Court Opinion

ID: 9447528
Source: CourtListenerOpinion
Date Created: 2023-08-03 22:37:04.845935+00
Date Added: 2024-06-11T17:31:04.874651
License: Public Domain

LUMBARD, Chief Judge
(dissenting).
I would reverse the judgment because of the refusal of the trial judge to charge Request No. 17 which was designed to advise the jury that any sum awarded the plaintiff is not subject to tax.
The purpose of damages is to compensate the plaintiff for losses which he has suffered to the time of trial and may reasonably be expected to suffer in the future. The plaintiff is entitled to have the jury instructed as to every item of loss, which includes reasonable medical expenses, loss of earnings past and future and pain and suffering past and future. On the other hand, the defendant, who must pay the damages, is entitled to have the jury instructed in such wise that it will make its calculations in the light of a proper understanding of what the plaintiff should receive in order to make him whole. The plaintiff should receive no more than that at the defendant’s expense. The defendant is entitled to a charge which will direct the jury’s attention to every item and consideration which may substantially reduce the plaintiff’s loss so that the jury does not charge the defendant with a loss which the plaintiff would never have to suffer. Even handed justice requires nothing less than this.
As to Request 17, Judge FRIENDLY concedes that it would not be error to instruct the jury that the award is not taxable. Internal Revenue Code of 1954, § 104(a) (2); New York Tax Law § 359(2) (e). Even so Judge FRIENDLY says that it was not error to refuse the request inasmuch as there is nothing to show that this jury improperly gave weight to this factor.
Of course we seldom, if ever, know what factors jurors have considered in arriving at a verdict. It is hornbook law that courts will not inquire into what factors jurors have or have not considered, even mistakenly; nor will verdicts be set aside even if it be established that the jurors rendered a verdict for mistaken reasons. The best we can do is to face the realities and require the trial judge to charge upon those matters regarding which misinformation by any one juror might lead the jury to give improper weight to a factor which should not be considered at all. Whatever is to be done must be done before the jury *41returns its verdict as it cannot be done later.
In my opinion it is likely that many jurors, without such an instruction as 17, would believe that damage awards are taxable and would weigh this factor against the defendant. In the past few years the public press has carried many reports of large sums won on television quiz programs or in lotteries and sweepstakes. These accounts almost always point out that a very large percentage of the winnings must be paid to the government as income tax. It would be natural enough for the layman to conclude that the plaintiff’s receipts from the judgment would be taxed. The only way that the trial court can protect a defendant against a verdict, unduly inflated to take care of taxes in whole or in part, is to charge as requested in 17.
Request 17 is simple and is easily understood. It requires no calculation or computation. The request should have been granted; it was error for the court not to charge the jury that any sum awarded the plaintiff was not subject to taxes. I would grant a retrial and accordingly I pass to the consideration of Request 18 which I think should also be granted, where some basis for it has been presented. I agree that on the state of the record the trial judge properly refused the request 18 because the record does not show what, if any, income taxes were paid by the plaintiff or what would be paid on the plaintiff’s income at -the rate of $4,800 per annum. But as I would reverse for failure to charge 17, I would also direct upon a retrial that Request 18 should be granted if the defendant offers some evidence as to what taxes the plaintiff actually paid in the past, or what taxes would normally be paid by someone in the plaintiff’s situation, i. e. by a bachelor with no dependents.
The majority opinion rests principally on the ground that a jury needs to consider only a few factors in returning a verdict for damages in personal injury actions and these are listed as being “future normal earning power, expectancy, and discount factor.” The opinion then goes on to argue that in order for the jury to consider the income tax factor considerable additional evidence would be required at trial and the jury would be faced with complex computations and the evaluation of many unpredictable variables. I disagree.
In my view Judge FRIENDLY greatly overestimates the task which the jury would be called on to perform. As his own opinion points out, all that the defendant needed to do in this case was to take the rate of earnings of the plaintiff — $4,800 a year — and compute the taxes which a bachelor with no dependents would pay on the simple tax form, namely $773. The proposed instruction would merely require the jury to estimate loss of future income on the basis of McWeeney’s net income of approximately $4,000 rather than upon his gross income of $4,800.
It is beside the point to conjure up, as Judge FRIENDLY does, all the additional complicating factors which might arise. As to the plaintiff, McWeeney, a bachelor at 39, there is no evidence of any dependents or of any deductions or of any other income or of any possible change with respect to any of these items in the future. Indeed it would be the exceptional case where any evidence would or could be offered as to the future. All that the jury usually has before it in the great majority of accident cases, is a record of the plaintiff’s earnings for a few years and a record of the tax paid or withheld. As all considerations about the future can be nothing more than a guess, it is simply a matter of guessing the income variable after taxes instead of guessing the gross income before taxes.
