In re: The Exxon Valdez Grant Baker v. Exxon Corp., 99-35898

• Decision Date: 08 February 2001
• Docket Number: No. 99-35898,99-35898
• Citation: 239 F.3d 985
• Parties: (9th Cir. 2001) In Re: THE EXXON VALDEZ GRANT BAKER, et al., as representatives of the Mandatory Punitive Damages Class, Plaintiffs-Appellees, v. EXXON CORPORATION; EXXON SHIPPING COMPANY, Defendants-Appellants
• Court: U.S. Court of Appeals — Ninth Circuit

Page 985

239 F.3d 985 (9th Cir. 2001)

In Re: THE EXXON VALDEZ

GRANT BAKER, et al., as representatives of the Mandatory Punitive Damages Class, Plaintiffs-Appellees, v. EXXON CORPORATION; EXXON SHIPPING COMPANY, Defendants-Appellants.

No. 99-35898

UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

Argued and Submitted November 9, 2000

Filed February 8, 2001

John F. Daum, O'Melveny & Myers, Los Angeles, California, for the defendants-appellants.

Brian B. O'Neill, Faegre & Benson, Minneapolis, Minnesota; David W. Oesting, Davis Wright Tremaine, Anchorage, Alaska, for the plaintiffs-appellees.

Appeal from the United States District Court for the District of Alaska H. Russel

Holland, District Judge, Presiding. D.C. No. CV-89-00095-HRH

Before: James R. Browning, Mary M. Schroeder, and Andrew J. Kleinfeld, Circuit Judges.

SCHROEDER, Circuit Judge:

This is another appeal arising out of the verdict and judgment of five billion dollars in punitive damages against Exxon Corporation following the disastrous 1989 Exxon Valdez oil spill into Prince William Sound, Alaska. As in an earlier appeal, we here consider whether some of the plaintiffs who settled with Exxon before certification of the mandatory punitive damages class are entitled to share in the allocation of the punitive damages judgment. See In re Exxon Valdez (Icicle Seafoods, Inc., et al. v. Baker, et al.), 229 F.3d 790 (9th Cir. 2000). As in Icicle, we here assume without deciding the validity of the judgment against Exxon, which is challenged in a related appeal. See id. at 793.

At issue in this appeal is the district court's July 23, 1999 order granting final approval to the plan of allocation of punitive damages to the seafood processors who were included in the plaintiff punitive damages class. The approved "Processor Plan" excluded several processors who otherwise would have been entitled to share in the punitive damages award. They were excluded because in earlier settlements, they had released their compensatory damages claims and partially assigned their punitive damages claims to Exxon in exchange for large lump sum payments from Exxon. This appeal is prosecuted by Exxon itself as the assignee of four of those excluded processors: Western Alaska Fisheries, Inc., Copper River Fishermen's Cooperative, Seahawk Seafoods, and Kodiak Salmon Packers, Inc. (collectively, the "Four Processors").¹ Exxon seeks to recover pursuant to its assignments and thus to participate in the damages allocation. Appellees are the representatives of the mandatory plaintiff class.

The disputed settlement agreements and partial assignments all occurred years before the 1994 certification of the mandatory punitive damages class. Exxon, however, at the time of the settlements, anticipated that there would be a punitive damages class, and understood that a conventional settlement of punitive damages, accompanied by the usual total release of claims by settling plaintiffs, would not work to Exxon's advantage in this case. This is because the release of individual claims for punitive damages would not affect the jury's eventual lump sum determination of the total punitive damages to be awarded to the class. As we explained in Icicle, Exxon "actually faced a financial disincentive to settle, because any amount of money [Exxon] paid to persuade an individual plaintiff to [give up its claim to punitive damages] would nevertheless be included in the amount of the eventual award." See 229 F.3d at 793.

Faced with this dilemma, Exxon tried to ensure that it would eventually recoup at least a portion of the actual share of punitive damages represented by the settled claims, thereby reducing Exxon's total punitive damages exposure. To this end, Exxon incorporated a device in its settlement agreements with the Four Processors that was functionally similar to the device it would later use in settling with the Icicle plaintiffs. In Icicle, the device utilized was a "cede back" agreement. There, the settling plaintiffs agreed to pursue their claims for punitive damages on their own behalf and, pursuant to their settlement agreements, "cede" a portion back to Exxon. See Icicle, 229 F.3d at 793. In the settlements we consider in this appeal, Exxon utilized partial assignments to accomplish the same result. Under these agreements, the Four Processors assigned to Exxon all but a small portion of their future individual claims to punitive damages so that Exxon could pursue the assigned portion in its own name and for its own benefit.

Following the jury's 1994 punitive damages verdict, the major remaining problem in the litigation was allocation of damages among individual plaintiffs. In 1996, the representatives of the class plaintiffs moved for and obtained approvalof a global plan of allocation, which provided for set percentage amounts of the total award to be allocated to specific categories of claimants. The global plan earmarked to the seafood processors 2.1% of the total five billion dollar award.

Following approval of the global plan, plaintiffs' class representatives set about crafting a separate allocation plan for each of the fifty-one claim categories. Each plan prescribed how the percentage of judgment allocated to each category would be distributed among individual claimants. In May 1997, plaintiffs moved for approval of their proposed Processor Plan, which they described as "the product of collaboration and negotiation." That plan excluded the portions of the claims of the Four Processors that had been assigned to Exxon, and refused to recognize the validity of those assignments.

Exxon objected, seeking enforcement of the assignments and a share of the distributions under the Processor Plan. The district court overruled Exxon's objections and approved the plan, relying upon the same reasoning that it had used in rejecting the claims that we considered in Icicle: namely, that Exxon should be prevented from sharing in the punitive damages. See id. at 793-98.

In this appeal by Exxon, we consider three issues. The first is whether Exxon lacks standing to appeal because it never formally intervened as a plaintiff in the allocation proceedings. We hold that it has standing. The second is whether, as a matter of public policy, the district court correctly ruled that Exxon should not be able to share in the punitive damages. That issue is controlled by our decision in Icicle in which we held that public policy supports functionally similar settlement agreements in situations like this, where an agreement on the part of the plaintiff to permit the defendant to share in the plaintiffs' punitive damages is necessary to permit any meaningful settlement of the punitive damage claims. See id. at 798. The third issue is therefore whether there is any material difference between this case and Icicle, since in this case Exxon relies on an assignment rather than a "cede back" agreement. We hold there is no material difference and therefore vacate the district court's order.

We turn first to appellees' contention that Exxon lacks standing to appeal. Appellees claim that Exxon was required to intervene formally...