Petition for Writ of Certiorari — EXXON MOBIL CORPORATION v. Grefer, 127 S. Ct. 1371 (2007) (No. 05-1670)

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: Supreme Court, U.S.

(!) FILED

051670 JUN 29 2006

OFFICE OF THE CLERK

No. 05-

IN THE

Supreme Court of the Anited States

EXXON MOBIL CORPORATION, -

Petitioner,

JOSEPH GREFER ET AL.,

Respondents.

On Petition for a Writ of Certiorari

to the Louisiana Court of Appeal, Fourth Circuit

PETITION FOR A WRIT OF CERTIORARI

GLEN M. PILIE WALTER DELLINGER

RONALD J. SHOLES (Counsel of Record)

Louis C. LACOwuR, JR. JOHN F. DAUM

MARTIN A. STERN JONATHAN D. HACKER

ADAMS AND REESE LLP NICOLE A. SAHARSKY

4500 One Shell Square _ NIKHIL SHANBHAG

New Orleans, Louisiana 70139 O’MELVENY & MYERS LLP

(504) 581-3234 1625 Eye Street, N.W.

Washington, D.C. 20006

(202) 383-5300

A itorneys for Petitioner

QUESTIONS PRESENTED

In this case, a Louisiana jury held ExxonMobil liable for

property damage caused when a local company cleaned

ExxonMobil’s pipes on a tract of industrial property, leaving

trace amounts of naturally occurring radioactive material on

the property. Plaintiffs urged the jury to award punitive

damages based primarily on the risks this material posed to

the cleaning company’s employees and the public, and the

jury awarded $1 billion in punitive damages. That punitive

damages award was over 17 times the jury’s award of reme-

diation costs and over 600 times the value of the property.

On appeal, the Louisiana Court of Appeal, Fourth District,

reduced the punitive damages award to $112 million and af-

firmed. It recognized that the trial court had improperly al-

lowed the jury to award punitive damages based on harms to

the public, but it determined that the trial court’s error did

not warrant a new trial. The questions presented are as fol-

lows:

1. Whether due process permits a jury to punish a de-

fendant for the effects of its conduct on non-parties.

2. Whether due process requires that an appellate court

order a new trial, rather than reduce a punitive damages

award, when the award rests on improper considerations and

the tainted portion of the award cannot be quantified or ex-

cised. “

3. Whether due process permits an award of punitive

damages of twice the amount of compensatory damages in a

case of solely economic injury when compensatory damages

are $56 million and plaintiffs’ actual harm is no greater than

$1.5 million.

PARTIES TO THE PROCEEDING

Petitioner is Exxon Mobil Corporation, one of two de-

fendants-appellants below. Intracoastal Tubular Services,

Inc. was the other defendant-appellant below and is a re-

spondent under this Court’s Rule 12.6. Other parties named

as defendants in the trial court — none of whom were parties

on appeal — were Alpha Technical Services, Inc.; Chevron,

U.S.A., Inc.; Conoco, Inc.; Homeco Inc.; HuntPetroleum

Corp.; Hassie Hunt Exploration Co.; Mobil Exploration &

Producing Southeast, Inc.; Phillips Oil Co.; Sexton Oil &

Mineral Corp.; Shell Offshore, Inc.; Shell Oil Co.; Shell

Western E&P, Inc.; System Fuels, Inc.; Texaco, Inc.; Tubu-

lar Corp; OFS, Inc.; and Oilfield Testers, Inc.

Plaintiffs-appellees below, Joseph Grefer, Camille Gre-

fer, Rose Marie Grefer Hassi, and Henry Grefer, are respon-

dents under this Court’s Rule 12.6.

RULE 29.6 DISCLOSURE

Exxon Mobi! Corporation has no parent corporation and

no person or entity owns 10% or more of its stock.

iii

TABLE OF CONTENTS

Page

CFE Fes FEI ED cecccvvesesovcescersenecsovevetcocsvosonsebeneens i

PARTIES TO THE PROCEEDING. ......c.cccrrossssescoscccoesssersees il

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PM CO FAT BIB C HD tisiscersvescenosesenticonsceersessntesssansains v

PETITION FOR A WRIT OF CERTIORARI.............. ce l

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Fee Bee eivitassnsereeseitatenionts Siascdelalicisdiieaaidaindéiacitiie l

CONSTITUTIONAL PROVISION INVOLVED ................ l

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ic FI TI sees coh sncttstenicscinsensaunnnionnitntcsinntcii 2

Be BO vacestctscntciscnicieicctniotiesiniinnsneninivciinne 3

REASONS FOR GRANTING THE PETITION .................. 7

I. THE LOUISIANA COURT OF APPEAL’S IM-

POSITION OF PUNITIVE DAMAGES FOR

THIRD-PARTY HARMS CONTRAVENES

THIS COURT’S PRECEDENTS AND EXAC-

ERBATES A CONFLICT AMONG THE

ee PPE Oe sitaihoprininieidensiscabaiciipuiuviaiecnetaotionieeites 9

A. The Decision Below Conflicts With State

PO I er istic icesicvtiegiteninicliniititeincarveinccvnein 1]

B. The Decision Below Exacerbates A Split

Among The Lower Courts Regarding The

Purposes For Which Due Process Permits

Consideration Of Third-Party Harms..................0++ 13

C. This Court Should Grant The Petition Or, In

The Alternative, Hold The Petition Pending

Philip Morris USA v. Williams .........cccsccsseseeseseees

II.

if.

THE LOUISIANA COURT OF APPEAL’S DE-

CISION TO REDUCE THE PUNITIVE DAM-

AGES AWARD RATHER THAN ORDER A

NEW TRIAL DEEPENS A CONFLICT

AMONG THE LOWER COURTS

A. There Is A Conflict In The Lower Courts

Over The Proper Remedy When A Punitive

Damages Award Is Tainted By Improper

Evidence Or Instructional Error ..............csseesseeeeeee 19

B. This Court Should Grant Review And Hold

That A New Trial Is The Appropriate Rem-

edy

THE LOUISIANA COURT OF APPEAL’S

IMPOSITION OF A 2:1 RATIO OF PUNITIVE

TO COMPENSATORY DAMAGES DISRE-

GARDS THIS COURT’S TEACHING IN

STATE FARM AND ADDS TO THE CONFU-

SION IN THE LOWER COURTS ..........ccccssossrsvesserseees 25

A. The Decision Below Disregards State Farm

And Highlights A Split In The Lower Courts

Regarding The Permissible Ratio When

Compensatory Damages Are Substantial................ 25

B. This Court Should Grant Review And In-

struct That The Maximum Permissible Ratio

Of Punitive To Compensatory Damages In

RN OE FG ic icaicscsscicedsmrgnesannindinincsidaseoaiebdicsaned’ 27

CR IEE cdcctcenstsonesnieipecerensss seshcpliounticcanisadmaichiah 30

“ *

TABLE OF AUTHORITIES

Page(s)

CASES

BMW of N. Am., Inc. v. Gore,

Fe ss PUNE CE ticachinsnnsiveninessoceomevetettonevtiatnies passim

Boerner v. Brown & Williamson Tobacco Co.,

Ee __. : Seer 27

Bullock v. Philip Morris USA, Inc.,

42 Cal. Rptr. 3d 140 (Cal. Ct. App. 2006)...............006 27

Cooper Indus., Inc. v. Leatherman Tool Group, Inc.,

ee CE Baiasisliaicesceseistnieseintcindsgenninnapiireenianns 23

Davey v. Lockheed Martin Corp.,

FU BFW SOO CI Cir, FIO Z) ccvsceverecccsseescorevrevevereesonen 20

Durham v. Vinson,

ee Fe ns BO ictcicnccsesensisernsviitdeseseuiarenienn 20

Estate of Moreland v. Dieter,

Fe te FEE CF le BP eesiciccivcteverenecnniensnconncseennees 27

Ford Motor Co. v. Ammerman,

705 N.E.2d 539 (Ind. Ct. App. 1999).............csseccssreeee 21

Gober v. Ralph's Grocery Co.,

40 Cal. Rptr. 3d 92 (Cal. Ct. App. 2006) .......... ee eee 16

Hansen v. Boyd,

Re ee OE sano cscissnsvestnsnsisceielinnienuruistteibiitsiaanbaninttt 24

Henley v. Philip Morris Inc.,

9 Cal. Rptr. 3d 29 (Cal. Ct. App. 2004)... 20, 21

Honda Motor Co. v. Oberg,

NN aici sincvinisiserseihinhiialyintiontsibinienceaiatdasttinne 24

Hurley v. Atl. City Police Dep’t,

ae ee a ES Bs cahanisenictoineusanoreiniontinnnicoretnin 20

In re Harvey TERM Litigation,

No. 01-8708 (La. Dist. Ct. Parish of Orleans,

EES RN EE et aN eA ROE Ee 1]

Johnson v. Ford Motor Co.,

Fe Rls HE 0 IE esceviaveieconceusinenssestiinebencsincgnesi 14, 15

Kennon v. Gilmer,

a eee ci cecdcesiaicicinirecteinecicatelasbteansipiitseataciuanibdanihe 24

Kocher v. Oxford Life Ins. Co.,

602 S.E.2d 499 (W. Va. 2004)

Marbury v. Madison,

pit Sige Sts gs, | | Cn eaneenemMane 22

Martinez v. City of Grants,

eT ae Se Gs CPD ciciternintiiccicsnrienstvtininveintenviion 20

McClure v. Walgreen Co.,

GES PE. 26 £25 CO BOO) oncicersccrescoviinvercnvenareosessnssion 20

Philip Morris USA v. Williams,

No. 05-1256 (cert. granted May 30, 2006) ................. 8,9

Planned Parenthood of the Columbia/Willamette,

Inc. v. Am. Coalition of Life Activists,

BEE Fe Pe Ce Bett entincartinmannnrvnncininninitin 16

Pollard v. E.I. DuPont De Nemours, Inc.,

BAS FIR GGT CGE, BO rerscrntesenccvemrevnvvrncssnscosovenen 26

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

Corp., 345 F.3d 1366 (Fed. Cir. 2003) .......ccceccesesenees 27

Romo v. Ford Motor Company,

6 Cal. Rptr. 3d 793 (Cal. Ct. App. 2003) ........ceesecereeees 21

Sand Hill Energy, Inc. v. Smith,

B4Z FS. W.Se USS CG. BOE) crceccecocivecsnsnocsnosserevicveoes 19, 20

Simon II Litig. v. Philip Morris USA Inc.,

GBF FOG E25 CO Ue, BO etre cctcccencccsevccctaenncientveianeii 16

Smith v. Wade,

BGR: TTD. FO CES scsrcssterieticsnenscnmnoceimevitnennctntanvienteenss 25

Stamathis v. Flying J, Inc.,

389 F.3d 429 C4 Cir. 2004)... sicaseoccorcnccesseseoveresercessees 27

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

Ek Sf | EM

= = o aad er SEE SR RR I EC TE THEE EEO TELE CT AE

Ras R SUP ie ace on oP NG OD OO

Vil

Veco, Inc. v. Rosebro.

F7O-P.26 FOS CAMBRAI 999). cccccscccosesccccccevarsesccesensseceers 20

White v. Ford Motor Co.,

312 F.3d 998 (9th Cir. 2002)............... we 15, 19, 22, 23

Williams v. ConAgra Poultry Co.,

378 F.3d 790 (Sth Cir. 2004) EAR a arene POON Passim

Williams v. Philip Morris, Inc.,

pag @ §y 78 Re) ERRRocmoreeete 13, 14, 17, 27

Wohlwend v. Edwards,

796 N.E.20 761 (ind. Ct. App. Z003)....<csccsossersesssoresees 16

Zaffuto v. City of Hammond,

Fe Gs Be intesepsatienscievicsinssntessepensazeies 20

CONSTITUTIONAL PROVISIONS

Eo | RSI NE ARRIOLA a RCC T TO ]

STATUTES

Se a as ITED icislsictuiisasiguliadeincidadposibianicadeicnesnlondmaceiias l

ee is I ineisinisescitiinicinteaitiatdededaonnsindsabatenbene 5

OTHER AUTHORITIES

1 Dan B. Dobbs, The Law of Remedies

(2d ed. 1993) iskiaosaeiiseibcaedilcsabetanlsindaaloddehtimeadinnbnertadedes 25

PETITION FOR A WRIT OF CERTIORARI

Petitioner Exxon Mobil Corporation (“ExxonMobil”) re-

spectfully petitions for a writ of certiorari to review the

judgment of the Louisiana Court of Appeal, Fourth Circuit,

in this case.

OPINIONS BELOW

The opinion of the Louisiana Court of Appeal is reported

at 901 So. 2d 1117 and is reprinted in the Appendix to the

Petition (“App.”) at la-6la. The final judgment of the trial

court is unreported and is reprinted at App. 62a-66a.

JURISDICTION

The Court of Appeal issued its opinion on March 31,

2005, and denied ExxonMobil’s timely petition for rehearing

on May 16, 2005. App. la, 67a-72a. The Louisiana Su-

preme Court denied ExxonMobil’s timely petition for certio-

rari review on March 31, 2006. Jd. at 73a-74a. This Court

has jurisdiction pursuant to 28 U.S.C. § 1257(a).

CONSTITUTIONAL PROVISION INVOLVED

The Fourteenth Amendment to the Constitution provides

in pertinent part: “No State shall . . . deprive any person of

life, liberty, or property, without due process of law... .”

STATEMENT OF THE CASE

In this case, a Louisiana jury awarded $1 billion in puni-

tive damages against ExxonMobil, not based on the harm it

caused to plaintiffs — which all concede was limited to prop-

erty damage — but rather based on potential health risks to

non-parties. Plaintiffs sued ExxonMobil to recover the costs

of remediating their industrial property. Trace amounts of

naturally occurring radioactive material (“NORM”) had been

deposited when Intracoastal Tubular Services, Inc. (“ITCO”)

cleaned and stored pipes used by ExxonMobil and other oil

companies on the property. Although plaintiffs alleged only

property damage, they urged the jury to award punitive dam-

ages based not on that damage, but on the health risks posed

by NORM to others. Starting in their opening statements

and continuing throughout the trial, plaintiffs urged the jury

to punish ExxonMobil for putting ITCO employees and the

public at risk, and the trial court instructed the jury to calcu-

late the amount of punitive damages based on harms to those

non-parties. As a result of that flawed trial, the jury awarded

a Staggering $1 billion in punitive damages.

The Louisiana Court of Appeal did not correct the trial

court’s serious errors. It recognized that the jury should not

have been allowed to base its punitive damages award on

potential harms to the public. But it approved the jury’s use

of potential harms to ITCO employees, finding ExxonMo-

bil’s conduct reprehensible because ExxonMobil failed to

give timely notice of the risks of NORM to ITCO — even

though the delay in giving notice did not injure plaintiffs.

And the appellate court failed to remedy the error it did iden-

tify. Rather than ordering a new, fairly conducted trial, the

appellate court reduced the punitive damages award to twice

the compensatory award, which it believed was the constitu-

tional maximum award.

A. Factual Background

1. Plaintiffs jointly own a 33-acre tract of industrial

property in Harvey, Louisiana. See App. 10a & n.8. That

tract of land would be worth at most $1.5 million if it had

never been damaged or was fully remediated. /d at 34a,

37a, 53a. ,

Plaintiffs for decades leased their land to ITCO, an oil

and gas service company. App. 10a. ITCO’s services in-

cluded the storage, handling, transportation, inspection,

cleaning, and threading of drill pipes used in oil production.

Id. Several oil companies, including ExxonMobil, routinely

sent their pipes to ITCO for cleaning. /d As part of clean-

ing the pipes, ITCO removed “scale” that had built up inside

some of the pipes over time. /d. at 1la-12a. Scale is caused

by mineral salts precipitating out of solution as oil and gas

flows through the pipes from underground reservoirs to the

surface. Jd. at 5a. Some of the scale contained radium sul-

fate, and over several decades, the pipe cleaning activities

led to the accumulation of NORM on plaintiffs’ property.

2. Although ExxonMobil and other oil companies had

sent pipes to ITCO for cleaning since the early 1950s, it was

not until 1986-that ExxonMobil learned that some of the

scale in the pipes contained low levels of NORM. App. 7a-

8a. Within nine months of that discovery, ExxonMobil noti-

fied ITCO and stopped shipping pipes to it for cleaning. Jd.

at 8a. ITCO continued to store pipes on the property until

1992, when it ceased all operations on plaintiffs’ land. /d. at

9a-1 la.

B. Proceedings Below

1. In August 1997, plaintiffs sued ExxonMobil, ITCO,

other oil companies, and other pipe-cleaning compar’ss,

claiming that their property had been damaged as a result of

the cleaning and storage of pipes on the property. App. 1 la-

12a. Plaintiffs asserted claims for negligence, strict liability,

absolute liability, nuisance, fraud, and breach of contract. /d.

at 12a. Plaintiffs sought damages for loss of use and reme-

diation of the property and punitive damages. Jd. They did

not assert any personal injury claims. Only the claims

against ExxonMobil and ITCO went to trial.

2. During a five-week trial in April and May of 2001,

the plaintiffs urged the jury to award massive punitive dam-

ages against ExxonMobil, based not on plaintiffs’ injury, but

on alleged risks posed to TCO employees and the public by

NORM on plaintiffs’ property. In his opening statement,

plaintiffs’ counsel described NORM as “a very, very, very

fine powder” that will “blow all over the place.” R.32:17.’

During trial; witnesses expressed concern that radioactive

material would “bi[o]w over a neighborhood,” R.32:122,

131, “travel towards the houses,” R.33:19, and infiltrate

churches and schools, R.33:200; R.34:38; see also R.39:137-

38; R.39:228-29; R.39:230-31 (testiniony of the plaintiffs

that they believed NORM was harmful to the community).

Plaintiffs showed the jury a video of schoolchildren getting

on and off a bus near their property, implying that the chil-

dren had been exposed to harmful levels of radiation.

R.33:191-99. Plaintiffs also suggested that radium from

plaintiffs’ property would enter the “food chain,” R.29:131,

that it would cause cancer and birth defects, R.29:137-41,

and that ExxonMobil had failed to monitor ITCO employees

or community members for radiation exposure, R.32:131-36.

