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Court rules Exxon owes a billion in damages, interest

Exxon Mobil Corp. was ordered Monday to pay roughly $1 billion to Alaska Natives, fishermen, business owners and others harmed by the 1989 Exxon Valdez spill in Prince William Sound.

A federal appeals court set the punitive damages Exxon must pay at $507.5 million -- the maximum allowed under last year's U.S. Supreme Court ruling on the case. And the appeals court said Exxon owes about $500 million in interest on the punitive damages.

The ruling was issued by the 9th U.S. Circuit Court of Appeals in San Francisco.

Setting the punitive damages award at the maximum was expected. However, a big question before the appeals court was when to start calculating the interest owed on the $507.5 million.

Exxon argued the interest should start last year after the Supreme Court decided for the first time that the law allowed punitive damages in maritime cases like this one.

The Natives, fishermen and other plaintiffs argued it should start in 1996, when the courts initially ordered Exxon to pay punitive damages for the nation's worst tanker spill. The plaintiffs have been owed the punitive damages since then, even if the amount of damages wasn't clear until now, they argued.

The appeals court picked the 1996 date, and it set the interest rate at 5.9 percent a year.

Texas-based Exxon can appeal Monday's decision on the interest payments to the Supreme Court. A spokesman for Exxon said in an e-mail that the company would comment after it reviews the decision.

Monday's decision would double the average payout of about $15,000 for the nearly 33,000 claimants, although some will get much more and many will get just a fraction of the average.

Exxon has already paid some of the money, an estimated $383 million, since last November.

"We're just happy that we've cleared another hurdle, and hopefully we can get the case tied up as soon as possible," Stanford University law professor Jeffrey Fisher, an attorney for the plaintiffs, said Monday. "What we want more than anything now is just to bring this case to a close."

Alaska Sen. Lisa Murkowski said she was pleased with the decision and hoped "the interest will help the victims of the worst environmental disaster in U.S. history recover a small part of their losses."

The case grew out of the 1989 grounding of the tanker Exxon Valdez, which dumped 11 million gallons of crude oil into Prince William Sound, fouling 1,200 miles of coastline. After leaving Valdez with a load of oil, the ship left the tanker lane through Prince William Sound to avoid icebergs. But the tanker never corrected its course to return to the lane. It slammed hard aground on Bligh Reef.

A jury originally awarded plaintiffs $5 billion in punitive damages. But that amount was cut in subsequent appeals by Exxon.

In 2006, the federal appeals court halved the award to $2.5 billion.

Then, last June, the Supreme Court slashed the punitive damages award to no more than $507.5 million -- the amount determined to be the actual damages sustained by the fishermen, Natives and other plaintiffs -- and sent the case back to the appeals court to set the exact amount.

The spill killed hundreds of thousands of birds and other marine animals, inflicting environmental damage from which the region has not fully recovered, according to numerous scientific studies.

Exxon countered that many studies have found the area healthy and thriving. The company had argued that punitive damages would be excessive punishment on top of the $3.4 billion in cleanup costs, compensatory payments and fines it already has paid.

Exxon maintained that it should not be liable for the actions of the supertanker's skipper, Joseph Hazelwood, when the nearly-1,000-foot vessel ran aground with 53 million gallons of oil in its hold.

According to prosecutors, Hazelwood was drunk, but he denied it and was acquitted of the charge in criminal court.

The appeals court Monday also ruled on how much of the $70 million Exxon estimated it spent on the case over time should be paid by the Natives, fishermen and other plaintiffs.

The appeals court said the plaintiffs should pay none of it.

"Although Exxon has succeeded in reducing an original jury verdict of $5 billion by about 90 percent, it remains liable for a far-from-nominal punitive award of more than $500 million," the appeals court said.

"Exxon contends that it is essentially the winner of the litigation and that plaintiffs should bear all, or at least 90 percent, of Exxon's appellate costs. With some 20/20 hindsight, Exxon now characterizes the course of this case as having been all about the amount of money Exxon would have to pay in punitives. Having reduced that amount by 90 percent, it declares itself the winner. Yet this ignores the hard-fought, even relentless, battle Exxon waged to avoid any liability for punitives, a battle that resulted in an evenly divided decision by the Supreme Court in 2008 leaving in place our 2001 decision on vicarious liability," the court said.

"In this case, neither side is the clear winner. The defendant owes the plaintiffs $507.5 million in punitives -- according to counsel at oral argument the fourth largest punitive damages award ever granted. Yet that award represents a reduction by 90 percent of the original $5 billion. In light of this mixed result, and mindful that the equities in this case fall squarely in favor of the plaintiffs -- the victims of Exxon's malfeasance -- we exercise our discretion by requiring each party to bear its own costs."


Staff and wire services