December 7, 1995 United States Court of Appeals For the First Circuit
No. 95-1462
CEH, INC.,
Plaintiff, Appellee,
v.
F/V SEAFARER (ON 675048), ET AL.,
Defendants, Appellants.
ERRATA SHEET ERRATA SHEET
The opinion of this Court issued on November 28, 1995 is corrected as follows:
On page 11, line 15 - insert the following text after "Moragne, 398 U.S. at 401-02": "(quoting The Lottawanna, 88 U.S.
(21 Wall.) 558, 575 (1875))".
On page 12, line 10 - change "and" to "[and]".
On page 13, last line - insert the following text after "(5th Cir. 1995)": "(en banc)".
On page 14 - delete footnote 9.
On page 22, first paragraph, line 11 - change "[Lake
Shore.]" to "Lake Shore . . . ."
United States Court of Appeals For the First Circuit
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF RHODE ISLAND
[Hon. Ronald R. Lagueux, U.S. District Judge]
Before
Boudin, Circuit Judge,
Coffin and Aldrich, Senior Circuit Judges.
Leonard W. Langer with whom Marshall J. Tinkle was on brief
for appellants. Mark A. McSally for appellee.
November 28, 1995
COFFIN, Senior Circuit Judge. Defendant-appellants, the F/V
SEAFARER, a fishing trawler, and Michael Doyle and Charles Niles,
its owner and captain respectively, appeal the district court's
decision after a bench trial finding them liable for the
destruction of appellee's lobstering gear and imposing
compensatory and punitive damages. CEH, Inc. v. F/V Seafarer,
880 F. Supp. 940 (D.R.I. 1995). Defendants challenge, inter
alia, the sufficiency of the evidence, the availability of
punitive damages as a matter of law, and the district court's
adoption of the Restatement (Second) of Torts 909 as a basis
for vicarious liability. We affirm.
I. BACKGROUND I. BACKGROUND
The facts, as the court found them, are as follows.
Plaintiff-appellee CEH, Inc. ("CEH") owns the F/V COURTNEY
ELIZABETH, an off-shore lobstering vessel based in Point Judith,
Rhode Island. During May and June of 1992, CEH owned 4,200
lobster traps, 2,857 of which were grouped off shore in
arrangements referred to as "lobster trawls." A lobster trawl
consists of 40 to 55 traps connected to each other by a ground
line. Each end of the ground line is attached to a blivet, a
cement block that keeps the trawl in place. A rope extends from
the top of each blivet to a high flier, a floatable device that
consists of ring floats, an aluminum pole and a flag, and which
is often marked with radar reflectors. The high fliers mark the
location of the lobster traps below.
-3-
The COURTNEY ELIZABETH regularly tended to these lobster
traps, but between May 13, 1992 and June 7, 1992, she was ashore
undergoing repairs. From May 19 to May 23, another vessel hauled
and reset the traps. Upon returning to duty on June 7, the crew
of the COURTNEY ELIZABETH discovered that 1,093 traps and related
equipment were missing. Subsequently, CEH brought this action
against defendants, alleging that during two trips between May 23
and June 7, the SEAFARER dragged through CEH's trawls and
destroyed 671 traps.1
The SEAFARER is a trawler that drags for fish by way of a
net extending beyond its stern. During May and June, 1992, the
SEAFARER was dragging for monkfish, a fish found near the ocean
floor, often in close proximity to high concentrations of
lobster. The shared migrations of these species typically cause
an overlap in the operating areas of draggers and lobstermen,
causing tensions between the two groups. The close quarters
result in inevitable gear conflicts, with trawlers often hauling
up lobster traps unintentionally. Trawlers generally dispose of
damaged, destroyed or abandoned traps ("ghost gear"), but
customarily return working traps ("fixed gear") to their owner.
During her first trip, May 23 to May 24, the SEAFARER
operated under the direction of Captain Roger Smith, with Charles
Niles serving as mate. On May 24, the captain of another
lobstering vessel observed the SEAFARER in the area of several of
1 CEH initially accused defendants of destroying all 1,093 traps, but amended this figure upon discovering that the SEAFARER did not tow in certain regions.
-4-
the COURTNEY ELIZABETH's trawls, and, through his wife, informed
Timothy Handrigan, the vice-president of CEH, that his lobster
trawls were at risk. The next day, Handrigan called Niles in
order to advise Niles of the location of his gear. Niles
responded that he did not need this information.
Niles captained the second trip of the SEAFARER, from May 28
through June 7, 1992. Also on board were John McKay (mate), and
deckhands Phien Hoang, Niles Pearsall and Richard Baker. Except
for Baker, who was Captain Niles' nephew, all crewmembers
regularly worked on the SEAFARER. On May 29, Captain Robert
Buffinton of the F/V EDNA MAE observed the SEAFARER near fixed
gear of the COURTNEY ELIZABETH. Upon approaching the SEAFARER,
he observed 20 unidentifiable lobster traps on board its deck.
