Schadel, Douglas v. IA Interstate RR ( 2004 )

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 02-2379
DOUGLAS SCHADEL and INEZ SCHADEL,
Plaintiffs-Appellees,
v.
IOWA INTERSTATE RAILROAD, LTD.,
Defendant-Appellant.
____________
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 99 C 8435—Nan R. Nolan, Magistrate Judge.
____________
ARGUED SEPTEMBER 24, 2003—DECIDED AUGUST 25, 2004
____________
Before BAUER, EASTERBROOK, and DIANE P. WOOD, Circuit
Judges.
DIANE P. WOOD, Circuit Judge. Complex questions relating
to such issues as claim reduction, the availability of con-
tribution and indemnity in a case governed by the Federal
Employers’ Liability Act (FELA), and the rules of joint and
several liability confront us in this case. Specifically, we
must decide whether a non-settling railroad should be held
liable for all damages suffered by its employee, reduced by
an amount attributable to the employee’s comparative ne-
gligence and a settlement with a third party, or alterna-
2 No. 02-2379
tively, if the railroad should be responsible only for its pro-
portionate share of damages, taking into account the com-
parative fault of the employee and that of a settling third-
party defendant. The district court allowed the jury to find
the total damages suffered by the plaintiff, without regard
to the settlement; it then reduced those damages by 50%, the
amount representing the plaintiff’s negligence; and finally,
using an Illinois standard, it applied a set-off against the
balance owed by the railroad. While our reasons are not
identical to those offered by the district court, we conclude
that the result was correct, and we therefore affirm the
judgment.
I
Douglas Schadel was employed as a conductor by the Iowa
Interstate Railroad (IAIS). He was working on the morning
of December 31, 1997, as part of a two-person crew assigned
to relieve an eastbound IAIS crew who were expected to
come through the Joliet, Illinois, area that morning. In keep-
ing with normal IAIS practice, rather than accomplish the
crew exchange at a railroad yard, Schadel’s crew was to meet
the train at an at-grade railroad crossing west of Joliet. The
one they chose was at Bush Road.
Engineer Eddie Brown was the other crew member. With
Brown at the wheel and Schadel in the passenger seat, the
two drove in an IAIS vehicle to the Bush Road crossing just
before 9:00 a.m. that morning. Brown parked the vehicle
approximately 50 feet south of the crossing gates, on the
west shoulder of the road. Brown immediately got out of the
car as the train came to a stop. Schadel initially went with
him, but then Schadel returned to the car to retrieve some
paperwork. By this time, the crossing gates, which were
equipped with bells and flashing lights, had caused the
approaching traffic to come to a halt. Suddenly, however, a
vehicle driven by Brenda Kowalewicz flew toward the gates
No. 02-2379 3
from the north, skidded past the stopped vehicles, crashed
through the wooden gates, and shot on to strike Schadel,
who was then standing behind the car. The impact of the
collision propelled Schadel into a nearby ditch. He was
taken to a local emergency room, and later he underwent
surgery and rehabilitative work on his knees. The accident
left him unable to work as a conductor.
Schadel sued IAIS under the FELA and he sued
Kowalewicz under Illinois state law. For the latter claim
only, his wife joined him and claimed loss of consortium.
IAIS filed cross-claims against Kowalewicz for contribution
and indemnification. Prior to the trial, Schadel settled with
Kowalewicz and her insurance carrier for the full amount
covered by her policy, $100,000, in return for dismissing his
claims against her. Invoking the Illinois Joint Tortfeasor
Contribution Act (“Contribution Act”), 740 ILCS 100/0.01 et
seq., Schadel and Kowalewicz asked the district court to
approve this settlement. As required by the Contribution
Act, the court convened a “good faith” hearing to assess the
validity and reasonableness of the settlement. (This case was
proceeding before the magistrate judge by consent of the
parties. See 28 U.S.C. § 636(c).) IAIS objected to the use of
the Illinois procedure at that juncture, arguing that issues
concerning the settlement should be governed by federal
common law, not by the Illinois statute. The district court
disagreed, approved the settlement, and, in accordance with
the Contribution Act, dismissed Kowalewicz from the case
with prejudice. That order of dismissal also extinguished
IAIS’s claims against her for contribution and indemnity.
