$23 Million Punitive Damage Award Upheld by Louisiana Appellate Court

On June 29, 2016, the Louisiana Third Circuit Court of Appeal affirmed a jury’s award of $23 million in punitive damages to the family of a young man fatally injured in a boating accident. The accident occurred on May 7, 2005, on the navigable waters of Louisiana, on a former channel of the Calcasieu River. Derek Hebert was a passenger on an open hull fishing boat manufactured by Champion, owned by Mr. Vamvoras and operated by his son. The Champion’s steering system failed while the boat was on a plane. The boat went into a spin, throwing Derek overboard. The boat’s propeller struck him 19 times, causing his death. His parents brought suit against the Vamvorases, various marinas, and three manufacturers, including Teleflex, manufacturer of the boat’s hydraulic steering system.

 

Litigation continued for nine years. By the time of the trial the only remaining defendants were the Vamvoras father and son and Teleflex. The Louisiana Department of Wildlife and Fisheries investigated the accident and determined that the boat, which had been purchased pre-owned by Vamvoras, lost its steering because of a hydraulic oil/fluid leak in one of the steering system’s lines at a hose/nut coupling assembly. The Department of Wildlife and Fisheries (and other experts) found that a leak in the hydraulic system can result in total failure of the steering system. Teleflex manufactured and supplied the hydraulic steering system, but one of the original Teleflex hoses had been replaced in the past with a non-Teleflex hydraulic hose. The remaining claim against Teleflex was not for construction or design defects. The claim asserted was that the steering system is defective because it contains an inherent danger unknown to users, and Teleflex breached its duty to warn unsuspecting users of a dangerous risk in using its product.

 

The case was tried twice to juries. In the first trial the trial judge dismissed the Vamvorases, holding that there was insufficient evidence to support a finding that they knew or should have known that loss of hydraulic fluid could result in catastrophic steering failure. According to testimony if enough fluid is lost the control of the boat is taken from the driver. The motor goes into a free spin, kicking completely to one side. The boat then suddenly turns on its own axis, referred to in the industry as a “kill spin”. Occupants are often ejected and are immediately in danger of being run over. Apparently the evidence showed that Teleflex, a sophisticated boating industry manufacturer, was well aware of this phenomenon. He also found that the warnings that were on the system were not positioned so as to be readily apparent to the operator. The judge also found that the warnings failed to advise the user that loss of fluid could result in system failure leading to ejection or death. In his opinion it was not foreseeable to the owner/driver that the system could fail and that Derek would be ejected from the boat. Thereafter the jury found in favor of Teleflex. However, the judge granted plaintiff’s motion for new trial holding that prejudicial error had occurred. The second trial was held. This time a jury awarded $125,000 compensatory damages and $23 million in punitive damages. There were numerous issues appealed by both the plaintiff and Teleflex.

 

The Court of Appeal recognized that because Derek was not a seaman or maritime worker his survivors were able to make a claim for punitive damages under the general maritime law. The Court noted that while punitive damages are rarely imposed they have long been recognized as punishment where a defendant’s actions are found to be intentional or so wanton and reckless to amount to a conscious disregard for the rights of others.

 

The Court noted that the evidence revealed that Teleflex not only knew about the steering loss, but had tested the system as early as 16 years before the accident and was aware of the consequences if there was loss of fluid and thereafter loss of control of steering. The Court concluded that the jury was influenced by this testimony and concluded that Teleflex was wanton and reckless to ignore such results when “an inexpensive stick-on warning costing thirty ($.30) cents could have saved a life”. Based on this and other evidence the Court of Appeal did not disturb the finding that the evidence reasonably supported the jury’s finding that the award of punitive damages was appropriate.

 

The Court then addressed the amount of the punitive damage award. Teleflex contended that it was grossly excessive as matter of federal maritime and constitutional law. Judge Ulysses Thibodeaux, writing for the Court, launched into a thorough review of U.S. Supreme Court cases where the propriety of the amount of the punitive damage award was at issue, and where the amount of the award was so grossly excessive as to violate the Due Process Clause of the 14th Amendment. The Supreme Court has recognized three guideposts for determining whether an award is grossly excessive: (1) the degree of reprehensibility of the misconduct; (2) the ratio, or disparity between the punitive damage award and the harm, or potential harm, suffered by the plaintiff; and (3) the difference between this remedy and the civil penalties authorized or imposed in comparable cases.

 

His review of each of the Supreme Court cases, in which all but one punitive damage award was reduced, led Judge Thibodeaux to conclude that each case must be judged on its particular facts. He decided that the Supreme Court’s finding in Exxon Shipping Company v. Baker (2008) that a 1:1 ratio between compensatory damages and the award of punitive was the appropriate measure in maritime cases was not binding. He then went on to find that the evidence supported the judgment and confirmed the 184:1 ratio. Although the Judge went to great pains to explain his reasoning, the author, having read the evidence and testimony cited by the Judge, sees nothing that separated this case from others. Certainly the loss of life is tragic. Legislators and judges across the country have, correctly so, found it in our society’s best interest to allow a tortfeasor to be punished for wanton, reckless and reprehensible conduct that results in injury and death. But there must be a balance. In the author’s opinion there is insufficient evidence to support an award for punitive damages that is 184 times the amount of damages the jury found the plaintiffs suffered. It is expected that Teleflex will appeal this decision to the Louisiana Supreme Court.

 

Warren v. Shelter Mutual Insurance Company, et al.

Dropping Anchor Does Not Trigger a Requirement to Provide Notice Under La. RS § 40:1749.11 for Dredge Owner

A dredge, seeking to secure position for anchoring, lowered its dredge ladder and cutter head into the seabed, striking a pipeline. The pipeline owner sued the owner of the dredge claiming, among other things, the dredge owner acted negligently in failing to discharge its notification responsibilities under the Louisiana Underground Utilities and Facilities Protection Law, La. Rev. Stat. Ann. § 40:1749.11 et seq. (referred to as “the One–Call Statute”), before engaging in the anchoring procedure.

