Bankruptcy & Employment Discrimination Claim (Palmer v. Union Pacific)

Here’s an interesting employment discrimination case that’s related to a prior bankruptcy: Palmer v. Union Pacific Railroad Co. (In re Palmer), Case No. 24-1212 (8th Cir., decided June 12, 2025).[Fn. 1]

Background

Debtor starts working for The Railroad in March 1998 as a Switchman/Brakeman, after disclosing a diabetes condition. Later, Debtor moves to the role of Trainman/Conductor.

Debtor develops “diabetic retinopathy,” which causes blurred vision:

in September 2011, Debtor undergoes surgery on his right eye—and continues working for The Railroad afterwards; but
in November 2013, Debtor’s left eye develops blurred vision, and The Railroad initiates a fitness-for-duty evaluation, removing Debtor from work in the meantime.

In February 2014, based on its November 2013 evaluation, The Railroad’s Chief Medical Officer imposes permanent work restrictions that disqualify Debtor from his position with The Railroad.

In May 2014, Debtor submits new medical information from an eye doctor, which states that Debtor’s vision is “good” and clears Debtor for work. In its December 2014 response letter, The Railroad’s Chief Medical Officer:

confirms Debtor’s permanent work restrictions; and
refuses to consider any additional information from Debtor’s eye doctor.

[Note: the two emphasized dates above are important for the District Court and Eighth Circuit rulings discussed below.]

Bankruptcy

On March 5, 2019, Debtor and his wife file a voluntary Chapter 7 petition in the Nebraska Bankruptcy Court (In re Palmer, Case No. 19-40333).

The Chapter 7 Trustee files a “Report of No Distribution” on June 5, 2019, (Doc. 9) declaring: “there is no property available for distribution from the estate.” Debtors receive their discharge on June 10, 2019 (Doc. 16), and the bankruptcy case is closed on June 17, 2019 (Doc. 18).

Class Action & EEOC Claim

In February 2016, a class action lawsuit begins in the U.S. District Court for Nebraska, alleging that The Railroad used its fitness-for-duty policy to routinely disqualify employees from service based on disabilities, without conducting individualized reviews.

The class:

is certified in February 2019 and includes employees routed through the fitness-for-duty process “at any time from September 18, 2014 until the final resolution of the action”; but
is decertified in March 2020.

So, Debtor files an individual charge of discrimination with the EEOC in April 2020 and receives a right-to-sue letter dated June 5, 2023.

Back in Bankruptcy

Meanwhile, on March 16, 2023, Debtor files a Motion to Reopen Chapter 7 Proceeding” in his old bankruptcy case (Doc. 19), disclosing the existence of the discrimination claim—which Motion is granted on Marh 17, 2023 (Doc. 21).

On April 4, 2023, Debtor files amended schedules in the bankruptcy case, (i) identifying the discrimination claim as an asset, and (ii) claiming that asset as exempt under both state (Neb. Rev. Stat. §§ 25-1558 & 25-1563.02) and federal (15 U.S.C. § 1673) statutes. The Chapter 7 Trustee objects to the exemption claim (Doc. 27), and the Bankruptcy Court defers consideration of the exemption dispute until after the discrimination claim is resolved (Doc. 32).

Lawsuit

On June 8, 2023, Debtor files a “Complaint” against The Railroad in the U.S. District Court for Nebraska (Case No. 8:23-cv-252).

The Railroad moves to dismiss the Complaint with prejudice (see Docs. 6 & 7) because:

Debtor “did not file his administrative complaint until April 24, 2020, well more than 300 days after the latest possible alleged discriminatory act”; and
“Therefore, [Debtor’s] ADA claims are untimely and should be dismissed with prejudice.”

The District Court grants The Railroad’s motion to dismiss because:

although a statute of limitations is suspended by the commencement of a class action lawsuit, Debtor could not have been part of the certified-then-decertified class because Debtor’s issues arose “in or around February 2014,”[fn. 2] which is prior to the earliest date (September 18, 2014) for the class against The Railroad; and
Debtor “did not file his charge with the EEOC within 300 days after his disability discrimination claim accrued.”

Eighth Circuit Court of Appeals

Debtor appeals to the Eighth Circuit Court of Appeals, which reverses and remands because the District Court “relied on an Eighth Circuit standard that has since been abrogated.”

Under the now-applicable standard, the Eighth Circuit finds:

to plead an adverse employment, Debtor is only required to plead “some harm respecting an identifiable term or condition of employment”; and
Debtor’s Complaint “plausibly alleges that the December 2014 letter caused him ‘some harm’” (emphasis added).

Conclusion

It will be interesting to see:

how the District Court lawsuit works out on remand; and
if Debtor is able to make a recovery in that lawsuit, how the exemption issues will be resolved in the bankruptcy.

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Footnote 1. This case is particularly interesting to me because, (i) it arose in North Platte, Nebraska, where the Union Pacific has a major facility (about 30 miles—as the crow flies—from my boyhood home), and (ii) Union Pacific is headquartered in Omaha, Nebraska (the city where I’ve lived since graduating from Law School). In this article, I refer to Union Pacific as “The Railroad”—that’s because many people back in the North Platte area, when asked about their employment will say, “I work for The Railroad.”

Footnote 2. Emphasis is added.

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