Amicus Curiae Brief — Southern Pacific Transportation Co. v. Hernandez

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No. 91-293

IN THE

Supreme Court of the United States

OCTOBER TERM, 1991

SOUTHERN PACIFIC TRANSPORTATION Co.,

i Petitioner,

JOSE HERNANDEZ,

Respondent.

On Petition for Writ of Certiorari to the

Texas Court of Appeals

MOTION FOR LEAVE TO FILE BRIEF AMICUS CURIAE

AND BRIEF AMICUS CURIAE OF THE

ASSOCIATION OF AMERICAN RAILROADS

IN SUPPORT OF PETITIONER

JOHN BROADLEY

DAVID W. OGDEN *

DONALD B. VERRILLI, JR.

J ULIE M. CARPENTER

JENNER & BLOCK

21 Dupont Circle, N.W.

Washington, D.C. 20036

(202) 223-4400

ROBERT W. BLANCHETTE

Vice President-Law and

General Counsel

ASSOCIATION OF AMERICAN

RAILROADS

American Railroads Building

50 F Street, N.W.

Washington, D.C. 20001

(202) 639-2502

Counsel for Amicus Curiae

Association of American

Railroads

September 18, 1991 * Counsel of Record

WILSON - Epgs PRINTING Co., INC. - 789-0096 - WASHINGTON, D.C. 20001

IN THE

Supreme Court of the United States

OCTOBER TERM, 1991

- No. 91-293

SOUTHERN PACIFIC TRANSPORTATION CoO.,

" Petitioner,

JOSE HERNANDEZ,

Respondent.

On Petition for Writ of Certiorari to the

Texas Court of Appeals

MOTION FOR LEAVE TO FILE BRIEF AMICUS CURIAE

The Association of American Railroads (“AAR”) re-

fully requests leave to file the attached brief amicus

curiae in support of the Petiticn for Certiorari in this

case. Petitioner has consented to the filing of the brief.

Counsel for Respondent has not responded to several re-

quests for consent.

AAR is a non-profit trade association representing the

Nation’s major railroads. Its members account for ap-

proximately 85 percent of the line haulage, employ 90

percent of the workers, and produce approximately 93

percent of the freight revenues of all railroads in the

United States. AAR represents its member railroads be-

fore courts, agencies, and the Congress in matters of com-

mon concern. AAR files briefs as amicus curiae before

administrative agencies and the courts in cases of interest

to its members.

The issue presented by the petition concerns this

Court’s decision in Norfolk & Western Ry. v. Liepelt, 444

U.S. 490 (1980). In Liepelt, this Court established as a

matter of federal common law that juries determining

damages for personal injury actions under the Federal

Employers’ Liability Act (FELA) must be instructed

that a plaintiff’s damages award is not subject to income

tax. The question presented in this case is whether a

trial court’s refusal so to instruct the jury in a FELA

action is reversible error in all cases or only in those in-

stances where the face of the verdigt clearly shows that

the jury_improperly inflated the veydict,to compensate

for taxes it mistakenly believed would be assessed.

All members of the AAR are subject to FELA, and an

AAR survey shows that in 1990 alone the railroad indus-

try paid out close to one billion dollars in FELA claims.'

Total gross operating revenues for the year were approxi-

mately $30 billion.* AAR members are confronted with

defending thousands of FELA lawsuits each year, and

are therefore vitally interested in practice and procedure

under FELA.* Given the substantial amount of money

paid out under FELA, the possibility of improperly in-

flated awards creates a significant financial burden on

AAR members. If the Texas appellate court’s decision is

allowed to stand, AAR’s members will have been deprived

of the protection afforded them by Liepelt.

AAR seeks to file this brief to emphasize the impor-

tance of this case to the railroad industry and to support

Petitioner’s position that the refusal of a court to prop-

erly instruct the jury pursuant to Liepelt cannot be con-

1 AAR 1990 Report of Claims and Litigation Experience at 2-9,

2-10. Railroads paid out $877,431,702 in claims. When the cost of

administering and defending claims, is considered, the total cost

exceeds one billion dollars.

2 Id.

%In 1989 nearly 6,000 FELA suits were filed, and in 1990 nearly

8,000. Jd. at 2-9.

sidered harmless error.

Given the widespread conflict

among the state and federal courts concerning this issue

—including state courts of last resort and federal courts

of appeals—amicus seeks the opportunity to urge this

Court to review the decision below.

For the foregoing reasons, the Association of American

Railroads respectfully requests that leave to file the at-

tached brief amicus curiae in support of the petition for

certiorari be granted.

September 18, 1991

Respectfully submitted,

JOHN BROADLEY ~

DAVID W. OGDEN *

DONALD B. VERRILLI, JR.

