UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
__________________
No. 92-4711 __________________
DOMINGO GUEVARA,
Plaintiff-Appellee,
versus
MARITIME OVERSEAS CORPORATION,
Defendant-Appellant.
______________________________________________
Appeal from the United States District Court for the Eastern District of Texas ______________________________________________
(September 30, 1994)
Before GOLDBERG, GARWOOD and WIENER, Circuit Judges.
PER CURIAM: In this case we uphold an injured seaman's recovery of damages
under the Jones Act. Fifth Circuit precedent also compels us to
uphold an award of punitive damages for the shipowner's failure to
timely pay maintenance and cure.
I.
Facts and Proceedings Below
Plaintiff-appellee Domingo Guevara (Guevara) was injured on
May 29, 1990, while serving as a member of the crew on the vessel
OVERSEAS PHILADELPHIA, owned and operated by Guevara's employer,
defendant-appellant Maritime Overseas Corporation (Maritime). The crew was preparing the ship to sail from Freeport, Texas, and
Guevara was helping to secure the gangway, the size of which
required that it be lifted by the ship's crane. The task was being
performed in the midst of considerable wind and rain. Guevara was
standing on a catwalk on the vessel pursuant to the orders of the
vessel's bosun, Guevara's superior, who was operating the crane.
As the gangway was lifted, it swayed in Guevara's direction and the
bosun ordered him to move away from where he was standing. But
when Guevara tried to move, he momentarily caught the tread of his
boot in the catwalk grating. Freeing himself, Guevara jumped from
the catwalk to the deck below to avoid being hit by the gangway.
Guevara injured his knee in the fall. He promptly reported
his injury to the third mate and was given assistance. Despite his
injury, Guevara continued to work on the vessel (apparently to
qualify for union benefits) for a period of four months. Upon the
vessel's return to port, Guevara saw a doctor who diagnosed him as
having a torn medial meniscus and a torn anterior cruciate
ligament. Although initially Guevara was reluctant to undergo
surgery, his knee was operated on in February 1991.
Guevara, through his attorney, made a number of formal demands
on Maritime for maintenance and cure beginning on February 5,
1991.1 Maritime, however, made no payment until at least June 24,
1991. Despite subsequent demands, Guevara did not receive his
second and final payment until December 29, 1991.
1 "Maintenance and cure" refers to a shipowner's ancient obligation to provide compensation (now often at the rate of $8.00 a day) and medical care to an ill or injured seamen until he has reached the point of "maximum recovery."
2 Guevara brought a negligence claim under the Jones Act, 46
U.S.C. App. § 688, and an unseaworthiness claim under general
maritime law, against Maritime. He also sought punitive damages
for Maritime's failure to pay maintenance and cure on a timely
basis. The jury returned a verdict in Guevara's favor, finding
Maritime negligent, the OVERSEAS PHILADELPHIA unseaworthy, and
Guevara not negligent. The jury awarded Guevara $131,000 in
compensatory damages for his May 29, 1990, injury, and $60,000 in
punitive damages for Maritime's arbitrary and capricious failure to
pay maintenance and cure. Maritime now appeals.
II.
Discussion
A.
Maritime argues that the district court erred in denying its
motions for judgment notwithstanding the verdict on Guevara's
negligence and unseaworthiness claims. Maritime also challenges
the jury's award of punitive damages for Maritime's failure to pay
maintenance and cure. We first consider whether there is
sufficient evidence to support the jury's finding that Maritime was
negligent. In this regard, Maritime is obliged to swim upstream
against a fast current because the standard of review to be applied
to a jury verdict in a Jones Act case is highly deferential. The
jury's verdict must stand unless there is a complete absence of
probative facts to support it. See, e.g., Wilson v. Zapata Off-
Shore Co., 939 F.2d 260, 266 n.9 (5th Cir. 1991).
There is enough evidence in the record to meet this lenient
standard. Guevara's theory of liability is that he had been
3 standing on the catwalk at the direction of the bosun, who then
lifted the gangway without first making sure that he (Guevara) was
in a safe position. The captain of the vessel testified that the
bosun is to blame if he performs such an operation without first
ascertaining that none of his men are in harm's way.2 The jury
could have concluded from this testimony that the bosun, and hence
Maritime as his employer, was negligent. Because we uphold the
jury's finding that Maritime was negligent and therefore liable
under the Jones Act, we need not decide whether the jury correctly
found Maritime's vessel to be unseaworthy under the general
maritime law.3
B.
We now turn to Maritime's challenge to the jury's award of
punitive damages to Guevara. Maritime argues, first, that Miles v.
Apex Marine Corp., 111 S.Ct. 317 (1990), bars the recovery of
2 "Q. And the bosun should make sure that his men are properly positioned before he allows the crane to lift up, correct, so nobody gets hurt?
A. Yes.
Q. And if someone is in harm's way, the bosun should stop the operation, correct?
Q. And if the bosun doesn't stop the operation, it's the bosun's fault that the man gets hurt, correct?
A. Yes." 3 The single finding of compensatory damages was not allocated or divided as between damages due to negligence and those due to unseaworthiness, nor was there any objection to the form of the charge or verdict in this respect; and, indeed, the evidence does not suggest any basis for such a division.
