# Appendix — Cook Inlet Processors, Inc. v. Baker > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386014_1758%3A2 ## Record - **Collection:** Supreme Court brief - **Document type:** Appendix - **Published:** January 1, 2001 - **Citation:** 533 U.S. 903 ## Text (a)rrrrces FILED No, 901664 APR 2 6 2002 IN THE SUPREME COURT Of YFREUNFLED STATES _ October Term, 2000 COOK INLET PROCESSORS, INC., Petitioner, GRANT BAKER, as class representatives of the Mandatory Punitive Damages class; and all persons similarly situated; et al. Respondants; and EXXON CORP., aka Exxon Mobil Company; Captain JOSEPH HAZELWOOD; EXXON SHIPPING CO., Respondants. ON PETITION FOR WRIT OF CERTIORARI TOTHE . UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT APPENDIX TO PETITION FOR WRIT OF CERTIORARI WEIDNER & ASSOCIATES, INC. Attomeys for Petitioner By: CL Ms LD lo) asibrs Phillip Paul Weidner Attomey of Record 330 "L" Street, Suite 200 Anchorage, Alaska 99501 (907) 276-1200 (SAP TABLE OF CONTENTS Document Memorandum, filed in Cook Inlet Processors, Inc. v. Grant Baker, et al., Ninth Circuit No. 99-35864, and Nautilus Marine Enterprises, Inc. v. Grant Baker, et al., Ninth Circuit No. 99-35866, on December 14, 2000 ................ccceees Opinion, filed in Icicle Seafoods, Inc., et al. and Exxon v. Grant Baker, et al., Ninth Circuit No. 96-36038 and Icicle Seafoods, Inc.., et al. v. Alaska Sportfishing Assoc.., Inc., et al., Ninth Circuit No. 97-35036, and Icicle Seafoods, Inc., et al. v. Grant Baker, et al. v. Exxon, Ninth Circuit No. 97-35190, on fg tee. RSS NI ALON RO Oe ee Memorandun,, filed in Sea Hawk Seafoods Inc., et al., and Western Alaska Fisheries Inc. v. Exxon, Ninth Circuit No. 99-35878, oh TO FE ee win iitasabahetisscadadiiccinisiicrierancias Order No. 348—Final Approval of the Plan of Distribution of Allocations to the Processor Claim Category, filed in In re The Exxon Valdez, U.S.D.C. No. PP-OFS, CR TUEG BD, BOI F seicccsicdsssnnsessarsosscsvesapses Order, filed in Cook Inlet Processors Inc. v. Grant Baker, et al., Ninth Circuit No. 99-35864, and Nautilus Marine Enterprises, Inc. v. Grant Baker, et al., Ninth Circuit No. 99-35866, on Page No. BOURAUEY DO, BIN cicipicr ascitic etapa nsassaepntimnncesoacienins 38 Judgment in a Civil Case, filed in In re the Exxon Valdez, U.S.D.C. No. A89-095 on September 16, 1994.0... eccceeeeeeeees 42 Order No. 204—Order Granting Conditional Final Approval and Certifying Mandatory Punitive Damages Class, filed in In re the Exxon Valdez, U.S.D.C. No. ABD-ODS, Cm PREG 1D, Fe acidic cea asccrseresocinctecoees 45 Cook Inlet Processing Partial Release Cathal WES 20, TRI wcutctnicaitancaidtmaimeninisnstbnanccsaeinisases 50 Complaint (Cook Inlet v. Exxon) mien BR ae, Tee cists chic stats ect ceepareeseten cinco 54 _ Agreement Among Counsel Regarding Joint Prosecution, Settlement, and Damages Allocation Agreement, : Retin: Aageth 1G, FIG vacccsscsncedunGnnnaniicasaipnictnscieiiiasesinbsnscein 57 Plaintiffs’ Memorandum in Support of Joint Motion of Plaintiffs and Defendants for Preliminary Approval of Phase IV Settlement, Plaintiffs’ Motion for Preliminary Approval of Plan of Allocation of Recoveries Obtained by Plaintiffs in Litigation Arising from the Exxon Valdez Oil Spill, and the Orders Requested in those Motions Scheduling a Hearing on Final Approval of the Phase IV Settlement and Plan of Allocation, and Authorizing Notice to Class li ee Members, filed in In re the Exxon Val U.S.D.C. Case No. A89-095 Dated January 12, 1996 ...s.....csccsccicshosemasesa Saeed 62 Memorandum in Support of All Plaintiffs’ Motion for Order Preliminarily Approving Plan of Distribution for Seafood Processor Claimants, filed in In re the Exxon Valdez, U.S.D.C. Case No. A89-095 Snaes Bley 8S, BOTT iickenieinccncaccictiiciaeeece es 100 Plaintiff Cook Inlet Processing’s Objection to the Plan of Distribution of Recoveries Obtained on Behalf of Processors, filed in In re the Exxon Valdez, U.S.D.C. No. A89-095; dated June 27, a cibttrlatiia tabi a8 eal peaintaiatdilciiabUdiddiidsbekaiostenccasine cs. 113 Supplemental Notice of Position by Polar Equipment, Inc. D/B/A Cook Inlet Processing Relating to Objections by Cook Inlet Processing to Plan of Distribution of Recoveries Obtained on Behalf of Processors, filed in In re The Exxon Valdez, U.S.D.C. No. A89-095 on August 8, 1997 oooooccccccccccccccceceeeececee.. 118 Second Supplemental Notice of Position by Polar Equipment, Inc. d/b/a Cook Inlet Processing Relating to Objections by Polar Equipment, Inc. d/b/a Cook Inlet Processing to Plan of Distribution of Recoveries Obtained on Behalf of Processors, filed in In re the Exxon Valdez, U.S.D.C. No. A89-095; dated September 23, og I RE RNA 121 Federal Rule of Civil Procedure 23 iV FILED DEC 14 2000 CATHY A. CATTERSON, CLERK U.S. COURT OF APPEALS NOT FOR PUBLICATION UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT In re: THE EXXON VALDEZ _) No. 99-35864 | ) | ) DC# CV-89- COOK INLET PROCESSORS, __) 00095-HRH INC., ) ) MEMORANDUM! Plaintiff-Appellant, ) ) GRANT BAKER, as class ) representatives of the Mandatory _) Punitive Damages class; and all ) persons similarly situated; ALASKA ) SPORT FISHING ASSOCIATION; ) LOUIS E. ALBER, AHMET ) ARTUNER; 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. KOMPKOFF, Sr.; ) JOSEPH KOPECKY; DANIEL ) l This disposition is not appropriate for publication and may not be cited to or by the courts of this circuit as may be provided by 9" Cir. R. 36-3. LOWELL; ANDREAN E. MARTUSHEFF; CAROL ANN MAXWELL; JACQUELAN JILL MAXWELL; ROBERT A. MAXWELL, Sr.; MICHAEL McLENAGHAN; ELENORE E. McMULLEN; LESLIE R. MEREDITH; NATIVE VILLAGE OF TATITLEK; LEONARD S. OGLE; STEVEN T. OLSEN; AUGUST M. PEDERSEN, Jr.; MARY LOU REDMOND; JOSEPH DAVID STANTON; JEAN A. TISDALL; DARRELL WOOD, Plaintiffs-Appellees, and EXXON CORP., aka Exxon Mobil Company; Captain JOSEPH HAZELWOOD; EXXON SHIPPING CO., Defendants-Appellees. ) i i ee ee ee ee ee ee ee ee ee ee ee es NAUTILUS MARINE No. 99-35866 ENTERPRISES, INC., DC# CV-89- Plaintiff-Appellant, 00095-HRH Vv. GRANT BAKER, et al., as class representatives of the Mandatory Punitive Damages class; and ail persons similarly situated; ALASKA SPORT FISHING ASSOCIATION; LOUIE E. ALBER; AHMET ee ee ee ee oe ee ee ee ee ee ee ARTUNER; 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. KOMPKOFF, Sr; ) JOSEPH KOPECKY; DANIEL _+) LOWELL; ANDREAN E. ) MARTUSHEFF; CAROL ANN) MAXWELL; JACQUELAN JILL) MAXWELL; ROBERT A. ) MAXWELL, Sr.; MICHAEL ) McLENAGHAN; ELENOREE. _) McMULLEN; LESLIE R. ) MEREDITH; NATIVE VILLAGE ) OF TATITLEK; LEONARDS. _) OGLE; STEVEN T. OLSEN: ) AUGUST M. PEDERSEN, Jr; _—+) MARY LOU REDMOND; JOSEPH ) DAVID STANTON; JEAN A. ) TISDALL; DARRELL WOOD, __—i+) ) ) ) ) ) ) ) ) ) ) ) ) Plaintiffs-Appellees, and EXXON CORP., aka Exxon Mobil Corporation; EXXON SHIPPING CO.; JOSEPH HAZELWOOD, Captain, Defendants-Appellees. Appeal from the United States District Court for the District of Alaska H. Russel Holland, Chief District Judge, Presiding 3 Argued and Submitted November 9, 2000 San Francisco, California BEFORE: SCHROEDER Chief Judge, BROWNING and KLEINFELD, Circuit Judges. Cook Inlet Processors and Nautilus Marine Enterprises appeal the district court’s approval of a seafood processor plan of distribution, which excluded them from recovering a portion of the $5 billion punitive damage verdict against Exxon for the Valdez oil spill. The plan excluded the processors on the basis of settlement agreements they both signed, which contained full punitive damage releases. We review the district court’s approval of a plan of distribution for an abuse of discretion, In re Exxon Valdez, 229 F.3d 790, 795 (9" Cir. 2000), and we affirm. Cook Inlet’s settlement agreement released Exxon from “all punitive damage claims of any kind arising at any time.” Similarly, Nautilus Marine’s settlement agreement released Exxon from “any and all claims for punitive damages in any way associated with [the Valdez spill].” The district court did not abuse its discretion when it approved the plan which excluded the processors from punitive damage recovery based on the release language. The processors’ arguments for invalidating the releases on the grounds of economic duress and waiver also fail. The processors presented no evidence to support setting aside the releases on the basis of economic duress. Exxon did not waive the releases by failing to plead them as affirmative defenses because the complaints did not request punitive damages.2 AFFIRMED. 2 Cook Inlet’s and Nautilus Marine’s remaining contentions are rejected as meritless. Z ibitineeteg FOR PUBLICATION UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT 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 No. 96-36038 D.C. No. CV-89-00095- Fisheries, HRH Plaintiffs-Appellants, and EXXON SHIPPING COMPANY; EXXON CORPORATION, Defendants-Appellants, V. GRANT BAKER, et al., as representatives of the Mandatory Punitive Damages Class, 3 Plaintiffs-A ppellees. 13063 ICICLE SEAFOODS, INC.; PETER PAN SEAFOODS, INC.; SEVEN SEAS 5 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, ¥, ALASKA SPORTFISHING ASSOC., INC.; No. 97-35036 LOUIE E. ALBER; AHMET ARTUNER; D.C. No. GRANT C. BAKER; JEFFREY BAILEY; CV-96-00056- WILLIAM BENNETT; MICHAEL HRH 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 R. 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; LEONARD S. OGLE; 13064 STEVEN T. OLSEN; AUGUST M. PEDERSON, JR.; MARY LOU 6 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, No. 97-35190 INC., dba Aleutian Dragon D.C. No. Fisheries; TRIDENT SEAFOODS CV-89-00095- CORPORATION; NORTH COAST HRH SEAFOOD PROCESSORS, INC., OPINION Plaintiffs-Appellants. Vv. GRANT BAKER, et al., as representatives of the Mandatory Punitive Damages Class, Plaintiffs-Appellees, V> EXXON CORPORATION, EXXON SHIPPING COMPANY, Defendants. 13065 Appeals from the United States District Court Be for the District of Alaska H. Russel Holland, District Judge, Presiding Argued and Submitted ri May 3, 1999—Seattle, Washington Filed October 12, 2000 Before: James R. Browning, Mary M. Schroeder,1 and Andrew J. Kleinfeld, Circuit Judges. Opinion by Judge Schroeder 1 Judge Schroeder was drawn to replace Judge Wiggins. She has read the briefs, reviewed the record and listened to the tape of oral argument held on May 3, 1999. 13066 13067 13068 COUNSEL David C. Tarshes, Davis Wnght Tremaine, LLP, Anchorage, Alaska, for the plaintiffs-appellees. James vanR. Springer, Dickstein Shapiro Morin & Oshinsky, Washington, D.C., 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 rs, Inc. OPINION SCHROEDER, Circuit Judge: 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 Exxon? by private parties injured by the spill and consolidated 13069 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 2 We follow the practice of other panels of this court who have decided cases involving the Exxon Valdez, and use “Exxon” to refer to Exxon Corporation, Exxon Shipping Company, Exxon Transportation Company, and any other related entity. See Eyak Native Village v. Exxon Corp., 25 F.3d 773, 774 n.1 (9" Cir. 1994). 9 ove i ¥ not include a release and therefore did not formally terminate the Seattle Seven’s claims against Exxon. The Seattle Seven agree, 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 13070 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. BACKGROUND 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 10 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 (9 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). 13071 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, tut 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 . 1] 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. - 13072 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 the fact that 12 in many cases, it had paid money to injured parties without requiring anything in return but a receipt and without requiring releases. Exxon’s president testified that Exxon had paid “over $300 million” receiving only receipts in return, and thus, that it had received nothing of in return for its payments. Exxon’s counsel reiterated this in his closing argument. In fact, however, because the $300 million figure included amounts paid to parties such as the Seattle Seven, who did agree to settle their claims, these statements were inaccurate. The amount paid in return for nothing but receipts was actually somewhere around $168 million. Exxon’s apparent strategy to maximize to the jury what Exxon had already paid in order to minimize punitive damages did not work well. On September 16, 1994, the jury awarded punitive damages in the sum of $5 billion, at that time the largest award of its kind in history. The next step was to allocate those damages among the plaintiffs in a manner proportionate to their injury. The original plan of allocation, drawn up by the non-settling plaintiffs, did not include the Seattle Seven because the Seven’s lack of a financial interest in the recovery meant that they also lacked motivation to pursue a stake in the award. In order to create a financial incentive for the Seattle Seven, in 1996 Exxon 13073 negotiated a modification to the 1991 settlement agreement with the Seattle Seven. The modification permitted the Seattle Seven to retain $12.4 million of their punitive damage allocation rather than ceding it all back to Exxon. The Seattle Seven then filed an objection to the proposed allocation with the district court, contesting their exclusion from the plan. At this point, the reason for the requested modification, the cede back provision, became known both to the district court and to the plaintiffs. The plaintiffs began vigorously to oppose inclusion of the Seattle Seven in the plan of allocation. 