In a ruling that the Ninth Circuit Court said it hoped would bring to an end the years-long legal battle over harms done by the massive oil spill from the supertanker Exxon Valdez in Alaskan waters in 1989, a three-judge Circuit panel on Monday found that the ship’s owner must pay about $500 million in interest to fishermen, other small businesses, and groups that had sued for damages.  That represents more than 12 years of interest; Exxon Mobil Corp. had fought to limit the interest to less than a year’s worth.

The decision resolves an issue that the Supreme Court left open last summer, after ruling that Exxon Mobil could be required to pay punitive damages.  The company, of course, could choose to fight on with further appeals.

The Circuit Court’s opinion, found here, also rejected Exxon Mobil’s plea that the other side pay at least 90 percent of the company’s court costs of $70 million, run up in challenging the punitive damages verdict against it.  The Circuit Court said each side should pay its own costs — the part of the ruling that produced a 2-1 split on the panel.

The ruling on interest requires Exxon Mobil (unless it can overturn the decision in a further appeal) to pay interest at 5.9 percent dating from Sept. 24, 1996 — the date on which a federal District Court first ordered the company to pay punitive damages.  This rate will be applied to the $507.5 million in punitive damages that is now the final figure, in the wake of a Supreme Court decision last June that cut the punitive award from $2.5 billion; at an earlier point, in the jury’s verdict, the punitive award had been at $5 billion, but that was reduced by lower courts. 

The Circuit Court did not calculate exactly how much the interest payment would now be, but lawyers for both sides had told the panel that using the 1996 starting date would yield an interest payment of about $500 million.

That would be on top of the $507.5 million in compensatory damages (which Exxon Mobil paid some time ago).  While the Supreme Court said the punitive damages could be no more than the compensatory damages were — that is, $507.5 million — that actually represents only the figure upon which interest is to be calculated.

Exxon Valdez actually owed a total of $507.5 million in the punitive award, and, so far, it has paid $383 million of that to those who sued.  The difference apparently represents money that the company had held back, in hopes of winning a court costs award — that is, up to $70 million — plus a portion of the punitive award that it had been promised would be returned to it by some seafood processing companies under a settlement deal the company had arranged with them.

In all, then, the company’s obligation (beyond earlier amounts it had paid to the federal and Alaska state governments) stands at somewhere above $1.4 billion.

After the Supreme Court had ruled a year ago that punitive damages could be assessed for a maritime incident like this one, but also said the ratio to punitive damages could be no higher than 1-to-1, the interest issue arose.  Those who sued then returned to the Supreme Court, asking the Justices to issue a further ruling that they were entitled to interest from the September 1996 date when the District judge made the punitive award.  Exxon Mobil replied that the Court should rule on the interest issue; if it did not, the company said, it would owe no interest under Supreme Court rules.

In August, the Justices declined to decide the interest issue, sending it back to the Ninth Circuit “without prejudice to the position of any party.” (The Court’s judgment formally concluding the case, including its action on the interest question, was discussed in this post. The actual judgment can be viewed here.)

The case was returned to the Circuit Court last Aug. 15, and the panel put it formally into effect on Sept. 10 (its order for entry of a judgment of $507.5 million in punitive damages can be found here).

That Sept. 10 action, Exxon Mobil then argued, provided the date that any interest payment should start running, not the September 1996 date of the District Court ruling — a time difference that would mean a difference in actual interest payment of many millions of dollars.

Without dissent, the Circuit Court panel agreed with the fishermen and others that they should get interest from the day in 1996 that they won punitive damages, even though the amount was greatly reduced later, especially by the Supreme Court.

The right of those who sued to get punitive damages, the opinion said, “was meaningfully ascertained when the original district court judgment was entered in 1996.”  The evidence supporting that conclusion and its legal foundation, it said, were not disturbed in “nearly a dozen years of subsequent litigation.”  (The parties did agree that, on any interest due, the rate should be 5.9 percent.)

The opinion was written by Circuit Judge Mary M. Schroeder and joined on the interest issue by Circuit Judges Andrew J. Kleinfeld and Sidney R. Thomas.

Judge Kleinfeld, in his separate opinion, said he agreed that interest was due from the 1996 date. “Exxon,” he wrote, “has had a half billion dollars of the plaintiffs’ money ever since the district court entered judgment in their favor.  Interest is required to compensate the plaintiffs for rthe delay in paying the plaintiffs their money.”  He dissented, though, from the ruling requiring each side to pay its court costs.

Judge Schroeder’s majority opinion on that point said: “Although Exxon has succeeded in reducing an original jury verdict of $5 billion by about 90%, it remains liable for a far-from-nominal punitive award of more than $500 million.”

The majority said that Exxon was using “some 20/20 hindsight” in declaring itself “the winner.”  The opinion added that “this ignores the hard-fought, even relentless battle Exxon waged to avoid any liability for punitives, a battle that resulted in an evenly divided decision by the Supreme Court in 2008 leaving in place our 2001 decision on vicarious liability.”

It concluded that, “in this case, neither side is the clear winner.”  Exxon still owed a large amount, yet the earlier award had been reduced by 90 percent.  “In light of this mixed result, and mindful that the equities in this case fall squarely in favor of the plaintiffs — the victims of Exxon’s malfeasance — we exercise our discretion by requiring each party to pay its own costs. Our decision is in accord with our usual practice when each side wins something and loses something.”

Judge Kleinfeld, dissenting, wrote that he was “unable to concur regarding costs.  Satisfying though it may be to shovel money from a large corporation to those whom it wronged, respect for the Supreme Court decision in this case and precedent in other circuits obligates us to award Exxon most, but not all, of its costs for its mostly successful appeal.”

The Circuit Court, the dissenting opinion added, “turned out to be mistaken” when it upheld a punitive award of $2.5 billion.  Kleinfeld noted, in addition, that after the Supreme Court had overturned the Circuit Court’s decision on punitives, it awarded Exxon it costs of pursuing the case in the Supreme Court.  (The Justices’ order in August on final judgment awarded Exxon $14,324 “for costs herein expended.”)

“The majority,” Judge Kleinfeld said, “says that Exxon ‘declares itself the winner,’ but it was really the Supreme Court of the United States that declared Exxon the winner.  Our liability ruling in favor of the plaintiffs was indeed left ‘undisturbed,’ but only because the Court’s tie vote on liability left our decision in place as to that issue.  The Court took pains to point out that leaving our decision in place did not mean we were correct.”

The Circuit Court’s ruling on liability, as Judge Kleinfeld saw it, merely “squeaked by in the Supreme Court,” and was only “a stepping stone on the way to the destination. The destination was money.  On the money, it turned out that we were way off.”

The law, the dissent said, required that Exxon “be compensated in part” for the battle it waged, and not punished for it, “because it turned out that Exxon was largely entitled to prevail, despite our opinions to the contrary.  Humility requires us to accept that.”

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