Supreme Court Cuts Exxon Oil Spill Penalty

The Supreme Court held today that a $2.5 billion punitive damages award against Exxon was far too high. In a 5-to-3 decision (in which Justice Samuel Alito was recused), the court held that the jury award in the 1989 Exxon Valdez tanker spill—the world's worst—far exceeded the average ratio between compensatory and punitive damages.

The court's problem was that occasional large jury awards create an unpredictability that is at odds with the desire for fairness and consistency in the court system. Based on the median payouts in punitive damages for maritime cases, the court held that the ratio of punitive damages should not be greater than 1:1.

For Exxon, that means punitive damages can be no more than $507.5 million, the amount a district court held for compensatory damages. The Supreme Court has remanded the case to the lower courts for a final decision.

This sum comes on top of billions Exxon has already paid. The company spent roughly $2.1 billion on cleanup efforts, settled a civil action for at least $900 million, and paid an additional $303 million to private parties. In addition, Exxon pleaded guilty to criminal violations.

—Emma Schwartz