00:01 [Archival]: We'll hear argument this morning in case 07-219, Exxon Shipping Company v. Baker et al.
00:10 Leon: Hey, everyone. This is Leon Neyfakh from Fiasco and Slow Burn. On today's episode of 5-4, Peter, Rhiannon and Michael are discussing Exxon Shipping v. Baker, a case in which Alaska's residents and businesses sued for damages after the Exxon Valdez oil spill.
00:26 [Archival]: It was the worst environmental disaster in United States history, killing more wildlife than any other previous catastrophe. On top of that, some 60,000 Alaskans, most involved in fishing, say the oil spill hurt their lives and livelihood.
00:42 Leon: The Court cut the amount of punitive damages owed by Exxon to one-tenth of what was originally awarded by the jury and effectively capped damages in similar cases. This is 5-4, a podcast about how much the Supreme Court sucks.
01:02 Peter: Welcome to 5-4, where we dissect and analyze the cases that have swarmed American life like locusts over a grassy plane. I am Peter, Twitter's The_Law_Boy. I'm here with Michael.
01:15 Michael: Hey, everybody.
01:19 Peter: And Rhiannon.
01:21 Rhiannon: Hello.
01:21 Peter: And today, we are discussing Exxon Shipping v. Baker, a case about the famous Exxon Valdez oil spill of 1989. The Exxon Valdez spill, it happens in Alaska's Prince William Sound in 1989, and it was at the time the worst oil spill in American history. And I think generally speaking, spills from oil tankers were a huge environmental concern until about 2010 when British Petroleum figured out a way to cut out the middleman and pump oil directly from the Earth's crust into our oceans.
02:04 Rhiannon: Oh, no.
02:04 Michael: God.
02:04 Peter: That's what innovation looks like, okay? So this is a case about damages. Exxon was sued for the spill by Alaskan residents and others who depend on the area for their livelihoods. Not Prince William himself, despite the Sound being named after him, I don't know why, abstained. Exxon loses in a trial and they are ordered to pay $5 billion in punitive damages. That amount gets lowered by the Ninth Circuit Court of Appeals to $2.5 billion, and here the Supreme Court held that even that was too much, lowering the damages to $500 million, which is about 10% of the original amount, and in the process, they effectively capped the punitive damages available in maritime aka seafaring cases.
03:00 Peter: This is another case where the Court just pulls a rule out of its ass and that rule just so happens to benefit the interest of wealthy and powerful people. Alright, as we'll discuss in a bit, limiting the ability of plaintiffs to recover damages in litigation has long been a key part of the conservative effort to limit the liability of corporations, to keep their costs down, and it's predicated in a very real belief held by corporatist conservatives that the American legal system is biased not against any marginalized groups, but against corporations.
03:39 Peter: Authoring the majority opinion, here is David Souter, a complete non-entity who's mostly notable for being nominated by George Bush Sr, and then ending up being a liberal. This was back in the late '80s when Republicans were just not very cut-throat about nominations. They were running scared, they had had a couple go poorly and one fail completely, and as a result, they nominated some pretty centristy folks, and Souter ended up being the farthest left. The only other real notable thing about him is that he is, by a very solid margin, the worst writer of the last 30 or so years, I think, on the Court.
04:22 Rhiannon: Absolutely.
04:22 Michael: Awful.
04:24 Rhiannon: Yeah, I think one thing to know about Souter is that if you were in law school at the time and you were like, "Oh, yeah, I need to name the nine Justices on the Supreme Court," you're always gonna forget Souter.
04:35 Peter: That's right, yeah.
04:37 Rhiannon: But yeah, he's not... You're gonna be like, "Who's that other white guy, dumbass," it's not gonna come to you.
04:43 Peter: That's right. So yeah, I guess nothing else interesting to say about him, he was usually on the liberal side, certainly good as far as Republican-nominated Justices go.
04:54 Rhiannon: Sure.
04:56 Peter: But he mostly sucked, just like the rest of them. He's dead, right?
05:02 Michael: No.
05:03 Rhiannon: I don't think so. [laughter]
05:03 Peter: Souter's still alive?
05:03 Michael: No, I think he just retired, yeah.
05:06 Peter: Yeah, he... Well, he definitely retired. I thought he also died.
05:07 Michael: No.
05:07 Rhiannon: Hold on, I'll check.
05:07 Michael: No, it's Stevens, Stevens died.
05:11 Peter: Well, I know, Stevens was 150, but... [chuckle]
05:14 Rhiannon: He's alive.
