Schnader Obtains Favorable Appellate Decision for Railroads

On April 7, 2016, the Pennsylvania Superior Court issued its opinion in Liberatore v. Monongahela Railway Company, et al. – a case that raises important issues for railroads across the country, on which federal and state courts  nationwide are sharply divided. Schnader partner Nancy Winkelman served as appellate counsel for the railroad defendants Norfolk Southern Railway Company and Consolidated Rail Corporation.

The underlying case was an FELA case; the jury returned a verdict for plaintiff, finding him 50% negligent and so reducing its award by that amount. The railroad defendants paid the reduced verdict, deducting (1) the share of federal Railroad Retirement Tax Act (“RRTA”) taxes they had paid on plaintiff’s behalf; (2) the amount plaintiff had received from the Railroad Retirement Board (“RRB”) during the period of his disability; and (3) the amount plaintiff had received in collectively-bargained Supplemental Sickness Benefits (“SSB”) during the period of his disability. 

The trial court held that the railroads had waived all their arguments by not filing a post-trial motion requesting permission to take the deductions, and further, even if that were not the case, the railroads had no right to make any of the deductions, and further still, as to the RRB/SSB benefits, the railroads had violated plaintiff’s due process rights by doing so.

The appeal presented four issues: (1) did the railroads waive their right to appeal by not filing a post-trial motion; (2) did the railroads properly deduct from the verdict plaintiff’s share of RRTA taxes; (3) did the railroads properly deduct the RRB benefits; and (4) did the railroads properly deduct the SSB benefits? The railroads were supported on appeal by two amici:  the U.S. Department of Justice, Tax Division and the Association of American Railroads.

In a 35-page precedential opinion, the Court found in the railroads’ favor on all issues.

The Court agreed with the railroads that no post-trial motion was required because, among other reasons, “Railroad was legally required to deduct these amounts from the judgment, and, consequently, it was not obligated to seek the trial court’s permission to do so.”

As to the RRTA issue, the Court carefully parsed the complex federal statutory and regulatory scheme and held that (1) time lost due to personal injury is taxable compensation under the RRTA and its sister statute, the Railroad Retirement Act; and (2) because the jury’s award was not apportioned, the entire verdict should be treated as lost time for RRTA tax purposes.

On the RRB issue, the Court held that the railroads had not violated plaintiff’s due process rights by deducting the amount of RRB benefits he received, and agreed with the railroads that the Railroad Unemployment Insurance Act entitled them to make the deduction.

On the SSB issue, Court also rejected the due process argument, and agreed with the railroads that the parties’ collective bargaining agreement required them to make the deduction.