Amicus Curiae Brief — United States v. Burke

FY. Ww

DEC 20 1991

No. 91-42 OFFiVE OU! ‘é Oli

ee _——

a

IN THE

Supreme Court of the United States

OCTOBER TERM, 1991

UNITED STATES OF AMERICA,

Petitioner,

Ve

THERESE A. BURKE, et al.,

Respondents.

On Writ of Certiorari to the

United States Court of Appeals

for the Sixth Circuit

BRIEF AMICUS CURIAE OF THE

EQUAL EMPLOYMENT ADVISORY COUNCIL

IN SUPPORT OF THE RESPONDENTS

ROBERT E, WILLIAMS

DouGLas 8. MCDOWELL *

MCGUINESsS & WILLIAMS

1015 Fifteenth Street, N.W.

Suite 1200

Washington, D.C. 20005

(202) 789-8600

Attorneys for Amicus Curiae

Equal Employment Advisory

Council

* Counsel of Record

a ee eS NN ee eS

WILSOM - Eras Printine Co.. Inc. - 789-0096 - WASHINGTON. D.C. 20001

TABLE OF CONTENTS

TABLE OF AUTHORITIES

INTEREST OF THE AMICUS CURIAE

STATEMENT OF THE CASE |...

SUMMARY OF ARGUMENT ....WW000 0.

ARGUMENT

THE COURT OF APPEALS CORRECTLY

RULED THAT TITLE VII CLAIMS ARE FOR

PERSONAL INJURIES AND THUS MONETARY

SETTLEMENTS FOR SUCH CLAIMS ARE EX-

EMPT FROM TAXATION UNDER THE EX.

EMPTION FOUND IN SECTION 104(a) (2) OF

THE INTERNAL REVENUE CODE ............

A.

This Court’s Decisions in Lukens Steel and

Wilson Held That Civil Rights Statutes (Sec-

tions 1981 and 1983) Protect Personal Injuries

That Are Characterized as Statutory Torts

Like Sections 1981 and 1983, Title VII Claims

Involve Personal Injury Actions Exempt From

AER crates cael dace Ree ee eae ee fecasebiebenees

. Potential Substantive Conflicts Between Title

VII and Section 1981 Have Been Resolved in

Favor of the Substantive Requirements and

Protections of Title V'I ..................

CONCLUSION

(i)

6

13

17

22

TABLE OF AUTHORITIES

CASES Page

Alexander v. Gardner-Denver Co., 415 U.S. 36

(1974) a

Brady Vv. Bristol-Meyers, Inc., 459 F.2d 621 (8th

+ OF : | eC ES 17

Burke v. United States, 929 F.2d 1119 (6th Cir.

1991), cert. granted, No. 91-42 ....._ CET 5, 13

Byrne v. Commissioner, 883 F.2d 211 (3d Cir.

1989) . 9,12

Chance v. Beard of Examiners, 534 F.2d 993 (2d

Cir. 1976), mod. on other grounds, 534 F.2d

1007 (2d Cir. 1976), cert. denied, reh’g denied,

Re SS i) , j er. 20

Curtis v. Loether, 415 U.S. 189 (1974)... ——

Davis v. Passman, 442 U.S. 228 (1979) ... OB 122

Delta Air Lines v. August, 450 U.S. 346 (1981) 3

Driscoll v. Jefferson, 11 Fair Empl. Prac. Cas.

(BNA) 308 (E.D. Mich. 1975) ___. 20

Espinoza v. Farah Mfq. Co., 11 Fair Empl. Prac,

Cas. (BNA) 696 (W.D. Tex. 1975) ar 18

Evans v. Jeff D., 475 U.S. 717 (1986) ; 3

Furnco Constr. Corp. v. Waters, 438 U.S. 567

(1978) ) ee,

Gairola v. Department of Gen. Servs., 753 F.2d

1281 (4th Cir. 1985) ERIS eee S 16

General Bldq. Contractors Ass’n, Inc. v. Pennsyl-

vania, 458 U.S. 375 (1982) 4

Goodman v. Lukens Steel Co., 482 U.S. 656

(1987) ES araE K+ « passim

Creat Amer. Fed. Sav. & Loan Ass'n v. Novotny,

442 U.S. 366 (1979) 3-4

Hinton v. Lee Way Motor Freight, Inc., 412 F.

Supp. 625 (W.D. Okla. 1975) _. 20

Huchschen v. Department of Health & Social

Servs., 716 F.2d 1167 (7th Cir. 1983) 16

Suiisinetitisial Bhd. of Teamsters v. United States,

431 U.S. 224 (1977) 3, 21

Johnson v. City of Cincinnati, 450 F.2d 796 (6th

Cir. 1971) 18

iii .

TABLE OF AUTHORITIES—Continued

Page

Johnson v. Railway Express Agency, Inc., 421

U.S. 454 (1975) Sececenas en ee 7, 13, 14

Lewis v. Central Piedmont Community College,

689 F.2d 1207 (4th Cir. 1982), cert. denied, 460

acco scccecdeeneucscvceveecsesece 16

Lewis v. University of Pittsburgh, 125 F.2d 910

(3d Cir. 1983), cert. denied, 469 U.S. 892

CTs cnencsencevoncecs 16

Lincoln v. Board of Regents of the Univ. Sys. of

Ga., 697 F.2d 928 (11th Cir. 1983), cert. denied,

464 U.S. 826 (1983) = 16

Lytle v. Household Mfqg., Ine., 110 S. Ct. 1331

(1990) ree 3

Marek v. Chesney, 473 U.S. 1 (1985) 3

McDonnell Douglas Corp. v. Green, 411 U.S. 792

(1973) . , 15

New York Transit Auth. v. Beazer, 440 U.S. 568

(1979) aa 15

Patterson v. American Tobacco Co., 535 F.2d 257

(4th Cir. 1976), cert. denied, 429 U.S. 920

(1976) |. ae +

Patterson v. McLean Credit Corp., 109 8. Ct. 2363

(1989) aie oe” Me

Pistillo v. Commissioner, 912 F.2d 145 (6th Cir.

