Opposition Brief — EXXON MOBIL CORPORATION v. Grefer, 127 S. Ct. 1371 (2007) (No. 05-1670)

JUL 24 2006

No. 05-1670

OFFICE QF THE CLERK

Jn The

Supreme Court of the Anited States

ous ¢ —

EXXON MOBIL CORPORATION,

Petitioner,

Vv.

JOSEPH GREFER, ET AL.,

Respondents.

> ———

On Petition For A Writ Of Certiorari

‘To The Louisiana Court Of Appeal,

Fourth Circuit

®

BRIEF IN OPPOSITION

+

STUART EH. SMITH STEPHEN [3. MURRAY

MictHakL G. Stac (Counsel of Record)

Smerru Sag, L.6.C. Artie M. MURRAY

365 Canal Street, Suite 2850 Murray LAW FIRM

New Orleans, Coutstana 70130 909 Poydras Street, Suite 2550

(504) 50-9600 New Orleans, Louisiana /0112

(50) 525-8 100

Attorneys for Respondents

i Additional Counsel On Inside Cover]

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{ regis i ‘8

mea SOI |

ANDREW B. SACKS

JOHN WESTON

LAW OFFICES OF ANDREW B.

SACKS AND ASSOCIATES

114 Old York Road

Jenkintown, Pennsylvania

19046

(215) 925-8200 _

RON A. AUSTIN

AUSTIN & ASSOCIATES, L.L.C.

400 Manhattan Avenue

Harvey, Louisiana 70058

(504) 436-7844

JACK W. HARANG

HARANG & BARKER, L.L.C.

3500 N. Hullen Street

Metairie, Louisiana 70002

(504) 456-8658

RALPH R. ALEXIS, III

PORTEOUS, HAINKEL &

JOHNSON, L.L.P

704 Carondelet Street

New Orleans, Louisiana 70130

(504) 581-3838

QUESTION PRESENTED FOR REVIEW

In this case, a Louisiana jury held Exxon Mohi!

Corporation liable for $56 million dollars in clean-up and

restoration costs as a result of Exxon’s contamination of

the Grefer family’s property. In addition. the jury awarded

one billion dollars in punitive damages against Exxon.

On appeal the Louisiana Court of Appeal for the

Fourth Circuit painstakingly reviewed the facts, and after

a determination that Exxon had indeed acted in a manner

to warrant the imposition of punitive damages. rigorous!v

and thoughtfully applied U.S. Supreme Court precedents

and reduced the jury’s punitive damage verdict to $112

million (a 2:1 ratio between punitive damages and com-

pensatory damages).

The sole question presented to the Court is whether

this Court should review the Louisiana Fourth Circuits

decision, considering the Fourth Circuit's strict adherence

in this case to the principles enunciated by this Honorable

Court in BMW of N. Am., Inc. v. Gore, 317 U.S. 559, 576-

77. 580, 581 (1996): Cooper Industries, Inc. v. Leatherman

Tool Group, Inc., 5382 U.S, 424 (2001): znd State Farm

Mut. Auto. Ins. Co. v. Campbel!, 538 U.S. dS 12003",

TABLE OF CONTENTS

(2) Exxon’s Conduct, Its Motivations For Such

Conduct, And The Effect Of Exxon’s Con-

duct On The Grefer Family And Their

INI iss cis ciuacitpedaseieadaibaaidanaiantipiientics

> Se III oc. crinsictusnidsiGcnmspiateuloaonntennideneebe

REASONS FOR DENYING THE PETITION ..............

I.

THE JURY’S CONSIDERATION OF THE

RISKS POSED BY EXXON’S CONDUCT

TOWARDS NON-PARTIES WAS PROPER;

MOREOVER, THE LOUISIANA FOURTH

CIRCUITS DECISION ENSURED THAT

NON-PARTY HARM WAS NOT THE BASIS

OF THE PUNITIVE AWARD, AND, CONSE-

QUENTLY, RESOLUTION OF THIS LAW-

SUIT SHOULD NOT BE PROLONGED

PENDING A DECISION IN THE WILLIAMS

A. The Fourth Circuit’s Decision Is Consis-

tent With State Farm And BMW In All Re-

B. Resolution Of The Issues This Court

Deemed Worthy Of Review In Williams

Would Have No Bearing On The Outcome

Page

QUESTION PRESENTED FOR REVIEW................... i

ee eRe ciswicincativicininnteniniciesinininieneinn ii

TABLE OF AUTHORITIES. ...............:ccccssssscceessreceeeseres iv

STATEMENT OF THE CASE ...............0.-...ssesccsseseeseesees 1

«IE frescdctiecespedcttteeestenninsnin 1

(TE) FER SACI FUG ocessccesccvessveresrconsvervesnors 1

11

11

IT.

IIT.

iii

TABLE OF CONTENTS -— Continued

Page

THIS COURT HAS ALREADY HELD THAT

THE STATES MAY CHOOSE THE PROCE-

DURE THEY DEEM APPROPRIATE TO EN-

SURE THAT PUNITIVE AWARDS COMPORT

WITH DUE PROCESS, AND ANY PUR-

PORTED CONFLICT IN THE LOWER

COURTS EITHER IS A BY-PRODUCT OF

THAT DISCRETION OR RELATES TO IM-

PROPER JURY CONSIDERATIONS NOT AT

ISSUE IN THIS CASE ..000..........eccssescsesssesesosees.

STATE FARM DID NOT IMPOSE A 1:1 CAP

ON “SUBSTANTIAL” PUNITIVE DAMAGE

AWARDS, AND EXXON’S ARGUMENTS

THAT THERE IS A CONFLICT IN THE

LOWER COURTS RELIES ENTIRELY ON

THE EXISTENCE OF SUCHACAP................

A. The 2:1 Ratio In This Case Is Entirely

Consistent With State Farm......................

B. The Fact That Every Substantial Punitive

Damage Award Since State Farm Has Not

Resulted In A 1:1 Ratio Does Not Mean

That This Court Needs To Resolve A Con-

flict In The Lower Courts ...........................

nh sc ase go IE,

20

24

24

TABLE OF AUTHORITIES

Page

CASES

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

Boeken v. Philip Morris, Inc., 127 Cal. App. 4th

1640, 26 Cal. Rptr. 3d 638 (Cal. App. 2nd Dist.

2005), cert. denied, 126 S. Ct. 1567, 164 L.Ed.2d

BOT, FS Se GOO CI th ercrrcivicnicersvcnineisniinnctsecttaie 25

Campbell v. State Farm Mut. Auto. Ins. Co., 98 P.3d

409 (Utah), cert. denied, 543 U.S. 874 (2004)............... 24

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

Be SF GI ee iccersitccintcciecrsnecsnienneiadaaaneaiien 22, 23

Exxon Mobil Corp. v. Grefer, stay denied, 126 S. Ct.

Be CHE bikcentinsncctavssrcscisvvenieieensaradaenemadiata 8,12

Grefer v. Alpha Technical, et al., 901 So.2d 1117

(La. App. 4th Cir. 2005), writ denied, 925 So.2d

CE Be ities cctturinncnsictvnticanenesecalanienadancaean 16

Pacific Mut. Life Ins. Co. v. Haslip, 499 U.S. 1

TIED sicincccinssisisspsibcacievnocntnnarectiniaiendadiediinanca aaa 29

Philip Morris USA v. Boeken, cert. denied, 126 S. Ct.

1567, 164 L.Ed.2d 297, 74 USLW 3308 (2006)..... 9, 28, 29

Philip Morris USA v. Williams, cert. granted, 126

S. Ct. 2329 (No. 05-1256) (2006) ..............cssseeeeeseees passim

Roman Catholic Church of the Archdiocese of New

Orleans v. Louisiana Gas Serv. Co., 618 So.2d

C76 CE. FID iaiticceveistsictcieicnnnaneneee 27

Riley v. Salley, 874 So.2d 874 (La. App. 4th Cir.

BOD tsisvnsiivbenininissiistenthnsninvatariavertatehanaaiadséane anal 23

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

SFE BD Te eesictitesvinckitcamnniciaivnanicancanine passim

Temple v. Liberty Mutual Ins. Co., et al., 330 So.2d

eal nctsecisevstcseveevnreeveoceseoveceserseesveecesces 23

Williams v. Philip Morris, Inc., 127 P.3d 1165 (Or.

2006), cert. granted in part, 126 S. Ct. 2329, 74

USLW 3572, 74 USLW 3665, 74 USLW 3668

LL ... « cunsecncesoneeneeveccorece 18

STATUTES

Louisiana Civil Code art. 2315.3 ...............ccccecsesssceeseees 7,19

Louisiana Admin. Code tit. 33

eo. cccoccncsncvecenevvsrrecennerenes 15

Louisiana Rev. Stat. Ann

a ccsvccsecnteceoerovereecserere 15

ae 23

OTHER AUTHORITIES

nn... ceuessneresereeeveuveeeceseeerens 10

WEBSTER’S NEW COLLEGIATE DICTIONARY 569 (7th

i coubecoseceesccorvevccenesces 15

PAGE 1 1S MISSING AT TIME OF FILMING

consisted of concentrated Radium-226, Radium-228, and

their daughter products, collectively known as Technologi-

cally Enhanced Radioactive Material (TERM).’ At Exxon’s

direction’, ITCO cleaned Exxon’s pipes and allowed the

waste to enter the environment in an uncontrolled fashion.

R. 33:14-18, 34:48-52. Specifically, the radioactive scale fell

from the pipes onto the ground when the pipes were trans-

ported in and around the yard, off-loaded by crane or forklift,

and cleaned by both portable and stationary air rattling

machines. Id.; R. 33:38-41, 34:49; Pl. Ex. 40-50. These

rattling machines used high pressure air compressors that

generated radioactive dust clouds. R. 33:17-19, 34:38. Aside

from the deposit of scale from ITCO’s cleaning operations,

the radioactive scale in the pipes was also randomly buried

and used as road and pipe rack building materials through-

out the yard daily during all years of operations. R. 33:39-41,

34:48-52; ITCO Ex. 193(D). Estimates of the average amount

of scale indicate that as much as 1.5 million pounds of scale

per cleaning machine was dispersed in the yard each year. R.

33:26, 29:10. This waste was never removed from the yard,

nor was there any record of a cleanup (of any sort).

