Justices pare jury award in Exxon Valdez oil spill case
Split ruling slashes punitive damages by more than 75%
A divided US Supreme Court cut the $2.5 billion punitive damage award against Exxon Mobil Corp. for the 1989 Valdez disaster to $507.5 million, ending a 19-year legal saga over the worst oil spill in US history.
The justices, voting 5 to 3, said the original award, which would have been increased by more than $2 billion with accrued interest, was excessive under federal maritime law.
Writing for the court, Justice David Souter said the spill was caused by recklessness, rather than intentional wrongdoing, and wasn't part of a company effort to "augment profit." The spill dumped 11 million gallons of oil into Alaska's Prince William Sound, devastating wildlife and local businesses.
Souter said the maximum punitive damage award in that type of case should be about equal to compensatory damages - actual economic harm suffered by the victims. That level "is a fair upper limit in such maritime cases," he wrote.
The award will go to a group that originally consisted of 33,000 commercial fishermen, seafood processors, landowners, native Alaskans, and small businesses. The ruling slashes their recovery of punitive damages from about $75,000 apiece to $15,000.
Yesterday's ruling adds to a body of Supreme Court decisions that have tightened the limits on punitive damages. Unlike previous cases, the Valdez case didn't concern the constitutional restrictions on awards, and Souter said those limits were less stringent than those governing maritime law.
Still, business advocates hailed the ruling as maybe having broader implications. Souter's opinion criticized what he called the "stark unpredictability of punitive awards" and said courts should intervene at times to limit jury awards.
Souter's reasoning "is going to be very useful in other contexts," said Amar Sarwal, a lawyer for the US Chamber of Commerce.
Alaska Governor Sarah Palin, a Republican, denounced the decision, saying the court "gutted the jury's decision on punitive damages." The environmental group Greenpeace USA said the ruling "makes a mockery of justice."
The $507.5 million award represents about 12 hours of sales for Exxon Mobil. The world's largest oil company last year broke its own record for annual profit by a US corporation with $40.6 billion. Exxon has obtained a letter of credit and set aside $5.4 billion to cover its payments in the case.
The award doesn't represent a financial burden for Exxon Mobil, which had $40.9 billion in cash and cash equivalents at the end of the first quarter, said William Andrews, a portfolio manager who helps oversee $8 billion at Pittsburgh-based C.S. McKee & Co.
"For Exxon, that's not a big number," said Andrews, who doesn't own any Exxon Mobil stock.
The company issued a statement that didn't directly address the ruling, calling the Valdez spill a "tragic accident" that it "deeply regrets."
