Opinion ID: 3040089
Heading Depth: 3
Heading Rank: 5

Heading: Punitive Damages Opinion I.

Text: We issued our first opinion on punitives damages in November, 2001. Our opinion went in detail through the facts of the disaster and the conduct of Exxon, and of Captain Hazelwood, because they bore so heavily on the consideration of the issues on appeal. Punitive Damages Opinion I, 270 F.3d at 1221-24. In an opinion of more than 40 pages, we rejected Captain Hazelwood’s separate appeal, and dealt at some length with all of the issues raised by Exxon. We ultimately rejected all of them except the challenge to the amount of punitive damages. Id. at 1254. Referring to the “unique body of law” that governs punitive damages, we focused on the two Supreme Court opinions that had been decided after the district court’s decision in the case, and we termed them “critical.” Id. at 1239. These were BMW v. Gore and Cooper v. Leatherman Tool Group. We said: In BMW, the Supreme Court held that a punitive damage award violated the Due Process Clause of the Fourteenth Amendment because it was so grossly excessive that the defendant lacked fair notice that it would be imposed. Dr. Gore’s car was damaged in 19712 IN RE: THE EXXON VALDEZ transit, and BMW repainted it but did not tell Dr. Gore about the repainting when it sold him the car. The jury found that to be fraudulent, and awarded $4,000 in compensatory damages for reduced value of the car and $4 million in punitive damages. The Alabama Supreme Court cut the award to $2 million, but the Court held that it was still so high as to deny BMW due process of law for lack of notice, because the award exceeded the amounts justified under the three “guideposts.” The BMW guideposts are: (1) the degree of reprehensibility of the person’s conduct; (2) the disparity between the harm or potential harm suffered by the victim and his punitive damage award; and (3) the difference between the punitive damage award and the civil penalties authorized or imposed in comparable cases. We apply these three guideposts to evaluate whether a defendant lacked fair notice of the severity of a punitive damages award, and to stabilize the law by assuring the uniform treatment of similarly situated persons. Id. at 1240-41 (internal quotations omitted). We noted that in Cooper v. Leatherman Tool Group the Supreme Court decided that “considerations of institutional competence” require de novo review of punitive damages awards. Id. at 1240 (quoting Cooper, 532 U.S. at 440). We went on to observe that the district court had not reviewed the award under the standards announced in those cases because neither case had been decided by the time the jury returned its verdict, and Exxon had never challenged the amount of the award on constitutional grounds until after the jury’s verdict. Id. at 1241. In view of the need for de novo review and the intervening decisions of BMW v. Gore and Cooper v. Leatherman Tool Group, we remanded for reconsideration of punitive damages. Id. We also provided some observations on possible alternative analyses of punitive damages under the BMW v. Gore factors. Id. at 1241-46. IN RE: THE EXXON VALDEZ 19713 These observations began with the factor of reprehensibility, quoting the Supreme Court’s admonition in BMW v. Gore that it is “[p]erhaps the most important indicum of the reasonableness of a punitive damage award.” Id. at 1241. We pointed to the Court’s analogy to criminal cases, and its statement that nonviolent crimes are less reprehensible than violent ones. Id. We drew an analogy to the facts of this case, where Exxon’s conduct was reckless, but there was no intentional spilling of oil “as in a midnight dumping case.” Id. at 1242. We agreed with the plaintiffs that Exxon’s conduct was reprehensible in that it knew of the risk of an oil spill in transporting huge quantities of oil through the Sound, and it knew Hazelwood was a relapsed alcoholic. Id. at 1242. We observed, however, that such reprehensibility went more to justify punitive damages than to justify such a high amount. Id. We noted some mitigating factors, including prompt ameliorative action and the millions spent in clean up. Id. We then turned to the ratio of actual harm caused by the misconduct to punitive damages awarded. Id. at 1243. Again analyzing BMW v. Gore, we said that it was difficult to determine what we called the “numerator,” that is, the value of the harm caused by the spill. Id. We used the jury award of $287 million in compensatory damages as one possible numerator and also, as alternative numerators, the district court’s estimates of harm, which at that time ranged from $290 million to $418 million. Id. We noted that if compensatory liability were used, any amounts Exxon had voluntarily paid in settlements should not be taken into account. We said that [t]he amount that a defendant voluntarily pays before judgment should generally not be used as part of the numerator, because that would deter settlements prior to judgment. “[T]he general policy of federal courts to promote settlement before trial is even stronger in the context of large scale class actions.” Id. at 1244 (citing Icicle, 229 F.3d at 795; Baker, 239 F.3d at 988). 19714 IN RE: THE EXXON VALDEZ As a final observation on the relationship between the punitive damages award and the harm, we pointed out that the substantial clean up costs and other losses to Exxon from the oil spill had already had considerable deterrent effect. We indicated such deterrence should, depending on the circumstances, call for a lower, rather than a higher ratio. Id. Turning to the third BMW v. Gore factor, we observed that the nature of criminal fines, which are potential state and federal penalties, might be useful in reviewing punitives. Id. at 1245. We observed that “[c]riminal fines are particularly informative because punitive damages are quasi-criminal.” Id. We then looked to the general federal statutory measure for fines and discussed a number of alternative guideposts. Id. We noted the federal fines could range from $200,000 to $1.03 billion. Id. We looked as well at the ceiling of civil liability under the Trans-Alaska Pipeline Act and noted it was $100 million in strict liability for anyone who spills oil from the pipeline. Id. In addition to those possible penalties, we looked at the actual penal evaluation made in the case by the Attorneys General of the United States and of the state of Alaska. Id. at 1245-46. Agreeing with the district court that they did not establish a limit, we noted that they did represent an adversarial judgment, by executive officers, of an appropriate level of punishment. Id. at 1246. Finally, without necessarily exhausting available analogies in the penalty field, we noted that Congress had subsequently amended the statute to increase the amount of civil penalties for grossly negligent conduct, and that the maximum penalty here under the new federal statue would be a maximum of $786 million. Id. The federal penalties are based upon the number of barrels of oil spilled. 33 U.S.C. § 1321(b)(7). In suggesting various possible guidelines to assess whether the $5 billion was “grossly excessive” we did not imply that any single guidepost would be controlling. Concluding that IN RE: THE EXXON VALDEZ 19715 the $5 billion was too high to withstand the review we were required to give it under BMW v. Gore and Cooper v. Leatherman Tool Group, and noting that those cases came down after the district court had ruled, we remanded for it to apply the due process analysis required under those decisions, with what we hoped would be helpful guidance from our opinion. Id. at 1241. No district court analysis of BMW v. Gore was before us and we thus could not have decided any specific issue arising from any such analysis arising from its guideposts. Id. We offered only guidance culled from what was then controlling Supreme Court precedent and general principles applicable to the calculation of damage liability. Id.