Court Opinion

ID: 9739611
Source: CourtListenerOpinion
Date Created: 2023-08-26 20:18:26.168256+00
Date Added: 2024-06-11T07:24:12.130387
License: Public Domain

JUSTICE RYAN, dissenting: The opinion in this case creates an absurdity in the law which I am sure will cause the public to figuratively shake its head in bewilderment and to express disgust with the courts and the legal profession. If a person is injured in an accident involving the Federal Employers’ Liability Act, a jury must be told that the award is not subject to Federal income tax, whereas if the same person is injured in an accident covered by State law, a jury cannot be told that the award is not subject to the tax. The tax consequences are exactly the same in both situations. So, as a layman, Mr. Lawyer, I would ask you, please explain the reason for the difference in the treatment of these two claims. As a lawyer, Mr. Layman, I can only answer it is so because the Illinois Supreme Court said it is so. We may not agree with the holding of the United States Supreme Court in Norfolk & Western Ry. Co. v. Liepelt (1980), 444 U.S. 490, 62 L. Ed. 2d 689, 100 S. Ct. 755, but it is the law which must be followed in FELA cases whether tried in a Federal or a State court. We may prefer Justice Blackmun’s reasoning as stated in his dissent, quoted in the majority opinion, but that is not the law which must be followed. Further, in Gulf Offshore Co. v. Mobil Oil Corp. (1981), 453 U.S. 473, 486-87, 69 L. Ed. 2d 784, 796-97, 101 S. Ct. 2870, 2879-80, the Supreme Court noted that it had not limited the holding in Liepelt to FELA cases, but had articulated in that case a Federal common law rule applicable to all Federal claims. So as the law now stands in Illinois, if a Federal claim is being tried in the State court, evidence of the tax consequences may be introduced and the jury must be instructed that any award is not subject to Federal income tax, whereas if the claim being tried arises under State law, the jury may not be so instructed. If a case involves both a claim arising under Federal law and one arising under State law, the trial judge has the dubious pleasure of trying to rationally instruct the jury that as to the Federal claim, and the Federal claim only, the award is not subject to income tax. I can clearly visualize the look of bewilderment on the faces of the jurors. I have reviewed the laws of the other States concerning whether and in what manner income tax consequences should be taken into account in awarding compensatory damages. It is an understatement to say that the decisions vary widely. (See generally Annot. 16 A.L.R.4th 589 (1982 & 1984 Supp.).) Some States have excluded all evidence regarding income taxes and prohibited all mention thereof in both argument and jury instructions. (See, e.g., Richardson v. LaBuz (1984), 81 Pa. Commw. 436, 459-61, 474 A.2d 1181, 1196-97; Dehn v. Prouty (S.D. 1982), 321 N.W.2d 534, 538-39.) Other courts have drawn a distinction between the specific types of damages involved. For example, income taxes which would have been paid upon awards for past wages are readily ascertainable and are to be deducted from the lost gross earnings, while gross future earnings are recoverable without tax reductions because future tax rates, exemptions, deductions and related questions are deemed too speculative. (See, e.g., Yukon Equipment, Inc. v. Gordon (Alaska 1983), 660 P.2d 428, 433-35.) Other courts have distinguished between personal injury actions and wrongful death actions, reducing the amount of recovery by the amount of taxes in wrongful death actions, while permitting a gross income recovery in personal injury actions. (See generally Louissaint v. Hudson Waterways Corp. (1981), 111 Misc. 2d 122, 126-27, 443 N.Y.S.2d 678, 680-81, and cases there cited. See also In re Air Crash Disaster Near Chicago, Illinois on May 20, 1979 (7th Cir. 1983), 701 F.2d 1189, 1195-96.) At least one court has specifically determined that evidence of tax consequences should be excluded but that the jury should be instructed that any award will not be subject to taxes. (Domeracki v. Humble Oil & Refining Co. (3d Cir. 1971), 443 F.2d 1245, cert. denied (1971), 404 U.S. 883, 30 L. Ed. 2d 165, 92 S. Ct. 212.) Even before Liepelt, several jurisdictions permitted some consideration of the tax consequences in calculating damages. See, e.g., Mosley v. United States (4th Cir. 1976), 538 F.2d 555, 558-59 (applying North Carolina law); Tenore v. Nu Car Carriers, Inc. (1975), 67 N.J. 466, 484-95, 341 A.2d 613, 623-29; Turcotte v. Ford Motor Co. (1st Cir. 1974), 494 F.2d 173, 184-86 (applying Rhode Island law); Runyon v. District of Columbia (D.C. Cir. 1972), 463 F.2d 1319, 1322 (applying District of Columbia law); Abele v. Massi (Del. 1970), 273 A.2d 260, 260-61; Adams v. Deur (Iowa 1969), 173 N.W.2d 100, 105-06; Floyd v. Fruit Industries, Inc. (1957), 144 Conn. 659, 671-73, 136 A.2d 918, 925-26; Dempsey v. Thompson (1952), 363 Mo. 339, 344-46, 251 S.W.2d 42, 44-45. A clear majority of commentators favor the jury’s consideration of income tax consequences in determining the amount of compensatory damages, either by the introduction of appropriate evidence, an appropriate instruction, or both. See, e.g., D. Dobbs, Remedies sec. 8.8 (1973); 2 F. Harper & F. James, Torts sec. 25.12 (1956); Elligett, Income Tax Considerations in Florida Personal Injury Actions, 36 U. Miami L. Rev. 643 (1982); Dennis, Sirmon & Drinkwater, Wrongful Death Damages — Fair Compensation for Future Pecuniary Loss Requires Consideration of Economic Trends and Income Tax Consequences, 47 Miss. L.J. 173 (1976); Feldman, Personal Injury Awards: Should Tax-Exempt Status Be Ignored?, 7 Ariz. L. Rev. 272 (1966); Burns, A Compensation Award for Personal Injury or Wrongful Death Is Tax-Exempt: Should We Tell the Jury?, 14 DePaul L. Rev. 320 (1965); Nordstrom, Income Taxes and Personal Injury Awards, 19 Ohio St. L.J. 212 (1958); Comment, 38 Wash. & Lee L. Rev. 289 (1981); Note, 33 Ohio St. L.J. 972 (1972); Note, 50 Ky. L.J. 601 (1962); Comment, 26 Ford L. Rev. 98 (1957); Note, 4 U.C.L.A. L. Rev. 636 (1957); Note, 44 Ky. L.J. 384 (1956); Note, 9 Vand. L. Rev. 543 (1956); Comment, 11 Wash. & Lee L. Rev. 66 (1954); Note, 42 Geo. L.J. 149 (1953); Note, 32 Tex. L. Rev. 108 (1953); Contra, Franz, Should Income Taxes Be Included When Calculating Lost Earnings?, 18 Trial 53 (Oct. 1982); Kennelly, The Effect of Income Taxes Upon Earnings in Wrongful Death and Permanent Disability Cases — An Update, 25 Trial Law. Guide 77 (1981); Note, 1983 B.Y.U. L. Rev. 159 (1983); Note, 35 N. Car. L. Rev. 401 (1957); Comment, 42 Iowa L. Rev. 134 (1956); Note, 8 Ark. L. Rev. 174 (1953); Comment, 33 B.U. L. Rev. 114 (1953). There is nothing we can do about the law as announced in Liepelt. That decision must be followed in all cases involving Federal claims tried in State courts. The law would look a little less absurd to the man on the street if the same rule of law were applied to claims arising under State law. I therefore respectfully dissent. JUSTICE MORAN joins in this dissent.