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3001 Provisions of the Act

3001.01 Section 2(f)

of the Act provides:

"If (i) benefits are paid to any employee with respect to unemployment or 

sickness in any registration period, and it is later determined that remuneration is 

payable to such employee with respect to any period which includes days in such 

registration period which had been determined to be days of unemployment or 

sickness, and (ii) the person or company from which such remuneration is 

payable has, before payment thereof, notice of the payment of benefits upon the 

basis of days of unemployment or sickness included in such period, the 

remuneration so payable shall not be reduced by reason of such benefits but the 

remuneration so payable, to the extent to which benefits were paid upon the 

basis of days which had been determined to be days of unemployment or 

sickness and which are included in the period for which such remuneration is 

payable, shall be held to be a special fund in trust for the Board..."

3001.02 Section 1(j) of the Act provides:

"The term `remuneration' means pay for services for hire, including pay for time 

lost, and tips, but pay for time lost shall be deemed earned on the day on which 

such time is lost. The term `remuneration' includes also earned income other 

than for services for hire if the accrual thereof in whole or in part is ascertainable 

with respect to a particular day or particular days. The term `remuneration' does 

not include (i) the voluntary payment by another, without deduction from the pay 

of an employee, of any tax or contribution now or hereafter imposed with respect 

to the remuneration of such employee, or (ii) any money payments received 

pursuant to any nongovernmental plan for unemployment insurance, maternity 

insurance, or sickness insurance."

3002 Analysis of Section 2(f)

3002.01 Provision for special fund

Section 2(f) provides for collection of a special fund from a person or company 

from which remuneration is payable with respect to a period including days of 

unemployment or sickness. Such a collection is to be made if:

a. remuneration is determined to be payable after the payment of benefits; and

b. the person or company has notice of the payment of benefits prior to the 

payment of remuneration.
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3002.02 Amount to be collected

The amount to be collected is the lesser of the following:

a. The amount of benefits paid for days which had been determined to be days 

of unemployment or sickness and which are included in any period with 

respect to which it is later determined that remuneration is payable. This is 

the amount which would not have been paid if days with respect to which 

remuneration is payable had not been considered days of unemployment or 

sickness. For example, if remuneration is payable for the first seven days of 

a registration period containing 14 days of unemployment, the amount due 

under section 2(f) is seven times the claimant's daily benefit rate.

OR

b. The amount of remuneration payable with respect to the period which 

includes days which had been determined to be days of unemployment or 

sickness.

3002.03 Effect on available balance

When the entire amount of benefits paid for any day or days is represented in 

such a collection, the day or days are to be disregarded in computing the number 

of days for which benefits have been paid.

3003 Initial Determinations on Claims

Adjudication of a claim shall not be delayed, but days in a registration period may 

be considered as days of unemployment or sickness, even though it is known 

that the claimant is claiming and may later receive remuneration for such days. If 

the facts are not clear as to whether the claimant is receiving, or expects to 

receive remuneration in the future, an investigation should be made to determine 

the facts.

3004 Notice under Section 2(f)

3004.01 Notice to person or company

When there is information that a claimant is claiming or may receive at some 

later date, pay for time lost for a particular day or days with respect to which 

benefits have been determined to be payable, notice of the Railroad Retirement 

Board's (RRB) right to recovery under section 2(f) shall be sent to the person or 

company which may pay the remuneration. When there is information that a 

claimant is a protected employee under a job protection plan, notice under 

section 2(f) shall be sent to his employer.
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3004.02 Notice in case of labor dispute

Notice under section 2(f) is to be sent to a covered employer whose employees 

are unemployed due to a stoppage of work caused by a labor dispute on the 

premises of the employer. Only one such letter is needed in connection with a 

particular work stoppage; separate letters respecting individual employees are 

not required.

3004.03 Notice to claimant

When information is received that a claimant is entitled to guaranteed wages, 

payable annually, he is to be notified of the RRB's right, under section 2(f) to 

recovery of benefits from any annual guarantee payment.

3005 Determining Amount to be Collected under Section 2(f)

3005.01 General

Determinations as to the amounts to be collected under section 2(f) are made in 

the Sickness and Unemployment Benefits Section (SUBS). in accordance with 

applicable instructions. The method to be used in a particular case depends 

upon provisions of the agreement or settlement under which remuneration is to 

be paid. The general principles for determining amounts to be collected under 

section 2(f) are given below, and are covered in more detail in Appendices A and 

B. Variations occur when an employee is in an occupation that does not have a 

standard eight-hour day, or when labor-management practices for implementing 

an agreement are not uniform.

3005.02 Remuneration payable for each day in the period covered

Pay for time lost under some agreements covers a period, e.g. a month, and 

remuneration is payable with respect to each day in the period. Payments of this 

type are made under agreements providing for monthly guarantees in the form of 

"coordination allowances" or "dismissal allowances". See Appendix A. 

Settlements of pay for time lost claims (such as those filed by employees who 

were discharged or held out of service and are seeking reinstatement, etc.) may 

also indicate that the payment should be considered as compensation for each 

day in the period covered. The amount to be collected under section 2(f) from a 

payment of this type is the lesser of these amounts:

a. the amount of benefits paid for days in the period for which the payment is to 

be made,

OR

b. the amount of the payment for the period.
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3005.03 Remuneration payable for time not worked in a particular month

Pay for time lost under some agreements covers time not worked within a period, 

e.g., a number of days within a month; and remuneration payable under such an 

agreement is attributable to less than the whole number of days in the period. 

Payments of this type are made under agreements similar to the National Job 

Stabilization Agreement of February 7, 1965. See Appendix B. The amount to 

be collected under section 2(f) in this type of case is the lesser of the following:

a. the amount of unemployment benefits paid for time not worked covered by 

the protective payment,

OR

b. the amount of the protective payment for time not worked.

3005.04 Remuneration payable under annual guarantee

When an employee is entitled to an annual guarantee of remuneration without 

reference to the number of hours or days per week, month or year for which he is 

protected, the amount to be collected under section 2(f) will be an amount equal 

to the benefits paid for a number of days equal to whichever is smaller of the 

following:

a. the number of days obtained by dividing the amount of the guarantee 

payment by the daily rate of compensation of the employee's job in the 

guarantee period,

OR

b. the number of days for which unemployment benefits were paid to the 

employee in the guarantee period.

Example: Employee works or gets vacation pay for 158 days in guarantee 

period, and is paid $4,684.00. His average daily compensation was therefore 

$29.65. His protective payment for the guarantee period was reported to be 

$2,541.78. This figure divided by $29.65 gives 86 days. The benefits paid for 86 

days amount to $877.20; this is the amount to be collected under section 2(f).

3005.05 Dining-car employees

These employees have a working standard different from the eight-hour day that 

is common in the non-operating railroad occupations. To determine the number 

of days to which protective payments are attributable under the National Job 

Stabilization Agreement in the case of a dining-car employee, the number of 

hours covered by the payment is generally divided by 8.3 instead of by 8. The 

8.3 figure is obtained by dividing 180 hours (full-time in dining-car service) by 

21.75 (the average number of working days in a month.)
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3005.06 Guaranteed extra board

Under some extra board agreements employees are guaranteed a specific 

number of basic days' pay per period. In the case of such an agreement the 

amount to be collected under section 2(f) from a guarantee payment is (1) an 

amount equal to the benefits paid for the number of days represented by the 

guarantee payment or (2) an amount equal to the benefits paid for days in the 

guarantee period, whichever is less.

3006 Effecting Collection

3006.01 Request for payment

When information is received that remuneration payable to a claimant is being 

withheld in accordance with the provisions of section 2(f), and a determination 

under section 2(f) has been made as specified in AIM-3005, the person or 

company from which the remuneration is payable is to be requested to remit the 

amount to be collected or informed that no amount is to be remitted.

3006.02 Adjudication pending receipt of remittance

When an employer to whom section 2(f) notice was sent advises that 

remuneration is payable to a claimant for a period for which benefits have been 

paid, no action shall be taken to recover from the claimant an amount due under 

section 2(f), as the amount to be collected is provided for in the special fund 

created by the employer.

3006.03 Brief of case when remuneration not withheld

A brief of case is to be submitted to the Sickness and Unemployment Benefits 

Section (SUBS) when an employer or company, after having been put on notice 

under section 2(f), pays remuneration to a claimant for a period including days of 

unemployment or sickness and does not withhold the amount to which the RRB 

is entitled. 

3006.04 Recovery from employee

An amount due under section 2(f) is to be collected from the claimant only if:

a. The amount is not received from the employer,

and

b. It is determined that the amount was paid erroneously to the claimant. (See 

instructions on "Reopening and Redetermination".)
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3007 Settlements to Which Both Sections 2(f) and 12(o) May be 

Applicable

Terms of settlement of an employee's personal injury claim against a person or 

company may provide for payment of an amount allocated as pay for time lost. 

In such a case, consideration is first given to the applicability of section 2(f). If 

section 2(f) is applicable and the amount to be collected there under is 

determined, section 12(o) will be considered applicable to the amount by which 

the total settlement exceeds the amount of the pay for time lost. An amount 

reported by the employer as pay for time lost is, to the extent that it bears a 

reasonable relation to the individual's earnings, to be considered to be pay for 

time lost.

3008 Authority to Make Determinations

SUBS is authorized to make determinations under section 2(f). Cases in which 

there is a question as to the proper determination are to be submitted to Policy 

and Systems for advice.

3020 Provisions of the Act

Section 12(o) of the Act provides:

"Benefits payable to an employee with respect to days of sickness shall be 

payable regardless of the liability of any person to pay damages for such 

infirmity. The Board shall be entitled to reimbursement from any sum or 

damages paid or payable to such employee or other person through suit, 

compromise, settlement, judgment, or otherwise on account of any liability (other 

than a liability under a health, sickness, accident, or similar insurance policy) 

based upon such infirmity, to the extent that it will have paid or will pay benefits 

for days of sickness resulting from such infirmity. Upon notice to the person 

against whom such right or claim exists or is asserted, the Board shall have a 

lien upon such right or claim, any judgment obtained there under, and any sum or 

damages paid under such right or claim, to the extent of the amount to which the 

Board is entitled by way of reimbursement."

3021 Analysis of Section 12(o)

3021.01 Benefits payable regardless of liability to pay damages

Section 12(o) provides that benefits payable with respect to days of sickness are 

to be payable regardless of the liability of any person to pay damages for the 

employee's infirmity.
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3021.02 RRB's right to reimbursement

The RRB is entitled to reimbursement under section 12(o) from any sum or 

damages paid or payable to the employee on account of any liability (except a 

liability under a health, sickness, accident, or similar insurance policy) based 

upon the infirmity. It is not necessary that a liability actually exist, but merely that 

it be asserted. No reimbursement is to be requested in connection with sickness 

benefits payable on the basis of any infirmity other than the infirmity for which a 

sum or damages were paid or payable. The RRB should not assert any right to 

reimbursement from amounts paid to, or in behalf of, the employee for his or her 

expenses in connection with an infirmity.

3021.03 Medical, hospital and legal expenses

The RRB's right of reimbursement under section 12(o) applies only to the net 

amount of a settlement after deduction of the amount of an employee's expenses 

incurred in connection with the injury. The right of reimbursement does not 

extend to amounts of expenses incurred by an employee for medical, hospital, or 

legal services in connection with the infirmity. Legal expenses include the 

amount of the attorney's fee with the employee (usually one-third of the gross 

settlement amount).

The fact that an employee's medical or hospital expenses are covered by health, 

sickness or accident insurance does not prevent them from being considered as 

expenses incurred by the employee. The costs of medical or hospital services 

provided an employee because of his membership in a medical or hospital plan 

or association, or provided under Medicare, are also considered to be expenses 

incurred by the employee. Medical or hospital expenses paid directly by the 

liable party (eg. employer, etc.), however, are not to be deducted from the gross 

settlement.

Medical and hospital expenses are not deductible if they are paid under an 

insurance policy that indemnifies a railroad employer against liability under the 

Federal Employers’ Liability Act (FELA). For example, under the Health and 

Welfare Agreement that was entered into by railroad management represented 

by the National Carriers’ Conference Committee and railroad labor represented 

by the Brotherhood of Maintenance of Way Employees on October 22, 1975, 

employee medical expenses are paid to the providers directly by an insurance 

company. See Appendix I for the Legal Opinion concerning the Agreement and 

click here for a link to the list of railroad employers covered by the Agreement.

3021.04 Amount of reimbursement

The amount of reimbursement is the lesser of (a) the amount of benefits, or (b) 

the amount of the sum or damages (excluding amounts of certain expenses 

incurred by the claimant in connection with his infirmity as indicated in subsection 

3021.03 above). In any case where Section 4(a-1)(ii) is also applicable, the 
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amount of reimbursement for purposes of section 12(o) is the amount of benefits 

paid after diminution or recovery under Section 4(a-1)(ii).

3021.05 Notice required

Notice is to be given to the person who is reported to be liable. Unless notice is 

given to a person who makes a payment of any sum or damages before he or 

she makes the payment, reimbursement is not to be requested of him or her.

3021.06 Recovery from claimant

The RRB may recover from the claimant if notice is not given to the person who 

pays a sum or damages before he makes the payment, or in some cases if 

notice has been given but not honored.

3021.07 Effect of 12(o) recovery on benefit balance

Any day for which the full amount of benefits is recovered or set off against a 

sum or damages is not to be counted in determining the number of days for 

which benefits have been paid in a benefit year.

3021.08 Workmen's compensation

Payments under workmen's compensation laws are not damage payments from 

which the RRB might be entitled to reimbursement. All payments under 

workmen's compensation laws are social insurance payments, but they affect a 

claimant's rights to benefits only if payable periodically to the claimant for total

disability. (See AIM-17, "Determinations under Section 4(a-1)(ii)".)

3021.09 Formula when sickness benefits for registration period based on 

two infirmities

When the benefits payable for a registration period are based, in part, on days of 

sickness resulting from an infirmity for which damages are payable and, in part, 

on days of sickness resulting from some other infirmity, the amount of 

reimbursement to which the RRB is entitled is to be determined according to the 

following formula: Number of days of sickness in registration period based on 

infirmity for which damages are payable minus seven or four days (as the case 

may be), multiplied by daily benefit rate.

3021.10 "Advances"

Ordinarily, a cash payment (other than wages), made by an employer to an 

employee following an injury, is considered to be a sum paid on account of a 

liability; and it is considered that the RRB is entitled to reimbursement to the 

extent that it has paid or will pay benefits for days of sickness resulting from such 

injury. However, if an employer makes payments to an employee in advance of 
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settlement (generally referred to as "advances"), benefit payments may be 

continued until settlement is made or liability is otherwise established.

3021.11 "Coverage U"

Section 12(o) does not apply to a payment made to a claimant by his own 

insurance carrier under an endorsement to his policy (usually referred to as 

"Coverage U") providing that the insurance carrier will pay all sums, up to a 

specified maximum, which the claimant or his legal representative is legally 

entitled to recover as damages for bodily injury from the owner or operator of an 

uninsured automobile. Section 12(o) does apply to any payment which may be

made by the tortfeasor, or anyone on his behalf, because of liability for causing 

the claimant's infirmity, whether the payment is made to the claimant or some 

other person, such as the claimant's insurance carrier under its subrogation 

rights.

3021.12 "No-fault automobile insurance statutes"

Section 12(o) applies to any payment made to our claimant under the "no-fault" 

insurance policy of another individual. A payment made under a no-fault 

insurance statute constitutes a sum paid because of the responsibility (liability) of 

the insured for our claimant's injury. The fact that a state's no-fault insurance 

statute requires payment without establishing fault for the injury does not remove 

the payment from the scope of section 12(o). 

The RRB's right to reimbursement was clarified in the General Counsel's opinion 

L77-464, which stated that where liability to a claimant under the insurance policy 

of another individual occurs, even though no fault is established, and where 

payments are made pursuant to that liability, the payments are subject to the 

RRB's right to reimbursement under section 12(o) of the RUIA.

3022 Initial Determinations on Claims

Except as provided in Section 3026 benefits for days of sickness shall not be 

withheld because of information indicating that the claimant is claiming or may 

later receive a sum or damages on account of a liability based on the infirmity 

from which such days of sickness resulted.

3023 Notice of RRB's Right to Reimbursement

3023.01 Notice of lien

Notice of the RRB's right to reimbursement, Form Letter ID-30b, Notice of Lien, is 

to be sent in each case where a right or claim to damages may be asserted on 

the basis of an infirmity for which sickness benefits may be paid. The notice is to 

be sent (a) to each person or company who may be responsible for the infirmity, 

and (b) to each person or company against whom a claim may be made. In 
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addition, if any such person or company is insured, notice is to be sent to the 

insurance company. When notice is sent in any case where the employee was 

not injured at work, only the employee's name and social security account 

number and the date and place of injury shall be shown on the lien notice. If a 

reply to a Notice of Lien indicates that it was misunderstood, new notice must be 

delivered with appropriate explanation, by contact representative, if necessary.

3023.02 Notice to claimant

When notice of the RRB's right to reimbursement under section 12(o) is given to 

a person or company other than a covered employer, the claimant is to be 

notified of his liability to reimburse the RRB in case of a settlement.

