Only Half a Billion

Today the U.S. Supreme Court cut a punitive damage award against Exxon for the 1989 Prince William Sound oil spill from $2.5 billion to $500 million. The original award, which had already been reduced by the appeals court, was $5 billion, 10 times the corresponding compensatory damages. In the majority opinion, Justice David Souter (joined by Roberts, Scalia, Kennedy, and Thomas) concludes that a 1-to-1 ratio of punitive to compensatory damages is an appropriate limit in cases like this one, involving the application of maritime law.

That question is different from the constitutional issue addressed by the Court in other cases dealing with punitive damages. In those cases, the Court has ruled that excessively high punitive damages violate the Due Process Clause, and it has indicated that multiples in the double digits are inherently suspect. In this case, by contrast, the Court sought to further the goals of maritime law by reining in "outlier punitive damages awards," thereby making judgments more consistent. The unpredictability of high punitive awards "is in tension with the function of the awards as punitive," says Souter, "because of the implication of unfairness that an eccentrically high punitive verdict carries." Since "most accounts show that the median ratio of punitive to compensatory awards remains less than 1:1," he says, that's a sensible upper limit.

Picking a ratio is inherently arbitrary, but less so than the highly variable judgments rendered by unconstrained judges and juries. "The real problem," Souter says, "is the stark unpredictability of punitive awards." He cites data indicating wide variability and "anecdotal evidence" suggesting that it is not justified by differences in the underlying facts. Maybe so, Justice John Paul Stevens says in his dissent, but this is a problem for Congress to fix. "While maritime law 'is judge-made law to a great extent,'" he writes, "it is also statutory law to a great extent; indeed, '[m]aritime tort law is now dominated by federal statute.'"

I tend to agree that legislation is a more appropriate response to the problems raised by arbitrary, unpredictable punitive awards, and many state legislatures already have imposed limits on punitive damages in the form of ratios or monetary caps. I'd prefer to see states and the federal government abolish punitive damages altogether, keeping civil lawsuits focused on compensation and imposing punishment for especially egregious conduct under criminal law. (Many of the people who said Exxon should pay billions in punitive damages conflated these two goals, arguing that victims of the Exxon Valdez spill were never adequately compensated, which is a separate issue.) But if we must have a parallel system of punishment, it's better to have one with statutory standards like those that govern criminal penalties.

I discussed the Exxon Valdez case in a column last fall.

Comments

liberty mike | June 25, 2008, 6:29pm | #

If a telecom or ISP hands over any info pertaining to you, why shouldn't there be unlimited punitive damages? Better to sting the pocketbook of that specie of tortfeasor who would invade your privacy to curry favor with Caesar. Even if it means financial ruin.

joe | June 25, 2008, 6:45pm | #

"The real problem," Souter says, "is the stark unpredictability of punitive awards."

See, I thought the real problem was the consequences of irresponsible behavior being so low that Exxon could write them off as a cost of doing business, rather than changing their behavior.

Punitive damages are supposed to hurt and deter. Ergo, the relevant figure to compare them to is not the compensatory damages, but the bad-actor's bottom line. If a company comes within moments of putting pluotonium in the LA water supply, and is saved at the last second by Die Hard heroics, what are the actual damages? Should that be the limit of their responsibility?

ChicagoTom | June 25, 2008, 6:50pm | #

So basically the court is slowly destroying the concept of punitive damages as a deterrent to being a bad actor.

What nonsense. There should not be any caps on punitive damages. The point of punitive damages is to deter bad actors and to not let a company do a cost benefit analysis to decide whether or not to it is financially better to not be a bad actor.

liberty mike | June 25, 2008, 6:50pm | #

How about state actors that intentionally violate your constitutional rights?

Say the Federal Bureau of Inquisition, in league with certain mobsters, arranges for the arrest, prosecution and imprisonment of innocent men charged with murder, in order to shield the guilty parties who are allied with the mobsters. After the innocent men have served 30 years in jail, the truth is brought to light after several of the mobsters and FBI "heroes" are indicted.

Should there be any cap on the COMPENSATORY damages that the government must pay?

Should the aggrieved parties be able to get any punitive damages?

The sad facts are (1) both the feds and the states have caps on the amount of compensatory damages available to the victims as against the feds or the state itself and (2) punitive damages are not available against the governmental entity. The cap on compensatory damages is generally $100,000.00-a lousy hundred grand.

Sure, one can sue the individual state actors. Reality tells us that this is no real remedy as the individual state actor is often protected by the judicially created doctrines of good faith immunity or absolute immunity.