05:15 Peter: Souter's alive?
05:16 Rhiannon: Yeah.
05:16 Michael: I thought he's still doing stuff like Emeritus or I don't know how to pronounce that word.
05:21 Peter: I think it's Emeritus.
05:23 Michael: Emeritus. No, but O'Connor was doing it for a while too. I think he still hears cases in the DC Circuit, no? Or am I making that up? I might be making that up.
05:31 Peter: I don't know. Obviously, I don't know, I thought he was dead.
05:32 Rhiannon: He's 81.
05:34 Michael: Yeah, he's not that old for...
05:35 Peter: Wait, when did he retire, '09?
05:37 Michael: Yeah.
05:38 Peter: Alright, so I think we should get into the background here. So Rhiannon, walk us through the Exxon Valdez oil spill.
05:47 Rhiannon: Yeah, I'm really excited about this, because if you thought this podcast was only about human suffering, well, today we're talking about oil-drenched sea otters and dead Free Willies. [chuckle] So I'm just mixing it up a little bit.
06:01 Michael: Spread it around.
06:03 Rhiannon: Right, right. This case comes out of the famous Exxon Valdez oil spill, like Peter said. It happened in March 1989 when the Exxon Valdez oil tanker ran into a reef in the Prince William Sound off the coast of Alaska. Like Peter said, it's now the second largest oil spill in US waters, but many scientists say that in terms of environmental impact, this is the worst one in history. So how millions of gallons of oil are spilled into the ocean is of course about corporate greed, but the particular facts and background are important here, I think, because after years of lawsuits, investigation, a lot of really good investigative journalism that uncovered what really happened, what led to this disaster, it becomes clear that Exxon's sheer disdain for the law, their ducking of accountability, and their overall unbending commitment to their bottom line, are at the heart of this environmental catastrophe, and the Supreme Court rushes in here, in this case, to protect them. And by them, I mean Exxon-motherfucking-Mobil, the oil company.
07:10 Peter: That's right.
07:11 Rhiannon: Okay? The Court says in this case, that they're "worse than negligent, but less than malicious," and I think a quick rundown of the facts that I'm about to tell you, that gives you everything that a kindergartener could use to determine that this corporation absolutely fucking sucks, to its core, and they suck on purpose with no regard for the consequences to any species, human or not. So the ship was carrying more than 50 million gallons of oil and about 11 million gallons were spilled into the Prince William Sound. But it's not a freak accident, it was actually highly foreseeable. First, there are issues with individual crew members. The captain, first of all, was widely reported to have been drinking heavily that night and he was sleeping off his bender when the ship struck the reef. The third mate, who was at the controls, was fatigued and overworked, and he failed to properly maneuver the vessel. Now...
08:06 Peter: Third mate? I've heard of first mates, that's the right-hand guy. By the time you get to the third, that's like Bring Your Child to Work day.
08:14 Rhiannon: Right, right. Yeah, you got the intern.
08:16 Peter: And he, and, "Daddy, what can I do?" And he's like, "You're the third mate, little buddy."
08:21 Rhiannon: Yep, they got that guy driving 50 million gallons of oil. But moving to what the corporation did, Exxon Shipping Company, it was determined after the collision, had failed, for a long time, to adequately supervise the captain of the ship, and they also failed to provide a rested and sufficient crew for the ship. The oil industry had also previously promised, but never installed, this sort of high-tech iceberg monitoring equipment on the ships, and the company also failed to maintain the collision avoidance radar System on the ship. If that piece of equipment had been functional, it would have indicated to the third mate that a collision was impending, because it would have detected radar reflectors that were placed in the Prince William Sound for literally this exact purpose of avoiding such collisions. And the radar system, it turns out, wasn't even turned on at the time of the collision, because it was fucking broken, and it had been broken for a year.
09:24 Peter: No radar and... They're just out there winging it.
09:26 Rhiannon: They're just out there shooting blind.
09:28 Michael: They're just...
09:28 Peter: 50 million gallons of oil in the fucking Arctic, and they're like, "No, no, we can just... We'll do this blind."
09:35 Rhiannon: Yeah, "Watch."
09:36 Peter: "Let me know if you see any ice out there."
09:37 Rhiannon: "I can do it with no eyes, watch," that's how they're doing this. And documents reveal afterwards that the radar system had been broken for a year, and it's just expensive to maintain and to fix, and so they had left it fucking broken.
09:52 Michael: "Fuck it."
