Opposition Brief — Philadelphia, Bethlehem & New England Railroad v. Newhard

yreme Court, U.S. 7

a FILED

JUN 4 (999

No. 98-1800

1K

IN THE

Supreme Court of the United States

PHILADELPHIA, BETHLEHEM AND

NEW ENGLAND RAILROAD COMPANY,

Petitioner,

V.

DAVID NEWHARD,

Respondent.

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COuRT OF APPEALS

FOR THE THIRD CIRCUIT

RESPONDENT?’S BRIEF IN OPPOSITION

Bruce S. ZERO

Counsel of Record

POWELL, POWELL & POWELL

Attorneys for Respondent

Barristers’ Row

142 Adams Avenue

Scranton, Pennsylvania 18503

(570) 961-0777

153267 @ Counsel Press LLC

FORMERLY LUTZ APPELLATE SERVICES

(800) 274-3321 + (800) 359-6859

WN

y

i

QUESTIONS PRESENTED

1. Whether the District Court abused its discretion by

applying the Federal Rule of Evidence 403 balancing test

and this Court’s ruling in Eichel v. New York Central

Railroad Co., 375 U.S.-253 (1963), in precluding

introduction of plaintiff's pension benefits and Railroad

Retirement Act disability benefits?

2. Whether this Court’s decision in Eichel v. New York

Central Railroad Co., 375 U.S. 253 (1963) supports the

District Court’s discretionary ruling that evidence of

plaintiff's receipt of pension benefits and disability benefits

have a substantial likelihood of prejudicial impact?

3. Whether this Court’s decision in Norfolk & Western

Railway Co. v. Leipelt, 444 U.S. 490 (1979) should be

extended to offset plaintiff's lost wages by Railroad

Retirement Board taxes?

4. Whether this matter is now moot due to the parties

settlement agreement and payment by PB&NE to plaintiff

in the amount of the Judgment plus interest and costs?

ul

TABLE OF CONTENTS

Page

Cusstions PUORGMIOE cc.sosk000s00040o dee i

Table of Contents ......ccece0. meyer eee il

Table of Cited Authorities .......ccccccccceees iii

TOR OF AMPORENOEE ick 60 i0s0kss eee vi

PPT ee Pe l

pentomnemt OF Ge CURD os és cccccuvedcdeus neues l

Reasons for Denying the Writ ................. 5

I. The District Court Properly Excluded

Evidence Of Newhard’s Retirement Pension |

And Disability Pension From The Railroad

otiemne TAGE... <5 «+4 wanae ecru 5

II. Newhard’s Company Pension Was Properly

Excluded By The District Court Under The

Collateral Source Rule And Federal Rule Of

BVIGONOG AGF. ccc csxsdiadapvesvenuess 11

III. This Court’s Decision In Northfolk And

Western Railway v. Liepelt, Does Not

Require That Railroad Retirement Taxes He

Considered When Calculating Plaintiff's

Wee BO, occ oc cecndsnds ceeesseeeeeee 16

IV. This Petition For Writ Of Certiorari Is Moot

Due To The Settlement Agreement Reached

Between Newhard And PB&NE ......... 20

NS ons ccs covaeasdene eee eee 22

reread

TABLE OF CITED AUTHORITIES

Page

Cases:

Clark v. Burlington Northern, Inc., 726 F.2d 448

a ne cea baeeuccvesé seen 11, 12, 15

Davis v. Odeco, Inc., 18 F.3d 1237 (Sth Cir.), cert.

den. sub nom., Murphy Exploration and Products

Co. v. Davis, 513 U.S. 819 (1994) ............ 14

EEOC v. Wyoming Retirement Systems, 771 F.2d

UMN, BEIED wae vccccccccccccescece 10

Eichel v. New York Central Railroad Co., 375 U.S.

aie el sscu sdb chee sector sce passim

Green v. Denver and Rio Grande Western Railway

Co., 59 F.3d 1029 (10th Cir. 1995), cert. denied,

Re ee 7,9, 10

Hall v. Minnesota Transfer Co., 322 F. Supp. 92

8, , EE er 13

Haughton v. Blackships, Inc., 452 F.2d 788 (5th Cir.

ER eee 7, 11, 12, 13

Hisquierdo v. Hisquierdo, 439 U.S. 575 (1979) ... 19

McGrath v. Consolidated Rail Corporation, 136

Pome Gee (eet Cor, EDGE) .w www cece ccccccsecss 8, 10

iv

Cited Authorities

Page

Norfolk & Western Railway Co. v. James L. Chittum,

251 Va. 408, 468 S.E.2d 877 (1996) .......... 18, 19

Norfolk & Western Railway Co. v. Leipelt, 444 U.S.

