Wednesday, June 25, 2008

Alaskans Unhappy With U.S. Supreme Court's Decision To Slash Exxon Valdez Judgment From $2.5 Billion To $507.5 Million


On June 25th, 2008, the United States Supreme Court, by a 5-3 vote, slashed the judgment against ExxonMobil for the Exxon Valdez spill from the prescribed by the Ninth U.S. Circuit Court of Appeals to $507.5 million, and many Alaskans are irate, including Governor Sarah Palin, Senators Ted Stevens and Lisa Murkowski, and Anchorage Mayor and Democratic Senate candidate Mark Begich.

First, the primary story, compiled and summarized from the Anchorage Daily News (280 public comments posted already and climbing), the Fairbanks Daily News-Miner, KTUU Channel 2, CNNMoney, and Forbes magazine.

Five justices signed the majority opinion; three dissented with parts of it. Justice Samuel Alioto recused himself for unspecified reasons. The court held that in maritime cases, punitive damages should be no more than the compensatory damages. That one-to-one ratio, a new legal standard, applies only to punitive damages in maritime law.

Click HERE to read the 61-page Supreme Court decision in PDF format.

"The punitive damages award against Exxon was excessive as a matter of maritime common law," Justice David Souter wrote in the majority opinion. "In the circumstances of this case, the award should be limited to an amount equal to compensatory damages."

That left the lawyers for the plaintiffs fuming. "I prefer to think of it as five of the justices on the Supreme Court going out of their way to help big business", said Brian O'Neill, one of the main attorneys for the plaintiffs. "This is a huge favor for big business, that's what it is. They don't feel punished at all by this. It isn't even a mosquito bite. They're laughing."

Exxon chairman and CEO Rex Tillerson issued a short statement saying that the company continues to regret the accident, but he did not specifically address the Supreme Court decision. "We know this has been a very difficult time for everyone involved," Tillerson said. "We have worked hard over many years to address the impacts of the spill and to prevent such accidents from happening in our company again," he said.

The case will go back to the U.S. District Court in Anchorage in the next several weeks. With interest, the total award adds up to close to $1 billion. Much of that money goes to commercial fishing interests, and about 20 percent goes to lawyer fees.

Plaintiffs can expect to begin getting money within 90 to 120 days, said David Oesting, the Anchorage attorney who has been working on the case for two decades. But the court's decision means that the awards will be about one-fifth of what many people were expecting to see. On KFQD conservative host Dan Fagan's program, it was said that each plaintiff can now expect only a $15,000 payout vs. $75,000 had the $2.5 billion judgment been upheld.

In 1994, an Anchorage jury assessed over $5.0 billion in total damages against ExxonMobil, consisting of $287 million in actual damages and $5.0 billion in punitive damages. Exxon has always considered the punitive damages grossly excessive and has fought it in court for 14 years. In 2006, the Ninth U.S. Circuit Court of Appeals sliced the judgment to $2.5 billion in total damages, but, despite Exxon's long-running string of windfall profits, Exxon refused to accept that serious compromise and continued to fight the judgment. Click HERE for a brief timeline of significant events in this case.

Prominent Alaskans lashed out in criticism of the Court's decision. Their statements have been consolidated on a single post on the Anchorage Daily News' Alaska Politics blog. Here's a snippet from each statement:

Senators Ted Stevens and Lisa Murkowski, Congressman Don Young: “We are extremely disappointed that the Supreme Court has chosen to reduce the punitive damages amount from $2.5 billion to $507.5 million. Three times previously, lower courts have ruled on the amount of damages and the Supreme Court, in our opinion, should have allowed the $2.5 billion judgment to stand. Today’s ruling adds insult to injury to the fishermen, communities and Alaska natives who have been waiting nearly 20 years for proper compensation following the worst environmental disaster in our nation’s history".

Governor Sarah Palin: “I am extremely disappointed with today’s decision by the U.S. Supreme Court,” Governor Palin said. “While the decision brings some degree of closure to Alaskans suffering from 19 years of litigation and delay, the Court gutted the jury’s decision on punitive damages”.

Mayor Mark Begich: “The thousands of Alaskans whose lives were devastated by this disaster are hurt, once again, by this ruling,” Begich said. “What we’re seeing today is another example of how Washington is out of touch with real people. The justices have sided with corporate America rather than with Alaska families who have suffered for nearly 20 years”. However, Begich couldn't resist the temptation to take a partisan cheap shot against opponent Ted Stevens in his statement. Begich, citing Exxon's $40 billion profits, called on Exxon to pony up within 30 days.

Democratic U.S. House Candidate Ethan Berkowitz: “It’s a sad day in American history when the highest court in the land allows a corporation to escape its responsibilities after devastating Alaskan lives, lands and waters. This case was about more than legal damages: it was about justice".

ExxonMobil Chairman Rex Tillerson: "We know this has been a very difficult time for everyone involved. We have worked hard over many years to address the impacts of the spill and to prevent such accidents from happening in our company again. We took immediate responsibility for the spill and have spent over $3.4 billion as a result of the accident, including compensatory payments, cleanup payments, settlements and fines. The company cleaned up the spill and voluntarily compensated more than 11,000 Alaskans and businesses. The clean-up was declared complete by the State of Alaska and the United States Coast Guard in 1992".

The Anchorage Daily News also took an editorial shot at the decision. In the closing paragraph of their editorial, they state "and so, thanks to the U.S. Supreme Court, the message today to companies that cut corners and risk ruining the lives of thousands of innocent people is this: Go ahead, take the chance, if you want to. If you gamble and lose, you won't lose that much. We've made sure that whatever you have to pay will be just another cost of doing business".

A separate Daily News article focuses upon reaction in one of the frontline Prince William Sound communities, Cordova, which was hit hard economically by the 1989 spill. In downtown Cordova, community activists were putting up banners this afternoon protesting the ruling. "CORPORATIONS ARE ABOVE THE LAW?" read one. "JUSTICE BROKEN," read another. Another said "EXXON MADE/$ WE PAID $" Dave Butler, 68, of Cordova owns a seine boat called the Kyle David, named after his son who died gillnetting on the Copper River in 1979. "It's over with," he said. "The court had a whole bunch of excuses for the way they ruled today. I sure as hell ain't going to be retiring now. I've got to fish till I'm 80." As far as the size of the judgment, he said: "I figured they'd cut it in half, not down to where they just gave us a kiss, you know?"

Analysis: ExxonMobil may have finally won a battle, but time will tell if they won the war. They squandered millions on legal fees to save billions, but they will take another major hit in good will. Nearly every prominent public official has criticized them; the comment boards on the Anchorage Daily News and Fairbanks Daily News-Miner are sizzling. On top of this is the added complication that the Palin Administration nurtures a bias against Big Three producers Conoco, BP, and Exxon; this Court decision will merely aggravate the bias.

The original $5 billion in punitive damages assessed in 1994 was clearly too large, and was an emotional decision formed in the heat of battle. However, Exxon's prolonged string of windfall profits gave them the means to compromise rather than continue dragging this out. In 2006, the Ninth Circuit Court met Exxon halfway by slicing the damage package to $2.5 billion, but Exxon, rather than do the right thing and settle the issue, chose to continue fight. They won, but did Alaska win?

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