Plaintiffs compared the conduct in this case to the Exxon

Valdez oil spill and urged the jury to bring ExxonMobil “to

an altar” again. R.56:43. In closing arguments, plaintiffs

argued that ExxonMobil left ITCO employees and the public

“unprotected for months, years, without telling them” about

risks posed by NORM. R.56:42.

All of this evidence, plaintiffs explained to the trial court,

was intended to show that NORM “threatened” ITCO em-

ployees and the public health and was an “environmental

hazard” in order to provide the jury with a basis to award

massive punitive damages against ExxonMobil. R.33:193;

see also R.29:108-09 (stating that the evidence went to “the

quantum of punitive damages”). ExxonMobil repeatedly

objected to this inflammatory and irrelevant evidence, but

the trial court overruled those objections. See, e.g.

R.29:114, 138-41; R.33:200; R.34:38.

' Citations to the trial court transcript are to the record filed with the

Court of Appeal and take the form “R.[volume]:[page].”

3. Not only did the trial court permit plaintiffs to intro-

duce evidence that could not properly be considered, it in-

structed the jury to award punitive damages based on poten-

tial harms to the public. The trial court told the jury that it

could award punitive damages if it found that ExxonMobil’s

conduct was “wanton” or “reckless,” which it defined as

“know([ing] that public safety was at ris..” or that it was

“highly probable that harm to the public would result from

[ExxonMobil’s] conduct.” App. 75a; see also id. (punitive

damages appropriate if ExxonMobil exhibited “conscious

indifference to consequences amounting almost to a willing-

ness that harm to the public safety would follow”). In in-

structing the jury regarding whether plaintiffs had estab-

lished the necessary predicate for punitive damages, the trial

court did not mention harm to the plaintiffs.

The trial court then instructed the jury regarding how to

determine the proper amount of punitive damages. It stated

that “[e]xemplary damages are regarded as a fine or penalty

for the protection of the public interest,” awarded “to compel

the wrongdoer to have due and proper regard for the rights of

the public,” and the jury should choose “an amount of exem-

plary damages which . . . will be reasonably likely to accom-

plish that purpose.” App. 75a (emphasis added). The court

then told the jury that other “factor[s]” it could “consider”

were “the nature and the extent of the harm to the plaintiffs”

and the “defendant’s financial position.” /d at 75a-76a.

Thus, the jury was explicitly instructed first and foremost to

consider harm to the public; harm to the plaintiffs themselves

was but a secondary factor at best.

4. The jury responded by awarding $1 billion in puni-

tive damages against ExxonMobil.” App. 13a. That enor-

? That massive punitive damages award was returned despite the fact

that Article 2315.3 of the Louisiana Civil Code, the state law authorizing

punitive damages, did not exist until September 1984, almost 30 years

after ITCO started cleaning pipes for ExxonMobil, and was repealed in

mous award was in addition to the jury’s award of $56 mil-

lion in remediation costs, which plaintiffs may — but are not

required to — expend on their property. /d. The jury also

awarded plaintiffs $145,000 in general damages. /d. The

trial court entered judgment against ExxonMobil for a total

of $1.056 billion, plus interest and costs.

5. ExxonMobil appealed to the Louisiana Court of Ap-

peal, Fourth Circuit. On March 31, 2005, the Court of Ap-

peal affirmed the trial court’s judgment, as amended. It re-

jected ExxonMobil’s various state law arguments that would

have reduced the compensatory damages award, leaving the

$56 million award intact. See App. 15a-48a. It then reduced

the punitive damages award to $112,290,000, twice the

award of compensatory damages and 75 times the value of

the property. /d. at 57a.

The court first determined that ExxonMobil’s conduct

was reprehensible — not based on ExxonMobil’s conduct to-

ward the plaintiffs, who “suffered strictly economic harm,”

but based on ExxonMobil’s “nine-month delay in notifying

ITCO ... of the dangers posed from handling NORM con-

taminated equipment.” /d. at 50a.”

April 1996, one and one-half years before this lawsuit was filed. Be-

cause ExxonMobil stopped shipping pipes to ITCO by March 1987, App.

8a, the statute was only in-effeet-foress than three years out of the dec-

ades of conduct at issue in this case.

> On application for rehearing, the Court of Appeal rejected Exxon-

Mobil’s argument that punitive damages could not be based on “put(ting]

ITCO’s employees at risk,” calling that argument “an exceedingly nar-

row reading of [State Farm v.] Campbell.” App. 68a; see also Brief of

Appellant Exxon Mobil Corp. at 31, Grefer v. Alpha Technical, No.

2002-CA-1237 (La. Ct. App. Dec. 30, 2002) (arguing that “if conduct

does not itself form a proper predicate for a punitive damages award, that

conduct may not be used as an excuse to inflate a punitive damages

award based on different conduct”).

The court then compared the punitive damages award to

plaintiffs’ harm. It properly recognized that the jury’s delib-

erations on the amount of punitive damages had been tainted

by reference to potential harms to the public:

Although the plaintiffs claimed only property damage,

and no physical harm, the trial court allowed the plain-

tiffs to argue and present substantial evidence, over

Exxon’s objections, of the potential and/or alleged actual

harm to other persons who were not parties to this suit

and whose claims were not before the jury.

App. 53a. That evidence “was irrelevant and, more than

likely, confused the jury, contributing to its exorbitant puni-

tive damage award,” an award that “is neither reasonable nor

proportionate to the amount of harm to the plaintiffs and to

the general damages recovered.” Jd. at 54a. But the appel-

late court did not order a new trial; rather, it simply “re-

duce[d]” the jury’s award to “twice the general damage

award,” which it determined was the “highest figure” that

could be awarded consistent with due process. /d. at 57a,

69a.

REASONS FOR GRANTING THE PETITION

Here, a Louisiana jury awarded $1 billion in punitive

damages, based not on the plaintiffs’ economic injury or on

ExxonMobil’s conduct towards them, but rather on the risk

of harms to third parties. This petition raises three important

issues that warrant this Court’s consideration:

First, this case raises the question whether due process

permits a jury to punish a defendant based on its conduct to-

ward non-parties. Although State Farm Mutual Automobile

Insurance Co. v. Campbell, 538 U.S. 408, 422 (2003), reaf-

firmed that a defendant may only be punished for “the spe-

cific harm suffered by the plaintiff,” the lower courts are di-

vided regarding the purposes for which a jury may consider

conduct toward non-parties in awarding punitive damages.

This Court has recently deemed the issue worthy of review,

having granted certiorari in Philip Morris USA v. Williams

(No. 05-1256) (cert. grantéd May 30, 2006). The first issue

presented here is the same as in Williams, but this case raises

an additional important and intertwined issue — the question

of remedy ~ as discussed below. This Court should grant

review and consolidate this case with Williams so that it can

consider both the limits on the use of non-party harms and

the proper remedy if the trial court exceeds those limits. At

the very least, this Court should hold this petition pending

the decision in Williams.

Second, this case presents another important question

that has divided the lower courts: whether due process per-

mits a reviewing court to remedy a jury’s improper consid-

eration of harms to non-parties with a reduction of the puni-

tive damages award, rather than a new trial. In this case, the

appellate court determined that the trial court erred in allow-

ing the jury to award $1 billion in punitive damages based on

the potential for harm to non-parties. Yet it did not order a

new trial; rather, it reduced the punitive damages award to

$112 million, which it deemed the maximum award consis-

tent with due process. There is a split in authority in the

lower courts regarding whether such a reduction is constitu-

tionally permissible when the award is tainted by unconstitu-

tional considerations and the reviewing court cannot quantify

the tainted portion of the verdict. The Ninth Circuit and the

Supreme Court of Kentucky have held that due process gen-

erally requires a new trial, while the California Court of Ap-

peal, the Indiana Court of Appeals, and the Eighth Circuit

have held that reduction of the award can cure the constitu-

tional defect. This Court granted review of this issue in

BMW of N. Am., Inc. v. Gore, 517 U.S. 559 (1996), but it did

not ultimately decide the issue. The need to address this

question will only be heightened by Williams.

Third, this case raises the issue of the maximum punitive

damages award allowed in a case involving exclusively eco-

nomic harm where compensatory damages are undeniably

“substantial.” Although State Farm teaches that, in cases of

“substantial” compensatory damages, punitive damages in an

amount “equal to compensatory damages” may be the

maximum permissible under the Constitution. 538 U.S. at

425, and the appellate court found that the punitive damages

award was “substantial” here, it reduced the award to twice

the amount of compensatory damages. This case provides a

striking example of the confusion in the lower courts about

when a 1:1 ratio of punitive to compensatory damages is re-

quired. Some courts have strictly adhered to this Court’s

statement in State Farm, capping punitive damages at the

amount of compensatory damages, while others have virtu-

ally ignored State Farm’s teaching on this issue, approving

much higher ratios. This Court should grant the petition to

provide additional guidance on this issue.

I, THE LOUISIANA COURT OF APPEAL’S IMPO-

SITION OF PUNITIVE DAMAGES FOR THIRD-

PARTY HARMS CONTRAVENES THIS COURT’S

PRECEDENTS AND EXACERBATES A CON-

FLICT AMONG THE LOWER COURTS

The decision below presents a critical issue that this

Court has already deemed worthy of review: whether due

process permits a jury to punish a defendant for the effects of

its conduct on non-parties. See Philip Morris U/SA v. Wil-

liams, No. 05-1256 (cert. granted May 30, 2006) (question

two). :

In this case, the jury returned a punitive aunages award

of $1 billion, based on everything but harm to the plaintiffs.

“From their opening statements onward” and continuing

“throughout the litigation,” State Farm, 538 U.S. at 420-21,

plaintiffs urged the jury to award punitive damages based on

the risks posed to ITCO employees and the community at

large by NORM on plaintiffs’ property. “Although the

plaintiffs claimed only property damage, and no physical

harm,” plaintiffs made ominous references “designed to fo-

ment the fear of a radium dust cloud blowing over houses,

churches, and schools” in the community; showed a video

“depict{ing] elementary school children getting on and off a

bus”; asked a nurse about “the effects of x-ray radiation and

the protections taken by those working with x-ray machines

to avoid personal injury”; and questioned witnesses about

“the potential harm of radiation to children and unborn chil-

dren.” App. 53a-54a.

The trial court then instructed the jury to award punitive

damages against ExxonMobil based on potential harm to the

public. It told the jury that the proper amount of punitive

damages depended, first and foremost, on the need “to com-

pel [ExxonMobil] to have due and proper regard for the

rights of the public.” App. 75a. Harm to the plaintiffs was

only “[aJnother factor” that the jury could “consider.” Jd.

Those instructions turned State Farm on its head. Rather

than limiting the jury’s consideration to harm to the plain-

tiffs, they focused the jury’s attention on risks to the public

and told the jury that the actual injury to the plaintiffs was

only one secondary factor that the jury could “consider” in

its discretion. |

The Court of Appeal did not fully remedy the trial

court’s error. Although it correctly recognized that the jury

should not have been permitted to calculate punitive dam-

ages based on harms to the general public, it nonetheless re-

lied on potential harms to ITCO to deem ExxonMobil’s con-

duct reprehensible. As explained in detail below, reckless-

ness toward third parties may be considered in assessing rep-

rehensibility, but only when the defendant has been similarly

reckless toward the plaintiffs. In this case, that necessary

predicate is lacking.

Because the jury punished ExxonMobil for the effects of

its conduct on non-parties, the punitive damages award was

orders of magnitude greater than any harm actually suffered

by the plaintiffs in this case. And there is now a concrete

risk of duplicative punishment, because pipeyard workers

and neighboring residents have filed numerous class action

lawsuits against ExxonMobil, purporting to represent thou-

sands of people adversely affected by the cleaning of pipes

on the Grefers’ land and seeking their own compensatory

and punitive damages. See, e.g., In re Harvey TERM Litiga-

tion, No. 01-8708 (La. Dist. Ct. Parish of Orleans, Div. D).

For those reasons, the award contravenes this Court’s deci-

sions in State Farm and BMW. In addition, it exacerbates a

conflict among the federal courts of appeal and the state

courts on which this Court has already granted certiorari.

A. The Decision Below Conflicts With State Farm

And BMW

In State Farm, the Court made clear that a distinction

must be drawn between accounting for the full effects of a

defendant’s behavior in order to assess reprehensibility and

actually punishing the defendant for harm to non-parties.

The State Farm Court found it appropriate to consider the

possible effects of the defendant’s conduct on non-parties or

previous similar conduct in assessing reprehensibility be-

cause that makes the conduct more blameworthy than a one-

time incident that only affects the plaintiff. 538 U.S. at 419-

20, 423. But “[t]he reprehensibility guidepost does not per-

mit courts to expand the scope of the case so that a defendant

may be punished for any malfeasance”; rather, conduct to-

ward non-parties may only be considered in assessing repre-

hensibility when it “hafs] a nexus to the specific harm suf-

fered by the plaintiff.” Jd. at 422.

The State Farm Court also held that the amount of puni-

tive damages awarded must be based on harms the plaintiffs

actually suffered: “Due process does not permit courts, in

the calculation of punitive damages, to adjudicate the merits

of other parties’ hypothetical claims against a defendant.”

538 U.S. at 423. Allowing a jury to award punitive damages

based on harm to non-parties “creates the possibility of mul-

tiple punitive damages awards for the same conduct” be-

cause non-parties could bring their own claims against the

defendant and recover punitive damages. Jd.

This Court similarly recognized in BMW that a jury may

not, consistent with due process, award punitive damages to

punish all of a defendant’s supposed misdeeds. It deter-

mined that evidence of extraterritorial conduct affecting

other customers “may be relevant to the determination of the

degree of reprehensibility of the defendant’s conduct,” but

that the jury could not “use the number of sales in other

States as a multiplier in computing the amount of its punitive

sanction.” 517 U.S. at 574 n.21; see also id. at 593 (Breyer,

J., concurring) (“Larger damages might also ‘double count’

by including in the punitive damages award some of the

compensatory, or punitive, damages that subsequent plain-

tiffs would also recover.”).

A simple example illustrates the teachings in State Farm

and BMW. If a defendant’s reckless conduct harms ten peo-

ple, and only one person files suit, then the harm caused to

the other nine people may be relevant in assessing reprehen-

sibility, but the plaintiff may not ultimately recover an

amount of punitive damages based on harms to all ten peo-

ple. And that rule assumes that the plaintiff is among the ten

people harmed by the defendant’s recklessness. If he is not,

then the defendant’s recklessness toward the other people

cannot supply the necessary predicate for a punitive damages

award to the plaintiff. But that is precisely what the Court of

Appeal allowed in this case.

Here, plaintiffs urged the jury to award punitive damages

based on harms to ITCO and the public, not based on plain-

tiffs’ property damage, and the trial court instructed the jury

that it could calculate punitive damages based on those third-

party harms. That contravened State Farm, which instructs

trial courts to keep from the jury “evidence that has little

bearing as to the amount of punitive damages that should be.

awarded” and to properly instruct the jury in “its task of as-

signing appropriate weight to evidence that is relevant and

evidence that is tangential or only inflammatory.” 538 U.S.

at 418.

On review, the Court of Appeal failed to restrict use of

third-party harms to the limited purposes sanctioned in State

Farm and BMW. It found ExxonMobil’s conduct reprehen-

sible based solely on ExxonMobil’s failure to give timely

notice to ITCO of the risks posed by NORM, even though it

acknowledged that the nine-month delay had no effect on

plaintiffs’ injury, which was “strictly economic harm”

caused by the deposit of NORM over the preceding thirty

years. App. 50a. That was error. The appellate court should

have refused to consider possible harm to ITCO in assessing

reprehensibility because the delay lacked “a nexus to the

specific harm suffered by the plaintiff.” State Farm, 538

U.S. at 422.

B. The Decision Below Exacerbates A Split Among

The Lower Courts Regarding The Purposes For

Which Due Process Permits Consideration Of

Third-Party Harms

The decision below also exacerbates a split in authority

in the lower courts, a split which this Court has determined

warrants review.

1. On one side is Williams v. Philip Morris, Inc., 127

P.3d 1165 (Or. 2006), cert. granted, 164 L. Ed. 2d 838 (US.

May 30, 2006) (No. 05-1256), where the Supreme Court of

Oregon approved the use of harms to non-parties, both in

assessing reprehensibility and calculating punitive damages.

In that case, the court affirmed a $79 million punitive dam-

age award to the widow of one smoker who died of lung

cancer, based not on harms to her husband, but on risks to

“the safety . . . of countless other Oregonians,” and the un-

proven assumption that Philip Morris’s conduct “caused a

significant number of deaths each year in Oregon during the

pertinent time period.” Jd. at 1170 & n.1, 1176-78 (internal

quotation marks omitted).

The Oregon Supreme Court flatly rejected Philip Mor-

ris’s argument “that [State Farm v.] Campbell prohibits the

state, acting through a civil jury, from using punitive dam-

ages to punish a defendant for harm to nonparties.” Jd. at

1175. Moreover, the court explicitly rejected a distinction

between use of non-party harms for purposes of assessing

reprehensibility and for calculating punitive damages, stat-

ing:

It is unclear to us how a jury could “consider” harm to

others, yet withhold that consideration from the punish-

ment calculus. If a jury cannot punish for the conduct,

then it is difficult to see why it may consider it at all.

Id. at 1175 n.3.

2. In contrast, a number of courts have determined, con-

sistent with State Farm, that conduct toward non-parties may

be relevant to the reprehensibility of the defendant’s con-

duct, but it cannot be the basis for calculating the amount of

punishment.

In Johnson v. Ford Motor Co., 35 Cal. 4th 1191, 1196

(2005), the jury awarded $10 million in punitive damages —

not for the fraud perpetuated on plaintiffs, but for Ford’s

“overall course of conduct” that plaintiffs claimed injured

numerous other California residents. Jd. at 1196. The Cali-

fornia Supreme Court recognized that although due process

“does not prohibit state courts . . . from considering the de-

fendant’s illegal or wrongful conduct toward others” in as-

sessing reprehensibility, it does not permit a jury to actually

award punitive damages to the plaintiffs based on profits

Ford made through sales to all California customers. /d. at

1204, 1209-10. That “aggregate disgorgement theory”

impermissibly “creates the possibility of multiple punitive

damages awards” and “present[s] a problem of ‘successive

prosecution’ in which a defendant that loses a single case

would also lose the benefit of all previous victories against

the same claim of misconduct,” id. at 1209-10 (internal quo-

tation marks omitted).*

In White v. Ford Motor Co., 312 F.3d 998, 1020 (9th Cir.