1990) | . | Cee .|6BUL

Price Waterhouse v. Hopkins, 109 S. Ct. 1775

(1989) ; 3, 6, 12

Rickel v. Commissioner, 900 F.2d 655 (3rd Cir.

1990) &

Rivera v. City of Wichita Falls, 665 F.2d 531 (5th

Cir. 1982) ......... : ots 16

Sabala v. Western Gillette, Inc., 516 F.2d 1251

(5th Cir. 1975), cert. granted, decision vacated,

case remanded, 431 U.S. 951 (1977) - conte 21

Sanders v. Dobbs House, Ine., 431 F.2d 1097 (5th

Cir. 1970), reh’g denied, 431 F.2d 1097, cert.

denied, 401 U.S. 948 (1971) ........................00..... 17

iv

TABLE OF AUTHORITIES—Continued

Page

Setser v. Novak Investment Company, 657 F.2d

962 (8th Cir. 1981), cert. denied, 454 U.S. 1064

(1981) . ad he SD a oe a 21

Shield Club v, City of Cleveland, 13 Fair Empl.

Prac. Cas. (BNA) 533 (N.D. Ohio 1974) 18

Terrell v. United States Pipe & Foundry Co., 6

Fair Empl. Prac. Cas. (BNA) 1027 (N.D. Ala.

1973) ...... . 18

Texas Dept. of Community Affairs v. Burdine, 450

U.S. 248 (1981) — 14

United States v. Rast Tex. Motor Freight Sys., 564

F.2d 179 (5th Cir. 1977) 4,21

United States v. Trucking Management, Inc., 662

F.2d 36 (D.C. Cir. 1981) : 4

Waters v. Wisconsin Steel Works, 502 F.2d 1309

(7th Cir. 1974), cert. denied, 425 U.S. 997

(1976) 18

Whiting v. Jackson State Univ., 616 F.2d 116

(5th Cir. 1980) 16

Wilson ». Garcia, 471 U.S. 261 (1985) 5, 6, 8,9

STATUTES

Age Discrimination in Employment Act of 1967,

29 U.S.C. 621 ef seq. 2

Civil Rights Act of 1964, Title VII, 42 U.S.C.

2000 ef seq. 2

§$ 703 (h) 18

Internal Revenue Code, 26 U.S.C. © 104 (a) (2) passim

42 U.S.C. § 1981 . 2

FEDERAL REGULATIONS

Exec. Order No. 11,246, 30 Fed. Reg. 12,319

(1965), as amended by 32 Fed. Reg. 14,302

(1967) 2

OTHER AUTHORITIES

Brief for the United States, Johnson v. Railway

Express Agency, Inc., 421 U.S. 454 (1975) 7,13, 14

Vv

\

TABLE OF AUTHORITIES—Continued

Page

Brief for the United States, Patterson v. McLean

Credit Union, 109 S.Ct. 2363 (1989) 0000000... 14,15

MISCELLANEOUS

Comment, Arbitral Deference and the Right to

Make and Enforce Contracts under 42 U.S.C.

§ 1981, 82 N.W. U.L. Rev. 109 (1987) .. aaa 10

Reiss, Requiem for an “Independent Remedy’:

The Civil Rights Acts of 1866 and 1871 as

Remedies for Employment Discrimination, 50

ae ee SE: , | eee nrnn eer eenee 17

IN THE

Supreme Court of the United States

OCTOBER TERM, 1991

No. 91-42

UNITED STATES OF AMERICA,

. Petitioner,

THERESE A. BURKE, et al.,

Respondents.

On Writ of Certiorari to the

United States Court of Appeals

for the Sixth Circuit

BRIEF AMICUS CURIAE OF THE

EQUAL EMPLOYMENT ADVISORY COUNCIL

IN SUPPORT OF THE RESPONDENTS

The Equal Employment Advisory Council (EEAC)

respectfully submits this brief amicus curiae in sup-

port of the respondent pursuant to Supreme Court

Rule 37. Letters of consent of the Solicitor General

and the respondent have been filed with the Clerk of

the Court.

INTEREST OF THE AMICUS CURIAE

EEAC is a nationwide association of employers and

trade associations, organized in 1976 to promote

sound approaches to the elimination of employment

discrimination. Its membership includes over 250

2

major U.S. companies, as well as several associations

which themselves have hundreds of corporate mem-

bers. The Councii’s governing body is a Board of Di-

rectors composed of experts in the field of equal em-

ployment opportunity. Their combined experience

gives EEAC an unmatched depth of knowledge of the

practical as well as the legal aspects of equal employ-

ment policies and requirements. The members of

EEAC are firmly committed to the principles of non-

discrimination and equal employment opportunity.

As employers, EEAC’s members are subject to

various equal employment laws, including Title VII

of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et

seq., the Age Discrimination in Employment Act of

1967 (ADEA), as amended, 29 U.S.C. § 621 et seq.,

42 U.S.C. § 1981, Executive Order 11,246 (30 Fed.

Reg. 12,319 (1965), as amended by 32 Fed. Reg.

14,302 (1967)), and other federal, state and local

statutes, orders and regulations prohibiting employ-

ment discrimination. As respondents in discrimina-

tion proceedings, many of EEAC’s members will be

involved in monetary settlements and remedial orders

involving employment discrimination claims, charges

and lawsuits.

