Baker v. Exxon Mobile Corp. , 472 F.3d 600 ( 2006 )

Volume 1 of 2
FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
In re: THE EXXON VALDEZ, 
GRANT BAKER; SEA HAWK
SEAFOODS, INC.; COOK INLET
PROCESSORS, INC.; SAGAYA CORP.;
WILLIAM MCMURREN; PATRICK L.
MCMURREN; WILLIAM W. KING;
GEORGE C. NORRIS; HUNTER CRANZ;
RICHARD FEENSTRA; WILDERNESS No. 04-35182
SAILING SAFARIS; SEAFOOD SALES,  D.C. No.
INC.; RAPID SYSTEMS PACIFIC LTD.; CV-89-00095-HRH
NAUTILUS MARINE ENTERPRISES,
INC.; WILLIAM FINDLAY ABBOTT,
JR.,
Plaintiffs-Appellees,
v.
EXXON MOBILE CORP; EXXON
SHIPPING CO.,
Defendants-Appellants.

19695
19696 IN RE: THE EXXON VALDEZ
In re: THE EXXON VALDEZ, 
GRANT BAKER; SEA HAWK
SEAFOODS, INC.; COOK INLET
PROCESSORS, INC.; SAGAYA CORP.;
WILLIAM MCMURREN; PATRICK L.
MCMURREN; WILLIAM W. KING;
GEORGE C. NORRIS; HUNTER CRANZ; No. 04-35183
RICHARD FEENSTRA; WILDERNESS
SAILING SAFARIS; SEAFOOD SALES,  D.C. No.
CV-89-00095-HRH
INC.; RAPID SYSTEMS PACIFIC LTD.;
NAUTILUS MARINE ENTERPRISES, OPINION
INC.; WILLIAM FINDLAY ABBOTT,
JR.,
Plaintiffs-Appellants,
v.
EXXON MOBILE CORP; EXXON
SHIPPING CO.,
Defendants-Appellees.

Appeal from the United States District Court
for the District of Alaska
H. Russel Holland, Chief Judge, Presiding
Argued and Submitted
January 27, 2006—San Francisco, California
Filed December 22, 2006
Before: Mary M. Schroeder, Chief Judge,
James R. Browning and Andrew J. Kleinfeld, Circuit Judges.
Per Curiam Opinon;
Dissent by Judge Browning
19700 IN RE: THE EXXON VALDEZ
COUNSEL
Walter Dellinger, O’Melveny & Myers, LLP, Washington,
D.C., and John F. Daum, O’Melveny & Myers LLP, Los
Angeles, California, for the defendants-appellants, cross-
appellees.
Brian B. O’Neill, Faegre & Benson, Minneapolis, Minnesota,
and David C. Tarshes, Davis, Wright, Tremaine, LLP,
Anchorage, Alaska, for the plaintiffs-appellees, cross-
appellants.
OPINION
PER CURIAM:
I. INTRODUCTION
We look for the third time at the punitive damages imposed
in this litigation as a result of the 1989 grounding of the oil
IN RE: THE EXXON VALDEZ 19701
tanker Exxon Valdez, and the resulting economic harm to
many who earned their livelihood from the resources of that
area. See Baker v. Hazelwood (In re the Exxon Valdez), 270
F.3d 1215 (9th Cir. 2001) [hereinafter Punitive Damages
Opinion I]; Sea Hawk Seafoods, Inc. v. Exxon Corp., No. 03-
35166 (9th Cir., Aug. 18, 2003). We are precluded, as the jury
was, from punishing Exxon for befouling the beautiful region
where the oil was spilled, because that punishment has
already been imposed in separate litigation that has been set-
tled. See Punitive Damages Opinion I, 270 F.3d at 1242. As
we explained in Punitive Damages Opinion I, the plaintiffs’
punitive damages case was saved from preemption and res
judicata because the award “vindicates only private economic
and quasi-economic interests, not the public interest in pun-
ishing harm to the environment. Id. “The plaintiffs’ claims for
punitive damages expressly excluded consideration of harm to
the environment.” In re the Exxon Valdez, 296 F. Supp. 2d
1071, 1090 (D. Alaska 2004).
The resolution of punitive damages has been delayed
because the course of this litigation has paralleled the course
followed by the Supreme Court when, in 1991, it embarked
on a series of decisions outlining the relationship of punitive
damages to the principles of due process embodied in our
Constitution. See, e.g., Pac. Mut. Life Ins. Co. v. Haslip, 499
U.S. 1 (1991); TXO Prod. Corp. v. Alliance Res. Corp., 509
U.S. 443 (1993) (plurality); BMW of N. Am., Inc. v. Gore, 517
U.S. 559 (1996); State Farm Mut. Auto Ins. Co. v. Campbell,
538 U.S. 408 (2003). Intervening Supreme Court decisions
have caused us to remand the matter twice to the district court
for reconsideration of punitives in light of evolving Supreme
Court law. The district court’s opinion, after our last remand
for it to consider the impact of the Supreme Court’s decision
in State Farm, is published at In re the Exxon Valdez, 296 F.
Supp.2d 1071 (D. Alaska 2004) [hereinafter District Court
Opinion]. It is the subject of this appeal.
Now, with the guidance of the Supreme Court’s decisions,
the district judge’s thoughtful consideration of the issues, and
19702 IN RE: THE EXXON VALDEZ
our own prior decisions in the litigation, we trust we are able
to bring this phase of the litigation to an end. While we agree
with much of the analysis of the district court, we are required
to review de novo the district court’s legal analysis in apply-
ing the Supreme Court’s guideposts. See Cooper Indus., Inc.
v. Leatherman Tool Group, Inc., 532 U.S. 424, 436 (2001).
While the original punitive damages award was $5 billion
and in accord with the jury’s verdict, the district court reduced
it to $4 billion after our first remand. In re the Exxon Valdez,
236 F. Supp. 2d 1043, 1068 (D. Alaska 2002), vacated by Sea
Hawk, No. 03-35166. Then, after our second remand, it
entered an award of $4.5 billion. District Court Opinion, 296
F. Supp. 2d at 1110. For the reasons outlined further in the
factual development and the analysis of this opinion, we con-
clude that the ratio of punitive damages to actual economic
harm resulting from the spill, reflected in the district court’s
award of $4.5 billion, exceeds by a material factor a ratio that
would be appropriate under Punitive Damages Opinion I and
the current controlling Supreme Court analysis. See State
Farm, 538 U.S. at 425. We order a remittitur of $2 billion,
resulting in punitive damages of $2.5 billion. We do so
because, in assessing the reprehensibility of Exxon’s miscon-
duct, the most important guidepost according to the Supreme
Court’s opinion in State Farm, there are several mitigating
facts. See id. at 419. These include prompt action taken by
Exxon both to clean up the oil and to compensate the plain-
tiffs for economic losses. These mollify, at least to some
material degree, the reprehensibility in economic terms of
Exxon’s original misconduct. Punitive Damages Opinion I,
270 F.3d at 1242. In addition, in considering the relationship
between the size of the award and the amount of harm, we
concluded in our earlier punitive damages opinion that the
substantial costs that Exxon had already borne in clean up and
loss of cargo lessen the need for deterrence in the future. Id.
at 1244. We disagree, however, with Exxon’s ultimate con-
tention that, as a result of two sentences in Punitive Damages
Opinion I, written five years ago and before the Supreme
IN RE: THE EXXON VALDEZ 19703
Court’s opinion in State Farm, Exxon is entitled to have puni-
tive damages assessed at no higher than $25 million. See id.
Our dissenting colleague goes to the other extreme.
Exxon’s misconduct was placing a relapsed alcoholic in
charge of a supertanker. Punitive Damages Opinion I, 270
F.3d at 1234. Yet, the dissent claims that we should ignore
our unanimous conclusion in Punitive Damages Opinion I,
270 F.3d at 1242, that Exxon’s conduct with respect to the
spill was not intentional. The dissent effectively treats Exxon
as though it calculatingly and maliciously steered the ship into
disaster. Purporting to rely on the intervening Supreme Court
decision in State Farm, the dissent also refuses to apply our
earlier holding that Exxon’s mitigation efforts reduce the rep-
rehensibility of its conduct. This amounts to a rejection of the
bedrock principle of stare decisis.
State Farm was an insurance contract case. Nothing in it
suggests that this court’s decision in Punitive Damages Opin-
ion I was improper. The Supreme Court did not explicitly or
implicitly hold that mitigation plays no role in determining
the constitutionality of a punitive damages award. Such a lack
of discussion in an insurance contract case cannot supplant
our express holding in the toxic-tort arena that mitigation
efforts are a factor in assessing the punitive damages award
in this case. Controlling authority should not be ignored or
distorted. As Learned Hand famously once said, “a victory
gained by sweeping the chess pieces off the table is not endur-
ing.” Learned Hand, Mr. Justice Cardozo, 52 HARV. L. REV.
361, 362 (1939).
We reiterate our previous holding that Exxon’s conduct
was not willful. Accordingly, a punitive damages award that
corresponds with the highest degree of reprehensibility does
not comport with due process when Exxon’s conduct falls
squarely in the middle of a fault continuum.
Because the history of this litigation tracks the recent juris-
prudential history of punitive damages, our analysis is best
19704 IN RE: THE EXXON VALDEZ
made in light of a thorough understanding of that history. We
therefore outline that history with what we hope is sufficient
clarity and thoroughness.
II. LEGAL AND FACTUAL BACKGROUND
A. From the Time of the Accident through the First
Punitive Damages Award and Denial of Motion for New
Trial: The Common Law through the Supreme Court
Decision in TXO.
The Exxon Valdez ran aground on Bligh Reef in Alaska’s
Prince William Sound on March 24, 1989. Punitive damages
at that time were governed by general common law principles.
At common law, the jury determined the punitives, and the
trial judge conducted a limited review to determine whether
the jury’s verdict was the product of passion and prejudice, or
whether the award was one that shocked the conscience. See
Renee B. Lettow, New Trial for Verdict Against Law: Judge-
Jury Relations in Early Nineteenth Century America, 71
Notre Dame L. Rev. 505, 542-51 (1996); Paul DeCamp,
Beyond State Farm: Due Process Constraints on Noneco-
nomic Compensatory Damages, 27 Harv. J.L. & Pub. Pol’y
231, 246-48 (2003); see also Browning-Ferris Indus. of Vt.,
Inc. v. Kelco Disposal, Inc., 492 U.S. 257, 278 n.24 (1989)
(affirming district court’s application of Vermont’s “grossly
and manifestly excessive” standard for judicial review);
Honda Motor Co. v. Oberg, 512 U.S. 415, 432 n.10 (1994).
Although there were cases dating from the Lochner era that
had suggested that there may be a due process ceiling on
punitive damages, at the time of this accident in 1989, the
Supreme Court had never invalidated an award on grounds
that the size of the award violated due process. See BMW v.
Gore, 517 U.S. at 600-01 (Scalia, J., dissenting) (discussing
the history of due process review of punitive damages
awards) (citing Seabord Air Line R. Co. v. Seegers, 207 U.S.
73, 78 (1907); Southwestern Tel. & Tel. Co. v. Danaher, 238
U.S. 482, 489-91 (1915); Waters-Pierce Oil Co. v. Texas, 212
IN RE: THE EXXON VALDEZ 19705
U.S. 86, 111-12 (1909); Standard Oil Co. of Ind. v. Missouri,
224 U.S. 270, 286, 290 (1912); St. Louis, I.M. & S.R. Co. v.
Williams, 251 U.S. 63, 66-67 (1919)).
In 1991, however, the Supreme Court decided Pacific
Mutual Life Insurance Co. v. Haslip, 499 U.S. 1 (1993).
There, for the first time in the modern era, the Court con-
ducted a substantive review of an award of punitive damages.
Haslip was an insurance fraud case, in which the agent pock-
eted the premiums and caused the plaintiff’s insurance to
lapse. Id. at 4-5. The Court upheld a punitive damages award
that amounted to four times the award of compensatory dam-
ages and 200 times the out-of-pocket costs of the defrauded
insured. Id. at 23-24. The Court noted that the ratios might be
“close to the line,” but said the award had to be upheld
because it “did not lack objective criteria.” Id. The Court
therefore concluded that the punitive damages did not “cross
the line into the area of constitutional impropriety.” Id. The
Supreme Court did not, at that time, and has not since, defined
any bright line of constitutional impropriety. It has, repeat-
edly, indicated that there is none. See, e.g., State Farm, 538
U.S. at 424-25.
In 1993, two years after Haslip, the Court took on another
major punitive damages case. In TXO Production Corp. v.
Alliance Resources Corp., 509 U.S. 443 (1993), the Court
reviewed a jury award of $19,000 in compensatory damages
and $10 million in punitive damages. Id. at 451. That case
arose out of an oil and gas development fraud scheme. Id. at
447-51. The case produced no majority opinion. The plurality,
reiterating that due process places some limit on punitive
damages, said that the award was not so “grossly excessive”
that it should be overturned, thus invoking the standard used
in Haslip. Id. at 462. The Court declined to provide any par-
ticular guidance in determining when an award would be
“grossly excessive.” Id. The plurality chose instead to say that
the dramatic disparity between the actual financial loss and
19706 IN RE: THE EXXON VALDEZ
the punitive award was not controlling. Id. The award was
upheld. Id.
It was against this background that the jury in this case was
instructed in 1994. The jury was told to take into account the
reprehensibility of the misconduct, the amount of actual or
potential harm arising from the misconduct, and, additionally,
to take into account mitigating factors such as the clean up
costs and fines already imposed as deterrents. District Court
Opinion, 296 F. Supp. 2d at 1081-82. The instructions were
the product of mutual effort of the parties and the district
court, and have not been seriously challenged. Id. They are
not questioned here and were, in retrospect, quite forward
looking.
