Louisiana Supreme Court's take on punitive damages

Returning to a frequent topic on account of new developments: 

A family was out boating on Louisiana waters when the boat's hydraulics malfunctioned, ejecting then killing a passenger. Teleflex made the hydraulics, and, the court found, it failed to warn buyers adequately that the loss of hydraulic fluid could result in passenger ejection and worse. 

Bizarrely, the Louisiana Supreme Court analyzed punitive damages under Gore v. BMW, an earlier case where the Supreme Court said punitive damages shouldn't be above a 9:1 ratio of compensatory damages, instead of Exxon v. Baker, a later Supreme Court case where the Court held under general maritime law, the ratio should be 1:1. The distinction makes sense: in Gore, the issue is due process - the constitutional boundary - while in Exxon, the issue is general maritime law, which is about the only area where federal courts still make law. In Gore, the Court isn't saying what's advisable; only what is permissible. But in Exxon, the Court is saying what is permissible. So why is this bizarre? After all, it's a claim brought under the Louisiana Products Liability Act - it stands to reason it'd be under Gore, not under Exxon. The LPLA doesn't allow punitive damages, and Louisiana law doesn't either except for drunk driving. So the only reason punitive damages are allowed is styling the claim as part of general maritime law, which should be under Baker. Near as I can tell, the Supreme Court notices this issue . . . then returns back to looking at Gore. 

And under Gore, while referencing Exxon, the Court says punitive damages should be limited to 2:1 compensatory damages under those specific facts. From the Court's opinion, it seems Louisiana would allow a higher ratio if there were worse facts. 

The case seems to be more than a little results-oriented, but now it's the law.  

One lemma: the Court says that the jury can look at the wealth of the defendant in determining punitive damages, because the idea is to punish, and you have to know how wealthy the defendant is to soak him, her, or it adequately. Fair enough. But if that's the case, then how on earth are we going to allow insurance for punitive damages? Yet we do, at least in Louisiana. 

New words for today

1. Feckful. I had to double check and learn it is, in fact, a word. I loathe the overused "feckless" so I am happy to see "feckful" is a thing. From now on, "less feckful" will be my replacement for "feckless" (though I have no plans to use either if I can help it).

2. Staunch versus stanch. Per Garner, "stanch" is preferable as the verb (to stop the flow, eg of blood); "staunch" as the adjective (a staunch and stalwart friend). 

3. Scaramuccian, which, I guess, defines itself. 

On judicial expertise

This article about Judge William Alsup of the Northern District of California is excellent, the thesis being that Judge Alsup, maybe unique or at least exceptional on the federal bench, has experience in coding. So it works out well that a lot of tech-heavy cases end up on his docket. 

When I teach my class, the second discussion regards different judicial approaches, and I use a series of articles back and forth between Garner & Scalia on the one hand, and Posner on the other. Garner and Scalia argue a judge only needs to know commonsense application of rules to reach the right result; Posner takes the position you need to know the underlying facts. And I return to this repeatedly (for instance, asking whether administrative agencies reach better results than judges because of their expertise). I confess to thinking judges need to keep an eye toward results - also, but not only, process - and therefore experience is material. To put it in other terms, a judge once told the audience, during oral argument, that it was his first foray into marine insurance, and he hoped it would be his last. My heart sank a little because experience matters. 

The article takes the position that experience matters, and it matters a lot in matters of code. It's hard for me to consider that wrong. For every legal conclusion, there are a number of factual conclusions, and even the legal conclusions are informed by facts. It is, after all, a dispute between parties over a certain set of facts that leads to a lawsuit and a judicial determination. How can somebody say where on the idea/expression dichotomy something falls if they aren't familiar with the underlying facts?

Marine world - even marine insurance - is nowhere near as complicated as LIDAR. For one thing, I can talk about marine stuff for ages, but I can't talk about JAVA or LIDAR or GNU for five minutes without revealing my ignorance. 

