Friday, December 22, 2006

Federal Appeals Court Slashes Exxon Civil Judgement Nearly In Half

On Friday December 22nd, 2006, the San Francisco-based 9th U.S. Circuit Court of Appeals ruled by a 2-1 margin that the original $5 billion judgement against Exxon awarded by an Anchorage jury in a 1994 civil trial exceeded new U.S. Supreme Court standards on punitive damage limits, and ordered the punitive damages assessed in conjuction with the 1989 oil spill in Prince William Sound reduced to $2.5 billion. The most comprehensive reports so far come from both the Anchorage Daily News and the Seattle Post-Intelligencer. This post draws from both sources.

Click HERE to view the entire 63-page court decision in PDF format.

This decision followed ExxonMobil's third appeal of the original 1994 jury award to 34,000 fishermen, many from outside Alaska, as well as other Alaskans financially harmed by the 11 million-gallon spill that oiled 1,500 miles of Alaskan coastline. In two previous appeals, the Appeals Court merely directed the judge in the original case, H. Russel Holland, to review the case and revise the judgement. This time the Appeals Court came up with their own figure.

Exxon can still appeal to the U.S. Supreme Court to try and get the judgement completely overturned if they so desire, but they've not indicated any intention to do so yet. Likewise, the plaintiffs can also appeal to get the original judgement reinstated. But the possibility that by accepting the Appeals Court decision, the 12-year old case could finally be resolved within two years is compelling.

Dave Oesting, the Anchorage-based lead attorney, reacted to the decision. "I'll be discussing this with my clients," he said. "I would expect, given Exxon's obstructionist tactics, that they will appeal."

For Exxon, it's nearly a final chance to set aside a record punitive award it has been fighting for more than a decade. ExxonMobil spokesman David Gardner said the company regrets the spill and that the company already has paid what it owes. ExxonMobil has made no decision on further appeal, he said. "The company took immediate responsibility for the spill, cleaned it up, and voluntarily compensated those who claimed direct damages," Gardner said Friday. "This case is not about compensating people for damages. The plaintiffs have been compensated for damages and most were compensated within one year of the spill."

However, some victims dispute this. Stewart Deal, a salmon gill-netter and a plaintiff in the class-action case, estimates he lost more than $300,000 in income when the Prince William Sound fishery crashed after the spill. "As I talk about this I feel my heart pounding," Deal said. "I try not to think about it, it's been so long. I think that the full $5 billion that the jury awarded was fair. But Exxon is indifferent to us." The case has actually dragged on for so long that 10% of the original plaintiffs have already died.

Deal and other fishermen cite Exxon's financial report as justification for their contention that the award was fair. The Exxon report showed the Texas-based oil giant raking in an unprecedented $36.1 billion in profit during 2005. Enough profit to give outgoing CEO Lee Raymond a $167.7 million retirement package.

Both sides have less than a month to either ask the 9th Circuit to empanel an "en banc" to review the decision or to appeal directly to the highest court in the nation. An "en banc" review, where the entire court hears a case rather than the normal three-judge complement, is typically used when there is a conflict in the appeals court decision.

Meanwhile, our intrepid salmon gill-netter Stewart Deal isn't expecting to see any money soon. "Based on their track record, Exxon is going to be happy to drag it out as long as they can," he said. "They are using their resources to take the justice system for a ride."

To further cap a bittersweet year for ExxonMobil, where their record profit has been offset not only by this continuing case, but also by outgoing Governor Frank Murkowski's eleventh-hour decision to unilaterally revoke the company's long time lease on the Point Thomson field, Exxon has discovered a replica parody website that resembles their own in nearly every conceivable way, but is an anti-corporate website. The Web site, looks strikingly similar to ExxonMobil's own site,, and is complete with working contact e-mail addresses, rewritten corporate history, Valdez spill updates and links to news stories.

When asked about some information provided by the site, much of it not flattering, ExxonMobil officials initially expressed surprise, then anger. "I'm speechless," said spokesman Dave Gardner when directed to the site. "It looks just like ours. But it's not. I've not seen it before."

