No Comment — November 4, 2007, 3:52 am

ExxonMobil’s Alabama Paydirt

Back in 1904, Ida Tarbell published what ultimately was to be seen as the seminal work of the muckrakers, The History of Standard Oil. It appeared first in nineteen installments in McClure’s Magazine, a rather less successful competitor of Harper’s, and shortly after the last installment appeared, Tarbell published the work in book form as well. In her work, Tarbell exposed the dark underside of corporate deal-making, the series of interlocking directorates and manipulations which had allowed John D. Rockefeller to build the oil leviathan and dominate the American market. Tarbell demonstrated that Rockefeller’s success came not so much from business acumen (though she never contested that he had plenty of that) as through a thorough understanding of how to game the system. John D. Rockefeller was a power unto himself. Politicians around the country were made and broken to suit him.

But Tarbell’s disclosures fueled the drive for antitrust legislation and a fairer and more competitive business environment—a drive which was, in its time, championed by progressive politicians of both parties, but particularly by Theodore Roosevelt. By 1911, Standard Oil was broken into thirty companies.

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But over time, like the liquid-metal monster in the “Terminator” series, Standard Oil pulled itself back together again. It was aided in this process by a change in attitudes across the political spectrum, but most particularly it was aided by America’s campaign finance system in which politicians standing for election require increasingly larger sums of money to pursue their campaigns, and support from the corporate till is essential. The final act of rebirth occurred when the two principal surviving pieces of the company, Exxon and Mobil, merged at the close of 1999. The resulting behemoth, ExxonMobil, is the largest publicly traded integrated petroleum and natural gas company in the world. It is also the world’s largest petroleum and natural gas company by revenue, with revenues of $377.6 billion in fiscal year 2006.

The State of Alabama believes that it was victimized by ExxonMobil. According to the state’s complaint launched by the Administration of Governor Don Siegelman, ExxonMobil committed fraud and underpaid the state in a contract dispute over natural gas pumped from Mobile Bay. Alabama won that litigation, and a jury awarded the state a judgment against ExxonMobil of roughly $3.6 billion. Not chump change, even for ExxonMobil. And for Alabama, an immense sum of money (roughly a third of the state’s annual budget).

But ExxonMobil appealed, secured a stay, and ultimately took the matter to the Alabama Supreme Court. Thursday, the state’s High Court handed down its decision, by a vote of 8-1. The Court sided with ExxonMobil and against Alabama. The punitive damage award was rejected, and Alabama was left with a compensatory award of $51.9 million, a pittance.

I’ll put my cards on the table. I have spent my career as a corporate lawyer representing firms much like ExxonMobil, including a Rockefeller or two. I believe that the United States is a litigation-crazed society, and that punitive damage awards have gotten out of control. So I am on board the tort-reform bandwagon. In fact, had I been on this court, I almost certainly would have supported a reduction of the judgment.

Nevertheless, there is something very foul and unseemly in the air surrounding this decision. It expunged the punitive award altogether. And the decision was 8-1. Every Republican justice sided with ExxonMobil and the court’s sole Democrat sided with the state. This serves to underscore and highlight what really looks like a partisan and political divide. That also is extremely telling.

Over the last fifteen years, judicial elections in Alabama have been increasingly politicized, with enormous sums of money entering the state from the national business community in an effort to seize control of the state’s courts. This money was largely channeled by the Chamber of Commerce and entities controlled by it and by the Business Council of Alabama, run by William Canary—the key figure in the scandal surrounding the politically manipulated prosecution of former Governor Siegelman.

William Canary is a campaign partner of Karl Rove’s and worked with Rove in Alabama Court politics starting with 1992; Toby Roth, the former chief of staff to Governor Bill Riley was a third member of their team. The Rove-Canary-Roth team scored a series of quite astonishing successes, and in the end it totally transformed the Alabama court landscape, starting with the state’s Supreme Court. I have no reason to link Rove, Canary and Roth to the specific litigation between ExxonMobil and the State of Alabama in particular. But in broader terms, the ExxonMobil decision should be counted the ultimate triumph of the Rove-Canary-Roth game plan. It got the oil and gas community exactly what it was aiming for from the beginning: the elimination of punitive damage awards in commercial cases.

The eight Republican judges on Alabama’s high court who backed ExxonMobil were put in office with the money of the business community, and the money of the oil and gas community. No matter what these eight judges say and do, they have laid themselves open to the charge that they hold the interests of their corporate donors very dear, but not the interests of the people of the state of Alabama. And it’s unlikely that their electors intended that result.

Alabama’s courts and prosecutors have become a cesspool. The unjust prosecution of former Governor Siegelman is only one of the more obvious reflections of this inequity; the decision in the ExxonMobil case is just as blatant and reflects no less the stench of corruption.

Another thing troubled me about this case. When I spoke with a number of Alabama lawyers to gain their impressions about the case, several of them directly questioned the intervention of Governor Bob Riley in it. According to two lawyers, Riley insisted that the firm which handled the litigation (and which obviously did a splendid job at the trial level, though it had troubles on appeal) affiliate a second firm on the case. According to this account, if the firm refused to cut his lawyer friends into the action, Riley suggested he would simply hire new counsel. The law firm he pressured the state’s counsel to affiliate is described as having a close relationship with the Governor’s son, a Birmingham lawyer. These dealings need to be fully explored and exposed to the light of day. If the governor was intervening in the matter in a way calculated to produce economic benefit for his son, that would obviously raise serious ethics issues. However, in the current environment in Alabama, no misdeeds of the government are exposed in the state’s lapdog press or seriously investigated by its law enforcement agencies, which have long ceased to function as dispassionate law enforcement.

All of this is evidence of the state’s complete political putrifaction, in which courts and prosecutors have been rendered into agents of corruption rather than safeguarders of state ethics. The Siegelman case demonstrates that claims of “clean government” have been wielded fraudulently, as a cynical political tool, destroying confidence in the impartial administration of justice. The treatment of the Lanny Young charges against Sessions and Pryor shows that there is no interest in the pursuit of corruption when the trail leads to those in power. The ruling in ExxonMobil and the conduct of the Siegelman case shows a judiciary enslaved to the interests of its sponsors and indifferent to justice.

The voters of Alabama need to recognize that they got just what the business community paid for. For corporate lawyers like me, that’s all fine and good. But the voters may find on further reflection, it doesn’t much suit their interests, nor the interests of justice.

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