Petition for Writ of Certiorari — St. Paul Fire & Marine Insurance v. Culver
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In the — 7
Supreme Court of the United States
OCTOBER TERM, 1983
St. Paul Fire & Marine Insurance Company,
Charles D. Slater d/b/a Slater Boat Company,
Euro-Pirates International, Inc., and
Steamship Mutual Underwriting Association, Ltd.
Petitioners
v.
Ruth Culver, et al
Respondents
PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
PETITION FOR WRIT OF CERTIORARI
WARREN M. FARIS
MAT W. GRAY, III
FARLIS, ELLIS, CUTRONE
& GILMORE
1207 Whitney Building
New Orleans, Louisiana 70130
Telephone: 504-581-6373
Counsel for Petitioners
A B Letter Service, Inc., 327 Chartres St., New Orleans, La. (504) 581-5555
16 pp
i
QUESTIONS PRESENTED FOR REVIEW
1. Whether the opinion in Culver IJ is contrary to
this Court’s decision in James & Laughlin Steel Corp. v.
Pfeifer, _. U.S. _, 103 S.Ct. 2541, 76 L.Ed.2d 768 (1983).
In order to account for the impact of inflation, the Fifth
Circuit Court of Appeals has mandated as a matter of law
in all civil and maritime cases that the ‘“‘below market dis-
count rate’ method is the sole method to compute loss of
future earnings and the sole method for adjusting the
award to present value.
2. Whether the opinion in Culver IJ conflicts with
holdings of this Court that in civil cases the plantiff has the
burden of proving his damages by a preponderance of the
evidence by its creation of an irrebuttable presumption
that every plaintiff will obtain uninterrupted annual wage
increases identical to the rate of inflation through the end
of his work-life expectancy regardless of his personal earn-
ings history and by its preventing any contrary evidence to
be presented by defendants that may likely decrease or
demonstrate fluctuation in future earnings.
3. Whether the opinion in Culver IJ conflicts with the
Seventh Amendment preserving the right to trial by jury
of fact issues in the district courts, except civil cases in ad-
miralty and maritime jurisdiction, since it implicitly man-
dates that every plaintiff will be awarded a constant, an-
nual earnings increase for inflation through the end of
work-life expectancy, regardless of any contradictory facts
reasonably adduced from the plaintiff's earnings and
employment history.
ii
STATEMENT OF THE PARTIES
Pursuant to Rule 21.1(b) and Rule 28.1, counsel for
petitioners certifies that the following named persons are
parties to this proceeding:
(1) Mrs. Ruth Culver, individually and as ad-
ministratrix of the estate of Curtis Culver and as natural
parent of/and Benny Culver, Tonia Culver, Rodney Wayne
Culver, and Bridgette Ann Culver;
(2) Charles D. Slater d/b/a Slater Boat Company;
(3) Euro-Pirates International, Inc.;
(4) Ocean Drilling & Exploration Company;
(5) ODECO, Inc.;
(6) Gulf Overseas Marine Corporation;
(7) Gulf Overseas Service Corporation;
(8) Steamship Mutual Underwriting Association,
Ltd.; and
(9) St. Paul Fire & Marine Insurance Company.
iii
TABLE OF CONTENTS
Page
Questions Presented for Review..................... i
ND a ii
EE iii
ee i ae V
ee ee ee 2
ee ee ee De eae, 2
re ee, OP ae eld Cs SOs 3
re 4
seen Gon Govemteme the Writ..................... 8
ye ia ww arp dcein a oom 9
(1) THE OPINION IN CULVER II IS IN
CONFLICT WITH THIS COURT'S DECISION
IN JONES & LAUGHLIN STEEL CORP. V.
PFEIFER, __ U.S. _, 103 S.CT. 2541, 76
ae a ue Wy Vol vA A nals ¢ 4 8 9
(2) THE OPINION IN CULVER II CONFLICTS
WITH THE HOLDINGS OF THIS COURT
THAT IN CIVIL CASES THE PLAINTIFF
HAS THE BURDEN OF PROVING HIS
DAMAGES BY A PREPONDERANCE OF THE
EVIDENCE BECAUSE IT CREATES AN
IRREBUTTABLE PRESUMPTION THAT
EVERY PLAINTIFF WILL BE AWARDED
ANNUAL WAGE INCREASES AT THE
IDENTICAL RATE THAT INFLATION IS
REMOVED FROM THE FULL MARKET
INTEREST RATE TO OBTAIN THE BELOW
MARKET RATE, REGARDLESS OF HIS
BGUARRrearwises PESCOEUIY..... 2.2... eee eee eee 12
(3) THE DECISION OF THE FIFTH CIRCUIT
IN CULVER II CONFLICTS WITH THE
RIGHT TO TRIAL BY JURY OF FACTUAL
ISSUES GUARANTEED IN THE UNITED ©
STATES CONSTITUTION............. SMES ie 13
ee uc kawucuewves 14
iv
TABLE OF CONTENTS (Continued)
Page
Coscia We Ga Fs ES OE: 16
APPENDIX A—Opinion of the Fifth Circuit Court
of Appeals, en banc, of December 22, 1983,
CO ese cate ark ns ORAS. Bd A-1
APPENDIX B—Order denying rehearing of Culver
II en banc, Opinion of February 24, 1984...... A-25
APPENDIX C—Opinion of the Fifth Circuit Court
of Appeals, en banc, of September 22, 1982,
3 Sg alien Poms et a8 ttl ny aoe PTC an A ee A-28
APPENDIX D—Panel opinion of Fifth Circuit
Court of Appeals of May 4, 1981............. A-60
Vv
TABLE OF AUTHORITIES
Cases Page
Johnson v. Penrod Drilling Co.,
510 F.2d 234 (5th Cir.), cert. denied,
ee ak a eases 5
Jones & Laughlin Steel Corp. v. Pfeifer,
__ U.S. __, 103 S.Ct. 2541, 76 L.Ed.2d
I er ore ar Ae See 6, 7, 8,9
Statutes:
United States Constitution, Seventh Amendment .... 13
ST RE eS ea BP Pinoy aia cad ee 13
ey ae Vey wd BG poe 13
ae Re es Rey ee gehts 10
Se ES os ae i RRR heen 10
1
IN THE
SUPREME COURT OF THE UNITED STATES
OCTOBER TERM, 1983
St. Paul Fire & Marine Insurance Company,
Charles D. Slater d/b/a Slater Boat Company,
Euro-Pirates International, Inc., and
Steamship Mutual Underwriting Association, Ltd.
Petitioners
v.
Ruth Culver, et al
Respondents
PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
PETITION FOR WRIT OF CERTIORARI
TO THE HONORABLE, THE CHIEF JUSTICE AND
THE ASSOCIATE JUSTICES OF THE SUPREME
COURT OF THE UNITED STATES:
Petitioners, St. Paul Fire & Marine Insurance Com-
pany, Charles D. Slater d/b/a Slater Boat Company, Euro-
Pirates International, Inc., and Steamship Mutual Under-
writing Association, Ltd., pray that a writ of certiorari
issue to review the decision of the United States Court of
Appeals for the Fifth Circuit entered in this cause.
2
DECISION TO BE REVIEWED
Petitioners seek review of the en banc decision of the
United States Court of Appeals for the Fifth Circuit
rendered in Ruth Culver, et al v. Slater Boat Co., et al, No.
79-3985, reported at 722 F.2d 114 (5th Cir. 1983), petition
for rehearing denied February 24, 1984.
The original panel opinion, Culver v. Slater Boat Co.,
is reported at 644 F.2d 460 (5th Cir. 1981), affirming the
district court. A petition for rehearing en banc was
granted. An en banc opinion was rendered, Culver v. Slater
Boat Company (Culver I), which is reported at 688 F.2d 280
(5th Cir. 1982), reversing and remanding the case to the
district court on the issue of damages but otherwise adop-
ting the panel opinion. A petition for rehearing of the en
banc opinion was granted. Culver v. Slater Boat Company,
No. 79-3985 was consolidated with Byrd v. Reederei, No.
78-3064. The en banc opinion in the consolidated cases was
rendered on December 22, 1983, Culver v. Slater Boat Com-
pany (Culver II), 722 F.2d 114 (5th Cir. 1983), from which
petitioners seek review by this Court.
The decisions are set forth in the Appendices. !
GROUNDS FOR JURISDICTION
The second opinion of the Fifth Circuit Court of
! In the Culver II opinion, the court reaffirmed parts I-IV of the
prior en banc decision, 688 F.2d 280, 283-295. It withdrew Parts VII-XII
of the decision in Culver I, 688 F.2d 295-311. In view of the length and
complexity of the footnotes in the withdrawn pages and the cost atter-
dant their being typeset, after consultation with the Clerk of Court, we
have omitted such withdrawn portions and the concurring and dissenting
opinions from the appendix, 688 F.2d 295-324. However, ten complete
photocopies have been lodged with the Clerk of Court for this Court’s con-
venience, if desired for review.
3
Appeals on rehearing en banc, Culver II, was rendered on
December 22, 1983. A timely petition for rehearing of the
en banc opinion was filed and the petition for rehearing was
denied on February 24, 1984.
This petition for a writ of certiorari was filed within
ninety days of the date said rehearing was denied.
Jurisdiction of this Court is predicated upon Title 28
USC §1254 (1).
STATUTORY PROVISIONS
The questions presented by this Petition involve the
following constitutional and statutory provisions of the
United States.
United States Constitution, Seventh Amendment,
states:
In suits at common law, where the value in con-
troversy shall exceed $20, the right to trial by
jury shall be preserved, and no fact tried by jury
shall be otherwise re-examined in any Court of the
United States, than according to the Rules of the
Common Law.
Rule 38 (a), F.R.C.P., states:
Right Preserved. The right of trial by jury as
declared by the Seventh Amendment to the Con-
stitution or as given by a statute of the United
States shall be preserved to the parties inviolate.
Rule 39(a), F.R.C.P., states:
4
By Jury. When trial by jury has been demand-
ed as provided in Rule 38, the action shall be
designated upon the docket as a jury action. The
trial of all issues so demanded shall be by jury,
unless (1) parties or their attorneys of record, by
written stipulation filed with the court or by an
oral stipu) ation made in open court and entered in
the record, consent to trial by the court sitting
without a jury or (2) the court upon motion or of
its own initiative finds that a right of trial by jury
of some or all of those issues does not exist under
the Constitution or statutes of the United States.
STATEMENT OF THE CASE
Decedent, Mr. Culver, was a seaman employed as the
foreman of an anchor handling crew, and he was killed
while working on a vessel at sea during said employment.
Mrs. Culver filed suit individually and in behalf of
her children in the United States District Court for the
Eastern District of Louisiana under the Jones Act and the
general maritime law against the defendants, Slater, Euro-
Pirates, Gulf Overseas, ODECO, and certain insurers.
Damages alleged included loss of financial support. The
civil action was tired to a jury.
During trial, Mr. Culver’s federal income tax returns
for five years preceding his death were placed in evidence:
1970-$12,861.56; 1971-$14,031.90; 1972-$16,393.65; 1973-
$11,428.95; and 1974-$14,156.61 (R. Vol. 6, pp. 388-89). No
evidence was introduced of hourly wage increases from
1970 to 1974. Mr. Culver was not a member of a union and
there was no employment contract or agreement covering
his earnings. Mr. Culver was thirty-one years of age, and he
had a worklife expectancy of thirty-one years.
Shee
5
The district court did not allow testimony, charges or
interrogatories to be submitted on the effects of inflation
on the damage award. No offer of proof was made by plain-
tiffs as to the excluded evidence. The plaintiffs chose not to
present evidence of a discount rate, nor was the economist
listed in the pre-trial order called by plaintiffs. Defendants
called an expert witness in the field of bond investments,
who testified that an investor in U.S. government bonds,
the safest marketplace, could earn nine and one-eighth per-
cent in denominations of $1,000 with a maturity date of
2009 (Mr. Culver’s worklike expectancy).
A jury verdict was returned against the defendants.
The verdict included specific interrogatories on the
elements of damages, including the amount of less of sup-
port sustained by Mrs. Culver and her children. The jury
held that loss of support was $13,363.20 per year over his
worklife expectancy of thirty-one years. The discount rate
applied by the court to reduce future amounts to present
value was nine and one-eighth percent.
An appeal was taken by the plaintiffs of the loss of
support award with respect to the exclusion of alleged
evidence of the impact of inflation upon decedent’s wages.
The panel of the Fifth Circuit Court of Appeals affirmed
the district court on two bases. Culver v. Slater Boat Co.,
644 F.2d 460, 463 (5th Cir. 1981). First, the panel held that
the en banc decision in.Johnson v. Penrod Drilling Co., 510
F.2d 234 (5th Cir.), cert. denied, 423 U.S. 839 (1975), was
dispositive of the inflationary evidence issue—‘‘the in-
fluence on future damages of possible inflation or deflation
is too speculative a matter for judicial determination’’. Se-
cond, the panel opinion noted that no evidence was in-
troduced to warrant argument of proposed earnings in-
creases since the tax returns showed his earnings were level
6
over five years, not increasing, and Mr. Culver had reached
the top of his line of employment. The panel found no error
in the treatment of earnings increases, considering the
absence of any evidentiary support.
Plaintiffs obtained an en banc rehearing to recon-
sider Johnson v. Penrod Drilling Co.. In its opinion, Culver
I, 688 F.2d 280 (5th Cir. 1982), the Fifth Circuit overruled
Johnson v. Penrod Drilling Co. After a complex, economic
analysis, the Court declined to select one approach to the
evidentiary problems attendant introduction of economic
testimony relative to the impact of inflation. It held that
appropriate economic evidence could be presented by either
party to ascertain damages for loss of future wages on a
case by case basis. However, in its summary and conclu-
sions, 688 F.2d at 308-10, in the opinion of defendants and
this Court,” it made serious error in its approved approach.
A petition for rehearing of the en banc opinion was
filed by defendants. While under consideration, on June 15,
1983, this Court decided Jones & Laughlin Steel Corp. v.
Pfeifer, __ U.S. __, 103 S.Ct. 2541, 76 L.Ed. 768 (1983). On
December 23, 1983, the Fifth Circuit en banc withdrew por-
tions of its opinion in Culver I and rendered a new opinion,
Culver II, 722 F.2d 114 (5th Cir. 1983). With nine judges
dissenting, a majority of the Court (thirteen judges) held
that the sole method to adjust damage awards to account
for inflation is a ‘“‘below market discount rate method.”
Their application of this method is that in all cases the
2 In Jones & Laughlin Steel Corp. v. Pfeifer, _. U.S. _, 103 S.Ct.
2541 (1983), at 2554, Note 27, this Court noted that the Fifth Circuit
recommended replacing the estimated stream of actual installments
(yearly earnings) with ar: ‘average annual income.”’ This Court conclud-
ed that this approach increases the size of the award providing plaintiffs
with an unjustified windfall.
7
only evidence to be received to calculate future earnings is
(1) wage increases, if any, the plaintiff would have received
each year as a result of all factors other than inflation and
(2) an estimate of the below market discount rate, defined
as the estimated market interest rate, adjusted for the ef-
fect of any income tax and then offset by the estimated rate
of general future price inflation. Jd. at 122.
Circuit Judges John R. Brown, Fay, Politz, R. Lanier
Anderson, III, Randall, Tate, Sam D. Johnson and Jerre S.
Williams dissented on the basis that this Court had ex-
pressly disapproved of mandating one single method for all
cases. Circuit Judge Tjoflat, in dissent, adhered to his opi-
nion in Culver I that plaintiffs were not entitled to a new
trial. The dissenters noted: (1) the opinion in Culver IJ is in
direct conflict with the decision of this Court in Pfeifer; (2)
in Jones & Laughlin Steel Corp. v. Pfeifer, __ U.S. __, 103
S.Ct. 2541, 76 L.Ed. 768 (1983), the Supreme Court ‘‘chose
to allow to the trial judge on remand discretion to apply in
a deliberate choice any one or more of the ‘legally accep-
table’ methods the Court discussed’’; (3) the High Court
chose not to pick one of several methods; and (4) the Fifth
Circuit “‘takes from the district court—and puts squarely
in the hands of the Court of Appeals—the responsibility of
choosing, from among competing economic theories, the
methodology or methodologies which could be used to most
equitably and adequately determine future lost earnings
under the circumstances of that case’’. Jd. at 123-125.
The defendants petitioned for a rehearing of Culver
II on the following bases: (1) The Culver IJ opinion is con-
trary to the Supreme Court’s decision in Jones & Laughlin
Steel Corp. v. Pfeifer; (2) The Culver IJ opinion is in error
as it mandates that all plaintiffs will receive annual income
increases at the identical rate that inflation is found to be
8
a component in the full market discount rate. It eliminates
the plaintiffs’ burden of proof. The opinion is insidious in
that it is not apparent that it is being mandated in the
calculations that annual income will be increased in a
straight uninterrupted line at the rate of inflation when the
below market discount rate method, as enunciated, is utiliz-
ed; and (3) The opinion should be modified. The sentence on
page 16123 of the opinion reads as follows: ‘‘Evidence
about the likelihood that the earnings of an injured worker
would increase due to personal merit, increased experience
and other individual and societal factors continue, of
course, to be admissible.’’ This language should be changed
in order to do justice to the parties to allow the trier of fact
to consider all relevant evidence unrelated to inflation that
is likely to change or influence future earnings.
The rehearing was denied.
REASONS FOR GRANTING THE WRIT
The decision of the Fifth Circuit Court of Appeals is
contrary to the holding of this Court in Jones & Laughlin
Steel Corp. vi Pfeifer, __ U.S. __, 103 S.Ct. 2541, 76 L.Ed.