3023.03 Notice to tortfeasor in "Coverage U" case

Upon receipt of information that a claimant has been paid by his insurer on 

account of an uninsured driver's legal liability for the claimant's injuries, the 

tortfeasor is to be notified of the RRB's right to reimbursement from any sum paid 

or payable to the claimant's insurer under its subrogation rights. A copy of such 

notice is to be sent to the claimant's insurer under its subrogation rights. A copy 

of such notice is to be sent to the claimant's insurer.

3024 Request for Information as to Liable Party

If it appears that a claimant is claiming or may later receive a sum or damages on 

account of liability for the infirmity from which his days of sickness resulted but 

information available is not sufficient for sending a Notice of Lien, further 

information is to be requested from the claimant. Such further information would 

ordinarily appear to be needed when covered employer liability is not indicated, 

the questions as to liability on the application for sickness benefits are not 

adequately answered, and the infirmity is an injury such as commonly results 

from an accident, or is a hernia, or in the case of a shop worker, is contact 

dermatitis.

Further information would also appear to be needed when liability other than 

covered employer liability is indicated and the liable party's insurance company is 

not known.

When it appears that the claimant may claim damages but he cannot or will not 

name the person who may be liable and such information is not available from 

some other source, the claimant shall be notified that he must advise the RRB of 

any settlement.
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3025 Releasing Information as to Amount Recoverable

3025.01 General

Information as to the amount recoverable under section 12(o) shall be furnished, 

upon request, to an employer or other person who may be liable for payment of 

damages, or to the claimant, or to an attorney representing any of those parties. 

Such information is to be furnished whether or not terms of a settlement have 

been agreed upon.

3025.02 Settlement made

If an inquiry as to amount recoverable discloses that settlement has been made, 

request for reimbursement shall be made as prescribed in Section 3028.

3025.03 Settlement not made

If an inquiry indicates that settlement has not been made, the adjudicating office 

shall advise the inquirer as to the amount of benefits paid to date on the basis of 

the injury for which settlement may be made. If the claimant is still claiming 

benefits on the basis of that infirmity, the inquirer shall be advised that the 

amount of benefits paid to date must not be considered as a final notice of 

benefits paid unless the RRB is notified within seven days that a settlement has 

been made.

3026 Ten-Day Suspension of Benefit Payments

When the employer, or other person who is to make a settlement, or the 

representative of any such party, has indicated that settlement is to be made 

within seven days in a case where the claimant is continuing to claim benefits on 

the basis of the injury for which settlement is being considered, benefits may be 

suspended for a period of ten days beginning with the day the information is 

furnished. The ten-day suspension will allow for mailing time for a 

communication sent by the employer or other person within the seven-day 

period. Benefits are not to be suspended unless the inquirer has indicated that 

settlement will be made within seven days.

3027 Determining Amount Recoverable

When a person or company notifies the RRB concerning the provisions of a 

settlement of a claim for damages, the adjudicating office shall determine the 

amount to which the RRB is entitled by way of reimbursement. The amount 

stated as the sum or damages, and the amounts, if any, stated as expenses paid 

to or in behalf of the employee in connection with his infirmity shall ordinarily be 

accepted as correct. Where no expenses are reported, it shall be assumed, in 

the absence of evidence to the contrary, that the sum or damages reported does 

not include any amount paid for expenses.
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3028 Request for Reimbursement

3028.01 General

When the amount recoverable from a settlement has been determined, request 

for reimbursement should ordinarily be addressed to the person or company 

making the settlement. If that person or company did not have notice that the 

RRB was paying benefits, the request for reimbursement should be addressed to 

the claimant. In the latter case no sickness or unemployment benefits should be 

paid to the claimant while any amount remains recoverable under section 12(o).

3028.02 Lien not honored

When the liable party has been put on notice but apparently failed to withhold for 

the RRB the amount recoverable under section 12(o), demand for 

reimbursement should be made upon the liable party. Telephone contact may be 

advisable as a means of ascertaining the facts and the liable party's position as 

to reimbursing the RRB. If this effort to collect from the liable party is 

unsuccessful, request for reimbursement should then be addressed to the 

claimant. Special efforts to get in touch with the claimant by personal visit or 

telephone may be advisable if the settlement was recent. In such a case the 

adjudicating office may send the collection letter to the field office for personal 

delivery and explanation.

If recovery from the claimant is not affected within a reasonable time, further 

efforts to recover from the liable party or his insurer should be undertaken without 

delay. Appropriate court decisions may be cited in making efforts to collect from 

insurance companies or large corporations. Care should be taken in speaking 

and writing not to disavow the RRB's right to recovery from the claimant. If there 

is an opportunity to collect from the claimant by offsetting benefits due under the 

Railroad Unemployment Insurance Act or the Railroad Retirement Act, the case 

should be submitted to the division of adjudication for an opinion whether 

recovery should be made by offset or whether efforts should be continued to 

recover from the liable party.

3028.03 Lien payment received

Ordinarily, receipt of a remittance in full payment of the RRB's lien will not require 

any acknowledgement. The remittance (canceled check, etc.) would usually be 

adequate evidence of payment. If, however, the railroad, insurance company, 

attorney, or other person requests a written acknowledgement, discharge, or 

release of lien, a typed letter is to be sent to the person or company requesting 

such acknowledgement. If a formal release is not requested, a release as shown 

in Exhibit W is to be sent.

If the remittance received is for less than the amount of the RRB's lien, and some 

question is raised as to the RRB's right to full reimbursement, the check is to be 
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returned to the remitter with a letter explaining the RRB's position, and a new 

remittance for the complete amount due the RRB is to be requested.

If, because of an apparent clerical error, less than the correct amount was 

remitted, the remittance is to be retained without depositing it, and a letter is to 

be sent explaining the situation and requesting the additional amount due.

3029 Notice to Claimant Concerning Expenses

When it appears, in connection with a report of a settlement, that information as 

to the claimant's expenses might affect the amount recoverable under section 

12(o), the claimant should be so advised. As a rule of thumb such advice should 

ordinarily be sent when all these conditions are present: (1) the settlement is 

reported to be for less than $3,000, (2) the settlement was made by a party other 

than a covered employer, and (3) the amount due the RRB is being withheld from 

the settlement.

3030 Receipt of Information Concerning Expenses

Action shall be taken as follows when information about a claimant's expenses is 

received after the amount recoverable under section 12(o) has been determined:

a. The amount to which the RRB is entitled by way of reimbursement is to be 

tentatively recomputed by deducting the reported expenses from the 

amount of settlement.

b. If deduction of the expenses from the amount of settlement would result in 

a smaller amount recoverable but the claimant has not furnished receipts, 

bills or statements supporting the expenses which he reported, he is to be 

requested to furnish such evidence or a statement explaining why he 

cannot furnish such evidence. Only amounts for which supporting 

evidence is furnished, or with respect to which the lack of such evidence is 

explained, are to be considered for purposes of Section 3031 below.

3031 Excessive Recovery

In any case where a recovery exceeds the amount to which the RRB is entitled 

by way of reimbursement under section 12(o), the correct disposition of the 

excess amount must be determined. If it is apparent that the excessive recovery 

has been withheld from the amount of the settlement paid the employee, the 

excess amount is to be paid to the employee. In other cases, it may appear that 

the excess amount should be refunded to the person or company from whom it 

was collected.
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3032 Set-Off under Section 12(o)

3032.01 Reimbursement for benefits payable but not paid

If the amount of the settlement for an injury exceeds the amount of benefits paid 

on the basis of the injury, any additional benefits payable on the basis of the 

same injury are to be offset against the amount of the settlement to the extent of 

the difference between the two amounts. This adjustment is to be completed 

before any benefits are offset against any amount recoverable from the claimant.

3032.02 Letter to claimant

When the amount of a settlement exceeds the amount of benefits paid, and it 

appears that the claimant might claim additional benefits on the basis of the 

injury for which settlement was made, the claimant should be advised concerning 

the set-off.

a. Settlement in excess of $7,500

If the sum or damages is in excess of $7,500, the letter should explain 

that the amount of the payment is in excess of the sickness benefits 

which may be payable as a result of his injury and that no sickness 

benefits are payable.

b. Settlement less than $7,500

If the sum or damages is less than $7,500, the earliest date with 

respect to which sickness benefits may be paid is to be determined, 

and the letter should explain that no sickness benefits resulting from 

the same injury may be paid before that date.

3032.03 Notice to employee when benefits may exceed payment for injury

When a sufficient time has elapsed so that sickness benefits may be paid and 

the claimant has informed the RRB that he wishes to begin or resume claiming 

benefits, a claim form for a series of registration periods for which no benefits 

may be paid is to be sent to the claimant, together with a letter of explanation.

3032.04 Supplemental medical evidence

If the information on the statement of sickness is sufficient for making a 

determination that the claimant is unable to work at the beginning of the period 

for which no benefits may be paid, no additional medical evidence is to be 

requested until a claim form is sent to the employee for a period for which 

benefits may be paid.
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3033 "Nuisance" Settlements

In some cases of disputed liability, railroads pay small amounts largely for the 

purpose of obtaining a release. In such cases, the amount paid is the amount of 

the settlement and accordingly that is the amount recoverable under section 

12(o).

3034 Attorney Fee Cases

3034.01 Attorney refuses to endorse check

Checks in payment of the RRB's claim under section 12(o) are often made 

payable jointly to the RRB, the injured person, and his attorney. If the attorney 

refuses to endorse and turn over the check unless the RRB pays part of his fee, 

an effort should be made to have the drawer of the check issue a new check 

payable to the RRB alone. If this effort fails, the case is to be briefed.

3034.02 Explaining the RRB's position

When explaining the RRB's position with respect to attorney's fees in section 

12(o) cases, the adjudicating office may cite the court decisions given in 

Appendices F and G.

3035 Protecting Lien in Court Cases

3035.01 Introduction

It is the duty of the adjudicating office to make arrangements for protecting the 

RRB's lien in cases where personal injury suits are based on infirmities for which 

the RRB has paid benefits. The first consideration is to prevent the money from 

getting away. Legal intervention in the suit is to be avoided, if possible. 

However, if legal intervention is necessary, preparation must be made for it. The 

adjudicating office should do all it can to provide time so that requests for legal 

intervention may be routed through the Department of Justice. Since information 

about a suit may reach the RRB at any of the various stages in the proceedings, 

the things to be done will vary according to the situation at the time when the 

RRB gets the information.

Note: In this instruction, "legal intervention" does not denote a particular form of 

legal action, either in the pending case or an independent suit, which the Dept. of 

Justice or a U. S. Attorney may ultimately determine to be advisable.

3035.02 Notice

If there is an amount recoverable under section 12(o) and if no notice of the 

RRB's lien has been sent to the defendant in the suit, Form Letter ID-30b should 

be sent, or delivered by special messenger, immediately.
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3035.03 Arrangements for protecting the RRB's lien

Arrangements to protect the RRB's lien should be undertaken as follows:

a. Protection of lien by defense attorney 

The attorney for the defendant should be asked whether the RRB's lien 

will be protected. If he gives assurance that the lien will be protected, 

he should be advised of the amount of reimbursement to which the 

RRB may be entitled, unless he already has this information. The 

attorney's assurance that he will protect the lien may ordinarily be 

accepted.

b. Protection of lien by plaintiff's attorney

If the attorney for the defendant does not give assurance that the 

RRB's lien will be protected, an effort should be made to get the 

plaintiff's attorney to agree to protect the RRB's lien. It is preferable to 

have him or her agree that the defendant's attorney should deduct the 

amount due the RRB. Whatever agreement is made, there should be 

some written record of it. A letter from the plaintiff's attorney is 

preferred as a record. A letter from the RRB office, confirming the 

understanding of action to be taken by the attorney, amy also serve as 

a record. Copies of this letter should be sent to the defense attorney, 

the clerk of the court, or the U.S. Attorney, or all, as appropriate. A 

written record may be dispensed with where experience with the 

attorney indicates that is not needed.

c. Attorneys refuse to protect lien

If arrangements cannot readily be made with the attorneys, the clerk of 

the court may be notified of the RRB's right to reimbursement under 

section 12(o). With the notice, he should also be furnished a copy of 

the Form Letter ID-30b which was sent to the defendant. If the clerk of 

the court gives assurance that the RRB's lien will be protected, further 

action will not ordinarily be necessary.

d. No arrangements for protection of lien

If no arrangements to protect the RRB's lien can be made, it will be 

necessary to make preparations for legal intervention.

e. Payment of funds to clerk of court

If there is information that funds on which the RRB has a lien under 

section 12(o) are to be, or have been, paid to the clerk of a court, the 

appropriate U.S. Attorney should be notified and the matter reported at 

once to the chief, division of adjudication, by telephone. If the 
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adjudicating office has already been given assurance that the RRB's 

lien will be protected, the U.S. Attorney should be so advised.

3035.04 Preparing for legal intervention

Following are steps to be taken, normally after consultation with the chief, 

division of adjudication, in preparation for legal intervention:

a. Find out the status of the court proceedings, including the scheduled or 

probable date of the next action, such as pre-trial hearing, trial, appeal, 

hearing on appeal, decision by the court, or payment in satisfaction of 

judgment.

b. Take steps to obtain sufficient delay in payment to the plaintiff to enable 

the RRB to take necessary action:

1. Find out when payment may be made and whether it will be made 

to the clerk of the court or to the plaintiff or his representatives. If 

payment is to be made to the clerk of the court, follow instructions 

in 3035.03e above.

2. If payment is to be made to the plaintiff or his representatives, ask 

the defendant's attorney for delay in payment, if necessary, so that 

the RRB may have at least seven days to institute proceedings. If 

delay is obtained in this way, notify the chief, division of 

adjudication, at once of the circumstances so that legal intervention 

can be undertaken. If delay cannot be obtained in this way, 

proceed as provided below.

c. If payment is to be made by the defendant within seven days and cannot 

be deferred, and efforts to protect the lien have been unsuccessful, give a 

report of the facts in the case immediately to the U.S. Attorney. In 

addition, notify the chief, division of adjudication, at once. The U.S. 

Attorney should be advised that the headquarters office of the RRB or the 

Department of Justice will request that he intervene in the case to protect 

the RRB's lien, and will furnish material on the interpretation of the law 

which may be required. In some cases the U.S. Attorney may find it 

necessary to take immediate action before receiving a formal request to 

intervene.

3035.05 Information to Policy and Systems

In any case where legal intervention may be required or where difficulty is 

encountered in protecting the RRB's lien, Policy and Systems is to be kept 

informed of all developments by memorandum or telephone. If there is any 

question about the relation of the suit to an infirmity resulting in days of sickness, 

copies of any complaints, answers, judgment and settlement agreements are to 
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be obtained and furnished. The initial report should include as much of the 

following as is available, together with any other pertinent information:

a. claimant's name and account number

b. name and address of plaintiff's attorney

c. name of the liable person or company (defendant)

d. name and address of defendant's attorney

e. date Notice of Lien was sent, and to whom it was sent

f. amount of the RRB's lien

g. name of the Court

h. case number

i. date of judgment, if rendered

j. date payment is to be made, if determined, and to whom

k. source of information about the judgment

l. date notice of judgment was given to the regional office

m. what are the attitudes of the claimant's attorney and the defendant's attorney 

with regard to recognizing the RRB's lien.

3036 Settlement to Which Section 12(o) and 2(f) May be 

Applicable

Terms of settlement of an employee's claim against a person or company may 

provide for payment of an amount allocated as pay for time lost. In such a case, 

consideration is to be given first to the applicability of section 2(f). If section 2(f) 

is applicable and the amount recoverable there under is determined, it is to be 

considered that section 12(o) is applicable to the amount by which the total 

settlement exceeds the amount of the pay for time lost.

3037 Authority to Make Determinations 

SUBS is authorized to make determinations under section 12(o). Cases in which 

there is a question as to the proper determination are to be submitted to Policy 

and Systems for advice.
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Appendices

Appendix A - Circular RE: Recovery From Protective Payments

Circular Letter No. Ui-C-110 - Recovery Of Benefits From Protective 

Payments

November 1966

To Unemployment Insurance Contact Officials

Benefits paid to an employee under the Railroad Unemployment Insurance Act 

may be recoverable under Section 2(f) of that Act if compensation is later found 

to be payable to him under a protective agreement. This circular explains how 

the amount recoverable from a protective payment is determined when 

provisions of the agreement under which the payment is made indicate that it 

should be considered as compensation for each day in the period covered.

The amount of benefits recoverable from a protective payment of the type 

described above is the lesser of these amounts:

a. the amount of benefits paid for days in the period (almost always a month) for 

which the protective payment is to be made;

b. the amount of the protective payment for the period.

c. (Provisions of many protective agreements take into account time worked in a 

base period as a factor in the extent of protection. Thereby they indicate that 

the protective payments provided should be considered not as compensation 

for each day in the period covered but rather as compensation for a lesser 

time not worked in the period. Payments under the National Job Stabilization 

Agreement of February 7, 1965 are of this nature. The procedure applicable 

to those payments is covered in Circular Letter UI-C-106, issued in December

1965.)

