Tuesday, December 31, 2013

In re the Exxon Valdez case brief

In re the Exxon Valdez case brief summary
Pre OPA case, 9th circuit

  • The Exxon Valdez ran aground on Bligh Reef spilling oil.
  • Exxon spent over $2 billion on efforts to remove the oil from the water.
  • Exxon spent $300 million on voluntary settlements prior to any judgments being entered against it.
  • Exxon agreed to pay $900 million to restore damaged natural resources to the state of Alaska and the US
  • This is an appeal of a $5 billion punitive damages award arising out of the Exxon Valdez oil spill.
  • The verdict in this case is for damage to economic expectations for commercial fishermen.
  • The plaintiffs here were almost entirely compensated for their damages years ago.
  • The punitive damages at issue were awarded to punish Exxon not to pay back the plaintiffs.
  • Issues:
    • Whether punitive damages should have been barred as a matter of law and
    • Whether the award was excessive.

Courts decision:
  • There was a class action.
  • This is not a case about environment. It’s about commercial fisherman.
  • Are punitive damages barred as a matter of law? NO.
  • Reasoning: this is a different result than in the Southport case were the court concluded the opposite.
  • The Clean water act says nothing about punitive damages.
Punitive damages Permissibility
  • Exxon argues that punitive damages aren’t traditionally allowable in admiralty law.
  • A prior criminal sanction doesn’t generally bar punitive damages.
    • Because the court has not been aware of a principle of law pursuant to which they should strike punitive damages award on the ground that the conduct had already been sufficiently punished and deterred.
Punitive damages in Maritime Law
  • In admiralty law, punitive damages sometimes are allowable and sometimes they are not.
    • Although rarely imposed, punitive damages have long been recognized as an available remedy in general maritime actions where defendant’s intentional or wanton and reckless conduct amounted to a conscious disregard of the right of others.
  • Punitive damages are available under the general maritime law.
  • Punitive damages are traditionally unavailable for breach of contract.
  • The consent decree pursuant to which the case was settled states the $900 million is “compensatory and remedial” and none of the amounts are described as punitive.
  • The punitive damages in this case are for harming the economic interests of commercial fishermen, the availability of fish to native subsistence fishermen and private land. As such, the harm and the punishment is distinct from the harm to the environment and natural resources.
Statutory preemption of common law → this is the Southport core decision
  • Exxon argues that the common law punitive damages remedy has been preempted by the comprehensive scheme for oil spill remedies in the Clean Water Act.
    • The issue should not be treated as waived. Exxon clearly and consistently argued statutory preemption as one of its theories for why punitive damages were barred as a matter of law and argued based on the Clean Water Act prior to entry of judgment.
    • Because the issue is massive in its significance to the parties and is purely on of law, it would be inappropriate to treat it as waived in the ambiguous circumstances of the case.
  • The better reading of the Clean Water Act is that it doesn’t preclude a private remedy for punitive damages.
  • Where a private remedy does not interfere with administrative judgments and does not conflict with the statutory scheme, a statute providing a comprehensive scheme of public remedies need not be read to preempt a preexisting common law private remedy.
    • The absence of any private right of action in the Act for damage from oil pollution may more reasonably be construed as leaving private claims alone than as implicitly destroying them.
  • Miles case → it doesn’t support Exxon’s argument (different decision than in South Port). It says that Miles was about wrongful death case.
  • The Clean Water Act doesn’t preempt a private right of action for punitive as well as compensatory damages for damage to private rights / The Clean Water act doesn’t preempt the right to punitive damages.

Rest of the case are the rules for allowing punitive damages (this isn’t admiralty law as such)
Standard of Proof
  • The standard of proof in maritime cases is preponderance of evidence as opposed to clear and convincing evidence required in instances as habeas corpus and deportation.
Vicarious liability.
  • Exxon argues that the district court erroneously instructed the jury that it could impose punitive damages on Exxon even if all the recklessness was by its employee Captain Hazelwood rather than by Exxon itself. The instructions said that “a corporation is not responsible for the reckless acts of all of its employees” but for “those employees who are employed in a managerial capacity while acting in the scope of their employment”.
  • The appellate court follows the of Protectus Alpha which says that punitive damages can be awarded against a principal for an agent’s torts, not only where they are authorized, ratified or approved and not only where the agent wax unfit and the principal was reckless in employing him, but also where he was “employed in a managerial capacity and was acting in the scope of employment”.
    • The court affirms the punitive damages judgment because the foreman was a managerial employee acting within the scope of his employment and had discretion in what he did.
Sufficiency of Evidence:
  • Exxon argues that there was insufficient evidence for the jury to award punitive damages against the Captain or against Exxon for the captain’s conduct.
    • There was sufficient evidence supported by testimony, exhibits and reasonable inferences from them.
Amount of the Punitive Damages Award:
  • The jury awarded $5 billion in punitive damages against Exxon (as well as $5,000 in punitive damages against the captain). At the time it was the largest punitive damages award in American history.
  • Exxon challenges the $5 billion award as excessive.
  • The punitive damages amount is about one year’s net profits for the entire world-wide operations of Exxon, and the jury may well have decided that for such egregious conduct the company responsible ought to have a year without profit.
  • Before Motor v. Oberg the court would not disturb punitive damage awards unless it appeared that the jury was influenced by passion or prejudice. However, as explained in Ace v Aetna, under Oberg the court must consider whether punitive damages award passes “muster under federal due process analysis” in addition to reviewing whether the vidence is sufficient as a matter of law to support the award.
    • The test of whether a punitive damages award survives review cannot be merely whether there is any evidence to support it, under Oberg.
  • Two critical Supreme Court opinions decided after the district court’s decision in this case, have expanded the way courts review constitutional challenges to large punitive damage awards.
    • In BMW v Gore the court held that $4 million in punitive damages award was unconstitutional because the defendant lacked fair notice that such a severe award would be imposed (if it was so grossly excessive that the defendant lacked fair notice that it would be imposed). In concluding the award violated the Cue Process Clause, the court established three guideposts for courts to use in determining whether a punitive damage award is grossly excessive:
      • The reprehensibility of the defendant’s conduct
      • The ration of the award to the harm inflicted on the plaintiff
      • The difference between the award and the civil or criminal penalties in comparable cases.
    • The Supreme Court reaffirmed the importance of BMW in Cooper v Leatherman – this time the courts said that considerations of institutional competence weigh in favor of independent appellate review. “Courts of appeal should apply a de novo standard of review when passing on districts courts’ determinations of the constitutionality of punitive damages awards.
    • In this case Exxon did not raise any direct constitutional challenges to the amount of the award until after the judgment. Therefore, the court has no constitutional analysis to which exercise any de novo review.
    • The court remands the district court to consider the constitutionality of the amount of the award in light of the guidespots established in BMW.
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