Baker v. Exxon Mobile Corp.

process em principles to the of due ages SCHROEDER, M. Chief Before MARY See, e.g., Pac. in our Constitution. bodied R. BROWNING Judge, JAMES 1, Haslip, v. 499 U.S. Mut. Ins. Co. Life KLEINFELD, Circuit J. ANDREW (1991); 1 TXO 111 113 L.Ed.2d S.Ct. Judges. Corp., 509 v. Alliance Res. Corp. Prod. 125 L.Ed.2d 366 113 S.Ct. Opinion; Dissent PER CURIAM (1993) Am., N. Inc. v. (plurality); Judge BROWNING. 517 U.S. PER CURIAM. (1996); Farm Mut. L.Ed.2d Campbell, Auto. Ins. Co.

I. INTRODUCTION (2003). 1513, 155 L.Ed.2d 585 decisions have Intervening Supreme Court puni time at the look for the third twice to the matter caused us remand litigation in this damages imposed tive court for reconsideration oil the district grounding of the result of the 1989 evolving Supreme Valdez, light resulting punitives tanker Exxon opinion, district court’s their Court law. The many harm to who earned economic for it to consider after our last remand of that area. from the resources livelihood (In Court’s decision impact re the Exxon Baker v. Hazelwood Cir.2001)[here In re the Exx (9th published at Valdez), (D.Alaska Valdez, I]; on Damages Opinion Sea inafter Punitive 2004) Opinion]. District Corp., [hereinafter No. Seafoods, Inc. v. Exxon Hawk 2003). (9th subject appeal. this It is the Cir., Aug. We are 03-35166 I, Now, ages Opinion guidance with the 270 F.3d at 1242. decisions, judge’s addition, relationship the district in considering Court’s issues, thoughtful consideration of the size of between the the award and prior litigation, in the harm, our own decisions earli- amount of we concluded in our phase of the bring trust we are able to punitive damages opinion er that the sub- litigation agree with to an end. we While already stantial costs Exxon had court, of district analysis much the in up cargo borne clean and loss of lessen de novo required are to review the in the need for deterrence the future. applying in legal analysis district court’s however, disagree, at 1244. Exx- We See Coo Supreme guideposts. Court’s that, on’s ultimate contention as a result Indus., per Inc. v. Tool Leatherman Damages Opin- Punitive in two sentences Inc., 436, Group, 424, 121 532 S.Ct. U.S. I, ion written five years ago and before (2001). L.Ed.2d 674 Farm, in State Supreme opinion Court’s punitive damages Exxon is entitled have original punitive damages While the no higher was in accord with the assessed at than million. award billion and $5 $25 verdict, See id. jury’s reduced it district court In re billion after our first remand. dissenting colleague goes Our oth- to the Valdez, 1043, the Exxon 236 er plac- extreme. Exxon’s misconduct was (D.Alaska 2002), by vacated Sea 1068 ing relapsed alcoholic in of a charge Hawk, Then, after our No. 03-35166. sec Damages Punitive Opinion supertanker. remand, ond entered an award $4.5 I, Yet, the dissent Opinion, billion. District Court 296 ignore claims that we should our unani- F.Supp.2d at 1110. For the reasons out Damages Punitive in mous conclusion in development lined further the factual I, Opinion 1242, F.3d at that Exxon’s analysis opinion, of this we con respect conduct with to the not spill was clude the ratio of intentional. The dissent effectively treats resulting actual economic from though Exxon as it calculatingly and mali- in spill, reflected the district court’s award ciously ship steered the into disaster. billion, by exceeds a material factor $4.5 rely Purporting on the Su- intervening ratio that appropriate would be under Farm, State preme in Court decision Damages Opinion

Punitive I cur dissent refuses to apply also our earlier controlling analysis. rent holding mitigation that Exxon’s re- efforts 425, 538 U.S. at reprehensibility duce the of its conduct. billion, 1513. We order a remittitur rejection to a This amounts of the bedrock resulting bil $2.5 stare principle of decisis. because, assessing lion. We do so State Farm was an insurance contract misconduct, reprehensibility of Nothing case. in it suggests that important according most to the guidepost Damages Punitive court’s decision in opinion Court’s Opinion I improper. The Supreme facts. See id. are mitigating there several explicitly implicitly Court did not hold 123 S.Ct. 1513. These include plays that mitigation no role in determin- prompt action taken Exxon both to ing constitutionality up compensate clean the oil of a and to ages for Such a lack of economic losses. These mol award. discussion lify, degree, least to some an insurance contract case supplant material cannot express holding economic terms of Exx our in the arena toxic-tort misconduct. Punitive Dam- original on’s efforts are a as- mitigation factor in America, 71 Dame Century teenth Notre in this damages award sessing (1996); DeCamp, 542-51 Paul L.Rev. authority should Controlling case. Due Con Beyond State Farm: Process Hand As Learned or distorted. ignored Compensatory on Noneconomic straints said, victory gained “a famously once Pol’y 27 Harv. J.L. & Pub. Damages, off the table pieces the chess sweeping (2003); Browning-Ferris also 246-48 see Hand, Mr. Jus enduring.” Learned Inc., Vt., Disposal, Inc. v. Kelco Indus. Cardozo, L. Rev. 52 Harv. tice n. (1939). (1989) (affirming district L.Ed.2d 219 holding that previous our reiterate “grossly application court’s of Vermont’s Accord- not willful. Exxon’s conduct was ju manifestly standard excessive” that cor- ingly, review); Oberg, v. Honda Motor Co. dicial degree of re- highest the responds with 10, 2331, 415, 129 n. 114 S.Ct. 512 U.S. 432 with due comport does not prehensibility (1994). Although there were L.Ed.2d 336 falls conduct when process era that dating from the Lochner cases of a fault contin- in the middle squarely may there be a due suggested had uum. damages, at the ceiling punitive on process history litigation of this the 1989, Because Supreme the time of this accident history of jurisprudential the recent tracks an award on Court had never invalidated analysis is best damages, our of the award violated punitive grounds that the size understanding thorough a 517 light process. made in due See BMW v. U.S. (Scalia, 600-01, J., dis therefore outline 116 S.Ct. 1589 history. of that history pro of due senting) (discussing the hope is sufficient history with what we awards) punitive damages cess review thoroughness. clarity and Ry. Seegers, v. (citing Air Line Seaboard 73, 78, 28, 52 L.Ed. 108 207 U.S. 28 S.Ct. II. LEGAL AND FACTUAL (1907); Tel. & Tel. Co. v. Southwestern BACKGROUND Danaher, 482, 489-91, 35 238 U.S. S.Ct. the Accident A. From the Time of (1915); 886, L.Ed. 1419 Waters-Pierce 59 Dam- through the First Punitive Texas, 86, 111-12, 212 29 v. U.S. Oil Co. ages Award and Denial Motion (1909); L.Ed. 417 Standard S.Ct. 53 Law New Trial: The Common Missouri, for 224 Ind. v. U.S. Oil Co. of Court Deci- through Supreme the (1912); 286, 290, 406, 56 L.Ed. 760 32 S.Ct. in TXO. sion Williams, Louis, 251 v. I.M. & S.R. Co. St. 63, 66-67, 64 139 L.Ed. Bligh on aground ran The Exxon Valdez (1919)). on in Alaska’s Prince Sound Reef William Punitive March 1991, however, the Court In by general common governed time were Co. Insurance Mutual decided Pacific Life law, jury At common the 113 principles. law Haslip, 499 U.S. S.Ct. (1991). trial There, the first time punitives, for determined L.Ed.2d era, a a review to deter conducted judge conducted limited in the modern Court jury’s of an award mine whether verdict substantive review fraud prejudice, Haslip was an insurance product passion damages. case, pre- agent pocketed that shocked the award was one which whether Lettow, insurance B. miums and caused conscience. See Renee 4-5, The lapse. Id. at S.Ct. Against Law: Trial Verdict New award upheld Early Nine- Court Relations Judge-Jury misconduct, and, additionally, to to four times the award of from the that amounted mitigating account factors such and 200 times the take into compensatory damages already in- and fines up the defrauded as the clean costs out-of-pocket costs of 23-24, deterrents. Court imposed 1032. The District sured. Id. at S.Ct. at 1081-82. The might Opinion, be “close noted that the ratios product of mutual line,” to be instructions were the award had to the but said court, objective parties effort of the and the district not lack upheld it “did because seriously challenged. con- and have not been Id. The Court therefore criteria.” They questioned are not here and cluded that the did were, retrospect, quite looking. forward the line into the area of constitu- “cross Id. The impropriety.” tional 16, 1994, September re- On time, not, at that and has not Court did billion ver- turned since, any bright line of constitu- defined dict, having imposed some time earlier has, in- impropriety. repeatedly, tional It compensatory award of million. See, e.g., dicated that there is none. accepted district court 424-25, judgment. Citing Haslip and and entered TXO, the district court denied Exxon’s years Haslip, two after January trial in of 1995. motion for a new major punitive another Court took on Corp. v. ages In TXO Production case. Appeal Damage B. The the Alloca- of 443, Corp., 509 U.S. Alliance Resources tion Plan and Our Decisions in 2711, (1993), 125 L.Ed.2d 366 the Baker and Icicle. $19,000 in jury reviewed a award of trial, million in compensatory damages many plaintiffs, Prior to several 451, 113 punitive damages. processors, Id. S.Ct. had entered into the sea food out of an oil and agreements 2711. That case arose with Exxon. Icicle settlement (In development fraud scheme. Id. at gas Seafoods, Inc. v. Baker re the Exxon (9th Cir.2000) 447-51, Valdez), pro- 790, 113 2711. The case S.Ct. 229 F.3d 792 Icicle]; majority opinion. plurality, duced no The Corp. Baker v. Exxon [hereinafter (In Valdez), 985, reiterating process places that due some re the Exxon 239 F.3d Baker], (9th Cir.2001) the punitive damages, limit on said The [hereinafter “grossly excessive” that agreements anticipated punitive award was not so a sizable overturned, Icicle, invoking be thus should award. 229 F.3d at Baker, 793; in Id. at In Haslip. standard used 239 F.3d at 986-87. return provide pay- 2711. The Court declined to millions in receiving S.Ct. substantial any guidance determining Exxon, in particular settling plaintiffs, from ments “grossly an exces- agreements, agreed when award would to al- separate two plurality Id. The chose instead to portion punitive sive.” locate a of their award to say disparity the dramatic between agreement Exxon. One was so called Icicle, punitive the actual financial loss and the agreement,” back 229 F.3d at “cede controlling. assignment award was not Id. The award an and the other was award, Baker, upheld. was the future 239 F.3d 986- against background It this that the court, however,

