In 1990, Californian Peter Maxwell owned a manufacturing company with just one employee: himself. Things took a bad turn when Maxwell got his sweater caught on the protruding bolt of a machine used to mix urethane for manufacturing foam padding. The father of two was pulled into the mixer and sustained severe injuries to his hand and arm. As a result he had surgery to have a metal plate implanted in his arm. After that, he complained of permanent loss of movement and did what any disgruntled employee would do: he sued himself. When Maxwell was contacted by his attorney, he was left with no alternative but to hire a second attorney to defend his business. The two attorneys negotiated and agreed to a settlement of $122,500 — Maxwell’s annual salary. Everything seemed fine until the IRS got wind of Maxwell’s bizarre legal shenanigans and launched an investigation. They sued Maxwell for claiming the compensation on his company’s books as a business expense and for failing to pay income taxes on the $122,500 award. In the end, a federal judge ruled in favor of Maxwell, saying he had done nothing illegal. As a result, Maxwell got the $122,500 back.
