Commentary: Exxon may both lose and win
Commentary
If the Supreme Court voted immediately in the huge oil spill case heard on Wednesday, and voted the sentiments the Justices expressed throughout 90 minutes of oral argument, this might well be the outcome: Exxon Mobil Corp. and its shipping subsidiary may well have to pay some punitive damages, but not $2.5 billion. The company’s core arguments — that any award of punitive damages violates two centuries of maritime law history and modern congressional policy, and that it was not responsible for the ship captain’s misconduct that led to the spill — did not appear to have fared well, although those points did find some sympathy on the bench. But the backup argument — that $2.5 billion in damages was just too high — loomed as the likely point on which a majority of an eight-Justice Court could agree (with some uncertainty about what the exact final figure might be). The Court will actually cast its first vote on the case on Friday, but that would be only the beginning.
First impressions, based on what was said or intimated at a fast-paced oral argument, can be quite misleading. This Court usually divides quite deeply in considering punitive damages claims — a factor that is even more complex in this case, because one Justice (Samuel A. Alito, Jr.) is not taking part, leaving at least a chance of a 4-4 split, perhaps on some but not all issues. But first impressions also might qualify as reasonable reactions, when what was asked and answered is parsed closely, and when atmospherics are taken into account. It was apparent that Exxon’s lawyer, Washington attorney Walter Dellinger, was under serious challenge throughout his argument, and critically so on his efforts to get the Court to forbid any punitive damages award for this kind of maritime accident. But it was equally apparent that the lawyer for the individuals and businesses who were awarded punitive damages, Stanford professor and lawyer Jeffrey L. Fisher, had to deal with a spreading view on the bench that there had to be some curbs on punitive damages in the maritime context — especially when the punitive verdict runs into the billions.
With Justice Alito out of the case, it could be that the Court would split 4-4 on Exxon’s liability for at least some punitive damage award — an outcome that would uphold the Ninth Circuit Court’s conclusion that a punitive award was justified. It was not apparent that there were five votes for Exxon’s claim that the Court had long ago decided against liability for shipowners who do not take a direct part in crew misconduct, or the company’s view that the captain of a huge supertanker does not rank high enough in a corporate hierarchy to hold the company itself to blame for his misconduct. If the Court splits 4-4 on each of those points, it would not decide them, but Exxon would lose because of the Ninth Circuit’s legal conclusions.
But there did appear to be a majority, perhaps a substantial one, for fashioning a new rule of law in the maritime context that would keep punitive awards in check, perhaps not a great deal higher than the amount of actual (compensatory) damages awarded — the kind of limitation that the Court has imposed when a punitive damages award is weighed as a constitutional matter, even though that is not the standard specifically at issue in this case about judge-made maritime law. Justices Anthony M. Kennedy and David H. Souter, for example, floated the notion that there be no more than a doubling of the compensatory amount in a maritime accident case in which punitives are awarded.
One of the restraints that several of the Justices seemed to feel was at work is that the Court would be essentially making up new legal rules as it went along, without precedent, and should be as cautious in such an endeavor as would be a “common law court,” the role the Court is playing in this instance, as Souter pointed out at one point.
Exxon’s main strategy for avoiding any punitive damages award for the Exxon Valdez’s spill of 11 million gallons of oil into Alaska’s Prince William Sound 19 years ago is to argue that the Supreme Court made clear in 1818 that no shipowner is liable for such special damages if it did not direct or countenance harmful behavior by a ship’s crew. A secondary argument is that the captain of a ship at sea is not an important enough official within a shipping company’s decision-making echelon to make the company liable for the captain’s accidents. And a third argument is that Exxon has already been punished enough for the 1989 oil spill’s harms, especially since it has already laid out $3.4 billion in response, and since Congress has specified financial penalties (in the Clean Water Act) for maritime mishaps.
Within minutes after attorney Dellinger began his argument, his first two arguments on that point appeared to have been lost, quite decisively. Justice Ruth Bader Ginsburg essentially demolished the claim that there is 200 years of maritime law history on Exxon’s side; she said that claim was “rather an exaggeration.” Justice Antonin Scalia also raised questions about that claim. (Only Justice Stephen G. Breyer seemed somewhat taken with the idea that there was, indeed, a long-standing precedent favoring Exxon.) No sooner had Ginsburg and Scalia finished with the history point, Chief Justice John G. Roberts, Jr., undercut the company’s second argument, suggesting that “someone driving one of these huge tankers” is very close to being a responsible figure within a shipping company’s top ranks. Justice Kennedy looked incredulous at the thought that a ship’s captain could never be treated as a managerial agent, and suggested that Dellinger was arguing that a captain on a huge vessel “binds Exxon for no purposes at all.” Justices Ginsburg and Souter also raised doubts on that point, with Souter opining that a ship putting to sea in the modern era is hardly “a sort of floating world by itself” as it was in olden times as soon as it left port.
