Louissaint v. Hudson Waterways Corp.

Decision Date07 August 1981
Citation443 N.Y.S.2d 678,111 Misc.2d 122
PartiesSaint Cyr LOUISSAINT, Plaintiff, v. HUDSON WATERWAYS CORP., and Seatrain Lines, Inc., Defendants.
CourtNew York Supreme Court

Kenneth Heller and Fred R. Profeta, New York City, for plaintiff.

Cichanowicz & Callan, New York City (Victor S. Cichanowicz, New York City, of counsel), for defendants.


This post trial motion raises questions of major significance for the personal injury trial bar, in reviewing whether or not taxes are to be deducted from future earnings in an assessment of special damages. Such a review is called for in the light of two recent cases, one by the United States Supreme Court and one by the Appellate Division, First Department, which are urged as authorities for requiring a deduction for taxes from future earnings.

After the first trial of this personal injury action by a marine welder for disabling injuries he sustained when struck by a falling steel lashing cable while working in the hold of defendants' vessel, in which the setting aside of the jury verdict in favor of defendants was unanimously affirmed (Louissaint v. Hudson Waterways Corp., et al., 78 A.D.2d 596, 432 N.Y.S.2d 41), a second trial was held which resulted in a jury verdict in favor of the plaintiff.

At the trial, there was testimony that plaintiff, 44 years of age at the time of the accident, had become totally disabled and that based on past union contracts, his loss of wages up to the time of trial was $140,082.00. The testimony by an economist, which was not refuted, was that the future loss of earnings to the end of his work expectancy (projecting an annual increase of 8%) would be an additional $576,690.00. Discounted, the present value of the lost future earnings would be $364,789.00. Together with earnings lost to date and loss of Social Security benefits after retirement, the total, discounted to the present value, would be $567,000.00. That sum constitutes the gross amounts of wages and benefits before taxation. In a special verdict, that is precisely the amount the jury found to be the plaintiff's gross amount of lost wages and benefits.

During the trial, defendants' counsel had persisted in insisting that any amount of lost wages found by the jury would have to be reduced by the taxes plaintiff would have paid on that income as it was earned, citing the 1980 decision of the United States Supreme Court in Norfolk & Western Railway Co. v. Liepelt, 444 U.S. 490, 100 S.Ct. 1667, 64 L.Ed.2d 250 (1980). On the basis of that ruling, and the holding by the Appellate Division, First Department in Gilliard v. New York City Health & Hospitals Corp., 77 A.D.2d 532, 430 N.Y.S.2d 308 (1980), the court, despite the prior long standing rule that taxes were not to be considered, determined that it would have to preserve the question for review. Thus, in order to obviate the necessity for a third trial, the court permitted defendants' counsel to question the economics expert as to whether his projection of future earnings included a calculation for income tax. The expert testified that taxes on the plaintiff's past income would have been at an effective rate of approximately 8.9%, but that as inflation and future increases pushed the plaintiff in higher tax brackets his effective rate for the future would average about 15% of his earnings. While understandably professing difficulty in calculating the amount of future earnings less taxes, he stated that his "best guess" as to the total of taxes, after discount and after removing certain nontaxable items, would be $73,670.

At the conclusion of the trial, the court asked the jury to return a special verdict fixing responsibility and specifying their findings as to general damages and special damages, breaking the latter down into medical expenses and loss of wages and benefits. The jury was asked to find both the gross amount of lost wages, and the deduction which would have to be made if taxes were considered.

The jury answered the following questions:


Was plaintiff injured as a result of the negligence of the defendants?




What damages, if any, do you award plaintiff for

(A) Special damages

(1) Medical expenses


(2) Loss of Wages--benefits

(i) Gross $567,000

(ii) Less taxes $75,750.00

(B) General damages $150,000."

The total of general damages and special damages deducting taxes came to $645,009.83. If taxes are not to be deducted, the total of general and special damages is $720,759.83.

Plaintiff now moves, pursuant to CPLR 5016(b) which provides "If there is a special verdict, the court shall direct entry of an appropriate judgment", to have the court enter judgment on the jury's special verdict in the sum of $720,759.83 with interest from March 2, 1981.

Prior to 1980, it had been the rule, both in federal and state courts, with few exceptions, that in considering the question of damages a jury was not to take future income taxes into account. Coleman v. New York City Transit Authority, 37 N.Y.2d 137, 371 N.Y.S.2d 663, 332 N.E.2d 850 (1975); McWeeney v. New York, New Haven and Hartford Railroad Company, 282 F.2d 34 (2nd Cir. 1960). In Coleman, supra, the jury had asked the Judge for an indication as to the taxability of the award to plaintiff. The trial judge responded:

"Don't concern yourselves with that. It forms no part of your deliberations. It is not an element to be considered by you. Do not consider it at all." Id. pg. 145.

The majority of the Court of Appeals held:

"Although there is division on the question, the great weight of decisional authority in this country in respect to a case such as this, is to the effect that the Judge was not required to charge the jury that any award to the plaintiff would be free of income tax." 37 N.Y.2d 137, 145, 371 N.Y.S.2d 663, 332 N.E.2d 850.

One dissenter contended not that the jury should be charged to deduct income tax, but rather that they should be informed that any damages awarded were not taxable income.

