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Punitive damages award in Exxon Valdez case was not excessive

Law Reporter, May 2004

In re the Exxon Valdez, 296 F. Supp. 2d 1071 (D. Alaska 2004).

A U.S. district court held that the $5 billion punitive damages award in litigation arising under the 1989 Exxon Valdez oil spill was not unconstitutionally excessive.

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Here, fishermen, landowners, native Alaskans, and others harmed by the spill sued Exxon corporation, alleging negligence in allowing the captain of the supertanker Exxon Valdez, whom defendant allegedly knew suffered from alcoholism, to operate the vessel. The suits were consolidated. In the first phase of trial, a jury found Exxon and the tanker captain liable for punitive damages. In the second phase, the jury returned a verdict for the fishermen for $287 million compensatory damages, and defendants settled with the native Alaskans for an additional $22.6 million. In the third phase of trial, the jury awarded $5 billion in punitive damages against Exxon and $5,000 against the captain. The Ninth Circuit Court of Appeals found the award too high and remanded for the trial court to consider the constitutionality of the amount in light of the guideposts established in BMW v. Gore, 116 S. Ct. 1589 (1996), 39 ATLA L. Rep. 239 (Aug. 1996). On remand, the trial court concluded that application of BMW supported the punitive award, but reduced it to $4 billion because the Ninth Circuit had mandated that the award be reduced. The Ninth Circuit later vacated the $4 billion judgment and remanded the case for reconsideration of the punitive damages award in light of State Farm Mut. Auto. Ins. Co. v. Campbell, 123 S. Ct. 1513 (2003), 46 ATLA L. Rep. 154 (June 2003). There, the U.S. Supreme Court held that a ratio of punitive to compensatory damages of 145 to one violated defendants' due process rights.

Reviewing the punitive damages award in light of State Farm, the court held that it was not excessive under the circumstances. Applying the analysis in State Farm, the court noted that a key factor in deciding whether a punitive damages award is permissible under the due process clause is whether the defendant was on notice that it would be subject to so severe a penalty. This includes the quality of defendant's conduct and what consequences defendant may expect to flow from its conduct. Here, the court said, defendant's conduct was reprehensible, causing not only economic but also environmental, social, and psychological damage, disrupting many lives. Further, the court said, the spill was a foreseeable consequence of allowing a captain whose problems with alcohol were known to operate a supertanker. Finally, the court noted, State Farm held that single-digit mulipliers pass constitutional muster for highly reprehensible conduct, as here. The jury's award of $5 billion satisfies this guideline, the court reasoned, as the amount of actual harm caused by defendant's conduct was approximately $513 million.

However, the court entered final judgment against defendant for $4.5 billion in punitive damages as a means of resolving the conflict between its conclusion that $5 billion was justified and the court of appeals's directions to reduce the award.

Plaintiffs' Counsel

David W. Oesting,

David C. Tarshes, and

Stephen M. Rummage, all of Anchorage, Alaska

*Lynn Lincoln Sarko,

*Michael Woerner,

David Copley, and

*Bradley S. Keller, all of Seattle, Wash.

Matthew D. Jamin, Kodiak, Alaska

H. Laddie Montague Jr., Philadelphia, Pa.

Brian O'Neill, Minneapolis, Minn.

James van R. Springer, Washington, D.C.

Comment: Documents in two related cases, LeCain v. Exxon Shipping Co., 38 ATLA L.Rep. 332 (Nov. 1995), and Lundquistv. Lundquist, 923 P.2d 42 (Alaska 1996), 40 ATLA L. Rep. 16 (Feb. 1997), are available through the Court Document Sets section in the back of this issue, courtesy of plaintiffs' counsel in diose cases.

Punitive damages award in Exxon Valdez case was not excessive

Law Reporter, May 2004

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