Posted by: bridget | 30 October 2007

Supreme Court Grants Cert in Exxon-Valdez

The Supreme Court granted cert today (yesterday?) in the Exxon-Valdez case (here; cert petition, here).  After a famous oil spill, Exxon was ordered to pay $5 billion in punitive damages.  That was later reduced to $2.5 billion.  The Ninth Circuit held that punitive damages may be assessed against the owner of a ship for the acts of its captain, even if the shipowner had not been found to “direct, countenanced, or participated in” the conduct.

The questions presented for cert are:

1. May punitive damages be imposed under maritime law against a shipowner (as the Ninth Circuit held, contrary to decisions of the First, Fifth, Sixth, and Seventh Circuits) for the conduct of a ship’s master at sea, absent a finding that the owner directed, countenanced, or participated in that conduct, and even when the conduct was contrary to policies established and enforced by the owner?

2. When Congress has specified the criminal and civil penalties for maritime conduct in a controlling statute, here the Clean Water Act, but has not provided for punitive damages, may judge-made federal maritime law (as the Ninth Circuit held, contrary to decisions of the First, Second, Fifth, and Sixth Circuits) expand the penalties Congress provided by adding a punitive damages remedy?

3. Is this $2.5 billion punitive damages award, which is larger than the total of all punitive damages awards affirmed by all federal appellate courts in our history, within the limits allowed by (1) federal maritime law or (2) if maritime law could permit such an award, constitutional due process?

A few thoughts:

#3: The Supreme Court did not agree to hear the second part of question #3 (the Due Process issue).  The Supreme Court rejected a $145 million punitive damages award against State Farm in one of the seminal cases on the subject.  Furthermore, federal courts tend to give lower punitive damage remedies than state courts; federal cases make up about 4% of the caseload in the US; and federal jurisdiction is not often available for tort claims.  It is not surprising that an environmental disaster would result in a punitive damages award that is higher than those from other federal jursidictions, put together.  (One would hardly be excused from appropriate damages for extraordinary harm, on the belief that said damages were unprecedented.  One ought to also look at the relative scale of harm.)

The punitive damages issue has bounced up and down the Ninth Circuit several times (here).  After State Farm, courts are almost free to recalculate a jury verdict, by weighing the Gore factors anew, and, of course, limiting punitive damages to an order of magnitude greater than compensatory damages (unless bedbugs are involved). 

This case might have made for good fun, as Scalia and Thomas are likely to state, again, that the Constitution does not place substantive, clear limits on a jury award; Ginsburg, likewise, may join in the fun with that group.  Both O’Connor and Rehnquist are gone; Alito has recused himself from the case (SCOTUSblog).  The State Farm majority (who voted to reduce punitive damages) are of the tree-hugging hippie varietal, who may not be so ready to apply State Farm to benefit Big Oil.

Snark aside, Exxon had already spent in excess of $3.5 billion dollars on compensatory damages, payments, fines, and the like.  A $2.5 billion award falls well within the Gore proportionality test.  The penal sanctions for the conduct are outlined in the Clean Water Act (up to a year in jail); most people may prefer the jail time to the $2.5 billion.  All in all, letting sleeping dogs lie and and such.

#2: The pachyderm does not know nearly enough to speculate about this.  She would say that, as a matter of textual interpreation, the delineation of two remedies would seem to exclude other, non-enumerated remedies.  Text of the Clean Water Act is here.  Appropriate remedies are on pg. 38 (of the pdf) onwards.  As it sets maximum fines, it may be difficult to argue that the statutory scheme (which is the basis for recovery) allows for punitive damages.

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Responses

  1. Hi Bridget………..I guess I can see how the company would be responsible for actual damages even if they hadn’t sanctioned or knowingly allowed the actions that were committed or omitted by the captain, but this question of labeling a remedy as “punitive” and assessing that against a person or company that didn’t commit anything with any debgree of intent, malice or negligence seems to be a bit unfair…………steve

  2. Steve,

    I agree. There is little deterrent effect; the company (esp. larger ones) simply cannot nanny everyone around them. In fact, as size increases, assets increase (i.e. what you grab for punitives), but the ability to monitor decreases.


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