The Exxon Valdez Decision

oil birdThis summer, the Supreme Court released rulings on issues from the death penalty to gun control. One death that the Court failed to understand is the murder of Prince William Sound. This case began, of course, with the Exxon Valdez oil spill, the worst environmental disaster in American history. Thirteen hundred miles of shoreline were destroyed in 1989.

This event loomed over environmentalism in the 1990s as the prototypical example of petroleum gone wrong. Images of gulls, otters, and beaches covered in black lay like an oil slick on every video, magazine, or book that discussed environmental problems. The story of the Valdez spill ended this summer, and its final twists demonstrate that even though the environmental movement has built momentum and awareness, the Justices of the Supreme Court have not absorbed environmentalism's understanding of the value of an ecosystem. In the end, the justices failed to adequately value the destruction of Prince William Sound.    

The court ruled correctly on the first issue of the case - was Exxon responsible for the spill? Exxon suggested the only fault was with Capt. Joseph Hazelwood, the drunken Valdez captain who'd left the bridge at the critical moment leading to the spill. The legal question is whether Exxon should be held liable for the actions of an employee who was violating company policy by drinking on duty. The court found that Exxon knew the captain was an alcoholic, and their decision to allow him to continue in his position meant they had to take responsibility for his actions.

Having resolved the question of whether Exxon bears legal responsibility for the spill, the Court turned to the issue of financial reparation. Exxon has already spent millions on direct remuneration for damages, and billions on clean up from the spill. This money, used for direct damages, was held to be appropriately spent.

The second sum of money Exxon contested, the far larger sum, was punitive damages. Punitive damages are intended to deter an agent from committing the crime in the future. According to Slate, Exxon argued that because they "did nothing malicious, nothing intentional, and that 'the company didn't stand to make $1 profit' from the spill, that they had already suffered enough."

Exxon claimed that because the spill was an accident, and not an intentional action intended to make money, they had no incentive to repeat the incident. Exxon, according to their lawyers, didn't need to be scared away from further spills, because they would avoid them on their own.

In response to this, those injured by the spill pointed out that Exxon's placement of an alcoholic captain at the helm constituted misconduct. Exxon had increased profits by not spending sufficiently on maintaining the safety of their operations. Punitive damages would ensure that Exxon alter their business practices to avoid future spills.

How much should those punitive damages be? The original jury that heard the case ruled it ought to be $5 billion, and a higher court reduced the punitive damages to $2.5 billion. How much is $2.5 billion for Exxon? The plaintiffs calculated that Exxon makes $2.5 billion in profits every three weeks. 

How much has Exxon paid already? $507 million to compensate the 32,000 native Alaskans, averages about $15,000 in compensation per person. Exxon has spent $3.4 billion on fines and clean-up. About 4 weeks of profit. 

So how did the majority of the Court find in this case? Justice Souter, writing for the 5 judges of the majority, presented a gripping description of the actions of the captain and his crew that led to the crash. The justice narrates events closely, telling how many drinks the captain had (5 double vodkas), and what his blood alcohol content was (.241). Justice Souter recounted where Hazelwood  stood, when he went below decks, who was left at the bridge.

money versus environmentWhen the decision proceeds to describing the events after the spill, we lose the heart-wrenching detail. Justice Souter lists numbers. He lists the numbers of the laws that Exxon broke, and he lists the costs of the clean-up. What Justice Souter didn't list was the destruction to human life caused by the spill.

What was destroyed by the Valdez spill? The Prince William Sound, which was home to not only a vibrant marine ecosystem but also a precious human community as well. The video below shows a slice of life in that human community. With no roads in or out, the people of Cordova, in Prince William Sound, could leave the keys in their car's ignitions. But what was lost here is not just another rural village, but also a vital part of our nation's food system. As they say "The world is hungry and we feed them good food - the best.  And that's really precious too." Instead of salmon, they have nothing but "Beaches and bays full of more oil than you can imagine."

 

 

The video was taken 15 years ago, in 1993. Since then, has Exxon cleaned up the beaches?

In the video below, high school students pour water on a supposedly clean beach, and watch an oil slick rise to the surface.

 

Instead of mentioning the destruction of this place, Justice Souter's learned opinion gave a remarkable history of punitive damages stretching back the code of Hammurabi, and including the creation of the American Constitution, and Anglo-American precedents and common law. He reviewed various American states' legal policies on punitive damages, as well as various nations' policies on punitive damages. He notes that many states and nations do not offer this opportunity for retribution and deterrence.  Justice Souter expressed the Court's disgust and disagreement at the vast differences in punitive awards granted by different juries when considering cases which share basic facts. The court, he says, would like to eliminate unpredictable punitive awards by instituting more rigorous standards.

What should that standard be? Justice Souter, and the majority, settled on a one-to-one ration between damages and punishment. As Exxon had paid $507 million dollars in compensation, they should pay no more than $507 million dollars in punitive damages.

There is no adequate justification given for why punitive damages should bear a specific relation with compensatory damages. Justice Souter even points out that 'punitive damages are designed to punish and deter, they ought to take into account the defendants' financial condition and the magnitude of harm caused.'

The defendants' financial condition is flush, and the harm caused here massive. In his dissent, Justice Stevens wrote that "In light of Exxon's decision to permit a lapsed alcoholic to command a supertanker carrying tens of millions of gallons of crude oil though the treacherous waters of Prince William Sound, thereby endangering all of the individuals who depended upon the sound for their livelihoods, the jury could easily have given expression to its moral condemnation of Exxon's conduct in the form of this award."

For the final analysis of this decision, lets turn simply to Forbes magazine. A journal explicitly of wealth, the magazine gives us an unfettered analysis from the point of view of big business. The title of the article is: Exxon Ruling Big Win for Business. The article reads in part:

"ExxonMobil officials couldn't immediately be reached for comment. It's certainly a bittersweet victory--$507.5 million is a hefty sum for anyone--but consider what might have been had the justices let stand the lower court's $2.5 billion penalty award. What ExxonMobil must now pay also pales in comparison to the company's record first-quarter profits of $10.9 billion on $116.8 billion in revenues." -Forbes

Is this ruling enough to punish and deter Exxon? Does this ruling adequately compensate the people and ecosystems whose lives have been irrevocably altered by the spill? I'm afraid not.

Further Reading:

 

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  • Posted on July 15, 2008. Listed in:

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