' On the facts of this case one thing is certain and that is that McWeeney never has escaped and never could expect to escape the payment of income taxes on any money which he has earned or would earn in the future. He has not lost $4,800 in the three years between the injury and the trial as Judge FRIENDLY suggests when he uses the figure of $14,000. He has in reality lost *42only $12,000 and the jury ought to be instructed to consider only this actual loss.
It follows that the same measure must accompany and govern the jury’s speculation as to future income. Nothing can be more certain than that there will be a federal income tax in the years to come and that it will be substantially what it is now and what it has been for many years. Income taxes are now as much a part of what the prudent man must expect to suffer as are real estate taxes.
The three items of damage which Judge FRIENDLY lists are all speculative in their nature, but it would surely be unfair to omit any one of them merely for that reason. Future normal earning power, expectancy and the discount factor are all sheer speculation so far as applying them to any plaintiff is concerned. But they are the most reasonable measures we have about what is likely to occur in the future.
Life expectancy and the discount factor may also change, just as the tax rate may change. It does not seem to me to overburden the jury to ask it merely to subtract one figure from another to get net income, an operation which counsel can perform and which the court can repeat by way of illustration from what may be in the record.
We held recently in O’Connor v. United States, 1959, 269 F.2d 578, that a judge sitting without a jury in a Federal Tort Claims Act case must deduct income taxes in computing loss of future earnings. There is no reason why there should be a different rule for jury cases. Jurors are as sophisticated about income taxes as are judges; they are just as able to make an estimate of what the taxes would be on the future earnings which they are asked to find that the plaintiff would have made had it not been for the accident. Our earlier decision in Stokes v. United States, 2 Cir., 1944, 144 F.2d 82, 87, is not persuasive authority to the contrary. The question received only casual treatment in the briefs and was disposed of in one brief sentence by Judge Frank who said merely that “such deductions are too conjectural.” We are much more certain of the continuance of federal income taxes in 1960 than we were in 1944. In our own circuit Connecticut has recognized the charge as proper. Floyd v. Fruit Industries, 1957, 144 Conn. 659, 136 A.2d 918, 63 A.L.R.2d 1393. There is a full discussion by Morris and Nordstrom in Personal Injury Recoveries and the Federal Income Tax Law, 46 A.B.A.Journal 274, in which the authors develop the arguments in favor of giving charges such as 17 and 18. See also Harper & James, The Law of Torts, § 25.12.
Of course we are apt to talk glibly of the jury’s complex computations when we know full well that the give and take of the jury room is in round figures and does not deal in actuarial tables, decimal points and percentages. So in this case, Judge Weinfeld charged in general terms about discounting the money which the jury might award for future loss. His instructions really amounted to no more than saying that the amount awarded now should be considerably less than the multiplication of lost earnings by a certain number of years of expectancy.
Nor do any of the additional factors which Judge FRIENDLY throws into the scales merit serious consideration. His opinion says there are at least two factors which tend to reduce the actual values of verdicts given plaintiffs — inflation and the fact that the plaintiff must pay a reasonable percentage of the recovery to his attorney.
As to inflation, what tomorrow’s values will do with today’s dollar can hardly be argued to be more harmful to plaintiffs than to defendants. We can only deal in today’s dollar. On any other basis any trial would soon be out of hand with only the sky as the limit. Defendants too must live with inflation, be they railroads or individuals; indeed railroads seem to have even more difficulty with inflation than do individuals. A plaintiff receiving a large amount will invest the money in all likelihood in such a manner that he *43will have some protection against both inflation and deflation.
Judge FRIENDLY’S second suggestion is also a matter the consequence of which should not in fairness be visited upon a defendant under our present view that each party must pay his own attorney. It is true that contingent fees are the rule in these cases and plaintiffs consequently must forego a considerable percentage of the recovery. It is also true that a system which would charge the losing party with the real costs of litigation, including attorneys’ fees, has much to be said for it including the fact that under such a system fees would be more reasonable. But we should not excuse our failure properly to evaluate a major claim of future loss because of some factor for which the defendant is not responsible and over which he has no control.
In any event, Judge FRIENDLY concedes, as he must, that there may be cases involving plaintiffs of large potential earnings where failure to consider the income tax factor would produce an improper result. I submit that if the factor is relevant in any case it is relevant in every ease. It can hardly be seriously argued that an item of $773 over McWeeney’s life expectancy of 29 years, or about $22,000 before discount, is so insubstantial that a trial court may choose to disregard it.
In summary, it seems to me that it is manifestly unfair to a defendant to ignore the substantial item of income tax payments on future income. A minimum of 15% to 20% of an individual’s gross income is generally paid in income taxes. The percentage is often much higher. In most eases the factor of income tax payments on future earnings would be more subtantial than medical bills and other incidental expenses. It is grossly unfair to defendants to deny an instruction as to future income taxes when such instruction is requested and the record contains evidence as to taxes.
I would reverse and remand for a new trial with directions to charge 17 and 18 at the new trial.