MPP CSOD 0 coccctvecss i, 1,3, 4, 5, 16, 17, 18, 19, 22

Page v. St. Louis Southwestern Railroad Co., 349

Fol Ce GPE Ge BOGE bv dn denevacseueneses 7

Phillips v. Western Co. of N. America, 953 F.2d

ok errr err err eer rer 10

Reed v. Philadelphia, Bethlehem & New England

Railroad Co., 939 F.2d 128 (3rd Cir. 1991), cert

Gam. TIS B. CR. TBS CTSSS) ce vssecivncesess 7, 10

Russo v. Matson, 486 F.2d 1018 (9th Cir. 1973) .. 13

Sheehy v. Southern Pacific Transportation Co., 631

ae re er errr rT 7

Tipton v. Socony Mobile Oil Co., 375 U.S. 34 (1963)

sdeuteums cu suee abe eben tcN ee eae wee eae 6, 9, 22

United States v. Price, 288 F.2d 488 (4th Cir. 1961)

chose bee hes 6se4 0 See Cede es tee ER ETA eee 11

Ward v. Union Barge, 443 F.2d 565 (3rd Cir. 1971)

scecenentsebashe e pene seamen Neannes 13,14

— 7

Cited Authorities

Page

Statutes:

UBER. ETON occciiwiwved ceehnces ccs l

SPU DOO secsasevecevicanseen eek 12

TP GES Oe Fra eRe eee taaase ee ee 12

OP es OOO ie dc bisecedcels sek 12

Rules:

Federal Rule of Evidence 403 ..... i, 1, 2, 4, 5, 8, 10, 11

United States Supreme Court Rule 12.7 ......... 2

s_cssaeemremamamammmmammamemmmmnmmeamattee

vi

TABLE OF APPENDICES

Page

Appendix A — Excerpts From Transcript Of Jury

Trial Dated June 3, 1997 .......... ccc cea eee la

Appendix B — Excerpts From Transcript Of Jury

Trial Dated June 5, 1997 .......... 0. cc eee ee 3a

OPINIONS BELOW

The Opinion of the Third Circuit Court of Appeals

affirmed rulings made by the District Court in excluding

evidence of David Newhard’s receipt of pension benefits

and Railroad Retirement Act disability benefits. The Court

of Appeals held that Eichel v. New York Central Railroad

Co., 375 U.S. 253 (1963) and its progeny supported the

District Court’s conclusion that pension benefits and

Railroad Retirement Act disability benefits are barred by

the collateral source rule. In addition, the Court of Appeals

found that since the District Court applied the Rule 403

balancing test to exclude plaintiff's receipt of pension and

disability benefits, the lower court’s decision is supported

by this Honorable Court’s decision in Eichel. F urthermore,

the Court of Appeals properly held that this Court’s decision

in Norfolk & Western Railway Co. y. Leipelt, 444 U.S. 490

(1980) should not be extended to include a deduction for

Railroad Retirement Board taxes to offset wages. See

Opinion of the Honorable Judge Lewis of the Third Circuit

Court of Appeals, attached as Appendix “A”, to Petitioners’

Writ of Certiorari.

STATEMENT OF THE CASE

On June 17, 1996, Respondent, David Newhard

(hereinafter “Newhard”), brought this action against his

employer, Petitioner, Philadelphia, Bethlehem & New

England Railroad (hereinafter “PB&NE”), for relief under

the Federal Employers’ Liability Act, 45 U.S.C. § 51,

et seq. (FELA). Newhard sought to recover damages for

severe injuries suffered in the course of his railroad

employment with PB&NE. Newhard was employed by

PB&NE as a conductor. On February 2, 1995, Newhard was

2

thrown from his train and seriously injured when the train

he was riding on was forced to make a sudden stop to avoid

a collision with another train which employees of PB& NE

had sent moving toward Newhard’s train on the same track.

Prior to trial, the District Court was presented with

several Motions in Limine. Relevant to the instant Writ of

Certiorari was PB&NE’s Motion for permission to introduce

evidence that Newhard received pension benefits. The

District Court denied this Motion. Another Motion made

by PB&NE was to allow the Railroad to introduce evidence

that plaintiff receives a Railroad Retirement Board

Disability Annuity. This Motion likewise was denied.

Newhard also filed a Motion to Preclude PB&NE from

offering into evidence any information with regard to

Newhard’s disability benefits under the Railroad Retirement

Act, pension benefits which he received through a collective

bargaining agreement with his Union and Newhard’s

retirement. Plaintiff's Motion was granted by the Trial

Judge, who relied upon Eichel v. New York Central Railroad

Co., 375 U.S. 253 (1963), and its progeny which precludes

evidence of collateral benefits whether such evidence is

presented during the liability or damage phase of an FELA

trial. Furthermore, the District Court excluded the

aforementioned evidence of pension benefits and Railroad

Retirement Act disability benefits, specifically indicating

that the admission of such evidence was more prejudicial

than probative, pursuant to Federal Rule of Evidence 403'

(J.A. 76, 79-81) (App. 2a, infra).

1. Respondent cites to the Joint Appendix (“J.A.”) that was

before the Third Circuit as allowed by Supreme Court Rule 12.7 to

support the factual statements made herein.

3

The case was tried before The Honorable Franklin S.

