Supreme Court Considers Exxon 'Valdez' Fine

The United States Supreme Court hears arguments today as Exxon appeals $2.5 billion punitive damages from the 1989 Valdez spill in Alaska. Patience Andersen Faulkner, an Alaska native, explains why she thinks the oil company should pay.

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ALISON STEWART, host:

Today, the U.S. Supreme Court hears a case that's been in the court system for years. It's about whether ExxonMobil should pay $2.5 billion in punitive damages for the Exxon Valdez oil spill. Remember, that happened 19 years ago now. In a few minutes, we'll talk with one of the more than 30,000 plaintiffs in the case. But before we get to that, here's a primer on the case from NPR legal affairs correspondent Nina Totenberg.

NINA TOTENBERG: On March 24th, 1989, the Exxon Valdez, traveling in the dead of night, struck Bligh Reef in Prince William Sound, Alaska. Captain Joseph Hazelwood, who'd abandoned the bridge during the treacherous crossing, first reported the accident to the Coast Guard.

Captain JOSEPH HAZELWOOD (Exxon Valdez): Yeah, this is the Valdez. We've - we should be on your radar there. We've fetched up (unintelligible) ground north of Goose Island off Bligh Reef, and evidently, we're leaking some oil.

TOTENBERG: The oil spill, in fact, turned out to be the largest on record in North America. Eleven-million gallons of crude oil spread across 600 linear miles, larger than the distance from Washington, D.C. to Atlanta. For Alaska and its citizens, the spill was an ecological and economic disaster of huge proportions. And for Exxon, it was a public-relations nightmare as evidence mounted that the captain had been drunk, and not for the first time.

A week after the disaster, Exxon's CEO, Lawrence Rawl, said of the captain.

Mr. LAWRENCE RAWL (Chief Executive Officer, Exxon): He was drunk.

TOTENBERG: And Rawl acknowledged that the corporation had known about Hazelwood's drinking, had ordered him into rehab and then allowed him back at the helm despite numerous reports that he'd fallen off the wagon.

Mr. RAWL: The judgment to put him back on a ship was a bad judgment.

TOTENBERG: The federal government indicted Exxon on five criminal charges, with potential penalties totaling $5 billion. The company soon agreed to plead guilty to three counts, with a fine of $25 million, plus $900 million more in civil fines to be paid over a 10-year period to the government. In addition, the company paid $2.1 billion in cleanup costs and several hundred million dollars more to fishermen for their lost summer catch. In all, the company would pay $3.4 billion.

But the fishing industry, plus businesses affected by the spill and the native Alaskans whose very way of life had been ruined, contended that Exxon had not paid enough. At Exxon's request, the federal court in Alaska certified 32,000 individuals with potentially valid claims to sue as a single group.

In closing arguments, their lawyer asked for between $5 and $20 billion in punitive damages - that is, damages meant not to compensate but to punish and deter such conduct in the future.

Exxon, in closing arguments, said there should be no punitive damages. The jury awarded $5 billion, which after two appeals was reduced to $2.5 billion, or roughly $75,000 per person. Now, the U.S. Supreme Court has agreed to hear Exxon's latest appeal, prompting this reaction from Alaska's Republican governor, Sarah Palin.

Governor SARAH PALIN (Republican, Alaska): It was like kind of a kick in Alaska's collective gut here, and it's seeming to be a case now of justice delayed being justice denied.

TOTENBERG: The Exxon Valdez case being argued today represents the latest twist in a two-decade campaign by the business community to get the courts to eliminate punitive damages altogether. In recent decades, corporate America has won a series of cases challenging punitive damages, but has not succeeded in getting rid of them completely because punitive damages are largely a matter of state law. The Supreme Court, however, has by and large reduced punitive damages, most recently laying down a general rule that they cannot be more than nine times the actual damages. In this case, the courts have said the punitives are only five times the actual damages. But Exxon contends that because this accident occurred at sea and is governed by maritime law, which is the sole province of the Federal courts, there should by no punitive damages at all.

