Exxon Valdez

I've written here before about Exxon and its fight to get out of paying punitive damages in a class-action lawsuit resulting from the Exxon Valdez oil spill. Just to reiterate, 19 years ago, a drunken captain steered a single-hulled Exxon oil tanker aground in Prince William Sound in Alaska, resulting in the largest oil spill in US history and severe environmental damage to a large fishing area.  This class-action lawsuit was about economic damage to the fishers. In 1994, a court granted the class members $5 billion in punitive damages, on top of the economic damages. Exxon has paid the economic damages, but has been fighting the punitive damages since then.

An appeals court cut the punitive amount in half, to $2.5 billion, but Exxon took the case to the Supreme Court. There were two issues before the Court: should Exxon be liable, under maritime law, for punitive damages based on the misconduct of its employee, and how much should the punitive damages be.

The second question has drawn most of the attention, as the Court voted 5-3 to cut the punitive damages to $500 million, on the premise that punitive damages should not exceed actual damages. There were no laws to apply here, no caps on punitive damages; the Court was free to make up their own standard, so they did. I haven't seen much in the way of justification for the 1-1 standard, only for the concept of a cap in general: that companies ought to be able to predict what punitive damages will be.

This would seem to run counter to the purpose of punitive damages. The point of punitive damages is to say to a company "don't ever do that again." If punitive damages are predictable, then you just plug that number into your cost-benefit analysis, and decide whether the profit you'll make by ignoring safety, the environment, or whatever inconvenient common good is in your way, is worth it.  It's also interesting to note that the original jury came up with the $5 billion amount based on the annual profit Exxon earned back then. Had the Supreme Court elected to apply that standard instead of a ratio to actual damages, the award would have been increased to $40 billion, Exxon's current annual profit.

So, ignoring safety and the environment continues to pay, thanks to the corporate-friendly composition of the Court. What's garnered less attention, though, is how close Exxon came to getting to Court to completely toss out the punitive damages. Remember that first question before the Court? The vote on that was 4-4. Unfortunately for Exxon, Justice Alito holds stock in Exxon, and had to recuse himself from the case. But for that stock holding, the vote on the first question likely would have been 5-4 that Exxon was not liable, and the punitive damages would have been completely thrown out.

Your Republican-dominated Supreme Court: making the world safe for corporations.