Petition — Burlington Northern Inc. v. Flanigan

ix, Supreme Court, U.S.

80-1094 % FILED

Nin JAN 2 1981

MICHAEL RODAK, JR. CLER

IN THE

Supreme Court of the United States

OcTOBER TERM, 1980

BURLINGTON NORTHERN INC., a corporation,

Petitioner,

VS.

EDWARD L. FLANIGAN,

Respondent.

PETITION FOR WRIT OF CERTIORARI

TO THE UNITED STATES COURT

OF APPEALS FOR THE

EIGHTH CIRCUIT

KARL D. DEXHEIMER

Pope and DRIEMEYER

One South Church Street

Belleville, Illinois 62220

(618) 277-4700

Attorneys for Petitioner

St. Louis Law Printing Co., Inc., 411 No. Tenth Street 63101 314-231-4477

Petitioner applies for a Writ of Certiorari and in support of

its application states:

QUESTION PRESENTED FOR REVIEW

The question in this case is whether the Court of Appeals er-

red in ignoring the dictate of the United States Supreme Court

in Norfolk and Western Railway Company v. Liepelt by refus-

ing to remand this case for new trial as a result of the trial

court’s failure to give the Liepelt income tax instruction when

Liepelt was decided while the appeal of this case was pending.

This issue involves the basic proposition of whether an ap-

péllate court is required to apply a new ruling by the United

States Supreme Court to a case on appeal at the time of the

Supreme Court’s decision.

ill

TABLE OF CONTENTS

Page

Question Presented For Review ..............ceceee- i

PPO 0 v's. o's eek denne 5340-05080 00 ee 1

Pere 2

it PP ree 3

Reasons for Granting the Writ .................0005. J 5

PET ees 12

TABLE OF AUTHORITIES

Cases

Cazad v. Chesapeake and Ohio Railway Company, 622

ogi te me | eer ree 9

Crabtree v. St. Louis-San Francisco Railway Company,

411 N.E. 2d 19 (App. Ct. Ill., Sth Dist. 1980) ..... 11

Great Northern Ry. Co. v. Sunburst Oil Co., 287 U.S.

ee eT erry ere 6

Lang v. Texas & Pacific Railway Company, 624 F. 2d

R75 Cte Ce, IGGB) «2 cv escccctie¥ coscunauee 8

Linkletter v. Walker, 381 U.S. 318, 85 S. Ct. 1731 (1965) 6

Nesmith v. Texaco, Inc., et al, 491 F. S. 561 (W.D. La.,

FIED sv cccncenesencevevdseeeseaceane 11

Norfolk and Western Railway Company v. Liepelt, 62

L. Ed. 22 689, 100S. Ct. 755 (1980) ............. 2,4

5,6,7,8,9,10,11,12

PREVIOUS PAGE WAS BLANK |

iV

Oltersdorf v. Chesapeake & Ohio Railroad Company,

404 N.E. 2d 320 (App. Ct. Ill. Ist Dist. 1980) .....

Seaboard Coast Line Railroad Company v. Yow, 384

ee A es es Ns ED eo va nce Kae cen 5

United States v. Schooner Peggy, 5 U.S. (One Cranch)

MED ce dei cba Caines oe eae ae dak as

Rules

Rules of the Supreme Court, Supreme Court Rule 17...

Statutes

35 Stat. 65, as amended, 45 U.S.C. Section 51.........

26 U.S.C. Section 61(a), Int. Rev. Code of 1954, Sec-

I ee as Gh ok 2 cn he diprea ha ece wae ae

26 U.S.C. 104(a), Int. Rev. Code of 1954, Section 104(a)

Se ee alee aay eee araNen De re Gare e mea nt! Nraet

10

10

2,3

INDEX TO APPENDIX

Exhibit ‘‘A’’ Opinion of Court of Appeals dated Sep-

Es GU FV ecnadvids ci ek besa k. Saweanes

Exhibit ‘‘B’’ Opinion of Court of Appeals dated Octo-

ber 16, 1980 denying rehearing .................

Exhibit ‘‘C’’ Judgment of Trial Court entered June 28,

Exhibit ‘‘D’’ Court Order dated July 18, 1979 denying

PII Seana You Seah ype ee

Exhibit ‘‘E’’ Judgment of Eighth Circuit Court of Ap-

peals entered September 4, 1980 ................

Exhibit ‘‘F’’ Burlington Northern Inc. Instruction No.

Exhibit ‘‘G’’ Pages 41-43 of Argument Section of Peti-

tioner’s Brief in Court of Appeals...............

Exhibit “‘H”’ Opinion in Norfolk and Western Railway

Company v. Liepelt, 62 L. Ed. 2d 699, 100 S. Ct.

PPR Rak eX henner ei bk Sch Ce eae

Exhibit “‘I’’ Petition of plaintiff for rehearing in Lie-

ME TTNE i400 CNW Oe oe be vous Ws wees

Page

A-1l

A-20

A-21

A-22

A-24

A-25

A-26

A-28

No.

IN THE

Supreme Court of the United States

OCTOBER TERM, 1980

BURLINGTON NORTHERN INC., a corporation,

Petitioner,

VS.

EDWARD L. FLANIGAN,

Respondent.

PETITION FOR WRIT OF CERTIORARI

TO THE UNITED STATES COURT

OF APPEALS FOR THE

EIGHTH CIRCUIT

JURISDICTION

Review is sought of the decision of the United States Court of

Appeals for the Eighth Circuit, filed September 4, 1980 denying

the appeal of petitioner, Burlington Northern, Inc. The decision

of the Court <f Appeals is set forth in the Appendix as Exhibit

**A’’, appendix pages A-1-A-19. The order of the Court of Ap-

peals for the Eighth Circuit denying the petition for rehearing en

banc filed by the petitioner is set forth in the Appendix as Ex-

hibit ‘‘B’’, appendix page A-20.

Jurisdiction of this Court is invoked under 28 U.S.C. Section

1254 (1) and this Court’s rules 17(1)(a) and 17(1)(c).

— po

In the instant case the United States Court of Appeals for the

Eighth Circuit has rendered a decision in conflict with decisions

of the United States Court of Appeals for the Fourth Circuit

and the United States Court of Apveals for the Fifth Circuit.

The conflict involves the issue of whether Norfolk and Western

Railway “ompany v. Liepelt, 62 L. Ed. 2d 689, 100 S. Ct. 755

(1980) requires reversal of the trial court judgment for the

failure of the trial court to give an instruction on the non-

taxability of a jury award.

STATUTES INVOLVED

45 U.S.C. Section 51, which provides:

‘‘Every common carrier by railroad while engaging in

commerce between any of the several States or Territories,

or between any of the States and Territories, or between

the District of Columbia and any of the States or Ter-

ritories, or between the District of Columbia or any of the

States or Territories and any foreign nation or nations,

shall be liable in damages to any person suffering injury

while he is employed by such carrier in such commerce, or,

in case of the death of such employee, to his or her per-

sonal representative, for the benefit of the surviving widow

or husband and children of such employee; and, if none,

then of such employee’s parents; and, if none, then of the

next of kin dependent upon such employee, for such injury

or death resulting in whole or in part from the negligence

of any of the officers, agents, or employees of such carrier,

or by reason of any defect or insufficiency, due to its

negligence, in its cars, engines, appliances, machinery,

track, roadbed, works, boats, wharves, or other equip-

ment.”’

26 U.S.C. Section 61(a), Int. Rev. Code of 1954, Section

61(a) which provides:

‘*(G]ross income means all income from whatever source

derived ...”’

ae

26 U.S.C. Section 104(a), Int. Rev. Code of 1954, Section

104(a)(2), which provides:

‘*Except in the case of amounts attributable to (and not

in excess of) deductions allowed under Section 213 relating

to medical, etc., expense for any prior taxable year, gross

income does not include. . .(2) the amount of any damages

received (whether by suit or agreement) on account of per-

sonal injuries or sickness .. .”’

STATEMENT OF THE CASE

Respondent, Edward L. Flanigan, an employee of the peti-

tioner, Burlington Northern, Inc., brought suit pursuant to 45

U.S.C. Section 51, commonly referred to as the Federal

Employer’s Liability Act, in the United States District Court for

the Eastern District of Missouri for a personal injury received

while working for the railroad. Flanigan’s injury was the

traumatic amputation of a leg, an injury alleged to be per-

manently disabling. The jury returned a verdict in favor of

Flanigan and against Burlington Northern, Inc. in the sum of

$500,000.00 and judgment was entered thereon.

During the instruction conference the railroad submitted its

tendered instruction No. 2, which was refused by the Court.

(Transcript of Trial, p. 611) The instruction, included in the Ap-

pendix as Exhibit ‘‘F’’ states as follows:

‘*You are instructed that any award made to plaintiff as

damages in this case, if any award is made, is not subject to

state or federal income taxes, and you should not consider

such taxes in fixing the amount of any award made plain-

tiff, if any you make.’’ (Court of Appeals Designated

Record p. 35)

The post-trial motion of the railroad, paragraph 20, raised

the error of the trial court in refusing the instruction. By Court

Order dated July 18, 1979 the post-trial motion was denied.

sat sale

That Order is included in the Appendix as Exhibit ‘‘D’’. (Court

of Appeals Designated Record p. 54)

Burlington Northern’s brief on appeal, pages 41-43 of which

are included in the Appendix as Exhibit ‘‘G’’, preserve the issue

of the trial court’s reversible error in refusing the tendered in-

struction that an award made to Flanigan was not subject to in-

come taxes. Between the time of trial of the case in the United

States District Court for the Eastern District of Missouri and

oral argument before the United States Court of Appeals,

Eighth Circuit, the decision of the Supreme Court of the United

States in Norfolk and Western Railway Company v. Liepelt,

supra, was rendered. The Court of Appeals, realizing the poten-

tial effect of the Liepelt decision on its ruling in this case,

ordered supplemental briefs. The order for supplemental briefs

was made at the time of oral argument of this case before the

Eighth Circuit on March 12, 1980. Pursuant to that order the

supplemental brief of appellant was filed to address the issue of

whether the decision of the Supreme Court of the United States

in Norfolk and Western Railway Company v. Liepelt, required

remandment of this case for a new trial.

The Court of Appeals rendered its opinion in this case on

September 4, 1980, affirming the judgment of Flanigan against

Burlington Northern (Appendix, Exhibit ‘‘A’’). Burlington

Northern filed a petition for rehearing en banc which was

denied by Court Order dated October 16, 1980 (Appendix, Ex-

hibit ‘‘B’’).

sina

REASONS FOR GRANTING THE WRIT

This case is of special importance beyond its importance to

the parties hereto, because it involves an issue which frequently

arises in appeals, an issue which must be resolved uniformly in

the courts in order to avoid chaos in the process of judicial

review. That issue is whether a federal appellate court is re-

quired to apply a decision handed down by the United States

Supreme Court to a case that is pending before the appellate

court at the time of the Supreme Court’s decision. The issue has

far-reaching consequences and will lead to confusion and lack

of predictability in the process of judicial review if it is not

decided uniformly. The Court of Appeals for the Eighth Circuit

in this case has departed from the long-standing rule that the ap-

pellate court is required to apply such new Supreme Court deci-

sions to pending cases and has created a conflict between the

Supreme Court and the fourth and fifth circuits on one hand,

and the eighth circuit on the other, as to how the Supreme

Court’s decision in Norfolk and Western Railway Company v.

Liepelt must be applied by the federal courts. If the decision in

this case is allowed to stand, it can be cited by litigants ad in-

finitum for the erroneous proposition that an appellate court is

not required to apply new case law decided while an appeal is

pending.

Liepelt holds, in a case arising under the Federal Employer’s

Liability Act, that it is reversible error not to give a jury instruc-

tion that any award given to the plaintiff is not subject to in-

come taxes. The Court of Appeals ignored the Supreme Court’s

mandate in Liepelt in failing to reverse and remand this case for

trial because of the trial court’s refusal to give the income tax in-

struction.

