United States: Uncertainty Surrounding FELA Releases - Circuit Split Leads To Contradictory Applications

The breadth of releases executed under the Federal Employers' Liability Act, 45 U.S.C § 51 et seq. ("FELA" or the "Act") continues to be a point of contention between courts and practitioners. FELA was enacted to enable injured railroad workers to overcome a number of traditional defenses to tort liability that had previously operated to bar their actions. The Act abolished the doctrine of assumption of risk, applied comparative rather than contributory negligence, and sought to prevent employers from contracting out of FELA liability.

FELA explicitly voids any contract attempting to exempt an employer from liability created by FELA, stating:

The broad wording of this Section 5 has led to questions of interpretation, especially with respect to releases entered into in settlement of employee lawsuits, including claims alleging diseases caused by exposure to asbestos.

Relatively recently, the Third and Sixth Circuit Courts of Appeals heard cases involving the allowable breadth of releases under FELA. The Circuits reached different conclusions as to the allowable breadth as it relates to preempting future lawsuits. The Circuit split has caused a problem of interpretation for state courts which has recently arisen in asbestos-related lawsuits. This article will first explore the differences between the Third and Sixth Circuits' opinions regarding the allowable breadth of releases under FELA. The article will then explore how this Circuit split has played out in terms of asbestos releases in State courts.

Babbitt v. Norfolk & Western – Bright Line Rule

In Babbitt v. Norfolk & Western Ry. Co., 104 F.3d 89 (6th Cir. 1997), former railroad employees brought claims for damages for hearing loss based on exposure to excessive noise levels during the course of their employment. Plaintiffs had previously left their employ at Norfolk & Western as part of a Voluntary Separation Plan ("Plan"). The Plan provided employees early retirement, a lump sum payment, and continuation of health and other benefits. For their part, the employees executed a Resignation and Release that discharged Norfolk from any claims, known or unknown, arising out of their employment.

The issue presented to the Sixth Circuit was whether Section 5 prohibited Norfolk from absolving itself of liability for FELA claims through the execution of such a general release. The Sixth Circuit ruled the Norfolk release was void. The Sixth Circuit held that "where there exists a dispute between an employer and employee with respect to a FELA claim, the parties may release their specific claims as part of an out-of-court settlement without contravening the Act." Id. at 93. However, "where the release was not executed as part of a specific settlement of FELA claims, [Section 5] precludes the employer from claiming the release as a bar to liability." Id. Thus, in order for a release to be valid it "must reflect a bargained-for settlement of a known claim for a specific injury, as contrasted with an attempt to extinguish potential future claims the employee might have arising from injuries known or unknown by him." Id. (Emphasis added). Thus, the Sixth Circuit established what is known as the "bright line" approach to determining if FELA releases are valid – a release is only valid for the specific injury complained of and cannot extend beyond that specific injury to any other conditions that may develop.

Wicker v. Consolidated Rail – Fact Intensive Approach

The Third Circuit disagreed with the Sixth Circuit's interpretation of Section 5 and formulated a different approach. In Wicker v. Consolidated Rail Corp., 142 F.3d 690 (3rd Cir. 1998), former Consolidated employees brought separate actions under FELA for injuries allegedly sustained from exposure to toxic chemicals. The employees had all brought prior claims against Consolidated for various injuries. In settlement of these prior claims, each employee had executed a release absolving Conrail from liability for all claims, both past and future, relating to their employment.

Essentially the same issue was before the Third Circuit – whether Section 5 prohibited Consolidated from absolving itself of liability for FELA claims through the execution of such a general release. For different reasons, the Third Circuit held the Consolidated releases were void. The Third Circuit first considered what it saw as the "bright line rule" set forth in Babbitt – limiting the release to those injuries known to the employee at the time the release is executed. While finding that the advantage to this approach was the benefit of predictability, the court recognized that "both employee and employer could fully comprehend future risks and potential liabilities and, for different reasons, want an immediate and permanent settlement." Id. at 700. Taking this into consideration, the court held that "a release does not violate Section 5 provided it is executed for valid consideration as part of a settlement, and the scope of the release is limited to those risks which are known to the parties at the time the release is signed." Id. at 701. In the court's view, "a release that spells out the quantity, location and duration of potential risks to which the employee has been exposed . . . allowing the employee to make a reasoned decision whether to release the employer from liability for future injuries of specifically known risks does not violate Section 5 of FELA." Id.