 

The pipeline owner moved for partial summary judgment seeking a ruling that the dredge owner and operator had engaged in “excavation” and was therefore required to provide advance notice under the One-Call Statute. The district court denied the motion, and the pipeline owner appealed to the U.S. Fifth Circuit. Because it is “excavation” that triggers the notification requirement in the statute, the critical question is whether the dredge owner’s anchoring procedure constitutes “excavation.”

 
The pipeline owner argued that the dredge owner’s anchoring activity was an “operation for the purpose of movement … of earth,” and thus constitutes “excavation” under § 1749.12(6)’s general definition of the term. Specifically, the pipeline argued that the dredge owner’s activity had “the purpose of” moving earth because, “to accomplish” the objective of stopping the movement of the dredge, “the cutter head would have to dig into the seabed and displace the earth.”

 
The Court held that under the rule of lenity, Louisiana courts resolve ambiguities in the “penal” statute, such as the one at issue in this matter, in favor of the defendants. As such, the Court was required to adopt a narrow reading of “purpose”. The Court also distinguished between “knowledge” of the operation “moving the earth” and “purpose” of the operation “moving the earth.”

 
The Court found that anchoring did not have the “purpose” of moving the earth, and the district court’s ruling denying the pipeline company’s motion was affirmed.

 
Plains Pipeline, L.P. v. Great Lakes Dredge & Dock Co.

No Expansion of the Longshoreman Definition

Coming before the Louisiana Third Circuit Court of Appeals  was the question of whether the Claimant was covered by the Longshore and Harbor Workers’ Compensation Act or the Louisiana Workers’ Compensation Act.  After reviewing the situs and status requirements of the LHWCA, the Court found he did not fall under the longshoremen classification.

Claimant was an employee of UNO Enterprises, LLC. At the time of his injury, he was working under the direction and control of M. Matt Durrance, LLC, a heavy construction company which was hired by Breaux’s Bay Craft to construct a boat ramp on Bayou Tech in Loreauville, Louisiana- a navigable waterway. On the date of his injury, Claimant was cutting timber to be used for construction of the ramp. The uncontested facts of the case established that Claimant was in a grassy area between thirty and one hundred feet from the ramp while cutting the timber.

The Court engaged in a “situs” and “status” analysis to determine whether Claimant met the definition of longshoreman within the meaning of the LHWCA.  The Court was not persuaded by the comparison of the boat ramp to a pier, which is an enumerated situs under the Act, as there was no evidence to establish that the ramp was “a structure built on pilings extending from land to navigable water.” Furthermore, there was no evidence to establish the adjoining area in question was customarily used by the employer in the loading, unloading, repairing, dismantling or building a vessel. Claimant therefore did not meet situs or status test necessary to be covered by the LHWCA.  The Court noted that the Claimant “was performing work on property used to construct physical reinforcements to stabilize the earth around a boat launch.” Claimant’s involvement in building the boat ramp was deemed insufficient to trigger application of the LHWCA.

Hernandez v. Louisiana Workers’ Compensation Corp.

Geographical Proximity is Not the Only Factor in Deciding OCSLA Jurisdiction

Robert Lewis, Jr. filed suit under the Outer Continental Shelf Lands Act (OCSLA), alleging injuries to his left elbow, cervical spine, and lumbar spine as the result of an accident that occurred while working on Ram-Powell, a tension-leg fixed platform, located in the Gulf of Mexico in Viosca Knoll Block 956.  The parties agreed that under OCSLA the substantive law for injuries occurring on fixed offshore platforms located on the outer continental shelf is the law of the adjacent state.  However, they disagreed as to which state’s law applied.  Plaintiff argued that Louisiana law should apply as it was the geographically closest to the platform in question.  Defendants, on the other hand, asserted that Alabama was the adjacent state and its law should apply, and filed a motion for summary judgment on the issue.

The court turned to the Fifth Circuit’s opinion in Snyder Oil Corp. v. Samedan Oil Corp. in resolving the issue.  Samedan set forth four factors in determining adjacency: (1) geographical proximity; (2) which coast federal agencies consider the subject platform to be “off of”; (3) prior court determinations; and (4) projected boundaries if the states’ borders were extended to the shelf.   Plaintiff argued that not only was Ram-Powell geographically closer to Louisiana, but that he also travelled to and from the platform via Louisiana and had no connections to Alabama.  Plaintiff further argued that there were no controlling decisions on Block 956, and that any evidence regarding the projected boundary is not as determinative as geographic proximity.

In finding for Defendants, the U.S. District Court for the Eastern District of Louisiana recognized that while Block 956 was geographically closer to Louisiana due to its peculiar boot shape, the other three factors, viewed together, indicated that Alabama was the adjacent state.  First, various federal and state agencies considered the platform to be off the coast of Alabama.  Next, there was indeed a prior decision ruling that the Ram-Powell was adjacent to Alabama; and the platform in question in Samedon was further to the west than Ram-Powell, and it too was considered adjacent to Alabama.  Furthermore, the projected boundaries as set forth by the Minerals Management Service (MMS), U.S. Commerce Department, and U.S. Bureau of Ocean Energy Management (BOEM) all indicate that Block 956 is within the portion of the outer continental shelf of Alabama.  Lastly, the court rejected Plaintiff’s state of transit argument, stating that the geographic proximity factor does not place import on the state of transit.  Thus, partial summary judgment was granted and Alabama law applied.

Lewis v. Helmerich & Payne International Drilling Co., et al.