JUDGE SAYS HER DECISION PROBABLY WON'T MATTER IN LONG RUN
Apr 18, 2001
By DAVE BRYAN
The Associated Press
MONTGOMERY, Ala. (AP) -- Exxon Mobil Chairman Ansel Condray said the oil
company didn't believe it would be cheating Alabama when it decided
how much to pay in royalties for natural gas wells drilled in state waters.
Condray testified at a hearing Tuesday before Circuit Judge Tracy McCooey,
who must decide whether to reduce a record $3.5 billion verdict against
the company.
Condray said a company analysis of how much to pay in royalties showed
there was a reasonable chance Exxon Mobil's interpretation of its
lease agreement with the state would be consistent with Alabama's
reading of it.
"We had a view and we thought we had a reasonable and fair and right
view," said Condray, who didn't testify during the trial.
But attorneys for Alabama said Exxon documents showed the company knew
it was probably underpaying the state but that the company decided to
risk it anyway.
"You calculated the chance of success of getting away with it, didn't
you?" asked Robert Cunningham, one of the attorney's hired by
the state.
"No sir, those are not the words I would use," Condray responded.
McCooey presided over a trial in December where a Montgomery jury decided
that Exxon Mobil had fraudulently underpaid the state on royalties for
natural gas wells drilled in waters along the Alabama coast. The jury
returned the largest verdict in state history: $87.7 million in compensatory
damages and $3.42 billion in punitive damages.
Now McCooey is holding a two-day hearing to determine whether the punitive
damages are excessive and should be reduced.
In a courtroom crowded with attorneys and their assistants, the judge
said the case is going to be appealed to the Alabama Supreme Court, which
will ultimately decide the appropriate amount.
"What I do probably doesn't matter anyway," she said, but
added that she wanted to make sure the court hearing provided a good record
for the Supreme Court to consider.
The judge's frank remarks continued during the hearing.
Exxon Mobil presented Washington economist Jonathan Walker, who contended
the punitive damages were grossly excessive. Walker offered a mathematical
formula about what would be necessary to deter a company from repeating
improper conduct. The formula involved removing the profit from the enterprise,
but did not consider the worth of the company when determining the appropriate
punishment.
Walker said the $87.7 million in compensatory damages would be sufficient
to deter Exxon Mobil because that amount included 12 percent interest
on unpaid royalties, and that would erase any gain the oil company had.
After hearing the economist's explanation, the judge said, "No
offense, Dr. Walker, but it sounds like a bunch of B.S."
She said courts normally consider the worth of a company, and she noted
Exxon Mobil recently finished in first place in the Fortune 500 list of
American companies with the greatest annual revenue.
"It would be insane to say that doesn't matter," McCooey said.