United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued May 12, 1998 Decided June 9, 1998
No. 97-1610
Stuart M. Reed,
Petitioner
v.
Railroad Retirement Board,
Respondent
On Petition for Review of an Order of the
United States Railroad Retirement Board
Jacqueline R. Scott argued the cause and filed the briefs
for petitioner.
Arthur A. Arfa, General Attorney, Railroad Retirement
Board, argued the cause for respondent, with whom Cather-
ine C. Cook, General Counsel, and Steven A. Bartholow,
Deputy General Counsel, were on the brief.
Before: Wald, Tatel and Garland, Circuit Judges.
Opinion for the court filed Per Curiam.
Per Curiam: Former Conrail President Stuart M. Reed
petitions for review of a decision by the Railroad Retirement
Board declaring him ineligible for railroad retirement bene-
fits. We deny the petition because substantial evidence sup-
ports the Board's determination that Reed terminated his
employment with Conrail more than a year short of the ten
years necessary to qualify for such benefits.
Under section 2(a)(1) of the Railroad Retirement Act, an
individual must have "ten years of service" to be eligible for
retirement benefits. 45 U.S.C. s 231a(a)(1). Section 3(i)(4)
of the Act provides that "an individual shall not be deemed
... to have rendered service for compensation in any month
in which such individual was [not] in an employment relation
to one or more [covered] employers...." 45 U.S.C.
s 231b(i)(4). And section 204.5 of the Board's regulations
provides that "an employment relation ... ceases after an
individual has resigned or relinquished his or her rights to
return to the service of [the] employer." 20 C.F.R s 204.5.
On December 30, 1987, Reed entered into an agreement
under which he resigned effective the next day as President,
Chief Operating Officer, and Director of Conrail. Pursuant
to the agreement, Conrail agreed to pay Reed $1.2 million in
exchange for a general release of Reed's claims against the
railroad, and also agreed that Reed would participate in
Conrail's Management Incentive Compensation Plan "for the
calendar year 1987, ... with the amount and timing of any
bonus to be received by Mr. Reed thereunder to be deter-
mined in accordance with the terms of that Plan." Conrail
paid Reed $1,288,763 in 1988 and $75,115 in 1989. The
payments were administered through Conrail's payroll sys-
tem, and Conrail sent Reed IRS Form W-2 wage and tax
statements for those years.
The Board held that the December 1987 agreement termi-
nated Reed's employment relationship with Conrail, and that
the subsequent payments were the separation allowances
contemplated by the agreement. Reed contends that al-
though he resigned as President, Chief Operating Officer, and
Director, he remained an "employee"; that the payments
were for "holding himself available" to advise Conrail in 1988
and 1989; and that those years should therefore be counted
toward the ten-year requirement.
This is Mr. Reed's second trip to this court. We granted
his previous petition for review and remanded to the Board to
explain how its conclusion that Reed had terminated his
employment in December 1987 was consistent with the fact
that the payments he received over the next two years were
distributed through Conrail's payroll system. See Reed v.
Railroad Retirement Bd., No. 96-1117 (D.C. Cir. Jan. 27,
1997). Remand was required because the Board had failed to
address the Railroad Retirement Act's presumption that a
"payment made by an employer to an individual through the
employer's payroll shall be presumed, in the absence of
evidence to the contrary, to be compensation for service
rendered by such individual as an employee of the employer
in the period with respect to which the payment is made," 45
U.S.C. s 231(h)(1) (emphasis added). We also ordered the
Board to explain how Reed's case differed from that of
Illinois Central Gulf, Railroad Retirement Board, Legal Op.
89-80 (June 22, 1989), in which the Board credited as employ-
ment service the period during which individuals received
"dismissal" payments.
On remand, the Board explained that the statutory pre-
sumption had been rebutted by "evidence to the contrary"--
namely, the 1987 agreement under which, according to the
Board's interpretation, Reed resigned before he received the
payments in question. Illinois Central Gulf was different,
the Board said, because in that case the employees agreed to
resign at the end of the period during which their dismissal
payments were to be made. We find these explanations
adequate to satisfy the requirement of reasoned decisionmak-
ing.
We review decisions of the Board for substantial evidence
in the record and for errors of law. See Andrews v. Railroad
Retirement Bd., 595 F.2d 676, 681 & n.59 (D.C. Cir. 1978); 45
U.S.C. s 231g; 45 U.S.C. s 355(f). Moreover, we apply a
Chevron 1 analysis when reviewing an agency's interpretation
of a contract. See National Fuel Gas Supply Corp. v. FERC,
811 F.2d 1563, 1569 (D.C. Cir. 1987). Thus, if the intent of
the parties is clearly expressed in the document, that intent
must prevail. See id. at 1572. If the contractual language is
ambiguous, however, we will defer to an agency's reasonable
interpretation. See id.
Under these deferential standards, we uphold the Board's
conclusion that Reed had no employment relationship with
Conrail after December 1987. The agreement stated that
Reed was "an employee, officer and director of Conrail" and
that he wished "to resign all such positions with Conrail."
The specific resignation clause provided that "[e]ffective at
the close of business on December 31, 1987," Reed "resigns
from employment as President and Chief Operating Officer of
Conrail and as a member of Conrail's Board of Directors."