13 The district court agreed with the plaintiffs, originally taking the position that the cede back provision itself was unlawful as against public policy. The Seattle Seven and Exxon moved for reconsideration, supporting their motion with declarations of numerous legal luminaries, including former U.S. Attorneys General, judges of various U.S. Courts of Appeal, law professors, and an Alaska Supreme Court Justice, all to the effect that cede back agreements are ethical, enforceable, and necessary for the orderly administration of justice in mass tort cases. Upon reconsideration, the district court agreed that the cede back agreement was not in and of itself unethical, but held that the Seattle Seven were nonetheless barred from participating in the allocation of damages because the jury was not told of the agreement’s existence. The court’s order stated that the problem was Exxon’s failure to tell the jury “the whole story” regarding the agreements. The court emphasized its belief that the jury should have been entitled to determine how much Exxon should actually pay in punitive damages, out of its own pocket, stating: “Punitive damages are imposed to punish the conduct which juries determine to be reckless. The court has no doubt that the Exxon Valdez jury would be outraged if Exxon, through the Seattle Seven settlement 13074 agreement, rather than the claimants, were to wind up with almost 15% of the punitive damages award.” In this appeal, appellants Seattle Seven and Exxon contend both that cede back agreements are lawful and that for their proper administration, they must not be disclosed to juries. Otherwise, appellants argue, the jury in order to compensate for them or to prevent the defendant from paying less than what the jury believes is appropriate punishment will inflate the punitive damages award. The appellee plaintiffs defend the district court’s reasoning, arguing that such agreements are unethical and 14 unenforceable unless juries are told of them. They also contend that even if juries should ordinarily not be told, disclosure in this particular case was warranted by Exxon’s exaggerated statements to the jury regarding the amount paid to claimants without releases in return. We review approval of the plan of allocation for abuse of discretion and any necessary legal questions do novo. See In re Mego Financial Corp. Sec. Litig., 213 F.3d 454, 460 (9® Cir. 2000). There are accordingly three principal issues that we must consider in the disposition of this appeal: (1) the lawfulness and enforceability of cede back agreements like the one in this case; (2) whether, if lawful and enforceable, they should generally, as a matter of law, be kept from the jury; and (3) if they should ordinarily be kept secret, whether there were circumstances present in this case that should have required Exxon to tell the jury about the existence of this particular agreement. We hold that cede back agreements are enforceable; that in accordance with the general principle that indemnification arrangements should not be allowed to affect a jury’s determination of damages, cede back agreements should not be disclosed to the jury; and, finally, that there are no circumstances in this case that would have warranted disclosing the terms of this cede back provision to the jury. We therefore conclude that the district court abused its discretion 13075 in approving a plan of allocation that denied enforceability of the settlement agreement between Exxon and the Seattle Seven and that barred the Seattle Seven from receiving any allocation of punitive damages. I. ENFORCEABILITY OF THE CEDE BACK PROVISION In recent years, federal courts have become all too familiar with the peculiar problems posed by mass tort litigation. See, for example, Amchem Products, Inc. v. Windsor, 521 U.S. 591 (1997) (asbestos); Valentino v. Carter-Wallace, Inc., 97 F.3d 1227 (9" Cir. 1996) (epilepsy medication); In re 15 Agent Orange Product Liability Litigation, 818 F.2d 145 (2d Cir. 1987). Such litigation oe dockets for decades, creating burdens on the judicial system and delaying relief for injured parties. As a result, the general policy of federal courts to promote settlement before trial is even stronger in the context of large-scale class actions. See Franklin v. Kaypro Corp., 884 F.2d 1222, 1229 (9 Cir. 1989) (stating that the fact that “there is an overriding public interest in settling and quieting litigation...is particularly true in class action suits.”). It is unfortunately also true, however, that such settlements are difficult to reach. “[O]btaining a settlement in multi-party litigation may be quite complex.” Id. at 1225. It will frequently be very close to impossible for a mass tort defendant to achieve a settlement with every potential plaintiff. The resulting presence of non-settling defendants, non-settling plaintiffs, or both, may seriously affect the parties’ incentives to settle in the first place. In addition to encouraging individual settlements, courts have encouraged the use of mandatory class actions to handle punitive damages claims in mass tort cases. Mandatory class actions avoid the unfairness that results when a few plaintiffs—those who win the race to the courthouse— bankrupt a defendant early in the litigation process. They also avoid the possible unfairness of punishing a defendant over and over 13076 again for the same tortious conduct. As a result, mandatory classes have been endorsed by many courts and commentators. See In re A.H. Robins Co., Inc., 880 F.2d 709, 738 (4" Cir. 1989) (recognizing that “the ‘trend’ of the authorities is clearly in the direction of a more liberal approach to the certification of the mass tort action”). See also II The American Law Institute, Enterprise Responsibility for Personal Injury 263 (Reporters’ Study 1991) (recommending federal legislation to create nationwide mandatory punitive ages classes); Richard A. Seltzer, Punitive Damages in Mass Tort Litigation: Addressing the Problems of Fairness, Efficiency and Control, 52 Fordham L. Rev. 37, 61 (1983) (arguing that 16 only class actions provide a practical means for resolving the problems that accompany punitive damage awards in mass tort litigation). One drawback to the mandatory class action, however, is that it makes it even more difficult to settle the claims of any individual plaintiff. Because punitive damages in a mandatory class action are awarded in one sum, @ defendant has a serious disincentive to settle with any plaintiff unless it can negotiate a settlement with them all, a staggering feat if not a practical i ity. Partial settlement merely reduces the number of plaintiffs who share an eventual award. It does not reduce the award’s amount. Because a defendant like Exxon would presumably be indifferent as to whether it paid 10,000 plaintiffs $500,000 each or 500,000 plaintiffs $10,000 each, the creation of mandatory punitive damages classes cuts against the strong judicial policy of encouraging settlement in class actions. We deal here with multiple plaintiffs suing one defendant, but an analogous problem frequently occurs in the more typical situation of a single plaintiff with claims against multiple defendants. When a plaintiff is able to settle with fewer than all of the defendants, the question becomes how to determine what share of a jury’s total assessment of damages a non-settling defendant should pay. Courts agree that the non- 13077 settling defendant does not have to pay the entirety of any eventual damages award. They diverge, however, on the issue of apportionment, taking three distinct approaches. See McDermott, Inc. v. Clyde, 511 U.S. 202, 215-17 (1994) (explaining the three approaches). Under the first ach, the non-settling defendant pays the entire amount of the award less the actual amount the plaintiff has already received from the settling defendant, even if this total turns out to be in excess of the non-settling defendant's share of the fault as determined by the jury. The non-settling defendant then retains the right to seek 17 contribution from the settling defendant in order to bring total payments in line with allocation of fault. This is called the “pro tanto with contribution” approach, and it creates little incentive for any defendant to settle. The second approach is known as “pro tanto without contribution.” Under this approach, the non-settling defendant pays the entire amount of the award less the amount of the settlement and does not retain the right to seek contribution. This helps ensure that the plaintiff receives the full amount of damages and maintains incentives to settle, but can result in the non-settling defendant paying more than its share of fault. Finally, under the “proportionate share” approach, the non- settling defendant pays only the amount of the award that is allocable to its share of the fault, as determined by the jury. The proportionate share approach is the law in the Ninth Circuit, has been adopted by the Supreme Court for use in maritime actions, and is the approach recommended by the American Law Institute. See Kaypro, 884 F.2d at 1231. See also McDermott, 511 U.S. at 217; Restatement (Third) of Torts: Apportionment of Liability § 16. The main advantage of the proportionate share approach is that it is the only one of the three that combines fairness to all parties with an appropriate balance of individual incentives to 13078 settle. The effect of proportionate share apportionment, however, is that the actual amount of damages the plaintiff receives will deviate from the amount awarded by the jury, unless the amount of the settlement exactly matches the settling defendant’s share of fault as subsequently determined by the jury. If the jury later determines that the settling defendant’s share of fault is less than the amount paid in settlement, this will result in a windfall to the plaintiff. Ifthe jury’s allocation is higher, this will result in a shortfall. 18 This case differs from the typical situation in that we do not have a single plaintiff seeking to recover a ¢e award from multiple defendants. The Exxon Valdez punitive | class involves multiple plaintiffs seeking to recover a award from a single defendant. Neither our court nor | 8 potential authorities have addressed this situation. The distortion of settlement incentives that occurs when some go uncollected, settlement incentives would have been preserved and the cede back provision would not have been necessary. Exxon had no such certainty, though (and indeed, the district court eventually refused to adopt such a method). Exxon therefore sought to achieve a proportionate share result without the court’s assistance by adding the cede back provision to its settlement agreement with the Seattle Seven. An analogous type of cede back agreement has been used in the multiple-defendant context and is called a Pierringer release, after the leading case to consider it, Pierringer v._ Hoger, 124 N.W.2d 106 (Wis. 1963). Pierringer ae have been approved in Wisconsin and Minnesota. See id.; Frey v. Snelgrove, 269 N.W.2d 9] 8, 922 (Minn. 1978). 13079 Pierringer releases have the effect of reaching a proportionate share result and have principally been used in jurisdictions that adhere to the “pro tanto with contribution” approach. A plaintiff who settles with one of multiple defendants agrees to indemnify that defendant for any eventual contribution action brought by the non-settling defendants after the entry of judgment. See Peter B. Knapp, Keeping the Pierringer Promise: Fair Settlements and Fair Trials, 20 Wm. Mitchell L. Rev. | (1994), The Supreme Court has recognized that Pierringer releases mitigate the adverse effect on settlement that exists under a 19 “pro tanto with contribution” regime, but has worried that the prospect of indemnity actions might add “yet another potential burden on the courts.” McDermott, 511 U.S. at 212. As a practical matter, however, Pierringer releases do not require the actual litigation of a contribution action, followed by an indemnity action. The portion of the judgment allocable to the settling defendant’s fault is simply considered uncollectible, just as it would be under the proportionate share approach. See Austin v. Raymark Ind., Inc., 841 F.2d 1184, 1190 (1" Cir. 1988) (stating that through a Pierringer release, a non-settling defendant “effectively obtain[s] its contribution from the settling defendants by having assessed against it only its own percentage of liability”). Similarly, in the multiple plaintiff context, a non- settling plaintiff through a cede back agreement obtains only its proportionate share of the entire punitive damages award. What Exxon and the Seattle Seven did, therefore, was use a Pierringer device to obtain the functional equivalent of a proportionate share allocation of damages. Since both the Ninth Circuit and the Supreme Court have endorsed the proportionate share approach because of its superiority in blending fairness to the parties with incentives to settle, we cannot hold such an agreement unenforceable as a matter of public policy. Far from being unethical, cede back agreements make it easier to administer mandatory class actions for the assessment of punitive damages and encourage settlement in mass tort cases. As a result, such agreements should typically be enforced. II. WHETHER CEDE BACK AGREEMENTS SHOULD GENERALLY BE DISCLOSED TO THE JURY The district court in this case held that cede back agreements, though ethical, should be disclosed to the jury because the jury should be able to take them into account in assessing punitive damages. Exxon and the Seattle Seven contend, however, that juries should never be told. They argue persuasively that the salutary purposes of such agreements would be frustrated if the jury knew about the terms of the 20 agreement and were permitted to offset them by increasing damages. We agree. If a jury was told that the defendant would eventually get back a portion of the punitive damages assessed, the jury would likely compensate