The Second Circuit today upheld an award of $1 billion in punitive damages.  The decision came in a case against a Turkish family that, the district court found, swindled Motorola and Nokia into lending the Uzans and their affiliates more than $2.8 billion to finance a telecommunications business. 

The district court awarded the $1 billion after the Second Circuit vacated Judge Rakoff’s previous award of more than $2 billion in punitives.  In this appeal, the court concluded that awarding a mere $1 billion didn’t run afoul of Illinois law or the U.S. constitution.  Motorola Credit Corp. v. Uzan, No. 06-1222-cv (2d Cir. Nov. 21, 2007).

[The WSJ expressed outrage at the Uzans’ fraudulent conduct.  How can the wheels of commerce turn with such deception, it demanded to know.  Except that, apparently, it hasn’t reported on the case or the conduct at all before today.]

What does Blawgletter make of the Second Circuit’s ruling?  At first blush, we thought that Exxon now will have to stop popping off about the behemothitude of the $2.5 billion award against it for "letting an alcoholic who’d relapsed into dipsomania captain an enormous oil tanker, the Exxon Valdez."  Until now, the oil gargantuan touted the fact that the award against it exceeded the total that federal courts of appeals have upheld since the dawn of time.  Will it now hush up?

Count us skeptical.  Exxon used the argument in hopes of getting the U.S. Supreme Court to review the Ninth Circuit’s affirmance of a $2.5 billion judgment — which the appeals court cut from a $5 billion verdict in 1994.  The Court of course abhors such tenditious arguments and as a result naturally would recoil from the Exxon petition.  Except that, er, um, it didn’t exactly do that.  Quite the opposite.

Perhaps Exxon will rephrase its point to say that, if the Court upholds the Valdez award and also lets the Uzan award stand, the $3.5 billion total will exceed Exxon’s earnings in less than 40 days during the fourth quarter of 2005 alone.  Then again, perhaps not.

Barry Barnett

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