Baker v. Exxon Mobile Corp ( 2009 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
In re: THE EXXON VALDEZ, 
GRANT BAKER; SEA HAWK
SEAFOODS, INC.; COOK INLET
PROCESSORS INC.; SAGAYA CORP.;
WILLIAM MCMURREN; PATRICK L.
MCMURREN; WILLIAM W. KING;
GEORGE C. NORRIS; HUNTER CRANZ; No. 04-35182
RICHARD FEENSTRA; WILDERNESS
SAILING SAFARIS; SEAFOOD SALES,  D.C. No.
CV-89-00095-HRH
INC.; RAPID SYSTEMS PACIFIC LTD.; OPINION
NAUTILUS MARINE ENTERPRISES INC.;
WILLIAM FINDLAY ABBOTT, JR.,
Plaintiffs-Appellees,
v.
EXXON MOBIL CORP.; EXXON
SHIPPING CO.,
Defendants-Appellants.

7079
7080 IN RE THE EXXON VALDEZ
In re: THE EXXON VALDEZ, 
GRANT BAKER; SEA HAWK
SEAFOODS, INC.; COOK INLET
PROCESSORS INC.; SAGAYA CORP.;
WILLIAM MCMURREN; PATRICK L.
MCMURREN; WILLIAM W. KING;
GEORGE C. NORRIS; HUNTER CRANZ; No. 04-35183
RICHARD FEENSTRA; WILDERNESS
SAILING SAFARIS; SEAFOOD SALES,  D.C. No.
INC.; RAPID SYSTEMS PACIFIC LTD.; CV-89-00095-HRH
NAUTILUS MARINE ENTERPRISES INC.;
WILLIAM FINDLAY ABBOTT, JR.,
Plaintiffs-Appellants,
v.
EXXON MOBIL CORP.; EXXON
SHIPPING CO.,
Defendants-Appellees.

Appeal from the United States District Court
for the District of Alaska
H. Russel Holland, District Judge, Presiding
Argued and Submitted
December 15, 2008—Pasadena, California
Filed June 15, 2009
Before: Mary M. Schroeder, Andrew J. Kleinfeld and
Sidney R. Thomas, Circuit Judges.
Opinion by Judge Schroeder;
Partial Concurrence and Partial Dissent by Judge Kleinfeld
IN RE THE EXXON VALDEZ 7083
COUNSEL
Jeffrey L. Fisher, Davis Wright Tremaine LLP, Stanford, Cal-
ifornia, for the plaintiffs-appellees-appellants.
Jonathan Hacker, O’Melveny & Myers LLP, Washington,
DC, for the defendants-appellants-appellees.
OPINION
SCHROEDER, Circuit Judge:
This epic punitive damage litigation arising from the 1989
wreck of the Exxon Valdez is before us once again. This time
it is after the United States Supreme Court remanded the case
to us to decide issues related to interest and appellate costs.
Order in Exxon Shipping Co. v. Baker, No. 07-219 (S. Ct.
filed June 25, 2008). The remand followed the Court’s 5-3
decision that, under maritime law, the maximum ratio of puni-
tive damages to compensatory damages is 1-1. Exxon Ship-
ping Co. v. Baker, 128 S. Ct. 2605, 2633 (2008). On the issue
of the availability of vicarious liability for punitive damages
under maritime law, the Court was evenly divided and thus
left in place our 2001 decision that punitives are available
under precedents binding on this court. Id. at 2616; see In re
Exxon Valdez, 270 F.3d 1215,1233-36 (9th Cir. 2001) (citing
The Amiable Nancy, 16 U.S. (3 Wheat) 546 (1818)); Protec-
tus Alpha Navigation Co., Ltd. v. N. Pac. Grain Growers,
Inc., 767 F.2d 1379 (9th Cir. 1985)).
The parties have now stipulated to the entry of judgment
against the defendant Exxon and in favor of the plaintiffs
7084 IN RE THE EXXON VALDEZ
Baker et al. in the amount of $507.5 million, representing the
amount the plaintiffs were awarded as compensatory damages
for the income they lost as a result of the massive oil spill.
This judgment achieves the 1-1 ratio the Supreme Court
deemed appropriate. We delayed issuance of the mandate at
the parties’ request and asked for supplemental briefing and
argument on the issues the Supreme Court left unanswered:
interest and costs.
Interest
[1] The issue with respect to interest is whether interest on
the $507.5 million should run from the date of the original
judgment, entered in 1996, or whether interest should run
only from the 2008 date that we entered judgment for plain-
tiffs in the wake of the Supreme Court’s decision. Exxon, of
course, argues for the later date; plaintiffs, for the earlier.
[2] There is no dispute that post-judgment interest must be
awarded, because 28 U.S.C. § 1961 provides that interest:
shall be allowed on any money judgment in a civil
case recovered in a district court . . . . Such interest
shall be calculated from the date of the entry of the
judgment, at a rate equal to the coupon issue yield
equivalent (as determined by the Secretary of the
Treasury) of the average accepted auction price for
the last auction of fifty-two week United States Trea-
sury bills settled immediately prior to the date of the
judgment.
28 U.S.C. § 1961 (1994 & Supp. II 1996). The Supreme Court
has explained that the “purpose of post-judgment interest is to
compensate the successful plaintiff for being deprived of
compensation for the loss from the time between the ascer-
tainment of the damage and the payment by the defendant.”
Kaiser Aluminum & Chem. Corp. v. Bonjorno, 494 U.S. 827,
IN RE THE EXXON VALDEZ 7085
835-36 (1990) (quoting Potelo v. Consol. Rail Corp., 826
F.2d 1270, 1280 (3d Cir. 1987)).
