Stephen A. Arneson v. Shirley S. Chater ( 1997 )

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
___________
Nos. 96-4183/97-1192
___________
Stephen A. Arneson, *
*
Appellee, *
*
v. * Appeals from the United States
District
* Court for the Eastern District of
John J. Callahan,1 Acting * Missouri.
Commissioner of the Social Security *
Administration, *
*
Appellant. *
Submitted: September 10, 1997
Filed: November 7, 1997
___________
Before BEAM, FLOYD R. GIBSON, and HEANEY, Circuit Judges.
___________
BEAM, Circuit Judge.
The Social Security Administration appeals the amount of back pay the
district court awarded Stephen A. Arneson. We affirm in part and reverse
in part.
1
John J. Callahan was named Acting Commissioner of the Social Security
Administration effective March 1, 1997. He has been substituted as appellant for
Shirley S. Chater pursuant to Fed. R. App. P. 43(c).
-2-
I. BACKGROUND
This dispute is before us for the third time. We will discuss only
those facts relevant to this appeal. Stephen A. Arneson sued the Social
Security Administration (SSA), claiming that it violated the Rehabilitation
Act of 1973, 29 U.S.C. §§ 701-796 in discharging him from his government
position. Arneson suffers from a neurological disorder, apraxia, which
affects his ability to concentrate and perform certain tasks.
The district court dismissed the suit and Arneson appealed. This
court remanded to determine whether the SSA failed to make reasonable
accommodations for Arneson's disability. Arneson v. Heckler, 879 F.2d 393,
400 (8th Cir. 1989). On remand, the district court entered judgment for
the SSA. In Arneson v. Sullivan, 946 F.2d 90, 92-93 (8th Cir. 1991), we
reversed that judgment, ordered the SSA to reinstate Arneson, and remanded
the case for a determination of the amount of back pay that the SSA owes
Arneson. The SSA now claims that the district court made three errors in
that calculation.
First, the SSA contends that the district court erroneously awarded
Arneson prejudgment interest accruing from his unlawful discharge. Second,
the SSA contends that the district court erred in awarding Arneson
additional monies to compensate him for the adverse tax consequences
associated with receiving twelve years of back pay in two payments.
Finally, the SSA contends that the district court erred in declining to
reduce Arneson's back pay award by the amount of disability retirement
benefits that Arneson received.
-3-
-4-
II. DISCUSSION
A. Prejudgment Interest
The no-interest rule provides that sovereign immunity generally
precludes a party from recovering interest in a suit against the United
States. See Library of Congress v. Shaw, 478 U.S. 310, 311 (1986).
Congress may expressly waive the government's sovereign immunity from
interest by statute or contract, see, e.g., id., at 317, or by removing the
cloak of sovereignty and giving the "status of a 'private commercial
enterprise.'" Loeffler v. Frank, 486 U.S. 549, 556 (1988) (quoting Shaw,
478 U.S. at 317 n.5).2
The Rehabilitation Act does not provide for prejudgment interest;
however, it expressly incorporates the "remedies, procedures and rights"
of Title VII. 29 U.S.C. § 794 (a)(1). Title VII of the Civil Rights Act
of 1964, provides that a court may order an employer to reinstate employees
"with or without back pay" or order "any other equitable relief as the
court deems appropriate." 42 U.S.C. § 2000e-5(g)(1). Arneson argues that
Congress waived sovereign immunity from interest under Title VII or,
alternatively, that the Back Pay Act, 5 U.S.C. § 5596, provides the
necessary waiver.3
2
The Supreme Court has also held that just compensation under the Fifth
Amendment takings clause waives sovereign immunity from interest. Smyth v. United
States, 302 U.S. 329, 353 (1937).
3
Sovereign immunity is a jurisdictional question which the government can raise
at any time. See, e.g., Preferred Risk Mut. Ins. Co. v. United States, 86 F.3d 789, 793
(8th Cir. 1996), cert. denied, 117 S. Ct. 1245 (1997). Thus, we reject Arneson's
argument that the government waived its claim of sovereign immunity by failing to
immediately appeal the district court's order awarding Arneson interest on his back pay
award.
