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U.S. Supreme Court decision could save vessel owners millions

Photo credit: Jim Allen/FreightWaves

The U.S. Supreme Court has ruled that vessel crews are not eligible for punitive damages for injuries allegedly caused by the unseaworthiness of a vessel in a decision that could save shipowners millions in claim settlements.

Dutra Group v. Batterton, published June 24 and decided by a vote of 6-3, involved crew member Christopher Batterton, who sought punitive damages from his employer, Dutra Group. Batterton was injured in 2014 while working aboard one of the company’s dredging barges in Newport Beach, California. Build-up of pressurized air blew open a hatch cover that crushed Batterton’s hand, permanently disabling him.

Batterton claimed the accident could have been prevented by venting excess air from the compartment, or by better warnings or supervision, and sued for punitive damages under a claim of vessel “unseaworthiness.”

However, the Supreme Court reversed a decision by the 9th Circuit Court of Appeals, based in California, that allowed for such damages under the unseaworthiness claim. Punitive damages for alleged unseaworthiness are now no longer allowed in any jurisdiction.

The decision allows shipowners to avoid punitive damage claims that can run into the millions of dollars, allowing them to instead settle cases for much less.

“I think it will knock down a number of claims – not that shipowners necessarily get hit a lot with punitive damages – but it’s still pretty tough standard,” Allen Black, a maritime lawyer and partner at Winston & Strawn, told FreightWaves. “It will also knock down those claims at a much earlier stage, at least in circuits [Circuit Courts] that had allowed them to go forward,” he said, such as the 9th Circuit Court and the 11th Circuit Court in Florida, both major areas of jurisdiction for maritime shipping.

The decision affects crew members and shipping companies that are able to file claims within the United States, and are more likely to involve a U.S. crew and U.S.-based shipping company. However, claims could potentially involve foreign crews and companies as well, Black said.

Black also said the decision could become a factor for ship owners exposed to claims alleging personal injury due to asbestos poisoning, although he did not know to what extent such cases might be pending.

“I think the result is positive for shipowners, because businesses in general are getting hammered to death by some of these huge punitive damages claims,” said Kathy Metcalf, President and CEO of the Chamber of Shipping of America, which represents U.S.-based domestic and foreign-flagged shipping companies. “I think tort reform is needed, because some of the claims have gotten completely out of hand.”

At the same time, Metcalf added, the decision is not an unfavorable one for seafarers. “The system as it is takes care of the seafarer for injuries under the maintenance and cure claim, while still allowing for litigation for unseaworthiness claims for non-punitive damages.”

The Supreme Court noted in its decision that because unseaworthiness claims run against the owner of the vessel, the owner could be liable for punitive damages while the ship’s master or operator – the entities that do the actual crew hiring for the vessel and therefore could be found more culpable in an injury case – would not be liable for such damages.

Punitive damages also place American shipping companies “at a significant competitive disadvantage,” the Supreme Court ruled, “and discourage foreign-owned vessels from employing American seamen.”

The Seafarers International Union, which represents U.S. merchant mariners that work aboard U.S.-flag vessels, was not able to respond for comment.

John Gallagher

Based in Washington, D.C., John specializes in regulation and legislation affecting all sectors of freight transportation. He has covered rail, trucking and maritime issues since 1993 for a variety of publications based in the U.S. and the U.K. John began business reporting in 1993 at Broadcasting & Cable Magazine. He graduated from Florida State University majoring in English and business.