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Oil and water

February 28, 2008 5:24 PM

One thing was clear after the argument before the Supreme Court in the Exxon Valdez case: It's absolutely unclear how the Court is going to resolve it.

For 90 minutes, the justices struggled to come up with a framework for deciding how much of the $2.5 billion in punitive damages Exxon will have to pay. That's the additional price-tag the oil giant is facing for spilling 11 million gallons of crude oil into Prince William Sound two decades ago—a spill Exxon's lawyer called the "one of the worst environmental tragedies in U.S. history."

The stakes are enormous---for Exxon and the 32,000 fishermen and villagers in Alaska who lost their livelihoods, but doctrinally, in the development of the law. Because on this case, as the justices made plain yesterday, the Court is writing on a blank slate.
The facts of the case are well known, at least to anyone over the age of 40. Capt. Joseph Hazelwood, the master of the ship and a lapsed alcoholic, was drunk and in his cabin when the supertanker ran aground on a reef and spilled millions of gallons of oil. It coated hundreds of miles of coastline and beaches, causing staggering environmental damage.

Despite years of cleanup efforts, the oily residue still remains on rocks and beaches for anyone to pick up, which is what one of the plaintiffs did. She brought it to Washington in a jar, and was showing it to reporters after the arguments yesterday.

After the spill, Exxon fired Hazelwood and paid $3.4 billion in fines, compensatory damages and cleanup costs. But the people harmed by the spill got very little—thus far, about $15,000 each. They stand to get about $75,000 more apiece if the Court upholds a $2.5 billion punitive damage award against Exxon.
Exxon says that's too much and argues it's paid enough—and that punitive damages are inappropriate in the case. Now that sounds pretty much like what any corporation sacked with punitive damages argues, whether its Phillip Morris or State Farm or BMW, and the Court over the past decade or so generally has sided with business to impose constitutional limits on those damage awards.

But this case is different. The Court isn't looking at whether the big-dollar damages awards are an excessive punishment under the Constitution. Instead, it will decide whether punitive damages are available for oil spills and other incidents at sea under maritime law, which applies in this case because the Valdez, obviously, was at sea when she ran aground on a reef with a drunken captain aboard.

Because the case is under maritime law, the Court will not decide the bigger questions about the constitutionality of punitive damages. It specifically declined to review whether the $2.5 billion jury award is excessive under the Constitution's Due Process Clause.

Instead, it is looking at rules nearly as old as the nation itself for vessels at sea—and whether those rules allow for punitive damages to punish misconduct by ship captains.

And there isn't a whole lot of precedent for the justices to rely on in making that decision—as Justice Ginsburg sharply pointed out early in the argument when Walter Dellinger, Exxon's lawyer, tried to argue that the rules had "been settled for 200 years."

"Mr. Dellinger, how was that rule settled?" interrupted Ginsburg.

"It's rather, I think, an exaggeration to call it a long line of settled decisions in maritime law," said Ginsburg.
And that pretty much settled that.

So with this blank slate, how will the justices start making the first marks? The most fascinating thing about the argument—and it really was one of the most fascinating arguments of the term--was watching the justices explore different proposals and options to put some limits on punitive damages.

You saw Justice Scalia—who has long refused to put constitutional limits on punitive damages (he doesn't see it in the Constitution any more than he sees a right to abortion in the Constitution)—free to weigh in and discuss a framework.
You saw Chief Justice Roberts, who has not ruled squarely on that broader constitutional issue, expressing skepticism about punitive damages and exploring the differences in maritime law—an area he knows well, having argued (and won) the important maritime case, Grubart v Great Lakes Dredge and Dock, which came about after the great Chicago flood. That case, written by Justice Souter, is one of his favorites—as a lawyer he quoted it frequently as an advocate, because it squarely rejected confusing multi-factor tests for admiralty jurisdiction.

You saw Ginsburg—who always is prepared at argument, but yesterday exhibited an almost astoundingly expert level of knowledge about this tortured and complex case—pressing Dellinger on the record, on precedent and on federal procedural rules. It was an extraordinarily impressive display, and to many observers she clearly got the best of the argument.