At the jury trial on Schadel’s FELA claims against IAIS,
the district court precluded IAIS from introducing any evi-
dence or argument about the Kowalewicz settlement. The
jury did hear expert testimony, however, about Kowalewicz’s
driving at the time of the accident. In its instructions and
special verdict form, the court allowed the jury to assign
fault only to Schadel or IAIS; it was not permitted to consider
4 No. 02-2379
Kowalewicz’s role. The jury found Schadel’s overall damages
to be $450,000. It found that he was 50% contributorily neg-
ligent, which reduced his recoverable damages to $225,000.
The court then reduced that number to $125,000, to account
for the settlement, and then added another $5,000 by agree-
ment of the parties to account for Mrs. Schadel’s loss of
consortium claim, for a final total of $130,000 due from
IAIS.
IAIS filed post-trial motions requesting a new trial on the
ground that the district court applied the wrong methodolo-
gies to the allocation of damages. Instead of using a pro
tanto approach (that is, accounting for the settlement with
a dollar-for-dollar reduction in the damages IAIS owed), IAIS
argued that the court should have used a proportionate
share approach. Under the latter rule, the jury would have
allocated responsibility among all three parties and im-
posed damages on IAIS only to the extent of its share of the
liability. The district court denied the motions and entered
the $130,000 judgment against IAIS.
II
The district court had federal question jurisdiction over
Schadel’s claim against IAIS, because it arose under the
FELA, see 28 U.S.C. § 1331, 45 U.S.C. §§ 51-60; it had
supplemental jurisdiction over Schadel’s claim against
Kowalewicz and IAIS’s contribution and indemnification
claims against her, see 28 U.S.C. § 1367(a). The more dif-
ficult question is what law governs the allocation of respon-
sibilities among these parties: federal law (including federal
common law), or state law (Illinois law in this case). Moreover,
even if federal common law governs, the further question is
whether courts are to develop that law independently, or if
this is one of those areas in which federal common law
borrows the state law rule. See United States v. Kimbell
Foods, Inc., 440 U.S. 715, 718 (1979). If state law applies
No. 02-2379 5
directly, or if federal common law adopts state law here, then
we would come full circle back to the question whether the
district court correctly applied the Illinois rule.
The reason this case is in federal court at all is because it
is one brought by a railroad employee against the railroad,
and thus it falls within the scope of the FELA. We begin,
therefore, with an examination of that statute. The FELA
makes railroad common carriers “liable in damages to any
person suffering injury while he is employed by such
carrier . . . for such injury or death resulting in whole or in
part from the negligence” of the railroad or its employees.
45 U.S.C. § 51. In Norfolk & Western Ry. Co. v. Ayers, 538
U.S. 135 (2003), the Supreme Court noted the long-standing
rule that “joint and several liability is the traditional
[FELA] rule.” Id. at 163. Relying on the language in the
statute making the railroad employer liable if the injury
results “in whole or in part” from its negligence, the Court
held that a jury is not permitted to make a deduction from
a damages award for the contribution of other defendants
to the employee’s injuries:
Nothing in the statutory text [of the FELA] instructs
that the amount of damages payable by a liable em-
ployer bears reduction when the negligence of a third
party also contributed in part to the injury-in-suit.
Id. at 160. This is so notwithstanding the fact, recognized
by the Court in Ayers, that the FELA specifies a rule of
comparative negligence. That rule is found in § 53, which
says that “the fact that the employee may have been guilty
of contributory negligence shall not bar a recovery, but the
damages shall be diminished by the jury in proportion to
the amount of negligence attributable to such employee.” 45
U.S.C. § 53.