The Appellate Court answered the threshold question correct-

ly in holding that it must apply the Supreme Court’s mandate in

Liepelt in the present case when the present case was on appeal

at the time Liepelt was decided. United States v. Schooner

ae as

Peggy, 5 U.S. (One Cranch) 103 (1801) requires the appellate

court to apply the change in the law as announced in Liepelt to

pending cases rather than merely prospectively, as is shown in

the denial of plaintiff’s petition for rehearing in Liepelt, 64 L.

Ed. 2d 250, 100 S. Ct. 1667 (1980). The petition for rehearing

contended that the majority opinion should operate only pro-

spectively. The petition argued at p. 7:

‘The ruling of the Court should be prospective only.

The Court may take judicial notice that literally hun-

dreds, if not thousands, of FELA cases are currently pend-

ing in various jurisdictions throughout the United States.

Undeniably those cases were tried in reliance upon the rule

prevailing in a majority of jurisdictions.

If the instant opinion stands in its present form, the deci-

sion will force remands of all of those cases. The expense

and inconvenience to innumerable parties will be enor-

mous.

In these circumstances respondent respectfully suggests

that the Court apply the rule of Great Northern Ry. Co. v.

Sunburst Oil Co., 287 U.S. 358, 53 S. Ct. 145 (1932), and

Linkletter v. Walker, 381 U.S. 318, 85 S. Ct. 1731 (1965).

As noted in Linkletter, the prospective ruling should not

even apply to the immediate parties before the Court,

otherwise the ruling will govern all other cases pending on

appeal (381 U.S. at 621-622).’’

(Appendix, Exhibit ‘‘I’’)

In denying the petition, the Supreme Court put to rest all

arguments for only prospective application of Liepelt.

The Court of Appeals further heid that Liepe/t required a

holding that it was erroneous for the trial court to fail to instruct

on the non-taxability of the award in the instant case. At this

juncture the Court should have simply followed Liepel/t and

= en

reversed the decision of the trial court and remanded for a new

trial on the issue of damages. The error of the Court of Appeals

is in its efforts to find an exception or a loophole that would

allow it to recognize the Liepelt decision while not applying it to

this case. First, the Court intimates that the Liepe/t decision was

based on a combination of errors including the failure to allow

the defendant Railroad to prove through its economist the pro-

jected net earnings after taxes and the failure to give the instruc-

tion on non-taxability. The Liepe/t decision does not stand for

this proposition at all. Liepelt holds, 62 L. Ed. 2d at p. 696 with

reference to the income tax instruction:

‘‘We hold that it was error to refuse the requested in-

struction in this case. That instruction was brief and could

be easily understood. It wou!d not complicate the trial by

making additional qualifying or supplemental instructions

necessary. It would not be prejudicial to either party, but

would merely eliminate an area of doubt or speculation

that might have an improper impact on the computation of

the amount of damages.’’

This language clearly holds that it was reversible error to refuse

the requested instruction of non-taxability. There is absolutely

no suggestion that reversal would not have been allowed absent

the issue of the failure of the Court to allow testimony by the

economist.

Second, the appellate court invokes a ‘‘harmless error’’ rule

for jury instructions, which puts the burden on the appellant to

establish the prejudicial effect of the trial court’s refusal to give

the requested instruction. If Liepe/t was meant to stand for the

proposition that the failure of a court to give the instruction on

non-taxability of jury award could be construed as ‘‘harmless

error’’, the decision would have so stated. It does not. To im-

pose this new requirement on the railroad of establishing the

prejudicial effect of the trial court’s refusal to give the instruc-

tion is contrary to Liepelt. As a matter of fact, it flies squarely

in the face of Liepelt. Liepelt was decided by the Supreme Court

for the purpose of determining whether it was error for the trial

court to refuse to instruct the jury that an award of damages

would not be subject to income taxation in a Federal

Employer’s Liability Act case. As there were different rulings by

different courts concerning the issue of whether or not this in-

struction should be given, the Supreme Court utilized the

Liepelt case to produce a definitive ruling that failure to give the

instruction on non-taxability of the jury award was reversible

error. This clear cut holding is designed to produce uniformity

among the courts on this issue. The decision in the instant case

negates this effort to create uniformity in the application of the

Federal Employer’s Liability Act among the various courts

which must interpret the statute. The decision trumpets a return

to a hodgepodge of individual decisions, certain to be contradic-

tory of each other. Such was not the intent of Liepelt.

The holding in the instant case is in direct conflict with rulings

by other appellate courts, both state and federal. These cases

have properly held that Liepe/t requires reversal for failure of

the trial cc urt to give the instruction on non-taxability of jury

awards without reference to a ‘“‘harmless error’’ rule. Lang v.

Texas & Pacific Railway Company, 624 F. 2d 1275, (Sth Cir.

1980) is one such case. It is a wrongful death action under the

Federal Employer’s Liability Act. The railroad contended that

the trial judge errec in refusing to give a requested charge deal-

ing with the effect of income taxation. The Fifth Circuit held

that Liepel/t must be applied, noting that Liepelt was decided on

February 19, 1980, subsequent to the trial of the Lang case and

while the Lang case was on appeal. The Liepelt decision effec-

tively changed the law, and the Fifth Circuit held it was its duty

to apply the law in effect at the time it rendered its decision,

unless to do so would result in ‘‘manifest injustice’’. The Fifth

Circuit did not find that retroactive application of Liepelt to its

case would result in ‘‘manifest injustice’’. The holding of the

Court was that in light of the Liepe/t decision it must find that

=

the trial cour erred in refusing to give the proper charge. Accor-

dingly, the court reversed and remanded for a new trial on the

issue of damages and did not hold that the ‘‘harmless error”’

rule had any application.

In Cazad v. Chesapeake and Ohio Railway Company, 622 F.

2d 72, (4th Cir. 1980) the Fourth Circuit reached the same

result. This was a Federal Employer’s Liability Act case in

which a jury verdict was rendered in favor of the employee in

the amount of $284,000.00. The employee had suffered serious

and disabling injuries. The appellate court did not try to dissect

the jury award, pro rating the award between various and sun-

dry elements of damage. It held, p. 75:

‘‘The cause must be remanded, however, for error by

the district court in its instruction on damages. The defen-

dant requested the district court to instruct the jury as

follows:

‘You are charged that any award made to plaintiff as

damages in this case, if any award is made, is not sub-

ject to federal or state income taxes, and you should

not consider such taxes in fixing the amounts of any

award made to plaintiff, if any you made.’

The requested instruction was refused. Since trial in the

district court the Supreme Court in Norfolk & Western

Railway Co. v. Liepelt, (1980) (citation omitted) has held

that such an instruction was proper in a FELA case and

ordered reversal of judgment in that case for failure to give

the instruction. That decision is controlling in this } ELA

case and mandates reversal.

The judgment below is accordingly reversed and the case

is remanded to the district court for proceedings consistent

with this opinion.”’

The court did not engraft a ‘‘harmless error’’ rule onto the

Liepelt decision.

—

Seaboard Coast Line Railroad Company v. Yow, 384 So. 2d

13, (S. Ct., Ala. 1980), was another Federal Employer’s Liabili-

ty Act case interpreting Liepelt. The railroad alleged error by

the trial court in refusing to charge the jury that any award of

damages would not be subject to federal or state income taxes.

The court ruled as follows, p. 13:

‘‘After this case was argued before this Court, the

United States Supreme Court rendered its decision in Nor-

folk & Western Ry. Co., (citation omitted) and held that it

was error for a trial judge to refuse requested instructions

that an award of damages in an FELA case was not subject

to federal taxation. The majority of that Court bottomed

their holding by saying, ‘It is entirely possible that the

members of the jury may assume that a plaintiff’s recovery

._. . will be subject to federal taxation, and that the award

should be increased substantially in order to be sure that

the injured party is fully compensated.’ On the authority

of Norfolk and Western Ry. Co., the judgment is reversed

for a new trial.”

There was no ‘“‘harmless error’’ rule applied.

A factually similar case is Oltersdorf v. Chesapeake & Ohio

Railroad Company, 83 lll. App. 3rd 457, 404 N.E. 2d 320 (App.

Ct. Ill. 1st Dist. 1980). Again in this Federal Employer’s Liabili-

ty Act case, the railroad claimed error by the trial court in not

allowing evidence as to the impact of taxation on the employee’s

lost future earnings and refusing to instruct the jury its award of

damages would not be subject to taxation. The plaintiff suf-

fered an amputation of his right leg just below the knee. The

court noted that since oral argument of its case the Supreme

Court of the United States had rendered its decision in Liepelt.

The court applied Liepelt holding at p. 325:

‘‘Plaintiff’s counsel has attempted to distinguish Liepelt

from the instant case. He contends Liepelt deals only with

wrongful death actions under the FELA in which damages

~ oo

are limited to decedent’s contributions to the surviving

dependents. We find no merit in this contention and con-

clude the Liepelt decision controls this case.

There is no language in the opinion of the United States

Supreme Court to indicate it is limited to wrongful death

cases under the FELA.”’

‘*Therefore we must apply the teaching of the United

States Supreme Court in Liepelt to the case before us. We

hold the trial court erred in refusing to allow evidence of

the impact of taxation on plaintiff’s lost future earnings

and in refusing to instruct the jury its award of damages

was not subject to taxation.”’

The court reversed the case and remanded for a new trial on the

issue of damages and did not apply a ‘‘harmful error’’ rule.

Nesmith v. Texaco, Inc., et al, 491 F.S. 561 (W. D. La., 1980)

is a case in which the district court applied Liepe/t without reser-

vation. The court, after noting the Liepelt decision at page 563,

made its determination of damages by subtracting the income

tax that would have been paid on the lost wages of the plaintiff

to arrive at the amount due and owing the seaman who was in-

jured.

Crabtree v. St. Louis-San Francisco Railway Company, 411

N.E. 2d 19, 25 (App. Ct. Ill., 1980) is a case brought by a

railroad employee under the Federal Employer’s Liability Act

for damages for personal injuries sustained to this lower back.

Noting that there was no suggestion that the decision in Liepelt

be given prospective application only, the court held that rever-

sal was required for failure of the trial court to give an instruc-

tion on the non-taxability of the damages awarded for personal

injury. The Illinois court, having been presented with all the

issues which are germane to this petition for writ of certiorari,

held that Liepelt would be applied to cases that had been com-

pleted in the trial court prior to the Liepelt decision but were not

sin ce

argued in the Court of Appeals until after the Liepelt decision.

This court did not apply a ‘‘harmless error’’ rule.

All of these decisions interpreting Liepelt hold that Liepelt

must be applied to those cases which were pending on appeal at

the time the Liepelt decision was rendered. All of the cases fur-

ther hold that failure to give the instruction on non-taxability of

a jury award is error which requires reversal and remandment

for a new trial on the issues of damages. None of the cases ap-

plies a “‘harmless error’’ rule to circumvent the requirements of

Liepelt. Only the decision of the Eighth Circuit in this case runs

contrary to the proper application of Liepe/t and creates a con-

flict in the federal circuits which should be resolved.

CONCLUSION

It is respectfully submitted that this petition for writ of cer-

tiora’’ should be granted to resolve the conflict between the

fourth and fifth circuits and the Eighth Circuit and the conflict

between the Eighth Circuit and the Liepelt decision of this

Court which emphatically holds that failure to give an instruc-

tion on the non-taxability of a jury award for personal injury is

reversible error.

DATED: December 31, 1980

Respectfully submitted,

Karl D. Dexheimer

Pope and Driemeyer

One South Church Street

Belleville, Illinois 62220

Counsel for Petitioner

APPENDIX

— * oe

EXHIBIT ‘‘A”’

UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

No. 79-1703

Edward L. Flanigan,

Appellee,

V.

Burlington Northern Inc., a corporation,

Appellant.

Appeal from the United States District Court

for the Eastern District of Missouri

Submitted: March 12, 1980

Filed: September 4, 1980

Before LAY, Chief Judge, HENLEY and McMILLIAN,

Circuit Judges.

LAY, Chief Judge.

