Appendix — Cook Inlet Processors, Inc. v. Baker
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————OF FICE OF THE CLERK
IN THE SUPREME COURT OF THE UNITED STATES
October Term, 2000
NAUTILUS MARINE ENTERPRISES, INC.
Petitioner,
GRANT BAKER, as class representatives of the Mandatory
Punitive Damages class; and all persons similarly situated;
et al.
Respondents; and
EXXON CORP., aka Exxon Mobil Company; Captain
JOSEPH HAZELWOOD; EXXON SHIPPING CO.,
Respondents.
ON PETITION FOR WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS FOR THE
NINTH CIRCUIT
\
APPENDIX TO PETITION FOR WRIT OF CERTIORARI
WEIDNER & ASSOCIATES, INC.
Attorneys for Petitioner
By: (Phik.p ey bn pire 4/25| 200)
Phillip Paul Weidner
Attorney of Record
330 "L" Street, Suite 200
Anchorage, Alaska 99501
(907) 276-1200
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 ...............cesseee
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
Ge gt D Sgt: RRR E Oe Ne EE nore ne Sent PRE EaD
Memorandum, filed in Sea Hawk Seafoods,
Inc., et al., and Western Alaska Fisheries,
Inc. v. Exxon, Ninth Circuit No. 99-35878,
Cotte Te TE, FI cicsiintissintetrinnstarisdevedeniacsnascceus
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.
AB9-095, nn July 23, 1999 ......020..scccrccercsssresoesees
- Page No.
Order, filed in Cook Inlet Processors
Inc. v. Grant Baker, et al., Ninth Circuit
No. 99-35864, and Nautilus Marine
Enterpnises, Inc. v. Grant Baker, et al.,
Ninth Circuit No. 99-35866, on
Jaman y 20, TOT ssccsitiitisciniieab cesta tbaiadneia cad alas catiiailadiss 38
Judgment in a Civil Case, filed in
In re the Exxon Valdez, U.S.D.C.
No. A89-095 on September 16, 1994 0.0... ccsecsesseeeeeeseenen 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.
ASS-O95, cm Pgmil US, 2G ivcsisticcceencrincioedenebintiennsabisace 44
Nautilus Marine Enterprises, Inc.
Recitals to Partial Release/Partial
Release, dated November 18, 1989 o............cccccccessesesssseeees 50
Complaint (Nautilus v. Exxon) |
Doatedd Seqpennemboetr G, 2 oa snisicsciincesniiccssnnsinstaninatenictiddiai 55 )
Agreement Among Counsel Regarding
Joint Prosecution, Settlement, and
Damages Allocation Agreement,
Gane’ Agel 1B, TFBS svscaciccamssenacintninamsedngll 67
ll
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
Members, filed in In re the Exxon Valdez,
U.S.D.C. Case No. A89-095
PPE INN Uk, CU lettres cttitieesk asi. oi 72
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
SoC 110
Plaintiff Nautilus Marine Enterprises, Inc.’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,
ill
Supplemental Notice of Position by Nautilus
Marine Enterprises, Inc. Relating to Objections
by Nautilus Marine Enterprises, Inc. 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.............csssesseeeeees im
Second Supplemental Notice of Position
by Nautilus Marine Enterprises, Inc.
Relating to Objections by Nautilus
Marine Enterprises, Inc. 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,
SUITE cinachisvohshiesna casita sackets bieaiadchiabsee digtdaaebaniiaaamiteaai 140
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
ee eee ee ee we SSS
| 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
ee ee ee ee ee ee ee ee ee ee ee
SHIPPING CO.,
Defendants-Appellees. )
)
aan
NAUTILUS MARINE No. 99-35866
~ ENTERPRISES, INC.,
DC# CV-89-
Plaintiff-Appellant,
V.
GRANT BAKER, et al., as class
representatives of the Mandatory
Punitive Damages class; and all
persons similarly situated; ALASKA
SPORT FISHING ASSOCIATION;
LOUIE E. ALBER; AHMET
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; ELENORE E. )
McMULLEN; LESLIE R. )
MEREDITH; NATIVE VILLAGE )
OF TATITLEK; LEONARD S. )
OGLE; STEVEN T. OLSEN; )
AUGUST M. PEDERSEN, It; )
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.
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.
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
No. 96-36038
SEAFOOD PROCESSORS, INC.; ADF,
INC., dba Aleutian Dragon
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,
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,
V.
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 PACIF IC 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.
V.
GRANT BAKER, et al., as
representatives of the Mandatory
Punitive Damages Class,
Plaintiffs-Appellees,
7,
EXXON CORPORATION, EXXON
SHIPPING COMPANY,
Defendants.
13065
Appeals from the United States District Court
7
for the District of Alaska
H. Russel Holland, District Judge, Presiding
Argued and Submitted
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 Wright 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
Processors, 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
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 wouid be certified. Claims for compensatory
damages could be easily disposed of by exchanging payment
for releases, but a plaintiffs 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
11
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 value 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
EE ———
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
i
smaNRRNAaLAA capes
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 clogs 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. “[OJbtaining 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 iegislation to create
nationwide mandatory punitive damages 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
Rn ee Ne SE eae eee ee eee ee ae Tee
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
class action are awarded in one lump sum, a
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 impossibility. 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. Ifthe 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. If the jury’s allocation is higher, this will result in a
shortfall.
This case differs from the typical situation in that we do not
have a single plaintiff seeking to recover a single award from
multiple defendants. The Exxon Valdez punitive damages
class involves multiple plaintiffs seeking to recover a single
award from a single defendant. Neither our court nor leading
authorities have addressed this situation. The potential
distortion of settlement incentives that occurs when some
parties settle and some do not is the same, however, as with
the multiple defendant situation. If Exxon could have been
sure that the district court would eventually adopt a form of
the proportionate share approach, permitting non-settling
plaintiffs to recover damages only in proportion to their
allocation of harm and allowing the remaining punitives to
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
provisior: 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 releases
have been approved in Wisconsin and Minnesota. See id.;
Frey v. Snelgrove, 269 N.W.2d 918, 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. 1 (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. Asa 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 dam
thereby assuring that the defendant would pay 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 thai 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 plaintiffs 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 allocating fault, the
jury cannot be told of a settlement or its terms. See 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 damages
according to the amount of the settlement. See Builder’s
Square, Inc. v. Shaw, 755 So.2d 721, 725 (Fl. 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 om 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 corporate 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. First, 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
FILED
DEC 18 2000
CATHY A. CATTERSON, CLERK
U.S. COURT OF APPEALS
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,
INC.,
Claimant-Appellant,
v.
EXXON CORP., a New Jersey
Corp.,
ee SSE SS
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 filed.”
Exxon filed a timely notice of appeal on August 20; 1999.
Western Alaska filed a notice of appeal 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” plainly 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 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 ts 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 (HRH)
(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 County 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 D*stribution. 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),
Western Alaska Fisheries, Inc. (Western), Inlet Fisheries,
Inc. (Inlet), Copper River Fishermen’s Cooperative (Copper
River), Sea Hawk Seafoods, Inc. (Sea Hawk), and Kodiak
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 damage 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”
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 Distnbution.
