Moreno v. Consolidated Rail Corp.

• Decision Date: 29 August 1995
• Docket Number: 94-1247,Nos. 94-1231,s. 94-1231
• Citation: 63 F.3d 1404
• Parties: , 4 A.D. Cases 1364, 11 A.D.D. 607, 7 NDLR P 31 Charles MORENO, an individual, Plaintiff-Appellant/Cross-Appellee, v. CONSOLIDATED RAIL CORPORATION, a foreign corporation, Defendant-Appellee/Cross-Appellant.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 1404

63 F.3d 1404

64 USLW 2158, 4 A.D. Cases 1364, 11

A.D.D. 607, 7 NDLR P 31

Charles MORENO, an individual, Plaintiff-Appellant/Cross-Appellee, v. CONSOLIDATED RAIL CORPORATION, a foreign corporation Defendant-Appellee/Cross-Appellant.

Nos. 94-1231, 94-1247.

United States Court of Appeals Sixth Circuit.

Argued May 4, 1995.

Decided Aug. 29, 1995.

Michael D. Burwell (argued and briefed), William T. Nahikian, Burwell & Nahikian, Bloomfield Hills, MI, for plaintiff-appellant/cross-appellee.

Robert C. Ludolph (argued and briefed), Judith E. Caliman (briefed), Pepper, Hamilton & Scheetz, Detroit, MI, for defendant-appellee/cross-appellant.

Before: RYAN and DAUGHTREY, Circuit Judges; HILLMAN, District Judge. ^*

HILLMAN, District Judge.

This appeal first presents the question whether a railroad which receives federal funds from a state under the Federal-Aid Highways Act of 1944 ("FAHA"), 23 U.S.C. Sec. 101 et seq., is a recipient of "Federal financial assistance" within the meaning of section 504 of the Rehabilitation Act of 1973, 29 U.S.C. Sec. 794. Second, it presents the question whether punitive damages are an available remedy to a plaintiff alleging intentional discrimination under section 504. Both are questions of first impression in this circuit.

Resolution of these issues requires interpretation of two statutes. First, Section 504 of the Rehabilitation Act provides that "[n]o otherwise qualified individual with a disability in the United States, ... shall, solely by reason of her or his disability, ... be subjected to discrimination under any program or activity receiving Federal financial assistance[.]" Section 505(a)(2), 29 U.S.C. Sec. 794a, which was added to the Act in 1978, makes "available" the "remedies, procedures, and rights" set forth in Title VI of the Civil Rights Act of 1964 for suits under section 504 against "any recipient of Federal assistance."

Second, under the FAHA as amended by the Intermodal Surface Transportation Efficiency Act of 1991 ("ISTEA"), 23 U.S.C. Sec. 134 et seq., the federal government provides funds to states for repair of railroad crossings. The states, in turn, identify crossings in need of repair and, using the federal funds, contract for this repair with the railroad companies which own the designated crossings.

I.

Plaintiff, Charles Moreno, sued his former employer, defendant Consolidated Rail Corp. ("Conrail"), pursuant to section 504, alleging that defendant intentionally discriminated against him when it removed him from service as a car inspector foreman because of his disability caused by diabetes mellitus. Although plaintiff worked for defendant for thirty-six years, defendant first learned of plaintiff's diabetic condition in the fall of 1991, when plaintiff returned to work following surgery for carpal tunnel syndrome. At that time defendant's medical director requested plaintiff's medical records. Defendant's medical director learned from these records that plaintiff was diabetic, and determined plaintiff should therefore be subject to certain restrictions at work.

These restrictions, issued on December 19, 1991, and modified on December 30, 1991, included a directive to avoid irregular shifts and irregular meal breaks. On Christmas Eve, 1991, plaintiff received a letter from Conrail informing him that due to the restrictions imposed by the medical department, he was disqualified from performing his duties as supervisor.

Plaintiff subsequently filed suit against defendant Conrail in the United States District Court for the Eastern District of Michigan, alleging Conrail, in violation of section 504, intentionally discriminated against him on the basis of his disability. Defendant Conrail moved for summary judgment, contending that it had no liability under section 504 because it was not a recipient of "Federal financial assistance" within the meaning of the Rehabilitation Act. After an evidentiary hearing, the district court denied defendant's motion. The district court ruled that defendant was a recipient of "Federal financial assistance" and, therefore, an employer subject to the Act. The district court later denied defendant's motion for reconsideration of this ruling.

Plaintiff's case was tried to a jury. Defendant's motion for judgment as a matter of law and renewed motion for judgment as a matter of law were denied. The jury awarded plaintiff $62,536 for wage/benefit loss; $125,000 for pain-and-suffering and emotional distress; and $1,312,752 in punitive damages.

