NATIONAL LAW UNIVERSITY ODISHA, CUTTACK

INTERPRETATION OF STATUTES

(SEMESTER VI)

“THE USE OF EXTERNAL AIDS IN US CORPORATE LAW”

SUBMITTED TO:
DR. ABHIK MAJUMDAR
(Assistant Professor of Law)

SUBMITTED BY:

ANKUR SHARMA KALYANI

SHARMA
(2019/BA.LLB/026)
(2019/BA.LLB/056)
 ACKNOWLEGEMENT

“In performing our assignment, we had to take the help and guideline of some respected persons,
who deserve our greatest gratitude. The completion of this assignment gives us much pleasure.
We would like to show our gratitude to Abhik Sir for giving us an interactive and a comfortable
environment to think critically and be ourselves.

We would also like to expand our deepest gratitude to all those who have directly and indirectly
guided us in writing this assignment. Many people, especially our classmates, have made
valuable comment suggestions on this proposal which gave us an inspiration to improve our
assignment. We thank all the people for their help directly and indirectly to complete our
assignment.”

ANKUR SHARMA
KALYANI SHARMA
 TABLE OF CONTENT

ACKNOWLEGEMENT..............................................................................................................2
TABLE OF CONTENT...................................................................................................................3
INTRODUCTION.......................................................................................................................4
Burke v. Independence Blue Cross..............................................................................................5
State Department of Natural Resources v. Public Utility District No. 1 of Klickitat County.....6
New Prime Inc. v. Oliveira..........................................................................................................7
Diamond Multimedia Systems Inc. V Superior Court.................................................................8
Jaworski v. Master Hand Contractors., Inc.,................................................................................9
Conclusion.................................................................................................................................11
BIBLIOGRAPHY......................................................................................................................12
 INTRODUCTION
The shift from an uncodified and oral law to a codified and written law was primarily because of
the reason to curb and eliminate the vagueness and confusion which the earlier method offered.
In today’s world, almost all the robust and sophisticated legal systems have, completely or
partially, codified structure of laws and statutes. Although this has been a successful endeavour
and has led to a clearer legal structure, it cannot be denied that it has caused its own set of unique
problems and that too without resolving the issue of vagueness and unpredictability as was
caused in the earlier system.

Statutes, though sought to codify and minimise the vagueness in the intent of law, sometimes
end up creating the vagueness and confusion regarding the meaning and intent of the law. This
issue is resolved by the help to various internal and external tools available at the dispensation of
the courts which help them interpret the legislation and apply the law as per originally intended
by the legislature. Generally, statutes in itself offer enough aids within itself which help in
interpreting the main provision of the law. But sometimes these internal aids are not sufficient in
helping the courts interpret the law to its fullest extent. In such situations the courts, upon its
discretion, seek aid from the extrinsic sources which may help in better interpreting the letter of
law. These external sources can include authoritative text books and dictionaries, statements of
objects and reasons, legislative debates and speeches, committee reports, foreign laws and
judgements, etc. These aids, usually, only have a persuasive value in the courts of law and can be
applied only as per the discretion of the courts.

This project aims to discuss the use of external aids in the US Corporate law in the light of
various recent and landmark cases from the jurisdiction of the U.S.A. These case laws help to
analyse the rationale of the courts behind the interpretation of statues and application of external
tools in resolving any possible lacunae which might be present in the legislation.
 Burke v. Independence Blue Cross1
In the present case, a six – year old autistic boy was receiving an autism – related medical
service, known as ABA, at his home. This treatment was covered under the family’s insurance
policy of the boy. The insurer here is the respondent, that is, the Independence Blue Cross. The
family of the boy urged the insurer company to cover the ABA treatment services which were to
be provided at the child’s elementary school. This request of the appellants was denied on the
basis of “place-of-service exclusion policy” which excluded the services to be covered if there
were provided at specific kinds of places such as schools.

