How much will th Gulf oil spill ultimately cost BP?

Wikipedia provides the following assessment:

"On July 5 BP reported that its own expenditures on the oil spill had reached $3.12 billion, including the cost of the spill response, containment, relief well drilling, grants to the Gulf states, claims paid, and federal costs.[294] The United States Oil Pollution Act of 1990 limits BP's liability for non-cleanup costs to $75 million unless gross negligence is proven.[295] BP has said it would pay for all cleanup and remediation regardless of the statutory liability cap. Nevertheless, some Democratic lawmakers are seeking to pass legislation that would increase the liability limit to $10 billion.[296][297] Analysts for Swiss Re have estimated that the total insured losses from the accident could reach $3.5 billion. According to UBS, final losses could be $12 billion.[298] According to Willis Group Holdings, total losses could amount to $30 billion, of which estimated total claims to the market from the disaster, including control of well, re-drilling, third-party liability and seepage and pollution costs, could exceed $1.2 billion."

Looking back to the Exxon Valdez spill is instructive about how these cases play out. A jury dunned Exxon $5 billion in punitive damages. By the time the Supreme Court finally ruled in 2008, that amount was trimmed by 95%, while Exxon recorded record profits in the billions of dollars. Herewith the Supremes' '08 ruling:

Exxon Shipping Company v. Baker
4 US 471 (2008)

Syllabus FN*

FN* The syllabus constitutes no part of the opinion of the Court but has been prepared by the Reporter of Decisions for the convenience of the reader. See United States v. Detroit Timber & Lumber Co., 200 U.S. 321, 337, 26 S.Ct. 282, 50 L.Ed. 499.

In 1989, petitioners' (collectively, Exxon) supertanker grounded on a reef off Alaska, spilling millions of gallons of crude oil into Prince William Sound. The accident occurred after the tanker's captain, Joseph Hazelwood-who had a history of alcohol abuse and whose blood still had a high alcohol level 11 hours after the spill-inexplicably exited the bridge, leaving a tricky course correction to unlicensed subordinates. Exxon spent some $2.1 billion in cleanup efforts, pleaded guilty to criminal violations occasioning fines, settled a civil action by the United States and Alaska for at least $900 million, and paid another $303 million in voluntary payments to private parties. Other civil cases were consolidated into this one, brought against Exxon, Hazelwood, and others to recover economic losses suffered by respondents (hereinafter Baker), who depend on Prince William Sound for their livelihoods. At Phase I of the trial, the jury found Exxon and Hazelwood reckless (and thus potentially liable for punitive damages) under instructions providing that a corporation is responsible for the reckless acts of employees acting in a managerial capacity in the scope of their employment. In Phase II, the jury awarded $287 million in compensatory damages to some of the plaintiffs; others had settled their compensatory**2609 claims for $22.6 million. In Phase III, the jury awarded $5,000 in punitive damages against Hazelwood and $5 billion against Exxon. The Ninth Circuit upheld the Phase I jury instruction on corporate liability and ultimately remitted the punitive-damages award against Exxon to $2.5 billion.

Held:

1. Because the Court is equally divided on whether maritime law allows corporate liability for punitive damages based on the acts of managerial agents, it leaves the Ninth Circuit's opinion undisturbed in this respect. Of course, this disposition is not precedential on the derivative liability question. See, e.g., Neil v. Biggers, 409 U.S. 188, 192, 93 S.Ct. 375, 34 L.Ed.2d 401. Pp. 2614 - 2616.

2. The Clean Water Act's (CWA) water pollution penalties, 33 U.S.C. § 1321, do not preempt punitive-damages awards in maritime spill cases. Section 1321(b) protects “navigable waters ... , adjoining shorelines, ... [and] natural resources,” subject to a saving clause reserving “ obligations*472 ... under any ... law for damages to any ... privately owned property resulting from [an oil] discharge,” § 1321 (o) . Exxon's admission that the CWA does not displace compensatory remedies for the consequences of water pollution, even those for economic harms, leaves the company with the untenable claim that the CWA somehow preempts punitive damages, but not compensatory damages, for economic loss. Nothing in the statute points to that result, and the Court has rejected similar attempts to sever remedies from their causes of action, see Silkwood v. Kerr-McGee Corp., 464 U.S. 238, 255-256, 104 S.Ct. 615, 78 L.Ed.2d 443. There is no clear indication of congressional intent to occupy the entire field of pollution remedies, nor is it likely that punitive damages for private harms will have any frustrating effect on the CWA's remedial scheme. Pp. 2616 - 2619.

