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AUGUST 16, 2010 vol. 26 • No. 20Reprinted with permission from the August 16, 2010 edition of Texas Lawyer. © 2010 ALM Media Properties, LLC. All rights reserved.Further duplication without permission is prohibited. For information, call 214-744-7723 or contact RMcKenzie@alm.com. subsidiary of Weeks Marine Inc., the other petitioner at the high court, filed a declaratory judgment action regarding its maintenance-and-cure obligations. Townsend filed his own suit under the Jones Act and general maritime law and filed counterclaims in the declaratory judgment action, seeking punitive damages for the arbitrary and willful denial of maintenance and cure. The U.S. District Court for the Middle District of Florida consolidated the cases. The tugboat owners moved to dismiss Townsend’s claim for punitive damages. The district court denied the motion but certified the question for interlocutory appeal. The 11th U.S. Circuit Court of Appeals agreed with the district court that the seaman could pursue his punitive damages claim for the willful withholding of maintenance and cure. The high court noted a split in the circuits. In Townsend, the Supreme Court abruptly changed course on whether punitive damages are available to people.
by JAMES T. BAILEY
The U.S. Supreme Court’s June 25, 2009, decision in Atlantic Sounding Co. Inc., et al. v. Townsend leaves uncertainty in its wake for those left to navigate the once-familiar waters of maritime damages. Townsend casts a large shadow over a line of case law within the 5th U.S. Circuit Court of Appeals that disallowed punitive damages and other nonpecuniary remedies in seamen’s cases. This article will address the effect of Townsend on maintenance-and-cure claims, suggest how lawyers can help maritime employers improve their handling of such claims and examine the potential expansion of punitive damages to other general maritime law claims.
“Maintenance and cure” is a centuries-old fundamental right of seamen when they fall ill or are injured while in service of a ship. The shipowner has a general maritime law duty to pay maintenance — a per diem equivalent of the room and board the seaman enjoyed on the vessel — and cure (curative medical treatment) until the seaman reaches maximum medical improvement.
According to the high court’s opinion in Townsend, seaman Edgar L. Townsend fell on a tugboat’s deck and was injured. He claimed that Atlantic Sounding, the owner of the tugboat, advised him it would not provide maintenance and cure. Atlantic Sounding, a wholly owned subsidiary of Weeks Marine Inc., the other petitioner at the high court, filed a declaratory judgment action regarding its maintenance-and-cure obligations. Townsend filed his own suit under the Jones Act and general maritime law and filed counterclaims in the declaratory judgment action, seeking punitive damages for the arbitrary and willful denial of maintenance and cure. The U.S. District Court for the Middle District of Florida consolidated the cases. The tugboat owners moved to dismiss Townsend’s claim for punitive damages. The district court denied the motion but certified the question of interlocutory appeal. The 11th U.S. Circuit Court of Appeals agreed with the district court that the seaman could pursue his punitive damages claim for the willful withholding of maintenance and cure. The high court noted a split in the circuits.
In Townsend, the Supreme Court abruptly changed course on whether punitive damages are available to people classified as seamen under the Jones Act when those seamen allege their employers willfully deny them maintenance and cure (a general maritime law remedy). In the past, especially within the 5th Circuit, Jones Act seamen could recover attorneys’ fees, but they generally could not win punitive damages for any of their claims under general maritime law.
However, the Townsend court held that a shipowner can be subject to punitive damages if it willfully or wantonly disregards its maintenance-and-cure obligations to seamen.
By permitting the recovery of punitive damages, the U.S. Supreme Court departed from the uniform framework for analyzing general maritime damages over the past 20 years. As Justice Samuel A. Alito Jr. noted in dissent, the court previously had endorsed a “principle of uniformity” in which it would look to the policy choices in maritime law statutes (such as the Jones Act) when developing general maritime law. If a statute did not make a form of relief available, the court would be “reluctant” to permit such relief on a similar claim under the general maritime law.
The Townsend majority did not see it that way. In deciding that punitive damages are available in a case where the plaintiff alleged willful denial of maintenance and cure, three points were central to the court’s decision: 1. Punitive damages have long been an available remedy at common law for wanton, willful or outrageous conduct. 2. The common-law punitive damages tradition extends to federal maritime law. 3. And nothing in maritime law undermines the applicability of punitive damages in the maintenance-and-cure context.
