May 05, 2015
The Continuing Ripple Effects of Atlantic Sounding v. Townsend
By: Michael A. Orlando and Mike A. Orlando Jr., Meyer Orlando LLC
Originally published at http://www.irmi.com/expert/articles/2015/orlando04-insurance-maritime-law.aspx. All citations can be found in the hyper-linked article.
It has been almost 6 years since the Supreme Court of the United States determined in Atlantic Sounding Co., Inc. v. Townsend that punitive damages were an available remedy for the willful and wanton withholding of an injured seaman’s maintenance and cure benefits. Townsend has been used by attorneys and courts in the time between its decision and the present in a number of ways to justify either expanding or contracting the remedies available to injured seaman. The 7-month old Fifth Circuit Court of Appeals McBride v. Estis Well Service, LLC decision offered the latest circuit court commentary on the breadth of Townsend and the remedies it allegedly provides. Eventually, the Supreme Court will review Townsend, Miles v. Apex Marine Corp., and McBride (among potentially other circuit court decisions) to determine the full development of its Townsend decision. In the meantime, an overview of how courts have interpreted different aspects of Townsend since its inception is worthwhile for understanding the present state of some maritime remedies.
1. Did Townsend extend a punitive damages remedy to claims of unseaworthiness?
“The general rule that punitive damages were available at common law extended to claims arising under federal maritime law.” This statement from Townsend, the Court’s discussion regarding available maritime punitive damage claims that preceded the Jones Act, and the recognition that the Jones Act does not expressly limit maintenance and cure or unseaworthiness claims set some lower courts down the path of allowing punitive damages as a remedy for an unseaworthiness claim under general maritime law:
• “Finally, in focusing on the substantive relationship among the various causes of action available to seamen, Defendants overlook the key inquiry identified in Atlantic Sounding: whether it is “possible to adhere to the traditional understanding of maritime actions and remedies without abridging or violating the Jones Act.” Id. at 420. As with claims for maintenance and cure, the Jones Act does not directly address unseaworthiness or its available remedies. See id. It is therefore feasible for courts to allow punitive damages in unseaworthiness actions, as they did at common law, without violating the Jones Act.” In re Asbestos Products Liability Litigation (No. VI), MDL Dkt. No. 875, 2014 WL 3353044 (E.D. Pa. July 9, 2014);
• “Finally, the Court rejects Hornblower’s argument that the remedies afforded under general maritime law on an unseaworthiness claim cannot be more expansive than the remedies provided under the Jones Act. Hornblower’s position is directly contradicted by the Supreme Court’s recognition in Atlantic Sounding that the Jones Act was remedial and was intended to enlarge the protections available to seamen, not narrow them. 557 U.S. at 417. Thus, its enactment did not eliminate preexisting remedies available to seamen under general maritime law, except to the extent specific provisions expressly restricted the traditional remedies available. There are no provisions in the Jones Act that limit the right to seek punitive damages on a claim for unseaworthiness. Accordingly, the Court concludes that punitive damages are available on Plaintiff’s unseaworthiness claim.” Rowe v. Hornblower Fleet, No. C-11-4979 JCS, 2012 WL 5833541 (N.D. Cal. Nov. 16, 2012);
• “Unlike in the maintenance and cure context, the Supreme Court has not directly addressed the issue whether punitive damages and attorney’s fees are recoverable in an unseaworthiness claim. The Eleventh Circuit Court of Appeals, in In re Amtrak Sunset Ltd. Train Crash, 121 F.3d 1421 (11th Cir. 1997), held that nonpecuniary damages such as punitive damages were only available in exceptional circumstances, such as the “intentional denial of a vessel owner to furnish a seaworthy vessel to a seaman and in those very rare situations of intentional wrongdoing.” 121 F.3d at 1429. However, in Atlantic Sounding, the Supreme Court clarified that punitive damages historically “extended to claims arising under federal maritime law.” Atlantic Sounding, 557 U.S. at 411. Thus, punitive damages may be awarded in an unseaworthiness action when the plaintiff can prove “wanton, willful, or outrageous conduct.” As in maintenance and cure actions, attorney’s fees may be awarded when the shipowner acts “in bad faith, callously, or unreasonably.” Flores, 47 F.3d at 1127.” Wolf v. McCulley Marine Services, Inc., No. 8:10-cv-2725-T-30TGW, 2012 WL 4077240 (M.D. Fla. Sept. 17, 2012).
These opinions, and others like them, prefer a reading of Townsend that expands potential remedies for injured seaman beyond the Supreme Court’s primary finding that punitive damages are available in maintenance and cure claims. The argument in favor of expanding remedies appears to be that punitive or non-pecuniary damages were available to seaman prior to the Jones Act’s enactment under general maritime law, and the Jones Act did not explicitly limit the availability of these non-pecuniary damages for unseaworthiness claims. Whether, prior to the Jones Act, punitive or non-pecuniary damages were an available remedy for the specific cause of action of unseaworthiness under general maritime law was not taken into consideration, or, was generally dismissed as moot due to Townsend’s statement regarding the general availability of these remedies. These courts’ decisions currently remain good law in their districts/circuits, allowing plaintiffs in these parts of the country remedies unavailable to others.
