Court Spares Exxon $2 Billion In Damages From Valdez Spill

WASHINGTON — The Supreme Court on Wednesday slashed the $2.5 billion punitive damages award in the Exxon Valdez disaster to $500 million, a decision that could have broader implications for limiting how much courts can order businesses to pay.

The decision was hailed by the business community and decried by environmentalists and Alaskans.

The court ruled that the victims of the worst oil spill in U.S. history may collect punitive damages from Exxon Mobil Corp. that amount to an average of $15,000 for each person who filed a claim against the energy company.

Justice David Souter wrote for the court that punitive damages may not exceed what the company already paid to compensate victims for economic losses, $507.5 million, an amount equal to about four days worth of Exxon Mobil Corp.'s profits last quarter.

The Exxon Valdez case involves reckless action that was "profitless" for the company and that has already resulted in substantial recovery for substantial injury, Souter wrote. A penalty should be "reasonably predictable" in its severity, he added.

The case grew out of the 1989 crash of the Exxon Valdez, a supertanker that dumped 11 million gallons of crude oil into Alaska's Prince William Sound, fouling 1,200 miles of coastline.

A jury decided in 1994 that Exxon should pay $5 billion in punitive damages. In 2006, a federal appeals court cut that verdict in half.

Exxon asked the Supreme Court to reject the punitive damages judgment altogether, saying the company already has spent $3.4 billion to clean up the spill and compensate Native Alaskans, landowners and commercial fishermen.

Story continues below

Nearly 33,000 plaintiffs are in line to share in the award approved Wednesday, an average of about $15,000 a person. They would have collected an average of $75,000 each under the $2.5 billion judgment.

The Supreme Court was divided on its decision, 5-3. Justice Samuel Alito took no part in the case because he owns Exxon stock.

Amar Sarwal, general litigation counsel for the U.S. Chamber of Commerce, said the ruling gives an "extraordinary amount of guidance" to courts beyond the Exxon Valdez case.

Plaintiffs attorneys pushed back, saying that the ruling applies solely to cases involving maritime law.

"Those who claim it stands for a generalized punitive damage limit are wrong," said Kathleen Flynn Peterson, president of the American Association for Justice, a national group of plaintiffs attorneys.

Souter wrote that the legal landscape is filled with examples of ratios and multipliers for punitive damages versus compensatory damages, saying most of them fall short of offering reasonable limitations in the Exxon Valdez case.

Osa Schultz of Cordova, Alaska, said she was "pretty disappointed" with the amount of the settlement. "On the other hand, I'm relieved they slapped Exxon in the face," Schultz said, adding that a $15,000 award wouldn't even begin to cover the losses to her and her husband's gillnet fishing business.

Exxon has fought vigorously to reduce or erase the punitive damages verdict by a jury in Alaska for the accident that dumped 11 million gallons of oil into Prince William Sound. The environmental disaster led to the deaths of hundreds of thousands of seabirds and marine animals.

In an opinion dissenting from the Souter decision, Justice John Paul Stevens endorsed the $2.5 billion figure for punitive damages, pointing out that Congress has chosen not to impose restrictions in such circumstances.

Justice Ruth Bader Ginsburg also dissented, saying the court was engaging in "lawmaking" by concluding that punitive damages may not exceed what the company already paid to compensate victims for economic losses.

"The new law made by the court should have been left to Congress," wrote Ginsburg. Justice Stephen Breyer made a similar point, opposing a rigid 1 to 1 ratio of punitive damages to victim compensation.

Writing for the majority, Souter said that traditionally, courts have accepted primary responsibility for reviewing punitive damages and "it is hard to see how the judiciary can wash its hands" of the problem by pointing to Congress for a solution.

On the question of whether Exxon was on the hook for punitive damages at all, the court split 4-4, which leaves the appeals court opinion saying that Exxon is liable. Had Alito participated, he could have been the deciding vote on the question, possibly leaving the victims with no punitive damages.

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.

Overall, Exxon has paid $3.4 billion in fines, penalties, cleanup costs, claims and other expenses resulting from the worst oil spill in U.S. history.

The commercial fishermen, Native Alaskans, landowners, businesses and local governments involved in the lawsuit 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," their Supreme Court lawyer, Jeffrey Fisher, said when the court heard arguments in February.

First-quarter profits at Exxon Mobil Corp. were $10.9 billion. The company's 2007 profit was $40.6 billion.

___

Associated Press writers Mark Thiessen and Rachel D'Oro in Anchorage, Alaska, contributed to this story.

Comments

[raker]

The upshot of this is obvious. If it's cheaper to take big risks and pay measly fines after a catastrophe than it is to make their operations safe, then guess what. After all, Iraq has made $500 mil. chump change to these criminals.

[arbroath]

Executive, bought & paid for, check.
Legislative, bought & paid for, check.
Judicial, bought & paid for, check.
Fourth estate, bought & paid for, check.

[openhand]

Yeah and guys we have a deadline, lets get a move on, we gotta sort this out by 3rd quarter 2008.

[foolchild0]

...and not to be upstage by Congress, the Judiciary contributes it's own absolute disgrace to the day's events in Washington.

This is a sad day on several counts.

[poppyseed]

This decision is curious to me. If the reason Souter cites for upholding the lower court's decision to vacate the award was "unpredictability" then how does he arrive at a "predictable" 1:1 maritime ratio? He bases it on an "average" and then tinkers with that average to raise it to 1:1 (the actual maritime average is below 1:1). How or why would this, in principle, be more "predictable" than the 5 billion award?