And you saw Souter looking back at the history of maritime law, how it developed centuries ago because ships were different than buildings. In the old days, a ship was completely cut off from communications once it set sail, which is why you had more limits on liability for the corporate officers back in the home office. Obviously not true today.
There was a lot to discuss, like whether Hazelwood was high enough in the company's management for him to subject Exxon to this kind of penalty. But here's the bottom line: The justices seemed to be, if anything, moving toward a rule that would be even more restrictive in these maritime cases than what they've said the Constitution limits.

In those cases, the tobacco, insurance and automobile cases, the Court has said that few awards exceeding a single-digit ratio between punitive and compensatory damages would satisfy due process. And it's suggested that four times the amount of compensatory damages might be close to the line.

But it hasn't been able to fashion a clear rule—Scalia and Thomas would say that's because the justices are just making all this stuff up, and that the Constitution doesn't say squat about ratios or punitive damages.

But in the maritime law context, which is at issue here, the justices have more freedom to just make it up—to craft a framework and adopt some clear rules.

It was Souter who best summed up the problem—and the opportunity for the Court in this case:

"We've spent the last decade or so of this Court dealing with the problem of how to set constitutional limits for awards which sort of by most people's standards verged on the excessive. The problem that we've had—and we've had two problems in coming up with those constitutional standards:

"One, is we simply can't substitute ourselves as lawmakers for the State. We're talking about constitutional limits, not optimum standards," Souter said. "And number two, given those limits on us, we have not been able to come up with anything that could be called determinant standards."

The Court, for example, has never found a sufficient reason for imposing an absolute ratio—to say punitive damages can never, ever, ever be more than 5 or 10 times compensatory damages.

But here, as Souter pointed out, the Court could do that. It's sitting as a kind of common-law court, more in the position of the states. So it could just pick a number—a clear administrable standard—to limit punitive damages in these kinds of cases.

And at least three justices seemed ready to adopt a clear formula to restrain punitive damages—maybe setting it at double or triple the compensatory damages. That's significant—because you would think bright-line rules and punitive damages go together about as well, as, say, oil and water.

Why not do that? Souter asked Stanford Law Professor Jeffrey Fisher, arguing for the plaintiffs. Why not just say our number is going to be double the compensatory damages, and that's the limit?

"Would that be an illegitimate thing for us to do or an unwise thing for us to do?" Souter asked.

"Well, I think it would---I'll stick with unwise, Justice Souter," Fisher responded, pointing out that the states didn't have ratios that would limit damages in that way.

But Justice Kennedy jumped in, enamored with the idea of a bright-line rule, much as Scalia seemed to be. And Justice Breyer weighed in, worrying that if punitive damages were to deter future misconduct, why should these people get the money, since they've already been compensated? (Earlier, Breyer had suggested a framework that assessed at damages based on how reprehensible the misconduct, a system that though lacking in clarity and predictability, may make more sense than plucking a number out of thin air.)

At any rate, all this is very good news for Exxon. Because an opinion along these lines—adopting a firm multiplier doubling compensatory damages--would be a huge win. It was ordered to pay close to half a billion dollars in compensatory damages. So if you double that—well, even someone as math challenged as me can see it ain't close to $2.5 billion, which was 5 times the amount of compensatory damages. And beyond that, think of the billions of dollars in interest that Exxon would save if it could cut the $2.5 billion more than half.

Look, we all understand the lure of bright-line rules. There's something enormously appealing about being able to just have a formula, plug in your numbers and, voila, here's our damages.

But it is hard to see how it would be any more workable in this context—for ships governed by maritime law, which has generally not allowed many punitive awards--than in the cases against the tobacco industry, insurance companies and automakers, where they are more common.

This ruling also could affect things like riverboat casinos and cruise liners, which essentially are floating hotels and restaurants. And it's pretty easy to imagine a scenario where assessing punitive damages at double the compensatory damages would be grossly inadequate to deter or punish a hotel or restaurant.

