Economic Loss, Punitive Damages, and the Exxon Valdez Litigation

On March 24, 1989, the Exxon Valdez ran aground on Bligh Reef off the Alaskan coast, spilling millions of gallons of crude oil into Prince William Sound. At the time, the spill was probably the worst environmental disaster in American history, and it sparked unusually extensive and complex litigation, as well as a vast academic literature. The Article uncovers a fundamental yet unnoticed inconsistency in American land-based and maritime tort law that surfaced through the Exxon Valdez litigation. On the one hand, liability for purely economic losses was strictly limited under Robins Dry Dock v. Flint, leaving dozens of thousands of victims uncompensated. On the other hand, liability was expanded through an award of punitive damages to relatively few successful claimants. While these two components of the legal saga might not seem incompatible from a simple doctrinal perspective, they are inconsistent on a deeper level. The inconsistency transcends the Exxon Valdez litigation: It is a troubling trait of land-based and maritime tort law, which happened to surface when the Exxon oil submerged. After delineating the contours of the incongruity, the Article proposes a conceptual framework for resolution. Generally, it holds that if courts believe liability must be expanded beyond the limits set by the exclusionary rule in order to obtain certain levels of deterrence and retribution, relaxing the exclusionary rule and allowing more victims to recover is a more defensible path than awarding punitive damages to the already compensated few.