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Damages Are Halved in Exxon Valdez Oil Spill
$5 Billion Award Ruled Excessive

By David Kravets
Associated Press
Saturday, December 23, 2006

SAN FRANCISCO, Dec. 22 -- A federal appeals court on Friday cut in half a $5 billion jury award for punitive damages against Exxon Mobil in the 1989 oil spill that smeared black goo across 1,500 miles of Alaskan coastline.

The case, one of the nation's longest-running noncriminal legal disputes, stems from a 1994 decision by an Anchorage jury to award the damages to 34,000 fishermen and other Alaskans. Their property and livelihoods were damaged when the Exxon Valdez tanker struck a charted reef, spilling 11 million gallons of crude oil.

It is the third time the U.S. Court of Appeals for the 9th Circuit ordered the Anchorage court to reduce the $5 billion award, the nation's largest at the time, saying it was unconstitutionally excessive in light of U.S. Supreme Court precedent.

"It is time for this protracted litigation to end," Chief Judge Mary Schroeder and Judge Andrew J. Kleinfeld wrote.

In dissent, Judge James R. Browning ruled that the $5 billion verdict should remain intact because there is "no principled means by which this award should be reduced."

This time, the court ordered a specific amount, $2.5 billion, in damages; its previous rulings demanded that a lower court come up with its own figures. U.S. District Judge H. Russel Holland of Anchorage grudgingly complied in 2002, reducing damages to $4 billion. Irving, Tex.-based Exxon again appealed.

The following year, the appeals court ordered Holland to reconsider his decision, balancing it against a Supreme Court ruling that said punitive damages usually could not be more than nine times general damages. The Anchorage jury awarded $287 million in general damages -- and issued punitive damages that were 17 times that amount.

Holland, appointed by President Ronald Reagan in 1984, declared Exxon's conduct "reprehensible" and set the figure at $4.5 billion plus interest, ruling that the Supreme Court's precedent did not directly apply to the case.

Exxon again appealed, arguing that it should have to pay no more than $25 million in punitive damages, which are meant to punish a company for misconduct.

The company, whose $36.1 billion profit last year was the highest ever by any U.S. corporation, said it has spent more than $3 billion to settle federal and state lawsuits and to clean the Prince William Sound area.

In October, Exxon Mobil reported a $10.49 billion profit in the third quarter, the second-largest quarterly figure ever recorded by a publicly traded U.S. company.

Exxon spokesman Dave Gardner criticized the court's decision, calling the spill "a tragic accident that Exxon Mobil deeply regrets."

Gardner did not say whether the company would appeal the decision but said that "in our opinion, the facts of this case do not warrant an award this size."

In 1994, a federal jury found recklessness by Exxon and the captain of the Exxon Valdez, Joseph Hazelwood, who caused the tanker to run aground. That finding made Exxon liable for punitive damages.

The disaster, the worst oil spill in U.S. history, prompted Congress to pass a law in 1990 banning single-hull tankers such as the Exxon Valdez from domestic waters by 2015.

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