Exxon Will Appeal $5 Billion Penalty For 1989 Oil Spill

`Armor-plated' verdict sends message to oil companies

THE Exxon Corporation of Irving, Texas, is expected within days to appeal the $5 billion fine levied by a federal jury on Friday for the nation's worst oil spill, the 1989 Exxon Valdez accident in Alaska.

The award is the nation's largest next to the $10.5 billion penalty a Texas court in 1985 slapped on Texaco USA of Houston for its interference with the Pennzoil Company, also of Houston.

But lawyers for the plaintiffs in the Exxon case, who earlier complained about pro-Exxon rulings United States District Court Judge H. Russel Holland made, now claim that the narrow interpretations give Exxon little ground for appeal. Chief liaison counsel Dave Oesting said: ``I think this verdict is essentially armor-plated for purposes of appeal.''

But, in a company statement, Exxon chairman Lee Raymond called the verdict ``unwarranted and unfair. It is excessive by any legal or practical measure.'' In trial testimony, he refused to admit that Exxon was reckless - even after jurors ruled so in the trial's first phase.

Exxon attorney Pat Lynch said the complexity of corporate finance confused the jury and brought an ``excess'' verdict. Last month, he praised jurors for awarding $286.8 million of $895 million sought as compensation by some 10,000 commercial salmon and herring fishermen.

Rulings didn't help verdict

The jury rejected Exxon's claims of post-spill contrition and reform despite Judge Holland's rulings, which include:

* Excluding information about tanker Capt. Joseph Hazelwood's two driver's-license revocations and the fact that he had lost his New York license due to alcohol violations at the time of the grounding.

* Excluding a 1984 memo to Exxon managers from a tanker officer who said Mr. Hazelwood had been drunk on board and abandoned the bridge while drunk; and testimony from flight attendants who said they had to stop an intoxicated Hazelwood from drinking more on the trip out of Valdez after the grounding. Throughout the trial, Exxon denied any connection between alcohol and the grounding. ``If he's an alcoholic, I'm a double one,'' Exxon attorney Jim Neal said.

* Excluding information about three other Exxon spills in 1988, 1989, and 1990, including a New Jersey refinery incident in which Exxon admitted negligence.

* Jury instructions that both prohibited any award over the minimum needed for punishment and deterrence, and ordered a finding that Exxon was reprehensible, not just reckless, to justify punitive damages. Other instructions told jurors they could consider the spill's damage to all plaintiff groups, but they forbade consideration of vast damages to natural resources. (Ecological claims were considered extinguished in the $1.025 billion deal Exxon signed with US and state governments in 1991, the instructions said.)

* Barring all evidence about the disaster's lack of a ``materially adverse effect'' on Exxon's finances. That included testimony from a plaintiff expert who was to tell the jury a $6 billion to $10 billion fine to punish a firm of Exxon's wealth was necessary. The testimony included Exxon financial statements that assured shareholders the spill litigation would not ``materially'' harm the company. And it included deposition testimony from Exxon's outside auditor - who said spill costs had not hurt the company - and the company's controller, who said no fine under $10 billion would cause material harm to operations or finances.

Sending a $5 billion message

The $5 billion fine ``ought to be a big enough message to people who run tankers, to people who take risks with our environment to be careful,'' said Brian O'Neill, chief trial lawyer for the plaintiffs - thousands of fishermen, American Indians, property owners, coastal communities, and native American corporations.

Through the 4 1/2-month trial, he told of boozy sailors, corporate arrogance, and 11 million gallons of oil in Prince William Sound, spoiling one of the world's last great marine wildernesses. Exxon ignored the risks of putting relapsed alcoholic Hazelwood in charge of a tanker, and then brushed off consequences with a publicity campaign and spending that was a mere ``hiccup'' for one of the world's richest institutions, Mr. O'Neill argued.

He asked for $5 billion to $20 billion in a punitive award made possible by the verdict this summer that recklessness by Exxon and Hazelwood caused the spill.

At the courthouse, fisherman Ken Duffus said he was satisfied with the verdict. ``I think it'll send a message to everybody else out there that you can't do business like that in this state.''

Some of the most dramatic testimony came early, when Hazelwood spoke in public for the first time about grounding on Bligh Reef and his alcohol and emotional problems in previous years. He defended himself for spending time before the voyage in a bar and denied being an alcoholic, despite failing sobriety tests taken after the grounding. The jury fined him $5,000, even though plaintiffs, saying he had been punished enough, asked for $1.

Jurors believed they were teaching a lesson, according to a TV interview of jury foreman and businessman Ken Murray. ``This is about letting Exxon and anybody else in the world know that, if you're going to come to Alaska, you're going to have to be able to pay the bill if you mess up, and you cause this type of damage,'' he told KTUU of Anchorage.

Some mariners need a reminder. As jurors deliberated, two captains and a chief mate from emergency-response vessels in Valdez were cited for being drunk on duty.

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