Nautilus Marine Enterprises, Inc. v. Exxon Mobil Corporation & Exxon Shipping Co.
332 P.3d 554
Alaska2014Background
- Exxon and Nautilus contracted in a 2006 Exxon Valdez–related settlement; the parties reserved the issue of prejudgment interest calculation. After federal proceedings, Exxon sued in Alaska superior court seeking reformation or a declaratory judgment that the settlement did not require compound interest. A three-day bench trial followed.
- Exxon was represented by local counsel (Patton Boggs, Anchorage) and out-of-state counsel (O’Melveny & Myers, Los Angeles). Cook Inlet Processing settled with Exxon before trial; Nautilus did not.
- At deposition, Nautilus’s president (Waterer) refreshed memory from telephone logs that Exxon’s forensic expert later concluded were altered; the superior court found Waterer acted in bad faith and sanctioned him.
- The superior court declared Exxon the prevailing party, awarded attorney fees under Alaska Civil Rule 82 (using actual fees), accepted O’Melveny’s Los Angeles billing rates, enhanced the fee award by 5% for misconduct, and awarded 60% of Exxon’s forensic expert fees as a Rule 37 sanction. Clerk approved costs including research, copying, travel, and depositions.
- On appeal, the Alaska Supreme Court affirmed the merits (prevailing-party finding) but reversed and remanded the fee and cost awards because the superior court erred by using out-of-state rates and failing to apportion fees and costs between Nautilus and Cook Inlet Processing; it affirmed other aspects (hours billed, enhancements, sanctions, and most costs).
Issues
| Issue | Nautilus’s Argument | Exxon’s Argument | Held |
|---|---|---|---|
| Whether Rule 82 fee awards should use local (forum) rates or out-of-state billing rates | Fee awards must be based on the prevailing party’s reasonable actual fees measured by the market where the case is litigated; out-of-state rates are improper absent extraordinary circumstances | Out-of-state counsel were reasonable given their long involvement and expertise in the underlying Exxon Valdez litigation; rates were reasonable | Fee awards should ordinarily be based on local rates; out-of-state rates justified only in extraordinary circumstances (remand to recalculate using Alaska rates) |
| Whether the number of hours and staffing billed by Exxon was reasonable | Hours billed were excessive, duplicative, and disproportionate to Nautilus’s fees | High hours and multiple attorneys were justified by case complexity, discovery, and trial preparation; billing statements were vetted | Superior court did not abuse its discretion in finding hours and staffing reasonable; no reduction required on this basis |
| Whether enhancement of fees and award of expert fees as sanctions for spoliation/bad-faith discovery was proper | Enhancement and expert-fee award were improper because deposition testimony was ultimately irrelevant and no prejudice occurred | Waterer acted in bad faith; Exxon incurred both attorney and expert expenses caused by misconduct; Rule 37 and Rule 82 permit such awards | Court did not abuse discretion: it found bad faith, enhancement (5%) and expert-fee sanction were appropriate and not double recovery |
| Whether fees and costs should have been apportioned between Nautilus and Cook Inlet Processing | Superior court erred by not apportioning fees and costs for work that related to both defendants, leaving Nautilus to bear disproportionate share | Much pre- and post-settlement work would have been necessary regardless; limited subtractions were made for block-billing tied solely to Cook Inlet Processing | Failure to apportion was an abuse of discretion; remand required for apportionment between the two defendants |
Key Cases Cited
- Thorstenson v. ARCO Alaska, Inc., 780 P.2d 371 (Alaska 1989) (fee apportionment: charging remaining defendant a grossly disproportionate share of overlapping fees is an abuse of discretion)
- Valdez Fisheries Dev. Ass’n v. Froines, 217 P.3d 830 (Alaska 2009) (useful guidance on applying Rule 82 and considering Alaska R. Prof. Conduct 1.5 factors in setting reasonable rates)
- Ihler v. Chisholm, 995 P.2d 439 (Mont. 2000) (discusses tests for using forum vs. out-of-forum rates and reasonableness standard)
- Cizek v. Concerned Citizens of Eagle River Valley, Inc., 71 P.3d 845 (Alaska 2003) (distinguishes Thorstenson and allows unequal apportionment only with specific findings justifying it)