The dispute was filed before an independent external review agency which was appointed by the
Pennsylvania Department of Insurance. The agency allowed for the denial of services based on
the “place-of-service exclusion” policy. Act 62 passed by the General Assembly in 2008
provided that “A health insurance policy covered under section 764h (a) shall provide to covered
individuals or recipients under twenty-one years of age coverage for the treatment of autism
spectrum disorders.” This provision was applied on the present case and therefore the appellant
filed a fresh complaint in the Court of Common Pleas challenging the validity of “place-of-
service exclusion policy” under Act 62. The said court gave its decision in the light of Section
764h (c) of the Act which provided of the general exclusions which were allowed under the Act.
The court held the “place-of-service exclusion” did not come under the purview of general
exclusion as contemplated under Section 764h (c). Hence, the court directed the insurance
company (insurer) to cover the school-based ABA treatment services for the appropriate period
of time. The respondent appealed against this decision in the Appellate Court which reversed the
order of the Superior Court and sent the matter to the tribunal for consideration on the merits.

There were several doctrines that were discussed and argued in this case by both the appellant
and the respondent. The respondent primarily based its case upon the doctrines of mootness,
standing, and ripeness to argue the justiciability of the case. As per the doctrine of mootness, the
respondent contended that the matter was moot by the time the Court of Common Pleas gave its
decision since the “period of coverage”, had by then expired. Regarding ripeness doctrine, the
decision given by the agency in the first instance applied to the insurance policy before the Act
62 came into play.

1
2017 Pa. LEXIS 2338.
 State Department of Natural Resources v. Public Utility District No. 1 of
Klickitat County2
In the present case, the cause of action arose when 2100 acres of forest area caught fire near
Washington after a tree fell on the power line controlled and owned by the Public Utility District
No. 1 of Klicktat County (PUD). A loss of over 1.6 million USD was suffered by the
Department of Natural Resources in the process of supressing the fire. On the basis of the
investigation carried out by the Natural Resources Department, it was concluded that the fire
occurred because of the negligence on the part of PUD as the tree was a potential hazard to the
power lines and still it failed to remove it. The main contention that was addressed in this case
was whether a municipal corporation like Public Utility District (PUD) is a person or a
corporation within the ambit of the fire cost recovery law.

The Department of Natural Resources filed a suit against the PUD to recover the loss incurred by
it in supressing the fire. According to the Forest Protection Act (hereinafter referred to as “Act”),
“the State has the right to recover the costs of suppressing fires negligently started by any
person, firm, or corporation”. The PUD sought to dismiss the suit claiming that PUD does not
come under the purview of “person, firm, or corporation” as is required under the Forest
Protection Act. The court dismissed this argument made by PUD and said that PUD is in fact a
“person” and a “corporation” as per the meaning suggested in the Act and therefore is liable to
be subjected to a civil suit to recover fire suppression costs incurred by the Department.

The court while examining this case reiterated that the fundamental objective of the court in
interpreting a statute is to determine and realise the intent of the legislature. If the meaning
derived from the statute is prime facie plain and lucid, then the court is obliged to carry out the
intent of the legislature and give such provision the plain and simple meaning as envisaged. The
use of canons of constructions arises in the case where there is ambiguity in the provision of the
law. The meaning of the statute is not solely limited to be interpretated by the text of the
concerned statute but is ascertained from “all that the Legislature has said in the related statutes
which disclose legislative intent about the provision in question.”3

2
2015 Wash. App. LEXIS 965.
3
State v. Costich, 98 P.3d 795 (2004).
 New Prime Inc. v. Oliveira4
In the present case, the petitioner, Dominic Oliveira finished an internship program in an
interstate trucking company, New Prime. Subsequently, Oliveira was suggested by the
representatives of Prime to establish a limited liability company and work an “independent
contractor” for the New Prime. Oliveira signed a contract regarding this arrangement with Prime.
Thereafter, he alleged that Prime encroached his status of independent contractor by exercising
excessive control over his work. Oliveira repudiated his earlier contract with Prime and started
working as an employee in the same firm where his job portfolio was considerably similar to his
responsibilities as the independent contractor.

Oliveira filed a class-action suit against Prime for Fair Labour Standards Act (FLSA) violations.
On this, Prime moved to the court to compel arbitration under Federal Arbitration Act (FAA).
This motion was challenged by Oliveira on the ground that his contract with Prime is exempted
under Section 1 of the FAA and it is for the court to determine the applicability of such
exemption. The district court affirmed this stance and concluded that “contracts of employment
of transportation workers” does not apply on independent contractors. Now the question for the
court to decide was regarding the status of the relationship between Oliveira and Prime to
determine whether their contract was of contract of employment for the purposes of Section 1 of
FAA. Applicability of FAA was the fundamental question to be determined by the court in this
case as it had been held by the Appellate court that Section 1 of FAA does not apply on the
contracts that seek to create an independent – contractor relationship.

