Thursday, November 22, 2007

Punitive Damages are a Fraud-2

"BP should pay at least $1 billion in criminal penalties for the deadly Texas City refinery explosion instead of the $50 million agreed to in a plea bargain with the U.S. government, a lawyer for the blast victims said Tuesday. ... David Perry [DP] ... argued that BP neglected repairs at the Texas City plant for six years and made more than $1 billion in profit from the plant in that time, so the corporation should pay at least $1 billion in fines. ... [DP's] federal court motions filed Tuesday asked that the plea be rejected and that U.S. District Judge Gary Miller remove himself from the case because his former law firm, Fullbright & Jaworski, helped BP in lawsuits over the explosion", Houston Chronicle, 21 November.

"Motorola ... may seek $1 billion in punitive damages from the former owners of a Turkish wireless carrier. ... The trial judge said the Uzans had $5 billion", NYT, 22 November.

Gary Miller (GM) "stepped down after a lawyer protesting BP's plea bargain pointed out that the judge's former law firm had represented the oil giant. [He] noted that he was not required to recuse himself", Houston Chronicle, 22 November.

The Uzan's "'failed to demonstrate that the award exceeds their ability to pay. Therefore, we conclude that the modified punitive damages award of $1 billion is valid under Illinois law'," WSJ, 23 November. So said the Second Circuit Court of Appeals in New York.

Who is GM, the Federal Bench's Mary Jo White, see my 10 August, 12 September and 7 October posts? GM wasn't? What's wrong with the federal bench?

Let's "do" some numbers. I can, I'm a CPA. A trial judge grants a punitive damages award of 20% of the Uzan family's net worth ($1 /$5). Now Exxon's and BP's net worths as reported in their 30 September quarterly SEC filings were: $118,603 and $90,541 million respectively, source: Now dividing, we see the Exxon Valdez punitive damages award was 2.1% of Exxon's net worth ($2,500 / $118,603) and the BP fine is: drumroll please, .06%, that's right, not even a rounding error to BP of BP's net worth ($50 / $90,541). Will my "favorite" Supreme John Roberts grant immediate certiorari to reduce Motorola's award against the Uzans, individuals, not Fortune 500 corporations? Will Theodore Boutros of Gibson, Dunn & Cruther file an amicus brief with the Second Circuit Court of Appeals in New York, pro bono on behalf of the Uzans? Don't hold your breath. Also see my 23 and 30 October posts.


OkieLawyer said...

I found you via your comment on Sudden Debt.

It appears I take the exact opposite position you do re: punitive damages. See my post: Supreme Court Case Limits Punitive Damages.

Independent Accountant said...

Okie lawyer:
You completely misunderstand me. See my previous comments on punitive damages. My point is: they are usually too small. I'll give an example: Suppose a "crook" company assumes ex ante that its likelihood of getting caught is 5%. It steals $1 million. For punitive damages to have any deterrent effect at all, they must exceed $20 million ($1 million / .05). My point is: $50 million is peanuts to BP. Last year BP made $22 billion. What's $50 million to BP? Nothing.

Independent Accountant said...

Richard Posner, 7th Circuit Court of Appeals Judge has done some good writing on this topic. He is our most economically literate judge. I will look at your website. By the way, I was aware of the case you mentioned.

Independent Accountant said...

I also posted on punitive damages on 10/23. You may, if interested, read all my posts on "Legal System Abuse". Then see if our thinking is far apart.