JULIE M. CARPENTER

JENNER & BLOCK

21 Dupont Circle, N.W.

Washington, D.C. 20036

(202) 223-4400

ROBERT W. BLANCHETTE

Vice President-Law and

General Counsel

ASSOCIATION OF AMERICAN

RAILROADS

American Railroads Building

50 F Street, N.W.

Washington, D.C. 20001

(202) 639-2502

Counsel for Amicus Curiae

Association of American

Railroads

* Counsel of Record

ee

QUESTIONS PRESENTED

I. Whether the Texas Court of Appeals, in conflict

with the United States Court of Appeals for the Fifth

Circuit as well as the courts of several States, erroneously

concluded that a trial court’s refusal to instruct the jury,

in conformity with Norfolk & Western Ry. v. Liepelt, 444

U.S. 490 (1980), that a damages award would not be

subject to income tax, required reversal only when the

resulting jury verdict exceeded the highest amount of

damages supported by the plaintiff’s evidence at trial.

II. Whether the Texas Court of Appeals, in conflict

with the courts of other States, erroneously concluded that

state and not federal law should govern the issue of when,

if ever, a jury verdict can be affirmed notwithstanding a

trial court’s failure to give a Liepelt instruction.

-?,

(i)

TABLE OF CONTENTS

Page

TABLE OF AUTHORITIES .................. <a, ora iv

INTEREST OF AMICUS CURIABE ............2.....0....0:::000- l

INTRODUCTION AND SUMMARY OF ARGU-

Re oe a ae cabcgieeaadendanieamentenies 1

REASONS FOR GRANTING THE WRIT .................. 4

aga. aneahiacnediubencan aemenpanenstamiees 13

(iil)

iv

TABLE OF AUTHORITIES

CASES: Page

Anderson v. Burlington Northern, Inc., 709 P.2d

641 (Mont. 1985), cert. denied, 476 U.S. 1174

(1986) : 5, 7,8

Bair v. St. Louis-San Francisco Ry., 647 S.W.2d

507 (Mo. 1983), cert. denied, 464 U.S. 830

(1983) assess 7

Barnette v. Doyle, 622 cas 1349 (Wyo. 1981) x

Caribe Tugboat Corp. v. Duffy, 427 So. 2d 227

(Fla. Dist. Ct. App. an eee denied, 436

So. 2d 98 (1983), cert. denied, 464 U.S. 1041

(1984) .. Pra ADELE 6

Dehn v. Prouty, 321 N.W. od 534 (S. D. 1982) . %

Faulkenberry v. Kansas City Southern Ry., 661

P.2d 510 (Okla. 1983), cert. denied, 464 U.S.

CEO CIDER) ..nccececec-<e. | 7,9

Flanigan v. Burlington Northern Inc.. 632 F.2d

880 (8th Cir. 1980), cert. denied, 450 U.S. 921

) | aS ik ere ae ee

Fritz v. Consolidated Rail Corp., 508 N.Y.S.2d 422,

501 N.E.2d 30 (1986) 7

Good Samaritan Hosp. Assoc., Inc. v. Saylor, 495

So.2d 782 (Fla. Ct. App. 1986) 7

Gorham v. Farmington Motor Inn, Inc., 271 A.2d

94 (Conn. 1970) ......... 7

Green v. Denney, 742 P.2d 639 (Or. Ct. App.

1987), review denied, 749 P.2d 136 x

Gulf Offshore Co. v. Mobil Oil Corp., 453 U.S. 473

(1981) 10, 12

Henninger v. Southern Pacific Co., 59 Cal. Rtpr.

76 (Cal. Ct. App. 1967) 7

Highshew v. Kushto, 184 N.E.2d 555 (Ind. 1956),

pet. denied, 185 N.E.2d 215 8

Maricle v. Spiegel, 329 N.W.2d 80 (Neb. 1983) ~

Marlow v. Atchison, Topeka & Santa Fe Ry., 671

P.2d 438 (Colo. Ct. App. 1983) 6,8

Marynik v. Burlington Northern, Ine., 317

N.W.2d 347 (Minn. 1982) 6,8

1 ssi atlantida mies a

Vv

TABLE OF AUTHORITIES—Continued

Page

Nesmith v. Texaco, 491 F. Supp. 561 (W.D. La.

