Record and brief — Exxon Shipping Co. v. Baker

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No. 07-219

Title. Exxon Shipping Company, et al., Petitioners

Grant Baker, et al

Docketed: August 21, 2007

Lower Ct: United States Court of Appeals for the Ninth Circuit

Case Nos.: (04-35183)

Decision Date: December 22, 2006

Rehearing Denied: May 23, 2007

Questions Presented

~~~Date~~~

meen Proceedings and Orders~~~~~~~~~~~~ ae ~~

Aug 20 2007 Petition for a writ of certiorari filed. (Response due September 20, 2007)

Sep 13 2007

Sep 19 2007

Sep 20 2007

Oct 10 2007

Oct 12 2007

Oct 29 2007

Dec 10 2007

Dec 11 2007

Dec 14 2007

Dec 17 2007

Consent to the filing of amicus briefs in support of either party received from counsel for

the petitioners.

Brief amici curiae of American Waterways Operators, et al. filed.

Brief amici curiae of American Petroleum Institute, et al. filed.

Brief amicus curiae of Chamber of Commerce of the United States of America filed.

Brief amicus curiae of American Institute of Marine Underwriters filed

Brief amicus curiae of Keystone Shipping Co. filed.

Brief amicus curiae of American Commercial Lines Inc. filed.

Brief amicus curiae of Washington Legal Foundation filed.

Brief amicus curiae of International Association of Drilling Contractors filed.

Brief amici curiae of Transportation Institute, et al. filed.

Brief amici curiae of International Chamber of Shipping, et al. filed.

Brief of respondents Grant Baker, et al. in opposition filed.

Brief amicus curiae of Maritime Law Association filed.

Brief amici curiae of International Association of Independent Tanker Owners, et al.

filed.

Brief amici curiae of Professors David J. Bederman, et al. filed.

DISTRIBUTED for Conference of October 26, 2007.

Reply of petitioners Exxon Shipping Company, et al. filed. (Distributed)

Petition GRANTED limited to Questions |, 2, and 3(1) presented by the petition. Justice

Alito took no part in the consideration or decision of this petition.

The time within which to file the joint appendix and petitioners’ brief on the merits ts

extended to and including December 17, 2007.

The time within which to file respondents’ brief on the merits is extended to and including

January 22, 2008.

Consent to the filing of amicus curiae briefs in support of either or neither party received

fron: counsel for the respondents.

Consent to the filing of amicus briefs in support of either party received from counsel for

the petitioners.

Joint appendix filed (4 volumes). (Statement of costs received).

Supplemental joint appendix filed (2 volumes). (Statement of costs received).

RUVALE ENE Vee te

Dec 17 2007

Dec 20 2007

Dec 21 2007

Dec 24 2007

Dec 26 2007

jan 7 2008

Jan 10 2008

Jan |] 2008

Jan 15 2008

Jan 22 2008

Jan 23 2008

Jan 25 2008

Jan 28 2008

Jan 29 2008

Brief of petitioners Exxon Shipping Company, et al. filed

Brief amicus curiae of Chamber of Commerce of the United States of America filed.

SET FOR ARGUMENT ON Wednesday, February 27, 2008

Brief amici curiae of Transportation Institute, et al. filed.

Brief amici curiae of International Chamber of Shipping, et al. filed.

Brief amici curiae of American Petroleum Institute, et al. filed.

Brief amicus curiae of Washington Legal Foundation filed.

Brief amicus curiae of Product Liability Advisory Council, Inc. filed.

Brief amicus curiae of American Maritime Safety Inc. filed.

Application (07A575) of respondents for leave to file the brief on the merits in excess of

the word limitation, submitted to Justice Kennedy.

Record received from U.S.C.A. for the 9th Circuit. (1 envelope)

Application (07A575) of respondents for leave to file the brief on the merits in excess of

the word limitation granted by Justice Kennedy.

CIRCULATED.

Brief amici curiae of Alaska Legislative Council, on behalf of Alaska State Legislature,

and Former Alaska Governors filed.

Brief of respondents Grant Baker, et al. filed. (Distributed)

22 copies of a DVD containing Respondents’ Submission of Select Trial Exhibits

received from counsel for the respondents.

Record received from U.S.D.C. for the District of Alaska. (1 envelope)

Brief amici curiae of U.S. Senators Theodore F. Stevens, and Lisa Murkowski, and U.S.

Reprensentative Don Young filed. (Distributed)

Brief amici curiae of Trustees for Alaska, et al. filed. (Distributed)

Brief amici curiae of Prince William Sound Regional Citizens’ Advisory Council, et al.

filed. (Distributed)

Brief amicus curiae of Professor Thomas J. Schoenbaum filed.

Motion of Alaska for leave to participate in oral argument as amicus curiae and for

divided argument filed.

Brief amici curiae of National Congress of American Indians, et al. filed. (Distributed)

Brief amicus curiae of Professor Arthur Miller filed. (Distributed)

Brief amici curiae of Jean-Michel Cousteau and Other Natural Scientists filed.

(Distributed)

Brief amici curiae of Sociologists, Psychologists, and Law and Economics Scholars filed.

(Distributed)

Brief amicus curiae of National Fisheries Institute filed. (Distributed)

Brief amici curiae of Maryland and 33 Other States filed. (Distributed)

Brief amici curiae of American Association for Justice. and Public Justice PC filed.

(Distributed)

Brief amicus curiae of Pacific Coast Federation of Fishermen filed. (Distributed)

Brief amicus curiae of Alaska filed. (Distributed)

Brief amici curiae of Former Ship Masters and Expert Mariners, et al. filed. (Distributed)

Motion for additional time to argue filed by respondents Grant Baker, et al.

RAUWANE ENE VE ae EZ

Jan 29 2008

Feb 6 2008

Feb 7 2008

Feb 8 2008

Feb 11 2008

Feb 14 2008

Feb 15 2008

Feb 19 2U08

Feb 26 2008

Feb 27 2008

Brief amici curiae of Experts on Alcohol in the Workplace filed. (Distributed)

Application (07A657) of petitioners for leave to file a reply brief on the merits in excess

of the word limit, submitted to Justice Kennedy.

Petitioners’ opposition to motion of Alaska for leave to participate in oral argument as

amicus curiae and for divided argument.

Letter, dated February 6, 2008, received from counsel for petitioner.

Reply letter of Alaska in support of motion for divided argument filed.

Application (07A657) granted by Justice Kennedy of petitioners for leave to file a reply

brief on the merits in excess of the word limit. provided that the brief does not exceed

9,000 words.

Letter, dated February | 11,2008, from counsel for respondents received. (Distributed).

Motion for additional time to argue by respondent GRANTED. Justice Alito took no part

in the consideration or decision of this motion.

Motion of Alaska for leave to participate in oral argument as amicus curiae and for

divided argument DENIED. Justice Alito took no part in the consideration or decision of

this motion.

Reply of petitioners Exxon Shipping Company, et al. filed. (Distributed)

18 copies of Video Compilation No. 9 (at JA 1295) submitted by counsel for respondents.

Argued. For petitioners: Walter Dellinger, Washington, D.C. For respondents: Jeffrey L.

Fisher, Stanford, Cal.

PETITION

FOR

WRIT OF

CERTIORARI

oO)

No. 07-

Supreme Court, U.S.

07-219 AUG 20 2007

OFFICE OF THE CLERK

IN THE

Supreme Court of the Anited States

EXXON SHIPPING COMPANY, ef ai.,

Vv.

Petitioners,

GRANT BAKER, et al.,

Respondents.

On Petition for a Writ of Certiorari

to the United States Court of Appeals

for the Ninth Circuit

PETITION FOR A WRIT OF CERTIORARI

E. EDWARD BRUCE

COVINGTON & BURLING LLP

1201 Pennsylvania Ave., N.W.

Washington, D.C. 20004

(202) 662-6000

Attorneys for Petitioner

Exxon Shipping Company

WALTER DELLINGER

(Counsel of Record)

JOHN F. DAUM

CHARLES C. LIFLAND

JONATHAN D. HACKER

O’MELVENY & MYERS LLP

1625 Eye Street, N.W.

Washington, D.C. 20006

(202) 383-5300

Attorneys for Petitioner

Exxon Mobil Corporation

QUESTIONS PRESENTED

An Alaska federal jury awarded $5 billion in punitive

damages against Exxon under federal maritime law for the

accidental grounding of the tanker EXXON VALDEZ and the

resulting oil spill. The award did not punish for harm to the

environment, which other proceedings had fully redressed,

but only for lost income and similar economic harm to com-

mercial fishermen and other private parties. Applying the

Due Process Clause, the Ninth Circuit reduced the award to

$2.5 billion—still 123 times the compensatory damages

awarded and five times what the court found was the total,

fully compensated loss to all private economic interests.

The questions presented are:

1. May punitive damages be imposed under maritime law

against a shipowner (as the Ninth Circuit held, contrary to

decisions of the First, Fifth, Sixth, and Seventh Circuits) for

the conduct of a ship’s master at sea, absent a finding that the

owner directed, countenanced, or participated in that con-

duct, and even when the conduct was contrary to policies

established and enforced by the owner?

2. When Congress has specified the criminal and civil

penalties for maritime conduct in a controlling statute, here

the Clean Water Act, but has not provided for punitive dam-

ages, may judge-made federal maritime law (as the Ninth

Circuit held, contrary to decisions of the First, Second, Fifth,

and Sixth Circuits) expand the penalties Congress provided

by adding a punitive damages remedy?

3. Is this $2.5 billion punitive damages award, which is

larger than the total of all punitive damages awards affirmed

by all federal appellate courts in our history, within the limits

allowed by (1) federal maritime law or (2) if maritime law

could permit such an award, constitutional due process?

PARTIES TO THE PROCEEDING

Petitioners are Exxon Shipping Company (now known as

SeaRiver Maritime, Inc.) and Exxon Mobil Corporation, de-

fendants-appellants below. Joseph Hazelwood (the master of

the EXXON VALDEZ) was also a defendant-appellant below

and is therefore a respondent under Rule 12.6.

Plaintiffs-appellees below, who are respondents under

Rule 12.6, are Grant Baker, Louie E. Alber, Ahmet Artuner,

Jeffrey Bailey, William Bennett, Michael Wayne Bullock,

Robyne L. Butler, Albert Ray Carroll, Larry L. Dooley,

Mark Doumit, Douglas R. Jensen, Dennis G. Johnson, Don-

ald P. Kompkoff, Sr., Josef Kopecky, Daniel Lowell, An-

drean E. Martusheff, Carol Ann Maxwell, Jacquelan Jill

Maxwell, Robert A. Maxwell, Sr., Michael McLenaghan,

Elenore E. McMullen, Leslie R. Meredith, Leonard S. Ogle,

Steven T. Olsen, August M. Pedersen, Jr., Mary Lou Red-

mond, Joseph David Stanton, Jean A. Tisdall, Darrell Wood,

the Alaska Sport Fishing Ass’n, Debra Lee, Inc., Dew Drop,

Inc., and the Native Village of Tatitlek. They are representa-

tives of a punitive damages class certified by the district

court and defined as “all persons who possess or assert a

claim for punitive damages” arising out of the grounding of

the EXXON VALDEZ and the resulting oil spill, except for cer-

tain governmental entities. App. 126a.'

RULE 29.6 DISCLOSURE

All of the stock of Exxon Shipping Company is owned

directly or indirectly by Exxon Mobil Corporation. Exxon

Mobil Corporation has no parent corporation and no person

or entity owns 10% or more of its stock.

' Citations to “App.” indicate the Appendix to this Petition. Citations

to “ER” and “RER” indicate materials available in Appellants’ Joint Ex-

cerpts of Record and Appellants’ Joint Rebuttal Excerpts of Record filed

in the fizst Ninth Circuit appeal (No. 97-35191). Citations to “DX” indi-

cate exhibits admitted at trial. Emphasis is supplied throughout, except

where otherwise stated, and internal quotations and citations are omitted.

ill

TABLE OF CONTENTS

Page

QUESTIONS PRESENTED......:.:0cssesessscseossssesessosssossecoossonse i

PARTIES TO THE PROCEEDING. .......cc.ccssrcsovessessesesscesees ii

Fe Be EI ciscsscicecscrncssvasvtonnesessesonsconnecenines il

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ca epasbeatsdadendebniensidedeiiedel 1

ii hatirtiiniennenninventsnasendcipinaiiiieniaensemene pestis

CONSTITUTIONAL AND STATUTORY PROVI-

IID icivitiichvciepnccetineinsiaesnstinnilnpiennnedepvesdne 1

RIOT Uictiicicsicsecsnsinsscnsenscsnesssctivnreenasensventventuomnens |

STATEMENT OF THE CASE.............:0:c-ssscscssosssssecssssssnesees 3

i aiitidetsintnsiceisenscstsintiiebenectnyuitnensin 3

I i scccicinienensinisemsntescennscsevennnsvetensh 5

REASONS FOR GRANTING THE PETITION................. 10

I. The Court Should Grant Certiorari to Resolve the

Conflict in the Circuits on Whether Maritime Law

Permits Vicarious Punitive Damages...................0.0000+ il

II. The Court Should Grant Certiorari to Resolve the ©

Conflict in the Circuits on Whether Maritime Law

Permits Judge-Made Remedies When Congress

Has Not Authorized Them in Applicable Statutes. .......15

Il. The Court Should Grant Certiorari to Remedy

Confusion in the Lower Courts and Make Clear

the Permissible Size of Punitive Damage Awards

under Maritime Law and under the Due Process

55S IRN a ENGINE LOR ON RO eS 21

REESE CNRS MORNE: CERT SRG RICA I TEE MES 97) 21

ATS SE Tae aS et TN TE ae 27

SE diiivicsbclnvistnsiestouicbionnciegsincsubisipbannainecaicaiiis 30

TABLE OF AUTHORITIES

Page(s)

CASES

American Dredging Co. v. Miller,

A 2 a icscenisencesepnpspengszecpinioninnesttl 23

BMW of North America v. Gore,

Sa iin scensaepnomtinnetipetanegnevnbaiels passim

Bogle v. McClure,

See ae Re 8 BE Gls BIE a cccvcccescosessovecrenscosonsenseees 28

Bullock v. Philip Morris USA, Inc.,

42 Cal. Rptr. 3d 140 (Cal. Ct. App. 2006) ...............004 28

California v. Deep Sea Research, Inc.,

Sa is seceulieniensnemnaain 10

CEH, Inc. v. F/V Seafarer,

Fe Cie cccccevecvssncecencnscnecsensetontios 12, 23

City of Milwaukee v. Illinois,

i scssnemneucinnsansbaiintend passim

Clark v. Chrysler Corp.,

Fe ee, BO OG) nc cccccncesocerseccseczesseccsvcceontes 30

Conner v. Aerovox, Inc.,

Fee Fe CIE ee BOO cncccocsecccccccccvcesssesscetene 18, 19

Dooley v. Korean Air Lines Co.,

Fe ee I bissccccticccscccccsvecvsssescssscessess 16, 17, 26

Estate of Moreland v. Dieter,

a Pt TIE, BIDE ccscninssnrecesvasoncsesioccssossidenns 28

Executive Jet Aviation v. City of Cleveland,

i atin nihiintnnhcedeecuionneticcnideitiins 23

Foremost Ins. Co. v. Richardson,

II Lorton tnienninscniassoutscecedpeonnseectecepeniciente 22

Gaffney v. Riverboat Services of Indiana,

Inc.,

Pe ae PED Gls Bin ssccicnssvsntsnrsccessccevenscsensobi 22

Greenbelt Co-op Pub. Ass'n v. Bresler,

Pe sidan siicinbdinightcsapcecinsiemenitajenpocidhite 13

Guevara Vv. Maritime Overseas Corp.,

59 F.3d 1496 (Sth Cir. 1995) (en banc) .............0006 18, 23

Honda Motor Co. v. Oberg,

iss srs cncnscssenstccrnesoossonnansotecy 21, 26

Horsley v. Mobil Oil Corp.,

BS ae GREE Ee. 1999) ...ccccecccceccccccsceccssceves 18, 19, 29

In re Oswego Barge Corp.,

ET IEEE, BOWE Dacecccoccccccccnceoccescesssecesescccosees 18

In re P&E Boat Rentals,

872 F.2d 642 (Sth Cir. 1989) (en banc) .............00+ 12, 13

In re Paris Air Crash,

eR ae EEE ile BDU cccccccccccescoxcvcsscscccosocesoeces 20

Kolstad v. American Dental Ass'n,

527 U.S. 526 (1999)............ OS FEE ere Oe 14

Lake Shore & M.S. Ry. Co. v. Prentice,

EEN ll

Lee v. Edwards,

IEE CE, BDO D a ccccccvesacscscecvcoscsscsocesercesssesee 22

Mason v. Texaco, Inc.,

948 F.2d 1546 (10th Cir. 1991)... cece eeceeceeeeeseneeees 10

Mathie v. Fries,

IE GE, BID Ph .nccncccoccscovsesccccnsonscncssucoesests 22

McDermott, Inc. v. AmClyde,

sen ssn ccesccntncsscnssocoesenscceeoes 10, 23

Middlesex County Sewerage Auth. v. Nat'l

Sea Clammers Ass'n,

RI A I os sacssccccscccoveccccceceseosessossece 16, 17, 18, 19

Miles v. Apex Marine Corp.,

a ccssssssenccncosscnesnene passim

Miller v. American President Lines,

989 F.2d 1450 (6th Cir. 1993)... cece ccceeeeeees 18, 29

Mobil Oil Co. v. Higginbotham,

i sc saciniscepentasionns 16, 17

Moragne v. States Marine Lines, Inc.,

EG ee EE cisitcensicctnsieenesesecsnessernsecemesesoneeee 10, 23

Norfolk Southern Ry. Co. v. Kirby,

I a iat sicanscctncsessncpesconiensaniegi 10, 22

Pacific Mut. Life Ins. Co. v. Haslip,

Se NE i ciindhcnaptnciencinncemeneceeseescosees 13, 22, 24, 25

Pacific Packing & Nav. Co. v. Fielding,

ae ee IG TIT ocas.cnncpdcensvssocenessovecvocsscrcoesete 11

Philip Morris USA v. Williams,

A TT Diciriinninecsonavacnncccensstsseseccoscetoecs 27, 29

Protectus Alpha Nav. Co. v. North Pac. Grain

Growers,

oe eA Re passim

Rhone-Poulenc Agro, S.A. v. DeKalb

Genetics Corp.,

pe | ey: | nr 28

Sisson v. Ruby,

i ciiiacia sotatocnenessevenesncieniensnctmnntinn 22

Spectrum Sports, Inc. v. McQuillan,

EE 13

Stamathis v. Flying J, Inc.,

Fee Be Ge EC. 2O0G).....n a cccrencscenserscrccesesecesecesceees 28

State Farm Mut. Auto. Ins. Co. v. Campbell,

NE I cc ci cidnlineseliotionennassevcncensnonsee passim

Superior Federal Bank v. Jones & Mackey

Const. Co.,

219 S.W.3d 643 (Ark. Ct. App. 2005) .0.........cccccceeeeeees 28

The Amiable Nancy,

is sac ancibcinnt ennetinesinencbanmncnisediniiaa 11

The Golden Gate, |

16 F. Cas. 141 (C.C.N.D. Cal. 1856) .........:..cccccceseereees 11

The Lottawanna,

EE ITI ca dascnissctstnsaksstnsicsbapneededvatcnntemieciidial 23

TTS

Vii

The State of Missouri,

ee ee Be ecisiccscccesescessosecevecvsooesavecsessconee 11

TXO Prod. Corp. v. Alliance Res. Corp.,

ee ick ties steesttassernsncescsccorsscsconees 22, 23, 26

United Int'l Holdings, Inc. v. Wharf

(Holdings) Lid.,

210 F.3d 1207 (10th Cir. 2000)................0...cccrerccsereeres 10

United States Steel Corp. v. Fuhrman,

407 F.2d 1143 (6th Cir. 1969).............ceceseeeeeenees 12, 13

United States v. Reliable Transfer Co.,

aces cnsislnisetaiennctentonseoninbens 10

Wahlstrom v. Kawasaki Heavy Indus.,

Oe FEO Oe Ce TIS ocecnccencccccsccoscossccrcccsscccsssecooes 18

Zazu Designs v. L'Oreal, S.A.,

Fe Se stresses sncecesesoscocsscccenscnente 26

STATUTES

a can EIN ceo aitsnjicscbeniannipeniscenanenstantaaeintsi 4,15, 19

ON SESE aaa ONE Ie a Pete DN CR I EN l

IIIT cath cnencsieniicanicncnrtsindicintnanpncindsvinnineineeneitiatiategl 5

acct conic igiclniaeininsaetiohbbiesiiilibieelititiedl 5

II iain ccsesseicinipitcieateinessthinliepastineniineimnidgnennbited 5

SR IIE Siinsidiiciciscvsiticadesentninerndcbeimiettensbenibessssntoneiniinit 5

TINTS di diseclipisdinsdeiccnelanctinsibthigitesdnbitteseineenedeninitnes 5

Clean Water Act (CWA), 33 U.S.C. § 1311 et

TI ied ttcintncpeteisiianadnccthensincatmseetesensqntianvennetesosonesenssanooenens ]

Oe nc snpessnosasaenscssoseunoennnnnis 4,15

CWA, Fo UBL. © TSTSI MA) ..cccceccccoceccsesessorsccvsessssessosed 4

elas ea ee OI in sccccrecesesncencssenssoneavopeannnees 15

I aT NRA TEI cdincdlicenionsorsanictecrercsnerinotitoncnenianens 20

Sey Se eee We EIT ccnsreveceveccorecccervsensesctorivnnte 15

CPA, Fe CAs 8 Tr FD cscecsccnovcnccecescscsvonccsecseceses 16

Vili

ig Bee Rae 0 Re rveceicenesscrseiniscatenccnsssssnteneecseod 4,15

ay ie eID cerccccsccccensscevscenecostcnatectniioneece 20

ay a le IID socscciiccnincertatscmscontnesisocianstvenseciaes 20

CONSTITUTIONAL PROVISIONS

as Gs SINE 7 cnisitcniniceisotcicnstiniteniccitenenlbcsidebissresapietnache l

te Be Se 8 eter ee eee eer 22

OTHER AUTHORITIES

Restatement (Second) of Torts § 909.............cscccccssseeseeenees 12

ee --

eres

PETITION FOR A WRIT OF CERTIORARI

Petitioners Exxon Shipping Company and Exxon Mobil

Corporation (collectively, “Exxon”) respectfully petition for

a writ of certiorari to review the judgment of the United

States Court of Appeals for the Ninth Circuit in this case.