4 punitive damages for failure to pay maintenance and cure, and,
second, that even if punitive damages are available in such
circumstances, a reasonable jury could not have concluded that
Maritime acted in an arbitrary and capricious manner. We will
discuss the second issue first.
Under the law of this Circuit, a shipowner who refuses to pay
maintenance and cure is subject to
"an escalating scale of liability: a shipowner who is in fact liable for maintenance and cure, but who has been reasonable in denying liability, may be held liable only for the amount of maintenance and cure. If the shipowner has refused to pay without a reasonable defense, he becomes liable in addition for compensatory damages. If the owner not only lacks a reasonable defense but has exhibited callousness and indifference to the seaman's plight, he becomes liable for punitive damages and attorney's fees." Morales v. Garijak, Inc., 829 F.2d 1355, 1358 (5th Cir. 1987).
A shipowner becomes liable for punitive damages when its refusal to
pay maintenance can be described as callous and recalcitrant,
arbitrary and capricious, or willful, callous, and persistent. See
id. In this case, the jury answered yes to the question whether
Maritime "arbitrarily and capriciously failed to provide
maintenance to the plaintiff, Domingo Guevara on a timely basis?"
and awarded $60,000 in punitive damages.4 A reasonable jury could
have so concluded.
The parties stipulated that Guevara's attorney made formal
demands for maintenance by letter on six occasions: February 5,
1991; February 26, 1991; April 4, 1991; June 7, 1991; August 21,
4 The jury was not asked to award attorneys' fees or compensatory damages on account of Maritime's failure to pay maintenance and cure.
5 1991; and January 31, 1992. Maritime's first payment, for $448,
was not received by Guevara until sometime after June 24, 1991.5
Maritime's second payment, for $1,344, was not received by Guevara
until December 29, 1991. Guevara argues that, because nearly five
months passed between his initial demand and Maritime's first
payment, there is adequate support for the jury's verdict.
Maritime correctly argues that it was entitled to a reasonable
period of time in which to investigate the legitimacy of Guevara's
claim. See McWilliams v. Texaco, Inc., 781 F.2d 514, 519 (5th Cir.
1986) ("Where doubt exists . . . a vessel owner may request
reasonable documentation from a seaman before it commences payment
of maintenance that may prove both lengthy and expensive").
However, that excuse is unavailable where a shipowner is guilty of
"laxness in investigating a claim that would have been found to be
meritorious." Breese v. AWI, Inc., 823 F.2d 100, 104 (5th Cir.
1987). In McWilliams, the shipowner withheld maintenance payments
until it received medical documentation of the seaman's claim;
after receiving such documentation, the shipowner commenced
payments "shortly thereafter." 781 F.2d at 519. Here, the medical
records compiled by the physician treating Guevara's injury were
forwarded to Maritime along with Guevara's February 5, 1991, and
March 4, 1991, demands for maintenance, yet Maritime made no
payment until several months later. In any event, even if the
delay between Guevara's first demand and Maritime's first payment
could be explained as a reasonable investigatory period, the jury
5 The record is unclear as to when Guevara actually received this payment; the date on the check was June 24, 1991.
6 was entitled to conclude that the six-month delay between
Maritime's first payment and its second payment, received by
Guevara practically on the eve of trial, could not. Under the
facts here, since Maritime had commenced payment, the jury could
properly find that the second delay could not be explained as time
needed to investigate Guevara's claim.6 Thus, the record supports
the jury's award of punitive damages under the prevailing law of
this Circuit.
C.
Maritime also argues that Guevara's recovery of punitive
damages is barred by the Supreme Court's decision in Miles. There,
the parents of a seaman killed by a fellow crew member sought to
recover damages for loss of society under general maritime law in
a cause of action for unseaworthiness. A unanimous Court held
that, although the wrongful death of a seaman is actionable under
general maritime law, damages recoverable in such actions do not
include loss of society. The second of these two holdings is of
principal concern here, although the Court's analytical methodology
was the same for each. Following the course first set by Moragne
v. States Marine Lines, Inc., 90 S.Ct. 1772 (1970), the Miles Court
tackled the question of the availability of remedies for wrongful
death under general maritime law by seeking guidance from
comparable federal statutes.
"We no longer live in an era when seamen and their loved ones must look primarily to the courts as a source of substantive legal protection from injury and death;
6 The evidence was not such as to compellingly show any legitimate reason for the long delay after June 24.
7 Congress and the States have legislated extensively in these areas. In this era, an admiralty court should look primarily to these legislative enactments for policy guidance. We may supplement these statutory remedies where doing so would achieve the uniform vindication of such policies consistent with our constitutional mandate, but we must also keep strictly within the limits imposed by Congress." Miles, 111 S.Ct. at 323.
Then observing that neither the Jones Act nor the Death on the High
Seas Act (DOHSA), 46 U.S.C.App. § 761, permits the recovery of
nonpecuniary losses, such as loss of society, the Miles Court
stated:
"It 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 allowed in cases of death resulting from negligence." Id. at 326.
The Court stressed the value of establishing a uniform rule of
damages applicable to the Jones Act, DOHSA, and general maritime
law. See id.
