Decided: June 18, 1975.
CATHERINE TENORE, ETC., ET AL., PLAINTIFFS-RESPONDENTS,
NU CAR CARRIERS, INC., DEFENDANT-APPELLANT
For affirmance as modified -- Chief Justice Hughes, Justices Mountain, Sullivan, Pashman and Clifford and Judge Conford. For reversal -- None. The opinion of the Court was delivered by Pashman, J.
[67 NJ Page 470]
This is a wrongful death action in which plaintiff appealed a $200,000 jury verdict contending that the trial court had erroneously refused to allow expert economic testimony concerning inflationary trends on the issue of future wage losses of the deceased. In an unreported opinion, the Appellate Division concluded that the evidence should have been admitted and ordered a new trial on the issue of damages only. We granted defendant's petition for certification, 66 N.J. 319 (1974), to consider the proper scope of expert testimony in this context.
The deceased, Richard Tenore, a 40-year old union electrician, was killed when he was struck by a wheel that broke free from one of defendant's trucks. The accident occurred on December 27, 1971 while Tenore and another electrician were working on the New Jersey Turnpike in the vicinity of the Newark Airport. At the time of his death Tenore was employed as a foreman by the Daidone Electric Company. In 1971 his gross salary was $20,323.43, exclusive of a $3,000 bonus which was paid to his wife shortly after his death.
In February 1972 Tenore's widow commenced a wrongful death action against defendant Nu Car Carriers, Inc., alleging that its negligence caused her husband's death. The jury found defendant negligent.
[67 NJ Page 471]
In support of the claim for damages, plaintiff offered the testimony of Arthur Schoenwald, an economist who specialized in the practical application of economic principles to problems of valuations. In response to specific questions by the court, the witness stated that his area of expertise included the training of an actuary in the determination of present value of future losses. Having qualified as an expert, Dr. Schoenwald testified that his examination of wage trends over the past 36 years showed an average increase of 5 1/2% a year.*fn1 In preparing his testimony, the witness extrapolated from these data and applied the projected wage increases to Tenore's most recent base earnings through the year 1996 (Tenore's projected work life expectancy would have been 24 years and 7 months) when the deceased would have reached the normal retirement age of 65.*fn2 When Dr. Schoenwald attempted to testify concerning his projections of Tenore's salary in future years, however, the court ruled the projections inadmissible:
THE COURT: . . . I will not allow projection in the future.
MR. GREENFIELD: May I respectfully ask why * * *?
THE COURT: Because it is a guess.
It was plaintiff's intention to have the expert testify from a prepared report to specific figures of projected future income and net losses of such income after deduction of personal expenses of decedent had he lived, and then to calculate the present value at a discount rate of 4% of such future
[67 NJ Page 472]
losses. In the projections the decedent would be shown as earning $35,584 in 1980, $52,672 in 1990 and $64,084 in 1995, the last working year of decedent's statistical expectancy. The report would have shown net future losses to the next of kin in the aggregate sum of $925,361, having a present value at the discount rate of 4% of $559,949. That would have been the figure presented to the jury as the expert's appraisal of the damages in this case.
Plaintiff was also concerned about the admissibility of testimony concerning the effect of income taxes on the deceased's future earnings, and after a discussion held out of the presence of the jury, the court, over objection, decided that the income tax liability on Tenore's earnings could not be brought out on cross-examination.*fn3
Despite the total absence of testimony concerning either factor and the court's express ruling on the tax question, the court permitted the jury to consider inflation in fixing damages and instructed them to consider the effect of income taxes upon income which the deceased might have earned had he lived.*fn4
[67 NJ Page 473]
Although the jury awarded her a verdict, plaintiff appealed on the basis of the trial court's exclusion of expert economic testimony on the question of deceased's future earnings. In remanding the case for retrial on damages, the Appellate Division reasoned that the economic evidence proffered by plaintiff was relevant to the determination of the aggregate anticipated loss of future earnings resulting from the untimely death of decedent. Acknowledging that this form of evidence "does not enjoy the quality of the absolute," the court nonetheless concluded that it did not warrant dismissal as speculation. Indeed, in the court's view, plaintiff's evidence would have reduced the degree of jury speculation by providing some guidelines for the practical application of inflation to the determination of the survivor's damages. We are only in partial agreement with that conclusion. In our judgment, the Appellate Division was correct in remanding the case for retrial as to the proper measure of damages, and approving expert testimony as to expected inflationary wage trends but not in implying that the witness might be allowed to present his conclusion as to damages in aggregate dollar terms.