Bottom line: If the state messes with your rights, it should face ruinous damages. Ditto for the individual state actor.

ChicagoTom | June 25, 2008, 6:51pm | #

See, I thought the real problem was the consequences of irresponsible behavior being so low that Exxon could write them off as a cost of doing business, rather than changing their behavior.

Exactly. Exxon makes enough revenue in one afternoon to cover 500 million. You think this paltry sum is going to motivate them to be more responsible? Hardly.

joshua corning | June 25, 2008, 6:55pm | #

See, I thought the real problem was the consequences of irresponsible behavior being so low that Exxon could write them off as a cost of doing business, rather than changing their behavior.

Exactly. Exxon makes enough revenue in one afternoon to cover 500 million. You think this paltry sum is going to motivate them to be more responsible? Hardly.

I think I have found the mythical Hit and Run echo chamber...strangely it is not a libertarian one.

joshua corning | June 25, 2008, 6:57pm | #

So basically the court is slowly destroying the concept of punitive damages as a deterrent to being a bad actor.

We can only hope. What a wonderful world it would be if things were actually priced at what markets value them at.

liberty mike | June 25, 2008, 6:58pm | #

Joe- A different scenario

If you rear-end me going 2 mph and I have no injureis, do not miss any work and have 500 bucks in damage to my rear bumper, I should only get 500 bucks.

Your conduct was negligent and only slightly negligent at that. Yes, you should be responsible for the 500 bucks in damages-but that's it. Even if a cop rear-ended me going 2 mph, it still should be the same result as the cop was not acting under the color of law while depriving me of my liberty.

Kolohe | June 25, 2008, 6:58pm | #

As I say most of the times on these issues, people can't have it both ways. Either you need
1) A permissive regulatory regime where regress for damages are pursued by other private parties and are adjudicated on a case by case basis - with high variability.
2) A strict regulatory regime which indemifies market participants as long as they follow the regs; departing from the regs is a criminal action, but following the rules is an absolute defense from criminal and civil liability.

a mismash of both is simultaneously bad for business and bad for the law.

John thomas | June 25, 2008, 6:58pm | #

Its pretty clear they finally got an attorney with the "right" connections. Clearly the "judge" ended up with a brief case full of cash! Corruption is bliss!
http://www.FireMe.To/udi

Kolohe | June 25, 2008, 6:59pm | #

redress, not regress of course

ChicagoTom | June 25, 2008, 7:00pm | #

I think I have found the mythical Hit and Run echo chamber...strangely it is not a libertarian one.

Is being for punitive damages to deter things like spilling tons of oil into the sea inherently un-libertarian?

liberty mike | June 25, 2008, 7:13pm | #

Kolohe-

This is a tough issue. I know my first two posts on this thread concern punitive damages in the violation of one's constitutional rights context. Putting aside Exxon Valdez and other cases that deal with egregious negligence not involving the state, how could it ever be good to have a systen of limited compensatory damages and no punitive damages for those who have had the pleasure of having their rights violated by the state?

Elemenope | June 25, 2008, 7:24pm | #

We can only hope. What a wonderful world it would be if things were actually priced at what markets value them at.

So, um, what's the "market value" for dumping loads of sweet light crude into the Alaskan shoreline?

Oh, wait, even Christians rarely say they can find Jesus in fucking food objects. Why does a libertarian under every fucking rock need to find a market?

Geotpf | June 25, 2008, 7:35pm | #

Punitive damages should only be issued when the conduct was extremely egregious. So, liberty mike's example is bad, because the conduct was not extremely egregious. A better example would be if you were drunk and high and drove your car through a playground, killing several children (as opposed to a minor fender bender). And, when issued, such damages should punish the offender (hence the name). A $500 million dollar award does not punish Exxon Mobil much.

Pilobious | June 25, 2008, 7:50pm | #

Is being for punitive damages to deter things like spilling tons of oil into the sea inherently un-libertarian?

In short, yes.

The real wingnut Libertarians believe that the consumer should punish Exxon (in this case) - not some regulatory agency.

Never mind the natural havoc.

Of course, 99% of consumers don't give a fuck.

HnR Blog: Short Version | June 25, 2008, 7:51pm | #

We worship wealthy people.

dpsc | June 25, 2008, 8:03pm | #

My first thought when I saw this on the news was "whoah- nineteen years ago? Am I really that old?" (I'm self-absorbed like that, and remarkably vain given my looks.) I had a look at my birth certificate and it turns out that I am in fact now aged. I'll have to hide that thing so my girlfriend never stumbles across it. I had to admit that I was over 21 when I bought her friends liquor right before her junior prom (which was a blast, btw... really takes me back), but I'm drawing a line in the sand there.