Defendant subsequently filed a motion for judgment as a matter of law or, in the alternative, for a new trial. The district court denied defendant's motions, except that it granted defendant's renewed motion for judgment as a matter of law with regard to the punitive damages award. The district court ruled that punitive damages were unavailable as a matter of law under section 504, and that the issue should not have been submitted to the jury. Accordingly, the court struck that portion of the award.

Plaintiff appealed, claiming that the district court erred in striking the jury's punitive damages award. Defendant cross-appealed, contending, as it did before the district court, that it was not a recipient of federal financial assistance within the meaning of section 504.

II.

Defendant Conrail cannot be held liable for discrimination under section 504 of the Rehabilitation Act unless it was a recipient of federal financial assistance within the meaning of the Act. At an evidentiary hearing held before the district court, Conrail conceded that it received federal funds through the Job Training Partnership Act ("JTPA"), 29 U.S.C. Sec. 1501 et seq. Conrail also conceded that it received federal funds from the State of Michigan through the Federal-Aid Highways Act of 1944 ("FAHA"), 23 U.S.C. Sec. 101 et seq., as amended by the Intermodal Surface Transportation Efficiency Act of 1991 ("ISTEA"), 23 U.S.C. Sec. 134 et seq. The district court found it unnecessary to consider whether the JTPA funds constituted federal financial assistance, since the court concluded Conrail was a recipient of federal financial assistance by virtue of its receipt of funds under the FAHA, as amended by the ISTEA. For the following reasons, we affirm the district court's conclusion under the FAHA, and we likewise decline to address the JTPA funds.

The FAHA provides in part that

the entire cost of construction of projects for the elimination of hazards of railway-highway crossings, including the separation or protection of grades at crossings, the reconstruction of existing railroad grade crossing structures, and the relocation of highways to eliminate grade crossings, may be paid from [federal funds provided under the FAHA].

23 U.S.C. Sec. 130(a).

Under the FAHA and its successor, the ISTEA, the federal government provides funds to states for repair of railroad crossings. The states, in turn, identify crossings in need of repair and, using the federal funds, contract for this repair with the railroad companies which own the designated crossings. Under this arrangement Conrail receives federal money from the State of Michigan to cover its actual costs for the crossing projects, as well as for its time and material at fair market value. The FAHA provides that railroads must reimburse the federal government to the extent they receive any net benefit from FAHA funds. 23 U.S.C. Sec. 130(c). At the same time, the FAHA further provides that the percentage of costs deemed to represent the net benefit to the railroads shall in no case exceed ten percent. 23 U.S.C. Sec. 130(b).

Based on Conrail's own admissions and other evidence introduced at the hearing, the district court made the following findings: The Railroad Safety and Tariffs Division of the Michigan Department of Transportation ("MDOT") conducts bi-annual on-site reviews of Michigan railways and issues reports and recommendations. In reliance on these reports, MDOT issues orders mandating railroad repairs as warranted, and when it does so, a railroad must comply, whether or not federal or state funds are available to assist with the upgrade. If state or federal funds are not available, the railroad is obligated to pay for the costs of the state-mandated repairs out of its own assets. Specifically, when no federal funds are available, the railroad is responsible for expenses associated with the gates, and for repairs to the rails, extending from the rail beds to a specified distance at the border of the road. The railroad is also responsible for 50% of the cost incurred for the signals and flashers.

On appeal, Conrail does not dispute these factual findings. Rather, Conrail disputes the district court's legal conclusion that on these facts, the funds Conrail receives from Michigan through the FAHA, as amended by the ISTEA, constitute federal financial assistance within the meaning of section 504. The district court concluded, on these facts, that Conrail is a recipient of federal financial assistance, because the State of Michigan provides it with federal monies to reconstruct or rehabilitate crossings which it has a preexisting duty to maintain. In this appeal, Conrail contends that on the facts before the district court, it is neither a "recipient" of funds within the meaning of section 504, nor are the funds dispersed under the FAHA "Federal financial assistance" within the meaning of section 504. Because these contentions present questions of statutory interpretation, the district court's determination is subject to de novo review. Michigan Carpenters Council v. C.J. Rogers, Inc., 933 F.2d 376, 388 (6th Cir.) ("Statutory interpretation is a question of law subject to a de novo review by this court."), cert. denied, 502 U.S. 982, 112 S.Ct. 585, 116 L.Ed.2d 610 (1991).

As a preliminary matter, Conrail contends that in reaching its conclusion, the district court improperly focused on the purpose and language of section 504. Conrail asserts ...