The Supreme Court is currently considering whether to halve the punitive damages levied against Exxon for its massive 1989 oil spill from the Exxon Valdez tanker, from the current $2.5 billion to something more like $1 billion. Exxon claims the higher number amounts to excessive punishment. According to the New York Times, the decision may come down to a tie with four justices on either side; Justice Alito is not participating because he owns Exxon Mobile stock. The Exxon Valdez disaster “caused a 3,000-square-mile oil slick and still affects Alaska’s fisheries after nearly 19 years.”
In case you think $2.5 billion could bankrupt the company, The Salt Lake Tribune points out that Exxon Mobile’s profit in the last quarter of 2007 was $11.7 billion, and that “the award represents less than three weeks’ worth of Exxon profit.” (Update: Consumerist reader oeolycus points out that several newspapers are misrepresenting Exxon’s profit: “Their NET INCOME was $11 billion. Net profit is closer to $5 billion.”) In this case, “excessive” seems to be related to what Exxon claims is appropriate under maritime law. Additionally, Exxon says it’s already paid “$3.4 billion in criminal fines, cleanup costs and compensation payments.”
The punitive damages would be dispersed to about 33,000 Alaskans, and Exxon is seeking to cut the per-person award from $75,000 to $30,000.
The New York Times’ coverage of yesterday’s argument is somewhat exciting to read, with Justice Ginsberg—who sympathizes with the plaintiffs—subjecting “Exxon’s lawyer, Walter Dellinger, to a rapid-fire series of questions about his central arguments,” and arguing with him about maritime law from as far back as 1818. By contrast, the Exxon-sympathetic Justice Breyer argued over how much culpability a company should accept for its employees’ actions:
“This is a very dramatic accident. It involves oil spills, and they cause an enormous amount of trouble. But there are accidents every day, and ships are filled with accidents.”Given that punitive damages have not been the normal rule in maritime cases, Justice Breyer continued, “then it will be a new world for the shipping industry and for those who work on the ships” if the courts begin to impose them. “What principles do you have to suggest, if any,” the justice asked Mr. Fisher, “for creating a fair system that isn’t just arbitrary?”
If the Supreme Court reaches a tie on the case, the current award stands and Exxon will have to find another way to screw over the Alaskans.
“Exxon Valdez payout could be cut in half” [AP via Salt Lake Tribune]
“Justices Take Up Battle Over Exxon Valdez “ [New York Times]
(Photo: Jack Smith/Associated Press)
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They did a horrible job at clean up, as the beaches and waters are still dirty. There’s still oil under the rocks you turn over at seaside, you can’t eat the shellfish, and the livelihood of thousands of fishermen was taken away. $2.5 billion isn’t enough, and $0 is so astoundingly arrogant, it shows what little regard Exxon has for the people it has harmed. The original punitive damages should stand, and Exxon should be tasked with undertaking a thorough cleanup.
Also, if you think more profits for oil companies will result in lower gas prices, you are living in an extreme fantasy.
@crankybureaucrat: Then to my point – if Alaskans historically support Conservative Republican ideology that favors large corporations, can they really be pissed when the result of that support in fact favors Exxon over their own economic interest?
@johnva
I made no statement on whether or not they should pay. They should–and they should make good on their cleanup promise.
But inaccurate news reporting is why there is so much mass confusion on issues like this. No matter if the issue is justified or good, a news organization shouldn’t inaccurately report the facts to fan the flames of outrage. It’s so readily apparent that Exxon did NOT make 11 billion in profit, but I count 7 or 8 news organizations on the front page of Google claiming that.
They do this every time companies post profits. I always see this mixup of income vs. profit.
@Tux the Penguin: From wikipedia: “All single-hulled tankers around the world will be phased out by 2026, in accordance with the International Convention for the Prevention of Pollution from Ships, 1973.[18]“
@royal72: Agreed. I say sure, let them only pay half the fine, and in turn, they can sell us gas at half the price. Then the people DO win!
The Supreme Court should reinstate the previous amount, and Exxon should be held liable for civil damages to those affected by the spill. This whole farce is just another indication of how the mighty have already fallen. It’s only going to get worse, people.
@randombob: Forget hydrogen fuel cells – less efficient and more expensive than batteries. Just get a pure plug-in car (or plug-in hybrid).
@bustit22:
Yes. I don’t like people’s lives being destroyed by someone who isn’t liable.
If I destroyed an entire bay, you better bet I’d be fined to clean it up and forced to reimbursed those I hurt.
If the supreme court rules in favor of Exxon, I think the only tactic that can be used against Exxon is negative publicity. Someone should organize Exxon Awareness Day.
