Justices decline to decide on Exxon interest payment

OIL SPILL: High court tells 9th Circuit to do "housekeeping."

August 13, 2008 

WASHINGTON -- Once again, plaintiffs who have been waiting for a payout in the Exxon Valdez lawsuit will have to continue their wait.

The U.S. Supreme Court on Tuesday declined to decide whether Exxon Mobil Corp. should pay interest on punitive damages, which would nearly double the $507 million award punishing the company for its role in the tanker spill that leaked 11 million gallons of crude oil into the waters of Prince William Sound.

The lawsuit, which was filed within days of the 1989 oil spill, has been slowly making its way through the nation's appellate courts, winding up in front of the Supreme Court in late February. The high court in June cut the punitive award from $2.5 billion to $507 million and set a 1-to-1 ratio for punitive damages in maritime cases, based on the amount of compensatory damages awarded.

Exxon has balked at paying interest, which lawyers for the fishermen and other plaintiffs in the case estimate would bring the company's total payout to $1 billion. Tuesday, the Supreme Court officially sent the case back to the 9th U.S. Circuit Court of Appeals in San Francisco to determine the interest payments and the total punitive damages.

"We can look at a few more years, huh?" said Andrew Wills, a former herring fisherman who now runs an inn and bookshop in Homer. "It would have been really simple for them to just say 'pay the interest.' I've given up the Supreme Court."

But lawyers for the plaintiffs say it's not unusual for the Supreme Court to shift such a decision back to the 9th Circuit. They don't see Tuesday's move as a setback, said Stanford Law School professor Jeffrey Fisher, who argued the case for the plaintiffs in front of the Supreme Court.

"It is typical procedure for the Supreme Court to decide the big legal questions and to leave it to the lower courts to do the housekeeping," Fisher said. "Having said that, we're going to do everything we can to bring this to a quick and expeditious close."

Lawyers for the fishermen and other plaintiffs in the case have calculated that interest will add up to about $488 million, bringing the total amount that Exxon owes from the 1989 oil spill to nearly $1 billion. Minus attorney's fees, they had estimated that $628 million would be divided among the more than 32,000 plaintiffs in the case.

Their calculations are based on interest accruing since 1994, when an Anchorage jury originally awarded $5 billion in punitive damages, an amount that was cut to $2.5 billion by an appeals court and then to $507 million by the Supreme Court. Lawyers for the plaintiffs calculated the interest on the $507 million, however, not on the original $5 billion award.

It would be unprecedented for the plaintiffs not to receive interest, Fisher said. They've researched similar cases in front of the 9th Circuit, and they've failed to find one where interest wasn't paid out -- even when punitive damages are reduced. In the cases they researched, interest was paid on the reduced amount, but going back to the original date of the judgment, Fisher said.

Lawyers for the plaintiffs filed their motion asking the court to address the question of interest as a precautionary move, based on their reading of an obscure Supreme Court rule in other, similar cases. While it was an abundance of caution on their part, Fisher said, Exxon used it as an opening to file an aggressive motion seeking to avoid an interest payout.

Exxon argued in its brief to the Supreme Court that the amount the court decided on was "the legally correct amount necessary to deter Exxon and others from future oil spills," and that the justices had no intent to allow millions more in interest to accrue.

The company continues to maintain that if interest is payable, it should be from the date the Supreme Court determined the damages -- June 25.

"Like everybody involved, we're anxious to have it resolved," said company spokesman Alan Jeffers. "But the reality is, the Supreme Court has declined to rule on this motion by the plaintiffs. So we will participate in that process in a timetable mandated by the court. It's really in the Ninth Circuit's hands."

Exxon, which posted record profits of $11.68 billion last quarter, has already accounted for a potential settlement of up to $507 million on its books. The company, considered the most profitable publicly traded U.S. corporation, subtracted $290 million from its second-quarter profits when they were announced at the end of July. The settlement will be tax deductible, and Exxon's accountants have estimated $290 million is the likely potential drop in the company's earnings. The number could go up if Exxon has to pay interest on the damages.


Find Erika Bolstad online at adn.com/contact/ebolstad or call her in Washington, D.C., at 202-383-6104.

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