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Fox v. Consolidated Rail Corp.

decided: July 20, 1984.

PAUL F. FOX AND MORRIS S. EXLER ON BEHALF OF THEMSELVES AND ALL OTHER SIMILARLY SITUATED PERSONS WHO WITHIN SIX YEARS BEFORE THE FILING OF THIS ACTION WERE EMPLOYEES OF CONSOLIDATED RAIL CORP. AND WHO WHILE EMPLOYEES OBTAINED SETTLEMENTS WITH THE DEFENDANT IN WHICH SUPPLEMENTAL SICK PAYMENTS WERE SETOFF AGAINST THE SETTLEMENT, APPELLANTS
v.
CONSOLIDATED RAIL CORPORATION, THEMSELVES AND ON BEHALF OF ALL OTHER RAILROADS COMPRISING THE NATIONAL CARRIERS' CONFERENCE COMMITTEE AND PARTICIPATING IN THE NATIONAL SUPPLEMENTAL SICKNESS BENEFIT PLAN ISSUED BY PROVIDENT LIFE AND ACCIDENT INSURANCE COMPANY, APPELLEE



Appeal from the United States District Court for the Western District of Pennsylvania.

Aldisert, Chief Judge, Weis and Rosenn, Circuit Judges.

Author: Aldisert

Opinion OF THE COURT

ALDISERT, Chief Judge.

In this case of first impression, we must decide whether plaintiffs have presented a claim for which relief could be granted in seeking to have a federal district court reopen Federal Employers' Liability Act cases originally brought, and thereafter settled, in the Pennsylvania state courts. Prior to payment of the agreed upon settlement amount, the defendant railroad deducted from that amount premium payments it had made on behalf of each plaintiff under supplemental insurance programs. Plaintiffs, believing such deductions improper, instituted the present action to recover same. The district court denied relief and plaintiffs appealed. We affirm.

I.

The named plaintiffs allegedly suffered personal injuries in the course of their employment with defendant, Consolidated Rail Corporation, and brought damage suits in state court under the provisions of the Federal Employers' Liability Act (FELA), 45 U.S.C. §§ 51-60. Section 51 of FELA provides, in relevant part, that "every common carrier by railroad while engaged in commerce . . . shall be liable in damages to any person suffering injury . . . resulting in whole or in part from the negligence of . . . such carrier. . . ." In order to limit the defenses available to defendant railroads, § 55 states that

any contract, rule, regulation, or device . . ., the purpose or intent of which shall be to . . . exempt [the railroad] from any liability created by this chapter, shall . . . be void: Provided, That . . . such common carrier may set off therein any sum it has contributed or paid to any insurance . . . that may have been paid to the injured employee. . . .

Thus, by their express terms, § 51 allows suit and § 55 prevents the raising of potential defenses.

Each of the state court cases initiated by plaintiffs was ultimately discontinued upon proof that a settlement agreement had been reached. The railroad then deducted from the settlement amounts the disability payments paid to plaintiffs under the supplemental insurance benefit program. Plaintiffs, alleging that these deductions violated § 55 of FELA, filed the present class action in the district court below. The complaint asked for a judgment in the amount of the deductions and an order enjoining the railroad from continuing this practice in future settlements. Defendant, arguing that the action was brought under § 55, moved under Rule 12(b)(6), F. R. Civ. P., to dismiss the complaint on the grounds that the section "neither establishes nor implies a private cause of action [and] in any event the settlements . . . were not unlawful." Because a favorable decision on defendant's motion would eliminate the need for the substantial expenditures associated with class certification, the parties agreed that the court should decide the dismissal motion first.

The district court agreed with the railroad and concluded that § 55 does not create a private cause of action, citing Bay v. Western Pacific R.R., 595 F.2d 514 (9th Cir. 1979), and Fullerton v. Monongahela Connecting R.R., 242 F. Supp. 622 (W.D. Pa. 1965). The court was persuaded by the Bay rationale that § 55 was intended only to allow a FELA plaintiff to avoid a railroad defense based on a contract discharging the carrier from liability. In the words of the Bay court, the statute provided a "shield" for the employee but not a "sword" that could be used to bring a separate suit against the railroad. Accordingly, the complaint was dismissed.

On appeal, plaintiffs contend that their case is based on § 51, not § 55. Appellee responds that the personal injury claims actionable under § 51 were extinguished by the settlements. Appellants' present contentions, appellee argues, are based on intentional acts of the railroad in connection with the settlements, not negligent conduct causing bodily injury that is the sole basis of liability under § 51. We must inquire, therefore, whether any relief is now available to appellants under § 51.

II.

Preliminarily, we note that even though FELA provides for concurrent state and federal court jurisdiction, 45 U.S.C. § 56, it is firmly established that the substantive aspects of such litigation are governed by federal law. See, e.g., Lukon v. Pennsylvania R.R., 131 F.2d 327, 329 (3d Cir. 1942); see also Dice v. Akron, Canton & Youngstown R.R., 342 U.S. 359, 96 L. Ed. 398, 72 S. Ct. 312 (1952). Also, in interpreting the Act, it is important to bear in mind that it was enacted in "response to the special needs of railroad workers," Sinkler v. Missouri Pacific R.R., 356 U.S. 326, 329, 2 L. Ed. 2d 799, 78 S. Ct. 758 (1958), and should be construed liberally for the protection of railroad employees, Sowards v. Chesapeake and Ohio Ry., 580 F.2d 713, 714 (4th Cir. 1978); Lukon, 131 F.2d at 329. Further, we note that the Act is a statutory mechanism designed to give injured railroad employees a federal right to sue "in commerce" railroad ...


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