If he suggests that EXXON should have been given either explicit warning of the punitive consequences of their "bad judgment" or some kind of "fair warning" based on precedent then how does he justify creating his own 1:1 ( previously non-exact) ratio? A more consistent ruling, if indeed the court supports the notion that lack of predictable punishment voids the award, would have been for Souter to have vacated the entire award.

Does this mean that the SCOTUS has created a "free pass" rule for the next entity that engages in the first act of bad judgment on a different issue?

[only1Demvoter]

poppyseed : Accountability is non - existant in the ' New Tort Reform ' .

And... Good Question !!


More to follow. -ralph

[leftcoastsportsbabe]

Yeah, I guess they had some sympathy for oil companies in these tough economic times.

[crooky62]

this is why we need a dem in office so we can change this ridiculous supreme court. in America big business rules everything.if there is a god why would he/she let this type of crap continue.each new day brings me closer to atheism.

[MarionKIN]

Let's not forget WHY Exxon received these punitive damages in the first place.

At the time Joseph Hazelwood was made Captain of their LARGEST supertanker, despite a history of alcoholism and repeated complaints of his drunkenness to high levels within Exxon, he could NOT even drive a car! He had two drivers' licenses revoked fro REPEATED DRUNKEN DRIVING and yet they still put him in charge.

This "accident" was foreseeable, avoidable, and because of their OUTRAGEOUS corporate neglect, INEVITABLE.

[stimpy]

Let's also keep in mind that Hazelwood was scapegoated nicely. I don't recall the story exactly, but supposedly there wasn't a functioning radar system on the boat because Exxon didn't feel like spending the money to fix it. And Hazelwood's little helper was piloting at the time.

[jimthefireman]

See fellahs? You can buy a Justice system!

[aicon]

Disgusting!! What poor arguments, specially in days where Exxon makes 2 billions a month. Shame on the Supreme court! How about giving an example and punishing those who spoil the environment so that future accidents may be prevented?

Those judges who voted in favor of Exxon should have had their home on the shores where the spill happened. I bet they would have a different opinion.

What image gives of the supreme court? That they protect big company before the people, before the environment and the animals.

SHAME.. PEW!!

[damnadamson]

Sad thing is the only country left on the planet that thinks America is the bastion of freedom and democracy in the world is America ! This is a great example of why that is.

[CalculatedRiskTaker]

Another Republican gift to the haves. There you go Alaska, I still bet you keep voting Repubican. Kind a like shooting your self in the foot.

[WYruAFRAID]

what are you saying? just can't tell where you stand because your comment is a little vague...

[only1Demvoter]

WY : ' Spin / Deflect must encompass a modicum of credibility.


-ralph

[PhantomAviator]

..

Gosh, they WEREN'T bought and paid for, were they?

How predictable is this? The Court is a loaded JOKE, and all we can do is cry about it. Perhaps if the Democrats hadn't been so WORTHLESS over the past 30 years, there would be a LIBERAL majority and not a FACIST one.

"Have imperator, morituri te salutant!"

Welcome to the Monkey House.

.

[TheBlackCat]

It's not a joke, it's deadly serious. It's falacious to think that the Supreme Court is filled with inept boobs. They're not. They know exactly what they're doing, and that's protecting corporate interests. That's the goal of the Republican party right now above all, protecting corporate interests. Corporate interests are important to take into account, as they provide the jobs.

The biggest problem in America today (I feel) is that both the right and left are unwilling to compromise. They think giving one inch is nothing but a precursor to complete downfall. We saw this on the left as they fought AGAINST a ban on partial birth abortion. They thought that if this very reasonable ban went through, the next step would be women chained to stoves with no reproductive rights whatsoever. On the right, you see them fighting AGAINST an assault weapons ban, or against ANY corporate accountability or ANY protection for workers, because they think if they give an inch the next thing you know the government is coming for your guns and companies will fall prey to a communist take over.

Where have you gone, Henry Clay? Our nation turns its lonely eyes to you.

[jmo007]

In order to impeach, you need 60 votes in the Senate. Since the dems have 50 members (+1 - Sanders, an independent caucuses with the dems), and the repugnikkkans 48, and 1 (LIEberman), no one will be impeached under this present Senate. The dems have to gain seats in November in order to get 60 vote majority. I know, we are in a pathetic state. This happens when people go and vote for a 3rd party instead of getting inside the dem party and MAKE IT PROGRESSIVE!

[sammy333]

Exxon Mobile: 40B a year of pure profit. Multiply for the number of years since the spill. 0.5B in this scale is literally nothing. These gentlemen from the Supreme Court call it a proportional punishment. At least they have not ordered the fishermen to pay 0.5B to Exxon. These days, when Exxon co-owns the government with the war mongers like Lieberman, nothing is surprising.

[Cybesq]

Let me get this straight: Exxon Mobil could easily afford to build double hulled ships but it chooses not to in order to save money, yet these damages were not foreseeable.

Uh huh.

[Cookie100]

Over 20 years these people have been waiting, and Exxon has been waiting for THEM TO DIE!! Do not buy Mobile gasoline under any circumstances. All I can say is, the exec's will rot in hell where they belong for eternity.
So will Scalia, cause that's the only place that guy belongs.

[Ajita]

I know what you mean. I listened to an hour on NPR a year ago about the villages in the bay destroyed because of the spill. The marine life has not returned to normal yet and there is still clean-up to be done. Exxon did not even do much cleaning up and now this.

[Schnitzel]

Here's a little slice of the future for the beach-combing folks in Florida and California if John McCain gets his way. What a stupid idea to think that the same folks who engineered the Valdez train wreck won't do the same thing there if they're allowed to drill offshore. But then again - maybe the folks in Florida and California don't really need to worry about it...it's not like they make any MONEY from pristine coastlines or anything.