As for this decision, I think it is a good outcome in this particular case, but possibly bad precedent. As the helpful Exxon spokesman pointed out on the nightly news, Exxon has spent more than 3 billion on clean-up, compensation, and fines. On top of that they took an enormous PR hit, and have had to litigate this case since I was... well, that's for me to know and no one else to ever, ever find out. I'd say that that is a sufficient deterrent, in this case, in much the same way that cyanide in random foodstuffs is a sufficient weight-loss aid, one way or another.

The difficulty here is that I do not trust the state, and I do not trust corporations, but I also don't trust my neighbors (i.e. the jury). I trust them all about as far as I can throw them.

It should be noted that I could throw an average neighbor tens of feet if they were compressed into a shape that was more aerodynamic and easier to get a grip on (it's my incessant discus practice that keeps me young-looking). The average multinational- honestly, I doubt I could even lift one without a strong wind in my favor.

But the feds... well, in this case it is strictly a question of how far they could throw me, and the answer is "to the moon, baby, one of these days, right to the moon."

Kolohe | June 25, 2008, 8:20pm | #

how could it ever be good to have a systen of limited compensatory damages and no punitive damages for those who have had the pleasure of having their rights violated by the state?

fwiw, i wasn't responding to you directly, i composed my comment without reading any others.

As for your example (and keep in mind I am by no means the anarchist you are) I would beg the question. A minarchist or classically liberal state (which is closer to where I'm at) would make it so that violations of the rights of individuals by state agents would be itself a violation of the regulations - hence no indemity, and thus subject to civil and criminal penalties. Obviously in practice this is a lot harder in theory. A lot of it depends on being able to do a version of 'piercing the corporate veil' on agents of the state, while trying not to create scapegoats nor witchhunts. A tough nut to crack, as you say.

Here's sort of an example. Environmental regulations from the EPA state that if your ship discharge oily waste directly into the harbor, on purpose or by accident, you will be subject to a fine based solely on the volume discharged. What is interesting is that this fine is assessd directly and personally on the master/captain of the vessel, and regardless of whether the vessel is civlilian or military. So consequently, there is a big incentive for Commanding Officers and Masters to train their crews how not to dump oil in the harbor. And it applies equally if your in charge of a 30 ft day cruiser, a 10K ton freighter, or the USS Nimitz - so you can't hide behind your corporation or government, but likewise the corp/govt has little incentive to help you cover stuff up.

dpsc | June 25, 2008, 8:38pm | #

Kolohe: A minarchist or classically liberal state (which is closer to where I'm at) would make it so that violations of the rights of individuals by state agents would be itself a violation of the regulations - hence no indemity, and thus subject to civil and criminal penalties.


You're stepping onto marshy ground here, I think, though, to your credit, you admit both that you are begging the question and that:

A lot of it depends on being able to do a version of 'piercing the corporate veil' on agents of the state, while trying not to create scapegoats nor witchhunts. A tough nut to crack, as you say.

The basic problem is this: if you hold that the state is necessary, or inevitable (and I believe both propositions, though the first follows easily from the second) you must also grant that it is exceptional, to some degree (if it is not, what makes it the state?). The state cannot act without actors, and this means that you must grant that they are exceptional as well.

The law has long recognized that the state, in isolation, is only liable to the degree to which it agrees to be liable. In the presence of a strong state non-state actors are also only liable to the degree that the state agrees that they are liable. This is not exactly the same thing, though...

joe | June 25, 2008, 10:54pm | #

liberty mike,

I hear you. And yet, I'm always hearing about taxpayer dollars theft-ed from the productive by menwithguns. When you sue the government, you're suing your neighbors, to exactly the same degree you are stealing from them by collecting Social Security.

You really can't see an argument for limiting the liability of the taxpayers?

Elemenope | June 25, 2008, 11:11pm | #

You really can't see an argument for limiting the liability of the taxpayers?

Why? We *are* liable if our government, which we have failed to control through ballot *or* bullet, harms one of its citizens (in a redressable manner).

If we are all, to some degree, responsible, shouldn't we all pay?

dpsc | June 25, 2008, 11:13pm | #

joe says: See, I thought the real problem was the consequences of irresponsible behavior being so low that Exxon could write them off as a cost of doing business

and:

joe says: You really can't see an argument for limiting the liability of the taxpayers?

