FILED

No. 07-219

SEP 2 0 2007OFFICE OF THE CLERKSUPREME COURT, U.S.

IN THE

~uprrmr Q~urt ~f tl~r ~nitr~ ~tatr~

EXXON SHIPPING COMPANY, et aL,

Wo

GRANT BAKER, et al.,

Petitioners,

Respondents.

On Petition for a Writ of Certiorarito the United States Court of Appeals

for the Ninth Circuit

BRIEF OF AMICUS CURIAETHE CHAMBER OF COMMERCE

OF THE UNITED STATES OF AMERICAIN SUPPORT OF PETITIONERS

ROBIN S. CONRADNATIONAL CHAMBER

LITIGATION CENTER, INC.

1615 H STREET, N.W.Washington, D.C. 20062(202) 463-5337

CARTER G. PHILLIPS*

VIRGINIA A. SEITZ

RICHARD A. KAPLAN

SIDLEY AUSTIN LLP

1501 K Street, N.W.Washington, D.C. 20005(202) 736-8000

Counsel for Amicus Curiae

September 20, 2007 * Counsel of Record

WILSON-EPES PRINTING Co., INC. -- (202) 789-0096 - WASHINGTON, D. C. 20002

Blank Page

TABLE OF CONTENTSPage

TABLE OF AUTHORITIES ...........................................ii

INTEREST OF THE AMICUS CURIAE .........................1

BACKGROUND AND INTRODUCTION .................... 2

ARGUMENT ...................................................................4

I. THE COURT SHOULD GRANT THE PETI-TION TO RESOLVE WHETHER THE CLEANWATER ACT DISPLACES COMMON LAWREMEDIES .............................................................4

II. THE COURT SHOULD GRANT THEPETITION TO DELINEATE THE FEDERALCOMMON LAW PRINCIPLES GOVERNINGREVIEW OF PUNITIVE DAMAGES INMARITIME CASES ...............................................10

III. THE COURT SHOULD GRANT THE PETI-TION TO RESOLVE THE DISARRAY IN THECOURTS OVER APPLICATION OF GORE’SGUIDEPOSTS .........................................................15

CONCLUSION ................................................................20

(i)

ii

TABLE OF AUTHORITIESCASES Page

Aken v. Plains Elec. Generation & TransmissionCoop., Inc., 49 P.3d 662 (N.M. 2002) .................20

Action Marine, Inc. v. Cont’l Carbon, Inc., 481F.3d 1302 (llth Cir. 2007), petition for cert.filed, No. 07-257 (U.S. Aug. 24, 2007) ...............20

BMW of N. Am., Inc. v. Gore, 517 U.S. 559(1996) ...................................................................1

Bach v. First Union Nat’l Bank, 486 F.3d 150(6th Cir. 2007) ......................................................18

Boerner v. Brown & Williamson Tobacco Co.,394 F.3d 594 (8th Cir. 2005) ...............................18

Bogle v. McClure, 332 F.3d 1347 (llth Cir.2003) ....................................................................18

Bowden v. Caldor, lnc., 710 A.2d 267 (Md.1998) ....................................................................13

Browning-Ferris Indus. of Vt., lnc. v. KelcoDisposal, Inc., 492 U.S. 257 (1989) ....................15

Brumbalough v. Camelot Care Ctrs., lnc., 427F.3d 996 (6th Cir. 2005) ......................................8

California v. Deep Sea Research, Inc., 523 U.S.491 (1998) ............................................................10

City of Milwaukee v. Illinois, 451 U.S. 304(1981) ...................................................................5

Complete Auto. Transit, lnc. v. Reis, 451 U.S. 401(1981) ...................................................................6

Dardinger v. Anthem Blue Cross & Blue Shield,781 N.E.2d 121 (Ohio 2002) ...............................12

E. River S.S. Corp. v. Transamerica Delaval, Inc.,476 U.S. 858 (1986) .............................................13

Firestone Tire & Rubber Co. v. Bruch, 489 U.S.101 (1989) ............................................................6

Gasperini v. Ctr. for Humanities, Inc., 518 U.S.415 (1996) ............................................................13

ooo111

TABLE OF AUTHORITIES - cominuedPage

Honda Motor Co. v. Oberg, 512 U.S. 415(1994) ........................................................... 10, 11, 12

Illinois v. Outboard Marine Corp., 680 F.2d 473(7th Cir. 1982) ......................................................5

Int’l B’hood of Elec. Workers v. Foust, 442 U.S.42 (1979) ..............................................................14

The Lottawanna, 88 U.S. (21 Wall.) 558 (1874) .....10Mass. Mut. Life Ins. Co. v. Russell, 473 U.S. 134

(1985) ...................................................................6, 7Merck v. Jewel Food Stores, 734 F. Supp. 330

(N.D. Ill. 1990), rev ’d in part on other grounds,945 F.2d 889 (7th Cir. 1991) ...............................14

Mertens v. HewittAssocs., 508 U.S. 248 (1993) .....7Middlesex County Sewerage Auth. v. Nat’l Sea

Clammers Ass’ n, 453 U.S. 1 (1981) ....................6Nero v. Indus. Molding Corp., 167 F.3d 921 (5th

Cir. 1999) .............................................................8Nw. Airlines, Inc. v. Transport Workers Union of

Am., 451 U.S. 77 (1981) ................................... 6, 9, 14Pac. Mut. Life Ins. Co. v. Haslip, 499 U.S. 1

(1991) ...................................................................11Parrott v. Carr Chevrolet, Inc., 17 P.3d 473 (Or.

