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TORT REFORMERS MOSTLY IGNORE EXXON VERDICT

Dec 22, 2000

Mobile Register

Maybe it's because the state would get the money. Maybe it's because the state, instead of some lonely consumer, was the plaintiff in the case. Maybe it's because the laws have already changed.

For whatever reason, Tuesday's $3.5 billion verdict against Exxon Mobil Corp., for underpaying natural gas royalties isn't generating the volume of alarm and outrage that earlier big Alabama verdicts created. The New York Times, The Wall Street Journal and National Public Radio are among those who noted the verdict, but few are claiming it will be a major black eye for the state's business image.

Matt McDonald, an attorney for the Alabama Civil Justice Reform Committee, said the lukewarm reaction comes in part because the amount of money lost by the state was substantial McDonald said that's unlike earlier tort reform oster children such as the suit against in Hale County that led to a $580 million verdict in 1999. That case, the record judgment in Alabama until Tuesday, was cited as the catalyst that finally convinced legislators to approve damage caps and other changes in the same year.

"Those cases involved very small examples of out-of-pocket loss, coupled with claims of mental anguish," McDonald said.

Lt. Gov. Steve Windom, who along with Gov. Don Siegelman applauds the Exxon verdict, said the state's involvement also is significant.

"I think this case is a lot different because it's all 4 million Alabamians that have been cheated by this particular company," said Windom, who pushed for tort reform after being elected in 1998 with the backing of business interests.

Those who opposed tort reform all along, like Montgomery trial lawyer Jere Beasley, said the judgment was an example of the justice such lawsuits can bring. He found it strange that some find it acceptable for the state, but not individuals or groups, to win big verdicts.

"I thought it was justified," Beasley said. "just based on the conduct, I thought this deserved to be punished."

Some of the people who pushed for change still managed to summon the old outrage. Skip Tucker, executive director of Alabama Citizens Against Lawsuit Abuse, summoned up the notorious nickname reform proponents use for Alabama.

"It's awful cold here, but obviously 'tort hell' has not frozen over," Tucker said.

But the freezing point may be nearing. The 1999 changes limited punitive damages in non-injury cases against large businesses to three times the compensatory damages or $500,000, whichever is greater. The limits for small businesses are $50,000 or 10 percent of the business's net worth. In cases involving injury, the cap for all businesses is three times the compensatory damages of $1.5 million, whichever is greater.

The Exxon case, and the four other gas royalty cases pending in Mobile, are exempt from those caps because they were filed before the limits took effect in the summer of 1999.

The state's case against Shell was filed June 11, 1999, while cases against Mobil Oil Corp. (now part of Exxon Mobil), Hunt Petroleum Corp. and Amoco Production So., (now part of BP) were all filed July 29, days before the caps kicked in. The Exxon case started July 28, 1999, when Exxon sued the state.

"That's something we feel like we fixed, but it was too late for this one," Tucker said.

Lawyers in the Exxon case argued that the amount punitive damages should be calculated from was $1 billion, what they said the state would have lost over the life of the gas wells if Exxon was allowed to keep underpaying.

Under that theory, said John Crowder, one of three Mobile lawyers who handled the case for the state, the damage award is not out of line with the standard of three times grater than compensatory damages. But if punitive damages were calculated using the $87.7 million that jury members said the state had lost to date, the maximum punitive damages would have been $263.1 million.

Verdict unlikely under new laws-

Beasley said he doubted the lawyers could have landed $3.5 billion under the new laws.

"It would have been reduced to some extent," he said.

Many hope the courts will reduce the verdicts even thought they were issues under the old caps. Exxon Mobil has pledged to appeal. As of Thursday, lawyers representing the world's largest oil company hadn't filed any motions, said an employee of Montgomery attorney Joe Espy, Exxon Mobile's local lawyer. The company has 30 days to file.

"If ever, this is most ripe for an appeal," said Dean Peeler, executive director of the Alabama Petroleum Council, which represents large oil companies.

Crowder said Tuesday that the state's lawyers are confident they can beat back further court action.

"We feel very good about the record in the case," Crowder said. "I feel very strongly."

'It will be taken care of"-

The expectation that a higher court will slash Tuesday's award is one reason that John McMillan, president of the Alabama Civil Justice Reform Committee, said he isn't as shocked by big numbers anymore.

"We've almost gotten immune to it in Alabama," McMillan said. "We figure somewhere up the line it will be taken care of."

Even before the Legislature enacted new caps, higher Alabama and federal courts had begun to look dimly on large punitive awards. State courts imposed some limits after business-backed candidates took control in 1997. Following the Trpublican Party's near sweep of appeals court races n November, Tuesday's verdict could serve as a test of how the new judges will treat high-dollar judgments.

Federal courts could also come into play.

The U.S. Supreme Court forced Alabama's high court to reduce a verdict won by a Birmingham doctor who discovered BMW had damaged and repainted his new car-and many others-without telling the owners. In 1996, a jury awarded $4million in punitive damages, which the Alabama Supreme Court reduced to $2million. But after the U.S. Supreme Court said that was still too mich, Alabama court cut the punitive damages $50,000.

Still the state's role as plaintiff could act as a brake on too drastic a reduction. All money that flows into the state's trust fund produces income that goes into the general fund. The general fund, in turn, funds the operation of the court system.

Beasley said he expected that Exxon's bill might raise that issue in their appeal, arguing that state judges subject to election should recuse themselves and designate some other venue to settle the appeal. If both Beasley and Windom said that state courts frequently deal with suits against the state that could impact the general fund.

"The court has had to deal with other measures, including this one we've been involved with, with the franchise tax," Windom said.

But whatever the direction of appeals, Beasley expects them to run for a long time.

Exxon very aggressive in court-

Exxon Mobil is noted a being very aggressive in court, Beasley said. The company is still appealing a 1994 $5 million punitive damage award against is stemming from the 1989 Exxon Valdez oil spill in Alaska, though the company has settled some claims.

"I think it's going to be a long, drawn out thing," Beasley said. "The state surely needs to stay after them."

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