Supreme Court May Be Divided Over Exxon Valdez Damages
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Supreme Court May Be Divided Over Exxon Valdez Damages
By David G. Savage
The Los Angeles Times
Thursday 28 February 2008
Several justices seem likely to slash the record punitive award in the oil-spill case.
Washington - Nearly 19 years after the Exxon Valdez oil spill fouled Alaska's Prince William Sound, the Supreme Court debated Wednesday whether the world's largest oil company must pay a record $2.5 billion in punitive damages.
The eight justices who heard the case appeared closely split, although several of them said they were looking for a way to reduce the size of the award. Justice Samuel A. Alito Jr. sat out the case because he is an Exxon stockholder. His stock holdings could prove costly to the company: A tie vote would have the effect of affirming the $2.5-billion verdict.
No one disputed that the oil spill was an extraordinary disaster. The company's lawyer described it as "one of the worst environmental tragedies in U.S. maritime history."
And no one disputed that Exxon was responsible for paying for the cleanup and for the losses suffered by fishermen, cannery workers and other Alaska residents. Exxon paid $900 million in cleanup costs, and a jury ordered it to pay $287 million to 32,000 Alaskans, many of whom lost their livelihoods when the fishing industry was destroyed.
At issue Wednesday was whether extra damages were needed to punish Exxon for corporate recklessness.
In 1994, a jury in Alaska imposed $5 billion in punitive damages, money that would go to the plaintiffs. Years of appeals followed, and the verdict was cut in half. During this same stretch, the Supreme Court began putting limits on punitive damages, believing the amount should be tied to the actual harm.
The case heard Wednesday was unusual because it was apparently the first before the high court involving punitive damages for an accident on the high seas.
In centuries past, maritime law shielded ship owners from being punished for damage caused by their vessels. This made sense during the era of sailing ships, said Justice David H. Souter. "In those days, when a ship put to sea, the ship was sort of a floating world by itself," he said. It was gone and out of the control of its owner for months, even years, until it returned to port.
Representing Exxon, Washington lawyer Walter Dellinger cited this principle of maritime law and urged the court to throw out the entire punitive verdict. He cited the case of the Amiable Nancy in 1818 as having set a historical precedent shielding ship owners.
But his argument quickly ran aground. "It's rather, I think, an exaggeration to call it a long line of settled decisions in maritime law," said Justice Ruth Bader Ginsburg. Souter and others also noted that times have changed. These days, ship owners can control where their ships go.
As a fallback, Dellinger argued that the $2.5-billion verdict was too high. He cited several federal laws that fine those who pollute the environment. Typically, he said, these legal fines may total millions of dollars, but not billions.
He also urged the justices to keep in mind that the spill was an accident: "This was not an intentional act. It was not malicious. The company did not make one dollar of profit."
But Stanford law professor Jeffrey L. Fisher, representing the Alaskan workers, said Exxon deserved to be punished for "putting a drunken master in charge of a supertanker."
He said the jury heard testimony that Exxon officials knew Captain Joseph Hazelwood was an alcoholic and had 33 reports that he had gone back to drinking. "Up and down the corporation, for three years, upper management was receiving reports that this man was drinking aboard the vessel," Fisher said.
On March 24, 1989, Hazelwood had been drinking and left the bridge of the supertanker. The third mate left in charge failed to turn the giant ship in time, and it hit Bligh Reef. About 11 million gallons of crude oil were spilled.
Fisher said the captain was an agent of Exxon's management. "It is perfectly appropriate to expose the corporation to punitive damages based on the reckless acts of such an individual," he said.
Chief Justice John G. Roberts Jr. and Justice Antonin Scalia questioned why a corporation should be punished if one of its officials violates its corporate policy. Exxon had a firm policy against drinking.
"What if there is a breach of the corporate policy? What more can a corporation do?" Roberts asked.
Fisher said the company should have enforced its policy. "There was no serious enforcement," he said, since the warnings about Hazelwood were ignored.
Three other justices -- Anthony M. Kennedy, Stephen G. Breyer and Souter -- said they saw a need to reduce the punitive damages.
