WASHINGTON (MarketWatch) -- The U.S. Supreme Court, in a fractured ruling, said punitive damages are allowed in a lawsuit over the 1989 Valdez oil spill but that lower courts should reduce the $2.5 billion award.

Justice David Souter, in the court's majority opinion, said the punitive damages award should be brought into line with $287 million in compensatory damages awarded against Exxon in the lawsuit. "The award here should be limited to an amount equal to compensatory damages," Souter wrote.

The high court otherwise split evenly 4-4 on an important maritime law question in the case but concluded that federal environmental laws don't bar punitive damages against the oil giant.

The Exxon Valdez spilled millions of gallons of oil into Alaska's Prince William Sound almost 19 years ago in one of the largest environmental accidents in U.S. history. The company has paid over $3.4 billion in remediation, fines, compensation and other costs.

The case before the court was brought separately by a class of 32,677 fishermen and other interests that had business disrupted by the oil spill. The case has been in litigation for 13 years, a timeframe in which the plaintiffs allege 20% of those eligible for damages have died.

Exxon Mobil had attacked the award on several fronts, arguing that maritime law doesn't allow punitive damages awards and that the federal Clean Water Act, which guided more than $900 million in sanctions and fines related to the spill, also bars the punitive damages award. Neither argument appeared likely to prevail in the eventual Supreme Court ruling.

The lawsuit before the court began in 1994, almost five years after the Valdez supertanker dumped 258,000 barrels of oil into the Prince William Sound. After a lengthy trial, a jury awarded those harmed by the spill $287 million in compensatory damages and $5 billion in punitive damages.

The 9th U.S. Circuit Court of Appeals in San Francisco first ruled in the case in 2001 when it upheld damages against Exxon Mobil but ordered the trial court to reduce the award. A second appeal to the Ninth Circuit was decided in 2006 that upheld the $2.5 billion in punitive damages.

The case is Exxon Shipping Co. and Exxon Mobil Corp. v. Baker, 07-219.

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