EXXON MOBIL FIGHTS BILLION-DOLLAR VERDICTS, STATES HAVE TO WAIT.
Exxon Mobil Corp. was ordered by juries twice in the past seven years to pay Alabama almost $3.6 billion in drilling royalties.
The state is still waiting for the money. So are Alaska and Louisiana, which also won verdicts against the world's biggest publicly traded oil company years ago.
Exxon Mobil's appeals have reduced the judgments it faces by billions of dollars and put the Irving, Texas-based company in a position to argue for more favorable legal precedents, said University of Richmond law Professor Carl Tobias. The original $5.29 billion Alaska verdict has been cut twice.
``They got $2 billion shaved from that award,'' Tobias said, referring to litigation over the 1989 Exxon Valdez oil spill, which dumped 11 million gallons of crude into Alaska's Prince William Sound. ``That speaks volumes on why they may want to keep litigating.''
The appeals are a fight the company can afford, even if it eventually had to pay the Alabama and Alaska verdicts. Exxon Mobil's net income last quarter was $10.3 billion. It earned $39.5 billion in 2006, breaking the U.S. record of $36.1 billion it set a year earlier.
Mark Boudreaux, an Exxon Mobil spokesman, declined to comment on the company's litigation costs.
In 2000 and at a 2003 retrial, jurors found Exxon Mobil fraudulently underpaid Alabama for gas-drilling rights in Mobile Bay. Exxon Mobil asked the Alabama Supreme Court on Feb. 6 to reverse the verdict. The court is likely to decide this year.
$4.5 Billion Bond
To satisfy rules on appealing the Alabama verdict, the company was able to post a $4.5 billion bond. The likelihood of its paying the Alabama judgment is ``remote,'' the company said in a 2005 regulatory filing.
Exxon Mobil set aside $5.4 billion in a letter of credit in case of an eventual payment of the damages awarded by a federal jury in 1994 over the Exxon Valdez oil spill, according to the filing.
``Alabama has a long way to go,'' said Dave Oesting, one of the lead attorneys representing more than 30,000 Alaskans who sued Exxon Mobil.
Appealing a $112 million punitive award imposed six years ago in a Louisiana land-contamination case, put the company in a better position to challenge the entire verdict.
High Court Ruling
The U.S. Supreme Court on Feb. 26 ordered a lower court to reconsider the May 2001 verdict in light of a Feb. 20 high-court ruling that bans punishing companies for injuries suffered by parties who aren't part of the case. Previously, some juries punished companies for the total impact of their bad conduct, nationally or even globally.
In the Alabama case, Exxon Mobil also may be sending a message to other coastal states that might see the state's award and consider filing their own suits, said Jim Vroman, the environmental litigation practice co-chairman for Jenner & Block, a Chicago-based firm.
Exxon raised two challenges to the Alabama award, company lawyer Dave Boyd said.
For one, it argues the state high court should follow the logic it applied in 2004 in a case Alabama brought against Hunt Petroleum Corp., Boyd said. Hunt, based in Dallas, sent Alabama monthly royalty reports stating what it owed. The state didn't rely on those reports to determine what Hunt should pay, so Alabama wasn't misled, the court said.
Exxon Mobil used the same leasing contract with the state as Hunt, and the same facts apply, Boyd said. Exxon Mobil submitted its reports and the state rejected them, using its own calculations, he said.
Exxon also can invoke a 2003 U.S. Supreme Court decision that found that a 145-to-1 ratio of punitive to compensatory damages was unconstitutional because it was excessive.
A Second Jury
The second Alabama jury awarded $63 million in compensatory damages, almost $40 million in interest on the unpaid royalties and $11.8 billion in punitive damages, the third-biggest punitive award ever after two involving the tobacco industry. The trial judge reduced the punitive damages to $3.5 billion five months later.
The jury attributed $23 million of the compensatory award to fraud and the rest to breach of contract. All the punitive damages were levied to punish the fraud, creating a ratio of about 150-to-1.
Constitutionally Excessive
In the Exxon Valdez oil spill case, the Ninth U.S. Circuit Court of Appeals in San Francisco agreed that the jury's punitive damages were constitutionally excessive and ordered the award cut. Exxon appealed again, and in December, the appeals court cut it again, by $2.5 billion. Exxon is asking the court to hear the case yet again for more reductions.
Oesting's clients won $287 million in compensation for damage to their property from the Valdez spill, about one-eighth the current punitive award.
Exxon Mobil's Boudreaux said the company paid almost $300 million to 11,000 residents within a year of the spill, before the 1994 trial. Thus, he said, the company had to pay only a court-ordered $25 million more to satisfy the jury's compensatory award. Punitive damages aren't warranted, he said.
The case is: Exxon Corp. v. Department of Conservation and Natural Resources, No. 1031167, Alabama Supreme Court.
I have no fear, the Kingpin of the Oil/Gas Mafia holds courts, states, and the government in fear.....not me. I want what is mine!
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