The Exxon Valdez Decision and Punitive Damages

July 9, 2008

Exxon Shipping Co. v. Baker (the Exxon Valdez decision) provides an interesting look at our Supreme Court, particularly since so many of the members were selected by our country’s first administration composed of former oil executives.

The decision derives from the worst environmental disaster in our country’s history, when millions of gallons of oil were leaked into Prince William Sound in Alaska. The oil came from a supertanker (over 900 feet long) whose drunken captain had left the vessel in the hands of an unlicensed third mate who could not negotiate the passage. The ship ran aground on a reef. Wildlife was destroyed, a habitat rendered toxic and all the people who depended on Prince William Sound for their livelihood, including fishermen in Alaska, Washington, as well as elsewhere, were ruined. The devastation was overwhelming. Even now nineteen years later, oil stained gravel and sand lies just below the surface on the shore.

The captain had a history of alcohol abuse and was still intoxicated eleven hours after the incident. Exxon was found by a jury to have acted recklessly, and the jury awarded $5 billion in punitive damages. Exxon appealed, questioning on a number of grounds the punitive damage award.

Before arriving at the Supreme Court, the case was considered by the Ninth Circuit Court of Appeals. That court upheld the jury’s right to award punitive damages, but cut the amount of the punitive damages award in half.

Exxon petitioned the Supreme Court for review hoping to convince it that punitive damages were in appropriate and failing that that even half of the jury’s award was excessive.

Washington’s Attorney General, an ardent tort reform proponent, who campaigned against large jury awards, saw an opportunity for publicity. While actually claiming to his constituents that large jury awards and excessive litigation costs prevented the State of Washington from correcting to the conduct that gave rise to the litigation against the State, he undertook to champion the cause for punitive damages to the Supreme Court. He argued for the right to punitive damages and asked that the $5 billion award be restored.

In a very unusual decision, the Court announced that it was evenly divided on the question of whether punitive damages could be awarded against a corporation under maritime law. The Court said that it would not render a decision on that point, leaving the decision of the Ninth Circuit in place. (With nine members you might wonder how the Court could be evenly divided. Justice Alito recused himself, presumably because of some association with Exxon, creating an even number of justices deciding this case.) In the next few years from two to four of the members of the Court will be replaced and a reconstituted Court could then decide this issue.

The Court, without examining the right to punitive damages under maritime, law chose to consider whether such damages were prohibited by the Clean Water Act and, if not, whether the award was excessive. What is odd about this is that the Court left open the opportunity for it to later decide that there were no punitive damages available under the maritime law, undercutting the entire decision.

This very narrow ruling is becoming a trademark of the new Roberts Court. The new Chief Justice attempts to avoid sweeping decisions and tries to limit them to the facts of the case while seeking to avoid fractious split decisions. In this decision he selected issues that were less divisive than the question of whether punitive damages were available under maritime law.

The Court, after finding the the Clean Water Act did not preempt maritime common law, discussed the roots of punitive damages, tracing it back to English common law, codes from the Middle Ages and even the Code of Hammurabi. The decision quotes from an 18th century American decision where punitive damages were awarded against the Secretary of State for an unlawful search of someone’s papers. (They apparently had different sensibilities then, although maybe not in the case of the Attorney General.)

The Court said that punitive damages were “wildly” accepted by American courts by the middle of the 19th century. At that time they were called “exemplary damages” a more favorable term, and were invoked in cases involving extraordinary wrongdoing. Their purpose was said to be to set an example for the sake of deterence. They were also said to compensate for intangible injuries that were not a part of the legal definition of compensatory damages. The court noted that the concept of compensatory damages has broadened so that this justification no longer applies. Today the Court said that punitive damages serve the purposes of retribution and deterrence and are reserved for outrageous conduct that is recklessly indifferent to the rights of others or otherwise deplorable.

In Nebraska punitive damages are barred entirely. In Washington, Louisiana, New Hampshire and Massachusetts they are permitted only when authorized by statute. (In Washington this nearly amounts to a bar on them as the legislature disfavors this aspect of the common law.) Two states have limited the type of rewards which may be recovered as exemplary damages and several have limited the amounts.

In an interesting and uncharacteristic detour the Court examined the laws of several other countries on the question of punitive damages and found that they were generally subject to tighter control than in American Courts.

The Court rejected the contentions of the tort reformers who claim that punitive damages are becoming extravagant. It stated that neither the amount of the awards nor the percentage of cases with punitive damages awards has increased over time. The Court said that the figures show restraint with respect to this type of award.

