Kenai Ironclad v. CP Marine Services ( 2023 )

Case: 22-30311 Document: 00516933851 Page: 1 Date Filed: 10/17/2023
United States Court of Appeals
for the Fifth Circuit United States Court of Appeals
Fifth Circuit
____________ FILED
October 17, 2023
No. 22-30311 Lyle W. Cayce
____________ Clerk
Kenai Ironclad Corporation,
Plaintiff—Appellee,
versus
CP Marine Services, LLC; Ten Mile Exchange, LLC,
Defendants—Appellants.
______________________________
Appeal from the United States District Court
for the Eastern District of Louisiana
USDC No. 2:19-CV-2799
______________________________
Before Haynes and Engelhardt, Circuit Judges, and deGravelles,
District Judge. *
0F
John W. deGravelles, District Judge:
Kenai Ironclad Corporation (“Kenai” or “Plaintiff”) alleged that CP
Marine Services, LLC, breached its contract to repair and convert Kenai’s
offshore supply vessel to a salmon fishing tender for use in Alaska. After
Kenai expressed dissatisfaction with the work, the relationship deteriorated.
*
United States District Judge for the Middle District of Louisiana, sitting by
designation.
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Kenai alleged that, after paying its final invoice, it attempted to remove its
vessel from CP Marine’s shipyard, but as it did so, CP Marine and co-
defendant Ten Mile Exchange, LLC, (“TME”) (collectively,
“Defendants”) rammed, wrongfully seized, detained, and converted Kenai’s
vessel for five days before finally releasing it.
After a five-day bench trial, the district court found that CP Marine
did not breach its contract with Kenai but did wrongfully seize, detain, and
convert the vessel. The court awarded punitive damages and attorney’s fees
for Defendants’ bad faith and reckless behavior in ramming, seizing, and
converting the vessel for five days.
Defendants appeal, arguing the trial court erred in (1) finding that they
wrongfully arrested or detained Kenai’s vessel; (2) finding that punitive
damages were legally and factually justified; and (3) awarding prejudgment
interest on the punitive damages award. After a careful review of the record,
we hold that there was sufficient evidence to support the district court’s
finding that Defendants wrongfully seized, detained, and converted
Plaintiff’s vessel in a manner that warranted the imposition of attorney’s fees
and punitive damages. However, because the record is unclear as to certain
aspects of the district court’s award of punitive damages—namely, whether
they were also intended, at least in part, to be compensatory and, if so, in
what amount—we REMAND to the district court for clarification of its
award.
FACTS AND PROCEDURAL HISTORY
In December 2018, Plaintiff Kenai orally contracted with Defendant
CP Marine to repair, modify, and paint the M/V IRON DON, an offshore
supply boat owned by Kenai that it intended to use as a salmon fishing tender
in Alaska. Work began in January 2019. In January and February, Kenai’s
representatives repeatedly expressed concerns about the quality of the work
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being performed and requested a written guarantee regarding the work’s
quality. CP Marine refused to give a guarantee.
Thereafter, CP Marine demanded immediate payment of outstanding
invoices, which Kenai paid immediately. Then, Kenai’s representatives
decided to “end the working relationship with Defendants as soon as
possible.” CP Marine next demanded that Kenai’s crew and equipment be
immediately removed from the vessel and shipyard and threatened to charge
a $1,000 per day storage fee if Kenai failed to comply. CP Marine further
threatened to return the vessel from dry dock to the water and charge a
$5,000 per day storage fee.
CP Marine had Jefferson Parish deputy sheriffs evict Kenai’s crew
from the vessel and then completed its work on same. On February 27, 2019,
CP Marine sent Kenai a final invoice. Kenai’s Austin Adler
immediately wrote a check for the final invoice and delivered it
to CP Marine, which CP marine deposited the same day. This
payment satisfied all outstanding CP Marine invoices to
Plaintiff. [ ] Adler called Plaintiff’s bank to confirm that the
check had cleared . . . [and] a representative from Plaintiff’s
bank confirmed that Defendant had cashed the check and that
it cleared on February 28, 2019.
Six days later, on March 5, 2019, the vessel hired by Kenai to remove
the IRON DON from the CP Marine shipyard (the M/V SUPER T) tied onto
the IRON DON and began to leave the shipyard. As it was doing so, a vessel
owned by TME, the M/V AUNT DI, “rammed” the SUPER T, pinned it
and the IRON DON against the bank, and thus prevented Kenai from
retrieving its vessel. Joseph Dardar, a part owner of both TME and CP
Marine, was at the wheel of the AUNT DI. Moreover, during this event,
Dardar threatened Adler.
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The following day, while the IRON DON was still being detained in
the CP Marine shipyard, TME “threatened Plaintiff by sending a $20,750
invoice from TME for ramming and detaining the IRON DON” and
demanded payment within two days. At this point, Kenai had “no formal
business relationship” with TME, and the invoice was sent “for the sole
purpose of intimidating and threatening Plaintiff.” Dardar admitted at trial
that “he never intended to collect on this invoice and ‘should never have sent
it.’” “Plaintiff ultimately retrieved the IRON DON and left the CP Marine
shipyard on March 11, 2019.”