768 (1983). Loss of earnings can arise in many different con-
texts and this Court emphasized that no one method
should be selected as the exclusive method in all federal
courts, Jd. at 2543-44, unless the legislative branch of the
government wishes to evaluate and fashion the proper rule
Id. at 2557. In Pfeifer, this Court reversed the federal
district court’s selection of a total offset method which held
‘‘as a matter of law that future inflation shall be presumed
equal to future interest rates’ Id. at 2543.
The Culver II opinion conflicts with the tenet of this
Court that in civil cases plaintiffs have the burden to prove
9
their damages by a preponderance of the evidence. In
Culver IT, the Fifth Circuit Court of Appeals presumes and
mandates that every plaintiff will receive in each and every
year annual earnings increases at least equal to the rate of
inflation. This is implicit as otherwise there is no justifica-
tion to subtract inflation from the market discount rate,
which market rate is certain and is automatically available
to the plaintiffs. Culver IJ eliminates plaintiff’s burden of
proof.
The methodology mandated in Culver II deprives
defendants of a right to trial by jury of fact issues. If a
plaintiff cannot prove the likelihood of his earnings increas-
ing reasonably parallel to inflation rates, the judge or jury
should have the right to so find. If a defendant can prove
the likelihood that earnings may decrease or periodically
fluctuate, the judge or jury should have the right and duty
to consider all such influences upon earnings. Variability in
each workers earnings should be allowed in evidence.
Pfeifer, at 2548-50.
ARGUMENT
1. THE OPINION IN CULVER II IS IN CONFLICT
WITH THIS COURT’S DECISION IN JONES &
LAUGHLIN STEEL CORP. V. PFEIFER, _ U.S. _, 103
S.Ct. 2541, 76 L.ED.2D 768 (1983).
The issue before the Fifth Circuit Court of Appeals in
Culver v. Slater Boat Company was the same issue upon
which this Court deliberated in Jones & Laughlin Steel
Corp. v. Pfeifer, __ U.S. __, 103 S.Ct. 2541, 76 L.Ed.2d 768
(1983): the calculation of an appropriate award for lost ear-
nings, including calculation of the impact of inflation.
While in Pfeifer this Court restricted its opinion to
10
negligent actions under §5(b) of the Longshoremen’s and
Harbor Workers’ Compensation Act, 33 U.S.C. 905(b), Id.
at 2555, the cause of action under §905(b) is a maritime tort
and damages are founded in the general maritime law.
Since the Culver case involved a suit under the Jones Act,
46 U.S.C. §688 and the general maritime law, the Pfeifer
decision is applicable.
In Pfeifer, this Court reviewed possible approaches
to calculate loss of earnings. The magnitude of inflation
and its predictability with reference to an individual is in
large measure unpredictable. Jd. at 2555. Specific forecasts
of future inflation are too unreliable for use in many cases.
Id. at 2544. This Court recognized that loss of earnings can
arise in many different contexts and in some sectors of the
economy it is far easier to assemble evidence of an in-
dividual’s most likely career path. Jd. at 2555. This Court
emphasized the right and duty of the district judge or jury
to estimate the shape of the plaintiff's future income
stream. Jd. at 2551. This Court expressly chose not to pick
one of several methods reviewed for calculating lost future
wages in all civil cases. It held that such an approach is not
warranted, noting that the legislative branch of the federal
government is far better equipped to fashion the proper
general rule, if any. Jd. at 2555. This Court was not
prepared to impose on unwilling litigants one specific
method making assumptions as to the impact of national
patterns of wage growth on an individual or an industry.
Id. at 2557.
The entire method to calculate future loss of earnings
established in Culver II is succinctly stated:
We hold that factfinders in this Circuit must ad-
just damage awards to account for inflation
11
according to the below-market discount rate
method. The parties may, if they wish, stipulate
the below-market discount rate, as they may
stipulate any other disputed issue. If they are
unable to do so, they may intorduce expert opi-
nion concerning the appropriate rate. Other
evidence about the effect of price inflation is inad-
missible. Evidence about the likelihood that the
earnings of an injured worker would increase due
to personal merit, increased experience and other
individual and societal factors, continue, of
course, to be admissible. 722 F.2d at 122.
The opinion in Culver II conflicts with all of the
aforesaid holdings of this Court. It expressly adopts one
single method of calculating future lost earnings in all
cases. 722 F.2d at 122. It is inflexible. It eliminates any
possibility of a deliberate choice by a judge or jury of a
reasoned approach to calculate an individual’s future earn-
ings stream consistent with the facts in the case. It holds
as a matter of law that in all cases every plaintiff’s annual
wages will grow as fast as the inflation rate whatever
evidence might have been submitted to the contrary. It
mandates and insures an inflation proof future for all plain-
tiffs and in every case where a plaintiff's wages would
heretofore have been held not to have kept up with infla-
tion, it will cause overcompensation.
This inflexible standard directly conflicts with this
Court’s decision in Pfeifer. It is economically unsound in
many instances, as illustrated by the earnings history of
Mr. Culver.
12
2. THE OPINION IN CULVER II CONFLICTS WITH
THE HOLDINGS OF THIS COURT THAT IN CIVIL
CASES THE PLAINTIFF HAS THE BURDEN OF PRO-
VING HIS DAMAGES BY A PREPONDERANCE OF
THE EVIDENCE BECAUSE IT CREATES AN IR-
REBUTTABLE PRESUMPTION THAT EVERY
PLAINTIFF WILL BE AWARDED ANNUAL WAGE
INCREASES AT THE IDENTICAL RATE THAT IN-
FLATION IS REMOVED FROM THE FULL MARKET
INTEREST RATE TO OBTAIN THE BELOW
MARKET RATE, REGARDLESS OF HIS EARNINGS
HISTORY.
There is uniform authority that a plaintiff has the
burden of proving his damages by a preponderance of the
evidence. A plaintiff must prove the likely amount of his
lost future earnings. The opinion in Culver IJ conflicts with
this established principle of this Court. By ordering use of
the single method described as the “‘below market discount
method”’, the Fifth Circuit Court of Appeals removes en-
tirely the plaintiff’s burden of proving that his future earn-
ings stream would annually increase at the rate of price
inflation.
For example, if a plaintiff’s earnings as a matter of
factual findings were never increasing or were variable,
even though inflation existed, the plaintiff may not prove
it is likely that his earnings would increase consistent with
inflation. On the other hand, there is no doubt that when
the money received is invested in the market place, he will
receive an inflation premium on his investment. Therefore,
if plaintiff’s earnings, as a matter of fact, are not likely to
increase parallel with the rate of inflation, the below-
market interest rate cannot properly be used. This was cor-
rectly recognized by the Fifth Circuit Court of Appeals in
13
its opinion in Culver J, 688 F.2d at 296-298. It can lead to
enormous Overcompensation in precisely a case like Culver.
The opinion mandates that the effects of inflation are
uniform on all individuals and that incomes rise at the rate
of inflation. Under the law of this Court, the effect of infla-
tion on an individual’s wages must be proven by a pre-
ponderance of the evidence. Mr. Culver must meet that
burden of proof based on competent evidence. A legal
presumption should not be allowed to replace this fun-
damental principle of this Court.
3. THE DECISION OF THE FIFTH CIRCUIT IN
CULVER II VIOLATES THE RIGHT TO TRIAL BY
JURY OF FACTUAL ISSUES GUARANTEED IN THE
UNITED STATES CONSTITUTION.
The Seventh Amendment to the United States Con-
stitution states that the right of trial by jury shall be
preserved and no fact trial by jury shall be otherwise reex-
amined in any Court of the United States. Rule 38(a) of the
Federal Rules of Civil Procedure states that the right of
trial by jury is declared by the Seventh Amendment to the
Constitution or as given by a Statute of the United States
shall be preserved to the parties inviolate. Rule 39(a)
guarantees trial of all issues of fact to the jury.
In the Culver proceedings, plaintiffs filed a civil ac-
tion under the Jones Act and the general maritime law and
received a jury trial. If the decision in Culver JI is upheld,
each plaintiff will be irrebuttably presumed to have increas-
ed his annual income at the inflation rate for his entire
worklife expectancy regardless of whether there is any proof
that his past annual earnings increased at all consistently
with past rates of inflation or that his future earnings are
14
likely to do so, and regardless of the characteristics of the
individual and the industry in which he is employed. It is
unclear in Culver IJ how the plaintiff’s historical earnings
records can be submitted to the district judge or jury for
its deliberation or how the jury can consider the likelihood
of future changes (up or down) in an individual’s earnings
based on the facts peculiar to the individual and the case
at bar. Issues of fact necessary for the jury to evaluate the
particular individual’s likely future earnings are foreclosed
by Culver II.
The court in Culver II abrogates the constitutic nally
protected right in a civil trial for damages to have a jury
determine as a fact issue the likely impact of inflation upon
a plaintiff's future earnings.
CONCLUSION
In Culver II, the Fifth Circuit holds that the impact
of inflation on an individual’s future earnings is certain and
invariable by mandating its below market discount rate
method. The decision is contrary to the dictates of this
Court in Pfeifer. It conflicts with the burden of proof
established by this Court in civil actions and is contrary to
the right of trial by jury of fact issues.
Petitioners pray that a writ of certiorari be issued
from this Court to review the judgment and opinion of the
United States Court of Appeals for the Fifth Circuit.
15
Respectfully submitted,
WARREN M. FARIS
MAT M. GRAY, III
FARIS, ELLIS, CUTRONE &
GILMORE
1207 Whitney Building
New Orleans, Louisiana 70112
Telephone: 504-581-6373
By:
MAT M. GRAY, III
Counsel for Petitioners
16
CERTIFICATE OF SERVICE
I hereby certify that three copies of the above and
foregoing have been sent to each opposing counsel of
record, by depositing same in U.S. Mail, postage prepaid,
this AB day of April, 1984.
I further certify that all parties required to be served
have been served.
MAT M. GRAY, III
A-1
APPENDIX ‘“A”’
Ruth CULVER, et ai.,
Plaintiffs-Appellants Cross-Appellees,
v.
SLATER BOAT CO., et al.,
Defendants-Appellees Cross-Appellants,
EUROPIRATES INTERNATIONAL, INC., et al.,
Defendants-Appellees and Cross-Appellees-Appellants,
v.
ODECO DRILLING, et al.,
Defendants-Appellees Cross-Appellants.
Willie Mae BYRD, As Administratrix of
the Estate of Lawrence Byrd, deceased,
Plaintiff-Appellant Cross-Appellee,
v.
Henrich Schmidt REEDEREI,
Defendant-Appellee Cross-Appellant.
Nos. 79-3985, 78-3064.
United States Court of Appeals,
Fifth Circuit.*
* Former Fifth Circuit case, Section 9(1) of Public Law 96-452 Oc-
tober 14, 1980.
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Dec. 22, 1983.
Wife and children of foreman of anchor-pulling crew
brought maritime personal injury case arising out of death.
The Court of Appeals affirmed a judgment of the United
States District Court for the Eastern District of Louisiana,
Charles Schwartz, Jr., J., as modified, 644 F.2d 460, but, on
rehearing en banc, the Court of Appeals reversed and
remanded, 688 F.2d 280. Appeals from judgment of the
United States District Court for the Middle District of
Florida, Wm. Terrell Hodges, Chief Judge, were con-
solidated. On petition for rehearing, the Court of Appeals
Alvin B. Rubin and Frank M. Johnson, Jr., Circuit Judges,
held that: (1) the case-by-case method is no longer to be us-
ed to adjust damage awards for inflation, and (2) fact
finders must adjust damage awards to account for inflation
according to below-market discount rate method.
Judgments reversed and cases remanded.
Brown, Circuit Judge, dissented and filed opinion in
which Fay, Politz, R. Lanier Anderson, III, Randall, Tate,
Sam D. Johnson and Jerre S. Williams, Circuit Judges,
joined.
R. Lanier Anderson, III, Circuit Judge, dissented
and filed opinion.
Tjoflat, Circuit Judge, dissented and filed opinion.
Appeals from the United States District Court for
the Eastern District of Louisiana.
Appeals from the United States District Court for
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the Middle District of Florida.
ON PETITIONS FOR REHEARING
Before GODBOLD, Chief Judge, BROWN,
CHARLES CLARK, RONEY, GEE, TJOFLAT, HILL,
FAY, RUBIN, VANCE, KRAVITCH, FRANK M.
JOHNSON, JR., HENDERSON, REAVLEY, POLITZ,
HATCHETT, ANDERSON, RANDALL, TATE, SAM D.
JOHNSON, THOMAS A. CLARK and WILLIAMS, Cir-
cuit Judges.**
AJLLVIN B. RUBIN and FRANK M. JOHNSON, Jr.,
Circuit Judges:
In Johnson v. Penrod Drilling Co., 510 F.2d 234 (5th
Cir.) (en banc), cert. denied, 423 U.S. 839, 96 S.Ct. 68-69, 46
L.Ed.2d 58 (1975), this court held that juries ‘‘should not
be instructed to take into account future inflationary or
deflationary trends in computing lost earnings...’’ Jd. at
241. Reviewing that decision in our first en banc considera-
tion of these two cases, we overruled Penrod and held ad-
missible evidence of inflation’s probable effect on damage
awards. Culver v. Slater Boat Co., 688 F.2d 280 (5th
Cir.1982) (en banc) (Culver I). Concluding that the jury
should resolve the issue on a case-by-case basis, we
disclaimed any intention to establish a ‘‘single method”’
** Judge Garza participated in the first en banc hearing but took
senior status on July 7, 1982. He, therefore, did not participe's in the
first en banc decision. Subsequently, he became qualified to sit by virtue
of the 1982 amendment to 28 U.S.C. § 46(a). He has, however, elected not
to participate.
Judges Garwood, Jolly, Higginbotham, and Davis joined the Court after
submission and oral argument and elect not to participate.
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for considering future economic conditions. Jd. at 299 n. 23.
Instead, we discussed several permissible methods the
district courts and parties could use. Jd. at 305-06.
While we were considering an application for rehear-
ing in Culver I, the Supreme Court decided Jones &
Laughlin Steel Corp. v. Pfeifer, _ U.S. _, 103 S.Ct. 2541,
76 L.Ed.2d 768 (1983). The Court’s opinion in Pfeifer cites
Culver I and confirms our holding that the fact-finder
should consider inflation in determining an appropriate
damage award. The Court’s opinion also emphasizes,
however, a fundamental point that we do not fully consider
in Culver I: that courts must not allow the adjustment for
inflation to convert “‘[t]he average accident trial...into a
graduate seminar on economic forecasting.’ 7
Reconsideration of Culver I in light of Pfeifer has
convinced us that our failure to identify a single method as
the one trial courts should use in adjusting damage awards
for inflation, particularly in jury trials, would extend an in-
vitation to litigants to engage in just such a seminar. We,
therefore, withdraw the opinion in Culver I insofar as it
goes beyond overruling Johnson, and hold that, in the
absence of a stipulation by the parties concerning the
method to be used, fact-finders shall determine and apply
an appropriate below-market discount rate as the sole
method to adjust loss-of-future-earnings awards to present
value to account for the effect of inflation. While expert
testimony and jury instructions must be based on this
method, juries may be instructed either to return a general
verdict or to answer special interrogatories concerning the
computation of damages.
1 Jones & Laughlin Steel Corp. v. Pfeifer, __ U.S. —, 103 S.Ct.
2541, 2556, 76 L.Ed.2d 768 (1983) (quoting Doca v. Marina Mercante
Nicaraguense, S.A., 634 F.2d 30, 39 (2d Cir. 1980)).
The calculation of damages suffered either by a per-
son whose personal injuries will result in extended future
disability or by the representatives of a deceased person in-
volves four steps: estimating the loss of work life resulting
from the injury or death, calculating the lost income
stream, computing the total damage, and discounting that
amount to its present value.
In Pfeifer the Court recognized, as we did in Culver
I, that calculation of the lost income stream begins with the
gross earnings of the injured party at the time of injury.2
To this amount other income incidental to work, such as
fringe benefits, should be added. From it, the fact-finder
should subtract amounts the wage earner would have been
required to pay, such as income tax and work expenses.°
Even in a non-inflationary economy, earnings of a
worker ‘‘tend to inflate’ from the operation of a number of
factors, ‘“‘some linked to the specific individual and sorne
linked to broader societal forces.”* The operation of both
kinds of influences should be considered to reach the first
“ The same principles apply if the suit, like these two, involves a
loss of earnings by a decedent. For simplicity we embrace in the term
“loss of earnings by the plaintiff’’ the losses suffered by the next-of-kin
or others entitled to recover in a wrongful death proceeding. In such
cases, of course, the objective is to determine the loss of benef‘ts the sur-
vivor would have suffered. Therefore, computation of the earnings lost
by the deceased provides only a starting point for determining the loss
of benefits suffered by the survivors.
3 When the suit is for wrongful death, the maximum loss of
benefits to the survivors cannot be determined without also subtracting
the living expenses that the worker would have incurred had he coun-
tinued to live and work.
4 Pfeifer, _ U.S. _, 103 S.Ct. at 2549, 76 L.Ed.2d at 782.
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stage in calculating an appropriate award, an estimate of
what the lost stream of income would have been “as a
series of after-tax payments, one in each year of the
worker’s expected remaining career.”
A lump-sum award may be invested in a wide variety
of securities, yielding varying rates dependent in part on
their relative safety. Both Pfeifer and Culver I require that
rate to be based on the return available from “‘the best and
safest investments,’ and to be computed after consider-
ing the effect of income tax on the interest received. !
The rate of interest available even on the safest in-
vestments varies depending on time at which the invest-
ment matures. Therefore, in computing the rate to be used,
it is essential to determine how the award will be invested.