Thus, EEAC’s members have a direct interest in

the issue presented here: whether payments received

by an individual in settlement of a Title VIL claim

are excludable from the individual’s gross income

under Section 104(a)(2) of the Internal Revenue

Code as “damages received . . . on account of per-

sonal injuries.”” Indeed, the potential impact of this

case extends beyond Title VII. The Solicitor Gen-

eral’s petition “agree[s] with the court of appeals

that there is no valid basis for distinguishing the tax

3

treatment of back pay under Title VII and under the

ADEA.” Pet. at 17.'

The Court’s decision will have a direct and sub-

stantial impact on the ability of parties to settle em-

ployment discrimination claims, as the degree of tax

liability has an absolute bearing on the amount of

settlement or monetary relief that an individual will

take home after tax liability has been calculated.

Moreover, to the extent that the government now is

refusing to settle employment discrimination cases

unless taxes are deducted from the settlement amount,

there is a disparity in settlement practices between

cases involving the government and those settled by

private entities.

The issues presented here require comparisons be-

tween the antidiscrimination and remedial schemes

of the various statutes at issue in this case, and in

other cases involving settlement of such claims. EEAC

has been involved as amicus curiae in numerous cases

involving those statutes. See, e.g., Goodman v. Lukens

Steel Co., 482 U.S. 656 (1987) (state tort statute of

limitations applies to claims under 42 U.S.C. § 1981) ;

Lytle v. Household Mfg., Inc., 110 8. Ct. 1331 (1990)

(court’s Title VII determination did not stop right

to Section 1981 jury trial on same issue) ; Patterson

v. McLean Credit Corp., 109 S. Ct. 2363 (1989);

Price Waterhouse v. Hopkins, 109 8S. Ct. 1775 (1989) ;

Evans v. Jeff D., A475 U.S. 717 (1986); International

Bhd. of Teamsters v. United States, 431 U.S. 324

(1977); Delta Air Lines v. August, 450 U.S. 346

(1981) (Rule 68); Marek v. Chesney, 473 U.S. 1

(1985) (Rule 68); Great Am. Fed. Sav. d& Loan

1“Pet.” references are to the petition for a writ of cer-

tiorari filed by the Solicitor General in this Case.

4

Ass'n v. Novotny, 442 U.S. 366 (1979) (comparison

of Title VII and 42 U.S.C. § 1985(3); General Bldg.

Contractors Ass’n v. Pennsylvania, 458 U.S. 375

(1982) (Section 1981 requires proof of intentional

discrimination); United States v. East Tex. Motor

Freight Sys., 564 F.2d 179 (5th Cir. 1977) (applied

Title VII seniority standards to Executive Order

11246); and United States v. Trucking Management,

Inc., 662 F.2d 36 (D.C. Cir. 1981) (same).

Accordingly, because of its past experience with

these issues, EEAC is well qualified to brief the Court

in this case. EEAC’s brief will be directed toward

arguing that Title VII claims are personal injury

claims, thus falling within the Section 104 (a) (2)

exemption. Cf. Goodman v. Lukens Steel Co., 482

U.S. 656 (1987).

STATEMENT OF THE CASE

This case involves the issue of whether monetary

amounts received in settlement of a Title VII sex dis-

crimination action are excludable from taxable in-

come. Section 104(a)(2) of the Internal Revenue

Code provides:

(a) In general.—Except in the case of amounts

attributable to (and not in excess of) deductions

allowed under section 213 (relating to medical,

etc., expenses) for any prior taxable year, gross

income does not include— .. .

(2) the amount of any damages _ received

(whether by suit or agreement and whether as

lump sums or as periodic payments) on account

of personal injuries or sickness .. .

26 U.S.C. $104(a)(2) (emphasis added).

The taxpayers herein brought this action seeking

refunds of federal income and social security taxes

5

withheld from payments received from their employer

in settlement of a Title VII sex discrimination action.

The Sixth Circuit examined “the nature of the injury

to determine whether the injury and claim are tort-

like in nature, and not whether the consequences of

the injury resulted in an award of compensatory dam-

ages or damages for back pay.” Burke v. United

States, 929 F.2d 1119, 1121 (6th Cir. 1991), cert.

granted, No. 91-42.

The Sixth Circuit held that the monetary settle-

ment here was for “personal injury” and thus ex-

empt from taxation under Section 104(a)(2). The

court stated that:

“[{e]ourts have long held that injuries resulting

from invidious discrimination, be it on the basis

of race, sex, national origin or some other un-

lawful category, are injuries to the individual

rights and dignity of the person. See, e.g., Good-

man v. Lukens Steel Co., 482 U.S. 656, 661

(1986) (race discrimination, challenged under

$ 1981, is a fundamental injury to the individ-

ual rights of the person; cf. Wilsor v. Garcia,

471 U.S. 261, 277 (1985) (analogizing a viola-

tion of the Civil Rights Acts of 1871 to a viola-

tion of the fourteenth amendment which sounds

in tort as an injury to the person); Curtis

v. Loether, 415 U.S. 189, 195-96 n. 10 (1974)

(analogizing racial discrimination to a “digni-

tary tort.”). This long-held view of the tort-

like nature of the injury resulting from unlaw-

ful discrimination has led this court and others

to the conclusion that damages resulting from

an action for unlawful discrimination are “dam-

ages on account of personal injury” for the pur-

poses of §$ 104(a)(2).

