NEGLIGENCE and DAMAGES COMMITTEE NEWSLETTER October 2008 Feuropean Update – the State of Courtplaintiffs
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US Supreme Court slashes punitive damages award in Exxon Valdez oil spill case Lawrence S Schaner Grace S Ho Publications, Newsletter & Website Editor, Arbitration Jenner & Block, LLP, Chicago Committee; Jenner & Block, LLP, Chicago [email protected] [email protected] urther limiting the authority of US juries to award night of the disaster, Hazelwood drank at least five Fpunitive damages, on 25 June 2008 the US Supreme double vodkas in the waterfront bars of Valdez, an Court drastically reduced the punitive damages intake of about 15 ounces of 80-proof alcohol. imposed against Exxon for its role in the 1989 Exxon On 23 March 1989, the Exxon Valdez was en route Valdez Alaskan oil spill, cutting the award from $2.5 from Alaska to Los Angeles. At 11:20pm, Hazelwood billion to $500 million.1 The Court ruled in a 5–3 took control of the Exxon Valdez and manoeuvred the decision that, in the absence of malice, a 1:1 ratio tanker east, from the outbound shipping lane into the NEWSLETTER represented the ‘fair upper limit’ of punitive damages inbound shipping lane in search of a less icy path. This to compensatory damages in cases under maritime move put the tanker in the path of the underwater reef law. Accordingly, the Court reduced the US$2.5 billion off Bligh Island. Hazelwood was thus required to turn US Supreme Courtpunitive damages slashes award to US$507.5 million, the the ship back west while it was still north of the reef. NEGLIGENCEamount of compensatory damages paid by Exxon to Two minutes before the required turn, Hazelwood commercial fishermen, landowners and Native Alaskan inexplicably left the bridge, leaving only one officer punitive damages plaintiffs.award in Exxon – who was unlicensed to navigate in those waters AND DAMAGESThe newly established 1:1 ratio for maritime cases is – alone with a non-officer to turn the tanker west and Valdez oil spilleven more restrictivecase than the guidelines previously set avoid the underwater reef. Hazelwood also sped up INTERNATIONAL BAR ASSOCIATION LEGAL PRACTICEby the Supreme DIV CourtISION in State Farm Mutual Automobile the tanker by placing it on autopilot, which made any Insurance Co v Campbell2 for civil cases in general. mistake harder to correct. The unlicensed officer and Lawrence S Schaner There, the CourtGrace held S Hothat punitive damages that the non-officer failed to make the necessary turn and Publications, Newsletter & Website Editor, Arbitration Jenner & Block, LLP, Chicago Vol 8 No 2 exceeded a single-digit ratio betweenO CpunitiveTOBER and 2008 the Exxon Valdez ran aground on Bligh Reef, tearing Committee; Jenner & Block, LLP, Chicago [email protected] damages were presumptively excessive the hull and spilling 11 million gallons of crude oil into [email protected] Supreme Courtand in violation slashes of Due Process. Prince William Sound. urther limiting the authority of US juries to award night of the disaster, Hazelwood drank at least five IN THIS ISSUE FROM THE CHAIR Fpunitive punitivedamages, on 25 June 2008 damages the US Supreme Thedoubleaward Exxon vodkas Valdez in the disasterin waterfront Exxon bars of Valdez, an Damages against Exxon CourtFrom the drastically Chair reduced the punitive1 damages intake of about 15 ounces of 80-proof alcohol. The case arose almost 20 years ago on 24 March In the aftermath of the man-made disaster, Exxon imposed against Exxon for its role in the 1989 Exxon On 23 March 1989, the Exxon Valdez was en route Committee Officers 2 1989, when the supertanker Exxon Valdez grounded paid approximately US$3.4 billion for clean-up Valdez Alaskan oil spill, cutting Valdezthe award from $2.5 oil spillfrom Alaska tocase Los Angeles. At 11:20pm, Hazelwood IBA Annual Conference 2008 – Bonusy Bligh Reef times off the Alaskan and coast, fracturing its efforts, fines and settlements. The remaining civil billion to $500 million.1 The Court ruled in a 5–3 took control of the Exxon Valdez and manoeuvred the Buenos Aires hull and spilling millions of gallons of crude oil into cases were consolidated into the present case in which decisionOur committee’s that, in sessions the absence at this of malice, a 1:1 ratio tanker east, from the outbound shipping lane into the year’s conference Lawrence S3 Schaner Prince WilliamGrace Sound. S Ho The oil eventually covered the District Court for the District of Alaska certified, represented the ‘fair upper limit’ of punitive damages a packedinbound shipping laneagenda in search of a less icy path. This Publications, Newsletter & Website Editor, Arbitration 11,000 Jennersquare & miles Block, of LLP, the Chicago ocean. The Exxon Valdez among others, a class of more than 32,000 plaintiffs. toA compensatorybrief