VanAntwerpin in the United States District Court for the

Eastern District of Pennsylvania, commencing on June 2,

1997. Plaintiff presented numerous witnesses on his behalf,

including but not limited to, medical expert testimony,

vocational rehabilitation expert testimony and an actuary

and economic consultant. On re-cross examination of

Newhard’s expert economist, PB&NE’s counsel attempted

to question said expert on the effects of the Railroad

Retirement tax. This area of questioning was properly

excluded by the District Court. The actuary hired by

Newhard, whose testimony was not refuted by an expert

for the AB&NE, took into account, the effect of income

taxes on Newhard’s past and future lost wages as required

by this Court’s ruling in Norfolk & Western Railway Co. v.

Leipelt, 444 U.S. 490 (1979) (J.A. 400-404, 422-424).

On June 5, 1997, the Jury returned a verdict in favor of

Newhard in the amount of Six Hundred Thirteen Thousand

Six Hundred Seventy-Six ($613,676) Dollars. The court

thereafter molded the verdict due to the fact that Jury found

Newhard five (5%) percent comparatively negligent and

entered Judgment on the verdict in the amount of Five

Hundred Eighty-Two Thousand Nine Hundred Ninety-Two

Dollars and twenty cents ($582,992.20). After trial, the

District Court denied PB& NE’s Motion for a New Trial on

several grounds that were not included in PB&NE’s appeal

to the Third Circuit or the Petition for Writ of Certiorari.

The Third Circuit Court of Appeals affirmed the

decision of the District Court on February 9, 1999. The

Third Circuit found that Zichel, and its progeny prohibits

the admission of Railroad Retirement Act (RRA) Disability

Benefits and the court held that insofar as the District Court

4

applied the Rule 403 balancing test to exclude pension

benefits and Railroad Retirement Act disability benefits,

this ruling is supported by this court’s recognition that

collateral source has a “substantial likelihood of prejudicial

impact”. Eichel, 375 U.S. at 255. Since there was not an

abuse of discretion or misapplication of the law, the Court

of Appeals refused to disturb the District Court’s

discretionary ruling in excluding Newhard’s pension

benefits and RRA disability benefits. It should be noted

that at no time did counsel for PB& NE offer factual evidence

or submit the terms of Newhard’s retirement pension plan

to the District Court below.’ Further, there was no testimony

concerning the terms of the Collective Bargaining

Agreement, since it was not a plan designed for a set off for

damages in an FELA case.

PB&NE also argued to the District Court that it should

have been allowed, on re-cross-examination of Newhard’s

actuary to raise the question of the effects of Railroad

Retirement tax (which, in effect, is the Railroader’s Social

Security Tax) on plaintiff's past and future wage loss

calculation (J.A. 423-424). The Third Circuit rejected this

argument stating that the Railroad Retirement Board (RRB)

(taxes), unlike income taxes, affects the amount of pension

benefits a Railroad employee actually receives upon

retirement. The Third Circuit declined to extend this Court’s

decision in Leipelt, 444 U.S. 490 (1979).

2. PB&NE on page 2, 3, and 5 of its Petition for Writ of

Certiorari attempts to outline the terms of the pension under

Newhard’s Collective Bargaining Agreement. It should be pointed

out that the Collective Bargaining Agreement itself setting forth

the pension plan, or any factual testimony regarding same was never

submitted into evidence at the time of trial. Therefore, such

statements of counsel have no factual support.

5

The Third Circuit affirmed that the District Court had

not abused its discretion by excluding Newhard’s retirement

and receipt of a retirement pension. The Court of Appeals

upheld this Court’s ruling in Eichel, and refused to disturb

the District Court’s ruling insofar as the District Court did

the balancing test required under Federal Rule of Evidence

403. Furthermore, the Third Circuit concluded that the

payment of income taxes and the payment of the Railroad

Retirement tax differ fundamentally and declined to extend

this Court’s holding in Leipelt.

REASONS FOR DENYING THE WRIT

I.

THE DISTRICT COURT PROPERLY EXCLUDED

EVIDENCE OF NEWHARD’S RETIREMENT

PENSION AND DISABILITY PENSION FROM THE

RAILROAD RETIREMENT BOARD.

This Honorable Court should deny review of this matter

since the District Court and Circuit Court properly precluded

evidence of Newhard’s disability pension and retirement

pension under longstanding federal case law on the issue

on the inadmissibility of collateral benefits. Furthermore,

the Circuit Court refused to disturb the District Court’s

discretionary ruling under Federal Rule of Evidence 403.

This Court’s opinion in Eichel v. New York Central Railroad

Co., 375 U.S. 253 (1963), held that in an action under the

FELA, the evidence of a Disability Pension payment was

inadmissible either as bearing on the extent or duration of

6

the injury, or to show a motivation for not returning to

work.’ The Court held:

In our view, the likelihood of misuse by the

jury [of such evidence] clearly outweighs the

value of this evidence. Insofar as the evidence

bears on the issue of malingering, there will

generally be other evidence having more

probative value and involving less likelihood of

prejudice than the receipt of a disability pension.