Put in its simplest terms, we must decide between two
alternatives. Under the one used by the district court, the
sequence of decisions is as follows: (1) ascertain the full
6 No. 02-2379
amount of damages suffered by the plaintiff; (2) ascertain
the plaintiff’s comparative fault with respect to the non-
settling defendant(s); (3) compute net damages due to the
plaintiff after reducing the total for that fault; (4) apply a
pro tanto reduction to the net sum, representing the amount
paid by the settling defendant(s); and (5) assess the balance
against the non-settling railroad. Applying that rule, we
have $450,000 in total damages, less 50% comparative fault,
for a net recoverable amount of $225,000, less $100,000 from
the Kowalewicz settlement, giving a final amount due of
$125,000 (plus the uncontested $5,000, which is unimpor-
tant to the issue before us and which we disregard from
now on).
The approach IAIS urges requires the following steps: (1)
ascertain the full amount of damages suffered by the plaintiff;
(2) ascertain the comparative fault of all parties involved,
both settling and non-settling; (3) compute net damages due
from the non-settling defendant by taking that percentage
from the total; and (4) assess that amount against the non-
settling defendant. (Whether the non-settling defendant has
a right of contribution against the settling defendants, if the
settling defendants have paid “too little” under this ap-
proach is a question we need not reach here, although we
note that the Supreme Court was critical of such a rule in
McDermott, Inc. v. AmClyde and River Don Castings, Ltd.,
511 U.S. 202, 221 (1994).) IAIS clearly thinks that this rule
would be highly favorable to it here. Suppose, for example,
that the jury would have found that Kowalewicz’s reckless
driving was responsible for 80% of the damages, that IAIS
was responsible for 10%, and that Schadel was 10% negli-
gent. Applying those proportions to the overall figure of
$450,000, that would mean that Kowalewicz should have
paid $360,000; that IAIS would pay $45,000, and that
Schadel would have absorbed $45,000 of the loss before tak-
ing the settlement into account. In fact, Schadel would wind
up substantially under-compensated under this regime,
No. 02-2379 7
because he would also be left with $260,000 of Kowalewicz’s
liability. This strikes us as, at best, in serious tension with
the rule of joint and several liability that applies to FELA
cases.
Before choosing the proper rule, we must first decide what
law governs: Illinois law, as the district court thought, or
federal common law. The Supreme Court has long empha-
sized the importance of giving the FELA a “uniform appli-
cation throughout the country,” which the Court sees as
“essential to effectuate its purposes.” Dice v. Akron, Canton &
Youngstown R.R. Co., 342 U.S. 359, 361 (1952). In fulfilling
this mandate, the Court has said that federal law must set
the terms of a railroad employee’s right to recover against her
employer for negligence, and accordingly “[s]tate laws are
not controlling in determining what the incidents of this
federal right shall be.” Id. Since the time of the FELA’s
enactment in 1908, the Court has “develop[ed] a federal
common law of negligence under the FELA, informed by
reference to the evolving common law.” Consol. Rail Corp.
v. Gottshall, 512 U.S. 532, 558 (1994) (Souter, J., concurring).
See also Dice, 342 U.S. at 361 (“[V]alidity of releases under
the [FELA] raises a federal question.”); N.Y. Cent. R.R. Co.
v. Winfield, 244 U.S. 147, 153 (1917) (states may not require
carriers to compensate their employees for injuries in the
absence of negligence because of conflict with the FELA).
In establishing the scope of recovery under the FELA, the
Court has defined not only the nature and cause of the
injuries that may be redressed under the statute, but also
the type and extent of damages available. See Monessen
S.W. Ry. Co. v. Morgan, 486 U.S. 330, 335 (1988). Ayers, as
we have already noted, addressed a question very close to
the one before us, insofar as it dealt with the way that lia-
bility could be apportioned under the statute. The fact that
the Court rejected a rule under which the railroad’s liability
would be reduced by the negligence of third-party tortfea-
sors is of no small interest to us here, since that is exactly
8 No. 02-2379
what IAIS wants—a reduction in its liability directly tied to
Kowalewicz’s negligence. The Court was clear that this did
not preclude railroads from seeking contribution or indemnity
from those other tortfeasors, “under otherwise applicable
state or federal law,” 538 U.S. at 162, but the railroad’s own
responsibility was affected only by the plaintiff’s compara-
tive negligence.