introduction damagesto civil in cases under maritime move putRamón the tanker Bado in Sanz the path of the underwater reef liability insuranceCommittee; in Argentina: Jenner & Block, LLP, Chicago supertanker [email protected] owned by Exxon Shipping Co, a Upon completion of a three-phase trial, the jury law.the ‘claimsAccordingly, made’ principle the Court reduced the US$2.5 billion off Bligh Island. Hazelwood was thus required to turn [email protected] subsidiaryEstudio Dr of Mezzera, Exxon Mobil Montevideo Corporation. It was over 900 awarded US$507.5 million in compensatory damages punitive Martín Gdamages Argañaraz Luqueaward to US$507.5 million, the the ship back west while it was still north of the reef. US Supreme Courtfeet [email protected] and slasheswas carrying 53 million gallons of crude to plaintiffs as well as US$5,000 in punitive damages amount and Jorge of Ocantoscompensatory damages4 paid by Exxon to Two minutes before the required turn, Hazelwood urther limiting the authority of US juries to award oilnight on ofthe the night disaster, of the Hazelwood spill. drank at least five against Hazelwood and US$5 billion in punitive commercialUS Supreme Court fishermen, slashes landowners and Native Alaskan inexplicably left the bridge, leaving only one officer punitive damages, on 25 June 2008 the USear Supreme Negligence anddoubleExxon Damages vodkas admitted Committee in the to itswaterfront negligence members bars in of the Valdez, disaster an damages against Exxon. The amount of punitive Fplaintiffs.punitive damagespunitive award in damages – awardwho was unlicensed in to navigate Exxon in those waters CourtExxon drasticallyValdez oil spill reduced case the punitive damagesWe are hoping youandintake will its of liabilityhave about received for 15 compensatoryounces this newsletterof 80-proof damages. prior alcohol. to Evidence or on damages assessed against Exxon was ten times the The newly established 1:1 ratio for maritimeD cases is – alone with a non-officer to turn the tanker west and imposed Lawrence against S Schaner Exxon for its role in thearrival 1989 at Exxon the International presentedOn 23 Bar March atAssociation’s trial 1989, indicated the 2008 Exxon that Annual Exxon Valdez Conference knew was en that route amount of compensatory damages for which Exxon was even and more Grace Srestrictive Ho than the guidelinesValdez6 previously oil set spillavoid the underwater case reef. Hazelwood also sped up Valdez Alaskan oil spill, cutting the awardin Buenosfrom $2.5 Aires. As ChairJosephfrom Alaskaof Hazelwood, the toNegligence Los Angeles.the ship’s and DamagesAt captain, 11:20pm, wasCommittee Hazelwood a lapsed found liable. by the Supreme Court in State Farm Mutual Automobile the tanker by placing it on autopilot, which made any billionDevelopments to $500 in million.the doctrine1 The Court ruledit is in my a 5–3great pleasurealcoholic,took and control immense that of Exxon thehonour Exxon officials to Valdezaddress drank and you with manoeuvred once Hazelwood, again the The District Court agreed with the jury that the US$5 Insuranceof deepening Co insolvencyv Campbell 2 for civil cases in general. mistake harder to correct. The unlicensed officer and decision that, in the absence of malice, anda 1:1 I ratiohope to meet asandtanker many that east, of Exxon you from as did Ithe did not outbound last consider year in shipping givingSingapore, Hazelwood lane one into the billion punitive damages award was reasonable. The There, Derek theJT Adler Court heldLawrence that punitive S Schaner damages that the non-officerGrace failed S to Ho make the necessary turn and represented and Sarah Loomis the Cave‘fair upper limit’8 of punitiveof the damagesmost successful ainbound shore-sideIBA conferences shipping assignment laneever in held.after search heTaking droppedof a intoless icyoutaccount path. of the This US Court of Appeals for the Ninth Circuit remanded exceededPublications, a single-digit Newsletter ratio between & Website punitive Editor, Arbitration and the ExxonJenner Valdez & Block, ran LLP, aground Chicago on Bligh Reef, tearing to compensatory damages in cases underthe maritime professionalism andprescribedmove excellence put the follow-up tanker demonstrated inprogramme the path by theof upon the IBA underwaterreturning in previous from reef the case to the District Court twice for reconsideration compensatoryBatten down theCommittee; damages hatches? What wereJenner presumptively & Block, LLP, Chicago excessive the hull and [email protected] 11 million gallons of crude oil into law.the creditAccordingly, crunch might the mean Court for reduced theconferences, US$2.5 billion the Argentineans’aoff 28-day Bligh alcohol Island. proclivity treatment Hazelwood to achieve programme. was the thus highest required Witnesses standards to turn in light of the Supreme