1980), modified in part per curiam on other

grounds, 727 F.2d 497 (5th Cir. 1984), cert.

denied, 469 U.S. 855 (1984) .....00000000000.. 10

Newlin v. Foresman, 482 N.E.2d 319 (Ill. Ct.

pS | een 8

Norfolk & Western Ry. v. Liepelt, 444 U.S . 490

(1980) .. ao ae: passim

O'Byrne v. ‘St. “Louis South we ester rn Ry., 632 F.2d

pt ene ws++20, 4, 6, 9

Onion v. Chicago & Illinois Midland Ry., 547

N.E.2d 721 (Ill. App. Ct. 4th Dist. 1989) 6

Paducah Area Public Library v. Terry, 655 S.W.2d

1923 (Ky. Ct. App. 1983) x

Psychiatric Institute of Washinyton v. Allen, 509

A.2d 619 (D.C. Ct. App. 1986) x

Rivera v. Philadelphia Theological Seminary, 507

p> Bel. S| 8

Scallon v. Hooper, 293 S.E.2d 843 (N.C. Ct. App.

1982), review denied, 295 S.E.2d 480 8

Seaboard Systems R.R. Inc. v. Cantrell, 520 So. 2d

479 (Miss. 1987) 7,8, 11

Sheff v. Conoco, Inc., 311 S.E.2d 14 (N.C. Ct.

pS |} ee 6

Solomon v. Warren, 540 F.2d ‘177 (5th Cir. 1976),

cert. dismissed sub nom. Warren v. Serody, 434

U.S. 801 (1977) ....... ad 10

South Buffalo Ry. v. Ahern, 344 U.S. 367 (19538) 9

Southern Pacific Transportation Co. v. Hernandez,

804 S.W.2d 557 (Tex. Ct. App. 1991) 2,3,4,9

Stover v. Lakeland Square Owners Assoc., 434

N.W.2d 866 (Iowa 1989) x

Tennis v. General Motors Corp., 625 S.W.2d 218

(Mo. Ct. App. 1981) x

Terveer v. Baschnagel, 445 N.E.2d 264 (Ohio Ct.

Lee App. 1982) x

W.M. Bashlin, Co. v. Smith, 643 S.W.2d 526 (Ark.

1982)

~]

vi

TABLE OF AUTHORITIES—Continued

Page

Watson v. Norfolk & Western Ry., 507 N.E.2d

468 (Ohio Ct. App. 1987) ....................--2-cee0seeceee- 5,9

Williford v. L.J. Carr Invest., Inc., 783 P.2d 235

8° RMR er aeons epee PRET CEN SEES SOR 7

Yost v. Union R.R., 551 A.2d 317 (Pa. 1988), app.

Gonted, G6R A.Da GET CIGGD) ...----0n-scecncececevceeccceeee-e- 6,9

Young v. Environmental Air Products, Inc., 665

P.2d 88 (Ariz. Ct. App. 1982) affirmed as modi-

SF I I issccschassaca-caencaceevtoness Guamankoadeosnaanicdesats 7

Yukon Equipment, Inc. v. Gordon, 660 P.2d 428

III 2c on casei hc ance sede conmeianeakaninngesenoncbietrar 7

OTHER:

AR ERAS NOE A Ss ent tic OSE Alot saa e LI 10

I ee een 2

45 U.S.C. § 56 ...........: eae ARES ANE hI AB st, Ona 2,5

Hill, Substance and Procedure in State FELA Ac-

tions—The Converse of the Erie Problem?, 17

og A Sk, | Se ee ee 9

Note, “Income Taxation and the Calculation of

Tort Damages Awards: The Ramifications of

Norfolk & Western Ry. v. Liepelt,” 38 WASH. &

Re Bi es ee ED ie cree 10

R. Stern, E. Gressman & S. Shapiro, SUPREME

COURT PRACTICE § 4.4 (6th ed. 1986) —................. 9

IN THE

Supreme Court of the United States

OCTOBER TERM, 1991

No. 91-293

SOUTHERN PACIFIC TRANSPORTATION CoO.,

. Petitioner,

JOSE HERNANDEZ,

Respondent.

On Petition for Writ of Certiorari to the

Texas Court of Appeals

BRIEF AMICUS CURIAE OF THE

ASSOCIATION OF AMERICAN RAILROADS

IN SUPPORT OF PETITIONER

INTEREST OF AMICUS CURIAE

The interest of amicus is set forth in the accompanying

Motion for Leave to File Brief Amicus Curiae.

INTRODUCTION AND SUMMARY OF ARGUMENT

In Norfolk & Western Ry. v. Liepelt, 444 U.S. 490

(1980), this Court ruled that in actions arising under

federal law, a trial court must instruct a jury that dam-

ages awards are not subject to federal or state income

tax. This case presents an important and recurring issue

that, since Liepelt was decided, has divided the Nation’s

federal and state appellate courts: whether failure to in-

struct a jury as required by Liepelt is harmless error

when the damages awarded fall within the range that

had been requested by the plaintiff. Amicus urges this

2

Court to grant certiorari to establish a uniform national

standard for appellate review of the continuing stream of

cases in which trial courts have failed to give the Liepelt

instruction.

