554 U.S. 471 (2008)
In March 1989 the Exxon Valdez supertanker grounded on Bligh Reef in Prince William Sound, Alaska, releasing millions of gallons of crude oil.1
Exxon Shipping Company, the vessel's owner and now known as SeaRiver Maritime, Inc., together with its parent Exxon Mobil Corporation, confronted widespread liability from the spill.2 The company settled a class action brought by more than 32,000 commercial fishermen, Native Americans, landowners, and others for $2.5 billion in compensatory damages.3 Exxon also pleaded guilty to violations of the Clean Water Act, the Migratory Bird Treaty Act, and the Refuse Act, paying $150 million in criminal fines, and spent an additional $2.1 billion on cleanup.4
Respondents, other persons whose businesses and livelihoods were disrupted by the spill, filed this civil action seeking punitive damages.5 The United States District Court for the District of Alaska divided the plaintiffs into three classes and conducted a three-phase trial.6 In the first phase the jury found Exxon Shipping Company and Captain Joseph Hazelwood, the ship's master, reckless and therefore potentially liable for punitive damages.7 In the second phase the jury awarded $5 billion in punitive damages against Exxon.8
The District Court later reduced the punitive award to $2.5 billion.9 On appeal the Ninth Circuit reinstated the jury's original $5 billion punitive damages award.10 The Supreme Court granted certiorari to consider whether the $2.5 billion punitive damages award was excessive under maritime law.11
Whether a shipowner may be held vicariously liable for punitive damages based on the reckless acts of a managerial employee?
Under maritime law the question of vicarious liability for punitive damages based on the acts of managerial employees is governed by traditional common law principles. The Court is equally divided on whether to adopt the Restatement rule or a more restrictive standard from The Amiable Nancy and Lake Shore.
No. The Court is equally divided on this question.12 This division means that the Ninth Circuit's decision on vicarious liability stands but is not precedential.13 The facts show that Captain Hazelwood was a managerial employee whose recklessness the jury found.14 Exxon did not dispute his managerial status.15 Without a majority no new rule is established and the lower court's ruling remains undisturbed.
The Court is equally divided on vicarious liability, leaving the Ninth Circuit's ruling undisturbed without precedential effect.
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Justice Scalia joined the judgment of the Court.16 He continued to believe that prior due process holdings limiting punitive damages were in error.17 He agreed with the argumentation based on those holdings.18
He maintained his view that the constitutional constraints announced in State Farm were mistaken.19 His position underscores that the judgment rests on maritime common law rather than constitutional compulsion.20 Scalia emphasized that the Court should not rely on what he viewed as erroneous constitutional precedent even while joining the result reached on other grounds.
Whether the Clean Water Act preempts common-law punitive damages awards in maritime oil-spill cases?
The Clean Water Act does not preempt common-law punitive damages awards in maritime oil-spill cases.21 The statute contains no clear indication of congressional intent to occupy the entire field of pollution remedies.22 Private claims for economic injury do not threaten interference with federal regulatory goals.23
No. The Clean Water Act does not preempt the common-law punitive damages remedy.24 The statute expressly protects navigable waters and shorelines.25 It contains a saving clause that preserves obligations for damages to privately owned property.26 The facts show that Exxon pleaded guilty to CWA violations and paid criminal fines.27
Respondents sought punitive damages for economic losses to their businesses and livelihoods.28 This category of relief the saving clause leaves untouched.29 Because the CWA does not displace compensatory remedies for economic harms, it likewise does not sever punitive damages from their common-law cause of action.30
The Clean Water Act does not preempt common-law punitive damages awards in maritime oil-spill cases.
Whether a punitive damages award of $2.5 billion is excessive under federal maritime law?
Under federal maritime law a punitive damages award is excessive when it exceeds a 1:1 ratio to compensatory damages in cases of reckless conduct that is not malicious or profit-driven.31 Such a ratio marks the line near which most reasonable awards fall.32 Higher ratios produce unpredictable outlier awards that undermine the goals of retribution and deterrence.33
Yes. The $2.5 billion punitive award is excessive under federal maritime law.34 The jury awarded $5 billion after finding recklessness.35 The District Court reduced the award to $2.5 billion.36
The Ninth Circuit reinstated $5 billion.37 The total relevant compensatory damages are $507.5 million.38 A 1:1 ratio therefore yields a maximum punitive award of $507.5 million.39 The facts establish reckless action that was profitless to Exxon.40
The action resulted in substantial recovery for substantial injury.41 This places the case within the category where a 1:1 ratio is the fair upper limit.42 The CWA's provision for daily fines up to $50,000 for knowing violations confirms that anything greater would be excessive.43
A punitive damages award of $2.5 billion is excessive under federal maritime law and must be limited to a 1:1 ratio with compensatory damages.
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Justice Stevens joined Parts I, II, and III but dissented from Parts IV and V.44 He argued that Congress rather than the Court should make the empirical judgments about punitive damages limits.45 He noted that the Limitation Act, TAPAA, and the Clean Water Act all point toward congressional resolution.46 He stated that the traditional abuse-of-discretion standard adequately restrains outlier awards.47
Stevens would have affirmed the judgment of the Court of Appeals. He emphasized that the judiciary should exercise restraint when Congress has already addressed related liability questions through comprehensive statutes.
Justice Ginsburg joined Parts I, II, and III and dissented from Parts IV and V.48 She questioned the need to depart from the traditional common-law approach.49 She noted that Congress is better equipped to assess empirical data and balance competing policy interests.50 Ginsburg would have affirmed the judgment of the Court of Appeals.
She stressed that the data did not demonstrate a systemic problem requiring judicial invention of a strict numerical cap in maritime cases.
Justice Breyer joined Parts I, II, and III but dissented from the reduction in Parts IV and V.51 He agreed that meaningful standards are needed.52 He argued that a limited exception to the 1:1 ratio is warranted.53 Exxon's conduct was highly reprehensible.54
The jury could reasonably have believed that Exxon knowingly allowed a relapsed alcoholic to pilot the vessel.55 Breyer would have upheld the $2.5 billion award. He viewed the facts as presenting a special case justifying departure from a rigid numerical rule.