Water Log 27:4

A Legal Reporter of the Mississippi-AlabamaSea Grant Consortium

WATER LOGVolume 27, Number 4

ExxonMobil Corp. v. Alabama Dept. of Conserva-tion and Natural Resources, 2007 WL 3224585(Ala. Nov. 1, 2007).

Stephanie Showalter, J.D., M.S.E.L.

In ExxonMobil Corp. v. Alabama Dept. of Conser-vation and Natural Resources, a contract disputebetween a corporation and the state resulted indecades of litigation and an eye-popping, jaw-dropping punitive damage award 180 timesgreater than the compensatory damages. Cor-porate greed and arrogance can easily enflame thepassions of ordinary citizens serving on jurieswho have little patience for the word gamesplayed by attorneys. Especially when the corpo-ration is Exxon.

In 1979, one of the largest natural gasreserves in the United States was discovered inMobile Bay. The Alabama Department of Con-servation and Natural Resources (DCNR)awarded seven leases to Exxon in 1981 and fif-teen more in 1984. Although most standard leaseforms are prepared by the oil companies, Exxon’sleases were executed using forms prepared byDCNR and contained royalty provisions morefavorable to the state.

Exxon began making monthly royalty pay-ments when the wells started production inDecember 1993. About the time Exxon beganmaking payments, DCNR discovered during anaudit of Shell Oil that the oil company was inter-preting the lease provisions differently than the

state.1 When the state got around to auditingExxon in 1996, the state discovered similar dis-parities in its royalty payments. In February1997, DCNR notified Exxon that it had miscal-culated its royalty payments and as a result owedan additional $50 million to the state of Alabama.On July 28, 1999, Exxon sued the state to obtainjudicial resolution of the calculation dispute. Thestate responded by filing a counterclaim allegingbreach of contract and fraud.

Alabama Supreme Court Reverses $3.5 BillionPunitive Damage Award Against ExxonMobil

In This Issue . . .Alabama Supreme Court Reverses $3.5 Billion

Punitive Damage Award Against ExxonMobil . . . . . 1

Mississippi Court of Appeals Reverses Coastal Rezoning Decision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Yacht Owner’s Hurricane Preparations FoundReasonable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Litigation Update . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

2007 Mississippi Legislative Update . . . . . . . . . . . . . . . . 7

Eleventh Circuit Upholds Expansive Wetland Permit . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Company Not Liable for Damage Causedby Shipping Containers . . . . . . . . . . . . . . . . . . . . . . 10

2007 Alabama Legislative Update . . . . . . . . . . . . . . . . 14

Interesting Items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Upcoming Conferences . . . . . . . . . . . . . . . . . . . . . . . . 16

See Punitive Damage, page 12

February 2008

Childs v. Hancock County Bd. of Supervisors, 2007Miss. App. LEXIS 748 (Miss. Ct. App. Nov. 6,2007).

Sarah Spigener, 3L, University of MississippiSchool of Law

In November, the Mississippi Court of Appealsreversed the decision of the Hancock CountyBoard of Supervisors (Board) to rezone approxi-mately 1,000 acres of coastal property. The courtheld that the Board failed to meet its burden ofproof that there was a substantial change in thecharacter to justify the rezoning.

BackgroundHancock County’s zoning ordinances and com-prehensive zoning map were adopted in 1997. In2005, the Board sought to rezone approximately1,000 acres of waterfront coastal property. Theproperty was zoned highway commercial, medi-

um density residential, and general agricultural.Before amending the County’s comprehensiveplan, the Planning Commission (Commission)was required to review the issues and submit itsrecommendations to the Board.