Over the next few days, the SEAFARER hauled up and discarded
approximately 200 traps, about 140 of which constituted fixed
gear. In addition, the crew cut loose trawl lines that became
entangled in the nets of the vessel. In total, the SEAFARER
destroyed 134 of CEH's traps.
CEH commenced this action against the ship's owner, Doyle,
and the two captains, Niles and Smith, in personam, and the
SEAFARER in rem, pursuant to the district court's maritime
jurisdiction. See 28 U.S.C. 1333; Executive Jet Aviation, Inc.
v. City of Cleveland, 409 U.S. 249 (1972). CEH sought
compensatory damages for negligence, and punitive damages for the
willful destruction of its property. Following a bench trial,
the court absolved Captain Smith of all liability, but found
-5-
Niles and the vessel at fault for destroying plaintiff's gear.
The court further found that Niles acted in reckless disregard of
CEH's property rights by towing through its fixed gear, and that
he acted intentionally and maliciously in ordering his crew to
cut trawl lines. The court awarded CEH compensatory damages in
the amount of $6,759.81 jointly and severally against all
parties, punitive damages against Captain Niles in the amount of
$10,000, and punitive damages against Michael Doyle in the amount
of $50,000.
Defendants attack the legal and factual bases of the court's
award. We address these issues seriatim.
II. SUFFICIENCY OF THE EVIDENCE II. SUFFICIENCY OF THE EVIDENCE
To establish liability for negligence under general maritime
law, CEH needed to prove by a preponderance of the evidence that
the SEAFARER destroyed CEH's traps, and that such destruction
could have been reasonably avoided. 1st Bank Southeast of
Kenosha, Wis. v. M/V Kalidas, 670 F. Supp. 1421, 1431 (E.D. Wis.
1987); see Burgess v. M/V Tamano, 564 F.2d 964, 977 (1st Cir.
1977).
Defendants' core argument is that the evidence fails to
demonstrate that the SEAFARER destroyed any of CEH's traps. We
review this factual issue in accordance with the "clearly
erroneous" standard of Fed. R. Civ. P. 52(a). DiMillo v.
Sheepscot Pilots, Inc., 870 F.2d 746, 749 (1st Cir. 1989).
Unless, after examining the record and according due deference to
the trial court, we form a "strong unyielding belief that a
-6-
mistake has been made," we will adopt the court's findings. Juno
SRL v. S/V Endeavour, 58 F.3d 1, 4 (1st Cir. 1995).
The district court determined that the SEAFARER destroyed
134 of CEH's traps and related gear through the following
specific findings: the SEAFARER dragged through Trawl 114 (50
wire traps) on May 31, and Trawls 16 (50 wire traps) and 60 (34
A-frame wooden pots) on June 1, 1992. In arriving at these
findings, the district court relied on a wealth of circumstantial
evidence, all of which is set forth in the district court's
opinion, and need not be repeated here in entirety. After
scrutinizing this evidence, we conclude that the inferences drawn
by the district court were plausible. As such, we affirm the
court's findings. Cumpiano v. Banco Santander Puerto Rico, 902
F.2d 148, 152 (1st Cir. 1990) (quoting Anderson v. City of
Bessemer City, 470 U.S. 564, 573-74 (1985) ("If the district
court's account of the evidence is plausible in light of the
record reviewed in its entirety, the court of appeals may not
reverse it even though convinced that had it had been sitting as
the trier of fact, it would have weighed the evidence
differently.")).
In light of the factual complexity of this case, we will
discuss in some detail the key evidence that supports the court's
findings. The court relied primarily on the testimony of crewman
Baker, and on a comparison of the logbooks of the SEAFARER and
the COURTNEY ELIZABETH.
-7-
Baker testified that during the trip: 1) the SEAFARER often
operated within 50 to 100 yards of high fliers; 2) a high flier
belonging to CEH was towed behind the boat; 3) about 200 traps
were brought on deck of the SEAFARER and dumped overboard; 4)
approximately 140 of these traps were reusable, and roughly 115
of these belonged to the COURTNEY ELIZABETH; and 5) Baker and
other crewmembers regularly cut trawl lines that hung up on the
doors of the net. Baker also asserted that after the trip,
Charles Niles phoned him in an effort to induce Baker to alter
his recollection of the trip.
Baker's testimony, taken alone, permits a reasonable
inference that the SEAFARER destroyed a number of CEH's traps.
In response, defendants argue that each of Baker's assertions is
in conflict with the testimony of the other crewmembers and
Captain Niles. The district court, however, was within its
prerogative to find Baker "wholly credible" while disbelieving
the other witnesses. See Rivera-Gomez v. de Castro, 900 F.2d 1,
4 (1st Cir. 1990).
To pinpoint the dates on which specific trawls were
destroyed, the court used the log books of both vessels to plot
the course of the SEAFARER against the position of the COURTNEY
ELIZABETH's lobster trawls. The court determined that the
SEAFARER's path intersected the groundlines of the three trawls
on May 31 and June 1.
