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WASHINGTON � The Exxon Valdez ran aground on a reef in the Prince William Sound nearly 20 years ago. But the complex legal fallout from the ensuing environmental disaster and a record punitive damages award has just reached the shores of the U.S. Supreme Court. Exxon Mobil Corp. recently filed a petition asking the high court to review and overturn a $2.5 billion punitive award � the largest punitive damages award ever affirmed by a federal appellate court, and larger than the total of all punitive damages awards affirmed by all federal appellate courts in history, according to Exxon’s counsel, Walter Dellinger, partner in the Washington office of O’Melveny & Myers. Close on the heels of that petition, the punitive damages class of roughly 33,000 Alaskan commercial fishermen, cannery workers, landowners, natives and others, filed a “conditional” cross-petition for review. If the justices agree to hear Exxon’s challenge to the punitives award, then they also should grant the class’s petition arguing that the $2.5 billion award is not excessive and that due process allows reinstatement of the jury’s original award of $5 billion, urges class counsel, David W. Oesting, partner in the Anchorage, Alaska, office of Seattle-based Davis Wright Tremaine. In the past 17 years, the Supreme Court has decided eight cases on punitive damages, reviewing awards made under state law. Exxon, however, is asking the high court to examine the $2.5 billion award � reduced from $5 billion by the 9th U.S. Circuit Court of Appeals � through the lens of general maritime law. For some maritime experts, the Exxon Valdez is, in a sense, legal history. After the ship’s massive oil spill, Congress enacted the Oil Pollution Act of 1990, governing oil spills and establishing private remedies. The act is silent on the availability of punitive damages. But for others, the Exxon Valdez remains a very practical issue in the international world of maritime commerce. “It’s a case that in maritime law circles has world renown and is referred to all the time,” said admiralty litigator John Kimball, partner in the New York office of Blank Rome in Philadelphia. “The punitive damages issue has been looked at very closely by marine insurance markets as a sign of what’s going on in the U.S. and what is the magnitude of risk in a major environmental damage case.” When the Oil Pollution Act was drafted, he recalled, the shipping industry was very fearful it was entering an era of unlimited liability. “The reaction of insurers was to put a cap of $1 billion on insurance they would provide,” he said. “Punitive damages normally are not insurable, so if they’re not insurable and not limited in some way, that leaves the shipowner or cargo owner wide open. My sense is we would all like to hear what the Supreme Court has to say about it.” Long history The Exxon Valdez, a 900-foot oil tanker, headed out of port into Prince William Sound on March 24, 1989. Moments before the tanker was to make a difficult turn away from a dangerous and well-known reef, Captain Joseph Hazelwood, the only one on board with a special license to navigate that part of the sound, gave the wheel to the third mate and left the bridge. The third mate was unable to make the turn and the Valdez’s hull was ripped open by the Bligh Reef, spilling 11 million gallons of oil into the environmentally pristine sound. After the wreck, Exxon spent an estimated $2.1 billion on cleanup. It paid $125 million in criminal fines and $900 million to Alaska and the federal government for environmental restoration. Exxon also paid $300 million in out-of-court settlements to parties claiming economic injuries caused by the oil spill. Because they believed the settlements and fines failed to compensate the area’s commercial fishing industry for the damages it had sustained, commercial fishermen and others filed numerous lawsuits. At Exxon’s urging, the U.S. District Court for the District of Alaska certified a multi-class action consisting of a compensatory damage class and a mandatory punitive damages class of 32,677 commercial fisherman, related individuals and businesses, private landowners and native Alaskans. After a three-phase trial that lasted 83 court days, involved 155 witnesses and produced 1,109 exhibits, the jury’s September 1994 verdict assessed $5 billion in punitive damages against Exxon and $5,000 against Hazelwood. The jury in an earlier phase awarded $287 million in compensatory damages. After 13 years of post-trial motions and appeals in which the punitives award was sent back to the district court to reconsider in light of intervening Supreme Court decisions on punitive damages, the 9th Circuit cut the jury award in half. Three questions At the Supreme Court, Exxon’s lawyer Dellinger asks three questions: whether maritime law permits a shipowner to be punished vicariously for the conduct of the ship’s master when the owner did not countenance or participate in that conduct; whether maritime law can expand the remedies that Congress provided in the controlling statute � here the Clean Water Act � by adding a punitive damages remedy, and whether this $2.5 billion award is within the limits allowed by maritime law or, if it is, does it comport with constitutional due process. Baker v. Exxon Shipping Co., No. 07-219. His answer to all three, not