2001) ....................................................................12Philip Morris USA v. Williams, 127 S. Ct. 1057

(2007) ...................................................................10Planned Parenthood v. Am. Coalition of Life

Activists, 422 F.3d 949 (9th Cir. 2005), cert.denied, 547 U.S. 1111 (2006) ..............................16

Pope & Talbot, Inc. v. Hawn, 346 U.S. 406(1953) ...................................................................13

Resolution Trust Corp. v. Frates, 52 F.3d 295(10th Cir. 1995) ....................................................5

Resolution Trust Corp. v. Miramon, 22 F.3d 1357(Sth Cir. 1994) ......................................................5

iv

TABLE OF AUTHORITIES - continuedPage

Rhone-Poulenc Agro, S.A. v. DeKalb GeneticsCorp., 345 F.3d 1366 (Fed. Cir. 2003) ................17

Snappv. Unlimited Concepts, Inc., 208 F.3d 928(1 lth Cir. 2000) ....................................................8

Sommers Drug Stores Co. v. Corrigan Enters.,Inc., 793 F.2d 1456 (5th Cir. 1986) .....................7

State Farm Mut. Auto. Ins. Co. v. Campbell, 538U.S. 408 (2003) ......................................... 1, 16, 18, 19

Stogsdill v. Healthmark Partners, L.L.C., 377F.3d 827 (8th Cir. 2004) ......................................18

Sweet v. Roy, 801 A.2d 694 (Vt. 2002) ...................12Textile Workers v. Lincoln Mills, 353 U.S. 448

(1957) ...................................................................14Tony Gullo Motors I, L.P. v. Chapa, 212 S.W.3d

299 (Tex. 2006) ....................................................12United Paperworkers Int’l Union v. Misco, Inc.,

484 U.S. 29 (1987) ...............................................14United States v. Oswego Barge Corp. (In re

Oswego Barge Corp.), 664 F.2d 327 (2d Cir.1981) ................................................................. 5, 6, 13

United States v. Reliable Transfer Co., 421 U.S.397 (1975) ............................................................13

Walker v. UPS, Inc., 240 F.3d 1268 (10th Cir.2001) ....................................................................8

Williams v. ConAgra Poultry Co., 378 F.3d 790(8th Cir. 2004) ......................................................18

Xin Liu v. Amway Corp., 347 F.3d 1125 (9th Cir.2003) ....................................................................8

Zhang v. Am. Gem Seafoods, Inc., 339 F.3d 1020(9th Cir. 2003) ......................................................17

STATUTES

18 U.S.C. § 3571 .....................................................929 U.S.C. § 185(a) ...................................................14

V

TABLE OF AUTHORITIES - continuedPage

29 U.S.C. § 1132 .....................................................6, 7§ 2617(a)(1)(A) ...................................... 7

33 U.S.C. § 1319 .....................................................8§ 1321(b)(6)(A)-(B) ............................... 9

SCHOLARLY AUTHORITY

Richard W. Murphy, Punitive Damages, Explan-atory Verdicts, and the Hard Look, 76 Wash. L.Rev. 995 (2001) ...................................................11

Blan~ Page

INTEREST OF THE AMICUS CURIAE~

The Chamber of Commerce of the United States ofAmerica ("the Chamber") is the nation’s largest federation ofbusinesses and associations, with an underlying membershipof more than 3,000,000 businesses and professionalorganizations of every size and in every relevant economicsector and geographic region. One important function of theChamber is the representation of its members’ interests byfiling amicus curiae briefs in cases involving issues ofnational concern to American business. The courts’ fair,consistent and predictable administration of punitive damagesawards is of profound concern to the Chamber’s members.

Accordingly, the Chamber regularly files amicus briefs insignificant punitive damages cases, including every case inwhich this Court has addressed that issue during the past twodecades. Petitioners here (hereafter "Exxon") presentcritically important questions related to the power of federalcourts to establish common law with respect to punitivedamages awards in the context of federal maritime law -issues on which the federal courts are in acknowledgedconflict. In addition, the decision below exacerbates thecourts of appeals’ disarray with respect to the application ofthe constitutional guideposts for punitive damages awardsestablished in BMW of North America, Inc. v. Gore, 517 U.S.559 (1996), and State Farm Mutual Auto Insurance Co. v.Campbell, 538 U.S. 408 (2003). The divisions among thecourts of appeals on the issues presented here result infundamental unfairness, as massive differences in punitivedamages awards turn on the fortuity of where a case happens

1 No counsel for any party to these proceedings authored this brief, inwhole or in part. No entity or person, aside from the amicus curiae, itsmembers, and its counsel, made any monetary conlribution for thepreparation or submission of this brief. Petitioners and respondents haveconsented to the filing of this brief. Letters reflecting such consent havebeen filed with the Clerk.

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to be filed. Moreover, the absence of uniformity in maritimelaw not only contravenes maritime policy and congressionalintent, but also creates damaging uncertainty for businesses inthis sector. These entities do not know whether they aresubject to imputed liability for the tortious acts of a shipmaster or crew, when conduct governed by the Clean WaterAct might also be subject to punitive damages, or what legalstandards govem punitive damages in maritime cases.

The Chamber believes that its knowledge of the practicalimplications for the business community of the legalprinciples embodied in the decision below can assist theCourt in assessing the merits of Exxon’s petition.

BACKGROUND AND INTRODUCTION

Although the Chamber fully supports review of all threequestions presented, this brief does not address the first issueof imputed liability under maritime law, viz., whether punitivedamages may be imposed on the owner of a vessel for thetortious acts of the master and crew when the owner has notauthorized, ratified, or controlled such actions. That issue isamply addressed by Exxon and by other amici. This briefsupports Exxon’s arguments that the remaining issues in thepetition are independently worthy of review.

