ExxonMobil asked the Supreme Court Feb. 27 to reverse a lower court’s decision awarding $2.5 billion in punitive damages to Alaskan fishermen, cannery workers and others impacted by the disaster. The 3,000-square-mile slick caused by the 11-million spill forced the closure of Alaskan fisheries and killed more than 250,000 sea birds, 3,000 otters, 300 harbor seals, 250 bald eagles and 22 whales. The worst oil spill in US history still affects Alaska’s fisheries after nearly 19 years.
In a class action suit against the oil company in 1994, an Alaska jury awarded plantiffs $287 million in compensatory damages and $5 billion in punitive damages. Exxon appealed the ruling, and in December 2006 the Ninth Circuit Court of Appeals reduced the punitive damages to $2.5 billion, roughly $75,000 per individual plaintiff. Exxon appealed again, was denied by the Ninth Circuit and then went to the Supreme Court. Some 6,000 of the plaintiffs have died since the class action lawsuit was first filed.
The case centers on whether Exxon is liable for the actions of the ship’s captain, Joseph Hazelwood, who went of course to avoid ice and left other crew members in charge with instructions on when to return the shipping lane—in violation of company rules. Hazelwood also admitted to drinking alcohol prior to the the incident. Exxon argued that two centuries of maritime law precluded punitive damages against the company for Hazelwood’s errors.
Justice Ruth Bader Ginsburg noted that Dellinger was largely relying on the Supreme Court’s decision in an 1818 case, The Amiable Nancy. Ginsburg said it was “an exaggeration to call it a long line of settled decisions in maritime law.” Added Justice David Souter: “In those days, when a ship put to sea, the ship was sort of a floating world by itself. And the contact with the shipowner was simply gone until the thing came back into port again. That is certainly not the case today and we know it’s not the case in the circumstances here.” Countered Exxon lawyer Walter Dellinger: “Exxon gains nothing by what went wrong in this case, and paid dearly for it.” He called the accident a “tragedy.”
Stanford law professor Jeffrey Fisher, representing the plaintiffs, said punitive damages are clearly allowed under maritime law, arguing that Hazelwood was in charge of a “business unit” of Exxon. “He was the person who decided on behalf of Exxon that it was safe to leave port the night of March 23, 1989,” Fisher told the justices. “It is perfectly appropriate to expose the corporation to punitive damages based on the reckless acts of such an individual.”
Chief Justice John Roberts appeared sympathetic to Exxon, asking how a corporation can protect itself against this kind of punitive damage award. Fisher: “It can hire fit and competent people.” Roberts: “But what more can the corporation do other than say ‘here [are] our policies’ and try to implement them?” Fisher reminded Roberts: “Up and down the corporation…for three years, upper management was receiving reports that this man was drinking aboard this vessel… Exxon nonetheless left Captain Hazelwood in command over a three-year span.”
Fisher said the $3.4 billion Exxon has paid in criminal fines, cleanup costs and compensation payments has done little to change the company’s attitude. “In the wake of the spill…Exxon fired one person—Captain Hazelwood. Everybody else up, further up the chain of command, who allowed this to happen received bonuses and raises. They have taken no action inside the company to express in any meaningful way that they’ve been deterred by what happened in this incident and the amount of money they’ve had to pay.”
Several justices broached limiting punitive damage awards. Justice Stephen Breyer called for “creating a fair system that isn’t just arbitrary.” Justice Anthony Kennedy suggested limiting awards to double the amount of monetary damages. This would cut the punitive damages in the Valdez case to about $550 million. Lawyers for the plaintiffs note that the $2.5 billion figure is “barely more than three weeks of Exxon’s net profits.”
Only eight of the nine justices heard the arguments. Justice Samuel Alito owns Exxon stock and has recused himself. That raises the possibility of a four-four tie, which would uphold the $2.5 billion award. A ruling is expected by June. (ENS, Feb. 27; NYT, Feb. 28)