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104 Case Commentaries Punitive damages ruled excessive in Exxon Valdez : Battista [2008] 3 Env. Liability
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Case Commentaries

U.S. Supreme Court rules punitive damages award recklessly by drinking heavily prior to departure and then,
in Exxon Valdez excessive: punitive award should while underway, exiting the ship’s bridge leaving a tricky
align with compensatory damages course correction to inexperienced and unlicensed
Exxon Shipping Co. v. Baker subordinates. Exxon was found liable for the reckless acts
554 U.S._ (2008); U.S., No. 07-219, June 25, 2008 of its employee who was acting in a managerial capacity in
the scope of his employment.
Gregory J. Battista Punitive damage awards vary widely, however, due to
Cravath, Swaine & Moore LLP, New York, USA the discretion of juries and courts and regulation by
individual states. Generally, juries determine the amount
of punitive damages and that determination is reviewed by
Summary and background the courts to ensure that it is reasonable. Some individual
The United States Supreme Court recently held that the states have put certain limits on punitive damages including
U.S.$2.5 billion punitive damage award in the infamous the following:
1989 Exxon Valdez oil spill is excessive under maritime
common law. The Court’s June 25, 2008 decision in Exxon • prohibited entirely on state constitutional grounds (e.g.,
Shipping Co. v. Baker found that the punitive award should Nebraska)
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not be more than the compensatory damages suffered by • allowed only when authorized by statute (e.g.,
the plaintiffs, which in this case amounted to approximately Massachusetts and Louisiana)
$500 million. • absolute monetary cap (e.g., $350,000 in Virginia)
The Supreme Court’s ruling follows a long series of • maximum ratio of punitive to compensatory damages,
markdowns on the original punitive damage award. After a typically ranging from 5:1 to 1:1.
jury trial in 1994, the United States District Court for the
District of Alaska awarded $5 billion in punitive damages
in addition to compensatory damages. In 2001, the Ninth Justice Souter’s majority opinion
Circuit Court of Appeals found that the $5 billion punitive Supreme Court Justice David Souter, writing for the 5–3
damage award violated the due process clause of the United majority, noted that ‘punitive damages overall are higher
States Constitution and remanded the case for further and more frequent in the United States than they are
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proceedings. In 2004, the District Court reduced the anywhere else.’ The Court found that the issue of most
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punitive damages to $4.5 billion. In December 2006, the concern was the ‘stark unpredictability of punitive awards’ 7
Ninth Circuit further reduced the award to $2.5 billion 4 and was apparently troubled by the lack of consistency of
and Exxon appealed that decision to the Supreme Court. such punitive awards in cases involving similar claims and
In the United States, punitive damages are awarded to circumstances. To the Court, there is something inherently
punish the defendant and to deter future wrongdoing. The unfair about widely variable punitive damage awards and
prevailing rule in American courts also limits punitive inexplicable results where punitive damages sometimes
damages to cases where the defendant’s conduct is ‘dwarf the corresponding compensatories’. 8
‘outrageous’, owing to gross negligence, recklessness or The Exxon Valdez matter created an opportunity for
other deplorable behavior. The original jury in this case the Court in the context of maritime law, rather than state
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found that the tanker’s captain, Joseph Hazelwood, acted law, to establish its own view of an appropriate outer limit
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6 ibid at 22.
1 Exxon Shipping Co. v. Baker, 554 U.S._(2008); U.S., No. 07–219, 7 ibid at 26.
June 25, 2008; http://www.supremecourtus.gov/opinions/ 8 ibid.
07pdf/07-219.pdf. 9 The Court’s previous decisions on punitive damages were in
2 In re Exxon Valdez, 270 F. 3rd 1215 (9th Cir. 2001). the context of state law interpretation and the limits placed on
3 In re Exxon Valdez, 296 F. Supp. 2d 1071 (D. Alaska 2004). such damages under the ‘due process’ standards of the United
4 In re Exxon Valdez, 472 F. 3rd 600 (9th Cir. 2006). States Constitution. The current case differs from due process
5 Exxon Shipping, at 19. review because it arises under federal maritime jurisdiction, a

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