Kennedy and Souter said it might make sense to limit punitive damages to twice the amount of compensatory damages. If that view were adopted, the punitive verdict in this case would have been limited to about $600 million.
Breyer strongly hinted that he would vote to reduce the award. "This is a very dramatic accident . . . but there are accidents every day," he said. He questioned whether "negligence or recklessness is now going to be not only imputed to the corporation but subject [to] punitives. . . . It will be a new world for the shipping industry."
If the justices are evenly divided in this case, Exxon vs. Baker, they could hand down a one-line order next week. More likely, however, they will work on writing an opinion to be handed down in several months.
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At the High Court, Damage Control
By Dana Milbank
The Washington Post
Thursday 28 February 2008
Chief Justice John Roberts was pained.
Exxon Mobil, the giant oil corporation appearing before the Supreme Court yesterday, had earned a profit of nearly $40 billion in 2006, the largest ever reported by a U.S. company - but that's not what bothered Roberts. What bothered the chief justice was that Exxon was being ordered to pay $2.5 billion - roughly three weeks' worth of profits - for destroying a long swath of the Alaska coastline in the largest oil spill in American history.
"So what can a corporation do to protect itself against punitive-damages awards such as this?" Roberts asked in court.
The lawyer arguing for the Alaska fishermen affected by the spill, Jeffrey Fisher, had an idea. "Well," he said, "it can hire fit and competent people."
The rare sound of laughter rippled through the august chamber. The chief justice did not look amused.
Perhaps, though, his consternation was misplaced. Everybody knows the wheels of justice turn slowly, but in the case of the 1989 Exxon Valdez spill, things have dragged on so long that Lady Justice's blindness could reasonably be attributed to cataracts.
Nineteen years after the Valdez ran aground in Prince William Sound and spilled 11 million gallons of oil, the 32,000 plaintiffs - mostly fishermen, cannery workers and Native Alaskans - have received no punitive damages from Exxon.
A jury awarded them $5 billion in punitive damages - a record level, for a record disaster - and an appeals court cut that in half. Now, the Supreme Court seems inclined to deal another insult to the victims (as many as a fifth of whom have already died) by cutting the award further.
Arguing for the Alaskans, Fisher, a tall and lanky Stanford professor with unruly gray hair, pointed out to the justices that the spill "destroyed an entire regional economy." Yet Exxon fired only one person, Capt. Joseph Hazelwood, who even the oil company admitted was drunk at the time of the accident, while executives received bonuses and pay raises. "What you have today are 32,000 plaintiffs standing before this court, each of whom have received only $15,000 for having their lives and livelihood destroyed and haven't received a dime of emotional-distress damages," Fisher argued.
Several justices, however, seemed more concerned about the emotional distress of the Exxon executives. "I assume the test is the person has to be high enough that it justifies holding the entire corporation" responsible," Antonin Scalia said, "and I doubt whether a captain is high enough."
Justice Anthony Kennedy, wagging his finger at Fisher as he challenged the lawyer's argument, charged that "the corporation's responsibility or complicity or culpability is simply not relevant under your theory of the case."
Roberts seemed the most agitated as he argued that Exxon wasn't responsible for the captain's unauthorized drunkenness. "I don't see what more a corporation can do," he said. "What more can the corporation do other than say 'Here is our policies' and try to implement them?"
Fisher tried to deflect some of the more barbed questions - "I don't want to act like a dog chasing his tail here, Justice Kennedy . . . I'm not going to fight you on that" - but it was clear that the court's main motive in hearing this case was to cut the jury award. When Fisher said he thought the justices had agreed to hear the case because of an unsettled aspect of maritime law, Scalia cut him off.
"That," the justice said, "and $3.5 billion."
One thing working in the Valdez victims' favor: Justice Samuel Alito, an Exxon shareholder, recused himself from the case. Also in the plaintiffs' favor: No justice, with the possible exception of Scalia and the ceiling-staring Clarence Thomas, liked Exxon's assertion that no punitive damage is legitimate.
Ruth Ginsburg pointed to the evidence that "Exxon knew that this captain had a severe alcohol problem, and yet, they let him stay on voyage after voyage and did nothing about it."