929 F.2d at 1121-22. (citations omitted) Based on

this reasoning, the Sixth Circuit held that the with-

6

holding of federal taxes from the Title VII settlement

damages giving rise to this taxpayer action was im-

proper, 929 F.2d at 1124.

This amicus curiae brief addresses in more detail

the case and statutory authority holding that the

personal injury nature of claims brought under 42

U.S.C. $$ 1981 and 1983 is equally applicable to

Title VII claims.

SUMMARY OF ARGUMENT

The court below correctly ruled that monetary set-

tlements of Title VII claims are “on account of per-

sonal injuries” and thus exempt from taxation under

the exemption found in Section 104(a)(2) of the

Internal Revenue Code. Numerous courts have

agreed that this exemption does not lose its force

even if the injury involves back pay, as the nature of

the injury is tort-like in nature, whatever the form

of injury resulting from alleged violation.

This Court repeatedly has held that the rights pro-

tected by the civil rights statutes are personal in

nature. For example, Wilson v. Garcia, 471 U.S. 261

(1985) and Goodman v. Lukens Steel Co., 471 U.S.

261 (1987) held that state tort statutes of limita-

tions apply to suits brought under 42 U.S.C. $§ 1981

and 1983. The Court rejected assertions that dis-

crimination claims essentially are contractual in na-

ture, and instead found that these statutes protect

against conduct that involves ‘a fundamental injury

to the individual rights of a person.” Lukens Steel,

482 U.S. at 661-62. Likewise, Title VII involves a

statutory employment “tort” that is “contrary to pub-

lic policy and harmful to society as a whole.” Price

7

Waterhouse v. Hopkins, 109 5, Ct. 1775, 1798 (T9S9)

(O’Connor, J., concurring ).

Universally, court decisions have construed

Title VIL and Section 1981 as providing identical

causes of actions on issues where their substantive

provisions both apply. Indeed, in its amicus curiae

brief in Johnson v. Railway Repress Agency Ince., the

Solicitor General argued that “claims of racially dis-

criminatory employment practices under Section 1981

and Title VII are essentially equivalent in substance.”

Brief at 21. Thus, the yovernment’s unexplained as-

sertions that Lukens Steel and Wilson “shed[] no

light” on the issues in the instant case (Brief of the

United States at 29) need be given no weight.

In Patterson ve. McLean Credit, 109 S. Ct. 2568,

2377-78, 2393, both the majority and dissenting opin-

ions stated that Title VII’s burden of proof scheme

should be used to examine the Section 1981 promotion

discrimination issue before the Court. In addition,

a large body of lower court opinions has ruled con-

sistently that the causes of action under Title VII and

Sections 198] and 1983 are virtually identical. In-

deed, it is quite common for plaintiffs to challenge

the same practices under both Section 1981 and Title

VII and for these issues to be treated as identical by

the courts.

Moreover, the courts universally have rejected ar-

guments that Section 1981 affords more protections

than Title VII because Section 1981 does not have

Title VII's specific limitations, such as requiring a

showing of intentional discrimination to attack an

otherwise bona fide seniority system.

Given the identical “personal” nature of claims

under Title VII and Section 1981, the Court should

8

affirm the Sixth Circuit’s reliance on Wilson and

Lukens Steel as a basis for ruling that monetary

amounts received under Title VII are “damages

on account of personal injury” for the purposes of

§$ 104(a)‘2)’s exemption from personal income taxes.

ARGUMENT

THE COURT OF APPEALS CORRECTLY RULED

THAT TITLE VII CLAIMS ARE FOR PERSONAL

INJURIES AND THUS MONETARY SETTLEMENTS

FOR SUCH CLAIMS ARE EXEMPT FROM TAXATION

UNDER THE EXEMPTION FOUND IN SECTION

104(a)(2) OF THE INTERNAL REVENUE CODE

A. This Court’s Decisions in Lukens Steel and Wilson

Held That Civil Rights Statutes (Sections 1981 and

1983) Protect Personal Injuries That Are Character-

ized as Statutory Torts

The Sixth Circuit’s decision below and other de-

cisions have relied upon this Court’s decisions in

Goodman v. Lukens Steel Co., 482 U.S. 656 (1987),

and Wilson v. Garcia, 471 U.S. 261 (1985), in hold-

ing that Title VII and ADEA claims are exempt

from federal income taxes.” For the reasons set forth

below, the government is plainly incorrect in its unex-

plained assertion that these decisions “‘shed[] no light

on the proper interpretation of Section 104(a) (2)

of the Internal Revenue Code.” (Brief for the United

States at 29.) Wilson, Lukens Steel and other related

decisions provide direct support for the Sixth Cir-

cuit’s holding that Title VII monetary settlements

are exempt as amounts of damages received ‘‘on ac-

count of personal injuries” under Section 104(a) (2).

* See e.g., Rickel v. Commissioner, 900 F.2d 655, 662-63

(3rd Cir. 1990) (ADEA) ; Pistillo v. Commissioner, 912 F.2d

145, 149 (6th Cir. ._990) (ADEA).

9

Prevailing decisions have established that violations

of federal statutory rights are “a personal injury

tort or tort type right, rather than for an economic

right arising out of contract.” Byrne v. Commis-

sioner, 883 F.2d 211, 215 (3d Cir. 1989).

Lawsuits brought under these statutes allege vio-

lations of a duty owed the plaintiff by the de-

fendant employer that arises by operation of the

Act. This duty is independent of any duty an

employer might owe his employee pursuant to an

express or implied employment contract; it arises

by operation of law.

Id. at 215.

