Schrader v. Fred A. Ray, M.D., P.C.

• Decision Date: 16 July 2002
• Docket Number: No. 00-5224.,00-5224.
• Citation: 296 F.3d 968
• Parties: Alexis Kim SCHRADER, Plaintiff-Appellant, v. FRED A. RAY, M.D., P.C., an Oklahoma Professional Corporation, Defendant-Appellee. United States of America, Amicus Curiae.
• Court: U.S. Court of Appeals — Tenth Circuit

296 F.3d 968

Alexis Kim SCHRADER, Plaintiff-Appellant, v. FRED A. RAY, M.D., P.C., an Oklahoma Professional Corporation, Defendant-Appellee.

United States of America, Amicus Curiae.

No. 00-5224.

United States Court of Appeals, Tenth Circuit.

July 16, 2002.

Patrick W. Cipolla (Kristin L. Oliver with him on the brief), Gable & Gotwals, Tulsa, OK, for Plaintiff-Appellant.

F. Michael McGranahan, Tulsa, OK, for Defendant-Appellee.

Seth M. Galanter, Attorney (Jessica Dunsay Silver, Attorney, with him on the brief), Department of Justice, Washington, DC, for Amicus Curiae, United States of America.

Before EBEL, McKAY, and LUCERO, Circuit Judges.

EBEL, Circuit Judge.

Plaintiff-appellant Alexis Kim Schrader appeals from the district court's order granting summary judgment in favor of defendant-appellee Fred A. Ray, M.D., P.C. ("Ray"), on Schrader's complaint brought pursuant to § 504 of the Rehabilitation Act of 1973, codified at 29 U.S.C. § 794 (the "Rehabilitation Act"). The district court held that Ray is not subject to liability under § 504 because it has less than fifteen employees. In this appeal, we hold that § 504(d) of the Rehabilitation Act, which incorporates the standards of the Americans with Disabilities Act, 42 U.S.C. § 12101, et seq. ("ADA"), for purposes of determining whether the Rehabilitation Act has been violated, does not incorporate the ADA definition of an "employer," and thus even employers with fewer than fifteen employees are subject to the Rehabilitation Act's requirements so long as they are recipients of federal assistance. We further hold that Ray is not entitled to urge on appeal, as an alternative ground for affirmance, an argument rejected by a magistrate judge in his report and recommendation to which Ray failed to file a timely objection. Accordingly, we REVERSE and REMAND for further proceedings.

BACKGROUND

Ray employed Schrader as a medical records clerk/receptionist. In 1984, Schrader was diagnosed with kidney cancer. She underwent surgery to remove multiple lipomas in October 1997. In November 1997, she was diagnosed with a brain tumor. She had kidney surgery on January 12, 1998, and was unable to return to work for several months. Schrader claims that during this period, her supervisor repeatedly reassured her that her job would be available when she was ready to return to work. Beginning in March 1998, after it was determined that the brain tumor was non-cancerous, Schrader alleges she was able to work and attempted to return to work on several occasions, but Ray rebuffed her attempts to return to work, then ultimately terminated her employment because of her disability. Schrader filed a one-count suit against Ray under the Rehabilitation Act.

Ray moved to dismiss Schrader's complaint on two grounds, arguing that (1) it was not subject to the Rehabilitation Act because it did not have fifteen or more employees; and (2) Schrader could not bring a cause of action against Ray under § 504 because she was not an intended beneficiary of any federal funds received by Ray. A federal magistrate judge assigned to consider the motion to dismiss prepared a report and recommendation proposing that the motion be denied on both grounds. Ray filed a timely objection to the magistrate judge's report and recommendation; however, its objection addressed only the magistrate judge's determination on the "fifteen or more employees" issue. Ray did not object to the magistrate judge's recommendation that the motion be denied on the issue of whether Schrader was an intended beneficiary of federal funds.

The district court subsequently held a status conference at which it entered an order rejecting the magistrate judge's report and recommendation. In this order, which appears in the record only in the form of a docket entry, the district court also converted Ray's motion to dismiss to a motion for summary judgment and requested further briefing from the parties.¹ Ray filed a supplemental brief in which it renewed its arguments on both the "fifteen or more employees" issue and the "intended beneficiary" issue. Schrader filed a response brief, also addressing both issues. The district court entered an order granting summary judgment to Ray only on the "fifteen or more employees" issue; it did not discuss the "intended beneficiary" issue other than to note that Ray had failed to object on this ground to the magistrate judge's recommendation.

DISCUSSION

I.