Kenai sued CP Marine and TME for breach of contract, wrongful
vessel seizure, conversion, and tortious interference with contractual
relations. After a five-day bench trial, the district court held that defendant
CP Marine did not breach its oral contract and implied breach of warranty of
workmanlike performance in connection with CP Marine’s painting, repair,
and modifications to the M/V IRON DON. The trial court held in part that
“Plaintiff has not met its burden to show that Defendants’ allegedly dilatory
performance caused [the IRON DON’s] late arrival in Alaska.”
However, the district court also found that “Defendants acted with
bad faith . . . [and] detained the [IRON DON] pursuant to an invalid maritime
lien.” The court awarded punitive damages measured by “the value of [the
vessel’s] missed contract days for the days that Defendants wrongfully
detained the vessel.” Specifically, the court stated it was awarding punitive
damages in the amount of $17,580.50, measured by the vessel’s daily rate of
$3,516.10 times the five days the vessel was wrongfully detained, plus
attorney fees, expenses, and court costs.
In addition, the court awarded “pre-judgment interest in accordance
with La. R.S. § 9:3500 from March 5, 2019, to the date of judgment, and post-
judgment interest in accordance with 28 U.S.C. § 1961(a).” Judgment was
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entered on May 17, 2022, and Defendants timely appealed on May 25, 2022.
Kenai did not.
The matter of the amount of attorney’s fees to be awarded was
referred to the magistrate judge. Although Kenai submitted attorney’s fees
totaling $78,017.68, the magistrate judge only recommended payment of
$38,831.40, reflecting a downward adjustment due in part to Kenai’s loss of
its breach of contract claim.1 On August 9, 2022, the district court adopted
the magistrate judge’s recommendation. Defendants separately appealed the
district judge’s adoption of the report and recommendation, but that appeal
was dismissed for want of prosecution because Defendants failed to timely
file a brief and record excerpts. Kenai Ironclad Corp. v. CP Marine Servs.,
L.L.C., No. 22-30492, 2022 WL 18776210, at *1 (5th Cir. Dec. 7, 2022). The
award of Kenai’s attorney’s fees is therefore final.
ISSUES ON APPEAL
Defendants’ appeal raises the following issues: did the district court
err (1) in finding that Defendants wrongfully seized, detained, and converted
Kenai’s vessel; (2) in awarding punitive damages; or (3) in awarding
prejudgment interest on the punitive damages award?
Resolution of the second issue turns on the proper relationship
between punitive damages and compensatory damages, both generally under
maritime law and in this case specifically. Sub-issues include: (a) whether the
district court erred in awarding punitive damages exceeding the 1:1 punitive
damage to compensatory damage ratio set by Exxon Shipping Co. v. Baker, 554
U.S. 471 (2008); (b) whether the district court erred as a matter of law in
1
The magistrate judge’s report and recommendation and the district court’s order
adopting same were not made a part of the ROA. The ROA goes only to E.D. La. ECF No.
113, whereas these orders are E.D. La. ECF Nos. 116, 122.
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awarding punitive damages in the absence of an explicit award of
compensatory damages; and (c) if so, whether the district court’s award
nevertheless should be affirmed because it had a compensatory component,
either because the award of attorney’s fees was compensatory or because the
punitive damage award itself was in part compensatory.
DISCUSSION
I. Did the district court err in finding Defendants wrongfully
arrested and converted Kenai’s vessel?
“To recover for wrongful arrest of a vessel, there must be (1) no bona
fide claim of a maritime lien on the vessel and [(2)] a showing of bad faith,
malice, or gross negligence [on the part] of the offending party.” Comar
Marine, Corp. v. Raider Marine Logistics, L.L.C., 792 F.3d 564, 574–75 (5th
Cir. 2015) (citations and internal quotations omitted). “Whether a maritime
lien exists is a question of law, reviewed de novo.” Id. at 575 (citations
omitted). A district court’s determination of bad faith, on the other hand, is
“a conclusion of fact, which we review under the deferential clear error
standard.” Id. (citation omitted).
“[F]or a bench trial, . . . we will upset the district court’s findings of
fact only if we are ‘left with the definite and firm conviction that a mistake
has been committed.’” Luwisch v. Am. Marine Corp., 956 F.3d 320, 326 (5th
Cir. 2020) (quoting Barto v. Shore Constr., LLC, 801 F.3d 465, 471 (5th Cir.
2015)). “Moreover, and of particular relevance here, the clearly erroneous
standard of review following a bench trial requires even ‘greater deference to
the trial court’s findings when they are based on determinations of
credibility.’” Id. (quoting Guzman v. Hacienda Records & Recording Studio,
Inc., 808 F.3d 1031, 1036 (5th Cir. 2015)). “Accordingly, ‘[w]e entertain a
strong presumption that the court’s findings must be sustained even though
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this court might have weighed the evidence differently.’” Id. (quoting
Johnson v. Cenac Towing, Inc., 544 F.3d 296, 303 (5th Cir. 2008)).
The Federal Maritime Lien Act, 46 U.S.C. §§ 31341–31343, grants
maritime liens to parties “providing necessaries to a vessel” and allows such
parties to bring a civil action in rem to enforce the lien. Id. § 31342(a)(1)–(2).
