Punitive damages award delayed
on Jun 27, 2012 at 5:42 pm
Supreme Court Justice Anthony M. Kennedy on Wednesday put on hold a state court ruling that made a punitive damages award look much smaller by putting hundreds of thousands of dollars of attorneys’ fees on the other side of the legal ledger. The postponement in Icicle Seafoods, Inc. v. Clausen (application 11A1176) will stay in effect until the Court completes action — next Term — on a pending appeal by the company (docket 11-1475). The Kennedy stay order is here. The company’s petition and lower court ruling are here.
If the Court ultimately takes on the case for review, it could lead to a new ruling on how courts are to calculate the ratio of punitive damages to compensatory damages — a ratio that, especially in maritime cases, the Court has said ought not to go beyond a ratio of 1 to 1. In other words, punitive damages as a general rule in an admiralty dispute should be matched dollar for dollar with compensatory awards. There is now an ongoing dispute over whether that 1 to 1 ratio was a hard and fast one.
The case grows out of an accident in Alaskan waters in February 2006. A marine engineer from Louisiana, Dana Clausen, was working on a barge, the Bering Star, when he tried to lift a piece of steel weighing 122 pounds. He seriously injured his lower back, neck, and hand. He went ashore in Alaska for medical treatment, and eventually went back home to Louisiana. He was unable to work because of his injuries.
Later, he complained that he had difficulty getting his employer, Icicle Seafoods, Inc., to pay for the traditional maritime obligation of “maintenance and cure” to cover living expenses while he was regaining his health. What Icicle did pay, he contended, was not enough to keep him from having to live in a trailer with a leaking roof and with no utilities. He was unable to work and, eventually, his injuries were found to be serious enough to end his working career.
After Icicle had sued in federal court to try to end the payment of maintenance and cure, on the claim that he had disrupted the company investigation into his accident, Clausen sued Icicle in state court. He sought maintenance and cure payments, and made claims that the company had been negligent in operating the vessel and that the barge was in an unseaworthy condition when he was injured. Icicle’s federal lawsuit was later dismissed, but a state court in Washington awarded Clausen $37,420 in compensatory damages for maintenance and cure. Because the jury found that the company’s actions were callous and willful, it tacked on punitive damages of $1.3 million.
The jury ruled for Clausen also on the negligence claim, awarding him $453,100 by dividing negligent liability in Icicle’s favor. No punitive damages could be awarded on that claim. The jury found for Icicle on the unseaworthiness claim.
The jury’s verdict on punitive damages for the maintenance and cure award, Icicle contended in state court, made the ratio of punitives to compensatory damages 34 to 1. It claimed that, under Supreme Court precedent for maritime cases, the ratio could be no more than 1 to 1. That claim relied upon the Supreme Court’s 2008 ruling in Exxon Shipping Co. v. Baker. Clausen also had been awarded $387,558 in attorneys’ fees, plus $40,547.57 in costs. The state court tacked those awards onto the $37,420 in compensatory damages on the maintenance and cure claim, and that had the arithmetic effect of increasing the compensatory side of the formula to $465,525 — thus reducing the ratio from 34 to 1 to close to 3 to 1.
In a divided ruling, the Washington Supreme Court upheld the award, concluding that the Exxon Shipping decision did not establish a fixed 1 to 1 ratio, and that attorney’s fees could properly be included on the compensatory side of the comparison.
Icicle has now paid Clausen a total of $825,545.64, which covered all of the compensation award, plus the legal fees and costs. The company, however, has continued to contest the punitive award of $1.3 million. It has posted a bond to cover the obligation if it ultimately loses.
Icicle in early June filed its petition for review in the Supreme Court, challenging both parts of the state court’s ruling. A week later, after the state court denied a stay, the company filed its application with Justice Kennedy for a delay of the state court decision until the Court acted on the company’s petition.
In Kennedy’s stay order, the part of the state Supreme Court ruling dealing with the punitive damages issue was blocked pending final action on Icicle’s appeal, provided that the posted bond remain in effect. If the petition is denied, the stay will end; if it is granted, the stay will remain until a decision emerges.
