Damage Awards and Settlement Payments

    We are internationally known as the "go to" lawyers for assessing and effecting the tax considerations and consequences of payments made or received in litigation, including attorney fees. We advise the litigants themselves, their lawyers, and even judges on the tax treatment of civil and criminal litigation. Robert W. Wood is widely considered to be the preeminent expert in the U.S. and internationally on the taxation of damage awards and settlement payments. A former Commissioner of the Internal Revenue Service referred to him as the "preeminent authority for tax practitioners on the federal taxation of damages and settlement payments." (Gibbs, Tax Notes, April 18, 2005, p. 393.) As the leading tax practitioner in this highly complex and unique area of the tax law, he frequently counsels clients (or represents clients against taxing authorities) on the consequences of litigation payments and recoveries.

    Robert Wood has practiced in this area for nearly four decades. He previously authored BNA's Tax Management Portfolio on this topic (1986). In 1989, Tax Institute published Robert Wood's ground-breaking treatise, Taxation of Damage Awards and Settlement Payments. Now in its Fourth Edition, Taxation of Damage Awards and Settlement Payments (Tax Institute © 2009 With 2012 Supplement) remains the most recognized book in this volatile area of the tax law. Taxation of Damage Awards and Settlement Payments is frequently used and cited by practitioners, the IRS, the U.S. Tax Court, state and local taxing authorities (such as the California Franchise Tax Board), Congress, and the Circuit Courts of Appeal. Citations to Robert Wood's book appear in U.S. Supreme Court filings.

    As an outgrowth of advising litigants and their counsel on key tax issues, we often assist in the formation and administration of qualified settlement funds, also known as 468B trusts. We are pioneers in the use of QSFs for the tax efficient, administrative and structure benefits such funds provide. Robert Wood has authored the first legal treatise entirely devoted to such funds, Qualified Settlement Funds and Section 468B (Tax Institute © 2009). See Qualified Settlement Funds.

    Robert Wood's tax expertise covers an unusually wide variety of cases, from wrongful death to antitrust, from securities fraud to personal injury, from employment discrimination to broker-dealer litigation. Perhaps more important, we are not focused on the tax position of exclusively plaintiffs or defendants, but routinely consider both a payor's and a payee's perspective. While we generally act as an advocate, we have occasionally served as a kind of tax-issue-mediator for both plaintiff and defendant.

    Our work on the tax aspects of cases relates to toxic torts, gender discrimination, sexual harassment, race discrimination, age discrimination, wrongful termination, defamation, securities law violations, fraud, environmental remediation liabilities and fines, will contests, contract disputes, antitrust, palimony and other matters. Our services include advising litigating attorneys and/or principals in the action on tax aspects, drafting or revising settlement documents to reflect a tax-efficient structure, rendering tax opinions to the principals or counsel, and, if necessary, litigating the tax characterization of settlement payments or providing expert testimony on this topic.

    Wood LLP has consulted on claims or payments in many jurisdictions, including California, New York, Alabama, Arkansas, Connecticut, Delaware, Florida, Georgia, Illinois, Idaho, Indiana, Kansas, Maine, Massachusetts, Minnesota, Montana, Nevada, New Mexico, New Jersey, North Carolina, Ohio, Rhode Island, Texas, the District of Columbia, West Virginia, Wyoming, Guam, England and Germany. The nature of the proceedings have ranged from settlements in advance of trial, arbitration or mediation, negotiation of settlements before the filing of a complaint, and other pre- and post-litigation tax advice. We have also regularly represented taxpayers before the Appeals Division of the IRS, U.S. Tax Court, appellate courts and state tax agencies concerning litigation payments and recoveries.

    Representations include:

    • Tax adviser on a record setting $60 million discrimination verdict (Issa v. Roadway Package Systems, Inc).

    • Tax adviser on a $2.5 million EEOC race discrimination case in Hawaii.

    • Represented the ACLU on tax issues arising out of a landmark $1.1 million school harassment case (Flores v. Morgan Hill).

    • Provided tax advice to plaintiffs in litigation arising out of 600 unnecessary heart surgeries, as depicted in the book by Stephen Klaidman, Coronary: A True Story of Medicine Gone Awry.

    • Provided tax advice to plaintiffs in litigation in the U.S. and Hong Kong arising out of investments in a prominent Hong Kong company.