On September 16, 1994, the jury returned a $5 billion puni-
tive damages verdict, having some time earlier imposed a
compensatory award of $287 million. The district court
accepted the punitive award and entered judgment. Citing
Haslip and TXO, the district court denied Exxon’s motion for
a new trial in January of 1995.
B. The Appeal of the Damage Allocation Plan and Our
Decisions in Baker and Icicle.
Prior to trial, several plaintiffs, many of the sea food pro-
cessors, had entered into settlement agreements with Exxon.
Icicle Seafoods, Inc. v. Baker (In re the Exxon Valdez), 229
F.3d 790, 792 (9th Cir. 2000) [hereinafter Icicle]; Baker v.
Exxon Corp. (In re the Exxon Valdez), 239 F.3d 985, 986 (9th
Cir. 2001) [hereinafter Baker]. The agreements anticipated a
sizable punitive damages award. See Icicle, 229 F.3d at 793;
Baker, 239 F.3d at 986-87. In return for receiving substantial
millions in payments from Exxon, the settling plaintiffs, in
two separate agreements, agreed to allocate a portion of their
punitive award to Exxon. One agreement was a so called
“cede back agreement,” Icicle, 229 F.3d at 793, and the other
IN RE: THE EXXON VALDEZ 19707
was an assignment of the future award, Baker, 239 F.3d at
986-87.
The district court, however, did not know of the agreements
during trial. Icicle, 229 F.3d at 793. When the court did learn
of them, during consideration of the parties’ proposed damage
allocation plan, and after the punitives had been imposed in
accordance with the jury’s verdict, the district court frowned
on the settlements. Id. at 794. In the district court’s view,
Exxon should have told the jury about the agreements so that
the jury would have known how much Exxon was actually
going to have to pay in punitive damages. Id. The district
court, therefore, refused to permit the settling plaintiffs to
receive any of the punitive damages award, on the theory that
Exxon should not benefit from the settlements. Id.; Baker, 239
F.3d at 987. Exxon pursued two appeals from the district
court’s refusal to enforce the agreements: one involving the
cede back agreement, Icicle, 229 F.3d at 793, and the other
involving the assignment agreement, Baker, 239 F.3d at 987-
88.
The two different forms of agreement were intended to
have essentially the same effect: allowing Exxon to keep
some portion of the eventual punitive award in exchange for
settling compensatory damage claims. In Icicle, this panel
considered the cede back agreement. In a thorough opinion,
we held that the cede back agreement was valid and enforce-
able and that the jury quite properly was not told of its exis-
tence. Icicle, 229 F.3d at 800. We reasoned that had the jury
been told of the agreement, it might well have compensated
for the settlement by imposing more damages. Id. at 798.
This, in turn, would have frustrated the efforts of parties to
reach settlements. We pointed out that settlements should be
encouraged, particularly in large class actions like this one. Id.
“Far from being unethical, cede back agreements make it eas-
ier to administer mandatory class actions for the assessment
of punitive damages and encourage settlement in mass tort
19708 IN RE: THE EXXON VALDEZ
cases. As a result, such agreements should typically be
enforced.” Id.
The second appeal, Baker, considered an assignment agree-
ment. Baker, 239 F.3d at 987-88. Following the Icicle reason-
ing, this panel reached the same conclusion. Id. at 988.
C. The Supreme Court’s Decision in BMW v. Gore.
As the parties were beginning their preparation for the first
appeal of the $5 billion punitive damages award, the Supreme
Court issued its first major due process/punitive damages
decision after TXO. In 1996, it decided BMW of North Amer-
ica, Inc. v. Gore, 517 U.S. 559 (1996). This was the Supreme
Court’s first attempt to describe specific factors that a court
should consider in reviewing a jury’s award of punitive dam-
ages. See id. at 575. The Court invoked the traditional con-
cepts of due process to describe the purpose of the review as
an assurance of fair notice to the defendant of the conse-
quences of its conduct. Id. at 574.
The Court described three factors to be considered. Id. at
575. The first was the reprehensibility of the conduct. Id. The
Court explained that reprehensibility is “[p]erhaps the most
important indicium of the reasonableness of a punitive dam-
ages award,” and said that an award should reflect “the enor-
mity” of the offense. Id. (citations omitted).
The second factor was the disparity between the actual or
potential harm to the plaintiffs flowing from that conduct, and
the punitive damages assessed by the jury. The Court said that
the disparity factor was the most commonly cited. Id. at 580.
The Court reasoned this factor is important because it “has a
long pedigree” extending back to English statutes from 1275
to 1753 providing for double, treble or quadruple damages. Id.
at 580-81. Thus the critical measure here is the ratio between
the punitive award and the amount of harm inflicted on the
plaintiff, or plaintiffs, before the court.
IN RE: THE EXXON VALDEZ 19709
The third factor was the difference between the punitives
and the civil and criminal penalties authorized by the state for
that conduct. Id. at 583. The Court indicated that reviewing
courts should use this factor to “accord substantial deference
to legislative judgments concerning appropriate sanctions for
the conduct at issue.” Id. at 583 (internal quotations omitted).
In BMW v. Gore, the defendant had engaged in a practice
of repainting damaged cars and passing them off as never-
damaged cars with their original paint. Id. at 563-64. The
plaintiff who had purchased one of these cars was awarded
$4,000 in compensatory damages and $4 million in punitives.
Id. at 565. The Alabama Supreme Court reduced the punitives
to $2 million, and the defendant petitioned for certiorari
review. Id. at 567. The Supreme Court held the punitives were
excessive. Id. at 585.
In examining the reprehensibility of the conduct, the
Supreme Court in BMW v. Gore stressed that the only harm
inflicted by the defendant was economic and not physical. Id.
at 576. The Court also emphasized that the conduct to be con-
sidered was only the conduct of the defendant towards the
plaintiff in the Alabama case and not other conduct that might
be a part of a nationwide practice. Id. at 572. Justice Breyer’s
concurring opinion noted the danger in subjecting a defendant
to punishment multiple times for the same conduct. Id. at 593
(Breyer, J., concurring).
Thus, in looking at the ratio between the punitives and the
harm, and in stressing that the ratio must be a reasonable one,
the Court was holding that the ratio must be measured by the
ratio of punitive damages to the harm suffered by the plaintiff
in that case, without regard to harm that might have been
experienced by others and for which the defendant might also
be responsible. Id. at 580. It concluded that a ratio of 500 to
1 was grossly excessive. Id. at 583. Such an excessive ratio
resulted from the jury’s improperly measuring the punitives in
relation to the damage inflicted on a nation of potential plain-
19710 IN RE: THE EXXON VALDEZ
tiffs rather than the damage to the plaintiff before that jury. Id.
at 573.
With respect to the third factor, the relationship between
the punitive damages and the comparable penalties under state
law, BMW v. Gore looked to the Court’s federalism jurispru-
dence. The Court’s opinion stressed that reviewing courts
should be mindful of the need to pay due deference to the leg-
islative judgments of states in assessing the reprehensibility of
conduct. Id. at 583 (“[A] reviewing court engaged in deter-
mining whether an award of punitive damages is excessive
should ‘accord ‘substantial deference’ to legislative judg-
ments concerning appropriate sanctions for the conduct at
issue.’ ”) (quoting Browning-Ferris, 492 U.S. at 301
(O’Connor, J., concurring in part, dissenting in part)).
Again refusing to draw any kind of mathematical bright
line between acceptable and unacceptable ratios, the Court
described the 500 to 1 ratio in BMW v. Gore as “breathtak-
ing.” Id. It remanded for further, not inconsistent, proceed-
ings, because, unlike Haslip, where the Court affirmed a
questionable award, the Court in BMW was “fully convinced”
that this award was “grossly excessive.” Id. at 585-86.
D. The First Punitive Damages Appeal.
It was against this background that briefing in the first
appeal of the original $5 billion punitive damages award in
this case went forward. Exxon contended the amount of the
award violated due process principles, as described in BMW
v. Gore. Punitive Damages Opinion I, 270 F.3d at 1241. The
district court had not had an opportunity to review BMW v.
Gore before its original judgment became final and appeal-
able upon denial of Exxon’s motion for a new trial. Id.
In its appeal from the $5 billion award, Exxon, in addition
to challenging the amount of the punitive damages, chal-
lenged the sufficiency of the evidence supporting punitive
IN RE: THE EXXON VALDEZ 19711
damages; the jury instructions; the allowability of any puni-
tive damages as a matter of public policy, maritime law and
res judicata; and the preemption of punitive damages by other
federal law. Needless to say, briefing was extensive. After
appellate proceedings were stayed from January 1998 to Sep-
tember 1998 for the parties to pursue a limited remand, this
panel heard argument in May of 1999.
While the case was under submission, the Supreme Court
granted certiorari in another Ninth Circuit case, and in May
2001, decided Cooper v. Leatherman Tool Group. The Court
there held our review of punitive damages was to be de novo.
Cooper, 532 U.S. at 436. This did not ease our task.
E. Punitive Damages Opinion I.
We issued our first opinion on punitives damages in
November, 2001. Our opinion went in detail through the facts
of the disaster and the conduct of Exxon, and of Captain
Hazelwood, because they bore so heavily on the consideration
of the issues on appeal. Punitive Damages Opinion I, 270
F.3d at 1221-24. In an opinion of more than 40 pages, we
rejected Captain Hazelwood’s separate appeal, and dealt at
some length with all of the issues raised by Exxon. We ulti-
mately rejected all of them except the challenge to the amount
of punitive damages. Id. at 1254.
Referring to the “unique body of law” that governs punitive
damages, we focused on the two Supreme Court opinions that
had been decided after the district court’s decision in the case,
and we termed them “critical.” Id. at 1239. These were BMW
v. Gore and Cooper v. Leatherman Tool Group. We said:
In BMW, the Supreme Court held that a punitive
damage award violated the Due Process Clause of
the Fourteenth Amendment because it was so grossly
excessive that the defendant lacked fair notice that it
would be imposed. Dr. Gore’s car was damaged in
19712 IN RE: THE EXXON VALDEZ
transit, and BMW repainted it but did not tell Dr.
Gore about the repainting when it sold him the car.
The jury found that to be fraudulent, and awarded
$4,000 in compensatory damages for reduced value
of the car and $4 million in punitive damages. The
Alabama Supreme Court cut the award to $2 million,
but the Court held that it was still so high as to deny
BMW due process of law for lack of notice, because
the award exceeded the amounts justified under the
three “guideposts.” The BMW guideposts are: (1) the
degree of reprehensibility of the person’s conduct;
(2) the disparity between the harm or potential harm
suffered by the victim and his punitive damage
award; and (3) the difference between the punitive
damage award and the civil penalties authorized or
imposed in comparable cases. We apply these three
guideposts to evaluate whether a defendant lacked
fair notice of the severity of a punitive damages
award, and to stabilize the law by assuring the uni-
form treatment of similarly situated persons.
Id. at 1240-41 (internal quotations omitted). We noted that in
Cooper v. Leatherman Tool Group the Supreme Court
decided that “considerations of institutional competence”
require de novo review of punitive damages awards. Id. at
1240 (quoting Cooper, 532 U.S. at 440).
We went on to observe that the district court had not
reviewed the award under the standards announced in those
cases because neither case had been decided by the time the
jury returned its verdict, and Exxon had never challenged the
amount of the award on constitutional grounds until after the
jury’s verdict. Id. at 1241. In view of the need for de novo
review and the intervening decisions of BMW v. Gore and
Cooper v. Leatherman Tool Group, we remanded for recon-
sideration of punitive damages. Id. We also provided some
observations on possible alternative analyses of punitive dam-
ages under the BMW v. Gore factors. Id. at 1241-46.
 IN RE: THE EXXON VALDEZ 19713
These observations began with the factor of reprehensibil-
ity, quoting the Supreme Court’s admonition in BMW v. Gore
that it is “[p]erhaps the most important indicum of the reason-
ableness of a punitive damage award.” Id. at 1241. We
pointed to the Court’s analogy to criminal cases, and its state-
ment that nonviolent crimes are less reprehensible than vio-
lent ones. Id. We drew an analogy to the facts of this case,
where Exxon’s conduct was reckless, but there was no inten-
tional spilling of oil “as in a midnight dumping case.” Id. at
1242. We agreed with the plaintiffs that Exxon’s conduct was
reprehensible in that it knew of the risk of an oil spill in trans-
porting huge quantities of oil through the Sound, and it knew
Hazelwood was a relapsed alcoholic. Id. at 1242. We
observed, however, that such reprehensibility went more to
justify punitive damages than to justify such a high amount.
Id. We noted some mitigating factors, including prompt ame-
liorative action and the millions spent in clean up. Id.
We then turned to the ratio of actual harm caused by the
misconduct to punitive damages awarded. Id. at 1243. Again
analyzing BMW v. Gore, we said that it was difficult to deter-
mine what we called the “numerator,” that is, the value of the
harm caused by the spill. Id. We used the jury award of $287
million in compensatory damages as one possible numerator
and also, as alternative numerators, the district court’s esti-
mates of harm, which at that time ranged from $290 million
to $418 million. Id. We noted that if compensatory liability
were used, any amounts Exxon had voluntarily paid in settle-
ments should not be taken into account. We said that
[t]he amount that a defendant voluntarily pays before
judgment should generally not be used as part of the
numerator, because that would deter settlements
prior to judgment. “[T]he general policy of federal
courts to promote settlement before trial is even
stronger in the context of large scale class actions.”
Id. at 1244 (citing Icicle, 229 F.3d at 795; Baker, 239 F.3d at
988).
19714 IN RE: THE EXXON VALDEZ
As a final observation on the relationship between the puni-
tive damages award and the harm, we pointed out that the
substantial clean up costs and other losses to Exxon from the
oil spill had already had considerable deterrent effect. We
indicated such deterrence should, depending on the circum-
stances, call for a lower, rather than a higher ratio. Id.
