Taisei Fire & Marine Ins. Co. v. Commissioner

*536 TANNENWALD, Judge: Respondent determined the following deficiencies in, and additions to, the Federal income taxes of the Taisei Fire & Marine Insurance Co., Ltd. (Taisei), the Nissan Fire & Marine Insurance Co., Ltd. (Nissan), the Fuji Fire & Marine Insurance Co., Ltd. (Fuji), and the Chiyoda Fire & Marine Insurance Co., Ltd. (Chiyoda):

*28 The principal issue in these consolidated cases is whether, during the years at issue, petitioners had a U.S. permanent establishment by virtue of the activities of a U.S. agent in accepting reinsurance on behalf of each petitioner. Depending on our resolution of this issue, there is a further issue concerning whether each petitioner's 1988 taxable income should include certain reductions in pre-1988 estimates of unpaid losses under excess of loss reinsurance contracts with non-U.S. insurers and reinsurers. Respondent has conceded that none of petitioners are liable for the addition to tax under section 6661 ² for any of the years in issue.

*537 FINDINGS OF FACT

Some of the facts have been stipulated and are so found. The stipulation of facts and accompanying exhibits are incorporated herein by reference. The facts found are those which, unless*29 otherwise specified, existed during the years at issue.

Each petitioner is a Japanese property and casualty insurance company with its principal place of business in Japan. The stock of each petitioner is publicly traded on a Japanese exchange. There is no stock ownership relationship among petitioners.

The primary business of each petitioner is writing direct insurance in Japan. Each petitioner also assumes reinsurance ceded ³ to it by insurers and reinsurers, including U.S. insurers and reinsurers, through a reinsurance department located in Tokyo. Each petitioner obtains foreign reinsurance through foreign brokers that bring reinsurance proposals to it, and from foreign insurers and reinsurers with which each petitioner has a direct relationship.

*30 Each petitioner has at least one representative office in the United States that provides information on the U.S. market to it and assists its clients in the United States, but which does not have authority to write any form of insurance. Taisei and Fuji do not have U.S. branches and do not have licenses to engage in the insurance business in the United States.

Chiyoda has a branch office in New York that has insurance licenses for California, Illinois, New Jersey, and New York. Nissan has a branch office in New York that has an insurance license for New York and California.

Fuji has a 100-percent owned U.S. subsidiary which holds an Illinois insurance license, and which participates in three insurance programs with a U.S. insurance company. The U.S. subsidiary retrocedes to Fuji, on a quota share basis, 50 percent of the business it receives under these programs.

In addition, each petitioner grants authority to two or three different U.S. agents, including Fortress Re, Inc., to *538 underwrite reinsurance on its behalf and to perform certain activities in connection therewith.

Fortress Re, Inc. (hereinafter referred to as new Fortress or Fortress) is the successor to Fortress*31 Reinsurance Managers, Inc., established in 1972 as a subsidiary of Penn General Agencies, Inc., which was owned in large part by Pennsylvania Life Co. Fortress Reinsurance Managers, Inc., acted as a reinsurance underwriting manager on behalf of various insurance companies with which it entered into management agreements. From its inception, the chief operating officer was Maurice D. Sabbah. In 1977, its name was changed to Fortress Re, Inc. (hereinafter referred to as old Fortress). In September 1979, certain of the assets and the name of old Fortress were sold to M.D. Sabbah & Co., a newly organized North Carolina corporation owned 66 2/3 percent by Mr. Sabbah and 33 1/3 percent by Kenneth Kornfeld. In October 1979, M.D. Sabbah & Co. changed its name to Fortress Re, Inc. (new Fortress). New Fortress assumed the duties, but not the liabilities, of old Fortress with respect to treaty accounts underwritten by old Fortress and certain duties of old Fortress with respect to the facultative accounts under-written by old Fortress. Since 1979, Mr. Sabbah has transferred some of his shares in Fortress to members of his family, so that Fortress is currently held as follows:

*32 The directors of Fortress are Mr. Sabbah, his wife, and Mr. Kornfeld. Mr. Sabbah is the chairman of Fortress, and Mr. Kornfeld is the president and chief underwriter.

