Exxon Valdez Oil Disaster and Class Action Lawsuit

ARTICLE ENDNOTES

THE EXXON VALDEZ LITIGATION JUSTICE DELAYED:
SEVEN YEARS LATER AND NO END IN SIGHT (1996)

by William B. Hirsch

ENDNOTES (For the article itself, click here)

The trial of In re: The EXXON VALDEZ, A89-0595-CV (HRH) was held in the United States District Court for the District of Alaska. It began on May 2, 1994 and ended on September 16, 1994. Exxon refers to Exxon Corporation and Exxon Shipping Company.
Anchorage Daily News, March 17, 1996.
Many fishermen claim that the amount of oil spilled was much higher, based on eyewitness accounts of oil continuing to flow out of the Exxon Valdez after the spill.
At trial, Rawls changed his position, denying that it was gross error or that Hazelwood was drunk (he said "his advisors" gave him "bad dope"). This was just one of the positions that Exxon took at trial that contradicted earlier statements to Congress and to the public. For example, a few days after the spill, Rawls told Congress that Exxon would not raise the Coast Guard's actions as a defense, but at trial Exxon tried to blame the Coast Guard.
At trial, Rawls switched his position to "legal claims," which renders the highly publicized apology meaningless.
Plaintiffs believe this claim is highly inflated, and includes such things as the cost of repairing the Exxon Valdez. It also does not account for the fact that many of these costs were taken as tax deductions, or that Exxon has sought over a billion dollars from its insurance carriers. Exxon reduced the claim at trial to $2.7 billion, but in its public announcements, Exxon has consistently used the larger number.
The parallel state action was filed in the Superior Court for the State of Alaska and was designated: In re EXXON VALDEZ OIL SPILL LITIGATION, No. 3AN-89-2533 Civil (Consolidated).
Other defendants included Joseph Hazelwood, and other oil companies that, along with Exxon, owned Alyeska, including B.P Pipelines (Alaska), Inc., ARCO Pipeline Company, and Mobile Alaska Pipeline Company. Exxon also filed a third party complaint naming Sperry Marine, claiming that the steering mechanism that it produced was faulty. This claim was ultimately dismissed.
43 U.S.C. §§ 1651-1655. Strict liability is a legal theory permitting recovery regardless of fault. It is usually limited to "ultra-hazardous" or other strictly defined activities, and recoverable damages are often "capped" or otherwise limited.
46 A.S. § 46.03.822.
United States Constitution, Art. III, § 2.
The concept of preemption is rooted in the Supremacy Clause of the United States Constitution. Art. VI, cl.2. Federal law preempts, or supersedes, state law when Congress expressly or implicitly intends for it to do so, or when there is a conflict between federal and state law. See Cippollone v. Liggett Group, Inc., 505 U.S. 504 (1992).
Under the locality test, the wrong must have occurred on the high seas or navigable waters. Under the maritime nexus test, the wrong must bear "a significant relationship to traditional maritime activity." See Order No. 38 at 2.
Robins Dry Dock & Repair Co. v. Flint, 275 U.S. 303 (1927); see Louisiana ex rel. Guste v. M/V Testbook, 752 F.2d 1019 (5th Cir. 1985), cert. denied, 477 U.S. 903, (1986). For a full discussion of this rule, see Owen, Recovery for Economic Loss Under U.S. Maritime Law: Sixty Years Under Robins Dry Dock, 18 J. Mar. L. & Com. 157 (1987).
In Order No. 38, Judge Holland held that plaintiffs' strict liability claims under the Alaska Act were not preempted, to the extent that they do not conflict with federal law. The ruling was based on TAPAA, which specifically imposes strict liability for oil spills up to $100 million. Thus, under TAPAA, the Robins Dry Dock rule does not apply to the first $100 million in damages. While the Alaska Act does not set such a limit for strict liability claims, Judge Holland held that the first $100 million of claims under the Alaska Act did not conflict with federal law and was not preempted; any claim in excess of $100 million was preempted.
Proximate cause is a legal tool used to limit a party's responsibility for the consequences of its acts. See generally William L. Prosser, Law of Torts, Chapt. 7 (4th ed. 1971). The standard test under the common law is to limit liability to "foreseeable" injuries. While this also restricts a party's liability, it does so without setting up the kind of strict and artificial barrier applied in maritime cases.
See Order Nos. 174 (Seafood Wholesaler, Processor, Cannery Employee, and Tenderer Plaintiffs) and 189 (Area Businesses and Municipalities). Judge Holland apparently derived pleasure by issuing several of the Robins Dry Dock orders on the fifth anniversary of the spill.
See Order Nos. 190 (Native Claims for Non-Economic Injury) and 223 (Unoiled Real Property). In Order No. 190, Judge Holland cited Robins Dry Dock for guidance, but dismissed the Alaska Natives' claim for injury to their subsistence way of life on different grounds. Essentially, Judge Holland concluded that the Alaska Natives claim amounted to a "public nuisance" claim, which could not be sustained because their non-economic subsistence claim was not "different in kind" than that of other Alaskans, and thus could not be maintained by private litigants. Judge Holland was somewhat contrite in Order No. 190, stating that his order did not reject the notion that there are cultural differences between Alaska Natives and other Alaskans. He also observed that neither the oil spill nor other historical threats to Native culture had deprived the Alaska Natives of their culture, which "is deeply embedded in the mind and the heart."
Order No. 38 (see Union Oil Co. v. Oppen., 501 F. 2d 558 (9th Cir. 1974).
Order Nos. 188 and 212. In Order No. 188, Judge Holland took the position that "economic loss" and "lost profits" are not the same, and that Oppen created an exception only for lost profits. Since devaluation of boats or permits are derivative of lost profits, not lost profits themselves, they were not recoverable. Plaintiffs estimated these claims to be worth $300-400 million.
Order No. 242.
September 26, 1990 Order; see Askew v. American Waterways Operators, Inc., 411 U.S. 325 (1973). Recently, the First Circuit Court of Appeals reached a similar conclusion. See Ballard Shipping Co. v. Beach Shellfish, 1994 U.S. App. LEXIS 22063 (1st Cir. 1994). After recognizing that the federal interest in regulating maritime commerce must be carefully weighed against a state's interest in regulating conduct affecting its residents, the First Circuit concluded that state law is not preempted unless it imposes or threatens "such heavy costs that maritime commerce may itself be impaired."
The theory of a class action derives from the concept of a common benefit fund. Over 100 years ago, the Supreme Court recognized that those who create a common benefit should be rewarded. Central Railroad & Banking Co. v. Pettus, 113 U.S. 116 (1885); Trustees v. Greenough, 105 U.S. 527 (1881). However, class actions were not a familiar part of the legal landscape until 1966, when Rule 23 of the Federal Rules of Civil Procedure was amended.
Rule 23(c)(1). Typically, plaintiffs file a motion which defendants may oppose.
Rule 23(a) provides:

(a) Prerequisites to a Class Action. One or more members of a class may sue or be sued as representative parties on behalf of all only if (l) the class is so numerous that joinder of all members is impracticable, (2) there are questions of law or fact common to the class, (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and (4) the representative parties will fairly and adequately protect the interests of the class.
Rule 23(b) provides:

(b) Class Actions Maintainable. An action may be maintained as a class action if the prerequisites of subdivision (a) are satisfied, and in addition:

    (1) the prosecution of separate actions by or against individual members of the class would create a risk of...

        (B) adjudications with respect to individual members of the class which would as a practical matter be dispositive of the interests of the other members not parties to the adjudications or substantially impair or impede their ability to protect their interests; or

    (2) the party opposing the class has acted or refused to act on grounds generally applicable to the class, thereby making appropriate final injunctive relief or corresponding declaratory relief with respect to the class as a whole; or

    (3) the court finds that the questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and that a class action is superior to other available methods for the fair and efficient adjudication of the controversy.
Of course, different class action lawsuits were tiled by many different lawyers, some of whom represented the same group of clients (e.g., commercial fishermen). Eventually, as in similar cases, all of the class action cases were consolidated into a single master complaint.
As an alternative, the consolidated class plaintiffs also sought certification under Rules 23(b)(2). Efforts were made to certify a use and enjoyment class under Rule 23(b)(2) on the grounds that injunctive relief was appropriate. Specifically, they wanted to force Exxon to clean up and monitor the environment, and adopt policies that would help ensure that there were no spills in the future. However, neither the state nor federal court certified any class under Rule 23(b)(2), primarily because such certification is only proper where plaintiffs primarily seek injunctive, not monetary, relief. See Order No. 35; Pretrial Order No. 17 (State).
It is widely recognized that there are at least two types of mass tort actions: (1) mass accidents, involving a large number of persons injured as a result of a single accident and (2) product liability cases arising out of injuries suffered from widespread use of a defective product. See Note "Federal Mass Tort Class Actions: A Step Toward Equity and Efficiency," 47 Alb. L. Rev. 1180 (1983). Mass accidents may involve mass exposure to a toxic or environmentally harmful substance. An "accident" may be a single catastrophic event, or it may be the result of cumulative long term exposure. As many courts and commentators have noted, mass accidents are part of the modern landscape and pose "the most important and difficult management problem facing the federal court system today." In re A.H. Robins Co., Inc., 880 F.2d 709 (4th Cir. 1989) (and cases and authorities cited); Newberg, Newberg on Class Actions (3d ed. 1992) 17.05. As one commentator observed:

Mass accidents are a recurring phenomenon of modern technological society. It is not unusual for hundreds or thousands of injuries to be caused by a sudden event -- an airplane crash or a structural building failure -- or by a product defect in a widely used drug. Victims typically seek redress for such injuries by initiating individual suits. As a result, the judicial system becomes crowded with multiple claims concerning one basic course of conduct, with each victim seeking to maximize his own recovery and each defendant attempting to reduce his potential liability. As each party acts to further a narrow perception of his own best interests, the collective interests of the parties. society. and the judicial system may be ignored.

Note, "Class Certification in Mass Accident Cases Under Rule 23(b)(1)." 96 Harv. L. Rev. 1143 (1983).

When Rule 23 was amended in 1966, the Advisory Committee Note warned that class actions under Rule 23(b)(3) would not normally be appropriate in mass tort personal injury cases because individual issues concerning damages and causation would predominate over common questions. However, courts in the 1980s began to turn to class actions as a case management tool, after years of asbestos and Dalkon Shield litigation proved unmanageable. These courts recognized that litigating and trying thousands upon thousands of individual cases was unduly burdensome to the judiciary and the parties, and led to waste, inefficiency and delay. As the Fourth Circuit observed in A.H. Robins:

"When account is taken of the toll of such cases on the court system itself, it is evident that the proper functioning of the courts and the fair and efficient administration of justice for other litigants whose right to a judicial determination are inevitably delayed inordinately by the clogging of the court system by mass tort actions tried individually and the societal costs of the endless repetition of these suits in separate trials at substantial costs to the judicial system mean that a mechanism for deciding expeditiously, efficiently and relatively inexpensively these actions without the delays of individual suits is demanded."