The hoaxer, who initially tried to provide false information to a reporter, couldn't be reached for comment. Gardner said the oil giant would not sit idly by. "It is not an ExxonMobil Web site; it is a fraud. We will pursue this matter aggressively."

Litigation History: In the original case, the jury first awarded $287 million in actual damages and $5 billion in punitive damages in 1994. The punitive damages were 17 times the amount of the actual damages.

In 2002, after Exxon appealed to the Ninth Circuit Court of Appeals, the court referred the case back to U.S. District Court Judge H. Russel Holland, directing him to review the case and revise the figure. Judge Holland begrudgingly complied, reducing damages to $4 billion.

However, in 2003, Exxon again appealed to the Ninth Court, which once again directed Judge Holland to revisit the case, this time balancing it against a new 2003 Supreme Court ruling that said punitive damages usually could not be more than nine times general, or actual damages. However, Judge Holland, appointed by President Reagan in 1984, declared Exxon's conduct "reprehensible" and set the figure at $4.5 billion plus interest, ruling that the Supreme Court's precedent did not directly apply to the case.

Exxon again appealed, and argued that it should have to pay no more than $25 million in punitive damages, which are meant to punish a company for misconduct. Exxon further claimed it has spent more than $3 billion to settle federal and state lawsuits and to clean the Prince William Sound area.

And this time the Appeals Court agreed, somewhat. In their 63-page decision, the Court stated that the substantial costs already borne by Exxon in cleanup and loss of cargo lessen the need for deterrence in the future. While actual damages are designed to compensate a plaintiff for actual loss, punitive damages are designed more for deterrence, and are assessed if malfeasance is found. However, the Appeals Court did not vacate the punitive damages altogether, in deference to the 1994 Anchorage jury's finding of malfeasance on the part of the Exxon Valdez captain, Joe Hazelwood. Indeed, Hazelwood himself was tried separately, but Alaska state prosecutors failed to convince the jury that Hazelwood was intoxicated at the time of the grounding, even though by his win admission, Hazelwood had "two or three vodkas" between 4:30 and 6:30 the night of the spill. Subsequent tests showed his blood alcohol content at .061. However, the defense argued that the blood samples were taken nearly ten hours after the incident and were mishandled. Most states, including Alaska, do not allow samples after three hours and a preservative required to halt fermentation was not added to the sample. Fermentation could have added to the amount of alcohol in the sample making the result invalid.

As a result, Hazelwood was acquitted on all felony charges, but was convicted of a misdemeanor charge of negligent discharge of oil, fined $50,000, and sentenced to 1,000 hours of community service.

Nevertheless, it's time to put this case to bed. The Appeals Court has significantly reduced the punitive damages, recognizing that Exxon may have been overtargeted. For Exxon to continue to appeal this case now would inflict grave damage upon their reputation and seriously hinder their ability to successfully win the Alaska natural gas pipeline contract. In light of their $36.1 billion profit in 2005, they can afford to pay it. From a public relations standpoint, they can't afford NOT to pay it.

And it's time for the plaintiffs to recognize that they simply "ain't gonna get the $5 billion no way, no how". Ten percent of the claimants have already died. Let's at least get part of the loaf if they can't get the whole loaf. And let's get it to them while they're still alive.

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  1. Over 8000 fishermen out of 12,000 boat owners at the time of the spill were never compensated by Exxon for loss of income when fish prices went south following the spill.

    In Exxon's world, this is MOST of the fishermen were initially paid.

    Exxon sat on its hands and refused to mobilize to prevent the spread of the oil following the grounding.

    They could have blown up the tanker which would have prevented the spread of oil. they refused

  2. Thanks for your comment, Anonymous. However, the longer this case continues, the longer they will go without. At some point, is it not useful to settle for a lesser amount, so long as it doesn't go to the lawyers? The lawyers should be separately compensated.

    The fact that Exxon "sat on its hands", which is clearly apparent by all public accounts, was taken into account by the Appeals Court when they upheld $2.5 billion of the damages. However, the Court apparently distinguishes between negligence and malevolence.