On April 14, 2005, just a few months beforeHurricane Katrina devastated parts of HancockCounty, the Commission met and proposed anew zoning classification, “C-4,” which wouldinclude such uses as condominiums, apartments,hotels, motels, and “tourist accommodationfacilities” without height restrictions. At the samemeeting, the Commission recommended that theBoard rezone the 1,000 acres under this new C-4 or “commercial resort” designation. The Com-mission’s recommendation stated that conditionsin the area had changed “which make an amend-ment to the Zoning Map necessary and desirableand in the public interest.”1 The Commissionalso stated that development trends in the areacalled for more “commercial resort uses to sup-port the commercial and recreational uses whichwill develop in conjunction with the BayouCaddy Casino.”2 On May 2, the Board adoptedthe Planning Commission’s recommendationsand “incorporated by reference the entire record”of the Planning Commission. The Board ofSupervisors did not issue independent findings.

On May 18, a group of Hancock Countyresidents (“Appellants”) who all owned proper-ty adjacent to the newly rezoned area filed a billof exceptions to the Hancock County CircuitCourt appealing the Board’s decision to rezone.On May 31, Paradise Properties Groups, LLCand Kudo Developers of Mississippi, LLC sep-arately filed motions to intervene claiming thatthe court should dismiss the Appellants’ bill ofexceptions. The circuit court affirmed theBoard’s decision on March 13, 2006. The prop-erty owners appealed to the Mississippi Courtof Appeals.

WATER LOG is a quarterly publicationreporting on legal issues affecting theMississippi-Alabama coastal area. Its goal isto increase awareness and understanding ofcoastal problems and issues.

To subscribe to WATER LOG free of charge, contact:Mississippi-Alabama Sea Grant Legal Program, 262Kinard Hall, Wing E, P. O. Box 1848, University, MS,38677-1848, phone: (662) 915-7775, or contact us via e-mail at: [email protected] . We welcome suggestions fortopics you would like to see covered in WATER LOG.

Interim Editor: Stephanie Showalter, J.D., M.S.E.L.

Publication Design: Waurene Roberson

Contributors: Terra Bowling, J.D. • Sarah Spigener, 3L

For information about the Legal Program’s research, ocean and coastal law, and issues of WATER LOG, visit our homepage at

http://www.olemiss.edu/orgs/SGLC

WATER LOG 2008 VOL. 27:4

Mississippi Court of Appeals Reverses Coastal Rezoning Decision

VOL. 27:3 WATER LOG 2008

AnalysisIn Mississippi, comprehensive zoning ordi-nances adopted by local governments are pre-sumed reasonable and in the public interest.Rezoning decisions, however, do not enjoy asimilar presumption of reasonableness. “For arezoning application to be approved, the appli-cant must prove by clear and convincing evi-dence that either (1) there was a mistake in theoriginal zoning, or (2) the character of theneighborhood has changed to such an extent asto justify rezoning and that a public need existsfor such rezoning.”3 The Board did not allegethat there was a mistake in the original zoning,so the court focused on examining the evidenceof a change in neighborhood character.

After examining the record, the court heldthat the Board failed to present clear and con-vincing evidence of a change in the character ofthe property. The Board’s first mistake was incor-porating the findings of the Commission with-out elaboration. The court concluded that “thePlanning Commission’s findings on the matterare sparse and conclusory at best, and non-exis-tent at worst.”4 The Commission failed to discusswhat conditions had changed and how. TheCommission also appeared to rely heavily on adocument prepared by a local citizen and pre-sented at a Commission meeting. This thirteen-page document contained a number of pho-tographs depicting blighted property, but thecourt found that it was unclear whether theseproperties were in the rezoned area or in a differ-ent condition than in 1997. While increasedblight can justify a zoning change, “the Board ofSupervisors may not make a conclusory findingand then defer to the citizenry by throwing pageafter page of citizen generated material upon itsfinding.”5 The Board must make its own specificfindings and properly support its conclusions.

The Board also argued that there was sub-stantial evidence of increasing development pres-sures which supported its decision to rezone thearea. Increasing development pressure can consti-tute a change in the character of a neighborhood,but the court found “no evidence of increasingdevelopment that over-taxed public infrastrac-

ture.”6 In fact, the evidence suggested the prob-lem was a lack of development. A lack of devel-opment or development options alone, accordingto the court, is not sufficient to demonstrate aneighborhood change.

