Opinion ID: 1890354
Heading Depth: 2
Heading Rank: 2

Heading: Damages for Future Lost Wages

Text: The proper measure of damages in a FELA claim is a federal question. [35] Damages for future lost wages in FELA claims are exempt from taxation. [36] They are measured in after-tax dollars [37] and reduced ( i.e., discounted) to present value. [38]
CSX asserts that the trial court committed reversible error by refusing to instruct the jury as follows: In the event that you determine to award the plaintiff a sum of money, you are instructed that the award is not subject to any deductions for federal or state income taxes. CSX relies on Norfolk & Western Ry. Co. v. Liepelt [39] for the principle that refusing to instruct the jury concerning the exemption from state and federal income tax [40] constitutes reversible error. Although we agree that the trial court erred by failing to give the requested instruction, we do not agree that the error compels us to reverse in this case. As we determined today in CSX Transportation, Inc. v. Begley, 313 S.W.3d 52 (Ky.2010), Liepelt does not require a conclusion that a refusal to give a tax instruction always constitutes reversible error. [41] Begley acknowledges that CR 61.01 presumes erroneous jury instructions to be prejudicial and places the burden on the appellee to show a lack of prejudice. It notes, however, that the error may be viewed as being harmless if the result probably would have been the same absent the error and if the error was not so prejudicial as to merit a new trial. In Begley we viewed a verdict that was not excessive under the evidence as showing a probable lack of prejudice. [42] A verdict is excessive under the evidence if it cause[s] the mind at first blush to conclude that it was returned under the influence of passion or prejudice on the part of the jury. [43] Even if liberal, an award that does not shock the conscience or is not clearly excessive may not be set aside. [44] The award in the present case was not clearly excessive under the evidence. The jury awarded a total of $2,540,000 in damages for future wage loss and past and future pain and suffering, which was slightly more than half of the $5,000,000 that Moody requested. Moody was 51 years old when the trial was held in 2003. Although he testified that he had intended to retire when he reached age 60, experience teaches us that circumstances change and that individuals often work to a later age than they had hoped to work at age 51. Moody testified that he had experienced memory loss and depression since the early 1980s and began to experience anxiety attacks sometime later. [45] Medical evidence indicated that he suffered from chronic toxic encephalopathy, a condition that could be treated but not cured; that the condition produced neuropsychological impairment, particularly affecting his memory, the ability to concentrate, and problem-solving skills; that it also produced depression, anxiety, and irritability, which were often disabling and apt to worsen over time; and that the difficulty he would have following instructions and finding jobsites rendered him incapable of employment. We affirm because we are convinced that the verdict was reasonable and was not returned under the influence of passion or prejudice. The record indicates that the jury probably determined what amount would compensate Moody reasonably and did not inflate that amount in the mistaken belief that it would be taxed.
CSX asserts that the trial court committed reversible error by refusing to instruct the jury to calculate Moody's lost after-tax earnings. An alternative argument relies on Reusch v. Seaboard System R. R. [46] for the proposition that Moody had the burden to prove his after-tax earnings in order to permit his future wage loss to be calculated and failed to meet that burden. We disagree. Filed on June 27, 2003, Moody's itemized damage list stated that he earned approximately $67,000 per year plus approximately $14,000 in travel pay; thus, he would lose approximately $6,700 per month due to his inability to work. He testified at trial that he made $4,500 per month and intended to retire from CSX at age 60. He did not specify whether the $4,500 figure represented his gross or after-tax earnings. CSX failed to cross-examine him and, unlike the defendant in Liepelt , [47] offered no evidence of its own concerning taxes. When denying the tendered instruction the trial court noted and CSX conceded the impossibility of determining that $4,500 was not Moody's after-tax earnings. Moody questioned what tax rates the jury would apply if the $4,500 per month was reduced for taxes. [48] The trial court did not err by refusing the requested after-tax instruction because, even if we were to assume for the purposes of discussion that Moody's gross monthly earnings were $4,500, the jury had no evidence from which to calculate his after-tax earnings. An instruction to reduce future lost earnings by the applicable taxes requires evidence of what the taxes would be or evidence to permit the jury to calculate taxes. Liepelt did not address which party is responsible for showing the applicable tax rates. Federal appellate courts that have addressed the matter since the Liepelt decision have concluded that the defendant is responsible. [49] We agree.