by imposing more thereby assuring that the defendant would y the entire amount deemed appropriate by the jury. This is exactly what the district court believed the jury should have been permitted to do in this case. Yet if that were to be the result of the settlement agreement, from the defendant’s perspective there would be no point in settling in the first place. The defendant would still have to pay the full amount assessed by the jury, in addition to the amount paid in settlement. This is what we have recognized elsewhere in our law: that a jury should assess damages but not determine how much defendants should “actually” pay or how much plaintiffs should “actually” receive. In Larez v. Holcomb, 16 F.3d 1513 (9" Cir. 1994), we held that it was prejudicial error to inform a jury deliberating on an award of punitive damages that the defendant would be indemnified by his employer for any such award. See id. at 1520-21. We stated that a jury’s task is to arrive at a “dispassionate” determination of the proper award, 13081 and that evidence of indemnification might have tempted the jury to inflate the award out of sympathy for the plaintiff. See id. at 1519. Similarly, we held in Brooks v. Cook, 938 F.2d 1048 (9" Cir. 1991), that juries should not be told about the availability of attorneys’ fees when fixing an award for a prevailing plaintiff. We explained that “the fear is that a jury, informed of plaintiff's right to additional funds, will view the money as a windfall and take steps to offset it.” Id. at 1052. These principles are not unique to this circuit. It is uniformly held that absent exceptional circumstances, a jury deliberating on the amount of a damages award is not to 21 consider where the funds what constitute that award will come from, or where they will end up. For example, the states of Georgia and Oregon both have enacted tort reform measures that provide that large portions of punitive damages awards (75 percent in Georgia and 50 percent in Oregon) go to the state or state-designated charities rather than the prevailing plaintiff. Both states have held that it is prejudicial error to inform the jury of this ultimate outcome, because of the temptation for the jury to inflate the award in order to more fully compensate the plaintiff. See Ford v. Uniroyal Goodrich Tire Co., 476 S.E.2d 565, 570-71 (Ga. 1996); Honeywell v. Sterling Furniture Co., 797 P.2d 1019 (Ore. 1990). Similarly, the Supreme Court of Minnesota has held that juries should not be informed that a finding of a certain percentage of comparative negligence on the part of the plaintiff will serve to reduce the damages award by that percentage. See Rosenthal v. Kolars, 231 N.W.2d 285, 288 (Minn. 1975). Juries are also not to be told of statutory caps on damages, or, in antitrust and RICO case, that damages will eventually be trebled. See Sasaki v. Class, 92 F.3d 232, 237 (4" Cir. 1996) (holding that informing a jury of a statutory cap on damages for one of plaintiff's claims may have led to an increased award on the non-capped claim); HBE Leasing Corp. v. Frank, 22 F.3d 41, 45-46 (2d Cir. 1994) (holding that informing a jury of RICO’s treble damage provision may confuse or prejudice jury into lowering the award in order to counteract the trebling effect); 13082 Pollock & Riley, Inc. v. Pearl Brewing Co., 498 F.2d 1240, 1242-43 (5" Cir. 1974) (treble damages); Semke v. Enid Automobile Dealers Ass’n, 456 F.2d 1361, 1370 (10® Cir. 1972) (treble damages); Weiss v. Goldfarb, 713 A.2d 427, 480 (N.J. 1988) (holding that informing a jury of a statutory cap on damages that applied to one defendant may have led the jury to increase the amount of damages allocable to other, non-capped defendants). The message from these cases is the same: juries are to be kept free of any outside influence that might lead them to inflate or reduce their damages award in order to “secure justice” for the parties. See Rosenthal, 231 N.W.2d at 288. 22 In cases involving settling and non-settling defendants, several states provide by statute that in ne fault, the jury cannot be told of a settlement or its terms. Conn. Gen. Stat. § 52-216a; Fla. Stat. Ch. 768.041; Maine Rev. Stat. Ann. § 163; N.H. Rev. Stat. Ann. § 507:7-i; N.Y. C.P.L.R. 4533-b (McKinney). The reason for this is the danger that the jury will adjust its award of according to the amount of the settlement. See Builder’s Square, Inc. v. Shaw, 755 So.2d 721, 725 (FI. Ct. App. 1999). If the jury perceives that the settlement amount is low, for example, it might be tempted to increase the amount of fault allocable to the non-settling defendants in order to maximize the plaintiffs recovery. In Minnesota, a state that has recognized the validity of agreements similar to the cede back provision in this case, the Supreme Court has held that the existence of a Pierringer release may be admissible for limited Purposes such as to show witness bias. The court must exercise its discretion, however, as to what details of the agreement should be provided to the jury, and “as a general rule the amount paid in settlement should never be submitted.” Frey v. Snelgrove, 269 N.W.2d 918, 923 (Minn. 1978). Thus, the existence of an agreement between the parties is clearly relevant should the settling defendant attempt to testify at trial in a manner favorable to the plaintiff. The details of the agreement should not 13083 be disclosed, though, and the evidence admitted should be limited to avoid distorting the jury’s deliberations on damages. See id. See also 23 Wright & Miller, Federal Practice and Procedure § 5311 (commenting that when evidence of a settlement agreement is admissible to show witness bias, "it is true that often the fact of a compromise will suffice to show bias and that exploring the details will increase the prejudice to the opposing party without any appreciable effect on the credibility of the witness”’); Restatement (Third) of Torts: Apportionment of Liability § 24, Reporters’ Note, comment i (recommending that when 23 the fact of a settlement agreement is admissible to show witness bias, the agreement itself should not be admitted into evidence, and that if it is, potentially prejudicial portions of it should be redacted). Therefore, it is clear that cede back agreements should generally not be revealed to juries deliberating on punitive damages. The only remaining question is whether any particular circumstances in this case warranted an exception from this general rule. Ill. SPECIAL CIRCUMSTANCES The plaintiffs argue that even if evidence of a cede back agreement would ordinarily be kept from a jury, Exxon should have volunteered it in this case to correct the false impression Exxon created when it announced that it had paid out $300 million in compensation requiring only receipts on return when the correct figure was approximately $168 million. They further argue that the fact that the exaggeration went uncorrected justifies the district court’s decision to exclude the Seattle Seven from the plan of allocation and render the cede back provision completely unenforceable. The plaintiffs rely on Lawson v. Trowbridge, 153 F.3d 368 (7" Cir. 1998). Lawson holds that otherwise inadmissible evidence of indemnification may be admitted on cross- examination to impeach a testifying defendant who intimates 13084 to the jury that he will be financially ruined by a large damages award. See id. at 379. Lawson does not concern the enforceability of the underlying indemnification agreement. We will not extend Lawson beyond its holding to justify the district court’s exclusion of the Seattle Seven from the plan of allocation on the basis of Exxon’s trial conduct. Denying the Seattle Seven recovery on the basis of Exxon’s actions would be manifestly unfair. 24 As for Exxon itself, we do not condone its conduct. The exaggerations it made at trial, however, have little, if anything, to do with the cede back provision. Exxon stated that it had paid out $300 million requiring only receipts in return; the only correction necessary was the alteration of that figure to $168 million. There would have been no need to mention the cede back provision, and thus no need to disturb the general rule that such agreements should be ordinarily be [sic] kept from the jury. Furthermore, the only conceivable prejudice the plaintiffs could have suffered when Exxon overstated its kine benevolence would have been a downward adjustment by the Jury of the damages award, and the proper remedy for such prejudice would be a new trial on punitive damages. The plaintiffs have never claimed that $5 billion was too low an award, however, nor have they ever sought a new trial. Refusing to enforce the cede back provision is not a remedy that relates to the error complained of. IV. OTHER ARGUMENTS The plaintiffs raise on appeal two alternative arguments in support of the district court’s decision to exclude the Seattle Seven from the plan of allocation. F irst, the plaintiffs claim that because the Seattle Seven “settled” their claims against Exxon, they have no right to claim a share of punitive damages regardless of the existence of the cede back provision. It is clear, however, that the settlement agreement did not contain a release of any claims; it merely “settled” the matter of 13085 what would happen to the claims once the claims were finally adjudicated. Second, the plaintiffs argue that public policy precludes any agreement that diminishes the deterrent effect of a punitive damages award. This argument runs contrary to the law of this circuit, which permits indemnification agreements and the settlement and release of punitive damages claims. As exemplified by Larez, it is not up to the jury to decide how much a defendant must actually 25 pay at the end of the day, or how much a plaintiff will actually receive. We therefore reject both of the plaintiffs’ alternative arguments. CONCLUSION We hold that the district court abused its discretion in approving the plan of allocation over the Seattle Seven’s objection. Cede back agreements are lawful and enforceable, and generally should not be disclosed to the jury. No special circumstances in this case justify the district court’s refusal to enforce the cede back agreement between Exxon and the Seattle Seven. As a result, the existence of the cede back agreement cannot justify exclusion of the Seattle Seven from the plan of allocation. The approval of the Allocation Plan is VACATED and the matter is REMANDED. 13086 26 NOT FOR PUBLICATION UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT SEA HAWK SEAFOODS, INC.: ) No. 99-35878 COOK INLET PROCESSORS, INC.; SAGAYA CORP.; WILLIAM ) D.C. No. CV-89- McMURREN; PATRICK L. ) 00095-HRH McMURREN; WILLIAM W. KING; GEORGE C. NORRIS; HUNTER CRANZ; RICHARD FEENSTRA; WILDERNESS SAILING SAFARIS; SEAFOOD SALES, INC.; RAPID SYSTEMS PACIFIC, LTD., MEMORANDUM! ) ) ) ) ) ) ; Plaintiffs-Appellees, ) and WESTERN ALASKA FISHERIES, ) ) ) ) ) ) ) ) Claimant-Appellant, v. EXXON CORP., a New Jersey Corp., l This disposition is not appropriate for publication and may not be cited to or by the courts of this circuit except as may be provided by 9" Cir. R. 36-3. 27 Defendant, and DISCOVERY MASTER, Appellee. | Appeal from the United States District Court for the District of Alaska (Anchorage) H. Russel Holland, Chief Judge, Presiding Argued and Submitted November 9, 2000 San Francisco, California Before: SCHROEDER, Chief Judge, BROWNING, KLEINFELD, Circuit Judges. Western Alaska Fisheries, Inc. appeals the district court’s approval of a plan of distribution, which excluded them from recovering a portion of the $5 billion punitive damage verdict against Exxon for the Valdez oil spill on the ground that they had failed to file an independent lawsuit against Exxon. We review a district court’s approval of a plan of distribution for abuse of discretion but consider any legal questions de novo. See In re Exxon Valdez, 229 F.3d 790, 795 (9" Cir. 2000); In re Mego Financial Corp. Sec. Litig., 213 F.3d 454, 460 (9® Cir. 2000). The time periods for filing notices of appeal are governed by Fed.R.App.P. 4. These periods are “mandatory and jurisdictional.” Browder v. Director, Dep’t of Corrections, 434 U.S. 257, 264 (1978) (quoting United States v. Robinson, 361 U.S. 220, 229 (1960)); see also Vahan v. Shalala, 30 F.3d 102 (9" Cir. 1994). Unless the notice of appeal is filed within the time fixed by Rule 4, we lack jurisdiction. See Torres v. Oakland Scavanger Co., 487 U.S. 312, 317 (1988). 