Alaska editorial: Endless appeals show flaw in justice system

Posted: Monday, June 04, 2007

Here's the judicial understatement of the decade. In turning aside Exxon's latest appeal of the multi-billion judgment imposed for its 1989 Alaska oil spill, the 9th U.S. Circuit Court of Appeals said Wednesday, "It is time for this protracted litigation to end."

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And how. It should have ended at least 10 years ago.

Exxon wants the courts to throw out all but a few scraps of the multibillion-dollar punitive damage award. This was the third time Exxon pushed its case in front of the 9th Circuit. And for the third time, the court declined to let Exxon off with the $25 million wrist slap it seeks.

In the previous go-round, the 9th Circuit roughly halved Exxon's original punitive damage award, down to $2.5 billion. The justices saw no reason to change their mind this time just because Exxon asked them to. The court had to act like a parent who must deal with a wayward but persistent kid. "We understand your argument," the court is saying, "and the answer is still no."

The appeals court's latest ruling explains that much of the delay in this case has stemmed from the U.S. Supreme Court's decision to begin allowing close judicial review of punitive damage awards. That was a major change in judicial practice, coming from a court dominated by supposed judicial conservatives. Lower courts had to engage in legal guesswork, waiting for the Supreme Court to rule in more cases and clarify the new standards for reviewing punitive damages.

The $2.5 billion is the most the appeals court felt it could justify under the Supreme Court's shifting rules. For most companies, such a huge punitive damage award would merit skeptical treatment by the courts. But for a behemoth like Exxon, it's not grossly excessive.

Keep in mind that punitive damages are supposed to deter the corporation's egregious conduct. To influence the behavior of a firm with annual revenues of $377 billion, the punishment has to be in the billions.

Exxon is sure to appeal to the Supreme Court. Alaskans in the case might as well cross-appeal and make the pitch for the original $5 billion award.

Normally, when a case drags out in the courts, there is no winner. Delay does both parties a disservice, by leaving important matters unsettled. But in this case, a decade and a half of delay clearly works to Exxon's favor.

Long ago the company set aside the money to pay for any punitive damages arising from the spill. The company won't even hiccup if it has to write Alaskans a $2.5 billion check.

Exxon's legal maneuverings should prod Congress into reconsidering the balance of power in lawsuits where big money is at stake. The current low rate of interest charged on judgments pending appeal - less than 6 percent - is one area to look at.

While appealing a multibillion-dollar judgment, a company can invest the money in its own operations and make far more income than the interest that will be added on to its eventual payment. A company would violate its obligations to stockholders if it didn't do everything it could to delay and reduce a final judgment. Fighting a war of attrition in courts can have a handsome payoff.

That explains why Exxon has tied up this case in endless appeals. It explains why Alaskans have long been denied the payments they thought they had won. And it's all the reason Congress needs to look at ways it might speed up the glacial pace of justice in big cases like this

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