United States v. 2009-09-02 | 08-35177 | JAMES PATTON V. TARGET CORPORATION | precedential | opinion |

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
 JAMES PATTON, No. 08-35177
Plaintiff-Appellee, DC No.
v. 03-CV-1722 BR
TARGET CORPORATION, ORDER
 Defendant-Appellee, CERTIFYING
QUESTION TOv. THE SUPREME
STATE OF OREGON, COURT OF
Plaintiff-Intervenor-Appellant. OREGON

Appeal from the United States District Court
for the District of Oregon
Anna J. Brown, District Judge, Presiding
Argued and Submitted
July 6, 2009—Portland, Oregon
Submission Vacated and Question Certified:
September 2, 2009
Filed September 2, 2009
Before: Harry Pregerson, Pamela Ann Rymer, and
A. Wallace Tashima, Circuit Judges.
COUNSEL
Lori Irish Bauman, Ater Wynne LLP, Portland, Oregon, for
the plaintiff-appellee.
Michael A. Griffin, Jackson Lewis LLP, Seattle, Washington,
for the defendant-appellee.
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Rolf C. Moan, Supreme Court Coordinator, Office of Attor-
ney General, Salem, Oregon, for the plaintiff-intervenor-
appellant.
ORDER
Under Oregon’s split-recovery statute, OR. REV. STAT.
§ 31.735, the State of Oregon (the “State”) is entitled to 60
percent of any punitive damages awarded under Oregon law.
The statute applies to cases decided under Oregon law in fed-
eral court. DeMendoza v. Huffman, 51 P.3d 1232, 1235-37
(Or. 2002). In the case at bench, after the jury awarded a sub-
stantial amount of punitive damages, but before judgment was
entered on the award, plaintiff and defendant settled the case
for an undisclosed amount, without notice to or approval of
the State. The State contends that the district court erred in
approving the settlement and entering judgment in accordance
with the settlement because the State’s consent was required
for any settlement that would reduce or eliminate the State’s
share of the punitive damages awarded by the verdict.
Because the interpretation of this facet of the split-recovery
statute is an important and unanswered question of Oregon
law that is dispositive in this case, we respectfully certify a
question to the Supreme Court of Oregon.
BACKGROUND1
I. Factual and Procedural History
Plaintiff-Appellee James Patton (“Patton”) sued Defendant-
Appellee Target Corp. (“Target”) in federal district court for
asserted violations of the Uniformed Services Employment
1This “Background” section constitutes our statement of the relevant
facts and explanation of the “nature of the controversy in which the ques-
tion[ ] arose.” OR. REV. STAT. § 28.210.
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and Reemployment Rights Act (“USERRA”), 38 U.S.C.
§§ 4301-4335, and for wrongful discharge under Oregon law.
Patton alleged that Target demoted and later fired him
because of his service in the National Guard. The jury found
in Target’s favor on the USERRA claim, but found in Pat-
ton’s favor on the state law claim. It awarded Patton $17,950
in economic damages, $67,000 in noneconomic damages, and
$900,000 in punitive damages.
The district court indicated that it expected a substantial
post-verdict dispute between the parties regarding the validity
and amount of the punitive damages award. Shortly after the
verdict, however, Patton and Target reached a settlement and
jointly moved the court to approve a stipulated judgment dis-
missing the case. Neither the motion nor the stipulated judg-
ment disclosed how much Target had agreed to pay Patton in
exchange for the dismissal, nor was any provision for any
payment to the State included in the settlement.2
The State then moved to intervene in the case, arguing that,
under the split-recovery statute, it had obtained a vested inter-
est in 60 percent of the punitive damages award upon the
entry of the verdict. It further argued that the parties could not
settle the case without its consent. The district court allowed
the State to intervene, but ultimately approved the proposed
settlement and denied the State’s claim. The district court rea-
soned that the State could not have obtained a vested interest
in the punitive damages award prior to the entry of a judg-
ment and that the parties were therefore free to settle the case
without the State’s involvement or consent. The State filed a
motion for relief from the district court’s judgment on the
ground that the Oregon Court of Appeals’ newly-announced
decision in MAN Aktiengesellschaft v. DaimlerChrysler AG
2The structure and amount of the settlement has not been entered into
the record and we are not privy to the actual terms of the settlement. But
the State’s position that it has been excluded from the settlement is uncon-
tested.
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(“MAN AG“), 179 P.3d 675 (Or. Ct. App. 2008), undermined
the district court’s reasoning. Upon reconsideration, however,
the district court affirmed its decision denying the State’s
motion for relief from the judgment of dismissal. This appeal
followed.