Moreover, it would violate the spirit of the

federal statutes that the receipt of disability

benefits ... were considered as evidence of

malingering by an employee asserting a claim

under the [FELA]. We have recently had

occasion to be reminded that evidence of

collateral benefits is readily subject to misuse

by a jury. Tipton v. Socony Mobil Oil Co., Inc.,

375 U.S. 34 (1963). It has long been recognized

that evidence showing that the defendant is

insured creates a substantial likelihood of

misuse. Similarly, we must recognize that the

petitioner’s receipt of collateral social insurance

benefits involves a substantial likelihood of

prejudicial impact.

Eichel, 375 U.S. at 255.

3. This Court has also precluded admission of collateral

sources of benefits in analogous Jones Act cases due to the

prejudicial nature of such evidence. Tipton v. Socony Mobile Oil

Co., 375 U.S. 34 (1963).

7

Circuit courts have consistently held that Eichel

precludes admission of collateral benefits, whether such

evidence is presented during the liability or damage phases

of the trial. See, e.g., Green v. Denver and Rio Grande

Western Railway Co., 59 F.3d 1029, 1032-33 (10th Cir.

1995), cert. denied, 516 U.S. 1009 (1995) (“Eichel compels

the conclusion that the collateral source rule prohibits

admission of Railroad Retirement Act disability benefits

in an FELA case”); Reed v. Philadelphia, Bethlehem & New

England Railroad Co., 939 F.2d 128, 134 (3rd Cir. 1991)

(finding that the trial court improperly allowed the defense

to argue that the plaintiff was receiving disability payments),

cert den., 113 S. Ct. 1584 (1993); Sheehy v. Southern Pacific

Transportation Co., 631 F.2d 649, 652 (9th Cir. 1980)

(“a discretion normally applicable to admit all relevant

evidence of collateral benefits is greatly limited in FELA

cases”). Page v. St. Louis Southwestern Railroad Co., 349

F.2d 820 (Sth Cir. 1965) (precluding the admission of

evidence of a railroad pension to show that an elderly

employee would have retired even absent the injury);

Haughton v. Blackships, Inc., 452 F.2d 788 (Sth Cir. 1972)

(declining consideration of a seaman’s maritime pension

in mitigation of damages on the theory that the pension was

a benefit directly attributable to the employer under the

collateral source rule when all the monies in the retirement

fund was contributed by the employer). The court in

Haughton found that the contract was in the nature of a

fringe benefit or deferred compensation and, thus, was not

established by the employer for the purposes of

indemnifying itself against liability. The court in Haughton,

concluded that the source of the funds may be determined

to be collateral or independent even though the employer

tortfeasor supplies such funds. 452 F.2d at 790.

8

The PB&NE also erroneously suggests that there is

disagreement between the Circuits which needs to be

resolved by this Court. In support of their position, PB& NE

cites McGrath v. Consolidated Rail Corporation, 136 F.3d

838 (1st Cir. 1998) (indicating that Eichel does not mandate

a per se bar of employer related payments in FELA cases).

The court in McGrath applied the 403 balancing test

considering evidence of such benefits. The District Court

in the instant matter applied the same Rule 403 balancing

test and concluded that such evidence of Newhard’s receipt

of pension benefits and disability benefits were more

prejudicial than probative and therefore should not be

admitted at the time of trial (App. 2a, infra). This

discretionary ruling by the District Court should not be

disturbed absent an abuse of discretion since the decision

is clearly in accordance with this Honorable Court’s opinion

in Eichel. This Court in Eichel conclusively determined that

Railroad Retirement Act disability payments to an injured

employee cannot be used to off-set the employer’s FELA

liability. Eichel, 375 U.S. at 254, 255.

As this Honorable Court stated in Eichel, the Railroad

“does not dispute that it would be highly improper for the

disability payments to be consideration in mitigation of

damage suffered by” the injured employee. 375 U.S. at 254.

In the instant case, counsel for PB& NE, with regard to his

attempt to admit Newhard’s receipt of Railroad Retirement

Act disability benefits, stated that he was not using the

receipt of disability benefits and pension benefits to show

malingering in this case (J.A. 73). However, the Jury may

have used evidence of pension benefits improperly and made

a finding of no liability on the Railroad due to the fact that

Newhard was already receiving some form of compensation.

9

In Tipton v. Socony Mobile Oil Co. Inc., 375 U.S. 34

(1963), this Court did not limit the application of the

collateral source rule to the damage phase of the trial noting

that the Jury in that case was led to place undue emphasis

on the availability of compensation benefits in determining

a liability issue (whether Plaintiff was a seaman within the

Jones Act) 375 U.S. at 38. Therefore, Eichel and Tipton

preclude admission of collateral benefits, whether presented

during the liability or damage phase of a trial.

This Honorable Court has recently denied Certiorari

on the same identical issue that Petitioner raises here.