2002), amended by 335 F.3d 833 (9th Cir. 2003), the Ninth

Circuit similarly recognized that extra-territorial conduct

may be relevant to assessing reprehensibility, but it may not

be used to calculate punitive damages. After reversing and

ordering a new trial because the jury improperly calculated

punitive damages based on harms occurring outside Nevada,

the court of appeals noted: “Extraterritorial conduct is ad-

missible for its bearing on degree of reprehensibility, but the

jury must be limited to punitive damages reasonably re-

quired to vindicate Nevada’s legitimate interests in punish-

ment and deterrence, if any, and prohibited from imposing

punitive damages to protect people or punish harm outside

of Nevada.” Id.

The Eighth Circuit followed a similar rule in Williams v.

ConAgra Poultry Co., 378 F.3d 790, 797 (8th Cir. 2004),

where it held that “courts cannot award punitive damages to

plaintiffs for wrongful behavior that they did not themselves

suffer,” even though they may consider the defendant’s

* The Johnson Court also identified another serious problem with

punitive damage awards that punish a defendant for harm suffered by

third parties, which is that plaintiffs may “proceed[] without the formali-

ties of a class action” and “can hope to recover without ever proving the

specifics of th{e] ‘hypothetical claims’” of the third parties. 35 Cal. 4th

at 1210 (quoting State Farm, 538 U.S. at 423). That concern is likewise

present in this case, for the punitive damages award punishes ExxonMo-

bil for alleged harms to the community that have never been established.

“conduct in other cases” in “assessing the defendant’s repre-

hensibility.” As the court explained, a jury that “fails to con-

fine its deliberations . . . to the specific harm suffered by the

plaintiff and instead focuses on the conduct of the defendant

in general,” “may award exemplary damages for conduct

that could be the subject of an independent lawsuit, resulting

in a duplicative punitive damages award.” /d.

The split among these courts illustrates the confusion

that has plagued the lower courts since this Court’s decision

in State Farm. Moreover, there are several other courts that

have recognized that State Farm and BMW place some limits

on consideration of harm to non-parties, but have not re-

solved precisely what those limits might be.’ Further guid-

ance from this Court is necessary.

C. This Court Should Grant The Petition Or, In The

Alternative, Hold The Petition Pending Philip

Morris USA vy. Williams

The first issue raised in this petition the same as a ques-

tion on which this Court has granted certiorari in Williams.

But the facts of this case present a twist on the issue raised in

Williams, because here, the only reckless conduct identified

~ ExxonMobil’s delay in notifying ITCO of risks posed by

> See, e. g., Planned Parenthood of the Columbia/Willamette, Inc. v.

Am. Coalition of Life Activists, 422 F.3d 949, 959 (9th Cir. 2005) (hold-

ing that jury could “factor[{] into the reprehensibility analysis” defen-

dants’ previous similar conduct but could not place “a great deal of

weight” on it); Simon II Litig. v. Philip Morris USA Inc., 407 F.3d 125,

138-39 (2d Cir. 2005) (denying certification of a nationwide class be-

cause State Farm prohibits “punishment on any basis that does not have

a nexus to the specific harm suffered by the plaintiff’); Gober v. Ralph's

Grocery Co., 40 Cal. Rptr. 3d 92, 104-08 (Cal. Ct. App. 2006) (refusing

to consider the defendant’s subsequent conduct under both the reprehen-

sibility guidepost and the comparable penalties guidepost); Wohlwend v.

Edwards, 796 N.E.2d 781, 787 (Ind. Ct. App. 2003) (excluding evidence

of the defendant’s similar conduct in the reprehensibility analysis be-

cause that conduct did not harm the plaintiff).

NORM - lacked the required nexus to plaintiffs’ injuries. As

a result, in this case (unlike Williams) third-party harms can-

not be used either in assessing reprehensibility or in calculat-

ing an amount of punitive damages.

Further, the Court should grant this petition because, in

addition to raising the question whether due process permits

consideration of harms to non-parties, this case raises an im-

portant related question, which is the proper remedy when a

reviewing court determines that the trial court has over-

stepped the constitutional limitations on use of harm to non-

parties. The Williams petition does not raise that issue be-

cause the Oregon Supreme Court did not find a due process

violation. See 127 P.3d at 1175-76. But, as discussed be-

low, the issue is both important and recurring, and it pro-

vides a compelling reason for this Court to grant merits re-

view in this case. At the very least, however, this Court

should hold this petition pending its decision in Williams.

Once this Court renders its decision in Williams, it should

then grant the petition, vacate the Louisiana Court of Ap-

peal’s decision, and remand the case in light of the additional

guidance provided in Williams.

If. THE LOUISIANA COURT OF APPEAL’S DECI-

SION TO REDUCE THE PUNITIVE DAMAGES

AWARD RATHER THAN ORDER A NEW TRIAL

DEEPENS A CONFLICT AMONG THE LOWER

COURTS

The decision below raises a second critical issue:

whether a reviewing court may cure a procedural infirmity,

such as the jury’s consideration of improper evidence, by

reducing the jury’s punitive damages award to the highest

amount it finds consistent with due process.

This“issue is beth important and recurring. It was ac-

cepted for review by the Court, but not ultimately addressed,

in BMW. BMW asked‘ »‘s Court to address “[w]hether the

Alabama Supreme Co, having found that the jury's

$4,000,000 punitive damages verdict unconstitutionally pun-

ished petitioner for hundreds of transactions that occurred

entirely outside of Alabama, was obligated to provide a

meaningful remedy for that constitutional violation.” Peti-

tion for a Writ of Certiorari at i, BMW v. N. Am., Inc. v.

Gore, 517 U.S. 559 (1996) (No. 94-896), 1994 WL

16011916 (first question presented).° The Court granted re-

view on that question, 513 U.S. 1125 (1995), but it did not

ultimately reach the issue, deciding instead that the “appro-

priate remedy” for the constitutional error “is a matter that

should be addressed by the state court in the first instance.”

517 U.S. at 586. The issue has arisen repeatedly since BMW,

provoking a conflict among the lower courts. Further, the

issue will become even more important if this Court decides

in Williams — as it should — that due process limits the pur-

poses for which a jury may consider harm to non-parties in

awarding punitive damages.

This Court should grant review and hold that due process

requires that a defendant be granted a new trial when a jury’s

punitive damages award was based on impermissible consid-

erations and there is no means by which to isolate the tainted

portion of the verdict. Reduction of an award to the maxi-

mum amount consistent with due process simply does not

cure a jury’s consideration of improper evidence, because the

reviewing court has no way of knowing what amount of

damages the jury would have awarded had it been properly

charged. Put another way, reduction of the award confuses a

procedural due process error with the problem of substantive

excessiveness. Here, the appellate court reduced the punitive

* BMW argued that the Court could provide a “meaningful remedy”

for the constitutional violation in one of two ways: It could either order a

new trial on punitive damages, or it could order a remittitur that removed

all of the extraterritorial punishment, the amount of which was clear from

the precise way in which the jury had calculated punitive damages.

Brief for Petitioner at 23-26, BMW of N. Am., Inc. v. Gore, 517 U.S. 559

(1996) (No. 94-896), 1995 WL 126508.

damages award to the “highest figure” consistent with due

process, App. 69a, as if the only defect in the jury’s award

was that it was too high. But the award was tainted because

it was based on improper evidence, and that problem should

have been remedied through a new punitive damages trial.

A. There Is A Conflict In The Lower Courts Over

The Proper Remedy When A Punitive Damages

Award Is Tainted By Improper Evidence Or In-

structional Error

The decision below exacerbates a conflict in the lower

courts between the Ninth Circuit and the Supreme Court of

Kentucky, on one hand, and the California Court of Appeal,

the Indiana Court of Appeals, and the Eighth Circuit, on the

other hand.

1. Several courts have held that, when a jury’s award of

punitive damages is based on improper evidence or instruc-

tions and the tainted portion of the award cannot be quanti-

fied, the reviewing court should order a new trial. For ex-

ample, in White v. Ford Motor Co., the Ninth Circuit held

that merely reducing the punitive damages award could not

cure the constitutional error of allowing the jury to award

punitive damages based on extra-territorial conduct. 312

F.3d at 1016-20. That is because the appellate court could

not know what amount of punitive damages the jury would

have awarded if limited to permissible conduct:

Possibly the jury would have chosen as large an award

had it been told to vindicate only the rights of Nevadans,

but possibly it would have chosen a substantially lower

award. For all we know, the jury would have applied a

much lower ratio than the thirty to one the [district] court

chose, or the sixty-six to one that the jury initially chose.

Id. at 1016.

Similarly, in Sand Hill Energy, Inc. v. Smith, 142 S.W.3d

153, 157 (Ky. 2004), the Kentucky Supreme Court eured the

jury’s improper use of extra-territorial conduct in calculating

punitive damages by ordering a new trial. The plaintiffs had

“encouraged” the jury to “punish Ford for its conduct

throughout the country,” in direct contravention of State

Farm, and “the jury instructions contained no limitations on

extraterritorial punishment.” Jd. at 157. The court deter-

mined that only a new trial on punitive damages could rem-

edy that error, and it provided model jury instructions and a

model verdict form to guarantee that the new trial would

comport with due process. Jd. at 166-67.

In addition to these decisions directly addressing the

remedy for improper consideration of harm to non-parties,

numerous other courts have recognized that, in the punitive

damages context like any other, a new trial is the proper cure

for errors in the record evidence, improper arguments to the

jury, and other prejudicial procedural errors.’

2. Decisions from other courts conflict with White and

Sand Hill Energy, as well as the other decisions requiring

new trials when procedural errors infect a jury’s punitive

damages award, by holding that reduction of the punitive

damages award cures a jury’s consideration of improper evi-

dence. For example, in Henley v. Philip Morris Inc., 9 Cal.

Rptr. 3d 29, 71-72 (Cal. Ct. App. 2004), review granted, 88

P.3d 497 (Cal. 2004), review dismissed, 97 P.3d 814 (Cal.

” See, e.g., Zaffuto v. City of Hammond, 308 F.3d 485, 491-92 (Sth

Cir. 2002) (improperly submitted claim); Davey v. Lockheed Martin

Corp., 301 F.3d 1204, 1208-12 (10th Cir. 2002) (affirmative defense

improperly denied); Hurley v. Atl. City Police Dep't, 174 F.3d 95, 102,

122-24 (3d Cir. 1999) (erroneous jury instructions); Durham v. Vinson,

602 S.E.2d 760, 767 (S.C. 2004) (improper evidence admitted); Kocher

v. Oxford Life Ins. Co., 602 S.E.2d 499, 502, 504 (W. Va. 2004) (errone-

ous jury instructions); Martinez v. City of Grants, 927 P.2d 1045, 1055

(N.M. 1996) (erroneous jury instructions); McClure v. Walgreen Co., 613

N.W.2d 225, 236-37 (lowa 2000) (improper evidence admitted); Veco,

Inc. v. Rosebrock, 970 P.2d 906, 924-25 (Alaska 1999) (improperly sub-

mitted claim).

2004), although the jury had heard “substantial evidence of

wrongful conduct outside California,” and the verdict form

did not indicate what amount of punitive damages was

awarded for that conduct, the court nonetheless decided that

“any error in the consideration of this evidence [would be]

sufficiently redressed” by reducing the $50 million award to

$9 million, the amount it believed a properly instructed jury

would choose. /d. at 71-72. See also Romo vy. Ford Motor

Company, 6 Cal. Rptr. 3d 793, 805, 812 (Cal. Ct. App. 2003)

(when jury instructions did not “restrict the jury to punish-

ment and deterrence based solely on the harm to the plain-

tiffs,” the resulting award would be cured by a reduction to

the amount “a properly instructed jury likely would award”),

overruled in part on other grounds by People v. Ault, 33 Cal.

4th 1250 (2004).

Similarly, in Ford Motor Co. v. Ammerman, 705 N.E.2d

539, 559-62 (Ind. Ct. App. 1999), the Indiana Court of Ap-

peals approved the reduction of a punitive damages award

based on extra-territorial conduct. “[I]n closing arguments

before the jury,” “counsel invited the jury to return an award

of punitive damages based on alternatives that would punish

Ford for conduct occurring beyond the borders of this State,”

and “[t}he jury complied,” awarding $58 million in punitive

damages. /d. at S61. The court of appeals found that the er-

ror would be cured by “reduc{ing]} the $58 million award to

$13.8 million, which represented Ford’s retooling costs [to

make the Bronco II more stable], along with an additional

$54.00 representing the cost for additional hardware installed

on each vehicle.” Jd. at 559. Yet there was no suggestion

that the jury would have awarded $13.8 million if properly

“limited to protecting this State’s consumers.” Jd. at 561-62.

Indeed, the reduced award was based on a calculation that

was not even presented to the jury. Jd. at 559.

And in Williams v. ConAgra Poultry Co., 378 F.3d 790,

797-98 (8th Cir. 2004), although the Eighth Circuit correctly

found that the jury’s award was infirm because it was based

on “evidence of [racial] harassment not suffered by [the

plaintiff],” it did not order a new trial. Rather, the court of

appeals reduced the award to the maximum allowed by due

process. Id. at 798-99.

The split in authority is unsurprising, because this Court

recognized in BMW that there is a serious question about the

proper remedy when a jury returns a large punitive damages

verdict based on unconstitutional considerations. The ques-

tion has remained, and it will come into sharp focus as this

Court considers Philip Morris v. Williams next Term.

B. This Court Should Grant Review And Hold That

A New Trial Is The Appropriate Remedy

Once a reviewing court determines that the jury’s puni-

tive damages award is based on unconstitutional considera-

tions, and it cannot clearly determine what portion of the

award is tainted, a new trial is the appropriate remedy.

When the Constitution has been violated, courts must gener-

ally provide a remedy that redresses the violation. See, e.g.,

Marbury v. Madison, 5 U.S. (1 Cranch) 137, 161-63 (1803).

But a reduction in the punitive damages award to the highest

amount allowed under the Constitution does not cure — or

actually even address — the constitutional violation. The ap-

propriate way to give the defendant redress is to allow an

untainted jury to decide the proper amount of punitive dam-

ages.

This Court held in BMW and State Farm that an award

can violate due process either because it exceeds the due-

process maximum, or because it impermissibly bases puni-

tive damages on conduct that did not harm plaintiffs. See

State Farm, 538 U.S. at 416-17; BMW, 517 U.S. at 574-75.*

® See also, e.g., White, 312 F.3d at 1016 (“A punitive damages award

that encompasses a defendant’s extraterritorial conduct may be unconsti-

tutional even if the size of the award itself, as compared to the compensa-

The Court thus recognized that large punitive damages

awards pose two distinct due process concerns. First, a State

may not constitutionally enforce a punitive damages award

that exceeds a due process maximum, which is determined

by reference to three guideposts that this Court has estab-

lished. See State Farm, 538 U.S. at 418-19. Second, a State

may not allow a jury to punish a defendant for harm to non-

parties. Id. at 421.

These two limitations on punitive damages require dif-

ferent remedies. In the first situation — substantive exces-

Siveness ~ reviewing courts ensure that punitive damages

awards do not exceed the maximum permitted by the Consti-

tution by reducing the awards. A reviewing court may fully

remedy an excessive award by reducing it, because the court

knows how much the (properly charged) jury awarded, and it

is the reviewing court’s responsibility to determine the con-

stitutional maximum. See Cooper Indus., Inc. v. Leatherman

Tool Group, Inc., 532 U.S. 424, 436 (2001) (mandating de

novo review of the constitutionality of punitive damages

awards).

But in the second situation — improper evidence or in-

structions — a reduction in the award to the constitutional

maximum does nothing to remedy the error. That is because

the reviewing court has no way of knowing what weight the

jury gave to the improper considerations and thus what por-

tion of the verdict is infected. See, e.g., White, 312 F.3d at

1016 (“For all we know, the jury would have applied a much

lower ratio than . . . the sixty-six to one that the jury initially

chose.”). The jury’s verdict provides no helpful starting

point because it is necessarily tainted by the trial error. At-

tempting to “cure” a jury’s consideration of improper con-

duct in awarding punitive damages by reducing the amount

tory damages, is not outside the bounds of due process.” (emphasis

added)).

of the award makes as much sense as trying to remedy the

use of a coerced confession in a criminal trial by reducing

the defendant’s ultimate sentence.

Indeed, this Court has long recognized that the common

law procedure of remittitur may only be used when the re-

viewing court is able to identify the untainted portion of the

verdict. For example, in Hansen v. Boyd, 161 U.S. 397, 411-

12 (1896), this Court noted that remittitur is allowed only if

the court can “clearly distinguish and separate” the “errone-

ous part” of the judgment. Similarly, in Kennon v. Gilmer,

131 U.S. 22, 29 (1889), the Court noted that “if the pleadings

and the verdict afforded the means of distinguishing part of

the plaintiff's claim from the rest, this court might affirm the

judgment upon the plaintiffs now remitting that part.”

Those common-law limitations should apply equally to the

remedy for a due process violation. See Honda Motor Co. v.

Oberg, 512 U.S. 415, 430 (1994) (“[A]brogation of a well-

established common-law protection against arbitrary depri-

vations of property raises a presumption that its procedures

violate the Due Process Clause.”).

This case vividly illustrates why reducing the punitive

damages award cannot cure the serious errors made by the

trial court below. The Court of Appeal recognized that the

plaintiffs improperly urged the jury to award punitive dam-

ages based on potential harm to the general public — despite

the lack of reckless conduct toward the plaintiffs — and that

error “contribut[ed] to [the jury’s] exorbitant punitive dam-

age award.” App. 54a. Yet the court did not order a new

trial. Instead, it reduced the punitive damages award to

twice the compensatory award, without any suggestion that

the reduced amount even approximated what the jury would

have awarded in the absence of the improper evidence. /d. at

57a. For all the court knew, the jury might have awarded no

punitive damages based solely on plaintiffs’ property dam-

age.” When a jury’s verdict is infected by the consideration

of improper evidence, reduction of the verdict to the maxi-

mum allowed by due process does nothing to ensure that the

defendant has not been punished based on unconstitutional

considerations. A new trial is the appropriate remedy.