[3] The issue here arises because the final $507.5 million
judgment of punitive damages represents a substantial reduc-
tion of the original district court judgment. Where a damages
award has been remitted, Federal Rule of Appellate Procedure
37(b) gives an appellate court discretion as to whether to
allow interest to run from the date of the original judgment,
or from the date of the remitted judgment. Rule 37(b) specifi-
cally provides as follows: “If the [appellate] court modifies or
reverses a judgment with a direction that a money judgment
be entered in the district court, the mandate must contain
instructions about the allowance of interest.” Fed. R. App. P.
37(b).
[4] Interest accrues on the reduced amount, not on the
higher amount that was vacated or remitted. Planned Parent-
hood of Columbia/Willamette Inc. v. Am. Coal. of Life, 518
F.3d 1013 (9th Cir. 2008). In Planned Parenthood, we
explained the framework for determining the allowance of
interest:
Post-judgment interest must run from the date of a
judgment when the damages were supported by the
evidence and meaningfully ascertained. We may
reverse and remand a judgment without concluding
that it is erroneous or unsupported by the evidence.
When the legal and evidentiary basis of an award is
thus preserved, post-judgment interest is ordinarily
computed from the date of [the judgment’s] initial
entry.
Id. at 1017-18 (internal quotation marks and citations omitted)
(alterations in original). Planned Parenthood thus makes it
clear that interest ordinarily should be computed from the date
of the original judgment’s initial entry when the evidentiary
and legal bases for an award were sound. Id.7086 IN RE THE EXXON VALDEZ
Exxon contends that the legal basis for an award was not
sound in 1996, arguing that until the Supreme Court handed
down its 2008 decision in this case, the law did not allow
vicarious liability for punitive damages in maritime cases.
Yet, an evenly divided Supreme Court left in place our 2001
opinion that punitives were recoverable, and we in turn relied
on Supreme Court and Ninth Circuit precedent of long stand-
ing. See In re Exxon Valdez, 270 F.3d at 1233-36 (citing The
Amiable Nancy, 16 U.S. 546, and Protectus Alpha Naviga-
tion, 767 F.2d 1379).
[5] We therefore conclude that plaintiffs’ entitlement to
punitives was “meaningfully ascertained” when the original
district court judgment was entered in 1996. Neither the evi-
dentiary basis for the award nor the legal foundation for an
award has been disturbed after nearly a dozen years of subse-
quent litigation. We see no reason to depart from Planned
Parenthood’s general rule in this case. The plaintiffs are enti-
tled to interest from that date on the principal amount they
ultimately are entitled to receive, $507.5 million.
As to the rate, the parties agree that the “average accepted
auction price for the last auction of fifty-two week United
States Treasury bills” was 5.9% on September 12, 1996. See
28 U.S.C. § 1961(a) (1994 & Supp. II 1996). We have no dis-
cretion to deviate from § 1961’s instructions on the calcula-
tion of interest. See Ford v. Alfaro, 785 F.2d 835, 842 (9th
Cir. 1986). Interest on the $507.5 million judgment shall,
therefore, run from September 24, 1996 at the rate of 5.9%.
Costs
Costs have become a point of contention in this case
because of the size of the supersedeas security bond that
Exxon posted to sustain its appeals, and also because of the
length of time the case has taken to reach what we hope is
now its conclusion. Thus, Exxon’s total costs approach $70
million. Although Exxon has succeeded in reducing an origi-
IN RE THE EXXON VALDEZ 7087
nal jury verdict of $5 billion by about 90%, it remains liable
for a far-from-nominal punitive award of more than $500 mil-
lion.
[6] The controlling rule is Federal Rule of Appellate Proce-
dure 39(a)(4), which provides that where “a judgment is
affirmed in part, reversed in part, modified or vacated, costs
are taxed only as the court orders.” Plaintiffs point to the last
time we issued a mandate on punitives in this case, in 2001,
when we ordered each party to bear its own costs. In re Exxon
Valdez, 270 F.3d at 1254. The punitive damages award had
been remitted at that time as well. Plaintiffs also stress that,
in a case of mixed judgment, where each side wins something,
this Court usually orders each party to bear its own costs.
Exxon contends that it is essentially the winner of the liti-
gation and that plaintiffs should bear all, or at least 90%, of
Exxon’s appellate costs. With some 20/20 hindsight, Exxon
now characterizes the course of this case as having been all
about the amount of money Exxon would have to pay in puni-
tives. Having reduced that amount by 90%, it declares itself
the winner. Yet this ignores the hard-fought, even relentless,
battle Exxon waged to avoid any liability for punitives, a bat-
tle that resulted in an evenly divided decision by the Supreme
Court in 2008 leaving in place our 2001 decision on vicarious
liability. Exxon Shipping Co., 128 S. Ct. at 2616.
To bolster its position, Exxon points to the fact that the
Supreme Court awarded Exxon its costs. But the default rule
before the Supreme Court is that when the lower judgment is
vacated, the petitioner gets costs “unless the Court otherwise
orders.” Sup. Ct. R. 43.2. Rule 39 contains no such presump-
tion: when a judgment is modified, “costs are taxed only as
the court orders.” Fed. R. App. P. 39(a)(4). The dissent does
not recognize the difference.
[7] In this case, neither side is the clear winner. The defen-
dant owes the plaintiffs $507.5 million in punitives — accord-
7088 IN RE THE EXXON VALDEZ
ing to counsel at oral argument the fourth largest punitive
damages award ever granted. Yet that award represents a
reduction by 90% of the original $5 billion. In light of this
mixed result, and mindful that the equities in this case fall
squarely in favor of the plaintiffs — the victims of Exxon’s
malfeasance — we exercise our discretion by requiring each
party to bear its own costs.