Turning to the third BMW v. Gore factor, we observed that
the nature of criminal fines, which are potential state and fed-
eral penalties, might be useful in reviewing punitives. Id. at
1245. We observed that “[c]riminal fines are particularly
informative because punitive damages are quasi-criminal.” Id.
We then looked to the general federal statutory measure for
fines and discussed a number of alternative guideposts. Id.
We noted the federal fines could range from $200,000 to
$1.03 billion. Id. We looked as well at the ceiling of civil lia-
bility under the Trans-Alaska Pipeline Act and noted it was
$100 million in strict liability for anyone who spills oil from
the pipeline. Id.
In addition to those possible penalties, we looked at the
actual penal evaluation made in the case by the Attorneys
General of the United States and of the state of Alaska. Id. at
1245-46. Agreeing with the district court that they did not
establish a limit, we noted that they did represent an adver-
sarial judgment, by executive officers, of an appropriate level
of punishment. Id. at 1246. Finally, without necessarily
exhausting available analogies in the penalty field, we noted
that Congress had subsequently amended the statute to
increase the amount of civil penalties for grossly negligent
conduct, and that the maximum penalty here under the new
federal statue would be a maximum of $786 million. Id. The
federal penalties are based upon the number of barrels of oil
spilled. 33 U.S.C. § 1321(b)(7).
In suggesting various possible guidelines to assess whether
the $5 billion was “grossly excessive” we did not imply that
any single guidepost would be controlling. Concluding that
IN RE: THE EXXON VALDEZ 19715
the $5 billion was too high to withstand the review we were
required to give it under BMW v. Gore and Cooper v. Lea-
therman Tool Group, and noting that those cases came down
after the district court had ruled, we remanded for it to apply
the due process analysis required under those decisions, with
what we hoped would be helpful guidance from our opinion.
Id. at 1241. No district court analysis of BMW v. Gore was
before us and we thus could not have decided any specific
issue arising from any such analysis arising from its guide-
posts. Id. We offered only guidance culled from what was
then controlling Supreme Court precedent and general princi-
ples applicable to the calculation of damage liability. Id.
F. The District Court Opinion on our First Remand.
The district court again did an extensive analysis of the rel-
ative reprehensibility of Exxon’s misconduct and of the harm
it caused. In re the Exxon Valdez, 236 F. Supp. 2d at 1054-60.
Though noting that an accurate assessment of the full extent
of the plaintiffs’ actual harm was impossible, the district court
attempted to reconstruct that harm by adding together the
jury’s compensatory damages verdict of $287 million, judg-
ments in related cases, as well as payments and settlements
made to plaintiffs before and during the punitive damages liti-
gation. Id. at 1058-60. The district court concluded that the
actual harm was just over $500 million. Id. at 1060. The dis-
trict court also concluded that the circumstances of this case
justified a ratio of punitive damages to harm of 10 to 1. Id. at
1065. This calculation would have supported the original $5
billion award. Id. The district court nevertheless reduced the
punitive damages to $4 billion, to conform to what it viewed
as our mandate. Id. at 1068.
G. The Second Appeal, the Supreme Court’s Opinion in
State Farm, and our Second Remand.
Not surprisingly, Exxon appealed again. And, not surpris-
ingly, the Supreme Court issued an opinion in still another
19716 IN RE: THE EXXON VALDEZ
punitive damages case while the appeal was pending. State
Farm Mut. Auto Ins. Co. v. Campbell, 538 U.S. 408 (2003).
The plaintiffs in State Farm, the Campbells, were involved
in a head-on collision and sued their automobile insurer, State
Farm, for bad faith. Id. at 413. The claim was based on State
Farm’s rejection of an offer to settle the Campbells’ claims at
the policy limit, State Farm’s assurances to them that they had
no liability for the accident, State Farm’s resulting decision to
take the case to court despite the substantial likelihood of an
excess judgment, and its subsequent refusal to pay an adverse
judgment over three times the policy limits. Id. at 413-14. The
case was similar to BMW v. Gore in that there were only two
plaintiffs before the jury. Id. Nevertheless, as in BMW v.
Gore, the jury was allowed to consider the effects of similar
but unrelated misconduct on many potential plaintiffs who
were not before the court. Id. at 415. Final judgment after
appeal to the Utah Supreme Court was for $1 million in com-
pensatory and $145 million in punitive damages. Id. at 412.
The United States Supreme Court remanded for the Utah
courts to reduce the award. Id. at 429.
The Supreme Court in State Farm once again emphasized
that the “most important indicium” of a punitive damages
award’s reasonableness is the relative reprehensibility of the
defendant’s conduct. Id. at 419; see also BMW v. Gore, 517
U.S. at 575. Yet State Farm significantly refined the repre-
hensibility analysis by instructing courts to weigh five spe-
cific considerations: (1) whether the harm caused was
physical as opposed to economic; (2) whether the conduct
causing the plaintiff’s harm showed “indifference to or a reck-
less disregard of the health or safety of others;” (3) whether
the “target of the conduct” was financially vulnerable; (4)
whether the defendant’s conduct involved repeated actions as
opposed to an isolated incident; and (5) whether the harm
caused was the result of “intentional malice, trickery, or
deceit, or mere accident.” 538 U.S. at 419. The Court did not
rank these factors. It did explain, however, that only one fac-
IN RE: THE EXXON VALDEZ 19717
tor weighing in a plaintiff’s favor may not be sufficient to
support a punitive damages award, and the absence of all fac-
tors makes any such award “suspect.” Id.
As to BMW v. Gore’s second guidepost, the ratio between
harm or potential harm to the plaintiff and the punitive dam-
ages award, the Court “decline[d] again to impose a bright-
line ratio which a punitive damages award cannot exceed.” Id.
at 425. But it provided some sharper guidance than it had in
previous cases.
First, it indicated that ratios in excess of single-digits would
raise serious constitutional questions, and that single-digit
ratios were “more likely to comport with due process.” Id. In
fact, despite the Court’s disclaimer that “there are no rigid
benchmarks that a punitive damages award may not surpass,”
the Court strongly indicated the proportion of punitive dam-
ages to harm could generally not exceed a ratio of 9 to 1. Id.
at 425 (“[F]ew awards exceeding a single-digit ratio between
punitive and compensatory damages, to a significant degree,
will satisfy due process.”).
Second, the Court discussed particular combinations of fac-
tors that would justify relatively higher or lower ratios. For
example, where a “particularly egregious act has resulted in
only a small amount of economic damages” or where “the
injury is hard to detect or the monetary value of the noneco-
nomic harm might have been difficult to determine,” ratios in
the high single-digits and perhaps even higher might be war-
ranted. Id. (quoting BMW v. Gore, 517 U.S. at 582). Con-
versely, “[w]hen compensatory damages are substantial, then
a lesser ratio, perhaps only equal to compensatory damages,
can reach the outermost limit of the due process guarantee.”
Id.
Finally, the Court minimized the relevance of criminal pen-
alties as a guide, saying that they were not particularly helpful
in determining fair notice. Id. at 428. Indeed, the Court did
19718 IN RE: THE EXXON VALDEZ
not analyze State Farm’s potential criminal penalty at all,
characterizing it as a “remote possibility.” Id. As to civil pen-
alties, the Court noted only that the $145 million punitive
damages award “dwarfed” the $10,000 maximum applicable
fine. Id.
The Supreme Court’s opinion in State Farm was filed in
2003, after the district court, on our first remand, had already
reviewed the punitive damages award. Because the district
court performed its review without the benefit of the more
focused guidance provided by the Court in State Farm, we
remanded the second appeal summarily for the district court
to reconsider the punitive damages award in light of State
Farm. Sea Hawk, No. 03-39166.
H. The District Court Opinion on our Third Remand and
this Appeal.
On remand for the third time, the district court, in an
assessment similar to that in its opinion after our first remand,
calculated plaintiffs’ harm at $513.1 million. District Court
Opinion, 296 F. Supp. 2d at 1103. Interpreting State Farm as
holding that “single-digit multipliers pass constitutional mus-
ter for highly reprehensible conduct,” and citing our decision
in Zhang v. American Gem Seafoods, Inc., 339 F.3d 1020 (9th
Cir. 2003), the district court decided to increase punitives
from $4 billion to $4.5 billion. 296 F. Supp. 2d at 1110. The
final punitive damages award represented a ratio of just under
9 to 1. Id.
Once again, Exxon appealed. The plaintiffs also appealed,
seeking to reinstate the jury’s full $5 billion punitive damages
verdict.
In this appeal, Exxon has focused intensively on the sen-
tences in our earlier opinion where we noted that pre-
judgment payments generally should not be part of the “nu-
merator” to avoid deterring pre-judgment settlements. Puni-
IN RE: THE EXXON VALDEZ 19719
tive Damages Opinion I, 270 F.3d at 1242. Exxon has argued
strenuously in the district court and to us that all of its settle-
ment and other pre-judgment compensatory payments to
plaintiffs must be subtracted from the over $500 million
amount of actual harm in the ratio of punitive damages we use
to review the award pursuant to the BMW v. Gore/State Farm
factors. This would reduce the harm to the relatively paltry
figure of $20.3 million.
We recognized in Punitive Damages Opinion I that Exxon,
soon after the spill, instituted a claims payment system that
almost fully compensated plaintiffs for their economic losses
and did so promptly. Id. We also recognized that Exxon’s
prompt payment of compensatory damages should be a sub-
stantial mitigating factor in our review of punitives. Id.
In Exxon’s appeal, major issues therefore relate to how,
after State Farm, to assess the reprehensibility of Exxon’s
conduct and the effect of the mitigating factors. An important
subsidiary issue is the extent to which we are bound to give
literal effect to the sentences in our earlier opinion concerning
subtracting the pre-judgment payments from actual harm,
even though State Farm suggests the mitigating factors should
be taken into account differently. For the reasons more fully
explained in this opinion, we do not accept the minimal bot-
tom line figure urged by Exxon and properly rejected by the
district court. We do, however, conclude there is merit to
Exxon’s contention that punitives should be reduced.
In their cross appeal, plaintiffs seek a reinstatement of the
original $5 billion punitive award. We do not fully adopt their
position either because doing so would peg the ratio of puni-
tive damages to harm at a level State Farm reserves only for
the most egregious misconduct. There was no intentional
infliction of harm in this case. In addition, because Exxon’s
mitigating efforts after the accident diminish the relative rep-
rehensibility of its original misconduct for purposes of
19720 IN RE: THE EXXON VALDEZ
reviewing punitive damages, such a high ratio is not war-
ranted in this case.
III. ANALYSIS
A. Lessons From History.
The history of the experience of the Supreme Court with
punitive damages over the last decade-and-a-half reflects an
evolutionary, not a revolutionary, course. In its first opinion
in Haslip, the Court suggested that there might be a bright line
of demarcation between punitive damages that comport with
constitutional protections, and punitive damages that do not.
Haslip, 499 U.S. at 23. Although it did not say what “the line”
would be, it termed ratios of punitive damages to compensa-
tory damages of 4 to 1, and to out-of-pocket costs of 200 to
1, to be close to it. Id.
In subsequent cases, however, the Court expressly avoided
a rigid mathematical formula or limit, while refining its ratio
analysis, concluding in State Farm that a ratio of punitive
damages to actual harm of less than 10 to 1 was more likely
to comport with due process than an award with a higher
ratio. State Farm, 538 U.S. at 425. Along the way, the Court’s
experience reflects efforts to comport with the tried and true
concepts inherent in due process, i.e., those of notice and fair-
ness. See, e.g., Mullane v. Cent. Hanover Bank & Trust Co.,
339 U.S. 306 (1950); Int’l Shoe Co. v. Washington, 326 U.S.
310 (1945).
In State Farm, the Court expressly noted its concern that
the jury had been allowed to take into account the effect of
conduct that may have taken place nationwide on thousands
of potential plaintiffs. State Farm, 938 U.S. at 422. The
unfairness of a defendant being hit with punitive damages
many times for the same conduct was central to the Court’s
analysis in remanding. Id. The Court explained,
“[p]unishment on these bases creates the possibility of multi-
IN RE: THE EXXON VALDEZ 19721
ple punitive damages awards for the same conduct; for in the
usual case non-parties are not bound by the judgment some
other plaintiff obtains.” Id. at 423.
Indeed, in State Farm, the Court stressed that the most
important factor is the reprehensibility of the particular con-
duct in the case. State Farm, 538 U.S. at 419. This is because,
in assessing the foreseeability of the possible effects of the
defendant’s conduct as it might bear on punitive damages, the
reviewing court is in reality dealing with the traditional con-
cept of the need for fair notice of the possible legal conse-
quences of one’s misconduct. Id. at 417.
Perhaps because such traditional elements of due process
are flexible, the Supreme Court has not often taken on the task
of reviewing the amount of punitive damages and has, in fact,
overturned only two punitive awards because of their size.
Each of them exceeded by a multiple of more than 100 the
amount of compensatory payments necessary to compensate
a plaintiff for the actual harm caused by the defendant’s mis-
conduct. BMW v. Gore, 517 U.S. at 582 (striking down a
500:1 ratio); State Farm, 538 U.S. at 429 (striking down a
145:1 ratio).
B. BMW v. Gore/State Farm Guideposts.
[1] BMW v. Gore identified three guideposts for reviewing
punitive damages, and State Farm added important refine-
ments. The guideposts are (1) the reprehensibility of the
defendant’s misconduct, (2) the ratio of punitives to harm,
and (3) comparable statutory penalties. They need not be rig-
idly or exclusively applied, for we agree with our sister circuit
that “[t]hese guideposts should not be taken as an analytical
straight jacket.” Zimmerman v. Direct Federal Credit Union,
262 F.3d 70, 81 (1st Cir. 2001). We must, nevertheless, exam-
ine them in the context of this case.