I actually can't believe my good fortune here, because this gives me a chance to talk about one of my all-time favorite lower court opinions, Mathais v Accor Economy Lodging. It was written by (who else?) the great and, at times, almost certifiably eccentric, Judge Posner.

The case came about after a brother and sister were bitten by bedbugs when they stayed at Motel 6 in Chicago.  The motel knew it had a terrible bedbug problem—its exterminator recommended it spray every room, at the hefty fee of $500 for the entire job. But the motel refused, and instead just started moving people from room to (infested) room when they complained. The problem, as Posner wrote, "began to reach farcical proportions….desk clerks were instructed to call the 'bedbugs' 'ticks,' apparently on the theory that customers would be less alarmed."

A jury awarded the siblings $5000 each in compensatory damages and $186,000 in punitive damages, a whopping 37.2 times the amount of compensatory damages. Motel 6 appealed, saying that ratio was way too high.

Posner agreed that the ratio was out of whack with recent Supreme Court decisions, which had signaled that anything over 4 or 5 times compensatory damages would be too high. (Which, remember, is what Exxon is now facing.)
But Posner rejected their arguments and sided with the bedbug victims. That's because in some cases, as he explained, the compensatory damages are just too low to deter future misconduct—and ratios will not work.

If Motel 6 only had to pay $10,000 or  $20,000 in punitive damages, plaintiffs would be discouraged from suing. The motel would therefore have less of an incentive to stop its bad conduct and could continue concealing-to the best it could—its bedbug infestation.

There would be no deterrence—which is one point of punitive damages.

Now Dellinger argued on Exxon's behalf that punitive damages are designed to deter activities done out of malice—where a company intends to harm and hopes it can conceal it.  Exxon is not like Motel 6. It had no malice. It couldn't conceal its misconduct. And it paid hundreds of millions in compensatory damages—no insubstantial sum.

But what is substantial to Exxon? What would deter future misconduct? Fisher scored big points when he pointed out that the company knew for three years that Hazelwood had a drinking problem and did nothing about it. And it's been noted repeatedly that the $2.5 billion award was only a few weeks of profits for the oil giant.

Moreover, Exxon didn't harm its customers. It hurt people in Alaska. Motel 6 (and a cruise liner) could argue it suffered great reputational costs, and that people were heading for the Red Roof Inn instead—which is deterrence enough. Exxon doesn't have those arguments.  Unlike Motel 6, it wouldn't be losing business to, say, BP, for spilling that oil.

The point of all this is that, despite the obvious appeal of a hard-and-fast ratio, there's a reason beyond the Constitutional one that those things are "unwise," as Fisher would say.

Obviously, you can't apply it in the cases where compensatories are "insubstantial." (See Posner.) And if you carve out that exception, then what constitutes substantial? A week of profits? A day? Three weeks?
Already, that bright-line rule is looking a bit fuzzy.

February 28, 2008 | Permalink | User Comments (2) | TrackBack (0)

Sex, Lies and Regulation?

February 21, 2008 6:27 PM

Let’s leave aside, for a moment, the obvious questions about whether the New York Times committed journalistic malpractice by relying on unnamed sources to imply John McCain was sleeping with a woman 30 years his junior—and then, as a favor to her, tried to twist arms at the Federal Communications Commission on behalf of one of her clients

Let’s also leave aside which of McCain’s unnamed “former campaign associates”—people from his 2000 presidential campaign---would be motivated to leak this stuff to the Times a few months ago, when reporters there first started working on the story.

Let’s focus for now on what we know---and whether, based on the facts we know, John McCain did anything inappropriate when he contacted the FCC about a pending licensing application—an application the woman, by the way, was lobbying to get approved.

This goes back to 1999, when McCain, as the powerful chairman of the Senate Commerce Committee, sent “highly unusual” letters to then-FCC Chairman William Kennard demanding to know why the Commission was taking so long to vote on the licensing application. McCain was “expressing concern,” as he wrote at the time, over how long the commission was taking to decide whether to approve a complicated swap of licenses for two television stations in Pittsburgh.