If this case were solely about Schadel’s right to recover
the full amount of damages against the railroad, regardless
of the responsibility of any other tortfeasor (settling or
otherwise), then Ayers indicates that federal common law
governs, and that the railroad is jointly and severally liable
for the full amount. If instead we characterize the case as
one that is really about IAIS’s ability to obtain contribution
or indemnity from a joint tortfeasor, then the cases cited in
Ayers indicate that state law governs. See, e.g., Shields v.
Consol. Rail Corp., 810 F.2d 397, 399 (3d Cir. 1987) (“Our
analysis of the merits begins by recognizing that third-party
actions for contribution arising out of FELA claims are
governed by state law.”); Ala. Great S. R.R. Co. v. Chi. &
N.W. Ry. Co., 493 F.2d 979, 983 (8th Cir. 1974); Bean v. Mo.
Pac. R.R. Co., 525 N.E.2d 1231, 1234 (Ill. App. Ct. 1988).
While the question is close, in our view the former charac-
terization comes closer to the mark. At stake is the question
of what effect, if any, Schadel’s decision to settle with
Kowalewicz will have on his ultimate FELA recovery. The
rationale of Ayers leads us to conclude that a federal rule
should apply here, just as it did there.
Next, we must decide what the content of that federal
rule is. It is well-established that federal common law may
either create a single rule of law that is applicable to all
cases in a particular area, or it may adopt as federal law
the rule of the state in which the case arises. See Richard
H. Fallon, Jr., Daniel J. Meltzer & David L. Shapiro, The
Federal Courts and the Federal System 701 (5th ed. 2003)
(noting that “the Court’s current approach to federal com-
No. 02-2379 9
mon lawmaking” reflects “a preference for incorporation of
state law absent a demonstrated need for a federal rule of
decision”). Kimbell Foods offered only general guidance on
this choice. There, the Court said that “[w]hether to adopt
state law or to fashion a nationwide federal rule is a matter of
judicial policy dependent upon a variety of considerations
always relevant to the nature of the specific governmental
interests and to the effects upon them of applying state
law.” 440 U.S. at 728 (internal quotation marks omitted).
In the case of the FELA, the emphasis has always been on
uniformity of result. State laws vary considerably in the
way they treat issues such as claim reduction, contribution,
indemnity, comparative fault, and the like. A single railroad
typically operates in more than one state. If we were to
choose the incorporation of state law for this issue, results
would vary depending on where the particular employee
happened to be injured. In our view, this is therefore an
instance of a case in which “application of state law would
frustrate specific objectives of the federal program[ ].”
Kimbell Foods, 440 U.S. at 728. See also Winfield, 244 U.S.
at 149 (“[T]here are weighty considerations why the
controlling law should be uniform and not change at every
state line.”). Only a uniform federal rule would be consis-
tent with nearly a century’s worth of FELA decisions from
the Supreme Court.
What, then, is the correct rule? This court has identified
four possible approaches to allocating damages in an action
involving multiple tortfeasors, some of whom settle with the
plaintiff prior to trial: no contribution, contribution,
contribution plus settlement bar, and claim reduction. In re
Oil Spill by Amoco Cadiz, 954 F.2d 1279, 1315 (7th Cir.