19722 IN RE: THE EXXON VALDEZ
1. Reprehensibility.
The most important guidepost is the reprehensibility of
Exxon’s misconduct. State Farm, 538 U.S. 419 (quoting
BMW v. Gore, 517 U.S. at 575). In our prior opinion, we
defined the relevant misconduct supporting punitive damages
as Exxon’s keeping Hazelwood in command with knowledge
of Hazelwood’s relapse into alcoholism. We said that “Exxon
knew Hazelwood was an alcoholic, knew that he had failed to
maintain his treatment regimen and had resumed drinking,
knew that he was going on board to command its supertankers
after drinking, yet let him continue to command the Exxon
Valdez through the icy and treacherous waters of Prince Wil-
liam Sound.” Punitive Damages Opinion I, 270 F.3d at 1237-
38. We see no need to reconsider this issue, despite Exxon’s
invitation to do so.
To evaluate the reprehensibility of the misconduct, State
Farm refers to five sub-factors: (1) the type of harm, (2)
whether there was reckless disregard for health and safety of
others, (3) whether there were financially vulnerable targets,
(4) whether there was repeated misconduct and (5) whether it
involved intentional malice, trickery, or deceit, rather than
mere accident. State Farm, 538 U.S. at 419.
[2] We must also consider mitigating factors. In Punitive
Damages Opinion I, in the context of this particular case, we
looked to Exxon’s response to the catastrophe, including its
prompt cleanup and compensatory payments. We held they
were factors mitigating the reprehensibility of the original
misconduct. Punitive Damages Opinion I, 270 F.3d at 1242.
“Reprehensibility should be discounted if defendants act
promptly and comprehensively to ameliorate any harm they
cause in order to encourage such socially beneficial behav-
ior.” Id.
The dissent takes issue with two components of our BMW
v. Gore analysis. Its reasons, however, are surprising, because
IN RE: THE EXXON VALDEZ 19723
they contradict our unanimous holding in Punitive Damages
Opinion I, 270 F.2d at 1242, that the spill was not intentional
nor Exxon’s conduct malicious. See Dissent at 19761 (charac-
terizing Exxon’s conduct as “malicious”). Then, the dissent
misapplies the Supreme Court’s mandate that we must per-
form an exacting appellate review to ensure that “an award of
punitive damages is based upon an ‘application of law, rather
than a decisionmaker’s caprice.’ ” State Farm, 538 U.S. at
418 (citing BMW v. Gore, 517 U.S. at 587).
First, the dissent maintains that the value of defendant’s
pre-litigation mitigation efforts should not affect punitive
damages because the Supreme Court did not explicitly pro-
vide for such a calculus in State Farm. Dissent at 19752-53.
Thus, the dissent would reject the principle of stare decisis
and the law of the case and overturn our holding in Punitive
Damages Opinion I, 270 F.3d at 1242, that Exxon’s voluntary
compensation to the plaintiffs effectuated good public policy
in making an injured party whole as quickly as possible. We
are not prepared to question the soundness of our unanimous
conclusion in Punitive Damages Opinion I merely because
intervening Supreme Court jurisprudence in the insurance
context did not address the issue. See State Farm, 538 U.S.
408. By contrast here, we have already held that mitigation is
both relevant and conscientious in the toxic-tort setting. It
would be unwise in reviewing punitive damages to ignore the
prompt steps of a defendant to take curative action in a mass
tort case.
The dissent also claims that we improperly treat BMW’s
fifth factor, the fault analysis, as a dichotomy with two mutu-
ally exclusive options: finding Exxon’s conduct intentional
and thus grossly reprehensible, or finding it accidental and
thus to a large degree excusable. Dissent at 19756. This is not
our analysis. We acknowledge that Exxon’s conduct was not
intended to cause an oil spill, but neither was allowing a
relapsed alcoholic to command a supertanker “mere acci-
dent.” Majority at 19729. Exxon’s reckless malfeasance falls
19724 IN RE: THE EXXON VALDEZ
in the middle of a continuum between accidental and inten-
tional conduct. Accordingly, the fifth subfactor of the repre-
hensibility analysis supports neither high nor low
reprehensibility on the part of Exxon.
The Supreme Court has reserved the upper echelons of con-
stitutional punitive damages (a 9 to 1 ratio) for conduct done
with the most vile of intentions. Thus, an affirmance of the
district court’s application of such a ratio in this case, where
the defendant’s conduct was reckless but not intentional,
would transgress the requisite constitutional boundaries as the
Supreme Court has explained them to date.
We turn now to the specific State Farm reprehensibility
subfactors. These demonstrate that a 5 to 1 ratio more appro-
priately comports with due process.
a. Type of Harm — Physical versus Economic.
[3] To evaluate the type of harm, State Farm instructs us
to consider whether “the harm was physical as opposed to
economic,” because conduct producing physical harm is more
reprehensible. State Farm, 538 U.S. at 419. In this case the
district court found that Exxon’s conduct caused no actual
physical harm to people, but caused more than mere economic
harm to them, because the economic effects of its misconduct
produced severe emotional harm as well. We agree with the
district court’s explanation that “the spilling of 11 million gal-
lons of crude oil into Prince William Sound and Lower Cook
Inlet disrupted the lives (and livelihood) of thousands of
claimants for years.” District Court Opinion, 296 F. Supp. 2d
at 1094.
[4] The Supreme Court has recognized conduct causing
emotional as well as economic harm can be more reprehensi-
ble than conduct causing mere economic harm. See BMW v.
Gore, 517 U.S. at 576 n.24. There it cited Blanchard v. Mor-
ris, 15 Ill. 35, 36 (1853), a case affirming a $700 punitive
IN RE: THE EXXON VALDEZ 19725
award against individuals who caused no physical harm and
only $13 of economic harm, but used mental torture to extort
it.
In Bains LLC v. Arco Products Co., 405 F.3d 764, 775 (9th
Cir. 2005), we held that “intentional, repeated ethnic harass-
ment” increased the level of reprehensibility beyond the
merely economic. See also Swinton v. Potomac Corp., 270
F.3d 794, 818 (9th Cir. 2001). The gratuitous, intentional
mental oppression of the victims made it “highly reprehensi-
ble conduct, though not threatening to life or limb.” Id. At
777. In Planned Parenthood v. American Coalition of Life
Activists, 422 F.3d 949, 958 (9th Cir. 2005), we held that a
“true threat” increased reprehensibility even though it was not
carried out, because the threat was intended to intimidate, and
the economic component went beyond reducing the victim’s
wealth or income to trying to drive the victims away from
their practices of medicine. Our Planned Parenthood decision
was consistent with BMW’s citation with approval of older
decisions upholding awards based on the “mental fear, torture,
and agony of mind” caused by the threat of violence. BMW
517 U.S. at 575-76, n.24.
The district court concluded that the mental distress caused
by the oil spill to the fishermen and property owners who
were harmed economically justified a higher level of repre-
hensibility, and Exxon urges that emotional distress damages
were not before the jury. Because our review must be de novo
under Cooper Indus., Inc. v. Leatherman Tool Group, Inc.,
532 U.S. 424, 436 (2001), we are not bound by the district
court’s rationale. The cases discussed above show that puni-
tive damages can — and traditionally do — consider the
effects of the tortfeasor’s conduct on the victim’s mentality,
not just his pocketbook. On the other hand, they may not go
so far, and we need not, as to justify punitive damages for
accidentally causing mental distress. State Farm states that
compensatory damages for mental distress generally include
19726 IN RE: THE EXXON VALDEZ
a punitive element, so including mental distress in punitive
damages may be duplicative. 538 U.S. at 426.
[5] What comes to something near the same result in this
case, though it would not in most cases, is the entirely fore-
seeable disruption to the way tens of thousands people live
their lives if a giant oil tanker were to run aground and spill
its cargo. When tens of thousands of people have to change
the way they make their living, their mental distress is not
comparable to a BMW owner, or even a large number of
BMW owners, being distressed because their cars were
scratched or dented during shipment and repaired without
their knowledge. Anyone setting an oil tanker loose on the
seas under command of a relapsed alcoholic has to know that
he is imposing this massive risk. Though spilling the oil is an
accident, putting the relapsed alcoholic in charge of the tanker
is a deliberate act. The massive disruption of lives is entirely
predictable when a giant oil tanker goes astray. Thus, Exxon’s
reprehensibility goes considerably beyond the mere careless
imposition of economic harm.
b. Reckless Disregard for Health and Safety of Others.
[6] The second subfactor we consider in assessing repre-
hensibility is whether Exxon displayed a reckless disregard
for the health and safety of others. State Farm, 538 U.S. at
418. We conclude this subfactor also militates toward greater
reprehensibility. When Exxon trusted an officer it knew was
incompetent to command the Exxon Valdez through the
treacherous waters of Prince William Sound, Exxon acted
with reckless disregard for the health and safety of all those
in the vicinity.
The Exxon Valdez grounding created a grave risk of physi-
cal harm for the crew and those who had to come to its rescue.
The district court found that something as simple as an
electro-static discharge could have ignited the crude oil and
incinerated everyone in the vicinity. District Court Opinion,
IN RE: THE EXXON VALDEZ 19727
296 F. Supp. 2d at 1095. We therefore agree with the district
court that Exxon acted with reckless disregard of the health
and safety of others when it put in command a person not
competent to perform that role.
Exxon argues that State Farm requires us to ignore Exxon’s
disregard of the potential harm to the crew and rescuers
because they are not plaintiffs to this litigation. Exxon mis-
reads State Farm. State Farm disapproved punishing defen-
dants for conduct in other states in which it might be lawful.
538 U.S. at 1522. Likewise, we had held in White v. Ford
Motor Company, before State Farm came down, that a jury’s
punitive damages award based on extraterritorial conduct
(plaintiff’s lawyer had made a “send them a message” argu-
ment addressing nationwide conduct) violated principles of
federalism established in BMW v. Gore. 312 F.3d 998, 1013-
14 (9th Cir. 2002). These cases do not prohibit consideration
of the potential harm to individuals merely because they are
not plaintiffs. See 538 U.S. at 1522. The lesson is that the
award in the other litigation “should have been analyzed in
the context of the reprehensibility guidepost only.” Id.; BMW
v. Gore, 517 U.S. at 574 n.21. State Farm therefore holds it
is appropriate to look at the risk to others in analyzing repre-
hensibility. State Farm, 538 U.S. at 427.
State Farm does warn against considering dissimilar acts of
the defendant, or what is described as acts “independent from
the acts upon which liability was premised.” Id. at 422. The
Court explained this is because “[a] defendant should be pun-
ished for the conduct that harmed the plaintiff, not for being
an unsavory individual or business.” Id. at 423. Here, how-
ever, the conduct that threatened the safety of the crew and
rescuers is the same conduct that harmed the plaintiffs, and is
the conduct that underlies this punitive damages litigation:
Exxon’s knowingly placing a relapsed alcoholic in charge of
the Exxon Valdez. The prohibition in State Farm against con-
sidering dissimilar acts does not apply here because taking
into account the potential harm to the crew and rescuers pun-
19728 IN RE: THE EXXON VALDEZ
ishes Exxon for the same conduct that harmed the plaintiffs.
We have made this point before. See, for example, Hangarter
v. Provident Life and Accident Insurance Co., 373 F.3d 998,
1015 n.11 (9th Cir. 2004), where we analyzed company-wide
policies in a single-plaintiff lawsuit and distinguished State
Farm’s warning against considering dissimilar acts. We said
“unlike in State Farm, a legally sufficient nexus existed
between Defendant’s allegedly widespread corporate policies
and the termination of [the plaintiff’s] benefits.” Id.
[7] Accordingly, where the same conduct risked harm to
all, the risk to all can be considered as a factor in assessing
reprehensibility. The district court did not err in recognizing
that Exxon recklessly disregarded the physical safety of the
crew and rescuers, and thereby increased the reprehensibility
of its conduct in putting Hazelwood in command.
c. Financially Vulnerable Targets.
The district court found Exxon’s conduct harmed finan-
cially vulnerable subsistence fishermen. District Court Opin-
ion, 296 F. Supp. 2d at 1095. Exxon does not dispute that
subsistence fishermen were financially vulnerable or that its
reckless actions harmed them. It does contend that this factor
applies only in fraud cases when a defendant intentionally
defrauds financially vulnerable targets, such as the sick or
elderly. While we do not believe the subfactor is so limited,
we agree there must be some kind of intentional aiming or tar-
geting of the vulnerable that did not occur here.
The purpose of reprehensibility analysis is to determine
“the enormity” of the offense, which “reflects the accepted
view that some wrongs are more blameworthy than others.”
BMW v. Gore, 517 U.S. at 575. The notion of “targeting” con-
notes some element of intent to harm particular individuals or
categories of individuals. See Planned Parenthood, 422 F.3d
at 958-59 (holding plaintiffs were financially vulnerable
because the defendants’ threats attempted to scare the plain-
IN RE: THE EXXON VALDEZ 19729
tiffs into quitting the jobs on which the plaintiffs’ livelihoods
depended). Exxon did not intentionally target subsistence
fishermen.
We conclude in this case that this consideration does not
materially affect our assessment of the reprehensibility of
Exxon’s conduct.
d. Repeated Action.
[8] The district court found that the conduct was repetitive
because Exxon repeatedly allowed Hazelwood to command
its supertankers for three years after it knew he had resumed
drinking. District Court Opinion, 296 F. Supp. 2d at 1096. As
the district court observed, Exxon did so, even though Exxon
was fully aware of the tremendous risk of harm that it
entailed. Id. “Over and over again, Exxon did nothing to pre-
vent Captain Hazelwood [from sailing] into and out of Prince
William Sound with a full load of crude oil.” Id.
[9] Exxon argues that the relevant conduct is the grounding,
not the knowledge of Hazelwood’s incapacity to command.
