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CSX Transportation, Inc. v. Robert D. Gardner FOR PUBLICATION


ATTORNEYS FOR APPELLANT:
ATTORNEYS FOR APPELLEE:
BRUCE A. HUGON
PAUL J. PASSANANTE
Stuart & Branigin LLP
DAWN M. MEFFORD
Indianapolis, Indiana
Simon Passanante, P.C.

St. Louis, Missouri
ALICE E. LOUGHRAN

Steptoe & Johnson LLP
JOHN T. ROACH
Washington, D.C.
Mann Law Firm

Terre Haute, Indiana
ATTORNEYS FOR AMICUS CURIAE
THE ASSOCIATION OF AMERICAN
RAILROADS:
HAROLD ABRAHAMSON
Abrahamson, Reed & Bilse
Hammond, Indiana

DANIEL SAPHIRE
LOUIS P. WORCHOT
Association of American Railroads
Washington, D.C.





IN THE

COURT OF APPEALS OF INDIANA




CSX TRANSPORTATION, INC.,
)



)
Appellant-Defendant, )
)
vs.
)
No. 49A02-0610-CV-917
)
ROBERT D. GARDNER,
)



)
Appellee-Plaintiff. )




APPEAL FROM THE MARION SUPERIOR COURT

The Honorable Gerald S. Zore, Judge

Cause No. 49D07-0412-CT-2365




September 18, 2007

2



OPINION - FOR PUBLICATION


ROBB, Judge

Case Summary and Issue
Following a jury trial, at which the jury found CSX Transportation, Inc., liable for
injuries sustained by an employee, Robert Gardner, CSX appeals the trial courts denial of its
post-trial motion to offset the amount awarded to Gardner by the amount CSX had
contributed to a fund from which Gardner was receiving a disability annuity pursuant to the
Railroad Retirement Act (the RRA). CSX raises the sole issue of whether it is entitled to
setoff this amount as a matter of law. Concluding that CSX is not entitled to setoff this
amount, we affirm.
Facts and Procedural History

On May 13, 2003, Gardner was working as a locomotive engineer for CSX and was
injured when he was thrown from a train. Gardner injured his neck, back, and right knee in
the accident, and had been unable to return to work at the time of the trial. Shortly after the
accident, Gardner applied for an occupational disability annuity with the Railroad Retirement
Board (the Board), which administers a disability and retirement fund established by the
RRA (the RRA Fund). The Board granted his application and has been paying him
$35,000 per year since December 2003, and will continue to do so until Gardner reaches the
age of 62, at which point it will pay him his retirement annuity instead.

Gardner also filed a complaint against CSX under the Federal Employers Liability

3
Act (FELA), alleging that CSXs negligence caused his injury. The case proceeded to
trial, where the jury found that CSX was 100 percent liable for Gardners injuries and
awarded Gardner $605,500 in damages. CSX filed a post-trial motion to setoff the amount
that CSX had contributed to the RRA Fund on Gardners behalf from the FELA award. The
trial court denied this motion, citing the Supreme Court case of Eichel v. New York Cent.
R.R. Co., 375 U.S. 253 (1963), as controlling. CSX now appeals.
1

Discussion and Decision
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CSX argues that it is entitled to setoff because it in effect is being required to pay
twice for Gardners lost wages; first, it contributed to the fund used to pay Gardners
disability annuity; and second, it compensated Gardner for his lost wages as part of the FELA
award. Therefore, CSX argues that Gardner received a windfall at CSXs expense. Gardner
argues that the annuity he receives pursuant to the RRA Fund should not be regarded as
payment from the tortfeasor CSX, but as payment from a collateral source, and that the
trial court properly disallowed setoff.
I. The Applicable Law and Standard of Review

The parties do not dispute any facts relevant to this appeal. The question of whether a
railroads contributions to the RRA Fund should be setoff against the FELA award is a pure
question of law. See Davis v. Odeco, Inc., 18 F.3d 1237, 1245 (5th Cir. 1994), cert. denied,
513 U.S. 819 (1994). Therefore, our standard of review is de novo, and we will pay no

1
The Association of American Railroads (the AAR), a nonprofit trade organization representing
Amtrak and many of the nations major freight railroads, has filed an amicus curiae brief aligned with CSX.

