Punitive damages are recoverable in maritime property damage claims. Based on decades of jurisprudence it has been widely accepted that in order to award punitive damages the negligent conduct must be more than mere negligence; the defendant must be guilty of “gross negligence, or actual malice or criminal indifference which is the equivalent of reckless and wanton misconduct”.
In Graham v. PCL Civil Constructors, Inc. 11-0056 (S.D. Texas – Dec. 23, 2013) the judge awarded punitive damages because the defendant did “not realize or appreciate the high degree of risk involved when a reasonable (company) in its position would do so.” In doing so, he made it easier for plaintiffs to carry the burden of proof necessary to justify an award for punitive damages.
In this case, Graham owned a fishing vessel that was damaged when two barges broke free from their moorings during a storm, drifted downriver and hit it. PCL, the owner of the barge, settled with Graham his claim for repairs. The case went to trial on Graham’s claims for punitive damages, lost profits and attorneys’ fees.
PLC was engaged in replacing a bridge spanning the Brazos River in Freeport. When the barges arrived in Freeport, they were moored to H-beam pilings by a single loop of a two-inch thick mooring line. In particular, Barge M-8028, a 195-foot steel barge that was loaded with two 350-ton bridge counterweights and several other tower sections, was moored to two steel H-beam pilings. Barge M-304, which carried part of the tower of the bridge, was tied alongside and outside of Barge 8028. The two mooring lines that attached Barge 8028 to the two H-beam pilings thus held the combined load of the counterweight barge and the tower barge.
The evidence indicates that PCL moored the H-beam pilings in a navigable waterway without obtaining a permit, which is required by federal law. Grady, PLC’s superintendent, testified that he received oral permission from the Coast Guard to place the pilings in the waterway, but Graham argued that this informal “comment in passing” did not satisfy the statutory requirement to obtain a permit from the Army Corps of Engineers.
Grady decided how to moor the barges, taking into consideration various factors when making the decision. He considered that this was expected to be a short-term mooring, that the area where the barges were being moored was in fairly protected waters with very limited boat traffic, that the tide action in the area was minimal, and that the area had protection from the wind due to a levee near the riverbank. Based on the foregoing considerations and determinations, Grady concluded that his planned mooring system would be adequate for the task at hand.
Grady testified that the PCL employees performed “visual inspections [of the moorings] while they were on the barge,” but there was no standard protocol for the frequency of these inspections, nor specific consideration given to “how the H-beams would cause the rope lines wrapped around them to wear.” The mooring lines were not changed during the two to four weeks that the barges were in place prior to the breakaway.
The breakaway occurred on March 5, 2011 during a storm with sustained winds of over 30 mph and wind gusts up to 43 mph. The PCL superintendent on site at the time explained the normal PCL practice for checking the weather as “[u]sually it’s your own accord to listen to the weather or pull it up on the Internet if there’s a suspected front…[or if] it’s already raining [y]ou would go to the office or call somebody at the office and say, How long is this here for? What’s it going to do? What’s the forecast?” Prior to the breakaway, the superintendent did not check the weather forecast himself, call the office to ask about the weather, nor receive any warning of the incoming storm from anyone else. He described the weather at the time of the breakaway as “very, very windy, gusts…cloudy; and I believe it [had] started to sprinkle rain.” PCL “did nothing specific” to change or strengthen any of the barge moorings despite the pending storm.
Graham’s expert testified that H-beam piles have square rather than rounded edges and that it is “common knowledge within the industry” that “anything other than a rounded edge would…create a sharp edge, a knife edge…that would cut your line or cable,” and that it is “basic safety” to “avoid any sharp edge on any type of mooring device.” In his opinion, there are very limited circumstances where a mooring system with H-beam pilings and two-inch ropes would be acceptable to use—only “for a few hours…with almost constant supervision” and with a tugboat standing by—otherwise, “the barge is at serious risk of breaking loose.”
The expert also testified that—in contrast to PCL’s response to the pending storm—“the standard is somebody looks at the weather every day—every morning, and then determines, you know, wind velocity, river flow and so forth…[and] if there’s a strong wind coming…they send out boats to…go beyond the normal checking to check the lines and moorings to make sure they’re adequate, and if necessary, put out extra rigging to make sure that the equipment stays moored.” (It does not appear that PLC called an expert on mooring practices in its own behalf.)
The judge conducted an analysis of the standards applied by state and federal courts when deciding if punitive damages are warranted. The court relied heavily on the U.S. Supreme Court’s ruling in the Exxon Valdez case which defined “recklessness”. It ruled that recklessness may consist of either of two different types of conduct. In one the actor knows, or has reason to know…of facts which create a high degree of risk of…harm to another, and deliberately proceeds to act, or to fail to act, in conscious disregard of, or indifference to, that risk. In the other the actor has such knowledge, or reason to know, of the facts, but does not realize or appreciate the high degree of risk involved, although a reasonable man in his position would do so. In other words, if the defendant knew or should have known that his actions or inactions would create a high degree of harm to another, his behavior was reckless.
The judge held that “the evidence certainly does not establish that PCL acted with malice, or even that its conduct was outrageous or showed wanton indifference to safety concerns. Nor does the Court conclude that PCL had actual knowledge of the extreme degree of risk yet proceeded with conscious indifference to the safety of others. But PCL did ‘not realize or appreciate the high degree of risk involved’ when ‘a reasonable [company] in [its] position would do so.’ Furthermore, PCL’s failure to take easily available precautions demonstrates an indifference to the magnitude of risks involved. That satisfies the Exxon Shipping recklessness standard for awarding punitive damages in maritime property damage cases. The Court therefore concludes that PCL’s conduct with regards to its inadequate moorings and weather preparations was reckless.”
The problem with this decision is that it creates more uncertainty as to when conduct crosses the line from negligent to reckless. Based on the faults recited it is not surprising that PLC recognized that its conduct evidenced neglect and thus chose to settle. It could have done a better job in monitoring the weather and in securing the barges. But was its conduct so misguided that it should be punished and made an example for the purpose of deterring future harmful conduct, which is the aim of punitive damages? Using this standard gives the spark of life to any claim of punitive damages for property loss. All the claimant need prove is that the defendant should have known that its conduct could cause harm. But isn’t that the same test for negligent conduct, i.e.: but for the act, the damage would not have occurred? Thanks to this decision the claims for punitive damages will continue to proliferate.