OPINIONS BELOW

The two opinions of the Ninth Circuit and the opinions of

Judges Kozinski and Bea dissenting from denial of rehearing

en banc are reported at 270 F.3d 1215 and 490 F.3d 1066

and reprinted at App. la-117a and 287a-293a. The district

court’s initial opinions on all issues are unreported and re-

printed at App. 224a-284a. Its two later opinions on the size

of the punitive award are reported at 236 F. Supp. 2d 1043

and 296 F. Supp. 2d 1071 and reprinted at App. 118a-223a.

JURISDICTION

The Ninth Circuit issued its opinions in this matter on

November 7, 2001, and December 22, 2006, and amended

the latter opinion on May 23, 2007, upon denial of Exxon’s

timely petition for rehearing. App. 285a. This Court has ju-

risdiction under 28 U.S.C. § 1254.

CONSTITUTIONAL AND STATUTORY

PROVISIONS INVOLVED

The Fifth Amendment provides: “No person shall be de-

prived of life, liberty, or property, without due process of

law.” Pertinent provisions of the Clean Water Act (CWA),

33 U.S.C. § 1311 et seq., are given at App. 293a-299a.

INTRODUCTION

This petition seeks review of what is by far the largest

punitive damage award ever affirmed by a federal appellate

court. Unlike all the other punitive awards this Court has re-

viewed, which arose under state law, this award is purely the

product of judge-made federal law and raises important fed-

eral questions not limited to whether the amount exceeds the

boundaries of due process. Because the oil spill was a mari-

time tort, the award was made under maritime law, a species

of federal common law which federal judges have responsi-

bility to declare and shape in the same manner that state

courts declare and shape the common law_of their states, and

of which this Court is the ultimate arbiter. The questions pre-

sented, of importance to the entire maritime community,

must therefore start with whether the award was proper un-

der maritime law. It was not.

First. The trial court instructed the jurors that if they

found the ship’s master had acted recklessly, they were re-

quired as a matter of law to impute his recklessness to the

shipowner, even if the master’s acts were contrary to the

owner’s properly enforced policies. As explained in Judge

Kozinski’s dissent, App. 287a-291a, in upholding these in-

structions the Ninth Circuit departed from 200 years of mari-

time law, and put itself squarely in conflict with decisions of

the First, Fifth, Sixth, and Seventh Circuits.

Second. Congress established a detailed scheme of penal-

ties and remedies for oil spills in the CWA, but did not au-

thorize punitive damages. In holding that punitive damages

were available, the Ninth Circuit departed from decisions of

this Court and other circuits holding that judge-made mari-

time law cannot add remedies to those Congress has pro-

vided in an applicable statute, including the CWA. The deci-

sion also conflicts with multiple maritime-law decisions of

other circuits barring judge-made punitive damages where

pertinent federal statutes do not authorize them.

Third. The Ninth Circuit refused to recognize that sub-

stantive maritime law limits the size of the award independ-

ently of due process. Indeed, the court said that absent a due

process limit, the jury might permissibly have awarded the

full $5 billion on the theory that Exxon “ought to have a year

without profit” as punishment for the spill. App. 91a. In so

holding, the Ninth Circuit ignored maritime law’s core ob-

jectives of uniformity, predictability, and avoidance of undue

burdens on maritime commerce. It also contradicted deci-

sions of other circuits that punitive awards made under fed-

eral law must comply not only with outer limits imposed by

due process, but also with non-constitutional limits imposed

by underlying federal law. The $2.5 billion award in this

case vastly exceeds any amount supportable under maritime

law. And for reasons including those discussed in Judge

Bea’s dissent, App. 292a-293a, the award also vastly exceeds

the maximum permitted by due process.

STATEMENT OF THE CASE

A. Factual Background

1. On March 24, 1989, the EXXON VALDEZ, a modern,

well-equipped tanker fully loaded with crude oil, ran

aground on Bligh Reef in Prince William Sound, Alaska.

The immediate cause of the grounding was the failure of

Third Mate Cousins to turr the vessel away from the reef,

the last step in a routine maneuver to avoid ice in the ship-

ping lanes. The vessel’s master, Captain Hazelwood, in-

structed Cousins when and where to make the turn, but then

left the bridge—a violation of Exxon’s explicit policy requir-

ing two officers to be present. For reasons never explained,

Cousins failed to make the turn as instructed, and the ship

went aground, spilling 258,000 barrels of oil. App. 61a-64a.

Upon leaming of the grounding, Exxon dispatched an

emergency response team which successfully prevented the

discharge of the remaining 80 per cent of the vessel’s cargo.

RER 287-91. Exxon acknowledged responsibility for the

spill and initiated a massive cleanup, ultimately spending

$2.1 billion on that effort—almost double Exxon’s annual

profit at that time from all petroleum operations in the

United States. App. 64a; RER 312; DX-6347. Exxon also

established a claims program which paid, without litigation

and mostly without requiring releases, over $300 million to

compensate commercial fishermen, seafood processors, and

other persons claiming that the spill had disrupted their busi-

nesses. App. 64a. And Exxon undertook comprehensive re-

medial measures to reduce the risk of future shipping acci-

dents and spills. ER 108-09.

2. The State of Alaska sued Exxon for compensatory and

punitive damages as parens patriae, and the United States

indicted Exxon for violating the CWA, 33 U.S.C. § 1311(a),

and other statutes. ER 1, 88. Both governments also sued

Exxon for natural resource damages under CWA § 1321(f).

App. 70a. Exxon resolved all these claims in a federal con-

sent decree and plea agreement entered in October 1991.

Exxon paid the governments $900 million for natural re-

source damages, and they dismissed or released all pending

or potential claims asserted on behalf of the general public,

including Alaska’s parens patriae claim for punitive dam-

ages. App. 65a; ER 242A. Exxon also pled guilty to certain

misdemeanors, including negligent discharge of oil in viola-

tion of CWA § 1319(c)(1A), and was sentenced under

18 U.S.C. § 3571(d) to pay a fine of $150 million and restitu-

tion to the United States and Alaska of $100 million. App.

103a. The fine was remitted to $25 million in recognition of

Exxon’s exemplary post-spill conduct, including its exten-

sive remedial measures and payment of $2.1 billion for

cleanup and $300 million to compensate private losses. App.

103a; ER 101-13. The net sentence of $125 million exceeded

the total of all fines previously imposed by the United States

in environmental cases. ER 124. Exxon’s pretrial payments,

settlements, and fines exceeded $3.4 billion. App. 100a.

At the 1991 sentencing hearing, the Attorney General’s

representative affirmed that the criminal sentence by itself

“clearly” achieved “adequate deterrence.” ER 155-56. The

Attorney General of Alaska concurred, stating that a $150

million fine was “a number which the State can hold up to

other polluters ... and that certainly should be sufficient ...

to give pause to those who do not show the proper regard for

the Alaska environment.” ER 169. The district court agreed,

noting that it “says to others in the industry ... that you can

expect fines that are off the chart in response to oil spills that

are off the chart{,] ... [bJut it also says ... [that] if you live

up to your legal responsibilities [after such a spill] ... you

will get credit for it.” The court found that “Exxon has ...

been a good corporate citizen[,} ... sensitive to its environ-

mental obligations[,} ... [who] immediately after the spill ...

stepped forward with both its people and its pocketbook and

did what had to be done in difficult circumstances, ... [and]

will do its utmost to prevent another [spill].” ER 194-97. The

court approved the sentence as containing both “an appropri-

ate amount of punishment” and “an appropriate element of

encouragement of respect for the law.” App. 103a; ER 197.

B. Proceedings Below

1. The punitive damage claims were tried in 1994 to-

gether with claims by commercial fishermen who alleged

that the spill had caused greater economic losses than Exxon

compensated in the claims program. (The claims were

mostly for business interruption—the State closed the fisher-

ies to protect the market reputation of Alaska salmon.) To

allow resolution of all punitive damage claims in a single

trial, the district court certified a class of all persons who

“possess[ed] or assert(ed]” a punitive damage claim arising

from the spill. App. 126a. The class asserted punitive dam-

age claims under federal maritime law against Captain

Hazelwood individually and also against Exxon, Hazel-

wood’s employer and the owner of the vessel and cargo. The

district court had jurisdiction under 28 U.S.C. §§ 1331, 1332,

1333, 1441, and 1442.

For purposes of the trial, Exxon stipulated that the two

Exxon entities could be treated as one. Exxon also stipulated

that Hazelwood had been negligent in leaving the bridge in

violation of Exxon’s two-officer policy. Plaintiffs contended

that Hazelwood had been reckless—the required predicate

for punitive damages—both by leaving the bridge and by

allowing alcohol to impair his judgment before that. Exxon

disputed these contentions, but if Hazelwood was impaired

on duty, that too violated Exxon’s explicit policy. App. 89a.”

? In separate criminal proceedings, an Alaska jury convicted Hazel-

wood of negligently spilling oil, but acquitted him of the more serious

charge of operating the vessel while impaired by alcohol. ER 43-45.

As the master of a tanker, Hazelwood was a “managerial

officer or employee” of Exxon as the jury instructions de-

fined that term. App. 300a. Over Exxon’s objection, the dis-

trict court instructed the jury that “the reckless act or omis-

sion of a managerial officer or employee of a corporation, in

the course and scope of the performance of his duties, is held

in law to be the reckless act or omission of the corporation.”

App. 300a. The district court further instructed the jury,

again over Exxon’s objection, that this was so “whether or

not those acts are contrary to the employer’s [established and

adequately enforced] policies or instructions.” App. 301a.

Plaintiffs also argued to the jury that Hazelwood was an

alcoholic, Exxon knew it, and Exxon had been independently

reckless for allowing Hazelwood to serve as master and not

supervising him sufficiently. The evidence on all these points

was highly disputed. The Ninth Circuit acknowledged that

based on the record the jury “could have decided that Exxon

followed a reasonable policy of fostering reporting and

treatment by alcohol abusers, knew that Hazelwood had ob-

tained treatment, did not know that he was an alcoholic, and

did not know that he was taking command of his ship

drunk.” App. 88a-89a. But the district court’s instructions

made it unnecessary for the jury to reach these questions.

2. In the first phase of the trial, the jury returned a verdict

that Hazelwood had been reckless. Having been instructed

that any reckless conduct of Hazelwood was “held in law” to

be reckless conduct of Exxon whether or not contrary to

Exxon’s policies or instructions, the jury also duly returned a

verdict that Exxon had been reckless. App. 300a. In the next

phase, the jury substantially rejected the fishermen’s claims

for $800 million in damages based on low fish prices, find-

ing that the spill did not cause prices to decline after 1989.

ER 460-62. (Exxon’s proof showed that a worldwide salmon

glut drove down prices.) After offsetting prior claims pay-

ments, the district court entered judgment for $19.6 million

in compensatory damages. App. 67a. A state court judgment

added $700,000 more, for a total of $20.3 million. App. 32a.

In the final phase of the trial, made necessary by the ver-

dicts on recklessness, the jury was asked to determine what

amount of punitive damages should be awarded against

Hazelwood and Exxon. The district court instructed the jury

that in determining these amounts, it should not consider

harm to the environment because “[a]ny liability for punitive

damages relating to those harms was resolved” in the gov-

ernment proceedings, App. 96a-97a, a result in any case re-

quired by res judicata. App. 73a. After hearing evidence

about Exxon’s net worth and income, the jury awarded puni-

tive damages of $5000 against Hazelwood and $5 billion

against Exxon. The district court denied Exxon’s post-trial

motions, App. 224a-280a, and entered judgment for the full

$5 billion punitive award. ER 781. Exxon appealed.

3. The Ninth Circuit issued its first opinion in November

2001. App. 57a. The court rejected Exxon’s arguments that

no punitive damages were authorized, but with significant

caveats. On the propriety of the jury instructions authorizing

vicarious punitive damages liability, the court pronounced

itself bound by its own earlier decision in Protectus Alpha

Nav. Co. v. North Pac. Grain Growers, 767 F.2d 1379 (9th

Cir. 1979), but acknowledged that Protectus conflicted with

the historic maritime-law rule as well as with modern mari-

time decisions of three other circuits. App. 85a-86a & n.84.

Addressing whether judge-made maritime remedies could be

added to those contained in the Clean Water Act, the court

acknowledged that the question was “serious,” “not without

doubt,” and “close.” App. 75a, 77a. And while the court

would not accept Exxon’s argument that maritime law and

due process bar punitive damages when prior sanctions and

liabilities have fully vindicated any reasonable public interest

in punishment and deterrence, it acknowledged that the ar-

gument had “force as logic and policy.” App. 68a.