The proposed deal at issue was complex and controversial. It involved a swap of licenses that would benefit Lowell Paxson, whose company, Paxson Communications, didn’t have a station in Pittsburgh and wanted to buy one.

But there’s this: Paxson knew McCain, had contributed thousands to McCain’s campaign, and had hired (here’s where an eight-year-old story about regulation and oversight of the telecommunications industry allegedly gets sexy) Vicki Iseman to lobby for it. She, of course, is the woman the NYT today effectively labeled “McCain’s Mistress,” even though she and McCain flatly deny a relationship.

So back to the question: What did McCain do with the FCC? Of course, it's not unusual for members of Congress or their staffs to contact the various commissioners, seeking status updates or weighing on with their views. In fact, other members of Congress had weighed in on the proposed swap with the FCC.

But some former commissioners said McCain did more than that when he wrote Kennard.

His letters were unusual. Some former commissioners told me today they were “unprecedented” and “extraordinary.” In fact, Kennard and former commissioner Gloria Tristani wrote McCain back immediately at the time, indicating he’d gone too far. But other commissioners said today it wasn’t so unusual.

McCain hadn’t take a position on the swap. He didn’t advocate for either side. He instead was demanding to know what the hold up was. He didn’t write the letter himself—a senior counsel on the committee, who was given marching orders by the Committee’s staff director, wrote it for him. McCain signed it. The point of the letter, sources said, was to get the FCC to focus on the issue and take action.

But what was “highly unusual” about the letter is that it asks Kennard which commissioners had voted and which ones had not—and if not, why not.

"I respectfully request that each member of the commission advise me, in writing no later than close of business on Tuesday, Dec. 14, 1999, whether you have already acted upon these applications in the course of the notation voting process,” McCain said in the letter. “If your answer to the latter question is no, please state further whether you will, or will not, be prepared to act on these applications at the open meeting on Dec. 15. If your answer to both of the proceeding questions is no, please explain why."

That’s a potential problem because the FCC doesn't sit around the table and vote on matters that aren't in a public hearing. They can cast votes by computer--and sometimes do so weeks apart. They closely guard this information, because the pressure on hold out commissioners would be enormous if lobbyists or congressmen knew which ones were still deliberating. 

That's why Kennard and Tristani quickly responded at the time with letters to McCain, telling him to back off.

But at the end of the day, as unusual as it was, other commissioners said it wasn’t unprecedented. Senators have made similar inquiries on other issues, one commissioner told me today. The difference is they don’t put it in writing—they pick up the phone and call.

The key here is that McCain did not advocate for anybody. So, after considering the facts of the case at the center of this entire episode--facts that were reported eight years ago--the real question becomes: How is this a story worthy of front-page treatment in the New York Times, after you've put aside the salacious, anonymous and unproven allegations that led the story?

Well?

February 21, 2008 | Permalink | User Comments (14) | TrackBack (0)

Obama and Guns

February 15, 2008 5:20 PM

A day after the tragic shootings at NIU, Barack Obama has revealed that he thinks the 2nd Amendment protects an individual’s right to own a gun.

That sounds surprising—and certainly not what you’d expect from someone with the Senate’s most liberal voting record.

Here he is, weighing in on one of the biggest and most contentious cases the Supreme Court will hear this term, a case that finally will answer one of the great unresolved question constitutional questions: Does the 2nd Amendment protects a person’s right to own a gun, or does it merely protects a state’s right to assemble a militia?

By embracing the individual rights approach, Obama is bucking gun control groups and states like New York, which have taken the more orthodox position that the 2nd Amendment only protects a state’s right—and that cities like Washington, D.C. can therefore ban all guns if they choose.

But if you dig a little deeper, Obama’s position is not as surprising as it first appears—especially when you think about those big primaries looming in gun-friendly states like Wisconsin (where he made the remarks today), Texas and Ohio. That’s because, as significant as this is, his embrace of individual rights is loosened by a qualifier.

