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Exxon Valdez Punitive Damages Decreased by U.S. Supreme Court

John Kimball’s insight on the Exxon Valdez ruling was recently sought by media outlets from Alaska to London.

The U.S. Supreme Court has cut the punitive damages awarded against the Exxon Valdez from $2.5 billion to $500 million for the 1989 oil spill in the environmentally pristine PriceWilliamSound.

The Supreme Court ruled that the ceiling punitive damages could not exceed the amount awarded in the compensatory damages for economic loss, which totaled $500 million. In a 5–3 vote, led by Justice David Souter, the Court decided that the $2.5 billion punitive award imposed on Exxon was excessive under maritime law. The Alaskan court originally made a punitive damage award of $5 billion against Exxon, which was cut on appeal to $2.5 billion.

“It’s unfortunate,” said John Kimball, a maritime law partner at Blank Rome’s New York office. “Here we have a decision that is in many ways a disappointment. The lower courts are now going to have to have to grapple with that,” he commented in Condé Nast.

According to Mr. Kimball in Lloyd’s List, while the court established a 1:1 ration as the upper limit for awarding punitive damages in maritime cases, it did not decide on the issue of whether the owner could be held liable for damages based on acts of the ship’s master or other employees. “The court left that decision for another day,” he said. “That issue will continue to vex the lower courts.”

But the ratio is certain to be raised in nonmaritime cases, said Mr. Kimball in the National Law Journal. “Justice Souter’s analysis of the punitive damages issue, his detailed exploration of their history and the various methods of calculating them would seem to have general application,” he said. “I’m sure we’re going to see this back at the Supreme Court.”

“Punitive Damages Take Hit in ‘Exxon’ Ruling, but How Hard?” by Marcia Coyle, appeared in the National Law Journal on July 1, 2008. “Supreme Court Cuts Exxon Valdez Fine” by Sandra Spears appeared in Lloyd’s List on June 25, 2008. “Slick” by Karen Donovan, appeared in Condé Nast on June 25, 2008.