Reid L. Feldman, as Administrator of the Estate of Nancy Feldman, Deceased, Plaintiff-Appellee-Cross-Appellant v. Allegheny Airlines, Inc.

524 F.2d 384, 1975 U.S. App. LEXIS 12536

Opinions

LASKER, District Judge:

On June 7, 1971, an Allegheny Airlines flight crashed in fog while approaching New Haven Airport. Nancy Feldman, a passenger, died, in the crash. Allegheny conceded liability, and the parties submitted the issue of damages to Judge Blumenfeld of the United States District Court for the District of Connecticut.¹ The airline appeals² from Judge Blumenfeld’s judgment awarding $444,056. to Reid Laurence Feldman, as administrator of the estate of his late wife.

Determination of damages in this diversity, wrongful death action is governed by Connecticut law, specifically Conn.Gen.Stats. § 52-555, which measures recovery by the loss to the decedent of the value of her life rather than by the value of the estate she would have left had she lived a full life. Perry v. Allegheny Airlines, Inc., 489 F.2d 1349, 1351 (2d Cir. 1974); Floyd v. Fruit Industries, Inc., 144 Conn. 659, 669—671, 136 A.2d 918, 924 (1957). In accordance with Connecticut law, the judgment represented the sum of (1) the value of Mrs. Feldman’s lost earning capacity and (2) the destruction of her capacity to enjoy life’s non-remunerative activities, less (3) deductions for her necessary personal living expenses. No award was made for conscious pain and suffering before Mrs. Feldman’s death because the evidence on this point was too speculative, nor did the award include pre-judgment interest.

Damages in a wrongful death action must of necessity represent a crude monetary forecast of how the decedent’s life would have evolved. Prior to stating his specific findings, the district judge noted, and we agree, that “[t]he whole problem of assessing damages for wrongful death . . . defies any precise mathematical computation,” citing Floyd v. Fruit Industries, Inc., supra, 144 Conn. at 675, 136 A.2d at 927 (382 F.Supp. at 1282).

It is clear from Judge Blumenfeld’s remarkably detailed and precise analysis that he nevertheless made a prodigious effort to reduce the intangible elements of an award to measurable quantities. It is with reluctance, therefore, that we conclude that his determination of loss of earnings and personal living expenses must be remanded.

I.

Damages for Destruction of Earning Capacity.

Nancy Feldman was 25 years old at the time of her death. From 1968 until shortly before the plane crash, she lived and worked in New Haven while her husband studied at Yale Law School. On Mr. Feldman’s graduation from law school in the spring of 1971 the Feldmans moved to Washington, D. C., where they intended to settle. At the time of her death, Mrs. Feldman had neither accepted nor formally applied for employment in Washington, although she had been accepted by George Washington Law School for admission in the Fall of 1971 and had made inquiries about the availability of employment.

A key objection of appellant Allegheny runs to Judge Blumenfeld’s calculation of the discount rate at lV2% in determining the present value of Mrs. Feldman’s lost earning capacity on the grounds that the court has no right to take inflation into account in any way in its assessment of damages. The district court decided that the appropriate rate of discount would be the “price of capital,” such to be “obtained by adjusting inter est rates on ‘risk-free’ investments so as to exclude the additional interest demanded by the investment market as compensation for investors’ assumption of the risk of inflation.” 382 F.Supp. at 1293.

In calculating the discount rate, the appellee’s expert, relied on by the district court, used an average earnings of 4.14% (from mutual savings bank investments) as representative of a prudent, non-sophisticated investment and subtracted 2.87% as the average yearly inflation rate revealed in the Department of Labor’s Consumer Price Index over an 18-year period, yielding a 1.27% difference which was rounded up to 1.5%. Judge Blumenfeld corroborated this “inflation-adjusted discount rate” of 1.5% by calculating the real yields of investments since 1940 in federal government securities (with inflation factored out) from the 1974 Economic Report of the President, a source referred to by appellant Allegheny’s expert. The district court made this calculation according to its view of Connecticut’s law and policies on the subject of inflation accounting in wrongful death damages.

We agree with the district court’s interpretation of Connecticut law as leaving open the question how inflation may be accounted for in such damages.³ We believe that Judge Blumenfeld, a long-time Connecticut lawyer and district court judge for 14 years, appropriately hypothesized the Connecticut Supreme Court’s favorable reaction to a discount rate adjustment, since Connecticut, unlike most jurisdictions, reduces what would otherwise be inflated judgments for wrongful death injuries by requiring deduction of income taxes payable on future earnings. Floyd v. Fruit Industries, Inc., supra, 144 Conn. at 673, 136 A.2d at 926.

