The crime and punishment of theExxon Valdez

Abstract

In June 2008, in Exxon Shipping Inc v Baker, the US Supreme Court substantially reduced the punitive damages previously awarded against Exxon-Mobil for the Exxon Valdez disaster, bringing to an end almost 20 years of controversy and legal actions arising from one of the largest maritime oil spills in US history. On March 24, 1989, the tanker Exxon Valdez, captained by Joseph Hazelwood, was transporting crude oil from Valdez, Alaska, to the lower 48 states. Through a combination of blunders and dereliction of duty, the vessel hit Prince William Sound's Bligh Reef, spilling an estimated 10.8 million gallons of crude oil into the sound, and causing enormous ecological and economic damage. The Valdez had departed from standard shipping lanes to avoid sea ice, and a failure to correct the course was later attributed to lack of communication among the crew and poor supervision by Captain Hazelwood, who was not at the helm at the time of the incident. The spill spread almost 500 miles, coating 1300 miles of shoreline with crude oil. After four summers, and at a cost of over $2 billion, the cleanup was finally called off, though some areas still show signs of contamination. Ratios between punitive and compensatory damages have run from 1:1 to 500:1. Since 1989, courts have, depending on the reprehensibility of the plaintiff's actions, decided that a ratio of punitive to compensatory damages must be reasonable; the rule of thumb is 3:1, with a limit of 10:1 considered excessive. In the Exxon case, in 1994, a jury found that Exxon and Hazelwood were reckless, and thus liable, and awarded punitive damages of $4 billion (along with an award of $5000 against Hazelwood). After reconsidering the Supreme Court precedents, a second decision increased the punitive award to $5 billion. However, in early 2007, the 9th Circuit Court of Appeals decided to lower the punitive award against Exxon-Mobil to $2.5 billion, reasoning that, because there was about $500 million in economic damage caused by the spill, a ratio of 10:1 – which the $5 billion in punitive damages represented – was too close to the limit required by Supreme Court opinions. In the most recent case, in a 5–3 decision authored by Justice Souter, the Court further lowered the punitive amount to a 1:1 ratio. Although the Court unanimously disagreed with Exxon by ruling that the CWA clearly allows punitive damages and that Exxon was liable for the reckless acts of the ship's captain, the Court also decided that punitive damages are unpredictable, that a hard-dollar cap for punitive damages was unfair, and that a punitive damage award for maritime cases seemed more fairly adjusted to a 1:1 ratio – in this case, about $500 million. The Court examined, among other things, state statutes that punish for environmental harms by imposing multiple damages, but found a mishmash that offered little guidance. Justice Souter noted that the CWA penalty rationale involves doubling damages for “knowing” versus “negligent” criminal penalties and reasoned that this “compares [with] discretion to double the civil liability on conduct going beyond negligence and meriting punitive treatment”. Thus, Justice Souter reasoned that a 1:1 ratio (for maritime cases, at least) was important “to protect against the possibility (and the disruptive cost to the legal system) of awards that are unpredictable and unnecessary” and to establish a “fair upper limit”. In dissent, Justice Stevens wrote that he would have upheld the $2.5 billion in punitive damages awarded by the lower court, whereas Justice Breyer believed that Exxon's conduct warranted “an exception from strict application of the majority's numerical rule”. So the long, sad tale of the Exxon Valdez may finally be at an end. The ship, renamed the Mediterranean, now sails under the flag of the Marshall Islands and is still doing its thing – hopefully under better direction.