Thus, by 1989, it appeared that there was a national trend to certify mass tort cases for class treatment, especially those involving a single triggering event, such as a toxic leak or explosion. See In re A.H. Robins, 880 F.2d at 725-27 (Dalkon Shield); Sterling v. Velsicol Chem. Corp., 855 F.2d 1188 (6th Cir. 1988) (toxic leak); In re School Asbestos Litigation, 789 F.2d 996 (3d Cir.), cert. denied sub nom., Celotex Corp. v. School Dist. of Lancaster, 479 U.S. 852 (1986); Jenkins v. Raymark Industries, Inc., 782 F.2d 468, reh'g denied, 785 F.2d 1034 (5th Cir. 1986) (asbestos); In re Copley Pharmaceutical, Inc., 161 F.R.D. 456 (D. Wyo. 1995).

However, there now appears to be a judicial backlash, as more and more mass tort actions have been prosecuted, not only in mass accident cases, but in other areas such as breast implants, tobacco products, electromagnetic fields, implanted medical devices, drugs, and blood products. Thus, whether to certify mass torts as class actions is currently one of the hottest issues in class action jurisprudence. Recently, three federal courts have reversed lower court decisions certifying cases involving personal injury claims. See Castano v. The American Tobacco Company, 84 F.3d 734 (5th Cir. 1996); In re American Medical Systems, Inc., 75 F.3d 1069 (6th Cir. 1996): In the Matter of Rhone-Poulenc Rorer, Inc., 51 F.3d 1293 (7th Cir.), cert. denied, 116 S. Ct. 184 (1995). In these cases, the courts explicitly evaluated the merits of the claims, despite clear Supreme Court law holding that pre-determination of the merits or outcome of the case are not appropriate at the class certification stage. See Eisen v. Carlisle & Jacquelin, 417 U.S. 156 (1974). These cases were also based on the appellate court's view that class actions provided the plaintiffs with unfair leverage over defendants, and were themselves unmanageable because of the need to apply the laws of the 50 states and conduct individual damage trials for all class members. These cases, and particularly Castano, the highly publicized case against the tobacco companies by nicotine dependent smokers, have left the future of product liability class actions in considerable doubt. Eventually, the Supreme Court will be forced to grapple with these issues.

Interestingly, the Advisory Committee on Civil Rules has recently considered modifications of Rule 23 and circulated drafts proposing vast changes, including provisions requiring a merits determination. As of April 1 996, such provisions had been removed, as had many other controversial provisions that would have made it more difficult to certify a class. See Proposed Amendments to the Federal Rules of Civil Procedure, dated April 18-19, 1996.

Of course, as the courts have struggled to solve these problems, use of the class action device to manage and resolve mass torts has also been widely discussed in the professional literature. See J. Coffee, "Class Wars: The Dilemma of the Mass Tort Class Action," 95 Colum. L. Rev. 1343 (1995); D. Rosenberg, "The Causal Connection and Mass Exposure Cases: A "Public Law" Vision of the Tort System," 97 Harv. L. Rev. 851; D. Rosenberg, "Class Actions for Mass Forts: Doing Individual Justice by Collective Means," 62 Ind. L.R. 561 (1987); C. Rubin. "Mass Torts in Litigation Disasters," 20 Ga. L. Rev. 429 (1986); Seltzer, "Punitive Damages in Mass tort Litigation: Addressing the Problems of Fairness, Efficiency and Control." 52 Fordham L. Rev. 37 (1983).
Sterling v. Velsicol Chemical Corp., 855 lK2d 1188 (6th Cir. 1988).
Judge Holland's decision was based on the fact that the case primarily concerned damages, and individual questions predominate with respect to damages. Judge Holland further ruled that the different classes, with overlapping memberships, would be difficult to manage. See Order No. 35.

However, the most important part of Judge Holland's order was a total surprise. Judge Holland, without any urging from any party. determined that plaintiffs were required to pursue claims through the Trans-Alaska Pipeline Liability Fund ("TAPLF") created by TAPAA before they would be permitted to pursue their claims in federal court. TAPLF is essentially an industry-controlled self-insurance pool with a maximum liability of $86 million (after the first $14 million is paid by the vessel owner). The Judge based his order on the long-standing rule that a plaintiff must "exhaust" any administrative remedies available before filing a lawsuit. The problem, as plaintiffs pointed out, was that TAPAA was not a government entity, and the exhaustion remedy was not applicable. Plaintiffs further contended that TAPAA explicitly provides that its jurisdiction is not exclusive. Nonetheless, Judge Holland set in motion an expensive and time-consuming process in which many plaintiffs filed individual claims with TAPLF. The whole enterprise was fruitless, for TAPLF denied almost every claim, after spending years and tens of millions of dollars analyzing them.
Pretrial Order Nos. 17 and 22. Judge Shortell did not certify a municipal government class, on the grounds that it did not meet the numerosity test, or the use and enjoyment class. Pretrial Order Nos. 23 and 24.
At the time, Judge Holland had failed to set a trial date, despite requests that he do so.
Judge Holland's two step analysis demonstrates how the law can be used to achieve a desired result. First, Judge Holland held that Exxon had properly removed the action brought on behalf of the environmental groups (to set up a trust fund to clean-up the environment and study the impact of the spill). Although it is black letter law that the existence of a federal question is determined by reviewing the pleadings (e.g., the complaint), here Judge Holland held that these plaintiffs had raised a federal question not in the pleadings, but in a separate reply brief they had drafted and filed in support of their motion to certify a "Conservation Trust" class (which Judge Shortell had in fact denied). Order No. 80.

