Torts - Cases, Principles, and Institutions Fifth Edition, 2016a

Witt & Tani, TCPI 10. Damages
to make a claim on the public tax resources that have gone towards paying for the plaintiff’s
insurance.
What pecuniary damages should be awarded to someone who has no history in the labor
market by which to calculate lost wages? What assumptions should be made about her likely
participation in the workforce? Keep in mind that the case below was decided in 1975, when
different assumptions might have been made about the deceased’s life plans.
5. The taxation of tort awards. The plaintiff’s expert in O’Shea discounted her future
earnings by reference to her expected federal income tax obligations. But as Judge Posner
observed in a part of the O’Shea opinion not excerpted here, this was an error. There are a
number of reasons courts decline to discount future earnings by income tax obligations. Judge
Posner pointed out that because interest on the damages award is subject to taxation (even if the
damage award is not), reducing the award by projected income taxes is a form of double taxation.
In West Virginia, courts do not take into account income tax obligations because “income tax
liability or saving is a matter not pertinent to the damages issue, being a matter between the
plaintiff and the taxing authority.” Hicks ex rel. Saus v. Jones, 617 S.E.2d 457, 463 (2005). The
logic seems to be that defendants should pay the full cost of the damages they caused. How that
payment is then divided between the state and the plaintiff is not the defendant’s concern, but
rather is up to the state. If states choose to adopt a tax regime friendly to tort plaintiffs, that policy
decision should hardly benefit the defendants! Any other outcome is a tax break for tortfeasors.
Alaska holds that income taxes should not be deducted for a different reason—that
“income tax laws and regulations are so subject to change in the future that we believe that a court
cannot predict with sufficient certainty just what amounts of money a plaintiff would be obliged
to pay in federal and state income taxes on income that he would have earned in the future had it
not been for a defendant’s tortious conduct.” Beaulieu v. Elliott, 434 P.2d 665, 673 (Alaska
1967). This leads to the interesting consequence that the court should deduct “taxes on income
earned prior to trial [which] can be easily calculated based on income tax laws and regulations as
they existed at the time the wages would have been earned.” Id. Should defendants gain the
benefit of a plaintiff’s likely future contributions to the public fisc?
Feldman v. Allegheny Airlines, 524 F.2d 384 (2d Cir. 1975)
LASKER, J.
On June 7, 1971, an Allegheny Airlines flight crashed in fog while approaching New
Haven Airport. Nancy Feldman, a passenger, died, in the crash. Allegheny conceded liability,
and the parties submitted the issue of damages to Judge Blumenfeld of the United States District
Court for the District of Connecticut. The airline appeals from Judge Blumenfeld’s judgment
awarding $444,056 to Reid Laurence Feldman, as administrator of the estate of his late wife.
Determination of damages in this diversity wrongful death action is governed by
Connecticut law, specifically Conn. Gen. Stats. § 52-55, which measures recovery by the loss to
the decedent of the value of her life rather than by the value of the estate she would have left had
she lived a full life. . . . In accordance with Connecticut law, the judgment represented the sum of
(1) the value of Mrs. Feldman’s lost earning capacity and (2) the destruction of her capacity to
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