More celebration of failure

Thereare a few cases pending that will be added either to successes or to failures soon enough. But in the vein of acknowledging failures, I thought this article about Google Project X, a/k/a the Moonshot Factory, was interesting and worthwhile. To wit:

Recently, X has gone further in accommodating and celebrating failure. In the summer of 2016, the head of diversity and inclusion, a Puerto Rican–born woman named Gina Rudan, spoke with several X employees whose projects were stuck or shut down and found that they were carrying heavy emotional baggage. She approached X’s leadership with an idea based on Mexico’s Día de los Muertos, or Day of the Dead. She suggested that the company hold an annual celebration to share stories of pain from defunct projects. Last November, X employees gathered in the main hall to hear testimonials, not only about failed experiments but also about failed relationships, family deaths, and personal tragedies. They placed old prototypes and family mementos on a small altar. It was, several X employees told me, a resoundingly successful and deeply emotional event.

The first of November is nearly upon us, and I will take the opportunity to expound a little further on the idea of celebrating failure. Though I'm not quite to celebrating death yet. 

Non-disclosure agreements and protective agreements

I reflexively put a confidentiality clause in every settlement agreement. I am benefiting my client (which would rather not have evidence of payment be used as proof of fault as opposed to compromise) and the confidentiality clause plays an important role. It doesn't really hurt the other side, who is, I would think, mostly interested in getting compensated. 

There is real public benefit when more information is in the public though. To take settlements, for instance - if I knew what the going rate is for settlements under X, Y, and Z circumstances because there were a database of the facts of every claim and the amount of the settlement, I'd have much more information. (This is also an argument in favor of the value to the public from trying more cases, which creates a written record of who is at fault and how much certain claims are worth, and the benefit of justice being done - and being seen to be done.) 

And cases where there is private benefit but public harm sound a lot to me like market failure. If the market isn't going to reach the right result, courts ought to be more willing to step in. 

I don't know what that would look like: when a non disclosure agreement or a protective agreement would be so burdensome, or the public interest so great, that it would be preemptively void, or that the consequences of violating it would be lessened. I do know that the rules should be clear enough that someone who is writing, or signing, a confidentiality agreement knows ahead of time what is and isn't covered, and that the parties know ahead of time whether and what sort of a breach would be permissible or punishable. Evidence of a crime? Hard to say that should be confidential (though I should note here attorney-client privilege is a whole different animal). What about evidence of noncriminal but awful conduct? How do you draw clear lines? And if you say a non-disclosure agreement that includes evidence of crimes is presumptively void, what if the would-be criminal defendant isn't charged, or if she or he isn't convicted? At that point, was there a violation of the NDA? Or do you say that you'll consider the public interest in determining penalties? That is cold comfort to somebody planning to come forward with evidence. 

On the insurability of punitive damages

Louisiana law allows insurance for punitive damages. This is wrong, and bad, and it should stop. 

I'll accept that Louisiana is unlikely to have a lot of case law on this issue because punitive damages are now limited to driving under the influence and child pornography - not really the hotbeds of appellate jurisdiction. But general maritime law applies the law of the adjacent state in the absence of controlling maritime law, so it matters a lot to marine insurance. 

I'll also accept that, absent the maintenance and cure context where decisions are more often made with an eye toward their likely consequences, the insurability of punitive damages is not likely to affect conduct significantly. If suddenly punitive damages are insurable and companies have such cover, they are, I suspect, not much more likely to act recklessly. Reckless conduct often enough has a built-in penalty in the form of a likelier accident. (With regard to M&C, insuring punitive damages would certainly make companies more willing to face the consequences of denying M&C. Whether that's good or bad depends on your stance.)

