Moreno v. Consolidated Rail Corp., s. 94-1231

• Court: United States Courts of Appeals. United States Court of Appeals (6th Circuit)
• Writing for the Court: DAVID A. NELSON; RYAN; BOYCE F. MARTIN, Jr.; DAUGHTREY
• Citation: 99 F.3d 782
• Parties: 145 A.L.R. Fed. 679, 65 USLW 2327, 6 A.D. Cases 86, 9 NDLR P 1 Charles MORENO, Plaintiff-Appellant, Cross-Appellee, v. CONSOLIDATED RAIL CORPORATION, Defendant-Appellee, Cross-Appellant. . Re
• Docket Number: 94-1247,Nos. 94-1231,s. 94-1231
• Decision Date: 04 November 1996

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99 F.3d 782 145 A.L.R. Fed. 679, 65 USLW 2327, 6
A.D. Cases 86, 9 NDLR P 1 Charles MORENO, Plaintiff-Appellant, Cross-Appellee,
v.
CONSOLIDATED RAIL CORPORATION, Defendant-Appellee, Cross-Appellant. Nos. 94-1231, 94-1247. United States Court of Appeals,
Sixth Circuit. Reargued June 12, 1996.
Decided Nov. 4, 1996.

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Michael D. Burwell (reargued and rebriefed), William T. Nahikian, Burwell & Nahikian, Bloomfield Hills, MI, for Charles Moreno.

Robert C. Ludolph (reargued and rebriefed), Judith E. Caliman, Pepper, Hamilton & Scheetz, Detroit, MI, for Consolidated Rail Corp.

Before: MARTIN, Chief Judge; MERRITT, KENNEDY, NELSON, RYAN, BOGGS, NORRIS, SUHRHEINRICH, SILER, BATCHELDER, DAUGHTREY, MOORE, and COLE, Circuit Judges.

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NELSON, J., delivered the opinion of the court, in which MERRITT, KENNEDY, BOGGS, NORRIS, SUHRHEINRICH, SILER, BATCHELDER and COLE, JJ., joined. RYAN, J. (p. 793), delivered a separate concurring opinion. MARTIN, C.J. (p. 793), and DAUGHTREY, J. (pp. 793-95), delivered separate opinions concurring in part and dissenting in part, with Chief Judge MARTIN and Judge MOORE also joining in Judge DAUGHTREY's opinion.

DAVID A. NELSON, Circuit Judge.

Section 504 of the Rehabilitation Act of 1973, 29 U.S.C. § 794, prohibits discrimination against certain handicapped individuals "under any program or activity receiving Federal financial assistance...." Defendant Consolidated Rail Corporation ("Conrail") accepts federal funds for its railroad crossing improvements, and the first question presented in this appeal is whether Conrail thereby subjects itself to the prohibitions of § 504. As did the district court, we shall answer this question "yes."

Finding that Conrail intentionally discriminated against plaintiff Charles Moreno in violation of § 504, a jury awarded Mr. Moreno compensatory damages exceeding $185,000 and punitive damages exceeding $1.3 million. Congress had previously authorized recovery of punitive damages for malicious or recklessly indifferent violations of a different section of the Rehabilitation Act, § 501, but punitive damages awarded under § 501 are subject to a statutory cap of not more than $300,000. See 42 U.S.C. § 1981a. Congress has never expressly authorized the recovery of monetary damages of any sort for violations of § 504, but federal courts have long held that compensatory damages may be awarded for such violations. Not until 1994--more than two decades after enactment of the Rehabilitation Act--did a single United States district court permit an award of punitive damages for a violation of § 504. With the exception of a three-judge panel of this court in the case at bar, no appellate court has ever held that punitive damages may be recovered for a violation of § 504.

The district court declined to let the jury's punitive damage award stand in the instant case, notwithstanding that federal courts generally have the power to grant "any appropriate relief in a cognizable cause of action brought pursuant to a federal statute." See Franklin v. Gwinnett County Public Schools, 503 U.S. 60, 70-71, 112 S.Ct. 1028, 1035, 117 L.Ed.2d 208 (1992). The propriety of the district court's decision not to allow punitive damages is the second question presented for review here.

We agree with the district court that under the Rehabilitation Act in its present form, punitive damages are not recoverable for violations of § 504. The judgment of the district court will be affirmed as to both of the points at issue in this appeal.

I

On December 24, 1991, plaintiff Moreno received a letter from Conrail, his employer of 36 years, removing him from his position as a car inspector foreman. As the reason for this adverse action, the letter cited work restrictions that included avoidance of irregular meal breaks and irregular shifts. The restrictions had been imposed a few days earlier when a company doctor learned, on reviewing Mr. Moreno's medical records in connection with a return to work following surgery for carpal tunnel syndrome, that Mr. Moreno suffered from diabetes mellitus. He had first been diagnosed with diabetes 13 years earlier, but had been able to control the condition with medication. There is no indication that the disease ever interfered with his job performance.

