Over at PointofLaw.com, we’ve got a post  on today’s Senate Judiciary hearing, “Courting Big Business: The Supreme Court’s Recent Decisions on Corporate Misconduct and Laws Regulating Corporations.” Chairman Pat Leahy (D-VT) used the hearing to criticize the “pro-business” Supreme Court on a variety of issues and decisions, including the restraint on punitive damages in the Exxon Valdez ruling. From a political and legislative standpoint, the most interesting element was the attack against pre-dispute arbitration, a congressional priority for the trial bar.

RTTNews has a straightforward account of the hearing here. Mayer Brown has a legislative update on the anti-arbitration bills moving through Congress, focusing on the effects on international arbitration.

A bit more fodder on last week’s U.S. Supreme Court decision in Exxon Shipping v. Baker, in which the court reduced the punitive damages awarded in the wake of the Exxon Valdez oil spill from $2.5 billion to a maximun of $507.5 million — the same amount as awarded in compensatory damages. (Copy of the opinion here.)

Kathleen Flynn Peterson, the head of the national trial lawyers association, the American Association for Justice, issued a statement in response. Excerpt:

The Court said that punitive damages may be capped through a ratio only in maritime cases that do not involve extraordinary misconduct by the corporation itself. Those in the business community who claim this decision stands for a generalized punitive damage limit are wrong, and the Court has made clear their decision applies only to maritime cases. [Our emphasis.]

Straw-man argument. No one in the business community we saw oversold the decision as a sweeping statement on punitive damages, making it clear that the ruling was made under maritime law.  Still, it might influence decision-making in other cases. Take a look at the NAM release:

The ruling was decided on the basis of maritime common law, not constitutional principles, and so is limited in scope, said Quentin Riegel, the NAM’s Vice President for Litigation and Deputy General Counsel. At the same time, the Justices clearly found the original punitive damage award excessive and arbitrary.

“The Court’s ruling continues its recent, important trend of clarifying the limits on punitive damages,” Riegel said. “The formula they chose was based on reasonableness in a case with ‘no earmarks of exceptional blameworthiness.’ By settling on a one-to-one standard – punitives equal to compensatory damages – they provided a standard that other courts can turn to.

And that’s it. L. Gordon Crovitz, a columnist with the Wall Street Journal, further explained the considerations involved in setting punitive damage limits in today’s “Common-sense in punitive damages.”

Over the years, the justices have tried to find limits for punitive damages, with mixed success. Relying on the due process clause, an earlier Supreme Court opinion said that a 9-to-1 punitive-to-compensatory ratio was probably the limit for cases in which there was no intent or maliciousness. In a footnote in this Exxon case, the justices said that when the compensatory damages are substantial, the “constitutional outer limit may well be 1:1.” Later litigation will determine if this indeed has become the new bright-line test for excessive punitive damages.

It’s so unusual for the justices to set clear guidelines that Justice Souter felt obliged proactively to defend the court’s approach. “History certainly is no support for the notion that judges cannot use numbers,” he wrote. He noted that judges made up the 21-year period in the rule against perpetuities relating to inheritances, and courts over the centuries have set common-law age limits in many situations. It would usually be unwarranted judicial activism for judges to replace their judgment for legislative decisions, but where there’s a void, common-law judges do set limits. These can be somewhat arbitrary, but still manage to establish rules of the road.

The void that Crovitz refers to is the worst of all possible worlds for business; such a void includes the possiblity that punitive damages will destroy a company all together, which can lead to all sorts of ill-considered decisions. Predictablity, or at the very least the lack of capriciousness, is the hallmark of a rule of law, with similar wrongs producing similar consequences, in effect reinforcing deterrence. 

In any case, if the choice is straw man versus common-sense, we’ll take the latter.

All in the tongue of the beslurper…

Anyway, last week ended with the usual wrap-up stories about the just-completed term for the U.S. Supreme Court. Dow Jones especially had a good review: “Supreme Court Term Is Mixed For Business, But Wins Were Big“: “The U.S. Supreme Court handed the business sector a mix of wins and losses in the 2007-2008 term ending Friday, but when business did win, it won big.” The opinions Dow-Jones highlights are Stoneridge, Riegel v. Medtronic and the Exxon Valdez case. More…

