An Empirical Assessment of Punitive Damages
Theodore Eisenberg (Cornell), Michael Heise and Martin T. Wells have recently posted “Variability in Punitive Damages: An Empirical Assessment of the U.S. Supreme Court’s Decision in Exxon Shipping Co. v. Baker” – available on SSRN. Here is the abstract:
ExxonShipping Co. v. Baker acknowledged what virtually all methodologicallysound punitive damages research shows. The Supreme Court relied in parton an article by the present authors and others to state that empiricalstudies undercut the most audible criticism of punitive damages andthat no mass of runaway punitive awards existed. Paradoxically, theCourt simultaneously expressed concern about jury predictability basedon a high mean and standard deviation in the punitive-compensatoryratio published in our article. The Court therefore reduced a $2.5billion punitive award relating to the Exxon Valdez oil spill to $500million to implement a 1:1 punitive-compensatory ratio and stated that“the constitutional outer limit may well be 1:1.” This article showsthat our empirical findings relied on by the Court do not support theunpredictability concern or widely applying the limiting ratio. Thehigh mean and standard deviation are artifacts of not accounting forthe key variable that explains punitive awards – the compensatoryaward. Stratifying the mean and standard deviation of thepunitive-compensatory ratio by the level of the compensatory awardshows that the ratio is reasonably stable in high award cases andsignificantly and explicably more variable in low award cases. Basingdoctrine on summary statistics that combine these heterogenousdistributions is not statistically supportable. The award reduction inExxon Shipping may have promoted consistency with other highcompensatory award cases but the 1:1 principle the case hints at is notstatistically supportable across the broad range of compensatoryawards, and could contribute to an inability to tailor punitive awardsto the facts and circumstances of particular cases.
ADL
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