First, this Court should review the question whether thecomprehensive remedial scheme of the Clean Water Act("CWA") has displaced federal common law remedies, arecurring and important question on which the lower courtsare in conflict. As this Court and others have made clear,where Congress enacts a comprehensive remedial design thatdoes not expressly include a specific remedy, courts are notfree to supplement that scheme with an additional remedyunder federal common law. This is true not simply undermaritime law, but as a general principle: A federal statutewith a comprehensive remedial scheme displaces federalcommon law remedies - particularly punitive damages. Thiscase provides an excellent example, because Exxon was

3

assessed $125 million in f’mes under the CWA alone. Thecontinuing lack of consistency concerning the CWA’s effecton federal common law remedies treats litigants unfairly,encourages forum shopping, and undermines maritime lawsand policies that recognize the critical importance of nationaluniformity and minimize burdens on maritime commerce.The resulting uncertainty is harmful to affected businessesmaking decisions in this unpredictable legal environment.

Second, this Court should grant the petition to delineate thecommon law principles that the federal courts should applywhen reviewing punitive damages awards in maritime cases.In maritime and other common law cases, before addressingthe question whether a punitive damages award isconstitutional, the federal court must review the award underthe relevant principles of federal common law. The courtbelow wholly failed to do so, and thus affirmed an award thatcontravenes maritime policies in numerous respects.Moreover, as noted above, it is essential to maritime law andpolicies that federal courts apply uniform, consistentprinciples to maritime law questions - including the questionwhether a punitive damages award in a maritime case isexcessive under federal common law. Yet, this Court hasnever addressed the federal common law principles thatgovern judicial review of punitive damages in maritime cases.This Court should grant the petition to end the damaginguncertainty about both the process and substance of judicialreview in this important area of commerce.

Third, the decision below adds to the confusing andinconsistent array of lower court decisions applying two ofthe Gore guideposts for constitutional review of punitivedamages awards. Specifically, the Ninth Circuit joined othercourts that simply do not take seriously this Court’sinstruction that when "substantial" compensatory damageshave been awarded, punitive damages should yield at most a4-to-1 ratio - in cases of highly reprehensible conduct - and a1-to-1 ratio in all other circumstances. In addition, the court

of appeals noted Gore’s instruction that a reviewing courtmust consider the disparity between the punitive damagesaward and available civil sanctions, but read State Farm tomake consideration of this guidepost essentially optional. Inboth respects, the decision badly misreads this Court’spunitive damages holdings and exemplifies the unfairinconsistency currently permeating this area of law. Thebroadening uncertainty and division on these recurring legalquestions is harmful to the legal system and Americanbusiness. This Court’s review is thus fully warranted.

ARGUMENT

I. THE COURT SHOULD GRANT THE PETITIONTO RESOLVE WHETHER THE CLEAN WATERACT DISPLACES COMMON LAW REMEDIES.

The Ninth Circuit acknowledged that "[b]efore and after theExxon Valdez oil spill, the Clean Water Act’s section on ’Oiland hazardous substance liability’ provided a carefullycalibrated set of civil penalties for oil spills, generally withceilings on penalties, even if the spills were grossly negligentor willful." App. 74a. That remedial regime has neverincluded punitive damages. The court of appeals nonethelessheld that a punitive damages award "does not conflict withthe statutory scheme," and therefore that the CWA "does notpreclude a private remedy for punitive damages." Id. at 75a,77a. See also id. at 77a ("a statute providing a comprehensivescheme of public remedies need not be read to preempt apreexisting common law private remedy").

As Exxon makes clear (Pet. 17-18), the decision belowconflicts with decisions of other federal courts of appeals. Itis also utterly inconsistent with this Court’s enduring teachingthat federal common law is displaced where Congress hasdirectly spoken to a particular subject matter.

Where, as here, "Congress addresses [a] problem formerlygoverned by federal common law," courts must construe the

5

federal statute at issue with a "willingness to findcongressional displacement of federal common law." City ofMilwaukee v. Illinois, 451 U.S. 304, 317 & n.9, 315 n.8(1981) ("Milwaukee 11") (emphasis omitted). This is because"it is for Congress, not federal courts, to articulate theappropriate standards to be applied as a matter of federallaw." Id at 317. As other courts of appeals have recognized,"once Congress has addressed a national concern, ourfundamental commitment to the separation of powersprecludes the courts from scrutinizing the sufficiency of thecongressional solution" or "holding that the solution Congresschose is not adequate." Illinois v. Outboard Marine Corp.,680 F.2d 473,478 (7th Cir. 1982); see Milwaukee II, 451 U.S.at 324. See also United States v. Oswego Barge Corp. (In reOswego Barge Corp.), 664 F.2d 327, 335 (2d Cir. 1981)("separation of powers concerns create a presumption in favorof [displacement] of federal common law whenever it can besaid that Congress has legislated on the subject").

Federal common law claims and remedies are displaced bydirect congressional treatment of an issue even if Congressdoes not expressly state that it is displacing common law. SeeResolution Trust Corp. v. Frates, 52 F.3d 295, 297 (10th Cir.1995) (to "supersede authority previously established byfederal judicial ruling, Congress need not affirmativelyproscribe that authority, but may do so simply by speakingdirectly to the issue"); Milwaukee II, 451 U.S. at 313-15;Resolution Trust Corp. v. Miramon, 22 F.3d 1357, 1360 (5thCir. 1994).2 Indeed, this Court has repeatedly observed that

2 The threshold for f’mding displacement of federal common law islower than that for finding preemption of state law by federal commonlaw. See Frates, 52 F.3d at 297. And, although the Second Circuit hassuggested that "the presumption of statutory preemption [applies]somewhat less forcefully to judge-made maritime law than to non-maritime federal common law," In re Oswego Barge Corp., 664 F.2d at336, that court too acknowledged that "preemption of maritime law hasoccurred both as to prior judge-made law and the authority to fashion new

