In Re: The Exxon Valdez
| Decision Date | 12 October 2000 |
| Docket Number | 97-35036,97-35190,No. 96-36038,96-36038 |
| Citation | 229 F.3d 790 |
| Parties | (9th Cir. 2000) In Re: THE EXXON VALDEZ ICICLE SEAFOODS, INC.; SEVEN SEAS CORPORATION; OCEAN BEAUTY SEAFOODS, INC.; OCEAN BEAUTY ALASKA, INC.; WARDS COVE PACKING COMPANY, INC.; ALASKA BOAT COMPANY; NORTH PACIFIC PROCESSORS; TRIDENT SEAFOODS CORPORATION; NORTH COAST SEAFOOD PROCESSORS, INC.; ADF, INC., dba Aleutian Dragon Fisheries, Plaintiffs-Appellants, and EXXON SHIPPING COMPANY; EXXON CORPORATION, Defendants Appellants, v. GRANT BAKER, et al., as representatives of the Mandatory Punitive Damages Class, Plaintiffs-Appellees. ICICLE SEAFOODS, INC.; PETER PAN SEAFOODS, INC.; SEVEN SEAS CORPORATION; STELLAR SEAFOODS, INC.; OCEAN BEAUTY SEAFOODS, INC.; OCEAN BEAUTY ALASKA, INC.; WARDS COVE PACKING COMPANY, INC.; ALASKA BOAT COMPANY; NORTH PACIFIC PROCESSORS; ADF, INC., dba Aleutian Dragon Fisheries; TRIDENT SEAFOODS CORPORATION; NORTH COAST SEAFOOD PROCESSORS, INC., Plaintiffs-Appellants, v. ALASKA SPORTFISHING ASSOC., INC.; LOUIE E. ALBER; AHMET ARTUNER; GRANT C. BAKER; JEFFREY BAILEY; WILLIAM BENNETT; MICHAEL WAYNE BULLOCK; ROBYNE L. BUTLER; ALBERT RAY CARROLL; DEBRA LEE, INC.; DEW DROP, INC.; LARRY L. DOOLEY; MARK DOUMIT; STEVE DOUMIT; DOUGLAS R. JENSEN; DENNIS G. JOHNSON; DONALD P. KOMKOFF, SR.; JOSEF KOPECKY; DANIEL LOWELL; ANDREW E. MARTUSHEFF; CAROL ANN MAXWELL; JACQUELAN JILL MAXWELL; ROBERT A. MAXWELL, SR.; MICHAEL MCLENAGHAN; ELENORE E. MCMULLEN; LESLIE R. MEREDITH; THE NATIVE VILLAGE OF TATITLEK; LEONARDS. OGLE; STEVEN T. OLSEN; AUGUST M. PEDERSON, JR.; MARY LOU REDMOND; JOSEPH DAVID STANTON; JEAN A. TISDALL; DARRELL WOOD, Defendants-Appellees. In Re: THE EXXON VALDEZ ICICLE SEAFOODS, INC.; PETER PAN SEAFOODS, INC.; SEVEN SEAS CORPORATION; STELLAR SEAFOODS, INC.; OCEAN BEAUTY SEAFOODS, INC.; OCEAN BEAUTY ALASKA, INC.; WARDS COVE PACKING COMPANY, INC.; ALASKA BOAT COMPANY; NORTH PACIFIC PROCESSORS; ADF, INC., dba Aleutian Dragon Fisheries; TRIDENT SEAFOODS CORPORATION; NORTH COAST SEAFOOD PROCESSORS, INC., Plaintiffs-Appellants, v. GRANT BAKER, et al., as re |
| Court | U.S. Court of Appeals — Ninth Circuit |
David C. Tarshes, Davis Wright Tremaine, LLP, Anchorage, Alaska, for the plaintiffs-appellees.
James vanR. Springer, Dickstein Shapiro Morin & Oshinsky, Washington, DC, for the plaintiffs-appellees.
Brian B. O'Neill, Faegre & Benson, Minneapolis, Minnesota, for the plaintiffs-appellees.
John F. Daum, O'Melveny & Myers, LLP, Los Angeles, California, for defendants-appellants Exxon Corporation.
Bradley S. Keller, Byrnes & Keller, LLP, Seattle, Washington, for plaintiffs-appellants North Coast Seafood Processors, Inc.
Appeals from the United States District Court for the District of Alaska. H. Russel Holland, District Judge, Presiding. D.C. No.CV-89-00095-HRH, D.C. No.CV-96-00056-HRH
Before: James R. Browning, Mary M. Schroeder,1 and Andrew J. Kleinfeld, Circuit Judges.
This appeal represents a small part of the massive litigation generated by the 1989 Exxon Valdez oil spill into the waters of Prince William Sound, Alaska. The dispute we consider here arises from the punitive damages claims filed against Exxon2 by private parties injured by the spill and consolidated into a single mandatory class action in federal court. Aligned on one side in this appeal are Exxon and a group of plaintiff seafood processors known as the Seattle Seven. The Seattle Seven reached a $64 million settlement agreement with Exxon in the immediate aftermath of the Valdez spill. On the other side are the remaining class plaintiffs, referred to in this opinion as "plaintiffs."
