For those of you who haven’t followed all the twists and turns of the litigation over the multi-billion dollar punitive damages award in the Exxon Valdez litigation, you can catch up using this flow chart.
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Senator Obama Won Punitive Damage Case on Appeal in the Seventh Circuit
When he was a practicing lawyer, Senator Obama successfully defended an arbitration award of punitive damages in the Seventh Circuit. According to the Sun Times, “In 1994, Obama went before the 7th Circuit to defend Ahmad Baravati, a trader blackballed by his bosses after he reported them for fraud. An arbitrator awarded Baravati $60,000 in damages plus $120,000 in punitive damages against the former bosses. They appealed, saying arbitrators don’t have the power to award punitive damages. Obama had a tough job because the same court had ruled a week earlier that an arbitrator could not award punitive damages. But Obama convinced them this case was different. ‘You’re suggesting that there’s a federal common law that likes punitive damages, but this could be preempted by a state law that says ‘no punitive damages,’ Posner told Obama. ‘I don’t think I’m saying there’s a federal law that ‘likes punitive damages,’ Obama responded, not dropping his tone of respect. ‘I think what I’m saying is that there’s a federal law that likes the notion that the same remedies that will be available in court will be available in arbitration.’ Obama won, and Baravati got to keep the extra $120,000. He still is grateful. ‘I found he’s a very smart, innovative, skilled, relentless advocate for his client,’ Baravati said. ‘When I met him, he reminded me of Abraham Lincoln.’”
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The Potential Impact of the United States Supreme Court’s Exxon Valdez Punitive Damages Opinion
The Daily Journal has an article (subscription required) previewing the February 27 oral argument in the Exxon Valdez case. The article begins: “When the Exxon Valdez oil tanker ran aground off the coast of Alaska in March 1989, the Berlin Wall had not fallen, NBC was making plans for a new sitcom called ‘Seinfeld,’ and John Roberts was a 34-year-old climber looking to make a name for himself as an appellate lawyer. Nineteen years later, Eastern Europe’s transformation and Seinfeld’s celebrated run are a part of history, but the Valdez dispute remains, as the Roberts-led Supreme Court is preparing to decide how much, if any, punitive damages Exxon owes for spilling 11 million gallons of oil into the Prince William Sound. The case, with arguments scheduled for Feb. 27, comes to the high court after three trips to the San Francisco-based 9th U.S. Circuit Court of Appeals, which settled on a $2.5 billion punitive-damages award to fishermen and other Alaskans who suffered economic harm from the massive environmental disaster. Though the figure was half the amount awarded by an Alaska jury, it was by far the largest punitive-damages award affirmed by a federal appellate court. Exxon protested that the award should be significantly lower, if not eliminated.”
The article makes the point that if the court sets forth a common law limitation on punitive damages, the case could have widespread impact, but if it simply applies maritime law, it is not likely to have much impact. The article also points out that the three primary dissenters in due process punitive damages cases (Justices Scalia, Thomas, and Ginsberg) may well be in play for Exxon in this case because the analysis under maritime law is different from the analysis under due process.
We previously blogged about the potential impact of the Exxon Valdez opinion here. And see here for a post about professor Erwin Chemerinsky’s article on the same subject.
UPDATE (by Lisa Perrochet on 2/13/08 at 9:55 a.m.): Cal Law has a similar story today [subs. req’d] regarding the imminent Exxon Valdez argument. Reporter Tony Mauro notes that Justice Alito has recused himself from the proceedings, opening the door for a 4-4 split. Mauro further observes, “Exxon supporters are hoping to win over Justices Antonin Scalia and Clarence Thomas, who have never found in their copies of the Constitution a bar against punitive damages. However, under maritime law — a form of judge-made common law — the two justices might join others who have voted to limit punitive damages in recent years.” Mauro also quotes Mayer Brown’s Andy Frey: “‘The shackles are off’ Scalia and Thomas” and, says Frey, even though the ruling may stress maritime law, it may also be “‘very important for the issue of punitive damages generally.’”
FURTHER UPDATE (by Jeremy Rosen on 2/13/08 at 1:21 pm): Some of the 32,000 class members in the case have created their own “whole truth” website. According to the BLT (the Blog of Legal Times), the class members started the website to “highlight the continuing impact on the lives and work of Native Alaskans and others in the Prince William Sound. The group also plans a candlelight vigil in D.C. around the time of the arguments.”
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Pending Petition for Review Challenges Appellate Decision Affirming Punitive Damages Against County Officials Mired in Bribery Scandal
On February 6, defendants in a case raising punitive damages issues filed a petition asking the California Supreme Court to grant review of an appellate court decision affirming a punitive award that the defendants claimed was unconstitutionally excessive. (Here’s the Supreme Court docket info.)The case is County of San Bernardino v. Walsh, and arises out of a bribery and corruption scandal. I haven’t seen the petition but, under the facts as outlined in the Court of Appeal opinion, I’m assuming there’s no traditional “ratio” challenge to the award given the relatively high compensatory damages: the trial court awarded damages of $4,242,626, comprised of various bribes, kickbacks, and fees accepted by the defendants, and further assessed $1 million in punitive damages against one defendant, plus $500,000 in punitive damages against another on breach of fiduciary duty and fraud causes of action.It appears the individual defendants’ focus has been on a comparison of the awards to the individuals’ net worth and claimed inability to pay. The Court of Appeal, however, held the trial court had discretion to infer that the defendants were well able to pay the judgment, concluding that they “intentionally concealed their assets, testified falsely regarding many factual issues, and were, at best, evasive and nonresponsive in answering questions as to their financial condition. This conduct gave the court wide latitude to make inferences from the evidence unfavorable to [defendants] Mays and Walsh.”
