Civil Suit Against Exxon: The Never-Ending Battle

Erik Sanborn

Background

On March 24, 1989, after leaving the port of Valdez, the Exxon Valdez ran aground on Bligh Reef in Prince William Sound, Alaska, causing the one of, if not the worst environmental disaster in United States history. More than 11 million gallons of North Slope crude oil spilled into the sound (Epler and Hulen 1989: A1). The event caused mass destruction of local habitat for land animals, sea animals, and vegetation, but this perhaps was not the worst part. Many humans were impacted far beyond the pain and suffering of the flora and fauna. Natives, for example, were forced to live differently from the subsistence lifestyle that had been buoying their people for hundreds of years. Commercial fishermen from towns such as Cordova were obligated to help Exxon in the cleanup or maybe not eat for the year as the Salmon and Herring fisheries either crashed or were severely contaminated. The people helping in the cleanup process also often contracted serious illness as a result of the fumes, etc.

Many possible factors were attributed to the spill and disaster including: the captain of the ship, Joe Hazelwood, being under the influence of alcohol; a slow response by the Alyeska Pipeline Company; the ship simply being understaffed; or improper monitoring by the United States Coast Guard. All of these entities could possibly have been to blame, so what followed could hardly have been unexpected. Lawsuits were filed constantly, which contributed to what would become one of the most litigated events in history. In 1994, the largest judgment of the litigation, $5 billion in punitive damages was awarded to 14,000 of residents who brought suit. It has still not been paid as of June 3, 2004. This has undoubtedly been a long and tedious ordeal for the plaintiffs in the case.

Public Civil Suit

First, the State of Alaska and the United States governments both brought criminal charges and sued Exxon on behalf of the public. They came to a settlement which totaled approximately $1 billion. Exxon was fined $150 million for criminal charges, the largest ever fine for an environmental crime (Exxon Valdez Oil Spill Trustee Council). The court exempted Exxon from paying $125 million for the entire cleanup process. The remaining $25 million was divided between a few different wildlife funds.

Next, the government collected criminal restitution for a total of $100 million which was a payment for injuries to wildlife and land. This money was split between the two governments evenly (Exxon Valdez Oil Spill Trustee Council).

Finally, there was a civil settlement between Exxon and the two governments. Under the agreement, Exxon would pay $900 million over ten years. The Exxon Valdez Oil Spill Trustee Council was created to decide where the money would be divided and spent. They have spent it in several projects including: land acquisition, restoration, and now, the remainder of the funds will be put towards the GEM project which will create a database of environmental research and monitoring. The trustee council also, wisely invested some of the money so the initial amount has grown over the years (Phillips, 2004).

There is also a $100 million re-opener clause that can be claimed between 2002 – 2006 if and only if there are previously unforeseen damages that need to be restored. There is much doubt whether this will happen or if the governments are even going to apply for it. According to Dr. Rick Steiner and other biologists, however, the Sound needs the extra money (Steiner, 2004).

Private Citizens Bring Suit

On May 9, 1994, the very first civil suit against Exxon came to trial. Other suits had been brought against them, but many of them had been settled. This case was a class action lawsuit brought by private citizens. In the month building up to the trial, the 12,000+ plaintiffs of a very diverse group of fishermen, property owners, and Alaska Natives were expecting to receive a large monetary award. It was estimated that there was an expected $1.5 billion in compensatory damages at stake as well as possibly ten times that in punitive awards (Pagano, 1994: B1). Some of the attorneys involved in the case felt that the case had a greater importance than simply compensating the victims and punishing the negligent. Brian O’Neill essentially asserted that this case would use Exxon as an example. He said that if something is not done, it could happen again, and that this was an example of “corporate arrogance at its worst” (Pagano, 1994: B1). Former Alaska Attorney General, John Havelock, said, “Money can’t correct all the harm done,” and that it would have been better for Exxon to spend the money on prevention than to worry about the billions of dollars on court fines (Pagano, 1994: B1).

The case was to be heard in front of U.S. District Judge Russel Holland in four different phases, if the later phases would be necessary (Pagano, 1994: B1). The first phase would consist of jurors needing to decide whether Exxon is liable at all for punitive damages based on negligence.

