U.S. Supreme Court Limits Punitive Damages in Maritime Law Cases

By Aaron Poehler

Published on July 01, 2008

In a 5-3 decision hailed as a victory for corporations seeking to limit lawsuit damages, the U.S. Supreme Court has severely reduced the $2.5 billion punitive award in the 1989 Exxon Valdez oil spill case. The new amount of the punitive damage award was set at $507.5 million, equivalent to the amount of compensatory damages in the case. The amount of the punitive award had originally been set at $5 billion in 1994, but was reduced upon appeal. Including interest since 1989, the current value of the punitive amount is estimated to be around $1 billion.

Justice David Souter, who authored the majority opinion in the decision, indicated that the ruling was intended to curb the unpredictability of punitive damages in maritime liability cases and establish a standard limiting the amount of punitive damages in maritime law cases to the amount of compensatory, or actual, damages in a particular case. While this new 1-to-1 ratio currently applies only in maritime shipping cases, advocates of limitations on punitive awards hailed the decision and stated that while the new standard is not binding outside of maritime law, the justices' decision is likely to become influential in a broad range of tort law cases.

Justices John Paul Stevens, Ruth Bader Ginsburg, and Stephen Breyer dissented from the majority opinion in the case. Justice Samuel Alito recused himself from the case due to his ownership of Exxon Mobil stock.

 

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