09:56 Rhiannon: This... [chuckle] Right. This accident happened because the Exxon Valdez had left the normal shipping channel to avoid ice flows, and that's a common occurrence, but it's not what was supposed to happen that night, they're supposed to stay in the channel and just slow down. But of course, time is money, and this is about the bottom line. So of course, 11 million gallons of oil is like, it's an unbelievable amount of oil spilled, but what made this particularly disastrous was Exxon's complete, completely incompetent handling of the disaster immediately following the collision. So I guess something that's widely known in the industry is that ships just like whoopsie-daisy crash all the time, and oil spills are, to some degree, inevitable, so a responsible party would invest in their clean-up and containment capabilities and equipment. It turns out, literally 10 months before this disaster, at a meeting of the six oil companies that own Alaska's oil, a chief of operations warned that it was "not possible to contain an oil spill in the center of the Prince William Sound," which if you're paying attention, is exactly where this happened.
11:09 Peter: Where were you, Prince William? Where were you that night?
11:14 Rhiannon: And that same chief of operations requested millions of dollars for spill containment equipment. This is equipment that was required by law, and it had already been promised by the companies to regulators, but at that meeting, the proposed spending was voted down by the oil companies.
11:31 Peter: Look, as someone who's talked to regulators on behalf of companies from time to time, I feel that. You know what I mean? Cut that. No, I'm kidding.
11:44 Rhiannon: Fully four years before the Exxon Valdez collision, the oil group's Valdez port commander warned the company in a confidential letter that, "Due to a reduction in manning, age of equipment, limited training, and lack of personnel, serious doubt exists that we would be able to contain and clean up effectively a medium or large-sized oil spill." And according to that port commander, there had already been a spill at Valdez before this one, but it was, of course, much smaller. And when he went to report it to the government, he said that he was told by his supervisor not to submit the notice, and he was told, "You made a mistake. This was not an oil spill." So just a little Orwellian flavor for you. And as to smaller spills that happened before this collision, even when they were reported to the government, they could have alerted regulators that the oil containment system was not functional, but a lab technician reported after this that she was routinely ordered by management to change test results to eliminate oil in water readings. So she was instructed...
12:51 Peter: That's the most important reading, is my guess. Is that right?
12:54 Rhiannon: Yeah, right. Yeah, yeah, yeah.
12:56 Peter: It's one of the big ones.
12:56 Rhiannon: "Is there oil in the water?" [laughter] She was instructed to dump out oily water and refill the test tubes that were taken from oil spills from a bucket of clean ocean water, and they literally called it "the Miracle Barrel."
13:13 Michael: That can't be an accurate way to measure this.
13:19 Rhiannon: No, no, I don't think so. This is not a scientifically sound system they have set up. So this is a lot, I know, but it needs to be absolutely clear how fucking wrong they were, and I don't know how the wormy elf David Souter can fix his lips to say that this shit wasn't malicious, but I think if you're lying about test results and the test is on a subject matter that's for sure gonna come up again, and the risk of failing the test is that you devastate thousands of miles of coastline and you murder millions of animals, and you Kill Bill, Achilles heel slice a local economy, I think it's safe to say that you did that shit on purpose. There was malice in your fucking heart.
14:00 Rhiannon: And so moving on to the effects. Just in the couple of days after the spill, literally thousands of sea otters were killed, hundreds of thousands of seabirds were dead, and because of the bungled clean up and containment efforts, there is literally still oil on that coastline, and reports say actually that only 10% of the oil was actually cleaned up. In addition, local groups of killer whales lost what some estimate as 40% of their population. It's believed that one group will now just die out soon. Our producer, Katya, you cannot cut out the fact about killer whales because I fucking love killer whales, and this is important to me personally. Have I ever told you guys about seeing killer whales in real life? Like how I reacted?
14:48 Michael: No. I mean, they're majestic creatures.
14:50 Rhiannon: No, they're fucking incredible in every way. Better than human beings, for sure. And when I saw them...
14:57 Michael: Did you cry?
14:58 Peter: Don't they actively torture seals for sport?
15:01 Rhiannon: Yeah.
15:02 Peter: Like, to train their children?
15:04 Rhiannon: Yes, they do. So when I saw them in real life, it was like two weeks after graduating from law school, and I saw them in real life off the coast of Washington and the San Juan Islands, and I not only cried, I freaked the fuck out. I was crying so intensely and hyperventilating and jumping up and down that a child on the boat got scared and asked his mom if we were gonna sink. [laughter] I was having that much of an emotional reaction to seeing them that I was literally scaring children. They thought our lives were in danger.