The Grefers first discovered the existence of oilfield

radioactive waste on their property on October 29, 1996,

* The acronym TERM refers to the radioactive scale deposits found

in used oilfield drilling pipe. The acronym NORM is also used to

describe that condition. See Grefer v. Alpha Technical, footnote 11; Petr.

App. 12a. The evidence revealed that one of the daughter products of

Radium is Lead-210, which is chemically toxic as well as radioactive.

The decay of radium also generates Radon gas, which is a known

human carcinogen.

* Exxon maintained offices at ITCO for its employees who managed

materials, oversaw quality control, and supervised ITCO. R. 33:11-12,

46:40-41. The Grefers had no involvement with the industrial activities

conducted by ITCO and Exxon on the property. R. 39:115-18.

3

when Judge Joseph Grefer, one of the four co-owners of the

property, received a sampling report and laboratory

analysis confirming that the property was contaminated

with Radium, a radioactive material. R. 20:4946-48.

(2) Exxon’s Conduct, Its Motivations For Such

Conduct, And The Effect Of Exxon’s Conduct

On The Grefer Family And Their Property.

In determining that an award of punitive damages

was appropriate in the amount of $112 million, The Fourth

Circuit concluded that Exxon’s actions in despoiling the

Grefer property resulted from its “callous, -calculated,

despicable and reprehensible conduct during the time-

period in question” (Petr. App. 68a.) which showed that

Exxon had no concern for human safety, “and even less

concern about the property damage it caused” to the

Grefer family. Petr. App. 68a. Indeed, the following facts —

which, incidentally, were not mentioned in Exxon’s Writ

Application — clearly support such a finding:

Exxon first learned of NORM contamination in oilfield

drilling equipment in 1981, when Occidental Petroleum

Corporation discovered it on its platforms in the North Sea.

Petr. App. 6a. Following the discovery, the U.K. National

Radiological Protection Board (“NRPB”) did further testing

and identified the radioactive component as Radium-226;

Petr. App. 7a. All major oil companies operating in the North

Sea, including Exxon, were immediately made aware of

Occidental’s discovery through the United Kingdom Offshore

Operator’s Association (“UKOOA”) the oil industry trade

association. Petr. App. 7a. As a result of Occidental’s discov-

ery, the U.K. government held a conference in 1983 for all

major oil companies operating in the North Sea, including

Exxon, dedicated solely to the NORM problem. Petr. App. 7a.

In 1985, the UKOOA Safety Committee drafted and

published safety guidelines and a reference manual that

were distributed to all oil companies. The reference manual

extensively covered both the identification of radioactive

scale in wells and the procedure to follow up on such identifi-

cation. Petr. App. 7a. Upon reviewing these guidelines,

important Exxon officials felt that the guidelines were too

onerous, restrictive, inflexible and unreasonable for Exxon’s

production operations in the United States. Petr. App. 45a.

However, Exxon’s own hygienist admitted that had Exxon

surveyed its U.S. wells sooner than 1986, it would have

discovered radium in its wellheads sooner. Petr. App. 45a.

Chevron discovered NORM contamination in its well

sites in Mississippi in 1986. In May 1986, after learning of

Chevron’s discovery, Exxon surveyed its Mississippi well

sites and confirmed the presence of radiation in its equip-

ment. Twice Exxon officials were notified that its cleaning

contractors had to be informed of the radioactivity, since it

posed a health and safety hazard, but Exxon still did

nothing to warn them. Petr. App. 45a.

In fact, an internal memorandum written in August,

1986 by Exxon’s then Director of Environmental and Regula-

tory Affairs showed that Exxon’s “prime concern” after

Chevron’s NORM discovery wasn’t health and safety or

property clean-up — it was to get the oil industry and federal

regulatory agencies to “slow down” the investigation into

NORM contamination out of fear that the Environmental

Protection Agency (“EPA”) would increase its regulation and

would eliminate the “produced water” exemption under the

Resource Conservation Recovery Act (“RCRA”). Under that

exemption oil companies such as Exxon are allowed to

dispose of water produced during drilling operations in an

unregulated manner. Petr. App. 45a-46a.

5

Exxon’s entirely selfish motivations were further

demonstrated by evidence that the same Exxon official,‘ at

a meeting of Exxon executives concerning NORM in

January, 1987, calculated that the loss to Exxon if it were

~ to lose its produced water exemption would be $750

million in the first year and $150 million for each subse-

quent year. Petr. App. 46a.

At the same meeting several Exxon officials concluded

that notifying pipe-cleaning contractors such as ITCO

about the health and safety risks of NORM was “prema-

ture”. Petr. App. 46a. This was contrary to the advice of an

Exxon hygienist who had earlier opined that cleaning

contractors such as ITCO had to be notified of the pres-

ence of radioactivity. Petr. App. 7a-8a

Another confidential memo written by another Exxon

executive in October, 1986, showed that Exxon wanted to

downplay the NORM problem because of Exxon’s potential

exposure to litigation. The memo noted that litigation

against Chevron by one of its pipe yard contractors had

followed Chevron’s disclosure of NORM contamination. The

same memo noted that ITCO was a potential “look alike” to

the Chevron contractor and suggested Exxon perform “low

key” radiation exposure measurements. Petr. App. 46a.

Exxon did not send any notification to ITCO until

March, 1987 — five months after the October, 1986 memo,

and ten months after it had identified the NORM problem at

its domestic well sites, causing further (and still unrestricted)

contamination of the Grefer property. Even then, Exxon

downplayed the problem. In a videotape played for ITCO’s

president, Exxon portrayed the health risks associated with

* The same Exxon official also wrote that Chevron’s discovery was

“nothing new”. Petr. App. 45a-46a.

6

NORM as minor, and the safety procedure guidelines as

merely suggestive of taking precautions to avoid breathing or

ingesting airborne dust. Petr. App. 46a-47a. Exxon’s inade-

quate warning did nothing to protect the Grefer property from

further contamination or to address the problem already

existing at the property.

Even after Exxon no longer used [TCO as a cleaning

contractor, Exxon was aware that contaminated equipment

remained stockpiled on the Grefer property and was further

aware of the danger posed by NORM-contaminated scale;

yet Exxon took no step to remove its radioactive material

from the Grefer property. Petr. App. 50a-52a.

At no point, did Exxon notify or warn the Grefer family

about the contamination at their property. R.20:4946-48.

Rather, Exxon knowingly and intentionally left the Grefer

family with a huge mess. As a result of the radioactive

contamination described above, the Grefers’ long-held

family property was despoiled. Petr. App. 5la. Exxon’s

actions financially burdened the Grefers with the task of

cleaning up the property. Petr. App. 5la. That burden,

according to the jury, was $56 million (not the $1.5 million

market value of the land asserted by Exxon). (Pet. 28).

This was less tian the estimate of plaintiff’s expert, Mr.

Stanley Waligora, and more than that of Exxon’s expert.’

Petr. App. 33a-34a. The Fourth Circuit determined that

* Mr. Waligora’s remediation plan was based not only on State of

Louisiana, Department of Environmental Quality Regulations, but also

on the more stringent United States Environmental! Protection Agency

(“EPA”) and Nuclear Regulatory Commission (“NRC”) guidelines. Petr.

App. 33a-34a. Given the twenty-four year history of significant and

unrestricted nen-homogeneous contamination at the Grefer tract, Mr.

Waligora’s plan also called for the removal and testing of the top two

feet of soil at the site to ensure that the entire property was safe. R.

29:22, 29:36, 33:163-64, 33:166.

there was sufficient evidence to support the jury’s award,

and left the award undisturbed. Petr. App. 6la; 67a-68a.

That judgment is now final.°

Exxon’s actions have not only exposed the Grefers to the

expense of defending claims brought by third parties as a

result of the contamination of the Grefer property but have

also exposed the Grefers to significant potential liabilities.

Petr. App. 71a. In fact, a number of suits have already

been instituted against the family.

B. Proceedings Below

The Grefers filed the instant suit in August of 1997 to

recover damages for the burial, concealment, and disposal

of radioactive scale throughout the Grefer tract. They

sought compensatory damages for the costs of restoration,

general damages associated with the damage to the Grefer

tract, and exemplary (punitive) damages under Louisiana

Civil Code art. 2315.3. Resp. App. 5a. After a five-week

trial, the jury found Exxon 85% at fault, ITCO 5% at fault,

and two absent defendants 10% at fault. The jury ren-

dered a verdict of: (1) $56 900,000.00 for the cost of reme-

diating the contaminati.. at the Grefer tract; (2)

$145,000.00 in general damages associated with the

damage to the Grefer tract; and (3) one billion dollars in

punitive damages assessed against Exxon. Both Exxon

and ITCO appealed the jury’s verdict. The Fourth Circuit

affirmed the judgment in its entirety but reduced the

punitive award to an amount equal to twice the compensa-

tory damage award. Petr. App. 6la, 67a-69a. Both the

* Indeed, Exxon has unconditionally paid that amount, with

interest, to the Grefer family. See Exxon’s Motion For Stay and Re-

newed Motion For Stay, ExxonMobil v. Grefer, Joseph, et al, No. 05A981.

plaintiffs and Exxon applied for Writs of Certiorari to the

“Louisiana Supreme Court. The Louisiana Supreme Court

denied both Writ Applications on March 31, 2006. Petr.

App. 73a.

On or about April 5, 2006, seeking to stay execution of

the punitive damage award, Exxon filed in the Supreme

Court of Louisiana an “Emergency Motion to Stay Execu-

tion of Judgment”. The court denied the Motion on April

24, 2006. Resp. App. 3a-4a.

On April 27, 2006, Exxon filed a Motion to Stay in this

Honorable Court. Justice Scalia denied the Motion on May

1, 2006. See Exxon Mobil Corporation v. Grefer, Joseph, et

al, No. 05A981. On May 1, 2006, Exxon filed a Renewed

Motion to Stay, which was referred to all members of this

Court, and was then denied on May 15, 2006. See Exxon

Mobil Corp. v. Grefer, 126 S. Ct. 2056 (2006).

Exxon now applies to this Honorable Court for a Writ

of Certiorari to the Louisiana Court of Appeal, Fourth

Circuit.

¢

REASONS FOR DENYING THE PETITION

This Court has_already examined the same issues

raised by Exxon in its petition, as they relate to this case.

Id. On May 1, 2006, after having been denied a stay by

Justice Scalia, Exxon filed a renewed application for stay,

directing it to Justice Kennedy. Jd. Exxon’s renewed

application was promptly referred to the entire Court and

denied on May 15, 2006. /d.