This case arises under the Federal Employers’ Liability

Act, 45 U.S.C. § 51 et seg. (“FELA”). Petitioner South-

ern Pacific Transportation Company (‘Southern Pacific’”’)

was sued under FELA by one of its employees, Respond-

ent Jose Hernandez, in Texas state court.! Mr. Herandez,

a laborer, sought damages for injuries incurred in the

course of his employment with Southern Pacific. He pre-

sented expert testimony as to the present value of his

lost future earnings. After offsets for contributory negli-

gence and other matters, Hernandez received a damages

award of $422,295.47, an amount within the range of

damages identified by Mr. Hernandez’s expert. See South-

ern Pacific Transportation Co. v. Hernandez, 804 S.W.2d

557, 561 (Tex. Ct. App. 1991).

At trial, Southern Pacific made a timely request for the

following jury instruction:

Under the law, any award made to the Plaintiff in

this case is not subject to federal or state income tax.

Therefore, in computing the amount of damages

which you may find the Plaintiff is entitled to recover

for past or future lost earnings, Plaintiff is entitled

to recover only the net, after-tax income.

This instruction was drawn verbatim from the pattern

instructions of the Fifth Circuit District Judges Asso-

ciation, and conformed to the requirements this Court

established in Norfolk & Western Ry. v. Liepelt, 444 U.S.

at 496-98. Liepelt, a FELA case like the present one,

squarely held that juries adjudicating damages under

federal recovery statutes such as FELA must be in-

structed not to adjust damages awards upward to com-

1FELA permits concurrent state and federal jurisdiction. 45

U.S.C. § 56.

3

pensate for presumed income tax liabilities.2 The state

trial court in this case, however, without explanation,

refused Southern Pacific’s requested Liepelt instruction,

and gave no instruction about income tax.

On appeal, Southern Pacific raised its properly pre-

served challenge to the jury verdict on the basis of the

trial court’s refusal to give the requested Liepelt instruc-

tion. The Court of Appeals of Texas agreed that-the trial

court’s refusal to give the instruction was error, 804

S.W.2d at 561, but, finding that the error was harmless,

nonetheless affiry..ced the verdict.

In determining whether the trial court’s error required

reversal, the Court of Appeals noted a split in governing

federal authority on whether the error was reversible: the

Fifth Circuit requires reversal whether or not the dam-

ages award exceeded the requested damages, and the

Eighth Circuit requires evidence of inflation of the award.

Compare O’Byrne v. St. Louis Southwestern Ry., 632 F.2d

1285 (5th Cir. 1980), with Flanigan v. Burlington North-

ern Inc., 632 F.2d 880 (8th Cir. 1980), cert. denied, 450

U.S. 921 (1981). To resolve the question, however, the

Court of Appeals—in conflict with the approach taken by

other States—-looked not to federal law but to a provision

of Texas law on harmless error. The court below specifi-

cally relied on Texas Rule of Appellate Procedure

2In Liepelt, a wrongful death action brought im Illinois state

court under FELA, the jury awarded $775,000 to the plaintiff.

Liepelt, 444 U.S. 497. The damages estimate provided by the plain-

tiff’s expert was $302,000. The Court noted the difference between

the award and the plaintiff’s evidence and speculated that it was

possible that the jury, composed of tax-conscious citizens, assumed

that the award would be subject to tax and therefore inflated the

award to compensate for that possible tax. The Court held, how-

ever, that “[w]hether or not” its speculation as to what the jury

assumed was accurate, “it was error to refuse the requested in-

struction.” Jd. at 497, 498. The Court accordingly reversed the

decision, and remanded the case for a new trial with a proper in-

struction that the award in a FELA case would not be taxed.

4

81(b) (1), which provides that errors of law do not justify

reversal of trial court judgments unless “the error com-

plained of amounted to such a denial of the rights of the

appellant as was reasonably calculated to cause and prob-

ably did cause rendition of an improper verdict.” 804

S.W.2d at 561.

Applying this state-law standard, the Court of Appeals

concluded that the trial court’s error did not cause an

improper verdict for two related reasons. First, the

verdict did not exceed the range of damages Respondent’s

expert had claimed was supportable on the evidence. Sec-

ond, Respondent’s expert testified that he had taken in-

come tax liability into account when estimating damages.

Under these circumstances, the court concluded, the stand-

ard of Tex. R. App. P. 81/b) (1) was not satisfied. The

Texas Supreme Court denied review. See Appendix B to

Petition for Certiorari at 14a.

