Daniel C. Greer v. United States of America

1
RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
ELECTRONIC CITATION: 2000 FED App. 0099P (6th Cir.)
File Name: 00a0099p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
_________________
DANIEL C. GREER,
Plaintiff-Appellee,
v.
UNITED S TATES OF AMERICA ,
Defendant-Appellant.
;>

1
No. 98-6593
Appeal from the United States District Court
for the Eastern District of Kentucky at Ashland.
No. 96-00117—Henry R. Wilhoit, Jr., Chief District Judge.
Argued: August 6, 1999
Decided and Filed: March 22, 2000
Before: JONES, SILER, and GILMAN, Circuit Judges.
_________________
COUNSEL
ARGUED: Kenneth W. Rosenberg, U.S. DEPARTMENT
OF JUSTICE, APPELLATE SECTION TAX DIVISION,
Washington, D.C., for Appellant. Patrick F. Nash, Lexington,
Kentucky, for Appellee. ON BRIEF: Kenneth W.
Rosenberg, U.S. DEPARTMENT OF JUSTICE,
APPELLATE SECTION TAX DIVISION, Washington, D.C.,
for Appellant. Patrick F. Nash, Lexington, Kentucky, for
Appellee.

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2 Greer v. United States No. 98-6593
_________________
OPINION
_________________
NATHANIEL R. JONES, Circuit Judge. The United States
appeals the district court’s grant of summary judgment in
favor of plaintiff-appellee Daniel C. Greer (“Greer”) in his
suit to recover monies that were withheld from him for tax
purposes when he was terminated by his employer. For the
reasons that follow, we REVERSE and REMAND for
proceedings consistent with this opinion.
I.
Greer worked for Ashland Oil, Inc. (“AOI”) from 1969
until his termination in July 1993. During his years of
employment with AOI, Greer held a variety of positions,
including executive assistant to the executive vice president
and executive assistant to the president. In 1988, he served as
AOI’s environmental compliance director. Although Greer
regularly received positive performance reviews during his
twenty-four years at AOI, he was fired in July 1993.
Greer and AOI dispute the company’s motivations for his
firing. According to Greer, the circumstances of his firing
were highly suspicious. As environmental compliance
director, Greer was required to perform environmental
compliance audits of AOI’s petroleum operations. Greer held
this position for two- and one-half years, and he visited and
audited approximately 120 sites. Greer claims he uncovered
and documented violations of environmental regulations at
AOI refineries. According to Greer, AOI executives feared
that his reports might be released to enforcement authorities
at a time when AOI was already under their close scrutiny.
In 1991, AOI removed Greer from the environmental
compliance department and appointed him director of cost
management. Despite the fact that he had no computer
programming experience, Greer was assigned the task of
creating a complex computer program. After Greer

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No. 98-6593 Greer v. United States 3
1AOI officials claim that Greer never requested a transfer to another
position after his position was eliminated.
completed the project, he was given little to do for several
months. Eventually, AOI’s human resources department
informed Greer that his position was being eliminated. Even
though Greer claims to have “begged to do anything else in
the company,” he was dismissed and told that he simply
“didn’t fit in.”1 Greer appealed his dismissal all the way to
AOI’s chairman of the board.
Given the events leading to his abrupt termination, Greer
believes AOI terminated him because he had too thoroughly
identified and documented AOI violations of environmental
regulations. When Greer learned that his termination was
final, he told AOI representatives, “I will seek whatever
remedies are available to me to protect myself in whatever
way I can.” However, Greer never explicitly threatened AOI
with a wrongful termination lawsuit, nor did he sue AOI. In
fact, Greer admitted in his deposition that he “didn’t have the
foggiest idea” what his legal rights were at that time.
Shortly after notifying Greer of his impending termination,
AOI proposed a compensation package to Greer. After
consulting with his attorney, Greer signed the proposed
agreement on his last day at AOI. AOI’s normal severance
policy was to grant one week’s salary for each year of service.
In Greer’s case, a normal severance package would have
totaled $51,000. However, AOI and Greer agreed that AOI
would pay Greer $331,968 in exchange for Greer’s
surrendering all claims against AOI. Specifically, by
accepting the offered compensation, Greer signed a document
titled “Severance Agreement and Release” (“the agreement”)
which waived:
any and all claims, rights, and causes of action [against
AOI] of all nature, which may have arisen, or which may
arise, known or unknown, out of any events or actions
occurring before the date of his execution of this release,
including, but not limited to, his employment, the

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4 Greer v. United States No. 98-6593
termination of his employment, or any prior agreements
between the parties, and expressly including, without
limitation, as claims to be released, any claims of
wrongful discharge, or any claims related to acts or
omissions of the Company involving him, or of
discrimination under any federal, state or local law, rule
or regulation. Examples of such federal, state or local
law, rule or regulation regarding discrimination include,
but are not limited to, any claims arising under Title VII
of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et
seq., or any claims arising under the Age Discrimination
in Employment Act, 29 U.S.C. § 621 et seq. This
release is for any relief, no matter how denominated,
including but not limited to wages, back pay, front pay,
compensatory damages, or punitive damages.
