Morales v. Garijak, Inc.

• Decision Date: 19 October 1987
• Docket Number: No. 86-2442,86-2442
• Citation: 829 F.2d 1355
• Parties: Leopoldo MORALES, Plaintiff-Appellee, v. GARIJAK, INC., Defendant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1355

829 F.2d 1355

1988 A.M.C. 1075

Leopoldo MORALES, Plaintiff-Appellee, v. GARIJAK, INC., Defendant-Appellant.

No. 86-2442.

United States Court of Appeals Fifth Circuit.

Oct. 19, 1987.

T. Mark Blakemore, Frank E. Perez, Royston, Rayzor, Vickery & Williams, Brownsville, Tex., for defendant-appellant.

John Wm. Black, Albert Villegas, Law Offices of Albert Villegas, Brownsville, Tex., for plaintiff-appellee.

Appeal from the United States District Court for the Southern District of Texas.

Before RUBIN, GARZA, and JONES, Circuit Judges.

ALVIN B. RUBIN, Circuit Judge:

A shipowner challenges an assessment of compensatory damages and attorney's fees for its failure to pay maintenance and cure to an injured seaman. Finding substantial evidence to support the jury verdict that the shipowner acted unreasonably, we uphold the award of compensatory damages, but because the evidence is insufficient to show that the failure to pay was so unreasonable as to be arbitrary, we vacate the award of attorney's fees. Since the jury was permitted to render a single award for both kinds of damages, we remand for determination of the amount of compensatory damages. We also modify the judgment to provide that Garijak shall continue to pay maintenance and cure until Morales's physician confirms that he has reached maximum cure.

I.

Leopoldo Morales sued Garijak, Inc. under the Jones Act and general maritime law for injuries, primarily a broken wrist, that he allegedly sustained while employed as a seaman aboard the F/V GARIJAK. According to Morales, he slipped and fell on the GARIJAK's back deck. He alleged that his injuries were proximately caused by the GARIJAK's unseaworthy condition and Garijak's negligence and lack of due care. Morales also alleged that Garijak arbitrarily and capriciously refused to pay him maintenance and cure benefits.

At trial, Morales testified that, on July 27, 1983, while working as a shrimper aboard the GARIJAK, he slipped and fell backwards, thereby suffering his injuries. He stated that another shrimper, Oscar Castillo, laughed at him for falling down, causing him and Castillo to get into an argument. Morales testified that he informed the captain, Julio Sanchez, about his accident but that Sanchez did not pay much attention to him. According to Morales, he did not tell Sanchez that he wanted to return to port to see a doctor because he needed to complete the trip to make more money. Morales testified that he worked approximately two weeks after his accident and that, two or three days after he returned to port, he went to Garijak's office to obtain his paychecks, received them from the secretary, but did not tell her about his accident. Morales also stated that he informed Ramiro Alvarado, a co-worker, about his accident.

Alvarado testified that he did not see the accident and that Morales did not tell him about it. He did, however, overhear Morales and Castillo arguing about the episode. He told Captain Sanchez about Morales's fall, but Sanchez did not pay much attention. Alvarado also testified that Sanchez had telephoned him after they had returned to port and inquired whether he had seen anybody fall on the GARIJAK and that he had told Sanchez that Morales had fallen on the back deck. Alvarado later told Garijak's lawyers that he had not seen Morales fall, but that he had heard Morales and Castillo arguing about it. He did not, however, observe Morales having any difficulty in performing his work.

Julius Collins, the president of Garijak, testified that he received a letter dated August 29, 1983, from Morales's attorney, Albert Villegas, informing him that Morales had injured himself while aboard the GARIJAK. The next day he telephoned Villegas, who informed him that Morales had gone to see Dr. Charles Daniel in Brownsville, Texas. Collins testified that he did not pay maintenance and cure to Morales because after conducting an investigation he concluded that although Morales was hurt, the injury did not occur while Morales was aboard the GARIJAK. Collins testified that Captain Sanchez, Alvarado, and Castillo all told him that they did not see or hear about Morales's fall. He also testified that when Morales had come into the office to pick up his paychecks before making his claim for maintenance and cure, he asked Morales his name and how he was doing, and that Morales identified himself, indicated he was fine, and did not mention an accident, whereupon he handed Morales his checks. Morales, however, denied seeing Collins when he picked up the checks. In refusing to pay maintenance and cure, Collins relied not only on Morales's professions of well-being, but also on the fact that Morales did not seek medical attention until a few weeks after the alleged accident.

