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Kia Franklin

On Exxon… The Supreme Corp Returns

I can't believe it. Exxon is essentially rewarded for dragging its feet for nearly two decades, after its role in one of history’s most devastating oil spills ever. Today's 5-3 Supreme Court decision reduced a $4.5 billion punitive damages award down to $500 million--for this mega corporation a paltry sum equivalent to a few days' profits. (Here's my prior post on the Exxon case) Here's what others are saying about it:

On ThePopTort blog:

Right now the folks at Exxon Mobile are probably writing out their 'Thank You' cards to the U.S. Supreme Court Justices. Even though the company posted a "disappointing" $10.9 billion profit in the first quarter of 2008 (the second highest U.S. corporate profit ever – the highest being themselves in 2007) the U.S. Supreme Court ruled today that the company only has to pay $500 million (nope, I didn't forget a zero) in punitive damages to the 30,000 victims of the Exxon Valdez oil spill. (Keep Reading)
On ScotusBlog:
Although the equal division of the Court on the question of Exxon’s liability for its ship captain’s actions meant that an award of punitive damages against Exxon would be permitted, the Court’s adoption of a strict 1:1 ratio for punitive damages to compensatories nevertheless comes as a huge blow to the over 32,000 plaintiffs, many of whom are either dead or bankrupt, in this case. After nineteen years of litigation, the Court’s reduced award means that each class member will now receive about $15,500 in compensatory damages and an equal amount in punitive damages, for a total award of roughly $31,000 per class member. (Keep Reading)

Stephanie Mencimer at MoJo Blog:

The decision strikes yet another blow against what is essentially the capital punishment of the civil justice system, in a long-running campaign by Exxon and other big companies to try to abolish these sorts of awards entirely. Punitive damages are the extra damages added to a jury verdict to punish especially egregious conduct by a civil defendant. As the former West Virginia Supreme Court Justice Richard Neely once wrote, punitive damage awards aren't given out for innocent mistakes, but are generally reserved for "really stupid defendants, really mean defendants, and really stupid defendants who could have caused a great deal of harm by their actions but who actually caused minimal harm." Punitive damages put the real teeth in the legal system, and serve as an ad-hoc form of regulation by standing as a potential deterrent to all sorts of egregious behavior. That, of course, is why business really hates them. (Keep Reading. Also see the comments section--interesting stuff.)

What more can I say? This is a tremendous, tremendous victory for big business. The Supreme Court is back to its Supreme Corp rulings.

The majority held that "unpredictability of high punitive awards is in tension with their punitive function," asserting that these awards (which it describes as "eccentrically high") are unfair because they are unpredictable. The majority says "a penalty should be reasonably predictable in its severity, so that even Holmes’s 'bad man' can look ahead with some ability to know what the stakes are in choosing one course of action or another." Is a punitive award of a few days' worth of profits really an "eccentrically" excessive punishment? Is the result of this decision really that corporate actors will choose the proper course of action--forgoing a bad behavior because it will cost the corporation twice the actual damages?

As it pays so much attention to making sure corporations can reasonably calculate the consequences of bad behavior, does the Court give due concern for the effect of inadequate punishment on the victims, the larger public, and others that could be harmed by such behavior?

Nope. I'm disgusted.

Kia Franklin: Author Bio | Other Posts
Posted at 1:57 PM, Jun 25, 2008 in Class Action | In the News | Supreme Court Rulings | Tort Victim Tragedies
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Comments

"When the jury awarded $5 billion in 1994, that represented a year of Exxon profits."

Posted by: Adam | June 25, 2008 5:31 PM

"Is the result of this decision really that corporate actors will choose the proper course of action—forgoing a bad behavior because it will cost the corporation twice the actual damages?"

Kia, Exxon has already paid $3.4 billion in cleanup costs, environmental restoration payments, criminal fines and out-of-court settlements.

At the end of the day, can anyone reasonably question whether a payment of $3.9 billion dollars is a sufficient incentive for oil companies to make sure that their captains are sober at the wheel?

Is it your argument that without an addition fine of $2 billion dollars Exxon won't properly take the necessary precautions to ensure their captains aren't drunk at the helm?

(Btw, the Supremes reduced the judgment from $2.5 billion, not $4.5 as you said in your post.)

Posted by: Lawyer | June 25, 2008 5:50 PM

The Supreme Court got this one correct, except for allowing the concept of punitive damages to still exist.

Punitive damages are a total charade.

IF, a very big IF, one accepts the notion of punitive damages are a valid concept, THEN all such damages should be payable to the government. TO allow attorneys to pad their fees and the "victims", already properly compensated by the compensatory damages, to collect these funds is simply to turn the litigation process into a giant lottery. That is unconscienable, unforgivable, and inconsistant with the demands of justice

Posted by: Paul W Dennis | June 25, 2008 6:28 PM

Paul W Dennis - No, you are missing the big picture. Giving the awards to the parties suing gives those parties incentive to pursue the case and to invoke the punishment - it is like privatizing - and isn't that a good thing? Taking government functions and putting them in the hands of private, for-profit, business interests, which would then be much more efficient than the government. Why would you want to create another huge government bureaucracy to do punitive damages when we already have a private system in place that works? What are you, some flaming liberal?

