February 25, 2008

ExxonMobil v. Grefer—Exxon Files Another Punitive Damages Cert. Petition

On the eve of oral arguments in the Exxon Valdez case pending in the U.S. Supreme Court, ExxonMobil has filed another cert. petition raising punitive damages issues.

ExxonMobil v. Grefer, arising from a toxic tort case in Louisiana state court, involves a claim for property damage to a piece of industrial property worth $1.5 million. The plaintiff leased its property to a company that cleaned oil pipes for various oil companies, including ExxonMobil. The plaintiff contends the property is contaminated by material released from the pipes. A jury awarded $56 million in remediation costs and $1 billion in punitive damages. The Court of Appeal reduced the punitive damages award to $112 million. The Louisiana Supreme Court denied review, but the U.S. Supreme Court granted cert., vacated the lower court decision, and remanded the case for reconsideration in light of Philip Morris v. Williams. On remand, the Court of Appeal reaffirmed the $112 million punitive damages award in full.

ExxonMobil's cert. petition raises the following three issues:

1. Whether the Court of Appeal on remand denied due process when it continued to punish ExxonMobil for harm to nonparties, left intact a punitive damages award without finding that ExxonMobil's conduct was reprehensible as it affected plaintiffs, and held that the jury could "consider the harm suffered by both parties and non-parties regardless of the type or similarity of harm suffered."

2. Whether, contrary to the decisions of other federal and state appellate courts, a court may remedy a concededly tainted punitive damages trial by affirming the maximum punitive damages award due process permits, rather than by ordering a new trial.

3. Whether due process permits punitive damages twice the amount of compensatory damages in a case of economic injury when compensatory damages are $56 million and plaintiffs' actual harm is no greater than $1.5 million.

The Supreme Court may think it has already answered questions one and three, even if many lower courts haven't gotten the message. Issue number two, however, is a recurring issue that the Supreme Court has not addressed. We have encountered this issue in several California punitive damages cases, with conflicting results. A resolution of that issue by the Supreme Court would be enormously beneficial.