But punitive damages should be uninsurable because insuring them undercuts the whole purpose: to punish. If insurance is had, punishment will not be had. And the second effect of insuring punitive damages is a likely erosion of the "gross negligence" or "arbitrary and capricious" standard. If the judge knows she or he is soaking an insurer, she or he is more likely to find punitive damages, for a broader range of conduct, and to blur the line between punitive and compensatory. It's hard to see how much good is done there. 

To put it in Kantian terms, we punish crimes not just to obtain justice against the criminal, but also to re-establish the moral world, and to tell the world that the criminal conduct was wrong. We want not just to punish wrongful conduct, but to be seen punishing wrongful conduct. Conduct warranting punitive damages is a world apart from criminal conduct, of course, but it is also supposed to be a world apart from ordinary negligence. Negligence is understandable; arbitrary or gross negligence shocks the conscience enough that we seek to punish the company - not just for the benefit of the plaintiff, but because we want to tell the world such conduct will not be tolerated. (In a number of jurisdictions, punitive damages go in part to the state precisely because they aren't meant to compensate the plaintiff, so the plaintiff has, it is thought, a thin claim to them.) If punitive damages are insured, we're not telling the world that we're punishing culpable conduct. We're telling people that it's a business transaction. That shouldn't be. 

A (rarely recurring) thought for the day

"The trouble with most of us is that we would rather be ruined by praise than saved by criticism." Thus spake Norman Vincent Peale, and its accuracy is probably best-proved by the knowledge we all have that we, the reader, are somehow different from those rubes. 

About which, it's worth reading anything by today's economics Nobel laureate, Richard Thaler, and looking at every other way that we delude ourselves, knowingly or (more often) unknowingly. (His work is really approachable and well-written.) Recognizing our shortcomings has to be a necessary step toward correcting them. 

Bryan Garner: Wrong on the Internet!

I should admit upfront that I have two books by Bryan Garner - legal usage, and modern american usage - on my end table, within arm's reach. The third book is the Chicago Manual of Style.*

Today he writes that lawyers are bad writers.  This is probably true in part. Take any sample that's big enough and you can probably distribute it on something that vaguely resembles a bell curve. There are a lot of lawyers who aren't good at writing. There's a lot of any [profession] that aren't good at [supposed core competence of profession]. 

But the wrong part: lawyers are bad writers because law schools fail them, and colleges fail them. Per Garner: "Writing standards have consistently fallen over the last century in secondary and higher education."

Really? There is more good writing available right now than ever before. I have at my fingertips and in front of my eyeballs writing about nearly any topic. It's really good! When I'm looking for inspiration, I'll go back and read Lincoln. Don't tell me he was emblematic of his times though. I could just as easily look a little more recently and find a hundred wonderful authors and journalists. How have writing standards fallen? Where's the proof? Come on. If you want legal examples, I will grant that maybe our current justices can't match Holmes or Brandeis. But look a little deeper and there are a lot of judges on the federal district and appellate benches whose writing ranges from lucid to exceptional. So too for lawyers. 

* The book ends are (a) a glass polar bear, which I got with my older sister in Italy, and (b) a brass propeller nut with some barnacles, which was briefly evidence in a case, which case is a different story for a different day.

Action against the United States can survive under OPA-90

Now, for an issue in the wheelhouse: OPA-90, pollution cover, 12(b)(6) motions, and appeals. It's like Christmas morning.  

The US Government owned a military transport, the FISHER. It spilled 11,000 gallons of fuel near Boston harbor. Ironshore, a pollution underwriter, paid for cleanup, then it pursued the US and Amsea .Amsea was responsible for crewing and maintaining the FISHER. 

The district court dismissed the case on the pleadings, finding that Ironshore can't go after the government or Amsea under OPA-90, and that OPA-90 provides all the possible remedies for an oil spill like this. Ironshore appealed, and it won. 