The Ninth Circuit did, however, hold that a $5 billion

award could not stand. Applying the due process guideposts

announced in BMW of North America v. Gore, 517 U.S. 559

(1996), the court held that Exxon’s conduct was not suffi-

ciently reprehensible to justify so high an award because the

spill was not intentional, punishment was for economic inju-

ries only, “fuel for the United States at moderate expense has

great social value,” and the company had spent billions to

mitigate harm in the aftermath of the accident. The court fur-

ther held that pretrial claims payments and settlements gen-

erally should not be included in the harm used to analyze the

ratio between punitive and compensatory damages, and that

a high ratio was unnecessary for deterrence because the $3.4

billion Exxon had already paid constituted a “massive deter-

rent” independent of any punitive damages. Finally, the court

noted that the case was “unusually rich” in comparable pen-

alties—including the $125 million criminal sanction deemed

sufficient punishment and deterrence by the Attorneys Gen-

eral of the United States and Alaska—none of which sup-

ported a punitive award of $5 billion. App. 95a-104a.’

4. The Ninth Circuit remanded the case for the district

court to determine the size of an appropriate remittitur. The

district court, however, declined to follow the Ninth Circuit’s

reasoning. It reduced the award to $4 billion, but asserted at

the same time that it saw no “principled” basis for any reduc-

tion at all. App. 222a-223a. Exxon again appealed, but be-

fore any briefs were filed, the Ninth Circuit sua sponte re-

manded the case for reconsideration in light of this Court’s

decision in State Farm Mut. Auto. Ins. Co. v. Campbell, 538

U.S. 408 (2003). This time the district court increased the

award to $4.5 billion, asserting that State Farm presump-

tively validated punitive damages of up to nine times the to-

tal harm (which the district court calculated to be $500 mil-

lion). App. 179a-180a. Exxon appealed for the third time.

5. The Ninth Circuit issued its second opinion in Decem-

ber 2006. App. la. The court again reviewed the award under

* The court implicitly assumed that the Fifth Amendment due proc-

ess analysis applicable to this federal-law judgment would be at least as

rigorous as the Fourteenth Amendment due process analysis applicable to

the state-court judgment in Gore. Exxon agrees.

the Gore guideposts, but this time with a different emphasis

seemingly aimed at rationalizing a multibillion dollar award.

On reprehensibility, for example, the court emphasized that

the spill had physically endangered the crew and rescuers of

the vessel, even though no one was injured and none of the

crew or rescuers was a plaintiff in the lawsuit. App. 26a-28a.

On ratio, the court repudiated its earlier statement that pre-

trial payments and settlements should not be included in the

harm, stating incorrectly that the facts of State Farm man-

dated this change of view. App. 32a-35a, 287a. Accepting

the district court’s calculation of $500 million in total

losses—and declining to follow State Farm’s admonition

that when “compensatory damages are substantial,” even a

1:1 ratio of punitive to compensatory damages may “reach

the outermost limit of the due process guarantee,” 538 U.S.

at 425—the court held that due process would permit a 5:1

ratio because the tort fell within the “mid range” of repre-

hensibility. App. 31a-40a. By this reasoning, the court up-

held an unprecedented punitive award of $2.5 billion. Al-

though this award was billions more than the applicable (and

substantial) legislatively enacted civil penalties for oil spills

of this magnitude—the third Gore guidepost—the court

opined that State Farm had reduced this guidepost to a mere

check on whether legislatures dealt with similar misconduct

“seriously.” App. 40a-41la. Finding that legislative penalties

for oil spills were serious, the court held this guidepost satis-

fied. Judge Browning dissented, and would have affirmed

the full award. App. 42a-56a.

6. Exxon filed a timely petition for panel rehearing and

rehearing en banc. The court denied it on May 23, 2007,

amending its decision to remove its incorrect statement about

the facts of State Farm, but not otherwise changing its result

or attempting to justify the repudiation of its prior decision.

App. 285a-286a. Two judges filed dissents from the denial of

en banc review. Judge Kozinski dissented on the ground that

the court had unjustifiably departed from 200 years of mari-

time precedent prohibiting vicarious punitive damages, in

conflict with every other circuit that had considered the is-

sue. App. 287a-292a. Judge Bea agreed with Judge Kozinski

that punitive damages should not have been awarded against

Exxon and dissented on the additional ground that a $2.5 bil-

lion award was excessive under State Farm. App. 292a-293a.

REASONS FOR GRANTING THE PETITION

This record punitive award* unquestionably raises impor-

tant issues of constitutional dimension. The Ninth Circuit’s

emphasis on concededly unrealized dangers to non-parties,

its disregard of State Farm’s admonition against high puni-

tive multipliers in cases with substantial compensatory dam-

ages, and its trivialization of the third Gore guidepost all

raise important and recurring due process questions on which

this Court’s guidance is urgently needed. See Part III.B infra.

But the award raises equally important issues under mari-

time law. Federal courts have a “unique role in admiralty

cases,” since the “need for a body of law applicable through-

out the nation was recognized by every shade of opinion in

the Constitutional Convention.” California v. Deep Sea Re-

search, Inc., 523 U.S. 491, 501 (1998). In maritime cases,

federal courts have the opportunity and duty to determine the

rules of maritime law, consistent with the policies that under-

lie the grant of admiralty jurisdiction, in the same way that

state courts determine the common law of their states. Nor-

folk Southern Ry. Co. v. Kirby, 543 U.S. 14, 22-25 (2004);

McDermott, Inc. v. AmClyde, 511 U.S. 202, 207-08 (1994);

United States v. Reliable Transfer Co., 421 U.S. 397, 409

(1975).

Parts I, Il, and ILA of this petition, therefore, do not in-

voke this Court’s authority as the final judge of constitu-

tional questions but rather its “traditional responsibility to

“ The largest award previously affirmed by a federal appellate court

under U.S. law, state or federal, is $58.5 million—a fortieth of this one.

United Int'l Holdings, Inc. v. Wharf (Holdings) Lid., 210 F.3d 1207 (10th

Cir. 2000). The largest for an unintentional tort is $12.5 million, for

wrongful death. Mason v. Texaco, Inc., 948 F.2d 1546 (10th Cir. 1991).

vindicate the policies of maritime law.” Moragne v. States

Marine Lines, Inc., 398 U.S. 375, 396-97 (1970). This Court

has the duty to clarify, shape, and ultimately declare, like a

common-law court, the uniform general maritime law appli-

cable in the United States to the issue of punitive damages.

The decision below creates clear circuit conflicts on mari-

time-law questions—the permissibility of vicarious punish-

ment, the availability of punitive damages when Congress

has not authorized them in applicable maritime statutes, and

the substantive maritime-law limits on the size of punitive

awards—that are of immense importance to the maritime

community, and have significance extending far beyond this

case or even oil spills generally.

I, The Court Should Grant Certiorari to Resolve the

Conflict in the Circuits on Whether Maritime Law

Permits Vicarious Punitive Damages.

As acknowledged by the panel and detailed in Judge

Kozinski’s dissent, the Ninth Circuit’s decision to uphold

vicarious punitive liability based on the misconduct of a ves-

sel’s master, contrary to the shipowner’s policy and hostile

to its vital interests, departs from the maritime-law rule to

which every other circuit confronting this issue adheres. In

The Amiable Nancy, 16 U.S. 546 (1818), the Court, speaking

through Justice Story, its leading maritime-law scholar, held

that punitive damages may not be imposed against the owner

of a vessel for tortious acts of the master and crew unless the

owner “directed,” “countenanced,” or “participated in” the

wrong. /d. at 559. The Court reiterated that principle in Lake

Shore & M.S. Ry. Co. v. Prentice, 147 U.S. 101 (1893), a

non-maritime case, and declared the Amiable Nancy rule to

be in accord with “the preponderance of well-considered

precedents.” /d. at 107-17. For 150 years, federal courts

faithfully applied the rule, and refused vicarious punitive

damages in maritime cases. E.g., The Golden Gate, 16 F.

Cas. 141, 143 (C.C.N.D. Cal. 1856); The State of Missouri,

76 F. 376, 380 (7th Cir. 1896); Pacific Packing & Nav. Co.

v. Fielding, 136 F. 577, 579-80 (9th Cir. 1905).

Outside the Ninth Circuit, that rule remains. In United

States Steel Corp. v. Fuhrman, 407 F.2d 1143 (6th Cir.

1969), the Sixth Circuit, emphasizing the maritime reality

that a ship’s master must have full authority to direct opera-

tions at sea, held that “punitive damages are not recoverable

against the owner of a vessel for the acts of the master unless

it can be shown that the owner authorized or ratified the

acts,” or that “the acts ... were those of an unfit master and

the owner was reckless in employing him.” /d. at 1148. In Jn

re P&E Boat Rentals, 872 F.2d 642 (Sth Cir. 1989) (en

banc), the Fifth Circuit held that “punitive damages may not

be imposed against a corporation when one or more of its

employees decides on his own to engage in malicious or out-

rageous conduct.” Jd. at 652. And in CEH, Inc. v. F/V Sea-

farer, 70 F.3d 694 (ist Cir. 1995), the First Circuit con-

firmed that maritime law bars imposition of punitive dam-

ages against an employer for the misconduct of a vessel’s

master absent “some level of culpability” on the part of the

employer. Jd. at 705.

The Ninth Circuit, by contrast, abandoned the maritime

rule against vicarious punitive damages in Protectus, supra,

a 1985 case in which that court chose to apply instead the

new rule of vicarious liability for acts of “managerial” em-

ployees proposed by the authors of the Restatement (Second)

of Torts § 909. 767 F.2d at 1386. No other circuit has fol-

lowed Protectus, and the Fifth and First Circuit decisions in

P&E Boat Rentals and CEH expressly rejected it. In the de-

cision below, however, the panel declared itself “bound by

Protectus,” App. 86a, and confirmed the Ninth Circuit’s con-

flict with the First, Fifth, Sixth, and Seventh Circuits on this

important point of maritime law. App. 85a n.84.

The panel below suggested that Exxon was not in the

same position as the owners of THE AMIABLE NANCY be-

cause the jury might have found that Exxon was independ-

ently reckless for not relieving Captain Hazelwood of his

command. App. 83a. But as the court tacitly acknowledged

by not ending its discussion there, that point is legally irrele-

vant in light of the instructions to the jury. The court con-

ceded that a jury verdict as to Exxon’s independent reckless-

ness could have gone either way, on the basis of highly dis-

puted evidence. App. 88a-89a. The instructions, however

(quoted supra at 6), required the jurors to find Exxon reck-

less if they found Captain Hazelwood reckless, whether or

not they reached any conclusion about Exxon’s independent

recklessness.° As this Court’s decisions make clear, when it

is impossible to know whether the jury imposed liability on a

permissible or an impermissible ground, “the judgment must

be reversed.” Greenbelt Co-op Pub. Ass'n v. Bresler, 398

U.S. 6, 11 (1970); see Spectrum Sports, Inc. v. McQuillan,

506 U.S. 447, 459-60 (1993). The conflict with the other cir-

cuits is thus squarely presented.

The Ninth Circuit’s other stated reasons for abandoning

the traditional maritime rule do nothing to explain away or

lessen the decisional conflict. The panel relied heavily on

this Court’s holding in Pacific Mut. Life Ins. Co. v. Haslip,

499 US. 1, 15 (1991), that vicarious punitive damages are

not unconstitutional, but the question is not whether the Con-

stitution permits such liability. It is whether maritime law

does so. The answer turns on the maritime-law precedents,

not on cases interpreting the outer limits of due process.

Protectus rested on the idea that “no reasonable distinc-

tion can be made between the guilt of the employee ... and

the guilt of the corporation.” 767 F.2d at 1386. But as the

other circuits have recognized, whatever the merits of that

idea when an employee’s acts implement company policy, it

is self-evidently untrue when, as here, the employee’s act is

forbidden by his employer and hostile to its vital interests.

Fuhrman, 407 F.2d at 1148; P&E Boat Rentals, 872 F.2d at

651-52. The Protectus panel also asserted that the Restate-

* In fact, jurors told the press they could not determine if Hazelwood

was impaired by alcohol, they found him reckless for leaving the bridge,

and they followed their instructions by imputing his conduct to Exxon.

ER 638-39, 652-54.

ment’s provision for purely vicarious punitive damages “bet-

ter reflects the reality of modern corporate America.” 767

F.2d at 1386. Since no evidence was taken about the “reality

of modern corporate America,” this appears to mean simply

that the Protectus panel thought changing maritime law to

adopt the Restatement was a progressive thing to do. But as

Judge Kozinski pointed out, “nothing has changed in the re-

lationship between ship owner and captain that would justify

importing this innovation into maritime law.” App. 288a n.1.

Moreover, courts take very different positions as to

whether vicarious punitive liability is permissible even in

land-based cases. Indeed, since the decision in Protectus, this

Court itself has expressly rejected the Restatement position

as a matter of federal civil rights policy, see Kolstad v.

American Dental Ass'n, 527 U.S. 526, 539-46 (1999), just as

federal appellate courts other than the Ninth Circuit have re-

jected it as a matter of federal maritime policy. In Kolstad,

the Court held that implementation and enforcement of good

faith policies to prevent misconduct is a defense to vicarious

punitive damages for acts of managerial employees. The in-

structions in this case stated the opposite.

The conflict among the circuits is not only stark, it is of

great importance to maritime commerce both nationally and

internationally. As Judge Kozinski observed, App. 290a-

29 1a:

The panel’s decision exposes owners of every ves-

sel 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 ... 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 understanding that they

won't be subject to punitive damages if they “[nJeither

directed it, nor countenanced it, nor participated in”

the wrong ....

... Moreover, the effects of this opinion are not

limited to shippers and docks based in the Ninth Cir-

cuit: The shipping business knows no circuit, or even

national, boundaries. Shippers everywhere will be put

on notice: If your vessels sail into the vast waters of

the Ninth Circuit, a jury can shipwreck your opera-

tions through punitive damages and the fact that you

did nothing wrong won’t save you. Such major turbu-

lence in the seascape of the law ought to come, if at

all, from the Supreme Court.

Ii. The Court Should Grant Certiorari to Resolve the

Conflict in the Circuits on Whether Maritime Law

Permits Judge-Made Remedies When Congress Has

Not Authorized Them in Applicable Statutes.

The decision below further contravenes decisions of this

Court and other circuits on the important maritime-law ques-

tion of whether judges may create punitive damages reme-

dies for conduct already governed by a statutory remedial

scheme that does not include punitive damages. In the Clean

Water Act (CWA), Congress specifically addressed the pun-

ishment and deterrence of maritime oil spills by enacting

both criminal and civil penalties. 33 U.S.C. § 1319(c)-(d)

(criminal and civil penalties for negligent or intentional dis-

charge of oil in violation of § 1311(a)); id. § 1321(b)(6)(B)

(alternative civil penalties for unauthorized discharge of oil).

Supplemented by 18 U.S.C. § 3571(d) (authorizing criminal

fines of up to double third-party pecuniary losses), the penal-

ties are substantial. Indeed, the enforcement of these provi-

sions by the federal government led to the record fine im-

posed on Exxon in this case. The CWA also creates limited

liability to the federal government for cleanup costs and

natural resource damages, but eliminates the liability limita-

tion in cases of “willful misconduct within the privity and

knowledge of the shipowner.” 33 U.S.C. § 1321(f). But the

CWA does not authorize private punitive damages, even for

willful misconduct.®

The CWA thus embodies a legislative judgment that

cleanup costs, natural resource damages, and potential crimi-

nal and civil penalties provide sufficient punishment and de-

terrence for oil spills. As such, it implicates the rule—

established in an unbroken line of cases beginning with Mo-

bil Oil Co. v. Higginbotham, 436 U.S. 618 (1978), and City

of Milwaukee v. Illinois, 451 U.S. 304 (1981), and continu-

ing with Middlesex County Sewerage Auth. v. Nat'l Sea

Clammers Ass’n, 453 U.S. 1 (1981), Miles v. Apex Marine

Corp., 498 U.S. 19 (1990), and Dooley v. Korean Air Lines

Co., 524 U.S. 116 (1998)}—that when Congress has spoken

to an issue of federal tort law, the statute (not judge-made

federal common law) determines the scope of the available

remedies.

In Mobil, this Court held that the Death on the High Seas

Act (DOHSA) precluded loss of society damages under

maritime law for a death on the high seas because Congress

had “limited survivors to recovery of their pecuniary losses.”

436 U.S. at 623. The Court rejected the contention that

judge-made maritime law could supplement the statutory

remedy provided in DOHSA, holding that “Congress has

struck the balance for us.” Jd. “In the area covered by the

Statute, it would be no more appropriate to prescribe a differ-

ent measure of damages than to prescribe a different statute

of limitations, or a different class of beneficiaries.” /d. at

625.

In Milwaukee, this Court held that the CWA’s “compre-

hensive regulatory program” for water pollution, which pro-

hibits the unauthorized discharge of any pollutant, displaced

* The CWA provisions applicable to this oil spill are reproduced at

App. 294a. After the spill, Congress increased the statutory civil penal-

ties for such spills—subject to reduction on account of mitigation efforts,

prior penalties, etc., see § 1321(b)(7)-(8), enacted as part of the Oil Pollu-

tion Act of 1990—but still did not authorize private punitive damages.

a non-maritime federal common-law nuisance remedy for

interstate water pollution. 451 U.S. at 317-26. Citing Mobil,

the Court held that when Congress has “spoke[n] directly to

a question,” judge-made federal law may not supplement the

remedies Congress has chosen. /d. at 315. It further held that

“when the question is whether federal statutory or federal

common law governs,” there is no presumption against pre-

emption, contrary to the rule for state law. Rather, “we start

with the assumption that it is for Congress, not federal

courts, to articulate the appropriate standards to be applied as

a matter of federal law.” Jd. at 316-17; see also id. at 315

(“Our commitment to the separation of powers is too funda-

mental to continue to rely on federal common law by judi-

cially decreeing what accords with common sense and the

public weal when Congress has addressed the problem.”).