The Court though found fault in the lack of predictability of the amount of the awards and the lack of consistency in determining an appropriate amount. It announced that it would create criteria so that this element of damages would be rendered more predictable.

The Court noted that the criminal justice system’s sentencing function has the same purposes as a jury assessing punitive damages: retribution and deterrence. It found it noteworthy that the “indeterminate” sentencing system had been rejected and suggested that it would do the same thing for punitive damages awards, avoiding the “deserts of uncharted discretion.”

The court cited studies showing that the ratio of punitive damage awards to compensatory awards was less than 1:1, meaning that actual damage awards were on average more than the accompanying punitive damage award. Without much more discussion the Court decided that in maritime cases the limit on punitive damages would be the amount of the compensatory award.

Justice Scalia and Thomas separately concurred. Justice Thomas often seems to follow Justice Scalia’s views almost like a shadow. Scalia said that the reasoning here was correct but he disputes cases cited in the opinion that put a constitutional limit on punitive damages.

Justice Stevens dissented from the part of the opinion that imposed a limit on maritime punitive damages. His dissent shows the shallow, if not outright ignorant use of the term “activist judges,” Tort reformers often rant against judges usurping the role of the legislature and attribute that to “liberal judges.” Justice Stevens, sometimes called a liberal justice, opined that it is not the role of the Court to devise a formula to impose on juries. He said that this is a legislative function that ought to be reserved for Congress.

Justice Ginsburg, generally regarded as particularly thoughtful, shared Stevens’ aversion to the Court legislating damage limits. She pointed out that the majority acknowledged that there was no perceived urgency requiring the court to break from the common law tradition. She pointed out that the data that informed the decision showed that the traditional “abuse of discretion” standard by which punitive damages are traditionally reviewed functioned perfectly well. She also pointed out a number of unanswered questions about the decision.

Justice Breyer also filed a dissent, saying that he had no particular problem with the imposition of a ration like the one adopted but that it should not apply in extraordinary cases. He went on to point out the high degree of scrutiny that this award had received at the trial court level and what the Ninth Circuit Court called the “egregious” nature of Exxon’s conduct. As a special case exception he would have sustained the Ninth Circuit Court’s decision.

There are a number of interesting features to this case which I’ll discuss on another occasion. One quick observation. Broadly speaking punitive damages and criminal law address the same sort of conduct, as suggested by the Court in this decision. That is conduct that is deplorable or which recklessly endangers others or their rights. Punitive damages and sentencing have exactly the same purposes, to punish the guilty and to deter such conduct. You would think that people supportive of strong or harsh sentencing standards would support strong or harsh punitive damages standards. It turns out of course that generally speaking the people who support incarceration over rehabilitative purposes in sentencing favor the abolishment of punitive damages. There are racial and class distinctions between the two groups of defendants. Hopefully there is some other explanation for this apparent inconsistency.


Washington’s Attorney General Takes Both Sides of Tort Reform Issues (Part 1)

June 26, 2008

Washington State’s Attorney General Rob McKenna recently campaigned for tort reform, claiming that the legislature needed to step in and reduce the awards that were being entered against the state. He indicated that the courts were out of control and the legislaure needed to do something about it:

“But the courts have moved so far away from what the Legislature intended back in the early 1960s that the law removing sovereign immunity is no longer recognizable, and at the same time the Legislature has failed to act at a policy level where the limits ought to be.”

Mr. McKenna got into office advocating tort reform for everyone, saying that judgments were getting too big.

That sounds to me like just expedient court bashing. He says lawsuits are preventing the state from taking corrective action? That sounds like baloney.

Well, what did he do when the Exxon Valdez case got to the Supreme Court and the Court was asked to review the biggest punitive damages award in American history, $5 billion? This award was being attacked on two grounds. First, Exxon said that it was excessive. The plaintiffs were awarded all their proven damages, plus $5 billion. Second the spill was a violation of the federal Clean Water Act which does not award punitive damages at all. This omission from the law was fought for by Republicans, who generally are beyond cautious with respect to environmental laws. The $5 billion punitive damages award was granted under court created doctrine that the trial judge held applied in spite of the Clean Water Act.

The arguments of Exxon are exactly the same positions that Mr. McKenna campaigned on and which he has been advocating recently.

Mr. McKenna participated in this case by helping prepare a brief on behalf of Washington and 33 other states which argued that the punitive damages award should not be reduced and that the court created doctrine that allows punitive damages ought to be respected in spite of contrary language in the Clean Water Act. This is exactly the opposite of what he is saying in public.

Lawyers are sometimes required to advance positions they do not believe in but this does not appear to be the case in this instance. Mr. McKenna is crowing about the result and how he helped preserve punitive damages under court created doctrine!