Defendants contend that inherent inaccuracies in the Loran
system and rounding errors in the log books render a comparison
-8-
of the logs misleading. Their expert, Thomas Bushy, testified
that the cumulative effect of all possible errors could cause two
separately recorded identical readings to be up to 1.6 nautical
miles apart. Nevertheless, on cross examination, Bushy admitted
that this figure was the absolute worst case scenario; that, in
fact, he did not know whether either vessel's system contained
correction factors that would have reduced possible error; and
that the locations of the tows and the trawls could have been
much closer together. Upon examining the whole of Bushy's
testimony, we find no error in the court's plotting of Loran
coordinates to reach its specific findings.
Baker's testimony, in conjunction with the court's analysis
of the ship logs, provides sufficient evidence to support the
court's conclusion that the SEAFARER destroyed Trawls 16, 60 and
114 on May 31 and June 1, 1992. Niles' failure to take any steps
to avoid CEH's traps, as demonstrated by his disregard for the
presence of high fliers and his rejection of the information
offered by Handrigan, establish, at the very least, negligence on
his part.
Because the facts set forth above sufficiently support the
court's disposition, we need not address defendants'
miscellaneous objections to other pieces of circumstantial
evidence. In any event, we find them unpersuasive. We uphold
the court's finding of negligence and its concomitant award of
compensatory damages.
III. PUNITIVE DAMAGES III. PUNITIVE DAMAGES
-9-
The defendants raise four challenges to the award of
punitive damages: 1) both Niles and Doyle claim that punitive
damages are unavailable as a matter of law in a maritime case; 2)
both claim that punitive damages are unjustified by the
underlying conduct in this case; 3) Doyle claims that such
damages may not be awarded against him through vicarious
liability; and 4) both claim that the awards imposed against them
are excessive.
A. Punitive Damages Under General Maritime Law A. Punitive Damages Under General Maritime Law
We review de novo the district court's determination that
punitive damages are recoverable pursuant to plaintiff's general
maritime claims. See In re Extradition of Howard, 996 F.2d 1320,
1327 (1st Cir. 1993).
Although rarely imposed, punitive damages have long been
recognized as an available remedy in general maritime actions
where defendant's intentional or wanton and reckless conduct
amounted to a conscious disregard of the rights of others. See
The Amiable Nancy, 16 U.S. (3 Wheat.) 546, 558 (1818) (criminal
trespass); Muratore v. M/S Scotia Prince, 845 F.2d 347, 354 (1st
Cir. 1988) (intentional infliction of emotional distress);
Protectus Alpha Navigation Co. v. North Pacific Grain Growers,
767 F.2d 1379, 1385 (9th Cir. 1985) (destruction of property);
Robinson v. Pocahontas, Inc., 477 F.2d 1048, 1051-52 (1st Cir.
1973) (willful failure to pay maintenance and cure); In re Marine
Sulphur Queen, 460 F.2d 89, 105 (2d Cir. 1972) (wrongful death);
Pino v. Protection Maritime Ins. Co., 490 F.Supp. 277, 281 (D.
-10-
Mass. 1980) (tortious interference with employment rights);
Dredge General, 1944 A.M.C. 948, 948 (S.D. Fla. 1944) (property
damage); The Ludlow, 280 F. 162, 163 (N.D. Fla. 1922) (malicious
and unlawful arrest); The Seven Brothers, 170 F. 126, 127 (D.R.I.
1909) (property damage); Gallagher v. The Yankee, 9 F. Cas. 1091,
1093 (N.D. Cal. 1859) (No. 5,196) (unlawful deportation), aff'd,
30 F. Cas. 781 (C.C.N.D. Cal. 1859) (No. 18,124); Ralston v. The
States Rights, 20 F. Cas. 201, 209-10 (E.D. Pa. 1836) (No.
11,540) (collision).
Nevertheless, in the wake of Miles v. Apex Marine Corp., 498
U.S. 19 (1990), courts have been increasingly hesitant to allow
punitive damages in certain general maritime actions involving
personal injury or death. In Miles, the Court held, inter alia,
that damages recoverable in an action for the wrongful death of a
seaman do not include loss of society. Id. at 37. In reaching
this conclusion, the Court enunciated principles of uniformity
relevant to wrongful death actions, and more broadly, to maritime
tort law, which have moved subsequent courts to limit recovery in
other similar contexts. Defendants ask us to extend Miles to bar
recovery of punitive damages in all general maritime cases.
However, as described more fully below, we believe Miles is
inapposite to plaintiff's maritime claim.
