California Punitives by Horvitz & Levy

  • Exxon Shipping Co. v. Baker Illustrates The Supreme Court’s Increasing Frustration with “Eccentrically High” Punitive Damages

    Today’s decision in the Exxon Valdez case (Exxon Shipping Co. v. Baker) will undoubtedly launch a thousand law review articles over the next few months and years. It will be interesting to see if any consensus develops in the legal academic community about the likely future developments that will flow from this opinion, but in the meantime, here are my initial thoughts.

    Taken in isolation, this opinion could be dismissed as a maritime law decision with little impact beyond federal common law. Technically, the opinion won’t be binding authority with respect to punitive damages awards arising under state law. But viewed in the context of the Supreme Court’s recent line of punitive damages decisions, the opinion seems to be a lot more important than that.

    When the Supreme Court ventured into the area of punitive damages in cases like Oberg, Haslip, and TXO, members of the Court expressed some concern about unlimited punitive damages awards, but they declined to impose any limits, focusing instead on procedural safeguards. A few years later, however, in BMW v. Gore, the Court seemed to arrive at the view that procedural safeguards were not enough and substantive limits were needed. But the Court adopted a flexible multi-factor balancing test instead of imposing any concrete limits. When that didn’t seem to work, the Court revisited the issue again in State Farm v. Campbell. While Campbell stopped short of imposing absolute bright-line limits, the Court limited the flexibility of its prior guidelines, holding that most awards should be less than ten times the amount of compensatory damages, and perhaps only equal to compensatory damages in cases where the compensatory damages themselves are “substantial.”

    Most recently, in last year’s Philip Morris v. Williams decision, the Supreme Court returned again to a procedural issue and declined to address the issue of ratios. Some commentators opined that Williams indicated a shift away from the idea of ratios and substantive limits. (See for example, Anthony Sebok, “After Philip Morris v. Williams: What Is Left of the Single Digit Ratio.”) Today’s opinion seems to clearly refute that notion. Single digits are back, with a vengeance.

    Because Exxon Shipping arose under maritime law and not state law, the Court felt even less constrained about imposing substantive limits, and opted for the the simplest possible test: a bright-line limit that punitive damages cannot exceed the amount of compensatory damages. Justice Souter, writing for the majority, adopted this ratio out of concern for the “stark unpredictability” of punitive damages and the unfairness that arises from outlier awards. Clearly, the Court did not think these fairness problems were sufficiently ameliorated by their prior decisions, so they abandoned the idea of a flexible multi-factor test in favor of a rigid bright-line rule. Moreover, they did not draw the line at 3:1 or 4:1, benchmarks mentioned in the Court’s prior opinions. Instead, they adopted the 1:1 line based on data indicating that the median ratio overall for punitive damages is below that line. I cannot help but conclude that the Court has simply grown frustrated with the more subtle approach of its prior decisions and felt that drastic action was necessary.

    In response to the view of the dissenting Justices that the Court’s adoption of a substantive limit usurps Congress’s lawmaking function, Justice Souter noted that outlier punitive damages award are a judicially created problem and therefore should be addressed by the judiciary. All of this suggests that the Court may ultimately decide to tighten the screws even further if and when it reviews another punitive damages award under the Due Process Clause.

    (UPDATE on 6/26/08: Upon further reflection, it might prove difficult for Justice Souter to garner enough votes to adopt a stricter ratio analysis as a matter of due process. Justices Scalia and Thomas, who joined the majority in Exxon Shipping Co., have consistently rejected the Court’s use of the Due Process Clause to impose restrictions on the amount of punitive damages. Even if Justice Alito (who recused himself from Exxon Shipping Co.) agreed to adopt a more rigid ratio analysis in due process cases, Justice Souter would still need to get a vote from either Justice Stevens (who wrote BMW v. Gore and concurred in State Farm v. Cambpell but dissented from Exxon Shipping Co.) or Justice Breyer (who concurred in BMW and State Farm but dissented from Exxon Shipping Co.))

