The justices reached no firm conclusions in court Wednesday, but they appeared to agree with Exxon that the $2.5 billion - or $75,000 a person - ordered by a federal court is excessive punishment for the massive 1989 oil spill.
Two justices, who could hold the balance of power in this case, suggested a payout of about $1 billion might be appropriate.
There was little talk in court of the plight of Alaskans who depend on the area environment for their paychecks or of Exxon's run of record profits. Neither has much to do with the legal principles that underlie the case.
The award represents less than three weeks' worth of Exxon profit, which was $11.7 billion in the last three months of 2007.
Still, Exxon has vigorously fought to knock down or erase the punitive damages verdict by a jury in Alaska in 1994 for the accident that dumped 11 million gallons of oil into Prince William Sound. The environmental disaster fouled 1,200 miles of Alaskan coastline and led to the deaths of hundreds of thousands of seabirds and marine animals.
The verdict has been cut in half once by a federal appeals court.
The problem for the people, businesses and governments who waged the lengthy legal fight against Exxon is that the Supreme Court in recent years has become more receptive to limiting punitive damages awards. The Exxon Valdez case differs from the others in that it involves issues peculiar to laws governing accidents on the water.
But several justices said that limits could be appropriate in this context too.
Justice Stephen Breyer, who has voted to overturn damages awards, said he worried how the court's decision in this case would play in other maritime accidents.
"This is a very dramatic accident. It involves oil spills, and they cause an enormous amount of trouble," he said. "But there are accidents every day, and ships are filled with accidents like automobiles in other places. And there are all kinds of things that go wrong.... What principles do you have to suggest, if any, for creating a fair system that isn't just arbitrary?"
Justices Anthony Kennedy and David Souter suggested that perhaps a reasonable number would be twice the amount of money the company has paid to compensate victims for economic losses, about $500 million.
Overall, Exxon has paid $3.4 billion in fines, penalties, cleanup costs, claims and other expenses resulting from the worst oil spill in U.S. history.
"Exxon gained nothing by what went wrong in this case and paid dearly for it," Exxon lawyer Walter Dellinger said, in urging the court to throw out the punitive damages judgment that has been upheld by the San Francisco-based 9th U.S. Circuit Court of Appeals.
Stanford University law professor Jeffrey Fisher said the commercial fishermen, Native Alaskans, landowners, businesses and local governments he represents have each received about $15,000 so far "for having their lives and livelihood destroyed and haven't received a dime of emotional-distress damages."
Fisher said nothing in prior Supreme Court decisions should cause the justices to overturn the $2.5 billion award, about $75,000 for each plaintiff.
It was less clear how the court would rule on the issue of whether the company should have to pay damages at all under the Clean Water Act and centuries-old laws governing shipping. Justice Samuel Alito, who owns Exxon stock, is not taking part in the case. A 4-4 split on that or any issue would leave the appeals court ruling in place.
The key element there is whether Exxon can be held liable at all for the acts of Exxon Valdez captain Joseph Hazelwood. Hazelwood was not on the ship's bridge when the accident occurred and had been drinking shortly before it left port, both in violation of Coast Guard rules and company policy.
"What more can the corporation do other than say, 'Here is our policies'? And try to implement them?" Chief Justice John Roberts said.
Fisher said Exxon had many warnings over three years that Hazelwood, an alcoholic, was drinking and that it knew that "putting a drunken master in charge of a supertanker was a potential for disaster and incalculably raised the chances of a disaster and a catastrophic spill occurring."
Two brothers from Cordova, Alaska, were in line in front of the Supreme Court on Wednesday morning, waiting to watch the arguments inside.
Commercial fisherman Steve Copeland, who was 41 at the time of the spill, said he cannot afford to retire because his business has never recovered from the steep decline it suffered due to the disaster.
His brother, Tom, said that Exxon "needs to get told they need to be a better corporate citizen."
A decision is expected before summer.
The case is Exxon Shipping Co. v. Baker, 07-219.
