Opinion ID: 484641
Heading Depth: 2
Heading Rank: 1

Heading: The Deduction for Future Income Taxes

Text: 71 With respect to the amount Woodling was entitled to recover as lost support, the trial court admitted evidence as to the likely amount of income tax for which Albert Woodling would be liable on his anticipated gross earnings and instructed the jury that it should deduct such likely income taxes from Albert Woodling's gross income in calculating the amount to which Woodling was entitled for lost support. The evidentiary ruling and the instruction were erroneous. 72 Preliminarily, we note that an action for wrongful death is one created by state law and that state law controls the correct measure of damages for such a claim. E.g., Feldman v. Allegheny Airlines, Inc., 524 F.2d 384, 386 (2d Cir.1975) (state law governs, inter alia, reduction for likely future taxes and the discount rate adjusted for inflation to be used in discounting damages to present value); Rhea v. Massey-Ferguson, Inc., 767 F.2d 266, 270 (6th Cir.1985) (state law governs entitlement to prejudgment interest); Jarvis v. Johnson, 668 F.2d 740, 745-46 (3d Cir.1982) (same), Spinosa v. International Harvester Co., 621 F.2d 1154, 1158 (1st Cir.1980) (state law governs effect of income tax on lost earnings); 1A Moore's Federal Practice p 0.310, at 3139 (2d ed. 1985). Here, New York law governs the issues of what factors the jury should take into account in awarding damages. 73 In Vasina v. Grumman Corp., a wrongful death action, we held that New York law does not allow evidence on the effect of taxes on lost income. 644 F.2d at 118. We see no persuasive reason why Vasina should be overruled. A ruling of one panel of this Circuit on an issue of state law normally will not be reconsidered by another panel absent a subsequent decision of a state court or of this Circuit tending to cast doubt on that ruling. See Lubbock Feed Lots, Inc. v. Iowa Beef Processors, Inc., 630 F.2d 250, 261 (5th Cir.1980); Lee v. Frozen Food Express, Inc., 592 F.2d 271, 272 (5th Cir.1979); cf. Kremer v. Chemical Construction Corp., 623 F.2d 786, 788 (2d Cir.1980) (on issues of federal law, one panel will not overrule another absent an intervening Supreme Court or Second Circuit decision that casts doubt on the validity of the first panel's decision), aff'd on other grounds, 456 U.S. 461, 102 S.Ct. 1883, 72 L.Ed.2d 262 (1982). Since Vasina, no decision of this Court has altered the rule established there, and two New York cases have accepted the proposition that taxes need not be deducted from lost income, see Sullivan v. Held, 81 A.D.2d 663, 665, 438 N.Y.S.2d 359, 361 (2d Dep't 1981); Louissaint v. Hudson Waterways Corp., 111 Misc.2d 122, 127-30, 443 N.Y.S.2d 678, 679-83 (Sup.Ct.N.Y.Co.1981), aff'd mem., 88 A.D.2d 1110, 452 N.Y.S.2d 472 (1st Dep't 1982). While we note that a contrary view was taken in Pellegrino v. State, 128 Misc.2d 757, 490 N.Y.S.2d 719, 720-21 (Ct.Cl.1985), aff'd on other issues, 121 A.D.2d 612, 503 N.Y.S.2d 865 (2d Dep't 1986), we regard this decision of a single trial judge of a court of limited jurisdiction as less persuasive than the decisions of the Appellate Division and New York Supreme Court in Sullivan and Louissaint. 74 In any event, we find no merit in defendants' argument that Vasina was wrongly decided because it read Coleman v. New York City Transit Authority, 37 N.Y.2d 137, 371 N.Y.S.2d 663, 332 N.E.2d 850 (1975), as barring not only jury instructions on the nontaxability of damages awards but also as barring evidence on the effect of taxes on lost income. Although the issue in Coleman was the instructions given to the jury, the Coleman court, in finding the instructions not erroneous, cited with approval a number of cases that addressed only the evidentiary issue, e.g., Petition of Marina Mercante Nicaraguense, S.A., 364 F.2d 118, 125-26 (2d Cir.1966), cert. denied, 385 U.S. 1005, 87 S.Ct. 710, 17 L.Ed.2d 544 (1967); McWeeney v. New York, N.H. & H. R.R. Co., 282 F.2d 34, 38-39 (2d Cir.), cert. denied, 364 U.S. 870, 81 S.Ct. 115, 5 L.Ed.2d 93 (1960). 75 In sum, we conclude that the district court erred in allowing evidence on the effect of income taxes on Albert Woodling's anticipated future earnings and in instructing the jury to take such taxes into account in assessing damages. 76 The jury's consideration of social security taxes is governed by the same principles. Although the trial court did not instruct the jury that it should deduct social security taxes, the court did permit the introduction of evidence as to such taxes, and it denied Woodling's request that the jury be instructed not to consider such taxes. This evidence should have been excluded and the jury should not have considered this factor. 77 There was substantial dispute at trial as to both what proportion of his earnings Albert Woodling would have been able to use as support for his family and what his income tax liabilities on his earnings would have been. Since there was no special interrogatory to the jury revealing the amount the jury deducted for taxes, we cannot determine the extent to which the jury's $750,000 award for lost support ($150,000 for past, $600,000 for future) was affected by the improper consideration of income or social security taxes. Thus, this facet of the damage claim must be retried. However, since the jury answered interrogatories that distinguished between the amounts awarded for lost support and those awarded for loss of services and loss of fatherly care and guidance, there need be no new trial as to the amounts recoverable for lost services, care, and guidance. See Martell v. Boardwalk Enterprises, Inc., 748 F.2d 740, 756 (2d Cir.1984).