When Dellinger got to the point that civil penalties authorized by Congress in the Clean Water Act should militate against any punitive damages, Justice Ginsburg aggressively challenged that argument, too. She suggested that Exxon’s trial lawyers had brought up that point too late, 13 months after the jury verdict was in. Justice Scalia rescued Dellinger from Ginsburg by suggesting that he move on to his argument that Exxon did not deserve any added punishment in the form of punitive damages.
As Dellinger pursued that argument, he found strong support from Justice Kennedy, who expressed concern about “open-ended penalties.” And Scalia chimed in to say that Dellinger could make the argument that, while the Clean Water Act might not bar all punitive damages for a maritime accident, perhaps its penalty scheme should be taken into account as one factor supporting a curb on punitives.
Fisher, the lawyer for the 32,677 commercial fishermen, private landowners and Native American who won the $2.5 billioin punitive damages award at issue, also had some difficulty at the outset, especially with his argument that the Exxon Valdez captain at the time of the spill, Joseph Hazelwood, had enough corporate responsibility to justify making Exxon liable. The Chief Justice expressed doubts about that, and wondered skeptically how to assess blame in the maritime accident context. Kennedy became very aggressive in challenging Fisher on a jury instruction that required that Exxon be held reckless if the captain were found to be reckless (as the jury did.
As Fisher’s argument proceeded, it became increasingly evident that a number of Justices were uncomfortable with the size of the verdict he was asking the Court to sustain. When the lawyer discussed the unsettled legal question that he said the Court was facing in this case, and suggested that that was the reason the Court had granted review, Justice Scalia interjected: “That — and $3.5 billion!”
After the Chief Justice pressed Fisher with more questions about Exxon’s liability for Captain Hazelwood’s conduct, the Justices moved more energetically into quizzing the lawyer about ways to set limits on punitive damages for accidents at sea. “This is a very dramatic accident,” Justice Breyer began, “but there are accidents every day….What principle do you have to suggest for a fair system [of setting punitive damages awards]?” Fisher said there was no need for a special rule just for maritime accidents, that the Court could look to “common law tradition” that focuses on the evidence the jury heard on blameworthiness.
Justice Kennedy again expressed his worry over “excessive damages,” and Justice Scalia repeated the suggestion that the availability of Clean Water Act penalties should be a factor in mediating the punitive award’s amount, or perhaps even in barring any punitive award. Justice Souter said the Court had in recent years had “an awful lot of experience with punitive damages,” but in the process had had serious difficulty “coming up with determinant standards.” Why, Souter asked, “not recognize the difficulty” in writing a standard, and simply come up with a number or multiple of a contemporary award — perhaps just a doubling.
Some members of the Court pondered, as part of this discussion, whether Exxon had already faced enough deterrence in the $3.4 billion it spent in fines, settlements, or clean-up costs. Fisher responded to that issue by saying that the punitive damages award was really based on evidence “all about Exxon’s conduct, not about Captain Hazelwood’s conduct.” There was “deep complicity” on the company’s part, in not dealing effectively with the captain’s recurring problems with alcohol, including consumption while on board supertankers. ‘Knowing what could happen, it left him in command,” Fisher argued. Hazelwood was the only person fired for the oil spill incident, and higher-up executives got bonuses and raises, he said, indicating that Exxon had not yet faced enough punishment to deter it from future misconduct.
Dellinger spent most of his four-plus minutes of rebuttal time arguing the point that the company had, indeed, already been punished enough.
The Court is expected to decide the case by late spring.
I put some comments on the Question-One issue here. I’m particularly curious how Dellinger wanted to finish his sentence at page 10 of the transcript that begins, “There are eight states…”
Comment by Chris Green — February 27, 2008 @ 3:52 pm
looks like the supreme court needs to learn the definition of punitive
pu·ni·tive –serving for, concerned with, or inflicting punishment: punitive laws; punitive
action.
Because 1 billion or less is hardly punishment to a corporation that profits 40
Billion in 1 year.
Thats rougly 2.5% of their profits from 1 year.
Take 2.5% of your current yearly salary, and thats gross, not net(profits), and
see how much it would sting if
that was your fine. If I destroyed an eco-system, ruined livelihoods of thousands of people, and only had to pay 2.5%, I’d be laughing all the way to the bank.
SICK!!!
Comment by Jared Kelley — February 27, 2008 @ 4:19 pm
Ah, I see that at page 42, Fisher finished Dellinger’s sentence for him.
Comment by Chris Green — February 27, 2008 @ 5:09 pm
What I find so odd about the courts action in this case is that in many other circumstances the court defers to the findings of the jury. This is what the sentencing cases are all about. Yet with punative damages, all of a sudden juries are untrustworthy nutcases out to stick it to the corporations. Is the court practicing law or engaging in juror psyschology? If juries are trustworthy enough to find the facts to stick someone away for life, certainly they are able to determine whether a company should be fined nothing (as in the USFL case) or 3.5 billion (as here). Sometime the SC makes no sense whatsoever.
