Exxon's Free Lunch (Oil On the Side)

Anyone who has checked out David Cay Johnston's excellent new book, "Free Lunch: How the Wealthiest Americans Enrich Themselves at Government Expense (and Stick You With the Bill)" has probably already pulled most of their hair out by now. The rest may be gone soon if word coming from the U.S. Supreme Court following oral argument on damages in the infamous (and long overdue - 19 years) Exxon/Valdez case is correct... or at least it may merit a new chapter in any reprints of Johnston's book.

Some analysts predict the Court will use the obscure tenets of maritime law, and a 200-year old case (the "Amiable Nancy") to overturn or diminish the $2.5 billion in punitive damages (already only half the original amount) awarded by jury trial in the decades long case. Originally complaints were filed in 1989 and then consolidated for trial in 1994. The jury awarded its verdict in 1994 - $287 million in actual damages, and $5 billion in punitive damages. You can find a complete timeline here.

Since then, what's happened?

Well, nothing. At least not much anyway. The company has paid out some settlement money (to the government for criminal fines (although even those may have been mitigated by the feds at taxpayer expense, according to the New York Times), for some tribal claims, among others, to the tune of a little more than $1 billion). And, they had clean-up costs of about $3.4 billion. Of course, the clean-up is still incomplete (by some reports only about 14% of all the oil spilled was actually recovered and/or remediated). And, the damages in the form of lost jobs, businesses, and biodiversity will perhaps never be recovered. The settlement monies and actual damages may sound like a lot, but as the plaintiff's attorney in the Supreme Court appeal pointed out, the total award to each plaintiff to date amounts to about $15,000 per plaintiff.
Probably... Tell it to the whale.

So, the Supremes have an opportunity to affirm the jury award and to send a message to corporate polluters that they must abide by some basic rules we all learn in kindergarten: clean up your own mess, and when you make a mistake, don't do it again! In all likelihood, though, the Court will look to determine the outcome on two narrow grounds. First, was the drunken captain (convicted of negligence, but acquitted of "driving under the influence") an "agent" of the corporation; and second, are punitive damages in maritime cases limited by maritime law? The Justices appeared to be skeptical of the first point, and affirmative, or at least supportive of the premise of that last.

This does not bode well for the fishermen and women, the local industries, the towns, the wildlife, or anyone or thing connected with the fallout in Alaska of this environmental catastrophe.

Oh, and message to polluters: drag litigation out as long as you can (Slate reports that 20% of the orginal plaintiffs - about 6,000 people - in the case have already died - not to mention the fact that even if they end up having to pay the full $2.5 billion, it represents only about 3 weeks of last year's record profits... some disincentive, huh?) and hope for a few more conservative justices on the Supreme Court - of course, that may not help you much if they're all shareholders!