II. The Split-Recovery Statute
Since 1987, Oregon has had a split-recovery statute enti-
tling the State to receive a portion of any punitive damages
awarded under Oregon law. As originally enacted, the statute
provided:
The punitive damage portion of an award shall be
distributed as follows:
(1) The attorney for the prevailing party
shall be paid the amount agreed upon
between the attorney and the prevailing
party.
(2) One-half of the remainder shall be paid
to the prevailing party.
(3) One-half of the remainder shall be paid
to [a state fund to compensate crime vic-
tims].
OR. REV. STAT. § 18.540 (1987). The weakness of the original
version of the statute was exposed in Eulrich v. Snap-On
Tools Corp., 798 P.2d 715 (Or. Ct. App. 1990). In that case,
the Oregon Court of Appeals held that the State had no inter-
est in an award of punitive damages until a fund capable of
distribution existed; thus, that the State could not state a claim
in intervention to ensure that the judgment provided for the
State’s share of an award. Id. at 716.
The Oregon Legislature responded in 1991 by amending
the statute to provide that, “[u]pon the entry of a judgment
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including an award of punitive damages, the Department of
Justice shall become a judgment creditor as to the punitive
damages portion of the award to which the Criminal Injuries
Compensation Account is entitled.” OR. REV. STAT.
§ 18.540(1) (1991). The legislature soon came to believe,
however, that even this new version was insufficient to pro-
tect the State’s interest. According to the legislative history
cited in MAN AG, the legislature was concerned that the new
statute left a loophole between the time when a jury verdict
for punitive damages was entered, and the memorialization of
that verdict in a final judgment by the court. During this
period, clever litigants could settle their claims and deprive
the State of its share of the punitive damages award. See 179
P.3d at 680-81.
This case, in which the jury awarded the plaintiff $900,000
in punitive damages, is a good example of what the legislature
feared could happen.3 Here, the State would be entitled to 60
percent, or $540,000, of that award, while the plaintiff would
receive the remaining $360,000. Instead of allowing judgment
to be entered on these terms, the parties could, pursuant to a
confidential settlement, stipulate to the entry of a judgment
dismissing the case without an award of punitive damages.
Because no “judgment including an award of punitive dam-
ages” would be entered, the State would not become a judg-
ment creditor under the 1991 version of the statute and would
have no claim on any proceeds from the suit. A settlement for
any amount greater than $360,000 but less than $900,000
would allow the plaintiff to receive more, and the defendant
to pay less, than under the jury verdict.4 The State, of course,
would be left holding an empty bag.
3In order to simplify the arithmetic, this example does not take into
account the jury’s award of about $84,950 in non-punitive damages, to
which the State has no claim under the split-recovery statute.
4If the plaintiff believed that even $360,000 would not withstand judi-
cial scrutiny under BMW of North America v. Gore, 517 U.S. 559, 574-85
(1996), he presumably would settle for a lesser amount. See Parrott v.
Carr Chevrolet, Inc., 17 P.3d 473 (Or. 2001) (setting forth scope and
method of judicial review of punitive damages verdicts after Gore and OR.
REV. STAT. § 18. 537).
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In the hope of preventing this type of situation, the legisla-
ture amended the statute yet again in 1995. Under this amend-
ment, the State would become a “judgment creditor,” not
upon the entry of a judgment, but “upon the entry of a verdict
including an award of punitive damages.” OR. REV. STAT.
§ 18.540(1) (1995) (emphasis added) (enacted as 1995 OR.
LAWS ch. 688 § 1). The statute, in its current form, provides:
Upon the entry of a verdict including an award of
punitive damages, the Department of Justice shall
become a judgment creditor as to the punitive dam-
ages portion of the award to which the Criminal
Injuries Compensation Account is entitled pursuant
to paragraph (b) of this subsection, and the punitive
damage portion of an award shall be allocated as fol-
lows:
(a) Forty percent shall be paid to the pre-
vailing party. . . .
(b) Sixty percent shall be paid to the Crimi-
nal Injuries Compensation Account of the
Department of Justice Crime Victims’
Assistance Section . . . .
OR. REV. STAT. § 31.735(1).5
But, if the basic intent of the legislature in amending the
statute was to prevent litigants from using post-verdict settle-
ments to deprive the State of its share of punitive damages, it
is not clear that the text of the statute embodies that intent. In
particular, it is not easy to see what it means for the State to
become a judgment creditor upon the entry of a verdict,
before a court has entered a final judgment in a case.
