WASHINGTON The Supreme Court on Wednesday slashed the $2.5 billion punitive damages award in the 1989 Exxon Valdez disaster to $500 million.
The court ruled that victims of the worst oil spill in U.S. history may collect punitive damages from Exxon Mobil Corp., but not as much as a federal appeals court determined.
Justice David Souter wrote for the court that punitive damages may not exceed what the company already paid to compensate victims for economic losses, about $500 million compensation.
The Exxon Valdez case involves reckless action that was "profitless" for the company and that has already resulted in substantial recovery for substantial injury, Souter wrote.
A penalty should be "reasonably predictable" in its severity, he added.
Exxon asked the high court to reject the punitive damages judgment, saying it already has spent $3.4 billion in response to the accident that fouled 1,200 miles of Alaska coastline.
A jury decided Exxon should pay $5 billion in punitive damages. A federal appeals court cut that verdict in half in 1994.
The Supreme Court was divided on its decision, 5-3, with Justice Samuel Alito taking no part in the case because he owns Exxon stock.
Amar Sarwal, general litigation counsel for the U.S. Chamber of Commerce, said the ruling gives an "extraordinary amount of guidance" to courts beyond the Exxon Valdez case.
Souter wrote that the legal landscape is filled with examples of ratios and multipliers for punitive damages versus compensatory damages, saying most of them fall short of offering reasonable limitations in the Exxon Valdez case.
A state legislative judgment that 3 to 1 is a reasonable limit overall is not a judgment that 3 to 1 is a reasonable limit in this particular type of case, Souter wrote.
Osa Schultz of Cordova, Alaska, said she was "pretty disappointed" with the amount of the settlement, "but on the other hand I'm relieved they slapped Exxon in the face." She said a $15,000 award wouldn't even begin to cover the losses to her and her husband's gillnet fishing business.
Exxon has fought vigorously to reduce or erase the punitive damages verdict by a jury in Alaska for the accident that dumped 11 million gallons of oil into Prince William Sound. The environmental disaster led to the deaths of hundreds of thousands of seabirds and marine animals.
Nearly 33,000 plaintiffs are in line to share in the award, an average of about $15,000 a person. They would have collected an average of $75,000 each under the $2.5 billion judgment.
In dissent, Justice John Paul Stevens supported the $2.5 billion figure for punitive damages, saying Congress has chosen not to impose restrictions in such circumstances.
Justice Ruth Bader Ginsburg also dissented, saying the court was engaging in "lawmaking" by concluding that punitive damages may not exceed what the company already paid to compensate victims for economic losses.
"The new law made by the court should have been left to Congress," wrote Ginsburg. Justice Stephen Breyer made a similar point, opposing a rigid 1 to 1 ratio of punitive damages to victim compensation.
Writing for the majority, Souter said that traditionally, courts have accepted primary responsibility for reviewing punitive damages and "it is hard to see how the judiciary can wash its hands" of the problem by pointing to Congress for a solution.
The problem for the people, businesses and governments who waged the lengthy legal fight against Exxon is that the Supreme Court in recent years has become more receptive to limiting punitive damages awards. The Exxon Valdez case differs from the others in that it involves issues peculiar to laws governing accidents on the water.
Overall, Exxon has paid $3.4 billion in fines, penalties, cleanup costs, claims and other expenses resulting from the worst oil spill in U.S. history.
The commercial fishermen, Native Alaskans, landowners, businesses and local governments involved in the lawsuit have each received about $15,000 so far "for having their lives and livelihood destroyed and haven't received a dime of emotional-distress damages," their Supreme Court lawyer, Jeffrey Fisher, said when the court heard arguments in February.First-quarter profits at Exxon Mobil Corp. were $10.9 billion. The company's 2007 profit was $40.6 billion.
Associated Press Writer Mark Thiessen in Anchorage, Alaska, contributed to this story.