28 Under Fed.R.App.P. 4(a)(3), “If one party timely files a notice of appeal, any other party may file a notice of within 14 days after the date when the first notice was 2 Exxon filed a timely notice of on August 20, 1999, Western Alaska filed a notice o four days later, within the 14 days permitted by Rule 4(a)(3). Western Alaska’s notice of appeal was therefore timely, Fed.R.Civ.P. 23(c)(1) authorizes district courts to alter or amend class certification orders only “before the decision on the merits.” The reference to “before” lainly implies disapproval of such alteration or amendment “afterward.” Vizcaino v. U.S. District Court, 173 F.3d 713, 721, as amended 184 F.3d 1070 (9 Cir. 1999). The mandatory punitive damages class, as defined in the class certification order and Plan of Allocation, consisted of all persons and entities that “possess” or “have asserted” a claim for punitive damages against Exxon arising from the spill. Western Alaska plainly met the class definition. The “timely lawsuit” requirement narrowed the mandatory class, excluding seafood processors that had relied on the plain language of the class certification order and notice. Such notice expressly instructed that putative class members need not have brought a lawsuit in any court to be a member of the mandatory class and that they could not file an independent lawsuit once the class was certified. The class definition was reaffirmed in the Plan of Allocation, which imposed a “timely lawsuit” requirement on only one of the fourteen claim categories, the “Area Businesses” category. At no point prior to the jury verdict was a “timely lawsuit” requirement imposed on seafood processors; Rule 23(c)(1) prohibits imposition of one afterward. As the order approving the seafood processor plan of distribution was entered on July 23, 1999, nearly five years after the jury returned its punitive damage verdict against Exxon and nearly three years after judgment was entered on the $5 billion award, addition of the “timely lawsuit” requirement was untimely and an abuse of discretion 29 There is no merit in Plaintiff's argument that punitive damages are unavailable, as a matter of law, to persons who have not asserted compensatory damage claims through an independent lawsuit. Under federal law, including federal maritime law, punitive damages are available to any person or entity that suffered actual injury arising from a defendant’s violation of a federally protected right, independent of whether legal injury is established at trial. See Passantino v. Johnson & Johnson Consumer Products, Inc., 212 F.3d 493, 514 (9® Cir. 2000) (“[P]unitive damages may be awarded in the absence of compensatory or nominal damages, as long as the plaintiff has shown that the defendant violated a federally protected right.””); Bise v. Int’ Brotherhood of Electrical Workers, 618 F.2d 1299, 1305-06 (9 Cir. 1979) (punitive damages are permissible to vindicate invasion of protected federal nghts, even where plaintiffs fail to prove legal entitlement to compensatory damages); Gill v. Manuel, 488 F.2d 799, 802 (9 Cir. 1973) (“[A]n award of compensatory damages i is not a necessary prerequisite to an award of punitive damages [under 42 U.S.C. § 1983].”). The “timely lawsuit” requirement in the seafood processor plan of distribution is vacated, with instructions to allow Western Alaska to share in the punitive damages recovery on the same basis as the other 33 eligible seafood processors. VACATED AND REMANDED. 30 FILED JUL 23 1999 UNITED STATES DISTRICT COURT DISTRICT OF ALASKA IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ALASKA In re: ) ) Case No. A89-095- The EXXON VALDEZ ) CV (Consolidated) THIS DOCUMENT RELATES TO ) ALL CASES ) )- ORDER NO. 348 FINAL APPROVAL OF THE PLAN OF DISTRIBUTION OF ALLOCATIONS TO THE PROCESSOR CLAIM CATEGORY On August 13, 1997, the court conducted a final approval hearing on the plan of distribution of allocations to the various claim categories in the Exxon Valdez oil spill litigation. Plaintiffs submitted fifty-one separate proposed orders, each involving a separate allocation plan. To date, the court has granted final approval of fifty allocation plans. The court will now consider the Plan of Distribution of Allocations to the Processor Claim category. A distribution plan will be approved where it is “fundamentally fair, adequate, and reasonable.” Officers of Justice v. Civil Serv. Comm’n of the City and Coun of San Francisco, 688 F.2d 615, 625 (9 Cir. 1982) (citation omitted). 31 [T]he court’s intrusion upon what is otherwise a private consensual agreement negotiated between the parties to a lawsuit must be limited to the extent necessary to reach a reasoned judgment that the agreement is not the product of fraud or overreaching by, or collusion between, the negotiating parties, and that the settlement, taken as a whole is fair, reasonable and adequate to all concerned. Id. at 625. The proposed Processor Plan of Distribution establishes four criteria for participation. A claimant must: (1) have been engaged in commercial seafood processing operations and suffered economic losses proximately caused by the Exxon Valdez oil spill; (2) be a signatory to plaintiffs’ joint prosecution agreement; (3) have filed a timely lawsuit on its own behalf as a direct action plaintiff or putative class representative; and (4) not have settled and released all its claims against the Exxon defendants.! Plaintiffs state that in applying these criteria, thirty-three Seafood Processors (Participating Processors) are eligible to participate in the Processor Plan of Distribution. Plaintiffs state further that the Processor Plan of Distribution is the product of a consensus among the Participating Processors. These Participating Processors agreed to the benchmark compensatory damages figure and agreed to be bound by that figure for purposes of the Plan of Distribution. Exxon Corporation, Western Alaska Fisheries, Inc., John Cabot Co., Inc., Cook Inlet Processing, and Nautilus Marine Enterprises, Inc. submitted objections to the Processor Plan ! All Plaintiffs Motion for Order Preliminarily Approving Processor Distribution Plan and Approving the Notice of the Request for Approval of Such Plan. Clerk’s Docket No. 7010 at 7. 32 of Distribution. The court will determine whether the objections render the Plan unfair, inadequate or unreasonable and justify setting aside the Plan. Exxon’s Objection Exxon objects to the Plan based on settlements that it entered into with Dragnet Fisheries Co., Inc. (Dragnet), Nense Alaska F gpg (Western), Inlet Fisheries, Inc. (Inlet), Copper River Fishermen’s aie ive ( River), Sea Hawk Seafoods, Inc. (Sea Ha ), and Kode Salmon Packers, Inc. (Kodiak) in 1990. Under the terms of the settlements, Exxon paid the Processors $13.6 million. The settlements provided that the Processors would release Exxon from compensatory damage claims for 1989, retain their compensatory omy a claims for the years after 1989, and share any recovery of punitive damages with Exxon. Plaintiffs refer to Western, Dragnet, and Inlet as “Non- Participating Processors” because they failed to comply with the Class Certification Order, failed to file a timely lawsuit against Exxon, and failed to sign the Joint Prosecution Agreement. The Class Certification Order stated that “putative class members of this decertified Area Business Class shall have 180 days from this date [March 14, 1994] to commence an action on a claim arising out of or related to the Exxon Valdez oil spill or be barred from suing on such claims”2 The Plan of Allocation incorporated the language of the Class Certification Order and stated that “{c]laims will be recognized only for businesses which filed timely lawsuits in compliance with the Class Certification Order.”3 The court finds that compliance with the Class Certification Order is a fair and objective criterion to identify Participating Processors. The Exxon Valdez litigation has been incredibly complex, in terms of both legal issues and 2 Class Certification Order, Clerk’s Docket No. 4653 at 3. 3 Plan of Allocation, Clerk’s Docket No. 6603 at 13 n.16. 33 case management. Consequently, the court has issued rulings, such as the Class Certification Order, requiring” timely action by the parties, and compliance with the Class Certification Order is a reasonable prerequisite to participating in the Processor Plan of Distribution. Exxon argues that it was unnecessary for the Non- Participating Processors to comply with the Class Certification Order because they could have asserted claims under the Trans-Alaska Pipeline Authorization Act (TAPAA), or under Alaska’s Environment Conservation Act” (the “Alaska Act”). Exxon, however, does not contend _ that any of the Non-Participating Processors made a claim against the TAPAA Fund. Regardless, such a claim would not have amounted to a claim against Exxon, and would not have satisfied the requirements of the Class Certification Order. Likewise, a claim under the Alaska Act would not satisfy the requirements of the Class Certification Order. Exxon’s arguments that the Plan should be restructured to include Non-Participating Processors does not render the Plan unfair, inadequate, or unreasonable, and the court | rejects Exxon’s arguments on this issue. Exxon also asserts that it is entitled to participate in the Plan based on its settlement agreements with Copper River, Sea Hawk, and Kodiak. These Processors, which are listed as Participating Processors in the Plan of Allocation, each settled their compensatory damages for either the calendar year 1989, or for calendar year 1989 and a portion of 1990. They also assigned to Exxon claims for punitive damages directly related to the settled compensatory damage claims. Copper River, Sea Hawk, and Kodiak, however, also expressly excepted and reserved all of their claims, including punitive damages, for the periods after they settled with Exxon. 34 the court, plaintiffs state Kodiak will be assigned a assigned their punitive damages to, Exxon. Plaintiffs intend, however, to allow Copper River, Sea Hawk and Kodiak to — in the ngs Distribution Plan, but base their share of allocations solely upon their compensatory damages for the periods after their settlements with Exxon. Plaintiffs’ Plan of Distribution with respect to Copper River, Kodiak, and Sea Hawk is fair, adequate, and reasonable, and consistent with the court’s intent to prevent Exxon from sharing in the punitive damages. Exxon’s arguments regarding Copper River, Kodiak, and Sea Hawk are rejected. Exxon also argues that the Plan is vague, but the Plan carefully explains the recoveries, eligibility criteria, methodology, and anticipated distribution proceeds. Exxon argues that Participating Processors who settled claims for 1989 lost profits should have those damages included in the Plan of Distribution with no adjustments for settlements. If Exxon’s argument were adopted, it would result in certain Processors recovering damages twice for 1989: once as part of a settlement, and again from the Plan of Distribution. The Processors who settled, however, agreed that the 1989 lost profits would be excluded from the damages matrix. None of Exxon’s arguments render the Processor Plan of Distribution unfair, inadequate, or unreasonable, and the court rejects Exxon’s arguments in their entirety. Western Alaska Fisheries, Inc.’s Objection 4 The court requested additional information from the Plaintiffs at Clerk’s Docket No. 7316. The Plaintiffs responded at Clerk’s Docket No. 7317. 35 Western is one of the Non-Participating Processors on which Exxon bases its claim. Western failed to file suit against Exxon as required by the Class Certification Order. The court has already found that the Plan’s criteria, including the requirement that a Processor file a timely lawsuit, are fair, adequate, and reasonable. Western’s arguments to the contrary are rejected. Western also argues that it should be entitled to take its share “‘off the top” in the manner in which certain Native | Corporations were compensated. The Native Corporations, ) however, unlike Western, timely asserted and preserved their claims against Exxon. Western’s argument is rejected. John Cabot Company’s Objection The John Cabot Company (Cabot) failed to file suit against Exxon and is not among the list of Participating | Processors. Having failed to meet the criteria for participating in the Plan, the court rejects Cabot’s objection. Cook-Inlet Processing’s Objection ~~ eee. ne ee The Plan of Distribution as to Cook Inlet Processing (CIP) excludes, for distributional purposes, CIP’s 1989 compensatory damages and all punitive damages. The Plan is fair, adequate, and reasonable with respect to CIP because CIP settled with Exxon and released its 1989 compensatory damages claims and all of its punitive damages claims. CIP is being treated in the same manner as other Processors that settled with Exxon, and the court rejects CIP’s objection. Nautilus Marine Enterprises, Inc:’s Objection The Plan of Distribution as to Nautilus Martine Enterprises, Inc. (Nautilus) excludes, for distributional purposes, Nautilus’ 1989 compensatory damages and all punitive damages. The Plan is fair, adequate, and reasonable with respect to Nautilus because Nautilus settled with Exxon and released its 1989 compensatory damages claims and all of its punitive damages claims. Nautilus is 36 being treated in the same manner as other Processors that settled with Exxon, and the court rejects Nautilus’ objection. Conclusion The court grants final approval to the Plan of Distribution of allocations to the Processor Claim Category.) Dated at Anchorage, Alaska, this 23 day of July, 1999. /S/ H. Russel Holland, Judge District of Alaska > Plaintiffs’ Motion to Strike Exxon’s Reply Memorandum on Objections to Processor Distribution Plan is denied as moot. Clerk’s Docket No. 7072. 37 FILED JAN 26 2001 CATHY A. CATTERSON, CLERK U.S. COURT OF APPEALS NOT FOR PUBLICATION UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT In re: THE EXXON VALDEZ ) No. 99-35864 ) ) DC# CV-89- COOK INLET PROCESSORS, ) 00095-HRH INC., Plaintiff-Appellant, GRANT BAKER, as class representatives of the Mandatory Punitive Damages class; and all persons similarly situated; ALASKA SPORT FISHING ASSOCIATION; LOUIS E. ALBER, AHMET ARTUNER; 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. KOMPKOFF, Sr.; JOSEPH KOPECKY; DANIEL LOWELL; ANDREAN E. MARTUSHEFF; CAROL ANN MAXWELL; JACQUELAN JILL MAXWELL; ROBERT A. MAXWELL, Sr.; MICHAEL ee ee ee ee a _ ee A, t,t, ee 38 McLENAGHAN; ELENOREE. __) McMULLEN; LESLIE R. ) MEREDITH; NATIVE VILLAGE ) OF TATITLEK; LEONARDS. _) OGLE; STEVEN T. OLSEN: ) AUGUST M. PEDERSEN, Jr; +) MARY LOU REDMOND; JOSEPH ) DAVID STANTON; JEAN A. TISDALL; DARRELL WOOD, Plaintiffs-Appellees, EXXON CORP., aka Exxon Mobil Company; Captain JOSEPH HAZELWOOD; EXXON SHIPPING CO., Defendants-Appellees. ) ) ) ) ) ) and ) ) ) ) ) ) ) ) NAUTILUS MARINE ) No. 99-35866 ENTERPRISES, INC., ) DC# CV-89- Plaintiff-Appellant, ) 00095-HRH ) District of Alaska V. ) (Anchorage) ) — GRANT BAKER, et al., as class ) ORDER representative of the Mandatory Punitive Damages class; and all persons similarly situated; ALASKA ) SPORT FISHING ASSOCIATION; ) LOUIE E. ALBER; AHMET ) ARTUNER; JEFFREY BAILEY; _) WILLIAM BENNETT; MICHAEL ) WAYNE BULLOCK; ROBYNE L. ) BUTLER; ALBERT RAY ) CARROLL; DEBRA LEE, INC.; ) 39 DEW DROP, INC.; LARRY L. DOOLEY; MARK DOUMIT; STEVE DOUMIT; DOUGLAS R. JENSEN; DENNIS G. JOHNSON; DONALD P. KOMPKOFF, Sr.; JOSEF KOPECKY; DANIEL LOWELL; ANDREAN E. MARTUSHEFF; CAROL ANN MAXWELL; JACQUELAN JILL MAXWELL; ROBERT A. MAXWELL, Sr.; MICHAEL McLENAGHAN; ELEANORE E. McMULLEN; LESLIE R. MEREDITH; NATIVE VILLAGE OF TATITLEK; LEONARD S. OGLE; STEVEN T. OLSEN; AUGUST M. PEDERSON, Jr.; MARY LOU REDMOND; JOSEPH DAVID STANTON; JEAN A. TISDALL; DARRELL WOOD, Plaintiffs-Appellees, and EXXON CORP., aka Exxon Mobil Corporation; EXXON SHIPPING CO.; JOSEPH HAZELWOOD, - Captain, Defendants-Appellees. ’ BEFORE: SCHROEDER, BROWNING and KLEINFELD, Circuit Judges. The panel has unanimously voted to deny the petition for rehearing. Judges Schroeder and Kleinfeld have voted to deny the petition for rehearing en banc, and Judge Browning so recommends. 