“‘Necessaries’ includes repairs, supplies, towage, and the use of a dry dock
or maritime railway . . . .” Id. § 31301(4). Prior to Kenai’s payment of its final
invoice, CP Marine had a valid lien on the IRON DON. See World Fuel Servs.,
Inc. v. MAGDALENA GREEN M/V, 464 F. App’x 339, 341 (5th Cir. 2012)
(quoting, inter alia, Equilease Corp. v. M/V Sampson, 793 F.2d 598, 602 (5th
Cir. 1986) (en banc) (A maritime lien “arises when the debt arises . . . .”)).
Because all amounts due had been paid with funds deposited in CP
Marine’s account six days prior, the district court did not clearly err in
finding that no valid lien existed at the time the IRON DON was seized. Once
the debt giving rise to the lien was paid, the lien ceased to exist. World Fuel
Servs., 464 F. App’x at 341 (“Where, as here, the debt is repaid and
satisfaction is acknowledged, the lien ceases to exist.” (citing Mullane v.
Chambers, 438 F.3d 132, 138 (1st Cir. 2006))). See also Argos Ports (Hous.)
LLC v. Kirby Inland Marine, LP, 598 F. Supp. 3d 512, 519 (S.D. Tex. 2022)
(“[A]ny claim T&T might have had would have been extinguished by
payment.”).2
Defendants argue that they seized the vessel because (a) Kenai’s
check had not cleared and (b) Dardar was concerned that Plaintiff might
2
See also Bunkers Int’l Corp. v. M/V Wuchow, No. 15-5221, 2016 WL 1161288, at *3
n.1 (E.D. La. Mar. 23, 2016) (“BIC’s purported maritime lien would be extinguished if BIC
received payment from China Navigation pursuant to its invoice.”); Maritrend, Inc. v. M/V
SEBES, No. 96–3140, 1997 WL 660614, at *2 (E.D. La. Oct. 23, 1997) (“the contractor
acquires a maritime lien against the vessel until payment is satisfied”).
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cancel the check and remove the funds from CP Marine’s account. The
district court rejected this explanation because (a) Defendants had
“produced no evidence that these check payments did not clear or were
cancelled;” (b) Dardar’s testimony lacked credibility; (c) the check had
cleared on February 28, 2019; and (d) the funds had been in CP Marine’s
account for six days at the time the IRON DON was seized. On this record,
ample evidence supports the district court’s conclusion that well before the
seizure, CP Marine’s bill was paid in full, so there was no longer a valid lien.
Defendants also argue that the IRON DON was never arrested and
thus could not have been arrested wrongfully. Contrary to the district court’s
finding that the AUNT DI “rammed” the SUPER T and endangered lives,
“the evidence overwhelmingly shows that the bumping was controlled, safe
and appropriate under the circumstances.” According to Defendants, the
bumping of the SUPER T was “initiated for a proper purpose,” i.e., “to
create a pause in the unfolding events so they could be rationally
discussed . . . .” Furthermore, there is no evidence that Defendants ever
refused a request to return the IRON DON, and once the request was made
on March 10, it was returned the next day.
Next, Defendants contend that Kenai did not prove that any arrest or
detention was in bad faith: “the ‘gravamen of the right to recover damages
for wrongful [arrest] or detention of vessels.’” Defendants were “fully
justified in the name of safety in stopping Kenai’s effort to unilaterally
remove the vessel from the shipyard . . . .” According to Defendants, the
manner in which the SUPER T was removing the IRON DON was unsafe in
that (a) it was being moved through a narrow channel, which imperiled CP
Marine’s hopper barge and dry dock, and (b) the removal attempt was
reckless in that the attempt was being made with only a single vessel.
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Contrary to Defendants’ argument, the record contains ample
evidence that the IRON DON was wrongfully arrested and, indeed, rammed
and pinned against the bank. This evidence includes the testimony of
Jonathan Tingley, video evidence of the ramming, the testimony of Austin
Adler, and even that of Joseph Dardar.3 Defendants’ bad faith detention and
conversion of the vessel is also supported by Defendants’ intentional
blocking of the canal for five days following the ramming.
Kenai presented sufficient evidence and testimony to support the trial
court’s finding that Defendants acted “in bad faith and with wanton
disregard of the legal rights of Plaintiff.” This evidence includes the backdrop
against which the seizure occurred: the deterioration of the parties’
relationship following Plaintiff’s request for a written guarantee on the
quality of the work and Defendants’ refusal to provide same. It also includes
(a) Defendants’ demand that Plaintiff remove its personnel from the vessel
and equipment from the shipyard although their presence had been a part of
the original agreement; (b) Defendants’ threat to charge Plaintiff a storage
fee of $1,000 per day if the equipment wasn’t removed; (c) Defendants’
threat to move the IRON DON from the dry dock to the water and thereafter
charge $5,000 per day until it was removed because “[Dardar] wanted them
off [his] property . . . to motivate them to get off [his] property”; (d) the
AUNT DI’s ramming of the SUPER T and the IRON DON, which the trial
court found to be in “callous disregard for the safety of the people aboard the
3
Although Defendants portray the contact as “the bumping of one tug into the
other,” Dardar admitted that he “laid up against him hard, and [Dardar] had a hold against
him.” Tingley described it as “extreme acceleration.” After viewing the video, the district
judge said, “[W]hat I’m seeing here is very troubling. The behavior here is very troubling.”