In Miles, the mother of a deceased seaman brought a wrongful
death action sounding both in negligence under the Jones Act, and
unseaworthiness under the general maritime law. In denying
recovery for loss of society, a form of nonpecuniary relief, the
-11-
Court ensured a uniform scheme of recovery regardless of whether
a wrongful death action was brought under the Death on High Seas
Act (DOHSA),2 the Jones Act3 or general maritime law.4 The
statutory actions provided only for pecuniary relief: the DOHSA
explicitly5 and the Jones Act implicitly, through its
incorporation of the Federal Employers' Liability Act (FELA),
which, prior to the enactment of the Jones Act, had been
construed to allow only pecuniary relief. Miles, 498 U.S. at 32
(citing Michigan Cent. R. Co. v. Vreeland, 227 U.S. 59, 69-71
(1913)). The Court extended this restriction to the
unseaworthiness claim, explaining that "[i]t would be
inconsistent with our place in the constitutional scheme were we
to sanction more expansive remedies in a judicially created cause
of action in which liability is without fault than Congress has
2 DOHSA, 46 U.S.C. 761, authorizes the personal representative of the decedent to bring an action "[w]henever the death of a person shall be caused by wrongful act, neglect, or default occurring on the high seas."
3 The Jones Act, 46 U.S.C. 688, provides that a seaman injured in the course of employment, or his representative in case of death, may "maintain an action for damages at law . . . and in such action all statutes of the United States modifying or extending the common-law right or remedy in cases of personal injury to railway employees shall apply."
4 In Moragne v. States Marine Lines, Inc. 398 U.S. 375, 409
(1970), the Court recognized a wrongful death action under general maritime law. Prior to Moragne, plaintiffs not
satisfying the requirements of DOHSA or the Jones Act had to rely on state wrongful death acts, which, if they existed, varied greatly in nature and scope.
5 Recovery under DOSHA is limited to "the pecuniary loss sustained by the persons for whose benefit the suit is brought." 46 U.S.C. 762.
-12-
allowed in cases of death resulting from negligence." Id. at
33.6
The Court's decision to "restore a uniform rule applicable
to all actions for the wrongful death of a seaman," id.,
logically followed the principle espoused in Moragne, 398 U.S. at
401-02 (quoting The Lottawanna, 88 U.S. (21 Wall.) 558, 575
(1875)), to promote "uniformity [that] not only will further the
concerns of both of the 1920 Acts but also will give effect to
the constitutionally based principle that federal admiralty law
should be 'a system of law coextensive with, and operating
uniformly in, the whole country.'" Though these principles of
uniformity defy precise limits, we think it clear that the
Supreme Court had in mind the need to defer to statutory
enactments addressing like issues. As the Court reasoned: "In
this era, an admiralty court should look primarily to these
legislative enactments for policy guidance. . . . [and] must be
vigilant not to overstep the well-considered boundaries imposed
by federal legislation." Miles, 498 U.S. at 27. Miles,
therefore, does not, as defendants contend, signify a call for
universal uniformity of maritime tort remedy, but rather
6 A shipowner's breach of the warranty of seaworthiness, a strict liability obligation, see Miles, 498 U.S. at 25, provided
a basis of liability under the general maritime law. Therefore, a plaintiff suing for the wrongful death of a seaman could bring a Jones Act claim, which required a showing of negligence, and/or a general maritime unseaworthiness claim, which required no showing of fault. Yet under the unseaworthiness claim, a plaintiff could anticipate, potentially, a much greater recovery than under the Jones Act.
-13-
emphasizes the importance of uniformity in the face of applicable
legislation.
The cases post-Miles reflect this focus on relevant
legislation. If the factual situation could support an action
under either DOHSA or the Jones Act, then nonpecuniary relief is
unavailable. See, e.g., Horsley v. Mobil Oil Corp., 15 F.3d 200,
203 (1st Cir. 1994) (punitive damages not recoverable in
unseaworthiness action for injured seaman); Miller v. American
President Lines, Ltd., 989 F.2d 1450, 1459 (6th Cir. 1993)
(punitive damages not available in unseaworthiness action for the
wrongful death of a seaman); Rollins v. Peterson Builders, Inc.,
761 F. Supp. 943, 950 (D.R.I. 1991) (same).
The import of this legislation in the context of personal
injury has led some courts to bar nonpecuniary relief in
circumstances addressed by the Jones Act, but involving non-Jones
Act plaintiffs and defendants. See, e.g., Wahlstrom v. Kawasaki
Heavy Industries, Ltd., 4 F.3d 1084, 1094 (2d Cir. 1993)
(concluding, based in large part on post-Miles authority, that
representatives of a deceased nonseaman could not recover
punitive damages under the general maritime law); Trahan v.
Texaco, Inc., 625 So.2d 295, 297 (La. App. 4th Cir. 1993)
(dismissing a general maritime claim for loss of consortium
brought by a seaman's spouse against nonemployer third-party
defendants); but see, e.g., Emery v. Rock Island Boatworks, 847
F. Supp. 114, 117-18 (C.D. Ill. 1994) (injured passenger's
husband could recover nonpecuniary damages because his claim not
-14-
cognizable under the Jones Act or DOHSA and, therefore, concerns
for uniformity do not exist); Sugden v. Puget Sound Tug & Barge
Co., 796 F. Supp. 455, 457 (W.D. Wash. 1992) (wife of deceased
seaman could recover nonpecuniary damages from non-employer
because husband was not a Jones Act seaman for purposes of the
suit).
