William Flannery, Committee for Michael George Flannery v. United States

HAYNSWORTH, Senior Circuit Judge:

The plaintiff, a twenty-two year old young man, became permanently comatose as a result of extensive brain damage suffered in an automobile accident later determined to have been caused by the negligence of the driver of the other vehicle who was a federal employee on official business. After a trial of this action, brought under the Federal Tort Claims Act, the court awarded damages of approximately $2,200,-000 consisting of $48,174.80 for medical expenses incurred before trial, $316,984 for future medical expenses, $535,855 for impairment of earning capacity, and $1,300,-000 for “loss of the ability to enjoy life.”

On appeal, the United States does not question the determination of its substantive liability. It does question the calculation of damages.

I.

When the case first came before us, we perceived the questions presented as principally to be determined as a matter of state law. There was a recently enacted statute in West Virginia authorizing the Supreme Court of Appeals of that state to accept and answer questions of West Virginia law certified to it by a federal court. We certified the two principal questions to the Supreme Court of Appeals of West Virginia without appreciating at the time that federal questions lurked in the case, 649 F.2d 270. The West Virginia Supreme Court of Appeals gave us a prompt response, holding that, as a matter of state law, the damages for loss of capácity to enjoy life were properly allowed notwithstanding the fact that the plaintiff has no awareness of his loss, and that no deduction of federal income taxes should be made in calculating the amount of loss of future earnings. Flannery v. United States, 297 S.E.2d 433 (W.Va.1982).

We should have first addressed the federal questions lurking in the case. We would have done so except, at the time, we failed to appreciate their presence.

II.

Under 28 U.S.C. § 2674 of the Tort Claims Act, damages generally are determinable under state law, for the United States is to be held liable “to the same extent as a private individual under like circumstances.” But there is a qualification, the relevance and importance of which is now clearly apparent. Punitive damages are not allowable. The Federal Tort Claims Act is a waiver of immunity from suit of the United States, and conditions attached to the waiver must be strictly enforced. The government’s immunity is waived insofar as compensatory damages may be determined and awarded. The door for the assertion of private tort claims in federal courts is opened that far, but then the question arises about the allowability of damages treated and labeled under state law as “compensatory” which are in excess of those necessary to provide compensation for injuries and losses actually sustained.

The question of the allowance of such damages is one of federal law. What is compensatory and what is punitive, within the meaning of the statute, is related directly to the extent of the waiver of sovereign immunity. How widely the Congress intended to open the door is not a matter to be resolved under the widely varying laws of the fifty states, but under a uniform standard. Thus, as was said in D’Ambra v. United States, 481 F.2d 14 (1st Cir.1973), a state’s statutory measure of damages “must be judged not by its language or the state’s characterization, but by its consequences.”

D'Ambra was a wrongful death action for the death of a child in Rhode Island. The Rhode Island statute provided an award to the decedent’s parents of an amount computed in terms of the economic loss to the decedent. That bore no relation to the actual loss suffered by the parents. Since damages under the Rhode Island statute were not to be determined by an assessment of the loss suffered by the survivors, a damage award under the statute was held *111to be punitive and impermissible under the FTCA.

Similarly, it has now been repeatedly held that federal income taxes must be deducted in computing lost future earnings, notwithstanding the fact that such deductions are not permitted under state law. Harden v. United States, 688 F.2d 1025 (5th Cir.1982); Felder v. United States, 543 F.2d 657 (9th Cir.1976); Hartz v. United States, 415 F.2d 259 (5th Cir.1969). A living person, with earnings subject to federal taxation, may spend only his net income after taxes, and an award to a plaintiff for lost future earnings based upon lost gross earnings gives the plaintiff more than is truly compensatory. As the court pointed out in Felder, the punitive nature of the award based upon a computation of lost gross earnings is particularly apparent when the defendant is the taxing authority.

The FTCA’s proscription of awards of punitive damages authorizes only those awards that compensate or reimburse, or provide recompense or redress for injuries suffered by the claimant. To the extent that an award gives more than the actual loss suffered by the claimant, it is “punitive” whether or not it carries with it the deterrent and punishing attributes typically associated with the word “punitive.”

III.

There is no doubt that Flannery has lost “his capacity to enjoy life.” He is conscious of nothing and incapable of enjoying anything. In his condition, he is quite susceptible to infections, but with proper care he may have a life expectancy of as much as thirty years from the date of his injury. There is no likelihood whatever that he will ever become aware of anything.

The Supreme Court of Appeals of West Virginia held that, as a matter of state law, damages for the loss of the capacity to enjoy life were assessable upon an objective basis, and it did not matter that this particular plaintiff is unaware of his loss. It is perfectly clear, however, that an award of $1,300,000 for the loss of enjoyment of life cannot provide him with any consolation or ease any burden resting upon him. The award of the cost of future medical care provides for his maintenance as well as his nursing and professional care. It provides all of the money needed for the plaintiffs care, should he live out his life expectancy. He cannot use the $1,300,000. He cannot spend it upon necessities or pleasures. He cannot experience the pleasure of giving it away. If paid, the money would be invested and the income accumulated until Flannery’s death, when it would be distributed to those surviving relatives of his entitled to inherit from him. If it is compensatory in part to any one, it is compensatory to those relatives who will survive him.