Maritime's argument that Miles abrogates this Circuit's rule
permitting the recovery of punitive damages in maintenance and cure
cases obviously cannot rest upon the specific holding in MilesSQ
that damages for loss of society are not recoverable in a general
maritime cause of action for wrongful death. Miles did not involve
maintenance and cure or punitive damages.7 Of course, it could be
7 That Miles involved a claim for wrongful death whereas Guevara's injury was nonfatal is not a relevant distinction. We have already held that Miles bars recovery of nonpecuniary losses in general maritime actions alleging personal injury. See Murray v. Anthony J. Bertucci Constr. Co., 958 F.2d 127, 129-30 (5th Cir.), cert. denied, 113 S.Ct. 190 (1992) (injured seaman; loss of society); Michel v. Total Transp., Inc., 957 F.2d 186, 191 (5th Cir. 1992) (injured seaman; loss of consortium); Nichols v. Petroleum Helicopters, Inc., 17 F.3d 119, 122 (5th Cir. 1994) (longshoreman injured on high seas; loss of consortium); accord Smith v. Trinidad Corp., 992 F.2d 996, 996 (9th Cir. 1993) (per
8 that the logic if not the holding of Miles supports Maritime's
argument. In the wake of Miles, in fact, four appellate courts
have held that punitive damages now are unavailable under general
maritime law. See Horsley v. Mobil Oil Co., 15 F.3d 200 (1st Cir.
1994); Miller v. American President Lines, Ltd., 989 F.2d 1450,
1454-59 (6th Cir. 1993); Penrod Drilling Corp. v. Williams, 868
S.W.2d 294 (Tex. 1993) (per curiam); Sky Cruises, Ltd. v. Andersen,
592 So.2d 756 (Fla. App.) (per curiam), rev. denied, 610 So.2d 551
(Fla.), cert. denied, 113 S.Ct. 466 (1992).8 However, in each of
these cases, plaintiff's claim for punitive damages was not based
upon a cause of action for maintenance and cure. In another line
of cases, several federal district courts have held that Miles does
not preclude recovery of punitive damages for failure to pay
maintenance and cure.9 In contrast, we have found only one court
curiam) (agreeing with Murray); Horsley v. Mobil Oil Co., 15 F.3d 200 (1st Cir. 1994) (injured seaman; loss of society). 8 A number of federal district courts have reached the same conclusion. See, e.g., Ellison v. Messerschmitt-Bolkow-Blohm, 807 F.Supp. 39, 41 (E.D.Tex.1992); La Voie v. Kualoa Ranch & Activity Club, Inc., 797 F.Supp. 827, 829-31 (D.Hawaii 1992); In re Waterman Steamship Corp., 780 F.Supp. 1093, 1095-96 (E.D.La.1992); In re Cleveland Tankers, Inc., 791 F.Supp. 679, 682 (E.D.Mich.1992); In re Aleutian Enter. Ltd., 777 F.Supp. 793, 796 (W.D.Wash.1991); Haltom v. Lykes Bros. Steamship Co., 771 F.Supp. 179, 181 (E.D.Tex.1991); In re Mardoc Asbestos Case Clusters, 768 F.Supp. 595, 599-600 (E.D.Mich.1991); Rollins v. Peterson Builders, Inc., 761 F.Supp. 943, 949-50 (D.R.I.1991). 9 See, e.g., Ridenour v. Holland America Line Westours, Inc., 806 F.Supp. 910 (W.D.Wash.1992); Anderson v. Texaco, Inc., 797 F.Supp. 531, 536 (E.D.La.1992); Ortega v. Oceantrawl, Inc., 1992 U.S.Dist.Lexis 21374, at *6-7 (D.Alaska Oct. 8, 1992); Howard v. Atlantic Pacific Marine Corp., 1992 U.S.Dist.Lexis 2474, at *4-5 (E.D.La. Feb. 28, 1992); Bachu v. Int'l Marine Terminals, 1991 U.S.Dist.Lexis 14485, at *3 (E.D.La. Sept. 26, 1991); Rowan Companies, Inc. v. Badeaux, 1991 U.S.Dist.Lexis 12355, at *4 (E.D.La. Aug. 28, 1991); Collinsworth v. Oceanic Fleet, Inc.,
9 which has held that Miles bars recovery of punitive damages in
maintenance and cure cases. See Gray v. Texaco, Inc., 610 So.2d
1090, 1096 (La. App.), cert. denied, 616 So.2d 686 (La. 1993).
The courts which have held that punitive damages are
unavailable in a cause of action for unseaworthiness have reasoned
that, because punitive damages are unavailable under either the
Jones Act or DOHSA,10 it would run counter to Miles to allow
punitive damages under general maritime law. While there is great
force to this argument, it is arguably not controlling in the
context of maintenance and cure. Essentially a form of workers'
compensation-like employee benefit, maintenance and cure has no
counterpart in either the Jones Act or DOHSA.
A panel of this Court may overrule the existing law in the
circuit if an intervening Supreme Court decision so requires. The
implications of Miles, however, are not so direct as to allow this
panel to depart from the Court's previous decisions that punitive
damages are available in maintenance and cure cases.
