Greer v. United States

RECOMMENDED FOR FULL-TEXT PUBLICATION

Pursuant to Sixth Circuit Rule 206

ELECTRONIC CITATION: 2000 FED App. 0099P (6th Cir.)

File Name: 00a0099p.06

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

_________________

;



DANIEL C. GREER,



Plaintiff-Appellee,





No. 98-6593

v.



>

UNITED STATES OF AMERICA, 

Defendant-Appellant. 

1

Appeal from the United States District Court

for the Eastern District of Kentucky at Ashland.

No. 96-00117—Henry R. Wilhoit, Jr., Chief District Judge.

Argued: August 6, 1999

Decided and Filed: March 22, 2000

Before: JONES, SILER, and GILMAN, Circuit Judges.

_________________

COUNSEL

ARGUED: Kenneth W. Rosenberg, U.S. DEPARTMENT

OF JUSTICE, APPELLATE SECTION TAX DIVISION,

Washington, D.C., for Appellant. Patrick F. Nash, Lexington,

Kentucky, for Appellee. ON BRIEF: Kenneth W.

Rosenberg, U.S. DEPARTMENT OF JUSTICE,

APPELLATE SECTION TAX DIVISION, Washington, D.C.,

for Appellant. Patrick F. Nash, Lexington, Kentucky, for

Appellee.

1

2 Greer v. United States No. 98-6593

_________________

OPINION

_________________

NATHANIEL R. JONES, Circuit Judge. The United States

appeals the district court’s grant of summary judgment in

favor of plaintiff-appellee Daniel C. Greer (“Greer”) in his

suit to recover monies that were withheld from him for tax

purposes when he was terminated by his employer. For the

reasons that follow, we REVERSE and REMAND for

proceedings consistent with this opinion.

I.

Greer worked for Ashland Oil, Inc. (“AOI”) from 1969

until his termination in July 1993. During his years of

employment with AOI, Greer held a variety of positions,

including executive assistant to the executive vice president

and executive assistant to the president. In 1988, he served as

AOI’s environmental compliance director. Although Greer

regularly received positive performance reviews during his

twenty-four years at AOI, he was fired in July 1993.

Greer and AOI dispute the company’s motivations for his

firing. According to Greer, the circumstances of his firing

were highly suspicious. As environmental compliance

director, Greer was required to perform environmental

compliance audits of AOI’s petroleum operations. Greer held

this position for two- and one-half years, and he visited and

audited approximately 120 sites. Greer claims he uncovered

and documented violations of environmental regulations at

AOI refineries. According to Greer, AOI executives feared

that his reports might be released to enforcement authorities

at a time when AOI was already under their close scrutiny.

In 1991, AOI removed Greer from the environmental

compliance department and appointed him director of cost

management. Despite the fact that he had no computer

programming experience, Greer was assigned the task of

creating a complex computer program. After Greer

No. 98-6593 Greer v. United States 3

completed the project, he was given little to do for several

months. Eventually, AOI’s human resources department

informed Greer that his position was being eliminated. Even

though Greer claims to have “begged to do anything else in

the company,”1 he was dismissed and told that he simply

“didn’t fit in.” Greer appealed his dismissal all the way to

AOI’s chairman of the board.

Given the events leading to his abrupt termination, Greer

believes AOI terminated him because he had too thoroughly

identified and documented AOI violations of environmental

regulations. When Greer learned that his termination was

final, he told AOI representatives, “I will seek whatever

remedies are available to me to protect myself in whatever

way I can.” However, Greer never explicitly threatened AOI

with a wrongful termination lawsuit, nor did he sue AOI. In

fact, Greer admitted in his deposition that he “didn’t have the

foggiest idea” what his legal rights were at that time.

Shortly after notifying Greer of his impending termination,

AOI proposed a compensation package to Greer. After

consulting with his attorney, Greer signed the proposed

agreement on his last day at AOI. AOI’s normal severance

policy was to grant one week’s salary for each year of service.

In Greer’s case, a normal severance package would have

totaled $51,000. However, AOI and Greer agreed that AOI

would pay Greer $331,968 in exchange for Greer’s

surrendering all claims against AOI. Specifically, by

accepting the offered compensation, Greer signed a document

titled “Severance Agreement and Release” (“the agreement”)

which waived:

any and all claims, rights, and causes of action [against

AOI] of all nature, which may have arisen, or which may

arise, known or unknown, out of any events or actions

occurring before the date of his execution of this release,

including, but not limited to, his employment, the

1

AOI officials claim that Greer never requested a transfer to another

position after his position was eliminated.