Our decision is in accord with our usual practice when each
side wins something and loses something. This court has con-
sistently ordered each party to bear its own costs on appeals
where punitive damages are upheld, but reduced. See, e.g.,
Mendez v. Cty. of San Bernardino, 540 F.3d 1109, 1133 (9th
Cir. 2008); Planned Parenthood, 422 F.3d at 967; Bains LLC
v. Arco Prods. of Atl. Richfield Co., 405 F.3d 764, 777 (9th
Cir. 2005). We have even done so during the course of this
litigation, under similar circumstances. See In re Exxon
Valdez, 270 F.3d at 1254.
We are aware of two cases concerning reduced punitive
damages where a court of appeals affirmed a district court’s
divided cost award. See Republic Tobacco Co. v. N. Atl. Trad-
ing Co., 481 F.3d 442, 449 (7th Cir. 2007); Emmenegger v.
Bull Moose Tube Co., 324 F.3d 616, 626-27 (8th Cir. 2003).
Whether a district court abuses its discretion in awarding
costs under similar circumstances is quite different from the
question of whether we should exercise our own discretion in
that manner. Moreover, if we were to apportion costs on the
basis of Exxon’s proposed mathematical formula, i.e., to
match the costs awarded to the percentage reduction of dam-
ages achieved during the appellate process, we would be
inviting increased and wasteful litigation over the apportion-
ment of costs. We see no reason to enter such a thicket, and
that the dissent has found only one thirty-year-old out-of-
circuit case adopting a similar approach validates our decision
that it would be unwise to do so.
IN RE THE EXXON VALDEZ 7089
Conclusion
Because the evidentiary and legal bases for the original
judgment of punitive damages have not been overruled, we
award interest on the final judgment of $507.5 million, at the
statutorily set rate of 5.9%, to run from the date of the original
judgment, September 24, 1996. Because the amount of the
original $5 billion judgment has been substantially reduced,
we order that each party bear its own costs.
[8] The case is remanded to the district court for entry of
the final judgment in accordance with this opinion.
KLEINFELD, J., concurring in part and dissenting in part:
I concur in the majority decision insofar as it rules in favor
of the plaintiffs on interest. Plaintiffs should indeed have the
benefit of interest from when they became entitled by judg-
ment to punitive damages, September 24, 1996, at the rate
they properly claim, 5.9%.1 Exxon has had a half billion dol-
lars of the plaintiffs’ money ever since the district court
entered judgment in their favor. Interest is required to com-
pensate the plaintiffs for the delay in paying the plaintiffs
their money.
I am unable to concur regarding costs. Satisfying though it
may be to shovel money from a large corporation to those
whom it wronged, respect for the Supreme Court decision in
this case and precedent in other circuits obligates us to award
Exxon most, but not all, of its costs for its mostly successful
appeal. As this case proceeded, the district court initially
upheld all,2 and on remand, nearly all,3 of the punitive dam-
1
See 28 U.S.C. § 1961 (1994 & Supp. II 1996).
2
See In re Exxon Valdez (Exxon I), 236 F. Supp. 2d 1043, 1068 (D.
Alaska 2002) (noting the district court’s rejection of Exxon’s original
motion for reduction or remittitur of the jury’s $5 billion award).
3
Id. at 1068-69 (reducing the award from $5 billion to $4 billion); In re
7090 IN RE THE EXXON VALDEZ
ages the jury awarded to the plaintiffs. We agreed with the
plaintiffs that they were entitled to punitive damages,4 and
held that half of the original award ($2.5 billion) was not too
high.5 We turned out to be mistaken. The Supreme Court held
that a tenth of the original award was as high as anyone — us,
the district court, or the jury — could go.6 After overturning
our decision, the Supreme Court awarded costs to Exxon.7
Due respect for the Supreme Court’s decision obligates us, as
a lower court, to exercise our discretion regarding costs in
accord with how the Supreme Court exercised its discretion.
The majority says that Exxon “declares itself the winner,”
but it was really the Supreme Court of the United States that
declared Exxon the winner. Our liability ruling in favor of the
plaintiffs was indeed left “undisturbed,” but only because the
Court’s tie vote on liability left our decision in place as to that
issue.8 The Court took pains to point out that leaving our deci-
sion in place did not mean we were correct.9
Exxon Valdez (Exxon III), 296 F. Supp. 2d 1071, 1110-11 (D. Alaska
2004) (reducing the award from $5 billion to $4.5 billion following an
additional remand for reconsideration in light of State Farm Mutual Auto-
mobile Insurance Co. v. Campbell, 538 U.S. 408 (2003)).
4
In re Exxon Valdez (Exxon II), 270 F.3d 1215, 1226, 1233-36 (9th Cir.
2001) (upholding punitive damages award).
5
See id. at 1243, 1246-47 (remanding for reduction of the punitive dam-
ages award); In re Exxon Valdez (Exxon IV), 472 F.3d 600, 602, 623-25
(9th Cir. 2006) (per curiam) (reducing the punitive damages award to $2.5
billion).
6
Exxon Shipping Co. v. Baker, 128 S. Ct. 2605, 2633-34 (2008) (hold-
ing that the “maximum” punitive damages award was $507.5 million).
7
Judgment, Exxon Shipping Co. v. Baker, No. 07-219 (Aug. 12, 2008).
8
Exxon Shipping, 128 S. Ct. at 2616.
