Exxon must pay $480 million in interest over Valdez oil tanker spill

Exxon Mobil Corp. must pay victims of the 1989 Exxon Valdez oil spill $480 million more in interest on their delayed punitive damages awards as well as cover $70 million in the company’s own appeals costs, a federal appeals court ruled Monday.

The decision by a three-judge panel of the U.S. 9th Circuit Court of Appeals more than doubles the oil giant’s costs in settling the lawsuits brought by fishermen, cannery workers, marine services and eco-tourism purveyors whose livelihoods were ruined by the nation’s most devastating oil spill.

The court costs stem from Exxon’s successful appeal to the U.S. Supreme Court of an Alaska jury’s 1996 award of $5 billion in punitive damages for recklessness in the grounding that dumped 11 million gallons of crude oil into the pristine waters of Prince William Sound.

It was disclosed at trial that the oil tanker’s captain had been drinking and wasn’t on the bridge when the ship ran aground on a reef.

A 9th Circuit panel cut the jury award to $2.5 billion in 2006. The U.S. Supreme Court, after its review a year ago, slashed the amount to $507.5 million, which the oil company began paying out to Alaskans in December.

In a 5-3 decision, the high court deemed Exxon’s conduct “worse than negligent but less than malicious” in deciding to reduce the punitive damages award to the same amount the company had to pay out in compensatory damages. That award was set by the Alaska trial judge.

The Supreme Court action reduced the amount due the average plaintiff to about $15,000.

By setting the interest rate clock back to the original 1996 jury award, though, the 9th Circuit decision could double that amount for each plaintiff.

Writing for the 9th Circuit panel, Judge Mary Schroeder said the appeals judges had the authority to decide whether interest on the $507.5 million in punitive damages should accrue from the 1996 jury verdict or from the June 2008 high court ruling.

“Neither the evidentiary basis for the award nor the legal foundation for an award has been disturbed after nearly a dozen years of subsequent litigation,” Schroeder wrote in explaining the panel’s judgment that 5.9% interest be tacked on to the award over the intervening 13 years. That would make the interest due $480 million, said Jonathan Hacker of O’Melveny & Myers in Washington, the lawyer who represented Exxon in the 9th Circuit case.

“Because the amount of the original $5-billion judgment has been substantially reduced, we order that each party bear its own costs,” the decision said of the nearly $70 million that Exxon had to pay for a security bond to sustain its appeal.

Judge Andrew J. Kleinfeld dissented from the panel’s decision to make the oil company pay for the costs of appealing the jury award.

“Satisfying though it may be to shovel money from a large corporation to those whom it wronged, respect for the Supreme Court decision in this case and precedent in other circuits obligates us to award Exxon most, but not all, of its costs for its mostly successful appeal,” Kleinfeld, appointed to the appeals court by President George H.W. Bush, wrote in a dissent that ran twice as long as the majority’s seven-page opinion.

Hacker referred comment on whether the 9th Circuit decision would be appealed to Exxon’s headquarters in Irving, Texas. Exxon spokesman Tony Cudmore said the oil company “will review the opinion before commenting further.”

In another assertion of Supreme Court authority in the continuing aftermath of the Exxon Valdez disaster, the justices, also on Monday, struck down as unconstitutional a tax imposed on oil tankers docking in the Alaskan city of Valdez.

In a 7-2 ruling, the high court said the tax violated the Constitution’s tonnage clause, a provision intended to foster free trade. The challenge of the Valdez tax, imposed since 2000, was brought by Houston-based ConocoPhillips.

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carol.williams@latimes.com