Supreme Court to Decide on Exxon Valdez Punitive Damages

The Supreme Court this week agreed to decide whether Exxon Mobil Corp. should pay $2.5 billion in punitive damages in connection with the huge Exxon Valdez oil spill that fouled more than 1,200 miles of Alaskan coastline in 1989.

The high court stepped into the long-running battle over the damages that Exxon Mobil owes in the spillage of 11 million gallons of oil into Alaska’s Prince William Sound, the worst oil spill in U.S. history.

The Exxon Valdez supertanker had run aground on a reef. A federal appeals court already had cut in half the $5 billion in damages awarded by a jury in 1994.

The justices said they would consider whether the company should have to pay any punitive damages at all. If the court decides some money is due, Exxon is arguing that $2.5 billion is excessive under laws governing shipping and prior high court decisions limiting punitive damages.

The damages were, by far, the largest ever approved by federal appeals judges, the company said in its brief to the court.

The case probably will be heard in the spring. The court’s last ruling on punitive damages, in February, set aside a nearly $80 million judgment against Altria Group Inc.’s Philip Morris USA. The money was awarded to the widow of a smoker in Oregon.

Justice Samuel Alito, who owns between $100,000 and $250,000 in Exxon stock, recused himself from the case.

Exxon said it already has paid $3.4 billion in clean-up costs and other penalties resulting from the oil spill, which killed hundreds of thousands of seabirds and marine animals.

“This case has never been about compensating people for actual damages,” company spokesman Tony Cudmore said in a statement. “Rather it is about whether further punishment is warranted…We do not believe any punitive damages are warranted in this case.”

Lawyers for the plaintiffs, some of whom are deceased, said the damages award is “barely more than three weeks of Exxon’s net profits.” The plaintiffs still living include about 33,000 commercial fishermen, cannery workers, landowners, Native Alaskans, local governments and businesses.

The Irving, Texas-based oil company marshaled more than a dozen organizations ranging from groups of shippers to the U.S. Chamber of Commerce, to support its bid for Supreme Court review.

The company argued it should not be held responsible for the mistakes of the ship’s captain, Captain Joseph Hazelwood, who violated clear company rules when the Exxon Valdez ran aground with 53 million gallons of crude oil in its hold on March 23, 1989.

The plaintiffs said Exxon knew Hazelwood had sought treatment for drinking, but had begun drinking again. “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,” they said.

The company has been battling the judgment for over a decade. The company has managed to get the award cut in half from the original $5 billion awarded in 1994 by an Anchorage jury in the class-action suit.

The 9th U.S. Circuit Court of Appeals reduced the punitive damages because, in part, the company tried to clean up the spill and didn’t spill oil from the tanker Exxon Valdez deliberately.

The disaster prompted Congress in 1990 to pass a law banning single-hulled tankers like the Valdez from domestic waters by 2015.

Exxon Mobil shares were up $1.61, or about 2 percent, to $93.82 in morning trading.

The case is Exxon Shipping Co. v. Baker, 07-219.