Maybe you're overlooking the deterrent effect, though that seems unlikely given your earlier comments.

dpsc | June 25, 2008, 11:38pm | #

lmnop says: "Why? We *are* liable if our government, which we have failed to control through ballot *or* bullet, harms one of its citizens (in a redressable manner).If we are all, to some degree, responsible, shouldn't we all pay?"

This is also problematic. Take the issue of slavery reparations, for instance. Many people would argue that because of the history of slavery in the US we ought to be paying large reparative sums to the descendants of slaves, regardless of how well they are doing in the modern US.

As the US becomes post-racial (i.e. truly mixed) this will resonate less and less. Intuitively, it doesn't make much sense to ask Cambodian refugees to pay slavery reparations. Less intuitively, it makes no sense to ask people who had no part in slavery, and who have received no tangible benefit from it to make such payments.

Between asking that the state be not liable at all and that the state be liable for all there is a middle ground. Fixing that ground is the issue for most people who don't take extreme positions.

Elemenope | June 25, 2008, 11:43pm | #

This is also problematic. Take the issue of slavery reparations, for instance. Many people would argue that because of the history of slavery in the US we ought to be paying large reparative sums to the descendants of slaves, regardless of how well they are doing in the modern US.

As the US becomes post-racial (i.e. truly mixed) this will resonate less and less. Intuitively, it doesn't make much sense to ask Cambodian refugees to pay slavery reparations. Less intuitively, it makes no sense to ask people who had no part in slavery, and who have received no tangible benefit from it to make such payments.

I don't disagree (much) but you took the argument and ran exactly the wrong way with it. The real problem with slave reparations is that the actual harm visited directly by the state was perpetrated against those who cannot be made whole (because they are long since dead). Slave reparations actually made a fuck-ton of sense when they amounted to forty acres of farmland and a mule, y'know, a few months after slavery was ended in the rebel states. Mootness applies.

It is far less problematic a case when the bad actor is present and accounted for, and the harmed individual is available to be made whole. Given those two conditions, I see nothing wrong whatsoever with a government of the people being liable to suit and judgments paid out of tax dollars.

Elemenope | June 25, 2008, 11:49pm | #

Between asking that the state be not liable at all and that the state be liable for all there is a middle ground. Fixing that ground is the issue for most people who don't take extreme positions.

Whoa, BTW, false dilemma. There are precious few who argue that the state should be liable for *everything*, and you are not likely to find them hanging around hereabouts.

The state is on the hook insofar as some bad actor uses the cloak of the state and acts under the color of its authority to perpetrate those bad acts, and the state for its part either is negligent in preventing the abuse or gives covert and/or overt assent to the actions either through willful disregard or material and official support.

If a cop beats the shit out of a suspect, the cop ought to be liable. To any extent that bad policies of the police department regarding use of force, blue wall of silence action, actions of superiors to ameliorate responsibility, or corruption occurs, the state is, to that extent *only*, responsible in a liability sense.

dpsc | June 25, 2008, 11:50pm | #

lmnop" I don't disagree (much) but you took the argument and ran exactly the wrong way with it.

Ayn_Randian | June 25, 2008, 11:51pm | #

Elemenope - slavery reparations, though, is really just shorthand for "discriminatory polices by the US Government" against American blacks, which go through the 1960s (or so).

I am not sure any black person really thinks it's really reparations for slavery so much as it's reparations for "Hey, Government, you fucked us over for a minute there. Pony up, bitches."

ClubMedSux | June 26, 2008, 12:01am | #

While I don't know if there's an inherently libertarian position on this issue, most libertarians I know seem to champion the Constitution, and the big issue with punitive damages is a constitutional one. While I'm sure many of you are aware of this, it has yet to be discussed in this thread so I'll summarize it now. Basically, criminal defendants are afforded certain protections that civil defendants are not (e.g. a criminal defendant must be proven guilty beyond a reasonable doubt while a civil defendant need only be proven liable by a preponderance of the evidence). Punitive damages straddle the line between civil and criminal, so the issue is what safeguards should be put in place (or rather what safeguards the Constitution requires be put in place) to ensure punitive damages are reasonable. So I suppose the question is if you're pro punitive damages, why do you see that as preferable to simply making certain acts illegal and subject to criminal fines? At least in that situation the windfall goes to the state instead of one individual who will already receive compensatory damages...

dpsc | June 26, 2008, 12:02am | #

Oops, I hit the wrong button. I had intended to respond at length but instead I will limit this comment to one point, and respond at length in another comment:

lmnop says: false dilemma. I would agree if I had offered those extreme positions as the only available choices. Instead I presented them as extreme positions, and suggested that the moderate position was to choose an intermediate value. I even suggested that deciding on where that value fell on the scale was the main difficulty.