Recently, the Fifth Circuit held that cure and maintenance
claims, often considered to lack a statutory counterpart, see
Anderson v. Texaco, Inc., 797 F. Supp. 531, 536 (E.D. La. 1992),
were, in fact, governed by Miles. Guevara v. Maritime Overseas
Corp., 59 F.3d 1496, 1512 (5th Cir. 1995) en banc; see also Glynn
v. Roy Al Boat Management Corp., 57 F.3d 1495 (9th Cir. 1995).7
While at first glance, Guevara may seem to provide comfort to
defendants, a closer reading supports our belief that Miles
simply is irrelevant here.
Guevara followed the approach set forth in Miles. First,
the court determined whether the factual setting of the case was
covered by a statute like the Jones Act or DOHSA. 59 F.3d at
1506. Then, upon finding a statutory/general maritime law
overlap,8 the court invoked the "Miles damages uniformity
7 Glynn and Guevara reached identical results through
different means. Though concluding that limiting recovery in cure and maintenance claims was consistent with Miles, the Ninth
Circuit relied primarily on its conclusion that there was no legal support for punitive damages in such cases. 57 F.3d at 1504-05.
8 The Fifth Circuit delineated two types of maintenance and cure actions: one based in tort involving the deterioration of a seaman's health due to failure to provide maintenance and cure; and one based in contract, not requiring personal injury, but
-15-
principle" and excluded punitive damages. Id. at 1512-13. As
the court reasoned, "[i]t makes little sense to create a
fragmentation of admiralty law by allowing punitive damages in
one class of maintenance and cure cases" while disallowing them
in another. Id. at 1513.
Guevara does not assist defendants in any way. Rather, it
merely illustrates, as do the other post-Miles cases cited above,
that Miles may be applicable in those areas of maritime law
where, at the very least, there is an overlap between statutory
and decisional law. In the instant case, however, there is no
legislation whatever that touches upon circumstances involving
the reckless or willful destruction of property. Quite simply,
Congress has not spoken, and we consequently see no basis under
Miles for barring nonpecuniary relief here.
Defendants' contention that it would be peculiar to provide
plaintiffs greater relief for property damage than for personal
injury has some force. The concern expressed in Miles, however,
was not with respect to an award of nonpecuniary damages in
maritime cases in general, but with inconsistency with
Congressional pronouncement. Miles does not mandate a uniform
result for every maritime action and we are hesitant to ascribe
to the Court a holding that goes well beyond any issue discussed
claiming reimbursement for the personal outlay of funds. Even though Guevara brought the latter type of claim, because the tort-like action "overlaps with the personal injury coverage of the Jones Act," id. at 1511, the court concluded that the
legislative scheme affected his recovery.
-16-
there. See United States v. London, 66 F.3d 1227, 1241 (1st Cir.
1995).
In sum, in the absence of any relevant legislation, we think
that the uniformity principle enunciated in Miles is
inapplicable. Therefore, plaintiffs are entitled to forms of
relief traditionally available under the general maritime law,
including punitive damages. Accordingly, we affirm the district
court's determination that punitive damages are recoverable under
plaintiff's general maritime claim.
B. Niles' Conduct B. Niles' Conduct
Having held that punitive damages are available, we now
address defendants' claim that the district court erred in
finding that Niles' conduct warranted them.
The award of punitive damages is within the sound discretion
of the district court. Muratore, 845 F.2d at 354. We review the
factual findings in support of the award for clear error. Bergen
v. F/V St. Patrick, 816 F.2d 1345, 1349 (9th Cir. 1987). And we
reiterate that the only circumstances that support an award of
punitive damages are "where defendant's actions were intentional,
deliberate or so wanton and reckless as to demonstrate a
conscious disregard of the rights of others." Muratore, 845 F.2d
at 354.
The court awarded punitive damages upon finding that Niles
acted in reckless disregard for the property rights of CEH in
towing through its trawls, and acted intentionally and
maliciously in destroying trawl lines and traps. In reaching
-17-
these conclusions, the district court relied on evidence
pertaining to the time before, during and after the conduct in
question.
The testimony indicated that prior to May 1992, apart from
the general conflict between lobstermen and trawlers, Niles and
the Handrigans had been involved in a dispute over a generator.
As a result of this row, Niles, as a matter of custom, refused to
return any gear to the COURTNEY ELIZABETH regardless of its
condition. Niles also acknowledged that, at the time of the
trip, he was aware that the COURTNEY ELIZABETH was laid up
undergoing repairs.
Niles' actions during the trip, as reported by Baker,
directly support the court's findings. Early on, Niles ordered
that "no gear comes home, and all traces of lines and stuff go
over board." Later, Niles operated the SEAFARER in close
proximity to high fliers, and at one point, dragged a high flier
behind the boat. His crewmen cut and disposed of trawl lines
that became entangled in the nets of the SEAFARER, and dumped
overboard all gear brought on board, including all workable
traps. Niles even joked about selling gear back to the owner.