That is not consistent with our description of the relevant mis-
conduct in Punitive Damages Opinion I as putting (and leav-
ing) Captain Hazelwood in command. Punitive Damages
Opinion I, 270 F.2d at 1237-38. The district court’s finding of
repetitive misconduct was not clearly erroneous. Planned
Parenthood, 422 F.3d at 954. It militates in favor of increased
reprehensibility.
e. Intentional Malice or Mere Accident.
Putting Captain Hazelwood in command of the super-
tanker was knowing and reckless misconduct. We agree with
the district court that this misconduct was not “mere acci-
dent.” District Court Opinion, 296 F. Supp. 2d at 1096.
Exxon points out that relieving Hazelwood of command
would have denied Hazelwood an employment opportunity on
19730 IN RE: THE EXXON VALDEZ
the basis of alcoholism and theoretically subjected Exxon to
a disability discrimination lawsuit. While Exxon’s concerns
may have been appropriate considerations in its evaluation of
the risk, they do not justify the dangers its decision created to
the livelihoods of tens of thousands of individuals. Spilling
the oil was an accident, but putting a relapsed alcoholic in
charge of a supertanker was not. And anyone doing so would
know they were imposing a tremendous risk on a tremendous
number of people who could not do anything about it.
Exxon’s knowing disregard of the interests of commercial
fishermen, subsistence fishermen, fish processors, cannery
workers, tenders, seafood brokers and others dependent on
Prince William Sound for their livelihoods, cannot be
regarded as merely accidental.
[10] At the same time, we must acknowledge that Exxon
acted with no intentional malice towards the plaintiffs. We
have consistently treated intentional conduct as more repre-
hensible than other forms of conduct subject to punitive dam-
ages. See Zhang, 339 F.3d at 1043; Bains LLC v. Arco
Products Co., 405 F.3d 764, 775 (9th Cir. 2005); Southern
Union Co. v. Southwest Gas Corp., 415 F.3d 1001, 1011 (9th
Cir. 2005). In this case, however, as we have already recog-
nized, “as bad as the oil spill was, Exxon did not spill the oil
on purpose.” Punitive Damages Opinion I, 270 F.3d at 1242-
43. While the reprehensibility of Exxon’s conduct that pro-
duced economic harm to thousands of individuals is high, the
conduct did not result in intentional damage to anyone. This
subfactor thus militates against viewing Exxon’s misconduct
as highly reprehensible. Id.
f. Mitigation of Reprehensibility.
[11] In assessing reprehensibility, we must not only take
into account the reprehensibility of the original misconduct,
but we have held that we must also take into account what has
been done to mitigate the harm that the misconduct caused.
Punitive Damages Opinion I, 270 F.3d at 1242; see also Swin-
IN RE: THE EXXON VALDEZ 19731
ton, 270 F.3d at 814-15 (discussing weight and relevance of
post-tort mitigation evidence). As we said in Punitive Dam-
ages Opinion I, mitigation is to be considered “in order to
encourage such socially beneficial behavior.” Punitive Dam-
ages Opinion I, 270 F.3d at 1242. Here, Exxon instituted a
system of voluntary payments to plaintiffs and it undertook
prompt cleanup efforts. We agree with what we said before:
“Exxon spent millions of dollars to compensate many people
after the oil spill, thereby mitigating the harm to them and the
reprehensibility of its conduct.” Id.
IN RE: THE EXXON VALDEZ 19733
Volume 2 of 2
IN RE: THE EXXON VALDEZ 19735
g. Evaluation of Reprehensibility.
Placing a relapsed alcoholic in control of a supertanker was
highly reprehensible conduct. As a result, Exxon disrupted the
lives of thousands of people who depend on Prince William
Sound for their livelihoods, and endangered its own crew and
their rescuers. Over the span of three years, Exxon could and
should have relieved Captain Hazelwood of command of
supertankers, but it did not do so. At the same time, however,
Exxon did not act with malice toward plaintiffs or anyone
else; Exxon did not intend to damage plaintiffs’ livelihoods or
cause them the emotional grief that went with the economic
loss.
[12] Thus, Exxon’s conduct is in the higher realm of repre-
hensibility, but not in the highest realm. In addition Exxon’s
post-grounding efforts to mitigate the harm serve materially
to reduce the reprehensibility of the original misconduct.
They reduce the reprehensibility for purposes of our review
to, at most, a mid range.
2. Ratio of Harm to Punitives.
The second BMW guidepost, as reiterated and refined by
State Farm, is the “ratio between harm, or potential harm, to
the plaintiff and the punitive damages award.” State Farm,
538 U.S. at 424. The goal of our review at this guidepost is
to “ensure that the measure of punishment is both reasonable
and proportionate to the amount of harm to the plaintiff and
to the general damages recovered.” Id. at 426.
a. Calculating The Harm.
In this case, the figure the district court used to represent
the harm to plaintiffs was $513.1 million. District Court
Opinion, 296 F. Supp. 2d at 1103. Calculating the total harm
to plaintiffs proved to be difficult because, in addition to con-
siderable economic losses, the spill caused other undeniable,
19736 IN RE: THE EXXON VALDEZ
if not easily quantifiable, harms. See id. at 1094. The district
court eventually calculated the harm figure by adding the
compensatory damages verdict from the second phase of the
trial to the actual judgments, settlements, and other recoveries
various plaintiffs obtained as a result of the spill. Id. at 1099-
1101.
Exxon does not dispute that the district court’s finding of
$513.1 million in harm is fundamentally a valid measure of
the actual harm caused by the spill. However, it disagrees that
it should be the figure we ultimately use as part of the ratio
of punitive damages to harm that we review as the second
guidepost.
Exxon’s principal contention is that, before establishing the
harm figure in the ratio, we must first deduct millions of dol-
lars of payments and costs from the figure representing the
total actual harm caused by the spill. Exxon would have us
subtract a sum of about $493 million representing amounts
paid to plaintiffs through Exxon’s voluntary claims program
and other settlements. Exxon would then have us use that
reduced figure to represent the total harm in assessing the
ratio of punitives to harm.
[13] This brings us to the central argument Exxon makes in
this appeal. Exxon focuses on the language of our prior opin-
ion in Punitive Damages Opinion I where we said, in a
lengthy discussion of formulating possible ratios pursuant to
BMW v. Gore, “[t]he amount that a defendant voluntarily pays
before judgment should generally not be used as part of the
numerator, because that would generally deter settlements
prior to judgment.” 270 F.3d at 1244. Exxon contends this
now means that in assessing the ratio of harm to punitives
after State Farm, we should ignore the total harm in favor of
a figure that in fact more closely approximates Exxon’s
remaining post-judgment liability for compensatory damages.
If we were to adopt Exxon’s interpretation of that sentence
as binding us now, the measure of harm would be a meager
IN RE: THE EXXON VALDEZ 19737
$20.3 million. Applying the ratio of close to 1 to 1 that Exxon
asserts is appropriate, Exxon contends we should cap punitive
damages at $25 million. Under Exxon’s theory, even using a
ratio of 9 to 1, which approaches the highest allowable under
State Farm, punitive damages would be capped at $182.7 mil-
lion. This would be the limit, even though Exxon’s reckless-
ness led to more than $500 million in harm. We said, in
discussing the nature of the relationship between punitive
damages and harm:
The “reasonable relationship” is intrinsically
somewhat indeterminate. The numerator is “the
harm likely to result from the defendant’s conduct.”
[BMW v. Gore, 571 U.S. at 581]. The denominator
is the amount of punitive damages. Because the
numerator is ordinarily arguable, applying a mathe-
matical bright line as though that were an objective
measure of how high the punitive damages can go
would give a false suggestion of precision. That is
one reason why the Supreme Court has emphasized
that it is not possible to “draw a mathematical bright
line between the constitutionally acceptable and the
constitutionally unacceptable that would fit every
case.” [BMW v. Gore, 517 U.S. at 576]. . . .
Although it is difficult to determine the value of
the harm from the oil spill in the case at bar, the jury
awarded $287 million in compensatory damages,
and the ratio of $5 billion punitive damages to $287
million in compensatory damages is 17.42 to 1. The
district court determined that “total harm could range
from $287 million to $418.7 million,” which pro-
duces a ratio between 12 to 1 and 17 to 1. This ratio
greatly exceeds the 4 to 1 ratio that the Supreme
Court called “close to the line” in Pacific Mutual
Life Ins. Co. v. Haslip[, 499 U.S. at 23].
The amount that a defendant voluntarily pays
before judgment should generally not be used as part
19738 IN RE: THE EXXON VALDEZ
of the numerator, because that would deter settle-
ments prior to judgment. “[T]he general policy of
federal courts to promote settlement before trial is
even stronger in the context of large scale class
actions,” such as this one. [Cf. Icicle, 229 F.3d at
795; Baker, 239 F.3d at 988].
Punitive Damages Opinion I, 270 F.3d at 1243-44.
The district court rejected the proposition that voluntary
payments before judgment should not generally be used as
part of the calculation of harm. But our prior decision did not
constrain the ratio analysis so firmly as Exxon contends. We
did not say that voluntary payments before judgment could
not be considered in calculating the numerator for purposes of
comparing the numerator with the amount of the award; we
said that they “generally” could not. Considerations of settle-
ment, critical to our analysis in Icicle, 229 F.3d 790, bear on
the due process concerns at the heart of BMW’s discussion.
Whenever a defendant governed by a board is sued for con-
duct egregious enough to create a genuine risk of punitive
damages, those making its litigation decisions have to try to
predict what may happen in court. Some may recommend
obdurate resistance, and some may recommend settlement, or
prejudgment payments even without settlement, each making
arguments based on predictions. Those recommending pay-
ment can reasonably predict that the entity will not be ham-
mered as hard as if it obstinately resisted acceptance of any
responsibility. And their prediction would be reasonable.
Criminal penalties have always been somewhat more lenient
for those who accepted responsibility prior to judgment, see
United States v. Gonzalez, 897 F.2d 1018, 1021 (9th Cir.
1990) (upholding the constitutionality of U.S.S.G. §3E1.1),
and punitive damages are but a civil version of punishment
for wrongdoing. It makes no practical sense to disarm all
those in the future who want their boards to accept some
responsibility by cutting out all the benefit their firms would
get.
IN RE: THE EXXON VALDEZ 19739
[14] There is a limit, however, to how far acceptance of
responsibility goes in both contexts. No criminal defendant
guilty of a serious wrong ordinarily resulting in lengthy
imprisonment could reasonably assume that he would receive
no imprisonment at all if he promptly pleaded guilty. And no
defendant’s board could reasonably predict that the defendant
could escape all punishment by paying predicted compensa-
tory damages before judgment. While “generally” prepay-
ments should not be used as part of the calculation of harm,
Punitive Damages Opinion I, 270 F.3d at 1244, that is not a
mechanical arithmetic limit, just as the nine to one limit is not
a mechanical arithmetic limit. See State Farm, 538 U.S. at
425; Planned Parenthood, 422 F.3d at 962; Bains, 405 F.3d
at 776-77. Due process considerations limit punitive damages
to what the wrongdoer could reasonably foresee, and that
works both ways.
[15] Therefore, Exxon’s argument goes too far. It would
produce, in Exxon’s analysis, a $25 million limit on punitive
damages where the harm was $513 million but $493 million
was paid before judgment. For purposes of notice to a tortfea-
sor of its liability risk, $25 million for causing a half billion
loss would obviously be too good to be true. A defendant can-
not buy full immunity from punitive damages by paying the
likely amount of compensatory damages before judgment.
[16] There is also a limit on the law of the case doctrine.
One exception to this doctrine exists for an intervening
change of law. See United States v. Bad Marriage, 439 F.3d
534, 538 (9th Cir. 2006). In this case, there is such a change.
Subsequent to our decision in Punitive Damages Opinion I,
the Supreme Court decided State Farm. In that case, the fact
that State Farm “paid the excess verdict before the complaint
was filed,” State Farm, 538 U.S. at 426, was a mitigating fac-
tor reducing the ratio. The Supreme Court did not use it to
reduce the amount of total harm. The Court in State Farm
itself took into account, in its consideration of whether the
ratio was proper, the substantiality and completeness of the
19740 IN RE: THE EXXON VALDEZ
compensatory award, the essentially economic nature of the
harm, the likelihood that the punitive award duplicated the
compensatory, and the defendant’s prompt settlement of com-
pensatory damages. Id. All these mitigating factors were used
to assess whether the ratio itself was likely to comply with
due process. State Farm did not use such mitigating factors to
reduce the harm. State Farm makes untenable the idea that a
defendant’s voluntary, pre-judgment payment of compensa-
tory damages may not generally be used as part of the calcula-
tion of harm. Punitive Damages Opinion I, 270 F.3d at 1244.
There are also some secondary issues relating to calculating
harm. One concerns payments made by Aleyska Pipe Lines
Service Corporation. Exxon asks us to set off $98 million that
its original co-defendant Alyeska Pipe Lines Service Corpora-
tion paid in settlement of plaintiffs’ claims. A consortium of
oil companies, including Exxon, had contracted with Alyeska
to respond to any oil spill in the area. After the Exxon Valdez
disaster, plaintiffs sued Alyeska for negligence in its response
to the spill, and eventually settled all claims against Alyeska,
including punitive damages, for $98 million. Exxon’s argu-
ment here is that this $98 million payment represents harm
attributable to Alyeska’s negligence, not Exxon’s reckless-
ness, and therefore should not be used to calculate damages
designed to punish and deter Exxon’s own harmful conduct.
