Court Opinion

ID: 9430939
Source: CourtListenerOpinion
Date Created: 2023-08-02 23:30:56.807832+00
Date Added: 2024-06-11T17:16:07.546417
License: Public Domain

Justice Powell,
with whom Justice Brennan, Justice Marshall, and Justice O’Connor join, dissenting.
Today the Court holds that personal injury awards may be treated as income for the purpose of determining whether a family is eligible for Aid to Families with Dependent Children (AFDC). Because such treatment is inconsistent with the compensatory nature of personal injury awards, and may work a substantial hardship on needy families that Congress intended to assist through the AFDC program, I dissent.
HH
Congress established the AFDC program, 42 U. S. C. §§601-615 (1982 ed. and Supp. Ill), to assist needy children and those who care for them. Shea v. Vialpando, 416 U. S. 251, 253 (1974). The AFDC statute provides that a family is eligible for AFDC benefits if its income and resources are not sufficient to maintain it at a subsistence level established by the State. The statute does not define either “income” or “resources.”1 Prior to 1981, excess income received in one month was counted as a resource in succeeding months. The Secretary of Health and Human Services (HHS) concluded that needy families receiving lump sums of nonrecurring income might spend the money as rapidly as possible to reduce their resources and regain eligibility for AFDC benefits. In 1981, Congress responded to the Secretary’s concern by amending the statute to provide that a family receiving ex*385cess income in one month is ineligible for AFDC benefits for the number of months that the excess income would support the family at a subsistence level. Omnibus Budget Reconciliation Act of 1981, 95 Stat. 845, 42 U. S. C. §602(a)(17) (1982 ed., Supp. III). Although the 1981 amendments changed the treatment of excess income, “neither the language of [the amendment] nor its legislative history indicates that Congress intended to change the meaning of ‘income’ in 1981.” Brief for Secretary of HHS 15. Accordingly, the Secretary advised the States to adhere to their existing definitions of income. 47 Fed. Reg. 5648, 5656 (1982).
Virginia responded to the 1981 amendments by promulgating a rule that payments for personal injuries must be counted as income in determining eligibility for AFDC benefits. Virginia Department of Social Services, ADC Manual (Va. ADC Manual) §305.4C (Jan. 1983), App. to Pet. for Cert. 71. Under the Virginia regulation at issue in this case, medical and legal expenses incurred prior to or within 30 days after the receipt of the award were not counted in income. The remainder of the personal injury award, “representing pain and suffering, loss of earning capacity, future medical expenses, and punitive damages,” was included in income. Brief for Petitioner 5, n. 5.2 The named re*386spondents, who had been entitled to AFDC benefits ranging from $181 to $255 per month, received personal injury or worker’s compensation awards of between $700 and about $10,250. App. 13-19; Brief for Respondents 3-5. As a result, the Virginia Department of Social Services ruled them ineligible for AFDC benefits for periods of from 2 months to 27 months. The respondents spent the awards primarily on basic living expenses, repayment of debts, and items such as used automobiles and appliances. App. 13-19. In each case, the families exhausted the modest awards long before they regained eligibility for AFDC benefits.
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The AFDC statute, as noted above, does not define “income.” “A fundamental canon of statutory construction is that, unless otherwise defined, words will be interpreted as taking their ordinary, contemporary, common meaning.” Perrin v. United States, 444 U. S. 37, 42 (1979). The plurality recognizes that income commonly is defined as “ ‘ “the gain derived from capital, from labor, or from both combined,” provided it be understood to include profit gained through a *387sale or conversion of capital assets Ante, at 375 (quoting Eisner v. Macomber, 252 U. S. 189, 207 (1920) (quoting Stratton’s Independence, Ltd. v. Howbert, 231 U. S. 399, 415 (1913); Doyle v. Mitchell Brothers Co., 247 U. S. 179, 185 (1918))). In light of Macomber, which held that stock dividends are not taxable income, the Solicitor of Internal Revenue concluded:
“If an individual is possessed of a personal right that is not assignable and not susceptible of any appraisal in relation to market values, and thereafter receives either damages or payment in compromise for an invasion of that right, it can not be held that he thereby derives any gain or profit. It is clear, therefore, that the Government can not tax him on any portion of the sum received.” 1-1 Cum. Bull. 93 (1922).
In a later tax case, the Court defined income as “accessions to wealth, clearly realized, and over which the taxpayers have complete dominion.” Commissioner v. Glenshaw Glass Co., 348 U. S. 426, 431 (1955). In Glenshaw Glass, the Court observed that “[d]amages for personal injury are by definition compensatory only,” id., at 432, n. 8, and cited “[t]he long history of departmental rulings holding personal injury recoveries nontaxable on the theory that they roughly correspond to a return of capital. . . ,” ibid, (citing 2 Cum. Bull. 71 (1920); 1-1 Cum. Bull. 92, 93 (1922); VII-2 Cum. Bull. 123 (1928); 1954-1 Cum. Bull. 179, 180).
Congress continues to exclude personal injury awards from income under the Internal Revenue Code. 26 U. S. C. § 104(a). Congress also excludes personal injury awards from income for the purpose of determining eligibility for food stamps, 7 U. S. C. § 2014(d)(8), and under the HHS poverty guidelines, 48 Fed. Reg. 7010, 7010-7011 (1983).3 In*388deed, the plurality does not cite a single statute in which Congress has defined income to include personal injury awards, and I am aware of none.
