FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

ARTHUR CLEMENS, JR.,

Plaintiff-Appellee/

Cross-Appellant,

v.

CENTURYLINK INC.,

Defendant,

and

QWEST CORPORATION,

Defendant-Appellant/

Cross-Appellee.

Nos. 15-35160

15-35183

D.C. No.

2:13-cv-01793-JPD

OPINION

Appeal from the United States District Court

for the Western District of Washington

James P. Donohue II, Magistrate Judge, Presiding

Argued and Submitted October 2, 2017

Seattle, Washington

Filed November 3, 2017

Before: Kim McLane Wardlaw, Richard R. Clifton,

and John B. Owens, Circuit Judges.

Opinion by Judge Owens
2 CLEMENS V. QWEST

SUMMARY*

Labor Law

The panel vacated the district court’s order denying the 

plaintiff a tax adjustment of a damages award in a Title VII 

case.

Agreeing with the Third, Seventh, and Tenth Circuits, 

the panel held that in Title VII cases, district courts have 

discretion to award the equitable relief of a “gross-up” 

adjustment to compensate for increased income-tax liability 

resulting from a plaintiff’s receipt of a back-pay award in 

one lump sum.

The panel remanded the case for further proceedings. It 

addressed other issues in a concurrently filed memorandum 

disposition.

COUNSEL

Eric D. Miller (argued) and James Sanders, Perkins Coie 

LLP, Seattle, Washington, for Defendant-Appellant/CrossAppellee.

Alexander J. Higgins (argued), Law Offices of Alex J. 

Higgins, Seattle, Washington; Rebecca E. Ary, Law Office 

of Rebecca E. Ary, Seattle, Washington; Daniel F. Johnson, 

 * This summary constitutes no part of the opinion of the court. It 

has been prepared by court staff for the convenience of the reader.
CLEMENS V. QWEST 3

Breskin Johnson & Townsend, Seattle, Washington; for 

Plaintiff-Appellee/Cross-Appellant.

OPINION

OWENS, Circuit Judge:

Arthur Clemens, Jr., sued his employer Qwest 

Corporation (“Qwest”) for Title VII violations. A jury 

awarded damages for back pay and emotional distress, as 

well as punitive damages. On appeal, Clemens challenges 

the district court’s refusal to consider adjusting his lumpsum back-pay award to account for the corresponding 

increase in his tax liability. We have jurisdiction under 

28 U.S.C. § 1291. We vacate the district court’s order 

denying a tax adjustment and remand for further 

proceedings.1

I. FACTS AND PROCEDURAL HISTORY

In 2008, Qwest initiated disciplinary proceedings against 

Clemens, a long-time employee and active union member. 

For a period longer than the American Civil War, Clemens 

and Qwest contested his work performance in internal 

proceedings and interviews, in arbitration, and before the 

Washington State Human Rights Commission.

In September 2013, Clemens sued Qwest for race 

discrimination and retaliation in violation of Title VII 

(42 U.S.C. §§ 2000e et seq.). After removal from state to 

 1 A concurrently filed memorandum disposition resolves Qwest’s 

challenges to the jury’s verdict and affirms the district court in those 

respects.
4 CLEMENS V. QWEST

federal court, the parties consented to a jury trial before a 

magistrate judge. The jury found for Clemens on his 

retaliation claim and awarded him over $157,000 for lost 

wages and benefits, over $275,000 for emotional distress, 

and $100,000 in punitive damages. The district court 

reduced the latter two awards to $300,000 to comply with 

Title VII’s cap on compensatory and punitive damages. See 

42 U.S.C. § 1981a(b)(3)(D). 

The district court also granted Clemens’s motions for 

attorney’s fees and, in part, an interest award. However, it 

denied his request for a “tax consequence adjustment” or 

“gross up” to compensate for increased income-tax liability 

resulting from his receipt of his back-pay award in one lump 

sum. The district court explained that “[g]iven the lack of 

authorization from the Ninth Circuit, the split among other 

Circuits on this issue, and the parties’ disagreement 

regarding an appropriate methodology for calculating the tax 

consequences of a lump sum payment,” it declined “to 

exercise its discretion to ‘gross up’ plaintiff’s damages 

award.” Clemens now challenges that decision.