surprisingly, is no. “As big an issue as the Exxon Valdez judgment is, this case is about far more than that in terms of the reach of maritime law,” said Dellinger. The case, he said, has caused a “huge stir” within the maritime and shipping communities, particularly the issue of vicarious liability and punitive damages. “It is also a fundamentally important question of the relationship between the Clean Water Act to judge-made remedies in maritime law that applies across-the-board and not just in oil spills,” he added. Dellinger said he expects about a dozen amicus briefs to be filed supporting his petition, most from organizations in the maritime world. The International Chamber of Shipping, which represents most of the world’s ocean-going commercial ships, and the American Institute of Marine Underwriters have already requested consent to file amicus briefs. Oesting, appointed one of two lead class counsel in 1989, said he was not surprised that Exxon filed in the Supreme Court. But he said he was surprised by the maritime law focus of the appeal, which received little emphasis in the lower appellate court briefing. “It’s recognition they had ridden the constitutional due process-limitation horse into the ground and it wasn’t going to get them anywhere for purposes of review,” said Oesting, whose co-counsel died in 1995, as have 20% of his clients during the litigation. While that approach may pique the interest of four justices necessary to grant review, Oesting said the argument is “quite a reach.” Exxon’s petition is “clearly a one-sided analysis of a very fact-bound decision made by the trial court and the 9th Circuit,” said Oesting, adding, “That would lead me to think the Supreme Court might think the case is too fact-intensive to take.” In his petition, Oesting contends the jury award meets the due process “guideposts” set out in the Supreme Court’s punitive damages rulings: Exxon’s conduct was highly reprehensible; the jury’s punitives award bears a 9.92-to-1 ratio to the economic harm caused and falls within a ratio in the low single digits after taking into account the additional noneconomic harm and potential harm; and comparable penalties gave Exxon fair notice that it could be punished well into the billions of dollars for a spill such as this one. Exxon Shipping Co. v. Baker, No. 07-276. Murky waters The Exxon petition raises important questions of federal maritime law, said John Paul Jones, a maritime law scholar at the University of Richmond School of Law who is drafting an amicus brief supporting high court review on behalf of a group of law professors. “The fundamental questions are: Does a federal court sitting as a court of admiralty have the power to award punitive damages in any case, and in a case that has certain characteristics such as this one?” he said. Jones and others said the Supreme Court has issued two decisions in which it appears to take for granted that admiralty courts can award punitive damages. But, Jones added, “That is far short of a holding and far short of certainty in the law.” Various courts have said on many occasions that punitive damages are available under general maritime law, but there are very few cases in which they actually have been awarded, particularly in the corporate context, said maritime law scholar Robert Force of Tulane University School of Law. “The mere fact some employee or low-level person acts in an outrageous manner is ordinarily insufficient to impose liability on the corporation itself,” he said. “You have to show management acted in a malicious, outrageous or extreme manner.” Exxon has made debatable at least whether the jury verdict found Exxon liable for its own misconduct or vicariously liable for Captain Hazelwood’s conduct, said Richmond’s Jones. “It may be the general maritime law allows punitive damages under the circumstances and by the same standards as either the prevailing view of American common law, or the view of Alaska, the forum state,” he said. “But it doesn’t have to. It could go its own way for reasons that are peculiarly maritime.” The Exxon case also could provide an opportunity for revealing the positions of high court’s newest justices on limits on punitive awards, some experts noted. Chief Justice John G. Roberts Jr. and Justice Samuel A. Alito Jr. have yet to rule on the question of an excessive award. Justices Antonin Scalia and Clarence Thomas have said repeatedly that they do not believe the Constitution limits punitives awards, and Justice Ruth Bader Ginsburg also has been skeptical recently. But the lens of general maritime law as well as the potential role of the Clean Water Act in this case could make a difference in some justices’ views, particularly those of Scalia and Thomas, they added. What appears to be true, Jones said, is that constitutional amendments like due process apply in the world governed by admiralty law in a way that is not necessarily the same as the way they apply ashore, in the view of courts. “When we were in law school, we all learned about prejudgment seizure cases and how due process requires the owner to get a hearing,” he said, but none of that applies in admiralty. “Maritime law can’t supply punitive damages beyond those due process allows,” added Jones. “But I don’t know that due process at sea allows the same amount as due process ashore.”

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