Harper v. Zapata Off-Shore Co.

• Decision Date: 07 September 1984
• Docket Number: OFF-SHORE,No. 83-3149,83-3149
• Parties: Lee D. HARPER, Plaintiff-Appellee, v. ZAPATACOMPANY, Defendant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 87

741 F.2d 87

1985 A.M.C. 979

Lee D. HARPER, Plaintiff-Appellee, v. ZAPATA OFF-SHORE COMPANY, Defendant-Appellant.

No. 83-3149.

United States Court of Appeals Fifth Circuit.

Sept. 7, 1984.

Abbott, Webb, Best and Meeks, Daniel A. Webb, Michael G. Cordes, New Orleans, La., for defendant-appellant.

Michael A. McGlone, James F. Shuey, New Orleans, La., amicus curiae, for Offshore Marine Serv. Ass'n Henderson, Hanemann & Morris, Philip E. Henderson, Houma, La., J. Fletcher Jones, Andalusia, Ala., for plaintiff-appellee.

Appeals from the United States District Court for the Eastern District of Louisiana.

Before REAVLEY, JOHNSON and JOLLY, Circuit Judges.

REAVLEY, Circuit Judge:

Lee D. Harper brought suit under the Jones Act and general maritime law for injuries suffered while working on Zapata Off-Shore Company's drilling barge and for inadequate maintenance. By this appeal, Zapata challenges the award of punitive damages and the amount of compensatory damages and maintenance found by the jury. We reverse and remand.

I. Background

Harper was attempting to carry a 90-pound rotary coupling part from the heliport on Zapata's drilling barge to a storage room below. While Harper was going down a steep flight of stairs, the barge shifted and he stumbled, injuring his back. The accident required Harper to have back surgery on two occasions to remove extrusions of ruptured discs. Following the incident Zapata paid for Harper's medical expenses and gave him a check for $638 every two weeks. The check specified that $112 was for maintenance and that $526 was an "advance." When Zapata learned that Harper was suing, it terminated the advances, but continued to pay maintenance of $8 a day ($112 every two weeks).

In a jury trial Harper sued for compensatory damages, increased maintenance, and attorney's fees and punitive damages for Zapata's failure to pay a proper amount of maintenance. The jury found that Zapata was negligent and that the vessel was unseaworthy and awarded Harper $40 a day in maintenance, $1,000,000 in compensatory damages, $500,000 in punitive damages, and $5,000 in attorney's fees. In response to Zapata's motion for new trial, the district court reduced the punitive damages award to $250,000 on remittitur, which Harper accepted.

II. Punitive Damages and Attorney's Fees

Zapata's position in the briefs and at oral argument was that lump-sum punitive damage awards could not be grounded on a failure to pay maintenance. The seminal case of Vaughan v. Atkinson, 369 U.S. 527, 82 S.Ct. 997, 8 L.Ed.2d 88 (1962), had been construed differently by the First and Second Circuits. Compare Kraljic v. Berman Enterprises, Inc., 575 F.2d 412 (2d Cir.1978) (Vaughan authorizes only attorney's fees as punitive damages) with Robinson v. Pocahontas, Inc., 477 F.2d 1048 (1st Cir.1973) (traditional exemplary damages permitted if shipowner wantonly refuses to pay maintenance). We have recently agreed with the First Circuit that punitive damages for the willful and arbitrary refusal to pay maintenance are available under general maritime law. See Holmes v. J. Ray McDermott & Co., 734 F.2d 1110, 1118 (5th Cir.1984); see also In re Merry Shipping, Co., 650 F.2d 622 (5th Cir.1981) (Unit B) (punitive damages allowed for willfully and wantonly creating or maintaining unseaworthy conditions).

It does not follow, however, that punitive damages may be based on a shipowner's failure to pay adequate maintenance. Zapata argues that the district court erred by allowing the jury to impose punitive damages merely because Zapata paid a maintenance rate that the jury later found to be inadequate. We agree. On this record, the district court should not have submitted the questions of punitive damages or attorney's fees to the jury. See Boeing Co. v. Shipman, 411 F.2d 365 (5th Cir.1969) (en banc). Both awards must be grounded on the same type of egregious shipowner conduct exhibiting wanton and intentional disregard of a seaman's rights. See Vaughan v. Atkinson, 369 U.S. 527, 82 S.Ct. 997, 8 L.Ed.2d 88 (1962); Kraljic v. Berman Enterprises, Inc., 575 F.2d 412, 416 (2d Cir.1978).

Harper does not dispute that Zapata consistently paid the traditional maintenance rate of $8 a day and designated those payments as maintenance. Instead, he attacks a settlement procedure employed by Zapata in dealing with injured employees. Every two weeks, while Harper was recuperating, Zapata paid him $526 as an "advance," along with maintenance. In addition, Zapata twice provided Harper with $3000 to help out with household expenses and personal bills. Testimony established that Zapata had no intention of recovering these "advances," but that the payments were made with a view toward settling claims without litigation. ¹ Zapata's claims representative stated at trial that he informed Harper that he would not have to repay the advances, but that if he instituted suit, Zapata would terminate the advances and pay the $8 amount that it thought was its legal obligation.