The ruling in Coleman, supra, while affirming the charge as to taxes that the jury was "not to consider it at all" really dealt with the question of informing the jury as to the taxability of its award, and did not specifically deal with the question of whether that award by the jury should reflect an adjusted amount for future income less future taxes.

McWeeney, supra, was a Federal Employer's Liability Act case. The trial judge refused a request to charge as follows:

"If your verdict is in favor of plaintiff, you must calculate any past or future loss of earnings on the basis of his net income after deduction of income taxes."

On appeal, Judge Friendly wrote that the proper measure of damages is gross income in the great mass of litigation involving lower or middle class plaintiffs, and he contended that putting the calculation of future income taxes before a jury was excessively speculative and problematical.

The decisions in Coleman, supra, and McWeeney, supra, were, until 1980, considered the prevailing rule throughout the United States. Mitchell v. Emblade, 80 Ariz. 398, 298 P.2d 1034; Seely v. McEvers, 115 Ariz. 171, 564 P.2d 394; Rodriguez v. McDonnell Douglas Corp., 151 Cal.Rptr. 399, 87 Cal.App.3d 626; Hildyard v. Western Fasteners, 33 Colo.App. 396, 522 P.2d 596 (1974); High v. State Highway Department, 307 A.2d 799 (Sup.Ct.Del.1973); Hall v. Chicago & North Western Railway Company, 5 Ill.2d 135, 125 N.E.2d 77 (1955); Highshew v. Kushto, 235 Ind. 505, 134 N.E.2d 555 (1956); Rediker v. Chicago, Rock Island & Pac. R. Co., 1 Kan.App.2d 581, 571 P.2d 70, cert. granted 435 U.S. 922, 98 S.Ct. 1483, 55 L.Ed.2d 514, cert. dis. 435 U.S. 982, 98 S.Ct. 1635, 56 L.Ed.2d 76 (1978); Louisville & Nashville Railroad v. Mattingly, 318 S.W.2d 844 (Ct.App.Ky., 1958); Roundtree v. Technical Welding & Fabrication Company, Inc., 364 So.2d 1325 (Ct.App.La., 1978); Michaud v. Steckino, 390 A.2d 524, 535 (Sup.Ct.Me., 1978); Lumber Terminals Incorporated v. Nowskowski, 36 Md.App. 82, 373 A.2d 282 (1977); Briggs v. Chicago Great Western Railway Company, 248 Minn. 418, 80 N.W.2d 625 (1957); Senter v. Ferguson, 486 S.W.2d 644 (Ct.App.Mo., 1972); McGee v. Burlington Northern Inc., 571 P.2d 784 (S.Ct.Mont., 1977); Bracy v. Great Northern Ry. Co., 136 Mont. 65, 343 P.2d 848 (1959); Coleman v. New York City Transit Authority, supra, 37 N.Y.2d 137, 371 N.Y.S.2d 663, 332 N.E.2d 850; Ericksen v. Boyer, 225 N.W.2d 66 (S.Ct.N.D., 1974); Smith v. Pennsylvania R. Co., 99 N.E.2d 501, 47 Ohio Opns. 49 (Ct.App. Ohio, 1950); Missouri-Kansas-Texas Railroad Company v. Miller, 486 P.2d 630 (S.Ct.Okl., 1971); Byre v. Wieczorek, 88 S.D. 185, 217 N.W.2d 151 (1974); Norfolk Southern Railway Company v. Rayburn, 213 Va. 812, 195 S.E.2d 860 (1973); Hardware Mutual Gas. Co. v. Harry Crow & Son, 6 Wis.2d 396, 94 N.W.2d 577 (1959); Draisma v. United States, 492 F.Supp. 1317 (W.D.Mich., 1980); Estate of Spinosa v. International Harvester Co., 621 F.2d 1154 (1st Cir. 1980); Geris v. Burlington Northern, Inc., 277 Or. 381, 561 P.2d 174 (1976); Hinzman v. Palmanteer, 81 Wash.2d 327, 501 P.2d 1228 (1972); Plourd v. Southern Pac. Transp., 266 Or. 666, 513 P.2d 1140 (1973); also Dullard v. Berkeley Associates Company, 606 F.2d 840 (9th Cir. 1979); Blake v. Delaware & Hudson Ry. Co., 484 F.2d 204 (2nd Cir. 1973); Varlack v. SWC Caribbean, Inc., 550 F.2d 171 (3rd Cir. 1977); Johnson v. Penrod Drilling, 510 F.2d 234 (5th Cir. 1975), cert. den., 423 U.S. 839, 96 S.Ct. 68, 46 L.Ed.2d 58 (1975); Felder v. United States, 543 F.2d 657 [9th Cir. 1976].

Only six jurisdictions permitted a reduction of recovery by the amount of taxes. Floyd v. Fruit Industries, 144 Conn. 659, 136 A.2d 918 (1957); Feldman v. Allegheny Airlines, Inc., 524 F.2d 384 (2nd Cir. 1975); Runyon v. District of Columbia, 463 F.2d 990 (Dist.Col., 1972); Adams v. Deur, 173 N.W.2d 100 (S.Ct. Iowa, 1969); Tenore v. Nu Car Carriers, Inc....

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