The district court was fully aware that in a way it was being speculative in what it was doing, as every trier of fact is required to some extent to be whenever it engages in calculating future earnings and a lump sum discount rate. 382 F.Supp. at 1291—92. As a matter of federal law we do not necessarily vouchsafe either the principle of making an “inflation adjustment” in setting a discount rate ⁴ or the means by which it was done in this instance. Yet we note that consideration of inflation has historically been approved in a number of state courts. See, e. g., Halloran v. New England Telephone & Telegraph Co., 95 Vt. 273, 276, 115 A. 143, 144 (1921) and cases cited in Judge Blumenfeld’s opinion, 382 F.Supp. at 1290. As a matter of federal law, at least one circuit has approved jury consideration of the impact of inflation and even reversed for charging that it should not consider “future increases or decreases in the purchasing power of money.” Bach v. Penn Central Transportation Co., 502 F.2d 1117, 1122 (6th Cir. 1974); see also Sleeman v. Chesapeake & Ohio Railway Co., 414 F.2d 305 (6th Cir. 1969). Our own Perry v. Allegheny Airlines, Inc., supra, 489 F.2d 1349, affirmed a $369,400. judgment on a jury verdict for the estate of another victim of the very same crash here involved; while the point was not discussed specifically in the opinion it is interesting that Judge Blumenfeld’s charge to the jury referred to the plaintiff’s expert’s testimony on a 1.5% discount rate and the underlying rationale therefor, a reference duly attacked on appeal by Allegheny. Commentators have supported an accounting for inflation in damage awards, see Econometrics and Damages, 44 Wash.L.Rev. 351, 360— 61 (1969); Comment, 6 U.S.F.L.Rev. 311 (1972). It has even been suggested that a trial court may be in error in failing to account fully for inflation in wrongful death damages in a non-diversity case. See Mills v. Tucker, 499 F.2d 866, 868 (9th Cir. 1974).⁵ As Judge Friendly himself said in McWeeney v. New York, New Haven and Hartford Railroad Co., 282 F.2d 34, 38 (2d Cir. 1960):

“There are few who do not regard some degree of continuing inflation as here to stay and would be willing to translate their own earning power into a fixed annuity, and it is scarcely to be expected that the average personal injury plaintiff will have the acumen to find investments that are proof against both inflation and depression — a task formidable for the most expert investor.” (Footnote omitted.)

Within the latitude afforded by the Connecticut decisions, note 3 supra, and with the support in the historical and other economic evidence before him that Judge Blumenfeld had, we cannot fault him for computing the discount rate by offsetting the anticipated rate of earnings from investment of the lump sum to be awarded, by an inflation factor.

In computing the value of Mrs. Feldman’s lost earning capacity, the trial judge found that Mrs. Feldman’s professional earnings in her first year of employment would have been $15,040. and that with the exception of eight years during which she intended to raise a family and to work only part time, she would have continued in full employment for forty years until she retired at age 65. The judge further found that during the period in which she would be principally occupied in raising her family, Mrs. Feldman would have remained sufficiently in contact with her profession to maintain, but not increase, her earning ability. Pointing out that under Connecticut law damages are to be based on “the loss of earning capacity, not future earnings per se . . . ” (382 F.Supp. at 1282) (emphasis in original), the judge concluded that when a person such as Mrs. Feldman, who possesses significant earning capacity, chooses to forego remunerative employment in order to raise a family, she manifestly values child rearing as highly as work in her chosen profession and her loss of the opportunity to engage in child rearing “may thus fairly be measured by reference to the earning capacity possessed by the decedent” (382 F.Supp. at 1283). Applying this rationale, the trial judge made an award for the eight year period of $17,044. per year, the salary which he computed Mrs. Feldman would have reached in the year preceding the first child-bearing year, but did not increase the amount during the period.

We believe the trial judge erred in automatically valuing Mrs. Feldman’s loss for the child-bearing period at the level of her salary. As Judge Blumenfeld’s opinion points out, the Connecticut cases distinguish clearly between loss of earning capacity and loss of capacity to carry on life’s non-remunerative activities. As we read Connecticut law, where a decedent suffers both kinds of loss for the same period each must be valued independently in relation to the elements particular to it.

The court in Floyd v. Fruit Industries, Inc., supra, equated “earning capacity” with “the capacity to carry on the particular activity of earning money.” 144 Conn, at 671, 136 A.2d at 925. Here the evidence established, and the trial court found, that Mrs. Feldman would have worked only part-time while raising a family. In the circumstances, we believe that under the Connecticut rule the plaintiff is entitled to recover “loss of earnings” for the child raising years only to the extent that the court finds that Mrs. Feldman would actually have worked during those years. For example, if the court finds that she would have worked 25% of the time during that period, the plaintiff would properly be credited only with 25% of her salary for each of the eight years.

This conclusion is consistent with the other leading authority in Connecticut. In Chase v. Fitzgerald, 132 Conn. 461, 45 A.2d 789 (1946), an award for “loss of future earnings” was denied in respect of a decedent who had been employed as a housekeeper, but who at the time of her death was a housewife with no intention of seeking outside employment. The court held that any award for wrongful death in such a case should be based not on the decedent’s loss of earning capacity, but rather on her “loss of the enjoyment of life’s activities.” 132 Conn. at 470, 45 A.2d at 793. Consistently with the holding in Chase, we conclude that any award in relation to the portion of the child-raising period during which Mrs. Feldman would not have been working must be predicated on her “loss of the enjoyment of life’s activities” rather than on loss of earnings, and on remand the district judge should reevaluate the elements accordingly.

