Punitive Damages Available In Martime Injury Cases, Louisiana Supreme Court Holds

On October 18, 2017, the Louisiana Supreme Court held punitive damages are recoverable in personal injury cases brought under general maritime law.

Below, our Jones Act attorneys review the Louisiana Supreme Court’s opinion in Warren v. Shelter Mutual Insurance Co.

The Maritime Injury Case

In 2005, Derek Hebert was killed when he was ejected from a 1998 Champion boat.  At the time, the vessel was operating in the navigable channels of the Calcasieu River in Louisiana.

The incident occurred when the vessel’s hydraulic steering system failed.  This caused the boat to turn violently on its axis, kicking to the side.  In the maritime world, this phenomenon is referred to as a “J-hook” or “kill spin.”

In this case, the J-hook ejected five passengers.  One of them, Mr. Hebert, was struck 19 times by the vessel’s propeller.

As a result of the incident, Mr. Hebert suffered severe trauma, sunk to the bottom of the lake, and died.

The Wrongful Death Claim

Mr. Hebert’s father and mother brought wrongful death claims against the steering system’s manufacturer, Teleflex.  The mother ultimately settled her claims.

After several years of litigation, in 2014, the claims brought by Mr. Hebert’s father were tried to a jury.

Mr. Hebert’s father alleged Teleflex failed to warn of inherent dangers in the product, namely that even a very small amount of hydraulic fluid loss could lead to J-hook, ejection, and death.

The evidence showed that 3.2 teaspoons of hydraulic fluid could make the difference between normal operation of the Teleflex system, and catastrophe.

The evidence also revealed that while there had been no documented prior J-hook incidents, Teleflex was aware of thousands of complaints regarding fluid loss in boats that had the same steering system.  Teleflex countered that the complaints were minimal considering that millions of systems had been sold.

A former Teleflex employee testified that the company knew of the issue for several years prior to the incident, but was unable to design around it.

Maritime Law – Punitive Damages Verdict

At trial, the jury awarded $125,000 in compensatory damages and $23 million in punitive damages.

Louisiana Appeals Court Affirms

The Louisiana Third Circuit Court of Appeals affirmed the jury verdict.

The court held that when a product has an inherently dangerous feature that cannot be designed out of the product, the manufacturer has a duty to warn of the specific danger.

The court also found that American National Standard Product Safety Signs and Labels (ANSI) standards required warning decals to be placed on the steering system itself.

Louisiana Supreme Court Holds Punitive Damages Recoverable for Maritime Injuries

Teleflex challenged the appeals court’s ruling to the Louisiana Supreme Court.

The Louisiana Supreme Court first held it was reasonable and permissible for the jury to award punitive damages:

“Although this court has yet to speak specifically on the issue, the appellate courts of this state have found punitive damages to be an available remedy under maritime law. Punitive damages are available as a remedy in general maritime actions where a defendant’s intentional or wanton and reckless conduct amounted to a conscious disregard for the rights of others. The Supreme Court has held that punitive damages under common law for wanton, willful, and outrageous conduct extends to claims arising under federal maritime law.  The United States Fifth Circuit, too, has held that punitive damages are recoverable under general maritime law for acts that are willful, wanton, and in callous disregard for the safety of others; this requires a showing of bad faith. ‘In order to recover punitive damages in a maritime case, a plaintiff must establish a higher degree of fault than simple negligence.’ In Bonnette v. Conoco, Inc., we explained that, in proving a claim for exemplary damages under former La. C.C. 2315.3 (repealed in 1996), ‘[wanton and reckless conduct means] the defendant proceeded in disregard of a high and excessive degree of danger, either known to him or apparent to a reasonable person in his position, or that the defendant engaged in ‘highly unreasonable conduct, involving an extreme departure from ordinary care, in a situation where a high degree of danger is apparent.’”

Teleflex argued no punitive damages were appropriate because the steering system had been manufactured and distributed for 15 years with no prior J-hook incidents.

The Louisiana Supreme Court disagreed, holding that Teleflex knew about the potential consequences of fluid and steering loss at least 9 years before the system was sold, and 16 years prior to the incident.