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 Eavironment 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
In response to an inquiry from the court,4 — state
that Copper River, Sea Hawk, and Kodiak will be assigned a
null value to their claims for the periods they settled with
Exxon. These Processors will then be treated like the Seattle
Seven Processors, who settled their claims with and
assigned their punitive damages to, Exxon. Plaintiffs intend,
however, to allow Copper River, Sea Hawk and Kodiak to
participate in the Processor 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.
<-~
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 Alaska Fisheries, Inc.’s Objection
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
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
36
with Exxon and released its 1989 compensatory damages
claims and all of its punitive damages claims. Nautilus is
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.
IS/__
- H. Russel Holland, Judge
District of Alaska
5 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.,
4
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
el ee ee ee ee ee ee ee ee ee ee ee ee a ee
38
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-A ppellees,
and
)
)
)
)
)
)
)
)
)
)
)
)
EXXON CORP., aka Exxon Mobil )
Company; Captain JOSEPH )
HAZELWOOD; EXXON )
SHIPPING CO., )
)
Defendants-Appellees. )
)
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; DEBRALEE, 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.
ee ee ee ae ee he ee ee
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.
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.
i= 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
eld eR RN ee te a — —
September 16, 1994 PHYLLIS RHODES
42
Date Clerk
cc: O&S _ fS/
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 of a mandatory
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
argument.
Conditional final approval of a mandatory punitive
damages class is now granted, on the terms and conditions
set forth below.
Pursuant to the provisions of Rule 23(b)(1)\(B),
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 who 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.
CASEY, GERRY, CASEY, WESTBROOK, REED
& SCHENK
110 Laurel Street
San Diego, Calif. 92101
45
Mathew D. Jamin
JAMIN, EBELL, BOLGER & GENTRY
323 Carolyn Street
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
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 Scartett
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 io 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
47
of any night to remand to the Superior Court, in which case
they shall be entitled to continue as class representatives.”
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
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
representatives who still seek remand is acceptable to those
class representatives and to plaintiffs.
48
CLASS REPRESENTATIVES
(EXHIBIT A)
Name Plaintiff No.
Alaska Sport Fishing Ass’n 139
Alber, Louie E.* 1761
Artuner, Ahmet 1601
Baker, Grant C. 40
Bailey, Jeffrey 828/4447
Bennett, William 1412
Bullock, Michael Wayne 1195
Butler, Robyne L. 41
Carroll, Albert Ray* 1997*
DEBRA LEE, Inc. 39
Dew Drop, Inc. 38
Dooley, Larry L.* | a
Doumit, Mark 302
Doumit, Steve 303
Jensen, Douglas R. 34
Johnson, Dennis G. 1215
Kompkoff, Donald P., Sr. 114
Kopecky, Josef 1405
Lowell, Daniel 35
Martusheff, Andrean E. 1366
Maxwell, Carol Ann 166
Maxwell, Jacquelan Jill 1194
Maxwell, Robert A. Sr. 165
McLenaghan, Michael* 2946*
McMullen, Elenore E.* 290*
Meredith, Leslie R.* 3928*
Native Village of Tatitlek 116
Ogle, Leonard S. 1375
Olsen, Steven T. 22
Pederson, August M., Jr. 246
Redmond, Mary Lou 1292
Stanton, Joseph David 1231
Tisdall, Jean A. 1387
Wood, Darrell 1316
49
RECITALS TO PARTIAL RELEASE
WHEREAS, Nautilus Marine Enterprises, Inc. (doing
business as Nautilus Marine, Inc., hereinafter called
Nautilus”) is a subtenant of Waterkist Corporation on
certain real property located in Valdez, Alaska and is the
only person or entity with a possessory interest in that certain
subleased real property and in the business conducted on said
subleased real property and is duly authorized to execute the
following Partial Release, and,
WHEREAS, Waterkist Corporation, hereinafter
called ““Waterkist”, the lessor to Nautilus, is a reorganized
Chapter 11 debtor pursuant to a plan of reorganization
confirmed by order of the bankruptcy court of the Western
District of Washington entered on April 25, 1986 under
cause no. 84-000610-W11. Waterkist is duly authorized to
execute the following Partial Release. The claims that are
the subject of this Partial Release arose in 1989 (after
confirmation of the referenced plan of reorganization).
Under the terms of the plan of reorganization, Waterkist is
authorized to enter into this Partial Release without order of
the bankruptcy court or other approval.
WHEREAS, Waterkist benefits from the
consideration to be paid as referenced in the following Partial
Release to the extent said consideration is received by
Nautilus, and not by Waterkist because such consideration
received by Nautilus enhances the financial strength of
Nautilus and its ability to honor its obligations to Waterkist
including its obligations under the referenced sublease
between Nautilus and Waterkist.
In reliance upon the forgoing facts represented by the
signators hereto to be true, Exxon Shipping Company, Exxon
Corporation and the M/V EXXON VALDEZ accepts the
following Partial Release:
50
PARTIAL RELEASE
FOR AND IN CONSIDERATION of the sum of ONE
MILLION, TWO HUNDRED TWELVE THOUSAND,
FIVE HUNDRED U.S. DOLI CARS ($1,212,500.00) paid to
NAUTILUS, WATERKIST, M. aterer and Dawn
Waterer, and further acknowledging the full amount of this
payment, and all previous payments, which cumulatively
amount to TWO MILLION, TWO HUNDRED FORTY-
FIVE THOUSAND, S -NINE
U.S. DOLLARS ($2,245, 779.00), and further in
consideration of the lost wage claim indemnification letter
from Exxon dated Rovenber 17, 1989, a copy of which is
attached to this Partial Release, receipt of all of which are
hereby acknowledged, and intending to be legally bound
hereby, the undersigned ABSOLUTELY AND
IRREVOCABLY RELEASE AND DISCHARGE, Exxon
Shipping Company, Exxon Corporation, their directors,
officers, employees and agents, and the M/V EXXON
VALDEZ, its officers and crew, from any and all claims,
demands and causes of action of every kind and character,
whether known or unknown, for damages that may have
been or may be sustained by the undersigned with respect to
any and all losses, injuries, damages, or claims for losses,
injuries, or damages arising during the calendar year 1989
(or during 1990 relating and growing out of the undersigned
parties’ 1989 fishing season business activities or operations)
which are in anyway associated with or arise from the
incident involving the M/V EXXON VALDEZ on March 24,
1989, or out of any and all oil-containment or clean-up
procedures that followed, including any causes of action
based on representations made during the course of any
response procedures. Further, the undersigned expressly
release any and all claims for punitive damages in any way
associated with the incident involving the M/V EXXON
VALDEZ on March 24, 1989, including any oil-containment
or clean-up procedures that followed. The undersigned
expressly except and reserve all claims, demands and causes
of action of every kind and character, other than those
released herein.
51
Without limiting the generality of the preceding
sentence, M. Thomas Waterer’s release herein does not apply
to a claim for lost income, if any, arising out of the incident
involving the M/V EXXON VALDEZ on March 24, 1989,
and the oil-containment and clean-up procedures that
followed, that may be made by Sunburst Limited Partnership
for the tender vessel, “Triton”.