The plurality nevertheless concludes that Virginia reasonably interpreted the AFDC statute to include personal injury awards in income, even if such awards do not result in any gain to the recipient. Ante, at 375-376. The plurality observes that the Internal Revenue Code, the Food Stamp statute, and the HHS poverty guidelines expressly exclude personal injury awards from income. In the plurality’s view, “the fact that Congress was silent in the AFDC statute but has elsewhere been explicit when it wished to exclude personal injury awards from income tends to refute rather than support a legislative intent to exclude them from AFDC computations.” Ante, at 376 (citation omitted; footnote omitted). This inference from congressional silence is unwarranted. Congress made a considered decision to exclude personal injury awards from income for purposes of the Internal Revenue Code and the Food Stamp statute. In contrast, as the Court of Appeals for the Seventh Circuit observed, “The inescapable fact is that Congress wanted to compel recipients of AFDC to budget lump-sum receipts of ‘income’ but did not consider what ‘income’ might be.” Watkins v. Blinzinger, 789 F. 2d 474, 480 (1986).
*389The fact that Congress did not define income for purposes of the AFDC statute hardly justifies an assumption that it considered the narrower question whether personal injury awards should be included in income. On the contrary, if Congress had considered the question, it is reasonable to believe that it would have treated personal injury awards as it has in a variety of other circumstances and excluded them from income. Finally, as discussed below, the effect of including personal injury awards in income is to deprive AFDC families of the benefits of tort and worker’s compensation remedies, most of which are provided by state law. I would not infer from the silence of Congress a “purpose to override the States’ traditional power to define the measure of damages applicable to state-created causes of action.” Norfolk & Western R. Co. v. Liepelt, 444 U. S. 490, 500, n. 3 (1980) (Blackmun, J., dissenting).4
The plurality also concludes that personal injury awards “can reasonably be treated as gain.” Ante, at 374-375, and n. 2. To be sure, some components of personal injury awards do result in gain to the plaintiff. Punitive damages, in the exceptional case in which they are awarded, are a windfall to the plaintiff rather than compensation. See Commissioner v. Glenshaw Glass Co., supra (punitive damages are taxable income). As a practical matter, an impoverished family is unlikely to receive a large award for lost income. If it does, however, it is reasonable to treat such an award as income. See ante, at 375. I cannot agree, however, that it is reasonable to treat the entire personal injury award as income. Damages for pain and suffering, physical injury, dis*390figurement, loss of consortium, and the like are intended to compensate the recipient for nonpeeuniary losses. In other contexts, Congress excludes the full amount of personal injury awards from income, to avoid the necessity for “a complex and administratively burdensome system” or to “confer a humanitarian benefit on the victim or victims of the tort.” Norfolk & Western R. Co. v. Liepelt, supra, at 501 (Blackmun, J., dissenting).
The plurality recognizes the elementary fact that “a family with monthly pain-and-suffering-award income but with a family member in physical and emotional pain is not better off than the family without that additional income but also without that suffering.” Ante, at 382 (emphasis in original). The plurality nevertheless concludes that the AFDC program is not designed to take into account physical and emotional well-being. But tort law and workers’ compensation statutes are designed to take these into account. The AFDC statute surely is not designed to deprive impoverished families of remedies for personal injury, most of which are provided by state law. To be sure, “there is no argument for increasing AFDC payments above the normal limit where pain and suffering exists without a tortfeasor who is compensating it.” Ibid, (emphasis in original). By the same token, there is no argument for decreasing AFDC payments for families who are free of pain and suffering.5
*391During the period at issue in this case, the Virginia Department of Social Services also included in income moneys intended for continuing medical and rehabilitative expenses. See Brief for Petitioner 5, n. 5.6 Thus, the Virginia regulation put impoverished families to a hard choice between obtaining medical care and providing for the basic needs of their children. One of the named respondents, Ona Mae Reed, actually faced this choice: She could not afford to see a physician while her family was ineligible for AFDC benefits. App. 15. I cannot accept the Court’s conclusion that Congress intended to permit such a harsh result.
Ill
It is beyond dispute that “[Compensating for the noneco-nomic inequities of life is a task daunting in its complexity . . . .” Ante, at 382-383. As I view this case, however, the issue presented is relatively straightforward. Our legal system compensates individuals for personal injuries by awarding damages in tort actions and workers’ compensation proceedings. In a variety of circumstances, Congress has *392recognized that injured persons and their families should be permitted to retain the full amount of these awards, awards that for the most part are compensatory in nature. It is unjust, and inconsistent with the basic purposes of the AFDC statute, to deny needy families the compensation our legal system affords to the rest of society. Accordingly, I dissent.