The fundamental aim of our Wrongful Death Act, N.J.S.A. 2A:31-1 et seq., is compensation for the pecuniary losses suffered by the survivors of those killed by wrongful act, neglect or default.*fn5 In assessing damages for pecuniary
[67 NJ Page 474]
loss, the Legislature has directed the jury to award an amount which is fair and just under the circumstances:
In every action brought under the provisions of this chapter the jury may give such damages as they shall deem fair and just with reference to the pecuniary injuries resulting from such death, together with the hospital, medical and funeral expenses incurred for the deceased, to the persons entitled to any intestate personal property of the decedent. [ N.J.S.A. 2A:31-5 (Supp. 1975-76)].
Under our practice, however, the defendant in a wrongful death action is entitled to have the recovery discounted to present value, a procedure which recognizes that the deceased would have had his income spread out over the remaining years of his working life, had he lived. See Matthews v. Nelson, 57 N.J. Super. 515, 520 (App. Div. 1959), certif. den., 31 N.J. 296 (1960); Kappel v. Public Service Ry., 105 N.J.L. 264, 265 (Sup. Ct. 1929). See also Russell v. City of Wildwood, 428 F.2d 1176, 1181-82 (3 Cir. 1970); Noa v. LeGore, 131 N.J.L. 229, 235-36 (E. & A. 1944).*fn6
[67 NJ Page 475]
At a time when past history and present economic trends prognosticate generally rising wage scales attributable largely to an inflationary cycle, there is no sound reason why the opinion of a qualified expert on that subject should not be made available for the assistance of the jury in appraising damages. Precluding this element from the damage determination would work an injustice upon the survivor, particularly when it is recalled that the verdict awarded the successful plaintiff represents current compensation for future loss.
The difficulty in the present case, however, was not in the trial court's failure to permit the jury to consider an inflation factor, but rather in the exclusion of evidence which was offered to provide expert testimony to guide the jury in its application of inflation to the verdict. We conclude that the jury should, within limitations stated hereinafter, have had the benefit of expert testimony on inflation to provide them with informed guidelines in assessing the effect of future wage increases on plaintiff's losses.
The problem of the effect of inflation upon damage awards is not a new one, but in the past the question has usually come before the courts either in the context of permitting the jury in the first instance to consider it in fixing damages, or in recognizing changes in the purchasing power of the dollar in reviewing verdicts. See generally Annotation, "Changes in the cost of living or in the purchasing power of money as affecting damages for personal injuries or death," 12 A.L.R. 2d 611 (1950); Note, 48 Colum. L. Rev. 264 (1948).*fn7 See Andryishyn v. Ballinger, 61 N.J. Super. 386 [67 NJ Page 476] (App. Div. 1960), certif. den., 33 N.J. 120 (1960) where the court observed that, in general, damages must be left to the discretion of the jury, "and the value of the award must be appraised in light of existing economic conditions." Id. at 393. See also Cermak v. Hertz Corp., 53 N.J. Super. 455, 465 (App. Div. 1958), aff'd per curiam, 28 N.J. 568 (1959); Cabakov v. Thatcher, 37 N.J. Super. 249, 258 (App. Div. 1955); Paparazzo v. Perkel, 16 N.J. Super. 128, 133 (App. Div. 1951); Moore v. Public Service Coordinated Transport, 15 N.J. Super. 499, 512 (App. Div. 1951); Dandrea v. Centofante, 13 N.J. Super. 445, 447 (App. Div. 1951); Bardack v. Extract, 13 N.J. Super. 350, 356 (App. Div. 1951); Nusser v. United Parcel Service, 3 N.J. Super. 64, 69-70 (App. Div. 1949); Bowes v. Public Service Ry., 94 N.J.L. 378, 379 (Sup. Ct. 1920); Clifford
[67 NJ Page 477]
v. McCloskey, 13 N.J. Super. 96, 97-98 (Law Div. 1951); McStay v. Przychocki, 9 N.J. Super. 365, 369 (Cty. Ct. 1950), aff'd, 10 N.J. Super. 455 (App. Div. 1950), aff'd, 7 N.J. 456 (1951).
