JUDGE CUTS ALABAMA VERDICT AGAINST EXXON MOBIL TO $3.6 BILLION
Mar 29, 2004
By PHILLIP RAWLS
The Associated Press
3/29/2004, 5:21 p.m. CT
MONTGOMERY, Ala. (AP) -- The record $11.9 billion verdict that Alabama
won in a natural gas royalty dispute with Exxon Mobil Corp. was cut to
$3.6 billion Monday by a state judge who said she was bringing it in line
with U.S. Supreme Court guidelines.
But Montgomery County Circuit Judge Tracy McCooey said there was no question
about Exxon Mobil's intentions when it drilled natural gas wells in
state-owned waters along the Alabama coast.
"This court is thoroughly convinced, as was the jury, that Exxon
intentionally and deliberately took actions, from the moment the leases
were signed, to commit fraud upon the state," the judge wrote. "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."
Exxon Mobil spokesman Bob Davis said the oil company would appeal to the
Alabama Supreme Court.
"The decision is unjustified and excessive," he said.
State attorneys Robert Cunningham and Jere Beasley said they would have
preferred to keep the $11.9 billion verdict, but the judge's decision
will help their case in the long run.
"It dramatically increases the likelihood it will survive Exxon's
efforts to have it reversed or reduced on appeal," Cunningham said.
In November, a Montgomery County jury ruled that Exxon Mobil had cheated
the state out of royalties from natural gas wells drilled in state-owned
waters along the Alabama coast.
The jury returned a verdict of $102.8 million in compensatory damages
and interest and $11.8 billion in punitive damages. The verdict, which
was bigger than the state sought, was the largest returned by any American
jury in 2003. The other verdicts in the top 100 last year totaled $7.6 billion.
In McCooey's decision, she left the compensatory damages intact, but
cut the punitive damages to $3.5 billion. At a total of $3.6 billion,
the outcome is still larger than any other verdict of last year.
McCooey said the state's anticipated loss from underpayments over
the life of the natural gas wells was between $386 million to $930 million.
She said reducing the punitive damages to $3.5 billion would create "a
single-digit ratio between the punitive damages and the anticipated gain,"
which is in keeping with U.S. Supreme Court guidelines.
Jury foreman Joe King of Montgomery said he was disappointed by the cut.
"We wanted to set an amount that would get their attention,"
he said. "They will laugh at this. It's just change to them."
The $3.6 billion judgment compares to nearly $247 billion in revenues
and $21.5 billion in profits reported by Exxon Mobil in 2003.
Dean Peeler, executive director of the oil industry's Alabama Petroleum
Council, said the decision shows why Alabama landed at the bottom of the
U.S. Chamber of Commerce's Litigation Environment Survey last year.
The case now heads to the Alabama Supreme Court, which overturned an earlier
verdict in the case. In 2000, a Montgomery jury returned a $3.5 billion
verdict against Exxon Mobil in the same dispute, but the Supreme Court
threw it out in 2002 because jurors saw an internal legal memo from Exxon Mobil.
The state also sued other oil companies that drilled natural gas wells
in Alabama's coastal waters.
The Alabama Supreme Court is currently considering Hunt Petroleum's
appeal of a $24.6 million verdict that a Mobile County jury returned against it.
Two other oil companies settled with the state in 2002 without going to
trial. Shell paid $33.5 million and Amoco $29 million.