The First Circuit ruled Ironshore could not proceed against the government or against Amsea under OPA-90. OPA-90 exempts "public vessel," and although that term is not defined in OPA-90, it is, conveniently, defined in case law following the well-named Public Vessels Act of 1925 (which waives sovereign immunity for public vessels). That case law establishes that public vessels certainly include US government and military vessels, even when they are crewed by third parties. The First Circuit held: 

The strict hierarchical relationship between the Military Sealift Command and AMSEA establishes, as the district court concluded, that AMSEA crewed the FISHER under the operational control of the United States. AMSEA did not lease the FISHER from the United States, nor was it permitted to use the vessel for its private gain. Rather, all of AMSEA's work on the FISHER benefited the Military Sealift Command and the United States directly. Under the OPA, the United States both owned and operated the FISHER

As the vessel was a public vessel, it is exempt under OPA-90. 

But wait, there's more!

OPA-90 does not occupy the field. Its language leaves general maritime remedies in place. Therefore, Ironshore gets to go after the US under general maritime law / the Public Vessels Act. But when pursuing a government vessel under the Public Vessels Act, a party can only go after the government, not an agent like Amsea. End result: Ironshore gets to go after the US government, but not after Amsea.

This seems like clearly the right result. Congress waived sovereign immunity for public vessels, but exempted public vessels under OPA-90. Therefore public vessels are still subject to all other remedies. Meantime Ironshore and its assured were responsible for cleaning up the spill in Boston harbor; it would be less than ideal if they didn't have a remedy against a party with assets. I would be surprised if the Amsea/government contract didn't make Amsea responsible for its own fault (as was here), so it is likely - or certainly should be likely - that Amsea is ultimately responsible for the damages caused by its own fault. As it should be. 

Gerrymandering

I will not offer comments about the Supreme Court case on gerrymandering being argued today, except to comment that when I bring up gerrymandering in my class, it is briefly and to acknowledge it is not my expertise. 

But I found the New York Times article on the topic to be worthwhile. 

EDIT

Oral Argument transcript is here. I won't hazard a guess about the outcome. 

Depositions

This week has been a little bananapants crazy, but normal will return with the weekend and with normal, more frequent updates, including insuring punitive damages. Scintillating! 

Four new judges for the Fifth Circuit

Your author cares much more about district court judges than he does about Fifth Circuit judges because (a) every appellate case starts as a district court case, and the profound majority end that way, and (b) most district court cases are decided on the facts, so review is on an abuse-of-discretion standard, where, pretty well everything gets affirmed. 

So it is without much comment that I point out the nomination of Kurt Engelhardt, Stuart Duncan, James Ho, and Don Willett to the Fifth Circuit. I will say that Judge Engelhardt has always been reasonable in my not-too-frequent interactions with him, and reading Willett opinions is fun - which, good writing is hard. I couldn't pick Mr. Duncan or Mr. Ho out of a lineup, as we don't run in the same circles. 

More interesting (for me) is Barry Ashe at Stone Pigman being elevated to the Eastern District. I've never had a case with soon-to-be-judge Ashe, but it is interesting that Judge Ashe isn't a maritime guy, like the three Obama appointees. He is a federal court litigator, which is encouraging. He's 61 (+/-), which is a little more experienced than expected, but I suppose that's the advantage of being a district court judge: more of the important work, less of the spotlight. 

General Damages

That general damages should be about three times medicals is both tired and wrong. Presented as evidence: Kelvin Dunn v. Marquette, a recent bench trial in front of Eldon Fallon in the Eastern District of Louisiana, where general damages are less than medicals. Off duty, Captain Dunn awoke to find his tug, with its tow of two chemical barges, was having some issues. He slipped in the engine room on diesel, and he 'severely fractured' his femoral head. He underwent an emergency surgery and facet joint injections; he will require two total hip replacements. 

He was thirty-nine years old, making $124,000 a year before fringe benefits; he could only return to work making $18,000 a year. (The defense expert suggested he could make $125,000 a year if he opened a tattoo parlor. Judge Fallon said LOL no.)