The court also stated, “[H]ow somebody goes to that extreme and puts life at stake because
they think somebody owes them money is a very hard hurdle for me to overcome in my fact
finding.” We conclude that there was no clear error in the district court’s assessment.
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vessels”; (e) Joseph Dardar’s threat made during the course of the vessel’s
arrest that “[i]f I had my shotgun, you’d be dead”; (f) Defendants blocking
the canal for five days following the seizure; (g) the district court’s disbelief
of Dardar’s purported reason for holding the vessel (waiting for the check to
clear); and (h) TME’s billing Plaintiff for TME’s wrongful seizure of the
IRON DON on March 5, which the court found was “for the sole purpose of
intimidating and threatening Plaintiff” and which Dardar later admitted was
“inappropriate” and should never have been sent.
In conclusion, the district court did not clearly err in finding that
Kenai’s vessel was wrongfully seized and converted in bad faith and in
reckless disregard of Kenai’s rights.
II. Did the district court err in awarding punitive damages?
A. Did the facts support such an award?
General maritime law has long recognized the availability of punitive
damages in the appropriate case. Atl. Sounding Co. v. Townsend, 557 U.S. 404,
414–15 (2009). As the Court in Townsend stated, “[P]unitive damages have
long been available at common law[,] [and] . . . the common-law tradition of
punitive damages extends to maritime claims.” Id. at 414. See also Exxon, 554
U.S. 471.4 “Punitive damages have long been an available remedy at common
law for wanton, willful, or outrageous conduct,” Townsend, 557 U.S. at 409,
but have also been awarded when a defendant engaged in “reckless action,”
4
“[Exxon] and Townsend affirm that, as a general rule, punitive damages are
available in appropriate cases under the general maritime law. Thus, punitive damage
awards are generally proper in cases in admiralty jurisdiction.” 1 Thomas J. Schoenbaum,
Admiralty & Maritime Law § 5:10 (6th ed. 2022).
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that was “worse than negligent but less than malicious,” Exxon, 554 U.S. at
510–11.5
As summarized in the preceding section, Kenai presented sufficient
evidence and testimony to support the district court’s finding that
Defendants’ conduct was in bad faith, in callous disregard for the safety of
the people aboard the vessels, and in reckless disregard of Kenai’s rights.
Hence, the district court did not clearly err in finding facts sufficient to
support an award of punitive damages.
5
The Court in Townsend noted that maritime punitive damages are available in a
wide variety of circumstances as exemplified in maritime law’s earliest cases, citing, for
example, Boston Manufacturing Co. v. Fiske, 3 F. Cas. 957, 957 (Story, Circuit Justice, C.C.
Mass. 1820) (No. 1,681) (“In cases of marine torts, or illegal captures, it is far from being
uncommon in the admiralty to allow costs and expences, and to mulct the offending parties,
even in exemplary damages, where the nature of the case requires it[.]”). Townsend, 557
U.S. at 411–12.
In short, prior to enactment of the Jones Act in 1920, “maritime
jurisprudence was replete with judicial statements approving punitive
damages, especially on behalf of passengers and seamen.” Robertson,
Punitive Damages in American Maritime Law, 28 J. Mar. L. & Comm. 73,
115 (1997) (hereinafter Robertson); see also 2 Sedgwick § 599b, at 1156
(“Exemplary damages are awarded in Admiralty, as in other
jurisdictions”); 2 J. Sutherland, Law of Damages § 392, p. 1272 (4th ed.
1916) (“As a rule a court of equity will not award [punitive] damages, but
courts of admiralty will . . .” (footnote omitted)).
Id. at 412.
Townsend cited with approval Professor Robertson’s article which discussed the
general availability of punitive damages in admiralty. Id. Professor Robertson’s article
surveyed a variety of early maritime cases recognizing such awards. 28 J. Mar. L. & Com.
at 88–115. Two such cases involved conversion, id. at 114–15, and one dealt with a
steamboat that “deliberately rammed its rival, causing relatively slight property damage
and no personal injuries,” id. at 90.
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B. Was there legal error?
1. Is Exxon v. Baker’s ratio absolute?
“A district court’s damages award is a finding of fact, which this court
reviews for clear error.” Comar Marine, 792 F.3d at 574 (quoting Jauch v.
Nautical Servs., Inc., 470 F.3d 207, 213 (5th Cir. 2006) (per curiam)). But,
“[d]espite this court’s typical deference to a district court’s factual findings,
‘a judgment based on a factual finding derived from an incorrect
understanding of substantive law must be reversed.’” Barto, 801 F.3d at 471(quoting Mobil Expl. and Producing U.S., Inc. v. Cajun Const. Servs., Inc., 45
F.3d 96, 99 (5th Cir. 1995)). Thus, this court reviews de novo the legal
questions of whether Exxon’s 1:1 ratio applies in all maritime cases, and
whether that ratio should have been applied by the district court, regardless
of its specific factual findings as to Defendants’ level of culpability and the
amount of harm done to Kenai.
According to Defendants, Exxon held that “a 1:1 [punitive damage to
compensatory damage] ratio . . . is a fair upper limit in such maritime cases.”
554 U.S. at 513. Thus, Defendants argue, since no compensatory damages
were awarded here, any punitive damage award impermissibly exceeds the
ratio.