Although the resignation clause did not repeat that Reed also
was resigning as an "employee," there is nothing to suggest
that Reed's prior status as an "employee" was based on
anything other than his positions as officer and director. To
the contrary, a subsequent paragraph of the agreement noted
that Reed "was asked to and agreed to resign from his
positions with Conrail" (emphasis added). Nor is there
anything in the agreement to suggest that Reed would re-
ceive any new position, "hold himself available" to advise
Conrail, or otherwise perform any future services. The ab-
sence of such indications is particularly significant given the
agreement's integration clause, which stated that "[t]his
agreement and Exhibit A attached hereto [the general re-
lease] contain the entire agreement between the parties here-
to and supersede any and all prior or contemporaneous
agreements between the parties."
Other sections of the agreement to which Reed points do
not counsel a different interpretation. Although the agree-
__________
1 See Chevron U.S.A. Inc. v. Natural Resources Defense Coun-
cil, Inc., 467 U.S. 837 (1984).
ment did provide that Reed's life insurance and medical
benefits would be made available to him "as if his employ-
ment were continuous from February 10, 1979 through July
31, 1990" (emphasis added), the subjunctive mood of the
emphasized language indicates the signers' understanding
that Reed's employment would not actually be continuous for
that period. And while the agreement also included a "non-
competition" clause barring Reed from employment with one
of Conrail's competitors through July 1990, that hardly evi-
dences an understanding that Reed would be employed with
Conrail during that time. Employers commonly use such
clauses in an effort to restrict their employees' post-
employment activities. See, e.g., Smith, Bucklin & Assocs.,
Inc. v. Sonntag, 83 F.3d 476, 478 (D.C. Cir. 1996); Group
Ass'n Plans, Inc. v. Colquhoun, 466 F.2d 469, 470 (D.C. Cir.
1972). In sum, even were we to view the agreement's lan-
guage as ambiguous, we would uphold the agency's interpre-
tation not only as a reasonable reading, but as the most
reasonable reading of the contract.
The extrinsic evidence of subsequent conduct offered by
Reed is not at variance with this reasonable interpretation of
the contract's language. The fact that Conrail reported its
1988 and 1989 payments to Reed on W-2 forms for those
years is not necessarily inconsistent with the view that he
resigned on December 31, 1987. Indeed, the best explanation
for the payments is that they constituted the payout of the
$1.2 million, which the agreement made clear was "in ex-
change for the General Release" entered into in December
1987, plus the promised bonus for work performed during
1987. Conrail may well have believed that since those pay-
ments were attributable to a year in which Reed was an
employee, they should be reported on W-2 forms in the year
in which they were paid, even though by that time Reed was
no longer employed.2
__________
2 See 26 C.F.R. s 31.3401(a)-(1)(a)(5) (IRS regulation providing
that "[r]emuneration for services ... constitutes wages even though
at the time paid the relationship of employer and employee no
longer exists"). Moreover, although Reed correctly points out that
the current Instructions for Form W-2 indicate that it is to be used
by employers "to report their employees' wages," 1997 Instructions
for Form W-2, at 4, Conrail may have believed that both the
While counsel for Reed does not dispute that the amount
over $1.2 million represented bonus payments, she contends
that it represented bonuses for work Reed performed in 1988
and 1989. Yet, there is no mention in the agreement of any
contemplated bonuses other than those attributable to "calen-
dar year 1987," and no mention of other amounts to be paid
Reed for any other services. There also are no time or
attendance records, or any other documentation to support a
claim that Reed performed work in 1988 or 1989, or that he
was paid for work performed in those years. Even counsel's
own submission to the Board referred to the payments mere-
ly as bonuses "which ... could not be paid until 1989"--
without indicating the work year with which they were associ-
ated. Counsel's "could not be paid until 1989" characteriza-
tion is consistent with the agreement's declaration that "the
amount and timing" of the 1987 bonus were left for future
determination.
Finally, we reject Reed's contention that the Board abused
its discretion in reopening his case after a favorable decision
by a hearings officer. The applicable Board Order permits
the Board to reopen a decision without time limit when the
underlying certification of eligibility for benefits is erroneous.
See Railroad Retirement Board Order 75-5, s 17 (Apr. 12,
1988); see also 20 C.F.R. s 260.9(g) ("The Board may, on its
own motion, review ... any decision issued by a subordinate
official or employee...."). Reed's argument that the Board
had discretion not to reopen his case fails to establish that the
Board abused its discretion by taking the other path.
The petition for review is denied.
__________
release payment and the bonus payments constituted wages for tax
reporting purposes. See 26 C.F.R. s 31.3401 (a)-(1)(b)(4) ("Any
payments made by an employer to an employee on account of
dismissal, that is, involuntary separation from the service of the
employer, constitutes wages...."); id. s 31.3401(a)-(1)(a)(2) ("bo-
nuses ... are wages within the meaning of the statute"). In
concluding that the reporting of these items on W-2 forms is not
necessarily inconsistent with the Board's interpretation of the con-
tract, we need not determine whether Conrail's treatment was
correct under the Internal Revenue Code or IRS regulations.