Day on Torts

August 25, 2006

Taxability of Damages

Damage paid for personal injury claims are not taxable, right? Wrong. Damages paid for personal injury claims "“on account of personal physical injuries or physical sickness” are not taxable. 26 U.S.C. § 104(a)(2). Damages paid for purely emotional injuries are taxable, at least in the opinion of the IRS.

Now, along comes Murphy v. Internal Revenue Service, No. 05-5139 (D.C. Cir. August 22, 2006). Murphy received "damages for emotional distress and loss of reputation she was awarded in an adminstrative action she brought against her former employer." She was asked to, and did, pay taxes on the award, and then sued to get her tax payments back. She tried to argue that the payments fell within the exclusion of § 104(a)(2), but that failed. However, the Court held that "§ 104(a)(2) is unconstitutional as applied to her award because compensation for a non-physical personal injury is not income under the Sixteenth Amendment if, as here, it is unrelated to lost wages or earnings."

The Court said "it is clear from the record that the damages were awarded to make Murphy emotionally and reputationally “whole” and not to compensate her for lost wages or taxable earnings of any kind. The emotional well-being and good reputation she enjoyed before they were diminished by her former employer were not taxable as income. Under this analysis, therefore, the compensation she received in lieu of what she lost cannot be considered income and, hence, it would appear the Sixteenth Amendment does not empower the Congress to tax her award." It went on to say that "every indication is that damages received solely in compensation for a personal injury are not income within the meaning of that term in the Sixteenth Amendment. First, as compensation for the loss of a personal attribute, such as wellbeing or a good reputation, the damages are not received in lieu of income. Second, the framers of the Sixteenth Amendment would not have understood compensation for a personal injury — including a nonphysical injury — to be income. Therefore, we hold § 104(a)(2) unconstitutional insofar as it permits the taxation of an award of damages for mental distress and loss of reputation."

August 24, 2006

Tissue Recalled – Donor Referral Services

by The Law Offices of John Day, P.C.

Another day, another article about problems in the human tissue industry. This time it is Donor Referral Services of Raleigh, N.C., a company run by a man named Philip Guyett.

This North Carolina firm in the business of body part brokering allegedly used an unsterile embalming room to get usable tissue. The number of people who received the tissue is unknown.

No lawsuits appear to have been filed concerning the problem and, in fact, it is unknown whether any patients have been injured by the tissue.

August 23, 2006

Tennessee Supreme Court Accepts Statute of Limitations Case

by The Law Offices of John Day, P.C.

The statute of limitations is tolled when the plaintiff is of unsound mind. Tenn. Code Ann. § 28-1-106. Does the fact that a Durable Power of Attorney (executed before the incompetency) is in existence trump the tolling statute and require the attorney-in-fact to take action within the original statute?

The Tennessee Court of Appeals said "no" in Sullivan v. Chattanooga Medical Investors, L.P., No. M2004-02264-COA-R3-CV – (January 26, 2006). See the original opinion here.

Judge Susano put the issue this way: "Is the tolling effect of Tenn. Code Ann. § 28-1-106 implicated when an individual, while competent, grants another a durable power of attorney, including the power to act for the grantor with respect to “claims and litigation”? The crux of both the defendant’s argument and the trial court’s holding in opposition to the application of § 28-1-106 is that, by granting a durable power of attorney, the deceased removed himself and the plaintiff from the ambit and protection of § 28-1-106."

August 22, 2006

2006 Changes in Medical Malpractice Reporting Law

by The Law Offices of John Day, P.C.

From a recent press release issued by the Tennessee Dept. of Commerce and Insurance:

"Public Chapter 744, effective May 23, 2006, contains several important changes to the Medical Malpractice Reporting Law of Tennessee, (Public Chapter 902, adopted in 2004, and codified at Tenn. Code Ann. § 56-54-101). For the first time, it requires “reporting entities” (insurance companies, uninsured health care facilities and professionals) to include the damages and defense expenses incurred from the inception date of the medical malpractice claim until the end of the reporting year in its annual report to the Department of Commerce & Insurance (the “Department”). This change will enable the Department to accurately report on all of the costs to date incurred by reporting entities in its annual report to the General Assembly, rather than just those costs incurred during the reporting calendar year. The law requires reporting entities to re-file 2005 reports by July 1, 2006 to reflect these inception-to-date damages and costs, and also extends the deadline for the Department to report to the General Assembly from September 1 to November 1 of each year.