Plaintiff offers three reasons why Defendants’ position is wrong. First,
Exxon’s 1:1 ratio does not apply in this case because it only applies in cases
involving gross negligence and only where the compensatory damages are
significant. Here, Defendants’ conduct was intentional and malicious, and
the district court “limited [compensatory damages] to attorney’s fees.”
Second, Plaintiff maintains that if Exxon does require compensatory damages
as a prerequisite to an award of punitive damages, the attorney’s fees
awarded by the district court were compensatory. Finally, even if attorney’s
fees cannot be considered compensatory, the district court’s punitive
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damage award recognized and was measured by the harm that Plaintiff
suffered from Defendants’ five-day seizure and detention of its vessel. Thus,
the punitive damage award “was, in fact, compensatory – or at the very least,
it had . . . a compensatory flavor[.]”
Regarding Plaintiff’s first argument, this court has not had occasion to
consider whether Exxon’s 1:1 ratio applies in all cases or only in cases “like”
Exxon, involving “reckless action, profitless to the tortfeasor, resulting in
substantial recovery for substantial injury[,]” and where the conduct was
“worse than negligent but less than malicious.” Exxon, 554 U.S. at 510–11.
Nor, to our knowledge, have the other federal courts of appeal or district
courts. Some state courts, however, have.
The majority of the cases that have squarely considered whether
Exxon sets a hard rule applicable to all cases hold that it does not. See, e.g.,
Clausen v. Icicle Seafoods, Inc., 272 P.3d 827, 835 (Wash. 2012), cert. denied,
568 U.S. 823 (2012) (“The Exxon case cannot be read as establishing a broad,
general rule limiting punitive damage awards, primarily because nowhere in
the opinion can such a rule be found.”); McWilliams v. Exxon Mobil Corp.,
2012-1288 (La. App. 3 Cir. 4/3/13), 111 So. 3d 564, 579, writ denied, 2013-
1402 (La. 11/8/13), 125 So. 3d 451 (Exxon “did not establish a general rule
pertaining to punitive damages, but rather, narrowly tailored that result to
the unique case before it.”); Colombo v. BRP US Inc., 179 Cal. Rptr. 3d 580,
606 (Cal. Ct. App. 2014) (“[W]e conclude that the [C]ourt [in Exxon] did not
intend to create . . . a bright-line rule limiting punitive damages to the amount
of compensatory damages awarded to a plaintiff.”); Warren v. Shelter Mut.
Ins. Co., 2016-1647 (La. 10/18/17), 233 So. 3d 568, 590 (“[W]e find the Court
in Exxon was expressly attempting to set a ‘fair upper limit’ for punitive
damages ‘in cases with no earmarks of exceptional blameworthiness . . . .’”
(quoting Exxon, 554 U.S. at 513)). In a Winter 2021 article surveying the
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jurisprudence on this issue, Professor Thomas C. Galligan, Jr. summarized
the case law as follows:
To recap, virtually all of the courts that have meaningfully
discussed the impact of Exxon’s statement concerning the 1:1
ratio of punitive to compensatory damages have refused to
treat it as a per se rule applicable in all admiralty cases. Rather
than emphasizing the broad scope of Justice Souter’s review of
the relevant social science data on punitive damages, the lower
courts have emphasized the limiting language in Justice
Souter’s opinion. That is, the lower courts have treated the 1:1
ratio as the precise holding of the Exxon case, a holding
applicable to the facts before the Court. At most, the courts
have treated Exxon as a rule for cases “like” Exxon. Those are
cases where the defendant’s conduct constituted recklessness
or gross negligence and not worse, such as willful, wanton,
malicious, arbitrary, capricious, or intentional wrongdoing.
Additionally, Exxon was a case in which the damage was not
difficult to detect—it was substantial and overt. It was also a
case where the compensatory damages, fines and penalties,
cleanup costs, and settlements of claims were substantial, even
gargantuan. Moreover, Exxon was a case in which the
defendant’s behavior—not taking action to relieve a known,
relapsed alcoholic of command of an oil tanker—was not
motivated by profit.
Thomas C. Galligan, Jr., There Are More Things to Punitive Damages in
Admiralty Than the 1:1 Ratio Set Forth in Exxon’s Legal Philosophy, 81 La. L.
Rev. 395, 420–21 (2021).6
6
Galligan’s article argues that the appropriate reading of Exxon is that it created a
variable, multi-factor approach to punitive damages in maritime cases, rather than a
universal 1:1 rule. The variable approach is supported by a careful reading of Exxon itself,
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Schoenbaum’s treatise, on the other hand, states without elaboration
that Exxon “ruled that ‘a punitive to compensatory ratio of 1:1 . . . yields
maximum punitive damages[ ]’” and that “[t]his ratio, the Court held,
constitutes a ‘fair upper limit’ for maritime punitive damage awards.”
Schoenbaum, supra, at § 5:10. Schoenbaum cites for this proposition Norfolk
& Portsmouth Belt Line Railroad Co. v. M/V MARLIN, No. 08-134, 2009 WL
1974298, at *4 (E.D. Va. Apr. 3, 2009), and Priyanto v. M/S Amsterdam, No.