The Burlington Northern, Inc. (BN) appeals from a judgment

entered on a jury verdict awarded for injuries to one of its

employees incurred during the course of his employment. The

action was brought under the Federal Employers’ Liability Act

(FELA), 53 Stat. 1404, 45 U.S.C. §§ 51-60 (1976).

caw le

Edward L. Flanigan was an inspector-carman for the

Burlington Northern. BN had a safety rule which required an

employee working on the track to place a blue flag on the end of

the train or a blue light if it was dark. Its purpose was to prevent

the train from being moved. When Flanigan was injured he was

hooking up the air brake hoses on cars located on track 11. He

had not put out a blue flag on track 11. It was dark and the

engineer could not see anyone working on the train, nor could

plaintiff see the cars being moved onto track 11. No warning

whistle was sounded when the cars were sent onto the track. The

train knocked Flanigan to the ground. He managed to kick his

right leg out of the way but his left leg slipped on some loose

coal and was run over by the train. It was necessary to amputate

his left leg several inches above the knee.

At about the time Flanigan became a carman he viewed a slide

presentation explaining the blue flag rule. He also indicated that

he had some knowledge of the blue flag rule when he answered

several questions concerning it on a 1969 job application to BN.

The evidence showed, however, that the blue flag rule was

seldom utilized and enforced. Flanigan had been told by more

experienced employees that blue flags were not used in the yard.

He was never supplied any blue flags nor was he told where he

would get them. Flanigan testified that he had seen a blue flag

used only once and that was on the ‘“‘rip track’’ where repairs

are made on defective cars. Another carman, who had worked

on the yards for five years, testified that it was not a practice to

use blue flags and that he had never seen a carman use a blue

flag.

The jury awarded Flanigan a verdict of $500,000. After entry

of judgment on the verdict the railroad appealed.

On appeal the railroad urges diverse errors allegedly occurr-

ing at trial. The most salient concern on appeal relates to the

trial court’s failure to instruct on the nontaxability of the

damage award. Subsequent to the entry of judgment pending

— pe

this appeal, the Supreme Court held in a wrongful death case

brought under the FELA that it was prejudicial error for a trial

court to fail to instruct that any award under the FELA was not

subject to income tax. Norfolk & Western Railway v. Leipelt,

100 S.Ct. 755 (1980). We discuss the issues raised seriatim.

Sole Proximate Cause.

The railroad first argues that Flanigan cannot recover because

his conduct as a matter of law was the sole proximate cause of

his injuries. The railroad relies on two blue flag rule cases. Perry

v. Misouri - Kansas - Texas Railroad, 340 Mo. 1052, 104

S.W.2d 332 (1937); Kramer v. Missouri - Kansas - Texas

Railroad, 326 Mo. 792, 32 S.W.2d 1075 (1930). Contrary to

defendant’s argument these decisions support the submission to

the jury of the issue of proximate cause. In both cases the

Supreme Court of Missouri held that the issue of proximate

cause was properly submitted to the jury and affirmed the ver-

dicts. The court in Perry specifically stated:

In view of the evidence set out, supra, as to the observance

of the blue light rule, in defendant’s yards when an

employee was doing the character of work plaintiff was at-

tempting to do when injured, we cannot say, as a matter of

law, that plaintiff’s failure to put up the blue light was the

sole proximate cause of his injury.

Perry v. Misouri - Kansas - Texas Railroad, 340 Mo. 1052, 104

S.W.2d 332, 339 (1937) (emphasis added).

Flanigan, as did the plaintiffs in Kramer and Perry, offered

evidence that the blue flag rule was not followed. Where the

evidence shows that it was the custom of the railroad not to en-

force a safety rule, the jury was entitled to consider the issue of

proximate cause. As succinctly observed by the Fifth Circuit:

The question as to the violation of the appellant’s safety

rule by the appellee was properly in this case. But whether

va © en

it was a cause of the injury, and if so whether the sole or a

contributing cause, and if the latter, the extent of the con-

tribution were properly treated as questions for the jury.

Illinois Central Railroad v. Andre, 267 F.2d 372, 374 (Sth Cir.

1959).

We hold that violation of the blue flag rule did not per se result

in the employee being the sole proximate cause of his injuries.

See Boop v. Baltimore & Ohio Railroad, 118 Ohio App. 171,

193 N.E.2d 714 (1963).'

' Defendant also argues the district court erred in failing to give a

sole proximate cause instruction. However, the cases cited by defen-

dant merely hold that it is not error to give such an instruction. Zappia

v. Baltimore & O.R.R., 312 F.2d 62, 64 (6th Cir. 1963); Jones v. Il-

linois Terminal R.R., 260 S.W.2d 487, 491 (Mo. 1953). The court is

not required to give such an instruction. Louisville & N. R.R. v.

Vickery, 288 Ala. 555, 263 So.2d 656 (1972); Seaboard Coast Line

R.R. v. Whitehead, 288 Ala. 505, 262 So.2d 752 (1972). In Almen-

darez v. Atchison, T. & S. F. Ry., 426 F.2d 1095 (Sth Cir. 1970) the

court held:

We agree with the plaintiff that the railroad’s theory to sup-

port its requested instruction is an attempt to engraft the

common-law doctrine of sole proximate cause onto the Federal

Employers’ Liability Act. The standards of liability for

negligence under the Act must not be confused with those under

the common law. This proposition, in the light of a requested in-

struction on sole proximate cause which was granted, was well

stated by Judge Brown in Page v. St. Louis Southwestern Ry.,

349 F.2d 820 (Sth Cir. 1965):

‘*(O}rdinarily in FELA cases there is really no place for this

issue in the jury submission as such. * * * This effort to cross ex-

amine the jury— * * * —leads only to confusion and a prolifera-

tion of metaphysical terms scarcely understandable to the most

astute scholar. * * *

“Of course the substantive law recognizes that if the

negligence of the Employee is the sole cause of the injury or

death, there is no liability. (citing cases). This is sometimes

spoken of as the employee’s contributory negligence being the

ae pen

Inadmissible Evidence.

The railroad objected to the line of testimony concerning the

present and possible expanded use of two-way radios in the

yard. It urges the admission of such testimony is reversible error

for several reasons: (1) an employer is not required to supply

employees with the latest equipment provided those in use are

reasonably safe and suitable; (2) the railroad is not required to

provide alternative safety measures when blue flags are

available; (3) the railroad is not negligent if the alternative safe-

ty device would not have assisted in preventing the injury; and

(4) evidence inferring that Flanigan would have heard any in-

structions over a radio that would have notified him of the

danger is speculative.

The railroad also sought to introduce a slide presentation ex-

plaining the blue flag rule, which plaintiff viewed prior to his in-

jury. The district court sustained an objection to it on the

grounds that it was inflammatory, and inaudible.

The admissibility of evidence in FELA cases is ordinarily left

to the discretion of the trial court and the court will not be

reversed unless it abused its discretion. See, e.g., Lavender v.

Kurn, 327 U.S. 645, 654 (1946); Chicago & North Western

Railway v. Green, 164 F.2d 55, 62 (8th Cir. 1947); Cardwell v.

sole proximate cause, but this is both an inaccurate use of the

term ‘contributory’ and seems to be wholly unnecessary since a

jury, honestly determining that the injured employee’s actions

were the sole cause of injury, necessarily finds (either on a

general charge or by special! interrogatories) that no act of the

railroad, even though found to be negligent, played any part in

bringing about the injury. * * * We ought to avoid those prac-

tices which ‘distract the jury’s attention from the simple issues

of whether the carrier was negligent and whether that negligence

was the cause, in whole or in part, of the plaintiff’s injury.’ ”’

349 F.2d 826-827.

Id. at 1097 (footnote omitted).

=

Chesapeake & Ohio Railway, 504 F.2d 444, 448 (6th Cir. 1974);

Cf. Simpson v. Norwesco, Inc., 583 F.2d 1007, 1013 (8th Cir.

1978) (non-FELA case). The testimony concerning two-way

radios was limited in scope. The plaintiff did not testify that he

should have had a radio—other carmen did say it might be

helpful. The district court did not abuse its discretion in allow-

ing this testimony into evidence. Similarly, once the blue flag

rule was in evidence and the evidence showed that the plaintiff

had viewed the slides, it was not abuse of discretion to rule out

the evidence.

Special Interrogatories.

The railroad argues the lower court committed error in failing

to submit special interrogatories pursuant to Fed. R. Civ. P.

49(b) as requested. It has been observed: ‘‘The decision whether

to use a general verdict accompanied by special interrogatories,

as authorized by Rule 49(b), is similarly committed to the

unreviewable discretion of the trial judge.’’ 9 Wright & Miller,

Federal Practice and Procedure: Civil § 2511, at 522 (1971). See,

e.g., Thomson v. Anderson, 138 F.2d 277 (8th Cir. 1943); Tur-

chio v. D/S A/S Den Norske Africa, 509 F.2d 101, 104 (2d Cir.

1974); Elston v. Morgan. 440 F.2d 47, 49 (7th Cir. 1971); Zaiko

v. District of Columbia, 427 F.2d 606, 609 (D.C.Cir. 1970). We

find no error here.

Excessive Verdict.

The railroad argues that the jury verdict of $500,000 was ex-

cessive. If the verdict is to be overturned because of its size, it

must be so large as to shock the judicial conscience. See, e.g.,

Scoville v. Missouri Pacific Railroad, 458 F.2d 639, 647 (8th

Cir. 1972); Chicago, Rock Island & Pacific Railroad v. Melcher,

333 F.2d 996, 1001 (8th Cir. 1964). This court has stated:

[E]xcessiveness of a verdict is basically, and should be, a

matter for the trial court which has had the benefit of hear-

a on

ing the testimony and of observing the demeanor of the

witnesses and which knows the community and its stan-

dards; that this is a responsibility which, for better working

of the judicial process and for other seemingly obvious

reasons, is best placed upon its shoulders; and that we shall

continue to consider review, as we have said before, not

routinely and in every case, but only in those rare situa-

tions where we are pressed to conclude that there is ‘‘plain

injustice’ or a ‘‘monstrous’’ or ‘‘shocking”’ result.

Solomon Dehydrating Co. v. Guyton, 294 F.2d 439, 447-48 (8th

Cir.), cert. denied, 368 U.S. 929 (1961).

The evidence showed that since the amputation of his left leg,

Flanigan has had severe and constant phantom pains, rash, in-

fection, and misalignment of the hip. He also suffers from

lower back pains, frequent falls, and excessive sweating. he can

no longer garden, swim, hunt, dance or do maintenance work

on his house. In view of the severity of plaintiff’s injuries and

the fact that he continues to have medical problems the verdict

is not excessive.

Instructions

I. Plaintiff’s Instructions.

The railroad argues that it was error to give plaintiff’s instruc-

tion on loss of earning capacity since there was no evidence to

sustain it. The evidence demonstrates that plaintiff suffered per-

manent injuries that prevent him from working. J/linois Central

Railroad v. Staples, 272 F.2d 829, 833 (8th Cir. 1959); Quilter v.

Elgin, Joliet & Eastern Railway, 409 F.2d 338, 340 (7th Cir.

1969). The instruction was clearly proper.

The railroad also argues that it was error to give plaintiff’s in-

struction on pain and suffering because it did not instruct the

jury to reduce the award to present value. In Chicago & North

Western Railway v. Chandler, 283 F. 881 (8th Cir. 1922), this

wien: al se

court held it was not error for the trial court to refuse to instruct

the jury to reduce any award for pain and suffering to present

value. Jd. at 884-85. Although there is sparse authority on this

point, the other circuits have generally followed the lead of

Chandler. See Taylor v. Denver & Rio Grande Western

Railroad, 438 F.2d 351, 352-53 (10th Cir. 1971); Texas & Pacific

Railway v. Buckles, 232 F.2d 257, 264 (Sth Cir. 1956); 3 Devitt

& Blackmar, Federal Jury Practice & Instructions § 85.13, at

125 (Notes) (3d ed. 1977); Annot., 60 A.L.R. 2d 1347, 1352-53

(1958). Recently, the Second Circuit held that future pain and

suffering should be reduced to present value, Chiarello v.