4 Greer v. United States No. 98-6593 No. 98-6593 Greer v. United States 21

termination of his employment, or any prior agreements that punitive damages are not “on account” of personal

between the parties, and expressly including, without injuries or sickness); Burke, 504 U.S. at 238-39 (holding that

limitation, as claims to be released, any claims of remedies such as backpay and frontpay are not excludible).

wrongful discharge, or any claims related to acts or

omissions of the Company involving him, or of For this reason, although we agree that the payment was

discrimination under any federal, state or local law, rule made in lieu of Greer’s tort claim, we believe the district

or regulation. Examples of such federal, state or local court acted too hastily when it granted summary judgment in

law, rule or regulation regarding discrimination include, Greer’s favor. Because a crucial issue remains in dispute, a

but are not limited to, any claims arising under Title VII trial may be necessary. Greer faces the burden of showing the

of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et court either that AOI made the entire “bonus” payment on

seq., or any claims arising under the Age Discrimination account of his personal injuries, or presenting evidence which

in Employment Act, 29 U.S.C. § 621 et seq. This would allow the court to determine that a distinct portion of

release is for any relief, no matter how denominated, the payment was made on account of personal injuries.

including but not limited to wages, back pay, front pay,

compensatory damages, or punitive damages. IV.

J.A. at 116 (emphasis added). In his deposition, Randy We find that the district court correctly concluded that the

Lohoff (“Lohoff”), AOI’s vice president of human resources, $280,968 payment above and beyond AOI’s standard $51,000

testified that it is AOI policy to include this general waiver severance payment was in lieu of Greer’s tort claim. At the

whenever it grants an employee an increase in the normal same time, a genuine issue remains as to whether that

severance pay. payment was made “on account” of personal injuries. For this

reason, we believe the district court must determine if the

AOI’s standard practice is to withhold taxes from every payment was indeed “on account” of Greer’s claimed

settlement amount it pays. The company applied that policy personal injuries, making the amount paid excludible under

to Greer’s case and withheld $108,873 from the compensation the Code. Pursuant to III.D.1.c of this opinion, the district

package for federal income tax purposes. On June 25, 1996, court may apportion between the excludible and non-

Greer filed for a refund in the district court pursuant to 26 excludible amounts of the payment if the evidence allows for

U.S.C. § 104(a)(2), seeking to recover the amount of his such a fine-tuned determination. We therefore REVERSE

compensation package that was withheld for taxes. the district court’s holding, and REMAND for proceedings

consistent with this opinion.

After depositions were taken of Greer and Lohoff, both the

Government and Greer filed motions for summary judgment.

Greer argued that the funds he received from AOI constituted

the settlement of his potential wrongful discharge claim. He

asserted that the circumstances of his termination diminished

his personal and professional reputation, and inflicted stress,

humiliation, mental anguish, self doubt and emotional pain.

Because they were part of the settlement of this potential

claim, Greer argued, the funds he received under the

agreement could not be taxed. The Government countered

20 Greer v. United States No. 98-6593 No. 98-6593 Greer v. United States 5

d. that the extra compensation from the agreement covered both

the release of all potential claims as well as consideration of

In sum, we find the following factual showings made by his past service. Because the funds paid to Greer comprised

Greer to be undisputed: Greer had a bona fide tort-based non-excludible compensation, the full amount could be taxed.

claim against AOI for wrongful discharge; the claim existed

at the time the agreement was reached; and the claim On September 22, 1998, the district court filed an

encompassed personal injury. Other undisputed unpublished opinion granting Greer’s motion for summary

facts—primarily the exorbitant amount paid to Greer relative judgment and denying the Government’s motion. The district

to a standard AOI severance package and the evidentiary court determined that the compensation package constituted

showing that AOI officials were aware of Greer’s potential a nontaxable personal injury tort settlement. Specifically, the

claim—establish that the agreement constituted a settlement district court concluded that $280,968 was nontaxable and

in lieu of prosecution of that claim. that approximately $51,000 of the agreement constituted

normal severance pay that could be taxed as income.

2.

The Government filed this timely appeal. Greer does not

Despite the strength of his evidence that the payment was contest the finding that $51,000 was taxable income.

made in lieu of his tort claim, Greer has failed to surpass the

second factual hurdle to gain exclusion under II.

§ 104(a)(2)—that the payment was “on account of personal

injuries or sickness.” Schleier, 515 U.S. at 330. As stated This court will review a grant of summary judgment de

supra, there is no doubt that Greer’s tort claim may have novo. See Terry Barr Sales Agency, Inc. v. All-Lock Co., 96

encompassed personal injuries. “Personal injuries” include F.3d 174, 178 (6th Cir. 1996). Summary judgment is

nonphysical injuries, “such as those affecting emotions, appropriate where there exists no genuine issue of material

reputation, or character,” Burke, 504 U.S. at 235 n.6, and can fact and the moving party is entitled to summary judgment as

include “intangible as well as tangible harms.” Schleier, 515 a matter of law. See id. (citing Fed. R. Civ. P. 56(c)).

