Exxon Valdez ruling could reshape U.S. tort law

Chris Rizo Jun. 2, 2008, 9:37am

Ted Frank

WASHINGTON (Legal Newsline)-The U.S. Supreme Court will end the long-running class-action lawsuit over the Exxon Valdez spill any Monday between today and June 23, when it issues a ruling before the high court's term recesses.

The lawsuit, which has been running for nearly 20 years, centers on a dispute over the $2.5 billion in punitive damages awarded after 11 million gallons of crude oil spilled in March 1989 in Alaska's Prince William Sound after the ship ran aground.

Ted Frank, director of American Enterprise Institute's Legal Center for the Public Interest, said the high court could issue a comprehensive ruling and redefine the role of punitive damages.

Frank told Legal Newsline that in addition to the billions of dollars at stake in the Alaska case, the high court could issue a ruling that would affect how state courts award damages, or the justices could simply rule narrowly on a point of admiralty law.

"It has the potential to be a major case," Frank said. "The court could remove strictures on punitive damages and leave it to the discretion of the lower courts and juries, and if that happens that obviously gives free rein for gigantic punitive damages."

He said the "more likely scenario" is that the high court "does something" to the punitive damage verdict against Exxon, noting that the justices decided to take the case when they could have declined it.

The 32,677 plaintiffs in the case have been waiting for their award since 1994, when an Anchorage jury returned a $5 billion punitive-damages verdict against Exxon Mobil Corp. for one of the worst environmental disasters in American history.

In 2006, the 9th U.S. Circuit Court of Appeals in San Francisco reduced the award to $2.5 billion. Exxon then appealed to the U.S. Supreme Court. The justices heard oral arguments in the case Feb. 27.

Darren McKinney, spokesman for the American Tort Reform Association, points to the billions of dollars in claims and fines the oil company has paid to-date saying that plaintiffs may have already "been made whole."

He said a victory for Exxon could help "redefine" the propriety of punitive damages as they "had always been intended" and historically interpreted by the courts.

"It was only with the last couple of decades that the seeking of punitive damages became a unique industry, often with little connection to the punishing of specific behavior," he said. "It's become a twisted game that too many in the plaintiffs' bar play, largely in pursuit of riches beyond their wildest dreams."

Exxon has based its appeals on an 1818 court decision that holds that ship owners aren't liable for punitive damages for the actions of their agents at sea unless they're complicit in their behavior.

The Irving, Texas-based oil giant also argues it should not face any punitive damages because the company already has paid out $3.4 billion in fines and penalties, cleanup costs and claims, among other expenses.

Since the 1994 jury award, nearly 20 percent of the 33,000 fishermen, Native Alaskans, cannery workers and others who stood to benefit from the lawsuit have died in the ensuing years.

Jennifer Gibbins, executive director of the clean water group Prince William Soundkeeper, told LNL the case is a test of the government's treatment of its citizens. She said the court's ruling will have a legal legacy just as it will it have a psychological one for the plaintiffs.

"It sure would be nice to know that the government of the United States will stand up to corporations and protect the rights of its citizens," Gibbins said from her office in Cordova, Alaska.

Adding she is "cautiously optimistic" that the court will favor the plaintiffs, Gibbins said given the case has been going for 19 years and the courts have given Exxon some legal victories, she said "it's very concerning."

From Legal Newsline: Reach reporter Chris Rizo by e-mail at chrisrizo@legalnewsline.com.

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