Domenico Bus Service, Inc., 542 F.2d 883, 886 (2d Cir. 1976),

however, we believe that the better reasoned position is that

taken in Chandler. The Chandler court said:

The application of the present value rule by the jury in

making up the amount of damages to be allowed for the

deprivation of pecuniary benefits arising from probable

future earnings is not only just, but feasible. It is feasible

because the jury may from actual past earnings, with other

factors in the problem proven, set opposite each year of

the estimated life the sum which would probably be earned

that year, and in death cases the probable pecuniary

benefit to the party complaining or beneficially interested.

These several sums can then be reduced to their present

value. No such process is possible in estimating the amount

to be allowed for pain and suffering, or for pain and in-

convenience. In the matter of pain, suffering, or inconve-

nience, no books are kept, no inventories made, no

balances struck.

Neither the plaintiff in the case nor any one else in the

world has ever established a standard of value for these ills.

The only proof ever received to guide the jury in determin-

ing the amount of the allowance they should make is,

broadly stated, the nature and extent of the injury, its ef-

—Y

fect and results. They are instructed to allow a reasonable

sum as compensation, and in determining what is

reasonable under the evidence to be guided by their obser-

vation, experience and sense of fairness and right. At the

best the allowance is an estimated sum determined by the

intelligence and conscience of the jury, and we are convinc-

ed that a jury would be much more likely to return a just

verdict, considering the estimated life as one single period,

that if it should attempt to reach a verdict by dividing the

life into yearly periods, setting down yearly estimates, and

then reducing the estimates to their present value. The ar-

bitrariness and artificiality of such a method is so apparent

that to require a jury to apply it would, we think, be an ab-

surdity.

The same amount of pain and suffering does not occur from

year to year nor can the degree of pain and suffering that will

occur in any year be quantified with any degree of certainty. Re-

quiring the reduction of an award for pain and suffering to its

present value would improperly allow a jury to infer that pain

and suffering can be reduced to a precise arithmetic calculation.

Therefore, we hold that the trial court properly denied the re-

quested instruction.

2. Defendant’s Requested Instructions.

(a) Contributory Negligence

The railroad objected to the district court’s failure to give re-

quested instructions concerning contributory negligence. The

district court instructed the jury that, ‘Contributory negligence

is fault on the part of a person injured, which cooperates in

some degree with the negligence of another, and so helps to

bring about the injury.’’ The court’s instruction was taken from

3 Devitt & Blackmar, Federal Jury Practice & Instructions §

— A-10 —

94.16 (3d ed. 1977). Failure to give defendant’s requested in-

struction further defining contributory negligence was not error

since the district court’s instruction adequately defined the

term. See King v. State Farm Life Insurance Co., 448 F.2d 597,

600 (8th Cir. 1971); Honebein v. McDonald, 299 F.2d 493,

495-96 (8th Cir. 1962).

The railroad also requested an instruction stating that it was

the duty of plaintiff to be free from contributory negligence.

Such an instruction is misleading. Contributory negligence is

not a bar to recovery in an FELA case as defendant’s instruc-

tion would have led the jury to believe. Rogers v. Missouri

Pacific Railway, 352 U.S. 500, 506 & n.12 (1957); Tiller v.

Atlanta Coast Line Railroad, 318 U.S. 54, 66-67 (1943);

Chicago Great Western Railway v. Scovel, 232 F.2d 952, 957

(8th Cir. 1956). Therefore, the district court properly denied the

instruction.

(b) Nontaxability of Jury Award.

The railroad objected to the district court’s failure to give the

following instruction: ‘‘You are instructed that any award made

to plaintiff as damages in this case, if any award is made, is not

subject to state or federal income taxes, and you should not

consider such taxes in fixing the amount of any award made

plaintiff, if any you make.”’

In Norfolk & Western Railway v. Liepelt, 100 S.Ct. 755

(1980), the Supreme Court, in reviewing a wrongful death

award under the FELA, found a gross disparity between the

verdict and the pecuniary loss proven. It observed that the

award was improperly inflated and that it was not ‘‘fanciful to

suppose’’ that the jury believed that a large portion of the

award would be payable in income taxes. It held that it was

necessary that the jury be instructed that no damage award shall

be subject to income tax.

— A-ll —

The Liepelt holding thus overruled the great majority of

federal and state cases which have generally found the instruc-

tion to be too speculative and conjectural or too difficult for a

jury to follow.’

In 1973, Judge Bright in Rouse v. Chicago, Rock Island &

Pacific Railroad, 474 F.2d 1180 (8th Cir. 1973), reiterated this

court’s earlier view set out in Raycraft v. Duluth, Missabe &

Iron Range Railway, 472 F.2d 27, 33 (8th Cir. 1973), stating:

In view of the state of the law and the record in the

instant case, this Court will not pass on the issue at the pre-

2 Too difficult or complex to follow. See Johnson v. Penrod Drill-

ing Co., 510 F.2d 234 (Sth Cir. 1975); Scruggs v. Chesapeake & O.

Ry., 320 F. Supp. 1248 (W.D. Va. 1970); Plourd v. Southern Pac.

‘Transp Co., 266 Ore. 666, 513 P.2d 1140 (1973); Hall v. Chicago &

N.W. Ry., 5 Ill.2d 135, 125 N.E.2d 77 (1955). Too speculative or con-

jectural. See Scalise v. Central R.R. of N. J., 129 N.J. Super. 303, 323

A.2d 525 (1974); Henninger v. Southern Pac. Co., 59 Cal. Rptr. 76

(Ct. App. 1967). Cf. Texas & N.O. R.R. v. Pool, 263 S.W.2d 582

(Tex. Civ. App. 1953). Collateral matter. See Raines v. New York

Cent. R.R., 51 Ill.2d 428, 283 N.E.2d 230 (1972); Bergfeld v. New

York, C. & St. L. R.R., 103 Ohio App. 87, 144 N.E.2d 483 (1956);

Hall v. Chicago & N.W. Ry., 5 Ill.2d 135, 125 N.E.2d 77 (1955).

Raises more problems than it would solve. See Combs v. Chicago, St.

P., M & O Ry., 135 F. Supp. 750 (N.D.Ia. 1955); Briggs v. Chicago

Great W. Ry., 248 Minn. 418, 80 N.W.2d 625 (1957). Long standing

practice need not be overruled. See Rouse v. Chicago R.I. & P.R.R.,

474 F.2d 1180 (8th Cir. 1973); Blake v. Deiaware & H. Ry., 484 F.2d

204 (2d Cir. 1973); Greco v. Seaboard Coast Line R.R., 464 F.2d 496

(Sth Cir. 1972); Payne v. Baltimore & O.R.R., 309 F.2d 546 (6th Cir.

1962); Altemus v. Pennsylvania R.R., 32 F.R.D. 7 (D.Del. 1963); S?.

Louis S.W. Ry. v. Greene, 552 S.W.2d 880 (Tex. Civ. App. 1977);

Norfolk S. Ry. v. Rayburn, 213 Va. 812, 195 S.E.2d 860 (1973);

Missouri-K-T R.R. v. Miller, 486 P.2d 630 (Okla. 1971); St. Johns

River Terminal Co. v. Vaden, 190 So. 2d 40 (Fla. Ct. Ap. 1966); Bracy

v. Great N. Ry., 136 Mont. 65, 343 P.2d 848 (1959); Louisville & N.

R.R. v. Mattingly, 318 S.W.2d 844 (Ky. 1958); Maus v. New York, C.

& St. L. Ry., 165 Ohio St. 281, 135 N.E.2d 253 (1956); Wagner v. Il-

linois Cent. R.R., 7 ill. App. 2d 445, 129 N.E.2d 771 (1955).

— A-12 —

sent time. Even if this panel were to adopt the instruction,

this panel would do so only prospectively.

Id. at 1183.

And more recently, citing Raycraft and Rouse, speaking

through Judge McMillian, this court indicated that although it

favored an instruction on the nontaxability of damages,

nonetheles ‘‘the position in this circuit is that such instructions

are not required, and we have said any change in this position

would be prospective only.’’ Taenzler v. Buriingion Northern,

Inc., 608 F.2d 796, 802 (8th Cir. 1979).

The fundamental question presented here is whether the

Supreme Court’s mandate in Liepel/t requires us to apply this

change of law in the present case when it was pending review at

the time Liepelt was decided. We think it does.

The oft quoted rule of Mr. Chief Justice Marshall set out in

United States v. Schooner Peggy, 5 U.S. (1 Cranch) 103 (1801),

governs here:

It is in the general true that the province of an appellate

court is only to enquire whether a judgment when rendered

was erroneous or not. But if subsequent to the judgment

and before the decision of the appellate court, a law in-

tervenes and positively changes the rule which governs, the

law must be obeyed, or its obligation denied. If the law be

constitutional . . . I know of no court which can contest its

obligation. It is true that in mere private cases between in-

dividuals, a court will and ought to struggle hard against a

construction which will, by a retrospective operation, af-

fect the rights of parties but in great national concerns...

the court must decide according to existing laws, and if it

be necessary to set aside a judgment, rightful when

rendered, but which cannot be affirmed but in violation of

law, the judgment must be set aside.

Id. at 110.

— A-13 —

The rule has recently been approved and analyzed by the

Supreme Court. See Bradley v. School Board, 416 U.S. 696,

710-21 (1974). Defendant BN argues the application of the rule

here.

Flanigan, on the other hand, urges that we apply the test in

Chevron Oil Co. v. Huson, 404 U.S. 97 (1971), that weighs rele-

vant factors in deciding whether a new rule is retroactive.’ In a

recent decision, the Missouri Court of Appeals applied the

Chevron test to the identical question involved here. In Ingle v.

Illinois Central Gulf Railroad, No. 40300 (Mo. Ct. App., filed

July 1, 1980), the court of appeals applied Liepelt prospectively

only. In doing so the court reasoned: (1) the trial judge in not

giving the instruction was executing his duties according to ex-

isting law; (2) prior history of the rule shows the primary pur-

pose underlying Liepelt was the court’s decision to prevent ex-

cessive verdicts, which the /ngle verdict was not, thus, in Ingle

retroactive application would not further the purpose of the rule

nor would prospective application ‘‘retard’’ its operation; (3)

the courts in the three cases relied upon by the Supreme Court in

Liepelt prospectively applied the new rule with respect to the in-

> In Chevron the Court observed:

First, the decision to be applied nonretroactively must establish

a new principle of law, either by overruling clear past precedent

on which litigants may have relied, . . . or by deciding an issue of

first impression whose resolution was not clearly foreshadowed

.... Second, it has been stressed that ‘‘we must . . . weigh the

merits and demerits in each case by looking to the prior history

of the rule in question, its purpose and effect, and whether

retrospective operation will further or retard its operation.’’

.. . Finally, we have weighed the inequity imposed by retroac-

tive application, for ‘‘[wJhere a decision of this Court could pro-

duce substantial inequitable results if applied retroactively, there

is ample basis in our cases for avoiding the ‘injustice or hard-

ship’ by a holding nonretroactivity.”’. . .

404 U.S. at 106-07 (citations omitted).

— htt mw

come tax instruction;‘ (4) applying Liepelt retroactively would

produce substantial inequitable results to the plaintiff.

Notwithstanding the appeal of such rationale, we have serious

doubts the doctrine of nonretroactivity is applicable here. In

Bradley the Court reasoned:

This Court in the past has recognized a distinction

between the application of a change in the law that takes

place while a case is on direct review, on the one hand, and

its effect on a final judgment under collateral attack, on

the other hand. Linkletter v. Walker, 381 U.S. 618, 627

(1965). We are concerned here only with direct review.

416 U.S. 710-11 (footnotes omitted).

Although it would appear Bradley makes a viable distinction

between cases on direct review and collateral attack, other re-

cent authority makes this assumption seem questionable. °

* Burlington Northern, Inc. v. Boxberger, 529 F.2d 284, 297 (9th

Cir. 1975); Domerackiv. Humble Oil & Ref. Co., 443 F.2d 1245, 1251

(3d Cir. 1971); Dempsey v. Thompson, 363 Mo. 339, 251 S.W.2d 42

(1952).