6

"’ [w]here a statute expressly provides a particular remedy orremedies, a court must be chary of reading others into it.’"Mass. Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 147 (1985)(quoting Transamerica Mortgage Advisors, Inc. v. Lewis, 444U.S. 11, 19 (1979)). Moreover, "’[t]he presumption that aremedy was deliberately omitted from a statute is strongestwhen Congress has enacted a comprehensive legislativescheme including an integrated system of procedures forenforcement.’" Id. at 147 (quoting Nw. Airlines, Inc. v.Transport Workers Union of Am., 451 U.S. 77, 97 (1981));see also Middlesex County Sewerage Auth. v. Nat’l SeaClammers Ass’n, 453 U.S. 1, 15 (1981) ("[i]n the absence ofstrong indicia of a contrary congressional intent, we arecompelled to conclude that Congress provided precisely theremedies it considered appropriate"); Complete Auto Transit,Inc. v. Reis, 451 U.S. 406, 417 n.18 (1981) (under parts of§301 of the Labor Management Relations Act, theavailability of a "significant array of other remedies" counselsagainst the imposition of punitive damages as a matter offederal common law).

This Court has already made clear that these principlesgovern in the maritime context, as described in detail byExxon. See Pet. 15-19 (citing cases). They also governfederal statutory interpretation as a general rule.

For example, the Employee Retirement Income SecurityAct of 1974 ("ERISA") has a comprehensive remedialscheme. Civil remedies for ERISA violations are set forth in§ 502, 29 U.S.C. § 1132, which "provides ’a panoply ofremedial devices’ for participants and beneficiaries of benefitplans." Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101,

law," id. at 337. And, in admiralty law, this Court has "decline[d] tofashion new remedies if there is a possibility that they may interfere with alegislative program." Nw. Airlines, Inc. v. Transport Workers Union ofAm., 451 U.S. 77, 97 n.40 (1981); see id. at 96 ("[e]ven in admiralty,however, where the federal judiciary’s lawmaking power may well be atits strongest, it is our duty to respect the will of Congress").

7

108 (1989) (quoting Russell, 473 U.S. at 146).3 This Courthas declined to supplement ERISA’s remedial regime forviolations of benefit plans with extracontractualcompensatory and punitive damages remedies under commonlaw, declaring itself "reluctant to tamper with an enforcementscheme crafted with such evident care as the one in ERISA."Russell, 473 U.S. at 147. In addition, the Court noted, "thereis a stark absence - in the statute itself and in its legislativehistory - of any reference to an intention to authorize therecovery of extracontractual damages." Id. at 148. Thus, theCourt concluded, "Congress did not provide, and did notintend the judiciary to imply, a cause of action for extra-contractual damages caused by improper or untimelyprocessing of benefit claims." Id.4

Federal courts of appeals have taken a similar approach inevaluating the effect of the comprehensive remedial schemeof the Family Medical Leave Act ("FMLA"). Under 29U.S.C. §2617(a)(1)(A), any employer who violates thestatute is liable "for damages equal to... the amount of": (1)"any wages, salary, employment benefits, or othercompensation denied or lost to such employee by reason ofthe violation"; (2) interest on that amount; and (3) "anadditional amount as liquidated damages equal to the sum ofthe amount described [in number one]." Courts have declinedto supplement this detailed plan, uniformly concluding that

3 Under ERISA § 502(a)(1)(B), a participant may bring a civil action

"to recover benefits due to him under the terms of his plan, to enforce hisrights under the terms of the plan, or to clarify his rights to future benefitsunder the terms of the plan." 29 U.S.C. § l132(a)(1)(B). Section502(a)(3)(B) authorizes civil actions "to obtain other appropriate equitablerelief (i) to redress.., violations or (ii) to enforce any provisions of thissubchapter or the terms of the plan." Id. § 1132(a)(3)(B).

4 See also Mertens v. Hewitt Assocs., 508 U.S. 248, 255-56 (1993)(suggesting that neither § 502(a)(2) nor § 502(a)(3) permits a participantor beneficiary to recover punitive damages); Sommers Drug Stores Co. v.Corrigan Enters., Inc., 793 F.2d 1456, 1462-65 (5th Cir. 1986) (same).

8

only compensatory damages are available under the FMLA.See Brumbalough v. Camelot Care Ctrs., Inc., 427 F.3d 996,1007-08 (6th Cir. 2005) (denying recovery for emotionaldistress under the statute); Xin Liu v. Amway Corp., 347 F.3d1125, 1133 n.6 (9th Cir. 2003) ("FMLA only provides forcompensatory damages and not punitive damages"); Walkerv. UPS, Inc., 240 F.3d 1268, 1277 (10th Cir. 2001) ("courtshave consistently refused to award FMLA recovery for suchother claims as consequential damages and emotional distressdamages") (citations omitted); Nero v. Indus. Molding Corp.,167 F.3d 921,930 (5th Cir. 1999) (same).5

Like these other federal statutes, the CWA enacts acomprehensive legislative scheme that precludes courts frominferring that additional remedies such as punitive damagesmay be available and that displaces any preexisting federalcommon law right to such an award. Pet. I5. The CWAauthorizes substantial civil and criminal penalties. Under 33U.S.C. § 1319(c), those who negligently or knowingly violatethe Act are subject to fines of not less than $2,500 or $5,000nor more than $25,000 or $50,000 per day of violation,respectively, and/or by imprisonment of not more than 1 or 3years, respectively.’’6

On the civil side, an entity who violates the statute issubject to a civil penalty "not to exceed $25,000 per day foreach violation." Id § 1319(d). Under § 1321(b)(6)(B), if an"owner, operator, or person in charge of any vessel ... from

~ Cf Snappv. Unlimited Concepts, Inc., 208 F.3d 928, 930, 933-35(1 lth Cir. 2000) (holding that §§ 216(a) & (b) of the Fair Labor StandardsAct establish "a comprehensive remedial scheme for violations of theFLSA’s substantive provisions that covers the whole terrain of punitivesanctions, compensatory relief, private rights of action, and actionsbrought by the Secretary of Labor," and declining to authorize awards ofpunitive damages under the private cause of action).