After the trip, Niles phoned Baker in an effort to influence
Baker to change his story. The district court, quite accurately,
characterized Niles' explanation of this call -- to get Baker's
phone number -- as "to say the least foolish, circuitous, and
illogical."
-18-
Defendants, again, protest that these findings are based
solely on Baker's testimony; again, this is of no avail. See
Rivera-Gomez, 900 F.2d at 4. And, even if defendants are correct
that there is inconclusive proof that each line cut or each trap
dumped belonged to CEH, the record contains more than enough
factual support to demonstrate Niles' willful and malicious
conduct toward CEH. Therefore, we affirm the court's award of
punitive damages against Niles.
C. Vicarious Liability C. Vicarious Liability
The district court found Doyle liable for punitive damages
under the standard enunciated in Restatement (Second) of Torts
909(c),9 because Doyle delegated "nearly absolute managerial
authority" to Niles. The adoption of the Restatement rule as a
basis of liability is a question of first impression in this
circuit, although we alluded to it in Muratore, 845 F.2d at 354-
9 Section 909 states:
Punitive damages can properly be awarded against a master or other principal because of an act by an agent, if but only if,
(a) the principal or a managerial agent authorized the doing and the manner of the act, or
(b) the agent was unfit and the principal or a managerial agent was reckless in employing or retaining him, or
(c) the agent was employed in a managerial capacity and
was acting in the scope of employment, or
(d) the principal or a managerial agent of the principal ratified or approved the act.
(Emphasis added.)
-19-
56. Muratore concerned the liability of a ship charterer
for the acts of ship photographers that constituted intentional
infliction of emotional distress. We discussed three approaches
courts have taken when addressing the liability of a principal
who neither authorizes nor ratifies her agent's misconduct.
Under the majority approach, punitive damages are treated
indistinguishably from compensatory ones, and traditional
respondeat liability attaches. Id. at 354. Principals are held
accountable for their agents' misdeeds that occur within the
scope of employment. In contrast, a significant minority of
courts follow the strict complicity rule of Lake Shore & M.S.R.
Co. v. Prentice, 147 U.S. 101 (1893), which limits principal
liability to those acts participated in, authorized or ratified.
Finally, the Restatement rule incorporates the Lake Shore
limitation but extends liability, regardless of authorization or
ratification, to acts committed by a managerial agent within the
scope of employment. 845 F.2d at 355.
In Muratore, we declined to follow the majority view,
favoring a more limited approach to "ensure that punitive damages
are awarded against the guilty offender." Id. Further
discriminating between the latter two formulations was
unnecessary as the plaintiff did not satisfy the requirements of
either one. Now, however, our determination of Doyle's liability
hinges upon which standard we adopt, because although there is no
evidence that Doyle authorized, ratified or participated in the
-20-
wrongdoing, it is clear that Niles meets the "managerial
capacity" criteria.
We turn first to precedent. In The Amiable Nancy, the
Supreme Court rejected the imposition of punitive damages against
the owners of THE SCOURGE for the privateering acts of her
captain and crew because "[the owners] are innocent of the
demerit of this transaction, having neither directed it, nor
countenanced it, nor participated in it in the slightest degree."
16 U.S. (3 Wheat.) 546, 559 (1818). The requirement of
complicity of some sort became further entrenched in Lake Shore,
where in rejecting a punitive award against a railway for the
harassing conduct of its train conductor, the Court stated:
Exemplary or punitive damages, being awarded, not by way of compensation to the sufferer, but by way of punishment of the offender, and as a warning to others, can only be awarded against one who has participated in the offence. A principal, therefore, though of course liable to make compensation for injuries done by his agent within the scope of his employment, cannot be held liable for exemplary or punitive damages, merely by reason of wanton, oppressive or malicious intent on the part of the agent.
147 U.S. at 107. Although Lake Shore was not an admiralty case,
a number of admiralty courts have followed this proposition,
rejecting liability absent principal complicity of some sort.
See, e.g., Matter of P & E Boat Rentals, Inc., 872 F.2d 642, 652
(5th Cir. 1989); U.S. Steel Corp. v. Fuhrman, 407 F.2d 1143, 1148
(6th Cir. 1969); Jones v. Compagnie Generale Maritime, 882 F.
Supp. 1079, 1086 (S.D. Ga. 1995); The Seven Brothers, 170 F. 126,
127 (D.R.I. 1909).
-21-
In Fuhrman, the Sixth Circuit reversed an award of punitive
damages against U.S. Steel for the actions of one of its captains
who decided to try to beach his holed vessel rather than abandon
ship. The court took the position that the captain in good faith
used his best judgment, not irrational under the circumstances,
"for the benefit of all concerned." 407 F.2d at 1147. Rather
than rest on this conclusion, which would make unnecessary any
consideration of the vessel owner's liability, the court opined
that "even if" the captain's actions warranted punitive damages:
We think the better rule is that punitive damages are not recoverable against the owner of a vessel for the act of the master unless it can be shown that the owner authorized or ratified the acts of the master either before or after the accident. Punitive damages also may be recoverable if the acts complained of were those of an unfit master and the owner was reckless in employing him.
