EXXON SHIPPING CO. v. BAKER
The Exxon Valdez supertanker ran aground in Alaska’s Prince William Sound in 1989 while under the command of Joseph Hazelwood, a relapsed alcoholic. Exxon knew that Hazelwood had resumed drinking but did not relieve him of his post, and the ship eventually spilled 11 million gallons of oil into the ecologically sensitive sound. The jury calculated compensatory damages at $287 million, and then awarded $5 billion in punitive damages. The punitive award has been reviewed three times by the Ninth Circuit Court of Appeals, which ultimately settled on a $2.5 billion figure. In a dissent from the full court’s denial of rehearing in the third review of the award, Judge Alex Kozinski posited that any award, no matter its size, violated the maritime law rule that a ship owner need not pay for the reckless actions of an employee.
Does maritime law permit judges to award punitive damages for employee misdeeds and does maritime law allow judge-made remedies when Congress has not authorized them?
Legal provision: Federal Water Pollution Control (Clean Water), plus amendments
Maybe and yes. With Justice Samuel Alito taking no part in the decision because he owns Exxon stock, the Court split evenly 4-4 on the issue of whether judges may award punitive damages against a company for employee misdeeds. Therefore, the Court left the Ninth Circuit's ruling that they can undisturbed, but noted that this affirmation could not be used as precedent because it merely reflected an even split in the Court. On the second issue, a 5-4 majority held that judges are free to create remedies in maritime cases where Congress has not legislated in the area. However, this freedom can be lost if Congress passes legislation restraining such judicial activism. Justice David Souter delivered the opinion of the Court. Justice Antonin Scalia, joined by Justice Clarence Thomas, wrote a concurring opinion, agreeing with the Court's application of punitive damages precedent but arguing that those prior holdings were in error. Justice John Paul Stevens concurred in part and dissented in part, stating that Congress, not the courts, should be the sole body entrusted with determining the permissibility of punitive damages. Justice Stephen Breyer also concurred in part and dissented in part, arguing that the punitive damages in this case should have been reduced.
Argument of Walter E. Dellinger, III
Chief Justice Roberts: We'll hear argument this morning in Case 07-219, Exxon Shipping Company versus Baker, et al..
Mr. Dellinger: Good morning, Mr. Chief Justice, and may it please the Court: When the Exxon Valdez ran aground in Prince William Sound on March 24, 1989, the resulting spill of 11 million gallons of oil was one of the worst environmental tragedies in U.S. maritime history.
The only remaining aspect... the only aspect of the litigation over the Valdez disaster that is before the Court today concerns almost entirely lost revenues by the commercial fishing industry.
Exxon long ago paid $400 million in compensation for that lost revenue.
At issue here is whether an additional warrant to the commercial fishing class of $2.5 billion dollars in punitive damages is permissible under Federal Maritime Law.
The first of the three reasons that the decision below should be reversed is that the Ninth Circuit erred in overturning a maritime law rule that has been settled for 200 years.
Although a shipowner is, of course, liable to fully compensate for all of the damages caused by the wrongful acts of a captain in compensation, it is liable for punitive damages under the long settled rule only if the shipowner directed, ratified, or participated in the--
Justice Ginsburg: Mr. Dellinger, how was that rule settled?
You go in that story and The Amiable Nancy, but no one even raised the question of punitive or exemplary damages in those cases.
So what is the long settled line of decisions of this Court in maritime law that you are relying on?
Mr. Dellinger: --Justice Ginsburg, The Amiable Nancy is the only maritime case, but this Court in Lake Shore in 1893--
Justice Ginsburg: That was on land on the railroad.
Mr. Dellinger: --Yes, but this Court's unanimous opinion by Justice Gray in Lake Shore cites with approval The Amiable Nancy decision and the maritime context.
Three times this Court has considered the question of whether there should be respondeat superior liability in punitive damages for the wrongful action.
Justice Ginsburg: You are talking about maritime law, and relying on The Amiable Nancy.
And my only point is that was not raised, argued, or decided.
So it's rather, I think, an exaggeration to call it a long line of settled decisions in maritime law.
Mr. Dellinger: Justice Ginsburg, the issue has been so well settled, and Courts of Appeals have so long recognized, that punitive damages are not available in vicarious liability in maritime cases that the issue, understandably, doesn't... doesn't come up.
Justice Scalia: And we thought so in Prentice.
Mr. Dellinger: --Yes.
In Lake Shore versus Prentice, this Court did in 1818 and 1893 and 1999 address this question, once in the maritime context, once in the context of Federal common law, and once in the particular statutory context of--
Justice Ginsburg: Well, the Lake Shore case, if I remember right, did not involve a managerial employee.
It involved a conductor on a train.
Mr. Dellinger: --That's... that's correct.
But it... but the rule is clear from Lake Shore versus Prentice that it is the same rule as The Amiable Nancy rule.
There is not respondeat superior liability in the absence of some action on the part of the shipowner.
Now, the reason--
Chief Justice Roberts: So the shipowner is, I suppose, the owner of Exxon or the hundreds of thousands of shareholders, right?
So you have to have a shareholder driving the boat before you can assess liability?
Mr. Dellinger: --No.
The company acts through its policymaking officers or through its policies; so that if a reckless judgment is made by someone who had authority to set policy for the company, either the president of Exxon Shipping... I mean if the Plaintiffs were correct that the jury actually, necessarily--
Chief Justice Roberts: So it's not quite correct to say only the owner.
In other words, it is a certain level of employee, because corporations only act through individuals.
It is a certain level of employee in the company.
Now, where do you draw the line between the CEO and the cabin boy?
How do you do that?
And I would suspect, just instinctively, that somebody driving one of these huge tankers is a lot closer to the CEO than the cabin boy.
Mr. Dellinger: --The one thing that, traditionally, if you look at all the Courts of Appeals cases and all of the tradition and maritime law, is that the captain or the pilot, anyone on board the ship, does not implicate in punitive damages the company, or the shipowner.
Justice Kennedy: You mean the captain--
Mr. Dellinger: --or the ship owner.
Justice Kennedy: --is not a managerial officer for any purpose?
Suppose he decides that he's going to leave despite an adverse weather report?
Is he not a managerial agent at least for that?
Mr. Dellinger: I think the tradition is clear, Justice Kennedy, that if it's a... that the maritime tradition is that, while you are liable for all of the harms caused by that, the decisions made on the ship do not implicate in punitive damages.
Justice Kennedy: Well, I'm... I'm asking about the concept of the managerial officer in general.
And I think that we can explore in this argument, whether or not The Amiable Nancy held very squarely about punitive damages, whether we ought to do so in the first instance.
Mr. Dellinger: That is correct.
Justice Kennedy: And it seems to me a large part of that inquiry turns on what a managerial officer is and what... was Hazelwood not a managerial officer for any purpose at all?
Mr. Dellinger: You know, I can't rule out the possibility that someone in that position might be, but he did not set company policy.
Justice Ginsburg: But I thought that you're talking about a different level.
I think we ought to be clear on this.
I thought it was conceded that Hazelwood was, indeed, a "managerial agent" as that term is used in the Restatement of Torts, right?
So you are talking about it's not good enough that you are managerial agent; you have to be in a higher echelon in the company.
That's your position?
Mr. Dellinger: That is correct.
There has... one has to be someone with authority to set relevant policy who has some responsibility over that area of the company's operations that would not--
Justice Souter: Why should that be?
I mean, why should there be a different rule?
Let's assume... I mean I'll assume for the sake of argument that The Amiable Nancy does not settle the issue absolutely.
Why, then, should the... and it doesn't, it seems to me, settle this distinction at all.
So why should there be a distinction between corporations generally and maritime corporations?
Mr. Dellinger: --Well, there are two responses to that question.
The first is that there is... this has worked in the context of maritime law for 200 years, and... and because of the... there has been a long tradition of needing to foster and promote maritime commerce, and the fact that it's thought to be particularly risky and dangerous to conduct maritime commerce.
Justice Souter: Well, isn't... isn't part of the reason, at least for the assumption that there's a distinction, something that I think was mentioned in The Amiable Nancy?
And that is in those days, when a ship put to sea, the ship was sort of a floating world by itself.
And the... the contact with the shipowner was simply gone until the thing came back into port again.
That is certainly not the case today, and we know it's not the case in the circumstances here.
So if the... if the relationship to the corporation, to the CEO, if you will, and the captain of a vessel is not in any way different from the relationship of the CEO and, say, a division chief of a corporation, I don't see why that distinction should hold today.
Mr. Dellinger: --There is no question, Justice Souter, but that communications have... have improved.
There is a... there is much of the tradition of maritime law that still obtains.
Maritime commerce, because it takes place on the high seas, is an inherently and continuously more risky endeavor than most other occupations, but--
Justice Souter: That may be an argument for no punitive damages, but I don't see why it's an argument for distinguishing between maritime corporations and others.
I mean, other... other kinds of enterprises have a lot of risk in them, too.
And I'm missing the distinction there.
Mr. Dellinger: --Well, to the extent that one doesn't see that the tradition of... of what's worked in maritime law in its own system of law for 200 years should be different, it is not at all clear why the maritime law rule ought not be the rule on land.
There are eight States--
Justice Scalia: Well, I had not understood you to concede that... that the land rule was different from the maritime rule.
I gather that in many States it's the same as what you assert the maritime rule to be.
