In re Valdez

          ORDER MOTION TO LIFT STAY AND FOR ENTRY OF JUDGMENT

          H. Russel Holland United States District Judge.

         Exxon Mobil Corporation and Exxon Shipping Company (referred to collectively as “Exxon” hereinafter) move^[1] to lift the stay that was entered in this case in 2009 and for entry of final judgment in favor of Nautilus Marine Enterprises in the amount of $2, 245, 622.87 less an offset of $496, 724.26 for fees and costs awarded to Exxon in state court. This motion is opposed in part and Nautilus Marine Enterprises and M. Thomas Waterer^[2] (referred to collectively as “NME” hereinafter) cross-move for entry of judgment in their favor in the amount of either $8, 537, 834.23 or $7, 044, 360.28, with no offset.^[3] The cross-motion is opposed.^[4] Oral argument was not requested and is not deemed necessary.

         Background

         On or about September 29, 2006, Exxon, NME, ^[5] and Cook Inlet Processing (“CIP”) entered into a settlement agreement, which resolved NME's and CIP's claims^[6] against Exxon for 1992 and 1993 damages arising out of the grounding of the Exxon Valdez. However, the parties were not able to agree as to the amount of prejudgment interest that should be paid on the principal amount of the settlement. Exxon contended that federal law controlled the prejudgment interest question; NME and CIP contended that Alaska law controlled the prejudgment interest question. The parties agreed that the prejudgment interest dispute would be submitted to this court for resolution.

         On February 20, 2007, NME and CIP filed motions on the prejudgment interest issue.^[7]After the briefing was completed on those motions, but before this court had ruled on the motions, the Ninth Circuit issued a decision in the Sea Hawk Seafoods case. See In re Exxon Valdez, 484 F.3d 1098 (9th Cir. 2007). Sea Hawk was a fish processor which, like NME and CIP, had pursued claims against Exxon arising out of the grounding of the Exxon Valdez. Sea Hawk and Exxon reached a settlement as to Sea Hawk's claims but could not agree on whether federal or state law should apply to the determination of prejudgment interest. This court had ruled that federal law applied, but the Ninth Circuit reversed, holding that state law governed prejudgment interest.

         After the Sea Hawk decision issued, this court called for supplemental briefing from the parties.^[8] The parties agreed that pursuant to Sea Hawk, the Alaska prejudgment interest rate of 10.5 percent should be applied to them. The parties also agreed that Alaska state law provides that prejudgment interest should be simple interest, unless the parties had otherwise agreed. Exxon contended that there was no agreement between the parties as to whether prejudgment interest should be simple or compound. NME and CIP contended that the parties had agreed that prejudgment interest would be compound no matter which rate governed.

         In Order No. 370, ^[9] this court held that NME and CIP were “entitled to prejudgment interest at a rate of 10.5% compounded annually.”^[10] In reaching this holding, the court focused upon the structure and text of the parties' integrated Settlement Agreement. The integrated Settlement Agreement included a proposed final judgment which provided for compounded interest, regardless of what rate of interest applied. After observing that the Settlement Agreement was silent about the compounding of interest issue, this court found that it was “the unequivocal statement of the agreed judgment form that the prejudgment interest should be compounded.”^[11]

         Exxon moved for reconsideration^[12] of Order No. 370 and for leave to file a Supplemental Answer to NME's complaint.^[13] Exxon sought to amend its answer to include a claim for reformation of the Settlement Agreement. This court denied the motion for reconsideration and the motion for leave to supplement.^[14]

         After Exxon's motions for reconsideration and leave to supplement were denied, this court entered a Final Judgment.^[15] On August 17, 2007, Exxon appealed Order No. 370 and the Final Judgment.

         On October 17, 2007, Exxon filed a complaint in state court which alleged a single cause of action for reformation of the Settlement Agreement. On November 2, 2007, NME and CIP removed the reformation case to this court pursuant to 28 U.S.C. § 1441. Exxon moved to remand, arguing that there was no jurisdictional basis for removal. On April 22, 2008, this court denied the motion to remand.^[16] NME and CIP then moved to dismiss Exxon's complaint. On November 18, 2008, this court granted the motion to dismiss, holding that Exxon's reformation claim was barred by res judicata, ^[17] and a final judgment dismissing the reformation case was entered.^[18]

         Exxon appealed. However, before the parties had begun briefing the appeal, on March 10, 2009, the Ninth Circuit ruled on Exxon's appeal of Order No. 370 and the Final Judgment in the interpretation case. The Ninth Circuit held that this court “erred in failing to consider extrinsic evidence regarding whether the parties agreed to compound interest.” In re Exxon Valdez, Case No. 07-35715, 2009 WL 605900, at *2 (9th Cir. March 10, 2009). The court of appeals also held that this court “did not abuse its discretion in denying leave to supplement the answer to add a counterclaim for reformation.” Id. Thus, the court of appeals reversed in part and remanded the interpretation case to this court. Upon remand, this court vacated the Final Judgment, Order No. 370, and the portion of its July 23, 2007 order that addressed Exxon's motion for reconsideration.^[19]

         On May 14, 2009, the Ninth Circuit vacated the judgment in the reformation case because it was based upon the Final Judgment in the interpretation case, which had been reversed in part.^[20] The reformation case was remanded to this court for further proceedings.