9
Id. (“[I]t should go without saying that the disposition here is not pre-
cedential on the derivative liability question.”). An evenly divided deci-
sion does not expressly or impliedly approve of the lower court’s
reasoning, and does not require other circuits to follow it. Neil v. Biggers,
409 U.S. 188, 192 (1972) (quoting Durant v. Essex Co., 74 U.S. (7 Wall.)
107, 112 (1869)).
IN RE THE EXXON VALDEZ 7091
The liability determination, which squeaked by in the
Supreme Court, was merely a stepping stone on the way to the
destination. The destination was money. On the money, it
turned out that we were way off. The Supreme Court held that
our decision, which reduced the award to $2.5 billion, was
still $2 billion too high and 5 times more than could properly
be awarded.10 The Court concluded that the “upper limit” on
the ratio of punitive damages to actual damages was 1 to 1.11
Exxon thus obtained at least a 90% reduction in the punitive
damages it owed.12 After the Supreme Court handed down its
decision, Exxon and the plaintiffs agreed to a punitive dam-
ages award of $507.5 million. We accepted this partial settle-
ment, so the amount of punitive damages is established at that
amount.
The majority is correct that Exxon fought a “relentless . . .
battle” until the Supreme Court vacated the award for being
far too high, but draws the wrong inference from the duration
and intensity of that fight. Exxon was not obligated to accept
our decision. Litigants have the right to appeal and petition
for certiorari when in good faith they think a lower court has
erred.13 Exxon appealed and fought. The Supreme Court
determined that Exxon was largely correct, more right than
we were. The law requires Exxon to be compensated in part
for that battle, not punished for it, because it turned out that
Exxon was largely entitled to prevail, despite our opinions to
the contrary. Humility requires us to accept that.
Federal Rule of Appellate Procedure 39 governs the award
of costs on appeal. Under the rule, how well or how poorly
10
Exxon Shipping, 128 S. Ct. at 2634.
11
See id. at 2633-34.
12
“[W]e take for granted the District Court’s calculation of the total rel-
evant compensatory damages at $507.5 million. A punitive-to-
compensatory ratio of 1:1 thus yields maximum punitive damages in that
amount.” Id. at 2634 (citation omitted).
13
See Fed. R. App. P. 3; Sup. Ct. R. 10.
7092 IN RE THE EXXON VALDEZ
a party does on appeal determines whether that party may col-
lect any money from its opponent to cover the costs of the
appeal.14 It implements “the principle . . . that all cost items
expended in the prosecution of the proceeding should be
borne by the unsuccessful party.”15 This ancient principle was
set out in the Statute of Gloucester in 1275.16 It has been mod-
ified only in the details since its establishment. Neither the
principle, nor our rule, use “costs” to mean what something
actually cost. “Costs” means the certain listed expenditures a
party has incurred for which it may seek reimbursement from
the opposing party.17 Exxon is not entitled to seek reimburse-
ment under Rule 39 of the fortune it undoubtedly spent on
attorneys’ fees.18 Allowable costs under Rule 39, for prepara-
tion and transmission of the record, for the reporter’s tran-
script, and for filing a notice of appeal ($455), are relatively
small.19 But the one remaining element of allowable costs,
14
Fed. R. App. P. 39(a).
15
Fed. R. App. P. 39 advisory committee’s note; see United States v.
Imperial Irrigation Dist., 595 F.2d 525, 532 (9th Cir. 1979) (explaining
that “parties should be allowed costs [under Rule 39] in the case in which
they prevailed”); see also Am. Auto. Mfrs. Ass’n v. Comm’r, Mass. Dep’t
of Envtl. Prot., 31 F.3d 18, 28 (1st Cir. 1994) (noting that “[p]revailing
parties are normally entitled to costs” under Rule 39); Studiengesellschaft
Kohle mBH v. Eastman Kodak Co., 713 F.2d 128, 131-32 (5th Cir. 1983)
(same); In re Penn Cent. Transp. Co., 630 F.2d 183, 189 (3d Cir. 1980)
(same); Delta Air Lines, Inc. v. Civil Aeronautics Bd., 505 F.2d 386, 387
-88 (D.C. Cir. 1974) (same).
16
Arthur L. Goodhart, Costs, 38 Yale L.J. 849, 852-53 (1929); Imperial
Irrigation Dist., 595 F.2d at 532 (“It has long been recognized that pre-
vailing parties may be awarded costs on appeal . . . .”); Waterman S.S.
Corp. v. Gay Cottons, 419 F.2d 372, 373 (9th Cir. 1969) (applying Rule
39 to civil actions in admiralty).
17
See Johnson v. Pac. Lighting Land Co., 878 F.2d 297, 298 (9th Cir.
1989); 10 Charles Alan Wright et al., Federal Practice and Procedure
§ 2666 (3d ed. 1998 & Supp. 2009) (discussing costs under the analogous
Federal Rule of Civil Procedure 54).
18
See Fed. R. App. P. 39(e); Johnson, 878 F.2d at 298 (holding that
allowable costs are limited to the items authorized in Rule 39).
19
Fed. R. App. P. 39(e)(1), (2), (4); U.S. Court of Appeals for the Ninth
Circuit, Updated Fee Schedule Effective April 9, 2006, http://www.ca9.
uscourts.gov/datastore/general/2009/03/25/FeeSchedule0306.pdf.
IN RE THE EXXON VALDEZ 7093
“premiums paid for a supersedeas bond or other bond to pre-
serve rights pending appeal,” can be, and was in this case, huge.20
If this appeal were, as the majority suggests in justifying
the denial of costs, primarily for the principle of the thing,
Exxon need not have posted a supersedeas bond. Exxon could
have pursued its appeal for no more than a few thousand dol-
lars in record preparation expenses and filing fees, plus unre-
coverable attorneys’ fees.21 But had Exxon appealed without
posting a supersedeas bond, Exxon would have had to pay the
plaintiffs all of the original judgment ($5 billion) in 1996,
including the $4.5 billion that the Supreme Court held it did
not owe. Given the practical difficulties of trying to get the
money back over a decade later, at best the appeal would have
generated a very expensive piece of paper saying that Exxon
had overpaid by $4.5 billion.