Ii. THE LOUISIANA COURT OF APPEAL’S IMPO-

SITION OF A 2:1 RATIO OF PUNITIVE TO COM-

PENSATORY DAMAGES DISREGARDS THIS

COURT’S TEACHING IN STATE FARM AND

ADDS TO THE CONFUSION IN THE LOWER

COURTS

Wholly apart from the Court of Appeal’s error in failing

to identify and remedy the jury’s improper consideration of

harms to non-parties, the punitive damages award in this

case is excessive. This Court recognized in State Farm that

compensatory damages have a deterrent function, and that

when compensatory damages are substantial, a State may

have no further interest in punishing and deterring a defen-

dant. In those cases, the Court suggested, the maximum

permissible ratio of punitive to compensatory damages is

1:1. Yet there is confusion in the lower courts regarding

when the 1:1 upper limit is appropriate. This Court should

grant the petition to provide clarity on this issue.

A. The Decision Below Disregards State Farm And

Highlights A * lit In The Lower Courts Regard-

ing The Perm:..sible Ratio When Compensatory

Damages Are Substantial

The punitive damages award of $112 million is enor-

mous, and it was affirmed despite the fact that plaintiffs were

* A jury generally has the discretion to award zero punitive damages,

even when it finds that the factual predicate for punitive damages has

been established. See 1 Dan B. Dobbs, The Law of Remedies, § 3.11(1),

at 458 (2d ed. 1993); see also, e.g., Smith v. Wade, 461 U.S. 30, 52

(1983).

awarded $56 million in remediation costs, which far ex-

ceeded their actual loss, which is at most the $1.5 million

value of their property. The Court of Appeal’s approval of a

2:1 ratio of punitive damages cannot be squared with State

Farm, which teaches that a 1:1 ratio is appropriate in this

case.

In State Farm, this Court addressed the purposes that are

served by punitive damages awards — punishment and deter-

rence. It recognized that a substantial compensatory dam-

ages award significantly advances those purposes in itself:

“It should be presumed a plaintiff has been made whole for

his injuries by compensatory damages, so punitive 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 pun-

ishment or deterrence.” 538 U.S. at 419 (emphasis added).

Where “compensatory damages are substantial,” as with the

$1 million compensatory award in State Farm, there is sig-

nificant punishment and deterrence even before any amount

of punitive damages are awarded. /d. at 425. As a result, if

punitive damages are necessary for punishment and deter-

rence even after a large compensatory verdict, “a lesser ratio,

perhaps only equal to compensatory damages, can reach the

outermost limit of the due process guarantee.” Jd.

The lower courts have given varying weight to this as-

pect of State Farm, with some strictly adhering to a maxi-

mum ratio of 1:1 in cases of substantial compensatory dam-

ages, and others disregarding it entirely. For example, sev-

eral courts have limited the ratio of punitive to compensatory

damages to roughly 1:1 when compensatory damages are

substantial — even in cases involving serious physical harm

or intentional misconduct. See, e.g., Pollard v. E.J. DuPont

De Nemours, Inc., 412 F.3d 657, 667-68 (6th Cir. 2005)

($2.5 million in punitives on $2.2 million in compensatories

for sexual harassment and intentional infliction of emotional

distress); Estate of Moreland v. Dieter, 395 F.3d 747, 757-58

(7th Cir. 2005) ($27.5 million in punitives on $29 million in

compensatories for beating and death); Boerner v. Brown &

Williamson Tobacco Co., 394 F.3d 594, 602-03 (8th Cir.

2005) ($5 million in punitives on $4 million in compensato-

ries for design defect that caused illness and death); Sta-

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

($350,000 in punitives on $250,000 in compensatories for

defamation and malicious prosecution); Williams v. ConAgra

Poultry Co., 378 F.3d 790, 799 (8th Cir. 2004) ($600,000 in

punitives on $600,000 in compensatories for race discrimina-

tion in employment).

Other courts have sanctioned much higher ratios in cases

of substantial compensatory damages, effectively ignoring

State Farm. See, e.g., Rhone-Poulenc Agro, S.A. v. DeKalb

Genetics Corp., 345 F.3d 1366, 1371-72 (Fed. Cir. 2003)

(3:1 ratio based on $15 million in compensatories for patent

infringement and related claims); 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 for products

liability and fraud); Williams v. Philip Morris, 127 P.3d at

1182 (Or. 2006) (97:1 ratio based on $800,000 in compensa-

tories for fraud).

B. This Court Should Grant Review And Instruct

That The Maximum Permissible Ratio Of Puni-

tive To Compensatory Damages In This Case Is

1:1

This Court should use this case as a vehicle to clarify

where the outermost limit of due process lies when compen-

satory damages are substantial.

In this case, the $112 million punitive damages award far

exceeds the limits of punishment and deterrence allowed un-

der the Due Process Clause. As the Court of Appeal recog-

nized, the $56 million compensatory damages award is un-

deniably “substantial” within the meaning of State Farm.

App. 53a, 57a. And the Court of Appeal acknowledged State

Farm’s teaching that a 1:1 ratio is the maximum allowed un-

der such circumstances. /d. at 53a. Indeed, the court all but

sanctioned a 1:1 ratio of punitive to compensatory damages

when it stated that, in light of the “substantial” compensatory

damages award and the fact that “plaintiffs claimed only

property damage, and no physical harm,” “a punitive dam-

ages award closer to the amount of compensatory damages”

was appropriate. Jd. at 53a, 57a.

Yet the Court of Appeal, without any explanation, im-

posed a 2:1 ratio instead. But this is the paradigm case for

zero punitive damages, or at most a 1:1 ratio of punitive to

compensatory damages. It is undisputed that plaintiffs suf-

fered only economic injury, id. at 50a, and the $56 million

award allows (but does not require) them to completely

remediate the property to their own standards. In light of the

type of injury and the substantial compensatory damages

award that afforded “complete compensation,” 538 U.S. at

426 — and then some — there is no justification for further

punishment and deterrence of ExxonMobil. Thus, the

maximum permissible ratio in this case is 1:1, and it makes

little sense for punitive damages to be imposed in any

amount.

Importantly, plaintiffs’ actual harm for ratio purposes is

at most the actual value of the property ~ $1.5 million — not

the $56 million awarded for plaintiffs to use to remediate

their property if they so choose. The $56 million award is a

grossly inflated measure of the harm to the plaintiffs. It is

many times the cost of remediating the property to the satis-

faction of the Louisiana Department of Environmental Qual-

ity (“DEQ”).'° In fact, the DEQ entered this litigation in

'° The cost to remediate the property to Louisiana Department of

Environmental Quality (“DEQ”) standards for unrestricted use — rather

than plaintiffs’ standards — was far less than the $56 million award. At

_ trial, ExxonMobil’s expert witness stated that the cost to remediate the

support of ExxonMobil to point out that trial courts that “tail

to follow or apply DEQ regulations in cases involving envi-

ronmental remediation,” result in inflated compensatory

damages awards like the one in this case, which in turn result

in inflated punitive damages awards. Brief of Amicus Curiae

Louisiana DEQ et al. at 5, Grefer v. Alpha Technical, No.

05-C-1590 (La. June 23, 2005). Indeed, the punitive dam-

ages award in this case is particularly inflated in light of the

fact that the vast majority of NORM was placed on plain-

tiffs’ property well before punitive damages were even al-

lowed in Louisiana. See infra note 2.

This Court has directed the lower courts to judge the

proportionality of a punitive damages award by comparing

the “harm suffered by the plaintiff and the punitive damages

award.” State Farm, 538 U.S-at 418 (emphasis added). In

this case, plaintiffs suffered only economic harm, and the

maximum economic harm plaintiffs suffered is the loss of

the value of their property — $1.5 million. The remediation

costs — which are more than 35 times the value of plaintiffs’

property — do not represent actual harm to plaintiffs, but are

based on plaintiffs’ desire to remediate their property to their

own personal standards, rather than DEQ standards for unre-

stricted use. This Court should limit the amount of punitive

damages to the amount of the plaintiffs’ harm, which is ap-

proximated by the $1.5 million value of their property. A

contrary result would allow the plaintiffs to circumvent the

State Farm protections by obtaining a grossly inflated com-

pensatory award, which in turn would allow a grossly exces-

sive punitive damages award, even when using a single-digit

multiplier.

property to comply with DEQ standards was $46,000. App. 35a. One of

plaintiffs’ own expert witnesses estimated that the cost to comply with

DEQ standards was $1,387,310. /d at 36a.

The punitive damages award in this case raises several

serious constitutional questions left unanswered by BMW

and State Farm. Those questions have percolated in the

lower courts for a number of years and created significant

splits in authority. Indeed, this Court has already agreed to

resolve one of the issues next Term, in Philip Morris USA v.

Williams. The Court should grant the petition in this case to

consider, with Williams, both the proper remedy for im-

proper consideration of harms to non-parties and the substan-

tive limits on an award of punitive damages when compensa-

tory damages are substantial. In the alternative, the Court

should hold this petition pending its decision in Williams and

enter an appropriate order once that case has been decided.

CONCLUSION

The petition for a writ of certiorari should be granted.

Respectfully submitted,

GLEN M. PILIE WALTER DELLINGER

RONALD J. SHOLES (Counsel of Record)

Louis C, LACour, JR. JOHN F. DAUM

MARTIN A. STERN JONATHAN D. HACKER

ADAMS AND REESE LLP NICOLE A. SAHARSKY

4500 One Shell Square NIKHIL SHANBHAG

New Orleans, Louisiana 70139 O’MELVENY & Myers LLP

(504) 581-3234 1625 Eye Street, N.W.

Washington, D.C. 20006

(202) 383-5300

Dated: June 29, 2006 -

APPENDIX

APPENDIX A

LOUISIANA COURT OF APPEAL OPINION

No. 2002-CA-1237

COURT OF APPEAL, FOURTH CIRCUIT

STATE OF LOUISIANA

***#* *

JOSEPH GREFER, CAMILLE GREFER, ROSE MARIE

GREFER HASSI AND HENRY GREFER,

ALPHA TECHNICAL, ET AL.

***# * *

APPEAL FROM

CIVIL DISTRICT COURT, ORLEANS PARISH

NO. 97-15004, DIVISION “A”

HONORABLE CAROLYN GILL-JEFFERSON, JUDGE

**e* ee

JUDGE LEON A. CANNIZZARO, JR.

***** *

(COURT COMPOSED OF JUDGE MICHAEL E. KIRBY,

JUDGE MAX N. TOBIAS, JR., AND JUDGE LEON A,

CANNIZZARO, JR.)

MARCH 31, 2005

ANDREW B. SACKS

JOHN K. WESTON

SACKS, WESTON, SMOLINKSKY, ALBERT & LUBER

510 WALNUT STREET

SUITE 400

PHILADELPHIA, PA 19106

AND

STUART H. SMITH

MICHAEL G. STAG

SMITH & STAG

365 CANAL STREET

2850 ONE CANAL PLACE

NEW ORLEANS, LA 70130

AND

STEPHEN B. MURRAY

ARTHUR M. MURRAY

MURRAY LAW FIRM

909 POYDRAS STREET

SUITE 2550

NEW ORLEANS, LA 70112-4000

AND

RON A. AUSTIN

SPEARS & SPEARS

1555 POYDRAS STREET

SUITE 1710

NEW ORLEANS, LA 70112

AND

WILLIAM A. PORTEOUS, il

PORTEOUS, HAINKEL & JOHNSON, L.L.P.

704 CARONDELET STREET

NEW ORLEANS, LA 70130-3774

AND

JACK W. HARANG

HARANG & BARKER, LLC

365 CANAL STREET

SUITE 2850

NEW ORLEANS, LA 70130

COUNSEL FOR PLAINTIFFS, JOSEPH GREFER, ET

AL.

SAM A. LEBLANC, III

RON A. SHOLES

GLEN M. PILIE

LOUIS C. LACOUR, JR.

MARTIN A. STERN

ROBERT N. MARKLE

ADAMS AND REESE LLP

701 POYDRAS STREET

4500 ONE SHELL SQUARE

NEW ORLEANS, LA 70139

AND

MITCHELL J. LANDRIEU

1100 POYDRAS STREET

SUITE 2950

NEW ORLEANS, LA 70163

COUNSEL FOR DEFENDANT, EXXON MOBIL

CORPORATION

THOMAS A. BALHOFF

JUDITH R. ATKINSON

ROEDEL PARSONS KOCH BLACHE BALHOFF &

MCCOLLISTER

8440 JEFFERSON HIGHWAY

SUITE 301

BATON ROUGE, LA 70809-7652

COUNSEL FOR DEFENDANT, INTRACOASTAL

TUBULAR SERVICES, INC.

HERMAN ROBINSON, GENERAL COUNSEL

PERRY M. THERIOT

APRIL SNELLGROVE

LOUISIANA DEPARTMENT OF ENVIRONMENTAL

QUALITY

LEGAL AFFAIRS DIVISION

P.O. BOX 82282

BATON ROUGE, LA 70884-2282

AMICUS CURIAE, DR. HALL BOHLINGER, SEC-

RETARY OF THE DEPARTMENT OF ENVIRON-

MENTAL QUALITY AND MURPHY J. FOSTER, JR.,

GOVERNOR, STATE OF LOUISIANA

AMENDED AND, AS AMENDED,

AFFIRMED

The defendants, Exxon Mobil Corporation (“Exxon”)

and Intracoastal Tubular Services, Inc. (“ITCO”), and the

plaintiffs, Joseph Grefer, Camille Grefer, Rose Marie Grefer

Haase,' and Henry Grefer (“the Grefers”), appeal from a dis-

trict court judgment rendered in accord with a jury verdict,

awarding the Grefers compensatory and punitive damages as

a result of the defendants’ contaminating their immovable

property’ with radioactive material. Exxon also appeals

from the district court judgment denying its exception of pre-

scription.

BACKGROUND HISTORY

The operations of most major oil companies are inte-

grated to include exploration and production, refining, and

marketing of oil and gas. In the production phase, a well is

drilled down to oil bearing sand, casing is cemented in the

hole, tubing is run down the hole, and the tubing and casing

' The plaintiffs’ original petition refers to Rose Marie Grefer Haase

as Rose Marie Grefer Hassi.

? The immovable property at issue was part of a larger tract of land

purchased by the plaintiffs’ great grandfather in 1875 and since then has

remained in the Grefer family. The plaintiffs acquired the naked owner-

ship of three-fourths (3/4ths) of the immovable property in February

1945 upon the death of their father, Archibald J. Grefer, Sr., and full

ownership of the entire tract in March 1996 upon the death of their

mother, Camille Claire Antoine Grefer.

are perforated at the level of the oil bearing sand to help

bring the oil and natural gas to the surface. A section of the

tubing is 2 to 3 inches in diameter and 30 feet long. The tub-

ing is screwed together, and depending on the depth of the

hole, could involve a string of tubing thousands of feet deep.

Pressure underground forces oil and gas through the perfo-

rated casing and tubing up to the wellhead at the surface. At

that point, separator tanks are used to separate the oil and

gas, the oil is piped to a refinery for further processing into

gasoline, diesel fuel, jet fuel, etc., and the natural gas is sent

to a gas processing plant to separate the various components.

As time goes by, water from underground also mixes

with and comes to the surface with the oil and gas. The wa-

ter usually only appears in mature fields since it is heavier

than oil and is generally not “produced” until much of the oil

reservoir has become depleted. This water is referred to as

“produced water” since it is “produced” up through the well.

“Produced water” historically has been pumped back into the

ground, or discarded in estuaries.

In the early 1900s, the oil industry discovered that the

underground water leached certain mineral salts out of the

earth’s crust and the “produced water” then carried those

mineral salts in solution up the tubing toward the surface. As

the water came through the perforations and rose up the tub-

ing, the change in pressure and temperature caused those

mineral salts to precipitate out of solution and form a scale or

crust on the inside of the tubing, and also in the separator

tanks at the surface near the wellhead. As scale built up in-

side the tubing, the production rate of oil and gas slowed

down as the flow path became increasingly constricted.

When this occurred the oil company extracted the tubing

from the well and sent it to a pipe yard where a cleaning con-

tractor mechanically reamed the inside of the tubing to return

it to its original diameter.

As early as 1914, the oil companies we « aware that the

chemical composition of the scale was primarily “barium

sulfate.” In the 1940s, chemical dictionaries identified “ra-

dium sulfate” as commonly being a co-precipitate with “bar-

ium sulfate.” Several years later, in 1953, in a geological

study done for the United States Atomic Energy Commis-

sion, radium sulfate was identified as the radioactive scale

precipitate in oil field equipment used in southeastern Kan-

sas oil fields. It was then that the oil industry learned that

radium sulfate in small percentages was being co-

precipitated with the scale’s chief components, non-

radioactive barium sulfate, strontium sulfate, calcium sulfate,

and calcium carbonate.

In July 1971, representatives from Phillips Petroleum

Company notified Exxon that it had found low-level radioac-

tive deposits inside production equipment in its gas plants.

‘Thereafter, Exxon undertook an investigation of its own gas

plants. During the course of its investigation, Exxon found

low-level radioactive deposits in varying amounts inside

pumps and compressors in most of the gas plants. Exxon

concluded that the source of the radioactivity was a radioac-

tive gas entering the gas plants with the natural gas stream

coming from the wellhead. Several years later, in 1977, the

oil companies, including Exxon, learned that other radioac-

tive materials had been identified in equipment in a Shell Oil

refinery in the United Kingdom (“U.K.”).

In 1981, in a routine well logging operation on two Oc-

cidental Petroleum Corporation platforms in the North Sea,

drillers registered elevated levels of radioactivity from the

radioactive scale in equipment on the platforms and the tub-

ing in the well holes. The levels of radiation required Occi-

dental to report the discovery to U.K. governmental authori-

ties. The National Radiological Protection Board (“NRPB”),

under contract to the U.K. government, did further testing

and identified the radioactive component as radium-226, in

the form of radium sulfate, co-precipitated with barium sul-

fate, calcium sulfate, and strontium sulfate. Radium-226 has

a half-life’ of approximately 1,600 years.

All miajor oil companies operating in the North Sea, in-

cluding Exxon, were immediately made aware of Occiden-

tal’s discovery through the United Kingdom Offshore Opera-

tors Association (““UKOOA”), the oil industry trade associa-

tion. As a result of the discovery, the U.K. Government held

a major conference in 1983 for the oil companies dedicated

solely to the NORM‘ problem. In 1985, the UKOOA Safety

Committee published NORM safety guidelines and a NORM

Reference Manual, which were distributed to all oil compa-

nies.