II. DISCUSSION

Standard of Review 

Whether Title VII permits gross-up adjustments is a legal 

question which we review de novo. See, e.g., Ileto v. Glock, 

Inc., 565 F.3d 1126, 1131 (9th Cir. 2009). 

Title VII Grants Courts The Authority To Award 

Back-Pay “Gross Ups”

Title VII exists in large part “to make persons whole for 

injuries suffered on account of unlawful employment 

discrimination.” Albemarle Paper Co. v. Moody, 422 U.S. 
CLEMENS V. QWEST 5

405, 418 (1975); accord, e.g., Rivera v. NIBCO, Inc., 

364 F.3d 1057, 1069 (9th Cir. 2004) (“Title VII’s central 

statutory purpose is eradicating discrimination throughout 

the economy and making persons whole for injuries suffered 

through past discrimination.” (internal quotation marks 

omitted)); Kraszewski v. State Farm Gen. Ins. Co., 912 F.2d 

1182, 1184–86 (9th Cir. 1990) (endorsing granting of 

equitable relief under Title VII where it is “necessary to put 

the victim in the place he would have been—to make him 

whole”); Thorne v. City of El Segundo, 802 F.2d 1131, 

1133–34 (9th Cir. 1986) (to the same effect). And Title VII 

provides courts with considerable equitable discretion to 

ensure adequate compensation. See 42 U.S.C. § 2000e5(g)(1) (authorizing “any other equitable relief as the court 

deems appropriate”); see also, e.g., Albemarle, 422 U.S. at 

418–21; Int’l Bhd. of Teamsters v. United States, 431 U.S. 

324, 364–65 (1977) (confirming that Title VII “vest[s] broad

equitable powers in . . . courts”); Franks v. Bowman Transp. 

Co., 424 U.S. 747, 763–64 (1976) (same); EEOC v. Gen. Tel. 

Co. of the Nw., 599 F.2d 322, 334–35 (9th Cir. 1979) 

(“Congress armed the courts with full equitable powers in 

Title VII cases. . . . The courts will be alert to adjust their 

remedies so as to grant the necessary relief.”).

Indeed, we recently reiterated that “[i]t is the historic 

purpose of equity to secure complete justice,” and that “[i]n 

the context of a claim brought under a federal statute 

intended to combat discrimination, the phrase ‘complete 

justice’ has a clear meaning: ‘the [district] court has not 

merely the power but the duty to render a decree which will 

so far as possible eliminate the discriminatory effects of the 

past as well as bar like discrimination in the future.’” Bayer 

v. Neiman Marcus Grp., Inc., 861 F.3d 853, 873 (9th Cir. 

2017) (some alterations in Bayer) (footnote, citations, and 

some internal quotation marks omitted) (quoting Gen. Tel. 
6 CLEMENS V. QWEST

Co., 599 F.2d at 334, and Albemarle, 422 U.S. at 418); see 

also Kraszewski, 912 F.2d at 1185–86. Back pay is one 

manifestation of this principle, see Loeffler v. Frank, 

486 U.S. 549, 558 (1988), as is prejudgment interest on 

back-pay awards, see id. at 557 (recognizing that the courts 

of appeals unanimously hold “that Title VII authorizes 

prejudgment interest as part of [back-pay awards]”).

But unfortunately for successful Title VII plaintiffs, 

back-pay awards are taxable. See Comm’r v. Schleier, 

515 U.S. 323, 327 (1995); see also 26 U.S.C. § 104(a)(2) 

(restricting income-tax exclusion for personal-injury awards 

to those “received . . . on account of personal physical

injuries or physical sickness” (emphasis added)). And a 

lump-sum award will sometimes push a plaintiff into a 

higher tax bracket than he would have occupied had he 

received his pay incrementally over several years. Clemens 

claims that very side effect here. He argues that the taxman’s 

expanded cut effectively denies him what Title VII 

promises—full relief that puts Clemens where he would be 

had the unlawful employment discrimination never 

occurred.

As the district court recognized, we are not the first 

tribunal to confront this issue. The Third, Seventh, and 

Tenth Circuits have all held that district courts have the 

discretion to “gross up” an award to account for income-tax 

consequences. See Eshelman v. Agere Sys., Inc., 554 F.3d 

426, 440–43 (3d Cir. 2009) (“[A] district court may, 

pursuant to its broad equitable powers granted by [42 U.S.C. 