There are two major reasons why Exxon’s position is not
correct. First, the harm caused by the oil spill is attributable
to Exxon under tort law principles. Exxon knowingly placed
a relapsed alcoholic in control of a supertanker loaded
with millions of gallons of oil. When it did so, Exxon
accepted the foreseeable risk from its choice of captain
that the tanker would have an accident causing an oil
spill, and that Alyeska might further aggravate the harm. See
Restatement (Second) of Torts §§ 433(a) cmt. c, 447(c),1 cmt.
1
“The fact that an intervening act of a third person is negligent in itself
or is done in a negligent manner does not make it a superseding cause of
harm to another which the actor’s negligent conduct is a substantial factor
in bringing about, if . . . (c) the intervening act is a normal consequence
of a situation created by the actor’s conduct and the manner in which it
is done is not extraordinarily negligent.”
IN RE: THE EXXON VALDEZ 19741
e.2 In fact, William Stevens, the President of Exxon, testified
before Congress that Exxon knew Alyeska was not prepared
to contain a spill of the size caused by the Exxon Valdez.
Because Exxon could be held liable for this foreseeable risk,
the district court properly included the harm caused by
Alyeska’s response as the natural consequence of the harm
caused by Exxon.
Second, the situation Exxon now complains of is strictly of
its own making. In 1994, the Supreme Court held that the pro-
portional fault rule governs calculation of non-settling defen-
dant’s liability for compensatory damages in maritime torts.
See McDermott, Inc. v. AmClyde, 511 U.S. 202 (1994).
Instead of following McDermott, Exxon agreed with plaintiffs
to proceed as if a pro tanto rule with respect to co-defendants’
settlements still governed.3 Exxon apparently thought it more
2
“The words ‘extraordinarily negligent’ denote the fact that men of ordi-
nary experience and reasonable judgment, looking at the matter after the
event and taking into account the prevalence of that ‘occasional negli-
gence,’ which is one of the incidents of human life,’ would not regard it
as extraordinary that the third person’s intervening act should have been
done in the negligent manner in which it was done. Since the third per-
son’s action is a product of the actor’s negligent conduct, there is good
reason for holding him responsible for its effects, even though it be done
in a negligent manner, unless the nature of the negligence is altogether
unusual.”
3
The stipulation between the parties reads in relevant part:
“[N]otwithstanding the rule of proportionate shares set out in
McDermott, Inc. v. AmClyde, credit for the Aleyska settlement
. . . shall be deducted from the sum that would, in the absence of
this stipulation, be the aggregate amount of any judgment or
judgment in favor of plaintiffs . . . and the liability of Exxon and
Shipping for compensatory damages to any and all plaintiffs
herein shall be reduced by the aggregate sum of $98 million. . . .
The parties expressly recognize and agree that the sum of $98
million is not necessarily a fair measure of what would be
Alyeska’s proportionate share of liability to plaintiffs[,] but the
parties are entering into this Stipulation in order to avoid the
alteration of their trial preparation that would result from a last-
minute overturning of the parties’ assumption that [the pro tanto
approach] would govern at trial and from requiring litigation of
Alyeska’s proportionate share.”
19742 IN RE: THE EXXON VALDEZ
advantageous at the time to have the $98 million deducted
from the final compensatory damage award after the fact,
rather than have the jury make a proportionate fault finding.
Since Exxon has already agreed that the $98 million does not
represent harm attributable to Alyeska, Exxon is not war-
ranted in asserting that this is what it represents now.
Exxon also contends that some $34 million included in the
district court’s harm finding should not properly be consid-
ered harm at all. This figure represents an apparent $9 million
overpayment by the Trans-Alaska Pipeline Liability Fund,
$13.4 million from the Phase IV settlement Exxon claims is
already accounted for elsewhere in the district court’s calcula-
tions, and $11.5 million paid to Native corporations and
municipalities for environmental clean up.
We conclude that the $9 million overpayment, inadver-
tently included in the district court’s findings, should be sub-
tracted from the total harm. Because Exxon does not specify
where the $13.4 million in double-counting is reflected in
other parts of the district court’s calculation, however, we are
unable to determine from our own review of the record where
they might be included. Therefore, Exxon has failed to con-
vince us that this figure should be reduced from the harm.
Finally, the $11.5 million Exxon paid to the plaintiffs for
clean up, like its early settlement of plaintiffs’ prospective
commercial losses, is a mitigating factor relevant to our judg-
ment about whether this punitive damages award is appropri-
ate. Like the earlier settlements the proper place for its
influence is as a mitigating circumstance to be considered in
our overall determination of the ratio’s reasonableness. It
does, however, represent a part of the total harm for which
Exxon is accountable.
[17] In sum, the district court’s attempt to approximate the
actual harm by adding together the various judgments, settle-
ments, and liabilities that Exxon had already acknowledged
IN RE: THE EXXON VALDEZ 19743
was sound. Subtracting the $9 million Trans-Alaska Pipeline
Liability Fund overpayment that the district court inadver-
tently overlooked, we conclude this record supports a total
harm component of $504.1 million for purposes of analyzing
the ratio of harm to punitives.
b. Evaluating the Reasonableness of the Ratio of Harm
to Punitives.
After our second remand, the district court reduced the
original punitive damages award of $5 billion to $4.5 billion.
This yielded a punitive damages to harm ratio of 8.77 to 1.
After our $9 million adjustment to the harm figure, that ratio
now stands at 8.93 to 1—a proportion bordering on the pre-
sumption of constitutional questionability. See State Farm,
538 U.S. at 425.
[18] In State Farm, the Supreme Court explained that “few
awards exceeding a single-digit ratio between punitive and
compensatory damages, to a significant degree, will satisfy
due process.” Id. at 425. Relatively high single-digit ratios
and perhaps even double-digit ratios may comply with due
process where “a particularly egregious act has resulted in
only a small amount of economic damages” or where “the
injury is hard to detect or the monetary value of the noneco-
nomic harm might have been difficult to determine.” Id.
(quoting BMW v. Gore, 517 U.S. at 582). Conversely, lower
single-digit ratios, even as low as 1 to 1, might mark the outer
limits of due process where compensatory damages are sub-
stantial. Id. This strongly suggests the ratio here is too high.
Our own decisions are also helpful. In Planned Parent-
hood, we used this guidance from State Farm to construct a
“rough framework” for determining the appropriate ratio of
punitive damages to harm. See 422 F.3d at 962. We held that
in cases where there are “significant economic damages” but
behavior is not “particularly egregious,” a ratio of up to 4 to
1 “serves as a good proxy for the limits of constitutionality.”
19744 IN RE: THE EXXON VALDEZ
Id. (citing State Farm, 538 U.S. at 425). In cases with signifi-
cant economic damages and “more egregious behavior,” how-
ever, a single-digit ratio higher than 4 to 1 “might be
constitutional.” Id. (citing Zhang, 339 F.3d at 1043-44; Bains,
405 F.3d at 776-77). Finally, in cases where there are “insig-
nificant” economic damages and the behavior is “particularly
egregious,” we said that “the single-digit ratio may not be a
good proxy for constitutionality.” Id.
The circumstances of this case fit into the second class of
cases in the Planned Parenthood framework. Exxon’s reck-
less decision to risk the livelihood of thousands by placing a
relapsed alcoholic in command of a supertanker, while molli-
fied by its prompt settlement and clean up policies, was “par-
ticularly egregious.” Moreover, the $500 million of loss is
well within the range of “significant” economic damages.
Thus, under Planned Parenthood, an appropriate ratio would
be above 4 to 1.
[19] Our review of the reprehensibility and mitigation
under the first guidepost of reprehensibility, however, com-
pels us to conclude the award should be toward the lower end
of that range. Our cases have generally reserved high single-
digit ratios for the most egregious forms of intentional mis-
conduct, such as threats of violence and intentional racial dis-
crimination. See Zhang, 339 F.3d at 1044 (upholding a ratio
of 7:1 for intentional racism); Bains, 405 F.3d at 776-77
(remanding for district court to set a ratio between 6:1 and 9:1
for intentional racism); Planned Parenthood 422 F.3d at 952,
963 (remitting to a 9:1 ratio for threats of violence). Exxon’s
conduct in this case, while inexcusable, did not involve any
intentional conduct that would normally be required to sup-
port a punitive damages award with a high single-digit ratio.
[20] Here mitigating factors also come into play. Exxon
instituted prompt efforts to clean up the spill and to compen-
sate the plaintiffs for their economic harm. As we earlier
observed, if a defendant acts promptly to ameliorate harm for
IN RE: THE EXXON VALDEZ 19745
which it is responsible, the size of a punitive damages award
should be reduced to encourage socially beneficial behavior.
Punitive Damages Opinion I, 270 F.3d at 1242. Moreover, the
costs that Exxon incurred in compensating the plaintiffs and
cleaning up the oil spill have already substantially served the
purposes of deterrence, lessening the need for a high punitive
damages award. Id. at 1244.
[21] Thus, Exxon’s conduct was particularly egregious and
involved significant economic damages. Nevertheless, its con-
duct was not intentional and it promptly took steps to amelio-
rate the harm it caused. With these considerations in mind, we
conclude that a punitive damages to harm ratio of more than
5 to 1 would violate due process standards under current con-
trolling Supreme Court and Ninth Circuit authority.
3. Comparable Penalties.
The third BMW v. Gore/State Farm guidepost is compara-
ble legislative penalties. Given the emphasis on this factor in
BMW v. Gore, we went to some lengths in Punitive Damages
Opinion I to extrapolate the comparable penalties that would
be imposed under state and federal law for the spill, the high-
est being approximately $1.03 billion dollars.
In State Farm, however, the Supreme Court stated that
“need not dwell long on this guidepost.” State Farm, 538 U.S.
at 428. In that case, the comparable penalties were not partic-
ularly informative: the comparable civil penalty was easily
“dwarfed” by the punitive award, and as to criminal penalties,
the Court explained that although their existence “does have
bearing on the seriousness with which a State views the
wrongful action,” they had “less utility” “[w]hen used to
determine the dollar amount of the award.” Id.
In our own circuit’s more recent post-BMW v. Gore and
State Farm cases, we have generally not attempted to quantify
legislative penalties. We have looked only to whether or not
19746 IN RE: THE EXXON VALDEZ
the misconduct was dealt with seriously under state civil or
criminal laws. See, e.g., Planned Parenthood, 422 F.3d at
963. In several recent decisions we have not discussed the
factor at all. See Southern Union Co., 415 F.3d at 1009-11
(9th Cir. 2005); Hangarter, 373 F.3d at 1014-15. This may be
because legislative judgments, unlike jury verdicts, do not
represent an individualized assessment of reprehensibility.
Here, the matter of spilling oil in navigable water has
clearly been taken quite seriously by legislatures, with Con-
gress enacting a specific statute after the spill, and state and
federal law having already authorized substantial penalties.
See Punitive Damages Opinion I, 270 F.3d at 1245-46. Thus,
the third BMW v. Gore/State Farm factor, substantial legisla-
tive penalties, supports our conclusion that Exxon’s reckless
conduct merits substantial punitive damages.
IV. CONCLUSION
For the foregoing reasons, Exxon’s reckless misconduct in
placing a known relapsed alcoholic in command of a super-
tanker, loaded with millions of barrels of oil, to navigate the
pristine and resource abundant waters of Prince William
Sound was reckless and warrants severe sanctions. The mis-
conduct did not, however, warrant sanctions at the highest
range allowable under the due process analysis, as explained
in the Supreme Court’s most recent opinion in State Farm.
[22] The district court’s imposition of punitive damages of
$4.5 billion, entered after our remand to reconsider due pro-
cess in light of State Farm, represents damages at the very
highest range, and is not warranted. It is not consistent with
the Supreme Court’s opinion in State Farm or with the most
important tenets of our prior opinion in Punitive Damages
Opinion I relating to Exxon’s mitigation of reprehensibility.
Although a one to one ratio marked the upper limit in State
Farm, the conduct here was far more egregious and justifies
a considerably higher ratio. An award of damages represent-
IN RE: THE EXXON VALDEZ 19747
ing a ratio of punitives to harm of 5 to 1 is consistent with
both.
[23] The judgment of the district court is VACATED, and
the matter is remanded with instructions that the district court
further reduce the punitive damages award to the amount of
$2.5 billion. We have decided pursuant to the de novo stan-
dard of review imposed by Leatherman, 532 U.S. at 436, that
this is the appropriate limit on punitive damages in this case
under the prevailing legal precedent. Thus, we do not remand
for further consideration of what the limit may be. It is time
for this protracted litigation to end.
VACATED AND REMANDED.
BROWNING, Circuit Judge, dissenting:
Because I believe the punitive damages award in this case
is not “grossly excessive,” I would affirm. In reviewing the
size of a punitive damages award, our sole duty is to ensure
its imposition does not violate due process. Where an award
lies within the bounds of due process, as this one does, we
may not substitute a figure we consider more reasonable for
one fairly awarded by a jury and properly reviewed by a dis-
trict court. Therefore, I respectfully dissent.
1. Due Process Review of Punitive Damages
To comport with the Constitution, a punitive damages
award must strike the proper balance between the state goals
of deterrence and retribution and a defendant’s due process
right to be free from arbitrary punishment. See State Farm
Mut. Auto Ins. Co. v. Campbell, 538 U.S. 408, 416-17 (2003).
The Supreme Court has determined the balance is upset at the
point an award becomes “grossly excessive,” reasoning that,
“[t]o the extent an award is grossly excessive, it furthers no
19748 IN RE: THE EXXON VALDEZ
legitimate purpose and constitutes an arbitrary deprivation of
property.” Id. at 417 (citing Pac. Mut. Life Ins. Co. v. Haslip,
499 U.S. 1, 42 (1991)).
But as the majority notes, ante at 19720, the Court has
shown little inclination to define “grossly excessive” more
concretely. See State Farm, 538 U.S. at 424; BMW of N. Am.,
Inc. v. Gore, 517 U.S. 559, 582 (1996). While it has several
times hinted at the possibility of establishing a 4 to 1 bench-
mark ratio of punitive damages to compensatory damages, it
has never explicitly done so. See State Farm, 538 U.S. at 425
(citing BMW, 517 U.S. at 581; Haslip, 499 U.S. at 23-24).