Comment by Daniel Thomas — February 27, 2008 @ 5:37 pm
Daniel–but with punitive damages, we don’t have any sentencing guidelines. The statutes generally just list a bunch of factors. Maybe we need size-of-punitive-damages guidelines. It is a little odd, I agree, that on the criminal side the Court is striking down the guidelines and giving trial courts more discretion, but on the civil side, it seems to be almost writing its own guidelines. The 7A jury trial right hasn’t been incorporated against the states, though, and the 6A’s has. And I think that Apprendi would actually be satisfied by a system that says the judge can make up his own sentence from 0 to life; it’s just the existence of different statutory maximum sentences that causes a problem.
Comment by Chris Green — February 27, 2008 @ 6:34 pm
Chris. Perhaps I misunderstand but I think Apprendi et al goes beyond giving trial courts more discretion; a key issue is that the facts upon which sentences are based needs to be found by the jury, not the judge. So on the criminal side the SC has transfered power away from the judge and to the jury. Yet, on the civil side they are taking power away from the jury. That’s what I don’t get.
The idea of writing “punative damages” guidelines is interesting but personally I’d reject it. To me, the issue is one of trust. Our system puts its trust, at least in the first instance, in the jury. That’s what trial by jury means. It also means that absent some highly unusual circumstances, the verdict of the jury should stand. This is equally the case when the jury is taksed with assessing the remedy for the violation. Again, go back to the USFL case; the award of $1 was not overturned because it was to low; the court upheld that remedy on the basis of the jury decision.
So as I see it, when the jury is making findings of fact in criminal trials, that’s OK. When the jury decides punative damages are not required, that’s OK too. But when a jury socks it to a company that’s not OK. To me, this is unacceptable. If the findings of the jury are a-ok in case A and B, I can’t think of a single rational reason it’s not OK in case C too.
And, in fact, the SC has never given a rational reason; it has simply fretted about “excessive” awards. As Souter himself said today, the SC itself can’t come up with a rational standard. I would like to suggest, humbly, that there is no rational standard on determining, as in this case, the precise amount to punish Exxon. And if that’s the case, I’d rather leave it up to the considered opinion of the jury who were closest to the facts than seven SC justices looking at it 20 years later.
Comment by Daniel Thomas — February 27, 2008 @ 9:44 pm
I think that’s a little broad on what the Apprendi is; if there isn’t a statute or a guideline that requires that a particular fact increases the punishment to which a defendant is subject, then a sentencing judge is free to base the sentence on facts not found by the jury.
Another big difference here is that under Cooper Industries v. Leatherman, the amount of punishment is not really a finding of fact. So there’s a difference betwen, on the one hand, a jury answering specific factual questions and, on the other, a jury deciding how much punishment is proper.
Comment by Chris Green — February 27, 2008 @ 10:21 pm
Discussing the guide lines for punitive awards in this case, the facts are that under denovo review the district court under instruction from the 9th circuit reduced the award twice once to 4b then again to 4.5b,judge Browning in dissent stated the 5b award was justified as the jury had concluded.Next the majority on the 9th reduced the final award to 2.5b that on top of the Seattle seven ageement between exxon and a group of plaintiffs that agreed to a cede back arrangement that resulted in a 11% reduction,the award has been reduced 61% from the original jury award.It is clear to me that the guidelines that the justices are reaching for are already in effect,what exxon ,the chamber of congress and exxons’ other amici are asking for is the elimination of punitive damage awards period. Chris Berns
Comment by Chris Berns — February 27, 2008 @ 10:31 pm
Originally, the jury awarded at a 9.5 to 1 ratio, and with the reductions from the 9th Circuit and the cede back agreement, it has been reduced to less than 4 to 1. Now, some of the SC Justices seem to think it needs to be reduced further; then, the question is why even have a jury trial if 15 years later a set of justices come up with an arbitrary calculation? I agree with Mr. Thomas, above, and would really like to have a rational reason SCOTUS would disrespect the reasoned decisions of a well-guided jury and trial. Additionally, if it is reduced to a 2:1 ratio, you can expect all businesses operating in a marine context (shipping companies) to just write that into their business plan. Acquiring insurance for punitive damages would be no problem at a 2:1 (4:1 might even be low enough, especially for a company like ExxonMobil).
Comment by Chris Berns — February 28, 2008 @ 1:11 am
What is not discussed is the fact that there are no guidelines should act as a deterrence for giant corporatons that will calculate punitive damage formulas and take it all into account in the cost of business. The very uncertainty of what a jury might do forces settlement.
State Farm was more injurious than any case of recent record. The Court appears overly sensitive to business interests and undermines the function of the jury. Post Hoc rationalizations 19 years after the fact undermine the legitimacy of the Court. 2.5% of the profits is really nothing much of a slap which the jury found was appropriate here. Where is the doctrine of judicial restraint so espoused by Scalia now?