According to Judge Holland, these plaintiffs had raised a federal question by an argument in the reply brief to the effect that they had a right to seek injunctive relief in the form of a trust fund, even though the State of Alaska had settled its claims against Exxon for damage to the environment. Judge Holland determined that the basis of this assertion was that the state settlement was insufficient, and held that the environmental plaintiffs were attacking the right of the state to settle on these terms, and seeking to set aside the settlement (something these specifically plaintiffs denied).

In the second step of the analysis, Judge Holland used the environmental plaintiffs as the pivot. According to Judge Holland, all of the other class actions were now properly before the federal court because these cases had been joined as separate actions in a consolidated complaint filed pursuant to court order. Judge Holland refused to sever the claims of the environmental plaintiffs from the other cases, or to accept that the filing of the consolidated complaint was a procedural convenience and not an indication that the claims had been substantively joined.
Plaintiffs Preliminary Designation of Issues For April 1993 Trial (State).
Chevron U.S.A., Inc. v. Hammond, 1978 Am. Mar. Cas. 1697 (D. Alaska 1978).
Order No. 83.
Judge Holland also denied the remand petition in three other cases, on the same grounds, even though these cases were filed after the other state cases had been removed. See Order Nos. 91, 92, and 108. The reasoning was that the plaintiffs in those actions had not objected to the Designation of Issues. However, the court remanded those actions in which the plaintiffs made "an immediate and timely objection" to the Designation. Thus, certain municipalities and native corporations were remanded to state court. See Order Nos. 93, 118, and 134. These cases eventually went to trial in state court in June 1994, with a jury returning a verdict in favor of plaintiffs for $9.7 million.
Exxon Shipping Co. v. Airport Depot Diner, No. 95-35819.
Order Nos. 289 and 292.
The Alyeska case was settled on behalf of a "settlement class." A settlement class is a device used to settle a case on a class basis even when no "litigation" class has previously been certified. Settlement classes are an effective tool for resolving complex cases, and are often supported by defendants who had previously opposed certification of a litigation class. Many courts relax the Rule 23 criteria for a settlement class, recognizing that different considerations apply. See A.H. Robbins, 880 F.2d at 738. However, the use of settlement classes has been criticized recently by some courts, including the Third Circuit in Georgine v. Amchem Prods., Inc. (3d Cir. May 10, 1996) (settlement class must meet criteria of Rule 23(b)) and In re General Motors Corp. Pick-Up Truck Fuel Tank Prods. Liab. Litig., 55 F.3d 768 (3d Cir. 1995) (settlement class must meet criteria of Rule 23(a)). The Advisory Committee's Proposed Amendments to Rule 23 expressly provides for settlement classes without requiring Rule 23(b)(3) findings.
Manual for Complex Litigation (3d), § 30.4.
See Rule 23(e); Officers for Justice v. Civil Service Commission in San Francisco, 688 F.2d 1615 (9th Cir. 1982), cert. denied, 459 U.S. 1217 (1983) (sets forth factors for determining if settlement is fair, adequate and reasonable).
The direct action lawyers also had to obtain client approval, but the court is not involved in this process.
In contingency cases, the lawyers advance all the costs of the litigation and receive no compensation unless and until there is a recovery. While in the Exxon Valdez case there is a large upside if the plaintiffs win big, the risks are enormous. Here, plaintiffs counsel have paid tens of millions of dollars in costs, and have expended close to a hundred million dollars of time. This means that the plaintiffs' lawyers work for nothing for years, making a huge investment of time and money in hopes of eventual success. In contrast, lawyers for Exxon are paid on a regular basis. as the work is performed. Total defense costs have been reported to be in the two to three hundred million dollar range, and may be greater. Obviously, in such cases, well-funded defendants like Exxon can put enormous pressure on plaintiffs.
Traditionally under the common law, those responsible for an injury (joint tortfeasors) were joint and severally liable for a victim's damages. This means that an injured plaintiff can recover the entire amount of damages from any of the joint tortfeasors, regardless of their proportionate share of the fault. Any of the joint tortfeasors that is required to pay may seek "contribution" or "indemnity" from the other joint tortfeasors, but the plaintiff is entitled to recover the entire amount from any one of joint tortfeasors, even if the other joint tortfeasors are unable to pay their share. For hundreds of years, this doctrine was enshrined in the law, based on the principle that equity mandated that, as between an innocent victim and a responsible defendant, the innocent party should be made whole. In recent years, "tort reformers" and corporate defendants that are sensitive to being the "deep pocket" have sought to change, or modify the law, imposing a system of proportionate fault that requires a defendant to only pay its "fair share" of the damages, based on its share of responsibility for the damages. Thus, if a defendant that is 70% at fault has no money, the plaintiff would be able to recover only 30% from the other responsible defendants.