J.A. at 116 (emphasis added). In his deposition, Randy
Lohoff (“Lohoff”), AOI’s vice president of human resources,
testified that it is AOI policy to include this general waiver
whenever it grants an employee an increase in the normal
severance pay.
AOI’s standard practice is to withhold taxes from every
settlement amount it pays. The company applied that policy
to Greer’s case and withheld $108,873 from the compensation
package for federal income tax purposes. On June 25, 1996,
Greer filed for a refund in the district court pursuant to 26
U.S.C. § 104(a)(2), seeking to recover the amount of his
compensation package that was withheld for taxes.
After depositions were taken of Greer and Lohoff, both the
Government and Greer filed motions for summary judgment.
Greer argued that the funds he received from AOI constituted
the settlement of his potential wrongful discharge claim. He
asserted that the circumstances of his termination diminished
his personal and professional reputation, and inflicted stress,
humiliation, mental anguish, self doubt and emotional pain.
Because they were part of the settlement of this potential
claim, Greer argued, the funds he received under the
agreement could not be taxed. The Government countered
No. 98-6593 Greer v. United States 21
that punitive damages are not “on account” of personal
injuries or sickness); Burke, 504 U.S. at 238-39 (holding that
remedies such as backpay and frontpay are not excludible).
For this reason, although we agree that the payment was
made in lieu of Greer’s tort claim, we believe the district
court acted too hastily when it granted summary judgment in
Greer’s favor. Because a crucial issue remains in dispute, a
trial may be necessary. Greer faces the burden of showing the
court either that AOI made the entire “bonus” payment on
account of his personal injuries, or presenting evidence which
would allow the court to determine that a distinct portion of
the payment was made on account of personal injuries.
IV.
We find that the district court correctly concluded that the
$280,968 payment above and beyond AOI’s standard $51,000
severance payment was in lieu of Greer’s tort claim. At the
same time, a genuine issue remains as to whether that
payment was made “on account” of personal injuries. For this
reason, we believe the district court must determine if the
payment was indeed “on account” of Greer’s claimed
personal injuries, making the amount paid excludible under
the Code. Pursuant to III.D.1.c of this opinion, the district
court may apportion between the excludible and non-
excludible amounts of the payment if the evidence allows for
such a fine-tuned determination. We therefore REVERSE
the district court’s holding, and REMAND for proceedings
consistent with this opinion.

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20 Greer v. United States No. 98-6593
d.
In sum, we find the following factual showings made by
Greer to be undisputed: Greer had a bona fide tort-based
claim against AOI for wrongful discharge; the claim existed
at the time the agreement was reached; and the claim
encompassed personal injury. Other undisputed
facts—primarily the exorbitant amount paid to Greer relative
to a standard AOI severance package and the evidentiary
showing that AOI officials were aware of Greer’s potential
claim—establish that the agreement constituted a settlement
in lieu of prosecution of that claim.
2.
Despite the strength of his evidence that the payment was
made in lieu of his tort claim, Greer has failed to surpass the
second factual hurdle to gain exclusion under
§ 104(a)(2)—that the payment was “on account of personal
injuries or sickness.” Schleier, 515 U.S. at 330. As stated
supra, there is no doubt that Greer’s tort claim may have
encompassed personal injuries. “Personal injuries” include
nonphysical injuries, “such as those affecting emotions,
reputation, or character,” Burke, 504 U.S. at 235 n.6, and can
include “intangible as well as tangible harms.” Schleier, 515
U.S. at 329 & n.4. Emotional distress, mental pain and
suffering, and injury to personal and professional reputation
also constitute personal injuries for exclusion purposes. See
supra. These are precisely the types of injury that Greer now
claims his wrongful discharge rendered: damage to his
personal and professional reputation, as well as distress,
humiliation, and mental anguish. However, Greer has not
presented concrete evidence demonstrating the precise causal
connection between such personal injuries and AOI’s
payment to him, a showing Schleier requires before a court
can render a settlement payment excludible. For example,
AOI may have intended portions of the payment to have been
on account of lost wages, lost future earnings, or punitive
damages, none of which are excludible under § 104(a)(2).
See O’Gilvie v. United States, 519 U.S. 79, 83 (1996) (stating
No. 98-6593 Greer v. United States 5
that the extra compensation from the agreement covered both
the release of all potential claims as well as consideration of
his past service. Because the funds paid to Greer comprised
non-excludible compensation, the full amount could be taxed.
On September 22, 1998, the district court filed an
unpublished opinion granting Greer’s motion for summary
judgment and denying the Government’s motion. The district
court determined that the compensation package constituted
a nontaxable personal injury tort settlement. Specifically, the
district court concluded that $280,968 was nontaxable and
that approximately $51,000 of the agreement constituted
normal severance pay that could be taxed as income.