The statement he issued on June 25 says this:

“We are pleased the court upheld an award of punitive damages, since Exxon had argued that no punitive damages can be awarded in a maritime case under federal law, no matter how egregious the circumstances,” McKenna said. “We are disappointed, however, that the Court did not award the full punitive damages authorized by the Court of Appeals. The reduced award is brutally disappointing for the Washington and Alaska fishermen and their families who were counting on this money to help make them whole.”

Don’t get me wrong; I don’t disagree with this sentiment. It is just that because I agree with him, I cannot in good conscience claim to support tort reform, particularly the two points championed by Exxon and Mr. McKenna in public statements.

I have puzzled over this for some time trying to render Mr. McKenna’s divergent positions rational. The only thing I can come up with is that Mr. McKenna thinks that punitive damages are fine for injured people in other states but not for people in Washington, except for fishermen. That still does not make sense to me.


Environmentalism and the Nazis

June 22, 2008

In the 1950’s communists were said to be infiltrating the government and the entertainment industry, as well as operating under several fronts. The McCarthy era ended when the demagoguery was challenged and the true charlatans were identified. While it lasted, though, it was a ticket to political prominence.

In the last few years some people have taken to identifying environmentalists as Nazis. This is actually done on national television and similar venues; we have almost grown to expect it in political campaigns. Such fear and hate mongering seems to be efficacious. You would think that it would backfire, but there must be more people swayed by it than repulsed.

On national media in 2006 Al Gore was compared to Nazi propagandist Goebbels and to Hitler for his success in publicising global warming. (It is a bit ironic that the people who diminish the Holocaust in this way tend to be Israel’s most zealous supporters.) On CNN Senator Inhofe actually described Gore’s testimony to the Senate Committee on the Environment and Public Utilities in that manner with the concurrence of Glenn Beck, the host.

In 2007 Fox News Radio continued the Gore/Hitler diatribe. CNN continued to transmit unbelievable comparisons to Hitler and Nazis. Glenn Beck recently said that Gore’s global warming campaign is like Hitler’s use of eugenics to justify exterminating 6 million European Jews.

With the new report on global warming just out, a report subscribed to about a dozen scientific groups associated with our government, doesn’t this treatment of science remind you of earlier, more primitive, periods of history?  Imagine: A world wide scientific conspiracy.  Really?

The hate and fear mongering diatribes are uniformly nothing more than name calling. There is no real rebuttal. Scientists picked “An Inconvenient Truth” apart pretty thoroughly finding some questionable facts and theatrics that suggested an unsupported conclusion. A UK judge found nine factual errors in the film.

But scientists and the British judiciary (one member anyway) agree that the film is rooted in good science and its overall message is supported by sound scientific theory and belief. This was known in 2007 and then Gore got a Nobel Peace Prize along with a U.N. panel of scientists investigating global warming. This, if anything, seemed to fan the flames of hate mongers.

This very odd discourse about environmentalism is probably the progeny of a pseudo-intellectual eddy in revisionist history. People are actually positing that environmentalism is a Nazi program, sort of like “Boys from Brazil.” This theory has been debunked by legitimate historians and even the people who are credited with originating this view disclaim any association with it.

A couple of years ago Jonah Goldberg’s book “Liberal Fascism: The Secret History of the American Left, From Mussolini to the Politics of Meaning” appeared. This book seemed to revitalize the “environmentalism is fascism” diatribe, although Goldberg claimed to have written nothing that was intended to suggest such a thing. The book sold well to mixed reviews. It was celebrated by conservative reviewers and panned by others.

The book’s thesis, behind all the pseudo-intellectual blather, is essentially Libertarian: Fascism means governmental regulation and liberalism means governmental regulation; therefore liberalism is fascist. Environmentalists want governmental regulation therefore they are fascists too. For proof just look at Nazi Germany where environmentalism was born. Nazis called themselves the national socialist party therefore socialists are fascists. Socialists are liberals. Very simple-minded stuff hiding in a lot of jargon.

This silly word parsing though unhinges people like those at the Building Industry Association of Washington who have made a habit of labeling anyone opposing their views as Nazis. In March their newsletter, in addition to more conventional name calling, called the Washington State Department of Ecology Nazis and lumped all environmentalists under that moniker.

This set off a local firestorm culminating in and Anti Defamation League demand for a retraction or apology. The B.I.A.W. of course refuses claiming the article (written by its storm drain columnist) is academically grounded. The B.I.A.W. is widely regarded as the Washington State Republican Party’s attack dog and neither the party nor any of its candidates has attempted to separate from this absurd propaganda machine.


