Punitive Damages in U. S. Maritime Law - The Current State of Play
Steamship Mutual
Published: December 01, 2012
Even “bad guys” are entitled to know what their conduct will cost
Although the published cases awarding punitive damages in the American maritime jurisprudence are few in number, the doctrine is, nevertheless, well ensconced in U. S. maritime law. As a result, the law forces maritime defendants to appraise the likelihood and the quantum of such awards when looking at their potential liabilities.
The U.S. Supreme Court’s decision in the “Exxon Valdez” continued our courts’ long standing recognition of punitive damages in the maritime context, set limits on the quantum of such awards limited to the circumstances of that case, but did not complete that Court’s exploration of the appropriate constraints on such awards in broader contexts.
The Valdez decision first confirmed the availability of punitive damages in the maritime context; secondly, accepted that a mechanical ratio between compensatory and punitive damages accomplished the stated purpose of punitive damages - punishment for past conduct and the deterrence of future similar bad acts. But then in establishing the judicially acceptable ratio, the court carefully limited its pronouncement to the facts at hand.
Herein lies the court’s unfinished business. Under the facts of Valdez, the court held that where the compensatory damages were substantial, the conduct, while reckless, was not intentional, and did not profit the wrongdoer, a ratio of about 1 to 1 was sufficient to accomplish the stated purpose of the award. The decision thus left for another day determination of the appropriate ratio where the compensatory damages were minor, the conduct intentional, and the wrongdoer actually profited monetarily from its conduct. In Clausen v Icicle Seafoods Inc., the defendant has asked for Supreme Court review in a matter raising these very issues. (The Court declined to hear the matter in an order dated October 1, 2012.)
The issue is vitally significant because, in Valdez, the Supreme Court also stated a party should be able to “predict” with some degree of certainty the monetary consequences of its conduct. In fact, such “predictability” has risen to the level of a federal constitutional requirement.
But because the Supreme Court has thus far only given limited guidance defining acceptable parameters for the required “predictability” in the maritime context, defendants in the shipping world who face punitive damage claims must of necessity look elsewhere for guidance in assessing the quantum of exposure to such claims. This article will identify some rule of potential guide posts pending further pronouncements from our Supreme Court.
The full text of this article, by Alfred J.Kuffler, Partner, Montgomery McCracken Walker & Rhoads LLP, Philadelphia and New York, can be viewed and downloaded below.