Some courts, even prior to the Fifth Circuit’s McBride decision, applied a more narrow view of Townsend. These courts cite to the Supreme Court’s Miles v. Apex Marine Corp. decision – that non-pecuniary damages were not an available remedy in a wrongful death action of a Jones Act seaman under general maritime law – as barring all other non-pecuniary or punitive damage claims in general maritime causes of action. The rationale of this limitation is as follows: in reaching its conclusions, the Townsend Court added that the reasoning of Miles remained “sound;” thus, Townsend did not overrule Miles, Townsend applies only to maintenance and cure claims, and non-pecuniary or punitive damages remain unavailable in non-maintenance and cure general maritime law claims, including unseaworthiness. In these opinions, Miles remains the ultimate authority on whether punitive damages are available in a general maritime cause of action and Townsend is limited to its primary conclusion regarding maintenance and cure. The two cases can be used congruently wherein Townsend does not contradict Miles, it merely made a determination regarding a wholly separate and independent maritime claim.
The answer to the topic question of whether Townsend opened the door for a punitive damages remedy for unseaworthiness claims depends entirely on what part of the country the claim lies in. However, the Fifth Circuit recently provided a definitive answer for claims within its constituency.
2. McBride’s limitation on Townsend-motivated unseaworthiness claims.
McBride v. Estis Well Service has been fully analyzed in other publications, however, its treatment of Townsend, and how Miles and Townsend should be read together regarding available remedies is important. The en banc McBride court was tasked with determining whether a seaman’s estate could pursue a remedy of punitive damages under the Jones Act or a general maritime claim of unseaworthiness. The court agreed with the Miles Court’s deduction that: 1) maritime law is subject to regulation by Congress; 2) Congress intended to insert FELA’s limitation on available remedies to pecuniary damages into the Jones Act; 3) the Court would not expand the remedies available in a judicially-created cause of action in which liability is without fault (unseaworthiness) to include non-pecuniary damages where the remedy available in a Congressionally-created, fault-based cause of action (Jones Act negligence) is limited to pecuniary damages only; 4) the only damages available in a wrongful death of a seaman action are pecuniary losses, whether under the Death on the High Seas Act, the Jones Act, or the general maritime law. McBride then stated that although Miles was a wrongful death action, its available remedy limitations apply to injury cases as well. Currently, in Fifth Circuit personal injury and death cases, Miles’s refusal to expand the available remedies for unseaworthiness or a general maritime law wrongful death action beyond Congress’s sanctioned Jones Act remedy of pecuniary losses controls. Essentially, if a Jones Act plaintiff cannot receive punitive damages, general maritime law plaintiffs cannot either.
McBride concluded that Townsend distinguished its facts from Miles and reaffirmed that Miles remains good law. According to Townsend, a claim for maintenance and cure is separate and independent from a claim for negligence or unseaworthiness. As claims for negligence and unseaworthiness are intertwined in their Jones Act remedy-limitation, maintenance and cure claims have never been touched by Congress and have always (i.e. before the Jones Act) been left to courts to determine available remedies. McBride summarily limited Townsend to its primary conclusion regarding maintenance and cure claims and refused to use Townsend as a vehicle to extend or modify Miles.
McBride has been appealed to the Supreme Court, and hopefully the Court will hear the case as this is a very important issue in maritime law. Until that time, however, district courts within the Fifth Circuit are constrained by McBride’s limitation based on Townsend that punitive damages are available only in maintenance and cure claims, but courts elsewhere in the country are free to allow such damages for unseaworthiness.
3. Application of Townsend’s available remedy to maintenance and cure claims.
In determining whether a maintenance and cure claim is eligible for the Townsend punitive damage remedy, courts look to whether the failure to pay a maintenance and cure claim was reasonable, or if the failure was unreasonable, was it willful and wanton. In Cambell v. Offshore Lifeboats, LLC, a vessel cook was allegedly injured in a dock allision; he was transported to defendant’s physician who diagnosed him with a back contusion and released him to full duty, plus he was offered additional treatment if he wanted it. The cook never returned to work, instead choosing to hire an attorney and threaten defendant with punitive damages unless maintenance and cure was paid. The cook did not provide any medical records with his demand. Upon this threat, the company began its investigation into whether maintenance and cure was owed, and how much. Ten business days after its investigation started, the company began paying maintenance and cure at $35 a day and compensated the cook from the day after the accident allegedly occurred. Nonetheless, the cook filed suit claiming, among other things, punitive damages for the company’s alleged disregard of maintenance and cure.
First, the court stated that before recovering maintenance and cure, the seaman bears the burden of establishing: (1) his engagement as a seaman; (2) that his illness or injury occurred, was aggravated, or manifested itself while in the ship’s service; (3) the wages to which he may be entitled; and, (4) the expenditures or liability incurred for medicine, nursing care, board and lodging. The court also stated that upon receiving a maintenance and cure demand, the ship-owner is not required to begin immediate payments and is entitled to investigate the legitimacy of the claim. A failure to pay maintenance and cure is reasonable if a diligent investigation indicates that the seaman’s claim is not legitimate or if the seaman does not submit medical reports to document his claim.
