A federal court in San Francisco last week threw out a five billion-dollar punitive damage award in the case of the Exxon Valdez oil spill. The court called the award excessive and ordered a lower court judge to reduce the amount.
In the 12 years this thing has been floating through the legal system, Exxon merged with Mobil and ExxonMobil’s spokesperson said the company should not have to pay any punitive damages whatsoever.
There are two types of damages a civil court may award: compensatory and punitive damages. Compensatory damages pay to make right what the guilty party has caused to go wrong; Exxon has paid $3 billion in compensatory damages in the Valdez case. Punitive damages are punishment for misbehavior; they are awarded to ensure guilty parties have learned their lesson and will misbehave no more.
The federal appeals court says $5 billion is too expensive and ExxonMobil can learn its lesson for less money. ExxonMobil says its lesson is learned and they don’t think they should have to spend another nickel. The question is: have they?
On March 24, 1989, the Exxon Valdez ran aground on Bligh Reef in Prince William Sound and spilled 11.3 million gallons of oil. The spill covered 10,000 square miles, an area equal to Connecticut, Rhode Island, Delaware and 25 Washington DCs combined. It contaminated 1,500 miles of shoreline – a length equal to the coast of California.
In September 1994, a jury in Anchorage made the $5 billion punitive damage award. On that day, Exxon stock rose by $1.50 a share. Why should that be? What lesson did the investment community draw from the Valdez tragedy? It was this: that Exxon could operate recklessly, create a catastrophe and walk away with a damage award that was little more than a pinch in the pocketbook for a corporate giant. If anything, $5 billion was too little.
But had Exxon learned its lesson? No, it hadn’t. In 1996, it was revealed that Exxon had cut a secret deal with seven commercial fishing companies whose business had been damaged by the Valdez spill. Instead of a long court battle, Exxon agreed to pay the fishing companies $750 million and the fishing companies agreed to kick most of the money back to Exxon. Exxon rigged it so it would be the beneficiary of its own settlement.
In 1997, the general manager of Exxon’s public relations firm, Hill&Knowlton, told a corporate audience that Exxon considered the Valdez spill to be more of a public relations problem than an environmental disaster.
But it was an environmental disaster. The Exxon Valdez oil spill killed 500,000 birds, 10 times more than any other oil spill in North America or Europe. A decade after the spill, only two of 26 species monitored by biologists had recovered. Eighty-six percent of the oil spilled – 9.7 million gallons – was never recovered. Prince William Sound looks clean on the surface today because the oil sank, but it continues to blight the ecosystem, fouling spawning beds and tainting the food chain.
Exxon, now ExxonMobil, has not learned its lesson and reducing the $5 billion punitive damage award makes more remote the possibility that the corporation will ever learn its lesson. Worse yet, the American people and the U.S. government have not learned our lessons from the Exxon Valdez spill.
If there was one bright spot in the oil-soaked gloom of March ’89 it was this: legislation to drill in the Arctic National Wildlife Refuge was steamrolling its way through the Senate when the Valdez foundered on Bligh Reef and the uproar that ensued pushed the issue off the screen for 12 years. Now ExxonMobil, Chevron, BP and Arco are again beating on the door of the wildlife refuge.
Let’s hope it doesn’t take another tragedy to preserve the refuge again. Let’s try to rely on common sense this time.
Unlearned Lessons
A federal court in San Francisco last week threw out a five billion-dollar punitive damage award in the case of the Exxon Valdez oil spill. The court called the award excessive and ordered a lower court judge to reduce the amount.
In the 12 years this thing has been floating through the legal system, Exxon merged with Mobil and ExxonMobil’s spokesperson said the company should not have to pay any punitive damages whatsoever.
There are two types of damages a civil court may award: compensatory and punitive damages. Compensatory damages pay to make right what the guilty party has caused to go wrong; Exxon has paid $3 billion in compensatory damages in the Valdez case. Punitive damages are punishment for misbehavior; they are awarded to ensure guilty parties have learned their lesson and will misbehave no more.
The federal appeals court says $5 billion is too expensive and ExxonMobil can learn its lesson for less money. ExxonMobil says its lesson is learned and they don’t think they should have to spend another nickel. The question is: have they?
On March 24, 1989, the Exxon Valdez ran aground on Bligh Reef in Prince William Sound and spilled 11.3 million gallons of oil. The spill covered 10,000 square miles, an area equal to Connecticut, Rhode Island, Delaware and 25 Washington DCs combined. It contaminated 1,500 miles of shoreline – a length equal to the coast of California.
In September 1994, a jury in Anchorage made the $5 billion punitive damage award. On that day, Exxon stock rose by $1.50 a share. Why should that be? What lesson did the investment community draw from the Valdez tragedy? It was this: that Exxon could operate recklessly, create a catastrophe and walk away with a damage award that was little more than a pinch in the pocketbook for a corporate giant. If anything, $5 billion was too little.
But had Exxon learned its lesson? No, it hadn’t. In 1996, it was revealed that Exxon had cut a secret deal with seven commercial fishing companies whose business had been damaged by the Valdez spill. Instead of a long court battle, Exxon agreed to pay the fishing companies $750 million and the fishing companies agreed to kick most of the money back to Exxon. Exxon rigged it so it would be the beneficiary of its own settlement.
In 1997, the general manager of Exxon’s public relations firm, Hill&Knowlton, told a corporate audience that Exxon considered the Valdez spill to be more of a public relations problem than an environmental disaster.
But it was an environmental disaster. The Exxon Valdez oil spill killed 500,000 birds, 10 times more than any other oil spill in North America or Europe. A decade after the spill, only two of 26 species monitored by biologists had recovered. Eighty-six percent of the oil spilled – 9.7 million gallons – was never recovered. Prince William Sound looks clean on the surface today because the oil sank, but it continues to blight the ecosystem, fouling spawning beds and tainting the food chain.
Exxon, now ExxonMobil, has not learned its lesson and reducing the $5 billion punitive damage award makes more remote the possibility that the corporation will ever learn its lesson. Worse yet, the American people and the U.S. government have not learned our lessons from the Exxon Valdez spill.
If there was one bright spot in the oil-soaked gloom of March ’89 it was this: legislation to drill in the Arctic National Wildlife Refuge was steamrolling its way through the Senate when the Valdez foundered on Bligh Reef and the uproar that ensued pushed the issue off the screen for 12 years. Now ExxonMobil, Chevron, BP and Arco are again beating on the door of the wildlife refuge.
Let’s hope it doesn’t take another tragedy to preserve the refuge again. Let’s try to rely on common sense this time.