Mr. Dellinger: --That is correct.
And it is the rule that this Court adopted in Lake Shore versus Prentice, and it is... it is--
Justice Scalia: Which was a land case.
Mr. Dellinger: --And the policy behind it--
Justice Souter: But you are right, and I want to make... let me just make clear one other point.
You are drawing a distinction, as I understood you to say to Justice Ginsburg, between the Restatement position and your position.
Mr. Dellinger: --That is correct--
Justice Souter: Okay.
Mr. Dellinger: --although there are some States that have the Restatement position that may read "managerial employee" in the way that maritime law does, and that is a person who is in a position to set relevant policy for the company and not just the branch manager at a... at a Wal-Mart.
Justice Ginsburg: But there aren't many States that follow the Restatement position.
Mr. Dellinger: That is correct.
And... but my point is not that... my point is simply that there are good reasons for the maritime law rule, and they have been accepted in other cases.
When Justice Gray embraced that rule in the Lake Shore case, he did so because he thought it inappropriate to impose punitive elements on someone who was not actually the wrongdoer.
And when Justice O'Connor wrote in Kolstad, she spoke of the important principle underlying common law limitations on vicarious liability for punitive damages.
Justice Ginsburg: Am I right, Mr. Dellinger, that in the railroad case the court was dealing with the concept of respondeat superior?
It didn't make any distinction between regular employees and managerial employees, and, indeed, it was not dealing with a managerial employee.
Mr. Dellinger: It was dealing with someone who was at the level of a conductor, I think, exactly on par with the captain.
Justice Ginsburg: But I don't recall that they made anything about managerial.
They were just talking about respondeat superior at large, I thought.
Mr. Dellinger: Yes.
Now, I think--
Justice Kennedy: But I don't think the conductor is on a par with a captain.
The captain has this huge vessel.
He can decide when it leaves.
He decides the course.
And I think that "managerial officer" might be a divisible concept.
Obviously, he doesn't bind Exxon for filing its tax returns or to decide whether there's a deduction.
But you are saying he binds Exxon for no purpose at all, ever.
Mr. Dellinger: --For punitive damages.
Of course, they are bound to pay for all of the harm caused.
Justice Kennedy: Of course, we are talking about punitive damages but at the concept of a "managerial officer".
And I haven't heard why he isn't a managerial officer at least as to some things.
Mr. Dellinger: --Well, for two reasons: One, he was unable to set policy for any of these issues.
And think of the larger context.
The reason we want to hold someone, an entity or a person, liable in punitive damages is because they make a decision that is malicious or profit seeking, or whatever.
When you are advancing the policies of the company and are empowered to advance those policies, and you do so in a way that is either malicious or driven by profit motives or hope to conceal it, when all of those things happen, it is appropriate to visit upon those persons the extra punishment of punitive damages.
And that's why it's not the importance of the job.
It's the fact that when someone acts contrary to the interest... contrary to the interest of a company and its shareholders, why in that instance should someone who is not advancing the company's interests, not authorized to make policy, do so?
So if the--
Justice Ginsburg: Are you--
Justice Stevens: May I ask this question, Mr. Dellinger?
Mr. Dellinger: --Yes.
Justice Stevens: In some punitive damages cases, the liability attaches because the person has hired someone who is obviously incompetent.
Supposing that the... a crew member was... an obviously incompetent crew member was hired by the captain of the ship.
Would that be sufficient to justify punitive damages?
Mr. Dellinger: Not against the company that owned the ship.
Only if someone--
Justice Stevens: And if he was hired by a shore based personnel, then, would that be the difference for you?
Mr. Dellinger: --The... only if the company at a policymaking level is implicated would the company--
Justice Stevens: The one... the company says the captain hires the crew members who could cause all sorts of damage.
And another company says somebody on shore can do it.
You have a different rule between those two?
Mr. Dellinger: --Oh, well, I think if the case arises in a maritime context, there would not be... there would not be a different rule, whether a decision was made on shore or not.
If you are talking about a maritime law case--
Justice Stevens: Would there be vicarious liability or not in the case: Negligence in hiring an incompetent crew member?
Mr. Dellinger: --Not unless the decision was made by someone at a policymaking level.
Justice Stevens: Well, he has the authority to decide who to hire.
Is that policymaking?
Mr. Dellinger: No.
That's the implementation of... that's the implementation of a policy.
So I think what... if you keep in mind the purposes of punitive damages, as to whether conduct should be deterred and whether it should be punished, and when you are talking about going against the shareholders of the company, not... of course, they have to pay for all the compensatory harms.
We don't doubt that.
But for punishment the notion is that it is the... that... that at least eight States have and it is in the maritime law rule that you need to show that there is... that there is--
Justice Stevens: Recklessness in hiring the employee who caused the damage can be a--
Mr. Dellinger: --Yes, absolutely.
We have not disputed the fact that if the jury actually did have to conclude that Exxon was reckless in the supervision or the hiring or the placement of Hazelwood, that that would be a grounds for imputing punitive damages liability.
Justice Stevens: --In hiring the third mate here, if he was negligently hired by somebody on shore, there would be liability?
But if he was negligently hired by the captain, there would be no liability?
Mr. Dellinger: No.
I think it has to do with the level at which the... at which the hiring decision was made.
It has to be a decision... and I think the way the case was tried it makes sense that if senior officials for Exxon were informed and if the jury decided on the basis that at a high level at Exxon Shipping that they knew that this person was... should not be put in command of a ship, and, nonetheless, it did so, that would implicate them.
If I could--
Justice Ginsburg: --There was... there was sufficient evidence of that.
Mr. Dellinger: --Yes.
Justice Ginsburg: --The jury could have found that Exxon knew that this captain had a severe alcohol problem; and, yet, they let him stay on voyage after voyage and did nothing about it.
So the jury could have found: Never mind the captain.
Exxon, itself, is a grave wrongdoer because it allowed the tanker to be operated by a captain who was certainly not fit.
Mr. Dellinger: Yes, and I want to be clear about that.
The answer to that question is: Yes, the jury could have found that Exxon was reckless in allowing Hazelwood to command the ship and that that recklessness would implicate the company for punitive damages.
But they need not have done so.
They need not even have reached the issue, and the court of appeals said... it is at page 88 and 89.
The Ninth Circuit said that the jury could also, in the alternative, have found that Exxon followed a reasonable policy of fostering reporting and treatment by alcohol abusers, knew that Hazelwood had obtained treatment, and did not know that he was taking command of the ship drunk.
Justice Ginsburg: It was a jury question.
There was evidence both ways.
So, on this issue, am I right in thinking that if you succeed, all you can get is a new trial?
Mr. Dellinger: That is correct.
Justice Ginsburg: And, I take it, next time around the jury would get a special verdict and be asked: Was Exxon, itself, reckless in allowing this captain to stay on the ship?
Mr. Dellinger: That is correct.
That is correct.
Chief Justice Roberts: That is only true if you lose on your second and third questions as well, right?
Mr. Dellinger: Yes.
Chief Justice Roberts: The answers to your second and third questions preclude a new trial?
Mr. Dellinger: That is correct.
And that's actually a recent--
Justice Breyer: Do you want to get... looking at this case of Lake Shore, as I read... as I read that case, I'm thinking that they looked back to the admiralty case, but they're saying this isn't an admiralty rule.
It's a Federal rule.
And the Federal rule is that to make the corporation liable for punitives in the absence of bad conduct by anyone in the corporation but for the lower executive, you can't do it.
But if it were a higher executive, the president and general manager or, in his absence, the vice president in his place, then you could.
So they are distinguishing among levels of corporate officials.
Now that seems to be the Federal rule, right?
Mr. Dellinger: --Yes.
Justice Breyer: All right.
Now, what happens to that Federal rule?
One thing we know happened to it is that time passed; Erie v. Thompkins came along; and most of the relevant cases left the Federal courts or Federal law and were decided under State law.
Was there anything left in the Federal system besides admiralty where this Federal rule might apply; and, if so, what happened to it?
Mr. Dellinger: The only place it would remain is in statutory settings where the court has to supply the answer to a question of whether punitive damages are an available remedy in a Title VII case.
And that's... that's the only--
Justice Breyer: Well, what's happened?
And the reason I think I'd like to know is because it seems to me it makes a difference from the point of view of stare decisis whether the Federal rule, as Federal rule, has always stayed the same or the Federal rule has eroded so that in place X and Y it disappears, remaining only in admirality, in which case you have a genuine outlier.
And I don't know what the history is.
Mr. Dellinger: --Well, the... of course, with the... with the replacement of the Arrowsmith versus Tyson by Erie against Thompkins, it was no longer a broad area.
Justice Breyer: I know.
That's beside the point to my question.
Mr. Dellinger: In the lower courts the rule has continued as a maritime law rule.
It has worked within the context of a maritime law rule.
Maritime is its own system of law.
The fact that West Virginia... West Virginia has a different law than this Court's maritime law--
Justice Stevens: Let me just interrupt.
To what extent is present maritime law informed by State common law throughout the country?
Mr. Dellinger: --It is in the absence of a... in the absence of a Federal rule, but here the... there are... there's not uniformity among the States.
To turn to the second question of whether... which would actually preclude the need even to resolve The Amiable Nancy issue as to whether there should be as a matter of judge made maritime law a punitive damages remedy for unintentional oil spills.