Conclusion
The jury's verdict is adequately supported by the evidence,
1991 U.S.Dist.Lexis 11759, at *9-10 (E.D.La. Aug. 19, 1991); Odeco, Inc. v. Cornish, 1991 U.S.Dist.Lexis 10827, at *4 (E.D.La. July 22, 1991). 10 Only pecuniary damages are available under the Jones Act and DOHSA. See Miles, 111 S.Ct. at 325 (Jones Act); Mobil Oil Corp. v. Higginbotham, 98 S.Ct. 2010, 2013 (1978) (DOHSA). Punitive damages are nonpecuniary and are therefore unavailable under either Act. See Bergen v. F/V St. Patrick, 816 F.2d 1345, 1347 (9th Cir. 1987); Kopczynski v. The Jacqueline, 742 F.2d 555, 560- 61 (9th Cir. 1984), cert. denied, 105 S.Ct. 2677 (1985). See also Horsley v. Mobil Oil Co., 15 F.3d 200, 203 (1st Cir. 1994); Miller v. American President Lines, Ltd., 989 F.2d 1450, 1457 (6th Cir. 1993).
10 and the judgment thereon is supported by applicable precedent in
this Circuit. Accordingly, the district court's judgment is
AFFIRMED.
11 GARWOOD, Circuit Judge, concurring:
I fully join the Court's opinion, and append this separate
writing merely to urge that the en banc court reexamine the
availability of general punitive damages in maintenance and cure
cases, particularly in light of the Supreme Court's opinion in
Miles v. Apex Marine Corp., 111 S.Ct. 317 (1990). That issue is
squarely presented in this case.
In my view, Miles seriously calls into question the
availability of punitive damages for nonpayment of maintenance and
cure. If the First and Sixth Circuits, the Texas Supreme Court,
and all the rest of the courts that have considered the matter, are
correct that Miles bars recovery of punitive damages in a cause of
action for unseaworthiness,1 as I believe they are, then this Court
en banc should seriously rethink its previous panel decisions
allowing punitive damages in maintenance and cure cases. See Gray
v. Texaco, Inc., 610 So.2d 1090, 1096 (La. App.), cert. denied, 616
So.2d 686 (La. 1983).
Both unseaworthiness and maintenance and cure are doctrines of
general maritime law, and in the past we have looked to the
availability of punitive damages under the one when deciding
whether they are available under the other. In In re Merry
Shipping, Inc., 650 F.2d 622, 625 (5th Cir. 1981), we cited a First
Circuit case allowing punitive damages in maintenance and cure
actions in support of our holding that punitive damages are
1 See our per curiam herein, note 8 and accompanying citations in text. See also, id. note 7 and note 10 and accompanying text.
12 recoverable in unseaworthiness actions. Thus, it would be highly
anomalous to allow punitive damages in the context of the contract-
like maintenance and cure claims if such damages are unavailable in
the context of the tort-like unseaworthiness claims.2
Furthermore, even though the Jones Act and DOHSA may not be
closely analogous reference points in the Miles analysis with
respect to maintenance and cure, the Longshore and Harbor Worker's
Compensation Act (LHWCA), 33 U.S.C. §§ 901-950, may be. It has
been said that maintenance and cure "is to the seaman almost what
workmen's compensation is to the land worker." 2 M. Norris, The
Law of Seamen § 26:1, at 3 (4th ed. 1985). The LHWCA, meanwhile,
2 Punitive damages are generally unavailable for breach of contract. See RESTATEMENT (SECOND) OF CONTRACTS § 355 (1979); 11 Williston on Contracts § 1340, at 209-11 (W. Jaeger 3d ed. 1968); 5 Corbin on Contracts § 1077, at 438-39 (1964). That the duty to pay maintenance and cure derives from contract was first stated by Justice Story in Harden v. Gordon, 11 Fed. Cas. 480, 482 (C.C.D. Me. 1823) (No. 6,047). Accord Brister v. AWI, Inc., 946 F.2d 350, 360 (5th Cir. 1991) (Maintenance and cure "is implied in the employment contract between seaman and shipowner."); 2 M. Norris, The Law of Seamen § 26:2, at 3 (4th ed. 1985) ("Maintenance and cure is a contractual form of compensation given by the general maritime law."). To be sure, the contract analogy has its limits. In Vaughan v. Atkinson, 82 S.Ct. 997 (1962), Justice Douglas stated that "[m]aintenance and cure differs from rights normally classified as contractual," id. at 1000, and then quoted Justice Cardozo: "Contractual it is in the sense that it has its source in a relation which is contractual in origin, but, given the relation, no agreement is competent to abrogate the incident." Cortes v. Baltimore Insular Line, 53 S.Ct. 173, 174 (1932). Yet just because a shipowner's obligation to pay maintenance and cure cannot "be abrogated by a contractual provision," Dowdle v. Offshore Express, Inc., 809 F.2d 259, 262 (5th Cir. 1987), does not mean that none of the rules of contract law pertain to maintenance and cure. It has been held, for example, that the rate of maintenance and cure may be set in a collective bargaining agreement. See Gardiner v. Sea-Land Serv., Inc., 786 F.2d 943, 948 (9th Cir.), cert. denied, 107 S.Ct. 331 (1986). In sum, to the extent that the obligation to pay maintenance and cure is contractual in nature, allowing punitive damages for a breach thereof is anomalous.