Although inflation has thus often been recognized in a general way in fixing or reviewing damage awards, attempts to introduce expert testimony to provide guidelines for evaluating its impact on future pecuniary loss is a relatively recent development, one which has been applauded by several commentators. One of the leading writers on the subject of wrongful death, for example, has argued:
See also Leonard, "Future Economic Value in Wrongful Death Litigation," 30 Ohio State L.J. 502 (1969).*fn8
The principal argument against the admission of expert testimony on the relationship between future inflationary trends and the claimant's pecuniary losses is the assertion that the evidence is unduly speculative.*fn9 Indeed, in the
[67 NJ Page 478]
present case, defendant has characterized this inquiry as a "ridiculous academic exercise."
Although the precise question is one of first impression in our State, many of the courts of other jurisdictions have concluded that expert testimony on the issue of future earnings, while in one sense speculative, in fact reduces the degree of jury conjecture in arriving at a just verdict. As early as 1949 in Turrietta v. Wyche, 54 N.M. 5, 212 P. 2d 1041 (1949), the Supreme Court of New Mexico held that testimony tending to prove plaintiff's future earning capacity in an action for personal injuries was properly admitted. Recognizing that the evaluation of an individual's future earning potential necessarily involves a degree of uncertainty, the court nonetheless concluded that "any evidence that would fairly indicate [plaintiff's] earning capacity, and the probability of its increase or decrease in the future ought to be admitted." 54 N.M. at 15, 212 P. 2d at 1047.
More recently, in Krohmer v. Dahl, 145 Mont. 491, 402 P. 2d 979 (1965), a wrongful death and survival action, the trial court admitted the testimony and exhibits of a professor of economics which were offered to prove the future earnings of an 18-year old college student. The evidence was admitted over defendant's objection that it was speculative. On appeal, the Supreme Court of Montana affirmed, emphasizing that the economic evidence would reduce the danger of speculation in fixing damages:
[67 NJ Page 479]
This court agrees that the testimony and exhibits of Heliker were speculative in nature, but no more so than any other evidence that has for its purpose the proof of future action or events. The issue before the trial judge, as seen by this tribunal, was whether the testimony of Heliker should be allowed, in order to give the jury some basis upon which to reach a conclusion in regard to the possible future earnings of the decedent, or whether to leave the jury unguided and hope that by their common knowledge and sense of justice they might arrive at a more accurate estimation of damages. It appears to us that in this particular case the element of conjecture is reduced significantly by the admission of expert testimony as to the possible future earnings of the decedent. It also appears that this expert testimony is not only the best evidence, but the only evidence available in this case to prove future earnings. [145 Mont. at 495, 402 P. 2d at 981].
See also Beebe v. Johnson, Mont., 526 P. 2d 128 (1974).
In the present case, however, Dr. Schoenwald attempted to project plaintiff's future losses not in general terms but by assuming a 4% rate of increase over decedent's remaining working life. Several courts which have considered the issue recently have specifically endorsed this approach, finding that such a projection is not unduly speculative. In Plourd v. Southern Pacific Transportation Co., 266 Or. 666, 513 P. 2d 1140 (1973), for example, an economist was permitted to assume a 5% rate of increase over a 23-year period in a personal injury action. In rejecting defendant's argument that the economist's projection was "'pure speculation,'" the court observed:
In our opinion, however, it is no more speculative to assume that wage rates for plaintiff's employment will continue to increase at least 5% per year for the next 23 years, based upon a history of such a rate of increase durting the past 23 years, than it is to assume that the interest discount rate will remain stationary during the same 23-year period. [266 Or. at 677, 513 P. 2d at 1146].