5The statute was amended again in 1997 in ways not relevant to this
case. See 1997 OR. LAWS ch. 73 § 1. In 2003, the former OR. REV. STAT.
§ 18.540 was renumbered as § 31.735.
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Although the Oregon Revised Statutes do not define “judg-
ment creditor,” the statutes refer to judgment creditors in sev-
eral provisions apart from the split-recovery statute and, in
each of these instances, the concept of “judgment creditor”
appears inseparable from the existence of a judgment. Thus,
a “judgment remedy” is the “ability of a judgment creditor to
enforce a judgment through execution.” OR. REV. STAT.
§ 18.005(11). In the section of the statute dealing with
enforcement of judgments, “[n]othing in [the relevant sections
of the statute] affects the ability of a judgment creditor to
enforce a judgment by means other than execution.” Id.
§ 18.252(4). The entire apparatus is built on the idea of judg-
ment creditors enforcing their rights, usually by means of exe-
cution, “upon the entry of the judgment.” Id. § 18.252(1).
This is in conformity with the generally accepted definition of
“judgment creditor.” See, e.g., Black’s Law Dictionary 921
(9th ed. 2009) (“A person having a legal right to enforce exe-
cution of a judgment for a specific sum of money.”).
Thus, under one reasonable interpretation of the statute, the
State cannot be a judgment creditor prior to the entry of a
judgment, as that term is normally understood. Even the State
concedes that, until a judgment is entered, the State lacks the
most basic power of a judgment creditor: it cannot enforce its
right to recovery by execution. To hold otherwise would
allow the State to short-circuit the judicial process and
attempt to recover money before a final judgment6 affirming
that it was entitled to the funds. Nevertheless, we cannot con-
clude, as did the district court, that the State does not obtain
any right as a judgment creditor under the statute prior to the
entry of a judgment. In so holding, the district court essen-
tially rendered the 1995 amendment meaningless. This vio-
lates one of the most basic principles of statutory
interpretation, which the Oregon legislature has codified:
6The Oregon statute defines “judgment” as “the concluding decision of
a court on one or more requests for relief in one or more actions, as
reflected in the judgment document.” OR. REV. STAT. § 18.005(8).
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[i]n the construction of a statute, the office of the
judge is simply to ascertain and declare what is, in
terms or in substance, contained therein, not to insert
what has been omitted, or to omit what has been
inserted; and where there are several provisions or
particulars such construction is, if possible, to be
adopted as will give effect to all.
OR. REV. STAT. § 174.010. The proper interpretation of the
statute requires a court to find some meaning in the legisla-
ture’s paradoxical decision to make the State a judgment cred-
itor without a judgment.
No Oregon case has interpreted this aspect of the statute.
The case that comes the closest, MAN AG, is of only limited
assistance in resolving this problem. In MAN AG, the trial
court entered a judgment including an award of punitive dam-
ages, but then approved a settlement between the parties and
entered a supplemental judgment that did away with the puni-
tive damages. 179 P.3d at 676. The State intervened, arguing
that the court could not approve a settlement that would
deprive the State of its portion of the punitive damages. Id.
The Oregon Court of Appeals did not reach the merits of the
State’s claim, but held that the State had standing to intervene
in the suit. Id. The court stated that, from the point “when the
court entered the jury’s verdict,” the State
had a vested right to 60 percent of the jury’s award
of punitive damages, subject to any legal challenges
to that award. It was not necessary for the state to
become a full party to the case in order to protect
that right; its status as a judgment creditor, which
gives it the ability to enforce the judgment, is suffi-
cient protection.
Id. at 681 (emphasis added).
The State contends that this “vested right” to the punitive
damages it obtained upon rendition of the jury’s verdict was
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sufficient to give it veto power over any subsequent settle-
ment that would deprive it of its portion of the punitive dam-
ages. In the State’s view, it had a claim to the proceeds of a
judgment as strong as the plaintiff ’s, and it was therefore a
necessary party to any settlement.
