Tort law provides for damages, which can be actual or punitive. The aggrieved party will be awarded actual damages based on an assessment of the damages accrued. In addition, the aggrieved party may be eligible for an award based on punitive damages, which are damages used to punish the negligent or reckless party and to send the message that negligent and reckless behavior can have very serious consequences.
In a maritime context, basic tort law is replaced by the maritime tort regime, which has many similarities and differences. The maritime law regime recognizes punitive damages, based on the United States Supreme Court ruling in Townsend. While punitive damages are an acceptable award in maritime law, the extent of a maritime award is not totally clear. The Supreme Court ruling in the 2008 case of Exxon Valdez v. Baker provided some color.
Under the Townsend ruling, which was discussed in a previous blog, maritime law recognized punitive damages. While the Jones Act replaces the tort regime found outside of maritime law, it is silent with respect to awarding punitive damages. The Supreme Court held that what the Jones Act explicitly replaces has a different body of law in a maritime context; what maritime law does not replace survives in the maritime context. Therefore, punitive damages are applicable in a maritime tort-like case.
Exxon Valdez v. Baker
In 1989, an Exxon Valdez tanker ship leaked a significant amount of oil into Prince William Sound on the Alaskan coast. At the time, there was much news coverage of the spill and it compelled Americans to examine the oil industry in Alaska. Subsequently, Exxon Valdez was involved in a massive clean-up effort on the Alaskan coast.
Sometime later, plaintiffs brought suit against Exxon Valdez in Alaskan Federal Court, alleging damage due to the recklessness of Exxon Valdez in transporting oil from a pipeline to an oil tanker ship. Initially, the Alaskan District Court ruled that Exoxon Valdez was liable for actual damages of approximately $500 million and, due to its recklessness, should pay $5 billion in punitive damages.
The Court noted that the punitive damage award was very high due to Exxon Valdez’s recklessness and may have been lower had it been a simple negligence claim.
On appeal, the Circuit Court upheld the actual damage award and cut the punitive damage amount to $2.5 billion. On appeal the Supreme Court, the Court ruled that a reckless punitive damage award should not exceed a 1:1 ratio. Therefore, the plaintiffs were only awarded a punitive damage award of $500 million.
An issue with punitive damages are that sometimes it is difficult to determine. How high should they go? What is a proper quid-pro-quo punishment for an entity that spills oil? All these issues need to be determined. The Supreme Court’s ruling provides some guidance of a 1:1 ratio cap, It seems that a negligence award of punitive damages should have a lower cap for paying such damages.
Hurt in a maritime accident? Contact the Kolodny law firm, a maritime injury firm.