The Supreme Court Breakfast Table

Whoops! Exxon Just Earned Another $2.5 Billion as I Wrote This!
An email conversation about the news of the day.
June 25 2008 6:58 PM

The Supreme Court Breakfast Table

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Dear Walter, Cliff, and Jack:

Anyone want to revisit their comments from earlier in the week about truly strange new bedfellows at the high court? The compromise between the justices who wanted to give huge punitive damages to victims of the 1989 Exxon Valdez oil spill in Alaska, and those who wanted to give none, is that everyone agrees to cap the damages with a formula that is almost completely arbitrary. I'm looking at the Exxon decision now, in which the court sliced and diced a punitive damages award against oil behemoth Exxon from $2.5 billion to the amount of compensatory damages awarded $507.5 million. That's an 80 percent reduction.

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Anybody who may have mistakenly believed that the high court was somehow conforming its decisions to public opinion this term can now rest assured that with gas at $4 a gallon and oil company profits at record highs, handing a monstrous win to Exxon might not be a popular move. By handing the more than 32,000 plaintiffs (of whom 20 percent are dead after 16 years of litigation) $15,000 each, as compared with the $75,000 they'd have collected had the $2.5 billion judgment been upheld, while Exxon earns an estimated $2.5 billion in net profits just about every three weeks, this court is pretty much assured of being labeled "pro-business." In fact, in the time it's taken me to write this one paragraph, I think Exxon just earned the money it will have to pay out to the plaintiff who sat next to me at oral argument.

The interesting part of this decision is that seeking vastly different results, everyone agreed to disagree. They split 4-4 on the question of derivative liability in maritime law—whether a ship's owner may be held liable for punitive damages based on the misconduct of its allegedly drunk employee. But then they voted 5-3 to cap the punitive damages award at the same amount as the compensatory damages. And no, the court isn't going to make unemployed cannery workers, Native Alaskans, and fishermen any happier with Justice David Souter's meandering legal excursion through the dusty facts of 19th-century maritime cases, cheerful references to the Code of Hammurabi, or the rollicking tour through median ratios. (0.66:1 versus 1.60:1—oh, my, how to choose?)

Walter, this was a monster win for you. One might even say it's huge. But how huge? What's the precedential value of all this going forward? Is the cap in punitive damages the law of the land or just of the seas? Will this be the new benchmark for state court damage awards? And for Walter and Cliff and Jack, another question: Is this an "activist" decision? Why? Why not?

Yours,
Dahlia

Dahlia Lithwick writes about the courts and the law for Slate. Follow her on Twitter.