07-3811, 2009 WL 1202888 (C.D. Cal. Apr. 30, 2009). But neither cited case
dealt directly with the issue here: whether Exxon’s 1:1 ratio applies in all
cases.7
Notably, Professor Galligan discusses Norfolk & Portsmouth at length.
81 La. L. Rev. at 407–09. He concludes that Norfolk & Portsmouth
“essentially stands alone.” Id. at 409.
the desirability of flexibility in imposing punitive damages for purposes of adequate
punishment and efficient deterrence, and the jurisprudence since Exxon.
81 La. L. Rev. at 395. See also Erin L. Brooks, A Rule Old and New, Borrowed and Blue:
Exxon Adapts State Punitive Liability Law to Craft New Interpretation in Admiralty, 54 St.
Louis U. L.J. 357, 380 (2009) (“Under Exxon, punitive damages must only be limited in
precise proportion to actual damages when the conduct is not exceptionally blameworthy
(intentional, malicious, or driven for gain) or when it is without ‘modest economic harm or
[low] odds of detection.’”) (citing Exxon, 554 U.S. at 513).
7
For example, in Norfolk & Portsmouth, a maritime allision case, the court denied
plaintiff’s motion to amend its complaint to add a claim for damages pursuant to a Virginia
punitive damage statute that provided for a “strict and inflexible [3:1] ratio of punitive
damages to actual or compensatory damages . . . [which] automatically applied . . . .” 2009
WL 1974298, at *4. The court denied plaintiff’s motion to amend because Virginia’s
“automatic punitive damage remedy in the form of triple damages is inconsistent with
Exxon’s 1:1 ratio . . . and therefore conflicts with the general maritime law.” Id. But while
Norfolk & Portsmouth did not confront the precise issue of whether Exxon created a hard
cap on all maritime punitive damage awards, it suggested in dicta that it did not. See id. at
*3 (characterizing Exxon’s holding as, “except for the most extreme cases, the maximum
permissible ratio is likely 1:1.” (emphasis added) (citing Exxon, 554 U.S. at 514–15)).
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We hold that the majority position is the correct reading of Exxon for
the following reasons. First, the language of Exxon itself strongly suggests
that the 1:1 ratio applies, to use the words of the Court, in “cases like [that]
one,” 554 U.S. at 513, which was described as “a case of reckless action,
profitless to the tortfeasor, resulting in substantial recovery for substantial
injury[,]” id. at 510–11. The court further defined Exxon’s conduct as
“worse than negligent but less than malicious.” Id. at 510.
Second, there is nothing in the Supreme Court’s subsequent maritime
punitive damage cases suggesting that 1:1 is a hard and inflexible rule. In
Townsend, decided a year later, the Court considered this an open question.
See Townsend, 557 U.S. at 424 n.11 (“Nor have petitioners argued that the
size of punitive damages awards in maintenance and cure cases necessitates
a recovery cap, which the Court has elsewhere imposed. We do not decide
these issues.” (internally citing Exxon, 554 U.S. at 514–15)).
Third, where the conduct is intentional and malicious, and the
compensatory damages are small, imposing the 1:1 ratio would do little to
serve the twin purposes of punitive damages: to punish the wrongdoer and
deter his and others’ similar future conduct. Exxon, 554 U.S. at 492 (“[T]he
consensus today is that punitives are aimed not at compensation but
principally at retribution and deterring harmful conduct.”).
Defendants’ conduct here, unlike that in Exxon, was intentional: the
ramming of the SUPER T and its tow, the IRON DON. It was not done for
purposes of safety but in anger. (See, e.g., Dardar’s threat that “[i]f I had my
shotgun, you’d be dead.”). The district court found that Defendants’
conduct displayed “callous disregard for the safety of the people aboard the
vessels” and was “in bad faith and with wanton disregard of the legal rights
of Plaintiff.” As reviewed above, there is no clear error in this finding.
Furthermore, unlike Exxon, where the compensatory damages were massive,
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the harm suffered by the five-day delay in the return of Kenai’s vessel was
relatively small.8
2. Do punitive damages require compensatory damages?
We need not resolve this issue now. As explained below, it is unclear
whether the district court intended her award to be compensatory, at least in
part. Because we remand to the district court for clarification on that issue,
we pass on this thornier question.
3. Was this attorney’s fee award compensatory?
Kenai contends that, even if a compensatory damage award is
necessary in order to obtain punitive damages, the attorney’s fees were
awarded as compensatory damages. Defendants cite Budinich v. Becton
Dickinson & Co., 486 U.S. 196, 200 (1988) for the proposition that “[a]s a
general matter . . . a claim for attorney’s fees is not part of the merits of the
action to which the fees pertain.” Therefore, contend Defendants, the
attorney’s fees awarded by the district court were awarded as costs and not
damages and cannot form a foundation for the award of punitive damages.
Defendants maintain that The Apollon, 22 U.S. 362 (1824), relied on by Kenai,
is inapposite in that here, unlike in Apollon, there was no proof of attorney’s
fees offered at trial.
