The Supreme Court on June 25 dealt a blow to victims of the 1989 Exxon Valdez disaster, cutting the $2.5 billion in punitive damages award for the worst oil spill in US history to $507 million. The court ruled 5-3 that the damages were excessive under maritime law. The ruling in Exxon Shipping v. Baker, No. 07-219 brings to a close a long-running legal battle between Exxon and a group of 33,000 fishermen, cannery workers, Native Alaskans and others affected by the disaster.
Justice David Souter, writing for the majority, said a ratio between punitive and compensatory damages of no more than one-to-one is generally appropriate, at least in maritime cases. Since Exxon has paid some $507 million to compensate those affected by the disaster, it should have to pay no more than that amount in punitive damages. That works out to $15,000 for each plaintiff for compensation and $15,000 more as punitive damages.
Justice John Paul Stevens, in a dissent, said he would have upheld the original jury award, which the 9th Circuit Court of Appeals in California had reduced to $2.5 billion. "In light of Exxon's decision to permit a lapsed alcoholic to command a supertanker carrying tens of millions of gallons of crude oil though the treacherous waters of Prince William Sound, thereby endangering all of the individuals who depended upon the sound for their livelihoods," he wrote, "the jury could easily have given expression to its moral condemnation of Exxon's conduct in the form of this award."
In his dissent, Justice Stephen G. Breyer wrote that Exxon's conduct warranted "an exception from strict application of the majority’s numerical rule."
Justice Samuel Alito, who owns Exxon stock, recused himself from the case. As a result, the court split 4 to 4 on a separate question in the case, that of whether Exxon may be held accountable for Hazelwood's recklessness. The effect of the even split was to leave intact the 9th Circuit ruling, which found Exxon may be held responsible. The remaining members of the court were unanimous in rejecting a third argument from Exxon, that the Clean Water Act's penalties pre-empted the punitive award.
Jeffrey L. Fisher, a lawyer for the plaintiffs, said there was "a great deal of sadness" among his clients. "What is painful," Mr. Fisher said, "is that there seems to have been some disagreement between the dissenters and the majority on how reprehensible Exxon's conduct was."
In a statement, Rex W. Tillerson, chairman and chief executive of ExxonMobil, said: "The company cleaned up the spill and voluntarily compensated more than 11,000 Alaskans and businesses. The clean-up was declared complete by the State of Alaska and the United States Coast Guard in 1992."
The Exxon Valdez slammed into a reef in Prince William Sound just after midnight on March 24, 1989, spilling 11 million gallons and contaminating some 1,500 miles of Alaskan coastline. The disaster disrupted the lives and livelihoods of people in the region and killing hundreds of thousands of birds and marine animals. It occurred after the ship's captain, Joseph J. Hazelwood, left the bridge at a crucial moment. Hazelwood, an alcoholic, had downed five double vodkas on the night of the disaster, according to witnesses. Exxon paid more than $3.4 billion in fines, clean-up expenses and other costs. The spill still affects Alaska's fisheries today.
The plaintiffs filed a class action suit against Exxon and in 1994, an Alaska jury awarded them $5 billion in punitive damages. Exxon appealed the ruling. In December 2006 the 9th Circuit reduced the punitive damages to $2.5 billion, roughly $75,000 per individual plaintiff. Exxon appealed again, was denied by the 9th Circuit and then appealed to the Supreme Court.
Prior to the accident, Hazelwood had maneuvered the vessel out of the shipping lane to avoid ice, leaving crew members in charge with instructions on when to return the shipping lane—in violation of company rules. Exxon argued that Hazelwood was not in effect a "managerial agent" of the company, meaning it could not be held liable for punitive damages stemming from his actions. This was the question the high court split 4-4 on.
In his majority opinion, Souter weighed in on the question of excessive punitive damages, in which the court found for Exxon. "The consensus today is that punitives are aimed not at compensation but principally at retribution and deterring harmful conduct," he wrote. "The real problem, it seems, is the stark unpredictability of punitive awards." Souter noted the Valdez case was "one of recklessness" not an intentional or malicious act, while conceding "that Exxon's and Hazelwood's failings were less than reprehensible."
In his dissent, Stephens wrote that question of what constitutes excessive damages should be left to the legislative branch. "Both caps and ratios of the sort the Court relies upon in its discussion are typically imposed by legislatures, not courts," Stephens wrote. "Congress is far better situated than is this Court to assess the empirical data, and to balance competing policy interests, before making such a choice."
Justice Ruth Bader Ginsburg, writing in a separate dissent, warned that the majority ruling creates more questions than it answers. "What ratio will the Court set for defendants who acted maliciously or in pursuit of financial gain?" Ginsburg asked. "Should the magnitude of the risk increase the ratio and, if so, by how much?"
Several prominent lawmakers also blasted the court's ruling. "This ruling is another in a line of cases where this Supreme Court has misconstrued congressional intent to benefit large corporations," said Senate Judiciary Committee Chairman Patrick Leahy (D-VT). The court has given Exxon Mobil a "$2 billion windfall by reading into the Constitution a protection for corporations that simply does not exist," he added. "This is activism, pure and simple."
Alaska's three members of Congress—Senators Ted Stevens and Lisa Murkowski and Rep. Don Young, all Republicans—called the decision "extremely disappointing," saying the court should have let the $2.5 billion award stand. "Today's ruling adds insult to injury to the fishermen, communities and Alaska natives who have been waiting nearly 20 years for proper compensation following the worst environmental disaster in our nation's history," they said in a joint statement.
The Exxon Valdez Oil Spill Trustee Council, made up of representatives of state and federal agencies, denies that Exxon's cleanup was complete, saying, "Not all beaches were cleaned; some beaches remain oiled today."
Exxon Shipping Company, which operated the Exxon Valdez tanker, has been renamed Sea River Shipping Company. The Exxon Valdez was repaired and renamed the Sea River Mediterranean. It is today used to haul oil across the Atlantic Ocean, prohibited by law from returning to Prince William Sound. (NYT [2], June 26; ENS [3], June 25)
See our last posts on the Exxon Valdez case [4], the struggle for Alaska [5], and petro-oligarchic rule [6].
