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U.S. Supreme Court

Jones & Laughlin Steel Corp. v. Pfeifer, 462 U.S. 523 (1983)

Jones & Laughlin Steel Corp. v. Pfeifer

No. 82-131

Argued February 28, 1983

Decided June 15, 1983

462 U.S. 523


Respondent was injured in the course of his employment while employed by petitioner as a loading helper on petitioner's coal barge in Pennsylvania. The injury made respondent permanently unable to return to his job or to perform other than light work. Respondent brought an action in Federal District Court against petitioner, alleging that his injury had been "caused by the negligence of the vessel" within the meaning of § 5(b) of the Longshoremen's and Harbor Workers' Compensation Act (LHWCA). The District Court found in respondent's favor and awarded damages of $275,881.31, holding that receipt of compensation from petitioner under § 4 of the LHWCA did not bar a separate recovery of damages for negligence. In calculating the damages, the court did not increase the award to take inflation into account nor did it discount the award to reflect the present value of the future stream of income. Instead, the court followed a decision of the Pennsylvania Supreme Court, which had held "as a matter of law that future inflation shall be presumed equal to future interest rates with these factors offsetting." The Court of Appeals affirmed.


1. A longshoreman may bring a negligence action under § 5(b) against the owner of a vessel who acts as his own stevedore, even though the longshoreman has received compensation from the owner-employer under § 4. The plain language of § 5(a), which provides that the liability of an employer for compensation prescribed in § 4 "shall be exclusive and in place of all other liability of such an employer to the employee," appears to support petitioner's contention that since, as respondent's employer, it had paid compensation to him under § 4, § 5(a) absolves it of all other responsibility to respondent for damages. But such contention is undermined by the plain language of § 5(b), which authorizes a longshoreman whose injury is caused by the negligence of a vessel to bring a separate action against such a vessel as a third party, unless the injury was caused by the negligence of persons engaged in providing stevedoring services to the vessel. If § 6(a) had been intended to bar all negligence suits against owner-employers, there would have been no need to put an additional sentence in § 5(b) barring suits against owner-employers

Page 462 U. S. 524

for injuries caused by fellow servants. And the history of the LHWCA further refutes the contention that § 5(a) bars respondent's suit under § 5(b). Pp. 462 U. S. 528-532.

2. The District Court, in performing its damages calculation, erred in applying the theory of the Pennsylvania decision as a mandatory federal rule of decision. Pp. 533-553.

(a) The two elements that determine the calculation of a damages award to a permanently injured employee in an inflation-free economy are the amount that the employee would have earned during each year that he could have been expected to work after the injury, and the appropriate discount rate, reflecting the safest available investment. Pp. 462 U. S. 533-538.

(b) In an inflationary economy, inflation should ideally affect both stages of the calculation described above. This Court, however, will not at this time select one of the many rules proposed by the litigants and amici in this case and establish it for all time as the exclusive method in all federal courts for calculating an award for lost earnings in an inflationary economy. First, by its very nature, the calculation of an award for lost earnings must be a rough approximation. Second, sustained price inflation can make the award substantially less precise. And third, the question of lost earnings can arise in many different contexts. Pp. 462 U. S. 538-547.

(c) Respondent's cause of action is rooted in federal maritime law, and thus the fact that Pennsylvania has adopted the total offset rule for all negligence cases in that forum is not of controlling importance in this case. Moreover, the reasons that may support the adoption of the rule for a State's entire judicial system are not necessarily applicable to the special class of workers covered by the LHWCA. P. 462 U. S. 547.

(d) In calculating an award for a longshoreman's lost earnings caused by a vessel's negligence, the discount rate should be chosen on the basis of the factors that are used to estimate the lost stream of future earnings. If the trier of fact relies on a specific forecast of the future rate of price inflation, and if the estimated lost stream of future earnings is calculated to include price inflation along with individual factors and other societal factors, then the proper discount rate would be the after-tax market interest rate. But since 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 longshoremen's resources to make such forecasts the centerpiece of litigation under § 5(b). On the other hand, if forecasts of future price inflation are not used, it is necessary to choose an appropriate below-market discount rate. As long as inflation continues, the amount of the "offset" against the market rate should be chosen on the basis of the same factors that are used to

Page 462 U. S. 525

estimate the lost stream of future earnings. If full account is taken of the individual and societal factors (excepting price inflation) that can be expected to have resulted in wage increases, then all that should be set off against the market interest rate is an estimate of future price inflation. Pp. 462 U. S. 547-549.

(e) On remand, whatever rate the District Court may choose to discount the estimated stream of future earnings, it must make a deliberate choice, rather than assuming that it is bound by a rule of state law. Pp. 462 U. S. 552-553.

678 F.2d 453, vacated and remanded.

STEVENS,J., delivered the opinion for a unanimous Court.

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