Protective payments of the type to which this circular applies are payable under 

the Washington Job Protection Agreement of May, 1936, the national agreement 

of September 25, 1964 covering shop craft employees, and, generally, all 

existing agreements (other than the National Job Stabilization Agreement) that 

protect employees who are deprived of employment against loss of 

compensation. An example of such a protective payment--based on 

compensation earned in, without regard to time worked in, the base period--is the 

"coordination allowance" payable under the Washington Agreement. It is a 

monthly allowance equivalent to 60% of the employee's average monthly 

compensation in the last 12 months of his employment before he was deprived of 

employment.
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The procedure by which recovery cases are identified and the amount of 

recovery determined is ordinarily as follows:

a. When an employer finds that, under terms of a protective agreement, 

compensation is due an employee for a particular period, the employer 

notifies the Board immediately as to the amount of compensation payable and 

asks how much is recoverable.

b. The Board determines the amount recoverable and notifies the employer. 

The amount recoverable is, as explained above, the amount of benefits for 

the period (usually a month), or the amount of the protective payment for the 

period, whichever is less.

c. The employer withholds the amount recoverable from the protective payment 

and remits it to the Board.

Some employers have been following this procedure. However, many have been 

sending Board offices lists of employees and asking for monthly reports of the 

amounts of unemployment benefits paid to the employees. Thereafter the Board 

gave such employers monthly reports of the amount of unemployment benefits 

paid to each employee on the list for the preceding month. If a protective 

payment was due any employee who had received benefits, the employer sent 

the Board a remittance equal to the amount of the benefits or the amount of the 

protective payment, whichever was less.

The Board's experience shows that the vase majority of employees on these lists 

do not claim benefits under the Railroad Unemployment Insurance Act and, of 

those who do claim benefits, many do not receive protective payments. 

Moreover, Board experience shows that the amounts reported on these lists are 

subject to change and cannot be validly considered as the amounts recoverable 

under Section 2(f). Therefore, with this circular the Board establishes a 

procedure whereby the Board will indicate on a list only whether or not benefits 

have been paid under the Railroad Unemployment Insurance Act without stating 

any amount. When an employer finds that a protective payment is actually due, 

the employer will advise the Board as to the amount of such protective payment. 

The Board will then promptly determine the amount recoverable under Section 

2(f) of the Railroad Unemployment Insurance Act and will notify the employer.

The bureau of unemployment and sickness insurance will be glad to answer any 

questions that employer officials may have about this circular.

s/ Samuel Chmell

------------------------

Director of Unemployment

and Sickness Insurance
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Appendix B - Circular RE: Nat'l Job Stabilization Agreement

Circular Letter No. UI-C-106 - Compensation Paid Under National Job 

Stabilization Agreement

December 1965

To Unemployment Insurance Contact Officials

I. Railroad Retirement Board's Right to Reimbursement

When a railroad determines that compensation is payable to an employee for 

time not worked in a period for which the Board has paid unemployment benefits, 

the benefits may be recoverable under Section 2(f) of the Railroad 

Unemployment Insurance Act. Railroads are now making many such payments 

of compensation under the national job stabilization agreement of February 7, 

1965. This circular is issued to explain how Section 2(f) is applied in connections 

with such payments.

Section 2(f) provides, in general, for recovery of unemployment benefits paid to 

an employee if it is later determined that compensation is due him from his 

employer for a period covered by the benefit payments, provided the employer 

has been put on notice concerning the benefit payments. The amount 

recoverable is the amount of the unemployment benefits paid for the period for 

which compensation is found to be payable, or the amount of the compensation, 

whichever is less.

II Procedure for Effecting Reimbursement

This is the general procedure under Section 2(f) in cases involving protective 

payments made under the national job stabilization agreement:

1. When it appears that a claimant for unemployment benefits may be protected 

under the agreement, the Board will notify the claimant's employer that 

unemployment benefits are being paid.

2. If the employer finds that compensation is due the employee for time not 

worked in a particular month, the employer should check with the Board to 

see whether benefits are recoverable from the compensation.

3. The Board will advise the employer of the amount recoverable, if any.

4. The employer should remit to the Board the amount determined to be 

recoverable.

III Determining Amount Recoverable
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When protective payments are made under the job stabilization agreement, the 

Board is entitled to reimbursement for:

The unemployment benefits paid for time not worked covered by the protective 

payment or the amount of the protective payment for time not worked, whichever 

is less.

The amount recoverable is derived as follows:

1. Compute the time not worked covered by the protective payment. This is the 

difference between (1) number of hours for which the employee is protected 

as established by the average monthly number of hours worked in the 12 

month base period* and (2) the number of hours actually worked in the month 

for which he is to receive payment.

* With respect to protected employees other than seasonal employees and 

employees holding regularly assigned positions on October 1, 1964, 

Article IV, Section 2 of the agreement provides for a "base period 

comprised of the last twelve months in which they performed 

compensated service immediately preceding the date of this Agreement."

2. Compute the amount of the protective payment covering time not worked in 

the month. This is the total compensation payable to the employee for the 

month for which the payment is made less the compensation paid for work 

performed in the month.

3. The amount by which the Board is to be reimbursed is the amount of 

unemployment benefits paid for the number of protected hours (converted 

into days) not worked and for which a protective payment is made (as 

computed in accordance with item 1) or the amount of the protective payment 

for time not worked (as computed in accordance with item 2) whichever is 

less. 

Example:

Consider an employee who is protected to the extent of 120 hours and 

$300 per month on the basis of his service in the base period.

A. In August he worked 80 hours (10 days) and earned $200. He 

received unemployment benefits from the Board for 11 days of 

unemployment in August at the rate of $10.20 per day, or 

$112.20.

1. Period of time not worked 
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120 hours minus 80 hours equals 40 hours 40 

hours divided by 8 hours per day equals 5 

days* 

When the hours for the month are not evenly 

divisible by 8, the fractional remainder is treated 

as a full day. For example, if dividing by 8 

produces a result of 3 days and 1 hour, 

consider that the answer is 4 days. A fraction of 

a day which is less than 1 hour is disregarded.

5 days

2. Amount of protective payment for time not 

worked $300 minus $200 equals $100 $100.00

3. Unemployment benefits paid at the rate 

of$10.20 for 5 days of unemployment for which 

the employee receives a protective payment $51.00

4. Since $51.00 (item 3) is less than $100 (item 2) 

the amount of reimbursement to which the 

Board is entitled is $51.00

5. The Board originally paid the employee $112.20 

for 11 days; he retains unemployment benefits 

of $61.20 for 6 days 

B. In September the employee worked 128 hours and earned 

$296.00.

1. Period of time not worked 120 hours minus 128 hours 

leaves a negative balance. Hence in September there is 

no period of time not worked for which a protective 

payment is to be made, and the Board is not entitled to 

reimbursement for any unemployment benefits. The 

protective payment of $4 is made for the days on which 

the employee actually worked.

IV. Information to be Furnished by Railroads

When an employer is preparing to make a payment under the job stabilization 

agreement for one or more months the Board will determine the amount 

recoverable as illustrated in the above section.

The employer will report:

1. Period of time not worked for which a protective payment is payable, and
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2. The amount of the protective payment covering the time not worked (shown in 

item 1 above).

s/ Samuel Chmell

Director of Unemployment

and Sickness Insurance

Appendix C - Circular Letters RE: 12(o)

Circular Letter Of Instructions No. UI-C-35 - Questions And Answers On 

Sections 12(o) And 2(f) Of The Railroad Unemployment Insurance Act, And 

On Workmen's Compensation Payments

Railroad Retirement Board

Bureau of Employment and Claims

October 17, 1947

This circular is issued in order to answer questions which employers have raised 

concerning provisions of the Railroad Unemployment Insurance Act under which 

employers are required to withhold sums payable to employees and to reimburse 

the Railroad Retirement Board for benefits paid to such employees.

The applicable sections of the Act are Sections 2(f) and 12(o). (Circular Letter of 

Instructions No. UI-C-34, issued July 9, 1947, also dealt with these sections of 

the Act.)

Provisions of Section 12(o)

Section 12(o) provides that:

"Benefits payable to an employee with respect to days of sickness shall be 

payable regardless of the liability of any person to pay damages for such 

infirmity. The Board shall be entitled to reimbursement from any sum or 

damages paid or payable to such employee or other person through suit, 

compromise, settlement, judgment, or otherwise on account of any liability (other 

than a liability under a health, sickness, accident, or similar insurance policy) 

based upon such infirmity, to the extent that it will have paid or will pay benefits 

for days of sickness resulting from such infirmity. Upon notice to the person 

against whom such right or claim exists or is asserted, the Board shall have a 

lien upon such right or claim, any judgment obtained there under, and any sum or 

damages paid under such right or claim, to the extent of the amount to which the 

Board is entitled by way of reimbursement."
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What payment by employers may be within the scope of Section 12(o)?

The "sum or damages paid or payable . . . on account of liability . . ." which is 

referred to in Section 12(o) includes what are ordinarily called payments for 

damages, settlements of personal injury claims, etc. Payments which are solely 

for time lost are not included. Workmen's Compensation payments are not 

included. (This statement may be considered as a correction of any earlier 

statements to the contrary. See the last three paragraphs of this circular letter.) 

Railroad relief association payments are not included.

When is an employer required to reimburse the Board under Section 12(o)?

An employer will be required to reimburse the Board in accordance with the 

provisions of Section 12(o) when all these conditions exist:

(1) Sickness benefits have been paid to an employee by the Board.

(2) A "sum or damages" is paid or payable to the employee by the employer 

on account of a liability based on the infirmity for which the sickness 

benefits were paid (liability under a health, sickness, accident, or similar 

insurance policy being excepted.)

(3) The employer has notice from the Board, before making settlement, that 

reimbursement may be required.

If the employer has already paid the employee before receiving the letter of 

notification, or otherwise having actual notice of the Board's rights under Section 

12(o), it will not be required to make any payment to the Board. Them 

employer's only responsibility to the Board in such cases is to furnish such 

information as the Board may require.

When and how will an employer be notified that reimbursement may be 

required?

The Board will notify an employer that reimbursement may be required under 

Section 12(o) whenever an employee who has made application or claim for 

sickness benefits:

(1) States that the employer has paid or may be responsible for payment of 

damages, or

(2) States that his injury resulted from his work.

The notification will be by letter addressed to an appropriate official of the 

employer. Such letters will be addressed to any official whom the employer 

designates. In the absence of any designation, they will be addressed to the 

sickness insurance contact officer for the employer.
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When action is required of an employer when he is notified that 

reimbursement may be required?

No action is required of an employer as a result of receipt of notice that 

reimbursement may be required until such time, if ever, as payment of a sum or 

damages is to be made to the employee.

In order to protect its interest, the employer should either (1) withhold payment of 

any sum, other than workmen's compensation, which has been awarded but has 

not been paid, until notified by the Board of the amount due the Board; or (2) 

before making settlement, obtain (by telephone or telegraph if desired) from the 

regional office information as to the amount of benefits paid to the employee. If 

the employer contacts the regional office before making settlement, the regional 

office will withhold payment of any additional benefits to the employee for seven 

days to give the employer an opportunity to complete the settlement. If, within 

seven days, the regional office does not receive notice that a settlement has 

been made, additional payments of benefits may be made to the claimant.

The employer is required to advise the Board of the amount of the settlement. (If 

the settlement exceeds $2000, only "in excess of $2000" need be reported.) The 

employer is to report also the amount, if any, allocated as pay for time lost, and 

the period to which pay for time lost is allocated. For the employer's convenience 

in furnishing this information, Form SI-5 will be sent with the notification. The 

Board will, in turn, notify the employer of the amount, if any, which is to be paid to 

the Board as reimbursement for benefits. The employer is then to send to the 

Board a check for this amount made payable to the Treasurer of the United 

States.

What will the amount of reimbursement be?

The amount to be paid to the Board as reimbursement will be whichever is the 

lesser of these:

(1) The amount of benefits paid on the basis of the infirmity, or

(2) The amount of the damages.

Provisions of Section 2(f)

Section 2(f) provides, in part, that:

"If (i) benefits are paid to any employee with respect to unemployment or 

sickness in any registration period, and it is later determined that remuneration is 

payable to such employee with respect to any period which includes days in such 

registration period which had been determined to be days of unemployment or 

sickness, and (ii) the person or company from which such remuneration is 

payable has, before payment thereof, notice of the payment of benefits upon the 

basis of days of unemployment or sickness included in such period, the 
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remuneration so payable shall not be reduced by reason of such benefits but the 

remuneration so payable to the extent to which benefits were paid upon the basis 

of days which had been determined to be days of unemployment or sickness and 

which are included in the period for which such remuneration is payable, shall be 

held to be a special fund in trust for the Board. The amount of such special fund 

shall be paid to the. . ."

When will payments by an employer to an employee be affected by 

provisions of Section 2(f)?

Payments by an employer to an employee may come under provisions of Section 

2(f) only if the employer has notice to that effect from the Board. The notice will 

ordinarily be in the form of a letter from the Board. In the absence of any such 

notice, Section 2(f) has no effect.

When will an employer be notified that Section 2(f) may be applicable?

The Board will notify an employer that Section 2(f) may be applicable when there 

is information that an employee is claiming or may receive remuneration from the 

employer for days for which unemployment or sickness benefits have been found 

payable.

What is meant by "remuneration" in Section 2(f)?

Upon receipt of notice that Section 2(f) may be applicable, an employer is 

required to take action if and when remuneration is found to be payable. In such 

case, the employer is required to:

(1) notify the Board of the amount of remuneration payable and the days for 

which it is payable; and

(2) withhold payment of remuneration until further advice is received from the 

Board.

What happens after the Board has been advised that remuneration is 

payable?

When the Board is advised that remuneration is payable for a day or days for 

which benefits have been paid, the Board will determine the amount which is 

recoverable under Section 2(f) and will notify the employer accordingly. The 

employer will be required to deduct that amount from the amount payable to the 

employee and pay it to the Board (in the form of a check made payable to the 

Treasurer of the United States).

How does the Board compute the amount to be paid to it?

The amount determined by the Board to be payable to it under the provisions of 

Section 2(f) will be whichever is the lesser of these:
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(1) The amount of benefits paid for days for which remuneration is found 

payable.

(2) The amount of remuneration found payable for days for which benefits 

were paid.

What is the relation between workman's compensation and benefits under 

the Act?

Certain workmen's compensation payments are considered social insurance 

payments. If workmen's compensation is paid to an employee for permanent 

total or temporary total disability, the payments are made "with respect to" 

definite period and are, consequently, within the scope of Section 4(a-1)(ii) of the 

Act. The effect of that section is that such an employee receives only the amount 

by which his benefits for a period under the Act exceed his workmen's 

compensation for the period.

What information is needed by the Board?

In order to determine the amount of benefits under the Act, which may be 

payable to an employee who is receiving workmen's compensation payments, it 

is necessary to have information as to whether such payments re for permanent 

total or temporary total disability, and, if so, the amount and duration of the 

payments. Employers can aid us materially is they will furnish such information 

promptly upon request.

Must the employer reimburse the Board from workmen's compensation 

payments?

No. If, after benefits under the Act have been paid to an employee, it is found 

that he has received workmen's compensation payments for days with respect to 

which the benefits were paid, recovery from the employee will be undertaken. 

Neither the employer, nor the insurance company concerned, who has made, or 

may be making, the workmen's compensation payments, will be requested to 

reimburse the Board in connection with such payments.

Action to be taken in judgment cases

If a judgment is paid by the employer into a court, it may become necessary for 

the Board to intervene and assert its lien. It is expected that cases of this kind 

will be few in number. Whenever such a payment is to be made immediate 

notice should be sent to the appropriate regional office.

Distribution of this circular

Two copies of this circular are being sent to each sickness contact officer. 

Additional copies will be furnished upon request.
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Director of Employment and Claims

Approved:

Chief Executive Officer

Circular Letter To Sickness Contact Officials - Supplement to Circular 

Letter No. UI-C-35 - Information About Past Settlements

Railroad Retirement Board

Bureau of Employment and Claims

December 19, 1947

This circular outlines what the Board does when a claim is made for sickness 

benefits on the basis of an injury for which the claimant has received a 

settlement.

If an employer has made a settlement even before the effective date of the Act 

and thereafter receives notice that sickness benefits may be paid, the employer 

is not required to reimburse the Board; however in such case the Board needs 

information regarding the amount of settlement since it may pay only that portion 

of the benefits which exceed the amount of settlement.

At the time the application for sickness benefits is received, the Board generally 

does not have any information as to whether a settlement has or has not been 

made. In his application for sickness benefits, the applicant is required to state 

whether some person may be responsible for the payment of damages. When 

an applicant states that some person or company may be responsible, the Board 

sends appropriate notice to such person or company.

If a settlement has been made prior to the date the notice is received, the person 

or company is not required to pay any amount to the Board. However, the Board 

cannot pay any sickness benefits to the claimant until the sickness benefits 

payable for his claims exceed the amount paid in settlement for his personal 

injury. At such time, the Board may pay only that amount which exceeds the 

amount of the settlement.

Accordingly, the Board needs prompt information as to the amount of the 

settlements made in these cases in order to prevent payment of sickness 

benefits to which the claimants are not entitled. In any case where you are 

asked to furnish the amount of settlement, it will be satisfactory when such 

settlement is in excess of $2,000 to report, "in excess of $2,000".