Both Wilson and Lukens Steel held that the stat-

ute of limitations for personal injury claims should

be used for suits under both 42 U.S.C. §$ 1981 and

1983. Wilson v. Garcia involved 42 U.S.C. § 1983.

Section 1983 provides a federal remedy for violation

of constitutional rights. The Court held that these

claims were “more analogous to tort claims for per-

sonal injury than, for example, to claims for damages

to property or breach of contract.” 471 U.S. at 277.

After stressing that the Constitution protects the

rights of “persons,” the Court concluded that “[a]

violation of that command is an injury to the individ-

ual rights of the person.” /d. The Court in Wilson

also explained that characterizing all § 1983 actions

as involving “personal injuries minimizes the risk

that the choice of a state statute of limitations would

not fairly serve the federal interests vindicated by

§$ 1983.” Id. at 279.

Similarly, the Court extended this ruling to suits

brought under 42 U.S.C. § 1981 and held that Section

1981 involves claims of “personal injury.” See Good-

10

man v. Lukens Steel, 482 U.S. 656. Lukens Steel is

of particular relevance here because the plaintiff ap-

parently brought the same racial discrimination

claims under both Title VII and 42 U.S.C. § 1981.

Some of the Title VII claims involved “disparate im-

pact,” which cannot be brought under § 1981. But as

to claims of “disparate treatment” (..e., intentional )

discrimination:

The District Court proceeded to find that the

company had violated Title VII in several sig-

nificant respects, including the discharge of em-

ployees during their probationary period, the

toleration of racial harassment by employees,

initial job assignments, promotions and decisions

on incentive pay. The court also found that i

these identical ways the company had also vio-

lated $1981...

Similarly, the Unions were found to have dis-

criminated on racial grounds in violation of both

Title VII and § 1981 in certain ways: failing to

challenge discriminatory discharges of proba-

tionary employees; failure and refusal to assert

racial discrimination as a ground for grievances;

and toleration and tacit encouragement of racial

discrimination.

482 U.S. at 664-65 (emphasis added). Thus, the

substantive § 1981 and Title VII issues were seen to

be identical.’

8 As argued more fully below, the overwhelming weight of

authority recognizes that the same substantive standards

apply to disparate treatment suits brought under Title VII

and § 1981. Indeed, “[i]t is quite common for an employment

discrimination plaintiff to bring his action under both § 1981

and Title VII.” Comment, Arbitral Deference and the Right

to Make and Enforce Contracts under 42 U.S.C. § 1981, 82

Nw. U.L. Rev. 109, 112 (1987).

11

On the limitations period issue, even though Sec-

tion 1981, by its terms, is premised upon the denial

of the right “to make and enforce contracts” as is

enjoyed by white citizens, the Court rejected the ar-

gument that Section 1981 claims are essentially con-

tractual” and not personal. Despite Section 1981’s

reference to contract rights, the court declined to

apply the longer limitations period applicable to con-

tract claims:

Section 1981 has a much broader focus than

contractual rights. . . . Its heading was and is

“Equal rights under the law” and is contained

in a chapter entitled “Civil Rights.” Insofar as

it deals with contracts, it declares the personal

right to make and enforce contracts, a right, as

the section has been construed, that may not be

interfered with on racial grounds. The provision

asserts, in effect, that competence and capacity

to contract shall not depend upon race. /t is thus

part of a federal law barring racial discrimina-

tion, which, as the Court of Appeals said, is a

fundamental injury to the individual rights of

a person. ... That § 1981 has far-reaching eco-

nomic consequences does not change this conclu-

sion, since the impact flows from guaranteeing

the personal right to engage in economically sig-

nificant activity free from racially discrimina-

tory interference. The Court of Appeals was

correct in selecting the Pennsylvania 2-year limi-

tations period governing personal injury actions.

482 U.S. at 661-62 (emphasis added) .*

* With respect to Title VIII of the Civil Rights Act of 1968,

42 U.S.C. § 3612, Justice Marshall’s unanimous decision

stated:

An action to redress racial discrimination may also be

likened to an action for defamation or intentional inflic-

12

The same reasoning applies equally to claims

brought under Title VII. As Justice O’Connor has ex-

plained: “[l]ike the common law of torts,” the stat-

utory employment “tort” created by Title VII has the

purposes of “deter[ring] conduct which has been

identified as contrary to public policy and harmful

to society as a whole,” and making whole the victims

of employment discrimination. Price Waterhouse v.

Hopkins, 109 S. Ct. 1775, 1798 (1989) (O’Connor,

J., concurring).

Thus, insofar as Title VII and Sections 1981 and

1983 provide causes of action for personal injury,

monetary remedies under all those statutes should be

exempt under Section 104(a) (2) of the Internal Rev-

enue Code.

Indeed, as we now show, this and other courts have

recognized that the substantive discrimination claims

under Title VII are of the same personal nature as

employment discrimination claims brought under 42

U.S.C. $$ 1981 and 1983. Both involve a duty owed

by the employer to employees that “is independent of

any duty an employer might owe his employee pur-

suant to an express or implied employment contract;

it arises by operation of law.” Byrne v. Commissioner,

883 F.2d 211, 215 (3d Cir. 1989).°

tion of emotional distress. Indeed, the contours of the

latter tort are still developing, and it has been suggested

that “under the logic of the common law development of

a law of insult and indignity, racial discrimination may

be treated as a dignitary tort.”

Curtis v. Loether, 415 U.S. 189, 195 n.9 (1974) (citation

omitted). See also Davis v. Passman, 442 U.S. 228, 235 n.10

(1979) (the right to be free from unreasonable gender dis-

crimination is a personal right).

5 The Solicitor General argues that “the existence of the

respondents’ employment contracts underlies their claims for

13

B. Like Sections 1981 and 1983, Title VII Claims Involve

Personal Injury Actions Exempt From the LR.C.

