Arthur Clemens, Jr. v. Qwest Corp., 874 F.3d 1113

Arthur Clemens, Jr., a long-time Qwest employee and union member, sued Qwest in 2013 for race discrimination and retaliation under Title VII; the case proceeded to a jury trial.
The jury found for Clemens on his retaliation claim and awarded over $157,000 in lost wages/benefits, over $275,000 for emotional distress, and $100,000 punitive damages; compensatory and punitive awards were reduced to comply with Title VII caps.
Clemens requested a "tax consequence adjustment" (a gross-up) because receiving his back pay in a single lump sum increased his income-tax liability compared to receiving it over time.
The district court denied the gross-up request, citing lack of Ninth Circuit authority, conflicting decisions in other circuits, and disagreement over methodology.
The Ninth Circuit reviewed the issue de novo, acknowledged a circuit split, and vacated the district court’s denial, holding that Title VII’s equitable powers permit district courts to award gross-ups in their discretion and remanding for further proceedings.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Title VII authorizes a tax "gross-up" to make a plaintiff whole when back pay paid as a lump sum increases tax liability	Clemens: Title VII's remedial/equitable powers require compensating increased tax burden to make plaintiff whole	Qwest: Monetary relief is legal not equitable; gross-up not authorized; issue waived; jury must decide back pay adjustments	Ninth Circuit: Title VII grants equitable authority to award gross-ups; district courts have discretionary power to award and quantify them; vacated denial and remanded
Whether the district court properly refused to consider a gross-up based on lack of Ninth Circuit precedent and other circuit disagreement	Clemens: District court should exercise equitable power to consider gross-up	Qwest: District court correctly declined absent Ninth Circuit authority; also argued methodology/jury issues	Ninth Circuit: District court erred to decline consideration solely for lack of Ninth Circuit precedent; discretion remains with district court on remand

Albemarle Paper Co. v. Moody, 422 U.S. 405 (Title VII aims to make victims whole and courts have broad equitable powers)
Franks v. Bowman Transp. Co., 424 U.S. 747 (courts vested with equitable powers to fashion remedies)
Loeffler v. Frank, 486 U.S. 549 (back pay as a remedial measure)
Comm’r v. Schleier, 515 U.S. 323 (taxability of back-pay awards)
Eshelman v. Agere Sys., Inc., 554 F.3d 426 (3d Cir.: district courts may award gross-ups under Title VII)
EEOC v. N. Star Hosp., Inc., 777 F.3d 898 (7th Cir.: endorsing gross-up to make plaintiff whole)
Sears v. Atchison, Topeka & Santa Fe Ry. Co., 749 F.2d 1451 (10th Cir.: upheld tax gross-up)
Dashnaw v. Pena, 12 F.3d 1112 (D.C. Cir.: rejected tax gross-ups)
Bayer v. Neiman Marcus Grp., Inc., 861 F.3d 853 (9th Cir.: courts must seek "complete justice" in discrimination remedies)