Supreme Court slashes Valdez damage award

Posted: Thursday, June 26, 2008

The morning of March 24, 1989, is a date Alaskans remember.

Just minutes into the day, the Exxon Valdez, a tanker owned by Exxon Corp. and carrying 53 million gallons of Alaska crude oil to Washington from the Valdez terminus of the trans-Alaska oil pipeline, struck Bligh Reef. Through a tear in its hull, 11 million gallons of oil leaked into Prince William Sound and eventually spread along 1,300 miles of shoreline, leaving a trail of death and devastation in its wake.

The morning of June 25, 2008, is another date Alaskans will remember, as news spread of the U.S. Supreme Court's decision on the suit resulting from the spill. The $5 billion punitive damages awarded to more than 32,000 claimants by an Anchorage jury in 1994 and later reduced to $2.5 billion in the 9th U.S. Circuit Court of Appeals in 2006, was cut to $507.5 million.

"I am extremely disappointed with today's decision by the U.S. Supreme Court," Alaska Gov. Sarah Palin said. "While the decision brings some degree of closure to Alaskans suffering from 19 years of litigation and delay, the court gutted the jury's decision on punitive damages."

"I'm embarrassed about what the court system did," said Minneapolis, Minn., attorney Brian O'Neill, one of the lawyers representing the plaintiffs. "They made it up to help big business -- and that is the truth."

Strong reactions also came from Kenai Peninsula organizations and individuals.

"There's no punishment there. The intent was to punish Exxon for one year's profit. This is like the coffee bill," said Homer fisherman Andy Wills, who fished herring in Prince William Sound. "We lost a way of life."

Homer fisherman Ken Castner criticized the Supreme Court's calculation that there should be a 1-to-1 ratio between compensatory damages and punitive damages.

"I think we had in the back of our mind it could be reduced, but not to a 1-to-1 ratio," he said. "The injustice is that the $507 million is what was provable at the time. We've had no recovery of herring fisheries in Prince William Sound or lower Cook Inlet."

"This is a miscarriage of justice," said Mike Beal, executive director of Seldovia Native Association. "The damage I saw personally I'll take with me the rest of my life. To let Exxon off at a four-day net profit as a punitive deterrent just means there's no deterrent in the future to do this same thing."

Wills made the same point -- and drew a parallel with the Pebble Partnership's proposal to mine near Bristol Bay salmon streams. "The courts are in favor of the corporations to the extreme. There's no stick," he said. "If you let the corporations in, it's over."

"We're just disappointed," said Homer City Manager Walt Wrede. "Obviously, disappointment and sadness. I feel bad for the people who had to wait 20 years. Some people had their lives ruined. I just think it's a sad day."

Castner said the Supreme Court decision sets a bad precedent.

"One of the tenets of the ruling was that businesses should know what they face in terms of penalties. I'd like to know what I face in the way of risk," he said. "There is a huge injustice here, and it's really kind of stilted in when you can bring suit, what you can prove at trial -- and it's all built around the expectations of business and not the risk of people business walked over."

After hearing of the spill in March 1989, Beal went to Seward and volunteered to help in animal rescue and clean-up efforts.

"The pain and suffering was so much that I couldn't deal with it," Beal said. "I couldn't see the otters, the seals, the hundreds of thousands of birds that were all crying and dying and couldn't understand what was happening to them. It made me sick."

James Kvasnikoff of Nanwalek and a Chugachmuit board member also was surprised at the Supreme Court's decision.

"This is a very big disappointment," Kvasnikoff said. "I don't see how those officials could sit there and play with people's lives, especially when we're subsistence users and commercial fishermen who depend on fishing as a way of life."

At the time the Exxon Valdez struck Bligh Reef, the village of Nanwalek was preparing a cultural event that highlighted subsistence.

"We were getting a lot of older adults involved in the planning. We had a week-long stretch of big tides and were going to teach our youth the subsistence way of life," Kvasnikoff recalled. "We heard about the oil spill and everything just collapsed. We never even got to the point of teaching our young people. We went into panic mode."

Kvasnikoff said villages began hearing stories that the oil was spreading their direction. About a week and a half later, if finally reached Nanwalek's shore.

"Marine life was washing up on the beach, covered in oil," he said. "Everyone was in shock."

The Supreme Court's decision has brought a different kind of shock.

"People have been watching the news carefully for years," Kvasnikoff said. "They viewed (the settlement) as a way to get things they longed to have, equipment that would help make living a little bit easier. With the cost of fuel rising, they'll be able to get fuel. It's kind of funny, getting oil spill money to purchase fuel. It's crazy."