In Pfeifer, the Court recognized that the plaintiff might in-
vest the award ‘exclusively in safe short-term notes,
reinvesting them at the new market rate whenever they
mature,”’ or in ‘‘a mixture of safe short-term, medium-term,
and long-term bonds, with one scheduled to mature each
year of his expected worklife.’”’ It then stated, ‘‘We perceive
no intrinsic reason to prefer one assumption over the
other.‘‘8
Inflation, which has been a permanent fixture in our
> Td. at _, 103 S.Ct. at 2550, 76 L.Ed.2d at 782 (emphasis added).
6 Pfeifer, _ U.S. at _, 103 S.Ct. at 2550, 76 L.Ed.2d at 783
(quoting Chesapeake & Ohio R. Co. v. Kelly, 241 U.S. 485, 491, 36 S.Ct.
630, 632, 60 L.Ed. 1117, 1123 (1916)); Culver J, 688 F.2d at 302.
7 Pfeifer, U.S. at _, 103 U.S. at 2550, 76 L.Ed.2d at 783; Culver
I, 688 F.2d 302 n. 32.
8 Pfeifer, U.S. at _n. 23, 103 S.Ct. at 2551-52 n. 23, 76 L.Ed.2d
at 785 n. 23.
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economy for many decades, affects both the income stream
and the market interest rate. In this opinion, we consider
only the method of taking general economic inflation into
account. In accomplishing this, as we said in Culver I,
“(t]he goal is not...to protect the lump-sum award from the
effect of inflation.” It is, instead, ‘‘to assure the plaintiff
the equivalent of the total of all of his future wages,’’ in-
cluding those earnings likely to be affected by inflation.?
As the Court noted in Pfeifer, three methods are
available for adjusting damage awards to account for the
effect of inflation. In the case-by-case method, the fact-
finder is asked to predict all of the wage increases a plain-
tiff would have received during each year that he could
have been expected to work, but for his injury, including
those attributable to price inflation. This prediction allows
the fact-finder to compute the income stream the plaintiff
has lost because of his disability. The fact-finder then dis-
counts that income stream to present value, using the
estimated after-tax market interest rate, and the resulting
figure is awarded to the plaintiff.1°
In the below-market-discount method, the fact-finder
does not attempt to predict the wage increases the par-
ticular plaintiff would have received as a result of price in-
flation. Instead, the trier of fact estimates the wage in-
creases the plaintiff would have received each year as a
result of all factors other than inflation. The resulting in-
come stream is discounted by a below-market discount
rate. This discount rate represents the estimated market
interest rate, adjusted for the effect of any income tax,
2 Culver I, 688 F.2d at 287.
10 See Pfeifer, _ U.S. at _, 103 S.Ct. at 2556, 76 L.Ed.2d at 790;
Culver I, 688 F.2d at 298.
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and then offset by the estimated rate of general future
price inflation. 11
The third method is the “total-offset’’ method. In
this calculation, future wage increases, including the ef-
fects of future price inflation, are legally presumed to offset
exactly the interest a plaintiff would earn by investing the
lump-sum damage award. Therefore, the fact-finder using
this method awards the plaintiff the amount it estimates he
would have earned, and neither discounts the award nor ad-
justs it for inflation. !2
II.
The Culver I opinion would have permitted the par-
ties to pursue any of these methods in order to demonstrate
to the fact-finder what adjustment, if any, should be made
to compensate for increases in the plaintiff’s future wages
due to the economic factors summed up by the term infla-
tion. Indeed, we endorsed the first method, involving
specific forecasts of inflation’s effect on a particular plain-
tiff’s wages, as “‘simpler and more accurate’ than the
below-market discount approaches. !3
The procedures necessary to determine the impact of
future price inflation on a particular plaintiff on a year-by-
1) See Pfeifer, U.S. at _, 103 S.Ct. at 2556, 76 L.Ed.2d at 790;
Culver I, 688 F.2d at 295-96.
12 See Pfeifer, _ U.S. at _, 103 S.Ct. at 2554, 76 L.Ed.2d at 787:
Culver I, 688 F.2d at 299 & n. 26; see also Beaulieu v. Elliott, 434 P.2d
665 (Alaska 1967). This was the approach adopted by the Third Circuit
in Pfeifer. See Pfeifer v. Jones & Laughlin Steel Corp., 678 F.2d 453 (3d
Cir.1982), rev'd, __ U.S. _, 103 S.Ct. 2541, 76 L.Ed.2d 768 (1983).
13 See Culver I, 688 F.2d at 298.
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year basis are complex and time consuming. Elaborate ex-
pert testimony is required. The battle of economic experts
is apt to shift the trial’s emphasis from the determination
of liability and the estimation of basic damages into the for-
mulation of predictions concerning the national, indeed,
global, economic future, including the liklihood of future in-
creases or decreases in oil prices and the stability of foreign
governments. Unuer Culver I, defendants were free not on-
ly to controvert the plaintiffs’ damage calculations; they
could alsc dispute the validity of the method by which the
plaintiffs’ experts calculated damages. If such a dispute
evolved, the fact-finder would be required to decide which
of at least two competing methods, each avouched by an
expert, it would use to determine discount before applying
the method it chose to determine the rate of discount, yet
another determination to be based on contradictory expert
testimony.
Different formulae, each thought to be theoretically
accurate, might be applied in literally hundreds of in-
dividual cases because of the conclusions reached by dif-
ferent fact-finders. The results in otherwise similar cases
would vary widely depending on the particular expert
witnesses called, on the fact-finders’ agreement or disagree-
ment with the methods they advocated, and of the different
fact-finders’ evaluations of their testimony. The voyage in
search of mathematical certainty would discover instead a
continent of conflict and conjecture.
Anticipating these problems to some degree in
Culver I, we expressed hope that the parties would, by
agreement, eliminate the need to litigate many of these con-
fusing issues:
In the great majority of cases, we believe, the
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parties can and will be able to stipulate to the
methodology, discount rate, the admissibility of
economic data, tables, etc. and other technical
aspects, as well as to any particular issues of fact
underlying the calculations.
Culver I, 688 F.2d at 311. We continue to express that hope.
Nothing in this opinion prevents the parties from stipulating
to any of these matters or to anything else that may affect
the determination of damages. We cannot ignore the
possibility, however, that in many, perhaps most, cases such
stipulations will not be possible. This opinion determines only
the method to be followed when the parties cannot agree.
In such cases, litigating in every instance the
amount and the effect of future price inflation is not likely
to produce the result that would have been obtained had
the plaintiff not been injured.14 No one can accurately
predict the course of future inflation. A survey of the
general literature for the past several years illustrates a
sorry tale of repeated confusion, contradition and uncer-
tainty in economic forecasts.!5 Current complaints about
economic 7
14 Cf Norfolk & W. Ry. v. Liepelt, 444 U.S. 490, 100 S.Ct. 755,
62 L.Ed.2d 689 (1980). In Liepelt the Court held that juries should be
permitted to consider the effect of income taxes on an award for lost
future earnings, notwithstanding the complexity of that issue and the
possible need for protracted expert testimony and debate. Jd. at 494,
100 S.Ct. at 758, 62 L.Ed.2d at 694. Ir that case the difficulty of placing
the issue before the jury was justified by the fact that the jury could
reach a correct determination if the evidence was presented to them
clearly. But there is no correct determination of inflationary trends. The
court or the jury must reach what is at best an educated guess.
15 See, e.g., Grant, Current / Yield, Barron’s 56, 70 (February 14,
1983); Where Big Economic Models Go Wrong, Bus. Week 70
(March 30, 1961); An Amazing Contradiction in Economic Prophecies,
Bus. Week 39 (May 28, 1979); Inflation Defies the Guidelines, Bus.
Week 32 (February 12, 1979); Mixed Grades for the Economists, Bus.
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forecasting generally concern relatively short-term
forecasts. Over a longer term, events as diverse—and
unpredictable—as spending to finance a Southeast Asian
war, an oil embargo, disagreement between members of the
oil cartel, or a drought causing widespread agricultural
failures could profoundly increase inflation.1© A major
depression or the discovery of significant and inexpensive
fuel resources might reduce its present impact.
Whether or not the science of economics continues to
be dismal,” it is assuredly in this regard conjectural. The
case-by-case method sacrifices efficiency and simplicity for
(Footnote 15 continued)
Week 30 (December 25, 1978); Theory Deserts the Forecasters, Bus.
Week 50 (June 19, 1974); Forbes, Economics Shouldn’t Be a Branch of
Mathematics, Forbes 21 (January 18, 1982); Jf We Don't Know Where
We Are, How Can We Tell Where We Are Going, Forbes 119 (April 2,
1979); Stockman’s Ladder, Newsweek 66 (February 9, 1981); Black-Box
Forecasting, Time 92 (February 23, 1981). Even the Council of Economic
Advisors has conceded that ‘‘its ability to forecast inflation is at best
imperfect.’’ The Economic Report of the President 1976, at 20; see also
Council of Economic Advisors, Economic Report of the President 1982,
at 215 (admitting federal government cannot fully anticipate the course
of the economy); Solow, The Intelligent Citizen's Guide to Inflation,
Public Interest 49 (Winter 1975) (suggesting we may be less able to
predict price levels 5-10 years into the future than in the past when
stable prices were the norm).
On September 14, 1981, the date we heard oral argument en banc
in Culver IJ, the prime lending rate was 20.5 percent and the annual rate
of inflation was 14.8 percent. On August 1, 1983, the prime lending rate
was 10.5 percent. For the first six months of 1983, the annual rate of in-
flation has been only 2.9 percent.
16 See W. Branson & J. Litvack, Macroeconomics 408-14 (1976);
Economic Report of the President 1978, at 139-42. Cf. Econc nic Report
of the President 1974 (‘increasingly complex and interdependent world”’
increases difficulties in forecasting inflation); Inflation Defies the
Guidelines, supra note 4 (discussing variety of factors affecting
inflation).
17 7. Carlyle, Latter-day Pamphlets no. 1 (1850).
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pursuit of a ‘“‘delusive exactness.’’/8 As the Court noted in
Pfeifer: ‘‘It is perfectly obvious that the most detailed in-
quiry can at best produce an approximate result.””19
The inherent inaccuracy of specific forecasts of
future inflation, coupled with the length and complexity of
the proceedings necessary to engage in such forecasts, con-
vinced the Supreme Court that the case-by-case method of
adjusting damage awards for inflation ‘‘should be
discouraged.’’29 “{S]ince specific forecasts of future price
inflation remain too unreliable to be useful in many cases,
it will normally be a costly and ultimately unproductive
waste of [plaintiffs’] resources to make such forecasts the
centerpiece’ of accident litigation.*1 Recognizing the
Court’s disapproval of the case-by-case method, we hold
that it should not be used in this circuit to adjust damage
awards for inflation.
Ill
The paramount concern of a court awarding damages
for lost future earnings is to provide the victim with a sum
of money that will, in fact, replace the money that he would
have earned. Arriving at a reasonable estimate of anyone’s
financial future involves estimates of a whole spectrum of
factors. We commonly exclude many relevant factors from
consideration on the basis that they are so speculative that
18See Pfeifer, _ U.S. at _, 103 S.Ct. at 2558, 76 L.Ed.2d at 792
(quoting Feldman v. Allegheny Airlines, Inc., 524 F.2d 384, 392 (2d Cir.
1975) (Friendly, J., concurring dubitante)).
19 preifer, _ U.S. at _, 103 S.Ct. at 2558, 75 L.Ed.2d at 792.
207d. at _, 103 S.Ct. at 2556, 76 L.Ed.2d at 790.
21 ia
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they cannot accurately be determined. For example, we
consider only work-life expectancy and do not take into ac-
count the possibility that a worker will change to work that
is more pleasurable but pays less. When considering the
loss suffered as a result of the death of a wage-earner, we
do not consider the likelihood that a widowed spouse may
remarry.22 Nor do we take into account the stability of an
already accomplished remarriage, or the age, appearance or
personality of the surviving spouse.
While factors such as these do in fact affect the loss
of future income, we place a higher value on a reasonable
and workable system for establishing damages than we do
on detailed precision in arriving at an award. ‘“[W]e must
remember that the ultimate total damage figure awarded is
the sum of a series of predictions, none of which involves
mathematical certainty, and that it is the reasonableness of
the ultimate figure that is really in issue in such a case as
this.” Barnes v. United States, 685 F.2d 66, 70 (3d
Cir.1982) (quoting United States v. Furumizo, 381 F.2d
965, 970 (9th Cir.1967)).24
“‘{I]f forecasts of future price inflation are not used,
it is necessary [for the fact-finder] to choose an appropriate
22 See, e.g., Bailey v. Southern Pac. Transp. Co., 613 F.2d 1385,
1388 (5th Cir.1980) (applying Texas law); City of Brady v. Finklea, 400
F.2d 352, 358 (5th Cir.1965) (same). See generally Annot., 88 A.L.R.3d
926 (1978); Annot. 87 A.L.R.2d 252 (1963).
23 See, e.g. Kalavity v. United States, 584 F.2d 809, 822 (6th
Cir.1978) (dictum; applying Ohio law).
24 See also Pfeifer, _ U.S. at _, n. 34, 108 S.Ct. at 2558 n. 34, 76
L.Ed.2d at 792 n. 34 (‘Throughout this opinion we have noted the many
rough approximations that are essential under any manageable ap-
proach to an award for lost earnings.’’).
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below-market discount rate.’’2° Adoption of this method
guards against the wide disparity in results, the extended
duration in trial time, and the increased cost to the parties
that may be anticipated if a specific forecast of future price
inflation is made anew in each case involving loss of future
earnings. It achieves a no more uncertain approximation of
inflation’s effect on the damage award. Because it does not
attempt a specific forecast of how inflation will affect the
particular plaintiff before the court, however, it is less com-
plex and time consuming.
Even establishing an appropriate below-market dis-
count rate, however, is difficult. Economists do not yet ful-
ly understand the relationship between inflation and in-
terest. Recent studies discredit the received wisdom, voic-
ed a decade ago, that there is a constant real rate of interest
that can be determined merely by filtering inflationary ex-
pectations from nominal interest rates.26 However, while
the studies find that the real rate varies, estimates
uniformly fix its amount over any fairly lengthy period as
falling into a range that runs from three percent to a
negative rate of -1.5%.27
“9 Pfeifer, _ U.S. at _, 103 S.Ct. at 2556, 76 L.Ed.2d at 790.
26 For examples of the most recent scholarship, see Wilcox, Why
Real Interest Rates Were So Low in the 1970's, 73 Am.Econ.R. 44 (1983);
Fama & Gibbons, Inflation, Real Returns and Capital Investment, 9 J.
Monetary Econ. 297 (1982); Mishkin, The Real Interest Rate: An Em-
pirical Investigation, National Bureau of Economic Research Reprint
No. 243 (1981).
27 See Pfeifer, U.S. at _ nn. 30 & 31, 103 S.Ct. at 2556-57 nn.
30 & 31, 76 L.Ed.2d at 790-91 nn. 30 & 31; O'Shea v. Riverway Towing
Co., 677 F.2d 1194, 1199 (7th Cir.1982); Doca, 634 F.2d at 39 & n. 10 (col-
lecting economic studies); Feldman v. Allegheny Airlines Inc., 382
F.Supp. 1271, 1293 (D.Conn.1974), aff'd, 524 F.2d 384 (2d Cir.1975). In
an article recently published in the American Economic Review, an
economist estimated the real rate between 1960 and 1973 at 1.3%.
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We hold that fact-finders in this Circuit must adjust
damage awards to account for inflation according to the
below-market discount rate method. The parties may, if they
wish, stipulate the below-market discount rate, as they may
stipulate any other disputed issue. If they are unable to do
so, they may introduce expert opinion concerning the ap-
propriate rate. Other evidence about the effect of price infla-
tion is inadmissible. Evidence about the likelihood that the
earnings of an injured worker would increase due to personal
merit, increased experience and other individual and societal
factors continue, of course, to be admissible.28 We recognize
that the Supreme Court declined in Pfeifer to select a single
(Footnote 27 continued)
Wilcox, Why Real Interest Rates Were So Low in the 1970's, 73 Am.Econ.R.
44, 45 (1983) (Table 1).
Interestingly, Wilcox also estimated that between 1974 and 1978,
the real rate was -0.8%. 73 Am.Econ.R. 44, 45. Professor Mishkin recently
summarized the movement of the real rate over the last twenty-five years:
[T]he real rate tended to be positive in the first twenty years
of the sample period [1953-1973], with a declining trend from
1953-1956, and upward trend reaching a maximum in the boom
years of the mid-1960’s, and a declining trend thereafter...The
real interest rate appears to turn negative towards the end of
1972 and the downward trend accelerates through the end of
1974, whereupon the real rate stays negative but has no easi-
ly discernible trend.
Mishkin, supra note 11, at 168-70. However, his estimates suggest that
the real rate has varied within the relatively narrow range between ap-
proximately two percent and approximately negative three percent. Jd.
at 171 (figure 2). Within the last year, we have witnessed what appears
to be a dramatic change in the real rate. estimates of inflation hover about
an annual rate of 5%. Long-term U.S. securities yield 11% or more in in-
terest. Scholarly economic writings that consider the effect of these
developments in economic theory have not yet appeared. However, this
development, which had not been forecast, indicates further the uncer-
tainties in economic forecasting.
28 See Pfeifer, _ U.S. at _, 103 S.Ct. at 2556, 76 L.Ed.2d at 790;
Culver I, 688 F.2d at 305 n. 39.
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method of accounting for inflation. We are confronted,
however, with the need to adapt that opinion to jury trials.
We also think it desirable to afford litigants and the courts
the opportunity to determine the actual operation of this
less complex method in order that its efficacy fo. national
use can be determined.
As we have noted, the discount rate may be affected
by the fact-finder’s assumption about the type of invest-
ment the plaintiff will choose, for long-term investments
usually yield higher nominal interest rate returns than
short-term investments of the same quality. The Supreme
Court having said in Pfeifer that it perceives ‘‘no intrinsic
reason to prefer one assumption over the other,’’ we man-
date neither.29 However, the fact-finder should not con-
sider the plaintiff’s possible need for emergency funds as a
factor in favor of short-term investments; the injured wage-
earner should have no greater right to a resource againrt
future emergencies than he vould have had if he had con-
tinued to work.