We are not convinced that MAN AG extends as far as the
State suggests.7 In MAN AG, unlike the current case, the trial
court had memorialized the award of punitive damages in a
judgment before the parties reached a settlement. See id. at
676. Under Oregon law, a right to recovery becomes vested
only when it is final: “The first and essential quality of [ ] a
judgment or decree [which gives to it the effect of a vested
right] is that it be a final determination of the rights of the par-
ties.” State ex rel. Weingart v. Kiessenbeck, 114 P.2d 147, 149
(Or. 1941). This was the basis for the Oregon Supreme
Court’s holding in DeMendoza, 51 P.3d at 1245-46, that the
split-recovery statute did not represent an illegal taking:
because no plaintiff had a vested interest in a judgment whose
value was retroactively reduced by the statute, the implemen-
tation of the split-recovery statute did not effect an illegal tak-
ing. If the Oregon Legislature “intended the state to have a
vested interest in an award of punitive damages immediately
upon the entry of a verdict,” MAN AG, 179 P.3d at 680, the
nature of that interest was very different from that of the Ore-
gon Supreme Court’s definition of vested interest.
Indeed, although the MAN AG court stated that “when the
court entered the jury’s verdict,” the State gained “a vested
right to 60 percent of the jury’s award of punitive damages,”
7In Engquist v. Oregon Department of Agriculture, 478 F.3d 985 (9th
Cir. 2007), aff’d, 128 S. Ct. 2146 (2008), we did observe that “[t]he stat-
ute’s express language, which invites the State to act only ‘[u]pon the
entry of a verdict including an award of punitive damages,’ belies any
inference that the State is required to become a party. . . . Therefore, we
conclude that Oregon is entitled to assert this substantive right without
becoming a party.” Id. at 1001 (quoting OR. REV. STAT. § 31.735) (second
brackets in the original).
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the court clarified immediately afterward that the State’s “sta-
tus as a judgment creditor . . . gives it the ability to enforce
the judgment.” Id. at 681. Even in this formulation, it is only
the existence of a judgment that can give substance to the
State’s status as judgment creditor. MAN AG tells us very lit-
tle about what powers the State has prior to the entry of a
judgment.
The legislative history8 of the 1995 amendment is helpful
in determining the broad outlines of legislative intent, but it
is not very useful in interpreting the specific details at issue
here. The only legislative history that has been presented to
the court is in the form of two statements quoted in the MAN
AG opinion. One legislator stated:
I heard Attorney General Kulongoski describe that in
some situations after a verdict is reached that maybe
the parties go back and rework the settlement * * *.
The state’s interest in these awards sometimes is
defeated by some maneuvering that seems to enrich
and maybe even more than — windfall might be
kind of a gentle phrase to describe the activity but it
seems like maybe the plaintiff and their lawyer come
out a lot better than perhaps they should.
MAN AG, 179 P.3d at 680 (quoting Tape Recording, S. Judi-
ciary Subcomm. on Civil Process, S.B. 482, Tape 28, Side A
(Or. 1995) (Statement of Randy Miller)) (alteration in origi-
nal). A representative of the bill’s sponsor made a similar
statement:
8A court in construing an Oregon statute may consider legislative his-
tory offered by one of the parties, and should “give the weight to the legis-
lative history that the court considers to be appropriate.” OR. REV. STAT.
§ 174.020(3). Under the Oregon Supreme Court’s recent decision in State
v. Gaines, 206 P.3d 1042, 1050-51 (Or. 2009), a court may consider legis-
lative history regardless of whether a statute is ambiguous.
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The Attorney General’s right does not vest until after
the judgment is entered. And so if the parties are
smart and if there is a large punitive damages award
entered, the parties will sit down and construct a
* * * settlement which will provide that no final
judgment will be awarded or that they will stipulate
to a final judgment that will provide an award of
general damages of a certain amount. And parties do
that quite often, by the way, because they like to
avoid the expense of appeal potentially. But they can
under the present statute in essence cut out the Attor-
ney General from that portion of the award because
again, the Attorney General does not have the right
to intervene until the judgment is entered.
Id. at 680-81 (quoting Tape Recording, S. Judiciary Sub-
comm. on Civil Process, S.B. 482, Tape 28, Side A (Or. 1995)
(Statement of John DiLorenzo)) (alteration in original).
It is clear enough from these statements that legislators
were concerned with preventing parties from colluding to
deprive the State of its share of a punitive damages award.
But the two statements do not indicate what powers the State
would have to prevent collusive settlements which cut out the
State’s interest. Not all settlements that do away with
punitive-damages awards represent cynical attempts to carve
up the State’s portion of an award. A plaintiff may be willing
to give up most or all of a punitive damages award in a belief
that the court will never approve the full amount of the jury’s
verdict. In the current case, for example, if Patton believed
that the trial court might grant judgment as a matter of law in
favor of Target, or even a substantial remittitur, he might have
been willing to settle his claim for $84,950, and thus give up
his own claim to punitive damages along with the State’s, in
order to be sure of receiving the full value of the compensa-
tory damages without the delay and uncertainty involved in an
appeal.
