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SUPREME COURT OF ALABAMA
OCTOBER TERM, 2008-2009 ____________________ 1070716 ____________________ Alabama Department of Conservation and Natural Resources et al. v. Exxon Mobil Corporation f/k/a Exxon Corporation Appeal from Montgomery Circuit Court (CV-99-2368)

BOLIN, Justice. This occasions. case has been before this Court on two prior

See Exxon Corp. v. State Dep't of Conservation &

Natural Res., 859 So. 2d 1096 (Ala. 2002), and Exxon Mobil

1070716 Corp. v. Alabama Dep't of Conversation & Natural Res., 986 So. 2d 1093 (Ala. 2007), for a detailed statement of the history and factual background of the case. In 1981 and again in 1984 Exxon Mobil Corporation,

formerly known as Exxon Corporation ("Exxon"), leased sites in the Mobile Bay natural-gas fields from the State of Alabama. In addition to paying $573.3 million in nonrefundable bonuses to the State for the leases, Exxon agreed to pay royalties to the State based on the production from the wells it drilled in the leased areas of Mobile Bay. leaseholds by the Alabama Following audits of the of Conservation and

Department

Natural Resources ("DCNR"), the State agency responsible for overseeing the leases, a disagreement arose between the State and Exxon regarding the manner in which Exxon was calculating the royalties payable to the State under the leases. In a

letter to Exxon dated February 4, 1997, DCNR stated that Exxon had paid to the State $102,915,386 in royalties for the period beginning October 1, 1993, through December 31, 1995, and that, according to DCNR's calculations, Exxon owed the State an additional to $50,495,418 negotiate the in royalties. Exxon and of DCNR the

continued

correct

interpretation

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1070716 royalty provisions of the leases, but no mutually agreeable settlement was reached. On July 28, 1999, Exxon sued the State, seeking a

judgment declaring the proper method of calculating royalties under the lease form pursuant to which Exxon leased the sites in Mobile Bay. The State asserted a counterclaim against

Exxon, alleging breach of contract and fraud and claiming that Exxon had fraudulently underpaid royalties on the leases from October 1, 1993, the date production from the leased fields began. The State amended its counterclaim to assert a claim Subsequently, the trial court realigned

for punitive damages.

the parties naming the State as the plaintiff and Exxon as the defendant, and the case proceeded to trial. On December 19, 2000, the jury returned a verdict for the State and awarded it $60,194,174 in additional royalties for the period between October 1, 1993, through December 1999, plus interest of $27,498,521, calculated at the statutory rate of 12%. On December 20, 2002, this Court reversed the

judgment and remanded the case, holding that the trial court had impermissibly admitted into evidence a confidential letter

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1070716 written by Exxon's in-house counsel. So. 2d at 1108. Following a trial after that remand, the jury returned a verdict in favor of the State and awarded it $63,769,568 in additional royalties for the period from October 1993 through December 2002. The jury found that, of that amount, See Exxon Corp., 859

$23,449,186 was the result of Exxon's fraudulent suppression of information relating to royalty payments through February 1997. The jury also awarded the State $11.8 billion in

punitive damages. the trial court,

Pursuant to

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Alabama Law