In judge-tried cases, a trial court adopting a pre-tax
discount rate between one and three percent will not be
reversed if it explains the reasons for its choice.29 This
guideline, however, goes only to the reasonableness of the
correlation between the pre-tax market rate of interest and
the inflation rate. As discussed above, this pre-tax discount
rate must then be adjusted for tax effects. If supported by
appropriate expert opinion, the trial judge might make no
discount or even adopt a negative rate not to exceed -1.5%
before adjusting for tax effects. In jury trials, the jury
29 Pfeifer, _ U.S. at _ n.23, 103 S.Ct. at 2552 n. 23, 76 L.Ed.2d
at 785 n. 23.
30 Pfeifer, U.S. at, 103 S.Ct. at 2556, 76 L.Ed.2d at 790.
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should be instructed in the usual fashion concerning the
weight to be given expert opinion evidence. The jury may
then be permitted to return a singie-figure award for
damages or it may be required to answer interrogatories
stating, among other items, the amount of loss of future
earnings for each year for which it makes an award, and the
discount rate it chooses to apply. The court will then be
able to compute the total award or to require the parties to
complete the arithmetic.
IV.
Just as we cannot ignore the reality of inflation, we
cannot ignore the fact that long term economic conditions
may change or that economic forecasting may become
more certain. We recognize too that, although both the
Fifth and Eleventh Circuits will be bound by this decision,
Congress has declared that we are no longer a single
court.?! It fulfills rather than ignores the will of Congress
to acknowledge that, in the future, either circuit en banc
will be free to reconsider this decision. Should counsel for
any party in any future case think this decision no longer
reflects long-term economic facts or contemporary
economic theory, a proffer of evidence may be made in the
trial court to preserve the issue for an appellate panel and,
thereafter, for en banc consideration.
Although we adopt a single method for adjusting
future damage awards, our ruling, made on application fer
rehearing, shall not apply to any case in which, before the
date this opinion was published, either a jury returned a
3! See Banco Nacional De La Vivienda v. Cooper, 680 F.2d 727,
730 n. 3 (11th Cir.1982); Stein v. Reynolds Securities, Inc., 667 F.2d 33,
34 (11th Cir.1982). See also The Fifth Circuit Court Reorganization Act
of 1980, P.L. 96-452, 94 Stat. 1995.
A-18
verdict after being instructed on the basis of the principles
set forth in Culver J, or a judge made findings of fact fixing
damages pursuant to those principles.
For these reasons, Parts I through VI of our prior en
banc decision, 688 F.2d 280, 283-95, are reaffirmed. The
rule announced in Johnson v. Penrod Drilling Co., 510 F.2d
234 (5th Cir.) (en banc), cert. denied, 423 U.S. 839, 96 S.Ct.
68-69, 46 L.Ed.2d 58 (1975), is overruled. We withdraw,
however, Parts VII through XII of our decision in Culver
I. 688 F.2d at 295-311. The views expressed in this opinion
shall govern the adjustment of federal damage awards for
future lost earnings in this Circuit.
Courts are not prophets and juries are not seers. In
making awards to compensate injured plaintiffs or the
dependents of deceased workers for loss of future earnings,
however, these fact-finders must attempt, in some degree,
to gauge future events. Absolute certainty is by the very
nature of the effort impossible. It is also impossible to take
into account every bit of potentially relevant evidence con-
cerning the tomorrows of a lifetime. The approach we adopt
attempts to assure plaintiffs a fair measure of damages, to
give defendants a reasonable adjustment for reducing
future losses to present value, and to avoid making trials
even more complex and their results even more uncertain.
It is the product of a balancing of competing values.
Ultimately, however, that is the root of all justice.
The judgments in Culver, No. 79-3985, and Byrd, No.
78-3064, are REVERSED, and the cases are REMANDFD
to the district court for further proceedings on the issue of
damages. The panel opinions are adopted in all other
respects.
A-19
JOHN R. BROWN, Circuit Judge, with whom FAY,
POLITZ, R. LANIER ANDERSON, ITI, RANDALL, TATE,
SAM D. JOHNSON and JERRE S. WILLIAMS, Circuit
Judges, join, dissenting:
With the ink scarcely dry on Pfeifer (Jones & Laughlin
Steel Corp. v. Pfeifer, _ U.S. _, __, 103 S.Ct. 2541, 2554, 76
L.Ed.2d 768, 788 (1983)), in which, with remarkable
unanimous clarity, the High Court chose not to pick one of
the several methods in its collective economic hat it con-
sidered legally sound for calculating lost future wages in civil
damage actions and instead chose to leave that crucial deci-
sion to the trial judge in that and future cases, a majority
of this Court elevates one approach beyond any choice to be
the only way, for mandatory application in eighteen! federal
judicial districts across a half-dozen Southern states, for a
broad group of litigants to arrive at fair sums of money to
compensate injured parties. Guided by the decision of Pfeifer,
its approval of Culver I, and the direction that the choice of
methodology should be left to the district court, not this
Court, I respectfully dissent.”
I.
In overruling Penrod (Johnson v. Peniod Drilling Co.,
! This is likely the last opinion of the “old” Fifth Circuit, binding
on all district courts in the present Fifth and Eleventh Circuits. See Bon-
ner vu. City of Prichard, 661 F.2d 1206, 1209 (11th Cir.1981) (en banc) (panel
decisions of former Fifth Circuit rendered prior to September 30, 1983
are binding precedent); Stein v. Reynolds Securities, Inc., 667 F.2d 33, 34
(11th Cir.1982) (all en banc decisions of former Fifth Circuit are binding
precedent).
2 Though I of course agree with the result of the majority opinion,
that the judgment below be reversed to overrule Penrod, the drastic
modification of Culver I and disregard of Pfeifer nevertheless compels me
to dissent.
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510 F.2d 234 (5th Cir.) (en banc), cert. denied 423 U.S. 839,
96 S.Ct. 68-69, 46 L.Ed.2d 58 (1975)) which forbade proof,
argument, or jury instruction concerning inflationary factors
in damage awards in actions under maritime or federal law,
“it [was] not our purpose to establish a single methodology”
for all federal courts in the Old Fifth to thenceforth account
for such factors in determining future lost earnings. Culver
v. Slater Boat Co., 688 F.2d 280, 305 (5th Cir.1982) (en banc)
(Culver I). Rather, we adopted a “flexible approach to the pro-
blem which [w]jould result in fairness regardless of the
economic circumstances that exist at the time of trial’’ and
left open the opportunity for each party to offer relevant
evidence supporting or refuting any of the several discussed
theories of calculating lost earnings. Jd. at 286. ‘In the
dynamic and ever-changing world of finance and economics,”
we felt that “any standard which is inflexible...will likely be
unable to cope with the problem of preventing windfalls either
to plaintiff or defendant.” Jd. at 300. Our goal was “to create
standards that are fair to both sides of the controversy, with
the trier of fact being allowed to receive and ac‘ upon credi-
ble evidence of the economic facts bearing, pro and con, on
the competing theories.” Jd.
Pfeifer, on the heels of Culver J, clearly follows this flex-
ible approach. The Supreme Court unequivocally refused to
establish anything but “the general boundaries within which
a particular award will be considered legally acceptable,’?
° The Supreme Court was squarely faced with the same choice before
this Court today.
The litigants and the amici in this case urge us to select one
of the many rules that have been proposed and establish it for
all time as the exclusive method in all federal trials for
calculating an award for lost earnings in an inflationary
economy.
A-21
U.S. at _, 103 S.Ct. at 2555, 76 L.Ed.2d at 789, simply
because no one method of calculating lost earnings was
above some legitimate criticism and thus appropriate for
all cases.
The Court questioned certain aspects of each of the
three principal proposed methods, making it clear that
under some circumstances one or more of the three could be
inappropriate. (i) It thought that methods employing
specific forecasts of future inflation on a case-by-case basis
‘remain too unreliable to be useful in many cases,’’ __ U.S.
at _, 103 S.Ct. at 2556, 76 L.Ed.2d at 790 (emphasis add-
ed), and discouraged their general use. (ii) As to the real in-
terest (or below-market) discount rate approaches, the
Court found the ‘‘economic evidence distinctly inconclusive
regarding an essential premise of those approaches,”’ id.—
the “‘key premise...that the real interest rate remains stable
over time.’’ Such a rate is ‘‘obviously not perfectly stable,”’
and, the Court observed, “‘whether it is even relatively
stable is hotly disputed among economists,”’ Jd. at __ n. 30,
103 S.Ct. at 2556 n. 30, 76 L.Ed.2d at 790 n. 30; accord
Culver I, 688 F.2d at 302 (‘‘As evidence becomes available
that the next 20 or 30 years will not be like the past 20 or
30 years, then the Feldman approach is less helpful.’’).
Even the majority recognizes this.4 (iii) Lastly, it ‘‘was not
(Footnote 3 continued)
__ U.S. at _., 103 S.Ct. at 2555, 76 L.Ed.2d at 789. Like that Court I am
“not persuaded, however, that such an approach is warranted.” Jd.
4 Even establishing an appropriate below-market discount
rate, however, is difficult. Economists do not yet fully
understand the relationship between inflation and interest.
Recent studies discredit the received wisdom, voiced a
decade ago, that there is a constant real rate of interest that
can be determined merely by filtering inflationary expecta-
tions from nominal interest rates.
See supra at 16123.
A-22
prepared to impose [the ‘‘total offset’’ approach] on unwill-
ing litigants,’’ as had the Third Circuit below, for such ap-
proaches rely on at least one assumption the Court could
not unquestioningly accept—that ‘‘the national patterns of
wage growth are likely to reflect the patterns within any
given industry.” _ U.S. at __, 103 S.Ct. at 2557, 76
L.Ed.2d at 791-92; cf. Culver I, 688 F.2d at 299 (“‘penalizes
defendants because...interest rates on relatively safe in-
vestments will typically ride several percentage points
above the rate of inflation’’). To the Court, “‘[t]he legislative
branch of the federal government [was] far better equipped
than [it] to perform a comprehensive economic analysis and
to fashion the proper general rule.’’__ U.S. at __, 103 S.Ct.
at 2557, 76 L.Ed.2d at 792. Importantly, though, the Court
characterized each of the three methods as “legally
acceptable.”’
Consequently, the Court chose to allow to the trial
judge on remand discretion to apply in a deliberate choice
any one or more of the “legally acceptable’’ methods the
Court discussed—those involving specific forecasts of
future inflation, those using a below-market or real interest
discount rate, or those based on the notion of total offset.
This is precisely what Culver I ordained: no one method
was either prescribed or forbidden. And Pfeifer approved
Culver I.°
> Of course, Pfeifer did point out, __ U.S. at __ n. 27, 103 S.Ct. at
2554 n. 27, 76 L.Ed.2d at 787 n. 27, an error in steps (2) and (3) in this
Court’s illustrative summary of computation of lost earnings in Culver
I. See 688 F.2d at 309 (concerning “average annual income’’).
Unavoidably cast in general terms, that summary would have led to
significant error. Since averaging the normally increasing estimated an-
nual income stream would raise estimates for the early years and lower
them for the later years, and since early years are discounted less that
later years, averaging would unjustifiably increase the award to plain-
tiffs. In the year since Culver I was handed down, I have valiantly made
every effort to correct this error.
A-23
II.
Despite the clear holding in Pfeifer and its approval
of Culver I’s approach, the majority today declares that,
though ‘‘the Supreme Court declined in Pfeifer to select a
single method of accounting for inflation,’’ unless the par-
ties can stipulate to the contrary, all ‘‘fact-finders in this
Circuit must adjust damage awards to account for inflation
according to the below-market discount rate method.”’ See
supra at 16123. The C: urt takes from the district court—
and puts squarely in the hands of the Court of Appeals—
the responsibilitiy of choosing, from among competing
economic theories, the methodology or methodologies
which could be used to most equitably and adequately
determine future lost earnings under the circumstances of
that case. Apparently this is done to spare jurors from the
rigors of listening to presentations on such competing
methods (which the Court seems ‘‘convinced”’ will in-
variably turn into ‘graduate seminar[s] on economic
forecasting,” see supra at [m/s at 4]), and from the difficul-
ty of making such reasoned choices. In doing so, the Court
makes choices of economic fact ‘‘hotly disputed [even]
among economists.”
Pfeifer, like Culver I, however plainly evidences a
confidence that trial courts® are fully capable and actually
better able to make such difficult decisions on the facts of
individual cases, at least until Congress declares otherwise.
© T read nothing in Pfeifer which would prevent a trial judge from
choosing the appropriate economic theory for calculating lost future ear-
nings in a jury trial, based on the proof put forward by the parties. To
me, however, Pfeifer leaves no room for this Court to make a similar
decision for all cases for all time without any consideration of the cir-
cumstances of a particular case.
A-24
I thus must dissent.
R. LANIER ANDERSON, III, Circuit Judge,
dissenting:
Although I personally approve of the approach
outlined by Judges Rubin and Frank M. Johnson, and
would recommend it to district courts in this circuit, I
agree with Judge Brown that the Supreme Court in Jones
& Laughlin Steel Corp. v. Pfeifer, _ U.S. _, 103 S.Ct. 2541,
76 L.Ed.2d 768 (1983), has disapproved of that approach.
Accordingly, I join Judge Brown’s dissent.
TJOFLAT, Circuit Judge, dissenting:
In Culver, No. 79-3985, I continue to adhere to my
view that appellants are not entitled to a new trial. Culver
v. Slater Boat Co., 688 F.2d 280, 315 (5th Cir.1982) (en
banc) (Culver I) (Tjoflat, J., dissenting).
In Byrd, No. 78-3064, I join in Judge Brown’s dissen-
ting opinion.
q Beyond disagreeing with the majority’s annointment of one
method over the other “‘legally acceptable’ rules for calculating lost ear-
nings, I simply point out that whether the majority has made the correct
choice is problematic. See, e.g. Zocco & Ledford, Penrod Overruled: Im-
plications and Shortcomings in Culver regarding the Determination of
Economic Damages, 29 Loy.L.Rev. 37, 47-53 (1983) (authors recommend
adoption of the ‘‘expected inflation method”’ as ‘‘the Feldman method
{using a below-market discount rate and adopted by the majority
here]...is merely Penroc! in disguise’’); also see the criticisms of that
theory in Pfeifer, _ U.S. at __, 103 S.Ct. at 2556, n. 30, 76 L.Ed.2d at
790-91, n. 30; and Culver J, 688 F.2d at 300-02. That ‘he below-market
discount rate method may be inappropriate under some (or most) cir-
cumstances is only further evidence supporting the flexible approach of
Culver I.
A-25
APPENDIX “B”
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT*
NO. 78-3064
WILLIE MAY BYRD, As Administratriz
of the Estate of Lawrence Byrd, deceased,
Plaintiff-Appellant-Cross-Appellee,
versus
HEINRICH SCHMIDT REEDEREI,
Defendant-Appellee-Cross-Appellant.
Appeals from the United States District Court for the
Middle District of Florida
NO. 79-3985
RUTH CULVEh, ET AL..,
Plaintiffs-Appellants-Cross-Appellees,
versus
SLATER BOAT CO., ET AL.,
Defendants-Appellees-Cross-Appellants *
* Former Fifth Circuit case, Section 9(1) of Public Law 96-452, Oc-
tober 4, 1980
A-26
EUROPIRATES INTERNATIONAL, iNC., ET AL.,
Defendants-Appellees and Cross-Appellees-Appellants,
versus
ODECO DRILLING, ET AL..,
Defendants-Appellees-Cross-Appellants.
Appeals from the United States District Court for the
Eastern District of Louisiana
ON PETITION FOR REHEARING
(Filed Feb. 24, 1984)
Before GOLDBOLD, Chief Judge, BROWN, CHARLES
CLARK, RONEY, GEE, TJOFLAT, HILL, FAY, RUBIN,
VANCE, KRAVITCH, FRANK M. JOHNSON, JR.,
HENDERSON, REAVLEY, POLITZ, HATCHETT,
ANDERSON, RANDALL, TATE, SAM D. JOHNSON,
THOMAS A. CLARK and WILLIAMS, Circuit Judges.**
PER CURIAM:
IT IS ORDERED that the petitions for rehearing
** Judge Garza participated in the first en banc hearing but
senior status on July 7, 1982. He, therefore, did not participate in the
first en banc decision. Subsequently, he became qualified to sit by virtue
of the 1982 amendment to 28 U.S.C. § 46(a). He has, however, elected not
to participate.
Judges Garwood, Jolly, Higginbotham, and Davis joined the Court after
' submission and oral argument and elect not to participate.
A-27
filed in the above entitled and numbered causes be and the
same are hereby DENIED.
ENTERED FOR THE COURT:
/S/ Signed
UNITED STATES CIRCUIT JUDGE
A-28
APPENDIX “C”’
Ruth CULVER, et al.,
Plaintiffs-Appellants Cross-Appellees,
v.
SLATER BOAT CO., et al.,
Defendants-Appellees Cross-Appellants,
EUROPIRATES INTERNATIONAL, INC., et al.,
Defendanits-Appellees and Cross-Appellees-Appellants,
v.
ODECO DRILLING, et al.,
Defendants-Appellees Cross-Appellants.
No. 79-3985
United States Court of Appeals,
Fifth Circuit*
Sept. 22, 1982.
Wife and children of foreman of anchor-pulling crew
brought maritime personal injury case arising out of
foreman’s death. The United States District Court for the
Eastern District of Louisiana, Charles Schwartz, Jr., J.,
entered judgment from which appeals and cross appeals
were taken. The Court of Appeals affirmed as modified, 644
F.2d 460. On rehearing en banc, the Court of Appeals
* Former Fifth Circuit case, Section 9(1) of Public Law 96-452—
October 14, 1980.
