Brown v. United States

• Decision Date: 12 August 1985
• Docket Number: Civ. A. No. 81-168-T.
• Citation: 615 F. Supp. 391
• Court: U.S. District Court — District of Massachusetts
• Parties: Honour BROWN, Individually and as Personal Representative of Cary Brown and as Administratrix of the estate of Gary Brown, et al., Plaintiffs, v. UNITED STATES of America, Defendant.

615 F. Supp. 391

Honour BROWN, Individually and as Personal Representative of Cary Brown and as Administratrix of the estate of Gary Brown, et al., Plaintiffs, v. UNITED STATES of America, Defendant.

Civ. A. No. 81-168-T.

United States District Court, D. Massachusetts.

August 12, 1985.

COPYRIGHT MATERIAL OMITTED

Michael B. Latti, William J. Griset, Jr., Latti Associates, Boston, Mass., for plaintiff.

David Hutchinson, Trial Atty., U.S. Dept. of Justice, Torts Branch, Washington, D.C., for U.S.

Astrid C. Glynn, Glynn & Dempsey, Boston, Mass., for Sea Fever Corp.

Robert L. Athas, Boston, Mass., for Gloucester Marine Railways.

MEMORANDUM

TAURO, District Judge.

In an opinion issued December 21, 1984, this court narrowly applied traditional tort principles to a unique factual setting in holding the government liable, because of its failure to properly maintain a computerized weather buoy, for the drowning deaths of three lobster fishermen.¹ Brown v. United States, 599 F.Supp. 877 (D.Mass. 1984). On January 28, 1985, a bench trial was held on the issue of damages. After the submission of post-trial briefs, the damages controversy was taken under advisement on June 6, 1985.

Plaintiffs seek to recover damages under the Death on the High Seas Act, 46 U.S.C. § 761-768 (DOHSA), which provides a cause of action "whenever the death of a person shall be caused by wrongful act, neglect, or default occurring on the high seas beyond a marine league² from the shore ... of the United States." DOHSA allows "fair and just compensation for the pecuniary loss sustained by the persons for whose benefit the suit is brought." 46 U.S.C. § 762. In Sea-Land Services, Inc. v. Gaudet, 414 U.S. 573, 584-85, 94 S.Ct. 806, 814, 39 L.Ed.2d 9 (1974), the Court recognized that loss of support is an element of pecuniary loss under DOHSA, and defined loss of support to include "all the financial contributions that the decedent ... would have made to his dependents had he lived." The Court also recognized that the "monetary value of the services the decedent ... would have continued to provide" is recoverable under DOHSA, including the value of the "nurture, training, education, and guidance that a child would have received."

In addition to seeking damages under DOHSA, plaintiffs seek compensation for the pain and suffering of their decedents. Plaintiffs' respective claims are discussed below.

I Gary Brown

Gary Brown was born on October 3, 1953 and drowned on November 22, 1980 at the age of 27. He married two months before his death. At the time of Gary's death, his wife, Honour, was pregnant with their daughter, Cary Brown, who was born in 1981.

Honour Brown is entitled to the aggregate income Gary Brown would have earned, less the amounts he would have paid in federal and state taxes, See Jones & Laughlin Steel v. Pfeifer, 462 U.S. 523, 534, 103 S.Ct. 2541, 2549, 76 L.Ed.2d 768 (1983),³ and for personal maintenance, Higginbotham v. Mobil Oil, 360 F.Supp. 1140, 1144 (W.D.La.1973), aff'd in relevant part, 545 F.2d 422 (5th Cir.1977), rev'd on other grounds, 436 U.S. 618, 98 S.Ct. 2010, 56 L.Ed.2d 581 (1978). In order to make this calculation, this court must determine the rate at which Gary Brown's income would have increased during the years of his employment.

The defendant's expert assumed that Gary Brown was a typical fisherman and concluded that his earnings would have increased at a rate of 6% a year. His testimony was based on the fact that fishermen's wages have increased at that rate during the past ten years (Tr. 5-160). The defendant's expert, however, did not consider the actual rate at which Gary Brown's income grew during the years preceding his death. Moreover, he failed to consider that Gary Brown was a lobsterman and not an ordinary fisherman (Tr. 5-169).

Plaintiffs' expert, on the other hand, examined Gary Brown's tax returns for the years 1977 to 1980 and concluded that, had he not been killed, his income would have continued to increase at an 11% rate until March 1, 1985. Applying that rate of increase to Gary Brown's 1980 earnings of $21,555, plaintiffs' expert calculated that Gary Brown would have had annual earnings of $37,087 as of March 1, 1985 (Tr. 5-131, 150).⁴

For the period following March 1, 1985, plaintiffs' expert made the conservative assumption that Gary Brown would not have made any further career advances and that his wages would have only increased at a rate of 1.5% a year, representing the benefit he would have received from the general increases in productivity that permeate the economy and benefit all American workers (Tr. 5-132). See Jones & Laughlin Steel v. Pfeifer, 462 U.S. 523, 535-36, 103 S.Ct. 2541, 2549-50, 76 L.Ed.2d 768 (1983) ("productivity increases ... have been a permanent feature of the national economy since the conclusion of World War II"); O'Shea v. Riverway Towing Corp., 677 F.2d 1194, 1200 (7th Cir.1982) (plaintiff "could expect her real wages ... to rise ... as average real wage rates throughout the economy rose, as they usually do over a decade or more").