During the second phase jurors would hear statistics and numbers about the actual loss of income as well as natural damage by the spill which would essentially assess the compensatory damages that Exxon would have to pay. The other part of Phase II involved other entities such as municipalities, native villages, and native corporations, all of whom claimed to have lost income, services, or native lands. The native groups, however, were not allowed by the courts to receive any damages for damage to way of life or culture, but they may for lost fish and things that make up their traditional diet (Pagano, 1994: B1).

If the answer was “yes” in phase one, the third phase involved how much the punitive damages would be. Attorney O’Neill said the plaintiffs would be seeking $15 billion in punitive compensation which would punish Exxon significantly (Pagano, 1994: B1).

The fourth phase was basically a housekeeping round which would take care of anything unresolved.

Approximately 600 witnesses and 5 million pages of documents were expected to be involved in the case.

Phase I of Trial

Phase I of trial took 4 weeks of testimony and argument, plus an extra four days of jury deliberations. At the end of it all, on June 13, 1994, the jury found that Exxon was reckless in causing the grounding of the Exxon Valdez. The strategy employed by the Attorney Brian O’Neill focused on attacking Captain Joseph Hazelwood. They focused on the possible fact that Hazelwood was impaired under the influence of alcohol, and above the legal limit when the ship ran aground. The plaintiffs’ attorneys applied the responsibility to Exxon by claiming they knew about the drinking problem of Hazelwood, but continued to allow him to run the ship (Phillips, 1994a: A1). Hazelwood, in fact, did not even have a valid driver’s license; it had been revoked in New York for drunk driving for the third time (Hulen, 1989: A1). Nine hours after the spill occurred, Hazelwood had a blood alcohol content of 0.061, which according to U.S. Coast Guard guidelines was over the limit of 0.04 to operate a vessel as large as a tanker (Postman and Toomey, 1989: A1). This proved to be the fatal blow to Exxon’s case.

Phase II of Trial

Phase II of trial was to find out the price of the loss of the fish, which cost many fishermen their livelihood with no money to pay for their loans on their houses, boats, nets, etc. As is clearly described in a plaque on the Cordova, AK boardwalk; the late John Cameron Hewitt, a local fisherman, was quoted, “I will always be a fisherman. It’s not something I do, it is who I am.” This shows exactly what the destruction of the fishing industry in Prince William Sound meant to the people affected. Mr. Hewitt was probably a plaintiff in the case, but unfortunately passed away before any payment was given.

During the second phase, the jury first heard opening statements from both sides. The fishermen’s attorneys claimed that they would be seeking compensatory damages in the amount of $978 million that the fishermen lost due to the oiled fisheries. Exxon’s opening statement included the claim that the $978 million figure was much too high, but they neglected to give what they felt was a reasonable amount (Phillips, 1994b: B1).

Throughout the trial, the court heard testimony from many biologists, economists, as well as fishermen to learn of figures on a multitude of issues. As pointed out by the lead attorney O’Neill each witness had their own message to convey. The fishermen had to point out that they lost their livelihood because “people don’t eat oiled fish” (Badger, B1). Their job was not to show specific numbers because they are not qualified; that job was for the scientists to do. The main issues that were focused on during the phase were: the lower prices for the fish, genetic defects in the runs, and decline in market value of the permits by almost as much as $150,000 (Badger, B1). One of the largest portions of the claim was that of the decline in prices of Salmon in the years shortly after the spill. Exxon’s key defense to the biggest part of the claim, was that the lower prices in Alaskan Salmon could be attributed to the rise of fish farms in South America in particular that can be sold for much cheaper (Phillips, 1994e: A1).

The trial ended on July 10, 1994 and the jury deliberated from July 11 to August 11 before returning with their verdict. In the closing arguments, the defense outlined where their claims came from. He showed that they lost $136.5 million from the closed fishing season in 1989 when the spill occurred. They lost $580.4 million because the “Alaskan Salmon” name was tainted by the spill. They lost $154.8 million from the depleted stock in following years. Finally, the ones that couldn’t afford to stay in the industry and tried to get out lost $23.3 million when they tried to sell their permits. This totaled up to near the amount that they were requesting for compensatory damages (Phillips, 1994c: A1).

