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A Secret Rule of Law

Let me tell you a secret. The secret is that there is an undisclosed rule of law that governs all of the big civil lawsuits. Lawyers know about this rule. But they either avoid speaking of it all (just like Lord Voldemort), or they talk of it only in guarded tones among themselves. Judges often apply the rule. But the judges will never, ever acknowledge that they are actually doing so. Instead, they will go out of their way to avoid disclosing the existence of the rule at all, writing at length about all kinds of legal esoterica to disguise what is really going on.

This secret rule is generally known by its initials. Those initials are: TFM. TFM stands for TOO FRIGGING MUCH. Actually, I’m fibbing about the “frigging.” The “F” in TFM stands for a harsher word than “frigging.” But you get the idea.

TFM is not a new rule of law. It goes way back. But the U.S. Supreme Court just issued what has to be the quintessential decision invoking TFM. I speak, of course, about Exxon Shipping Co. v. Baker. This tarball has blackened all who have touched it. It was released from the hold of the Exxon Valdez just after midnight on March 24, 1989. It rolled around spoiling the most beautiful place on the face the Earth (Prince William Sound), ruined the lives of all sorts of sea creatures (humans among them), and was flushed out down the Alaska coastline all the way to the Aleutians. Then it landed with a plop in federal court in Anchorage, until it was picked up by the Ninth Circuit Court of Appeals. The Court of Appeals used it in a super slo-mo game of ping pong that left a black smear across the federal judiciary. The U.S. Supreme Court finally picked up the dripping mess and dunked it in a vat of WD-40 in an effort to mostly dissolve the damn thing.
courtWe all knew it was coming. When the Court accepted cert on the case last fall, you could hear the chant in the hills: “TFM . . . TFM . . . TFM.” The public comments of the Governor and others showed that they knew what was going to happen. (A “kick in the gut” was how Gov. Palin characterized the Court’s decision to take the case.) The Supremes did not take the case to just say: “Ditto, Ninth Circuit!” They were going to change the outcome in some way. The oral argument was another sign of things to come. In commenting on why the Supremes took the case, Justice Scalia joked that there was an interesting legal point or two in the case and some “2.5 billion other reasons.”

Still, you wanted to hope that there was at least some chance the large verdict would be upheld. Pristine Alaska wilderness wrecked. A thriving fishing economy ruined. The largest (and most profitable) oil company was responsible for the stupid debacle. A jury of 12 upstanding PFD recipients delivered a deservedly stiff rebuke. A conscientious trial judge carefully controlled the whole thing. If you couldn’t whack Exxon for a few billion dollars out of its petty cash fund in this instance, then when can you whack someone?

But the unspoken rule, TFM, says you can’t whack anybody this hard. Not even Exxon, I guess. Justice Souter wrote a 42 page opinion to explain the reasoning in creating a federal common law rule to limit punitive damages. He needn’t have gone to such lengths. He could just as easily said, “We just had to chop this thing down to something most of us could stomach.” That would have been a more honest assessment, but it would have required an express acknowledgement of the TFM rule.

One can legitimately debate the reasoning used in its decision. If the purpose of punitive damages is to punish the wrongdoer and deter others, then why tie punitives to a rigid 1:1 ratio with compensatory damages? It is not hard to think of cases where really bad conduct could cause only minimal compensatory losses. The need to punish the bad actor and put a damper on other miscreants should dictate that no rigid 1:1 formula should be followed. And, are the compensatory damages the fisherfolk suffered in the case ($507.5 million) really a good measure for puntives? Exxon trumpeted the fact that it spent some $2.1 billion in an effort to clean up the spill. Wouldn’t tying the punitives to these expenses (or these expenses plus the fisherpeople’s compensatories) have been a better measure of the proper amount? After all, aren’t these clean-up expenses part of overall compensation due for the spill even though they were not directly paid to the plaintiffs?

And, gosh, why adopt this as a rule of federal common law just applicable to maritime cases? This sidesteps the more important question of whether due process requires this same ratio as matter of constitutional law. Does the Constitution allow a greater ratio of punitives to compensatories to be employed? If so, why not go to the full limit the Constitution allows in this ugly case? At least why not explain the reasons for not going to the full constitutional limit for this awful and wholly avoidable disaster?

But this sort of quibbling is all very much beside the point. The whole case turned on the unspoken TFM rule. From Alaska’s standpoint, its sad to say that $2.5 billion for despoiling the most fabulous place on Earth and groin-punching the citizenry who live and work there was just TOO FRIGGING MUCH.