Exxon Whines to Supremes

October 30, 2007 12:19 PM

Corporate Citizenship On March 24, 1989, the oil tanker Exxon Valdez struck Bligh Reef in Prince William Sound, Alaska, spilling more than 11 million gallons of crude oil. The spill was the largest in U.S. history and tested the abilities of local, national, and industrial organizations to prepare for, and respond to, a disaster of such magnitude. Oil from the massive spill, which coated 1,200 miles of Alaskan coast, continues to threaten the damaged ecosystem there, long after experts believed it would dissipate. Facing a $5 billion damage award, Exxon appealed, and won reductions to $4.5B, then $2.5B. It was still too much, the company argued. Now, the U.S. Supreme Court has agreed to hear Exxon's appeal. Justice Alito has recused himself.

The best outcome for business ``would be a decision that cuts this award down to a million or two, or some modest amount, on the grounds that nothing more than that is necessary or appropriate,' said Tager, a lawyer at Mayer Brown in Washington. ``That would have broader ramifications beyond the maritime context.'

The court under Chief Justice John Roberts has issued a series of business victories in the last two years. The U.S. Chamber of Commerce called the most recent term, which concluded in June, the best in decades.

posted by Kirth Gerson (56 comments total)

With Ginsburg, Stevens and Souter in play (possibly) during the next administration, I'll be forced to vote for Corporate War Party Blue even if they nominate HRC.
posted by i_am_a_Jedi at 12:23 PM on October 30, 2007

Largest spill in US history?

Also featuring Exxon, unsurprisingly.
posted by hermitosis at 12:25 PM on October 30, 2007

How can they argue this? Since the spill they have had they most profitable years in industry history?
posted by tkchrist at 12:31 PM on October 30, 2007 [2 favorites]

A jury in 1994 awarded $5 billion in punitive damages, on top of a $287 million compensatory award. Judges later cut the punitive award to $4 billion, then raised it back to $4.5 billion. The 9th U.S. Circuit Court of Appeals reduced the sum to $2.5 billion, saying that was the maximum the U.S. Constitution would permit.

Exxon has obtained a letter of credit and set aside $5.4 billion to cover its payments in the case. The company broke its own record for full-year profit in 2006, recording $39.5 billion in net income.

``If any company in the world can afford this judgment, Exxon can,'' said Fadel Gheit, an analyst at Oppenheimer & Co in New York. ``They have the strongest balance sheet. They have more cash than debt. They were generating record profits when oil prices were $60 a barrel.''

Exxon Mobil's annual sales exceed the gross domestic products of all but 20 of the world's nations. The company took in $658,500 every 60 seconds during the second quarter.


How odd. I wonder ... if the Constitution can be read as to put an upper limit on the amount of damages awarded in any particular case, could it also be read as to put an upper limit on corporate income?

Nah, I'm sure theres a very fine and nuanced legal reason why the poor are supposed to get screwed while companies richer than 90% of the world's nations get a pass. Very nuanced indeed.
posted by Avenger at 12:33 PM on October 30, 2007 [3 favorites]

How can they argue this? Since the spill they have had they most profitable years in industry history?

They are arguing this in order to set a precedent for future cases, not strictly to recoup their losses.
posted by googly at 12:34 PM on October 30, 2007

I hold Ralph Nader responsible. Really.
posted by found missing at 12:38 PM on October 30, 2007

I will never in my life knowingly buy Exxon or British Petroleum gas (because it's owned by Exxon.) I have already been put to the test on this one: when my car ran out of gas in the 1990s, my choice was a nearby Exxon or walking about five miles to something else. I walked.

15 years later, I'd STILL walk.

No Exxon gas. Ever.

(I did break my boycott the tiniest bit: I bought a pack of gum in an Exxon station a few years ago.)
posted by Malor at 12:39 PM on October 30, 2007

(I did break my boycott the tiniest bit: I bought a pack of gum in an Exxon station a few years ago.)

SHAME SHAME SHAME, SHAME ON YOU MALOR.



/tongue in cheek
posted by Skygazer at 12:42 PM on October 30, 2007

I've always vaguely wondered why we don't do taxes on a %ile basis, companies and individuals indexed separately, with a very high maximum rate, and a slightly negative minimum rate-cum-EITC.

Self-leveling, self-setting, no/very few knobs for politics/bribery.
posted by Skorgu at 12:48 PM on October 30, 2007

I also put Exxon (and then Mobil) on my shitlist after PWS. If I was running out of gas, I'd probably buy a gallon just to get to another station, though. And I'd use a credit card to pay.