15:39 Michael: I was gonna say, I'm picturing Kristen Bell with the sloth, sort of like this...
15:43 Rhiannon: Yes, yes, yes, yes. That's me plus killer whales.
15:46 Michael: Great.
15:46 Peter: I think if there's ever a really good movie made about the Exxon Valdez spill, a good scene would be like a series of cuts where you have someone on the ship, the spill just happens and they're frantically making a call to some guy in a corporate office. He calls an even more important guy, he calls an even more important guy, all of a sudden it's clearly a boardroom, and then he calls a less important guy and a less important guy, and they're all just silently answering the phone and you can't hear what they're saying, and the last one hangs up and walks outside and he's at a gas station and he just raises the price by 25 cents.
16:20 Rhiannon: He's like, "Problem solved. I got this, guys." Yeah. Okay, so how this case comes to the Supreme Court. Peter said Exxon is sued in Alaska and a jury awarded about $500 million in compensatory damages and $5 billion in punitive damages, which we'll talk about the difference between those things in just a second. True to their evil core, Exxon appealed that verdict, and the Ninth Circuit did order that the punitive damages should be reduced. When it got back to the trial judge, Russel Holland, in Alaska, he reduced the punitive damages to $4 billion, emphasizing that this was not an egregious figure based on the facts of the case, based on the damage that was done by this oil spill. Exxon turns around and appeals that decision, the Ninth Circuit again ordered it back down to Judge Holland, and that time, Judge Holland increased the punitive damages to $4.5 billion plus interest.
17:20 Michael: What a fucking king. What a king.
17:21 Rhiannon: Yeah, Judge Holland is the only cool judge...
17:25 Peter: He's the man.
17:26 Rhiannon: To have ever existed. Anyway, so Exxon appeals it again, the Ninth Circuit ordered the punitive damages to be reduced to $2.5 billion, and that's when it went to the Supreme Court. Now, just one more point, because they're so fucking evil, just to emphasize again how this rotten piece of shit, satanic corporation is absolutely evil to its core. Exxon's official position was that punitive damages against them should be no more than $25 million because it had spent an estimated $2 billion on the clean-up, but you have to know that they recovered a significant portion of the cost of clean-up and litigation through insurance claims.
18:06 Michael: Of course.
18:09 Rhiannon: And also in 1989, a few months after the accident, Exxon sued the state of Alaska, saying that the state had not given Exxon permission to use oil dispersant chemicals in the clean-up until a couple of days after the spill. So it was apparently Alaska's fault why the clean-up was bad. Alaska's response, by the way, they said that Exxon didn't need permission to use the chemicals. They were like, "I don't know why you're asking us." And in fact, Exxon didn't have enough and that's why they were blaming the delay on the state of Alaska. Also, the chemicals used in the clean-up caused liver, kidney, lung, nervous system and blood disorders among the clean-up crews. I love my life, I love this case, I love the world we live in.
18:53 Michael: Yeah.
18:54 Rhiannon: Let's get back to the law.
18:55 Peter: Maybe they should have needed approval to use those chemicals, just gonna throw that out there.
18:57 Rhiannon: Yeah.
19:00 Peter: Alright, so that was... Wow, that's a lot. I feel like I learned a lot about Exxon. I will be getting my gas from Gulf only from now on. [laughter] Gulf, the oil supplier you can trust.
19:15 Rhiannon: Yeah, yeah. You got it.
19:18 Peter: Let's lock that ad down. Let's lock it in. It's time to start bringing in the big bucks, guys.
19:21 Rhiannon: You can sleep easy tonight.
19:24 Peter: They're probably fucking owned by Exxon already.
19:25 Rhiannon: Right, yeah, yeah. It's either them or BP, I'm sure.
19:29 Michael: Right.
19:30 Peter: Alright, so the first thing to note about the law here, it's not that important for understanding the case, but it is sort of fun. We're talking about maritime law...
19:39 Rhiannon: Whoop, whoop.
19:40 Peter: Which is the law that applies on the water, on the open ocean. And the reason that maritime law is like, it's a separate thing, is mostly a jurisdictional thing. Like if you're on a ship, you are not necessarily under the jurisdiction of any given state, so you need a separate set of laws and rules to govern you. And it's also this sort of historic thing that carries back from these old ancient rules and the waters around Britain and all that. It's just... Every maritime law case, even modern ones, read like they're from the 1700s. It's very bizarre. The more important thing to understand about this case is that we're talking about two types of damages: One is compensatory, which are meant to compensate someone for any damage that they actually took; the other, the one that's being contested here, is punitive damages, and those are meant to punish the wrong-doer and deter others from engaging in the same type of conduct.