Elemenope | June 26, 2008, 12:11am | #

false dilemma. I would agree if I had offered those extreme positions as the only available choices. Instead I presented them as extreme positions, and suggested that the moderate position was to choose an intermediate value. I even suggested that deciding on where that value fell on the scale was the main difficulty.

True enough. I realized that about five seconds after I had posted (damn you, preview button!). You are right, it isn't a false dilemma. It was more of a *strawman* since nobody in sight was defending one of the aforementioned "extreme positions" (namely, the one where the state is on the hook for everything under the sun). That's not entirely correct either, since you do not exactly proffer an argument that logically follows from the assertion of the entire continuum.

I guess it just plain irritated me. Pay me no mind. ;)

Elemenope | June 26, 2008, 12:16am | #

I am not sure any black person really thinks it's really reparations for slavery so much as it's reparations for "Hey, Government, you fucked us over for a minute there. Pony up, bitches."

I'm right there with you up until "minute".

As far as post-slavery discrimination, especially post-Civil Rights Act 60's and 70's, most unfriendly fucking of black people happened outside the sanction of the law.
Thus, it would be much harder to assign liability to the state directly (though endemic corruption or racism amongst certain organizations of individuals, like police departments, could still be a point of liability).

More often, it is a singular bad actor or a small group of such actors acting outside the bounds of the law, and can be brought to heel within the power structure as it exists. So long as there is no significant foot-dragging or negligence, the state is off the hook.

dpsc | June 26, 2008, 12:23am | #

Actually, it's not even a strawman. I offered up a continuum. I believe that almost all of the commenters on this thread fall somewhere on that continuum. For it to have been a strawman it would have to be the case that no serious commenter had fallen anywhere on that continuum.

You're probably correct that you were just frustrated. I've found that masturbating on a picture of the Pope helps with that.

Ayn_Randian | June 26, 2008, 12:25am | #

More often, it is a singular bad actor or a small group of such actors acting outside the bounds of the law, and can be brought to heel within the power structure as it exists. So long as there is no significant foot-dragging or negligence, the state is off the hook.

Heh...how about we just charge the whole lot of 'em with enterprise corruption? That oughta take care of that.

dpsc | June 26, 2008, 12:34am | #

Ayn_Randian: Heh...how about we just charge the whole lot of 'em with enterprise corruption? That oughta take care of that.

The problem is that that would pretty much dissolve our government. If you charged them all on the basis that we charge conspiracies for other crimes, as they deserved, you'd be left with pages and interns running things. And not even very many of those.

Ayn_Randian | June 26, 2008, 12:38am | #

dpsc - I'm at a loss as to why you'd classify that outcome as a "problem". I think of it more as "the solution".

Elemenope | June 26, 2008, 12:49am | #

The problem is that that would pretty much dissolve our government. If you charged them all on the basis that we charge conspiracies for other crimes, as they deserved, you'd be left with pages and interns running things. And not even very many of those.

Oh, now that's just melodrama. Conspiracy requires the actors involved to have a hand in planning future bad acts, if not carry out an overt act furthering the bad act as planned. I seriously doubt the poor fuckers over at Dept. of Agriculture were in on the plot to gentrify neighborhoods in south central Detroit.

So, we'd lose the Dept of Justice (no big loss), perhaps Defense, maybe State. Some federal regulatory agencies could go, too. But many would remain untouched, as it is hard to imagine any proximate bad act of the government that would require collaboration of *all* its arms. Heck, even getting two departments to work together *at all* is a chore.

Though, like Ayn_Randian, if you did happen to be right, I'd be hard pressed to figure how on balance it would be such a bad thing.

dpsc | June 26, 2008, 12:52am | #

Ayn_Randian: I'm at a loss as to why you'd classify that outcome as a "problem". I think of it more as "the solution".

Look upthread. I believe that it is not possible to get rid of the state given current conditions. If you dissolve it you'll wind up with a state run by one faction- the faction that wins the war of dissolution.

Note that Ilya Somin cites Pirates and Feudalists as his models for anarchy. I prefer Albania, as it's more modern. I would rather live in the States now than be a Pirate or a Peasant, let alone an Albanian.

Elemenope | June 26, 2008, 1:01am | #

Look upthread. I believe that it is not possible to get rid of the state given current conditions. If you dissolve it you'll wind up with a state run by one faction- the faction that wins the war of dissolution.

