Martin Doherty v. Turner Broadcasting Systems, Inc., No. 22-7072 (D.C. Cir. 2023)
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Plaintiff injured himself on the job while working as a photojournalist for media corporation Turner Broadcasting Systems, Inc. In the following years, while he was unable to work, Turner paid him for his leave. Plaintiff claimed that because his injury was job-related, Turner paid him workers’ compensation, while Turner claims that it paid him according to a separate disability policy. This distinction has legal significance because income earned as workers’ compensation is non-taxable, while disability payments are taxed. Turner reported the compensation as part of Plaintiff’s taxable income on the W-2s it filed with the IRS. Plaintiff sued Turner under 26 U.S.C. Section 7434 for willfully filing fraudulent information returns on his behalf. The district court granted summary judgment for Turner.
The DC Circuit reversed. The court explained that under Section 7434, a plaintiff must show: (1) the defendant filed an information return on his or her behalf, (2) the return was false as to the amount paid, and (3) the defendant acted willfully and fraudulently. The parties agree that the W-2s qualify as information returns, and Plaintiff has raised a dispute of material fact as to the second and third elements. As to falsity, Plaintiff’s injury was job-related, and a reasonable jury could therefore conclude that the W-2s were inaccurate because they overstated his taxable income by including workers’ compensation. And as to scienter, several pieces of evidence including the language of Turner’s own policies as well as communications between the parties could lead a factfinder to conclude that Turner knew or should have known the actual nature of these payments.
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