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Apr 25, 2004

Unjustifiable Business

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

Mobile Register 
By David S. Casey 

ExxonMobil verdict sends a clear message that scheming corporate America can't hide behind its lofty status 

Earlier this month, the Mobile Register published an opinion piece titled "Huge verdict could scare of business." That headline should have read, "Huge verdict punishes rip-off of Alabama taxpayers." 

The facts in the case are nicely summarized by one sentence from the judge's 65-page order: "Exxon engaged in a carefully planned scheme, conceived and approved at the highest echelons of its corporate offices, to keep nearly $1 billion in easy money that it knew was due the state." 
These royalties were owed the taxpayers for natural gas extracted from the sands below Mobile Bay. Exxon viewed the fraudulent scheme as, to quote the judge's order again, a "cost-free, risk-free option." 

"If it did not get caught," the order explained, ExxonMobil "would pocket up to a billion dollars of the state's money; if it did get caught and was forced to repay, it still would pocket untold millions of the state's dollars and have the use of the money for years." 

Well, Exxon did get caught, thanks to eagle-eyed oil-and-gas auditors and the talent of the lawyers for the state. The jury unanimously agreed that the company's conduct was so egregious that punitive damages were justified. 

The trail judge also excoriated the company and praised the jury's decision, while lowering the punitive judgment from $11.9 billion to $3.6 billion. 

And how does the U.S. Chamber of Commerce react when one of the wealthiest corporations in the world is caught red-handed in such a blatant swindle? It blames the justice system in Alabama. It blames the lawyers, the judge and the jury - that is, the ordinary citizens of the state. 
This is shameful. 
Former U.S. Congressman James Martin, a self-described "conservative Republican businessman," was commissioner of the Alabama Department of Conservation when Exxon first started pumping gas from Mobile Bay. In a recent commentary about this case, he wrote, "Exxon's despicable conduct is what is important here, or certainly at least as important as the amount of the verdict. 

"This case shows our system is working. We should praise our juries and criticize the wrongdoers, not the other way around." 

Yet the U.S. Chamber argues that large verdicts against wrongdoers scare off business. Is the chamber implying that big business will punish states that challenge swindlers, by moving to states that don't? 

Rather than attack the judge and jury who punished Exxon, why doesn't the chamber express outrage that one of its wealthiest corporate members would so deliberately cheat and swindle the taxpayers of Alabama? 

Why doesn't it work to enforce corporate responsibility and to increase public confidence in corporate behavior, rather than take the side of a corporate wrongdoer against taxpayers? 

This case - and the chamber's reaction to it - proves one more time that the tort "reform" movement, of which the chamber is a major voice, seeks only to take away the legal rights of American families and to protect those with economic and political resources from the people they injure, including taxpayers. 

The U.S. Chamber cites a survey that ranks Alabama 48th among the 50 states in terms of "legal fairness." But who participated in this survey? 

The corporate lawyers who defend Exxon when it rips off Alabama taxpayers for hundreds of millions of dollars, that's who. And other companies that injure or defraud consumers or employees (or taxpayers).

And many of these lawyers stated that the civil justice system does either an "excellent" or "good" job of holding corporations liable for their bad acts. Of course, the chamber doesn't trumpet these assessments - and neither did its op-ed piece in the Register. 

The truth is, no one knows better than corporate lawyers that the threat and reality of punitive damage judgements - punishment for near-criminal behavior - are the only threat that their corporate bosses really fear. With their wealth and power, they can handle the politicians. They can handle the bureaucrats. 

But you, the jury, present a problem. Corporate wrongdoers are afraid of you, as well they should be. As jurors, you carefully consider the facts and arguments offered by both sides. You are not easily fooled or cajoled. You cannot be bought at any price. 

And you almost always get it right, as every lawyer and every judge knows. 
It's amazing, when you think about it: The tort "reformers" are trying to convince the American people that their judgment can't be trusted, that their friends, neighbors and coworkers who do their patriotic duty by serving on juries are somehow undermining the fabric of our society by holding wrongdoers accountable. 

I believe in citizen juries. I believe in judges. I believe in lawyers. I believe in the safeguards built into the system. 

Yes, there are a few bad lawsuits - and judges can, should and do throw them out. 
In this case, the jury wanted to send Exxon and other companies a message about right and wrong. The judge reduced the verdict to a lesser amount that would convey the same message: "Cheat the taxpayers of Alabama and you'll be punished." 

Following this verdict in Alabama, other states and royalty-holders will certainly take a closer look at Exxon's royalty statements, and Exxon should take a closer look at its own practices. This is good, not bad. 

The allegation that a robust legal system is detrimental to business is hogwash. The United States has the most open, free and fair legal system in the world - and the most dynamic job-producing economy in the world. Justice and business work well together. 

According to three small-business surveys, Alabama ranks in the top 10 states for business. Moreover, state economic development officials say in the Register's story that the court system and the "potential exposure to large verdicts [aren't] a primary consideration" in recruiting new business to Alabama. 

Former Congressman Martin said, "I do not think this verdict shows that Alabama is a bad place for business. I think it shows that Alabama will not tolerate bad conduct by businesses." Would the Chamber of Commerce have it any other way? 

The truly conservative principle in the matter of Alabama vs. Exxon is that the bedrock of our democracy - our civil justice system, with its citizen juries, as mandated in the Seventh Amendment to the Constitution - should be left alone to function as it has for over two centuries: faithfully and well.

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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