* See Williams v. United States, 401 U.S. 646 (1971), where, in

discussing Linkletter v. Walker, the Court observed:

In Linkletter v. Walker, 381 U.S. 618 (1965), we declined to

give complete retroactive effect to the exclusionary rule of Mapp

v. Ohio, 367 U.S. 643 (1961). Relying on prior cases, we firmly

rejected the idea that all new interpretations of the Constitution

must be considered always to have been the law and that prior

constructions to the contrary must always be ignored. Si .ce that

time, we have held to the course that there is not inflexible con-

stitutional rule requiring in all circumstances either absolute

retroactivity or complete prospectivity for decisions construing

the broad language of the Bill of Rights. Nor have we accepted

as a dividing line the suggested distinction between cases on

direct review and those arising on collateral attack. Rather we

have proceeded to ‘‘weigh the mertis and demerits in each case

by looking to the prior history of the rule in question, its pur-

pose and effect, and whether retrospective operation will further

or retard its operation.

— A-15 —

The Bradley v. Schooner Peggy rule gives presumptive weight

to applying the change of law retroactively unless manifest in-

justice would follow. On the other hand, the Chevron tests pro-

vide a more neutral, objective basis for analyzing whether a

change in law should be applied only prospectively. When con-

stitutional or procedural rules are involved the Linkletter

-Williams - Chevron rule is clearly applicable. However, where

there is a decisional change of state or federal substantive law

between the time of trial and appeal, it would appear the

Schooner Peggy doctrine is controlling. See Robinson v. Neil,

409 U.S. 505 (1973); Vandenbark v. Owens - Illinois Glass Co.,

311 U.S. 538 (1941). We conclude we are controlled by the

language in Bradley relying on Thorpe v. Housing Authority of

Durham, 393 U.S. 268 (1969), that ‘‘a court is to apply a law in

effect at the time it renders its decision’’ unless there exists a

‘“‘manifest injustice.’’ Mr. Justice Blackmun expands this

discussion by observing:

Although the precise category of cases to which this excep-

tion applies has not been clearly delineated, the Court in

Schooner Peggy suggested that such injustice could result

“‘in mere private cases between individuals,’’ and implored

the courts to ‘‘struggle hard against a construction which

will, by a retrospective operation, affect the rights of par-

ties.’’

416 U.S. at 717.

The Court sets out three tests to be applied in determining the

possible working of manifest injustice: (a) the nature and identi-

401 U.S. at 651-52 (emphasis added) (footnotes omitted).

See also our opinion in Martin v. Wyrick, 568 F.2d 583 (8th Cir.

1978), where on the strength of Linkletter and Williams we held the

newly announced rule of Faretta v. California, 422 U.IS. 806 (1975),

providing the right of self-representation, not applicable to cases

pending appeal at the time Faretta was announced.

— A-16 —

ty of the parties, (b) the nature of their rights, and (c) the nature

of the impact of the change in law upon those rights. /d.

Although the present case may be viewed as a ‘“‘routine

private lawsuit’’ between disparate parties, i.e. an individual

and a large corporate entity, we perceive by plaintiff’s success in

obtaining a verdict below, the disparity of the parties has not af-

fected ‘‘the respective abilities of the parties adequately to pre-

sent and protect their interests.’’ Jd. at 718. Secondly, the

nature of their rights is such that at least under the prior views

of this court, that it cannot be said that the intervening change

‘‘would infringe upon or deprive a person of a right that had

matured or become unconditional.’’ Jd. at 720. Nor do we feel

the nature of the impact of the change in law upon existing

rights is significant. As the Supreme Court reasoned in Liepelt,

the plaintiff has never been able to prove loss of earnings solely

on a gross earning basis. Liepelt, 100 S.Ct. at 757.

Assuming prejudical error, plaintiff must, at the very worst,

give up his verdict and have a new trial on damages only. We

perceive inconvenience to the plaintiff but little injustice.

Therefore, we conclude under Schooner Peggy and its progeny

we must apply the substantive change in law as announced by

Liepelt. In this instance we find that the rule in Liepel/t requires

us to say it was erroneous for the trial court to fail to instruct on

the nontaxability of the award.

This does not, however, end our inquiry. The Supreme Court

found in Liepelt the failure to give the cautionary instruction on

nontaxation of the award was error. However, the Court also

found error in failing to allow the defendant railroad to prove

through its economist the projected net earnings after taxes. On

this combination of error, the Court found the error to be pre-

judicial requiring a new trial.

Jury instructions are subject to the ‘‘harmless error’’ rule,

General Insurance Co. of America v. Hercules Construction

Co., 385 F.2d 13, 24 (8th Cir. 1967), which requires reversal of a

— A-17 —

trial court judgment only if errors adversely affect the substan-

tial rights of the complaining party. Gilliam v. City of Omaha,

524 F.2d 1013, 1015 (8th Cir. 1975); Skogen v. Dow Chemical

Co., 375 F.2d 692, 701 (8th Cir. 1967). Under this rule, it is also

generally held that it is the appellant’s burden to establish the

prejudicial effect of the trial court’s refusal to give a requested

instruction. General Insurance Co., 385 F.2d at 24.

In McWeeney v. New York, New Haven & Hartford

Railroad, 282 F.2d 34 (2d Cir. 1960), the Second Circuit, in con-

sidering the prejudicial effect of a trial court’s failure to give a

nontaxability instruction, stated: ‘‘Before an appellate court

should hold that failure to give such a cautionary instruction

was reversible error, there ought to be evidence either that juries

in general increase recoveries on this account or that the par-

ticular jury did so.’’ Jd. at 39. The appellant in Mc Weeney fail-

ed to show any indication that the jury had increased the

recovery so the court refused to vacate the award.°®

This court in Raycraft v. Duluth, Missabe & Iron Range

Railway, 472 F.2d 27 (8th Cir. 1973), indicated that the pre-

judicial effect of a failure to give a nontaxability instruction

should be decided on the existence of evidence that the jury did,

in fact, operate under a false impression of the tax laws.’ Jd. at

33 n.10.

‘The Second Circuit relied on a Michigan Law School study,

Kalven, A Report on the Jury Project, Conference on the Aims and

Methods of Legal Research, University of Michigan Law School,

167-68 (1957), to conclude that juries, in general, do not increase

recoveries in the mistaken belief that they are subject to income tax.

McWeeney, 282 F.2d at 39 & n.15. See Rouse v. Chicago, R.1. & P.

R.R., 474 F.2d 1180, 1183-84 n.3 (8th Cir. 1973).

’The Third Circuit has reached a similar conclusion. Domeracki v.

Humble Oil & Ref. Co., 443 F.2d 1245, 1252 & n.15 (3d Cir. 1971).

on

The Supreme Court in Liepeit was also greatly concerned

with whether the jury increased the award on the misconceived

notion that any award would be taxable. The Liepelt jury

awarded the plaintiff $775,000 whereas the plaintiff’s own

economist testified to lost earnings of only $302,000. This large

disparity between the evidence and the verdict greatly influenc-

ed the Supreme Court in deciding that the failure of the trial

court to give a nontaxability instruction was prejudicial error.

Liepelt involved a wrongful death award and the plaintiff’s

proof concentrated on his loss of pecuniary earnings and con-

tribution to his dependents. In the present case, in addition to

being compensated for loss of future income that resulted from

losing his leg, Flanigan was also entitled to compensation for his

medical expenses and pain and suffering. The pain and suffer-

ing in this case was substantial. Plaintiff’s amputation ‘‘started

just under the knee or right below the knee and went right down

the leg and severed the bone just above the ankle.”’ Six wheels

of the train passed over his leg. Plaintiff testified that when the

train had come to a stop:

My foot was still attached and I felt down and I could

feel the blood was—my main vein was cut and there was

blood squirting out of it, so I took my shirt off and made a

tourniquet out of it and I tied it—there were sticks in the

yard and I tied it down and put the sticks in it and pulled it.

After he made a tourniquet, Flanigan was in severe pain and

had to crawl through the yard yelling for help. It was 45 minutes

before he was discovered. Plaintiff testified that he continues to

have considerable pain. Considering plaintiff’s pain and suffer-

ing, his medical expenses as well as his loss of earning potential,

the verdict does not indicate that the jury erroneously

speculated that plaintiff’s award would be subject to income

tax.

— A-19 —

In the present case the railroad was not precluded from offer-

ing relevant evidence of net earnings. Additionally, the defen-

dant has failed to point out any evidence that the jury inflated

its award on the erroneous belief that the award would be tax-

able. In fact, the evidence fully supports the jury’s verdict and

indicates that the jury was nor operating under any misconceiv-

ed notions of the tax laws. In the present case without evidence

of an excessive verdict and considering all of the other relevant

factors, we find the failure to give the instruction was not pre-

judicial to the rights of the parties. Under the present cir-

cumstances we hold the error was harmless.

Judgment affirmed.

A true copy.

Attest.

CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.

—_—s

EXHIBIT ‘‘B”’

UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

No. 79-1703

September Term, 1980

Edward L. Flanigan,

Appellee,

vs.

Burlington Northern Inc., etc.,

Appellant.

Appeal from the United States District Court

for the Eastern District of Missouri

The Court, having considered appellant’s petition for rehear-

ing and suggestions for rehearing en banc and being now fully

advised in the premises, hereby orders the petition for rehearing

and suggestions for rehearing en banc denied.

Judge Bright was disqualified and did not vote, and Judge

Ross would grant the petition for rehearing en banc.

October 16, 1980

— Al

EXHIBIT ‘‘C”’

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MISSOURI

EASTERN DIVISION

78-601C (3)

Edward L. Flanigan,

Plaintiff,

VS.

Burlington Northern, Inc., a Corporation,

Defendant.

JUDGMENT

This action came on for trial before the Court and a jury,

Honorable John F. Nangle, District Judge presiding, and the

issues having been duly tried and the jury having returned its

verdict in favor of the plaintiff and against the defendant:

It is ORDERED and ADJUDGED that the plaintiff recover

of the defendant, the sum of $500,000.00 dollars damages under

plaintiff’s cause of action with interest thereon at the rate of 6%

per annum and costs.

WILLIAM D. RUND, Clerk

U.S. District Court

By: EARL M. RANEY

Deputy Clerk

Dated at St. Louis, Missouri

this 28th day of June, 1979,

— A-22 —

<XHIBIT ‘‘D”’

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MISSOURI

EASTERN DIVISION

No. 78 - 601 C (3)

Edward L. Flanigan,

Plaintiff,

VS.

Burlington Northern, Inc.,

Defendant.

ORDER

This matter is before the Court upon post-trial motions filed

by defendant. Defendant has filed a motion for credit against

judgment, setting forth various amounts which defendant

claims to already have paid on plaintiff’s behalf. In response,

plaintiff asserts that he

has no knowledge or information with which to verify the

exact amounts of the claimed benefits and payments

allegedly made, and therefore respectfully suggests to the

Court that exact amounts claimed be appropriately

verified.

The Court further notes that defendant has failed to comply

with Rule 7 (B), Rules of the United States District Court for the

Eastern Judicial District of Missouri, in connection with its mo-

tion for credit against judgment.

Accordingly,

— A-23 —

IT IS HEREBY ORDERED that defendant shall, within

seven days of this date, appropriately verify the amount of

credits claimed in its motion for credit against judgment and file

a list of citations of authorities on which defendant relies in sup-

port of said motion, at which time this matter will be resubmit-

ted to the Court for consideration.

IT IS FURTHER ORDERED that defendant’s motion for

judgment in accordance with its motion for directed verdict, for

judgment notwithstanding the verdict or in arrest of judgment

be and is denied.

/s/ John F. Nangle

United States District Judge

Dated: July 18, 1979.

aS

EXHIBIT ‘‘E”’

UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

No. 79-1703

September Term, 1979

Edward L. Flanigan,

Appellee,

VS.

Burlington Northern Inc., a Corporation,

Appellant.

