Archives for September 2011

Nigerian Law, Not U.S. Law, Applied to Vessels Alliding in Nigeria

The Turkish-flagged vessel of Company #1 allided with the Greek-flagged vessel of Company #2 in the Port of Lagos, Nigeria.  Company #1 is a Turkish company, and Company #2 is a Greek company.  Following the allision, the Greek-flagged vessel required temporary repairs in Nigeria and then extensive repairs in Turkey.  Because the repairs caused loss of use damages, Company #2 sued Company #1 in the Eastern District of Louisiana after Company #2 arrested Company #1’s vessel during an unrelated call to a U.S. port.   An interlocutory appeal was granted by the Fifth Circuit to consider which country’s law–U.S. or Nigeria–applied to the controversy.  Importantly, Nigerian law does not recognise loss of use claims. 

The Supreme Court previously articulated eight factors a court should consider when determining whether U.S. or foreign law applies: (1) the place of the wrongful act; (2) the law of the flag; (3) the allegiance of domicile of the injured party; (4) the allegiance of the defendant shipowner; (5) the place of the contract; (6) the inaccessibility of the foreign forum; (7) the law of the forum; and (8) the shipowner’s base of operations.  Hellenic Lines, Ltd. v. Rhoditis, 398 U.S. 306 (1970); Lauritzen v. Larsen, 345 U.S. 571 (1953).  Here, the Fifth Circuit agreed with the lower court’s decision that Nigerian law should apply.  “Applying the law of the place of the wrongful act promotes stability in maritime law and comity between nations, key concerns in the international choice-of-law context.”  The loss of use damages all arose from the Nigeria allision, and as the situs of the wrongful act, Nigerian law governs. 

Kriti Filoxenia Special Mar. Enter. v. Yasa H. Mehmet Motor Vessel, No. 10-31232, 2011 WL 4436621 (5th Cir. 2011).

Cap on Punitive Damage Under Fire

In 2008, nineteen years after Exxon’s supertanker Exxon Valdez grounded on Bligh Reef fracturing its hull and spilling millions of gallons of crude oil into Prince William Sound, the U.S. Supreme Court considered the question of whether the award of $2.5 billion in punitive damages was greater than maritime law should allow in the circumstances.  Exxon Shipping Company v. Baker, 128 S.Ct. 2605 (2008).  

In the lower court trial, Phase I, the jury found Exxon and Hazelwood reckless (and thus potentially liable for punitive damages) under instructions providing that a corporation is responsible for the reckless acts of employees acting in a managerial capacity in the scope of their employment.  In Phase II, the jury awarded $287 million in compensatory damages to some of the plaintiffs.  Others had settled their compensatory claims for $22.6 million.  In Phase III the jury awarded $5,000 in punitive damages against Hazelwood and $5 billion against Exxon.  The Ninth Circuit upheld the Phase I jury instruction on corporate liability and ultimately remitted the punitive damages award against Exxon to $2.5 billion.  Exxon then appealed to the Supreme Court.

The Court found the punitive damage award against Exxon was excessive as a matter of maritime common law, and that “in the circumstances of this case the award should be limited to an amount equal to compensatory damages.”  In doing so, the Court noted that although some state studies showed the dollar amount of awards growing over time, most accounts showed that the median ratio of punitive to compensatory awards remained less than 1:1.  Continuing, the Court stated that the data did not show a marked increase in the percent of cases with punitive damage awards.  The real problem was the stark, unpredictability of punitive damages.  Stating that courts are concerned with fairness as well as consistency, the available data suggested that the spread between high and low individual awards was not acceptable.  In coming to this conclusion, the Court found that a penalty should be reasonably predictable in its severity so that even the “bad person” can look ahead with some ability to know what the stakes are in choosing one course of action or another.  The Court considered the option of setting a hard dollar punitive cap, but rejected this because there is no “standard” tort or contract injury, thus making it difficult to settle upon a particular dollar figure as appropriate across the board.  The Court found the more promising alternative was to peg punitive awards to compensatory awards, using a ratio or maximum multiple.  The Court found that this is a model used in many states, and an analogous of federal statutes allowing multiple damages.  The question was what ratio would be most appropriate.  To arrive at its answer, the Court analyzed studies reflecting the judgment of juries and judges in thousands of cases as to what punitive awards were appropriate in circumstances reflecting the range from the least blame -worthy conduct, to malice and avarice, to recklessness, to gross negligence.  The Court found that the data in question put the median ratio for the entire gamut a less than 1:1, meaning that the compensatory award, in most cases, exceeds the punitive award.  Accordingly, the Court found that a 1:1 ratio was a fair upper limit in maritime cases.