Now, fully appreciating (though not mentioning) the

implications of this Court's stay denial, Exxon focuses its

brief on an entirely different lawsuit — Philip Morris USA

v. Williams, cert. granted, 126 S. Ct. 2329 (No. 05-1256)

(2006). The reason for this, of course, is that Williams,

unlike this case, involves issues which the Court has

already determined merit review. Indeed, each of Exxon’s

three “reasons for granting the petition” incorporate a

request that a grant of certiorari in this case be tied, in

some way, to this Court’s ultimate holding in the Williams

case. Pet. 9, 16, 17, 22, 27, 30. Exxon’s hope is that the

Court will indefinitely delay an outcome in this case

pending a decision in Williams, and then, without further

review or discussion, send this case back to the Louisiana

state court for a new trial on the punitive damages award.

Exxon’s overt attempt to “piggy back” its way to a grant of

certiorari and subsequent reversal in this case is fatally

flawed.

First, Exxon assumes that the issues in Williams are

present in this case. As discussed below, the only common

element that the Williams case and this case share is that

both involve a due process challenge to a punitive award.

The issues this Court felt worthy of review in Williams are

simply not issues in this case.

Second, Exxon ignores the fact that certiorari was

granted in Williams only fifteen days after the stay applica-

tion in this case was denied. Presumably, this Court was

aware of the issues in the Williams case when it denied the

stay in this case, yet it did not grant the stay application.

Third, this Court denied certiorari only two months

earlier in another smoker personal injury case — Philip

Morris USA v. Boeken, cert denied, 126 S. Ct. 1567, 164

L.Ed.2d 297, 74 USLW 3308 (2006). The denial of certio-

rari in Boeken demonstrates that Exxon is reading too

much into the grant of certiorari in Williams, stretching

and pulling the issues in that case as far as possible,

10

desperately trying to demonstrate that this case will

somehow be affected by the Court’s ultimate decision in

Williams.

Once the Court properly removes the layers and

layers of Williams “tie-ins” from Exxon’s Petition for a Writ

of Certiorari, there is little more to Exxon’s petition than a

general cemplaint about the outcome in this case (i.e.,

according to Exxon, the entire Louisiana court system

erred, as a matter of law and on a constitutional level, by

reducing the award from 18:1 to 2:1, instead of 1:1). That

is far from sufficient to justify this Court exercising its

supervisory review. As Supreme Court Rule 10 makes

abundantly clear, “[a] petition for a writ of certiorari is

rarely granted when the asserted error consists of errone-

ous factual findings or the misapplication of a properly

stated rule of law.” Sup. Ct. Rule 10.

The decision of the Fourth Circuit Court of Appeals for

the State of Louisiana is sound. It is a well-reasoned and

detailed opinion that follows this Court’s guidance in

BMW, Cooper, and State Farm to the letter. There is

simply no reason for the Fourth Circuit or a new jury (as

suggested by Exxon) to reconsider the judgment in this

case. Exxon’s conduct was wanton and reckless under

Louisiana law.’ Petr. App. 48a. A Louisiana jury rendered a

punitive award to punish and deter that conduct. Petr.

App. 64a. The Louisiana Fourth Circuit reduced the award

by almost $900 million, taking into consideration due

process constraints. Petr. App. 57a. The Louisiana Su-

preme Court refused to grant writs and denied Exxon’s

subsequent stay application. Resp. App. 3a-4a. This Court

"In fact, the Fourth Circuit called Exxon’s conduct “callous,

calculated, despicable and reprehensible.” Petr. App. 68a.

i

denied Exxon’s stay application, taking into consideration

the likelihood of a grant of certiorari and/or an ultimate

reversal of the decision. See Exxon Mobil Corporation uv.

Grefer, stay denied, 126 S.Ct. 2056 (2006). Exxon is

looking for relief that is not justified by the facts and the

law in this case. Yet, Exxon continues to seek relief from

this, the highest court in the land.

I. THE JURY’S CONSIDERATION OF THE RISKS

POSED BY EXXON’S CONDUCT TOWARDS

NON-PARTIES WAS PROPER; MOREOVER,

THE LOUISIANA FOURTH CIRCUIT’S DECI-

SION ENSURED THAT NON-PARTY HARM

WAS NOT THE BASIS OF THE PUNITIVE

AWARD, AND, CONSEQUENTLY, RESOLUTION

OF THIS LAWSUIT SHOULD NOT BE PRO-

LONGED PENDING A DECISION IN THE WIL-

LIAMS CASE.

A. The Fourth Circuit’s Decision Is Consistent

With State Farm And BMW In All Respects.

At the outset of its first argument, Exxon details

record evidence relating to the risks Exxon’s conduct posed

to the public, as well as jury instructions in any way

referencing the risks Exxon’s conduct posed to the public.

Pet. 10. Exxon wants this Court to believe that the trial of

this matter was “tainted” by improper evidence and

instructions relating to non-parties and, by extension, the

award must have been “tainted.” Nothing could be further

from the truth.

A preliminary problem with Exxon’s position is that

neither the evidence listed nor the jury instructions

mentioned in Exxon’s Petition were raised as a basis for

reversal during Exxon’s appeal. Petr. App. 14a. In fact, a

1Z

number of the “objectionable” exemplary damage instruc-

tions mentioned by Exxon in its Petition were proposed by

Exxon. See, e.g., R. 18:231; Resp. App. la-2a.

Another problem with Exxon’s position is it ignores

Louisiana law. Article 2315.3 of the Louisiana Civil Code

(Resp. App. 5a) provided for punitive damages, during the

time period in question, if the plaintiff’s harm was caused

by the “wanton or reckless disregard of public safety in the

storage, handling, or transportation of hazardous or toxic

substances.” LA. Civ. CODE art. 2315.3 (Resp. App. 5a)

(repealed 1996) (emphasis added). The evidence submitted

by the Grefers relating to the risks to the public posed by

Exxon’s conduct was required to demonstrate a violation of

this statute and, as such, was properly admitted.

Even if the risks posed to non-parties by Exxon’s

conduct was not required to demonstrate a violation of

Louisiana Civil Code art. 2315.3 (it was), such evidence

could be admitted as it was related to the reprehensibility

of Exxon’s conduct. Under BMW, one of the factors to

consider when determining the reprehensibility of a

defendant’s conduct is whether or not the conduct “evinced

an indifference to or disregard of the health or safety of

others.” BMW of N. Am., Inc. v. Gore, 517 U.S. 559, 576-77

(1996). Consistent with that, State Farm instructs that the

possible effects of a defendant’s conduct on non-parties

may be considered when assessing reprehensibility. See

State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408,

419-23 (2003). However, Exxon argues that the evidence

considered falls under the exception to this rule because,

according to Exxon, the conduct towards non-parties in

* This is one of the many reasons that the various instructions

relating to such evidence were properly given.

B

this case has no “nexus to the specific harm suffered by

the plaintiff.” Pet. 11. This argument ignores the facts.

State Farm instructs that “evidence of other acts need

not be identical to have relevance in the calculation of

punitive damages.” State Farm, U.S. 538 at 423. Faced

with the Utah court’s consideration of and reliance upon

wholly unrelated out-of-state conduct, the Court also held

that non-party conduct bearing “no relationship” to or

having “nothing to do with” the harm to the plaintiff(s)

cannot be used to support the constitutionality of a puni-

tive award. Jd. at 422, 424. In this case, Exxon’s conduct

towards the ITCO employees who worked at the Grefer

tract and the homeowners who lived around the Grefer

tract is inextricably intertwined with (and, in some in-

stances, identical to) Exxon’s conduct towards the Grefers

and their property (i.e., the Grefer tract).

For twenty-four years, Exxon directed that its pipe

service contractor clean used oilfield tubing contaminated

with radioactive materials. R. 33:14-18, 34:48-52 (“The

evidence in the record indicates that radioactive scale was

discharged from the used oilfield pipes from the 1960s

through 1992 when ITCO terminated its lease.”); Petr. App

42a. This waste was distributed throughout the Grefer

property during that time frame. Petr. App. 42a, R. 33:17-

19, 33:38-41, 34:38, 34:48-52. When Exxon discovered that

there was a risk associated with its operations, it did

nothing to warn ITCO for almost a year and, in turn,

allowed the Grefer property to be further (and unrestric-

tively) contaminated during that time. Petr. App. 5a-7a. The

“warning” finally given, according to the record evidence,

downplayed the risks and failed to fully inform ITCO

about the problem. Petr. App.8a. (“Exxon’s representatives

made no mention of the possible build-up of radioactive

NN EOE

14

scale on ITCO’s premises even thought it knew pipe scale

had been accumulating on the premises for years and had

learned in June 1986 that it was hazardous.”), Petr. App.

47a; R. 36:151, 154, 46:46-50, 47:20. More importantly,

Exxon never told the Grefers about the contamination at

the site. It certainly never warned them about anything.’

Rather, Exxon continued to send pipe to ITCO for cleaning

at the Grefer property.” R. 47:39. Six years later, when

Exxon finally decided that the potential liabilities associ-

ated with the continued disposal of radioactive material at

the Grefer tract had become too great, it stopped sending

pipe to ITCO (effectively putting it out of business) and

abandoned the yard, leaving its radioactive material at the

* The record evidence indicates that the Grefers first learned of the

existence of oil field radioactive waste on their property on October 29,

1996, when Judge Grefer, one of the four co-owners of the property,

received a sampling report and laboratory analysis from the attorney of

an ITCO worker confirming that the property was contaminated with

Radium, a radioactive material. R. 20:4946-48. The surrounding neighbor-

hood was likewise left in the dark by Exxon.

* After March of 1987, screening procedures were established by

ITCO. R. 33:36-37; R. 46:52-53. However, the record evidence demon-

strates these screening procedures did not prevent additional radioac-

tive scale from contaminating the Grefer tract. As Mr. Waligora pointed

out at trial, “you can’t always tell what's in the pipe from an outside

measurement.” R. 36:167-68. For example, Exxon had taken a meas-

urement outside of a pipe which read background, and when the scale

inside the pipe was measured, it read 170 pCi/g. R. 38:132-36. Fur-

thermore, [TCO’s pipe measurements were fundamentally flawed as an

ITCO worker testified that he usually obtained his background reading

by sampling soil (one sample) approximately 10 to 15 feet away from

where he was about to measure. R. 33:37. Inflated background readings

can lead to the cleaning of pipe emitting unsafe levels of radiation.

