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High court to hear Exxon Valdez case

Justices to consider whether company should pay punitive damages for oil spill

Posted: Tuesday, October 30, 2007

WASHINGTON - Eighteen years after the worst oil spill in U.S. history, its victims suddenly face the prospect of having a $2.5 billion judgment wrested away from them by the Supreme Court.

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A federal appeals court had already cut in half the $5 billion punitive damages award that a jury decided Exxon Mobil Corp. should pay for the huge Exxon Valdez oil spill that fouled more than 1,200 miles of Alaskan coastline in 1989.

The justices said Monday they would consider whether Exxon Mobil, which already has paid $3.4 billion in cleanup costs and other penalties, should face any punitive damages at all.

Eleven million gallons of oil poured into Prince William Sound when Exxon's supertanker hit a reef, an environmental disaster that killed hundreds of thousands of seabirds and marine animals.

Few companies could afford the award as easily as Exxon Mobil, the plaintiffs' lawyers said in urging the court to turn down the case. The money is "barely more than three weeks of Exxon's net profits," they said.

Irving, Texas-based Exxon Mobil is the world's largest publicly traded oil company and last year posted the largest annual profit by a U.S. company - $39.5 billion. That result topped the previous record, also by Exxon Mobil, of $36.13 billion set in 2005.

Roughly 20 percent of the original plaintiffs have died since the lawsuit began. The plaintiffs still living include about 33,000 commercial fishermen, cannery workers, landowners, Native Alaskans, local governments and businesses.

"After more than 18 years, it is time for this protracted litigation to end," they said, quoting the appeals court judges who ratified the $2.5 billion figure.

Mike Webber of Cordova, Alaska, a Native Alaskan artist and commercial fisherman, said any money would be insufficient.

"I ... would have been able to make twice what I make now if the fisheries had stayed healthy," Webber said Monday after learning of the court's action.

Still, even after being halved, the award would be the largest punitive damages judgment ever. Exxon said it should not have to pay a penny of it.

"This case has never been about compensating people for actual damages," company spokesman Tony Cudmore said in a statement. "Rather it is about whether further punishment is warranted.... We do not believe any punitive damages are warranted in this case."

The justices on this business-friendly court agreed that the issues laid out by the company are worthy of review. Exxon contended it should pay no punitive damages under the Clean Water Act and centuries-old laws governing shipping, saying the 9th U.S. Circuit Court of Appeals mistakenly upheld the $2.5 billion judgment. The Supreme Court reverses lower court decisions roughly 75 percent of the time.

John Paul Jones, a University of Richmond law professor and expert in maritime law, said the court was right to jump into the case because lower courts long have been divided on some of the issues peculiar to the laws concerning accidents on the water.

"The decision in this case could dictate the outcome of a significant number of cases," Jones said.

Exxon said that even if the court finds some money is due, it should rule that the $2.5 billion award violates the Constitution because it is too large. The justices said they would not consider that argument when they hear the case early next year.

Justice Samuel Alito, who owns $100,000 to $250,000 in Exxon stock, did not take part in the decision to accept the appeal.

The court's last ruling on punitive damages, in February, set aside a nearly $80 million judgment against Altria Group Inc.'s Philip Morris USA. The money was awarded to the widow of a smoker in Oregon.

The company marshaled more than a dozen organizations ranging from groups of shippers to the U.S. Chamber of Commerce, to support its bid for Supreme Court review.

The company argued it should not be held responsible for the mistakes of the ship's captain, Captain Joseph Hazelwood, who violated clear company rules when the Exxon Valdez ran aground with 53 million gallons of crude oil in its hold on March 23, 1989.

The plaintiffs said Exxon knew Hazelwood had sought treatment for drinking, but had begun drinking again.

"Exxon placed a relapsed alcoholic, who it knew was drinking aboard its ships, in command of an enormous vessel carrying toxic cargo across treacherous and resource-rich waters," they said.

The San Francisco-based appeals court reduced the punitive damages because, in part, the company tried to clean up the spill and didn't spill oil from the tanker Exxon Valdez deliberately.

The disaster prompted Congress in 1990 to pass a law banning single-hulled tankers like the Valdez from domestic waters by 2015.

Exxon Mobil shares were up $1.91, or about 2 percent, to $94.12 in afternoon trading. The shares are up nearly 30 percent since the start of the year.

The case is Exxon Shipping Co. v. Baker, 07-219.



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