40 — The full court has been advised of the petition for an en banc rehearing, and no judge of the court has requested a vote on the petition for rehearing en banc. Fed.R.App.P. 35(b). The petition for rehearing is denied and the petition for rehearing en banc is rejected. 4] UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ALASKA FILED JUDGMENT IN A CIVIL CASE SEP 16 1994 UNITED STATES DISTRICT COURT DISTRICT OF ALASKA By Deputy In re the EXXON VALDEZ Case Number: A89-0095—CV (HRH) Consolidated Re: All Cases __—~—- JURY VERDICT. This action came before the Court for a trial by jury. The issues have been tried and the jury has rendered its verdict. ae DECISION BY COURT. This action came to trial or hearing before the Court. The issues have been tried or heard and a decision has been rendered. IT IS ORDERED AND ADJUSTED THAT, based upon the jury verdicts in Phases I and III, all plaintiffs in the Mandatory Punitive Damages Class recover from the Exxon defendants punitive damages in the amount of $5,000,000,000.00 and from defendant Hazelwood punitive damages in the amount of $5,000.00. APPROVED: /s/ U.S. District Court Judge September 16, 1994 PHYLLIS RHODES 42 lia Date Clerk cc: O&J /S/ L. Miller (By) Deputy clerk D. Serdahely D. Ruskin ** JUDGMENT VACATED BY ORDER DATED 10-24- 94 AT DOCKET NO. 6055** FILED APR 15 1994 UNITED STATES DISTRICT COURT DISTRICT OF ALASKA By /s/ , Deputy IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ALASKA In re ) ) No. A89-095-CV (HRH) the EXXON VALDEZ _ ) (Consolidated) ) RE: ALL CASES ORDER NO. 204 ORDER GRANTING CONDITIONAL FINAL APPROVAL AND CERTIFYING MANDATORY PUNITIVE DAMAGES CLASS The Court now has before it the motion of defendants Exxon Corporation (D-1) and Exxon Shipping Company (D- 2), as counterclaimants, for certification + me punitive damages class pursuant to Rule 23(b)(1)(B), Federal Rules of Civil Procedure.' The court previously granted leave to these defendants to file a class action counterclaim, and granted conditional, preliminary approval of a mandatory punitive damages class. Amended Order 180. Promptly following the entry of Amended Order 180, notice was given by mail to all persons who have claims for punitive damages against Exxon and/or Exxon Shipping, and such persons were given an opportunity to file objections to | Clerk’s Docket No. 4470. certification of the class. In addition, the court received oppositions to the motion from a number of plaintiffs in this court and in the Superior Court. The court has heard oral ail argument. | Conditional final approval of a punitive damages class is now granted, on the maar eee set forth below. Pursuant to the provisions of Rule 23(b\( 1B), Federal Rules of Civil Procedure, and the other terms of this order, the plaintiffs and/or counterclaim defendants listed in Exhibit A (attached hereto) are conditionally certified as representatives of an ved class. The class consists of all persons or entities w Possess or have asserted claims for punitive damages against Exxon and/or Exxon Shipping which arise from or relate in any way to the grounding of the EXXON VALDEZ or the resulting oil spill. The court appoints as counsel for the class the following: Kenneth L. Adams DICKSTEIN, SHAPIRO & MORIN 2101 “L” Street, N.W. Washington, D.C. 20037 Jerry S. Cohen COHEN, MILSTEIN, HAUSFELD & TOLL 1401 New York Avenue, N.W., Suite 600 Washington, D.C. 20005 Richard F. Gerry CASEY, GERRY, CASEY, WESTBROOK, REED & SCHENK 110 Laurel Street San Diego, Calif. 92101 Mathew D. Jamin JAMIN, EBELL, BOLGER & GENTRY 323 Carolyn Street 45 Kodiak, Alaska 99615 Amold Levin LEVIN, FISHBEIN, SEDRAN & BERMAN 320 Walnut Street, Suite 600 Philadelphia, Penn. 19106 Lloyd B. Miller SONOSKY, CHAMBERS, SACHSE, MILLER, MUNSON & CLOCKSIN 900 West 5" Avenue, Suite 700 Anchorage, Alaska 99501 Laddie Montague BERGER & MONTAGUE 1622 Locust Street Philadelphia, Penn. 19103 David W. Oesting DAVIS WRIGHT TREMAINE 550 West 7” Avenue, Suite 1450 Anchorage, Alaska 99501 i Brian B. O’Neill FAEGRE & BENSON 2200 Norwest Center 90 South Seventh Street Minneapolis, Minn. 55402 Lynn Lincoln Sarko KELLER ROHRBACK 1201 Third Avenue, Suite 3200 Seattle, Wash. 98101 Randall Scarlett BROWN, MONZIONE, FABRO, ZAKARIA : & SCARLETT 900 Montgomery Street San Francisco, Calif. 94133 Jeffrey Smyth ADOLPH & SMYTH Columbia Seafirst Center 701 First Avenue, 71" Floor Seattle, Wash. 98104 Melvyn I. Weiss MILBEG, WEISS, BERSHAD, HYNES & LERACH One Pennsylvania Plaza New York, N.Y. 10119 The court’s previous orders with respect to the appointment and duties of Liaison Counsel, Co-Lead Counsel, and Lead Trial Counsel shall remain in place and apply to the mandatory punitive damages class. Pursuant to Rule 23(c)(1), Federal Rules of Civil Procedure, this final approval and certification is conditional for the reason that there is presently pending an appeal by certain of the plaintiffs who believe that they are entitled to a remand of their claims to the Superior Court for the State of Alaska. This court denied such a remand. In the event that the latter decision should be reversed, the court would expect to re-examine the appropriateness of this certification. Certain of the class representatives listed in Exhibit A (those identified with an asterisk) are among the plaintiffs seeking remand of their claims to the Superior Court. In the event that this court’s decision denying remand is reversed as to such plaintiffs, they shall automatically cease to be class representatives, except upon their filing in this court a waiver of any right to remand to the Superior Court, in which case they shall be entitled to continue as class representatives.? 2 Following the hearing on April 8, the court asked counsel for defendants and Co-Lead Counsel for plaintiffs to agree upon a list of class representatives. The court is advised that Exhibit A reflects the result of that agreement, and that the condition stated in the text of this order with respect to class 47 Pursuant to Rule 2(c)(4)(A), Federal Rules of Civil Procedure, this certification is limited to the issues of: (1) whether Exxon and/or Exxon Shipping are liable to members of the class, or any of them, for punitive damages, and (2) if so, what amount of punitive damages should be assessed. ENTERED: 4/14/94 /s/ H. RUSSEL HOLLAND United States District Judge representatives who still seek remand is acceptable to those class representatives and to plaintiffs. 48 Name Alaska Sport Fishing Ass’n Alber, Louie E.* Artuner, Ahmet Baker, Grant C. Bailey, Jeffrey Bennett, William Bullock, Michael Wayne Butler, Robyne L. Carroll, Albert Ray* DEBRA LEE, Inc. Dew Drop, Inc. Dooley, Larry L.* Doumit, Mark Doumit, Steve Jensen, Douglas R. Johnson, Dennis G. Kompkoff, Donald P., Sr. Kopecky, Josef Lowell, Daniel Martusheff, Andrean E. Maxwell, Carol Ann Maxwell, Jacquelan Jill Maxwell, Robert A. Sr. McLenaghan, Michael* McMullen, Elenore E.* Meredith, Leslie R.* Native Village of Tatitlek Ogle, Leonard S. Olsen, Steven T. Pederson, August M., Jr. Redmond, Mary Lou Stanton, Joseph David Tisdall, Jean A. Wood, Darrell 49 CLASS REPRESENTATIVES (EXHIBIT A) Plaintiff No. 139 1761 1601 40 ‘ 828/4447 1412 COOK INLET PROCESSING a Division of Polar Equipment, Inc. Partial Release 1. FOR AND IN CONSIDERATION of the sum of TWO MILLION, EIGHT HUNDRED FIFTY THOUSAND AND 00/100 ($2,850,000.00) paid to the undersigned, Cook Inlet Processing, a division of Polar Equipment, Inc., (“Cook Inlet Processing’), a corporation organized pursuant to the laws of the State of Alaska, receipt of which is hereby acknowledged, and further acknowledging previous payments totaling $750,000.00, and in further consideration of the confidentiality, costs and fees letter of even date herewith, and attached hereto, for a cumulative payment amount of $3,600,000.00, and intending to be legally bound hereby, Cook Inlet Processing ABSOLUTELY AND IRREVOCABLY RELEASES AND DISCHARGES Exxon Corporation, Exxon Shipping Company, Exxon Pipeline Company, their directors, officers, employees and agents, and the M/V EXXON VALDEZ, its officers and crew (hereinafter collectively referred to as “Exxon’”), from all claims, demands and causes of action of every kind and character (whether known or unknown, or yet to occur), for all damages, costs, expenses, fees and all other injuries incurred during the calendar year 1989 and during 1990 up to the date of execution of this Partial Release (or which are incurred thereafter but relate to Cook inlet Processing’s operations and business activities during the calendar year 1989 and during 1990 up to the date of execution of this Partial Release),and all punitive damages of any kind arising at any time, that (a) are associated with or arise from the incident involving the M/V EXXON VALDEZ on March 23- 24, 1989, (b) arise out of any and all oil-containment or cleanup procedures that preceded or followed the incident involving the M/V EXXON VALDEZ, or (c) are based on representations made at any time prior to or during the course of any oil spill response procedures. The sum stated above is accepted by Cook Inlet Processing in full settlement of the claims described above. The undersigned understands that this sum was agreed upon in a compromise settlement and is not an admission of liability by any party. 50 2. In further consideration of the payment stated above, Cook Inlet Processing hereby assigns, sells, transfers and subrogates to Exxon Corporation, without limitation, any and all rights, claims, interests and causes of action, known se, settle or otherwise dispose of, in the name of Cook Inlet Processing or otherwise, the claims assigned herein, including the power and authority to release and discharge in the name of Cook Inlet Processing or otherwise, any persons, corporations or 3. In further consideration of the payment stated above, in the event the assignment of any or all of the rights, claims, interests and causes of action by Cook Inlet Processing to Exxon Corporation in paragraph 2 above shall be found for any reason to be inval unenforceable, Cook Inlet hereby covenants and agrees not to execute or to seek to enforce any judgment against any party for any such right, claim, interest, or cause of action which was sought to be assigned by Cook Inlet Processing to Exxon in paragraph 2 above. forms executed on August 29, March 9, 1990. 51 Executed this 22™ day of May, 1990. COOK INLET PROCESSING, INC. A division of Polar Equipment, Inc. /s/ /s/ Witness Signature Howard M. Baker Printed Name President, Polar Equipment, Inc. /s/ /s/ Witness Signature Mike Shupe Printed Name 52 Secretary, Polar Equipment, a Corporate Seal 53 IN THE SUPERIOR COURT FOR THE STATE OF ALASKA THIRD JUDICIAL DISTRICT AT ANCHORAGE COOK INLET PROCESSING, a division of Polar Equipment, Inc., an Alaska corporation, Plaintiff, EXXON CORPORATION, EXXON COMPANY USA, and EXXON SHIPPING COMPANY, ) ) ) ) ) ? ) VS. ) ) ) ) Defendants. ) ) Case No. 3AN-91-2445 Civil COMPLAINT COMES NOW the plaintiff, Cook Inlet Processing, a division of Polar Equipment, Inc. (““CIP’’), by and through its attorneys of record, Birch, Horton, Bittner and Cherot, and for its Complaint hereby states and alleges as follows: l. Plaintiff CIP is a division of Polar Equipment, Inc., an Alaska corporation. CIP maintains offices in Nikiska, Kodiak and Anchorage, Alaska. Polar Equipment, Inc. has paid its biennial corporation tax last due and filed its biennial report for the last reporting period and is fully entitled to maintain this action. 54 Exxon Shipping Company and/or Exxon Company USA and/or Exxon Corporation is the owner of the M/V : into Prince William Sound, Alaska on March 24, 1989 and thereafter (“Exxon oil spill”). Exxon Company USA and/or Exxon Corporation was the owner of the oil aboard the Exxon Valdez. Defendants Exxon Shipping Company, Exxon Company USA, and Exxon Corporation are liable to plaintiff for damages resulting from the Exxon oil ill under the laws of the state of Alaska and other applicable law. a Plaintiff suffered a as a result of the Exxon oil efendants, in May, 1990, defendants paid plaintiff valuable consideration and plaintiff executed a partial release in favor of defendants and others for all damages suffered by plaintiff through approximately May, 1990. By agreement of plaintiff and defendants, however, plaintiff did not release defendants for any damages suffered by plaintiff after May, 1990. 