State asks $9.3 billion verdict in Exxon case

posted on:
November 13, 2003

author:
Kim Chandler

category:
Fraud

The state’s lawyers asked a Montgomery jury on Wednesday to slap Exxon Mobil Corp. with a record $9.3 billion verdict, saying the oil giant knowingly cheated the state out of natural gas royalties for years.

The state sued Exxon in 1999 claiming the company fraudulently deducted processing and other costs when calculating royalty payments due Alabama from wells in Mobile Bay. Exxon lawyers countered the company had a reasonable interpretation of the lease.

The case is being closely watched because of the potential verdict size. Another Montgomery jury made national headlines in 2000 when it handed down a $3.5 billion award in the case, six times Alabama’s previous record.

The verdict was thrown out on appeal, prompting a new trial. The earlier verdict was also one of the largest in the nation that did not involve personal injury. By comparison, Exxon was hit with a total $5 billion judgment after its disastrous 1989 Alaskan oil spill.

Jurors heard closing arguments in the new trial late Wednesday and will begin deliberating today.

In closing arguments, Jere Beasley and Robert Cunningham, attorneys representing the state, likened Exxon to a schoolyard bully that aimed to take advantage of a state it perceived as a regulatory weakling.

But Exxon’s lawyers said the company was forthcoming about how it interpreted the lease agreement.

“There’s not one piece of paper where they say no deduction” for processing and other costs, Exxon attorney Chris King said.

Cunningham said the state had been cheated out of more than $63 million in royalties and added that the figure could have climbed to $930 million over the working life of the natural gas field. He asked the jury to return a verdict of up to 10 times that figure, or $9.3 billion.

Shifting expenses:

Lawyers for both sides dedicated a portion of their closing arguments to the appropriateness of a large punitive damage verdict.

Exxon’s lawyers asked jurors to consider the amount of investment the company had made in Alabama and said the punitive damage award Cunningham suggested would dwarf that.

Beasley and Cunningham, however, said the Irving, Texas-based oil giant would be “happy as larks” over a verdict in the millions of dollars, rather than billions. They said something needed to be done to “make them stop.”

Beasley said the company knew the natural gas in Mobile Bay required special processing and that the company wanted to shift that treatment cost to Alabama taxpayers.

The case against Exxon was filed before the state placed new limits on punitive-damage verdicts.

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