The court ultimately found that punitive damages were not available to the cook because there was no evidence of egregious, willful, or wanton conduct on the part of the ship-owner. Upon receiving the demand from the cook’s attorney, the ship-owner immediately commenced an investigation into the cook’s status as a Jones Act seaman and what the appropriate rate of compensation would be without any proof from the cook of his incurred food, lodging, or medical expenses. It was not the ship-owner’s obligation to inquire about the cook’s actual costs and expenses; it is the injured party’s duty to provide such. The court stated that a 10-day investigation was reasonable and that $35 a day was appropriate; Townsend’s remedy was not applicable in this case.
On the other end of the spectrum, Jefferson v. Baywater Drilling, LLC provides an example of when Townsend becomes applicable to an egregious handling of a maintenance and cure claim. The plaintiff broke out in blisters over much of his body while working aboard a vessel; his supervisors ordered that he leave the vessel without giving plaintiff a mode of transportation home; defendant’s crew boat dropped plaintiff off on shore, leaving plaintiff to fend for himself while in severe pain from his skin condition; two wireline workers from the vessel (not affiliated with the defendant) drove plaintiff to a spot where plaintiff could meet a friend to take him home; plaintiff was left alone and in pain until his friend arrived and could call an ambulance. Plaintiff was taken to a hospital, and was not fully healed from his condition for six months.
Once informed that plaintiff was receiving treatment, defendant sent a claims adjuster to determine plaintiff’s condition and the circumstances surrounding his injury. The adjuster did not interview the doctor, review medical records, or make any medical determinations (he was not tasked with doing any of these things). After asking non-medical questions regarding plaintiff’s criminal record and employment history, the adjuster was asked to leave; he did not obtain any of plaintiff’s medical records. Defendant’s human resources manager performed the remainder of the investigation into plaintiff’s claim: he discussed the adjuster’s hospital visit, talked to plaintiff once on the telephone, spoke with employees that worked with plaintiff on the vessel, and reviewed the incident reports completed in connection with plaintiff’s claim. With only that information, and without any further investigation into plaintiff or his medical records and without requesting any medical tests, the defendant concluded that plaintiff’s injuries were caused by a pre-existing condition and denied maintenance and cure payments.
The court found that regardless of whether plaintiff had a pre-existing ailment, his skin condition was exacerbated while he was performing his duties on the vessel; he was unlawfully denied maintenance (daily per diem for food, lodging, etc.) and cure (medical expenses). The court employed an escalating scale of liability for analyzing a potential unlawful denial of maintenance and cure:
“In addition to a maintenance and cure payment, Plaintiff also seeks compensatory damages, punitive damages, and attorneys’ fees. The damages recoverable for the denial of maintenance and cure fall on an “escalating scale of liability.” A shipowner is entitled to investigate and require corroboration of a claim for maintenance and cure before commencing payment. “If, after investigating, the shipowner unreasonably rejects the claim,” the owner is liable for compensatory damages. If the denial was not only unreasonable but “callous and recalcitrant, arbitrary and capricious, or willful, callous and persistent,” the shipowner is also liable for punitive damages and attorneys’ fees.” (internal citations omitted.)
Further, “laxness in investigating a claim that would have been found to be meritorious” will be viewed as arbitrary and capricious conduct on behalf of the ship-owner.
Ultimately, the court found that defendant’s investigation was impermissibly lax and plaintiff should be awarded punitive damages and attorneys’ fees. Recall that defendant concluded that plaintiff’s condition pre-existed his time on the vessel, yet defendant did not investigate or consult any medical records or conduct any tests that would have proven this conclusion true; defendant made a medical determination without medical evidence. The court decided that plaintiff was owed compensatory damages for unreasonably rejecting the claim as well as punitive damages for the impermissibly lax investigation and “to ensure the next worker who falls ill aboard one of Defendant’s vessels receives the treatment he deserves, as a seaman and as a human being.” Plaintiff was awarded the same amount in punitive damages as compensatory damages because, “as a general rule in maritime cases, punitive damages should not exceed the amount of compensatory relief awarded.”
These two cases illustrate the recent analysis that Fifth Circuit lower courts have undertaken in applying Townsend’s punitive damage remedy. These decisions are instructive to any district that applies a McBride-type reading of Townsend and limits it to its opinions regarding punitive damages for maintenance and cure claims.
4. Townsend going forward.
As seen above, some district courts broadly recite Townsend to provide for punitive damages in all general maritime causes of action that pre-date the Jones Act. The Fifth Circuit, however, in McBride has refused to allow such damages for unseaworthiness. This dichotomy in available remedies leads not so much to forum selection, but more forum lottery; a Jones Act plaintiffs’ claim in California or Florida carries much more exposure than a claim in Texas or Louisiana. The onus is on the Supreme Court to correct this disparity and bring uniformity to this area of maritime law.