Supreme Court slashes Exxon Valdez oil damages

The US Supreme Court on June 25 rejected as excessive $2.5 billion in punitive damages awarded to victims of the Exxon Valdez oil disaster and said it should be cut to $507 million. The long-running legal battle stretches back to Mar. 24, 1989 when the Exxon Valdez crashed into a reef in Prince William Sound, Alaska, spilling 11 million gallons of crude into the seas in the country's worst oil disaster. After the spill, ExxonMobil spent about $2.1 billion cleaning up the polluted coastline and more than $300 million in compensation for fishermen and locals affected by the catastrophe. The company also paid out more than $900 million of fines in a bid to halt criminal proceedings brought against it by the US government and the state of Alaska. In an opinion penned by Justice David Souter, the Supreme Court said Exxon Mobil should not have to pay out punitive damages exceeding the compensatory damages awarded against it. In 1994 a jury in a civil Alaskan lawsuit ordered the Texas-based firm to pay $5 billion in punitive damages to some tens of thousands of fishermen and others who worked in the Prince William Sound. That sum was cut to $4 billion in December 2002, and then increased to $4.5 billion in January 2004 in various appellate rulings. Then in December, the US Court of Appeal cut the punitive damages to $2.5 billion saying the amount was more in line with legal precedent. This latest ruling rejected the federal appeals court damages. The reduced 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. "Exxon was responsible for one of the greatest environmental disasters our country has seen, and the Supreme Court let them off with a slap on the wrist," said Kathryn Kolbert, president of liberal organization People for the American Way. "This award is a drop in the bucket of Exxon's enormous profits, and it certainly provides no disincentive for them to avoid another accident in the future." 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. 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.