There can be no serious argument that the sub-

stantive protections of Title VII and 42 U.S.C. § 1981

are not of the same personal nature. Thus, the gov-

ernment cannot brush off Lukens Steel as “shed[ing]

no light” on this case. See Brief for the United

States at 29.

Indeed, the government’s argument here is under-

cut by its argument in Johnson v. Railway Express

Agency, Inc., 421 U.S. 454 (1975). In Johnson, the

Solicitor General explained the relationship between

Title VIi and Section 1981:

Title VII offers the aggrieved individual special

assistance—e.g., investigations, conciliation ma-

chinery, legal counsel, waiver of court costs, and

attorneys’ fees—unavailable under Section 1981.

But for individuals alleging that employers cov-

ered by Title VII have discriminated against

wages”, in that their claim for lost wages is based on “a

condition of that contract implied in law.” Brief for the

United States at 23. The government’s position here is a

replay of the contract-based arguments rejected in Lukens

Steel, where the cause of action was held to involve claims

for personal injury notwithstanding the fact that the denial

of the right to contract is the gravamen of a Section 1981

claim.

Additionally, even if the monetary claims here involve back

pay—a point disputed by the respondent—several courts have

ruled, that “to determine whether damages received by a tax-

payer were paid on account of personal injuries, courts must

look to the nature of the claim and not to the consequences

that result from the injury.” Pistillo v. Commissioner, 912

F.2d at 148-49, and cases cited. As the court below correctly

stated, it is the nature of the injury and not “whether the

consequences of the injury resulted in an award of... dam-

ages for back pay” which is determinative. Burke v. United

States, 929 F.2d at 1121.

14

them on the basis of race, the substantive pro-

tections of the two statutes are quite similar.

Brief for the United States as Amicus Curiae, in

Johnson v. Railway Express Agency, Inc., supra, at

13 (emphasis added). The government’s Johnson

brief further explained: ‘““As we have shown above,

. claims of racially discriminatory employment

practices under Section 1981 and Title VII are essen-

tically equivalent in substance.” Id. at 21.

That position has been adopted universally by the

courts, and both this Court and the Solicitor General

have determined that Section 1981 will be enforced

by applying Title VII’s burden of proof scheme estab-

lished in McDonnell Douglas Corp. v. Green, 411 U.S.

792 (1973), and related cases. For example, in Pat-

terson v. McLean Credit Union, 109 S. Ct. 2363, 2377-

78 (1989)—a suit brought under Section 1981—the

majority opinion stated:

We have developed, in analogous areas of civil

rights law, in a carefully designed framework of

proof to determine, in the context of disparate

treatment, the ultimate issue of whether the de-

fendant intentionally discriminated against the

plaintiff. See Texas Dept. of Community Affairs

v. Burdine, 450 U.S. 248 (1981); McDonnell

Douglas Corp. v. Green, 411 U.S. 792 (1973).

We agree with the Court of Appeals that this

scheme of proof, structured as a “sensible, or-

derly way to evaluate the evidence as it bears on

the critical question of discrimination.” Furnco

Construction Corp. v. Waters, 438 U.S. 567

(1978), should apply to claims of racial dis-

crimination under § 1981."

® On this point, the majority opinion agreed with the Brief

for the United States in Patterson v. McLean Credit Union.

There, the Solicitor General cited Lukens Steel to show that

15

Similarly, Justice Brennan’s dissenting opinion in

Patterson applied this same line of Title VII prece-

dent in determining that the district court’s jury

instruction on the plaintiff’s promotion claim was

“inconsistent with the scheme of proof we have care-

fully designed in analogous [Title VII] cases” for

deciding whether the defendant had committed inten-

tional discrimination. 109 S. Ct. at 2393. As Justice

Brennan stated:

There is no reason why this scheme of proof,

carefully structured as a “sensible, orderly way

to evaluate the evidence in light of common ex-

perience as it bears on the critical question of

discrimination,” Furnco Construction Corp. v.

Waters, 438 U.S. 567, 577 (1978), should not

apply to claims of racial discrimination under

§ 1981. Indeed, the Court of Appeals held below

that “[t|he disparate treatment proof scheme

developed for Title VII actions in McDonnell

Douglas Corp. v. Green and its progeny may

properly be transposed as here, to the jury trial

of a $1981 claim.”

109 S. Ct. at 2393 (emphasis added). The dissenting

opinion then applied these Title VII standards to

determine that the majority had improperly upheld

the jury instruction.’

proof of discriminatory purpose is required under Section

1981. The brief then argued that “fa]s in actions under

Title VII,” the same burden of proof scheme should be used

for Section 1981 suiis. Br. for the United States at 23-24

in Patterson v. McLean Credit Union, 109 S. Ct. 2363 (1989).

7 See also New York Transit Auth. v. Beazer, 440 U.S. 568,

583 n.24 (1979) (Moreover, our treatment of the Title VII

claim also disposes of the § 1981 claim without need of a

remand.’’).

16

Like this Court, numerous courts have ruled that

the causes of action for employment discrimination

in Title VII and Sections 1981 and 1983 are virtually

identical. See e.g., Gairola v. Department of Gen.