Now, the starting point to think about that, I believe, is this Court's decision in Milwaukee versus Illinois in 1981.
This is the standard the Court set: Federal courts create common law only as a necessary expedient when problems requiring Federal answers are not addressed by Federal statutory law.
That precisely describes this case.
The Court looking out--
Chief Justice Roberts: Well, the City of Milwaukee involved the displacement by Federal statutory law of Federal common law.
Your case involves the displacement of Federal maritime law by Federal statutory law.
Federal maritime law is routine.
Federal courts do that all the time.
Federal common law is unusual, and in the City of Milwaukee was resorted to simply by necessity.
Doesn't that suggest that whatever the Federal maritime rule on punitive damages is, it's a harder showing on your part to conclude that it's displaced by the statutory process?
Mr. Dellinger: --Well, the reason I think that's not... not the case is twofold.
First of all, the era in which this Court created lots of admiralty law has receded itself because Congress has become active, and then there's no longer a... as necessary, a role for this Court.
Justice O'Connor, for example, said that in... that we sail... the courts sail... now sail in occupied waters in making maritime law because of the amount of Federal statutory law.
And, secondly, the assumption that there was a well developed punitive damages remedy in maritime law, and that we have a harder road to show that the existence of a series of Federal statutes eliminates the need for that, is just not established.
This Court itself has never affirmed an award of punitive damages under maritime law.
It has never held that punitive damages are available for unintentional conduct in maritime law.
It has never held that they were available for oil spills.
There were only four cases of Federal maritime punitive damage awards in the history of the country before the Clean Water Act was passed.
Professor Robinson finds eight more cases that don't use the term 12.
We think the answer is four.
So that... and, in fact, the largest award ever... ever made was for $500,000.
So there was no... and that was after the Clean Water Act.
So there's no established tradition of... of punitive damages.
This Court would be making a major step to affirm an award, to play a role, in an unintentional case of punitive damages in maritime law for oil spills.
Because what Congress has done here is to obviate the need for a remedy by passing a comprehensive and carefully calibrated statute.
But the hallmark of the Clean Water Act is the obvious effort to balance--
Justice Ginsburg: Mr.... Mr. Dellinger, before we get into the merits of that issue, the Clean Water Act did not enter this case until 13 months after the jury verdict.
And the trial court, who had very carefully managed this case... and it was a humongous case... would never list it as an issue in the case.
And so he said: I won't hear it 13 months after the verdict.
Why shouldn't we instruct the court of appeals that when a district judge does a diligent job like that one did to try to get at all the issues... says you're too late; you can't come in 13 months after the verdict and argue a point of law that would have overtaken the verdict, because essentially you're asking for judgment as a matter of law on this issue.
Mr. Dellinger: --Justice Ginsburg, that sort of concern has much more force if you are talking about issues that go to the substantiality of the evidence.
But here the court of appeals--
Justice Ginsburg: No.
Well, what did you make... you made a motion to bring up the Clean Water Act as dispositive on punitive damages, and you made that motion 13 months after the jury verdict.
Mr. Dellinger: --Right.
Justice Ginsburg: And what is the basis in the Federal rules for that motion?
Mr. Dellinger: The motion was made before the entry of judgment.
Justice Ginsburg: 13 months after the verdict.
Mr. Dellinger: That... the motion was not on... on... the court of appeals held... not only did the court of appeals press... not only was the issue pressed and passed upon by the court of appeals, the court of appeals held that the district court was wrong in assuming that it was waived.
The district court was told by the plaintiffs that this was the same motion--
Justice Ginsburg: But I... that's not my question.
My question is: Under what Federal rules did you move to bring up this issue 13 months after the verdict?
Mr. Dellinger: --It was under rule 59, under rule 49.
Justice Ginsburg: 49 is on special verdicts.
What did this have to do with special verdicts?
Mr. Dellinger: I'm sorry.
It was a rule 50... it was a rule 50 motion.
It was not untimely, and the court of appeals--
Justice Ginsburg: Rule 50 is pretty strict, isn't it?
I mean, rule 50... if you want to use rule 50, you have to first move before the case goes to the jury.
And if the judge says no, I'll reserve it.
Then you move again after the jury.
And if you don't, it's got very tight timelines.
And you are arguing to a court that has held that these limitations in the Federal rules must be strictly observed.
And I don't know of any time limit in the Federal rules that's stricter than the rules that involve 50(b).
Mr. Dellinger: --Justice Ginsburg, there are several answers to the waiver question.
First of all, this Court has the authority to based upon it because the court appeal based upon it.
Secondly, the court of appeals correctly said that as the... the plaintiffs had told the judge, that motion, he need not rule on because it is the same motion that the... that had been made earlier.
Now the earlier motion was based upon the TAPAA Act, as... that it features it as a reason why the court need not create or recognize a punitive damages remedy.
The second motion--
Justice Ginsburg: And you didn't appeal on that.
You raised it properly, you lost on it, and you didn't appeal on TAPAA.
Mr. Dellinger: --That would be the case if we hadn't raised it all.
We raised it both times, the court said it was the same motion.
Here's what the court of appeals said.
The court of appeals said that Exxon clearly and consistently argued statutory preemption as one of the theories--
Justice Ginsburg: Statutory.
But the statute was TAPAA, and it was not the Clean Water Act.
Mr. Dellinger: --That is correct.
But the essential argument, the court of appeals is the same, and if the issue were not raised... even if the issue had not been raised at all in the trial court, even if the had not been put before the district court, the court of appeals still could have agreed to hear the question of whether a punitive damages remedy is obviated by the panoply of Federal statutes that are out there.
That... that there is... there was an exercise of the court of appeals.
The decision is now the law in the Ninth Circuit and this Court has full authority to review it, because as the--
Justice Ginsburg: As you know, there were or at least some strong amici briefs in this case that have asked this Court, tell the court of appeals that's no way to operate vis a vis district courts.
Mr. Dellinger: --Well, the... even Professor Miller recognizes that this is not jurisdictional and that the court has the power to do it, the power to hear this case.
And it is before it.
And... and even if the matter had not been raised in the district court, the court of appeals had authority to consider it.
Chief Justice Roberts: Mr. Dellinger, did you say you had a second and a third point?
Mr. Dellinger: --Yes.
Chief Justice Roberts: You going to get to them?
Mr. Dellinger: Oh, uh... yes, indeed.
Chief Justice Roberts: All right.
Mr. Dellinger: The... the Clean Water Act, the reason it's an important issue, is that the one thing that Congress has not done, whether it's in TAPAA, in the Clean Water Act or the Oil Pollution Act, is they have not provided for punitive damages but moreover, they have never had any remedy that is uncalibrated, that is limitless, that is not carefully measured so that it respects the need to protect the interests to be protective by those laws, by the interest in clean water, with a decision not to overdeter.
The problem with having a punitive damages remedy in an area where punitive damages has played no significant role, that is judge made, is that it simply obliterates the balance that Congress has struck.
If you look at the--
Justice Kennedy: You're talking about tradition.
It has never been the tradition for criminal statutes to have open ended penalties.
So that... that explains why the CWA has specific limits.
Mr. Dellinger: --Even on civil fines, even on other aspects of it, there is... there is a careful calibration.
And once Congress has decided that the limits of liability are twice the measurable pecuniary loss, to add to that careful set of remedies that Congress has adopted another remedy that is however many billions of dollars the jury might choose totally unsettled the scheme when Congress has addressed the very issue.
When you ask the question: Are punitive damages available for oil spills, and you look at the Clean Water Act, which covers so much of the territory of this act, it is hard to make out the case that... that there's a need for a judicially created remedy, particularly when the judicially created remedy, unlike something that was done by Congress comes without caps, without structure, without guidance.
If Congress were to decide that a punitive damages remedy, it's likely that they would place some kind of structural limits or caps on it and not have this limitless, free floating--
Justice Kennedy: Well, perhaps that's a segue to point No. 3.
I don't wish to--
Mr. Dellinger: --No.
That's a... I think that--
Justice Kennedy: --to cut you off.
Mr. Dellinger: --Even if the--
Justice Kennedy: --On point No. 3--
Mr. Dellinger: --I'm sorry.
You have a question?
Justice Kennedy: --My only question is this: Assume that there will be punitive damages applicable to Exxon under maritime law in in case.
We have read in the briefs about the limits that should be imposed on these punitive damages.
And those are from our due process cases.
If we are deciding this case as a matter of our authority to determine Federal maritime law, are there factors that we should include in a punitive damages framework that do not... that do not appear in our due process cases?
And, if so, what are those factors?
Mr. Dellinger: Well, I think surely that's right.
And the... your question recognizes, as have individual Justices, that... that here you are like a State court in the sense that, as Justice Scalia said, State courts have ample authority to eliminate unfairness and to set their own rules in this area, as you do here.
Now, the first--
Justice Scalia: You would say one of those factors is the Clean Water Act, wouldn't you?
Mr. Dellinger: --Yes.
Justice Scalia: Even if it is not pre emptive as a matter of law, it's one of the factors that you can bring to the Court's attention, I suppose.
Mr. Dellinger: That is correct.
Justice Kennedy: And I take it, under that, you would point to the double... the provision for a fine double the amount of the damages?
That would be a factor?
Mr. Dellinger: The--
Justice Kennedy: I mean, if we're looking for guidelines--
Mr. Dellinger: --Yes.
