Document: 515 U.S. 323115 S.Ct. 2159132 L.Ed.2d 294 COMMISSIONER OF INTERNAL REVENUE, Petitioner,v.Erich E. SCHLEIER and Helen B. Schleier, Respondents. No. 94-500. Supreme Court of the United States Argued March 27, 1995. Decided June 14, Syllabus * On his 1986 federal income tax return, Erich Schleier (hereinafter respondent) included as gross backpay portion, but not liquidated damages an award that he received in settlement a claim under Age Discrimination Employment Act 1967 (ADEA). After Commissioner issued deficiency notice, asserting should have been income, respondent initiated Tax proceedings, contesting ruling seeking refund for had paid on backpay. The agreed with entire constituted "damages . account personal injuries or sickness" within meaning § 104(a)(2) Internal Revenue Code was therefore excludable from income. Appeals affirmed. Held: Recovery ADEA is A taxpayer must meet two independent requirements before recovery may be excluded 104(a)(2): underlying cause action giving rise to "based upon tort type rights", "on sickness." Respondent has failed satisfy either requirement. Pp. ____. (a) No part respondent's 104(a)(2)'s plain language. back wages does critical requirement being of" any injury, no injury affected amount recovered. In addition, this explicitly held Trans World Airlines, Inc. v. Thurston, 469 111, 125, 105 613, 623-624, 83 523, Congress intended ADEA's punitive nature; thus, they serve compensatory function cannot described injuries." (b) There also basis excluding Commissioner's regulation interpreting 104(a)(2). Even if were correct based "tort rights" 26 CFR 1.104-1(c)'s meaning, substitute statutory sickness"; it additional ____-____. (c) Nor term construed Burke, where rejected argument taxpayer's pre-1991 Title VII Civil Rights 1964 Two elements distinguish VII—namely rights jury trial damages—are insufficient bring Burke's conception righ[t]," statute lacks primary characteristic such action: availability damages. Moreover, satisfaction type" inquiry eliminate need other excludability discussed herein. F.3d 1119 (CA5 1994), reversed. STEVENS, J., delivered opinion Court, which REHNQUIST, C.J., KENNEDY, GINSBURG, BREYER, JJ., joined. SCALIA, concurred judgment. O'CONNOR, filed dissenting opinion, THOMAS, joined, Part II SOUTER, Kent L. Jones, Washington, DC, petitioner. Thomas F. Joyce, Chicago, IL, respondents. Justice STEVENS Court. 1 question presented whether authorizes exclude 2 (respondent)1 former employee (United). Pursuant established policy, fired when reached age 60. then complaint Federal District alleging termination violated ADEA. 3 "broadly prohibits arbitrary discrimination workplace age." Lorillard Pons, 434 575, 577, 98 866, 868, 55 40 (1978); 120, 621, 523 (1985); see McKennon Nashville Banner Publishing Co., 513 ----, 115 879, 883-884, 130 852 (1995). Subject certain defenses, 29 U.S.C. 623(f) (1988 ed. Supp. V), §§ 4 12 make unlawful employer, inter alia, discharge individual between ages 70 "because individual's 623(a)(1) 631(a). incorporates many enforcement remedial mechanisms Fair Labor Standards (FLSA). Like FLSA, provides "such legal equitable relief appropriate effectuate purposes chapter." 626(b). That include "without limitation judgments compelling employment, reinstatement promotion." Ibid. More importantly purposes, FLSA provisions permit "of lost equal damages." 216(b). See generally McKennon, at S.Ct., 883-884. Despite these broad mechanisms, there are important constraints courts' power First, unlike specifically "liquidated shall payable only cases willful violations 626(b); U.S., 623. Second, Courts unanimously held, contest, separate pain suffering emotional distress.2 5 Respondent's consolidated class brought by employees challenging United's policy. claims tried jury, determined committed violation entered judgment plaintiffs, reversed appeal. Monroe Air Lines, Inc., 736 F.2d 394 (CA7 1984). parties into settlement, pursuant $145,629. Half attributed "backpay" half did withhold payroll taxes portion 6 When proceedings claiming properly sought settlement. Relying prior Circuit decision turn relied our 504 229, 112 1867, 119 34 (1992), Fifth Because inconsistent conclusions taxability recoveries general particular, compare Downey Commissioner, 33 836 1994) (United taxable) Schmitz 790 (CA9 excludable), we granted certiorari, 507, 415 (1994). Our consideration language 104(a), text implementing 104(a)(2), reasoning Burke convinces us 7 Section 61(a) definition "gross income": "Except otherwise provided subtitle, means all whatever source derived." 