20:41 Peter: So if you burn someone's house down due to your own recklessness, you could be sued for the value of the house, but they could also ask for punitive damages, basically saying you're an asshole, and there should be a punishment for being an asshole, so you have to pay this amount of money. So the Court here is holding that the punitive damage amount was excessive and that Exxon should not have to pay as much as it was ordered to pay, which at this point was $2.5 billion, down from an original jury award of $5 billion, so it's already half of what it was.
21:19 Peter: And to remind you, this money, the damages would have gone to a bunch of local Alaskans who were suing because their livelihoods were impacted by the spill. Another thing we should note before we get into this, there are a ton of different opinions in this. There's different sections of the opinion and different Justices sign to different sections of the opinion. We're gonna ignore almost all of that, just focus on what David Souter wrote and the controlling majority for the most part, and I will make one other note, which is that Justice Alito recused himself because he owned too much Exxon stock.
21:56 Rhiannon: Oh, my God. It's fucking embarrassing.
22:00 Michael: Rules. Yeah. Alright, let's go to a fucking ad. [chuckle]
22:06 Peter: So getting into the opinion itself. First, Souter starts out with this unbelievably dull exploration of the origins of punitive damages in the law, and holy shit, is it boring, guys. It's just like, "In 1683, Sir Collinsworth of Yorkshire first noted the wisdom of punitive damages. In his famous letter from the Emsworth Castle... " [laughter] Oh, just shut the fuck up.
22:36 Michael: It's so fucking terrible. It has a literal reference to fucking Hammurabi's code. Punitive damages for stealing a goat from a freed man, that's in there. So we have citations to fucking Babylonia in this opinion, and as I'm reading it, I'm gearing up to be like, "Here's another case of the fucking Supreme Court just basing its decision on all this bullshit that doesn't matter because it doesn't matter," but then Souter is like, none of this matters. He literally is like, "Regardless... " That's how he fucking punctuates this whole history, "Regardless, this is the current state of the law, and this is what we're working with." And it's like, "Why the fuck are you wasting everybody's time with this discursive historical discussion?" It's meaningless.
23:29 Peter: I feel like I went on a little journey to Babylon.
23:29 Rhiannon: Yeah.
23:31 Michael: That's right.
23:32 Rhiannon: No, it's absolutely like when you needed to write a 2000-word essay and you're around 1800 words and you're just like, "Fuck, what do I... How do I... "
23:40 Michael: What's the history of punitive damages? They used to be called exemplary damages.
23:45 Michael: That's also in the opinion and an explanation of why.
23:50 Peter: It's like a little trivia about punitive damages. So he makes this quick note about how punitive damages are limited to "cases of enormity where the wrong-doing is particularly severe." And he never really says it, but you can tell he's sort of hinting at the idea that this isn't one of those cases, and it's like, I do feel like that's pretty offensive, like how many fucking seals do you have to kill for it to be a case of enormity?
24:20 Michael: Yeah, and so he also points out that, "Look, punitive damages, they're more common and more generous in America than there are in other countries." And he's like, "Look, you know, in Canada, in the UK, there are these caps and some countries in Europe forbid them altogether and even will shield their native corporations from punitive damage judgments gotten against them in foreign courts." And it's like, okay, except you can't talk about foreign legal systems like that without also including all the other ways that they regulate and police corporate behavior, right?
24:56 Rhiannon: Exactly, yeah.
24:58 Michael: Like torts damages, that's just one piece. There are safety regulations and government oversight, which are just all different pieces of the larger scheme that societies decide how to police corporate malfeasance, and it's not illuminating to just shear off one piece of the scheme and compare it to another. I've done business in Germany and those corporations are a lot more restrained in what they have to do, 'cause they're heavily regulated, and it might make sense in that scheme to have more limited punitive damages, but it doesn't make any sense here, where you basically have corporations who just want it both ways. They want little to no front-end government restraints, but they also want no liability on the back end either. Like that's...
25:46 Rhiannon: Exactly.
