Opinion ID: 3040089
Heading Depth: 3
Heading Rank: 1

Heading: From the Time of the Accident through the First

Text: Punitive Damages Award and Denial of Motion for New Trial: The Common Law through the Supreme Court Decision in TXO. The Exxon Valdez ran aground on Bligh Reef in Alaska’s Prince William Sound on March 24, 1989. Punitive damages at that time were governed by general common law principles. At common law, the jury determined the punitives, and the trial judge conducted a limited review to determine whether the jury’s verdict was the product of passion and prejudice, or whether the award was one that shocked the conscience. See Renee B. Lettow, New Trial for Verdict Against Law: Judge- Jury Relations in Early Nineteenth Century America, 71 Notre Dame L. Rev. 505, 542-51 (1996); Paul DeCamp, Beyond State Farm: Due Process Constraints on Noneconomic Compensatory Damages, 27 Harv. J.L. & Pub. Pol’y 231, 246-48 (2003); see also Browning-Ferris Indus. of Vt., Inc. v. Kelco Disposal, Inc., 492 U.S. 257, 278 n.24 (1989) (affirming district court’s application of Vermont’s “grossly and manifestly excessive” standard for judicial review); Honda Motor Co. v. Oberg, 512 U.S. 415, 432 n.10 (1994). Although there were cases dating from the Lochner era that had suggested that there may be a due process ceiling on punitive damages, at the time of this accident in 1989, the Supreme Court had never invalidated an award on grounds that the size of the award violated due process. See BMW v. Gore, 517 U.S. at 600-01 (Scalia, J., dissenting) (discussing the history of due process review of punitive damages awards) (citing Seabord Air Line R. Co. v. Seegers, 207 U.S. 73, 78 (1907); Southwestern Tel. & Tel. Co. v. Danaher, 238 U.S. 482, 489-91 (1915); Waters-Pierce Oil Co. v. Texas, 212 IN RE: THE EXXON VALDEZ 19705 U.S. 86, 111-12 (1909); Standard Oil Co. of Ind. v. Missouri, 224 U.S. 270, 286, 290 (1912); St. Louis, I.M. & S.R. Co. v. Williams, 251 U.S. 63, 66-67 (1919)). In 1991, however, the Supreme Court decided Pacific Mutual Life Insurance Co. v. Haslip, 499 U.S. 1 (1993). There, for the first time in the modern era, the Court conducted a substantive review of an award of punitive damages. Haslip was an insurance fraud case, in which the agent pocketed the premiums and caused the plaintiff’s insurance to lapse. Id. at 4-5. The Court upheld a punitive damages award that amounted to four times the award of compensatory damages and 200 times the out-of-pocket costs of the defrauded insured. Id. at 23-24. The Court noted that the ratios might be “close to the line,” but said the award had to be upheld because it “did not lack objective criteria.” Id. The Court therefore concluded that the punitive damages did not “cross the line into the area of constitutional impropriety.” Id. The Supreme Court did not, at that time, and has not since, defined any bright line of constitutional impropriety. It has, repeatedly, indicated that there is none. See, e.g., State Farm, 538 U.S. at 424-25. In 1993, two years after Haslip, the Court took on another major punitive damages case. In TXO Production Corp. v. Alliance Resources Corp., 509 U.S. 443 (1993), the Court reviewed a jury award of $19,000 in compensatory damages and $10 million in punitive damages. Id. at 451. That case arose out of an oil and gas development fraud scheme. Id. at 447-51. The case produced no majority opinion. The plurality, reiterating that due process places some limit on punitive damages, said that the award was not so “grossly excessive” that it should be overturned, thus invoking the standard used in Haslip. Id. at 462. The Court declined to provide any particular guidance in determining when an award would be “grossly excessive.” Id. The plurality chose instead to say that the dramatic disparity between the actual financial loss and 19706 IN RE: THE EXXON VALDEZ the punitive award was not controlling. Id. The award was upheld. Id. It was against this background that the jury in this case was instructed in 1994. The jury was told to take into account the reprehensibility of the misconduct, the amount of actual or potential harm arising from the misconduct, and, additionally, to take into account mitigating factors such as the clean up costs and fines already imposed as deterrents. District Court Opinion, 296 F. Supp. 2d at 1081-82. The instructions were the product of mutual effort of the parties and the district court, and have not been seriously challenged. Id. They are not questioned here and were, in retrospect, quite forward looking. On September 16, 1994, the jury returned a $5 billion punitive damages verdict, having some time earlier imposed a compensatory award of $287 million. The district court accepted the punitive award and entered judgment. Citing Haslip and TXO, the district court denied Exxon’s motion for a new trial in January of 1995.