Obama is actually straddling the issue somewhat like the Bush Administration did when it filed a brief in the case last month. He does support individual rights, but says—and this is the qualifier--the government can impose reasonable restrictions on gun ownership. And he then suggests that pretty much any existing laws are reasonable.

“There's been a long standing argument among constitutional scholars about whether the 2nd Amendment referred simply to militias or whether it spoke to an individual right to possess arms,” Obama said. “I think the latter is the better argument. There is an individual right to bear arms, but it is subject to common-sense regulation just like most of our rights are subject to common-sense regulation.”  Watch Obama's comments HERE.

He declined, just as the Bush Administration did, to take a position on whether the DC gun ban violates the 2nd Amendment. He said instead that states and cities should have broad latitude to regulate guns—even if the Constitution guarantees an individual right to own them.

“The city of Chicago has gun laws, so does Washington, DC,” Obama said.  “The notion that somehow local jurisdictions can't initiate gun safety laws to deal with gang bangers and random shootings on the street isn't borne out by our Constitution.”

Now that sure sounds like someone who thinks the handgun bans would be a reasonable restriction under the 2nd Amendment.

And that shows why conservatives are up in arms over the Bush Administration’s brief in the case.

Instead of embracing the categorical approach of D.C. Circuit Judge Laurence Silberman, who said a ban on handguns was a clear violation of the 2nd Amendment, the Bush Administration’s brief argued for a balancing test. It refused to take a position on the DC gun ban, and instead urged the Court to send the case back to the lower courts to apply the different, less strict standard.

Conservatives were outraged. They strongly believed the Bush Administration—even though weighing in on the side of individual rights—advanced a legal position that would make the 2nd Amendment meaningless. Even though the administration said the ban “may well be unconstitutional,” it gave enough wiggle room for a court to hold otherwise.

And if it’s constitutional to ban all guns in a city, as DC basically does, what’s the point of the 2nd Amendment? If that’s not unconstitutional, conservatives ask, what is?

Nothing, they say.

Obama’s position on the 2nd Amendment may make that point for them. As he said today: “I think there's a lot of room before you (start) bumping against a constitutional barrier for us to institute some of the common-sense gun laws that I just spoke about.”

Incidentally, Obama was not one of the 55 senators (including Wisconsin Democratic Sen. Russell Feingold and eight other Democrats) who signed a brief last week arguing the 2nd Amendment protects an individual right and that the DC gun ban was unconstitutional. That brief, also signed by 250 members of the House and Vice President Cheney, urges the Court to strike down the gun ban—and adopt Silberman’s test.

Obama wouldn’t go that far. Neither would the Bush Administration.

And that raises the question: If the Supreme Court won’t either, will the big gun case have any impact on existing gun laws whatsoever?

February 15, 2008 | Permalink | User Comments (106) | TrackBack (0)

Does Terror Trump Torture?

February 12, 2008 5:43 PM

We all know Justice Antonin Scalia is a big fan of 24's Jack Bauer, the fictional hero of the popular television show who sometimes tortures terrorists to derail their fiendish plots and save lives.  Scalia mounted a spirited defense of Bauer during a judicial conference in Ottawa last year when a Canadian judge said, "Thankfully, security agencies in all our countries do not subscribe to the mantra 'What would Jack Bauer do?' "

Scalia shot back: "Jack Bauer saved Los Angeles . . . . He saved hundreds of thousands of lives…Are you going to convict Jack Bauer?  Say that criminal law is against him? 'You have the right to a jury trial?' Is any jury going to convict Jack Bauer? I don't think so."

Now, Scalia is again weighing in on the issue of torture, telling a BBC reporter that the "ticking time bomb" scenario raised difficult questions that could possibly justify extreme measures. The interview is causing quite a stir, especially among human rights groups, which are taking Scalia to task for refusing to draw a clear line against torture in every case.

But in the interview, it's Scalia who seems to be taking folks to task--venting about people who make quick moral judgments about torture without considering the hard hypotheticals. The choice made, he suggested to the BBC reporter, depends on the circumstances. As he said in Canada last year, if law enforcement knows a terrorist has a nuclear bomb and is going to blow up LA, the American people would find that a pretty clear case. To listen to an excerpt from the interview click here.