61(a). We repeatedly emphasized "sweeping scope" section its predecessors. Glenshaw Glass 348 426, 429, 75 473, 475, 99 L.Ed. 483 (1955). 233, 1870; Helvering Clifford, 309 331, 334, 60 554, 556, 84 788 (1940). corollary 61(a)'s construction, namely "default rule interpretation exclusions narrowly construed." 248, 1878 (SOUTER, concurring judgment); Centennial Savings Bank FSB, 499 573, 583, 111 1512, 1519, 113 608 (1991); Jacobson, 336 28, 49, 69 358, 369, 93 477 (1949); 244, 1875-1876 (SCALIA, judgment). 8 recognizes "sweeping" concedes constitutes unless expressly excepted another provision Code. claims, however, proceeds reach 104(a).3 104(a) exclusion five categories "compensation argues falls second those categories, excludes "the 9 view, undermines contention. Consideration typical case illustrates usual Assume automobile accident, injured, result suffers medical expenses, wages, pain, suffering, distress measured precision. If settles resulting lawsuit $30,000 (and previously deducted her 104(a)), would expenses arising out accident clearly constitute Similarly, compensate injury."4 Finally, injuries," long resulted time work injuries. See, e.g., Threlkeld 87 T.C. 1294, 1300, WL 22061 (1986) (hypothetical surgeon who loses finger through tortious conduct because "[t]his will undoubtedly special including loss future income"), aff'd, 848 81 (CA6 1988). point hypothetical each element recoverable simply rather satisfies set forth subsections 104(a)) 10 contrast, though first glance comparable victim's fall Whether one treats attaining laid off proximate neither birthday nor can fairly "personal injury" "sickness." caused some psychological "personal" intangible clear attributable injury. Thus, hypothetical, causes wages. discrimination, both linked other. recovered completely existence extent short, 11 suggests, nonetheless, fits comfortably exclusion. He cites observation Overnight Motor Transportation Co. Missel, 316 572, 62 1216, 86 1682 (1942), "are compensation, penalty punishment," might too obscure difficult proof estimate." Id., 583-584, 1223; Brooklyn O'Neil, 324 697, 707, 65 895, 902, 89 1296 (1945). presumed known incorporated FLSA's ADEA, serve, least part, plaintiffs quantify. agree injuries, well come are, weaknesses argument. even assume aware Court's authorized provide compensation "obscure" necessarily follow understood referring than economic. more importantly, argument: already concluded significant departure 581, 870; 126, 624, Thurston: "Congress nature." 624.5 13 holding Thurston disposes requires conclusion like sickness."6 III 14 seeks circumvent relying section. 1.104-1(c) Treasury Regulations, (1994), provides: 15 "Section [of Code] (whether suit agreement) sickness. 'damages agreement)' (other workmen's compensation) prosecution rights, agreement lieu prosecution." 16 contends recover terms used regulation, thus regulation. 17 accept characterization action, infra, __, regulatory Indeed, repeated As brief, "only (i) 'action rights' (ii) 'on sickness.' " Reply Brief Petitioner 2.7 decide authority dispense entirely requirement, she disclaims intent do so, belie disclaimer. reliance unpersuasive. IV 18 suggests compels excludable. payment version rested quoted above. For reasons, think foundation 19 Burke. examined scheme VII. Noting "Title allow awards damages," "instead, limits available remedies backpay, injunctions, relief," tort-like addressed 'legal economic character.' 238, 239, 1873, 1873. 20 points issue Burke: trial, 585, 872; cf. Lehman Nakshian, 453 156, 101 2698, 548 (1981); second, allows believe features sufficient righ[t]." It true, notes, lack right absence factors distinguishing traditional litigation, id., 238-240, 1872-1874. not, indicate presence coverage 21 gives attention what recognized "action rights": remedies. noted "one hallmarks liability range plaintiff 'fairly rights.' 235, 1871. continued: "Although often ., larger necessary reimburse actual monetary sustained anticipated plaintiff, redress deemed important, pecuniary [their] immediate consequence[s]." (internal quotation marks omitted). Against background, found "for harms associated distress, harm reputation, consequential 22 VII, injury." Monetary limited "economic character," damages, function. closer conclude rights." 