A similar conclusion was reached by the court in Resner v. Northern Pacific Ry., 161 Mont. 177, 505 P. 2d 86 (1973), a wrongful death action brought under the Federal Employers'
[67 NJ Page 480]
Liability Act, in which the Montana Supreme Court reinstated a jury verdict based on a 5% projected rate of wage growth.*fn10
We are persuaded that fair and just compensation in wrongful death cases must be based on a jury consideration of the effects of future inflation. It is naive to suppose that the question does not occur to the average juror, particularly in these troubled economic times. In this respect we find the observations of the court in Scruggs v. Chesapeake & Ohio Ry., 320 F. Supp. 1248 (W.D. Va. 1970) appropriate:
The question before the jury was the pecuniary loss which would be suffered by the plaintiff and her son in the future. The probability of increases in decedent's income was certainly relevant to that issue. It seems unlikely that their conclusions will be any less valid from having heard the testimony objected to, and they may be much more correct than otherwise. Inflation is a topic of almost universal discussion and it seems improbable that the jury could avoid taking it into account even in the absence of any testimony about it. The defendant cross-examined [the economist] and also argued its analysis of the trends, which the jury apparently did not accept. [320 F. Supp. at 1251].
We conclude, as did the court in Scruggs, that "some inflation over a period of years seems to be a fact of life and . . . as a practical matter, juries can scarcely be prevented from considering such elements in their deliberations." 320 F. Supp. at 1250-51.*fn11
[67 NJ Page 481]
In our view, therefore, in wrongful death actions, the jury should be instructed that it is permissible for them to consider the impact of inflation upon the survivor's future losses.*fn12 To reduce the possibility of undue conjecture on the part of the jury, plaintiff should also have an opportunity to offer expert economic testimony on the question to provide them with informed guidelines in their deliberations. See Evid. R. 56; Rempfer v. Deerfield Packing Corp., 4 N.J. 135, 141-42 (1950). Of course, we recognize that economists may differ in their analyses of past trends and future projections and consequently we anticipate that defendants in wrongful death cases will want to offer the testimony of their own experts in rebuttal. This is a familiar practice in other contexts and we see no reason why the same procedure cannot be resorted to in order to give the jury in death cases the benefit of all available points of view.*fn13
In holding that expert economic testimony is admissible in actions for wrongful death on the issue of the effect of inflation
[67 NJ Page 482]
on the survivor's future pecuniary loss, we are aware that not all courts share this view.*fn14 In our judgment, however, it is simply unrealistic to ignore the problem of inflation in this context. Given the enormity of the potential impact of rising costs over a long period of time,*fn15 we conclude that evidence of informed estimates of future inflationary trends will result in damage awards that are fair and just.
We return to the matter of introduction in evidence of tables prepared by the expert witness purporting to show plaintiff's aggregate damages. This is improper for two reasons. In the first place, the tables assume fact findings not within the peculiar expertise of the economic expert. In the second place, the projection of a gross figure before the jury submitted by an expert tends to exert an undue
[67 NJ Page 483]
psychological impact leading to the danger of its uncritical acceptance by the jury in the place of its own function in evaluating the proofs.
As to the first point, the tables assume there will never be a lapse in decedent's earning capacity because of illness, incapacity, change of jobs, layoffs, etc. Cf. Cross v. Robert E. Lamb, Inc., 60 N.J. Super. 53, 79, 80 (App. Div. 1960), certif. den 32 N.J. 350 (1960). They also assume that a substantial share of the family income would not have been consumed by decedent but only his pocket money expense of about $4,223 per year (as to the lack of justification for this assumption see O'Connor v. United States, 269 F.2d 578 (2 Cir. 1959)). When these disputable assumptions, as to which the jury should make their own subordinate findings, are taken together with the, at best, guesses by the expert that the rate of annual wage increase will proceed at a 4% level for the entirety of the projected working life expectancy of decedent and that 4% is a fair rate for discounting to present value (in the face of conservative current interest rates of at least double that figure), there is necessarily present in the total resulting damage figure submitted by the expert a substantial risk of unreliability and a considerable degree of non-expert conclusion.