U.S. at 329 & n.4. Emotional distress, mental pain and Although both parties below stipulated that there were no

suffering, and injury to personal and professional reputation disputes over any material facts in the case, and each

also constitute personal injuries for exclusion purposes. See submitted motions for summary judgment, that fact “does not

supra. These are precisely the types of injury that Greer now require [us] to rule that no fact issue exists.” Cherokee

claims his wrongful discharge rendered: damage to his Insurance Co. v. E.W. Blanch Co., 66 F.3d 117, 123 n.4 (6th

personal and professional reputation, as well as distress, Cir. 1995) (quoting Begnaud v. White, 170 F.2d 323, 327 (6th

humiliation, and mental anguish. However, Greer has not Cir. 1948)). Indeed, “summary judgment in favor of either

presented concrete evidence demonstrating the precise causal party is not proper if disputes remain as to material facts.”

connection between such personal injuries and AOI’s Taft Broadcasting Co. v. United States, 929 F.2d 240, 248

payment to him, a showing Schleier requires before a court (6th Cir. 1991). At the same time, “cross motions for

can render a settlement payment excludible. For example, summary judgment do authorize the court to assume that there

AOI may have intended portions of the payment to have been is no evidence which needs to be considered other than that

on account of lost wages, lost future earnings, or punitive which has been filed by the parties.” Harrison Western

damages, none of which are excludible under § 104(a)(2). Corp. v. Gulf Oil Co., 662 F.2d 690, 692 (10th Cir. 1981).

See O’Gilvie v. United States, 519 U.S. 79, 83 (1996) (stating

6 Greer v. United States No. 98-6593 No. 98-6593 Greer v. United States 19

III. AOI was aware of the potential for such a claim. This clear

evidence distinguishes this case from Pipitone and Taggi and

Under § 61(a) of the Internal Revenue Code taxpayers are renders the lower court’s apportionment of the payment

liable for all gross income, meaning “all income from proper.

whatever source derived . . . .” 26 U.S.C. § 61(a) (1994). As

the Supreme Court has oft repeated, this section is to be Finally, to the extent that Taggi and Pipitone stand for the

construed liberally “in recognition of the intention of proposition that courts can never engage in apportionment—a

Congress to tax all gains except those specifically exempted.” stance the Government takes—we disagree with that

Commissioner v. Glenshaw Glass Co., 348 U.S. 426, 430 conclusion. Such a hard-and-fast rule not only stands on

(1955). Thus, there is no dispute that the compensation paid weak legal ground,6 but would defy the established

to Greer under the agreement falls well within the broad framework of scrutinizing the totality of the circumstances to

sweep of § 61(a) unless it is specifically excluded elsewhere determine the intent of the payor whenever a written

in the Code. See Commissioner v. Schleier, 515 U.S. 323, severence/settlement agreement is not clear as to its purpose.

328 (1995) (concluding that the taxpayer’s settlement If in undertaking this inquiry, a court finds the evidence to be

agreement “constitutes gross income unless it is expressly sufficiently clear that it can determine that a specific amount

excepted by another provision”); United States v. Burke, 504 was paid for settlement purposes under Schleier, we see no

U.S. 229, 233 (1992) (“There is no dispute that the settlement reason why a court should not set that amount aside as

awards in this case would constitute gross income within the excludible. Indeed, we believe this is what the relevant

reach of § 61(a).”). Exclusions to § 61(a) are narrowly precedent requires. Of course, outside of an explicit

construed, see Schleier, 515 U.S. at 328; Commissioner v. apportionment, evidence will rarely be clear enough to allow

Jacobson, 336 U.S. 28, 49 (1949), and the taxpayer bears the for such a determination. Nonetheless, we find this to be that

burden of proving the amount he is entitled to recover. See rare case where it is.

United States v. Janis, 428 U.S. 433, 440 (1976).

Greer claims that most of the compensation at issue should 6

be excluded because it falls within § 104(a)(2) of the Code, Taggi cited a 1985 Minnesota district court decision in support of

which excludes from gross income any “damages received its statement that the court “was not in a position to apportion the

payment among the various possible claims.” 35 F.3d at 96 (quoting

(whether by suit or agreement and whether as lump sums or Villaume v. United States, 616 F. Supp. 185, 190 (D. Minn, 1985)), and

as periodic payments) on account of personal injuries or also cited several Tax Court cases. See, e.g., Whitehead v. Commissioner,

sickness.” 26 U.S.C. § 104(a)(2). The Supreme Court in 49 T.C.M. (P.H.) ¶ 80,508 (1980). These cases all look back to a 1979

Schleier set forth a two-prong test that must be met for Tax Court decision, Gunderson v. Commissioner., 48 T.C.M. (P.H.)