In Green v. Denver and Rio Grande Western Railway Co.,

59 F.3d 1029 (10th Cir. 1995), cert. den., 516 U.S. 1009

(1995). The Circuit Court in Green asserted that Eichel

decided the issue against off-set of damages. The court in

Green followed Eichel and stated:

As plaintiff asserts Eichel compels the

conclusion that the collateral source rule

prohibits admission of RRA disability benefits

in an FELA case. The narrow issue in Eichel was

whether evidence of RRA disability payments

was admissible to show malingering by the

plaintiff. The Supreme Court stated that “the

likelihood of misuse by the jury clearly

outweighs the value of this evidence” and noted

that it had collateral benefits is readily subject

to misuse by the jury.

Id. at 255 (citing Tipton v. Socony Mobil Oil Corp., 375

U.S. 34 (1963)).

10

The Tenth Circuit in Green was also persuaded by the

decisions of several other Circuits which determined that

admission of collateral source payments was not harmless.

Phillips v. Western Co. of N. America, 953 F.2d (Sth Cir.

1992). Reed v. Philadelphia, Bethlehem & New England

Railroad Co., 939 F.2d 128, 134 (3rd Cir. 1991), cert. den.,

113 S. Ct. 1584 (1993).

Similar to Green case, the Third Circuit Court of

Appeals in the instant matter concluded that Eichel v. New

York Central Railroad, 375 U.S. 253 (1963) and its progeny

support the District Court’s conclusion that Newhard’s

pension and Railroad Retirement Act disability pension are

barred by the collateral source rule. Furthermore, the Third

Circuit in the instant case also held that insofar as the

District Court applied the Rule 403 balancing test to exclude

this evidence, “we find that its decision is supported by the

Supreme Court’s recognition that collateral source evidence

has a ‘substantial likelihood of prejudicial impact.’ ”

See Opinion of Circuit Judge Lewis, page 5 and 6, attached

as Appendix “A” to Petitioner’s Writ of Certiorari.

Even the case cited by PB& NE in support of its position,

McGrath v. Consolidated Rail Corp., 136 F.3d 838

(1st Cir. 1998). The defendant railroad did not even ask the

court to rule that Railroad Retirement Act disability benefits

could be used to reduce the defendant’s liability under the

FELA. The court in Green, 59 F.3d at 1029, in reaching the

result it did, did more than just rely on Eichel; it also

analyzed cases involving similar sources of compensation,

and concluded that the law is clear and such sources cannot

be used by the PB&NE to reduce their liability. Furthermore,

Petitioner improperly relies on EEOC v. Wyoming

Retirement Systems, 771 F.2d 1425 (10th Cir. 1985), which

een

11

is an age discrimination case where there was no danger of

prejudicing a jury with such evidence of benefits received.

Eichel and its decisional progeny, clearly exclude evidence

of Newhard’s receipt of collateral benefits, such as his

railroad pension and disability pension.

il.

NEWHARD’S COMPANY PENSION WAS PROPERLY

EXCLUDED BY THE DISTRICT COURT UNDER THE

COLLATERAL SOURCE RULE AND FEDERAL RULE

OF EVIDENCE 403.

The Petitioner also argues that since PB&NE was the

sole source of the pension benefits, that same are not

collateral. This argument is completely without merit under

the Federal Employers’ Liability Act. In cases analyzing

this subject, the courts have consistently ruled that the

collateral source rule applies even when the employer is

the sole source of the fund. The important consideration is

the character of the benefits received rather than when the

source is actually independent of the employer. Clark v.

Burlington Northern, Inc., 726 F.2d 448 (8th Cir. 1984);

Haughton v. Blackships, Inc., 452 F.2d 788 (5th Cir. 1972);

see also United States v. Price, 288 F.2d 488 (4th Cir. 1961).

Therefore, the mere fact that the employer was the sole

source of the fund, does not mean that it is not a collateral

source subject to exclusion under the longstanding collateral

source rule in FELA cases.‘

4. PB&NE did not attempt to enter into evidence the

Collective Bargaining Agreement it negotiated between itself and

the Union representing Newhard. It is submitted that said Collective

Bargaining Agreement did not provide for an off-set of PB&NE’s

(Cont’d)

12

In Clark, 726 F.2d at 448, the agreement in that case

was submitted into evidence by defendant’s counsel which

allowed the Trial Judge to make a correct ruling. The policy

in question in Clark contained a clause allowing a set-off

from any settlement or other payment on account of

plaintiff's injuries. 726 F.2d at 449. PB&NE did not submit

the Collective Bargaining Agreement in the instant matter

since no language permitting a set-off is contained therein.

In order to have a set-off from an FELA damage award,

PB&NE’s contract with the employee has to have a specific

provision permitting said set-off similar to the one in Clark.

