Grefer Judgment Vacated by Recent U.S. Supreme Court Decision

by Laura L. Hart

The U.S. Supreme Court granted Exxon Mobil Corporation’s (“Exxon Mobil”) Petition for a Writ of Certiorari (2006 WL 1786680, 75 USLW 3009, 6/29/2006) and vacated the punitive damages award granted in the Grefer suit. See, Exxon Mobil Corporation v. Grefer, Joseph, et al., 05-1670 __ S.Ct. __, 2007 WL 559870 (2/26/2007).         

Plaintiffs claimed that their property had been contaminated with naturally occurring radioactive material (“NORM”) as a result of the pipe cleaning operations conducted thereon. A jury rendered judgment for the plaintiffs and awarded $56.145 million in compensatory damages, $145,000 in general damages, $56 million in restoration costs, and $1 billion in exemplary/punitive damages. The Louisiana Fourth Circuit Court of Appeal affirmed the awards of compensatory damages, general damages, and damages awarded for restoration costs, but reduced the $1billion award for punitive damages to $112.290 million. 

The reduction was granted because the punitive damages award was so excessive in comparison to the amount awarded in compensatory damages that it constituted “an irrational and arbitrary deprivation of Exxon’s property” and violated the Due Process Clause of the Fourteenth Amendment. Exxon Mobil’s Application for Writ of Certiorari and/or Review from the Louisiana Supreme Court following the Louisiana Fourth Circuit Court of Appeal’s ruling was denied. See, 925 So.2d 1248. Therefore, Exxon Mobil filed a Petition for Writ of Certiorari with the U.S. Supreme Court. See, 2006 WL 1786670, 75 USLW 3009. The U.S. Supreme Court granted Exxon Mobil’s Petition for a Writ of Certiorari on February 26, 2007 and thereby vacated the previous judgment. The case was remanded to the Louisiana Fourth Circuit Court of Appeal “for further consideration” based on the U.S. Supreme Court’s ruling in Philip Morris USA v. Williams, 05-1256 (2/20/2007), 127 S.Ct. 1057. 

In Williams, the U.S. Supreme Court “explicitly” held “that a jury may not punish for the harm caused to others.” 

Id. at 1064. In Williams, a widow was awarded $79.5 million in punitive damages based in part on harm caused to nonparties. The U.S. Supreme Court found that the Oregon Supreme Court’s decision to reinstate the $79.5 million punitive damage award was erroneous and remanded the case for further proceedings. The U.S. Supreme Court explained that “the Constitution’s Due Process Clause forbids a State to use a punitive damages award to punish a defendant for injury that it inflicts upon nonparties or those whom they directly represent, i.e., injury that it inflicts upon those who are, essentially, strangers to the litigation.” Id.at 1063.   However, the U.S. Supreme Court refused to rule on whether the 100-to-1 ratio of compensatory damages to punitive damages ($821,000 awarded in compensatory damages compared with $79.5 million awarded in punitive damages) constituted a “‘grossly excessive’” punitive award.