Alabama’s government won an $11.9 billion verdict against Exxon Mobil Corp. on Friday in a suit that accused the oil giant of cheating the state out of natural gas royalties according to the Associated Press.
The circuit court verdict included $11.8 billion in punitive damages, a record for Alabama and more than the state’s attorneys had sought. The jury had to find Exxon Mobil committed fraud to return the multibillion dollar verdict.
If the damages are upheld on appeal, the money would go into state coffers, which have been struggling in recent years. Gov. Bob Riley said it will be years before the appeals are completed, and any money the state realizes won’t have any impact on the state’s current layoffs and 18 percent budget cuts for many agencies.
Company attorneys are optimistic their appeal will be successful because the punitive damages are more than 180 times greater than the compensatory damages.
“The punitive award in this case defies common sense,” company attorney Sam Franklin said.
The state sued Irving, Texas-based Exxon Mobil in 1999, contending the company had violated its leases for natural gas wells in state-owned waters along the Alabama coast. The state accused the company of cheating Alabama out of millions of dollars by intentionally deducting too much in expenses for operating the wells, including $6,000 for a “family picnic” at a Mississippi casino.
Exxon Mobil’s attorneys argued that the company owed the state nothing because it had followed its leases with the state and reported all production to the state. The Alabama case was first tried in 2000, when a Montgomery jury awarded the state $3.5 billion — setting the record until Friday. The decision was overturned by the Alabama Supreme Court, which said the jury was wrongly allowed to see one of the oil company’s internal legal memos. That prompted the new trial, which began Oct. 20.
“The jury brought the largest corporation in the world to it knees for the second time. They felt we didn’t ask for enough,” Robert Cunningham, an attorney for the state, said after the verdict.
In closing arguments Wednesday, Cunningham said the state government had been shorted $63.6 million in royalties and that the loss could have climbed to as much as $930 million over the 30-year life of the natural gas field in Mobile Bay.
The state hired two of Alabama’s top plaintiff law firms, Beasley Allen and Cunningham Bounds, to handle the case on a contingency fee: nothing if they lost and 14 percent of the judgment if they won. Senior partner Jere Beasley is a Clayton native and former Barbour County attorney.