UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

In Re: THE EXXON VALDEZ

GRANT BAKER, et al., as
                                                             No. 99-35898
representatives of the
                                                             D.C. No.
Mandatory Punitive Damages               CV-89-00095-HRH
Class,
                                                             District of Alaska
Plaintiffs-Appellees,
                                                             (Anchorage)
v.
                                                             OPINION
EXXON CORPORATION; EXXON
SHIPPING COMPANY,
Defendants-Appellants.

Appeal from the United States District Court
for the District of Alaska
H. Russel Holland, District Judge, Presiding

Argued and Submitted
November 9, 2000--San Francisco, California

Filed February 8, 2001

Before: James R. Browning, Mary M. Schroeder, and
Andrew J. Kleinfeld, Circuit Judges.

Opinion by Judge Schroeder

_________________________________________________________________
 

COUNSEL

John F. Daum, O'Melveny & Myers, Los Angeles, California,
for the defendants-appellants.

Brian B. O'Neill, Faegre & Benson, Minneapolis, Minnesota;
David W. Oesting, Davis Wright Tremaine, Anchorage,
Alaska, for the plaintiffs-appellees.

_________________________________________________________________

OPINION

SCHROEDER, Circuit Judge:

This is another appeal arising out of the verdict and judg-
ment of five billion dollars in punitive damages against Exxon
Corporation following the disastrous 1989 Exxon Valdez oil
spill into Prince William Sound, Alaska. As in an earlier

                               1817
appeal, we here consider whether some of the plaintiffs who
settled with Exxon before certification of the mandatory puni-
tive damages class are entitled to share in the allocation of the
punitive damages judgment. See In re Exxon Valdez (Icicle
Seafoods, Inc., et al. v. Baker, et al.), 229 F.3d 790 (9th Cir.
2000). As in Icicle, we here assume without deciding the
validity of the judgment against Exxon, which is challenged
in a related appeal. See id. at 793.

At issue in this appeal is the district court's July 23, 1999
order granting final approval to the plan of allocation of puni-
tive damages to the seafood processors who were included in
the plaintiff punitive damages class. The approved "Processor
Plan" excluded several processors who otherwise would have
been entitled to share in the punitive damages award. They
were excluded because in earlier settlements, they had
released their compensatory damages claims and partially
assigned their punitive damages claims to Exxon in exchange
for large lump sum payments from Exxon. This appeal is
prosecuted by Exxon itself as the assignee of four of those
excluded processors: Western Alaska Fisheries, Inc., Copper
River Fishermen's Cooperative, Seahawk Seafoods, and
Kodiak Salmon Packers, Inc. (collectively, the "Four Proces-
sors").1 Exxon seeks to recover pursuant to its assignments
and thus to participate in the damages allocation. Appellees
are the representatives of the mandatory plaintiff class.

The disputed settlement agreements and partial assignments
all occurred years before the 1994 certification of the manda-
tory punitive damages class. Exxon, however, at the time of
the settlements, anticipated that there would be a punitive
damages class, and understood that a conventional settlement
of punitive damages, accompanied by the usual total release
of claims by settling plaintiffs, would not work to Exxon's
advantage in this case. This is because the release of individ-
_________________________________________________________________
1 In its reply brief, Exxon abandoned its claims pertaining to assign-
ments from Dragnet Fisheries, Inc. and Inlet Fisheries, Inc.

                               1818
ual claims for punitive damages would not affect the jury's
eventual lump sum determination of the total punitive dam-
ages to be awarded to the class. As we explained in Icicle,
Exxon "actually faced a financial disincentive to settle,
because any amount of money [Exxon] paid to persuade an
individual plaintiff to [give up its claim to punitive damages]
would nevertheless be included in the amount of the eventual
award." See 229 F.3d at 793.