And I'd take a big dump on their front step.
posted by Kirth Gerson at 12:49 PM on October 30, 2007

I will never in my life knowingly buy Exxon or British Petroleum gas (because it's owned by Exxon.)

Is this true? I thought BP was an independent company.
posted by shothotbot at 12:50 PM on October 30, 2007

Exxon's position is that they have, at $3.5B, paid enough to deter people from making the same mistake and that the balance of the punitive damages are excessive.
posted by shothotbot at 12:53 PM on October 30, 2007

re: Corporate citizenship: I think if we have corporate personhood, they should also get some analog of incarceration and a corporate death penalty.
posted by TheOnlyCoolTim at 12:54 PM on October 30, 2007 [1 favorite]

Exxon bad? Unpossible!
posted by Mister_A at 1:04 PM on October 30, 2007

How odd. I wonder ... if the Constitution can be read as to put an upper limit on the amount of damages awarded in any particular case, could it also be read as to put an upper limit on corporate income?

What's odd about it? The Constitution can be read as establishing an upper limit on the amount of punishment that can be inflicted, but it does not bear any plausible interpretation that would allow the courts to limit wealth creation or require wealth redistribution.

I get that you don't like Exxon, but the dichotomy that you pointed out is not really difficult to grok.
posted by Slap Factory at 1:05 PM on October 30, 2007

Exxon's position is that they have, at $3.5B, paid enough to deter people from making the same mistake and that the balance of the punitive damages are excessive.

Lord the IRONY.

I bet they have paid five times that in PR and lobbying congress to go easy on them.

The true issue is the spill is to this day wreaking on the local environment and economy. The 3.5 billion they paid out did next to nothing in the long run.
posted by tkchrist at 1:08 PM on October 30, 2007

I've always vaguely wondered why we don't do taxes on a %ile basis

That would be class warfare. What incentive would Exxon have to give a $400 million golden parachute to a retiring chairman if they had a higher tax rate?
posted by ryoshu at 1:14 PM on October 30, 2007

I will never in my life knowingly buy Exxon or British Petroleum gas (because it's owned by Exxon.)

Is this true? I thought BP was an independent company.

Not true. BP's an entirely separate company, always has been. In fact, in the midst of Exxon's aggressive anti-climate change campaign in the late '90s, BP's CEO came forward as the first major oil executive to acknowledge the existence of climate change.

Also, the overarching corporation is ExxonMobil, which retails its gas under the Exxon, Mobil and (in Canada) Esso brands.
posted by gompa at 1:14 PM on October 30, 2007

It's kind of funny. I'm taking a business ethics class where it's a big orgy about ZOMG, YOUR BUSINESS WILL FAIL IF YOU'RE NOT ETHICAL BECAUSE NOBODY WILL EVER BUY FROM AN UNETHICAL COMPANY.
Then, I looks at companies like Wal-Mart, Best Buy, Exxon, and others who are slimy at best when it comes to ethics and yet are the top players. Not right, but it appears being unethical and failing at corporate citizenship wins when it comes to massive profits (not counting fraud like the Enron case).
posted by jmd82 at 1:15 PM on October 30, 2007

What's odd about it? The Constitution can be read as establishing an upper limit on the amount of punishment that can be inflicted, but it does not bear any plausible interpretation that would allow the courts to limit wealth creation or require wealth redistribution.

Oh I know. Thats the problem.

So I, Mr. Avenger, have the right to make unlimited amounts of money, but when I decide to do something evil with my vast wealth, you, Mr. Person-I-have-screwed-over, only have the right to sue for an arbitrarily limited amount.

The Constitution is rigged against the poor.
posted by Avenger at 1:19 PM on October 30, 2007

The Corinthos spill in the Delaware River in 1975 was about equal in size to the Exxon Valdez. Neither compares anywhere close to the estimated between 95,000 to 141,000 tons of oil spilled in Hawaii by the Hawaiian Patriot in 1977 though.
posted by Pollomacho at 1:23 PM on October 30, 2007

The Constitution can be read as establishing an upper limit on the amount of punishment that can be inflicted,

Ok, Where in the constitution is that?
posted by afu at 1:27 PM on October 30, 2007

it appears being unethical and failing at corporate citizenship wins when it comes to massive profits

The test is not "do unethical companies have big profits" but instead "how much bigger would the profits of these companies be if they were more ethical?"
posted by patricio at 1:28 PM on October 30, 2007

The Constitution can be read as establishing an upper limit on the amount of punishment that can be inflicted,

sure it can... in the same way that the song "helter skelter" can be read as predicting an apocalyptic end-times race war.
posted by saulgoodman at 1:31 PM on October 30, 2007 [1 favorite]

One gallon of crude weighs about 7.5 pounds. One ton of crude would be about 267 gallons. So your Hawaii spill is less than 38,000 gallons. You're right; it's not comparable to 11 million gallons.
posted by Kirth Gerson at 1:41 PM on October 30, 2007

The test is not "do unethical companies have big profits" but instead "how much bigger would the profits of these companies be if they were more ethical?"