The Government filed this timely appeal. Greer does not
contest the finding that $51,000 was taxable income.
II.
This court will review a grant of summary judgment de
novo. See Terry Barr Sales Agency, Inc. v. All-Lock Co., 96
F.3d 174, 178 (6th Cir. 1996). Summary judgment is
appropriate where there exists no genuine issue of material
fact and the moving party is entitled to summary judgment as
a matter of law. See id. (citing Fed. R. Civ. P. 56(c)).
Although both parties below stipulated that there were no
disputes over any material facts in the case, and each
submitted motions for summary judgment, that fact “does not
require [us] to rule that no fact issue exists.” Cherokee
Insurance Co. v. E.W. Blanch Co., 66 F.3d 117, 123 n.4 (6th
Cir. 1995) (quoting Begnaud v. White, 170 F.2d 323, 327 (6th
Cir. 1948)). Indeed, “summary judgment in favor of either
party is not proper if disputes remain as to material facts.”
Taft Broadcasting Co. v. United States, 929 F.2d 240, 248
(6th Cir. 1991). At the same time, “cross motions for
summary judgment do authorize the court to assume that there
is no evidence which needs to be considered other than that
which has been filed by the parties.” Harrison Western
Corp. v. Gulf Oil Co., 662 F.2d 690, 692 (10th Cir. 1981).

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6 Greer v. United States No. 98-6593
III.
Under § 61(a) of the Internal Revenue Code taxpayers are
liable for all gross income, meaning “all income from
whatever source derived . . . .” 26 U.S.C. § 61(a) (1994). As
the Supreme Court has oft repeated, this section is to be
construed liberally “in recognition of the intention of
Congress to tax all gains except those specifically exempted.”
Commissioner v. Glenshaw Glass Co., 348 U.S. 426, 430
(1955). Thus, there is no dispute that the compensation paid
to Greer under the agreement falls well within the broad
sweep of § 61(a) unless it is specifically excluded elsewhere
in the Code. See Commissioner v. Schleier, 515 U.S. 323,
328 (1995) (concluding that the taxpayer’s settlement
agreement “constitutes gross income unless it is expressly
excepted by another provision”); United States v. Burke, 504
U.S. 229, 233 (1992) (“There is no dispute that the settlement
awards in this case would constitute gross income within the
reach of § 61(a).”). Exclusions to § 61(a) are narrowly
construed, see Schleier, 515 U.S. at 328; Commissioner v.
Jacobson, 336 U.S. 28, 49 (1949), and the taxpayer bears the
burden of proving the amount he is entitled to recover. See
United States v. Janis, 428 U.S. 433, 440 (1976).
Greer claims that most of the compensation at issue should
be excluded because it falls within § 104(a)(2) of the Code,
which excludes from gross income any “damages received
(whether by suit or agreement and whether as lump sums or
as periodic payments) on account of personal injuries or
sickness.” 26 U.S.C. § 104(a)(2). The Supreme Court in
Schleier set forth a two-prong test that must be met for
compensation to fall within § 104(a): exclusion is warranted
only when an amount is received (1) through the prosecution
of an action or the settlement entered into in lieu of
prosecution of an action based upon tort or tort-type rights;
and (2) the amount is paid on account of personal injuries or
sickness. See 515 U.S. at 337; Gerbec v. United States, 164
No. 98-6593 Greer v. United States 19
6Taggi cited a 1985 Minnesota district court decision in support of
its statement that the court “was not in a position to apportion the
payment among the various possible claims.” 35 F.3d at 96 (quoting
Villaume v. United States, 616 F. Supp. 185, 190 (D. Minn, 1985)), and
also cited several Tax Court cases. See, e.g., Whitehead v. Commissioner,
49 T.C.M. (P.H.) ¶ 80,508 (1980). These cases all look back to a 1979
Tax Court decision, Gunderson v. Commissioner., 48 T.C.M. (P.H.)
¶ 79,099 (1979). But Gunderson never enunciated a rule against non-
apportionment. Instead, the Gunderson Court only held that based on the
facts of the case before it, there was no evidence that the payor intended
the lump sum payment to the employee to be anything but to settle
contractually based rights. See Gunderson, 1979 T.C.M. (P.H.), at 79-
435 (“[T]here is [no] factual basis in the record upon which we could
make an allocation of the settlement to any specific claims that petitioner
might have asserted against [his employer].”). Thus, it appears that later
cases such as Whitehead converted Gunderson’s fact-based conclusion
into an ironclad rule of law, and cases like Taggi propounded
Whitehead’s mistake. Moreover, none of these “non-apportionment”
decisions articulated any reason for such a rigid non-apportionment rule.
AOI was aware of the potential for such a claim. This clear
evidence distinguishes this case from Pipitone and Taggi and
renders the lower court’s apportionment of the payment
proper.