Faced with this dilemma, Exxon tried to ensure that it
would eventually recoup at least a portion of the actual share
of punitive damages represented by the settled claims, thereby
reducing Exxon's total punitive damages exposure. To this
end, Exxon incorporated a device in its settlement agreements
with the Four Processors that was functionally similar to the
device it would later use in settling with the Icicle plaintiffs.
In Icicle, the device utilized was a "cede back" agreement.
There, the settling plaintiffs agreed to pursue their claims for
punitive damages on their own behalf and, pursuant to their
settlement agreements, "cede" a portion back to Exxon. See
Icicle, 229 F.3d at 793. In the settlements we consider in this
appeal, Exxon utilized partial assignments to accomplish the
same result. Under these agreements, the Four Processors
assigned to Exxon all but a small portion of their future indi-
vidual claims to punitive damages so that Exxon could pursue
the assigned portion in its own name and for its own benefit.

Following the jury's 1994 punitive damages verdict, the
major remaining problem in the litigation was allocation of
damages among individual plaintiffs. In 1996, the representa-
tives of the class plaintiffs moved for and obtained approval
of a global plan of allocation, which provided for set percent-
age amounts of the total award to be allocated to specific cate-
gories of claimants. The global plan earmarked to the seafood
processors 2.1% of the total five billion dollar award.

Following approval of the global plan, plaintiffs' class rep-
resentatives set about crafting a separate allocation plan for

                               1819
each of the fifty-one claim categories. Each plan prescribed
how the percentage of judgment allocated to each category
would be distributed among individual claimants. In May
1997, plaintiffs moved for approval of their proposed Proces-
sor Plan, which they described as "the product of collabora-
tion and negotiation." That plan excluded the portions of the
claims of the Four Processors that had been assigned to
Exxon, and refused to recognize the validity of those assign-
ments.

Exxon objected, seeking enforcement of the assignments
and a share of the distributions under the Processor Plan. The
district court overruled Exxon's objections and approved the
plan, relying upon the same reasoning that it had used in
rejecting the claims that we considered in Icicle: namely, that
Exxon should be prevented from sharing in the punitive dam-
ages. See id. at 793-98.

In this appeal by Exxon, we consider three issues. The first
is whether Exxon lacks standing to appeal because it never
formally intervened as a plaintiff in the allocation proceed-
ings. We hold that it has standing. The second is whether, as
a matter of public policy, the district court correctly ruled that
Exxon should not be able to share in the punitive damages.
That issue is controlled by our decision in Icicle in which we
held that public policy supports functionally similar settle-
ment agreements in situations like this, where an agreement
on the part of the plaintiff to permit the defendant to share in
the plaintiffs' punitive damages is necessary to permit any
meaningful settlement of the punitive damage claims. See id.
at 798. The third issue is therefore whether there is any mate-
rial difference between this case and Icicle, since in this case
Exxon relies on an assignment rather than a "cede back"
agreement. We hold there is no material difference and there-
fore vacate the district court's order.

We turn first to appellees' contention that Exxon lacks
standing to appeal. Appellees claim that Exxon was required

                               1820
to intervene formally in the district court proceedings as a
party plaintiff in order to maintain any right to rely upon its
assignments from the Four Processors and to recover dam-
ages. This argument is formalistic in the extreme, and lacks
substance. Exxon has been a party to this case from the begin-
ning and now contends that it is aggrieved by the district
court's order denying the validity of its assignments.

[1] Appellees point out that Exxon was originally a defen-
dant and is now shifting sides. They contend that Exxon
therefore should have formally applied to intervene as a
claimant, even though it was already a party defendant. We
view Exxon's shift from defendant to claimant as analogous
to a realignment of parties within ongoing litigation. See, e.g.
Keith v. Volpe, 858 F.2d 467, 476 (9th Cir. 1988). As in cases
where diversity of citizenship is at issue, it is the court's
responsibility to align the parties according to their interests
in the litigation. See id.; Dolch v. United California Bank, 702
F.2d 178, 181 (9th Cir. 1983). Exxon's interests in recovering
pursuant to its assignments clearly align it with other punitive
damages claimants to the extent of the assignments.