When the jury rendered their decision, there were very mixed emotions between the parties involved. After the almost five weeks of deliberation, 10,000 fishermen received a $286.8 million award. Naturally, due to their expectations, the fishermen were very disappointed. Richard McGahan, a fisherman in the Cook Inlet area, commented that he was sick to his stomach after hearing of the decision. Others commented that they were “stunned” (Phillips, 1994e: A1).

Exxon, unsurprisingly, was pleased at the result, especially since they could be excused for $130 million that they already paid in claims shortly after the spill. It turns out that the jury rejected claims that the fishermen would lose additional money in 1994 and 1995, as well as chopping more than half of what the plaintiffs were claiming for loss of value of permits. Fishermen in the Sound were awarded $58.8 million while the rest was split between Cook Inlet, Kodiak, and Chignik (Phillips, 1994e: A1).

There was scheduled to be a second part of Phase II, but the Natives and Exxon settled for $20 million out of court for the damage to the subsistence way of life. This was a satisfactory result for the Natives, said Gary Kompkoff, President and Chief of the Village of Tatitlek (Phillips, 1994d: A1). The amount was to be divided between eighteen villages including Kodiak Island with average amounts expected to be around $4000 which is about a half year of income in a village such as Tatitlek (Phillips, 1994d: A1). The damage to subsistence living, however, continues to this day. Everything changed as a result of the spill, and according to Roy Totemoff, the Vice-President of Tatitlek, everything feeds off herring, and they are gone because of the spill (Totemoff, 2004). This in turn has reduced the seals, and other traditional Native food sources.

The settlement by the Native villages did not disqualify them from being able to receive payments from any possible punitive awards that could come about (Phillips, 1994d: A1).

Also at the same time as the second phase of the trial going on, there was another trial going on in state court with a different jury. This was to decide damages to Native corporations and municipalities for damages by the oil spill as well as bills that Exxon owed to the towns. They were able to receive compensatory damages only, and were awarded only $9.7 million to the Native corporations and the Kodiak Island Borough (McCormick 1994: A1). This, again, was an unsatisfactory result for the plaintiffs. They were hoping to receive more than $120 million (McCormick, 1994: A1).

Phase III of Trial

The third and final phase of the trial was what has become the most controversial in this long and ongoing battle. As they decided in the first phase, Captain Hazelwood and Exxon were reckless and liable, which allowed for this phase of the trial. The jury now had to decide whether, and what amount could be awarded that would be sufficient to punish Exxon. Going into the trial, the plaintiffs were seeking as much as $15 billion.

After hearing testimony for about a week and even taking a helicopter tour of Prince William Sound, the jurors retired to seriously consider what if any further damages to assess to the Exxon Corporation. They looked at several factors. One of the major factors that was argued and shown in evidence was the continued strength of Exxon’s bottom line and profits. The jurors said they weighed that factor closely when trying to decide what would “get their attention” to punish them (Phillips, 1994f: A1). The deliberations were very long procedures that included reading every page of evidence that was admitted which sometimes required lots of sifting through boxes upon boxes of evidence.

$5 Billion

September 16, 1994 was the date that the largest punitive award ever against a corporation came down. The award was to punish Exxon for the liability in the spill as well as for emotional trauma caused from the spill through 1993 (Ott, 2002: B4). The jury announced the $5 billion award which marked the end of a four month trial which saw hundreds of witnesses with several tactics and arguments. The attorneys for the plaintiffs commented that they were ecstatic; some even began crying tears of joy. Only one fisherman was present in the courtroom at the time of the announcement. Otherwise, there were around sixty attorneys plus several journalists (Phillips, 1994g: A1). Exxon attorneys and officials commented that it was far from over (Phillips, 1994g: A1), and they were absolutely correct.

Appeals

Directly after the decision was announced, Exxon filed motions with Judge Holland to grant a new trial, drastically reduce the amount granted, or rule that they were not reckless and not allow any award (Toomey, 1995: A1). Judge Holland denied the motions and upheld the decision saying that the evidence supported the damages and that the $5 billion amount does not violate federal rules (Toomey, 1995: A1). Exxon vowed to “use every means available to overturn this unjust verdict” (Toomey, 1995: A1).