Instead, the one constitutional limit the Court has identified is
that generally found between single-digit and double-digit
multipliers. See id. (“[F]ew awards exceeding a single-digit
ratio between punitive and compensatory damages, to a sig-
nificant degree, will satisfy due process. . . . Single-digit mul-
tipliers are more likely to comport with due process, while
still achieving the State’s goals of deterrence and retribution,
than awards with ratios in range of 500 to 1 [or] 145 to 1.”
(internal citations omitted)).
The Supreme Court’s reluctance to establish a more con-
crete limit, or to adopt any other sort of categorical approach,
counsels that in cases such as the one at bar, “[t]he judicial
function is to police a range, not a point.” Mathias v. Accor
Econ. Lodging, Inc., 347 F.3d 672, 678 (7th Cir. 2003) (citing
BMW, 517 U.S. at 582-83; TXO Prod. Corp. v. Alliance Res.
Corp., 509 U.S. 443, 458 (1993)). We should let this punitive
damages award stand unless the BMW factors indicate with
some certainty that it was the product of caprice or bias such
that its imposition violates Exxon’s right to due process.1 “As-
1
The majority correctly recognizes, ante at 19702, that a determination
that an award is “grossly excessive” is reviewed de novo. Cooper Indus.,
Inc. v. Leatherman Tool Group, Inc., 532 U.S. 424, 436 (2001). De novo
review, however, is only applied to determine the constitutional upper
limit on a punitive damages award in a given case. If the award does not
IN RE: THE EXXON VALDEZ 19749
suming that fair procedures were followed, a judgment that is
a product of that process is entitled to a strong presumption
of validity. Indeed, there are persuasive reasons for suggesting
that the presumption should be irrebuttable, or virtually so.”
TXO, 509 U.S. at 457 (plurality opinion) (internal citations
omitted).
No procedural concerns are present here that, at the outset,
might weaken the “strong presumption of validity” to which
this award is entitled. See BMW, 517 U.S. at 586-87 (Breyer,
J., concurring) (citing TXO, 509 U.S. at 457; Haslip, 499 U.S.
at 40-42); see also id. at 583 (“In most cases, the ratio will be
within a constitutionally acceptable range, and remittitur will
not be justified on this basis.”). The jury received thorough,
almost prescient, punitive damages instructions.2 And
although Exxon is a large corporation, there is no indication
that the size of this punitive damages award resulted from an
improper “emphasis on the wealth of the wrongdoer” at trial,
see TXO, 509 U.S. at 464, or from an attempt by Plaintiffs or
the jury to “make up for the failure of other factors, such as
exceed this ceiling, we owe deference to the determination of the district
court and jury. See id. at 433-34 (noting that within substantive limits on
an award, the jury has discretion in establishing the precise number). Coo-
per does not give us free reign to pick the number we would have chosen
had we sat as the jury or district court.
2
The district court explained the retributive and deterrent purposes of
punitive damages and the “appropriate,” i.e., non-environmental, counter-
vailing “Alaska-oriented” interests of the plaintiffs; cautioned the jury that
punitive damages must have a rational basis in the record and bear a rea-
sonable relationship to the harm; admonished the jury not to be arbitrary;
and, perhaps most importantly, alerted them that they could take Exxon’s
mitigation efforts into account when determining both whether punitive
damages were warranted and, if so, the size of the award. See In re Exxon
Valdez, 296 F. Supp. 2d 1071, 1091 (D. Alaska 2004). Considering that
BMW and State Farm were decided after the jury trial, these instructions
indeed were, as the majority notes, ante at 19706, “in retrospect, quite for-
ward looking.”
19750 IN RE: THE EXXON VALDEZ
‘reprehensibility,’ ” see BMW, 517 U.S. at 591 (Breyer, J., con-
curring).3
Furthermore, Exxon’s conduct implicates a strong state
interest in punishing reckless behavior and deterring its future
repetition. Our constitutional review must consider punitive
damages in the context of these state interests. See id. at 568
(“Only when an award can fairly be categorized as ‘grossly
excessive’ in relation to these interests does it enter the zone
of arbitrariness that violates the Due Process Clause of the
Fourteenth Amendment.” (emphasis added)). In both State
Farm and BMW, the Court’s guidepost analysis was not an
entirely separate endeavor, but instead gave structure to its
constitutional concern that the defendants’ due process rights
were violated by judgments incorporating punishment for
conduct not properly before the awarding court. See State
Farm, 538 U.S. at 419-24 (discussing out-of-state conduct
and conduct unrelated to plaintiffs’ injuries); BMW, 517 U.S.
at 568-73 (describing out-of-state conduct).
In stark contrast, there is no concern here that the scope of
appropriate state interests has been exceeded. This punitive
damages award was imposed pursuant to strong, but properly
circumscribed, state interests. As the district court noted,
Plaintiffs’ collection of federal and state claims all arise out
of harm to “Alaska fisheries, Alaska business, [and] Alaska
property” caused by Exxon’s conduct having “a direct nexus
with the grounding of the Exxon Valdez on Bligh Reef in
Prince William Sound.” See In re Exxon Valdez, 296 F. Supp.
2d at 1090-91.
3
Indeed to the contrary, there is evidence in the record comparing this
award to Exxon’s wealth in a manner that suggests the award was neither
capricious nor an instance of over-deterrence. See In re Exxon Valdez, 296
F. Supp. 2d at 1105-06 (“[A]fter judgment was entered on the punitive
damages award, Exxon’s treasurer advised the court that ‘the full payment
of the Judgment would not have a material impact on the corporation or
its credit quality.’ ”).
IN RE: THE EXXON VALDEZ 19751
Thus, before engaging in the multi-factored analysis intro-
duced in BMW and reiterated in State Farm, it is important to
note that we are not faced here with any of the major constitu-
tional concerns present in those cases.
2. BMW Guidepost Analysis
Although I agree with much of the majority’s analysis
under BMW and State Farm, I cannot agree with it all.
Despite clear guidance from the Court that reprehensibility is
the critical factor, the majority, ante at 19722, 19730, gives
defining weight to a consideration entirely of its own creation.
It then engages, ante at 19743-45, in what appears to be the
very “categorical approach” the Supreme Court has consis-
tently rejected. See BMW, 517 U.S. at 582. An appropriate
evaluation of the award in question demonstrates it is consti-
tutionally permissible.
(a) Reprehensibility
In its most recent punitive damages opinion, the Supreme
Court gave direct instruction to courts evaluating reprehensi-
bility. State Farm, 538 U.S. at 419. As the majority correctly
notes, ante at 19716, we must weigh five factors: (1) whether
the harm was solely economic, (2) whether the conduct
showed indifference to or reckless disregard for others’ health
and safety, (3) whether the conduct’s target was financially
vulnerable, (4) whether the conduct involved repeated actions,
and (5) whether the harm resulted from intentional malice or
mere accident. State Farm, 538 U.S. at 419. Somewhat inex-
plicably, though, the majority adds to the State Farm factors
one of its own creation—post-tort mitigation. See ante at
19722 (“We must also consider mitigating factors.”); id. at
19730. I do not agree that mitigation should be considered in
a reprehensibility analysis. Furthermore, unlike the majority,
I believe that all five State Farm factors weigh in favor of
finding that Exxon’s reckless conduct was highly reprehensi-
ble.
19752 IN RE: THE EXXON VALDEZ
(i) Mitigation
I cannot agree with the majority’s assertion that we must
consider Exxon’s post-tort mitigation in evaluating the repre-
hensibility of its original misconduct. See ante at 19722. The
majority is correct that when we previously considered
Exxon’s conduct, we suggested mitigation should be consid-
ered as part of the reprehensibility analysis. See Baker v.
Hazelwood (In re the Exxon Valdez), 270 F.3d 1213, 1242
(9th Cir. 2001) [hereinafter Punitive Damages Opinion I].
However, subsequent to our decision in Punitive Damages
Opinion I, the Supreme Court decided State Farm, which sig-
nificantly refined the Court’s punitive damages jurisprudence.
The analysis of reprehensibility in State Farm differs from
our analysis in Punitive Damages Opinion I, and, as interven-
ing controlling authority, gives us reason to reconsider our
prior approach. See United States v. Bad Marriage, 439 F.3d
534, 538 (9th Cir. 2006) (noting that a court may reexamine
an issue it previously decided if “intervening controlling
authority makes reconsideration appropriate”).
When we considered mitigation in Punitive Damages Opin-
ion I, Supreme Court precedent provided limited guidance for
the reprehensibility analysis. In State Farm, however, the
Supreme Court explained that courts should use five specific
factors to evaluate reprehensibility. 538 U.S. at 419. Although
there was evidence of mitigation in State Farm, id. at 426, the
Court did not include mitigation as one of the factors in the
reprehensibility analysis. Given such explicit guidance, this
omission acquires particular significance and suggests we
reconsider our prior statement about mitigation.4 As explained
4
The majority suggests State Farm is distinguishable because the dis-
pute concerned an insurance contract rather than a toxic tort. See ante at
19703, 19723. However, the five-part reprehensibility analysis in State
Farm is designed to evaluate a broad range of conduct, and nothing in the
opinion indicates this framework applies only to insurance cases. Further-
more, despite factual differences between the cases, the majority itself rec-
IN RE: THE EXXON VALDEZ 19753
below, upon reconsideration I find that including mitigation in
the reprehensibility analysis is neither good law nor good pol-
icy.
Aside from a single mention of mitigation in Punitive Dam-
ages I, the majority’s approach is supported by neither
Supreme Court precedent nor our own precedent. The major-
ity cites Swinton v. Potomac Corp., 270 F.3d 794 (9th Cir.
2001), as support, even though Swinton, like Punitive Dam-
ages Opinion I, was decided prior to State Farm. Therefore,
it did not have the benefit of the Supreme Court’s most recent
and comprehensive analysis of reprehensibility. Furthermore,
Swinton did not consider whether mitigation warrants a reduc-
tion in a punitive damages award imposed by a jury. Rather,
our analysis was limited to the question of whether the district
court erred in excluding evidence of mitigation efforts in an
employment discrimination suit. See id. at 811, 815. We
refused in that case to create a generalized rule in the employ-
ment context or anywhere else. See id. at 814-15. Instead, we
left it to the discretion of the district courts to decide the rele-
vancy of mitigation efforts on a case-by-case basis.
We also expressly rejected the idea that the Supreme Court
endorses the categorical relevance of mitigation in punitive
damages calculations. See id. at 812 (“We do not interpret the
language in BMW and Cooper as relying on evidence of post-
occurrence remediation for overturning the punitive damages
awards; rather the Court appears simply to have been recount-
ing a full history of the litigation to give a complete picture
ognizes State Farm as intervening controlling authority with respect to
calculation of the punitive damages “numerator.” See ante at 19740
(“State Farm makes untenable the idea that a defendant’s voluntary, pre-
judgment payment of compensatory damages may not generally be used
as part of the calculation of harm.”). Just as the Supreme Court’s decision
not to include mitigation in the calculation of harm requires us to recon-
sider our prior statements about that issue, its decision not to include miti-
gation in the reprehensibility analysis compels similar reconsideration.
19754 IN RE: THE EXXON VALDEZ
of the proceedings.”). While post-tort mitigation by a defen-
dant may or may not be relevant to a jury’s determination of
whether and in what amount to award punitive damages,
Swinton gives no support to the majority’s position that miti-
gation is properly considered as part of the reprehensibility
analysis in a constitutional review.
Additionally, the majority’s approach makes little sense as
a matter of policy, for it runs directly counter to the twin goals
of punitive damages: deterrence and retribution. See State
Farm, 538 U.S. at 416 (“[P]unitive damages serve a broader
function; they are aimed at deterrence and retribution.”); The-
odore Eisenberg, Damage Awards in Perspective, 36 Wake
Forest L. Rev. 1129, 1145 (2001) (“[A] wrongdoing party’s
voluntary—to the extent payments are truly voluntary after
being ‘caught’—remediation payment does not reduce the
propriety of punishing or deterring.”). While including miti-
gation in the reprehensibility analysis doubtlessly increases
the incentive to remediate, it does so at the expense of under-
mining deterrence and retribution. The majority’s approach
minimizes deterrence by creating a post-tort means of limiting
punitive damages. This allows potential tortfeasors to engage
in risky behavior, safe in the knowledge they can minimize
liability for any resulting harm by prompt payment of foresee-
able damages. It also cripples the state’s interest in retribu-
tion, as it allows the tortfeasor, rather than the jury, to
recharacterize the reprehensibility of its misconduct after a
tort has been committed. Cf. Cooper, 532 U.S. at 432 (recog-
nizing that the “imposition of punitive damages is an expres-
sion of [the jury’s] moral condemnation”).
Nonetheless, the majority insists that including mitigation
in the reprehensibility analysis is good public policy because
it encourages socially beneficial conduct. Ante at 19730. A
company in Exxon’s position, however, already has signifi-
cant incentives to clean up its mess. Had Exxon not taken
prompt action to clean up the oil spill and compensate injured
parties, see ante at 19702, the actual harm caused could well
IN RE: THE EXXON VALDEZ 19755
have exceeded the $504.1 million figure we use as the numer-
ator in our ratio analysis. See ante at 19743. Specifically, if
eleven billion gallons of oil were left indefinitely in Prince
William Sound, and injured parties were without resources to
start their lives anew, both economic and social harm would
have grown. This would have increased Exxon’s liability not
only for compensatory damages, but also for punitive dam-
ages. Greater actual harm translates to a larger punitive dam-
ages numerator and a higher ceiling for the punitive damages
award. Thus, mitigation is already reflected in the calculation
of compensatory damages and in our constitutional review of
the jury’s punitive damage award.
