Judge orders Exxon Mobil to pay up

Oil company plans to appeal the nearly $7 billion ruling

Posted: Thursday, January 29, 2004

ANCHORAGE - A federal judge in Anchorage on Wednesday ordered Exxon Mobil Corp. to pay nearly $7 billion in punitive damages and interest to thousands of fishermen and others affected by the 1989 Exxon Valdez oil spill.

"We have now closed the trial court doors for the last time in this litigation after 15 years," said David Oesting, lead attorney for the plaintiffs. "We're definitely on track to the end of the entire dispute."

In Wednesday's ruling, U.S. District Judge Russel Holland ordered Exxon Mobil to pay $4.5 billion in punitive damages and interest estimated at about $2.25 billion.

The money is to go to 32,000 fishermen, Alaska Natives, landowners, small businessmen and municipalities affected by the nearly 11 million gallon spill in Prince William Sound.

An Exxon Mobil official said the Irving, Texas-based company plans to appeal the 81-page ruling, the latest of several issued by Holland since Exxon appealed a $5 billion punitive award approved by a federal jury in Anchorage in 1994.

The 9th U.S. Circuit Court of Appeals has twice vacated Holland's decision in the case, said Exxon spokesman Tom Cirigliano. Holland had been ordered by the appellate court to reconsider the damages of an earlier decision.

"This ruling flies in the face of the guidelines set by the appeals court," Cirigliano said of Wednesday's order.

Gov. Frank Murkowski noted that while the decision "moves the process on," Exxon's plans to appeal signify there's no end in sight to the legal dispute that has dragged on for a decade.

"It would be helpful if the two parties would consider discussing a settlement, so that any award that might come from the lawsuit could have application during the lifetime of the thousands of plaintiffs," Murkowski said.

In 2002, Holland reduced the Exxon punitive damages award to $4 billion after a three-judge appeals panel sent the original $5 billion verdict back, saying it was excessive.

In his latest ruling, the judge was to consider a U.S. Supreme Court decision last year involving a Utah traffic accident and damages awarded in that case.

Attorneys from both sides argued that the Supreme Court case, State Farm Mutual Automobile Insurance Co. v. Campbell, supported their damages claims. In that case, the Supreme Court ruled that a state court jury's award of $145 million to punish the insurance company was grossly excessive when actual damages were $1 million.

The high court held that the ratio of punitive to actual damages should not exceed single digits, or 9-to-1.

Exxon attorneys argued that injury to plaintiffs was only economic and damages should be based on a lower ratio, such as 1-to-1 or less, which would produce damages of about $25 million. Exxon has already paid $3.2 billion on cleanup, settlements and other fees and penalties, attorneys said.

But lawyers for the plaintiffs argued that the key issue is conduct, and that Exxon's was among the worst. They said Exxon knew that tanker Capt. Joe Hazelwood had alcohol problems but still allowed him to take charge of the Exxon Valdez. Attorneys calculated the actual damages caused by the spill at more than $500 million, which equals roughly $5 billion when the 9-1 ratio is applied.

Holland agreed with a higher ratio.

"In the view of this court," the judge wrote, "the decision by Exxon to leave Capt. Hazelwood in command of the Exxon Valdez is the critical factor in evaluating the quality of Exxon's conduct and therefore the amount of punitive damages."

Cirigliano said that when the matter was sent back to Holland, Exxon Mobil lawyers predicted this would be the result - "serious further delays" - from having to appeal rulings from a court "that has already made numerous mistakes."

Given the convoluted history of the case, the amount of the award was astonishing, said Los Angeles attorney Curt Cutting, who has worked on numerous punitive damage cases, including filing a friend-of-the-court brief in the State Farm matter.

"I can't imagine what the District Court saw in the State Farm opinion to make it increase the amount rather than decrease," Cutting said. "The point of punitive damages is to punish and deter defendants for their conduct, not to compensate plaintiffs in the case, whether there are one or 10,000. I would expect the 9th Circuit to greatly reduce the award. The appellate court's opinion was very clear that it thought $5 billion was excessive."

The spill occurred March 24, 1989, less than three hours after the 987-foot ship left the Alyeska Pipeline terminal in Valdez.

The ship grounded at Bligh Reef, rupturing eight of its 11 cargo tanks and spewing some 10.8 million gallons of crude oil into the sound.

An estimated 250,000 seabirds and thousands of marine mammals died as a result of the spill, which contaminated more than 1,200 miles of shoreline.

Lingering effects of the spill include declines in various marine populations, such as stunted growth and indirect mortality increases in pink salmon populations.

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