The Exxon Corporation promptly filed appeals on several grounds to what they believed to be an excessively large verdict. Exxon’s main goal was to have the verdict substantially reduced. Filing and having an appeal accepted automatically can delay payment by years. The papers on Exxon’s case weren’t even available until a full year after the decision. One of the first areas they attacked was the jury. They claimed that jurors were coerced and pressured into making a large decision. One juror did admit to feeling she had to make a decision to avoid a hung jury (Pagano, 1995: B1). One juror also admitted to having a drug problem as he had a very difficult time giving up his marijuana habit. Exxon also had claims that the jurors had improper access to information that was supposed to be sealed from them, particularly information about Captain Joe Hazelwood. They claimed that this information possibly was leaked to them by a security guard at the courthouse. On September 12, 1995, Exxon asked for a new trial based on this possible evidence of juror misconduct and tampering (Pagano, 1995: B1). The request was denied based on a lack of sufficient evidence.

Three years later, in 1998, after investigations had taken place into the jury tampering question, Judge Russel Holland formally demanded evidence of the U.S. Marshals so that he could decide if there was adequate evidence (Phillips, 1998a: B2). Later that year, he rejected those claims and denied Exxon’s appeal based on jury tampering, and the Supreme Court also refused to hear the case in the year 2000.

Another of Exxon’s motions suggested they had paid enough, and punished enough by the $3.5 billion they paid during the cleanup process. This appeal is still pending, and could be for what is expected to be for two more years.

Meanwhile, as appeals dragged, Exxon was making more money than is even imaginable by the layperson. Exxon was ordered by the court to put the $5 billion from the verdict into a fund where it would be separated, but also earn interest at 5.9 percent per year. That comes out to approximately $9.40 per minute, and $812,160 per day (Phillips, 1998b: A1). This unbelievable amount also allows Exxon to re-invest the interest payments in the different markets.

Exxon's Feelings

The Exxon Corporation was very undoubtedly very dissatisfied with the $5 billion punitive decision awarded by the jury. They have guaranteed to fight the decision as long as they can, and they have proven that correct and done just that. Attorney for the defendants, Patrick Lynch felt that “It is a case of the jury not appreciating what $5 billion means” (Phillips, 1994g: A1).

One of Exxon’s philosophies on the issue is that they claim they have paid for the same fish and resources three times already. The first, as described by Al Maki, one of Exxon’s head scientists, was during the time shortly after the spill. Each commercial fisherman was allowed to come in, with evidence of previous years’ catch such as receipts, and be compensated for them. This amount totaled $300 million (Maki, 2004).

The second payment for the resources was the $1 billion settlement with the state and federal government where the trustee council is in charge of restoring and helping Prince William Sound (Maki, 2004).

The third payment was the 1994 compensatory damages claims which were paid after the small amount was subtracted from debts already paid. This was to compensate fishermen for the lost harvests in the years after the spill (Maki, 2004).

Mr. Maki explained that Exxon would be paying a fourth time for the same fish if they were forced to pay the punitive damages, and that they have been punished enough (Maki, 2004). He and Exxon also feel that the oil is not the sole cause of the reduction in fish harvests, and points to fish farms in South America as a large, cheaper competitor. He also says some species have been on a natural trend which is on a downward slope at this point in time (Maki, 2004).

Plaintiff's Feelings

The plaintiffs in the civil suit against Exxon have had a number of different feelings regarding the case, but one sentiment seems constant; most victims just want closure in a case that has lasted nearly ten years since the decision was announced in 1994.

There are several issues that the plaintiffs highlight to show they are owed this money by Exxon. Dr. Riki Ott, a renowned and published scientist in the field of oil pollution, and very active before, during, and after the spill, wrote an article about why Exxon should pay the full $5 billion. Exxon proposed a substantially reduced punitive penalty as low as $25-$40 million (Ott, 2002: B4). She renounced these offers with several justifications.

She pointed out that, for starters, Exxon spilled more oil than it actually reported. Through a thorough analysis of the numbers reported by the lightering (oil transfer) tankers, she showed that the Valdez actually leaked closer to 35 million gallons rather than the 11 million they reported (Ott, 2002: B4). This led to nearly 2.5 times as much coastline oiled as was reported. This incorrect reporting she described as a “breach of public trust” (Ott, 2002: B4).