The sum stated above is accepted by the undersigned
in full settlement of the claims described above. The
undersigned understand that this sum was agreed upon as a
compromise settlement and is not an admission of liability
by any party. In further consideration of the payment stated
above, the undersigned hereby assign, sell, transfer and
subrogate to Exxon Shipping Company, without limitation,
any and all rights, claims, interest and causes of action
known or unknown, for Exxon Shipping Company’s own use
and benefit, that the undersigned have or may have in respect
to the claims described above against any person, corporation
or governmental agency, including any liability fund that
may be available for the payment of damage claims; by so
doing, the undersigned give Exxon Shipping Company full
power and authority, for Exxon Shipping Company’s own
use and benefit, and on such terms and conditions as Exxon
Shipping Company may deem reasonable in the exercise of
its sole discretion, to litigate, compromise, settle or otherwise
dispose of, in the names of the undersigned or otherwise, any
claims described above, including the power and authority to
release and discharge, in the name of the undersigned or
otherwise, any persons, corporations or governmental
agencies.
The undersigned also agree that other than the
attached lost wage indemnification letter, there is no
agreement or other understanding between any of the
undersigned and Exxon except for this Partial Release, and
that the Funds Receipt and Claims Credit dated August 30,
1989, the Funds Receipt and Claims Credit notarized
October 30, 1989, and the Partial Release dated May 26,
1989, and July 3, 1989 are superseded by this Partial
Release.
52
The undersigned agree to keep the existence and
terms of the settlement embodied in this Partial Release .
strictly confidential and agree not to disclose the same to any
person unless required to do so by lawful order. 3
Executed this 18" day of November, 1989.
Witness:
(seal)
Witness:
Witness:
NAUTILUS MARINE
ENTERPRISES, INC.
/s/_
Karen Lee Teal
Signature
M. Thomas Waterer
Printed Name
President
Title
WATERKIST
CORPORATION
Karen Lee Teal
/s/
Signature
M. Thomas Waterer
Printed Name
President
Title
/s/
Karen Lee Teal
Signature, M. Thomas
Waterer
/s/
Signature, Dawn
Waterer
I am counsel for all of the above signatory parties,
and I have fully explained to each company’s management
and to the individuals involved the legal consequences of this
Partial Release, which releases all specific claims.
/S/
Edward P. Weigelt, Jr.
54
RANDALL H. SCARLETT, ESQ.
LINDA ZUBOWSKI, ESQ.
BROWN, MONZIONE, FABBRO ZAKARIA &
SCARLETT
900 Montgomery Street
San Francisco, California 94133-4603
Telephone: (415) 834-1111
CHARLES W. COE, ESQ. RECEIVED
805 West 3" Avenue, Suite 100 SEP 9 1994
Anchorage, Alaska 99501 BOGLE & GATES
Telephone: (907) 276-6173
Attomeys for Plaintiffs
THE SUPERIOR COURT FOR THE STATE OF ALASKA
THIRD JUDICIAL DISTRICT OF ANCHORAGE
NAUTILUS MARINE ENTERPRISES,
Defendants.
)
INC., a [sic] Alaska corporation, and M. ) Case No.
THOMAS WATERER, ) 3AN-94-8077
) Cl
Plaintiffs, )
)
vs. )
) Complaint
EXXON CORPORATION, a New J )
Corporation, EXXON SHIPPING )
COMPANY, a Delaware Corporation; ) RECEIVED
JOSEPH J. HAZELWOOD, EDWARD ) SEP 9 1994
MURPHY, ) BOGLE&
) GATES
)
)
Plaintiffs, and each of them, for their Complaint
against the defendants, and each of them, state:
55
i Plaintiffs hereby do not adopt any portion of
the Consolidated Plaintiffs’ Preliminary Designation of
Issues for the April 1993 Trial, filed February 3, 1992, in the
consolidated litigation case no. 3AN-89-2533 Civil.
2. This Complaint arises out of the March 24,
1989 grounding of the Exxon Valdez and the resulting oil
spill. Plaintiffs’ claims are based on various Alaska statutes
and Alaska common law. Plaintiffs do not assert any federal
causes of action.
> Subject matter is proper under A.S.
22.10.020(a).
4. This Court has personal jurisdiction by virtue
of the fact that all defendants either transact business in the
state of Alaska or have sufficient contacts with the state of
Alaska.
5. Venue is proper in the Third Judicial District
at Anchorage pursuant to Alaska Civil Rule of Procedure
3(c) because the claims arose in the Third Judicial District.
PARTIES
6. Nautilus Marine Enterprises, Inc., is a [sic]
Alaska corporation, doing business in the State of Alaska and
operates as a seafood processor located in Valdez, Alaska.
Nautilus Marine Enterprises, Inc. has a processing presence
in Prince William Sound. Nautilus Marine Enterprises, Inc.
primarily purchases all species of salmon, in addition to
halibut, herring and cod directly from Alaskan fishermen in
the waters of Prince William Sound, inclusive of tender
purchases, as well as dock deliveries. Product is sold
eviscerated, graded and packed fresh, frozen, and salt-cured,
in wholesale cartons ready for distribution either
domestically or exported. Salmon roe caviar is also
processed at the Valdez plant for export.
56
7. M. Thomas Waterer is a resident and citizen
of the [sic] Washington State and conducts business in the
State of Alaska as president and principle [sic] stockholder of
Nautilus Marine Enterprises, Inc., a seafood processor
facility.
DEFENDANTS
8. Defendant Exxon Corporation is a New Jersey
corporation, with its principal place of business at 225 East
John Carpenter Freeway, Irving, Texas. Exxon Corporation,
which is engaged in the business of operation [sic] petroleum
companies through its subsidiaries and divisions, including
those in the State of Alaska, was at all relevant times herein
an owner and operator of the vessel known as the Exxon
Valdez, which operated out of Alaska waters on a continuous
and systematic basis, and was at all relevant times herein the
owner of the crude oil being transported on the vessel known
as the Exxon Valdez.
9. Defendant Exxon Shipping Company is a
Delaware corporation, and subsidiary of defendant Exxon
Corporation, with its principal place of business at 800 Bell
Street, Houston Texas, and was at all relevant times herein
an owner and operator of the vessel known as the Exxon
Valdez, which operated in Alaskan waters.
10. At all time relevant hereto, defendant Exxon
Shipping Company was an agent and/or representative and/or
alter ego of defendant Exxon Corporation. The term
“Exxon” shall refer in this document to defendants Exxon
Corporation and Exxon Shipping Company, collectively.
11. | Defendant Edward Murphy is a resident of
Homer, Alaska, and at all relevant times herein was
employed as a harbor pilot for the harbor of Valdez, Alaska.
12. Defendant Joseph J. Hazelwood is a resident
of the State of New York, and was employed by Exxon in the
State of Alaska as Captain of the vessel Exxon Valdez.