As stated in Clark, the benefit in question must be meant to

indemnify the employer against possible liabilities under

the FELA. 726 F.2d at 450. 45 U.S.C. § 55 specifically

prohibits any contract, the purpose or intent of which shall

be to enable any common carrier to exempt itself from any

liability created under the FELA. Since the Collective

Bargaining Agreement setting forth the pension benefits in

the instant matter nor any other agreement concerning

Newhard’s receipt of pension benefits was not entered in

the record in this case, no set-off can be permitted.

Similarly, in Haughton v. Blackships, Inc., 452 F.2d

788 (Sth Cir. 1972), a boat swain brought an action for

personal injuries and a question arose in computing damages

payable to a seaman whether it was improper to consider

the seaman’s maritime pension in mitigation of damages

on the theory that the pension was a benefit directly

(Cont'd)

FELA liability by pension payments made to Respondent. PB& NE

cannot unilaterally alter its contract with the Union to provide a

provision not negotiated on or agreed to. The Railway Labor Act,

45 U.S.C. §§ 152, 156 establishes the exclusive method for altering

an existing contract.

13

attributable to the employer under the collateral source rule

where all of the money in the retirement fund was

contributed by the employer. The fund was established by

virtue of a contract between the employer and the Union.

(The exact same type of retirement plan in the instant

matter). The court found that the contract was in the nature

of a fringe benefit or deferred compensation and, thus, was

not established by the employer for the purposes of

indemnifying itself against liability. The Fifth Circuit in

Haughton, concluded that the source of the funds may be

determined to be collateral or independent even though the

employer tortfeasor supplies such funds. 452 F.2d at 790.

The reasoning in Haughton was also followed in the case

of Russo v. Matson, 486 F.2d 1018 (9th Cir. 1973), where

evidence of pension benefits received by an employee were

excluded by application of the collateral source rule citing

Haughton, 452 F.2d at 788, and Hall v. Minnesota T, ransfer

Co., 322 F. Supp. 92 (D. Minn. 1971).

The PB&NE also fails to point out to this Court that

Newhard’s acceptance of the company pension was his ri ght

irrespective of his injury. In attempting to cross-examine

the Newhard, the record revealed that Newhard was entitled

to his pension as a result of his employment with the

PB&NE for thirty (30) years. (J.A. 245-247). It was then, a

benefit that he has already earned through years of service

to the PB&NE, as opposed to a future right to continued

employment.’ PB&NE never submitted the company’s

pension plan to the court as a part of the record and cannot

now, submit, in argument, the terms of the plan. In Ward v.

5. PB&NE now seeks to diminish the compensation for

injuries Mr. Newhard suffered as a direct result of their negligence

because of benefits Mr. Newhard earned through thirty years of

service to the railroad.

14

Union Barge, 443 F.2d 565 (3rd Cir. 1971), defendant, in a

case involving maintenance and cure to a seaman, attempted

to argue that it was entitled to a credit based upon a

Collective Bargaining Agreement. The court held that, since

the contract had never been put into the record, it was

presumed that it was not entitled to a credit. Jd. at 572.

Here, PB&NE makes many arguments about the contents

and terms of the agreement in question without having

submitted it into the record. This attempt, of course, is

improper.® Moreover, counsel for PB&NE admitted to the

court that Newhard was entitled to this benefit under any

circumstances (J.A. 244). Thus, the pension benefit was a

vested right at the time of his injury, and not a future

contingency.

There is another reason for ignoring the pension benefits

in calculating damages under the FELA. In determining

whether payments under an employee benefit plan should

reduce the PB&NE’s liability, courts have focused on

whether the plan expressly provides for such reduction. If

it does not, courts are uniform in rejecting the use of pension

payments to reduce an employer’s liability. Perhaps no

better expression of this rule is found than in Davis v. Odeco,

Inc., 18 F.3d 1237, 1244 (Sth Cir.), cert. den. sub nom.,

Murphy Exploration and Products Co. v. Davis, 513 U.S.

819 (1994):

Generally speaking, when an employee has

bargained for a fringe benefit as additional

consideration for employment, compensation

received by the employee under that fringe

6. The record in this matter is flawed due to the fact the

collective bargaining agreement in question was never introduced

as evidence in the District Court.

15

benefit should not be deducted from damages

awarded to the employee as a result of the

employer’s negligence. As-the employee is

already contractually entitled to that benefit,

allowing the employer to deduct such

compensation would both compensate the

employee and provide the employer with an

undeserved windfall. Thus in evaluating whether

a benefit derives from a collateral source, we

ordinarily assess that whether that benefit is in

the nature of a fringe benefit (or deferred

compensation) or instead reflects a tortfeasor’s

effort to anticipate potential liability.

The pension fund from which Newhard received

payment certainly was not established with the tort liability

of the Railroad in mind. It came about as the result of

negotiations with the Union, and entitlement to its benefits

in no way depends upon Railroad tort liability, whether the

FELA or otherwise. Employees are entitled to the retirement

benefits so long as the contractual requirements relating to

age and time of service are met. Thus, that Newhard may

have been motivated by his injury to retire, when he did is

irrelevant. The key to the role that retirement payments

should play in an FELA action depend rather on the purpose

of the pension contract and not why employees choose to

retire. In all of the cases which set off of fringe benefits

were permitted, general non-set off rule was recognized,

but the courts found that the employer-employee agreement

expressly permitted set off. See, e.g., Clark v. Burlington

Northern, Inc., 726 F.2d 448 (8th Cir. 1984).