13 "creates a worker's compensation scheme for certain maritime
workers which is exclusive of other remedies and does not provide
for punitive damages." Miller, 989 F.2d at 1457; see 33 U.S.C. §
905 (exclusiveness of LHWCA remedies). Generally workers'
compensation schemes, whether state or federal, for seamen or land
lubbers, do not permit injured workers to recover punitive damages.
See 2A A. Larson, The Law of Workmen's Compensation § 65.37, at 12-
36 (1987) ("punitive damages are of course not recoverable under a
workers' compensation act"). See also Atkinson v. Gates, McDonald
& Co., 838 F.2d 808, 813-14 (5th Cir. 1988).
Before examining the genesis of this Court's relevant
jurisprudence, it will be helpful to provide an overview of the law
in this area among the other circuits. In addition to the Fifth,
the First, Second, and Eleventh Circuits have held (prior to Miles)
that punitive damages are recoverable for nonpayment of maintenance
and cure. See Robinson v. Pocahontas, Inc., 477 F.2d 1048 (1st
Cir. 1973); Kraljic v. Berman Enterprises, Inc., 575 F.2d 412 (2d
Cir. 1978); Hines v. J.A. La Porte, Inc., 820 F.2d 1187 (11th Cir.
1987) (per curiam). In the Second Circuit, however, recovery is
limited to the amount of attorneys' fees. Kraljic. The law in the
Sixth3 and Ninth4 Circuits is unclear. The other circuits have no
3 Relying on dicta in Al-Zawkari v. American Steamship Co., 871 F.2d 585, 590 n.8 (6th Cir. 1989), one district court in the Sixth Circuit has held that "a claim for punitive damages under the doctrine of maintenance and cure is recognizable in this circuit." Hoeffling v. United States Steel, 792 F.Supp. 1029, 1030 (E.D.Mich. 1991). Another district court in that Circuit has said that a seaman may recover "an award of punitive damages limited to attorney's fees." Owens v. Conticarriers & Terminals, Inc., 591 F.Supp. 777, 792 (W.D.Tenn.1984) (original emphasis). Still another has suggested that they are not recoverable at all.
14 law.
Although the right to maintenance and cure "stems from the
ancient sea codes of the Middle Ages," 2 Norris, supra § 26:2, at
4-5, this Court had never upheld an award of punitive damages for
nonpayment of maintenance and cure until 1984. See Holmes v. J.
Ray McDermott & Co., 734 F.2d 1110 (5th Cir. 1984). See also
McWilliams v. Texaco, 781 F.2d 514, 519 & n.11 (5th Cir. 1986).
Holmes deals with the issue in only an abbreviated fashion, the
extent of Holmes' analysis being as follows:
"In Vaughan v. Atkinson, 369 U.S. 527, 82 S.Ct. 997, 8 L.Ed.2d 88 (1962), the Supreme Court held that an employer's willful and arbitrary refusal to pay maintenance and cure gives rise to a claim for damages in the form of attorneys' fees in addition to the claim for general damages. Subsequent decisions have established that, in addition to such attorneys' fees, punitive damages for such refusal are available under the general maritime law. See Complaint of Merry Shipping, Inc., 650 F.2d 622, 625 (5th Cir. 1981) (collecting cases); see also Robinson v. Pocahontas, Inc., 477 F.2d 1048 (1st Cir. 1973)." Holmes, 734 F.2d at 1118.
Thus, Holmes relied exclusively upon three cases: the Supreme
See Mardoc Asbestos Case Clusters, supra, 768 F.Supp. at 600 n.1. As noted, the Sixth Circuit held recently that general maritime law does not allow recovery of punitive damages in a cause of action for unseaworthiness. See Miller, supra. Miller, however, did not specifically discuss maintenance and cure claims. 4 In Sample v. Johnson, 771 F.2d 1335, 1347 n.12 (9th Cir. 1985), cert. denied, 106 S.Ct. 1206 (1986), the Ninth Circuit stated in dicta that "[p]unitive damages are awardable, in some circumstances to a seaman where payment for maintenance and cure is wrongfully denied." Relying in part on Sample, two district courts in the Ninth Circuit have held that punitive damages are available. See Ridenour, supra, 806 F.Supp. at 911-13; Nelsen v. Research Corp., 805 F.Supp. 837, 854 (D.Hawaii 1992) (dicta). Another district court, however, reached the opposite conclusion. See La Voie, supra, 797 F.Supp. at 831-32. Ridenour and La Voie, while reaching different conclusions, agreed that there is no Ninth Circuit case dispositive of the issue.
15 Court's Vaughan, this Court's Merry Shipping, and the First
Circuit's Pocahontas. None of these cases, however, provides
significant support for the rule announced in Holmes.
In Vaughan, the Supreme Court upheld an award of attorneys'
fees where the shipowner had deliberately withheld maintenance and
cure. The rationale underlying Vaughan's holding is subject to
considerable debate and we will discuss it at greater length later
on. For now, it is enough to know this: Vaughan upheld an award
of attorneys' fees, not punitive damages, and therefore does not
directly support the holding of Holmes. See Reinschreiber,
Punitive Damages in Admiralty for Bad Faith Refusal to Provide
Maintenance and Cure, 15 San Diego L. Rev. 309, 313 (1978) ("the
Vaughan decision affords no new basis for recovery of punitive
damages"). Nor did Holmes dispute this fact; it said that, after
Vaughan, subsequent decisions made punitive damages available.
