Admiralty - Colin A. Mcrae and Jessica L. Mcclellan

• Publication year: 2008

Admiraltyby Colin A. McRae^* and Jessica L. McClellan^**

I. Introduction

The United States Supreme Court and Eleventh Circuit Court of Appeals were busy in 2007 with admiralty cases and other matters of importance to maritime practitioners. The Supreme Court considered two punitive damages cases with maritime implications and reviewed a case under the Federal Employers' Liability Act¹ with potential bearing on Jones Act² jurisprudence. The Supreme Court also clarified an important procedural issue concerning the application of the forum non conveniens doctrine, which often arises in maritime cases. The Eleventh Circuit continued its trend of tackling important maritime questions by issuing opinions on (1) the interplay between the Seaman's Wage Act³ and the Convention on the Recognition and Enforcement of Foreign Arbitral Awards,⁴ (2) the recoverability of punitive damages in Jones Act cases, and (3) the burden of proof in allision cases.

II. United States Supreme Court Cases

A. Punitive Damages and Due Process

Exxon Mobil Corp. v. Grefer⁵ involved the contamination of property owned by the Grefers and leased to an oil and oil pipe company.⁶ Exxon was among the defendants sued by the Grefers for damages after they discovered radium on their land. The plaintiffs sued under theories of negligence, strict liability, absolute liability, nuisance, and fraud and sought compensatory and punitive damages for loss of use and remediation of the property. The case was initiated in 1997 in civil trial court in Louisiana and was subsequently amended and affirmed on appeal.⁷ The United States Supreme Court granted certiorari.⁸

The Grefers leased their thirty-three-acre property to a company known as Intracoastal Tubular Services, Inc. ("ITCO"), who cleaned oil pipelines for Exxon. The property owners learned after the end of the lease that the land was contaminated with radium and sued ITCo, Exxon's main cleaning contractor, and Exxon, among others. At trial, the district court in Orleans Parish awarded the Grefers over $56 million in compensatory damages and $1 billion in punitive damages, to be paid by Exxon, for the harm done to their property.⁹

Exxon and the Grefers appealed.¹⁰ The Louisiana Court of Appeal for the Fourth Circuit reduced the punitive damages award to twice the compensatory damage amount to comply with the Due Process Clause of the Fourteenth Amendment,¹¹ but otherwise the court of appeal affirmed the lower court's holding.¹² Exxon filed many assignments of error on appeal, but only the lack of due process claim succeeded.¹³

The appellate court rejected Exxon's argument that the $56 million in restoration damages was unreasonable, deferring to the trier of fact for the determination of damages, despite the fact that the tract of land was valued at $1.5 million.¹⁴ The appellate court upheld the restoration damages.¹⁵ The court then cited evidence of the defendants' wanton or reckless conduct, such as the continued health and environmental hazards they caused between 1985 and 1992 and their failure to warn the public or make efforts to remedy the hazards.¹⁶ Although the appellate court was willing to uphold an award for punitive damages, it held that the amount of the award, $1 billion, was unconstitutional because it was exceedingly disproportionate to the $56 million compensatory award.¹⁷ The appellate court concluded that a lesser, single-digit ratio between the compensatory and punitive awards would be appropriate and decreased the punitive award to $112,290,000.¹⁸

Exxon appealed the appellate court's decision to the United States Supreme Court.¹⁹ The Supreme Court granted the petition for certiora-ri and vacated the judgment of the Louisiana Court of Appeal and remanded it for consideration in light of Philip Morris USA v. Wil-liams.²⁰

B. Punitive Damages and Harm to Nonparties

The question of whose injury may be assessed in determining punitive damage awards was addressed by the United States Supreme Court in Philip Morris USA v. Williams.²¹ This case arose when the representative of Jesse Williams's estate brought suit for negligence and deceit against the manufacturer of cigarettes the decedent smoked. The estate claimed the manufacturer downplayed the reality of the dangers of smoking and thus contributed to the decedent's death.²²

The jury awarded the Williams family $821,000 in compensatory damages and $79.5 million in punitive damages to be paid by Philip Morris. The trial court reduced the large award of punitive damages, but the state appellate court reinstated the jury's verdict. The Oregon Supreme Court upheld the punitive damage award, which was partially based on harm to nonparties to the litigation. The United States Supreme Court granted Philip Morris' petition for certiorari to address its contention that the punitive damage award was grossly excessive and impermissibly included a consideration of harm to nonparties.²³