Servs., 753 F.2d 1281, 1285 (4th Cir. 1985) (“Under

Title VII and either § 1981 or § 1983, the elements

of.the required prima facie case are the same), and

cases cited; Lewis v. University of Pittsburgh, 725

F.2d 910, 915 (3d Cir. 1983) ($$ 1981 and 1983

claims “require the same elements of proof as a

Title VII action”), cert. denied, 469 U.S. 892 (1984);

Huebschen v. Department of Health & Social Servs.,

716 F.2d 1167, 1170 (7th Cir. 1983), quoting Rivera

v. City of Wichita Falls, 665 F.2d 531, 534 n.4 (5th

Cir. 1982) (“when § 1983 is used as a parallel rem-

edy with Title VII in a discrimination suit, the ele-

ments of the substantive cause of action are the same

under both statutes.”).* And as noted previously,

plaintiffs commonly allege that the same conduct con-

stitutes violations of both Title VII and § 1981.’

* Numerous other appellate cases hold that when “the

plaintiff predicates liability under Title VII under disparate

treatment, the legal elements of the claim are identical to

those of a claim under § 1981.” Lincoln v. Board of Regents

of the Univ. Sys. of Ga., 697 F.2d 928, 935 n.6 (11th Cir.

1983), cert. denied, 464 U.S. 826 (1983), and cases cited.

Accord Lewis v. Central Piedmont Community College, 689

F.2d 1207, 1209 n.3 (4th Cir. 1982), cert. denied, 460 U.S.

1040 (1983), and cases cited; Whiting v. Jackson State Univ.,

616 F.2d 116, 121 (5th Cir. 1980) (“When section 1981 is

used as a parallel basis for relief with section 706 of Title VII

against disparate treatment in employment, its elements

appear to be identical to those of section 706.”).

*“Disregarding questions of scope and of coverage, juris-

diction, and procedure . . . proof considerations—including

burdens of proof, the elements of a prima facie case, and the

theories of discrimination—have traditionally been treated as

17

C. Potential Substantive Conflicts Between Title VII and

Section 1981 Have Been Resolved in Favor of the Sub-

stantive Requirements and Protections of Title VII

The decisions previously discussed involved claims

of disparate treatment where there was no serious

dispute that the same substantive standards applied

to Title VII and Section 1981 disparate treatment

claims. Of particular relevance, in addition, are cases

where plaintiffs seized upon language differences be-

tween the two statutes to argue that Section 198]

provides more substantive protections than Title VII.

There have been several instances in which asserted

substantive conflicts with Title VII have been re-

jected and Title VII’s provisions consistently have

been found controlling. Courts thus have been re-

luctant to find violations under Section 1981 that

would invalidate employer practices found permissi-

ble under Title VII.

The legislative enactments of Congress “have long

evinced a general intent to accord parallel or over-

lapping remedies against discrimination.” Alexan-

der v. Gardner-Denver Co., 415 US. 36, 47 & n.7

(1974) (emphasis added), specifically citing to 42

U.S.C. § 1981." Thus, while it is true that courts

have found that Section 1981 was not preempted by

similar whether an action is brought under Title VII or under

one of the earlier civil rights acts. This is true in both the

individual case and other class action.” Reiss, R¢ quiem for

an “Independent Remedy”: The Civil Rights Acts of 1866

and 1817 as Remedies for Emplowment Discrimination, 50

S. Cal. L. Rev. 961, 1017 (1977).

' Accord Brady v. Bristol-Meyers, Inc., 459 F.2d 621. 623-

24 (8th Cir. 1972).

18

Title VII,’ such decisions usually have stressed that,

unlike here, there was no “specific area of irrecon-

cilable conflict between the laws” presented in those

cases.’* Accordingly, the decisional law demonstrates

that the standard of a claim against a private party

under 42 U.S.C. § 1981 is in essence that applied in

a suit under Title VII, and that “decisions under

Title VII cases . . . apply equally to actions brought

under the century old Civil Rights Acts, 42 U.S.C.

$$ 1981 and 1983.” Shield Club v. City of Cleveland,

13 Fair Empl. Prac. Cas. (BNA) 533 (N.D. Ohio

1974).

In particular, the courts rejected arguments that

the special protections given bona fide seniority sys-

tems by Section 703(h) of Title VII did not exist

under Section 1981 because similar language was

missing from the latter statute.* In Waters v. Wis-

"! See, e.g., Sanders v. Dobbs House, Inc., 431 F.2d 1097,

1100-01 (5th Cir. 1970) reh. denied, 431 F.2d 1097, cert. de-

nied, 401 U.S. 948 (1971); and Johnson v. City of Cincinnati,

450 F.2d 796, 797-99 (6th Cir. 1971).

'2 See Sanders, and Johnson, supra note 11.

'S See also Terrell v. United States Pipe & Foundry Co..,

6 Fair Empl. Prac. Cas. (BNA) 1027, 1028 (N.D. Ala.

1973) (Title VII definitions used as a guide to determine the

proper parties in action under Section 1981); Espinoza v.

Farah Mfg. Co., 11 Fair Empl. Prac. Cas. (BNA) 696

(W.D. Tex. 1975) (Section 1981 claim dismissed because

Title VII holdings on same subject matter found no viola-

tion) ; Patterson v. American Tobacco Co., 535 F.2d, 257, 270

(4th Cir. 1976) (in order to avoid conflict with Title VII,

“bumping” remedy was held not available under Section

1981), cert. denied, 429 U.S. 920 (1976).

'*£ 703(h) reads in pertinent part:

Notwithstanding any other provisions of this title, it

shall not be an unlawful employment practice for an em-

19

consin Steel Works, 502 F.2d 1309 (7th Cir. 1974),

cert. denied, 425 U.S. 997 (1976), the plaintiff chal-

lenged the employer’s “last hired, first fired” senior-

ity system for brick layers. The district court held

that the seniority system, which had its genesis in a

period of racial discrimination, violated Section 1981

and was not bona fide under Title VII. 502 F.2d at

1314, 1317. Although the Seventh Circuit agreed

that the employer had violated Section 1981 by its

pre-Title VII hiring discrimination, it reversed the

district court’s holding that the seniority system was

invalid because it perpetuated the effects of past

discrimination.

