HARD AGROUND - Wreck of the Exxon Valdez - March 24, 1989


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The Associated Press

Anchorage Daily News
Date: 09/19/96
Day: Thursday
Edition: Final
Section: Metro
Page: C2

ANCHORAGE- Exxon will need to obtain a letter of credit if it wants to appeal the $5 billion judgment in the Exxon Valdez oil spill, the judge in the case has ruled.

In an order filed Wednesday, U.S. District Judge Russel Holland rejected Exxon's proposals for securing the huge judgment while it appeals.

The company originally suggested an ''irrevocable covenant,'' which the company said would bind it to pay a sum upheld on appeal no matter who was in charge of Exxon -- or even if the company sought bankruptcy protection.

Exxon later modified that proposal to trigger filing of a letter of credit if the shareholder equity fell below $20 billion or the debt-to-capital ratio exceeded 50 percent.

But if those triggers don't occur, the judge wrote, the plaintiffs have no security beyond Exxon's promise. That, he said, isn't enough. And if the company's financial condition slips, it's not clear the company could obtain a letter of credit at that point.

A second Exxon proposal to escrow its own commercial paper also provides no third-party security, the judge wrote, and is too complicated.

''At this point, it is clear that the least complicated and least costly means of providing plaintiffs with some meaningful security for timely payment of their judgment is an automatically renewable, irrevocable, letter of credit, issued by one or more banks with which Exxon routinely does business,'' the judge wrote in Wednesday's order.

Holland had earlier asked the two sides to suggest ways to secure the 1994 judgment. It is too large to be backed by a bond as is customary in civil cases, because bonding companies aren't big enough to secure such a huge amount.

''We said, 'Judge, tell them to file a letter of credit,' '' said David Oesting, an Anchorage lawyer representing plaintiffs. ''This is ordering them to get a letter of credit.''

That will protect the claimants, who include Alaska Natives, commercial fishermen and landowners harmed by the 11-million-gallon oil spill in 1989.

Exxon resisted the letter of credit, saying it would cost $7 million to $10 million a year to service.

The company suggested that the plaintiffs provide security for that cost in case Exxon won on appeal. Holland rejected that idea as well.

''It is Exxon which desires to be relieved of the obligation of paying the judgment ... forthwith,'' the judge wrote. ''In return for that relief, it is only reasonable that Exxon pay the cost of providing the plaintiffs with security. ...''

Oesting said the case was winding close to the actual entering of a judgment in Holland's court -- though he wouldn't estimate when that might occur. Once the judgment is entered, the appeals can begin. That process could take years.

Story Index:
Main | The Legal Battles
Overall: story 344 of 380 Previous Next
The Legal Battles story 79 of 87 Previous Next

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