Supreme court to decide Exxon Mobil Valdez appeal

By James Vicini

WASHINGTON (Reuters) - The U.S. Supreme Court said on Monday it would hear Exxon Mobil Corp's appeal seeking to overturn the $2.5 billion in punitive damages for the 1989 Exxon Valdez oil spill off Alaska.

The justices agreed to review a ruling by a U.S. appeals court that awarded record punitive damages to about 32,000 commercial fishermen, Alaska natives, property owners and others harmed by the nation's worst tanker spill.

The high court rejected a separate appeal by the plaintiffs seeking to reinstate the jury's original award of $5 billion in punitive damages against Exxon Mobil.

The Exxon Valdez supertanker ran aground in Alaska's Prince William Sound in March 1989, spilling about 11 million gallons of crude oil.

The spill spread oil to more than 1,200 miles of coastline, closed fisheries and killed thousands of marine mammals and hundreds of thousands of sea birds.

A federal jury in Alaska awarded $5 billion in punitive damages in 1994. A federal judge later reduced it to $4.5 billion. A U.S. appeals court in December further cut the amount to $2.5 billion.

Exxon Mobil, the largest U.S. company by market capitalization, appealed to the Supreme Court, arguing the $2.5 billion award still was too high.

Company lawyers called it the largest punitive damage award ever affirmed by a federal appellate court, larger than the total of all punitive damage awards upheld by federal appellate courts in U.S. history.

The Supreme Court agreed to decide whether the award violated federal maritime law. It refused to decide another argument by the company that the award violated the constitutional right to due process.

Exxon Mobil said it welcomed the Supreme Court's decision to hear the appeal.

EXXON: NO PUNITIVE DAMAGES WARRANTED

It said it already has spent more than $3.5 billion for compensatory and cleanup payments, settlements and fines. "We do not believe any punitive damages are warranted in this case," it said in a statement.

"It is also important for the Supreme Court to uphold long-standing maritime law that provides that ship-owners are not liable for punitive damages based upon conduct by the ship-master who disregarded the owner's rules and policies," the oil company said.

Sue Johnson, president of the tribal council in Tatitlek, the tiny Native Alutiiq village in Prince William Sound, said the news from the Supreme Court caused disappointment.

"It was a big letdown, a big stress because of the financial state of our village," Johnson said. "The spill is still affecting us here."