The critical factual element is the settlement agreement between Exxon and the Seattle Seven. The Seattle Seven, who process seafood caught in Prince William Sound, sued Exxon for compensatory and punitive damages after the spill forced their operations to shut down for significant periods of time. The settlement agreement they reached with Exxon did not include a release and therefore did not formally terminate the Seattle Seven's claims against Exxon. The Seattle Seven agreed, however, that they would not execute on any compensatory damages award entered in their favor and also would pay or "cede" back to Exxon any punitive damages they might recover. The agreement was subsequently modified to permit the Seattle Seven to retain a portion of the punitive damages award received.
Although both the district court and the plaintiffs knew that there had been a settlement agreement between Exxon and the Seattle Seven, neither knew of the existence of the cede back provision. Acting in its own best interest, Exxon chose not to inform the punitive damages jury either. On September 16, 1994, the jury assessed punitive damages against Exxon in the amount of $5 billion. The plan of allocation the plaintiffs eventually proposed for this award, and that the district court approved, did not include the Seattle Seven.
The central issue for us to decide is whether the jury should have been told of the cede back provision during the last phase of the punitive damages trial. The district court, agreeing with the class plaintiffs, held that Exxon's failure to affirmatively disclose this information to the jury merited exclusion of the Seattle Seven from the plan of allocation. Exxon and the Seattle Seven appeal this ruling.
Exxon's liability for any punitive damages, and the amount of punitives the jury imposed are challenged in related appeals. We here assume without deciding, for purposes of this appeal, the validity of the judgment against Exxon. We do not intimate what the result of that appeal will be.
The oil tanker Exxon Valdez ran aground on the Bligh Reef in Prince William Sound, Alaska on the evening of March 23, 1989. Damage to the Valdez's cargo holds caused it to spill 11 million gallons of oil into the Sound, resulting in a great environmental disaster. The spill grievously injured both the environment and the economic livelihood of those individuals who relied on the theretofore abundant marine life of the region for their livelihood.
The State of Alaska and the United States brought actions against Exxon for the injury to the environment. Those cases were resolved by entry of a consent decree on October 8, 1991, under the terms of which Exxon agreed to pay at least $900 million to restore damaged natural resources. See Eyak Native Village v. Exxon Corp., 25 F.3d 773, 775 (9th Cir. 1994).
The hundreds of private civil actions filed in federal court were consolidated before Judge H. Russel Holland of the District of Alaska. First the plaintiffs, and then Exxon moved the district court to certify a mandatory punitive damages class. Judge Holland granted Exxon's motion on April 19, 1994. Alaska's state courts agreed to recognize the class action as the only avenue through which any plaintiff, whether in state or federal court, could recover punitive damages from Exxon. See Chenega Corp. v. Exxon Corp., 991 P.2d 769, 775 (Alaska 1999).
The Seattle Seven, the largest of the region's seafood processors, sued Exxon in 1989. Exxon sought to reach a settlement as quickly as possible, but its negotiations with the Seattle Seven and other plaintiffs revealed a roadblock posed by the increasing likelihood that a mandatory punitive damages class would be certified. Claims for compensatory damages could be easily disposed of by exchanging payment for releases, but a plaintiff's release of its slice of the future lump-sum punitive damages award merely reduced the number of claimants sharing the punitive damages pie, not the size of the pie itself. Exxon thus actually faced a financial disincentive to settle, because any amount of money it paid to persuade a plaintiff to forgo its slice would nevertheless be included in the amount of the eventual award.
On January 8, 1991, the Seattle Seven and Exxon settled the Seattle Seven's claims for the 1989 and 1990 fishing seasons in exchange for a payment of $63.75 million. To avoid the punitive damages dilemma, the parties included in the agreement a "cede back" provision. The provision stated that the Seattle Seven would not release their punitive damages claims against Exxon but would instead remain parties to the litigation in order to receive their share of an eventual punitive damages award, which they would then cede back to Exxon. The existence of a settlement agreement was made known to the rest of the subsequent punitive damages class, but its terms were kept confidential.
The mandatory punitive damages class action was tried to a jury in three phases in 1994. The first determined that Captain Joseph Hazelwood's behavior had been reckless, a necessary prerequisite for an award of punitive damages. The second phase assessed the amount of compensatory damages attributable to the spill to give the jury guidance in fixing the appropriate amount of punitive damages. For purposes of this appeal, we need not question the determinations during those phases. The third phase fixed the amount of punitive damages.
Before the third phase began, the parties entered into an Impact Stipulation. This described the harm the Valdez spill had caused private parties and quantified part of it by referring to the total amount already paid by Exxon to private parties in compensation (approximately $300 million). This figure included the approximately $64 million paid to the Seattle Seven under the 1991 settlement agreement.
In the third phase of the punitive damages proceedings, the plaintiffs emphasized to the jury the magnitude of the harm and the resulting need for punishment and deterrence. Exxon, for its part, sought to demonstrate that it had already accepted corporate responsibility by pointing to...
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