On April 10, 1986, Chevron identified radium-226 in oil-

field equipment at a well site near Brookhaven, Mississippi.

As a result of Chevron’s discovery, Exxon conducted sur-

veys at four Exxon Mississippi well sites in June 1986 and

found radium-226 at those sites. Later that month, Exxon

representatives met with other oil company representatives at

the Alabama/Mississippi Mid-Continent Oil & Gas Associa-

tion meeting to discuss the radioactive scale problem. Fol-

lowing the meeting, Exxon industrial hygienist, Mr. Lindsay

* Half-life is the time required for half of the atoms of a radioactive

substance to decay. No two substances have the same half-life. For ex-

ample, uranium-238 has a half-life of approximately .5 billion years; tho-

rium-234 has a half-life of 24 days; and tellurium has a half-life of 4.2

minutes. Nearly all decay products ate themselves radioactive, giving

rise to decay chains that eventually end in a stable nuclide.

* “NORM” is the acronym for Naturally Occurring Radioactive Ma-

terial.

* The UKOOA NORM safety guidelines covered the transportation

and disposal of contaminated equipment, training of personnel, and the

use of qualified and experienced de-scaling contractors. The NORM

Reference Manual outlined the systematic approach oil companies were

to follow to identify wells with radioactive scale.

Booher, reported to Mr. M.F. Terrell, a production manager

for Exxon’s Eastern Division, which covered Louisiana,

Mississippi, Alabama, and Florida, advising him what he had

found. In a letter dated June 19, 1986, Mr. Booher informed

Mr. Terrell that where oilfield equipment was opened up for

maintenance, inspection, and cleaning, there would be a hu-

man health concern, and if equipment contaminated with ra-

dioactive scale was turned over to contractors for cleaning,

those contractors had to be notified of the presence of radio-

activity. ITCO was Exxon’s main cleaning contractor. Over

the next several months, Exxon prepared a videotape and a

letter advising cleaning contractors of the NORM problem

and how to manage it.

On March 27, 1987, Exxon representatives met with Mr.

John Hooper, president of ITCO, and other ITCO employees,

to inform them of the NORM problem. At that time, Exxon

played the video and gave them a set of procedural safety

guidelines prepared by Mid-Continent Oil & Gas Associa-

tion to follow when handling NORM contaminated equip-

ment. The focus of the Exxon video and safety procedures

was on precautions to prevent workers from breathing or in-

gesting airborne dust. At that time, Exxon’s representatives

made no mention of the possible buildup of radioactive scale

on ITCO’s premises even though it knew the pipe scale had

been accumulating on the premises for years and had learned

in June 1986 that it was hazardous.

Following the meeting, Mr. Hooper decided that ITCO

would not clean any more piping/tubulars that contained

NORM, and he informed Exxon of his decision. According

to its guidelines, Exxon determined that piping/tubulars with

NORM levels reading SpCi/g (five picoCuries per gram)

“above background”® were deemed contaminated.’ Mr.

® Under certain conditions, the levels of radiation caused by the ra-

dium in scale exceed the normal background levels of radiation from the

earth and the sun, to which everyone is exposed.

Hooper then had the Exxon piping/tubulars monitored as

they entered the ITCO yard to verify that they were below

the SpCi/g threshold. Piping/tubulars that were above the

threshold were segregated to an area in ITCO’s lower yard

that was leased to Exxon: This area was fenced off and

posted. Mr. Hooper also surveyed the piping/tubulars in the

pipe racks on the premises to determine if they registered

any elevated NORM levels. The piping/tubulars in the racks

that had elevated levels of radioactivity were moved to the

segregated area. The survey of the ITCO yard, which in-

cluded the Grefer tract, did not register above background

levels with the exception of the two following areas: 1) the

ground near an inspection shed outside of the Grefer prop-

erty, and 2) the ground where the pipe cleaning machine was

situated on the Grefer property.

Shortly thereafter, ITCO built a Controlled Environ-

mental Cleaning (“CEC”) unit to clean NORM contaminated

pipe. The unit had a special dust collection vacuum system,

and ITCO demonstrated it for Exxon hygienists and engi-

neers in the summer of 1987. Exxon requested several minor

modifications, which ITCO made. However, no one from

Exxon ever informed Mr. Hooper that the unit had been ap-

proved. Thus, ITCO never used it commercially. Sometime

’ Three types of radiation measurement acronyms are important to an

understanding of this case. The first is microentgens per hour (uR/hr),

which is the reading one would get from a geiger-type counter or survey

meter, measuring the amount of radiation in the air at any specific point.

See, James R. Cox, Naturally Occurring Radioactive Materials in the Oil

Field: Changing the NORM, 67 Tul. L. R. 1197 (1993), note 6 at 1202.

This less thorough measurement may be taken anywhere in the field and

is known as an external dose rate. /d. The second measurement is pico-

Curies per gram (pCi/g), which measures the radioactivity of solid media

such as soil or scale, and this test must be performed with sophisticated

laboratory techniques. /d. at 1201. The third measurement is millirems

(mR), which concerns the dose of radiation to the body. Jd. at 1202.

10a

thereafter, ITCO’s business began to steadily decline, and

Mr. Hooper decided to shut down operations.

FACTS AND PROCEDURAL HISTORY

OF THE CASE

ITCO was founded in 1935 as an oil and gas service

company. The business was located on Peters Road adjacent

to the Harvey Canal in Harvey, Louisiana. Initially, [TCO

stored and warehoused oil field production pipe for Humble

Oil & Refining Company (a predecessor to Exxon). Eventu-

ally, ITCO expanded its services to include the cleaning, in-

specting, testing, threading and transporting of »ipe for

Exxon and other oil companies. To accommodate its ex-

panding operation, in 1968, ITCO began leasing several par-

cels of adjacent land from Mrs. Camille Antoine Grefer

(“Mrs. Grefex’’). Between 1968 and 1992, ITCO had leased

eight separate tracts of the Grefer property.* Beginning in

1984, however, ITCO chose not to renew five of the leases

because it had purchased an adjacent 240-acre tract of land

for its pipe yard activities.

Due to the decline in business, in June 1992, Mr. Hooper

met with Judge Joseph Grefer to discuss terminating ITCO’s

three remaining leases, G-2, G-3 and G-6. Mr. Hooper in-

formed Judge Grefer that he wanted to cease ITCO’s busi-

ness operations at the end of August 1992. He told Judge

Grefer that he would pay the monthly rentals through that

date, and asked Judge Grefer if his mother, Mrs. Grefer,

would forego the additional three years of rental payments

due under the leases. Judge Grefer agreed to recommend

this to his mother.

* The Grefer property is a continuous tract of land measuring

1,426,500 square feet, or approximately 33 acres, that runs from 16th

Street to Breaux Avenue and from Peters Road to Pailet Avenue in Har-

vey, Louisiana. The leased tracts are referred to as G-! through G-4 and

G-6 through G-9; there was no G-S lease.

: lla

After discussing the matter with her son, Mrs. Grefer

agreed to terminate ITCO’s remaining leases in exchange for

$23,193.51. Mr. Hooper then contacted ITCO’s attorney,

Daniel Lund.’ who prepared a “Release,-Settlement and

Termination Agreement” for the parties to sign. After re-

viewing the proposed release agreement and finding it insuf-

ficient, Judge Grefer spoke to Mr. Lund sometime between

June 30 and July 2, 1992, and asked him at that time to insert

a clause in the release agreement to reserve the lessor’s

rights and claims against third parties. Edmond Haase, III,

Mrs. Grefer’s grandson and a colleague of Mr. Lund,

brought the revised release agreement to Judge Grefer and

suggested that he call Mr. Hooper about possible radiation

on the property. Shortly thereafter, Judge Grefer called Mi-

chael Hooper, Mr. Hooper’s son, who assured him that an

inspection of the property disclosed no radioactive contami-

nation. Based on Michael Hooper’s assurances, Judge Gre-

fer approved the revised release agreement and Mrs. Grefer

signed it on July 13, 1992. Judge Grefer then returned the

signed agreement to Mr. Lund, who forwarded it to Mr.

Hooper for his signature. The fully executed agreement was

then recorded in the Conveyance Records of Jefferson Par-

ish.

Several years later, in September 1996, an attorney rep-

resenting a former ITCO employee contected Judge Grefer,

seeking permission to enter the property “ormerly leased to

ITCO to test for radioactive contamination. Judge Grefer

allowed the property to be tested and the following month he

received the sampling report and laboratory analysis con-

firming that the property was contaminated with radium.

In August 1997, the Grefers filed suit against Exxon,

ITCO, and Alpha Technical Services, Inc. (“Alpha Techni-

* Daniel Lund, P.L.C., is a partner in the Law Offices of Montgom-

ery, Barnett, Brown, Read, Hammond & Mintz.

12a

cal”),'° among others, alleging that they had recently discov-

ered their property was contaminated with Technologically

Enhanced Radioactive Material (“TERM™”)'’ from scale de-

posited on used oilfield piping/tubulars that were cleaned

and/or maintained by ITCO and Alpha for Exxon and other

oil companies. They claimed that the defendants knew that

the TERM contained hazardous, toxic and carcinogenic sub-

stances and was present in both inshore and offshore oil pro-

cucing wells but never informed the public of the safety haz-

ard. As to Exxon and the other defendants, the plaintiffs as-

serted causes of action in negligence, strict liability, absolute

liability, nuisance, and fraud and sought compensatory dam-

ages for loss of use and remediation of the property as well

as punitive damages pursuant to La. C.C. art. 2315.3. The

plaintiffs also asserted a breach of contract claim against

ITCO.

ITCO subsequently filed a cross-claim against Exxon, al-

leging that pursuant to its contracts with Exxon, Exxon was

required to provide ITCO with any pertinent information on

any known toxic and hazardous substances contained in its

oilfield piping/tubulars. Exxon was also required to meet

with ITCG on a regular basis to determine whether any

changed condition or specific health or safety hazards would

'° Alpha Technical, an oilfield service company, also had leased

property from the Grefers.

'' The plaintiffs’ use the acronym TERM to refer to the radioactive

scale deposits found in the used oilfield tubulars. The defendants, on the

other hand, refer to the deposits as NORM. As mentioned, infra, the ra-

dioactive scale consists of radium-226, radium-228, and their daughter

products. To the extent radium is found in used oilfield tubulars, it is

naturally occurring and may be technologically enhanced. It is some-

times referred to as Technologically Enhanced Naturally Occurring Ra-

dioactive Material (“TENORM”), which is defined as “natural sources of

radiation which would not normally appear without some technological

activity not expressly designed to produce radiation.”

LAC33:XV.1417.A.1.

13a

be encountered by ITCO during its pipe cleaning operations.

ITCO also alleged that these contracts provided a “Distribu-

tion or Risks” between the parties wherein Exxon contractu-

ally assumed the risk for its own negligence, willful miscon-

duct, and/or strict liability. ITCO claimed that Exxon sent

the majority of its used tubulars from its Eastern and Off-

shore Divisions to ITCO to clean, and that Exxon had .

knowledge of radioactive scale deposits in some of the pip-

ing/tubulars prior to March 27, 1987, the date Exxon first

disclosed to ITCO the existence of NORM in the tubulars.

ITCO alleged a claim against Exxon for the NORM depos-

ited during ITCO’s pipe/tubular operations at ITCO’s owned

or operated sites based upon Exxon’s breach of the health

and safety disclosure provisions of the ITCO/Exxon con-

tracts. ITCO further alleged that in the event it would be cast

in judgment in favor of the Grefers on the main demand, it

would be entitled to full indemnity and/or contribution from

Exxon.

Prior to trial, the plaintiffs dismissed all defendants other

than ITCO and Exxon. After a five-week trial, the jury re-

turned a verdict in favor of the Grefers and awarded them

compensatory damages in the amount of $56,145,000.00,

which included $145,000.00 in general damages and

$56,000,000.00 in restoration costs (special damages), as

well as exemplary (punitive) damages in the amount of

$1,000,000,000.00 (one billion dollars). In answers to the

jury interrogatories, the jury allocated 85% of the fault to

Exxon, 5% to ITCO, 5% to Alpha Technical and 5% to OFS,

Inc.'? The jury also answered special interrogatory number

11 in favor of ITCO, holding that “ITCO is entitled to re-

cover from Exxon all amounts awarded against ITCO under

'? ITCO also had filed a third party demand against OFS, Inc. and

Oilfield Testers, Inc., alleging that these two licensed NORM handling

facilities conducted operations near or adjacent to the Grefer tract that

resulted in NORM contamination to the property.

l4a

its counterclaim against Exxon[.]” A month after the jury

returned its verdict, the trial court held a separate hearing to

consider the merits of Exxon’s exception of prescription.

Following the hearing, the trial court rendered a judgment

denying the exception and a judgment in accord with the

jury’s verdict. It is from these judgments that Exxon, ITCO

and the Grefers appeal.

ASSIGNMENTS OF ERROR

Exxon raises the following seven assignments of error on

appeal:

1. The trial court erred in denying Exxon’s exception of

prescription;

2. The trial court judgment is based on an unlawful jury

verdict;

3. The trial court erred in refusing to instruct the jury on

the Louisiana Department of Environmental Quality

(“DEQ”) standards governing NORM limits for unre-

stricted-use land;

4. The trial court erroneously instructed the jury on ex-

emplary ¢amages though the plaintiffs’ cause of ac-

tion accrued before the legislature enacted Louisiana

Civil Code article 2315.3;

5. The jury’s awara of exemplary damages was mani-

festly erroneous because the evidence does not sup-

port a finding that Exxon engaged in wanton or reck-

less conduct;

6. The jury’s punitive damages award is unconstitu-

tional, excessive, and must be vacated or reduced to

comport with due process; and

7. The trial court erroneously instructed the jury on

ITCO’s indemnity claim.

15a

ITCO's single assignment of error is that the jury erred in

finding it at fault. The Grefers sole assignment of error is

that the trial court erred in refusing to attach prejudgment

interest to the jury’s punitive damage award.

DISCUSSION

Prescription

Exxon argues on appeal that the plaintiffs’ claims had

prescribed four years before they filed suit in 1997. Specifi-

cally, it argues that Judge Grefer admitted that he had ac-

quired knowledge from his nephew, Mr. Haase, that there

might be a problem with radiation on the property during

ITCO’s negotiations to terminate the three remaining leases

and transfer the property back to Mrs. Grefer in 1992. This

knowledge, Exxon contends, was sufficient to excite atten-

tion, prompt further inquiry, and commence the running of

the one-year prescriptive period at that time.

The plaintiffs, on the other hand, contend that Judge Gre-

fer made a reasonable inquiry in 1992 when, at the sugges-

tion of his nephew, he asked Mr. Michael Hopper about the

possibility of radiation on the property. Invoking the doc-

trine of contra non valentem, they argue that prescription

could not have commenced at that time because Exxon had

withheld from ITCO the results of subsurface surveys con-

ducted at the ITCO yard prior to 1992 that disclosed radioac-

tive contamination on the property. Also, the plaintiffs argue

that because the radioactive material was hidden randomly,

subsurface, they had no way of knowing their property was

contaminated until they obtained actual knowledge of the

contamination when Judge Grefer received the results of the

radiation study conducted in October 1996.

When damage is caused to immovable property, the one-

year prescriptive period commences to run from the day the

owner of the immovable acquired, or should have acquired,

knowledge of the damage. La. C.C. art. 3493.

16a

When an exception of prescription is filed, the burden of

proof is on the party pleading prescription. Lima v. Schmidt,

595 So. 2d 624, 628 (La. 1992). If, however, prescription is

evident on the face of the pleadings, then the burden shifts to

the plaintiff to show that the cause of action has not pre-

scribed. Eastin v. Entergy Corporation, 2003-1030, p. 5 (La.

2/6/04), 865 So. 2d 49, 54.

The rule of prescription is subject to the discovery rule of

contra non valentem agere nulla currit praescriptio, which

suspends the running of prescription during the period in

which the cause of action was not known by or reasonably

knowable by the plaintiff. Plaquemines Parish Commission

Council v. Delta Development Company, Inc., 502 So. 2d

1034 (La. 1987). The Louisiana Supreme Court set forth

four instances where contra non valentem is applied to pre-

vent the running of prescription: (1) where there was some

legal cause which prevented the courts or their officers from

taking cognizance of or-acting-upon the plaintiff's action; (2)

where there was some condition coupled with the contract or

connected with the proceedings which prevented the creditor

from suing or acting; (3) where the debtor himself has done

some act effectually to prevent the creditor from availing

himself of his cause of action; and (4) where the cause of

action is not known or reasonably knowable by the plaintiff,

even though this ignorance is not induced by the defendant.

Id. at 1054-55. The Court, in Jordan v. Employee Transfer

Corp., 509 So. 2d 420 (La. 1987), clarified its application of

contra non valentem, stating:

Prescription will not begin to run at the earliest possible

indication that a plaintiff may have suffered some wrong.

Prescription should not be used to force a person who be-

lieves he may have been damaged in some way to rush to

file suit against all parties who might have caused that

damage. On the other hand, a plaintiff will be responsi-

17a

ble to seek out those whom he believes may be responsi-

ble for a specific injury.

When prescription begins to run depends on the reason-

ableness of a plaintiffs action or inaction.

Id., 509 So. 2d at 423. Constructive knowledge or notice

sufficient to commence the running of prescription, however,

requires more than a mere apprehension that something

might be wrong. Landry v. Blaise, Inc., 2002-0822, pp. 5-6

(La. App. 4 Cir. 10/23/02), 829 So. 2d 661, 665-66. Pre-

scription will commence only when the plaintiff knew or

should have known by exercising reasonable diligence that

tortious conduct occurred and that certain parties are respon-

sible. Jd. at 666.

At the post-trial prescription hearing, in addition to Judge

Grefer’s testimony, Exxon introduced into evidence the

depesition testimony of Mr. Lund taken on January 9, 2001,

and proffered the testimony of Mr. Haase as well as several

documents evidencing Mr. Haase’s legal representation of

ITCO."? Exxon also asked the court to consider an affidavit

executed by Mr. Lund."

'? Exxon had subpoenaed both Mr. Haase and Omer F. Kuebel, Jr.,

another attorney from the Montgomery Barnett law firm, to testify but

the trial court quashed the subpoenas because Exxon failed to list them as

witnesses on the pre-trial witness list. As a result, Exxon was precluded

from calling them as witnesses at the prescription hearing. Nonetheless,

the trial court allowed Exxon to proffer statements that it believed Mr.