@royal72: Punitive my friend, as in PUNISHMENT. And how do you think Exxon’s competitors, you know, the ones who didn’t cause the world’s worst environmental disaster, would feel about Exxon getting off the hook based on your logic?
And why exactly would this raise prices? Wouldn’t this be an opportunity for competitors to gain market share based on temporarily lower relative operating costs?
@jeff303: as of right now, but you have to remember the fuel cell technology is still relativly new, give it another 5-10 years of development. Hydrogen fuel cells are very efficent but the kicker is the production of the hydrogen it uses right now it takes more energy to create the hydrogen then it saves thru the use of the fuel cell.
Wait… OUR Supreme Court is considering putting over a billion dollars back in the pockets of a corporate juggernaut like Exxon? Say it ain’t so!
I am SO moving out of this country. The USA is dead.
@selectman: how exactly is the oil industry, as a whole, competitive rather than a monopoly? as a group, they set the cost of oil to enth degree to get as much for it as they can, while making sure there’s enough demand to support the market.
same thing with the cable/satellite industry. short of squabbling amongst themselves for a few extra customers, do you really believe it’s a competitive market for the consumer?
Obviously no one here understands jackshat about where oil companies make their money. Big oil profit center is the extraction and refinement of oil (which is used for a lot more than gasoline) and natural gas. Consumer gasoline is a LOSS for (most) oil companies. They make far more off your purchases of cigarettes, milk, and beer than filling up your suburban (or prius). Also please take a look at profit MARGIN you accounting wizards. I think you will find it far less than that of banks, pharma, and tech.
Moreover, oil companies are taxed atrociously for so-called “Windfall profits”. This is not the case for any other industry.
As for the court decision, it should be noted that Exxon paid 300mm in a class action for the aforementioned 30,000 Alaskans (outside of the cleanup costs etc). Additionally, every justice said that they would be in favor of cutting the punitive damages, even your (the collective) favorite Clinton appointees! Read more at the LA Times: [tinyurl.com]
I still wait for the day the Consumerist stops tying profit (what companies are in business for!) to anti-consumerism.
@bustit22: Taxpayers pay as well. Here’s something funny about the tax code. Exxon can take whatever they pay out in punitive damages in a summary judgment as a business expense. They get a HUGE tax shield, dollar for dollar, against earnings. So, I dunno why they are even fighting it. You’re talking $2.5B today (it WAS big money to them in 1988, it isn’t anymore), and they get to keep that (rather than pay taxes on $2.5B) much more in April, 2009. Improves their balance sheet and their other financials, thereby improving stock price.
Meanwhile, there is a tax payment shortage on the judgment amount, which will be made up by all the rest of us. Including the Alaskan settlement recipients. Who will all likely be moved into a higher tax bracket when the income is considered. But yeah, they pay, and we shoulder the load through higher gas prices (to keep earnings up) and higher taxes or fewer services (to keep the deficit stable). Everyone loses.
Which isn’t to say they shouldn’t just pay the damn thing already.
“then it will be a new world for the shipping industry and for those who work on the ships”
Uhm, Justice Breyer. It would be a world in which the shipping industry doesn’t ship with rusty, leaky hulls or alcoholic captains. In other words, they act like any other industry that is subjective to punitive damages. duh.
So why don’t we pass a law saying that Conservative Supreme Court justices have to live on the oil-ruined shores in-between court sessions? And eat only food that is caught from there? Bet they’d change their vote in a NYC minute.
The point that is being missed by so many is this is really an attempt to put another chink in the fabric of punitive damages, as many corporations have been appealing cases and lobbying for years that punitive damages are unconstitutional or illegal, and these arguments are gaining traction.
@savvy999: I am with you there on the arbitration.
Come on ExxonMobile. Pay the fine already- you just had a bonus year in 2007 so dig in and get it done with…
The amount Exxon “says” it paid for the clean up, did NO good. There is still oil seeping up and killing fish,clams, birds, otters, seals and plant life…Prince William Sound will never be the same in “our” lifetime and maybe not the next lifetime either. The least Exxon could do is pay those that have lost their life of being able to fish, dig clams and kill ducks to eat as they have done for hundreds of years..Exxon has taken that away.Then there are the fishermen that lost their way of life…Exxon ruined a way of life…The coastal way of life has been deleted thanks to a drunken Capt. that was put aboard a ship for the Exxon Mobile Co…A Capt. with a history of excessive drinking. A history that Exxon was well aware of.
@BillyMumphry:
I am one of those 33,000 Alaskan’s that you SAY has been paid 3 million….Check my bank account.!! The 33,000 have been paid NOTHING!! We have waited for almost 19 years for the promised that Exxon made at a meeting in Cordova. That promised was ” We ( Exxon ) will make you whole again”….We are still waiting while Exxon goes on making huge profits and crying “too excessive”!! So apparently you are the one that does not know jack sh- -!!
