In re Exxon Valdez, 04-35182.

• Decision Date: 22 December 2006
• Docket Number: No. 04-35183.,No. 04-35182.,04-35182.,04-35183.
• Citation: 490 F.3d 1066
• Parties: In re the EXXON VALDEZ, Grant Baker; Sea Hawk Seafoods, Inc.; Cook Inlet Processors, Inc.; Sagaya Corp.; William McMurren; Patrick L. McMurren; William W. King; George C. Norris; Hunter Cranz; Richard Feenstra; Wilderness Sailing Safaris; Seafood Sales, Inc.; Rapid Systems Pacific Ltd.; Nautilus Marine Enterprises, Inc.; William Findlay Abbott, Jr., Plaintiffs-Appellees, v. Exxon Mobile Corp.; Exxon Shipping Co., Defendants-Appellants. In re the Exxon Valdez, Grant Baker; Sea Hawk Seafoods, Inc.; Cook Inlet Processors, Inc.; Sagaya Corp.; William McMurren; Patrick L. McMurren; William W. King; George C. Norris; Hunter Cranz; Richard Feenstra; Wilderness Sailing Safaris; Seafood Sales, Inc.; Rapid Systems Pacific Ltd.; Nautilus Marine Enterprises, Inc.; William Findlay Abbott, Jr., Plaintiffs-Appellants, v. Exxon Mobile Corp.; Exxon Shipping Co., Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

490 F.3d 1066 In re the EXXON VALDEZ,
Grant Baker; Sea Hawk Seafoods, Inc.; Cook Inlet Processors, Inc.; Sagaya Corp.; William McMurren; Patrick L. McMurren; William W. King; George C. Norris; Hunter Cranz; Richard Feenstra; Wilderness Sailing Safaris;

[490 F.3d 1067]

Seafood Sales, Inc.; Rapid Systems Pacific Ltd.; Nautilus Marine Enterprises, Inc.; William Findlay Abbott, Jr., Plaintiffs-Appellees,
v.
Exxon Mobile Corp.; Exxon Shipping Co., Defendants-Appellants.
In re the Exxon Valdez,
Grant Baker; Sea Hawk Seafoods, Inc.; Cook Inlet Processors, Inc.; Sagaya Corp.; William McMurren; Patrick L. McMurren; William W. King; George C. Norris; Hunter Cranz; Richard Feenstra; Wilderness Sailing Safaris; Seafood Sales, Inc.; Rapid Systems Pacific Ltd.; Nautilus Marine Enterprises, Inc.; William Findlay Abbott, Jr., Plaintiffs-Appellants,
v.
Exxon Mobile Corp.; Exxon Shipping Co., Defendants-Appellees. No. 04-35182. No. 04-35183. United States Court of Appeals, Ninth Circuit. Argued and Submitted January 27, 2006. Filed December 22, 2006. Amended May 23, 2007.

[490 F.3d 1068]

Walter Dellinger, O'Melveny & Myers, LLP, Washington, DC, and John F. Daum, O'Melveny & Myers LLP, Los Angeles, CA, for the defendants-appellants, cross-appellees.

Brian B. O'Neill, Faegre & Benson, Minneapolis, MN, and David C. Tarshes, Davis, Wright, Tremaine, LLP, Anchorage, AK, for the plaintiffs-appellees, cross-appellants.

Appeal from the United States District Court for the District of Alaska; H. Russel Holland, Chief Judge, Presiding. D.C. No. CV-89-00095-HRH.

Before: MARY M. SCHROEDER, Chief Judge, JAMES R. BROWNING and ANDREW J. KLEINFELD, Circuit Judges.

Order; Dissent to Order by Judge KOZINSKI; Dissent to Order by Judge BEA; Per Curiam Opinion; Dissent by Judge BROWNING.

ORDER

IT IS ORDERED THAT:

The opinion in In re Exxon Valdez, 472 F.3d 600 (9th Cir.2006) is amended as follows: On page 621, delete the first full paragraph commencing with "There is also a limit on the law of the case doctrine . . ." and concluding with ". . . may not generally be used as part of the calculation of harm."

With that amendment, the panel has voted to otherwise deny the petition for panel rehearing.

The petition for panel rehearing is DENIED.

The full court was advised of the petition for rehearing en banc. A judge of the court called for a vote on whether to rehear the matter en banc. The matter failed to receive a majority of votes of the nonrecused active judges in favor of en banc consideration. Fed. R.App. 35.¹

The petition for rehearing en banc is DENIED.

KOZINSKI, Circuit Judge, dissenting from the order denying the petition for rehearing en banc:

For two centuries, maritime law has protected ship owners from liability for punitive damages based solely on the fault of captain and crew. See Thomas J. Schoenbaum, Admiralty & Maritime Law § 5-17 (2005) ("[A]dmiralty cases deny punitive damages in cases of imputed fault."). The Supreme Court first erected this bulwark in The Amiable Nancy, 3 Wheat. 546, 16 U.S. 546, 558-59, 4 L.Ed. 456 (1818), explaining that a ship owner can't be subject to "exemplary damages" for the actions of its agent if the owner is "innocent of the demerit of this transaction, having neither directed it, nor countenanced it, nor participated in it in the slightest degree."