That would be true only in the case of a true power vacuum. But the United States, as the name implies, is composed of many sovereigns, all fifty of which I am sure would be eager to step each into their own little piece of the gap opened by the fed's rotting corpse.

And given that I think that the fed collapsing due to a few RICO suits is melodramatic hogwash, a skeleton state at least would remain to coordinate trade and business among the fifty sovereigns.

You know, like a confederation; they could even have articles, if they want.

dpsc | June 26, 2008, 1:06am | #

lmnop: Oh, now that's just melodrama.

You have a funny tendency to call things the opposite of what they are. That is not melodrama. It is a dry acceptance of the simple truth that agents of the state are judged by a separate set of standards.

I mean, let's talk about melodrama- you've got Balko who is somehow convinced that black guys are more likely to be sentenced to death, for instance. Pure melodrama.

I'll stand by my statement. The only people in politics who are not, to one degree or another, complicit in payoffs, are pages and interns.

Elemenope | June 26, 2008, 1:24am | #

I'll stand by my statement. The only people in politics who are not, to one degree or another, complicit in payoffs, are pages and interns.

You have to stretch "payoff" to an untenable degree of distortion to come close to the standards for civil liability, and since we're talking about bankrupting the fed with civil suits, it just doesn't fly. It's melodrama to call a salary a "payoff", for example, which seems to be what you are implying.

More to the point, it is melodrama *precisely because* it is impossible to imagine, given any reasonably just system of laws and justice, for an agent of one disparate part of the government being held to account for another. It does not matter whether or not "agents of the state are judged by a separate set of standards", since that set of standards could never include the Agriculture secretary being sued for HUD's shenanigans. And since the budgets are compartmentalized, there is insulation from a runaway take from the coffers.

Absent that, only portions of the government (probably for the most part police agencies) are likely to have liability outstanding that would, in our hypothetical world where the fed is sued for its civil misdeeds, face action and possible bankruptcy.

And this, in the final analysis, is all rather academic. My original point was only that there is nothing *morally repugnant* in penalizing citizens who at least nominally support their government by

1. voting considerably often
2. following most of its laws dutifully
3. not rising as one to slay the agents of the state

for their complicity through inaction or ineffectual action of the civil torts and criminal acts of the state by making them pay, through taxation, for the errors of their duly sworn agents.

dpsc | June 26, 2008, 1:53am | #

You have to stretch "payoff" to an untenable degree

No, you really don't. You can just look at who received an unreasonable advantage and also gave a lot to politicians. I'd start with peanut farmers and the sugar industry. I'd move on to "low sulphur" coal producers. By the time I was done with _really obvious payoffs_ I would have recovered more than one trillion dollars. Sorry if that's a bit too melodramatic for you, but it's true.

There are no secret conspiracies, but there sure as hell are a lot of outight I'm going to fuck you cartels.

joshua corning | June 26, 2008, 4:23am | #

Is being for punitive damages to deter things like spilling tons of oil into the sea inherently un-libertarian?

Seeing as how oil spills are down and Exxon did not get the big of punitive damages you think are necessary your theory that higher punitive damages are necessary to deter spills is in a bit of jeopardy.

Almost as if an invisible hand steered an industry to be more responsible. Imagine that.

joshua corning | June 26, 2008, 4:32am | #

joe says: See, I thought the real problem was the consequences of irresponsible behavior being so low that Exxon could write them off as a cost of doing business

and:

joe says: You really can't see an argument for limiting the liability of the taxpayers?

Maybe you're overlooking the deterrent effect, though that seems unlikely given your earlier comments.

Government should never be deterred...Government is a force of good and the more powerful it is the better off we all are.

joshua corning | June 26, 2008, 4:39am | #

I do like how the same people who think Exxon should pay more then their fair share, also think irresponsible lenders and home buyers should pay less then their fair share.

Can a sense for moral hazard be schizophrenic? Or is this just a case of willful cognitive dissonance?

joe | June 26, 2008, 7:59am | #

dpsc, LMNOP,

Don't you think the chain of liability that runs through cop->supervisor->city manager->city council-> taxpayers change the math on the deterrence issue, compared to captian->manager->Exxon?

joe | June 26, 2008, 8:05am | #

This is relevant both the moral issue of responsibility, but also to efficacy of deterrence. Exxon is in a much stronger position to control the behavior of its ships' crews than the taxpayers are to control the behavior of individual government employees.

Elemenope | June 26, 2008, 8:08am | #

Don't you think the chain of liability that runs through cop->supervisor->city manager->city council-> taxpayers change the math on the deterrence issue, compared to captain->manager->Exxon?

