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.
Decided Nov. 4, 1996.
Reargued June 12, 1996.
99 F.3d 782
We REVERSE the order of the district court and REMAND this action with instructions to affirm the order of the ALJ.
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.
DAVID A. NELSON, Circuit Judge.
Section 504 of the Rehabilitation Act of 1973,
Finding that Conrail intentionally discriminated against plaintiff Charles Moreno in violation of
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
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
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
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....”
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.”
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.
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.
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 com-
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 federal government to enter into an agreement in which the railroad undertakes to make the necessary improvements. Generally, Mr. Tibbits explained, the railroad makes the improvements itself, although in some cases it may hire a contractor. The state then uses federal funds to reimburse the railroad for its costs. See generally
Mr. Tibbits confirmed important parts of Mr. Magoon‘s testimony, stating that to his knowledge Conrail owns all of the property on which its rails are located; that the issuance of regulatory orders has “nothing to do [with the availability of] federal funds;” and that Conrail owns the improvements—“[f]lashing light signals, gates, crossing surface and ... any of the circuitry involved“—made to the crossings. Both Mr. Tibbits and Mr. Magoon explained that if federal funds are not available for an improvement ordered by the state at a grade-crossing, the allocation of expenses depends on the type of project; the railroad must bear all the cost of repairing rough crossing surfaces and all of the cost of installing gates, whereas the cost of installing flashing light signals is borne equally by the railroad and the highway or road authority.
The relationship described by Mr. Magoon and Mr. Tibbits is outlined in a “Master Agreement for Railway-Highway Grade Crossing Improvements on Public Highways,” entered into between Conrail and the Michigan State Highway Commission on December 21, 1978. The Master Agreement provides that each project involving federal funds must receive approval from the Federal Highway Administration before any work is started; that Conrail “will bear the full cost of any items for which [it is] responsible and which are determined to be not properly a part of a Project;” and that unless the parties agree otherwise, after the installation of traffic-control devices, crossing surfaces or other improvements, the railroad will “own and operate” the improvement.
The Agreement contemplates that Conrail will be subject to federal anti-discrimination laws applicable to entities receiving federal financial assistance. In addition to mandating compliance with Department of Transportation regulations implementing Title VI of the Civil Rights Act of 1964,2 the Agreement incorporates an appendix (Appendix B) that explicitly obligates Conrail to “comply with the Regulations relative to nondiscrimination in Federally assisted programs of the Department of Transportation....”
A December 1982 amendment to the Agreement substitutes MDOT for the Highway Commission, makes clear that the Agreement “shall apply only to improvements which are federally funded,” and states that “it is the desire of the parties to obtain federal funding when possible.” The amendment makes no change in Appendix B, leaving intact the provision requiring compliance with the nondiscrimination regulations for federally assisted programs.
III
Conrail acknowledges that it receives government money for the improvement of railroad crossings. Conrail does not deny
Conrail argues that it does not “receive” federal funds, technically, because the federal government distributes the money to the State of Michigan and Conrail is at most an indirect beneficiary; that the purpose of the federal statute under which Michigan receives the funds was to promote public safety and serve the needs of commerce, not to subsidize railroads; that paying a railroad the fair market value of construction services rendered by the railroad cannot be equated with providing financial assistance to the railroad; and that Conrail receives no benefit for which it does not reimburse the state, Congress having determined that the benefit to the railroad cannot exceed 10 percent of the cost of the improvements and provision having been made for reimbursement by Conrail of amounts not exceeding 10 percent of the costs.