In Sea Clammers, t'is Court held that Milwaukee pre-

cluded a common-law nuisance claim for damage to the fish-

ing, clamming, and lobster industries allegedly caused by

ocean pollution in violation of CWA permits. 453 US. at 21-

22. And in Miles, the Court held that a survival action by the

heirs of Jones Act seamen under general maritime law could

give no remedies not provided by the Jones Act. 498 U.S. at

32 (“It would be inconsistent with our place in the constitu-

tional scheme were we to sanction more expansive remedies

in a judicially created cause of action”). The unanimous de-

cision in Miles emphasized not only the subordinate role of

judge-made federal law in matters addressed by Congress,

but also the strong maritime policy of uniformity:

We sail in occupied waters. Maritime tort law is now

dominated by federal statute, and we are not free to

expand remedies at will .... Cognizant of the consti-

tutional relationship between the courts and Con-

gress, we today act in accordance with the uniform

plan of maritime tort law Congress created.

498 U.S. at 36-37. This Court most recently reaffirmed these

principles in Dooley, declining, again unanimously, to ap-

prove a general maritime law survivorship remedy for pre-

death pain and suffering damages not recoverable under

DOHSA. 524 U.S. at 121-24.

Federal circuit courts outside the Ninth Circuit have

faithfully applied these principles. E.g., Conner v. Aerovox,

Inc., 730 F.2d 835, 838-42 (ist Cir. 1984) (Milwaukee and

Sea Clammers equally foreclose judge-made maritime-law

nuisance claims for pollution damage to fishing grounds); Jn

re Oswego Barge Corp., 664 F.2d 327, 339-44 (2d Cir.

1981) (CWA forecloses maritime-law negligence claims for

government cleanup costs exceeding government’s maxi-

mum recovery under the CWA). And multiple circuits have

held that these principles bar recovery of puniiive damages

under judge-made maritime law when federal statutes do not

authorize them. £.g., Miller vy. American President Lines,

989 F.2d 1450, 1454-59 (6th Cir. 1993) (no punitive dam-

ages for survivors of Jones Act seamen in maritime wrongful

death claim); Wahlstrom v. Kawasaki Heavy Indus., 4 F.3d

1084, 1091-94 (2d Cir. 1993) (no punitive damages for sur-

vivors of non-seamen killed in territorial waters); Horsley v.

Mobil Oil Corp., 15 F.3d 200, 203 (1st Cir. 1994) (no puni-

tive damages for injured Jones Act seamen in maritime un-

seaworthiness claim); Guevara v. Maritime Overseas Corp.,

59 F.3d 1496, 1500-13 (Sth Cir. 1995) (en banc) (no punitive

damages for seamen for shipowner’s failure to pay mainte-

nance and cure). As Judge Kozinski accurately noted, the

modern cases reaffirm maritime law’s historic reluctance to

impose punitive damages at all. App. 290a; see note 8 infra.

By contrast, the Ninth Circuit here refused to apply these

principles despite its acknowledgement that the CWA pro-

vides a “carefully calibrated set of civil penalties for oil

spills, generally with ceilings on penalties, even if the spills

were grossly negligent or willful.” App. 74a. But the panel’s

efforts to distinguish decisions of this Court and the other

federal circuits do not withstand scrutiny. The opinion below

brushed aside Miles as pertinent only to the “specialized and

traditionally limited” tort of wrongful death. App. 75a. In

doing so, the opinion not only ignored that this Court, in

Milwaukee and Sea Clammers, applied the same rule of def-

erence—originally drawn from Mobil—to federal pollution

statutes, but put the Ninth Circuit in conflict with other cir-

cuits (cited above) that have applied Miles to bar judge-made

punitive damages for non-death maritime-law claims.

The Ninth Circuit also purported to distinguish Sea

Clammers (and Conner) on the ground that the judge-made

claims in those cases would have interfered with administra-

tive determinations of the permissible amount of pollution.

App. 77a. But the operative principle is not merely that

judge-made federal law may not interfere with federal ad-

ministrative determinations. The operative principle—in all

the cases cited above—is that when Congress has spoken to

an issue, federal courts applying judge-made federal law are

not free to expand the remedies provided by Congress so as

to disrupt the balance Congress has struck. In the CWA,

Congress plainly spoke to the issue of punishment and deter-

rence of oil spills by enacting both criminal and civil penal-

ties and various special liability provisions. A judge-made

punitive damages remedy literally billions of dollars higher

than the penalties Congress has provided not only disrupts

the balance Congress has struck but obliterates it.

Nor is there any merit to the Ninth Circuit’s novel sug-

gestion that Congress should be deemed to have intended the

CWA to punish only “public” as distinguished from “pri-

vate” harm from oil spills. App. 77a. Nothing in the CWA

Suggests or supports such a distinction, and indeed, the pro-

visions of 18 U.S.C. § 3571(d) used to authorize the record

criminal fine in this case gauged the amount of the fine by

reference to the losses incurred by private parties. Moreover,

if the court meant that private punitive damages are intended

to serve anything other than public interests, its opinion fun-

damentally misconceived both the nature and purpose of pu-

nitive damages. As Justice Kennedy has written:

[Punitive damages plaintiffs] act as private attorneys

general to effect the deterrence and retribution func-

tions of [punitive damages]. So far is this from being

a fundamental personal right that it is not truly per-

sonal in nature at all. It is rather a public interest.

In re Paris Air Crash, 622 F.2d 1315, 1319-20 (9th Cir.

1980) (Kennedy, J.); see State Farm, 538 U.S. at 417 (puni-

tive damages “serve the same purpose as criminal penal-

ties”). Under the cases cited above, because Congress ad-

dressed the public interest in punishing and deterring oil

spills in a duly enacted statute, federal courts are not free to

expand on the remedies Congress has provided by awarding

punitive damages under judge-made maritime law. '

The Ninth Circuit acknowledged that this question was

“serious,” “not without doubt,” and “close.” App. 75a-77a.

Its resolution of the issue, however, departs from the princi-

ples established in the decisions of this Court and other cir-

cuits. For the same reasons expressed in Judge Kozinski’s

dissent on vicarious punishment, the issue has immense sig-

nificance for the maritime community, not only in pollution

cases but in every other area in which the issue of statutory

’ The Ninth Circuit noted that some CWA provisions expressly state

that they are not intended to affect other reinedies. App. 76a (citing CWA

§§ 1321(0)(1) and 1365(e)). Section 1321(c)(1), however, provides only

that that “[nJjothing in this section”—i.e., § 1321, which establishes civil

penalties for oil spills and potentially limits liability to the government

for cleanup costs and natural resource damages—“shall affect or modify

in any way the obligations of any owner or operator of any vessel ... for

damages to any publicly owned > privately owned property resulting

from a discharge of ... oil.” On iw ‘ce, this provision states only that the

section does not affect liability for “damages to ... property” from spilled

oil. It says nothing about punitive damages. Section 1365(e) is part of the

CWA's “citizen suit” provision. It provides that “[njothing in this sec-

tion”—i.e., the citizen suit provision—“shall restrict any right which any

person ... may have ... to seek any other relief.” In Milwaukee, this

Court confirmed that § 1365(e) means only that the citizen suit provision

(i.e., “this section”) does not in and of itself revoke other remedies. 451

U.S. at 328-29. “It most assuredly cannot be read to mean that the Act as

a whole does not supplant formerly available federal common-law ac-

tions.” /d. Neither section suggests that Congress intended to authorize

federal courts to create punitive damages remedies dwarfing the CWA’s

careful scheme of criminal penalties, civil penalties, and liability limits.

displacement of judge-made punitive damage claims arises.

This Court should grant certiorari to confirm that judge-

made punitive damages remedies are not available when

Congress has already addressed the problem.

IIf. The Court Should Grant Certiorari to Remedy Con-

fusion in the Lower Courts and Make Clear the Per-

missible Size of Punitive Damage Awards under

Maritime Law and under the Due Process Clause.

A. Maritime Law. In this maritime case, the Ninth Cir-

cuit gave no consideration to how the substantive maritime

law should affect the permissible size of any punitive dam-

age award. Despite Exxon’s express request, the Ninth Cir-

cuit affirmatively declined to perform its duty as a maritime

court to effectuate the policies of maritime law, to articulate

based on those policies the maritime-law rules that should

govern punitive damages, and to reduce the award accord-

ingly. It held that the only applicable limit on the size of the

award was the constitutional one. App. 68a-70a, 90a-91a.

The petition should be granted so that this Court, as the ulti-

mate arbiter of maritime law, can articulate and clarify the

appropriate standards for maritime punitive damage awards.

The Ninth Circuit’s conclusion that only the Constitution

limits the size of punitive damage awards was contrary to

decisions of this Court and of other circuits. In Honda Motor

Co. v. Oberg, 512 U.S. 415 (1994), the Court held that

common-law judicial review of the size of punitive damage

awards is a vital part of the traditional justification for allow-

ing juries to make such awards, and that it cannot be omitted

consistent with procedural due process. See also Gore, 517

U.S. at 598 (Scalia, J.). As the Second Circuit has said:

[E]ven where the punitive award is not beyond the

outer constitutional limit marked out ... by the three

Gore guideposts, we retain an appellate responsibility

to review punitive awards for excessiveness in apply-

ing federal statutes .... [T]he appellate function must

be exercised, and review of punitive awards for exces-

siveness is an especially appropriate context in which

the reflective role of a court of appeals follows the of-

ten dramatic arena of a trial court.

Mathie v. Fries, 121 F.3d 808, 816-17 (2d Cir. 1997); see

Lee v. Edwards, 101 F.3d 805, 809 (2d Cir. 1996); Gaffney

v. Riverboat Services of Indiana, Inc., 451 F.3d 424, 464 &

n.39 (7th Cir. 2006); see also TXO Prod. Corp. v. Alliance

Res. Corp., 509 US. 443, 458 n.24 (1993) (non-

constitutional state law reasonableness requirements).

Individual Justices have also emphasized the power and

duty of common-law courts to make rules governing punitive

damages. E.g., Haslip, 499 U.S. at 42 (Kennedy, J.) (“We do

not have the authority, as do judges in some of the states, to

alter the rules of the common law .... Were we sitting as

state court judges, the size and recurring unpredictability of

punitive damage awards might be a convincing argument to

reconsider those rules.”); TXO, 509 U.S. at 472 (1993)

(Scalia, J.) (“State ... courts have ample authority to elimi-

nate any perceived ‘unfairness’ in the common-law punitive

damages regime.”); State Farm, 538 U.S. at 438 (Ginsburg,

J.) (“state high courts” could “cap punitive damages”). In

maritime cases, however, this Court performs the same func-

tion as state high courts do when ruling on state common

law. This case thus offers the Court an ideal opportunity to

lead by example and show how standards for punitive dam-

ages awards should operate in practice.

The appropriate standards for the award of punitive dam-

ages under maritime law of course depend on the policies

underlying the grant to this Court of admiralty and maritime

jurisdiction, U.S. Const. Art III, § 2, cl.1, and the ensuing

responsibility to shape maritime law. This Court has reiter-

ated that the “fundamental interest giving rise to maritime

jurisdiction is the protection of maritime commerce.” Kirby,

543 U.S. at 25; accord Sisson v. Ruby, 497 U.S. 358, 367

(1990); Foremost Ins. Co. v. Richardson, 457 U.S. 668, 674

(1982). Maritime commerce entails risks not found on land.

Accidents can never be avoided entirely, and mariners must

pes

often make difficult decisions. Therefore “[tJhrough long

experience, the law of the sea ... is concerned with ... limita-

tion of liability.” Executive Jet Aviation v. City of Cleveland,

409 U.S. 249, 270 (1972). This Court has also reiterated that

maritime law demands the “uniformity and consistency at

which the Constitution aimed on all subjects of a commercial

character affecting the intercourse of the States with each

other or with foreign states.” The Lottawanna, 88 U.S. 558,

575 (1874); American Dredging Co. v. Miller, 510 U.S. 443,

451 (1994). And this Court has referred from time to time to

admiralty’s policies of fair compensation for injury, promo-

tion of settlement, and judicial economy. Moragne, 398 U.S.

at 387; McDermott, 511 U.S. at 211.

None of these policies supports enormous punitive dam-

ages.* Such awards penalize maritime commerce rather than

protecting it; they expand rather than limit liability; they are

unpredictable and inconsistent; they have nothing to do with

compensation for actual injury; and they impede rather than

promote settlement and judicial economy. Because of the

unique role of federal courts in shaping maritime law, federal

courts are the “proper institutions of our society to undertake

th{e] task,” TXO, 509 US. at 472 (Scalia, J.), of specifying,

based on maritime policies, the permissible size of maritime

punitive damages. The Ninth Circuit’s inability to discern or

even acknowledge any substantive maritime-law principles

limiting the size of this extraordinary punitive award demon-

strates the urgency of the need for this Court to articulate

such limits.

* Indeed, maritime law has traditionally restricted or disallowed pu-

nitive damages. Guevara, 59 F.3d at 1508 n.11; CEH, 70 F.3d at 699-702

Prior to this case, punitive damages were never awarded for an oil spill,

while the largest maritime punitive damages award affirmed by a federal

appellate court, in Protectus, was $500,000, or 1/14 of the $7 million in

compensatories, 767 F.2d at 1381, for a deliberate act that resulted in a

death, in stark contrast to the award here, for lost commercial income

from an unintentional spill that caused no personal injury. App. 98a.

Here the answer is clear. The decision below to uphold a

$2.5 billion punitive award is contrary to every maritime pol-

icy that this Court or other federal courts have ever recog-

nized. Yet the Ninth Circuit did not even consider whether

the award was consistent with those policies or with mari-

time law. This case accordingly provides a particularly suit-

able vehicle for this Court to hold that federal courts consid-

ering maritime punitive damage awards must determine

whether such awards are consistent with the policies of mari-

time law. Exxon submits that a $2.5 billion punitive damages

award cannot be a proper exercise of the federal courts’ au-

thority to make maritime law when, as here, all the following

conditions obtain.

¢ Prior criminal and civil sanctions and other payments

have already vindicated any reasonable public interest in

punishment or deterrence. In Haslip, this Court recognized

that the only proper purpose of punitive damages was to vin-

dicate the public interest in retribution and deterrence. 499

U.S. at 19; accord Gore, 517 U.S. at 568. In State Farm, the

Court recognized that punitive damages should be awarded

only when compensatory damages are not sufficient “to

achieve punishment or deterrence.” 538 U.S. at 419; see

Gore, 517 U.S. at 584-85 (requiring consideration of whether

“less drastic remedies could be expected” to achieve pun-

ishment and deterrence). The Ninth Circuit itself acknowl-

edged the “force and logic” of Exxon’s argument that puni-

tive damages should be limited to what is necessary to

achieve deterrence and punishment, and tis: such damages

should be precluded when $3.4 billion in prior payments,

liabilities, and fines achieved “massive deterren{ce],” and

when the Attorneys General of both the United States and

Alaska, the authorized representatives of the public interest

in punishment, agreed that the record fine imposed was suf-

ficient to achieve appropriate punishment. App. 68a. In such

circumstances, punitive damages achieve nothing but over-

kill; they pile liability upon liability to give a windfall to

plaintiffs already fully compensated. The strong maritime

policies of uniformity, predictability, and avoiding undue

burdens on maritime commerce compel the conclusion that,

as a matter of maritime law, no additional punitive damages

are reasonable in these circumstances.

e Compensatory damages are substantial. Many state

courts and state legislatures have now imposed caps on puni-

tive damages awards, generally by requiring that they not

exceed a fixed multiple of compensatory damages. See Gore,

517 U.S. at 615-16 (Ginsburg, J.). In State Farm, this Court

stated that when compensatory damages are substantial,

“then a lesser ratio, perhaps only equal to compensatory

damages, can reach the outermost limit of the due process

guarantee.” See Part [II.B.1 infra. Because the Court was in-

terpreting the Constitution in State Farm, it did not make this

principle into a rule applicable in every situation. But if a 1:1

ratio when damages are substantial can reach the “outer

limit” of what the Constitution permits, surely that ratio

represents the most the Court should permit when it is not

marking the outer boundary permissible to a sovereign state

in the pursuit of its own policies, but determining for itself,

as the ultimate arbiter of maritime law, the correct rule based

on federal maritime law and policy. Accordingly the same

considerations of “size and recurring unpredictability” that

have led state courts and legislatures to impose caps should

lead the Court to set a limit here. See Haslip, 499 U.S. at 42

(Kennedy, J.). Enforcing such a limit would of course serve

the maritime policies of uniformity and predictability. It

would also promote the maritime policies of settlement and

judicial economy by creating an incentive for prompt pay-

ment of compensation, since compensation paid by way of

settlements could no longer be the predicate “harm” for a

punitive damages award.

has prescribed for the same conduct. Maritime conduct has

long been heavily regulated by Congress, and the statutes in

question typically provide an array of substantial civil penal-

ties and other punishments for infractions of what Congress

has ordained. Even if these enactments were not sufficient to

preclude punitive damages altogether, but see Part II supra,

respect for the pre-eminent role of Congress in the maritime

area means that federal courts should not impose, through

punitive damages, civil punishment that results in a total

penalty greater than what Congress has prescribed. When

Congress has specified by statute the available civil penal-

ties, federal courts are “not free” to impose additional civil

punishment, and thereby “to rewrite rules that Congress has

affirmatively and specifically enacted,” Dooley, 524 U.S. at

122. Aligning punitive awards with statutory civil penalties

would also serve the maritime-law policies of predictability

and uniformity by ensuring that civil punishment for particu-

lar conduct does not vary depending on whether it is im-

posed by public authorities or by juries in private lawsuits.