Not really. Additional layers of bureaucracy should not render additional protection from liability; if people are on the hook for what their cops do, this becomes an incentive for people to take measures bringing them more in direct *control* of those cops and their policies.

I could care less how removed from the proximate agent the ultimately responsible party happens to be; if they are responsible for the actions of their organization (as citizens are in a democratic government, or stockholders are for a corporation) then they should get it in the teeth.

Elemenope | June 26, 2008, 8:09am | #

This is relevant both the moral issue of responsibility, but also to efficacy of deterrence. Exxon is in a much stronger position to control the behavior of its ships' crews than the taxpayers are to control the behavior of individual government employees.

Call it an incentive to develop such control.

joe | June 26, 2008, 8:15am | #

joshua corning doesn't know the difference between endangering other people and not.

Please, lecture us more on fine moral issues, Ghandi.

Elemenope | June 26, 2008, 8:18am | #

No, you really don't. You can just look at who received an unreasonable advantage and also gave a lot to politicians. I'd start with peanut farmers and the sugar industry. I'd move on to "low sulphur" coal producers. By the time I was done with _really obvious payoffs_ I would have recovered more than one trillion dollars. Sorry if that's a bit too melodramatic for you, but it's true.

Gee, thanks for proving my point. Let's be generous and say that of "the really obvious stuff" you could win 50% of those cases. OK, so that's a hook for 500 Billion; chump change in the big picture of the federal budget (one-sixth of federal outlays not including ongoing war spending.)

As the cases get less "really obvious" the probability of a suit's success plummets. If I were to be really generous, let's say of all suits obvious or otherwise, one were able to take the fed for a cool Trillion.

At almost exactly *one-third* of the total budget, that wouldn't even come close to your apocalyptic "pages and interns" prediction. Melodrama indeed.

Lost_In_Translation | June 26, 2008, 8:38am | #

I'm very much anti-punitive damages, because what you're basically saying is "a judge or group of 12 people believe that you have been so negligent that you must pay lots of money to a relatively few people"

What?!? That doesn't make any sense. If the problem was egrarious, it should be up to the regulatory agencies to impose fines, not some random, industry uneducated judge or equally uninformed pool of 12 random people. There is no scientific basis for how to arrive at punitive number figures and therefore no way to argue against them except as either being "enough or too much" (depending whether you're the plaintiff or defendant). I would do away entirely with that concept and simplify civil court litigation to just compensatory damages, which are straightforward and can be understood by judges and juries. If a company needs to be punished any more for their actions, it should up to a society representative agency such as a governmental regulatory agency or, yes, the consumer.

Elemenope | June 26, 2008, 9:04am | #

I would do away entirely with that concept and simplify civil court litigation to just compensatory damages, which are straightforward and can be understood by judges and juries.

I hope you're kidding. Punitive Damages are too complicated for judges (!) and juries? Well, there goes the entire criminal justice system; if they can't be trusted with mere dollars, how on Earth could they be trusted with peoples' lives?

There is nothing especially complicated about explaining to twelve average folk that punitive damages are to discourage the bad actor from repeating his bad action and also to deter by making too expensive such a choice for similar actors. That's *way* simpler than your average white collar criminal case, for sure.

Nigel Watt | June 26, 2008, 9:06am | #

The main problem with the 5 billion was that that number was so high that, as Exxon had to put up a bond for the money to appeal it, the interest was so high that they could pay for fighting the decision completely with interest from money they had to put up anyways. They couldn't afford not to fight it.

joe | June 26, 2008, 9:12am | #

Very interesting point, Nigel.

Dr. Kenneth Noisewater | June 26, 2008, 9:14am | #

Exxon is in a much stronger position to control the behavior of its ships' crews than the taxpayers are to control the behavior of individual government employees.

Folks, our work is done here. In his attempt to rationalize liability caps for the state, joe has stumbled upon one of the biggest reasons not to hand over gobs of power to the state in the first place.

Our baby's all growns up!!!! It's like an angel has just earned it's wings! I'm so proud!

joe, you can pick your decoder ring up any time between 10AM and 3PM in Room 302 of the Milton Friedman Building. Welcome!

joe | June 26, 2008, 9:26am | #

Too many weirdos hanging out by the entrance with stacks of mimeographed pages, doctor. I'll pass.

Lost_In_Translation | June 26, 2008, 9:35am | #

LMNP, I am not joking in the slightest. The punitive damage system in civil litigation is the worst invention ever. It is an impractical, unfair system created because some businesses acted badly when some people were put in danger. It would have been easy enough to punish these companies with penalties assesed by the government, but someone decided that individual judges should be able to decide the economic fate of companies based on single instances. Its a horrible system.