When there is more than one defendant, and one or more settles before trial, the prior settlements can be offset against the trial judgment in one of two ways. See In re Jiffy Lube Sec. Litig., 927 F.2d 155 (4th Cir. 1991); Franklin v. Kaypro Corp., 884 F.2d 1222 (9th Cir. 1989), cert. denied, 498 U.S. 890 (1990). First, it can be deducted "pro tanto," meaning that the amount of the settlement is deducted from the amount of the judgment, dollar for dollar. A second method is to determine the proportionate fault of each tortfeasor, and require each to pay only their percentage share of the damages. In this scenario, if plaintiffs settle with one party for an amount that is less than their proportionate share, as determined at trial by the jury, plaintiffs would simply not recover the difference between the settlement amount and that defendant's proportionate share. In this case, that was a risk that plaintiffs were not willing to take, so they conditioned the settlement on a court determination that the settlement could only be deducted on a pro tanto basis from any recovery against Exxon.
Order No. 163. Judge Holland held that a finding that the settlement was fair, adequate and reasonable under Rule 23(e) was sufficient to meet the "good faith" standard.
Order Nos. 163 and 182.
In the end, this did not matter, for Alyeska paid more than its share in light of the amount of the Phase II verdict.
This was necessary because Judge Holland had been unable to retain control over all of the state cases removed by Exxon. Judge Shortell had set the cases remanded to state court for trial on June 6, 1994. Judge Holland immediately set May 2, 1994 as the trial date in federal court.
See TXO Prod. Corp. v. Alliance Resources Corp., 509 U.S. 443 (1993); Pacific Mutual Life Ins. Co. v. Haslip, 499 U.S. 1 (1991).
Order No. 180 Supplement; see In re "Agent Orange" Prod. Liab. Litig., 100 F.R.D. 718 (E.D.N.Y. 1983), mandamus denied sub nom., In re Diamond Shamrock Chem. Co., 725 F.2d 858 (2d Cir. 1984).
Order No. 204; Order No. 180 Supplement.
Setting aside these tactical considerations, mandatory punitive damages classes make sense, both from a legal and practical perspective. Courts and legal reformers have long been concerned that defendants that are subject to multiple punitive damages awards, in successive trials by plaintiffs bringing similar claims, may exhaust the resources of the defendants and violate their due process rights. See Dunn v. Hovic, 1 F.3d 1371 (3d Cir. 1993) (full discussion of cases and commentary). While a jury that has determined that punitive damages are appropriate is normally told, before deciding on the amount, about the amount of punitive damages awarded in other cases involving the same wrongful conduct, each such jury is still free to make its own determination as to the appropriate amount necessary to serve the twin goals of deterrence and punishment. This may be appropriate, since a jury typically does not hear evidence regarding injuries other than to those of the plaintiffs in that particular case. To properly decide on the amount of punitive damages that must be awarded to both deter and punish the defendant for its wrongful conduct, it may be necessary for each jury to make its own determination. However, this can result in a windfall to the first plaintiffs in the courthouse door, for juries in subsequent cases may decide that the defendant has already been punished enough, in the earlier trials.

A solution to these problems is to conduct a single punitive damages trial on behalf of all possible claimants. Not only does this avoid multiple trials, and multiple risks to defendants, it ensures that whatever award is made is fairly distributed among all injured plaintiffs. The caveat, of course, is that the jury must hear all the relevant evidence, including evidence concerning the injuries suffered by all members of the class. Otherwise, logically, the jury would be unable to make a punitive damages award that had a "reasonable relationship" to the actual damages suffered. In reality, defendants often fear such a trial, because the risk is so great, and many plaintiffs attorneys are also opposed, for they think that a defendant exposed to multiple punitive damages trials is more vulnerable and likely to settle.

One alternate utilized by some courts is to conduct a liability trial on a class basis, including a determination as to whether plaintiffs are entitled to punitive damages. However, in the asbestos cases, and many other cases involving personal injuries, the amount of actual damages must be determined on an individual basis, in subsequent minitrials or administrative proceedings. In these cases, some courts have instructed the jury to decide on the proper ratio of compensatory to punitive damages, which can then be imposed mechanically as damages are determined in each individual case. See Jenkins v. Raymark Industries, Inc., 109 F.R.D. 269 (E.D. Tex. 1985), aff'd, 782 F.2d 468 (5th Cir. 1986).
28 U.S.C. § 2283 provides:

A court of the United States may not grant an injunction to stay proceedings in a State court except as expressly authorized by Act of Congress, or where necessary in aid of its jurisdiction, or to protect or effectuate its judgments.
The lesson is that mandatory punitive damages classes are dangerous to defendants. Indeed, as much as they complain about multiple punitive damage trials, corporate defendants consistently oppose certification of a punitive damages class, either on a mandatory or opt out basis.
Plaintiffs' attorneys also cynically believe that defense attorneys become more reasonable after discovery, for by then they have had the opportunity to run up their fees. This view probably has as much validity as the corporate community's cry that plaintiffs' bring strike suits, forcing defendants to settle claims with no merit for their "nuisance value."
In complex cases such as this, courts often appoint a "discovery master," with responsibility for resolving discovery disputes. Here, Judge Holland and Judge Shortell agreed at the beginning of the case to coordinate discovery and jointly appointed a local attorney to serve as the discovery master. While a party usually has the right to appeal a decision of a discovery master to the judge, such appeals are discouraged and rarely granted.
One advantage of a class action is that "absent class members" (members of the class who are not named class representatives) are not normally subject to discovery. The reason is that the named class representatives stand in their shoes, and represent their interests. Since discovery can include answering interrogatories (written questions), producing documents, and answering questions under oath in a deposition, this is a tremendous advantage. In this case, however, some plaintiffs originally filed individual cases, only to decide later to dismiss those cases and become a class member. Exxon nevertheless sought discovery from them and, inexplicably, the Discovery Master granted that request, even when the original direct action was filed without the individuals' knowledge or authorization.
This was difficult for many plaintiffs, since many were forced to comply with repeated requests for more information. In many cases, plaintiffs were unable or unwilling to comply, and their claims were dismissed. Unfortunately, in some of these cases, some of the plaintiffs' lawyers were also at fault. for either failing to keep track of all of their clients, or by failing to follow through with discovery requests.
Fed. R. Civ. P. 26 and 30.
The work product doctrine protects "the mental impressions, conclusions, opinions or legal theories concerning the litigation of an attorney or other representative of the party." See Hickman v. Taylor, 329 U.S. 495 (1947); also see Fed. R. Civ. Proc. 26.
In June 1992, Judge Holland denied plaintiffs' motion to remand the class actions to state court. Order No. 80. Certain classes, however, had been certified by Judge Shortell. In December 1993, at the urging of Judge Holland, the parties stipulated to redefine those classes. Thus, despite the earlier battles over class certification, the parties stipulated to certify the following classes a few months before trial: (1) Commercial Fishing class (with nine subclasses by area and species); (2) Alaska Native class (with subclasses by area); and (3) Property Owner class. The parties further agreed to "decertify" the area business class previously certified by Judge Shortell. Had these classes not been certified, plaintiffs' class counsel were prepared to file thousands of additional individual cases, for most class members had entered into an agreement with class counsel to represent them on an individual basis if necessary.
Punitive damages can of course be awarded for intentional conduct. Since recklessness is considered a form of intent, it too is a basis of awarding punitive damages. See Smith v. Wade, 461 U.S. 30 (1983); Prospectus Alpha Navigation Co. Ltd v. North Pac. Grain Growers. Inc., 767 F.2d 1379 (9th Cir. 1985).
Originally, Phase II was divided into two pairs Phase II-A (commercial fishing) and Phase II-B (Alaska Natives). At trial, the Alaska Natives were limited to their claim for the commodity value of their lost subsistence harvest. Order No. 190. Just before Phase II-B was scheduled to begin, the Alaska Natives settled their remaining claim for $20 million, retaining their right to appeal Order No. 190. This was a class settlement, and many Alaska Natives who had brought individual claims opted out. Eventually, they settled on the same basis as the class.
In the most important ruling in plaintiffs' favor. Judge Holland denied Exxon's motion to exclude plaintiffs from introducing the results of the Hazelwood blood test taken by the United States Coast Guard after the spill. demonstrating that Hazelwood was legally drunk at the time of the grounding. Order No. 215. Exxon argued that the tests were unreliable, because the blood sample could have been tainted. There was no evidence of tampering with the blood sample, but the chain of custody was not maintained with sufficient care and professionalism by the Coast Guard.
Several such orders were issued "under seal" to protect "confidential" information.
Pictures of the loss of wildlife and the clean-up were excluded, on the grounds that they had more emotional appeal than relevancy.
Order No. 245. This included evidence that would impeach Exxon's claims regarding how much it had spent in response to the spill.
Order No. 246. The excluded evidence was based on the statement in Exxon's financial statements that the final outcome relating to the lawsuits "will not have a material adverse effect on the corporation's operations or financial condition."
Judge Holland precluded flight attendants on Alaska Airlines from testifying that Hazelwood was drinking heavily on a flight from Alaska to the Lower 48 a few days after the spill.
In civil cases, the standard of proof is either the preponderance of evidence (more likely than not), or clear and convincing evidence. In criminal trials, the standard of proof is higher: beyond a reasonable doubt.
Phase III Jury Instruction Nos. 33 and 34.
Phase II Jury Instruction No. 38. This instruction contradicted an earlier court order holding that the potential impact on shareholders should not affect the award of punitive damages, because "shareholders who invest in Exxon bear the risk that Exxon will spill oil, and if they do not wish to bear that risk, they may invest elsewhere." See Order No. 196.
Phase III Jury Instruction No. 30.
Phase III jury Instructions 30, 31, 34, 35, and 36.
See TXO, 113 5. Ct. at 2723; Haslip, 499 U.S. at 19.
Two of these were particularly important. First, Judge Holland, as requested by plaintiffs, instructed the jury that punitive damages can be imposed in maritime cases when the conduct was reckless. Phase I Jury Instruction Nos. 27, 28 and 40, see Prospectus Alpha Navigation Co.. Ltd. v. North Pac. Grain Growers, Inc., 767 F. 2d 1379 (9th Cir. 1985). Exxon had argued that the standard was not reckless conduct, but actual malice. Second, Exxon argued that Captain Hazelwood was not a "managing agent" of Exxon, and that Phase I Jury Instruction Nos. 34 and 36 improperly directed the jury to find that he was. Exxon's argument is that in leaving the bridge of the ship, Captain Hazelwood violated Exxon's policies and therefore was not acting within the scope of his employment. The point, however, is that the jury was provided a test for determining whether Hazelwood was a managerial agent, found that he ‘a as, and further found that he was acting within the scope of his employment when he reckless lv commanded the tanker. Exxon's attack on the jury instructions is really a disguised attack on the jury's findings.
Plaintiffs will probably appeal Judge Holland's Robins Dry Dock rulings, ten or so jury instructions, and several of the evidentiary rulings, and ask the Ninth Circuit to consider them only in the event that it first decides to reverse the $5 billion punitive damage award.
During the trial, Exxon reputedly had over a hundred attorneys in Alaska working on the case (plus untold back-up in Houston, Seattle. and Los Angeles), and kept a squadron of college students employed for the summer reviewing deposition transcripts and the like.
Captain Hazelwood's trial lawyer was a Columbo prototype from New York.
Plaintiffs had an additional 15 to 20 other core members of the trial team, another 20 or 30 attorneys who participated at different points in the trial, and a core of 4 or 5 attorneys on their legal team, responsible for responding to Exxon's many motions and other legal issues.
Frank larossi, President of Exxon Shipping Company, stated that assigning a captain such as Hazelwood with "an alcohol abuse problem was a potential for disaster to the environment."
Plaintiffs put on evidence demonstrating that Hazelwood was a known alcoholic since at least 1985, when he was sent to a treatment center; that he had relapsed and was drinking openly after his release; that Exxon was not required by law or its own internal policies to return Hazelwood to a safety-sensitive position; that Exxon contributed to Hazelwood's relapse by assigning him to command a tanker immediately upon his release from a treatment center; and that Exxon failed to properly evaluate Hazelwood before returning him to his job as ship captain.
Plaintiffs put on evidence that Exxon ignored known and accepted requirements for aftercare and monitoring; ignored Hazelwood's relapse despite repeated incidents, reports and warnings for over four years; and failed to monitor Hazelwood or institute an effective monitoring program, as demonstrated by its failure to produce a single piece of paper documenting any monitoring activities.
The evidence showed that Hazelwood had at least 8 or 9 double vodkas the afternoon of the grounding, before he returned to the ship. and had a blood alcohol level of .241 at the time of the grounding.
Hazelwood left the bridge two minutes before the ship needed to make a critical turn, and failed to return when told there was a problem. Other pilots testified that it was the duty of the captain to stay on the bridge during the entire transit through PWS.
The so-called Hammond factors adopted by the Supreme Court in Haslip include the following:

(a) whether there is a reasonable relationship between the punitive damages award and the harm likely to result from the defendant's conduct as well as the harm that has actually occurred; (b) the degree of reprehensibility of the defendant's conduct, the duration of that conduct, the defendant's awareness, any concealment, and the existence and frequency of similar past conduct; (c) the profitability to the defendant of the wrongful conduct and the desirability of removing that profit and of having the defendant also sustain a loss; (d) the "financial position" of the defendant; (e) all the costs of litigation; (f) the imposition of criminal sanctions on the defendant for its conduct, these to be taken in mitigation; and (g) the existence of other civil awards against the defendant for the same conduct, these also to be taken in mitigation.
This included harm to the native Alaskans who settled their claims just before trial ($20 million), damages awarded to native corporations and municipalities in the state court trial ($9.7 million), settlements with processors in 1990 ($123 million), Phase IV damages ($70-200 million), and damages to commercial fishermen in state court for permit and vessel losses ($50-140 million), for a total of $559.7-779.7 million. In determining that there was a reasonable relationship between the actual and potential harm and the punitive damage award, Judge Holland did not even consider the damages to the processors and permit and vessel losses, for these were not legally cognizable under his Robins Dry Dock analysis. Order No. 267.
Plaintiffs made no attempt to include the damages caused to other plaintiffs, whose claims were dismissed by Judge Holland under Robins Dry Dock. While there is no doubt that these claimants were damaged by the spill. and are potentially members of the class, plaintiffs did not want to create another issue for Exxon on appeal. Plaintiffs also put on no evidence of the social and psychological impacts of the spill, or of damages to the environment, for the same reason. Nonetheless, a strong case can be made that all harm caused, or likely to be caused, is pertinent, even if those who suffered those losses cannot recover under the prevailing legal standards. See TXO, 113 S.Ct. at 2720.
Despite this stipulation, Exxon has made it clear that it intends to raise the issue on appeal, claiming that the jury was given inflated damage estimates and was told about losses suffered by certain plaintiffs not entitled to recover anything under the law.
At trial, Exxon reduced the $3.5 billion figure it had used up to that time, because plaintiffs were prepared to show that the additional payments were for such things as repairing the Exxon Valdez and paying for the litigation.
As explained above, plaintiffs were not permitted to show that much of the cost was tax deductible or borne by others. Order No. 245. In addition, plaintiffs did not counter Exxon's evidence regarding the clean-up, even though Exxon's story was disputed by practically every individual involved. The reason was simple: much of the evidence was of necessity anecdotal, and proving that the clean up effort was by and large a public relations stunt and little else would be time-consuming and inconclusive, and would divert attention from the real issues.
Exxon was able to do this in Phase III, even though in Phase I it had defended the policies that it later changed. Usually, a defendant must choose to either defend its policies, or show how it has learned from its mistakes and changed. This was one of the great tactical advantages enjoyed by Exxon because of the three-phase trial structure.
Analysts had already "discounted" Exxon's stock in anticipation of the punitive damage award. Most expected an award in the $6-8 billion range.
Entry of final judgment means that all issues have been decided and the case is ready for appeal. See Fed. R. Civ. Proc. 54.
Plaintiffs who are successful at trial are normally entitled to pre-judgment interest on compensatory damages, payable as of the day the injury was suffered, and post-judgment interest. Here, such interest has been awarded. Order No. 299; 28 U.S.C. § 1961.