Mr. Sabbah handles contacts with insurance companies Fortress represents and has responsibility for reports provided to those companies, in addition to certain administrative responsibilities. Mr. Kornfeld's duties include underwriting the reinsurance entered into on behalf of the companies Fortress represents, establishing retrocession programs with respect to its reinsurance treaties, managing claims with respect to those treaties, and managing the daily affairs of *539 Fortress. Mr. Sabbah and Mr. Kornfeld have total control over the daily operations of Fortress, including the hiring and firing of employees and the assigning of responsibilities to them. Fortress has approximately 20 employees, whose duties include assisting underwriting, handling claims, data processing and computer operations, secretarial support, and accounting services.

Fortress maintains leased offices in Burlington, North Carolina, for which it pays the rent. Fortress purchases property and liability insurance in connection with its business. *33 The operating costs of Fortress, including rent and salaries, are borne by Fortress.

Fortress is a reinsurance underwriting manager, which involves acting as an agent for insurance companies in underwriting and managing reinsurance on behalf of such companies. Fortress is not licensed to conduct insurance or reinsurance business in any jurisdiction. Fortress underwrites reinsurance and places retrocessions only on behalf of the companies with which it enters into management agreements. Fortress enters into reinsurance and retrocession contracts on behalf of the companies it represents only through brokers; Fortress itself does not act as a broker.

Fortress enters into a separate management agreement with each insurance company it represents. The agreements with petitioners are identical except for the net acceptance limit (see infra p. 541). Since its inception, Fortress has been involved in as many as 10 management agreements in a management year. A management year is defined as the annual period from July 1 to June 30. From inception through June 30, 1989, the management years have been designated as years I through XVI, respectively.

Taisei and Chiyoda first entered into management*34 agreements with old Fortress in November 1972. Nissan and Fuji first entered into management agreements with Fortress in May 1981. Nissan and Fuji had previously been quota share reinsurers with respect to the companies Fortress represented. In the agreements, Fortress is referred to as the "manager", and the insurance company is referred to as a "member". Each agreement authorizes Fortress, among other things, to act as agent of each company to underwrite and retrocede reinsurance on behalf of each company. Under the agreement, the liability of the member with respect to each *540 reinsurance contract, underwritten by Fortress on the member's behalf, is several and not joint with any other member.

Under the agreement, it is contemplated that Fortress may enter into similar, or substantially similar, management agreements with other insurance or reinsurance companies or other insurers. Fortress does not need permission of, or even to consult, the companies with which it has agreements, before entering into a new agreement. Although in practice, when a member terminated a management agreement, Fortress offered to increase the participation of the companies it already represented, *35 it was not obligated to do so. In 1988, another Japanese insurance company, Dai Tokyo, approached Fortress about entering into a management agreement, which would have had the effect of diluting the participation of petitioners. After declining to enter into this agreement, Fortress, at the insistence of Dai Tokyo, polled petitioners to determine and confirm whether petitioners would be receptive to Dai Tokyo's participation.

Each reinsurance contract underwritten by Fortress, or old Fortress, on behalf of the companies it represented, is assigned to a management year. All premiums and losses, including claims settled in later years, associated with a particular reinsurance contract are allocated to the management year to which the reinsurance contract was assigned. Fortress is responsible for the handling and disposition of all claims against the companies it represents. In many cases, claims relating to the reinsurance underwritten by Fortress on behalf of companies it represents are not fully settled for many years. Fortress has total control over the handling and disposition of claims on behalf of petitioners.

Pursuant to each agreement, Fortress regularly exercises the authority*36 to conclude original reinsurance contracts and to cede reinsurance on behalf of each petitioner. Each agreement provides Fortress with underwriting authority on a continuous basis until the agreement is terminated. The agreements can be terminated by either party, but only with 6 months' notice, although in practice the notice period has been waived. After termination of an agreement, Fortress continues to have obligations with respect to reinsurance previously underwritten. During the years in issue, Fortress had continuing duties to 13 insurance companies, excluding *541 petitioners, for contracts underwritten in prior management years.

The only material limitation on Fortress' authority under the agreement is a "net acceptance limit", which is the maximum amount of net liability in respect of any one original reinsurance contract that Fortress can accept on behalf of a member. There is no gross acceptance limit in the agreements, so that Fortress can underwrite reinsurance contracts on behalf of a member that are greater than the net acceptance limit, provided that Fortress arranges for retrocessions of the excess over the net acceptance limit. In practice, Fortress sets *37 its own gross acceptance limit, as to which it voluntarily advises petitioners. When approached by Chiyoda with regard to inserting a gross acceptance limit into its agreement, Fortress refused, and Chiyoda dropped its request.