To hold onto the money until the courts determined
whether the $5 billion judgment was correct, Exxon had to
secure payment of the judgment, guaranteeing that the money
would be there for the plaintiffs if Exxon lost. Under Federal
Rule of Civil Procedure 62(d), an appellant can stay execution
of a money judgment by posting a supersedeas bond approved
by the district court. Exxon obtained such a stay by posting
a bond that secured the entire $5 billion judgment, plus interest.22
Had Exxon not posted a supersedeas bond, the plaintiffs
would have been entitled to take Exxon’s money, all $5 bil-
lion of the punitive damages award plus interest, 10 days after
the district court entered judgment in the plaintiffs’ favor.23
20
Fed. R. App. P. 39(e)(3).
21
Fed. R. App. P. 3, 4; see also Fed. R. Civ. P. 62(a), (d).
22
The supersedeas bond was amended each time the amount of the judg-
ment changed. See Order Continuing Stay of Execution of Money Judg-
ment, In re Exxon Valdez, No. A89-095 CIV (HRH) (D. Alaska Feb. 3,
2009) (Document No. 8969).
23
Fed. R. Civ. P. 62(a); United States v. $2,490.00 in U.S. Currency,
825 F.2d 1419, 1420-21 (9th Cir. 1987).
7094 IN RE THE EXXON VALDEZ
The plaintiffs would then have been free to spend the money
in the 13 intervening years as the appeals and remands
dragged on.
The rationale for a supersedeas bond is that there can be no
certainty about who is in the right until the appeals are done;
the party that lost should not have to pay the winner until the
district court’s decision is finally affirmed, but in the mean-
time, the party that won in district court should not be at risk
of the money disappearing.24 To protect the winner from the
risk that the loser will not have money if and when the judg-
ment is affirmed, the bond is ordinarily secured by property
or by surety. The surety, such as a bank or insurance com-
pany, obligates itself to pay the judgment creditor. In this
case, the $5 billion judgment was secured by several banks
(the judgment was apparently too big for one bank). The
banks authorized an irrevocable25 letter of credit,26 which
authorized the clerk of court to request payment of the judg-
ment for the benefit of plaintiffs. To pay out the billions of
dollars to the plaintiffs, all the clerk needed to do was sign a
form saying “pay as directed in the attached order of the Dis-
trict Court,” like endorsing a traveler’s check or cashier’s
check.
24
11 Charles Alan Wright et al., Federal Practice and Procedure § 2905
(2d ed. 1995 & Supp. 2009); see, e.g., Celotex Corp. v. Edwards, 514 U.S.
300, 301-02 (1995); Lunn v. F.W. Woodworth Co., 210 F.2d 159, 159-60
(9th Cir. 1954).
25
I.e., the banks cannot withdraw from the undertaking.
26
Warner Bros. Int’l TV. Distrib. v. Golden Channels & Co., 522 F.3d
1060, 1062-63 (9th Cir. 2008) (“A letter of credit creates ‘an absolute,
independent obligation and payment must be made upon presentation of
the proper documents regardless of any dispute between the buyer and
seller concerning their agreement.’ Like a Travelers Check (which is a let-
ter of credit), it enables international business to be done safely and
securely because the vendor need only rely on the financial strength of the
issuing bank, and not on the financial strength and willingness to pay of
the vendee.” (internal citations omitted)).
IN RE THE EXXON VALDEZ 7095
Sureties do not commit their credit for free. To hold onto
the $5 billion until the appeals finished, Exxon had to pay the
banks $60.6 million. Exxon paid 90% percent of this money,
about $54.5 million dollars, for the right to hold onto the $4.5
billion plus interest that the Supreme Court concluded Exxon
did not owe. Only 10% percent, about $6.1 million, bought
the right to delay paying money that Exxon turned out to owe
the plaintiffs. In other words, Exxon had to spend about $6
million to secure money it did owe, and over $50 million to
shield money it did not owe, while it pursued its appeals.
The Supreme Court awarded costs in favor of Exxon
against the plaintiffs, even though it rendered a split decision
that left the plaintiffs with up to 10% of their victory.27 The
majority does not follow the Supreme Court’s determination.
Instead, the majority pretends that Exxon did not win, pun-
ishes it for fighting so long and hard, and denies Exxon any
costs at all. Because Exxon won 90% percent of its case and
paid 90% of the $60.6 million to hold onto money it ulti-
mately did not owe, Exxon ought to recover 90% of its allow-
able supersedeas bond costs. The $60.6 million was the price
of Exxon’s train ticket to victory. The rules, in place with lit-
tle change for many centuries, say that a party that wins on
appeal is entitled to have the loser reimburse the price of that
train ticket.28
Had Exxon won the case entirely, we would still have had
discretion to deny costs, because Rule 39 says “unless . . . the
court orders otherwise.”29 The strong presumption in favor of
awarding costs to the prevailing party would have made such
an exercise of discretion unlikely.30 When a court has discre-
27
Judgment, Exxon Shipping Co. v. Baker, No. 07-219 (Aug. 12, 2008).
The Court stated that the “maximum punitive damages award” was $507.5
million. Exxon Shipping, 128 S. Ct. 2605, 2615-16, 2634 (2008).
28
Fed. R. App. P. 39(a), (e) & advisory committee’s note; cf. Fed. R.