§ 2000e-5], award a prevailing employee an additional sum 

of money to compensate for the increased tax burden a back 

pay award may create.”); EEOC v. N. Star Hosp., Inc., 

777 F.3d 898, 903–04 (7th Cir. 2015) (agreeing with Third 

and Tenth Circuits that “without the tax-component award, 
CLEMENS V. QWEST 7

[the plaintiff] will not be made whole, a result that offends 

Title VII’s remedial scheme”); Sears v. Atchison, Topeka & 

Santa Fe Ry., Co., 749 F.2d 1451, 1456–57 (10th Cir. 1984) 

(upholding a tax gross up because under Title VII, “the trial 

court has wide discretion in fashioning remedies to make 

victims of discrimination whole”); see also Thomas R. 

Ireland, Tax Consequences of Lump Sum Awards in 

Wrongful Termination Cases, 17 J. Legal Econ. 51, 53–54 

(2010) (explaining the circuits’ approaches to equitable tax 

adjustments).

The D.C. Circuit, however, does not permit such gross 

ups. In a per curiam opinion (and a mere one paragraph), it 

rejected gross ups because it knew “of no authority for such 

relief” and “[g]iven the complete lack of support in existing 

case law for tax gross-ups,” it “decline[d] so to extend the 

law in this case.” Dashnaw v. Pena, 12 F.3d 1112, 1116 

(D.C. Cir. 1994) (per curiam), abrogated on other grounds 

by Rann v. Chao, 346 F.3d 192, 197–98 (D.C. Cir. 2003). 

Of course, that paragraph ignored the Tenth Circuit’s 

decision in Sears and the Supreme Court’s reasoning in 

cases like Albemarle, Loeffler, and Franks, as well as Title 

VII’s equitable underpinnings.

We join the thoughtful analysis of the Third, Seventh, 

and Tenth Circuits, and reject the matchbook musings of the 

D.C. Circuit. In so doing, we also agree with those courts 

that the decision to award a gross up—and the appropriate 

amount of any such gross up—is left to the sound discretion 

of the district court. As the Third Circuit put it, “we do not 

suggest that a prevailing plaintiff in discrimination cases is 

presumptively entitled to an additional award to offset tax 

consequences . . . . The nature and amount of relief needed 

to make an aggrieved party whole necessarily varies from 

case to case,” Eshelman, 554 F.3d at 443, and the 
8 CLEMENS V. QWEST

“circumstances peculiar to the case” drive that decision, id.

(quoting Albemarle, 422 U.S. at 424).

There may be many cases where a gross up is not 

appropriate for a variety of reasons, such as the difficulty in 

determining the proper gross up or the negligibility of the 

amount at issue. In any case, the party seeking relief will 

bear the burden of showing an income-tax disparity and 

justifying any adjustment. We express no opinion on 

whether a gross up is appropriate here—that is for the district 

court to decide on remand.

Acknowledging the circuit split, Qwest puts up little 

resistance to the majority view. It argues for the first time 

on appeal that monetary relief is legal, not equitable. That 

argument is both waived, see Smith v. Marsh, 194 F.3d 1045, 

1052 (9th Cir. 1999) (“[A]n appellate court will not consider 

issues not properly raised before the district court.”), and at 

odds with the controlling Title VII case law discussed above. 

Qwest also suggests that only a jury can award a back-pay 

tax adjustment—another argument that is both waived 

because it is made to our court first, see id., and wrong under 

Title VII case law, see Lutz v. Glendale Union High Sch., 

403 F.3d 1061, 1068–69 (9th Cir. 2005) (“[T]here is no right 

to have a jury determine the appropriate amount of back pay 

under Title VII . . . . Instead, back pay remains an equitable 

remedy to be awarded by the district court in its discretion.”).

Qwest finally argues that the district court did exercise 

its discretion in refusing Clemens a tax gross up. While we 

appreciate that the district court’s ruling on this issue was 

somewhat opaque, what is clear is that the court declined to 

consider a gross up in part because the Ninth Circuit had 

never authorized one. Consistent with all of the courts that 

have thoughtfully addressed this issue, we do so now.
CLEMENS V. QWEST 9

The district court’s order denying an adjustment is 

vacated and the case remanded for further proceedings.

VACATED AND REMANDED.