Jared Carter

November 4, 2007

The United States Supreme Court granted certiorari to Exxon Shipping Company in its appeal to overturn the $2.5 billion dollar punitive damages penalty for the Exxon Valdez oil tanker disaster. The history of the tragedy of the Exxon Valdez is well known: In 1989, the oil tanker Valdez, piloted by the apparently intoxicated Joseph Hazelwood, ran aground in Prince William Sound dumping eleven-million gallons of oil into the Northern Pacific. Massive environmental and economic destruction ensued.

Nearly two decades later, the case is still unresolved. In its petition for certiorari, Exxon argued that the punitive damage penalty awarded by the Ninth Circuit to 33,000 fisherman and landowners was improper because maritime law prohibits punitive awards against ship owners for actions by employees. Exxon reasons that since the tanker's pilot was apparently drunk, the company is not liable for punitive damages and that the penalty imposed is "unconstitutional." Exxon also argues that it has already paid billions of dollars to clean up the oil spill. In fact, the Ninth Circuit expressly acknowledged Exxon's "laudable efforts" in cleaning up after the spill. Despite Exxon's "laudable efforts" there is little doubt that the damage caused to the local environment and economy cost billions of dollars and that it still persists today nearly twenty years later.

The case has not been a model of judicial consistency. The lower courts have been all over the map on the issue of punitive damages, in part because the Supreme Court has announced several different punitive damage standards. As a result of the Court's most recent standard, the Ninth Circuit reduced Exxon's punitive damage penalty from $4.5 billion dollars to the $2.5 billion Exxon is now appealing.

As the Washington Post reported, the Court will "consider whether the Clean Water Act and maritime laws allow for punitive damages, and if so, whether the award is excessive." However, in granting certiorari the Supreme Court explicitly declined to address Exxon's contentions about the constitutionality of the punitive damages. Whether or not the Supreme Court will rule in favor of Exxon is unpredictable, but it is well settled that maritime law doesn't present a per se rule against punitive damages when the ship owners are not at fault.

Either way, the Court will be short one Justice when it hears this case in the February or March. Justice Samuel Alito owns between $100,000 and $250,000 of Exxon stock, and therefore recused himself from the case. This twist is sure to keep the pundits wondering: how much will Exxon have to pay for the Valdez disaster?

Sources:

Robert Barnes, Justices to Examine Punitive damages in Exxon oil spill, Wash. Post, Oct. 30, 2007, at http://www.washingtonpost.com/wp-dyn/content/article/2007/10/29/AR2007102900779.html?hpid=topnews.

Pegasus News Wire, U.S. Supreme Court to hear Exxon's appeal of $2.5 billion Valdez award, Associated Press, Oct. 29, 2007, at http://www.pegasusnews.com/news/2007/oct/29/us-supreme-court-hear-exxons-appeal-25-billion-val/.

In re Exxon Valdez, 472 F.3d 600 (9th Cir. 2006) (cert. granted Oct. 2007).