U.S. – Are Punitive Damages in Maintenance and Cure Cases to be Capped?
Published: June 01, 2010
Following the decision in Townsend v Atlantic Sounding (see September 2009 website article U.S. - Punitive Damages Maintenance and Cure Cases) there has now been another finding of entitlement to punitive damages against a shipowner defendant for failure to provide adequate maintenance and cure to a crewmember. The case in question was that of Clausen v Icicle Seafoods (November 2009, 9th Circuit) in which a jury awarded the plaintiff US$1.3 M in punitive damages.
Icicle appealed the punitive damages award to the Judge on the basis that the ratio between compensatory and punitive damages exceeded 1:1. Their argument was that the punitive damages award should not exceed a 1:1 ratio, as had been applied in Exxon Shipping v Baker. In this case, adding together unpaid maintenance and cure and attorney’s fees award, the amount of compensatory damages was $465,525. The resulting ratio of compensatory to punitive damages was therefore 1:2.79.
In the Exxon case the Supreme Court stated that a cap of 1:1 would be imposed in maritime cases which did not involve "exceptional blameworthiness" or "behaviour driven primarily by desire for gain", which were "profitless for the tortfeasor" and which were the result of reckless rather than intentional behaviour. Moreover, the Supreme Court stated that in cases with substantial damages (US$507,000 in the Exxon case) a 1:1 ratio can reach the outer limit of due process. Thus in Exxon a 1:1 ratio was applied to those particular facts. It did not establish a 1:1 limit for all maritime cases.
The Court in Clausen disagreed that a 1:1 ratio cap need be applied to this case. The Supreme Court in Townsend had not applied a recovery cap (as it had in the Exxon case) and it left that issue open.
The 1:1 cap applied in the Exxon case has been projected as the appropriate cap in non-maritime cases where the compensatory award, as it was in Exxon, is particularly large. The implication is that when compensatory damages are substantial a lower ratio of compensatory to punitive damages would be required to reach the outermost limit of the due process guarantee.
It appears that when assessing the level of any punitive damages award which is handed down one of the most important indicators of reasonableness is the degree of reprehensibility of the defendant's conduct. In the past the Supreme Court has provided clear instructions for trial courts to determine whether a particular punitive damages award is appropriate. In State Farm Mut. Auto. Ins. Co. v Campbell the Court identified markers of reprehensibility as follows:
(1) Indifference to or reckless disregard for the health of others
(2) The target of the conduct was financially vulnerable
(3) The conduct involved repeated actions and was not isolated
(4) The harm was a result of intentional malice, trickery or deceit and was not an accident
Furthermore, deliberate false statements, acts of affirmative misconduct and concealment of evidence of improper motive demonstrates the most reprehensible conduct.
In Clausen the Supreme Court of Washington ruled that the defendant’s conduct was at the “zenith of reprehensibility” and that their failure to provide maintenance and cure was “intentional”, “repeated”, “malicious” and was “motivated by profit”.
It appears that, when considering the difference between the compensatory damages award and the punitive damages award a court will look at whether there is any drastic disparity between the actual harm and the potential harm and the punitive award. Whilst a 1:1 ratio might be considered, there are many other factors which will influence a Court on the issue of the reasonableness of an award. However, it must be remembered that this is just one decision on the subject and it is likely that conflicting verdicts will be seen in the future. This recent case, though, supplies some useful guidance on the issues to consider when dealing with maintenance and cure claims.
