discounting a lump sum award for lost future earnings is a practice effectively abolished in Pennsylvania
How later courts described this case
- discounting a lump sum award for lost future earnings is a practice effectively abolished in Pennsylvania
- overruling Magill v. Westinghouse Electric Corp., 464 F.2d 294 (3rd Cir.1972)
- "total offset method" adopted: no discount rate to present value is applied, because future inflation will offset the plaintiff's ability to draw interest on the award
Written by the judges who cited it.
The opinion
SUR PETITION FOR REHEARING
Before SEITZ, Chief Judge, and ALDI-SERT, ADAMS, GIBBONS, HUNTER, WEIS, GARTH, HIGGINBOTHAM, SLO-VITER, BECKER and VAN DUSEN, Circuit Judges.
The petition for rehearing filed by Appellant in the above entitled case having been submitted to the judges who participated in the decision of this court and to all the other available circuit judges of the circuit in regular active service, and no judge who concurred in the decision having asked for rehearing, and a majority of the circuit judges of the circuit in regular active service not having voted for rehearing by the court in banc, the petition for rehearing is denied.
Circuit Judges ADAMS and JAMES HUNTER, III, would grant the petition for rehearing.
Statement of Circuit Judge ADAMS:
Judge Adams believes that the damages rule established in this case — that inflation and interest rates will be deemed to offset one another so that no discount to present value is necessary — is likely to have considerable consequences for a great many subsequent cases. Although it may be that economic conditions warrant this dramatic change in our system of calculating damages, the presence at this time of very high interest rates and substantially reduced inflation would suggest caution in adopting a rule that appears to be premised on some immutable relationship between interest and inflation. 1 Even if the newly-adopted damages rule is appropriate under today’s economic situation, institution of the rule is a matter of unusual importance that merits consideration by the full Court. Moreover, because the rule implicates interests and affects parties in a wide range of litigation settings, rehearing in banc would provide an opportunity for this Court to consider amicus briefs from other groups concerned with the damages rule. Accordingly, he dissents from the denial of rehearing in banc.
Circuit Judge JAMES HUNTER, III, also would grant rehearing and joins in Circuit Judge ADAMS’ statement.
. Other Courts of Appeals have considered the problem of accounting for inflation in damage awards, and have arrived at outcomes that are somewhat at variance with the rule adopted here. The Second Circuit, for example, after reviewing economic literature in the field, ruled that damage awards should still be discounted to reflect a “real” interest rate, untainted by inflation, estimated at about one to two percent. Doca v. Marina Mercante Nicaragüense, S.A., 634 F.2d 30, 39-40 (2d Cir. 1980); accord, O’Shea v. Riverway Towing Co., 677 F.2d 1194, 1201 (7th Cir. 1982). The Fifth Circuit, which has until now applied a higher discount rate, recently voted to reconsider in banc the proper treatment of inflation in calculating damage awards. Byrd v. Reederei, 638 F.2d 1300 , rehearing granted, 650 F.2d 1324 (5th Cir. 1981).