25:48 Peter: Right. I wanna note that I've also done business in Germany, I bought hashish in Berlin in 2018. So Souter then starts talking about how research shows that punitive damages are not out of control, that they're usually pretty stable, but he says there's like a real problem, that's that they're very unpredictable, they can vary in size, they've got large standard deviations from one to the next and all that. And so he's bringing up this big concern, and this is the central premise of the entire argument he's making: "How can the people and corporations who are being sued for their reckless wrong-doing, predict the exact amount of punitive damages they might have to pay?" And the answer is, they can't. And Souter is very concerned about that.
26:39 Peter: And I think our rhetoric to that is pretty simple. Why does it matter at all? Souter says that it's important that bad actors know the stakes, so that they can properly weigh the consequences, but that's fucking batshit crazy, it's completely backwards. Allowing corporations to do the math so they can figure out exactly how much litigation will cost, so that they can do a cost benefit analysis on dumping oil on a fucking baby seal, that's not a worthy goal, that's terrible. It's a truly awful thing, and to think that it is actually the great outcome, is beyond me. I think the primary purpose of having these sorts of damage awards that are meant to punish the wrong-doer, is to deter big companies, especially, from engaging in this sort of activity, and having unpredictable damages serves as a good deterrent, they might fear that they're going to get sued for whatever environmental pollution they cause and actually get their shit together, maybe start investing in safety protocols, etcetera.
27:49 Peter: But if they know that the amount will be fairly small, they can just build that into their calculus and maybe decide that polluting or being reckless with respect to their pollution, is in fact the way to go. So in other words, Souter treats the unpredictability of punitive damages as if it's a bug, but in reality, it's a feature, it forces companies to invest in safety and public safety and public health, and it keeps them on their toes in such a way, where we don't have to worry that they are behind the scenes sort of calculating how best to fuck all of our shit up.
28:28 Rhiannon: Exactly. I think a really personally offensive part of the opinion for me is when he says that this is analogous to, in criminal law where there are minimum and maximum ranges of punishment, so people know, like it's predictable, that there's this system in place where you know the maximum amount of time, for instance, that you would serve in prison for committing a certain crime. That's so absurdly stupid that it makes me wanna die.
28:58 Peter: The maximum criminal punishment is death.
29:01 Rhiannon: Right, exactly. The maximum criminal punishment, is... Say it's even life, so it's a life sentence, there's a natural cap on it, because that's the natural end of what a person can give, you dumb ass piece of shit.
29:15 Peter: And that's not meant to give criminals the opportunity to figure out whether it's worth it.
29:19 Rhiannon: Right, exactly. The second thing is that...
29:21 Peter: That's the point.
29:22 Rhiannon: Right, the second thing is that he's counter-intuited that point, by saying corporations need to know the maximum. That... Sorry, the maximum sentence in the criminal world is that you pay the ultimate price, you give your fucking life, for something bad that you did. But here, he's flipping it to say, it should be predictable and manageable, the amount of punishment that a corporation gets, rather than saying a corporation needs to pay the ultimate price for fucking shit up.
29:54 Michael: And even citing to cases and statutes and stuff that are like punitive damages should not bankrupt corporations. That's the last thing you want with punitive damages, is to just totally... But that is the equivalent, fucking ExxonMobil, raze it to the ground, fuck 'em.
30:10 Rhiannon: Right, right. Exactly.
30:12 Peter: Exactly. If you're gonna compare it to criminal law, then the same logic should apply. If you're willing to kill a human being for what they've done, in some cases, as we mentioned in our Tison v. Arizona episode, in some cases where that person didn't even kill anyone, if you're willing to do that, then surely bankrupting a company can't be a bridge too far. But, fuck it, whatever. A couple of episodes ago, we made fun a little bit of the field of law and economics, and I think that this decision is part of the rot caused by that trend in legal academia. There's an assumption built into a lot of law and economics reasoning that if someone does damage to someone else, they can just pay the monetary equivalent and all is good, and that really ignores how these things work in reality.
31:02 Peter: If someone burns down your house and then hands you the cash value of everything you lost, you're not like, "Oh, okay, never mind, we're good." The situation has not been fully addressed and, more generally, some damages are hard to quantify or hard to prove, and here we have both. Money can maybe help undo some of the damage Exxon caused, but can really fix it. How many animals were killed, how many habitats were destroyed or rendered uninhabitable for a long period of time, how many people had their livelihoods interrupted for years and years on end? You can't rely on companies who break the law simply paying out cash to fix everything. They need to be actively deterred with the prospect of big penalties.