We do not find Conrail‘s arguments persuasive. It is true that in United States Dep‘t of Transp. v. Paralyzed Veterans of America, 477 U.S. 597, 106 S.Ct. 2705, 91 L.Ed.2d 494 (1986), the case on which Conrail relies most heavily, the Supreme Court held that commercial airlines which were indirect beneficiaries of federal funding of airports and of the air traffic control system had not been “receiving” federal financial assistance within the meaning of
It makes no difference, in our view, that the federal funds of which Conrail is the recipient come to it through the State of Michigan rather than being paid to it by the United States directly. See Grove City College v. Bell, 465 U.S. 555, 104 S.Ct. 1211, 79 L.Ed.2d 516 (1984) (holding that a college was the recipient of federal financial assistance when its students received educational grants for payment of college tuition). And see
It is equally clear, we believe, that what Conrail receives is “financial assistance“—as Conrail itself presumably recognized when it signed a Master Agreement with an appendix containing an express promise to comply with the nondiscrimination regulations for federally assisted programs. Without the federal grade-crossing program, Conrail itself would have had to pay 50 percent or 100 percent of the full cost of the improvements; with the federal program, Conrail has to pay less than 10 percent of the cost. Congress may not have chosen to say in so many words that it was subsidizing Conrail and other railroads, but actions sometimes speak louder than words—and Congress was certainly not unaware of the assistance the railroads were receiving. Cf. Grove City, 465 U.S. at 565-66, 104 S.Ct. at 1217-18, where the Court stressed that the legislative history of the Education Amendments of 1972 was “replete
The argument that Conrail merely receives the money as a quid pro quo for its services as a contractor will not wash, in our opinion. It is true that Conrail is paid for constructing the improvements, but Conrail also owns the improvements. One can obviously be the recipient of federal financial assistance in kind, see Paralyzed Veterans, 477 U.S. at 607 n. 11, 106 S.Ct. at 2712 n. 11, and the result is the same whether we think of Conrail as a recipient of dollars or as a recipient of flashers, gates, and the like.
Its ownership of the improvements has no significance, Conrail contends, because the percentage of the improvements’ costs that is “determined to represent the net benefit to the railroad” cannot exceed 10 percent, under
But Conrail is perfectly free not to accept federal funding at all. This is significant, Paralyzed Veterans suggests, Congress having limited the application of
The fact that the percentage of the construction costs “deemed” to represent the net benefit to the railroad may be set by the Secretary of Transportation anywhere in the range between zero and 10 percent certainly does not mean that the benefit is deemed to be limited to this range for purposes of determining whether the railroad receives federal financial assistance. On the contrary, the statute explicitly says that the purpose of the percentage-setting exercise is to “determine the railroad‘s share of the cost of construction,” which share “shall in no case exceed 10 per centum.”
As Judge Duggan summed the matter up, “the railroad companies receive federal funds to reconstruct or rehabilitate crossings that they are under a duty to maintain. This is unquestionably a benefit to the railroads who own the rails in need of repair. The funds go directly to the railroad to pay for improvements that they would otherwise have to pay for themselves.” Slip opinion of 8/23/93 at 11-12. If this is not “federal financial assistance,” the term is simply devoid of any normal meaning.
IV
We turn now to the question of whether punitive damages may be awarded under
This court, like most other circuits, has concluded that a private cause of action to redress violations of
In Franklin v. Gwinnett County Pub. Schs., 503 U.S. 60, 112 S.Ct. 1028, 117 L.Ed.2d 208 (1992), the Supreme Court determined that compensatory damages were available under Title IX of the Education Amendments of 1972,
The availability of punitive damages was not at issue in Franklin.3 The Franklin Court did, however, refer to the “general rule” under which, “absent clear direction to the contrary by Congress, the federal courts have the power to award any appropriate relief in a cognizable cause of action brought pursuant to a federal statute.” 503 U.S. at 70-71, 112 S.Ct. at 1035; see also Lane v. Pena, 518 U.S. 187, 116 S.Ct. 2092, 135 L.Ed.2d 486 (1996).
Under one possible interpretation, Franklin invites us to engage in a two-part inquiry here. First, we are invited to determine whether there is any clear indication of congressional intent to limit the presumption in favor of any and all appropriate damage remedies; second, absent any such indication, we are invited to determine whether the remedy in question is “appropriate.” See CSX Transp. Inc. v. Marquar, 980 F.2d 359 (6th Cir.1992). We shall use this analytical approach out of an abundance of caution, although we are by no means sure that its use is mandatory where punitive damages, as opposed to compensatory remedies, are at issue, or where statutory sanctions have been provided, as they have been for violations of
A.
In this case, as in Franklin, the usual sources of legislative history—contemporaneous committee reports, floor debates and the like—are of little help, the cause of action having been created by the courts and not by Congress. We therefore turn, as did the Franklin Court, to subsequent congressional actions.