As her second point, Ott showed that the emotional damages the award paid for through 1993 have continued well beyond that. In research by federal researchers, as well as research by Ott has shown that “oil is much more dangerous than previously thought.” She shows that a small amount of oil will reduce populations of many marine species (Ott, 2002: B4). This damage then is continuing constantly as long as oil remains. Exxon released other research to discredit the federal researchers, but according to Ott, “Exxon’s studies are not credible in the eyes of the scientific community” (Ott, 2002: B4). Her book on this subject is to be published in the summer of 2004.

Finally, Ott shows evidence of failed reporting of illness by Exxon during the cleanup. Even though Exxon claims to have paid $2.2 billion in cleanup, they made countless people sick in the process (Ott, 2002: B4). They reported many illnesses as simple colds to avoid long term health monitoring and payment, meanwhile, people were getting sicker from such things as oil inhalation and dangerous chemicals used to clean the gear they were wearing (Ott, 2004). People are still suffering from the health effects of the cleanup.

Another issue of agitation for people of the Prince William Sound area is the ease with which Exxon, now ExxonMobil, could afford to pay the full amount of the punitive damages. In 2003, ExxonMobil announced annual after-tax profits of $21.5 billion (ExxonMobil, 2003: 33). That is only one out of the fifteen years since the spill. One quarter of one year’s profits would pay for the entire damage.

Former mayor of Cordova, Kelley Weaverling spoke of a strong division of the people affected by the spill. At the time of the spill, some people went to work for Exxon in the cleanup and became known as “Spillionaires,” while some others did not go to work for Exxon, and still others worked, but did not feel right accepting payment from them (Weaverling, 2004). It was basically a separation of the “haves” and “have-nots.” Mr. Weaverling pointed out that the same thing will likely happen again when or if the punitive award comes. The people with their name on the suit will possibly become very wealthy, which could cause more resentment in the small fishing village (Weaverling, 2004).

This division of feelings was illustrated clearly right after the decision was announced; some fishermen were overjoyed at the news, while some remained frustrated. Cordova fisherman James Myklen was quoted as saying, “This verdict does not help me. There is no money in my hand, and my feeling is that Prince William Sound is not fully restored” (Phillips, 1994g: A1). Others pointed out that they may have been hoping for more, but were very happy nonetheless (Phillips, 1994g: A1).

What is next?

What awaits the plaintiffs is hopefully no more than two more long grueling years in tied up in appeals. Some people involved in the process are very doubtful if it will ever be paid, while some remain hopeful.

Most recently, the case was sent from the Ninth Circuit Court back to Judge Russel Holland to reduce the amount of the $5 billion award. In his opinion following, he concluded that he did not find the award excessive deterrence or excessive punishments, which are the two reasons for punitive awards. He also felt that the 10 to 1 punitive to compensatory ratio was warranted in this case. He then pointed out legal precedents such as in the BMW v. Gore 517 U.S. 583 case which limited punitive awards based on criminal proceedings, but also suggested using the civil penalties as a possible guideline. Holland pointed out that criminally, the case was settled out of court for only $25 million plus $100 million in restitution and that the civil penalty should be the guideline (Holland, 2002: 47-52).

He concluded that he firmly disagreed with the notion that the judgment had to be reduced, but since it had to be, he reduced it to $4 billion (Holland, 2002: 47-52).

Exxon continued to fight this ruling, and in 2003, the Ninth Circuit Court urged Holland to reconsider. In January of 2004, Holland re-concluded that recent Supreme Court decisions did not change his mind, and decided that Exxon owed $4.5 billion plus $2.25 billion in interest (Holland, 2004).

Conclusion

The class action suit by several thousand fishermen, natives, and cities has been almost ten years in litigation. There have been appeals on top of appeals which have made it such a long process. Exxon could easily have paid the $5 billion in punitive damages, and many feel they should, if nothing else, just to get it over with. One possible explanation is they do not want to set the precedent of such a large award for an oil spill, but it would go a long way to improve their corporate image.

Many of the plaintiffs in this case have run into tough times since the Exxon Valdez spilled more than 11 million gallons of oil into the pristine Prince William Sound environment. Fishermen have gone bankrupt, many others have died in the ten years since the decision was announced, they will never see any compensation for their losses.