4. At some future time, the return of salmon or other fish to the Upper Cook Inlet, Kodiak, or Prince William Sound fisheries in the state of Alaska may be adversely affected as a direct or proximate result of the Exxon oil spill, which would cause plaintiff damage. Or plaintiff may suffer some damages at a future date as a result of the Exxon oil spill. Plaintiff is entitled to a declaratory judgment that Wherefore, plaintiff prays for the following relief: 55 1. That this court enter a declaratory judgment to the effect that should plaintiff incur some damage in the future from the Exxon Valdez oil spill, plaintiff is not barred by the statute of limitations from bringing such action against defendants at such dates in the future as the court may determine; 2. In the alternative, that judgment be entered in favor of plaintiff against defendants, jointly and severally, in an amount in excess of $50,000 to compensate plaintiff for the future damages to be sustained by plaintiff; 3. That the court award plaintiff prejudgment interest, costs, and Rule 82 attorney fees; 4. That the court award such further relief as it deems just and equitable. DATED this 26" day of March, 1991, at Anchorage, Alaska. : BIRCH, HORTON, BITTNER and CHEROT Attorneys for Plaintiff By: /S/ Peter A. Galbraith 56 AGREEMENT AMONG COUNSEL REGARDING JOINT PROSECUTION, SETTLEMENT, AND DAMAGES ALLOCATION AGREEMENT 1. This agreement is entered into among counsel representing all or virtually all plaintiffs whose claims have been asserted in the consolidated Exxon Valdez Oil Spill Litigation in the United States District Court for the District of Alaska (In Re the Exxon Valdez, Case No. A89-095-CV (HRH)) and the Superior Court for the State of Alaska (In re Exxon Valdez Oil Spill Litigation, Case No. 3AN-89-2533 Civil), for the purpose of maximizing the recovery from Exxon on behalf of all plaintiffs. 2. ‘It is agreed by and among the undersigned counsel as follows: A. All recoveries from defendants by any Signatory Plaintiff or group of Signatory Plaintiffs, whether by settlement or trial, will be shared among Signatory Plaintiffs in accordance with the allocation matrix attached hereto as Attachment | (including any revisions pursuant to paragraph B below). B. The Allocation Committee and the casewide Executive Committee appointed by the presiding judges in federal and state court pursuant to Pretrial Order Nos. 6 (state) and 9 (federal) may approve revisions to Attachment | which do not reduce the aggregate allocated share of any group of Signatory Plaintiffs identified in Attachment 1 below that percentage share of the aggregate allocated share set forth for such plaintiff group in Attachment 2. In the event that this Joint Prosecution, Settlement, and Damages Allocation Agreement is submitted to a court for approval in connection with either the continuing litigation or a settlement agreement in the consolidated Exxon Valdez Oil Spill Litigation identified above and the court’s approval is conditioned on a change in the aggregate allocated share of a pla.ntiff group which reduces the percentage share of the aggregate allocated share for such plaintiff group below that percentage share of such plaintiff group set forth in 57 Attachment 2, then the adversely affected plaintiff group shall have the right to withdraw from this agreement. C. The undersigned counsel will use their best efforts to persuade any court which presides over the distribution of recoveries referred to in paragraph | above, to abide by this agreement and the reasonable terms of any settlement agreement with the defendants, and will refrain from taking any action to undermine the implementation of this agreement or to challenge its fairness and appropriateness. D. This agreement supercedes the Joint Prosecution, Settlement, and Damages Allocation Agreement executed by plaintiffs’ counsel in or about July 1994. 3. This agreement may be executed in several counterparts and by facsimile and, as executed, shall constitute one agreement, binding on all Signatory Plaintiffs hereto, even though all Signatory Plaintiffs do not sign the original or the same counterpart. Brian O'Neill Dated: _—4/18 , 1995. Dated: , 1995. Dated: , 1995. Dated: , 1995. Dated: , 1995. _ Dated: , 1995. Dated: , 1995. Dated: , 1995. Dated: , 1995. Dated: , 1995. gs Dated: Dated: 59 ATTACHMENT 1 CURRENT ALLOCATED AND “FLOOR” SHARES OF EXXON RECOVERIES Case Fund 2.83% Non-Signatories’ Share 5.00% Signatories’ Share 92.17% Signatory Current Share “Floor” Share Plaintiffs Signatories’ Share of Signatories’ Share* FISHERIES Oiled 77.21% 77.21% Unoiled 2.31% 2.31% Tenders 0.64% 0.64% Fisheries Total 80.16% 80.16% AQUACULTURE ASSN’S 2.12% 1.91% BUSINESSES 0.31% 0.28% CANNERY WORKERS _ 00.59% 0.53% LANDOWNERS 3.95% 3.56% MUNICIPALITIES 2.42% 2.18% NATIVES 7.37% 6.64% NATIVE CORPORATIONS 0.73% 0.65% PROCESSORS 2.33% 2.10% RECREATIONAL USE 0.01% 0.01% GRAND TOTAL 100% 98.02% *”Floor” share equals 90% for non-fishing plaintiffs. ATTACHMENT 2 % SHARE FISHERIES 80.16% 60 AQUACULTURE ASSOCIATIONS BUSINESSES CANNERY WORKERS LANDOWNERS MUNICIPALITIES NATIVES NATIVE CORPORATIONS PROCESSORS RECREATIONAL USE GRAND TOTAL 61 98.02% David W. Oesting DAVID WRIGHT TREMAINE 550 West 7™ Avenue, Suite 1450 Anchorage, AK 99501 (907) 257-5300 Co-Lead Counsel for Plaintiffs Lloyd B. Miller SONOSKY, CHAMBERS, SACHSE, MILLER, MUNSON & CLOCKSIN 900 West 5" Avenue, Suite 700 Anchorage, AK 99501 (907) 258-6377 Liaison Counsel for Plaintiffs Honorable H. Russel Holland IN THE UNITED STATES DISTRICT COURT | FOR THE DISTRICT OF ALASKA In re: The EXXON VALDEZ Case No. A89-095- CV (HRH) (Consolidated) THIS DOCUMENT RELATES TO ALL CASES a ee a a PLAINTIFFS’ MEMORANDUM IN SUPPORT OF JOINT MOTION OF PLAINTIFFS AND DEFENDANTS FOR PRELIMINARY APPROVAL OF PHASE IV SETTLEMENT, PLAINTIFFS’ MOTION FOR PRELIMINARY APPROVAL OF PLAN OF ALLOCATION OF RECOVERIES OBTAINED BY PLAINTIFFS IN LITIGATION ARISING FROM THE EXXON VALDEZ OIL SPILL, AND THE ORDERS REQUESTED IN THOSE MOTIONS SCHEDULING A 62 HEARING ON FINAL APPROVAL OF THE PHASE IV SETTLEMENT AND PLAN OF ALLOCATION, AND AUTHORIZING NOTICE TO CLASS MEMBERS TABLE OF CONTENTS Section Page(s) TABLE OF AUTHORITIES ili I. INTRODUCTION 1 RELEVANT FACTS | 5 A. THE PHASE IV SETTLEMENT 5 B. THE PLAN OF ALLOCATION 9 1. Genesis of The Plan of Allocation: The Joint Prosecution Agreement 9 2. The Plan of Allocation 13 a) Development of An Overall Approach to Allocation } 13 b) Claim Categories | 15 c) The Damage Matrix 16 (1) Process Followed in Developing the Damage Matrix 16 (ii) Claims Valuation 18 (ili) Percentage Shares 20 d) Virtually All Plaintiffs Have Agreed to the Plan of Allocation 24 C. DISTRIBUTION OF RECOVERIES AMONG 63 PLAINTIFFS AND CLASS MEMBERS 25 II. THE COURT SHOULD APPROVE PRELIMI- NARILY THE PHASE IV SETTLEMENT AND THE PLAN OF ALLOCATION AS FAIR, ADEQUATE AND REASONABLE 27 A. THE STANDARDS FOR PRELIMINARY APPROVAL OF SETTLEMENT AGREEMENTS 28 B. THE PHASE IV SETTLEMENT IS FAIR, REASONABLE AND ADEQUATE 32 C. THE PLAN OF ALLOCATION IS FAIR, REASONABLE AND ADEQUATE 34 D. THIS IS AN APPROPRIATE TIME FOR THE COURT TO CONSIDER APPROVAL OF THE PLAN OF ALLOCATION 35 III. PROPOSED NOTICE TO CLASS MEMBERS AND TIMETABLE 36 A. THE COURT SHOULD AUTHORIZE THAT NOTICE BE GIVEN TO THE CLASS 36 B. PROPOSED NOTICE 37 C. PROPOSED TIMETABLE 38 IV. CONCLUSION 39 TABLE OF AUTHORITIES CASES Page(s) In re Ambase Corp. 1995 U.S. Dist. Lexis 15516 at *4 (S.D.N.Y. Oct. 20, 1995) (90 Civ. 2011 (CSH)) 28 64 Armstrong v. Board of Sch. Directors, 616 F.2d 305 (7" Cir. 1980) In Re Beef Indus. Antitrust Lit bi 607 F.2d 167 (5® Cir. 1979) In re Cement & Concrete Antitrust Litigatio 817 F.2d 1435 (9" Cir. 1987), rev'd on other grounds, 490 U.S. 93 (1982) 38 In re Chicken Antitrust Litigation, 669 F.2d 228 (5® Cir. 1982) , 3, 31,32, 33 Class v. City of Seattle, : 955 F.2d 1268 (9" Cir. 1991), cert. denied sub nom., Hoffer v. City of Seattle, alin . 5 AOS a ae (1992) 3, 28, 30, 31, 34 In re Corrugated Container Antitrust Liti gation, - 643 F.2d 195 (5" Cir. 1981) In re Corrugated Container Antitrust Litigation, 659 F.2d 1322 (5" Cir. 1981), cert. denied sub nom., CFS Continental, Inc. v. Adams Extract Co., 456 U.S. 998 (1982) “pies 31 Detroit v. Grinnell Co * 356 F.Supp. 1380 (S.D.N.Y. 1972), aff'd in relevant part, 495 F.2d 448 (2d Cir. 1974) 29 In re Equity Funding Corp. of Am. Sec. Litig. 603 F.2d 1353 (9® Cir.1979) 28, 35, 37 In re Fortune Sec. Litig., 1988 U.S. Dist. Lexis 18505 (N.D. Cal. May 10, 1988) In Re Four Seasons Sec. Laws Litig., 58 F.R.D. 19 (W.D. Okla. 1972) 65 In re GCC Richmond Works Cases, No. 2906 (Cal. Sup. Ct., Contra Costs Cty., Nov. 13, 1995) 32 Kirkonan v. Bonelli, 695 F.Supp. 446 (M.D. Cal. 1988) 30 Lai v. Anthony, [1991 Transfer Binder] Fed. Sec. L. Rep. (CCH) § 96,174 (D. Haw. July 5, 1991) 32 In re Mid Atlantic Toyota Antitrust Litig., 564 F.Supp. 1379 (D. Md. 1983) 29 Officers for Justice v. Civil Service Commission of San Francisco, 688 F.2d 615 (9® Cir. 1982), cert. denied, 459 U.S. 1217 (1983) 27, 30 Paul, Johnson, Alston & Hunt v. Graulty, 886 F.2d 268 (9® Cir. 1989) 32 Philadelphia Housing Auth. v. American Radiator & Standard Sanitary Corp., 322 F.Supp. 834 (E.D. Pa. 1971), aff'd sub nom., Ace Heating and Plumbing Co. v. Crane Co., 453 F.2d 30 (3d Cir. 1971) 30 Roberts v. Heim, 1991 U.S. Dist. Lexis 17782 (N.D. Cal. August 28, 1991) 35 Suffolk v. Long Island Lighting Co.., 710 F.Supp. 1422 (E.D.N.Y. 1989) aff d in relevant part, 907 F.2d 1295 (2d Cir. 1990) 29 Weinberger v. Kendrick, 698 F.2d 61 (2d Cir. 1982) 29, 30 MISCELLANEOUS 66 Manual for Complex Litigation (Third) § 30.41 28 Newberg on Class Actions (3 ed. 1991) 29 = mo RNP ET PHI MDs beri? PRAT NO aha Ba pa SUL ako ; RETR er onten IE NaCI ONS NSD RMIT : 67 I. INTRODUCTION Plaintiffs are pleased to inform the Court that, through agreement with Exxon on the Phase IV Settlement and among plaintiffs on the Plan of Allocation, virtually all the claims pending before the Court in this consolidated litigation are now ready for resolution. The Phase IV Settlement will dispose of all remaining compensatory damage claims, other than the claims of a handful of pro per plaintiffs. The Plan of Allocation will determine, by a percentage share formula, the amount each category of claimants will recover on all federal or state court claims arising out of the Exxon Valdez oil spill, regardless of whether the claims involve compensatory or punitive damages, and regardless of whether the funds involved already have been recovered or may be recovered in the future. ! In consequence, plaintiffs believe that upon final approval of the Phase IV Settlement and Plan of Allocation, it will be appropriate for the Court to enter a final judgment permitting appeal of the punitive damage verdict and other matters which must be resolved by the Ninth Circuit before this almost seven-year-old litigation can be concluded. Simultaneous with the process of seeking the Court’s approval of the Phase [V Settlement and the Plan of Allocation, plaintiffs also will seek the entry of final judgment in these cases. Plaintiffs ask the Court to preliminarily approve the Phase IV Settlement so that notice of a hearing on final approval can be provided to the class members. The settlement agreement provides for dismissal of virtually all Phase IV compensatory damage claims remaining in this Court for a total settlement consideration of $3,507,981. 1 The Phase IV Settlement Agreement and the Plan of Allocation have been filed with the Court and, in addition, are Exhibits A and D, respectively, to the Affidavit of David W. Oesting being filed herewith. 68 Offsets from prior payments to claimants will result in a lack of any cash payment from Exxon to the settling plaintiffs specifically with respect to the Phase IV claims. Nevertheless, the settlement agreement is fair, reasonable and adequate. The decision to settle rather than try the Phase IV claims will greatly expedite appellate resolution of the issue on which all plaintiffs have the greatest interest — the status of the more than $5 billion verdict for punitive damages. Furthermore, by conditioning their acceptance of the Phase IV Settlement on Court val of the Plan of Allocation, the Phase IV plaintiffs have traded off the risk and delay inherent in the Phase IV trial for a guaranteed participation in recoveries that are ready for distribution, and participation in the punitive and compensatory damage awards if they are sustained on appeal. Many decisions hold that a court will not second guess the decision of informed, expert counsel that their clients’ interests are well served by giving up claims of uncertain value for a guaranteed Participation in a settlement fund.2 In this case, counsel’s judgment is confirmed by the agreement of substantially all Phase IV direct action plaintiffs in addition to the class representatives. Since the Phase IV Settlement contemplates approval of the Plan of Allocation, that Plan is the linchpin of plaintiffs’ efforts to finally resolve all the claims before the Court. Plaintiffs submit that the Plan is eminently fair and reasonable, and should be preliminarily approved by the Court for the purpose of giving notice to the affected class members. 2 See, e.g., Class v. City of Seattle, 955 F.2d 1268, 1287-8 (9® Cir. 1991), cert. denied sub nom., Hoffer v. City of Seattle, U.S. _, 113 S.Ct. 408 (1992); In re Corrugated Container Antitrust Litigation, 643 F.2d 195, 221 (5™ Cir. 1981). See also, In re Chicken Antitrust Liti ation, 669 F.2d 228, 238 (5" Cir. 1982). 