On June 25, the next-to-last day of the current term, the United States Supreme Court slashed the punitive damages judgment for the 1989 Exxon Valdez oil spill, which devastated Alaska’s Prince William Sound. The award was reduced from $2.5 billion to only $507.5 million—an amount equivalent to a few days’ profit for the giant oil company..
Exxon Mobil Corporation paid more than $1 billion to settle state and federal claims for environmental damages. The company went to trial in 1994, however, against a class action suit by over 32,000 individuals and small businesses devastated by the accident, predominantly commercial fishermen, native Alaskans and local landowners, who claimed that Exxon’s reckless conduct caused the accident
Just in case you are not old enough to remember the diaster:
Witnesses testified that before leaving port Hazlewood consumed five double-vodka drinks, an amount that would have rendered any non-alcoholic unconscious. When tested by the Coast Guard 11 hours after the accident Hazlewood still had a blood-alcohol level of .061, meaning that during the wreck his level was about three times the legal limit for driving a car.
As the ship approached a well-known reef, Hazlewood set the autopilot, increased speed and turned the ship over to a subordinate unlicensed to perform the maneuver necessary to avoid running aground. The Exxon Valdez hit the reef, spilling crude oil into Prince William Sound. Hazlewood then tried to “rock” the ship free, a procedure that spewed more oil and risked killing the crew.
The result was the largest oil spill in US history: 11 million gallons covering 11,000 square miles, including 1,300 miles of pristine shoreline. The spill devastated the local economy as well as the environment. Estimated losses in the sport fishing industry alone were almost $600 million over the two years following the accident. Within days an estimated 250,000 seabirds perished, along with thousands of otters and seals. Despite billions of dollars in cleanup, the environmental effects of the spill still linger. Much of the oil seeped below the surface of affected beaches, decaying at a rate of about three to four percent per year. Animals that dig in the sand for their food continue to be contaminated.
Now that that is out of the way.
The essence of this ruling is that it drastically reduces the power of punitive damages to deter the most harmful conduct of big business and makes it much more difficult for plaintiffs’ lawyers to finance costly and protracted litigation like the Exxon Valdez case. The court has taken what was once considered a big club for plaintiffs and their attorneys and whittled it into a toothpick.