6 Repeat offenders are subject to maximum penalties of $50,000 or

$100,000 per day of violation, depending upon whether the violationoccurred negligently or knowingly. 33 U.S.C. § 1319(c)(1)-(2).

9

which.., a hazardous substance is discharged in violation ofthe statute, that individual or entity may be assessed up to"either $10,000 per violation (up to $25,000) or $10,000 perday for each day for which the violation continues (up to$125,000), depending on the kind of civil penalty assessed.33 U.S.C. § 1321(b)(6)(A)-(B). Additionally, as the NinthCircuit noted, 18 U.S.C. § 3571, "the federal measure forfines in this case," could result in a $200,000 civil fine, aswell as a potential $1.03 billion criminal fine, which is "’notmore than the greater of twice the gross gain or twice thegross loss’" suffered by another person as a result of theoffense. App. 101 a, 102a.

"The judiciary may not, in the face of such [a]comprehensive legislative scheme[], fashion new remediesthat might upset carefully considered legislative programs."Nw. Airlines, lnc. v. Transport Workers Union of Am., 451U.S. 77, 97 (1981). The court of appeals decision violatesthis standard.

The Ninth Circuit’s ultimate conclusion7 that - despite itscomprehensive remedial provisions - other CWA provisionspreserve a plaintiff’s right to pursue punitive damages ismeritless. Section 1321(o)(1) preserves only actions toremedy "’damages to ... property’" (emphasis supplied)(omission in original), and § 1365(e) limits only the reach ofthe citizen suit provision. Pet. 20 n.7. Neither provisionpreserves the common law remedy of punitive damages forconduct comprehensively addressed by the CWA.s

7 In analyzing the question whether the CWA displaced the punitive-

damages remedy, the Ninth Circuit acknowledged that "the question is notwithout doubt," App. 75a, and that "[t]he issue is close," id at 77a.

8 The Ninth Circuit also maintained that "a statute providing a

comprehensive scheme of public remedies need not be read to preempt apreexisting common law private remedy." App. 77a. A statute imposingonly "public remedies" might not displace or preempt compensatorydamages through which aggrieved private parties recoup their losses. Butlike other public remedies, punitive damages serve the goals of

10

For numerous reasons, the conflict and uncertaintyconcerning this issue should not be permitted to continue.First, "’It]he need for a body of [maritime] law applicablethroughout the nation was recognized by every shade ofopinion in the Constitutional Convention.’" California v.Deep Sea Research, Inc., 523 U.S. 491,501 (1998) (alterationin original). This Court, too, has remarked on the necessityfor "uniformity and consistency" in maritime law in light ofits interstate and international character. The Lottawanna, 88U.S. (21 Wall.) 558, 575 (1874). Second, allowing theconflict to endure is fundamentally unfair to litigants whoseentitlement to punitive damages will turn on the geographiclocation in which the case is filed, and will serve to encourageunseemly forum shopping. Third, uncertainty about the scopeof a federal statute has harmful consequences for any nationalbusiness whose conduct is regulated by that statute.

This Court should grant the petition to decide whether theCWA displaces the federal common law remedy of punitivedamages for conduct regulated by the Act.

II. THE COURT SHOULD GRANT THE PETITIONTO DELINEATE THE FEDERAL COMMON LAWPRINCIPLES GOVERNING REVIEW OF PUNI-TIVE DAMAGES IN MARITIME CASES.

The court of appeals failed to review the punitive damagesaward in this case to determine whether it was consistent withgoverning federal common law principles. This omissioncannot be reconciled with this Court’s decision in HondaMotor Co. v. Oberg, 512 U.S. 415 (1994), or with thelongstanding principles of common law that apply toappellate review of punitive damages awards. Moreover, hadit been reviewed, the award could not have survived scrutinyunder the applicable common law principles. Granting

punishment and deterrence, Philip Morris USA v. Williams, 127 S. Ct.1057, 1062 (2007), and thus a comprehensive scheme of public remediespresumptively preempts punitive damages.

11

review would allow this Court first, to make clear that infederal common law cases, including maritime cases, a courtmust review a punitive damages award under both federalcommon law principles and the Constitution, and second, toarticulate uniform standards for review of such awards inmaritime cases illuminated by maritime laws and policies.

"Judicial review of the size of punitive damages awards hasbeen a safeguard against excessive verdicts for as long aspunitive damages have been awarded." Id. at 421; see alsoPac. Mut. Life Ins. Co. v. Haslip, 499 U.S. 1, 15 (1991).Long before this Court addressed federal constitutional limitson punitive damages awards, federal and state courtsroutinely reviewed those awards under common lawprinciples. Oberg, 512 U.S. at 424-25; Richard W. Murphy,Punitive Damages, Explanatory I/’erdicts, and the Hard Look,76 Wash. L. Rev. 995, 1014 (2001) ("loin the common-lawside, courts have reviewed punitive damages verdicts forexcessiveness since 1763"). But despite Exxon’s repeatedrequests for review under federal common law, the court ofappeals addressed only constitutional limits on the punitivedamages award. App. 68a-70a, 90a-91a. The court thusabdicated its responsibility as a federal common law court.