The court also refused to accept the Board’sargument that the Commission and the Boardrelied on “their common knowledge and famil-iarity with the property in question.” If suchknowledge was relied on, it was not made clear inthe record and could not be invoked in supportof the rezoning classification.

ConclusionBecause the Board articulated no factual basis forthe ruling, its decision to rezone the property wasarbitrary and capricious. The court stated that“neither the Planning Commission nor theBoard of Supervisors supported its decision withany reasoned conclusion.”7

Endnotes1. Childs v. Hancock County Bd. of Supervisors,

2007 Miss. App. LEXIS 748 at *3. (Miss. Ct.App. Nov. 6, 2007).

2. Id. The Bayou Caddy Casino, at the time thisresolution was adopted, was scheduled tobegin operation in 2006. Hurricane Katrinahalted construction.

3. Id. at *8.4. Id. at *9.5. Id. at *14.6. Id. at *15.7. Id. at *18.

Photograph of Harrison County beachfront after Hurricane Katrina courtesy of BenPosadas, Ph.D., Mississippi State University-Coastal Research and Extension Center.


Fischer v. S/Y Neraida, 2007 US App. LEXIS26698 (11th Cir. Nov. 19, 2007).

Terra Bowling, J.D.

In 2004, Hurricane Frances hit the southeast coastof Florida causing widespread damage. During thestorm, a sailing yacht broke free of its mooringsand crashed into a dock. The dock owner broughtsuit and the Eleventh Circuit exonerated the yachtowner. The court found that the yacht owner’spreparations for the hurricane were reasonable andthat the damage could not have been prevented bythe exercise of reasonable care.

Background The S/Y Neraida was anchored in Lake Worth,Palm Beach by its owner, Peter Siavrakas.Siavrakas lived in Michigan and relied on a care-taker to maintain the yacht. When the NationalWeather Service issued a hurricane warning forthe east coast of Florida, Siavrakas contacted theyacht’s caretaker and another acquaintance,Steven Cienkowski, to make the necessary prepa-rations. Cienkowski made the preparations aloneon the evening of September 3. The main anchoron the yacht was already set, and Cienkowskiensured that the sails were tied and secured to themast and dropped the yacht’s secondary anchor.

On the night of September 4, hurricane forcewinds began to hit the area and Frances made land-fall early the next morning. During the storm, theNeraida broke free of its moorings and crashed intoDavid Fischer’s dock. Fischer brought suit in remagainst the boat and an action in personam againstSiavrakas and the Neraida Co.

The United States District Court for theSouthern District of Florida ruled in favor ofSiavrakas. The court held that Siavrakas met theburden of proving that his actions in securing theyacht were reasonable and exonerated him.Fischer appealed the judgment to the Eleventh

Circuit. On appeal, he argued that the districtcourt erred by failing to shift the burden of proofto Siavrakas, the court should have held Siavrakasliable because it found that Hurricane Franceswas not so severe as to make the accidentinevitable, and that Siavrakas’ preparations werenot reasonable.

Burden of ProofThe Eleventh Circuit first examined whether thedistrict court correctly shifted the burden of proofto Siavrakas. The Eleventh Circuit concluded thatthe district court correctly shifted the burdenwhen it stated that Siavrakas would be “relievedfrom liability only if [he] can show that the dam-age caused to [Fisher’s] dock could not have beenprevented by the exercise of reasonable care.”1

Next, the court addressed whether theLouisiana Rule required a higher standard of carethan reasonable care. The Louisiana Rule statesthat when a vessel moving or drifting due to anexternal force, such as the current or the wind,allides with a stationary object, the moving vesselis presumptively at fault.2 The presumption isrebuttable if the defendant can illustrate one ofthe following three things: “that the allision wasthe fault of the stationary object; that the movingvessel acted with reasonable care; or that the alli-sion was an unavoidable accident.”3