jury in this instructed in 1994. The district did case was during trial. Ici- agreements into account the know of the jury The was told to take cle, misconduct, the court did 793. When reprehensibility of the them, during consideration potential arising amount of actual or learn Baker, The damage plan, appeal, allocation second considered an parties’ proposed Baker, assignment imposed agreement. had been punitives and after the F.3d jury’s verdict, Following at 987-88. the Icicle reasoning, accordance with panel on the the same district court frowned settlements. reached conclusion. view, Id. at 988. Id. at In the district court’s jury Exxon have told about the should C. The Decision Supreme Court’s agreements that the have so would BMW v. Gore. actually go- Exxon was known how much ing pay punitive damages. to have to parties beginning As the were their therefore, court, Id. The district refused preparation appeal for the first of the $5 permit settling plaintiffs receive award, billion the Su damages award, on the major preme Court issued its first due theory Exxon should benefit from process/punitive damages decision after Id.; Baker, F.3d at settlements. TXO. it decided BMW North appeals two from the pursued America, Inc. v. refusal (1996). district court’s enforce 134 L.Ed.2d 809 This agreements: involving the back one cede attempt was the first Court’s Icicle, agreement, 229 F.3d at specific describe factors that a court assignment involving agreement, other reviewing a jury’s should consider Baker, 239 F.3d at 987-88. damages. award See id. 116 S.Ct. 1589. The Court invoked the of agreement different forms two concepts process traditional of due de essentially were to have the same intended purpose scribe the of the review allowing keep por- effect: Exxon to some assurance of fair notice to the defendant of tion of in ex- the eventual consequences the of its conduct. Id. at change settling compensatory damage for 574, 116 S.Ct. 1589. Icicle, panel the claims. In considered The Court three factors to described be opin- In a agreement. thorough cede back 575, considered. 116 S.Ct. Id. ion, back agreement held that the cede first reprehensibility The was the the was valid and enforceable and that explained that conduct. Id. The Court jury quite properly was told of its the most reprehensibility “[p]erhaps im- Icicle, existence. 800. We reasonableness portant indicium of the that had the been told of the reasoned award,” and said that an punitive damages have agreement, might compensat- well enormity” “the award should reflect by imposing ed for more the settlement omitted). (citations offense. Id. This, turn, damages. Id. at 798. would disparity The was the be- parties have frustrated the efforts second factor pointed potential or harm the reach settlements. We out tween actual conduct, encouraged, plaintiffs flowing from that particu- settlements should be by the larly jury. actions assessed large class like this one. unethical, disparity factor being Id. “Far from cede back The Court said 580, cited. Id. at agreements commonly it easier to was the most make administer actions for the 116 S.Ct. The Court reasoned this mandatory class assessment it “has a important long factor is because encourage settle- result, English pedigree” extending ment in tort cases. As such back stat- mass providing be utes from to 1753 dou- agreements typically should enforced.” ble, damages. quadruple treble or Id. 580-81, Thus, Thus the critical in looking at the ratio between the measure here is the ratio between the punitives harm, and the and in stressing punitive award and the amount of harm one, that the ratio must be a reasonable plaintiff, plaintiffs, inflicted on the be- the Court holding that the ratio must fore the court. by measured the ratio of dam ages to suffered plaintiff The third factor was the difference be- case, in that regard without to harm that punitives tween the and the civil and crimi- might experienced have been by others penalties nal authorized the state for and for which might the defendant also be that conduct. Id. at 116 S.Ct. 1589. responsible. Id. at 116 S.Ct. 1589. It The Court indicated that reviewing courts concluded that a ratio of 500 to 1 was should use this factor to “accord substan- grossly excessive. Id. at legislative tial deference to judgments con- 1589. Such an excessive ratio resulted cerning appropriate sanctions for the con- from jury’s improperly measuring the duct at issue.” Id. at 116 S.Ct. 1589 punitives in relation to the damage inflict (internal omitted). quotations on a potential ed nation of plaintiffs rather the defendant had than the damage to the plaintiff before engaged practice of repainting dam jury. 573, 116 Id. at S.Ct. 1589. aged passing cars and them off as never- respect factor, With to the third damaged cars with original paint. their relationship between 563-64, 116 Id. at plaintiff S.Ct. 1589. The comparable penalties and the under state purchased who had one of these cars was law, BMW v. Gore looked to the Court’s $4,000 awarded in compensatory damages jurisprudence. federalism The Court’s and million in punitives. Id. at opinion stressed that reviewing courts S.Ct. 1589. The Alabama Court should be mindful of the need to pay due punitives million, reduced the deference to legislative judgments of defendant petitioned for certiorari review. in assessing states Id. at 116 S.Ct. 1589. (“[A] conduct. Id. at 116 S.Ct. 1589 punitives held the were excessive. reviewing engaged court in determining Id. at S.Ct. 1589. whether an award of punitive damages is In examining the reprehensibility of the excessive should ‘accord “substantial defer- conduct, Supreme the in Court BMW v. legislative ence” to judgments concerning Gore stressed that only the harm inflicted appropriate sanctions for the conduct at by the defendant was economic and not ”) issue.’ (quoting Browning-Ferris, physical. Id. at 116 S.Ct. 1589. The (O’Connor, U.S. at J., 109 S.Ct. 2909 emphasized Court also that the conduct to concurring part, in dissenting in part)). only considered was the conduct of the Again refusing defendant to plaintiff towards the in draw kind the Ala- of bama mathematical bright case and not line accept- other conduct that between might ratios, able part unacceptable be a of a practice. nationwide the Court Id. at described the 500 to 1 Brey- S.Ct. 1589. Justice ratio in BMW v. er’s concurring opinion Gore as danger “breathtaking.” noted the in Id. It remanded further, subjecting defendant to punishment inconsistent, mul- proceedings, tiple because, times for the same conduct. Haslip, Id. at unlike where the Court J., (Breyer, award, S.Ct. 1589 concur- questionable affirmed a the Court ring). in “fully BMW was convinced” that this Hazelwood, at Captain they Id. because bore so “grossly excessive.” award was 585-86, 116 heavily on the consideration of the issues I, Damages appeal. Opinion on Punitive Damages Ap- The Punitive

D. First In an opinion 270 F.3d 1221-24. peal. rejected 40 pages, Captain more than separate appeal, Hazelwood’s and dealt at against background this It was length with all of the raised some issues appeal original in of the briefing the first rejected ultimately Exxon. We all of them in this punitive damages award billion $5 pu- the to the except challenge amount the went forward. contended case damages. nitive Id. at process of the award violated due amount in v. as described BMW Gore. principles, Referring “unique body to the law” I, Opinion Damages Punitive punitive damages, governs we focused not had 1241. The district court had Supreme opinions that on the two Court v. before to review BMW Gore opportunity had after the district court’s been decided ap- became final and original judgment its case, in the and we decision termed them motion for upon denial of Exxon’s pealable Id. These “critical.” at 1239. were BMW trial. a new Cooper v. v. Leatherman Tool Gore award, appeal In its from billion $5 Group. We said: Exxon, challenging addition BMW, Court held that a Supreme chal- punitive damages, amount Due punitive damage award violated the sufficiency sup- of the evidence lenged Process Clause of Fourteenth jury in- punitive damages; porting grossly it was Amendment because so structions; allowability any punitive lacked fair excessive that the defendant mari- public policy, as a matter of imposed. Dr. notice it would be judicata; pre- time law and res transit, damaged car was Gore’s punitive damages by other fed- emption Dr. repainted it but did not tell BMW say, briefing eral law. Needless repainting about the when sold Gore appellate proceedings After extensive. him the car. The found that to be stayed January Septem- from were fraudulent, $4,000 in com- and awarded pursue a limited parties 1998 for the ber damages for reduced value of pensatory remand, argument May panel heard car and million cut The Court ages. Alabama submission, million, was under

While case the award but the Court granted deny high Court certiorari that it so as to held was still case, May and in process another Ninth Circuit due of law for lack of notice, Tool Cooper decided Leatherman the award exceeded because justified there held our review under three Group. amounts novo. damages was be de punitive “guideposts.” guideposts of The BMW (1) reprehensibility Cooper, degree are: the (2) conduct; disparity did not our task. the person’s This ease the potential the harm suf- between Damages Opinion I. E. Punitive by punitive and his fered the victim (3) award; damage difference opinion punitives issued our first on We damage November, award and opinion punitive damages 2001. Our between penalties imposed authorized or of the the civil through in detail facts went Exxon, We these comparable apply and of cases. conduct of disaster Sound, guideposts three to evaluate and it knew Hazelwood was a whether re- lapsed lacked fair notice of the sever- alcoholic. Id. 1242. We ob- defendant served, award, however, that such ity punitive damages of a and to justify assuring punitive damages went more to by stabilize the law the uniform justify than to high such a amount. Id. similarly persons. situated treatment factors, noted mitigating We some includ- (internal quotations omit Id. 1240-41 ing prompt ameliorative action and the ted). Cooper v. We noted that Leather spent up. millions in clean Id. Group man Tool Court de cided that “considerations institutional We then turned to the ratio of actual competence” require de novo review of harm by punitive caused the misconduct to awards. Id. at awarded. Id. at 1243. Again (quoting Cooper, analyzing 532 U.S. at v. we that BMW said 1678). was difficult to determine what we called “numerator,” is, that the value of the that We went on to observe the district harm caused the spill. Id. We used the court had not reviewed the award under jury in compensatory award of million $287 standards announced those cases possible as one numerator and because neither case had been decided also, numerators, as alternative the district verdict, the time the returned its harm, court’s estimates of which at that challenged Exxon had never the amount of ranged time from million to grounds the award on constitutional until million. if compensato- Id. We noted that jury’s after the verdict. at 1241. In Id. ry used, liability were amounts Exxon view of the need for de novo review and voluntarily paid had in settlements should intervening decisions BMW v. Gore not be taken into account. We said and Cooper Group, v. Leatherman Tool we [t]he amount that a defendant voluntari- remanded for reconsideration of ly pays before judgment general- should damages. provided Id. also some ob- We ly part numerator, not be used as analyses servations on alternative possible because that would deter settlements under the v. prior judgment. general poli- “[T]he Gore factors. Id. at 1241-46. cy promote of federal courts to settle- with began These observations the fac- stronger ment before trial is even in the reprehensibility, tor of quoting the Su- large context of scale class actions.” preme Court’s admonition BMW v. Gore Icicle, 795; Id. at 1244 (citing 229 F.3d at important it is most “[pjerhaps the 988). Baker, 239 F.3d at indicum of the reasonableness of a As a final observation on the relation- damage pointed award.” Id. at We ship between the damages award cases, analogy to the Court’s to criminal harm, pointed out that and its statement that nonviolent crimes up substantial clean costs and other losses reprehensible are less than violent ones. to Exxon from oil spill already had had analogy Id. We drew an to the facts of this considerable deterrent effect. We indicat- case, reckless, where Exxon’s conduct was should, ed such depending deterrence on spilling but there was no intentional of oil circumstances, lower, call for a rather in midnight dumping “as case.” Id. higher than a ratio. agreed reprehensible Turning Exxon’s conduct was in that to the third fac- BMW Gore tor, it spill knew of the risk of an oil in trans- we observed that the nature of crimi- fines, porting huge quantities through of oil the nal which potential are state and guidance opin- be helpful be useful in re- would from our penalties, might federal analy- Id. at 1245. We ob- ion. at 1241. No district court viewing punitives. Id. “[cjriminal particular- fines are sis v. Gore was before us and we that served any specific thus could not have decided ly because informative analysis then to issue from such aris- arising Id. looked quasicriminal.” are We ing from statutory guideposts. federal measure for its Id. We offered general the only guidance number of culled from was then and discussed a alterna- what fines the and controlling Supreme precedent Id. noted federal guideposts. tive $200,000 general applicable to calcula- range principles from to the fines could $1.08 liability. tion of damage well at ceil- Id. billion. Id. We looked as the liability the Trans-Alas- of civil under ing F. District Court on our Opinion The Act it was and noted Pipeline