         On June 5, 2009, Exxon filed a second complaint in Alaska state court seeking a declaratory judgment interpreting the parties' rights and obligations under the Settlement Agreement, or, in the alternative, for reformation of the Settlement Agreement. NME and CIP removed the 2009 case to this court.^[21] Exxon moved to remand both the original reformation case and the 2009 case to state court.^[22] The court granted both motions to remand^[23] and stayed the interpretation case pending the outcome of the state court cases.^[24]

         The state court cases were consolidated and trial was scheduled for November 2010. Shortly before the trial, CIP and Exxon reached a settlement.

         NME and Exxon proceeded to trial. On March 17, 2011, the state court judge entered Findings of Fact and Conclusions of Law.^[25] The state court judge

[a]fter reviewing the written exchange of offers and counteroffers, the Letter Agreement, as well as the testimony of Mr. Daum and Mr. Weidner [the two attorneys who negotiated the Settlement Agreement], ... f[ound] there is no evidence that the parties discussed and reached agreement that only compound interest would apply regardless of whether state or federal law controlled.^[26]

         In short, the state court judge concluded that “[a]ll of the extrinsic evidence demonstrates that the parties never agreed that interest would be compounded” and “that the proposed judgment ... was intended to provide a form of judgment that [this court] could use to implement the parties' agreement” but that “[t]he proposed judgment was not intended to include or be an agreement to pay compound interest.”^[27]

         Judgment was entered in the consolidated state court case in Exxon's favor and Exxon was awarded attorney's fees. NME appealed the trial court's conclusion that the parties had not agreed that interest would be compound. On July 19, 2013, the Alaska Supreme Court affirmed the trial court's decision. Nautilus Marine Enterprises, Inc. v. Exxon Mobil Corp., 305 P.3d 309, 312 (Alaska 2013). NME also appealed the award of attorney's fees to Exxon. On August 22, 2014, the Alaska Supreme Court “reverse[ed] the awards of attorney fees and costs and remand[ed] for a recalculation of the fees award based on local rates and for the apportionment of fees and costs” but affirmed as to “all other issues.” Nautilus Marine Enterprises, Inc. v. Exxon Mobil Corp., 332 P.3d 554, 565 (Alaska 2014).

         After the attorney's fees were re-calculated, on October 8, 2015, the state trial court entered a second revised final judgment.^[28] The second revised final judgment provided:

1. The September 2006 settlement between Exxon ... and NME did not require Exxon to pay compound interest regardless of the applicable law. The parties intended that Judge Holland of the U.S. District Court determine both the correct rate of interest and the method of computing that interest under federal or state law.

2. Plaintiff Exxon's request for reformation is denied.

3. It is for Judge Holland to decide the appropriate law that applies, the proper interest rate, and the method of calculating that interest rate.

4. Exxon is awarded attorneys' fees in the amount of $340, 211, expert costs in the amount of $67, 500 and costs of $89, 013.26 for a total award of $496, 724.26.^[29]

         The state court proceedings having been completed, Exxon now moves to lift the stay of this case (the interpretation case) and for entry of judgment in NME's favor. NME does not oppose lifting the stay nor does NME oppose entry of judgment in its favor. However, the parties disagree as to the amount of the judgment to be entered.

         Discussion

         There being no disagreement between the parties, the stay is lifted.

         With the stay lifted, what remains is for the court to enter judgment. In order to enter judgment, the court must determine the amount that is still owed to NME under the Settlement Agreement.

         Under the Settlement Agreement, Exxon paid NME and CIP an initial settlement amount of $8, 500, 000.^[30] This amount represented $824, 601.09 for CIP's 1992 and 1993 damages and $3, 726, 556.16 for NME's 1992 and 1993 damages plus prejudgment interest on both of those amounts calculated at the applicable federal rate.^[31] NME received $5 million of the initial settlement amount and CIP received $3.5 million.^[32] Exxon also agreed to pay a Supplemental Settlement Amount, which would be “the amount, if any, that may become payable pursuant to the provisions of paragraphs 3.1, 3.2 and/or 3.3” of the Settlement Agreement.^[33]

         Paragraph 3.1 requires Exxon to pay the difference between prejudgment interest calculated at the federal rate and prejudgment interest calculated at whatever rate the court finds is the correct rate.^[34] There is now no dispute the correct rate of prejudgment interest is the state rate of 10.5% simple. The parties agree that the difference between prejudgment interest calculated at the federal rate up to November 1, 2006 and the state rate of 10.5% simple is $3, 470, 716.32.^[35]

         The $3, 470, 716.32 number is based on the report of Exxon's expert, Bruce Budge. Budge reached this number by calculating prejudgment interest at a rate of 10.5% simple on CIP's and NME's combined 1992 damages ($3, 778.584.56) and on CIP's and NME's combined 1993 damages ($2, 862, 112.94).^[36] Adding these two numbers together results in the total prejudgment interest on CIP's and NME's 1992 and 1993 damages through November 1, 2006, when calculated at 10.5% simple, being $6, 640, 697.50.^[37] In the initial settlement amount, ...