A-29
Brown, Circuit Judge, overruling a previous case, held
that: (1) prohibition of any consideration of inflationary fac-
tors in ascertaining damages award for loss of future wages
is unfair to plaintiffs and would be overruled, an (2) in
ascertainment of damages for loss of future wages, plain-
tiffs should be permitted to establish by factual economic
and labor data, and expert testimony, that their income
would probably continue to increase in response to infla-
tion in future years if they continue to work, and likewise,
using economic and labor data and expert testimony,
defendant should be permitted to rebut such evidence.
Reversed and remanded.
James C. Hill, Circuit Judge, filed opinion concurring
in part and dissenting in part, in which R. Lanier Ander-
son, III, Circuit Judge, joined.
Charles Clark, Circuit Judge, dissented and filed opi-
nion in which Roney and Gee, Circuit Judges, joined.
Gee, Tjoflat and Frank M. Johnson, Jr., Circuit
Judges, dissented and filed opinions.
Appeals from the United States District Court for
the Eastern District of Louisiana.
ON REHEARING EN BANC
Before GODBOLD, Chief Judge, BROWN,
CHARLES CLARK, RONEY, GEE, TJOFLAT, HILL,
FAY, RUBIN, VANCE, KRAVITCH, FRANK M.
JOHNSON, Jr., HENDERSON, REAVLEY, POLITZ,
HATCHETT, ANDERSON, RANDALL, TATE, SAM D.
A-30
JOHNSON, THOMAS A. CLARK and WILLIAMS, Cir-
cuit Judges.**
JOHN R. BROWN, Circuit Judge:
This case comes before us on rehearing en banc to
consider whether the holding of this Court in Johnson v.
Penrod Drilling Co., 510 F.2d 234 (5th Cir. 1975) (en banc),
that neither proof, nor argument, nor jury instructions con-
cerning inflationary factors may be considered or used in
maritime, Jones Act, and FELA personal injury and
wrongful death actions, should be overruled.! After careful
consideration of this singular issue, we overrule Penrod and
remand this case to the District Court.
Bound by Penrod
The facts leading up to this appeal have already been
outlined by this Court in the panel’s opinion, 644 F.2d 460,
462-63 (5th Cir. 1981). Briefly, Curtis Culver was killed
while working on a vessel owned by Slater Boat Company.
The vessel upon which the accident took place was engaged
in moving the drilling barge OCEAN QUEEN from its
** Judge Garza participated in the panel opinion and in the en
banc hearing but took senior status on July 7, 1982 and is no longer
qualified to participate in the en banc decision.
Judges Garwood, Jolly and Higginbotham joined the Court after
submission and oral argument but do not choose to participate.
1 Another case involving the same issue, Byrd v. Heinrich
Schmidt Reederei, 638 F.2d 1300, on reh'g en banc, __ F.2d _ (5th Cir.
1982) (en banc) {No. 78-3064, slip op. at 15699, 15700, 1982], was con-
solidated wit’> the present case on rehearing en banc. The Byrd opinion
appears on tae pages immediately following this opinion.
A-31
location on the Outer Continental Shelf to a new location.
The fatal injury occurred before the barge was actually
moved. Culver’s widow and children brought suit under the
Jones Act, 46 U.S.C. § 688, the Death on the High Seas Act
(DOHSA), 46 U.S.C. § 761 et seq., and the general maritime
tort and negligence theory. The jury found negligence on
the part of Gulf Overseas Marine Corporation (Culver’s
employer), Euro-Pirates International (the charterer of the
vessel), and Ocean Drilling & Exploration Company (the
owner of a barge involved in the fatality), and no con-
tributory negligence on the part of Culver.
On the issue of damages, the District Court allowed
testimony concerning discount rates and the earning power
of money invested in low risk bonds. The jury was in-
structed to “discount the total amount”’ of any award by
a percentage that represented an appropriate rate of in-
terest. In answer to the special interrogatory submitted
asking what discount percentage rate was applicable, the
jury filled in ‘‘25%’’. The trial judge, on the basis that the
jury obviously misunderstood the interrogatory, substi-
tuted 9.125%, the only other rate put into evidence by the
defendant. In accordance with Penrod, the District Court
did not allow testimony, charges, or interrogatories to be
submitted on the effects of inflation on probable loss of
future income.
In short, Culver was not permitted to show any like-
ly increase in future earnings due to inflation. But the
award was to be discounted by an interest factor reflecting
anticipated inflation.
Culver initially appealed the judgment, raising five
issues: (i) should Penrod be overruled?; (ii) if Penrod is not
overruled, should evidence of probable non-inflationary
A-32
future wage increases (e.g. merit raises) be prohibited?; (iii)
can a District Court disregard a jury finding regarding the
discount rate and apply one based on opinion testimony?;
(iv) was the testimony of Culver’s adverse witness suffi-
ciently clear that the court could apply that witness’ opi-
nion of the discount rate?; and (v) can a District Court enter
a final judgment for damages applicable to all beneficiaries
in a maritime death action that is incapable of apportion-
ment among the various beneficiaries?” Cross-appeals were
brought by all of the defendants raising several additional
issues.?
Oral argument was heard by a panel of this Court,
and the District Court judgment was affirmed as slightly
4 Briefly, Culver objected to the special interrogatory, which ask-
ed the jury to find the amount that “‘will fairly and adequately compen-
sate Mrs. Culvaer and her children for their damages,” on the grounds
that it was impossible for the jurv to separate the losses suffered by the
children from those suffered by Mrs. Culver. Because a wrongful death
action in Louisiana is a new cause of action by the survivors, and not
a part of the decedent's estate, La. Civ. Code Art. 2315, Culver argued
that damages must be apportioned outside the probate courts. This
argument raised the issue of whether Louisiana law applied at all, in
light of Culver’s Jones Act and DOSHA claims. DOHSA, for example,
specifically provides for apportionment by the Court. 46 U.S.C. § 762.
The defendants argued that a new trial on this issue could be avoided
by permitting the District Court or a state court to apportion the award.
The panel found that the record contained no evidence on which a jury
could have based an apportionment, and that this maritime action was
an improper vehicle to apportion the award. 644 F.2d at 465. We need
not decide this issue because of our remand for a new trial on damages,
at which time the District Judge may properly frame the issue for
Culver’s various claims. See note 6, infra.
3 The following issues were raised on cross-appeal: (i) was it proper
for the District Court to submit a liability question under the DOHSA,
46 U.S.C. § 761, to a jury?; (ii) was there substantial evidence to support
the jury verdict against the defendants?; (iii) did the District Court fail
to find a right of indemnification among the defendants?; and (iv) was
there sufficient evidence to establish William Culver as a child of the
decedent?
A-33
modified. Specifically, the panel considered itself bound by
Penrod’s holding that ‘‘the influence on future damages of
possible inflation or deflation is too speculative a matter
for juridical determination.” 644 F.2d at 643, quoting
penrod, 510 F.2d at 241. And in accordance with Byrd v.
Reederei, 638 F.2d 1300 (5th Cir. 1981) (rehearing en banc
granted), the panel rejected Culver’s argument that the
Supreme Court overruled Penrod in Norfolk & Western
Railway v. Liepelt, 444 U.S. 490, 100 S.Ct. 755, 62 L.Ed.2d
689 (1980).4 Likewise, the panel found no error in the trial
judge’s refusal to allow Culver to argue likely future wage
increases on the basis of merit, because no evidence was of-
fered to show that such an argument was warranted and,
in addition, such evidence was ‘‘merely an indirect way of
putting inflation factors into evidence before the jury
[which is] not allowed under Penrod.”’ 644 F.2d at 464.°
4 In Liepelt, the Supreme Court stated;
[Fjuture interest rates, and future inflation are...matters of
estimate and prediciton. Any one of these issues might pro-
vide the basis for protracted expert testimony and debate.
But the practical wisdom of the trial bar and the trial bench
has developed effective methods of presenting the essential
elements of an expert calculation in the form that is
understandable by juries that are increasingly familiar with
the complexities of modern life.
444 U.S. at 494, 100 S.Ct. at 758, 62 L.Ed.2d at 694. This Court in Byrd,
638 F.2d at 1308, held that ‘‘Liepelt’s favorable dicta is only that.”
5 In addition, the panel found no error in the District Court’s
substitution of 9.125% for 25% as the discount rate to be applied to the
jury's award, because Culver did not offer discount rate evidence and
the court's adoption of the rate suggested by the defendants’ expert was
a proper exercise of discretion. 644 F.2d at 464-65. As to apportionment
of damages, the panel found this maritime action an improper vehicle to
apportion the award, especially since the record contained no evidence
on which the jury could have based its apportionment. 644 F.2d at 465.
The panel also found sufficient and adequate evidence to support the
verdict on liability. The defendants’ arguments as to indemnity on the
A-34
Culver filed a petition for panel rehearing,® and a
separate petition for rehearing en banc, as required by our
rules, raising two closely related issues: (i) should Penrod
be overruled and (ii) does Penrod prohibit a trier of fact in
this Circuit to receive evidence of non-inflationary factors,
such as probabie merit raises and productivity increases, in
arriving at future losses? This Court, voting for rehearing
en banc, determined that the time was ripe for reconsidera-
tion of the rule in Penrod pertaining to the “inflation fac-
tor’ in damages awards. Although Culver’s brief to this
court on rehearing en banc addressed primarily issue (i),
whether proof and argument concerning inflationary
factors
(Footnote 5 continued)
basis of the active/passive negligence theory, was likewise found to be
without merit. 644 F.2d at 465-66. Finally, the claim by one defendant
for a reduction in the damage award based upon the trial judge’s finding
of comparative negligence on the part of Culver was found by the panel
to be unsupportable and that portion of the judgment was modified.
This claim for reduction was based on the finding, in the indemnity
phase of the case, that Culver’s employer was actively negligent because
of the failure of its employee (Culver) to stay in a position of safety. Yet
the jury found Culver free from negligence, and the panel held that the
jury determination should prevail. 644 F.2d at 465.
Except as to those issues concerning the damages award which
will be decided on remand, we adopt all of the panel’s findings and
conclusions.
6 The petition for panel rehearing asserted three errors: (i) it was
improper for the trial judge to adopt the opinion testimony of defen-
dants’ witness as a basis for discounting the jury award, (ii) it was
statutorily necessary that the awards be apportioned by the trier of fact,
and (iii) sufficient evidence was presented such that the jury could have
apportioned damages.
These issues, all relating to the damages award, need not be reach-
ed because of our decision to reverse and remand the case for a new trial
on the question of damages. Specifically, we leave to the District Court
initially the proper handling of the apportionment issue, bearing in mind
the respective beneficiaries, adult and minor, and the respective bases
for liability; Jones Act, DOHSA, Maritime law and Louisiana Law.
A-35
should be permitted in this Circuit, issue (ii) is also involved
since automatic exclusion of evidence of probable merit
raises has resulted from a misreading of Penrod. The defen-
dants argue that Penrod should be upheld, and, in addition,
contend that Culver waived the right to relief on the infla-
tion issue by failing to make an offer of proof regarding the
likelihood of inflation.
A.
Briefly, we will address the defendants’ claim that
Culver waived the right to raise the issue of inflation by his
failure to make a formal proffer at trial. The defendants
called as a witness an investment baker who specialized in
bonds. On cross-examination, Culver’s attorney attempted
to ask whether people earned more money over the years of
their employment due only to productivity. An objection to
the question was sustained. After several more questions,
all counsel approached the bench where the judge made it
clear that the type of evidence excluded in Penrod would
not be permitted in court. The jury was then temporarily
excused, and Culver’s attorney told the judge that he
wanted to ask the expert whether the principal of a bond
would be worth less in the future. The trial judge replied
that deflation was as likely as inflation, and any testimony
as to such factors would be pure speculation. The judge
concluded that “I will not permit you to introduce any
evidence kL» fore the jury relative to inflation in view of the
present law that I am bound by which is the Penrod case.”’
Before closing argument, and before the jury returned, the
judge explained that:
Plaintiff’s counsel will not be permitted to argue
that the jury should take into consideration infia-
tion, nor will it be permitted to make an indirect
A-36
argument which would achieve the same purpose
of permitting him to argue inflation by attemp-
ting to indicate that it could be expected that
plaintiff would receive job promotions or merit
increases.
Again, the judge mentioned the prohibitions of Penrod.
Given this flat prohibition against introducing testimony
(or making argument) as to future inflationary trends on
the basis of Penrod, it makes no sense to argue that Culver
may not raise this issue on appeal simply because he did
not proffer an expert on inflation. Reading the trial
transcript, it is obvious that a record was being created to
challenge or at least find an exception to Penrod. We find
that the matter was suffficiently presented to the judge at
trial and that all parties understood the dilemma—Culver
wanted the jury to consider inflation, and Penrod stood in
the way.
B.
The most problematic issue on this appeal remains:
Should Penrod be overruled so as to allow parties to pre-
sent proof and argument concerning inflationary factors to
the trier of fact? Our analysis will begin with a brief review
of the Penrod decision. In order to illustrate graphically the
implications of Penrod and why it has to be overruled, we
will discuss many of the cases in this Circuit where
Penrod’s prohibitions were effective. Next, we will sum-
marize the criticisms of Penrod which come from other cir-
cuits as well as commentators. As our analysis proceeds, it
will become clear that the problem is one of fairness to
plaintiffs as well as defendants in the trial process. Per-
sonal injury awards, once they have been calculated on the
basis of projected income and life expectancy, are paid
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immediately to the plaintiff. It is well-known that if a plain-
tiff (or his beneficiaries) receives a lump-sum award, total-
ing the income that the plaintiff would have received
throughout the rest of his work life, that money can be in-
vested so as to yield a far greater amount than the initial
award. This would be unfairly liberal to the plaintiff. Conse-
quently, the law tradicionally permits introduction of
testimony, usually by an expert in financial matters, that
the lump-sum should be discounted by a factor equal to the
interest rate which could likely be earned on a relatively
safe investment by an unsophisticated investor. The total
projected earnings are thus reduced to the present cash
value. However, it will be demonstrated that in an infla-
tionary economy, discounting an award in this manner
results in unfairness to a plaintiff or his beneficiaries.
When a discount rate is applied to an award in an economy
where wage-earners typically receive cost of living in-
creases each year due to inflation, the plaintiff will not be
adequately compensated for his loss of future income—
inflation will erode the value of the award, and no adjust-
ment for cost of living can be made even though wages con-
tinue to increase throughout the economy. On the other
hand, if courts respond to this dilemma by refusing to app-
ly a discount rate, as some have, the result would be un-
fairness to defendants. Quite simply, plaintiffs are to be
compensated, by a culpable tortfeasor, but should not be
over- or under-compensated. Likewise, defendants found
liable should pay no more or less than the amount a plain-
tiff lost because of the injury. Keeping in mind the goal of
fairness to both sides of a controversy, this opinion will
consider alternatives and possible guidelines for use in this
Circuit. We will establish a flexible approach to the pro-
blem which should result in fairness regardless of the
economic circumstances that exist at the time of trial. In
the process, we overrule Penrod.
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Il.
Prolegomena
It is crucial to keep in mind that this is really an
economic, and not a legal problem. The likelihood of future
wage increases, whether given on the basis of productivity,
merit advancement, or inflation, or a combination of them,
does not have anything to do with the law. The legal ques-
tion whether such matters should be considered by the courts
is a foundational policy question, the answer to which will
be influenced by recourse to the financial and economic com-
munity. At trial, the issue may well be a legal credibility of
witnesses or competency of evidence, but a pronouncement
that inflation is speculative or that workers will or will not
receive productivity and merit raises is essentially an
economic statement, not a declaration of law.
If we consider, as an example, a person totally and
permanently injured by a defendant’s negligence, the in-
jured worker is entitled to the equivalent of his lost future
earnings. The law decides that much, and the question re-
mains how much money should be given to him now. Once
a lump-sum determination is made, it is clearly unfair to
give him the whole amount, because even an unsophisti-
cated investor could earn a great deal of interest. However,
in predicting how much money this worker will likely
receive throughout the remainder of his work-life, we must
consider the likely increase in wages he would have receiv-
ed. These will include possible advancements from one
position to another, any raises due to company productivi-
ty, or other merit increases. In addition, in an inflationary
economy, we must consider projected cost of living in-
creases which are given by an employer to offset in part the
effects of inflation. Each of these factors must be carefully
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distinguished, since they arise from wholly different
causes. Although these factors may not all be present in a
particular case, each must be considered in computing the
total amount of likely earnings before a discount rate is ap-
plied to reduce that amount to its present cash value
because of investment potential. The goal, albeit ideal, is
that if the injured worker has a 20-year work-life expectan-
cy, and he invests his lump-sum award in relatively risk-
free investments, he will receive in the nineteenth and in
the twentieth year roughly the same amount as if he had
worked each of those years. The goal is not, it must be
made clear at the outset, to protect the lump-sum award
from the effect of inflation. Rather, before determining how
much now needs to be paid, the goal is to assure the plain-
tiff the equivalent of the total of all of his future wages, in-
cluding those likely to be given/received in the form of cost
of living increases in response to inflation.
III.
The Prohibitions of Penrod
In Johnson v. Penro.! Drilling Co., 510 F.2d 234 (5th
Cir. 1975) (en banc), we recognized ‘‘the likelihood that in-
flation could become a predictable condition for the
future,’’ but we were not able to ‘‘so surely discern the
shadow of inflation as a coming event as to warrant requir-
ing its inclusion in a present rule for calculating future
damages.”’ 510 F.2d at 236. Quoting the full initial panel
opinion in Penrod, we expressly disapproved ‘‘the district
court’s attempt to take into account, in computing the
plaintiffs’ future lost earnings, inflationary trends in this
nation’s economy for the next several decades.” 510 F.2d
at 241. The “influence on future damages of possible infla-
tion or deflation is too speculative a matter for judicial
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determination.’’ Jd. Therefore, triers of fact ‘“‘should not be
instructed to take into account future inflationary or defla-
tionary trends in computing future lost earnings, nor
should the jury be advised to consider such alternative
descriptions of inflationary and deflationary trends as the
purchasing power of the dollar or the consumer price in-
dex.’’ Id.