Total damages:

(1) Past wage loss: $234,360.00;

(2) Past fringe benefits and meal loss: $38,760.88;

(3) Future wage loss: $1,665,121.00;

(4) Future fringe benefits and meal loss: $280,041.10;

(6) Future medical expenses: $641,435.89;

(7) Past pain and suffering: $100,000.00;

(8) Future pain and suffering: $400,000.00

Total: $3,359,718.87. This is a massive judgment. But general damages are less than past and future medicals, and the plaintiff was severely injured as a result of the accident. $500,000 strikes me as hardly crazy for these sorts of injuries and surgeries. Wage loss makes up two thirds (66% on the nose) of the entire judgment. The lesson to learn, I would submit, is that cases are going to be fact-specific, and that emphasis has to follow concern: where wage loss is the biggest worry, more emphasis should go there. 

Toward a sensible reading of the "as owner" clause

In my little world, some ink has been spilled on the Naquin v. EBI case, which expanded Jones Act status and limited a cause of action for negligent infliction of emotional distress. 

But there's another opinion coming out of the loss that's just as important, regarding insurance. Mr. Naquin was using a land-based crane to load a vessel. The crane collapsed, injuring Naquin and killing another employee. Naquin was found to be a Jones Act seaman - a topic for another day.

Does the P&I policy respond? The P&I policy is limited to liabilities incurred "as owner of the vessel[s]" listed in the policy. Naquin wasn't working on a vessel. The vessel didn't have anything to do with the accident. So how could liability be vessel-based? The Fifth Circuit followed this logic and held the P&I policy does not provide coverage. 

What would provide coverage? An MEL policy is the obvious choice, and it stands to reason Jones Act employers need both. P&I covers any incident that occurs on the vessel. MEL covers everything else. Injured on the way to the vessel? Or on a rig at which the vessel is tied up? There is still possibly Jones Act exposure, and certainly M&C, but those are MEL risks. It follows, I think, that it may be useful for a P&I underwriter to add MEL cover to address the gap. 

Benefits of the common law

Equifax was naughty, both in storing its users information, and in publishing it to the world. Is there a remedy? Not my area of expertise; I don't know, but my brief research indicates it may be harder than you might think. 

One suggestion I've seen is that there should be a common law remedy fashioned. Maritime law is the only major extant body of federal common law, so my sympathies naturally lie there. 

What is interesting to me is that there is a small body of literature suggesting that common law is better, with the general conclusion that common-law systems are better at protecting creditor and stockholder rights, and facilitate more financial development. For more, Luigi Zingales's A Capitalism for the People touches on the topic. 

On collisions in the open ocean

Presented without significant comment: why destroyers keep running into oceangoing vessels. 

[H]uman factors will continue to dominate as the cause of collisions. Were the watch-standers on each ship well-qualified? Were they distracted? Were they properly rested? Did they understand the rules of the road? Was the proper maintenance performed on installed electronic navigation systems? Were those systems ignored or devalued?

Sovereign immunity

The marine world has been reasonably bereft of conflict over the weekend. Instead I'm pointing at an area where I have negligible knowledge: tribal sovereignty. As it happens, some American indian tribes are using (selling? leasing?) their immunity to drug companies and payday lenders - the idea being that if the tribe is doing something, and the tribe is a sovereign government, then the tribe can't be sued for its actions no matter how despicable. A very good though brief summary is here. 

And buying drug patents to extend their lives, and offering shelter to payday lenders, strike me as reasonably unlikely to end well for our sellers. I hope they're getting top dollar up front. If you're a Posnerian at heart, finding your outcome then backing into how you get there, this is guaranteed to end poorly for the tribes, with uncertain downstream effect. 

In constitutional law, there's the idea of a market participant: a state can't favor its own when it's acting as a state government, but when it's acting as just another market participant, it can - for instance, when Louisiana funds LSU, it can favor Louisiana residents over Texas residents. I wonder if somehow there will be an analogous idea that when a tribe inserts itself as a market participant, it loses that immunity. 