If BB didn't do all the mail in rebates and try to renig on over-price warranties...If Wal-Mart didn't cut the clock for workers, cut people off at 39 hours to avoid benefits, if they didn't destroy all business and strong-arm suppliers...If Exxon's trying to avoid billions of dollars for a decade-old disaster most people could care less about anymore...yea.

Companies use sleazy tactics precisely because it saves money. By and large, it appears to work. I'd love to be proven wrong, I really would, but I just don't see the evidence that being ethical provides substantial monetary advantages over not being ethical where not mandated by law.
posted by jmd82 at 1:43 PM on October 30, 2007

So what are the legal issues at stake, anyone know? (Did the articles explain in some paragraph I missed?)
posted by salvia at 1:44 PM on October 30, 2007

Math is my weak point
posted by Kirth Gerson at 1:45 PM on October 30, 2007

That would be class warfare. What incentive would Exxon have to give a $400 million golden parachute to a retiring chairman if they had a higher tax rate?

Huh?
posted by Skorgu at 1:46 PM on October 30, 2007

Kirth, check your math. I get a hair shy of a million gallons.
posted by notsnot at 1:47 PM on October 30, 2007

Fuck! Nemmind.
posted by notsnot at 1:49 PM on October 30, 2007

Life is rigged against the poor. And you don't need a book to look that up.
posted by you just lost the game at 1:51 PM on October 30, 2007

salvia, I haven't been following the case that closely, but I'm guessing the main legal issue is this. The Supreme Court has said that the Due Process clause of the 14th Amendment prohibits punitive damage awards that are "excessive." In two major cases the past two terms(BMW v. Gore and Phillip Morris v. Williams) they have established several criteria for setting what damages are considering excessive including the degree of harm suffered and the ratio of punitive to non-punitive damages. As a general rule, the court has said that ratios of greater than 10:1 are excessive.

This is an extraordinarily controversial issue, that has produced some interesting court splits. The dissenters in the previous two cases have included both Scalia and Ginsburg.
posted by Bulgaroktonos at 1:57 PM on October 30, 2007

Thanks Bulgaroktonos.

In the meantime, I dug up a couple resources:
* some background on corporate personhood
* a citizen's guide to corporate charter revocation under state law
posted by salvia at 2:00 PM on October 30, 2007

Oh, this is interesting about how Exxon has influenced global warming debate [pdf]
posted by salvia at 2:01 PM on October 30, 2007

(Just add the word "information" and a period at the end for that comment to make sense.)
posted by salvia at 2:02 PM on October 30, 2007

18.5% ROA. 10% CFROI (per HOLT). Did not earn a penny of economic profit for ten straight years in the 80s and 90s, and only fairly recently surpassing its cost of capital by any meaningful amount.

If the profits look so super-awesome-mega-huge to you, you lack either a rudimentary understanding of corporate finance, or a sense of perspective.

Really, you guys should go back to railing against big pharma.
posted by Kwantsar at 2:08 PM on October 30, 2007

It's not that Exxon did this to Alaska shores. Humanity did this to the planet. I'm saying this and I am SO not an environmentalist supporter. I'm waiting for Gaia to get ticked off enough to throw us off her back like a mutt diving into flea dip. Gaia is not going to check to see whether or not you worked for Exxon or bought gas at their stations when she kicks in the next Ice Age in retaliation. She's gonna do us all in, so we might as well enjoy the convenience of Exxon gas stations while they're still functional.

Considering how EVERY DAY there are ships carting oil in heinous amounts all over the oceans, I am quite frankly shocked that this sort of thing doesn't happen more often than it does. Human beings are arrogant, we are frail, and we are careless. Gaia's judgment is the only judgment that really matters, and this planet is not known for her forgiveness.

I say we should let the baby Exxon have its way. This time. It wants to pay a little less, let it pay a little less. What's a few billion to a company that big, anyway? What I want to know is did it learn its lesson, or will it let this happen again?

