U.S. Supreme Court

Will Court’s 1-1 Ratio in Maritime Case Have Broad Punitives Impact?

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When Justice David H. Souter set a 1-1 ratio for punitive to compensatory damages in a majority opinion yesterday, he emphasized he could do so because the court was setting a common law rule in a maritime case rather than a constitutional limit.

That isn’t keeping some lawyers from speculating the ruling could have a broader impact. The ratio adopted by the U.S. Supreme Court in a 5-3 decision yesterday cut a punitive damages award imposed against Exxon Mobil for the 1989 Exxon Valdez oil spill from $2.5 billion to $507.5 million.

In a 2003 case setting constitutional limits, the U.S. Supreme Court ruled in State Farm v. Campbell that a ratio of no more than 9-1 was appropriate in all except the most egregious cases, the New York Times notes in its story on yesterday’s ruling. The court in Campbell said that when compensatory damages are substantial, a ratio of 1-1 might be appropriate. Souter emphasized that point in yesterday’s Exxon decision, writing in a footnote that in cases with large compensatory damages, “the constitutional outer limit may well be 1:1.”

Amar Sarwal, general litigation counsel for the National Chamber Litigation Center, told the Washington Post the opinion could be a “persuasive precedent” guiding state courts reviewing punitives under common law.

Kathleen Flynn Peterson, president of the American Association for Justice, disagreed with that suggestion. “Those in the business community who claim this decision stands for a generalized punitive damage limit are wrong,” she told the Post.

The case may have been decided a different way if Justice Samuel A. Alito Jr. had participated, the Los Angeles Times reports. He recused, apparently because he owns Exxon stock.

Without Alito, the court split 4-4 on the issue of whether Exxon could be punished for the actions of its agent, Capt. Joseph Hazelwood. The split had the effect of upholding a ruling by the San Francisco-based 9th U.S. Circuit Court of Appeals that Exxon could be held liable. If Alito had participated, he probably would have joined the court’s conservatives to throw out the entire award, the story says.

The opinion is Exxon v. Baker.

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