(AFP) – Jun 25, 2008
WASHINGTON (AFP) — The US Supreme Court Wednesday rejected as excessive 2.5 billion dollars in punitive damages awarded to victims of the Exxon Valdez oil disaster and said it should be cut to 507 million dollars.
The long-running legal battle stretches back to March 24, 1989 when the Exxon Valdez crashed into a reef in Prince William Sound, Alaska, spilling 11 million gallons of crude into the seas in the country's worst oil disaster.
After the spill, ExxonMobil spent about 2.1 billion dollars cleaning up the polluted coastline and more than 300 million in compensation for fishermen and locals affected by the catastrophe.
The company also paid out more than 900 million dollars of fines in a bid to halt criminal proceedings brought against it by the US government and the state of Alaska.
In an opinion penned by Justice David Souter, the Supreme Court said Exxon Mobil should not have to pay out punitive damages exceeding the compensatory damages awarded against it.
In 1994 a jury in a civil Alaskan lawsuit ordered the Texas-based firm to pay five billion dollars in punitive damages to some 34,000 fishermen and others who worked in the Prince William Sound.
That sum was cut to four billion in December 2002, and then increased to 4.5 billion in January 2004 in various appellate rulings.
Then in December, the US Court of Appeal cut the punitive damages to 2.5 billion saying the amount was more in line with legal precedent.
Wednesday's ruling rejected the federal appeals court damages and transferred the case to the lower court "to remit the punitive damages award accordingly."
While acknowledging there were no firm rules for determining punitive damages, the high court said it was guided by studies of penalties in hundreds of civil cases in lower courts.
In those cases, the median of the punitive awards handed down came to less than the amount in compensatory damages, Souter wrote.
As a result, the justices concluded that the punitive award in the Exxon case should not exceed a one-to-one ratio of the 507.5 million dollars already awarded in compensation damages.
The US Chamber of Commerce called the ruling a "victory."
"For years the chamber has argued that punitive damages are too unpredictable and unfair, and today the court agreed," the chamber's president Tom Donohue said in a statement.
But People for the American Way, a liberal organization critical of the conservative justices appointed to the court by President George W. Bush, condemned the outcome.
"Exxon was responsible for one of the greatest environmental disasters our country has seen, and the Supreme Court let them off with a slap on the wrist," its president Kathryn Kolbert said in a statement.
"This award is a drop in the bucket of Exxon's enormous profits, and it certainly provides no disincentive for them to avoid another accident in the future."
ExxonMobil had asked the country's top court to consider both the amount of the damages and whether it was in fact liable under existing maritime law.
The court was split 4-4 on the principle of whether the company was liable under maritime law with Justice Samuel Alito recusing himself because he owned shares of Exxon stock.
That let stand an earlier decision by a federal court that held Exxon liable for punitive damages.
Examining the history of punitive damages, the Supreme Court said the concept dates back to the 1700s and under US law has been meant to serve as retribution and deterring harmful conduct.
But it said rules for punitive awards vary from state to state and are often seen as arbitrary or unpredictable.
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