The second case cited by Holmes, and the one upon which it
seems to rely most heavily, is Merry Shipping. Like Vaughan,
however, Merry Shipping does not squarely support the Holmes rule.
Merry Shipping upheld an award of punitive damages for the wrongful
death of a seaman in a cause of action for unseaworthiness. In
support of its holding, Merry Shipping approvingly cited the First
Circuit's Pocahontas decision, which, in the words of Merry
Shipping, "upheld an award of punitive damages for a shipowner's
willful and callous withholding of a seaman's maintenance and
cure." 650 F.2d at 625. Yet this endorsement of the holding in
Pocahontas is clearly dictum since Merry Shipping did not involve
maintenance and cure. As one commentator has noted, "The Holmes
16 Court's authority for allowing an award of punitive damages is not
readily apparent, because maintenance and cure was not at issue in
Merry Shipping." Davis, Punitive Damages for Maintenance and Cure,
10 Mar. Law. 103, 108 (1985).
Furthermore, when one looks back on Merry Shipping with the
benefit of Miles, it becomes clear that Merry Shipping is doubtful
authority at best. The holding of Merry ShippingSQthat punitive
damages are available under general maritime lawSQrested upon two
assumptions, both of which were capsized by Miles. First, Merry
Shipping stated that nonpecuniary losses are recoverable under
general maritime law. See 650 F.2d at 626. That proposition, of
course, was squarely rejected in Miles. See 111 S.Ct. at 325.
Second, Merry Shipping argued that the unavailability of punitive
damages under the Jones Act does not compel their unavailability
under general maritime law. See 650 F.2d at 626. That reasoning,
however, is flatly inconsistent with Miles' insistence upon
uniformity in the availability of damages under general maritime
law and statutes such as the Jones Act. See 111 S.Ct. at 323, 325.
Thus, because of Miles, it would appear that Merry Shipping is no
longer good law.
The last case cited by Holmes is the First Circuit's
Pocahontas decision. To be sure, that case did squarely hold that
punitive damages are available in maintenance and cure cases, and
it was favorably cited in Merry Shipping. Pocahontas, however,
suffers from the fact that it relied upon the dissent in Vaughan.
See Pocahontas, 477 F.2d at 1051. As the Second Circuit pointed
out in its Kraljic opinion:
17 "The [Pocahontas] court justified the punitive damage award primarily by relying on Mr. Justice Stewart's dissenting opinion in [Vaughan v.] Atkinson which, as we have indicated, would have awarded exemplary damages under traditional concepts not necessarily limited to the amount of counsel fees. The obvious difficulty with this approach is that the court followed the views of the dissenters in Atkinson and not the majority." Kraljic, 575 F.2d at 415.
Holmes made no mention of Kraljic, even though it was decided six
years earlier. In Kraljic, the Second Circuit held that willful
nonpayment of maintenance and cure entitles a seaman to recover
punitive damages limited to the amount of attorneys' fees. The
Kraljic court stated:
"The [Pocahontas] court, we believe, correctly perceived that both majority and minority opinions in Atkinson in essence found that punitive damages were awardable in maintenance and cure cases. The inescapable fact is, however, that the majority opinion in Atkinson limited that recovery to counsel fees despite the explicit view of the dissenters that no such curb be imposed." Id. at 415-16.
Finally, a brief word is in order about the Eleventh Circuit's
Hines case, which was decided three years after Holmes.
Recognizing that on the question of the availability of punitive
damages, "Vaughan is not dispositive because in that case only a
claim for attorney's fees was asserted," Hines, 820 F.2d at 1189,
the Hines court choose to "[f]ollow[ ] the guidance of Merry
Shipping", id., and allow punitive damages in maintenance and cure
cases. Again, however, Merry Shipping is questionable authority at
best.5
To sum up, the cases that Holmes relied upon cannot now
5 Two of the judges on the Hines panel were on the pre-split Fifth Circuit panel in Merry Shipping, which was authored by one of them. Hines was a per curiam.
18 support the result in Holmes. Vaughan awarded attorneys' fees, not
punitive damages; Merry Shipping did not involve maintenance and
cure and has probably been overruled by Miles; and Pocahontas was
based upon the Vaughan dissent. Of the cases that Holmes did not
cite, Kraljic limits punitive damages to the amount of attorneys'
fees and Hines relied upon the now-dubious Merry Shipping. In
arguable support of Holmes, there is one remaining possibility that
should be considered, namely, that Vaughan, while only upholding an
award of attorneys' fees, announced a principle broader than its
result. Vaughan is unquestionably the root of this entire area of
law; hence, we now attempt to determine how broad Vaughan is.
Vaughan, a brief opinion by Justice Douglas, has been
described as "ambiguous"6 and "cryptic"7SQand rightly so. What is
clear is that Justice Douglas upheld an award of attorneys' fees to
a seaman where his employer had deliberately withheld payment of
maintenance and cure. The confusion surrounds the theory under
which Justice Douglas awarded the attorneys' fees. On the one
hand, the adjectives that Justice Douglas used to describe the
employer's behaviorSQ"callous," "recalcitran[t]," "willful and
persistent," Vaughan, 82 S.Ct. at 999SQimply that the award was
meant to be a punitive sanction. On the other hand, his statements
that a seaman is entitled to recover "necessary expenses" and that
the seaman "was forced to hire a lawyer and go to court to get what
6 1B E. Flynn, D. Cooper & G. Raduazzo, Benedict on Admiralty § 51, at 4-80 (7th rev. ed. 1991). 7 Robertson, Judge Rubin's Maritime Tort Decisions, 52 La. L. Rev. 1527, 1572 (1992).
