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Oliveri v. Delta Steamship Lines Inc.

decided: June 13, 1988.

JOSEPH OLIVERI, PLAINTIFF-APPELLEE,
v.
DELTA STEAMSHIP LINES, INC. AND CROWLEY MARITIME CORP., DEFENDANTS-APPELLANTS AND THIRD-PARTY PLAINTIFFS, V. MIDLAND-ROSS CORPORATION, THIRD-PARTY DEFENDANT



Appeal from a judgment of the District Court for the Southern District of New York (Whitman Knapp, Judge), entered after a jury trial, awarding damages to plaintiff in an action brought under the Jones Act, 46 U.S.C. § 688 (1982), for injuries suffered by plaintiff. Defendants challenge the method of discounting awards for future lost earnings and future pain and suffering. Reversed and remanded, unless the plaintiff agrees to a remittitur.

Feinberg, Chief Judge, Newman and Winter, Circuit Judges.

Author: Newman

JON O. NEWMAN, Circuit Judge:

This appeal primarily concerns the method of discounting damage awards to present value and the propriety of applying a present value discount to damages for future pain and suffering. Defendants Delta Steamship Lines, Inc. and Crowley Maritime Corp. (collectively "Delta") appeal from a judgment of the District Court for the Southern District of New York (Whitman Knapp, Judge) entered after a jury trial, awarding damages in favor of plaintiff Joseph Oliveri, and from the District Court's orders denying Delta's post-trial motions. Oliveri brought this action under the Jones Act, 46 U.S.C. § 688 (1982), for injuries he suffered while working on defendant's vessel. Delta conceded liability, and the issue of damages was tried before a jury. The jury returned a special verdict in the amount of $486,004.10, including $240,000 for lost future earnings and $50,000 for future pain and suffering. The trial judge discounted the future earnings and pain and suffering components of the jury award by subtracting 2% of the sums awarded. Delta appeals on the grounds that certain evidence regarding Oliveri's future earning capacity was improperly admitted and that the present value calculation was incorrectly performed. We conclude that the evidence regarding earning capacity was admissible but that the discounting was performed incorrectly. We reverse and remand, unless the plaintiff agrees to a remittitur.

Background

On June 27, 1984, Oliveri was injured while working aboard Delta's ship SANTA ROSA, when a spreader weighing several tons fell on his right foot. Three of Oliveri's toes were fractured, and two digits of the second toe eventually had to be amputated. At the time of his injury, Oliveri was working as an unlicensed seaman. He had been attending marine engineering school in order to obtain a marine engineer's license. After the injury, Oliveri continued his course of study in the hope that his injury would heal. He passed the Coast Guard licensing exam and was licensed as a third assistant engineer of steam vessels. He applied for membership in the marine engineers' union, District 2 Marine Engineers Beneficial Association, but was not accepted because he was deemed unfit for sea duty as a result of his foot injury. He has been considered medically unfit for sea duty ever since.

Oliveri commenced this action under the Jones Act to recover damages for his injuries. Delta conceded liability, and the issue of damages was tried to a jury before Judge Knapp. At the trial, Oliveri presented the testimony of William Powers, an official from District 2 Marine Engineers Beneficial Association. Powers testified as to compensation rates for third, second, first, and chief marine engineers. He also testified as to how individuals were promoted through these ranks and the average number of years experience needed before each promotion. Over Delta's objection, Judge Knapp admitted the testimony on the theory that Oliveri's future earnings would be affected by any promotions he might have received. In the course of Powers' testimony, the jurors were instructed that whether Oliveri would in fact have received any promotions was a question for them to decide.

Dr. Thomas Fitzgerald, an economist, testified for the plaintiff concerning lost wages. Based on Powers' testimony as to compensation rates for marine engineers, Fitzgerald prepared charts showing what Oliveri's lost past and future wages would be based on different assumptions concerning Oliveri's future employment. Fitzgerald prepared eight charts, representing the combinations of four different engineering positions (third, second, first, and chief engineer) and two variations as to average length of time at sea per year (six and eight months). For example, chart 1 assumed that Oliveri would always remain a third assistant engineer and would average eight months at sea each year, while chart 8 assumed that Oliveri would become a chief engineer by April 1990 and would average six months at sea each year. Each chart contained a figure for total lost future earnings. Dr. Fitzgerald testified that this figure was computed by projecting Oliveri's expected earnings, adjusting upward for inflation by approximately 4.1% per year, and then discounting the inflation-adjusted income stream to present value by using a discount factor of 6.5%, which Dr. Fitzgerald testified was an historical average of low-risk interest rates. Each chart stated that the discount rate employed was 6.5%.

The parties discussed the discounting issue at several pre-charge conferences. Plaintiff contended that discounting should be performed by the jury, that the proper rate was approximately 2% (the difference between the interest rate and the inflation rate testified to by his expert), and that the expert's figures already presented properly discounted figures for future earnings. Defendants expressed a willingness to have the District Judge do the discounting but urged that the rate to be used should be 6.5% (the interest rate used by plaintiff's expert, unadjusted for inflation). Neither side clearly articulated the precise method by which discounting should be accomplished. Plaintiff presumably believed that the right method was the one reflected in the present value discount tables used by his expert. Defendants said nothing helpful on this score before the verdict, but argued strenuously after the verdict that traditional present-value discounting should be done. Judge Knapp concluded that the parties had stipulated that he would do the discounting and that he would do so simply by reducing the future components of the jury's award by 2%, i.e., subtracting 2% of the amount of such components and including the remaining 98% in the judgment. Judge Knapp recognized that this was not the way discounting was "ordinarily" done, but believed that this was the method he had discussed with counsel and that they had agreed to it.

The jury was instructed that they should not be concerned with discounting to present value but that they should be aware that "any future figures you give" would be reduced by 2%. The precise method of effecting the reduction was not explained. The jury awarded plaintiff a total of $486,004.10, identifying on a special verdict form damages components of $240,000 for future earnings, $50,000 for future pain and suffering, plus other amounts not at issue on this appeal, for medical expenses, past earnings, and past pain and suffering. Judge Knapp then discounted by subtracting 2% of $290,000, or $5,800, from the sum of the components for future earnings and future pain and suffering, and adding the balance of $284,200 to the other sums awarded, yielding a total award of $480,204.10 for which judgment was entered.

Delta moved pursuant to Fed. R. Civ. P. 59 to amend the judgment or for a new trial on the ground that the discounting was improperly performed. Judge Knapp denied the motion because he believed that the parties had stipulated to the method of discounting "to simplify the matter." Delta appealed to this Court but withdrew its appeal when it learned that the judgment was not final pursuant to Fed. R. Civ. P. 54(b) because a third-party claim for indemnification had not yet been adjudicated. Delta then sought and obtained certification so that an appeal would be permissible. Thereafter, Delta filed a second Rule 59 motion, challenging the damage award on the ground that Powers' testimony had been improperly admitted. Judge Knapp denied the second Rule 59 motion as untimely.

Delta appeals from the judgment and from the denial of both Rule 59 motions.

Discussion

A. Powers' ...


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