Thus, the assertion by PB&NE that the pension in this

case is not a collateral source because “it is entirely funded

16

by and comes directly from” and that there “is no source

independent of’ PBN&E is misleading in two respects. First,

it shows a misunderstanding of the reality of employment

contracts. In a real sense, just like “there is no such thing as a

free lunch”, there is also “no such thing as a free fringe benefit”.

The fact that the employer makes payments to the fund as an

initial matter does not mean that the employer is really the

source of those payments. In reality, the payments are funded

by the employee’s labor, and are non-wage form of

compensation.

iil.

THIS COURT’S DECISION IN NORTHFOLK AND

WESTERN RAILWAY vy. LIEPELT, DOES NOT

REQUIRE THAT RAILROAD RETIREMENT

TAXES HE CONSIDERED WHEN CALCULATING

PLAINTIFF’S WAGE LOSS.

Petitioner asserts incorrectly in its Brief, that it should

have been allowed to illicit testimony from Newhard’s expert

actuary concerning payment of Railroad Retirement Tax. The

Petitioner entirely misinterprets this Court’s analysis in Norfolk

& Western Railway Co. v. Leipelt, 444 U.S. 490 (1979). There,

this Court merely held that evidence of income taxes might

be relevant and for the jury to consider in making its award,

along with an instruction concerning the fact that there will

be no taxes on the award. In doing so, however, the court also

noted that the introduction of such evidence must not,

necessarily, be admitted in every case. Leipelt, 444 U.S. at

494. Moreover, Newhard offered evidence through his

vocational expert that he was essentially disabled from all lines

of employment, rail and otherwise, thus the relevance of the

taxes further attenuated.

17

PB&NE did not present an economist or actuary to

substantiate or dispute Newhard’s wages, gross or net. The

testimony was presented by Newhard’s expert, who testified

concerning the impact of taxes upon Newhard’s past and

future wage loss. PB&NE at no point, raised an objection

to any of the testimony presented by Newhard during direct

examination and did not bring the subject of the Railroad

Retirement Tax up during cross-examination. It was not

until re-cross examination that PB&NE’s counsel attempted

to cross-examine Newhard’s economist on the effect of

Railroad Retirement Taxes.’

Newhard presented the testimony of an actuary, which

followed Leipelt, where the court noted: “Effective methods

of presenting the essential elements of any expert calculation

in a form that is understandable by juries . . .” 444 U.S. at

494. In the instant matter, the economist presented a

calculation to the jury in the traditional manner, accounting

for wage increases, taxes, discount rate and present value.

The PB&NE argues that in calculating employee’s

wages, the “net loss” should be determined after deduction

of Railroad Retirement Board Taxes, citing Leipelt. There

is a fundamental difference between the nature of income

taxes and the nature of Railroad Retirement Board Taxes.

Income taxes paid by an individual are 100% diluted in their

impact on the individual, i.e., no individual can trace any

benefit to himself as a result of his payment of taxes.

Railroad Retirement Board taxes, however, are different in

that earnings and resulting taxes paid to the Railroad

Retirement Board directly impact eligibility for benefits.

When a railroad employee cannot keep paying Railroad

7. The District Court properly refused to allow PB&NE to

re-cross examine the economist on Railroad Retirement Taxes.

18

Retirement Board taxes, he is impairing his eligibility for

Railroad Retirement Board disability benefits. When an

injured person cannot pay income taxes, other taxes are

being paid, which help run the government. Thus, if the

court is to deduct Railroad Retirement Board Taxes, it also

opens the door to require a showing of the resulting loss to

Newhard, leading to a likelihood of totally confusing the

jury. This Court in Leipelt never intended for the deduction

of social insurance taxes to be used in computing plaintiff's

lost wages, past or future.

The Supreme Court of Virginia in Norfolk & Western

Railway Co. v. James L. Chittum, 251 Va. 408, 468 S.E.2d

877 (1996), was confronted with the same identical issue

presented here. The railroad in Chittum, argued that for the

purpose of calculating Chittum’s net wages under the

{[FELA], Tier 1 and Tier 2 retirement payments made by

Chittum should be deducted from his gross wages. Again,

the railroad relied on Liepelt, a wrongful death action

brought under the FELA, where the Supreme Court held

that with respect to the measure of damages, a railway

company is entitled to present evidence of the effective

income taxes on the decedent’s estimated future earnings.