compensation to fall within § 104(a): exclusion is warranted ¶ 79,099 (1979). But Gunderson never enunciated a rule against non-

apportionment. Instead, the Gunderson Court only held that based on the

only when an amount is received (1) through the prosecution facts of the case before it, there was no evidence that the payor intended

of an action or the settlement entered into in lieu of the lump sum payment to the employee to be anything but to settle

prosecution of an action based upon tort or tort-type rights; contractually based rights. See Gunderson, 1979 T.C.M. (P.H.), at 79-

and (2) the amount is paid on account of personal injuries or 435 (“[T]here is [no] factual basis in the record upon which we could

sickness. See 515 U.S. at 337; Gerbec v. United States, 164 make an allocation of the settlement to any specific claims that petitioner

might have asserted against [his employer].”). Thus, it appears that later

cases such as Whitehead converted Gunderson’s fact-based conclusion

into an ironclad rule of law, and cases like Taggi propounded

Whitehead’s mistake. Moreover, none of these “non-apportionment”

decisions articulated any reason for such a rigid non-apportionment rule.

18 Greer v. United States No. 98-6593 No. 98-6593 Greer v. United States 7

I guess I’d have to refer to the agreement itself and it F.3d 1015, 1025 (6th Cir. 1999) (citing Schleier).2 This two-

would -- it’s provided because of the promises made and part test tightly packs a number of discrete elements. Due to

accepted between Mr. Greer and Ashland as stated in the the complexity of this case, we find it useful to disaggregate

severance agreement and release as to why the payments the test into its disparate elements. To satisfy Schleier, the

were made . . . . I think the document speaks for itself. taxpayer must show that 1) there was an underlying claim

sounding in tort; (2) the claim existed at the time of the

J.A. at 105. settlement; (3) the claim encompassed personal injuries; and

(4) the agreement was executed “in lieu” of the prosecution of

In short, although Lohoff’s testimony creates an issue of the tort claim and “on account of” the personal injury,

fact as to whether he personally knew of the full set of rendering it a settlement rather than a mere severance

circumstances regarding Greer’s termination, his testimony agreement. By requiring each of these elements, courts can

does nothing to counter Greer’s showing that other AOI effectively distinguish between severance and settlement

officials—and most critically, Thomas—were aware of the agreements and prevent parties from “creating contrived

background circumstances leading to Greer’s ultimate ‘settlement agreements’ to avoid taxation of [severance]

termination. Because cross motions for summary judgment proceeds.” Lubart v. Commissioner, 154 F.3d 539, 542 (5th

allow a reviewing court to assume that there is no additional Cir. 1998).

evidence to be considered, we find that there is no issue of

fact regarding Greer’s showing that AOI was aware of his tort The Government argues that the agreement between Greer

claim. and AOI lacks several of these elements and thus constitutes

a fully taxable severance package under § 61(a). We disagree,

c. concluding that the agreement and the unique circumstances

leading to its inception satisfy most of these elements; indeed,

Finally, we believe the facts of this case are sufficiently we find that the agreement meets the first prong of the

unique and the evidence sufficiently clear to allow the district Schleier test—that it was made in lieu of a viable, existent tort

court to apportion the payment into the components that were claim. At the same time, we believe a genuine issue remains

“in lieu” of a tort claim and those that were clearly not. as to what amount of the payment, if any, was “on account of”

Unlike Taggi and Pipitone, where the evidence was not personal injuries.

adequate to enable those courts to apportion among various

claims, see Pipitone, 180 F.3d at 165; Taggi, 35 F.3d at 96, A.

the undisputed evidence in this case allows for such a

determination. First, it is clear that AOI’s standard The compensation AOI paid to Greer satisfies the first

calculation would have provided Greer with a severance element we listed supra: that the alleged claim be based upon

payment of $51,000, an amount that is not excludible. tort or tort-type rights. See Schleier, 515 U.S. at 337. To

Second, Greer has adduced that there were no other viable make this determination, we must “focus[] on the origin and

claims at the time of the agreement. Under cross-

examination, Lohoff acknowledged that AOI officials

perceived Greer to have no viable claims against AOI for age 2

discrimination or Title VII discrimination, which were the This test emanated in part from treasury regulations that had defined

only other specific claims waived by the agreement. The the term “damages received” as “an amount received . . . through

prosecution of a legal suit or action based upon tort or tort type rights, or

record thus leaves wrongful discharge as the only bona fide through a settlement agreement entered into in lieu of such prosecution.”

claim at the time of the agreement, and, crucially, evinces that Treas. Reg. § 1.104-1(c).

8 Greer v. United States No. 98-6593 No. 98-6593 Greer v. United States 17

characteristics of the claims settled in determining whether that Lohoff concluded that he had not been aware of any

such damages are excludible under § 104(a)(2).” Pipitone v. claims on the horizon. See J.A. at 99-101 (stating that he

United States, 180 F.3d 859, 862 (7th Cir. 1999) (citing “didn’t recall him ever making that type of statement,” and

Burke, 504 U.S. at 237). In particular, we look to state law to that he “didn’t recall [Greer] making any statements” that

determine the nature of the claim. See Burnet v. Harmel, 287 AOI had violated environmental regulations “to me”).

