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)

Want more consumer news? Visit our parent organization, Consumer Reports, for the latest on scams, recalls, and other consumer issues.