US High Court May Reduce Punitive Damages in Exxon Spill

The 987-foot tanker missed a turn and ran aground on a reef in Prince William Sound, causing the worst oil spill in US history.

Exxon Valdez 88 (photo credit: )
Exxon Valdez 88
(photo credit: )
The Supreme Court seemed inclined yesterday to let Exxon Mobil Corp. off the hook for some of the $2.5 billion the energy giant was ordered to pay as punishment for a massive oil spill in Alaska nearly 19 years ago. The justices questioned lawyers for the company and nearly 33,000 victims of the Exxon Valdez disaster for 90 minutes, making only one passing reference to Exxon's record profits. The award represents less than three weeks' worth of Exxon profit, which was $11.7 billion in the last three months of 2007. Exxon has vigorously fought to knock down or erase the punitive damages verdict by a jury in Alaska in 1994 for the accident that dumped 11 million gallons of oil into Prince William Sound. The environmental disaster fouled 1,200 miles of Alaskan coastline and led to the deaths of hundreds of thousands of seabirds and marine animals. The verdict has been cut in half once by a federal appeals court. The problem for the people, businesses and governments who waged the lengthy legal fight against Exxon is that the Supreme Court in recent years has become more receptive to limiting punitive damages awards. The Exxon Valdez case differs from the others in that it involves issues peculiar to laws governing accidents on the water. But several justices said that limits could be appropriate in this context too. Justice Breyer, who has voted to overturn damages awards, said he worried how the court's decision in this case would play in other maritime accidents. "This is a very dramatic accident. It involves oil spills, and they cause an enormous amount of trouble," he said. "But there are accidents every day, and ships are filled with accidents like automobiles in other places. And there are all kinds of things that go wrong. ... What principles do you have to suggest, if any, for creating a fair system that isn't just arbitrary?" Justices Kennedy and Souter suggested that perhaps a reasonable number would be twice the amount of money the company has paid to compensate victims for economic losses, about $500 million. Overall, Exxon has paid $3.4 billion in fines, penalties, cleanup costs, claims, and other expenses resulting from the worst oil spill in American history. "Exxon gained nothing by what went wrong in this case and paid dearly for it," lawyer Walter Dellinger said, urging the court to throw out the punitive damages judgment that has been upheld by the San Francisco-based 9th U.S. Circuit Court of Appeals. A Stanford University law professor, Jeffrey Fisher, said the commercial fishermen, Native Alaskans, landowners, businesses, and local governments he represents have each received about $15,000 so far "for having their lives and livelihood destroyed and haven't received a dime of emotional-distress damages." Mr. Fisher said nothing in prior Supreme Court decisions should cause the justices to overturn the $2.5 billion award, about $75,000 for each plaintiff. Meanwhile, the court decided yesterday that employees who claim job discrimination should not suffer because of mistakes made by the federal agency charged with investigating their allegations. The 7-2 ruling allows an age discrimination lawsuit to proceed against FedEx Corp. The majority opinion by Justice Kennedy is critical of the Equal Employment Opportunity Commission, which failed to notify FedEx that 14 employees had filed a complaint. Companies must be told about complaints before discrimination lawsuits can be filed.