After the Exxon Valdez oil tanker ran aground in 1989, experts predicted it would take years to clean up the worst oil spill in U.S. history and restore the pristine waters of Alaska’s Prince William Sound. It has turned out that cleaning up the massive litigation in its wake has taken even longer.
To the surprise and dismay of some weary plaintiffs’ lawyers, the Supreme Court announced Monday that it would reconsider whether Exxon Mobil Corp. can be forced to pay a record $2.5 billion in punitive damages for allowing a heavy drinker to take the helm of the huge ship.
The money would go to more than 32,000 fishermen, cannery workers and Alaska natives -- although more than 20% of the original plaintiffs have died during the course of the litigation.
Exxon already has paid out $3.4 billion in fines and settlements to cover the cost of the cleanup and compensate those whose livelihoods were affected. The punitive damages were intended to punish the world’s largest oil company for what the U.S. 9th Circuit Court of Appeals called “reckless misconduct.”
“Spilling the oil was an accident, but putting a relapsed alcoholic in charge of a supertanker was not,” the appeals court in San Francisco said last year in upholding the award.
David W. Oesting, an attorney for the plaintiffs, awoke in Anchorage on Monday thinking the day would finally bring an end to the litigation. Instead, he received a 6 a.m. phone call from a clerk at the Supreme Court who said the justices wanted to hear the case early next year.
The high court has become increasingly skeptical of juries awarding large punitive verdicts, so the call was anything but good news.
“We are kind of stunned and discouraged,” Oesting said. “After 18 years, and three decisions by the district court and two by the appeals court, we thought they would say: ‘Enough is enough.’ ”
Oesting has been on the verge of victory several times. In 1994, a jury in Anchorage awarded the plaintiffs $5 billion in punitive damages. Since then, the case has gone back and forth between a judge in Alaska and the 9th Circuit Court in California. The award was lowered to $4.5 billion, then $4 billion and finally $2.5 billion in December.
“It is time for this protracted litigation to end,” the 9th Circuit declared.
Not surprisingly, Exxon’s attorneys were not ready to quit. Walter Dellinger, who served as U.S. solicitor general under President Clinton, filed a lengthy appeal with the high court arguing that for 200 years, it has been understood that shipowners cannot be punished for damages caused by their vessels on the high seas.
Dellinger picked up an important ally this year when 9th Circuit Judge Alex Kozinski, a well-known conservative, filed a dissent. He accused his colleagues of “throwing overboard” the long-standing rule of maritime law that shipowners are not “subject to punitive damages.”
Unless the Supreme Court intervened in the case, Kozinski said, shipping on the West Coast could be disrupted. “Shippers everywhere will be put on notice: If your vessels sail into the vast waters of the 9th Circuit, a jury can shipwreck your operations through punitive damages and the fact that you did nothing wrong won’t save you,” Kozinski wrote.
Dellinger quoted Kozinski’s dissent and cited it as grounds for the Supreme Court to toss out the punitive damages entirely. Meanwhile, 12 business-friendly organizations -- including the U.S. Chamber of Commerce, the American Petroleum Institute and groups that represent international tankers -- also urged the justices to hear Exxon’s appeal.
In 1989, when the litigation began, the high court had taken a hands-off approach to punitive damages. Increasingly, however, the justices have moved to rein in these awards, saying they can be so high as to be excessive and unconstitutional. In February, the justices overturned an Oregon jury’s $80-million punitive verdict against cigarette maker Philip Morris USA
On Monday, the court said it would not consider whether the $2.5-billion punitive award against Exxon was excessive. Instead, the justices said they would rule on whether it violated maritime law.
Legal experts said that could work in Exxon’s favor. The only bad news was that Justice Samuel A. Alito Jr., an appointee of President Bush, said he would not participate in the decision because he owned Exxon stock. If the court were to split 4-4 in the case of Exxon Shipping Co. vs. Baker, the 9th Circuit’s ruling would stand and the plaintiffs would win.
In defense of the plaintiffs’ victory in the lower courts, Oesting will argue that the grounding of the Exxon Valdez was not simply an accident. The plaintiffs say the huge ship left port on the night of March 23, 1989, carrying 53 million gallons of crude oil -- and a captain, Joseph Hazelwood, who had been drinking.
“Before boarding the ship, Hazelwood had consumed ‘at least five doubles (about 15 ounces of 80 proof alcohol) in waterfront bars,’ ” the plaintiffs said in a petition urging the Supreme Court to reject Exxon’s appeal.
Citing testimony from the original trial, they also argued that Hazelwood had been treated for alcoholism but had resumed drinking. And Exxon officials knew it.
Soon after leaving port, the captain went below to his cabin and left a third mate in charge. That crewman ran the 987-foot-long tanker aground on the treacherous Bligh Reef, spilling 11 million gallons of oil. About 250,000 seabirds and thousands of marine mammals died because of the spill, which contaminated more than 1,200 miles of shoreline.
Exxon has argued that it should not be held responsible for Hazelwood’s actions because he had violated company rules.
The $2.5-billion punitive verdict, if it stands, would be far higher than any such award upheld to date. But as the plaintiffs note, it “represents barely more than three weeks of Exxon’s current net profits.”