Today, in the Supreme Court, Exxon's lawyer, Walter Dellenger, will tell the justices that punishments for oil spills like this were set out in the Clean Water Act and preempt punitive damages in a private lawsuit. The Alaskans dismissed that argument, contending that Congress passed the Clean Water Act to protect the environment, not to outlaw individual damage suits for bad conduct. Most importantly, Exxon contends that under maritime law, a ship owner is not subject to punitive damages for the conduct of the ship's captain, unless the conduct was directed by the ship's owners. Exxon's lawyer, Walter Dellenger.

Mr. WALTER DELLENGER (Attorney): No court has ever upheld an award of punitive damages for either the intentional or unintentional discharge of hazardous substances.

TOTENBERG: Stanford law professor Jeffrey Fisher, representing the Alaskan plaintiffs, will make the contrary argument.

Professor JEFFREY FISHER (Law, Stanford University): It's been accepted for hundreds of years that punitive damages are available in maritime law, basically under the same circumstances that they're available in tort law, when a defendant acts egregiously or in callous disregard for the rights of others.

TOTENBERG: Exxon contends that it did not do that. It now contends that Captain Hazelwood wasn't legally drunk, and that it couldn't remove him from his job because it didn't know that he'd relapsed into drinking on the job after his initial period of rehabilitation. The plaintiffs counter by pointing to the federal court finding that Exxon management knew for three years that Hazelwood had resumed drinking on board their ships. Exxon concedes that its behavior in allowing Hazelwood to remain at the helm of the ship could have been an issue in the punitive damages phase of the trial, but it wasn't. The company says, yes, that Hazelwood leaving the bridge on the night of the accident was reckless, but it contends that Exxon's failure to remove Hazelwood was not an issue. Exxon lawyer, Walter Dellenger.

Mr. DELLENGER: The idea that it was proven or determined that they knowingly put a lapsed alcoholic who was drinking on the job in charge of a ship was not even a question the jury was told that they needed to resolve.

TOTENBERG: Not so, says Jeffrey Fisher.

Prof. FISHER: The entire phase three of trial was all about Exxon's corporate knowledge of Hazelwood's drinking.

TOTENBERG: Indeed, says Fisher, Hazelwood dropped out of the post-rehab program. Exxon management knew that Hazelwood had subsequently had his license to drive a car revoked because of a drunk driving charge. Fifteen witnesses testified at trial about his drinking, often with Exxon personnel. And Exxon supervisors were informed of his drinking, including by a report to the president of Exxon shipping.

Exxon notes that punitive damages are not meant to make individual whole. The company contends that plaintiffs had their chance to get compensatory damages, and that in all, the company paid $500 million to the fisherman. Exxon argues that punitive damages are simply not appropriate here because the company profited not one penny from the accident, and indeed, lost its own ship and cargo. Walter Dellenger.

Mr. DELLENGER: We're a company that's seeking to make big profits from reckless behavior, then big punitives are a response to that. But here, there was no profit made, no profit sought by any of the wrongful acts that are charged to the company and upon which the company has acknowledged responsibility.

TOTENBERG: Professor Fisher counters that it is the very irrationality of Exxon's actions which justify punitive damages.

Prof. FISHER: An alcoholic culture pervaded the company such that officials didn't want to blow the whistle on a friend. This is precisely what makes Exxon's conduct so egregious and that necessitates punishment like this because there is no good reason for what Exxon did. And it just showed utter disregard for the environment and for the tens of thousands of Alaskans that depended on the bounty of Prince William Sound.

TOTENBERG: Fisher argues that the punitive damages here are just barely enough to punish and deter, since the 2.5 billion represents only three weeks of Exxon's current net profits. Exxon, on the other hand, says the award amounts to more money than all the punitive damage awards ever upheld by the federal courts combined. A Supreme Court decision is expected by summer.

MARTIN: NPR's Nina Totenberg, reporting.

STEWART: Now, the Exxon Valdez court case has close to 30,000 plaintiffs. One of them, a native Alaskan, a Chugach, her name is Patience Andersen Faulkner. She's joining us to tell us how her life has changed in the last 19 years. She is president of the board of Prince William Sound Regional Citizens Advisory Council, representing the Cordova District Fishermen United. Hi, Patience.

Ms. PATIENCE ANDERSEN FAULKNER (President of the Board, Prince William Sound Regional Citizens Advisory Council): Good morning, how are you?

STEWART: I'm doing all right. Hey, what do you remember about the day of the spill?

