Exxon Corp. v. Heinze

• Citation: 32 F.3d 1399
• Decision Date: 17 August 1994
• Docket Number: 92-35323,Nos. 92-35266,s. 92-35266
• Parties: EXXON CORPORATION, Plaintiff-Appellant-Cross-Appellee, v. Harold C. HEINZE; Charles E. Cole, Attorney General for the State of Alaska; Ronald Swanson, Director of the Division of Lands; James E. Eason, Director of the Division of Oil and Gas, Defendants-Appellees-Cross-Appellants.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

Page 1399

32 F.3d 1399

EXXON CORPORATION, Plaintiff-Appellant-Cross-Appellee, v. Harold C. HEINZE; Charles E. Cole, Attorney General for the State of Alaska; Ronald Swanson, Director of the Division of Lands; James E. Eason, Director of the Division of Oil and Gas, Defendants-Appellees-Cross-Appellants.

Nos. 92-35266, 92-35323.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Nov. 2, 1993.

Decided Aug. 17, 1994.

Thomas Gibbs Gee and David D. Sterling, Baker & Botts, Houston, TX; Carl J.D. Bauman and Joseph R.D. Loescher, Hughes, Thorsness, Gantz, Powell & Brundin, Anchorage, AK, for plaintiff-appellant-cross-appellee.

Bruce M. Botelho, Deputy Attorney General, Juneau, AK; and Wilson L. Condon, Deborah L. Williams, and Katheryn Bradley, Condon, Partnow & Sharrock, Anchorage, AK, for defendants-appellees-cross-appellants.

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

Before: WRIGHT, GOODWIN, and HUG, Circuit Judges.

GOODWIN, Circuit Judge:

Exxon Corporation ("Exxon") ¹ appeals an order dismissing its 42 U.S.C. Sec. 1983 lawsuit and denying its prayer to enjoin certain Alaska state court litigation over state oil and gas royalties. Exxon contends that the state court litigation violates its due process right to an unbiased forum. Because a partial settlement has substantially changed the posture of the case, and because the factual record is now insufficient to review Exxon's claims on their merits, we dismiss for lack of ripeness, vacating the district court's order.

I.

In 1977, the State of Alaska filed a state court action against Exxon and eighteen other companies producing gas and oil on Alaska's North Slope ("the producers"). See Alaska v. Amerada Hess Corp. et al, Civil No. IJU-77-847 (hereinafter "the ANS Royalty Litigation"). The State sought a declaration of its rights under certain mineral leases which require the producers to pay royalties on the gas and oil they extract from state lands.

In 1983, the State amended its complaint to add a claim for underpayment of past royalties, alleging that the producers had systematically underestimated the value of certain gas and oil. The producers counterclaimed for overpayment of royalties. The parties agreed to sever the gas royalty and other gas claims from the oil royalty claims and to litigate the oil royalty claims first.

In 1987, after extensive discovery on the oil royalty claims, several producers, including Exxon, filed suit in federal court, contending that the pending ANS Royalty Litigation violated their due process rights and requesting injunctive and declaratory relief under 42 U.S.C. Sec. 1983. Standard Alaska Production Co. v. Schaible, No. 87-621 (D.Alaska, Nov. 2, 1987). The complaint alleged that the outcome of the ANS Royalty Litigation would substantially affect the Alaska Permanent Fund, and, consequently, the annual Permanent Fund dividends Alaska residents receive each year. ² Because Alaska state judges and potential jurors are eligible to receive Permanent Fund dividends, the producers argued, they had a financial interest in the case, rendering them unconstitutionally biased.

Then-District Judge Kleinfeld, an Alaska state resident, recused himself from the federal case, agreeing that one might question the impartiality of a judge who receives Alaska Permanent Fund dividends, but expressly declining to reach the due process issue or rule on the fairness of the state court forum. R.T. March 8, 1988. The Chief Judge of the Ninth Circuit then appointed Judge Belloni, a non-Alaskan, to hear the case.

Judge Belloni ultimately dismissed the producers' Sec. 1983 complaint without prejudice, rejecting the State's Eleventh Amendment defense, but holding that the controversy was not ripe for federal review because the producers had not raised the bias issue in a state court motion to disqualify. Judge Belloni challenged the State to provide a fair forum, and invited the producers "to re-open this federal case" if "the State Officials fail to provide an unbiased forum within a reasonable time." Standard Alaska Prod. Co. v. Schraible, No. 87-521, Unpublished Opinion at 7 (D.Alaska June 20, 1988). We affirmed, agreeing that "[u]ntil a proper motion for disqualification is made in the state court, the disputed factual questions concerning the alleged bias of all Alaska judges and jurors cannot be reviewed by any federal court." Standard Alaska Prod. Co. v. Schaible, 874 F.2d 624, 630 (9th Cir.1989), cert. denied, 495 U.S. 904, 110 S.Ct. 1923, 109 L.Ed.2d 287 (1990).