Before each management year, Fortress provided each petitioner with an estimate of net premium income for the upcoming year, based on the gross and net participations of that petitioner. Net premium income equals the gross premiums received for all reinsurance contracts less retrocession premiums. Under the terms of the management agreement, Fortress is not limited on how many contracts it writes, only that no one contract can exceed the net acceptance limit, so in effect the total net premium income from reinsurance handled by Fortress is unlimited. When any of petitioners approached Fortress about lowering its net premium income, Fortress' advice was to increase the quota share cession to its affiliated quota share reinsurer, Carolina Reinsurance Ltd. (hereinafter referred to as Carolina Re). See infra p. 546.

In 1986, Fortress anticipated a very favorable market and sought to increase its capacity. It did so by offering to increase the underwriting done*38 for its existing members and by soliciting four other Japanese insurance companies about entering into management agreements.

Each reinsurance contract underwritten by Fortress is executed with a "security stamp" that identifies each member and the percentage of the total liability assumed by each member under the contract. The percentage to be assumed by each member on each reinsurance contract entered into during the management year is determined before the start of the management year, after Fortress comes to terms with *542 each member regarding the net acceptance limit for the year. ⁴ The percentage of each contract assumed is subject to that limit.

Mr. Kornfeld is the chief underwriter and, as such, *39 decides what business Fortress will underwrite and retrocede on behalf of the members. The retrocession program for a management year was presented to each petitioner in advance, during an annual trip by Mr. Kornfeld to each petitioner's offices. However, Fortress does not need approval, and did not seek or receive input, from petitioners.

All original reinsurance contracts, as defined in the management agreements, are "excess of loss" contracts. The lines of reinsurance that were the subject of original reinsurance contracts and ceded reinsurance were aviation excess of loss, nonmarine catastrophic excess of loss (e.g., land-based risks such as hurricanes, tornadoes, earthquakes, and fires), and marine excess of loss (e.g., water-based risks involving oil rigs and ocean liners). With excess of loss reinsurance, the reinsured pays a premium to a reinsurer for a layer of protection, whereby the reinsurer agrees to pay all losses above a certain amount (the retention), but only up to a certain limit. There may be several layers of protection where a different reinsurer "writes" each layer, the lowest layer being the first to bear a loss. Generally, Fortress wrote a percentage of a *40 single layer of loss. In choosing which layer to write, Fortress tries to pick the first "true" catastrophic layer; i.e., a layer that would not bear ordinary losses but would be the first to bear a loss from a catastrophe or extraordinary loss. The rationale behind this strategy is that *543 the reinsurer of lower layers receives a higher premium, and Fortress feels a true catastrophe would cause losses at all layers so that Fortress is getting a higher premium than reinsurers of higher layers, yet bears similar risk. In respect of each reinsurance contract, Fortress independently decides which layer it should write on behalf of petitioners.

As part of its retrocession program, Fortress cedes a part of the liability it writes, so that no reinsurance contract exposes its members to a direct liability greater than their net acceptance limit. In such a situation, each petitioner is liable in the event the reinsurers should default. The benefit of writing more reinsurance than it accepts on behalf of petitioners is that a commission is earned on the ceded reinsurance. Fortress transacted retrocessions through brokers, most of which are in London and the rest in New York.

The premiums*41 and commissions were established by a lead underwriter of the reinsurance proposals and were followed by Fortress.

Petitioners utilize the services of Fortress because Fortress has good relationships with reinsurance brokers, has access to good business, and has a profitable business strategy.

Fortress has continued access to good business because it has a reputation for paying its claims promptly and, of immeasurable importance, because its clients are large insurance companies that represent good security. Brokers would not deal with Fortress if its clients were not as financially secure as petitioners. However, there are 21 insurance companies in Japan and hundreds in the world that meet the minimum capital requirements and whom Fortress could have as clients and continue to obtain similar reinsurance business.

Fortress was compensated for its services pursuant to compensation schedules set forth in each agreement. During 1986 to 1988, Fortress' income was derived from management fees, contingent commissions, and override commissions payable under management agreements entered into for management years I through XVI. Also, Fortress earned investment income on its own funds, which*42 was not related to the management agreements. Fortress' compensation structure is the same as other reinsurance underwriting managers, although its management fees are slightly lower and its profit commissions slightly higher than the norm.

*544 Management fees are calculated as a fixed percentage of the gross earned premiums, with the percentage lower as the volume of the premiums increases. It was anticipated that the management fees would cover current operating expenses of Fortress, including salaries. The fees are established on the basis of experience rather than projections. For each of the years in issue, a portion of the management fees Fortress earned was related to reinsurance underwritten in prior management years.

