Drexler v. Seaboard System R.R., Inc.
| Decision Date | 27 May 1988 |
| Parties | John A. DREXLER v. SEABOARD SYSTEM RAILROAD, INC. 86-1645. |
| Court | Alabama Supreme Court |
James H. Wettermark and Claire E. Burge, Birmingham, for appellant.
W.W. Conwell of Johnston, Conwell & Hughes, Birmingham, for appellee.
The primary issue in this Federal Employers Liability Act case relates to the jury's determination of future lost earnings where the employee alleges permanent job-related injuries: 1 Whether the trial court erred in admitting opinion evidence concerning present value of future wages where the data base for the opinion (interest rates and inflation rates) was not within the personal knowledge of the expert witness. Because we hold that the challenged testimony was based on hearsay evidence, we reverse the judgment and remand the cause for a new trial. 2
To understand our holding, it is important to appreciate the nature and purpose of the testimony in issue. The expert testimony offered by the plaintiff was to the effect that, in commuting a lump sum loss of future earnings to its present value (the authorized award of damages), it is essential to build into the formula two separate calculations--a discount or interest rate factor and an inflation rate factor. Before the interest rate is allowed, it must be offset by the inflation rate. The object here, of course, is premised on the proposition that the injured employee is entitled to be compensated with, and the employer is obligated to pay, that present sum that could reasonably be expected, over the exployee's work life expectancy, to yield the lost future earnings. Thus, the annual rate of yield, less the annual rate of inflation, when mathematically applied, will reduce the aggregate lump sum loss to its present value.
For a somewhat oversimplified example, if we assume that over the past 10 to 20 years, the interest and inflation rates were the same, the lump sum loss would not be subject to any reduction in arriving at the appropriate award. Both parties however, premise their arguments on the fact that, over the past 20 years, the interest rate, generally speaking, has exceeded the inflation rate. In the final analysis, then, it is this differential in the two rates that is critical to the "present value" calculations.
The plaintiff's expert witness, an economist, in arriving at his "present cash value" opinion, used in his calculations the following factors: 1) plaintiff's work life expectancy; 2) the amount of money the plaintiff is currently losing less tax consequences; 3) interest earned on principal less tax consequences; 4) wage growth rate; 5) discount rate; 6) inflation rate; and 7) business expenses that will no longer be incurred. Applying these factors, he testified that the present cash value of the plaintiff's after-tax, after-expense income loss would be $360,507. See Culver v. Slater Boat Co., 722 F.2d 114 (5th Cir.1983), cert. denied, 469 U.S. 819, 105 S.Ct. 90, 83 L.Ed.2d 37 (1984). Because of its special significance to the issue here presented, we note that the plaintiff's expert witness used a 2% differential between the interest rate and the inflation rate in making his final "present cash value" calculation.
The defendant's expert, also an economist, challenged the basis for the plaintiff's expert testimony--specifically the 2% interest/inflation rate differential. Using what he proposed as a "more reliable" data base, the defense witness factored into his calculations the "official" U.S. Government Reports from 1980 to 1986. We quote directly from the record of trial:
On voir dire, plaintiff's counsel questioned the defendant's witness:
That the statements relating to the 1984, 1985, and 1986 inflation and interest rates made to the witness by someone at the Birmingham Public Library over the telephone are out-of-court statements, which were offered to prove the truth of the matters asserted, is not seriously...
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Wesley v. State
...not permitted to testify concerning what the record of the defendant's past medical history revealed). See also Drexler v. Seaboard System Railroad, 530 So.2d 754, 757 (Ala.1988) (expert testifying to the present value of future wages could not base his testimony on information he obtained ......