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U.S. Supreme Court

Supreme Court Overturns $2.5B in Exxon Punitives, Sets 1-1 Ratio

Posted Jun 25, 2008 9:13 AM CDT
By Debra Cassens Weiss

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The U.S. Supreme Court has overturned $2.5 billion in punitive damages imposed against Exxon Mobil for the 1989 Exxon Valdez oil spill.

The court ruled 5-3 that the punitive award was excessive under maritime common law. The court said the award should be no higher than compensatory damages, which were set at $507.5 million, SCOTUSblog reports.

Justice David H. Souter wrote the majority opinion (PDF posted by SCOTUSblog). Justice Samuel A. Alito Jr. did not participate in the case.

The court also held damages were not pre-empted by the Clean Water Act and divided equally on a third issue—whether maritime law permits punitive damages for the acts of agents.

Souter said a 1-1 ratio for punitive damages is "a fair upper limit in such maritime cases." He defended setting a numerical ratio, noting that the ruling concerned maritime common law rather than constitutional limits.

"Some will murmur that this smacks too much of policy and too little of principle," he wrote. "But the answer rests on the fact that we are acting here in the position of a common law court of last review, faced with a perceived defect in a common law remedy."

Souter wrote of "the stark unpredictability of punitive awards" and noted studies showing the median ratio of punitive to compensatory awards was a little less than 1-1.

He said a ratio was preferable to verbal guidelines for punitive awards, and cited past cases to defend the decision. "History certainly is no support for the notion that judges cannot use numbers. The 21-year period in the rule against perpetuities was a judicial innovation," he wrote, "and so were exact limitations periods for civil actions, sometimes borrowing from statutes. ... And of course, adopting an admiralty-law ratio is no less judicial than picking one as an outer limit of constitutionality for punitive awards."

Coverage of the opinion is available from the Associated Press and Reuters.

The opinion is Exxon v. Baker.

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