Exxon Valdez Punative Damages Slashed

This Editorial brings up several issues.

link
A punitive ruling
Supreme Court strayed when it reduced punitive damages paid to Exxon Valdez oil-spill victims


Copyright 2008 Houston Chronicle

After almost 20 years of legal battles over the Exxon Valdez oil spill, the Supreme Court last week slashed the punitive damages imposed on Exxon Mobil to $500 million from $2.5 billion.

In a 5-3 ruling, the justices limited the amount of punitive damages to the amount of actual damages. Justice David H. Souter cited studies showing that under federal maritime law, punitive damages were on average equivalent to actual damages in cases where the damage was not deliberate or malicious.

The problem was that the court was not drawing on any previous court rulings (because none exist) when it arrived at this arbitrary decision. It's what conservatives call "judicial activism" when so-called liberal judges do it. As Justice John Paul Stevens wrote in his dissent, "Congress is far better situated than is this court to assess the empirical data, and to balance competing policy interests, before making such a choice."

Justices Ruth Bader Ginsburg and Stephen G. Breyer also dissented. (The ninth jurist, Justice Samuel Alito, an Exxon stockholder, had recused himself.) Ginsburg wrote, "The new law made by the court should have been left to Congress." So it should. Yet again, as in cases involving automakers, cigarette manufacturers and other companies, the court has sided with big business. As Tom Donohue, president of the U.S. Chamber of Commerce, said: "This is good news for companies concerned about reining in excessive punitive damages."

Whether the damages were excessive is questionable: Exxon was originally assessed $5 billion in punitive damages, which at that time, 1994, amounted to about one year of Exxon's profits, The Washington Post reported. The $2.5 billion figure was arrived at in December 2007. By then, Exxon's annual earnings were $40.6 billion. Calling Exxon's conduct "worse than negligent but less than malicious," the court slashed that award by 80 percent, to $507.5 million. That's worth about four days of Exxon's profits as of last quarter and gives an average of about $15,000 to each of the more than 32,000 plaintiffs — fishermen, cannery workers and Alaska natives.

When the Exxon Valdez ran aground on a reef in March 1989, it spilled nearly 11 million gallons of oil into Prince William Sound, the worst recorded spill in North America. It fouled almost 1,300 miles of Alaska coastline, wiped out hundreds of thousands of birds and marine animals and damaged or destroyed the livelihoods of more than 32,000 residents. The captain, a known alcoholic, had been drinking and was not on the bridge at the time of the grounding.

When the punitive damages were reduced to $2.5 billion, Exxon appealed to the Supreme Court, asking that the judgment be not just reduced, but thrown out, claiming that Exxon should not be held responsible for the captain's recklessness. They almost succeeded. The justices tied 4-4 on that issue. If Justice Alito had voted, given his record on the court, he would have joined the conservative justices, and no punitive damages would have been awarded. Exxon said in a statement that it had voluntarily cleaned up the spill and compensated more than 11,000 Alaskans and businesses, spending more than $3.4 billion. It also said, "The Valdez oil spill was a tragic accident, and one which the corporation deeply regrets."

Exxon is a business, and it functions like a business. The Supreme Court, however, strayed from its function in arriving at this arbitrary decision with no basis in the law, and that's everybody's business.


edit: if you go to the link there are some interesting comments from the readers who seem to be knowledgable on the law in this case