In recent years the issue of punitive damages has been the subject of several noteworthy cases, all of which trend toward expansion of its use.  In Atlantic Sounding Co v. Townsend, 129 S.Ct. 2561 (2009), the Supreme Court overruled longstanding case law and found that as a matter of general maritime law, a seaman is entitled to seek punitive damages for his employer’s alleged willful and wanton disregard of its maintenance and cure obligation.  This ruling has opened the door for plaintiffs to try to expand the claims and causes of action for which punitive damages may be recoverable.  In Wagner v. Kona Blue Water Farms, LLC, 2010 WL 3566731, the United States District Court in Hawaii ruled that punitive damages are available under the general maritime law claims of unseaworthiness, citing the Ninth Court of Appeals’ decision in Evich v. Morris, 819 F.2d, 256 (9th Cir. 1987).  In Rogers v. Resolve Marine, 2009 WL 2984199, a case decided here in the Eastern District of Louisiana, plaintiff, a Jones Act seaman, moved to amend his Complaint to claim punitive damages for the alleged gross, willful and wanton  negligence of his employer in causing his injuries.   Judge Barbier did not specifically rule that he would recognize this cause of action, but did allow the amendment “in light of the movement of the law in this area, to avoid re-trial in the event the law changes.” 

On March 16, 2011, U.S. Senator Sheldon Whitehouse (D-RI) introduced Senate Bill 592 entitled The (Maritime Liability Fairness Act.)  Here Senator Whitehouse, quoting directly the Supreme Court’s reasoning in Baker, introduced legislation stating “Except as otherwise provided in its title, in a civil action for damages arising out of a maritime tort, punitive damages may be assessed without regard to the amount of compensatory damages assessed in this action.” 

This is evidence of a continuing trend towards the expansion of rights of recovery and punitive damages in the maritime law.  Following the Deep Water Horizon event, Senate Bill 3755 entitled “A Bill to Ensure Fairness in Admiralty and Maritime Law” was filed.  It would have eliminated the right to seek limitation of liability by vessel owners in all but a few scenarios, eliminate the cap on punitive damages, allow the award of non-pecuniary damages (loss of care, comfort and companionship) in claims for death on the high seas and allowed non-pecuniary damages in Jones Act claims.  This bill stalled during the legislative process.

Nevertheless, the mood of Congress and the judiciary appears to be moving for a more liberal philosophy when it comes to the type and amount of damages available to maritime workers.  We can expect to see continued attempts by counsel for injured maritime workers to expand the circumstances when punitive damages can be awarded.

New Longshore Case at the Supreme Court

This morning, the Supreme Court of the United States granted certiorari in a Longshore and Harbor Workers’ Compensation Act decision out of the Ninth Circuit: Roberts v. Sea-Land Servs., 625 F.3d 1204 (9th Cir. 2010).  Note: the Ninth Circuit styled this case as Roberts v. Director, OWCP.

As reported on SCOTUSBlog, the Court is going to consider one question: “Whether the phrase ‘those newly awarded compensation during such period’ in Longshore Act § 6(c), applicable to all classes of disability except permanent total, can be read to mean ‘those first entitled to compensation during such period,’ regardless of when it is awarded.”

The Navigable Waters post on this case is available here.

Which Federal Circuit’s Law Applies to a Defense Base Act Claim?

In the United States, there are twelve Courts of Appeals which are known as “circuit courts.”  All fifty states, as well as the District of Columbia, are divided into various circuits.  These courts are intermediate appellate courts; the last step before the Supreme Court of the United States.  Over time, each circuit court has developed its own identity and reputation.  The circuit courts can decide issues differently, sometimes because of geographical, political or ideological differences.  When a circuit court decides an issue differently from a court in another circuit, a “split” is created.  Lower courts in a circuit (i.e. district courts) are bound by their appellate court’s decisions.  Those same courts are not bound by another circuit court’s decision.