    Although Exxon Shipping Co. won’t be binding authority in many cases, many lower courts are likely to find it persuasive. The reasoning behind the Supreme Court’s adoption of the 1:1 limit is not based on any peculiarities of maritime law. It is based on fairness concerns arising from the wild unpredictability of outlier punitive damages awards, an issue that is obviously not limited to maritime cases.

  • The Exxon Valdez Decision: “A Warning About Litigant-Funded Research in Supreme Court Cases”

    Professor Rick Hasen at Election Law Blog has posted an interesting comment on this footnote (fn. 17) in the Exxon Valdez (Exxon Shipping Co. v. Baker) opinion:

    The Court is aware of a body of literature running parallel to anecdotal reports, examining the predictability of punitive awards by conducting numerous “mock juries,” where different “jurors” are confronted with the same hypothetical case. See, e.g., C. Sunstein, R. Hastie, J. Payne, D. Schkade, W. Viscusi, Punitive Damages: How Juries Decide (2002); Schkade, Sunstein, & Kahneman, Deliberating About Dollars: The Severity Shift, 100 Colum. L. Rev. 1139 2000); Hastie, Schkade, & Payne, Juror Judgments in Civil Cases: Effects of Plaintiff’s Requests and Plaintiff’s Identity in Punitive Damage Awards, 23 Law & Hum. Behav. 445 (1999); Sunstein, Kahneman, & Schkade, Assessing Punitive Damages (with Notes on Cognition and Valuation in Law), 107 Yale L. J. 2071 (1998). Because this research was funded in part by Exxon, we decline to rely on it.

    (Emphasis added.)

    Here’s Rick’s comment:

    Now I used to keep up with the psychological literature more than I do now, but I remain somewhat familiar with this work and very familiar with the work of some of the authors cited above. It is really top notch work. So I find this footnote troubling. There will be cases (including election law cases) in which there are no extant studies on an empirical question at the heart of a case. At that point, it makes sense for litigants to fund such research. Indeed, when such research appears in an expert report subject to cross-examination, I assume the Court has no problem relying upon the evidence. So why should it be different when a litigant funds the research, particularly if the research has gone through peer review and of course if the funding source is disclosed so that the opposing side may probe for bias?

    Rick’s point makes a lot of sense to me (and not just because he’s affiliated with our firm).

  • Supreme Court Reduces Exxon Valdez Punitive Damages Award


    The U.S. Supreme Court issued its decision in the Exxon Valdez punitive damages litigation (Exxon Shipping Co. v. Baker) this morning. As we predicted, the Court reduced the award but rejected Exxon’s request to throw out the punitive damages altogether. The Court was split 4-4 (because Justice Alito recused himself) regarding Exxon’s argument that the actions of a ship captain cannot, as a matter of law, expose the ship owner to punitive damages. And the Court rejected Exxon’s argument that the Clean Water Act prohibits the imposition of punitive damages.

    But the Court agreed with Exxon that the award is excessive. The Court based its excessiveness analysis not on the Due Process Clause (as in the BMW v. Gore and State Farm v. Campbell cases), but on principles of federal common law. After fleshing out those principles, the Court reduced the award down to $507.5 million, equal to the amount of compensatory damages as determined by the district court. This may finally bring this case to a close, twenty years after the spill and fourteen years after the verdict.

    We will have further commentary on this opinion once we’ve had a little more time to digest it.

  • No Opinion Yet In Exxon Valdez Punitive Damages Case; Ruling Could Come on Wednesday

    This morning, the U.S. Supreme Court issued opinions in three of its ten undecided cases from this term, but the Court still hasn’t ruled on the Exxon Valdez punitive damages case (Exxon Shipping Co. v. Baker).