Justice Kennedy: --double general damages is a factor that we could... that we could follow in the maritime framework?
Mr. Dellinger: --Yes, but you would look to what the criminal penalty is that's actually imposed.
The Court has said civil fines are a better guide.
And the civil fine, the maximum civil fine here for both the State of Alaska and the United States, would be $80 million.
If you look to what the responsible law enforcement authorities and public officials of both the United States and Alaska thought was the proper amount, they imposed a criminal fine of $150 million, which was reduced to $25 million because of the cleanup efforts and the fact that Exxon prepaid $300 million of the losses in advance.
Justice Ginsburg: What about looking at what this Court said in TXO was proper in a punitive damages case?
That is, this spill was horrendous, but it could have been far worse.
And so, under TXO, you look at what was the... could be the maximum damage that could have been caused by this occurrence, and that could be many times--
Mr. Dellinger: Well, there was... first of all, it would be different to look at potential harm if the potential harm were attempted by the defendant, and the defendant had been unable to carry out the--
Justice Ginsburg: --But it wasn't--
Mr. Dellinger: --the planned harm.
Justice Ginsburg: --a factor here.
I mean, wasn't the example that the captain was trying to maneuver the ship after the disaster in such a way that would have made it much worse?
Mr. Dellinger: That was not even the basis of liability that was put before the jury.
And if you... and... nor was it shown that that... that that would have caused harm.
What... what you really have here is you... the first thing you would start with, Justice Kennedy, is to ask whether it is necessary for punishment and deterrence.
And when you start with payments that have reached $3.4 billion in terms of compensation, fines, remediation, restitution, that clearly obviates the need for deterrence.
And if you look to... if you look to punishment... if you look to punishment, here the one thing that is clear is that this was not an intentional act.
It was not malicious.
The company did not stand to make one dollar of profit.
There was no effort to enhance the profits of the company, nor was there any possibility of concealment.
And what the... what the Plaintiffs put before this Court, the Respondents in this case, are a number of issues that were never put before the jury, not part of the case, by people who were not even plaintiffs; matters that were outside of the record and contrary to the instructions.
So that the jury was told compensation--
Justice Kennedy: What would be the formulation of the rule if the Court thinks that any added amount would not deter, and how do we know that?
How do you formulate this rule?
Mr. Dellinger: --Well, it is absolutely essential to formulate some kind of rule.
The best guide is to look, I think, at civil penalties, which gets to... to $80 million, but to look to what the Court said in your opinion in State Farm, where... where compensatories are so substantial it may eliminate any need for additional punitive damages remedy.
Justice Souter: May I go back to your civil penalty point?
Mr. Dellinger: --Yes.
Justice Souter: Isn't the problem with the civil penalty argument is... that the civil penalties were calibrated for environmental damage, and what we are dealing with here is individual economic damage?
So we've got an apples and oranges comparison, haven't we?
Mr. Dellinger: Well, two responses: First of all, the $150 million penalty did... the purpose of the Clean Water Act also includes protection of property.
So it's not just for the environment.
And, indeed, part of the reason for cutting the $150 million award was the compensation that had been paid.
But, secondly, if you--
Justice Souter: To the... for lost trade or something?
Mr. Dellinger: --Right.
It... even if you took that as calibrated to the environmental damage, the environmental damage was twice what the compensation... the total compensation paid was $500 million.
The company paid nearly a billion dollars for natural resources harm.
If $150 million was the right amount for the environmental damage, then the right amount for the half of that that constitutes the lost wages would be $75 million, which is itself close to the $80 million.
But here I think that it is incumbent upon the Plaintiffs to show why you need deterrence when there was no profit motive, and you've had to pay $3.4 million.
And when if you look to punishment, that can't be a black hole into which all the limits on punitive damages disappear.
It's whether that... if this Court can't set standards that would limit an award of this kind, that is a reason for believing that this ought to be done by Congress if there are going to be punitive damages.
I'd like to reserve--
Justice Breyer: But the... I mean, the obvious kind of thing would to be say that the standard would depend upon the reprehensibility of the conduct of the officer of the corporation, including the captain, if you lost on that.
And where we said roughly before zero to 10... and you are quite right that this is a huge amount of money... you'd say zero to five, up to five times.
I mean that would be rough and ready.
But the idea would be to impose enormous deterrence upon large firms involved in your industry that you are representing not to make certain the officers on the ship behave in a reprehensible way.
It's crude, but I mean that's the kind of thing that we said in the due process cases.
Mr. Dellinger: --Well--
Justice Breyer: Then why wouldn't you--
Mr. Dellinger: --Keep in--
Justice Breyer: --Why wouldn't you--
Mr. Dellinger: --Keep in mind that the largest award in the history of punitive damages was an award for 500,000.
That was 1/14--
Justice Breyer: --You're going to say... you're going to hear in two seconds... they're going to say this is the company that makes the most amazing profit, et cetera.
And so you're trying to deter them.
So we know what, you know... so, what do you say to that?
Mr. Dellinger: --I... I say that this... that the amount is enough to deter anybody for anything when it is $3.4 billion.
And it's hard to know how you could have a punitive rationale for something which was unintentional, not designed to make a profit, and could not have been concealed.
Argument of Jeffrey L. Fisher
Chief Justice Roberts: Thank you, counsel.
Mr. Fisher: Mr. Chief Justice, and may it please the Court: Each of the three rulings at issue here rests firmly in the mainstream of American tort law.
And there is no reason in maritime jurisprudence to depart from those rules.
I want to start with the first question presented, what Exxon calls the vicarious liability issue.
And I think it's important to frame the discussion by starting with the actual jury instruction that's at issue in this case.
It's at Pet.
It says that a managerial agent is someone who supervises other employees and has responsibility for, and authority over, particular aspects of a corporation's business.
And, as Justice Ginsburg noted, Exxon has never disputed that Captain Hazelwood satisfied this definition.
As its own internal documents explain, Captain Hazelwood was in charge of what they called a business unit of Exxon Shipping.
He was in charge of hundreds of millions of dollars of equipment, of product; he was in charge of budgeting and personnel with respect to the vessel; he was also in charge of safety.
He was the person who decided on behalf of Exxon that it was safe to leave port the night of March 23, 1989.
Now, it is our submission that it is perfectly appropriate to expose the corporation to punitive damages based on the reckless acts of such an individual.
In doing so, it does not, as Exxon would contend, impose vicarious liability.
Rather, what it does is it exposes a corporation to liability based on its own culpability.
The very point of the restatement test, as opposed to the vicarious liability rule that is followed by the majority of the States, is that it requires some complicity on the part of the corporation.
Chief Justice Roberts: What if it's the lookout posted... I don't know if they have one... but the lookout posted in the front of the ship, and he is drunk, and doesn't see the reef or something?
Is the corporation liable in that case?
Mr. Fisher: Not for punitive damages, Mr. Chief Justice.
And the reason why is because the lookout does not run a business unit of Exxon Shipping.
What is happening here... and I want to focus on this for a moment because Mr. Dellinger--
Chief Justice Roberts: So you regard the ship as a business unit?
Mr. Fisher: --That's what Exxon regarded the ship as, and so that's what the record says.
And the idea is that you had--
Chief Justice Roberts: That's different if they say that it's... depending on how they categorize the different units tells whether they are liable or not?
Mr. Fisher: --Well, I don't want to rest primarily on labels.
The idea is function.
And I think, going back to the instruction, what the instruction is asking the jury to determine is: Is this a person who has authority over an aspect of a corporation's business?
I think a shorthand for that is in Exxon's own documents that it is--
Justice Scalia: In respect, I mean, the janitor has authority over an aspect of the corporation.
I mean, surely, that can't be the test.
Mr. Fisher: --Well, I think the authority--
Justice Scalia: I assume the test is the person has to be high enough that it justifies holding the entire corporation.
And I doubt whether a captain is... is high enough.
How many of these units does Exxon have?
Mr. Fisher: --There are about 20 vessels like the Valdez.
Justice Scalia: Twenty vessels.
Mr. Fisher: Now, I think Mr. Chief Justice had it right when he said it's no answer to say it can't be the master; it has to be the corporation.
The corporation can only act through people.
So there has to be a line drawing that takes place.
Now, this notion of the idea that the master isn't good enough because he had to be a policymaker is new to us.
Chief Justice Roberts: That was a question that I asked, not a statement.
Well, how do you draw the line?
I mean, is the second in command on the boat a man responsible for policy?
Mr. Fisher: He may not be.
I don't think the question is whether he's responsible for policy.
Again, it's whether he's the person in charge.
What Exxon during instruction to the district court asked the jury to be required to find is that there was a shore based supervisory official of the Exxon defendants who made the decision.
So Exxon itself recognized that you have to draw the line somewhere.
We think the best place to draw the line, and the conservative place to law, the line is the managerial agent rule that's in the Restatement.
Now, Mr. Dellinger says there are eight States that follow a different rule.
And it's important to understand that that's not the case.
Even among the States that follow the Lake Shore formulation in general, you still have to have a way to implement it.
It's not... the idea is if the corporation has to be complicit, you still have to tell the jury which human beings they can look to for that complicity.
So at page 33 of our red brief--
Justice Scalia: I thought the Lake Shore... well, I thought the Lake Shore and Amiable whatever it is principle was that a captain ain't one of those.