U.S. 103, 110 (1932) (“[S]tate law creates legal interests, but

the federal statute determines when and how they shall be But as both Greer and Lohoff testified, Greer expressed his

taxed.”). In this case, Greer alleges that his underlying claim displeasure directly with other, more senior AOI officials.

was wrongful discharge, which is a clearly recognized tort First, Greer testified and Lohoff acknowledged that he had a

claim under Kentucky law. See Firestone Textile Co. Div. v. closed-door meeting with the chairman of AOI, John Hall,

Meadows, 666 S.W.2d 730, 733 (Ky. 1983). The about his termination. Second, Greer discussed these matters

Government does not dispute that wrongful discharge is a tort on numerous occasions with Richard Thomas, who during the

that could give rise to § 104(a)(2) exclusion. period in question was vice president of human resources,

vice president of the law department, general counsel for the

B. petroleum company, and responsible for all environmental

activities in the company. Thomas was not only the person to

Second, we conclude that the wrongful discharge claim whom Greer had directly reported when he was responsible

existed at the time Greer and AOI struck the agreement. As for environmental compliance, but he “reviewed” with

other courts have stated, for an agreement to be rendered a Thomas the controversial findings he had made in that

settlement, there must be an actual dispute and existing claim position. Thomas was also the official who personally

at the time of that agreement. See Pipitone, 180 F.3d at 862; informed Greer of his termination. According to Greer,

Lubart,154 F.3d at 542. Claims for potential future personal Thomas—who was Lohoff’s boss at the time—was also a

injuries are insufficient. See Pipitone, 180 F.3d at 862; point-man in the negotiations that culminated in the

Lubart, 154 F.3d at 542 (“If section 104(a)(2) were construed agreement, and Greer directly told Thomas that he would

to encompass releases of potential unspecified future claims, “have to seek whatever remedies are available to me,” J.A. at

. . . manufacturing section 104(a)(2) tax treatment would be 37. Overall, therefore, given his broader role in the company

simple.”). The dispute must be bona fide, although it need and long-time supervision of and interaction with Greer,

not be valid or sustainable. See Pipitone, 180 F.3d at 862. Thomas was the key AOI official who, according to Greer’s

testimony, knew of the environmental violations and also was

We find that a bona fide claim for wrongful discharge directly involved in hammering out the settlement agreement.

under Kentucky law existed at the time of the settlement. Yet nowhere in the record has the Government attempted to

Kentucky law recognizes a cause of action for wrongful rebut this evidence regarding Thomas’s involvement and

discharge “based on public policy.” Firestone Textile Co. knowledge. Thomas was not himself deposed, and the

Div., 666 S.W.2d at 732. Such a public policy-based Government asked Lohoff nothing about Thomas’s or other

wrongful discharge claim exists when the “alleged reason for officials’ perceptions of Greer’s potential claim. Only once

the discharge of the employee was the failure or refusal to was Lohoff directly asked whether, “[a]s far as Ashland was

violate a law in the course of employment,” or when the concerned,” the payment was of the nature of severance pay

reason for the discharge “was the employee’s exercise of a or a settlement. J.A. at 105 (emphasis added). Rather than

right conferred by well-established legislative enactment.” countering Greer’s account, his answer was nonresponsive:

Nelson Steel Corp. v. McDaniel, 898 S.W.2d 66, 69 (Ky.

16 Greer v. United States No. 98-6593 No. 98-6593 Greer v. United States 9

that AOI officials had good reason to know that a bona fide 1995) (internal quotation marks and citation omitted).

wrongful discharge claim existed at the point of Greer’s Whether or not Greer could have prevailed on such a

termination. Moreover, Lohoff, the Government’s only wrongful discharge claim in state court is irrelevant here.

witness, largely bolstered Greer’s account of events. First, he Rather, we find that Greer’s account of the unique

confirmed the basic career progression that Greer had circumstances of his firing—an account which, as we explain

described. Second, Lohoff testified that he knew that Greer infra, the Government largely failed to dispute—was

was not pleased with his dismissal, and that he was sufficient to state a bona fide claim for wrongful discharge at

sufficiently disgruntled to appeal it through several levels of the time of his termination.

management. His testimony, coupled with the agreement

itself, also showed that the agreement took Greer’s individual The Government wrongfully asserts that a claim could not

needs into account. Lohoff acknowledged, for instance, that have existed unless Greer actually filed that claim against

AOI adjusted the agreement after Greer indicated he felt that AOI before the settlement. Circuit courts and the Tax Court

