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Exxon demands court reduce $5 billion award

Firm says money spent over the years shows harm 'largely avoided'

Posted: Sunday, January 29, 2006

SAN FRANCISCO - Exxon Mobil Corp. urged a federal appeals court Friday to erase the $5 billion in damages an Alaska jury ordered the oil giant to pay for the 1989 Valdez oil spill.

Exxon attorney Walter Dellinger told a three-judge panel of the 9th U.S. Circuit Court of Appeals that the company should be liable for no more than $25 million in punitive damages. Punitive damages are meant to deter and punish misconduct.

Exxon, which reported third-quarter earnings of $10 billion, said it has spent more than $3 billion on clean-up work and to settle other federal and state lawsuits stemming from the spill.

"Deterrence has been so satisfied by that amount," Dellinger said, adding that because of the money Exxon already has paid out over the last 16 years "the harm was largely avoided."

The comment prompted chuckles from a packed courtroom that included fishermen whose livelihoods were damaged when the Valdez hit a charted reef and dumped 11 million gallons of crude oil into Prince William Sound.

"Our lives were trashed," said Max McCarty, a former Prince William Sound fisherman who said he now works as a substitute teacher in Arizona and hawks fish at local markets.

Friday's arguments were based Exxon's appeal of an Anchorage jury's 1994 punitive damages award to 34,000 fishermen and other Alaskans whose property and jobs were harmed by the black goo the ship left smeared on roughly 1,500 miles of coastline.

During questioning, Judge Andrew Kleinfeld suggested to Dellinger that the $5 billion should be reduced to about $1.2 billion.

"You're saying we should basically erase the punitive damages award," Kleinfeld said to Dellinger.

The case has come before the San Francisco-based appeals court twice before. Both times, the 9th Circuit ordered U.S. District Judge H. Russel Holland of Anchorage to reduce the award.

The latest figure he came up with was $4.5 billion plus interest.

In 1994, a federal jury found recklessness by Exxon and the captain of the Valdez, Joseph Hazelwood. The finding of malfeasance made Exxon liable for punitive damages.

The plaintiffs alleged that Hazelwood ran the ship aground while he was drunk and that Exxon knew the captain had a drinking problem but let him command oil tankers anyway.

"That Exxon took chances with the livelihood of 32,000 people makes the conduct, from a common sense perspective, worse," plaintiff's attorney Brian O'Neill argued.

But Kleinfeld wasn't so sure. "They wouldn't want to lose their 11 million gallons of oil," he said.

Chief Judge Mary Schroeder, who noted the appeals court was grappling with U.S. Supreme Court precedent that sets limits on punitive damages, said the award "should be the harm placed on those individuals."

The court did not indicate when it would rule. Judge James Browning, the third member of the panel, remained silent during the 60-minute hearing.

The case is Baker v. Exxon Mobil Corp., 04-35182.



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