While there is some basis for Kenai’s position as a general proposition,
it ultimately falls short under the law governing wrongful arrest and the facts
8
Awards of punitive damages are, of course, constrained by “[t]he Due Process
Clause of the Fourteenth Amendment [which] prohibits the imposition of grossly excessive
or arbitrary punishments on a tortfeasor.” State Farm Mut. Auto. Ins. Co. v. Campbell, 538
U.S. 408, 416 (2003). See also TXO Prod. Corp. v. Alliance Res. Corp., 509 U.S. 443, 446
(1993); Wellogix, Inc. v. Accenture, L.L.P., 716 F.3d 867, 884–85 (5th Cir. 2013), cert denied
sub nom., Accenture, L.L.P. v. Wellogix, Inc., 573 U.S. 904 (2014); Lincoln v. Case, 340 F.3d
283, 292 (5th Cir. 2003).
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of this case. We have stated the following about the award of attorney’s fees
as damages in wrongful seizure cases:
The reasons for the award of [such] damages are analogous to
those in cases of malicious prosecution. The defendant is
required to respond in damages for causing to be done through
the process of the court that which would have been wrongful
for him to do himself, having no legal justification therefor and
acting in bad faith, with malice, or through a wanton disregard
of the legal rights of his adversary.
Frontera Fruit Co. v. Dowling, 91 F.2d 293, 297 (5th Cir. 1937).
Thus, by way of analogy, for common law malicious prosecution
actions, “[c]ompensatory damages for tangible losses or harm normally
include reasonable attorney fees and other expenses incurred in defending
the wrongful criminal or civil litigation or avoiding or quashing abusive
process . . . .” Dobbs, Hayden, & Bublick, supra, at § 596; cf. also Hale v. Fish,
899 F.2d 390, 403–04 (5th Cir. 1990) (reinstating § 1983 plaintiff’s award of
$25,000 “for the amount expended in his defense of the criminal charges
against him”).
Such awards are more properly categorized as compensatory damages
only when they were incurred as “collateral legal expenses”—defined as
attorneys’ fee outlays incurred in some way other than the proceeding in
which the attorneys’ fee award is being sought . . . .” David W. Robertson,
Court-Awarded Attorneys’ Fees in Maritime Cases: The “American Rule” in
Admiralty, 27 J. Mar. L. & Com. 507, 511 (1996) (emphasis added).
However, many courts make such awards without drawing this distinction.
See id. at 539 (citing, inter alia, State Bank & Tr. Co. of Golden Meadow v. Boat
D.J. Griffin, 755 F. Supp. 1389 (E.D. La. 1991)).
Here, since the attorney’s fees awarded were in connection with
services rendered in this case, there was no other proceeding in which
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attorney’s fees were incurred and thus, no “collateral legal expenses.” The
magistrate judge’s recommendation limited the attorney’s fees in large
measure to that part of the case dealing with the wrongful seizure (excluding
the fees incurred in connection with the unsuccessful breach of contract
claim). Still, the fees awarded were earned in this, not a collateral, proceeding
and, therefore, may not properly be considered compensatory damages.9
4. Was the punitive damage award partly compensatory?
In connection with its argument on prejudgment interest, Kenai
argues that the language and reasoning of the district court’s award of
punitive damages shows that the award was intended to be compensatory, at
least in part. Defendants maintain the award was “entirely punitive” because
“the district court found that Kenai suffered no damage from delay at CP
Marine’s shipyard.”
In this case, the district court’s ruling strongly suggests that the
punitive damages award was intended, at least in part, to compensate Kenai
for the five-day loss of its vessel:
Although the Court finds that Defendants’ performance was
not dilatory and did not cause Plaintiff’s late arrival in Alaska,
Defendants’ wrongful detention of Plaintiff’s vessel plainly delayed
Plaintiff by five days. Therefore, as a measure of punitive
damages, the Court will award Plaintiff the value of its missed
contract days for the days that Defendants wrongfully detained
the vessel.
Here, the district court found that Defendants converted Plaintiff’s
vessel for five days. The district court’s discussion of Defendants’ bad faith
9
We again note that Defendants’ separate appeal of the attorney’s fees award was
dismissed for want of prosecution. Kenai Ironclad, 2022 WL 18776210, at *1. Thus, this
award is final.
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conduct in the court’s Conclusions of Law is entitled “Wrongful Arrest and
Conversion.”
“Under the general maritime law, as under the common law of torts,
a person may be liable for certain intentional wrongs, such as conversion[.]”
Schoenbaum, supra, at § 5:3 (citing The Lydia (Hugh D. MacKenzie Co. v.
Steamship Lydia), 1 F.2d 18 (2d Cir. 1924)). The Fifth Circuit looked to the
“landside context” for this maritime tort to define it as “the unlawful and
wrongful exercise of dominion, ownership or control over the property of
another, to the exclusion of the same rights by the owner.” Goodpasture, Inc.
v. M/V Pollux, 602 F.2d 84, 87 (5th Cir. 1979) (citing Bankers Life Ins. Co. v.
Scurlock Oil Co., 447 F.2d 997, 1004 (5th Cir. 1971) (applying Texas law)).
See also 4 H Const. Corp. v. Superior Boat Works, Inc., 659 F. Supp. 2d 774,
780 (N.D. Miss. 2009), aff’d, 579 F. App’x 278 (5th Cir. 2014) (finding
Mississippi state law of conversion relevant because its application “would
not interfere with the uniformity or characteristic features of admiralty and
maritime law[]”); Restatement (Second) of Torts § 222A (Am. L. Inst.