The court also observed that the Jones Act preserves such common-law claims. The court wrote that “uniformity in admiralty” is a “laudable quest,” but it does not mandate limiting general maritime law damages to what Congress authorizes under separate statutory causes of action.
Prior to Townsend, the 5th Circuit was influential in expanding the doctrine of uniformity in maritime damages to limit seamen’s recoveries to pecuniar
y losses in a variety of cases, even going so far as to include claims asserted against non-employer third parties. These holdings now are on tenuous footing, as maritime plaintiffs will seek to expand the scope of damages available to them.
Open Questions
The following broader questions remain in Townsend’s wake.
1. Can a shipowner deny maintenance-and-cure benefits without fear of incurring a punitive award? In the appropriate cases, yes. Shipowners and their insurers rightfully are concerned that a seaman will use any perceived misstep in handling maintenance-and-cure benefits to obtain a punitive reward. But exemplary damages require more than a simple mistake: A company must act willfully, wantonly or outrageously.
In light of this, lawyers for shipowners should ensure their clients take some basic steps when handling injured seamen’s claims. Shipowners should arrange an independent medical examination of an injured seaman as early as possible. This provides a medical foundation upon which to make maintenance-and-cure decisions. Companies also should conduct periodic reviews of their open injury files to ensure the timely and appropriate administration of benefits. With punitive awards a new reality after Townsend, renewed vigilance by the company against arbitrary and capricious tactics in dealing with injured seamen is imperative.
2. Is there an identifiable cap on punitive damages in a maintenance-and-cure claim? This remains to be seen. On June 25, 2008, in Exxon Shipping Co., et al. v. Baker, et al., the U.S. Supreme Court applied a 1:1 ratio of punitive-to-compensatory damages in reducing a federal maritime punitive award to fishermen impacted by the Exxon Valdez oil spill. The court determined that the 1:1 ratio was appropriate because Exxon’s conduct was “worse than negligent, but less than malicious.”
Despite the cap imposed in Baker, the Townsend court declined to decide whether a “recovery cap” for punitive damages in maintenance-and-cure cases was necessary. In other contexts, the Supreme Court has stated that punitive awards exceeding a single-digit ratio between compensatory and punitive damages are unlikely to satisfy due process. Post-Townsend, parameters of one to 10 times compensatory damages should guide the analysis of punitive damages, with an emphasis on limiting awards to no more than a 1:1 punitive-to-compensatory ratio.
3. Will Townsend open the door to punitive damages in other maritime actions? On May 2 in Wagner v. Kona Blue Water Farms LLC, the U.S. District Court for Hawaii denied a seaman’s argument that Townsend permits the recovery of punitive damages in a Jones Act negligence case. The court wrote that Townsend did not “wholesale permit the recovery of punitive damages in maritime actions.”
Since Townsend stated no opinion on whether the Jones Act prohibits the recovery of punitive damages under that statute, the district judge determined that Townsend did not conflict with 9th U.S. Circuit Court of Appeals precedent prohibiting such recovery. The district court followed its circuit case law, refusing to expand Townsend’s reach by allowing punitive damages under the Jones Act.
The 5th Circuit and its district courts were at the forefront in relying upon admiralty’s “uniformity principle” to limit damages available under the general maritime law. Armed with Townsend, the maritime plaintiffs bar can attack this circuit’s precedents as they seek to expand the general maritime remedies available to their clients. Courts within the 5th Circuit may find the analysis in Wagner persuasive, as maritime defendants will urge them to preserve the laws that have been the foundation of maritime damages in this circuit.
The Supreme Court has muddied the once-clear waters of maritime damages. The map provided by Townsend is incomplete, leaving those who litigate in this now-fluid environment subject to the legal tides that move the admiralty courts at any given time. As several commentators and practitioners rightfully noted after Townsend, it is “game on” to re-define or defend the remedies available under general maritime law.
James T. Bailey is a director in the Houston office of Galloway, Johnson, Tompkins, Burr & Smith. For nine years, he has served his clients in the maritime and offshore oil and gas industries in marine casualty litigation and appeals involving personal injury, cargo law, vessel collisions, oil spills and business litigation.
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