 The AFDC statute provides that the States must exclude from resources the family home and one automobile worth up to $1,600. 42 U. S. C. § 602(a)(7)(B); 45 CFR § 233.20(a)(3)(i) (1986). The States also are required to disregard certain earnings of family members and relatives in determining income. 42 U. S. C. §§ 602(a)(8)(A), 602(a)(31). Congress provided no further guidance to the Secretary and the States in defining “income” and “resources.”

 Virginia subsequently modified its rule in response to a congressional amendment giving States the option of reducing the period of ineligibility to account for expenditures related to a lump-sum payment. Section 2632 of the Deficit Reduction Act of 1984, 98 Stat. 1141, 42 U. S. C. § 602(a)(17) (1982 ed., Supp. III). The State now provides that the period of ineligibility must be reduced to reflect future medical expenses. Va. ADC Manual §305.4C (Oct. 1984), App. to Pet. for Cert. 84.
In addition, the Secretary recently promulgated a rule requiring the States to treat personal injury awards as income. 45 CFR §233.20 (a)(3)(ii)(F) (1986). The plurality declines to consider the Secretary’s new rule. Ante, at 379, n. 5. It nevertheless concludes that Virginia’s decision to treat personal injury awards as income during the period at issue in this case was in accord with the Secretary’s prior interpretation *386of the AFDC statute, and so is entitled to deference. Ante, at 378-379. See Chevron U. S. A. Inc. v. Natural Resources Defense Council, Inc., 467 U. S. 837, 842-845 (1984). Prior to the passage of the 1981 amendments, however, the Secretary’s only comment on this subject was that “a settlement of industrial compensation as the result of loss of hand or foot might represent a ‘lump sum’ payment.” HHS Handbook of Public Assistance Administration, Part IV, S-3120, Supplement for Administrative Use (Sept. 6,1957), App. 58 (emphasis added). Moreover, as the plurality concedes, there is no evidence in the record that any State included personal injury awards in income prior to the 1981 amendments. Ante, at 378, n. 4. Based on this record, I conclude that the Secretary took no position on the treatment of personal injury awards prior to 1981.
Justice Blackmun would defer to the Secretary’s interpretation of the statute. Because I conclude that the Secretary’s interpretation is inconsistent with the statute, I do not think it is entitled to the customary deference.

