Research Proposal on "Exxon Valdez Case Analysis"

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Exxon Valdez Case Analysis: Common Law vs. Maritime Law Legal Implications for Tort and Claim Liability

Case Details:

The Exxon Valdez a massive oil tanker went aground in Alaska, spilling more than 11 million gallons of crude oil into the sound, doing irreparable damage to the environement and subsequently the thousands of fishery and subsidiary industries in the reqgion and those surrounding the sound. The oil spill was found to be due to the negligence of the captain of the vessel, who was legally drunk. Exxon had knowledge of the captains alcohol problem for more than three years but continued to allow him to navigate huge tankers despite of the known problem. Additionally, Exxon was fully aware of the kind of environmental impact and subsequent ethic of care it had to avoiding such accidents, and the limited resources that were available at the time to cope with such a disaster. The ethic of care being established in civil law, though does not necessarily constitute a maritime tort in maritime law and the scope of liability required countless hours of litigation and appeals.

Initial lawsuits found Exxon in full liability for 5 billion dollars of restitution to be paid to all those individuals who filed against it in various lawsuits and then subsequently accepted the terms of a large class action lawsuit. The company then filed an appeal, claiming that the liability ruling of 5 billion was in excess of liability and the Ninth District Court of Appeals reduced the amount to 4.5 billion dollars, partly ruling in favor of the company but still claiming that the company knowingly endangered lives and property as well as the environment by continuing to

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allow the captain of the vessel to navigate the Valdez through the area, even when it was fully aware of the potential consequences of its actions.

Background:

Key stakeholders in this case are a vast list of player including but not limited to those associated with Exxon itself. The captain of the vessel. Fisheries and canneries in and around the area, subsistence fisherman who rely on the sound and area surrounding it for their livelihood, secondary tourist and support companies who were negatively effected by the spill in a secondary and primary way with both economic and/or physical damage to shore properties. Additionally, there are many other stakeholders, such as those who found fault in the economic impact of the event on fuel prices that added insult to injury to offset the cost of the clean up on Exxon. (Nixon, 1994, pp. 330-333)

The impact associated with this event is vast as well, given that the economic and environmental effects beyond immediate physical property damage as whole industries closed for production for part or all of the 1989 seasons. Fishermen who worked in the area were unable to continue with their work for the foreseeable future and many held little if any savings to support or sustain their businesses from one season tot the following, State and local agencies that were then required to offer owners and support staff financial necessity payments in the form of unemployment and/or other state funded support where they qualified for such. The state of Alaska for its involvement in the immediate and long-term financial burden of containment and clean up, and of course the large amounts of funds that were needed initially and were provided by Exxon to help resolve the immediate problem. (Greely, 1989, p. 721) Ethical and operational issues such as the known exposure, long-term environmental impact, such as death of marine and costal life are far to vast to even generalize about and there is evidence that the spill is still impacting marine life and coastal environments to this day. (Greely, 1989, pg 721) Operational impact on the key stakeholders, such as fisheries, canneries and fisherman were also vast, and required many years of rebuilding and redistributing of resources, while many of the smaller businesses and independent fishermen simply ceased operations and relocated in an attempt to rebuild their lives. Bankruptcies became a rampant act of resolution, and sentencing for key players at Exxon was limited;

The most common example used by legal scholars in the debate over the promulgation of the Organizational Sentencing Guidelines was the Exxon Valdez oil spill. The ship ran aground on a reef off the coast of Alaska, spilling eleven million gallons of oil and creating an environmental disaster, killing birds, fish and other wildlife. The tanker's captain was indicted and convicted of misdemeanor negligence. Exxon was eventually indicted on five counts of felony and misdemeanor charges. (Recine, 2002, p. 1535)

While Exxon was relatively protected, as they were able to avoid liability and even recoup millions of dollars in costs incurred for cleanup, as was the captain of the vessel who was only convicted a misdemeanor negligence, while others had no legal recourse but to wait out the long process of litigation and appeals on the part of the company in the wake of thousands of damages claims. (Recine, 2002, p. 1535)

Legal analysis:

The legal analysis of the case was confusint to say the least as the U.S. was underprepared for sifting through the situation, with both civil an maritime law becoming an issue as well as the scope of liability that the comapnay had. Was the company responsibvle for a larger assumed ethic of care than other defendants had been in the past, simply by virtue of the magnitude of the case and the ample evidence of willful negligence on the part of company officials? The case in many ways became a groundbreaking case, though it did not come close to answering all the questions associated with it, with the debate between superseding laws, civil and/or maritime and the ethic of care that the company was liable for. In general both maritime and civil laws offer limitations of what is considered reasonable care. In civil law individuals involved in liability cases frequently are allotted the demonstration of limitation on liability, and in maritime law the same can be said of ships/captains/company owners and even whole nations. Yet, this case served as a benchmark where the civil jury and subsequent appeals judges felt there was enough grounds to expand the liability to a greater degree, even though it was still then necessary to limit the number of class action litigate in the case, depending on their involvement and the justifiable impact upon them. There was in fact a moment in litigation when all individuals who did not prove physical damage from the spill could have been excluded from compensatory damages, according to maritime law. (Nixon, 1994, pp. 330-333) Thankfully the court saw fit to hold Exxon accountable for an expanded set of liability, as a result of proof of prior knowledge of negligence on the part of the captain. The analogy below shows the varied differences in these two scenarios. While others still argued grounds for existing liability limitations. (Nixon, 1994, pp. 330-333) second limitation on the duty to exercise reasonable care is that the duty to prevent economic harm is much more limited than the duty to prevent physical harm. If a driver carelessly causes an accident that blocks the Lincoln Tunnel leading into New York, many people will be late for work and have their wages docked, some sales representatives will miss appointments and fail to close important deals, and the coffee shops in Manhattan that sell coffee and donuts to arriving commuters will lose business. The driver clearly has a duty of care to anyone physically injured in the accident, but is she also liable to all these people who suffer only economic injury because of the same act of carelessness? Generally not, because even though the harm that occurs is easily foreseeable, the scope of the potential liability is too great. In some cases, however, there is a duty to prevent economic harm. One important class of cases involves large environmental disasters. When the Exxon Valdez oil tanker broke up off the Alaska coast and spilled millions of gallons of oil, some shore property owners suffered physical damage to their property when the oil washed ashore. Those property owners were direct victims of Exxon's negligence, so Exxon was liable to them for violating its duty of reasonable care. Many more people suffered economic harm without physical damage, though. Fishermen couldn't fish, boat rental agencies couldn't rent their boats to tourists, California motorists paid higher gasoline prices, and so on. Courts engaged in tough line-drawing issues to determine which of these parties Exxon owed a duty of care. (Feinman, 2000, p. 146)

The Exxon case provides ample opportunity for the redevelopment of federal consumer protection laws, but has subsequently ended with little or no resulting change, as late as 2008 the Supreme Court again reduced the liability of the company to a paltry 507.5 million dollars, taking into consideration amount the company has already paid for compensation as well as clean up of the spill. ("Exxon Valdez Damages Reduced," June 2008,… READ MORE

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Quoted Instructions for "Exxon Valdez Case Analysis" Assignment:

“

Case Study requirements:

10 pages

Word format

APA style, 1 inch margins

Use at least 4 references to supplement the information in the case or support your recommendations.

The format for the case analysis report is:

Case Details:

Describe in detail the illegal/unethical behavior you will be analyzing in your case analysis.

Background:

Identify the key stakeholders in the case and the impact of operational/ethical issues on the stakeholders.

Legal analysis:

Depending on the situation in the case, summarize the key legal issues related to federal employment or federal consumer protection law and in what way the company is non-compliant with the law. What factors do you think have contributed to the company be non-compliant.

Ethical analysis:

Summarize the key ethical issues in the situation. Apply at least three of the ethical perspectives (theories of ethical thought see below) and for each perspective, give your opinion as to what aspects of the situation (actions by any stakeholder) demonstrate ethically sound behavior and which illustrate unethical behavior.

Contributing factors: corporate culture and corporate governance/guidelines.

Analyze how the company*****s corporate culture that may have either helped to minimize the unethical behavior or actually contributed to/caused the unethical behavior. Analyze how the company*****s corporate governance (overall guidelines, strategic decisions/actions) may have helped to minimize the unethical behavior or actually contributed to/caused the unethical behavior.

Ethical decision factors to consider:

Based on the ethical perspectives (theories of ethical thought, see below), what are the key factors that should be addressed or considered in resolving the legal/ethical issues identified in this case (as outlined above). List each ethical issue and then for each issue, the factors to be addressed or considered based on the ethical perspectives used above.

Recommended corrective action:

Recommend corrective actions for each of the legal/ethical issues outlined above. Provide supporting rationale for each recommendations or industry examples of the use of your recommendations as *****best practices*****.

Recommend approaches or policies that the company can take to help prevent these issues in the future. Provide supporting rationale for each recommendations or industry examples of the use of your recommendations as *****best practices*****.

Reference List: minimum of 4 references. References can be used for the following:

*****¢to show *****best practices***** from organizations for preventive or corrective actions related to ethical issues

*****¢examples of similar incidents in the same/other industries, to illustrate factors contributing to the unethical behavior

*****¢examples of common concerns expressed by the stakeholders you identified in the cases

* reference material (law, research articles, government data) to explain why the actions in the case are not in compliance, or what the compliance requirements are

Theories of Ethical Thought

1. Consequential Theories - Acts are judged good or bad based on whether the acts have achieved their desired results. Acts of the business community or any other social unit i.e. government, school, (fraternity, and sorority). Act and rule utilitarianisms are two sub-schools.

2. Deontological Theories - Actions can be judged good or bad based on rules and principles that are applied universally.

3. Humanist Theories - Action are evaluated as good or bad depending on whether they contribute to improving inherent human capacities such as intelligence, wisdom and self-restraint.

