Supreme Court to Review $2.5B in Damages Owed by Exxon Mobil Corp. for 1989 Oil Spill

WASHINGTON – The Supreme Court on Monday stepped into the long-running battle over the $2.5 billion in punitive damages owed by Exxon Mobil Corp. for the Exxon Valdez oil spill in 1989.

Eleven millions gallons of oil spilled into Alaska's Prince William Sound when the supertanker ran aground on a reef. A federal appeals court already had cut in half the $5 billion in damages awarded by a jury in 1994.

The justices said they would consider whether the company should have to pay any punitive damages at all. If the court decides some money is due, Exxon is arguing that $2.5 billion is excessive under laws governing shipping and prior high court decisions limiting punitive damages.

The damages were, by far, the largest ever approved by federal appeals judges, the company said in its brief to the court.

The case probably will be heard in the spring. The court's last ruling on punitive damages, in February, set aside a nearly $80 million judgment against Altria Group Inc.'s Philip Morris USA. The money was awarded to the widow of a smoker in Oregon.

Exxon already has paid $3.4 billion in clean-up costs and other penalties resulting from the oil spill, the company said.

Lawyers for the plaintiffs, some of whom are deceased, said the damages award is "barely more than three weeks of Exxon's net profits." The plaintiffs still living include about 33,000 commercial fishermen, cannery workers, landowners, Native Alaskans, local governments and businesses.

The Irving, Texas-based oil company marshaled more than a dozen organizations ranging from groups of shippers to the U.S. Chamber of Commerce, to support its bid for Supreme Court review.

The company argued it should not be held responsible for the mistakes of the ship's captain, Captain Joseph Hazelwood, who violated clear company rules when the Exxon Valdez ran aground with 53 million gallons of crude oil in its hold on March 23, 1989.

The plaintiffs said Exxon knew Hazelwood had sought treatment for drinking, but had begun drinking again. "Exxon placed a relapsed alcoholic, who it knew was drinking aboard its ships, in command of an enormous vessel carrying toxic cargo across treacherous and resource-rich waters," they said.

The company has been battling the judgment for over a decade. The company has managed to get the award cut in half from the original $5 billion awarded in 1994 by an Anchorage jury in the class-action suit.

The 9th U.S. Circuit Court of Appeals reduced the punitive damages because, in part, the company tried to clean up the spill and didn't spill oil from the tanker Exxon Valdez deliberately.

The case is Exxon Shipping Co. v. Baker, 07-219.