69 The Plan is predicated upon a joint prosecution agreement which was entered into by all but a few of the individual plaintiffs in the litigation prior to commencement of Phase II of the trial, together with a further joint prosecution agreement also signed on behalf of virtually all plaintiffs in the Spring of 1995. Over a period of more than two years, the Plan of Allocation was developed and refined by an Allocation Committee of plaintiffs’ counsel, working in conjunction with plaintiffs’ Executive Committee. Together those counsel represent every category of claimant affected by the Plan. They organized and conducted an intense process of information gathering and arm’s-length negotiations among plaintiffs’ counsel which ultimately culminated in the Plan In its final form, the Plan of Allocation has been approved by plaintiffs’ Lead Counsel and Casewide Executive Committee, and has been agreed to by all class representatives and all direct action plaintiffs in both the federal and state court consolidated litigations, except for a few individual plaintiffs.3 In support of these motions, plaintiffs are filing an Affidavit of David W. Oesting (the “Oesting Affidavit’), Co- Lead Counsel for plaintiffs and a member of the Allocation and Executive Committees. That Affidavit describes the historical genesis of the Plan of Allocation, the make up of the Allocation Committee, the information which the Committee obtained and considered, the criteria which it employed, the procedures it followed, and the conclusions which it reached. In addition, the Plan of Allocation itself describes in great detail the various claim categories and the methodology and bases upon which recoveries will be allocated among claim categories pursuant to the Plan. 3 The Plan provides that the allocable share (as determined by the Court) of those few individual plaintiffs who have not agreed to be bound by the Plan of Allocation would be taken “off the top” and thus would not require any change in the percentage share allocation applicable to signatories. 70 For the reasons given below and in the Oesting Affidavit, the Court should preliminarily approve the Phase IV Settlement and the Plan of Allocation and should enter an RELEVANT FACTS A. The Phase IV Settlement aS LY Settiement In Phase IV, the parties were scheduled to try the compensatory claims of commercial fishermen whose claims were not tried as a part of Phase ITA, Native Alaskans who had opted out of the Native Class Settlement, Landowners, certain Native Corporations and others.4 Virtually all these “Phase IV” plaintiffs have agreed to settle their untried claims against the Exxon defendants,> conditioned upon judicial approval of the Plan of Allocation. 5 As discussed below, the only non-participating Phase [V plaintiffs who have not already resolved their Phase [V claims in separate settlements are the “Seattle Seven” Processors and five pro per plaintiffs. 71 The Phase IV Settlement Agreement provides for the dismissal with prejudice of all Phase IV compensatory damage claims remaining in this Court for a total of $3,507.981.6 Exxon is entitled to offset against the Phase IV Settlement previous payments to plaintiffs from the Alyeska settlement, Exxon Claims program, and TAPL Fund. Asa result of these offsets, there will be a zero net recovery. While the Phase IV Settlement will not, in itself, provide a cash fund for distribution to the settling plaintiffs, the rationale supporting that settlement is sound. Trying the Phase IV claims would be complex, time co and expensive, and would significantly delay the point at which all plaintiffs could obtain entry of final judgment and final determination on appeal of their right to recover the punitive damages awarded by the jury, in which recovery the Phase IV plaintiffs will share. 7 Furthermore, there were substantial risks and uncertainties concerning the ultimate outcome of these various claims at trial. For each of the Phase IV categories, Exxon stated that it would present evidence and argument that the claimants had incurred little or no damage from the oil spill, and that any damage that had occurred had already been compensated. While plaintiffs would have presented evidence in support of their claims, the risks and uncertainty with respect to the ultimate outcome at trial was evident to plaintiffs’ counsel and further confirmed the wisdom of accepting the Phase IV Settlement and moving forward much 6 The Phase IV Settlement does not bar the settling plaintiffs from appealing the Court’s summary judgment rulings, seeking remand to state court, or pursuing claims foreclosed by the Court which the Ninth Circuit or state court may allow. 7 Among other things, in light of an issue as to whether interest runs on the punitive damage verdict prior to final judgment, plaintiffs’ counsel were concerned that delay in entry of a final judgment might cost plaintiffs over $268 million per year in lost interest. 72 more quickly to obtain an appellate determination on the punitive damage verdict and other important matters. The 7 from the Phage gee tight to withdraw from the Phase IV Settlement if the of Allocation is not approved. Consequently, the Phase IV Settlement represents a very rational ff of uncertain Phase IV Claims for the greater benefit of inclusion in the presently in hand, as well as a fair percentage of aggregate future recoveries for punitive and compensatory damages. An important consideration leading the Phase IV plaintiffs to settle on these terms was the belief that resolving final judgment enabling the parties to Proceed with appellate review of the punitive damages verdict and other issues. native opt-outs;8 (b) the “Seattle Seven” seafood processors and related entities, which previously settled and released their claims against Exxon and subsequently brought a second suit for damages allegedly not encompassed in their 8 These include approximately 717 Natives falling within the Native Class definition who opted out of the Native Class. On October 12, 1995, these "direct action” Natives settled their claims for the commodity value of lost subsistence 73 first action; 9 and (c) certain plaintiffs in pro per, i.e., Tom LaKosh, Daniel DeNardo, Donald Ferguson, Rainbow King ~ Lodge, and W. Findlay Abbott. Even the above short list of exclusions from the Phase IV Settlement understates the extent to which that settlement effectively eliminates all but a handful of compensatory damage claims remaining in this Court. The Court has already given preliminary approval to the Native opt-Out settlement, and that group of plaintiffs has agreed to participate in the Plan of Allocation. The “Seattle Seven” seafood processors group separately settled the claims which they initially brought. Furthermore, under the law of the case, the seafood processors have no viable claim for compensatory damages in light of the Court’s ruling in Order No. 174, Clerk’s Docket No. 4444, that Robins Dry Dock precludes such claims (subject, of course, to their nght to pursue this issue on appeal). This leaves only five pro per plaintiffs in a posture where their compensatory damage claims still need to be resolved. Plaintiffs believe those claims to be de minimus, and submit that those claims should not stand in the way of entry of final judgment allowing an appeal to proceed on the punitive damage and other issues. B. The Plan of Allocation 1. Genesis of The Plan of Allocation: The Joint Prosecution Agreement 9 That group of plaintiffs includes Icycle [sic] Seafoods, Inc.; Astoria Warehousing, Inc.; Peter Pan Seafoods, Inc.; Peninsula Salmon, Inc.; Seven Seas Corporation; Stellar Seafoods, Inc.; Washington Fish & Oyster Company; Ocean Beauty Alaska, Inc.; Portland Fish Group, Inc.; Wards Cove Packing Company; Alaska Boat Company; and North Pacific Processors, Inc. 74 As plaintiffs’ counsel prepared for trial in 1993, plaintiffs’ court-appointed, Casewide Executive Committee concluded that it was essential to uncouple allocation of recoveries from the fortunes of individual plaintiffs at trial. This was the only way to ensure a unified effort by the myriad plaintiffs towards their common goal of maximizing total recoveries. Plaintiffs’ optimal trial strategy was to present the jury a focused, hard-hitting case emphasizing the defendants’ reckless wrongdoing and overall harm to the people, economy and environment of Alaska. The Executive Committee elected to try before a single jury the punitive damage cases against the defendants, and compensatory damage cases of Native communities injured by the oil spill, and salmon and hearing fishermen in the worst-affected “oiled” fishing areas — Chignik, Upper Cook Inlet, Kodiak and Prince William Sound. Compensatory damage cases of other federal court plaintiffs were slated for later trial phases. Development of a “joint prosecution agreement” under which plaintiffs would pool all recoveries in the consolidated litigation and share those recoveries on a fair and reasonable basis was a crucial part of the process that enabled plaintiffs to proceed with such a practical, effective trial plan, which subordinated the interests of each group of plaintiffs to the collective interests of all. After extensive negotiations and discussions, in July 1994, counsel representing virtually all plaintiffs whose claims have been asserted in the federal and state court Exxon Valdez Oil Spill Litigation signed a document entitled “Joint Prosecution, Settlement, And Damages Allocation Agreement” (hereafter the “Initial Joint Prosecution Agreement’) (Exhibit F to the Oesting Affidavit). That Agreement confirmed an oral agreement which had been reached by plaintiffs’ counsel prior to the commencement of Phase IIA of the trial. The agreement provided that all recoveries by any plaintiff or group of plaintiffs, whether by settlement or trial, would be shared among all plaintiffs in accordance with an allocation matrix attached to that 75 document.!9 The Initial Joint Prosecution Agreement further provided that the undersigned counsel would use their best efforts to persuade their clients (and any court which presided over the distribution of such recoveries) to approve the agreement. Subsequent to execution of the Initial Joint Prosecution Agreement, all the signatory counsel confirmed to plaintiffs’ Co-Lead Counsel that their clients agreed in principle with the Initial Joint Prosecution Agreement. During the spring of 1995, while negotiations on a possible Phase IV Settlement were underway, the Initial Joint Prosecution Agreement was modified and superseded by an “Agreement Among Counsel Regarding Joint Prosecution, Settlement, And Damages Allocation Agreement” (the “Joint Prosecution Agreement”) (Exhibit G to the Oesting Affidavit). That document was signed by counsel representing virtually all plaintiffs whose claims have been asserted in the consolidated litigation in federal or state court. Consistent with the Initial Joint Prosecution Agreement, it provided that all recoveries by any signatory plaintiff or plaintiff group, whether by settlement or trial, would be shared among signatory plaintiffs in accordance with the allocation matrix attached to that document as Attachment 1. That allocation matrix reflected preliminary damage estimates for the various Claim Categories based upon the information which was then available. All parties to the agreement recognized that the damage estimates and percentage shares reflected in the matrix were subject to refinement based on information which had not yet been received or developed. Consequently, the Joint Prosecution Agreement expressly authorized the Allocation Committee and the Casewide Executive Committee to approve revisions of the allocation matrix set forth in Attachment 1, so long as those revisions did not reduce the aggregate allocated share 10 Plaintiffs would be entitled to participate under the matrix without regard to whether their ciaims had been dismissed and were subject to appeal at the time of payment. 76 ERNE REID OIE / ee Phot eeAT on tiety =r SY TTT NR i ag ar cd fos Ni ' a of any group of signatory plaintiffs below a “floor” percentage set forth for that group in Attachment 2 to the Joint Prosecution Agreement, | | The matrix revisions contemplated by the Joint Prosecution Agreement were made by the Allocation Committee, have been agreed to by plaintiffs’ counsel, and are reflected in the Plan of Allocation presented here for Court approval. !2 The Joint Prosecution Agreement is, of course, ‘a binding contractual agreement among its signatories. The parties to that agreement gave up their right to keep for themselves whatever damages would be recovered on their own claims. In return, they received ample Consideration in the form of the payments which will be forthcoming to each Signatory and class member under the Plan of Allocation. In addition, the signatories also benefited from the Joint Prosecution Agreement through the enhanced ability of plaintiffs’ counsel to present a concise, effective case at trial which focused on the strongest of plaintiffs’ claims. Insofar as the signatories include representatives of certified classes, the Joint Prosecution Agreement is binding upon the absent class members subject to approval of the Court. In substance, that approval will be rendered if the Court approves the Plan of Allocation, since the Signatory I] Specifically, the Joint Prosecution Agreement sets forth “floor” shares below which matrix shares of major Claim Categories (i.e., all Claim Categories except for individual commercial fisheries) could not fall. These floor shares on matrix damage quantified as of April 1995. The certainty afforded by the floor shares was necessary to obtain consent for settlement of the Phase IV federal court claims. 12 The Plan of Allocation does not reduce the allocated share of any group of signatory plaintiffs below their applicable “floor”. 77 plaintiffs agreed to be bound by that Plan in the Joint Prosecution Agreement. 