    • Advised the plaintiffs on tax issues in a $39.75 million antitrust settlement with 3M (Bradburn Parent/Teacher Store, Inc. v. 3M).

    • Provided tax advice to two plaintiffs in a case generating a $61 million jury verdict.

    • Represented the plaintiff in a case involving serial rapist and cosmetics empire heir Andrew Luster, who was ultimately brought to justice by Dog the Bounty Hunter.

    • Served as tax counsel in an airline industry whistleblower case involving a $12.5 million verdict (Otto v. North American Airlines, Inc., Alameda County Superior Court).

    • Rendered tax advice in a landmark tobacco case involving $50 million of punitive damages that went to the U.S. Supreme Court (Richard Boeken v. Phillip Morris, Inc., Los Angeles County Superior Court, Case No. BC 226593).

    • Advised on the tax aspects of recoveries for deaths in a nationally publicized burning nightclub incident.

    • Represented class counsel in the structuring of attorney fees arising out of a $100 million attorney fee award.

    • Rendered tax advice on the largest recovery ever against a public school district for denying an appropriate education to an autistic child, a case that received national attention and which garnered a Clay Award to Plaintiff's Counsel by the State Bar of California (Porter v. Board of Trustees of Manhattan Beach Unified School Dist., Los Angeles County Superior Court, Case No. CV000842GAF).

    • Represented a departing partner in a global private equity fund (Carlyle Group) with respect to certain tax issues.

    • Represented the plaintiffs in a record-setting $6.7 million recovery against a school district for failure to educate a special education student.

    • Advised the plaintiff in a case under seal in New York arising out of spoliation (intentional destruction of evidence) by a major stock brokerage firm.

    • Rendered a tax opinion to the plaintiff in a case arising under Massachusetts law for the destruction and desecration of a human body.

    • Advised a public multi-national insurer on the tax aspects of a structured settlement vehicle, rendering a formal legal opinion on the federal income tax effects of the assignment of structured settlement obligations.

    • Represented the founders of a public software company in a tax structuring of the settlement of intellectual property litigation, coupled with an acquisition by another party to the litigation (Synopsis, Inc. acquisition of Nassda Corp.).

    • Provided tax advice to plaintiffs counsel in one of the largest medical malpractice awards rendered against Kaiser Permanente (Azari v. Kaiser Permanente).

    • Rendered tax advice to plaintiffs counsel in a multi-million dollar class action against a public health care company over unnecessary heart transplants (Tenet Healthcare Corp. et al.).

    • Advised a class representative and plaintiff's counsel on the tax treatment of a multi-million dollar recovery arising out of a failure of a structured settlement company, including filing declarations with the court, conferences with IRS National Office, etc.

    • Represented a large insurance company in the mediation of tax issues arising out of a huge wrongful death case.

    • Rendered a formal tax opinion regarding a multi-million dollar intellectual property recovery by an inventor/entrepreneur, and related legal malpractice actions.

    • On the eve of trial, served as consultant on a unique Tax Court case involving the exacerbation of physical injuries/physical sickness.

    • Advised 175 women about tax alternatives concerning settlements of over $500,000 each in a nationally-publicized class action against the federal government, after 25 years of litigation in the federal and U.S. Supreme Courts.

    • Represented the taxpayer in the settlement of an environmental dispute arising out of post-September 11 clean-up adjacent to the World Trade Center.

    • Represented multiple plaintiffs in tax controversies arising out of nationally prominent gender discrimination against a New York based global brokerage firm.

    • Represented the taxpayer in the appeal of a Tax Court decision involving the taxation of a Pennsylvania Human Rights recovery (Peaco v. Commissioner, 48 F. App'x 423, 90 A.F.T.R. 2d 2002-6813, 2002 USTC P 50,707 (3d Cir. Decided 9-27-02)).

    • Rendered tax advice in the whistleblower case on which the movie The Insider was based.

    • Advised on the tax aspects of a case litigated in the U.S. Supreme Court.

    • Rendered tax advice to plaintiff's lawyers and economists on the charitable contributions and other tax aspects of Microsoft's landmark antitrust settlement proposals.

    • Advised a financial institution on a $100 million recovery arising out of the Financial Institutions Reform, Recovery and Enforcement Act.

    • Rendered tax advice on intellectual property litigation involving U.S. and foreign distributees.

    • Advised Mexican and Brazilian companies receiving settlement monies in a software distribution dispute from English and Dutch defendants.

