The Supreme Court/The Supreme Court.iso/pc/ascii/1991/91_0042/91_0042.zc1

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SUPREME COURT OF THE UNITED STATES
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No. 91-42
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UNITED STATES, PETITIONER v. THERESE A.
BURKE, CYNTHIA R. CENTER, and
LINDA G. GIBBS
on writ of certiorari to the united states court of
appeals for the sixth circuit
[May 26, 1992]

  Justice Scalia, concurring in the judgment.
  Section 104(a)(2) of the Internal Revenue Code excludes
from gross income -the amount of any damages received . . .
on account of personal injuries or sickness.-  26 U. S. C.
104(a)(2) (emphasis added).  The Court accepts at the
outset of its analysis the Internal Revenue Service regula-
tion (dating from 1960) that identifies -personal injuries-
under this exclusion with the violation of, generically, -tort
or tort type rights,- 25 Fed. Reg. 11490 (1960); 26 CFR
1.104-1(c) (1991)-thus extending the coverage of the
provision to -`dignitary' or nonphysical tort[s] such as
defamation,- ante, at 6-7 (footnote omitted).  Thereafter,
the opinion simply considers the criterion for determining
whether -tort or tort type rights- are at stake, the issue on
which it disagrees with the dissent.
  In my view there is no basis for accepting, without
qualification, the IRS's -tort rights- formulation, since it is
not within the range of reasonable interpretation of the
statutory text.  See Chevron U. S. A. Inc. v. Natural Re-
sources Defense Council, Inc., 467 U. S. 837, 842-845 (1984).
In isolation, I suppose, the term -personal injuries- can be
read to encompass injury to any noncontractual interest -for
which the court will provide a remedy in the form of an
action for damages.-  Ante, at 5 (quoting W. Keeton, D.
Dobbs, R. Keeton, & D. Owen, Prosser and Keeton on the
Law of Torts 2 (1984)).  That is assuredly not, however, the
only permissible meaning of the term.  Indeed, its more
common connotation embraces only physical injuries to the
person (as when the consequences of an auto accident are
divided into -personal injuries- and -property damage-), or
perhaps, in addition, injuries to a person's mental health.
      -Under the American decisional law, the phrase
`personal injury' denotes primarily an injury to the
body of a person.  At least some of the courts, however,
have not narrowly limited the term, and have conclud-
ed that a personal injury or an injury to person, within
the meaning of the law, does not necessarily involve
physical contact with the person injured or mere bodily
or physical injuries, but may embrace all actionable
injuries to the individual himself.-  1 S. Speiser, C.
Krause, & A. Gans, Law of Torts 6 (1983).
See also Black's Law Dictionary 786 (6th ed. 1990).
  In deciding whether the words go beyond their more
narrow and more normal meaning here, the critical factor,
in my view, is the fact that -personal injuries- appears not
in isolation but as part of the phrase -personal injuries or
sickness.-  As the Court has said repeatedly, -[t]he maxim
noscitur a sociis, that a word is known by the company it
keeps, while not an inescapable rule, is often wisely applied
where a word is capable of many meanings in order to avoid
the giving of unintended breadth to the Acts of Congress.-
Jarecki v. G. D. Searle & Co., 367 U. S. 303, 307 (1961).
The term -sickness- connotes a -[d]iseased condition;
illness; [or] ill health,- Webster's New International
Dictionary 2329-2330 (2d ed. 1950), and I think that its
companion must similarly be read to connote injuries to
physical (or mental) health.  It is almost as odd to believe
that the first part of the phrase -personal injuries or
sickness- encompasses defamation, as it would be to believe
that the first part of the phrase -five feet, two inches- refers
to pedal extremities.
