Legal News

Sizing Up the Exxon Valdez Punis Argument

By Ashby Jones

The Supreme Court waded into murky waters today during oral arguments in a case involving the 1989 Exxon Valdez oil spill. At issue: whether to uphold a $2.5 billion punitive-damages award levied against Exxon Mobil for the spill, which occurred in Alaska’s Prince William Sound and created one of the largest environmental accidents in U.S. history. Here’s the 9th Circuit opinion on appeal. Click here for reports today from ScotusBlog and Dow Jones Newswires.

And here’s something cool — a transcript of the oral arguments.

We caught up with University of Texas law professor Michael Sturley, who was there (and also helped Exxon-Mobil prepare its brief). Sturley called the arguments “well argued on both sides,” and said that all the Justices (save Thomas) asked at least one question. Sturley, wouldn’t hazard a guess as to where the chips will fall. “They could uphold the damages or say no punitives at all are permissible. In between, they could remand it with more specific guidelines. None of these outcomes would really surprise me.”

According to the Dow Jones Newswires report, the justices seemed inclined to uphold at least part of the Exxon-Mobil award, which is five-times greater than the underlying actual damages. In other contexts, the Court has held that punitive damages do not violate due process so long as they bear a reasonable connection to the underlying harm suffered. Recent cases have loosely pegged the permissible ratio of punitives-to-compensatories at 9:1.

So what ratio will the Justices use? According to the Newswires account, Justices Kennedy and Souter homed in on provisions in criminal law that allow punitive damages that double actual damages.

According to Sturley, the Justices also spent much of the time on a separate issue: Whether it’s constitutional to levy punitives on an entire company for the actions of one of its foot-soldiers, in this instance Captain Joseph Hazelwood. The issue is whether the company can be held vicariously liable and punished for the actions of someone in his shoes.

“Where do you draw the line between CEO and cabin boy?,” Justice Roberts reportedly said. “I suspect someone driving one of these tankers is closer to CEO than cabin boy.”

Fisher argued that Hazelwood’s violation of policy by leaving the ship’s bridge before the accident was “perfectly appropriate to expose a company to punitive damages.” Dellinger, on the other hand, argued that Hazelwood did not have sufficient authority to justify an award.

One possible outcome to look out for: a 4-4 split decision. Justice Alito recused himself from the case, without explanation.

As for the counsel: Exxon-Mobil was represented by former Solicitor General Walter Dellinger; for the plaintiffs, Stanford Law professor Jeffrey Fisher argued for the plaintiffs.

Full post as published by Law Blog - WSJ.com on February 27, 2008 (boomark / email).