"Seems to me you have to say, as unlikely as that is, it would be absurd to say that you can't stick something under the fingernails, smack them in the face. It would be absurd to say that you couldn't do that. And once you acknowledge that, we're into a different game," he told the BBC interviewer. "How close does the threat have to be, and how severe can an infliction of pain be?"

He then explains what a tough call that would be.

"There are no easy answers involved, in either direction, but I certainly know you can't come in smugly and with great satisfaction and say, 'Oh, this is torture, and therefore it's no good,'" he said. "You would not apply that in some real-life situations. It may not be a ticking bomb in Los Angeles, but it may be, 'Where is the group that we know is plotting this painful action against the United States? Where are they? What are they currently planning?'"

The BBC reporter started the conversation by asking Scalia whether torture would violate the Constitution's 8^th Amendment, which prohibits cruel and unusual punishment. Scalia says that would be "extraordinary," because that wouldn't be "punishment" for a crime under the 8^th Amendment. The 8th Amendment prohibits "cruel and unusual punishment" for crimes--but if the CIA or the police or the FBI haul someone in for interrogation and torture them, that's not "punishment."

"Is it really so easy to determine that smacking someone in the face to find out where he has hidden the bomb that is about to blow up Los Angeles is prohibited by the Constitution? Because smacking someone in the face would violate the 8^th Amendment in the prison context. You can't go around smacking people about," Scalia said. "Is it obvious that what can't be done for punishment can't be done to exact information that is crucial to society? It's not at all an easy question, to tell you the truth."

It may be a violation of Due Process, but Scalia wasn't asked about that.

February 12, 2008 | Permalink | User Comments (66) | TrackBack (0)

More Ammo for Gun Rights

February 07, 2008 6:18 PM

Momentum is building for gun rights supporters in next month’s big 2^nd Amendment case, with a bipartisan majority in the Senate and House filing an amicus brief in the Supreme Court tomorrow arguing that the 2^nd Amendment protects an individual’s right to own a gun.

Fifty five senators and 250 representatives have signed the amicus brief—believed to be the most members of Congress to join together on a brief in modern history, said Sen. Kay Bailey Hutchison, the Texas Republican who helped spearhead the effort.

"A majority of both houses of Congress have signed our brief in support of the respondent who simply wishes to exercise his constitutional right to protect himself," Hutchison said. "In a situation like this, we feel it is important for members of the legislative branch to give our opinion on the legislative history and its relevance."

Hutchison and Montana Sen. Jon Tester, a Democrat, talked about the case—and why they think the brief is significant—in a forum today at the Heritage Foundation. Both discussed the robust support for gun rights in their respective states—Hutchison joked that gun control in Texas “means you use both hands”--but said the case was important because of the message it could send if the court strikes down the DC handgun ban.

“It will say to any city that is enacting gun control laws that it is a fundamental right and you can not go beyond a certain point,” Hutchison said.

The brief, written by Virginia attorney Stephen Halbrook, traces the history of federal gun laws and efforts to protect gun rights. It also urges the Court to adopt the D.C. Circuit’s strict standard for reviewing whether regulations are unconstitutional.

The Bush Administration enraged gun rights supporters last month when it filed a brief urging the Court to take a less strict approach than that of the D.C. Circuit, in an opinion by Judge Laurence Silberman. The congressional brief embraces Silberman’s approach, which it says is "limited" and would not undermine federal gun laws--including machine gun laws and regulations on licensing and background checks.

“The lower court’s categorical approach in holding a prohibition on handguns to be unconstitutional per se was correct,” the brief argues.

But the congressional brief says even under the standard proposed by the Bush Administration, the DC handgun ban clearly was unreasonable on its face and unconstitutional.

Alan Gura, the attorney challenging the handgun ban, also said he expects a majority of the states to file amicus briefs supporting the individual rights interpretation.

February 7, 2008 | Permalink | User Comments (20) | TrackBack (0)