In the Defense Base Act (“DBA”) context, the applicable federal circuit law is determined by statute.  Section 1653(b) of the DBA states: “Judicial proceedings provided under sections 18 and 21 of the Longshoremen’s and Harbor Workers’ Compensation Act in respect to a compensation order made pursuant to this Act shall be instituted in the United States district court of the judicial district wherein is located the office of the deputy commissioner whose compensation order is involved if his office is located in a judicial district, and if not so located, such judicial proceedings shall be instituted in the judicial district nearest the base at which the injury or death occurs.”

If the office of the deputy commissioner (now known as “district director”) controls which circuit’s caselaw to apply, then only a limited numberof circuit’s will have precedent in DBA cases because there are only a limited number of district director offices.  As seen on the Division of Longshore and Harbor Workers’ Compensation’s contact page, there are offices in Boston, New York, Baltimore, Norfolk, Jacksonville, New Orleans, Houston, San Francisco, Honolulu, Seattle and Longbeach, with the National Office situated in Washington, D.C.  Under this scheme, only the legal intreptations from the 1st, 2nd, 4th, 5th, 9th and 11th circuits would constitute potentially precedential caselaw in DBA claims, to the exclusion of the interpretations made by the 3rd, 6th, 7th, 8th, 10th and D.C. circuits.  For claimants residing in twenty-seven States and the District of Columbia, their cases will be analyzed using the law of a federal circuit court that is not their own.   An injured longshoreman and an injured DBA claimant living next door to each other in Chicago, Illinois, will have different interpretations from different circuits–the 5th and the 7th–applied to their claim.  As such, it is important to know the interpretations of the Longshore and Harbor Workers’ Compensation Act and the DBA that are employed by the applicable circuit.

Below is a chart that identifies the federal circuit for each State.  To the far right, the chart identifies the controlling circuit caselaw based on the district director’s office.  If the State’s name is written in “all caps,” then the typical circuit law that applies to that state has been displaced by the DBA’s judicial proceedings statute.

State Federal Circuit Applicable DBA Circuit Law Based On District Director’s Office
Alabama 11th 11th – Jacksonville Office
Alaska 9th 9th – Seattle Office
Arizona 9th 9th – San Francisco Office
ARKANSAS 8th 5th – New Orleans Office
California 9th 9th – San Francisco or Long Beach Office
COLORADO 10th 9th – Seattle Office
CONNECTICUT 2nd 1st – Boston Office
DELAWARE 3rd 4th – Baltimore Office
D.C. D.C. 4th – Baltimore Office
Florida 11th 11th – Jacksonville Office
Georgia 11th 11th – Jacksonville Office
Hawaii 9th 9th – Honolulu Office
Idaho 9th 9th – Seattle Office
ILLILNOIS 7th 5th – Houston Office
INDIANA 7th 5th – Houston Office
IOWA 8th 5th – Houston Office
KANSAS 10th 5th – Houston Office
KENTUCKY 6th 11th – Jacksonville Office
Louisiana 5th 5th – New Orleans Office
Maine 1st 1st – Boston Office
Maryland 4th 4th – Baltimore Office
Massachusetts 1st 1st – Boston Office
MICHIGAN 6th 5th – Houston Office
MINNESOTA 8th 5th – Houston Office
Mississippi 5th 5th – New Orleans Office
MISSOURI 8th 5th – Houston Office
Montana 9th 9th – Seattle Office
NEBRASKA 8th 5th – Houston Office
Nevada 9th 9th – San Francisco Office
New Hampshire 1st 1st – Boston Office
NEW JERSEY 3rd 2nd – New York Office
NEW MEXICO 10th 5th – Houston Office
New York 2nd 2nd – New York Office
NORTH CAROLINA 4th 11th – Jacksonville Office
NORTH DAKOTA 8th 9th – Seattle Office
OHIO 6th 5th – Houston Office
OKLAHOMA 10th 5th – Houston Office
Oregon 9th 9th – Seattle Office
PENNSYLVANIA 3rd 4th – Baltimore Office
Rhode Island 1st 1st – Boston Office
SOUTH CAROLINA 4th 11th – Jacksonville Office
SOUTH DAKOTA 8th 9th – Seattle Office
TENNESSEE 6th 11th – Jacksonville Office
Texas 5th 5th – Houston Office
UTAH 10th 9th – Seattle Office
VERMONT 2nd 1st – Boston Office
Virginia 4th 4th – Norfolk Office
Washington 9th 9th – Seattle Office
West Virginia 4th 4th – Baltimore Office
WISCONSIN 7th 5th – Houston Office
WYOMING 10th 9th – Seattle Office