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Louisiana Court Upholds Award of $309,174 in Attorneys’ Fees for Pursuit of Maintenance and Cure

Case:   Stermer v. Archer-Daniels- Midland Co.
             Louisiana 3rd Circuit Court of Appeal
             15-811 (La. App. 3 Cir 02/24/16), 186 So. 3d 319

Adrienne Stermer sued her employer, ARTCO, its insurer, Agrinational Insurance Company, and Archer-Daniels-Midland Company, ARTCO’s parent company/owner of the M/V Cooperative Enterprise, for damages under the Jones Act, unseaworthiness of the vessel, and Retaliatory Discharge. She also claimed ARTCO unreasonably refused to pay her maintenance and cure. In a hotly contested bench trial, she was awarded damages under the Jones Act and the trial judge also determined ARTCO’s refusal to pay Ms. Stermer maintenance and cure for 2.5 years was arbitrary and capricious and awarded her $300,000 in punitive damages and $150,000 in attorneys’ fees. The unseaworthiness and retaliatory discharge claims were dismissed, as the Judge found Stermer did not prove those claims.

On appeal, the Third Circuit affirmed the Jones Act claim, the award of $300,000 in punitive damages, and agreed Stermer was entitled to attorney’s fees for arbitrary and capricious failure to pay maintenance and cure. However, the appellate court reversed the $150,000 attorney’s fees award and remanded the matter, as no analysis was made by the trial court as to how it arrived at the amount awarded. The original panel of the Third Circuit also awarded $10,000 in attorneys’ fees to Stermer for the work performed by her attorneys on the original appeal. ARTCO then filed a writ to the Louisiana Supreme Court which was denied. The original judgment was thus final, except for the amount of attorneys’ fees owed.

On remand, the trial court awarded $309,174 in attorneys’ fees and court costs. ARTCO appealed the award, and Stermer answered.  ARTCO contended the district court erred (1) in awarding attorneys’ fees for time spent after maintenance and cure benefits were commenced by ARTCO; and (2) in allocating the time spent by plaintiff’s counsel on the prosecution of maintenance and cure benefits and other claims. Stermer, on the other hand, requested the award be amended to increase the amount of attorneys’ fees, the amount of costs incurred in prosecuting the action in district court and for an award of attorneys’ fees for the second appeal.

Under the manifest error-clearly wrong standard, the Third Circuit found there was a reasonable basis for the trial court’s conclusions. On the first issue, ARTCO argued when it paid all the maintenance and cure owed Ms. Stermer on April 19, 2010 “under protest” and kept the payments current thereafter, her attorneys’ fees should have been limited to the time spent on pursuit of the maintenance and cure payments preceding the date of its “payments under protest.” Defendants stipulated when they tendered maintenance and cure prior to the original trial on April 10, 2010, they would continue to pay maintenance and cure but would reserve their rights to contest the payments at trial. At the time of trial, all outstanding maintenance and cure had been paid which totaled approximately $56,000. Ms. Stermer argued ARTCO, by paying under protest, was simply trying to shield itself from attorneys’ fees and punitive damages.

The court rejected ARTCO’s position, noting Stermer was able to show that an accident occurred, contrary to ARTCO’s defense asserted from the outset and through initial appeal that there was no accident, no injury and that plaintiff’s claims were fraudulent. The court noted a vessel owner is obligated to investigate a claim before denying or terminating benefits and may refuse to pay only “if diligent investigation indicates the seaman’s claim is not legitimate.” The appellate court stated it could understand ARTCO’s failure to pay maintenance and cure at the outset of the case, but not why ARTCO waited an additional 10 months after a medical report of its own physician indicated her wrist injury was aggravated by her accident. The Third Circuit further took note that the plaintiff’s attorney had to continue to defend through trial to uphold the maintenance and cure that was paid to their client.

ARTCO further challenged the $309,174 award of attorneys’ fees set by the trial court on remand, arguing that amount was excessive and an abuse of discretion based on the trial court on remand failing to properly allocate the amount of time spent on the maintenance and cure issue as opposed to the other more complicated issues in the case.

The appellate court noted the trial judge properly applied the lodestar method of calculating fees based on the number of hours reasonably expended times a reasonable hourly rate (here determined to be $300/hour). Interestingly, the court found that 90 percent of counsel’s work, reflected in plaintiff’s reconstructed time sheets encompassing 938.3 hours of time spent on all issues, was reasonable. Additionally, the appellate court noted Ms. Stermer’s counsel argued in the trial court on remand and again on appeal that the work he did on the entire case was so “intertwined” that he was unable to break down his time sheets such that the time spent solely on the maintenance and cure issue could be legally separated from time spent in preparation and trial of the entire case. The Third Circuit agreed, noting while it could be legitimately argued that allocation of time in this case was high, they were nevertheless constrained by the manifest error rule, and that a reasonable finder of fact, based on the evidence in the record, could make such a conclusion that the amount was reasonable.

One of the appellate judges dissented on the majority’s conclusion that Ms. Stermer was entitled to attorneys’ fees for work performed in the trial court after ARTCO instituted payment of maintenance and cure benefits. He cited to earlier decisions indicating the payment of maintenance and cure prior to suit does not constitute a waiver of any defenses which might be asserted. He noted an employer always has the right to defend a claim for maintenance and cure benefits and stated, “The fact that an employer pays maintenance and cure benefits, but contends the benefits are not owed, does not entitle a seaman to recover attorneys’ fees.” He further noted a seaman is only entitled to attorneys’ fees if the employer refused to pay the benefits and the refusal is determined to be callous, and recalcitrant, arbitrary and capricious, or willful, callous and persistent. He believed the attorneys’ fees award, even if an employers actions were initially willful, callous and recalcitrant, should be limited to those incurred for the period of time during which the benefits were not paid. Otherwise, the employer is subjected to continued penalties for failure to pay maintenance and cure although it instituted payment of the benefits. This, in his opinion, would be a disincentive to payment of maintenance and cure if the employer finds the seaman’s claim is questionable.  He further stated the designation of the payment “under protest” had no legal significance, whatsoever, and payment under protest does not afford the employer any more rights or subject the seaman to any additional burden. 

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