Burlington Northern Railroad Company v. John T. Strong
1990 U.S. App. LEXIS 12184, 907 F.2d 707, 17 Fed. R. Serv. 3d 179 (1990)
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Rule of Law:
A claim for contractual reimbursement of disability benefits does not arise out of the same transaction or occurrence as an employee's underlying tort claim for personal injury, and thus is not a compulsory counterclaim. Furthermore, under the Federal Employers Liability Act (FELA), an employer may set off disability benefits paid to an employee against a personal injury judgment where the benefit plan explicitly states its purpose is to indemnify the employer and prevent double recovery for lost wages.
Facts:
- John Strong was an employee of Burlington Northern Railroad Company (Burlington) and a member of a union.
- The union's collective bargaining agreement included a Supplemental Sickness Benefit Agreement (1973 Agreement), which was funded entirely by Burlington.
- The 1973 Agreement specified that any Supplemental Sickness Benefits (SSB) paid to an employee would not duplicate a recovery for lost wages from the railroad and would be offset against any such recovery.
- Strong sustained injuries in work-related accidents on September 12, 1983, and March 5, 1985.
- Following his injuries, Strong received $11,678.21 in SSB payments under the 1973 Agreement.
Procedural Posture:
- John Strong sued Burlington Northern Railroad Company in U.S. District Court under the Federal Employers Liability Act (FELA) for personal injuries.
- A jury returned a verdict for Strong, awarding him $73,000 in damages for one of the injuries.
- Post-judgment, Burlington filed a motion in the same action to set off the $11,678.21 in disability benefits it had paid to Strong.
- The district court denied Burlington's motion for a setoff.
- Burlington then initiated a separate lawsuit against Strong in the same district court, seeking to recover the disability benefit payments on a breach of contract theory.
- The district court granted summary judgment in favor of Burlington in the second lawsuit.
- John Strong, as appellant, appealed the district court's grant of summary judgment to the U.S. Court of Appeals for the Seventh Circuit, with Burlington as the appellee.
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Issue:
Does a railroad's claim for reimbursement of supplemental sickness benefits, based on a collective bargaining agreement, arise out of the same transaction or occurrence as an employee's personal injury claim under FELA, thereby making it a compulsory counterclaim under Federal Rule of Civil Procedure 13(a) that is waived if not brought in the original action?
Opinions:
Majority - Ripple, J.
No. A railroad's claim for contractual reimbursement of benefits is a permissive counterclaim, not a compulsory one, because it does not arise from the same transaction or occurrence as the employee's underlying personal injury tort claim. Burlington's claim was grounded in the 1973 Supplemental Sickness Benefit Agreement, whereas Strong's claim was grounded in the accidents that caused his injury. The court applied the 'logical relationship' test and determined that the two claims raised different legal and factual issues governed by different bodies of law and thus were not logically related. Furthermore, the court held that even if the claims were related, Burlington's claim was not waived because it had not 'matured' at the time of the original lawsuit; the right to recoup the benefits only came into existence after Strong obtained a judgment for lost wages. The court also rejected Strong's argument that the setoff violated FELA, concluding that 45 U.S.C. § 55 permits such an arrangement when a benefit plan clearly expresses an intent to indemnify the employer and supplement, not duplicate, FELA recovery.
Analysis:
This decision clarifies the scope of the 'logical relationship' test for compulsory counterclaims under FRCP 13(a), reinforcing that claims arising from a separate contract are distinct from the underlying tort, even if factually connected. It gives defendants greater flexibility, allowing them to pursue contractual reimbursement claims in a separate action without fear of waiver. The opinion also solidifies the interpretation of FELA's anti-exemption provision, 45 U.S.C. § 55, by confirming that employers and unions can validly contract for benefit plans that prevent double recovery, so long as the contractual language explicitly states the plan's indemnification purpose. This protects employers who provide disability benefits from having to pay twice for the same lost wages.
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