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A federal appeals court ruled yesterday that the $5 billion punitive damages award against Exxon Mobil Corp. in the 1989 Valdez oil spill is excessive. The court then ordered a judge to determine a lesser amount.
In 1994, a jury in Anchorage, Alaska, had ordered the Exxon to pay the $5 billion to thousands of commercial fisherman, Alaska natives, property owners, and others harmed by the nation's worst oil spill.
Exxon, which later merged with Mobil, argued that it shouldn't have to pay any punitive damages, claiming the company has learned its lesson and has spent more than $3 billion cleaning up the Prince William Sound area and to settle federal and state lawsuits.
The 9th U.S. Circuit Court of Appeals said some damages were justified to punish the company for its harmful behavior, but that $5 billion the largest punitive damage award in history, at the time was excessive. The amount was equal to a year's worth of Exxon's profits.
The plaintiffs stated that the spill, which polluted Alaska's Prince William Sound with 11 million gallons of crude oil and smeared black waste across roughly 1,500 miles of coastline, had reduced their property values and damaged fishing and hunting grounds.
The same jury also found recklessness by Exxon and the captain of the Valdez, Joseph Hazelwood, who caused the tanker to run aground on a charted reef. That finding of malfeasance made Exxon liable for punitive damages.
The plaintiffs had alleged that Hazelwood ran the ship aground while drunk and that Exxon knew about his drinking problem yet left him in charge of tankers. Hazelwood was acquitted in 1990 of operating the tanker while drunk.
The jury also awarded commercial fishermen $287 million to compensate them for economic losses suffered as a result of the spill. Months after the court battle, U.S. District Judge Russel Holland upheld the verdicts.