Exxon Shipping Co. v. Baker, 554 U.S. 471 (2008), was a case decided by the Supreme Court of the United States. The Court ruled in a 5-3 decision that the punitive damages awarded to the victims of the Exxon Valdez oil spill should be reduced from $2.5 billion to $500 million.
The case was received by the Supreme Court of the United States from an appeal from the United States Court of Appeals for the Ninth Circuit. The Ninth Circuit had also ruled that Exxon could be held liable for the reckless conduct of the ship's captain, Joseph J. Hazelwood, who had left the bridge during the disaster and had been drinking vodka that evening. The Supreme Court was split 4–4 on the question of whether Exxon was liable for Hazelwood's action. The result of the split is that the Ninth Circuit's ruling on Exxon's respondeat superior liability for Hazelwood's conduct remains since Hazelwood acted in a managerial capacity under the Restatement (Second) of Torts Section 909(c) approach to punitive damages.
After considering the punitive damage policies of foreign nations, the Court reasoned that although punitive damages were warranted, they may not exceed what Exxon already paid to compensate victims for economic losses, which was about US$500 million. It held that a one-to-one ratio between punitive and compensatory damages was "a fair upper limit" in maritime cases that involved recklessness, compared to the lower liability of negligence or the higher liability of intentional conduct.[1] Its reasoning, "The real problem, it seems, is the stark unpredictability of punitive awards," frustrates the goal of punitive damages, deterring reprehensible conduct, because predictable damages create an incentive to continue dangerous misconduct if the personal injury liability is less than the potential profit, as on the