The Roberts Court, while examining the language and construction of FAA, held that the courts
may compel arbitration only in the agreements concerning maritime or commerce transactions.
As far as the term “contract of employment” is concerned, the court took the view that it is not
the term that is narrowly limited to only the contracts that create employer – employee
relationship rather it has to be given the broad construction, keeping in mind the evolution of
commerce and economy in the contemporary times, and hence includes all kinds of “work
agreements”. Therefore, the court concluded that the “contract of employment” between Oliveira
and Prime falls in the ambit of the exception of Section 1 of FAA.

4
2019 U.S. LEXIS 724.
 Diamond Multimedia Systems Inc. V Superior Court5

The facts of the case are such that the petitioner in the case that is the corporation had made press
releases and public announcements which were untrue and were deemed as stock induction , in
which there was artificial inflation of the stock prices turning profits for insider officers and
directors of the company , the same is unlawful under section 25400 of California Corporation
Code it was argued by the petitioner that out of state purchasers are not entitled to recovery or
sue the company since the legislative history of the Corp Code is to protect the interest of the
California based investors and the code Diamond Multimedia contends that "in this state" also
defines the location at which a purchase or sale affected by the market manipulation takes place.
It argues that it was the legislative intent to regulate and assert jurisdiction only over the offer
and sale of securities in California and that the Corporate Securities Law regulates only intrastate
securities transactions. Based on this reasoning Diamond Multimedia finally argues that the law
imposes civil liability only for violations affecting intrastate transactions. Therefore, it claims, it
is not enough that the seller is located in California. The purchaser must also be in California.
The defendants argued to look into the legislative history of the code not just in the context
which it was enacted but also with the intention, comments made by the committee appointed by
then Commissioner of Corporations Harold R. Volk, which drafted the law when the law was
submitted to the Legislature, and by Commissioner Volk and Professor Harold Marsh, Jr., the
reporter of that committee, in their treatise, Practice Under the California Corporate Securities
Law of 1968 (1969). The court declined to take this into consideration and gave the reasoning
that in a case where more than one legible construction exists to interpret the statue extrinsic aids
can come into play although the Court dismissed the petitioner’s argument but discarded
defendants’ invitation to use external tools such as legislative history to ascertain meaning of the
code.6

5
1999 Cal. LEXIS 1
6
1995 Cal. LEXIS 707
 Jaworski v. Master Hand Contractors., Inc.,

