Exploring the values at stake when environmental regulation meets admiralty: the framework that has enabled courts and legislatures to work together to prevent and control pollution should be nurtured and retained.

• Author: Weller, Kris

WHEN the Alaska Supreme Court decided Kodiak Island Borough v. Exxon Corp. (1) in 1999, it weighed state and federal statutory law against the common law of admiralty to decide that Alaska municipalities could sustain a claim against Exxon for the cost of services diverted from their citizens in order to participate in the environmental cleanup effort necessitated by the Exxon Valdez oil spill. If one takes Kodiak Island as a starting point in exploring the social values at stake in legal battles over oil spills, the conclusion must be that the law historically has defined who are parties to an economic contract much too narrowly. Recent changes resulting from oil pollution legislation constitute a logical step in the evolution of admiralty jurisdiction and are appropriate for an age in which society is recognizing its fragility and the complexity of its dependence on the natural environment.

KODIAK ISLAND

Kodiak Island brought to an end just one of the many long lines of litigation that followed the Exxon Valdez oil spill. It exemplifies many of the issues of competing and complementary state, federal and admiralty jurisdiction created by the spill and the federal legislation it precipitated--the Oil Pollution Act of 1990 (OPA). (2) Although there is little doubt that the OPA would not have been enacted were it not for the Exxon Valdez spill in March 1989, other spills after Exxon Valdez show that it was not an isolated incident. As one commentator noted, with a touch of federalist paranoia, "No environmentalist conspiracy could have been more effective in bringing about comprehensive oil spill reform." (3)

The discrete question addressed by the Supreme Court of Alaska in Kodiak Island was whether an Alaska statute imposing strict liability for the discharge of hazardous substances permitted recovery of damages incurred by municipalities for the costs of diverted public services. To answer that question, the court analyzed the validity of the statute in terms of its interplay with the established law of admiralty.

1. The Case

   Seven municipalities, referred to as the "Cities" in the court's opinion--Kodiak Island Borough, Seward, Cordova, Old Harbor, Ouzinkie, Port Lions and Larsen Bay--sued Exxon, as the owner of the spilled oil, and Exxon's subsidiary, Exxon Shipping Corp., as owner of the Exxon Valdez, for the costs they incurred because their municipal officials and employees were forced to participate in a massive cleanup operation. These "diverted services" claims, according to the plaintiffs, "included the value of ordinary municipal services that the spill prevented the cities from providing their residents and costs of extraordinary services necessitated by the spill."

   The Cities invoked an Alaska statute that imposes strict liability for the discharge of hazardous substances and provides for recovery of various categories of direct and indirect damages resulting from discharges. Alaska Statutes [section] 46.03.822(a) provides that certain parties, of which Exxon was one:

   are strictly liable, jointly and severally, for damages, for the costs of response, containment, removal, or remedial action incurred by the state, a municipality, or a village, and for the additional costs of a function or services, including the administrative expenses for the incremental costs of providing the function or service, that are incurred ... and the costs of projects or activities that are delayed or lost because of the efforts ... resulting from an unpermitted release of a hazardous substance or with respect to response costs, the substantial threat of an unpermitted release of a hazardous substance. Section 46.03.824 states that "damages include but are not limited to injury to or loss of persons or property, real or personal, loss of income, loss of means of producing income, or the loss of an economic benefit."

   The trial court granted Exxon summary judgment on the narrow question of whether diverted services were compensable under the statute. The supreme court, applying its independent judgment to answer that question of law, reversed, holding that diverted services were covered. (4) Having made that finding, however, the court still needed to reconcile the statute with federal maritime law.

2. The Statute

   The part of the Kodiak Island decision that involved whether a diverted services claim could be maintained under the Alaska statutes was for the most part an unexceptional matter of statutory interpretation. Exxon argued unsuccessfully that the Cities did not have standing to sue for recovery of diverted-services costs because those services belonged to the residents, not the Cities themselves.

   Exxon made another argument--that the diverted-services claim was precluded by the common law "free public services doctrine," which, it contended, provides that the public must bear the costs of providing emergency public services, thus relieving individual tortfeasors of liability. On this point, the court held that to the extent that the free public services doctrine applied, it had been abrogated by the Alaska statute, which clearly intended to hold tortfeasors liable for the cost of cleanup of hazardous material spills.

   The court did not answer the question of standing in reference to maritime law, but instead noted that the Alaska statute expressly conferred standing on the Cities, as the court put it, "to replenish their own coffers with municipal funds that they could expend for the benefit of their citizens, as originally intended." The court distinguished, without full exploration, the cases on which Exxon relied on grounds that they involved damages suffered directly by, and payable directly to, individuals. This resolution skirted the issue, relevant to maritime law, of who actually suffered the economic damage--the Cities or the citizens who lost the benefit of the normal municipal services.

3. Statute and Maritime Law

   Exxon contended that even if Alaska statutes supported the diverted-services claims of the Cities, those claims were pre-empted by federal maritime law. Its argument centered on admiralty's Robins doctrine, derived from Robins Dry Dock 8: Repair Co. v. Flint, (5) and described by the First Circuit in Ballard Shipping Co. v. Beach Shellfish, as holding that "purely economic losses arising from a tort, but unaccompanied by a physical injury to anything in which plaintiff has a proprietary interest, are not compensable under federal maritime law." (6)

   The Alaska court applied a two-part test derived from the U.S. Supreme Court's decision in American Dredging Co. v. Miller, (7) to determine whether federal maritime law pre-empted the...