E. Pauline Barnes - Page 9

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               Having found that the settlement proceeds were attributable            
          to both mental distress and punitive damages, we must now decide            
          whether these types of damages were received on account of                  
          personal injuries or sickness.                                              
               Respondent argues that our decision is controlled by the               
          Supreme Court's holding in Commissioner v. Schleier, 515 U.S.               
          ___, 115 S. Ct. 2159 (1995).  We disagree with respondent's                 
          assertion to the extent discussed herein.  The specific holding             
          of Schleier was that back pay and liquidated damages recovered              
          under the Age Discrimination in Employment Act (ADEA) are not               
          received on account of personal injuries.  Petitioner's case is             
          distinguishable in that it involves settlement proceeds received            
          in lieu of mental distress and punitive damages under Oklahoma's            
          wrongful termination tort cause of action.                                  
               In Schleier, the Supreme Court recognized that damages                 
          received on account of personal injuries or sickness may                    
          encompass recoveries based on intangible as well as tangible                
          harms.  Commissioner v. Schleier, 515 U.S. at ___ n.4, 115 S. Ct.           
          at 2164 n.4.  Although the Court acknowledged that intangible               
          discrimination harms can constitute personal injuries, it held              
          that the ADEA does not provide for recovery for such harms.  Id.            
          at 2165 n.6.  We therefore interpret Schleier as allowing the               
          exclusion of damages received for intangible harms such as mental           
          distress where the law governing the underlying action provides             
          for such damages.  See Banks v. United States, 81 F.3d 874, 876             

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