Court negates $5 billion damages in Exxon oil spill

SAN FRANCISCO -- A federal appeals court Wednesday threw out as excessive the $5 billion punitive-damages verdict against Exxon for the 1989 Exxon Valdez oil spill in Alaska.

The court ordered a judge to determine a lesser amount.

A jury in Anchorage, Alaska, had ordered the oil giant in 1994 to pay the sum to thousands of commercial fishermen, Alaska natives, property owners and others harmed by the nation's worst oil spill.

Exxon, which has since merged with Mobil to form Exxon Mobil Corp., had argued the verdict was "completely unwarranted, unfair and is excessive by any legal or practical measure."

A three-judge panel of the 9th U.S. Circuit Court of Appeals said some damages were justified to punish the company but agreed that $5 billion -- the biggest punitive damage award in history at the time -- was too much. The amount was equal to a year's worth of Exxon's profits.

The jury also awarded commercial fishermen $287 million to compensate them for economic losses suffered as a result of the spill. The appeals court left that part of the verdict intact.

Monetary vindication

The decision confirmed the company's belief that the $5 billion award was excessive, Exxon Mobil chairman Lee Raymond said Wednesday.

David Oesting, a lawyer for the fishermen, said he might ask the court to reconsider, or ask the U.S. Supreme Court to review the ruling.

The plaintiffs noted that the spill, which polluted Alaska's Prince William Sound with 11 million gallons of crude oil and smeared black goo across roughly 1,500 miles of coastline, had reduced their property values and damaged fishing and hunting grounds.

The jury found recklessness by Exxon and the captain of the Valdez, Joseph Hazelwood, who caused the tanker to run aground on a charted reef. That finding of malfeasance made Exxon liable for punitive damages.

The appeals court Wednesday said that for every dollar in compensatory damages, the jury awarded more than $17 in punitive damages -- a ratio that would not get by the U.S. Supreme Court.

The appeals court noted the high court in 1991 ruled that a 4-to-1 ratio was "close to the line" between a constitutionally acceptable and unacceptable jury verdict.