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Dec 21, 2000

Hefty Punitive Award Brings Mixed Feelings

Featuring: Robert T. Cunningham, George M. Dent III, John T. Crowder Jr. and David G. Wirtes Jr.

Birmingham Post Herald 

State Rep. Perry Hooper Jr. is of two minds about Tuesday's verdict that resulted in a record $3.5 billion award for Alabama against Exxon. 

Hooper, R-Montgomery, sponsored legislation two years ago that limits punitive damages against large companies. 

"I think the courts are still going to have to take a look at the amount and consider my legislation," Hooper said. 

On the other hand, Hooper is also vice chairman of the House's general fund budget committee. 

"We could certainly use the revenue," he said. 

A Montgomery jury sided with the state of Alabama in a case stemming from allegations that Exxon over the years defrauded the state out of millions of dollars in natural gas royalties. The jury awarded Alabama $87.7 million in compensatory damages, but slapped Exxon with $3.42 billion in punitive damages, the type of verdict that led to passage of Hooper's legislation to prevent future "jackpot justice" cases, as opponents of the large jury awards called them. 

The cap on punitive damages now limits awards to $500,000 or three times the compensatory damages, whichever is greater. 

In the Exxon case, the cap on punitive damages took effect after Alabama and Exxon sued each other in court in 1995 and does not apply to the billion-dollar award, said Ted Hosp, Gov. Don Siegelman's legal adviser. 

Attorneys for the state argued that Exxon intentionally cheated Alabama out of revenues from royalties on natural gas wells that the company operates in state waters along the coast. 

Alabama has a history of large punitive damage awards. The previous record in a civil damages case in Alabama was $581 million, awarded last year by a Hale County jury to a family who claimed that a finance company cheated them out of $1,200 in the purchase of a satellite dish. 

Hooper is considered a strong proponent of business and a critic of large punitive awards against companies. But he said Exxon needed more than a slap on the wrist. 

"Based on what I've heard and read, the verdict seems to be somewhat appropriate," he said. "No one is going to condone the cheating of the state. But the amount (of the jury's award) can be hashed out." 

Lt. Gov. Steve Windom, a Republican who helped lead the charge for tort reform, released a carefully worded statement after the verdict was announced. 

"The state's suit against Exxon is the result of audits and litigation that began in the mid-1990s," the statement read. "While the monetary award in the Exxon case will obviously be subject to future court appeals, this case sent a clear message — when you mistreat the people of Alabama, you do so at your own risk." 

Pro-business advocates have long worried that the tendency of Alabama juries to award large punitive damages could hurt the state's ability to recruit new companies. 

"In Alabama we're so quick to hit everybody hard," said Larry Vinson, executive director of the Alabama Civil Justice Reform Committee. "It doesn't bode well for us to attract new business."

Related Case

$11.9 Billion Verdict

$11.9 Billion Verdict for the State of Alabama Against Exxon for Royalty Fraud

State of Alabama vs. ExxonMobil | Montgomery County, Alabama | Case No. CV-99-2368

Cunningham Bounds was retained by the State of Alabama Department of Conservation and Natural Resources to assert claims of royalty fraud against E...

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