Finally, to the extent that Taggi and Pipitone stand for the
proposition that courts can never engage in apportionment—a
stance the Government takes—we disagree with that
conclusion. Such a hard-and-fast rule not only stands on
weak legal ground,6 but would defy the established
framework of scrutinizing the totality of the circumstances to
determine the intent of the payor whenever a written
severence/settlement agreement is not clear as to its purpose.
If in undertaking this inquiry, a court finds the evidence to be
sufficiently clear that it can determine that a specific amount
was paid for settlement purposes under Schleier, we see no
reason why a court should not set that amount aside as
excludible. Indeed, we believe this is what the relevant
precedent requires. Of course, outside of an explicit
apportionment, evidence will rarely be clear enough to allow
for such a determination. Nonetheless, we find this to be that
rare case where it is.

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18 Greer v. United States No. 98-6593
I guess I’d have to refer to the agreement itself and it
would -- it’s provided because of the promises made and
accepted between Mr. Greer and Ashland as stated in the
severance agreement and release as to why the payments
were made . . . . I think the document speaks for itself.
J.A. at 105.
In short, although Lohoff’s testimony creates an issue of
fact as to whether he personally knew of the full set of
circumstances regarding Greer’s termination, his testimony
does nothing to counter Greer’s showing that other AOI
officials—and most critically, Thomas—were aware of the
background circumstances leading to Greer’s ultimate
termination. Because cross motions for summary judgment
allow a reviewing court to assume that there is no additional
evidence to be considered, we find that there is no issue of
fact regarding Greer’s showing that AOI was aware of his tort
claim.
c.
Finally, we believe the facts of this case are sufficiently
unique and the evidence sufficiently clear to allow the district
court to apportion the payment into the components that were
“in lieu” of a tort claim and those that were clearly not.
Unlike Taggi and Pipitone, where the evidence was not
adequate to enable those courts to apportion among various
claims, see Pipitone, 180 F.3d at 165; Taggi, 35 F.3d at 96,
the undisputed evidence in this case allows for such a
determination. First, it is clear that AOI’s standard
calculation would have provided Greer with a severance
payment of $51,000, an amount that is not excludible.
Second, Greer has adduced that there were no other viable
claims at the time of the agreement. Under cross-
examination, Lohoff acknowledged that AOI officials
perceived Greer to have no viable claims against AOI for age
discrimination or Title VII discrimination, which were the
only other specific claims waived by the agreement. The
record thus leaves wrongful discharge as the only bona fide
claim at the time of the agreement, and, crucially, evinces that
No. 98-6593 Greer v. United States 7
2This test emanated in part from treasury regulations that had defined
the term “damages received” as “an amount received . . . through
prosecution of a legal suit or action based upon tort or tort type rights, or
through a settlement agreement entered into in lieu of such prosecution.”
Treas. Reg. § 1.104-1(c).
F.3d 1015, 1025 (6th Cir. 1999) (citing Schleier).2 This two-
part test tightly packs a number of discrete elements. Due to
the complexity of this case, we find it useful to disaggregate
the test into its disparate elements. To satisfy Schleier, the
taxpayer must show that 1) there was an underlying claim
sounding in tort; (2) the claim existed at the time of the
settlement; (3) the claim encompassed personal injuries; and
(4) the agreement was executed “in lieu” of the prosecution of
the tort claim and “on account of” the personal injury,
rendering it a settlement rather than a mere severance
agreement. By requiring each of these elements, courts can
effectively distinguish between severance and settlement
agreements and prevent parties from “creating contrived
‘settlement agreements’ to avoid taxation of [severance]
proceeds.” Lubart v. Commissioner, 154 F.3d 539, 542 (5th
Cir. 1998).
The Government argues that the agreement between Greer
and AOI lacks several of these elements and thus constitutes
a fully taxable severance package under § 61(a). We disagree,
concluding that the agreement and the unique circumstances
leading to its inception satisfy most of these elements; indeed,
we find that the agreement meets the first prong of the
Schleier test—that it was made in lieu of a viable, existent tort
claim. At the same time, we believe a genuine issue remains
as to what amount of the payment, if any, was “on account of”
personal injuries.
A.
The compensation AOI paid to Greer satisfies the first
element we listed supra: that the alleged claim be based upon
tort or tort-type rights. See Schleier, 515 U.S. at 337. To
make this determination, we must “focus[] on the origin and

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8 Greer v. United States No. 98-6593
characteristics of the claims settled in determining whether
such damages are excludible under § 104(a)(2).” Pipitone v.
United States, 180 F.3d 859, 862 (7th Cir. 1999) (citing
Burke, 504 U.S. at 237). In particular, we look to state law to
determine the nature of the claim. See Burnet v. Harmel, 287
U.S. 103, 110 (1932) (“[S]tate law creates legal interests, but
the federal statute determines when and how they shall be
taxed.”). In this case, Greer alleges that his underlying claim
was wrongful discharge, which is a clearly recognized tort
claim under Kentucky law. See Firestone Textile Co. Div. v.