31:48 Peter: You can't just wait for something to happen and say, "Okay, now they can pay you for whatever they did," there needs to be a way to actually prevent them from doing it in the first place. The law and economics approach, what it does is reduce human suffering and animal suffering and environmental damage to a matter of mathematics. But it's not that simple and concrete. Sometimes large wealthy corporations need to face significant consequences in situations where the damage done can't be readily repaired. And when you say the companies need to be able to easily predict how much they'd pay, you're playing into a game where they can use their resources to strategically weigh their risk and reward and avoid liability for their wrong-doing.
32:29 Rhiannon: Exactly.
32:31 Peter: And the Court is acting like facing big penalties is like this horrible burden on these companies. And one of the big ironies here is that this oil spill happened in 1989. This case happened in 2008, so here we are, 19 years later, Exxon is still challenging their liability in court. The very existence of this case is proof that these corporations will fight tooth and nail to avoid the consequences of their actions.
33:05 Rhiannon: Absolutely. So Souter in the opinion is basically saying like, "Look, defendants shouldn't have to be worried about paying a bunch of money just because they single-handedly endangered the orca species. Instead, we're gonna create a rule. Punitive damages can't be higher than the compensatory damages in maritime cases." So Exxon had been ordered to pay about $500 million as compensation, and the $5 billion was the punitive damages portion. The Ninth Circuit cut the $5 billion in half, like we said, and the Supreme Court then reduces it by an additional 80% down to $500 million, one-tenth of what the original jury found. And this outcome and the rule that punitive damages can't be higher than the compensatory damages, that is completely arbitrary.
33:54 Rhiannon: It's literally just the Court saying, "Look, that's unfair, it's just too much money. You can't make Exxon pay that." That's it. That's the legal analysis that's behind this. We talk a lot on this podcast about how selectively the Court applies the concept of judicial restraint. Justices will say, "Look, it's not the duty of the Court to step in here," but that's just when it suits them. Here they're making a completely unfiltered judgment call that Exxon had to pay too much money in damages for a massive oil spill.
34:29 Michael: Yeah, and then as usual, we have some criticism from the liberals in dissent as well. And so Stevens, in particular, he writes this dissent and it's very focused on sort of the judicial restraint question, and it's like, "Well, look, this isn't really our job." And so he sort of talks about how maritime law is like one of the few areas where the Supreme Court actually gets to sit as a court in common law and make up the law. But it does it in sort of parallel with Congress and that Congress is legislated a lot, and this is really, should be statutory, Congress has spoken on limiting damages in some cases, and the fact that it isn't here, they should respect that and blah, blah, blah, and it's well-argued, but completely unpersuasive.
35:14 Michael: Completely absent from the entire discussion is everything we've talked about, the damage, the just utter destruction of this wildlife, this habitat, these people's livelihoods, which is like, that's the core issue. Nobody's gonna really care whether or not the Supreme Court is overstepping its bounds. What people care about is whether this monetary award is ridiculous. Is it out of step with reason, is it something that we socially think is inappropriate? And all the arguments about that are about how reckless Exxon was and how damaging this spill was, and Stevens has nothing to say about that at all. It's just so fucking weak and disconnected. Yeah, it's like ivory tower bullshit at its peak.
36:12 Peter: Yeah, right. So it's important to understand that this case fits into a broader political objective, spearheaded by Republicans to limit damages in civil cases, to limit damages in lawsuits. And they want that because their political allies, large corporations, would benefit from it. Obviously, big corporations are frequently sued, and so putting caps on damages or otherwise limiting them helps those corporations tremendously.
36:40 Michael: Right, and so a lot of this stems from a familiar refrain on this podcast, a lot of this stems from right-wing efforts to roll back legal and policy gains that the left made in the '60s and '70s, and in this area, there were a number of stuff that pissed off conservatives. Just a few examples are, this was the first time commercial actors started having affirmative duties put on them to protect consumers. This was also the time when contributory negligence was eliminated as a complete defense, so it used to be if there was a car accident and one party was 95% at fault and the other party was 5% at fault, too bad, that 5% eliminates you from claiming anything in court, and that changed.
37:27 Michael: And corporations hated this shit and so what did they do? They funneled a bunch of money into the Republican party and right-leaning think tanks like the Heritage Foundation, and you had this whole movement, Ronald Reagan campaigned on it, it was a tort reform. Torts are like that's when you just sue someone for negligence or assault or things like that. That was a big thing in '94 when the Republicans took over the House, it was part of their contract with America. They passed a big law in the '90s, and Bill Clinton vetoed it in '96 and Bob Dole ran on it in that election. Fucking Bob Dole. God.