CSX tendered the following instruction on present value: If you should find that the plaintiff is entitled to a verdict, and further find that the evidence in this case establishes either: (1) a reasonable likelihood of future medical expense, or (2) a reasonable likelihood of loss of future earnings, then it becomes the duty of the jury to ascertain the present worth in dollars of such future damages, since the award of future damages necessarily requires that payment be made now for a loss that will not actually be sustained until some future date. Under these circumstances, the result is that the plaintiff will in effect be reimbursed in advance for the loss, and so will have the use of money, which he would not have received until some future date, but for the verdict. In order to make a reasonable adjustment for the present use, interest free, of money representing a lump-sum payment of anticipated future loss, the law requires that the jury discount or reduce to its present worth, the amount of the anticipated future loss, by taking (1) the interest rate or return which the plaintiff could reasonably be expected to receive on an investment of the lump-sum payment, together with (2) the period of time over which the future loss is reasonably certain to be sustained; and then reduce, or in effect deduct from, the total amount of anticipated future loss whatever that amount would be reasonably certain to earn or return, if invested at such rate of interest over such future period of time; and include in the verdict an award for only the present-worththe reduced amountof anticipated loss. CSX asserts that the plaintiff in a FELA action has the burden to prove the present value of future lost wages. [50] Relying on Jones & Laughlin Steel Corporation v. Pfeifer [51] CSX also asserts that the trial court committed reversible error in this case by refusing to instruct the jury that damages for future wage loss must be reduced to present value. We disagree. The Sixth Circuit has rejected arguments by railroads that damages for future wage loss are prohibited absent proof of a discount rate. In other words, the plaintiff is not required to produce evidence concerning the present value of future lost wages [52] in order to be entitled to damages for future wage loss. We adhere to the Sixth Circuit's view. The U.S. Supreme Court determined in Kelly [53] that federal law requires future damages to be reduced to present value but considered the evidence admitted to assist the jury in making the computation to be a matter of procedure and evidence... to be determined according to the law of the forum. In Pfeifer , [54] a Jones Act case, the court acknowledged that because the lost stream [of earnings] can never be predicted with complete confidence, any lump sum represents only a `rough and ready' effort to put the plaintiff in the position he would have been in had he not been injured. [55] The court explained that the calculation of damages resulting from an injury begins with the assumption that the plaintiff would have continued to work until retirement. The calculation then attempts to compensate for the stream of income lost due to the injury, which depending on the proof may include not only present wages but fringe benefits as well as anticipated future wage increases due to inflation or cost-of-living adjustments, likely promotions, seniority, and merit raises. [56] In order to compensate only for the plaintiffs actual pecuniary loss, the calculation must account for the fact that most or all of the items in the earnings stream would be subject to income tax. [57] Likewise, the calculation must account for the fact that the plaintiff will receive the award in a lump sum rather than in periodic payments. That is accomplished by discounting the lump sum at a rate that is based not only on the return from investing the sum in the best and safest investments but also on the extent to which that return is likely to be offset by taxes and inflation. [58] The Pfeifer court refused to specify a mandatory formula for choosing the discount rate but rejected the application of a state's total offset rule as a matter of law, stating that the trier of fact must make a deliberate choice. [59] The court noted, however, that nothing would prevent parties interested in controlling litigation costs from stipulating to the total offset method before trial. [60] The trial court did not err in refusing CSX's present value instruction. It mentioned only some relevant factors and was not supported by any evidence. Pfeifer makes it clear that an appropriate discount rate considers three factors: the interest likely to be earned on the best and safest investments; the applicable tax rate on the interest; and the extent to which inflation would be likely to reduce the return further. Neither Pfeifer nor St. Louis Southwestern Railway Co. v. Dickerson [61] or Monessen Southwestern Railway Company v. Morgan, [62] both of which applied Pfeifer to FELA claims, addressed the evidentiary foundation necessary to require an instruction directing the jury to discount future wage loss damages. Neither party introduced evidence concerning any of the factors comprising a discount rate in the present case or indicating that the interest likely to be earned would exceed taxes and inflation. Thus, no evidentiary basis existed to support an instruction that referred specifically to any of the factors. The trial court's Instruction No. 7 and Verdict Form No. 4 directed the jury to determine from the evidence a sum of money that will fairly and reasonably compensate Troy Moody for future lost wages. As the Sixth Circuit has observed: Jurors are presumed to be intelligent people, generally aware, from today's economy and their own experience with it, of the earning value of money when placed in safe investments. [63] Jurors are also aware from their own experience that interest is taxed and that inflation reduces the value of money. The trial court could have said more on the subject than it did, but the instructions were adequate under the circumstances.
We affirm with respect to future medical expenses. Although Moody's cross-motion sought discretionary review of the Court of Appeals' decision to vacate his award of future medical expenses, he failed to address the matter in his brief to this court. We conclude for that reason that he has abandoned the issue. The decision of the Court of Appeals is affirmed. All sitting. All concur.