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JUDGE WEIGHS WHETHER TO REDUCE RECORD $11.9 BILLION VERDICT

Mar 11, 2004

By PHILLIP RAWLS
The Associated Press

MONTGOMERY, Ala. (AP) -- A judge hearing arguments on a record $11.9 billion verdict against Exxon Mobil may reduce it because the jury returned more than the state sought, Alabama's attorney general said Thursday.

Montgomery County Circuit Judge Tracy McCooey started a two-day hearing Thursday to determine whether to throw out, reduce or uphold the verdict by a Montgomery jury that ruled Exxon Mobil cheated the state out of natural gas royalties.

The verdict — the biggest ever in Alabama and the largest returned by any American jury in 2003 — was $2.5 billion more than the state sought in closing arguments in the trial.

Attorney General Troy King said he "wouldn't be surprised" if the judge reduced it to the amount requested by the state.

Jere Beasley, another of the attorneys representing the state, agreed with King. But he and King said the facts justify a large verdict, and they expect the judge to leave most of the judgment intact.

Exxon Mobil's attorneys and witnesses called the verdict excessive.

"My bottom line conclusion is a smaller penalty would be sufficient to deter," said Robert Gertner, an economist from the University of Chicago, during his testimony Thursday.

McCooey plans to rule by March 22. Attorneys for both sides expect her decision to be appealed to the Alabama Supreme Court.

A jury in November decided Exxon Mobil had defrauded the state on royalties due from natural gas wells drilled in state-owned waters along the Alabama coast. The jury returned a verdict of $63.6 million in compensatory damages and $11.8 billion in punitive damages.

The jury foreman, third-grade school teacher Joe King, watched the proceedings Thursday and, outside the court, he defended the jury's verdict.

"I'd be disappointed if they reduced it because we worked real hard on it," he said.

King said some jurors were so upset by Exxon Mobil's conduct that they wanted to award twice what the state was seeking. He said the jury compromised on $11.8 billion in punitive damages because that's as high as one juror would go.

Exxon Mobil attorney Dave Boyd argued in court that the jurors were biased by the state's well-publicized budget problems. The verdict came two months after Alabama voters rejected a $1.2 billion tax hike and the Legislature responded by cutting the appropriations of most state agencies by 18 percent.

The judge said company attorneys never asked potential jurors about the state's budget problems when the jury was selected for the trial.

"This judge and the (Alabama) Supreme Court understand that budget problems in the state have absolutely zero to do with punitive damages in this case," McCooey said.

Exxon Mobil presented witnesses Thursday to back up its argument that the verdict doesn't have a rational basis.

Accountant David Borden testified that the $11.8 billion in punitive damages is more than five times larger that the oil company's total investment of $2.1 billion along the Alabama coast.

"It's huge in relation to the total investment," he said.

In closing arguments at trial, the state's attorneys said Exxon Mobil could have made as much as $930 million by underpaying the state through the entire life of the natural gas field, and the jury should return a punitive damage verdict of 10 times that amount.

During Thursday's hearing, McCooey noted that in recent years, judicial and legislative restraints have been placed on punitive damage verdicts against corporations, but at the same time, news stories about corporate fraud have increased.

"It's kind of not working out too well," the judge said.

This is the second time McCooey has heard the Exxon Mobil case. In 2000, a Montgomery jury returned a $3.5 billion verdict against the company. She upheld the verdict, but the Alabama Supreme Court overturned it because jurors were improperly allowed to see an Exxon legal memo.

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