The Case of environmental disaster and Exxon

You will have correctly surmised that the pending case involves Exxon's responsibility for a major accident off the coast of Alaska in March 1989. The story was widely reported at the time. It has stayed intermittently in the news ever since. The best account of the underlying incident appears in a brief from the Washington Legal Foundation:

"The Exxon Valdez ran aground in Prince William Sound on the night of March 24, 1989. The immediate cause of the grounding is not in dispute. As the ship was leaving Valdez harbor, Joseph Hazelwood (the ship's captain) explained to Gregory Cousins (the officer on watch) a maneuver that would be required to avoid ice detected in the ship's path. In violation of Exxon's written policy regarding operation of Exxon vessels, Hazelwood then left the ship's bridge and went to his cabin, leaving Cousins and a helmsman alone on the bridge.


"Cousins failed to steer the ship away from a reef, and the ship ran aground, spilling several hundred thousand barrels of oil into the Sound. Hazelwood had a history of alcoholism (a history of which Exxon was aware), and there was evidence at trial that he was drinking heavily on the night of the grounding."

Call it a calamity, a disaster, or a major misfortune, the spill was a terrible blow to both the region and the company. Exxon never sought to evade or minimize its responsibility. Over the past 18 years it has spent $2.1 billion in cleaning up the mess; it has paid private claims amounting to $300 million; and it has agreed to pay another $900 million for damages it caused to environmental resources.

The pending argument in the Supreme Court involves an insult added to the injury: Last March the 9th U.S. Circuit ordered the company to pay another $2.5 billion in punitive damages. Circuit Judges Mary M. Schroeder and Andrew J. Kleinfeld defended the unprecedented award: Granted, the company's conduct was "not intentional." The disastrous spill was "not willful." There are "several mitigating facts." And yes, Exxon "promptly took steps to ameliorate the damage it has caused."

Even so, "Exxon's reckless misconduct in placing a known relapsed alcoholic in command of a supertanker, loaded with millions of barrels of oil, to navigate the pristine and resource abundant waters of Prince William Sound was reckless and warrants severe sanctions."

With that rebuke, the two judges reduced a District Court award of $4.5 billion to the now-contested $2.5 billion. Judge James R. Browning, dissenting, would have awarded the plaintiffs the whole shebang.

Unless the Supreme Court overturns that verdict, four plaintiff seafood companies, two plaintiff marine enterprises and seven named individual plaintiffs — plus their eager-beaver lawyers — will be made filthy rich. As Exxon's own lawyers complain, it is "by far the largest award of punitive damage ever affirmed by a federal appellate court." King Croesus should have had such counsel.

Wholly apart from its preposterous award of punitive damages, the case raises important questions of maritime law. Exxon's counsel argue in their brief that this arcane field of law is governed by congressional statute — and Congress has never authorized the award of punitive damages in such cases. Constitutional questions also arise under the rubric of "due process." Here, punitive liability was imposed upon the shipowner for the misconduct of the vessel's master — misconduct that was "contrary to the shipowner's policy and hostile to its vital interests."

In their brief to the high court, Exxon's counsel cite to a Supreme Court opinion by Justice Joseph Story in 1818. The case involved an American merchant schooner with the lovely name of The Amiable Nancy. The ship and its crew were subjected to "gross and wanton outrage" by the crew of an American privateer. The marauders inflicted inexcusable damage, but the owners themselves, "having neither directed, nor countenanced, nor participated in the slightest degree" in the boarding and plundering, could not be held accountable.

With that unanimous opinion, the high court reduced the lower court's judgment of $6,827.60 to $774.21. That precedent sounds just about right for Exxon.

(Letters to Mr. Kilpatrick should be sent by email to kilpatjj@aol.com.)

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