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COOK v. BUDGET RENT-A-CAR CORP.

December 4, 1980

Timothy M. COOK, on behalf of himself and all others similarly situated, Plaintiff,
v.
BUDGET RENT-A-CAR CORPORATION and Transamerica Corporation, Defendants



The opinion of the court was delivered by: WARD

Plaintiff brings this action under Section 504 of the Rehabilitation Act of 1973, 29 U.S.C. § 794. The action has been discontinued with prejudice as to defendant Transamerica Corporation by an order of the Court dated June 16, 1980. The remaining defendant, Budget Rent-A-Car Corporation ("Budget"), moves to dismiss plaintiff's claims pursuant to Rule 12(b)(6), Fed.R.Civ.P. However, since Budget has relied upon matters outside of the pleadings, the Court will treat the motion as one for summary judgment under Rule 56(b), Fed.R.Civ.P. Plaintiff cross-moves for summary judgment under Rule 56(a), Fed.R.Civ.P. For the reasons hereinafter stated, summary judgment is granted in favor of Budget. Plaintiff's cross-motion for summary judgment is denied.

Background

 Budget is a wholly-owned subsidiary of Transamerica Corporation. It is engaged in the business of renting automobiles to the general public, mostly through franchises to local dealers. Plaintiff alleges that he is handicapped, but that his impairment does not affect his ability to operate a motor vehicle. He has been a licensed driver since 1970. Plaintiff further alleges that, during 1979, a Budget franchisee named George R. Bunch refused to rent an automobile to plaintiff solely because of his handicap.

 Plaintiff contends that these allegations state a claim for violation of Section 504 of the Rehabilitation Act of 1973, 29 U.S.C. § 794 ("Section 504"). He seeks compensatory and punitive damages, as well as injunctive relief, for the alleged violation. The relevant portion of Section 504 reads as follows:

 
No otherwise qualified handicapped individual in the United States, as defined in section 706(7) of this title, shall, solely by reason of his handicap, 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 or under any program or activity conducted by an Executive agency or by the United States Postal Service....

 An action will lie against a private party under Section 504, then, only if that party is a recipient of "Federal financial assistance." Budget contends that the material facts necessary to determine whether it receives Federal financial assistance are not in genuine dispute, and that summary judgment should be entered in its favor because these facts show that Budget does not receive Federal financial assistance. The question before the Court on Budget's instant motion is thus simply whether Budget is a recipient of Federal financial assistance within the meaning of Section 504. *fn1"

 Budget has conceded in answers to interrogatories filed with the Court that it receives funds from the federal government under automobile rental contracts which it has with a number of federal agencies. *fn2" These contracts, and the payments received by Budget on account of them, are the sole basis for plaintiff's contention that Budget is a recipient of Federal financial assistance under Section 504. Accordingly, unless these contracts constitute Federal financial assistance within the meaning of the statute, Budget cannot be subjected to liability under Section 504, and Budget's motion for summary judgment must be granted.

 Discussion

 The task before the Court is plainly one of statutory interpretation. The term "Federal financial assistance" is not defined by the Rehabilitation Act of 1973 ("the Act"). The Court has not been apprised, either by the parties or by virtue of its own research, of any case dealing with this issue in any great detail. *fn3" The question is thus essentially one of first impression, requiring the Court to consider the language and the administrative interpretations of Section 504, the legislative history of Section 504, the prevailing interpretation of any related statutes, and the general purposes of the Act.

 A. Language and Administrative Interpretations of Section 504

 The Court notes, with regard to the language of Section 504, that it finds the use of the specific word "assistance" to be most striking. This word connotes such transactions as a transfer of government funds by way of a subsidy, or a sale of government assets at reduced consideration. "Assistance" does not on its face impress the Court as comprehending "procurement contracts," that is, contracts in which goods or services are sold or purchased by the government for its own account at fair market value. There is no suggestion in the present case that the government paid greater than fair market value under its automobile rental contracts with Budget. *fn4" Accordingly, if Section 504 is given what the Court views to be its plain meaning, Budget is not a recipient of Federal financial assistance. See Rogers v. Frito-Lay, Inc., 433 F. Supp. 200, 204 (N.D.Tex.1977), aff'd on other grounds, 611 F.2d 1074 (5th Cir. 1980), cert. denied, 449 U.S. 889, 101 S. Ct. 246, 66 L. Ed. 2d 115 (1980) (ruling, solely on basis of plain meaning of term, that "Federal financial assistance" under Section 504 "does not comprehend government contracts but rather refers to the form of grant assistance that goes primarily to public entities").

 The Court is also strongly influenced by the administrative interpretations of the term "Federal financial assistance." The Department of Health, Education, and Welfare ("DHEW") was directed to coordinate the issuance of regulations effectuating the Act by Exec. Order No. 11,914, 41 Fed.Reg. 17,871 (1976), reprinted in 29 U.S.C. § 794 app. DHEW's regulations under the Act are codified in 45 C.F.R. pt. 84 (1979). These regulations define "Federal financial assistance" as follows:

 
"Federal financial assistance" means any grant, loan, contract (other than a procurement contract or a contract of insurance or guaranty), or any other arrangement by which the Department provides or ...

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