The defendants and others have suggested that
Penrod could be ‘‘modified’’, ‘‘explained’’, or watered down
by this Court, but not overruled, so that adjustments could
be made in individual cases where the influence of inflation
was not speculative. However, if fairness requires that we
allow some evidence of inflation properly to compensate
plaintiffs and avoid windfalls to defendants, any hope of
“‘distinguishing”’ or ‘‘explaining away’”’ Penrod crumbles in
the face of Penrcd’s own words—inflation and deflation are
too speculative for judicial determination, triers of fact
should not take into account future infiationary or defla-
tionary trends, juries should not consider changes in the
purchasing power of dollars or the consumer price index,
and judges should not undertake to instruct juries on such
ideas. The prohibition on such evidence could not be
clearer.
To argue, as the defendants do, that Penrod
forecloses only consideration of future economic trends,
while it allows evidence of past inflation, is to miss the
point. The significant basis for predicting future inflation
or deflation is past inflation or deflation. And the effect of
past inflation alone, under a rule forbidding consideration
of likely future inflation, leaves economically eclipsed a
significant portion of the amount of money the wage-earner
may receive in the future.
A-41
Even if it were possible to isolate Penrod and analyze
its terms in an academic vacuum, to reach the conclusion
that evidence of inflation is permissible in the Fifth Circuit
so long as the jury is not permitted to ‘“‘speculate’’ as to the
“‘influence’”’ on future damages of ‘‘possible’’ inflation or
deflation, the result of this exercise would be unworkable
as a practical matter. For in practice, Penrod has placed a
prison-like wall between any evidence of likely inflationary
or deflationary trends (and argument or instruction there-
on) and the courtrooms of the Fifth Circuit. Our decisions
since 1975 on this issue have merely served to place barbed
wire on top of the wall. Moreover, it is likely that in other
cases, as in this one, evidence of probable increases in
wages due to merit or productivity has been kept out of the
jury room unwittingly because of Penrod’s prohibitions.
Economic data is readily available concerning past average
annual wage increases of workers in the United States, and
such data is often broken down into particular professions
and geographic areas. But it is difficult to determine the
percentage of those increases given for merit-productivity
and distinguish the percentage repre-
senting cost of living increases in response to inflation.
Many plaintiffs have thus been unable to scale Penrod’s
wall and introduce evidence of non-inflationary wage in-
creases, even though such increases are theoretically unaf-
fected by inflation, and thus evidence of such increases
should not have been prohibited.
IV.
Penrod in Practice
In our determination of whether Penrod ought to be
overruled, it is important not only to consider what Penrod
says, but also what this Court through the years since
A-42
1975 has said it says. We will look first to the recent cases
arising in this Circuit applying Penrod. In Davis v. Hill
Engineering, Inc., 549 F.2d 314 (5th Cir. 1977), this Court
reduced the District Court’s award of $628,991 to $425,321
for the total loss of the plaintiff's future earning capacity,
because the District Court increased the basic damage
award, prior to discounting to present value, to offset wage
and price inflation. The plaintiff's expert was unimpeached,
and the defendants had no opposing expert. The trial judge
was thus free to rely on the expert’s testimony, and was ap-
parently convinced of the need to allow over $200,000 to
offset expected wage increases due to inflation. 549 F.2d at
331. Nevertheless, we held that until Penrod is overruled,
an inflation element cannot be included in
damage computations, either in the form of [i]
calculating loss of future earnings without dis-
counting to present value or of [ii] increasing the
basic damage award, prior to discounting, with a
figure representing the projected inflation rate.
The former [i] is the Beaulieu [v. Elliott, 434, P.2d
665, 671 (Alaska 1967)] method, the lattr [ii] the
District Court’s method in this case.
549 F.2d at 332 (brackets added). Judge Wisdom
acknowledged that other circuits consider inflation as a fac-
tor in computing future earnings damages, an approach
that ‘“‘more accurately [reflects] loss of future earnins than
does a discounted figure because it prevents inflation from
eroding the damage award.”’ 549 F.2d at 332. Alas, he con-
ceded, his hand were tied by Penrod. Id.
In In the Matter of S/S HELENA, 529 F.2d 744, 753
(5th Cir. 1976), this Court remanded for recalculation the
District Court’s damages award because an inflationary
rate was assumed and applied. In determining the damages
A-43
for loss of support payable to the wives of deceased crew
members of a vessel, the trial judge stated:
I have to some degree offset discount to present
value by the effects of inflation and a likely rise in
decedent’s earnings resulting from increases in
the general wage level. I have assumed a discount
rate of 5%, and a three per cent inflationary level
thus making the net discount rate 2%.
529 F.2d at 753, quoting 329 F.Supp. 652 at 660. Other
calculations of the damages for loss of support also ‘‘seem-
ed to be bascd on the inflation and present value factors,
the expert testimony and present value factors, the expert
testimony of an economist as to expected future earnings,
and the present cost of annuities that would pay monthly
amounts increasing at the estimated rate of inflation.’’ 529
F.2d at 753. Quoting Penrod, we remanded to District
Court for a more detailed calculation of the damages. On re-
mand, the District Court filed supplemental responses
heeding our instructions, and Penrod was again faithfully
followed. Matter of S/S HELENA, sub nom. Sincere
Navigation Corp. v. United States, 547 F.2d 255, 256 (5th
Cir. 1977). The element of inflation was eliminated and the
damages recomputed. Id.
In Higginbotham v. Mobil Oil Corporation, 545 F.2d
422, 433-35 (5th Cir. 1977), rev’d and remanded on other
grounds, 436 U.S. 618, 98 S.Ct. 2010, 56 L.Ed.2d 581
(1978), this Court reviewed the District Court’s use of a 5%
annual straight line estimated salary increase to calculate
the probable future earnings of the deceased. Although the
trial judge stated that he did not take into consideration
“the decreasing purchasing power of the dollar,’’ we held
that under Penrod ‘‘the plaintiff must bear the difficult
A-44
burden of proving what portion of the increases would have
been given other than as an automatic hedge against infla-
tion.”’ 545 F.2d 434-35. The defendant, wielding the mighty
sword of Penrod, made the factually unsupported argu-
ment that ‘‘it is common experience that annual ‘raises’ are
for the most part cost of living wages,’’ therefore a 5%
straight line annual increase amounted to a _ hidden
inflation-based award. 545 F.2d at 434. While common ex-
perience likewise tells us that some portion of pay raises
reflect performance and experience, the plaintiff's expert
failed to distinguish between cost of living or inflationary
increases and rewards for experience or productivity. 545
F.2d at 435. Thus we rejected the District Court’s award
based on the 5% future earnings factor, and remanded to
give the plaintiff an opportunity to walk the straight and
narrow of Penrod. Judge, now Chief Judge, Godbold, in his
partial dissent, observed that in ‘“‘innumerable other con-
texts we accept the events of the past as the basis for an
inference as to what the future will hold.”’ 545 F.2d at 437
(Godbold, J.). “Yet we would not permit consideration of
evidence that a particular plaintiff had received a $200 per
year increase in pay every year for 20 years, unless he could
divide it up into ‘productivity’ pay and ‘economic change
pay.’ ’’ Id. (Godbold, J.).
In this single area of projecting future earnings
we deny ourselves the best evidence available on
the asserted ground that it is not sufficiently
reliable, and, in the name of reliability we man-
date the artificial conclusion that one will earn
the rest of his life what he is earning on the day
he is killed or injured. The only thing certain
about this is that it is certain to be wrong.
Id. (Godbold, J.).
A-45
In Menard v. Penrod Drilling Company, 538 F.2d
1084, 1089 (5th Cir. 1976), the plaintiff's economic expert
estimated that, apart from the possibility that the plaintiff
might advance through the ranks of his employer, a worker
‘would have to get at least 2% per year, on the average, in-
crease to maintain the same buying that he has to-day.’ A
discount rate of 442% was selected by the expert. Id.
Because no objection was made, the jury was actually per-
mitted to consider future inflation as a factor in calculating
damages. One member of this Court’s panel observed that
although this was not plain error, it would have been rever-
sible error under Penrod had an objection been made. Id.
(Gee, Jr., concurring).
Continuing our historical journey into the past, this
Court in Lacaze v. Olendorff, 526 F.2d 1213, 1222 (5th Cir.
1976), reh’g en banc granted, 526 F.2d at 1223, found error
in the trial court’s overuling an objection to expert
testimony on future lost earnings because the expert in-
cluded a 3% inflation rate in his calculations. On the basis
of Penrod the case was reversed and remanded on the issue
of damages. 526 F.2d at 1223.
In Weakley v. Fischbach & Moore, Inc., 515 F.2d
1260 (5th Cir. 1975), a diversity suit arising out of an elec-
trical explosion in Texas, we affirmed the judgment of the
District Court even though the jury considered both future
productivity and future inflation in assessing a $300,000
award for lost earning capacity. For this Court, Judge
Wisdom observed that although this ‘“‘Court has writ large
its disapproval of calculating future damages by reference
to predictions of future inflation,’’ Texas law applied and
juries in Texas are permitted to weigh evidence of future in-
flation in setting awards for future damages. 515 F.2d at
1266-67, citing Penrod. In a similar federal cause of action
A-46
we may be certain that this Court would have reversed a
judgment based on such a “‘speculative’’ jury finding.
Again, specifically on the basis of Penrod, we con-
cluded in Petition of M/V ELAINE JONES, 513 F.2d 911,
912 (5th Cir. 1975) cert. denied, 423 U.S. 840, 96 S.Ct. 71,
46 L.Ed.2d 60 (1975), that the District Court erred by in-
cluding a 2% per year cost of living increase in the com-
putation of loss of future earnings. We announced that
“the trier of fact should not be instructed to take into ac-
count future inflationary or defaltionary trends in com-
puting future lost earnings.”’
In Standefer v. United States, 511 F.2d 101 (5th Cir.
1975), the District Court, sitting without a jury, awarded
damages to a plaintiff for loss of future earnings and in-
cluded an inflationary factor of 5.5%; in addition, the
award of future medical expenses included an inflationary
factor of 4.5%. Because Penrod foreclosed any considera-
tion of inflation in computing such damages, the District
Court’s decision was reversed and remanded for a recom-
putation of damages.
Robertson v. Douglas Steamship Company, 510 F.2d
829 (5th Cir. 1975), stands as yet another example of how
we applied the Penrod strait-jacket. In accordance with the
trial court’s instructions, the jury divided the plaintiff's
award into (i) the amount of basic damages and (ii) the
amount of damages sustained ‘’as a result of loss of future
wage increases or inflation or decrease in the purchasing
power of money.”’ 510 F.2d at 836-37. Of course, the second
part of the award was reversed, even though it is possible
that a portion of that element was awarded due to likely
merit or productivity increases not based upon inflation or
cost of living adjustments. Thus we see that although
A-47
Penrod was not intended to eliminate evidence of future
wage increases on the basis of merit or productivity, the
practical effect of Penrod is often to throw the baby of
future merit increases out with the inflationary washtub
waters.
Finally, on the very day that Penrod was published,
this Court, in Law v. Sea Drilling Corporation, 510 F.2d
242, 251-52 (5th Cir. 1975) on reh’ing, 523 F.2d 793 (5th Cir.
1975), held that the District Court’s allowance for addi-
tional inflationary cost of living increases was improper.
Again, the increases in the decedent’s income over the
years before his death, upon which the trial judge based his
reasonable expectation that the decedent’s income would
have continued to rise, probably reflected increases due to
both merit and productivity and not just cost of living in-
creases. Nevertheless, because an element of inflation was
considered, Penrod was dispositive.
In all of the above discussed cases, this Court, by
both its actions and its words, flatly prohibited any con-
sideration of inflation, whether in evidence presented, in
jury instructions or in final argument, without regard to
the cogency or persuasiveness of the evidence offered to
prove that inflation, to some extent, will likely occur.
Swept unthinkingly before Penrod also were merit-
productivity increases. Thus stands the law in this Circuit,
until today.
In our attempt to assess the impact of Penrod in this
Circuit, not only is it necessary to consider our own ap-
pellate opinions, as we have done above, but it is also
helpful to review some of the District Court opinions where
the tentacles of Penrod were perceived and predictably ef-
fective. In Complaint of Metcalf, 530 F.Supp. 446 (S.D.
A-48
Tex. 1981), the District Court stated emphatically that in
its award for loss of earnings in the future, any ‘‘future in-
flationary or deflationary effect on earnings is not to be
considered.’’ 530 F.Supp.a t 458, citing Penrod. Likewise,
in Kratzer v. Capital Marine Supply Inc., 490 F.Supp. 222
(M.D. La. 1980), aff'd 645 F.2d 477 (1981), the plaintiff pro-
duced an economist who testified as to lost wages
predicated upon an inflation factor and an increased pro-
ductivity factor. The District Court simply cited Penrod
and stated that there ‘“‘was no evidentiary justification for
these factors, and the Court declines to accept them, and as
noted, utilized a discount figure of 6 percent with no other
factors in computing lost wages.’’ Again, we see how
Penrod often operates to prohibit not only evidence of infla-
tion, but also evidence of likely merit or productivity wage
increases. In McLean v. United States, 446 F.Supp. 9 (E.D.
La. 1977), the plaintiff carefully met his burden of proof by
establishing a ‘‘productivity”’ factor of 5.7% on the basis of
past merit and change in job title increases over his
previous years of employment. Because that factor was in
no way compensation for inflation, evidence thereof was ad-
missible under Penrod. 446 F.Supp. at 13, 14. In Thompson
v. Offshore Co., 440 F.Supp. 752 (S.D. Tex. 1977), the
District Court announced that in calculating a decedent’s
future earnings, any future inflationary effect on wages iss
not to be considered. 440 F.Supp. at 762. Finally, in
Hamilton v. Canal Barge Co., 395 F.Supp. 978 (E.D. La.
1975), allowance for inflation or increased cost of living was
denied in light of Penrod, and for the additional reason that
the diminution in the purchasing power of an award, caus-
ed by inflation, is not an item of damage caused by death
or by prepayment of future wages. 395 F.Supp. at 987.
However, the District Court did allow a 4% annual increase
factor on the basis of skill and productivity. Id.
A-49
Nesmith v. Texaco, Inc., 491 F.Supp. 561 (W.D. La.
1980), stands out as an anomaly to the law of Penrod. In
startling contrast to the usual acceptance of Penrod’s rejec-
tion of evidence of inflation, the District Court interpreted
Norfolk & Western Railway v. Liepelt, 444 U.S. 490, 100
S.Ct. 755, 62 L.Ed.2d 689 (1980), to say that ‘‘in arriving
at an award for future loss of earnings the very factors
disapproved in [Penrod] should now be considered.’”” 491
F.Supp. at 564. While the court was ‘‘mindful of the fact
that this interpretation of Liepelt may be erroneous, and
[Penrod] may still bar the door to speculative damages as
to factors other than income taxes in a case of future loss
from personal injuries,’’ the plaintiff was permitted to pre-
sent expert testimony that the growth rate for wages based
upon inflationary factors in the piaintiff’s job and
geographic area will be approximately 6% over the next 30
years. 491 F.Supp. 564, 565 n. 4. This attempt to break the
bonds of Penrod resulted in an appeal, disposition of which
is being held pending the outcome of the present opinion
and Byrd, see note 1.
‘In Liepelt, the Supreme Court said:
[There] are many variables that may affect the amount of a
wage earner’s future income tax liability. The alw may
change, his farnily may increase or decrease in size, his
spouse’s earning may effect his tax bracket, and extra in-
come or unforeseen deductions may become available. But
future employment itself, future help, future personal expen-
ditures, future interest rates, and future inflation are also
matters of estimate and prediction. Any one of these issues
might provide the basis for protracted expert testimony and
debate. But the practical wisdom of the trial bar and the trial
bench has developed effective methods of presenting the
essential elements of an expert calculation in a form that is
onderstandable by juries that are increasingly familiar with
the complexities of modern life.
444 U.S. at 494, 100 S.Ct. at 757, 62 L.Ed.2d at 694.
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The cases discussed in this section demonstrate the
absolute prohibition on any consideration of inflationary or
cost of living trends in the courts of this Circuit. District
Court judges have found themselves under a duty, imposed
by Penrod, to prevent experts in their testimony, and at-
torneys in their arguments, from even mentioning
economic trends that would effect «ture wage increases.
Likewise, in their instructions to the jury, District judges
have been careful not to mention inflation as a factor in
computing damages, or, where inflation was mentioned,
the purpose was to explain to the jury that they should not
consider inflation in their computations. In those cases
where the jury was permitted to consider the effect of
future inflation or damage awards, either because they
heard testimony by an expert or because the trial judge in-
structed them to consider inflation, we have reversed the
judgment and, in most cases, remanded for a new trial. In
non-jury cases, the District Court judges have not been
permitted to consider inflation in their assessment of
damages. Even where plaintiffs have clearly limited their
evidence (as to inflation) to likely cost of living increases,
thereby carefully avoiding any inference that the total
award should be somehow “‘protected’’ from inflation ir-
respective of wage increases, the evidence has been re-
jected. In short, Penrod in practice has been a firm, inflexi-
ble standard that we have been unable to explain or inter-
pret away. The standard is simple: no evidence of inflation
may be presented to the trier of fact, regardless of how ex-
pert the testimony, how understandable the presentation,
or how fair to the parties. Argument of counsel is also for-
bidden, as is jury instruction by the Court. This standard
has at times been so overwhelming that it has prohibited
evidence that should have been allowed, such as evidence
of likely wage increases based upon merit or productivity,
either on a misreading of Penrod or a perceived (and
A-51
sometimes actual) impossibility of separating out infla-
tionary elements from admissible merit-productivity in-
creases. Quite possibly, an employer may take into account
rising inflation in his decision to grant promotions, and it
would be impossible for anyone, expert or otherwise, to
distinguish that part due to merit only and determine the
percentage amount of the raise due wholly to non-
inflationary factors.