The California Supreme Court is currently due to rule on the petition by early April (within 60 days after February 6). -
Are Federal Credit Unions Immune from Punitive Damages Claims?
A few months ago, in McGee v. Tucoemas Federal Credit Union, the California Court of Appeal held federal credit unions were not entitled to sovereign immunity from punitive damages claims.
As counsel of record for the defendant, we (Horvitz & Levy LLP) are filing today a cert petition to the US Supreme Court challenging this holding. Here’s a summary from the petition outlining the question presented:
“Federal credit unions are federal instrumentalities chartered under the Federal Credit Union Act, 12 U.S.C. §§ 1751 to 1795k. Does their authority under that Act to ‘sue and be sued,’ 12 U.S.C. § 1757(2), waive their immunity as federal instrumentalities from punitive damage claims? The decision of the Court of Appeal of the State of California, which allowed the punitive damage claims here, declined to follow decisions of the Sixth, Eighth, Ninth, and Eleventh Circuits of the United States Court of Appeals.”
Stay tuned!
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Punitive Damages in Mordor?
The estate of author J.R.R. Tolkien has sued New Line Cinema for more than $150 million in compensatory damages for the alleged failure to pay the estate contractual royalties from the three Lord of the Rings movies. The lawsuit apparently also seeks punitive damages. However, whether the Tolkien estate can claim punitive damages for New Line’s alleged breach of the contract may well be determined by the City of Hope case recently argued in the California Supreme Court.
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Ninth Circuit Clarifies Rules for Accrual of Post-Judgment Interest After Appellate Reduction of Punitive Damages
The Ninth Circuit today released an opinion in Planned Parenthood v. American Coalition. The opinion was written by Judge Fisher and joined by Judges Leavy and Berson. The opinion begins:
“At what all surely must hope is the conclusion of this long running litigation, we must address an issue of some importance under Federal Rule of Appellate Procedure 37(b) relating to the award of post-judgment interest to the plaintiffs-appellees on the punitive damages judgment they obtained against the defendants-appellants. This is a cautionary tale for all whose judgments on appeal are subject to the requirements of Rule 37(b). In an earlier appeal, we reduced the punitive damages because we concluded they were excessive under the Supreme Court’s Due Process Clause jurisprudence. We accordingly directed the district court on remand to enter a judgment for the damage amounts we specified, assuming the plaintiffs opted not to have a new trial. Because our mandate did not contain instructions about the allowance of post-judgment interest as required by Rule 37(b), we are now called upon to decide whether the district court had the authority to award post-judgment interest from the date of its original judgment, as modified in its final judgment, or only from the date of that final judgment. We hold that our failure to specify the accrual date for post-judgment interest in our mandate precluded the district court’s order that interest would run from the date of the original judgment.”
The court then finds that its failure to include the post-judgment interest was inadvertent and it recalled its mandate to provide for post-judgment interest from the date of the original judgment. The court cautioned in the future that Rule 37(b)’s rules regarding mandates will be followed and adhered to. This opinion provides a caution for lawyers to make sure they clearly remind the court to include such direction for awarding of post-judgment interest in the mandate when a judgment is reversed or no interest can be awarded by the district court.
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William Lerach Sentenced to Maximum Term
Although not directly relevant to punitive damages, since William Lerach has been responsible for seeking major punitive damage awards in the past, his recent sentence and conviction (as well as the information on how he found certain clients) is noteworthy. As reported in the Recorder:
“After criticizing a plea deal, Los Angeles federal Judge John Walter accepted it, but sentenced star plaintiff attorney William Lerach to the highest term under the agreement — 24 months in federal prison.
Walter hammered prosecutors in court Monday about why they cut the deal with Lerach, who pleaded guilty in connection with kickbacks to lead plaintiffs of his former law firm, now known as Milberg Weiss. Lerach pleaded guilty to a single count of giving an improper payment to a plaintiff.
Checking his famous bravado at the courtroom door, the former securities class action king expressed humble regret as Walter reluctantly accepted the deal hashed out between Lerach and federal prosecutors.
Lerach’s lawyer, John Keker of San Francisco’s Keker & Van Nest, had asked that Lerach serve six months in prison and six months’ home confinement, while the government wanted 24 months behind bars.”
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Law Review Article Explores Constitutional Limits on Punitive Damages in Wrongful Death Cases
Professor Mark A. Geistfeld has an article entitled “Punitive Damages, Retribution and Due Process” in the January 2008 edition of the Southern California Law Review. The article calls for a new method of analyzing the excessiveness of punitive damages in cases involving serious bodily injury and death. He posits that punitive damages should serve to vindicate the social cost of a premature death. Relying on government statistics to compute those costs, he concludes that the $79.5 million punitive damages award approved by the Oregon Supreme Court in Philip Morris v. Williams was not excessive.
Click here to see the abstract.
Hat tip to How Appealing.
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“Punitive Damages are Needed to Keep Big Oil Accountable”
In an op-ed in the Anchorage Daily News (subscription required) John Devens of the citizens’ councils for Prince William Sound and Cook Inlet explains why those groups filed an amicus brief in support of the plaintiffs in the Exxon Valdez case. Devens argues that Exxon Mobil relies on outdated maritime law principles that no longer reflect today’s realities, and he argues that punitive damages must be available in maritime law cases to deter irresponsible corporate behavior. Devens faults Exxon most for its underfunding of Alyeska Pipeline: “Alyeska Pipeline, tasked with initial cleanup efforts after a spill, was utterly unprepared for what it faced on March 24, 1989. Exxon was (and is) one of the owners of Alyeska. It helped determine Alyeska’s budget, how much equipment Alyeska had on hand, and how Alyeska’s people were trained to clean up oil. Alyeska’s unpreparedness and the inadequate response that resulted were due in large measure to deliberate actions by Exxon itself.”