Exxon Appeals $3.6B Alabama Court Verdict

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Exxon Appeals $3.6B Alabama Court Verdict

MONTGOMERY, Ala. -- A $3.6 billion court verdict won by the state of Alabama against ExxonMobil Corp. is being challenged by the company, claiming that the judgment -- which is beiger than the state's General Fund Budget -- is unconstitutionally excessive, Forbes reported.

The verdict, which could increase to $4.7 billion when including interest and deferred payments, is being appealed in the State Supreme Court. The verdict was the largest return in the nation in 2003 and a record for Alabama.

In 2003, the state sued the company, alleging that the company defrauded Alabama out of millions of dollars in off-shore natural gas royalties. In its appeal, the company wrote, "The jury and the trial court rewarded those tactics with a giant punitive damages award. But there was no evidence of fraud, and no basis for any punitive damages. The State could not prove and the evidence they submitted does not prove fraud. That's because there was no fraud."

ExxonMobil attorney, David Boyd, called the verdict "astronomical" and believes the jury was improperly influenced by news reports of Alabama's budget problems at the time, the report stated.

"This entire case stems from a contract dispute over a poorly drafted lease agreement. Fraud had no part in the dispute," ExxonMobil general counsel Charles Matthews said in a written statement. "It's a dangerous precedent for a state to be able to charge someone with fraud if you don't agree with their interpretation of a contract."

The judgment's interest is so large, Governor Bob Riley made plans to attend the arguments held before the State Supreme Court yesterday, according to the report. After arguments are made, the Court has no deadline to rule, but usually takes four to six months to decide.

The original case in 2003 sided with the state argument that the company intentionally underpaid Alabama in royalties from natural gas wells drilled in state-owned waters along the Alabama coast. ExxonMobil was forced to pay $102.8 million in compulsory damages and $11.8 billion in punitive damages.

The punitive damages were reduced to $3.5 billion by circuit judge Tracey McCooey, dropping the total verdict to $3.6 billion. After this, the verdict was still the largest in America for that year, the report stated, citing data from the National Law Journal and VerdictSearch.

While on appeal the judgment continues to grow. If the state succeeds, it would collect 12 percent annual interest on the judgment, adding an additional $1 billion, as well as $100 million in disputed royalties since the case went to trial, according to state attorneys cited by Forbes.