Top court reduces $2.5b Exxon Valdez damages

Washington: The US Supreme Court on Wed-nesday threw out the record $2.5 billion in punitive damages that ExxonMobil Corp had been ordered to pay for the 1989 Exxon Valdez oil spill off Alaska, the nation's worst tanker spill.

By a 5-3 vote, the court ruled that the punitive damages award should be slashed to a maximum amount equal to the total relevant compensatory damages of $507.5 million.

The justices overturned a ruling by a US Court of Appeals that had awarded the record punitive damages to about 32,000 commercial fishermen, Alaska natives, property owners and others harmed by the spill.

In the majority opinion, Justice David Souter concluded the $2.5 billion in punitive damages was excessive under federal maritime law, and should be cut to the amount of actual harm.

Soaring oil prices have propelled ExxonMobil to previously unforeseen levels of profitability in recent years; the company posted earnings of $40.6 billion in 2007.

It took ExxonMobil just under two days to bring in $2.5 billion in revenue during the first quarter of 2007.

The Exxon Valdez supertanker ran aground in Alaska's Prince William Sound in March 1989, spilling about 11 million gallons of crude oil.

The spill spread oil to more than 1,200 miles of coastline, closed fisheries and killed thousands of marine mammals and hundreds of thousands of sea birds.

A federal jury in Alaska awarded $5 billion in punitive damages in 1994. A federal judge later reduced the punitive damages to $4.5 billion, and the appeals court further cut it to $2.5 billion. ExxonMobil, the largest US company by market capitalisation, then appealed to the Supreme Court.

Souter rejected ExxonMobil's argument that the federal clean water law's water pollution penalties preempt punitive damage awards in maritime spill cases. But he sided with the company in slashing the award. "We hold that the federal statutory law does not bar a punitive award on top of damages for economic loss, but that the award here should be limited to an amount equal to compensatory damages," he said.