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Exxon crude oil $US45.45: US Supreme Court ruling

with 3 comments

In a landmark ruling, the US Supreme Court today slashed the damages bill against Exxon for the 11 million gallons of oil their drunken captain poured into a pristine Alaskan ecosystem just 20 years ago. Deciding that “the people” – as in of the, by the, and for the – of the original jury were brain damaged for originally awarding $5 billion in punitive damages against the company, Justice David Souter today pissed mightily in the faces of victimized communities, environments, and species for generations to come.

He found that Exxon should only have to pay $500 million in punitive damages, seeing as the company had already paid $507 million in damages to directly compensate communities of Prince William Sound for economic losses.

$500 million totals about $15 000 for each of the 33 000 claimants, and 4 days worth of Exxon’s profits last year, according to the full article here in Huffington Post. And it’s an even stranger decision when one considers that even now, damage and contamination persist – a clear indication that much more remains to be done.

Potentially more durable, though, is the frightening principle which Souter has cemented within today’s ruling: that punitive damages against a corporation should not be unreasonably excessive, and that the measure of “reasonable” should be established by weighing punitive damages against payment made for economic loss.

In addition to $507 million spent supposedly recompensing locals for economic loss, Exxon claims to have spent $3.5 billion cleaning up after themselves in Alaska. But why should this number – however grand it might sound – generate any sympathy from a court deciding punitive damages?

“Okay, Exxon, you say you spent a bunch on penguin shampoo and buckets. You gave these people some cash to make up for the fish they couldn’t sell. Apart from 20 years spent treating them like annoying parasites, you have really made an effort. To make sure you don’t do it again, we’re going to take away your pocket money for a week… Oh, I can’t stay mad at you Exxon – not like that Enron bastid. Better make it four days.”

Remember how as a kid you broke something of your parent’s? It could have been a vase, could have been a car. Either way, you got your ass kicked, and you had to fix it, and you made sure as hell not to do it again, and you got grounded/tied down and didn’t stop hearing about it at least once every Xmas for the next 20 years. Unless your folks were on Prozac, there was no “at least you tried to fix what you broke, let’s shake our head at you and forget the whole thing.”

Meaning, essentially, that Mike Brady is more hardcore than David Souter.

Furthermore, by explicitly stating the proportional relationship between compensatory and punitive damages, Souter has given every future corporate-sponsored apocalyst a get-out-of-white-collar-jail-free card.

Consider this: I run a nuclear power plant. I decide not to institute the $3 billion program that is recommended to me for monitoring of personnel and installation of advanced failsafes. I don’t run background checks, I don’t verify resumes, I don’t run blood or urine checks for supervisors or operators, I don’t even install those groovy computer gizmos that monitor a panel operators eyelids to make sure they aren’t sleeping on the job. One day, hiccup, snore, crack, bang – a sleeping supervisor and a drunken materials handler combine to create a mini emergency. Waste is released into the water supply used by the nearby town of 50 000.

As a conscientious (and crafty) corporate cat, I rush in with $10 000 for every man, woman and child so that they don’t suffer while their businesses are closed, so they can buy masses of bottled water and so they can go shopping to cheer themselves up – just like the Prez-o-dent told people to after 9-11. Meanwhile I spend $1 billion cleaning up the mess I made, and $200 million making sure that environmental agency heads have the equipment and resources to go and look at problems elsewhere.

Of course the townsfolk take me to court. Of course the court orders me to pay punitive damages. But by Souter’s Exxon precedent it must order me to pay less than $(50 000 x 10 000). Instead of spending $3 billion on extensive but basic corporate responsibility in the first place, I’m paying $2.2 billion + lawyer’s fees to clean up my own mess.

Even if the numbers aren’t this convenient, even though it’s obviously better for everyone to prevent, rather than just hope against, the 1-in-10000 cataclysm, why bother?

Take a look at the different websites regarding the gassing deaths of more than 3 000 people in India by Union Carbide. According to the company (now a Dow property), Union Carbide Corporation worked diligently to provide immediate and continuing aid to the victims and set up a process to resolve their claims. According to activists still struggling for justice for survivors of Bhopal, at least 15 000 people died in the first month after the accident and the ongoing contamination and myriad health issues continue unabated and unaddressed.

