Marine & Energy News Alert: U.S. Fifth Circuit Court of Appeals Hears Argument on the Recoverability of Punitive Damages in Unseaworthiness Cases

May 20, 2014

On May 14, 2014, the United States Court of Appeals for the Fifth Circuit sitting en banc heard oral argument on the issue of whether seamen can recover punitive damages for their vessel owner/employer’s willful and wanton breach of its general maritime law duty to provide a seaworthy vessel. While cases in United States Courts of Appeals are traditionally decided by a three-judge panel, a majority of the active circuit judges could and did decide to rehear this case en banc (meaning by the entire Fifth Circuit bench, rather than by a panel selected from the Fifth Circuit) given the significance of this U.S. general maritime law issue.

The case came to the Fifth Circuit on rehearing application from an October 2013 decision by Judges Stewart, Barksdale and Higginson allowing seamen to recover punitive damages for their vessel owner/employer’s willful and wanton breach of its general maritime law duty to provide a seaworthy vessel.

At the District Court, plaintiffs/rig crewmembers filed suit against their employer stating causes of action for general maritime law unseaworthiness and negligence under the Jones Act. The rig crewmembers sought compensatory as well as “punitive and/or exemplary” damages arising out of an incident that occurred when a derrick pipe shifted on a drilling rig causing the rig to topple over. The rig owner/employer moved to dismiss the claims for punitive damages by arguing that punitive damages were not an available remedy for unseaworthiness or Jones Act negligence. The Magistrate Judge agreed and dismissed all claims for punitive damages.

The rig crewmembers appealed the judgment and contended that prior federal case law mandates that federal courts, in exercising their maritime lawmaking authority, cannot authorize a more expansive remedy for a general maritime cause of action such as unseaworthiness than exists for a parallel statutory maritime cause of action (Jones Act), if, at the time the statutory cause of action or remedy was enacted, the parallel cause of action or remedy did not exist under general maritime law. In other words, the rig crewmembers contended that punitive damages remain available as a remedy for the general maritime law cause of action for unseaworthiness because, like maintenance and cure, unseaworthiness was established as a cause of action before Congress passed the Jones Act. The Fifth Circuit relied on the rule established by the Supreme Court in Atlantic Sounding Co. Inc. v. Townsend, 557 U.S. 404, 424 (2009), (which restored the availability of punitive damages for maintenance and cure claims under general maritime law): if a general maritime law cause of action (unseaworthiness) and remedy (punitive damages) were established before the passage of the Jones Act, and the Jones Act did not address that cause of action or remedy, then that remedy remains available under that cause of action unless and until Congress intercedes. The Court concluded that punitive damages remain available to seamen as a remedy for the general maritime law claims of unseaworthiness.

At the en banc hearing, Prof. David W. Robertson with the University of Texas School of Law, who has been retained by the Plaintiff’s Steering Committee in the ongoing BP Macondo Oil Spill litigation and who has written extensively for the promotion of punitive damages in that litigation and in general, argued that the Jones Act was not intended to preclude preexisting remedies such as punitive damages for unseaworthiness caused by the willful and wanton conduct of the vessel owner. The rig owner’s counsel argued that previous U.S. Supreme Court jurisprudence, namely, Miles v. Apex Marine Corp., 498 U.S. 19 (1990) specifically limited the types of remedies that are recoverable to only pecuniary damages under the Jones Act and precluded non-pecuniary damages such as punitive damages; thus, to promote uniformity in the general maritime law, punitive damages should also not be recoverable in unseaworthiness cases.

This particular issue is extremely significant to vessel/drilling rig operators in the marine, offshore, and energy industries because if allowed to stand, the prior Fifth Circuit decision will effectively expand vessel owners’/employers’ exposure where the unseaworthy condition allegedly results from vessel owners’ willful and wanton conduct. In addition, punitive damages are typically excluded from insurance coverage, thereby posing a significant litigation risk to the viability of marine and energy companies.

The case is Haleigh Janee McBride, et al v. Estis Well Service, L.L.C., No. 12-30714 En Banc.

A link to an audio recording of the oral argument is attached at the U.S. Court of Appeals for the Fifth Circuit website.