Id. at 1148.
The Fifth Circuit followed Fuhrman in Matter of P & E Boat
Rentals, Inc., 872 F.2d at 652. That case involved multiple
wrongful death and personal injury claims brought against
Chevron, USA, following a serious collision caused in part by
Chevron foremen who directed a charter vessel to operate in
extremely foggy conditions. The court observed that the foremen
were low level supervisors with no policymaking authority and
stated:
We hold simply that punitive damages may not be imposed against a corporation when one or more of its employees decides on his own to engage in malicious or outrageous conduct. In such a case, the corporation itself cannot be considered the wrongdoer. If the corporation has formulated policies and directed its employees properly, no purpose would be served by
-22-
imposing punitive damages against it except to increase the amount of the judgment.
Id.
In contrast, the Ninth Circuit, in Protectus Alpha
Navigation Co. v. North Pacific Grain Growers, Inc., 767 F.2d
1379 (9th Cir. 1985), expressly adopted the Restatement rule. In
that case, North Pacific's dock foreman set adrift a burning
vessel in defiance of firemen's orders. This conduct in part
caused the destruction of the vessel and the death of a fireman.
Because the foreman acted with "reckless or callous disregard"
for the rights of Protectus Alpha, and because he was a
managerial employee of North Pacific acting in the scope of his
employment, the court upheld the imposition of punitive damages
against North Pacific. Id. at 1385-87.
Justifying its adoption of the Restatement rule, the court
reasoned:
We believe the standard of the Restatement better reflects the reality of modern corporate America. We agree that a corporation can act only through its agents and employees, and that no reasonable distinction can be made between the guilt of the employee in a managerial capacity acting within the scope of his employment and the guilt of the corporation. 22 Am.Jur.2d, Damages 261 (1965). It seems obvious that no corporate executive or director would approve the egregious acts to which punitive damages would attach, and, therefore, no recovery for more than compensatory damages could ever be had against a corporation if express authorization or ratification were always required.
Id. at 1386.
In sum, both approaches draw support from precedent.
Although the Supreme Court cases cited adopted the strict
-23-
complicity view, we do not believe the early nineteenth century
decision in The Amiable Nancy and the late nineteenth,
nonadmiralty decision in Lake Shore dictate the result here.
Neither considered the more modern concerns reflected in the
contrary caselaw and, indeed, the Court has indicated that Lake
Shore may have been unduly restrictive even for its own time.
American Society of Mechanical Engineers, Inc. v. Hydrolevel
Corp., 456 U.S. 556, 575 n.14 (1982) ("[T]he Court may have
departed from the trend of late 19th-century decisions when it
issued Lake Shore."). We note, moreover, that most courts
outside the maritime context do not follow Lake Shore. Id.; W.
Page Keeton, et al., Prosser and Keeton on the Law of Torts 13
(5th ed. 1984). This growing body of precedent is of
significance because we discern no reason, and defendants point
to none, why vicarious liability should be treated differently on
sea than on land. See Archer v. Trans/American Services, 834
F.2d 1570, 1573 (11th Cir. 1988) ("Federal maritime law embraces
the principles of agency."). After all, Lake Shore itself,
though repeatedly cited by admiralty courts, was not a maritime
case.
After giving both perspectives due consideration, we
conclude that strict adherence to the complicity approach would
shield a principal, who, though not guilty of direct
participation, authorization or ratification in his agent's
egregious conduct, nevertheless shares blame for the wrongdoing.
Therefore, we believe that some features of the Restatement
-24-
approach are helpful here. In our view, imposing vicarious
liability on a principal for the act of an agent employed in a
managerial capacity and acting in the scope of employment
represents an appropriate evolution of the Lake Shore rule, at
least when linked to requiring some level of culpability for the
misconduct.
Our approach today falls short of wholesale adoption of the
Restatement because section 909(c), read literally, could impose
liability in circumstances that do not demonstrate any fault on
the part of the principal. Because this is not such a case,
however, we need not resolve whether the Restatement's vicarious
liability principle would in fact reach so far.
Whatever the outer parameters of "managerial capacity"
liability may be, the district court supportably found that the
circumstances here justified the imposition of punitive damages
against Doyle. In so concluding, the district court discussed at
some length the intertwined issues of Niles' managerial authority
and Doyle's culpability in failing to supervise Niles. Niles had
total authority to hire and fire the crew, to determine the
duration, location and targets of the trips, and to sell the
catch wherever he chose. In short, Niles had "complete
managerial discretion over the means and methods of fishing."
Niles set forth and implemented whatever policy, if any, the crew
of the SEAFARER followed. Moreover, the decisions made by Niles
directly affected the success of Doyle's fishing business.