During the examination of Zapata's claims representatives, the district court instructed the jury that Zapata's advances were not to be credited toward maintenance--"the advances [have] nothing to do with the proper amount of maintenance." ² Yet the court, in referring to the punitive damages issue, told the jury that it "should consider the total actions of Zapata in connection with this case ...."

We cannot escape the conclusion that the jury penalized Zapata for terminating its advances. During closing argument, Harper's counsel repeatedly emphasized the millions of dollars Zapata saved with settlement efforts. ³

For purposes of the punitive damages issue, the district court appeared to have considered the settlement advances as maintenance payments. The court stated that it "share[d] the jury's apparent outrage produced by defendant's intentional evil practice of attempting to prevent litigation by cutting the maintenance rate to a starvation level." Harper v. Zapata Off-Shore Co., 563 F.Supp. 576, 585 (E.D.La.1983). Despite stating that "the evidence supporting punitive damages was overwhelming," the court cited only the termination of advances and the "starvation payment" of $8 a day. The district court did not find that the advances were maintenance payments in disguise, and the jury was not allowed to credit the advances toward Zapata's maintenance payments. Therefore, we think it was improper to view termination of settlement efforts as an evil reduction in maintenance. The special verdict only asked, "Was defendant's failure to pay an amount of maintenance higher than $8 per day intentional and with callous disregard for the plaintiff's rights?"

The cases in which punitive damages or attorney's fees have been granted share the common element of a shipowner's default, either in failing to provide maintenance and cure or in failing to investigate an injured seaman's claim. See Vaughan v. Atkinson, 369 U.S. 527, 82 S.Ct. 997, 8 L.Ed.2d 88 (1962) (shipowner exhibited willful and persistent default and did not investigate seaman's claim); Holmes v. J. Ray McDermott & Co., 734 F.2d 1110 (5th Cir.1984) (shipowner failed to reinstate seaman's maintenance and cure after seaman gave notice of claim based on diagnosis of herniated disc); Picou v. American Offshore Fleet, Inc., 576 F.2d 585 (5th Cir.1978) (trial court awarded attorney's fees and punitive damages because shipowner, in face of seaman's attempts to obtain maintenance and cure, failed to investigate claim and to pay maintenance); Kraljic v. Berman Enterprises, Inc., 575 F.2d 412 (2d Cir.1978) (attorney's fees awarded because shipowner willfully refused to provide maintenance and cure); Robinson v. Pocahontas, Inc., 477 F.2d 1048 (1st Cir.1973) (shipowner terminated all maintenance payments after seaman refused settlement offer; shipowner initially refused to pay past due wages to seaman, using pretext that he was fired for cause); Hodges v. Keystone Shipping Co., 578 F.Supp. 620 (S.D.Tex.1983) (shipowner, without justification, paid none of seaman's medical bills and paid no maintenance until suit filed, approximately ten months after receiving demand for maintenance and cure); Solet v. M/V Capt. H.V. Dufrene, 303 F.Supp. 980 (E.D.La.1969) (attorney's fees awarded for shipowner's willful and persistent default in paying maintenance).

Courts have refused to allow awards of attorney's fees or punitive damages in cases in which the shipowner's conduct was not sufficiently egregious or wanton. See e.g., Ober v. Penrod Drilling Co., 726 F.2d 1035, 1037 n. 4 (5th Cir.1984) (per curiam) (attorney's fees and damages for mental anguish are not recoverable solely based on untimely payment of maintenance and cure); Richard v. Bauer Dredging Co., 433 F.2d 954 (5th Cir.1970) (per curiam) (record failed to demonstrate arbitrary or capricious conduct prerequisite to the allowance of attorney's fees); Constance v. Johnston Drilling Co., 422 F.2d 369 (5th Cir.1970) (per curiam) (seaman not entitled to attorney's fees; no suggestion that shipowner, who had paid lower amount of maintenance than that finally awarded, was lax in investigating claim or acted arbitrarily or unreasonably); cf. Smith v. Atlas Off-Shore Boat Service, Inc., 653 F.2d 1057, 1064 (5th Cir.1981) (punitive damages not imposed on shipowner who terminated employment of seaman who persisted in personal injury claim).

No bright line separates the type of conduct that properly grounds an award of punitive damages--a shipowner's willful and callous default in its duty of investigating claims and providing maintenance and cure--from the type of conduct that does not support a punitive damages award. We do not attempt to draw the line between an absolute failure to provide maintenance and cure and the payment of a nominal amount of maintenance. Clearly, a shipowner who attempts to comply with its duty of providing maintenance by paying a seaman $1 a day would be subject to...