38:06 Michael: And so the corollary to this, of course, is that then, plaintiff's lawyers started funneling a bunch of money to Democrats and are one of the most important donor bases for Democrats, so it's like a sharply partisan, well-monied issue on both sides of the political divide. And now, this has been going on since the '80s, and you have an entire generation of politicians, policy guys, conservative lawyers and judges, who just have been immersed in this culture for their entire lives, for decades, that's what they came up in, that's all they know.
38:41 Peter: It's penetrated popular culture in a lot of ways, the idea that we are a litigious society is basically, it borders on being common sense in the view of a lot of people, and the idea that there are like people in this country are willing to sue about anything, and the hot coffee case where the lady spilled McDonald's coffee on herself and was a laughing stock of talk show hosts. Only recently has the rhetorical tide turned back, where people were like, "Actually, that woman was severely burnt." It would surprise a lot of people to know that it's not just that those things are over-simplified or wrong, they are right-wing talking points that successfully made their way into living room conversation.
39:25 Rhiannon: Yeah, that's such a good point. And it goes back to what Michael said up top, which is, this is the system that we have here, we have corporate accountability built into a system of litigation where you can sue to hold people and companies accountable. That's not a bad thing.
39:42 Michael: Right, right, that's part of the deal here. You have laissez faire economics on the front end, where you have less regulations, but on the back end, you have to pay up if you fuck up. And the McDonald's case, I didn't learn this until law school, again, taken in by the right-wing talking points that I didn't know McDonalds was purposely making the coffee insanely hot that they knew was dangerous and certainly not drinkable, because they had research saying, "Well, look, people buy it at the drive-through and they don't drink it for 10 minutes, so we need it so fucking hot, that 10 minutes later when they get to destination, it's still warm and the right drinking." So yeah, she fucking burned her skin off because they were purposely making a dangerous product.
40:26 Rhiannon: Exactly, and this wasn't ever public either, and I don't remember if this is 100% accurate, but the way they calculated damages in that case was taking the profit that McDonald's makes off of just coffee sales for one day. So just a millions of dollars total award amount seemed so crazy, but it was actually incredibly reasonable for that corporation.
40:53 Peter: Right. What this conservative movement led to, is an ideological framework that I think would sound crazy to the average person, but just about any practicing lawyer can tell you is true. Conservatives genuinely believe that the legal system is unfair, not to minorities or the poor, but to corporations and this is because corporations find themselves in litigation frequently, and litigation is very expensive. Corporations are full of guys in boardrooms who are looking at the books and they have this big fucking book of legal costs, and they're just like, "God damn, this is too much." So they lobby to keep those costs down, and the amount of times I've heard of people that work at or for businesses in the law, say that their real problem is frivolous lawsuits.
41:46 Peter: It's unbelievable, they really, truly believe it. And obviously, this ignores the reality that the legal system's reliance on money to drive litigation benefits corporations, of course, for the very simple reason that they have a lot of it, and they are absolutely crushing very meritorious claims like this one. We've got a case here, where 20 years later, the plaintiffs are trying to recover punitive damages and the Court is still fucking with it, and Exxon is still trying to do their best to fight at every single turn, and winning, because they're rich, because their interests align with the powerful people who make the decisions. This decision comes from that ideological foundation, corporations believe that their legal costs are generally excessive, so they fight them at every stage, all the way up to the Supreme Court, and they often win, because as we are wont to say on this podcast, the Supreme Court sucks.
42:52 Rhiannon: Yep.
42:53 Michael: That's right.
42:56 Peter: Next week, we are talking about qualified immunity, the doctrine that protects police officers and other government officials from civil liability when they are sued by people who they smack in the head with batons and so forth.
43:13 Michael: Yeah, good stuff.
43:16 Rhiannon: I don't even...
43:17 Michael: Normal policing business. Yeah.
43:21 Peter: Follow us on Twitter @fivefourpod, retweet our episodes, tell your friends about us, tell your parents about us, I think they'd like us.
43:34 Rhiannon: Yeah, dads love me.
43:41 Michael: 5-4 is presented by Westwood One and Prologue Projects. This episode was produced by Katya Kumkova, with editorial oversight by Leon Neyfakh and Andrew Parsons. Our artwork is by Teddy Blanks at CHIPS NY, and our theme song is by Spatial Relations.
44:08 Leon: From the Westwood One Podcast Network.