Feldman v. Allegheny Airlines, Inc.

• Decision Date: 30 September 1975
• Docket Number: Nos. 725,817,D,s. 725
• Citation: 524 F.2d 384
• Parties: Reid L. FELDMAN, as Administrator of the Estate of Nancy Feldman, Deceased, Plaintiff-Appellee-Cross-Appellant, v. ALLEGHENY AIRLINES, INC., Defendant-Appellant. ockets 74-2299, 74-2357.
• Court: U.S. Court of Appeals — Second Circuit

Page 384

524 F.2d 384

Reid L. FELDMAN, as Administrator of the Estate of Nancy

Feldman, Deceased, Plaintiff-Appellee-Cross-Appellant, v. ALLEGHENY AIRLINES, INC., Defendant-Appellant.

Nos. 725, 817, Dockets 74-2299, 74-2357.

United States Court of Appeals, Second Circuit.

Argued April 11, 1975.

Decided Sept. 30, 1975.

Wiliam R. Moller, Wesley W. Horton, Hartford, Conn., for appellant.

John W. Douglas, G. R. Poehner, Washington, D. C., Peter B. Cooper, New Haven, Conn., for appellee-cross-appellant.

Before FRIENDLY and OAKES, Circuit Judges, and LASKER, District judge. ^*

LASKER, District Judge:

On June 7, 1971, an Allegheny Airlines flight crashed in fog which 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. ¹ The airline appeals ² 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 the diversity wrongful death of action is governed by Connecticut law, specifically Conn.Gen.Stats. § 52-555, which measures recovery by the loss to the decedent of her life rather than buy the value of the value of the estate she would have left had she lived a full life. Perry v. Allegheny Airlines, Inc., 489 F.2d 1349, 1351 (2d Cir. 1974); Floyd v. Fruit Industries, Inc., 144 Conn. 659, 669-671, 136 A.2d 918, 924 (1957). 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 enjoy life's non-remunerative activities, less (3) deductions for her necessary personal living expenses. No award was made for conscious pain and suffering before Mrs. Feldman's death because the evidence on this point was too speculative, nor did the award include pre-judgment interest.

Damages in a wrongful death action must necessity represent a crude monetary forecast of how the decedent's life would have evolved . Prior to stating his specific findings, the district judge noted, and we agree, that "the whole problem of assessing damages for wrongful death...defies any precise mathematical computation," citing Floyd v. Fruit Industries, Inc., supra, 144 Conn. at 675, 136 A.2d at 927 (382 F.Supp. at 1282).

It is clear from Judge Blumenfeld's remarkably detailed and precise analysis that he nevertheless made a prodigious effort to reduce the intangible elements of an award to measurable quantities. It is with reluctance, therefore, that we conclude that his determination of loss of earnings and personal living expenses must remanded.

I

Damages for Destruction of Earning Capacity.

Nancy Feldman was 25 years old at the time of her death. From 1968 until shortly before the plane crash, she lived and worked in New Haven while her husband studied at Yale Law School. On Mr. Feldman's graduation from law school in the spring of 1971 the Feldmans moved to Washington, D.C., where they intended to settle. At the time of her death, Mrs. Feldman had neither accepted nor formally applied for employment in Washington, although she had been accepted by George Washington Law School for admission in the Fall of 1971 and had made inquiries about the availability of employment.

A key objection of appellant Allegheny runs to Judge Blumenfeld's calculation

of the discount rate at 1as no right to take inflation into account in any way in its assessment of damages. The district court decided that the appropriate rate of discount would be the "price of capital," such to be "obtained by adjusting interest rates on 'risk-free' investments so as to exclude the additional interest demanded by the investment market as compensation for investors' assumption of risk of inflation." 382 F.Supp. at 1293.

In calculating the discount rate, the appellee's expert, relied on by the district court, used an average earnings of 4.14% (from mutual savings bank investments) as representative of a prudent, non-sophisticated investment and subtracted 2.87% as the average yearly inflation rate revealed in the Department of Labor's Consumer Price Index over an 18-year period, yielding a 1.27% difference which was rounded up to 1.5%. Judge Blumenfeld corroborated this "inflation-adjusted discount rate" of 1.5% by calculating the real yields of investments since 1940 in federal government securities (with inflation factored out) from the 1974 Economic Report of the President, a source referred to by appellant Allegheny's expert. The district court made the calculation according to its view of Connecticut's law and policies on the subject of inflation accounting in wrongful death damages.

