Thursday, June 26, 2008

On our way to a 1:1 ratio with punitive damages??

Yesterday, the United States Supreme Court decided Exxon Shipping v. Baker. This decision dealt with a punitive damages award arising out of the spill from the Exxon Valdez in 1989. Millions of gallons of crude oil were dumped into Prince William Sound, causing extensive damage to the environment, commercial fishermen, and native Alaskans. Claims were brought for economic losses sustained by individuals who were dependent on the Prince William Sound for their livelihoods. A jury awarded $5 billion against Exxon in punitive damages. The Ninth Circuit reduced the punitive damage award to $2.5 billion. Total compensatory damages were calculated at $507.5 million.

The Supreme Court ordered that the punitive award be reduced even further. The Court was careful to emphasize that this case arose under federal maritime jurisdiction and required review of a jury award at the level of judge-made federal common law. The court adopted a 1:1 ratio as a fair upper limit in these maritime cases. Thus, the jury award of punitive damages was reduced to $5o7.5 million.

I don't care what the Court says. This case will be cited in state and federal courts for the proposition that a 1:1 ratio is preferred and comports with due process. It will be interesting to follow the life of this ruling.

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