Opinion ID: 3040089
Heading Depth: 3
Heading Rank: 2

Heading: The Appeal of the Damage Allocation Plan and Our

Text: Decisions in Baker and Icicle. Prior to trial, several plaintiffs, many of the sea food processors, had entered into settlement agreements with Exxon. Icicle Seafoods, Inc. v. Baker (In re the Exxon Valdez), 229 F.3d 790, 792 (9th Cir. 2000) [hereinafter Icicle]; Baker v. Exxon Corp. (In re the Exxon Valdez), 239 F.3d 985, 986 (9th Cir. 2001) [hereinafter Baker]. The agreements anticipated a sizable punitive damages award. See Icicle, 229 F.3d at 793; Baker, 239 F.3d at 986-87. In return for receiving substantial millions in payments from Exxon, the settling plaintiffs, in two separate agreements, agreed to allocate a portion of their punitive award to Exxon. One agreement was a so called “cede back agreement,” Icicle, 229 F.3d at 793, and the other IN RE: THE EXXON VALDEZ 19707 was an assignment of the future award, Baker, 239 F.3d at 986-87. The district court, however, did not know of the agreements during trial. Icicle, 229 F.3d at 793. When the court did learn of them, during consideration of the parties’ proposed damage allocation plan, and after the punitives had been imposed in accordance with the jury’s verdict, the district court frowned on the settlements. Id. at 794. In the district court’s view, Exxon should have told the jury about the agreements so that the jury would have known how much Exxon was actually going to have to pay in punitive damages. Id. The district court, therefore, refused to permit the settling plaintiffs to receive any of the punitive damages award, on the theory that Exxon should not benefit from the settlements. Id.; Baker, 239 F.3d at 987. Exxon pursued two appeals from the district court’s refusal to enforce the agreements: one involving the cede back agreement, Icicle, 229 F.3d at 793, and the other involving the assignment agreement, Baker, 239 F.3d at 98788. The two different forms of agreement were intended to have essentially the same effect: allowing Exxon to keep some portion of the eventual punitive award in exchange for settling compensatory damage claims. In Icicle, this panel considered the cede back agreement. In a thorough opinion, we held that the cede back agreement was valid and enforceable and that the jury quite properly was not told of its existence. Icicle, 229 F.3d at 800. We reasoned that had the jury been told of the agreement, it might well have compensated for the settlement by imposing more damages. Id. at 798. This, in turn, would have frustrated the efforts of parties to reach settlements. We pointed out that settlements should be encouraged, particularly in large class actions like this one. Id. “Far from being unethical, cede back agreements make it easier to administer mandatory class actions for the assessment of punitive damages and encourage settlement in mass tort 19708 IN RE: THE EXXON VALDEZ cases. As a result, such agreements should typically be enforced.” Id. The second appeal, Baker, considered an assignment agreement. Baker, 239 F.3d at 987-88. Following the Icicle reasoning, this panel reached the same conclusion. Id. at 988.