The captain doesn't... doesn't do the job.
Mr. Fisher: --There was no captain at issue in Amiable Nancy.
And, Of course, there wasn't a captain at issue in Lake Shore, because it was a land based case.
But on page 33 of our red brief we've given you seven... several States that say we follow the complicity test, and here's how you do it.
You require the jury to find that the person is at least a managerial agent.
Exxon itself in its reply brief on page... page 11, footnote 5, cites several States.
And I gather these are the States to which Mr. Dellinger is referring when he says there are eight States that follow our rule.
Well, we did some research after getting the reply brief, and I want to give you a few cites, because it illustrates the principle yet again.
Several of those States say we follow the Lake Shore complicity idea.
And, therefore, the way we do it is we require a jury to find at least a managerial agent.
So Kansas is a State that Exxon cites.
In the Flint Hills case at 941 P. 2d 374, Kansas says the way in modern times you implement Lake Shore is you require a managerial agent.
In Connecticut, the Stoltz case 867 A. 2d 860, and in the D.C. Circuit, Justice Scalia, they quote one of your opinions.
If you look at D.C. law, the D.C. Court of Appeals itself and a D.C. circuit in another case have said... and this is the Arthur Young case, 631 A. 2d 354, and the GMAC case at 273 F. 2d 92--
Justice Kennedy: Do any of those cases say the managerial agent is liable if he violated express instructions from an employer?
Mr. Fisher: --No State tort case that we're aware of, Justice Kennedy, adopts... I think what you're referring to is the Kolstad policy exception.
Justice Kennedy: Because that's what the last part of your instruction 33 says.
And it does seem to me that this captain may be managerial for some purposes and not others.
I think that's the way it's going to have to come out.
But certainly he was not entitled to set aside the policy of Exxon that you cannot navigate a vessel while intoxicated.
Mr. Fisher: Well, I think I want to say two things.
The first is that, as I understand it, Exxon has conceded across the board that Captain Hazelwood is a managerial agent.
And in this case... in this Court's own Kolstad case, if you look at it again, it says Amiable Nancy, Lake Shore and the way you implement that--
Justice Kennedy: But they have not conceded the accuracy or correctness of instruction 33.
And that's because he was not entitled to set aside the policy on intoxication.
Mr. Fisher: --Well, if you were to adopt a rule that no other State has adopted, which is to say there was a policy defense in ordinary tort cases, which unlike Kolstad do not rest on the subjective knowledge of the actor, even then, we submit, we tried that issue in this case, Justice Kennedy; and there was... Exxon had every opportunity to argue policy.
In its closing argument to the jury, the only policy it mentioned was the policy of two officers on the bridge while transporting--
Justice Kennedy: No.
Your instruction says if he was a managerial agent, his acts are attributable to the corporation.
Mr. Fisher: --That's right, Justice Kennedy.
We think that's the proper rule of law.
Justice Kennedy: So the corporation's responsibility or complicity or culpability is simply not relevant under your theory of the case, even though that's what you talk about in your brief.
Mr. Fisher: Well, I don't want to act like a dog chasing his tail here, Justice Kennedy, but the idea is to ask whether the corporation is culpable, you have to ask which people.
And what happened in this Court's own decision in Kolstad said in implementing Lake Shore that you look to the managerial agents.
And that's what--
Justice Breyer: That's... that's why I'm interested in the same question I asked on the other side.
As I read Lake Shore, it seemed to me my first reading of it that it picked up this distinction that Justice Story made, and it said quite right, you could impute punitives or exemplary damages to a corporation where its managerial official is the one who causes... who behaves recklessly.
But wait, we don't mean quite that.
We mean some managerial officials.
And they seem to refer in the admiralty case, I'll tell you one who he isn't, namely, the ship's captain.
He's not in that category.
And then in this other case, they say... they talk about a superintending agent authorized to imply, employ, and discharge the conductor.
And they give that as an example of a managerial official where there would not be exemplary damages assessed against the corporation in light of his conduct.
So when I read that, I thought that this Lake Shore case is just picking up the earlier case; and that's the Federal law.
And you've given the examples where the State law has changed; and I have no doubt you are right.
You read the cases very well.
But is there an example where I could say that the Federal law has changed, too?
And you started down that track, but the reason this is of probably more than inordinate concern to me is that I wrote the case in Sand, I wrote a dissent in Legion, I looked into stare decisis law and made fairly clear views of what it is.
So what would you say to someone who has accepted certain legal principles that we have had in prior cases?
And you want to say nonetheless you win.
Mr. Fisher: --Three reasons, Justice Breyer.
The first is with all due respect, Amiable Nancy did not involve the wrongdoing of the captain.
It involved the wrongdoing of a lower officer on the ship; and so it's... there's nothing in the Amiable Nancy that deals with captains, so you don't have a stare decisis effect that comes from Amiable Nancy with respect to captains.
The second thing is there are some more recent Federal cases that discuss the Lake Shore managerial agent idea.
We've cited them in our... in our red brief along through... I'm flipping now... but there are RICO cases; there are other cases, and Mr. Dellinger said, where statutory case... statutory regimes need to be implemented.
And we have cited several lower court decisions that look to the managerial agent rule to do that, none of this Court.
The third thing is to understand, as you talked about in Lake Shore, you are having to pick somebody, and the general idea is higher up is okay, and way down low is not okay.
Fletcher in his Cyclopedia on corporations says that if the Lake Shore idea is to make sense today, you have to understand that when you're dealing with humongous corporations, you have to look not just to the president or vice president... and this is what the D.C. Circuit said in the GMAC case as well... is that when you deal with multinational corporations with tens of thousands of employees and divisions, you look to... you look a little bit lower down than those top job titles to managers.
And so again this is what Professor Schoenbaum says in his amicus brief to this Court dealing with that from a maritime perspective.
Chief Justice Roberts: Mr. Fisher, you... your friend says in his reply brief that you cannot cite one U.S. maritime case that has allowed vicarious liability for punitive damages.
Is this the first one?
Mr. Fisher: No, it would not be, Mr. Chief Justice.
What we did--
Chief Justice Roberts: What's your best case?
Mr. Fisher: --What we did our reply brief... I'm sorry, what we did in our red brief is cite to Professor Robertson's article in saying that he collected the cases, and which he did; and so our best cases are the City of Carlisle case, the Ludlow and Ralston against States Rights is very close.
There's a distinction in Ralston versus exemplary--
Chief Justice Roberts: Well, let's take... take the Ludlow.
Mr. Dellinger says that's a case where the court found that the owner is not vicariously liable.
Mr. Fisher: --We don't think that's the right reading of the case.
We submit... we have a footnote in our own brief that says that there are only two cases that they cite in which a captain's conduct is not imputed to the ship's owner.
They are both more than 100 years old, and neither of them deal with corporations.
So I think it is entirely fair to say that you have more or less an open issue before you today.
What I think I want to be sure the Court understands, though, is that there is not a stare decisis problem that this Court has to confront with respect to the first question.
You have a spattering of a few old cases that lean in different directions.
Justice Breyer: And so it differs from Sand, for example, where they are like two cases?
Mr. Fisher: Pardon me?
Justice Breyer: It differs from Sand?
You say it is not... I'm interested in your last remark.
In the Sand ways I found... you know we went through it, public policy was on the other side.
But... but we had several cases, it wasn't a thousand; it was more like two; and the Supreme Court had said in two cases, one very clearly, you know... you see the point there.
Mr. Fisher: Yes.
Justice Breyer: Why do you say there is no stare decisis problem?
Mr. Fisher: Well, because neither Amiable Nancy nor the Lake Shore case, which are the only two cases from this Court, dealt with a managerial agent.
The more recent cases from this Court, Hydrolevel and Kolstad... Hydrolevel says any agent for treble damages for antitrust, and Kolstad follows the managerial agent principle, following in the natural evolution of Amiable Nancy and Lake Shore.
So I don't think this Court has ever considered it to be any stare decisis problem, even if all of the lower courts were lined up against it, which is far from the... far from the case here.
What you have is a just few lower courts in either correction.
I gather that's one of the reasons why this Court decided to grant certiorari in this case, because there's some dispute among the lower courts as to exactly how this principle works in maritime law.
But again, we don't think there's any problem with this Court--
Justice Scalia: That, and $3.5 billion.
Mr. Fisher: --I said one of the reasons, Justice Scalia.
Justice Ginsburg: There's some confusion, Mr. Fisher, about this Kolstad.
I take your... it has entered this case at two levels.
One is this business about the company policy; but as far as Exxon having a policy, you don't mix alcohol with employment on a tanker; but Kolstad said it has to be a consistently enforced policy.
So you don't have any problem with Kolstad on that issue, if you're using it here for a managerial--
Mr. Fisher: Kolstad starts from the proposition of managerial agent is the proper way to implement a complicity rule.
There's a second part of Kolstad that says we have to change what we think is the ordinary common law rule, the proper Federal common law rule.
We have to change it in the context of Title VII because of the unusual situation in which employers can be held liable based on the subjective knowledge of the wrongdoer; and tort law is exactly the opposite.
It is an objective test.
And so there's no worry in imposing punitive damages here, that you're going to... that you're going to dissuade an employer from training its employees.
Now, on the facts, even if you were to agree with me on that legal argument, you're exactly right on the facts, Justice Ginsburg.