• Associated Press: Long quiet, justices end their term with a growl
• Associated Press: Summaries of leading Supreme Court cases
• USA Today: Paradox marks Supreme Court term
• Los Angeles Times editorial: The evolving Supreme Court
• New York Times, Linda Greenhouse: On Court That Defied Labeling, Kennedy Made the Boldest Mark
• Legal Times, Tony Mauro: Despite June Fireworks, a Calmer Supreme Court Term
• Christian Science Monitor: A Less Deferential High Court

Meanwhile, Akin Gump Strauss Hauer & Feld LLP and SCOTUSblog.com issued their annual end-of-term statistical summary of the U.S. Supreme Court’s decisions. A few highlights:

• The Justices issued 67 merits opinions after argument this term, the lowest number since the 1953-54 Term
• The Justices decided 71 cases in total this term, the lowest number of decisions in recent memory.
• Five-to-four rulings represented 17 percent of the term’s opinions; last year’s percentage was 33 percent.

 Crossposted from Point of Law.com.

The NAM issued a news release noting the importance of the Supreme Court’s ruling in encouraging more balance and less capriciousness in punitive damage awards. Key passage:

The ruling was decided on the basis of maritime common law, not constitutional principles, and so is limited in scope, said Quentin Riegel, the NAM’s Vice President for Litigation and Deputy General Counsel. At the same time, the Justices clearly found the original punitive damage award excessive and arbitrary.

“The Court’s ruling continues its recent, important trend of clarifying the limits on punitive damages,” Riegel said. “The formula they chose was based on reasonableness in a case with ‘no earmarks of exceptional blameworthiness.’ By settling on a one-to-one standard – punitives equal to compensatory damages – they provided a standard that other courts can turn to.

“Future defendants can point to that standard as a means of eliminating the ‘stark unpredictability’ of punitive damages the Court was so concerned about,” Riegel said.

James Copland of the Manhattan Institute digs into similar issues with his analysis posted at Point of Law.com, here and here.

The Supreme Court, working mostly through common law, continues its efforts to bring rationality and predictability to punitive damage amounts. In today’s ruling about the Exxon Valdez litigation, the court ruled that the $2.5 billion punitive damages was excessive as a matter of maritime common law. In this case, at least, the award should match the amount the District Court determined for compensatory damages, i.e., $507.5 million.

From the syllabus, Exxon Shipping v. Baker:

A penalty should be reasonably predictable in its severity, so that even Holmes’s “bad man” can lookahead with some ability to know what the stakes are in choosing one course of action or another. And a penalty scheme ought to threaten defendants with a fair probability of suffering in like degree for like damage.

After rejecting various approaches toward determining the punitive amounts, the Court looked to quantified limits:

(iii) The more promising alternative is to peg punitive awards to compensatory damages using a ratio or maximum multiple. This is the model in many States and in analogous federal statutes allowing multiple damages. The question is what ratio is most appropriate. An acceptable standard can be found in the studies showing the median ratio of punitive to compensatory awards. Those studies reflect the judgments of juries and judges in thousands of cases as to what punitive awards were appropriate in circumstances reflecting the most down to the least blameworthy conduct, from malice and avarice to recklessness to gross negligence. The data in question put the median ratio for the entire gamut at less than 1:1, meaning that the compensatory award exceeds the punitive award in most cases.

In a well-functioning system, awards at or below the median would roughly express jurors’ sense of reasonable penalties in cases like this one that have no earmarks of exceptional blameworthiness. Accordingly, the Court finds that a 1:1 ratio is a fair upper limit in such maritime cases. Pp. 39–42.

All in all, though decided under maritime law, this is a good ruling generally for the cause of predictability, which actually reinforces the deterrent effect of punitive damages.

From AP: “WASHINGTON (AP) — US Supreme Court cuts $2.5 billion judgment to victims of Exxon Valdez disaster.” No ruling on the D.C. guns case, Heller.

ScotusBlog has been live blogging today’s public session and links to the Exxon Shipping v. Baker decision.

The NAM had filed an amicus brief supporting the appeal by Exxon Shipping. You can find a description of the case and our brief at our Legal Beagle site.

UPDATE: (10:38 a.m.) More from AP:

WASHINGTON (AP) — The Supreme Court on Wednesday cut the $2.5 billion punitive damages award in the 1989 Exxon Valdez disaster to $500 million.

The court ruled that victims of the worst oil spill in U.S. history may collect punitive damages from Exxon Mobil Corp., but not as much as a federal appeals court determined.

Justice David Souter wrote for the court that punitive damages may not exceed what the company already paid to compensate victims for economic losses, about $500 million compensation.