23 narrower suggests. following framework IRS regulations, determination 234, 1870. so doing, hold beginning end analysis. VII's failure qualify intend basic amounts condition condition.8 24 sum, applicable establish demonstrate rights"; show reasons above, 25 ordered. 27 SCALIA concurs 28 whom THOMAS joins SOUTER respect II, dissenting. inflicts principles (ADEA) taxable Unless reads tangible (i.e., physical mental injuries)—a reading eight Members contradicted agency's reasonable administers—the inescapable damage 30 disputed petitioners elsewhere; lump sum periodic payments) ." What injuries" obvious history statute, since 1960 Service (IRS) regulations defined phrase reference principles: "The Fed.Reg. 11490 (1960); 31 At time, determining straightforward task. 1299, (1986), 1988), 15-1 decision, test follows: 32 Therefore, 'personal injuries' inquiry. To determine complained personal, look origin character consequences T.C., 1299. Threlkeld, invasion virtue person sight law." 1308. Under standard, surely "[D]iscrimination cognizable little doubt point." supra, 249, (O'CONNOR, dissenting). "racial fundamental person." Goodman Lukens Steel 482 656, 661, 107 2617, 2621, 96 572 (1987). Such offense dignity attaches regardless race, sex, age, suspect characteristics. Price Waterhouse Hopkins, 490 228, 265, 109 1775, 1798, 104 268 (1989) judgment) ("[W]hatever final outcome decisional process, inclusion race sex society individual"); EEOC Wyoming, 460 226, 231, 103 1054, (1983) (Age "inflict[s] workers accompanying opportunity engage productive satisfying occupations"). 1992, courts awarded Pistillo 912 145 1990); Rickel 900 655 (CA3 Redfield Insurance North America, 940 542 1991). 35 Things changed, supra. case, Appeals, violative infringes therefrom Agreeing violates nevertheless "recompense (e.g., ruined credit rating)." 36 I dissented fix seek enforce," 1878, remain view today. Dean Prosser presciently observed years ago "[t]he relation contract presents very confusing field, still process development, few made attempt chart path." W. Prosser, Law Torts 635 (3d 1964) (footnote Three decades later, despite path (or perhaps it), remedy sounds depends characterizations. Compare 790, 794 (ADEA "compensate victims prove"), 836, 840 "as name implies, party prove losses arise delay performance obligations—as remedy"). 37 today sidesteps difficulties laying down new per se rule: illegal "fairly injury' 'sickness.' Ante, justify conclusion, offers car crash, miss work. She able, circumstances, injuries.' By of' recovered." 38 This assumes wrong answer case: injury? Eight Justices 239-240, 1873; 247, 1877 Only disagreed, arguing instead "is health," 1875; employment without more, inflict deprivation, ibid. Whatever merits wisely advanced 10, 25, n. 15. 39 Although professes comprehends harms, ante, ____, 4, analysis contradicts premise. contrast due crash presumes relevant difference discrimination. But exists Those course, differ stigmatic victims, relevance 104(a)(2)—at adopt today, 4. redresses—like reputation business dignitary defamation, 234-235, 1870-71; id. judgment)—may always manifest themselves symptoms, less worthy states: "Whether assertion, key analysis, reconcilable recognition although "to acknowledge say harms." 6. logic hard follow. 41 overlooking defect precedents. deferred stated "discrimination could evidenced remedy." rights," (1991), entitle "victims race-based obtain 'both relief, and, awarded.' 240, 1873 (quoting Johnson Railway Express Agency, 421 454, 460, 95 1716, 1720, 44 295 (1975)). 42 Unlike aggrieved civil "shall entitled fact owing chapter," 626(c)(2) (emphasis added). limit grant panoply purposes" Act, 626(c)(1) added), addition emphasizes nature, emphasis relevance. Punitive traditionally tort. Dobbs, Remedies 118 (2d 1993) ("The against prevails breach contract] wilful malicious, tort"). characterized compensatory, form go beyond focus character,' Albemarle Paper Moody, 422 405, 418, 2362, 2372, 45 280 Plaintiffs then, "circumscribed VII," sue appears "other antidiscrimination statutes offering remedies" distinguished 241, 1874. 