-25-
This delegation of complete managerial discretion was made
notwithstanding Doyle's knowledge that "he had hired his captains
to work in an atmosphere characterized in part by the tension
that raged between lobstermen and draggers." Not only was there
a complete delegation of authority in a troublesome work
situation, but also a complete absence of any policy directive,
written or oral, regarding the operation of Doyle's vessels in
lobster trawl areas. This combination of circumstances places
this case well within the sphere of culpability.10
As applied here, the imposition of punitive damages, in the
district court's words, "encourages shipowners to hire qualified
and responsible captains and to exercise supervisory power over
them." In addition, it fairly punishes Doyle for his failure to
provide any supervision over his captains. In short, therefore,
the district court's award properly serves the purposes of
punitive damages: "to punish defendant and to deter others from
engaging in like manner." Muratore, 845 F.2d at 354.
Accordingly, we affirm the award of punitive damages against
Doyle.
D. The Amount of the Awards D. The Amount of the Awards
10 In addition, these factors further distinguish Matter of
P & E Boat Rentals and Fuhrman. In the former case, as indicated
earlier, the Fifth Circuit rejected vicarious liability in part because the "corporation ha[d] formulated policies." 872 F.2d at 652. In the latter, the Sixth Circuit, upon considering the unique emergency circumstances involved, concluded that the captain had "the responsibility to make the final decision as to what the proper course of action must be in view of all of the factors concerned." 407 F.2d at 1147. Here, in contrast, Niles' misconduct occurred during the regular course of operations, an area where the owner could have and should have set policy.
-26-
Finally, we address defendants' arguments that the amounts
awarded in punitive damages were excessive and in error. The
court assessed punitive damages against Niles for $10,000 and
Doyle for $50,000.
We begin by stating two basic propositions. First, we
review the district court's determination of the correct amount
of punitive damages for clear error. See American Title Ins. Co.
v. East West Financial, 16 F.3d 449, 461 (1st Cir. 1994).
Second, punitive damages are solely intended to serve the
purposes of punishment and deterrence, and should not provide
plaintiff with a windfall. Aldrich v. Thomson McKinnon Sec.,
Inc., 756 F.2d 243, 249 (2d Cir. 1985); Ramsey v. American Air
Filter Co., 772 F.2d 1303, 1314 (7th Cir. 1985). Taken together,
we will not disturb an award of punitive damages unless we are
certain that it is greater than reasonably necessary to punish
and deter. See Pacific Mut. Life Ins. Co. v. Haslip, 499 U.S. 1,
21-22 (1991); Vasbinder v. Scott, 976 F.2d 118, 121 (2nd Cir.
1992) (quoting Haslip, 499 U.S. at 21) ("Thus, the function of
appellate review of punitive damages is to make 'certain that the
punitive damages are reasonable in their amount and rational in
light of their purpose to punish what has occurred and to deter
its repetition.'").
The Supreme Court has rejected a "mathematical bright line"
approach to the award of punitive damages. Haslip, 499 U.S. at
18; TXO Production Corp. v. Alliance Resources Corp., 113 S. Ct.
2711, 2721 (1993) (rejecting "an approach that concentrates
-27-
entirely on the relationship between actual and punitive
damages"). Instead, the Court has indicated that an award should
be reasonable in light of various considerations, such as the
magnitude of harm caused or potentially caused and the net worth
of the defendant. See TXO, 113 S.Ct. at 2722 & n.28. Contrary
to defendants' exhortations, there is no general rule defining
the maximum proportion of net worth that may be exacted.
However, an award should not result in the defendant's financial
ruin. Vasbinder, 976 F.2d at 121; Arceneaux v. Merrill Lynch,
Pierce, F. & S., 767 F.2d 1498, 1503 (11th Cir. 1985).
Having set forth these basic considerations, we address each
award in turn. The assessment of $10,000 against Niles
constitutes approximately 55% of his net worth of $18,250.
Undoubtedly, this award will cause financial hardship.
Nonetheless, we are satisfied that the district court carefully
considered Niles' financial status when fashioning this
punishment. We cannot hold as a matter of law that the award
exceeds an amount appropriate for punishment and deterrence,
particularly in light of Niles' willful misconduct in destroying
CEH's property and in attempting to conceal that misconduct.
Therefore, we affirm the amount of Niles' award.
In light of Doyle's higher net worth, the court awarded
punitive damages against him in the amount of $50,000. Doyle
argues that it is "fundamentally unjust" to punish a principal
who did not commit the misconduct at a higher level than the
actual perpetrator. Notwithstanding the difference in amount, we
-28-
note that, in terms of net worth, Doyle's punishment is
proportionately much less than Niles'. Moreover, it is axiomatic
that any theory of vicarious liability will inevitably involve
charging liability upon a less directly involved principal.
Additionally, the consideration of Doyle's net worth is integral
to the objectives of punitive damages: it ensures that the award
is neither too severe nor too trivial.
We cannot, therefore, conclude as a matter of law that a
$50,000 award here is clearly erroneous. We affirm the award
imposed against Doyle.
Affirmed. Affirmed.
-29-