JUDGMENT

APPEAL FROM the United States District Court for the

Eastern District of Missouri.

THIS CAUSE came on to be heard on the original designated

record of the United States District Court for the Eastern

District of Missouri and briefs of the respective parties and was

argued by counsel.

ON CONSIDERATION WHEREOF, it is now here ordered

and adjudged by this Court, that the judgment of the said

District Court, in this cause, be, and the same is hereby, affirmed

in accordance with the Court’s opinion.

September 4, 1980

Order entered in accordance with opinion:

Robert D. St Vrain

Clerk, U.S. Court of Appeals, 8th Circuit.

— A-25 —

EXHIBIT ‘‘F’’

Defendant’s Instruction #2.

You are instructed that any award made to plaintiff as

damages in this case, if any award is made, is not subject to state

or federal income taxes, and you should not consider such taxes

in fixing the amount of any award made plaintiff, if any you

make.

— A-26 —

EXHIBIT ‘‘G”’

5. WHETHER THE DISTRICT COURT ERRED WITH

REGARD TO JURY INSTRUCTIONS AS FOLLOWS:

E. IN REFUSING THE RAILROAD‘S TENDERED IN-

STRUCTION TWO INSTRUCTING THE JURY THAT ANY

AWARD MADE TO FLANIGAN IS NOT SUBJECT TO IN-

COME TAXES.

The Railroad’s tendered instruction #2 states as follows:

‘You are instructed that any award made to plaintiff as

damages in this case, if any award is made, is not subject to state

or federal income taxes, and you should not consider such taxes

in fixing the amount of any award made plaintiff, if any you

make.’’ (D.R.p.35)

This instruction was offered by the Railroad and refused by

the court. (T.622) There is a split on the issue of whether or not

this instruction must be given if tendered. Two circuits have

held that the court must instruct that the jury award will not be

subject to personal income taxes when the instruction is offered.

The Third Circuit case is Domeracki v. Humble Oil and Refin-

ing, 443 F. 2d 1245 and the Ninth Circuit case is Burlington

Northern Inc. v. Boxberger, 529 F. 2d 284, 297 (9th Cir., 1975).

In harmony with this position is McWeeney v. New York, New

Haven and Hartford Railroad Co., 282 F. 2d 34 (2nd Cir.,

1960). Also in support of this position is Anderson v. United

Airlines, 183 F.S. 97 (D.C.Cal,1960). The two states most in-

volved with this litigation, that being Illinois, the site of the in-

jury, and Missouri, the site of the trial, are in accord with this

position. Dempsey v. Thompson, 251 S.W. 2d, 42, 45 (Supreme

Court Missouri, 1952) states that the court is convinced that an

instruction that an award of damages for personal injuries is not

subject to Federal or State Income taxes should have been given

in this Federal Employers’ Liability Act case. The court made its

ruling prospective only. Hall v. Chicago & N.W.Ry. Co., 110

— A-27 —

N.E. 2d 654, 661 (1st Dist.,1953) also holds that it is proper for

the court to instruct the jury concerning the fact that the award

would not be subject to income tax. This issue is currently pen-

ding before the United States Supreme Court in Norfolk and

Western v. Liepelt. Certiorari was granted on April 16, 1979 to

this case designated as No. 78-1323, 39 C.C.H. S. Ct. Bull.

p.1774.

The court erred in refusing to give the tendered instruction

that any award of damages is not subject to state of federal in-

come taxes. Such error is prejudicial to the Railroad. Blue v.

Western Railway of Alabama, 469 F. 2d 487, 497 (5th Cir.,

1972) requires that if a reversal be granted on a damages issue

such as this, the entire case be remanded for trial on all issues.

The court stated as follows:

“Because Western so strenuously and vigorously pressed

its mitigation defense of Blue’s contributory negligence

during the district court proceedings and because that

defense was not insubstantial, we have no alternative but

to remand this matter for a new trial on all issues.... Partial

reversals and remands in FELA cases are not favored

unless it conclusively appears that such a disposition will

not prejudice the party which has not prevailed on appeal.

We have no way of knowing to what extent the jury reduced

its award for Blue on the basis of a finding of Blue’s con-

tributory negligence. Such a situation would and should

have been avoided through the use of special inter-

rogatories under Rule 49, Federal Rules of Civil Pro-

cedure.”’

The failure to give to the jury offered instruction #2 of the

Railroad is prejudicial error which should be corrected by rever-

sai and remand for a new trial on all issues.

— A-28 —

EXHIBIT ‘‘H”’

NORFOLK AND WESTERN RAILWAY COMPANY,

Petitioner,

V.

KANDYTHE J. LIEPELT, Administratix, etc.

— US —, 62 L Ed 2d 689, 100 S Ct — 755 (1980)

[No. 78-1323]

Argued November 5, 1979. Decided February 19, 1980.

Opinion Of The Court

Mr. Justice Stevens delivered the opinion of the Court.

[1a, 2a] In cases arising under the Federal Employers’ Liability

Act,' most trial judges refuse to allow the jury to receive

evidence orf instruction concerning the impact of federal income

taxes on the amount of damages to be awarded. Because the

prevailing practice developed at a time when federal taxes were

relatively insignificant, and because some courts are now

following a different practice, we decided to answer the two

questions presented by the certiorari petition in this wrongful

death action: (1) whether it was error to exclude evidence of the

income taxes payable on the decedent’s past and estimated

future earnings; and (2) whether it was error for the trial judge

to refuse to instruct the jury that the award of damages would

not be subject to income taxation.

In 1973 a fireman employed by petitioner suffered fatal in-

juries in a collision caused by petitioner’s negligence.’ Respon-

' 35 State 65, 45 USC §§ 51 et seq. [45 USCS §§ 51 et seq.].

2 The issue of liability was vigorously contested at the trial and was

the subject of extensive consideration by the Appellate Court of Il-

linois, First District. See 62 Ill App 3d 653, 378 NE2d (1978). No

aspect of that issue, however, is now before us.

— A-29 —

dent, as administratrix of the fireman’s estate, brought suit

under the FELA to recover the damages that his survivors suf-

fered as a result of his death. In 1976, after a full trial in the Cir-

cuit Court of Cook County, the jury awarded respondent

$775,000. On appeal, the Appellate Court of Illinois held that it

was ‘‘not error to refuse to instruct a jury as to the nontaxability

of an award”’ and also that it ‘‘was not error to exclude evidence

of the effect of income taxes on future earnings of the

decedent.’’ 62 Ill App 3d, at 668-669, 378 NE2d, at 1245. The II-

linois Supreme Court denied leave to appeal.’

The evidence supporting the damage award included

biographical data about the decedent and his family and the ex-

pert testimony of an economist. The decedent, a 37-year-old

man, was living with his second wife and two young children

and was contributing to the support of two older children by his

first marriage. His gross earnings in the 11 months prior to his

death on November 22, 1973 amounted to $11,988. Assuming

continued employment, those earnings would have amounted to

$16,828.26 in 1977.

The expert estimated that the decedent’s earnings would have

increased at a rate of approximately five percent per year, which

would have amounted to $51,600 in the year 2000, the year of

his expected retirement. The gross amount of those earnings,

plus the value of the services he would have performed for his

family, less the amounts the decedent would have spent upon

himself, produced a total which, when discounted to present

value at the time of trial, amounted to $302,000.

Petitioner objected to the use of gross earnings, without any

deduction for income taxes, in respondent’s expert’s testimony

and offered to prove through the testimony of its own expert,

an actuary, that decedent’s federal income taxes during the

years 1973 through 2000 would have amounted to about

> App to Pet for Cert A27-A28.

— A-30 —

$57,000. Taking that figure into account, and making different

assumptions about the rate of future increases in salary and the

calculation of the present value of future earnings, petitioner’s

expert computed the net pecuniary loss at $138,327. As already

noted, the jury returned a verdict of $775,000.

Petitioner argues that the jury must have assumed that its

award was subject to federal income taxation; otherwise, it is

argued, the verdict would not have exceeded respondent’s ex-

pert’s opinion by such a large amount.‘ For that reason, peti-

tioner contends that it was prejudiced by the trial judge’s refusal

to instruct the jury that ‘“‘your award will not be subject to any

income taxes, and you should not consider such taxes in fixing

the amount of your award.”’

[3] Whether it was error to refuse that instruction, as well as

the question whether evidence concerning the federal taxes on

the decedent’s earnings was properly excluded, is a matter

governed by federal law. It has long been settled that questions

concerning the measure of damages in an FELA action are

federal in character. See, e.g., Michigan Cent. R. Co. v.

Vreeland, 227 US 59, 57 L Ed 417, 33 S Ct 192. This is true even

if the action is brought in state court. See, ¢.g., Chesapeake &

Ohio Railway Co. v. Kelly, 241 US 485, 491, 60 L Ed 1117, 36S

Ct 630.° In this case the Appellate Court of Illinois recognized

‘ Respondent argues that the excess is adequately explained by the

jury’s estimate of the pecuniary value of the guidance, instruction and

training that the decedent would have provided to his children.

5 One of the purposes of the Federal Employer’s Liability Act was

to “create uniformity throughout the Union’”’ with respect to

railroads’ financial responsibility for injuries to their employees. HR

Rep No. 1386, 60th Cong, Ist Sess, p 3 (1908). See also Dice v. Akron,

Canton and Youngstown R. Co., 342 US 359, 362, 96 L Ed 398, 72S

Ct 312, 47 Ohio Ops 53, 63 Ohio L Abs 161; Brady v. Southern

Railway, 320 US 476, 479, 88 L Ed 239, 64 S Ct 232; Hill, Substance

and Procedure in State FELA Actions—The Converse of the Erie

Problem?, 17 Ohio St LJ 384 (1956).

— A-31 —

that the practice then being followed in Illinois was subject to

change when this Court addresses the issue.© We do so now,

first considering the evidence question and then the proposed

instruction.

I

{[1b, 4] In a wrongful death action under the FELA, the

measure of recovery is ‘‘the damages . . . [that] flow from the

deprivation of the pecuniary benefits which the beneficiaries

might have reasonably received. . . .’’: Michigan Cent. R. Co. v.

Vreeland, supra, 227 US, at 70, 57 L Ed 417, 33 S Ct 192. The

amount of money that a wage earner is able to contribute to the

support of his family is unquestionably affected by the amount

of the tax he must pay to the Federal Government. It is his after-

tax income, rather than his gross income before taxes, that pro-

vides the only realistic measure of his ability to support his family.

It follows inexorably that the wage earner’s income tax is a rele-

vant factor in calculating the monetary loss suffered by his

dependents when he dies.

Although federal courts have consistently received evidence

of the amount of the decedent’s personal expenditures, see,

e.g., Kansas City Southern R. Co. v. Leslie, 238 US 599, 604, 59

L Ed 1478, 35 S Ct 844, and have required that the estimate of

future earnings be reduced by ‘‘taking account of the earning

power of the money that is presently to be awarded.’’

Chesapeake and Ohio v. Kelly, 241 US 485, 489, 60 L Ed 1117,

36 S Ct 630, they have generally not considered the payment of

income taxes as tantamount to a personal expenditure and have

* “The Supreme Court of the United States has not spoken on this

issue. Absent an authoritative pronouncement by that Court we will

follow the decisions of our own supreme Court in Raines v. New York

Central R. R. Co. (1972), 51 Ill 2d 428, 430, 283 NE2d 230, cert denied

(1972), 409 US 983, [34 L Ed 2d 247, 93 S Ct 322], and Hall v. Chicago

& North Western Ry. Co. (1955), 5 Ill 2d 135, 149-52, 125 NE2d

77....”” 62 Ill App 3d, at 668-669, 378 NE2d at 1245.

—

- A-2 —~

regarded the future prediction of tax consequences as too

speculative and complex for a jury’s deliberations. See, ¢.g.,

Johnson v. Penrod Drilling Co., 510 F2d 234, 236-237 (CAS

1975), cert denied, 423 US 839, 46 L Ed 2d 58, 96 S Ct 68, 96S

Ct 69.

