Oil and the Courts: Will History Repeat Itself?

As BP begins a risky attempt to stem its still-leaking oil rig in the Gulf of Mexico, and oil starts to lap against the shores of the Gulf Coast, lawsuits against the oil giant have begun. The devastating oil spill has already surpassed the size of the 1989 Exxon Valdez disaster, and the litigation that follows it is sure to be just as contentious and lengthy. Two years ago, 19 years after the Valdez spill, the tens of thousands of victims of the disaster saw their case end up before the Supreme Court…and the Court gave Exxon Mobil a huge handout. While the facts this time are different and the legal issues won’t be exactly the same, if their case ends up before the high court, victims of the BP spill will have a legitimate reason to worry –the Roberts Court has displayed a clear willingness to go out of its way to keep individual citizens from holding big oil accountable.

In 1989, an Exxon oil tanker carrying over a million barrels of crude oil crashed off the coast of Alaska, spilling at least ten million gallons of oil into the Prince William Sound. The spill destroyed wildlife habitats and the livelihoods of fishermen up and down the Northwest coast. Those affected by the spill entered into years of litigation to try to recover from Exxon some of what they had lost. In 1994, a jury awarded the 32,677 plaintiffs in the case $5 billion in punitive damages. An appeals court judge halved the amount to $2.5 billion.

Then, in 2008, the Supreme Court gave Exxon Mobil a $2 billion gift. As our Rise of the Corporate Court report explains:

[E]ven this pared-down judgment was way too much for Justices Roberts, Kennedy, Thomas, Souter and Scalia. In 2008, this bloc reduced the punitive damage award from $2.5 billion to $507.5 million. Indeed, the only thing that stopped them from deleting the award altogether was that they were one vote short of being able to find that a corporation is not responsible for the reckless acts of its own managers acting in the scope of their employment.

What the 5-justice majority found, over the objections of dissenting liberal justices who accused them of legislating from the bench, was that it would impose in maritime tort cases a 1-1 ratio between compensatory and punitive damages—a formula found nowhere in the statute and essentially pulled out of a hat made by a big corporation. In dissent, Justice Stevens chastised the majority for interpreting the "congressional choice not to limit the availability of punitive damages under maritime law" as "an invitation to make policy judgments on the basis of evidence in the public domain that Congress is better able to evaluate than is this Court."

But Exxon, which amazingly ended up making money on the spill because of the resulting increase in oil prices, got its way with a corporate-leaning Court and ended up paying punitive damages equal to a day or two of company profits.

The Exxon Valdez spill was the largest oil spill ever in U.S. waters. Until now, that is.

As oil keeps leaking from a BP oil rig into the Gulf of Mexico, the Gulf Coast has started to feel the impact of what the White House yesterday declared to be the worst oil spill in U.S. history.

President Obama called the spill a "potentially unprecedented environmental disaster." 11 people died in the rig’s explosion, and the resulting spill has already begun to destroy Gulf Coast ecosystems and has started a devastating ripple effect through the economy.

An early estimate put the economic impact of the spill at $12.5 billion. And the damage could continue for decades.

Not surprisingly, the lawsuits from those who are losing their livelihoods have begun. As of May 21, more than 130 had been filed.

Lawsuits against BP will no doubt involve millions, and probably billions of dollars in both compensatory and punitive damages. While compensatory damages are essential to helping victims recover from a disaster of this size, punitive damages serve to dissuade the company and others like it from acting recklessly in the future. The Roberts Court’s willingness to invent a rule capping punitive damages against Exxon doesn’t bode well for anyone hoping to hold BP accountable for this disaster and to make sure it doesn’t happen again.

The Court has a responsibility to ensure that ordinary people get treated fairly, even when pitted against big corporations—but the current Supreme Court has made it clear that we can’t always count on that.

This disaster is a tragic reminder of why we need Justices who won’t favor the interests of the powerful over the rights of ordinary citizens.

 UPDATE (May 28, 2:30 PM):

For a sense of the scale of the disaster, take a look at NASA's stunning time-lapse video of the spill unfolding (via Mother Jones):

PFAW