Siavrakas raised the defense that he exercisedreasonable care in preparing the yacht for the hur-ricane. The court cited several allision cases inwhich the court applied the reasonable care stan-dard, negating Fischer’s argument that a higherstandard should be used. Fischer based his argu-ment on several Eleventh Circuit cases that“referred to the burden facing a defendant seekingto overcome the Louisiana Rule’s presumption offault as “heavy” or “strong.”4 The court noted thatthe use of those words did not result in a higherstandard of conduct, but meant that the defen-dant had a strong burden of persuasion. Fischer

Yacht Owner’s Hurricane PreparationsFound Reasonable

also argued that the “act of God defense” requiresthe defendant to prove that he took not just onereasonable course of action among many, but allreasonable measures. The court noted that thereasonable care defense under the Louisiana Ruledoes not require the defendant to show that hetook all reasonable measures.

Reasonable CareFinally, Fischer challenged the district court’sdecision that Siavrakas took reasonable care inpreparing for Hurricane Frances. The courtdefined the standard of reasonable care in thiscase as “that of prudent men familiar with theways and vagaries of the sea.”5

Fischer first challenged the fact that theNeraida’s sails were not removed; however, thecourt agreed with expert testimony that removingthe sails before a storm only protects the sails anddoes not protect the ship from breaking anchorage.Next, Fischer contended that the anchorage wasunreasonable for the storm, but the court notedFischer’s own expert’s testimony stating that the useof fewer anchors is safer in shifting wind condi-tions. Finally, Fischer argued that the ship shouldhave been moved to a different location. The courtagreed with expert testimony that not moving theNeraida was a reasonable decision given “thestorm’s movement, the hazards of navigating in

shallower waterways, and the risks of docking inmore densely packed anchorages further south.”6

ConclusionThe Eleventh Circuit affirmed the district court’sdecision.

Endnotes1. Fischer v. S/Y Neraida, 2007 US App. LEXIS

26698 at *12 (11th Cir. Nov. 19, 2007).2. Id. at *14. 3. Id. at *14-15. 4. Id. at *19. 5. Id. at *24.6. Id. at *25.


Photograph of Hurricane Katrina damage courtesy of NOAA’s Photo Library, fromthe Collection of Wayne and Nancy Weikel, FEMA Fisheries Coordinators.

This year's theme is Coastal Resiliency. Coastalresiliency refers to the ability of coastal cities,towns, and communities to adapt and recover froman increasing number of natural hazards, includinghurricanes, tsunamis, floods, and disease epi-demics. Presentations will be given on a variety oftopics including flood insurance litigation in thewake of hurricanes, local government authority toenact fertilizer ordinances to address harmful algalblooms, and legal mechanisms available to adapt tosea level rise. The keynote address on Tuesday

night, March 25, will be given by Lt. Gen. ClarkGriffith, Chair of the Biloxi, Mississippi Revivingthe Renaissance Commission.

To download the registration form and for moreinformation, please visit the Journal's website athttp://www.olemiss.edu/orgs/SGLC/National/SGLPJ/SGLPJ.htm .

We look forward to seeing you in March!

AnnouncementWe invite you to attend the inaugural symposium of the

Sea Grant Law and Policy Journal to be held March 25 - 26, 2008 at the University of Mississippi in Oxford, Mississippi.


Parm v. Shumate, 2007 U.S. App. LEXIS 29948(5th Cir. Dec. 28, 2007).

Update of La. Court Finds No Right to Fish, Hunton River, WATERLOG 26:3 (2006).

Terra Bowling, J.D.

In 2006, the United States District Court for theWestern District of Louisiana held that there isno federal common law or state law right to fishand hunt on the Mississippi River when it inun-dates privately owned land. Recently, the FifthCircuit Court of Appeals affirmed that decision.