Global Warming Detractors Get Reduced Funding

May 29, 2008

This came from a spokesman for Exxon Mobile:

“We discontinued contributions to several public-policy research groups whose position on climate change could divert attention from the important discussion about how the world will secure the energy required for economic growth in an environmentally responsible manner.”

Without the support of oil companies, this position will lose much of whatever traction is still has.

According to the Dow Jones Newswire Exxon Mobil in 2007 donated about $13 million to “environmental” and “public policy research.” Over the last two years there has been a marked softening of Exxon Mobile’s once adamant position that global warming was a fantasy. This corresponds with the replacement of Lee Raymond, its CEO and chairman, by Rex Tillerson two years ago.


America’s Climate Security Act of 2007

May 28, 2008

For years the Senate Committee on Environment and Public Works was the burial ground for legislation addressing among other things coal powered electricity generation. The U.S. has about a quarter of the world’s known supply of coal and coal is the primary source of electricity in this country. (Hydroelectric power is not as prominent elsewhere as in this region.) It is commonly said that reducing the emissions of coal used to generate electricity is vital to controlling greenhouse gas emissions here. Most seem to believe that this is the cornerstone to any effective policy. In December the committee, with a Democratic majority, passed America’s Climate Security Act of 2007 and it the bill will be debated in the Seante next week.

The Republicans are split on this bill. Larry Craig and other Republicans did all he could to prevent the bill from getting out of committee. The bill though is sponsored by Joe Lieberman and John Warner. (Warner is on the committee.)

The bill would impose emission limits on electric utility, transportation and manufacturing industries and includes financial incentives for reducing emissions, as well as assistance for zero and low carbon technologies. The bill creates carbon trading, the sort of thing that is talked about by Senator McCain in speeches. Senator McCain though has not endorsed the bill. When he was in the Northwest he talked vaguely about legislation that sounded kind of like this bill. Remember that a few years ago McCain had co-sponsored a bill with Lieberman on this topic. As 2008 approached though he seemed to fade from association with this legislation. Lieberman continued the fight and on the current bill Warner’s name appears in place of McCain.

The principal opponents of the bill seem to be the National Association of Manufacturers and the American Council for Capital Formation. Their opposition is adamant but their argument is tired and unimaginative, same old refrain that has proven to be false in the past. They say that jobs will be lost and that the price of electricity will soar. This is exactly what they said in opposition to legislation to curb acid rain but prices actually fell following the legislation without imposing hardship on the work force. They do not to offer a good explanation of why they were wrong then and right now.

A number of environmental groups oppose the bill because it is not as comprehensive as it could be and its standards are not terribly limiting. In fact part of the selling of this bill to industry was that if this isn’t passed something far more stringent might be imposed. Carbon trading is not universally embraced as an effective means of controlling the emissions and many groups balk at the support the bill will give the nuclear industry.In short it is a compromise designed to get through Congress. Senator Bernie Sanders tried mightily to amend the bill to give it more scope and spine but failed. The bill’s adovates say that the bill is a meaningful beginning to a pressing problem. It’s detractors say that it frames the issues for years to come in a manner favorable to industry.

Check out the Senate debate.

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The Judicial Branch and the Environmental Protection Agency

February 18, 2008

For many observers the low water mark in recent judicial history was the case Bush v. Gore in which the Supreme Court inserted intelf into state election procedures without any precedent whatsoever, dictated the outcome and stated that its decision should not be given value as precedent. In so doing it handed Florida’s electoral votes to Bush, which gave him the election. As it turned out Gore had in fact taken Florida and Gore garnered more votes nationally than Bush. The Supreme Court’s action in giving the election to Bush was so much at odds with tradition and established precedent that at least one national commentator called it treasonous.

In at least one area the federal courts have demonstrated their independence from the administration. The efforts to change the E.P.A. from watchdog into advocate for polluters have been frustrated by the courts. The U.S. Court of Appeals for the District of Columbia and the U.S. Supreme Court ordered the E.P.A. to follow the law in requiring utilities to install pollution controls when power plants were upgraded. The U.S. supreme Court required the E.P.A. to start regulation green house gas emissions from automobiles. Just recently the D.C. Circuit Court admonished the E.P.A. to require reductions in mercury emissions from coal-powered power plants.

But for the role of these federal courts, which include Bush appointees, the administration would have effectively converted the role of the E.P.A. from policing industry’s compliance with federal environmental law to shielding it from those laws. Certainly during the last seven years the E.P.A. has been compromised but hopefully it will soon be regenerated.