REASONS FOR GRANTING THE WRIT

The Petition for Certiorari correctly identifies a con-

flict in the Federal Courts of Appeals as to whether, and

under what circumstances, a reviewing court may affirm

a jury verdict despite the trial court’s failure to give a

Liepelt instruction. In the wake of Liepelt, the Fifth Cir-

cuit held that a FELA damages award must be reversed

because of failure to give a proper income tax instruc-

tion, irrespective of any evidence of inflation of the

award. See O’Byrne v. St. Louis Southwestern Ry., 632

F.2d at 1286. The Eighth Circuit, in contrast, requires

evidence of inflation to justify a reversal. See Flanigan

v. Burlington Northern Inc., 632 F.2d at 889.

Without more, the conflict in circuit authority identified

by Petitioner justifies plenary review. See Supreme Court

Rule 10.1(A). The conflict identified by Petitioner is,

however, symptomatic of a pervasive and continuing

confusion in this Nation’s appellate courts—state as well

as federal—over the principles that should govern appel-

5

late review of trial court failure to give a Liepelt in-

struction. The court below is not the first state court to

recognize that the “Federal Circuit Courts of Appeal

are not in agreement on this issue,” see Anderson v.

Burlington Northern, Inc., 709 P.2d 641, 646 (Mont.

1985), cert. denied, 476 U.S. 1174 (1986), or to struggle

with the proper standards for reviewing Liepelt error. As

amicus will show, the persistence of divergent results in

state courts adjudicating FELA cases—and even be-

tween state and federal courts for the same jurisdiction—

underscores the need for plenary review of the question

presented here. The time has come for this Court to

establish a uniform national standard for determining

when, if ever, Liepelt error may be deemed harmless.

Because FELA actions may be brought in state as

well as federal court, 45 U.S.C. § 56, state courts are

frequently responsible for applying the federal law neces-

sary to resolve those cases. The appellate courts of four-

teen States have faced the question whether a trial court

commits reversible error when it fails to comply with

Liepelt. Of those fourteen, four have held that a trial

court’s refusal to give the Liepelt instruction constitutes

reversible error, without reference to the amount of the

award. Ten States have held that, although trial courts

err in refusing to give the instruction, the error is harm-

less when the amount of an award does not suggest that

the jury has inflated it to compensate the plaintiff for

taxes, or, conversely, that the error requires reversal

when it appears the jury has inflated the award.

For example, the Ohio Court of Appeals held in 1987

that a trial court’s refusal to give the Liepelt instruction

invariably mandates reversal, without regard to the size

of the verdict. Watson v. Norfolk & Western Ry., 507

N.E.2d 468 (Ohio Ct. App. 1987). The plaintiff argued

on appeal that because defendant could not show that

the jury inflated the verdict due to tax considerations,

reversal was improper. The court noted, however, that

6

“(t]he Supreme Court [in Liepeit] did not require proof

of an inflated award before reversing for failure to give

the tax instruction.” Jd. at 471. Citing the Fifth Cir-

cuit’s decision in O’Byrne v. St. Louis Southwestern Ry.,

632 F.2d 1285 (5th Cir. 1980), the Ohio court reversed

the trial court and remanded for a new trial.

Three other state courts have reached similar results.

See Onion v. Chicago & Illinois Midland Ry., 547 N.E.2d

721, 723 (Ill. App. Ct. 4th Dist. 1989) (noting, without

reference to amount of award, that “since the instant

case is based on Federal law, the Liepelt instruction

should have been given to the jury. The trial court’s

failure to do so was reversible error.”) ; Sheff v. Conoco,

Inc., 311 S.E.2d 14 (N.C. Ct. App. 1984) (reversing

decision without reference to amount of award when trial

court refused instruction) ; Yost v. Union R.R., 551 A.2d

317 (Pa. 1988) (finding reversible error without refer-

ence to amount of jury award when trial court refused

to give Liepelt instruction), appeal denied, 562 A.2d 827

(1989).

Other States have held that a trial court’s failure to

give the Liepelt instruction is reversible error only if

the damages award suggests prejudice. Relying fre-

quently on Flanigan v. Burlington Northern, Inc., 632

F.2d 880 (8th Cir. 1980), these state courts typically

compare the amount of the jury award with the evidence

presented at trial. If the award does not exceed the dam-

ages claimed by the plaintiff, those courts have concluded

that the jury did not inflate the amount to compensate

for presumed income tax liability. See Marlow v. Atchi-

son, Topeka & Santa Fe Ry., 671 P.2d 438 (Colo. Ct.

