The Supreme Court cut, but did not eliminate, the punitive damage award against Exxon in the Exxon Valdez oil spill case, as I predicted earlier. It cut the punitive damage award from $2.5 billion down to $507 million. Plaintiffs also received $507 million in compensatory damages, so the court limited the punitive damages to no more than the compensatory damages plaintiffs received.
There was a strong argument that no punitive damages were justified at all against Exxon, under traditional principles of maritime law, but the justices divided equally on whether any punitive damages were available at all under maritime law, so they did not cut the damages based on that argument, and that legal issue remains unresolved after the Supreme Court’s ruling today in Exxon Shipping Co. v. Baker.
Instead, the justices decided that even if punitive damages were warranted, when compensatory damages are substantial, punitive damages on top of that are excessive when they exceed compensatory damages (that is, a punitive-to-compensatory damages ratio of greater than 1-to-1). That ratio is the same as the one used by the Supreme Court in State Farm Mut. Automobile Ins. Co. v. Campbell (2003) to gauge whether punitive damages awarded by state courts are so excessive as to presumptively violate due process.