November 16, 2017, Trial News

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Louisiana Supreme Court upholds punitive damages in maritime case

Mandy Brown

photo of powerboat on water

The Louisiana Supreme Court has affirmed a verdict awarding a plaintiff compensatory and punitive damages for products liability and maritime law claims he brought after his son died in a recreational boating incident. The court reduced the punitive damages award but found that punitive damages are available under general maritime law in Louisiana, a question that remains unsettled in jurisdictions across the country.
 

The Louisiana Supreme Court has affirmed a verdict awarding a plaintiff compensatory and punitive damages for products liability and maritime law claims he brought after his son died in a recreational boating incident. The court reduced the punitive damages award but found that punitive damages are available under general maritime law in Louisiana, a question that remains unsettled in jurisdictions across the country. (Warren v. Shelter Mut. Ins. (Teleflex), 2017 WL 4737109 (La. Oct. 18, 2017).)

In 2005, a recreational boat’s hydraulic steering system, manufactured by Teleflex, failed suddenly due to a loss of hydraulic fluid, causing the boat to turn violently to the side. Uncontrolled, the boat then spun in the water with the motor still running. Derek Herbert was thrown from the boat, struck by its propeller, and killed.

Herbert’s parents filed wrongful death and survival claims against multiple parties. Herbert’s mother’s case settled after mediation, but Herbert’s father, Ron Warren, went to trial with claims against the boat operator and Teleflex in 2014. The trial was bifurcated. At the close of the liability phase, the court granted the operator’s motion for a directed verdict, and the jury found Teleflex was not liable.

The court granted the plaintiff’s motion for a new trial, finding that prejudicial error had occurred when jurors were incorrectly told—after asking the court during deliberations—that a boat user manual introduced into evidence was the 1997 original and not the revised 2006 version.

At the second trial, the plaintiff brought only a failure-to-warn claim against Teleflex, alleging that by not adequately warning of the hydraulic steering system’s inherent danger, Teleflex violated the Louisiana Products Liability Act and was negligent under general maritime law. The jury awarded $125,000 in compensatory damages and $23 million in punitive damages. Teleflex appealed, arguing that the plaintiff’s motion for a new trial should not have been granted and that the punitive damages award was excessive. The Louisiana Court of Appeal affirmed the verdict, and Teleflex appealed again.

The Louisiana Supreme Court began by reviewing the plaintiff’s burden of proof to establish that the defendant is the product’s manufacturer, the damage was proximately caused by a characteristic of the product, this characteristic made the product “unreasonably dangerous,” and the damage arose from a reasonably anticipated use of the product. The court said a product is “unreasonably dangerous” under Louisiana law if it meets at least one of four criteria, one of which is that “an adequate warning about the product has not been provided.” A jury’s determination of whether a product has an inadequate warning will be overturned only if it is clearly wrong or manifest error. The steering system had a warning label, but it was not visible from the boat’s interior and only advised that boat operators should check fluid levels—not that a leak could lead to fatalities.

“If you lose power steering in your car, you don’t suddenly lose control of the car,” said Lake Charles, La., attorney Randall Hart, who represented the plaintiff from the second trial through appeal. “But that’s exactly what happens in boats with this hydraulic steering system. Teleflex knew how small the margin of error was with these fluid leaks, and it still chose not to put 30-cent warning stickers on the steering columns. Why? One of its corporate representatives testified that it didn’t want to cause ‘mass hysteria.’ But the company didn’t want to include the warning because it was trying to compete with mechanical steering systems, which don’t pose this danger.”

Teleflex did not challenge the appellate court’s ruling that the jury was not manifestly wrong in determining that the company had failed to provide an adequate warning of the steering system’s inherent dangers. Instead, it argued that the court had no material reason to grant a new trial because even though the user manual was misidentified, it was irrelevant to the case. The boat operator and owners had testified they did not receive a manual when they purchased the boat and had not read it before.

“In oral argument, Teleflex repeated over and over that the manual had no relevance to the first verdict in Teleflex’s favor. It was rewarding to be able to point out the many places in the trial record where Teleflex had in fact talked about that manual,” Hart said. “The court could clearly see how what Teleflex was arguing on appeal was not what it had told the jury.”

The high court agreed with the lower court that the jury was given a manual and then received incorrect information about it during deliberations: “Because the trial court articulated a reason for finding a miscarriage of justice, we cannot say the trial court abused its . . . discretion in granting a new trial.”

The court then turned to the other key issue raised on appeal: whether $23 million in punitive damages was excessive compared to the compensatory damages award. The court held that evidence showed that “Teleflex failed to take any action to advise its end users of the risk of severe injury and possible death. . . . [This] evinces a conscious disregard for . . . the safety of its customers, justifying the imposition of punitive damages.”

But it found the award was excessive. It applied the three-prong test established by the U.S. Supreme Court in BMW of North America, Inc. v. Gore (517 U.S. 559 (1996)), which includes analyzing the reprehensibility of the defendant’s misconduct, the ratio between the punitive award and the harm, and the difference between the award and civil penalties imposed in comparable cases.   

Although Teleflex’s conduct was “reprehensible,” the ratio between punitive and compensatory damages—184:1—was too disparate, the court held. It reduced punitive damages to $4.25 million, which created an acceptable 2:1 ratio to compensatory damages when the plaintiff’s and Herbert’s mother’s damages were added together. The court rejected the defendant’s claim that a strict 1:1 damages ratio was required after Exxon Shipping Co. v. Baker (554 U.S. 471 (2008)).

New Orleans attorneys Conrad “Duke” Williams and Paul Sterbcow—members of the Louisiana Association for Justice Amicus Committee, which filed a joint amicus brief with the American Association for Justice in the case—emphasized the significance of the state’s high court taking a position on the availability of punitive damages in this context. “This case was important because unsettled questions still exist with respect to when and whether punitive damages are available in cases governed by general maritime law and what the proper measure of a punitive or exemplary award should be,” said Williams. “Here, the defendants argued that a strict reading of Exxon required application of a 1:1 damages ratio. It was this issue that was most troublesome and concerning, but the court held that a strict application of the Exxon ratio was not justified based on analysis of other U.S. Supreme Court cases involving punitive damages.”

Sterbcow echoed the importance of this precedent. “The bottom line is that while the Supreme Court has long recognized that punitive damages are available for certain types of general maritime law claims, Warren is the Louisiana Supreme Court’s first pronouncement that punitive damages are available in a products liability claim involving a recreational boating plaintiff.”