The U.S. Supreme Court reduced Exxon’s $2.5 billion punitive damages penalty to $500 million in June 2008, nearly 20 years after the company’s oil tanker caused one of the worst environmental disasters in American history.
The ruling allowed victims of the 1989 Exxon Valdez oil spill in Alaska to receive punitive damages, but cut the amount they could collect by $2 billion, according to History.
The decision came after years of legal battles involving fishermen, Native Alaskans, landowners, businesses and local governments affected by the disaster. These groups had sought a larger payment for the damage to their communities and livelihoods after approximately 11 million gallons of crude oil spilled into Prince William Sound on March 24, 1989.
The Supreme Court ruled 5-3 that Exxon should pay $500 million in punitive damages. According to CBS News, Justice David Souter wrote the majority opinion, explaining that under federal maritime law, punitive damages should not exceed the amount awarded for the victims’ economic losses.
Today, starting at 12:30pm ET on C-SPAN 3 – a look back 30 years to the 1989 Exxon Valdez oil spill in Alaska. This clip from our recent @CSPANCities visit. pic.twitter.com/oHqy8jRnbv
— American History TV (@cspanhistory) March 23, 2019The court used a one-to-one limit between punitive damages and compensation. In this case, the company had already been ordered to pay about $500 million in compensation, making that amount the limit for additional punitive damages.
Justice Samuel Alito did not take part in the decision because he owned Exxon stock.
The ruling disappointed many of the people who had waited years for the case to end. Under the earlier $2.5 billion judgment, nearly 33,000 Alaskans could have received around $75,000 each. With the Supreme Court’s decision, their expected share fell to about $15,000 per person.
The disaster began shortly after midnight on March 24, 1989, when the oil tanker Exxon Valdez struck Bligh Reef in Prince William Sound, Alaska.
The ship had left the port of Valdez on March 23, carrying approximately 53 million gallons of crude oil from Alaska’s Prudhoe Bay. After hitting the reef, its damaged hull released an estimated 11 million gallons of oil into the surrounding waters.
The oil spread across the water and eventually affected about 1,200 to 1,300 miles of Alaska’s coastline.
The spill caused serious damage to wildlife and marine habitats. Hundreds of thousands of seabirds and marine animals died, including sea otters, seals, bald eagles and killer whales. The contamination also affected fish populations and threatened the fishing industry that many Alaska residents depended on for income.
Thousands of people took part in the cleanup. More than 11,000 Alaska residents, along with Exxon employees and federal response teams, worked to remove oil from the affected areas.
Cleanup efforts included removing oil from the water, washing polluted beaches and rescuing animals covered in crude oil. Exxon reported spending billions of dollars on cleanup, habitat restoration, personal damages and other costs connected to the disaster.
The company also faced criminal and civil cases following the spill. In February 1990, the U.S. Department of Justice brought criminal charges against Exxon Corporation and its shipping subsidiary for violations of several environmental laws, including the Clean Water Act and the Migratory Bird Treaty Act.
In October 1991, a federal court in Anchorage accepted guilty pleas from Exxon and approved a settlement involving criminal penalties and restitution. The government and Alaska also reached a civil settlement with the company over cleanup costs and damage to natural resources.
The legal battle over punitive damages continued long after the initial cleanup.
An Alaska jury originally decided that Exxon should pay $5 billion in punitive damages.
Exxon continued to challenge the ruling, asking the Supreme Court to remove the punitive damages altogether. The company argued that it had already spent approximately $3.4 billion responding to the disaster through cleanup expenses, penalties, claims and other payments.
When the Supreme Court reviewed the case, it agreed that Exxon could still be required to pay punitive damages. However, the justices ruled that the amount should not be higher than the compensation already awarded for the victims’ financial losses.
Justice Souter said a penalty should be “reasonably predictable” in its severity.
The ruling also drew criticism from members of the court. Justice John Paul Stevens supported keeping the $2.5 billion award, while Justice Ruth Bader Ginsburg argued that the court was engaging in “lawmaking” by setting a limit on punitive damages.
Ginsburg wrote, “The new law made by the court should have been left to Congress.”
Justice Stephen Breyer also opposed the strict one-to-one limit between punitive damages and compensation.
CBS News chief legal analyst Andrew Cohen described the decision as a sign of the court’s business-friendly approach. He said the ruling would also create a precedent that could make it harder for other plaintiffs to win large punitive damages awards in future cases.
For the people affected by the Exxon Valdez disaster, the decision marked an important point in a legal fight that had lasted nearly two decades. However, the reduced award meant that many victims would receive far less than they had expected.
Related: A Michigan man paid $30 for a Gertrude Abercrombie painting at an estate sale; it sold for $1,352,600 at auction this month
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