Comment by Keith Hanratty — February 28, 2008 @ 1:09 pm
So why not fine people for their speeding tickets under a percentage of their income, rather than a fixed amount? Answer: the speeder’s wealth is not the proper measurement of the wrong. Likewise, profitable companies are not more guilty than failing companies. We are needlessly promoting classism to think that punitive damages should be determined according to the depth of one’s pocket rather than the extent of the wrong.
Comment by James N. Markels — February 28, 2008 @ 4:29 pm
James. I agree that the speeders income is not the proper measure of the wrong, but it might be a factor in the proper remedy for that wrong. For example, Norway and Sweden do in fact levy speeding fines based upon the income of the person who committed the violation. As I recall, there was a big splash in the papers a few years ago because some rich person got dinged with a $96k fine.
Of course, we are not Norway but the point is that the idea is not as far-fetched as you seem to think. Further, I agree that failing companies are no less guilty than successful ones. But it’s simply plain error to suggest that the jury went after Exxon because it was successful. It went after Exxon because it committed a wrong and in its well-reasoned opinion $5 billion was the remedy for that wrong.
Comment by Daniel Thomas — February 28, 2008 @ 6:40 pm
Yes, we are not Norway or Sweden. That some countries have idiotic laws is no excuse for bringing them here.
Punitive damages are not a “remedy.” They are a punishment. Thus, the jury was clearly not thinking about compensating the plaintiffs for their damages, but rather about how hard to slug Exxon. And key to gauging that effort was Exxon’s success. Notice that the jury originally awarded punitive damages roughly equal to all of Exxon’s profits in the preceding year. Who do you think wanted to get that information before the jury? Do you really think that plaintiffs’ trial lawyer made no mention of it in closing argument? And do you really think that the jury would have made the same determination if Exxon had instead been put to the brink of bankruptcy as a result of the spill? Come on.
Comment by James N. Markels — February 29, 2008 @ 1:23 pm
What I find lacking and infuriating is that no remarks were been made about the fact that in reality Exxon only cleaned a small portion of the damage it created. To this day you can still find tar under the surface on the beaches in Prince William Sound. They got off cheap on the clean- up! They have no right to trumpet what they spent on the clean-up effort.
There wasn’t much said about what punitive damages are meant to accomplish. Anything less than 5 billion dollars is just a slap on their wrist. When a crewman on a fishing boat mistakenly pumps a smidgen of oil from the bilge into the sea, the boat owner may endure fines that could bankrupt him or her.
If you consider that the gross value of all the salmon or herring fishing operations in the impacted areas of Alaska now are worth maybe at best 25% of what they were worth pre-spill and Exxon’s stock has almost tripled it might give you an idea of why reducing the punitive damages in this case would be criminal.
Comment by Paul Harder — March 1, 2008 @ 11:36 am
Tort law was created in a period where corporations were not an actor in society, as they are today. Punitive damage awards were to punish and deter a natural person who, presumably acting with a conscience and rational thought, still committed a reprehensible act. The idea was to change his motives for such behavior, and to deter others from similar action, with punishment adequate to do so. The question now is what mechanism can be used to punish and deter a corporate entity?
One determining factor ought to be market capitalization. There are several degrees of market capitalization: small, mid, and large. Mid-cap companies are worth 2 to 10 billion dollars. Large cap is over 10 billion dollars. It is assumed that corporations operate with profit as the primary motive; but not only company profit. Shareholder wealth is of concern for most corporations, and the maximization of that keeps shareholders happy and out of corporations’ business. There ought to be motivation within the legal system, then, to influence the shareholders, the “conscience” of these corporations. Exxon’s market value is in the 380b dollar range. In a jury trial the company was found to have acted reprehensible, Dellinger argued that the clean up costs will deter, when in actuality that cost was actually passed on to the consumer.
2.5B$ is .65% of exxons market value.
Comment by Chris Berns — March 1, 2008 @ 3:25 pm
How would a punitive penalty not also be passed on to the consumer?
The only real punitive penalty that would be effective against a corporation are penalties directly felt by the directors and officers of that company. They are the ones making the policy decisions. If you cannot reach them, then the issue is fairly moot, don’t you think?
Comment by James N. Markels — March 1, 2008 @ 5:28 pm
The court can only remove directors or officers through criminal proceedings,jail. Share holders in theory could, but will they if the profit motivation isn’t there.In this case Lee Raymond was rewarded not penalized at retirement,as Fisher made clear everyone but Hazelwood was advanced in the company after the spill.How do you reach into the company to deter if not through some profit reduction trigger. Ceo’s wield the power or the company,but they are not the company.I get back to the problem of laws developed to deter a natural person that have a hard time being applicable to corporations.A person can’t pass the cost on to the consumer as easily as a corporation. Moot it my not be.
Comment by Chris Berns — March 1, 2008 @ 6:23 pm
James. You raise two interesting points. First, I would dispute the notion that “punitive” judgements are not a remedy. Of course they are. They may not be a direct economic remedy but they can quite easily be seen as a moral remedy for outrageous behavior. As for what was going on in the jury’s mind, I am glad you can read them because I can’t! We have a *presumption* in our Constitution that juries are the right vehicle for resolving these disputes and I stick to the position that what the jury finds should not be overruled unless in exceptional circumstances.
