Though divided, the US Supreme Court slashed the punitive damages awarded against Exxon Mobil Corp for the 1989 Valdez oil spill from $2.5 billion to a relatively paltry $507.5 million.
The Exxon Valdez super tanker spilt oil off the Alaskan coast 19 years ago, when it ran aground in Alaska's Prince William sound in 1989. It spilt over 40-million litres (11 million gallons) of crude oil into the water, and closed fisheries, and killed hundreds of thousands of birds and marine animals, causing substantial ecological damage.
It is said to be the worst oil spill in US history.
Exxon had argued that it could not be punished for the misconduct of the vessel's captain, Joseph Hazelwood, who was said to be drunk on the night the vessel ran aground.
A group of around 33,000 Alaskans had sued Exxon asking for compensation and additional punishment for the company. Their lawyers had argued that Exxon managers had assigned a relapsed alcoholic in Capt. Joseph Hazelwood to command the supertanker. The jury found that Captain Hazelwood acted recklessly, and also found that Exxon had acted recklessly as well.
Hazelwood was ordered to pay $5,000 in punitive damages, and Exxon was ordered to pay $5 billion, which was later reduced to $2.5 billion.
Exxon said that federal maritime law does not allow ''vicarious'' punitive damages which punish a company for the misconduct of its employees. The justices voted 5-3 to cut the the award, terming it as excessive under a federal maritime law. That award would have jumped by over $2 billion with accrued interest, and the full sum would have been the largest punitive damage payment in US history.
Justice David Souter said punitive damages could be awarded under maritime law, but the verdict against Exxon "under the circumstances of this case" should be limited to the amount equal to the damages already paid by Exxon to compensate victims of the oil spill.
Only eight justices of the nine-member court participated in the case, as Justice Samuel Alito excused himself as he owns ExxonMobil stock.
Business groups have praised the move by the high court as a step in reducing the level of uncertainty in punitive damages cases. However, environmentalists and analysts say the court has it wrong, as Exxon was squarely responsible for one of the greatest environmental disasters the US has witnessed, and say that the judgement amounts to ''a slap on the wrist''.
Irving- (Texas) based Exxon Mobil had argued that it had already paid enough for the disaster, around $3.4 billion in terms of clean-up costs, fines and other spill-related expenses. Exxon last year smashed its own annual profit record by a US corporation, posting $40.6 billion.
The award is to be spread amongst thousands of victims of the oil spill.
The original group comprised 33,000 commercial fishermen, seafood processors, landowners, native Alaskans and small businesses. They had sued in 1989, and won a $5 billion punitive damage award in 1994. Thereafter the case bounced around in the court system for the next 14 years bouncing up and down the court system.