[5a] Admittedly there are many variables that may affect the

amount of a wage earner’s future income tax liability. The law

may change, his family may increase or decrease in size, his

spouse’s earnings may affect his tax bracket, and extra income

or unforseen deductions may become available. But future

employment itself, future health, future personal expenditures,

future interest rates, and future inflation are also matters of

estimate and prediction. Any one of these issues might provide

the basis for protracted expert testimony and debate. But the

practical wisdom of the trial bar and the trial bench has

developed effective methods of presenting the essential elements

of an expert calculation in a form that is understandable by

juries that are increasingly familiar with the complexities of

modern life. We therefore reject the notion that the introduc-

tion of evidence describing a decedent’s estimated after-tax ear-

nings is too speculative or complex for a jury.’

Respondent argues that if this door is opened, other equally

relevant evidence must also be received. For example, she points

out that in discounting the estimate of future earnings to its pre-

sent value, the tax on the income to be earned by the damage

award is now omitted.' Logically, it would certainly seem cor-

7 [5b] This is not to say, however, that introduction of such

evidence must be permitted in every case. If the impact of future in-

come tax in calculating the award would be de minimis, introduction

of the evidence may cause more confusion that it is worth. Cf. Fed

Rule Evid 403.

* See McWeeney v. New York, N. H. & N. R. Co., 282 F2d 34, 37

(CA2 1960), cert denied, 364 US 870, 5 L Ed 2d 93, 81 S Ct 115.

— A-33 —

rect that this amount, like future wages, should be estimated on

an after-tax basis. But the fact that such an after-tax estimate, if

offered in proper form, would also be admissible does not per-

suade us that it is wrong to use after-tax figures instead of gross

earnings in projecting what the decedent’s financial contribu-

tions to his survivors would have been had this tragic accident

not occurred.

[6] Respondent also argues that evidence concerning costs of

litigation, including her attorneys’ fees, is equally pertinent to a

determination of what amount will actually compensate the sur-

vivors for their monetary loss. In a sense this is, of course, true.

But the argument that attorneys’ fees must be added to a plain-

tiff’s recovery if the award is truly to make him whole is con-

trary to the generally applicable ‘‘American Rule.’’ See Alyeska

Pipeline Co. v. Wilderness Society, 421 US 240, 247, 44 L Ed 2d

141, 95 S Ct 1612. The FELA, however, unlike a number of

other federal statutes,’ does not authorize recovery of at-

torneys’ fees by the successful litigant. Only if the Congress

were to provide for such a recovery would it be proper to con-

sider them. In any event, it surely is not proper for the Judiciary

to ignore the demonstrably relevant factor of income tax in

measuring damages in order to offset what may be perceived as

an undesirable or unfair rule regarding attorneys’ fees.'°

* See Civil Rights Act of 1964, Tit VII, § 706(k), 78 Stat 261, 42

USC § 2000e-5(k) [42 USCS § 2000e-5(k)]; Clayton Act § 4, 36 Stat

731, 15 USC § 15 [15 USCS § 15]; and numerous others collected in

Alyeska Pipeline Co. v. Wilderness Society, supra, 421 US, at

260-261, n 33, 44 L Ed 2d 141, 95 S Ct 1612.

'© The dissent takes the position that § 104(a)(2) of the Internal

Revenue Code, see nn 11-12, infra, which makes personal injury

awards nontaxable, ‘‘appropriates for the tortfeasor a benefit intended

to be conferred on the victim or his survivors.’’ Post, at —, 62 L Ed 2d

697. But we see nothing in the language and are aware of nothing in

the legislative history of § 104(a)(2) to suggest that it has any impact

whatsoever on the proper measure of damages in a wrongful death ac-

tion. Moreover, netting out the taxes that the decedent would have

paid does not confer a benefit on the tortfeasor any more than netting

out the decedent’s personal expenditures. Both subtractions are re-

— os —

II

[2b] Section 104(a)(2) of the Internal Revenue Code provides

that the amount of any damages received on account of per-

sonal injuries is not taxable income.'' The section is construed

to apply to wrongful death awards; they are not taxable income

to the recipient.'?

Although the law is perfectly clear, it is entirely possible that

the members of the jury may assume that a plaintiff’s recovery

in a case of this kind will be subject to federal taxation, and that

the award should be increased substantially in order to be sure

that the injured party is fully compensated. The Missouri

Supreme Court expressed the opinion that ‘*it is reasonable to

assume that many jurors will believe [that its verdict will] be

subject to such taxes.’” Dempsey v. Thompson, 363 Mo 339,

346, 251 SW2d 42, 45 (1952). And Judge Aldisert, writing for

the Third Circuit, agreed: |

‘“We take judiciai notice of the ‘tax consciousness’ of the

American public. Yet, we also recognize, as did the court

in Dempsey v. Thompson, 363 Mo 339, 251 SW2d 42

(1952), that few members of the general public are aware

of the special statutory exception for personal injury

awards contained in the Internal Revenue Code.

quired in order to determine ‘‘the pecuniary benefits which the

beneficiaries might have reasonably received. . . .’” Michigan Cent. R.

Co. v. Vreeland, supra, 227 US, at 70, 57 L Ed 417, 33 S Ct 192.

'' The statute contains an exception for the reimbursement of

medical expenses that have been taken as a deduction. The section

provides in relevant part:

‘Except in the case of amounts attributable to (and not in excess of)

deductions allowed under Section 213 (relating to medical, etc., ex-

pense) for any prior taxable year, gross income does not include—. . .

(2) the amount of any damages received (whether by suit or agree-

ment) on account of personal injuries or sickness. . . ag

'2 See Rev Rul 54-19, 1954-1 Cum Bull 179.

— A-35 —

‘* ‘(T]here is always danger that today’s tax-conscious

juries may assume (mistakenly of course) that the judg-

ment will be taxable and therefore make their verdict big

enough so that plaintiff would get what they think he

deserves after the imaginary tax is taken out of it.’

‘‘H. Harper & James, The Law of Torts § 25.12, at

1327-1328 (1956).’’ (Footnote omitted.) Domeracki v.

Humble Oil & Refining Co., 443 F2d 1245, 1251 (CA3

1971), cert denied, 404 US 883, 30 L Ed 2d 165, 92S Ct

212.

A number of other commentators have also identified that

risk.'?

In this case the respondents’ expert witness computed the

amount of pecuniary loss at $302,000, plus the value of the care

and training that decedent would have provided to his young

children; the jury awarded damages of $775,000. It is surely not

fanciful to suppose that the jury erroneously believed that a

large portion of the award would be payable to the Federal

Government in taxes and that therefore it improperly inflated

the recovery. Whether or not this speculation is accurate, we

agree with petitioner that, as Judge Ely wrote for the Ninth

Circuit,

**To put the matter simply, giving the instruction can do

no harm, and it can certainly help by preventing the jury

from inflating the award and thus overcompensating the

plaintiff on the basis of an erroneous assumption that the

judgment will be taxable.’’ Burlington Northern, Inc. v.

Boxberger, 529 F2d 284, 297 (CA9 1975).

'* See, e.g., Burns, A Compensation Award for Personal Injury or

Wrongful Death is Tax Exempt: Should We Tell the Jury?, 14 DePaul

L Rev 320 (1965); Feldman, Personal Injury Awards: Should Tax Ex-

empt Status Be Ignored?, 7 Ariz L Rev 272 (1966); Nordstrom, In-

come Taxes and Personal Injury Awards, 19 Ohio St LJ 212 (1958).

nha

We hold that it was error to refuse the requested instruction

in this case. That instruction was brief and could be easily

understood. It would not complicate the trial by making addi-

tional qualifying or supplemental instructions necessary. It

would not be prejudicial to either party, but would merely

eliminate an area of doubt or speculation that might have an im-

proper impact on the computation of the amount of damages.

The judgment is reversed and the case is remanded to the Ap-

pellate Court of Illinois for further proceedings consistent with

this opinion.

It is so ordered.

Separate Opinion

Mr. Justice Blackmun, with whom Mr. Justice Marshall

joins, dissenting.

In this action for wrongful death arising under the Federal

Employers’ Liability Act, 35 Stat 65, as amended, 45 USC §§

51-60 [45 USCS §§ 51-60], the Court today holds that if an

award is granted, federal income taxes on the decedent’s lost

earnings are to be taken into account and are to reduce the

amount of the award. The Court further holds that, on request,

the jury must be instructed that the award is not subject to

federal income tax.

I agree with neither ruling. In my view, by mandating adjust-

ment of the award by way of reduction for federal income taxes

that would have been paid by the decedent on his earnings, the

Court appropriates for the tortfeasor a benefit intended to be

conferred on the victim or his survivors. And in requiring that

the jury be instructed that a wrongful death award is not subject

to federal income tax, the Court opens the door for a variety of

admonitions to the jury not to ‘‘misbehave,’’ and unnecessarily

interjects what is now to be federal law into the administration

of a trial in a state court.

— *

In this day of substantial income taxes, one is sorely tempted,

in jury litigation, to accept the propriety of admitting evidence

as to a tort victim’s earnings net after estimated income taxes,

and of instructing the jury that an award will be tax-free. This,

it could be urged, is only common sense and a recognition of

financial realities.

Ordinarily, however, the effect of an income tax upon the

recipient of a payment is of no real or ultimate concern to the

payer. Apart from required withholding, it just is not the

payer’s responsibility or, indeed, ‘‘any of his business.’’ The

concept of ‘‘net after taxes’’ and the omnipresence of the tax

collector, to be sure, are present facts of life and are within the

constant awareness of both recipient and payer. But these fac-

tors do not change the basic character of an award for damages,

whether that award be one to compensate the surviving victim

for his injury, or one to compensate the deceased victim’s sur-

vivors, by way of statutory wrongful death benefit, for their

loss. The income tax effect should flow and be retained in its

own channel. Surely, it should not operate to assist the tort-

feasor by way of a benefit, perhaps even a windfall.

I

The employer-petitioner argues, and the Court holds, that

federal income taxes that would have been paid by the deceased

victim must be subtracted in computing the amount of the

wrongful death award. Were one able to ignore and set aside the

uncertainties, estimates, assumptions, and complexities involved

in computing and effectuating that subtraction, this might not

be an unreasonable legislative proposition in a compensatory

tort system. Neither petitioner nor the Court, however,

recognizes that the premise of such an argument is the nontax-

ability, under the Internal Revenue Code, of the wrongful death

award itself.

— A-38 —

By not taxing the award, Congress has bestowed a benefit. '

Although the parties disagree over the origin of the tax-free

status of the wrongful death award,’ it is surely clear that the

lost earnings could be taxed as income. Cf. Commissior* v.

Glenshaw Glass Co., 348 US 426, 430-431, 99 L Ed 483, 75S Ct

473 (1955). See, generally, M. Chirelstein, Federal Income Tax-

ation 39-40 (1977). In my view, why Congress created this

benefit under one statute is relevant in deciding where the

benefit should be allocated under another statute enacted by

Congress.’

' The parties agree that these awards are not taxable. Of course, it

would not be in the interest of either party to take the position that the

award is taxable.

? Respondent maintains that a wrongful death award is within the

exclusion of § 104(a)(2) of the Internal Revenue Code of 1954, 26 USC

§ 104(a)(2) [26 USCS § 104(a)(2)], which provides that ‘‘gross income

does not include . . . the amount of any damages received (whether by

suit or agreement) on account of personal injuries or sickness.’’ Brief

for Respondent 8-9, and n 2. Petitioner, on the other hand, contends

that a wrongful death award is not, in the words of the statute,

‘*received . . . on account of personal injuries.’’ Petitioner points to

an early ruling that wrongful death damages are not within the Code’s

definition of income because they merely replace contributions the

decedent’s relatives would have received from the decedent. IT 2420,

VII-2 Cum Bull 123 (1928): see Rev Rul 54-19, 1954-1 Cum Bull 179.