The United States Supreme Court held that although harm to nonparties could be considered in assessing the reprehensibility of the defendant's conduct for purposes of punitive damages, the punitive award cannot be based on the jury's desire to punish the defendant for harming people not parties to the litigation at hand.²⁴ The Court held that such an award was a taking of property without due process because a defendant would not be able to adequately defend itself against a claim of injury to a nonparty.²⁵

The Court in Philip Morris did not address the allegation that the award was grossly excessive and instead vacated the punitive damage judgment and remanded the case for reconsideration based on due process considerations.²⁶ The Court concluded that punitive damage awards cannot be used to punish a defendant for harming nonparties because too much would be left to jury speculation.²⁷ Potential harm can only be considered when it is potential harm to the plaintiff.²⁸ If a court permits a jury to consider harm to others, it cannot uphold a punitive damage award based solely on that premise.²⁹ The case was remanded to the Oregon Supreme Court to apply the correct constitutional standard, which may lead to either a new trial or a reduction of damages.³⁰

Justice Stevens argued in his dissent that the harm to nonparties is a relevant factor in assessing reprehensibility in civil court punitive damage awards.³¹ Justice Stevens classified punitive damages as "a sanction for the public harm the defendant's conduct has caused or threatened."³²

C. Standard of Causation Under the Federal Employers' Liability Act

The Federal Employers' Liability Act ("FELA")³³ is a statutory scheme governing railroads' liability to their employees for injuries resulting in whole or in part from the railroad's negligence.³⁴ An employee's contributory negligence is not a bar to recovery under FELA, but the employee's recovery is reduced in proportion to his or her contributory negligence.³⁵ In Norfolk Southern Railway Co. v. Sor-rell,³⁶ Timothy Sorrell sued his employer, Norfolk Southern Railway Co., in Missouri state court under FELA. Sorrell sustained neck and back injuries while working as a trackman when his dump truck veered off the road and tipped over. The cause of the accident was disputed, and Sorrell claimed it was due to the employer railroad company's negligence. Sorrell's employer responded that Sorrell's own negligence caused the accident and resulting injuries.³⁷

Missouri's jury instructions for FELA liability call for one standard of causation to be applied to employer negligence and another to employee contributory negligence.³⁸ The instructions provide that a jury must "find an employee contributorily negligent if the employee was negligent and his negligence 'directly contributed to cause' the injury."³⁹ On the other hand, per these instructions, railroad negligence will be found "if the railroad was negligent and its negligence contributed 'in whole or in part' to the injury."⁴⁰ The Missouri state court instructed the jury according to these standards, over the employer's objection, and the jury found for Sorrell, awarding $1.5 million in damages. The Missouri Court of Appeals for the Eastern District affirmed, and the Missouri Supreme Court denied discretionary review.⁴¹

The United States Supreme Court granted the railroad's petition for certiorari and vacated the judgment awarding $1.5 million to Sorrell.⁴² The railroad's primary argument on appeal was the variation in standards for contributory negligence of the employee as opposed to negligence of the employer. In arguing for a single standard, Norfolk Southern pointed out that Missouri is the only state that advocates this divergent standard, and at common law, the causation standards for negligence and contributory negligence are the same.⁴³ The Supreme Court gave great weight to the common law in its analysis and found "no basis for concluding that Congress in FELA meant to allow disparate causation standards."⁴⁴

Sorrell argued that even if the instructions improperly contained different causation standards, the error was harmless and the verdict should be upheld.⁴⁵ The United States Supreme Court refused to make this decision and remanded the case to the Missouri Court of Appeals to decide whether a new trial would be necessary.⁴⁶

D. Threshold Jurisdiction and Forum Non Conveniens

In Sinochem International Co. v. Malaysia International Shipping Corp.,⁴⁷ the United States Supreme Court addressed a jurisdictional question to resolve a split among the circuits. A Pennsylvania district court dismissed a case on forum non conveniens grounds without first addressing potential subject matter or personal jurisdiction objections, and Malaysia International, the original plaintiff, challenged the permissibility of the dismissal. The United States Court of Appeals for the Third Circuit reversed, holding that a district court must first determine that it has both subject matter and personal jurisdiction to entertain...