19 was plainly owed him," id., suggest that the fees were meant to be
a compensatory award for out-of-pocket expenses. As one
commentator put it:
"Yet Vaughan did not clearly articulate if such an award was compensatory or punitive. Initially, the Court cited Cortes for the proposition that an employer's failure to make timely payments of maintenance and cure may entitle the seaman to the recovery of necessary expenses, intimating that the award was compensatory. The Court went on to stress, however, that the defendant's failure to make the payments was willful and callous, language that lends itself to the view that the award was punitive." Maslanka, Punitive Damages in the Admiralty, 5 Mar. Law. 223, 228 (1980); accord Davis, supra, at 106.
The commentators are divided as to whether the Vaughan award was
intended to be compensatory8 or punitive9 in nature.
Fortunately, in deciphering Vaughan, we are not confined to
the text of that enigmatic opinion or the unexpressed intent of its
author. Since Vaughan was decided in 1962, the Supreme Court has
8 See 6 J. Moore, Moore's Federal Practice ¶ 54.78[3], at 54- 503 n.29 (2d ed. 1986) ("The [Vaughan] court found that . . . the expenses of the suit could rightly be treated as part of the compensatory damage."); id. at 54-504 n.30; 2 Norris, supra § 26:41, at 111 ("The allowance of counsel fees was justified by virtue of the inclusion of 'necessary expenses' as items of damage arising out of the suffering and physical handicap which follows the failure to give maintenance and cure."); Reinschreiber, supra, at 312 ("the [Vaughan] majority award[ed] attorney's fees as an item of compensatory damages"). 9 See G. Gilmore & C. Black, The Law of Admiralty 313 (2d ed. 1975) (Vaughan "awarded what were essentially punitive damages under the name of counsel fees."); Mallor, Punitive Attorney's Fees for Abuse of the Judicial System, 61 N.C. L. Rev. 613, 632 (1983) ("Although the Supreme Court awarded the seaman attorneys' fees under the rubric of compensatory damages, it emphasized the role that defendant's bad faith had played in causing those damages."). That the award was punitive was also the view of Judge Rubin. See Sanchez v. Rowe, 870 F.2d 291, 293 (5th Cir. 1989) ("Fees were awarded [in Vaughan] on the basis of the shipowners' bad-faith response to the seaman's underlying claim."). Judge Rubin has been described as "an acknowledged master of the maritime field." Robertson, supra, at 1527.
20 cited it in seven cases. Each of these cases concerns the shifting
of attorneys' fees; none of them concerns maritime law. In all
seven cases, the Court has treated Vaughan as supporting an
exception to the so-called "American Rule" that litigants generally
must bear their own costs. In the first such case, Chief Justice
Warren read Vaughan as establishing a compensatory basis for fee-
shifting:
"Limited exceptions to the American rule . . . have been sanctioned by this Court when overriding considerations of justice seemed to compel such a result. In appropriate circumstances, we have held, an admiralty plaintiff may be awarded counsel fees as an item of compensatory damages (not as a separate cost to be taxed)." Fleischmann Distilling Corp. v. Maier Brewing Co., 87 S.Ct. 1404, 1407 (1967) (emphasis added).
Since Maier Brewing, however, Vaughan has now come to stand for the
proposition that attorneys' fees may sometimes be awarded to a
prevailing party when his opponent has acted in bad faith in the
conduct of litigation.10 As one commentator has said, Vaughan now
"is uniformly cited as a foundational case to the so-called 'bad
faith' exception to the American rule." Reinschreiber, supra, at
312.11 The purely compensatory description of Vaughan has not been
10 See Summit Valley Indus., Inc. v. Local 112, 102 S.Ct. 2112, 2114 (1982); Roadway Express, Inc. v. Piper, 100 S.Ct. 2455, 2464 (1980); Runyon v. McCrary, 96 S.Ct. 2586, 2601 (1976); Alyeska Pipeline Serv. Co. v. Wilderness Society, 95 S.Ct. 1612, 1622 (1975); F.D. Rich Co. v. United States, 94 S.Ct. 2157, 2165 (1974); Hall v. Cole, 93 S.Ct. 1943, 1946 (1973). 11 Accord Lear Siegler, Inc. v. Lehman, 842 F.2d 1102, 1118 (9th Cir. 1988) ("Although Vaughan sounded in admiralty, the Supreme Court subsequently construed the case as an example of bad faith conduct justifying an award of attorneys' fees in civil litigation generally."); Green, From Here to Attorney's Fees, 69 Cornell L. Rev. 207, 232 n.148 (1984) ("Both the Court and commentators have, in retrospect, characterized the Vaughan decision as involving the 'bad faith' exception to the American
21 aired in a majority opinion since Maier Brewing.12 In short, the
Court's current view is that the fee award in Vaughan should be
understood as a sanction for bad-faith conduct in litigation.