Honda Motor Corp. v. Oberg involved an amendment tothe Oregon Constitution that precluded judicial review ofpunitive damages awards except in certain very narrowcircumstances. 512 U.S. at 418. As the Court explained, "ifthe defendant’s only basis for relief [was] the amount ofpunitive damages the jury awarded, Oregon provide[d] noprocedure for reducing or setting aside that award." Id. at426-27. This Court rejected this scheme, holding that "theDue Process Clause requires judicial review of the amount ofpunitive damage awards." Id. at 420.

The Court observed that "[j]udicial review of the amountawarded was one of the few procedural safeguards which thecommon law provided against that danger," id. at 432(emphasis added), and that "Oregon, unlike the common law,

12

provides no assurance that those whose conduct issanctionable by punitive damages are not subjected topunitive damages of arbitrary amounts," id. at 429. TheCourt held that, by "remov[ing] that safeguard withoutproviding any substitute procedure and without any indicationthat the danger of arbitrary awards has in any way subsidedover time," Oregon violated the Due Process Clause of theFourteenth Amendment. Id. at 432.

The Court’s decision in Oberg, accordingly, makes clearthat common law courts must conduct some form of review ofpunitive damages awards sufficient to ensure that "thosewhose conduct is sanctionable by punitive damages are notsubjected to punitive damages of arbitrary amounts." Id. at429. Although some form of judicial review (or some equallyeffective safeguard against excessiveness and arbitrariness) isrequired, it is for the common law court - be it state orfederal- to determine the precise content of that mandatorycommon law review. And, Oberg shows that this commonlaw review is independent of, and precedes, the application ofconstitutional limits on punitive damages awards. (Indeed,the Court did not mandate the application of substantiveconstitutional limits on such awards until two years later inGore.) Thus, a common law court (either state or federal)must review a punitive damages award for compliance withapplicable common law and the Constitution.

Many state common law courts conduct this two-phasereview as a matter of course, first applying the pertinentexcessiveness standard under common law and thenconsidering the constitutional limits. See, e.g., Parrott v.Carr Chevrolet, Inc., 17 P.3d 473, 484 (Or. 2001) ("theguideposts announced in Gore are additional factors for thereviewing court in Oregon to consider as part of the . . .rational juror review"); Tony Gullo Motors I, L.P. v. Chapa,212 S.W.3d 299, 307 n.33 (Tex. 2006); Dardinger v. AnthemBlue Cross & Blue Shield, 781 N.E.2d 121, 143-44 (Ohio2002); Sweet v. Roy, 801 A.2d 694, 714-15 (Vt. 2002);

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Bowden v. Caldor, lnc., 710 A.2d 267, 277-78 (Md. 1998);see also Gasperini v. Ctr. for Humanities, lnc., 518 U.S. 415,430 n.12 (1996) ("[f]or rights that are state created, state lawgoverns the amount properly awarded as punitive damages,subject to an ultimate federal constitutional check forexorbitancy").

In cases involving federal common law, a federal appellatecourt reviewing a punitive damages award should assume thesame role as state appellate courts and conduct the same two-tier analysis. In reviewing the punitive damages award here,the court of appeals thus should have started by reviewing thepunitive damages award under the applicable principles offederal common law. Its failure to do so was legal error.

Moreover, had the court of appeals reviewed the awardunder federal common law principles, it would have beenrequired to give content to those principles. In maritime law,as in other areas governed by federal common law, the federalcourts create the applicable federal common law. See Pope &Talbot, Inc. v. Hawn, 346 U.S. 406, 409 (1953); E. River S.S.Corp. v. Transamerica Delaval, Inc., 476 U.S. 858, 864(1986) ("[w]ith admiralty jurisdiction comes the applicationof substantive admiralty law"); In re Oswego Barge Corp.,664 F.2d at 336 (citing the "substantial law-creating functionfor federal courts in maritime law"). This entails, inter alia,establishing the remedies available for each cause of action.United States v. Reliable Transfer Co., 421 U.S. 397, 409(1975) ("the Judiciary has traditionally taken the lead informulating flexible and fair remedies in the law maritime").

Exxon has already described in detail the maritime law andpolicies that should inform courts in reviewing the punitivedamages award in this case, Pet. 22-25. Briefly, the maritimepolicies of uniform and consistent laws, appropriate and faircompensation for injury, avoidance of undue burdens oncommerce, the encouragement of settlement of claims, andjudicial economy all militate against the massive andunprecedented punitive damages awarded below in this case.

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/d. The Court’s review is of particular importance in thisinstance, where the $2.5 billion punitive damages award is inaddition to the nearly $3.5 billion Exxon has alreadyexpended - in fines, settlements, and affirmative mitigationcosts - as a result of the oil spill. Id. at 3-4.

Indeed, Exxon was not asking the court of appeals to doanything other than to fulfill its responsibilities as a federalcommon law court - i.e., to determine the appropriateprocedural and substantive standards for reviewing punitivedamages awards in light of the federal policies and interests atstake. That is precisely what the federal courts have done inthe closely analogous context of § 301 of the LaborManagement Relations Act, 29 U.S.C. § 185(a), a statute thatinstructs the courts to create a federal common lawinterpreting, enforcing, and remedying violations of collectivebargaining agreements and agreements between labor unionsand their members. See Nw. Airlines, 451 U.S. at 95, 96 n.35.Pursuant to that statutory command, federal courts have notonly developed the general contours of the law governinglabor agreements, but also have crafted the law governing theremedies for violations of such agreements. In doing so, theirdecisions are informed by the relevant federal labor policy.See Int’l B’hood of Elec. Workers v. Foust, 442 U.S. 42, 50-52 (1979) (barring awards of punitive damages for breach of aunion’s duty of fair representation); Merck v. Jewel FoodStores, 734 F. Supp. 330, 331 (N.D. Ill. 1990) (Posner, J.)(agreeing with the majority of federal courts that refuse toallow punitive damages for violations of collective bargainingagreements under § 301), rev ’d in part on other grounds, 945F.2d 889 (7th Cir. 1991).9

9See also Textile Workers v. Lincoln Mills, 353 U.S. 448, 455-58(1957) (enforcement of arbitration agreements); United Paperworkerslnt’l Union v. Misco, Inc., 484 U.S. 29, 36-45 (1987) (limited review ofarbitration awards).