-5-
The Supreme Court has previously held that Title VII does not waive
the federal government's sovereign immunity from interest.4 Shaw, 478 U.S.
at 319. The Court stated that waivers of sovereign immunity must be
strictly construed in the sovereign's favor. Id. at 318. Furthermore, the
Court stated:
[T]here can be no consent by implication or by use of ambiguous
language. Nor can an intent on the part of the framers of a
statute or contract to permit the recovery of interest suffice
where the intent is not translated into affirmative statutory
or contractual terms. The consent necessary to waive the
traditional immunity must be express, and it must be strictly
construed.
Id. (alternation in original) (quoting United States v. N. Y. Rayon
Importing Co., 329 U.S. 654, 659 (1947)). See also, e.g., Miller v. Alamo,
992 F.2d 766 (8th Cir. 1993) (Congress must clearly and unequivocally waive
the government's sovereign immunity).
After Shaw, Congress amended Title VII, expressly waiving sovereign
immunity from interest. 42 U.S.C. § 2000e-16(d). Neither party disputes
that the district court properly awarded Arneson interest beginning on
November 21, 1991, the amendment's effective date. However, the 1991
amendment does not apply retroactively. See Huey v. Sullivan, 971 F.2d
1362, 1365-66 (8th Cir. 1992). Nonetheless, Arneson argues that he is
entitled to interest on his back pay award from January 21, 1983, through
November 21, 1991, because the Back Pay Act waives sovereign immunity.
4
In Shaw, the plaintiff argued that Congress waived sovereign immunity from
interest under Title VII because Title VII holds the United States "liable 'the same as
a private person' for 'costs,' including 'a reasonable attorney's fee.'" Shaw, 478 U.S. at
317-18 (quoting 42 U.S.C. § 2000e-5(k)).
-6-
The Back Pay Act generally provides certain federal agency employees
with a monetary remedy for "unjustified or unwarranted personnel action
which has resulted in the withdrawal or reduction" of the employees' pay.
5 U.S.C. § 5596(b)(1). The Back Pay Act did not provide for interest
against the United States until Congress amended it in 1987. 5 U.S.C. §
5596(b)(2)(A).
Arneson cites three circuit decisions for the proposition that the
amended Back Pay Act waives the government's sovereign immunity from
interest awards in Rehabilitation Act and Title VII cases. See Brown v.
Secretary of the Army, 918 F.2d 214 (D.C. Cir. 1990); Edwards v. Lujan, 40
F.3d 1152, 1154 (10th Cir. 1994) (adopting Brown); Woolf v. Bowles, 57 F.3d
407, 410 (4th Cir. 1995) (adopting Brown). With due respect to our sister
circuits, we find the reasoning in those cases inconsistent with sovereign
immunity and the no-interest rule.
In Brown, the court held that the Back Pay Act waives the federal
government's sovereign immunity from interest in Title VII cases. Brown,
918 F.2d at 218. The court relied upon Loeffler, 486 U.S. at 556, for the
proposition that a statute other than Title VII can provide the requisite
sovereign immunity waiver. Brown, 918 F.2d at 216. The court stated, "The
government offers no convincing reason why the Back Pay Act does not supply
the immunity waiver prescription absent in Title VII, just as the Postal
Reorganization Act does." Id. The court next held that because the Back
Pay Act complements Title VII, the Back Pay Act waives sovereign immunity
from interest for any claim which could have been brought under the Back
Pay Act.5 Id. at 218.
5
In Brown, the plaintiffs brought an unlawful failure to promote claim under Title
VII and not the Back Pay Act. Brown, 918 F.2d at 216. Because the Back Pay Act
limits its protections to the unlawful "withdrawal or reduction" of compensation, 5
U.S.C. § 5596(b)(1), and the plaintiffs alleged unlawful failure to promote, the court
did not award them any interest from the government. Brown, 918 F.2d at 221.
-7-
We find this reasoning unpersuasive. In Loeffler, 486 U.S. at 556,
the Supreme Court held that Congress expressly waived the postal service's
sovereign immunity at its inception because, under the 1970 Postal
Reorganization Act, the postal service assumed the role of a "private
commercial enterprise." Express and unequivocal Congressional waiver of
sovereign immunity was not required in Loeffler because the postal service
fit within the "private commercial enterprise" exception to the no-interest
rule. Id. In cases like Brown and the present one however, the private
commercial enterprise exception does not apply.
We hold that to provide the sovereign immunity waiver absent in Title
VII, the separate statute must, at a minimum, unequivocally express
Congress's intent to waive sovereign immunity under Title VII. Cf.