We agree with the district court's interpretation of Connecticut law as having open the question how inflation may be accounted for in such damages. ³ We believe that Judge Blumenfeld, a long-time Connecticut lawyer and district court judge for 14 years, appropriately hypothesized the Connecticut Supreme Court's favorable reaction to a discount rate adjustment, since Connecticut, unlike must jurisdictions, reduces what would otherwise be inflated judgments for wrongful death injuries by requiring deduction of income taxes payable on future earnings. Floyd v. Fruit Industries, Inc., supra, 144 Conn. at 673, 136 A.2d at 926.

The district court was fully aware that in way it was being speculative in what it was doing, as every trier of fact is required to some extent to be whenever it engages in calculating future earnings and a lump sum discount rate. 382 F.Sup. at 1291-92. As a matter of federal law we do not necessarily vouchsafe either the principal of making an "inflation adjustment" in setting a discount rate ⁴ or the means by which it was done in this instance. Yet we note that consideration of inflation has historically been approved in a number of state courts. See, e.g., Halloran v. New England Telephone & Telegraph Co., 95 Vt. 273, 276, 115 A. 143, 144 (1921) and cases cited in Judge Blumenfeld's opinion, 382 F.Supp. at 1290. As a matter of federal law, at least one circuit has approved jury consideration of the impact of inflation and even reversed for charging that it should not consider "future increases or decreases in the purchasing power of money." Bach v. Penn Central Transportation Co., 502 F.2d 1117, 1122 (6th Cir. 1974); see also Sleeman v. Chesapeake & Ohio Railway Co., 414 F.2d 305 (6th Cir. 1969). Our own Perry V. Allgheny Airlines, Inc., supra, 489 F.2d 1349, affirmed a $369,400. judgment on a jury verdict for the estate of another victim of the very same crash here involved; while the point was not discussed specifically in the opinion it is interesting that Judge Blumnfeld's charge to the jury referred to the plaintiff's expert's testimony on a 1.5% discount rate and the underlying rationale therefor, a reference duly attacked on appeal by Allgheny. Commentators have supported an accounting for inflation in damage awards, see Econometrics and Damages, 44 Wash.L.Rev. 351, 360-61 (1969); Comment, 6 U.S.F.L.Rev. 311 (1972).

It has even been suggested that a trial court may be in error in failing to account fully for inflation in wrongful death damages in a non-diversity case. See Mills v. Tucker, 499 F.2d 866, 868 (9th Cir. 1974). ⁵ As Judge Friendly himself said in McWeeny v. New York, New Haven and Hartford Railroad Co., 282 F.2d 34, 38 (2d Cir. 1960):

"There are few who do not regard some degree of continuing inflation as here to stay and would be willing to translate their own earning power into a fixed annuity, and it is scarcely to be expected that the average personal injury plaintiff will have the acumen to find investments that are proof against both inflation and depression--a task formidable for the most expert investor." (Footnote omitted.)

Within the latitude afforded by the Connecticut decisions, note 3 supra, and with the support in the historical and other economic evidence before him that Judge Blumenfeld had, we cannot fault him for computing the discount rate by offsetting the anticipated rate of earnings from investment of the lump sum to be awarded, by a inflation factor.

In computing the value of Mrs. Feldman's lost earning capacity, the trial judge found that Mrs. Feldman's professional earnings in her first year of employment would have been $15,040. and that with the exception of eight years during which she intended to raise a family and to work only part time, she would have continued in full employment for forty years until she retired at age 65. The judge further found that during the period in which she would be principally occupied in raising her family, Mrs. Feldman would have remained sufficiently in contact with her profession to maintain, but not increase, her earning ability. Pointing out that under Connecticut law damages are to be based on "the loss of earning capacity, not future earnings per se . . . " (382 F.Supp. at 1282) (emphasis in original), the judge concluded that when a person such as Mrs. Feldman, who possesses significant earning capacity, chooses to forego remunerative employment in order to raise a family, she manifestly values child rearing as highly as work in her chosen profession and her loss of the opportunity to engage in child rearing "may thus fairly be measured by reference to the earning capacity possessed by the decedent" (382 F.Supp. at 1283). Applying this rational, the trial judge made an award for the eight year period of $17,044. per year, the salary which he computed Mrs. Feldman would have reached in the year preceding the first child-bearing year, but did not increase the amount during the period.

We believe the trial judge erred in automatically valuing Mrs. Feldman's loss for the child-bearing period at the level of her salary. As Judge Blumenfeld's opinion points out, the Connecticut cases...