The $2.5 Billion Question

WASHINGTON, D.C. – Nineteen years after the Exxon Valdez oil tanker rammed a reef, spilling 11 million gallons of crude off the Alaskan coast, the legal case involving compensation over the disaster is still very much afloat.

On Wednesday, the Supreme Court hears arguments in Exxon Shipping Co. v. Baker, a case that could stick the oil giant with a record $2.5 billion in punitive damages. Business groups–notably the oil industry and U.S. Chamber of Commerce–warn that a decision against Exxon could open the door to excessive punitive damages claims against other companies.


In reality, the court’s ruling, which is expected later this spring, is unlikely to provide a great deal of insight into what it considers excessive damages. This case hinges on the justices’ interpretation of maritime law, and a ruling will probably focus narrowly on that. Also, Justice Samuel Alito has recused himself, because he owns a sizable chunk of Exxon stock, so the entire Court does not have the opportunity to weigh in. A 4-4 split would uphold the lower court’s $2.5 billion decision against Exxon.

Nonetheless, in appearance at least, it’s a case for the ages. The grounding of the Valdez, allegedly caused by an intoxicated captain, was one of the major environmental disasters of the last few decades. It pits America’s largest company and most influential industry groups against the state of Alaska, several of the state’s most prominent politicians (including Republican Sens. Ted Stevens and Lisa Murkowski) and environmental groups.

Forbes