ka $100 First Remand. anyone liability for who million strict the Id. spills pipeline. oil from again The court district did extensive penalties, analysis the relative possible In addition to those and harm it penal at the evaluation misconduct of the we looked actual Valdez, caused. Attorneys case General In re the Exxon made the the Though noting of the at 1054-60. that of the United States and state an accurate assessment of full extent Agreeing Alaska. Id. 1245-46. the plaintiffs’ impossi- did not actual harm was they district court that estab ble, limit, they did court to recon- repre attempted we district lish a noted by adding together struct that harm judgment, sent an adversarial executive officers, punish jury’s verdict of appropriate compensatory damages of an level million, cases, judgments as Finally, at 1246. without neces related ment. Id. $287 and made to sarily exhausting analogies payments in the well settlements available field, Congress during and penalty we noted that had before The damages litigation. statute in Id. at 1058-60. subsequently amended the actual penalties civil district court concluded that crease the amount of conduct, just over million. Id. at grossly negligent and that harm was $500 court concluded penalty under the fed The district also maximum here new justi- that the circumstances of this case eral would a maximum of statute $786 harm of penalties are fied a ratio of million. Id. federal This would barrels 10 to at 1065. calculation upon based the number of of oil Id. 1321(b)(7). original have billion supported § 33 U.S.C. spilled. $5 The district court nevertheless award. guidelines suggesting possible various billion, reduced the whether billion was to assess the $5 man- to conform to what as our viewed imply “grossly excessive” we did date. Id. at controlling. any single guidepost would be high was Concluding billion too Appeal, G. The Second we were required to withstand review Opinion Court’s it under give Cooper BMW Gore our Remand. Second Group, noting v. Leatherman Tool again. surprisingly, appealed after Not that those cases came down the dis And, ruled, Supreme Court surprisingly, had for it trict court we remanded in still another process analysis required opinion the due issued an apply pend- decisions, appeal case while hoped those with what under ing. others;” Farm Mut. regard State Auto. Ins. Co. v. or safety health (3) 408, 1513, Campbell, “target 123 S.Ct. whether the of the conduct” (2003). (4) vulnerable; financially was L.Ed.2d 585 whether the defendant’s conduct repeated involved ac- plaintiffs Camp- in State incident; tions opposed as to an isolated bells, were involved a head-on collision (5) whether the harm caused was the insurer, and sued their automobile malice, result of “intentional trickery, or 413, faith. Id. at bad 123 S.Ct. deceit, 419, or mere accident.” 538 U.S. 1513. The claim was based on State 123 S.Ct. 1513. The Court did not rank rejection of an offer Farm’s to settle the however, explain, these factors. It did limit, Campbells’ policy claims at the only one factor weighing plain- in a they Farm’s assurances to them that had may tiffs favor not be support sufficient to accident, liability no for the State Farm’s punitive award, damages and the ab- resulting to decision take case to court sence of all factors makes such award despite the substantial likelihood of an ex- “suspect.” Id. judgment, subsequent cess and its refusal As to v. guidepost, BMW Gore’s second pay judgment to an adverse over three potential ratio between harm or harm 413-14, policy times the limits. Id. at plaintiff to the punitive S.Ct. 1513. The case was similar to BMW award, again the Court “decline[d] to im- v. only plain- Gore that there were two pose a brightline ratio which a punitive Nevertheless, jury. tiffs Id. as before damages award cannot exceed.” Id. at Gore, BMW v. allowed provided 123 S.Ct. 1513. But it some consider the effects of similar but unrelat- sharper guidance previous than it had in many potential ed misconduct on plaintiffs cases. who were not before the court. judgment S.Ct. 1513. Final ap- after First, it indicated that ratios in excess of

peal to the Utah Court was for single-digits would raise serious constitu- in compensatory million mil- questions, tional single-digit and that ra- lion in punitive damages. Id. at likely tios were comport “more with due 1513. The United States fact, process.” Id. despite the Court’s dis- Court remanded for the Utah courts to claimer that “there are no rigid bench- reduce the award. Id. at 123 S.Ct. marks may not surpass,” strongly the Court indicated the proportion damages to The Supreme Court in State Farm once generally harm could not exceed a ratio of again emphasized that impor- the “most (“[F]ew 9 to 1. Id. at 123 S.Ct. 1513 tant indicium” of a exceeding awards a single-digit ratio be- award’s is the reasonableness relative re- tween compensatory prehensibility of the defendant’s conduct. ages, to a significant degree, will satisfy 1513; Id. at see also BMW process.”). due 116 S.Ct. 1589. significantly Second, Yet State Farm refined the particular the Court discussed reprehensibility analysis by instructing justify combinations of factors that would courts weigh specific five relatively higher considerations: or lower ratios. For ex- (1) whether the harm caused was physical ample, where a “particularly egregious act (2) economic; opposed whether only has resulted in a small amount of conduct causing damages” injury economic or where “the showed “indifference to or a reckless dis- monetary hard detect or the value of (9th Cir.2003), the district court de- might have been the noneconomic determine,” in high punitives ratios cided to increase from billion to $4 difficult higher F.Supp.2d even to 1110. perhaps billion. at single-digits $4.5 v. Id. BMW The final (quoting repre- award might be warranted. 1589). under 9 to 1. Id. just a ratio of sented compensatory dam- Conversely, “[w]hen again, appealed. plain- Once The ratio, substantial, then a lesser ages are appealed, seeking tiffs also to reinstate the only equal compensatory to perhaps jury’s full damages billion ver- $5 the outermost limit of the ages, can reach dict. Id. process guarantee.” due appeal, In this Exxon has focused inten- the rele Finally, the Court minimized sively on in our earlier opin- the sentences penalties guide, criminal as a vance of that prejudgment pay- ion where we noted they particularly were not saying that generally part ments should not be of the Id. determining in fair notice. helpful deterring pre-judg- “numerator” to avoid Indeed, the Court did Damages Punitive ment settlements. potential Farm’s crimi analyze State I, Opinion 270 F.3d at 1242. Exxon has all, characterizing it as a nal penalty argued strenuously in the district court possibility.” Id. As to penal civil “remote to us that all of its settlement and ties, only noted the Court pre-judgment compensatory pay- other damages award “dwarfed” million must subtracted ments fine. Id. $10,000 maximum applicable over million amount of actu- from the opinion in State Court’s in ratio of punitive al harm the Farm was filed in after the district pursuant we use to review the award remand, court, already had on our first Farm factors. the BMW v. Gore/State damages award. reviewed the harm to the rela- This would reduce the its performed the district court Because tively million. paltry figure $20.3 of the more review without the benefit Damages Punitive recognized Court in guidance provided focused I Exxon, Opinion spill, after the soon Farm, ap remanded the second payment system that instituted claims summarily court to peal for district for fully compensated plaintiffs almost reconsider promptly. and did so their economic losses Hawk, No. 03- light of State Farm. Sea Id. We also recognized that Exxon’s prompt payment compensatory factor in mitigating be a substantial should on our Opinion H. The District Court punitives. our review of Appeal. Third Remand and this major time, issues there- appeal, the dis- In Exxon’s remand for the third On how, after court, to that fore relate trict in an assessment similar con- remand, of Exxon’s calcu- assess opinion in its after our first fac- mitigating million. duct and the effect lated harm at plaintiffs’ $513.1 subsidiary issue is the important An Opinion, District Court tors. give liter- to which we are bound State Farm holding extent Interpreting to the sentences our earlier constitu- al effect “single-digit multipliers pass subtracting pre- concerning opinion con- highly reprehensible tional muster harm, actual Zhang payments from duct,” judgment citing our decision Inc., though State Farm suggests the miti- Seafoods, American Gem even gating factors should be taken into account than likely less 10 to was more to com differently. fully port process For the reasons more with due than award with a higher ratio. State explained opinion, accept we do not 538 U.S. at 425, Along way, 123 S.Ct. 1513. the figure urged by minimal line bottom experience Court’s reflects efforts to com properly rejected by Exxon and the dis- port with the concepts tried and true in do, however, trict court. We conclude i.e., process, herent in due those of notice there is merit to Exxon’s contention that See, e.g., and fairness. Mullane v. Cent. punitives should be reduced. Co., 306, Hanover Bank & Trust 339 U.S. appeal, plaintiffs In their a cross seek 652, (1950); 70 S.Ct. 94 L.Ed. 865 Int’l original pu- reinstatement of the billion 310, Washington, Shoe Co. v. fully adopt nitive award. do not We their 154, (1945). 90 L.Ed. 95 position doing peg either because so would Farm, In State expressly Court not- of punitive damages ratio to harm at a ed its concern that had been level only State Farm reserves for the allowed to take into account the effect of egregious most misconduct. There was no may conduct that place have taken nation- intentional infliction of harm in this case. wide on potential plaintiffs. thousands of addition, In mitigating because Exxon’s ef- Farm, 422, 538 U.S. at 123 S.Ct. forts after the accident diminish the rela- 1513. The unfairness of a defendant being reprehensibility original tive of its miscon- hit with many times for duct purposes reviewing punitive the same conduct was central to the damages, high such a ratio is not warrant- analysis remanding. Court’s Id. The ed in this case. explained, “[pjunishment on these bases possibility creates the of multiple III. ANALYSIS punitive damages awards for the same A. History. Lessons From conduct; for in the usual case non-parties are not judgment bound some other history experience of the of the plaintiff 423, obtains.” at 123 S.Ct. punitive Court with over the last decade-and-a-half reflects an

evolutionary, revolutionary, not a course. Indeed, Farm, in State the Court opinion its first in Haslip, the Court stressed that important the most factor is suggested that there a might bright line reprehensibility particular of the con- punitive of demarcation between duct the case. State U.S. that comport with constitutional protec- because, 123 S.Ct. 1513. This is tions, punitive damages that do not. assessing foreseeability possible Haslip, 499 U.S. S.Ct. 1032. effects of the defendant’s conduct as it Although say it did not what “the line” might bear on damages, the re- be, would it termed of punitive ratios dam- viewing court in reality dealing with the ages compensatory damages of 4 to concept traditional of the need for fair out-of-pocket costs of 200 to to be possible legal notice of the consequences of close to it. Id. one’s misconduct. Id. at cases, however,

In subsequent the Court expressly avoided a rigid mathematical Perhaps because such traditional ele- limit, formula or refining while its ratio process flexible, ments of due are the Su- analysis, concluding in State Farm that preme Court has not often taken on the ratio of punitive damages to actual harm of reviewing task of the amount of has, fact, only- overturned tinue to command the damages and Exxon Valdez through icy of their size. and treacherous two awards because waters of Prince by multiple William Sound.” Punitive Dam- Each of them exceeded I, ages Opinion compensato F.3d at 1237-38. more than 100 the amount issue, see no need to reconsider necessary de- ry payments compensate spite Exxon’s invitation to do so. plaintiff for the actual caused defendant’s misconduct. BMW v. To evaluate the (striking 116 S.Ct. 1589 U.S. misconduct, State Farm refers to five sub- ratio); a 500:1 down (1) (2) harm, type factors: whether (striking down a 123 S.Ct. 1513 disregard there was reckless for health ratio). 145:1 (3) others, and safety of whether there (4) financially targets,

were vulnerable B. v. Farm Guide- BMW Gore/State repeated whether there was misconduct

posts. (5) and whether it involved intentional mal ice, trickery, deceit, or rather than mere v. identified three BMW Gore Farm, accident. State 538 U.S. at reviewing guideposts punitive damages, S.Ct. 1513. important and State Farm added refine (1) guideposts repre ments. The are We must also mitigating consider fac- misconduct, hensibility of the defendant’s I, Damages tors. In Punitive Opinion (2) (3) harm, punitives the ratio of case, particular the context of this comparable statutory penalties. They looked to response to the catastro- exclusively rigidly applied, need not be phe, including prompt cleanup its and com- circuit agree for we with our sister pensatory payments. they heldWe were guideposts should not be taken as “[t]hese mitigating reprehensibility factors analytical straight jacket.” an Zimmer original misconduct. Punitive Dam- Union, man v. Direct 262 Federal Credit I, ages Opinion “Repre- 270 F.3d at 1242. (1st Cir.2001). must, F.3d 81 We nev hensibility should be discounted if defen- ertheless, examine them the context of promptly comprehensively dants act this case. they ameliorate in order cause encourage socially such beneficial be- Reprehensibility. havior.” Id. compo- important guidepost