2. The Plan of Allocation (a) Development of An Overall Approach To Allocation After extensive discussions, plaintiffs’ counsel concluded that the most equitable way to allocate recoveries among plaintiff groups, both punitive and compensatory damages, was in proportion to plaintiffs’ quantified damages as fairly determined by plaintiffs themselves. Plaintiffs’ counsel also agreed that it was fair to include, at a discount, claims by plaintiffs who had in fact suffered loss as a result of the spill, but whose claims had been dismissed for lack of legal causation. These dismissed plaintiffs had rights of appeal, and many had made large contributions to the prosecution of the litigation. Alternative schemes for allocation of punitive damage ie recoveries were considered and rejected as less fair. For example, per capital distribution among all plaintiffs would not fairly reflect the weight of the harm caused by the spill, given its huge geographic reach and the widely disparate types and degrees of loss. Allocation on the basis of jury verdicts would unfairly force small groups of plaintiffs (like a single fishery or Native community) to bear the entire risk of adverse trial results in their particular cases, most of which, uncoupled from the Phase I and III trials, would not have had the benefit of a jury that had considered evidence of liability for punitive damages as well as evidence of compensatory damages. Before the actual recoveries were known, it was impossible to determine what plaintiffs’ absolute dollars shares would be under a plan of allocation. However, percentage shares of ultimate recoveries could be derived, at least for broad categories of plaintiffs. Consequently, plaintiffs’ counsel agreed to construct a “Damage Matrix” for broad categories of damage claims (“Claim Categories”). 78 It was agreed that for each Claim , “Matrix Damages” would be determined by quanti actual damages suffered as a proximate result of Valdez oil spill, and discounting them for litigation risk. Each Claim Category’s “Matrix Share” bag! be calculated as the ratio, expressed as a tage, of the claim Category Matrix Damages to the sum total of all Claim Categories’ Matrix Damages. Each Claim Category’s share would be derived by applying its Matrix Share to all recoveries including punitive and compensatory damages, whether obtained from the Exxon Defendants, Alyeska defendants, or Trans Alaska Pipeline Liability (“TAPL”) Fund. Consistent with that approach, the Plan of Allocation applies the Matrix Shares not only to the Native and of their claims, and this litigation will be in a Position to Commercial Fisheries (with numerous subdivisions based on fishery and gear type), Aquaculture Associations, Area Businesses, Cannery Workers, Municipalities, Alaska natives, Alaska Native Corporations, Personal Injury, Personal Property, Processors, Real Property, Recreational Users, Subsistence Users, and Tenders. 79 of damage, the Plan specifies the claim category involved. On the other hand, where the same Claimant has damages falling within different claim categories (hence no double counting would be involved), the claimant can participate separately within each of the applicable claim categories. (C) The Damage Matrix (i) Process Followed In Developing The Damage Matrix Plaintiffs’ court-appointed Co-Lead Counsel and Executive Committee have overseen the design and construction of the Damage Matrix, and appointed an Allocation Committee, comprised of direct and class action counsel, to fairly and consistently quantify Matrix Damages and determine Matrix Shares. As described in the Oesting Affidavit, the Allocation Committee began its work on April 1, 1993. Since then it has been actively involved in planning and organizing the work necessary to formulate an intelligent and fair allocation plan, obtaining and reviewing pertinent data, working up initial valuations of claim category damages, circulating © those initial valuations, engaging in extensive discussions with interested persons concerning those valuations, and finalizing the valuations in the Damage Matrix. In addition, the Committee has been working throughout its existence to assure that all or virtually all the plaintiffs involved in the consolidated federal and state court litigations understood and would agree to participate in the plan. The Allocation Committee reviewed extensive information submitted by counsel on behalf of their clients, as well as trial proof, expert studies, TAPL Fund reports, data and reports from agencies of the State of Alaska, claims data submitted in connection with the Alyeska Settlement, and other information The Committee has consulted with direct action plaintiffs, class representatives, other individual plaintiffs, adhoc committees of plaintiffs, and plaintiffs’ counsel. Strict quality control standards and consistent 80 available information. The Hom Affidavit confirms that, among themselves, the members o i Committee represent every category of claimant covered by represented vigorously and effectively through arm’s-length discussions and negotiations by the members of the Allocation Committee. Reasonable consideration has been by any conflict of interest. In Consequence the outcome of the Committee’s work is a fair and balanced allocation Program. See generally, Oesting Affidavit TT 31-43. treatment to all litigants while enormously expediting the completion of these consolidated proceedings. (ii) Claims Valuation As discussed above, plaintiffs’ counsel concluded that the most equitable way to divide recoveries is in proportion to each Claim Category’s reasonable compensatory damage claim as evaluated jointly by plaintiffs’ counsel. The Plan of Claim Categories, the types of plaintiffs and class members asserting such claims, and the bases on which damages were determined, including any discount for risk. 81 As one example of the approach taken in the Plan of Allocation to damage valuation, matrix damages for the Oiled Fishery Claim Categories include: income from commercial fishing operations lost as a result of diminished price or harvest; diminished value of limited-entry commercial fishing permits and fishing vessels; injury to quality of life and emotional stress; and repair and replacement of oiled vessels, nets, skiffs and other equipment. Non-economic damages of commercial fishermen and economic damages to the subsistence way of life of Native Alaskans are discounted by 50%, and permit - and vessel devaluation losses are discounted by one-third. For a more detailed explanation, see Plan of Allocation at p. 14, n.23-24; p. 15, n.25. As another example, matrix damages for the Real Property Claim Category are limited to loss in property value caused by the oil spill, plus expenses of protecting property from the spill, cleanup and restoration. Property devaluation losses are discounted by 50%, while costs of protection, cleanup and restoration are not discounted.!3 To qualify for inclusion in the Real Property Claim Category, a claim must derive from damage to real property which lies within “Oil- Affected Areas,” defined generally as areas encompassed by the shaded portions of a map (attached to the Plan of Allocation) issued by the State of Alaska Department of - Natural Resources. For a more detailed discussion, see Plan of Allocation, p. 25. The above are merely two examples of the informed and balanced approach followed by the Allocation Committee in 13 Excluded from the Real Property Claim Category are claims for economic losses suffered by commercial enterprises operated on real property, which are included in the Claim category which is appropriate for the type of commercial operation. Also excluded from the Real Property Claim Category are claims for non-economic loss, such as emotional distress, hedonic damages, and invasion of privacy. 82 deriving fair and reasonable damage figures. The Plan itself spells out in great detail the criteria applied and the conclusions reached with respect to each of the many Claim Categories which it covers. (iii) Percentage Shares In the Plan of Allocation, the e figure for each Claim Category has been totaled, and compared to the aggregate damage figure for all Claim Categories to determine the percentage of aggregate damages attributable to each Claim Category.!4 The percentage figure for each Claim Category constitutes the percentage of total recoveries in the litigation allocable to that Claim Category. The percentage shares of each of the Claim Categories as set forth in the Plan of Allocation are as follows: MATRIX SHARES CLAIM CATEGORY Aquaculture Associations 1.91% Businesses 0.28% Cannery Workers 0.53% Commercial Fisheries — Oiled 78.73% 14 At the time of the Alyeska settlement, the Court approved a plan of allocation for that settlement fund which was based on the information and experts’ reports which were available at that time. In light of the additional information which subsequently became available, the Allocation Committee has adjusted many of the percentage shares allocated to Claim Categories in the Alyeska settlement matrix. : Plaintiffs have been informed that if the percentage of total recoveries allocated to their Category in the Plan of Allocation is different from the share they received in the Alyeska settlement, future distributions will be adjusted to provide them with an aggregate allocation (including the Alyeska payment) consistent with the Plan of Allocation. 83 Commercial Fisheries — Unoiled 2.31% Municipalities 2.18% Natives 6.64% Native Corporations — Signatories 0.65% Personal Injury 0.14% Personal Property 0.014% Processors 2.099% Real Property 3.558% Recreational use 0.008% Subsistence 0.008% Tenders 0.940% GRAND TOTAL , 100.00% Within the categories of “Commercial Fisheries Oiled” and “Commercial Fisheries Un-Oiled,” the Plan includes the following further breakdown for specific subsets of damage claims: MATRIX SHARES OF OILED FISHERY CLAIM CATEGORIES CHIGNIK Salmon Seine 4.96% Area Total 4.96% COOK INLET Dungeness crab 0.084% Miscellaneous Finfish 0.004% Pot Shrimp 0.015% Roe Herring (Lower Cook Inlet only) 0.294% Salmon Dnift 15.2% Salmon Seine 2.32% Salmon Set 6.25% Tanner crab 0.136% Area Total 24.30% KODIAK Dungeness Crab 0.034% 84 Food Bait Herring Miscellaneous Finfish Miscellaneous Shellfish Roe Herring Drift Roe Herring Seine Salmon Beach Seine Salmon Seine Salmon Set Net Scallops Area Total PRINCE WILLIAM SOUND King 1989 Fund Miscellaneous Finfish Miscellaneous Shellfish Pot Shrimp Roe Herring Drift Roe Herring Seine Roe on Kelp Pounds Sablefish Salmon Drift Salmon Seine Salmon Set Tanner Crab Trawl Shrimp Wild Roe on Kelp Area Total GRAND TOTAL 0.033% 0.029% 0.017% 0.17% 0.57% 0.24% 14.5% 4.47% 0.015% 20.10% 0.022% 0.102% 0.060% 3.33% 0.018% 0.003% 0.19% 0.27% 4.14% 2.20% 0.015% 6.35% 11.75% 0.45% 0.30% 0.009% 0.15% 29.40% 78.73% MATRIX SHARES OF UNOILED FISHERY CLAIM CATEGORIES Bristol By Roe Herring 0.036% Bristol Bay Salmon 1.32% Cape Romanzoff Roe Herring 0.0014% Chignik Herring Seine 0.00005% Cook Inlet (Upper) Roe Herring 0.0002% Halibut 0.0006% Kotzebue Salmon 0.0046% Kuskokwim Roe Herring 0.0027% Kuskokwim Salmon 0.225% Lower Yukon Salmon 0.0143% Norton Sound Roe Herring 0.0139% Norton Sound Salmon ; 0.0015% Peninsular Aleutians Roe Herring 0.0025% Peninsular Aleutians Salmon 0.369% Southeast Roe Herring 0.0160% Southeast Salmon 0.499% Upper Yukon Salmon 0.0021% GRAND TOTAL 2.31% (d) Virtually All Plaintiffs Have Agreed To The Plan of Allocation All individual plaintiffs and class representatives in the federal and state litigations have agreed to the Plan of Allocation in the form in which it is now presented to the Court for approval, except for a very few individual plaintiffs. Non-signatories include a handful of institutional plaintiffs who refused to participate in the Joint Prosecution Agreement, elected not to share their recoveries with other plaintiffs, and instead took their chances in separate trials — Chenega Corporation, Chugach Alaska Corporation, English Bay Corporation, Eyak Corporation, Port Graham Corporation and Tatitlek Corporation. Nor have three of the pro per plaintiffs agreed to participate. !5 15 The Plan of Allocation does not apply to the “Seattle Seven” processors who settled their Exxon claims early in the litigation and who will not share in any recoveries except their own settlement. 86 e b State court bined en, the non-si ative Corporations failed to in any net recovery. Nevertheless, it is to allocate them 3% of punitive damage recoveries. Thi is a fair share commensurate with their Matrix Damages. Signatory plaintiffs will share in the remaining 97% of punitive damage recoveries, and all further compensatory damage recoveries. It is appropriate for the Court to give final to the Plan of Allocation notwithstanding that a few ividual _ nonsignatories will be taken “off the top”, and the tage shares of the various Claim Categories for which Plan of Allocation provides will be applied to the amount of recoveries remaining after payment is to those non- Signatories. C. Distribution of Recoveries Among Plaintiffs And Class Members The Plan of Allocation deals only with the formula for allocating recoveries amon claimant groups. Within 90 days of approval of the Plan o Allocation, Co-Lead Counsel will submit for judicial approval, after notice and opportunity for comment, a plan of distribution specifying how the amount allocated to each Claim Category will be distributed among constituent claimants. Where Claim Categories consist solely of plaintiffs who have already been identified, the plan of distribution will set forth each claimant’s specific Upon judicial approval of the plan of distribution, an interim claims program (“Supplemental Claims Program”) will be conducted to distribute approximately $23 million plus interest which has been collected in the Native and municipality settlements. In the course of this claims program, plaintiffs will gather and process all information 87 necessary to compute percentage shares of all plaintiffs who claim a share of the recoveries, including those class members who have not yet been identified. Based on the Supplemental Claims Program, Co-Lead Counsel will seek judicial approval of a list of Final Percentage Shares. This list will identify all persons and entities entitled to share in future recoveries, and specify for each a percentage share of recoveries. Additional recoveries collected [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386014_1758%3A2. Public record. Not legal advice.