/a/ H. L. Carter

Director of Employment and Claims

Approved:
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/a/ Robert H. LaMotte

Chief Executive Officer
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Circular Letter No. UI-C-35 - Withholding For Board When All Or Part Of 

Damage Settlement Is To Reimburse Employee For Expenses

United States of America

RAILROAD RETIREMENT BOARD

844 Rush Street

Chicago 11, Illinois

Bureau of Employment and Claims

December 3, 1948

Supplement No. 2

To Sickness Insurance Contact Officials

This circular supplements information previously supplied regarding the 

provisions of Section 12(o) of the Railroad Unemployment Insurance Act.

It has recently been held that Section 12(o) applies only to the net amount of a 

settlement after deduction of the amount, if any, of expenses incurred by a 

claimant in connection with his injury. (Such expenses would include costs of 

hospital care, doctor's fees, and attorney's fees.)

For employers, the practical effects of this are as follows:

1. When the amount of a claimant's expenses is equal to or more than the 

amount of the settlement, no report to the Board of the settlement is 

required even though the employer may have been notified, in accordance 

with Section 12(o), that the claimant had applied for sickness benefits. In 

cases of this type, the Board will not be entitled to any reimbursement.

Example: Claimant's medical expenses - $585. Settlement - $500. No 

report to the Board required.

2. When the amount of a claimant's expenses is less than the amount of the 

settlement, Section 12(o) is applicable only to the amount of the 

difference. That is, it is applicable only to the amount of the settlement 

less the amount of the expenses. In cases of this type, the employer 

should inform the Board of (a) the amount of the claimant's expenses and 

(b) the net amount of the settlement after deduction of such expenses.

Example: Claimant's medical expenses- $500. Settlement - $2000. 

Sickness Benefits paid - $650. Information to be furnished 

to the Board: (a) claimant's expenses - $500; (b) net amount 

of settlement - $1500. Amount to be withheld from the 

settlement for reimbursement to the Board - $650.
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Example: Claimant's medical expenses - $1500. Settlement - $2000. 

Sickness Benefits paid - $650. Information to be furnished 

to the Board: (a) claimant's expenses - $1500; (b) net 

amount of settlement - $500. Amount to be withheld from 

the settlement for reimbursement to the Board - $500.

3. When the net amount of a settlement is more than $2000, the employer 

may report such net amount as being "in excess of $2000", instead of 

reporting the exact amount.

Example: Claimant's medical expenses - $450. Settlement - $2600. 

Information to be furnished to the Board: (a) claimant's 

expenses - $450; (b) net amount of settlement - "in excess of 

$2000."

What has been said above relates only to expenses for which the claimant has 

made, or is to make, payment. It does not apply to expenses borne directly by 

an employer. Any amount which an employer pays directly to a third party (such 

as a doctor or hospital) for care of an employee is not to be reported to the Board 

and is not to be deducted from the total amount of the settlement.

Example: The employer directly paid claimant's doctor and hospital 

bills amounting to $235. Settlement - $1000. Amount of 

settlement to be reported to the Board - $1000. No report of 

the $235 paid directly to be made.

Additional copies of this circular will be furnished upon request.

/s/H.L.Carter

Bureau of Employment and Claims

Circular Letter No. UI-C-35 - Disclosure Of Information In Personal Injury 

Cases

United States of America

RAILROAD RETIREMENT BOARD

844 Rush Street

Chicago 11, Illinois

Bureau of Employment and Claims

December 3, 1949

Supplement No. 3

To Sickness Insurance Contact Officials
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The Board sometimes receives requests for information from employers in 

personal injury cases which cannot be released because of prohibitions set by 

the Railroad Unemployment Insurance Act on the release of information.

Section 12(d) contains a general prohibition against disclosure of information but 

permits disclosure when it would be in the claimant's interest. Section 12(n) 

specifically prohibits the disclosure of information furnished by a doctor except 

that such information may be disclosed in a court proceeding relating to a claim 

for benefits under the Act by the employee.

In view of these provisions of the Act, the Board cannot release information in a 

personal injury case beyond what is needed to protect a lien in accordance with 

the provisions of Section 12(o) of the Act. Section 12(o) relates to 

reimbursement of the Board when a settlement is made with an employee to 

whom the Board has paid sickness benefits. The Board must, or course, advise 

the employer or other liable party of the amount of reimbursement due. In the 

ordinary case, the Board can disclose no more than this. In any event, the Board 

will not be able to disclose any of the medical information which may be in file.

Two copies of this circular are being sent to each sickness contact officer. 

Additional copies will be furnished upon request.

/s/ H. L. Carter

Director of Employment and Claims

Circular Letter No. UI-C-35 - Notifying Board When Personal Injury Case 

Goes To Court

United States of America

RAILROAD RETIREMENT BOARD

844 Rush Street

Chicago 11, Illinois

Bureau of Employment and Claims

October 24, 1950

Supplement No. 4

To Sickness Insurance Contact Officials and Claims Attorneys

This circular has to do with protecting the Board's lien under Section 12(o).

In a personal injury case where appeal is taken from a judgment or where efforts 

to satisfy a judgment are met with refusal by either the plaintiff or the court to 

recognize the Board's lien, the railroad's counsel should wire the Board's General 
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Counsel, Myles F. Gibbons, at 844 Rush Street, Chicago 11, Illinois or call him at 

Whitehall 4-5500.

The regional office from which the employer obtained the lien information should 

also be notified.

Additional copies of this circular should be requisitioned for claims attorneys and 

those who may represent the employer in personal injury suits. 

/s/ H. L. Carter

Director of Employment and Claims

Circular Letter No. UI-C-35 - Letting Board Know Amount Of Damage

United States of America

RAILROAD RETIREMENT BOARD

844 Rush Street

Chicago 11, Illinois

Bureau of Unemployment and Sickness Insurance

Released to Employers 6-22-55

Supplement No. 5

SETTLEMENT

To Sickness Insurance Contact Officials

Circular Letter UI-C-35 and it Supplement No. 1 stated that it would be 

satisfactory to report a damage settlement amounting to more than $2000 as "in 

excess of $2000". This is no longer adequate as benefit rates under the recent 

amendments to the Railroad Unemployment Insurance Act will result in payment 

of more than $2000 in benefits based on injuries in a number of cases.

Accordingly, the Board needs to know the exact amount of settlements up to 

$3000. If a settlement is in excess of $3000, it will be satisfactory to report it as 

"in excess of $3000." Form SI-5 is being revised accordingly.

Additional copies of this circular will be furnished on request.

/a/ H. L. Carter

Director of Unemployment and Sickness Insurance

Appendix D - Court Decision: Lewis v. Railroad Retirement Board

Alabama Supreme Court Decision
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(Lewis v. Railroad Retirement Board, 54 So. 2d 777 (Ala. 1951) cert. den. 

343 U.S. 919 (1952))

Following is a copy of decision of the Alabama Supreme Court which affirms the 

decision of a lower court directing payment to the Railroad Retirement Board of 

an amount due under Section 12(o) of the Railroad Unemployment Insurance 

Act. 

L-51-493

THE STATE OF ALABAMA - - - JUDICIAL DEPARTMENT

THE SUPREME COURT OF ALABAMA

OCTOBER TERM, 1951-52

6 Div. 234

David D. Lewis etc., et al.,

v. 

Railroad Retirement Board et al.,

Appeal from Jefferson Circuit Court

in Equity.

STAKELY, JUSTICE

This is an interpleader suit in equity in which the lower court entered a final 

decree awarding the fund in controversy of $1,213.25, which had been paid into 

the registry of the court, to the claimant, respondent Railroad Retirement Board, 

and denying in whole or in part to the claimant, complainant David D. Lewis and 

the intervening law firm of Jackson, Rives & Pettus, any right to such fund. The 

claimant, complainant David D. Lewis, and the intervenors Jackson, Rives & 

Pettus have appealed to this court from the decree. The Railroad Retirement 

Board is an independent agency in the executive branch of the Government of 

the United States. -- 45 U.S.C.A. S 228(j).

The complainant was injured on or about February 25, 1948. Complainant filed 

his application for sickness benefits under the Railroad Unemployment Insurance 

Act with the Regional Office of the Railroad Retirement Board on March 3, 1948. 

The Railroad Retirement Board began payments under the provisions of the act

to the complainant on account of this injury on February 25, 1948, the day 

following the injury. These payments continued with a brief interruption provided 

by the act through September, 1949. On August 13, 1948 the Railroad 

Retirement Board sent notice, as provided by the act, to the Comptroller of the 

Louisville & Nashville Railroad Company. This notice was received on or about 

the 17th of August, 1948.

The firm of Jackson, Rives & Pettus, Intervenors, was first contacted by the 

complainant with reference to employment as his attorneys in his civil action 

against the Louisville & Nashville Railroad Company on January 20, 1949. 

Intervenors filed suit in behalf of complainant against the Louisville & Nashville 

Railroad Company on January 21, 1949, and the summons and complaint in the 
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suit were served on January 27, 1949. This suit was for personal injuries and 

was brought under the Federal Employers' Liability Act. On October 3, 1949 a 

consent judgment in the aforesaid suit -- Case Number 18,372-X--in the sum of 

$37,500.00 was entered in favor of the complainant and against the Louisville 

and Nashville Railroad Company in the circuit Court for the 10th Judicial Circuit 

of Alabama. On October 8, 1949 the Louisville & Nashville Railroad Company 

requested information from the Railroad Retirement Board concerning the 

amount of benefits paid by the Board to the complainant, referring to the Board's 

letter of August 13, 1948. On October 13, 1949 the Board advised the Louisville 

& Nashville Railroad Company that the correct amount paid was $1,213.25. It is 

without dispute that this is the correct amount which was paid.

The Louisville & Nashville Railroad Company paid to the Clerk of the Circuit 

Court for the 10th Judicial Circuit of Alabama the sum of $36,286.75 subsequent 

to the entry of the aforesaid judgment. The sum of $1,213.25 was withheld 

because of the claim of the Railroad Retirement Board.

Subsequent thereto the intervenors distributed the amount received by them from 

the clerk of the court by deducting and paying to the firm $611.67 for expenses, 

by withholding as a fee the sum of $8,918.77 and paying over the balance of the 

proceeds to the complainant. This was done with knowledge that the Board 

claimed $1,213.25 of the $37,500.00 judgment.

I. It is without dispute that the complainant employed intervenors on January 

20, 1949 as his attorneys to represent him in prosecuting Liability Act 

against the L. & N. Railroad Company with the agreement that the 

attorneys' fee of intervenors would be a contingent fee in an amount equal 

to 24% of the amount of recovery after deduction of expenses of 

prosecuting the claim. This suit was filed as aforesaid and without dispute 

the intervenors prepared the case for trial and tried the case. While the 

case was in progress and shortly before submission of the case to the 

jury, the consent judgment in the amount of $37,500.00 was entered by 

the court, as aforesaid. Without dispute the fee as agreed upon was 

conceded to be a reasonable fee and the services of the attorneys in 

bringing and prosecuting the suit were well and properly performed.

No attorneys' fee has been paid to the intervenors on the $1,213.25, which 

was withheld from payment by the L. & N. R.R. Co. and which was later 

paid into the registry of the court in this interpleader suit. In addition to the 

claim of the intervenors for a fee from the fund of $1,213.25, the 

intervenors also claim an additional fee for filing the bill of interpleader on 

behalf of complainant in the amount of $100.00.

In the letter of August 13, 1948 from the respondent, the Railroad 

Retirement Board, to the Louisville & Nashville Railroad Company the 

statute under which the respondent claimed its lien is set out in a form 
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attached to the letter. This statute is Section 12(o) of the Railroad 

Unemployment Insurance Act, 45 U.S.C.A., 362(o) and reads as follows:

"Benefits payable to an employee with respect to days of sickness shall be 

payable regardless of the liability of any person to pay damages for such 

infirmity. The Board shall be entitled to reimbursement from any sum or 

damages paid or payable to such employee or other person through suit, 

compromise, settlement, judgment, or otherwise on account of any liability 

(other than a liability under a health, sickness, accident, or similar 

insurance policy) based upon such infirmity, to the extent that it will have 

paid or will pay benefits for such days of sickness resulting from such 

infirmity. Upon notice to the person against whom such right or claim 

exists or is asserted, the Board shall have a lien upon such right or claim, 

any judgment obtained thereunder, and any sum or damages paid under 

such right or claim, to the extent of the amount to which the Board is 

entitled by way of reimbursement."

It is the position of the appellants that the lien of the respondent, the 

Railroad Retirement Board, if any, is subordinate to the lien of the 

intervenors for attorneys' fees for services performed in obtaining 

judgment in the suit brought by the complainant against the Louisville & 

Nashville Railroad Company. The lien of intervenors as attorneys arises 

pursuant to 64 (2), Title 46, Code of 1940, which reads as follows:

"2. Upon suits, judgments, and decrees for money, they shall have a lien 

superior to all liens but tax liens, and no person shall be at liberty to satisfy 

said suit, judgment or decree, until the lien or claim of the attorney for his 

fee is fully satisfied; and attorneys at law shall have the same right and 

power over said suits, judgments, and decrees, to enforce their liens, as 

their clients had or may have for the amount due thereon to them."

Subsection 4 of the aforesaid section of the code is as follows:

"4. The lien in the event of suit, provided in paragraphs two and three of 

this section, shall not attach until the service upon the defendant or 

respondent of summons, writ or other process * * * *."

It clearly appears from the statute that the lien of the intervenors as 

attorneys could not arise until summons and complaint were served. This 

service was made on January 27, 1949. The notice of the respondent 

Railroad Retirement Board to the Louisville & Nashville Railroad Company 

was given on August 13, 1948 and was received not later than the other. 

It is apparent that the lien of the Railroad Retirement Board antedates that 

of the intervenors by several months because the lien of the Railroad 

Retirement Board under the statute arises "Upon notice to the person 

against whom such right or claim exists * * *." -- 45 U.S.C.A. 362(o). 
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Since the lien of the Railroad Retirement Board antedates the lien of the 

intervenors, it is superior to it.

In Adams v. Alabama Lime and Stone Corp., 221 Ala. 10, 127 So. 544, 

this court said:

"- - -it has been consistently and often declared that the attorneys' lien is 

subordinate to all set-offs held by the judgment debtor as the time of its 

rendition. * * *

"We do not think this settled rule, declaring in effect that the attorneys' lien 

on a judgment rises no higher than the judgment itself at the time of its 

rendition, has been changed by our statute, ***. It could hardly be 

supposed the attorney's lien on property is made to displace existing liens 

or equities therein. ***

"It is often said with force this view destroys, wipes out the judgment, the 

subject matter on which the lien is declared; that it is sound policy to 

protect the attorney whose professional labors have brought the judgment 

into being. Obviously our statutes aim to protect attorneys as to the 

effects of their clients involved in the litigation. There is likewise strong 

reason for saying the rights of the attorney shielded to those of his client."

In the case of Grace v. Solomon, 241 Ala. 452, 3 So. 2d 3 this court said:

"This lien here provided (attorney's lien) cannot be extended beyond the 

fair interment of the statute, the effect of which, in agreement with the 

common law, is to place the attorney in the position of an equitable 

assignee of the judgment obtained for his client."

From the foregoing authorities it is clear that the lien of the intervenors as 

attorneys is limited to the equity of their client in the judgment. It cannot 

under the statute extend to an equity in the judgment which is owned by 

another and which is superior to that of the complainant. Under the 

federal statute the Railroad Retirement Board clearly had a lien to the 

extent of the payments made by it superior to the rights of the lien of the 

intervenors, attorneys, must be considered as subordinate to the lien of 

the respondent Railroad Retirement Board.

It is contended that the notice relied upon the respondent Railroad 

Retirement Board in its letter of August 13, 1948 to the Louisville & 

Nashville Railroad Company fails to meet the requirements in claiming a 

lien because it fails to state any amount for which a lien is claimed and for 

which reimbursement should be made. There is no merit in this 

contention. The statute provides that the Board's right to reimbursement 

is determined by the "extent that it will have paid or will pay benefits for 

days of sickness resulting from such infirmity". The statute provides for 
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notice to the persons against whom the claim of the injured person exists 

and does not require any notice of the amount. Benefits paid under this 

statute are not lump sum benefits but are paid every two weeks upon 

application of the person entitled thereto. In the present case complainant 

upon his application received benefits beginning February 26, 1948 and 

continued with a brief interruption until September 1949. A total of 

$1,213.25 was paid. It would have been impossible at any time prior to 

the last payment for the respondent to have advised the Louisville & 

Nashville Railroad Company of the amount of it lien. To require it to wait 

would cause it to fail to assert its lien and would be to impose a condition 

not required by the act. We think the notice was in all respect sufficient to 

create a lien provided for in the statute and as pointed out, it contains in 

an attachment to the letter the provisions of the act relating to the Board's 

lien in verbatim. We think the notice served to advise the Louisville & 

Nashville Railroad Company might later owe to the complainant. The 

notice put the Louisville & Nashville Railroad Company on notice of the 

right of the Board and provided the railroad with the means of ascertaining 

the amount claimed upon to settle complainant's claim against it. The 

railroad was placed in the position where it had the duty to make inquiry 

and was charged with all that inquiry would reveal. -- Figh v. Taber, 203 

Ala. 253, 82 So. 495; Morgan Plan Co. v. Accounts Supervision Co., 34 

Ala. App. 457, 41 So. 2d 424, cert. den. 252 Ala. 473, 41 So. 2d 428.

