Friday, December 22, 2006

How Long Can One Punitive Damages Award Be Litigated?

I admit: I laughed at the "Dick in a Box" skit on Youtube. Alas, we don't even TiVo SNL anymore -- that's how lame we've become w/ 2 careers and 2 children under 2. (I even sent it to some colleagues who promptly ignored my giving gesture.) But something else in the papers caught my eye today. The AP reports that the Ninth Circuit has again remanded the punitive damages award against Exxon for its Valdez oil spill, finding that the district judge's $4.5 billion award was excessive. See the story here. Get this, though: in a 2-1 panel decision, the court reverses a Reagan-appointed district judge, H. Russel Holland, apparently because the punitive damages award, it said, should usually not be more than 9x the actual damages award and that that "rule" should apply in this case. Even supposing Holland has turned the thing into a personal blood feud against a corporation that last year cleared $36 billion, what gives? This was, no exaggeration, the third time the case had been up to the Ninth Circuit and, to listen to people who've lived through the ordeal, Exxon should've paid the $4.5 billion cash on the barrelhead and thought itself getting off cheap. Just for example: the thousand or so otter carcases they recovered meant that between 3500 and 5500 actually perished. The Prince William Sound fisheries may never fully recover and the workers who tried to clean it up are still developing nasty latent illnesses.

At issue in this appeal is the growing collection of "substantive" due process precedents from this Supreme Court attacking the unfairness of punitive damages awards like Holland's. In point of fact, the Court has held that "exemplary" damages awards 10x or more the actual damages are suspect as being "grossly disproportionate" and thus a denial of "due process of law." But it has also said that "[a] higher ratio may also be justified in cases in which the injury is hard to detect of the monetary value of noneconomic harm might have been difficult to determine." BMW of North American v. Gore, 517 U.S. 559, 582 (1996). This is what leads me to wonder: two months after Exxon announced its eye-popping quarterly profit of $10.5 billion, a year after one local scientist self-published her own account of the many latent harms now manifesting themselves in the Sound, and a century after Lochner, is this how our judiciary is safeguarding the rule of law? There must be any number of ways to justify an award of this size against the brand of malfeasance that brought us the Exxon Valdez, no?

Incidentally, that study is Rikki Ott, Sound Truths and Corporate Myths: The Legacy of the Exxon Valdez Oil Spill (2005)--available here.