 The plurality concludes that “[t]he explicit differences between the definition of ‘income’ in the Food Stamp program and the HHS poverty *388guidelines on the one hand and the AFDC statute on the other are simply too great” to allow a presumption that they share a common definition of income. Ante, at 377. It is true that “income” is defined to exclude all nonrecurring lump-sum payments for purposes of the Food Stamp program, 7 U. S. C. § 2014(d)(8), and that the HHS poverty guidelines exclude capital gains, gifts, and lump-sum inheritances, 48 Fed. Reg. 7010, 7011 (1983). It also is undisputed that lump-sum payments representing a gain to the family, such as retroactive Social Security payments, must be included in income under the AFDC program. But the decision to include some lump-sum gains under the AFDC program that are excluded under other poverty programs does not indicate that Congress also intended to include payments that do not represent a gain, and that Congress has not included in income under any program.

 The plurality asserts that this objection is “simply irrelevant,” ante, at 383, because Virginia officials chose to treat personal injury awards as income. But Congress could not know in advance whether the treatment of personal injury awards would be left to the States. Indeed, as noted above, the Secretary now requires the States to include personal injury awards in income. See n. 2, supra. In my view, the possibility that AFDC families would be deprived of state tort remedies is sufficient to preclude inclusion of personal injury awards in income.

 In my view, Virginia’s treatment of personal injury awards was inconsistent with the Secretary’s “equitable treatment regulation,” which states that “the eligibility conditions imposed must not exclude individuals or groups on an arbitrary or unreasonable basis, and must not result in inequitable treatment.” 45 CFR § 233.10(a)(1) (1986). During the period at issue in this case, Virginia treated money received as a result of a property loss as a resource rather than income. Va. ADC Manual §303.3 (Jan. 1983), App. 25. Thus, if an AFDC family received compensation for a damaged automobile it could spend the money as it wished, but if it received compensation for an injury to a family member, it was obliged to use the money to meet basic needs. The plurality concludes that casualty awards do not increase their recipients’ well-being, since they “merely re-*391stor[e] resources to previous levels.” Ante, at 381. Because personal injury awards are designed to compensate individuals rather than to increase their level of well-being, I conclude that it is unreasonable to treat personal injuries less favorably than property losses. Virginia’s treatment of awards for property losses also demonstrates that it failed to adhere consistently to a definition of income as “any money that comes in.” See ante, at 375.

 During this period, Virginia excluded from income only those amounts of the award used for medical care, rehabilitation, and legal services incurred prior to or within 30 days after the receipt of the award. See supra, at 385; Va. ADC Manual § 305.4C (Jan. 1983), App. to Pet. for Cert. 72. Petitioner concedes that “the amount of a lump sum personal injury award subject to the rule is that portion representing pain and suffering, loss of earning capacity, future medical expenses, and punitive damages.” Brief for Petitioner 5, n. 5 (emphasis added). As noted above, n. 2, supra, Virginia has amended its rules to provide that the period of ineligibility must be reduced to reflect medical expenses incurred subsequent to receipt of the lump sum. Va. ADC Manual § 305.4C (Oct. 1984), App. to Pet. for Cert. 84.