And punitive damages themselves are necessary because corporations cannot be thrown in jail - so they need to be punished some other way. You only get punitive damages for quasi-criminal behavior. Whining about it to me sounds like you just want criminals to get off scot free. There is a simple way for any company to avoid punitive damages - don't engage in quasi-criminal activities. I don't cry when a murderer gets sentenced to life in prison and I certainly don't cry when a criminally-acting corporation has to pay a painful amount of money as a direct result of its criminal behavior.

Posted by: Disgusted Beyond Belief | June 26, 2008 12:37 PM

"You only get punitive damages for quasi-criminal behavior."

DBB, so then you should agree that Exxon owes no punitive damages since they didn't do anything criminal. The captain was the one drunk behind the wheel not the company.

Posted by: Adam | June 26, 2008 1:06 PM

Adam - Truly you are talented at saying nonsense. Here, let me demonstrate:

Say the suit was that every single employee in the company was drunk, from CEO down to janitor, and that caused the spill. Now, I can simply use your brilliant defense:

"Exxon owes no damages since they didn't do anything criminal. The employees were the ones who were drunk, not the company."

Wow, why didn't I think of that? I'll make billions in criminal defense work!

Posted by: Disgusted Beyond Belief | June 26, 2008 1:13 PM

Dear Disgustipated Beyond Belief

"Paul W Dennis - No, you are missing the big picture. Giving the awards to the parties suing gives those parties incentive to pursue the case and to invoke the punishment ..."

Shall we allow private incarcerations and debtors prisons too ?

I would not create a government bureaucracy to enforce punitive damages - I would do away with them - any conduct which reaches the level of actually deserving punitive damages (and damned few cases where punitives are plead actually reach that level) deserves criminal prosecution. I expect the government to prosecute criminal behavior

Privatizing PUNISHMENT is the same as authorizing vigilante justice. I refuse to approve of such behavior, whether it be lynch mobs hanging horse thieves or lawyers looting value of millions of American stockholders investments

Posted by: Paul W Dennis | June 27, 2008 3:08 AM

Paul - We already do privatize prisons. It is a multi-billion dollar industry.

And it seems terribly inefficient to require essentially two trials, one private (for the regular damages) and then one by the people (for criminal) when the issue is purely monetary damages that could all be handled in the first trial. Again, you advocate for vastly larger government bureaucracy. As it is, the vast majority of criminal corporate wrongdoing isn't prosecuted (or often even discovered) because there are millions of businesses and there are a relatively few number of government investigators with limited resources to find them, much less engage in a full scale prosecution. We'd need to hire probably tens of thousands of people, perhaps more, to even come close to having enough government people to actually do what you propose.

And I'm sorry, when you have to adjudicate it in a court of law before a judge and a jury of your peers, it is rather a stretch to call it "vigilante justice."

Posted by: Disgusted Beyond Belief | June 27, 2008 9:09 AM

"the vast majority of criminal corporate wrongdoing isn't prosecuted (or often even discovered) because there are millions of businesses and there are a relatively few number of government investigators with limited resources to find them"

You're surely not suggesting that Exxon had any chance of having its oil spill not caught.

"Exxon is essentially rewarded for dragging its feet for nearly two decades"

How did Exxon drag its feet? It has paid out over $3.4 billion (worth well over $5-6 billion in today's dollars) for something that caused $500 million in damage, solely because an employee disregarded company policy.

Posted by: Ted | June 27, 2008 10:06 AM

Ted: "You're surely not suggesting that Exxon had any chance of having its oil spill not caught."

That's not what I got out of his claim. He merely claimed that the vast majority of corporate misconduct isn't prosecuted, or even discovered. That's a 100% true claim.

Paul: I agree the government should prosecute corporate misconduct. The trouble is that it lacks the manpower and willpower to do it effectively. Politicians on both sides of the aisle are loathe to see their biggest contributors prosecuted.

Posted by: Justinian Lane | June 27, 2008 10:16 AM

"[T]he vast majority of corporate misconduct isn't...discovered. That's a 100% true claim."

If the conduct is never discovered, is it possible to know of its existence with "100%" certainty?

Posted by: Lawyer | June 27, 2008 10:49 AM

Lawyer: In the same way that we know the vast majority of medical malpractice is unreported, or that the vast majority of tax cheats aren't caught, etc.

Posted by: Justinian Lane | June 27, 2008 12:35 PM

I don't see any reason to believe that material corporate misconduct is going uncaught. The rewards for whistleblowers are substantial, yet 80% of False Claims Act cases are meritless, and securities class actions add maybe only 1 or 2% to enforcement efforts according to studies on the issue. Given the huge incentives for trial lawyers to suss out corporate misconduct, the fact that they're unable to do so and have to devote substantial resources to meritless extortionate suits suggests that the problem is not under-enforcement.

We also don't know that "the vast majority of medical malpractice is unreported." Studies on the subject measure "medical error", which is a broader category than malpractice, and include various de-minimis errors that have no reason to be reported.

Posted by: Ted | June 27, 2008 1:04 PM

"The vast majority of corporate conduct isn't...discovered...The vast majority of medical malpractice is unreported [and] that the vast majority of tax cheats aren't caught."

Setting aside the imprecision of the term "vast majority," suffice is to say that a "vast majority" of Justinian's claims are unsubstantiated.

Posted by: Lawyer | June 27, 2008 2:44 PM