The most is the re- The dissent takes issue with two analysis. of our Its prehensibility Exxon’s misconduct. nents BMW v. Gore reasons, however, surprising, 123 are S.Ct. because Gore, they holding v. (quoting BMW 517 U.S. at contradict our unanimous 1589). I, prior opinion, Damages In our 270 F.3d at Opinion Punitive sup- spill we defined the relevant misconduct that the was not intentional nor porting punitive damages as Exxon’s Exxon’s conduct malicious. See Dissent keeping (characterizing Hazelwood command with Exxon’s conduct as “malicious”). Then, knowledge relapse misapplies of Hazelwood’s into al- the dissent mandate that we Supreme coholism. We said “Exxon knew Ha- Court’s alcoholic, perform exacting appellate an an review zelwood was knew he must regi- had failed to maintain his treatment to ensure that “an award of law, drinking, ages upon ‘application men an and had resumed knew that is based going caprice.” he was on board to command its su- rather than a decisionmaker’s pertankers drinking, yet him 123 S.Ct. after let con- State Supreme 517 U.S. at Court has reserved (citing 1589). upper echelons constitutional (a ratio) 9 to for conduct done First, that the val- the dissent maintains Thus, the most vile intentions. mitigation pre-litigation ue of defendant’s applica- court’s affirmance district efforts should affect case, a ratio in where the tion such explic- did not because the conduct defendant’s was reckless but calculus in State itly for such a provide intentional, requisite would transgress Thus, the dissent Farm. Dissent constitutional boundaries as the reject the of stare decisis principle would explained Court has them to date. our the law of the and overturn case I, holding Damages Opinion in Punitive turn now specific We to the voluntary 270 F.3d at that Exxon’s These Farm subfactors. effectuated compensation ap that a 5 demonstrate to 1 ratio more injured making an good public policy in propriately comports process. with due party quickly possible. whole as prepared question are not sound- Type Physical a. versus of Harm — in Puni- ness of our unanimous conclusion Economic. Damages Opinion merely I because tive harm, the type To evaluate State intervening Supreme jurisprudence Court us Farm instructs to consider whether insurance did not address context physical opposed “the harm was as to eco- 408, the issue. See nomic,” physi- producing because conduct By con- 123 S.Ct. 155 L.Ed.2d 585. cal harm is more reprehensible. here, miti- already have held that trast we U.S. at 1513. In 538 conscientious gation both relevant and that Exx- this case district court found toxic-tort be unwise setting. It would physical on’s conduct caused no actual reviewing punitive damages ignore people, harm to but caused more than steps to take prompt of a defendant them, harm mere economic because the in a curative action mass tort case. pro- economic effects its misconduct improp- The dissent also that we claims duced severe emotional harm as well. We factor, fault erly treat BMW’s fifth explanation the district agree with court’s mutually analysis, dichotomy a two spilling gallons that “the of 11 million options: Exxon’s conduct finding exclusive into Prince crude oil Sound William grossly reprehensible, intentional and thus (and Inlet lives disrupted Lower Cook large it a finding accidental and thus to livelihood) of claimants for thousands of This is degree excusable. Dissent years.” Opinion, District 296 analysis. acknowledge our Exxon’s conduct not intended to cause was spill, allowing an oil was a con recognized but neither The Court has super- causing alcoholic economic relapsed to command duct emotional as well as Majority tanker “mere at 617. can more than con reprehensible accident.” harm be causing falls in the mere harm. See Exxon’s reckless malfeasance duct economic accidental n. 116 middle of a continuum between BMW v. U.S. at 576 Accordingly, the There and intentional conduct. S.Ct. 1589. it cited Blanchard Morris, (1853), anal- 15 Ill. a case affirm reprehensibility fifth subfactor ysis supports high repre- ing against neither nor low individu hensibility only no part physical on of Exxon. als who caused harm, of economic but used mental for accidentally causing to extort it. mental torture distress. State Farm states that compensatory damages for mental distress Co., In Bains LLC v. Arco Products element, generally include a so (9th Cir.2005), we held that F.3d including mental distress in “intentional, repeated ethnic harassment” ages may duplicative. of reprehensibility increased the level be 123 S.Ct. 1513. yond merely economic. See also Swin Corp., ton v. Potomac 270 F.3d something What comes to near the same (9th Cir.2001). gratuitous, intentional case, result in this though it would not in oppression mental made it victims cases, most is the entirely foreseeable dis- conduct, reprehensible “highly though not ruption way to the tens of peo- thousands threatening to life or limb.” Id. at 777. ple live if giant their lives oil tanker were In Planned Parenthood v. American Co aground spill to run cargo. its When Activists, alition of Life people tens of thousands of change have to (9th Cir.2005), held that a “true threat” way they living, make their their men- though increased even tal distress is not comparable to a BMW out, not carried the threat because owner, large or even a number of BMW intimidate, was intended and the eco owners, being distressed because their component beyond reducing nomic went cars were during ship- scratched or dented trying the victim’s wealth or income to repaired ment and without their knowl- away practices drive the victims from their edge. Anyone setting oil tanker loose of medicine. Our Planned Parenthood de on the seas under relapsed command of a cision was consistent with citation BMW’s alcoholic has to imposing know that he is approval upholding of older decisions Though this massive risk. spilling the oil fear, torture, awards based on the “mental accident, putting relapsed is an alco- agony by and of mind” caused the threat charge holic in of the tanker is a deliberate BMW, 575-76, of violence. n. act. disruption The massive lives 24, 116 S.Ct. 1589. entirely predictable giant when a oil tank- The district court that concluded Thus, goes astray. reprehensi- er Exxon’s spill mental distress caused the oil to bility goes considerably beyond the mere property the fishermen and owners who imposition careless of economic harm. economically justified harmed a high- were reprehensibility, er level of and Exxon b. Disregard Reckless Health and for urges that emotional distress Safety Others. jury.

were not before the Because our Cooper review must be de novo under The second subfactor we consider in as- Indus., Group, sessing reprehensibility Inc. v. Leatherman Tool is whether Exxon Inc., 424, 436, displayed disregard 532 U.S. S.Ct. a reckless for the (2001), L.Ed.2d 674 not safety we are bound health and of others. State the district court’s rationale. The cases 123 S.Ct. 1513. We con- discussed that above show clude this subfactor also militates toward ages traditionally greater reprehensibility. can—and do—consider Exxon When incompetent the effects of the tortfeasor’s conduct on trusted an officer it knew was mentality, just pocket- through the victim’s not his command Exxon Valdez hand, they may go book. On the other not treacherous waters of Prince William far, not, Sound, justify so and we need as to Exxon acted with reckless disre- “independent is described as acts safety of all those what the health gard for liability upon the acts which vicinity. from in the Id. at 123 S.Ct. 1513. premised.” grounding created a The Exxon Valdez explained this is because “[a] The Court physical harm for crew grave risk punished for the con- defendant should be come to its rescue. those had to who plaintiff, that not for be- duct harmed something as found that The district court unsavory individual or business.” ing discharge could as an electro-static simple Here, however, 123 S.Ct. 1513. and incinerated ignited the crude oil have safety the conduct that threatened vicinity. in the District Court everyone the same conduct the crew and rescuers is at 1095. We Opinion, and is the con- plaintiffs, that harmed the court that agree with the district therefore duct underlies disregard of the Exxon acted with reckless knowingly placing Exxon’s a re- litigation: it safety put of others when health and charge of the lapsed alcoholic Exxon per- person competent command a Farm prohibition Valdez. The State form that role. against considering dissimilar acts does argues requires Farm Exxon apply taking here because into account disregard po ignore us to potential harm to the crew and res- harm to crew and rescuers be tential punishes cuers Exxon for the same con- litiga they are not to this cause plaintiffs. have duct harmed Farm. State tion. misreads State See, point example, made this before. disapproved punishing Farm defendants and Accident Hangarter Provident Life for conduct in other states which Co., n. 11 Insurance might be lawful. 538 U.S. (9th Cir.2004), analyzed compa- where we Likewise, we had held in White v. ny-wide in a policies single-plaintiff lawsuit Farm Company, Ford Motor before State distinguished warning Farm’s down, jury’s came that a against considering dissimilar acts. We conduct award based on extraterritorial legally said “unlike in State suffi- lawyer had made a “send them (plaintiffs cient nexus existed between Defendant’s argument addressing nation message” widespread corporate allegedly policies conduct) principles violated of feder wide plaintiffs] and the termination of ben- [the in v. Gore. 312 alism established BMW efits.” Id. (9th Cir.2002). 998, 1013-14 These F.3d Accordingly, of the where the same conduct prohibit cases do not consideration all, merely be risked harm to the risk to all can be potential harm to individuals assessing repre- a factor in they plaintiffs. cause are not See 538 U.S. considered as 420-22, hensibility. court did not err 1513. The lesson is The district S.Ct. recognizing recklessly in that Exxon disre- litigation the award in the other garded physical safety in the context of the crew and analyzed “should have been rescuers, thereby repre- guidepost only.” increased the reprehensibility of the Gore, Id.; hensibility putting at 574 n. of its conduct Hazel- BMW v. Farm therefore wood command. 116 S.Ct. 1589. State to look at the risk to appropriate holds it is Financially Targets. c. Vulnerable analyzing reprehensibility.

others 427, 123 538 U.S. at court found Exxon’s conduct The district financially vulnerable against Farm does warn consider- harmed subsistence defendant, Opinion, 296 or fishermen. District Court ing dissimilar acts ing] at 1095. Exxon does not dis- into and out of F.Supp.2d Prince William Sound fi- full pute that subsistence fishermen were with a load of crude oil.” Id. nancially vulnerable or that its reckless argues Exxon that the relevant conduct It contend that actions harmed them. does grounding, is the knowledge only in fraud applies this factor cases when incapacity Hazelwood’s to command. That intentionally a defendant defrauds finan- is not consistent with our description of cially targets, vulnerable such as the sick the relevant misconduct in Punitive Dam- elderly. we do not believe the While (and ages Opinion putting I as leaving) limited, agree is so there subfactor Captain Hazelwood in command. Punitive aiming or must be some kind of intentional I, Damages Opinion 270 F.3d at 1237-38. targeting the vulnerable did The district court’s finding repetitive occur here. misconduct was not clearly erroneous. Parenthood, purpose reprehensibility analysis Planned 422 F.3d at 954. It enormity” is to determine “the of the of reprehensi- militates favor of increased fense, accepted bility. which “reflects the view wrongs blameworthy

that some are more than others.” e. Intentional Malice or Mere Acci- “target S.Ct. 1589. The notion of dent. ing” connotes some element of intent Putting Captain Hazelwood in command categories individuals or particular of the supertanker knowing reck- Parenthood, Planned individuals. See agree less misconduct. We with the dis- (holding plaintiffs F.3d 958-59 were trict court that this misconduct was not financially vulnerable because the defen “mere accident.” District Opinion, attempted to dants’ threats scare the at 1096. jobs quitting into on which plaintiffs’ depended). livelihoods Exx points relieving out that Hazel- intentionally target on did not subsistence wood of command would have denied Ha- fishermen. an employment opportunity zelwood on the theoretically basis of alcoholism and sub- conclude in this con- case jected disability Exxon to a discrimination materially sideration does not affect our may lawsuit. While Exxon’s concerns assessment of the of Exx- appropriate have been considerations its conduct. on’s risk, they justify evaluation of the do not dangers its decision created to the Repeated d. Action. livelihoods of tens of thousands of individu- accident, Spilling The district court found that the oil conduct als. was an but repetitive repeatedly putting relapsed was because Exxon a in charge alcoholic of a super- supertanker anyone allowed Hazelwood to command its not. And doing was years for they tankers three after knew he so would know a imposing were tre- drinking. had resumed District Court mendous risk on a tremendous number of Opinion, people at 1096. As the who could not do it. anything about observed, so, district court Exxon did even knowing disregard the interests fishermen, though fully Exxon was aware of the tre- of commercial subsistence fish- ermen, workers, cannery mendous risk of harm that it entailed. Id. processors, fish tenders, again, nothing “Over and over Exxon did seafood brokers and others de- to prevent Captain pendent Hazelwood sail- on Prince their [from William Sound for reprehensi- and the

