Supreme Court Splits in Baker v. Exxon Shipping Decision
This article was submitted by Jonathan W. Thames at Archer Norris.
The US Supreme Court today released a very significant decision on maritime punitive damages in the Exxon Valdez case, Baker v. Exxon Shipping. The Court granted certiorari to address three issues: (1) whether the general maritime law allows corporate liability for punitive damages on the basis of unratified acts of managerial employees; (2) whether the federal Clean Water Act forecloses an award of punitive damages because the statute provides for civil penalties and thus preempt any punitive damages award; and (3) whether the $2.5 billion punitive damages award confirmed by the federal appellate court (the Ninth Circuit) was excessive as a matter of the general maritime law.
Under the general maritime law can an employer be liable for punitive damages for the reckless acts of its managerial employees?
As we all know, the law in most every state for land-side cases is that employers are responsible for punitive damages for the acts of their employees that merit punitive damages. This is consistent with both the majority of states' common law (punitive damages available for acts of any employees) and the Restatement (Second) of Torts § 909(c) (1977) (punitive damages okay for acts of only managerial employees). The Ninth Circuit allowed punitive damages against Exxon directly for the acts of its managerial employee, Captain Hazelwood.
Exxon argued, though, that the general maritime law is different, and has been for over a century. Based on two very august cases from the 19th century (, Exxon argued that a vessel owner is not liable for the reckless acts of the master. It conceded that a vessel owner would be liable for the negligent acts of the master through the theory of respondeat superior, certainly, but not for reckless acts which were not "directed, countenanced or participated in by the owners." This relates to punitive damages because punitive damages cannot be awarded for merely negligent conduct, and thus vessel owner could not be on the hook for punitive damages for the reckless acts of the vessel's master or any of its employees. Baker argued, though, that the Ninth Circuit's decision should be affirmed, and the Supreme Court should bring the general maritime law in line with state common law and the Restatement.
This could have been a very important ruling, but the Supreme Court for once exercised judicial restraint and punted. The justices were equally divided on the question, and so they left the Ninth Circuit's decision undisturbed-no reversal, no remand, no affirmation. The rule in this situation is that the appellate court's decision stands, but the Supreme Court's not reversing the decision has no precedential effect--it is not tantamount to an affirmation. Accordingly, the law in the Ninth Circuit will stand, and vessel owners can be liable directly for punitive damages for the reckless acts of their employees. However, this may or may not be the law in the various other circuits-they remain able to reach their own decisions, since the Supreme Court did not provide any certainty.
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