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Earlier this year, the Exxon Valdez trial judge set the punitive damages award against Exxon at a shocking $4.5 billion for the infamous Alaska oil spill. Years ago, Alaska fisheries and others sued the oil giant for economic damages caused by the spill. The jury awarded $287 million in compensatory damages and $5 billion in punitive damages. Thus began a process of following-the-bouncing-ball litigation, as the case moved up and down on the issue of the constitutionally permissible amount of punitives. First bounce: Exxon appealed the judgment after the jury’s verdict. Relying on an intervening U.S. Supreme Court decision, Cooper v. Leatherman (2001), that created a de novo standard of review for punitive awards, the 9th U.S. Circuit Court of Appeals returned the case to the trial judge to reconsider the amount. In the process, the appellate court made plain its belief that $5 billion was far too high, noting Exxon did not deliberately cause the spill, killed no one and had already paid almost $3 billion in cleanup costs, restitution and penalties. All of these are relevant considerations in determining whether the punitives are grossly excessive and constitutionally impermissible. Second bounce: In December 2003, the trial judge, following the letter of the 9th Circuit’s mandate, knocked off one billion dollars, a significant reduction (relatively speaking), though the amount was incredibly high to start. Exxon appealed again, but before briefing even began, the Supreme Court handed down State Farm Mut. Auto. Ins. Co. v. Campbell (2003), rendering its strongest opinion yet on the need for courts to control runaway punitives. Once more, the 9th Circuit returned the Exxon case to the district judge to reconsider the amount. Third bounce: The trial court issued its latest order in January. Inexplicably, though it had set the number at $4 billion a year ago, this time it added another $500 million, for a grand total of $4.5 billion in punitive damages. Exxon spilled oil, not blood Exxon certainly has ample and solid grounds to appeal again. True, the incident caused enormous economic harm; the Valdez captain, Joseph Hazelwood (known to Exxon to be a relapsed alcoholic), had been drinking and should not have left the bridge. But does an employer’s failure to monitor an employee or remove him justify this much punishment, and is it appropriate under Campbell? The trial judge tried to justify his $4.5 billion figure by citing the devastation to fisheries and the environment, adding that the clean-up itself could have endangered lives; he found Campbell of little relevance. But Campbell was aimed at precisely this type of problem; it made clear that, in setting the proper punitive amount, conduct causing only economic harm is less blameworthy than conduct resulting in physical injury or death, and intentional or violent acts are worse than omissions, accidents or even recklessness. Approaching a “bright line” test, Campbell concluded that a 4-to-1 ratio of punitive to compensatory damages comes close to constitutional excessiveness. And where the compensatory damages are themselves “substantial,” perhaps only 1-to-1 is appropriate. In the Exxon case, the substantial compensatory award (for conduct that physically injured no one) is dwarfed even by the reduced punitives. In the year since Campbell came down, most state and federal courts have been applying it conscientiously. Though they differ in their interpretation of the landmark decision, for the most part they have gotten the message, often significantly reducing juries’ punitive awards. But in the Exxon case, the trial court made no serious effort to reduce the demonstrably excessive award. To the contrary, the trial court, after Campbell, tacked another $500,000 back onto the verdict, vacating its prior $1 billion reduction and starting from scratch. The cost to Exxon of this “bouncing” back and forth, in the form of legal fees, posting of a prohibitive appeal bond and interest running on the judgment, is staggering. And-especially after Campbell-it shouldn’t have been necessary. A punitive award assumes that the plaintiffs have already been made whole by the compensatory award. Punitive damages are designed to punish reprehensible conduct. The fact that Exxon is a large, wealthy corporation can no longer be used to justify an enormous punitive award. Under Campbell, punishment should be reserved for especially egregious conduct and the amount must be tailored to the offense. The award should not be the product of jackpot jurisprudence. It is time for the final bounce. The number should come down substantially, once and for all. Christina J. Imre is a partner in the Los Angeles office of San Francisco-based Sedgwick, Detert, Moran & Arnold, where she has an appellate practice.

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