Meadows, 666 S.W.2d 730, 733 (Ky. 1983). The
Government does not dispute that wrongful discharge is a tort
that could give rise to § 104(a)(2) exclusion.
B.
Second, we conclude that the wrongful discharge claim
existed at the time Greer and AOI struck the agreement. As
other courts have stated, for an agreement to be rendered a
settlement, there must be an actual dispute and existing claim
at the time of that agreement. See Pipitone, 180 F.3d at 862;
Lubart,154 F.3d at 542. Claims for potential future personal
injuries are insufficient. See Pipitone, 180 F.3d at 862;
Lubart, 154 F.3d at 542 (“If section 104(a)(2) were construed
to encompass releases of potential unspecified future claims,
. . . manufacturing section 104(a)(2) tax treatment would be
simple.”). The dispute must be bona fide, although it need
not be valid or sustainable. See Pipitone, 180 F.3d at 862.
We find that a bona fide claim for wrongful discharge
under Kentucky law existed at the time of the settlement.
Kentucky law recognizes a cause of action for wrongful
discharge “based on public policy.” Firestone Textile Co.
Div., 666 S.W.2d at 732. Such a public policy-based
wrongful discharge claim exists when the “alleged reason for
the discharge of the employee was the failure or refusal to
violate a law in the course of employment,” or when the
reason for the discharge “was the employee’s exercise of a
right conferred by well-established legislative enactment.”
Nelson Steel Corp. v. McDaniel, 898 S.W.2d 66, 69 (Ky.
No. 98-6593 Greer v. United States 17
that Lohoff concluded that he had not been aware of any
claims on the horizon. See J.A. at 99-101 (stating that he
“didn’t recall him ever making that type of statement,” and
that he “didn’t recall [Greer] making any statements” that
AOI had violated environmental regulations “to me”).
But as both Greer and Lohoff testified, Greer expressed his
displeasure directly with other, more senior AOI officials.
First, Greer testified and Lohoff acknowledged that he had a
closed-door meeting with the chairman of AOI, John Hall,
about his termination. Second, Greer discussed these matters
on numerous occasions with Richard Thomas, who during the
period in question was vice president of human resources,
vice president of the law department, general counsel for the
petroleum company, and responsible for all environmental
activities in the company. Thomas was not only the person to
whom Greer had directly reported when he was responsible
for environmental compliance, but he “reviewed” with
Thomas the controversial findings he had made in that
position. Thomas was also the official who personally
informed Greer of his termination. According to Greer,
Thomas—who was Lohoff’s boss at the time—was also a
point-man in the negotiations that culminated in the
agreement, and Greer directly told Thomas that he would
“have to seek whatever remedies are available to me,” J.A. at
37. Overall, therefore, given his broader role in the company
and long-time supervision of and interaction with Greer,
Thomas was the key AOI official who, according to Greer’s
testimony, knew of the environmental violations and also was
directly involved in hammering out the settlement agreement.
Yet nowhere in the record has the Government attempted to
rebut this evidence regarding Thomas’s involvement and
knowledge. Thomas was not himself deposed, and the
Government asked Lohoff nothing about Thomas’s or other
officials’ perceptions of Greer’s potential claim. Only once
was Lohoff directly asked whether, “[a]s far as Ashland was
concerned,” the payment was of the nature of severance pay
or a settlement. J.A. at 105 (emphasis added). Rather than
countering Greer’s account, his answer was nonresponsive:

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16 Greer v. United States No. 98-6593
that AOI officials had good reason to know that a bona fide
wrongful discharge claim existed at the point of Greer’s
termination. Moreover, Lohoff, the Government’s only
witness, largely bolstered Greer’s account of events. First, he
confirmed the basic career progression that Greer had
described. Second, Lohoff testified that he knew that Greer
was not pleased with his dismissal, and that he was
sufficiently disgruntled to appeal it through several levels of
management. His testimony, coupled with the agreement
itself, also showed that the agreement took Greer’s individual
needs into account. Lohoff acknowledged, for instance, that
AOI adjusted the agreement after Greer indicated he felt that
Ashland may have “somehow wronged him” regarding certain
investment losses. J.A. at 100-01; J.A. at 118. See also J.A.
at 109 (acknowledging that “there are provisions in it that . . .
are specific to Mr. Greer”).
Most importantly, Lohoff’s testimony failed to rebut
Greer’s assertions that AOI had reason to know of his bona
fide wrongful discharge claim. This is because most of
Lohoff’s statements simply described his own personal
conversations with Greer and his impressions based on those
conversations, which were of limited value to the Government
in light of both Greer’s and Lohoff’s testimony that a number
of the crucial conversations in question did not involve
Lohoff at all. In fact, relative to other persons with whom
Greer interacted at AOI, Lohoff was in a poor position to
know of Greer’s potential claims against the company.
