In Re: The Exxon Valdez Grant Baker, as Representatives of the Mandatory Punitive Damages Class v. Exxon Corporation Exxon Shipping Company
Docket: 99-35898
Court: Court of Appeals for the Ninth Circuit; February 8, 2001; Federal Appellate Court
The appeal in 239 F.3d 985 (9th Cir. 2001) revolves around a $5 billion punitive damages judgment against Exxon Corporation, stemming from the 1989 Exxon Valdez oil spill. The court considers whether certain seafood processors, who settled with Exxon before the certification of a mandatory punitive damages class, are entitled to share in the punitive damages allocation. The district court's July 23, 1999 order approved a plan of allocation that excluded several processors due to their earlier settlements, which involved releasing compensatory claims and partially assigning punitive damages claims to Exxon for lump sum payments. Exxon appeals as the assignee of four excluded processors—Western Alaska Fisheries, Inc., Copper River Fishermen's Cooperative, Seahawk Seafoods, and Kodiak Salmon Packers, Inc.—seeking to recover under these assignments and participate in the damages allocation. The settlements occurred before the certification of the punitive damages class in 1994, and Exxon anticipated the class's establishment. The court notes that settling individual punitive damages claims would not benefit Exxon since the total punitive damages awarded to the class would remain unaffected by such settlements.
Exxon sought to recoup part of its punitive damages liability through settlement agreements with the Four Processors, utilizing a mechanism similar to a "cede back" agreement employed in a prior case with the Icicle plaintiffs. In these settlements, the Processors assigned nearly all their future punitive damages claims to Exxon, allowing it to pursue these claims for its benefit. Following a jury's punitive damages verdict in 1994, a global allocation plan for damages was approved in 1996, designating 2.1% of a $5 billion award to the seafood processors. Subsequently, plaintiffs crafted separate allocation plans for various claimant categories, excluding claims assigned to Exxon, which they deemed invalid. Exxon objected and sought enforcement of the assignments, but the district court approved the allocation plan, siding with the rationale used in the Icicle case that prevented Exxon from benefiting from punitive damages.
In Exxon’s appeal, three key issues were addressed: (1) whether Exxon had standing to appeal without formally intervening as a plaintiff, which was affirmed; (2) whether public policy justified the district court's decision to deny Exxon access to punitive damages, which was supported by the Icicle ruling favoring similar settlements; and (3) whether the distinction between Exxon's assignment and the "cede back" agreement in Icicle was material, which was found not to be the case, leading to the vacating of the district court's order. The appellees argued that Exxon's lack of formal intervention undermined its appeal rights, but this argument was deemed overly formalistic, as Exxon had been involved in the case from its inception and asserted it was aggrieved by the court's ruling on the validity of the assignments.
Exxon, initially a defendant, is argued by Appellees to have improperly shifted to a claimant status without formally intervening. However, this shift is viewed as a realignment of parties within ongoing litigation, where the court must align parties based on their interests, similar to precedent cases involving diversity of citizenship. Exxon's interests in recovering damages align with other claimants, negating the need for a formal motion to intervene since it is already a party involved in the case.
The central issue is whether Exxon can enter a settlement agreement to recover damages assessed against itself. Citing the Icicle case, it is argued that policies favoring dispute settlements support such agreements, and that cede-back agreements facilitate managing punitive damages in mass tort cases. The district court erred by not allowing Exxon to participate in the punitive damages award.
Appellees argue that Exxon's pursuit of claims via an assignment creates a legal impossibility, as one cannot claim against oneself, citing prior case law. However, this argument overlooks the mandatory class action context, which ensures Exxon's obligations to the plaintiff class remain intact. Exxon's pursuit of the Four Processors' claims is to mitigate its overall financial liability to the class, not to assert independent claims.
A valid assignment grants the assignee standing to sue for the assignor, and distinctions made by Appellees between assignments and cede-back agreements are deemed immaterial, as both serve the same purpose in encouraging settlements. The district court's approval of the Processor Plan is vacated, and the case is remanded for enforcing the settlement agreements. Notably, Exxon has abandoned claims related to assignments from Dragnet Fisheries, Inc. and Inlet Fisheries, Inc.