    The Court has seven undecided cases remaining from this term. Wednesday is the next day on which the Court will issue opinions. Because the Court is not likely to issue all seven opinions on Wednesday, there will probably be at least one more opinion day after that.

    Hat tip: SCOTUSblog.

  • No Ruling on Exxon Valdez Case Today; The Supreme Court May Issue Its Opinion on Monday

    The U.S. Supreme Court issued five opinions today, but did not decide the ExxonValdez case (Exxon Shipping Co. v. Baker). The term is coming to a close and the Court still has 10 unresolved cases. The next batch of opinions will be released on Monday.

  • Sen. Murkowski Pushes Bill to Give Tax Break on Exxon Valdez Punitive Damages Award

    The Anchorage Daily News reports that Alaska Senator Lisa Murkowski is trying to push a bill through Congress to give tax breaks to the plaintiffs in the Exxon Valdez case, should they receive a windfall punitive damages award. She doesn’t have much time, as the Supreme Court is expected to decide the case within the next week. And if our predictions about the likely outcome of the case prove correct, the windfall won’t be nearly as large as the $2.5 billion approved by the Ninth Circuit.

  • Three Strikes For Linda Greenhouse: Her Commentary on Williams III Misses the Mark

    Linda Greenhouse reported here on the United States Supreme Court’s recent cert grant in Williams III. As we pointed out here, the court granted cert only on the question regarding the independent state law ground and declined to review the award for excessiveness. Greenhouse writes that “the justices denied review on the first question, which would have had broad application to all punitive damages cases. In earlier rulings, the Supreme Court has suggested that punitive damages should be no more than nine times the compensatory damages, and perhaps a good deal less than that, but there is evidently not a clear majority to convert the suggestion into a firm rule. Instead, they will hear Philip Morris’s appeal only on the second question, which applies to this convoluted case, now in its ninth post-verdict year, and to no other. The justices, in other words, appeared less concerned with making law than with asserting their own authority over that of state courts on the issue of punitive damages.”

    Greenhouse’s analysis ignores the current state of punitive damages jurisprudence. First, the Supreme Court has not “suggested” that the ratio of punitive damages to compensatory damages must be in the single digits and perhaps the very low single digits; it has held that such an outcome is mandated by federal due process (subject to a few narrow exceptions, e.g., where the compensatory damages are very small). Second, there plainly is a clear majority for this holding and a firm rule that is required to be applied nationwide. Indeed, the State Farm v. Campbell case was a 6-3 opinion and is controlling authority on this point. Third, the issue raised by the second question is not unique only to this case. It is the question squarely presented by the petition for review to the California Supreme Court in Buell-Wilson v. Ford.

  • U.S. Supreme Court Grants Certiorari in Williams III

    The U.S. Supreme Court has granted cert. yet again in Philip Morris v. Williams. The Court’s order limits the grant of certiorari to Question 1 presented by the opinion, which involves the Oregon Supreme Court’s use of a state-law procedural rule to find that Philip Morris forfeited its right to complain about the due process violation that the Supreme Court found in its earlier opinion:

    “Whether, after this Court has adjudicated the merits of a party’s federal claim and remanded the case to state court with instructions to “apply” the correct constitutional standard, the state court may interpose–for the first time in the litigation–a state-law procedural bar that is neither firmly established nor regularly followed.”

    The Court declined to review the second issue presented, which was the constitutional excessiveness of the award. The Court’s limited grant of review is interesting because the Court granted review on the excessiveness issue last time around, although the Court never reached that issue given its disposition of the case. The limited grant of review will probably lead to a lot of speculation about whether the Court’s views on excessiveness have shifted after the addition of Justices Roberts and Alito, who may share the view of Justices Scalia and Thomas that the Constitution does not impose restrictions on the amount of punitive damages. On the other hand, the Court’s decision not to review the second issue may simply reflect an understanding among the members of the Court that they are likely to reverse the Oregon Supreme Court on the procedural issue (again) and therefore won’t need to reach the excessiveness issue. Or perhaps the justices feel that they said all that needs to be said about excessiveness in BMW v. Gore and State Farm v. Campbell.