The case began when several fishermen werearrested for trespass after they refused to stopfishing on Gassoway Lake and adjacent smallwater bodies in East Carroll Parish Louisiana.The land under and surrounding the lake isowned by a limited liability company (LLC),Walker Lands, Inc. At one time, the lake was partof the Mississippi River, but it is now three and ahalf miles away. The fishermen were able toaccess the lake when the river was at its annualflood height.

The fishermen brought suit against the sher-iff in federal district court, seeking damages forfalse arrest under 42 U.S.C. § 1983 and aninjunction prohibiting further arrests for fishinguntil a judgment was reached. The district courtconsidered the fundamental question: whetherthe plaintiffs had the federal or state right to nav-igate, fish, and hunt the Mississippi River at itsnormal heights. The federal navigational servi-tude under the Commerce Clause of the U.S.Constitution gives the federal government a“dominant servitude” over the navigable watersof the United States. The court held that neitherthe federal navigational servitude nor other fed-eral statutes gave the plaintiffs a right to huntand fish on the lake. The court also held thatstate law did not give the fishermen the right,noting a comment to the Louisiana Civil Codeproviding that the right of navigation is merelyfor purposes “incidental to the navigable charac-ter of the stream and its enjoyment as an avenueof commerce.”1

On appeal, the Fifth Circuit examinedwhether the fishermen had either a federal orstate right to fish on the LLC’s property in thespring during the Mississippi River’s normalflood stage. The court affirmed that the federalnavigational servitude did not create a right tofish on privately owned land. The court furthernoted that the state of Louisiana had title to alllands below navigable waters in its boundariesand therefore had the exclusive right to regulatethose public trust lands.

The fishermen argued that both the state con-stitution and code created the right to fish on theland when it is submerged. The court disagreed,citing a portion of the constitution providingthat “[n]othing contained herein should be con-strued to authorize the use of private property tohunt, fish, or trap without the consent of theowner of the property.”2 The fishermen nextcited a section of the code which provides that

Litigation Update

See Litigation Update, page 9

Photograph of man fishing in fog courtesy of USFWS.


Stephanie Showalter

The following is a summary of legislation enacted by the Mississippi Legislature during the 2007 session.

2007 Mississippi Laws Ch. 313 (S.B. 2890) (Approved March 12, 2007)Designates the Bogue Chitto River from the confluence with Boone Creek in Lincoln County to theMississippi-Louisiana state line as eligible for nomination to the State Scenic Streams StewardshipProgram.

2007 Mississippi Laws Ch. 346 (S.B. 3002) (Approved March 15, 2007)Creates a special account, known as the “Coastal Preserve System Timber Account,” within theMississippi Marine Resources Fund to receive funds from the salvage or harvesting of timber or sale ofother forest products from lands in or managed as part of the Mississippi coastal preserves system. Theaccount is to be treated as a special trust fund with funds to be expended, subject to the approval of theLegislature, for the management and improvement of the System and the acquisition of additional lands.

2007 Mississippi Laws Ch. 403 (H.B. 1378) (Approved March 15, 2007)Designates the Noxubee River in Noxubee County from the Oktibbeha County line to the Mississippi-Alabama line as eligible for nomination to the State Scenic Streams Stewardship Program.

2007 Mississippi Laws Ch. 448 (H.B. 702) (Approved March 26, 2007)Designates the Tombigbee River flowing through Itawamba County as eligible for nomination to the StateScenic Streams Stewardship Program.

2007 Mississippi Laws Ch. 471 (H.B. 827) (Approved March 27, 2007)Authorizes the Mississippi Department of Fisheries, Wildlife and Parks Commission to promulgaterules and regulations for nonresident recreational and commercial permits and licenses to promoteand enter into reciprocal agreements with other states.

2007 Mississippi Laws Ch. 477 (H.B. 1076) (Approved March 27, 2007)Provides that Mississippi residents on active military duty outside the state do not have to purchase orhave in possession a hunting or fishing license while hunting or fishing on leave.

