The Exxon Valdez Oil Spill Class Action Lawsuit
On March 23, 1989, the Exxon Valdez oil tanker ran aground on a reef in the Alaskan Prince William Sound, spilling 11 million gallons of oil and contaminating 1,300 miles of beaches. It was the worst oil spill in American History and evidence quickly surfaced that the tanker’s captain had been drinking and was absent from the wheelhouse at the time of the crash and that Exxon had knowingly put a “recovering” alcoholic in charge of a ship carrying 55 million gallons of crude oil through pristine Alaskan waters. Shortly after the disaster, a class action lawsuit was filed on behalf of 32,000 fisherman, Alaskan natives, property owners and others whose livelihoods were destroyed by the spill. Not surprisingly, due to its magnitude, this case made it all the way to the United States Supreme Court.
The Trial
The millions of gallons of spilled oil spread through the Prince William Sound, killed thousands of sea creatures and contaminated fishing grounds and beaches. Separate and apart from the environmental damage, the spill caused massive economic losses to local businesses, workers and property owners. Hundreds of lawsuits were filed as a result of the Valdez disaster.
The largest lawsuit was the federal class action suit filed on behalf of local fisherman and property owners. Because Exxon admitted that it had been negligent and caused the spill, there were essentially three issues in the case: (1) What compensatory damages should be paid to the people harmed by the spill?; (2) Had Exxon been reckless so as to justify an award of punitive damages?; and, if so (3) What amount of punitive damages would be appropriate?
In a lawsuit, “compensatory damages” are meant to make up for the actual loss suffered, while “punitive damages” are designed to punish or deter a defendant who has acted recklessly and outrageously.
After years of trial preparation involving the production of millions of documents and the interviewing of thousands of injured parties and expert witnesses for both the class and Exxon, trial started on May 2, 1994. The critical evidence at trial for the main issue in the case, punitive damages, involved proof that:
- Exxon was aware of the risks of transporting crude oil in the Prince William Sound;
- Exxon ignored the risk of having a known alcoholic captain a supertanker;
- Exxon was reckless in returning the caption to sea without proper supervision;
- The captain abused alcohol on the night of the disaster (he admitted to drinking at least three vodkas);
- The captain was reckless for turning over the tanker to an inexperienced, unqualified and fatigued third mate when they were crossing treacherous reefs;
- In terms of an adequate amount of punitive damages (to punish and deter), the class proved that Exxon had average net profits of $15 billion per year and had its stock increase in value by $20 billion since the spill.
Exxon denied that the captain was drunk and claimed that he was carefully supervised. Ultimately, the jury decided that Exxon had been reckless and that punitive damages were appropriate. The jury awarded $287 million in compensatory damages (much less than claimed by the class) and $5 billion in punitive damages.
The Appeals
Even though Exxon’s stock went up the day after the verdict (a signal that the market had expected an even harsher punishment), Exxon appealed the verdict attempting to strike or reduce the punitive damages award. The trial judge refused to modify the jury’s award. The next level of appeal to the 9th Circuit Court of Appeals resulted in a finding that the $5 billion punitive damages award was excessive and a reduction to $2.5 billion.
Still not satisfied, Exxon petitioned for the United States Supreme Court to review the punitive damage issue. The Supreme Court accepted the case and, on June 25, 2008 (over 19 years after the spill), decided the case. The Court held that punitive damages were permitted, but that they were unconstitutionally high when compared to the compensatory damages. The justices reasoned that, under federal law, maximum punitive damages should equal the amount of compensatory damages. Since compensatory damages (including interest) were $507 million, punitive damages were reduced from $5 billion to $507 million.
Tim is a graduate of Widener University School of Law (J.D.) and the Temple University Beasley School of Law (Master’s Degree in Trial Advocacy). Tim focuses his practice in Personal Injury law, including car, truck, motorcycle, bicycle and pedestrian accidents, slip and falls, dangerous products/products liability cases and medical malpractice. Tim is a partner in the Chester County, PA, law firm of MacElree Harvey and has offices in Kennett Square and West Chester, PA, and Centreville, DE. Tim is the author of numerous publications on Personal Injury law and writes a Blog providing news and information on Personal Injury law at www.macelree.com/traynelaw and is a columnist for The Kennett Paper writing a column titled “Legal Lines.” Tim has also published two books on Personal Injury law: “A Lawyer’s Guide to Purchasing Car Insurance” and “A Lawyer’s Guide to Personal Injury Cases.” In 2007, Tim was named by Main Line Today as one of the area’s Top Personal Injury Litigators. In addition, Tim is a member of the Million Dollar Advocates Forum which recognizes the “Top Trial Lawyers in America,” with membership limited to attorneys who have won million dollar awards and settlements on behalf of their clients.
Tim can be reached by phone at 610-840-0124, by email at trayne@macelree.com or on his Blog at www.macelree.com/traynelaw