Finally, even the segregation process would have led to contamination.

Trial testimony indicated that scale was frequently dislodged from

pipes as they were moved from place to place. R. 33:41.

15

Grefer tract. Petr. App. 52a; R. 47:39-40. In short, the

Grefers were left “holding the bag”.

The Grefers, as the landowners, faced (and still face

today) significant potential liabilities with respect to the

ITCO workers and to the surrounding neighbors.” The

Grefers also faced potential state and federal enforcement

actions (as well as associated fines) for storing radioactive

material without a license. See, e.g., LA. ADMIN. CODE tit.

33, § 1401 et seq.; La. REv. Stat. ANN. § 30:2025 (E)(1)(a).

Not having the funds required to clean such extensive

contamination, the Grefers’ potential liabilities grew with

each passing day. Given the significant cloud on their title,

the Grefers could not even sell or transfer the property to

stop the bleeding.

Certainly, Exxon’s conduct towards ITCO, its workers

and the surrounding neighbors has a “nexus” to the harm

suffered by the Grefers.” As the Fourth Circuit held:

... In reviewing an award of punitive/exemplary

damages, we have the responsibility of looking

to the callous, calculated, despicable and repre-

hensible conduct of Exxon during the time period

in question. Even though this case is not a per-

sonal injury claim by the ITCO workers, the

mindset of Exxon should be considered in decid-

ing whether the sum awarded was appropriate.

The fact that Exxon showed no regard for ITCO’s

workers, i.e., no concern for human safety, cer-

tainly demonstrates that it had even less concern

" While Exxon eagerly pointed out the cases it is being sued in as a

result of its conduct at the Grefer tract, it failed to mention that the

Grefers are also defendants in those suits. Pet. 11.

“ “Nexus” is defined simply as a connection or a link. WEBSTER’S

NEW COLLEGIATE DICTIONARY 569 (7th ed. 1963).

16

for the property damage that it caused, thus fur-

ther demonstrating the morally culpable nature

of its conduct. Grefer v. Alpha Technical, 901,

So.2d 1117, 1154-55 (La. App. 4th Cir. 2005), writ

denied, 925 So.2d 1248 (La. 2006); Petr. App.

68a, (Emphasis supplied).

The Fourth Circuit’s conclusion that a nexus exists

between Exxon’s conduct towards non-parties and the

harm to tire Grefers is amply supported by the record. For

instance, Exxon’s failure to tell anyone about the contami-

nation at the Grefer tract (whether for one year in the case

of ITCO or never in the case of the Grefers) not only put

ITCO’s workers and the surrounding neighbors at risk but

also led to further contamination of the Grefer tract.

Additionally, its failure to praperly warn ITCO (when a

warning was finally given) and its failure to implement

adequate screening and handling procedures at the yard,

not only put ITCO’s workers and the surrounding

neighbors at risk but also led to even more contamination.

Most importantly, Exxon’s failure to remediate its damage

(at any point) not only put ITCO’s workers and the sur-

rounding neighbors at risk but also left the Grefers with a

huge mess.”

* This was clearly a fact the Court considered during its reprehen-

sibility analysis. When discussing the financial vulnerability factor, the

Court found that the Grefers “are now financially burdened with the

task of remediating the property.” Petr. App. 51a. Later in its reprehen-

sibility analysis, the Court also found that “Exxon took no step to

remove the radioactive material” from the Grefer tract. Petr. App. 52a.

Exxon’s assertion that the Fourth Circuit found Exxon’s conduct

reprehensible based “solely” on “Exxon's failure to give timely notice to

ITCO” is flatly controverted by these portions of the Fourth Circuit's

reprehensibility analysis.

17

Additionally, the risk posed by Exxon’s conduct to-

wards ITCO’s workers and the surrounding neighbors is

directly related to the potential harm to the Grefers. To be

specific, given the fact that the Grefers are potentially

liable to third parties under Louisiana law (as owners of

the property), the nature and extent of the risks posed to

third parties demonstrates this potential harm to the

Grefers and, in turn, is a valid consideration under the

second BMW guidepost. See State Farm, 538 U.S. at 425

(confirming that the second BMW guidepost considers the

ratio between the “harm, or potential harm, to the plaintiff

and the punitive damages award”).

Though Exxon quotes State Farm and BMW exten-

sively, it fails to demonstrate that any portion of State

Farm or BMW has been ignored or challenged. The reason

for this is simple. The Fourth Circuit’s opinion follows this

Court’s guidance to the letter.

B. Resolution Of The Issues This Court

Deemed Worthy Of Review In Williams

Would Have No Bearing On The Outcome

Of This Case.

At the very beginning of its argument on the non-

party harm issue, Exxon, pointing to the grant of certio-

rari in Williams, makes the following general statement:

“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.” Pet. 9. There are a number

of problems with Exxon’s statement.

While Exxon properly cites the second issue this Court

deemed worthy of review in Williams, it entirely ig-

nores/disregards the first issue made subject to the grant

18

of certiorari. That first issue, which asks whether or not

the reprehensibility guidepost can override an otherwise

unconstitutional ratio, necessarily controls and limits the

second issue. Put another way, utilizing reprehensibility (a

guidepost that, in part, considers conduct directed at non-

parties) to “trump” a ratio which, considering the harm to

the plaintiffs, is constitutionally excessive, raises concerns

that the award may be punishing a defendant for harms to

non-parties. Limited by the first issue in this respect, the

second issue appears far less expansive than Exxon

suggests. After all, standing on its own, the issue of

whether a defendant can be punished for harm to non-

parties has already been answered by this Court. See State

Farm, 538 U.S. at 423. It is an established rule of law that

does not require the Court’s review. See id.

Appreciating the apparent scope of the second issue in

Williams, the question becomes: What, if any, effect would

resolution of that issue (or the first issue for that matter)

have on this case? The answer is none.

In Williams, a smoker personal injury suit, the Oregon

Supreme Court conceded that the almost 100:1 ratio in the

case was constitutionally excessive but then held that the

harm caused by Philip Morris’ highly reprehensible

conduct (much of it being extra-territorial conduct) justi-

fied the award.” Williams v. Philip Morris, Inc., 127 P.3d

* Even if the Court intends to consider this issue in the more

general sense asserted by Exxon, as will be discussed below, the

punitive award does not punish Exxon for the effects of its conduct on

non-parties. Consideration of that issue, therefore, would have no

bearing on the outcome of this case.

* Extra-territorial conduct, a significant concern when considering

the propriety of punitive damage awards (as the states are generally

supposed to limit punishment to conduct within their respective

borders), is not at issue under the facts of this case. The conduct at

(Continued on following page)

19

1165, 1181-82 (Or. 2006), cert. granted, 126 S. Ct. 2329, 74

USLW 3572, 74 USLW 3665, 74 USLW 3668 (2006) (No.

05-1256). In fact, the court specifically relied upon the

harm to non-parties (most of whom did not live in Oregon)

as its basis for upholding the award. Id. This is, at least

arguably, a departure from the guidance of BMW and

State Farm.

Unlike the almost 100:1 ratio in Williams, the 2:1

ratio in this case is not constitutionally excessive under

BMW or State Farm (this issue is discussed extensively in

Section III below). Furthermore, unlike the situation in

Williams, harm to non-parties was never discussed or

considered by the Fourth Circuit. Petr. App. 48a-57a. Even

the risk posed to non-parties by Exxon’s conduct was only

considered during the court’s reprehensibility analysis.

Petr. App. 50a-55a. In fact, though it was not the reason

for its reduction,” the court noted during its ratio analysis

that the evidence of risk to the surrounding neighbors and

Exxon’s wealth (both properly before the jury under

Louisiana law) possibly contributed to the ratio being

constitutionally excessive.” Petr. App. 54a-55a. As the

issue in this case occurred within Louisiana’s borders, at a Louisiana

property. Petr. App. 10a.

* It is clear from a plain reading of the Fourth Circuit’s decision

that the reduction to 2:1 was based on this Court's ratio discussion in

State Farm (and nothing else). Petr. App. 52a-53a (“Considering the

substantial compensatory damages awarded in this case, in our opinion

a lesser single digit ratio would be appropriate.”).

" Por the reasons set forth in Section I.A. above, the Grefers

disagree with the Fourth Circuit’s assertion that the evidence of risk to

the surrounding neighbors was “irrelevant.” Indeed, the court’s

statement conflicts with its holding that, to demonstrate a violation of

article 2315.3, the Grefers had to prove that “the danger created by

{Exxon’s}] wanton or reckless conduct threatened or endangered public

safety.” Petr. App. 44a.

20

Fourth Circuit expressed concern that the risk posed to

non-parties may have factored into the jury’s excessive

punitive award, there is no possibility that the court relied

on non-party harm as a basis for its punitive award in this

case. This is supported by the fact that the court focused

solely on the Grefers’ actual harm ($56,145,000) when it

concluded that the $112,290,000 punitive award in this

case is constitutionally permissible. Petr. App. 57a.

As reprehensibility was not used to support a consti-

tutionally excessive ratio in this case, resolution of the

issues in Williams will have no bearing on the Fourth

Circuit’s opinion. Moreover, given the fact that the 2:1

ratio in this case was based solely on the actual harm to

the plaintiffs, there is no risk of duplicative punishment.

For these reasons, in addition to the fact that Exxon’s writ

issue has no inc 2pendent merit and should be denied,

holding this case pending resolution of the Williams case

would be entirely unwarranted.

Il. THIS COURT HAS ALREADY HELD THAT THE

STATES MAY CHOOSE THE PROCEDURE

THEY DEEM APPROPRIATE TO ENSURE

THAT PUNITIVE AWARDS COMPORT WITH

DUE PROCESS, AND ANY PURPORTED CON-

FLICT IN THE LOWER COURTS EITHER ISA

BY-PRODUCT OF THAT DISCRETION OR RE-

LATES TO IMPROPER JURY CONSIDERA-

TIONS NOT AT ISSUE IN THIS CASE.

Exxon specifically requested that the Fourth Circuit

reduce the punitive award in this case. Petr. App. 14a.

" The Fourth Circuit made this point abundantly clear in its

rehearing denial. Petr. App. 68a.

21

Nevertheless, Exxon now argues, without jurisprudential

support, that due process protections entitled it to a new

trial on punitive damages, rather than a reduction to

constitutional limits. Pet. 18-19.

