Plaintiffs’ counsel in Exxon Valdez case will try to survive on share of lowered verdict

by Kevin Underhill on December 27, 2006

The WSJ’s Law Blog reported recently on the joy being experienced by lawyers in the firms representing plaintiffs in the Exxon Valdez case, their spirits dampened only mildly by the Ninth Circuit’s recent reduction in the punitive award from $4.5 billion to $2.5 billion. Those firms include traditional plaintiffs’ firms such as Milberg Weiss, but also firms normally seen representing defendants, such as Davis Wright Tremaine and Faegre & Benson.

How do Faegre & Benson lawyers feel about the prospect of sharing in perhaps one-third of $2.5 billion? “It’s great,” said partner Brian O’Neill to the WSJ. Any grief due to the $2 billion reduction is probably tempered by the amazing $2 billion in post-judgment interest that will be tacked onto the final bill. (Actually, maybe that’s not amazing in itself, since the case has been pending since 1989. Still, the interest “is not chicken s___,” as O’Neill put it.) O’Neill said of the titanic fee that is coming their way, “This is one of the few chances a bill-by-the-hour guy and a bill-by-the-hour firm has to get ahead.” I for one have been worried for some time about how the partners in these little “bill-by-the-hour firms” were managing to get by, so it’s good to know that for once they may have been able to afford that second can of beans for the family at Christmas dinner.

Damages in the case were estimated at about $500 million. The Ninth Circuit basically held that the evidence did not warrant a punitive award that went to the limit of what is permitted under State Farm v. Campbell, a 9:1 or “single-digit” ratio, and reduced the ratio to 5:1.


1 Dave 12.27.06 at 12:50 pm

And what is the problem here? Lawyers produced $5 billion of value for their clients, and as their lawful contract provides, will make a lot of money.

Is your position that Exxon can entrust an oil tanker to a known drunkard, and when he crashes the ship fight tooth and nail against the people who it harmed for 17 years, and then merely have to pay the actual damages it caused and not a penny more?

2 Justinian Lane 12.27.06 at 1:18 pm

I think the “problem” here is that lawyers only deserve hefty fees when they represent defendants.

3 Kevin 12.27.06 at 1:19 pm

No, that’s not my position. As a lawyer, I’m all for lawyers making money, but whether we actually produce anything like that kind of value in any particular case is debatable. Nor did I say that the right amount of punitives was zero. I do think that since the compensatory damages were substantial, there’s a good argument that under Supreme Court authority a 1:1 ratio would have been justified, not 5:1.

And I think what you’re calling “fighting tooth-and-nail” I would call an “appeal.” Seventeen years is an awfully long one, it’s true, but on the other hand $4.5 billion is an awful lot of money.

Mainly I liked Mr. O’Neill’s quote. I’d be cashing the check just like he will, but I don’t think I would suggest I had just been scraping by otherwise. Of course, he might have been kidding.

4 Ted 12.27.06 at 2:53 pm

Exxon paid not only actual damages (which were surely exaggerated, given the recovery of the Alaska coastline in the intervening years), but an additional $2 billion in cleanup costs, and untold damage to its reputation for the spill. It’s hardly the case that punitive damages were necessary to create deterrent effect, even assuming that Exxon’s conduct merited punishment, which is far from certain.

5 Jay Wilson 12.27.06 at 7:02 pm

I must concur with Mr. Lane. My firm litigated a small class action against a large corporate defendant. In short, an employee engaged in egregious misconduct (as stated by the Court of Appeals), and the corporation went to great lengths to cover up the misconduct by holding a meeting and tricking elderly class members into signing releases. The case was litigated (pre-trial) for two years and the trial lasted four weeks. After a successful jury verdict (which returned, on average, over 300% of class members’ out-of-pocket losses) defense counsel had the audacity to contest our fee request. After disputing our lodestar (arguing that our hours were unreasonable), they refused to produce their billables. When the court finally compelled the discovery of the defense hours, we were shocked (sarcasm). They had three times as many attorneys working on the case and, in fact, they were paid more than our fee request–without having to risk several million of their own dollars on the outcome.

Courts across the country, both state and federal, have recognized that some lodestar enhancement is justified when cases are taken on a contingency basis. Yet, we were forced to spend several hundred more hours litigating the reasonableness of our fee award (which time is arguably not compensable from the common fund created) only to find out that defense counsel had been paid more–with no risk of loss.

In short, I think Mr. Lane is onto something (or at least has taken a defendable position).

6 Rosa 12.30.06 at 10:01 am

I realize this forum is about the legal profession and whether they are being overly compensated (they aren’t), and not about the merits of the case. But, I would like to comment on some of the inaccuracies that seem to come up by people who only see this case from a “courtroom” point of view.

I am a plaintiff in this case, and was paid “actual damages” of less than 10% of a year’s income …a little over $11,000 for losing my business, my ability to make an income in my chosen profession, my home, and my way of life. The statement that we have been compensated for “actual damages” is the most ludicrous statement anyone could ever say. Would $11,000 compensation be enough for you lawyers if your ability to practice law was wrongly and forever stripped from you? Would a 1:1 punitive award be enough to compensate you?

Many fisherman were compensated for a year’s losses,..some more, some less. But what of the loss of the last 18 years of making a living in our profession? And where is the compensation for the loss of value of our fishing permits? Many permits that were worth $250,000 the day before the spill are now worth less than $10,000. Many fishermen owned several permits, which multiplies their losses even further. Our herring season has never come back, and that was the fishery that made the financial difference in tiding us over between seasons. That fishery was worth $100,000 a year in income to many fisherman who were only paid “actual damages” of around $20,000 dollars. This disaster didn’t just take away a year’s fishing, it forever changed our lives for the worse. We couldn’t pay our loans for our boats, our gear, our homes. It ruined our credit and our ability to recover.
The number of people who were able to keep fishing is small. Most of us have had to change our careers, unfortunately to much lower paying professions.
This punitive damage award is not seen in any way as a “punitive windfall” to us. To us, it is just a small step in paying us for our actual damages, and even then it falls short.

I would suggest you go spend a month living in Cordova and see first hand what this disaster has done to our way of life and the income of the residents. Then, maybe you wouldn’t be pondering whether 1:1 is a fairer ratio for Exxon to pay.

How do you think this sounds to us when Exxon made profits of $30 billion this year while we are sitting here STILL ruined and uncompensated for almost 20 years?

7 Kevin 12.30.06 at 1:57 pm

My post only said that this may have been a windfall to the lawyers, not to the injured parties. In fact, I specifically said that I thought it was wrong that each lawyer involved would probably end up with much more than each injured party has (something that may well be true for lawyers on both sides of the case). Your argument shows that actual damages should have been higher, not that a punitive award nine or ten times actual damages (or even five times) is necessarily appropriate.

In other words, asking “whether a 1:1 punitive award would be enough to compensate” someone isn’t a question that makes any sense — actual (or compensatory) damages are what compensate an injured party, not punitives. In fact, I think that under Alaska law, half of any punitive award goes to the state, not to the plaintiff, showing that the purpose of those damages is a public one, not private or compensatory.

I was not suggesting that the plaintiffs had been fully compensated. I am suggesting that there is a legitimate debate about how “punishment” damages should be measured in this or in any other case.

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