Even Roberts seemed skeptical when he asked Exxon's lawyer, former solicitor general Walter Dellinger: "So you have to have a shareholder driving the boat before you can assess liability?"
Dellinger licked his lips frequently and drank generously from his water glass. "Exxon gained nothing by what went wrong and paid dearly for it," he pleaded to the justices.
It seemed likely Exxon would have to pay more for it - though not terribly much. The court's dealmakers, Kennedy and David Souter, floated the idea that punitive damages could be double the amount of compensatory damages - about $800 million, instead of the $2.5 billion ordered by the appellate court. Souter wondered aloud whether "we've simply got to come up with a number."
The notion of the justices pulling a number out of thin air seemed a bit too neat for an oil spill that spoiled 1,200 miles of Alaska's coastline. But then the argument had less to do with the dead marine animals and ruined fishermen than with an obscure maritime law case from 1818 called The Amiable Nancy- or, as Scalia put it, the " Amiable Whatever It Is."
As the justices probed the intricacies of the laws of the sea, Ginsburg discussed Rule 50. Kennedy invoked Instruction 30, Instruction 33 and Instruction 36. Spectators showed evidence of drowsiness. Reporters yawned - at least until they were jolted awake by an alarming prospect raised by Ginsburg, who spoke about "a new trial" and the "next time around."
A new trial? After 19 years of legal fighting? Out on the plaza after the argument, Brian O'Neill, one of the Alaska victims' lawyers, conceded that, whatever the Supreme Court's ruling, Exxon had already won. "I guess the lesson you learn," he said, "is that if you're big and powerful enough, you can bring the system to a halt."
Exxon Valdez Oil Spill Lingers in Alaska
By Tomas Alex Tizon
The Los Angeles Times
Wednesday 27 February 2008
In one fishing village, residents say they've never recovered from the 1989 disaster. Now the Supreme Court is hearing arguments on whether the company should pay $2.5 billion in punitive damages.
Cordova, Alaska - By way of telling his story, and the story of this fishing village, Mike Maxwell - born, raised and hoping to die here - wants to talk about what happened to the herring.
They were the little kings of the sea in these parts. They ran so thick in Prince William Sound that some days, it was said, you could walk on the water stepping on their silvery-blue backs.
When the Exxon Valdez spilled its oil in March 1989, the world saw images of blackened seabirds and otters and seals, of bloated whale carcasses and once-pristine beaches covered with crude. Hardly anything was said about the herring.
No one at the time understood the fish's central place in the ecosystem, nor did anyone know the herring's demise would lead to years of hardship for the people here.
"It's scary what we didn't know," says Maxwell, 47, a scruffy, balding, big-boned man with a small voice.
The herring disappeared four years after the spill - long after intense public scrutiny had faded and the story line had devolved into squabbling between lawyers.
Exxon claimed the region recovered quickly. Government scientists, however, said oil remained and was still working its way through the ecosystem in a process that would last decades. At the back of a local tavern, hand-scrawled graffiti expresses a common sentiment here: "Oil spills are forever."
In December, nearly 19 years after the spill, scientists published the most definitive study of its kind linking Exxon oil with the collapse of the herring population. Oil killed adult herring, but more significantly, it damaged eggs and larvae.
Surviving fish developed lesions in their livers. Larvae hatched prematurely and never grew to their full 8 or 9 inches. They showed depressed immune systems, which made them susceptible to disease.
The population, which used to be scooped up by the millions of tons, never recovered and, from indications, may never return.
Countless species, including salmon, depended on the little fish as a food source, said Richard Thorne, a fisheries scientist and coauthor of the study. And Cordova fishermen, like Maxwell, made a living on herring. He fished in the summer and mended nets in the winter.
When the herring vanished in 1993, Maxwell lost the only life he knew how to live. His boat and equipment became worthless. His commercial fishing permit, valued at $300,000 before the spill, amounted to a scrap of paper. Maxwell went into debt and eventually filed for bankruptcy. He withdrew from friends and family. He sank into a deep depression. His life fell apart, and he - like the herring - has not recovered.
Except for a small circle of scientists and local taverns of forlorn seamen, few know the fate of the Prince William Sound herring and the fishermen whose story runs parallel. They were collateral damage, a faint ripple long after the fact.
