Jury deliberations on Exxon continue

posted on:
November 14, 2003

Phillip Rawls


Jury deliberations in Alabama’s lawsuit against Exxon Mobil went into a second day, with billions at stake for the financially troubled state.

The state accused Exxon Mobil of cheating on its royal payments for natural gas wells drilled in state-owned waters along the Alabama coast. At the end of a four-week trial, the state’s attorneys asked the jury to return a record $9.3 billion verdict.

Exxon Mobil’s attorneys argued that the company has followed its leases with the state and had been a good corporate citizen by paying the state $1.4 billion in drilling fees, royalties and severance taxes from its coastal wells since 1981.

Jurors deliberated 4 ½ hours Thursday before deciding to return at 9 a.m. today.

Before leaving Thursday, jurors asked the judge to go over with them again today the elements of fraud. Jurors will have to find Exxon Mobil committed fraud to return the multibillion-dollar verdict that the state is seeking. If jurors find there was no fraud, the state’s maximum possible verdict would be in the millions.

Attorneys for both sides declined to read anything into the jury not reaching a verdict Thursday and seeking more instruction. “It’s just an indication they’ve been a very attentive group of jurors,” Exxon Mobil attorney Sam Franklin said.

The state sued 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 expense for operating the wells.

The case was first tried in 2000, when a Montgomery jury returned a record verdict of $3.5 billion – six times the state’s previous record. The verdict was overturned by the Alabama Supreme Court, which said the jury was wrongly allowed to see an internal oil company memo. That prompted a new trial that began Oct. 20.

Jurors, who have sat through one of the longest trials ever in Montgomery County Circuit Court, have become friends during the proceedings. On Thursday afternoon, they told the judge they had enjoyed the experience and presented her with a coffee pot.

“I’ve never had a jury give me a present,” Circuit Judge Tracy McCooey said.

The trial was conducted while the state has been going through a financial crisis that has resulted in about 800 state workers getting layoff notices. Some of the courthouse workers who dealt with the jury are due to lose their jobs Nov. 26, but the judge prohibited everyone involved in the case from mentioning the state’s financial troubles or Exxon Mobil’s financial condition.

In closing arguments Wednesday, state attorney Robert 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. He asked the jury to return a verdict of up to 10 times the potential loss, or $9.3 billion.

Exxon Mobil’s attorneys said Alabama used a new kind of a lease for wells along the coast rather than the standard industry lease. The oil company argued that its payments to the state were in line with memos from the state Conservation Department that said the company could deduct the “reasonable direct cost of manufacture and transportation.”

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

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