Haase would have testified to if he had been allowed to testify. The prof-

fered testimony provided that Mr. Haase had represented ITCO in several

matters during his employment with the Montgomery Barnett law firm,

including assisting ITCO in NORM related matters and negotiations with

Exxon regarding the remediation of ITCO’s upper yard; despite his

knowledge of the radioactive contamination on the property, he did not

inform his family that it might have contaminated their adjacent land.

'* Mr. Lund executed an affidavit on November 28, 2000 that ITCO

submitted in support of its motion for summary judgment and exception

of prescription filed in December 2000. In the affidavit Mr. Lund

18a

Judge Grefer testified at the prescription hearing that Mr.

Hooper came to him in June 1992 to discuss terminating the

leases because he was closing his business. He further testi-

fied that his nephew, Mr. Haase, who was representing ITCO

at the time, brought him the final document prepared by the

Montgomery Barnett law firm to formally terminate the

leases and suggested that he contact Michael Hooper to dis-

cuss whether there was a problem with radiation on the

property. Judge Grefer then called Mr. Michael Hooper,

who assured him that he, personally, had inspected the prop-

erty and found no radiation. According to Judge Grefer, he

accepted Mr. Michael Hooper’s representation and, based on

their families’ close business and personal relationship, had

no reason to doubt his word. Judge Grefer also acknowl-

edged that he had spoken to Mr. Lund after reviewing an ini-

tial draft of the lease termination agreement because he was

concerned about reserving his mother’s rights against any

third parties who might be responsible for damage to the

property. However, he testified that he did not recall ever

discussing with Mr. Lund his concern about radiation or

other environmental damage to the Grefer property.'> Also,

averred that in 1992 during negotiations with Judge Grefer regarding the

cancellation of the [TCO lease, Judge Grefer expressed concern about

radiation on the property and asked him to include a reservation of rights

clause in the termination agreement. After the trial court denied the mo-

tion for summary judgment, ITCO abandoned its exception of prescrip-

tion.

'S At a January 3, 2001 deposition, Judge Grefer testified that Mr.

Haase told him to call Mr. Michael Hooper because “‘there may be a

problem with the property.”” When asked whether or not Mr. Haase had

told him there was a potential problem with radiation on the property,

Judge Grefer replied, “I don’t recall.” Likewise, when asked whether the

word “‘radiation’” was ever used in his conversation with Mr. Michael

Hooper, Judge Grefer again replied, “I don’t recall.” At a January 29,

2001 deposition, when questioned by Exxon’s counsel about his conver-

sations with Mr. Lund regarding the release for [TCO and whether there

was a potential for environmental contamination on his family’s prop-

erty, Judge Grefer stated, unequivocally, “No, I had no conversation with

19a

Judge Grefer denied ever visiting the ITCO premises in 1992

to observe the cleaning and remediation of an area around

the pipe-cleaning machine.

Mr. Lund testified at his deposition that he had several

phone conversations with Judge Grefer in late June and early

July 1992 during which Judge Grefer asked him to include a

reservation of rights provision in the release, settlement and

termination agreement because he was concerned about ra-

dioactive contamination. Mr. Lund told Judge Grefer that

ITCO had advised him that they had found an area on the

property with a radioactivity reading above acceptable back-

ground levels in an area near the pipe cleaning machine; that

the machine had been cleaned and that the area around it had

been scraped with a bulldozer and the dirt was moved to an-

other site. According to Mr. Lund, Judge Grefer then told

him that he had been to the property himself and observed

the work being done.'®

Dan Lund about environmental contamination on the property.” Exxon’s

counsel then asked, “But just to make sure I understand, it’s not that you

don’t recall the conversation? You know you didn’t have one?” Judge

- Grefer again responded, “I didn’t have one.”

'© The exhibits attached to Mr. Lund’s deposition included corre-

spondence and notes from Mr. Lund’s ITCO file, which the plaintiffs

obtained through discovery. Mr. Lund identified two handwritten nota-

tions that he had made at the time he spoke to Judge Grefer. The first

notation, which appears on a copy of the June 19, 1992 cover letter that

Mr. Kuebel wrote to Judge Grefer advising him to review an attached

draft of the revised settlement agreement, read “6/30 — Tel Joe — is Hold-

ing the Check what about environmental —.” Mr. Lund explained that the

notation, made on June 30, 1992, indicated that he had telephoned Judge

Grefer, who was holding ITCO’s check and was inquiring about envi-

ronmental conditions on the property. The second handwritten notation,

Mr. Lund explained, was made during a telephone conversation with

Judge Grefer on July 2, 1992 and read “Telephone Joe Grefer, 10:00

a.m., told Joe —says he’s concerned about radiation, put in agreement.

No indication at this time. This is not intended to release or waive any

rights against any party who may have responsibility.”

20a

After considering the evidence from the trial and the

post-trial prescription hearing, the trial court determined that

prescription was not evident on the face of the plaintiffs’ pe-

tition and that Exxon had the burden of proof but did not sat-

isfy its burden. In reasons for judgment, the trial court stated

that she found both Judge Grefer and Mr. (John) Hooper

were credible witnesses.'’ She determined that when Mr.

Haase informed Judge Grefer of possible contamination in

1992, Judge Grefer made a reasonable inquiry of Mr. Mi-

chael Hooper and due to the long-term business and profes-

sional relationship between them, Judge Grefer was reason-

able to rely upon Mr. Michael Hooper’s representations that

the property had been tested and there was no radioactive

contamination. The trial court doubted that Judge Grefer, an

attorney and former judge, would have allowed ITCO to

terminate the lease three years early and as compensation

receive only the rent due through August 1992 and a reserva-

tion of rights as to third parties if he had any knowledge of

'’ Mr. Michael Hooper did not testify at trial but the parties stipu-

lated that had he testified his testimony would have been the same as Mr.

John Hooper’s testimony. Mr. John Hooper testified at trial that after

Exxon disclosed the NORM problem to ITCO in March 1987, ITCO dis-

continued the cleaning of any used piping/tubulars that were above the

safe threshold. He further testified that ITCO surveyed its yard, includ-

ing the Grefer tract, to determine if there were any elevated NORM read-

ings on site. Piping/tubulars found in pipe racks that had elevated levels

of radioactivity were moved to a segregated area in ITCO’s lower yard.

According to Mr. Hooper, the ITCO yard did not register above back-

ground levels with the exception of two areas, one outside an inspection

shed and the other where the pipe-cleaning machine was situated on the

Grefer property. Mr. Randy Minton, ITCO’s radioactive safety officer,

reported those areas presented no hazards since the primary safety con-

cern discussed by Exxon with ITCO was the airborne dust which could

be ingested by workers. Mr. Hooper testified that ITCO never know-

ingly cleaned any NORM contaminated pipe after March 27, 1987, and

that when he transferred the property back to Mrs. Grefer in mid-1992,

he was not aware of any unacceptable levels of radioactive scale on the

property.

2la

contamination in 1992. She also questioned the veracity of

Mr. Lund’s testimony that he told Judge Grefer in 1992 that

ITCO knew that an area of the property was contaminated.

The court opined that Mr. Lund’s statement was against his

client’s (ITCO’s) interest and “defied belief.”'®

When findings are based on determinations regarding the

credibility of witnesses, the manifest error — clearly wrong

standard demands great deference to the trier of fact’s find-

ings, for only the factfinder can be aware of the variations in

demeanor and tone of voice that bear so heavily on the lis-

tener’s understanding and belief in what is said. Rosell v.

ESCO, 549 So. 2d 840, 844 (La. 1989). If the trial court’s

findings are reasonable in light of the record reviewed in its

entirety, the court of appeal may not reverse even though

convinced that had it been sitting as the trier of fact, it would

have weighed the evidence differently. Jd.

After reviewing the record, we find the trial court was

correct in determining that prescription was not evident on

the face of the plaintiffs’ petition and that Exxon had the

burden of proof but did not satisfy its burden by a prepon-

derance of the evidence. Furthermore, we cannot say the

trial court was clearly wrong in determining that Judge Gre-

fer acted reasonably in relying on Mr. Michael Hooper’s as-

surances that the Grefer property did not contain unaccept-

'* Mr. Lund initially made the sworn statement in his affidavit in

November 2000, which ITCO submitted in support of its motion for

summary judgment and exception of prescription. At that time, JTCO

was making the same argument that Exxon made at the post-trial pre-

scription hearing and asserts in this appeal, i.e., Judge Grefer knew or

should have known by exercising reasonable diligence that the property

was contaminated and that the defendants were responsible. Mr. Lund’s

statement certainly was not against his client’s interest; rather it rein-

forced ITCO’s claim that Judge Grefer had knowledge sufficient to

commence the running of prescription in July 1992. In any event,

whether or not the statement was against tTCO" s interest is not germane

to the issue at hand.

22a

able levels of radioactive waste. The trial court made find-

ings of fact based on her determination that both Judge Gre-

fer and Mr. Hooper were credible witnesses, and her find-

ings, are supported by evidence in the record. Thus, we can-

not disturb the trial court’s judgment overruling the defen-

dants’ exception of prescription.

Unlawful Jury Verdict

In its second assignment of error, Exxon argues that the

judgment is based on an unlawful jury verdict, and the trial

court reformed the verdict without legal justification. Spe-

cifically, Exxon contends that the transcript from the original

jury polling disclosed that on interrogatory number 2

(whether Exxon’s fault caused damage to the plaintiffs’

property) only seven jurors answered, “yes.” After review-

ing his audiotapes, the court reporter, Mr. Joseph Catalano,

amended the transcript to reflect that eight jurors voted “yes”

and four voted “no.” Mr. Catalano then certified the tran-

script as being “true and correct.” Exxon subsequently ob-

tained a copy of the certified transcript and discovered the

vote tally on interrogatory number 2 was deficient, as only

eight “yes” votes were recorded. Exxon notified the court of

the deficiency. Meanwhile, the plaintiffs had filed a motion

to correct the record pursuant to La. C.C.P. art. 2132 to re-

flect that juror number three, Mr. Emile Ferbos,'? voted af-

firmatively to interrogatory number 2. Nearly a year after the

jury rendered the verdict, the trial court granted the plain-

tiffs’ motion and amended the official transcript to reflect

that nine jurors had voted affirmatively on interrogatory

number 2.

The plaintiffs argue that Exxon cannot contest the trial

court’s correction of the erroneous jury poll transcript be-

'° The original jury poll transcript of May 22, 2001 refers to Mr.

Ferbos as “Mr. Provost” and the amended transcript of May 22, 2001

refers to him as “Mr. Ferbost.”

23a

cause Exxon failed to make a contemporaneous objection to

the vote count on interrogatory number 2 at the time the jury

was polled. Also, the plaintiffs point out that the trial court

corrected the transcript based upon her recollection of the

jury poll and the notes taken by Exxon’s counsel at that time,

which were consistent with the evidence proffered at the

hearing on the motion to correct the record.

Louisiana Code of Civil Procedure article 1797(B) pro-

vides, “[iJf trial is by a jury of twelve, nine of the jurors must

concur to render a verdict unless the parties stipulate other-

wise.” Article 2132 of the Code of Civil Procedure provides

that a record on appeal which is incorrect or contains mis-

statements, irregularities or informalities may be corrected

by the parties by stipulation, by the trial court or by the order

of the appellate court. Furthermore, Code of Civil Procedure

article 2088 confers upon the trial court jurisdiction to “cor-

rect any misstatement irregularity, informality, or omission

of the trial record, as provided in Article 2132.”

After the jury’s verdict was read in open court, Exxon’s

counsel requested that the trial court poll the individual ju-

rors as to each interrogatory. The original transcript of the

jury poll reflects that initially seven jurors voted “yes” and

five jurors, including Mr. Ferbos and Ms. Huyen Bui (juror

number 8)”° voted “no” on jury interrogatory number 2. At

completion of ihe polling, Exxon’s counsel informed the

court that he had a problem with the vote on jury interroga-

tory number 9 regarding the cost to restore the plaintiffs’

property; only eight jurors had voted “yes.” The trial court

met with counsel outside the presence of the jury and appar-

ently determined the problem pertained to Ms. Bui’s vote.

When the trial court returned to the bench, she repeated in-

”” Ms. Bui is referred to as “Hu Yong Wi” and “Ms. Wei” in the jury

polling transcript, the amended transcript and in the trial court judgment

correcting the record.

24a

terrogatory number 9 to Ms. Bui, who responded “yes,” giv-

ing the plaintiffs’ the requisite nine votes on that interroga-

tory. Exxon’s counsel then raised an objection to the incon-

sistencies in the jurors’ responses to interrogatory numbers

12 and 13 even though the plaintiffs had at least nine votes in

their favor on each.” No objection, however, was ever made

to the vote on interrogatory number 2.

Several months later, after Exxon discovered the defi-

ciency in the certified transcript of the jury poll, the trial

court addressed the issue at a hearing on December 21, 2001,

stating for the record:

The court conducted the poll of each individual on each

individual case and the numbers, and as the court will re-

call especially on question number two that it was only

juror number two who answered it in the negative as I re-

call who answered it in the negative on every question.

And when the polling was being done that counsel for

the plaintiff specifically stopped the court on a particular

question where the number was not correct and the court

took corrective action at that time and that should be re-

flected in the transcript as well.[77]

2! Interrogatory numbers 12 and 13 pertained to whether or not

Exxon was responsible for punitive damages and, if so, the amount

thereof. Ten jurors voted to award the plaintiffs punitive damages but

only nine agreed to the one billion dollar amount. The inconsistencies

arose because two jurors, Ms. Denise Green and Mrs. Lois Washington,

voted to award punitive damages but did not agree with the amount while

one juror, Mr. Anthony Green, voted not to award punitive damages yet

agreed to the one billion dollar amount.

22 The record reflects that first, five jurors are recorded as having an-

swered “no” to interrogatory number 2 (not one, as the trial court recol-

lected); second, juror number 2, Ms. Sam, answered “yes” to interroga-

tory numbers 3,4, 5 and 6 (and not “no” on every question); and third, it

was defense counse! (not plaintiffs’ counsel) who stopped the court on a

particular question when the number of votes was not sufficient on inter-

rogatory number 9.

25a

The court then allowed the attorneys to question Mr.

Catalano about the certified trial transcript. Responding to

questions from plaintiffs’ counsel, Mr. Catalano stated that

he had recently reviewed the audiotape and his contempora-

neous stenographic notes of the jury poll and concluded that,

while the audiotape was not very clear, his notes reflected

that a change should be made in Ms. Bui’s response to inter-

rogatory number 2 from “no” to “yes,” and that the certified

transcript was otherwise correct. He also explained that Mr.

Ferbos’ vote on interrogatory number 2 was inaudible. The

trial court then instructed Mr. Catalano to surrender the

original audiotapes to the court for safekeeping and informed

the attorneys that they would be allowed to listen to the au-

diotapes at a later date and that she would entertain motions

to technically enhance the tapes if necessary prior to ruling

on the issue.

Two months later, the plaintiffs filed a motion to correct

the trial record pursuant to La. C.C.P. art. 2132, arguing that

because neither the trial judge nor the attorneys present at

trial noticed a polling deficiency on interrogatory number 2,

it did not occur, and thus, the jury poll transcript should be

corrected to reflect nine “yes” votes on interrogatory number

At the hearing on the motion to correct held on April 19,

2002, the trial court allowed the plaintiffs to introduce into

evidence the original tape recordings of the trial and the

notes made by Exxon’s counsel during the jury poll. The

plaintiffs then proffered as evidence testimony by Mr.

Catalano, a copy of an amended transcript prepared by him,

the testimony and affidavit of Mr. Ferbos, and the testimony

of both Mr. Scott Newman, an audio production specialist

with Evidence Management, and Mr. Jeffrey Talbot, an au-

dio engineer. Exxon proffered testimony by Mr. Leo “Jim”

26a

Odom, an electrical engineer specializing in audio produc-

tion.

In granting the plaintiffs’ motion, the trial court relied on

her own polling of the jurors and the parties’ failure to object

to the responses to interrogatory number 2 and found that the

Official trial transcript, which recorded Mr. Ferbos’ answer

to interrogatory number 2 as “no,” was incorrect. The trial

court then rendered judgment, ordering Mr. Catalano to

amend the certified transcript of the jury poll to correct the

votes cast by Ms. Bui and Mr. Ferbos in response to inter-

rogatory 2 from “no” to “yes” and to file the corrected tran-

script into the record of the court.

We find the trial court did not err in correcting the record

pursuant to La. C.C.P. art. 2132. The notes taken by

Exxon’s counsel during the jury poll reflect that Ms. Bui

voted “no” to interrogatory numbers 3 and 4 only, corrobo-

rating Mr. Catalano’s testimony from the December 21, 2001

hearing that she had voted affirmatively on interrogatory

3 The proffered evidence indicates that Mr. Catalano and Mr. New-

man returned to the courtroom on March 18, 2002 to listen to the original

tapes, using a Macintosh computer to enhance the sound. The enhanced

audiotape disclosed that Mr. Ferbos’ answer to interrogatory number 2

was “yes” and Mr. Catalano amended the jury transcript accordingly.

Mr. Talbot later obtained an audio file of the original recording from Mr.

Newman and, at his request, used a broadband noise reduction computer

program to “filter” or eliminate the background noise to better hear the

recorded voices. After listening to the original audio file, both filtered

and unfiltered, he determined that Mr. Ferbos and Ms. Bui both answered

“yes” to the second interrogatory. Mr. Odom, listened to the same audio

files using a wave frequency analysis software program and concluded

that on interrogatory number 2 there were five “yes” votes, three “no”

votes, and the remaining four votes were indistinguishable. In view of

the fact that Mr. Catalano had Mr. Newman enhance the original! audio-

tapes without counsel present and Mr. Ferbos’ testified nearly a year after

the jury was polled, the trial court did not abuse her discretion in exclud-

ing the proffered testimony, copy of the amended transcript, and affida-

vits into evidence.

27a

number 2. As to Mr. Ferbos’ responses, Exxon’s counsel

made no clear notation to indicate his vote on any interroga-

tory. The fact that counsel failed to indicate a “no” vote for

Mr. Ferbos supports the plaintiffs’ argument that he did in

fact respond “yes” to interrogatory number 2, because the

notes record the “no” votes of those jurors who voted “no”

on the various interrogatories.