We recognize that thus computed the total award for Mrs. Feldman’s child-raising years may be similar to that already made, but conclude that the conceptual framework we have described is required by Connecticut’s distinctive law of damages.

II.

Deductions for Decedent’s Necessary-Personal Living Expenses.

Where the decedent had been subject to the expense of self-maintenance, Connecticut case law provides for the deduction of “personal living expenses” from damages otherwise recoverable for the loss of earning capacity. Floyd v. Fruit Industries, Inc., supra, 144 Conn. at 674, 136 A.2d at 926. Judge Blumenfeld properly held that although a husband under Connecticut law has a duty to support his spouse, (see, e. g., Conn.Gen.Stats. §§ 46-10; 53-304), that duty does not exempt an income-earning wife from an obligation to apportion a part of her income for her own support. The Floyd court defined the term “personal living expenses” as:

“ . . . those personal expenses which, under the standard of living followed by a given decedent, it would have been reasonably necessary for him to incur in order to keep himself in such a condition of health and well-being that he could maintain his capacity to enjoy life’s activities, including the capacity to earn money.” 144 Conn. at 675, 136 A.2d at 926-927.

The trial judge concluded that, under Connecticut law, deductions for Mrs. Feldman’s personal living expenses should include the cost, at a level commensurate with her standard of living, of food, shelter, clothing and health care. The judge fixed such costs in Washington, D. C. for the year following her death at $2,750., increasing that figure by 3% per year to the age of retirement. After retirement, living expenses were deducted at the rate of $5,000. annually. These figures were discounted annually by 1.5% to reduce the deduction to present value. Although the process by which the trial judge determined the level of Mrs. Feldman’s living expenses was proper, we believe that he substantially underestimated the actual costs of food, shelter, clothing and health care.

On direct examination, Mr. Feldman testified that his wife’s personal living expenses in New Haven had been approximately $2,120. per year. On cross-examination, this figure was shown to have been unduly conservative with regard to clothing and food, and the trial judge rounded the amount to $2,200. He found that the Feldmans’ cost of living would have increased after they moved to Washington, where living expenses were higher and their social and economic status would have changed from that of students to that of young professionals. Accordingly, the judge adjusted the $2,200. figure upward by 25% for the first year Mrs. Feldman would have resided in Washington, and by 3% annually until she would have reached the age of sixty-five and retired. Personal living expenses for that year were calculated to be $6,675, but during the years of retirement deductions were lowered to $5,000., a level which the trial judge felt was consistent with a high standard of living but also reflected the fact that the cessation of work often produces a reduction in personal expenditures.

We recognize the perils involved in an appellate court dealing de novo with factual matters. We would not venture to do so in this case if we did not feel we have the right to take judicial notice of the facts of life, including the cost of living for those in the position of the Feldmans in such metropolitan areas as Washington, D. C. We reluctantly conclude that the trial judge was in error in computing living expenses at $2,750. for the year after Mrs. Feldman’s death, and building 6n that base for later years.

Without attempting to specify what the results of such a computation should be, we believe that it would fall more nearly in the area of $4,000., including approximately $25. per week for food, $125. per month for rent, $1,000. annually for clothing and $400. annually for health care. For one year the difference between the trial judge’s figure of $2,750. and the suggested figure of $4,000. may be considered de minimis in relation to the total award. However, projected over the 52 years of Mrs. Feldman’s life expectancy, and at an annual increase of 3%, the difference is sufficiently large to require us to remand the matter for further determination by the trial judge.

We have considered the other points raised by Allegheny and find them to be without merit.

The judgment is affirmed in part, reversed in part and remanded.

Footnotes

1

. Judge Blumenfeld’s detailed opinion is reported at 382 F.Supp. 1271.

2

. Mr. Feldman filed a cross-appeal to enable him to argue that, if this court were inclined to adopt some of Allegheny’s contentions, “there are other damage elements, not. recognized by the District Court which would offset any reduction in the award and thus justify a judgment of $444,056.” We disagree that Judge Blumenfeld failed to recognize any appropriate element of damages.

3

. Connecticut law requires discounting the lump sum representing loss of earning capacity (Chase v. Fitzgerald, 132 Conn. 461, 45 A.2d 789 (1946)), less income taxes that would be paid (Floyd v. Fruit Industries, Inc., 144 Conn. 659, 136 A.2d 918 (1957)). In Quednau v. Langrish, 144 Conn. 706, 714, 137 A.2d 544, 549 (1957), the court reserved judgment whether a case “could arise in which it would be proper to charge the jury that they should take into consideration the depreciated value of the dollar in assessing damages.” The Connecticut courts’ position thus does not pose the bar to explicit consideration of an inflation factor by the fact-finder which the Nebraska court’s position did in Riha v. Jasper Blackburn Corp., 516 F.2d 840, 843 (8th Cir. 1975).

4

. We refer specifically to the situation as here where inflation is not taken into account in calculating the amount of damages from most earning capacity.

5

. But see Johnson v. Penrod Drilling Co., 510 F.2d 234 (5th Cir. 1975) (en banc, 12-3 on issue of inflation), petition for cert. filed, 43 U.S.L.W. 3684 (June 24, 1975).