Court Opinion

ID: 8924293
Source: CourtListenerOpinion
Date Created: 2022-11-27 06:32:57.309933+00
Date Added: 2024-06-11T17:09:21.780853
License: Public Domain

LAY, Chief Judge,
concurring,
Although I concur in the majority’s resu]tj j cannot agree with the reasoning behind thig court>s exchlsion of the tax consequences of piaintiffs’ investments in determining the measure of recovery. I would affírm the distr¡ct eourt>s refusai to consider past tax benefits realized by plaintiffs, but solely on the ground that Austin v. Loftsgaarden, 675 F.2d 168 (8th Cir. 1982), was wrongly decided.
In endorsing Austin and affirming the district court, the majority attempts to distinguish between the Securities Act of 1933 § 12, 15 U.S.C. § 771 (1982), and a section of the Minnesota Blue Sky Act, Minn.Stat. Ann. § 80A.23(1) (West Supp.1984). Both Acts contain identical language in relevant part allowing restitutionary recovery of: “consideration paid * * * less the amount of any income received * * *■” Id- By attempting to distinguish between the meaninS of the two Securities Acts, there could be noticeable confusion, particularly in those cases seekin& alternative recovery under both federal and state law' Ironica1' ^ the majority fails to notice that in interPretinS section 771 of the federal Securities Act the Austin court relied uP°n Minnesota.law and dted the Minnesota statute now sa'd to be distinguishable.
I would overrule Austin. Restitutionary or rescissionary damages seek to return the parties to the status quo. This can be achieved only where the wrongdoer is required to disgorge' all consideration received. In Austin the defendant was found guilty of fraud. Such a wrongdoer should not be allowed to benefit from the “collateral source” of an individual’s tax benefits. As Justice Blackmun stated in his dissenting opinion in Norfolk & West*442ern Ry. Co. v. Liepelt, 444 U.S. 490, 498-99, 100 S.Ct. 755, 759-60, 62 L.Ed.2d 689 (1980) (Blaekmun, J., dissenting): “In my view, by mandating an adjustment of the award by way of reduction for federal income taxes * * * the [cjourt appropriates for the tortfeasor a benefit * * This concern is even more paramount in a suit involving rescissionary damage. The taxpayer receives no unjust enrichment, for any tax benefit that he or she gained will be accounted for as recaptured depreciation under the Internal Revenue Code. This accounting, however, is between the government and the taxpayer; the defendant should receive no gain from the possible tax consequences resulting from the plaintiffs recovery.
I am confident the rule in Austin will create greater complications for litigants in actions seeking restitutionary damages. The Court in Norfolk & Western Ry. Co. v. Liepelt, 444 U.S. 490, 100 S.Ct. 755, 62 L.Ed.2d 689 (1980), intended to limit the inclusion of tax consequences in determining the amount of plaintiffs recovery to cases involving a lost earnings claim. To open the door beyond the limited holding in Norfolk & Western Ry. Co. turns the rule of rescissionary damages on its head. I would therefore affirm the district court, not on a meaningless distinction between Minnesota and federal law, but on the fundamental basis that tax law governing tax shelters is irrelevant to recoupment and restitutionary damages.