In an attempt to justify its argument, Exxon asserts,

in very contradictory fashion, that the Court has not yet

addressed the issue. To be specific, on the one hand, Exxon

claims that “BMW asked this Court to address this issue

... but it did not ultimately reach that issue.” Pet. 18. On

the other hand, Exxon recognizes that the Court held

“therein” that the “appropriate remedy” for the constitu-

tional error “is a matter that should be addressed by the

state court in the first instance.” Jd. How can Exxon

interpret that to mean that this Court did not reach the

issue? Of course the Court reached the issue, and its

answer was very clearly that the remedy is a matter of

state concern. As the issue is a procedural one, this Court

has left the choice between reducing an award to constitu-

tional limits and ordering a new trial to the states. That is

the current rule of law, and any conflict in the lower courts

is a logical by-product of the various states handling

procedure in the manner they deem appropriate. So long

as due process protections are afforded by the state’s

procedure, this Court, under BMW, has indicated that it

will not get involved.

The current rule of law, as established in BMW, is

sound. The guideposts inherently protect against the

courts considering non-party harm to justify an otherwise

constitutionally excessive award. To be specific, the ratio

analysis requires that the punitive award be proportionate

to the actual and potential harm to the plaintiff{s). See

State Farm, 538 U.S. at 424. So, long as there is propor-

tionality with respect to the plaintiff’s harm, then the

22

court can rest assured that non-party harm is not at issue

in the award (even if conduct directed towards non-parties

was considered by the jury as an element of reprehensibil-

ity).” If, under state law, the lower court can achieve

proportionality (where it is otherwise lacking) through a

reduction to constitutional limits, this Court has indicated

that such a procedure is acceptable. See generally Cooper

Indus., Inc. v. Leatherman Tool Group, Inc., 532 U.S. 424

(2001).

Recognizing that the law on this issue is quite clear,

Exxon argues that it should have received a new trial on

the punitive damage award because the award was,

according to Exxon, tainted by “improper” jury considera-

tions. Pet. 19. The problem with this argument is that it is

based entirely on an unsupported conclusion in an earlier

Exxon argument (a by-product of trying to tie all its issues

to the grant of certiorari in Williams). As was amply

demonstrated in Section I above and, more to the point, in

the Fourth Circuit’s opinion, the evidence and instructions

relating to the risks posed by Exxon’s conduct towards

non-parties were proper in light of both Louisiana Civil

Code art. 2315.3 (Resp. App. 5a) and BMW reprehensibil-

ity considerations. Additionally, the evidence and instruc-

tions were proper because the risks posed by Exxon’s

conduct towards non-parties related directly to the Grefers’

potential harm (i.e., potential legal liability). Exxon’s

argument, premised on the incorrect assumption that the

evidence and instructions relating to conduct directed

towards non-parties was improper, necessarily fails. The

* It is only when there is not proportionality and the court,

nevertheless, upholds the award based on the reprehensibility guide-

post (as was the case in Williams) that duplicative punishment issues

arise.

23

four pages Exxon spends attempting to demonstrate a

conflict in the lower courts over this issue are of no mo-

ment. Pet. 19-22. Even supposing those cases (the majority

of which involve considerations of extra-territorial conduct

not present in this case) demonstrate a valid conflict

worthy of review, this case does not involve improper jury

considerations. As such, there is no basis for this case to be

the vehicle for that issue to be decided.

Moreover, Exxon’s argument runs afoul of this Court’s

instruction in Cooper. Under Cooper, the constitutionality

of punitive damage awards is to be reviewed de novo.

Cooper, 532 U.S. at 436 (“Our decisions in analogous cases,

together with the reasoning that produced those decisions,

thus convince us that courts of appeals should apply a de

novo standard of review when passing on district courts’

determinations of the constitutionality of punitive dam-

ages awards.”).” Exxon entirely disregards the Cooper rule

when it argues that a court can only sometimes decide for

itself what award would be sufficient to alleviate due

process concerns. In essence, Exxon wants de novo review

when its interests are served by such review, but other-

wise, it wants a new trial by jury. That is an entirely

unreasonable position and one which does not merit this

Court’s review.

” The Cooper analysis mirrors Louisiana’s long-existing law. The

Louisiana Constitution provides for appellate review of both law and

fact. When a Louisiana appellate court determines that trial errors may

have influenced a jury’ award, the appellate court is under a duty to

review de novo the law and the facts and to render a judgment based

upon that independent review. LA. Const. art. 5, § 10(B); Temple v.

Liberty Mutual Ins. Co., et al, 330 So.2d 891, 892 (La. 1976) and Riley v.

Salley, 874 So.2d 874, 878 (La. App. 4th Cir. 2004).

24

Ill. STATE FARM DID NOT IMPOSE A 1:1 CAP ON

“SUBSTANTIAL” PUNITIVE DAMAGE AWARDS,

AND EXXON’S ARGUMENTS THAT THERE IS

A CONFLICT IN THE LOWER COURTS RE-

LIES ENTIRELY ON THE EXISTENCE OF

SUCH A CAP.

A. The 2:1 Ratio In This Case Is Entirely Con-

sistent With State Farm.

Decided only three years ago, the State Farm decision

provided further guidance with respect to the application

of the BMW guidelines. For example, the Court instructed

that “in practice, few awards exceeding a single-digit ratio

between punitive and compensatory damages, to a signifi-

cant degree, will satisfy due process.” State Farm, 538 U.S.

at 425 (emphasis added). The Court also advised that

“when compensatory damages are substantial, then a

lesser ratio, perhaps only equal to compensatory damages,

can reach the outermost limit of the due process guaran-

tee.” Id. (emphasis added). However, the Court “decline[d]

again to impose a bright-line ratio which a punitive

damages award cannot exceed.” Jd. It reaffirmed that “the

precise award in any case, of course, must be based upon

the facts and circumstances of the defendant’s conduct and

the harm to the plaintiff.” Jd.

Exxon’s argument that a 2:1 ratio in this case is

excessive cuts against everything this Court held in State

Farm. The Court did not state (or even imply) that 1:1

ratios are the absolute limit in substantial damage cases.”

* The history of the State Farm case after this Court rendered its

opinion supports the Grefers’ position. Following the Utah Supreme

Court’s reconsideration of the punitive award against State Farm and

consequent reduction to a 9:1 ratio, this Court denied writs. Campbell

(Continued on following page)

BEST A

25

It if it had intended to do that, it would not have said

“perhaps only equal to compensatcry damages” and “can

reach the outermost limit of the due process guarantee.” It

certainly would not have declined again to impose a bright

line ratio which punitive damages cannot exceed. Yet,

Exxon argues fervently that there is a cap, and it is 1:1.

Pet. 25, 28. Exxon is incorrect.

This is evidenced by the fact that this Court, only

three months ago, refused to grant certiorari in the Boeken

case, a smoker personal injury suit involving a 9:1 ratio

between punitive damages ($50,000,000) and compensa-

tory damages (approximately $5,500,000). Boeken v. Philip

Morris, Inc., 127 Cal. App. 4th 1640, 26 Cal. Rptr. 3d 638

(Cal. App. 2nd Dist. 2005), cert. denied, 126 S. Ct. 1567,

164 L.Ed.2d 297, 74 USLW 3308 (2006). Surely, a 9:1 ratio

case involving such a substantial punitive damage award

would have led to a grant of certiorari if the Court had

intended to impose.a 1:1 cap under State Farm. The fact

that certiorari was denied in Boeken demonstrates that

the 2:1 ratio in this case is not constitutionally excessive.”

Exxon may want there to be a bright-line limit on punitive

damag awards, but, as is evidenced by the State Farm

decision and the denial of certiorari in Boeken, this Court

is not willing to do that.

v. State Farm Mut. Auto. Ins. Co., 98 P.3d 409 (Utah), cert. denied, 54:

U.S. 874 (2004).

2 Consideration of the potential harm to the Grefers (e.g. potentia

liability to ITCO’s workers and the surrounding neighbors, potentia

enforcement actions by environmental agencies, potential state an:

federal fines, etc.... ) further supports the constitutionality of th

punitive award in this case. After all, when the potential harm to th

Grefers is added to the equation, as BMW instructs the courts to do, th

ratio in this case is even lower than 2:1. BMW, 517 U.S. at 581.

AILABLE COPY

26

Recognizing that its argument that State Farm

imposed a 1:1 ratio limit on substantial damage awards is

a stretch among stretches, Exxon falls back to another

- (even less credible) argument. Specifically, Exxon asserts

that, because the Grefer property only has a market value

of $1.5 million, the ratio in this case is actually much

higher than 2:1. Pet. 26, 29. This argument is thoroughly

flawed. To begin with, it disregards the fact that there are

no cases which have held that actual harm, for purposes of

a punitive damage analysis, can be limited to certain

portions of a compensatory award. Indeed, both BMW and

State Farm confirm that the compensatory award, as a

whole, comprises the plaintiff’s actual harm. BMW, 517

U.S. at 580 (“[E]xemplary damages must bear a ‘reason-

able relationship’ to compensatory damages.”); State Farm,

538 U.S. at 425 (“ratio between punitive and compensatory

damages”). The lower courts are consistent on this point.”

Exxon cannot dispute that the compensatory portion

of this award, pursuant to the Louisiana Fourth Circuit’s

final and executable judgment, is $56,145,000.00. In fact,

recognizing that there is no basis to challenge the compen-

satory award in this Court, Exxon has already paid that

amount to the Grefers. In shert, the actual harm in this

case has been established by the Louisiana courts, and

that amount has been satisfied. Exxon is foreclosed from

arguing to this Court that a lesser amount is somehow the

“true” measure of the Grefer’s harm in this case.

* Tellingly, all of the cases cited by Exxon at pages 26-27 of its

Petition relate to the lower courts’ consideration of the ratio between

“punitives” and “compensatories.” Pet. 26-27 (emphasis added).

Zi

Moreover, Exxon’s argument ignores the fact that,

under Louisiana law, plaintiffs are entitled to have their

property restored, even if the cost of the remediation plan

exceeds the value of the land.“ Roman Catholic Church of

the Archdiocese of New Orleans v. Louisiana Gas Serv. Co.,

618 So.2d 874, 879-80 (La. 1993). In other words, Louisi-

ana law instructs that the Grefers’ actual harm is the cost

of clean-up.”