livelihoods, regarded merely ing the harm to them cannot be bility of its conduct.” Id. accidental. time, acknowledge must At the same we g. Reprehensibility. Evaluation of intentional mal that Exxon acted with no Placing relapsed alcoholic control of We have consis plaintiffs. ice towards the supertanker highly reprehensible as more intentional conduct tently treated result, disrupted conduct. As a forms of conduct reprehensible than other people depend of thousands of who on lives damages. Zhang, subject livelihoods, Prince for their William Sound 1043; v. Arco Bains LLC 339 F.3d endangered its own crew and their (9th Co., 405 F.3d Cir. Products years, span rescuers. Over the of three 2005); Co. v. Southwest Southern Union Cap- Exxon could and should have relieved (9th 1001, 1011 Cir. Corp., 415 F.3d Gas supertank- tain of command of Hazelwood 2005). case, however, as we have In this ers, but it did not do so. At the same as the oil already recognized, spill “as bad time, however, Exxon did not act with

was, pur the oil on spill Exxon did else; plaintiffs anyone malice toward or I, Damages Opinion pose.” Punitive damage plaintiffs’ Exxon did not intend to reprehensibili F.3d at 1242-43. While livelihoods or cause them the emotional eco ty produced of Exxon’s conduct that grief that went with the economic loss. of individuals is nomic harm to thousands Thus, higher Exxon’s conduct is in the in inten high, the conduct did not result reprehensibility, realm of but not in the anyone. This subfactor damage tional highest post- realm. In addition Exxon’s against viewing militates Exxon’s mis thus grounding mitigate efforts to the harm highly reprehensible. conduct as materially reprehensi- serve to reduce the bility original They of the misconduct. Mitigation Reprehensibility. f. purposes reduce the to, most, range. our review mid must assessing reprehensibility, we reprehensi- only take into account 2. Ratio Harm to Punitives. misconduct, bility original but guidepost, The second as re also take into have held that we must iterated and refined is the mitigate done to account what has been harm, harm, potential “ratio between caused. Pu- the harm that the misconduct plaintiff I, 270 F.3d at Damages Opinion nitive award.” State 1242; Swinton, 270 F.3d at 814-15 see also goal 1513. The of our review at this (discussing weight post- and relevance guidepost is to “ensure that the measure of evidence). we said in mitigation tort As punishment propor is both reasonable and I, mitigation is Damages Opinion Punitive plain tionate to the amount of harm to the encourage “in order to be considered general damages tiff and to the recov Puni- socially such beneficial behavior.” ered.” Id. S.Ct. 1513. I, at 1242. Opinion Damges tive Here, system Exxon instituted a volun- Calculating a. The Harm. it under- tary payments case, the court agree figure efforts. We the district prompt cleanup took represent plaintiffs harm to spent with what “Exxon used the we said before: many Opin- million. District Court compensate millions of dollars to $513.1 ion, Calculating thereby mitigat- people spill, after the oil in proved figure to be harm favor of a fact more plaintiffs total harm to the because, closely approximates in addition to considera- Exxon’s remaining difficult losses, spill caused other post-judgment liability compensatory economic ble undeniable, easily quantifiable, if not damages. court at 1094. The district

harms. See id. adopt interpreta- If we were to Exxon’s by eventually figure calculated the harm now, binding tion of that sentence as us adding compensatory damages verdict of harm a meager the measure would be of the trial to the phase from the second Applying million. the ratio of close $20.3 settlements, and other judgments, actual appropriate, to to that Exxon asserts is various obtained as recoveries cap punitive Exxon contends we should spill. result of the 1099-1101. damages at million. Exxon’s Under $25 dispute not that the district Exxon does a ratio of 9 theory, using even to which million in harm is finding court’s $513.1 approaches highest allowable under actu- fundamentally a valid measure of the Farm, punitive damages would However, it spill. al harm caused million. This capped would be $182.7 figure that it we disagrees should be limit, though even Exxon’s reckless- ultimately part puni- use as of the ratio of ness led to more than million harm. $500 damages to harm that we review as tive said, in discussing the nature of the guidepost. the second relationship between that, harm: contention is be- principal Exxon’s harm in the establishing figure

fore in relationship” The “reasonable is ratio, of dol- we must first deduct millions trinsically somewhat indeterminate. figure from the payments lars of and costs likely The numerator is “the actual harm caused representing the total result from the defendant’s conduct.” us sub- spill. Exxon would have Gore, v. [BMW repre- million tract sum of about $493 The denominator is the 1589]. S.Ct. plaintiffs through senting paid amounts punitive damages. amount of Because program and voluntary claims ordinarily arguable, ap is the numerator then other settlements. would bright line as plying a mathematical repre- figure have us use that reduced objective though that were an measure assessing total harm in the ratio sent the high go of how can to harm. punitives give suggestion preci a false would why That is one reason sion. Su brings argument This us to the central emphasized has preme Court appeal. Exxon makes in this Exxon focuses to “draw a mathematical possible language prior opinion on the of our constitutionally line bright between I we Damages Opinion Punitive where unac constitutionally and the acceptable said, lengthy formulating in a discussion of every that would fit case.” ceptable Gore, pursuant ratios to BMW v. possible 517 U.S. at [BMW voluntarily amount that defendant “[t]he 1589]. . . . judgment generally before should pays numerator, Although it is difficult determine part because be used spill of the harm from the oil pri deter the value generally that would settlements bar, Exx in the case at awarded 270 F.3d at 1244. judgment.” or to damages, in compensatory million this now means that assess on contends $287 ratio of billion punitives harm to after ing the ratio of compensatory Fatm, ages to million ignore the total should predictions. on Those recom- to 1. The district court ments based is 17.42 mending reasonably predict can range payment that “total harm could determined entity as million,” that the will not be hammered million to from $418.7 $287 obstinately accep- hard if it resisted 12 to 1 as a ratio between produces which any responsibility. pre- tance of And their greatly 1. This ratio exceeds and 17 to reasonable. Criminal diction would be that the the 4 to ratio always have somewhat penalties been to the line” in Mu called “close Pacific [, accepted for those who re- at more lenient Haslip tual Ins. Co. Life sponsibility prior judgment, see United 1032]. 111 S.Ct. Gonzalez, 897 F.2d States v. volun- The amount that defendant (9th Cir.1990) (upholding the constitution- judgment should tarily pays before 3E1.1), § ality of U.S.S.G. part generally not be used punish- are but a civil version of numerator, that would deter because It wrongdoing. prac- ment for makes no prior judgment. “[T]he settlements in tical sense to disarm all those the future pro- of federal courts to general policy accept some who want their boards to trial even mote before is settlement responsibility by cutting out all the benefit large context of scale stronger get. their firms would actions,” such as one. class [Cf. Baker,