In this case the plaintiffs are employees misclassified under Employee Classification Act (ECA)
by the defendants referred to as Master Hand, the time period between 2004 to 2006 the
plaintiffs worked doing various construction work for the defendants were master hand did not
pay the plaintiff adequately , did not pay them time and a half for every hour they worked in
excess of forty hours also they were not given the full amount that was agreed upon beforehand
for the work performed during the relevant time period by failing to pay minimum and overtime
wages, defendants violated the Fair Labor Standards Act (the "FLSA") and the Illinois Minimum
Wage Law (the "IMWL"). The plaintiffs also claim that the defendants violated the Illinois
Prevailing Wage Act (the "IPWA") by failing to pay the general prevailing rate for work on
public works projects, the Illinois Wage Payment and Collection Act (the "IWPCA") by failing
to pay earned wages, and the Employee Classification Act (the "ECA") by improperly
classifying the plaintiffs as employees. Furthermore, the plaintiffs claim that the defendants
violated the FLSA and ECA retaliation prohibitions. The plaintiffs seeks relief for the damaged
caused to them by master hand under two different grounds : (1) the ECA's plain language
encompasses the substantive rights of the IMWL and IWPCA by reference; or (2) the ECA's
language is open to interpretation, but the legislative intent was to allow construction workers to
obtain those substantive rights without having to separately establish that they are "employees"
under  the IMWL and IWPCA. The Court approves the plaintiffs' application on the second
ground for the reasons described below. The plaintiffs argues that Section 60(a)(1) allows them
to recover back wages owed under the IMWL and IWPCA. They argue that the plain text of the
ECA incorporates by reference the substantive rights of the IMWL and IWPCA, or that the
wording of the ECA is vague and their interpretation [*7] is compatible with legislative purpose.
In response, Master Hand claims that the plain language of the ECA does not incorporate by
reference the substantive rights of the IMWL and IWPCA and that the legislature did not intend
to create "a two-tier system in which construction workers would be covered by all Illinois
labour statutes" without having to meet the same coverage requirements as workers in other
industries. No court has construed Section 60(a)(1) on its own or in conjunction with other
Illinois employment regulations such as the IMWL or IWPCA. This Court must predict how the
Illinois Supreme Court will rule on the subject. Old National Bancorp v. Pisciotta,. 7 The Illinois
Supreme Court has stated its approach to statute interpretation as follows:
“The fundamental rule of statutory construction is to ascertain and give effect to the legislature's
intent. The best indication of legislative intent is the statutory language, given its plain and
ordinary meaning. Where the language is clear and unambiguous, we must apply the statute
without resort to further aids of statutory construction. If the statutory language is ambiguous,
however, we may look   to other sources to ascertain the legislature's intent. A court will give
substantial weight and deference to an interpretation of an ambiguous statute by the agency
charged with administering and enforcing that statute. . . A statute is ambiguous if it is capable of
being understood by reasonably well-informed persons in two or more different ways.”
7
2007 U.S. App. LEXIS 20068
In interpreting the meaning of the plain language of a state the Supreme Court of Illinois has
been considerate of the construction that the statutory text and the subject it addresses and the
intention of the legislature to enact it “People v. Perry8. In addition to administrative agency
interpretations, the Supreme Court of Illinois also utilizes legislative history as an extrinsic aid
for ascertaining legislative intent. People v. Eppinger”9
The Court quickly dismiss the plain language argument, while that being said the lack of any
provisions for payment of wages to workers in the ECA and that Section 60(a)(1) of ECA
doesn’t incorporate the IMWL and IWPCA the court finds the language ambiguous. When read
in its entirety, the ECA's apparent intent is to address construction worker misclassification
through a variety of enforcement mechanisms, including allowing misclassified workers to seek
lost "wages, salary, employment benefits, or other compensation" through a private right of
action. Although ECA never mentions about compensations and doesn’t mention other statues i.e
IMWL and IWPCA which allow the mechanism to provide such relief. In light of these
observations the Court had to turn to other sources to determine the legislative intent behind
Section 60(a)(1).
The Court held that there is no rationale behind classifying the workers as employees and there
being no mechanism for them to avail benefits such a employment benefit , minimum wages, etc.
Hence it is necessary that ECA is In Pari Materia with other statutes governing employee wages
"[I]n pari materia statutes should be construed so as to give effect to all statutory provisions in
order that no portions of the statutes are rendered inoperative, superfluous, or ineffective."10
Further, the interpretation of the ECA by the Illinois Department of Labor ("IDOL") supports the
plaintiffs' view that Section 60(a)(1) entitles them to the back wages provided for by the IMWL
and IWPCA. IDOL regulations state that the ECA "addresses the practice in the construction
industry of some contractors misclassifying individuals as independent contractors in order to
avoid payroll taxes, unemployment insurance contributions, workers' compensation premiums
and minimum wage and overtime payments. The court held that IDOL’s interpretations are
consistent and substantive with the legislative history of the ECA.11
In light of these interpretations the Court granted the plaintiffs are entitled to their due payments
and all benefits under Section 60(a)(1) of the ECA.

8
2007 Ill. LEXIS 435
9
2013 Ill. LEXIS 270
10
1984 Ill. App. LEXIS 1703
11
See, e.g., 95th Ill. Gen. Assem., House Proceedings, April 19, 2007, at 106 (statement of
Representative Osterman)
 Conclusion
The above-mentioned cases as discussed and summarized show a very positive trend in use of

external aids in the US law. Through these cases it was evident that legislative history is used in

a very precise and efficient manner in the Courts. The use of extrinsic aids makes the

interpretation of statues relevant and sometimes mechanizes the intention of a statue in case there

is ambiguity in certain sections of law. Although this has been a successful endeavour and has

led to a clearer legal structure, it cannot be denied that it has caused its own set of unique

problems and that too without resolving the issue of vagueness and unpredictability as was

caused in the earlier system. In few of the cases we can also see courts refusing to use extrinsic

aid and provide with other tools of interpretation maintaining a fine balance.