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Court to rule on Exxon Valdez verdict

Last updated 1:50 p.m.

The Supreme Court agreed on Monday to rule on the legality of the $2.5 billion punitive damages award against Exxon Mobil Corp. and its shipping subsidiary for the massive oil spill in Alaska’s Prince William Sound in 1989 — an incident that has sparked a 13-year courtroom battle over money damages. The Court limited its review to issues involving maritime law, declining to hear a claim that the verdict was excessive under the Constitution’s Due Process Clause. The Court also refused to hear a cross-appeal, seeking to reinstate an earlier $5 billion damages award.

Click on the following links to read the petition for certiorari, brief in opposition, and petitioner’s reply, as well as amicus briefs (all supporting the petitioner) from the American Waterways Operators, International Association of Independent Tanker Owners, American Petroleum Institute, Chamber of Commerce, American Institute of Marine Underwriters, Keystone Shipping, American Commercial Lines, Washington Legal Foundation, International Association of Drilling Contractors, Transportation Institute, International Chamber of Shipping, Maritime Law Association, and a group of professors.

In a second grant, the Court said it would decide whether the Federal False Claims Act applies only to claims of misspent funds when those claims are presented to a federal government agency, or whether it also covers claims submitted to a federal contractor if the claim ultimately will be paid with federal money. The case is Allison Engine v. U.S. ex rel. Sanders (07-214). Click on the following links to read the petition for certiorari and brief in opposition, as well as an amicus brief from the Chamber of Commerce.  This is an appeal by a group of four defense subcontractors who supplied generators to power a class of Navy guided missile destroyers — the Arleigh Burke Class.  The lower courts are split on the question at stake.

That and the Exxon case were the only ones granted.

In agreeing to hear the Exxon appeal, the Court indicated it would decide whether the company should be freed of any punitive damages award on the theory that it was based solely upon judge-made maritime law in contradiction of decades of legal history — an issue that the appeal says has divided the lower courts. Also included in the grant will be the difference between the Clean Air Act, in which Congress specified penalties for maritime conduct but did not include punitive damages, and the ruling in this case awarding punitive damages based on federal maritime law. Further, the case raises the issue of whether, if maritime law does govern, this specific award is too high because it is said to be “larger than the total of all punitive damages awards affirmed by all federal appellate courts in our history.” That was the third of three questions Exxon had raised in its petition, but the appeal also included in that question a test of whether a verdict of that size was unconstitutional; it is that latter point that the Court did not agree to hear. The appeal is Exxon Shipping Co., et al., v. Baker, et al. (07-219).

The case does raise the prospect that the Court could split 4-4, thus upholding the verdict, because Justice Samuel A. Alito, Jr., is recused from the case, according to the Court’s grant order.  Alito’s past financial disclosure statements have indicated he owns a sizeable amount of Exxon Mobil stock, according to Bloomberg News.

The second case growing out of the 1989 accident, a plea by individuals who had sued Exxon and its shipping unit, had sought reinstatement of a full $5 billion damages award, originally assessed by a District judge and upheld by the Ninth Circuit Court, but later cut in half by the Circuit Court. That cross-appeal was Baker, et al., v. Exxon Mobile Corp., et al. (07-276). Justice Alito also did not take part in the unexplained order denying review.

Exxon Mobil, in a news release discussing the Court’s action, said that it had already spent more than $3.5 billion in “compensatory payments, cleanup payments, settlements and fines.” Thus, it said, the case “has never been about compensating people for actual damages.”  The ship’s captain at the time of the incident, Joseph Hazelwood, was later convicted of negligently spilling the oil, but was found not guilty of operating the ship while drunk. Exxon Mobil claims that he violated company policy in leaving the bridge of the Exxon Valdez before she went aground on Bligh Reef, spilling 11 million gallons (about 258,000 barrels) of oil.

The case before the Justices does not involve any claims for the environmental damage; that was resolved in earlier actions by the federal and Alaska state governments.  Exxon Mobil also has paid off other private interests with $300 million in settlement payments.  The Ninth Circuit’s decision to cut in half the $5 billion verdict was based, in part, upon that Court’s conclusion that it bore only a 5 to 1 ratio of the $500 million in estimated economic harms. The spilling of the oil was found not to have been intentional.  The award of punitive damages was made in a case involving a class of 32,677 commercial fishermen, private landowners and Native Americans.

Because the case was proceeding in federal court, the normal basis for punitive damages — state tort law — did not apply. Thus, the claim for damages was based upon the assertion of a maritime tort under federal law that is fashioned largely by court decisions, rather than by federal statute.

Among other actions taken Monday, the Court, in an unusual order, with seven of the nine Justices not taking part, summarily upheld a D.C. Circuit Court ruling that those Justices had immunity to a civil damages claim of $75,000 by a Washington, D.C., attorney who has challenged the Court for an earlier refusal to hear his case. Since those seven members of the Court were directly sued, they were recused; under federal law, when the Court does not have a quorum (six Justices minimum), the effect is to affirm the lower court ruling. The attorney, Montgomery Blair Sibley, had sued the Justices after they had denied review of a case involving a domestic relations and child custody dispute.   In Monday’s order, no Justice made any comment on the merits of the Circuit Court ruling being affirmed. The case was Sibley v. Breyer, et al. (07-6522).

Among the cases on which review was denied Monday were these:

** The constitutionality of a state business profits tax that treats dividends paid to U.S. companies by foreign subsidiaries differently, based upon whether those foreign units do business within the state. The case was General Electric v. Commissioner, New Hampshire Department of Revenue Administration (06-1210). The U.S. Solicitor General, asked by the Court for the government’s views on the case, urged a denial.

** A test of whether a worker suing for discrimination in the workplace must show that every non-discriminatory reason the management gave for its action was merely a pretext for bias. The appeal sought a ruling that it should be sufficient if a worker is able to discount one such reason as a pretext. Crawford v. Fairburn, GA (07-233).

** A claim that it violates the Fifth Amendment privilege against self-incrimination if prosecutors use a suspect’s silence before being given Miranda warnings, as evidence of guilt. Salinas v. U.S. (07-36).

** An appeal seeking to reinstate a lawsuit by private individuals in the U.S. and Canada seeking to recover one of Vincent van Gogh’s late paintings, ultimately acquired by Hollywood actress Elizabeth Taylor. The descendants of a German woman who acquired the painting in 1907 claimed that the work was looted by the Nazis. The Ninth Circuit rejected the lawsuit, which had been based on Holocaust property-recovery law, on the theory that the law did not create the remedy of private lawsuits. The case was Orkin, et al., v. Taylor (07-216).