Chris. As for the correct punishment, I have long belived that we need a “corporate death penalty”. I am exteremly encouraged by the new law in AZ dealing with illegal immigrants that is directed along those lines. If there are acts commited by natural persons which warrent death, then certainly there are acts committed by a corporate person that also deserve the legal eqivalent of death. Part of a corporate death sentence could easily be that the officers and directors of a corporation are banned (killed) from serving in any such capacity in the future. Whether the Exxon’s actions rise to such a level as a matter of public policy is open to debate.
Comment by Daniel Thomas — March 1, 2008 @ 7:49 pm
Evidence of net worth is admissible at trial in regard to punitive damages as a factor to be considered by the jury. Comment 9 above further shows the context here. At stake is the function of the jury vs. the judicial activists such as Scalia who champion conservative ideology under the guise of judicial restraint.
Comment by Keith Hanratty — March 2, 2008 @ 10:22 am
Obviously comment 19 shows how little judicial knowledge is out there. There are four judicial activist on the Court–Souter, Breyer, and even more so are Stevens and Ginsburg.
Do you need an example? Last November, when the Partial-Birth Abortion cases were argued who else but Justice Ginsburg, upon fearing she would be on the losing side of the Abortion case and therefore could not play legislature from the bench, had the folling to say: “Well what about states rights.” She was immediately rebuffed by Scalia who said “Excuse me, where were states rights during Roe or Casey.”
The point is Ginsburg is almost always against states rights, especially concerning abortion, except this time and her motives had nothing to do with adhering to the Constitution but was instead meant to sway Justice Kennedy’s vote so that she and her liberal sidekicks might win and keep partial birth infanticide legal in all cases.
Thank God for Scalia, Thomas, Alito and Roberts.
Comment by Danny Evans — March 2, 2008 @ 6:15 pm
Spelling correction in comment 20– “following” to say
Comment by Danny Evans — March 2, 2008 @ 6:18 pm
Dellingers assertion that exxon didn’t make one dollar off of the spill is right,but they were trying to make extra profit.The vessel was short crewed and overworked,that was where the profit motive comes into play. Oil was in the 9$-10$ range, paying to have enough qualified crew on board may have been worth the expense. Not having enough clean up equipment in place was also profit driven.It took OPA90 to bring Alyeska into compliance.Think about the savings of 20 business units short crewed[tankers] It is easier to revise history the farther you get away from the incident and have people buy into it.19yrs is along time ago and memories fade.
Comment by Chris Berns — March 2, 2008 @ 10:01 pm
Daniel, you still have not said anything to distinguish punitive damages from mere punishment. It is no more a “remedy” than a jail sentence is a remedy. I’m also not biting on your faith in juries since garbage in often means garbage out. I like juries fine, but if you agree that a company’s profit margin should not be a measure of the wrong, then telling the jury about the company’s profitability would affect their determination in a way inconsistent with justice.
Your “corporate death penalty” idea is more intriguing. We all know that corporations are creations of the state. Thing is, I doubt that Exxon’s corporate charter or corporate offices were located in Alaska — and even if they were, these could be moved to other states as necessary. Thus, the worst that Alaska could really do is perhaps forbid Exxon from conducting any business in the state for a period of time by revoking its business license. Even that might be a fairly effective threat against some companies.
Comment by James N. Markels — March 3, 2008 @ 10:24 am
James,Alaska is pro-oil, overwhelmingly Republican and there is broad support for drilling in ANWR.The jury in this case was picked out of a cross section of Alaskans,Judge Holland a Reagan appointee is a conservative judge. Explain {garbage in garbage out}is that the jury it self,the evidence,what is up with that comment.
Comment by Chris Berns — March 3, 2008 @ 11:34 am
Re comment 20. I am merely pointing out the inconsistency in positions of the so called advocates of judicial restraint listed. They have no problem actively interfering with the verdict of the jury when it suits them. What would the founding fathers think of the sanctity of the Exxon jury verdict that as we go back to original intent argument Scalia and his ilk use as justification for their positions?
Comment by Keith Hanratty — March 3, 2008 @ 12:06 pm
Chris, I can barely understand your writing.
I will say first that all the Justices have certain biases when it comes to jury verdicts. None of the Justices have a low opinion of juries, mind you. Merely that they hold the line on what juries hear differently. The so-called liberal Justices are more willing to overturn jury verdicts that result in the death penalty; the so-called conservative Justices are more willing to overturn large punitive damage awards. Both sides are willing to overturn a jury verdict they see as the product of unconstitutional or prejudicial evidence. They differ on where and how to draw the line, that’s all.
Chris’ comment appears to suggest that Exxon really deserves the penalty because of the circumstances surrounding the trial — Republican pro-oil state, Reagan-appointed judge, etc. My point is not that Exxon does not deserve to be penalized. I am only questioning how the punitive damages penalty was reached.