II. Citing Kimbrough v. Dickinson, 251 Ala. 677, 39 So. 2d 241, the position is 

taken by the appellant that the intervenors are entitled to be allowed a fee 

out of the fund paid into the registry of the court on the principle that the 

complainant has maintained a successful suit for the creation, 

preservation and protection of a common fund and has brought into court 

a fund in which another may share. The principle set forth in the foregoing 

authority is not applicable here. That case involved a trust fund of an 

estate. The interest of the person who had borne the burden and expense 

of litigation was not antagonistic to those who benefitted by the litigation, 

all being heirs and next of kin of a decedent. In the foregoing authority it 

was said:

"It will be observed that the co-complainants, in suits of this nature, all 

have a similar interest in the subject matter of litigation--a common, and 

not an antagonistic interest in the trust fund, which has been brought 

under the control of the court. The necessary expenses of the original 

complainant incurred in litigation may very well, under these 

circumstances, be made payable out of the common fund. * * *"

In the case of Lewis v. Wilkinson, 237 Ala. 197, 186 So. 150, the court 

said:
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"Attorney's fees will be charged to the interest in truth of fact represented. 

The fact that the representation incidentally resulted in benefit to the other 

cestuis sque trustent did not authorize charging them with attorney's fees."

In Wilkinson v. McCall, 247 Ala. 225, 23 So. 2d 577, this court said:

"Services for the common benefit of the parties mean services that are of 

benefit to the common estate, or in other words services rendered in a 

matter in which the trust as a trust is interested and not serviced in behalf 

of the individual interests of the parties to the cause." See Bidwell v. 

Johnson, 191 Ala. 195, 67 So. 985; Coker v. Coker, 208 Ala. 239, 94 So. 

308.

In the foregoing authorities the court was considering the right of the 

attorney in the administration of a trust and in most of these cases such 

right in the light of 63, Title 46, Code of 1940. See Penney et al. v. 

Pritchard & McCall, _______Ala.______, 49 So. 2d 782. But even though 

no trust be involved, the right to charge a fund with costs and expenses 

depends upon whether the costs and expenses were incurred in the 

promotion of the interest of those eventually found to be entitled to the 

fund. 14 Am. Jur. 48.

The suit brought by complainant against the Louisville & Nashville 

Railroad Company was not in any sense a class suit or brought for the 

benefit of others. The complainant sought only to establish his own rights. 

The incidental benefit resulting to the Railroad Retirement Board is not a 

basis for charging the Railroad Retirement Board with the creation of a 

fund for its benefit.

Furthermore the action in which the judgment was procured was an action 

in a law court and not in equity. It was not filed in aid of or in connection 

with an equity proceeding as for example a receivership. In an action at 

law attorney's fees are not ordinarily taxable as costs., -- 20 C.J.S. p. 457. 

The interpleader suit was instituted by complainant to protect himself 

against conflicting claims, 48 C.J.S. p. 38 and not to create or protect a 

common fund from waste or destruction. -- Strong v. Taylor, 82 Ala. 213, 

2 So. 760; Penny v. Pritchard & McCall, supra. 

The services rendered by the attorney in the suit in which the judgment 

against the railroad company was procured were services rendered in 

behalf of a client, the complainant in the cause, and his individual interest 

under a contract made only between complainant and intervenors. It was 

not a service rendered in behalf of the Railroad Retirement Board, 

although it resulted incidentally in benefit to the Railroad Retirement 

Board. As a result of the views which we have here expressed, the 

allowance of a fee cannot be sustained on a theory of services rendered 

for the common benefit of all the parties.
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III. As to the allowance of an attorney's fee to be paid to the attorneys for 

instituting the interpleader proceedings out of the fund deposited, this was 

a matter which rested in the discretion of the court. There is nothing to 

show that this discretion was abused in failing to make the allowance, 

especially since the complainant and the intervenor were adjudged to 

have no interest in the fund. -- Jennings v. Jennings, 250 Ala. 130, 33 So. 

2d 251.

There was no error in directing payment of the fund deposited in court to 

the Railroad Retirement Board. The decree of the lower court must be 

affirmed.

Affirmed.

Livingston, C. J., Brown and Lawson, J. J., concur.

Appendix E - Court Decision: U.S. v. Luquire Funeral Chapel

Decision By The United States Court Of Appeals

FOR THE FIFTH CIRCUIT

(U.S. v. Luquire Funeral Chapel, 199 Fed. (2d) 429 (CA 5, 1952))

The following is a copy of a decision of the United States Court of Appeals for the 

Fifth Circuit. The Court held that a notice addressed to "Luquire Ambulance 

Company" when it should have been addressed to "Luquire Funeral Chapel, Inc." 

was a legal and sufficient notice under Section 12(o), in that it reached the party 

for whom it was intended and fulfilled every purpose of such a notice. The Court 

also held that the Board does not have to prove that a compromise or settlement 

was based upon actual legal liability for the employee's injuries.

IN THE

UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 13763

UNITED STATES OF AMERICA,

Appellant,

versus

LUQUIRE FUNERAL CHAPEL, AND

JOHNS FUNERAL CHAPEL, INC.,

Appellees.

(October 31, 1952)

Before BORAH, STRUM, and RIVES, Circuit Judges.
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RIVES, Circuit Judge: The district court held that a notice addressed to "Luquire 

Ambulance Company" when it should have been addressed to "Luquire Funeral 

Chapel, Inc." was insufficient, and hence that no lien was created within the 

purview of Section 12(o) of the Railroad Unemployment Insurance Act, 45 

U.S.C.A. 362(o), set out in the margin.1/ The appellee2/ insists that the 

judgment in its favor should be affirmed on account of the claimed insufficiency of 

the notice, and, if not, then because there was no proof "of any liability" on the 

part of the appellee for the sickness of the railroad employee.

The case was tried upon an agreed statement of facts. The railroad employee, 

George R. Sewell, was injured in a motorcycle accident. An ambulance of 

Luquire Funeral Chapel, Inc., while transporting him to a hospital, collided with an 

automobile. Luquire Funeral Chapel, have been sustained by Sewell as the 

result of said collision, but ultimately agreed to a settlement pursuant to which 

judgment by consent in the State Court was entered in favor of Sewell and 

against the Luquire Funeral Chapel, Inc. in the sum of $5,000.00 and costs, 

which judgment has been paid and satisfied.

Meanwhile, Sewell had filed claims with the Railroad Retirement Board for 

sickness benefits stating that his injuries were sustained in a collision between an 

automobile and an ambulance of "Luquire Ambulance Company, Birmingham, 

Alabama." Over a period of months, the Railroad Retirement Board paid to him 

sickness benefits on said claims in the total amount of $985.00. The Board 

mailed a letter addressed to right of reimbursement under the provisions of 

Section 12(o), supra. There was no Luquire Ambulance Company, but the 

correct corporate title was Luquire Funeral Chapel, Inc. The letter was received 

by appellee's President and turned over by him to its attorney, who placed it in 

the legal files concerning the suit which Sewell had brought against the appellee. 

Notwithstanding that letter, Sewell's claim against the appellee was subsequently 

compromised and settled without recognition of the Board's right or 

reimbursement.

Under Section 12(o), the lien arises "upon notice" to the party alleged to be 

responsible for the injury. Appellee insists that since the notice is a condition 

precedent to the creation of the lien, the Board had no rights until the giving of 

the notice in precisely the manner required. It appears to us that no particular 

form of notice is prescribed, and that actual notice is sufficient. Luquire Funeral 

Chapel, Inc. was not misled because the notice was wrongly addressed to 

Luquire Ambulance Company. It reached the appellee for whom it was intended 

and fulfilled very purpose of, and in effect was, a legal and sufficient notice.3/ 

We would not underestimate the help rendered by technical accuracy in notices

and proceedings toward attaining the goal of justice under law, but it is seldom 

that a poor vehicle should compel abandonment of the journey.

In support of its further defense, appellee points out that the Board is entitled to 

reimbursement from any sum or damages paid "on account of any liability" based 

upon the infirmity for sickness resulting from which the benefits are paid, and that 
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there was no showing in this case of any such liability on the part of the appellee. 

The appellee denied liability and insists that "it bought its peace and procured a 

release by the entry of a consent judgment". Section 12(o), supra, explicitly 

provides that the Board's right of reimbursement extends to any sum or damages 

paid through "compromise" or "settlement". It refers several times in the 

alternative to the employee's "right or claim", and in one instance follows those 

words with the alternative expression "exists or is asserted". The Railroad 

Unemployment Insurance Act contains no express provision for the Board's 

enforcement of the employee's right or claim against an alleged tortfeasor in the 

event the employee himself elects not to pursue the same, and that is probably 

for the reason that, without the employee's cooperation, such a provision would 

usually prove to be impractical or unenforceable. It is true also, we think that the 

Board's right to reimbursement in cases of compromise or settlement would 

generally be unenforceable, if the Board had to prove that the compromise or 

settlement was based upon actual legal liability for the employee's injuries. An 

employee who asserts a colorable or false claim against an alleged tortfeasor 

cannot expect more favorable treatment from the Board than one whose right is 

based upon legal liability. In either case, the obstacle to a compromise or 

settlement is a necessary consequence of the employee's acceptance of benefits 

from the Board. The result contemplated by the Act is that the Board shall 

ultimately respond in benefits to the employee only to the extent that damages 

are not collected from the alleged tortfeasor.

The judgment is therefore reversed with instructions to enter judgment for the 

appellant, plaintiff below.

REVERSED.

A True Copy;

Teste

Clerk of the United States Court of Appeals for the Fifth Circuit

1/ "Benefits payable to an employee with respect to days of sickness shall be 

payable regardless of the liability of any person to pay damages for such 

infirmity. The Board shall be entitled to reimbursement from any sum or 

damages paid or payable to such employee or other person through suit, 

compromise, settlement, judgment, or otherwise on account of any liability 

(other than a liability under a health, sickness, accident, or similar 

insurance policy) based upon such infirmity, to the extent that it will have 

paid or will pay benefits for days of sickness resulting from such infirmity. 

Upon notice to the person against whom such right or claim exists or is 

asserted, the Board shall have a lien upon such right or claim, any 

judgment obtained thereunder, and any sum or damages paid under such 

right or claim, to the extent of amount to which the Board is entitled by way 

or reimbursement."
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2/ Luquire Funeral Chapel, Inc. and Johns Funeral Chapel, Inc. had merged, 

and we therefore refer to the appellees as a single party. 

3/ No case on this point has been decided under this Section, but diligent 

counsel have collected many cases as to the sufficiency of notice under 

other statutes. Closely analogous are cases of mistakes in the names of 

persons to whom writs of garnishment are addressed; e.g. Johnson, et al. 

vs. McDonald et al., 73 S.W. 2d 128; Arkansas Rice Growers' Cooperative 

Ass'n vs. Minneapolis-Moline Power Implement Co., 65 S.W. 2d 913; Aly 

et al. vs. Texas Publication House, 5 W.S. 2d 235; Bailie Furniture Co. vs. 

Hotel Richmond Inc., 57 Ga. App. 281; Eslinger vs. Herndon, 158 Ga. 

823. The cases cited by the parties include, for the appellant; Internation 

M. & T. Co. vs. Kensington Heights Homes Co., 183 N.W. 793; Whiteselle 

vs. Texas Loan Agency, 27 S.W. 309; Coffee vs. United States, 157 F. 2d 

968; United States vs. Perry, 115 F. 2d 724; The Maine, 28 F. Supp. 578, 

580, 581, aff'd sub nom. Standard Wholesale P. & A. Works vs. Travelers 

Ins. Co., 107 F. 2d 373 (C.A. 4, 1939); and for the appellee; Fleisher Co. 

vs. United States, 311 U.S. 15; United States vs. Beaver Run Coal Co., 99 

F 2d 610; Barton vs. City of Waterloo, 255 N.W. 700; in Re Lounsberry, 

226 N.W. 140.

Appendix F - Court Decision: U.S. v. Hall

L-53-490

U.S. v. Hall, 

116 F. Supp. 47 (W. D. Wis., 1953)

BOARD'S LIEN AGAINST PERSONAL INJURY AWARD

United States of America, Plaintiff v. Norman C. Hall and Wisconsin Telephone 

Company, a Wisconsin corporation, Defendants.

In the United States District Court for the Western District of Wisconsin. Civil No. 

492, July 21, 1953.

Where notice of a lien against an award granted in a personal injury settlement 

was properly given under Section 12(o) of the Railroad Unemployment Insurance 

Act which provides for recovery of the amount of benefits paid for sickness or 

injury in such cases, the Board is entitled to reimbursement. The defendant 

company's attempt to nullify the provisions of the Act and the lien thereunder, by 

payment of the award before notice to the Board of such payment, was futile and 

it could not avoid its liability on the lien by such procedure.

Frank L. Nikolay, U.S. Attorney, Madison, Wisconsin, for the plaintiff.
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Messrs. Crawford, Crawford, and Cirilli, Attorneys, Superior, Wisconsin for the 

defendant.

STONE, J. -- This case was considered by the Court on briefs submitted by the 

plaintiff and the defendant Wisconsin Telephone Company on their respective 

motions for summary judgment, the action having previously been dismissed as 

to the defendant Norman C. Hall. The Court hereby makes the following findings 

of fact and conclusions of Law:

Findings of Fact

1. The Railroad Retirement Board, hereinafter referred to as the Board, is an 

independent agency in the Executive Branch of the Government of the 

United States.

2. The defendant Norman C. Hall resides at 1212 North 57th Avenue West, 

Duluth, Minnesota.

3. The defendant Wisconsin Telephone Company, hereinafter referred to as 

the Telephone Company, was on August 17, 1948, and at all times 

subsequent thereto has been, a corporation duly organized and existing 

under the laws of the State of Wisconsin and engaged in the business of 

furnishing telephone service.

4. The Board is charged with the administration of the Railroad 

Unemployment Insurance Act (45 U.S.C., 1946 ed., 3 351-367), 

hereinafter referred to as the Act.

5. Norman C. Hall was injured on August 17, 1948, through the alleged 

negligence of the Telephone Company, and on the basis of that injury 

benefits under the Act, in the total amount of $650.00, were paid him by 

the Treasurer of the United States, upon certification by the Board, during 

the period from August 17, 1948, through February 28, 1949.

6. The said payments were made under the following provisions of Section 

12(o) of the Act, 45 U.S.C., 1946 ed., 3 362(o):

"Benefits payable to an employee with respect to days of sickness shall be 

payable regardless of the liability of any person to pay day damages for 

such infirmity. The Board shall be entitled to reimbursement from any sum 

or damages paid or payable to such employee or other person through 

suit, compromise, settlement, judgment, or otherwise on account of any 

liability (other than a liability under a health, sickness, accident, or similar 

insurance policy) based upon such infirmity, to the extent that it will have 

paid or will pay benefits for days of sickness resulting from such infirmity. 

Upon notice to the person against whom such right or claim exists or is 

asserted, the Board shall have a lien upon such right or claim, any 
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judgment obtained thereunder, and any sum or damages paid under such 

right or claim, to the extent of the amount to which the Board is entitled by 

way or reimbursement."

7. Notice of the Board's rights under the said provisions of Section 12(o) was 

sent the Telephone Company on August 27, 1948.

8. At some time during May, 1949, the Telephone Company's attorneys 

agreed with Norman C. Hall's attorneys to pay Mr. Hall $5,000.00 in 

settlement of his claim against the Telephone Company.

9. At some time during May 1949, the Telephone Company's attorneys 

advised Mr. Hall's attorneys that "it will be necessary that we pay the sum 

of $650.00 to the Railroad Retirement Board in order to extinguish the lien 

which is given to them under the Federal statutes."

10. On May 25, 1949, the Telephone Company's attorneys requested the 

Board's Minneapolis regional office to furnish them a letter stating the 

amount due the Board by way of reimbursement, and asked to be advised 

to whom the check should be made payable.

11. On May 26, 1949, the Telephone Company's attorneys were advised by 

the regional office that the amount due the Board was $650.00 and that 

payment should be made to the Treasure of the United States.

12. Mr. Hall's attorneys subsequently advised the Telephone Company's 

attorneys that he "would not accept the settlement unless the Railroad 

Retirement Board's claim of $650.00 was paid in addition to the settlement 

already agreed on."

13. The Telephone Company's attorneys thereupon, without notice to the 

Board, applied to the Superior Court of Douglas County, Wisconsin, for 

approval of a $5,000.00 settlement between the Telephone Company and 

Norman C. Hall.

14. Pursuant to the said application, judgment for $5,000.00 was entered in 

Mr. Hall's favor on June 23, 1949, no provision being made for the

protection of the Board's claim.

15. The amount of the judgment was thereupon paid by the Telephone 

Company to the Clerk of the Court, by whom it was disbursed to Mr. Hall.

