In re Exxon Valdez

• Decision Date: 22 December 2006
• Docket Number: No. 04-35183.,No. 04-35182.,04-35182.,04-35183.
• Citation: 472 F.3d 600
• 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; No. 04-35182 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.
• Court: U.S. Court of Appeals — Ninth Circuit

472 F.3d 600

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; No. 04-35182 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.

No. 04-35182.

No. 04-35183.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted January 27, 2006.

Filed December 22, 2006.

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

David W. Oesting, Stephen M. Rummage, David C. Tarshes, Jeffrey L. Fisher, Davis Wright Tremaine LLP, Anchorage, AK, Brian B. O'Neill, Faegre & Benson, Minneapolis, Minnesota, James vanR. Springer, Dickstein Shapiro LLP, Washington, DC, 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.

PER CURIAM Opinion; Dissent by Judge BROWNING.

PER CURIAM.

I. INTRODUCTION

We look for the third time at the punitive damages imposed in this litigation as a result of the 1989 grounding of the oil tanker Exxon Valdez, and the resulting economic harm to many who earned their livelihood from the resources of that area. See Baker v. Hazelwood (In re the Exxon Valdez), 270 F.3d 1215 (9th Cir.2001)[hereinafter Punitive Damages Opinion I]; Sea Hawk Seafoods, Inc. v. Exxon Corp., No. 03-35166 (9th Cir., Aug. 18, 2003). We are precluded, as the jury was, from punishing Exxon for befouling the beautiful region where the oil was spilled, because that punishment has already been imposed in separate litigation that has been settled. See Punitive Damages Opinion I, 270 F.3d at 1242. As we explained in Punitive Damages Opinion I, the plaintiffs' punitive damages case was saved from preemption and res judicata because the award "vindicates only private economic and quasi-economic interests, not the public interest in punishing harm to the environment." Id. "The plaintiffs' claims for punitive damages expressly excluded consideration of harm to the environment." In re the Exxon Valdez, 296 F.Supp.2d 1071, 1090 (D.Alaska 2004).

The resolution of punitive damages has been delayed because the course of this litigation has paralleled the course followed by the Supreme Court when, in 1991, it embarked on a series of decisions outlining the relationship of punitive damages to the principles of due process embodied in our Constitution. See, e.g., Pac. Mut. Life Ins. Co. v. Haslip, 499 U.S. 1, 111 S.Ct. 1032, 113 L.Ed.2d 1 (1991); TXO Prod. Corp. v. Alliance Res. Corp., 509 U.S. 443, 113 S.Ct. 2711, 125 L.Ed.2d 366 (1993) (plurality); BMW of N. Am., Inc. v. Gore, 517 U.S. 559, 116 S.Ct. 1589, 134 L.Ed.2d 809 (1996); State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 123 S.Ct. 1513, 155 L.Ed.2d 585 (2003). Intervening Supreme Court decisions have caused us to remand the matter twice to the district court for reconsideration of punitives in light of evolving Supreme Court law. The district court's opinion, after our last remand for it to consider the impact of the Supreme Court's decision in State Farm, is published at In re the Exxon Valdez, 296 F.Supp.2d 1071 (D.Alaska 2004)[hereinafter District Court Opinion]. It is the subject of this appeal.

Now, with the guidance of the Supreme Court's decisions, the district judge's thoughtful consideration of the issues, and our own prior decisions in the litigation, we trust we are able to bring this phase of the litigation to an end. While we agree with much of the analysis of the district court, we are required to review de novo the district court's legal analysis in applying the Supreme Court's guideposts. See Cooper Indus., Inc. v. Leatherman Tool Group, Inc., 532 U.S. 424, 436, 121 S.Ct. 1678, 149 L.Ed.2d 674 (2001).