3. The punitive-damages award against Exxon was excessive as a matter of maritime common law. In the circumstances of this case, the award should be limited to an amount equal to compensatory damages. Pp. 2619 - 2634.

(a) Although legal codes from ancient times through the Middle Ages called for multiple damages for certain especially harmful acts, modern Anglo-American punitive damages have their roots in 18th-century English law and became widely accepted in American courts by the mid-19th century. See, e.g., Day v. Woodworth, 13 How. 363, 371, 14 L.Ed. 181. Pp. 2619 - 2620.

(b) The prevailing American rule limits punitive damages to cases of “enormity,” Day, supra, at 371, 14 L.Ed. 181, in which a defendant's conduct is outrageous, owing to gross negligence, willful, wanton, and reckless indifference for others' rights, or even more deplorable behavior. The consensus today is that punitive damages are aimed at retribution and deterring harmful conduct. Pp. 2620 - 2622.

(c) State regulation of punitive damages varies. A few States award them rarely, or not at all, and others permit them only when authorized by statute. Many States have imposed statutory limits on punitive awards, in the form of absolute monetary caps, a maximum ratio of punitive to compensatory damages, or, frequently, some combination of the two. Pp. 2622 - 2624.

(d) American punitive damages have come under criticism in recent decades, but the most recent studies tend to undercut much of it. Although some studies show the dollar amounts of awards growing over time, even in real terms, most accounts show that the median ratio of **2610 punitive to compensatory awards remains less than 1:1. Nor do the data show a marked increase in the percentage of cases with punitive awards. The real problem is the stark unpredictability of punitive awards. Courts are concerned with fairness as consistency, and the available data suggest that the spread between high and low individual awards is unacceptable. The spread in state civil trials is great, and *473 the outlier cases subject defendants to punitive damages that dwarf the corresponding compensatories. The distribution of judge-assessed awards is narrower, but still remarkable. These ranges might be acceptable if they resulted from efforts to reach a generally accepted optimal level of penalty and deterrence in cases involving a wide range of circumstances, but anecdotal evidence suggests that is not the case, see, e.g., BMW of North America, Inc. v. Gore, 517 U.S. 559, 565, n. 8, 116 S.Ct. 1589. Pp. 2624 - 2626.

(e) This Court's response to outlier punitive-damages awards has thus far been confined by claims that state-court awards violated due process. See, e.g., State Farm Mut. Automobile Ins. Co. v. Campbell, 538 U.S. 408, 425, 123 S.Ct. 1513, 155 L.Ed.2d 585. In contrast, today's enquiry arises under federal maritime jurisdiction and requires review of a jury award at the level of judge-made federal common law that precedes and should obviate any application of the constitutional standard. In this context, the unpredictability of high punitive awards is in tension with their punitive function because of the implication of unfairness that an eccentrically high punitive verdict carries. A penalty should be reasonably predictable in its severity, so that even Holmes's “bad man” can look ahead with some ability to know what the stakes are in choosing one course of action or another. And a penalty scheme ought to threaten defendants with a fair probability of suffering in like degree for like damage. Cf. Koon v. United States, 518 U.S. 81, 113, 116 S.Ct. 2035, 135 L.Ed.2d 392. Pp. 2626 - 2627.

(f) The Court considers three approaches, one verbal and two quantitative, to arrive at a standard for assessing maritime punitive damages. Pp. 2627 - 2634.

(i) The Court is skeptical that verbal formulations are the best insurance against unpredictable outlier punitive awards, in light of its experience with attempts to produce consistency in the analogous business of criminal sentencing. Pp. 2627 - 2629.

(ii) Thus, the Court looks to quantified limits. The option of setting a hard dollar punitive cap, however, is rejected because there is no “standard” tort or contract injury, making it difficult to settle upon a particular dollar figure as appropriate across the board; and because a judicially selected dollar cap would carry the serious drawback that the issue might not return to the docket before there was a need to revisit the figure selected. Pp. 2629 - 2632.

