November 11, 2007
SCOTUS to review Exxon Valdez punitive damages award
The Supreme Court of the United States has granted certiorari to review the 2.5 billion dollar punitive damages award assessed against Exxon for harms resulting from the infamous Exxon Valdez oil spill. In case you've forgotten the details, the Tanker/Vessel Exxon Valdez spilled roughly 11 million gallons of crude oil into the Prince William Sound and Lower Cook Inlet of Alaska when the ship's captain, Joseph Hazelwood, ran the vessel into Bligh Reef on March 24, 1989.
The Court will consider three issues in Exxon Shipping Co. v. Baker : 1) Whether a shipowner may be held liable for punitive damages under maritime law for conduct of the ship's master at sea; 2) Whether courts may add a punitive damage remedy to the criminal and civil remedies Congress has specified in an applicable statute (in this case, the Clean Water Act); and 3) Whether the 2.5 billion dollar punitive damages award is within the limits allowed by federal maritime law.
Initially, a federal jury awarded 5 billion dollars in punitive damages to commercial fishers and other private parties for lost income and related economic harm resulting from the Exxon Valdez oil spill. Exxon appealed to the Ninth Circuit Court of Appeals, and after several rounds of remand and appeal, the Ninth Circuit reduced the award to 2.5 billion dollars in the case In re: The Exxon Valdez. However, that holding is at odds with every other circuit's interpretation of the U.S. Supreme Court's 1818 decision in The Amiable Nancy.
The Amiable Nancy is a well known maritime case that arose out of the War of 1812, and the facts of the case are as follows: the American brig "The Scourge" was one among hundreds of privateers authorized to attack British merchant ships in the West Indies. Not content with British targets, the captain and crew of The Scourge boarded and plundered a non-enemy Haitian schooner called The Amiable Nancy. The owner of the schooner sued the owner of The Scourge in federal court and was awarded damages. The U.S. Supreme Court reversed, holding that a ship's owner cannot be subject to punitive damages for the actions of its agent where the owner is "innocent of the demerit of this transaction, having neither directed it, nor countenanced it, nor participated in the slightest degree." 3 Wheat. 546, 558, 16 U.S. 546 (1818).
Exxon argues in its petition for certiorari that the Ninth Circuit's decision in In re: The Exxon Valdez runs afoul of the rule from The Amiable Nancy, which has been applied by every other circuit that has considered the issue to bar vicarious punitive liability in maritime cases. Dave Oesting, lead attorney for the respondents/claimants, disagrees and notes that the degree of control that the owner of a vessel can, and usually does, assert over a captain is very different in the 21st century than it was in 1812. Mr. Oesting argues that modernly, where vessels are monitored by satellite, radio, teleradio, telephone and internet, the "rule should be that the master of a vessel is wholly subject to the control, observation and supervision of the shoreside company managers and where a manager [sic, perhaps he meant to say "master"?] of a vessel that is a thousand feet long and carrying 254,000 barrels of oil runs amok, the company ought to be responsible for it."