Between 1986 and 1991 Congress amended the Rehabilitation Act three times. To understand the significance of these amendments, it is important to understand something of the background against which Congress was legislating.
After Darrone (in 1984) and before Franklin (in 1992), lower courts were divided on whether tort-style damages, such as compensatory damages for pain, suffering, and emotional distress, were available under
Neither were punitive damages thought to be available under Title VI of the Civil Rights Act of 1964, the remedies of which had been made available under
It is against this pre-Franklin background—virtual unanimity that
In 1986 Congress passed the Civil Rights Equalization Act,
Four years after enacting the 1987 Civil Rights Restoration Act, Congress passed the Civil Rights Act of 1991. The 1991 Act was the result of an extensive legislative compromise between President Bush and Congress. Subject to a monetary cap that could not exceed $300,000, the new act made punitive damages available—for the first time—under § 501 of the Rehabilitation Act,4 Title VII of the Civil Rights Act of 1964, and the Americans with Disabilities Act,
The plaintiff contends that because Congress did nothing to limit the availability of punitive damages, such damages must be presumed to have been available all along.
But generally speaking, at least, legislators are not clairvoyants. Punitive damages had never been awarded under
It is true that in Franklin the Court indicated that passage of the 1986 and 1987 Acts evinced a congressional intent not to disturb the traditional presumption in favor of compensatory damages. But case law prior to passage of the Acts could reasonably be said to have put Congress on notice of this traditional presumption. See, e.g., Guardians Ass‘n v. Civil Service Comm‘n of City of New York, 463 U.S. 582, 103 S.Ct. 3221, 77 L.Ed.2d 866 (1983) (where four justices would have allowed recovery of compensatory damages for violations of Title VI (id. at 615, 103 S.Ct. at 3239, dissenting opinion of Marshall, J.; id. at 639, 103 S.Ct. at 3252, dissenting opinion of Stevens, J., in which Brennan and Blackmun, JJ., joined) and two others left open the possibility of compensatory damages for intentional discrimination (id. at 597, 103 S.Ct. at 3229, opinion of White, J., announcing the judgment of the Court, in which Rehnquist, J., joined)); Consolidated Rail Corp. v. Darrone, 465 U.S. 624, 104 S.Ct. 1248, 79 L.Ed.2d 568 (1984) (backpay available for intentional discrimination); Pfeiffer v. Marion Center Area Sch. Dist., 917 F.2d 779, 789 (3d Cir.1990) (compensatory damages available under Title IX for intentional discrimination); Beehler v. Jeffes, 664 F.Supp. 931, 938-39 (M.D.Pa. 1986) (same). Congress had no similar notice that punitive damages might be awarded under
B.
The repeated enactment of amendments to the Rehabilitation Act without altering the existing understanding that punitive damages were not available under
In the first place, punitive damages are plainly inappropriate under
In the second place, punitive damages are not appropriate because Congress has chosen other ways to “punish” those who violate
A principle of statutory construction often applied by the Supreme Court teaches that “where a statute expressly provides a particular remedy or remedies, a court must be chary of reading others into it.” Transamerica Mortgage Advisors, Inc. v. Lewis, 444 U.S. 11, 19, 100 S.Ct. 242, 247, 62 L.Ed.2d 146 (1979), quoted in Meghrig v. KFC Western, Inc., 516 U.S. 479, 116 S.Ct. 1251, 1256, 134 L.Ed.2d 121 (1996), and Middlesex County Sewerage Auth. v. National Sea Clammers Ass‘n, 453 U.S. 1, 14, 101 S.Ct. 2615, 2623, 69 L.Ed.2d 435 (1981), as well as in numerous other cases. The Court did, of course, read other remedies into Title IX in Franklin. But there the equitable remedies suggested by the defendant were clearly inadequate. Franklin, 503 U.S. at 76, 112 S.Ct. at 1038. In the case at bar, in contrast, the plaintiff will be fully compensated for his actual injuries.
