[Guest post by DRJ]
The U.S. Supreme Court will hear ExxonMobil’s appeal of a $2.5B punitive damages award in the 18-year-old Exxon Valdez case:
“ExxonMobil on Monday won the chance to persuade the US Supreme Court that it should not have to pay $2.5bn in punitive damages to victims of the 1989 Exxon Valdez oil spill, the largest such award in US history. The US business community had urged the Supreme Court to intervene in the 18-year old legal fight over the Valdez crash, which released 11m gallons of oil into Alaska’s Prince William Sound.
The Supreme Court will consider the punitive damages issue in the context of a maritime case and not as it relates to general tort law:
“Business groups wanted the court to use the case to issue a broad ruling that large punitive damage awards are unconstitutional. The justices on Monday refused to go that far, agreeing to a narrower review which would determine whether the Exxon award violated maritime law. However, the case could still have a big impact beyond the world of shipping, legal experts said.
“This is a big deal. Anytime the court takes a punitive damages case, that’s an important thing,” said Robin Conrad, executive vice-president of the National Chamber Litigation Center, the legal arm of the US Chamber of Commerce. “This will affect a lot of companies and not just in the maritime arena.”
Legal experts view this case as important to businesses that face environmental issues even if they aren’t subject to maritime laws:
“The Supreme Court must decide whether federal maritime law permits punitive damages and whether it allows a shipowner to be held liable for the conduct of the ship’s master when the company did not countenance or participate in that conduct.
In their brief, Exxon’s lawyers quote Judge Alex Kozinski, a judge of the appeals court that heard the case: “Shippers everywhere will be put on notice: if your vessels sail into the vast waters of the ninth circuit, a jury can shipwreck your operations through punitive damages and the fact that you did nothing wrong won’t save you.”
The Supreme Court has thrown out high punitive damage awards in several recent cases. A ruling to reduce the Exxon award would be seen as good news for businesses that face environmental suits beyond the shipping industry.”
The Valdez case primarily raises three maritime law issues:
“At the Supreme Court, Exxon’s lawyer Dellinger asks three questions: whether maritime law permits a shipowner to be punished vicariously for the conduct of the ship’s master when the owner did not countenance or participate in that conduct; whether maritime law can expand the remedies that Congress provided in the controlling statute — here the Clean Water Act — by adding a punitive damages remedy, and whether this $2.5 billion award is within the limits allowed by maritime law or, if it is, does it comport with constitutional due process. Baker v. Exxon Shipping Co., No. 07-219. His answer to all three, not surprisingly, is no.
“As big an issue as the Exxon Valdez judgment is, this case is about far more than that in terms of the reach of maritime law,” said Dellinger. The case, he said, has caused a “huge stir” within the maritime and shipping communities, particularly the issue of vicarious liability and punitive damages.
“It is also a fundamentally important question of the relationship between the Clean Water Act to judge-made remedies in maritime law that applies across-the-board and not just in oil spills,” he added. “
Of course, the Valdez case is especially important to the shipping industry:
“In the past 17 years, the Supreme Court has decided eight cases on punitive damages, reviewing awards made under state law. Exxon, however, is asking the high court to examine the $2.5 billion award — reduced from $5 billion by the 9th U.S. Circuit Court of Appeals — through the lens of general maritime law.
For some maritime experts, the Exxon Valdez is, in a sense, legal history. After the ship’s massive oil spill, Congress enacted the Oil Pollution Act of 1990, governing oil spills and establishing private remedies. The act is silent on the availability of punitive damages.
But for others, the Exxon Valdez remains a very practical issue in the international world of maritime commerce. “It’s a case that in maritime law circles has world renown and is referred to all the time,” said admiralty litigator John Kimball, partner in the New York office of Blank Rome in Philadelphia. “The punitive damages issue has been looked at very closely by marine insurance markets as a sign of what’s going on in the U.S. and what is the magnitude of risk in a major environmental damage case.”
A legal analyst at the National Law Journal stated that Justices Roberts and Alito have yet to rule in a punitive damages case. There is added uncertainty because the case involves maritime law and the Clean Water Act but one thing is for sure: By the end of this Supreme Court term, we should know more about these issues.