The court’s rejection of the seniority allegation

was based upon Section 703(h) of Title VII and its

legislative history. 502 F.2d at 1317-20. In its hold-

ing, the court discussed the relationship between the

two statutes:

Title VII and section 1981 are “parallel dr over-

lapping remedies against discrimination.” Alex-

ander v. Gardner-Denver Co., 415 U.S. 36, 94

S. Ct. 1011, 39 L. Ed. 2d 147 (1974). Conse-

quently, in fashioning a substantive body of law

under Section 1981 the courts should, in an effort

to avoid undesirable substantive law conflicts,

look to the principles of Jaw created under Title

VII for direction.

502 F.2d at 1316. The court then stated that “Th lav-

ing passed scrutiny under the substantive require-

ployer to apply different standards of compensation, or

different terms, conditions, or privileges of employment

pursuant to a bona fide seniority or merit system, pro-

vided that such differences are not the result of an inten-

tion to discriminate because of race, color, religion, sex,

or national origin.

20

ments of Title VII, the employment seniority system

utilized by Wisconsin Steel is not violative of 42 U.S.C.

$ 1981.” 502 F.2d at 1320 n.4.

Similarly, in Hinton v. Lee Way Motor Freight,

Inc., 412 F. Supp. 625, 628-29 (W.D. Okla. 1975),

‘he court rejected claims that Lee Way had violated

42 U.S.C. $1981 by its contractual seniority sys-

tem. Even though no Title VII allegations were as-

serted, and the suit was brought exclusively under

Section 1981, the court-applied the seniority protec-

tions of Title VII in dismissing the suit, noting that

Title VII provided “modern legislative history which

is directly in point.” /d. at 628. After quoting the

language in the Waters decision, cited above, the

court then noted:

The above statement appears appropriate for

consideration in the instant case wherein Plain-

tiffs proceed only under 42 U.S.C. § 1981, pos-

sibly attempting to avoid the congressional dic-

tates of Title VII. Courts must apply all princ’-

ples of law applicable to a given issue and may

not narrowly construe a particular statute to the

exclusion of an overlapping statute on the same

issue. The principles contained in Title VII are

applicable to Plaintiff’s case herein and are con-

sidered by the Court in deciding same. ;

412 F. Supp. at 628 (emphasis added). Accord

Chance v. Board of Examiners, 534 F.2d 993 (2d

Cir. 1976), mod. on other grounds, 534 F.2d 1007

(2d Cir. 1976), cert. denied, 431 U.S. 965 (1977),

reh’q denied, 434 U.S. 881 (1977); Patterson v.

American Tobacco Co., supra at 270; ef. Driscoll v.

Jefferson, 11 Fair Empl. Prac. Cas. (BNA) 508

(E.D. Mich. 1975) (oral opinion).

21

Accordingly, the cases appear to be unanimous that,

with respect to Section 1981, the substantive require-

ments of that earlier legislation must be construed to

-harmonize with Title VII definitions of discrimina-

tion, even where protective language (such as Section

703(h)) has not specifically been provided. In order

to avoid conflict in the interpretation of “parallel”

federal legislation, Title VII has been interpreted to

be the latest and paramount expression of Congres-

sional intent.”

The courts thus have realized that to apply differ-

ent standards under Title VII and Section 1981

“would make little sense.” Setser v. Novak Invest-

ment Company, 657 F.2d 962, 967 (8th Cir. 1981),

cert. denied, 454 U.S. 1064 (1981). The courts

should “look to the principles of law created under

Tile VII for-direction” in order to avoid substantive

conflicts with Section 1981. /d., at 967.

Given the overwhelming weight of authority equat-

ine the substantive provisions of Title VII and Sec-

tion 1981, Title VII violations should be construed

as causing “a fundamental injury to the individual

'* Relying on these decisions, other courts ruled that Title

VII's substantive protections of bona fide seniority systems

also apply to Executive Order 11,246, another nondiscrimina-

tion scheme that does not have the specific seniority protec-

tions of Section 703(h) of Title VII. See United States v.

Trucking Management, Inc., 662 F.2d 36 (D.C. Cir. 1981) ;

and United States v. East Tex. Motor Freight Sys., 564 F.2d

179, 185 (5th Cir. 1977). In East Teras the court relied in

part on this Court’s remand of the Section 1981 claims in

Sabala v. Western Gillette, Inc., 516 F.2d 1251 (5th Cir.

1975), cert. granted, decision vacated, and case remanded,

- 431 U.S. 951 (1977), for reconsideration in light of the Title

VII seniority holdings in /nternational Bhd. of Teamsters v.

United States, 431 U.S. 324 (1977).

22

rights of a person. .. .” Goodman v. Lukens Steel,

482 U.S. at 661-62. Title VII monetary settlements

thus are exempt from taxable income under Section

104(a) (2) of the LR.C.

CONCLUSION

For the reasons stated, the amicus curiae EEAC

urges the Court to affirm the decision below and hold

that monetary settlements under Title VII are on ac-

count of “personal injuries” and thus exempt from

taxable income under Section 104(a)(2) of the In-

ternal Revenue Code.

Respectfully submitted,

ROBERT E. WILLIAMS

DOUGLAS S. McDowELL *

MCGUINESS & WILLIAMS

1015 Fifteenth Street, N.W.

Suite 1200

Washington, D.C. 20005

(202) 789-8600

Attorneys for Amicus Curiae

Equal Employment Advisory

Council

December 20, 1991 * Counsel of Record