The opinion of the court was delivered by: GOURLEY
These are two consolidated civil actions in which plaintiff seeeks to recover certain sums of money paid to and seized by the Internal Revenue Service as social security taxes for twenty steel consultants working abroad in foreign steel mills but under contract with plaintiff. In one of the civil actions, the government has counterclaimed for additionally assessed taxes. This Court has jurisdiction pursuant to Title 28 U.S.C. § 1346(a)(1). A non-jury trial has been conducted, and counsel for the respective parties have filed their proposed findings of fact and conclusions of law. The Court has reviewed the entire proceedings and is of the opinion that plaintiff should prevail.
The facts of the case are these. On April 2, 1965, the Internal Revenue Service assessed a tax deficiency against plaintiff in the amount of $14,771.80 for unpaid social security taxes allegedly owing the government for the period of January 1, 1961 through December 31, 1962 as a result of the relationship between plaintiff and the aforementioned twenty steel consultants. On June 25, 1965, the Internal Revenue Service assessed a similar tax deficiency in the amount of $9,610.76 plus assessed interest of $1,229.38 for the period from January 1, 1963 through December 31, 1963. On August 12, 1966, the Internal Revenue Service assessed a further tax deficiency of $6,906.71 plus assessed interest of $890.10 for the period from January 1, 1964 through December 31, 1964.
On December 31, 1966, plaintiff paid $348.00 to the Internal Revenue Service as a first quarter social security withholding tax payment for consultant Keenan. Plaintiff then filed a claim for refund for said amount with the Internal Revenue Service, and said claim was disallowed on April 17, 1967. A suit was then filed for said amount on April 27, 1967. After the suit was filed, the Internal Revenue Service seized a bank account belonging to plaintiff and containing the sum of $8,224.46. On March 10, 1967, the Internal Revenue Service applied the amount seized to plaintiff's claimed outstanding liability for unpaid social security taxes for the period January 1, 1961 through December 31, 1962. Defendant then counterclaimed for the remaining outstanding balance of the assessment for the period January 1, 1961 through December 31, 1964. Plaintiff then filed, on April 25, 1968, a claim for refund for the amount seized. This claim was rejected on October 9, 1968. Plaintiff then filed a second suit on August 26, 1968 for the amount seized. This second suit was then consolidated with the prior suit by order of the Court.
By virtue of the arrangements made by Mr. Coletti, American steel consultants primarily assisted in the development of steel plants in Australia, India, Japan, and Sweden. In the various contracts between plaintiff and the steel consultants, there were provisions which obligated plaintiff to pay the consultants' moving expenses, expenses of transportation of technical materials, expenses of travel between the United States and foreign countries and in certain instances, plaintiff was required to provide the consultants with housing while overseas. Under the contracts, plaintiff had the right, exercised on occasion, to assign a particular consultant to a given foreign steel plant, to transfer the consultant to another plant in another country, and to terminate the contract and dismiss the consultant if the conduct of the consultant or his family was detrimental to the reputation of the plaintiff or if the consultant proved incompetent and unable to perform his duties to the satisfaction of the plaintiff or the steel plant to which he was assigned.
These consultants brought professional skills of a technical nature to the foreign steel plants. In many instances the consultants were subjected to requirements of foreign management and the governments of the foreign countries in which they served. It was acknowledged by Mr. Coletti, President of plaintiff, that many of the consultants had more professional expertise than he and that this expertise rendered the consultants quite independent of not only plaintiff but also, in given instances, the foreign managements served.
Mr. Coll, for example, a roller receiving pension from the United States Steel Company, contracted with plaintiff to assist in steel mills in Sweden and India. During the eighteen months which Mr. Coll served in the Swedish mill and the year which he served in the Indian mill, Mr. Coll exercised his own professional judgment in the exercise of his duties. He received a paid vacation upon request from the management of the Swedish mill. Mr. Coll also testified that while Mr. Coletti, acting for plaintiff, had the contractual right to terminate Mr. Coll's contract, he would not have done so as long as the services of Mr. Coll remained satisfactory to the foreign management which he served. Only on occasion did Mr. Coletti, acting for plaintiff, travel to the foreign mills and on such an occasion, Mr. Coletti did not supervise Mr. Coll. Mr. Coletti handled financial arrangements for Mr. Coll to the extent of placing a certain amount of Mr. Coll's salary in a bank in the United States and a certain amount in a bank in the particular foreign country in which Mr. Coll was working.
This tripartite arrangement between Mr. Coletti, acting for plaintiff, steel consultant Coll and the given foreign company for which Mr. Coll worked at a given time, was exemplary of the arrangements between plaintiff, the other steel consultants, and the foreign companies for which the consultants worked.
In this civil suit for refund of social security taxes paid to and seized by the Government, plaintiff asserts that Mr. Coll and the nineteen other steel consultants having a similar relationship with plaintiff were not "employees" within the meaning of Title 42 U.S.C. § 410 but rather were independent contractors for whom plaintiff had no obligation to pay social security taxes. Section 410, a definitional provision, states in relevant part:
(e) The term 'American employer' means an employer which is * * * (6) a corporation organized under the laws of the United States of or any State."
Counsel for neither party have contended that the steel consultants fall within particular statutory classifications of "employees" and, accordingly, common law principles must be applied to determine whether employer-employee or independent contractor relationships existed. Instructive in this regard is 20 C.F.R. § 404.1004(c) which provides as follows:
"(c) Common-law employees. (1) Every individual is an employee if under the usual common-law rules the relationship between him and the person for whom he performs services is ...