16. Subsequently, on or about June 26 1949, the Telephone Company's 

attorneys advised the Board's Minneapolis regional office of the entry and 

payment of the judgment.
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17. The Board had no prior notice of the proceedings in the Superior Court, 

and has never been reimbursed for any of the benefits paid Norman C. 

Hall as aforesaid.

18. The Telephone Company has rejected all demands that it reimburse the 

United States of America in the amount of the Board's claim.

Conclusions of Law

Upon the foregoing findings of fact, which are made a part of the judgment 

herein, the Court concludes that:

1. The Court has jurisdiction of this proceeding under the provisions of 28 

U.S.C., 1946 ed., Supp. V, 3 1345.

2. The indebtedness of the defendant Wisconsin Telephone Company to 

Norman C. Hall was at all times after the notice to it on August 27, 1948, 

subject to the statutory lien of the Railroad Retirement Board under the 

provisions of Section 12(o) of the Railroad Unemployment Insurance Act 

(45 U.S.C., 1946 ed., 3 362(o).

3. The defendant Telephone Company's attempt to nullify the provisions of 

the Federal Act, and the Board's lien thereunder, by entry and payment of 

the judgment, without notice to the Board until after the amount of the 

judgment had been paid to Norman C. Hall, was futile and of no effect, 

and the Telephone Company could not by this procedure avoid its liability 

on the said lien.

4. The defendant Telephone Company is indebted to the plaintiff in the 

amount of $650.00, with interest from June 23, 1949.

5. The plaintiff is entitled to summary judgment against the defendant 

Wisconsin Telephone Company for $650.00, with interest from June 23, 

1949, and costs, and the Telephone Company's motion for summary 

judgment must be denied.

Memorandum Opinion

The plaintiff has moved for summary judgment against the defendant Wisconsin 

Telephone Company, for the sum of Six Hundred Fifty Dollars ($650.00), plus 

interest, which represents the benefit payments by the alleged negligence of the 

defendant. The action was dismissed against the defendant, Norman C. Hall. 

The Railroad Retirement Board is an independent agency in the Executive 

Branch of the Government of the United States and will be hereinafter referred to 

as the Board.

Admitted Facts
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The allegations in the amended complaint are admitted by the defendant's 

answer, and read as follows:

"The Railroad Retirement Board is an independent agency in the Executive 

Branch of the government of the United States, established under the Railroad 

Retirement Acts, as amended.

"This Court has jurisdiction by reason of 28 USC 1345.

"The defendant, Norman C. Hall, is a resident of 1212 North 57th Avenue West, 

Duluth, Minnesota, whose occupation is unknown.

"That the Wisconsin Telephone Company is a corporation duly organized and 

existing under the laws of the Sate of Wisconsin and is engaged in the business 

of furnishing telephone service and was such a corporation and so engaged on 

August 17, 1948 and at all times subsequent thereto.

"Plaintiff claims of the defendants the sum of $650.00 plus interest at the rate of 

5% from August 27, 1948, and costs, said principle sum representing the 

payment by the Railroad Retirement Board during the period from August 17, 

1948 through February 28, 1949, inclusive for sickness benefits to defendant, 

Norman C. Hall under the Railroad Unemployment Insurance Act, as amended.

"Plaintiff avers that on August 17, 1948, defendant Norman C. Hall was injured 

and that on June 23, 1949 judgment in favor of Norman C. Hall in the sum of 

$5,000 was made against the defendant, Wisconsin Telephone Company, for 

personal injuries sustained in the accident of August 17, 1948, claimed to have 

resulted from negligence of defendant Wisconsin Telephone Company, which 

$5,000.00 was subsequently paid to defendant Norman C. Hall by the Clerk of 

Court, Superior, Douglas County, Wisconsin.

"Plaintiff further avers that on August 27, 1948 the Railroad Retirement Board 

duly notified by letter the defendant, Wisconsin Telephone Company, a 

corporation, of the right of the Railroad Retirement Board under Section 12(o) of 

the Railroad Unemployment Insurance Act, as amended (45 U.S.C. 1946 ed. 

362(o)), for the sickness benefits paid to and to be paid to defendant Norman C. 

Hall out of any sums or damages payable to said Norman C. Hall by defendant 

Wisconsin Telephone Company for injuries sustained by the said Norman C. Hall 

in the accident occurring August 17, 1948.

"That on May 25, 1949, Mr. R. A. Crawford, an attorney at law in Superior, 

Wisconsin and counsel for the defendant, Wisconsin Telephone Company, 

informed the Regional Adjudicator, Railroad Retirement Board, 123 East Grant 

Street, Minneapolis 3, Minnesota, to put the claim of the Railroad Retirement 

Board in letter form and advise as to whom the check should be made payable, 

and that the paid Railroad Retirement Board on May 26, 1949, forwarded such a 
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reply to the said R. A. Crawford, stating the amount due to be $650.00 and that 

payment should be made to the Treasurer of the United States.

"Plaintiff further avers that neither defendant Norman C. Hall or defendant 

Wisconsin Telephone Company, a Wisconsin corporation, have reimbursed that 

said Railroad Retirement Board in accordance with Section 12(o) of the Railroad 

Unemployment Insurance Act, as amended, and demand having been made, the 

said defendants have refused to pay.

"WHEREFORE, Plaintiff demands judgment of the defendants in the sum of 

$650.00 plus interest and costs."

Controlling Statute

The defendant Norman C. Hall was injured on August 17, 1948, through the 

alleged negligence of the defendant Wisconsin Telephone Company. He applied 

to the Railroad Retirement Board, an agency of the United States Government, 

for benefits under the Railroad Unemployment Insurance Act, 45 U.S.C. 1946 

ed. 3 351-367, based on that injury. Such benefits totaling $650.00 were paid 

him during the period from August 17, 1948, through February 28, 1949. These 

payments were made under the following provisions of Section 12(o) of the Act, 

45 U.S.C., 1946 ed. 3 362(o):

"Benefits payable to an employee with respect to days of sickness shall be 

payable regardless of the liability of any person to pay day damages for 

such infirmity. The Board shall be entitled to reimbursement from any sum 

or damages paid or payable to such employee or other person through 

suit, compromise, settlement, judgment, or otherwise on account of any 

liability (other than a liability under a health, sickness, accident, or similar 

insurance policy) based upon such infirmity, to the extent that it will have 

paid or will pay benefits for days of sickness resulting from such infirmity. 

Upon notice to the person against whom such right or claim exists or is 

asserted, the Board shall have a lien upon such right or claim, any 

judgment obtained thereunder, and any sum or damages paid under such 

right or claim, to the extent of the amount to which the Board is entitled by 

way or reimbursement."

Notice of the Board's rights under this Section was sent the defendant Wisconsin 

Telephone Company on August 27, 1948.

Statement of Benefits Paid

On May 26, 1949, pursuant to defendant's request, the Board furnished it with a 

statement of the amount of benefit payments it had paid to Norman C. Hall from 

the date of injury, August 17, 1949, to February 28, 1949, and for which it 

claimed its statutory lien on any indebtedness defendant owed or may owe 

Norman C. Hall, arising of his injury.
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On or about June 26, 1949, after the judgment in favor of Hall for $5,000.00 and 

against the defendant had been entered in the Superior Court for Douglas 

County, Wisconsin, the defendant then thoughtfully notified the Board that 

judgment had been entered, but failed to apprise the Board that it paid the full 

amount of the judgment to Hall via the Clerk of the Superior Court for Douglas 

County, Wisconsin, almost immediately after its entry.

Defendant Liable on Lien

Defendant's indebtedness to Hall was at all times after notice to defendant on 

August 27, 1948, subject to plaintiff's statutory lien and defendant's attempt to 

invalidate the Federal Statute and plaintiff's lien by entry and payment of the 

judgment without notice to the Board until after the judgment was paid to Hall 

was futile and of no effect. It could not by this procedure avoid its liability to 

plaintiff on the said lien. It is now indebted to plaintiff for the amount claimed in 

plaintiff's complaint with interest.

Plaintiff may have judgment against defendant for said amount, with cost.

Plaintiff's counsel may submit proposed findings of fact, conclusions of law and 

judgment.

Appendix G - Legal Opinions Re: Deductible Expenses

Chronological Summary Of Legal Opinions Re Deductible Expenses In 

12(o) Cases

L-48-643

(August 26, 1948)

In this opinion it was held that the provisions of Section 12(o) should be applied 

only to the net amount inuring to the benefit of the individual after the payment of 

medical, legal, and other expenses incurred in connection with the injury. The 

associate general counsel pointed out that to apply the provisions of Section 

12(o) to amounts representing reimbursement for such expenses would tend to 

discourage benefit claimants from prosecuting their demands against those 

responsible for their injuries and that this would react unfavorably upon the 

railroad unemployment insurance account by reducing the amounts recovered 

under Section 12(o).

L-50-127

(March 1, 1950)

In this opinion it was held that, in determining the net amount available for 

reimbursement of the Board under Section 12(o), the claimant's hospital 

expenses should be deducted even though they were covered by his personal 
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hospitalization policy. The associate general counsel noted that there are 

provisions in the RUIA which show a definite concern by Congress that a 

claimant's private insurance should not in any way limit his rights under the Act. 

Thus, Section 12(o) specifically provides that no reimbursement shall be required 

from payments made "under a health, sickness, accident, or similar insurance 

policy". Similarly, it is provided in Section 1(j) that "money payments received 

pursuant to any nongovernmental plan for unemployment insurance, maternity 

insurance, or sickness insurance: shall not constitute "remuneration"; 

consequently, the receipt of such payments does not prevent an individual from 

receiving benefits under the Act. The associate general counsel also stated in L50-127 that it was immaterial whether the claimant was a patient in a member 

hospital, which supplied the services, or in a non-member hospital which was 

reimbursed under the provisions of his hospitalization policy.

October 1, 1957

In a letter of this date to Peter A. McDermott, Esq. (case of Henry T. Bieker, Jr.), 

the associate general counsel stated that the cost of hospital and medical 

services provided because of the claimant's membership in a hospital association 

should be deducted in computing the net amount of his settlement. In this

connection he said: "The fact that because of his membership in, and 

contributions to, the Hospital Association, Mr. Bieker was not actually out-ofpocket for the amount of these expenses is not, in my opinion, controlling."

L-60-461

(November 4, 1960)

This case involved the off-duty injury of Luis Guerrero. In this opinion, the 

associate general counsel pointed out that the conclusion stated in the Bieker 

matter must also be reached in a case, such as that of Guerrero, in which the 

claimant's hospital association dues are paid by his employer pursuant to an 

agreement with the employee's labor organization. The Associates General 

Counsel pointed out that the provisions of Section 12(o) and 1(j) referred to in L50-127 make no distinction on the basis of who pays for the insurance. Nor does 

there appear to be any reason for such a distinction in the matter of determining 

when hospital and medical expenses may be deducted in determining the net 

amount of a settlement. One of the considerations upon which earlier rulings 

permitting the deductions of such expenses were based was the fact that to 

apply Section 12(o) to these amounts would tend to discourage benefit claimants 

from prosecuting their personal-injury claims and that this would react 

unfavorably upon the unemployment insurance account. Refusal to permit the 

deduction of hospital and medical expenses would have as great a tendency to 

discourage the prosecution of a person-injury claim in the case of an employee, 

such as Mr. Guerrero, whose hospital association dues were paid by his 

employer pursuant to an agreement with his labor organization, as it would in the 

case of a claimant, such as Mr. Bieker, who had paid his own hospital 
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association dues. It was also noted, in L-60-461, that the payment of Mr. 

Guerrero's hospital association dues by his employer is not a gratuity, but rather 

something to which he became entitled under the terms of an agreement 

negotiated with the employer by his labor organization.

July 11, 1961

L-61-316

B.O. 61-115

This case involved the on-duty injuries of claimant Jones and Townsent. These 

claimants were entitled to medical and hospital cars by reason of their member 

ship in the Union Pacific Railroad Employees Hospital Association. The 

employer contributes a fixed percentage of the entire cost of operating the 

Association to compensate the Association for caring for employees injured on 

duty.

In L-61-316, the associate general counsel pointed out that there is nothing in the 

Hospital Association's Regulations to indicate that a member of the Association is 

not entitled, as a member, to care for injuries sustained on duty. It was apparent 

that the Railroad Company's contribution to the Hospital Association is required 

under agreements resulting from negotiations between the Company and the 

labor organization. Under these circumstances, and in accordance with the 

views expressed in the Guerrero case, the associate general counsel believed 

that the cost of the claimant's medical and hospital care should be deducted in 

determining the net amounts available for reimbursement of the Board under 

Section 12(o). The associate general counsel noted that the situation here is 

unlike the ordinary case in which an alleged tort-feasor, in settling a personal 

injury claim, himself takes care of the medical and hospital expenses. Here, the 

Company's payment to the Hospital Association is required by its agreements 

with the labor organizations, and is made without reference to whether or not the 

Company is liable, or is alleged to be liable, for the injury involved.

Appendix H - Court Decision: Richter and Levy v. U.S.

This decision denied a claim for counsel fees against the Railroad Retirement 

Board on that part of a personal injury recovery paid to the Board under Section 

12(o) of the Railroad Unemployment Insurance Act. (For decision of U.S. District 

Court see Appendix G.)

Cite this case: 296 F. 2d 509; cert denied, 369 U.S. 828

UNITED STATES COURT OF APPEALS

For The Third Circuit
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No. 13, 563

B. NATHANIEL RICHTER AND ELWOOD S. LEVY,

Appellants

v.

UNITED STATES OF AMERICA

Argued October 2, 1961

Before Goodrich, Staley and Smith, Circuit Judges.

OPINION OF THE COURT

(Filed November 16, 1961)

By Goodrich, Circuit Judge. 

The plaintiffs effected a settlement with a railroad in a Federal Employers' 

Liability Act case and paid part of the recovery to the United States under 

statutory provision. They now claim counsel fees against the Government on 

that part of the settlement paid to it. Plaintiffs lost in the court below. 190 F. 

Supp. 159 (1960).

The facts are undisputed. The plaintiffs, as lawyers, secured on behalf an 

employee of the Pennsylvania Railroad the sum of $16,800. The railroad, in 

satisfaction of a lien of the Railroad Retirement Board, fits previously paid by the 

United States to the employee as compensation for disability arising from the 

accident. The remainder of the settlement arrangement, retained $4,639.41 and 

turned the remainder over to the injured employee. What the appellants now 

want from the United States if one-third of what was paid to the Government 

pursuant to the provisions of the Railroad Unemployment Insurance Act.

The plaintiffs base their claim on the Tucker Act, 28 U.S.C., sec. 1346(a)(2). 

This gives a district court jurisdiction in claims against the United States founded 

upon an act of Congress or upon either express or implied contract with the 

United States.1/ The argument for the appellants suggests that the district judge 

denied them relief on the basis that there was no implied contract with the United 

States within the meaning of the Tucker Act. They now say that this is not the 

theory of their case at all. In their words, "they depend upon the 'founded upon 

an Act of Congress' provision of the Tucker Act jurisdictional declarations."

The relevant portion of the Railroad Unemployment Insurance Act provides that 

the Board is entitled to reimbursement from any damages paid to an employee 

through suit on or settlement of any liability.2/

The act itself makes no provision for counsel fees for those who affect the 

recovery for the injured workman. Nor does the act make any statement against 

counsel fees. The section referred to obviously is to protect the interest of the 

United States.3/ The plaintiffs say, however, that, even though the act does not 
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provide for an attorney's fee, they should be allowed to recover one either under 

Pennsylvania law or general federal equity principles. The theory is that the 

attorney who, by efforts, created the fund should be entitled to reimbursement 

from the Government on the principle or preventing unjust enrichment. 

RESTATEMENT, RESTITUTION, sec. 1, 105(2).

The minute this argument is made, however, it puts the claim outside the Tucker 

Act altogether. The claim is then based not upon a statute of the United States, 

but rather on general equitable principles. There is no basis in the Tucker Act at 

all for the assertion of these. In spite of the multitude of citations with which we 

have been deluged, the point seems to us perfectly clear.

Then it is suggested that, even though the act does not expressly provide for 

attorneys' fees in this case, the appellant should be entitled to a fee. The 

employee, it is said, is the only one who can retain an attorney to benefit both 

himself and the Board. Therefore, since the employee did so and did benefit 

both the Board and himself through the lawyer's efforts, the lawyer by proper

implication from the act should be paid.

We find no basis for taking any such liberty with the statute. What we are in 

effect asked to do is to write in a provision which is not there. We think we are 

no more entitled to redraft the Railroad Unemployment Insurance Act than we 

are to tinker with a provision in the Internal Revenue Code. Cf. Evans v. Dudley, 

No. 13559, 3d Cir., Nov. 8, 1961. There is nothing in the legislative history to 

which we are cited that says anything for or against attorneys' fees in this 

situation. Congress when it desires to make provision for attorneys' fees knows 

perfectly well how to do so, as it has in the Federal Employees' Compensation 

Act4/ and an abundance of other situations.5/ It has not done so here and we do 

not think it a proper subject for court action.

The judgment of the district court will be affirmed.

A True Copy;

Teste

Clerk of the United States Court of Appeals

for the Third Circuit.