However, our knowledge that Vaughan involved a bad-faith fee-
shift does not immediately tell us whether awards of that type are
compensatory or punitive. Although some have asserted that an
award of attorneys' fees under the bad-faith exception to the
American rule is compensatory,13 the Supreme Court's view now may
be otherwise. In Hall v. Cole, 93 S.Ct. 1943 (1973), Justice
Brennan stated:
"Thus, it is unquestioned that a federal court may award counsel fees to a successful party when his opponent has acted in bad faith, vexatiously, wantonly, or for oppressive reasons. In this class of cases, the underlying rationale of 'fee shifting' is, of course, punitive, and the essential element in triggering the award of fees is therefore the existence of 'bad faith' on the part of the unsuccessful litigant." Id. at 1946 (emphasis added; internal quotation marks omitted).
Hall's reasoning was reaffirmed in the recent case of Chambers v.
NASCO, Inc., 111 S.Ct. 2123 (1991). Quoting Hall, the Chambers
Court said: "in the case of the bad-faith exception to the American
rule."). Professor Moore calls the bad-faith interpretation of Vaughan "a revisionist view." Moore, supra, at 54-506. Be that as it may, the Supreme Court is obviously the final arbiter of the meaning of its precedents. 12 Justice Marshall, in a dissenting opinion, once revived the compensatory interpretation of Vaughan. See Alyeska, 95 S.Ct. at 1633 ("the attorney's fee award [in Vaughan] was legitimately included as a part of the primary relief to which the plaintiff was entitled, rather than an ancillary adjustment of litigation expenses"). However, in a previous opinion written for the Court, Justice Marshall had endorsed the bad-faith view of Vaughan. See F.D. Rich Co., 94 S.Ct. at 2165. 13 See Reinschreiber, supra, at 313.
22 Rule, 'the underlying rationale of "fee-shifting" is, of course,
punitive.'" Id. at 2137. Even three dissenters in Chambers cited
Hall for the proposition that "the rationale for the bad faith
exception is punishment." Id. at 2148 (Kennedy, J., dissenting).
The Chambers Court specifically rejected the argument made by the
petitioner that fee-shifting is compensatory in character. This
argument, the Court said, "fails utterly," id. at 2137 n.15,
because even though the fees may have a compensatory effect, their
primary purpose is punitive. The Court analogized to fines for
civil contempt, which may be compensatory in consequence but are
punitive in design.
Based upon the above, it might seem that the Second Circuit in
Kraljic got it right: the Vaughan award was a form of punitive
damage, but one limited to the recovery of attorneys' fees. A
careful reading of Chambers, however, belies the view that awards
made under the bad-faith exception to the American rule are
essentially punitive damages. The Chambers Court drew a
distinction between fees awarded pursuant to the bad-faith
exception, which are based upon a federal court's inherent power to
sanction parties for their litigation behavior, and other "fee-
shifting rules that embody a substantive policy, such as a statute
which permits a prevailing party in certain classes of litigation
to recover fees." Id. at 2136. In other words, bad-faith fee-
shifting is not based on the outcome or merits of a suit, but
rather "on how the parties conduct themselves during the
litigation." Id. at 2137. While the Chambers majority opinion
equivocated on the question whether a federal court has the
23 inherent power to impose sanctions for conduct relating to the
merits of the case, rather than the conduct of the litigation, see
id. at 2138 n.16, four justices were firmly of the view that bad-
faith fee-shifting may not be used to sanction prelitigation
conduct. Justice Scalia argued that the American rule is deeply
rooted in our history and "prevents a court (without statutory
authorization) from engaging in what might be termed substantive
fee-shifting, that is, fee-shifting as part of the merits award.
It does not in principle bar fee-shifting as a sanction for
procedural abuse." Id. at 2140 (dissenting opinion; original
emphasis). Likewise, Justice Kennedy, writing for himself and two
others, argued that "[w]hen a federal court, through invocation of
its inherent powers, sanctions a party for bad-faith prelitigation
conduct, it goes well beyond the exception to the American Rule."
Id. at 2148 (dissenting opinion).
The upshot of all this is the following: the bad-faith
exception to the American rule, of which the Vaughan award was an
example, is not in a true sense punitive damages. Punitive damages
are awarded on the basis of the merits of a case, whereas bad-faith
fee-shifting sanctions abuses of the litigation process. As the
Chambers Court said, quoting from the Fifth Circuit decision below,
"'[f]ee-shifting here is not a matter of substantive remedy, but of
vindicating judicial authority.'" Id. at 2138 (quoting 894 F.2d at
705). This interpretation comports with the facts in Vaughan.
Because the shipowner's liability for maintenance and cure was
perfectly clear, it was an abuse of the litigation process to
require him to "go to court to get what was plainly owed him under
24 laws that are centuries old." Vaughan, 82 S.Ct. at 999.
At the end of the day, one need not definitely resolve whether
Vaughan awarded compensatory damages or established an exception to
the American rule. Either way, its award clearly was not a
punitive damages award and therefore Vaughn provides no support for
the Holmes rule. Vaughan entitles injured seamen to recover
attorneys' fees, or perhaps compensatory damages, when their
employer unreasonably fails to pay maintenance on a timely basis.
But in light of Miles, this Court should reconsider en banc whether
punitive damages should be similarly available.