Lohoff himself acknowledged that Greer and he did not
interact much at AOI. He further testified that he was aware
of other conversations Greer had had regarding his
termination, the details of which he was not knowledgeable.
J.A. at 98-99 (acknowledging that Greer “appealed [his]
dismissal beyond [him]” and that he “was not privy to those
conversations”); J.A. at 99 (stating that Greer “had
discussions with other people as well, including the Chairman
of the Board”). Nevertheless, the sole evidence the
Government elicited comprised Lohoff’s narrow testimony
about what Greer had told him personally in their limited
interaction, and it was based only on this limited interaction
No. 98-6593 Greer v. United States 9
1995) (internal quotation marks and citation omitted).
Whether or not Greer could have prevailed on such a
wrongful discharge claim in state court is irrelevant here.
Rather, we find that Greer’s account of the unique
circumstances of his firing—an account which, as we explain
infra, the Government largely failed to dispute—was
sufficient to state a bona fide claim for wrongful discharge at
the time of his termination.
The Government wrongfully asserts that a claim could not
have existed unless Greer actually filed that claim against
AOI before the settlement. Circuit courts and the Tax Court
have consistently rejected such a formalistic requirement.
See, e.g., Pipitone, 180 F.3d at 863 (“The fact that Pipitone
did not file a formal suit alleging these claims . . . is not
necessarily detrimental to his efforts to establish the existence
of an underlying cause of action.”); Carey v. Commissioner,
74 T.C.M. (CCH) 705, 707 (1997) (stating that the claim
“need not have been previously asserted”); Phillips v.
Commissioner, 74 T.C.M. (CCH) 187, 190 (1997); Keel v.
Commissioner, 73 T.C.M.(CCH) 3092, 3095 (1997); see also
Hamm v. Commissioner, 74 T.C.M. (CCH) 279, 282 (1997)
(“[W]e have not found . . . any authority for the proposition
that the taxpayer must file a claim prior to the settlement
agreement in order . . . to qualify for the exclusion.”). We
also find that the Government mischaracterizes the Second
Circuit’s holding in Taggi when it suggests that that opinion
required that a claim actually be made. See Gov’t Br. at 21-
23, 26 (reading Taggi to say that “if the taxpayer has not
asserted a claim, there is nothing to settle”). In fact,
consistent with other courts, the Taggi Court considered
Taggi’s failure to make a formal claim as but one factor of a
multi-factor analysis. See 35 F.3d at 96. Directly after
observing that no claim had been filed, the court proceeded to
consider the contents of the agreement, the amount paid to
Taggi, and the consequences of the signing of the agreement
(namely, no subsequent litigation). See id. Had the court
used a strict filing requirement as the Government suggests,
the latter analysis would have been wholly unnecessary. See
generally Hamm, 74 T.C.M. (CCH) at 282 (reading Taggi

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10 Greer v. United States No. 98-6593
3In 1996, Congress amended § 104(a)(2) to read “on account of
personal physical injuries or physical sickness.” (emphasis added).
Because the amendment took effect after AOI and Greer executed their
agreement, it is not applicable to this case.
similarly). Thus, we conclude that Greer’s failure to file suit
against AOI does not defeat his argument that a bona fide
claim existed.
C.
Third, we find that Greer’s tort claim potentially involved
injuries that were personal. Courts and the IRS have long
recognized that §104(a)(2)’s reference to personal injuries
“encompasses . . . nonphysical injuries to the individual, such
as those affecting emotions, reputation, or character . . . .”
Burke, 504 U.S. at 235 n.6. See also Schleier, 515 U.S. at
329 & n.4 (stating that § 104(a)(2) covers “intangible as well
as tangible harms”). Specifically, personal injuries include
emotional distress, see Burke, 504 U.S. at 235 n.6, mental
pain and suffering, see Bent v. Commissioner, 835 F.2d 67, 70
(3d Cir. 1987), and injury to personal and professional
reputation. See Threlkedl v. Commissioner, 848 F.2d 81, 83-
84 (6th Cir. 1988); Church v. Commissioner, 80 T.C. 1104,
1109 (1983). Here, Greer’s tort claim sufficiently
encompasses personal injury. Specifically, Greer claims
injuries to his personal and professional reputation, as well as
distress, humiliation, and mental anguish. These claims of
non-physical injury fall within the broad ambit of § 104(a)(2)
“personal” injuries.3
D.
Fourth, and most critically, we must determine the
motivation behind the agreement itself. In determining
whether it was reached “in lieu” of the tort claim in existence
at the time and “on account of” the personal injuries
underlying that claim, 26 U.S.C. § 104(a)(2), we consider all
facts and circumstances. See Kroposki v. Commissioner, 74
T.C.M. (CCH) 1434, 1436 (1997). We first look to the
No. 98-6593 Greer v. United States 15
5Because it is the intent of the payor that matters, the Government
errs when it argues that Greer did not know that he enjoyed a wrongful
discharge claim in particular. Gov’t Br. at 23. The crucial question is
whether AOI officials interpreted Greer’s threatening statements to mean
that they potentially faced a wrongful discharge suit.