Contingent profit commissions are based on the profitability of business underwritten. Each year, Fortress recomputes its contingent profit commission for the prior management years to reflect results as they unfold and to reflect revisions to the loss reserves with respect to reinsurance contracts assigned to that year.

Override commissions are amounts received on certain pro rata retrocessional treaties and are not a significant part of Fortress' compensation.

*43 For 1986, 1987, and 1988, Fortress earned $ 1,819,152, $ 5,023,631, and $ 20,747,536, respectively, from management fees and profit commissions. Of these amounts, 74 percent, 78 percent, and 62 percent, respectively, were attributable to reinsurance underwritten in management years that ended before the particular calendar years.

Fortress has the authority, under the management agreements and its agreement with old Fortress, to control the investment of funds withheld pursuant to such agreements in its sole discretion. Distributions are made in accordance with the management agreements and are made over a period of years following the management year.

Fortress provides quarterly accounting reports to all insurance companies with which it or old Fortress has entered into management agreements. The quarterly reports contain a summary which reflects the results for the company to which the report is provided for the particular quarter for all management years for which Fortress underwrote reinsurance on behalf of such company. In addition, each report provides an individual summary of the results for each such management year.

Each quarterly report reflects estimates for unpaid losses, *44 including reserves for incurred but not reported (IBNR) losses. The reserves are set by Fortress based on Mr. Sabbah's judgment, *545 taking into account experience and information from the reinsureds.

Each report also contains a narrative summary of Fortress' overall underwriting results prepared by Fortress.

Each year Mr. Kornfeld separately visited the offices of each petitioner in Tokyo. At these meetings, he described the underwriting results for prior management years, as well as the retrocessional program. Communication during the year occurred via letter or telex. There were no communications by telephone. During the years in issue, a representative of each petitioner visited the offices of Fortress one or two times. There were also an additional few visits between representatives of Chiyoda and Fortress in connection with discussions of the sale of Fortress to Chiyoda. The other petitioners were not aware of these discussions between Fortress and Chiyoda.

Petitioners attend monthly industry meetings where each is present, but they have never met to discuss Fortress. With one exception relating to a profit commission, petitioners did not communicate with each other about*45 their relationship with Fortress.

In 1984, the owners of Fortress caused the formation of Carolina Re, under the laws of Bermuda. In 1984, the stockholders of Carolina Re were as follows:

The latter four shareholders were Bermuda residents and the shares were held as qualifying director's shares, and Fortress was the beneficial owner of each share. The original officers of Carolina Re were Mr. Sabbah, Mr. Kornfeld, Charles D. Edelman, Leon E. Nearon, and Alan L. Brown.

In 1986, Fortress sold its shares in Carolina Re for $ 1 each, as follows: *546

Carolina Re acts as a quota share reinsurer of reinsurance underwritten by Fortress, meaning that it assumes a certain share of the reinsurance ceded by petitioners, for which it is paid a premium. Before forming Carolina Re, Fortress notified petitioners of its intentions although it did not need their approval.

Fortress requires that Carolina Re be retroceded*46 a minimum percentage of the reinsurance contracts accepted on behalf of each petitioner, although each petitioner may increase the percentage. In 1988, at the insistence of Fortress, the minimum percentage ceded to Carolina Re was increased, despite the objections of three of four petitioners.

Fortress' income is subject to U.S. Federal income tax and is included on Fortress' Federal income tax returns. Each petitioner included the items of income and expense with respect to the reinsurance underwritten by Fortress on its behalf in its Japanese income tax returns. Each petitioner filed protective Federal income tax returns for the years in issue with the Internal Revenue Service Center at Philadelphia, Pennsylvania. After the issuance of the deficiency notices, each petitioner made payment of the tax and additions to tax asserted therein, together with accrued interest, for which each petitioner filed an amended petition asking for a determination of overpayment.

OPINION

Under the Convention Between the United States of America and Japan for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income, Mar. 8, 1971, 23 U.S.T. (Part 1) 969 *47 (hereinafter referred to as the U.S.-Japan convention or convention), the commercial profits of a Japanese resident are exempt from U.S. Federal income tax, unless such profits are attributable to a U.S. permanent establishment. Convention, Art. 8(1). The relevant provisions of the convention whereby a Japanese resident will be deemed to have a U.S. permanent establishment due to the activities of an agent are as follows:

*547 (4) A person acting in a Contracting State on behalf of a resident of the other Contracting State, other than an agent of an independent status to whom paragraph (5) of this article applies, shall be deemed to be a permanent establishment in the first-mentioned Contracting State if such person has, and habitually exercises in the first-mentioned Contracting State, an authority to conclude contracts in the name of that resident, unless the exercise of such authority is limited to the purchase of goods or merchandise for that resident.

