I was going to write tonight about another company that I’ve had great dealings with, and do a little plug for them, but I’ve changed my mind. The news has been all about the Exxon Valdez case, so maybe I’ll make a few notes here about this subject. For those of you who haven’t been following it (and I haven’t followed this latest round too closely), the US Supreme Court is currently hearing arguments from Exxon and the plaintiffs, folks from the the Prince William Sound, Alaska area, specifically concerning punitive damages. I’m no lawyer, so my comments are worth the price you’re paying to read them – but I’ll share them here regardless. 🙂
In late March 1989 the Exxon Valdez oil tanker dumped nearly 11 million gallons of crude oil into Prince William Sound. These estimates come largely from simple math – 53 million (the number of gallons originally onboard), minus what was later reclaimed from the vessel equalled 10.8 million gallons missing, i.e., spilled. Many watch groups argue these estimates, though widely accepted, are underreported, because much of the oil recovered from the ship was diluted with sea water. The accident occurred, investigations found, primarily because the ship’s captain was drunk and sleeping at the time.
An initial courtcase found Exxon Mobil guilty, and charged with $287 million actual damages, plus a further $5 billion in punitive damages. Later appeals led to a reduction to $2.5 billion punitive damages. The latest go-round is an argument largely revolving around how this relates to a history of maritime law, and whether Exxon should be charged further damages – they claim they’ve already paid around $3.4 billion in fines, compensatory damages and cleanup costs.
Claims that the ship’s captain isn’t a high enough “manager” to warrant the corporation being held responsible are, IMO, somewhat absurd. If a minimum wage earning coffee maker is an integral enough part of the MacDonald’s corporation that a scalded customer can sue MacDonald’s, then I see no reason why a ship’s captain is to be deemed not equally so. Further, investigations found the accident the fault of a drunk captain (Exxon knew the man was a relapsed alcoholic – how would you feel if Delta Airlines had a known alcoholic flying your plane? – The guy had lost his driver’s license in 2 states for multiple drink driving offences .. and reports were handed in to high-level Exxon management as recently as the week before the accident about him drinking on duty) and a tired overworked, understaffed crew (Exxon reduced the number of the ship’s mates from 4 –> 3 in order to save nearly $100 000 a year in wages – the on duty mate was supposed to have had 6 hours off-duty in the 12 hours before his watch, but wasn’t able to because of the smaller number of workers – Exxon didn’t increase this crewsize back to 4 until right before their initial trial).
I won’t go on about this – Exxon clearly ought be held responsible for the accident, and for not ensuring a safe passage of its ship and cargo. I won’t even go on here about the scope of environmental damage the accident incurred – 1500 miles of shoreline, hundreds of thousands of otters, seals, birds and other animals died, thousands of Alaska natives and fisherman and other locals effectively lost a way of life they’d known for far longer than Exxon have even been in business. Scientists are still finding new and potentially harmful long-term environmental impact from the toxic crude oil. Oil is still being found in feeding grounds today. Dr. Charles H. Peterson, says “Alumni Distinguished professor of marine sciences at the University of North Carolina at Chapel Hill. “… the environmental consequences of the Exxon Valdez oil spill went far beyond the more than 250,000 seabirds, thousands of marine mammals and countless numbers of other coastal marine organisms killed in the first days, weeks and months.” Here’s an article among others, that discusses some of those impacts:
This latest round is apparently not about guilt or responsibility, Exxon claim it’s about a justice system that is out of control – punitive damages being too high, that they’ve already paid enough money, etc. What they don’t say is that of the money they’ve already paid, nearly $800 million of it was paid by the insurance company, Lloyd’s of London. They don’t say that for the $1billion in civil and criminal liability, Exxon’s actual cost was around $450 million (or less than half), the rest effectively paid for by the tax deductions they were allowed through the settlement. They don’t say that Exxon were allowed to deduct its actual cleanup costs (nearly $40 million) from its civic settlement payment – i.e., the Govt actually paid for the cleanup. In short, Exxon claim to have already paid nearly $3 billion. When we subtract the Insurance payment, and the net cost of Civil payment, the true cost is a little over $1.5 billion .. about half, or about 2 weeks profit for them today.
Regarding a cap on punitive damages, based on actual damages, I’d say it’s quite simple. Any form of punishment ought be based on 2 things – the scope of the damage incurred in the incident or crime, and the potential effect the punishment might have on the guilty party. This principle ought hold no differently for a misbehaving child as for a supranational corporation. The root of the word “punitive” is the Latin “punit”, past participle of “punire” which means punish. In legal-ese, punitive damages are awarded as punishment. Exxon are effectively claiming that the money they’ve paid already, including cleanup costs, are punishment enough. I’d argue those, and compensatory damages, are not a punishment at all, those are a responsibility. If I steal a car, having to return the car is not a punishment, it’s restoration. If Mike Tyson bites off your ear, him paying for your following medical bills is not punishing Mike Tyson – it’s simply incurring the cost of his actions. If my vehicle leaks oil on your driveway, me cleaning it up isn’t punishing me, it’s me taking responsibility for my vehicle. The cost of that isn’t a punishment at all.
Further, in matters like this, to argue it’s already cost a lot of money ignores the scope of the business Exxon do. $2.5billion, half of the original award, from an accident that occurred nearly 20 years ago, is pocket change to Exxon – they probably paid a quarter of that in hiring so-called “scientists” to frump up studies indicating the Prince William Sound ecology has been restored to a healthy and viable ecosystem. They’ve probably paid a quarter of that hiring lawyers get their ass out of trouble. They pay an equally absurd amount of money every year funding scientific consensus studies to refute global warming and other environmental concerns. At their current rate of income, it’s about 5 weeks worth of profit – profit, not income. How can they reasonably claim this amount is any way extravagant? How can they even claim “extravagant” isn’t appropriate, in light of their irresponsibility directly causing the greatest man-made environmental disaster in history (short of maybe, global warming, of which they’re also a culpable and major contributing factor)? I’d propose the punishment OUGHT be extravagant. How can they even claim sincerity when they’ve twice now been convicted of fraudulently underpaying the State of Alabama gas drilling rights almost $3.6 billion (none of which, of course, has been paid)?
The US Supreme Court has, IMO, a responsibility to uphold the punishment the lower court dealt Exxon for their irresponsibility. I guarantee you they’d do exactly that if it were me, or you, on trial for some misdemeanor. IMO, the scope of the accident, and the scope of the business and their public visibility ought require them be held MORE responsible than any individual might, not less. Their ability to absorb the punishment must be a factor in a decision of the amount – I can’t understand how it cannot be.
Fry ’em, I say.