For a similar argument (that states should lose immunity to antitrust when they are a market participant) see here, and regarding employment, see here.  

The Curse of Bigness

Dear reader, it is with great regret that I inform you Harry Morse, LLC was not selected among the Five Firms that Strike Fear into General Counsel. I probably need another dozen pedigreed lawyers to make a New Orleans list and a gross to make a regional list. 

There is an interesting debate resurfacing about the role of antitrust. I am not an antitrust expert. But I have done some reading (and am particularly sympathetic to) a strain of argument going back to Jefferson about bigness. The best version of which, near as I can tell, was written by Justice Brandeis - there's a good summary here. 

My input is this: my responsibilities are to my clients. If I want to take a case for free, that's my business. If I think a motion should be filed, the process goes like this: first, consider what should be done. Second, recommend it to the client. Third, do it. 

If Harry Morse LLC were bigger, I wouldn't write motions. I'd have people write motions then I'd review them. My responsibilities would be to my clients, but also to my employees and partners. It'd provide real advantages: bigness helps. Hey, I might make internet listicles. But it'd provide real disadvantages too. I'd do less of what I like, and I'd have less flexibility to do it. And I'd be lying if I told you I provide bespoke representation. 

Another (small) pair of data points regarding punitive damages

The Eastern District - Judge Barbier - decided Hancock v. Higman, where passengers on a mud boat filed suit, alleging they were run over by a pushboat. Higman, trying to strike parts of the claim early, argued the facts as alleged were inadequate to find gross negligence and award punitive damages. The Court stated:

Here, Plaintiffs allege that the M/V Trinity's captain and the crew saw Darrell and Ethan Hancock in their mudboat, but that the ship did not slow down. The complaint alleges that M/V Trinity continued to bear down upon Darrell and Ethan Hancock, which caused them to evacuate the mudboat. At this stage in litigation, the Court is not prepared to declare that these allegations, taken as true, fail to state a claim for which punitive damages may be appropriate under maritime law.

In abject fairness, this is on Rule 12(c), which is an identical standard to Rule 12(b)(6). Still, hard to compare this to the Palin decision without coming away with the belief one court uses a very different "reckless" standard from the other. 

And perhaps more distinctively, in Michigan, a district court in a Jones Act case ruled a plaintiff who was denied M&C for a certain time and lived (for free) with his father could still claim punitive damages despite a summary judgment motion. Without meaningful comment, the Court concludes:

Plaintiff is a 52 year old adult who claims he was forced to live with his father out of economic necessity. Plaintiff admits that he did not pay rent or utilities, but contends he had an agreement with his father to reimburse him for the support provided.

The court finds that there is an issue of fact whether defendants acted in bad faith with regard to the delay in paying maintenance benefits. 

This gives rise to a reasonably interesting question: there is an argument, which I've never seen pressed, as follows. If a Jones Act seaman is improperly denied M&C, s/he is entitled to compensatory damages for the denial. Meanwhile, per Exxon v. Baker, punitive damages are capped at 1:1 the compensatory damages. The argument (which I think is accurate) is that the punitive damages for arbitrary and capricious denial of M&C should be capped at 100% of the compensatory damages for denial of M&C - not 100% of the total compensatory damages for the case. 

Still, to press that issue, you'd have to find the right case, which nobody wants to be fighting on that territory anyway. 

On RIchard Posner's retirement

I don't have a lot to add to commentary about the retirement of Judge Richard Posner, which is today. In a future post I'll elaborate on his first big, much-needed blow in the Pennsylvania Rule, which is catching on here in the Eastern District of Louisiana. 

I will offer this: the guy is brilliant, and he has to top Liebling in the category of writing faster than anybody who can write better, and better than anybody who can write faster. Then again its hard to think of somebody with more volume.