43 These distinctions prevailing avoid interpreted conclusively scope Both, according impose like, states showing contention untenable. makes deciding permits excluded. quoting introduced following: "Neither legislative explanation Since 1960, formally identification principles." 1.104-1(c), identified hallmark Every member opinion—that principles. 246-247, 1876-77 disagreed nonphysical 243-244, 1875 judgment), "descriptive ambit whole," 242, 1, 1874, 1. consistently establishing Rev.Rul. 85-98, 1985-2 Cum.Bull. 51. pressed O.T.1991, 91-42, pp. 22-23; affirmed after 93-88, 1993-2 61; below, Appellant 93-5555(CA5), p. 16; opening briefs us, 5, 16-17, 7. sentence reply brief expressed odds administrative rulings, agency practice, representations courts—a expands 46 accord deference light "differing interpretations own regulation," ignoring off-hand assertion wipe slate clean. formal taxpayers positions courts, one, their decisions. willing declare unreasonable, ignored. Lyng Payne, 476 926, 939, 106 2333, 2341, 90 921 (1986). asserts 'the Service's interpretive rulings force effect regulations,' Davis States, 495 472, 484, 110 2014, 2021, 457 (1990)). true; says nothing about give interpretations, fuller exposition precedent indicates level substantial. practices considerable weight involve contemporaneous construction use." (citations 47 "reads correctly case." statement past reasonable. Both reasonable; nature ambiguity. event, necessary, sufficient, purports interpret agreement)," unambiguous; plainly includes kinds damages—inflicted property person, tort, agreement. Read context, define overall concept ambiguity controversies over subtitled, "Damages sickness," reads: expansive statements futility received," sensibly read defining 48 rules "may overturn statute." 8. anything plain. "[n]either why promulgated linking slippery stops short declaring unreasonable; merely regulation's to, place of, But, besides room graft ambiguous phrase, imposing superfluous precondition basis. 49 respectfully dissent. syllabus prepared Reporter Decisions convenience reader. Detroit Lumber 200 321, 337, 282, 287, 50 499. husband joint return. Vazquez Eastern 579 (CA1 1978); Al Tech Specialties Corp., 731 143, 147 (CA2 1984); Rogers Exxon Research & Engineering 550 834 1977); Slatin Stanford Institute, 590 1292 (CA4 1979); American Security Ins. 559 1036 1977), cert. denied, 1066, 1243, 767 Hill Spiegel, 708 233 1983); Pfeiffer Essex Wire 682 684, 687-688 (CA7) 459 1039, 453, 74 606 (1982); Fiedler Indianhead Truck Line, 670 806 (CA8 1982); 1994); Perrell FinanceAmerica 726 654 (CA10 Goldstein Manhattan Industries, 758 1435, 1446 (CA11 1985). generally, H. Eglit, 18.19 (1982 Supp.1984); J. Kalet, 110-111 part: "Compensation sickness "(a) general.—Except excess of) deductions allowed 213 (relating medical, etc., expenses) year, — "(1) acts sickness; "(2) sums "(3) health insurance employee, (A) contributions employer includable (B) employer); "(4) pension, annuity, similar allowance active service armed forces country Coast Geodetic Survey Public Health Service, disability annuity 808 Foreign 1980; "(5) incurred direct violent attack Secretary State determines terrorist occurred while engaged official duties outside States." V). 1989, amended, adding, provision: "Paragraph (2) apply connection involving Though considered point, now encompasses harms. 6, 1872, 6; 3, 1876, (acknowledging sickness' injuries). find noteworthy arguments offered example, counter punitive," Equal Opportunity Commission (EEOC) argued ADEA—as —shows designed full primarily punish employer." O.T. 1984, Nos. 83-997 83-1325, 36. "Thus, focused fair him nonpecuniary readily calculable, humiliation self respect." 36-37. (relying ). nature" taken rejection exclusively) compensatory. recognize House Conference Report 1978 Amendments contains supports respondent. H.R.Conf.Rep. 95-950, 2d Sess. (1978) Cong. Admin. News 504, 528. However, evidence 37, persuasive. reason different now. much punitive. knew showed reckless disregard matter prohibited ADEA." 624 employer's knowledge unlawfulness determinative factor odd dissent's suggestion, post, course compensates arguably treated superseded sentence. 1875, unambiguously differing present litigating position deference. agree, case. recent revenue seems rely same urged 61. Ruling note regulations," 2022, (1990), see, Bartels Birmingham, 332 132, 67 1547, 1550-1551, 91 1947 (1947).

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