Exxon had a paper alcohol policy that prohibited drinking aboard ship, just like the Coast Guard has a policy to that effect.
But the evidence in this case was that Exxon didn't enforce it.
Justice Kennedy: So in your theory of the case, instruction 33, if the superior had told Hazelwood don't pilot the ship today, Exxon would still be liable?
That's your theory of the case under instruction 33?
Mr. Fisher: On the--
Justice Kennedy: Or the last part of the instruction 36, I think.
Mr. Fisher: --On the first part of the case in phase one that was our... that was the legal theory, Justice... you're right, Justice Kennedy.
But in phase three of the trial when a jury decided whether to award punitive damages, the instructions told it, among other things... this is instruction 30 in phase three... it told among other things to consider whether or not the wrongdoers were violating company policy.
Justice Kennedy: Well, but that... that goes to measures, not to liability.
Mr. Fisher: Absolutely.
Justice Kennedy: That was the first phase.
And that's the instruction, it seems to me, that you have to explain.
Mr. Fisher: Well, I... I accept that, and I think I've explained that by distinguishing an ordinary tort case from the situation in Title VII.
I think it's instructive for this Court, and we agree with Exxon that when this Court sits as a maritime court, it looks for guidance to what other State courts have done.
And we think it's instructive that not one single State court, either before or after Kolstad, has adopted a policy defense for defendants.
There's simply no such decision on the books outside of discrimination cases.
Chief Justice Roberts: What is your position of how to look at the case if you have a managerial employee who acts contrary to corporate policy?
Is the corporation still exposed to punitive damages?
Mr. Fisher: --In a tort case, Your Honor?
Chief Justice Roberts: In a case like this.
Mr. Fisher: Yes.
We think... and that's... and that's what instruction Justice Kennedy--
Chief Justice Roberts: So what can a corporation do to protect itself against punitive damages awards such as this?
Mr. Fisher: --Well, it can hire fit and competent people who it decides--
Chief Justice Roberts: Well, and assume it has a policy that we will hire fit and competent people?
Mr. Fisher: --Well--
Chief Justice Roberts: And you're saying... that's the question I'm asking.
What if there is a breach of the corporate policy?
I don't see what more a corporation can do.
I mean, your... other than... other than what?
I mean it has to say that the policy is this, and if somebody breaks the policy, they're liable for compensatory damages, which can as this case shows be in the billions of dollars, and of course the individual is liable for punitive and other awards.
But what more can the corporation do other than say here is our policies?
And try to implement them.
Mr. Fisher: --Apart from adopting a policy, they need to implement it soundly.
And the argument you're making, if I understand it correctly, would obtain just as easily if the vice president of Exxon Corporation or the president of Exxon Shipping, whom Mr. Dellinger says would put Exxon on the hook, had made the decision to put Joe Hazelwood in command of this ship.
And so you always have the problem--
Chief Justice Roberts: At that level... at that level, the president, I think you would have an argument that the policy was being changed.
It's not clear that that argument works when you're dealing with someone at Mr. Hazelwood's level.
Mr. Fisher: --Well, in some... I think in some respects we're back to the argument of where you draw the line.
But let's look at the conduct in this case.
Who made the decision that it was safe to depart port that night on behalf of Exxon Corporation?
The record unequivocally says that Captain Hazelwood is the one who made that policy decision.
Justice Stevens: Let me throw this thought on the table.
If the policy is made by the board of directors, can the president unilaterally change the policy?
The Chief seems to be suggesting he could?
Mr. Fisher: I don't think so.
Justice Stevens: It seems to me we have this problem, the president of the company is the same as the vice president.
Mr. Fisher: I think that's the point that I was trying to make.
Chief Justice Roberts: I suppose that would go to how consistently and how effectively the policy is enforced.
If the president of the company isn't following the policy it's not going to be taken very seriously.
That's different than saying you have a situation where on an episodic and sporadic basis a firm company policy is breached, the individual is breaching the policy.
Mr. Fisher: Well, if we're to the point where the question is whether or not the policy was enforced, we'll very happily rest on the record in this case, because that was what we tried to the jury: That there was no serious alcohol policy that was enforced.
We showed 33 instances in the record of Exxon employees drinking with Hazelwood or learning that he drank.
Up and down the corporation, as the district judge explained, for three years, upper management was receiving reports that this man was drinking aboard the vessel.
Now, its policy, Mr. Chief Justice, was that that was not allowed.
But over a three year span, as the district judge found again and again and again, they were told there was a problem.
Justice Breyer: That wouldn't... you might win on that one.
I mean if you show that.
They have... we have to assume that that isn't so, don't we--
Mr. Fisher: I think you assume--
Justice Breyer: --for purposes of this argument?
Mr. Fisher: --Well, two... two points, Justice Breyer: On answering the first question presented--
Justice Breyer: Yes.
Okay, that's all.
Mr. Fisher: --you assume--
Justice Breyer: That's fine.
Mr. Fisher: --unless we can show... unless we can make an overwhelming harmless errors--
Justice Breyer: On the second and third, this is what--
Mr. Fisher: --The second and third, I think you assume the facts--
Justice Breyer: --some time available.
I would like you to address at some point at your convenience what should the standards be if, in fact, the captain of a ship, or responsible for conditions, for example, negligence or recklessness is now going to be not only imputed to the corporation but subject for punitives.
Now, what I'm interested in, in the back of my mind is: This is a very dramatic accident.
It involves oil spills, and they cause a enormous amount of trouble.
But there are accidents every day, and ships are filled with accidents like automobiles in other places.
And there are all kinds of things that go wrong.
And if, in fact, it has not been normal in admiralty until now to assess punitives against the corporation on the basis of the activity of, say, the ship's master, failures of responsibility, then it will be a new world for the shipping industry and for those who work on the ships.
What happens when a sailor slips and is hurt, and it's very serious to that sailor, et cetera?
What principles do you have to suggest, if any, for creating a fair system that isn't just arbitrary?
Mr. Fisher: --Well, I think this is the perfect segue from the first and third questions.
As I transfer there, I want to point out that I think the only reason that we heard in the first... the first portion of the argument for absolving Exxon of responsibility in the situation is because of the dangerousness of captaining vessels like this.
This Court has already addressed that concern in its collision doctrine, and tort law generally addresses the problem of dangerous activities and split second decisions.
And the answer to that is they are simply not reckless when somebody makes a good faith decision in a crisis in the midst of dangerous activity.
So we don't think there's any special rule that is necessary with respect to the first question presented.
Now, you asked me how do deal with it in terms of the size of the award.
We think... first of all, I think that if I can beg to differ slightly with the way you framed it, as Professor Robertson explained, punitive damages are... have always been firmly established in maritime law.
And then just because there haven't been that many cases doesn't tell you that they've been frowned upon.
It just means that we haven't had that many cases that have resulted in reported decisions.
Now, in looking to guidance, this Court isn't sitting as a maritime court.
So it... it's siting as a common law type court.
We think the best place to start is with the common law tradition, which is that cases are tried to juries; juries make the first decision; and then the trial court reviews for passion and prejudice and for substantial evidence, as our trial court did here.
And then the court of appeals reviews that for abuse of discretion.
If there's anything more that's necessary in maritime law, we submit Congress has already stepped into the breach with the Limitation of Liability Act.
Justice Kennedy: Correct me if I'm wrong.
You've read the case... our case in Cooper, which says that the appellate court has to examine de novo to determine the adequacy or the excessiveness of the award to deter.
Mr. Fisher: I think that's a constitutional holding.
What this Court said in Cooper was if--
Justice Kennedy: Well, then, a fortiori, it gives us the right and the duty to do so as... sitting as a common law type court.
Mr. Fisher: --Yes.
I'm not going to fight you on that, Justice Kennedy.
There was an earlier sentence in Cooper that says if no constitutional issue is raised, the only thing an appellate court should do is review for abuse of discretion.
But I think that ultimately you end up in the same place, which is that there's a de novo review of the excessive... of whether the award is excessive based on the facts that have been... that have been tried.
And if this Court is going to adopt a set of guideposts for maritime law, we think the proper place to look is the due process cases this Court has already decided.
This Court has already... in its due process cases, the Court looked to the common law.
That's where, I gather, the guideposts this Court adopted came from: Reprehensibility, in particular, which this Court said was the most important indicia, as well as a reasonable relationship, what's commonly referred to as the "ratio test".
Justice Scalia: What about... what about looking to the Clean Water Act?
And I wanted to ask you this question about the Act.
Assuming we agree with you that... that it was too late to raise the Clean Water Act as a separate pre emptive factor in the case, why was it too late in the appellate court to raise the Clean Water Act as an additional reason why maritime law should not be interpreted to allow punitive damages and, in part 3 of the case, as a factor, why punitive damages of the amount at issue here should not be allowed?
It seems to me there it's not a new argument.
It's just an additional factor for arguments that have already been made.
Mr. Fisher: I think I accept what you said, Justice Scalia.
The third... with respect to the size of the award, we never contested Exxon's ability to argue that the Clean Water Act is one place you can look.
So, if you were to look to the Clean Water Act, you initially have the problem that Justice Souter mentioned.
You have the apples and oranges problem.
The Clean Water Act sets a fine cording to the environmental harm.
Now, the State of Alaska had that estimated in its... and this is in its brief... and that came out to be... I believe the number is about $2.6 billion.
