Thursday, May 24, 2007
Ninth Circuit Denies En Banc Rehearing of Exxon Valdez Ruling
By a MetNews Staff Writer
The Ninth U.S. Circuit Court of Appeals yesterday denied en banc rehearing of its December ruling cutting punitive damages awarded to commercial fishermen damaged by the 1989 Exxon Valdez oil spill from $4.5 billion to $2.5 billion.
In a brief order, the court announced that a majority of its unrecused active judges had rejected the petition of Exxon Mobil Corp. to have a larger panel review the decision, in which two judges voted to cut the award and the other voted to leave it in place. Exxon argued that the award was constitutionally excessive and contrary to maritime law.
Two judges, Alex Kozinski and Carlos Bea, wrote separate dissents from the decision not to rehear the case. Judges Kim Wardlaw and Sandra Ikuta—both former partners in O’Melveny & Myers, which represented Exxon—and Richard Tallman recused themselves.
Jurors in the U.S. District Court in Alaska awarded the plaintiffs $287 million in compensatory and $5 billion in punitive damages in a 1994 verdict. The plaintiffs successfully contended that Exxon was reckless in hiring an alcoholic to captain the supertanker.
The punitive damage award was reversed twice previously by the Ninth Circuit as the law of punitive damages has evolved, and was fixed by Judge H. Russel Holland of the District of Alaska at $ 4.5 billion following the second reversal.
In its December opinion, the panel applied State Farm Mutual Automobile Ins. Co. v. Campbell (2003) 123 S. Ct. 1513, in which the court concluded that while the Constitution does not “impose a bright-line ratio which a punitive damages award cannot exceed,” there would be few situations in which “awards exceeding a single-digit ratio between punitive and compensatory damages, to a significant degree, will satisfy due process.”
The ruling says that the ratio will be limited according to degree of reprehensibility of the defendant’s conduct, looking at such factors as whether the conduct is criminal, whether it is intentional, and whether it involves personal injury or only economic damage.
In the Exxon Valdez case, the panel majority—Chief Judge Mary M. Schroeder and Judge Andrew Kleinfeld—reasoned that the total damages caused by the defendant, calculated by adding the compensatory damage award to settlements with other claimants, was about $513 million.
Noting that the company had paid $2 billion in compensation independent of the lawsuit and $900 million for environmental restoration, the court held that punitive damages should be limited to less than five times the plaintiffs’ economic losses.
Senior Judge James Browning, dissenting, argued that the majority had erroneously added “post-tort mitigation” to the list of factors to be considered. The award as reduced by the district judge, Browning insisted, was consistent with due process and should not have been reversed.
Kozinski, in his dissent from the denial of en banc review, said that in allowing punitive damages without proof of intentional misconduct by the vessel’s owner, the court was ignoring longstanding maritime law, an 1818 Supreme Court ruling, and the holdings of all other circuits that had considered the issue.
While modern tort law holds that an employer may be liable for punitive damages based on the misconduct of a managerial-level employee, that concept has not made its way into maritime law, he argued. “Such major turbulence in the seascape of the law ought to come, if at all, from the Supreme Court,” he said.
Bea said he agreed with Kozinski, and that he also believed that the amount of damages as determined by the majority “seems to violate the limits implied by the [Supreme] Court for a case where the reprehensibility of the conduct of the defendant does not include infliction of physical injury, nor an assessment for environmental damage.”
The case is In re The Exxon Valdez, 04-35182.
Copyright 2007, Metropolitan News Company