Common sense says the same thing. Without the $56

million restoration award in this case, the Grefers would

not be in a position to conduct a clean-up that ensures that

their entire property complies with state and federal

«4 The limitations on this allowance are that the landowner must

have “a reason personal .. . for restoring the property” or there must be

“a reason to believe that the plaintiff will, in fact, make the repairs.”

Roman Catholic Church, 618 So.2d at 879-80. In this case, the jury

found that at least one of these requirements was met and, in turn,

awarded the amount it determined to be reasonable and necessary to

effectuate a complete remediation of the Grefer tract. The Fourth

Circuit agreed with the jury’s assessment. App. 38a. Given the site

history at the Grefer tract (a history involving twenty-four years of non-

homogeneous burial of radioactive material), the Grefers properly

demanded that all of their property (not less than 1%, as suggested by

Exxon) be cleaned in conformance with both state and federal radiation

regulations. This was the only way to ensure that the Grefers would be

protected from not only environmental enforcement actions but alse

continuing liability to the vicinage. Exxon’s argument that such ar

award is “grossly inflated” defies logic. Pet. 98. Exxon’s attempt &

interject the commentary of the Louisiana Department of Environ

mental Quality in “support” of its untenable position is misleading. Pet

28-29. Indeed, it is difficult to think of a worse advocate for Exxon’

position. The Louisiana DEQ is the same agency that, as evidenced 6;

the testimony of a DEQ employee at trial, failed to enforce the Louisian

Radiation Regulations with respect to Exxon’s activities at the Grefe

tract for over two decades. R. 29:41, 32:117, $2:121-22, 32:135, 32:13$

32:141-42, 32:145, 33:184-87, 36:135, 36:169-70.

* Exxon does not challenge the constitutionality of this substantis

law.

ne

standards. In turn, the Grefers would be saddled with

virtually never ending liability, and their actual and

potential harm would increase with each passing day.”

The Grefers would not be able to prevent new civil law-

suits, and they would have no way of complying with

government enforcement actions. How can such an award

not be considered the Grefer’s actual harm?

B. The Fact That Every Substantial Punitive

Damage Award Since State Farm Has Not

Resulted In A 1:1 Ratio Does Not Mean That

This Court Needs To Resolve A Conflict In

The Lower Courts.

Exxon attempts to demonstrate a conflict in the lower

courts with respect to the proper application of the State

Farm decision by string citing punitive damage cases with

varying results.” Pet. 26-27. Exxon’s hope, of course, is

that the “inconsistency” of those decisions will encourage

this Court to instruct the lower courts that a strict 1:1

cutoff should be enforced in substantial damage cases. As

was discussed above, it cannot be reasonably disputed that

such an instruction would run counter to this Court’s

guidance in State Farm. This conclusion is supported by

the fact that the exact same request was made in Boeken,

* Radium-226 has a half-life of approximately 1600 years. R.

32:144.

” Looking for another tie-in, Exxon cites the Williams decision as

its example of an extreme departure from State Farm. Pet. 27. It is

ironic, however, that Exxon attempts to tie this issue into the grant of

certiorari in Williams. Had Exxon carefully read Philip Morris’ brief in

the Williams case, it would have seen that Philip Morris argued that

the 2:1 ratio in this case conforms with the Court’s guidance in State

Farm. Brief for Petitioner at 13, Philip Morris USA v. Williams.

29

and the Court denied certiorari. Brief for Petitioner at 14

Philip Morris USA v. Boeken.

Although State Farm does not say what Exxon asserts

it does, there is another reason that the purported incon:

sistency in the lower courts does not merit this Court’:

review. As Justice Kennedy pointed out in his concurrence

in Pacific Mut. Life Ins. Co. v. Haslip, 499 U.S. 1 (1991):

Some inconsistency of jury results can be ex-

pected for at least two reasons. First, the jury is

empaneled to act as a decisionmaker in a single

case, not as a more permanent body. As a neces-

sary consequence of their case-by-case existence,

juries may tend to reach disparate outcomes

based on the same instructions. Second, the gen-

erality of the instructions may contribute to a

certain lack of predictability. The law encom-

passes standards phrased at varying levels of

generality. As with other adjudicators, the jury

may be instructed to follow a rule of certain and

specific content in order to yield uniformity at

the expense of considerations of fairness in the

particular case; or, as in this case, the standard

can be more abstract and general to give the ad-

judicator flexibility in resolving the dispute at

hand. These features of the jury system for assess-

ing punitive damages discourage uniform results,

but nonuniformity cannot be equated with consti-

tutional infirmity. (emphasis added at 41)

Because this Court has properly refused to impose

bright line limitation on punitive awards, such awards are

bound to vary to some degree. However, this variance, as

Justice Kennedy points out, “cannot be equated witt

constitutional infirmity.” The cases cited by Exxon do not

demonstrate a need for this Court’s review. Moreover, this

30

case, which comports with State Farm in all respects, is

not the appropriate vehicle for such a review.

CONCLUSION

Exxon’s Petition for a Writ of Certiorari should be

denied.

Respectfully submitted,

STUART H. SMITH

MICHAEL G. STAG

SMITH StTac, L.L.C.

365 Canal Street, Suite 2850

New Orleans, Louisiana 70130

(504) 593-9600

ANDREW B. SACKS

JOHN WESTON

LAW OFFICES OF ANDREW B.

SACKS AND ASSOCIATES

114 Old York Road

Jenkintown, Pennsylvania

19046

(215) 925-8200

Ron A. AUSTIN

AUSTIN & ASSOCIATES, L.L.C.

400 Manhattan Avenue

“Harvey, Louisiana 70058

(504) 436-7844

Dated: July 24, 2006

STEPHEN B. MURRAY

(Counsel of Record)

ARTHUR M. MURRAY

MuRRAY LAW FIRM

909 Poydras Street, Suite 2550

New Orleans, Louisiana 70112

(504) 525-8100

JACK W. HARANG

HARANG & BARKER, L.L.C.

3500 N. Hullen Street

Metairie, Louisiana 70002

(504) 456-8658

RALPH R. ALEXIS, III

PORTEOUS, HAINKEL &

JOHNSON, L.L.P

704 Carondelet Street

New Orleans, Louisiana 70130

(504) 581-3838

APPENDIX

ia

APPENDIX A

EXXONMOBIL’S PROPOSED INSTRUCTION 17

EXEMPLARY DAMAGES - GENERALLY

In this particular case, Louisiana law permits you t

consider an additional element of damages called exem

plary damages (or called “punitive damages” in othe

states).

The phrase “wanton and reckless” means a consciou

indifference to consequences, amounting almost to

willingness that harm to the public safety would follow

Stated another way, wanton and reckless conduct is the

which amounts to intentional and deliberate action the

has the character of outrage frequently associated wit

crime.

Unless you find that the defendants acted with almos

a willingness that harm to the public safety would follov

then you may not award exemplary damages.

exemplary damagesyo- may not award such- damages for

conduct that the defendents—engaged-tmn before 15984 or

er-1096—HHegible}houisi lew,-the-plaintilf

entitled to-exemplery damages for condret that the defen-

(Under Louisiana the as may be entitled to punitive

exemplary damages only for cona:.ct that the defendants

engaged in between 1984 and 1996.]

[4474]

EXXONMOBIL’S PROPOSED INSTRUCTION 18

EXEMPLARY DAMAGES - DISCRETIONARY

Exemplary damages are within your discretion. This

means that even if you find that the defendants’ conduct

was wanton or reckless, you are not required to award

exemplary damages to the plaintiffs."

* Johnson, Louisiana Civil Law Treatise, Civil Jury Instructions,

§ 18.02; Oubre v. Union Carbide Corp., 747 So.2d 22, 227 (La. App. 5th

Cir. 1999); Adams v. Marathon Oil Co., 688 So.2d 75, 76 n.2 (La. App.

5th Cir. 1997); Haydel v. Herclules Transport, Inc., 654 So.2d 418, 438-

39 (La. App. Ist Cir. 1995); Landry v. Uniroyal Chemical Co., Inc., 653

So.2d 1199, 1205 (La. App. ist Cir. 1995); Lasha v. Olin Corp., 634

So.2d 1354, 1361 (La. App. 3d Cir. 1994); Fuselier v. Amoco Production

Co., 607 So.2d 1044, 1050 (La. App. 3d Cir. 1992); Griffin v. Tenneco Oil

Co., 531 So.2d 498 (La. App. 4th Cir. 1988).

* Johnson, Louisiana Civil Law Treatise, Civil Jury Instructions,

§ 18.02.

14475]

3a

APPENDIX B

Supreme Court

[SEAL] STATE OF LOUISIANA

New Orleans

PASCAL F. GALOGERO, JR. 400 Royal Street

CHIEF JUSTICE New Orleans, LA 70130

JOHN TARLTON OLIVIER TELEPHONE (504) 310-23(

CLERK OF COURT HOME PAGE

http://www .lasc.org

April 24, 2006

Hon. Dale N. Atkins, Clerk

Orleans Parish — Civil District Court

421 Loyola Ave.

Suite 402

New Orleans, LA 70112

In Re: Grefer, Joseph etal

vs. Alpha Technical eta

No: 2005-C-1590

Dear Ms. Atkins:

This is to advise that the Court took the following acti

on the Motion to Stay Execution of Judgment filed in t

above entitled matter:

“Motion for Stay is Denied.”

Victory & Weimer, JJ. would grant.

4a

With kindest regards, I remain,

Very truly yours,

John Tarlton Olivier

Clerk of Court

/s/ Katherine A. Fontana

By: Katherine A. Fontana

Deputy Clerk of Court

KAF: rtd

ccs: All Counsel

Court of Appeal, Fourth Circuit, Number 2002-1237

Civil District Court Div. “A” Number 97-15004

5a

APPENDIX C

La. C.C. art. 2315.3

Art. 2315.3. Additional damages, storage, handling, a

transportation of hazardous substances

In addition to general and special damages, exemple

damages may be awarded, if it is proved that plaintii

injuries were caused by the defendant’s wanton or reckle

disregard for public safety in the storage, handling,

transportation of hazardous or toxic substances. As us

in this Article, the term hazardous or toxic substan

shall not include electricity.

(Repealed by Acts 1996, 1st Ex. Sess., No. 2, § 1, April :

1996.)

BRIEF

pn

&

~Jj

me

—s

ae |

cq?

