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Kraljic v. Berman Enterprises Inc.

decided: May 9, 1978.

ANTHONY P. KRALJIC, PLAINTIFF-APPELLEE,
v.
BERMAN ENTERPRISES, INC., AND GENERAL MARINE TRANSPORT CORP., DEFENDANTS, BERMAN ENTERPRISES, INC., DEFENDANT-APPELLANT



Appeal from a judgment entering an award of punitive damages in a seaman's action for maintenance and cure.

Gewin*fn* and Mulligan, Circuit Judges, and Miller,*fn** Judge.

Author: Mulligan

MULLIGAN, Circuit Judge

This appeal raises a novel issue in this circuit. May a seaman in an action for maintenance and cure recover in addition to compensatory damages, both attorney's fees and punitive damages?

Anthony P. Kraljic sustained injuries during the course of his employment while working as a seaman for the appellant, Berman Enterprises, Inc. (Berman), which by stipulation of the parties for the purpose of the trial was deemed to be the owner and operator of the tugboat on which appellee was employed. Kraljic brought suit in the United States District Court for the Eastern District of New York against his employer seeking damages under the Jones Act and General Maritime Law for the negligence of the appellant, the unseaworthiness of the vessel and for failure to pay maintenance and cure. After a three-day jury trial before Chief Judge Jacob Mishler, the jury found that the plaintiff was entitled to compensatory damages in the amount of $19,650 on the negligence and unseaworthiness claims ($26,200 reduced by 25% for his contributory negligence) and $900 for maintenance and cure plus interest. Attorney's fees of $300 for the maintenance and cure representation were also awarded by the court, the amount having been agreed upon by the parties. In addition, the jury awarded Kraljic $3,000 in punitive damages on the maintenance and cure claim. Berman appeals solely from the award of punitive damages.

I

The leading case on the issue, Vaughan v. Atkinson, 369 U.S. 527, 82 S. Ct. 997, 8 L. Ed. 2d 88 (1962), is relied upon by both parties to this appeal. In that case, Mr. Justice Douglas, writing for the majority, held that in an action for maintenance and cure the seaman is entitled not only to a recovery of his actual damages but also to an award of counsel fees where the defendant's default is "callous" or "willful and persistent".

While the result is unambiguous the theory upon which the majority awarded counsel fees is not clearly articulated. On the one hand Justice Douglas stated,

While failure to give maintenance and cure may give rise to a claim for damages for the suffering and for the physical handicap which follows . . . the recovery may also include "necessary expenses." Cortes v. Baltimore Insular Line, 287 U.S. 367, 371, 77 L. Ed. 368, 53 S. Ct. 173.*fn1

369 U.S. at 530. This might lead one to conclude that the award of attorney's fees was compensatory as a "necessary expense," rather than based on a punitive damage theory. However, it then becomes difficult to understand the Court's emphasis on the malice of the shipowner. His refusal to supply maintenance and cure was termed "callous". Id. Indeed, his "default was willful and persistent." Id. at 531. Moreover, the Court took pains to point out that the obligation of the shipowner to provide maintenance and cure was not contractual. It quoted with approval, 369 U.S. at 532-33, Mr. Justice Cardozo's opinion in Cortes v. Baltimore Insular Line, supra, 287 U.S. at 371, where, in characteristic language, he explained the nature of the employer's duty to provide maintenance and cure:

The duty to make such provision is imposed by the law itself as one annexed to the employment. Contractual it is in the sense that it has its source in a relation which is contractual in origin, but given the relation, no agreement is competent to abrogate the incident. (Citation omitted).

It is well understood that punitive damages are not recoverable in an action for breach of contract. E.g., A.L.I., Restatement of Contracts § 342 (1932); C. McCormick, Damages § 81 (1935); J. Calamari & J. Perillo, Contracts § 204 (1970). We conclude therefore that the majority in Atkinson, by eschewing a contractual basis for the employer's maintenance and cure obligation and by stressing the willfulness of the shipowner's conduct, was in fact awarding counsel fees as punitive damages.

Unlike the majority opinion, Mr. Justice Stewart's dissent is not ambiguous on this point. He found no authority for holding that a seaman could recover counsel fees as compensatory damages. Rather, the dissent found that:

If the shipowner's refusal to pay maintenance stemmed from a wanton and intentional disregard of the legal rights of the seaman, the latter would be entitled to exemplary damages in accord with traditional concepts of the law of damages. While the amount so awarded would be in the discretion of the fact finder, and would not necessarily be measured by ...


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