First, this case stands out among most of this type, which
often involve conclusory allegations of claims and employer’s
knowledge of claims—allegations that courts have properly
found unavailing. See, e.g., Lubart, 154 F.3d at 542 (rejecting
taxpayer for only alleging “potential unspecified future
claims”); Kroposki, 74 T.C.M. (CCH) at 1435 (rejecting
taxpayer’s allegations as after-the-fact, self-serving, and
uncorroborated); Keel, 73 T.C.M. (CCH) at 3095 (opining
that “we are furnished with no clue as to the nature of the
claimed injuries”). In contrast, Greer presented substantial
evidence suggesting not only that the tort claim based on
personal injury existed, but that AOI had good reason to know
of the potential wrongful discharge claim. This evidence
went largely undisputed by the Government. Greer testified
that he was transferred from his position as environmental
compliance director shortly after issuing a series of
“embarass[ing]” reports documenting various environmental
regulation violations by AOI. J.A. at 62. The new position
was one for which he was ill-qualified technically, and after
some time, the post demanded little responsibility from Greer
for the $100,000-plus salary it paid him. Finally, on short
notice and with little explanation, AOI terminated him.
Moreover, unlike the numerous cases where there is no
evidence that taxpayers had “even talked to” the employer
about a possible tort suit, Morabito v. Commissioner, 74
T.C.M. (CCH) 62, 64 (1997), Greer presented such evidence
below. First, he appealed his dismissal all the way to the
chairman of the company. Second, he specifically warned
AOI officials that he would “seek whatever remedies [w]ere
available to [him],” and indicated that he would “protect
[him]self in whatever way [he] could.” J.A. at 74, 79.5
Based on Greer’s testimony as to his employment history
and his dialogue with his AOI supervisors, the record shows

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14 Greer v. United States No. 98-6593
Greer dwarfed the amount that would have resulted using
AOI’s standard calculation of severance pay—one week of
salary paid for each year of service. Based on Greer’s length
of service—twenty-four years—and his salary at the
time—$112,000 per year—a standard severance payment
would have been approximately $51,000. AOI paid him just
under $332,000—well over six times the standard amount.
Although AOI acknowledged that it generally provides more
compensation than standard severance when a terminated
employee releases claims, neither AOI nor the Government
provided any explanation for the dramatic increase in Greer’s
“bonus.” Lohoff’s only explanation was that “[i]t ha[d] to do
with some relationship to a salary.” J.A. at 103. Nor have we
found any other cases where the release “bonus”
approximated such a dramatic increase. In Taggi, for
example, AT&T supplemented the standard severance
payment owed to Taggi, $29,700, with an additional $19,800
for the general release. See 35 F.3d at 96. In Pipitone, the
employer provided Pipitone with twice the number of months
owed under the severance policy, which was the standard
bonus paid for such releases. See 180 F.3d at 865. Thus,
unlike other cases finding agreements to be for severance
purposes only, we can not conclude that the payment made to
Greer was either standard for AOI or based on a standard
severance calculation. To the contrary, it was far in excess of
such a calculation, as well as far in excess of AOI’s standard
severance agreement.
b.
Second, courts look to other evidence to divine the payor’s
intent in executing the agreement, including the
circumstances leading to the termination, the filing of a claim
against the employer prior to the agreement, and other
statements by and events involving the parties. While “the
absence of any knowledge of the claim on the part of the
employer-payor obviously has a negative impact in
determining the requisite intent of the payment,” Keel, 73
T.C.M. (CCH) at 3095, we find the record to support Greer’s
assertion that AOI had knowledge of his potential claim.
No. 98-6593 Greer v. United States 11
4In doing so, we find that the material facts on this issue are not in
dispute. The agreement itself is clear, and there is no dispute over the
amount paid. Greer’s description of his job history at AOI was largely
undisputed by Lohoff. Most importantly, the presence of a bona fide, if
not necessarily valid, tort claim is also not in dispute; neither is AOI
officials’ knowledge of the potential for such a claim. For reasons stated
below, given Greer’s description of the events culminating in his
termination, Lohoff—the only witness the Government deposed—was
only minimally effective in countering Greer’s account. Therefore, even
viewing the evidence in the record in a light most favorable to the
Government, there is no dispute over the material facts on this issue.
agreement itself for indicia of its purpose. If the agreement
lacks express language of purpose, we look beyond the
agreement to other evidence that may shed light on “the intent
of the payor as to the purpose in making the payment.”
Knuckles v. Commissioner, 349 F.2d 610, 613 (10th Cir.
