# Petition — Burlington Northern Inc. v. Flanigan > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385007_1068%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition - **Published:** January 1, 1981 - **Citation:** 450 U.S. 921 ## Text 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 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 — 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. --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385007_1068%3A1. Public record. Not legal advice.