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Simpson v. Reynolds Metals Co.

decided: August 21, 1980.


Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 79-C-1227 -- J. Sam Perry, Judge.

Before Fairchild, Chief Judge, Bauer and Cudahy, Circuit Judges.

Author: Cudahy

Plaintiff-appellant Clinton Simpson, who suffers from alcoholism, brought suit under §§ 504 and 503(a) of Title V of the Rehabilitation Act of 1973, 29 U.S.C. §§ 794 and 793(a), alleging his discharge by defendant Reynolds Metals Company ("Reynolds") resulted from discrimination against him because of his alcoholism and violated the affirmative action covenant in Reynolds' government procurement contracts. The district court granted defendant's motion to dismiss,*fn1 and Simpson appealed. We hold that to maintain an action for employment discrimination under § 504, a handicapped individual must be an intended beneficiary of the federal financial assistance received by his employer or must be able to show that the discrimination directed against him affected the beneficiaries of such aid. In addition, we hold that a private right of action may not be implied under § 503(a), which requires that government contracts contain affirmative action covenants in favor of handicapped individuals. Accordingly, we affirm.


Plaintiff Simpson was employed by Reynolds at its aluminum processing plant in McCook, Illinois from March 25, 1948, until July 27, 1977. Throughout much of his thirty-year tenure with the defendant, Simpson worked on the plant's "Hot Line," monitoring and, when necessary, regulating, the passage of molten metal along "hot roll tables."

Simpson admits he has a history of chronic alcoholism which is known to Reynolds and dates back to 1948. At defendant's suggestion, in late March 1976, Simpson was voluntarily hospitalized for four weeks at the Chicago Alcoholic Treatment Center. During that treatment period, plaintiff received standard sick pay from defendant. Plaintiff returned to his job in late April 1976, and worked without incident until September 27, 1976, when Reynolds suspended him without pay for missing three work days because of his drinking problem. Simpson's suspension lasted until April 13, 1977, when he was conditionally reinstated without back pay or benefits but also without loss of seniority. Among the conditions of his reinstatement were that plaintiff submit proof of regular attendance at Alcoholics Anonymous ("A.A.") meetings and that any future unexcused absence would be cause for dismissal.

Plaintiff was absent without excuse on July 24, 25, and 26, 1978. As a result, the company suspended him. Plaintiff admits that his absence was due to his alcoholism. Plaintiff appealed his suspension; he requested and received a hearing at which company and union representatives were present. Shortly thereafter, he was notified by letter that his appeal was denied and that he was discharged effective as of the date of his suspension.

Simpson brought suit alleging that Reynolds discharged him solely on account of his handicap of chronic alcoholism in violation of §§ 503(a) and 504 of the Rehabilitation Act of 1973, 29 U.S.C. §§ 793, 794. Section 503(a) requires federal contractors to take affirmative action to employ and advance in employment qualified handicapped individuals.*fn2 Section 504 prohibits the exclusion of, denial of benefits to, or discrimination against handicapped persons under any program or activity receiving federal financial assistance.*fn3 Plaintiff added a pendent claim of handicap discrimination under Article I, Section 19 of the Illinois Constitution. In addition to declaratory relief, Simpson sought unspecified monetary damages and reinstatement with seniority and benefits to which he was entitled at the time of his discharge.

In his complaint, plaintiff asserted that his chronic alcoholism made him "a handicapped person, . . . having a combined physical and mental impairment substantially limiting his major life activity of earning a livelihood." He also alleged, however, that he was an " "otherwise qualified' handicapped person in the . . . sense of being fully capable of performing the essential functions of his . . . job provided only that defendant took steps reasonably to accommodate and/or help overcome . . . (his) chronic alcoholism handicap." Plaintiff contended his alcoholism never interfered with his job performance for Reynolds. Plaintiff said that the duty not to discriminate was incumbent upon Reynolds as a "continuing recipient of various forms of federal assistance" and that Reynolds' responsibility to provide affirmative action assistance arose because of its status as a federal contractor.

Reynolds moved to dismiss the § 503 count of plaintiff's complaint on the ground that that section does not provide a private right of action. Reynolds also asserted three bases for dismissal of the § 504 claim. First, it contended the action must be dismissed since Reynolds does not receive any federal grants or financial assistance. While Reynolds admitted it contracted on several occasions with various federal agencies and departments for the procurement of goods and services, the company argued that this participation in procurement contracts did not constitute "assistance" within the meaning of § 504. Reynolds emphasized that at no time relevant to this litigation had its McCook, Illinois plant or any other of its facilities participated in any program which could be considered to involve the receipt of federal financial assistance. Reynolds stated that such abstention reflected a corporate policy established because of what it claimed are the onerous reporting requirements accompanying such federal assistance. Reynolds insisted that there have been no exceptions to this policy.

Reynolds did concede that it maintains certain apprenticeship or on-the-job training ("OJT") programs at its McCook plant but argued the programs, contrary to plaintiff's contentions, did not provide the company with any federal financial assistance. The employees hired for the program include both veterans and non-veterans. Although all such employees are paid identical salaries by Reynolds, the veterans in these apprenticeship programs may be able to receive additional benefits directly from the Veterans Administration ("VA"). Payment of the benefits is made to the veterans, and Reynolds contended it does not receive or accept any of the funds or otherwise act as a conduit between the agency and the beneficiaries. According to the company, these benefits do not affect the level of salary it pays to either the veterans or the non-veterans who participate in the apprenticeship training. Neither, Reynolds added, do the payments alter the costs of maintaining the program.

