Crime, Punishment and ExxonMobil

Last month witnessed the extraordinary contrast of two perspectives on crime, punishment and ExxonMobil.

Just two days after leading climate change scientist James Hansen told the U.S. Congress that he believed ExxonMobil and other fossil fuel company CEOs "should be tried for high crimes against humanity and nature" for their role in delaying a serious global response to climate change, the U.S. Supreme Court decreed that a $2.5 billion punitive judgment against Exxon for the Valdez oil spill disaster denied the company the "sense of fairness" to which it is entitled.

Each of these proclamations is extremely significant in its own right.

The Supreme Court's ruling has the more obvious direct importance. Operating in the framework of maritime law, where it is free to establish its own rules in the absence of Congressional guidance, the Court held in a 5-3 ruling that punitive damage awards should not exceed compensatory damages. In other words, the punitive fine imposed by a civil jury should not be greater than the harm the jury found a defendant caused to a plaintiff by its wrongful act.

As a matter of law, this was a remarkable ruling -- a hyper-activist, policy-driven, non-originalist action by a faction of the Court that claims to defer to legislative determinations or seek its legitimacy in the Constitution, law or strongly rooted history. And the policy choices made by the Court are not only corporate-friendly and harmful to the victims of corporate wrongdoing and the environment, they are remarkably poorly argued.

The real premise of the Court's decision, written by Justice Souter, is that "American punitive damages have been the target of audible criticism in recent decades," but it is forced to acknowledge in the same sentence that these criticisms are ill founded. There is no problem of runaway awards, the Court concedes; and punitive damage awards are rising in neither frequency nor amount. Thus the Court is forced to rely on a purported problem of unpredictability in punitive damage awards, even as it acknowledges that appellate courts routinely overturn or limit outlier awards. (Indeed, the original Exxon punitive verdict had been $5 billion.)

Concluding that more predictability is needed, the Court determines that some formula to restrict punitives is appropriate. It settles on the idea of a ratio to compensatory damages. Many states have adopted such ratios, so they seem like a good idea, the Court concludes. A plurality of states have a ratio of 3:1, but having relied on the state experience as the rationale for adopting a federal maritime rule, the Court then declares that the state rules are too different to set the right ratio.

Instead, the Court says it bases its assessment of a reasonable ratio on juries' actual awards -- the very juries it is trying to constrain. The median punitive damage award is less than the compensatory award, so the Court settles on a 1:1 ratio. The Court states, "we would expect that awards at the median or lower would roughly express jurors' sense of reasonable penalties in cases with no earmarks of exceptional blameworthiness within the punishable spectrum." You can read that a few times. It still won't make sense.

In a very concise dissent, Justice Stevens takes apart the majority argument. In short, he writes, if Congress has not acted, and there are no constitutional issues (none were involved in this case), then appellate courts should review punitive awards and overturn them only if they constitute an abuse of discretion. If the only problem is a few outlier awards, then appellate review easily solves the problem.

"On an abuse-of-discretion standard, I am persuaded that a reviewing court should not invalidate this award," Justice Stevens wrote. "In light of Exxon's decision to permit a lapsed alcoholic to command a supertanker carrying tens of millions of gallons of crude oil through the treacherous waters of Prince William Sound, thereby endangering all of the individuals who depended upon the sound for their livelihoods, the jury could reasonably have given expression to its 'moral condemnation' of Exxon's conduct in the form of this award."

Left unstated, but most important for the purpose of deterring bad corporate behavior, is that the very unpredictability disdained by the Court's majority is one of the core benefits of punitive damages. Corporations are not people, and the Court's rhetoric about preserving a "sense of fairness in dealing with one another" is inapposite as regards corporations' wrongful acts against real people. The point that corporations are not people is not just rhetorical; they have different forms of calculus and are differently affected moral restraints. The possibility of facing an outlier punitive verdict for wrongful conduct is a needed control on corporate recklessness.

The direct precedential value of the Exxon decision is limited, because it was issued in the confines of maritime law, and includes some caveats. But it will cast an ominous shadow over state and federal court decisions on punitive damages for years to come.

Dr. James Hansen, the NASA climatologist who was one of the first to sound the alarm on global warming and who has refused to capitulate in the face of Bush administration efforts to silence him, does not specialize in the law but he offers a far keener sense of justice than did the Supreme Court.

