As the Gulf disaster continues, it is worth thinking about about the potential liability of BP and other parties. Following the Exxon Valdez disaster, the Supreme Court held, acting in its capacity as a common-law court, that punitive damages in admiralty could not exceed the compensatory damage award. Justice Breyer dissented from this part of the opinion, explaining that “this was no mine-run case of reckless behavior. The jury could reasonably have believed that Exxon knowingly allowed a relapsed alcoholic repeatedly to pilot a vessel filled with millions of gallons of oil through waters that provided the livelihood for the many plaintiffs in this case. Given that conduct, it was only a matter of time before a crash and spill like this occurred.”
Perhaps some future court will distinguish Exxon from a suit against BP, but the opinion is awfully clear that a 1:1 rule is the law. Congress, though, is free to change this, since Exxon is not part of the Court’s due process jurisprudence on punitive damages (which treats anything above 10:1 as suspect). Just as Congress may amend the Limitation of Liability Act in response to this crisis, they should also look at the punitive damage question.