective on January 1,
1980. The Basic Agreement deals with the terms and conditions of
the players' employment with the Clubs, such as minimum salaries,
benefits, and discipline. In addition, each player uses the
Uniform Player's Contract ("UPC"), attached to the Basic
Agreement as Schedule A, as the basis of his individually
negotiated employment contract.
In 1986, 1987, and 1988, the Players' Association filed three
separate grievances against the Clubs, charging that the Clubs
had violated the Basic Agreement by acting in concert to
interfere with the rights of "free agents" to bargain freely with
the Clubs. In each case, the Major League Arbitration Panel*fn1
(the "Panel") held that
the Clubs had violated Article XVIII(H) of the Basic Agreement,
which prohibits collusion in the market for free agents.
Specifically, the Panel found that following the 1985 and 1986
seasons, the Clubs had agreed not to bid for free agents whose
present Club wanted to retain their services, and that following
the 1987 season, the Clubs shared information regarding bids in
order to restrain the market for players.
In subsequent proceedings, the Panel determined that the
aggregate salary shortfall, which measures the additional
compensation the players would have received if the Clubs had not
colluded, was $10,528,086.71 for 1986, $38,000,000 for 1987, and
$64,500,000 for 1988. In an informal draft decision, the Panel
substantially agreed with the Clubs that the players could not
recover for any alleged non-salary related injuries. After the
Players' Association objected to the draft decision, the Panel
agreed to further consider the matter, but no final decision ever
The parties settled before the Panel considered the salary
shortfalls for the years subsequent to 1988, and before the Panel
released a final decision relating to the players' non-salary
related claims. Under the Settlement Agreement, dated December
21, 1990, the Clubs agreed to pay a total of $280 million to the
players, constituting $243,202,104 in settlement of all claims
and $36,797,896 in pre-settlement interest. The Settlement
Agreement did not allocate the settlement funds to any of the
specific claims or years beyond the separation of damages and
interest. Instead, it allowed the Players' Association to
determine how to allocate the settlement fund among the players,
but required all proposed distributions to be approved by the
Each Club agreed to pay 1/26th of the total settlement amount.
The Settlement Agreement provided that until the entire
settlement fund was distributed, each Club's share of the
settlement fund would be tracked by a separate "Club Subaccount,"
initially increased by the Club's payments into the overall
Settlement Account and then reduced by a proportionate share of
any distribution to the players. The Settlement Agreement also
provided that each Club's creditors could attach its subaccount
but not that of any other Club, and that each Club would be
responsible for the payment of taxes on investment earnings
attributed to its subaccount.
The Players' Association advanced a Proposed Framework for the
Evaluation of Individual Claims (the "Framework"), which was
substantially approved by the Panel on September 11, 1991. The
Framework permits players to submit a variety of claims,
including, inter alia, what it calls "salary related" claims
for lost salary, lost bonuses, and lost multi-year contracts as
well as what it calls "non-salary related" claims for lost jobs,
loss of mobility, and loss of security. While the Framework does
not allocate any specific dollar amount for the non-salary
related injury claims (other than for lost jobs), it does note
that the Players' Association's best judgment was that there was
"only a very minimal chance of prevailing" on such claims, and
that the Players' Association "does not believe there will be
many potentially valid claims of this type."
The Players' Association proposed three distribution plans
relating to the salary shortfall claims submitted by the players
for the years 1986 and 1987. The Panel substantially approved
these plans, which resulted in the distribution of $45,970,701 to
the players. The Players' "non-salary related" claims were dealt
with in Partial Distribution Plan IV (the "Distribution Plan"),
proposed by the Players' Association on January 7, 1994 and
approved by the Panel on January 10, 1995. The Distribution Plan
covered the players' claims submitted for the years 1986 and 1987
relating to lost jobs, loss of mobility, emotional distress,
other non-salary related damages, and lost major league service.
The Distribution Plan recommended a total payment of $7,208,355,
including $1,890,000 for loss of mobility claims.*fn2
The payments arising out of these loss of mobility claims are
the subject of the present action. Players submitted loss of
mobility claims to receive compensation for their inability to
work in the city of their choice or for the manager they
preferred. The Panel approved the Players' Association's proposal
to pay all those receiving loss of mobility payments a flat
Pursuant to the Distribution Plan, seven former Giants baseball
players were paid a total of $90,000, excluding interest, in
compensation for their loss of mobility. Specifically, three
players received $10,000 each for 1986, and six received $10,000
each for 1987. The Giants paid $6,885 in FICA taxes and $336 in
FUTA taxes on these payments in 1995. The Giants then filed a
claim for a refund with the Internal Revenue Service ("IRS"),
which the IRS denied on March 5, 1997. The present action for a
refund of the employment taxes followed.
Both parties now move for summary judgment.
Summary judgment is proper only when there is no genuine issue
of material fact and, when viewing the evidence in the light most
favorable to the nonmoving party, the movant is clearly entitled
to prevail as a matter of law. See Fed.R.Civ.P. 56(c); Cleary
v. News Corp., 30 F.3d 1255, 1259 (9th Cir. 1994). Once a
summary judgment motion is made and properly supported, the
nonmoving party may not rest on the mere allegations of its
pleadings, but must set forth specific facts showing that there
is a genuine issue for trial. See Fed R. Civ. P. 56(e);
Celotex Corp. v. Myrtle Nell Catrett, 477 U.S. 317, 106 S.Ct.
2548, 91 L.Ed.2d 265 (1986). In addition, to withstand a proper
motion for summary judgment, the nonmoving party must show that
there are "genuine factual issues that ...