# Petition for Writ of Certiorari — EXXON MOBIL CORPORATION v. Grefer, 127 S. Ct. 1371 (2007) (No. 05-1670) > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386016_1111%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition for Writ of Certiorari - **Published:** January 1, 2007 ## Text : 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, V. 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 i 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. ii 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 ee re Pe csisinscerenssisanténtsszncnsniuis:satesseonmetine il PM CO FAT BIB C HD tisiscersvescenosesenticonsceersessntesssansains v PETITION FOR A WRIT OF CERTIORARI.............. ce l eT TUT cittaisslsniinpiiicipnisssieniniiddatmnicietniesnesiuileinsiltebiaiia l Fee Bee eivitassnsereeseitatenionts Siascdelalicisdiieaaidaindéiacitiie l CONSTITUTIONAL PROVISION INVOLVED ................ l aA TE AE OE Ci eitctecscnscsncenccscntsvsrsboesisnnnvianega l 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. iV 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 “ * Vv 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] vi 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).... 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”). 7 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. 8 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. 9 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 10 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. 1] 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 12 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 13 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 14 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 15 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. t 16 “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). 17 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 18 $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. 19 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 20 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). 21 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 22 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- 23 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)). 24 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- 25 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). 26 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 27 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. 28 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 29 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. 30 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, V. 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 2a 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 3a 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 4a 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. Sa 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. 6a 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 Ja 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. 8a 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. 9a 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 2. 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 o [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386016_1111%3A1. Public record. Not legal advice.