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A plaintiff who won a $350,000 jury verdict in an age discrimination case is entitled to a $33,124 enhancement of the award to compensate for the “negative tax consequences” of receiving his lost pay in a single year instead of spreading the income over several years, a federal judge has ruled. In Jordan v. CCH Inc., U.S. District Judge Berle M. Schiller also awarded more than $219,000 in attorney fees to winning plaintiff’s attorneys Ronald H. Surkin and Brian P. Kirby of Richard, DiSanti, Gallagher, Schoenfeld & Surkin. In his 26-page opinion, Schiller found that the 3rd U.S. Circuit Court of Appeals “has never specifically addressed the issue of whether damages should be awarded to compensate for the negative tax consequences from an ADEA backpay award.” But Schiller found that one of his colleagues on the Eastern District of Pennsylvania bench — U.S. Magistrate Judge Jacob P. Hart — authored an opinion in August 2000 that offered “compelling” reasons for granting such enhancements. In O’Neill v. Sears Roebuck & Co., Hart added more than $38,000 to the jury’s verdict of $519,068 after finding that it was the only way to ensure that the winning plaintiff in an ADEA case is truly “made whole” by the verdict. Hart found support for his decision in the 3rd Circuit’s 1995 decision in Starceski v. Westinghouse Electric Corp., which relied on the “make-whole” purpose of the ADEA in concluding that the plaintiff was entitled to an award of liquidated damages and prejudgment interest. In Starceski, Hart said, the 3rd Circuit held that prejudgment interest “reimburse[s] the claimant for the loss of the use of its investment or its funds from the time of the loss until judgment is entered.” That same general principle, Hart said, also applies to the negative tax consequences of receiving an award of several years’ pay in a lump sum that is taxed as if earned in a single year. “Since the 3rd Circuit recognized the economic necessity of compensating for the lost ‘time value of money’ in order to comply with the ‘make-whole’ doctrine, we anticipate that the 3rd Circuit would likewise compensate the claimant for the depletion of that money due to the increased taxes to which the award is subject on account of its being received in a single tax year, rather than being spread out over time,” Hart wrote. Now Schiller has adopted Hart’s logic completely — including Hart’s holding that such enhancements should apply only to the plaintiff’s backpay and front pay awards, but not to any compensatory or liquidated damages. In doing so, Schiller rejected a defense argument that the math behind such enhancements is too speculative. “The speculative task of determining a plaintiff’s tax liability does not preclude the award when an economic expert that testified at trial presents the change in applicable tax rates,” Schiller wrote. In awarding attorney fees, Schiller found that Surkin is entitled to $325 per hour. According to court papers, Jordan was hired by CCH in 1987, at age 48, to sell tax and legal publications for CCH, a Chicago-based publishing company, to accountants, lawyers and businesses in Delaware County, Pa., and parts of Delaware, including Wilmington. Surkin told the jury that Jordan was very successful, and was selected for CCH’s Honor Club as one of the company’s top salesmen in 1990 and 1991. But things began to change in the summer of 1995, Surkin said, when Jordan’s manager, who was about his age, resigned and was replaced by a new manager, age 40. The new manager began hiring younger salesmen, and Jordan soon found himself among the oldest still working in his department. A year later, when layoffs were announced, Surkin said, the older workers were hit the hardest and the younger salesmen kept their jobs. Jordan was 47 at the time he was fired, Surkin said, and was replaced by a 30-year-old who had been with the company only since the previous summer. Surkin told the jury in his opening statement not to expect any “smoking gun” evidence of discrimination, but instead to be looking for evidence of pretext in the company’s asserted reasons for the layoffs. “No one is going to come in and say, ‘I heard so-and-so say that we’ve got to get rid of some of these older sales reps.’ We won’t show you a document that lists the reps by age, with Xs through the names of the older reps. But we will prove to you that the reasons offered by CCH for terminating Bob Jordan are not legitimate and were created during the course of this case,” Surkin said. In its verdict, the jury awarded Jordan $260,000 in lost earnings and benefits accruing up to the time of trial and $90,000 in compensatory damages.

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