(iii) The more promising alternative is to peg punitive awards to compensatory damages using a ratio or maximum multiple. This is the model in many States and in analogous federal statutes allowing multiple damages. The question is what ratio is most appropriate. An acceptable standard can be found in the studies showing the median ratio of punitive to compensatory awards. Those studies reflect the judgments of juries and judges in thousands of cases as to what punitive *474 awards were appropriate in circumstances reflecting the most down to the least blameworthy conduct, from malice and avarice to recklessness to gross negligence. The data in question put the median ratio for the entire gamut at less than 1:1, meaning that the compensatory award exceeds the punitive award in most cases. In a well-**2611 functioning system, awards at or below the median would roughly express jurors' sense of reasonable penalties in cases like this one that have no earmarks of exceptional blameworthiness. Accordingly, the Court finds that a 1:1 ratio is a fair upper limit in such maritime cases. Pp. 2632 - 2634.

(iv) Applying this standard to the present case, the Court takes for granted the District Court's calculation of the total relevant compensatory damages at $507.5 million. A punitive-to-compensatory ratio of 1:1 thus yields maximum punitive damages in that amount. P. 2634.

472 F.3d 600 and 490 F.3d 1066, vacated and remanded.

SOUTER, J., delivered the opinion of the Court, in which ROBERTS, C.J., and SCALIA, KENNEDY, and THOMAS, JJ., joined, and in which STEVENS, GINSBURG, and BREYER, JJ., joined, as to Parts I, II, and III. SCALIA, J., filed a concurring opinion, in which THOMAS, J., joined. STEVENS, J., GINSBURG, J., and BREYER, J., filed opinions concurring in part and dissenting in part. ALITO, J., took no part in the consideration or decision of the case.


Walter Dellinger, Washington, DC, for petitioners.

Jeffrey L. Fisher, for respondents.

E. Edward Bruce, Covington & Burling LLP, Washington, D.C., Walter Dellinger, Counsel of Record, John F. Daum, Charles C. Lifland, Jonathan D. Hacker, O'Melveny & Myers LLP, Washington, D.C., for Petitioner Exxon Mobil Corporation.

James vanR. Springer, Dickstein Shapiro LLP, Washington, DC, Brian B. O'Neill, Faegre & Benson LLP, Minneapolis, MN, David W. Oesting, Counsel of Record, Stephen M. Rummage, David C. Tarshes, Jeffrey L. Fisher, Davis Wright Tremaine LLP, Anchorage, AK, for Respondents.



Justice SOUTER delivered the opinion of the Court.

*475 There are three questions of maritime law before us: whether a shipowner may be liable for punitive damages *476 without acquiescence in the actions causing harm, whether punitive damages have been barred implicitly by federal statutory law making no provision for them, and whether the award of $2.5 billion in this case is greater than maritime law should allow in the circumstances. We are equally divided on the owner's derivative liability, and hold that the federal statutory law does not bar a punitive award on top of damages for economic loss, but that the award here should be limited to an amount equal to compensatory damages.

I
On March 24, 1989, the supertanker Exxon Valdez grounded on Bligh Reef off the Alaskan coast, fracturing its hull and spilling millions of gallons of crude oil into Prince William Sound. The owner, petitioner Exxon Shipping Co. (now SeaRiver Maritime, Inc.), and its owner, petitioner Exxon Mobil Corp. (collectively, Exxon), have settled state and federal claims for environmental damage, with payments exceeding $1 billion, and this action by respondent Baker and others, including commercial fishermen and native Alaskans, was brought for economic losses to individuals dependent on Prince William Sound for their livelihoods.

**2612 A
The tanker was over 900 feet long and was used by Exxon to carry crude oil from the end of the Trans-Alaska Pipeline in Valdez, Alaska, to the lower 48 States. On the night of the spill it was carrying 53 million gallons of crude oil, or over a million barrels. Its captain was one Joseph Hazelwood, who had completed a 28-day alcohol treatment program while employed by Exxon, as his superiors knew, but dropped out of a prescribed followup program and stopped going to Alcoholics Anonymous meetings. According to the District Court, “[t]here was evidence presented to the jury that after Hazelwood was released from [residential treatment], he drank in bars, parking lots, apartments, airports, *477 airplanes, restaurants, hotels, at various ports, and aboard Exxon tankers.” In re Exxon Valdez, No. A89-0095-CV, Order No. 265 (D.Alaska, Jan. 27, 1995), p. 5, App. F to Pet. for Cert. 255a-256a (hereinafter Order 265). The jury also heard contested testimony that Hazelwood drank with Exxon officials and that members of the Exxon management knew of his relapse. See ibid. Although Exxon had a clear policy prohibiting employees from serving onboard within four hours of consuming alcohol, see In re Exxon Valdez, 270 F.3d 1215, 1238 (C.A.9 2001), Exxon presented no evidence that it monitored Hazelwood after his return to duty or considered giving him a shoreside assignment, see Order 265, p. 5, supra, at 256a. Witnesses testified that before the Valdez left port on the night of the disaster, Hazelwood downed at least five double vodkas in the waterfront bars of Valdez, an intake of about 15 ounces of 80-proof alcohol, enough “that a non-alcoholic would have passed out.” 270 F.3d, at 1236.