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The legislature might reasonably have believed that this
type of settlement was not as offensive as one in which the
parties divided up the State’s share of the punitive damages
for themselves. The legislature might also have concluded
that the State’s interests would be adequately protected as
long as it had an opportunity to intervene and state its objec-
tions, even if the court retained the power to approve a settle-
ment in spite of the objections. The legislative history
presented to the court is insufficient to rule out either of these
possibilities.
These questions are central and unavoidable in deciding the
current case. Yet any answers we might provide would be, at
best, only our gloss on the text of the statute and reflect only
our reading of the legislative history. If the district court’s
interpretation of the split-recovery statute — that the State
does not become a judgment creditor until the entry of a judg-
ment — violated a principle of statutory interpretation
because it ignored the 1995 amendment to the statute and
“omit[ted] what ha[d] been inserted,” it could be argued that
the State’s proposed interpretation violates the same principle
in the opposite way: it “insert[s] what has been omitted.” OR.
REV. STAT. § 174.010. In short, there are more than one rea-
sonable interpretations of the statute.
Rather than attempt to resolve this conundrum ourselves,
we believe it is the more prudent course to certify the question
to the Oregon Supreme Court. This case meets the statutory
criteria for certification because it involves a determinative
question of state law for which there is no controlling prece-
dent. See OR. REV. STAT. § 28.200. The Oregon Supreme
Court is also likely to find that the case meets the criteria the
court has established for exercising its discretionary power to
accept certified questions. See W. Helicopter Servs., Inc. v.
Rogerson Aircraft Corp., 811 P.2d 627, 631-34 (Or. 1991). In
particular, the Oregon Supreme Court suggested that it
believes the question presented here is important when it
granted review of the Oregon Court of Appeals’ decision on
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a similar issue. See MAN Aktiengesellschaft v. DaimlerChrys-
ler AG, 189 P.3d 749 (Or. 2008). The parties there, however,
reached a settlement before the court rendered its decision.
See Brent Hunsberger, State Drops Old Dispute on Daimler
Judgment, THE OREGONIAN, Apr. 4, 2009, at B7.
Because this case turns on an open question of Oregon law,
our resolution would not be authoritative, and would represent
only a prediction of how the Oregon Supreme Court would
rule. See Chale v. Allstate Life Ins. Co., 353 F.3d 742, 745
(9th Cir. 2003). By certifying a question in this case, assum-
ing an affirmative response, we, as well as the Oregon Bar
and the lower courts, will have the benefit of an authoritative
decision on this issue.
CONCLUSION
For the reasons described above, we respectfully certify to
the Oregon Supreme Court the following question under Ore-
gon law:
When a jury has returned a verdict that includes
an award of punitive damages under Oregon law, is
the State of Oregon’s consent necessary before a
court may enter a judgment giving effect to any set-
tlement between the parties that would result in a
reduction or elimination of the punitive damages to
which the State would otherwise be entitled under
Oregon Revised Statutes § 31.735?
We respectfully ask the Oregon Supreme Court to exercise
its discretionary authority under Oregon’s Uniform Certifica-
tion of Questions of Law Act, OR. REV. STAT. §§ 28.200 -
.255, to accept and decide this question. Our phrasing of the
question should not restrict the court’s consideration of the
issues involved. We acknowledge that “[t]he court may refor-
mulate the relevant state law questions as it perceives them to
be, in light of the contentions of the parties,” Toner ex rel.
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Toner v. Lederle Labs., 779 F.2d 1429, 1433 (9th Cir. 1986),
and “[w]e agree to abide by the decision of the Oregon
Supreme Court,” Doyle v. City of Medford, 565 F.3d 536, 544
(9th Cir. 2009). If the court decides that the question pre-
sented in this case is inappropriate for certification, or if it
declines the certification for any other reason, we will resolve
the question according to our best understanding of Oregon
law.
The Clerk will file a certified copy of this Order with the
Oregon Supreme Court under OR. REV. STAT. § 28.215. In the
meantime, this appeal is withdrawn from submission and will
be resubmitted for decision following receipt of the Oregon
Supreme Court’s Opinion on the question certified or its
rejection of the same. This panel retains jurisdiction over fur-
ther proceedings in this court. The parties will notify the
Clerk within ten days after the Oregon Supreme Court accepts
or rejects certification, and again within ten days after the
court renders its Opinion.
IT IS SO ORDERED.
HARRY PREGERSON
United States Circuit Judge, Presiding
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