App. 1983) (harmless error where defendant cannot show

jury inflated award) ; Caribe Tugboat Corp. v. Duffy, 427

So. 2d 227 (Fla. Dist. Ct. App. 1983) (harmless error

considering evidence presented and relative amount of

award), review denied, 486 So. 2d 98 (1983), cert.

denied, 464 U.S. 1041 (1984); Marynik v. Burling-

7

ton Northern, Inc., 317 N.W.2d 347 (Minn. 1982) (harm-

less error when disparity between jury award and evi-

dence may be based on fact that damages for pain and

suffering are recoverable) ; Seaboard Systems R.R. Inc.

v. Cantrell, 520 So. 2d 479 (Miss. 1987) (when court

could not say whether jury inflated award for tax rea-

sons or not, error was reversible) ; Bair v. St. Louis-San

Francisco Ry., 647 S.W.2d 507 (Mo. 1983) (en banc)

(harmless error although jury awarded amount in excess

of plaintiff's projected income because pain and suffering

were proper components of verdict and no other evidence

suggested jury inflated award), cert. denied, 464 U.S.

830 (1988) ; Anderson v. Burlington Northern, Inc., 709

P.2d 641 (Mont. 1985) (harmless error when jury awards

the amount, or less than the amount, projected by econ-

omist) ; Fritz v. Consolidated Rail Corp., 508 N.Y.S.2d

422, 501 N.E.2d 30 (1986) (reversible error where jury

awarded sum in excess of what counsel asked for in

summation) ; Faulkenberry v. Kansas City Southern Ry,.,

661 P.2d 510 (Okla. 1983) (harmless error where no dis-

parity between amount of award and evidence), cert.

denied, 464 U.S. 850 (1983) .*

% The confusion shows no signs of abating. The fourteen deci-

sions discussed above are not limited to the one or two years follow-

ing the 1980 Liepelt decision. In the instant case, of course, the

Texas appellate court first faced the issue in 1991. And, between

1982 and 1991, with the exception of 1990, at least one state ap-

pellate court per year has ruled on the reversible/harmless error

issue. Nor is the case law evolving toward a consistent position.

It is likely that state appellate courts will continue to face this

issue despite Liepelt’s mandate. Many States have rejected the

Liepelt instruction in cases arising under state law. E.g., Yukon

Equipment, Inc. v. Gordon, 660 P.2d 428, 434 (Alas. 1983), over-

ruled on other grounds, Williford v. L.J. Carr Invest., Inc., 783

P.2d 235 (Alas. 1989); Young v. Environmental Air Products, Inc.,

665 P.2d 88, 95 (Ariz. Ct. App. 1982) affirmed as modified, 665 P.2d

40; W.M. Bashlin, Co. v. Smith, 643 S.W.2d 526, 532 (Ark. 1982) ;

Henninger v. Southern Pacific Co., 59 Cal. Rptr. 76, 80 (Cal. Ct.

App. 1967) ; Gorham v. Farmington Motor Inn, Inc., 271 A.2d 94, 96-

97 (Conn. 1970); Good Samaritan Hosp. Assoc., Inc. v. Saylor, 495

8

The divergence in approach is substantial even among

the state courts that apply harmless error analysis. In

some jurisdictions, the burden appears to be on the de-

fendant to demonstrate prejudice from the failure to give

instructions. See, e.g., Marlow v. Atchison, Topeka &

Santa Fe Ry. Co., 671 P.2d at 442-43 (harmless error

where “defendant failed to point to any evidence that the

jury inflated the award.”) In others, the plaintiff appears

to have the burden to show the absence of prejudice. Sea-

board Systems R.R., Inc. v. Cantrell, 520 So.2d at 485

(reversible error when court could not say whether jury

inflated award for tax reasons). Some state courts affirm

awards when they do not exceed the evidence of lost

earnings, Anderson v. Burlington Northern, Inc., 709

P.2d at 646, while others affirm even awards that exceed

the lost earnings component. Marynik v. Burlington

Northern, Inc., 317 N.W.2d at 351.

Moreover, state courts appear confused as to whether

state or federal law should govern the treatment of

Liepelt error on appeal. A proper understanding of the

So.2d 782. (Fla. Ct. App. 1986); Newlin v. Foresman, 432 N.E.2d

319, 325-326 (Ill. Ct. App. 1982); Highshew v. Kushto, 134 N.E.2d

555, 556 (Ind. 1956), pet. denied, 135 N.E.2d 215; Stover v. Lake-

land Square Owners Assoc., 434 N.W.2d 866, 871 (Iowa 1989);

Paducah Area Public Library v. Terry, 655 S.W.2d 1923 (Ky. Ct. App.

1983); Tennis v. General Motors Corp., 625 S.W.2d 218, 227 (Mo.