e The jury was allowed to consider the net worth of the

corporate defendant. Plaintiffs’ evidence in Phase III of the

trial was entirely devoted to Exxon’s income and net worth,

and the jury was instructed it could consider that evidence in

determining the proper size of the award. ER 517-19. Pun-

ishment on such a theory is clearly contrary to the maritime

policies of predictability and uniformity, since it implies that

the punishment of different actors for the same conduct may

be different. It rests on an economically irrational founda-

tion, a false analogy between the wealth of individuals and

corporate net worth, as Judge Easterbrook has explained

clearly, Zazu Designs v. L’Oreal, S.A., 979 F.2d 499, 508-09

(7th Cir. 1992), and its effect is to punish companies dispro-

portionately based on size, which is directly contrary to the

fundamental maritime-law policy of encouraging adequate

capitalization for risky activities. Finally, allowing juries to

base punishment on corporate net worth invites them to vent

“raw redistributionist impulses,” 7XO, 509 U.S. at 468

(Kennedy, J.), lets them “use their verdicts to express bi-

ases,” Honda, 512 U.S. at 432, and “provides an open-ended

basis for inflating awards.” Gore, 517 U.S. at 591 (Breyer,

J.). None of this serves the policies of maritime law.

No case illustrates better than this one the need for sim-

ple, reasonable, and easily administered standards to con-

strain unfettered discretion in the award of punitive damages.

See Philip Morris USA v. Williams, 127 S. Ct. 1057, 1062

(2007); Gore, 517 U.S. at 587 (Breyer, J.). Punishment and

deterrence, to the satisfaction of the public representatives of

the United States and Alaska, were achieved in 1991. Com-

pensation for natural resource damages and nearly all private

damages was accomplished by 1991 or a few years after.

Given those facts, no maritime policy and no principle of

maritime law supports a punitive damage award. Even if pu-

nitive damages may be awarded in maritime cases where

Congress has not provided them by statute, but see Part II

supra, it is for the federal courts, under this Court’s leader-

ship, to make sure that such awards correspond to what mari-

time law and policy permit. Because the courts below failed

to provide such standards, for the past 15 years the parties

have been litigating almost exclusively the propriety of an

additional multibillion dollar windfall to private plaintiffs

who were fully compensated long ago. The Court should

grant the petition and provide the guidance to the lower fed-

eral courts that will prevent another such case.

B. Due Process. 1. “[P]}unitive damages should only be

awarded if the defendant’s culpability, after having paid

compensatory damages, is so reprehensible as to warrant the

imposition of further sanctions to achieve punishment or de-

terrence.” State Farm, 538 U.S. at 419. And “[w]Jhen com-

pensatory damages are substantial, then a lesser ratio, per-

haps only equal to compensatory damages, can reach the

outermost limit of the due process guarantee.” Jd. at 425.

Here Exxon paid $3.4 billion in cleanup costs, natural re-

source damages, claims payments, fines, and penalties—

more than enough to deter and punish anyone for anything.

Under the State Farm test, no “further sanctions” are neces-

sary “to achieve punishment or deterrence.” The compensa-

tory damages awarded came to $20.3 million—a figure that

is “substantial” by any standard, especially given that $1 mil-

lion was held “substantial” in State Farm, id. at 412, 426.

The Ninth Circuit calculated “harm” at $500 million and

used that as the predicate for punitive damages, yet still

thought it appropriate to use a 5:1 “ratio” and approve an

award of $2.5 billion. As Judge Bea recognized in his dis-

sent, App. 293a, this is entirely inconsistent with this Court’s

teaching that in such circumstances a 1:1 ratio “can reach the

outermost limit of the due process guarantee.” 538 U.S. at

425.

Indeed, the Ninth Circuit’s reasoning was exactly back-

wards. The ratio prong of Gore and State Farm is not an ex-

cuse to multiply large compensatory damages to manufacture

an even larger punitive award. Rather, the overriding princi-

ple is that an award should be no greater than what is rea-

sonably necessary to punish and deter, and a large compen-

satory award, like large cleanup costs, fines, and penalties,

itself provides punishment and deterrence and thereby re-

duces the need for an award of punitive damages. Taking

Haslip, Gore, and State Farm together, the point is clear. Yet

many lower courts have ignored this Court’s message. They

continue to resist the concept that they should give meaning-

ful consideration to what is necessary overall to punish and

deter, not simply find a “ratio” based on reprehensibility and

* Some courts have followed State Farm faithfully, limiting punitive

damages to a 1:1 ratio when compensatory damages are substantial, even

in cases of intentional and egregious wrongdoing. E.g., Estate of More-

land v. Dieter, 395 F.3d 747, 757-58 (7th Cir. 2005) (beating and death);

Stamathis v. Flying J, Inc., 389 F.3d 429, 443 (4th Cir. 2004) (defama-

tion and malicious prosecution). Others, like the Ninth Circuit here, have

permitted much higher ratios, effectively ignoring State Farm. E.g.,

Rhone-Poulenc Agro, S.A. v. DeKalb Genetics Corp., 345 F.3d 1366,

1371-72 (Fed. Cir. 2003) (3.33:1 ratio based on $15 million in compensa-

tories); Bogle v. McClure, 332 F.3d 1347, 1359, 1362 (11th Cir. 2003)

(4:1 ratio based on $3.5 million in compensatories for emotional dis-

tress); Bullock v. Philip Morris USA, Inc., 42 Cal. Rptr. 3d 140, 176 (Cal.

Ct. App. 2006) (33:1 ratio based on $850,000 in compensatories); Supe-

rior Federal Bank v. Jones & Mackey Const. Co., 219 S.W.3d 643, 653

(Ark. Ct. App. 2005) (17.6:1 ratio based on $175,000 in compensatories).

multiply that by whatever “harm” the plaintiff can persuade

them occurred. The cases are in disarray, and there is a clear

need for further guidance from the Court. See note 9 supra.

2. The Ninth Circuit’s use of a 5:1 ratio depended on its

conclusion that Exxon’s conduct was in the “mid range” of

reprehensibility. App. 31a. Of course this entire analysis was

flawed, since the court assumed that the jury found that

Exxon’s own conduct, as opposed to Hazelwood’s, was reck-

less. See Part I supra. There was thus a complete disconnect

between the conduct the Ninth Circuit considered reprehen-

sible and the facts the jury’s instructions required it to find.

For all anyone knows, jurors agreed on none of the “facts”

the Ninth Circuit recited.

Even leaving that critical defect in reasoning aside, the

Ninth Circuit’s reprehensibility discussion had few points of

contact with this Court’s analysis in Gore, 517 U.S. at 576-

77, or State Farm, 538 U.S. at 419. The panel did acknowl-

edge that the spill was not intentional, that there was no

fraud or trickery, and that plaintiffs were not financially vul-

nerable “targets.” App. 29a. It conceded that injury to the

plaintiffs was solely economic, but invented a “non-

economic injury” of “loss of livelihood”—even though no

“livelihood” was lost since Exxon voluntarily paid compen-

sation quickly and, as the jury verdict showed, fairly. It con-

ceded that plaintiffs’ health and safety were never at risk, but

pointed to the theoretical danger to the crew of the Exxon

VALDEZ, none of whom was injured, and none of whom was

a member of the plaintiff class. App. 26a. This was an im-

proper attempt to “adjudicate the merits of other parties’ hy-

pothetical claims” in the guise of reprehensibility analysis,

State Farm, 538 U.S. at 423, and to punish Exxon for harms,

not even real ones, to persons not before the court, see Philip

Morris, 127 S. Ct 1057. (Remarkably, the Ninth Circuit in-

creased punitive damages against Exxon based on hypotheti-

cal injury to the VALDEZ crew, whereas if any seamen had

actually been injured, Miles, Miller, and Horsley would have

barred punitive damages based on those injuries, see Part II

supra.) The pane] pretended that Exxon was guilty of re-

peated misconduct, App. 29a, although there was clearly

only one spill and only one decision to let Hazelwood re-

sume command. Correctly analyzed, reprehensibility here

was in a very low range, and did not come close to justifying

a multiple of five times $500 million.

3. Finally, the Ninth Circuit’s decision conflicts with

State Farm and Gore, and with decisions of other circuits,

e.g., Clark v. Chrysler Corp., 436 F.3d 594, 607 (6th Cir.

2006), because it failed to give any weight at all to the third

guidepost this Court has identified for assessing the constitu-

tionality of a punitive damages award—comparable civil

penalties. According to that guidepost, a reviewing court

must give “substantial deference to legislative judgments

conceming the appropriate sanctions for the conduct at is-

sue.” Gore, 517 U.S. at 583. In State Farm, the Court made

plain that only civil penalties should be considered, not

criminal ones. 538 U.S. at 428. Combined federal and state

civil penalties for this oil spill could not have exceeded about

$80 million, and therefore an award of $2.5 billion could not

conceivably be justified under this guidepost. Even though it

recognized that this case was “unusually rich in compara-

bles,” App. 101a, the Ninth Circuit ignored all of them, hold-

ing that the third guidepost imposes mo quantitative con-

straint on punitive damage awards. According to the Ninth

Circuit, this guidepost addresses “only ... whether or not the

misconduct was dealt with seriously under state civil or

criminal laws.” App 41a. Having concluded that the state and

federal governments take oil spills “seriously,” the Ninth

Circuit refused to accord any deference whatever to the “leg-

islative judgments concerning appropriate sanctions for the

conduct at issue,” let alone the “substantial deference” that

Gore requires. 577 U.S. at 583. In other words, the Ninth

Circuit wrote the third guidepost out of the law.

CONCLUSION

The petition for a writ of certiorari should be granted.

Respectfully submitted,

E. EDWARD BRUCE

COVINGTON & BURLING LLP

1201 Pennsylvania Ave., N.W.

Washington, D.C. 20004

(202) 662-6000

Attorneys for Petitioner

Exxon Shipping Company

Dated: August 20, 2007

WALTER DELLINGER

(Counsel of Record)

JOHN F. DAUM

CHARLES C. LIFLAND

JONATHAN D. HACKER

O’MELVENY & MYERS LLP

1625 Eye Street, N.W.

Washington, D.C. 20006

(202) 383-5300

Attorneys for Petitioner

Exxon Mobil Corporation

APPENDIX

TABLE OF CONTENTS

APPENDIX A:

In re the Exxon Valdez (9th Cir. Dec. 22, 2006, as

amended May 23, 2007).........csvessssssssssessecesssseeeeneen

APPENDIX B:

In re the Exxon Valdez (9th Cir. Nov. 7, 2001).......

APPENDIX C:

In re the Exxon Valdez, Order No. 364, On

Second Renewed Motion for Reduction of Puni-

tive Damages Award (D. Alaska Jan. 28, 2004).....

APPENDIX D:

In re the Exxon Valdez, Order No. 358, On Re-

newed Motion for Reduction of Punitive Dam-

ages (D. Alaska Dec. 9, 2002).............scscssssssesessesees

APPENDIX E:

In re the Exxon Valdez, Order No. 267, On

Exxon’s Motions for Judgment and for New

Trial on Punitive Damages’ Claims (D. Alaska

i Ser I cle tcchetindaleh acercihehhtndeinidiaphitalinandbetvesinens

APPENDIX F:

In re the Exxon Valdez, Order No. 265, On

Exxon’s Motion for Judgment on Punitive

Damages Claims (Phase I Issues) (D. Alaska Jan.

NERC ea ee aE

APPENDIX G:

In re the Exxon Valdez, Order No. 264, On

Exxon’s and Hazelwood’s Motions for a New

Trial on Plaintiffs’ Punitive Damages Claims

(Jury Instructions) (D. Alaska Jan. 27, 1995).........

258a

APPENDIX H:

In re the Exxon Valdez, Order No. 196, On Mo-

tion in Limine to Exclude Evidence of or Com-

ment upon Exxon Defendants’ Total Wealth, Net

Worth, Earnings, Cash Flow, or Other Indicia of

Financial Condition (D. Alaska March 31, 1994)......

APPENDIX I:

In re the Exxon Valdez (9th Cir. May 23, 2007),

Order Amending Opinion, Denying Rehearing,

and Denying Rehearing En Bane.................ccscceeeeeeee

Opinion of Kozinski, J., dissenting from denial

I a tins thintincciniesidtitcticsniteinniuniascnrenoie

Opinion of Bea, J., dissenting from denial of

IIE sicsictincotncthnsetviscarkisntiniaitsaeescsatinmesionsiois

APPENDIX J:

Relevant Criminal and Civil Penalties of the

Clean Water Act (in force March 24, 1989)..............

APPENDIX K:

Jury Instructions on Vicarious Liability for Pu-

I aio scsinesissidstsLahaaloiepaiiiapabetngabiesionhimialiai

APPENDIX L:

Special Verdict Form for Phase I of Trial..................

APPENDIX A

United States Court of Appeals

For The Ninth Circuit.

In re: The EXXON VALDEZ,

Grant Baker; Sea Hawk Sea-

foods, Inc.; Cook Inlet Proces-

sors, Inc.; Sagaya Corp.; William

Mcmurren; Patrick L. Mcmurren;

William W. King; George C. No. 04-35183

Norris; Hunter Cranz; Richard DC.No

Feenstra; Wildemess Sailing Sa- -20.00N0S

faris; Seafood Sales, Inc.; Rapid. “Von

Systems Pacific Ltd.; Nautilus

Marine Enterprises, Inc.; William

Findlay Abbott, Jr.,

Plaintiffs-Appellees,

Exxon Mobile Corp; Exxon

Shipping Co.,

Defendants-Appellants.

Appeal from the United States District Court

for the District of Alaska

H. Russel Holland, Chief Judge, Presiding

Argued and Submitted

January 27, 2006-San Francisco, California

Filed December 22, 2006

[As amended May 23, 2007]

Before Mary M. Schroeder, Chief Judge,

James R. Browning and Andrew J. Kleinfeld, Circuit Judges.

Per Curiam Opinion;

Dissent by Judge Browning.

COUNSEL

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.

Brian B. O’Neill, Faegre & Benson, Minneapolis, Minnesota,

James vanR. Springer, Dickstein Shapiro LLP, Washington,

DC, for the plaintiffs-appellees, cross-appellants.

OPINION

PER CURIAM.

I, INTRODUCTION

We look for the third time at the punitive damages im-

posed 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 set-

tled. 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 pun-

ishing harm to the environment.” /d. “The plaintiffs’ claims

for punitive damages expressly excluded consideration of

harm to the environment.” Jn 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 (1991); ZXO Prod. Corp. v. Alliance Res. Corp., 509

U.S. 443 (1993) (plurality); BMW of N. Am., Inc. v. Gore, 517

U.S. 559 (1996); State Farm Mut. Auto. Ins. Co. v. Campbell,

538 U.S. 408 (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 Jn 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 apply-

ing the Supreme Court’s guideposts. See Cooper Indus., Inc. v.

Leatherman Tool Group, Inc., 532 U.S. 424, 436 (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. Jn 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 en-

tered an award of $4.5 billion. District Court Opinion, 296 F.

Supp. 2d at 1110. For the reasons outlined further in the fac-

tual development and the analysis of this opinion, we con-

clude 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. We order a remittitur of $2 billion,

resulting in punitive damages of $2.5 billion. We do so be-

cause, in assessing the reprehensibility of Exxon’s miscon-

duct, the most important guidepost according to the Supreme

Court’s opinion in State Farm, there are several mitigating

facts. See id. at 419. 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. Jd. at 1244. We

disagree, however, with Exxon’s ultimate contention that, as a

result of two sentences in Punitive Damages Opinion I, writ-

ten five years ago and before the Supreme Court’s opinion in

State Farm, Exxon is entitled to have punitive damages as-

sessed 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 explic-

itly or implicitly hold that mitigation plays no role in deter-

mining 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 dam-

ages 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 duc srocess 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 suffi-

cient clarity and thoroughness.

Il. 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 None-

conomic 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 (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 (1994).

Although there were cases dating from the Lochner era that

had suggested that there may be a due process ceiling on pu-

nitive damages, at the time of this accident in 1989, the Su-

preme 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 (Scalia, J., dissenting) (discussing the

history of due process review of punitive damages awards)

(citing Seaboard Air Line Ry. v. Seegers, 207 U.S. 73, 78

(1907); Southwestern Tel. & Tel. Co. v. Danaher, 238 U.S.

482, 489-91 (1915); Waters-Pierce Oil Co. v. Texas, 212 U.S.

86, 111-12 (1909); Standard Oil Co. of Ind. v. Missouri, 224

U.S. 270, 286, 290 (1912); St. Louis, LM. & S.R. Co. v. Wil-

liams, 251 U.S. 63, 66-67 (1919)).

In 1991, however, the Supreme Court decided Pacific

Mutual Life Insurance Co. v. Haslip, 499 U.S. 1 (1991). There,

for the first time in the modern era, the Court conducted a

substantive review of an award of punitive damages. Haslip

was an insurance fraud case, in which the agent pocketed the

premiums and caused the plaintiff's insurance to lapse. Jd. at

4-5. The Court upheld a punitive damages award that

amounted to four times the award of compensatory damages

and 200 times the out-of-pocket costs of the defrauded insured.

Id. at 23-24. The Court noted that the ratios might be “close to

the line,” but said the award had to be upheld because it “did

not lack objective criteria.” /d. The Court therefore concluded

that the punitive damages did not “cross the line into the area

of constitutional impropriety.” Jd. The Supreme Court did not,

at that time, and has not since, defined any bright line of

constitutional impropriety. It has, repeatedly, indicated that

there is none. See, e.g., State Farm, 538 U.S. at 424-25.

In 1993, two years after Haslip, the Court took on another

major punitive damages case. In 7X¥O Production Corp. v.