Moreover, I am not convinced the majority’s approach will
ultimately encourage defendants to settle. Cf. Franklin v. Kay-
pro Corp., 884 F.2d 1222, 1229 (9th Cir. 1989) (noting there
is an “overriding public interest” in promoting settlement).
Instead, I fear it has the unintended consequence of giving
tortfeasor defendants a way to reduce the risk of litigation
without reaching a settlement with injured parties. Under our
past precedent, the threat of a significant punitive damages
award created a strong incentive for defendants to pay injured
parties in exchange for a release or similar arrangement.5 The
majority’s approach, however, allows defendants to limit their
exposure to punitive damages by taking unilateral steps, even
token ones, to remediate harm. I am concerned this will fre-
quently lead to more protracted litigation, as injured parties
will not necessarily be satisfied with defendants’ mitigation
5
In this case, the certification of a mandatory punitive damages class
meant that individual plaintiffs could not reduce the ultimate punitive
damages award by releasing their claims. See In re Exxon Valdez, 229
F.3d 790, 793 (9th Cir. 2000) (“Claims for compensatory damages could
be easily disposed of by exchanging payment for releases, but a plaintiff’s
release of its slice of the future lump-sum punitive damages award merely
reduced the number of claimants sharing the punitive damages pie, not the
size of the pie itself.”). However, several plaintiffs nonetheless used the
looming punitive damages award as a bargaining chip by allocating Exxon
a portion of any award they might receive. See ante at 19706.
19756 IN RE: THE EXXON VALDEZ
efforts, and defendants will have less incentive to reach settle-
ment agreements. Thus, policy implications support the legal
conclusion that it is not appropriate to add mitigation to the
State Farm factors.
(ii) State Farm Factors
Because I see no basis for the majority’s inclusion of miti-
gation in our due process reprehensibility analysis, I consider
only the five factors outlined by the Supreme Court. I agree
with the majority that the first, second, and fourth factors6
suggest Exxon’s conduct was highly reprehensible and capa-
ble of supporting a substantial award. However, I cannot
agree with the analysis concerning the fifth factor, whether
“the harm was the result of intentional malice, trickery, or
deceit, or mere accident.” State Farm, 538 U.S. at 419. As the
majority recognizes, Exxon’s decision to put a relapsed alco-
holic in charge of a supertanker constituted knowing and
reckless misconduct, which was neither intentionally mali-
cious nor a mere accident. Ante at 19729-30. However, faced
with conduct that does not fit squarely in either category men-
tioned in State Farm, the majority arbitrarily determines this
factor weighs against high reprehensibility because Exxon
6
I am not convinced by the majority’s analysis of the third factor, but
I do agree that it plays a relatively small role in this case and therefore
does not warrant an extended discussion. The majority classified as neutral
the third factor, whether “the target of the conduct had financial vulnera-
bility,” see State Farm, 538 U.S. at 419. As the majority admits, ante at
19730, by recklessly placing a “relapsed alcoholic in charge of a super-
tanker,” Exxon knew that it was “imposing a tremendous risk on a tremen-
dous number of people who could not do anything about it.” Not only
were many of those people “financially vulnerable” by virtue of being
subsistence fishermen, but they were also particularly vulnerable to the
specific risk imposed on them by Exxon. See In re Exxon Valdez, 296 F.
Supp. 2d at 1094-95. Thus, I would find this factor indeed suggests
Exxon’s reckless conduct was highly reprehensible. See BMW, 517 U.S.
at 576 (“To be sure, infliction of economic injury, especially . . . when the
target is financially vulnerable, can warrant a substantial penalty.”).
IN RE: THE EXXON VALDEZ 19757
“did not spill the oil on purpose.” Id., at 19730. I cannot agree
with this conclusion for two reasons.
First, if we read this State Farm factor to recognize only
two categories of conduct, the fact that Exxon’s acts fall in
neither category could suggest this is a neutral factor, weigh-
ing neither for nor against high reprehensibility. However, if
the majority is correct that we must determine whether
Exxon’s conduct is more similar to one category or the other,7
I believe it is closer to “intentional malice, trickery, or deceit”
than to “mere accident.” State Farm, 538 U.S. at 419; cf.
Black’s Law Dictionary 968 (7th ed. 1999) (defining malice
as, inter alia, “[r]eckless disregard of the law or of a person’s
legal rights”). The jury held Exxon responsible not merely for
spilling oil, but rather for knowingly giving command of a
supertanker “carrying over 53 million gallons of volatile,
toxic, crude oil” to a relapsed alcoholic. See In re Exxon
Valdez, 296 F. Supp. 2d at 1097. Exxon did so for three years
with full knowledge of the tremendous risk of serious harm to
the health, safety, and livelihood of many people. See ante at
19726. This cannot fairly be described as an accident. Given
the extreme recklessness of Exxon’s conduct, I would con-
clude the fifth factor militates in favor of finding Exxon’s
behavior highly reprehensible. Accord Swinton, 270 F.3d at
818 (holding that conduct which was, at most, reckless disre-
gard for others’ health and safety, easily “constitutes highly
reprehensible conduct justifying a significant punitive dam-
ages award”).
Thus, unlike the majority, I find that all five of State
Farm’s reprehensibility factors suggest that Exxon’s reckless
7
Contrary to the majority’s assertion, ante at 19723, I do not suggest it
views Exxon’s conduct as a largely excusable accident. Rather, I note that
in finding this factor “militates against viewing Exxon’s misconduct as
highly reprehensible,” ante at 19730, the majority treats Exxon’s reckless
misconduct as it would treat an accident. This is not consistent with the
majority’s own statement that “the reprehensibility of Exxon’s conduct
that produced economic harm to thousands of individuals is high . . .” Id.
19758 IN RE: THE EXXON VALDEZ
conduct in this case—the malicious endangerment of the
property and livelihood of thousands of Alaskans—was
highly, if not extremely, reprehensible and capable of “war-
rant[ing] a substantial penalty.” See BMW, 517 U.S. at 576.
(b) Ratio
Under the second BMW guidepost, we must analyze “the
disparity between the actual or potential harm suffered by the
plaintiff and the punitive damages award.” See id. at 418.
While I agree with the majority’s “calculation of harm,” or
“numerator,” analysis, ante at 19743, I cannot agree with its
conclusion, id. at 19745, that the Constitution prohibits a ratio
in this case above 5 to 1. The majority arrives at this constitu-
tional limit through two steps. First, it uses the “rough frame-
work” of Planned Parenthood of Columbia/Willamette, Inc. v.
American Coalition of Life Activists, 422 F.3d 949 (9th Cir.
2005), to arrive at the conclusion that the appropriate ratio in
this case is above 4 to 1, but no greater than 9 to 1. Ante at
19743-44. However, it then asserts the proper ratio cannot be
much greater than 4 to 1 because Exxon’s conduct was not
intentional and because Exxon attempted to mitigate the harm
it caused. Ante at 19744. I cannot agree with this.
In Planned Parenthood, we established a three-tiered
“rough framework” to guide us in determining an appropriate
ratio.8 Applying Planned Parenthood to this case, the majority
concludes a 4 to 1 benchmark is appropriate based on its
determination that the economic damages are “significant.”
Ante at 19743-44. As an initial matter, the majority’s assess-
ment of economic damages focuses on a number devoid of its
8
Where the economic damages are significant but the behavior not “par-
ticularly egregious,” a ratio of less than 4 to 1 is warranted. Planned Par-
enthood, 422 F.3d at 962. If the economic damages are significant but the
behavior “more egregious,” a ratio greater than 4 to 1 might be acceptable.
Id. Finally, if the economic damages are insignificant but the behavior is
“particularly egregious,” ratios beyond single digits may be appropriate.
Id.
IN RE: THE EXXON VALDEZ 19759
context. An award is significant not because it is numerically
large, but rather because it approaches full compensation for
the plaintiff’s harms. See State Farm, 538 U.S. at 426 (“The
compensatory award in this case was substantial; [the plain-
tiffs] were awarded $1 million for a year and a half of emo-
tional distress. This was complete compensation.”). I am not
convinced that a compensatory damages award that equates to
a mere $10,000 per plaintiff is actually “substantial” in the
way the Supreme Court uses the term. Cf. id. at 425 (provid-
ing, as an example of “small” economic damages, cases
where the injury was hard to detect or not fully economic in
nature).
Even if the majority were correct that the economic dam-
ages awarded in this case are “significant,” Planned Parent-
hood still does not support a 4 to 1 benchmark in this case.
In Planned Parenthood, we refused to remit the award to less
than a 9 to 1 ratio because not all of the plaintiff’s damages
were quantifiable, not all of it was compensated, and the
plaintiffs were likely to incur further costs. 422 F.3d at 963.
All three are true here as well. The oil spill disrupted the
social fabric of the plaintiffs’ community. See In re Exxon
Valdez, 296 F. Supp. 2d at 1094. This type of harm is not eas-
ily quantifiable. Moreover, the plaintiffs’ recovery in this case
was limited to economic harm. It therefore did not compen-
sate the plaintiffs for harm attributable to increased “social
conflict, cultural disruption and psychological stress.” Id.
Finally, there is evidence the plaintiffs have incurred substan-
tial further costs. See id. Thus, it cannot be said the compensa-
tory damages in this case are so large or sufficiently
comprehensive they warrant a lower punitive damages award.
Nor, in my mind, does the majority find support in Zhang
v. American Gem Seafoods, Inc., 339 F.3d 1020 (9th Cir.
2003), or Bains LLC v. Arco Products Co., 405 F.3d 764 (9th
Cir. 2005). That we upheld an award in the 7 to 1 range in
Zhang, and remanded for a similar award in Bains—both for
intentional racial discrimination in the employment context—
19760 IN RE: THE EXXON VALDEZ
says little if nothing about the constitutionality of this award
for the reckless endangerment of the property and livelihood
of tens of thousands of people. While it is true any given con-
duct is more reprehensible if intentional than if reckless, it
does not necessarily follow that all intentional conduct is
more reprehensible than all reckless conduct. Indeed, because
we are the first court to review an award for misconduct
resulting in harm of the type and scale at issue here, I find it
unhelpful to note that our cases to date “have generally
reserved high single-digit ratios for the most egregious forms
of intentional misconduct, such as threats of violence and
intentional racial discrimination.” See ante at 19744. Instead,
every indicator in this case suggests that Exxon’s reckless
conduct—leaving for three years a known alcoholic in com-
mand of a supertanker in treacherous waters upon which thou-
sands of people depend— is egregious enough to support an
award within the 9 to 1 range. Accord Swinton, 270 F.3d at
818-20 (upholding a 28 to 1 ratio despite recognizing that the
conduct at issue involved no acts or threats of violence and,
therefore, “[did] not amount to the worst kind of tortious con-
duct a defendant can commit”).
One final consideration convinces me that the 8.93 to 1
ratio in this case does not indicate that Exxon has been subject
to a “grossly excessive” punitive damages award. In State
Farm, the Supreme Court reiterated that it is appropriate to
consider for purposes of ratio calculation not only the actual
harm caused, but the potential harm that a defendant’s mis-
conduct could have foreseeably caused. See 538 U.S. at 418
(describing the second guidepost as requiring consideration of
“the actual or potential harm suffered” (emphasis added) (cit-
ing BMW, 517 U.S. at 575)); accord TXO, 509 U.S. at 460
(“Taking account of the potential harm that might result from
the defendant’s conduct in calculating punitive damages was
consistent with the views we expressed in Haslip.” (internal
citation omitted)). As the majority recognizes, ante at 19726,
the potential harm from Exxon’s decision to keep Hazelwood
in command of the Exxon Valdez was both massive and fore-
IN RE: THE EXXON VALDEZ 19761
seeable. But despite the propriety of such consideration, the
calculation of harm in this case explicitly incorporates only an
estimate of actual, and not of potential, harm. See In re Exxon
Valdez, 296 F. Supp. 2d at 1103; ante at 19743. Thus, if any-
thing, the jury’s punitive damages award potentially underval-
ued the harm.
Conclusion
In accordance with State Farm and its predecessors, we are
required to subject this award to “exacting [de novo] appellate
review” in order to ensure it is “based upon an application of
law, rather than a decisionmaker’s caprice.” See 538 U.S. at
418 (internal quotation marks omitted) (quoting BMW, 517
U.S. at 587 (Breyer, J., concurring)). But that review does not
empower us to substitute our own, perhaps more finely-tuned,
award for one that was fairly awarded and already lies within
the range of constitutional awards. See BMW, 517 U.S. at 583
(noting that most awards fall within a “constitutionally
acceptable range” (emphasis added)).
After thorough and concerned analysis of this punitive
damages award, I conclude that its imposition does not violate
Exxon’s constitutional right to due process. The award was
levied as a result of fair procedure and in pursuit of the undis-
putedly strong, and properly circumscribed, state interests in
punishing Exxon for its misconduct, and in deterring any sim-
ilar behavior by Exxon in waters it continues to frequent.
While the award is large, it addresses what must be character-
ized as extremely reprehensible misconduct. There is simply
no excuse for allowing a relapsed alcoholic to pilot a super-
tanker in any waters, much less for three years in the treacher-
ous and treasured waters of Prince William Sound. Exxon’s
knowing decision to do so was a malicious one that placed at
massive risk, and ultimately seriously injured, the property
and livelihood of tens of thousands of Alaskans. There is
every indication the award before us reasonably addresses that
egregious behavior, and nothing in the record that suggests it
19762 IN RE: THE EXXON VALDEZ
resulted from passion, bias, or caprice. I therefore agree with
the district court’s assessment that there is no principled
means by which this award should be reduced. See In re
Exxon Valdez, 296 F. Supp. 2d at 1110. Accordingly, and
with respect, I dissent.