  The common-sense interpretation I suggest is supported
as well by several other factors: First, the term -personal
injuries or sickness- is used three other times in 104(a),
and in each instance its sense is necessarily limited to
injuries to physical or mental health.  See 104(a)(1) (gross
income does not include -amounts received under work-
men's compensation acts as compensation for personal
injuries or sickness- (emphasis added)); 104(a)(3) (gross
income does not include -amounts received through accident
or health insurance for personal injuries or sickness-
(emphasis added)); 104(a)(4) (gross income does not
include -amounts received as a pension, annuity, or similar
allowance for personal injuries or sickness resulting from
active service in the armed forces . . . or as a disability
annuity payable under . . . the Foreign Service Act- (empha-
sis added)).  When, sandwiched in among these provisions,
one sees an exclusion for -the amount of any damages
received . . . on account of personal injuries or sickness,-
one has little doubt what is intended, and it is not recovery
for defamation (or other invasions of -personal- interests
that do not, of necessity, harm the victim's physical or
mental health).  Second, the provision at issue here is a tax
exemption, a category of text for which we have adopted a
rule of narrow construction, see, e.g., United States v.
Centennial Savings Bank FSB, 499 U. S. ___, ___ (1991)
(slip op., at 10).
  The question, then, is whether the settlement payments
at issue in this case were -received . . . on account of
personal injuries--viz., -on account of- injuries to the
recipients' physical or mental health-so as to qualify for
exclusion under 104(a)(2).  I think not.  Though it is quite
possible for a victim of race- or sex-based employment
discrimination to suffer psychological harm, her entitlement
to backpay under Title VII does not depend on such a show-
ing.  Whether or not she has experienced the sort of distur-
bances to her mental health that the phrase -personal
injuries- describes, a Title VII claimant is entitled to be
-restor[ed] . . . to the wage and employment positio[n] [she]
would have occupied absent the unlawful discrimination.-
Ante, at 10; see Albemarle Paper Co. v. Moody, 422 U. S.
405, 420-421 (1975) (-[G]iven a finding of unlawful discrim-
ination, backpay should be denied only for reasons which,
if applied generally, would not frustrate the central statuto-
ry purposes of eradicating discrimination throughout the
economy . . .-).  The only harm that Title VII dignifies with
the status of redressable legal injury is the antecedent
economic deprivation that produced the Title VII violation
in the first place.  See Albermarle Paper Co., supra, at 418
(-Title VII deals with legal injuries of an economic character
. . .-).  I thus conclude that respondents did not receive their
settlement payments (in respect of backpay) -on account of
personal injuries- within the meaning of 104(a)(2), and
would reverse the judgment of the Court of Appeals.
  It is true that the Secretary's current regulation, at least
as it has been applied by the IRS, see n. 1, supra, contra-
dicts the interpretation of the statute I have set forth
above.  But while agencies are bound by those regulations
that are issued within the scope of their lawful discretion
(at least until the regulations are modified or rescinded
through appropriate means, see, e.g., Motor Vehicle Mfrs.
Assn. of United States, Inc. v. State Farm Mutual Automo-
bile Ins. Co., 463 U. S. 29, 41-42 (1983)), they cannot be
bound by regulations that are contrary to law.  Otherwise,
the Secretary of the Treasury would effectively be empow-
ered to repeal taxes that the Congress enacts.  Cf. Office of
Personnel Management v. Richmond, 496 U. S. 414,
427-428 (1990).  The existence of an ever-so-rare ``taxpayer-
friendly'' Treasury regulation (however inconsistent with
the statutory text) may be relevant to whether penalties for
blameworthy failure to pay can be assessed, see Cheek v.
United States, 498 U. S. ___, ___ (1991) (slip op., at 9-11),
but it cannot control the determination of whether the tax
was due and owing according to Congress's command.
  Finally (and relatedly), I must acknowledge that the basis
for reversing the Court of Appeals on which I rely has not
been argued by the United States, here or below.  The rule
that points not argued will not be considered is more than
just a prudential rule of convenience; its observance, at
least in the vast majority of cases, distinguishes our
adversary system of justice from the inquisitorial one.  See
United States v. Pryce, 291 U. S. App. D.C. 84, 96, 938 F. 2d
1343, 1355 (1991) (Silberman, J., dissenting in part).  Even
so, there must be enough play in the joints that the
Supreme Court need not render judgment on the basis of a
rule of law whose nonexistence is apparent on the face of
things, simply because the parties agree upon it-particu-
larly when the judgment will reinforce error already
prevalent in the system.  See, e.g., Arcadia v. Ohio Power
Co., 498 U. S. ___ (1990).  I think that is the case here.
  For the foregoing reasons, I concur in the judgment.