Icicle, 795; 229 F.3d limit, however, There is a to how far F.3d at 988]. acceptance responsibility goes both guilty contexts. No criminal defendant I, Opinion 270 F.3d at Damages Punitive . wrong ordinarily resulting a serious 1243-44 reasonably lengthy imprisonment could as- rejected proposi- court district imprison- sume that he would receive no voluntary payments judg- before tion promptly pleaded guilty. ment at all if he part be used as generally ment should reasonably And no defendant’s could board prior harm. But our of the calculation of predict escape that the defendant could all analy- constrain the ratio decision did not predicted compen- punishment paying did firmly sis so as Exxon contends. We satory damages judgment. before While voluntary before say payments “generally” prepayments should not be in calcu- judgment could not be considered harm, part used as of the calculation of com- lating purposes the numerator for I, Damages Opinion Punitive 270 F.3d at amount of paring the numerator with the 1244, that not a arithmetic mechanical award; they “generally” we said limit, just limit as the nine to one is not a settlement, could not. Considerations of mechanical arithmetic limit. See State Icicle, analysis critical to our 1513; 538 U.S. at process on the due concerns bear Parenthood, 962; Planned F.3d at the heart of discussion. Whenever BMW’s Bains, process 405 F.3d at 776-77. Due governed by a defendant a board is sued considerations limit egregious enough to create a for conduct wrongdoer reasonably what the could fore- genuine punitive damages, risk of those see, ways. and that works both try making litigation decisions have to its Therefore, argument goes in court. Exxon’s too predict may happen what analysis, It produce, obdurate resis- far. would may Some recommend tance, million limit on may recommend settle- and some $25 ment, the harm was million but payments even where prejudgment settlement, paid judgment. before For making argu- without each million may ages generally of notice to a tortfeasor of its be used purposes part Punitive Dam- risk, of harm. liability causing million for a half the calculation $25 I, ages Opinion 270 F.3d at 1244. obviously good would be too to billion loss buy A cannot full im- be true. defendant secondary There are also some issues damages by munity paying from relating calculating to harm. One concerns likely compensatory amount of dam- by Alyeska made payments Pipe Lines judgment. ages before Corporation. Exxon Service asks us to set off million that original its co-defen- $98 is a limit on the law of the There also Alyeska Pipe dant Corpora- Lines Service exception case doctrine. One to doc- paid plaintiffs’ tion in settlement of claims. intervening change trine exists for an companies, A consortium of oil including Marriage, v. Bad law. See United States Exxon, Alyeska had contracted with (9th Cir.2006). In this respond spill oil the area. After case, change. Subsequent there is such a disaster, Exxon Valdez sued Damages Opin- to our decision in Punitive Alyeska negligence response its I, ion Court decided State spill, eventually and settled all claims case, Farm. In that the fact that State against Alyeska, including punitive dam- “paid Farm the excess verdict before the ages, for million. argument filed,” complaint was payment rep- here is that this million mitigating was a Alyeska’s resents harm attributable reducing factor the ratio. The recklessness, negligence, not Exxon’s did not use it to reduce the amount Court therefore should not be used to calculate Farm of total harm. The damages designed punish and deter account, in itself took into its consideration Exxon’s own harmful conduct. proper, of whether the ratio was sub- stantiality completeness of the com- major why are There two reasons Exx- award, pensatory essentially First, economic position on’s is not correct. harm, nature of the the likelihood that the spill harm caused the oil is attributable duplicated compensato- principles. to Exxon under tort law Exx- ry, prompt and the defendant’s settlement knowingly placed relapsed on a alcoholic All compensatory damages. these of a mil- supertanker control loaded with so, mitigating gallons factors were used to assess lions of of oil. When did likely accepted the ratio itself to com- Exxon the foreseeable risk from whether State Farm did not that the tanker would ply process. captain with due its choice of mitigating causing spill, such factors to reduce the have an accident an oil use State Farm makes untenable Alyeska might aggravate harm. further (Second) voluntary, pre- that a harm. Restatement of Torts idea defendant’s 433(a) c, 447(c),1 fact, §§ cmt. cmt. e.2 In judgment payment compensatory intervening 'extraordinarily negligent’ de- 1. "The fact that an act of a third 2. "The words ordinary person negligent experience a the fact that men of is in itself or is done in note judgment, looking negligent at the mat- manner does not make it su- and reasonable taking perseding cause of to another which the ter after the event and into account the negligence,’ negligent prevalence actor’s conduct is a substantial fac- of that 'occasional life,’ about, (c) bringing tor in if ... which is one of the incidents of human interven- ing regard extraordinary consequence act would not it as that the is normal situation intervening person’s act should have created the actor’s conduct and the man- third negligent extraordinarily manner in which it ner in which it is done is not been done in the negligent.” person's was done. Since the third action Stevens, Exxon, finding properly the President of should not be considered William Congress that Exxon knew testified before harm at all. figure represents This Alyeska prepared spill was not to contain a apparent overpayment by million $9 by the Exxon of the size caused Valdez. Fund, Pipeline Liability Trans-Alaska held liable for this Because Exxon could be million from the Phase IV settlement $13.4 risk, court properly foreseeable the district already Exxon claims is for accounted else- by Alyeska’s caused included the harm calculations, where in the district court’s response consequence natural as the paid corpora- million to Native $11.5 harm Exxon. caused municipalities tions and for environmental up. clean Second, the situation Exxon now com- In plains strictly making. of is of its own overpay- conclude that the million $9 Court held that ment, inadvertently included the district proportional governs fault rule calculation findings, court’s should be subtracted from non-settling liability defendant’s for the total harm. Exxon Because does not compensatory damages in maritime torts. specify where the million in double- $13.4 McDermott, AmClyde, Inc. v. counting parts is reflected in other of the 128 L.Ed.2d 148 calculation, however, court’s district we are (1994). McDermott, following Instead of to unable determine from our own review agreed plaintiffs proceed Exxon to they might of the record where be includ- pro respect if a tanto to co- rule with Therefore, ed. Exxon has failed to con- governed.3 defendants’ settlements still figure vince us that this should be reduced it advan- apparently thought Exxon more from the harm. tageous at the time to have the million $98 compensatory deducted from the final Finally, the million paid $11.5 fact, damage award after the rather than plaintiffs up, early for clean like its have the proportionate make a fault plaintiffs’ prospective settlement of com- finding. already agreed Since Exxon has losses, mercial a mitigating is factor rele- represent million does $98 judgment vant to our about whether this Alyeska, attributable to Exxon is not punitive damages award is appropriate. asserting warranted this is what Like the earlier the proper settlements represents now. place for its influence is as a mitigating Exxon also contends that some mil- circumstance to be considered in our over- $34 lion included in the district court’s harm all determination of the ratio’s reasonable- conduct, product negligent satory damages plaintiffs of the actor's and all good holding responsi- there is reason for him aggregate herein shall be reduced effects, though ble for its even it be done ain parties express- sum of million.... The manner, negligent unless nature of the ly recognize agree that the sum of negligence altogether unusual.” necessarily million is fair measure of Alyeska's proportionate what would be stipulation parties 3. The between the reads in liability plaintiffs!,] par- share of but the part: relevant entering Stipulation ties are into this "[N]otwithstanding proportion- rule order avoid the alteration of their trial McDermott, ate shares set out in Inc. v. preparation that would result from a last- AmClyde, Aleyska credit for the settlement overturning parties’ assump- minute ... shall be deducted from the sum that pro approach] that[the tion tanto would would, stipulation, in the absence of this govern requiring litigation at trial and from aggregate any judgment amount of Alyeska's proportionate share.” judgment in favor of ... and the liability Shipping compen- of Exxon and however, does, represent part strongly suggests It Id. This the ratio here ness. high. ac- is too harm for Exxon is of the total which countable. In helpful. Our own decisions are also Parenthood, Planned used sum, guid- attempt the district court’s ance from State Farm to construct a by adding the actual harm approximate “rough determining framework” for judgments, settle- together the various appropriate ratio of damages to ments, that Exxon had al- and liabilities harm. See 422 F.3d at 962. We held ready acknowledged was sound. Subtract- “significant cases where there are eco- Pipeline million Trans-Alaska ing the $9 damages” “par- nomic but behavior is not Fund that the dis- Liability overpayment ticularly 1 egregious,” up a ratio of to 4 to overlooked, inadvertently we trict court good a proxy “serves as for the limits of harm supports this record a total conclude Farm, constitutionality.” Id. (citing State purposes of million for component $504.1 1513). In 538 U.S. eases punitives. of harm analyzing the ratio significant economic Reasonableness Evaluating b. the behavior,” however, egregious “more a sin- the Ratio Harm to Punitives. gle-digit higher “might ratio than 4 to 1 be (citing Zhang, constitutional.” Id. remand, district After our second Bains, 1043-44; F.3d at 405 F.3d at 776- punitive dam original court reduced the 77). Finally, in cases where there are ages award billion billion. $5 $4.5 “insignificant” economic yielded a to harm This “particularly egregious,” behavior is to 1. After our million ratio of 8.77 single-digit may that “the ratio said be adjustment figure, harm that ratio to the good proxy constitutionality.” a Id. 1-a bor proportion now stands at 8.93 to dering presumption on the constitutional The circumstances of this case fit into Farm, questionability. See 538 U.S. the second class of in the Planned State cases S.Ct. 1513. Parenthood framework. Exxon’s reckless decision to risk the livelihood of thousands In Court ex- State by relapsed alcoholic in command placing a exceeding awards a plained “few supertanker, of a while mollified its single-digit ratio between up prompt policies, settlement and clean compensatory damages, significant Moreover, “particularly egregious.” was satisfy Id. at degree, process.” will due million of within the loss is well Relatively high 123 S.Ct. 1513. sin- damages. range “significant” economic double- gle-digit perhaps ratios and even Parenthood, Thus, an ap- under Planned digit may comply process ratios with due ratio would above to 1. propriate be act has particularly egregious where “a only of eco- resulted small amount Our review damages” injury mitigation guidepost nomic “the under the first of re- where however, compels us to con- monetary prehensibility, hard to detect or the value of might have been clude the award should be toward low- noneconomic (quoting range. end of that Our cases have difficult to determine.” er high single-digit ratios generally reserved 1589). egregious ra- for the forms of intentional Conversely, single-digit lower most tios, misconduct, mark as threats of violence and might even as low as such racial discrimination. process the outer limits of due where intentional (upholding at 1044 a ratio compensatory damages Zhang, are substantial. racism); Bains, spill, highest being approximately 405 the of 7:1 for intentional dollars. billion (remanding for district $1.03 F.3d at 776-77 6:1 and 9:1 for court to set a ratio between Farm, however, racism); Parenthood Planned intentional long on stated that “need not dwell Court (remitting to a 9:1 422 F.3d at guidepost.” this violence). Exxon’s con- ratio for threats of case, In that the com- 123 S.Ct. 1513. inexcusable, case, did not while particularly duct were not in- parable penalties comparable penalty intentional conduct that would civil involve formative: easily “dwarfed” normally required support award, penalties, and as to criminal high single-digit with a damages award although their exis- explained ratio. bearing tence “does have on the serious- factors also come into mitigating Here wrongful with which a State views the ness prompt efforts to play. Exxon instituted action,” they utility” had “less “[w]hen spill compensate and to up clean the dollar amount of the used to determine harm. plaintiffs for their economic As we award.” observed, if a earlier defendant acts post- In our more recent own circuit’s it promptly to ameliorate harm for which cases, and Farm v. Gore we BMW of a responsible, is size generally attempted quantify have not ages should be reduced to encour- only legislative penalties. We have looked age socially beneficial behavior. Punitive or not the misconduct was whether I, Damages Opinion 270 F.3d at 1242. seriously with under state civil or dealt Moreover, in the costs that Exxon incurred See, e.g., criminal laws. Planned Parent compensating cleaning hood, 422 In F.3d several recent up spill already substantially the oil have decisions we have discussed the factor deterrence, purposes served the of lessen- Co., at all. See Southern Union ing high punitive damages the need for a (9th Cir.2005); Hangarter, at 1009-11 Id. at 1244. award. may at 1014-15. F.3d This be because Thus, particularly Exxon’s conduct verdicts, legislative judgments, jury unlike egregious significant and involved econom- an individualized represent do assess Nevertheless, ic its conduct was damages. reprehensibility. ment promptly steps took not intentional and Here, in spilling naviga- the matter of oil to ameliorate the harm it caused. With clearly quite has been taken ble water mind, these considerations in we conclude seriously by legislatures, Congress that a to harm ratio of enacting specific spill, statute after the process than 5 to 1 violate due more would already having and state and federal law controlling under current standards Su- penalties. Pu- authorized substantial preme authority. and Ninth Circuit I, Damages Opinion nitive 270 F.3d at Thus, 1245-46. the third BMW v. Gore/ Comparable Penalties. factor, legislative State Farm substantial The third BMW v. Farm Gore/State our penalties, supports conclusion penal- guidepost comparable legislative Exxon’s reckless conduct merits substan- on factor in emphasis ties. Given the punitive damages. tial lengths we went to some in IV. CONCLUSION I Damages Opinion extrapo- Punitive reasons, comparable penalties late the that would foregoing For placing in a known imposed under state and federal law for reckless misconduct sive,” I super- reviewing alcoholic in command of a would affirm. relapsed tanker, award, loaded with millions of barrels size of a damages our sole oil, navigate pristine and resource duty is to imposition ensure its does not abundant waters of Prince William Sound process. violate due Where an award lies severe sanc- was reckless warrants process, within the bounds of due as this not, however, The misconduct did does, tions. may one not substitute a figure highest range warrant sanctions fairly we consider more reasonable one process analysis, under the due allowable properly awarded reviewed explained Court’s most by Therefore, respect- a district court. I opinion recent State Farm. fully dissent. imposition puni- The district court’s Due Process Review of Punitive billion,

tive entered after $4.5 Damages process our due remand reconsider light represents of State Constitution, comport To with the pu- very highest range, at the and is not war- nitive damages award must strike the It is not with the ranted. consistent Su- proper goals balance between the state or preme opinion Court’s State Farm deterrence and retribution and a defen- important pri- with the most tenets of our process right dant’s due to be free from I opinion Damages Opinion Punitive arbitrary punishment. See State Farm relating mitigation reprehen- to Exxon’s Mut. Auto. v. Campbell, Ins. Co. sibility. Although a one to one ratio 416-17, 123 S.Ct. 155 L.Ed.2d upper marked the limit in (2003). 585 The Court has deter- egregious here far more and conduct upset point mined the balance is at the justifies considerably higher a ratio. An excessive,” “grossly award becomes rea- damages representing a ratio of award that, soning the extent an award is “[t]o punitives to harm of 5 to 1 is consistent excessive, grossly legitimate it furthers no with both. purpose arbitrary depri- and constitutes an 417, property.” vation of Id. at 123 S.Ct. judgment

The of the district court is (citing 1513 Pac. Mut. Ins. Co. v. VACATED, and the matter is remanded Life 1, 42, 1032, Haslip, 499 111 113 U.S. S.Ct. with the district court instructions (1991)). 1 L.Ed.2d punitive damages further reduce the to the amount of billion. award We $2.5 notes, 612, majority But as the ante at pursuant have decided to the de novo stan shown little inclination to Court has Leatherman, imposed by dard of review “grossly concretely. excessive” more define 436, 1678, 532 at 121 that this U.S. S.Ct. 424, Farm, 538 at 123 S.Ct. See State U.S. punitive damages limit on appropriate Am., 1513; N. Inc. v. 517 BMW of prevailing legal this case under 1589, 559, 582, 116 134 L.Ed.2d U.S. S.Ct. Thus, precedent. we do not remand (1996). it has several times 809 While may further consideration of what the limit possibility establishing at the a 4 hinted litigation It for this protracted be. is time punitive damages to 1 ratio of bench-mark to end. damages, it has never compensatory explicitly done so. See State 538 REMANDED.

