Supreme Court Agrees To Review Punitive Damages In Exxon Valdez Case

Monday, October 29th 2007, 9:56 am

By: News On 6

WASHINGTON (AP) _ The Supreme Court agreed Monday to decide whether Exxon Mobil Corp. should pay $2.5 billion in punitive damages to victims of 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 from the supertanker accident in Prince William Sound that was the worst oil spill in U.S. history. The Exxon Valdez ran aground on a reef, cracking its hull and spilling 11 million gallons of oil.

Hundreds of thousands of seabirds and marine animals died as a result.

It is a case filled with superlatives. The award, even after it was cut in half by a federal appeals court in December, would be the largest punitive damages judgment ever. A jury in Alaska awarded $5 billion in damages in 1994 and the company has been appealing the verdict ever since.

Irving, Texas-based Exxon Mobil is the world's largest publicly traded oil company and last year posted the largest annual profit by a U.S. company _ $39.5 billion. That result topped the previous record, also by Exxon Mobil, of $36.13 billion set in 2005.

Arguing against Supreme Court review, lawyers for the plaintiffs, some of whom have died, 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. They urged the court to reject the company's appeal, saying, ``After more than 18 years, it is time for this protracted litigation to end.''

But the justices said they would consider whether the company should have to pay damages at all under the Clean Water Act and centuries-old laws governing shipping. The court has frequently sided with business interests in punitive damages and other cases of corporate liability.

John Paul Jones, a University of Richmond law professor and expert in maritime law, said the court was right to jump into the case because lower courts long have been divided on some of the issues peculiar to the laws concerning accidents on the water.

``The decision in this case could dictate the outcome of a significant number of cases,'' Jones said.

Exxon said that even if the court finds some money is due, it should rule that the $2.5 billion award violates the Constitution because it is too large. The justices said they would not consider that argument when they hear the case early next year.

Justice Samuel Alito, who owns between $100,000 and $250,000 in Exxon stock, did not take part in the decision to accept the appeal.

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.

Exxon said it already has paid $3.4 billion in cleanup costs and other penalties resulting from the oil spill.

``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.''

The 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 contended 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 San Francisco-based 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 $1.91, or about 2 percent, to $94.12 in afternoon trading. The shares are up nearly 30 percent since the start of the year.

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