The ship sailed at 9:12 p.m. on March 23, 1989, guided by a state-licensed pilot for the first leg out, through the Valdez Narrows. At 11:20 p.m., Hazelwood took active control and, owing to poor conditions in the outbound shipping lane, radioed the Coast Guard for permission to move east across the inbound lane to a less icy path. Under the conditions, this was a standard move, which the last outbound tanker had also taken, and the Coast Guard cleared the Valdez to cross the inbound lane. The tanker accordingly steered east toward clearer waters, but the move put it in the path of an underwater reef off Bligh Island, thus requiring a turn back west into the shipping lane around Busby Light, north of the reef.

Two minutes before the required turn, however, Hazelwood left the bridge and went down to his cabin in order, he said, to do paperwork. This decision was inexplicable. There was expert testimony that, even if their presence is not strictly necessary, captains simply do not quit the bridge during maneuvers like this, and no paperwork could have *478 justified it. And in fact the evidence was that Hazelwood's presence was required, both because there should have been two officers on the bridge at all times and his departure left only one, and because he was the only person on the entire ship licensed to navigate this part of Prince William Sound. To make matters worse, before going below Hazelwood put the tanker on autopilot, speeding it up, making the turn trickier, and any mistake harder to correct.

As Hazelwood left, he instructed the remaining officer, third mate Joseph Cousins, to move the tanker back into the shipping lane once it came abeam of Busby Light. Cousins, unlicensed to navigate in those waters, was left alone with helmsman Robert Kagan, a nonofficer. For reasons that remain a mystery, they failed to make the turn at Busby Light, and a later emergency maneuver attempted by Cousins came too late. The tanker ran aground **2613 on Bligh Reef, tearing the hull open and spilling 11 million gallons of crude oil into Prince William Sound.

After Hazelwood returned to the bridge and reported the grounding to the Coast Guard, he tried but failed to rock the Valdez off the reef, a maneuver which could have spilled more oil and caused the ship to founder.FN1 The Coast Guard's nearly immediate response included a blood test of Hazelwood (the validity of which Exxon disputes) showing a blood-alcohol level of .061 11 hours after the spill. Supp.App. 307sa. Experts testified that to have this much alcohol in his bloodstream so long after the accident, Hazelwood at *479 the time of the spill must have had a blood-alcohol level of around .241, Order 265, p. 5, supra, at 256a, three times the legal limit for driving in most States.

FN1. As it turned out, the tanker survived the accident and remained in Exxon's fleet, which it subsequently transferred to a wholly owned subsidiary, SeaRiver Maritime, Inc. The Valdez “was renamed several times, finally to the SeaRiver Mediterranean, [and] carried oil between the Persian Gulf and Japan, Singapore, and Australia for 12 years. ... In 2002, the ship was pulled from service and ‘laid up’ off a foreign port (just where the owners won't say) and prepared for retirement, although, according to some reports, the vessel continues in service under a foreign flag.” Exxon Valdez Spill Anniversary Marked, 30 Oil Spill Intelligence Report 2 (Mar. 29, 2007).


In the aftermath of the disaster, Exxon spent around $2.1 billion in cleanup efforts. The United States charged the company with criminal violations of the Clean Water Act, 33 U.S.C. §§ 1311(a) and 1319(c)(1); the Refuse Act of 1899, 33 U.S.C. §§ 407 and 411; the Migratory Bird Treaty Act, 16 U.S.C. §§ 703 and 707(a); the Ports and Waterways Safety Act, 33 U.S.C. § 1232(b)(1); and the Dangerous Cargo Act, 46 U.S.C. § 3718(b). Exxon pleaded guilty to violations of the Clean Water Act, the Refuse Act, and the Migratory Bird Treaty Act and agreed to pay a $150 million fine, later reduced to $25 million plus restitution of $100 million. A civil action by the United States and the State of Alaska for environmental harms ended with a consent decree for Exxon to pay at least $900 million toward restoring natural resources, and it paid another $303 million in voluntary settlements with fishermen, property owners, and other private parties.