After we decided Schaible, the Alaska legislature amended the Permanent Fund dividend legislation to provide that "income earned on money awarded after trial" in the ANS Royalty Litigation would "not [be] available for distribution to the dividend fund." Alaska Stat. Sec. 43.23.045(b) (1989) (repealed 1991). In addition, the Alaska Supreme Court amended Alaska Rule of Civil Procedure 47(c) to provide that an Alaska juror's eligibility to receive Permanent Fund dividends did not constitute grounds for challenging the juror for cause. ³

After the Supreme Court denied certiorari, Schaible, 495 U.S. 904, 110 S.Ct. 1923, 109 L.Ed.2d 287 (1990), and the state court imposed a deadline for filing a motion to disqualify, Exxon moved to disqualify Alaska Superior Court Judge Carpeneti, who was presiding over the state court litigation. ⁴ Exxon argued that the 1989 amendment had not cured the bias problem because it did not address: (1) payments received pursuant to a declaratory judgment; (2) payments received as a result of a settlement or summary judgment; or (3) payments received as a result of royalty-in-kind adjustment clauses. Judge Carpeneti issued a "Notice of Intention to Grant Motion for Disqualification," concluding that judges who receive Permanent Fund dividends have a "direct financial interest or another interest which strongly resembles a direct interest in the outcome of this case," and ruling that the 1989 amendments had not eliminated that interest. In re ANS Royalty, No. IJU-77-847, Order No. 91-9 at 9 (Sup.Ct. Alaska March 14, 1991). Judge Carpeneti also found that the "Rule of Necessity" did not apply. Id. He gave the state seventy days to remedy the bias problem.

In response, in May 1991, the Alaska legislature again amended Alaska Stat. Sec. 43.23.045, replacing the 1989 amendment with an amendment requiring any award received as a result of the ANS Royalty Litigation (including royalty-in-kind adjustments from third parties and interest earned on such funds) to be deposited into the Permanent Fund principal and not made available for distribution as dividends. Alaska Stat. Sec. 43.23.045(e) (1991) (current version at Alaska Stat. Sec. 37.13.145(d) (1992)). ⁵ The legislature also enacted a section providing that the amendment would be automatically repealed if the Alaska Supreme Court held that eligibility to receive Permanent Fund dividends under the unamended statute would not disqualify a judge or juror from hearing the ANS Royalty Litigation. Alaska Stat. Sec. 43.23.045(e) (1991) (current version at Alaska Stat. Sec. 37.13.145(d) (1992)).

Judge Carpeneti ruled that these amendments cured the bias problem and denied Exxon's motion to disqualify. Exxon filed a motion to reconsider, arguing that the newest amendments did not eliminate the bias problem because they did not address the producers' counterclaims and because the repeal provision "reinforced" each Alaskan's interest. Judge Carpeneti denied the motion to reconsider, ruling that the producers had waived any challenge based on the counterclaims and rejecting Exxon's reliance on the repeal provision on its merits. A second superior court judge affirmed, and the Alaska Supreme Court summarily denied Exxon's petition for review and motion for an expedited appeal. BP Exploration v. Alaska, No. S-4654, S-4662, S-4689 (Alaska filed Aug. 23, 1991).

Exxon and Chevron then filed the instant Sec. 1983 action in federal court, again seeking to enjoin the ANS Royalty Litigation. Exxon moved to disqualify Judge Singleton, the Alaska District Judge assigned to the federal case. Judge Singleton denied Exxon's motion to disqualify, ruling that a citizen's eligibility to receive Permanent Fund dividends is a "bare expectancy," not a financial interest, and noting that even if justification for recusal existed, the Rule of Necessity might require him to hear the case. Exxon Corp. v. Heinze, 792 F.Supp. 72, 76 (D.Alaska 1992) (citing United States v. Will, 449 U.S. 200, 212-16, 101 S.Ct. 471, 479-81, 66 L.Ed.2d 392 (1980)). Chief Judge Holland, reviewing Judge Singleton's ruling pursuant to 28 U.S.C. Sec. 144, affirmed. Exxon Corp. v. Heinze, 792 F.Supp. 77, 79 (D.Alaska 1992).

Judge Singleton then denied the producers' motion for a preliminary injunction and dismissed the complaint with prejudice, relying on the Rule of Necessity. R.T. March 12, 1992 at 17. Exxon and Chevron appealed. Thereafter, in April 1992, Chevron and Exxon settled the oil royalty claims and counterclaims. The severed gas claims and counterclaims remain.

II.

Both parties agree that the posture of this case has changed significantly since Judge Singleton dismissed it. Both parties, however, urge us to reexamine Judge Singleton's orders in light of the facts as they then existed. We decline to do so. Because of the settlement, the correctness of Judge Singleton's rulings, on the facts as they then existed, is moot. Northern Alaska Envtl. Ctr. v. Hodel, 803 F.2d 466, 469 (9th Cir.1986). We will not issue an advisory opinion on the merits of Judge Singleton's various orders regarding the settled oil claims.

However, Exxon urges that its appeal is not entirely moot, as the severed gas claims and counterclaims remain. It asks us to decide if the same bias problems apply to the remaining claims and notes that Judge Singleton's dismissal with prejudice may preclude it from returning to federal...