    • Represented the Relator in a federal whistleblower action, U.S. ex. rel. Boisvert v. FMC Corp., an action involving more than $80 million, arising out of defective armored vehicles operated in the Gulf War which generated national publicity and coverage.

    • Rendered tax advice on settlement structure in the litigation against PG&E depicted in the movie Erin Brockovich.

    • Advised the whistleblower on tax consequences arising out of a nationally publicized case concerning Medicare fraud.

    • Represented prison guards in the tax treatment of a noted harassment case.

    • Represented a multinational on the U.S. and U.K. tax aspects of an employment settlement with her London employer.

    • Represented the plaintiff on the state and federal tax aspects of power plant litigation in the Nebraska Supreme Court.

    • Represented a technology worker on the U.S. and U.K. tax aspects of a disability dispute mediated in London.

    • Consulted with plaintiff's counsel and his client on tax issues in a wrongful death case involving well over $100 million in punitive damages.

    • Served as tax counsel to the New Jersey Four in a federal civil rights lawsuit as co-counsel to Johnnie Cochran, Peter Neufeld and Barry Scheck. The case involved alleged racial profiling and four black youths shot on the New Jersey Turnpike by State Troopers. The recovery was in excess of $10 million.

    • Served as tax counsel to a telecommunications concern in a multi-million dollar antitrust action against one of the Bell telephone companies, structuring the multi-million dollar verdict into a tax-advantaged settlement for the plaintiff and its shareholders.

    • Advised a college instructor in a multi-million dollar series of actions against a state university for immigration fraud, discrimination, etc.

    • Formed a qualified settlement fund (Section 468B) for the distribution of proceeds to 3,000 Phen-Fen diet drug litigants in Alabama.

    • Structured the recovery of a nationally publicized suit against prison officials and a state correctional system.

    • Advised a foreign national on the U.S. and foreign income tax consequences of multi-million dollar biotechnology patent recovery involving human growth hormones.

    • Rendered a formal legal opinion in the internationally publicized Fen-Phen diet drug litigation.

    • Advised a film star settling a fraud and invasion of privacy suit against another film star and movie studio.

    • Structured a $150 million quasi-marital settlement involving the founder of a major internet company.

    • Restructured a settlement involving videotape royalties between a legendary recording star and a major Hollywood film studio.

    • Advised a group of plaintiffs and their lawyers in the settlement of a multi-party sexual harassment case.

    • Assisted a large national law firm in tax planning associated with a large contingent fee award.

    • Represented a group of former shareholders of a dissolved law firm in the tax treatment of a multi-million dollar antitrust settlement.

    • Advised the plaintiff and her attorneys in an internationally televised sexual harassment case.

    • Advised several closely-held companies and their shareholders on the tax treatment of a $20 million recovery for anti-competitive business practices.

    • Structured a settlement award to an electronics manufacturer in a multi-million dollar antitrust action.

    • Structured a multi-million dollar recovery to a family trust arising out of a series of complicated real estate transactions.

    • Advised a class of plaintiffs in a multi-million dollar lender liability action.

    • Advised a public company on the tax treatment of a settlement with the company's discharged Chief Executive Officer.

    • Assisted a former Commissioner of Internal Revenue in the tax treatment of a multi-million dollar legal malpractice award.

    • Served as court-appointed expert to opine on the tax treatment of a catastrophic injury settlement fund, resolving a deadlock between the parties.

    • Advised many plaintiffs and their counsel in age, gender and racial discrimination, sexual orientation and wrongful termination claims.

    • Advised a multi-billion dollar international agribusiness concern on the tax aspects of its settlement of fraud and securities litigation.

    • Advised a pharmaceutical company on the treatment of a recovery for unfair trade practices.

    • Assisted many departing executives in structuring both litigated and non-litigated severance packages and negotiating releases.

    • Successfully defeated in Tax Court a proposed assessment based on the allocation of a settlement between tort and contract claims.

    • Advised a group of litigants, attorneys and other tax advisors on the tax treatment of fraud and undue influence by a securities brokerage house.

    • Structured the settlement of an environmental dispute with a governmental agency for a public Silicon Valley high-tech concern.

    Robert Wood regularly speaks nationally to accountant, attorney and business groups, and he has published hundreds of articles on the tax treatment of litigation payments for legal, accounting, tax and employment publications.

    References available on request.