Anchorage Daily News

Nineteen years after the Exxon Valdez caused the nation's worst oil spill, the justice system finally resolved the biggest claim against the company. It took five years for the main spill lawsuit to go to trial, and another 14 years for the courts to resolve all the appeals.

The phrase "justice delayed is justice denied" comes to mind.

Why did the case take so long?

First, Exxon truly felt aggrieved by the multibillion punitive damage award and fought it to the bitter end. The company believed that taking responsibility for dealing with the aftermath of the spill should excuse the irresponsible behavior that produced the spill in the first place.

Second, federal law on punitive damages was in a state of flux as the case moved through the court system. Each time the Supreme Court ruled on other punitive damage cases, Exxon lawyers had new grounds for trying to attack the judgment against the company. The case made multiple trips up to the federal appeals court and back to the trial court.

But an obscure aspect of federal law also rewards prosperous companies like Exxon for stringing out a case as long as possible.

Here's how it works.

Federal law requires the final judgment to include interest covering the entire time the case is appealed. However, the interest rate is quite low -- so low that it rewards delay.

The interest rate is pegged to whatever rate the federal government pays to borrow money at the time the damage award is made. The U.S. government is the most credit-worthy borrower in the world, so the interest rate it gets is the lowest available in the market. Exxon will pay a modest 5.9 percent interest on the $507.5 million judgment, according to plaintiff's attorney David Oesting.

Prosperous corporations like Exxon earn much higher rates of return on their money, Oesting notes. While the meter was running at 5.9 percent on the judgment that Alaskans won, Oesting points out, Exxon made at least twice that much -- between 12 percent and 26 percent, he says -- by using the money in its business operations.

Every day Exxon could hold onto a dollar instead of paying it to Alaskans, it earned far more than the extra money it will pay in interest. That means a strategy of maximum delay is good for the corporate bottom line.

Alaska law recognizes this problem, according to Oesting. He says Alaska's post-judgment interest rate is set by a formula that puts it well above what federal courts use. Alaska's higher rate is a way to discourage delay and encourage out-of-court settlements.

If Alaska's formula applied to the Exxon Valdez case, the company would have paid 9 percent interest. That's still well below what Exxon would have earned by holding on to the money, but the company's interest bill would gone up by roughly a third.

Oesting says there isn't any serious discussion of raising the federal interest rate that applies during appeals. That's too bad. Victims like Alaskans hurt by the oil spill could expect speedier justice if federal law didn't reward wrongdoers like Exxon for delay.

BOTTOM LINE: Changing this federal law would speed up cases in court, but it won't happen any time soon.

ALASKA ALMANAC

For Exxon, delay was rewarding

$5 billion -- Amount the jury said Exxon should pay in punitive damages for its Alaska oil spill.

14 -- Years Exxon spent appealing the case before it was finally resolved.

50% -- Reduction in the jury award that Exxon won from the federal appeals court.

90% -- Reduction in the jury award that Exxon won from the U.S. Supreme Court.

$110 million -- Amount of the final award Exxon will pay to itself, thanks to a once-secret settlement of other spill claims with Seattle seafood processors.

1 year -- Time it would have taken Exxon to earn enough profit to cover the $5 billion award when it was handed down in 1994.

5 days -- Time it will take Exxon to earn enough profit to cover the final award set by the Supreme Court.

5.9% -- Annual interest rate Exxon will pay on the award covering the 14 years of appeals.

12% -- Minimum annual amount Exxon earned as it held onto the money due Alaskans during those 14 years.

$40 billion -- Exxon's profits in 2007.

Sources: Daily News files; interview with plaintiff's attorney David Oesting, June 26, 2008.

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