SAN FRANCISCO, Nov. 7 — A federal appeals court ruled today that the $5.3 billion in punitive damages the Exxon Corporation was ordered to pay for the 1989 Exxon Valdez oil spill, the worst in the nation's history, was excessive, and told a judge to set a lower amount.
The decision vacates the award a jury in Anchorage ordered Exxon to pay in 1994 to 33,000 commercial fishermen, Alaska Natives, property owners and others harmed when the Exxon Valdez ran aground and spilled 11 million gallons of crude oil into Alaska's Prince William Sound.
Bill Scheer, of Valdez, Alaska, is covered in crude oil while working on a beach fowled by the spill of the tanker Exxon Valdez at Prince William Sound, April 13, 1989. The $5 billion punitive damages award against Exxon-Mobil Corp. in the 1989 Valdez oil spill is excessive, a federal appeals court ruled Wednesday, Nov. 7, 2001, ordering a judge to determine a lesser amount. (AP Photo/John Gaps III, File)
Exxon, which has since merged with Mobil to become the Exxon Mobil Corporation, had repeatedly appealed the jury award, arguing that it should not have to pay the punitive damages because it had already paid damages as ordered by Congress. A district court in Alaska rejected the company's appeal in 1995, and the United States Supreme Court rejected its request for a new trial last year.
But today, a three-judge panel of the United States Court of Appeals for the Ninth Circuit, ruling on oral arguments made in 1999, said that while punitive damages could be awarded for the spill, which devastated 3,000 square miles and severely damaged one of the world's most sensitive ecosystems, the $5.3 billion was excessive in light of recent Supreme Court rulings on damage awards. Under those rulings, Exxon Mobil might be ordered to pay up to about $1.6 billion, or less than one- third of the original award.
Exxon Mobil had no immediate reaction to the decision, a company spokeswoman said.
In Alaska, the organization representing the Prince William Sound fishermen affected by the spill said there was "shock and surprise" at the ruling.
"There's some disappointment around here," said Sue Aspelund, executive director of the Cordova District Fishermen United. "People's lives have been on hold a long time, since 1989, trying to get this thing resolved."
Environmental groups said they were dismayed by the ruling.
"We feel that Exxon is getting let off the hook," said Gary Skulnik, a spokesman for Greenpeace. "They have committed environmental atrocities, and they are not being made to pay the price for it."
The Ninth Circuit panel, in what sounded like an effort to deflect such a reaction, wrote, "This is not a case about befouling the environment."
"The verdict in this case," it said, "was for damage to economic expectations for commercial fishermen."
The panel noted that the Supreme Court in 1996 set forth for the first time factors that should be considered in reviewing whether punitive damages were excessive, including the reprehensibility of the defendant's conduct, the ratio of the award to the harm inflicted on the plaintiff, and the difference between the award and the civil or criminal penalties in comparable cases.
Judge Andrew J. Kleinfeld, in writing the unanimous decision, noted that Exxon mitigated its reprehensibility by spending more than $2 billion to remove the oil from the water and adjacent shores, "and even from the individual birds and other wildlife dirtied by the oil." Exxon also "began settling with property owners, fishermen and others whose economic interests were harmed by the spill," Judge Kleinfeld wrote, spending $300 million on voluntary settlements "prior to any judgments being entered against it."
Finally, he noted, the ratio of the $5.3 billion in punitive damages and the $287 million in compensatory damages the jury awarded was more than 17 to 1, a figure that would not get by the Supreme Court.
While the appeals panel did not set an amount for the Alaska district court to order, it noted that the Supreme Court set a ratio of about four to one in punitive awards to actual harm to the plaintiffs. The panel noted that the district court had determined the actual monetary damage to the plaintiffs as $288.7 million to $418.7 million, which would bring the punitive damages to, at most, about $1.65 billion.
The Exxon Valdez spill occurred shortly after midnight on March 24, 1989, when the tanker ran aground on a reef while trying to steer away from icy waters. The Anchorage jury found that the tanker's captain, Joseph Hazelwood, was reckless for leaving the bridge as the vessel neared the reef, which was shown on navigation charts.
The jury also found recklessness by Exxon for allowing Mr. Hazelwood to be in charge of the ship when the company knew that he was an alcoholic, that he had begun drinking again and that he was drinking on board their ships.
The oil spill disrupted entire fishing communities, forcing shops to close, fishermen to declare bankruptcy and people to move from their hometowns. (While many people did receive settlements from Exxon, many others did not.) The spill also killed 250,000 birds and thousands of marine mammals, affecting 20 animal species. Ten years later, only two species, the bald eagle and the river otter, had fully recovered, while 10 had shown no significant recovery.
While public outrage over the spill forced President George Bush to abandon his drive to allow drilling in the coastal plain of Alaska's Arctic National Wildlife Refuge, the plan has been renewed this year under the administration of his son.
Copyright 2001 The New York Times Company