Ct. App. 1981) ; Maricle v. Spiegel, 329 N.W.2d 80, 86 (Neb. 1983);

Scallon v. Hooper, 293 S.E.2d 848, 845 (N.C. Ct. App. 1982); review

denied, 295 S.E.2d 480; Terveer v. Baschnagel, 445 N.E.2d 264, 268-

69 (Ohio Ct. App. 1982); Green v. Denney, 742 P.2d 639, 643 (Or.

Ct. App. 1987), review denied, 749 P.2d 136; Rivera v. Philadelphia

Theological Seminary, 507 A.2d 1, 22 (Pa. 1986); Dehn v. Prouty,

321 N.W.2d 534, 538-39 (S.D. 1982); Barnette v. Doyle, 622 P.2d

1349, 18367 (Wyo. 1981). But cf., Psychiatric Institute of Wash-

ington v. Allen, 509 A.2d 619 (D.C. Ct. App. 1986). It appears that

this state court hostility to the Liepelt rule in state law actions has

resulted in a frequent and continuing failure of state courts to give

the Liepelt instruction in cases arising under FELA—as well as

some disposition in state appellate courts to find error harmless on

indefensible grounds.

9

relation between federal and state law suggests that fed-

eral law governs this question because it vitally affects

substantial federally-created statutory rights. See Hill,

Substance and Procedure in State FELA Actions—The

Converse of the Erie Problem?, 17 OHIO ST. L. J. 384

(1956). Some state courts properly appear to have

treated the effect of Liepelt error as a federal question.

See, e.g., Watson v. Norfolk & Western Ry., 507 N.E.2d

at 471; Faulkenberry v. Kansas City Southern Ry., 661

P.2d at 512. Other state courts, including the court below,

appear to have treated the issue as one of state law. In

this case, for example, the Texas Court of Appeals ap-

plied the reversible error standard of Texas R. App. P.

81(b) (1), and did not conduct any independent analysis

as to whether federal law permitted harmless error analy-

sis. 804 S.W.2d at 561. See also Yost v. Union R.R., 551

A.2d 317 (applying Pennsylvania law).

This lack of uniformity is fundamentally at odds with

the general principle that federal law should have the

same meaning in every jurisdiction. See R. Stern, E.

Gressman & S. Shapiro, SUPREME COURT PRACTICE § 4.4,

197 (6th ed. 1986). As this Court held in South Buffalo

Ry. v. Ahern, 344 U.S. 367, 371 (1953), FELA was in-

tended to ensure a uniform application of law to the

nation’s railroads. The present nationwide confusion over

the consequences of Liepelt error vitiates that federal pol-

icy, as well as the general goal of uniform application of

federal law, and provides a substantial reason for grant-

ing the petition for certiorari.

Indeed, AAR’s member railroads are presently subject

to differing standards of law depending on not only the

State in which a case is brought, but also whether a case

is brought in state or federal court. Had the present case

been filed in federal court in Texas, for example, the

court would have been bound by O’Byrne v. St. Louis

Southwestern Ry., 6382 F.2d 1285 (5th Cir. 1980), which

requires reversal for Liepelt error without any showing

that the verdict was inflated. The risk of forum shopping

————

10

in the present confused situation is a substantial addi-

tional reason for plenary review.*

Review is also warranted because the ill-defined harm-

less error rule applied below threatens the “strong federal

policies of fairness and efficiency in litigation of federal

claims” advanced by the Liepelt instruction. See Gulf

Offshore Co. v. Mobil Oil Corp., 453 U.S. 473, 487 (1981).

Requiring proof that a damages award exceeded the dam-

ages supported by plaintiff’s evidence can hardly be called

a rule of harmless error. In a typical case, the plaintiff’s

evidence will support a range of damages awards. The

range will depend on what the evidence shows as to the ex-

tent of disability, the plaintiff’s future earnings power, the

proper discount rate for calculating present value, the

proper level of compensation for pain and suffering, and

a host of other variables. That a verdict ultimately falls

below the upper boundary of verdicts supportable by the

evidence provides very little guarantee against improper

inflation of the kind Liepelt is meant to prevent. A jury

might well conclude that the damages were near the low

end of the range of supportable verdicts, inflate the award

to compensate for presumed tax liability, and render a

verdict that by happenstance remains below the upper

limit of verdicts arguably supported by the plaintiff’s evi-

dence. In such a case, the defendant would be harmed;