"For the rest of the country, Exxon happened a long time ago," Maxwell says, a plaintive crack in his voice. "For me, for the people I grew up with, the oil is still spilling. We're still waiting for the end."
Cordova, population 2,300, is full of Maxwells - people living in the long-running wake of a catastrophe. People waiting for resolution.
The legal saga, a bitter back-and-forth spanning 18 years, could finally end this year, as the U.S. Supreme Court hears arguments today on whether Exxon - now Exxon Mobil - should pay $2.5 billion in punitive damages to 32,600 fishermen, cannery workers and Alaskan natives affected by the spill. A ruling is expected this summer.
The verdict is of monumental importance here. It will be history's judgment. And townspeople could use the money.
Cordova, the sound's biggest fishing village, has been called the prettiest dying town most Americans will never see. Glacier-carved peaks loom over what looks by comparison a toy-sized main street, and beyond, a harbor of crayon-colored boats. Only there aren't many boats left.
After the spill, the fishing fleet shrunk by half, three of the town's five canneries went bankrupt, countless fishermen and cannery workers left, a former mayor - distraught over the town's bad fortune - committed suicide, and lifers like Maxwell came to haunting the streets and docks like lost souls.
"That's my boat there," Maxwell says. He's leaning out the driver's window of his jalopy pickup. It is a frigid winter afternoon, overcast and darkening by the minute. Cordova gets as little as five hours of sunlight in the cold months.
Maxwell's words blow out in white gusts. Between odd jobs, he drives by his boat, a 28-foot bow picker, almost every day on his way to somewhere. It sits on blocks in a ragged lot next to an empty building. He paid almost $60,000 for it in 1989. Now he couldn't give it away.
The town is a graveyard of old boats, dry-docked in junkyards and backyards, as if the tide receded and never came back. Some sit by themselves, many are thrown together, listing every which way.
If the plaintiffs win, Maxwell's share wouldn't amount to a fortune. The average payout would be about $76,500 - just enough, Maxwell figures, to fix up his boat.
"It's not like Exxon can't afford it," he says, driving off. "It's only the richest corporation in the world."
Much of Cordova turned speechless earlier this month when Exxon Mobil announced the highest profits ever recorded by any company in a single year: $40.6 billion in 2007.
"Who's being punished?" Maxwell says, his voice rising as he navigates potholes in the road. "It's not Exxon. It's us."
The executives who spoke on behalf of Exxon just after the Valdez gushed its North Slope crude, 11 million gallons over 1,300 miles of coastline, have retired or moved on, but their words - "The corporation deeply regrets the accident . . . " - are repeated verbatim by today's company officials.
Spokesman Tony Cudmore, in an e-mail, said Exxon Mobil had already paid $3.5 billion in cleanup and fines, including compensatory damages to plaintiffs within a year of the spill. Cudmore cited Exxon-financed scientists who had repeatedly given Prince William Sound a clean bill of health. These scientists declared the sound "essentially recovered" within a few years of the accident.
One Exxon attorney, at the start of the civil suit, made the argument that crude oil didn't even qualify as a pollutant, the suggestion being that no permanent harm was done. The idea permeates much of the language of Exxon's defenders.
"The environment in Prince William Sound is healthy, robust and thriving," Cudmore said. The company's view is that it has already paid an enormous price, and "further punishment is unwarranted."
Exxon did compensate victims for actual damages just after the spill, but - and here is the core of Cordova's complaint - it wasn't until years later that the herring and pink salmon fisheries collapsed about the same time, setting off the town's decline. "Shouldn't Exxon be punished not just for spilling oil but for ruining lives?" says Kory Blake, 48.
A lifelong Cordovan, Blake grew up with Maxwell, fished the same waters and suffered the same fate. At his lowest point, he contemplated taking his own life, and got as far as pointing a gun to his head before deciding, at the last second, he'd rather fight than die. Blake became a plaintiff in the case.
Maxwell parks his truck in front of a bronze statue across from the Alaska Commercial general store. The statue is of a wind-swept fisherman looking out at the sound. A wood railing, with a wide, flat top, runs along the front of the statue.