Morales presented the deposition testimony of Dr. Rick William Bassett, who testified about the nature of Morales's broken wrist and other injuries and the expected course of treatment. The parties stipulated that "$15 a day is an adequate and reasonable maintenance rate."

On December 17, 1985, the jury concluded that Garijak was not negligent; that the GARIJAK was not unseaworthy; that Morales was entitled to maintenance and cure; that he would reach maximum cure "Minimum June 30, 1986[,] Maximum December 31, 1986;" that Garijak wrongfully and arbitrarily refused to pay maintenance and cure benefits; that $50,000 would fairly compensate Morales for "damages he suffered, including worsening of his medical condition, and attorney's fees for the wrongful and arbitrary failure to pay maintenance and cure;" and that Garijak's refusal to pay maintenance and cure was not "wanton and intentional or willful and callous."

The district court entered judgment on the jury verdict. The court awarded Morales $50,000 with interest from September 1, 1983 until paid; maintenance at the rate of $15 per day from July 28, 1983, until June 30, 1986, or, if Morales did not reach maximum cure by June 30, 1986, $15 per day until Morales reached maximum cure or until December 31, 1986, whichever came first; and reasonable medical expenses for repairing his wrist until he reached maximum cure or until December 31, 1986, whichever came first.

II.

When a seaman becomes ill or injured while in the service of his ship, the shipowner must pay him maintenance and cure, whether or not the shipowner was at fault or the ship unseaworthy. ¹ This obligation includes paying a subsistence allowance, reimbursing medical expenses actually incurred, and taking all reasonable steps to ensure that the seaman receives proper care and treatment. ²

Upon receiving a claim for maintenance and cure, the shipowner need not immediately commence payments; he is entitled to investigate and require corroboration of the claim. ³ If, after investigating, the shipowner unreasonably rejects the claim, when in fact the seaman is due maintenance and cure, the owner becomes liable not only for the maintenance and cure payments, but also for compensatory damages. These are the damages that have resulted from the failure to pay, such as the aggravation of the seaman's condition, determined by the usual principles applied in tort cases to measure compensatory damages. ⁴

If the shipowner, in failing to pay maintenance and cure, has not only been unreasonable but has been more egregiously at fault, he will be liable for punitive damages and attorney's fees. We have described this higher degree of fault in such terms as callous and recalcitrant, arbitrary and capricious, or willful, callous and persistent. ⁵ Thus, there is an escalating scale of liability: a shipowner who is in fact liable for maintenance and cure, but who has been reasonable in denying liability, may be held liable only for the amount of maintenance and cure. If the shipowner has refused to pay without a reasonable defense, he becomes liable in addition for compensatory damages. If the owner not only lacks a reasonable defense but has exhibited callousness and indifference to the seaman's plight, he becomes liable for punitive damages and attorney's fees as well.

On at least one occasion, this court has suggested that the standard of liability for punitive damages or attorney's fees also applies to compensatory damages. ⁶ And, while neither party has raised the issue, we note that the district court, which used pattern jury instructions, also incorrectly described the standard for compensatory damages in terms of the standard for punitive damages or attorney's fees. As this court has observed previously, the pattern jury instructions used by Fifth Circuit district courts mischaracterize the standard of fault for compensatory damages as arbitrary and capricious or callous behavior instead of unreasonable behavior. ⁷ A misreading of the Supreme Court's decision in Vaughan v. Atkinson ⁸ apparently has caused the confusion. ⁹

Adopting the higher standard of fault for compensatory damages claims would require not only a misapplication of decisions by the Supreme Court, this circuit, and other circuits, ¹⁰ but also an outcome at odds with general legal doctrine. Neither in tort nor in contract law must a plaintiff prove arbitrary and capricious or callous behavior in order to recover reasonably forseeable damages that have resulted from the breach of a duty owed him; ¹¹ to require such a showing would provide insufficient incentive for individuals to fulfill their legal obligations. Because of the incorrect instructions, Morales was required to bear too heavy a burden in order to recover compensatory damages. In this case, the error was harmless because, in finding that Garijak acted arbitrarily, the jury necessarily indicated that it believed Garijak had acted unreasonably.

The jury found that Morales had suffered his injury while aboard the GARIJAK and therefore was entitled to maintenance and cure payments. On appeal, Garijak concedes Morales's entitlement to maintenance and cure but challenges the length of...