Csx Transp., Inc. v. Gardner

Decision Date18 September 2007
Docket NumberNo. 49A02-0610-CV-917.,49A02-0610-CV-917.
Citation874 N.E.2d 357
PartiesCSX TRANSPORTATION, INC., Appellant-Defendant, v. Robert D. GARDNER, Appellee-Plaintiff.
CourtIndiana Appellate Court

Bruce A. Hugon, Stuart & Branigin LLP, Indianapolis, IN, Alice E. Loughran, Steptoe & Johnson LLP, Washington, D.C., Attorneys for Appellant.

Paul J. Passanante, Dawn M. Mefford, Simon Passanante, P.C., St. Louis, MO, John T. Roach, Mann Law Firm, Terre Haute, IN, Attorneys for Appellee.

Harold Abrahamson, Abrahamson, Reed & Bilse, Hammond, IN, Daniel Saphire, Louis P. Worchot, Association of American Railroads, Washington, D.C., Attorneys for Amicus Curiae the Association of American Railroads.

OPINION

ROBB, Judge.

Case Summary and Issue

Following a jury trial, at which the jury found CSX Transportation, Inc., liable for injuries sustained by an employee, Robert Gardner, CSX appeals the trial court's denial of its post-trial motion to offset the amount awarded to Gardner by the amount CSX had contributed to a fund from which Gardner was receiving a disability annuity pursuant to the Railroad Retirement Act (the "RRA"). CSX raises the sole issue of whether it is entitled to setoff this amount as a matter of law. Concluding that CSX is not entitled to setoff this amount, we affirm.

Facts and Procedural History

On May 13, 2003, Gardner was working as a locomotive engineer for CSX and was injured when he was thrown from a train. Gardner injured his neck, back, and right knee in the accident, and had been unable to return to work at the time of the trial. Shortly after the accident, Gardner applied for an occupational disability annuity with the Railroad Retirement Board (the "Board"), which administers a disability and retirement fund established by the RRA (the "RRA Fund"). The Board granted his application and has been paying him $35,000 per year since December 2003, and will continue to do so until Gardner reaches the age of 62, at which point it will pay him his retirement annuity instead.

Gardner also filed a complaint against CSX under the Federal Employers' Liability Act ("FELA"), alleging that CSX's negligence caused his injury. The case proceeded to trial, where the jury found that CSX was 100 percent liable for Gardner's injuries and awarded Gardner $605,500 in damages. CSX filed a post-trial motion to setoff the amount that CSX had contributed to the RRA Fund on Gardner's behalf from the FELA award. The trial court denied this motion, citing the Supreme Court case of Eichel v. New York Cent. R.R. Co., 375 U.S. 253, 84 S.Ct. 316, 11 L.Ed.2d 307 (1963), as controlling. CSX now appeals.1

Discussion and Decision2

CSX argues that it is entitled to setoff because it in effect is being required to pay twice for Gardner's lost wages; first, it contributed to the fund used to pay Gardner's disability annuity; and second, it compensated Gardner for his lost wages as part of the FELA award. Therefore, CSX argues that Gardner received a windfall at CSX's expense. Gardner argues that the annuity he receives pursuant to the RRA Fund should not be regarded as payment from the tortfeasor CSX, but as payment from a "collateral source," and that the trial court properly disallowed setoff.

I. The Applicable Law and Standard of Review

The parties do not dispute any facts relevant to this appeal. The question of whether a railroad's contributions to the RRA Fund should be setoff against the FELA award is a pure question of law. See Davis v. Odeco, Inc., 18 F.3d 1237, 1245 (5th Cir.1994), cert. denied, 513 U.S. 819, 115 S.Ct. 78, 130 L.Ed.2d 32 (1994). Therefore, our standard of review is de novo, and we will pay no deference to the trial court's decision.

As Gardner filed his claim under FELA, federal law governs this case. See Dice v. Akron, Canton & Youngstown R.R. Co., 342 U.S. 359, 361, 72 S.Ct. 312, 96 L.Ed. 398 (1952) (noting that "only if federal law controls can the federal Act be given that uniform application throughout the country essential to effectuate its purposes"). Indiana law,3 or the law of any other state, has no applicability as to liability or damages. See S. Buffalo Ry. Co. v. Ahern, 344 U.S. 367, 371-72, 73 S.Ct. 340, 97 L.Ed. 395 (1953).

II. The Applicable Statutes
A. The RRA

This current version of the RRA was enacted in 1974, and significantly altered its predecessor, the Railroad Retirement Act of 1937 (the "1937 Act"). The current version "resembles both a private pension program and a social welfare plan." Hisquierdo v. Hisquierdo, 439 U.S. 572, 574, 99 S.Ct. 802, 59 L.Ed.2d 1 (1979). It establishes two tiers of benefits: Tier I, which provides amounts essentially equivalent to social security benefits; and Tier II, which provides retirement benefits over and above social security benefits and operates similarly to other industrial pension systems. See Railroad Retirement Board, Railroad Retirement Handbook 2006, at 5, available at www.rrb.gov/pdf/opa/ handbook.pdf (hereinafter the "Board Handbook"). The Board, "an independent agency in the executive branch," administers the RRA. 45 U.S.C. § 231f.

