WASHINGTON - The U.S. Supreme Court appeared sympathetic Wednesday to Exxon Mobil Corp.'s efforts to reduce a $2.5 billion punitive damages award for the company's role in one of the nation's most catastrophic oil spills.
But the oil giant met with resistance when it came to overturning the award outright. While justices seemed to grapple with the size of the damages awarded, they indicated that they thought Exxon failed to make a winning argument that it wasn't subject to punitive damages under maritime law.
If the court reduces the award, it would mean a smaller payout for the fisherman and other plaintiffs who have been waiting since 1994 to see the money awarded by an Anchorage jury. That would be an injustice, said Jeffrey Fisher, the Stanford University professor who argued the case for the plaintiffs.
"What you have today are 32,000 plaintiffs standing before this court, each of whom have received only $15,000 for having their lives and livelihood destroyed and haven't received a dime of emotional distress damages," Fisher said in court, adding after the hearing that, "we think it's not too much to ask that some recompense and punishment be paid for the human toll of the spill and not simply the environmental impact."
From the start of the 90-minute hearing, many of the justices seemed critical of Exxon's central argument: that 200 years of maritime law has little precedent for levying punitive damages against a company for the actions of its agents at sea.
Within minutes Justice Ruth Bader Ginsburg had poked holes in the argument that the 1818 case was the final word on punitive damages in maritime law.
"It's rather, I think, an exaggeration to call it a long line of settled decisions in maritime law," she said.
Exxon based its appeal on a case that holds that ship owners aren't liable for punitive damages for the actions of their agents at sea unless they're complicit in their behavior. The case, known as the Amiable Nancy for the ship involved, was jokingly referred to as the "Amiable whatever-it-is" by Justice Antonin Scalia.
Clearly, money was on the minds of many of the justices, though. When Fisher suggested the justices took the case to settle fundamental maritime legal issues, Scalia was again the jokester.
"That, and $3.5 billion," he said to laughter.
Several justices suggested that there might be a more conservative framework for awarding punitive damages within maritime law. They might consider capping punitive damages at twice the compensatory damages, said Justice David Souter. In 1994, a jury awarded the plaintiffs $287 million in compensatory damages to the plaintiffs in this case. Exxon also paid damages to plaintiffs in other cases filed after the spill.
They could also use the criminal code as a model, which allows punitive damages to be double the loss, said Justice Anthony M. Kennedy.
'NOT INTENTIONAL, NOT MALICIOUS'
Exxon has been appealing the verdict since 1994, when a jury in Anchorage returned a $5 billion punitive-damages award against the company. In 2006, the 9th U.S. Circuit Court of Appeals cut the award to $2.5 billion. Exxon, which already has paid $3.5 billion in fines, compensation and settlements, appealed that decision to the Supreme Court.
The company's lawyer, Walter Dellinger, argued that Exxon has been punished enough by state and federal environmental regulators, and that the money the company already has paid is deterrent enough.
"This was not an intentional act, it was not malicious, nor was there any possibility of concealment," Dellinger said. "The amount was enough to deter anybody or anything."
Still, the justices spent much of their time on the central issue of whether maritime law allows Exxon to be held responsible for the Valdez's captain, Joseph Hazelwood. They repeatedly asked whether Hazelwood was considered an important enough executive in the company that it should be punished for what he did at sea.
THE CEO AND THE CABIN BOY
Ultimately, corporations act through individuals, Chief Justice John G. Roberts said, as he grilled Dellinger about the company's role.
"Now, where do you draw the line between the CEO and the cabin boy? How do you do that?" Roberts said. "And I would suspect, just instinctively, that somebody driving one of these huge tankers is a lot closer to the CEO than the cabin boy."
Later, however, Roberts seemed to lean toward Exxon's view that the company wasn't responsible for Hazelwood's actions. He asked what corporations could do to avoid punitive damages, and said it appears there's little a company can do if they have established policies but top executives flout them.
"It can hire fit, competent people," Fisher said. Exxon knew for three years that Hazelwood was an alcoholic and failed to act appropriately, Fisher told the court, and the original trial was about the company's role in the spill.
Prosecutors alleged that Hazelwood was drunk when the ship ran aground on March 24, 1989, but he denied the charge and was acquitted in criminal court. However, Fisher reminded the justices that there were 33 proven examples in the court record of Exxon employees drinking with Hazelwood or learning that he drank.
"Up and down the corporation, as the district judge explained, for three years, upper management was receiving reports that this man was drinking aboard the vessel," Fisher told the court.
SHAKING UP THE SHIPPING INDUSTRY
The captain "may be managerial for some purposes and not others," Kennedy said. "I think that's the way it's going to have to come out. Maybe not. But certainly he was not entitled to set aside the policy of Exxon that you cannot navigate a vessel while intoxicated."
But Justice Stephen G. Breyer suggested that if the court were to decide that Exxon is subject to punitive damages under maritime law, the ramifications would reach to others in the shipping industry.
"And if, in fact, it has not been normal in admiralty until now to assess punitive (damages) against the corporation on the basis of the activity of, say, the ship's master, failures of responsibility, then it will be a new world for the shipping industry and for those who work on the ships," he pointed out.
Eight of the nine justices heard the case. Justice Samuel A. Alito, who owns Exxon Mobil stock, recused himself.
A decision is expected before the court's term ends in June. If the case ends in a 4-4 tie, the appeals court's $2.5 billion verdict would stand.
Find Erika Bolstad online at adn.com/contact/ebolstad or call her in Washington, D.C., at 202-383-6104.
By ERIKA BOLSTAD / Anchorage Daily News
Anchorage Daily News