Restoration Damages

In its third assignment of error, Exxon argues that the

trial court failed to properly instruct the jury on DEQ stan-

dards governing NORM remediation of land for unrestricted

use.“ Specifically, it contends that the trial court should

have charged the jury that under DEQ standards land with

NORM levels of 5 pCi/g or less above background required

i.) remedial action, i.e., no “restoration.” Although the pro-

posed charge referenced exemplary damages, Exxon con-

tends the trial court’s failure to give it gave the jury unfet-

tered discretion in awarding restoration damages, and as a

result, the jury disregarded evidence that only minimal effort

and cost was needed to render the plaintiffs’ property com-

pletely fit for unrestricted use. Alternatively, Exxon com-

plains that the jury charge included no requirement of “rea-

sonableness.” Thus, Exxon contends the $56 million restora-

tion award is unreasonable and manifestly erroneous in view

of the evidence that the Grefer property is valued at only

$1.5 million. Based on these errors, Exxon requests a de

novo review.

The plaintiffs counter that Exxon objected to the trial

court’s refusal to give its proposed jury charge regarding

DEQ standards on the basis of exemplary rather than restora-

tion damages, and, therefore, waived its right to appeal the

* The Louisiana limit for unrestricted use of sites containing

TENORM is five picocuries per gram (5 pCi/gm) above background of

radium-226 or radium-228. LAC33:XV.1417.A.1.

28a

restoration award on the basis of an insufficient jury instruc-

tion.

The record reflects that the trial court held a conference

on May 10, 2001, at which the parties apparently debated

proposed jury charges, but the court reporter verified that the

transcript from the conference is missing. The transcript

from a conference held on May 18, 2001, the day the jury

was charged, nonetheless reflects that Exxon’s counsel had

asked for a charge limiting restoration damages and objected

when it was denied. Thus, Exxon preserved its right to raise

the issue on appeal.

La. C.C.P. art. 1792(B) requires the trial court to instruct

the jurors on the iaw applicable to the cause submitted to

them. The sufficiency of a jury charge must be determined

in light of the charge as a whole. The court is not required to

give the precise instruction subsitted by either party, but

must give instructions that properly reflect the applicable law

in light of the facts of the particular case. Even if the re-

quested instructions are fair statements of the law, the trial

court need not include them verbatim but may strike a fair

balance so that no one issue is unduly emphasized. Baxter v.

Sonat Offshore Drilling inc., 98-1054, p. 6 (La. App. 1 Cir.

5/14/99), 734 So. 2d 901, 906. Whether to include a re-

quested jury instruction is a matter within the wide discretion

of the trial court, and its decision will not be overturned ab-

sent an abuse of that discretion. Wingfield v. State, Dept. of

Transportation and Development, 2001-2668, p. 17 (La.

App. | Cir. 11/8/02), 835 So. 2d 785, 801. The discovery of

an error in the instructions does not by itself justify a de novo

review. The appellate court must measure the gravity of the

error, while considering the instructions as a whole and the

circumstances of the case. Jd. A verdict should not be set

aside unless the error in the instructions misled the jury to

such an extent so as to prevent it from doing justice. /d;

Baxter, 98-1054 at p. 6, 734 So. 2d at 906.

i i ee es ee ee, ee eee ee ees ers ee ll rs as mmm acl elle em ae ea a ~~

29a

Both parties, to some extent, rely on the Louisiana Su-

preme Court’s decision in Roman Catholic Church of the

Archdiocese of New Orleans v. Louisiana Gas Service Com-

pany, 618 So. 2d 874 (La. 1993). In that case, the U.S. De-

partment of Housing and Urban Development (“HUD”) ac-

quired a 13-building apartment complex in 1976 in consid-

eration of the cancellation of a $3.3 million loan. In 1977,

HUD entered into an agreement with the Roman Catholic

Church for the Archdiocese of New Orleans (“Church”) to

manage the housing complex in order to provide federally

subsidized housing to low-income families; HUD spent $3

million renovating the complex from 1977 through 1980. In

1981, the Church agreed to acquire the complex for $1.7 mil-

lion, subject to the resolutory condition that if the Church

failed to maintain the complex as a facility for low-income

families for 15 years, the complex’s ownership would revert

to HUD. In 1983, a fire destroyed one of the buildings in the

complex; the fire was caused by a malfunction in the defen-

dant’s (Louisiana Gas Service Company’s) gas regulation

equipment in the building, which caused a natural gas surge.

The defendant acknowledged its fault, thus making the only

issue for trial the quantum of damages. The trial court ruled

that the Church’s recovery was limited to the amount it ex-

pended to restore the building to its pre-fire condition less

depreciation. The Court ultimately concluded that the ex-

penditure of $232,677.00 for restoration without depreciation

of one building was reasonable albeit the Church had paid

but $1.7 million for the property and the renovated building

had a longer useful life.

The Supreme Court stated that “[t]he single issue pre-

sented is whether the lower courts erred in limiting plaintiffs’

damages to replacement cost, less depreciation, rather than

awarding the plaintiffs the full cost of restoration that had

been reasonably incurred.” /d. at 876. The Court concluded

that:

30a

[A]s a general rule of thumb, when a person sustains

property damage due to the fault of another, he is entitled

to recover damages including the cost of restoration that

has been or may be reasonably incurred, or, at his elec-

tion, the difference between the value of the property be-

fore and after the harm. If, however, the cost of restor-

ing the property in its original condition is dispropor-

tionate to the value of the property or economically

wasteful, unless there is a reason personal to the

owner for restoring the original condition or there is a

reason to believe that the plaintiff will, in fact, make

the repairs, damages are measured only by the differ-

ence between the value of the property before and af-

ter the harm. Consequently, if a building such as a

homestead is used for a purpose personal to the

owner, the damages ordinarily include an amount for

repairs, even though this might be greater than the

entire value of the building.

Id. at 879-80. (Emphasis supplied).

The Court also recognized that damage awards between

private litigants for costs of remediation of environmental

problems necessarily involve the consideration of the as-

sessments and compliance orders of the DEQ, the primary

state agency concerned with environmental protection and

regulation. See, Matter of American Waste and Pollution

Control, Co., 93-3163 (La. 9/15/94), 642 So. 2d 1258 and

Save Ourselves, Inc. v. Louisiana Environmental Control

Commission, 452 So. 2d 1152 (La. 1984). The DEQ’s ac-

tions in protecting the public interest in the environment are

governed by a rule of reasonableness that “requires a balanc-

ing process in which environmental costs and benefits must

be given full and careful consideration along with economic,

social and other factors.” Save Ourselves, 452 So. 2d at

1157. As the Second Circuit aptly noted in Morris & Dick-

3la

son Co., Inc. v. Jones Brothers Company, Inc., 29,379 (La.

App. 2 Cir. 4/11/97), 691 So. 2d 882,

[t]he DEQ’s exercise of its role as the public trustee for

the protection of the environment results in the develop-

ment and imposition of a remediation plan [that] deter-

mines in large part the measure of damages for the envi-

ronmental liability affecting a particular property. Apart

from this imposed liability as a broad remedy for the

public’s protection, the actual damages for the private

litigants involved in the controversy might not be the

same under the conventional measure of damages.

Id. at 17, 691 So. 2d at 892.

In this case, the trial court charged the jury on restoration

damages as follows:

Generally, when a plaintiff sustains damage to prop-

erty due to the fault of another, he is entitled to recover

damages, either the cost of restoration or the difference

between the value of the property before and after the

harm. However, if the cost of restoring the property to

its original condition exceeds the value of the property

damages may be measured by the difference between the

value of the property before and after the harm. You

may award plaintiffs’ [sic] the cost to repair and restore

the property if you find that plaintiffs intend to repair or

restore it. As a general rule, a plaintiff should be put in

as good a position as before his property was damaged,

but not a superior position.

This jury charge clearly sets forth the law as enunciated in

Roman Catholic Church, supra, but makes no reference to

DEQ rules governing the remediation of land for unrestricted

use.

The trial court’s jury instruction on restoration damages

insofar as it followed Roman Catholic Church is a correct

statement of the law, and when the jury instructions are

32a

viewed as a whole, we cannot say that the exclusion of the

DEQ standard from the jury charge misled the jury or tainted

the verdict. Also, the record contains extensive testimony

from environmental experts and documentary evidence per-

taining to DEQ NORM regulations on land remediation and

Exxon has not shown that the jury ignored this evidence due

to the absence of the proposed jury charge in making its

award.

Next, we must consider whether the jury’s award of $56

million in restoration damages is unreasonable or manifestly

erroneous in view of the evidence presented at trial.

The Louisiana Supreme Court in the case of Corbello v.

lowa Production, 02-0826 (La. 2/25/03), 850 So. 2d 686,

considered the issue of whether the trial court erred in ren-

dering judgment on a jury verdict that awarded the plaintiff

$33 million for the defendant’s failure to restore property to

its original condition even though the land would be worth

$108,000.00 in the restored condition. In 1961, the plaintiffs

by a written contract leased land to the defendant for the

purpose of conducting the defendant’s oil and gas related

activities. The lease in pertinent part stated:

Lessee agrees to indemnify and hold lessor harmless

from any and all less, damage, injury and liability of

every kind and nature hat may be caused by its opera-

tions or result from the exercise of the rights or privileges

herein granted. Lessee further agrees that upon ter-

mination of this lease it will reasonably restore the

premises as nearly as possible to their present condi-

tion. [Emphasis supplied. ]

The Court noted that the contract did not limit the defen-

dant’s liability for reasonable restoration to the market value

of the property. /d. at p. 7, 850 So. 2d at 694. Included

within the $33 million damage award was $28 million for

restoration of the Chicot Aquifer even though the trial testi-

mony established only that the aquifer might be contami-

33a

nated. Jd. at pp. 12-14, 850 So. 2d at 697-98. Distinguishing

Roman Catholic Church, supra, on the basis that it was a tort

suit, the Court held that the contract was the law between the

parties that did not limit the defendant’s liability for dam-

ages. /d. at p. 8, 850 So. 2d at 694-95. The Court further

held that the contractual obligation to reasonably restore the

property was not “tethered” to the market value of the prop-

erty. /d. at p. 6, 850 So. 2d at 693. The Court recognized the

right of a party to recover the costs of remediation even

though the damaged party could not be forced to use the

award to do so. /d. at pp. 12-21, 850 So. 2d at 697-701. Cit-

ing Federal Insurance Co. v. Insurance Co. of North Amer-

ica, 262 La. 509, 263 So. 2d 871 (1972), the Court noted that

when one has a contractual relationship with another and

claims to have been damaged by the conduct arising out of

that contractual relationship, two remedies exist: one in con-

tract and another tort; the damaged party may elect to re-

cover his damages in either tort or contract. Corbello, p. 32,

850 So. 2d at 708. If the damaged party elects to proceed in

contract, he waives his right to seek exemplary damages. /d.

at p. 31, 850 So. 2d at 707. On rehearing by per curiam, the

Court specifically emphasized that a party could only re-

cover for actual harm, not potential harm. /d. at p. 1, 850 So.

2d at 715.

As to the evidence presented at trial concerning restora-

tion costs, the plaintiffs’ expert, Stanley Waligora, a health

physicist certified by the American Board of Health Physics

and principal health physicist with Environmental Dimen-

sions, Inc., testified that he had extensive experience work-

ing under contract with the United States Government on the

remediation of radioactive waste sites. Although he did not

actually survey the Grefer property, Mr. Waligora visited the

site on several occasions. He estimated that it will cost the

plaintiffs between $60 million and $82 million to test, col-

lect, contain, transport, and dispose of the radioactive waste

on the surface and subsurface of the 32.75-acre property to

34a

comply with the DEQ and the United States Environmental

Protection Agency (“EPA”) regulations. According to his

estimate, disposal costs alone would be $58,862,684.00. In

reaching his conclusion, Mr. Waligora considered the pub-

lic’s safety and the history of the site, i.e., ITCO had cleaned

piping/tubulars on the property for many years. He ex-

plained that his cleanup procedure used a “segmented gate

system” that was designed by the U.S. Departments of En-

ergy and Defense and has been used by the federal govern-

ment and private industries for remediation of similar sites.

The plan called for the removal of the first two feet of topsoil

throughout the entire Grefer tract. He chose the average

depth of two feet for excavation because radiation has been

found in some instances as deep as three feet and in other

instances as shallow as one foot. The excavated soi! would

then be processed on site by a machine that scans the soil on

a conveyor belt. The clean soil would be separated from the

contaminated. Uncontaminated soil would be re-deposited on

the Grefer tract, and the contaminated soil would be disposed

of properly. Mr. Waligora acknowledged that his remedia-

tion plan was not based solely on the DEQ standard for

remediation of NORM contaminated property for unre-

stricted use and that his estimated cost of remediation greatly

exceeded the $1.5 million value of the property in an unre-

stricted use state. He further explained, however, that a

remediation under DEQ standards requires that property be

cleaned to a level sufficient to prevent public exposures in

excess of 25 millirems per year, yet a soil reading of 5 pCi/g

above background may still emit dangerous levels of radia-

tion in excess of 200 millirems per year. Mr. Waligora testi-

fied that the standard of no more than 1 pCi/g above back-

ground meets DEQ, Nuclear Regulatory Commission

(“NRC”) and EPA dose standards and is reasonably achiev-

able and protective of the public health.

Exxon’s expert, Mr. Mark Krohn, a certified radiation

protection technologist with American Radiation Service

35a

(“ARS”), testified that he performed a gamma exposure rate

screening survey of the Grefer tract in June 2000 and identi-

fied five areas of the property with gamma exposure rates

equal to or greater than twice background levels. He re-

turned in August 2000 to conduct a detailed 100% gamma

exposure rate survey and sampling evolution to a depth of 12

inches on those five areas and found one area that contained

a sealed radium-226 source. Once the sealed source was re-

moved gamma exposure rates returned to normal background

levels. In February and March 2001, ARS conducted two

separate 100% gamma exposure rate surface scans of areas

of the tract that were not surveyed earlier. At that time, ARS

also did a detailed sub-surface survey and sampling evolu-

tion on the entire Grefer tract to confirm the absence or pres-

ence of sub-surface NORM. Mr. Krohn testified that the

ARS survey indicated five small areas measuring a total of

11,518 square feet or 0.8 percent (0.8%) of the Grefer tract

contained radium-226 activity levels greater than 5 pCi/gm

above background, and under DEQ NORM regulations these

were the only areas on the property that required remedia-

tion. Based on the ARS survey results, he opined that 99.2

percent of the property may be put to unrestricted use. Mr.

Krohn emphasized that to bring the Grefer tract into compli-

ance with DEQ regulations entailed removing the top six

inches of soil. He estimated that remediation and disposal

costs to release the Grefer property to unrestricted use in ac-

cordance with DEQ regulations was approximately

$46,000.00. On cross-examination, Mr. Krohn acknowl-

edged that for remediation purposes DEQ standards require

the property be cleaned to prevent public exposures in excess

of 25 millirems per year of radiation yet conceded that he

had not done any calculations to determine the amount of

radiation emitted from a soil reading of SpCi/g above back-

ground.

The record also reflects that in the early stages of the liti-

gation, the plaintiffs had retained the professional services of

36a

Mr. Edwin M. Cargill, a health physicist from Radiation Pro-

tection Resources, and had listed him as an expert witness

for trial. At the request of plaintiffs’ counsel, Mr. Cargill

surveyed the Grefer property to determine the amount, if

any, and location of radioactive material on the premises. In

conjunction with his survey, Mr. Cargill prepared a prelimi-

nary report dated November 13, 1999, that indicated the

presence of TERM on several areas of the property and esti-

mated that the cost to remediate and restore the property for

unrestricted use at $1,387,310.00. However, Mr. Cargill

noted in the preliminary report that the survey results and

estimated costs could change “because of the possibility that

buried waste was not detected and also due to the heavily

wooded state of the property, making [the] survey difficult.”

The plaintiffs neither called Mr. Cargill to testify at trial

nor introduced into evidence his survey and preliminary re-

port. Exxon, however, did admit the survey results and pre-

liminary report into evidence during the direct examination

of Mr. Krohn to demonstrate that Mr. Waligora’s estimate

between $60 million and $80 million was clearly unreason-

able. Mr. Krohn testified that although he disagreed with

Mr. Cargill’s remediation estimate, he did consider his sur-

vey and report in conducting the ARS survey. In contrast,

Mr. Waligora, acknowledged that he had worked closely

with Mr. Cargill on several remediation projects and in other

litigation and that he respected his opinion, but he thought

Mr. Cargill’s survey results were not accurate and his reme-

diation estimate too low because they failed to consider the

full extent of the subsurface contamination on the Grefer

tract.

Unlike Corbello, the Grefers and ITCO had a contract

between them that did not require the land to be restored to

its original state at the end of the contract. Further, the Gre-

fers elected to proceed per Federal Ins. Co. v. Insurance Co.

of North America, supra, in tort, not contract, and to exercise

37a

their right to seek exemplary damages under the now former

La. C.C. art. 2315.3. Thus, Roman Catholic Church governs

that which the Grefers may recover from Exxon and ITCO.

In determining damages, the trier of fact is accorded

much discretion. La. C.C. art. 2324.1. On appeal, consid-

eration of the jury’s determination of damages is limited to a

review for manifest error or abuse of discretion. Wingfield,

supra, 2001-2668 at p. 27, 835 So. 2d at 806. In determining

the amount of damages, the discretion vested in the trier of

fact is “great.” Youn v. Maritime Overseas Corp., 623 So.

2d 1257, 1261 (La. 1993), cert. denied, Maritime Overseas

Corp. v. Youn, 510 U.S. 1114, 114 S. Ct. 1059, 127 L. Ed. 2d

379 (1994). Where there is conflict in the testimony, reason-

able evaluations of credibility and reasonable inferences of

fact should not be disturbed upon review, even though the

appellate court may feel that its own evaluations and infer-

ences are as reasonable. Rosell v. ESCO, supra at 844.

Where there are two permissible views of the evidence, the

fact finder’s choice between them cannot be manifestly erro-

neous or clearly wrong. /d.