57
GENERAL ALLEGATIONS
13. On Thursday evening, March 23, 1989, one of
Exxon’s largest vessels, the tanker Exxon Valdez, a 987 foot
ship, weighting 211,000 deadweight tons with cargo and
bunker fuel, left the port of Valdez, Alaska, bound for Long
Beach, California.
14. The vessel's twelve oil tanks were filled with
approximately 53 million gallons of Alaskan crude oil which
had been shipped from Alaska’s north slope. The crude oil
was owned by Exxon.
15. The vessel carried a crew of nineteen persons
plus the captain, defendant Joseph J. Hazelwood. There were
only three mates on board.
16. Prior to departure on Thursday, March 23,
1989, Captain Hazelwood, while ashore at Valdez, Alaska,
consumed a number of alcoholic beverages.
17. __ Prior to departure, Third Mate
Cousins was on duty until nearly midnight the previous night
of March 22, and was awake and generally at work for much
of the day of March 23". The Second Mate Lloyd McCain
worked long hours in loading operations during the day of
March 23”. Exxon’s emphasis on rapid turnaround led to
fatigue of the crew of the Exxon Valdez.
18. Prior to departure, when Captain Hazelwood
and several members of the crew arrived at the Alaska
terminal gate at around 8:25 p.m., they found that the posted
sailing time of the vessel had been moved up to 9:00 p.m.
without their knowledge.
19. Shortly after 9:00 p.m., the Exxon Valdez
passed through the harbor and Valdez Narrows under the
command of Harbor Pilot Edward Murphy. Captain
Hazelwood left the bridge — of the transit through
the narrows, leaving only one officer, Murphy, on the bridge.
58
20. While on board, Murphy noticed the smell of
alcohol on Hazelwood’s breath.
21. After piloting the ship out of the harbor,
Murphy turned over command to Captain Hazelwood, who
came up to the bridge but was obviously impaired and not fit
for duty. Murphy disembarked at the southern end of the
Narrows, leaving the vessel in the command of Captain
Hazelwood, who had obviously been drinking.
22. Hazelwood was the only officer on the bridge
for a period during Murphy’s departure.
23. Hazelwood operated the vessel in violation of
Exxon’s company policy regarding the use of alcohol.
24. Hazelwood deviated from the accepted traffic
pattern due to reports that icebergs which had calved from
the Columbia glacier were floating in the outbound lane.
25. Hazelwood could simply have slowed down
to avoid icebergs, but such action would have meant a brief
delay in the transport of oil, a delay which Hazelwood knew
was unacceptable to Exxon.
26. Hazelwood gave the order to increase the
ship’s speed and turn it on a due south course which led
across the separation zone, into and beyond the incoming
traffic lane. Hazelwood placed the ship on autopilot.
28. Hazelwood retired to his cabin, one flight
below the bridge, leaving only one officer, Gregory Cousins,
the third mate, on the bridge, in violation of Exxon policy.
59
29. Cousins did not have a pilotage endorsement
for Prince William Sound. Cousins was fatigued due to
working long hours the previous night and day. Cousins was
inadequately trained to pilot the ship in Prince William
Sound.”
30. Robert Kagan, the helmsman, was the only
other person on the bridge during this period. Robert Kagan
was inadequately trained and not competent to be at the helm
of the Exxon Valdez.
31. | Second Mate LeCain was due to relieve
Cousins at midnight but was not awakened to do so because
he had worked long hours during the loading operations that
day.
32. The vessel proceeded outside the shipping
lanes into the shallow reef area. The first commands to
change course and turn the vessel back towards the shipping
lane, issued by Cousins, occurred just minutes before the
impact.
33 The vessel was approximately one-quarter
mile outside the channel when it first struck the well-marked
Bligh Reef, which ripped along the starboard side with
jarring impact, tearing three holes in the starboard tanks and
ripping out a portion of the hull.
34. Although the ship was still navigable after the
first impact, it was so far east of deep water that when
Cousins tried to run the Exxon Valdez back towards the west,
it struck a second part of the shallow reef. This second
impact grounded the ship, completely stopping its progress.
35. Hazelwood, having returned to the bridge
after the grounding to futilely gun the ship’s engine for at
least an hour and a quarter, hoped to get the Exxon Valdez off
the reef.
36. | The scraping impact and grounding of the
Exxon Valdez upon Bligh Reef cut open at least eight of the
60
ship’s oil tanks causing the largest oil spill in United States
history. Approximately 11 million gallons of crude oil were
discharged into Prince William Sound.
37. Shortly after ey Hazelwood’s breath
smelled of alcohol and empty ially empty alcoholic
beverage containers were observed in Hazelwood’s cabin, in
violation of Exxon’s policy on alcohol. \
38. _ Approximately nine hours after the vessel ran
aground on Blight [sic] Reef, Hazelwood submitted to blood
and urine alcohol tests from which they determined that he
was under the influence of alcohol.
39. Exxon was aware of the great risk of an oil
spill from its tanker traffic in Prince William Sound and the
potential damage to plaintiffs, that would result from the
spill.
40. Atall times relevant hereto, Hazelwood,
Cousins, Hagan and LeCain were acting within the scope of
their employment and as agents and/or representatives of
defendants Exxon. Exxon is liable for the acts of its
employees, agents and representatives.
41. __ Hazelwood acted negligently and with
reckless indifference to the interests of others throughout
March 23-24, 1989.
42. Exxon acted negligently and with reckless
indifference to the interests of others in allowing the Exxon
Valdez to run aground.
43. By policy and procedure, Exxon negligently,
knowingly and recklessly operates its vessels so as to achieve
rapid turnaround of its oil transport. Exxon’s emphasis on
rapid turnaround is designed to reduce costs, even if in doing
So creates great risk to the public, including these plaintiffs.
44 By policy and procedure, Exxon negligently,
knowingly and recklessly undermans its vessels resulting in
61
overwork and fatigue of its crews. Exxon’s undermanning is
designed to reduce costs, even if doing so creates great risk
to the public, including these plaintiffs.
45. Exxon negligently, knowingly and recklessly
assigned Hazelwood to Master the Exxon Valdez.
Hazelwood had a history of alcohol abuse and related
impairment known to Exxon. In 1985, with Exxon’s
knowledge, Hazelwood was hospitalized for alcoholism
treatment and was diagnosed as suffering from dysthymia.
He had been convicted of charges involving drinking and
driving in 1985 and 1988, and had his driver’s license
revoked three times during the five years prior to the spill.
At the time of the grounding, Hazelwood was not licensed to
drive an automobile due to his alcohol use. Exxon received
numerous reports that Hazelwood continued to use alcohol
between 1985-and 1989. [E]xxon also received reports that
on occasions Hazelwood left the bridge in violation of Exxon
policy. Exxon knew or should have known of Hazelwood’s
impairment and his lack of fitness to Master the Exxon
Valdez. Exxon assigned Hazelwood as Master, even when
doing so created great risk to the public, including these
plaintiffs.
46. Exxon negligently, knowingly and recklessly
allowed Cousins to operate the Exxon Valdez alone, in a
fatigued condition, with inadequate training, and without a
pilotage endorsement for Prince William Sound. Exxon
allowed Cousins to operate the vessel, even when doing so
created great risk to the public, including these plaintiffs.
