Court ruling means Exxon may save millions
Seattle Times staff reporter
A federal appeals court has upheld a secret deal by several Seattle seafood-processing companies in the aftermath of the Exxon Valdez oil spill that could reduce by hundreds of millions of dollars the amount the oil company ultimately must pay in damages.
A three-member panel of the 9th Circuit Court of Appeals yesterday ruled that the judge in the 1994 trial abused his discretion by invalidating the agreement and ruling that the so-called "Seattle Seven" could not share in the punitive damages.
The trial court had criticized the deal, and other plaintiffs' lawyers complained it was unethical, particularly because Exxon didn't tell the jury - or anybody else - about it as it argued its case.
But the appeals court reinstated the agreement, saying it was an innovative way to encourage settlements in large class-action cases and is in the public interest.
In such lawsuits, punitive damages are awarded in a lump sum and then divided among the plaintiffs.
The court said that Exxon's ability to get some of that money back encourages such settlements.
The upshot of yesterday's ruling is that the Seattle Seven will get their share of the damages - as much as 15 percent - and then give back most of it to Exxon. The effect is that the ruling will soften the company's punishment and shrink the pot of money available to hundreds of other plaintiffs.
"Obviously, we're disappointed in the decision," said Jerry Nolting in Minneapolis, one of several lawyers representing hundreds of businesses affected by the 11 million gallons of oil spilled in Prince William Sound, Alaska, when the Exxon Valdez tanker ran aground in 1989.
"Exxon should not be able to, through the Seattle Seven, reduce the punitive damages. We're not sure what we're going to do about it yet," he said.
Exxon, now called ExxonMobil, praised the court and defended the deal.
"This decision vindicates ExxonMobil and confirms that the . . . agreement was both an ethical and creative way of settling a large portion of a very complicated piece of litigation," said Charles Matthews, the company's chief counsel.
According to the decision, 10 processors - including the seven largest in Seattle - settled with Exxon in 1991 for $64 million. The deal was that the companies would not release Exxon from any punitive damages, but would give back all but $12.4 million of whatever they were given, in what is called a "cede-back agreement."
Three years later, a jury levied a record $5 billion in punitive damages. If that amount is ultimately upheld - Exxon's appeal is pending before the 9th Circuit - the Seattle Seven would have been eligible for as much as $750 million. Under the agreement, almost all of it will be given back.
The seven Seattle companies are: Icicle Seafoods, Ocean Beauty Seafoods, Wards Cove Packing Co., North Pacific Processors, Trident Seafoods Corp., North Coast Seafood Processors and Aleutian Dragon Fisheries.
"The lion's share of the amount allocated to the Seattle Seven will go to Exxon," said Seattle Seven lawyer Brad Keller. The companies will get to keep some of the money, he noted.
Keller also defended the 1991 deal, even though his clients would have been eligible for hundreds of millions of dollars more if they had not settled.
"We received a very substantial compensatory-damage settlement a decade ago and have had those funds to grow operations and provide employment in the Alaska fishing industry," he said.
That there may be more money now "does not negate the wisdom of having settled 10 years earlier for a sizable sum," Keller said.
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