2007 Mississippi Laws Ch. 524 (H.B. 753) (Approved April 17, 2007)Requires all members of the Building Codes Council to be residents of the state of Mississippi and pro-vides for the replacement of any council member with unexcused absences for more than three consecu-tive meetings. Authorizes counties and municipalities that adopt or amend their building codes to adoptthe codes promulgated by the Council as minimum codes. Establishes within the Department ofInsurance a comprehensive hurricane damage mitigation program consisting of a cost-benefit study onwind hazard mitigation construction measures, wind certification and hurricane mitigation inspections,financial grants to retrofit properties, education and consumer awareness efforts, and an advisory council.Implementation of this program is subject to the availability of funds that may be appropriated by theLegislature for this purpose.

2007 Mississippi Legislative Update


Sierra Club v. U.S. Army Corps of Engineers, 2007WL 4276553 (11th Cir. Dec. 7, 2007).


The Eleventh Circuit Court of Appeals recentlyupheld a regional general permit (RGP) issued bythe U.S. Army Corps of Engineers (Corps)authorizing the dredge and fill of wetlands acrossa large area of the Florida panhandle. En-vironmental groups challenged the Corps’ actionas violating the general permit provisions of theClean Water Act (CWA).

BackgroundIn June 2004, the St. Joe Company, Florida’slargest private landowner, received a RGP fromthe Corps allowing it to discharge dredged or fillmaterial into non-tidal wetlands “when con-structing residential, commercial, and recreation-al projects, in addition to accompanying roads,parking lots, garages, yards, utility lines, andstormwater management facilities,” provided thecompany adhere to specific environmental con-ditions.1 The RGP covered more than 48,000acres in the Florida panhandle.

Section 404(e) of the CWA authorizes theCorps to issue RGPs when the proposed permitactivities are “similar in nature” and will “causeonly minimal adverse environmental effectswhen performed separately and will have onlyminimal cumulative adverse effects on the envi-ronment.” General permits are often used by theCorps to prevent unnecessary delays and admin-istrative burdens associated with the individualpermitting process. The June 2004 RGP, howev-er, covered an unusually large geographic areaand immediately raised red flags within the envi-ronmental community.

To secure the permit, St. Joe agreed “not toalter more than 125 acres of high-quality wet-lands on the property and not more than 20 per-cent of low-quality wetlands in any one sub-

basin.”2 The company also agreed to mitigatethat 20 percent loss through the use of conserva-tion areas and mitigation banks. All in all, theRGP has twenty-four specific conditions intend-ed to preserve 10,000 acres of wetlands in thecoverage area.

Several environmental organizations broughtaction against the Corps alleging that the per-mit violated the CWA. The district courtfound in favor of the Corps, and the organiza-tions appealed.

AnalysisThe parties dispute whether the developmentactivities authorized by the permit are similar innature and whether the activities will have mini-mal environmental impacts. While concedingthat this was a “very close case,” the court con-cluded that the RGP’s “special conditions effec-tively cabin the scope of permitted activities andmitigate any environmental impacts such thatthe [permit] is a proper exercise of the Corps’Section 404(e) general permitting authority.”3

The court highlighted a number of the spe-cial conditions it felt would operate to minimizethe environmental impact. For instance, the per-mit requires the conservation of ten wetlandunits, comprising over 13,200 acres. The courtalso seemed comforted by the application processlaid out by Special Condition 20. Although aRGP eliminates the need for developers to obtainindividual permits, applications must still besubmitted to the Corps. Special Condition 20establishes internal review procedures whichinclude a pre-application meeting with represen-tatives from several federal, regional, and stateagencies for evaluation of the project and sub-mission of a detailed application packet. If theCorps determines that the project meets the con-ditions of the RGP, it may issue a letter of autho-rization. Development cannot begin until theauthorization is received. If the project fails toqualify, the developer must apply for an individ-ual permit.