[2] Appellees rely on Marino v. Ortiz, where the Supreme
Court held that persons who were not parties to the underlying
lawsuit, nor members of either the certified classes or the var-
ious associations and societies who formally intervened as co-
defendants, had no standing to challenge a consent decree
approving a settlement agreement. See 484 U.S. 301, 303-04
(1988) (per curiam). Marino's denial of standing depended
upon the challengers' status as non-parties. In this case,
Exxon is already a party, and falls within the general rule that
only parties "or those that properly become parties may
appeal an adverse judgment." See id. at 304. There was there-
fore no reason for Exxon to file a formal motion to intervene.
Appellees cite no authority suggesting a contrary result.

[3] The merits of this controversy concern whether Exxon
may enter into a settlement agreement that permits it to

                               1821
recoup damages assessed against itself. This issue is con-
trolled by our decision in Icicle, where we held that policies
supporting settlement of disputes militate in favor of permit-
ting such settlements. See 229 F.3d at 798 ("Far from being
unethical, cede back agreements make it easier to administer
mandatory class actions for the assessment of punitive dam-
ages and encourage settlement in mass tort cases."). Hence,
the district court erred here, as in Icicle, in refusing to permit
Exxon to share in the punitive damages award.

The final issue is whether this case should be treated any
differently because Exxon received an "assignment " rather
than an agreement to "cede back." Exxon is here pursuing the
claims in its own name, rather than indirectly through the set-
tling plaintiffs as was the case in Icicle. Appellees maintain
that an assignment is different from a cede back agreement
because in form, an assignment grants Exxon a claim to col-
lect on a judgment against itself and thereby creates a legal
impossibility that extinguishes the plaintiffs' claims. In sup-
port, appellees rely on language in two cases: Matter of Lock-
ard, 884 F.2d 1171, 1178 n. 13 (9th Cir. 1989) ("He cannot,
after all, have a claim against himself."), and Bartneck v.
Dunkin, 1 Cal. App. 3d 58, 62, 81 Cal. Rptr. 428, 431 (Cal.
App. 1969) ("The assignment of the claim to some of the
defendants is ample evidence that there was an intent to
release those defendants from any further liability.").

[4] Appellees' arguments ignore the mandatory class action
context of the settlements in this case. The settlements could
not have affected the Four Processors' membership in the
plaintiff class because membership was mandatory. The
assignments therefore did not affect Exxon's duty to pay the
entire five billion dollars into a damages fund. Rather than
asserting the merits of any claim of its own, Exxon is now
pursuing the Four Processors' claims in order to reduce its out
of pocket, lump sum liability to the class as a whole. See
Misic v. Building Serv. Employees Health & Welfare Trust,
789 F.2d 1374, 1378 (9th Cir. 1986) (per curiam) ("[A] valid

                               1822
assignment confers upon the assignee standing to sue in place
of the assignor."); see also United States v. Thornburg, 82
F.3d 886, 891 (9th Cir. 1996) (recognizing common law rule
that an assignee stands in the shoes of the assignor). Appel-
lees' proffered distinctions between the partial assignments in
this case and the cede back agreements in Icicle  are distinc-
tions without a material difference. Both devices performed
the identical function, accomplished the same result, and
encouraged settlements in this mass tort litigation. See Icicle,
at 797-98 (holding that the cede back agreements achieved the
functional equivalent of a proportionate share allocation of
damages, and "blend[ed] fairness to the parties with incen-
tives to settle"). Exxon has no more of a conflict of interest
in enforcing the assignments in this case than it had in recov-
ering damages through the cede back agreements in Icicle.

The district court's final order approving the Processor Plan
is VACATED and the matter REMANDED for enforcement
of the settlement agreements.

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