On Wednesday, June 25, 2008, the United States Supreme Court failed to uphold its duty to the public good with a questionable decision in favor of Exxon Mobile, an energy conglomerate ranked 3 on Forbes’ 500 list¹. We have here another case of the U.S. government supporting corporations, possibly because of kickbacks and lobbying. Unfortunately, people like you and me cannot afford to lobby politicians with virtually infinite money.

While Alaskan Natives and local fishermen have waited 20 years for their rightful justification, they instead were met by a slap to the face by the Court and its newest friend, Exxon Mobile.

The Situation

In March 1989, the oil tanker Exxon Valdez struck Bligh Reef in Prince William Sound off the coast of Alaska, steered by a drunken shipman. While the spill was relatively smaller than most other oil spills, the remote location wreaked havoc on local wildlife, including salmon and sea otters. As a result the Exxon Valdez oil spill ranks as the largest man-made environmental disaster to occur at sea.

To put the magnitude of the oil spill in perspective, consider that:

• 500,000 seabirds died
• 1,000 sea otters died
• 250 bald eagles died

The affects of the spill are still felt today according to a University of North Carolina study². The research team estimated that the area would take more than 30 years to recover, an assertion that Exxon executives deny (however, the National Oceanic and Atmospheric Administration supports the University’s estimate).

The Exxon Valdez Litigation Timeline

1994

The 32,677 plaintiffs against the oil company have been waiting since 1994 for their compensation. The plaintiffs include “former Alaska governors, the current governor, the state’s congressional delegation, supertanker captains, environmentalists, state lawmakers, Alaska Natives and experts”³

In the Alaskan case of Baker v. Exxon, the jury awarded $287 million for actual damages and $5 billion for punitive damages against Exxon. The $5 billion punitive damages were equal to one year’s profit at that time.

Advertisement (continue below)

Exxon appealed this decision as they are rightfully permitted.

2002

The Baker v. Exxon decision was appealed to the 9th U.S. Circuit Court of Appeals. Judge Russel Holland reduced the punitive damages to $4 billion as not to be “grossly excessive.”

However, a similar case had passed meanwhile. Exxon therefore appealed Judge Holland’s decision. But after reviewing the precedent case, the judge increased the punitive damages to $4.5 billion with interest.

Exxon appealed this decision as they are rightfully permitted.

2006

The 9th U.S. Circuit Court of Appeals reviewed the case again and lowered the punitive damagers by nearly 50% to $2.5 billion citing a limit set by the Supreme Court on punitive damages.

Exxon appealed this decision as they are rightfully permitted.

2008

Finally, the U.S. Supreme Court heard the appeal on June 25, 2008. Justice David Souter issued the 5-3 decision to lower the punitive damages to only $507.5 million, a limit established by compensatory damages⁴.

Exxon executives maintained that the company had already paid more than $2 billion in cleanup and a further $1 billion in criminal charges. Seems fair. But when you consider that Exxon makes nearly $40 billion in annual revenue (the largest profit in U.S. history), the damages are more like a drop of oil in a bucket⁵.  The company can recuperate the punitive damages in about an afternoon of oil drilling.

Exxon responded by issuing a weak 154-word Statement by CEO Rex W. Tillerson on June 25, 2008, citing that the company has already paid billions in damages and that situation has been cleaned up according to a 1992 U.S. Coast Guard study. Mr. Tillerson closes the case with his statement⁶.

The Problem

Aside from the environmental damages, the U.S. Supreme Court backed America’s third largest corporation against the people (in this case, Alaskan fishermen who have lost their livelihood as a result of diminishing wildlife populations).

We cannot only blame Exxon for appealing the court decisions as they are legally permitted, plus they are a corporation that seeks profits. However, the Supreme Court is a culprit for essentially creating law (a duty traditionally reserved for the Congress).

The Supreme Court’s slap on the wrist to Exxon will teach the big oil companies a lesson. This is what’s wrong with America.

So here’s the final lesson to American corporations: it is fine to ruin whatever you want, as long as your wallet is open. Yesterday’s Supreme Court ruling finally turns one of the darkest pages in American history to an even darker page, dripping with black gold.

Advertisement

References

1. Forbes 500s [↩]
2. Williamson, David. “Exxon Valdez oil spill effects lasting far longer than expected, scientists say“, UNC/News, University of North Carolina at Chapel Hill, 2003-12-18. [↩]
3. Supreme Court Slashes Punitive Award in Exxon Valdez Oil Spill by 80% [↩]
4. SCOTUSblog [↩]
5. Exxon Mobil sets annual profit record. [↩]
6. Statement by ExxonMobil Chairman and CEO, Rex W. Tillerson, Regarding the Valdez Supreme Court Ruling [↩]