In the third place, judicial creation of a punitive damages remedy would upset a long-standing balance that the courts, absent some contrary directive by Congress, should be vigilant to preserve. “Any interpretation of
The whole issue of punitive damages is becoming an increasingly problematic one, of course, as a sort of game-show mentality leads some contemporary juries to award punitive damages in amounts that seem utterly capricious.6 The Supreme Court has repeatedly struggled with the serious constitutional questions raised by such awards (see, e.g., BMW of North America, Inc. v. Gore, 517 U.S. 559, 116 S.Ct. 1589, 134 L.Ed.2d 809 (1996); TXO Production Corp. v. Alliance Resources Corp., 509 U.S. 443, 454, 113 S.Ct. 2711, 2718, 125 L.Ed.2d 366 (1993); Pacific Mut. Life Ins. Co. v. Haslip, 499 U.S. 1, 111 S.Ct. 1032, 113 L.Ed.2d 1 (1991)), and against this background we are even less enthusiastic than we might otherwise be about creating by implication a new punitive damages remedy (if a private fine may properly be called a “remedy“) that Congress has never seen fit to create by statute. It would be particularly unseemly for the judicial branch to create a mechanism allowing a
The judgment of the district court is AFFIRMED as to both of the issues raised on appeal.
In August 1995, as a member of the panel that decided this case initially, I subscribed to the view that punitive damages are available under section 504 of the Rehabilitation Act of 1973,
On rehearing en banc, I have revisited that question, and, after much deliberation and study, I am now satisfied that I erred in my initial judgment. I now think I assigned too little significance to the expression “appropriate relief” in the foregoing quotation, particularly in light of other language on the subject of damages in Franklin, and in view of the compelling points made in part IV.B. of Judge Nelson‘s excellent opinion for the en banc court.
While I am unpersuaded by the portion of my brother‘s opinion which posits that Congress has indicated its intention not to allow punitive damages in section 504 actions, I recognize that the point is one subject to reasonable dispute, and I confess that my brother has made a compelling if, to me, unpersuasive case for the congressional intent argument.
In sum, then, I concur in the majority view that Consolidated Rail Corporation has subjected itself to the prohibitions of section 504 by accepting federal funds for its railroad crossing improvements. I also now agree that punitive damages are not available under section 504, because, for the reasons developed in part IV.B. of Judge Nelson‘s opinion, punishment is not “appropriate relief” within the context of that statute.
BOYCE F. MARTIN, Jr., Chief Judge, concurring in part and dissenting in part.
I join Judge Daughtrey‘s opinion concurring in part and dissenting in part. I agree that the Consolidated Rail Corporation has received federal assistance, and I agree with Judge Daughtrey that punitive damages are appropriate in Section 504 cases.
DAUGHTREY, Circuit Judge, concurring in part and dissenting in part.
As noted in the majority opinion, Section 504 of the Rehabilitation Act of 1973 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....
I agree with the majority that Consolidated Rail is “receiv[ing] Federal financial assistance” within the meaning of
[t]he general rule ... is that absent clear direction to the contrary by Congress, the federal courts have the power to award any appropriate relief in a cognizable cause of action brought pursuant to a federal statute.
Id. at 70-71, 112 S.Ct. at 1035. This clear directive must guide our thinking in determining the availability of punitive damages in actions under
Applying Franklin to the case at hand, two questions follow. First, we must ask whether Congress intended to limit the application of this general principle in
When we examine the state of the law surrounding
The second question is whether punitive damages are “appropriate” in
The majority‘s footnote that “it is by no means clear that Franklin has more than peripheral relevance to the case at bar” rests on the observation that Franklin spoke in compensatory terms such as “mak[ing] good the wrong done” and “redress[ing] injuries.” Franklin, 503 U.S. at 66, 112 S.Ct. at 1033. But this analysis ignores the Supreme Court‘s directive in Franklin to permit “any appropriate relief.”
The majority also relies extensively on pre-Franklin case law, which was divided on the propriety of all types of damages in
Finally, I cannot help but observe that the majority‘s conclusion that punitive damages are inappropriate under
For these reasons, I respectfully must dissent from Part IV of the majority‘s opinion.
DAVID A. NELSON
UNITED STATES CIRCUIT JUDGE