McGehee v. Panama Canal Comm'n, 872 F.2d 1213, 1215 (5th Cir. 1989)
(holding that for Congress to waive sovereign immunity by statute, the
"legislation giving rise to the cause of action" itself must expressly
subject "the government to interest payments").
In this Rehabilitation Act case, Arneson recovered back pay under
Title VII's remedial provisions. He did not rely upon the Back Pay Act to
recover back pay, but now asserts that the Back Pay Act provides the
necessary waiver of sovereign immunity. The Back Pay Act language relied
upon by Arneson states that "[a]n amount payable under paragraph (1)(A)(I)
of this subsection shall be payable with interest." 5 U.S.C.
§ 5596(b)(2)(A). The amended Back Pay Act does not even mention Title VII
or the Rehabilitation Act. This provision does not evidence Congress's
clear and unequivocal consent to interest awards against the government
under the Rehabilitation Act and Title VII. Had Congress desired to waive
sovereign immunity from interest awards under either the Rehabilitation Act
or Title VII, it would not have limited Section 5596(b)(2)(A) interest
awards to amounts payable under "paragraph (1)(A)(I)." Congress could also
have expressed its intent by amending Title VII before 1991.
-8-
The Supreme Court's decisions addressing sovereign immunity and the
no-interest rule buttress our holding. The Court has instructed us to
construe the scope of such waivers in the sovereign's favor, see Shaw, 478
U.S. at 318; to limit such waivers to their plain language, see Ruckelshaus
v. Sierra Club, 463 U.S. 680, 694 (1983); and to construe "ambiguities in
favor of immunity." United States v. Williams, 514 U.S. 527, 531 (1995).
The Back Pay Act does not expressly and unambiguously waive the federal
government's sovereign immunity from interest awards under the
Rehabilitation Act or Title VII. We therefore reverse the prejudgment
interest award to the extent it relies upon the Back Pay Act to waive
sovereign immunity.6
B. Tax Enhancement Damages
The district court awarded Arneson additional monies to compensate
Arneson for the adverse tax consequences from receiving back pay in two
payments (tax enhancement award). The SSA argues that tax enhancement
awards are not available under Title VII and that, if available, Congress
has not waived sovereign immunity from these awards.
If the tax enhancement remedy is available under Title VII, we find
it analogous to the prejudgment interest remedy, see Manko v. United
States, 830 F.2d 831, 836 (8th Cir. 1987), as an element of making persons
whole for discrimination injuries. See Loeffler, 486 U.S. at 558.
Therefore, we treat the tax enhancement remedy like the prejudgment
interest remedy and hold that Congress must expressly and unequivocally
waive sovereign immunity before a party can recover a tax enhancement award
from the federal government.
We do not believe that Congress has authorized the tax enhancement
remedy against the federal government. Nowhere within the statutory
framework of the
6
In light of this finding, we need not address Arneson's argument that the 1987
Back Pay Act amendment applies retroactively.
-9-
Rehabilitation Act or Title VII, has Congress expressly waived sovereign
immunity from tax enhancement damages. The mere fact that Congress
intended that discrimination victims receive a full measure of back pay
does not amount to an unequivocal and express waiver of sovereign immunity.
We therefore reverse the district court's award of tax enhancement
damages.7
C. Disability Retirement Annuity
After his unlawful discharge, Arneson received Civil Service
Retirement System (CSRS) disability retirement benefits (disability
benefits) in the amount of $72,241.87. The SSA argues that we should
deduct the amount of these benefits from Arneson's back pay award because
Arneson would otherwise receive a double recovery. We disagree.
The Title VII back pay remedy is limited by 42 U.S.C. § 2000e-5(g),
which provides in part, "[i]nterim earnings . . . by the person or persons
discriminated against shall operate to reduce the back pay otherwise
allowable." This provision prevents employment discrimination victims from
recovering twice for the same injury. The SSA argues that Arneson's
disability benefits constitute interim earnings.
Because the National Labor Relations Act provides the model for the
Title VII back pay remedy, see Craig v. Y & Y Snacks, Inc., 721 F.2d 77,
82 (3d Cir. 1983), we find the Court's decision in NLRB v. Gullett Gin Co.,
340 U.S. 361 (1951) particularly relevant to this issue.
7
Because we believe Congress has not unequivocally expressed its intention to
waive the federal government's sovereign immunity from this tax enhancement award,
we need not decide whether plaintiffs may recover this type of award against private
parties.