47. Exxon negligently, knowingly and recklessly
allowed Kagan to serve as an able-bodied seaman and to be
at the helm of the Exxon Valdez in confined waters. Exxon
allowed Kagan to man the helm, even when doing so created
great risk to the public, including these plaintiffs.
48. Exxon’s actions and omissions herein caused
the oil spill and directly and proximately.
62
49. Exxon made representations to the public,
including these plaintiffs, that they had the capability to
respond to a major oil spill.
50. _ Exxon failed to establish and provide an
adequate contingency plan to contain and clean up a major
discharge of oil.
51. _ Exxon failed to properly plan and Carry out
the ensuing clean up effort.
52. The acts and omissions of Exxon described
herein were undertaken with reckless indifference to the
interests, right and safety of others and were sufficiently
outrageous to be deemed equivalent to actual malice.
THE IMPACTS OF THE OIL SPILL
53. In the weeks and months that followed the
spill, the oil predictably traveled through the waters of Prince
William Sound along the Kenai Peninsula into the Cook Inlet
and other areas. Oil also went through Kodiak, and along the
Alaska Peninsula, eventually fouling some 1,244 miles of
Alaska coastline.
54. These plaintiffs suffered damages to their
businesses, their property, their quality of life (hedonic
damages), incidental and consequential damages, and
emotional distress as a direct and proximate result of the oil
spill. The damage caused by the oil spill to plaintiffs’
property, trades and businesses, quality of life, fishing and
marine life will last for years.
55. The defendants knew at all relevant times of
the disastrous economic and other consequences that would
result to tender operators, crew members, landowners and
those who rely on the oceans [sic] bounty for their livelihood
as a result of a major oil spill.
63
DAMAGES
56. | Asaresult of the Exxon Valdez oil spill,
Nautilus Marine Enterprises, Inc. has suffered damages
including, but not limited to the following: lost
earnings/income, lost retained earnings, lost shareholders’
equity, loss in market share of raw materials, (in percentage
of fish catch and fishermen in Prince William Sound, loss in
market share of distribution, salmon roe brand removed from
critical marketing channels for one year, closure of Valdez ~
processing plant in Prince William Sound resulting in
cessation of fish buying activities, of sales and distribution of
firm’s products, additional extreme costs of reentry into the
market, losses due to cash shortages as a result of the spill,
loss of future market share, (both raw and distribution),
increased obligations, loss of use of Valdez dock/rental
value, tortious interference with contract, and loss of good
will.
57. Asaresult of the Exxon Valdez oil spill,
plaintiff M. Thomas Waterer has suffered damages
including, but not limited to the following: lost income, lost
reputation, legal fees, loss of good will, additional costs
incurred with the bankruptcy plan of organization of
Waterkist, Inc. and loss to the value of leasehold assets
through loss of production of Nautilus Marine Enterprises,
Inc.
COUNT I
(NEGLIGENCE)
_ §8. Paragraphs 1 through 57 are incorporated
herein.
59. All defendants owed the plaintiffs a duty of
care in the loading, transportation and handling of the crude
oil that constituted the Exxon Valdez’s cargo on March 23,
1989, as well as in the prevention, containment, cleanup and
other disposition of the spill of such cargo on and after
March 24, 1989.
60. The defendants breached their duty of care to
the plaintiffs in their loading, transportation and handling of
said crude oil, as well as in their exercise of precautionary
and preventative measures and in their cleanup, prevention
and containment efforts after the spill occurred.
61. _ Asadirect and proximate result of
defendants’ negligence as described above, the plaintiffs
have suffered damage and will suffer damage in the future,
for which these defendants are jointly and severally liable, in
an amount in excess of $100,000.00 per plaintiff.
Plaintiffs’ legal and factual investigation of the
matters herein alleged is continuing, and plaintiffs hereby
give notice that they reserve the right to amend this
Complaint to assert such additional claims, including,
without limitations, claims on behalf of or against persons
not now party hereto, as the court and the rules may allow.
WHEREFORE, the plaintiffs pray for judgment
against the defendants, and each of them, jointly and
severally, for the following relief:
l. The full amount of actual damages suffered
by the plaintiffs against each defendants [sic] in excess of
$100,000.00 per plaintiff;
2. Prejudgment interest at the maximum rate
allowed by law;
> The plaintiffs’ costs, including attorneys fees,
as provided by law;
4. Such other and further relief as the Court
deems just and proper.
Dated: September 6, 1994
BROWN, MONZIONE, FABBRO,
ZAKARIA & SCARLETT
By /S/
RANDALL SCARLETT, ESQ.
Dated: September 6, 1994
LAW OFFICES OF CHARLES W. COE
4
By _ /§/
CHARLES W. COE, ESQ.
ATTORNEYS FOR PLAINTIFFS
66
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 1
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
plaintiff group which reduces the percentage share of the
aggregate allocated share for such plaintiff group below that
67
percentage share of such plaintiff group set forth in
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 1 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.
68
Dated: , 1995.
Dated: , 1995.
69
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 = 0.59% _ 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%
*”Eloor” share equals 90% for non-fishing plaintiffs.
70
ATTACHMENT 2
FISHERIES
AQUACULTURE ASSOCIATIONS
BUSINESSES
CANNERY WORKERS
LANDOWNERS
MUNICIPALITIES
NATIVES
NATIVE CORPORATIONS
PROCESSORS
RECREATIONAL USE
GRAND TOTAL
71
% SHARE
80.16%
1.91%
0.28%
0.53%
3.56%
2.18%
6.64%
0.65%
2.10%
0.01%
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: )
) Case No. A89-095-
The EXXON VALDEZ ) CV (HRH)
__) (Consolidated)
)
THIS DOCUMENT RELATES TO )
ALL CASES )
_)
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
72
HEARING ON FINAL APPROVAL OF THE PHASE
[V SETTLEMENT AND PLAN OF ALLOCATION,
AND AUTHORIZING NOTICE TO CLASS MEMBERS
TABLE OF CONTENTS
Section Page(s)
TABLE OF AUTHORITIES ili
I. INTRODUCTION l
RELEVANT FACTS 5
A. THE PHASE IV SETTLEMENT 5
B. THE PLAN OF ALLOCATION 9
_l. 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
(iii) Percentage Shares 20
d) Virtually All Plaintiffs Have Agreed
to the Plan of Allocation 24
73
C. DISTRIBUTION OF RECOVERIES AMONG
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
Ill. 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
74
ee
Armstrong v. Board of Sch. Directors,
616 F.2d 305 (7® Cir. 1980) 29
In Re Beef Indus. Antitrust Litig.,
607 F.2d 167 (5" Cir. 1979) 29
In re Cement & Concrete Antitrust Litigation,
817 F.2d 1435 (9" Cir. 1987),
rev'd on other grounds, 490 U.S. 93 (1982) 38
In re Chicken Antitrust Litigation, d
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,
__ US. __, 13'S. Ct. 408 (1992) 3, 28, 30, 31, 34
In re Corrugated Container Antitrust Litigation,
643 F.2d 195 (5" Cir. 1981) 3
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) 31
Detroit v. Grinnell Corp.,
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) 35
In Re Four Seasons Sec, Laws Litig.,
58 F.R.D. 19 (W.D. Okla. 1972) 30
75
In re GCC Richmond Works Cases,
No. 2906 (Cal. Sup. Ct., Contra Costs Cty.,
Nov. 13, 1995)
Kirkonan v. Bonelli, —
695 F.Supp. 446 (M.D. Cal. 1988)
Lai v. Anthony,
[1991 Transfer Binder] Fed. Sec. L. Rep.