Ashland may have “somehow wronged him” regarding certain have consistently rejected such a formalistic requirement.

investment losses. J.A. at 100-01; J.A. at 118. See also J.A. See, e.g., Pipitone, 180 F.3d at 863 (“The fact that Pipitone

at 109 (acknowledging that “there are provisions in it that . . . did not file a formal suit alleging these claims . . . is not

are specific to Mr. Greer”). necessarily detrimental to his efforts to establish the existence

of an underlying cause of action.”); Carey v. Commissioner,

Most importantly, Lohoff’s testimony failed to rebut 74 T.C.M. (CCH) 705, 707 (1997) (stating that the claim

Greer’s assertions that AOI had reason to know of his bona “need not have been previously asserted”); Phillips v.

fide wrongful discharge claim. This is because most of Commissioner, 74 T.C.M. (CCH) 187, 190 (1997); Keel v.

Lohoff’s statements simply described his own personal Commissioner, 73 T.C.M.(CCH) 3092, 3095 (1997); see also

conversations with Greer and his impressions based on those Hamm v. Commissioner, 74 T.C.M. (CCH) 279, 282 (1997)

conversations, which were of limited value to the Government (“[W]e have not found . . . any authority for the proposition

in light of both Greer’s and Lohoff’s testimony that a number that the taxpayer must file a claim prior to the settlement

of the crucial conversations in question did not involve agreement in order . . . to qualify for the exclusion.”). We

Lohoff at all. In fact, relative to other persons with whom also find that the Government mischaracterizes the Second

Greer interacted at AOI, Lohoff was in a poor position to Circuit’s holding in Taggi when it suggests that that opinion

know of Greer’s potential claims against the company. required that a claim actually be made. See Gov’t Br. at 21-

Lohoff himself acknowledged that Greer and he did not 23, 26 (reading Taggi to say that “if the taxpayer has not

interact much at AOI. He further testified that he was aware asserted a claim, there is nothing to settle”). In fact,

of other conversations Greer had had regarding his consistent with other courts, the Taggi Court considered

termination, the details of which he was not knowledgeable. Taggi’s failure to make a formal claim as but one factor of a

J.A. at 98-99 (acknowledging that Greer “appealed [his] multi-factor analysis. See 35 F.3d at 96. Directly after

dismissal beyond [him]” and that he “was not privy to those observing that no claim had been filed, the court proceeded to

conversations”); J.A. at 99 (stating that Greer “had consider the contents of the agreement, the amount paid to

discussions with other people as well, including the Chairman Taggi, and the consequences of the signing of the agreement

of the Board”). Nevertheless, the sole evidence the (namely, no subsequent litigation). See id. Had the court

Government elicited comprised Lohoff’s narrow testimony used a strict filing requirement as the Government suggests,

about what Greer had told him personally in their limited the latter analysis would have been wholly unnecessary. See

interaction, and it was based only on this limited interaction generally Hamm, 74 T.C.M. (CCH) at 282 (reading Taggi

10 Greer v. United States No. 98-6593 No. 98-6593 Greer v. United States 15

similarly). Thus, we conclude that Greer’s failure to file suit First, this case stands out among most of this type, which

against AOI does not defeat his argument that a bona fide often involve conclusory allegations of claims and employer’s

claim existed. knowledge of claims—allegations that courts have properly

found unavailing. See, e.g., Lubart, 154 F.3d at 542 (rejecting

C. taxpayer for only alleging “potential unspecified future

claims”); Kroposki, 74 T.C.M. (CCH) at 1435 (rejecting

Third, we find that Greer’s tort claim potentially involved taxpayer’s allegations as after-the-fact, self-serving, and

injuries that were personal. Courts and the IRS have long uncorroborated); Keel, 73 T.C.M. (CCH) at 3095 (opining

recognized that §104(a)(2)’s reference to personal injuries that “we are furnished with no clue as to the nature of the

“encompasses . . . nonphysical injuries to the individual, such claimed injuries”). In contrast, Greer presented substantial

as those affecting emotions, reputation, or character . . . .” evidence suggesting not only that the tort claim based on

Burke, 504 U.S. at 235 n.6. See also Schleier, 515 U.S. at personal injury existed, but that AOI had good reason to know

329 & n.4 (stating that § 104(a)(2) covers “intangible as well of the potential wrongful discharge claim. This evidence

as tangible harms”). Specifically, personal injuries include went largely undisputed by the Government. Greer testified

emotional distress, see Burke, 504 U.S. at 235 n.6, mental that he was transferred from his position as environmental

pain and suffering, see Bent v. Commissioner, 835 F.2d 67, 70 compliance director shortly after issuing a series of

(3d Cir. 1987), and injury to personal and professional “embarass[ing]” reports documenting various environmental

reputation. See Threlkedl v. Commissioner, 848 F.2d 81, 83- regulation violations by AOI. J.A. at 62. The new position