VACATED AND BMW, 425, (citing at 123 S.Ct. 1513 U.S. BROWNING, Judge, dissenting. Circuit 581, 1589; Haslip, 517 U.S. at 116 S.Ct. 1032). 23-24, 111 In- punitive damages I 499 at S.Ct. Because believe U.S. stead, limit “grossly award in this case is not exces- the one constitutional 626 Indeed, generally validity. persuasive is that found of there are has identified double-digit mul- single-digit

between suggesting presump- reasons for that the (“[F]ew awards exceed- tipliers. irrebuttable, See id. virtually tion should be ing single-digit ratio between TXO, so.” 509 U.S. at 113 S.Ct. 2711 signifi- to a compensatory damages, (internal (plurality opinion) citations omit- satisfy due degree, process.... cant will ted). likely Single-digit multipliers are more procedural present No concerns are comport process, due while still that, outset, might here at the weaken the achieving goals of deterrence State’s validity” “strong presumption of to which retribution, than awards with ratios BMW, this award is 517 entitled. See U.S. (internal 145 range of 500 to 1 to 1.” [or] 586-87, J., (Breyer, 116 S.Ct. 1589 con- omitted)). citations TXO, curring) (citing 509 U.S. at 113 reluctance to es- The Court’s 2711; 40-42, Haslip, S.Ct. U.S. limit, adopt tablish a more concrete or to 1032); S.Ct. see also id. at 116 S.Ct. approach, categorical other sort of (“In cases, most the ratio will be as the one at counsels that cases such constitutionally acceptable range, within a bar, judicial police function is to “[t]he justified and remittitur will not be on this range, point.” Mathias Accor basis.”). jury thorough, received al- (7th Inc., Lodging,

Econ. prescient, punitive damages most instruc- Cir.2003) BMW, 582-83, (citing 517 U.S. at although large tions.2 And Exxon is a 1589; Corp. 116 S.Ct. TXO Prod. v. Alli- corporation, there is no indication that the 443, 458, Corp., ance Res. size of this award result- (1993)). 125 L.Ed.2d improper “emphasis ed from an on the should let trial, TXO, wrongdoer” wealth see stand unless the factors indicate or from an certainty product with some that it was the attempt by or the Plaintiffs “make caprice imposition or bias such that its factors, up for the failure of other such as right process.1 violates to due ” BMW, Teprehensibility,’ fair see 517 U.S. at “Assuming procedures that were fol- 591, lowed, J., judgment product (Breyer, that is a of that 116 S.Ct. concur- 1589 process strong presumption ring).3 is entitled to a i.e., majority correctly recognizes, "appropriate,” 1. The ante at non-environmen- 602, tal, that a that an award is determination countervailing "Alaska-oriented” interests "grossly de excessive” is reviewed novo. plaintiffs; jury puni- the of cautioned the that Indus., Cooper Group, Inc. v. Leatherman Tool tive must have a rational basis the in Inc., 424, 436, 532 U.S. 149 relationship record and bear a reasonable review, (2001). L.Ed.2d 674 er, De novo howev harm; jury the admonished the not to be only applied is to determine the constitu and, arbitrary; perhaps importantly, most punitive damages upper tional on a limit they them that could alerted take Exxon’s given award in case. If the award does not mitigation efforts into when deter- account ceiling, exceed this we owe deference to the mining punitive damages both whether were jury. court determination of the district and, so, warranted if the size of award. 433-34, (noting See id. at 121 S.Ct. 1678 Valdez, See In re Exxon 296 award, within substantive limits on an (D.Alaska 2004). Considering jury establishing precise has discretion in number). Cooper give reign BMW and State Farm were decided after the does not us free pick trial, were, we would have jury number chosen these instructions indeed as had we sat as the district court. notes, majority retrospect, ante at "in quite looking.” forward explained

2. The district court the retributive purposes punitive damages and deterrent of Thus, Furthermore, in impli engaging Exxon’s conduct before the multi-fac- analysis tored in introduced BMW and punishing interest strong cates a state Farm, important reiterated in State it is deterring its future reckless behavior note that we are not faced here with review must repetition. Our constitutional major present constitutional concerns context consider in those cases. interests. See id. at of these state (“Only fairly when an award can S.Ct. 1589 categorized ‘grossly excessive’ Guidepost Analysis 2.

relation to these interests does it enter the I Although agree with much of the ma- that violates the Due zone arbitrariness jority’s analysis under BMW and State of the Fourteenth Amend Process Clause Farm, agree Despite I cannot with it all. added)). In both State (emphasis ment.” guidance repre- clear from the Court that BMW, guidepost Farm and the Court’s factor, hensibility majori- is the critical entirely en analysis separate was not an 613, 618, ty, gives weight ante at defining deavor, gave instead structure to its but entirely to a consideration its own cre- constitutional concern that the defendants’ 623-24, engages, ation. It then ante at rights by judg violated process due were appears very “categorical what to be the for con incorporating punishment ments approach” has consis- Court awarding before the properly duct BMW, tently rejected. See U.S. at 419- court. 538 U.S. appropriate 1589. An evaluation (discussing out-of-state 123 S.Ct. 1513 question the award demonstrates plaintiffs’ unrelated to and conduct conduct constitutionally permissible. BMW, 568-73, injuries); (describing out-of-state con

S.Ct. 1589 (a) Reprehensibility duct). In its most recent contrast, is no concern stark there gave opinion, direct scope appropriate state here evaluating reprehen- instruction courts puni- interests has been exceeded. This sibility. State imposed pursuant tive award was majority correctly S.Ct. 1513. As circumscribed, strong, properly but notes, weigh ante at must five interests. As the district court not- state (1) solely factors: whether the harm was ed, Plaintiffs’ collection federal state (2) economic, showed whether the conduct claims all arise out of harm to “Alaska disregard indifference or reckless business,[and] fisheries, Alaska Alaska (3) safety, others’ health and whether the conduct hav- property” caused Exxon’s vulnerable, financially target conduct’s ing grounding “a nexus direct with (4) repeated involved whether the conduct Bligh on Reef in Prince (5) the Exxon Valdez actions, and whether the harm resulted Valdez, In re Exxon William Sound.” See from intentional malice or mere accident. Farm, at 123 S.Ct. F.Supp.2d at 1090-91. State U.S. award, contrary, Exx- 3. Indeed to the there is evidence in entered on the comparing the record this award Exxon’s advised the court that 'the full on's treasurer suggests the award wealth in a manner that Judgment payment of the would not have capricious nor an instance of was neither impact corporation or its material on the Valdez, over-deterrence. See In re Exxon ”). quality.’ credit ("[A]fter judgment was at 1105-06 may that a court reexamine an though, (noting inexplicably, 1513. Somewhat “intervening if Farm factors previously issue it decided majority adds to the State authority makes reconsidera- controlling creation-post-tort mitiga- of its own one (“We also tion. See ante appropriate”). at 613 must tion factors.”); id. 618. mitigating consider mitigation in Puni- we considered When mitigation should be agree I do I, Damages Opinion tive Supreme Court analysis. reprehensibility in a considered guidance for precedent provided limited I Furthermore, majority, be- unlike State analysis. reprehensibility Farm factors weigh that all five State lieve Farm, however, Supreme Court ex- that Exxon’s reckless finding favor specific use five plained that courts should highly reprehensible. conduct was reprehensibility. to evaluate factors Although 123 S.Ct. 1513. (i) Mitigation State mitigation evidence of there was majority’s as agree I with the cannot id. the Court must consider sertion we of the mitigation did not include as one evaluating the re post-tort mitigation reprehensibility analysis. factors original misconduct. prehensibility of its explicit guidance, such this omission Given majority correct See ante The is acquires particular significance sug- Exx previously we considered when prior reconsider our statement gests we conduct, suggested mitigation on’s below, mitigation.4 explained As about repre part considered as should be including I find that upon reconsideration Baker v. Hazel hensibility analysis. See analysis mitigation (In Valdez), 270 F.3d re the Exxon wood good good policy. is neither law nor (9th Cir.2001) Pu [hereinafter However, single mitiga- mention of Damages Opinion /]. Aside from nitive I, Damages in Punitive Punitive majority’s tion in subsequent to our decision I, approach supported Supreme neither Damages Opinion Court precedent. own significantly precedent nor our decided which v. Potomac Swinton ju majority cites The refined the Court’s (9th Cir.2001), reprehensi Corp., sup- as analysis 270 F.3d 794 risprudence. The Swinton, like Punitive Farm differs port, though from our anal even bility in I, I, Damages Opinion and, Damages Opinion in Punitive prior was decided ysis Therefore, it controlling authority, gives State Farm. not have the did intervening Court’s most re- prior ap our benefit us reason to reconsider v. Bad Mar analysis repre- proach. See United States comprehensive cent and (9th Cir.2006) Furthermore, Swinton did not hensibility. riage, ty respect suggests to calculation of the majority State Farm is distin- damages (‘State See ante at 621 "numerator.” guishable dispute concerned an because the the idea that a Farm makes untenable rather than toxic tort. insurance contract voluntary, pre-judgment payment defendant’s However, five-part ante at damages may generally compensatory reprehensibility analysis in State Farm is de- harm.”). part be used as of the calculation of conduct, range signed to evaluate a broad of not to Just as the Court's decision nothing opinion in the indicates this and mitigation in the calculation of harm include applies only cases. to insurance framework requires prior us to reconsider our statements Furthermore, despite be- factual differences issue, its decision not to include about that cases, recognizes majority analysis tween the itself mitigation reprehensibility in the compels intervening controlling authori- similar reconsideration. State Farm as in deterring.”). including mitigation a While warrants re- mitigation consider whether analysis doubtlessly im- reprehensibility the punitive in a duction remediate, Rather, it analysis our increases the incentive jury. a posed by expense undermining the dis- does so at the of the of whether question limited to majori- of deterrence and retribution. The excluding in evidence trict court erred ty’s dis- minimizes deterrence cre- employment approach in an mitigation efforts limiting punitive of ating post-tort 815. We a means suit. id. crimination damages. potential This allows tortfeasors generalized in that to create a refused case behavior, in any- risky or in safe the engage context employment rule in the Instead, they liability can minimize for knowledge id. 814-15. where else. See of any resulting by prompt payment district to the discretion of the we left it mitigation damages. cripples It also the relevancy of foreseeable courts to decide the retribution, in as it allows state’s interest case-by-case on a basis. efforts tortfeasor, jury, than the the rather rejected the idea expressly alsoWe reprehensibility of its recharacterize the categori- endorses the Court commit- misconduct after a tort has been mitigation punitive in dam- cal relevance of Cooper, ted. Cf. (“We id. at 812 do ages calculations. See “imposition (recognizing in and language interpret expression [the is post- relying on evidence Cooper as condemnation”). jury’s] moral overturning for occurrence remediation awards; rather the Nonetheless, majority insists that been re- simply to have appears mitigation including history litigation full of the counting a it policy because analysis good public is proceed- complete picture a give conduct. encourages socially beneficial by a post-tort mitigation ings.”). While company posi- A Ante at 618. to a may may not be relevant defendant or however, in- tion, already significant has of whether and jury’s determination up its mess. Had Exxon centives to clean punitive damages, what amount to award up action to clean the oil prompt not taken majority’s support to the gives no Swinton injured parties, see spill compensate properly consid- position mitigation actual harm caused could ante at reprehensibility analy- part ered million fig- well have exceeded $504.1 review. sis a constitutional in our ratio as the numerator ure we use if analysis. Specifically, See ante at 623. Additionally, majority’s approach of oil left indefi- gallons eleven billion were policy, as a matter of for makes little sense Sound, and in- goals nitely Prince William directly counter to the twin runs without resources jured parties were damages: deterrence retribu anew, both economic and start their lives tion. See State This (“[Pjunitive grown. have social harm would damages serve S.Ct. 1513 liability not function; have increased Exxon’s they aimed at deter would are broader damages, but also retribution.”); compensatory only Theodore Eisen for rence actual damages. Greater 36 for Damage Perspective, Awards in berg, (2001) larger punitive harm translates to Forest L.Rev. Wake higher ceiling (“[A] numerator and voluntary-to ages wrongdoing party’s Thus, miti- damages award. voluntary truly are after payments extent in the calcula- already reflected gation is ‘caught’-remediation payment does being in our damages and compensatory tion of punishing propriety not reduce the jury’s punitive appropriate of the conclusion that is not add constitutional review mitigation to the State Farm factors. damage award. Moreover, I not convinced the ma am (ii) Factors Farm State ultimately encourage will jority’s approach majority’s I Because see no basis for the Kay Franklin v. to settle. defendants Cf. mitigation process inclusion of our due (9th pro Corp., 884 F.2d Cir. analysis, only I consider 1989) “overriding public (noting there is by outlined the five factors settlement). In promoting interest” majority I agree Court. with the that the stead, I fear it has the unintended conse first, second, suggest and fourth factors6 defendants a quence giving tortfeasor highly reprehensible Exxon’s conduct was without way litigation to reduce the risk capable supporting a substantial injured reaching parties. a settlement However, I agree award. cannot with the past precedent, our the threat of a Under factor, analysis concerning the fifth wheth damages award creat significant punitive er “the harm was the result of intentional strong pay ed a incentive for defendants to malice, deceit, trickery, or or mere acci injured a parties exchange for release Farm, dent.” arrangement.5 majority’s ap similar majority recognizes, S.Ct. 1513. As the however, limit proach, allows defendants to put relapsed Exxon’s decision to a alcohol by exposure punitive damages their tak charge supertanker ic in of a constituted ones, to ing steps, unilateral even token misconduct, knowing and reckless which harm. I am concerned this will remediate intentionally was neither malicious nor a frequently protracted litiga lead to more mere accident. Ante at 617-18. However, tion, injured parties necessarily will not faced with conduct that does not fit mitigation be satisfied with defendants’ ef squarely category in either mentioned in forts, and defendants will have less incen majority arbitrarily deter agreements. weighs against high tive to reach settlement mines this factor re Thus, support legal prehensibility policy implications spill because Exxon “did not case, majority In this the certification of a mandato- cussion. The neutral classified as factor, ry punitive damages target class meant that individ- the third whether "the plaintiffs vulnerability,” ual could not the ultimate reduce conduct had financial see State by releasing award their 538 U.S. at 123 S.Ct. 1513. As Valdez, admits, claims. See In re Exxon majority by recklessly ante at (9th Cir.2000) (“Claims compensatory for placing "relapsed charge alcoholic in of a easily disposed by could be ex- supertanker,” Exxon knew that it was "im- releases, changing payment plain- but a posing a tremendous risk on tremendous lump- tiff's release of its slice of the future people anything number of who could not do merely sum award reduced only many peo- Not about it.” were of those sharing ple "financially by being the number of claimants vulnerable” virtue itself.”). damages pie, pie fishermen, not the size of the they par- subsistence but were also However, several nonetheless used ticularly specific vulnerable to the risk im- looming award as a posed on them Exxon. In re See bargaining allocating portion chip by Valdez, Thus, Exxon a at 1094-95. I they might receive. See ante at suggests would find this factor indeed highly reprehensible. reckless conduct was BMW, 517 U.S. at ("To sure, injury, majority's analy- economic am not convinced infliction of I factor, especially target financially agree ... when the sis of the third but I do that it vulnerable, penal- plays relatively can a substantial small role in this case and warrant