If it ever does it again to that magnitude? Exxon should cease to exist in any way shape or form as a corporate entity, and all efforts should be made to find out why such a spill occurred and how never to let any company do that to Alaska or anywhere ever again. The times it has happened up until now can be viewed as painful lessons learned. Any company in the business that doesn't learn from this example should no longer be offered the priviledge of using this planet's waterways to cart about petroleum products.

A millenium or two from now, our successors will study the geology of this planet and see humanity as a mere blip on the Geologic Time Scale, so it really doesn't matter when you think about it.
posted by ZachsMind at 2:41 PM on October 30, 2007

The Constitution can be read as establishing an upper limit on the amount of punishment that can be inflicted,

Ok, Where in the constitution is that?

The Eighth Amendment
posted by buddha9090 at 3:16 PM on October 30, 2007

The Constitution of the United States does not provide for a limit to the amount of money one can make.

sure it can... in the same way that the song "helter skelter" can be read as predicting an apocalyptic end-times race war.

The analogy presented is inapt. The Constitution explicitly bans cruel and unusual punishment. Helter Skelter does not in any way advocate for race war. Read the document.
posted by Ironmouth at 3:21 PM on October 30, 2007

The anti-Corporate personhood meme is the biggest bunch of bs out there. Essentially, corporations are treated as a "person" in the eyes of the law so that the law can easily be applied without having to rewrite every section of code. The doctrine applies to the organizations PETA and the American Civil Liberties Union as much as it does to Exxon.

Were it to be removed, the result would be a third class of potential parties known as corporations and a whole lot of work rewriting a lot of statutes to make them apply to corporations. It would not make a whit of difference regarding how corporations would be treated in a lawsuit.

The doctrine is what allowed the government to bring criminal conspiracy charges against the entity known as Enron.

There's a lot wrong out there. Unrestrained capitalism is at the root of a lot of it. But the fact that the legal fiction of a corporation being treated as a person at law has absolutely nothing to do with the problems of unrestrained capitalism. Focus on the fact that taxation and lending policies are allowing 1% of the country to comandeer 99% of the wealth. The fact that corporate organization exists is not the cause of the problems of the country. It allows the NAACP to sue racists without fear that its individual officers will be targeted by white supremacists in law suits.
posted by Ironmouth at 3:29 PM on October 30, 2007

How timely. I accepted an internship at one of the law firms suing Exxon about a week ago. Hopefully they'll get paid around the time I start full-time.

FIGHT THE POWER...and such.

I do think this whole discussion brings to the surface some of the interesting problems with punative damages. Especially with mega-corporations, how much of a damages award do we need to smack them with to keep others from committing the same atrocities?
posted by craven_morhead at 3:58 PM on October 30, 2007

But ironmouth, aren't there key differences between companies and people that mean they should be treated differently? And doesn't forming a corporation accrue certain advantages (otherwise, why would people bother?) that individuals don't get? You obviously know a lot more about this than I do.

If companies are people, can they be charged with manslaughter, say, if an airline's plane crashes and people die? Or could the tobacco companies that knowingly did things that caused people to die get the "death penalty?"
posted by salvia at 4:12 PM on October 30, 2007

Wow! I'm listening to Marketplace on NPR. They just quoted Goldman Sachs as having said today "it's time to take the profit out of oil."
posted by salvia at 4:14 PM on October 30, 2007

The Eighth Amendment

From that Wikipedia article: "In Rummel v. Estelle, 445 U.S. 263 (1980), the Court upheld a life sentence with the possibility of parole for fraud crimes totaling $230."

The 9th U.S. Circuit Court of Appeals reduced the sum to $2.5 billion, saying that was the maximum the U.S. Constitution would permit.

Here's the entire text of the amendment: "Excessive bail shall not be required, nor excessive fines imposed, nor cruel and unusual punishments inflicted."
posted by kirkaracha at 4:38 PM on October 30, 2007

I think the true beginning of the end for civilzation was when corporate entities were given rights and privileges as if they were human beings. If we ever survive this, the history books will no doubt reflect that, unless the corporate entities outlive us, at which point they will blame us for their folly in their history books. We won't care because we will be extinct and corporate entities will roam the Earth uncontested.
posted by ZachsMind at 5:35 PM on October 30, 2007

buddha9090 writes"The Eighth Amendment"

It applies to Exxon.

Just not in Guantánamo Bay or to retarded kids on death row.
posted by orthogonality at 5:51 PM on October 30, 2007

If I were Exxon I would appeal. Billions, in punitives? Perhaps the compensatory damage award was too small, but assuming that it is correct a twenty fold punitive award is ripe for appeal.