*The issue has even broader significance because the Liepelt

rule applies not only in FELA actions but in many other cases

arising under federal statutes authorizing recovery for injuries,

including: the Jones Act, Nesmith v. Texaco, 491 F. Supp. 661, 563

(W.D. La. 1980), modified in part per curiam on other grounds,

727 F.2d 497 (5th Cir. 1984), cert. denied, 469 U.S. 855 (1984),

actions brought pursuant to the Death on the High Seas Act,

Solomon v. Warren, 540 F.2d 777, 788 n.12 (5th Cir. 1976), cert.

dismissed sub nom. Warren v. Serody, 434 U.S. 801 (1977), and

perhaps in actions brought pursuant to 42 U.S.C. § 1983 involving

awards for loss of future earnings, see Note, “Income Taxation and

the Calculation of Tort Damages Awards: The Ramifications of

Norfolk & Western Ry. v. Liepelt,” 38 WasH. & LEE L. REV. 289,

301 (1981).

eee ee

11

yet, the court below—as well as those in ten other States

and at least one federal circuit—would deem the error

harmless.

The court below also made a fundamental error in

assuming that harmless error could be premised on the

fact that the plaintiff’s expert testimony took income tax

liability into account. By merely informing a jury that :

damages calculations account for income tax, an expert

does not give a jury enough information to know it should

not adjust its verdict to compensate for anticipated taxes.

The jury receives sufficient information only if it is in-

formed that the sum it awards will not be taxed. Indeed,

if the jury believes that taxes will be levied against the

verdict, expert testimony like that given in this case may

well increase the likelihood of inflation of the award, be-

cause the jury might fear that without inflation the

award would be taxed twice: once in the jury room, when

only take-home pay would be awarded, and a second time

by the Internal Revenue Service. Furthermore, the testi-

mony of an expert cannot substitute for instruction from

the trial judge as to the proper standard for measuring

damages. See Seaboard Systems R.R., Inc., 520 So.2d at

484.

At bottom, the harmless error analysis undertaken

below, and endorsed by many state courts as well as the

Kighth Circuit, is at odds with the ruling in Liepelt. In

that case, the Court overturned the jury’s verdict without

any inquiry into whether the amount of the jury award

exceeded the damages supported by the trial evidence.

Although the Court speculated that the jury may well

have increased its verdict to compensate for anticipated

tax liabilities, the Court went on to make explicit its hold-

ing that reversal was required “whether or not” the jury

had in fact compensated for anticipated taxes. Thus,

Liepelt established a prophylactic rule, designed to protect

defendants from the potentially serious financial! effects of

lay jurors’ misconceptions about tax laws—whether or

EEE

12

not jury misconceptions can be shown to have affected a

particular verdict. Liepelt, 444 U.S. at 496-98.

As this Court made clear in Liepelt and Gulf Offshore,

instructing a jury that FELA awards are not subject to

income tax is an important guarantee that this Nation’s

railroads will be protected against inappropriate and un-

fair jury inflation of damages awards in FELA cases.

The strength of that guarantee now varies widely from

State to State and Circuit to Circuit. Inconsistent appel-

late enforcement is, moreover, robbing the Liepelt rule

of much of its protective force. That poses a particular

threat to amicus’s member railroads. At present, FELA

liability claims consume three percent of the annual op-

erating revenues of these railroads—which amounts to

almost a billion dollars per annum. See Motion For Leave

To File Brief Amicus Curiae, at 2. Liepelt represented a

salutary effort to inject a degree of fairness into a system

that has seen an inexorable growth in liability,’ and, by

the simple expedient of a brief jury instruction, to elimi-

nate one egregious sort of unjustifiable windfall to plain-

tiffs. Plenary review is needed to establish a uniform

national standard and to restore the Liepelt rule as an

effective protection against arbitrary, unfair and _ ineffi-

cient verdicts in FELA cases.

5 Since Liepelt was decided in 1980, annual FELA liability has

increased by 156 percent, from $343 million to $877 million. AAR

1990 Report of Claims and Litigation Experience at 2-10; AAR

1989 Report of Claims and Litigation Experience at 2-8.

13

CONCLUSION

For all the foregoing reasons, as well as those set forth

in the Petition for Certiorari, this Court should grant

certiorari.

Respectfully submitted,

JOHN BROADLEY

DAVID W. OGDEN *

DONALD B. VERRILLI, JR.

JULIE M. CARPENTER

JENNER & BLOCK

21 Dupont Circle, N.W.

Washington, D.C. 20036

(202) 223-4400

ROBERT W. BLANCHETTE

Vice President-Law and

Genera! Counsel

ASSOCIATION OF AMERICAN

RAILROADS

American Railroads Building

50 F Street, N.W.

Washington, D.C. 20001

(202) 639-2502

Counsel for Amicus Curiae

Association of American

Railroads

September 18, 1991 * Counsel of Record