Alliance Resources Corp., 509 U.S. 443 (1993), the Court

reviewed a jury award of $19,000 in compensatory damages

and $10 million in punitive damages. Jd. at 451. That case

‘arose out of an oil and gas development fraud scheme. Jd. at

447-51. The case produced no majority opinion. The plurality,

reiterating that due process places some limit on punitive

damages, said that the award was not so “grossly excessive”

that it should be overturned, thus invoking the standard used

in Haslip. Id. at 462. The Court declined to provide any par-

ticular guidance in determining when an award would be

“grossly excessive.” Jd. The plurality chose instead to say that

the dramatic disparity between the actual financial loss and

the punitive award was not controlling. /d. The award was

upheld. Jd.

It was against this background that the jury in this case

was instructed in 1994. The jury was told to take into account

the reprehensibility of the misconduct, the amount of actual or

potential harm arising from the misconduct, and, additionally,

to take into account mitigating factors such as the clean up

costs and fines already imposed as deterrents. District Court

Opinion, 296 F. Supp. 2d at 1081-82. The instructions were

the product of mutual effort of the parties and the district court,

and have not been seriously challenged. Jd. They are not

questioned here and were, in retrospect, quite forward look-

ing.

On September 16, 1994, the jury returned a $5 billion

punitive damages verdict, having some time earlier imposed a

compensatory award of $287 million. The district court ac-

cepted the punitive award and entered judgment. Citing

Haslip and TXO, the district court denied Exxon’s motion for

a new trial in January of 1995.

B. The Appeal of the Damage Allocation Plan and Our De-

cisions in Baker and Icicle.

Prior to trial, several plaintiffs, many of the sea food

processors, had entered into settlement agreements with

Exxon. Icicle Seafoods, Inc. v. Baker (In re the Exxon Valdez),

229 F.3d 790, 792 (9th Cir. 2000) [hereinafter Icicle]; Baker v.

Exxon Corp. (In re the Exxon Valdez), 239 F.3d 985, 986 (9th

Cir. 2001) [hereinafter Baker]. The agreements anticipated a

sizable punitive damages award. See Icicle, 229 F.3d at 793;

Baker, 239 F.3d at 986-87. In return for receiving substantial

millions in payments from Exxon, the settling plaintiffs, in

two separate agreements, agreed to allocate a portion of their

punitive award to Exxon. One agreement was a so called

“cede back agreement,” Jcicle, 229 F.3d at 793, and the other

was an assignment of the future award, Baker, 239 F.3d at

986-87.

The district court, however, did not know of the agree-

ments during trial. Jcicle, 229 F.3d at 793. When the court did

learn of them, during consideration of the parties’ proposed

damage allocation plan, and after the punitives had been im-

posed in accordance with the jury’s verdict, the district court

frowned on the settlements. /d. at 794. In the district court’s

view, Exxon should have told the jury about the agreements

so that the jury would have known how much Exxon was

actually going to have to pay in punitive damages. Jd. The

district court, therefore, refused to permit the settling plain-

tiffs to receive any of the punitive damages award, on the

theory that Exxon should not benefit from the settlements. /d. ;

Baker, 239 F.3d at 987. Exxon pursued two appeals from the

district court’s refusal to enforce the agreements: one in-

volving the cede back agreement, Icicle, 229 F.3d at 793, and

the other involving the assignment agreement, Baker, 239

F.3d at 987-88.

The two different forms of agreement were intended to

have essentially the same effect: allowing Exxon to keep

some portion of the eventual punitive award in exchange for

settling compensatory damage claims. In Icicle, this panel

considered the cede back agreement. In a thorough opinion,

we held that the cede back agreement was valid and en-

forceable and that the jury quite properly was not told of its

existence. Icicle, 229 F.3d at 800. We reasoned that had the

jury been told of the agreement, it might well have compen-

sated for the settlement by imposing more damages. Jd. at 798.

This, in turn, would have frustrated the efforts of parties to

reach settlements. We pointed out that settlements should be

encouraged, particularly in large class actions like this one. Jd.

“Far from being unethical, cede back agreements make it

easier to administer mandatory class actions for the assess-

ment of punitive damages and encourage settlement in mass

tort cases. As a result, such agreements should typically be

enforced.” Jd.

The second appeal, Baker, considered an assignment

agreement. Baker, 239 F.3d at 987-88. Following the Icicle

reasoning, this panel reached the same conclusion. /d. at 988.

C. The Supreme Court’s Decision in BMW v. Gore.

As the parties were beginning their preparation for the

first appeal of the $5 billion punitive damages award, the

Supreme Court issued its first major due process/punitive

damages decision after TXO. In 1996, it decided BMW of

rth America, Inc. v. Gore, 517 U.S. 559 (1996). This was

the Supreme Court’s first attempt to describe specific factors

that a court should consider in reviewing a jury’s award of

punitive damages. See id. at 575. The Court invoked the tra-

ditional concepts of due process to describe the purpose of the

review as an assurance of fair notice to the defendant of the

consequences of its conduct. Jd. at 574.

The Court described three factors to be considered. /d. at

575. The first was the reprehensibility of the conduct. Jd. The

Court explained that reprehensibility is “[p]erhaps the most

important indicium of the reasonableness of a punitive dam-

ages award,” and said that an award should reflect “the

enormity” of the offense. /d. (citations omitted).

The second factor was the disparity between the actual or

potential harm to the plaintiffs flowing from that conduct, and

the punitive damages assessed by the jury. The Court said that

the disparity factor was the most commonly cited. Jd. at 580.

The Court reasoned this factor is important because it “has a

long pedigree” extending back to English statutes from 1275

to 1753 providing for double, treble or quadruple damages. Jd.

at 580-81. Thus the critical measure here is the ratio between

the punitive award and the amount of harm inflicted on the

plaintiff, or plaintiffs, before the court. —

The third factor was the difference between the punitives

10a

and the civil and criminal penalties authorized by the state for

that conduct. Jd. at 583. The Court indicated that reviewing

courts should use this factor to “accord substantial deference

to legislative judgments concerning appropriate sanctions for

the conduct at issue.” Jd. at 583 (internal quotations omitted).

In BMW v. Gore, the defendant had engaged in a practice

of repainting damaged cars and passing them off as

never-damaged cars with their original paint. Jd. at 563-64.

The plaintiff who had purchased one of these cars was

awarded $4,000 in compensatory damages and $4 million in

punitives. Jd. at 565. The Alabama Supreme Court reduced

the punitives to $2 million, and the defendant petitioned for

certiorari review. Jd. at 567. The Supreme Court held the pu-

nitives were excessive. Jd. at 585.

In examining the reprehensibility of the conduct, the Su-

preme Court in BMW y. Gore stressed that the only harm in-

flicted by the defendant was economic and not physical. Jd. at

576. The Court also emphasized that the conduct to be con-

sidered was only the conduct of the defendant towards the

plaintiff in the Alabama case and not other conduct that might

be a part of a nationwide practice. Jd. at 572. Justice Breyer’s

concurring opinion noted the danger in subjectirig a defendant

to punishment multiple times for the same conduct. Jd. at 593

(Breyer, J., concurring).

Thus, in looking at the ratio between the punitives and the

harm, and in stressing that the ratio must be a reasonable one,

the Court was holding that the ratio must be measured by the

ratio of punitive damages to the harm suffered by the plaintiff

in that case, without regard to harm that might have been

experienced by others and for which the defendant might also

be responsible. /d. at 580. It concluded that a ratio of 500 to 1

was grossly excessive. Jd. at 583. Such an excessive ratio

resulted from the jury’s improperly measuring the punitives in

relation tc the damage inflicted on a nation of potential

plaintiffs rather than the damage to the plaintiff before that

jury. Id. at 573.

lla

With respect to the third factor, the relationship between

the punitive damages and the comparable penalties under state

law, BMW vy. Gore looked to the Court’s federalism juris-

prudence. The Court’s opinion stressed that reviewing courts

should be mindful of the need to pay due deference to the

legislative judgments of states in assessing the reprehensibil-

ity of conduct. Jd. at 583 (“{[A] reviewing court engaged in

determining whether an award of punitive damages is exces-

sive should ‘accord “substantial deference” to legislative

judgments concerning appropriate sanctions for the conduct at

issue.””) (quoting Browning-Ferris, 492 U.S. at 3019

(O’Connor, J., concurring in part, dissenting in part)).

Again refusing to draw any kind of mathematical bright

line between acceptable and unacceptable ratios, the Court

described the 500 to 1 ratio in BMW v. Gore as “breathtak-

ing.” Jd. It remanded for further, not inconsistent, proceedings,

because, unlike Haslip, where the Court affirmed a ques-

tionable award, the Court in BMW was “fully convinced” that

this award was “grossly excessive.” Jd. at 585-86.

D. The First Punitive Damages Appeal.

It was against this background that briefing in the first

appeal of the original $5 billion punitive damages award in

this case went forward. Exxon contended the amount of the

award violated due process principles, as described in BMW v.

Gore. Punitive Damages Opinion I, 270 F.3d at 1241. The

district court had not had an opportunity to review BMW y.

Gore before its original judgment became final and appeal-

able upon denial of Exxon’s motion for a new trial. Jd.

In its appeal from the $5 billion award, Exxon, in addition

to challenging the amount of the punitive damages, chal-

lenged the sufficiency of the evidence supporting punitive

damages; the jury instructions; the allowability of any puni-

tive damages as a matter of public policy, maritime law and

res judicata; and the preemption of punitive damages by other

federal law. Needless to say, briefing was extensive. After

appellate proceedings were stayed from January 1998 to

12a

September 1998 for the parties to pursue a limited remand,

this panel heard argument in May of 1999.

While the case was under submission, the Supreme Court

granted certiorari in another Ninth Circuit case, and in May

2001, decided Cooper v. Leatherman Tool Group. The Court

there held our review of punitive damages was to be de novo.

Cooper, 532 U.S. at 436. This did not ease our task.

E. Punitive Damages Opinion I.

We issued our first opinion on punitives damages in No-

vember, 2001. Our opinion went in detail through the facts of

the disaster and the conduct of Exxon, and of Captain

Hazelwood, because they bore so heavily on the consideration

of the issues on appeal. Punitive Damages Opinion I, 270 F.3d

at 1221-24. In an opinion of more than 40 pages, we rejected

Captain Hazelwood’s separate appeal, and dealt at some

length with all of the issues raised by Exxon. We ultimately

rejected all of them except the challenge to the amount of

punitive damages. Jd. at 1254.

Referring to the “unique body of law” that governs puni-

tive damages, we focused on the two Supreme Court opinions

that had been decided after the district court’s decision in the

case, and we termed them “critical.” Jd. at 1239. These were

BMW v. Gore and Cooper v. Leatherman Tool Group. We

said:

In BMW, the Supreme Court held that a punitive

damage award violated the Due Process Clause of the

Fourteenth Amendment because it was so grossly

excessive that the defendant lacked fair notice that it

would be imposed. Dr. Gore’s car was damaged in

transit, and BMW repainted it but did not tell Dr. Gore

about the repainting when it sold him the car. The jury

found that to be fraudulent, and awarded $4,000 in

compensatory damages for reduced value of the car

and $4 million in punitive damages. The Alabama

Supreme Court cut the award to $2 million, but the

Court held that it was still so high as to deny BMW

13a

due process of law for lack of notice, because the

award exceeded the amounts justified under the three

“guideposts.” The BMW guideposts are: (1) the degree

of reprehensibility of the person’s conduct; (2) the

disparity between the harm or potential harm suffered

by the victim and his punitive damage award; and (3)

the difference between the punitive damage award and

the civil penalties authorized or imposed in compara-

ble cases. We apply these three guideposts to evaluate

whether a defendant lacked fair notice of the severity

of a punitive damages award, and to stabilize the law

by assuring the uniform treatment of similarly situated

persons.

Id. at 1240-41 (internal quotations omitted). We noted that in

Cooper v. Leatherman Tool Group the Supreme Court de-

cided that “considerations of institutional competence” re-

quire de novo review of punitive damages awards. /d. at 1240

(quoting Cooper, 532 U.S. at 440).

We went on to observe that tle district court had not re-

viewed the award under the standards announced in those

cases because neither case had been decided by the time the

jury returned its verdict, and Exxon had never challenged the

amount of the award on constitutional grounds until after the

jury’s verdict. Jd. at 1241. In view of the need for de novo

review and the intervening decisions of BMW y. Gore and

Cooper v. Leatherman Tool Group, we remanded for recon-

sideration of punitive damages. Jd. We also provided some

observations on possible alternative analyses of punitive

damages under the BMW v. Gore factors. Jd. at 1241-46.

These observations began with the factor of reprehensi-

bility, quoting the Supreme Court’s admonition in BMW vy.

Gore that it is “[p]erhaps the most important indicium of the

reasonableness of a punitive damage award.” Jd. at 1241. We

pointed to the Court’s analogy to criminal cases, and its

statement that nonviolent crimes are less reprehensible than

violent ones. Jd. We drew an analogy to the facts of this case,

where Exxon’s conduct was reckless, but there was no inten-

14a

tional spilling of oil “as in a midnight dumping case.” Jd. at

1242. We agreed with the plaintiffs that Exxon’s conduct was

reprehensible in that it knew of the risk of an oil spill in

transporting huge quantities of oil through the Sound, and it

knew Hazelwood was a relapsed alcoholic. /d. at 1242. We

observed, however, that such reprehensibility went more to

justify punitive damages than to justify such a high amount. /d.

We noted some mitigating factors, including prompt amelio-

rative action and the millions spent in clean up. Jd.

We then turned to the ratio of actual harm caused by the

misconduct to punitive damages awarded. Jd. at 1243. Again

analyzing BMW v. Gore, we said that it was difficult to de-

termine what we called the “numerator,” that is, the value of

the harm caused by the spill. Jd. We used the jury award of

$287 million in compensatory damages as one possible nu-

merator and also, as alternative numerators, the district court’s

estimates of harm, which at that time ranged from $290 mil-

lion to $418 million. Jd. We noted that if compensatory li-

ability were used, any amounts Exxon had voluntarily paid in

settlements should not be taken into account. We said that

{t]he amount that a defendant voluntarily pays before

judgment should generally not be used as part of the

numerator, because that would deter settlements prior

to judgment. “[T]Jhe general policy of federal courts to

promote settlement before trial is even stronger in the

context of large scale class actions.”

Id. at 1244 (citing Icicle, 229 F.3d at 795; Baker, 239 F.3d at

988).

As a final observation on the relationship between the

punitive damages award and the harm, we pointed out that the

substantial clean up costs and other losses to Exxon from the

oil spill had already had considerable deterrent effect. We

indicated such deterrence should, depending on the circum-

stances, call for a lower, rather than a higher ratio. Jd.

Turning to the third BMW v. Gore factor, we observed that

the nature of criminal fines, which are potential state and

15a

federal penalties, might be useful in reviewing punitives. Jd.

at 1245. We observed that “[c]riminal fines are particularly

informative because punitive damages are quasicriminal.” Jd.

We then looked to the general federal statutory measure for

fines and discussed a number of alternative guideposts. Jd. We

noted the federal fines could range from $200,000 to $1.03

billion. Jd. We looked as well at the ceiling of civil liability

under the Trans-Alaska Pipeline Act and noted it was $100

million in strict liability for anyone who spills oil from the

pipeline. Jd.

In addition to those possible penalties, we looked at the

actual penal evaluation made in the case by the Attorneys

General of the United States and of the state of Alaska. Jd. at

1245-46. Agreeing with the district court that they did not

establish a limit, we noted that they did represent an adver-

sarial judgment, by executive officers, of an appropriate level

of punishment. Jd. at 1246. Finally, without necessarily ex-

hausting available analogies in the penalty field, we noted that

Congress had subsequently amended the statute to increase

the amount of civil penalties for grossly negligent conduct,

and that the maximum penalty here under the new federal

statute would be a maximum of $786 million. Jd. The federal

penalties are based upon the number of barrels of oil spilled.

33 U.S.C. § 1321(b)(7).

In suggesting various possible guidelines to assess

whether the $5 billion was “grossly excessive” we did not

imply that any single guidepost would be controlling. Con-

cluding that the $5 billion was too high to withstand the re-

view we were required to give it under BMW v. Gore and

Cooper v. Leatherman Tool Group, and noting that those

cases came down after the district court had ruled, we re-

manded for it to apply the due process analysis required under

those decisions, with what we hoped would be helpful guid-

ance from our opinion. Jd. at 1241. No district court analysis

of BMW v. Gore was before us and we thus could not have

decided any specific issue arising from any such analysis

arising from its guideposts. Jd. We offered only guidance

l6a

culled from what was then controlling Supreme Court

precedent and general principles applicable to the calculation

of damage liability. Jd.

F. The District Court Opinion on our First Remand.

The district court again did an extensive analysis of the

relative reprehensibility of Exxon’s misconduct and of the

harm it caused. Jn re the Exxon Valdez, 236 F. Supp. 2d at

1054-60. Though noting that an accurate assessment of the

full extent of the plaintiffs’ actual harm was impossible, the

district court attempted to reconstruct that harm by adding

together the jury’s compensatory damages verdict of $287

million, judgments in related cases, as well as payments and

settlements made to plaintiffs before and during the punitive

damages litigation. Jd. at 1058-60. The district court con-

cluded that the actual harm was just over $500 million. Jd. at

1060. The district court also concluded that the circumstances

of this case justified a ratio of punitive damages to harm of 10

to 1. Jd. at 1065. This calculation would have supported the

original $5 billion award. Jd. The district court nevertheless

reduced the punitive damages to $4 billion, to conform to

what it viewed as our mandate. Jd. at 1068.

G. The Second Appeal, the Supreme Court's Opinion in State

Farm, and our Second Remand.

