Really Mean and Really Stupid:

Exxon Funds Attack on Punitive Damages

by Russell Mokhiber and Robert Weissman, Free Press contributors

n March 23, 1989, the Exxon Valdez, one of Exxon's largest oil tankers, under the command of a captain who had been drinking and who abandoned the bridge, struck a reef and spilled eleven million gallons of crude oil into the Prince William Sound in Alaska.

In September, 1994, an Alaska jury found Exxon liable for punitive damages for its conduct in causing the oil spill and assessed $5 billion against the company. The lawsuit was brought by commercial fishermen, Alaska natives and others directly harmed by the spill.

In the nearly five years since its jury verdict, Exxon has not paid a penny of the damages. Instead, it has chosen to use an appeals process to delay and possibly defeat any payment.

To commemorate the Exxon Valdez oil spill, the world's largest oil company has decided to ratchet up the corporate attack on punitive damages.

It has just come to our attention that last year, Exxon funded Harvard Law Professor W. Kip Viscusi to look into the issue of punitive damages. Viscusi obliged, and wrote an article for the Georgetown Law Journal advocating the abolition of punitive damages. ("The Social Costs of Punitive Damages Against Corporations in Environmental and Safety Torts," by W. Kip Viscusi, 87 Georgetown Law Journal 2(285), November 1998.)

In a footnote to the article, Viscusi discloses that the research for the article was funded in part by "a grant from the Exxon Corporation."

But as a short conversation we had with Viscusi made clear, the Harvard Professor doesn't want the world to know how much Exxon paid him.

To begin the conversation, we asked how much money he received from Exxon, Viscusi's first reply: "I don't even know."

"I have several projects," Viscusi said. "This is one paper I did, but I'm working on several other things."

Well, how much did you receive in total from Exxon?

"I don't remember that either," Viscusi replied.

When asked whether he received more than one check from Exxon, Viscusi responds: "Yes, but it was for different projects that overlap the time period."

When asked whether he can give a ballpark figure of how much money he took from Exxon, Viscusi says "no," arguing that the information is not public information.

Viscusi says the he received money from Exxon just in 1998.

Finally, when pressed again as to why he won't reveal the amount of money he took from Exxon for the research on punitive damages, Viscusi responds bluntly -- "It's none of your business."

We disagree. It makes a difference whether Viscusi took $10 or $10,000 or $100,000 from Exxon. As readers we have a right to know.

But we also agree with Georgetown Professor David Luban who applauds Viscusi for disclosing the fact of Exxon's funding in an age when other academics do not. We also agree that "when one learns that an interested party has funded work, there should be a higher threshold of critical examination." And Viscusi's Exxon funded work doesn't withstand the higher threshold of critical examination.

Luban, a professor of law and philosophy, wrote a rebuttal to Viscusi's article in the same issue of the Georgetown Law Journal.

In "A Flawed Case Against Punitive Damages," 82 Georgetown Law Journal 2(359) (November 1998), Luban dissects Viscusi's argument, finding "thirteen critical errors that if I'm right, undermine Viscusi's argument at every stage."

In a nutshell, Viscusi argues that punitive damages don't create social benefits, and they do impose social costs on businesses, and thus should be eliminated.

To show that punitive damages create no social benefits, Viscusi argues that accident rates in environmental and other cases are not statistically significantly different in the four states that don't have punitive damages (Michigan, Nebraska, New Hampshire, and Washington) than the 46 states that do.

Luban says that he disagrees that the lack of difference between the four no-punitive-damages states and the other 46 shows that punitive damages are ineffective.

"Even if a business is in one of those four states, they won't look only to those states' tort regimes," Luban says. "They will look at any state that they might be sued in. After all, there are relatively few businesses that are strongly local in the sense that they operate locally, all of their customers are local, and their safety procedures and equipment are local."

And Luban argues that punitive damages are not there simply to deter all forms of unsafe conduct. Punitive damages are meant to be awarded only when the defendant's conduct has been egregious. Justice Richard Neely of West Virginia has put forward a useful formulat in TXO v. Alliance Resources, 1992: punitive damages exist to punish defendants whose conduct is either "really mean" or "really stupid." And as a result, they are not awarded very often.

Viscusi argues that punitive damage judgments are "out of control." But Luban says that on average, about three percent of plaintiffs' jury victories end with punitive damages being awarded against the defendants.

How can it be, we asked, that two scholars looking at the same data come to such radically different conclusions?

"Observers of the punitive damages scene focus on different aspects," Luban says. "Those of us who don't think punitive damages are out of control tend to look at the low overall incidence of punitive damages and the relatively low median of punitive damages -- about $50,000. What critics look at is the relatively high mean -- the average -- which is $735,000."

When you have a high mean and a low median, it shows that you have a whole population of relatively low punitive damages with a few, very, very high punitive awards that bring the average up, Luban says.

Punitive damages are a retributive sanction: they send a message to corporate America that what you have done is wrong and intolerable in a civil society.

Exxon's behavior in Prince William Sound was either really mean or really stupid and is deserving of punishment. Instead of attacking punitive damages, it should focus on cleaning up its act to ensure that the nightmare of Valdez will not be repeated.

Russell Mokhiber is editor of the Washington,DC-based Corporate Crime Reporter. Robert Weissman is editor of the Washington, DC-based Multinational Monitor.