For ExxonMobil, delay saves big bucks in Valdez spill

Nearly two decades after the Exxon Valdez ran around on Bligh Reef in Prince William Sound, the U.S. Supreme Court has taught Exxon (now ExxonMobil) and corporations everywhere a lesson:

Don’t pay off legal judgments. Stall, stall, stall for 19 years.

Courts have held that Exxon must pay $2.5 billion in punitive damages for spilling 11 million gallons of crude oil that soiled 1,200 miles of Alaskan coastline. In 1994 a jury found Exxon Valdez captain Joseph Hazelwood and Exxon to be reckless. Hazelwood, who had been drinking before the single-hulled tanker hit the reef, had left the bridge as the vessel faced a difficult turn. The jury awarded $287 million in compensatory damages and originally $5 billion in punitive damages (later halved by another court).

But Exxon shouldn’t have worried. The business-tilted Court whacked the already-reduced $2.5 billion by four-fifths.

Exxon sought to have the Supreme Court reduce the punitive award — and it succeeded. Exxon need shell out only $500 million to cover the commercial losses by the 32,677 commercial fishermen, business operators and landowners, Native Alaskans and municipalities party to the high-court case.

Those harmed by Exxon’s operations in Prince William Sound will receive “an average of about $15,000 a person. They would have collected an average of $75,000 each under the $2.5 billion judgment,” said an Associated Press story.

Justice David Souter, writing for the majority in a 5-3 decision, said that any penalty must be “reasonably predictable” in its severity.

Hogwash. Exxon ought to pay dearly for its poor decisions. Exxon should have known its operation of a single-hulled tanker by a captain with alcohol-related issues would have had “reasonably predictable” and severe environmental consequences — and attendant punitive consequences for the company.

But Exxon told the Court it has paid enough, having spent $3.4 billion in response to the vessel’s grounding that led to the deaths of hundreds of thousands of wildlife. And the court, according to the AP, said “punitive damages may not exceed what the company already paid to compensate victims for economic losses, about $500 million compensation.” [emphasis added]

What about punishment for the environmental consequences?

Exxon says its money has left Prince William Sound environmentally sound and thriving. Others disagree:

The Exxon Valdez Oil Spill Trustee Council reports that the multi-million dollar herring fish industry, which once supported thousands of lives and livelihoods in the area, remains closed indefinitely.

From the beginning, Exxon acted arrogantly. Its CEO refused to be interviewed. It delayed clean-up for two weeks in calm weather and began it in rough weather. A senior Exxon official did not appear on site for several days. Exxon spent $1.8 million for full-page ads in 166 newspapers; it apologized but failed to accept responsibility.

Over the years, Exxon has spent nearly $2 billion on public-relations efforts to evade responsibility and repair its image. It has paid lawyers dearly for nearly 20 years to stall paying what victims are due by appealing court decision after decision. Between PR and lawyers, Exxon’s probably shelled out more than the original $5 billion punitive judgment.

Exxon delayed in any way it could, and low and behold, conservatism took hold in the Supreme Court. Exxon today found its punitive financial liability a mere pittance, only 10 percent of the original jury award. Moral: Stall, stall, stall …

The U.S. Chamber of Commerce is ecstatic. In a press release, it presaged the future:

“This is good news for companies concerned about reining in excessive punitive damages,” said Tom Donohue, president and CEO of the U.S. Chamber of Commerce. “For years the Chamber has argued that punitive damages are too unpredictable and unfair, and today the Court agreed.”

“The decision could have an effect far beyond federal maritime law,” according to Robin Conrad, executive vice President of the National Chamber Litigation Center. “Limiting punitive damages to no more than the amount of a compensatory award will go a long way in cabining unpredictable punitive damages.” [The NCLC is the chamber’s public policy law firm.]

So corporations may continue to soil air, water and land and not fear “unpredictable and unfair” punitive judgments, thanks to Exxon’s intransigence and the rightward tilt of the Court.

ExxonMobil continues to operate a single-hulled tanker in the vicinity of the Prince William spill. It is the only company to do so. In 2007, ExxonMobil earned a profit of $40.6 billion on sales of $404 billion. It earned $1,287 in profit for every second of 2007, according to a NYT story.

This has been a perfect storm: Exxon’s risky Valdez escapade, its delaying tactics over two decades, and the rise of a conservative judiciary friendly to business has left those suffering social, financial, cultural and environmental costs with nothing but a Court-shredded oil boom to protect them.

photo credits:

• Exxon Valdez grounded on Bligh Reef: NOAA
• protective boom around salmon hatchery in Prince William Sound: NOAA

xpost: Scholars and Rogues

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