Dutifully following The Amiable Nancy, we held in Pacific Packing & Navigation Co. v. Fielding, 136 F. 577, 580 (9th Cir. 1905), that punitive damages are unavailable against a ship owner for the reckless conduct of the captain. We abruptly changed course in Protectus Alpha Navigation Co. v. North Pacific Grain Growers, Inc., 767 F.2d 1379 (9th Cir.1985), and held that, under maritime law, punitive damages are available against an owner for the actions of his agent who "was employed in a managerial capacity and was acting in the scope of employment." Id. at

[490 F.3d 1069]

1386 (quoting Restatement (Second) of Torts § 909).¹

The conflict between Protectus Alpha and Pacific Packing washed ashore in In re the Exxon Valdez (Valdez I), 270 F.3d 1215 (9th Cir.2001).² Following Protectus Alpha, and consigning The Amiable Nancy and Pacific Packing to the dustbin of history, the district court instructed the jury that Exxon was responsible for the reckless acts of the captain if he was "employed in a managerial capacity while acting in the scope of [his] employment." See Valdez I, 270 F.3d at 1233 (internal quotations omitted). Once the jury found that the captain acted recklessly, it was also required to find that Exxon acted recklessly. On appeal, the panel recognized that Protectus Alpha conflicts with Pacific Packing; at that point, it was duty-bound to call this case en banc. See United States v. Hardesty, 977 F.2d 1347, 1348 (9th Cir.1992) (en banc) (per curiam). Instead, it scuttled the en banc process and held that Protectus Alpha's imposition of punitive damages based on vicarious liability is now the maritime rule in our circuit. See Valdez I, 270 F.3d at 1235-36.³

This decision puts us at loggerheads with every other circuit that has considered this issue. In United States Steel Corp. v. Fuhrman, 407 F.2d 1143 (6th Cir.1969), cert. denied, 398 U.S. 958, 90 S.Ct. 2162, 2163, 26 L.Ed.2d 542 (1970), the Sixth Circuit followed The Amiable Nancy and Pacific Packing in holding that a ship owner cannot be held liable for punitive damages "unless it can be shown that the owner authorized or ratified the acts of the master either before or after the accident . . . [or] the acts complained of were those of an unfit master and the owner was reckless in employing him." Id. at 1148. The Fifth Circuit followed the same course in In re P & E Boat Rentals, Inc., 872 F.2d 642 (5th Cir.1989). In rejecting Protectus Alpha, it observed that admiralty courts, going back to The Amiable Nancy, have held that punitive damages are unavailable based on vicarious liability. See id. at 652. Finally, in CEH, Inc. v. F/V Seafarer, 70 F.3d 694, 705 (1st Cir.1995), the First Circuit, while taking a

[490 F.3d 1070]

somewhat broader view of what constitutes a ship owner's fault, endorsed the principle that "some level of culpability" on the part of the ship owner is required before punitive damages may be imposed under maritime law.

The panel's decision is also contrary to the modern drift of maritime law, which has reaffirmed its historical reluctance to impose hedonic and punitive damages at all. See Guevara v. Maritime Overseas Corp., 59 F.3d 1496, 1508 n. 11 (5th Cir. 1995) (en banc). In Miles v. Apex Marine Corp., 498 U.S. 19, 31-33, 111 S.Ct. 317, 112 L.Ed.2d 275 (1990), a unanimous Supreme Court held that the family of a seaman couldn't recover nonpecuniary damages in a wrongful death action brought under general maritime law. Courts have read Miles as barring nonpecuniary damages, including punitive damages, for wrongful death, personal injury and other related actions brought on behalf of seamen, see Glynn v. Roy Al Boat Mgmt. Corp., 57 F.3d 1495, 1502-05 & n. 14 (9th Cir.1995); Guevara, 59 F.3d at 1503, 150607, 1512, and some have interpreted Miles as applying to nonseamen, see Wahlstrom v. Kawasaki Heavy Indus., Ltd., 4 F.3d 1084, 1092 (2d Cir.1993). While these cases involve the intersection of federal statutes with maritime common law, they confirm the Supreme Court's observation in Executive Jet Aviation, Inc. v. Cleveland, 409 U.S. 249, 270, 93 S.Ct. 493, 34 L.Ed.2d 454 (1972), that the "long experience [of] the law of the sea . . . is concerned with . . . limitation of liability." It makes no sense to hold that families of those who are killed and maimed at sea can't get punitive awards, or even damages for pain and suffering or loss of consortium, and yet reverse centuries of maritime law to make it easier for businessmen to recover billions in punitive damages for harm to their commercial interests.

The panel's decision exposes owners of every vessel and port facility within our maritime jurisdiction—a staggeringly huge area—to punitive damages solely for the actions of managerial employees. Because of the harsh nature of vicarious liability, ship owners won't be able to protect themselves against our newfangled interpretation of maritime law through careful hiring practices. Accidents at sea happen—ships sink, collide and run aground—often because of serious mistakes by captain and crew, many of which could, with the benefit of hindsight, be found to have been reckless. For centuries, companies have built their seaborne businesses on the under standing that they won't be subject to punitive damages if they "[n]either directed it, nor countenanced it, nor participated in" the wrong, The Amiable Nancy, 16 U.S. at 559; the panel opinion has thrown this protection overboard.

This case demonstrates the pernicious impact of departing from the traditional protections of maritime law. The plaintiffs here suffered no physical injuries—their only claim was that the oil spill harmed their commercial fishing interests. See Valdez I, 270 F.3d at 1221. After the accident, Exxon acted as a model corporation—it spent over $2 billion to remove oil from the water and adjacent shore and $900 million to restore damaged natural resources. Id. at 1223. Furthermore, before the jury ever entered a verdict, Exxon compensated the plaintiffs for most of their damages. See Valdez II, 472 F.3d at 611-12. Yet the jury, perhaps subscribing to the maxim that a rising tide lifts all boats, took advantage of the vicarious liability instruction to award billions in punitive damages as a windfall to their fellow Alaskans.

As Exxon learned, a company can voluntarily compensate harmed parties, take every step imaginable to undo the tragic

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mess its agents created, and still be subject to the largest punitive award ever upheld by a federal court—all because it had the misfortune of hiring a captain who committed a reckless act. Moreover, the effects of this opinion are...