The RRA provides that railroad employees who are injured and unable to continue their regular work may receive either total disability or occupational disability annuities. See 45 U.S.C. § 231a(a)(1)(iv), (v). Payments under the RRA are not premised on the injury occurring as a result of the negligence of the railroad. See 45 U.S.C. § 231a. In order to qualify for occupational disability, the employee must be permanently disabled for work in his or her regular railroad occupation and either have at least twenty years of railroad service or be at least sixty years old and have ten years of railroad service. See 45 U.S.C. § 231 a(a)(1). In order to receive total disability annuities, the employee must have at least ten years of railroad service and be disabled for any kind of regular employment. Id. The amount of an employee's annuity depends on the length of the employee's employment. See 45 U.S.C. § 231b(b). The primary difference between the benefits under RRA and the 1937 Act is that under the 1937 Act, many employees received benefits under both the 1937 Act and the Social Security Act, leading to a windfall for railroad employees also employed in other fields. See Board Handbook, supra, at 4. The current RRA phased out these dual benefits, but also improved the benefits by easing eligibility requirements and increasing the amount of the annuities paid to widows and other survivors. Id. at 5-6.

The RRA Fund is supported in part by a tax on both the railroad companies and the railroad employees. 26 U.S.C. §§ 3201, 3211. Both the railroads and their employees pay taxes into Tier I at a rate equal to social security taxes. See id. For Tier II, the tax rate varies, and is published annually by the Department of the Treasury. See 26 U.S.C. 3241(d). The Tier II annual tax rate for employers is significantly higher than that for employees. E.g., 71 Fed.Reg. 67,709 (Nov. 22, 2006) (an employer is taxed 12.1 percent and an employee is taxed 3.9 percent of the employee's compensation). For the fiscal year 2006, the aggregate of the employee and employer taxes made up 48.4 percent of the total amount contributed to the RRA Fund. See United States Railroad Retirement Board, 2007 Annual Report, at 11, available at www.rrb.gov/pdf/ opa/AnnualRprt/AnnualReport.pdf (hereinafter, the "Board Report"). The remainder of the funding comes from the financial interchange with social security trust funds (35.7%), national railroad investment trust transfers (9.7%), federal income taxes (4.7%), general appropriations (1.0%), and interest on investments (0.6%).4 Id. The primary difference between the current funding structure and that in place prior to 1974, is that employees and employers were previously taxed at an equal rate, while now the employer pays a significantly greater amount than does the employee. See Board Handbook, supra, at 4.

B. FELA

In 1908, Congress enacted FELA to deal with the numerous injuries sustained by railroad employees. See Norfolk S. Ry. Co. v. Sorrell, ___ U.S. ___, 127 S.Ct. 799, 805, 166 L.Ed.2d 638 (2007). Under FELA, railroad companies "shall be liable in damages to any person suffering injury while he is employed by such carrier ... for such injury . . . resulting in whole or in part from the negligence of any of the officers, agents, or employees of such carrier." 45 U.S.C. § 51. As the statute's text indicates, FELA is not a workers' compensation scheme, as recovery under FELA is limited to cases in which the employer was at fault. See Sorrell, 127 S.Ct. at 805; Consol. Rail Co. v. Gottshall, 512 U.S. 532, 543, 114 S.Ct. 2396, 129 L.Ed.2d 427 (1994). In this regard, FELA "does not make the employer the insurer of the safety of his employees while they are on duty. The basis of his liability is his negligence, not the fact that injuries occur." Gottshall, 512 U.S. at 543, 114 S.Ct. 2396 (quoting Ellis v. Union Pac. R.R. Co., 329 U.S. 649, 653, 67 S.Ct. 598, 91 L.Ed. 572 (1947)).

III. Eichel v. New York Central Railroad Company

Gardner contends that the outcome of this case is controlled by Eichel v. New York Cent. R.R. Co., 375 U.S. 253, 84 S.Ct. 316, 11 L.Ed.2d 307 (1963). In Eichel, a former employee of the railroad filed a FELA claim and obtained a judgment against the railroad. The issue before the Supreme Court was whether evidence that the plaintiff had been receiving disability payments under the 1937 Act was admissible in regard to the extent of the plaintiff's injury and as to whether the plaintiff was malingering. Id. at 253-54, 84 S.Ct. 316. The Supreme Court held that such evidence was inadmissible as the employee's "receipt of collateral social insurance benefits involves a substantial likelihood of prejudicial impact." Id. at 255, 84 S.Ct. 316. In so holding, the Court noted that the railroad did "not dispute that it would be highly improper for the disability pension payments...

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