No. 05-1670

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

REPLY BRIEF FOR PETITIONER

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

Attorneys for Petitioner

i

TABLE OF CONTENTS

Page

TABLE OF AU TIRES Me cicernesvsocicessersscssentenesnsoenseretinmen il

FREE heh CURE FOUR FS FE 8 BME se cceseccosersccsesosecorsencevesnces ]

PROUT E ccitecsiesnsianssripnesdiicimatihiitlamsiaramsiiannaaiahamaeaiaial l

I. THE CONCEDED CONFLICT REGARDING

HARM TO NON-PARTIES [S SQUARELY

IMPLICATED EN THES CABE oscccosoccessccsressesseesososscorsete l

Il. THERE IS AN UNRESOLVED CONFLICT

REGARDING HOW TO REMEDY IMPROPER

CONSIDERATION OF HARMS TO NON-

F PADWE TEEEP éxccsreiansunnsastnnieacsetnies soshtummsnedantecieintiipmarisiaeberte 5

Il]. THERE IS SIGNIFICANT DISAGREEMENT

ON THE CONSTITUTIONAL MAXIMUM IN

CASES OF SUBSTANTIAL COMPENSA-

PORES CARED creccecestssncssniontenveemnssscenesinntnintansea Sieben

CIC RA FIES oo ccnsovevsccsetcseiusteseiatinintadsinninnnmenewenegennmeanebeetn 10

ti

TABLE OF AUTHORITIES

Page(s)

CASES

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

TT TT sca ccsnoeeiinepenesesonsennsedesennnvoneseionsnennets 6

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

i ial cetmamevanicnmestobnesenies 6

Orr v. Orr,

ascent vndisaneatidinenniaswenniinabeninees 5

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

rc cevsigupionisenenneneininnnses 9

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

ET OLN passim

STATUTES

IT I TE ETE. os cuncucensnscqnenceseosenreveneeseoveeetvicsoniees 3

OTHER AUTHORITIES

Robert L. Stern et al., Supreme Court Practice (8th

a cneunisniiadibenidiinniai 5

REPLY BRIEF FOR PETITIONER

Plaintiffs do not — and cannot — deny that there is sub-

stantial disagreement in the lower courts regarding whether

due process permits a jury to punish a defendant for its con-

duct toward non-parties. Plaintiffs likewise do not deny that

there are conflicts in the lower courts regarding the appropri-

ate remedy for improper consideration of third-party conduct

and regarding the due process limits when compensatory

damages are substantial. The only grounds for plairitiffs’

opposition are their arguments that the conceded conflicts

are not implicated by this case. But they are. Indeed, this

case is an ideal vehicle to address those conflicts: plaintiffs

received a $1 billion punitive damages award by scaring the

jury with outlandish tales of unadjudicated potential harms to

non-parties, and the Court of Appeal upheld the award, after

reducing it to $112 million, based only on risks to non-

parties. Plaintiffs’ new attempts to manufacture support for

the enormous award cannot obscure the significant issues

here that warrant this Court’s attention.

ARGUMENT

I. THE CONCEDED CONFLICT REGARDING

HARM TO NON-PARTIES IS SQUARELY IMPLI-

CATED IN THIS CASE

There is a clear conflict in the lower courts over whether

due process allows punitive damages to be based on risks to

non-parties, and. it will be addressed in PAilip Morris USA v.

Williams. The decision below exacerbates that conflict be-

cause it unheids punitive damages based entirely on risks

posed to 'i1CO employees, and it exposes ExxonMobil to a

concrete risk of multiple punishment. This Court should

grant review and hold that ExxonMobil cannot be punished

for risks to non-parties. Alternatively, it should hold the pe-

tition pending Williams.

2

1. Plaintiffs concede the conflict in the lower courts over

the circumstances under which a jury may consider harm to

non-parties in adjudicating punitive damages, but they assert

that the conflict is not implicated here because questions of

harm to non-parties “simply are not issues in this case.”

Opp. Br. 9. Nothing could be further from the truth. At trial,

plaintiffs “argue[d] and present[ed] substantial evidence . . .

of the potential and/or alleged actual harm to other persons

who were not parties to this suit.” App. 53a. The jury in-

structions focused on risks to non-parties and made harms to

the plaintiffs a secondary factor at best. Jd. at 75a. The

Court of Appeal upheld the award based entirely on Exxon-

Mobil’s nine-month delay in notifying ITCO of the risks

posed by NORM, even though the delay had no effect on

plaintiffs’ “strictly economic harm.” /d. at 50a-52a, 68a.

And in their opposition to certiorari, plaintiffs continue to

utilize risks to non-parties to justify punitive damages.’

2. Plaintiffs alternatively suggest (at 12) that the court

below properly relied on potential harm to non-parties be-

cause that evidence “was related to the reprehensibility of

Exxon’s coriduct.” Plaintiffs are incorrect. Although effects

of a defendant’s conduct on non-parties may be considered

in assessing reprehensibility when the defendant’s conduct

has similarly affected the plaintiffs, recklessness toward non-

parties cannot supply the predicate for punitive damages

when there is no similar recklessness toward the plaintiffs.

Pet. 12. That necessary predicate is completely lacking here.

P’aintiffs argue (at 15-16) that evidence of ExxonMohbil’s

reckiessness toward [TCO was relevant to the reprehensibil-

ity of ExxonMobil’s conduct toward plaintiffs because it

showed ExxonMobil’s general disregard for public safety.

' See Opp. Br. 1 (property “is adjacent to a residential community”);

id. at 13 (ExxonMobil “did nothing to wa:* ITCO for almost a year” and

“failed to fully inform ITCO about the problem”); id. at 16 (ExxonMobil

“put ITCO’s workers and the surrounding neighbors at risk”).

3

That argument proves too much. If recklessness toward third

parties suffices to establish reprehensibility as to the plain-

tiff, then risks to non-parties would always suffice to justify

punitive damages. This Court has squarely rejected that con-

tention: “A defendant should be punished for the conduct

that harmed the plaintiff, not for being an unsavory individ-

ual or business.” State Farm Mut. Auto. Jas. Co. v. Camp»

bell, 538 U.S. 408, 423 (2003).

Further, plaintiffs suggest that punitive damages were

properly based on plaintiffs’ “potential[] liab[ility] to third

parties under Louisiana law.” Opp. Br. 17. First, plaintiffs’

“potential liability” was not the reason that the appellate

court upheld the award; the appellate court focused solely on

risks to ITCO employees. Second, there is no record evi-

dence establishing the nature and extent of those potential

harms. Punitive damages must be based on “harm suffered

by the plaintiff.” State Farm, 538 U.S. at 418. Upholding

punitive damages based on plaintiffs’ belated, wholly unsup-

ported, and purely speculative assertion of potential harms

would open a tremendous loophole in State Farm, effectively

eviscerating this Court’s limits on punitive damages.

Plaintiffs also argue (at 12) that the punitive damages

award was permissible under Louisiana Civil Code Article

2315.3 and thus constitutional. But it is far from clear that

Article 2315.3, which has since been repealed, would allow

use of harms to non-parties completely unmoored from

harms to the plaintiffs. More fundamentally, the fact that

state law may have required the jury instructions given only

raises the constitutional question; it does not answer it.

3. Plaintiffs half-heartedly suggest (at 11) that even if

the jury improperly considered risks to non-parties, the Court

of Appeal ‘ensured that non-party harm was not the basis of

the punitive award.” That is incorrect. The Court of Appeal

did not justify plaintiffs’ punitive damages based on their

harm, which everyone agreed was “strictiy economic.” App.

4

50a. Rather, it based them on ExxonMobil’s “nine-month

delay in notifying ITCO ... of the dangers posed from han-

dling NORM contaminated equipment” which “put [ITCO]

employees at risk.” Jd. The appellate court’s entire repre-

hensibility discussion focused on TCO.’ On petition for re-

hearing, the Court of Appeal identified the basis for punitive

damages as “put[ting] ITCO’s employees at risk,” and it ex-

plicitly rejected ExxonMobil’s argument that “harm to third

parties cannot be punished.” /d. at 68a.

4. Next, plaintiffs argue (at 17-19) that certiorari review

is not appropriate because the second question presented in

Williams is necessarily limited by the first question pre-

sented, and this Court’s resolution of Wifliams will only af-

fect cases in which the court below has used “the reprehensi-

bility guidepost [to] override an otherwise unconstitutional

ratio.” In plaintiffs’ view, so long as the ratio of punitive

damages to actual harm is within permissible bounds, the

punitive damages award must have been based on harms to

the plaintiffs, and it does not matter what evidence the jury

actually considered in assessing reprehensibility.

Plaintiffs cannot possibly be correct, because even they

admit that State Farm places limits on the jury’s considera-

tion of the effects of the defendant’s conduct on non-parties.

Opp. Br. 18. As this Court said in State Farm: “Due process

does not permit courts, in the calculation of punitive dam-

ages, to adjudicate the merits of other parties’ hypothetical

claims against a defendant.” 538 U.S. at 423. Plaintiffs’ ar-

gument simply begs the question raised here and in Williams:

After State Farm, when, if ever, may a factfinder consider

? See, e.g., id. at 50a-51a (NORM “posed a health hazard” to ITCO);

id. at Sla (delay “le[ft] ITCO with the mess”); id. (“ITCO’s business

steadily declined”); id at 52a (delay “posed a direct danger to the physi-

~~ cal health and safety of those workers”).

5

harms to non-parties in awarding punitive damages?’ That

question has generated substantial disagreement; it is ripe for

review; and it is critical to the outcome in this case.

5. Finally, plaintiffs suggest (at 11-12) that the issue of

risks to non-parties is not properly before this Court.

ExxonMobil pressed that argument before the Court of Ap-

peal, and the argument was passed on by the Court of Ap-

peal. See Brief of Appellant ExxonMobil Corp. at 29-34,

Grefer v. Alpha Technical, No. 2002-CA-1237 (La. Ct. App.

Dec. 30, 2002) (“ExxonMobil Br.”) (“[{T]he trial court

impermissibly allowed Plaintiffs to present evidence of po-

tential and/or alleged actual harm to other persons who were

not parties to this lawsuit and whose claims were not before

this jury.”); App. 14a (Assignment of Error No. 6); id. at

50a-52a, 68a (rejecting argument that “harm to third parties

cannot be punished” under State Farm). The issue is thus

within this Court’s certiorari jurisdiction. See Orr v. Orr,

440 U.S. 268, 274-75 (1979); see also Robert L. Stern et al.,

Supreme Court Practice 175-76 (8th ed. 2002).