In calculating the aggregate amount of income a decedent would have earned, a court may not simply add up the salary plaintiff would have received during his work-life expectancy. Rather, the court must discount the decedent's projected earnings so as to arrive at their present value. Establishing the appropriate discount rate is, of course, the threshold task.

At trial, the parties offered two alternate methods of ascertaining the proper discount rate. Plaintiffs' expert economist proposed a "real" discount rate. A real discount rate is based on the "fairly constant relationship between interest and inflation rates." Doca v. Marina Mercante Nicaraguense, S.A., 634 F.2d 30, 37 (2d Cir.1980), cert. denied, 451 U.S. 971, 101 S.Ct. 2049, 68 L.Ed.2d 351 (1981). The real discount rate itself is the margin by which the interest rates of risk-free instruments (such as Treasury securities) historically exceed inflation.⁵

Plaintiffs' expert employed a real discount rate of 3.5%. He made this selection based on his findings that the interest rate on Treasury securities was 2.5% to 3.0% during the fifties, when there was little inflation and slight expectation of future inflation. He also noted that high grade corporate bonds paid interest of 3.5% to 4.0% during the fifties (Tr. 133). The higher rate of interest paid on corporate bonds apparently caused plaintiffs' expert to opt for a higher discount rate than the rate paid on Treasury securities.

From the plaintiffs' standpoint, their expert's selection of a 3.5% discount rate was extremely conservative. The rate of corporate bonds should not have had an impact on the plaintiffs' expert's selection of a real discount rate, for even the highest quality corporate bond contains an element of risk that is reflected in a higher interest rate. Consequently, the interest rate of corporate bonds is an inappropriate measure of the real or risk-free discount rate.

A real discount rate of 3.5% also appears high in light of other analyses. In Doca, the Second Circuit adopted Judge Blumenfeld's methodology in Feldman v. Allegheny Airlines, 382 F.Supp. 1271, 1310 (D.Conn.1974), aff'd 524 F.2d 384 (2d Cir. 1975), for calculating the real discount rate. Judge Blumenfeld found the interest rates on Treasury securities for each year between 1952 and 1966. He then subtracted the percentage rise in the Consumer Price Index for that corresponding year.⁶ This methodology yielded a real discount rate of 2% which the Second Circuit employed in Doca. Moreover, the Supreme Court has held that a trial court may reasonably estimate the real discount rate at between 1 and 3%. Jones & Laughlin, 462 U.S. at 548-49, 103 S.Ct. at 2556.

Defendant's expert did not use a real discount rate. Rather, he projected a 6% increase in Gary Brown's salary throughout his 32 year work-life expectancy. He then discounted that future stream of earnings at a rate of 10%, the rate paid by long-term municipal bonds at the time of trial.

This court finds that the plaintiffs' expert's approach, forecasting real wage increases and then discounting the resultant real wages at a real discount rate, is more credible and reliable than that employed by defendant's expert. Plaintiffs' method eliminates unnecessary speculation as to the level of future inflation. The fairly constant differential between interest and inflation rates, on which the real discount rate is premised, makes it more reasonable to predict the relationship between the two rates than to predict the level of either rate in isolation. See Doca, 634 F.2d at 37. Defendant's expert took the more precarious route of assuming a certain rate of inflation, although it is not possible to assign a number to that rate because he did not break down his 10% discount rate into the components of risk, future expectation of inflation, and the real interest rate.⁷ Assuming the defendant's expert believed that the risk of the municipality failing to meet its obligations was negligible,⁸ and further assuming that he believed the real rate of interest was 2%, he would be assuming an 8% rate of inflation in the future. He would further be assuming that Gary Brown's wages, which he projected to increase at a rate of 6% a year, would be losing ground to inflation at a rate of 2% a year.

Recognizing how speculative it is to project future inflation, the First Circuit in Williams v. United States, 435 F.2d 804, 807 (1st Cir.1970), rejected any consideration of the impact of inflation on lost future earnings. More recently, however, the First Circuit noted in dicta that "courts around the nation have not been oblivious to the effects of inflation on damage awards," citing Doca. Brochu v. Ortho Pharmaceutical Corp., 642 F.2d 652, 664 n. 17 (1st Cir.1981). Indeed, the approach used in Doca of utilizing the real discount rate has the desirable effect of taking inflation into account...