Civ. P. 54(d).
29
Fed. R. App. P. 39.
30
See United States v. Imperial Irrigation Dist., 595 F.2d 525, 530 (9th
Cir. 1979); Fed. R. App. P. 39 advisory committee’s note (explaining that
7096 IN RE THE EXXON VALDEZ
tion, ordinarily the question is whether the court has abused
its discretion. Not infrequently this court reverse district
courts for abusing their discretion. Likewise, we ourselves
must not abuse our discretion. We do so here, unfortunately,
by denying all costs whatsoever.
What persuades me that we are abusing our discretion is the
Supreme Court’s exercise of its discretion in this case. The
Supreme Court awarded costs entirely in favor of Exxon, even
though it left our liability decision standing on a tie vote and
allowed for a half billion punitive damages award in favor of
the plaintiffs on remand.31 Just as the Supreme Court’s deci-
sion binds us, its exercise of discretion should guide us. The
Supreme Court concluded that Exxon prevailed to so great a
degree as to deserve costs. As a lower court implementing the
Supreme Court’s decision on remand, we abuse our discretion
by pretending otherwise.
The majority evades this obligation by arguing that there is
a substantive, and not merely verbal, difference between the
Supreme Court rule on costs and ours. There is not. The
Supreme Court’s rule says “[i]f the Court reverses or vacates
a judgment, the respondent or appellee shall pay costs unless
the Court otherwise orders.”32 Our rule says that “if a judg-
ment is affirmed in part, reversed in part, modified, or
vacated, costs are taxed only as the court orders.”33 From the
tone of the language, one might (the majority does not) tease
out a theory that the Supreme Court rule connotes a somewhat
more favorable inclination toward costs than our rule, but
Rule 39 implements the “principle” that costs “should be borne by the
unsuccessful party”); 16AA Charles Alan Wright et al., Federal Practice
and Procedure § 3985 (4th ed. 2008 & Supp. 2009); cf. Fed. R. Civ. P.
54(d)(1); 10 Wright et al., supra note 17, § 2668.
31
Judgment, Exxon Shipping Co. v. Baker, No. 07-219 (Aug. 12, 2008).
32
Sup. Ct. R. 43(2) (emphasis added).
33
Fed. R. App. P. 39(a)(4) (emphasis added).
IN RE THE EXXON VALDEZ 7097
such an inference would be too gossamer, and any attendant
presumption too weak, in the face of plainly discretionary lan-
guage for both courts.
For both our rule and the Supreme Court’s rule, the words
are discretionary, “unless the Court otherwise orders” in the
Supreme Court,34 “only as the court orders” here.35 In sub-
stance the rules are the same, leaving costs to the court’s dis-
cretion. They do so against the background of our legal
system, which has, for the better part of a millennium,36
awarded costs to prevailing plaintiffs, and for about half a
millennium to whichever party prevailed.37 As for who the
prevailing party is, we have in all our decisions been much
closer to plaintiffs’ view of the case, but the Supreme Court
disagreed and is, after all, supreme.
The Second Circuit addressed the similarity of the costs
rules in its scholarly opinion, Furman v. Cirrito.38 In that case,
as here, the Supreme Court had reversed the court of appeals.
On remand, the party that won costs in the Supreme Court
under its Rule 4339 sought them in the court of appeals under
34
Sup. Ct. R. 43(2).
35
Fed. R. App. P. 39(a)(4).
36
See Goodhart, supra note 16, at 852-60.
37
See Fed. R. App. P. 39 advisory committee’s note; Buckhannon Bd.
& Care Home, Inc. v. W. Va. Dep’t of Health & Human Res., 532 U.S.
598, 606 n.8 (2001) (noting that “by the long established practice and uni-
versally recognized rule of the common law . . . the prevailing party is
entitled to recover a judgment for costs” (quoting Mansfield, Coldwater &
Lake Mich. Ry. Co. v. Swan, 111 U.S. 379, 387 (1884) (alteration omit-
ted)); Goodhart, supra note 16, at 851-54; Philip M. Payne, Costs in Com-
mon Law Actions in the Federal Courts, 21 Va. L. Rev. 397, 403 (1935);
cf. Fed. R. Civ. P. 54(d)(1) (“Unless . . . a court order provides otherwise,
costs — other than attorney’s fees — should be allowed to the prevailing
party.”).
38
782 F.2d 353 (2d Cir. 1986).
39
Sup. Ct. R. 43(2).
7098 IN RE THE EXXON VALDEZ
Rule 39.40 Furman holds that despite the slight verbal differ-
ences, “[t]he language of the district, circuit, and Supreme
Court rules that confer discretion to award costs is almost
identical,” so a Supreme Court reversal and award of costs
“entitles” the victor there to costs in the court of appeals.41
The Second Circuit explained that just as a district court on
remand must follow a circuit court’s decision when taxing
costs, a circuit court’s award of costs should be consistent
with the Supreme Court’s decision.42 Since the Supreme Court
reversed the Second Circuit and awarded costs under its rule
to the appellants, Furman held that proper deference to the
Supreme Court’s decision meant the appellants should also be
considered prevailing parties for the purposes of Rule 39,
entitling them to appellate costs.43 Because neither our rule,
nor the factual circumstances before us, differ materially from
those before the Supreme Court, our decision on costs should,
like Furman, be consistent with the Supreme Court’s deci-
sion. The Supreme Court awarded costs in favor of Exxon,
and we abuse our discretion by defying its judgment.
The only distinction that could arguably be drawn between
Furman and our case is that Furman was not a decision that
left each side with something. But both our cases and those
of our sister circuits have addressed what is to be done in that
circumstance as well. Costs go to the “prevailing party.”44 Our
40
Fed. R. App. P. 39.