The Third Circuit held that a release under FELA is "strong, but not conclusive, evidence of the parties' intent." Id. The court was "wary of making the validity of a release turn on the writing alone because of the ease in writing detailed boiler plate agreements." Id. The written release was not to be conclusive. Rather, courts must undertake a fact-intensive process to determine if a release subject to FELA is valid. Applying this new standard, the Third Circuit held that the Consolidated releases were void. The Court did not believe the releases demonstrated that the parties understood, let alone addressed or discussed, the scope of the claims being waived or that the plaintiffs had been made aware to the potential health risks to which they had been exposed.

Thus, the Third Circuit established what is known as the fact intensive approach to determining if FELA releases are valid, in which courts must assess the validity of a release in light of the parties' actual known risks. The different approaches developed by the Third and Sixth Circuits left state courts to determine which approach to follow. New York and Michigan State Courts have since faced this issue in asbestos lawsuits.

State Courts' Resolution of the Circuit Split New York - Oliverio v. Consolidated Rail

In Oliverio v. Consolidated Rail Corp., 14 Misc.3d 219, 822 N.Y.S.2d 699 (Sup. Ct. Erie Co. 2006), the New York Supreme Court (Erie County) had to determine which of the two appellate courts offered a more sound analysis of Section 5. Plaintiff had previously brought suit in 1996 based on alleged asbestos exposure and, in resolving that case, had executed a release. Plaintiff brought suit against Consolidated a second time, claiming that he had contracted bladder cancer as a result of asbestos exposure.

The New York court first determined whether the language of the release should be judged by the bright line rule set forth in Babbitt or the fact intensive approach set forth in Wicker. While the court agreed that the Babbitt approach would be easier to apply, it viewed the court's perspective on how parties compromise claims as unrealistic. It feared that this approach would lead to a more complicated inquiry into the nature of the injury or have an overall chilling effect on settlements:

The court instead adopted the Wicker approach. In the court's view, Wicker offered a more realistic approach in that it allowed for:

The release from plaintiff's 1996 claim specifically included all cancer and fears of cancer. In negotiating this settlement, plaintiff had to know that he was compromising based on his claimed exposure to asbestos and any future claims based upon the same exposures. Id. Likewise, Consolidated "had a reasonable expectation of finality with respect to the specific claim of asbestos exposure, and the settlement paid was likely to have been based upon that expectation." Id. at 223. Thus, the court found that the 1996 release was enforceable and dismissed the case.

Michigan - Jaqua v. Canadian National

The Michigan Court of Appeals is the most recent court to weigh in on the issue. In Jaqua v. Canadian Nat'l R.R, Inc., 274 Mich. App. 540, 734 N.W.2d 228 (Mich. Ct. App. 2007), plaintiff originally brought claims against Canadian National alleging that his exposure to asbestoscontaining products while an employee caused his asbestosis. In settlement of this initial claim, plaintiff executed a release acknowledging that his pulmonary and respiratory injuries might worsen in the future and voluntarily waived and released all associated claims. Among the conditions expressly listed in the release was cancer.

Plaintiff was later diagnosed with lung cancer and filed a new complaint against Canadian National based on his new lung cancer diagnosis. Canadian National sought to dismiss this new claim based upon the release previously executed. Thus, the Michigan appellate court was faced with the same question as the Third and Sixth Circuits – whether Section 5 only permits a release of known injuries that exist at the time of the release or whether Section 5 permits the release of known risks of future conditions.

The Michigan Court of Appeals adopted the approach set forth by the Wicker Court and held that the initial release barred the new lung cancer claim. The court analyzed the bright line rule set forth in Babbitt and deemed the holding to be overly broad. In contrast, the court maintained that Wicker is "consistent with Section 5 . . . without unnecessarily broadening or narrowing the scope of the rule." Id. at 555. Analyzing the case pursuant to the Wicker approach, the court determined that the initial release was a valid settlement and not an attempt to escape liability. "The release addressed a specific instance of disputed liability and specific injuries that Jaqua suffered, or was at great risk of suffering in the future – asbestosis and lung cancer." Id. at 556. Having addressed these risks, the release was enforceable.

Conclusion

While most courts will likely adopt the Wicker approach, defense counsel must caution clients entering into releases based upon FELA. If a court were to use the Babbitt approach in a claim based upon asbestos exposure, a release would only dispense of the exact injury complained of. For example, a release for damages related to asbestosis could not be used to prevent a new claim from being brought if the same plaintiff were to develop lung cancer. To the extent that the Wicker approach would apply, defense counsel would be wellserved to include language within the release that sets forth all ailments allegedly caused by exposure to asbestos.

Short of Congress or the U.S. Supreme Court resolving this issue, all defense counsel advising clients entering into releases subject to FELA should be wary of the pitfalls and uncertainty that exists in this unsettled area of law.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.