Arneson v. Callahan

• Decision Date: 07 November 1997
• Docket Number: 97-1192,Nos. 96-4183,s. 96-4183
• Citation: 128 F.3d 1243
• Parties: 11 NDLR P 96 Stephen A. ARNESON, Appellee, v. John J. CALLAHAN, 1 Acting Commissioner of the Social Security Administration, Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 1243

128 F.3d 1243

11 NDLR P 96

Stephen A. ARNESON, Appellee, v. John J. CALLAHAN, ¹ Acting Commissioner of

the Social Security Administration, Appellant.

Nos. 96-4183, 97-1192.

United States Court of Appeals,

Eighth Circuit.

Submitted Sept. 10, 1997.

Decided Nov. 7, 1997.

Stephanie R. Marcus, Department of Justice, Washington, DC (Marleigh D. Dover, on the brief), for Appellant.

David J. Newburger, St. Louis, MO, for Appellee.

Before BEAM, FLOYD R. GIBSON, and HEANEY, Circuit Judges.

BEAM, Circuit Judge.

The Social Security Administration appeals the amount of back pay the district court awarded Stephen A. Arneson. We affirm in part and reverse in part.

I. BACKGROUND

This dispute is before us for the third time. We will discuss only those facts relevant to this appeal. Stephen A. Arneson sued the Social Security Administration (SSA), claiming that it violated the Rehabilitation Act of 1973, 29 U.S.C. §§ 701-796 in discharging him from his government position. Arneson suffers from a neurological disorder, apraxia, which affects his ability to concentrate and perform certain tasks.

The district court dismissed the suit and Arneson appealed. This court remanded to determine whether the SSA failed to make reasonable accommodations for Arneson's disability. Arneson v. Heckler, 879 F.2d 393, 400 (8th Cir.1989). On remand, the district court entered judgment for the SSA. In Arneson v. Sullivan, 946 F.2d 90, 92-93 (8th Cir.1991), we reversed that judgment, ordered the SSA to reinstate Arneson, and remanded the case for a determination of the amount of back pay that the SSA owes Arneson. The SSA now claims that the district court made three errors in that calculation.

First, the SSA contends that the district court erroneously awarded Arneson prejudgment interest accruing from his unlawful discharge. Second, the SSA contends that the district court erred in awarding Arneson additional monies to compensate him for the adverse tax consequences associated with receiving twelve years of back pay in two payments. Finally, the SSA contends that the district court erred in declining to reduce Arneson's back pay award by the amount of disability retirement benefits that Arneson received.

II. DISCUSSION

A. Prejudgment Interest

The no-interest rule provides that sovereign immunity generally precludes a party from recovering interest in a suit against the United States. See Library of Congress v. Shaw, 478 U.S. 310, 311, 106 S.Ct. 2957, 2959-60, 92 L.Ed.2d 250 (1986). Congress may expressly waive the government's sovereign immunity from interest by statute or contract, see, e.g., id., at 317, 106 S.Ct. at 2963, or by removing the cloak of sovereignty and giving the "status of a 'private commercial enterprise.' " Loeffler v. Frank, 486 U.S. 549, 556, 108 S.Ct. 1965, 1970, 100 L.Ed.2d 549 (1988) (quoting Shaw, 478 U.S. at 317 n. 5, 106 S.Ct. at 2963 n. 5). ²

The Rehabilitation Act does not provide for prejudgment interest; however, it expressly incorporates the "remedies, procedures and rights" of Title VII. 29 U.S.C. § 794(a)(1). Title VII of the Civil Rights Act of 1964, provides that a court may order an employer to reinstate employees "with or without back pay" or order "any other equitable relief as the court deems appropriate." 42 U.S.C. § 2000e-5(g)(1). Arneson argues that Congress waived sovereign immunity from interest under Title VII or, alternatively, that the Back Pay Act, 5 U.S.C. § 5596, provides the necessary waiver. ³

The Supreme Court has previously held that Title VII does not waive the federal government's sovereign immunity from interest. ⁴ Shaw, 478 U.S. at 319, 106 S.Ct. at 2964. The Court stated that waivers of sovereign immunity must be strictly construed in the sovereign's favor. Id. at 318, 106 S.Ct. at 2963. Furthermore, the Court stated:

[T]here can be no consent by implication or by use of ambiguous language. Nor can an intent on the part of the framers of a statute or contract to permit the recovery of interest suffice where the intent is not translated into affirmative statutory or contractual terms. The consent necessary to waive the traditional immunity must be express, and it must be strictly construed.

Id. (alternation in original) (quoting United States v. N.Y. Rayon Importing Co., 329 U.S. 654, 659, 67 S.Ct. 601, 604, 91 L.Ed. 577 (1947)). See also, e.g., Miller v. Alamo, 992 F.2d 766 (8th Cir.1993) (Congress must clearly and unequivocally waive the government's sovereign immunity).

