By William BraniginWashington Post Staff Writer Monday, October 29, 2007; 1:00 PM
The Supreme Court today agreed to hear an appeal by Exxon Mobil Corp. that seeks to overturn $2.5 billion in punitive damages a federal court ordered the company to pay for the 1989 Exxon Valdez oil spill off Alaska.
Stepping into the long-running dispute between the world's largest publicly traded oil company and more than 30,000 class-action plaintiffs, the court separately rejected the plaintiffs' appeal to reinstate the trial jury's original award of $5 billion in punitive damages. The 1994 award ultimately was cut in half during an appeals process that reached the U.S. Court of Appeals for the 9th
Circuit, which issued its ruling in December.Fishing boats connected to an oil skimmer by containment booms, patrol the waters off Erlington Island on Prince William Sound, Alaska, in this April 12, 1989 file photo, as workers continues to clean up crude left over from the spill of the tanker Exxon Valdez. The Supreme Court on Monday, Oct. 29, 2007, 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. (AP Photo/John Gaps III, File) (John Gaps Iii - AP)
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Exxon Mobil argues that the $2.5 billion punitive award violates federal maritime law, and the Supreme Court agreed to take the case to settle that question. The justices declined to consider an argument that the award was so large that it violates the Constitution.
Justice Samuel A. Alito Jr. recused himself from the case without explanation. According to his 2006 financial disclosure report, he owned between $100,000 and $250,000 in Exxon Mobil stock as of Dec. 31.
Exxon Mobil asserts that it has been sufficiently punished for the oil spill, which occurred when the Exxon Valdez, a 900-foot oil tanker carrying 53 million gallons of crude oil, ran into a reef in Alaska's Prince William Sound in March 1989. The captain, Joseph Hazelwood, the only person on board with a special license to navigate the portion of the waterway containing the dangerous reef, turned over the wheel to the tanker's third mate and left the bridge. When the third mate was unable to execute the turn properly and hit the reef, the tanker's hull split open and 11 million gallons of crude gushed into the sound.
Massive pollution ensued, and the company eventually paid more than $3.4 billion in cleanup costs, environmental restoration payments, criminal fines and out-of-court settlements to private parties claiming economic damages.
But nearly 33,000 commercial fishermen, private landowners, cannery workers, Native Alaskans, local governments and businesses filed a class-action lawsuit. They argued that Exxon knew Hazelwood had sought treatment for alcoholism and was drinking aboard its ships, but nevertheless put him in charge of a huge vessel carrying "toxic cargo across treacherous and resource-rich waters."
Exxon argued that it should not be held responsible for mistakes by Hazelwood, who it said violated company rules.
A jury in Anchorage sided with the plaintiffs in 1994, awarding them $5 billion in punitive damages from Exxon and $5,000 from Hazelwood, on top of $287 million in compensatory damages. During subsequent appeals, the punitive award was cut to $4 billion, raised to $4.5 billion, and ultimately reduced to $2.5 billion, which the Court of Appeals for the 9th Circuit said was the maximum it could impose.
In seeking Supreme Court review, Exxon Mobil argued that the $3.4 billion it paid in cleanup and other costs was "more than enough to deter and punish anyone for anything." It said the $2.5 billion punitive award, the largest ever upheld by a federal appellate court, was not allowed under federal maritime law.
Lawyers for the plaintiffs contended that the large punitive award was justified by the widespread damage caused by the oil spill, which polluted more than 1,200 miles of Alaskan coastline, forced the closure of fisheries and resulted in the deaths of hundreds of thousands of birds and thousands of marine mammals.
Besides, the plaintiff's lawyers have argued, the oil giant can easily afford the punitive damages, given the company's record profits in recent years. In 2006, Exxon Mobil recorded a profit of $39.5 billion, surpassing its previous record from 2005 by more than $3 billion. The 2006 figure was the largest annual profit ever posted by a U.S. company.
The Supreme Court is expected to rule in the case, Exxon Shipping Co. v. Baker, by the end of June.
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