As to the prejudicial capacity before a jury of gross dollar totals submitted in this manner, compare Botta v. Brunner, 26 N.J. 82, 104 (1958) where the court said:
We know that as a matter of practice when the ad damnum clause is brought to the attention of the jury, the court admonishes them that it only represents the claim of the plaintiff and that their award must be based on reasonable compensation. But it is extremely doubtful whether such admonitions are sufficient to eliminate the figure from their minds as a conscious or unconscious factor in reaching their verdict. [26 N.J. at 104].
See also Cross v. Robert E. Lamb, Inc., supra.
What we do expect is that the experts will provide the jury with their analyses of trends of future wage increases
[67 NJ Page 484]
and discount interest rates generally and that then, giving due regard to credibility, the jury will use those trends and rates in arriving at their own independent single-figure appraisal of plaintiff's pecuniary loss.
Although the trial court in the present case instructed the jury that any award for plaintiff should be based on losses after income taxation and that the award itself would not be subject to federal income taxation,*fn16 the court refused to allow defendant to pursue the question of taxes on cross-examination. In our view, the trial court erred in this respect. Since plaintiff's losses in a wrongful death action are limited to the value of the deceased's net income,*fn17 we believe that fairness requires that defendant
[67 NJ Page 485]
have an opportunity to introduce evidence of deceased's tax liability or to develop the matter on cross-examination of plaintiff's witnesses.
The matter of income taxes has concerned the courts in two ways: (1) should future taxes be deducted from future wages in estimating losses from deprivation of future earnings; (2) should juries be told the fact that awards of damages are not subject to income taxes. Different considerations apply to these questions but the courts have frequently dealt with them together. The first problem is addressed to precision in estimating loss of future earnings; the second, to the matter of dissuading the jury from increasing a verdict on the mistaken assumption that the damages are taxable and a desire to make the plaintiff whole as against such tax imposition. See Abele v. Massi, Del., 273 A.2d 260, 261 (Sup. Ct. 1970).
In the past most courts which have been confronted with the problem of the effect of income taxes on damage awards have refused to admit evidence on the issue or to instruct the jury on such issues. See generally Nordstrom, "Income Taxes and Personal Injury Awards," 19 Ohio State L.J. 212 (1958); Annotation, "Propriety of taking income tax into consideration in fixing damages in personal injury or death action," 63 A.L.R. 2d 1393 (1959). Two principal reasons are generally advanced to justify the view that income taxes should be ignored in fixing damages in personal injury or death cases: (1) an individual's future income tax liability is too speculative or conjectural a factor to be considered, e.g., Stokes v. United States, 144 F.2d 82, 87 (2 Cir. 1944); Hall v. Chicago & North Western Ry., 5 Ill. 2d 135, 125 N.E. 2d 77, 86 (1955); and (2) tax matters are too complicated for jury consideration, e.g., Highshew v. Kushto, 235 Ind. 505, 134 N.E. 2d 555, 556 (1956); Pfister v. Cleveland, 96 Ohio App. 185, 113 N.E. 2d 366, 368
[67 NJ Page 486]
(Ct. App. 1953), appeal dismissed, 159 Ohio St. 580, 112 N.E. 2d 657 (1953).*fn18
Stokes, supra is one of the earliest reported decisions dealing with the problem of income taxes and damage awards and although it is frequently cited as authority for the proposition that income taxes should not be deducted in estimating loss of income, the court resolved the question in an off-hand fashion stating simply that there was no error "in the refusal to make a deduction for income taxes in the estimate of the libellant's expected earnings; such deductions are too conjectural." 144 F.2d at 87.
