Exxon – Valdez Oil Spill


ANCHORAGE, Alaska, June 13— In a verdict that could have striking economic implications for the world’s largest oil company, a Federal jury said today that the Exxon Corporation was reckless when it permitted a captain with a history of alcohol abuse to command a supertanker.

The jury also determined that the captain, Joseph J. Hazelwood, was himself negligent and reckless when he drank heavily on the afternoon before the Exxon Valdez strayed off course in the dangerous waters of Alaska’s Prince William Sound and ran aground on March 24, 1989, causing North America’s worst oil tanker spill.

The verdicts, announced this morning in Federal District Court here, were the first in what could be a long and costly summer for Exxon. The findings of negligence and recklessness move the legal proceedings to the next phase, in which the same jury is to establish how much Exxon compensate the 10,000 or so people who fish, hunt or live near the sound and depend on it for subsistence or income. Then the jury is to decide on the size of punitive damages.

The plaintiffs, all private citizens, are asking $1.5 billion in compensatory damages and $15 billion in punitive damages. Exxon previously acknowledged that it had been negligent, opening the way for a jury to consider what compensation was just. The jury’s finding today that the company was reckless means that the company is also liable for punitive damages.

Exxon has already spent $3.4 billion responding to the disaster, and it argues that the $1.5 billion claim for compensation is too large and that punitive damages are not warranted. Estimates by Government agencies of the scope of the damage have varied widely, up to many billions of dollars.

The effect of the verdict was immediately felt on the stock market, where Exxon shares fell $2.625, to $59.50, by the close of trading.

Elated but obviously worn by the trial, the lead lawyer for the plaintiffs, Brian O’Neill of Minneapolis, said after the verdicts: “A company as large as Exxon thinks that it is above the law. You need to take a substantial bite out of their butt before they change their behavior. This verdict will help to do that and send a message to all the Exxons of the world.”

Patrick Lynch, a lawyer from Los Angeles who represents Exxon, said the company would continue to defend itself against charges that it was uncaring or reckless. “Exxon’s behavior after the accident was exemplary,” he said in an interview. “We took extraordinary steps to clean up, to compensate people, and to correct and improve operating practices.”

This was the first jury trial for Exxon involving the Valdez spill but the second jury trial for Mr. Hazelwood. In 1990, a state jury in Alaska acquitted him of charges that he had operated his ship under the influence of alcohol. But he was convicted of a lesser charge of discharging oil, a misdemeanor that was overturned a year later by a state appeals court.

In 1991, the Coast Guard also acquitted Mr. Hazelwood of charges that he was impaired while commanding the Exxon Valdez. The Coast Guard, though, suspended Mr. Hazelwood’s license for nine months for leaving the tanker’s bridge at a critical moment. Mr. Hazelwood’s license has since been reinstated, and, according to his testimony here, he is a paid employee of the New York office of one of his lawyers, Michael Chalos. Exxon is paying Mr. Hazelwood’s legal fees.

A lawyer representing Mr. Hazelwood, Thomas Rousso of New York, said today: “We still believe Captain Hazelwood was not reckless in the grounding of the Exxon Valdez. We are hoping when all is said and done, when people look back over time and look at this objectively, Captain Hazelwood will be vindicated.” Civil and Criminal Differences

Because some procedures and the legal issues usually differ between civil and criminal cases, plaintiffs in civil suits can often win judgments and collect damages for negligence or reckless acts from defendants who have been acquitted of criminal charges in another trial.

During the monthlong trial, Mr. O’Neill sought to prove that Exxon’s senior corporate executives had failed to account for the risks of hauling millions of gallons of oil in a supertanker commanded by a skipper they knew was prone to bouts of drinking. Mr. O’Neill’s strategy was to establish a morality play pitting thousands of ordinary Alaskans whose lives and livelihoods depended on Prince William Sound’s vast natural resources against a company he portrayed as an uncaring oil giant that left its most modern supertanker in the hands of an alcoholic.

Mr. Lynch and other Exxon lawyers sought to show that alcohol had not been a factor. He contended the disaster had been caused solely by the failure of the ship’s third mate, Gregory Cousins, to follow Captain Hazelwood’s command and turn the ship back into the proper channel.

Because of the complexity of the case and the amount of money at stake, the trial has been divided by Judge H. Russel Holland into four phases. The jury verdicts today ended the first phase.

The second phase begins next week to set damages suffered by the plaintiffs, which their lawyers have put at $1.5 billion. The third phase establishes punitive damages.

The fourth phase, involving a different jury, is to hear hundreds of individual damage claims against Exxon brought by residents and property owners who are not involved in the first three phases. Raw Spot for Alaskans

Five years after the spill, the disaster remains a raw spot with many Alaskans. New scientific data collected by the state and the Federal Government indicate that the environmental damage from the spill endures. Fishing catches for herring and other species are down; the numbers of some marine mammal species have not recovered, and there is still ample evidence, say villagers as well as Federal scientists, that oil lingers on some beaches.

Exxon, which has 91,000 employees worldwide, earned total revenue last year of nearly $111 billion. Of the $3.4 billion that Exxon says it has spent in responding to the spill, $2.1 billion was spent in the months immediately afterward to scrub beaches, recover spilled oil and perform other environmental cleanup work.

The company also spent $300 million paying claims filed by about 11,000 residents and businesses in the Prince William Sound region. In 1991, the company also settled state and Federal civil and criminal charges that stemmed from the spill. It paid $900 million in civil-settlement costs and $125 million in criminal penalties for polluting Prince William Sound.

Lawyers for the plaintiffs said a turning point in the trial’s first phase may have been the testimony of Lawrence G. Rawl, Exxon’s former chief executive officer and chairman.

In 1989, in the early weeks after the spill, Mr. Rawl testified several times in Congress and was quoted in newspapers and on television as saying that it had been a mistake for the company to allow Mr. Hazelwood to skipper the Exxon Valdez because of his drinking problems.

But during the trial, Mr. Rawl recanted, testifying he had been misled about the causes of the accident by news reports, by reports from the Coast Guard and by statements the company’s own lawyers were making to prepare him for his Congressional appearances. Mr. Rawl said he now believed that Mr. Hazelwood had not been impaired by alcohol.

Photo: A jury in Anchorage said yesterday that Capt. Joseph J. Hazelwood had been reckless in the 1989 Exxon Valdez accident. Mr. Hazelwood, in center, walked away from the courthouse in Anchorage after the verdict. (Associated Press) (pg. A18)