February 18, 2008

Cornell Previews Exxon Valdez Oral Argument

Cornell University's Legal Information Institute has prepared this excellent summary and preview of the Exxon Valdez case scheduled to be argued in the U.S. Supreme Court on February 27, 2008. The preview concludes with this assessment: "The first question for the Court is when a shipowner can be held liable for punitive damages for a ship master’s tort. In answering this, the Court will resolve disagreement among the circuits. However, the question has a case-specific complication: Exxon’s possible independent liability. The second question—whether CWA displaces punitive damages under maritime law—may have little significance beyond this case. The Oil Pollution Act of 1990, not the CWA, is now the controlling statute in oil spill cases. Nevertheless, resolving the second question in Exxon’s favor may enable the court to avoid sending the case back for further factfinding if Exxon’s independent liability proves pivotal to judgment on Question 1."

6 comments:

  1. I don't really understand what this "Exxon's independent liability" point is about. Corporations only act through agents. This seems to be a shorthand for employee-other-than-Hazelwood-based liability, but the same Amiable-Nancy question could arise for whoever that that is.

    I think the first question for Exxon should be, "Wouldn't your approach, getting rid of vicarious liability for punitive damages and applying Amiable Nancy to corporations, get rid of corporate punitive damages entirely? If not, when are they available, and why?"

    See here for more (look for "5R Problem").

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  2. I think the "Exxon's independent liability" point in the Cornell preview refers to the plaintiffs' argument that even without vicarious liability, Exxon should be liable for its own conduct - - knowingly putting an alcoholic in charge of an oil tanker.

    As I understand it, that point is independent of the Amiable Nancy argument. Exxon cites Amiable Nancy for the point that a shipping company can't be exposed to punitive damages unless a manager (someone other than the ship captain) authorized, ratified, or participated in the punishable misconduct. The plaintiffs contend that Amiable Nancy applies only to cases involving armed privateers. They contend that, under the Restatement's general standard for corporate punitive liability, a ship captain can be a "managerial agent" whose conduct subjects the ship owner to punitive damages.

    Even if plaintiffs lose that argument, they could still win if they could show that Exxon management itself participated in punishable misconduct. That's why the Cornell summary refers to this as "Exxon's independent liability."

    I don't see how adopting Exxon's Amiable Nancy argument would get rid of corporate punitive damages entirely. The Amiable Nancy issue is purely a matter of maritime law. The Supreme Court's adoption of Amiable Nancy would not impact punitive damages rendered under state law (which constitute the vast majority of all punitive damage awards), or even punitive damage awards rendered under federal law in other contexts, such as employment litigation.

    Also, many states have already adopted the same standard Exxon is proposing, and corporations are frequently subjected to punitive damages in those states. In California, for example, we have a statute providing the same rule proposed by Exxon, i.e., that corporations cannot be hit with punitive damages unless a managing agent of the corporation authorized, ratified, or participated in the punishable conduct. That statute certainly hasn't stopped plaintiffs from recovering punitive damages against corporations in California.

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  3. I don't think that's right about what Exxon's asking for. They attack vicarious liabilty for punitive damages, as such, specifically criticizing the Restatement of Torts section 909 "managerial employee" rule, which is actually more restrictive than lots of states' any-agent rules. Exxon isn't saying that Hazelwood wasn't a managerial employee; they're saying that the Restatement's rule is wrong. Cal. Civ. Code § 3294(b) tracks the language of the Restatement, which the plaintiffs want the Court to adopt for admiralty law. The Exxon litigation did seem to involve a looser definition of "managerial" than does California; jury instruction 34 defined it as including supervisors, but White v. Ultramar adopts a policymaker rule for California. Exxon isn't saying, however, that the Court should tighten up the definition of "managerial," a la California; it's saying the Court should junk the Restatement rule altogether. Exxon concedes that under the Restatement rule, it loses: "As the master of a tanker, Hazelwood was a 'managerial officer or employee' of Exxon as the jury instructions defined that term." 2007 WL 4439454, *11. Looking at its original CA9 brief, 1997 WL 33493500, it seems Exxon never challenged instruction 34 itself.

    What I mean about the Amiable Nancy is that, taken at face value, it adopts a rule getting rid of vicarious liability for punitive damages entirely in admiralty law. But because corporations only act through agents--that is, they only act vicariously--getting rid of vicarious liability for punitive damages in a field of law would, if taken seriously, necessarily get rid of corporate punitive damages in that field.

    My issue with the plaintiffs' "Exxon itself" argument is that Exxon's argument against vicarious liability could be run again regarding whichever folks put Hazelwood in charge. Exxon itself didn't put him in charge, the argument would go; these particular managerial employees did. Don't punish us for what they did. If the argument works for Hazelwood, it ought to work again for his superiors. I think the consequence reduces the Amiable Nancy rule to absurdity as applied to corporations, but the plaintiffs instead don't acknowledge the consequence.

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  4. Thanks for elaborating on your previous comment. In my view, Exxon's argument is not quite so broad. As I read Exxon's brief, it argues for the same sort of rule we have in California, i.e., that corporations can be liable for punitive damages based on the acts of a policy-maker, but not for acts by an employee that contradict corporate policy.

    When Exxon argues that "vicarious liability" for punitive damages is inconsistent with 200 years of maritime law precedent, they're talking about "vicarious" in the traditional sense, meaning liability based solely on the fault of the employee. I don't see anything in their brief suggesting that a corporation should be immune from punitive damages if corporate policy-makers engage in punishable conduct. For example, Exxon urges the Court to follow the same approach they used in Kolstad, which shielded corporations from punitive damages only when the corporation has adopted policies inconsistent with the punishable acts. Kolstad certainly did not eliminate punitive damages claims against corporations in the employment context.

    I just don't see any chance that adoption of Exxon's argument will result in the elimination of punitive damages against corporations.

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  5. I agree that there's no chance that the Court will eliminate corporate punitive damages entirely, but I do still think that, taken seriously, the Amiable-Nancy rule would do so. So the Court won't take it seriously. Even Lake Shore doesn't take it seriously, since it says that if scienter is "brought home" to a corporation--whatever that means!--then corporate punitive damages are OK. But I do think that the iterability of the ratification-or-authorization requirement is a big theoretical problem for applying a Amiable-Nancy-style requirement to corporations.

    I don't think that Exxon quite advocates the rule of Kolstad. They say that, at a minimum, they should get a managerial-employees limit plus a good-faith defense, but I think they're really claiming much more. They say at *27, "If there is to be any relaxation of the maritime rule against vicarious punitive damages for employee misconduct, it should at a minimum incorporate the defense recognized in Kolstad."

    While we're on this topic, I can't seem to find online the appendix to the respondent's brief in opposition to certiorari. Some critical jury instructions seem to be there. E.g., "[E]vidence of a corporation's consistently enforced policy (as well as an agent's lower level status) may mitigate the need for punishment. ... But ... Exxon received precisely such a jury instruction here. BIO App. 17a." 2008 WL 194284, *34. How was that written? How close would it come to a Kolstad good-faith defense?

    My preferred rule would be to have just a good-faith defense, but no managerial-employees restriction. I can't tell whether Exxon forfeited any chance to ask for that sort of rule, though.

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  6. I'm not aware of any online version of the appendix. I too would be interested in seeing the precise language of the instruction.

    Thanks a lot for your thoughtful comments. Keep 'em coming! Our blog is new and we're hoping it will evolve into a forum for further discussions like this.

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