1965) (defining “conversion” as “an intentional exercise of dominion or
control over a chattel which so seriously interferes with the right of another
to control it that the actor may justly be required to pay the other the full
value of the chattel.”).
Some courts have found that maritime law requires a finding of bad
faith to establish conversion, at least in the context of wrongful attachment.
See Furness Withy (Chartering), Inc., Panama v. World Energy Sys. Assocs., Inc.,
854 F.2d 410, 412 & n.6 (11th Cir. 1988). See also Comar Marine, 792 F.3d at
575 n.32 (citing Furness with approval in describing burden of proving
wrongful seizure and stating that it requires showing of bad faith). See also
Restatement (Second) of Torts § 222A (identifying good faith as one of six
“important” factors “[i]n determining the seriousness of the interference
and the justice of requiring the actor to pay the full value”). Ultimately, the
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exact contours of the maritime tort of conversion need not be defined here,
as the district court correctly found that Defendants wrongfully exercised
control over Kenai’s vessel to Kenai’s exclusion and that Defendants did so
in bad faith.10
Defendants argue that despite the district court’s finding that
Defendants converted Kenai’s vessel resulting in its loss of use for five days
and despite the court’s use of the vessel’s daily rate as the measure of
punitive damages, the court’s award was in no way compensatory. While the
district court’s reference to the tort of conversion tends to support Kenai’s
position that the award is in part compensatory, there is some ambiguity in
the trial court’s decision. As a result, we remand for clarification. If the award
was intended to be compensatory in part, the court should make clear its
delineation of compensatory and punitive damages.
III. Did the district court err in awarding pre-judgment interest?
Defendants urge that the district court erred in awarding prejudgment
interest, as it is not allowed under Louisiana law or federal law.11 Kenai
responds that, while “prejudgment interest is not [generally] applicable to
punitive damages awards under maritime cases[,]” the award here is actually
10
The district court called this an act of conversion, but there is some authority
that this is perhaps more accurately called trespass to chattel. See Restatement (Second) of
Torts § 222A cmt. c (distinguishing between two torts and explaining that conversion
entitled plaintiff to “full value of the chattel” while trespass to chattel allows a plaintiff to
“recover for the diminished value of his chattel because of any damage to it, or for the
damage to his interest in its possession or use” (emphasis added)). Again, the exact contours
of the tort need not be fully explored, as, either way, Kenai is entitled to compensation for
the loss of use of its property.
11
Defendants also argue that the district court’s judgment did not grant
prejudgment interest on the award of attorney’s fees, but, to the extent that it did so, this
was inappropriate. This is not before the court since the attorney’s fee award was appealed
separately and dismissed for want of prosecution.
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compensatory in nature, at least enough so to justify an award of prejudgment
interest. Kenai points the panel to Illinois Central Railroad Co. v. Texas
Eastern Transmission Corp., 551 F.2d 943 (5th Cir. 1977), where the court
affirmed pretrial interest on demurrage although the demurrage award was
partly punitive in nature.
Defendants dispute Kenai’s allegation that the punitive damages
award was partly compensatory because “the district court found that Kenai
suffered no damage from delay at CP Marine’s shipyard.” This, argue
Defendants, is a critical fact that distinguishes Illinois Central.
“As a general rule, prejudgment interest should be awarded in
admiralty cases—not as a penalty, but as compensation for the
use of funds to which the claimant was rightfully entitled.” The
district court has discretion to deny prejudgment interest
“only when there are ‘peculiar circumstances’ that would
make it inequitable for the losing party to be forced to pay
prejudgment interest.”
Comar Marine, 792 F.3d at 580 (quoting Noritake, 627 F.2d at 728–29). See
also In re Signal Int’l, LLC, 579 F.3d 478, 500 (5th Cir. 2009) (citing Corpus
Christi Oil & Gas Co. v. Zapata Gulf Marine Corp., 71 F.3d 198, 204 (5th
Cir.1995)).
As discussed earlier, we are unable to resolve this issue because it is
unclear whether the district court intended the punitive damages award to be
in part compensatory. If, as in Illinois Central, it was intended to be partly
compensatory, the district court’s grant of prejudgment interest was
appropriate. The case is remanded to the district court for clarification of this
issue.
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CONCLUSION
In sum: we AFFIRM the district court’s finding that Defendants
wrongfully seized and converted Kenai’s vessel in bad faith and in a manner
egregious enough to warrant an award of punitive damages. We VACATE
the district court’s award of damages and REMAND on the limited basis of
clarifying the court’s award, specifying whether any part of the award was
intended as compensatory damages and, if so, in what amount. In doing so,
the district court should make whatever findings of fact and conclusions of
law are necessary to arrive at its decision. Additional briefing of the parties is
strongly encouraged. Whatever the decision of the district court, it will not
be necessary for the parties to file a new notice of appeal in order to obtain
appellate review of that decision. The parties need only file certified copies
of the district court’s ruling plus any supplementary briefs and materials. The
matter will then be referred to this panel. See United States v. Gaston, 608
F.2d 607, 614 n.3 (5th Cir. 1979); Chaney v. Schweiker, 659 F.2d 676, 679 n.5
(5th Cir. 1981); Royal Bank of Canada v. Trentham Corp., 665 F.2d 515, 519
(5th Cir. 1981).
23