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EXXON VERDICT REFLECTS WIDER ANGER |
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by Susan Warren
Judgment of $11.9
Billion in Alabama Underscores Distrust of Companies An Alabama jury's $11.9 billion civil judgment against Exxon Mobil Corp. for cheating the state out of natural-gas royalties is the latest of several huge jury awards against the oil giant, underscoring the public's distaste for what it perceives as bad corporate behavior. Legal experts say the verdict isn't likely to survive appeal because of a recent U.S. Supreme court ruling limiting punitive awards. But it reflects the jury's harsh view of Exxon's actions and an apparent belief that only a large verdict would halt them. Robert Cunningham, one of Alabama's attorneys, said jurors told him after the trial that they were appalled at how Exxon handled royalty payments on natural-gas production in the state's coastal waters. "They wanted to put a stop to what Exxon's doing," he said. Exxon denied wrongdoing and said it would appeal, which likely will delay any final verdict for years. After deliberating a day and a half, the Alabama jury concluded Exxon was liable to Alabama for $63.6 million in natural-gas royalties and then slapped $11.8 billion in punitive damages on top of the actual damages. Mr. Cunningham had asked the jury for $9.3 billion in punitive damages. Exxon attorney Sam Franklin, aghast at the size of the punitive damages in the case, said the award "defies common sense." The Montgomery, Ala., trial was Exxon's second unsuccessful attempt to convince a jury that it hadn't underpaid royalties. In December 2000 a jury found that the state had suffered $87.7 million in actual damages and awarded $3.42 billion in punitive damages. But the Alabama Supreme Court ordered a new trial after concluding the jury shouldn't have seen an internal Exxon memo that discussed its attorneys' views of the impending trial. In the next trial, which began Oct. 20, the state argued that Exxon improperly deducted costs from its royalty tab. Exxon, based in Irving, Texas, maintained that the state was fully aware of its methods for calculating the royalties owed. Exxon spokesman Bob Davis said fraud shouldn't have been an issue in the trial, since Exxon never attempted to deceive Alabama officials. Mr. Davis characterized the award as "grossly excessive." Chances are good that the Alabama damages also will be reduced on appeal, legal experts say. Earlier this year, the U.S. Supreme Court ruled that punitive awards should be limited to no more than nine times the actual damages established. But each side does the math differently. Exxon says the $11.8 billion penalty is more than 180 times the $83.6 million in actual damages awarded. Mr. Cunningham, representing Alabama, argues that with interest, and including future damages that would have been suffered if Exxon had continued its behavior for the 30-year life of the gas field, actual damages would have been $930 million. The judgment is the latest hefty jury verdict against Exxon Mobil, the world's largest publicly held oil company. A New Orleans jury ordered it to pay $1 billion in punitive damages in a 2001 pollution case that the company is appealing. The same year, a Florida jury returned a $500 million verdict--in favor of gas-station owners who claimed Exxon Mobil shortchanged them. In 1994, Exxon appealed a $5 billion punitive damage award from an Alaska jury related to the 1989 Exxon Valdez tanker accident, in which millions of gallons of crude oil spilled into Prince William Sound. The infamous incident saddled Exxon with a reputation for arrogance and disregard for the environment. Actual damages were $287 million in the case. The trial judge reduced the award to $4 billion, but the Ninth U.S. Circuit Court of Appeals in San Francisco sent it back to the lower court again last summer, saying the penalty was excessive.
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