Opinion ID: 544298
Heading Depth: 2
Heading Rank: 2

Heading: Right to Set Off

Text: 22 Mr. Strong next argues that Burlington had no right to set off the SSB payments. Mr. Strong's position has two-prongs: either the setoff impermissibly exempts Burlington from FELA liability, or, if Burlington can set off, the amount should be limited to the premiums actually paid into the fund by Burlington. The FELA provision that governs this issue is 45 U.S.C. Sec. 55: 23 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 [FELA], 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 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. 24 As the Supreme Court has noted, this statute is designed to prevent common carriers from adopting a regulation or entering into a contract to limit their FELA liability. Atchison, Topeka & Santa Fe Ry. v. Buell, 480 U.S. 557, 561, 107 S.Ct. 1410, 1413, 94 L.Ed.2d 563 (1987). 25 Mr. Strong first asserts that the SSB payments were intended as a fringe benefit to the employees and therefore are not available to indemnify Burlington. The governing principle is clear: 26 [F]ringe benefit programs, such as medical and hospital insurance and retirement pensions that are offered as partial consideration for employment, cannot be set off against an FELA judgment. But where ... the employer clearly intends to make a voluntary disability plan supplemental to sums recovered under the FELA, setoff is appropriate. 27 Clark v. Burlington N., Inc., 726 F.2d 448, 451 (8th Cir.1984). 6 To distinguish a benefit intended to indemnify the employer from a fringe benefit, a court must look to ' the purpose and nature of the fund and of the payments and not merely at their source.'  Folkestad v. Burlington N., Inc., 813 F.2d 1377, 1381 (9th Cir.1987) (citation omitted) (quoting Russo v. Matson Navigation Co., 486 F.2d 1018, 1020 (9th Cir.1973) (quoting Gypsum Carrier, Inc. v. Handelsman, 307 F.2d 525, 534 n.31 (9th Cir.1962) ). Guidance on making this determination may be found in the specific provisions of the benefits plan in issue. See Clark, 726 F.2d at 451. 28 Two circuits already have confronted an argument similar to Mr. Strong's, and both have rejected it. In Folkestad, the plaintiff was injured in a railroad accident, sued Burlington (his employer), and won a jury verdict of $490,000. Burlington requested a setoff of $57,000, representing payments to the plaintiff from the railroad's health and welfare plan. That plan, similar to the plan in this case, contained a clause stating that payments will satisfy any right of recovery against the employing railroad for such benefits to the extent of the benefits so provided. 813 F.2d at 1379. The district court refused the setoff; the Ninth Circuit reversed. The court first explained that the reason for enactment of 45 U.S.C. Sec. 55 was to prevent railroads from exempting themselves from liability for railroad accidents. Id. In addition, the statute embodied the collateral source rule, in that the railroads would not be permitted to discount a tort judgment by payments made from independent insurance. Id. at 1380-81. Neither of these policies were offended by allowing setoff, concluded the court, because the expressed purpose of the insurance coverage in the collective bargaining agreement was to indemnify the employer against FELA liability. Id. at 1383. 7 The same basic rationale was followed by the Eighth Circuit in Clark. The court noted that Congress enacted section 55 to prevent railroads from escaping liability. But when the employer procures insurance to protect itself from FELA liability, the situation is quite different. Section 55 allows employers to set off money paid to an injured employee because of his or her injury as long as the employer is not seeking to totally avoid liability. 726 F.2d at 451. Because the employer intended the disability payments to supplement FELA payments, the court concluded that setoff was appropriate. Id. 29 We agree with our colleagues in 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. Clark, 726 F.2d at 451. The intent of the agreement in this case is clear. Benefits received under the SSB program were not intended to duplicate, in whole or in part, any amount recovered for loss of wages from ... the employing railroad. R.1 Ex.C at 6 (SSB Agreement). The plan further provides that any SSB amounts received will be offset against any right of recovery for loss of wages the employee may have against the employing railroad. Id. Burlington paid the entire amount necessary to fund the SSB program. Mr. Strong can point to only one passing reference in one letter that called the SSB program a wage equivalent. R.1 Ex.D at 2 (letter from the National Railway Labor Conference dated October 7, 1971). We conclude, however, that the language of the agreement controls, and that the parties intended the SSB payments to be deducted from a FELA recovery. 30 We turn now to Mr. Strong's alternative position. He asserts that, if Burlington is entitled to a setoff, there must be further fact finding to determine the amount of premiums paid by Burlington into the plan and the setoff must be limited to that amount. This argument is based on the language in section 55 that allows an employer who is prohibited from setting off the amount paid by an insurance program to recover the amount actually paid in premiums. 8 But we have determined that, because of the terms of the agreements, Burlington may set off the SSB payments recovered by Mr. Strong, and thus this provision is inapplicable. Therefore, the district court was correct in not limiting the setoff to the premium payments made by Burlington. Cf. Folkestad, 813 F.2d at 1382 n. 5 (not limiting setoff to insurance premiums); Clark, 726 F.2d at 449-51 (reaching same result without discussion).