While the original punitive damages award was $5 billion and in accord with the jury's verdict, the district court reduced it to $4 billion after our first remand. In re the Exxon Valdez, 236 F.Supp.2d 1043, 1068 (D.Alaska 2002), vacated by Sea Hawk, No. 03-35166. Then, after our second remand, it entered an award of $4.5 billion. District Court Opinion, 296 F.Supp.2d at 1110. For the reasons outlined further in the factual development and the analysis of this opinion, we conclude that the ratio of punitive damages to actual economic harm resulting from the spill, reflected in the district court's award of $4.5 billion, exceeds by a material factor a ratio that would be appropriate under Punitive Damages Opinion I and the current controlling Supreme Court analysis. See State Farm, 538 U.S. at 425, 123 S.Ct. 1513. We order a remittitur of $2 billion, resulting in punitive damages of $2.5 billion. We do so because, in assessing the reprehensibility of Exxon's misconduct, the most important guidepost according to the Supreme Court's opinion in State Farm, there are several mitigating facts. See id. at 419, 123 S.Ct. 1513. These include prompt action taken by Exxon both to clean up the oil and to compensate the plaintiffs for economic losses. These mollify, at least to some material degree, the reprehensibility in economic terms of Exxon's original misconduct. Punitive Damages Opinion I, 270 F.3d at 1242. In addition, in considering the relationship between the size of the award and the amount of harm, we concluded in our earlier punitive damages opinion that the substantial costs that Exxon had already borne in clean up and loss of cargo lessen the need for deterrence in the future. Id. at 1244. We disagree, however, with Exxon's ultimate contention that, as a result of two sentences in Punitive Damages Opinion I, written five years ago and before the Supreme Court's opinion in State Farm, Exxon is entitled to have punitive damages assessed at no higher than $25 million. See id.

Our dissenting colleague goes to the other extreme. Exxon's misconduct was placing a relapsed alcoholic in charge of a supertanker. Punitive Damages Opinion I, 270 F.3d at 1234. Yet, the dissent claims that we should ignore our unanimous conclusion in Punitive Damages Opinion I, 270 F.3d at 1242, that Exxon's conduct with respect to the spill was not intentional. The dissent effectively treats Exxon as though it calculatingly and maliciously steered the ship into disaster. Purporting to rely on the intervening Supreme Court decision in State Farm, the dissent also refuses to apply our earlier holding that Exxon's mitigation efforts reduce the reprehensibility of its conduct. This amounts to a rejection of the bedrock principle of stare decisis.

State Farm was an insurance contract case. Nothing in it suggests that this court's decision in Punitive Damages Opinion I was improper. The Supreme Court did not explicitly or implicitly hold that mitigation plays no role in determining the constitutionality of a punitive damages award. Such a lack of discussion in an insurance contract case cannot supplant our express holding in the toxic-tort arena that mitigation efforts are a factor in assessing the punitive damages award in this case. Controlling authority should not be ignored or distorted. As Learned Hand famously once said, "a victory gained by sweeping the chess pieces off the table is not enduring." Learned Hand, Mr. Justice Cardozo, 52 HARV. L. REV. 361, 362 (1939).

We reiterate our previous holding that Exxon's conduct was not willful. Accordingly, a punitive damages award that corresponds with the highest degree of reprehensibility does not comport with due process when Exxon's conduct falls squarely in the middle of a fault continuum.

Because the history of this litigation tracks the recent jurisprudential history of punitive damages, our analysis is best made in light of a thorough understanding of that history. We therefore outline that history with what we hope is sufficient clarity and thoroughness.

II. LEGAL AND FACTUAL BACKGROUND

A. From the Time of the Accident through the First Punitive Damages Award and Denial of Motion for New Trial: The Common Law through the Supreme Court Decision in TXO.

The Exxon Valdez ran aground on Bligh Reef in Alaska's Prince William Sound on March 24, 1989. Punitive damages at that time were governed by general common law principles. At common law, the jury determined the punitives, and the trial judge conducted a limited review to determine whether the jury's verdict was the product of passion and prejudice, or whether the award was one that shocked the conscience. See Renee B. Lettow, New Trial for Verdict Against Law: Judge-Jury Relations in Early Nineteenth Century America, 71 Notre Dame L.Rev. 505, 542-51 (1996); Paul DeCamp, Beyond State Farm: Due Process Constraints on Noneconomic Compensatory Damages, 27 Harv. J.L. & Pub. Pol'y 231, 246-48 (2003); see also Browning-Ferris Indus. of Vt., Inc. v. Kelco Disposal, Inc., 492 U.S. 257, 278 n. 24, 109 S.Ct. 2909, 106 L.Ed.2d 219 (1989) (affirming district court's application of Vermont's "grossly and manifestly excessive" standard for judicial review); Honda Motor Co. v. Oberg, 512 U.S. 415, 432 n. 10, 114 S.Ct. 2331, 129 L.Ed.2d 336 (1994). Although there were cases dating from the Lochner era that had suggested that there may be a due process ceiling on punitive damages, at the time of this accident in 1989, the Supreme Court had never invalidated an award on grounds that the size of the award violated due process. See BMW v. Gore, 517 U.S. at 600-01, 116 S.Ct. 1589 (Scalia, J., dissenting) (discussing the history of due process review of punitive damages awards) (citing Seaboard Air Line Ry. v. Seegers, 207...