The legislation places requirements on counsel for claimants to submit their information on medical malpractice fee arrangements directly to the Department by April 1 of each year, beginning in 2007. Counsel for claimants are also included in the definition of “reporting entities” over which the Department has civil penalty authority to levy a fine of $100 a day for failure to report. The law now requires claimant’s counsel to report the portion of settlement or judgment received in the reporting calendar year. Similarly, all reporting entities must now list the name of each attorney representing claimants in its annual report in order to provide the Department with additional enforcement information. All settlement and judgment information submitted to the Department will continue to be held confidential, and reported only in aggregate form.

August 21, 2006

Legal Links

by The Law Offices of John Day, P.C.

Here is an interesting site that provides a good number of links of use to tort lawyers (and others). The site is published by the Philadelphia Association of Paralegals and has more than 100 links.

For instance, Omni Medical Search is a site that I was unfamiliar with that is referenced by the PAP. It looks great.

Enjoy.

August 18, 2006

Products in the News – Vioxx and Cigarettes

by The Law Offices of John Day, P.C.

Merck got hammered twice yesterday, first in New Orleans and then in New Jersey.

In New Orleans, a federal court jury ordered Merck to pay $51 M to a retired FBI agent who suffered a heart attack after taking Vioxx for three years. The case was a "must win" for the plaintiffs in the Vioxx litigation, who lost the first Vioxx trial in the federal court case track several months ago.

In New Jersey, Judge Higbee granted a motion for new trial in a case lost by a Vioxx plaintiff several months ago, a case tried before it became public knowledge that Merck had played games with the data underlying a published study on the "safety" of Vioxx. The Judge "said that jurors should not have had to consider the [New England Journal of Medicine] article without knowing that its editors believed that Merck had misrepresented the results of the trial." Judge Higbee is presiding over 7100 suits in New Jersey.

August 17, 2006

Expert Witnesses – Discovery of Reports

by The Law Offices of John Day, P.C.

The ABAs House of Delegates voted 207-137 to recommend adding to Federal Rules of Civil Procedure Rule 26(a)(2) a privilege for draft reports and communications between attorneys and their experts.

A Law.com article on the votes reports that "[t]he proposed change was prompted by varying judicial interpretations of 1993 amendments that expanded permissible expert discovery from "materials relied on" by an expert to "any data or other information considered by an expert" in forming his or her opinion. Some judges protect drafts until experts turn them over to counsel, while others require counsel and experts to turn over all drafts. "

Read the full article here.

August 16, 2006

Destructive Testing

by The Law Offices of John Day, P.C.

Law.com has posted an interesting article about destructive testing in products liability actions. The article was written by Michael Hoenig and was originally published in the New York Law Journal.

The article discussed the recent case of Mirchandani v. Home Depot, U.S.A., Inc., 235 FRD 611 (D. Md. 2006), in which the court was faced with a request to permit destructive testing of a bolt that allegedly failed on a ladder. The court sought to achieve a "balance between the ‘costs of irreversibly altering the object and the benefits of obtaining the evidence sought in the case.’" In doing so it weighed these four factors:

"(1) whether the proposed testing is reasonable, necessary and relevant to proving the movant’s case;

August 15, 2006

Lack of Sleep and Commerical Drivers

by The Law Offices of John Day, P.C.

A recent study reports about the risk of lack of sleep on commercial drivers. In an article entitled "Impaired Performance in Commercial Drivers: Role of Sleep Apnea and Short Sleep Duration" researchers from the University of Pennsylvania "examined 406 truck drivers and found that those who routinely slept less than five hours a night were likely to fare poorly on tests designed to measure sleepiness, attention and reaction time, and steering ability. Drivers with severe sleep apnea, a medical condition that causes a poor quality of sleep, also were sleepy and had performance impairment," according to a summary of the article at Insurance Journal.

The Penn report indicates that 5600 people per year are killed in wrecks with commercial trucks and that many of them involve drivers falling asleep at the wheel.

The Penn report is published in American Journal of Respiratory and Critical Care Medicine. The article can be accessed here.

August 14, 2006

Assignment of Fault to a Nonparty

by The Law Offices of John Day, P.C.

Under Tennessee law fault cannot be assigned to a plaintiff’s employer but the defendant is permitted to prove and argue that the employer was the cause in fact of the injury.

But what if the defendant wants to ask the jury to apportion fault to an entity that is deemed an employer under Tennessee worker’s compensation law and therefore obtains the benefit of immunity from suit by the plaintiff? Can the statutory employer be assigned fault even though the plaintiff cannot sue it?

In a case of first impression, the Court of Appeals (Western Section) says "yes" in Troup v. Fischer Steel Corp., No. W2005-00913-COA-R3-CV ( August 10, 2006) and in doing so reversed a $500,000+ verdict for the plaintiff. The court ruled that the Trial Court erred when it failed to permit the steel subcontractor defendant from proving and arguing the fault of the general contractor in a personal injury case filed by the employee of the roofing subcontractor.