Punitive Damages: A Bad Decision by the U.S. Supreme Court
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Punitive Damages: A Bad Decision by the U.S. Supreme Court

Sunday, August 10, 2008By Richard Alexander

The United States Supreme Court reduced the amount of punitive damages Exxon Mobile will have to pay for its destruction of the Alaska coastline from $5 billion to $500 million. This gift to Exxon comes on the heels of a reported $40 billion profit by the oil giant for the year 2007. This is the largest annual profit for a corporation in history.

The decision insulates grossly negligent corporations when thousands of people are injured and encourages years of litigation by mega-corporations

Originally a jury awarded the victims of the 1989 Exxon Valdez spill $5 billion in punitive damages.Later an Appellate Court to $2.5 billion reduced that.The Supreme Court showing they are more generous than any appellate jurisdiction reduced it to just $500 million.

The original jury verdict was in 1994. The giant oil corporation, by balking at paying the jury's award, was able to save $4.5 billion in penalties, plus the cost of money over 14 years. If Exxon had put the original award of $5 billion into a certificate of deposit at 7%, it would have earned $500 million in interest in less than two years.

That's Exxon's punishment for its reckless misconduct in spilling 10.8 million gallons into Prince William Sound.It remains one of the greatest environmental disasters in our history.

But the real story is the Court's decimation of the important role of punitive damages to punish outlaws and hold them publicly accountable.

Corporations and the corporate controlled media like to perpetuate the mythology that punitive damages awards are excessive.Punitive damages are only used against a defendant when a jury has determined an egregious wrong was committed. The jury in the Exxon Valdez found that the company knew that the Captain of the vessel was an alcoholic and that he had been drinking on the ship.They also found that compensatory damages to commercial fisherman would never be sufficient for their loss.

In addition, the court found Exxon was slow to act to clean-up the disaster and executives of the company had little remorse for the actions of the company that led to the disaster.

The 33,000 plaintiffs in the case would have received $150,000 after the jury award, $75,000 after the reduction by the Appellate Court and $15,000 after the today's ruling.Fifteen thousand dollars is the equivalent of $7,000 placed in a bank in 1994 at five percent interest.

The Court's ruling is a travesty for protecting the environment.Scientists have concluded it will take over 30 years for the coastline to recover.There is no reason, given the new guidelines for punitive damages, that giant corporations should fear be deterred from reckless or intentional misconduct, as long as they have correctly calculated their economic risks.

Environmental destruction, contaminated foods, toxic products, and dangerous toys for children will not be detrrred as a result of this decision.

There's other lesson from the Exxon Valdez case.Corporations now are assured that if they stretch litigation out and get to a very friendly Supreme Court they can maximize their profit and limit their liability. The only real danger they face is from a qualified attorney in front of a jury that will justly determine the damages.

That's why corporations are supporting John McCain for president.With four right-wingers just waiting for one more vote, the election of McCain guarantees a decade of corporate protection at the U.S. Supreme Court.

Across the board the right-wing minority on the Supreme Court relishes its power to eviscerate the rights of consumers whenever it can scare up one more vote. Check the recent history on prescription drugs and medical devices.

We need the Supremes to sing a different tune.That will only be possible if we elect a candidate for change in November.He's not the old white guy riding in a golf cart with President Bush.

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