(CCH) § 96,174 (D. Haw. July 5, 1991)
In re Mid Atlantic Toyota Antitrust Litig.,
564 F.Supp. 1379 (D. Md. 1983)
Officers for Justice v. Civil Service Commission
of San Francisco, 688 F.2d 615 (9 Cir. 1982),
cert. denied, 459 U.S. 1217 (1983)
Paul, Johnson, Alston & Hunt v. Graulty,
886 F.2d 268 (9™ Cir. 1989)
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)
Roberts v. Heim,
1991 U-S. Dist. Lexis 17782
(N.D. Cal. August 28, 1991)
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)
Weinberger v. Kendrick,
698 F.2d 61 (2d Cir. 1982)
76
32
30
32
29
27, 30
32
30
35
29
29, 30
MISCELLANEOUS
Manual for Complex Litigation (Third) § 30.41 28
Newberg on Class Actions (3" ed. 1991) 29
77
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 IV 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.
78
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 approval 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 Litigation, 669 F.2d
228, 238 (5" Cir. 1982).
79
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.
80
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
order providing for dissemination to the class members of
notice of those agreements and of the court hearing with
respect to final approval.
RELEVANT FACTS
A. The Phase IV Settlement
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 IIA, 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.
The Phase IV plaintiffs whose claims are resolved
pursuant to the settlement include both direct action plaintiffs
and members of the Commercial Fishing Class, the Native
Class, and the Landowner Class. Of course, all the Phase [V
plaintiffs are members of the Mandatory Punitive Damages
Class as well.
4A great variety of the different claims were slated for trial,
including, for example, commercial salmon fishermen in
Lower Cook Inlet; commercial fishermen in “oiled” areas
who harvested species other than salmon and herring;
commercial fishermen who sold permits or vessels after
September 1993; personal injury plaintiffs; aquaculture
associations in “oiled” areas and municipalities.
> As discussed below, the only non-participating Phase IV
plaintiffs who have not already resolved their Phase IV
claims in separate settlements are the “Seattle Seven”
processors and five pro per plaintiffs.
81
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 consuming, 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. /
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.
82
more quickly to obtain an appellate determination on the
punitive damage verdict and other important matters.
The Phase IV plaintiffs have reserved the right to
withdraw from the Phase IV Settlement if the Plan of
Allocation is not approved. Consequently, the Phase IV
Settlement represents a very rational tradeoff of uncertain
Phase IV Claims for the greater benefit of inclusion in the
Plan of Allocation, under which the Phase IV plaintiffs are
already guaranteed participation in recoveries which are
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
the Phase IV claims by settlement would significantly
expedite the point in time at which the Court would enter a
final judgment enabling the parties to proceed with appellate
review of the punitive damages verdict and other issues.
As a result of the Phase IV Settlement, virtually all the
compensatory damage claims presented in this consolidated
litigation have now been resolved in this Court. The
settlement applies to all plaintiffs and class members who
were scheduled to participate in Phase IV except for (a) the
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
harvest against the Exxon defendants. On October 27, 1995,
the Court granted preliminary approval of that settlement,
authorized notice of the settlement, and scheduled a fairness
hearing for January 19, 1996.
83
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 right 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.
84
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.
4
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
85
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. soni
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 claims had been dismissed
and were subject to appeal at the time of payment.
86
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
1] 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
equaled 90% of each Claim Category’s matrix share based
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”.
87
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
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”).
88
It was agreed that for each Claim Category, “Matrix
Damages” would be determined by quantifying actual
damages suffered as a proximate result of the Exxon Valdez
oil spill, and discounting them for litigation risk. Each
Claim Category’s “Matrix Share” would be calculated as the
ratio, expressed as a percentage, 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
municipality settlement funds now in hand, but to all future
recoveries in the federal and state litigations as well. Upon
judicial approval of the Plan of Allocation, the settling
Natives and municipalities will make available their
settlements for distribution among all plaintiffs, plaintiffs
with Phase IV claims will give final consent to the settlement
of their claims, and this litigation will be in a position to
proceed to the appellate stage.
(b) Claim Categories
In developing the Plan of Allocation, the plaintiffs’
claims were divided into the following categories:
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.
Many individual plaintiffs have claims falling into
more than one of the categories. The Plan of Allocation
specifically addresses areas of overlap in order to avoid
double counting of matrix damages. Where an issue might
exist as to the applicable claim category for a particular form
89
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
90
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methodologies have been applied. Expertise of counsel has
been relied upon to set realistic discount factors to account
for litigation risk. In short, all reasonable efforts have been
made to base Matrix Damages and Matrix Shares on the best
available information.
The Oesting Affidavit confirms that, among themselves,
the members of the Allocation Committee and the Executive
Committee represent every category of claimant covered by
the Plan, and that the interests of each plaintiffs’ group were
represented vigorously and effectively through arm’s-length
discussions and negotiations by the members of the
Allocation Committee. Reasonable consideration has been
given to all the positions and claims of the various categories
of claimants, and the work of the Committee was not tainted
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 4] 31-43.
The responsible manner in which the Allocation
Committee, Lead Counsel and the Casewide Executive
Committee went about formulating and implementing a plan
of allocation is further confirmed by the fact that virtually all
plaintiffs who have brought claims in the consolidated
litigation have agreed to join in the Plan. Clearly, the Plan of
Allocation has been designed to provide fair and reasonable
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
Allocation contains a detailed description of each of the
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.
91
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.
92
ask Fi thal ‘ai
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 damage figure for each
Claim Category has been totaled, and then 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.
93
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%
94
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
Dungeness Crab
Food Bait Herring
King Crab
i989 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
95
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. 15
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.
96
In state court trials last summer, the non-signatory
Native Corporations failed to obtain any net recovery.
Nevertheless, it is proposed to allocate them 3% of punitive
damage recoveries. This 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 val to
the Plan of Allocation notwithstanding that a few individual
plaintiffs have, to date, withheld agreement. The Plan of
Allocation provides that any amounts awarded to
nonsignatories will be taken “off the top”, and the percentage
shares of the various Claim Categories for which the Plan of
Allocation provides will be applied to the aggregate amount
of recoveries remaining after payment is made 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 among claimant groups. Within 90
‘days of approval of the Plan of 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
percentage shares. For Claim Categories having class
members not yet identified, the plan of distribution will set
forth the manner in which individual percentage shares will
be determined through a claims program.
