Exxon Must Pay $507.5 Million for 1989 Valdez Oil Spill, Court Rules

PASADENA, Calif. (CN) - The 9th Circuit on Monday ordered Exxon Mobil to pay $507.5 million plus interest for the 1989 Exxon Valdez oil spill, a 90 percent reduction from the $5 billion originally awarded to fishermen, Alaska natives, business owners and other litigants in what Judge Schroeder called "epic punitive damage litigation."

The court also ordered each party to bear its own appellate costs, rejecting Exxon's bid for the plaintiffs to pick up its $70 million tab.

The ruling follows a June 2008 remand from the U.S. Supreme Court, in which justices urged the 9th Circuit to slash the jury's $5 billion punitive damage award to about $507.5 million, the amount victims were awarded for the income they lost as a result of the massive oil spill.

In 1989, Capt. Joseph Hazelwood grounded the oil supertanker on a reef, spilling 11 million gallons of oil into Alaska's Prince William Sound. The spill mucked up 1,200 miles of Alaskan coast line.

A jury awarded the victims $287 million in compensatory damages, and slapped Hazelwood and Exxon with punitive damage awards of $5,000 and $5 billion, respectively.

The 9th Circuit halved the award against Exxon - the largest ever approved by a federal appeals court - partly because the oil company blamed the spill on the reckless captain, who had a history of alcohol abuse and whose blood contained a high level of alcohol 11 hours after the spill.

The Supreme Court vacated the $2.6 billion award and remanded for further reduction, saying the punitive damage award "should be limited to an amount equal to compensatory damages."

Exxon argued that it should pay no punitive damages, because it already spent $3.4 billion on cleanup efforts.

A three-judge panel of the 9th Circuit ruled 2-1 that Exxon should pay the $507.5 million, plus 5.9 percent interest on the reduced amount, which has accrued since the original judgment in 1996.

The court also refused to force the plaintiffs to cover the $70 million Exxon spent on appeal. Exxon sought legal costs after declaring victory in having reduced the original award by 90 percent.

"Yet this ignores the hard-fought, even relentless, battle that Exxon waged to avoid any liability for punitive (damages)," Schroeder noted.

Instead, the Pasadena-based appellate panel ordered each party to bear its own costs on appeal.

Judge Kleinfeld concurred with the majority opinion, but disagreed with its ruling on costs.

"Satisfying though it may be to shovel money from a large corporation to those whom it wronged," Kleinfeld wrote, "respect for the Supreme Court decision in this case and precedent in other circuits obligates us to award Exxon most, but not all, of its costs for its mostly successful appeal."

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