So, if you were to look... if you were to put aside the apples and oranges problem and look to the Clean Water Act, then you get almost the number that we're standing here with today.
If you look at the harm a different way, you still get an extremely large number.
You get $500 million of compensation to the Plaintiffs.
And then on top of that, we think in light of the way this Court has addressed ratio analysis in its other cases, you need to take account of the fact that there are vast injuries that have not resulted in any compensation.
So to do any kind of--
Justice Scalia: Yes.
That's part 3.
What about part 2?
Why... why can't the Petitioner raise the argument or why could not the Petitioner raise it in the court of appeals?
Okay, we agree that the Clean Water Act does not pre empt the granting of punitive damages here, but one of the factors that we ought to take into account in deciding whether modern admiralty law in this situation permits punitive damages is the existence of the Clean Water Act.
That's not a pre emption thing.
Is that also waived, do you think?
Mr. Fisher: --Well, I think it would be because that's... they never made that argument in the district court, and they didn't make that argument to the--
Justice Scalia: They don't have to make every tiny little argument.
I mean, you can think of additional points on appeal so long as it's under the same major heading.
And the major heading here is not the Clean Water Act pre empts punitive damages; the major heading is, rather, modern admiralty law does not permit.
And, you know, they had made other arguments about prior cases; they had talked about State law; and this is just another argument: By the way, here's another one.
There's the Clean Water Act.
Mr. Fisher: --Well, they didn't make that argument, but if they had, I don't think it ends up being any different than their pre emption argument because... remember their pre emption argument isn't a pure pre emption argument.
They're not here today saying the Plaintiffs can't recover compensatory damages, as was the case in the Milwaukee and Illinois case, for example.
What they're saying is that the Clean Water Act displaces our ability to recover punitive damages.
And there, by making the argument that I gather you've sketched out, it looks very much like the same argument that they didn't properly make.
Justice Scalia: It's close.
Mr. Fisher: But it doesn't--
Justice Scalia: But it doesn't really say pre emption, and so it's... it's just another factor to consider when you decide what the evolving law of admiralty requires.
Justice Ginsburg: --There was a statute that was raised in the district court.
And the district court raised this TAPA Act, and they thought that that was the statutory guide, and that was the reason why there should not be punitive damages, but... so that was one of the things the court of appeals said under the head of waiver.
They're substituting one federal statute for another.
Mr. Fisher: --That's right, Justice Ginsburg.
And at page 103 of the joint appendix, the district court ruled on that motion and held that TAPAA was the statute that was controlling with respect to spills of trans Alaska oil and that the savings clause of TAPAA expressly preserved our ability to seek punitive damages.
That's a ruling that, as you noted, Exxon never appealed, and so it is the law of the case.
Chief Justice Roberts: A while ago you were about to make a point on the Limitation of Liability Act.
Mr. Fisher: Yes.
Chief Justice Roberts: But I was... I would have thought that cuts heavily against you on the third point.
In other words, if we're looking to guidance, you look to Federal law.
And whether it's directly applicable or not, the Limitation of Liability Act reflects a very strong Federal policy about restricting liability on shipowners, adopted at a time when it was intended to encourage maritime... the maritime economy.
And why isn't that something we should look to, at least under question three?
Mr. Fisher: Well, as I said, I agree you should look to it, but you should do it in a way this Court's Miles decision instructs.
It says that Congress doesn't just enact general policies.
By enacting a statute that gives some protection, Congress indicates not just a general policy, but more importantly, the sphere into which that policy is to be given effect.
And so the notion that Congress did step in and give shipowners some protection but left out shipowners like Exxon that behave in the manner at issue in this case, we think is a strong--
Chief Justice Roberts: Well, that means they don't get the really quite extraordinary protection that the limitation of liability gives.
It doesn't mean that we should ignore the reflection of that policy outside the confines of the Limitation of Liability Act.
Mr. Fisher: --Well, I think... I think you should look to it and understand that Congress has declined to give the protection.
In OPA 90, which was passed right after the spill in direct response to the spill, Congress made explicit that the Limitation Act should never apply to spills of Trans-Alaska oil.
And the TAPAA did the same thing in the--
Chief Justice Roberts: The argument is not that the Limitation of Liability Act should apply.
It's that it would be very strange to say, where Congress has radically reduced the exposure of shipowners in one area, that we as a matter of development of Federal common law, Federal maritime law should allow dramatically expanded punitive liability in another area of shipowning liability.
Mr. Fisher: --Well, we don't think we're asking for any kind of expansion of liability.
All we're asking is for the traditional admiralty rule which has been recognized by Justice Story early on and all through the cases that in cases of reckless indifference a shipowner can be held liable for punitive damages.
The only thing--
Justice Souter: Mr. Fisher, the problem I have... maybe it isn't a problem I have, but a question that that argument raises is this: We know something now that Justice Story did not know, and that is we've had an awful lot more experience with punitive damages practice.
And we've spent the last decade or so of this Court dealing with the problem of how to set constitutional limits for awards which sort of by most people's standards verged on the excessive.
The problem that we've had... we've had two problems in coming up with those constitutional standards: One is we can't simply substitute ourselves as lawmakers for the State.
We're talking about constitutional limits, not optimum standards.
And number two, given those limits on us, we have not been able to come up with anything that could be called determinant standards.
We've never, for example, found a sufficient reason constitutionally to put an absolute ratio kind of limit on it.
But here, as you were pointing out earlier, we're sitting as a kind of common law court.
We are in the position of the States here.
Why shouldn't we recognize the difficulty of trying to deal with indeterminate limits which we've proven in the constitutional context and say, therefore, we've simply got to come up with a number, because no other way is going to give us any kind of an administrable standard; and our number... and I'm not saying this should be it... but our number is going to be double the compensatory damages?
That's the limit.
Would that be an illegitimate thing for us to do or an unwise thing for us to do?
Mr. Fisher: --Well, I think it would... I'll stick with unwise, Justice Souter.
And I think the reason why is because we agree with Exxon.
You should... you should look to the experience of the States.
Not one single State, as a matter of common law authority, has set a bright line ratio.
The only place--
Justice Kennedy: But the... the United States Code, the general criminal code, 18 U.S.C. 3571, has exactly that number.
It's... for... it's double the pecuniary loss for a criminal act.
And it seems to me, if when we're looking for guidance, as Justice Souter quite properly indicated we must, and Justice Scalia has indicated with reference to the Water Act, that this is... gives us a very valuable instruction.
Mr. Fisher: --We think that's one place this Court can look.
But again, a common law court, we believe, sets standards, not a bright line rule.
If you were to adopt some sort of bright line statute, you'd have to deal with any number of legislative problems that the several States have dealt with and Congress, when it has passed these kinds of limits.
First, you have to decide the ratio number.
You have to pull something out there.
Then you have to decide is it on a per capita basis in terms of... what several States have done is they've set a limit, that a ratio only kicks in at a certain dollar amount.
In this case, it's worth remembering that the plaintiffs are only standing to recover $75,000 a piece in punitive damages.
Now, most States that even have caps, or several of the States at least, say they don't apply if the awards are under a $100,000 per capita.
Justice Breyer: Why?
What's even the theory of that?
Because the theory of punitives is that the individual who's receiving the money wasn't hurt one penny's worth?
Mr. Fisher: But the theory--
Justice Breyer: And that really the money ought to go to the people generally in the State or it ought to go to other people, rather than those people who have already been compensated.
That's the theory of it.
Mr. Fisher: --I think that's--
Justice Breyer: That exhibits the difficulty for me of trying to figure out how to do it.
Mr. Fisher: --I think the theory of the States, Justice Breyer, is that if you hurt lots and lots of people, it's a worse act than if you only hurt one or two.
And so if you have, as in this case, destroyed an entire regional economy, that it would be inappropriate to give some sort of credit for that by a lower ratio just because you've harmed more people.
Now, there's also--
Justice Kennedy: But isn't the measure what is necessary to deter?
Isn't that what we've asked first and foremost, not exclusively perhaps?
Mr. Fisher: --Well, I think you've looked at punishment and deterrence, Justice Kennedy.
And if I could finish the last thing I want to say about looking at a ratio, several States that even have ratios carve out drunk driving cases and cases involving intoxication from any other otherwise applicable limits.
And that's... I think one reason why, Justice Kennedy, is deterrence.
And so, I think let's start with deterrence, but I want to frame that discussion by recognizing that in Cooper this Court said that deterrence is not the only goal; you also look to punishment.
Now, I think Exxon's primary argument on deterrence grounds is that we've paid $3.4 billion out of our pocket already as a result of this spill, and that's a lot of money.
The reality is, once they get their tax credit and insurance benefits for that money, the number is really under 2 billion.
But it's still a lot of money.
And so I think it's important to look at the district court proceedings involving the Clean Water Act, involving the criminal prosecution here, and ask whether it makes sense to have Exxon pay additional money in punitive damages.
We think it is.
The first thing to understand is that the same district judge that saw the criminal proceedings in this case sat over our trial.
He understood what the criminal case was about, and what it was about was the environment.
That was only thing on the table in the criminal case.
And so, when we tried to argue--
Chief Justice Roberts: It was a different jury.
And the jury is the one that set the amount of punitive damages.
Mr. Fisher: --There was no jury, of course, in the criminal case.
Chief Justice Roberts: Right.
Mr. Fisher: But there was a jury in our case.