V.
Penrod and Other Circuits
Worthy of our consideration is how our sister circuits
perceive Penrod. In 1975, the Eighth Circuit, citing Pemrod,
was able to say that the
federal circuits that have faced the issue in cases
involving federally created claims, governed by
federal rather than state law, have for the most
part rejected testimony, jury instructions or trial
court consideration of future inflationary trends
in damage assessment.
Johnson v. Serra, 521 F.2d 1289, 1295-96 (8th Cir. 1975),
aff'd on remand, 586 F.2d 1291 (8th Cir. 1978). More recent-
ly, however, in the trend toward increasing consideration of
inflation, Taenzler v. Burlington Northern, 608 F.2d 796,
800 n. 9 (8th Cir. 1979), cited Penrod but declined to follow
its approach. Expert testimony on future wage increases,
when limited to future trends in earnings of a particular
group of employees, thus avoiding the excessively general
national inflation rate, was found to be acceptable in trial
courts.® 608 F.2d at 801.
© The Court tempered its acceptance of limited expert testimony
A-52
Feldman v. Allegheny Airlines, Inc., 524 F.2d 384 (2d
Cir. 1975), a case arising under Connecticut law, cited with
approval Judge Friendly’s earlier assessment of inflation:
There are few who do not regard some degree of
continuing inflation as here to stay and would be
willing to translate their own earning power into
a fixed annuity, and it is scarcely to be expected
that the average personal injury plaintiff will
have the acumen to find investments that are pro-
of against both inflation and depression—a task
formidable for the most expert investor.
524 F.2d at 388, citing McWeeney v. New York, New
Haven and Hartford Railroad, 282 F.2d 34, 38 (2d Cir.
1960) (Friendly, J.). The computation by trial Judge
Blumenfeld of the discount rate of earnings on a prudent
unsophisticated investment by an inflation factor was
approved.” This computation, subtracting the assumed in-
flation rate from the rate of interest on a safe investment
(the traditional discount rate), yields an ‘‘inflation-adjusted
discount rate.’’ Judge Fiendly, a member of the panel in
Feidman, was not completely satisfied with this result—
Penrod’s emphasis on ‘‘the plethora of uncertainties”’ that
(Footnote 8 continued)
on inflation with the caution that expert testimony predicting future in-
flation at a specified rate (i) may mislead the trier of fact by its pretend-
ed exactness, (ii) may distort the effect of inflation by not including
“concomitant increases for countervailing effects of inflation such as
higher rates of return on investment,’’ and (iii) may open up collateral
matters that waste time and confuse the issues such that its probative
value would be cutweighed. 608 F.2d at 801. As will become «ear in our
discussion, we share these concerns.
9 524 F.2d at 387. The plaintiff's expert at trial calculated the dis-
count rate by establishing 4.14% as the average annual earning power
of a safe investment, and then subtracted 2.87% as the average yearly
inflation rate over an 18-year period, which yielded a 1.27% difference
which was rounded up to 1.5%. Id.
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accompany testimony regarding inflationary trends was
contrasted with the trial court’s apparent construction of
‘“‘an iron-clad guaranty against the unknown and unknow-
able future effects of inflation.” 524 F.2d at 392 (Friendly,
J. concurring). Such protection against inflation is not en-
joyed by the millions of Americans on fixed pension or in-
vestment income, or even by the average worker whose
wages do not keep up with inflation. This highlights a
weakness in the Feldman approach: it assumes that wage
increases will mirror inflation. Jd. Judge Friendly thus
predicted that Feldman ‘‘will not constitute a precedent on
the inflation problem in a case arising under federal law.”’
524 F.2d at 393, (Friendly, J. concurring).
More recently, in a suit brought by an injured cargo
checker against a stevedore and a shipowner (neither was
his employer), pursuant to the LHWCA, 33 U.S.C. §§ 901
et seq., the Second Circuit carefully considered the question
whether and to what extent an award for lost future wages
should be adjusted because of inflation. Doca v. Marina
Mercante Nicaraguense, S.A., 634 F.2d 30 (2d Cir. 1980),
cert. denied, 451 U.S. 971, 101 S.Ct. 2049, 68 L.Ed.2d 351
(1981). Penrod as well as similar cases in the Third!® and
First! circuits were identified as unsound minority views.
634 F.2d at 36. Broad agreement was perceived among
economists that inflation ‘‘is a dominant factor on the cur-
rent economic scene and, despite episodic recessions, is
likely to be so for the foreseeable future.”’ 634 F.2d at 37.
10 yagill v. Westinghouse Electric Corp., 464 F.2d 294, 299-301
(3d Cir. 1972). But see Pfeifer v. Jones & Laughlin Steel Corp., 678 F.2d
453 (3d Cir. 1982) (‘‘total offset method’ adopted; no discount rate to
present value is applied, because future inflation will offset the plain-
tiff’s ability to draw interest on the award), discussed in section XI
infra.
11 Wiliams v. United States, 435 F.2d 804 (1st Cir. 1970).
A-54
The District Court in Doca, 474 F.Supp. 751, 758
(S.D.N.Y. 1979), found that the plaintiff was entitled to
recover $352,560, ‘‘representing his future loss of earnings
considering both probability of continued inflation and a
discount to present value.’’ The extent to which inflation
was considered was unspecified, and no computation was
provided by the District Court. 634 F.2d at 34. On appeal,
the plaintiff urged that the trial judge used a discount fac-
tor of 1%, an inference drawn by comparing the difference
between the award given and the plaintiff’s own projection
of future lost wages. €34 F.2d at 34 & n. 4. The defendants
objected to the court’s computation on the grounds of lack
of evidence to support an estimate of future inflation and
argued that any adjustment for inflation is impermissible.
634 F.2d at 34-35.
The Second Circuit in Doca described two basic ap-
proaches as to how inflation could be considered. First, the
question of inflation rate may be submitted to the fact
finder in one of three ways: (i) by allowing expert opinion,
(ii) by requiring the fact finder to apply its own knowledge,
or (iii) by permitting the fact finder to apply its own
knowledge together with expert testimony. Each of the
three contemplate that a separate determination as to infla-
tion is to be made in each case. Second, a rule of law may
be adopted that focuses on the somewhat constant relation-
ship between inflation and interest rates, as in the Alaska
Supreme Court’s view!2 that the inflation rate should be
assumed to equal the interest rate, thereby eliminating the
discount to present value. 634 F.2d at 38-39. The Doca
Cert was not prepared to specify any particular
mecvhodology:
T2 Beaulieu v. Elliot, 434 P.2d 665 (Alaska 1967).
A-55
If litigants prefer to offer evidence as to future rates
of both inflation and interest, they are entitled to do so....
We emphasize that we are not requiring the use
of an inflation-adjusted discount rate.... Litigants
are free to account for inflation in other ways, or,
if they use the adjusted discount rate approach,
to offer evidence of a rate [other] than 2%.
634 F.2d at 39-40. The District Court’s award was remand-
ed for reconsideration for two reasons: (i) if a 1% adjusted
discount rate was used, it was too low since 2% is the “‘true
cost of money appropriate for use in a computation to
determine the present value of lost future wages,”’13 and
(ii) the District Court took into account a post trial wage in-
crease based upon cost of living, therefore duplicative con-
sideration was given to the impact of inflation.!4 634 F.2d
at 40.
13 This figure, 2%, “‘lies within the narrow range bracketed by
many economists as representing the true yield of money.” 634 F.2d at
39. There “‘is substantial opinion that during periods of stable rates of
inflation, the real yield of money, whether constant or slightly flu:-
tuating, is approximately 2%....’’ 634 F.2d at 39 n.10. This theory of the
real rate of interest wiil be discussed in detail later in this opinion. It
may be noteworthy that the Second Circuit was dealing with findings of
a District Judge, not a jury verdict.
14 The court is here making a critical point with regard to ad-
justing a discount rate for inflation. There are basically two methods of
calculation: In the first, if the sum total of a plaintiff's future earnings
is computed by multiplying his annual income for the year he was in-
jured times the number of years of his work expectancy, then it is fair
to both plaintiff and defendant to apply a discount rate that has been
adjusted for inflation. For example, if a relatively safe investment yields
6%, and the inflation rate is predicted to be 4% over the period of that
investment, then the adjusted discount rate would be 2%, and this
would be separately applied to each year’s projected actual earnings not
increased by inflation. Under the second method, if the sum total of the
plaintiff's future earnings is computed by adding up the annual earnings
of the plaintiff based upon likely cost of living increases (i.e., $10,000 in
A-56
Feldman, supra, approved the use of an “‘inflation-adjusted
discount rate”’ of 1.5%. 524 F.2d at 387. The purpose of the
method used in Feldman, and approved as one possible
technique in Doca, was to determine the “real yield” of
money—that portion of interest gained on virtually risk-
free investments which represents only the real growth of
the investment and not the losses due to future inflation. !5
The theory is that the “‘real yield’’ of money is roughly 2%
in any year, because in periods of high inflation, interest
rates will be a bit higher, and in low inflationary periods,
the interest rates will still be a little above the rate of
inflation.
Doca_ recognized the disagreement among
economists over the validity of the assumption that the
real rate of interest is constant and consequently indepen-
dent of inflation, but noted that various economic studies
of similar time frames have estimated that the real rate of
interest was between 1.5% and 3%. 634 F.2d at 39 n. 10.
VI.
Penrod and Some Commentators
In 1977, one commentator—with an error in timing—
(Footnote 14 continued)
1981, $11,000 in 1982, $12,000 in 1983, etc.), then the full discount rate,
e.g. 6% in the above example, should be separately applied to each year’s
figure of the plaintiff's projected future earnings.
15 634 F.2d at 35. Under this approach, the adjustment to account
for future inflation is accomplished by decreasing the traditional present
value discount. This rate is determined by subtracting the average an-
nual change in the consumer price index over each of several years from
the effective annual interest on government bonds held during each of
the same years, and then computing the average of the rates resulting
from these subtractions. Feldman, supra, 382 F.Supp. 1271 at 1306-12.
A-57
predicted that ‘‘the Fifth Circuit soon could decide...that
Penrod is ‘substantively indefensible.’ "16 This was
precipitated by Judge Wisdom’s concurring opinion in
Freeport Sulpkur Co. v. SSS HERMOSA, 526 F.2d 300, 311
(5th Cir. 1976) (Wisdomm, J., concurring). Judge Wisdom
there expressed his dissatisfaction with Penrod and iden-
tified the inconsistency in this Circuit’s insistence upon
discounting while ignoring inflationary effects. Jd. The
policy concerns of Penrod, (i) achieving complete compensa-
tion, (ii) preventing speculation, and (iii) simplifying trial
procedures, would be served better by adopting an ap-
proach that considered the effect of inflation on damage
awards. Id.
Penrod has also been labeled a source of serious
judicial error. Kane, Inflation, tight money, and Penrod:
the cost of judicial error, Texas Trial Lawyers Forum,
April-June, 1980, at 3-5. In Penrod, we stated that “if
future inflation does cause higher wages, experience predic-
tably demonstrates that higher interest rates on in-
vestments which have always accompanied inflation will
also occur and this factor will mitigate the failure to include
an inflationary surcharge in wage rate calculations.’’ 510
F.2d at 236.
The obvious flaw in this line of reasoning lies in
the fact that while interest rates do rise in
response to accelerating inflation, a higher in-
terest rate only reduces the present value of a
future loss, thus further penalizing the plaintiff.
The problem for the plaintiff is compounded when
the series of future income payments cannot be
proportionally increased for the same inflation
that drove up the interest rate.
16 Comment, Future Inflation, Prospective Damages, and the Cir-
cuit Courts, 63 Va. L. Rev. 79, 115-16 (1977).
A-58
Kane, supra, at 3-4.
Spiraling inflation during the years since Penrod has
indirectly led to much of the criticism of our 1975 opinion. 17
Although consumer prices have fallen in the early months
of 1982, which might signal the beginning of the end to
“spiraling” inflation, 18 this does not demonstrate that Penrod
is not so bad after all. The problem with Penrod is not primari-
ly its spectacular unfairness in periods of extremely high in-
flation. To the contrary, the danger of Penrod lies ‘n its un-
willingness to consider the effect of inflation on future wages
at all. Penrod stands for the inflexible proposition that triers
of fact should not consider inflation or deflation at all,
whether high or low or nonexistent, in predicting wage loss.
At the same time, defendants are freely allowed to show the
highest inflation-induced interest rates available on relatively
safe investments. Unfortunately, any evidence of the fact that
I" The Statistical Abstract of the Unitead States, 1980 (101st Ed.,
U.S. Dept. of Comm.), indicates the following annual Consumer Price In-
dex increases:
1975 9.1%
1976 5.8%
1977 6.5%
1978 7.7%
1979 11.3%
1980 14.4%
Id., Table No. 807, at 486. In addition, the annual percentage increase in
Consumer Pvices for 5 year periods reveals the following changes:
1970-1975 6.6%
1971-1976 6.9%
1972-1977 7.3%
1973-1978 8.0%
1974-1979 7.9%
Id., Table No. 706, at 425.
18 “Why Prices Are Falling,” Newsweek, Feb. 22, 1982, at 59.
A-59
wages will likely increase to combat the eroding effects of
inflation remains eclipsed by the Court-declared spectre of
speculation.
What we seek, in response to criticism from both
within and without the Circuit, is fairness with regard to
the pr~sentation of economic data by either side in the legal
controversies that our federal courts face. The principles
that we adopt to facilitate this goal must be flexible enough
to remain workable in any economic climate. To this end,
the remainder of this opinion will explore the alternatives
and adopt those that meet the standards of economic flex-
ibility and fairness to plaintiffs and defendants alike.
A-60
APPENDIX “D”
Ruth CULVER, et al.,
Plaintiffs-Appellants Cross-Appellees,
Vv.
SLATER BOAT CO., et al.,
Defendants-Appellees Cross-Appellants,
EURO-PIRATES INTERNATIONAL, INC., et al.,
Defendants-Appellees and Cross-Appellees-Appellants,
Vv.
ODECO DRILLING, et al.,
Defendants-Appeliees Cross-Appellants.
No. 79-3985
United States Court of Appeals,
Fifth Circuit
Unit A
May 4, 1981.
Wife and children of foreman of anchor-pulling crew
brought maritime personal injury case arising out of
foreman’s death. The United States District Court for the
Eastern District of Louisiana, Charles Schwartz, Jr., J.,
held that foreman was free from negligence and that em-
ployer, bareboat charterer, and owner of drilling barge were
actively negligent and not entitled to indemnity, and ap-
peals and cross appeals were taken. The Court of Appeals,
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Ainsworth, Circuit Judge, held that: (1) district judge pro-
perly refused to aliow testimony, charges, or inter-
rogatories concerning effects of inflation on any award of
damages; (2) district judge properly refused to aliow plain-
tiffs to argue to jury that foreman’s wages would have in-
creased over time and that jury should take this into ac-
count in its award of future support; (3) district judge pro-
perly substituted 9.125 percent for 25 percent as discount
rate to be applied to jury’s award; (4) district judge did not
err in failing to submit interrogatories to jury which would
have separated each plaintiff's award from those of the
other four; (5) evidence was sufficient to support jury’s
determination that defendants were negligent; and (6) each
defendant was actively negligent and thus not entitled to
indemnity.
Affirmed as modified.
Sam D. Johnson, Circuit Judge, filed a concurring
opinion.
Appeals from the United States District Court for
the Eastern District of Louisiana.
Before AINSWORTH and SAM D. JOHNSON, Cir-
cuit Judges, and HUNTER*, District Judge.
AINSWORTH, Circuit Judge:
This maritime personal injury case raises several
issues, including the use of an inflation factor to compute
* District Judge of the Western District of Louisiana, sitting by
designation.
A-62
future loss of earnings, the construction of jury instruc-
tions and interrogatories, and the rights to indemnity bet-
ween actively and passively negligent tortfeasors. The
district court’s disposition of the indemnity issue requires
a slight modification; in all other respects we affirm the
district court.
I. FACTS.
Curtis Culver, the husband and father of plaintiffs-
appellants, was the foreman of an anchor-pulling crew
employed by Gulf Overseas Marine Corporation (Gulf).
Shell Oil Company (Shell) contracted with Gulf to provide
an anchor-pulling crew to assist in moving the drilling
barge OCEAN QUEEN to a new location off the Louisiana
coast in the Gulf of Mexico. In their anchor-pulling opera-
tions, the Gulf crew used the vessel M/V BLACK BART
which was owned by Charles D. Slater d/b/a Slater Boat
Company and leased under a bareboat charter to Euro-
Pirates International, Inc. (collectively EPI). The OCEAN
QUEEN was owned and maintained by Ocean Drilling &
Exploration Company (ODECO). Essentially, the Gulf
crew’s job was to use the machinery on the BLACK BART
to lift the anchors of the OCEAN QUEEN out of the sea-
bed, to float the drilling barge to its new location, and to
anchor it again there. To get control of the anchor line, the
Gulf crew, under the direction of foreman Culver, first
‘“‘lassoed”’ a buoy attached to the anchor line and brought
the buoy aboard the BLACK BART. Then, a set of unusual
circumstances combined to produce the unfortunate acci-
dent which gives rise to this lawsuit. The anchor line was
too short, and the BLACK BART drifted away from the
OCEAN QUEEN: thus, the cable “‘lasso’’ was holding not
only the weight of the line but also the weight of the an-
chor. The taut cable ‘“‘lasso’’ raked across a jagged surface
A-63
of the buoy and severed. As the buoy raced back over the
deck of the BLACK BART and into the water, it struck
Culvaer who had left his position of safety at the stern of
the vessel to inspect the line. Culver died from his resulting
injuries.