1992). Briefly, the “no contribution” rule holds defendants
jointly and severally liable for full damages without the
option of contribution; the “contribution” rule holds the
defendants jointly and severally liable for full damages with
the option of contribution from both settling and non-set-
10 No. 02-2379
tling defendants; the “contribution plus settlement bar” rule
is the same as the contribution rule, except that settling
defendants are exempt from contribution; and finally the
“claim reduction” rule holds defendants jointly and sever-
ally liable, unless one or more settles, in which case the
“plaintiff forgoes the ability to collect from the remaining
defendants any damages attributable to the settling party’s
share of fault . . . [and] the remaining defendants are not
entitled to contribution from the settling party—because
after claim reduction there is no ‘excess’ payment for which
contribution would be appropriate.” Id. In Amoco Cadiz, we
observed that “none of the four approaches is without its
problems, and that claim reduction in particular is no
panacea [because it] creates a substantial possibility of
extended collateral litigation.” Id. at 1318. See also Akzo
Nobel Coatings, Inc. v. Aigner Corp., 197 F.3d 302, 308 (7th
Cir. 1999) (“[T]he choice between the pro tanto approach and
claim reduction is a tossup.”). In the face of such a tossup,
we concluded in Akzo that “it is best to match the handling
of settlements with the way intersecting principles of law
work.” Id.IAIS urges us to look to the Supreme Court’s decision in
McDermott, supra, for the relevant legal principles. In
McDermott, the Court adopted a proportionate share approach
and held that the liability of non-settling defendants in an
admiralty case should be calculated with reference to the
jury’s allocation of proportionate responsibility of all parties,
rather than by giving non-settling defendants credit for the
dollar amount of the settlement (the pro tanto approach).
But there is an important, and we think dispositive, dif-
ference between McDermott and this FELA case. Under the
admiralty rule adopted by the Court in McDermott, each
defendant is responsible for only its proportionate share of the
liability (when such an allocation can reasonably be made).
511 U.S. at 208. The Court distinguished the result in
Edmonds v. Compagnie Generale Transatlantique, 443 U.S.
No. 02-2379 11
256 (1979), in which it had refused to reduce the judgment
against a shipowner by the proportionate fault attributed to
a stevedore whose liability was limited by the Longshore-
men’s and Harbor Worker’s Compensation Act (LHWCA).
Instead, the plaintiff was permitted to collect from the
shipowner the entirety of his damages, after adjusting for
the plaintiff’s own negligence. Edmonds, the Court stated
“merely reaffirm[ed] the well-established principle of joint
and several liability.” 511 U.S. at 220.
These final comments about Edmonds, coupled with the
approach in Ayers, persuade us that the pro tanto approach
effectively used by the district court is the correct one for a
FELA case. The principle of joint and several liability is
common to the LHWCA and the FELA. In other areas of
federal law, the Court has refused to fashion a federal
common-law right of contribution where liability was joint
and several. See Texas Industries, Inc. v. Radcliff Materials,
Inc., 451 U.S. 630, 646 (1981) (no federal common-law right to
contribution in antitrust cases); Northwest Airlines, Inc. v.
Transport Workers, 451 U.S. 77, 88-91, 97 (1981) (rejecting
federal common-law right of contribution in Equal Pay Act
case, and distinguishing admiralty precedents). As an ini-
tial matter, under the FELA, IAIS was responsible for the
full amount of Schadel’s injuries, reduced only by the part
attributable to Schadel’s own negligence. Schadel did not
even have to include Kowalewicz as a named defendant, as
long as he was able to prove that the railroad was negligent
in whole or in part, and his injuries were caused by that
negligence. The purpose of the FELA, to reiterate, is to
facilitate the injured railroad employee’s recovery. We
therefore conclude that, as a matter of federal law, Schadel
was entitled to the full $130,000 from IAIS.
Before concluding, we note that IAIS did not include in its
appeal any complaint about the district court’s decision to
dismiss its claims for contribution and indemnity against
Kowalewicz. We therefore have no occasion to decide whether
12 No. 02-2379
the FELA requires this type of immunity for a settling
defendant, or if a settling defendant must take into account
the possibility of a claim for contribution or indemnity. The
Supreme Court’s discussion in Ayers notes that a bar on
such actions would tend to encourage settlement. It also
observes that a fairness hearing like the one held here
ought to catch settlements that are grossly disproportionate to
the settling defendant’s likely liability, but that there are
limits to these hearings as well. On the other hand, permitting
contribution or indemnity would have the effect of ulti-
mately allocating responsibility accurately. The question is
far too complex for us to address in the abstract, even if we
appropriately could do so. We therefore leave it for another
day.
III
The judgment of the district court is AFFIRMED.
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—8-25-04