1965); see also Lubart, 154 F.3d at 541 (“[T]he intent of the
employer [] determine[s] the treatment of the payment.”).
This includes considering the amount paid, comparing the
circumstances and amount paid to other agreements the
company has entered into, considering the factual
circumstances that led to the agreement, and weighing other
facts that may reveal the employer’s intent. See generally
Pipitone, 180 F.3d at 864-65. We also heed the wisdom that
“[w]hen assessing the tax implications of a settlement
agreement, courts should neither engage in speculation nor
blind themselves to a settlement’s realities.” Bagley v.
Commissioner, 121 F.3d 393, 395 (8th Cir. 1997). Applying
this fact-based analysis, we find that the unique circumstances
of Greer’s termination rendered the agreement a settlement
reached “in lieu” of the existent tort claim.4 Nonetheless, we
find that there remains a dispute as to whether the agreement
was “on account of” personal injuries. The case must be
remanded for this factual determination.
1.
First, we conclude that there is no genuine issue as to
whether AOI provided the payment in lieu of Greer’s existent

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12 Greer v. United States No. 98-6593
tort claim. The government wholly failed to rebut Greer’s
evidence that this was in fact the case.
First, like most agreements in cases such as this, the
agreement does not resolve whether it is a settlement or a
severance agreement. On its face, the agreement does not
appear to be drafted with a specific tort in mind. Courts
generally find the fact that a waiver is broadly worded to
support a finding that the settlement does not come within the
§ 104 exclusion. See, e.g., Pipitone, 180 F.3d at 864 (noting
that the agreement “is a general release of all claims and
makes no specific reference to whether the payment
compensated Pipitone for personal injuries or sickness”); Ball
v. Commissioner, 163 F.3d 308, 309 (5th Cir. 1998)
(concluding that an agreement releasing a “laundry list” of
possible claims is not a settlement for “personal injury or
sickness” within § 104). The agreement in this case is much
like those of Pipitone and Ball. It waived a variety of claims:
wrongful discharge, age discrimination, Title VII, and claims
regarding prior agreements between Greer and AOI. Despite
the express waiver of the wrongful discharge claim, such a
“broad” and “generic” release does not render the payments
excludible, Ball, 163 F.3d at 309, and bolsters the
Government’s argument that AOI did not intend the
agreement to be a waiver of tort claims. The fact that the
agreement provides for the withholding of federal income
taxes and that AOI withheld the amount at issue in this case
also boosts the Government’s case that AOI intended the
payment to be for non-tort, severance-type purposes.
Nevertheless, that presumption is somewhat diluted because
Lohoff testified that AOI would “typically” withhold even in
a settlement for a wrongful discharge action. Overall, as in
most cases of this type, the agreement itself is not sufficiently
explicit to resolve this issue.
We thus are required to look “beyond the words” of the
agreement to divine the payor’s purpose. Pipitone, 180 F.3d
at 865. When we do so in this case, we find conclusive
evidence that AOI intended this to be a settlement of a
wrongful discharge claim. We also note that the facts in the
No. 98-6593 Greer v. United States 13
record are substantially dissimilar from cases where courts
found agreements to be for severance purposes only.
a.
First, the amount of compensation Greer received strongly
supports his contention that the agreement was a settlement of
his tort claim. Generally, other courts have reasoned that the
manner in which an agreement calculates payment provides
reliable evidence of the nature of an agreement. See, e.g.,
Pipitone, 180 F.3d at 865; Lubart, 154 F.3d at 541.
Specifically, payments are categorized as standard severance
pay when they are calculated based on the length of the
terminated employee’s service to the employer (with possible
bonus allowances for their agreement to sign the waiver) and
appear to be consistent with the amount paid to other
employees under similar agreements. See Pipitone, 180 F.3d
at 865; Lubart, 154 F.3d at 541; Kroposki, 74 T.C.M. (CCH)
at 1436. Most agreements at issue in cases such as this have
easily complied with these standards, largely because they
were reached with numerous employees as part of a general
“downsizing.” See, e.g., Lubart, 154 F.3d at 541 (concluding
that Lubart’s termination agreement, executed as part of a
broad IBM downsizing program, “was a standard document
offered to all employees” and its amount was calculated based
on salary and years of service); Taggi, 35 F.3d at 94 (stating
that Taggi’s termination was part of a general AT&T
workforce reduction); Carey, 74 T.C.M. (CCH) at 708
(concluding that the release at issue “was calculated on length
of service and salary” and was “essentially the same as that in
the many other cases involving IBM separation pay”); Hamm,
74 T.C.M. (CCH) at 283 (granting weight to the fact that the
employee’s termination was part of a broader IBM reduction
program implemented to reduce the number of employees and
increase company efficiency).
Greer’s case is strikingly different. His termination was
isolated, as opposed to part of a general reduction. He was
told simply that he “didn’t fit in” despite years of positive
performance reviews. And crucially, the amount AOI paid

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