Comment by James N. Markels — March 3, 2008 @ 2:00 pm
Chris has a lock on all this. James, should the justices llmit what evidence the jury can hear? Would that solve anything? Sincerely, KGH.
Comment by Keith Hanratty — March 4, 2008 @ 2:46 am
Read, starting at page 71 line 13 of the oral argument transcript, the exchange between Fisher and Roberts to get a feel for how the judge and jury play into this case. Judge Holland sat over both trials,the criminal and the civil, at the time it was perceived that his bias was leaning towards the oil company and it may have been.When the case was remanded back to the district court denovo from the 9th, Holland reviewed the entire case and held that the jury award of $5b was justified,but reduced it to $4b, as he was ordered to by the 9th,it was remanded a 2nd time, Holland reviewed the case devovo and came back with an award of $4.5b making clear that he felt upon review $5b was justified but was ordered to reduce.Judge Holland was involved with this case for well over a decade, in the end has no problem with the jury decision or how the jury got to the decision, that is more than obvious in his final brief back to the 9th.
Comment by Chris Berns — March 4, 2008 @ 8:28 am
Chris: Again, your argument that the “perceived bias” of the judge justifies the punitive damages award is unconvincing.
Keith: I have still not heard anyone disagree with my original statement that “[a tortfeasor’s] wealth is not the proper measurement of the wrong.” The Court’s seeming inclination that the magnitude of allowable punitive damages be limited in some way by the magnitude of the actual harm caused (say, twice the compensatory damages award) fits in with that principle. Whether that means limiting testimony on the tortfeasor’s wealth or merely allowing judges to cap the award after the verdict…I haven’t thought enough about that issue to have a clear preference. Offhand, I am troubled that a jury could be the chosen vehicle to “send a message” to companies through sky-high punitive verdicts. And it is certainly likely that the average juror would know that Exxon is a huge company anyway. So, in the end, while I might think that testimony about a tortfeasor’s wealth is as unhelpful as testimony about a tortfeasor’s insurance when it comes to crafting a just penalty, a pure limitation on punitive damages is the more efficient course.
Comment by James N. Markels — March 4, 2008 @ 8:49 am
James,Are you suggesting scrapping the jury system in these punitive cases and going to a board system or have some sort of simple calculation that you plug numbers into,what do you want to have here?Lay it out.
Comment by Chris Berns — March 4, 2008 @ 11:00 am
Chris, I suggest that you re-read my previous post, in my response to Keith, beginning with, “Whether that means…” Please note that I have never suggested “scrapping the jury system in these punitive cases,” and I am having difficulty discerning where you even got that notion.
Comment by James N. Markels — March 4, 2008 @ 1:57 pm
It would still seem that the fact that a jury was given the case should bear more weight. The difficulty is that Exxon has litigated this to end and should bear the costs as it is in a better economic position to do so. Loss spreading and compensation should be paid by the party m0st able to afford it, not the victims who have suffered quite a bit here. Comment 28 is very much on point.
Comment by Keith Hanratty — March 4, 2008 @ 4:54 pm
FWIW, I’ve posted a short paper on Exxon v. Baker, forthcoming in Engage, here.
Comment by Chris Green — March 4, 2008 @ 6:00 pm
Chris Green: I read your paper. Thanks for laying it out.
Comment by Chris Berns — March 4, 2008 @ 6:59 pm
Keith: “It would still seem that the fact that a jury was given the case should bear more weight.”
Why? This makes no more sense than the “but the verdict came out of a judge appointed by a REPUBLICAN!!!” argument.
I’m also having trouble deciphering your “the party most able to afford it” argument. Are you suggesting that rich defendants should shoulder the attorneys’ fees of anyone who sues them? Do you really think that is a just or sustainable policy? I can understand someone favoring the English Rule over the American Rule, but…
Comment by James N. Markels — March 4, 2008 @ 8:21 pm
James: What is your view of the function of the jury, and the role of the District Court Judge who heard the case? What are the the limits of Judicial Intervenion? Would you not agree that the losing side should pay costs if they continue to litigate as seen by Chris and his comments? I am sure most would agree that losers such as Exxon should pay as opposed to the general public, or the fisherman.
Comment by Keith Hanratty — March 5, 2008 @ 2:33 am
The jury is the determiner of the facts; the trial judge is the determiner of the law — unless it’s a bench trial in which case the judge determines both. Your argument that the verdict should be upheld merely because an Alaskan jury and Republican-appointed judge created it makes me ask you: What is your view of the function of the appellate judiciary, if not to simply ratify every jury verdict and trial judge ruling?