Culver’s widow and children sued Shell, Gulf, EPI,
and ODECO under the Jones Act, 46 U.S.C. § 688, the
Death on the High Seas Act, 46 U.S.C. § 761 et seq.,
maritime tort, and negligence. Shell was dismissed as a par-
ty defendant. The remaining defendants filed appropriate
cross-claims. A jury found all the remaining three defen-
dants negligent, the BLACK BART unseaworthy and
Culver free from contributory negligence. As between the
defendants, on their cross-claims for indemnity, the district
court found each actively negligent and not entitled to in-
demnity from either of the other two. The judge held that
Gulf was negligent because its employee, Curtis Culver,
failed to remain in his position of safety away from the an-
chor line. However, the district judge did not disturb the
jury’s finding of no negligence! on the part of Culver in the
main action.
In determining the damages sustained by the
Culvers for the death of Curtis, the district judge allowed
testimony concerning discount rates and the earning power
of money invested in low risk bonds. The judge instructed
! The jury interrogatory concerning Curtis Culver’s negligence
reads as follows:
5. Was Mr. Curtis Culver negligent in a manner which con-
tributed to causing his own injury and death?
Yes __ No X
R. vol. 3 at 629.
A-64
the jury to “discount the total amount”’ of any award for
loss of future services or support by a percentage that
represents an appropriate rate of interest.2 The inter-
rogatory submitted to the jury® was returned with a dis-
count rate of 25% filled in. The judge decided that obvious-
ly the jury had misunderstood, and he substituted the only
other rate put into evidence, 9.125%.4 The total award
after discounting was $238,861.05. The district judge did
not allow testimony, charges, or interrogatories to be sub-
mitted on the effects of inflation on any damage award,
* The district judge instructed the jury:
Therefore if you find that any of the Culvers will sustain a
loss of support and/or services in the future, the amount is
to be reduced, that is you should discount the total amount
that you think will be lost by a percentage that you feel
represents an appropriate rate of interest at the present time
in the New Orleans area.
R. vol. 8 at 858.
3 The interrogatory reads as follows:
f. If you have made any award to plaintiffs for loss of sup-
port and/or services in the future (parts b, c, and d of this
question), what discount percentage rate do you find to be
applicable in order to reduce the award for future loss of sup-
port and/or services to their present value. (Your answer to
this question should be in the form of a percentage.)
twenty-five percent
R. vol. 3 at 631.
4 Defendant ODECO’s expert witness in the field of bond in-
vestments, Mr. Donald Hattier, an investment banker with E. F. Hut-
ton, testified that an investor could purchase U.S. government bonds
with a coupon rate of 9.125% in denominations of $1,000 with a maturi-
ty date in the year 2009 (Culver’s normal work-life expectancy). R. vol.
7 at 735. At the time of trial the bonds were selling at a slight discount
which the distrit judge chose to ignore. Mr. Hattier testified further that
government bonds were the safest in the marketplace.
A-65
citing Johnson v. Penrod Drilling Co., 510 F.2d 234 (5th
Cir.), cert. denied, 423 U.S. 839, 96 S.Ct. 68, 46 L.Ed.2d 58
(1975), as his reason therefor.
II. INFLATION FACTORS
The Culver’s principal contention is that this cir-
cuit’s en banc decision in Johnson v. Penrod Drilling Co.,
supra, relating to the use of an inflation factor to compute
future loss of earnings, has been overruled either by chang-
ed circumstances or by the Supreme Court’s decision in
Norfolk and Western Railway Co. v. Liepelt, 444 U.S. 490,
100 S.Ct. 755, 62 L.Ed.2d 689 (1980). In Penrod, we held
that “‘the influence on future damages of possible inflation
or deflation is too speculative a matter for judicial deter-
mination.”’ 510 F.2d at 241. Therefore, ‘‘triers of the facts
should not be instructed to take into account future infla-
tionary or deflationary trends in computing lost earnings.”
Id. The Culvers argue that the extremely high rates of in-
flation this country has experienced in recent years make
the Penrod rule an unjust anachronism and that in any
case, Liepelt has overruled Penrod.
In Liepelt, the Supreme Court responded to an argu-
ment that future prediction of tax consequences is ‘‘too
speculative and complex for a jury’s deliberations”’:
Admittedly there are many variables that may
affect the amount of a wage earner’s future in-
come tax liability. The law may change, his fami-
ly may increase or decrease in size, his spouse’s
earnings may affect his tax bracket, and extra in-
come or unforeseen deductions may become avail-
able. But future employment itself, future health,
future personal expenditures, future interest
rates, and future inflation are also matters of
A-66
estimate and prediction. Any one of these issues
might provide the basis for protracted expert
testimony and debate. But the practical wisdom
of the trial bar and the trial bench has developed
effective methods of- presenting the essential
elements of an expert calculation in a form that is
understandable by juries that are increasingly
familiar with the complexities of modern life. We
therefore reject the notion that the introduction
of evidence describing a decedent’s estimated
after-tax earnings is too speculative or complex
for a jury.
444 U.S. at 494, 100 S.Ct. at 758.
Our recent decision from Unit B of the Fifth Circuit
in Byrd v. Reederei, 638 F.2d 1300 (5th Cir. 1981),
specifically addresses the continued vitality of Penrod and
is dispositive of the issue here before us. In Byrd, we noted
first that ‘‘[aJn en banc decision of our court may be over-
ruled only by subsequent en banc consideration or by the
United States Supreme Court.” Jd. at 1308. Byrd then con-
sidered the argument for admitting inflation factors in
light of Liepelt. ‘‘Liepelt’s favorable dicta is only that.
Thus, until the Supreme Court speaks more directly or we,
as an en banc court, decide otherwise, Penrod still ap-
plies....’’ 638 F.2d at 1308. We are in agreement with
Byrd’s disposition of the Liepelt issue.
III. INCOME INCREASES
The Culvers next object to the district judge’s not
allowing them to argue to the jury that Curtis Culver’s
wages would increase over time and that the jury should
take this into account in its award for future support. As
we read the record, the district judge refused to permit the
A-67
Culvers to argue such increases for two reasons. First, the
Culvers offered no evidence to show that such an argument
was warranted.” Curtis Culver’s tax returns for the
preceding five years showed that his income was level, not
increasing, and Culver had reached the top of his particular
line of work. Plaintiffs’ counsel’s attempt to prove in-
creases were not sufficiently relevant to Culver’s particular
circumstances.® Second, the trial judge stated that possi-
ble job promotions and merit wage increases were merely
an indirect way of putting inflation factors into evidence
before the jury and were thus not allowed under Penrod.
We find no error in the trial judge’s rulings concerning
wage increases. !
IV. DISCOUNT RATE
The Culvers also object to the district judge’s
> The district judge did allow the Culvers’ witness to testify to in-
creases in the hourly wage for anchor-pulling crew foremen from $4.75
in 1975 to $6.50 in 1978 and $6.96 on the date of trial in 1979. R. vol.
6 at 276. The judge explained a formula to the Culvers’ attorney by
which Curtis Culver’s hypothetical 1978 and 1979 salaries could be
estimated, id. at 279, but counsel chose not to use that formula. By us-
ing the formula, Culver’s earnings would have been approximately
$19,000 per year in 1979. R. vol. 8 at 766. Instead counsel stated that
he wished to argue, without any apparent evidentiary support, Culver’s
earnings would be $35,000 per year. Jd.
6 Counsel attempted to establish Culver’s hypothetical 1978 earn-
ings, a year for which counsel had adduced an exact hourly wage, by
reference to the earnings of other foremen working for other companies.
Counsel did not use Culver’s personal work history to establish earnings.
7 The district judge did permit the jury to consider provable in-
creases in the wage of Gulf anchor-pulling foremen up to the time of trial
in determining future earnings. However, the jury was apparently unim-
pressed with any of the arguments relating to wage increases. It chose
instead to fix damages at the approximate average earnings that Culver
had reported on his income tax statements for the five years prior to his
death.
A-68
substitution of 9.125% for 25% as the discount rate to be
applied to the jury’s award. The Culvers argue either that
a rate of 25% per year is manifestly unjust and does not
conform to the evidence, thereby entitling them to a new
trial, or, alternatively, that the jury’s application of a 25%
total discount cannot be disregarded and replaced by a
yearly rate put into evidence by a defense witness. We
recognize that the jury instruction and the interrogatory
concerning the discount rate were subject to either a
“total” or a ‘“‘per year”’ interpretation.® However, it is clear
to us that the pe: ues and the court intended, and the law
requires,” a per year rate. A 25% lump sum reduction in the
award is not a rate. The trial judge was faced with a situa-
tion where applying a 25% per year discount would have
been unjustly harsh and applying a 25% reduction would
have been contrary to the law. The Culvers chose not to put
evidence of a discount rate into the record. Although they
had an economist on their witness list, they did not call him
to testify. Adopting the rate suggested by the defendants’
expert was a proper exercise of the district judge’s
discretion.
V. APPORTIONMENT OF DAMAGES
The Culvers’ final contention is that the case should
be remanded for the trial court’s failure to submit inter-
rogatories to the jury which would have separated each
plaintiff's award from those of the other four. The argu-
ment is without merit. The conflicting interests of the in-
dividual plaintiffs in a separated award, and the fact that
8 See notes 2 and 3 supra.
9 Chesapeake & O. Ry. v. Kelly, 241 U.S. 485, 490-91, 36 S.Ct. 630,
632, 60 L.Ed. 1117 (1916).
A-69
the suit was brought by Curtis’ wife for herself and as
representative of the children, make this federal maritime
suit the improper vehicle to apportion the award. Any
separation is better left to the state court which appointed
Mrs. Culver representative of her children. Moreover, the
record contains no evidence on which the jury could have
based its apportionment.
VI. DEFENSES AND CROSS-CLAIMS
In its answers to interrogatories, the jury held all
defendants negligent and also determined that Curtis
Culver was free from contributory negligence. Stating that
his disposition of the cross-claims was ‘‘in conformity with
the verdict of the jury,”’ the district judge found all de-
fendants were actively negligent and apportioned the
damages equally between them.
All defendants first contend that the jury’s deter-
mination that they were negligent is without evidentiary
support. We disagree. Evidence in the record, as outlined in
Section I, supra, is sufficient and adequate to support the
jury’s verdict. See Fairley v. American Hoist & Derrick
Co., 640 F.2d 679 at 680-81 (5th Cir. 198i); Nunez v.
Superior Oil Co., 572 F.2d 1119, 1124 n.6 (5th Cir. 1978);
Manchack v. S. S. Overseas Progress, 524 F.2d 918, 919
(5th Cir. 1975). Next, each defendant cross-claims against
its codefendants and asserts that the district judge’s fin-
dings of active negligence as to it are erroneous, that it was
only passively negligent, and is therefore entitled to indem-
nity from its codefendants. EPI’s and ODECO’s claims in
this regard are without merit. The failure of EPI’s crew on
the BLACK BART to keep a proper lookout and its allow-
ing the vessel to drift were substantial causes of Culver’s
ultimate injury; therefore, EPI’s negligence was active. See
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Chesapeake & Ohio Railway v. Illinois Central Gulf
Railroad, 564 F.2d 222, 224 (7th Cir. 1977), cert. denied, 435
U.S. 919, 98 S.Ct. 1515, 55 L.Ed.2d 535 (1978). Likewise,
ODECO’s use of an anchor line that was too short and the
failure to maintain its buoy amounted to active negligence.
Gulf’s claim that it was only passively negligent re-
quires more extended discussion. In the indemnity phase of
the case, the district judge found Gulf actively negligent
based on the failure of its employee, Curtis Culver, to stay
in a position of safety at the stern of the vessel; yet, the
jury found Culver free from negligence. These findings are
obviously inconsistend. The judge followed the jury’s fin-
dings in all other respects. Under the circumstances, the
jury determination will prevail.
Although the jury exonerated Culver of negligence,
it nevertheless found that Gulf was negligent. Gulf con-
tends that the jury’s determination can be based only on
Gulf’s failure to provide a safe place to work under the
Jones Act, 46 U.S.C. § 68810 and that such a failure is
merely passive or technical negligence. Accordingly, Gulf
10 Section 688 of the Jones Act provides:
Any seaman who shall suffer personal injury in the course
of his employment may, at his election, maintain an action
for damages at law, with the right of trial by jury, and in
such action all statutes of the United States modifying or ex-
tending the common-law right or remedy in cases of personal
injury to railway employees shall apply; and in case of the
death of any seaman as a result of any such personal injury
the personal representative of such seaman may maintain an
action for damages at law with the right of trial by jury, and
in such action all statutes of the United States conferring or
regulating the right of action for death in the case of railway
employees shall be applicable. Jurisdiction in such actions
shall be under the court of the district in which the defendant
employer resides or in which his principal office is located.
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argues that the district court, consistent with the jury’s
answers to interrogatories, should have held that Gulf is en-
titled to indemnity from the active tortfeasors ODECO and
EPI. Tri-State Oil Tool Industries, Inc. v. Delta Marine Drill-
ing Co., 410 F.2d 178, 181 (5th Cir. 1969). We need not decide
here whethex mere failure to provide a safe place to work is
active or passive negligence. But see Wedlock v. Gulf
Mississippi Marine Corp., 554 F.2d 240, 243 (5th Cir. 1977)
and Avondale Shipyards, Inc. v. The Vessel THOMAS E.
CUFFE, 434 F.Supp. 920, 928 (E.D.La.1977) (Rubin, J.) (both
cases suggesting that liability without fault for unseawor-
thiness is the only instance where indemnity should be allow-
ed). Where a tortfeasor’s own acts and omissions help create
the unsafe workplace, its negligence undoubtedly is active.
Wedlock v. Gulf Mississippi Marine Corp., supra at 243;
Transcontinental Pipeline Corp. v. Mobile Drilling Barge, 424
F.2d 684, 693 (5th Cir.), cert. denied, 400 U.S. 832, 91 S.Ct.
65, 27 L.Ed.2d 64 (1970); General Electric Co. v. Cuban-
American Nickel Co., 396 F.2d 89, 99 n.16 (5th Cir. 1968);
Avondale Shipyards, Inc. v. The Vessel THOMAS E. CUFFE,
supra at 928. The jury heard evidence during the trial that
Gulf’s anchor-pulling crew failed to notice the jagged buoy,
that the crew failed to ask that additional anchor line be add-
ed before lassoing the buoy, that its anchor box used in lif-
ting the anchor may have been defective, and that the cable
lasso may have been the wrong gauge or strength for perfor-
ming the operation. From the general nature of the jury’s
response to the interrogatory concerning Gulf’s negligence, | l
it is impossible for us to say that its finding of negligence
1! The jury interrogatory and answer read as follows:
1. Was defendant Gulf Overseas Marine Corporation or Gulf
Overseas Service Corporation negligent in a manner that was
a proximate cause of the injury and death of Mr. Culver?
Yes X No _
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was not based on one or more of these theories. Any one of
these would constitute active negligence. Therefore, Gulf’s
claim for indemnity must likewise be denied.
Finally, ODECO’s claim for a reduction in the
damage award based on the judge’s finding of comparative
negligence on the part of Curtis Culver is unsupportable
since we are modifying that portion of the district court
judgment.
The judgment is
AFFIRMED AS MODIFIED.
SAM D. JOHNSON, Circuit Judge, concurring:
This writer concurs in the majority opinion, but
wishes to supplement it in one particular: Th time is right
for en banc reconsideration of the rule in Johnson v. Penrod
Drilling Co., 510 F.2d 234 (5th Cir. 1975) (en banc), pertain-
ing to the ‘‘inflation factor’ in damage awards.
The en banc precedent of Penrod does indeed man-
date the result that this panel reaches. Immediate en banc
rehearing of the instant case is therefore urged as the ap-
propriate route toward the proper disposition of this
critically important issue.
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Ruth CULVER, et al.,
Plaintiffs-Appellants Cross-Appellees,
v.
SLATER BOAT CO., et al.,
Defendants-Appellees Cross-Appeliants,
EUROPIRATES INTERNATIONAL, INC., et al.,
Detendants-Appellees and Cross-Appellees-Appellants,
v.
ODECO DRILLING, et al.,
Defendants-Appellees Cross-Appellants.
No. 79-3985
United States Court of Appeals,
Fifth Circuit
June 24, 1981
Appeals from the United States District Court for
the Eastern District of Louisiana; Charle:; Schwartz,
District Judge.
ON PETITION FOR REHEARING AND
PETITION FOR REHEARING EN BANC
(Opinion May 4, 1981, 5 Cir., 1981, 644 F.2d 460).
Before GODBOLD, Chief Judge, BROWN,
AINSWORTH, CHARLES CLARK, RONEY, GEE,
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TJOFLAT, HILL, FAY, RUBIN, VANCE, KRAVITCH,
FRANK M. JOHNSON, Jr., GARZA, HENDERSON,
REAVLEY, POLITZ, HATCHETT, ANDERSON, RAN-
DALL, TATE, SAM D. JOHNSON, THOMAS A.
CLARK, and WILLIAMS, Circuit Judges.
BY THE COURT:
A member of the Court in active service having re-
quested a poll on the application for rehearing en banc and
a majority of the judges in active service having voted in
favor of granting a rehearing en banc,
IT IS ORDERED that the cause shall be reheard by
the Court en banc with oral argument on a date hereafter
to be fixed. The Clerk will specify a briefing schedule for
the filing of supplemental briefs.
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.