After Shaw, Congress amended Title VII, expressly waiving sovereign immunity from interest. 42 U.S.C. § 2000e-16(d). Neither party disputes that the district court properly awarded Arneson interest beginning on November 21, 1991, the amendment's effective date. However, the 1991 amendment does not apply retroactively. See Huey v. Sullivan, 971 F.2d 1362, 1365-66 (8th Cir.1992). Nonetheless, Arneson argues that he is entitled to interest on his back pay award from January 21, 1983, through November 21, 1991, because the Back Pay Act waives sovereign immunity.

The Back Pay Act generally provides certain federal agency employees with a monetary remedy for "unjustified or unwarranted personnel action which has resulted in the withdrawal or reduction" of the employees' pay. 5 U.S.C. § 5596(b)(1). The Back Pay Act did not provide for interest against the United States until Congress amended it in 1987. 5 U.S.C. § 5596(b)(2)(A).

Arneson cites three circuit decisions for the proposition that the amended Back Pay Act waives the government's sovereign immunity from interest awards in Rehabilitation Act and Title VII cases. See Brown v. Secretary of the Army, 918 F.2d 214 (D.C.Cir.1990); Edwards v. Lujan, 40 F.3d 1152, 1154 (10th Cir.1994) (adopting Brown ); Woolf v. Bowles, 57 F.3d 407, 410 (4th Cir.1995) (adopting Brown ). With due respect to our sister circuits, we find the reasoning in those cases inconsistent with sovereign immunity and the no-interest rule.

In Brown, the court held that the Back Pay Act waives the federal government's sovereign immunity from interest in Title VII cases. Brown, 918 F.2d at 218. The court relied upon Loeffler, 486 U.S. at 556, 108 S.Ct. at 1969-70, for the proposition that a statute other than Title VII can provide the requisite sovereign immunity waiver. Brown, 918 F.2d at 216. The court stated, "The government offers no convincing reason why the Back Pay Act does not supply the immunity waiver prescription absent in Title VII, just as the Postal Reorganization Act does." Id. The court next held that because the Back Pay Act complements Title VII, the Back Pay Act waives sovereign immunity from interest for any claim which could have been brought under the Back Pay Act. ⁵ Id. at 218.

We find this reasoning unpersuasive. In Loeffler, 486 U.S. at 556, 108 S.Ct. at 1969-70, the Supreme Court held that Congress expressly waived the postal service's sovereign immunity at its inception because, under the 1970 Postal Reorganization Act, the postal service assumed the role of a "private commercial enterprise." Express and unequivocal Congressional waiver of sovereign immunity was not required in Loeffler because the postal service fit within the "private commercial enterprise" exception to the no-interest rule. Id. In cases like Brown and the present one however, the private commercial enterprise exception does not apply.

We hold that to provide the sovereign immunity waiver absent in Title VII, the separate statute must, at a minimum, unequivocally express Congress's intent to waive sovereign immunity under Title VII. Cf. McGehee v. Panama Canal Comm'n, 872 F.2d 1213, 1215 (5th Cir.1989) (holding that for Congress to waive sovereign immunity by statute, the "legislation giving rise to the cause of action" itself must expressly subject "the government to interest payments").

In this Rehabilitation Act case, Arneson recovered back pay under Title VII's remedial provisions. He did not rely upon the Back Pay Act to recover back pay, but now asserts that the Back Pay Act provides the necessary waiver of sovereign immunity. The Back Pay Act language relied upon by Arneson states that "[a]n amount payable under paragraph (1)(A)(I) of this subsection shall be payable with interest." 5 U.S.C § 5596(b)(2)(A). The amended Back Pay Act does not even mention Title VII or the Rehabilitation Act. This provision does not evidence Congress's clear and unequivocal consent to interest awards against the government under the Rehabilitation Act and Title VII. Had Congress desired to waive sovereign immunity from interest awards under either the Rehabilitation Act or Title VII, it would not have limited Section 5596(b)(2)(A) interest awards to amounts payable under "paragraph (1)(A)(I)." Congress could also have expressed its intent by amending Title VII before 1991.

The Supreme Court's decisions addressing sovereign immunity and the no-interest rule buttress our holding. The Court has instructed us to construe the scope of such waivers in the sovereign's favor, see Shaw, 478 U.S. at 318, 106 S.Ct. at 2963; to limit such waivers to their plain language, see Ruckelshaus v. Sierra Club, 463 U.S. 680, 694, 103 S.Ct. 3274, 3282, 77 L.Ed.2d 938 (1983); and to construe "ambiguities in favor of immunity." United States v. Williams, 514 U.S. 527, 531, 115 S.Ct. 1611, 1615, 131 L.Ed.2d 608 (1995). The Back Pay Act does not expressly and unambiguously waive the federal government's sovereign immunity from interest awards under the Rehabilitation Act or Title VII. We therefore reverse the prejudgment interest award to the extent it relies upon the Back Pay Act to waive sovereign immunity. ⁶

B. Tax Enhancement Damages

The district court awarded Arneson additional monies to compensate Arneson for the adverse tax consequences from receiving back pay in two payments (tax enhancement award). The SSA argues that tax enhancement awards are not available under Title VII and that, if available, Co...