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June 25, 2008 1:31 PM

Attorneys' Fees Plummet Following Exxon Valdez Decision

Posted by Nate Raymond

Plaintiffs' firms saw their potential fees from the Exxon Valdez litigation slashed about 80 percent to nearly $188 million following the Supreme Court's ruling Wednesday.

In its 5-to-3 ruling, the court limited damages that were originally $2.5 billion to $507.5 million. With interest, the award basically doubles to more than $995 million, and plaintiffs' lawyers still stand to get more than a fifth of the award.

The decision comes 19 years after the Exxon Valdez tanker spilled 11 million gallons of oil into the Prince William Sound off Alaska. A jury in 1994 imposed $5 billion in punitive damages against what is today Exxon Mobil Corp. Since then, the award has bounced back and forth between the district court in Alaska and the Ninth Circuit, which in 2007 cut the already-reduced $4.5 billion punitive award to $2.5 billion.

The Supreme Court's ruling limits any award to no more than $507.5 million, which includes the $287 million in compensatory damages from the trial as well as other settlements. It also remanded the case to the Ninth Circuit for further consideration.

A final award would include 5.9 percent annual interest starting from late September 1996, bringing a maximum possible award today to about $995 million. More than 32,000 Alaskans stand to get a share of the award. Today's ruling is "unfair," says Faegre & Benson partner Brian O'Neill, one of the lead attorneys on the matter since the litigation commenced.

"They made up this one to help out Exxon," he says. "They just shouldn't be making stuff up to help out these powerful entities, and that's just what they did."

Work is already underway to split up the attorney fees. Under a 2004 ruling by U.S. district court judge H. Russel Holland of Alaska, plaintiffs attorneys will get 3 percent off the top of all damages, which will go to an undetermined group of firms deemed the most active. Attorneys will also get 19.4 percent of all moneys that don't go to native corporations and a group of seafood companies in Seattle.

(Exxon itself will actually get 11 percent of the verdict, under a settlement with a group of seafood companies known as "the Seattle Seven." The firm agreed in 1991 to pay them $63.75 million for their stake. That stake, it turns out, is worth around $106 million.)

A motion filed May 23 by the plaintiffs' fee committee establishes how the fees could be distributed to the firms, should Holland approve the plan. About 60 percent goes to 42 firms representing class plaintiffs. Davis Wright Tremaine, which logged the most hours under the lead of Anchorage partner David Oesting, will receive the largest slice of the class fee pie, 17.6 percent. The firm, under Wednesday's ruling, stands to now get no more than $28 million.

"It's hard to work on a case for 19 years, and it isn't one of those cases where you know in the end...you'll get paid," says Lynn Sarko of Seattle plaintiffs firm Keller Rohrback, which acts as fund distribution administrator on the case. Sarko's firm would get 17.4 percent of the fees, roughly $27 million.

Kodiak, Alaska-based Jamil Ebell Bolger & Gentry and Washington, D.C.-based Dickstein Shapiro could both earn between $14 million and $15 million. Milberg, which would no doubt appreciate an infusion of cash given the $75 million settlement it agreed to earlier this month, could get 4.5 percent, or $7 million.

About 40 percent of the judgment would go to individuals represented in direct action suits. Fees for the firms representing individual fishermen and cannery workers in direct actions are governed by client contracts, but those lawyers have agreed to cap their share at 19.4 percent, the same as for class action claimants. Faegre & Benson has the bulk of the direct actions, with 17.5 percent of all 32,000 claims, O'Neill says. He expects his firm will take in around $24 million.

Those firms and others could get even more once the 3 percent, or nearly $30 million, is distributed to the most active firms. That list has yet to be determined, but contenders include Davis Wright; Faegre & Benson; Jamin Ebell; Dickstein Shapiro; and Keller Rohrback.

While their take-home fees are now reduced, the remaining award could still cover the plaintiff side's expenses, which O'Neill estimates are more than $30 million. While the attorneys received a potion of the compensatory damages when they were distributed from 2002 to 2004, O'Neill says only now can they cover their costs. "I haven't put the math together, but I am sure that the recoveries [before today] are less than our actual expended costs," he says.

Those expenses are nothing when compared to the bills Exxon has been paying during the last two decades to firms like O'Melveny & Myers, its primary outside counsel on the litigation. In 1990 alone, according to a feature story in The American Lawyer following the jury verdict, Exxon reportedly paid $60 million in defense fees.

O'Neill estimates that Exxon has likely spent about $400 million defending the case during the last two decades, citing numbers that one of his team's lawyers saw during litigation that was related to the case. Exxon spokesman Tony Cudmore declined to confirm that figure. "We have not released a figure for legal costs," he says. "I can tell you they have been significant, but I am not able to provide a number."

O'Melveny & Myers partner John Daum is Exxon's lead counsel. Other lawyers that have had prominent roles over the years include Covington & Burling's E. Edward Bruce; Douglas Seraheley at Patton Boggs; and James Neal of Nashville's Neal & Harwell. Theodore Olson and Matthew McGill at Gibson, Dunn & Crutcher also advised Exxon behind-the-scenes, such as during moot courts, in connection with the Supreme Court case.

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There is more to this story yet to unfold. Many fishermen'slawyers and law firms who dedicated six figures of costs,thousands of hours of time, and twenty years of their careers to the case have been entirely left out of the fee allocations, so that firms like Davis, Wright, Jamin and Faegre will profit grandly, despite the recent SCOTUS ruling.

The Supreme Court should be ashamed...as should Exxon...but they are capitalist droids so they have an excuse. It seems the Justices have sold their souls. Exxon claims of the $3 billion spent cleaning up is penalty enough would have some justification if it hadn't been spent so haphazardly....think Katrina. It was all for show and would have done as much good if the dollars were dropped into the wilderness from a helicopter.

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