1/ The wording of the subsection is as follows:

"(2) Any other civil action or claim against the United States, not 

exceeding $10,000 in amount, founded either upon the 

Constitution, or any Act of Congress, or any regulation of an 

executive department, or upon any express or implied contract with 
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the United States, or for liquidated or unliquidated damages in 

cases not sounding in tort."

2/ Railroad Unemployment Insurance Act section 12(o), 45 U.S.C.A., sec. 

362(o):

"Benefits payable to an employee with respect to days of sickness shall be 

payable regardless of the liability of any person to pay damages for such 

infirmity. The Board shall be entitled to reimbursement from any sum or 

damages paid or payable to such employee or other person through suit, 

compromise, settlement, judgment, or otherwise on account of any liability 

(other than a liability under a health, sickness, accident, or similar 

insurance policy) based upon such infirmity, to the extent that it will have 

paid or will pay benefits for days of sickness resulting from such infirmity. 

Upon notice to the person against whom such right or claim, any judgment 

obtained thereunder, and any sum or damages paid under such right or 

claim, to the extent of the amount to which the Board is entitled by way of 

reimbursement."

3/ The extent of this interest is shown in figures cited to us by government 

counsel. The Government states that the Board, by virtue of 312(o), has 

been able to recover almost ten percent of the sickness and maternity 

benefits paid out under the Railroad Unemployment Insurance Act. At the 

end of the fiscal year 1958-59, the cumulative benefits disbursed by the 

Board totalled $500,000,000, while the total section 12(o) reimbursement 

was $39,294,000.

4/ 5 U.S.C.A., sec. 777 provides that, if a compensable injury creates a legal 

liability in some person other than the United States and a beneficiary 

entitled to compensation under the act recovers damages therefore from 

that other person, the beneficiary "shall, after deducting costs of suit and a 

reasonable attorney's fee, refund the amount of the compensation 

received or to be received from the United States." (Emphasis added.)

5/ For example, Congress has made specific provision for the recovery of 

attorneys' fees in various types of private actions which might be said to 

be affected with a public interest. See 15 U.S.C.A. 315 (suits by persons 

injured by violations of the antitrust laws); 15 U.S.C.A., sec. 77www (suits 

against persons filing false and misleading statements under the Trust 

Indenture Act); 49 U.S.C.A., sec. 16(2) (proceedings to enforce orders of 

the Interstate Commerce Commission).

Appendix I - Court Decision: Richter, Lord and Levy v. U.S.

This decision denied a claim for counsel fees against the Railroad Retirement 

Board on that part of a personal injury recovery paid to the Board under Section 
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12(o) of the Railroad Unemployment Insurance Act. (For decision of U.S. Court 

of Appeals see Appendix F.)

L-61-15-A 

Cite this case: 190 F. Supp. 159 (E.D. Penn., 1960); affirmed 196 F. 2d 509; cert

denied, 369 U.S. 828

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

B. NATHANIEL RICHTER, : CIVIL ACTION

JOSEPH S. LORD, III, and :

ELWOOD S. LEVY :

v.

UNITED STATES OF AMERICA : NO. 27957

OPINION AND ORDER

EGAN, J. DECEMBER 29, 1960.

This suit was brought by a well known Philadelphia law firm against the United 

States to recover a one-third portion of the amount remitted by the Pennsylvania 

Railroad Company direct to the Government in pay of a lien filed with the railroad 

by the Railroad Retirement Board under 312(o) of the Railroad Unemployment 

Insurance Act of June 25, 1938, c. 680, 52 Stat. 1107, as added by section 323 

of the Act of July 31, 1946, c. 709, 60 Stat. 740, 45 U.S.C. section 362 (o).1/

Jurisdiction is founded on the Tucker Act, 28 U.S.C., section 1346.2/ The 

Government moves to dismiss for lack of jurisdiction of the subject matter and for 

failure of the complaint to state a claim upon which relief can be granted. The 

motion will be granted.

The instant case is a suit against the United States to recover a proportionate 

share of a legal fee for services allegedly rendered to the United States in 

connection with a suit under the Federal Employers' Liability Act.

The plaintiffs are B. Nathaniel Richter, Joseph S. Lord, III, and Elwood S. Levy. 

The complaint alleges that plaintiffs, as attorneys for Peter J. Urban during March 

of 1960, effectuated by settlement a gross recovery from the Pennsylvania 

Railroad Company of the sum of $16,800, for injuries sustained in the course of 

his employment; that the railroad, in satisfaction of the lien of the Railroad 

Retirement Board, paid to the United States a portion of said recovery amounting 

to $2,210, said amount representing the benefits previously paid by the said 

accident; that the railroad paid to the plaintiffs and the employee the sum of 

$14,590, being the difference between the agreed settlement of $16,800 and the 

sum of $2,210 paid by the railroad to the United States pursuant to the lien of the 

railroad Retirement Board; that plaintiffs were retained as counsel by the 

employee on a contingent fee basis; 3/ that the employee paid a contingent fee 
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to the plaintiffs for their services of $4,639.41 based on the net recovery after 

litigation expenses and the aforesaid lien of the Railroad Retirement Board had 

been deducted; that the payment to the United States was made possible by, 

and as a direct result of, the efforts and legal services of the plaintiffs who seek 

to be paid by the United States for these services; and that the reasonable and 

proper value of the services rendered by the plaintiffs for the benefit of the United 

States is $736.67.

The plaintiffs aver that the payment to the United States was the direct result of 

their legal efforts and services and seek to be paid on any of several theories. 

Since there is no statutory authority, their recovery must be based on a quantum 

meruit basis or on principles of implied contract or of quasi-contract, or on the 

equitable principle of having created the fund.

It is quite clear from reading the complaint that if the plaintiffs have any claim 

against the United States, it is on the basis of a contract implied in law as 

opposed to a contract implied in fact, or on the equitable principle of having 

created the fund. The United States has not consented to be sued in this action 

and federal jurisdiction recognizes no such equitable right. Therefore the District 

Court has no jurisdiction over this action.

Under the Tucker Act, (supra, footnote 1) jurisdiction is conferred upon the 

District Courts concurrent with that of the Court of Claims of "any other civil 

action or claim against the United States," not exceeding $10,000 in amount, 

founded either upon the Constitution, or upon any express or implied contract 

with the Untied States, or for liquidated or unliquidated damages in cases not 

sounding in tort. 28 U.S.C. section 1346(a)(2).

The Courts have uniformly construed the above provision of the Tucker Act to 

provide that the implied contract must be one implied in fact as opposed to one 

implied in law. Goodyear Tire & Rubber Co. v. United States, 276 U.S. 287 

(1928); United States v. Minnesota Mutual Investment Co., 271 U.S. 212 (1926); 

Sutton v. United States, 192 F. 2d 438 (3 Cir. 1951).

As the Supreme Court stated in the case of United States v. Minnesota Mutual 

Investment Co., supra, at page 217:

"* * * An implied contract in order to give the court of claims or a district 

court under the Tucker Act jurisdiction to give judgment against the 

government must be one implied in fact and not one based merely on 

equitable considerations and implied in law."

This distinction between contracts implied in fact as opposed to contracts implied 

in law is well recognized and has been the subject of much comments by the 

Courts. The Third Circuit defined the distinction as follows in the case of 

American La France Fire Engine Co. v. Borough of Shenandoah, 115 F. 2d 866 

(3 Cir. 1940), at page 867:
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"* * * The distinction between express and implied contracts on the one 

hand and quasi-contracts on the other basic. It has been succinctly stated 

by Mr. Justice Stern in Cameron v. Eynon, 332 Pa.. 529, 532, 3 A.2d 423, 

424, thus: "A quasi contract arises where the law imposes a duty upon a 

person, not because of any express or implied promise on his part to 

perform it, but even in spite of any intention he might have to the contrary. 

A quasi contract, which is a fictional contract, is not to be confused with a 

contract implied in fact, which is an actual contract, and which arises 

where the parties agree upon the obligations to be incurred, but their 

intention, instead of being expressed in words, is inferred from their acts in 

the light of the surrounding circumstances.'"

The distinction was also set forth at some length in the case of G.T. Fogle & Co. 

v. United States, 135 F. 2d 117 (4 Cir. 1943), at page 120:

"* * * The law, however, makes a distinction, absolutely vital here, between 

contracts implied in fact and contracts implied by law. This distinction is 

thus aptly stated in 17 C.J.S., Contracts, section 4, p. 320, 321: section 

Contract implied in law distinguished. A distinction exists between 

contracts implied in fact and those which are implied in law. Thus, a 

contract implied in fact is a true contract, the agreement of the parties 

being inferred from the circumstances, while a contract implied in law is 

but a duty imposed by law and treated as a contract for the purposes of a 

remedy only. Another distinction between such classes of implied 

contracts lies in the fact that, * * * in the case of contracts implied in fact, 

there must be an assent of the parties, as in express contracts, whereas, * 

* * in the case of contracts implied in law, or more properly quasi or 

constructive contracts, such element of assent is lacking. The distinction 

has also been stated that a contract implied in fact is an implied contract in 

which the intention is ascertained and enforced while a contract implied in 

law is a mere fiction, the intention being disregarded, and the quasi 

contractual obligation being imposed by law to bring about justice, without 

regard to the intention of the parties. Again, in the case of contracts 

implied in fact, the contract defines the duty, while in the case of 

constructive contracts, the duty defines the contract.'"

See also Martin v. Campanaro, 156 F. 2d 127 (2 Cir. 1946) and Lach v. Fleth, 

361 Pa. 340 (1949).

In the instant case, there are no facts alleged in the complaint from which assent 

can be inferred. In fact, the complaint alleges no direct relationship whatsoever 

between the plaintiffs and the United States or the Railroad Retirement Board. It 

is quite clear that the theory of the complaint is that by the Plaintiffs' services, a 

benefit has been conferred upon the United States, of which, in equity, the United 

States should bear its proportionate share of the cost of recovery. Thus, it is 

quite clear that recovery is sought on the basis of equitable principles rather than 

a contract implied in fact.
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This case does not fall within the category of class actions4/ and certainly an 

attorney cannot seek to have a contract implied in fact as against the 

Government when he has been representing a private client under a separate 

bilateral agreement and was acting solely in his behalf. Any benefit which might 

be received by the Government is purely incidental. In Coleman v. United 

States, 152 U.S. 96 (1894), the Court refused to imply a contract in fact between 

an attorney and the United States when he had been previously engaged by 

another party and the attorney admitted that he had looked to that client for his 

recompense. The rule generally is that each litigant must pay his own counsel 

fees and that an attorney cannot make another party - who receives an indirect 

benefit - his debtor by voluntarily rendering services in his behalf without his 

express or implied assent. Nolte v. Hudson Navigation Co., 47 F. 2d 166 (2 Cir. 

1931); Lamar v. Hall & Wimberly, 129 Fed. 79 (5 Cir. 1904); Weinberg v. 

Goldenberg's, 81 F. Supp. 353 (D.D.. 1948).

As the general rule is stated in 7 C.J.S., Attorney & Client, section 175:

"An attorney's claim for professional services against persons sui juris, or 

against the property of such persons, must rest on a contract of 

employment, express or implied, made with the person sought to be 

charged or with his agent. No one can legally claim compensation for 

incidental benefits and advantages to one, flowing to him on account of 

services rendered to another by whom the attorney may have been 

employed, or, as has been shown supra section 160, for services 

voluntarily rendered."

There is sound reason why a contract cannot be implied in fact in the instant 

case. Under the statutes of the United States only the Attorney General or the 

United States Attorney can represent the Government in an action in Court. 5 

U.S.C. sections 306-310; Sutherland v. International Insurance Co. of New York, 

43 F. 2d 969 (2 Cir. 1930). Section 306 of Title U.S.C. provides as follows:

"The officers of the Department of Justice, under the direction of the 

Attorney-General, shall give all opinions and render all services requiring 

the skill of persons learned in the law necessary to enable the President 

and heads of Departments, and the heads of Bureaus and other officers in 

the Departments, to discharge their respective duties; and shall, on behalf 

of the United States, procure the proper evidence for, and conduct, 

prosecute, or defend all suits and proceedings in the Supreme Court and 

in the Court of Claims, in which the United States, or any officer thereof, 

as such officer, is a party or may be interested; and no fees shall be 

allowed or paid to any other attorney or counselor at law for any service 

herein required of the officers of the Department of Justice, except in 

cases of services performed by attorneys appointed under section 503 of 

Title 28, for whom compensation is provided under section 508 of Title 

28."
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Further, Sections 314 and 315 provide:

"Section 314. Counsel fees restricted. No compensation shall be allowed 

to any person, besides the respective United States attorneys and 

assistant United States attorneys for services as an attorney or counselor 

to the United States, or to any branch or department of the Government 

thereof, except in cases specially authorized by law, and then only on the 

certificate of the Attorney General that such services were actually 

rendered, and that the same could not be performed by the Attorney 

General, or Solicitor General, or the officers of the Department of Justice, 

or by the district attorneys. * * *"

"Section 315. Appointment and oath of special attorneys or counsel. 

Every attorney or counselor who is specially retained, under the authority 

of the Department of Justice, to assist in the trial of any case in which the 

Government is interested, shall receive a commission from the head of 

such department, as a special assistant to the Attorney General, or to 

some one of the district attorneys, as the nature of the appointment may 

require; and shall take the oath required by law to be taken by the district 

attorneys, and shall be subject to all the liabilities imposed upon them by 

law. Foreign counsel employed by the Attorney General in special cases 

shall not be required to take the oath required by this section."

In the case of Eastern Extension Tel. Co. v. United States, 251 U.S. 355 (1920), 

the Supreme Court stated, at pages 363-66:

"* * * It is obvious that no express contract by the United States to adopt 

and be bound by the third or any of the concessions can be made out from 

the findings of fact, and it is equally clear that such an implied contract, 

using the words in any strict sense, cannot be derived from the findings, 

for it is plain that there is nothing in them tending to show that any official 

with power, express or implied, to commit that government to such a 

contract, ever intended to so commit it.

"The contention of the claimant must be sustained, if at all, as a quasi 

contract, - as an obligation imposed by law independent of intention on the 

part of any officials to bind the government, - one which in equity and good 

conscience the government should discharge because of the conduct of 

its representatives in dealing with the subject-matter.

* * * *

"In the jurisdiction given to the court of claims Congress has consented 

that contracts, express or implied, may be judicially enforced against the 

government of the United States. But such a liability can be created only 

by some officer of the government lawfully invested with power to make 
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such contracts or to perform acts from which they may be lawfully 

implied."

See also United States v. Willis, 164 F. 2d 453 (4 Cir. 1947)

Thus, it can be seen that only the Attorney General has the authority to make a 

contract for the special employment of an attorney. Furthermore, no attorney can 

receive counsel fees from the Government except on receipt of the certificate of 

the Attorney General that such services were actually rendered. There is no 

allegation in the complaint of the receipt of such a certificate. Under the 

circumstances, plaintiffs cannot qualify and no contract can be implied in fact.

It is clear, therefore, that the United States has not consented to be sued and 

that the complaint must be dismissed.

Notwithstanding this posture of the federal law, the plaintiffs in the instant action 

contend "that this is a misconstruction of the Act and that, absent a specific 

provision in the statute denying reasonable compensation to the attorneys who 

benefitted the Board by creating the fund from which the Board is to receive the 

payments, the courts must look to the laws of the several states to determine 

whether the attorney who so benefitted the Board is entitled to reasonable 

compensation out of the Board's share of the recovery" and further that the 

"issue of the case is whether the Act of Congress requires denial of 

compensation to those who created the fund for the Board or whether by reason 

of the failure of Congress to specifically deny the employee's attorneys' 

compensation the courts should look to applicable state law. The plaintiffs 

contend that where Congress is silent the courts should not ascribe to Congress 

an inequitable intent." (Plaintiffs' brief, p. 15).

From this circumstance, they argue that the Pennsylvania decisions, notably 

Furia v. Philadelphia, 180 Pa. Super. 50 (1955) (where plaintiff's attorney was 

permitted recovery on the theories of subrogation and the creation of a fund from 

which the City was reimbursed its workmen's compensation outlay), and Meehan 

v. Philadelphia, 184 Pa. Super. 659 (1957) (where it was stated that in 

Pennsylvania "subrogation is a matter of pure equity"), apply and that this 

permits a recovery by plaintiffs under the Rules of Decision Act, section 1652 of 

the Judicial Code of June 25, 1948, c. 646, 62 Stat. 944, 28 U.S.C. section 1652.

Unfortunately for plaintiffs, they overlook the fact that the equity jurisdiction of the 

Federal Courts differs from that of the State Courts. The general rule is stated at 

19 Am. Jur., Equity §11 as follows:

"The equity jurisdiction of the Federal Courts is derived from the 

Constitution and laws of the United States; and throughout the different 

states of the Union the jurisdiction of these courts in equity is uniform and 

unaffected by state legislation."
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See Mississippi Mills v. Cohn, 150 U.S. 202 (1893).

As a consequence the many authorities cited by plaintiffs in their well-prepared 

briefs have no application to the facts at hand.

