Once upon a time - double vodkas, 53 million gallons of oil and enough booze “that a non-alcoholic would have passed out.”

Posted by Alaska_Politics

Posted: June 26, 2008 - 6:43 am

From David Hulen in Anchorage --

Yesterday's 61-page Exxon Valdez ruling can be a bit of a slog to read through. But the narrative laying out the facts of the case is pretty compelling stuff.

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On March 24, 1989, the supertanker Exxon Valdez grounded on Bligh Reef off the Alaskan coast, fracturing its hull and spilling millions of gallons of crude oil into Prince William Sound. The owner, petitioner Exxon Shipping Co. (now SeaRiver Maritime, Inc.), and its owner, petitioner Exxon Mobil Corp. (collectively, Exxon), have settled state and federal claims for environmental damage, with payments exceeding $1 billion, and this action by respondent Baker and others, including commercial fishermen and native Alaskans, was brought for economic losses to individuals dependent on Prince William Sound for their livelihoods.

The tanker was over 900 feet long and was used by Exxon to carry crude oil from the end of the Trans-Alaska Pipeline in Valdez, Alaska, to the lower 48 States. On the night of the spill it was carrying 53 million gallons of crude oil, or over a million barrels. Its captain was one Joseph Hazelwood, who had completed a 28-day alcohol treatment program while employed by Exxon, as his superiors knew, but dropped out of a prescribed follow-up program and stopped going to Alcoholics Anonymous meetings. According to the District Court, “[t]here was evidence presented to the jury that after Hazelwood was released from [residential treatment], he drank in bars, parking lots, apartments, airports, airplanes, restaurants, hotels, at various ports, and aboard Exxon tankers.” In re Exxon Valdez, No. A89–0095–CV, Order No. 265 (D. Alaska, Jan. 27, 1995), p. 5, App. F to Pet. for Cert. 255a–256a (hereinafter Order 265). The jury also heard contested testimony that Hazelwood drank with Exxon officials and that members of the Exxon management knew of his relapse. See ibid. Although Exxon had a clear policy prohibiting employees from serving onboard within four
hours of consuming alcohol, see In re Exxon Valdez, 270 F. 3d 1215, 1238 (CA9 2001), Exxon presented no evidence that it monitored Hazelwood after his return to duty or considered giving him a shoreside assignment, see Order 265, p. 5, supra, at 256a. Witnesses testified that before the Valdez left port on the night of the disaster, Hazelwood downed at least five double vodkas in the waterfront bars of Valdez, an intake of about 15 ounces of 80-proof alcohol, enough “that a non-alcoholic would have passed out.” 270 F. 3d, at 1236.

The ship sailed at 9:12 p.m. on March 23, 1989, guided by a state-licensed pilot for the first leg out, through the Valdez Narrows. At 11:20 p.m., Hazelwood took active control and, owing to poor conditions in the outbound shipping lane, radioed the Coast Guard for permission to move east across the inbound lane to a less icy path. Under the conditions, this was a standard move, which the last outbound tanker had also taken, and the Coast Guard cleared the Valdez to cross the inbound lane. The tanker accordingly steered east toward clearer waters, but the
move put it in the path of an underwater reef off Bligh Island, thus requiring a turn back west into the shipping lane around Busby Light, north of the reef.

Two minutes before the required turn, however, Hazelwood left the bridge and went down to his cabin in order, he said, to do paperwork. This decision was inexplicable. There was expert testimony that, even if their presence is not strictly necessary, captains simply do not quit the
bridge during maneuvers like this, and no paperwork could have justified it. And in fact the evidence was that Hazelwood’s presence was required, both because there should have been two officers on the bridge at all times and his departure left only one, and because he was the only person on the entire ship licensed to navigate this part of Prince William Sound. To make matters worse, before going below Hazelwood put the tanker on autopilot, speeding it up, making the turn trickier, and any mistake harder to correct.

As Hazelwood left, he instructed the remaining officer, third mate Joseph Cousins, to move the tanker back into the shipping lane once it came abeam of Busby Light. Cousins, unlicensed to navigate in those waters, was left alone with helmsman Robert Kagan, a nonofficer. For reasons that remain a mystery, they failed to make the turn at Busby Light, and a later emergency maneuver attempted by Cousins came too late. The tanker ran aground on Bligh Reef, tearing the hull open and spilling 11 million gallons of crude oil into Prince William Sound.

After Hazelwood returned to the bridge and reported the grounding to the Coast Guard, he tried but failed to rock the Valdez off the reef, a maneuver which could have spilled more oil and caused the ship to founder. (As it turned out, the tanker survived the accident and remained in Exxon’s fleet, which it subsequently transferred to a wholly owned subsidiary, SeaRiver Maritime, Inc. The Valdez “was renamed several times, finally to the SeaRiver Mediterranean, [and] carried oil between the Persian Gulf and Japan, Singapore, and Australia for 12 years. . . .In 2002, the ship was pulled from service and ‘laid up’ off a foreign port (just where the owners won’t say) and prepared for retirement, although, according to some reports, the vessel continues in service under a foreign flag.” Exxon Valdez Spill Anniversary Marked, 30 Oil Spill
Intelligence Report 2 (Mar. 29, 2007).

