ACSBlog: The Blog of the American Constitution Society

by Center for Progressive Reform scholars Alexandra Klass, University of Minnesota Law School, and Sandra Zellmer, University of Nebraska College of Law

This morning, the Supreme Court will hear oral argument in the case of Exxon Shipping Company v. Baker. The case, brought by commercial fisherman against Exxon Mobil, arises out of the grounding of the Exxon Valdez oil tanker in Prince William Sound, Alaska in 1989, causing the release of 11 million gallons of oil. More birds and marine mammals were killed than in any other U.S. oil spill to date.  The harm to affected species continues to this day, due to the loss of critical food sources, smothered spawning grounds, and decreased reproduction. In 2007, the U.S. Fish and Wildlife Service concluded that “history will judge the Exxon Valdez oil spill as the worst kind of spill in one of the worst places for a spill--an incredibly rich ecosystem.”

In 1994, a federal jury awarded $5 billion in punitive damages based on evidence that Exxon officials knew that not only was the captain of the ship, Joseph Hazelwood, a relapsed alcoholic, but he was actually drinking while in command of their ships, and yet they did nothing to prevent him from doing so. There was also evidence that Hazelwood was drunk on the night in question and had abandoned the bridge immediately prior to the accident. The propriety and amount of the punitive damages award has bounced back and forth between the trial and appellate courts, and was ultimately reduced to $2.5 billion. Now, nearly 20 years after the grounding of the Exxon Valdez, Exxon’s appeal has reached the Supreme Court, which will determine whether federal law preempts, or forecloses, the fishermen’s claims.

Federal law, consistent with the law of most states, generally allows juries to impose punitive damages in cases of intentional, willful, wanton, or reprehensible conduct, as opposed to merely negligent or careless conduct.  Punitive damages serve an important function to punish past misconduct and deter future misconduct. Despite popular belief to the contrary, juries rarely award punitive damages and, when they do, courts conduct exacting reviews to ensure that the awards are based on the facts and the law rather than on passion or prejudice. To be sure, the award in this case is large. Punitive damages, however, are awarded based in part on the magnitude of harm and also, unlike compensatory damages, on the financial condition of the defendant. In this case, both are substantial. The economic injury imposed on the fishermen as a result of the Exxon’s misconduct was over $500 million, with significant harm continuing to this day. Exxon is the biggest company in the world, with profits this year of $39.5 billion, the largest in U.S. history. Indeed, Exxon testified at trial that paying the original $5 billion jury award (which was later reduced to $2.5 billion) “would not have a material impact on the corporation or its credit quality.”

The Ninth Circuit Court of Appeals held that neither federal maritime law nor the federal Clean Water Act, which includes provisions on the release of oil and other hazardous substances, precluded a remedy for punitive damages or, for that matter, any other private tort damages. In reaching its decision, the court emphasized that the fishermen were only attempting to vindicate private economic interests, and thus were not duplicating any punishment the federal government had imposed through civil and criminal penalties.

The Ninth Circuit reached the right result. In enacting the Clean Water Act, Congress intended to create a comprehensive framework to govern the discharge of pollutants into waters of the United States and also allow the federal government to seek penalties for violation of the law, particularly violations that result in harm to public resources. Congress did not, however, create any mechanism for private parties to recover for damages to private interests. Instead, as in many other federal environmental laws of that era, it expressly left in place existing tort remedies so that private parties could continue to recover damages for private harm. Supreme Court authority interpreting the Clean Water Act and other similar laws is consistent with this approach. Although the Court has refused to allow private parties or states to bring common law tort claims that would interfere with federal regulations governing the discharge of pollutants, it has also said time and time again that Congress’s failure to provide a right of action for damages for private economic harm argues in favor of, not against, preserving long-standing common law rights to recover for private harm.

Exxon argues that it has spent billions of dollars remediating Prince William Sound, compensating the federal and state governments for harm to natural resources, and paying civil and criminal penalties for violating federal law. Exxon’s efforts in this regard may be commendable, but Exxon’s payments were for harm to public resources. Nothing in federal law forecloses private citizens from exercising their existing state and federal rights to recover for harm to private interests when such recovery does not interfere with federal regulatory requirements. 

Indeed, punitive damages are especially crucial in cases like this, where injuries arise out of outrageous conduct at sea, because maritime claims do not cover consequential economic and other damages. In other words, there are several compensatory damages claims that plaintiffs cannot bring solely because the conduct occurred at sea rather than on land, thus, the punitive damages award serves as an important gap-filler. 

It is telling that the State of Alaska has consistently supported its citizens’ rights to the full spectrum of remedies for private economic losses caused by the spill. In particular, Alaska agrees that a private punitive damages award would not only punish Exxon for the unique wrongs inflicted upon the fishermen, but would also complement the State's own efforts in redressing the spill.

Tort law must continue to perform the work of punishing and deterring misconduct that harms private interests. The applicable federal and state laws work together to provide comprehensive but not overlapping remedies for public and private harm. The Supreme Court should continue to recognize this important distinction and retain the plaintiffs’ longstanding rights to both compensatory and punitive damages.