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Supreme Court Slaps Alaska Natives, Fishermen, etc. in the face!!!

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June 25, 2008 – Comments (10)

This is an outrage and a cold slap in the face to the people who suffered very real and long-standing losses relating to this spill. 

Here's what the legal system has essentially communicated to the victims: 

"we recognize the enormity of this event and the real losses you have suffered as a result.  Here's $5 billion... oh wait... here's $4.5 billion.  Let's stick with that for a while.  We've thought about it some more.. here's $2.5 billion.. that ought to cover it.  But let's get together in twenty years to talk about it some more.  Hi... nice to see you again... my, so much time has passed... we think no one cares about you any more, and won't mind if we give you one-fifth of the previously awarded amount.  Oh, and by the way, inflation over the past twenty years has added up quote a bit, so that $500 million has the purchasing power of about half that by 1989 standards.  Good luck to you."

I worked in the maritime industry not long after the Valdez spill, investigating accidents at sea.  I reviewed the documents reporting estimates of long-term impacts to the surrounding area... and we're talking long-term.  Go to the Valdez area, wade out a few feet, and lift up a rock.  You'll find a nice oily surprise awaits.

The award needed to be high... in large part to maintain the highest possible incentive for the industry to prevent a repeat of this utterly preventable tragedy.  I am outraged by the Supreme Court's actions today... not surprised... but outraged.  

http://biz.yahoo.com/rb/080625/exxon_valdez_court.html?.v=3

WASHINGTON (Reuters) - The U.S. Supreme Court on Wednesday overturned the $2.5 billion in punitive damages that Exxon Mobil Corp (NYSE:XOM - News) had been ordered to pay for the 1989 Exxon Valdez oil spill off Alaska.

The nation's high court ruled that the punitive damages should be limited to an amount equal to the compensatory damages of $507.5 million.

In the court's opinion, Justice David Souter concluded that the $2.5 billion in punitive damages was excessive under federal maritime law, and should be cut to the amount of actual harm.

The case involved about 32,000 commercial fishermen, Alaska natives, property owners and others harmed by the nation's worst tanker spill.

Soaring oil prices have propelled Exxon Mobil to previously unforeseen levels of profitability in recent years, posting earnings of $40.6 billion in 2007.

It took the company just under two days to bring in $2.5 billion in revenue during the first quarter of 2007.

The Exxon Valdez supertanker ran aground in Alaska's Prince William Sound in March 1989, spilling about 11 million gallons of crude oil.

The spill spread oil to more than 1,200 miles of coastline, closed fisheries and killed thousands of marine mammals and hundreds of thousands of sea birds.

A federal jury in Alaska awarded $5 billion in punitive damages in 1994. A federal judge later reduced the punitive damages to $4.5 billion, and the appeals court further cut it to $2.5 billion.

10 Comments – Post Your Own

#1) On June 25, 2008 at 12:23 PM, Tastylunch (29.27) wrote:

I am very glad someone else is mad about this.

This ruling is completely outrageous!

The court systems in general needs an overhaul, the wealthy have too much power and can win everytime just by endlessly appealing.

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#2) On June 25, 2008 at 12:42 PM, binv271828 (< 20) wrote:

What!! That is insane! Yes, that is completely outgrageous!

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#3) On June 25, 2008 at 12:58 PM, madcowmonkey (< 20) wrote:

"Soaring oil prices have propelled Exxon Mobil to previously unforeseen levels of profitability in recent years, posting earnings of $40.6 billion in 2007."

and this

 "A federal jury in Alaska awarded $5 billion in punitive damages in 1994. A federal judge later reduced the punitive damages to $4.5 billion, and the appeals court further cut it to $2.5 billion."

 Got my panties in a bunch. How can you calculate the actual damages, when they are still existing? Come on. The fine is to pay back the victims and to penalize exxon, not give it a little pat on the butt.  

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#4) On June 25, 2008 at 12:58 PM, abitare (39.81) wrote:

With record high oil prices, how can they be expected to pay so much?