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The same approach should have been utilized here. TheNinth Circuit abjured its obligation to review the punitivedamages award under common law standards, and thusnecessarily failed to fulfill its responsibility to craft commonlaw principles of review informed by maritime laws andpolicies. The court’s failure to determine and apply theapplicable common law principles was clear le~0al error, and

led directly to the excessive award in this case. Moreover,the decision creates uncertainty about the nature of review ofpunitive damages awards in maritime law- uncertainty withthe damaging consequences set forth supra. And, because thefederal court must determine the applicable common lawstandards in this context, this Court has a unique opportunityto demonstrate to other common law courts how punitivedamages standards ought to operate - not at their outermostconstitutional limits, but in fulfilling punitive damages’ basicfunction of deterring and punishing wrongful acts. For thesereasons, too, the Court should grant the petition.

III. TIlE COURT SHOULD GRANT THE PETITIONTO RESOLVE THE DISARRAY IN TIlE COURTSOVER APPLICATION OF GORE’S GUIDEPOSTS.

1. In State Farm, this Court sought, inter alia, to provideguidance to the lower courts on the proper application ofGore’s guideposts for assessing punitive damages. Relevanthere, this Court stated in describing the second Goreguidepost that "few awards exceeding a single-digit ratio

lo In Browning-Ferris Indus. of Vt., Inc. v. Kelco Disposal, Inc, thisCourt refused to f’md a punitive damages award based on a state-law causeof action "excessive as a matter of federal common law," holding that"[i]n a diversity action, or in any other lawsuit where state law providesthe basis of decision, the propriety of an award of punitive damages forthe conduct in question, and the factors the jury may consider indetermining their amount, are questions of state law." 492 U.S. 257, 277,278 (1989). Here, in contrast, the underlying claim arises under a form offederal common law and thus review under judge-made common lawprinciples is mandatory.

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between punitive and compensatory damages, to a significantdegree, will satisfy due process." 538 U.S. at 425. Critically,moreover, the Court added that a ratio exceeding double-digits may be permissible when "’a particularly egregious acthas resulted in only a small amount of economic damages,’"but that "[w]hen compensatory damages are substantial, thena lesser ratio, perhaps only equal to compensatory damages,can reach the outermost limit of the due process guarantee."Id (emphasis supplied). This is because when compensatorydamages are substantial, "further sanctions" generally are notrequired "to achieve punishment or deterrence." Id. at 419.

Despite this facially clear guidance, many lower courtshave failed to comply, which has resulted in the persistent,inconsistent treatment of punitive damages in the lowercourts. The instant case exemplifies this disturbing state ofaffairs. Although compensatory damages in this case were$20.3 million, the court of appeals first held that the actualharm suffered was $500 million. This award was"’substantial,’" App. 293a, and thus the same amount ofpunitive damages should have been at the "outermost limit ofthe due process guarantee." The court of appeals insteadfollowed the path marked out in its decision in PlannedParenthood v. Am. Coalition of Life Activists, 422 F.3d 949,962 (9th Cir. 2005), cert. denied, 547 U.S. 1111 (2006),which authorized a ratio of up to 4-to-1 for cases involvingsignificant economic damages without egregious behavior anda higher ratio when behavior is egregious. Accordingly, thecourt affirmed an award that imposed punitive damages at aratio of 5-to-1 to the court’s estimate of harm (many timeshigher than actual damages). App. 41a-42a.1~

This award directly contravenes State Farm. It alsohighlights a disturbing trend among courts that underminesthis Court’s intent to ensure due process by achieving greater

~1 For the reasons set forth in the Petition at 28-29, the court of appeals

also erred by labeling Exxon’s conduct egregious.

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uniformity, predictability and reasonableness in the punitivedamages arena. The Ninth Circuit and many other courtshave failed to heed this Court’s instructions about theappropriate relationship between compensatory and punitivedamages awards. For example, in Zhang v. Am. GemSeafoods, Inc., 339 F.3d 1020 (9th Cir. 2003), the courtupheld a $2.6 million punitive damages award in relation to a$360,000 compensatory damage award (a ratio exceedingseven to one). The court did not discuss the impact of thesubstantial nature of the compensatory award, but simplydeclared that it was "aware of no Supreme Court or NinthCircuit case disapproving of a single-digit ratio betweenptmitive and compensatory damages." Id. at 1044.

Similarly, the Federal Circuit noted that a $50 millionpunitive damages award did "not even approach the possiblethreshold of constitutional impropriety," as it was "barelyabove three times the compensatory award of $15 million inthis case." Rhone-Poulenc Agro, S.A. v. DeKalb GeneticsCorp., 345 F.3d 1366, 1372 (Fed. Cir. 2003). The court heldthat because the 3-to-1 ratio "remains within the ’[s]ingle-digit multipliers [which] are more likely to comport with dueprocess,’ not even reaching the 4-to-1 ratio mentioned by theCourt as a threshold where the punitive award may becomesuspect[,] .... this low ratio of punitive to compensatorydamages award lies well within the bounds of constitutionalpropriety." Id. (first two alterations in original) (quoting StateFarm, 538 U.S. at 425). The court simply ignored thisCourt’s instructions concerning awards in cases involvingsubstantial compensatory damages despite its clearapplication to an award of $15 million. See also Pet. 28 n.9(citing cases disregarding this Court’s instructions).