Sixteen years later, however, the Second Circuit gave the issue a more thorough airing in McWeeney v. New York, N.H. & H.R.R., 282 F.2d 34 (2 Cir. 1970) (en banc), cert. den. 364 U.S. 870, 81 S. Ct. 115, 5 L. Ed. 2d 93 (1960). McWeeney was an action brought under the Federal Employers' Liability Act by a brakeman who was injured when he was struck by a railroad freight car. A jury awarded McWeeney $87,000 but when defendant's motion for a new trial was denied, he appealed claiming that the trial court erred in denying ten requests to charge.*fn19 Defendant's requests
[67 NJ Page 487]
were intended to caution the jury to calculate plaintiff's future losses on the basis of his net income and to advise them that a damage award is tax-exempt. Defendant's requests brought into sharp focus the dual nature of the inquiry in this context. First, should gross or net income be used to calculate plaintiff's lost earnings; and second, should the jury be advised of the exemption?*fn20
Writing for the majority, Judge Friendly held that Stokes, supra was controlling and consequently no deduction should be made for income taxes in computing plaintiff's losses. 282 F.2d at 39. Acknowledging that the deduction of taxes from the loss of earning power has a "surface appeal," 282 F.2d at 35, the majority nonetheless concluded that the pragmatic difficulty in instructing the jury on a matter as uncertain as plaintiff's future income tax liability was
[67 NJ Page 488]
impractical in the ordinary case.*fn21 The court also conceded that when viewed in isolation, a failure to instruct the jury to consider income taxes "may tend to make verdicts too high," but reasoned that two off-setting factors, inflation and attorneys' fees, would tend to counter-balance what would otherwise be "any excess in the verdict due to failure to deduct income tax." 282 F.2d at 37-38. In holding that no deduction was warranted in the instant appeal, however, the court left open the possibility that there may indeed be exceptional cases in which such a deduction would be appropriate:
There may be cases where failure to make some adjustment for the portion of a plaintiff's or decedent's earnings that would have been taken by income taxes would produce an improper result, but these are at the opposite end of the income spectrum from McWeeney's. For example, if a plaintiff or a plaintiff's decedent, had potential earnings of $100,000 a year, more than half of which would have been consumed by income taxes, an award of damages based on gross earnings would be plainly excessive even after taking full account of the countervailing factors we have mentioned. [282 F.2d at 38 (footnote omitted)].
With respect to defendant's request that the court simply advise the jury that plaintiff's damages are not taxable, the court correctly observed that unlike the instruction on plaintiff's
[67 NJ Page 489]
net earnings, "it imposes no new burden on the jury and there is nothing speculative about it," 282 F.2d at 39, thus it would not have been error for the court to give the instruction. However, since there was no evidence that the jury had increased its verdict to account for taxes, the court declined to characterize the omission as reversible error. 282 F.2d at 39-40.
Chief Judge Lumbard dissented. In his view, the judgment should have been reversed because of the trial court's failure to charge the jury that any sum awarded to plaintiff would not be taxable. 282 F.2d at 40. He also argued that the instruction on plaintiff's net income should also be given on retrial if defendant offered evidence of plaintiff's actual taxes in the past or alternatively what an individual in plaintiff's position would normally pay. With respect to the majority's conclusion that in order for the jury to consider the income tax factor, the jury would be subjected to considerable additional evidence, complex computations, and unpredictable variables, the Chief Judge observed:
In my view Judge Friendly greatly overestimates the task which the jury would be called on to perform. As his own opinion points out, all that the defendant needed to do in this case was to take the rate of earnings of the plaintiff -- $4,800 a year -- and compute the taxes which a bachelor with no dependents would pay on the simple tax form, namely $773. The proposed instruction would merely require the jury to estimate loss of future income on the basis of McWeeney's net income of approximately $4,000 rather than upon his gross income of $4,800. [282 F.2d at 41 (Lumbard, C.J. dissenting.)].*fn22
McWeeney, however, was by its terms applicable only in situations in which damages are governed by federal law, or where the applicable state law is silent on the subject of taxes. 282 F.2d at 39. As a result, the McWeeney court found no conflict between its resolution of the tax issue and
[67 NJ Page 490]
its prior decision in O'Connor v. United States, 269 F.2d 578 (2 Cir. 1959), a decision applying the Oklahoma law of damages, and which, ironically, contains one of the most articulate arguments in favor of deducting income taxes in computing damages. Plaintiff in O'Connor sued the United States under the Federal Tort Claims Act to recover for the death of her husband. In concluding that a deduction should be made, the court observed that it would be "wholly unrealistic" to suppose that federal income taxes would cease or decrease substantially in the deceased's lifetime:
We think that such a deduction should be made. It has been said that future taxes are too uncertain to admit of advanced computation. But it is wholly unrealistic to suppose that, at any time within the limits of the years the deceased could reasonably have been expected to live either the discontinuance or substantial reduction of Federal Income Taxes would occur. The deceased, as a salaried employee, never had in his own hands the amount withheld from his earnings for Federal Income Tax purposes; and his wife and child could have no direct benefit from that part of his earnings. While mathematical certainty is not possible any more than it is in a prognosis of life expectancy and future earnings, nevertheless, an estimate may be made based generally on current rates, from which there should be computed the future income of the deceased after payment of Federal Income Taxes rather than before. [269 F.2d at 584].