Not surprisingly, Exxon appealed again. And, not sur-

prisingly, the Supreme Court issued an opinion in still another

punitive damages case while the appeal was pending. State

Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408 (2003).

The plaintiffs in State Farm, the Campbells, were in-

volved in a head-on collision and sued their automobile in-

surer, State Farm, for bad faith. Jd. at 413. The claim was

based on State Farm’s rejection of an offer to settle the

Campbells’ claims at the policy limit, State Farm’s assurances

to them that they had no liability for the accident, State Farm’s

resulting decision to take the case to court despite the sub-

stantial likelihood of an excess judgment, and its subsequent

refusal to pay an adverse judgment over three times the policy

17a

limits. Jd. at 413-14. The case was similar to BMW vy. Gore in

that there were only two plaintiffs before the jury. Jd. Nev-

ertheless, as in BMW v. Gore, the jury was allowed to consider

the effects of similar but unrelated misconduct on many po-

tential plaintiffs who were not before the court. Jd. at 415.

Final judgment after appeal to the Utah Supreme Court was

for $1 million in compensatory and $145 million in punitive

damages. /d. at 412. The United States Supreme Court re-

manded for the Utah courts to reduce the award. Jd. at 429.

The Supreme Court in State Farm once again emphasized

that the “most important indicium” of a punitive damages

award’s reasonableness is the relative reprehensibility of the

defendant’s conduct. Jd. at 419; see also BMW v. Gore, 517

U.S. at 575. Yet State Farm significantly refined the repre-

hensibility analysis by instructing courts to weigh five spe-

cific considerations: (1) whether the harm caused was

physical as opposed to economic; (2) whether the conduct

causing the plaintiffs harm showed “indifference to or a

reckless disregard of the health or safety of others;” (3)

whether the “target of the conduct” was financially vulner-

able; (4) whether the defendant’s conduct involved repeated

actions as opposed to an isolated incident; and (5) whether the

harm caused was the result of “intentional malice, trickery, or

deceit, or mere accident.” 538 U.S. at 419. The Court did not

rank these factors. It did explain, however, that only one

factor weighing in a plaintiff's favor may not be sufficient to

support a punitive damages award, and the absence of all

factors makes any such award “suspect.” Jd.

As to BMW v. Gore's second guidepost, the ratio between

harm or potential harm to the plaintiff and the punitive dam-

ages award, the Court “decline[d] again to impose a brightline

ratio which a punitive damages award cannot exceed.” Jd. at

425. But it provided some sharper guidance than it had in

previous Cases.

First, it indicated that ratios in excess of single-digits

would raise serious constitutional questions, and that sin-

gle-digit ratios were “more likely to comport with due proc-

18a

ess.” Id. fact, despite the Court’s disclaimer that “there are no

rigid benchmarks that a punitive damages award may not

surpass,” the Court strongly indicated the proportion of puni-

tive damages to harm could generally not exceed a ratio of 9

to 1. Id. at 425 (“[FJew awards exceeding a single-digit ratio

between punitive and compensatory damages, to a significant

degree, will satisfy due process.”’).

Second, the Court discussed particular combinations of

factors that would justify relatively higher or lower ratios. For

example, where a “particularly egregious act has resulted in |

only a small amount of economic damages” or where “the

injury is hard to detect or the monetary value of the none-

conomic harm might have been difficult to determine,” ratios

in the high single-digits and perhaps even higher might be

warranted. Jd. (quoting BMW v. Gore, 517 U.S. at 582).

Conversely, “[w]hen compensatory damages are substantial,

then a lesser ratio, perhaps only equal to compensatory

damages, can reach the outermost limit of the due process

guarantee.” Jd.

Finally, the Court minimized the relevance of criminal

penalties as a guide, saying that they were not particularly

helpful in determining fair notice. Jd. at 428. Indeed, the Court

did not analyze State Farm’s potential criminal penalty at all,

characterizing it as a “remote possibility.” Jd. As to civil

penalties, the Court noted only that the $145 million punitive

damages award “dwarfed” the $10,000 maximum applicable

fine. Jd.

The Supreme Court’s opinion in State Farm was filed in

2003, after the district court, on our first remand, had already

reviewed the puaitive damages award. Because the district

court performed its review without the benefit of the more

focused guidance provided by the Court in State Farm, we

remanded the second appeal summarily for the district court

to reconsider the punitive damages award in light of State

Farm. Sea Hawk, No. 03-39166.

19a

H. The District Court Opinion on our Third Remand and this

Appeal.

On remand for the third time, the district court, in an as-

sessment similar to that in its opinion after our first remand,

calculated plaintiffs’ harm at $513.1 million. District Court

Opinion, 296 F. Supp. 2d at 1103. Interpreting State Farm as

holding that “single-digit multipliers pass constitutional

muster for highly reprehensible conduct,” and citing our de-

cision in Zhang v. American Gem Seafoods, Inc., 339 F.3d

1020 (9th Cir. 2003), the district court decided to increase

punitives from $4 billion to $4.5 billion. 296 F. Supp. 2d at

1110. The final pu itive damages award represented a ratio of

just under 9 to 1. Jd.

Once again, Exxon appealed. The plaintiffs also appealed,

seeking to reinstate the jury’s full $5 billion punitive damages

verdict.

In this appeal, Exxon has focused intensively on the sen-

tences in our earlier opinion where we noted that prejudgment

payments generally should not be part of the “numerator” to

avoid deterring pre-judgment settlements. Punitive Damages

Opinion I, 270 F.3d at 1242. Exxon has argued strenuously in

the district court and to us that all of its settlement and other

pre-judgment compensatory payments to plaintiffs must be

subtracted from the over $500 million amount of actual harm

in the ratio of punitive damages we use to review the award

pursuant to the BMW v. Gore/State Farm factors. This would

reduce the harm to the relatively paltry figure of $20.3 mil-

lion.

We recognized in Punitive Damages Opinion I that Exxon,

soon after the spill, instituted a claims payment system that

almost fully compensated plaintiffs for their economic losses

and did so promptly. Jd. We also recognized that Exxon’s

prompt payment of compensatory damages should be a sub-

stantial mitigating factor in our review of punitives. Jd.

In Exxon’s appeal, major issues therefore relate to how,

after State Farm, to assess the reprehensibility of Exxon’s

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conduct and the effect of the mitigating factors. An important

subsidiary issue is the extent to which we are bound to give

literal effect to the sentences in our earlier opinion concerning

subtracting the pre-judgment payments from actual harm,

even though State Farm suggests the mitigating factors

should be taken into account differently. For the reasons more

fully explained in this opinion, we do not accept the minimal

bottom line figure urged by Exxon and properly rejected by

the district court. We do, however, conclude there is merit to

Exxon’s contention that punitives should be reduced.

In their cross appeal, plaintiffs seek a reinstatement of the

original $5 billion punitive award. We do not fully adopt their

position either because doing so would peg the ratio of puni-

tive damages to harm at a level State Farm reserves only for

the most egregious misconduct. There was no intentional in-

fliction of harm in this case. In addition, because Exxon’s

mitigating efforts after the accident diminish the relative

reprehensibility of its original misconduct for purposes of

reviewing punitive damages, such a high ratio is not war-

ranted in this case.

Il. ANALYSIS

A. Lessons From History.

The history of the experience ef the Supreme Court with

punitive damages over the last decade-and-a-half reflects an

evolutionary, not a revolutionary, course. In its first opinion in

Haslip, the Court suggested that there might be a bright line of

demarcation between punitive damages that comport with

constitutional protections, and punitiwe damages that do not.

Haslip, 499 U.S. at 23. Although it did not say what “the line”

would be, it termed ratios of punitive damages to compensa-

tory damages of 4 to 1, and to out-of-pocket costs of 200 to 1,

to be close to it. Jd.

In subsequent cases, however, the Court expressly

avoided a rigid mathematical formula or limit, while refining

its ratio analysis, concluding in State Farm that a ratio of pu-

nitive damages to actual harm of less than 10 to 1 was more

2la

likely to comport with due process than an award with a

higher ratio. State Farm, 538 U.S. at 425. Along the way, the

Court’s experience reflects efforts to comport with the tried

and true concepts inherent in due process, i.e., those of notice

and fairness. See, e.g., Mullane v. Cent. Hanover Bank &

Trust Co., 339 U.S. 306 (1950); Int'l Shoe Co. v. Washington,

326 U.S. 310 (1945).

In State Farm, the Court expressly noted its concern that

the jury had been allowed to take into account the effect of

conduct that may have taken place nationwide on thousands

of potential plaintiffs. State Farm, 538 U.S. at 422. The un-

fairness of a defendant being hit with punitive damages many

times for the same conduct was central to the Court’s analysis

in remanding. Jd. The Court explained, “[{p]junishment on

these bases creates the possibility of multiple punitive dam-

ages awards for the same conduct; for in the usual case

non-parties are not bound by the judgment some other plain-

tiff obtains.” Jd. at 423.

Indeed, in State Farm, the Court stressed that the most

important factor is the reprehensibility of the particular con-

duct in the case. State Farm, 538 U.S. at 419. This is because,

in assessing the foreseeability of the possible effects of the

defendant’s conduct as it might bear on punitive damages, the

reviewing court is in reality dealing with the traditional con-

cept of the need for fair notice of the possible legal conse-

quences of one’s misconduct. Jd. at 417.

Perhaps because such traditional elements of due process

are flexible, the Supreme Court has not often taken on the task

of reviewing the amount of punitive damages and has, in fact,

overturned only two punitive awards because of their size.

Each of them exceeded by a multiple of more than 100 the

amount of compensatory payments necessary to compensate a

plaintiff for the actual harm caused by the defendant’s mis-

conduct. BMW v. Gore, 517 U.S. at 582 (striking down a

500:1 ratio); State Farm, 538 U.S. at. 429 (striking down a

145:1 ratio).

22a

B. BMW v. Gore/State Farm Guideposts.

BMW y. Gore identified three guideposts for reviewing

punitive damages, and State Farm added important refine-

ments. The guideposts are (1) the reprehensibility of the de-

fendant’s misconduct, (2) the ratio of punitives to harm, and

(3) comparable statutory penalties. They need not be rigidly

or exclusively applied, for we agree with our sister circuit that

“[t]hese guideposts should not be taken as an analytical

straight jacket.” Zimmerman v. Direct Federal Credit Union,

262 F.3d 70, 81 (ist Cir. 2001). We must, nevertheless, ex-

amine them in the context of this case.

1. Reprehensibility.

The most important guidepost is the reprehensibility of

Exxon’s misconduct. State Farm, 538 U.S. at 419 (quoting

BMW v. Gore, 517 U.S. at 575). In our prior opinion, we de-

fined the relevant misconduct supporting punitive damages as

Exxon’s keeping Hazelwood in command with knowledge of

Hazelwood’s relapse into alcoholism. We said that “Exxon

knew Hazelwood was an alcoholic, knew that he had failed to

maintain his treatment regimen and had resumed drinking,

knew that he was going on board to command its supertankers

after drinking, yet let him continue to command the Exxon

Valdez through the icy and treacherous waters of Prince Wil-

liam Sound.” Punitive Damages Opinion I, 270 F.3d at

1237-38. We see no need to reconsider this issue, despite

Exxon’s invitation to do so.

To evaluate the reprehensibility of the misconduct, State

Farm refers to five sub-factors: (1) the type of harm, (2)

whether there was reckless disregard for health and safety of

others, (3) whether there were financially vulnerable targets,

(4) whether there was repeated misconduct and (5) whether it

involved intentional malice, trickery, or deceit, rather than

mere accident. State Farm, 538 U.S. at 419.

We must also consider mitigating factors. In Punitive

Damages Opinion I, in the context of this particular case, we

looked to Exxon’s response to the catastrophe, including its

23a

prompt cleanup and compensatory payments. We held they

were factors mitigating the reprehensibility of the original

misconduct. Punitive Damages Opinion I, 270 F.3d at 1242.

“Reprehensibility should be discounted if defendants act

promptly and comprehensively to ameliorate any harm they

cause in order to encourage such socially beneficial behav-

ior.” Id.

The dissent takes issue with two components of our BMW

v. Gore analysis. Its reasons, however, are surprising, because

they contradict our unanimous holding in Punitive Damages

Opinion I, 270 F.3d at 1242, that the spill was not intentional

nor Exxon’s conduct malicious. See Dissent at 633 [56a]

(characterizing Exxon’s conduct as “malicious”). Then, the

dissent misapplies the Supreme Court’s mandate that we must

perform an exacting appellate review to ensure that “an award

of punitive damages is based upon an ‘application of law,

rather than a decisionmaker’s caprice.’” State Farm, 538 U.S.

at 418 (citing BMW v. Gore, 517 U.S. at 587).

First, the dissent maintains that the value of defendant’s

pre-litigation mitigation efforts should not affect punitive

damages because the Supreme Court did not explicitly pro-

vide for such a calculus in State Farm. Dissent at 628

[46a-47a]. Thus, the dissent would reject the principle of stare

decisis and the law of the case and overturn our holding in

Punitive Damages Opinion I, 270 F.3d at 1242, that Exxon’s

voluntary compensation to the plaintiffs effectuated good

public policy in making an injured party whole as quickly as

possible. We are not prepared to question the soundness of our

unanimous conclusion in Punitive Damages Opinion I merely

because intervening Supreme Court jurisprudence in the in-

surance context did not address the issue. See State Farm, 538

U.S. 408. By contrast here, we have already held that mitiga-

tion is both relevant and conscientious in the toxic-tort setting.

It would be unwise in reviewing punitive damages to ignore

the prompt steps of a defendant to take curative action in a

mass tort case.

24a

The dissent also claims that we improperly treat BMW's

fifth factor, the fault analysis, as a dichotomy with two mu-

tually exclusive options: finding Exxon’s conduct intentional

and thus grossly reprehensible, or finding it accidental and

thus to a large degree excusable. Dissent at 630 [51a]. This is

not our analysis. We acknowledge that Exxon’s conduct was

not intended to cause an oil spill, but neither was allowing a

relapsed alcoholic to command a supertanker “mere acci-

dent.” Majority at 617 [30a]. Exxon’s reckless malfeasance

falls in the middle of a continuum between accidental and

intentional conduct. Accordingly, the fifth subfactor of the

reprehensibility analysis supports neither high nor low rep-

rehensibility on the part of Exxon.

The Supreme Court has reserved the upper echelons of

constitutional punitive damages (a 9 to 1 ratio) for conduct

done with the most vile of intentions. Thus, an affirmance of

the district court’s application of such a ratio in this case,

where the defendant’s conduct was reckless but not inten-

tional, would transgress the requisite constitutional bounda-

ries as the Supreme Court has explained them to date.

We turn now to the specific State Farm reprehensibility

subfactors. These demonstrate that a 5 to 1 ratio more ap-

propriately comports with due process.

a. Type of Harm-Physical versus Economic.

To evaluate the type of harm, State Farm instructs us to

consider whether “the harm was physical as opposed to eco-

nomic,” because conduct producing physical harm is more

reprehensible. State Farm, 538 U.S. at 419. In this case th-

district court found that Exxon’s conduct caused no actual

physical harm to people, but caused more than mere economic

harm to them, because the economic effects of its misconduct

produced severe emotional harm as well. We agree with the

cistrict court’s explanation that “the spilling of 11 million

gallons of crude oil into Prince William Sound and Lower

C 9k Inlet disrupted the lives (and livelihood) of thousands of

claimants for years.” District Court Opinion, 296 F. Supp. 2d

25a

at 1094.

The Supreme Court has recognized conduct causing

emotional as well as economic harm can be more reprehen-

sible than conduct causing mere economic harm. See BMW v.

Gore, 517 U.S. at 576 n. 24. There it cited Blanchard v.

Morris, 15 Ill. 35, 36 (1853), a case affirming a $700 punitive

award against individuals who caused no physical harm and

only $13 of economic harm, but used mental torture to extort

it.

In Bains LLC v. Arco Products Co., 405 F.3d 764, 775

(9th Cir. 2005), we held that “intentional, repeated ethnic

harassment” increased the level of reprehensibility beyond the

merely economic. See also Swinton v. Potomac Corp., 270

F.3d 794, 818 (9th Cir. 2001). The gratuitous, intentional

mental oppression of the victims made it “highly reprehensi-

ble conduct, though not threatening to life or limb.” Jd. at 777.

In Planned Parenthood v. American Coalition of Life Activists,

422 F.3d 949, 958 (9th Cir. 2005), we held that a “true threat”

increased reprehensibility even though it was not carried out,

because the threat was intended to intimidate, and the eco-

nomic component went beyond reducing the victim’s wealth

or income to trying to drive the victims away from their

practices of medicine. Our Planned Parenthood decision was

consistent with BMW's citation with approval of older deci-

sions upholding awards based on the “mental fear, torture, and

agony of mind” caused by the threat of violence. BMW, 517

US. at 575-76, n. 24.

The district court concluded that the mental distress

caused by the oil spill to the fishermen and property owners

who were harmed economically justified a higher level of

reprehensibility, and Exxon urges that emotional distress

damages were not before the jury. Because our review must

be de novo under Cooper Indus., Inc. v. Leatherman Tool

Group, Inc., 532 U.S. 424, 436 (2001), we are not bound by

the district court’s rationale. The cases discussed above show

that punitive damages can-and traditionally do-consider the

effects of the tortfeasor’s conduct on the victim’s mentality,

26a

not just his pocketbook. On the other hand, they may not go so

far, and we need not, as to justify punitive damages for acci-

dentally causing mental distress. State Farm states that

compensatory damages for mental distress generally include a

punitive element, so including mental distress in punitive

damages may be dupicative. 538 U.S. at 426.