"CEOs of fossil energy companies know what they are doing and are aware of long-term consequences of continued business as usual," Hansen told a Congressional committee. "In my opinion, these CEOs should be tried for high crimes against humanity and nature" for spreading doubt about global warming and obstructing needed action.

This notion of justice suggests individual as well as organizational responsibility; insists on connecting the predictable and intended consequences to ultimate instigators without being distracted by intervening factors; and refuses to let perpetrators establish rules to legitimize their conduct.

However, Hansen noted, "conviction of ExxonMobil and Peabody Coal CEOs will be no consolation, if we pass on a runaway climate to our children."

Even more significant than Hansen's call for prosecution of CEOs for crimes against humanity was his description of his latest research. Hansen and colleagues have concluded that the safe level of atmospheric carbon dioxide -- the level below which catastrophic, self-reinforcing climate change can be averted -- is considerably lower than previously thought. Not only must the world slow its carbon emissions, Hansen argues, it must reduce atmospheric carbon from current levels. This remains achievable, Hansen believes, if immediate, far-reaching action is taken.

A society reveals its values in what it tolerates and proscribes, in what it authorizes and punishes. The U.S. Supreme Court held that basic fairness means that Exxon, which made more than $40 billion in profits last year, should not be slapped with a $2.5 billion punitive verdict. Representing humanity's better face. Dr. James Hansen asserted that the basic principles of justice and accountability to which street criminals are held should be applied to the rich and powerful, particularly when their intentional actions recklessly endanger the lives of not just one or two or five people, but millions.

The Supreme Court signaled that ExxonMobil should continue business as usual. Hansen said that business as usual is intolerable.

"In my opinion," Hansen said, "if emissions follow a business-as-usual scenario, sea level rise of at least two meters is likely this century. Hundreds of millions of people would become refugees. No stable shoreline would be reestablished in any time frame that humanity can conceive."

Comments

[akryan]

There wouldn't have been any reward at all but Alito had to recuse himself from the case because he owned Exxon stock. This part of the case was tied 4-4 so it was brought back down to the lower court's opinion.

[RoloTomassi]

For Exxon-Mobil to get a pass on this verdict is a tragedy, but it is also one of the more dispicable symptoms of the criminal BushCo regime; had it been a small business owner who happened to be a democrat, then I suspect the outcome would have been quite different.

In the end, our denial of Global Warming and refusal to do anything significant to stop it will be effectively be an entire species commiting suicide.

All things considered--if we are realistic--such will be the outcome.

All things considered--regardless of what we think or believe--such will likely be the BEST outcome.

I mean really, if we aren't willing to bring down the mighty 1% in order to save our species, then we deserve extinction.

You hear people talking about saving the planet, but the planet will do fine without us; this is about maintaining an environment we can survive in...but I guess we humans have become so arrogant that we believe we can conquer anything....

[PublicAdvocate]

Returning the same two political parties to mismanage our nation for four more years, only guarantees more of the same wasteful and self destructive policies. Anyone who has not noticed the flip-flops, hypocracy, and radical departures from stated principles by both McCain and Obama on torture, tax cuts, public/private financing, FISA, Iraq war funding, NAFTA, and numerous other issues are simply living in a dream bubble. That happy bubble is that things can just continue forever and we should block our ears if we hear something unpleasant.
Ralph Nader at his website has an energy plan that halts the subsidies from inefficient coal, oil and nuclear power generation, endorses GreenPeace's statement on Climate Change, and wants to develop solar, wind and geothermal energy both for the health and safety and sustainability of the climate, but also to cut America's outsourcing of wealth to oil rich nations while generating jobs at home.

[BBackSoon]

Steal a loaf of bread you go to prison for 5 years.

Steal a loaf of bread and trade it for drugs; go to prison for 10 years.

Steal a loaf of bread with a gun and trade it for drugs; go to prison for 20 years.

Steal a few billion and possibly cause irreparable damage to the planet, get a fine of about 1 percent of your profit this year.

This reinforces the belief that you must think big!!!

[mgloraine]

Excellent analysis, but you left out the small, albeit highly significant, part about diverting some of that stolen few billion toward "campaign contributions" (aka, bribes). American Justice is not arbitrary or illogical, but for sale to the highest bidder.

[AJinCamden]

"A society reveals its values in what it tolerates and proscribes, in what it authorizes and punishes."

Sort of says it all.

[peterg76]

So, they don't like punitive damages because they would be, you know, punitive.