Further, a decal warning sticker would have cost 30 cents.

Court Reduces Punitive Damages Award to $4.25 Million

Teleflex argued that even if punitive damages were appropriate, $23 million in punitives on a $125,000 compensatory damages award was excessive and violated the company’s constitutional right to due process of law.  The Louisiana Supreme Court agreed.

The Louisiana Supreme Court noted that under the U.S. Supreme Court’s holding in BMW of North America v. Gore, three “guideposts” are considered in punitive damages awards: (1) the reprehensibility of the defendant’s conduct; (2) the ratio between the exemplary damages award and the harm the defendant’s conduct caused; and (3) the size of any civil or criminal penalties that could be imposed for comparable misconduct.

The Court held that under Louisiana precedent including Mosing v. Domas, the defendant’s wealth should also be considered.  The Court noted that “the importance of the defendant’s financial situation to the goals of punishment and deterrence is obvious.”

This is similar to Texas punitive damages law, including Texas Civil Practice & Remedies Code Section 41.011, which permits the jury to consider net worth in awarding punitive damages.

The Louisiana Supreme Court then discussed several U.S. Supreme Court holdings on punitive damages, including:

• Pacific Mut. Life Ins. Co. v. Haslip, 499 U.S. 1 (1991), affirming punitive damages of 4 times compensatory damages and 200 times out-of-pocket costs in insurance fraud case.
• TXO Production Corp. v. Alliance Resources Corp, 509 U.S. 443 (1993), affirming $10 million in punitive damages on $19,000 in compensatory damages.
• BMW, in which the U.S. Supreme Court reversed a $2 million punitive damages award on $4,000 in economic damages, stressing, however, that no mathematical formula was appropriate, and that low awards of compensatory damages could support large punitive damages awards in certain cases.
• State Farm Mut. Auto Ins. Co. v. Campbell, in which the court remanded a $145 million punitive damages award on a $1 million compensatory damages award, suggesting that in most cases, only a 9:1 ratio of punitive: compensatory damages would be appropriate.
• Exxon Shipping Co. v. Baker, 554 U.S. 471 (2008), holding $4.5 billion in punitives on a $507.5 million compensatory damages award for the Exxon Valdez oil spill in Alaska was excessive.

Applying the U.S. Supreme Court’s reasoning, the Louisiana Supreme Court held that in Mr. Hebert’s case, while the compensatory damages award was low, the harm was great, which opened the door to a punitive damages award in excess of any ratio.

The Court noted, however, that while Teleflex knew that the device had the potential to fail, there was no evidence that Teleflex had “targeted” specific customers, no history of ignoring prior incidents, no evidence that Teleflex was emphasizing profits over safety, and no evidence of intent to harm.

The latter factors, if they had been present, may have warranted a much higher award.  The Louisiana Supreme Court concluded that “although we agree that Teleflex’s conduct was reprehensible, and certainly within the punishable spectrum, we cannot say the record supports a finding that Teleflex’s conduct was on the extreme end of ‘malicious behavior and dangerous activity carried on for the purpose of increasing a tortfeasor’s financial gain.’”

Continuing its analysis, the Court found that the value of the mother’s claims could be considered in evaluating the appropriate amount of punitive damages.  Those claims were settled pre-trial, but could have amounted to $2 million or more under existing precedent.

The Court determined that, therefore, the appropriate compensatory damages figure to consider was $2,125,000, the potential value of the mother’s claim, plus the father’s compensatory damages award.

On the existing record, an appropriate punitive damages award would be a 2:1 ratio of that amount, or $4,250,000.

The Louisiana Supreme Court amended the punitive damages award to $4,250,000, and otherwise affirmed the trial court’s judgment.

The case is Warren v. Shelter Mutual Insurance Company; 2017 WL 4737109 (La. 10/18/17).

Our maritime injury lawyers at Morrow & Sheppard have handled Jones Act and maritime injury cases around the country.  Call us at 800-489-2216 for a free, confidential case evaluation.