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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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