## Facts

- In 1989, the oil tanker *Exxon Valdez* grounded on Bligh Reef in Prince William Sound, Alaska, spilling millions of gallons of crude oil.
- The vessel’s captain, Joseph Hazelwood, left the bridge during a difficult passage and the ship was operated by subordinates during a course correction.
- Hazelwood had a history of alcoholism, and evidence showed a high blood-alcohol level hours after the spill.
- Exxon knew of Hazelwood’s prior alcohol abuse and that he had resumed drinking, but did not remove him from duty.
- Exxon spent approximately $2.1 billion on cleanup, pleaded guilty to criminal violations with fines, settled with the United States and Alaska for at least $900 million, and made substantial voluntary payments to private parties.
- Remaining private claims for economic loss by fishermen, landowners, and others dependent on the Sound were consolidated into a maritime action seeking compensatory and punitive damages.

## Issues

1. Whether maritime law permits punitive damages against a corporate shipowner based on a ship’s master’s reckless conduct without proof the owner directed or participated in the wrongdoing.
2. Whether the Clean Water Act’s oil-spill penalty provisions preempt punitive damages under federal maritime common law.
3. Whether, as a matter of federal maritime common law, punitive damages in a maritime spill case may exceed compensatory damages, and if so by how much.

## Decision

- The Court split 4–4 on corporate vicarious liability for punitive damages; the lower court’s ruling allowing such liability remained in place for this case, but the Supreme Court’s disposition had no precedential effect on that question.
- The Court held that the Clean Water Act does not preempt maritime punitive-damages awards for private plaintiffs.
- Acting under its maritime common-law authority, the Court adopted a substantive limit on punitive damages in maritime cases: punitive damages may not exceed compensatory damages (a 1:1 ratio) when compensatory damages are substantial.
- Applying the rule, the Court reduced the punitive award against Exxon from $2.5 billion to $507.5 million to match the compensatory damages figure used as the baseline.

## Legal Principles

- Federal courts may develop common-law rules in admiralty where Congress has not displaced the area with a clear statutory directive.
- The Clean Water Act’s oil-discharge penalty scheme does not, by itself, eliminate maritime common-law punitive damages for private harms.
- Under federal maritime common law, when compensatory damages are substantial, punitive damages are limited to no more than an equal amount of compensatory damages (1:1 ceiling) to improve fairness and reduce unpredictability.
- A Supreme Court affirmance by an equally divided Court leaves the judgment below intact but creates no binding precedent on the question that produced the tie.

## Conclusion

The Court refused to treat the Clean Water Act as barring punitive damages in maritime oil-spill litigation but imposed a federal maritime common-law cap limiting punitive damages to the amount of compensatory damages, reducing Exxon’s punitive liability to a 1:1 ratio while leaving unresolved, as precedent, the scope of corporate vicarious liability for punitive damages in admiralty.


Exxon Shipping Co. v. Baker, 554 U.S. 471 (2008)