IN RE AIR CRASH DISASTER NEAR CHICAGO, ILL., ETC.

• Decision Date: 17 November 1981
• Docket Number: No. 79 C 2444.,MDL 391,79 C 2444.
• Citation: 526 F. Supp. 226
• Parties: In re AIR CRASH DISASTER NEAR CHICAGO, ILLINOIS ON MAY 25, 1979 This Document Relates to, Syed HAIDER, as Administrator of the Estate of Victoria Chen Haider, Deceased, Plaintiff, v. McDONNELL DOUGLAS CORPORATION, a corporation; and American Airlines, Inc., a corporation, Defendants.
• Court: U.S. District Court — Northern District of Illinois

526 F. Supp. 226

In re AIR CRASH DISASTER NEAR CHICAGO, ILLINOIS ON MAY 25, 1979 This Document Relates to Syed HAIDER, as Administrator of the Estate of Victoria Chen Haider, Deceased, Plaintiff, v. McDONNELL DOUGLAS CORPORATION, a corporation; and American Airlines, Inc., a corporation, Defendants.

MDL 391, No. 79 C 2444.

United States District Court, N. D. Illinois, E. D.

November 17, 1981.

John J. Kennelly, Chicago, Ill., for plaintiff Syed Haider.

Norman J. Barry and Christoper G. Walsh, Jr., Rothschild, Barry & Myers, Chicago, Ill., for defendant McDonnell Douglas Corp.

Thomas D. Allen, Robert E. Haley, Elise E. Singer, Wildman, Harrold, Allen & Dixon, Chicago, Ill., for defendant American Airlines, Inc.

William P. Butler and C. Kevin McCabe, Lord, Bissell & Brooke, Chicago, Ill., for Motor Vehicle Mfrs. Ass'n of the United States, Inc. (amicus curiae).

ROBSON and WILL, District Judges.

MEMORANDUM AND ORDER

Victoria Chen Haider, a resident of Illinois, was one of 273 people who died in the crash of an airplane, built by McDonnell Douglas Corporation (MDC), and owned and operated by American Airlines (American), outside Chicago on May 25, 1979. The wrongful death action brought by her husband (who is still a resident of Illinois), as the administrator of her estate, was consolidated with approximately 150 others for pretrial proceedings in this Court. Federal jurisdiction is based upon diversity of citizenship under 28 U.S.C. § 1332.

Defendants seek to introduce evidence as to the portion of the decedent's past earnings which were subject to taxation, and evidence as to the percentage of any future earnings which would have been paid as taxes had the decedent lived. Defendants also seek to have the jury instructed that:

If you decide to award any damages to the plaintiff, your award will be exempt from any income taxes; therefore, in fixing the amount of your award, you should not be concerned about or consider the effect of taxes on the award.¹

Plaintiff Syed Haider opposes both the introduction of this evidence and the giving of instructions as to the tax status of damages awards. Both plaintiff and defendant MDC have filed motions in limine seeking a determination of these issues. For the reasons hereinafter stated, we grant plaintiff's motion and deny defendant's motion.²

We note preliminarily that the questions whether evidence of the effect of taxation upon earnings is admissible, and whether the jury should be instructed as to the tax status of any award, are separate issues. Nordstrom, Income Taxes and Personal Injury Awards, 19 Ohio St. L.J. 212, 219-21 (1958). But in the context of an action whose federal jurisdiction rests upon diversity of citizenship, our inquiry is limited to two issues: (1) whether the determination of the issues raised in the parties' motions is to be made pursuant to Illinois law or federal law, and (2) whether Illinois law, if it applies, would lead to a different result than would federal law. Because there would be no need to determine whether Illinois or federal law governs the resolution of the issues raised in these motions if application of either Illinois law or federal law led to the same result, we address first the question whether Illinois law and federal law would resolve these issues differently.

I.

Federal law, if applicable to an action whose jurisdiction rests on diversity of citizenship, would require that we admit evidence of the effect of taxation upon the decedent's estimated capacity to contribute to the support of her family. The admissibility of this evidence is governed by the concepts of materiality and relevance. See Rules 401-03, Federal Rules of Evidence (FRE). Because "just compensation" under the Illinois Wrongful Death Act³ — the source of plaintiff's substantive rights in this action — is restricted to the "pecuniary loss" sustained by the decedent's survivors, Kaiserman v. Bright, 61 Ill.App.3d 67, 18 Ill.Dec. 108, 377 N.E.2d 261, 263 (1978), evidence of the effect of taxation upon earnings is "of consequence to the determination" of "just compensation." Rule 401, FRE. Defendants correctly state that, because the focus of the Illinois Wrongful Death Act is on the decedent's contributions to her survivors rather than on her earnings, the amount which would have been taken in taxation is relevant to the determination of the portion of her earnings which would have been or could have been contributed to her survivors.

