Employment Development Department v. United States Postal Service, Franchise Tax Board v. United States Postal Service

698 F.2d 1029 EMPLOYMENT DEVELOPMENT DEPARTMENT, Plaintiff-Appellant, v. UNITED STATES POSTAL SERVICE, Defendant-Appellee. FRANCHISE TAX BOARD, Plaintiff-Appellant, v. UNITED STATES POSTAL SERVICE, Defendant-Appellee. Nos. 80-5694, 80-5700. United States Court of Appeals, Ninth Circuit. Argued and Submitted Dec. 8, 1981. Decided Feb. 10, 1983. Jeffrey M. Vesely, Los Angeles, Cal., for Employment Development Dept. and Franchise Tax Bd. David Epstein, Dept. of Justice, Washington, D.C., for U.S. Postal Service. Appeal from the United States District Court for the Central District of California. Before SCHROEDER and REINHARDT, Circuit Judges, and THOMPSON, * District Judge. PER CURIAM: 1 At issue is whether California state agencies may use California summary tax collection procedures to reach funds in the hands of the United States Postal Service. The district court consolidated these two cases involving similar facts and legal questions but different statutes, and granted summary judgment for the Postal Service. In both cases, California state taxing authorities sought to utilize administrative collection procedures resembling garnishment in order to collect sums owed by the Postal…

dissenting in part:

I concur in the court’s opinion in No. 80-5694 holding that the California Employment Development Department may recover funds which the U.S. Postal Service owes to mail transportation contractors who are delinquent in paying state unemployment taxes.

I dissent from the decision in No. 80-5700 which holds that the California Franchise Tax Board may not use similar procedures to recover funds which the Service owes to employees who are delinquent in paying state income taxes. The majority reaches that determination because it interprets 5 U.S.C. § 5517 to prohibit use of such procedures. I cannot agree.

Section 5517 authorizes federal agencies to withhold state income taxes from their employees’ salaries. By its own terms, it is a limited waiver of sovereign immunity. It therefore provides in part that

The language is merely a description of the limited congressional consent given in that provision. It does not purport to limit congressional power to waive immunity in other statutes.

In the Postal Reorganization Act, Congress did waive Postal Service immunity, without any qualification regarding state tax procedures, by providing that the Service can “sue…

At issue is whether California state agencies may use California summary tax collection procedures to reach funds in the hands of the United States Postal Service. The district court consolidated these two cases involving similar facts and legal questions but different statutes, and granted summary judgment for the Postal Service. In both cases, California state taxing authorities sought to utilize administrative collection procedures resembling garnishment in order to collect sums owed by the Postal Service to delinquent taxpayers.

Plaintiff in the first case is the Employment Development Department, seeking to recover unemployment insurance taxes owed to the state by contractors who have done work for the Postal Service. Plaintiff in the second case is the Franchise Tax Board, seeking to collect personal income taxes owed by Postal Service employees. Because the applicable statutes and resulting analysis differ, we discuss each case separately.

I. The Employment Development Department

In February 1978, the Employment Development Department (the Department) issued two “notices of levy” pursuant to § 1755 1 ***of the California Unemployment Insurance Code, notifying the Postal…