Variability in Punitive Damages: Empirically Assessing Exxon Shipping Co. v. Baker

Exxon Shipping Co. v. Baker acknowledged that empirical studies undercut criticism of punitive damages. Paradoxically, the Court simultaneously expressed concern about jury predictability based on a high and variable punitive-compensatory ratio published in an article by the present authors. The Court reduced the $2.5 billion Exxon Valdez punitive award to $500 million and stated: »the constitutional outer limit may well be 1:1.« Our empirical findings do not support the unpredictability concern or widely applying the limiting ratio. The high and variable ratio is an artifact of not accounting for the key variable that explains punitive awards – the compensatory award.