A judgment of $11.8 billion against ExxonMobil on behalf of the State of Alabama recently won the state’s attorney firm in that case a place on the Hall of Fame of the National Law Journal.
The verdict won by Mobile-based Cunningham Bounds LLC earned the firm a #4 place among the 100 inductees on the publication’s honor roll.
The lawsuit was based on audits by the Alabama Department of Conservation that showed ExxonMobil shorted the state of royalties owed on natural gas wells in state waters of the Gulf of Mexico.
In 2001, a jury ruled in favor of Alabama and awarded the state $3.5 billion in punitive damages. The Alabama Supreme Court overturned that case and directed a retrial, which resulted in another jury raising damages to $11.8 billion — one of the highest judgments in history.
“‘We’re dealing with Alabama. We’ve got us a bunch of Bubbas, and they’ll never figure out that we’re cheating them out of royalties.”‘ That’s what plaintiff attorney John Crowder told jurors was the thinking of ExxonMobil officials.
And such a view was just what ExxonMobil’s attorney’s told the jury — arguing that the lease agreement developed by the Alabama Department of Commerce was the cobbled-together work of amateurs.
“Most industry leases were just put on Farmer Brown’s table,” Robert Macrory — the man who drew up the lease on behalf of the state — told Business Alabama in our March, 2001 cover story, “Minding the Till, or Tort Hell?”
Macrory, a state conservation department attorney, was no amateur. He was the former executive director of the Alabama Petroleum Council, a chapter of the American Petroleum Institute.
Alabama, said Macrory, set out with determination to draft a lease that was suitably different from standard industry-drawn documents — leases that based royalty on the lowest possible value of gas at the wellhead.
“After Exxon’s gas wells came on line (1992),” Crowder told Business Alabama, “they made a conscious decision to ignore the terms of Alabama’s lease and threw it in the pile with their industry-friendly leases.”
It was a big mistake. The state dutifully kept track of the shortages in payments, did the accounting and hired Cunningham Bounds to present their case.
“They (ExxonMobil) have 115 lawyers. They reviewed this lease, knowing it was different,” Crowder said. “They signed it 22 times.”