@mycroft2000:
Read a book called ” Exxon Valdez 18 Years and Counting” by Kellie Kvasnikoff if you really want to know the things that Exxon has done world wide!! It will make you sick.
@LyndaK:
That should have been 300 million as was stated by Billy Mumphry….Could have been 300 Billion, the 33,000 Alaskans have still received NOTHING…
Admiralty law…completely different. Tons of fun.
@choinski: That’s a pretty good point. Frankly, I feel that many people don’t view it this way. In the past, the government of AK has looked out for the residents AND sold out to big business. Usually to the detriment of big business. (Just look at the new tax policy for operating in Alaska–the most costly in the world). Here, corporations that operate in the state have been forced to prove their worth (read: pay out the nose) to Alaska and its residents. I can’t say I speak for the whole state but those who are the most upset are those who make their living on the water. These folks, usually fishermen, tend to be fiercely independent and more liberal than your stereotypical Alaskan republican.
This is an interesting political place. As a liberal federal employee it’s doubly entertaining.
Well if you know anything about class actions, Lynda, you should know to look for about $20. Ask your lawyer about the rest. Please note that calling St. Barth’s is long distance.
BillyMumphry wrote:
No. The articles I’ve read—including the LA Times article BillyMumphry references in the comment quoted above—make no mention of what side Justices Stevens and Thomas are on. Considering the New York Times and LA Times both mention a chance of a tie, the implication is Stevens and Thomas are both in support of leaving the damages as they are. But we don’t know for certain.
Additionally, there are only two Clinton appointees, Ginsburg and Breyer. Breyer is in favor of reducing the amount, while Ginsburg isn’t.
Although the media is spinning it as a potential tie, it looks more likely to come down to a 5-3 vote in favor of reducing the amount (provided Stevens and Thomas side with Ginsburg, which is a total guess at this point).
Other than those two Justices, everyone else on the Supreme Court was appointed by a Republican president—either Ford, Reagan, or one of the two Bushes.
@BillyMumphry wrote:
Yes. Class action lawsuits = deeply broken.
@oeolycus: Re. your net income point — thanks for the info. I’ve updated the post.
Yeah, the oil companies may be making a large profit, but that money is not just going into thier pockets. All of the oil companies reinvest most of thier profits in finding new technologies to drill deeper for more oil. It’s the same thing as a computer company taking it’s large profit and reinvesting that money to make faster computers. i don’t hear anyone bitching about Apple’s or Microsoft’s large profits in the last quarter.
@ELWmusic1: Ha ha ha. Hee hee hee. Ho ho ho.
@ELWmusic1:
“Almost 15 years after the spill, a team of scientists at the University of North Carolina found that the effects are lasting far longer than expected. The team estimates some shoreline habitats may take up to 30 years to recover.”
Microsoft/Apple never fucked the environment this bad due to negligence. I really hope all these people defending Exxon are astro-terfing and not really that stupid.
@brent_w:
They haven’t done it again, have they?
Still…we’re talking about one of the three biggest non-government industries in the state of Alaska stabbing the other two biggest industries (fishing and tourism) right in the fucking heart. There is nothing wrong with making them pay, and pay big.
@Trai_Dep: God pod, eh? Hm. Sounds like it’d be a good target. If I was Exxon, I’d be on the lookout for pissed-off Alaskan fishermen w/ rocket launchers.
I’m not sayin’…I’m just sayin’.
@Trai_Dep: Amen to that, brother. “Reinvesting” my Aunt Edna.
And @BillyMumphry, don’t you have an Exxon board meeting to go to already?
Making money is fine by me, but when you get to screw over the environment on a regular basis as well as get the gubbamint to squash research into anything (alternate energy?) that would hurt your bottom line…you have a shall we say unfair advantage and are worthy of our ire.
In other words, who gives a shit if it was 10% or 4%, you earned it through having the gubbamint in your back pocket so you don’t have to play fair, so go DIAF.
@oeolycus: I think a lot of this analysis is misguided, but a mistake to support my view is still a mistake. What on earth are you talking about? As close I can tell you are subtracting out capital expenditures from net income which is incorrect on numerous levels. Please let me know. Thanks.
A billion here and a billion there, then soon we’re talking about real money.
@LionelEHutz:
If this hadn’t been an instance of one multi-billion dollar industry shitting all over two other multi-billion dollar industries, we’d probably be looking at much smaller numbers.
Of course EXXON can’t afford it now…they have to send that money to help pay for John McCain’s campaign. You don’t think a Republican Supreme Court would short change a Republican politician’s chances of election ??