Exxon asks justices to limit spill tab

The U.S. Supreme Court agreed last week to review the $2.5 billion punitive damages award levied against Exxon Mobil Corp. for its role in the massive Exxon Valdez oil spill off the coast of Alaska 18 years ago.

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The U.S. Supreme Court agreed last week to review the $2.5 billion punitive damages award levied against Exxon Mobil Corp. for its role in the massive Exxon Valdez oil spill off the coast of Alaska 18 years ago. Exxon Shipping Co. v. Baker, No. 07-219. Exxon Mobil and an array of maritime and other business groups asked the justices to knock down what would otherwise be the highest damages award ever approved by a federal court. In December, the 9th U.S. Circuit Court of Appeals cut the jury award down from $5 billion to $2.5 billion. [NLJ, Sept. 10.] Even this, Exxon Mobil told the court, is “123 times the compensatory damages awarded, and five times what the court found was the total, fully compensated loss to all private economic interests.” Former Acting Solicitor General Walter Dellinger, now an O’Melveny & Myers partner, wrote the brief for the oil giant. “The jury awarded punitive damages proportionate to the harm,” wrote David Oesting of Davis Wright Tremaine in his brief. He represents more than 32,000 claimants against the company. “Exxon’s highest executives condoned placing an alcoholic who they knew had relapsed at the helm of an oil supertanker that regularly transited the resource-rich waters of Prince William Sound,” he said. The tanker’s captain, Joseph Hazelwood, had left the helm when the vessel struck Bligh Reef and leaked 11 million gallons of crude oil into the sound on March 24, 1989. Several business groups filed briefs urging the high court to review the Exxon Valdez case. They said lower courts are still divided and confused about applying the Supreme Court’s limits on punitive damages. In a series of cases, including BMW v. Gore, 116 S.Ct. 1589; State Farm v. Campbell, 123 S. Ct. 1513; and Philip Morris v. Williams, 127 S. Ct. 1057, the justices have offered benchmarks for lower courts to determine when a punitive award is excessive, including scrutinizing the ratio between compensatory and punitive damages and the degree of reprehensibility of the conduct. The Exxon Valdez case arises in maritime law, a unique area of the law in which the Constitution gives federal courts broad power to create common law, comparable to the role of some state courts. If the high court finds the award excessive under maritime law, said Mayer Brown partner Evan Tager, “it may lead by example” and encourage state courts to “incorporate [limits] into the fabric of state law” and make federal court review less necessary in the future. Tager was part of a Mayer Brown team that authored a brief for the American Petroleum Institute in support of review. Significantly, the court limited the questions it will review in the case in such a way as to sidestep Exxon Mobil’s argument that the size of the award violates the Constitution’s due process clause as well as maritime law. Tager speculated that the court’s action may have been a nod to justices Antonin Scalia and Clarence Thomas, who have long declined to find that high punitive damages violate the Constitution. “They may have decided to set aside that distraction and just make maritime law.” Also complicating the issue is Justice Samuel A. Alito Jr.’s decision to recuse himself from the case, thus raising the possibility of a 4-4 split, which would have the effect of upholding the 9th Circuit’s $2.5 billion award. In his latest financial disclosure statement, Alito indicated that he owns between $100,001 and $250,000 in Exxon Mobil stock.

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