Alleging a violation of § 504, Mr. Moreno brought suit against Conrail in the United States District Court for the Eastern District of Michigan. Conrail moved for summary judgment on the ground that it was not a recipient of federal financial assistance and was thus not subject to the Rehabilitation Act. Following an evidentiary hearing, the district court (Duggan, J.) issued an unpublished opinion and order denying Conrail's motion.

The case was tried to a jury of seven, defense motions for a directed verdict were denied by the court, and the jury returned a verdict for the plaintiff. The jury assessed

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damages of $62,536 for lost wages and benefits, ¹ $125,000 for emotional distress, and $1,312,752 in punitive damages. The district court entered judgment on the verdict, but subsequently granted a motion for judgment n.o.v. (now known as a "renewed motion for a judgment as a matter of law") with respect to the punitive damage award. See Moreno v. Consolidated Rail Corp., 909 F.Supp. 480, 488-89 (E.D.Mich.1994). A timely appeal and cross-appeal followed.

A three-judge panel of this court affirmed the district court's ruling on Conrail's receipt of federal financial assistance, but reversed the striking of the punitive damage award. See 63 F.3d 1404 (6th Cir.1995). A majority of the active judges of this court then voted to rehear the case en banc, thereby vacating the action taken by the panel. See 70 F.3d 433 (6th Cir.1995). The case has now been briefed and argued before the full court, and the matter is ready for our decision.

II

Section 504 of the Rehabilitation Act provides that "[n]o otherwise qualified individual with a disability ... shall, solely by reason of her or his disability, ... be subjected to discrimination under any program or activity receiving Federal financial assistance...." 29 U.S.C. § 794(a). We turn first to the question of whether Conrail received such assistance.

Under a program first established by the Federal-Aid Highways Act of 1944 ("FAHA") and continued by a successor statute, the Intermodal Surface Transportation Efficiency Act of 1991, the federal government appropriates funds for use by the states in "the elimination of hazards of railway-highway crossings." 23 U.S.C. § 130(a). These funds are allocated to the several states on the basis of a statutory formula. See id. § 130(f).

Railroad crossings are subject to regulation by both state and federal authorities. Congress has granted the Secretary of Transportation authority to promulgate federal railroad safety regulations, including regulations concerning grade crossings. 49 U.S.C. § 20103. (Prior to 1994 the Secretary's authority was codified at 45 U.S.C. §§ 431, 433.) States may adopt their own regulations or continue state regulations in force until the Secretary issues a federal regulation on the subject, and states may keep in place more stringent regulations that do not conflict with federal regulations and do not unduly burden interstate commerce. 49 U.S.C. § 20106, previously 45 U.S.C. § 434. Pursuant to the Highway Safety Act of 1973, each state makes regular inspections of railroad crossings and develops a schedule for necessary improvements. 23 U.S.C. § 130(d).

Where federal funds are spent to upgrade a railroad crossing, the FAHA provides that the Secretary may require the railroad to pay the United States a percentage of the construction cost deemed to represent the "net benefit" to the railroad. Id. § 130(b) and (c). Section 130(b) provides that this percentage may not exceed ten percent of the cost. The implementing regulations further limit the amounts that railroads are required to pay, providing in many cases that there shall be no payment at all. Projects classified as "grade crossing improvements" and projects for "reconstruction of existing grade separations," for example, are generally deemed to be of "no ascertainable net benefit to the railroad," and the railroads are generally not required to share in their cost. 23 CFR § 646.210(b)(1) & (2). In the case of "projects for the elimination of existing grade crossings at which active warning devices are in place or ordered to be installed by a State regulatory agency," the railroad bears only five percent of the cost. Id. § 646.210(b)(3).

The evidentiary hearing conducted by the district court in this case provided clarification of how the process works in Michigan. Clarence Magoon, a former official of the Railroad Safety and Tariffs Division of the Michigan Department of Transportation ("MDOT"), explained that the MDOT undertakes a biennial safety-oriented review of each railroad crossing in the state. Where the review shows that improvements are warranted, and pursuant to various administrative procedures allowing for public comment

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and for objection from the railroad that owns the property, the MDOT issues orders to the railroad requiring that the improvements be made. The sole criterion for the issuance of such orders, Mr. Magoon testified, is safety; the orders are in no way dependent upon the availability of federal funding.

Larry Tibbits, a current MDOT official, elaborated on the process by which railroad crossing improvements are federally funded. Once the Safety Division issues regulatory orders, Mr. Tibbits explained, a different arm of the MDOT prioritizes eligible projects and contacts the railroad and the local highway authority to ascertain what role they will play in the actual construction. The state then engineers the project and prepares cost estimates. Each individual project must be approved by the federal government. The railroad and the state are required by the...