Jury returns $11.9 billion judgment against Exxon Mobil

posted on:
November 14, 2003

author:
Phillip Rawls

category:
Fraud

The financially troubled state government won an $11.9 billion verdict against Exxon Mobil Corp. Friday in a suit over disputed natural gas royalties.

The jury awarded $11.8 billion in punitive damages, a record in the state, and $63.6 million in compensatory damages.

“We felt Exxon thought they were gong to get away with this,” said jury foreman Joseph King, a Montgomery teacher. “We wanted to send a message that they were not, and that this corporation can’t get away with doing wrong.”

Exxon Mobil spokesman Bob Davis said the verdict was excessive and the company would appeal.

Jurors had to find Exxon Mobil committed fraud to return the multibillion-dollar verdict Alabama sought. They deliberated 4 ½ hours Thursday and about two hours Friday.

“We did not engage in fraud, pure and simple,” Davis said.

The state, which previously won a $3.5 billion verdict that was set aside on appeal, had asked for $9.3 billion this time – but the jury went even higher.

“The jury brought the largest corporation in the world to its knees for the second time. They felt we didn’t ask for enough,” said Robert Cunningham, an attorney for the state.

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.

“A billion dollars to them in chump change,” said Wallace, who works at a plastics factory.

Attorneys said an appeal of the verdict means it could be years before the state knows whether it will collect any money.

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.

Exxon Mobil’s attorneys said the company has followed its leases with the state and owes Alabama nothing.

The case was first tried in 2000, when a Montgomery jury awarded the state $3.5 billion. The decision 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.

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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