In the court's view, such a deduction was also warranted because it discerned an implication in the Oklahoma law of damages that "'take home' pay is considered the proper basis of earnings." 269 F.2d at 585.*fn23
Although the Second Circuit continues to apply McWeeney in the "great mass of litigation at the lower or middle reach of the income scale," 282 F.2d at 39, see, e.g., Petition of Marina Mercante Nicaraguense, S.A., 364 F.2d 118, 125-26 (2 Cir. 1966), cert. den. 385 U.S. 1005, 87 S. Ct. 710, 17 L. Ed. 2d 544 (1967), other courts have declined to follow
[67 NJ Page 491]
its lead even in cases involving persons of moderate income. In Brooks v. United States, 273 F. Supp. 619 (D.S.C. 1967), for example, a wrongful death and survival action instituted pursuant to the Federal Tort Claims Act, plaintiff sought damages for the death of her husband, a service technician for a cash register company. Finding that the question was an open one in the jurisdiction, the court felt free to follow "the commands of reasonable justice" and deduct income taxes from the deceased's prospective income. 273 F. Supp. at 632.
In deciding Brooks, the court emphasized the conceptual differences between personal injury and death actions for purposes of evaluating the income tax problem, a distinction which had often been overlooked in the past:
[A]sserted want of "sufficient certitude" is most often predicated upon the claim that changes in taxable deductions, such as increases in dependents, may subsequently occur, making impossible any fair calculation of future tax. Such argument may be applicable to a personal injury suit but has little relevancy to a death action. [273 F. Supp. at 629-30].*fn24
Since McWeeney was a personal injury action, the court concluded that the argument advanced by Judge Friendly which raised the possibility of an increase in the size of plaintiff's family and the attendant need of the jury to guess or hear testimony on the matter, was simply not relevant in a death case. 273 F. Supp. at 630. See also In re Sincere Navigation Corp., 329 F. Supp. 652, 659 (E.D. La. 1971); Meehan v.
[67 NJ Page 492]
Central R.R. Co. of New Jersey, 181 F. Supp. 594, 614 (S.D.N.Y. 1960) (reviewing verdict).*fn25
The courts of several states have also concluded that income taxes must be recognized in fixing damages in wrongful death cases. In Floyd v. Fruit Industries, 144 Conn. 659, 136 A.2d 918 (1957), a wrongful death action in which plaintiff sought damages under the Connecticut statutory framework for the death of a passenger who was killed in an automobile accident, the Supreme Court of Errors of Connecticut considered and rejected the reasoning of the cases in which evidence of income taxes was excluded. With specific reference to Stokes, supra, and a case which followed it, the court said:
We are not impressed by the reasoning of these cases. The factor in question is no more uncertain, speculative or conjectural than many of the other factors which must be, and in this case were, submitted to the consideration of the jury . . . . [144 Conn. at 672, 136 A.2d at 925].