84 (6th Cir. 1988); Church v. Commissioner, 80 T.C. 1104, was one for which he was ill-qualified technically, and after

1109 (1983). Here, Greer’s tort claim sufficiently some time, the post demanded little responsibility from Greer

encompasses personal injury. Specifically, Greer claims for the $100,000-plus salary it paid him. Finally, on short

injuries to his personal and professional reputation, as well as notice and with little explanation, AOI terminated him.

distress, humiliation, and mental anguish. These claims of Moreover, unlike the numerous cases where there is no

non-physical injury 3fall within the broad ambit of § 104(a)(2) evidence that taxpayers had “even talked to” the employer

“personal” injuries. about a possible tort suit, Morabito v. Commissioner, 74

T.C.M. (CCH) 62, 64 (1997), Greer presented such evidence

D. below. First, he appealed his dismissal all the way to the

chairman of the company. Second, he specifically warned

Fourth, and most critically, we must determine the AOI officials that he would “seek whatever remedies [w]ere

motivation behind the agreement itself. In determining available to [him],” and indicated that he would “protect

whether it was reached “in lieu” of the tort claim in existence [him]self in whatever way [he] could.” J.A. at 74, 79.5

at the time and “on account of” the personal injuries

underlying that claim, 26 U.S.C. § 104(a)(2), we consider all Based on Greer’s testimony as to his employment history

facts and circumstances. See Kroposki v. Commissioner, 74 and his dialogue with his AOI supervisors, the record shows

T.C.M. (CCH) 1434, 1436 (1997). We first look to the

5

3 Because it is the intent of the payor that matters, the Government

In 1996, Congress amended § 104(a)(2) to read “on account of errs when it argues that Greer did not know that he enjoyed a wrongful

personal physical injuries or physical sickness.” (emphasis added). discharge claim in particular. Gov’t Br. at 23. The crucial question is

Because the amendment took effect after AOI and Greer executed their whether AOI officials interpreted Greer’s threatening statements to mean

agreement, it is not applicable to this case. that they potentially faced a wrongful discharge suit.

14 Greer v. United States No. 98-6593 No. 98-6593 Greer v. United States 11

Greer dwarfed the amount that would have resulted using agreement itself for indicia of its purpose. If the agreement

AOI’s standard calculation of severance pay—one week of lacks express language of purpose, we look beyond the

salary paid for each year of service. Based on Greer’s length agreement to other evidence that may shed light on “the intent

of service—twenty-four years—and his salary at the of the payor as to the purpose in making the payment.”

time—$112,000 per year—a standard severance payment Knuckles v. Commissioner, 349 F.2d 610, 613 (10th Cir.

would have been approximately $51,000. AOI paid him just 1965); see also Lubart, 154 F.3d at 541 (“[T]he intent of the

under $332,000—well over six times the standard amount. employer [] determine[s] the treatment of the payment.”).

Although AOI acknowledged that it generally provides more This includes considering the amount paid, comparing the

compensation than standard severance when a terminated circumstances and amount paid to other agreements the

employee releases claims, neither AOI nor the Government company has entered into, considering the factual

provided any explanation for the dramatic increase in Greer’s circumstances that led to the agreement, and weighing other

“bonus.” Lohoff’s only explanation was that “[i]t ha[d] to do facts that may reveal the employer’s intent. See generally

with some relationship to a salary.” J.A. at 103. Nor have we Pipitone, 180 F.3d at 864-65. We also heed the wisdom that

found any other cases where the release “bonus” “[w]hen assessing the tax implications of a settlement

approximated such a dramatic increase. In Taggi, for agreement, courts should neither engage in speculation nor

example, AT&T supplemented the standard severance blind themselves to a settlement’s realities.” Bagley v.

payment owed to Taggi, $29,700, with an additional $19,800 Commissioner, 121 F.3d 393, 395 (8th Cir. 1997). Applying

for the general release. See 35 F.3d at 96. In Pipitone, the this fact-based analysis, we find that the unique circumstances

employer provided Pipitone with twice the number of months of Greer’s termination rendered the agreement a settlement

owed under the severance policy, which was the standard reached “in lieu” of the existent tort claim.4 Nonetheless, we

bonus paid for such releases. See 180 F.3d at 865. Thus, find that there remains a dispute as to whether the agreement

unlike other cases finding agreements to be for severance was “on account of” personal injuries. The case must be

purposes only, we can not conclude that the payment made to remanded for this factual determination.

Greer was either standard for AOI or based on a standard

severance calculation. To the contrary, it was far in excess of 1.

such a calculation, as well as far in excess of AOI’s standard

severance agreement. First, we conclude that there is no genuine issue as to

whether AOI provided the payment in lieu of Greer’s existent

b.

