# Amicus Curiae Brief — United States v. Burke

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URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385013_0167%3A09

## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 1992
- **Citation:** 504 U.S. 229

## Text

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

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385013_0167%3A09. Public record. Not legal advice.