Several experts doubt the award will ever be paid, but after looking at the facts, I feel it probably will be paid, maybe not in full, but the plaintiffs will probably receive some compensation from the punitive awards. Judge Russel Holland has been in the corner of the plaintiffs and, if needed, it will go all the way to the Supreme Court until this matter is decided.

The Exxon Valdez Oil Spill affected many lives in many negative ways. This case has been a long and painful process for the people of the several cities, towns, and villages surrounding Prince William Sound, Alaska, but all will continue to wait to get their justice.

Works Cited

Badger, T.A. 1994. “Spill Juries Today Consider Damages,” Anchorage Daily News, June 20: B1.

Epler, Patti and David Hulen. 1989. “Crude Oil Fouls Sound: Tanker Spill is largest ever in U.S.,” Anchorage Daily News, March 25: A1.

ExxonMobil. 2003. ExxonMobil 2003 Annual Report. Irving, Texas: ExxonMobil Corporation.

Exxon Valdez Oil Spill Trustee Council. 2002. Oil Spill Facts: Settlement, 2002. Anchorage, Alaska: EVOSTC. http://www.evostc.state.ak.us/facts/settlement.html. Accessed May 20, 2004.

Hulen, David. 1989. “Captain’s Record Shows Three Alcohol Arrests,” Anchorage Daily News, March 28: A1.

Holland, H. Russel. 2002 “Order 358.” In re Exxon Valdez. United States District Court. Anchorage, AK, December 6, 47-52.

Holland, H. Russel. 2004. “Order 364.” In re Exxon Valdez. United States District Court. Anchorage, AK. January 28.

Maki, Al. 2004. Personal Interview. Anchorage, AK, May 1.

McCormick, David. 1994. “Jury Awards $9.7 Million to Native Corporations, Kodiak for Spill,” Anchorage Daily News, September 25: A1.

Ott, Riki. 2002. “Why Exxon owes Alaska $5 billion,” Anchorage Daily News, June 25: B4.

Ott, Riki. 2004. Personal Interview. Cordova, AK, May 11.

Pagano, Rosanne. 1994. “Stage Set for Battle over Exxon Oil Spill,” Anchorage Daily News, May 1: B1.

Pagano, Roseanne. 1995. “Exxon Claims Juror Misconduct in Asking for New Trial,” Anchorage Daily News, September 12: B1

Phillips, Gail. 2004. Personal Interview. Anchorage, AK. April 30.

Phillips, Natalie. 1994a. “Jury finds Exxon, Hazelwood Reckless,” Anchorage Daily News, June 14: A1.

Phillips, Natalie. 1994b. “Trial’s Part 2 will put Price on Fish Loss: Jury to Decide Damages,” Anchorage Daily News, June 21: B1.

Phillips, Natalie. 1994c. “For Jurors, Question is: How Much?” Anchorage Daily News, July 12: A1.

Phillips, Natalie. 1994d. “Exxon Settles Lawsuit,” Anchorage Daily News, July 26: A1.

Phillips, Natalie. 1994e. “Damage: $287 Million,” Anchorage Daily News, August 12: A1.

Phillips, Natalie. 1994f. “The Exxon Decision: We did the right thing, Jury Foreman Recounts Long Haul to Judgment,” Anchorage Daily News, August 12: A1.

Phillips, Natalie. 1994g. “$5,000,000,000: Jury sets Oil Spill Damages,” Anchorage Daily News, September 17: A1.

Phillips, Natalie. 1998a. “Judge Demands Evidence of Oil-Spill Jury- Tampering,” Anchorage Daily News, January 27: B2.

Phillips, Natalie. 1998b. “As Appeals Drag, Exxon Banks the Interest,” Anchorage Daily News, August 4: A1.

Postman, David and Sheila Toomey. 1989. “NTSB: Captain too Drunk to Run Ship: Exxon Fires Skipper; State Continues Investigation to Decide on Prosecution,” Anchorage Daily News, March 31: A1.

Steiner, Rick. 2004. Personal Interview. Anchorage, AK. May, 1.

Toomey, Sheila. 1995. “Judge upholds Exxon Award,” Anchorage Daily News, January 25: A1.

Totemoff, Roy. 2004. Personal Interview. Tatitlek, AK. May, 11.

Weaverling, Kelley. 2004. Personal Interview. Cordova, AK. May 12.

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