Second, courts look to other evidence to divine the payor’s

intent in executing the agreement, including the 4

In doing so, we find that the material facts on this issue are not in

circumstances leading to the termination, the filing of a claim dispute. The agreement itself is clear, and there is no dispute over the

against the employer prior to the agreement, and other amount paid. Greer’s description of his job history at AOI was largely

statements by and events involving the parties. While “the undisputed by Lohoff. Most importantly, the presence of a bona fide, if

absence of any knowledge of the claim on the part of the not necessarily valid, tort claim is also not in dispute; neither is AOI

employer-payor obviously has a negative impact in officials’ knowledge of the potential for such a claim. For reasons stated

below, given Greer’s description of the events culminating in his

determining the requisite intent of the payment,” Keel, 73 termination, Lohoff—the only witness the Government deposed—was

T.C.M. (CCH) at 3095, we find the record to support Greer’s only minimally effective in countering Greer’s account. Therefore, even

assertion that AOI had knowledge of his potential claim. viewing the evidence in the record in a light most favorable to the

Government, there is no dispute over the material facts on this issue.

12 Greer v. United States No. 98-6593 No. 98-6593 Greer v. United States 13

tort claim. The government wholly failed to rebut Greer’s record are substantially dissimilar from cases where courts

evidence that this was in fact the case. found agreements to be for severance purposes only.

First, like most agreements in cases such as this, the a.

agreement does not resolve whether it is a settlement or a

severance agreement. On its face, the agreement does not First, the amount of compensation Greer received strongly

appear to be drafted with a specific tort in mind. Courts supports his contention that the agreement was a settlement of

generally find the fact that a waiver is broadly worded to his tort claim. Generally, other courts have reasoned that the

support a finding that the settlement does not come within the manner in which an agreement calculates payment provides

§ 104 exclusion. See, e.g., Pipitone, 180 F.3d at 864 (noting reliable evidence of the nature of an agreement. See, e.g.,

that the agreement “is a general release of all claims and Pipitone, 180 F.3d at 865; Lubart, 154 F.3d at 541.

makes no specific reference to whether the payment Specifically, payments are categorized as standard severance

compensated Pipitone for personal injuries or sickness”); Ball pay when they are calculated based on the length of the

v. Commissioner, 163 F.3d 308, 309 (5th Cir. 1998) terminated employee’s service to the employer (with possible

(concluding that an agreement releasing a “laundry list” of bonus allowances for their agreement to sign the waiver) and

possible claims is not a settlement for “personal injury or appear to be consistent with the amount paid to other

sickness” within § 104). The agreement in this case is much employees under similar agreements. See Pipitone, 180 F.3d

like those of Pipitone and Ball. It waived a variety of claims: at 865; Lubart, 154 F.3d at 541; Kroposki, 74 T.C.M. (CCH)

wrongful discharge, age discrimination, Title VII, and claims at 1436. Most agreements at issue in cases such as this have

regarding prior agreements between Greer and AOI. Despite easily complied with these standards, largely because they

the express waiver of the wrongful discharge claim, such a were reached with numerous employees as part of a general

“broad” and “generic” release does not render the payments “downsizing.” See, e.g., Lubart, 154 F.3d at 541 (concluding

excludible, Ball, 163 F.3d at 309, and bolsters the that Lubart’s termination agreement, executed as part of a

Government’s argument that AOI did not intend the broad IBM downsizing program, “was a standard document

agreement to be a waiver of tort claims. The fact that the offered to all employees” and its amount was calculated based

agreement provides for the withholding of federal income on salary and years of service); Taggi, 35 F.3d at 94 (stating

taxes and that AOI withheld the amount at issue in this case that Taggi’s termination was part of a general AT&T

also boosts the Government’s case that AOI intended the workforce reduction); Carey, 74 T.C.M. (CCH) at 708

payment to be for non-tort, severance-type purposes. (concluding that the release at issue “was calculated on length

Nevertheless, that presumption is somewhat diluted because of service and salary” and was “essentially the same as that in

Lohoff testified that AOI would “typically” withhold even in the many other cases involving IBM separation pay”); Hamm,

a settlement for a wrongful discharge action. Overall, as in 74 T.C.M. (CCH) at 283 (granting weight to the fact that the

most cases of this type, the agreement itself is not sufficiently employee’s termination was part of a broader IBM reduction

explicit to resolve this issue. program implemented to reduce the number of employees and

increase company efficiency).

We thus are required to look “beyond the words” of the

agreement to divine the payor’s purpose. Pipitone, 180 F.3d Greer’s case is strikingly different. His termination was

at 865. When we do so in this case, we find conclusive isolated, as opposed to part of a general reduction. He was

evidence that AOI intended this to be a settlement of a told simply that he “didn’t fit in” despite years of positive

wrongful discharge claim. We also note that the facts in the performance reviews. And crucially, the amount AOI paid