Court says fish processors entitled to punitive damages in Exxon case

SAN FRANCISCO (AP) -- The 9th U.S. Circuit Court of Appeals has upheld the validity of a settlement agreement between Exxon and 10 seafood processors stemming from the 1989 Exxon Valdez oil spill.

The decision means, if the appeals court upholds the $5 billion punitive damage award, Exxon will see a portion of those damages returned to it. The appeals court has not yet decided on Exxon's challenge to the punitive damage award.

The plaintiffs had argued Exxon would hardly be punished if it could pay a share of the damages to itself.

''The court confirmed that the arrangement is completely in keeping with public policy to settle cases,'' Exxon Mobil spokesman Tom Cirigliano said Thursday.

The processors are Icicle Seafoods Inc.; Seven Seas Corp.; Ocean Beauty Seafoods Inc.; Ocean Beauty Alaska Inc.; Wards Cove Packing Co.; Alaska Boat Co.; North Pacific Processors; Trident Seafoods Corp.; North Coast Seafood Processors Inc. and Aleutian Dragon Fisheries.

Following the ecological disaster, the 10 processors sued Exxon Corp. as part of a huge class-action suit including dozens of other plaintiffs. Exxon settled with the 10 processors out of court in 1991 for $64 million.

As part of the deal, the processors agreed to give back any damages awarded in what is known as a ''cede back'' agreement. The processors remained plaintiffs in the case despite the out-of-court settlement.

Because of the cede back agreement, the original plan to allocate the $5 billion in punitive damages in the national class-action lawsuit did not include the affected processors. Subsequently, in a new 1996 settlement, Exxon agreed to pay the 10 processors $12.4 million from the $5 billion punitive damages pot.

But U.S. District Court Judge H. Russel Holland said the processors were not entitled to the punitive damages, because the original cede back agreement was kept confidential from the jury. The jury might have reached a higher damages number had it known, Holland said.

Holland called the maneuver an ''astonishing ruse'' and rejected Exxon's claim to the money.

The appeals panel, however, said Thursday that juries do not need to be told of cede back agreements. The three-judge court said such agreements help settle cases and that a jury might render higher damages to offset the cede back agreement.

The ruling remands the case back to Holland to come up with a new allocation plan that includes the processors.