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
97
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 on behalf of signatory
plaintiffs and class members, beyond the $23 million in hand
from the Native and municipality settlements, will be
distributed according to the Final Percentage Shares,
following judicial approval. Once all recoveries in this
litigation become certain and fully collected, there will be a
“Final Distribution.” In the Final Distribution, each
signatory plaintiff's and class member’s Final Percentage
Share will be multiplied times the sum total of all recoveries
allocated to signatory plaintiffs and class members, including
recoveries already distributed. Previous payments will be
deducted, and the net difference will be the final distribution
to each claimant. !6
16 At the time of each distribution, counsel for plaintiffs
anticipate they will apply to the Court for an award of
attorneys’ fees. However, the Plan of Allocation provides
that unreimbursed litigation expenses (estimated to
eventually total approximately $25 million) will be deducted
solely from punitive damage recoveries. Pursuant to fee
orders entered by this Court on March 26, 1992, and the
Alaska Superior Court on September 17, 1991, three percent
(3%) of the recovery will be placed in a Consolidated Case
Fund from which all counsel can apply for payment of fees
based on their contribution to the successful prosecution of
this litigation. In addition, the above orders provide that a
Class Action Attorneys’ Fees Fund is to be financed through
percentage set-asides from class recoveries, subject to
application to the Court. As described in the Plan of
Allocation, all plaintiffs’ counsel participating in the Plan
98
Il. THE COURT SHOULD APPROVE
PRELIMINARILY THE PHASE IV SETTLEMENT
AND THE PLAN OF ALLOCATION AS FAIR,
ADEQUATE AND REASONABLE
Both the Phase IV Settlement and the Plan of Allocation
are subject to review and approval by this Court under Rule
23 of the Federal Rules of Civil Procedure. While many of
the Phase IV claimants are direct action plaintiffs, the Phase
IV Agreement is also a class action settlement on behalf of
the members of the Commercial Fishing Class, Native Class,
claims. In addition, the Plan of Allocation will be binding on
the members of all the classes which this Court has certified
in the Exxon Valdez litigation, including all plaintiffs as
members of the Mandatory Punitive Damages Class.
The Ninth Circuit has recognized that, in reviewing a
proposed class action settlement, “the universally applied
standard is whether the settlement is fundamentally fair,
adequate and reasonable.” Officers for Justice v. Civil
Service Commission of San Francisco, 688 F.2d 615, 625
(9° Cir. 1982), cert. denied, 459 U.S. 1217 (1983). A plan of
allocation is reviewed under the same standard, and the
district court’s determination that a plan is fair and
reasonable is reviewed only for an abuse of discretion. Class
v. City of Seattle, 955 F.2d 1268, 1284-85 (9" Cir. 1991),
cert. denied sub nom., Hoffer v. City of Seattle, _ US.
__, 113 S.Ct. 408 ( 1992): In re Equity F unding Corp. of
Am. Sec. Litig., 603 F.2d 1353, 1362 (9" Cir. 1979)
(approving a settlement and plan of allocation); In re Ambase
Corp., No. 90 Civ. 2011 (CSH), 1995 U.S. Dist. LEXIS
15516, at *4 (S.D.N.Y. Oct. 20, 1995) (approving a
settlement including a plan of allocation of the settlement
fund).
have agreed to limit their fees on recoveries subsequent to
the Alyeska settlement to an effective rate of 22.4% of the
amount recovered, providing an additional benefit to the
plaintiffs and class members.
99
At this juncture, plaintiffs do not ask the Court to finally
approve the Phase IV Settlement and the Plan of Allocation.
Rather, they seek only preliminary approval determining that
it is appropriate to provide notice of the proposed Phase [V
Settlement and Allocation Plan prior to a public hearing and
final evaluation by the Court on these matters.
A. The Standard for Preliminary Approval of
Settlement Agreements
The Manual for Complex Litigation (Third) § 30.41
(citations omitted) sets forth procedures and criteria for
preliminary approval of settlement and approval of notice to
the class:
Approval of class action settlements involves a
two-step process. First, counsel submit the
proposed terms of settlement and the court
makes a preliminary fairness evaluation. In
some cases this initial evaluation can be made
on the basis of information already known to the
court, supplemented as necessary by briefs,
motions, or informal presentations of the
settling parties.
“es ee *& *
If the preliminary evaluation of the proposed
settlement does not disclose grounds to doubt its
fairness or other obvious deficiencies, such as
unduly preferential treatment of class
representatives or of segments of the class, or
excessive compensation for attorneys, and
appears to fall within the range of possible
approval, the court should direct that notice
under Rule 23(e) be given to the class members
of a formal fairness hearing, at which arguments
and evidence may be presented in support of
and in opposition to the settlement.
100
ee ee
Accord, Armstrong v. Board of Sch. Di 616 F.2d 305,
314 (7® Cir. 1980) (purpose o iminary ing is to
ascertain whether there is any reason to notify the class
members of the proposed settlement and to proceed with a
fairness hearing); In Re Mid Atlantic Toyota Antitrust Litig.,
564 F.Supp. 1379, 1384 (D. Md. 1983).!
Here, the proposed Phase IV Settlement and Plan of
Allocation fall well within the of reasonableness
sufficient to warrant the mailing of a notice apprising class
members that the Court will consider final approval of those
agreements. As discussed in Relevant Facts above and in
II.B. and C. below, counsel for plaintiffs had a sound and
reasonable basis for entering into those ents, and the
interests of the class members will be well served by their
approval.
Counsel for plaintiffs have extensive experience in
class action and mass tort litigation, and believe the Phase IV
Settlement and Plan of Allocation are fair, reasonable and
|7 Rule 23(d)(5) of the Federal Rules of Civil Procedure also
grants the Court authority to enter an order preliminarily
approving a class settlement. This rule empowers the Court
to make “appropriate orders” dealing with procedural
matters. See Newberg on Class Actions, (3” ed. 1991), §
11.26. This authority has been exercised frequently to
preliminarily approve class-wide settlements. See
Weinberger v. Kendrick, 698 F.2d 61 (2d Cir. 1982), cert.
denied, 464 U.S. 818 (1983); In Re Beef Indus. Antitrust
Litig., 607 F.2d 167 (5" Cir. 1979); 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); City of Detroit
v. Gnnnell Corp., 356 F.Supp. 1380 (S.D.N.Y. 1972), affd
in relevant part, 495 F.2d 448 (2d Cir. 1974); In Re Four
Seasons Sec. Laws Litig., 58 F.R.D. 19 (W.D. Okla. 1972):
Philadelphia Housing Auth. v. American Radiator &
Standard Sanitary Corp., 322 F.Supp. 834 (E.D. Pa.), aff'd
sub nom., Ace Heating and Plumbing Co. v. Crane Co., 453
F.2d 30 (3d Cir. 1971).
101
adequate in light of the circumstances of this case. Many
courts recognize that the opinion of experienced counsel
supporting a settlement is entitled to considerable weight.
