Justices to Examine Punitive Damages In Exxon Oil Spill
Tuesday, October 30, 2007
The worst oil spill in U.S. history begat the costliest punishment in U.S. history, but the Supreme Court agreed yesterday to decide whether Exxon Mobil has been penalized too much for the environmental damage caused when the Exxon Valdez ran aground in pristine Alaskan waters in 1989.
The court agreed to consider the $2.5 billion in punitive damages approved by a federal appeals court for a group of nearly 33,000 fishermen, landowners and others who brought a suit over the environmental disaster.
Even though the punishment is only half the $5 billion originally awarded by a federal jury in Alaska in 1994, it is still the largest-ever U.S. punitive damages total. The award is on top of the $3.4 billion the company said it has paid in cleanup costs and other penalties for the oil spill, which polluted 1,200 miles of Alaskan coastline.
That, said the company's petition to the court, filed by Washington lawyer Walter Dellinger, is "more than enough to deter and punish anyone for anything."
Dellinger said in the petition that the damages award is not only the largest in history but also "larger than the total of all punitive damages awards affirmed by all federal appellate courts in our history."
Anchorage lawyer David W. Oesting countered in his brief opposing Exxon Mobil's appeal that the amount "represents barely more than three weeks of Exxon's current net profits."
The Supreme Court was urged to take the case by an array of business interests, including the U.S. Chamber of Commerce, which said last year that these justices are the most friendly to business in years.
But in taking the case, the court said it will not consider whether the punitive damages award is so large that it violates the Constitution's guarantee of due process, as Exxon Mobil had asked; other business defendants have used that argument in trying to reduce jury awards.
Instead, the justices will consider whether the Clean Water Act and maritime laws allow for punitive damages, and if so, whether the award is excessive.
Justice Samuel A. Alito Jr. did not take part in the decision to hear the case. Although he gave no reason, his 2006 financial disclosure statement shows that he owns considerable Exxon Mobil stock. If only eight justices hear the case and they deadlock -- as happened earlier this term -- the award will stand.
At the 83-day trial in 1994, the group suing Exxon presented evidence showing that ship captain Joseph Hazelwood was drunk at the time the Valdez ran aground in Prince William Sound and had turned over control of the ship to someone unfamiliar with the bay's reefs. More than 11 million gallons of oil spilled.
"Unlike any other shipowner of which we are aware," Oesting wrote in his brief, "Exxon placed a relapsed alcoholic, who it knew was drinking aboard its ships, in command of an enormous vessel carrying toxic cargo across treacherous and resource-rich waters."
But the company's petition argued that the decision of the U.S. Court of Appeals for the 9th Circuit to uphold the punitive damages award "based on the misconduct of a vessel's master, contrary to the shipowner's policy and hostile to its vital interests, departs from the maritime-law rule to which every other circuit confronting this issue adheres."
The case is Exxon Shipping Co. v. Grant Baker (07-219).