Case:

Exxon Valdez

On Good Friday, March 24, 1989, the oil tanker Exxon Valdez was run aground on Bligh Reef in Prince William Sound, Alaska. On March 24, 1989, Joseph Hazelwood was in command of the Exxon Valdez. DefenÂ¬dant Exxon Shipping [Company] owned the Exxon Valdez. Exxon employed Captain Hazelwood, and kept him employed knowing that he had an alcohol problem. The captain had supposedly been rehabilitated, but Exxon knew better before March 24, 1989. Hazelwood had sought treatment for alcohol abuse in 1985 but had "fallen off the wagon" by the spring of 1986. Yet, Exxon continued to allow Hazelwood to command a supertanker carrying a hazardous cargo. Because Exxon did nothing despite its knowledge that Hazelwood was once again drinking, CapÂ¬tain Hazelwood was the person in charge of a vessel as long as three football fields and carrying 53 million gallons of crude oil. The best available estimate of the crude oil lost from the Exxon Valdez into Prince William Sound is about 11 million gallons. Commercial fisheries throughout this area were totally disrupted, with entire fisheries being closed for the 1989 season. Subsistence fishing by resiÂ¬dents of Prince William Sound and Lower Cook Inlet villages was also disrupted. Shore-based businesses depenÂ¬dent upon the fishing industry were also disrupted as were the resources of cities such as Cordova. Exxon undertook a massive cleanup effort. Approximately $2.1 billion was ultimately spent in efforts to remove the spilled crude oil from the waters and beaches of Prince William Sound, Lower Cook Inlet, and Kodiak Island. Also, Exxon underÂ¬took a voluntary claims program, ultimately paying out $303 million, principally to fishermen whose livelihood was disrupted. [Lawsuits] (Involving thousands of plainÂ¬tiffs) were ultimately consolidated into this case. The jury awarded a breathtaking $5 billion in punitive damages against Exxon. Exxon appealed the amount of punitive damages [to the U.S. Court of Appeals for the Ninth Circuit]. [T]he Ninth Circuit Court of Appeals in this case reiterated the guideposts for use in determining whether punitive damages are grossly excessive [include] the reprehensibility of the defendant's conduct. The court of appeals remanded the case [and] unequivocally told this court that "[t]he $5 billion punitive damages award is too high" and" [i] t must be reduced."

Justice Holland

[T]he reprehensibility of the defendant's conduct is the most important indicium [indication] of the reasonableÂ¬ness of a punitive damages award. In determining whether a defendant's conduct is reprehensible, the court considÂ¬ers whether "The harm caused was physical as opposed to economic; the tortious conduct evinced an indifference to or a reckless disregard of the health or safety of others; the target of the conduct had financial vulnerability; the conÂ¬duct involved repeated actions or was an isolated incident; and the harm was the result of intentional malice, trickery, or deceit, or mere accident."

The reprehensibility of a party's conduct, like truth and beauty, is subjective. One's view of the quality of an actor's conduct is the result of complex value judgments. The evaluation of a victim will vary considerably from that of a person not affected by an incident. Courts employ disinterÂ¬ested, unaffected lay jurors in the first instance to appraise the reprehensibility of a defendant's conduct. Here, the jury heard about what Exxon knew, and what its officers did and what they failed to do. Knowing what Exxon knew and did through its officers, the jury concluded that Exxon's conduct was highly reprehensible.

Punitive damages should reflect the enormity of the defendant's offense. Exxon's conduct did not simply cause economic harm to the plaintiffs. Exxon's decision to leave Captain Hazelwood in command of the Exxon Valdez demonstrated reckless disregard for a broad range of legitiÂ¬mate Alaska concerns: the livelihood, health, and safety of the residents of Prince William Sound, the crew of the Exxon Valdez, and others. Exxon's conduct targeted some financially vulnerable individuals, namely subsistence fisherÂ¬men. Plaintiffs' harm was not the result of an isolated inciÂ¬dent but was the result of Exxon's repeated decisions, over a period of approximately three years, to allow Captain Hazelwood to remain in command despite Exxon's knowlÂ¬edge that he was drinking and driving again. Exxon's bad conduct as to Captain Hazelwood and his operating of the Exxon Valdez was intentionally malicious. [Emphasis added.]

Exxon's conduct was many degrees of magnitude more egregious [flagrant] [than defendant's conduct in other cases]. For approximately three years, Exxon management, with knowledge that Captain Hazelwood had fallen off the wagon, willfully permitted him to operate a fully loaded crude oil tanker in and out of Prince William Sound-a body of water which Exxon knew to be highly valuable for its fisheries resources. Exxon's argument that its conduct in permitting a relapsed alcoholic to operate an oil tanker should be characterized as less reprehensible than [in other cases] suggests that Exxon, even today, has not come to grips with the opprobrium [disgracefulness] which society rightly attaches to drunk driving. Based on the foregoing, the court finds Exxon's conduct highly reprehensible.

[T]he court reduces the punitive damages award to $4.5 billion as the means of resolving the conflict between its conclusion and the directions of the court of appeals. [T]here is no just reason to delay entry of a final judgment in this case. The Court's judgment as to the $4.5 billion puniÂ¬tive damages award is deemed final.

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