In a stinging ruling, a federal judge chastised Exxon and its attorneys for concocting a secret deal to recover a large chunk of the $5 billion judgment against the oil company after the Exxon Valdez oil spill.
U.S. District Court Judge Russel Holland not only rebuked Exxon but rejected the oil company's attempt to gain part of the punitive damage award.
''The court will not countenance Exxon's astonishing ruse and allow it to manipulate the jury and negate its verdict,'' Holland wrote in a ruling released Wednesday.
The out-of-court settlement between Exxon and a group of seafood processors known as the Seattle Seven required the processors to pursue a share of the punitive damage award and then turn it over to Exxon.
The Seattle Seven stepped forward in January when attorneys for the plaintiffs filed their plan for distributing the $5 billion award. The processors opposed that plan, saying they had not given up their right to a part of the award even though they already had settled with Exxon for $70 million long before the trial began.
They calculated they were entitled to nearly 15 percent -- or $745 million -- of the $5 billion, which was awarded to 30,000 fishermen, Natives and others by a federal jury for damages caused in 1989 by the 11 million-gallon oil spill.
Holland disagreed, saying the seafood processors already had settled all their claims.
His scolding fills about six pages of the 50-page ruling in which he approved the distribution plan without giving a dime to the processors. He wrote that the attorneys representing Exxon and the processors came dangerously close to violating the Alaska Bar Association's rules of professional conduct.
''Exxon has acted as Jekyll and Hyde, behaving laudably in public and deplorably in private,'' Holland wrote.
Exxon spokesman Ed Burwell said Wednesday the legalities of the type of out-of-court settlement proposed have never been tested in court and that the company will probably appeal Holland's ruling. Exxon declined to make company officials available for an interview.
Court records show that Exxon offered the seafood processors financial incentive to pursue a portion of the $5 billion award and hand most of it over to Exxon.
''Seattle Seven would recover $750,000 for each percentage point of punitive damages recovered up to 10 percentage points,'' Holland quoted from the settlement agreement. After that the seafood processors would get $1 million for each percentage point between 10 percent and 15 percent, according to court documents.
The processors calculated they were entitled to 14.9 percent of the punitive damages. Had Holland agreed with their position, the processors would have gotten $12.4 million for their effort.
Holland wrote that Exxon officials and attorneys misled the jurors. Because of the secrecy, ''the jury didn't learn that Exxon might be paying itself a chunk of the punitive damage award,'' Holland wrote.
Had the jury known about the secret deal, ''the jury may very well have increased the punitive damages by 15 percent,'' Holland wrote. ''The jury determined that $5 billion, and not a penny less, was the amount reasonably necessary to punish and deter Exxon.''
He also wrote, ''As the result of a secret agreement, neither the court, nor the jury, nor plaintiffs knew that Exxon intended to share in the very punitive damages award which the jury deemed necessary to fulfill society's goal of punishment and deterrence.''
Holland also upheld a $3.5 million out-of-court settlement between Exxon and what are known as the Phase IV plaintiffs, for miscellaneous claims pending against Exxon following the 1994 trial. That just leaves a handful of small issues that must be resolved before Holland can enter a final judgment in the case. Then, Exxon is expected to file an appeal on a long list of issues.