Overturning Exxon Verdict Appears Political

posted on:
November 4, 2007

author:
Staff

category:
Fraud

In truth, however, the only surprise was that it took this long for the court to reverse a 2003 lower court ruling against the oil giant.

There were legal questions to be decided, including whether the state proved that ExxonMobil actually committed fraud, as defined by Alabama law. But there also was no denying that the case was politically charged, as evidenced by the court’s split decision.

Its eight Republican associate justices voted for a reversal of the fraud finding while its lone Democrat was opposed.

The ExxonMobil case long has been in the gun sights in Alabama’s long-running war between business interests, who tend to back GOP candidates, and trial lawyers, who donate heavily to Democrats.

Montgomery attorney Jere Beasley, the standard bearer for trial lawyers and the devil incarnate for business interests, represented the state in part of its litigation against ExxonMobil. He maintained that the oil giant deserved punishment because it cheated Alabama out of royalty payments.

“They took families to casinos, paid for uniforms, landscaping, promotional T-shirts, you name it, they deducted it,” Beasley said.

A jury handed down $11.8 billion in punitive damages, later reduced to $3.5 billion. The lower court ruled that actual damages amounted to $102.8 million.

But ExxonMobil lawyers argued that the state never proved fraud. They cast the case as a simple contract dispute and said the Supreme Court should follow the precedent it set in 2004 in a similar case when it reversed a $20 million punitive damage verdict against Hunt Oil.

On Thursday, the Supreme Court ruled that ExxonMobil did not commit fraud and therefore the state was not entitled to the $3.5 million punitive damages. The justices also voted to reduce the actual damages by half, to $5 1.9 million.

Chief Justice Sue Bell Cobb, the sole Democrat, dissented, saying the court “is substituting its judgment for the jury’s regarding the weight of evidence.”

Republican Associate Justice Champ Lyons agreed to the extent that a “jury could reasonably concluded from the evidence that Exxon’s business ethics would pass only the first prong of the Rotary Club’s famous 4-Way Test” which asks if something is true, fair to all concerned, likely to build good will and friendship and beneficial to all concerned. Even so, there was no basis for the punitive damages, he wrote.

Fair or not, the judgment of many state residents on the court’s ExxonMobil decision is likely to be that politics influenced the case. Cobb, who has called for nonpartisan judicial elections, may find that Thursday’s ruling is another arrow in that quiver after all is said and done.

 

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