The Supreme Court handed a $2 billion victory to Exxon Mobil, saying the punitive-damages award for the Exxon Valdez disaster was too high.
The New York Times and Wall Street Journal both put the news on A1 and say it—finally—draws a close to a near twenty-year saga. The Journal notes that the drawn-out American-style justice means one out of five of the plaintiffs won’t even get the reduced award (now just $500 million, or 10 percent of the original $5 billion award before various courts began whittling it down) have already died. (See previous Audit coverage)
The Court said in a 5-3 ruling that punitive damages shouldn’t be more than actual damages, which totaled $507.5 million, a ruling the Journal says “may reach well beyond the icy shores of Prince William Sound”. That’s because the Supremes have “broad discretion” over maritime law and may apply the ruling’s principles to the states, too. Big Business lauded the news, The Washington Post says on A1.
The Times says the 1:1 ratio the Court came up with isn’t based on law, but on studies that determined the median punitive award is 65 percent of the actual-damage award. The Journal says David Souter, who wrote the majority opinion, said blockbuster awards were unjust because they caused “stark unpredictability.”
Bloomberg says that “Even an off year for business at the U.S. Supreme Court is still a good year,” noting that the Chamber of Commerce won eight of its fifteen cases (last year it was twelve of fourteen), including the three most important ones.
In the dissent, John Paul Stevens wrote:
“In light of Exxon’s decision to permit a lapsed alcoholic to command a supertanker carrying tens of millions of gallons of crude oil though the treacherous waters of Prince William Sound, thereby endangering all of the individuals who depended upon the sound for their livelihoods,” Justice Stevens wrote, “the jury could reasonably have given expression to its moral condemnation of Exxon’s conduct in the form of this award.”
Justice Samuel Alito sat this one out because he owns Exxon stock. Hey, Judge: Sell it, guy! It’s the biggest corporation in the country and you’re on the Supreme Court for crying out loud.
A 100-million-year-old energy plan
In a separate Exxon story on its Marketplace front, the Journal takes an interesting look at how the oil goliath is drilling for gas in a hard-to-crack field in Hungary—evidence, it says, of how energy firms are having to dig deeper (literally and metaphorically) for reserves.
The Times on C1 looks at the Democratic and Republican takes on offshore driling, finding they have different ones and that neither will help ease gas prices anytime soon.
The Republicans want to end a nearly three-decade-long ban on offshore drilling along the coast, but the Dems want to make companies drill in areas they already control first. This is interesting:
The biggest problem is that much of the coastal United States, subject to a drilling ban since the early 1980s, has not been thoroughly explored for oil. Neither the industry nor the government has any definitive idea how much could be recovered. In order to hazard a guess for some areas of the Eastern Seaboard, the government has had to inspect geological maps from Morocco, which was connected to North America more than 100 million years ago.
The paper says oil companies would have a hard time drilling anytime soon because they’re all tied up elsewhere.
The Federal Reserve, worried about inflation, left interest rates unchanged for the first time since August and said the next change is likely to be an increase rather than a cut.
The Journal and Financial Times front the news, while the NYT places it on C1. They report that the Fed said recessionary risks have moderated, while “inflation and inflation expectations” have not. That may be optimistic—or a fudge. The Times:
“There are too many risks to the economy for the Fed to raise rates now,” said Albert M. Wojnilower, an economic consultant to Craig Drill Capital. “What this statement does is get the policy makers to their next meeting—on Aug. 5—without committing themselves.”
The president of the European Central Bank signaled that it would likely raise its interest rates next week in a bid to keep inflation in check.
Housing: Look out below
In other economic news, new home sales dropped 40.3 percent in May from a year ago and 2.5 percent from April, the WSJ says on A2 and the NYT inside its Business Day section. Inventories increased to 10.9 months from 10.7 months, and median prices fell 5.7 percent to $231,000.