Kvasnikoff said images of the spilled oil and what it did still haunt villagers.

"People will continue to go out and do subsistence harvesting, but in the back of our minds the thought is still there, 'How safe is it?' It destroys a human being's thought of harvesting. It destroys the way you think of it now," Kvasnikoff said.

For Frank Mullen, a Homer resident and 44-year Cook Inlet commercial fisherman, the Supreme Court's decision has left him feeling "like an old horse that's been kicked off the edge of the pasture."

He clearly recalled hearing about the spill and that there were no resources readily available to stop the oil's spread.

"Consequently, it spread and spread and killed and killed," Mullen said. "It was horrible."

When commercial fishing in Cook Inlet was canceled that season due to the spill, Mullen's life also was disrupted in more ways than the economic loss.

"My daughter, who was 12 or 13 at the time, was all geared up to be one of my deckhands that summer. She came to me with tears in her eyes and said, 'Dad, I want to go fishing.' That was really tough for me," Mullen said. "The true impact of the spill in 1989 was not the economic impact. It was an emotional impact. It was a human indignity that had been thrust upon us by a careless corporation with no logic or rationale to it. It was just impossible to make sense out of why birds and otters were dying and why it was that life was turned totally upside down."

Mullen, who was serving on the Kenai Peninsula Borough Assembly that summer, spent days after the spill involved in cleanup efforts in Seward, the Kenai Fjords and Kachemak Bay.

By Mullen's estimates, the Supreme Court's reduction means plaintiffs will receive between 15-18 percent of what was originally expected.

"If you estimated your award yesterday (Tuesday) to be $100,000, you might actually recover about $18,000," Mullen said.

Exxon has had to pay 5.9 percent interest on the punitive damages. O'Neill estimated that the reduced punitive damages of $507 million would pencil out to be about $1 billion. Lawyers will take about 20 percent. The amount plaintiffs receive varies depending on the degree of their involvement in affected fisheries. Under the $5 billion fine, some boat and permit owners might have seen $600,000 and deckhands maybe $60,000, Castner said. With the fine now at $1 billion -- including interest -- plaintiffs might get a fifth of that, minus legal fees.

"If there are any spillionaires out of this, it will be a rare thing," Castner said.

Some of the settlement will go to local communities. At one point, Homer might have gotten $8 to 10 million, Wrede said -- enough that the city established a Homer Permanent Fund in anticipation. Castner estimated the city could get about $1.4 million.

What the city lost doesn't compare to the loss to families, Wrede said.

"The city lost a bunch of money. The city will get by. The real story is the individuals," he said.

Estimates made by Kenai Peninsula Borough Mayor John Williams were similar to those made by Mullen, but took into consideration the impact of federal taxes.

"It averages about $15,800 if my math serves me correctly," said Williams, who was "thoroughly disappointed in the outcome" of the court's decision.

In March 1989, Williams, then the mayor of the city of Kenai, was president of the state's conference of mayors. He and other mayors immediately headed to Juneau to see what they could do to speed a response to the spill.

"It was a bright, beautiful, sunny morning. The sea was just flat as a pancake. The Alaska Airlines pilot elected to take a route through Valdez," Williams said. "He circled over the wreck at a lower altitude and we all got a firsthand look. Here was this giant tanker hung up on Bligh Reef."

In Juneau, Williams observed "a state of confusion," with no clear directions being given, no one taking charge and the oil industry without the resources to respond quickly.

"There was one cleanup barge (in Valdez) and it had a hole in it and was sitting on the beach. You had guys out there in fishing boats with 55-gallon drums, bucketing (oil) up and hauling it to shore. It was the most pathetic thing I'd ever seen."

In the 19 years since the spill, Williams said 6,000 plaintiffs have died.

"They never received compensation. Their lives were sorely interrupted. Their lives, their family, their futures were in jeopardy because of this. That's the part that really comes home," Williams said.

There have been some, although few, positive outcomes in the 19 years since the 11-million gallons of crude oil spread along Alaska water and beaches, Williams noted.

"The only things that came out of it to save Mother Earth is that we did pass the Oil Pollution Act -- (then borough mayor) Don Gilman and I were both involved in that -- and we got double-hull tankers out of the thing," Williams said.

Signed into law in 1990, OPA established requirements to enhance oil spill response and natural resource damage assessment. It also paved the way for phasing out single-hull tankers, such as the Exxon Valdez, from U.S. ports.

Castner pointed out one more benefit.

"It's over. That's the good news," he said. "We don't have to wait one more minute to find what's happened. This fall we'll get checks and hopefully we'll get closure."

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