[corp-focus] Crime, Punishment and ExxonMobil

[robert weissman]

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Crime, Punishment and ExxonMobil
By Robert Weissman
July 11, 2008

Last month witnessed the extraordinary contrast of two perspectives on 
crime, punishment and ExxonMobil.

Just two days after leading climate change scientist James Hansen told 
the U.S. Congress that he believed ExxonMobil and other fossil fuel 
company CEOs "should be tried for high crimes against humanity and 
nature" for their role in delaying a serious global response to climate 
change, the U.S. Supreme Court decreed that a $2.5 billion punitive 
judgment against Exxon for the Valdez oil spill disaster denied the 
company the "sense of fairness" to which it is entitled.

Each of these proclamations is extremely significant in its own right.

The Supreme Court's ruling has the more obvious direct importance. 
Operating in the framework of maritime law, where it is free to 
establish its own rules in the absence of Congressional guidance, the 
Court held in a 5-3 ruling that punitive damage awards should not exceed 
compensatory damages. In other words, the punitive fine imposed by a 
civil jury should not be greater than the harm the jury found a 
defendant caused to a plaintiff by its wrongful act.

As a matter of law, this was a remarkable ruling -- a hyper-activist, 
policy-driven, non-originalist action by a faction of the Court that 
claims to defer to legislative determinations or seek its legitimacy in 
the Constitution, law or strongly rooted history. And the policy choices 
made by the Court are not only corporate-friendly and harmful to the 
victims of corporate wrongdoing and the environment, they are remarkably 
poorly argued.

The real premise of the Court's decision, written by Justice Souter, is 
that "American punitive damages have been the target of audible 
criticism in recent decades," but it is forced to acknowledge in the 
same sentence that these criticisms are ill founded. There is no problem 
of runaway awards, the Court concedes; and punitive damage awards are 
rising in neither frequency nor amount. Thus the Court is forced to rely 
on a purported problem of unpredictability in punitive damage awards, 
even as it acknowledges that appellate courts routinely overturn or 
limit outlier awards. (Indeed, the original Exxon punitive verdict had 
been $5 billion.)

Concluding that more predictability is needed, the Court determines that 
some formula to restrict punitives is appropriate. It settles on the 
idea of a ratio to compensatory damages. Many states have adopted such 
ratios, so they seem like a good idea, the Court concludes. A plurality 
of states have a ratio of 3:1, but having relied on the state experience 
as the rationale for adopting a federal maritime rule, the Court then 
declares that the state rules are too different to set the right ratio.

Instead, the Court says it bases its assessment of a reasonable ratio on 
juries' actual awards -- the very juries it is trying to constrain. The 
median punitive damage award is less than the compensatory award, so the 
Court settles on a 1:1 ratio. The Court states, "we would expect that 
awards at the median or lower would roughly express jurors’ sense of 
reasonable penalties in cases with no earmarks of exceptional 
blameworthiness within the punishable spectrum." You can read that a few 
times. It still won't make sense.

In a very concise dissent, Justice Stevens takes apart the majority 
argument. In short, he writes, if Congress has not acted, and there are 
no constitutional issues (none were involved in this case), then 
appellate courts should review punitive awards and overturn them only if 
they constitute an abuse of discretion. If the only problem is a few 
outlier awards, then appellate review easily solves the problem.

"On an abuse-of-discretion standard, I am persuaded that a reviewing 
court should not invalidate this award," Justice Stevens wrote. "In 
light of Exxon’s decision to permit a lapsed alcoholic to command a 
supertanker carrying tens of millions of gallons of crude oil through 
the treacherous waters of Prince William Sound, thereby endangering all 
of the individuals who depended upon the sound for their livelihoods, 
the jury could reasonably have given expression to its 'moral 
condemnation' of Exxon’s conduct in the form of this award."

Left unstated, but most important for the purpose of deterring bad 
corporate behavior, is that the very unpredictability disdained by the 
Court's majority is one of the core benefits of punitive damages. 
Corporations are not people, and the Court's rhetoric about preserving a 
"sense of fairness in dealing with one another" is inapposite as regards 
corporations' wrongful acts against real people. The point that 
corporations are not people is not just rhetorical; they have different 
forms of calculus and are differently affected moral restraints. The 
possibility of facing an outlier punitive verdict for wrongful conduct 
is a needed control on corporate recklessness.

The direct precedential value of the Exxon decision is limited, because 
it was issued in the confines of maritime law, and includes some 
caveats. But it will cast an ominous shadow over state and federal court 
decisions on punitive damages for years to come.

Dr. James Hansen, the NASA climatologist who was one of the first to 
sound the alarm on global warming and who has refused to capitulate in 
the face of Bush administration efforts to silence him, does not 
specialize in the law but he offers a far keener sense of justice than 
did the Supreme Court.

"CEOs of fossil energy companies know what they are doing and are aware 
of long-term consequences of continued business as usual," Hansen told a 
Congressional committee. "In my opinion, these CEOs should be tried for 
high crimes against humanity and nature" for spreading doubt about 
global warming and obstructing needed action.

This notion of justice suggests individual as well as organizational 
responsibility; insists on connecting the predictable and intended 
consequences to ultimate instigators without being distracted by 
intervening factors; and refuses to let perpetrators establish rules to 
legitimize their conduct.

However, Hansen noted, "conviction of ExxonMobil and Peabody Coal CEOs 
will be no consolation, if we pass on a runaway climate to our children."

Even more significant than Hansen's call for prosecution of CEOs for 
crimes against humanity was his description of his latest research. 
Hansen and colleagues have concluded that the safe level of atmospheric 
carbon dioxide -- the level below which catastrophic, self-reinforcing 
climate change can be averted -- is considerably lower than previously 
thought. Not only must the world slow its carbon emissions, Hansen 
argues, it must reduce atmospheric carbon from current levels. This 
remains achievable, Hansen believes, if immediate, far-reaching action 
is taken.

A society reveals its values in what it tolerates and proscribes, in 
what it authorizes and punishes. The U.S. Supreme Court held that basic 
fairness means that Exxon, which made more than $40 billion in profits 
last year, should not be slapped with a $2.5 billion punitive verdict. 
Representing humanity's better face. Dr. James Hansen asserted that the 
basic principles of justice and accountability to which street criminals 
are held should be applied to the rich and powerful, particularly when 
their intentional actions recklessly endanger the lives of not just one 
or two or five people, but millions.

The Supreme Court signaled that ExxonMobil should continue business as 
usual. Hansen said that business as usual is intolerable.

"In my opinion," Hansen said, "if emissions follow a business-as-usual 
scenario, sea level rise of at least two meters is likely this century. 
Hundreds of millions of people would become refugees. No stable 
shoreline would be reestablished in any time frame that humanity can 
conceive."


Robert Weissman is editor of the Washington, D.C.-based Multinational 
Monitor, <http://www.multinationalmonitor.org> and director of Essential 
Action <http://www.essentialaction.org>.

(c) Robert Weissman

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