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Court declines to rule on Exxon interest

The Supreme Court refused on Tuesday to decide whether the fishermen and others who sued over the Exxon Valdez oil spill are entitled to collect interest on the punitive damages award they won — an award that was sharply reduced by the Court.  Instead, the Court sent the issue back to the Ninth Circuit Court to consider, “without prejudice” to either side’s argument on the issue. The Court’s judgment is here.

The Court’s action came in the form of a final judgment, putting into effect its ruling on June 25 in Exxon Shipping, et al., v. Baker, et al. (07-219).  In that ruling, the Court reduced the punitives award from $2.5 billion to the same level as the previous award of compensatory damages — $507.5 million.  The Court said then that, at least in the maritime law field, a punitive award for such an incident should be at most on the same level as the compensatory award — that is, 1 to1.

In that ruling, the Court did not discuss the issue of whether those who sued Exxon Shipping Co. and its parent, Exxon Mobil Corp., for the 1989 oil spill into Prince William Sound in Alaska were entitled to interest on the punitive verdict. Two weeks later, those who sued asked the Court to “make clear in its judgment” either that they were entitled to interest, or else that a Court rule dealing with interest issues did not apply

They are seeking interest at a rate of 5.9 percent from Sept. 24, 1996 — leading, according to their lawyers, to an award of $488 million. The date chosen is keyed to the final ruling of a U.S. District Court awarding punitive damages (at that time, $4.5 billion) and requiring Exxon to pay interest on it.

Their July 8 filing said they were concerned that, if the Court’s judgment in the case did not mention interest, “then Exxon may argue on remand that this Court’s opinion and judgment deprive [those who sued] of their right to interest on the new punitive judgment that will be entered, despite the district court’s prior and unappealed ruling on this issue.”

In response, Exxon on July 15 urged the Court to decide the interest issue itself. If the Court did not do so, it contended, “no interest is allowed” under the Court’s Rule 42.1.  The Court should rule, it suggested, “to forestall further litigation.”

The big oil company and its shipping subsidiary said there was no “sound basis” to award “approximately $488 miliion over and above the $507.5 million that this Court determined was the legally proper amount to punish and deter.”

The Court, now in summer recess, has been pondering the issue since July 18, when those who sued filed the final paper in the dispute, their reply.  At midday Tuesday, the Court issued its formal judgment.

The Court said it was returning the case to the NInth Circuit to reduce the punitive award as required by the June 25 ruling, “and to address the parties’ contentions about respondents’ entitlement to interest on the award remaining, a matter on which this Court declines to rule in the first instance, without prejudice to the position of any party.”

The Court added that Exxon Shipping and its parent were entilted to recover $14,324 in costs — $14,024 for printing the record and $300 for the costs of the Court’s Clerk.

The judgment made no mention of the Court’s Rule 42.1, and the competing interpretations of that offered by the two sides.  That Rule specifies the interest rate to be paid when interest arises in a federal court case — the amount set by law, which is now 5.9 percent.  That was not in dispute.  But the Rule also says that, if the Court has “modified or reversed” a lower court’s judgment, and ordered the lower court to award “a judgment for money,” the Court would provide “instructions with respect to the allowance of interest.”

Those who sued argued that the Rule did not even apply in the Exxon Valdez case, because the District Court in the case already had ruled that they were entitled to interest on the judgment.  The Rule, they added, “addresses a situation in which this Court directs that plaintiffs be awarded money to which they had not previously established a legal entitlement.”

But, if the Rule did apply, they went on, the Court should specify in its final document implementing the decision that they were entitled to interest.

Exxon countered that the Rule directly applied in this case, because the Court had modified the size of the punitive awards. The only issue, it added, “is whether interest should be awarded from the date of the original district court judgment (September 24, 1996) as plaintiffs seek, or whether it should be awarded only from some later date, such as the date of this Court’s judgment fixing the legally proper amount of punitive damages.”

The big oil company contended that there was no reason to “penalize” it by awarding another $488 million.

By the Justices action on Tuesday, there was no clarification of whether Rule 42.1 even applied or what it might mean in such a case in the future.  The Rule’s meaning will not be an issue when the case goes back to the Ninth Circuit. But the question of the meaning of the District Court’s 1996 ruling, and the date on which any interest on the puntives award should start running, will be central to that reopened controversy.

It is conceivable, of course, that whoever loses in the Ninth Circuit could again seek to appeal to the Supreme Court. It is also possible that the Ninth Circuit may return the dispute to the District Court for an initial review.