Alaska Employment Law

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Introduction

The United States Supreme Court issued its long-awaited opinion in the Exxon Valdez opinion today. This summary briefly reviews the case and its significance.

The Case: Issues and Arguments before the Court

Exxon raised three issues before the United States Supreme Court: (1) that punitive damages could not be awarded in maritime law for acts or omissions of managing agents; (2) that punitive damages were pre-empted by the Clean Water Act; and (3) that as a question of federal common law, the $2.5 billion punitive damages award was either not allowed or was excessive.

The Opinion

Justice Souter wrote for the Court. Justice Alito had previously recused himself from taking part in the case because he owns substantial Exxon stock. Thus, only eight (8) justices decided the case.

On the first issue, the court split 4-4. When an appellate court is equally divided in this manner it means that the lower court’s decision is upheld. Accordingly, the Ninth Circuit’s decision that punitive damages could be awarded in maritime law for the acts or omissions of managing agents was upheld. However, this issue could be reviewed in any subsequent case and a different result could be reached because an equally divided split does not result in a decision that any lower court has to follow (the opinion has no precedential effect).

On the second issue, the court unanimously rejected Exxon’s pre-emption argument based on the Clean Water Act.

On the third issue, the court held 5-3 that a $2.5 billion punitive damages award was excessive as a matter of federal common law. The Court reviewed punitive damages from both a historical and a current perspective. The Court noted that punitive damages were intended to punish and deter. Comparing practice in the United States with other common law nations, the Court observed that punitive damages “are higher and more frequent in the United States than they are anywhere else.” This trend, however, was not what most concerned the Court. Instead, what excited the Court’s attention was the “stark unpredictability of punitive awards.” Struggling with some methodology that would develop order from chaos, the Court struck upon a 1:1 ratio. As a question of federal common law, punitive damages could be awarded in maritime law for the acts or omissions of managing agents, but only in an amount equal to the resulting compensatory damages. Here, damages were $507.5 million. Therefore, the Court concluded that $507.5 million represented a cap on what could be awarded as punitive damages.

Justices Stevens, Ginsburg, and Breyer dissented from the Court’s disposition of the third issue, each writing separate dissents. They would have allowed the $2.5 billion judgment to stand. Justice Stevens thought that the Court’s 1:1 ratio was an issue of federal policy best left to Congress to enact. Justice Breyer accepted the 1:1 ratio as a basic norm, but felt that this was a unique case and that exceptions to the 1:1 ratio should be recognized where appropriate. Justice Ginsburg concluded that the Ninth Circuit’s disposition correctly handled the award of damages.

Significance

Obviously, this case has tremendous significance for all Alaskans, especially for those individuals who suffered tremendous losses (many of whom have waited over 19 years for substantial relief).

Beyond the significant impact here in Alaska, however, there is a more important message. A fundamental tenet of our common law tradition is that consistency and stability in the law are critical to establishing a predictable regimen. The rule of law is premised on the assumption that common law courts will render predictable judgments that afford both government and the public-at-large with the stability needed to conduct our affairs. In the Court’s view, the unpredictable manner by which punitive damages could be awarded threatened the orderly administration of justice. Therefore, it felt compelled to set limits. It remains to be seen if this heralds a trend to revisit the Due Process punitive damages cases (most notably, State Farm and BMW v. Gore) in other federal common law contexts, too.

Finally, students of the court will remember that Justice Kennedy has been subjected to a fair amount of criticism in recent years for the extent to which he has, at times, cited and discussed cases or legal developments in other common law countries and used such authority as persuasive support in Court opinions. It is interesting that Justice Souter also looked abroad to study trends and standards in other nations in his discussion regarding the purpose, scope, and permissible limits of punitive damages.

Conclusion

This legal summary is for informational purposes and is not intended as legal advice. Employers with questions or seeking additional information should confer with counsel.

Disclosure: Mr. Fisher’s firm,, Birch Horton Bittner and Cherot, represented some of the plaintiffs in the Exxon litigation. This summary focuses solely on the public record and the Court’s opinion.