2
Because we affirm the trial court on other grounds, we need not address Gardners argument that the

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deference to the trial courts decision.

As Gardner filed his claim under FELA, federal law governs this case. See Dice v.
Akron, Canton & Youngstown R.R. Co., 342 U.S. 359, 361 (1952) (noting that only if
federal law controls can the federal Act be given that uniform application throughout the
country essential to effectuate its purposes). Indiana law,
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or the law of any other state, has
no applicability as to liability or damages. See S. Buffalo Ry. Co. v. Ahern, 344 U.S. 367,
371-72 (1953).
II. The Applicable Statutes
A. The RRA

This current version of the RRA was enacted in 1974, and significantly altered its
predecessor, the Railroad Retirement Act of 1937 (the 1937 Act). The current version
resembles both a private pension program and a social welfare plan. Hisquierdo v.
Hisquierdo, 439 U.S. 572, 574 (1979). It establishes two tiers of benefits: Tier I, which
provides amounts essentially equivalent to social security benefits; and Tier II, which
provides retirement benefits over and above social security benefits and operates similarly to
other industrial pension systems. See Railroad Retirement Board, Railroad Retirement
Handbook 2006, at 5, available at www.rrb.gov/pdf/opa/handbook.pdf (hereinafter the
Board Handbook). The Board, an independent agency in the executive branch,
administers the RRA. 45 U.S.C. § 231f.

general nature of the jurys verdict, which did not indicate what portion of the award was attributable to
Gardners lost wages, precludes setoff.

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The Indiana legislature has altered the common law regarding the collateral source doctrine.

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The RRA provides that railroad employees who are injured and unable to continue
their regular work may receive either total disability or occupational disability annuities. See
45 U.S.C. § 231a(a)(1)(iv), (v). Payments under the RRA are not premised on the injury
occurring as a result of the negligence of the railroad. See 45 U.S.C. § 231a. In order to
qualify for occupational disability, the employee must be permanently disabled for work in
his or her regular railroad occupation and either have at least twenty years of railroad service
or be at least sixty years old and have ten years of railroad service. See 45 U.S.C. §
231a(a)(1). In order to receive total disability annuities, the employee must have at least ten
years of railroad service and be disabled for any kind of regular employment. Id. The
amount of an employees annuity depends on the length of the employees employment. See
45 U.S.C. § 231b(b). The primary difference between the benefits under RRA and the 1937
Act is that under the 1937 Act, many employees received benefits under both the 1937 Act
and the Social Security Act, leading to a windfall for railroad employees also employed in
other fields. See Board Handbook, supra, at 4. The current RRA phased out these dual
benefits, but also improved the benefits by easing eligibility requirements and increasing the
amount of the annuities paid to widows and other survivors. Id. at 5-6.
The RRA Fund is supported in part by a tax on both the railroad companies and the
railroad employees. 26 U.S.C. §§ 3201, 3211. Both the railroads and their employees pay
taxes into Tier I at a rate equal to social security taxes. See id. For Tier II, the tax rate
varies, and is published annually by the Department of the Treasury. See 26 U.S.C. 3241(d).
The Tier II annual tax rate for employers is significantly higher than that for employees.

See Ind. Code § 34-44-1-2.

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E.g., 71 Fed. Reg. 67,709 (Nov. 22, 2006) (an employer is taxed 12.1 percent and an
employee is taxed 3.9 percent of the employees compensation). For the fiscal year 2006, the
aggregate of the employee and employer taxes made up 48.4 percent of the total amount
contributed to the RRA Fund. See United States Railroad Retirement Board, 2007 Annual
Report, at 11, available at www.rrb.gov/pdf/opa/AnnualRprt/AnnualReport.pdf (hereinafter,
the Board Report). The remainder of the funding comes from the financial interchange
with social security trust funds (35.7%), national railroad investment trust transfers (9.7%),
federal income taxes (4.7%), general appropriations (1.0%), and interest on investments
(0.6%).
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Id. The primary difference between the current funding structure and that in place
prior to 1974, is that employees and employers were previously taxed at an equal rate, while
now the employer pays a significantly greater amount than does the employee. See Board
Handbook, supra, at 4.
B. FELA
In 1908,