The district judge reviewed that and said, after being instructed in instruction number 36 in our case... and this is something that we tried... the chairman of Exxon took the stand in trial and gave the jury a chart of all the money that Exxon had paid out of its pocket and told the jury: We've been deterred enough, so you shouldn't award any punitive damages.
And the jury, of course, rejected that argument that Exxon made.
And the district judge reviewing that decision... and this is around page 240 to 245 of the petition appendix... the district judge said: I think the jury had ample reason to do so.
And remember to the tune of $5 billion.
And so why did the district judge think that?
Chief Justice Roberts: This is the same judge who approved the instruction that said Hazelwood's negligence and recklessness is automatically imputed to Exxon, right?
Mr. Fisher: --Yes.
Chief Justice Roberts: So he was operating that under understanding of the law.
Mr. Fisher: Well, not when he was reviewing the size of the award, Mr. Chief Justice.
In the criminal case, the statement of facts supporting the guilty plea in the criminal case... and remember, we're only talking about environment in the criminal case... and in terms of punishment, the only money for punishment in the criminal case is $25 million.
All the rest of the money is, as the district court said, to clean up Exxon's mess or to put money into the environment.
Now, for $25 million fine that Exxon paid in the criminal case, the district judge explained... or I'm sorry, the district judge approved the statement that the U.S. attorney submitted, which said the basis for this is that the captain and the third mate were negligent.
That was the only thing even there.
It wasn't until our trial and our discovery that it was brought out that the complicity of the organization ran far deeper.
And so at our... phase three of our trial, which was entirely about Exxon's conduct, not any more at all about Captain Hazelwood's conduct... in phase three of our trial we started out the closing argument by saying here's the relevant evidence for the jury.
And we played something for the jury called Trial Compilation 9.
Now, that appears at appears at page 1295 of the joint appendix, and we actually submitted a videotape that we have submitted to the Clerk's office, and it is sitting in the Clerk's office.
There are 50 segments in Trial Compilation 9, and all 50 deal with Exxon's upper management receiving reports of Hazelwood's conduct and deeming it a gross error to put him in command and so forth, all there.
So it wasn't until the trial in our case that it came out how deep the complicity ran in the organization and how reprehensible the conduct was.
And in reviewing the award the district judge said: Now, with that level of complicity and reprehensibility, I think the jury could have decided that Exxon should be punished for this--
Justice Breyer: What is the relevance?
Mr. Fisher: --deterrence.
Justice Breyer: What's the relevance of the leg that we're assuming Exxon, other than the captain, did bad things?
Mr. Fisher: We submit that--
Justice Breyer: You seem to be now talking about the evidence that they did bad things.
But that's the leg that they did--
Mr. Fisher: --The district judge said that this is what he deemed a critical factor supporting the punitive award.
Justice Breyer: --Well, doesn't that show, then, that there had to be a finding that they did the bad thing?
Mr. Fisher: No.
If you accept our argument in the first that to get in the door, all we had to show was that a managerial agent was reckless and that Captain Hazelwood, as Exxon conceded, Was a managerial agent.
When you are reviewing the size of the award... and I think we're talking about the third question presented, the size of the award... all the... all the evidentiary questions are resolved in favor of us, and certainly they are resolved in a way that conducting de novo reviews, a lower court understood and told this Court what the record was.
And it is all about the three years that they knew Captain Hazelwood was drinking.
But I don't want to leave Justice Kennedy's question about deterrence, because even if this Court looks at the payments Exxon has made from a perspective of deterrence, there are two legs in which Exxon has clearly not been deterred.
The first is that Exxon's own executives testified to Congress shortly after the spill that the results of the spill were, quote, "pretty much as we envisioned".
Now, it was also common knowledge in the organization, and this came out at trial, that the idea of putting a drunken master in charge of a supertanker was a potential for disaster and incalculably raised the chances of a disaster and a catastrophic spill occurring.
Knowing all this; knowing what could happen; knowing that the industry did not have sufficient cleanup equipment to contain a big spill; knowing that tens of thousands of Alaskans that depended on Exxon taking proactive action, the kind of action that Congress had demanded in passing the TAPAA; Exxon nonetheless left Captain Hazelwood in command over a three year span.
So it wasn't deterred by knowing what would happen if the tanker ran aground.
Even if you look at it from the perspective of having paid the money out of its pocket, what did it do?
It still hadn't been deterred.
In the wake of the spill, and this is part of Trial Compilation 9, and this was part of the argument to the jury, Exxon fired one person... Captain Hazelwood.
They reassigned the third mate.
Everybody else up... further up the chain of command who allowed this to happen received bonuses and raises.
They have taken no action inside the company to express in any meaningful way that they've been deterred by what happened in this incident--
Justice Ginsburg: Mr. Fisher--
Mr. Fisher: --and the amount of money that they've had to pay.
Justice Ginsburg: --your time is running out.
And this there's one question I'd like you to address, and that is are there other cases against Exxon seeking compensation and punitive damages based on this oil spill that are still awaiting trial or decision?
Or is this it?
Mr. Fisher: By definition, Justice Ginsburg, this is a mandatory punitive class, so this is the one and only time Exxon will face the respect of punitive damages.
Justice Ginsburg: So you don't have the problem of litigant A getting these punitive damages and than B, C and D all wanting to--
Mr. Fisher: Right.
One of the many ways in which this case is the mirror image of the due process cases that Justice Souter was referring to that caused this Court to have such great concern about the uptick in punitive damages, here you have a single case.
You have a single digit ratio which is proportionate to the harm that was shown in this case.
You have... in contrast to State Farm, in the most recent... second most recent case this case had... in State Farm you had two plaintiffs who stood before this Court having received $500,000 each in compensatory damages for the emotional distress of 18 months of not knowing whether an insurance claim was going to be paid.
What you have today are 32,000 plaintiffs standing before this Court, each of whom have received only $15,000 for having their lives and livelihood destroyed and haven't received a dime of emotional distress damages.
If there are no further questions, I'll submit.
Rebuttal of Walter E. Dellinger, III
Chief Justice Roberts: Thank you, Mr. Fisher.
Mr. Dellinger, you have four and a half minutes.
Mr. Dellinger: Let me begin by noting that it's... I do not think the Court will find in the record that Exxon said this was expected and approved the... you can look at that excerpt on the DVD and see for yourself what was... what was meant by that.
With respect, it is difficult to decide what level of employee should implicate a company; but it is divisible I think, as Justice Kennedy suggested.
It is based on whether that employee has authority over the policy, and even a ship captain may have authority over some policies; he did not hear.
At the end of the day what the Ninth Circuit held was that Exxon was liable... could be liable for 2.5 billion, simply because against its policies, Hazelwood left the deck.
That's all that we need to be found.
Now with respect to the... with respect to the amount of punitive damages here, where you are... punitive damages cases generally look to for the need to deter the activity where someone acts out of malice and hostility, intending to harm, which is not true here; or when a corporation acts out of a profit motive and hopes perhaps it will be concealed or that it will make enough money off of it.
That is not true here.
Exxon gains nothing by what went wrong in this case, and paid dearly for it.
In the criminal case, the U.S. and Alaska agreed that the amount of the penalty was quote,
"sufficient to provide punishment and deterrence for the conduct in question. "
Now if you talk about the... the amount where you have that kind of deterrent, for an unintentional act that... of the amount that's already paid, I heard no response to what one would say to Justice Kennedy's opinion in State Farm as an outer, outer limit.
In State Farm the Court said where compensatory damages are substantial, then perhaps... this is the constitutional context... perhaps an amount equal to compensatories would be the most.
What was substantial there was 1 million dollars.
The compensatories here were 400 or 500 times the... what the Ninth Circuit found... 504 million dollars.
Justice Ginsburg: Just as a class, if you take them individually, each individual, did Mr. Fisher say 15,000 something?
Mr. Dellinger: Well, from the stand... first of all, from the stand point of a company it doesn't matter whether you pay one person 500 million dollars or a lot of people 500 million dollars, in terms of punishment and deterrence.
But also it is the case that... that with regard to the first plaintiff who had been fully compensated, the argument would have been that in light of all that happened, there is no need for punishment and deterrence even in the first case, and certainly cumulatively, when the amount ad reached, say the amount of the civil fines of 80 million, one would have said no more punitives, because the purpose of punitive damages is a public purpose.
It is not to compensate the individual.
Here we're at 500 times what was considered substantial in State Farm.
I don't see... and what is that... that part of State Farm is to be considered a dead letter, how one could not see that this is the case.
But that... that amount of compensatories is an outer limit, because if you look to what the civil penalties would be that responsible officials have obtained, it is 80.2 million dollars; and when you look to the fact that this is a case where, as Justice Breyer notes, with the First Circuit opinion, outside the fishing context there would have been no compensatories paid at all, or owing, because it's consequential damages and in most States, the great majority of the States, that is not even a compensable... a compensable injury.
But it is a special rule for... for fishing.
So these are awards... that would not have been done in any case.
This was a tragic and terrible event, and one for which the company has paid dearly, and the... at the end of the day, the question will be whether this Court without any guidance should assume that there should a punitive damages remedy in areas where Congress has already acted, and whether, if so, the plaintiffs have made out any case of an additional need for punishment and deterrence beyond what public authorities have agreed to.
Chief Justice Roberts: Thank you, Counsel.
The case is submitted.