B
The remaining civil cases were consolidated into this one against Exxon, Hazelwood, and others. The District Court for the District of Alaska divided the plaintiffs seeking compensatory damages into three classes: commercial fishermen, Native Alaskans, and landowners. At Exxon's behest, the court also certified a mandatory class of all plaintiffs seeking punitive damages, whose number topped 32,000. Respondents here, to whom we will refer as Baker for convenience, are members of that class.

For the purposes of the case, Exxon stipulated to its negligence in the Valdez disaster and its ensuing liability for compensatory damages. The court designed the trial accordingly: Phase I considered Exxon and Hazelwood's recklessness and thus their potential for punitive liability; Phase II set compensatory damages for commercial fishermen and *480 Native Alaskans; and Phase III determined the amount of punitive damages for which Hazelwood and Exxon were each liable. (A contemplated Phase IV, setting compensation for still other plaintiffs, was obviated by settlement.)

In Phase I, the jury heard extensive testimony about Hazelwood's alcoholism and his conduct on the night of the spill, as **2614 well as conflicting testimony about Exxon officials' knowledge of Hazelwood's backslide. At the close of Phase I, the Court instructed the jury in part that

“[a] corporation is responsible for the reckless acts of those employees who are employed in a managerial capacity while acting in the scope of their employment. The reckless act or omission of a managerial officer or employee of a corporation, in the course and scope of the performance of his duties, is held in law to be the reckless act or omission of the corporation.” App. K to Pet. for Cert. 301a.

The Court went on that “[a]n employee of a corporation is employed in a managerial capacity if the employee supervises other employees and has responsibility for, and authority over, a particular aspect of the corporation's business.” Ibid. Exxon did not dispute that Hazelwood was a managerial employee under this definition, see App. G, id., at 264a, n. 8, and the jury found both Hazelwood and Exxon reckless and thus potentially liable for punitive damages, App. L, id., at 303a.FN2

FN2. The jury was not asked to consider the possibility of any degree of fault beyond the range of reckless conduct. The record sent up to us shows that some thought was given to a trial plan that would have authorized jury findings as to greater degrees of culpability, see App. 164, but that plan was not adopted, whatever the reason; Baker does not argue this was error.


In Phase II the jury awarded $287 million in compensatory damages to the commercial fishermen. After the Court deducted released claims, settlements, and other payments, the *481 balance outstanding was $19,590,257. Meanwhile, most of the Native Alaskan class had settled their compensatory claims for $20 million, and those who opted out of that settlement ultimately settled for a total of around $2.6 million.

In Phase III, the jury heard about Exxon's management's acts and omissions arguably relevant to the spill. See App. 1291-1320, 1353-1367. At the close of evidence, the court instructed the jurors on the purposes of punitive damages, emphasizing that they were designed not to provide compensatory relief but to punish and deter the defendants. See App. to Brief in Opposition 12a-14a. The court charged the jury to consider the reprehensibility of the defendants' conduct, their financial condition, the magnitude of the harm, and any mitigating facts. Id., at 15a. The jury awarded $5,000 in punitive damages against Hazelwood and $5 billion against Exxon.

On appeal, the Court of Appeals for the Ninth Circuit upheld the Phase I jury instruction on corporate liability for acts of managerial agents under Circuit precedent. See In re Exxon Valdez, 270 F.3d, at 1236 (citing Protectus Alpha Nav. Co. v. North Pacific Grain Growers, Inc., 767 F.2d 1379 (C.A.9 1985)). With respect to the size of the punitive-damages award, however, the Circuit remanded twice for adjustments in light of this Court's due process cases before ultimately itself remitting the award to $2.5 billion. See 270 F.3d, at 1246-1247, 472 F.3d 600, 601, 625 (2006) (per curiam), and 490 F.3d 1066, 1068 (2007).

We granted certiorari to consider whether maritime law allows corporate liability for punitive damages on the basis of the acts of managerial agents, whether the Clean Water Act (CWA), 86 Stat. 816, 33 U.S.C. § 1251 et seq. (2000 ed. and Supp. V), forecloses the award of punitive damages in maritime spill cases, and whether the punitive damages awarded against Exxon in this case were excessive as a matter of maritime common law. **2615 552 U.S. ----, 128 S.Ct. 492, 169 L.Ed.2d 337 (2007). We now vacate and remand.