444 U.S. at 493-94. The court in Chittum stated:

The Supreme Court, however, has never held that

Tier 1 and Tier 2 payments toward retirement

are to be treated the same as federal and state

income taxes and, therefore, deducted to

establish net income. Nevertheless, building

upon Liepelt, N & W asserts that the retirement

payments are congressionally mandated federal

taxes and, therefore, like income taxes, should

be deducted from gross income in determining

19

damages. We do not agree. Even though retirement

payments are mandated by Congress, we do not

equate them with income taxes. Furthermore, N &

W has not cited, and we have not found, a single

FELA decision from either a federal or a state court

holding that retirement payments should be

deducted from gross iacome in calculating net

income. We conclude, therefore, that the trial court

did not err in rejecting N & W’s contention.”

251 Va. at 416, 468 S.E.2d at 882.

The Railroad Retirement tax is not a Federal Income Tax,

as asserted by the railroad. The PB&NE cites no case directly

supporting its position with regard to this issue. Further,

PB&NE’s reliance on Hisquierdo v. Hisquierdo, 439 U.S. 575

(1979), is entirely misplaced. This Court stated in Hisquierdo

that compulsory Federal Taxes finance the Railroad Retirement

Act Benefits rather than holding that deductions under the

Railroad Retirement Act are compulsory federal taxes on

income.

Moreover, the Trial Judge properly charged the jury that

they should take into consideration NEW HARD’s lost wages

after taxes (App. 4a, infra) and the testimony concerning taxes

was presented into evidence by Newhard’s Economist, who

took into consideration a conservative figure of 18% in

reducing plaintiff's lost wages to their net value (J.A. 401-

402). This testimony was not countered by any actuary or

economist hired by the PB&NE in this case. Newhard presented

testimony concerning Newhard’s lost wages after taxes and

the Trial Judge instructed the jury concerning same and

therefore Liepelt was strictly followed in this case.

20

IV.

THIS PETITION FOR WRIT OF CERTIORARI IS

MOOT DUE TO THE SETTLEMENT AGREEMENT

REACHED BETWEEN NEWHARD AND PB&NE.

The final compelling reason for denying Petitioner’s

Writ of Certiorari in this matter is due to the fact that the

case has already been settled. On February 9, 1999, the

Court of Appeals affirmed the Judgment of the District

Court in favor of Newhard. The Circuit Court issued its

mandate on March 3, 1999. Thereafter, PB&NE filed a

Motion to Recall the Mandate and Stay Execution of the

Judgment pending disposition of a Petition for Writ of

Certiorari to the Supreme Court. After response was filed

by the Appellee in opposition to said Motion, the Circuit

Court denied PB&NE’s Motion to Recall the Mandate and

Request for a Stay.

During the pendency of the Railroad’s Motion to Stay

Execution of the Judgment, counsel for PB& NE requested

that counsel for Newhard refrain from executing on the

Judgment until the Third Circuit ruled on the Stay Motion.

In consideration for not executing on the Judgment, it was

agreed between the parties that the matter would be settled

for the total amount of Judgment plus interest and costs if

PB&NE’s Motion for Stay was denied by the Court of

Appeals. On April 12, 1999, the parties were served with

an Order dated April 9, 1999, wherein PB&NE’s Motion

for Stay was denied.

On April 15, 1999, PB&NE forwarded to the attention

of Newhard’s counsel the settlement draft for the amount

of Judgment, interest and costs pursuant to the settlement

21

agreement. Thereafter, counsel for Newhard forwarded to

counsel for PB&NE a Stipulation of Dismissal for filing

with the District Court due to the settlement agreement

reached between the parties. In breach of the above-

referenced settlement agreement, PB&NE filed the instant

Petition for Writ of Certiorari. Since the Judgment has been

satisfied and settlement has been reached between the

parties, it is clear that PB&NE’s Petition for Writ of

Certiorari is now moot.

Since the Judgment has been satisfied by the payment

to Newhard in the amount of the Judgment plus interest

and costs, it will be impossible for this Honorable Court to

grant the relief requested by PB&NE in its Petition for Writ

of Certiorari. This matter has béen concluded by way of

settlement between the parties and this Honorable Court

should forthwith deny the instant Writ.

22

CONCLUSION

The decision by the District Court and the Third Circuit

is in accord with Eichel, Tipton and with the many other

Circuit Court decision which have addressed the same issue.

There is obviously no conflict with this Court or other

Circuit Courts of Appeals and no compelling argument has

been presented that Eichel should be overruled. In addition,

this Court’s decision in Leipelt was not intended to allow

Defendant Railroads to deduct the Railroad Retirement Tax

in computing an injured workers’ past and future lost wages.

Such a result would deprive a railroad worker of a benefit

earned over thirty years of employment. The tortfeasor

railroad would conversely derive an undeserved windfall

by reducing justly deserved compensation the injured

railroad worker earned from a lifetime of work.

Finally, the Writ of Certiorari should be denied due to

the fact that this matter has been settled and the Judgment

is now satisfied.

Respectfully submitted,

Bruce S. ZERO

Counsel of Record

POWELL, POWELL & POWELL

Attorneys for Respnodent

Barristers’ Row

142 Adams Avenue

Scranton, Pennsylvania 18503

(570) 961-0777

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