It is interesting that you are “sure most would agree that losers such as Exxon should pay” when, in fact, America has distinctly rejected that policy. Hence, the “American rule” rather than the “English rule.” Remember, “loser pays” would have forced those poor fishermen to shoulder Exxon’s costs if they lost at trial — a proposition so expensive that many plaintiffs would be discouraged from filing cases against big corporations. Further, Exxon’s appeals have not been frivolous. The oh-so-”conservative” 9th Circuit has twice ruled in their favor, and the U.S. Supreme Court may chop the penalty even more. When the appellate courts keep telling the trial judge that he got the law wrong, why do you want to penalize Exxon?
May I ask: Are you a lawyer?
Comment by James N. Markels — March 5, 2008 @ 8:49 am
James: But the rub then, are the limits of the appellate judiciary’s power if I understand your argument correctly. The inherent tension between the various circuits (9th circuit to be sure)shows here. Is the 9th to be regarded as some liberal rogue to be cabined in this particular case?
In your view, what is the law proper view of the law regarding punitive damages, (particularly in light of State Farm) to be applied?
Do you think the trial judge is in error due to the amount, that he has a bias? Thank you for your insightful comments. Attykh.
Comment by Keith Hanratty — March 5, 2008 @ 9:28 am
“The oh-so-”conservative” 9th Circuit has twice ruled in their favor, and the U.S. Supreme Court may chop the penalty even more.When the appellate courts keep telling the trial judge that he got the law wrong, why do you want to penalize Exxon?”
This is where I think the law is not clear at all. Let’s assume punitive damages are available in martime law, what should the ratio of punitive damages to compensatory damages be? Do judges really know it more than the jury when there is nothing in the constitution that tells them what the number is? Can a bright line rule be established no matter the circumstances of the case?
In my view, if we are to justify punitive damages , at least we should make sure its goal of deterrence will work accordingly. My views are similar to Judge Posner’s Mathais v Accor Economy Lodging. A fixed ratio may work sometimes, but it doesn’t always do.
Comment by Chee Foong Chew — March 5, 2008 @ 9:48 am
I have already discussed my view of the law of punitive damages in this case, Keith; see comment 29. To answer my own question, the purpose of the appellate courts is to clarify and enforce the law as applied by the trial courts. Chew is correct that the law of punitive damages in maritime cases is not very clear, or at least not clear in a modern context. That is why we have appellate courts — to clarify those areas. So far, one appellate court has, twice already, found the punitive damage award in this case to be excessive or at least needing a re-measuring. I’m not blaming the trial judge here — I’m just pointing out what has happened so far.
Chew asks if judges really know more than juries about the just measure of punitive damages. I think the answer is clearly “yes.” Why? Because juries only care about the case in front of them. They aren’t thinking about what their verdict in this case will mean for other cases down the line. As the Justices pointed out during oral argument, a ruling that cabins punitive damages would essentially be common law — a judge-made body of law. This is not a province for jurors to engage in.
I think it is fairly obvious that the notion of “no limit” punitive damage awards is prohibitive. Would we unthinkingly affirm a jury award of, say, one trillion dollars (applying tip of pinky to corner of mouth) in this case? Why not one googol dollars? Googol-plex? I think not. Does it make sense for the punitive damage award to be unconnected to the actual sum of compensatory damages? Does the maritime nature of the case affect the analysis? These are all appropriate questions for the appellate courts to decide. Not the jury.
Comment by James N. Markels — March 5, 2008 @ 11:55 am
Chee Foong Chew gets us back to comment 9.
Comment by Chris Berns — March 5, 2008 @ 12:00 pm
James,If the jury has the appropriate instruction why shouldn’t they make the decision?Comment 40 clarifies your position,thank you.In this case the jury,district judge,the 9th circuit didn’t have the guidance of Leatherman Cooper,Gore BMW,State Farm.This is why this case has been reviewed de novo several times. The guide lines are in play now,not bright lines,bright lines are problematic for numerous reasons discussed previously.This case is at 4-1 compensatory to punitive ratio based on midrange reprehensibility.This case is far from excessive, being a one time mandatory class action which the company petitioned for.With over 32000 claimants it works out on a per capita basis of $76k. Is it excessive for admiralty?The action of the company is what is at question,will they be let of the hook because this happened in a marine context not on land?
Comment by Chris Berns — March 5, 2008 @ 12:43 pm
Iam not a lawyer but a “poor fishermen” that was severly damaged by this incident. I too have hit rocks as have many of my friends. However, my cargo, fish, is not toxic as Hazelwoods was. I understand the idea of not making it any more difficult for Exxon to prosecute its business and the need for them to be in a position to take the risks of transferring its cargo without excessive financial risk. It was very frustrating for me at the time in talking to my lawyers, being a conservative Republican entrapeneur, to see how I was going to be made whole for all of the problems created by the spill that were not compensable in Maritime law (emotional and pshchological damage rather then just monetary damage) and remain true to my beliefs that accidents happen and bad things happen to good people.
How am I going to compensated for the effect this spill had on my psychy when it comes to my taking financial risks knowing that some well intentioned ships captain might hit a rock and spill oil in my fishing grounds and that I might not have a legal vehicle to get compensation. This is the new paradigm for Alaska fishermen wanting to grow their businesses in PWS.
