The American justice system is not beset by“runaway” punitive damage awards. In fact, punitive damages are “infrequent,” and there has been no “marked increase” in the number of awards or their typical size. Those assertions don’t come from the trial lawyers lobby; they are the conclusions of the Supreme Court. Indeed, they appear in a 5-3 opinion joined by four of the most conservative justices — and would undoubtedly be endorsed by the trio of liberal dissenters.

The court’s assessment of the state of punitive damages in this country was buried, however, under a dramatic headline: “Justices Cut Damages for Exxon Valdez Spill.” The court decided last month that instead of the $5 billion award voted by a federal trial court jury in Alaska, or the $2.5 billion penalty approved by a federal appeals court, Exxon deserved only a little over $500 million in punishment for its corporate recklessness in causing the worst oil spill in American history.

The court’s solicitude for the company stemmed from what Justice David H. Souter, writing for the majority, called “the stark unpredictability” of punitive damage awards. In the 1990s, he was the most liberal of the justices joining a series of decisions that set some quite-loose due process limits on such awards in state courts. The Exxon case — brought under federal maritime law — gave the court a clear opening to regulate punitive damages under its common-law authority over the field.

Souter took the task seriously, carefully surveying a range of recent studies. “It’s the most empirically informed opinion the Supreme Court has written on civil litigation in a long time,” commented Richard Nagareda, a tort expert at Vanderbilt Law School. And the research, Souter concluded, “tends to undercut” much of the “audible criticism” of punitive damages. That criticism has come loud and long from the business community, which for more than two decades has depicted class actions and other civil suits as part of a run-amok system that imperils corporate America and the U.S. economy.

Instead, what Souter found was no problem with “mass-produced runaway awards” and “no marked increase” in the percentage of cases that ended with the defendant having to pay money to the plaintiffs as punishment for the behavior that led to the lawsuit. The median ratio of punitive to compensatory damages may have increased but remains below 1-to-1, he said. In sum, he concluded, the research revealed “an overall restraint” in the awarding of punitive damages by both juries and judges.

The Exxon Valdez case, of course, was no run-of-the-mill suit. In March 1989, the 1,000-foot supertanker spilled 11 million gallons of oil in Prince William Sound after a relapsed alcoholic skipper turned the helm over to a third mate, who ran the ship aground on a reef. Although Exxon knew the captain, Joseph Hazelwood, often drank with crew members, the company left him in command.

The spill devastated the region’s fishing economy. Five years later, a federal court jury found Exxon’s conduct reckless, awarding $287 million in compensatory damages and adding a $5 billion punishment. The trial judge and the 9th U.S. Circuit Court of Appeals tried to heed the Supreme Court’s punitive damages decisions, one of which suggested a 9-to-1 punishment-to-compensatory ratio as the outer limit. After calculating the economic harm at about $500 million, Judge Russel Holland set punitive damages at $4.5 billion. The appeals court lowered the amount to $2.5 billion on the ground that Exxon’s lapses had not been intentional or aimed at increasing profits.

The lower courts’ efforts were lost on a Supreme Court majority consisting of Chief Justice John G. Roberts Jr. and Justices Souter, Antonin Scalia, Anthony M. Kennedy and Clarence Thomas. They were instead concerned about “the spread” in punitive damages generally — in statistical parlance, the “standard deviation” was too high. “Outlier cases,” Souter wrote, “subject defendants to punitive damages that dwarf the corresponding compensatories.”

As a clear alternative, Souter proposed a 1-to-1 ratio as the limit for punitive damages in maritime cases, at least if the conduct was neither malicious nor profit-seeking. (He rounded up from the ratio of 0.65 to 1 that the research found in recent jury awards.) Souter labored to explain away alternatives: more explicit jury instructions, or the 2-to-1 or 3-to-1 ratios of many states. “Some will murmur,” he acknowledged, “that this smacks too much of policy and too little of principle.”

Many longtime tort reform advocates hailed the decision, though without mentioning the underlying refutation of their arguments. In the Wall Street Journal, former publisher L. Gordon Crovitz said the case would be an antidote to “out-of-control jury awards” that “sometimes bankrupt companies and industries.” The U.S. Chamber of Commerce saw the decision as a signal to state and federal judges to rein in punitive damages across the board.

Exxon was not and is not near bankruptcy, but the Alaskan fishermen whose lives have never been the same reacted with disillusionment. Their lawyer, Brian O’Neill of Minneapolis, could offer no solace when he met with some of them five days later. “We got screwed,” he said, according to the Anchorage Daily News. “I’m ashamed and embarrassed about what the court system did.”

Kenneth Jost is the Supreme Court editor for CQ Press. For a complete listing of his columns, click here.