(5) A resident of a Contracting State shall not be deemed to have a permanent establishment in the other Contracting State merely because such resident engages in industrial or commercial activity in that other Contracting *48 State through a broker, general commission agent, or any other agent of an independent status, where such broker or agent is acting in the ordinary course of his business.

[Convention, Art. 9.]

Initially, it is undisputed that Fortress had the authority, which it exercised, to conclude contracts on behalf of petitioners, so that unless Fortress is "a broker, general commission agent, or any other agent of an independent status" within the meaning of Article 9(5), petitioners will be deemed to have U.S. permanent establishments. The parties are in agreement that Fortress was not a "broker" or "general commission agent", and respondent concedes that Fortress was acting in the ordinary course of its business when acting on behalf of petitioners. Thus, the issue before us is whether, during the years at issue, Fortress was an "agent of an independent status" in respect of each petitioner. In this connection, we note that neither petitioners nor respondent has argued that any petitioner should be treated differently from any other petitioner in resolving this issue.

The U.S.-Japan convention itself does not define an "agent of an independent status". In applying a treaty*49 definition, "Our role is limited to giving effect to the intent of the Treaty parties." Sumitomo Shoji America, Inc. v. Avagliano, 457 U.S. 176, 185 (1982); see also Crow v. Commissioner, 85 T.C. 376, 380 (1985) (quoting Maximov v. United States, 299 F.2d 565, 568 (2d Cir. 1962) ("The goal of treaty interpretation is 'to give the specific words * * * a meaning consistent with the genuine shared expectations of the contracting parties.'"), affd. 373 U.S. 49 (1963)); Estate of Burghardt v. Commissioner, 80 T.C. 705, 708 (1983), affd. without published opinion *548 734 F.2d 3 (3d Cir. 1984). Beyond the literal language, we must examine the treaty's "purpose, history and context." Crow v. Commissioner, 85 T.C. at 380.

Our examination shows that the relevant provisions of the convention are not only based upon, but are duplicative of, Article 5, comments 4 and 5, of the 1963 O.E.C.D. Draft [model] Convention (hereinafter referred to as the 1963 model). ⁵ See letter of transmittal*50 from President Nixon to the Senate requesting ratification of the convention, dated May 11, 1971, 2 Tax Treaties (CCH) par. 5222, at 34,021-3; Senate Committee on Foreign Relations, Report on Tax Convention with Japan and Tax Protocol with France (Nov. 22, 1971), 1973-1 C.B. 642, 643. While the 1963 model itself provides no more definition than the convention, the model is explained in part by a commentary, which states in pertinent part:

15. Persons who may be deemed to be permanent establishments must be strictly limited to those who are dependent, both from the legal and economic points of view, upon the enterprise for which they carry on business dealings (Report of the Fiscal Committee of the League of Nations, 1928, page 12). Where an enterprise has business dealings with an independent agent, this cannot be held to mean that the enterprise itself carries on a business in the other State. In such a case, there are two separate enterprises.

* * * *

19. Under paragraph 4 of the Article, only one category of dependent agents, who meet specific conditions, is deemed to be permanent establishments. All independent agents and the remaining dependent*51 ones are not deemed to be permanent establishment. Mention should be made of the fact that the Mexico and London Drafts * * * and a number of Conventions, do not enumerate exhaustively such dependent agents as are deemed to be permanent establishments, but merely give examples. In the interest of preventing differences of interpretation and of furthering international economic relations, it appeared advisable to define, as exhaustively *549 as possible, the cases where agents are deemed to be "permanent establishments".

* * * *

20. * * * In the Mexico and London Drafts and in the Conventions, brokers and commission agents are stated to be agents of an independent status. Similarly, business dealings carried on with the co-operation of any other independent person carrying on a trade or business (e.g. a forwarding agent) do not constitute a permanent establishment. Such independent agents must, however, be acting in the ordinary course of their business. * * *

* * * *

The special problems which can arise in the case of insurance companies dealing by means of intermediaries or variously qualified representatives shall be further studied.