Of interest Insiders have been able to cash out:

http://www.secform4.com/insider-trading/34088.htm 

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#5) On June 25, 2008 at 1:03 PM, colonelnelson (44.61) wrote:

Wow!  This is a terrible decision.  Punitive damages are supposed to punish a person or corporation for acts that are grossly negligent, willful, wanton or reckless (e.g. employing a captain of a tanker with a long history of alcohol abuse and allowing him access to booze while piloting a vessel filled with millions of gallons of oil). 

The concept is that the tortfeasor (and other potential wrongdoers) will correct their behavior for fear of being punished in the future.  Here the Court has adopted a standard of 1:1 ratio of compensatory to punitive damages.  This is a ridiculous thing to do since a $287M punitive damage award is not "punitive" at all to a company of Exxon's size and scale.  This standard defeats the purpose of the damage award.

Undoubtedly the Court was emboldened by the fact that their ruling would be limited to recoveries under maritime law, and thus was a very narrow holding.  It doesn't make their decision right.

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#6) On June 25, 2008 at 2:12 PM, colonelnelson (44.61) wrote:

Wow!  This is a terrible decision.  Punitive damages are supposed to punish a person or corporation for acts that are grossly negligent, willful, wanton or reckless (e.g. employing a captain of a tanker with a long history of alcohol abuse and allowing him access to booze while piloting a vessel filled with millions of gallons of oil). 

The concept is that the tortfeasor (and other potential wrongdoers) will correct their behavior for fear of being punished in the future.  Here the Court has adopted a standard of 1:1 ratio of compensatory to punitive damages.  This is a ridiculous thing to do since a $287M punitive damage award is not "punitive" at all to a company of Exxon's size and scale.  This standard defeats the purpose of the damage award.

Undoubtedly the Court was emboldened by the fact that their ruling would be limited to recoveries under maritime law, and thus was a very narrow holding.  It doesn't make their decision right.

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#7) On June 25, 2008 at 2:16 PM, AnomaLee (28.62) wrote:

I'm glad someone else is aware of this, but honestly Exxon had a very good arguement since this incident was largely caused by the captain and operator neglect.

If the mailman crashes and damages someone's car who is liable?

Well, how would you feel if they sued you because he was delivering your package?

It's a terrible situation, but the captain of that tanker should've never had a license in the first place.

More importantly Exxon has the money to spend on litigation money. I figured they would escape with far less liability and pass more of the blame off on the captain.

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#8) On June 25, 2008 at 2:52 PM, devoish (98.37) wrote:

How are those requests for offshore drilling leases going, anyway?

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#9) On June 25, 2008 at 3:07 PM, colonelnelson (44.61) wrote:

"honestly Exxon had a very good arguement since this incident was largely caused by the captain and operator neglect."

Ah.  But the legal principle is that the master is liable for the negligent/reckless acts of his servant.  If in the course of his work for Exxon, drunk old Captain Hazelwood abandons the deck to lackeys who ground the boat upon the rocks, Exxon is liable in civil law for the damages that result.

Moreover, the evidence was that Exxon hired and promoted Cpt. Hazelwood, despite their knowledge that he was a drunk, and knowing that he had access to alcohol on board the ship.  What a man to give such great responsibilities to!

The punitive damages which were at issue in this case should have been left alone so as to teach Exxon to take a little more care regarding who they put in charge of their oil tankers.

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#10) On July 14, 2008 at 7:05 PM, lepersinmyhead (25.14) wrote:

Great blog post.  You can't really talk about encouraging a free market if you don't have to pay when you injure other people while your doing business.  Free markets don't work if there are not consequences for stupid, reckless activity. 

AnomaLee - Captain Hazlewood had completed a twenty-eight day alcohol treatment program while at Exxon.  His supervisors knew he was an alcoholic.  He failed to complete a follow-up program and dropped out of AA.  There was evidence that the "good" captain drank with Exxon superiors and that he drank onboard.  There was evidence that Exxon superiors knew about relapse.

Dude downed five double vodkas in the port before piloting his 900 foot long tanker with over one million barrels of oil.  That's enough alcohol to be a non-alcoholic in the hospital.

Sounds like Exxon superiors knew  that the captain was a walking time bomb.

Truly outrageous decision given the consequences of mishaps like this.

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