Plaintiffs, however, are only entitled to post-judgment interest on an award of punitive damages. Recently, Judge Holland ruled that post-judgment interest does not begin to accrue until final judgment is actually entered, and cannot be retroactively awarded as of the date of the trial verdict. Order No. 314. Thus, Exxon has already saved almost $500 million because final judgment has not yet been entered.
These motions are brought under Fed. R. Civ. Pro. 50 and 59. The losing party typically files such motions after every trial.
In its motions for judgment on Phases I and III. Exxon argued that the evidence was insufficient as a matter of law to find that Exxon's conduct was reckless or that the punitive damage award served the purposes of deterrence and punishment. Exxon also requested a new trial based on three separate arguments: (1) three legally incorrect jury instructions; (2) the admission of Hazelwood's blood test; and (3) the Phase I and III verdicts were against the weight of the evidence.
In essence, a court must deny a motion for judgment as a matter of law unless there was but one reasonable conclusion as to the proper judgment, after drawing all factual inferences in favor of the moving party. Lytle v. Household Mfg., Inc., 494 U.S. 545, 554-55 (1990). If reasonable minds could disagree. the motion must be denied. Vaughn v. Ricketts, 950 F.2d 1464, 1468 (9th Cir. 1991). Similarly, a motion for new trial must be denied unless the verdict is against the "great weight" of the evidence or it is quite clear that the verdict is seriously erroneous. Venegas v. Wagner, 831 F.2d 1514, 1519 (9th Cir. 1987).
Order Nos. 264-268 and 270-275. Exxon did not give up, and filed additional motions to reconsider some of these orders. These, too, were denied.
Plaintiffs had long been concerned that Judge Holland would protect Exxon in the event that the jury awarded plaintiffs a large amount of punitive damages. Some plaintiffs were therefore convinced that Judge Holland would grant Exxon's motion for a new trial on the punitive damage award, or offer a "remittitur" reducing the punitive damage award in lieu of a new trial. Had the judge offered a remittitur, plaintiffs would have been required to accept a reduced punitive damage award in an amount determined by Judge Holland to be reasonable, or retry the case. Neither alternative was attractive.
Order No. 67.
After Judge Holland stood behind the jury. Exxon came up with a new strategy. After reading an article in the Anchorage Daily News regarding the jury in early 1995, months after the trial had ended, Exxon filed a motion for a new trial based on jury misconduct and coercion. Judge Holland called in each of the jurors and let the parties cross-examine them. He then denied the motion, at one point stating that "Exxon's melodrama is an extraordinary and exaggerated account of the events." Order No. 308. One of the more amusing incidents cited by Exxon as an example of witness intimidation occurred when one of the jurors found a dead salmon in her driveway. According to Exxon, this was reminiscent of the "Godfather" movie, when a bloody horse's head was left in someone's bed. In fact, the fish was left the day after a free salmon give-away in downtown Anchorage, had no impact on the juror and could not be linked to the trial. But Exxon will undoubtedly appeal the ruling.
For example, Exxon sought to reduce the jury award because plaintiffs would enjoy a "windfall" if a fish enhancement tax charged by the state was not deducted from the verdict.
Order No. 297.
Stipulation and Order Re Phase IIA Verdicts.
The Plan of Allocation provides that commercial fishermen as a group will receive about 81% of any recovery, with the PWS fisheries receiving the largest share, just over 29.4%, and Cook Inlet receiving 24.3% and Kodiak 20.1%. In addition, the Alaskan natives will receive about 6.6%, property owners about 3.5%, municipalities about 2.2%, and other groups proportionally smaller shares.

To illustrate how these shares were determined, the commercial fishing share was calculated by combining lost income from fishing operations as a result of diminished price and harvest, for 1989-1995; diminished value of limited-entry fishing permits and fishing vessels, discounted by 50% due to Judge Holland's Robins Dry Dock rulings; injury to quality of life and emotional stress, weighted towards PWS fishermen, who were closest to the spill; and replacement costs for damaged vessels and equipment.
In July 1994, certain of the Native Corporations had gambled, refusing to agree to the Joint Prosecution Agreement because they expected to obtain a large award in the state court trial of their compensatory damage claims. After the state court trial, in which these Native Corporations received a relatively small award, the other plaintiffs decided to hold them to their trial results. Although most of these Native Corporations ultimately reached agreement with the other plaintiffs regarding their allocated share, those that did not reach agreement objected to the Plan of Allocation. Judge Holland agreed with plaintiffs and awarded the objectors a share based on their state trial verdicts, and nothing else. See Order No. 317.
The Seattle Seven also did not join the Joint Prosecution Agreement, and do not have a viable legal claim, since they did not retain their right to appeal Judge Holland's ruling dismissing similar claims by other processors under Robins Dry Dock.
Plaintiffs opposed these efforts, arguing that the Seattle Seven have no right to the punitive damage award since their claims have been released, that the Seattle Seven are not members of the class since their interests are opposed to those of the class, and that Exxon's scheme is against public policy since it would not serve the public goals of punishment and deterrence. Plaintiffs also argued that Exxon should be barred from seeking to reduce the punitive damage award. since it did not disclose the deal at trial, and in fact affirmatively told the jury to consider the amount it had paid in settlement to the seafood processors to be a mitigating factor in determining the appropriate amount of punitive damages.
The way it works is simple. Exxon, or any other defendant, could settle with a plaintiff that has little chance of recovery for, by way of example, $100,000. If the total compensatory damages awarded to other plaintiffs in the case was $400,000 and $2,000,000 for punitive damages, the defendant could reduce its punitive damage award by 20%, thus saving $300,000 ($400,000 - $100,000). This would nullify the jury's judgment of the amount necessary to deter and punish the wrongful behavior.
Order Nos. 317 and 318.
BMW of North America, Inc. v. Ira Gore, Jr., 1996 U.S. LEXIS 3390.

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Exxon Valdez Oil Disaster and Class Action Lawsuit

ARTICLE ENDNOTES

THE EXXON VALDEZ LITIGATION JUSTICE DELAYED: SEVEN YEARS LATER AND NO END IN SIGHT (1996)

ENDNOTES (For the article itself, click here)

THE EXXON VALDEZ LITIGATION JUSTICE DELAYED:
SEVEN YEARS LATER AND NO END IN SIGHT (1996)