Second, Reynolds argued that its motion to dismiss the § 504 claim should be granted because plaintiff was not a beneficiary of any assistance arguably received by Reynolds. It is undisputed that plaintiff never participated in the apprenticeship program at the McCook plant. Neither did he allege that he was eligible to participate in the program or that he ever desired to participate in the program. As the third basis for its motion to dismiss the § 504 count, Reynolds contended Simpson failed to plead in his complaint that any such assistance allegedly received by Reynolds was primarily for the purpose of providing employment. Finally, Reynolds argued that in the event the district court dismissed plaintiff's federal claims, Simpson's pendent state law claim should be dismissed for want of a substantial federal claim to support jurisdiction over it.

The district court granted defendant's motion without giving reasons for its ruling. On appeal, the parties address the same arguments raised in the district court.



Implicit in plaintiff's argument on his § 504 claim is the assumption that this circuit in Lloyd v. Regional Transportation Authority, 548 F.2d 1277 (7th Cir. 1977), recognized that a private right of action may be implied under that section. This assumption by plaintiff, as well as by courts analyzing Lloyd,*fn4 may reflect an oversimplified view of that case and ignores the limitations we there expressed.

In Lloyd, we stated that a private right of action for declaratory and injunctive relief can be implied under § 504 on behalf of disabled persons who because of physical disabilities were unable to use federally funded mass transportation facilities. After deciding that § 504 conferred affirmative rights on the plaintiffs in that action, 548 F.2d at 1281, we held that, given the existence of only proposed interim regulations not yet published in final form by the Department of Health, Education and Welfare ("HEW"), an administrative remedy was not available for the plaintiff class. Hence, pending adoption of a meaningful administrative enforcement scheme, relief would be available only through a private judicial remedy. Id. at 1286-88. We expressly reserved the question whether a private right of action would still be available after final regulations were promulgated.*fn5

The final HEW regulations implementing § 504 and providing for administrative remedies have become effective since we issued our opinion in Lloyd ; however, we need not address the question we reserved there because the apprenticeship program which plaintiff argues qualifies as "federal financial assistance" under § 504 is one implemented and funded not by HEW but by the VA which had not issued final regulations (but only proposed regulations) when the complaint in this action was filed. Under the terms of Executive Order 11,914, regulations issued by the VA are to govern enforcement of § 504 with regard to the apprenticeship program.*fn6 Given the unavailability of final VA regulations which may provide an administrative remedy, Lloyd would mandate a judicial remedy through a private action were it not for a more fundamental obstacle, which we now discuss, relating to Simpson's standing to assert a private right of action under § 504.*fn7


Section 504 makes it unlawful for otherwise qualified handicapped individuals*fn8 to "be excluded from the participation in, be denied the benefits of, or be subjected to discrimination under any program or activity receiving Federal financial assistance" solely because of their handicaps. 29 U.S.C. § 794. Simpson has not contended that he ever sought to participate in or was denied admittance to the apprenticeship program. It is undisputed that he is not a veteran and that he, therefore, could not have been a participant in the program which he alleges constituted "federal financial assistance" to his employer. Neither has he demonstrated his allegedly discriminatory discharge denied him the benefits of the federal assistance in issue. Finally, he has not shown, as we doubt he could, since there was never any historical connection between his employment and the apprenticeship program, that he was "subjected to discrimination under any program or activity receiving Federal financial assistance." Even assuming that the OJT program qualifies as "federal financial assistance" under the statute,*fn9 since plaintiff has not demonstrated any nexus between his discharge and the federal assistance, we find the district court's dismissal of his claim under § 504 should be affirmed.

The statute does not, as plaintiff seems to contend, generally forbid discrimination against the handicapped by recipients of federal assistance. Instead, its terms apparently require that the discrimination must have some direct or indirect effect on the handicapped persons in the program or activity receiving federal financial assistance. To be actionable, the discrimination must come in the operation of the program or manifest itself in a handicapped individual's exclusion from the program or a diminution of the benefits he would otherwise receive from the program.

The parties have not cited us to any discussion of § 504 in the legislative history which might shed further light on this issue. Neither has our research revealed any extensive consideration of the point in the committee reports which accompanied the adoption of § 504 in the Rehabilitation Act of 1973 and the further changes added by the Rehabilitation Act Amendments of 1974 and the Rehabilitation, Comprehensive Services, and Developmental Disabilities Amendments of 1978. However, there is certainly nothing in the brief references to § 504 in the committee reports which precludes the restriction of recovery under the section to persons directly or indirectly benefiting from the federal financial assistance in question. In fact, these references support our interpretation that to be actionable the alleged discrimination must be in connection with a federally funded program or activity.*fn10

Against the conclusion we reach, plaintiff also argues that one of the express purposes of the Rehabilitation Act of 1973 was to "promote and expand employment opportunities in the public and private sectors for handicapped individuals and to place such individuals in employment." 29 U.S.C. § 701(8) (1975).*fn11 But he fails to read this statement together with the introductory language which precedes the enumerated list of statutory objectives, of which this statement is a part. When the statement is read with the introductory language, it is clear that Congress in adopting Title V intended "to authorize programs . . . to promote and expand employment activities." Id. (emphasis supplied). The full excerpt shows that Congress intended that the promotion and expansion of employment opportunities come in connection with a federally funded program or activity. We fail to see how this section manifests an intent by Congress that § 504 impose a general requirement upon recipients of federal grants not to discriminate against handicapped employees who are not involved in a program or activity receiving such assistance.*fn12

We find little consideration in reported cases of the question whether a private right of action under § 504 to redress employment discrimination may be implied on behalf of individuals who are not the intended beneficiaries of the federal financial assistance in ...

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