Plaintiffs argue, contrary to the defendant, that Lewis v. Railroad Retirement 

Board, 256 Ala, 430 54 So. 2d 777 (1951), cert. denied, 343 U.S. 919 (1952), 

supports plaintiffs' theory of the instant case. They say that the Sate Court 

decided Lewis on the basis of whether the lien of the Board or the lien of the 

employee's attorney was superior, and applying Alabama law determined that the 

Board's lien, being first in time, was superior to that of the attorney. From this 

they argue that this Court, by applying Pennsylvania law, will reach a conclusion 

directly opposite to that reached by the Alabama court under the unique lien law 

of that State. We believe that the Alabama court reached the right conclusion, 

but for the wrong reason. No State law and no State decision can divest or 

downgrade a federal lien in the absence of the cent of Congress. This is clear 

from the authorities above cited.

Plaintiffs also argue that the cases cited by the defendant, decided under the 

Longshoremen's and Harbor Workers' Compensation Act, 33 U.S.C. sections 

901-50, have no value in helping the Court in solving the problems presented by 

the instant case. We disagree. We think those cases are most helpful because 

they make it clear that when Congress wants an attorney's fee paid out of money 

returned to the Government by way of a lien, it knows how to use language to 

accomplish the purpose. The cases referred to are Davis v. United States Lines 

Co., 253 F. 2d 262 (3 Cir. 1958); Oleszezuk v. Calmar Steamship Corp., 163 F. 

Supp. 370 (D. Md. 1958); Davis v. United States Lines Co., 153 F. Supp. 912 

(1957) decided by my able colleague, Judge Van Dusen; Fontana v. 

Pennsylvania R.R., 106 F. Supp 461 (S.D. N.Y. 1952), aff'd sub nom. Fontana v. 

Grace Line, Inc., 205 F. 2d 151 (2 Cir.), cert. denied, 346 U.S. 886 (1953). See 

also Voris v. Gult-Tide Stevedores, Inc. 211 F. 2d 549 (5 Cir.), cert. denied, 348 

U.S. 823 (1954).

For the foregoing reasons, we believe that defendant's motion to dismiss must be 

granted as this Court has no jurisdiction and plaintiffs have not stated a cause of 

action.

It is so ordered.

/s/ Thomas C. Egan

Thomas C. Egan

J.

1/ section 12(o) provides: "Benefits payable to an employee with respect to 

days of sickness shall be payable regardless of the liability of any person 

to pay damages for such infirmity. The Board shall be entitled to 

reimbursement from any sum or damages paid or payable to such 
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employee or other person through suit, compromise, settlement, 

judgment, or otherwise on account of any liability (other than a liability 

under a health, sickness, accident, or similar insurance policy) based upon 

such infirmity, to the extent that it will have paid or will pay benefits for 

days of sickness resulting from such infirmity. Upon notice to the person 

against whom such right or claim exists or is asserted, the Board shall 

have a lien upon such right or claim, any judgment obtained thereunder, 

and any sum or damages paid under such right or claim, to the extent of 

the amount to which the Board is entitled by way or reimbursement."

2/ Jurisdiction is founded upon the Tucker Act as codified in §1346 of the 

Judicial Code (28 U.S.C. section 1346) which provides in part that, "(a) 

The district courts shall have original jurisdiction, concurrent with the Court 

of Claims, of: . . . (2) Any other civil action or claim against the United 

States, not exceeding $10,000 in amount, founded either upon the 

Constitution, or any Act of Congress, or any regulation of an executive 

department, or upon any express or implied contract with the United 

States, or for liquidated or unliquidated damages in cases not sounding in 

tort."

3/ A copy of the contingent fee contract is not in the record but it is 

immaterial to our disposition of the case. 

4/ The cases of Sprague v. Ticonic National Bank, 307 U.S. 161 (1939); 

Doherty v. Bress, 262 F. 2d 20 (D.C. Cir. 1958) cert. denied, 359 U.S. 934 

(1959); Voris v. Gulf-Tide Stevedores, Inc., 211 F. 2d 549 (5 Cir. 1954), 

and Brown v. T. W. Phillips Gas & Oil Co., 105 F. Supp. 479 (W.D. Pa. 

1952) are not controlling here. They were special situations and are 

controlled by their own facts.

Appendix J - Decision Of The Comptroller General Of The United States

L-72-230

On occasion, the Board's assertion of a section 12(o) lien against a recovery of 

damages under the Federal Tort Claims Act has been resisted by the 

Government agency concerned or by one of its contacts in the General 

Accounting Office on the strength of Comptroller General decisions holding that 

property damage claims between government agencies must be borne by the 

agency suffering the loss, since the appropriations of the other agency are not 

considered available for reimbursement. (Such opinions are found in 25 Comp. 

Gen. 49, 25 Comp. Gen 322, 9 Comp. Gen. 263, 8 Comp. Gen. 600 and in other 

reports of such decisions.) In answering such an objection, the Board has 

pointed out the differences between the decisions cited and the situation 

involving a Board claim against someone who is entitled to recover damages 

from the other agency rather than a claim against the other agency itself.
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The distinction the Board has urged in such a case was made by the Comptroller 

General in the 1950 opinion quoted below. In handling a 12(o) claim asserted 

against damages recovered from another government agency under the Federal 

Tort Claims Act, the direct authority may be more readily accepted by the other 

agency and by reviewers in the General Accounting Office.

29 Comp. Gen. 470 [B-94488], May 17,1950

"Personal Injuries--Damages--Availability of Post Office Department 

Appropriations to Reimburse Subrogee Under Railroad Unemployment Insurance 

Act 

"The Railroad Retirement Board, as subrogee under the Railroad Unemployment 

Insurance Act of a railroad employee injured through the negligence of a postal 

employee, may be reimbursed from appropriations of the Post Office Department 

the sum withheld by the Department from an award made under the Federal Tort 

Claims Act, in the amount of sick benefits received by the employee from the 

Railroad Unemployment Insurance Account.

"Comptroller General Warren to the Postmaster General, May 17, 1950: 

"Reference is made to your letter of April 10, 1950, requesting to be advised as 

to whether your Department properly may reimburse the Railroad Retirement 

Board for an amount paid as sick benefits to an employee of the Central Railroad 

Company of New Jersey, who was injured through the negligence of an 

employee of your Department while performing official duties.

It is explained that the injured employee of the Central Railroad Company of New 

Jersey filed a claim with your Department in the sum of $335.56 pursuant to the 

Federal Tort Claims Act, approved August 2, 1946, 60 Stat. 842, 843, and that, 

upon consideration of the claim, it appeared that the claimant had been paid the 

sum of $68 in sick benefits by the Railroad Retirement Board. Under such 

circumstances the claimant was awarded the sum of $267.56 and the Railroad 

Retirement Board has now requested reimbursement from your Department in 

the amount paid by the Board as sick benefits to the claimant as the result of 

such injury.

"You point out that the right of an insurer or other subrogee to assert a claim 

under the Federal Tort Claims Act has been established in the case of United 

States v. Aetna Casualty & Surety Company, 338 U.S. 366. However, it is 

indicated that your doubt in the instant matter arises by reason of the fact that the 

subrogee, the Railroad Retirement Board, is an agency of the United States 

Government, and as such comes within the principles of the decisions 25 Comp. 

Gen. 322; 10 id. 288; 8 id. 600; 5 id. 162.

"The decisions of the accounting officers just cited are to the effect that, where 

public property in the custody of one agency of the Government is loaned to 
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another agency, the cost of repairs and replacement in the event of damage or 

loss of the property may not be paid from the appropriations of the borrowing 

agency. The reason for this rule is, generally, that the appropriations of the 

borrowing agency were not provided for the purpose of repairs or replacements 

of articles under the control of another agency, and that any payment therefor 

would result in an improper enhancement of the appropriations of the lending 

agency available for that purpose. However, the applicability of the rule of said 

decisions to the instant case is not apparent. Aside from the fact that there is not 

here involved the matter of repairs or replacement of damaged or lost public 

property, it is obvious that the appropriations of the Post Office Department are 

available for the payment requested by the Railroad Retirement Board, and that 

such payment would not result in any improper enhancement of appropriated 

funds of the Board. In that connection, it appears that the benefits in question 

were paid from the Railroad Unemployment Insurance Account established by 45 

U.S. Code 360, which account is maintained by the contributions of employers 

and employee representatives covered by the Railroad Unemployment Insurance 

Act. See 45 U.S. Code 358.

"Further, particular attention is invited to section 12(o) of the Railroad 

Unemployment Insurance Act, 45 U.S. Code 362(o), which provides as follows:

'Benefits payable to an employee with respect to days of sickness shall be 

payable regardless of the liability of any person to pay damages for such 

infirmity. The Board shall be entitled to reimbursement from any sum or 

damages paid or payable to such employee or other person through suit, 

compromise, settlement, judgment, or otherwise on account of any liability 

(other than a liability under a health, sickness, accident, or similar 

insurance policy) based upon such infirmity, to the extent that it will have 

paid or will pay benefits for days of sickness resulting from such infirmity. 

Upon notice to the person against whom such right or claim exists or is 

asserted, the Board shall have a lien upon such right or claim, and any 

judgment obtained thereunder, and any sum or damages paid under such 

right or claim, to the extent of he amount of which the Board is entitled by 

way of reimbursement.'

Appendix K 

L-2011-06 

 July 22, 2011
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L-2011-06

Mr. Richard G. Lifto

Assistant Vice President

General Claims Department

BNSF Railway Company

2500 Lou Menk Drive

Fort Worth, Texas 76131

In reply refer to 

C. 2011-3617

Dear Mr. Lifto:

This is in reply to your letter of June 24, 2011, wherein you asked the Railroad 

Retirement Board (RRB) to modify the factors it considers when determining 

whether to waive all or a portion of the RRB’s lien under section 12(o) of the 

Railroad Unemployment Insurance Act (RUIA). 

More specifically, you asked that the RRB not allow the 12(o) lien amount to be 

reduced by the amount of medical expenses that are paid on the employee’s 

behalf pursuant to a Health and Welfare Agreement (“Agreement”) entered into 

by rail management and rail labor on October 22, 1975. That Agreement 

provides in relevant part that:

In the case of an injury or a sickness for which an Employee who is eligible for 

Employee benefits and may have a right of recovery against the employing 

railroad, Benefits will be provided under the Policy Contract, subject to the 

provisions hereinafter set forth. The parties hereto do not intend that benefits 

provided under the Policy Contract will duplicate, in whole or in part, any amount 

recovered from the employing railroad for hospital, surgical, medical or related 

expenses of any kind specified in the Policy Contract, and they intend that 

benefits provided under the Policy Contract will satisfy any right of recovery 

against the employing railroad for such benefits to the extent of the benefits 

provided. Accordingly, benefits provided under the Policy Contract will be offset 

against any right of recovery the Employee may have against the employing 
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railroad for hospital, surgical, medical or related expenses for any kind specified 

in the Policy Contract. (Art. III, Sec. A.).

Section 341.5(b) of the RRB’s regulations specifies the expenses that may be 

subtracted from the amount of damages recovered in calculating a 12(o) lien:

“(1) The medical and hospital expenses that the employee incurred 

because of his or her injury. These expenses are deductible even if they are 

paid under an insurance policy covering the employee or are covered by his or 

her membership in a medical or hospital plan or association. But such expenses 

are not deductible if they are not covered by insurance or by membership in a 

medical or hospital plan or association and are consequently paid by a railroad or 

other person directly to the doctor, clinic or hospital that provided the medical 

care or services. 

(2) The cost of litigation. This includes both the amount of the fee to which 

the attorney and the employee have agreed and the other expenses that the 

employee incurred in the conduct of the litigation itself.” [20 CFR 341.5(b)(1) and 

(2)].

You have explained that when an employee’s medical expenses are paid for 

pursuant to the Agreement, the insurance company United Healthcare pays the 

medical service providers directly. The insurance is funded solely by BNSF. 

Thus, although BNSF does not pay the medical expenses directly to the 

providers of those services, it does pay the full cost of the insurance obtained to 

fund the railroad’s liability for medical expenses resulting from the employee’s 

injury or illness where the employee may have a right of recovery against the 

railroad.

The question then becomes whether payment of medical expenses by an 

insurance policy fully paid for by the railroad for the purpose of funding the 

railroad’s liability for medical expenses resulting from employee injury or illness 

should be considered the equivalent of payment of medical expenses directly by 

the railroad. 

A railroad’s liability for an employee’s injury would generally be determined under 

the provisions of the Federal Employers’ Liability Act (45 U.S.C. § 51 et seq.) 

(FELA). That Act contains the following provision:

“Any contract, rule, regulation, or device whatsoever, the purpose or intent of 

which shall be to enable any common carrier to exempt itself from any liability 

created by this chapter, shall to that extent be void: Provided, That in any action 

brought against any such common carrier under or by virtue of any of the 

provisions of this chapter, such common carrier may set off therein any sum it 

has contributed or paid to any insurance, relief benefit, or indemnity that may 
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have been paid to the injured employee or the person entitled thereto on account 

of the injury or death for which said action was brought.” 45 U.S.C. §55.

While section 55 in effect prohibits a railroad from exempting itself from liability 

under the FELA, it anticipates that a railroad may insure itself to cover liability 

under FELA and allows the railroad to set off amounts paid for such insurance 

from an amount paid to an employee who brought an action under FELA. The 

issue of whether benefits paid pursuant to such insurance should be set off from 

money due to the injured employee in an FELA action has been addressed by 

several courts. According to the U.S. Court of Appeals for the Ninth Circuit:

“In dealing with this issue both in the railroad and maritime cases, courts have 

been virtually unanimous in their refusal to make the source of the premiums the 

determinative factor in deciding whether the benefits should be regarded as 

emanating from the employer or from a ‘collateral source’. Rather, courts have 

tried to look to ‘the purpose and nature of the fund and of the payments’ and not 

merely at their source.” Folkestad v. Burlington Northern, Inc., 813 F.2d 1377, 

1381 (9th Cir. 1987).

In the Folkestad decision, the Ninth Circuit discussed whether the insurance 

should be treated as a fringe benefit in part compensation for the employee’s 

work. The Court noted that if the insurance is viewed as the product of the 

employee’s labors, it is deemed to come from a source collateral to the employer 

rather than from the employer. Setoff in that instance would permit avoidance of 

FELA liability and such avoidance is prohibited by 45 U.S.C. § 55, 813 F.2d at 

1381. The Court then noted that if the insurance is viewed as a contribution by 

the employer intended to fulfill FELA obligation, it would appear to fall within the 

proviso of 45 U.S.C. § 55 and setoff should be permitted. The Court considered 

the fact that the 1975 Health and Welfare Agreement between railroads 

represented by the National Carriers’ Conference Committee and railroad 

employees represented by the Brotherhood of Maintenance of Way Employees, 

which contained a provision almost identical to the Agreement provision quoted 

at the beginning of this letter, expressly provided for setoff. Because the 

agreement between the railroad and the union was clear, the Court held that the 

amount of the FELA judgment should be reduced by the amount of the insurance 

benefits paid pursuant to the collective bargaining agreement.

Two other Federal Circuit Courts of Appeals have reached the same conclusion 

with respect to setoff. See Clark v. Burlington Northern, Inc. , 726. F.2d 448 (8th

Cir. 1984), wherein the Court found that the railroad employer clearly intended to 

make a voluntary disability plan supplemental to sums recovered under the FELA 

and allowed setoff; and Burlington Northern Railroad Company v. Strong, 907 F. 

2d 707 (7th Cir. 1990), wherein the Court found that benefits paid pursuant to a 

Supplemental Sickness Benefit Agreement, which provided that the 

Supplemental Sickness Benefits (SSB) received by employees would not 

duplicate recovery of lost wages, could be set off from the amount of a FELA 

award. The Seventh Circuit Court wrote that, “We agree with our colleagues in 
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the Eighth and Ninth Circuits that section 55 is not violated by an indemnity 

program agreed to between the union and the employer that allows the employer

to deduct certain amounts from a FELA award. Section 55 was designed to 

prevent employers from receiving a windfall but not, as the Eighth Circuit points 

out, to ‘deter them from voluntarily paying monthly disability payments in lieu of 

wages to disabled workers’” 907 F.2d at 714, quoting Clark, 726 F.2d at 451. 

It is my opinion, based on the discussion set out in this letter, that the RRB 

should not allow the amount of its 12(o) lien to be reduced by the amount of 

medical expenses that are paid on an injured employee’s behalf pursuant to the 

Health and Welfare Agreement (the Agreement) entered into by rail management 

and rail labor on October 22, 1975 because that Agreement is clear that rail 

management and rail labor have agreed that the amount of a FELA award should 

be reduced by the amount of the insurance benefits paid pursuant to the 

Agreement. I find further that this conclusion is consistent with the last sentence 

of section 341.5(b)(1) of the RRB’s regulations, as the “insurance” cited therein 

refers to a fringe benefit provided as part of an employee’s compensation paid by 

an employer and not to insurance purchased to indemnify a railroad employer 

against FELA liability.

A copy of this opinion is being released to the RRB’s Office of Programs so that 

appropriate procedures may be developed to apply the conclusion reached 

herein on a prospective basis. See 20 CFR 261.3.

 Sincerely,

 Steven A. Bartholow

 General Counsel