Il. THERE IS AN UNRESOLVED CONFLICT RE-

GARDING HOW TO REMEDY IMPROPER CON-

SIDERATION OF HARMS TO NON-PARTIES

The jury’s award in this case was tainted by the consid-

eration of improper evidence, and that taint was not reme-

died by the appellate court’s reduction of the punitive dam-

ages award. As explained in the petition (at 22-25), due

process limits on punitive damages include both a substan-

tive and a procedural component. See State Farm, 538 U.S.

at 416. Those different limitations require different reme-

* Plaintiffs’ attempt to distinguish this case from Williams suffers

from a second flaw: it confuses the substantive limits on the amount of

punitive damages with the procedural limits on consideration of certain

evidence. A failure of procedural due process cannot be cured by reduc-

ing the resulting punitive damages award. See infra pp. 5-6.

6

dies. When a punitive damages award exceeds the constitu-

tional maximum for the conduct at issue, that defect may be

cured by reducing the award. But when a punitive damages

award is constitutionally infirm due to improper evidence or

instructional error, reduction of the jury’s tainted award is

insufficient because there is no way for the reviewing court

to know how the improper evidence or instructions affected

the jury’s award. Plaintiffs do not address this important dis-

tinction at all. Nor do they take issue with the cases that

demonstrate the substantial and mature conflict in the lower

courts on this issue. Instead, they suggest that review by this

Court is unnecessary for other reasons.

1. Plaintiffs first contend that this Court squarely

reached the remedy issue in BMW of North America, Inc. v.

Gore, 517 U.S. 559 (1996), and adopted a “rule of law” that

“the choice between reducing an award to constitutional lim-

its and ordering a new trial” in all cases is left “to the states.”

Opp. Br. 21. Plaintiffs completely misunderstand this

Court’s statement in BMW. The Court had already deter-

mined that the punitive damages award was “grossly exces-

sive” and that the case should be remanded to the Alabama

Supreme Court for further proceedings. 517 U.S. at 585-86.

Rather than be the first court to address whether the appro-

priate remedy was a new trial or remittitur, the Court asked

the state court to consider that question “in the first in-

stance.” /d. The Court did not hold that state courts always

may decide the proper remedy for themselves; it simply

asked one court in one particular case to answer a constitu-

tional question before this Court would address it.

2. Plaintiffs also claim (at 23) that the resolution of the

remedy question is dictated by Cooper Industries, Inc. v.

Leatherman Tool Group, Inc., 532 U.S. 424 (2001). Plain-

tiffs contend that because Cooper mandates de novo review

of the constitutionality of punitive damages awards in all

cases, there cannot be different remedies for different types

J

of constitutional violations. But Cooper’s de novo review

requirement merely answers the question of what deference

an appellate court should give to a trial court on the constitu-

tional issues; it does not answer the substantive question of

what the Constitution requires. When a reviewing court de-

termines that a punitive damages award is tainted because of

improper evidence or instructions, it has performed the ap-

pellate function contemplated by Cooper. The next question

~ the proper remedy — is a substantive constitutional question

not addressed in Cooper. But this Court’s other teachings, as

well as the common-law limitations on remittitur, indicate

that the proper remedy is a new trial.

Plaintiffs’ related suggestion (at 23 n.20) that Louisiana

law provides an adequate remedy for improper consideration

of risks to non-parties is likewise misguided. Even assuming

that Louisiana appellate courts may review the facts in a case

de novo and render a judgment, that is not what the Court of

Appeal did here. The Court of Appeal approved the jury’s

use of risks to ITCO employees to award punitive damages

and rejected ExxonMobil’s argument as “an incorrect and

exceedingly narrow reading of Campbell.” App. 68a. It at-

tempted to remedy the problem of excessiveness by reducing

the award to what it believed to be the constitutional maxi-

mum, but it provided no cure for the jury’s consideration of

harms to non-parties.

3. Next, plaintiffs renew their argument that if the ratio

of punitive damages to actual harm is a single digit, “then the

court can rest assured that non-party harm is not at issue in

the award” — “even if conduct directed toward non-parties

was considered” by the jury. Opp. Br. 21-22 (emphasis

added). First, plaintiffs’ statement (at 20) that “the 2:1 ratio

in this case was based solely on the actual harm to the plain-

tiffs” is incorrect as a factual matter. The Court of Appeal

explicitly relied on risks to ITCO in upholding the punitive

damages award. See supra pp. 3-4.

8

Second, when a jury considers risks to non-parties and

then returns a punitive damages award of twice the compen-

satory damages, one simply cannot know the basis for the

award in the absence of a special verdict. The jury could

have awarded the entire amount based on harms to the plain-

tiffs; it could have awarded the entire amount for risks posed

to non-parties; or it could have decided to punish the defen-

dants once for risks to the plaintiffs and once for risks to oth-

ers. Only the first outcome is constitutionally permissible,

yet there is no way to ensure that it is what happened.

4. Finally, plaintiffs suggest that there is no error be-

cause “Exxon specifically requested that the Fourth Circuit

reduce the punitive award in this case.” Opp. Br. 20.

ExxonMobil asked the Court of Appeal to “vacate[{] or re-

duce[]” the award “to comport with due process,” App. 14a,

because it argued both that the $1 billion jury award was

substantively excessive and that it was impermissibly prem-

ised on risks to non-parties. See ExxonMobil Br. 31-35.

The Court of Appeal agreed that the award was substantively

excessive and reduced it, but it disagreed about risks to non-

parties. Had the Court of Appeal agreed with ExxonMobil,

it should have vacated the award and ordered a new trial.

Ill. THERE IS SIGNIFICANT DISAGREEMENT ON

THE CONSTITUTIONAL MAXIMUM IN CASES

OF SUBSTANTIAL COMPENSATORY DAMAGES

Even if the punitive damages award had been based en-

tirely on harms to the plaintiffs, it would be excessive.

Plaintiffs received an undeniably “substantial” award of res-

toration costs — 37 times their economic loss. In such a case,

punitive damages are only justified if there is a reason for

additional punishment and deterrence, and the amount of pu-

nitive damages should not exceed the plaintiffs’ actual harm.

1. Plaintiffs essentially admit (at 28-29) that there is

significant disagreement in the lower courts on the maximum

punitive damages allowed when compensatory damages are

9

substantial. They argue only that the disagreement does not

warrant review because it is due to the fact that juries some-

times “‘reach disparate outcomes based on the same instruc-

tions.’”” Opp. Br. 29 (quoting Pac. Mut. Life Ins. Co. v.

Haslip, 499 U.S. 1, 41 (1991) (Kennedy, J., concurring in the

judgment)). ExxonMobil does not contend that this Court

should intervene any time different juries reviewing similar

conduct award different amounts of punitive damages. The

problem here is that the lower courts have adopted conflict-

ing rules of law regarding the constitutional upper limit on

punitive damages in cases of substantial compensatory dam-

ages. Plaintiffs make no attempt to harmonize those rules.

2. Plaintiffs also argue (at 24-25) that State Farm does

not require a 1:1 ratio of punitive damages to actual harm in

all cases of substantial compensatory damages. What State

Farm does make clear is that punitive damages must further

a “legitimate purpose,” such as punishment or deterrence.

538 U.S. at 417. Large compensatory damages awards have

a deterrent function in themselves, id. at 426, so punitive

damages “should only be awarded if the defendant's culpa-

bility, after having paid compensatory damages, is so repre-

hensible as to warrant the imposition of further sanctions to

achieve punishment or deterrence,” id at 419 (emphasis

added). When there is a substantial compensatory damages

award, it is unlikely that additional punishment and deter-

rence are required, and that is why this Court suggested that

a 1:1 ratio of punitive damages to actual harm is the constitu-

tional maximum. /d. at 425.

Applying State Farm’s teaching to this case, there is no

reason why additional punishment is required on top of the

enormous $56 million restoration costs award. Plaintiffs’

economic injury was more than fully remedied by an award

that allows them to restore their property to their own speci-

fications. App. 50a. The only reason plaintiffs offer for fur-

ther punishment and deterrence is the risk of harm to non-

10

parties, and that cannot constitutionally be the only basis for

the award.

Plaintiffs focus on this Court’s denial of certiorari in

Boeken v. Philip Morris, stating that it “demonstrates that the

2:1 ratio in this case is not constitutionally excessive.” Opp.

Br. 25. But of course a denial of certiorari has no preceden-

tial value. Equally significant, Boeken was a personal injury

suit. A key reason why 1:1 is the maximum permissible ra-

tio here is that plaintiffs suffered “only property damage,”

App. 53a, and reprehensibility is lessened when the plain-

tiffs’ harm is “economic” rather than “physical,” State Farm,

538 U.S. at 419.

3. Finally, plaintiffs try to justify the punitive damages

award by arguing that their actual harm was the $56 million

restoration costs award, not the $1.5 million value of their

property. Opp. Br. 26-27. It is the “harm suffered by the

plaintiff’ that must be proportional to the punitive damages

award. State Farm, 538 U.S. at 418. In many cases, the

compensatory damages approximate the plaintiff's harm. In

this case, they do not, because the plaintiffs’ only “loss” is

the $1.5 million value of their property. They did not lose

$56 million, nor have they incurred any obligation to pay

$56 million. The $56 million results simply from a special

feature of Louisiana law allowing piaintiffs to recover resto-

ration costs, even though they do not in any legal or collo-

quial sense “compensate” plaintiffs for any loss in value of

the property. Having been fully compensated for the loss in

value of their property, any additional money plaintiffs re-

ceive to restore the property to its prior condition is actually

a windfall. The restoration costs award thus does not reflect

any harm to which the punitive damages award properly may

be compared.

CONCLUSION

The petition for a writ of certiorari should be granted.

GLEN M. PILIE

RONALD J. SHOLES

Louis C. LACour, JR.

MARTIN A. STERN

ADAMS AND REESE LLP

4500 One Shell Square

New Orleans, Louisiana 70139

(504) 581-3234

Dated: August 7, 2006

Respectfully submitted,

WALTER DELLINGER

(Counsel of Record)

JOHN F. DAUM

JONATHAN D. HACKER

NICOLE A. SAHARSKY

NIKHIL SHANBHAG

O’MELVENY & MYERS LLP

1625 Eye Street, N.W.

Washington, D.C. 20006

(202) 383-5300