In June the United States Supreme Court cut the amount of punitive damages awarded in the Exxon Valdez case. You will remember that the Valdez was the oil tanker wrecked off the coast of Alaska in 1989, causing 11 million gallons of oil to spill in the Prince William Sound. To date this is the worst oil spill in United States history. Exxon faced both criminal and civil actions as a result of the oil spill. Exxon appealed from the civil action, in which the jury awarded $5 billion (later reduced to $2.5 billion) in punitive damages against Exxon and for the Plaintiffs, commercial fishermen and native Alaskans whose livelihood was destroyed by the oil spill. The United States Supreme Court reduced the $2.5 billion in punitives to $507.5 million, the same amount as compensatory damages. The reduction in punitives was based on the Supreme Court’s review and interpretation of maritime law regarding punitive damages.

The evidence that had been presented to the jury awarding the damages showed that the captain of the Exxon Valdez was intoxicated as he commanded the ship. Testimony at trial showed that the captain, Joseph Hazelwood, was an alcoholic in relapse who drank in bars, hotels, restaurants, various parking lots and ports, airports, airplanes, and on oil tankers, and that his alcoholism was known by members of Exxon management. Although Exxon had a policy prohibiting crew from serving on its ships within four hours of consuming alcohol, no action was taken to discipline Hazelwood or remove him as captain of the tanker. On the night of the accident, Hazelwood drank at least five double-vodkas before boarding the ship and his blood alcohol is estimated to have been about .241 at the time of the disaster.

Exxon posted a $40.6 billion profit for 2007 and had the highest quarterly results for any corporation in United States history in February 2008. Considering the enormous wealth of this corporation, the amount of punitive damages remaining against Exxon will doubtless have little if any deterrent effect on Exxon’s future conduct. In spite of its record earnings, Exxon has recently filed a request with the United States Supreme Court asking it to declare that it does not have to pay post-judgment interest on the reduced judgment. The victims are asking for interest which would amount to about $500 million. I believe they are entitled to receive it.

The effect of this decision on punitive damages in other cases is being debated with no real answer at this point. It’s my belief that the Exxon case will not have the effect that many in Corporate America hope it will have. Only time will tell if that assessment is correct.