Supreme Court Update: SCOTUS Grants CERT on Issue of Punitive Damages for Unseaworthiness and Denies CERT on Maritime Contract Test
Last month, the US Supreme Court decided to take up whether punitive damages are recoverable in general maritime law claims for unseaworthiness when it granted certiorari in Batterton v. Dutra Group, 880 F.3d 1089 (9th Cir. 2018), writ granted Docket No. 18-266 (Dec. 7, 2018). As we reported in June 2018, Batterton brings the issue into focus for the high court because it is directly at odds with a 2014 US Fifth Circuit decision that held that punitive damages are nonpecuniary and therefore not recoverable in unseaworthiness actions. McBride v. Estis Wells Serv., 768 F.3d 382 (5th Cir. 2014).
The US Ninth Circuit in Batterton relied on a prior decision from that circuit, Evich v. Morris, 819 F.2d 256 (9th Cir. 1987), which held that punitive damages are available for general maritime law claims of unseaworthiness if certain conditions are present (i.e., when the conduct constitutes reckless or callous disregard for the rights of others, gross negligence, actual malice, or criminal indifference). The Ninth Circuit also relied on the broad principle announced in Atlantic Sounding v. Townsend, 557 US 404 (2009), that punitive damages have been available under the general maritime law and should, therefore, be available in unseaworthiness actions even though that case concerned the refusal of an employer to pay maintenance and cure benefits to a seaman.
The Fifth Circuit in McBride, however, relied on an earlier Supreme Court decision in answering the same question. In Miles v. Apex Marine Corp., 498 US 119 (1990), the Supreme Court held that a seaman’s damages are limited to pecuniary loss. The Fifth Circuit determined that punitive damages are nonpecuniary, and therefore are not recoverable for an unseaworthiness claim.
The Supreme Court will take up the question in due course, and we will continue to provide updates on this case, as punitive damages can impact the value of a case and present insurance coverage issues.
Separately, the Supreme Court denied cert in December 2018 from In re Crescent Energy Servs., L.L.C., 896 F.3d 350 (5th Cir. 2018), writ denied Docket No. 18-436 (Dec. 10, 2018), the first Fifth Circuit case that applied the new test for determining whether a contract in the oil and gas context is maritime since the en banc court changed the test in In re Larry Doiron Inc., 879 F.3d 568 (5th Cir. 2018). We summarized that line of cases in our August 2018 newsletter. The test under Doiron is two-pronged:
- Is the contract to provide services to facilitate the drilling or production of oil and gas on navigable waters?
- If the answer to the above question is “yes,” does the contract provide for, or do the parties expect, a vessel to play a substantial role in the completion of the contract? If so, then the contract is maritime in nature.
In In re Crescent Energy Servs., L.L.C., the issue presented on appeal was whether a contract to provide services to oil wells located on fixed platforms in navigable waters within a state is a “maritime” contract when a vessel plays a substantial role in the performance of the contract. The Fifth Circuit applied the Doiron test and answered in the affirmative, finding that the contract was indeed maritime. The Supreme Court denied cert, and the new test for a maritime contract in the oil and gas context adopted by Doiron continues to apply. Whether a contract is maritime in nature plays a role in the enforceability of indemnity obligations among the parties because indemnity provisions are generally enforceable under maritime law, but are often prohibited under oilfield anti-indemnity acts in Texas and Louisiana. If a contract is nonmaritime, then state law applies, which can bar enforcement of the indemnity provisions in the contract.