There is nothing especially complicated about explaining to twelve average folk that punitive damages are to discourage the bad actor from repeating his bad action and also to deter by making too expensive such a choice for similar actors. That's *way* simpler than your average white collar criminal case, for sure.


The complication comes in determining what punitive damage would be appropriate to not shut the business down entirely (and if your whole goal is to shut it down anyway, just have the government revoke their permits to operate).

..and as Nigel said, it behooves Exxon to continue fighting punitive damages indefinitely because paying lawyers to litigate is cheaper than the damages in the long run.

MP | June 26, 2008, 9:38am | #

Did I miss something? There seems to be only one comment here (by ClubMedSux) that actually discusses the legal issues involved. And even that comment was off base, since it was referring to the Due Process problem of punitive awards, which wasn't an issue here because:

Today's enquiry differs from due process review because the case arises under federal maritime jurisdiction, and we are reviewing a jury award for conformity with maritime law, rather than the outer limit allowed by due process;

Nick M | June 26, 2008, 9:58am | #

Picking a ratio is inherently arbitrary

I disagree. Here's a Rothbardian analysis.

If you intentionally knock out my tooth. Then you should have to pay to have my tooth fixed.
[compensatory action]

But, since you robbed my of not just my tooth, but also my rights to my own tooth then the balance of rights is reinstated by me taking an equal portion of your rights to one your teeth (i.e. I get to knock out one of your teeth).
[punitive action]

Therefore, reason dictates that a 1:1 ratio be the upper limit on punitive to compensatory penalties.

However, it should be noted that, in this analysis, both halves (punitive and compensatory) are owed to the victim.

Nobody owes anything to the state. And so the victim would be able to waive his or her right to exact either penalty.

Lost_In_Translation | June 26, 2008, 10:06am | #

Nick,

So in the worst case (intential and belligerent), the penalty for a company should be no more than an amount equal to the compensatory damages. I could probably live with that because very few incidents are deliberate by the companies and therefore should be less.

Nigel Watt | June 26, 2008, 10:08am | #

By the way, my post above was what a friend at Exxon told a relative of mine fifteen years ago. They were going to take it to SCOTUS no matter what, because they had to or shareholders would have roasted them.

Nick M | June 26, 2008, 10:17am | #

Lost_In_Translation | June 26, 2008, 10:06am | #

Nick,

So in the worst case (intential and belligerent), the penalty for a company should be no more than an amount equal to the compensatory damages.

Yes. And, according to the Rothbardian analysis, if the transgression was 100% unintentional, then there could only be compensatory action. Because the punitive action is to counteract the taking of rights, and, in an accident, you could say that, while the property was taken, the rights weren't so much taken as, well, transferred by fate.

dpsc | June 26, 2008, 1:20pm | #

LMNOP: Gee, thanks for proving my point. Let's be generous and say that of "the really obvious stuff" you could win 50% of those cases. OK, so that's a hook for 500 Billion; chump change in the big picture of the federal budget (one-sixth of federal outlays not including ongoing war spending.)

OK, here's the problem: I'm talking about an abstract principle (what it would cost them/us if punitive damages were assessed against them/us across the board in line with how the were in the Exxon case), while you are talking about the likely effects of taking away the cap on damages assessed against the feds, and limiting your analysis to the feds.

You're right that the practical effect of taking away that cap would be negligible. I think you're being very optimistic when you say that I might win 50% of those cases. The average juror/citizen is a lot more like Joe than he is like me (for which you should be thankful if you have teenage daughters). At any rate I'm certainly not against removing that cap, and I don't think that doing so would lead to the collapse of Western Civ, mainly because I don't think that damages would be assessed in line with the way they are assessed against non-state actors.

But, and I hate to say it, joe is half-right about the chain of responsibility. I'd much rather see cops and their immediate supervisors jailed or driven to ruin when they do terrible things than see municipalities bankrupted (and unlike the fed, punitive damages in line with the Exxon damages could bankrupt a small community in just one case). But beggars can't be choosers and I would take either situation over the current one that allows cops to act badly with near impunity.

As for your argument about the states stepping in to fill the vacuum, that is just pushing the problem off. It's like answering all cosmological questions with "God created it."

The postman brought me a new MIDI controller this morning, and I've been building new patches and writing parts in expectation of its arrival for the last little while so I have to go dick around with them a bit. Rejoice! Otherwise I would have another choice several thousand words to say on the subject ;).