Consequently, the court concluded that there was no error in allowing defendant to cross-examine plaintiff's accountant and to introduce independent evidence on the question of plaintiff's income tax liability. 144 Conn. at 673, 136 A.2d at 926. But see Gorham v. Farmington Motor Inn, Inc., 159 Conn. 576, 271 A.2d 94 (1970) (trial court did not err in refusing
[67 NJ Page 493]
to charge jury that the verdict in a personal injury action would not be subject to income tax).
Almost ten years ago, the court in Furumizo v. United States, 245 F. Supp. 981, 1014 (D. Haw. 1965), aff'd 381 F.2d 965 (9 Cir. 1967), characterized the deduction of estimated income taxes as "the more modern and reasonable" rule. We agree, and although we are aware that some degree of conjecture is involved in making this adjustment in estimating losses in death cases, we are not persuaded that this degree of uncertainty requires us to close our eyes to reality. We also appreciate the fact that our decision will of necessity inject additional elements of proof into the trial of wrongful death cases. We do not think that the problem will be insurmountable for the trial courts or juries. We decline to give simplicity paramount significance in fashioning the law of damages. Such an approach might aid the judiciary but hardly justice. Todd v. Sandidge Construction Co., 341 F.2d 75, 77 (4 Cir. 1964).*fn26
More recently, in Adams v. Deur, Iowa, 173 N.W. 2d 100 (1969), the Supreme Court of Iowa reached a similar conclusion. Adams was a wrongful death action in which the trial court overruled repeated attempts by defendant to offer evidence of deceased's income tax payments for prior years. Recognizing that the weight of authority precluded the proffered evidence, the court nonetheless held that its refusal constituted reversible error. 173 N.W. 2d at 104. Finding that future probable taxes are no more speculative than many other elements which a jury must consider in fixing damages in a wrongful death case, the court concluded that:
[67 NJ Page 494]
This court is satisfied and now holds it is more realistic, reasonable and fair that a defendant be permitted, in a wrongful death action, to cross-examine plaintiff's witnesses, present evidence, and comment in argument to the jury or trier of the facts, with regard to the incidence of taxes, federal and state, upon a decedent's past and probable future earnings or income as they relate to present value of a decedent's estate. [173 N.W. 2d at 105].
See also Turcotte v. Ford Motor Co., 494 F.2d 173, 185 (1 Cir. 1974) (under Rhode Island law it was error in a wrongful death action not to consider evidence of plaintiff's income tax liability).
We conclude that the approach taken by the court in Adams, supra is the most reasonable and just solution to the problem of income taxes and damage awards. Consequently, we hold that under our wrongful death act,*fn27 defendants must have an opportunity to cross-examine plaintiffs' witnesses to elicit testimony concerning deceased's income tax liability, or to develop the matter by extrinsic evidence, to the end that the jury be enabled to make an informed estimate, based upon the deceased's projected net income after taxes, of the survivor's pecuniary loss.*fn28 Consequently, plaintiff's recovery must be calculated on the basis of the deceased's
[67 NJ Page 495]
net income after taxes giving due regard to the evidence adduced on the deceased's income tax liability. As we have pointed out above, there is a sound purpose in having the court instruct the jury that the damage award is not subject to income taxation itself. This is to prevent a jury which might think otherwise from improperly increasing the verdict to protect plaintiff from the impact of such taxes. In accordance with cases cited above, we therefore direct that such an instruction be given the jury in this type of case.
We do not mean to suggest from the foregoing that the jury in death cases must be given a precise formula and then by complex instructions be asked to compute a verdict with mathematical exactness. Cf. Moich v. Terminal & Transportation Co., 82 N.J. Super. 353, 365 (App. Div. 1964); Andryishyn v. Ballinger, supra, 61 N.J. Super. at 393. See also Cross v. Robert E. Lamb, Inc., supra. But see Matthews v. Nelson, supra, 57 N.J. Super. at 520. But we have determined that the jury should have the benefit of evidence which will apprise them of the probable impact of income taxes on deceased's future losses. With the benefit of this evidence, the jury, guided by instructions to base future losses on net rather than gross income, can exercise its collective judgment in arriving at a just verdict under all the circumstances.
Affirmed and modified.