41
Furman, 762 F.2d at 355-56.
42
Id.
43
Id.
44
See United States v. Imperial Irrigation Dist., 595 F.2d 525, 530 (9th
Cir. 1979); see also Am. Auto. Mfrs. Ass’n v. Comm’r, Mass. Dep’t of
Envtl. Prot., 31 F.3d 18, 28 (1st Cir. 1994) (noting that “[p]revailing par-
ties are normally entitled to costs” under Rule 39); Studiengesellschaft
Kohle mbH v. Eastman Kodak Co., 713 F.2d 128, 131-32 (5th Cir. 1983)
(same); In re Penn Cent. Transp. Co., 630 F.2d 183, 189 (3d Cir. 1980)
(same); Delta Air Lines, Inc. v. Civil Aeronautics Bd., 505 F.2d 386, 387
-88 (D.C. Cir. 1974) (same).
IN RE THE EXXON VALDEZ 7099
case law holds that a party “need not prevail on every issue,
or even on the ‘central issue’ in the case, to be considered the
prevailing party.”45 A party “prevails” when it wins substan-
tial relief; the amount of the cost award is determined by
looking at the extent of the party’s success.46 As far as awards
of appellate costs go, we have awarded costs to the party that
“substantially and primarily prevailed on appeal.”47
Likewise, the Seventh and Eighth Circuits both treat a
defendant’s success in substantially reducing the size of the
damages award as meriting costs for amounts paid to obtain
supersedeas bonds. The Eighth Circuit held in Emmenegger v.
Bull Moose Tube Co.48 that when the defendants succeeded in
knocking several million dollars off the plaintiffs’ recovery,
the defendants were properly awarded costs for the premiums
on a supersedeas bond they paid to shield the money while
they appealed.49 The costs defendants got in Emmenegger
45
Hashimoto v. Dalton, 118 F.3d 671, 677 (9th Cir. 1997) (emphasis
added and citation omitted); Stivers v. Pierce, 71 F.3d 732, 751 (9th Cir.
1995) (“If the plaintiff is only partially successful in seeking the relief, and
achieves only some of the benefit sought by the litigation, he is still con-
sidered the prevailing party.”); see A&M Records, Inc. v. Napster, Inc.,
239 F.3d 1004, 1029 (9th Cir. 2001) (awarding costs to party that “sub-
stantially and primarily prevailed on appeal”); 10 Wright et al., supra note
17, § 2667 (discussing analogous Federal Rule of Civil Procedure 54).
46
See Hensley v. Eckerhart, 461 U.S. 424, 440 (1983); see also Aguirre
v. L.A. Unified Sch. Dist., 461 F.3d 1114, 1121 (9th Cir. 2006) (remanding
for apportionment of fees in accord with party’s “degree of success”); cf.
Comedy Club, Inc. v. Improv W. Assocs., 553 F.3d 1277, 1294 n.18 (9th
Cir. 2009) (awarding costs only on the issues on which the party prevailed
pursuant to an arbitration agreement which provided for the award of costs
to the “prevailing party”); Cancellier v. Federated Dep’t Stores, 672 F.2d
1312, 1320 (9th Cir. 1982) (awarding attorneys’ fees on appeal to reflect
party’s partial success on appeal), abrogated on other grounds, Gilchrist
v. Jim Slemons Imps., Inc., 803 F.3d 1488, 1494 (9th Cir. 1986).
47
A&M Records, 239 F.3d at 1029; see also Mills ex rel. Mills v. Free-
man, 118 F.3d 727, 734-35 (11th Cir. 1997) (citing Furman with
approval).
48
324 F.3d 616 (8th Cir. 2003).
49
Id. at 626-27.
7100 IN RE THE EXXON VALDEZ
were for the portion of the supersedeas bond securing the por-
tion of the judgment the defendants got erased, not the whole
thing.50 We should exercise our discretion consistently with
the Eighth Circuit’s approach.
The Seventh Circuit in Republic Tobacco Co. v. North
Atlantic Trading Co.51 likewise upheld an award of costs for
supersedeas bond expenses in a partial defense victory. Even
though the plaintiffs wound up with $3 million out of a $18.6
million jury verdict (retaining a larger percentage of the origi-
nal award than the plaintiffs in this case), the Seventh Circuit
held that it was a proper exercise of discretion to tax the full
costs incurred for the supersedeas bond.52 The Seventh Circuit
suggested a better exercise of discretion would be the Eighth
Circuit’s approach, awarding as costs the amount spent to
secure the portion of the judgment vacated on appeal.53
The majority argues for disregarding the Seventh and
Eighth Circuit cases because they speak to exercises of discre-
tion by district courts, instead of exercises by appellate courts.
But the discretionary authority of district courts, circuit
courts, and the Supreme Court to award costs is conferred by
rules that, as Furman holds, are in substance the same at all
three levels.54 We, like district courts and the Supreme Court,
have a duty to exercise our discretion fairly and not abuse it.
These precedents explain how that discretion may be properly
exercised with regard to supersedeas bond costs and split
decisions on appeal.
The D.C. Circuit exercised its own discretion, and did not
merely analyze a district court’s exercise of discretion, in A
50
Id.51
481 F.3d 442 (7th Cir. 2007).
52
Id. at 448-49.