The conclusion that federal law would probably admit evidence of the effect of taxation upon a decedent's earnings, subject to the limitations of Rule 403, receives some support from the Supreme Court's recent decision in Norfolk & Western Ry. v. Liepelt, 444 U.S. 490, 100 S.Ct. 755, 62 L.Ed.2d 689 (1980). In Liepelt, the Court held that an Illinois state court erred in refusing evidence as to taxation of the decedent's earnings in a wrongful death action brought under the Federal Employers Liability Act (FELA).⁴ The Court noted that the FELA, in addition to seeking to "`create uniformity throughout the Union' with respect to railroads' financial responsibility for injuries to their employees," is compensation oriented. 444 U.S. at 493 and n.5, 100 S.Ct. at 757, quoting from H.R.Rep.No. 1386, 60th Cong., 1st Sess. 3 (1908). It reasoned that "after-tax income ... provides the only realistic measure of a person's ability to support others," and that a wage earner's income tax is therefore relevant to a determination of the monetary loss suffered by her family when she dies. 444 U.S. at 493-94, 100 S.Ct. at 757-58.

Similarly, it appears that federal law, if applicable, would require that we instruct the jury that under section 104(a)(2) of the Internal Revenue Code, the principle of an award for damages is not taxable. Both defendants argue essentially that Liepelt, if applicable to a diversity action, requires giving the requested instruction. American points to the compensatory nature of both the FELA and the Illinois Wrongful Death statute. MDC argues that the instruction is merely cautionary. MDC notes that the giving of cautionary instructions is generally within the discretion of the trial court, Simineo v. School District No. 16, 594 F.2d 1353, 1357 (10th Cir. 1979); Krieger v. Bausch, 377 F.2d 398, 402 (10th Cir. 1967), but claims that Liepelt demonstrates that in certain circumstances cautionary instructions are mandated when requested by a party. Our reading of Liepelt, however, convinces us that the Court did not intend its holding in that case to be read so broadly. Liepelt dealt with the narrow realm of actions brought under the FELA, and did not purport to address the issues of the admissibility of evidence and the propriety of instructions, concerning taxation, outside the context of the FELA. Estate of Spinosa, 621 F.2d 1154 (1st Cir. 1980); Croce v. Bromley Corp., 623 F.2d 1084 (5th Cir. 1980); Fenasci v. Travelers Ins. Co., 642 F.2d 986 (5th Cir. 1981); see also Vasina v. Grumman Corp., 644 F.2d 112 (2d Cir. 1981). Some clarification of Liepelt is provided in Gulf Offshore Co. v. Mobil Oil Corp., ___ U.S. ___, 101 S.Ct. 2870, 69 L.Ed.2d 784 (1981), an action for personal injuries brought under the Outer Continental Shelf Lands Act (OCSLA), 43 U.S.C. §§ 1331 et seq., which raised the question whether Louisiana law permits or precludes instructing the jury concerning the taxability of an award but did not present the question whether evidence showing the effect of income taxes on past and future earnings is admissible. The Court noted that the OCSLA, unlike the FELA, explicitly authorizes the adoption of state law to the extent that it is not inconsistent with federal law. The Court noted that Liepelt was based on the need for uniformity in FELA actions. The Court stated that Liepelt, because the FELA afforded no guidance as to whether juries must be instructed on the status of compensatory damages, had announced a "federal common law rule." 101 S.Ct. at 2879-80. The Court added that Congress, in providing that the OCSLA incorporates applicable state law, "`specifically rejected national uniformity' as a paramount goal" in the OCSLA. Id. at 2880, quoting Chevron Oil v. Huson, 404 U.S. 97, 104, 92 S.Ct. 349, 354, 30 L.Ed.2d 296 (1972). The Court remanded Gulf Offshore to the Texas Court of Civil Appeals for a determination of whether Louisiana law requires giving an instruction as to the taxability of a damages award, and, if it does not, whether Liepelt displaces the state rule in OCSLA cases.

Gulf Offshore indicates that the "federal common law rule" of Liepelt is limited to situations similar to those in which it arose. We assume, however, for the sake of argument, that federal law requires giving the instruction in addition to admitting evidence as to taxation, and we proceed to a determination of whether Illinois law provides otherwise.

Neither the Illinois Wrongful Death Act nor the Illinois Pattern Instructions concerning the calculation of damages in wrongful death cases, IPI (Civil) § 31.01-.03, contains any reference to the use of evidence as to a decedent's after-tax income to establish the pecuniary loss to the decedent's survivors or to the tax treatment accorded damages by the Internal Revenue Code. Before Liepelt, Illinois prohibited, in FELA actions brought in state court, both the introduction of evidence on the effect of taxes upon earnings and giving the jury instructions as to the non-taxable nature of compensation for damages. Hall v. Chicago & N.W.Ry., 5 Ill.2d 135, 125 N.E.2d 77 (1955); Raines v. N.Y. Central R.R., 51 Ill.2d 428, 283 N.E.2d 230, cert. denied, 409 U.S. 983, 93 S.Ct. 322, 34 L.Ed.2d 247 (1972). Currently, Illinois follows Liepelt in FELA actions. Crabtree v. St. Louis-San Francisco Ry., 89 Ill.App.3d 35, 44 Ill.Dec. 113, 411 N.E.2d 19 (1980); Oltersdorf v. Chesapeake & Ohio Ry., 83 Ill.App.3d 457, 38 Ill.Dec. 896, 404 N.E.2d 320 (1980). No Illinois cases,...