BUT, Union Carbide squeezed out under a billion dollars in court settlements, compensation, and strategic donations within a relatively short time after the accident. And therefore, by Justice Souter’s logic, they should have to pay less than $1 billion in punitive damages. Which would work out at less than $70 000 per life, as long as you don’t consider future generations, deformities, destroyed aquifers and waterways, decimated forests, livestock, and native animals, intergenerational equity, etc., etc.

But, at least if you’re an American Enterprise, the lives of Indians – like otters, seals, penguins, bears, fish, birds, clean water, fresh air, and the planet in general – have always been pretty cheap.

So thankyou Justice Souter! Thankyou for making sure that economic irrationalism has prevailed over those manipulative eco-terrorists. Never again need MegaCash Ltd fear spraining their bottom line on little things like ‘punitive damages’, ‘restorative justice’, or ‘basic human decency’.

The Supreme Court has today sent a very clear message to future victims of massive disasters yet to happen.

Although obviously in agreement with environmentalists, scientists, and a majority of the world’s population that the value of life can not be measured, rather than risk setting a price that is too high, Justice Souter decided that he – and future Justices – should not even try.


3 Responses

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  1. I think the fundamental issue here is actually how long this case has been dragging through the courts. For justice to provide guidance it must be swift and consistent, which is certainly not being achieved.

    I personally agree with some analysis on nytimes on this issue, that reasonableness as a multiple of actual losses should be determined by Congress and not the courts, if a limit is required.

    However, the complainants should consider themselves lucky that they won on the main point, whether Exxon should be liable in punitive damages for the actions of its employess, something Exxon was disputing.

    With respect to the hypothetical Nuclear accident can we be sure that the company isn’t doing the right thing? If a problem costs $3 billion to prevent, but $2 billion to remedy don’t we take the risk and invest the saved $1 billion in reducing malaria in kids in Africa?

    Alex Wadsley

    June 30, 2008 at 3:19 pm

  2. I’m pretty much always interested in what you have to say A., but I think part of the point being missed is the one that Edward O Wilson has been making for years and which is only now creeping into fringe-of-mainstream awareness.
    A couple of years ago, Wilson filtered environmental services provided by the planet through a financial prism (of sorts) and came up with a figure of (if I recall) $US90 trillion per annum. In a much cruder way, Stern filed his report on the relative difference in value (and to who) of action v. inaction on climate change. Even now, though, on an increasingly accepted eco-unit – the ecological footprint – there is no allowance made for land or anything else on the planet that may be needed to support non-human life. One
    could indeed argue that this is the reason why the EFP has actually found the degree of acceptance which it has.
    The economic damages awarded against Exxon related only to measurable economic impacts as a consequence of environmental and regional damage. No penalty for damage to ecosystems or species simply for their own sake. And justice was swift. $5 billion in punitive, reduced to $2.5 billion, reduced finally to $0.5 billion AND creating a potentially disastrous precedent for future punitive damages.
    How much stronger and more positive signal would the courts have sent if they had actually INCREASED the damages awarded on each successive appeal?
    The hypothetical can’t be remedied for $2 billion. But the quick fix can be rubberstamped for that amount. Think about it. There’s a big difference. The amount spent so far on Chernobyl has not been and will prove not to be even a fraction of what is needed to address the issues of radioactive contamination in Europe. Depleted uranium across Afghanistan, Iraq, and the former Yugoslavia has not been properly studied and will continue to impact on successive generations until a clean up can find half the finance that a war can.
    The price tags are huge, but relatively nothing – in comparison to what is needed, and weighed against what will be lost in the coming decades.

    I don’t think you’ll actually find a single one of the 30 000 Exxon Valdez complainants consider themselves lucky at all.


    July 1, 2008 at 3:59 am

  3. Why the natural forces of this world even let the corporate maggots of this world do what they do makes no sense. Sure there should be conscientous people who give reason, but it is ridiculous to have let these maggots take it as far as they have.

    There should just be decentralization in this world. Natural forces who have access to land, resources, and nature who seek to be in no way tied to the corporate forces of this world should just reserve lands throughout the globe that cannot be touched by such creatures.


    August 31, 2008 at 9:57 am

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