therefore does not warrant an extended dis- 1y-”)-

631 Thus, Id., majority, I find that all I unlike cannot at 618. purpose.” on the oil fac of Farm’s five reasons. for two this conclusion agree with that Exxon’s reckless conduct suggest tors factor First, Farm if we read endangerment malicious in this case—’the con- categories of only two recognize and livelihood of thousands property fall in duct, that Exxon’s acts the fact extremely, if not highly, of Alaskans —was this is a suggest could category neither “warranting] reprehensible capable factor, for nor weighing neither neutral BMW, penalty.” See a substantial However, if high reprehensibility. against U.S. at S.Ct. deter- that we must majority is correct (b) Ratio is more Exxon’s conduct whether mine other,7 I category or the to one similar guidepost, Under second malice, to “intentional it is closer believe analyze disparity “the between the must acci- than to “mere or deceit” trickery, harm suffered potential actual or at dent.” State award.” plaintiff Dictionary 1513; Law Black’s I id. at 123 S.Ct. 1513. While cf. ed.1999) (7th as, (defining malice inter majority’s with the “calculation agree “[rjeckless or of alia, disregard of the law “numerator,” harm,” analysis, ante at jury held legal rights”). conclusion, person’s a id. agree I with its cannot merely spilling for responsible prohibits the Constitution that giving com- oil, knowingly majori- but rather in this case above 5 to The ratio “carrying over 53 limit supertanker ty this constitutional mand of arrives First, volatile, toxic, it uses the steps. crude oil” through two gallons million of Planned Parent- “rough In re Exxon framework” alcoholic. See relapsed to a Columbia/Willamette, Inc. v. Exxon did hood Valdez, at 1097. Activists, 422 American Coalition knowledge full years three with so for of Life (9th Cir.2005), at the to arrive F.3d 949 to the risk of serious the tremendous ratio in appropriate conclusion many peo- health, and livelihood of safety, greater no above but this case is This cannot ante at 615-16. ple. See However, it then to 1. Ante at 623. than 9 an accident. Given described as fairly be cannot be much proper ratio asserts con- of Exxon’s recklessness the extreme Exxon’s con- 4 to 1 because greater than mili- duct, the fifth factor I would conclude Exx- not intentional and because duct was finding Exxon’s behavior tates favor of harm it mitigate attempted on Swinton, reprehensible. Accord highly agree I cannot Ante at 623-24. caused. (holding that conduct F.3d at 818 this. was, most, disregard for reckless which Parenthood, “consti- we established safety, easily In Planned health and others’ guide justify- “rough framework” conduct a three-tiered reprehensible highly tutes award”). ratio.8 appropriate determining us ing significant punitive assertion, reprehen- “the majority's statement that own majority’s ante at Contrary produced eco- sibility Exxon’s conduct suggest Exxon's conduct it views I do not Rather, of individuals I note harm to thousands largely accident. nomic as a excusable against high finding "militates ...” Id. this factor repre- highly viewing misconduct as Exxon's signifi- are hensible,” economic majority 8. Where the treats ante egre- "particularly behavior not cant but the as it would treat misconduct Exxon's reckless is warrant- gious,” less than 4 to 1 a ratio of with the is not consistent an accident. This Applying case, Planned Parenthood to this for harm attributable to increased “social majority conflict, concludes a 4 to 1 benchmark cultural disruption and psychologi- appropriate is based on its Finally, determination cal stress.” Id. there is evidence damages the economic “signifi plaintiffs are have incurred substantial fur- matter, cant.” Ante at As an Thus, initial ther costs. See id. it cannot be majority’s assessment of economic said the compensatory in damages this damages focuses on a number devoid of its case large are so or sufficiently compre- context. An significant award is not they be hensive warrant a lower numerically cause it is large, but rather damages award. approaches compensation because it full Nor, mind, my in does the majority find plaintiffs harms. See support Zhang in v. American Gem Sea (“The 538 123 S.Ct. 1513 com Inc., (9th foods, Cir.2003), 339 F.3d 1020 pensatory in award this case was substan Co., Bains LLC v. Arco Products tial;[the plaintiffs] were awarded million (9th Cir.2005). 764 That we upheld year for a and a half of emotional distress. award in 7 1 range in Zhang, and complete This was I compensation.”). am remanded for a similar award in Bains— compensatory convinced that a dam both for intentional racial in discrimination ages $10,000 equates award that to a mere employment says if little context — per plaintiff actually “substantial” in the nothing about the constitutionality of this

way the Supreme Court uses the term. award for the endangerment reckless id. at (providing, 123 S.Ct. 1513 Cf. property and livelihood of tens of thou an example of “small” economic damages, people. sands of While it is any given true cases injury where the hard to detect reprehensible conduct is more if intention nature). fully or not economic reckless, al than if it does not necessarily if majority Even were correct that follow that all intentional conduct is more the economic damages reprehensible awarded than all reckless conduct. “significant,” Indeed, case are Planned Parent- because we are the first court to hood still does not a 4 1 support to bench- review an award for misconduct resulting mark in this case. In Planned Parent- here, harm of the type and scale at issue hood, we refused to remit the award to I unhelpful find it to note that our cases to less than a 9 to 1 ratio because not all of generally date “have reserved high single- plaintiffs damages quantifiable, were digit ratios for egregious the most forms of not all of it was compensated, misconduct, intentional such as threats of plaintiffs likely were to incur further costs. violence and intentional racial discrimina 422 F.3d 963. All three are true here tion.” Instead, See ante at every as well. The oil spill disrupted the social indicator in suggests this case that Exx plaintiffs’ fabric of the community. See In on’s reckless leaving for three conduct— Valdez, re Exxon years a known alcoholic command of a type This of harm easily quantifia- is not supertanker upon treacherous waters Moreover, plaintiffs’ ble. recovery in which depend-is thousands of people egre this case was limited to gious economic harm. It enough to support an award within compensate therefore did not range. Swinton, the 9 to 1 Accord Parenthood, ed. Planned 422 F.3d at 962. insignificant If if the economic are but significant the economic are but the “particularly egregious,” the behavior is ra- egregious,” behavior greater beyond "more a ratio single digits may tios appropriate. be might acceptable. Finally, than to 1 Id. (internal 1 ratio (upholding quotation 28 to at 818-20 F.3d omitted) BMW, (quoting at marks recognizing that conduct despite J., (Breyer, concur- acts or threats of vio- S.Ct. 1589 involved no issue and, ring)). empower But that review does therefore, amount to “[did] not lence own, perhaps us to substitute our more kind a defen- the worst of tortious conduct commit”). finely-tuned, fairly for one that was can dant already range awarded and lies within the me final consideration convinces One BMW, 517 of constitutional awards. See to in this does not the 8.93 1 ratio case that (noting at that U.S. 116 S.Ct. subject to a that Exxon has been indicate “constitutionally most awards fall within a punitive damages “grossly excessive” ” added)). (emphasis acceptable range In award. analysis After and concerned thorough appropriate that it Court reiterated award, of this I conclude for of ratio calculation purposes consider imposition that its does not violate caused, harm but the only the actual right constitutional to due process. harm that a defendant’s miscon- potential proce- was as a result fair award levied foreseeably See duct could have caused. in pursuit undisputedly dure and (describing at 123 S.Ct. 1513 538 U.S. circumscribed, and strong, properly state consid- guidepost requiring second as punishing Exxon for its mis- interests potential harm actual or eration “the conduct, deterring any and in similar be- added) BMW, (emphasis (citing suffered” havior in waters it continues 1589)); accord it frequent. large, While the award is TXO, addresses what must be characterized potential (“Taking account of extremely misconduct. reprehensible result from the con- might defendant’s allowing no excuse simply There is for in calculating punitive duct relapsed pilot supertanker alcoholic to expressed with the views we consistent waters, years much less three omitted)). (internal As Haslip.” citation waters of the treacherous treasured majority recognizes, ante knowing Prince Sound. Exxon’s William potential harm from Exxon’s decision to do was a malicious one that decision so keep in command of the Exxon Hazelwood risk, ultimately seri- placed at massive was both massive and foreseeable. Valdez ously injured, property and livelihood despite But of such consider- propriety There is of tens of thousands of Alaskans. ation, case the calculation of harm in this us rea- every indication the award before only explicitly incorporates an estimate behavior, sonably egregious addresses actual, In potential, and not of harm. See nothing suggests in the record that Valdez, 1103; F.Supp.2d re Exxon bias, ca- passion, from 19761 resulted Thus, jury’s if anything, ante at 623. I the district price. agree therefore under- potentially princi- is no court’s assessment there valued the harm. means this award should be pled which Conclusion Valdez, 296 reduced. See In re Exxon its with State Farm and accordance Accordingly, at 1110. and with subject required are predecessors, I respect, dissent. “exacting appellate [de novo] this award to ensure it is “based review” order law, than a

upon application rather caprice.” 538 U.S. at

decisionmaker’s

Case Details

Case Name: Baker v. Exxon Mobile Corp.

Court Name: Court of Appeals for the Ninth Circuit

Date Published: Dec 22, 2006

Citation: 472 F.3d 600

Docket Number: 04-35182, 04-35183

Court Abbreviation: 9th Cir.