In this particular case, the jury’s award of $56 million for

restoration damages for a tract of land whose highest market

value is $1.5 million certainly appears unreasonable. None-

theless, the Supreme Court in Corbello affirmed an award

for millions of dollars of damages for a water aquifer where

no evidence was presented that the aquifer beneath the Cor-

bello property was in fact damaged by contamination from

the defendant’s operations and it was questionable as to the

right of Corbello to recover those alleged damages. When

we compare that to the language in Roman Catholic Church

that requires the award of reasonable damages in a tort case,

which rarely may exceed the fair market value of the prop-

erty, we cannot conclude that the $56 million award in this

case is unreasonable.

38a

The jury was presented with evidence from experts esti-

mating the cost to remediate the Grefer property ranged from

$46,000.00 to $82 million dollars, with $1,387,310.00 being

the closest estimate to the market value of the property. Al-

though Mr. Waligora’s estimate of $60 million to $82 mil-

lion was based not on DEQ’s standard for remediation of

NORM contaminated property for unrestricted use, but

rather on more stringent guidelines set by the EPA and Nu-

clear Regulatory Commission (“NRC”), the evidence reflects

DEQ’s regulations were considered in his remediation plan.

Still, the jury’s restoration award was $4 million less than

Mr. Waligora’s lowest estimate.

We also emphasize Judge Grefer’s testimony that he and

his siblings want to restore the property, which has been in

the Grefer family since 1875, to its original condition and not

to the mere minimum DEQ standard. He explained that they

are unable to sell or lease the contaminated property without

exposing themselves to liability and they do not want to bur-

den their children with this. Judge Grefer also expressed

grave concern about the effects the radioactive contamina-

tion might have on the neighbors and the general public.

Clearly, the plaintiffs had both personal and economic rea-

sons for wanting to restore their property to its original con-

dition. Pursuant to the rule set forth in Roman Catholic

Church, supra, they may elect to do so. After a review of

the record, we cannot say the jurors abused their discretion

or manifestly erred in making the $56 million award. Thus,

we will not disturb the jury award on restoration damages.

Applicability of Louisiana Civil Code Article 2315.3

In this assignment of error, Exxon asserts that the jury’s

award of exemplary damages must be vacated because the

plaintiffs’ cause of action accrued before La. C.C. art. 2315.3

was enacted. Specifically, Exxon contends that the plain-

tiffs’ cause of action accrued when their property first sus-

tained the “slightest” damage, i.e., sometime in the 1960s

39a

when ITCO began cleaning NORM scale from Exxon’s used

oilfield equipment on Grefer property. Because the plain-

tiffs’ cause of action accrued before 1984, and article 2315.3

cannot be applied retroactively under Anderson v. Avondale

Industries, Inc., 2000-2799, p. 3 (La. 10/16/01), 798 So. 2d

93, 97, Exxon asserts the plaintiffs are precluded from re-

covering exemplary damages.

Former La. Civil Code article 2315.3 was enacted in

1984 and later was repealed by La. Acts 1996, Ist Ex. Sess.,

No. 2, § 1, effective April 16, 1996. The former article pro-

vided, in pertinent part:

In addition to general and special damages, exemplary

damages may be awarded, if it is proved that plaintiff's

injuries were caused by the defendant’s wanton or reck-

less disregard for public safety in the storage, handling,

or transportation of hazardous or toxic substances.

In support of its argument that article 2315.3 is inappli-

cable because the plaintiffs’ cause of action accrued prior to

its enactment, Exxon relies on the cases of Champagne v.

Celotex, 599 So. 2d 1086 (La. 1992) and Bulot v. Intra-

coastal Tubulars Services, Inc., 98-2105, p. 1 (La. App. 4

Cir. 2/24/99), 730 So. 2d 1012. In Champagne, the Supreme

Court considered whether to apply pre-comparative fault law

to tort claims filed by employees injured by long-term asbes-

tos exposure. Finding that all of the employees were injured

by long-term asbestos exposure before the 1979 comparative

fault law was enacted, the Court held that the pre-

comparative fault mechanism for allocating liability applied

even though the employees alleged that some exposure oc-

curred after the comparative fault law went into effect. /d. at

1088.

In Bulot v. Intracoastal Tubulars Services, Inc., 98-2105,

pp. 4-8 (La. App. 4 Cir. 2/24/99), 730 So. 2d 1012, 1015-16,

a personal injury case also involving the Grefer property and

ITCO’s operations, several former ITCO employees and the

40a

survivors of deceased employees filed suit against Exxon

and others for injuries caused by occupational exposure to

TERM scale and other toxic materials. The issue before us

was whether the plaintiffs could recover exemplary damages

if they or the decedents worked for ITCO prior to the enact-

ment of La. C.C. art. 2315.3 in 1984. We held that the La.

C.C, art. 2315.3 did not apply to claims filed by the living

employees, or to the survival claims filed by the survivors of

the deceased employees, but that it did apply to the wrongful

death claims of the survivors of those former employees who

died while La. C.C. art. 2315.3 was in effect.

On remand from the Supreme Court in Bulot v. Jntra-

coastal Tubulars Services, Inc., 98-2105, p. 1 (La. App. 4

Cir. 5/17/00), 761 So. 2d 799, we had to reconsider our deci-

sion in view of the Supreme Court’s recent holding in Walls

v. American Optical Corp., 98-0455 (La. 9/8/99), 740 So. 2d

1262.7° We again concluded that the application of La. C.C.

art. 2315.3 to survival actions is triggered by the date of ex-

posure, citing Cole v. Celotex Corp., 599 So. 2d 1058 (La.

1992). As to the wrongful death claims, based on the

Court’s holding in Walls, we concluded that La. C.C. art.

2315.3 was applicable because the cause of action arose after

the effective date of the amendment, noting that the law in

effect at the time of death is the law that applies to a wrong-

ful death action. Thus, the plaintiffs could seek exemplary

> In Walls, the Supreme Court addressed the issue of whether the

Workers’ Compensation Act, specifically La. R.S. 23:1032 as amended

in 1976, which extends tort immunity to executive officers, barred a

wrongful death action against the executive officers when the decedent’s

occupational exposures occurred entirely before the statute was amended,

but the death from silicosis did not occur until years after the amend-

ment’s effective date. The Court held that applying the 1976 amendment

to silicosis exposure that predated the statute, resulting in death after the

effective date of the statute, did not result in an impermissible retroactive

application of the law.

4la

damages in their wrongful death claims even though the de-

cedents’ exposure occurred prior to the enactment of article

2315.3 in 1984. Bulot, 98-2105 at p. 2, 761 So. 2d at 800-

01.

Thereafter, the Supreme Court in Bulot v. Intracoastal

Tubular Services, Inc., 2000-2161 (La. 11/13/00), 773 So. 2d

152, granted a writ intending to address whether the applica-

tion of La.C.C. art. 2315.3 to conduct arising prior to its ef-

fective date would be an improper retroactive application of

the article under Walls. However, in reviewing the record,

the Court determined that the plaintiffs had alleged each of

the decedents had some exposure to hazardous substances

after the effective date of La. C.C. art. 2315.3. Because the

case was before the Court on an exception of no cause of ac-

tion and the plaintiffs pled a cause of action for punitive

damages arising from post-1984 conduct, the Court recalled

the writ, stating that, “we express no opinion as to whether

plaintiffs could recover punitive damages for pre-1984 con-

duct.” Bulot v. Intracoastal Tubular Services, Inc., 2000-

2161, p. 2 (La. 2/9/01), 778 So. 2d 583, 584 n.4.

Thus, for the purpose of determining when La. C.C. art.

2315.3 applies, the relevant time period is the time the injury

occurs. In Quick v. Murphy Oil Co., 446 So. 2d 775, 780

(La. App. 4th Cir.1984), we stated:

We do distinguish, however, the time when a cause of

action arises from when prescription begins to run. A

cause of action arises when injury occurs, while prescrip-

tion begins to run only when the injured party becomes

aware of his injury.

Unlike Champagne and Bulot, which involved latent dis-

ease injuries, the contamination to the plaintiffs’ land oc-

curred as the result of Exxon’s conduct over a period of sev-

eral years. ‘need, the build up of NORM scale deposits on

the surface and subsurface of the Grefer property occurred

gradually during years of cleaning pipe on the premises. It is

42a

well settled that when a tort involves continuing injury, the

cause of action accrues at the time the tortious conduct

ceases. In re Med. Rev. Panel of Moses, 2000-2643, p. 16

(La. 5/25/01), 788 So. 2d 1173, 1183. Since no single inci-

dent in the continuous chain of tortious activity can be iden-

tified as the cause of significant harm, courts have held it

proper to regard the cumulative effect of the conduct as ac-

tionable. /d. at p. 20, 788 So. 2d at 1185.

The evidence in the record indicates that radioactive

scale was discharged from the used oilfield pipes from the

1960s through 1992 when ITCO terminated its lease. The

discharged scale was dumped, buried, and utilized through-

out the yard as road fill and surface material. In time, radio-

active contamination resulting from the NORM scale depos-

its was found in varying degrees throughout the Grefer tract.

The record also indicates that in March 1987, ITCO first

learned that Exxon’s used oilfield piping/tubulars contained

NORM, and it no longer cleaned NORM contaminated pipes

after that date. If we were to accept Exxon’s argument that

the plaintiffs’ cause of action accrued when ITCO began

cleaning Exxon’s NORM contaminated oilfield pipe in the

1960s, we would effectively excuse any punitive conduct

that occurred after the enactment of La. C.C. art. 2315.3,

provided it was a continuation of pre-enactment misconduct.

We do not believe this was the intent of the Louisiana legis-

lature in enacting the statute. Thus, for purposes of deter-

mining the applicability of La. C.C. art. 2315.3, we find the

plaintiffs’ cause of action accrued in March 1987, when

ITCO stopped cleaning Exxon’s NORM contaminated pipe

on the Grefer land. After that date, any piping/tubulars with

NORM levels reading SpCi/g or higher above background

were segregated to that portion of ITCO’s property leased to

Exxon.

43a

Conduct Under Louisiana Civil Code Article 2315.3

In its fifth assignment of error, Exxon argues that the

jury’s award of exemplary damages must be vacated because

the record does not support a finding that Exxon engaged in

wanton or reckless conduct. Exxon contends the La. C.C.

art. 2315.3 required the plaintiffs to prove that it sent

NORM-contaminated oilfield tubing to ITCO for cleaning

even though it knew public safety was at risk, or that it

should have known that it was “highly probable” that its con-

duct would harm the public. In other words, Exxon’s state of

mind had to be one of “conscious indifference to the conse-

quences, amounting almost to a willingness that harm should

follow.” Griffin v. Tenneco Oil Co., 531 So. 2d 498, 501

(La. App. 4th Cir. 1988). Exxon further argues that no rea-

sonable juror could have concluded that Exxon acted with

the quasi-criminal intent article 2315.3 required. See Oubre

v. Union Carbide Corp., 99-0063, p. 22 (La. App. 5th Cir.

12/15/99), 747 So. 2d 212, 227.

In contrast, the plaintiffs argue that they presented suffi-

cient evidence at trial to allow a reasonable person to con-

clude: (1) that Exxon acquired specific knowledge of the

dangers of the radioactive waste in its oil production and

specific knowledge of the procedures to protect against those

dangers in 1985; (2) that Exxon never adequately warned

ITCO of the danger; (3) that Exxon withheld information

from the Grefers; (4) that Exxon failed to take any steps to

prevent further contamination until 1987; and (5) that

Exxon’s preventative measures were inadequate.

The statute providing for exemplary damages for wanton

and reckless disregard for public safety in storage, handling

or transportation of hazardous or toxic substances must be

strictly construed, as it imposes a penalty. Bonnette v.

Conoco, Inc., 2001-2767, p. 27 (La. 1/28/03), 837 So. 2d

1219, 1236-37. To obtain an award of exemplary or punitive

damages under La. C.C. art. 2315.3, the plaintiff must prove:

44a

(1) that the defendant’s conduct was wanton and reckless by

proving that “the defendant proceeded in disregard of a high

and excessive degree of danger, either known to him or ap-

parent to a reasonable person in his position,” or that the de-

fendant engaged in “highly unreasonable conduct, involving

an extreme departure from ordinary care, in a situation where

a high degree of danger is apparent;” (2) that the danger cre-

ated by the defendant’s wanton or reckless conduct threat-

ened or endangered public safety; (3) that the defendant’s

wanton or reckless conduct occurred in the storage, handling

or transportation of hazardous or toxic substances; and (4)

that the plaintiff's injury was caused by the defendant’s wan-

ton or reckless conduct. /d.; Billiot v. B.P. Oil Co., 93-1118,

pp. 16-17 (La. 9/29/94), 645 So. 2d 604, 613.

Our review of the record discloses sufficient evidence to

support the jury’s finding that Exxon engaged in wanton and

reckless conduct. Exxon first learned of NORM contamina-

tion in oilfield drilling equipment in 1981, when Occidental

Petroleum discovered it on its platforms in the North Sea. At

that time, Dr. Andrew Lloyd Smith, a Scottish environmental

consultant, was working for Occidental Petroleum in the

U.K., and following the discovery, was a member of the

United Kingdom Offshore Operators Association (UKOOA)

Safety Committee that drafted and published the UKOOA

safety guidelines and Reference Manual that were given to

all oil companies operating in the North Sea. ITCO offered

Dr. Smith as a health and safety expert witness at trial. Ac-

cording to Dr. Smith, the reference manual was extensive

and covered both the identification of radioactive scale and

the procedure to follow up on such identification. The guide-

lines, promulgated by the oil and gas industry and approved

by the National Radiological Protection Board (“NRPB”),

recommended the specific steps to minimize or eliminate the

effect of NORM on public health and the environment. Dr.

Smith conceded that the UKOOA reference manual was de-

voted exclusively to NORM scale accumulating in the North

45a

Sea and, for all the industry knew, the NORM phenomena

was peculiar to oil production in that area.

Though Exxon was abreast of the problem, it took no ac-

tion to survey its wells elsewhere. The depositions of Mr.

John Rullman, Director of Exxon’s Eastern Division Envi-

ronmental and Regulatory Affairs, and that of Mr. Everett C.

Hutchinson, Exxon’s Assistant Director of Environmental

and Regulatory Affairs, were introduced into evidence and

read to the jury at trial. Mr. Rullman testified that he had

obtained a copy of the UKOOA safety guidelines and found

they were very onerous, restrictive, and inflexible. He also

admitted that he was not sure if at that time Exxon had the

same problem in the U.S. Mr. Hutchinson, too, believed the

UKOOA guidelines were unreasonable for Exxon’s produc-

tion operations in the U.S. Mr. Booher, Exxon’s industrial

hygienist, admitted that if Exxon had surveyed its wells prior

to the Chevron discovery in the U.S. in 1986, then it would

have discovered radium in its wellheads much sooner.

In May 1986, after learning of Chevron’s NORM discov-

ery in Mississippi, Exxon surveyed its Mississippi well sites

and found radiation accumulation in its equipment. Twice

Exxon officials were notified that the cleaning contractors

had to be informed of the radioactivity, as it posed a health

and safety hazard, but they still did nothing to warn them.

The evidence further reflects that by August 1986 Exxon

was clearly worried about governmental regulation and los-

ing the produced water exemption, which allowed it to dis-

pose of the by-product in an unregulated manner. A memo

written on August 28, 1986, by Mr. Howard Collier, Exxon’s

director of Environmental and Regulatory Affairs, stated,

“Chevron has taken a very high profile approach to handling

their discovery of radiation in Mississippi and many agencies

are now involved.” Mr. Collier expressed an interest in

“(getting} the industry and the regulatory agencies to slow

down.” Then he admitted,

46a

Chevron’s discovery is nothing new. After all, if there

wasn’t some radiation in down-hole formations, it would

be difficult to run a gamma ray log. My primary concern

is the current investigation and analysis not unduly influ-

ence the EPA who is in the process of deciding under

RCRA [Resource Conservation Recovery Act] whether

produced water should be classified as a hazardous waste

and handled as such.

Mr. Booher’s notes taken from comments made by Mr. Col-

lier at an Exxon NORM meeting in Houston on January 8,

1987, indicate the cost of losing the RCRA exemption for

produced water as $750 million in the first year and $150

million for each year thereafter. At that same meeting, sev-

eral Exxon officials concluded that notifying the cleaning

contractors would be “premature.”

Exxon was also concerned about litigation arising from

the NORM discovery in Mississippi. Street, Inc., a pipe yard

company in Mississippi, had filed suit against Chevron and

other oil companies (not Exxon), for $35 million, claiming

negligence for failure to advise that pipe delivered to it was

contaminated with radioactive material. Mr. Hutchinson, in

an internal memo copied to Mr. Rullman, recognized the

possible “need to manage the disposal of large accumula-

tions of contaminated scale, such as could occur at a pipe

yard.” Mr. Rullman, in a confidential memo dated October

14, 1986, noted [TCO was a potential “look alike” to Street,

Inc., and stated, “If potential exists for radioactive material

accumulation, perform low key radiation exposure measure-

ments;” “Coordinate ITCO plan with Eastern Division;” and

“Consider advisory letter to ITCO with Headquarters in-

volvement.” Still, Exxon did nothing to notify ITCO.

Eventually, Exxon sent the letter notifying the cleaning

contractors ef the NORM problem in March 1987, ten

months after it had identified the problem at its domestic

well sites. Even then Exxon downplayed the hazard, as evi-

47a

denced by Exxon’s meeting with ITCO. According to Mr.

John Hooper, Exxon’s videotape made the health risks asso-

ciated with NORM scale sound minor and the safety proce-

dure guidelines merely suggested taking precautions to avoid

breathing or ingesting airborne dust.

Exxon maintains that no reasonable juror could have

concluded that it knew about the NORM buildup in domestic

oil production tubing before 1986. We disagree. Although

the 1981 discovery of NORM inside drilling equipment was

limited to the North Sea area, by that time Exxon knew that

Shell Oil had found radioactive material in equipment at a

refinery in the U.K. The knowledge that radioactive material

had been found in both drilling and refining equipment in

that region of the world coupled with the fact that just a few

years earlier Exxon discovered radioactive deposits inside

equipment at several Texas gas plants, and concluded the

source was radon-222 entering the plants with the natural gas

stream coming from the wellhead, the jury could have con-

cluded that Exxon knew or should have known of the likeli-

hood of NORM contamination in domestic oilfield produc-

tion equipment before Chevron’s Mississippi discovery in

1986. Considering the integrated nature of Exxon’s opera-

tions, such a conclusion is reasonable. Also, in view of Mr.

Collier’s August 28, 1986 memo, stat

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