Exxon Shipping Co. v. Baker

PETITIONER: Exxon Shipping Company et al.
RESPONDENT: Grant Baker et al.
LOCATION: Earthquake Park

DOCKET NO.: 07-219
DECIDED BY: Roberts Court (2006-2009)
LOWER COURT: United States Court of Appeals for the Ninth Circuit

CITATION: 554 US 471 (2008)
GRANTED: Oct 29, 2007
ARGUED: Feb 27, 2008
DECIDED: Jun 25, 2008

ADVOCATES:
Jeffrey L. Fisher - on behalf of the Respondents
Walter E. Dellinger, III - on behalf of the Petitioners

Facts of the case

The Exxon Valdez supertanker ran aground in Alaska's Prince William Sound in 1989 while under the command of Joseph Hazelwood, a relapsed alcoholic. Exxon knew that Hazelwood had resumed drinking but did not relieve him of his post, and the ship eventually spilled 11 million gallons of oil into the ecologically sensitive sound. The jury calculated compensatory damages at $287 million, and then awarded $5 billion in punitive damages. The punitive award has been reviewed three times by the Ninth Circuit Court of Appeals, which ultimately settled on a $2.5 billion figure. In a dissent from the full court's denial of rehearing in the third review of the award, Judge Alex Kozinski posited that any award, no matter its size, violated the maritime law rule that a ship owner need not pay for the reckless actions of an employee.

Question

Does maritime law permit judges to award punitive damages for employee misdeeds and does maritime law allow judge-made remedies when Congress has not authorized them?

Media for Exxon Shipping Co. v. Baker

Audio Transcription for Oral Argument - February 27, 2008 in Exxon Shipping Co. v. Baker

Audio Transcription for Opinion Announcement - June 25, 2008 in Exxon Shipping Co. v. Baker

John G. Roberts, Jr.:

Justice Souter has our opinion this morning in case 07-219, Exxon Shipping Company versus Baker.

David H. Souter:

This case comes to us on writ of certiorari of the Ninth Circuit.

In 1989, the -- the supertanker Exxon Valdez ran a ground off the Alaskan coast spilling 11 million gallons of crude oil into Prince William Sound.

The spill happened after its Captain, Joseph Hazelwood, had apparently been drinking that night and he was an individual with the history of alcohol abuse and gave up the helm at a critical moment, leaving a tricky course correction to unlicensed subordinates.

Exxon paid more than $2 billion in clean up costs and over $1 billion more and penalties for environmental damage.

This case is about not the environmental effects of the spill, but the economic loss it sustained by respondents, Baker and others, commercial fishermen and additional groups who depend on, depended at least on Prince William Sound for their livelihood.

They sued Captain Hazelwood in the Exxon petitioners, seeking compensatory and punitive damages under instructions providing that a corporation is liable for the reckless acts of its managerial employees, the jury found that Hazelwood and Exxon had been reckless thus opening them to punitive liability.

After awarding substantial compensatory damages, the jury imposed $5000 in punitive damages against Hazelwood and $5 billion against Exxon.

The Ninth Circuit upheld the jury instruction on corporate liability and ultimately remitted the punitive judgment against Exxon to $2.5 billion on the strength of our due process guide both for punitive damages.

Exxon sought certiorari arguing that it should not face punitive liability for Hazelwood's reckless acts that the remedies of the Clean Water Act preempt punitive damages for oil spills and that in any case, the $2.5 billion punitive award was too large as a matter of maritime common law.

In an opinion filed with the Clerk today, we are equally divided on the corporate liability question and thus leave the Ninth Circuit's judgment undisturbed in this respect, noting that our ruling is of course not precedencial.

We also conclude that the Clean Water Act's remedies to damage to waters, shorelines and natural resources have no bearing on and thus, do not preempt these plaintiff's claims for economic loss.

But while Exxon maybe subject to punitive liability, we conclude that the $2.5 billion award in this case is excessive as a matter of maritime common law.

In reviewing a maritime award, we sit not in our usual position reviewing a state law award for constitutionality, but in the same position as the State Supreme Court reviewing a state law award.

In doing so, we are mindful of data showing that although the median ratio of punitive compensatory damages hovers around one to one, the punitive award in any given case is unpredictable.

The prospect of eccentric punishment carries an implication of unfairness in odds with the nature of a punitive remedy.

As Congress and the States have recognized in the criminal context, a penalty should be reasonably predictable and consistent so that even Justice Holmes's “bad man” can look ahead with some ability to know the stakes when he takes action or fails to measure up.

This concern convinces us that some limitation is necessary and in considering the appropriate standard, we come back to the median ratio of about one to one.

The medians suggest that in a well-functioning system, awards at or below the compensatory award would express jury's sense of reasonable punishment in cases like this one with no earmarks of exceptional blame worthiness such as intentional, malicious or profit-seeking conduct.

We thus conclude that a punitive to compensatory ratio of one to one is a fair upper limit in such maritime cases.

In this case, the District Court's calculation of the relevant compensatory damages at $507.5 million with a ratio of one to one yields maximum punitive damages in that amount.

We vacate the judgment and remand the case to the Court of Appeals to remit the punitive award accordingly.

Justice Scalia has filed a concurring opinion in which Justice Thomas has joined.

Justice Stevens, Justice Ginsburg and Justice Breyer have each filed opinions concurring in part and dissenting in part.

Justice Alito took no part in the consideration or decision of this case.