Since the award of $1,300,000 can provide Flannery with no direct benefit, the award is punitive and not allowable under the FTCA.

IV.

We have already adverted to the decisions holding that federal income taxes must be deducted in computing lost future earnings, at least when the earnings are substantial. They are entirely consistent with the holding of the Supreme Court that such an adjustment must be made in a wrongful death action brought under the Federal Employers Liability Act, Norfolk & Western Railway Co. v. Liepelt, 444 U.S. 490, 100 S.Ct. 755, 62 L.Ed.2d 689 (1980); see also Gulf Offshore Co. v. Mobil Oil Corp., 453 U.S. 473, 101 S.Ct. 2870, 69 L.Ed.2d 784 (1981). They are consistent with other cases requiring such deductions in actions brought under the Longshoremen’s and Harbor Workers’ Compensation Act and admiralty cases. Fanetti v. Hellenic Lines, Ltd., 678 F.2d 424 (2d Cir.1982), Sauers v. Alaska Barge, 600 F.2d 238 (9th Cir.1979). As the Supreme Court observed in Jones & Laughlin Steel Corp. v. Pfeifer, -U.S.-, 103 S.Ct. 2541, 76 L.Ed.2d 768 (1983), “Since the damage award is tax-free, the relevant stream is ideally of after-tax wages and benefits.” (Emphasis in original).

*112The lost earnings projections employed generous figures. Flannery had been attending college for three years, but he had completed so few courses he was ranked only as a sophomore. On the afternoon preceding the evening when he was so tragically injured, he had earned $16 working in a filling station, and that constituted his complete employment history. Nevertheless, the projections accepted by the district judge were that he would earn from $17,481 in 1978 to $182,795 in 2017, plus about 35% of those figures in fringe benefits and “supplemental income.”1

The United States has requested an adjustment for income taxes on the basis of a flat 10% deduction. That is a very conservative estimate. On the basis of current tax tables, a single taxpayer earning $17,481 a year would pay more than that. One earning over $182,000 would have a current tax liability of over 40%. Discounting at the flat rate of 10%, however, has the virtue of simplicity. Since the United States requested no more, we think its suggestion should be accepted.

V.

The plaintiff contends that if an adjustment is made for income taxes upon estimated future earnings, an adjustment should be made for the income taxes payable on income on invested funds after the judgment is paid. We reject the contention, for it is unknown how the fiduciary who will handle the funds will invest them. It could invest them in whole or in part in tax exempt securities. We find no basis for an adjustment for a tax liability which is avoidable and may never be incurred.

VI.

Except for the tax adjustment it seeks, the United States does not question the award for lost future earnings. In many cases, such an award is clearly compensatory and useful to provide for a claimant’s subsistence and that of his dependents. A question arises in this case, however, for the judgment already requires the United States to pay a sum calculated to provide for the plaintiff’s living expenses throughout the remainder of his life, should he live out his life expectancy.

The question has not been raised by the United States, but we feel compelled to reduce the award for lost earnings because, in part, it duplicates the award of future medical expenses.

An award of lost earnings is made to an incapacitated plaintiff so that he may provide for himself and his dependents those necessities, comforts and niceties he would have provided out of his earned income had he not been injured. In an FTCA wrongful death action, the survivors are entitled to an award based upon lost future earnings of the decedent only after a deduction of the decedent’s estimated living expenses, for the survivors are entitled to no greater benefit than they would have enjoyed had the decedent lived and continued working. Hartz v. United States, 415 F.2d 259 (5th Cir.1969). A successful plaintiff is entitled to be made as financially secure as he would have been had there been no injury or death, but no more.

In the usual case, a living plaintiff must pay his own living expenses, though an award for lost earnings may be the source of his funds. In this case, however, the plaintiff will be required to pay nothing, for the award of future medical expenses includes all of the personal expense that the plaintiff will incur. Indeed, the testimony was that, in the future, he will need little skilled medical care. His personal expenses will be to provide himself with housing, food, and nursing and custodial care of the kind provided in a nursing home. That is the expense covered by the award for future medical expense. The label should not be permitted to mislead us, for, in truth, the judgment requires the United States to pay the plaintiff’s personal living expenses twice. Thus, the award for lost earnings, as finally determined, should be reduced by *113the amount of the award for future medical expenses.

VII.

The judgment is vacated and the case remanded for further proceedings consistent with this opinion.

VACATED AND REMANDED.

. The very large figures for later years were properly discounted for an increasing likelihood that he would not have remained in employment so long.