See, e.g., Weinberger, 698 F.2d at 74; Kirkonan v. Bonelli,
695 F.Supp. 446, 451 (M.D. Cal. 1988); see also, Class v.
Seattle, 955 F.2d at 1291 (listing experience and views of
counsel as a factor in Court’s determination to approve
settlement) (citing Officers for Justice, 688 F.2d at 625).18
Furthermore, “([t]his standard applies with as much force to
the review of the allocation agreement as it does to the
review of the overall settlement between plaintiffs and
defendants.” In re Chicken Antitrust Litig. Am. Poultry, 669
F.2d 228, 238 (5™ Cir. 1982). Typically an allocation
agreement which is the product of arm’s-length negotiations
between the attorneys for the class and individual plaintiffs
obviates the need for a court determination of “the
distribution of the settlement fund among the myriad
claimants.” Id. at 240 (quoting In re Equity Funding Corp.,
603 F.2d at 1365).
18 In considering the potential settlement and plan of
allocation, the trial court does not have to reach any ultimate
conclusions on the issues of fact and law which underlie the
merits of the dispute (City of Detroit, 495 F.2d at 456), and
need not engage in a trial on the merits (Officers for Justice,
688 F.2d at 625). Rather, “(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 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.” Officers for Justice, 688 F.2d at 625. In this
regard, a court reviewing a settlement should keep in mind
that “essence of settlement is compromise. . . . [and] ‘a just
result is often no more than an arbitrary point between
competing notions of reasonableness.” In re Corrugated
Container Antitrust Litig., 659 F.2d 1322, 1325 (5™ Cir.
1981), cert. denied sub nom., CFS Continental, Inc. v.
Adams Extract Co., 456 U.S. 998 (1982).
102
The plaintiffs seek preliminary approval of interrelated
agreements which will resolve, on the District Court level,
the remaining claims of virtually all of the class and direct
action plaintiffs in the consolidated Exxon Valdez Oil Spill
Litigation. The courts have recognized a strong judicial
preference towards settlement of complex class action
litigation. See, e.g., Class v. City of Seattle, 955 F.2d at
1276, 1289 (citing Officers for Justice, 688 F.2d at 625, and
In re Corrugated Container Antitrust Litig., 643 F.2d at 207).
There is also a strong judicial preference favoring disposition
of the claims of all interested parties — both class and
individual — in a single settlement. See, e.g., In re Chicken
Antitrust Litig. Am. Poultry, 669 F.2d at 238 (5" Cir. 1982).
To this end, courts have had no difficulty approving
agreements which set forth the terms upon which parties will
share in future recoveries. See, e.g., Paul, Johnson, Alston &
Hunt v. Graulty, 886 F.2d 268, 269-70 (9 Cir. 1989); Lai v.
Anthony, [1991 Transfer Binder] Fed. Sec. L. Rep. (CCH) 4
96,174, at 90,946 (D. Haw. July 5, 1991). Similarly, courts
have approved settlements and plans of allocation which
apply to both class and individual plaintiffs. City of Detroit,
495 F.2d at 462 (noting that a number of plaintiffs in the
individual subscriber non-class actions were participating in
the settlement along with the class action plaintiffs); see also
In re GCC Richmond Works Cases, No. 2906, slip. op. at 4
(Cal. Sup. Ct., Contra Costa Cty., Nov. 13, 1995) (approving
settlement resolving “all compensatory claims of the
plaintiffs and class members who accept the settlement, and .
| .. all punitive damages claims of any individuals affected”).
B. The Phase IV Settlement Is Fair,
Reasonable and Adequate
Plaintiffs’ counsel have determined that it is in the
best interests of the Phase IV plaintiffs to settle their Phase
IV claims on the terms set forth in the Settlement
Agreement. To litigate the Phase IV claims would require a
time-consuming and expensive series of trials in which the
103
cen eee
outcome would be subject to numerous risks and
uncertainties.
Furthermore, plaintiffs’ counsel are concerned that trial
of the Phase IV claims would delay significantly the entry of
final judgment. The amount of the Phase III verdict is of a
magnitude whereby all claimants’ reasonable expectations
can be satisfied. Consequently, continuing delay in entry of
the Phase III judgment has a vital significance to the Phase
IV plaintiffs (and indeed all plaintiffs). The Phase [V
Settlement reasonably addresses that concern by clearing the
way for appellate review.
The fact that under the Settlement Agreement the Phase
IV plaintiffs will receive no cash is not bar to approval. By
agreeing to the settlement, the Phase IV plaintiffs will gain
the right to participate in the distribution of the entire amount
recovered against the defendants under the Plan of
Allocation. Courts have approved settlement agreements
under similar circumstances where a plan of allocation will
protect the interest of all claimants in securing a fair and
reasonable global settlement. See, ¢.g., In re Chicken
Antitrust Litig. Am. Poultry, 669 F.2d at 238-39.
C. The Plan of Allocation is Fair,
Reasonable and Adequate
After consultation with clients and extensive
deliberation, plaintiffs’ counsel have concluded that the
fairest, most expeditious way to allocate any funds that are
recovered in the consolidated litigation is through the Plan of
Allocation. That Plan is the product of serious, informed,
and non-collusive negotiations among plaintiffs’ counsel
representing every category of claim included in the Plan of
Allocation. Each lawyer and group of lawyers has been
zealously representing their clients’ interests, and Lead
Counsel worked assiduously to protect and advance the
interests of the whole. The virtually unanimous agreement
on the Plan of Allocation which has been reached by the
direct action plaintiffs confirms the lack of any conflict of
104
interest tainting the procedure and the vigorously arm’s-
length nature of the process.
The Plan of Allocation is the product of careful and
thorough evaluation of all pertinent data available to
plaintiffs’ counsel. As discussed above, it empleys
reasonable and appropriate criteria with respect to the
damage valuation figures and percentage shares attributable
to the different claim categories. _—
Under the case law, the above factors render the
allocation plan fair and reasonable. E.G., Class v. City of
Seattle, 955 F.2d at 1284-85; Roberts v. Heim, Nos. C-84-
8069 TEH, C-87-6174 TEH, C-88-3373, 1991 U.S. Dist.
LEXIS 17782 (N.D. Cal. August 28, 1991) (finding formula
fair and reasonable as used in allocation plan); In re Fortune
Sec. Litig., No. C-83-3348(A) WHO, 1988 U.S. Dist. LEXIS
18505 (N.D. Cal. May 10, 1988) (same); see also In re
Equity Funding Corp., 603 F.2d at 1358.
D. This Is An Appropriate Time For The
Court To Consider Approval Of The
Plan Of Allocation
During the 16 months since the federal jury verdicts
were returned, defendants have mounted an array of post-
trial challenges, and they are expected now to pursue every
possible avenue of appeal. We fully expect plaintiffs to
prevail, but it is likely that several years wiil pass before
plaintiffs’ ultimate recoveries become certain and are fully
collected. Obviously, until all recoveries are collected, no
plaintiff can know the actual dollar amount of his or her
individual share.
It is possible to fix each signatory plaintiffs’ percentage
share of future recoveries now, and there are compelling
reasons to do so. First, as explained infra there is available
for distribution approximately $23 million from settlements
with the Exxon
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