Federal: US Supreme Court Reduces Exxon Valdez Punitive Award

In June 2008 the US Supreme Court reduced the $2.5 billion punitive damages award, stemming from the 1989 environmental disaster caused by the oil spill released by the 1,000 foot tanker Exxon Valdez, to $500 million. While the court agreed that punitive damages could be collected, Justice David H. Souter, writing for the majority, determined that the amount of punitive damages should not exceed the $507.5 million in compensatory damages which Exxon had already paid to the plaintiffs. In doing so he, in effect, decided a punitive/compensatory multiple of approximately one. In reaching this decision the court recognized that it can apply more direction and discretion given that the Valdez case was governed by maritime common law. The court concluded that it could apply broader discretion in such cases as opposed to ruling on state court decisions and determining if they were so extreme that they stepped over the bounds of constitutionality. It is interesting to note that in prior rulings on punitive damages involving state decisions, the US Supreme Court advocated a punitive/compensatory multiple of no more than nine (“single digits”). In this case, where the court recognized it had more leeway, it lowered the multiplier that would be acceptable to one. The decision by the Supreme Court brings to an end a long and tortuous 13 year process that initially resulted in a federal jury award of $5 billion in punitive damages. The case was a class action filed on behalf of over thirty thousand fishermen and other interests. In 1994 the federal appeals court cut this amount in half. It is noteworthy to mention that Exxon has already paid $3.4 billion in clean-up costs and various other fines and penalties.

Joining Justice Souter in the majority 5-3 decision were Chief Justice John Roberts Jr., and Justices Antonin Scalia, Anthony Kennedy and Clarence Thomas. Dissenting were Justices Ruth Ginsberg, John Paul Stevens and Stephen Breyer. The minority dissenters took issue with what they believed was an overly restrictive punitive/compensatory multiplier. Justice Samuel Alito did not take part in the decision due to his ownership of Exxon stock.