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Variability in Punitive Damages: An Empirical Assessment of the U.S. Supreme Court’s Decision in Exxon Shipping Co. v. Baker


Theodore Eisenberg


Cornell University - Law School

Michael Heise


Cornell Law School

Martin T. Wells


Cornell University - School of Law

April 20, 2009

Cornell Legal Studies Research Paper No. 09-011

Abstract:     
Exxon Shipping Co. v. Baker acknowledged what virtually all methodologically sound punitive damages research shows. The Supreme Court relied in part on an article by the present authors and others to state that empirical studies undercut the most audible criticism of punitive damages and that no mass of runaway punitive awards existed. Paradoxically, the Court simultaneously expressed concern about jury predictability based on a high mean and standard deviation in the punitive-compensatory ratio published in our article. The Court therefore reduced a $2.5 billion punitive award relating to the Exxon Valdez oil spill to $500 million to implement a 1:1 punitive-compensatory ratio and stated that “the constitutional outer limit may well be 1:1.” This article shows that our empirical findings relied on by the Court do not support the unpredictability concern or widely applying the limiting ratio. The high mean and standard deviation are artifacts of not accounting for the key variable that explains punitive awards - the compensatory award. Stratifying the mean and standard deviation of the punitive-compensatory ratio by the level of the compensatory award shows that the ratio is reasonably stable in high award cases and significantly and explicably more variable in low award cases. Basing doctrine on summary statistics that combine these heterogenous distributions is not statistically supportable. The award reduction in Exxon Shipping may have promoted consistency with other high compensatory award cases but the 1:1 principle the case hints at is not statistically supportable across the broad range of compensatory awards, and could contribute to an inability to tailor punitive awards to the facts and circumstances of particular cases.

Number of Pages in PDF File: 24

Keywords: Punitive Damages, Tort, Empirical Studies

JEL Classification: K00, K13, K32, K41

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Date posted: April 26, 2009 ; Last revised: April 26, 2014

Suggested Citation

Eisenberg, Theodore and Heise, Michael and Wells, Martin T., Variability in Punitive Damages: An Empirical Assessment of the U.S. Supreme Court’s Decision in Exxon Shipping Co. v. Baker (April 20, 2009). Cornell Legal Studies Research Paper No. 09-011. Available at SSRN: http://ssrn.com/abstract=1392438 or http://dx.doi.org/10.2139/ssrn.1392438

Contact Information

Theodore Eisenberg (Contact Author)
Cornell University - Law School ( email )
524 College Ave
Myron Taylor Hall
Ithaca, NY 14853
United States
607-255-6477 (Phone)
607-255-7193 (Fax)
Michael Heise
Cornell Law School ( email )
310 Myron Taylor Hall
Ithaca, NY 14853-4901
United States
607-255-0069 (Phone)
607-255-7193 (Fax)
Martin T. Wells
Cornell University - School of Law ( email )
Comstock Hall
Ithaca, NY 14853
United States
607-255-8801 (Phone)
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