What comes to something near the same result in this case,

though it would not in most cases, is the entirely foreseeable

disruption to the way tens of thousands people live their lives

if a giant oil tanker were to run aground and spill its cargo.

When tens of thousands of people have to change the way

they make their living, their mental distress is not comparable

to a BMW owner, or even a large number of BMW owners,

being distressed because their cars were scratched or dented

during shipment and repaired without their knowledge.

Anyone setting an oil tanker loose on the seas under command

of a relapsed alcoholic has to know that he is imposing this

massive risk. Though spilling the oil is an accident, putting

the relapsed alcoholic in charge of the tanker is a deliberate

act. The massive disruption of lives is entirely predictable

when a giant oil tanker goes astray. Thus, Exxon’s reprehen-

sibility goes considerably beyond the mere careless imposi-

tion of economic harm.

b. Reckless Disregard for Health and Safety of Others.

The second subfactor we consider in assessing reprehen-

sibility is whether Exxon displayed a reckless disregard for

the health and safety of others. State Farm, 538 U.S. at 418.

We conclude this subfactor also militates toward greater

reprehensibility. When Exxon trusted an officer it knew was

incompetent to command the Exxon Valdez through the

treacherous waters of Prince William Sound, Exxon acted

with reckless disregard for the health and safety of all those in

the vicinity.

The Exxon Valdez grounding created a grave risk of

physical harm for the crew and those who had to come to its

rescue. The district court found that something as simple as an

27a

electro-static discharge could have ignited the crude oil and

incinerated everyone in the vicinity. District Court Opinion,

296 F. Supp. 2d at 1095. We therefore agree with the district

court that Exxon acted with reckless disregard of the health

and safety of others when it put in command a person not

competent to perform that role.

Exxon argues that State Farm requires us to ignore

Exxon’s disregard of the potential harm to the crew and res-

cuers because they are not plaintiffs to this litigation. Exxon

misreads State Farm. State Farm disapproved punishing de-

fendants for conduct in other states in which it might be lawful.

538 U.S. at 421. Likewise, we had held in White v. Ford

Motor Company, before State Farm came down, that a jury’s

punitive damages award based on extraterritorial conduct

(plaintiff's lawyer had made a “send them a message” argu-

ment addressing nationwide conduct) violated principles of

federalism established in BMW v. Gore. 312 F.3d 998,

1013-14 (9th Cir. 2002). These cases do not prohibit consid-

eration of the potential harm to individuals merely because

they are not plaintiffs. See 538 U.S. at 420-22. The lesson is

that the award in the other litigation “should have been ana-

lyzed in the context of the reprehensibility guidepost only.”

Id.; BMW vy. Gore, 517 U.S. at 574 n.21. State Farm therefore

holds it is appropriate to look at the risk to others in analyzing

reprehensibility. State Farm, 538 U.S. at 427.

State Farm does warn against considering dissimilar acts

of the defendant, or what is described as acts “independent

from the acts upon which liability was premised.” Jd. at 422.

The Court explained this is because “[a] defendant should be

punished for the conduct that harmed the plaintiff, not for

being an unsavory individual or business.” /d. at 423. Here,

however, the conduct that threatened the safety of the crew

and rescuers is the same conduct that harmed the plaintiffs,

and is the conduct that underlies this punitive damages liti-

gation: Exxon’s knowingly placing a relapsed alcoholic in

charge of the Exxon Valdez. The prohibition in State Farm

against considering dissimilar acts does not apply here be-

28a

cause taking into account the potential harm to the crew and

rescuers punishes Exxon for the same conduct that harmed the

plaintiffs. We have made this point before. See, for example,

Hangarter v. Provident Life and Accident Insurance Co., 373

F.3d 998, 1015 n. 11 (9th Cir. 2004), where we analyzed

company-wide policies in a single-plaintiff lawsuit and dis-

tinguished State Farm’s warning against considering dis-

similar acts. We said “unlike in State Farm, a legally suffi-

cient nexus existed between Defendant’s allegedly wide-

spread corporate policies and the termination of [the plain-

tiffs] benefits.” Jd.

Accordingly, where the same conduct risked harm to all,

the risk to all can be considered as a factor in assessing rep-

rehensibility. The district court did not err in recognizing that

Exxon recklessly disregarded the physical safety of the crew

and rescuers, and thereby increased the reprehensibility of its

conduct in putting Hazelwood in command.

c. Financially Vulnerable Targets.

The district court found Exxon’s conduct harmed finan-

cially vulnerable subsistence fishermen. District Court

Opinion, 296 F. Supp. 2d at 1095. Exxon does not dispute that

subsistence fishermen were financially vulnerable or that its

reckless actions harmed them. It does contend that this factor

applies only in fraud cases when a defendant intentionally

defrauds financially vulnerable targets, such as the sick or

elderly. While we do not believe the subfactor is so limited,

we agree there must be some kind of intentional aiming or

targeting of the vulnerable that did not occur here.

The purpose of reprehensibility analysis is to determine

“the enormity” of the offense, which “reflects the accepted

view that some wrongs are more blameworthy than others.”

BMW v. Gore, 517 U.S. at 575. The notion of “targeting”

connotes some element of intent to harm particular individu-

als or categories of individuals. See Planned Parenthood, 422

F.3d at 958-59 (holding plaintiffs were financially vulnerable

because the defendants’ threats attempted to scare the plain-

29a

tiffs into quitting the jobs on which the plaintiffs’ livelihoods

depended). Exxon did not intentionally target subsistence

fishermen.

We conclude in this case that this consideration does not

materially affect our assessment of the reprehensibility of

Exxon’s conduct.

d. Repeated Action

The district court found that the conduct was repetitive

because Exxon repeatedly allowed Hazelwood to command

its supertankers for three years after it knew he had resumed

drinking. District Court Opinion, 296 F. Supp. 2d at 1096. As

the district court observed, Exxon did so, even though Exxon

was fully aware of the tremendous risk of harm that it entailed.

Id. “Over and over again, Exxon did nothing to prevent Cap-

tain Hazelwood [from sailing] into and out of Prince William

Sound with a full load of crude oil.” Jd.

Exxon argues that the relevant conduct is the grounding,

not the knowledge of Hazelwood’s incapacity to command.

That is not consistent with our description of the relevant

misconduct in Punitive Damages Opinion I as putting (and

leaving) Captain Hazelwood in command. Punitive Damages

Opinion I, 270 F.3d at 1237-38. The district court’s finding of

repetitive misconduct was not clearly erroneous. Planned

Parenthood, 422 F.3d at 954. It militates in favor of increased

reprehensibility.

e. Intentional Malice or Mere Accident.

Putting Captain Hazelwood in command of the super-

tanker was knowing and reckless misconduct. We agree with

the district court that this misconduct was not “mere acci-

dent.” District Court Opinion, 296 F. Supp. 2d at 1096.

Exxon points out that relieving Hazelwood of command

would have denied Hazelwood an employment opportunity

on the basis of alcoholism and theoretically subjected Exxon

to a disability discrimination lawsuit. While Exxon’s concerns

may have been appropriate considerations in its evaluation of

the risk, they do not justify the dangers its decision created to

30a

the livelihoods of tens of thousands of individuals. Spilling

the oil was an accident, but putting a relapsed alcoholic in

charge of a supertanker was not. And anyone doing so would

know they were imposing a tremendous risk on a tremendous

number of people who could not do anything about it.

Exxon’s knowing disregard of the interests of commercial

fishermen, subsistence fishermen, fish processors, cannery

workers, tenders, seafood brokers and others dependent on

Prince William Sound for their livelihoods, cannot be re-

garded as merely accidental.

At the same time, we must acknowledge that Exxon acted

with no intentional malice towards the plaintiffs. We have

consistently treated intentional conduct as more reprehensible

than other forms of conduct subject to punitive damages. See

Zhang, 339 F.3d at 1043; Bains LLC v. Arco Products Co.,

405 F.3d 764, 775 (9th Cir. 2005); Southern Union Co. v.

Southwest Gas Corp., 415 F.3d 1001, 1011 (9th Cir. 2005). In

this case, however, as we have already recognized, “as bad as

the oil spill was, Exxon did not spill the oil on purpose.” Pu-

nitive Damages Opinion I, 270 F.3d at 1242-43. While the

reprehensibility of Exxon’s conduct that produced economic

harm to thousands of individuals is high, the conduct did not

result in intentional damage to anyone. This subfactor thus

militates against viewing Exxon’s misconduct as highly rep-

rehensible. Jd.

f. Mitigation of Reprehensibility.

In assessing reprehensibility, we must not only take into

account the reprehensibility of the original misconduct, but

we have held that we must also take into account what has

been done to mitigate the harm that the misconduct caused.

Punitive Damages Opinion I, 270 F.3d at 1242; see also

Swinton, 270 F.3d at 814-15 (discussing weight and relevance

of post-tort mitigation evidence). As we said in Punitive

Damages Opinion I, mitigation is to be considered “in order to

encourage such socially veneficial behavior.” Punitive

Damges Opinion I, 270 F.3d at 1242. Here, Exxon instituted a

system of voluntary payments to plaintiffs and it undertook

3la

prompt cleanup efforts. We agree with what we said before:

“Exxon spent millions of dollars to compensate many people

after the oil spill, thereby mitigating the harm to them and the

reprehensibility of its conduct.” /d.

g. Evaluation of Reprehensibility.

Placing a relapsed alcoholic in control of a supertanker

was highly reprehensible conduct. As a result, Exxon dis-

rupted the lives of thousands of people who depend on Prince

William Sound for their livelihoods, and endangered its own

crew and their rescuers. Over the span of three years, Exxon

could and should have relieved Captain Hazelwood of com-

mand of supertankers, but it did not do so. at the same time,

however, Exxon did not act with malice toward plaintiffs or

anyone else; Exxon did not intend to damage plaintiffs’ live-

lihoods or cause them the emotional grief that went with the

economic loss.

Thus, Exxon’s conduct is in the higher realm of repre-

hensibility, but not in the highest realm. In addition Exxon’s

post-grounding efforts to mitigate the harm serve materially

to reduce the reprehensibility of the original misconduct.

They reduce the reprehensibility for purposes of our review to,

at most, a mid range.

2. Ratio of Harm to Punitives.

The second BMW guidepost, as reiterated and refined by

State Farm, is the “ratio between harm, or potential harm, to

the plaintiff and the punitive damages award.” State Farm,

538 U.S. at 424. The goal of our review at this guidepost is to

“ensure that the measure of punishment is both reasonable and

proportionate to the amount of harm to the plaintiff and to the

general damages recovered.” Jd. at 426.

a. Calculating The Harm.

In this case, the figure the district court used to represent

the harm to plaintiffs was $513.1 million. District Court

Opinion, 296 F. Supp. 2d at 1103. Calculating the total harm

to plaintiffs proved to be difficult because, in addition to

conside:able economic losses, the spill caused other undeni-

32a

able, if not easily quantifiable, harms. See id. at 1094. The

district court eventually calculated the harm figure by adding

the compensatory damages verdict from the second phase of

the trial to the actual judgments, settlements, and other re-

coveries various plaintiffs obtained as a result of the spill. /d.

at 1099-1101.

Exxon does not dispute that the district court’s finding of

$513.1 million in harm is fundamentally a valid measure of

the actual harm caused by the spill. However, it disagrees that

it should be the figure we ultimately use as part of the ratio of

punitive damages to harm that we review as the second

guidepost.

Exxon’s principal contention is that, before establishing

the harm figure in the ratio, we must first deduct millions of

dollars of payments and costs from the figure representing the

total actual harm caused by the spill. Exxon would have us

subtract a sum of about $493 million representing amounts

paid to plaintiffs through Exxon’s voluntary claims program

and other settlements. Exxon would then have us use that

reduced figure to represent the total harm in assessing the

ratio of punitives to harm.

This brings us to the central argument Exxon makes in this

appeal. Exxon focuses on the language of our prior opinion in

Punitive Damages Opinion I where we said, in a lengthy

discussion of formulating possible ratios pursuant to BMW v.

Gore, “[t]he amount that a defendant voluntarily pays before

judgment should generally not be used as part of the nu-

merator, because that would generally deter settlements prior

to judgment.” 270 F.3d at 1244. Exxon contends this now

means that in assessing the ratio of harm to punitives after

State Farm, we should ignore the total harm in favor of a

figure that in fact more closely approximates Exxon’s re-

maining post-judgment liability for compensatory damages.

If we were to adopt Exxon’s interpretation of that sentence

as binding us now, the measure of harm would be a meager

$20.3 million. Applying the ratio of close to 1 to 1 that Exxon

33a

asserts is appropriate, Exxon contends we should cap punitive

damages at $25 million. Under Exxon’s theory, even using a

ratio of 9 to 1, which approaches the highest allowable under

State Farm, punitive damages would be capped at $182.7

million. This would be the limit, even though Exxon’s reck-

lessness led to more than $500 million in harm. We said, in

discussing the nature of the relationship between punitive

damages and harm:

The “reasonable relationship” is intrinsically

somewhat indeterminate. The numerator is “the harm

likely to result from the defendant’s conduct.” [BMW

v. Gore, 517 U.S. at 581]. The denominator is the

amount of punitive damages. Because the numerator is

ordinarily arguable, applying a mathematical bright

line as though that were an objective measure of how

high the punitive damages can go would give a false

suggestion of precision. That is one reason why the

Supreme Court has emphasized that it is not possible

to “draw a mathematical bright line between the con-

stitutionally acceptable and the constitutionally un-

acceptable that would fit every case.” [BMW v. Gore,

517 US. at 576]....

Although it is difficult to determine the value of

the harm from the oi! spill in the case at bar, the jury

awarded $287 million in compensatory damages, and

the ratio of $5 billion punitive damages to $287 mil-

lion in compensatory damages is 17.42 to 1. The dis-

trict court determined that “total uarm could range

from $287 million to $418.7 million,” which produces

a ratio between 12 to 1 and 17 to 1. This ratio greatly

exceeds the 4 to 1 ratio that the Supreme Court called

“close to the line” in Pacific Mutual Life Ins. Co. v.

Haslip {, 499 U.S. at 23).

The amount that a defendant voluntarily pays be-

fore judgment should generally not be used as part of

the numerator, because that would deter settlements

prior to judgment. “[T]he general policy of federal

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courts to promote settlement before trial is even

stronger in the context of large scale class actions,”

such as this one. [Cf Icicle, 229 F.3d at 795; Baker,

239 F.3d at 988].

Punitive Damages Opinion I, 270 F.3d at 1243-44.

The district court rejected the proposition that voluntary

payments before judgment should not generally be used as

part of the calculation of harm. But our prior decision did not

constrain the ratio analysis so firmly as Exxon contends. We

did not say that voluntary payments before judgment could

not be considered in calculating the numerator for purposes of

comparing the numerator with the amount of the award; we

said that they “generally” could not. Considerations of set-

tlement, critical to our analysis in Icicle, 229 F.3d 790, bear on

the due process concerns at the heart of BMW’s discussion.

Whenever a defendant governed by a board is sued for con-

duct egregious enough to create a genuine risk of punitive

damages, those making its litigation decisions have to try to

predict what may happen in court. Some may recommend

obdurate resistance, and some may recommend settlement, or

prejudgment payments even without settlement, each making

arguments based on predictions. Those recommending pay-

ment can reasonably predict that the entity will not be ham-

mered as hard as if it obstinately resisted acceptance of any

responsibility. And their prediction would be reasonable.

Criminal penalties have always been somewhat more lenient

for those who accepted responsibility prior to judgment, see

United States v. Gonzalez, 897 F.2d 1018, 1021 (9th Cir.

1990) (upholding the constitutionality of U.S.S.G. § 3E1.1),

and punitive damages are but a civil version of punishment for

wrongdoing. It makes no practical sense to disarm all those in

the future who want their boards to accept some responsibility

by cutting out all the benefit their firms would get.

There is a limit, however, to how far acceptance of re-

sponsibility goes in both contexts. No criminal defendant

guilty of a serious wrong ordinarily resulting in lengthy im-

prisonment could reasonably assume that he would receive no

3Sa

imprisonment at all if he promptly pleaded guilty. And no

defendant’s board could reasonably predict that the defendant

could escape all punishment by paying predicted compensa-

tory damages before judgment. While “generally” prepay-

ments should not be used as part of the calculation of harm,

Punitive Damages Opinion I, 270 F.3d at 1244, that is not a

mechanical arithmetic limit, just as the nine to one limit is not

a mechanical arithmetic limit. See State Farm, 538 U.S. at

425; Planned Parenthood, 422 F.3d at 962; Bains, 405 F.3d at

776-77. Due process considerations limit punitive damages to

what the wrongdoer could reasonably foresee, and that works

both ways.

Therefore, Exxon’s argument goes too far. It would pro-

duce, in Exxon’s analysis, a $25 million limit on punitive

damages where the harm was $513 million but $493 million

was paid before judgment. For purposes of notice to a tort-

feasor of its liability risk, $25 million for causing a half billion

loss would obviously be too good to be true. A defendant

cannot buy full immunity from punitive damages by paying

the likely amount of compensatory damages before judgment.

There are also some secondary issues relating to calcu-

lating harm. One concerns payments made by Alyeska Pipe

Lines Service Corporation. Exxon asks us to set off $98 mil-

lion that its original co-defendant Alyeska Pipe Lines Service

Corporation paid in settlement of plaintiffs’ claims. A con-

sortium of oil companies, including Exxon, had contracted

with Alyeska to respond to any oil spill in the area. After the

Exxon Valdez disaster, plaintiffs sued Alyeska for negligence

in its response to the spill, and eventually settled all claims

against Alyeska, including punitive damages, for $98 million.

Exxon’s argument here is that this $98 million payment

represents harm attributable to Alyeska’s negligence, not

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