People make too much of this one accident. It was bad, really bad, and Exxon is all to blame. However, it has taken on a life of its own in the environmental movement far beyond the scope of damages. That is not healthy for the movement.

If you were playing catch with a baseball near an open can of gasoline for a lawn mower, and perhaps even sort of throwing the ball kind of near the can, and then your buddy kicks it over while catching the ball, and it cost $500 to remediate the spill in the yard, should you be liable for $10,000 in punitive damages, or even $5,000? You were being an asshole and tempting fate....
posted by caddis at 9:02 PM on October 30, 2007 [1 favorite]

Caddis, Babe. Yes. Yes MOFO absolutely. If you're making record BILLIONS per quarter, it's only fair. Even without it, it's still the right thing to do-- especially with Bush and Cheney giving you a "get out of jail free" card-- Prince William Sound is FUCKED UP.

I do understand your point, but the parrellel doesn't really hold up (and oh it pains me cause you are so wise and one of my fave mefier's Everyone else dont' worry I have bunch of faves and if your intelligent and have no illusion about life you are SMART, I spend too much time on metafilter, SO PERHAPS you are a fave too...REALLY!!) ,

What is a can of fuel spilled on a yard compared to a whole ecosystem seriously comprimised? We need a precedent. The oil companies need to be more careful and fuck...beyond that they need to actually pursue all those alternative energy sources they give lip service too. I'm drunk. So pleaze don't be meane anyone who reads tho=is.
posted by Skygazer at 3:46 AM on October 31, 2007

Use progressive fines, like they do in Finland for traffic offences.

Kwantsar, I can't be arsed checking every single year, but these are some findings on Exxon's earnings in the 80's and 90's. All of the quotes are taken from NYT financial articles found by googling 'Exxon earnings xxxx' where xxxx is the year.

For all of 1986, however, Exxon's earnings grew 10 percent, to $5.4 billion, or $7.42 a share, from 1985's $4.9 billion

For the year 1989, Exxon's earnings fell 27.6 percent, to $3.81 billion,

Exxon had $5.6 billion in earnings last year (1991)

For the full year 1995, Exxon reported net income of $6.47 billion, or $5.18 a share, on revenue of $123.08 billion. In 1994, the company earned $5.1 billion, or $4.07 a share, on revenue of $113.9 billion.

Which ten straight years were these poor souls not making any profit?
posted by Jakey at 5:36 AM on October 31, 2007

The Constitution explicitly bans cruel and unusual punishment.

so waterboarding exxon is off the table?
posted by saulgoodman at 7:00 AM on October 31, 2007

I have no love for Exxon, they being the largest funder of the global warming deniers and all. However, I just think all the angst and effort placed into this one single accident are misplaced when you consider the totality of damage Exxon does to the environment. The way the post is laid out its as if it is an outrage that Exxon is appealing the damage award. Given the size of the award (and yes I know how big Exxon is), it would be a dereliction of their duty to their shareholders if they didn't appeal this. I frankly hope they lose, but they basically have to appeal, and my guess is that their punitive award will be further limited to something more like two to three times the compensatory award.
posted by caddis at 7:49 AM on October 31, 2007

Which ten straight years were these poor souls not making any profit?

Reread my post, then start here.
posted by Kwantsar at 10:08 AM on October 31, 2007

saulgoodman -- you can't punish them with it, but you can interrogate them with it.
posted by garlic at 10:28 AM on October 31, 2007

OK, Kwantsar, I take your point about economic profit - I wasn't aware of that measure.

Nonetheless, the fact remains that even if the ROI for Exxon is low in a relative sense, the capital involved is so large that the absolute returns are enormous. In order to regulate such a beast, the punishments need to be of an order that serves as a serious deterrent. A fine of the of $2-3B sends a clear signal to all of the corporate sector that failure to operate in a safe manner will not be tolerated, and the punishment will be progressively applied so that not even the largest operator can flout the law with impunity.

Judging by the number of people that are in jail in the US, it seems that deterrence forms a large part of the philosophy of the US justice system. If it's good for the little guy, it's good for the big guy, too.
posted by Jakey at 11:03 AM on October 31, 2007

Just not in Guantánamo Bay or to retarded kids on death row.

Wildly cynical and inaccurate statement. The Court has expressly held that the Eighth Amendment prevents the execution of people under the age of 18 and the mentally retarded, and it likely would apply to any punishment inflicted at Gitmo, too.
posted by Slap Factory at 6:01 PM on October 31, 2007