A jury's $5 billion punitive damage award for the 1989 Exxon Valdez oil spill was too high compared to the damage caused and the sums the company already has spent for cleanup and compensation, a federal appeals court ruled today.
A three-judge U.S. Court of Appeals panel in San Francisco rejected Exxon Mobil Corp.'s attempt to throw out the entire punitive damage verdict -- saying it was justified by the knowing employment of an alcoholic captain -- but ordered a federal judge in Alaska to reduce the award.
The court did not specify the proper amount, but noted that the U.S. Supreme Court had ruled in another case in 1996, two years after the Exxon Valdez trial, that punitive damages four times as high as the amount of compensation awarded were "close to the line" allowed by the Constitution.
The suit was filed by commercial fishers, property owners and others harmed by the 11-million-gallon spill, still the nation's worst.
Compensatory damages awarded by the jury totaled $287 million. Four times that amount would be $1.148 billion. The $5 billion award was more than 17 times the amount of compensation. The appellate panel also noted that Exxon had paid $2.1 billion to clean up the spill, $1.2 billion to settle suits by state and federal agencies and other private parties, and additional sums that raised its total cost above $3.4 billion -- apart from the current verdict.
The wrongfulness of Exxon's conduct was not so severe that it would justify an extraordinary damage award, the court said.
"As bad as the oil spill was, Exxon did not spill the oil on purpose, and did not kill anyone," wrote Judge Andrew Kleinfeld.
He said the jury was entitled to find that the company acted recklessly: "It knew of the risk of an oil spill in the transportation of huge quantities of oil through the icy waters of Prince William Sound. And it knew (Capt. Joseph) Hazelwood was an alcoholic who was drinking."
"But this goes more to justify punitive damages than to justify punitive damages at so high a level."
Kleinfeld said U.S. District Judge H. Russel Holland must re-evaluate the case in light of the 1996 Supreme Court ruling and another high court decision this year, both of which said punitive damages must bear a reasonable relationship to the harm caused and the wrongfulness of the defendant's conduct.
The 984-foot tanker ran aground on a reef just after midnight on March 24, 1989, polluting more than 1,000 miles of shoreline and killing tens of thousands of birds and marine mammals.
Hazelwood, a dropout from an alcohol rehabilitation program who had been drinking heavily before the voyage, left the bridge and went to his cabin before the accident, leaving the helm to a fatigued third mate.
The $5 billion punitive verdict was a record at the time but has since been eclipsed by a $145 billion Florida verdict against tobacco companies, now on appeal.
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