[Commentary to Art. 5 of the 1963 model.] *52

Based on the above, petitioners argue that the test of independent status is one of both legal and economic dependence and that, if we find that Fortress was either legally or economically*53 independent of petitioners, it will necessarily follow that Fortress was not a permanent establishment. Respondent argues that comment 15 erroneously phrased the standard in terms of "dependence" and the conjunctive "and" instead of the disjunctive "or", thus allowing either legal or economic independence to satisfy the requirement for independent status. See Roberts, "The Agency Element of Permanent Establishment: The OECD Commentaries from the Civil Law View (Part Two)," Intertax 488, 490 (Oct. 1993); Skaar, Permanent Establishment: Erosion of a Tax Treaty Principle 506-507 (1991); Nitikman, "The Meaning of 'Permanent Establishment' in the 1981 U.S. Model Income Tax Treaty: Part 2," 15 Intl. Tax J. 257, 267-268 (1989). ⁶*55 The basis for this argument is that comment 15 of the 1963 model expressly refers to the Report of the Fiscal Committee of the League of Nations 12 (1928), the commentary to which states: "The words 'bona-fide agent of independent status' are intended to imply absolute independence, both from the legal *550 and economic points of view" (emphasis supplied); ⁷ see Roberts, supra at 490. Indeed, the commentary to the OECD model was changed in the 1977*54 revision so that both legal and economic independence is necessary. ⁸ Comment 36 to the OECD Revised Model Double Taxation Convention on Income and Capital--1977 (hereinafter referred to as the 1977 model); see also comment 37 to Art. 5 of the OECD Model Tax Convention on Income and on Capital (1992). Generally, we would have reservations about interpreting a convention, ratified in 1971, on the basis of a commentary, adopted in 1977, that contradicts the literal language of the commentary in effect at the time of ratification. However, in light of the extensive analysis by the previously cited commentators and the confirmation of such analysis by our own research, we are persuaded that the criteria in the later commentary reflects the original intention of the commentary to the 1963 model and that the 1963 model should be interpreted as having a disjunctive ("or") meaning. ⁹

*56 We note, however, that if we focus, as the parties have ultimately done, on the test for legal and economic independence set forth in comment 37 to Article 5 of the 1977 model, as applied to the facts herein, the issue of disjunctive versus conjunctive reading of the 1963 model fades into the background. That comment provides:

37. Whether a person is independent of the enterprise represented depends on the extent of the obligations which this person has vis-a-vis the enterprise. Where the person's commercial activities for the enterprise are subject *551 to detailed instructions or to comprehensive control by it, such person cannot be regarded as independent of the enterprise. Another important criterion will be whether the entrepreneurial risk has to be borne by the person or by the enterprise the person represents. * * * [Comment 37 to Art. 5 of the 1977 model.]

It is obvious that the tests of "comprehensive control" and "entrepreneurial risk", as the determinants of legal and economic independence, involve an intensely factual inquiry, which does not lend itself to the articulation of a "definitive statement that would produce a talisman for the solution of concrete cases." *57 Commissioner v. Duberstein, 363 U.S. 278, 284-285 (1960).

Petitioners suggest that guidance can be found in the factors used in distinguishing employees from independent contractors. See Donroy, Ltd. v. United States, 301 F.2d 200, 205-206 (9th Cir. 1962); Nitikman, supra at 266. We think the employee versus independent contractor analogy is of limited use. The fact that petitioners herein are clearly not employees (indeed, respondent does not contend that they are) and therefore would be considered independent contractors does not answer the question before us, namely, whether they are the kind of independent contractors who should be held to be "agent(s) of an independent status". Nor are we prepared to accept respondent's argument that the quoted phrase should be given a narrow scope by virtue of the ejusdem generis rule in that it was intended to encompass only those agents who exhibited characteristics associated with a "broker" or "commission agent". We think that the generality of the phrase "agent of an independent status" was intended to have an expansive rather than a confining scope, particularly since *58 the words "broker" and "commission agent" themselves lack specificity. Respondent's reliance on Fleming (H.M. Inspector of Taxes) v. London Produce Co., 1 W.L.R. 1013, 2 All E.R. 975 (Ch. Div. 1968), is misplaced. In that case the language, to which the doctrine of ejusdem generis was applied, was totally different ("In this subsection, 'broker' includes a general commission agent" (emphasis added)).

Against the foregoing background, we turn to the determination of Fortress' legal and economic independence.