June 25, 2008

Supreme Court Reduces Exxon Valdez Punitive Damages Award

The U.S. Supreme Court issued its decision in the Exxon Valdez punitive damages litigation (Exxon Shipping Co. v. Baker) this morning. As we predicted, the Court reduced the award but rejected Exxon's request to throw out the punitive damages altogether. The Court was split 4-4 (because Justice Alito recused himself) regarding Exxon's argument that the actions of a ship captain cannot, as a matter of law, expose the ship owner to punitive damages. And the Court rejected Exxon's argument that the Clean Water Act prohibits the imposition of punitive damages.

But the Court agreed with Exxon that the award is excessive. The Court based its excessiveness analysis not on the Due Process Clause (as in the BMW v. Gore and State Farm v. Campbell cases), but on principles of federal common law. After fleshing out those principles, the Court reduced the award down to $507.5 million, equal to the amount of compensatory damages as determined by the district court. This may finally bring this case to a close, twenty years after the spill and fourteen years after the verdict.

We will have further commentary on this opinion once we've had a little more time to digest it.