The Coast Guard’s nearly immediate response included a blood test of Hazelwood (the validity of which Exxon disputes) showing a blood-alcohol level of .061 eleven hours after the spill. Supp. App. 307sa. Experts testified that to have this much alcohol in his bloodstream so long after the accident, Hazelwood at the time of the spill must have had a blood-alcohol level of around .241, Order 265, p. 5, supra, at 256a, three times the legal limit for driving in most States.

In the aftermath of the disaster, Exxon spent around $2.1 billion in cleanup efforts. The United States charged the company with criminal violations of the Clean Water Act, 33 U. S. C. §§1311(a) and 1319(c)(1); the Refuse Act of 1899, 33 U. S. C. §§407 and 411; the Migratory Bird
Treaty Act, 16 U. S. C. §§703 and 707(a); the Ports and Waterways Safety Act, 33 U. S. C. §1232(b)(1); and the Dangerous Cargo Act, 46 U. S. C. §3718(b). Exxon pleaded guilty to violations of the Clean Water Act, the Refuse Act, and the Migratory Bird Treaty Act and agreed to pay a $150 million fine, later reduced to $25 million plus restitution of $100 million. A civil action by the United States and the State of Alaska for environmental harms ended with a consent decree for Exxon to pay at least $900 million toward restoring natural resources, and it paid another $303 million in voluntary settlements with fishermen, property owners, and other private parties.

The remaining civil cases were consolidated into this one against Exxon, Hazelwood, and others. The District Court for the District of Alaska divided the plaintiffs seeking compensatory damages into three classes: commercial fishermen, Native Alaskans, and landowners. At Exxon’s behest, the court also certified a mandatory class of all plaintiffs seeking punitive damages, whose number topped 32,000. Respondents here, to whom we will refer as Baker for convenience, are members of that class.

For the purposes of the case, Exxon stipulated to its negligence in the Valdez disaster and its ensuing liability for compensatory damages. The court designed the trial accordingly: Phase I considered Exxon and Hazelwood’s recklessness and thus their potential for punitive liability;
Phase II set compensatory damages for commercial fishermen and Native Alaksans; and Phase III determined the amount of punitive damages for which Hazelwood and Exxon were each liable. (A contemplated Phase IV, setting compensation for still other plaintiffs, was obviated
by settlement.)

In Phase I, the jury heard extensive testimony about Hazelwood’s alcoholism and his conduct on the night of the spill, as well as conflicting testimony about Exxon officials’ knowledge of Hazelwood’s backslide. At the close of Phase I, the Court instructed the jury in part that “[a] corporation is responsible for the reckless acts of those employees who are employed in a managerial capacity while acting in the scope of their employment. The reckless act or omission of a managerial officer or employee of a corporation, in the course and scope of the performance of his duties, is held in law to be the reckless act or omission of the corporation.”

The Court went on that “[a]n employee of a corporation is employed in a managerial capacity if the employee supervises other employees and has responsibility for, and authority over, a particular aspect of the corporation’s business.” Ibid. Exxon did not dispute that Hazelwood
was a managerial employee under this definition, see App. G, id., at 264a, n. 8, and the jury found both Hazelwood and Exxon reckless and thus potentially liable for punitive damages, App. L, id., at 303a. ( The jury was not asked to consider the possibility of any degree of fault beyond the range of reckless conduct. The record sent up to us shows that some thought was given to a trial plan that would have authorized jury findings as to greater degrees of culpability, see App. 164, but that plan was not adopted, whatever the reason; Baker does not argue this was error.)

In Phase II the jury awarded $287 million in compensatory damages to the commercial fishermen. After the Court deducted released claims, settlements, and other payments, the balance outstanding was $19,590,257. Meanwhile, most of the Native Alaskan class had settled
their compensatory claims for $20 million, and those who opted out of that settlement ultimately settled for a total of around $2.6 million.

In Phase III, the jury heard about Exxon’s management’s acts and omissions arguably relevant to the spill. See App. 1291–1320, 1353–1367. At the close of evidence, the court instructed the jurors on the purposes of punitive damages, emphasizing that they were designed not to provide compensatory relief but to punish and deter the defendants. See App. to Brief in Opposition 12a–14a. The court charged the jury to consider the reprehensibility of the defendants’ conduct, their financial condition, the magnitude of the harm, and any mitigating facts. Id., at
15a. The jury awarded $5,000 in punitive damages against Hazelwood and $5 billion against Exxon.

On appeal, the Court of Appeals for the Ninth Circuit upheld the Phase I jury instruction on corporate liability for acts of managerial agents under Circuit precedent. See In re Exxon Valdez, 270 F. 3d, at 1236 (citing Protectus Alpha Nav. Co. v. North Pacific Grain Growers, Inc., 767
F. 2d 1379 (CA9 1985)). With respect to the size of the punitive damages award, however, the Circuit remanded twice for adjustments in light of this Court’s due process cases before ultimately itself remitting the award to $2.5 billion. See 270 F. 3d, at 1246–1247; 472 F. 3d 600, 601,
625 (2006) (per curiam), and 490 F. 3d 1066, 1068 (2007).

We granted certiorari to consider whether maritime law allows corporate liability for punitive damages on the basis of the acts of managerial agents, whether the Clean Water Act (CWA), 86 Stat. 816, 33 U. S. C. §1251 et seq. (2000 ed. and Supp. V), forecloses the award of punitive damages in maritime spill cases, and whether the punitive damages awarded against Exxon in this case were excessive as a matter of maritime common law. 552 U. S. ___ (2007). We now vacate and remand.

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