Alternatively, petitioner argues that even if wrongful death damages

are covered by § 104(a)(2), Congress’ purpose in enacting that subsec-

tion was not to aid tort victims. Rather, § 104(a)(2) can be traced to

Congress’ concern in 1918 that personal injury damages were not in-

come within the meaning of the Sixteenth Amendment, citing HR Rep

No. 767, 65th Cong, 2d Sess, 9-10 (1918). Brief for Petitioner 31-32, n

23.

> Petitioner argues that a decision in this case that would rest on

Congress’ purpose not to subject wrongful death awards to federal in-

come taxation would ‘‘fundamentally alter all forms of injury com-

pensation in this country,’’ Reply Brief for Petitioner 10-11, since this

nontaxabiiity is not limited to awards under the FELA. My position,

however, is merely that the policies embodied in one federal statute

are relevant in aid of the interpretation of another federal statute. Ab-

sent a more explicit statement of Congress’ intent, I would not infer a

congressional purpose to override the States’ traditional power to

define the measure of damages applicable to state-created causes of

action.

— A-39 —

While Congress has not articulated its reasons for not taxing a

wrongful death award, it is highly unlikely that it intended to

confer this benefit on the tortfeasor. Two more probable pur-

poses for the exclusion are apparent. First, taxing the award

could involve the same uncertainties and complexities noted by

respondent and the majority of the courts of this country as a

reason for not taking income taxes into account in computing

the award. Congress may have decided that it is simply not

worthwhile to enact a complex and administratively burden-

some system in order to approximate the tax treatment of the in-

come if, in fact, it had been earned over a period of time by the

decedent. Second, Congress may have intended to confer a

humanitarian benefit on the victim or victims of the tort. One

District Court has reasoned:

**The court can divine no societal purpose that would be

furthered by awarding wrongdoing defendants with the

benefit of this Congressional largesse. A societal purpose

would be served by benefiting innocent victims of tortious

conduct. Indeed, since the victims’ chances of needing

public relief are thereby diminished, this concern would be

greater, not less, in the case of death, where the loss of ear-

ning capacity is total. This court therefore concludes that

Congress, as with all exemptions under Section 104, ‘.. .

intended to relieve a taxpayer who has the misfortune to

become ill or injured... .’ ’’ Huddell v. Levin, 395 F Supp

64, 87 (NJ 1975),* quoting Epmeier v. United States, 199

F2d 508, 511 (CA7 1952), quoted in turn in Haynes v.

United States, 353 US 81, 84, n 3, 1 L Ed 2d 671, 77S Ct

649 (1957).

See also Comment, Income Tax Effects on Personal Injury

Recoveries, 30 La L Rev 672, 685 (1970); Note, 69 Harv L Rev

1495, 1496 (1956); Note, Taxation of Damage Recoveries from

Litigation, 40 Cornell LQ 345, 346 (1955).

* Vacated on other grounds, 537 F2d 726 (CA3 1976).

—S

Whichever of these concerns it was that motivated Congress,

transfer of the tax benefit to the FELA tortfeasor-defendant is

inconsistent with that purpose. If Congress felt that it was not

worth the effort to «stimate the decedent’s prospective tax

ability on behalf of the public fisc, it is unlikely that it would

want to require this effort on behalf of the tortfeasor. And Con-

gress would not confer a humanitarian benefit on tort victims or

their survivors in the Internal Revenue Code, only to take it

away from victims or their survivors covered by the FELA. I

conclude, therefore, that any income tax effect on lost earnings

should not be considered in the computation of a damages

award under the FELA.

II

The Court concludes that, as a matter of federal law, the jury

in an FELA case must be instructed, on request, that the

damages award is not taxable. This instruction is mandated, it is

said, because ‘‘it is entirely possible that the members of the

jury may assume that a plaintiff’s recovery . . . will be subject to

federal taxation, and that the award should be increased

substantially in order to be sure that the injured party is fully

compensated.’’ Ante, at —, 62 L Ed 2d 695, The Court finds it

‘‘surely not fanciful to suppose’’ that the jury acted on that

assumption in this case. Ante, at — - —, 62 L Ed 2d 696.

The required instruction is purely cautionary in nature. It

does not affect the determination of liability or the measure of

damages. It does nothing more than call a basically irrelevant fac-

tor to the jury’s attention, and then directs the jury to forget

that matter. Even if federal law governed such an admonition to

the jury not to misbehave, the instruction required by the Court

seems to me to be both unwise and unjustified, and almost an

affront to the practical wisdom of the jury.

It also is ‘‘entirely possible’ that the jury ‘‘may’’ increase its

damages award in the belief that the defendant is insured, or

—

that the plaintiff will be obligated for substantial attorney’s

fees, or that the award is subject to state (as well as federal) in-

come tax, or on the basis of any number of other extraneous

factors. Charging the jury about every conceivable matter as to

which it should not misbehave or miscalculate would be burden-

some and could be confusing. Yet the Court’s desicion today

opens the door to that possibility. There certainly is no evidence

in this record to indicate that the jury is any more !ikely to act

upon an erroneous assumption about an award’s being subject

to federal income tax than about any other collateral matter.

Although the Court suggests that the difference in the expert’s

estimation of the pecuniary loss and the total amount of the

award represents inflation of the award for federal income

taxes, ante, at — - —, 62 L Ed 2d 696, this is pure surmise. The

jury was instructed that it could compensate for factors on

which experts could not place a precise dollar value, and it is

‘‘entirely possible’ that these, instead, were the basis of the

award.

In any event, it has long been settled that the giving of cau-

tionary instructions is governed by state law when an FELA ac-

tion is brought in state court. ‘‘[Q]uestions or procedure and

evidence [are] to be determined according to the law of the

forum [in cases arising under the FELA].’’ Chesapeake & Ohio

R. Co. v. Kelly, 241 US 485, 491, 60 L Ed 1117, 36 S Ct 630

(1916). This Court, to be sure, has asserted federal control over

a number of incidents of state trial practice that might appear to

be procedural, and has done so out of concern, apparently, for

protecting the rights of FELA plaintiffs. See, e.g., Brown v.

Western R. of Alabama, 338 US 294, 94 L Ed 100, 70S Ct 105

(1949) (a State cannot apply, in an FELA case, its usual rule that

pleadings are construed against the pleader); Dice v. Akron, C.

& Y.R. Co., 342 US 359, 96 L Ed 398, 72 S Ct 312, 47 Ohio Ops

53, 63 Ohio L Abs 161 (1952) (FELA plaintiff is entitled to a

jury trial in state court notwithstanding a contrary state rule);

C. Wright, Law of Federal Courts 195-196 (3d ed 1976); Hill,

—

Substance and Procedure in State FELA Actions—The Con-

verse of the Erie Problem?, 17 Ohio St LJ 384 (1956). I agree, of

course, that state rules that interfere with federal policy are to

be rejected, even if they might be characterized as

‘*procedural.’’ See, e.g., Note, State Enforcement of Federally

Created Rights, 73 Harv L Rev 1551, 1560-1561 (1960). See

generally Note, Procedural Protection for Federal Rights in

State Courts, 30 U Cin L Rev 184 (1961). I cannot conclude,

however, that a purely cautionary instruction to the jury not to

misbehave implicates any federal interest. This issue truly can be

characterized as one of the ‘‘ordinary incidents of state pro-

cedure,’’ Dickinson v. Stiles, 246 US 631, 633, 62 L Ed 908, 38S

Ct 415 (1918), which should be governed by state law.

Since the law of Illinois, where this case arose, is that it is not

error to refuse to instruct the jury as to the nontaxability of the

award, Raines v. New York Central R. Co., 51 Ill 2d 428, 430,

283 NE2d 230, 232, cert denied, 409 US 983, 34 L Ed 2d 247, 93

S Ct 322 (1972), and since I believe the trial court correctly ex-

cluded evidence of the prospective tax liability of the deceased

victim, I would affirm the judgment of the Appellate Court of

Illinois.

~— Ale —

EXHIBIT ‘‘T’”’

Section 104(a)(2) of the Internal Revenue Code provides, and

numerous court decisions thereunder hold, that damage awards

for personal injuries or wrongful death are tax-exempt. The

‘*probable purposes for the exclusion’’ are persuasively spelled

out in the dissenting opinion. (pp. 3-4). Responding to that con-

tention, the majority states, (ft, nt. 10):

‘‘But we see nothing in the language and are aware of

nothing in the legislative hisotry of §104(a)(2) to suggest

that it has any impact whatsoever on the proper measure

of damages in a wrongful death action. Moreover, netting

out the taxes that the decedent would have paid does not

confer a benefit on the tortfeasor, any more than netting

out the decedent’s personal expenditures. Both subtrac-

tions are required in order to determine the ‘pecuniary

benefits which the beneficiaries might have reasonably

received...” ’’ (Opin. p. 6).

The short answer to the majority’s argument is that in the one

case Congress mandated that taxes should not be ‘‘netted out’’

in the case of a damage award against the tortfeasor, whereas

the FELA requires the ‘‘netting out of decedent’s personal ex-

penditures.’’

f

The ruling of the Court should be prospective Only.

The Court may take judicial notice that literally hundreds, if

not thousands, of FELA cases are currently pending in various

jurisdictions throughout the United States. Undeniably those

cases were tried in reliance upon the rule prevailing in a majority

of jurisdictions.

If the instant opinion stands in its present form, the decision

will force remands of al/ of those cases. The expense and in-

convenience to innumerable parties will be enormous.

—— ee

In these circumstances respondent respectfully suggests that

the Court apply the rule of Great Northern Ry. Co. v. Sunburst

Oil Co., 287 U.S. 358, 53 S. Ct. 145 (1932), and Linkietter v.

Walker, 381 U.S. 318, 85 S. Ct. 1731 (1965). As noted in

Linkletter, the prospective ruling should not even apply to the

immediate parties before the Court, otherwise the ruling will

govern all other cases pending on appeal. (381 U.S. at 621-622).

See also England v. Louisiana State Board of Medical Ex-

aminers, 375 U.S. 411, 84S. Ct. 461 (1964) and James v. United

States, 366 U.S. 213, 81 S. Ct. 1052.

In this connection it should also be noted, and in support of

its holding that a cautionary income tax instruction be given,

Mr. Justice Stevens cites Dempsey v. Thompson, 363 Mo. 339,

231 S.W.2d 42 (1952) and Domerackie v. Humble Oil & Refin-

ing Co., 443 F.2d 1245 (3rd Cir. 1971). (Opin. p. 7).

Significantly, in each of those two cases the Court held that

the rule there adopted was to be given prospective effect only

and not to be applied to the parties before the Court. Simple

justice and equity require similar treatment in the case at bar.*

A prospective application of the instant decision would help

preserve the orderly administration of justice in 34 States, 5

Federal Circuits and the District of Columbia, all of whom

follow the ‘‘gross earnings’’ rule, and exclude customary in-

struction on income tax impact.

* In 1B Moore Federal Practice. 40.402 (2nd Ed. 1974). Professor

Moore suggests that two factors should be considered: where there has

been a justifiable reliance upon the old rule and the impact of a

retroactive application of a new rule, both on litigants and on the ad-

ministration of justice as a whole.

In the case at bar the majority commences its opinion with the

observation that, ‘‘most trial judges refuse to allow the jury to receive

evidence or instructions concerning the impace of federal income taxes

on the amount of damages to be awarded,’’ (Opin. 1). Since the rule

against giving such instructions has been widely and almost universally

applied prior to the decision here other than a prospective application,

will be greatly detrimental to many litigants.

— hag

The remaining matter of advising the jury as to the taxfree

status of any award, is a cautionary, procedural instruction.

Notwithstanding Justice Stewart’s inquiry during oral argu-

ment, no case, State or Federal, has ever been reversed solely on

the ground of failure to give such instruction. The Boxberger

decision reversed on two grounds: failure to admit evidence of

future taxes and refusal to give the tax-free cautionary instruc-

tion. If Boxberger had involved only the single issue of failure to

give the instruction, it can be confidently assumed that there

would have been no reversal, but a ruling for prospective effect

exactly as has bene done in every jurisdiction in this country

prior to the instant decision. Respondent respectfully asks that

the same prospective application of the instruction rule be ac-

corded her.