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For more than a decade, major corporate defense firms, particularly Mayer Brown and Gibson, Dunn & Crutcher, have aggressively and successfully pursued U.S. Supreme Court limits on punitive damages awards. The high court’s most recent punitive damages decision — this time in maritime law — offers new fodder for those legal strategists. Whether the June 25 decision in Exxon Shipping Co. v. Baker, No. 07-219, reflects a new approach by the justices that could lead to additional and stricter limits on punitive awards outside the context of maritime law will have to await the next constitutional due process challenge that arrives at the high court. But it is clear that the Exxon ruling now will become part of the defense arsenal in challenges to these damages awards. In Exxon, a 5-3 court, led by Justice David Souter, held that the $2.5 billion punitive award imposed on Exxon Mobil Corp. in connection with the massive oil spill by the Exxon Valdez 19 years ago in Prince William Sound, Alaska, was excessive under maritime law. The majority reduced the award to $507.5 million after holding that a 1-to-1 ratio of punitive to compensatory damages is a “fair upper limit” in maritime cases in order to protect against “unpredictable and unnecessary” awards. Souter concluded that the ratio was the appropriate tool after reviewing a variety of other approaches to protecting against the “stark unpredictability” of punitive awards, such as verbal formulations superimposed on general jury instructions, and finding those approaches ineffective. ‘Not there yet’ The high court is “not there yet” in concluding that a 1-to-1 or similar ratio should exist for punitive awards outside of maritime law, said high court litigator Mark I. Levy, a counsel to the Washington office of Atlanta’s Kilpatrick Stockton who filed an amicus brief supporting Exxon on behalf of shipping companies and others. “But there is a sense here of a dynamic in play such that maybe the court, down the road, will come to a similar result as a constitutional matter, perhaps not as stringent a standard as this common law standard,” he said. “There now will be a whole generation of cases seeking to push that dynamic.” Because maritime law is part of federal common law, said Mayer Brown partner Andrew Frey, the Exxon decision should produce a similar result in other federal common law areas, such as awards under the Federal Employers Liability Act and under Section 1981, a civil rights law protecting against discrimination in the making and enforcing of contracts. Frey, one of the longtime leaders in the legal assault on punitive damages who filed a brief supporting Exxon on behalf of the American Petroleum Institute and others, and Levy said that the Exxon decision will be influential in state courts as those courts grapple with their own excessiveness review of punitive awards. It will be influential, first, they said, because anything the high court says is noticed by state courts. Second, they added, it will influence them because the high court went through the same exercise that state courts, sitting as common law courts, go through regularly in reviewing punitive awards. Third, Levy said, Souter’s majority opinion reflects frustration with the various approaches to cabining excessive punitive awards. “If Justice Souter explains in a common law context why these other approaches aren’t doing an effective job, then again, if you’re on a state court dealing with punitive damages as a matter of common law, it’s possible you’re having the same frustration and it may lead to the same result under state law that Souter reached.” That frustration voiced by Souter, they and others said, is also why the decision has potential implications for constitutional cases. If Souter and the newest justices — Chief Justice John G. Roberts Jr. and Justice Samuel A. Alito Jr., who joined the majority opinion — believe that verbal formulations and other approaches are ineffective, at some point they may find them ineffective as well for constitutional purposes. Not everyone agrees. Leslie Brueckner, staff attorney for Public Justice, which filed an amicus brief supporting Baker, sees no implications in that area for two reasons. First, the court itself, she said, was very explicit that the ruling was confined to maritime issues and the case had nothing to do with the question of whether substantive due process places limits on punitive damages. “Now I imagine corporations are saying this is clearly a sign the court is going to erect limits in other cases, but the reason I don’t think that’s true is who made up the five-justice majority,” she added. “It included [Antonin] Scalia and [Clarence] Thomas. They have taken the position that in the ordinary civil case there should be no constitutional limit whatsoever on punitive damages. So the fact their votes were integral in erecting the 1-to-1 ratio in the maritime context is not going to have any effect on what they do in nonmaritime cases. And without their votes, you don’t have a majority.” Admiralty law scholar John Paul Jones of the University of Richmond School of Law also was skeptical of the decision’s implications outside of maritime law. The “narrow stage” of maritime law, he said, allowed the high court — sitting as a common law court — to say what the law — a law they could make — should be. “If moving to a case about the due process clause, I couldn’t ignore the wishful thinking the court expressed in a case where it expressed it could do what it wanted to do,” he said. “The other side of it, and the reason why it doesn’t predict the future, is when you get to the constitutional question, the court is going to end up balancing something it didn’t have to balance here, and that’s the federalism issues.” The Exxon case, added Jones, also was a case about financial losses. “I hesitate to say this decision would apply to cases in other federal common law areas where real people bleed and die.” But the ratio is certain to be raised in nonmaritime cases, said maritime litigator John Kimball, partner in the New York office of Philadelphia’s Blank Rome. “Justice Souter’s analysis of the punitive damages issue, his detailed exploration of their history and the various methods of calculating them would seem to have general application,” he said. “I’m sure we’re going to see this back at the Supreme Court.”

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