Other courts, however, have heeded this Court’s clear callfor restraint, as the citations in Exxon’s petition (id.) againreveal. As the Sixth Circuit recently explained, ."the generalprinciple [is] that a plaintiff who receives a considerablecompensatory damages award ought not also receive a

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sizeable punitive damages award absent specialcircumstances." Bach v. First Union Nat’l Bank, 486 F.3d150, 156 (6th Cir. 2007). In addition, the Eighth Circuit hasgenerally reduced exorbitant punitive damages awards whenmeasured against substantial compensatory ones. SeeBoerner v. Brown & Williamson Tobacco Co., 394 F.3d 594,603 (Sth Cir. 2005) (reducing $15 million punitive damagesaward to $5 million to achieve a 1-to-1 ratio); Williams v.ConAgra Poultry Co., 378 F.3d 790, 799 (Sth Cir. 2004)(remitting the punitive damages award to an amount equal tothe compensatory damages award of $600,000 because "[s]ixhundred thousand dollars is a lot of money"). But seeStogsdill v. Healthmark Partners, L.L.C., 377 F.3d 827, 833(Sth Cir. 2004) (finding $500,000 in compensatory damages"substantial," but only reducing the 10-to- 1 ratio to 4-to- 1).~2

Clearly, the goals of uniformity and predictability thatmotivated this Court’s due process standards for punitiveawards have continued to elude the lower courts, insignificant part due to their failure faithfully to apply Goreand State Farm. This failure - and the resulting uncertainty -continues to have an outsized effect on American businessesby distorting how business and litigation are conducted.

2. As the petition observes, the decision below does notapply Gore’s teaching that courts should consider "thedisparity between the punitive damages award and the ’civilpenalties authorized or imposed in comparable cases.’" StateFarm, 538 U.S. at 428 (quoting Gore, 517 U.S. at 575). Thecourt justified this omission by relying on the State FarmCourt’s statement that it "need not dwell long on thisguidepost," id. The court of appeals took this statement to

12 The Stogsdill approach was also utilized in Bogle v. McClure, 332

F.3d 1347, 1362 (llth Cir. 2003), where the court held that "[a]lthoughthe [plaintiffs] received substantial compensatory damages, given the factsof this case, the [four-to-one] ratio of punitive damages to compensatorydamages does not indicate that the punitive damages award violates dueprocess."

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mean that a disparity between punitive damages andpotentially analogous civil penalties was unimportant. SeeApp. 41a ("[i]n our own circuit’s more recent post-BM~ v.Gore and State Farm cases, we have generally not attemptedto quantify legislative penalties" but "have looked only towhether or not the misconduct was dealt with seriously understate civil or criminal laws. In several recent discussions wehave not discussed the factor at all") (citation omitted).

This attitude, which is not confined to the Ninth Circuit, isbased on a misinterpretation of State Farm, and sabotages thisCourt’s efforts to guide the lower courts to consistency anduniformity. First, as the context makes clear, the court belowcompletely misread State Farm. This Court stated:

Here, we need not dwell long on this guidepost. Themost relevant civil sanction under Utah state law for thewrong done to the Campbells appears to be a $10,000fine for an act of fraud, an amount dwarfed by the $145million punitive damages award. The Supreme Court ofUtah speculated about the loss of State Farm’s businesslicense, the disgorgement of profits, and possibleimprisonment, but here again its references were to thebroad fraudulent scheme drawn from evidence of out-of-state and dissimilar conduct. This analysis wasinsufficient to justify the award.

538 U.S. at 428 (citation omitted). As this language makesplain, State Farm duly considered the disparity between thepunitive damages award and comparable civil sanctions. ThisCourt simply found that its application in that instance wasuncomplicated, because the comparable penalties were"dwarfed" by the Utah Supreme Court’s award.

That is hardly a license to adopt the Ninth Circuit’s utterlycavalier approach to this disparity question, which unfortun-ately is not limited to the Ninth Circuit. Some courts haveplainly indicated that the this guidepost should be "’accordedless weight in the reasonableness analysis than the first two

2O

guideposts.’" Action Marine, Inc. v. Cont’l Carbon, Inc., 481F.3d 1302, 1322 (llth Cir. 2007) (quoting Kemp v. AT&T,393 F.3d 1354, 1364 (1 lth Cir. 2004)), petition for cert. filed,No. 07-257 (Aug. 24, 2007). Others claim that the thirdguidepost "has been criticized as ineffective and very difficultto employ." Aken v. Plains Elec. Generation & TransmissionCoop., Inc., 49 P.3d 662, 671 (N.M. 2002). Still others,including the Ninth Circuit, have fashioned alternativeapproaches. See, e.g., App. 41a (assessing only whether ornot the legislature "dealt with [the issue] seriously").

Since establishing Gore’s third guidepost, the Court has notelaborated further. Here, the combined civil penaltiesimposed on Exxon could not have exceeded $80 million, andthe court below acknowledged that this case is "’unusuallyrich in comparable[]’" civil penalties. Pet. 30 (quoting App.101a). This case is, accordingly, also an excellent vehicle forthe rehabilitation of this Gore guidepost which has oftenreceived short shrift from the lower courts, although it is anintegral part of the due process equation.

CONCLUSION

The petition for certiorari should be granted.

Respectfully submitted,

ROBIN S. CONRAD

NATIONAL CHAMBER

LITIGATION CENTER, INC.

1615 H STREET, N.W.Washington, D.C. 20062(202) 463-5337

CARTER G. PHILLIPS*

VIRGINIA m. SEITZ

RICHARD A. KAPLAN

SIDLEY AUSTIN LLP

1501 K Street, N.W.Washington, D.C. 20005(202) 736-8000

Counsel for Amicus Curiae

September 20, 2007 * Counsel of Record