Equitable Distribution and the Exxon Valdez Decision
Since 1996, the law in Alaska has been that the Exxon Valdez claims for punitive damages are marital property to the extent that the claims for compensatory damages are marital property. Lundquist v. Lundquist, 923 P.2d 42, 51 (Alaska 1996). However, as the Alaska Supreme Court commented in 2000: “[I]t is not known how much will be collected or even if the plaintiffs will ever actually collect this award.” Edelman v. Edelman, 3 P.3d 348, 355 (Alaska 2000).
At the time of Edelman, the punitive damages award was $4.786 billion dollars. Id. But Exxon had appealed the award to the Ninth Circuit Court of Appeals. Id.
Yesterday, the United States Supreme Court slashed the punitive damages award from $2.5 billion dollars to $500 million dollars. The Alabama Appellate Watch has a well-written succinct summary of the Exxon Shipping Co. v. Baker decision:
Justice Souter authored the 5-3 majority opinion. In his opinion, Justice Souter found that this was a maritime case, and thus decided under the federal common law and not due process principles. Justice Souter discussed at length the different punitive damage standards used by various states, and discussed the general purposes of punitive damages. Interestingly, Justice Souter notes that "by most accounts the median ratio of punitive to compensatory awards has remained less than 1:1." Slip Op. p. 24-25.
Justice Souter also examined three various methods used to review punitive damages: (1) verbal tests (using criteria such as "shock the conscience" or "passion and prejudice"); (2) dollar caps; and (3) ratios.
In the end, Justice Souter found the ratio test most appropriate. Under the facts of this case, where no malicious intent was found or behavior driven primarily for gain, and with a substantial compensatory award, a 1:1 ratio was appropriate. Thus, the award was reduced to the amount of the compensatory award, which is approximately $500 million.
I recommend that any visitor to this post who has been involved with the Exxon case and has a final judgment, is in the middle of a divorce, or is contemplating a divorce contact their divorce attorney to discuss the impact of this decision on them.