Where I found the light so to speak is when I watched the video depositions of the ship captains and fleet managers where they admitted, sometimes laughing while admitting, that Hazelwood, who was on a permenant abstenance from all alcohol program and had stopped going to the meetings had started drinking again and this fact had been reported up the Exxon chain of command and nothing was done about it. This in effect changed the company rule against drinking because the rule was knowingly not being inforced and puts Exxon sqare in the cross hairs of culpability. This is the fact that the jury used to push Exxon straight to the head of the reprehensibility scale and hit them with one years lost income, which at the time was $5b.
Over a decade later the SC established in State Farm “something less then double digits” as a cap on punis in common law which is exactly where the jury put it. They got it exactly right and it was proven so in the decade later SC decision in State Farm.
The degree of apathy in the Exxon hierchy and their desire to profit by maintaining a relapsed alcoholic (that could not even hold a drivers license because of his repeated DUI record) at the helm of a Super tanker because Hazelwood was not only a ships captain but a Prince William Sound Pilot as well, which reduced the costs to Exxon by keeping him at the helm rather then going to the expense of replacing him. Replacing Hazelwook would have cost Exxon at least Hazelwoods salary which at the time I think was about $250k per year.
Again, I am not a lawyer but I have been forced to deal with this case for the last 19 years and this where I see us now.
Comment by Michael McLenaghan — March 5, 2008 @ 1:25 pm
“If the jury has the appropriate instruction why shouldn’t they make the decision?”
For the reasons stated in comment 40.
I think we’re retreading old ground, here. If we agree that the depth of one’s pockets is not an accurate measurement of the wrong, then it is self-evident that “sending a message” based on the size of the corporate defendant is inappropriate. It is similarly inappropriate to measure the depth of the plaintiff’s pockets as well, or their presumed share. The punitive punishment should be connected to the harm caused. Whether it should be a 4:1 ratio or 2:1, or whatever, that is for wiser minds to determine, not me. But my initial impression is that treading beyond a bright-line rule, while perhaps more satisfying to some, will only degrade uniformity and predictability in the law.
With that, I’ll leave the floor.
Comment by James N. Markels — March 5, 2008 @ 1:57 pm
42. Chris is more persuasive. How about a law that says if you cross the punitive damage threshold you are stuck with whatever the jury decides to nail you with. Certain. Predictable and scary at the same time for huge corporate defendants who will not be able to waste everyones resources for 19 years or so. Settlement would then be encouraged. Come back James, I like the bright line rule you mention and my solution solves the problem.
What bright line rule do you have to offer folks?
Comment by Keith Hanratty — March 5, 2008 @ 2:38 pm
Chris,
I apologize for hijacking your point.
James,
“I think it is fairly obvious that the notion of “no limit” punitive damage awards is prohibitive.”
“I continue to believe that the Constitution does not constrain the size of punitive damages awards.”-Justice Thomas
It’s not obvious to Justice Thomas though I don’t share his view, but it goes to indicate that not all judges think they’re better at doing this job than the jury. Perhaps the legislature could do better.
” If we agree that the depth of one’s pockets is not an accurate measurement of the wrong, then it is self-evident that “sending a message” based on the size of the corporate defendant is inappropriate. It is similarly inappropriate to measure the depth of the plaintiff’s pockets as well, or their presumed share. The punitive punishment should be connected to the harm caused. Whether it should be a 4:1 ratio or 2:1, or whatever, that is for wiser minds to determine, not me. But my initial impression is that treading beyond a bright-line rule, while perhaps more satisfying to some, will only degrade uniformity and predictability in the law.”
What you described is correct if the sole objective of punitive damages was to punish and nothing else. But it usually contains another goal, i.e deterrence. Sometimes, the compensatory damages may be small but we may need a huge punitive damage to deter otherwise profitable behaviour. For example, a hotel which knows about asbestos in it rooms, but not doing anything about it. If you stayed there, found out and sue, there may not be much on compensatory damage as it might not have cause much effect to you but surely we don’t think it should get away with little punitive damages. This is where I have a huge problem with the bright line rule.
I am not sure I did Judge Posner’s description justice but if you want the details, check out his opinion in MATHIAS V. ACCOR ECONOMY LODGING, INC.
Comment by Chee Foong Chew — March 5, 2008 @ 4:23 pm
“For instance, a man wildly fires a gun into a crowd. By sheer chance, no one is injured, and the only damage is to a $10 pair of glasses. A jury reasonably could find only $10 in compensatory damages, but thousands of dollars in punitive damages to teach a duty of care. We [509 U.S. 443, 460] would allow a jury to impose substantial punitive damages in order to discourage future bad acts.” Id., at 661, 413 S.E.2d, at 902 (citing C. Morris, Punitive Damages In Tort Cases, 44 Harv.L.Rev. 1173, 1181 (1931)).
Comment by Chris Berns — March 5, 2008 @ 8:13 pm