    In any event, the Supreme Court’s grant of certiorari in this case will come as a bit of surprise to some. Howard Bashman, for example, predicted that the Court would not be interested in the procedural issue. My co-blogger Jeremy Rosen, on the other hand, was highly confident that the Court would reverse the Oregon Supreme Court on the procedural issue. Jeremy predicted a summary reversal, which obviously didn’t happen, but a reversal seems likely nevertheless.

    SCOTUSblog has links to the opinion below, petition, the brief in opposition, the reply, and the amicus briefs at the petition stage (by the US Chamber, Washington Legal Foundation, Associated Oregon Industries, and the Products Liability Advisory Council).

  • Mercer Law Review Casenote: “Who’s on First? Why Philip Morris USA v. Wililams Left Juries Confused . . .”

    The Spring 2008 edition of the Mercer Law Review has a casenote on Philip Morris v. Williams entitled “Who’s on First? Why Philip Morris USA v. Williams Left Juries Confused About Whose Injuries Can Be Considered When Determining Punitive Damages.” (I don’t have a link to the article, but the Westlaw citation is 59 MERLR 1043.)

    The note, written by Steven Moulds, is largely a summary of the Williams decision and the Supreme Court’s recent series of punitive damages decisions. But the note concludes with a few interesting observations. Among them is the observation that only Justice Thomas, and not Justice Scalia, dissented on the ground that the Constitution does not protect defendants from excessive punitive damages. The article notes that Justice Scalia consistently dissented on that basis in the Court’s prior punitive damages cases, but he did not do so in Williams. He did not write a separate opinion on that basis nor did he join Justice Thomas’ dissent. Instead he joined Justice Ginsburg, who did not address whether the Constitution limits the jury’s discretion to award punitive damages.

    The article suggests that “Justice Scalia’s shift from Justice Thomas’s to Justice Ginsburg’s dissent might suggest that he is backing down from his previous dissents in Gore and Campbell, and that he may accept some limitations on punitive damages in future cases.” It never occurred to me before that Justice Scalia’s nonparticipation in Justice Thomas’s dissent might suggest a shift in Justice Scalia’s views. I had always assumed Justice Scalia did not think it necessary to reiterate his standing objection to the court’s due process excessiveness analysis in Williams because the Court did not reach that issue in Williams. We may have to wait some time to learn whether Justice Scalia’s views have shifted. Although the forthcoming decision in the Exxon Valdez case could conceivably shed some light on the issue, in all likelihood that decision will not delve into any Constitutional issues.

  • Still No Ruling On Cert. Petition in Williams II

    As we noted in a prior post, the Supreme Court originally distributed the third cert. petition in Philip Morris v. Williams for consideration at its May 22 conference, but when the court issued its order list for the May 22 conference, the court did not rule on Williams II. The court then redistributed the case for consideration at its May 29 conference. Today, the order list for that conference is now available, and there’s still no ruling on Williams II. Does this mean (as my co-blogger Jeremy Rosen has suggested) that the Supreme Court is planning to issue a summary reversal and they’re taking additional time to draft their opinion? Are they having trouble reaching a decision on whether to grant cert.? Are they holding the case pending the disposition of the Exxon Valdez case (which seems unlikely, since the excessiveness issue in that case arises under federal common law rather than the Due Process clause, as in Williams)?

    UPDATE: SCOTUSblog reports that Williams II has been re-distributed for the court’s June 5 conference.

    FURTHER UPDATE: A reader points out: “Actually, it is the third petition for cert. in this saga. The first was GVR’d in light of State Farm, the second granted, and now this one.” Good point. We’ve corrected our post accordingly. We’re still referring to this as Williams II for now, since the Supreme Court’s opinion (if cert. is granted) will be its second in this case.