-10-
The common law collateral source rule holds that the defendant's
liability shall not be reduced merely because the plaintiff's net damages
are reduced by payments received from others. See Gullett Gin, 340 U.S.
at 364. In Gullett Gin, the Court applied the collateral source rule to
uphold the National Labor Relations Board's refusal to deduct unemployment
benefits from an employee's NLRA back pay award for unlawful discharge.
Id. The Court held that the unemployment benefits at issue were
collateral because they were not direct benefits from the employer and they
were made "to carry out a policy of social betterment for the benefit of
the entire state." Id.
We have previously addressed this issue under the Age Discrimination
in Employment Act of 1967, 29 U.S.C. § 621. See, e.g., Smith v. World Ins.
Co., 38 F.3d 1456, 1465 (8th Cir. 1994). In Smith, we refused to reduce
an ADEA back pay award by pension benefits received on account of the
employee's wrongful discharge and remanded the case to determine whether
"the award of backpay includes amounts designed to put [the employee's]
pension account in the same position as though he were never discharged."
Id. at 1466.
We affirm the district court's refusal to deduct Arneson's disability
benefits from his back pay award because these benefits were from a
collateral source and should not be considered interim earnings.8 Cf.
Eichel v. New York Central R.R. Co., 375 U.S. 253, 254 (1963) (stating
"[r]espondent does not dispute that it would be highly improper for the
disability pension payments to be considered in mitigation of" petitioner's
damages). We believe Arneson's back pay award does not include monies
8
This case is distinguishable from Beshears v. Asbill, 930 F.2d 1348 (8th Cir.
1991). Beshears involved an employee that received disability benefits due to injuries
which were unrelated to his unlawful discharge. Id. at 1355. Thus we adopted the test
articulated by the Tenth Circuit in Spulak v. K Mart Corp., 894 F.2d 1150, 1158 (10th
Cir. 1990), to determine whether the disability benefits received should operate to
reduce the employee's wrongful discharge back pay award. Beshears, 930 F.2d at
1355. By contrast, Arneson received disability benefits as a result of the government's
wrongful termination. Therefore, we do not apply the Beshears analysis.
-11-
for disability pension contributions that the SSA would have made but for
Arneson's wrongful termination. Moreover, the disability benefits do not
come entirely from Arneson's employer because Arneson has unquestionably
contributed to his CSRS disability retirement fund. Finally, the payments
to Arneson from the CSRS disability fund were made to carry out a social
policy wholly independent of back pay awards and they did not discharge any
direct obligation that the SSA had to Arneson. See Gullett Gin, 340 U.S.
at 364.
D. Attorney's Fees and Costs
The district court awarded Arneson attorney's fees totaling $178,610
and other costs totaling $9,381.13. The SSA argues that Arneson should not
recover the fees and costs related to any issues that Arneson loses on
appeal because Arneson would no longer be the prevailing party with respect
to those issues. We agree.
Under Title VII, the district court may, in its discretion, award
"the prevailing party" a "reasonable attorney's fee (including expert fees)
as part of the costs." 42 U.S.C. § 2000e-5(k).9 In awarding attorney's
fees and costs when the plaintiff has only achieved limited or partial
success, the court must consider "whether the expenditure of counsel's time
was reasonable in relation to the success achieved." Hensley v. Eckerhart,
461 U.S. 424, 436 (1983).
We find Arneson's post-trial claims for prejudgment interest and a
tax enhancement award distinct and unrelated to those that he has prevailed
on, see id. at 437 n.12, and thus, the district court has the discretion
to reduce Arneson's award of costs, including attorney's fees, accordingly.
We recognize that "[t]here is no precise rule or formula for making these
determinations." Id. at 436. However, "[a] request
9
Congress expressly waived the government's sovereign immunity from costs and
attorney's fees. 42 U.S.C. § 2000e-5(k) ("[T]he United States shall be liable for costs
the same as a private person.").
-12-
for attorney's fees should not result in a second major litigation." Id.
at 437. Nonetheless, we remand the case to enable the court most familiar
with the litigation to award Arneson a reasonable fee in relation to the
results obtained on appeal.
III. CONCLUSION
For the foregoing reasons, we affirm the district court decision in
part and reverse in part. We remand the case for a redetermination of
interest and costs, including attorney's fees.
A true copy.
Attest:
CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.
-13-