"We review a district court's grant of summary judgment de novo, applying the same legal standard used by the district court." Hollins v. Delta Airlines, 238 F.3d 1255, 1257 (10th Cir.2001). Summary judgment is proper if the moving party shows "there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). "When applying this standard, we view the evidence and draw reasonable inferences therefrom in the light most favorable to the nonmoving party." Scull v. New Mexico, 236 F.3d 588, 595 (10th Cir.2000) (internal quotation marks omitted).

II.

Schrader brought her cause of action under § 504 of the Rehabilitation Act, which states that "[n]o otherwise qualified individual with a disability in the United States ... shall, solely by reason of her or his disability, be excluded from the participation in, be denied the benefits of, or be subjected to discrimination under any program or activity receiving Federal financial assistance." 29 U.S.C. § 794(a). This statute makes available a private right of action to qualified individuals who have been subjected to employment discrimination by a program or activity receiving federal financial assistance.² Niehaus v. Kan. Bar Ass'n, 793 F.2d 1159, 1162 (10th Cir.1986). A plaintiff makes out a prima facie case of employment discrimination under the Rehabilitation Act by showing that

(1) plaintiff is handicapped under the Act; (2) he is "otherwise qualified" to participate in the program; (3) the program receives federal financial assistance; and (4) the program discriminates against plaintiff.

Powers v. MJB Acquisition Corp., 184 F.3d 1147, 1151 (10th Cir.1999).

The Rehabilitation Act does not restrict its definition of "program or activity" in the employment discrimination context based upon the number of the defendant's employees. In 1992, however, Congress amended the Rehabilitation Act to provide that in employment discrimination cases alleging violations of the Rehabilitation Act, "[t]he standards used to determine whether this section [of the Rehabilitation Act] has been violated ... shall be the standards applied under title I of the Americans with Disabilities Act." 29 U.S.C. § 794(d). The ADA defines an employer as "a person engaged in an industry affecting commerce who has 15 or more employees for each working day in each of 20 or more calendar weeks in the current or preceding calendar year." 42 U.S.C. § 12111(5)(A) (emphasis added). However, § 504 of the Rehabilitation Act does not use the term "employer," but rather imposes liability upon entities (or programs or activities) who receive federal assistance. See 29 U.S.C. § 794.

It is undisputed that Ray employs fewer than fifteen employees. The central question posed in this case, therefore, is whether § 504(d) of the Rehabilitation Act incorporates the ADA's "fifteen or more employees" definition of employer as a limitation on the definition of entities covered by the Rehabilitation Act.

Neither the Supreme Court nor this circuit has yet resolved this issue.³ Other courts have analyzed whether § 504(d) makes the ADA definition of "employer" applicable to the Rehabilitation Act, and they have reached conflicting conclusions. Compare Johnson v. N.Y. Hosp., 897 F.Supp. 83, 86 (S.D.N.Y.1995) (holding that 1992 amendment to Rehabilitation Act did not incorporate the ADA definition of employer), aff'd, 96 F.3d 33 (2d Cir.1996), with Hiler v. Brown, 177 F.3d 542, 547 (6th Cir.1999) (appearing to assume that Rehabilitation Act's incorporation of ADA standards extends to definition of employer); Romand v. Zimmerman, 881 F.Supp. 806, 812 (N.D.N.Y.1995) ("The definition of `employers' found in the ADA is also applicable to the Rehabilitation Act."); Haltek v. Vill. of Park Forest, 864 F.Supp. 802, 803 (N.D.Ill.1994) (same).

Of the cases that have thus far considered the issue, we find the analysis in Johnson to be the most convincing:

In enacting the 1992 amendment of the Rehabilitation Act, Congress intended that the standard of "reasonable accommodations" that employers must make under the ADA would serve as the standard in actions alleging Rehabilitation Act violations in the employer-employee context. 42 U.S.C. § 12112(b)(5)(A). This is more easily understood once we recognize that the Rehabilitation Act provides a broader prohibition than one limited to discrimination that takes place in the employment setting.... [T]he Rehabilitation Act protects, for example, students at educational institutions and patients at medical facilities, with no explicit exception for entities with less than 15 employees.

The Rehabilitation Act's application to the employment context was similarly not dependent on an [entity's] number of employees, and did not become so as a result of the 1992 amendment. The language of the amendment states that the ADA's standards are to be used only "to determine whether [the Rehabilitation Act] has been violated." 29 U.S.C. § 794(d). What the amendment does not state is that the standards of the ADA are to be used to determine whether an employer is even subject to the Rehabilitation Act in the first instance.

Johnson, 897 F.Supp. at 86.

We find this reasoning persuasive. We believe that § 504(d) addresses only the substantive standards for determining what conduct violates the Rehabilitation Act, not the definition of who is covered under the Rehabilitation Act. In this regard, Ray's reliance on McDonald v. Commonwealth of Pennsylvania, ...