Ms. ANDERSEN FAULKNER: Well, it was unbelievable. We've had small spills before, you know, that have been around tankers, etc. But as the day got on, it was like someone was telling the story the sky was falling. And by the end of the day, we knew the sky was falling.

STEWART: I know you're involved with a larger group that's seeking a settlement, but you're also personally a plaintiff. Why are you, Patience, personally a plaintiff in this case? What happened to you and your livelihood as a result of the spill?

Ms. ANDERSEN FAULKNER: Well, there are 53 categories of plaintiffs, because we're all so unique and different, like Alaskans are. I'm a plaintiff under the subsistence category. And subsistence happens to be - I get my food that I live on and sustain myself on from the waters and the areas in Prince William Sound.

STEWART: So I'm guessing the oil spill made that quite difficult for you.

Ms. ANDERSEN FAULKNER: It did make it difficult. And 19 years later, it still is difficult. We don't have any herring, and that was one of our first nutritious foods from the Sound in the spring. We would get that in late March, in April. And we can't depend on the herring being there, for one. But also, is it tainted?

STEWART: I want to walk back a little bit. You said that day, the oil spill was a little bit like the sky is falling, and then you realized, oh, my gosh. This is something so much bigger. When did you realize, okay, this incident is going to have a really long-term effect on my life?

Ms. ANDERSEN FAULKNER: Well, you know, we know oil and water don't mix very well. And the way the water works in the Prince William Sound, it flushes in and out, and more oil kept coming out, much larger than we could even contain. And as we watched, every single day we watched the black tide keep moving further and further south and starting to hit more and more of our lands, the area that we use for Chugach people. And then it started going down into the Kodiak people's lands.

STEWART: You've been working on this project for - being a plaintiff in the settlement and working with these various regional groups - for a long time now. Have you seen any money at all in terms of settlement?

Ms. ANDERSEN FAULKNER: As a subsistence person, we saw some money under an Alyeska settlement, and some under the compensatory, and it probably total amounted to, I'll say a solid $2,000, but that was about it.

STEWART: So what do you think about Exxon's argument that, look, we've already paid this $3.4 billion in criminal and civil fines and penalties and compensatory damages, and we've done the cleanup and the Clean Water Act doesn't permit more punitive damages. What do you think about that argument?

Ms. ANDERSEN FAULKNER: Well, we certainly haven't been compensated. I mean, Exxon said they would make us whole, and the hole they put us in was a big pit. It damaged us, and a third of my life has been spent dealing with this issue. Just as a plaintiff, just sitting - if I just sat around and did nothing, wasn't active in this, a third of my life was damaged by it. I had to produce financial records. I've had to answer questions. Everywhere I go, I'm asked about this case.

As an activist person, meaning because I'm so intimately involved in it, because I worked with the class action attorneys - I work first of all with my fellow community members to try and clean it up, and then I worked with the class action attorneys to try and get the case together. And since then, the last nine years has been for no pay. People just expect me to know all the answers and to be the conduit to the attorneys to find out what's going on. When are we going to settle this? You know, when are things going to be better? What are the scientists saying?

STEWART: So how much, ultimately, do you hope that you'll receive in this settlement, personally and through your native regional corporation?

Ms. ANDERSEN FAULKNER: Well, for subsistence it'll be a short $50,000 because of the interest that has built up. And then we expect to receive maybe another $10,000 from our regional corporation, and that's of the lands that were damaged.

STEWART: And I know there's some thought up there that there should be some financial planning should you get this money, if and when you get this money, to help people out in the future, correct?

Ms. ANDERSEN FAULKNER: Yes. And that is an area I was worried about because we hope that when we get money, it would be in a lump sum, and that would give us a total number in which to deal with and we can do some planning. But a lot of folks aren't used to receiving lump sum payments. I mean, I'm not used to receiving, let's say, $60,000, so I'm going to need some financial planning. And a bunch of us got together over coffee one day and we organized an organization called Oiled Regions of Alaska Foundation.

STEWART: Well, Patience Andersen, one of the plaintiffs in the Exxon Valdez case, it she appeared in front of the Supreme Court today. Thank you for sharing your story with us.

Ms. ANDERSEN FAULKNER: Thank you.

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