Maxwell grabs an ice-scraper and ambles toward it. He has bad hips and wobbles when he walks.
"I want you to meet some people," he says. He begins scraping the top of the railing. Under the snow lie bronze plaques embedded in the wood. Every few swipes of the scraper reveal another plaque, and each reads like a gravestone. Bob McMaster, 1997. Michael Roberts, 1998. Christopher Lee Fulton, 1998. Dan Lowell, 1999. William A. Merritt, 2004. Howard Johnson, 2005. The plaques are in no particular order.
All were fishermen or somehow connected to fishing. They died from accidents and diseases and old age, from all the things that people die from. They all lived in Cordova, and they were all profoundly affected by the spill. Each was a plaintiff.
An estimated 6,000 plaintiffs have died since an Anchorage jury in 1994 awarded punitive damages of $5 billion, later reduced by an appellate court to $2.5 billion. The deceased remain claimants. Exxon has appealed at every stage.
"They died waiting," says Maxwell, who finally lets the scraper fall to his side. His chest heaves from the effort. He gestures to the railing. "There's a bunch more names," he says, catching his breath. "I'm getting tired!"
Maxwell returns to his truck and putters to a warehouse down the street. It is a big wooden building filled with fishing equipment. Nets hang from the walls. Big bearded men stand around and talk. Maxwell grew up with these guys.
In one of the large rooms, a couple of men stand next to a suspended salmon seine net, tying knots along its edge. Their hands move slowly, delicately.
This is what Cordova fishermen do in the off-season: make and mend nets. There's been more work lately as pink salmon have slowly recovered. The market still pays only a fraction of what it used to for Prince William Sound salmon - from a high of more than $1 a pound pre-spill to a low of 6 cents a pound after the spill.
When the local fisheries collapsed, buyers went elsewhere for fish and many never returned. The stigma of oiled fish and competition from foreign and farmed-fish operations contributed to the price drop.
A popular hangout for years, the warehouse was a natural place for fishermen to vent. These walls absorbed untold curses. But now the men just seem worn out.
Everyone here is a plaintiff in the Exxon case. Each has a story with a different twist, and yet every story has the same narrative arch. They were all born into fishing. Now who were they?
"If Exxon gets away with it, it's time for civil war," says Mark King, 53, a cup of coffee clasped in his hand.
The men in the room nod.
"Is Cordova dying?" someone asks.
"Are the herring dead?" a voice answers. "Hell, yes."
"This town isn't dead yet," says James Aguiar, 47, the biggest, hairiest, burliest man in the place. The room falls silent. "It's moving sideways. It's part of the living dead."
Later that day, one of the locals, Mike Webber, walks over to the town museum, the Ilanka Cultural Center, which is just down the road. Every place here is just down the road.
Webber, 47, is a full Alaska native, part Alutiiq, part Tlingit. His family had done nothing but fish, according to oral history, since the beginning of time. Webber no longer fishes. After the fish disappeared, "the spirits," he says, moved him in a different direction. Now he carves. One of his pieces stands in the main room of the museum, a cedar totem pole dedicated to Exxon Mobil. It is a "shame pole," a type of totem once used by natives to bring shame to people who've committed dishonorable acts.
"The whole story's there," Webber says, looking up at his creation. He made it, he says later, because it was better than crying.
The Exxon pole is done in a modern style, like an impressionist painting, with bright colors and abstract images. At the top is an upside-down face of a man who symbolizes Exxon. A black river flows from his open mouth down to the rest of the pole. Below: the outline of two little fish without flesh. They are herring, the life of the sound turned skeletal.
Before 1989, few people, even in Cordova, would have called herring pretty. They were useful, abundant. No one knew those skinny little bodies held together such a complicated web.
If the herring ever come back, townspeople like Maxwell and Webber - and the guys at the warehouse - might start believing the spill is finally over. The signs aren't good, but even scientists can't know for sure. Otters have rebounded; bald eagles and murres too. Among the optimistic here, the flickering hope is that the natural forces of Prince William Sound will do, over time, what corporations and lawyers and governments can't.
Says Webber: "I just hope to live long enough to see it."
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