The pilots say landings are the most hazardous part of any flight: long flight or short, the pilot is tired, stressed, and wants to get on the ground. So it is with counsel settling a litigation. When your client has finally gotten to “yes,” and the adversary has finally found some bucks in the file, the boilerplate stip of discontinuance (or whatever its equivalent in your jurisdiction) and the equally routine stip of settlement is the sight of the runway looming up just before your wheels touch.

But that’s when the tax troubles start. Here’s Judge Travis A. (“Tag”) Greaves to tell you all about it, in Rebecca A. Tressler, 2021 T. C. Sum. Op. 33, filed 9/13/21*. Rebecca was an Amtrak engineer and road foreman, who sued Amtrak for various delictions, involving assault, hostile work environment, injuring her ankle when exiting a train, and retaliatory employment practices. Amtrak won summary J in USDCDC, but Rebecca appealed, and Amtrak settled.

Rebecca never filed for year at issue, so the SNOD here is from a SFR. Rebecca doesn’t contest the portion of the settlement Amtrak treated as lost wages. But she contests the rest, saying she needed psychotherapy to recover from the PTSD caused by the evil deeds visited upon her.

Unfortunately, the sitp of settlement boilerplate knocks out all but $6900 of the $55K Rebecca claims.

“The plain text of section 2.2 [of the stip] establishes that the $55,000 payment represents ‘settlement of Ms. Tressler’s claim for emotional distress damages related to her allegations’ in the lawsuit. Petitioner points to section 2.5, which provides that the $82,500 payment ‘is inclusive of all claims by Ms. Tressler for any alleged damages against Amtrak, including, but not limited to, any alleged claims for physical injuries, emotional distress, attorneys’ fees, and costs’. We recognize that petitioner’s complaint in District Court included allegations of physical injuries, but section 2.5 does not state that any part of the $55,000 payment is attributable to the settlement of a physical injury claim. Section 2.5 is a general exculpatory provision whereby petitioner relinquishes the right to further sue Amtrak. This Court has held that a general liability release does not supersede explicit contractual text providing a settlement payment for emotional distress. We simply cannot accept petitioner’s request to allocate the $55,000 payment among her claims for ‘physical injuries, emotional distress, attorneys’ fees, and costs’ when section 2.2 attributes the whole $55,000 to her claim for emotional distress damages related to her claims in the lawsuit.” 2021 T. C. Memo. 33, at p. 8 (Citation omitted).

And extrinsic evidence that Amtrak knew about the assault doesn’t vary the stip of settlement provisions that lump all the nonwage money together.

As for Rebecca’s payments for psychotherapy after the year at issue, that’s for another day.

Takeaway- Practitioner, watch the boilerplate. As long as the other side can deduct the settlement payment, they shouldn’t make it hard for you to get whatever you reasonably can for your client.

And I’ll give Rebecca’s trusty trial attorney a Taishoff “Good Job,” for getting a good settlement out of losing summary J.

*Rebecca A Tressler 2021 T C Sum Op 33 9 13 21