53
Id.54
782 F.2d at 355; see Fed. R. Civ. P. 54(d); Fed. R. App. 39; Sup. Ct.
R. 43.
IN RE THE EXXON VALDEZ 7101
Quaker Action Group v. Andrus,55 a case that had gone up five
times on appeal and resulted in a partial victory for each side.56
Though neither party prevailed entirely, the D.C. Circuit
made cost awards under Rule 39 in favor of the “predomi-
nately prevailing party.”57 Quaker Action held that the plain-
tiffs should recover 30% of their costs for the fifth appeal and
75% of their costs for the fourth appeal.58
Like the Seventh and Eighth Circuits, the D.C. Circuit
awarded partial costs to the partial victor. Since the D.C. Cir-
cuit exercised its own discretion to award appellate costs in a
split decision, the majority is simply cavilling when it sug-
gests that the Seventh and Eighth Circuit decisions only speak
to how circuit courts should review exercises of discretion.
The majority would disregard Quaker Action Group because
it is a “thirty-year-old out-of-circuit case.”59 Indeed it is. But
our legal system has no sunset provision for precedents.60 We
use decades-old and centuries-old precedents to achieve con-
sistency over time.
The majority rejects the “mathematical” approach to super-
sedeas bond costs as a “thicket,” and says that awarding a par-
tial victor the percentage of its supersedeas bond costs equal
to the percentage of its victory would generate “wasteful litiga-
tion.”61 The D.C. and Eighth Circuits had no trouble with
arithmetic. Spending many thousands to litigate about $60.6
million is not “wasteful,” and taking 90% of a number is
fourth grade arithmetic. This percentage approach is no more
55
559 F.2d 716 (1977) (per curiam).
56
Id. at 718 n.1, 719.
57
Id. at 719.
58
Id.59
Maj. op. 7088.
60
See Roe v. Wade, 410 U.S. 113 (1973); Marbury v. Madison, 5 U.S.
(1 Cranch) 137 (1803).
61
Maj. op. 7088.
7102 IN RE THE EXXON VALDEZ
complicated than calculating a tip, not much of a “thicket.”
Those who find it challenging could always use a calculator.
All the majority cites to support its exercise of discretion
are cases in which we have not spoken to this issue at all.
Every case the majority cites62 is a split decision in which we
said, “[e]ach party shall bear its own costs on appeal.” Each
case says that without explanation and without any indication
that the costs were even disputed. None contain a holding
about the apportionment of supersedeas bond expenses. None
even mention Rule 39, let alone discuss when or how a court
should award appellate costs under it. There are, of course,
numerous split decisions in which we did the opposite and
awarded costs, rather than required each party to bear their
own.63
The problem is that majority uses these citations as decora-
tion, as opposed to how citations are meant to be used, to
assure that like cases are treated alike. We look to precedent
because fairness requires that like cases be treated alike,
instead of being treated differently according to how the
62
Mendez v. County of San Bernardino, 540 F.3d 1109, 1133 (9th Cir.
2008); Planned Parenthood of Columbia/Willamette, Inc. v. Am. Coal. of
Life Activists, 422 F.3d 949, 967 (9th Cir. 2005); Bains LLC v. Arco
Prods. Co., 405 F.3d 764, 777 (9th Cir. 2005).
63
See, e.g., McCoy v. Chase Manhattan Bank, USA, 559 F.3d 963, 972
(9th Cir. 2009); Nigg v. U.S. Postal Serv., 555 F.3d 781, 790 (9th Cir.
2009); Merrifield v. Lockyer, 547 F.3d 978, 992 (9th Cir. 2008); Ameri-
sourceBergen Corp. v. Roden, 495 F.3d 1143, 1154 (9th Cir. 2007);
Swartz v. KPMG LLP, 476 F.3d 756, 767 (9th Cir. 2007); Alperin v. Vati-
can Bank, 410 F.3d 532, 563 (9th Cir. 2005); Smith v. Pac. Props. & Dev.
Corp., 358 F.3d 1097, 1107 (9th Cir. 2004); Theofel v. Farey-Jones, 359
F.3d 1066, 1079 (9th Cir. 2004); Carpinteria Valley Farms, Ltd. v. County
of Santa Barbara, 344 F.3d 822, 832 (9th Cir. 2003); Freeman v. San
Diego Ass’n of Realtors, 322 F.3d 1133, 1157 (9th Cir. 2003); Lyons v.
England, 307 F.3d 1092, 1119 (9th Cir. 2002); A&M Records, Inc. v. Nap-
ster, Inc., 239 F.3d 1004, 1029 (9th Cir. 2001); Saridakis v. United Air-
lines, 166 F.3d 1272, 1279 (9th Cir. 1999); San Pedro Hotel Co. v. City
of L.A., 159 F.3d 470, 479 (9th Cir. 1998).
IN RE THE EXXON VALDEZ 7103
judges feel. For guidance as to how costs should be awarded
in this instance, there is no more analogous precedent than the
Supreme Court’s award of costs in this very case. In the face
of the Supreme Court’s decision overturning us, the majority
chooses to not award costs, even though the United States
Supreme Court chose to award them, to Exxon.
The plaintiffs were victims of Exxon’s malfeasance. They
had to wait much too long for the punitive damages award.
That wait is why they are entitled to interest.64 But Exxon had
to pay for a supersedeas bond to secure $4.5 billion it did not
owe. That is why Exxon is entitled to recover that portion of
its costs under Rule 39.65 Whether we like it or not, Exxon got
us overturned, and saved 90% of what the jury thought it
should pay and 80% of what we thought it should pay by win-
ning in the Supreme Court. The prevailing party has for many
centuries been entitled to its costs. As for who in large part
won the case in the Supreme Court, there cannot be serious
doubt. The champagne corks that popped after the Supreme
Court reversed us were doubtless on Exxon’s side, not the
plaintiffs.
64
See 28 U.S.C. § 1961 (1994 & Supp. II 1996).
65
Fed. R. App. P. 39(a)(4), (e).