Large Portion of Settlement Money from Exxon Case Will Go to Legal Expenses

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Summary: A judge must now approve the settlement reached between the state of New Jersey and ExxonMobil Corporation, a settlement that many feel is too small.

Many have criticized New Jersey’s decision to agree to settle a multibillion-dollar lawsuit with ExxonMobil Corporation. New Jersey settled the case for $225 million, which baffled many onlookers, since the state had originally asked for $8.9 billion in damages in court, according to the New York Times.

  

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Even if the deal is approved, the state will not receive the full $225 million. After legal expenses and costs are deducted, New Jersey will receive around $180 million.

According to the Wall Street Journal, Governor Chris Christie explained that the settlement did not include money that Exxon will use to clean up the spill site. There is no cap on cleanup costs.

The case was handled on a contingency basis by Kanner & Whiteley of New Orleans. The firm specializes in environmental lawsuits. The firm had previously worked closely with the state attorney general’s office, as well as the Department of Environmental Protection. The firm should receive around 20 percent of any recovery, should the settlement and legal expenses be approved by a judge.

After around ten years of fighting in court, New Jersey has prevailed on key issues of liability. Last year, a trial was conducted to determine what damages Exxon should pay for contamination it caused at two refinery sites in the northern part of the state.

Last year, ExxonMobil was accused of unlawful discrimination.

After the trial ended, New Jersey argued that the “scope of the environmental damage resulting from the discharges is as obvious as it is staggering and unprecedented in New Jersey.” Exxon argued that it should not have to pay any damages.

Judge Michael J. Hogan was thought by many to be ready to rule on the issue in January, but the attorney general’s office asked him to hold off and then informed the court that a settlement had been reached.

Attorney General John J. Hoffman and Bob Martin, New Jersey’s environmental commissioner, said last week in a statement that the “historic” deal was reached “because this administration aggressively pushed the case to trial” and engaged in “long-fought settlement negotiations.”

The statement also said that Hoffman’s office negotiated the deal, “working in coordination” with Martin’s agency and Governor Chris Christie’s office.

The Kanner firm was retained by New Jersey more than ten years ago to assist it with developing an initiative that would include pressing charges for damages to natural resources and the loss of their use to the public. A news release from the attorney general’s office in 2004 said that the sate would be assisted by “a group of experienced outside counsel.”

At the end of 2012, a settlement in a BP oil spill case was approved by a judge.

A top advisor to Hoffman, Jeffrey Jacobson, said, “In these big-stakes cases like the $9 billion Exxon trial, New Jersey should and will be happy that we had those outside partners working with us.”

During the damages portion of the proceedings, John Saco with the Department of Environmental Protection testified about why outside firms should be used. He said that the environmental agency and the attorney general’s office did not “have the expertise in-house to litigate a case of this complexity.”

Exxon was represented by Theodore V. Wells Jr., a partner and co-chairman of the litigation department at Paul, Weiss, Rifkind, Wharton & Garrison, and several other skilled attorneys.

Paul Weiss’s revenue was in excess of one billion dollars in 2014.

The Kanner firm assisted New Jersey with assessing potential lawsuits under the initiative. In addition, it helped the state try cases that could not be settled, and it was assigned to handle the Exxon lawsuits. These suits sought damages for contamination in Bayonne and Linden, also called Bayway.

The firm was initially to be paid on a contingency basis, with a sliding scale that included a 20 percent fee of any recovers over $25 million after a trial began. However, a judge later invalidated the scale, ruling that the rates had to comply with the state’s court rules, which do not specify a percentage for any recoveries over $3 million except to note that fees must be “reasonable.” These fees also must be approved by a judge.

Since then, the attorney general’s office has argued hat the original scale was “presumptively reasonable.” Under the state’s retainer agreement, if there is no recovery by the state, the outside firm absorbs the costs of litigation.

In considering the legal fees, Judge Hogan will weigh the risks the firm undertook, the hours the attorneys worked, and their standard billing rates, John Leubsdorf, a law professor at Rutgers University, said. Leubsdorf has written a great deal about legal fees.

Professor Leubsdorf added that the fact that the state settled for less than it was seeking will likely not be a consideration. “The client always has the right to settle the case,” explaining that a state would have “many motives” to settle, in addition to trying to recover “as much money through the courts as it can.”

According to Wikipedia, the Bayway refinery, the center of this litigation, has consistently been ranked one of the worst polluters in the country.

Source: New York Times

Photo credit: wnyc.org, NJ.com (Hoffman), law.net (Wells)