Feb. 27

On the heels of Exxon Mobil´s $40.6 billion in profits last year, Supreme Court justices will start deciding today if the oil giant is liable for punitive damages worth just one-sixteenth of that record-breaking total.

Justices have extended the usual hour allotted for oral arguments Feb. 27 because of the complexity of the case pitting the world´s largest publicly traded oil company against those claiming harm in the worst oil spill in U.S. history. At issue is the legality of $2.5 billion in punitive damages assessed against Exxon.

The 987-foot supertanker Exxon Valdez, captained by relapsed alcoholic Joseph Hazelwood, leaked 11 million gallons of crude oil after running aground on a reef March 24, 1989, on Bligh Reef in Alaska´s Prince William Sound.

A pivotal point for the court is whether maritime laws allow such punitive damages to be imposed. Lower courts are divided. A case summary by the high court refers to the $2.5 billion as larger than the total of the combined punitive damage awards approved by all federal appellate courts in U.S. history.

An amalgam of local governments, Native Alaskans, cannery workers, property owners and fishermen filed the initial class action suit, claiming the spill caused private economic harm. However, Exxon Mobil (it was Exxon Corp. in 1989) countered by asking if further punishment is warranted in a case where a company voluntarily compensated most plaintiffs within a year of the spill.

The oil company claims it has spent more than $3.5 billion, including compensatory payments, cleanup payments and government-imposed settlements and fines. Company attorneys also argue that the Clean Water Act governs punishment or discharges of oil and other hazardous substances.

"This case has never been about compensating people for actual damages," Exxon Mobil officials said in a statement. "We do not believe any punitive damages are warranted in this case."

Not surprisingly, the National Association of Manufacturers joined four other major trade associations -- the American Petroleum Institute, the American Chemistry Council, the American Tort Reform Association and the Western States Petroleum Association -- in supporting Exxon Mobil´s claim.

A decision is expected by June. Chief Justice John Roberts and seven of his eight colleagues will participate in today´s argument. Justice Samuel Alito Jr. is recusing himself because he owns a significant amount of Exxon Mobil stock. A tie would mean the award stands.

The spill, which spread black goo 600 miles and devastated 1,500 miles of coastline, killed and harmed thousands of birds, fish and other aquatic species.

"It is also important for the Supreme Court to uphold long-standing maritime law that provides that ship owners are not liable for punitive damages based upon conduct by the ship-master who disregarded the owner´s rules and policies," Exxon officials said in citing almost 200 years of maritime law.

Back in 1994, an Alaska federal jury originally awarded $5 billion in punitive damages to the plaintiffs. After several appeals and remands, the 9th Circuit Court eventually cut that amount in half. At least 6,000 of the 33,000 claimants have died during the last 14 years.

Either way, lawyers for those who filed the suit say Exxon Mobil makes enough in net profits in less than a month to cover a multibillion-dollar judgment. Profits earned by the Irving, Texas-based company in 2007 are recognized as the largest by a U.S. business.

The case, 07-219, is Exxon Shipping Co. v. Baker.

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