Legal expert calls Exxon Valdez decision 'limited'

By Chris Rizo | Jun 25, 2008

Tom Donohue

WASHINGTON (Legal Newsline)-Legal reformers praised the U.S. Supreme Court on Wednesday for its decision to slash the punitive damages award in the long-running Exxon Valdez case, but one expert said the maritime case will have little effect on the overall legal landscape.

The high court, in a 5-3 ruling, said the original $2.5 billion punitive damages award against Exxon Mobil Corp. to compensate victims of the one of the worst environmental disasters in American history was excessive.

The justices said punitive damages should be kept no more than $507.5 million.

"This is the right ruling; there should not have been punitive damages awarded in this case, but the precedential implications here will be fairly limited," James Copland, director of the Manhattan Institute Center for Legal Policy, told Legal Newsline.

"Unfortunately, this is going to be a pretty narrow holding," Copland said in a telephone interview from his New York office. "This ruling applies to maritime law, so it's not going to apply to all the torts out there."

Copland said he is encouraged that the Supreme Court agreed to hear the case, and the split ruling indicates that the high court may decide to hear more cases where excessive punitive damages awards are claimed.

"Because the Supreme Court has decided to look at this case and step in, and that the majority of the eight justices who were sitting said the amount of punitive damages should be limited to the amount of compensatory damages, (the ruling) is at least a strong signal to litigants that the Supreme Court may start to review these sorts of cases more," Copland said.

Darren McKinney, a spokesman for the American Tort Reform Association, agreed the case is not a landmark decision.

"This isn't a ruling that will influence a lot of rulings down the road," McKinney told LNL.

Even so, McKinney said, his organization is "gratified" anytime the courts put "reasonable checks on what have been and can be runaway punitive damage awards."

Tom Donohue, president and CEO of the U.S. Chamber of Commerce, said the court's ruling is "good news" for companies concerned about excessive punitive damages awards.

"For years the Chamber has argued that punitive damages are too unpredictable and unfair, and today the Court agreed," Donohue said in a statement.

Legal Newsline in owned by an affiliate of the U.S. Chamber of Commerce.

The class action lawsuit against Exxon has been running for nearly twenty years. It centered on a dispute over the $2.5 billion in punitive damages awarded after 11 million gallons of crude oil spilled in March 1989 in Alaska's Prince William Sound after the ship ran aground.

In the high court's majority opinion, Associate Justice David Souter wrote that the punitive damages award should be brought into line with compensatory damages awarded earlier in the case.

"The award here should be limited to an amount equal to compensatory damages," Souter wrote.

Joining Souter in the majority were Chief Justice John Roberts and Associate Justices Antonin Scalia, Clarence Thomas and Anthony Kennedy.

Dissenting were Associate Justices John Paul Stevens, Ruth Bader Ginsburg and Stephen Breyer. Associate Justice Samuel Alito, who has significant investments in Exxon, was recused in the case.

The 32,677 plaintiffs in the case have been waiting for their award since 1994, when an Anchorage jury returned a $5 billion punitive-damages verdict against Exxon Mobil Corp.

In 2006, the 9th U.S. Circuit Court of Appeals in San Francisco reduced the award to $2.5 billion. Exxon then appealed to the U.S. Supreme Court. The justices heard oral arguments in the case Feb. 27.

Irving, Texas-based Exxon, among other things, argued it should not face any punitive damages because the company already has paid out $3.4 billion in fines and penalties, cleanup costs, claims, among other expenses.

In a statement, Alaska Gov. Sarah Palin said she was disappointed by the court's decision.

"While the decision brings some degree of closure to Alaskans suffering from 19 years of litigation and delay, the Court gutted the jury's decision on punitive damages," the Republican governor said.

The case is Exxon Shipping Co. v. Baker, 07-219.

From Legal Newsline: Reach reporter Chris Rizo by e-mail at chrisrizo@legalnewsline.com.

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