The Multinational Monitor


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Exxon: Mean and Stupid

On March 23, 1989, the Exxon Valdez, one of Exxon's largest oil tankers, under the command of a captain who had been drinking and who abandoned the bridge, struck a reef and spilled 11 million gallons of crude oil into the Prince William Sound in Alaska.

In September 1994, an Alaska jury found Exxon liable for punitive damages for its conduct in causing the oil spill and assessed $5 billion against the company. The lawsuit was brought by commercial fishers, Alaska natives and others directly harmed by the spill.

In the nearly five years since its jury verdict, Exxon has not paid any of the punitive damages. Instead, it has chosen to use an appeals process to delay and possibly defeat any payment.

And to help create a favorable climate for its efforts to defeat the massive punitives award, Exxon has lobbied against the concept of punitive damages in general.

In 1998, Exxon funded Harvard Law Professor W. Kip Viscusi to look into the issue of punitive damages. Viscusi obliged, and wrote an article, "The Social Costs of Punitive Damages Against Corporations in Environmental and Safety Torts," for the Georgetown Law Journal advocating the abolition of punitive damages.

In a footnote to the article, Viscusi discloses that the research for the article was funded in part by "a grant from the Exxon Corporation."

But Viscusi will not say how much Exxon paid him.

Asked how much money he received from Exxon, Viscusi's first reply is, "I don't even know."

"I have several projects," Viscusi says. "This is one paper I did, but I'm working on several other things."

Asked how much he received in total from Exxon, Viscusi replies, "I don't remember that either."

Asked whether he received more than one check from Exxon, Viscusi responds: "Yes, but it was for different projects that overlap the time period."

Asked whether he can give a ballpark figure of how much money he took from Exxon, Viscusi says "no," arguing that the information is not public information.

Viscusi says that he received money from Exxon just in 1998.

Finally, when pressed again as to why he won't reveal the amount of money he took from Exxon for the research on punitive damages, Viscusi responds bluntly -- "It's none of your business."

Georgetown Professor David Luban applauds Viscusi for at least disclosing the fact of Exxon's funding in an age when other academics do not. "When one learns that an interested party has funded work, there should be a higher threshold of critical examination," Luban adds.

This is not a hypothetical issue for Luban, a professor of law and philosophy. He wrote a rebuttal to Viscusi's article in the same issue of the Georgetown Law Journal.

In "A Flawed Case Against Punitive Damages," Luban dissects Viscusi's argument, finding "13 critical errors that if I'm right, undermine Viscusi's argument at every stage."

In a nutshell, Viscusi argues that punitive damages don't create social benefits, and they do impose social costs on businesses, and thus should be eliminated.

To show that punitive damages create no social benefits, Viscusi argues that accident rates in environmental and other cases are not statistically significantly different in the four states that don't have punitive damages (Michigan, Nebraska, New Hampshire, and Washington) than the 46 states that do.

Luban says that he disagrees that the lack of difference between the four no-punitive-damages states and the other 46 shows that punitive damages are ineffective.

"Even if a business is in one of those four states, they won't look only to those states' tort regimes," Luban says. "They will look at any state that they might be sued in. After all, there are relatively few businesses that are strongly local in the sense that they operate locally, all of their customers are local, and their safety procedures and equipment are local."

And Luban argues that punitive damages are not there simply to deter all forms of unsafe conduct. Punitive damages are meant to be awarded only when the defendant's conduct has been egregious. Justice Richard Neely of West Virginia has put forward a useful formulation in TXO v. Alliance Resources in 1992: punitive damages exist to punish defendants whose conduct is either "really mean" or "really stupid." And as a result, they are not awarded very often.

Viscusi argues that punitive damage judgments are "out of control." But Luban says that on average, about 3 percent of plaintiffs' jury victories end with punitive damages being awarded against the defendants.

Asked how two scholars looking at the same data come to such radically different conclusions, Luban says, "Observers of the punitive damages scene focus on different aspects. Those of us who don't think punitive damages are out of control tend to look at the low overall incidence of punitive damages and the relatively low median of punitive damages -- about $50,000. What critics look at is the relatively high mean -- the average -- which is $735,000."

A high mean and a low median suggests a whole population of relatively low punitive damages with a few, very high punitive awards that bring the average up, Luban says.

Exxon was one of the very high cases. The jury found that its actions in the Valdez disaster were "really mean" and "really stupid."

-- Russell Mokhiber