Eleventh Circuit Upholds Expansive Wetland Permit


The court also highlighted other specific con-ditions of merit. These include a condition thatindividual projects have specific stormwatertreatment plans meeting higher standards forstormwater discharge than Florida’s currentrequirements, restrictions on the type and quali-ty of dredge material, and requirements ofbuffers for Lake Powell and high quality wet-lands. Despite being “acutely aware of [SierraClub’s] legitimate concerns over abuse of thegeneral permitting process,” the court concludedthat Corps made the best argument when iturged the court to “grant deference to its inter-pretation regarding the conditions under whichit may issue a general permit under Section404(e) of the [CWA].”4

ConclusionThe Eleventh Circuit obviously struggled withthe decision it made in the present case. Relyingheavily on the district court’s 2006, 115-pageopinion, the court ultimately decided that thepermit, because of the special conditions, fellwithin the scope of Section 404(e). According tothe court, the special conditions “reflect theCorps’ efforts to design a permit that is consider-ate of the [CWA] and yet tailored to the uniqueproblems presented by this large area of north-west Florida.”5

Endnotes1. Expansive EPA Wetlands General Permit Draws

Activists’ Lawsuits, INSIDE EPA, July 22, 2005.

2. Id.3. Sierra Club v. U.S. Army Corps of Engineers,

2007 WL 4276553 at *2 (11th Cir. Dec. 7,2007).

4. Id. at *4.5. Id.

Satellite photograph of Florida panhandle provided courtesy of NASA.

everyone has the right to fish in the state’srivers.3 The court also rejected this argument,noting the comment cited by the lower courtexplaining that the right is merely for purposes“incidental to the navigable character of thestream and its enjoyment as an avenue of com-merce.”4 Finally, the fishermen argued thatLouisiana law created a right to fish on the prop-erty when it was submerged on the basis thatrunning waters were public things owned by theLouisiana under LA. CIV. CODE ANN. art. 456.The Fifth Circuit disagreed, noting that al-

though an owner must permit running waters topass through the estate, the landowner is notrequired to allow public access to the waterway.For those reasons, the Fifth Circuit affirmed thedistrict court’s judgment.

Endnotes1. LA. CIV. CODE ANN. art. 452. cmt. b.2. LA. CONST. art. I, §27. 3. LA. CIV. CODE ANN. art. 452. 4. Id. art. 452. cmt. b.

Litigation Update, from page 6

Lee Brother, LLC v. Crowley Liner Servs., 2007U.S. Dist. LEXIS 46449 (S.D. Miss. June 26,2007).


In a negligence action brought by Lee Brother,LLC, against Crowley Liner Services(“Crowley”) for damage caused to its businessproperty during Hurricane Katrina, the UnitedStates District Court for the Southern District ofMississippi held that Crowley had no duty totake additional measures, beyond reasonablemeasures, to secure its property from damagingplaintiff ’s property.

BackgroundCrowley operated a cargo company at the Port ofGulfport. At 4:00 p.m. on Friday, August 26,

2005, the National Hurricane Center changed itsforecast for the landfall of Hurricane Katrina toinclude the Mississippi Gulf Coast. Immediatelyafter this forecast, Crowley began makingarrangements for its customers to retrieve ormove their cargo containers from the Port priorto the storm’s landfall. Crowley then decided, asit had in preparation for previous hurricanes, toblock stow the remaining containers and equip-ment on its terminal. Block stowage is thearrangement of cargo in a given space to providestability and strength. The process was complet-ed after the mandatory evacuation of the Port at1:00 p.m. on Sunday, August 28.

The plaintiff, Lee Brothers, owned businessproperty approximately .75 mile from theMississippi Gulf Coast in Gulfport, Mississippi.During the hurricane on the morning of August29, one of Crowley’s shipping containers dam-aged the plaintiff ’s property. The plaintiff filed


Company Not Liable for Damage Caused byShipping Containers

Photograph of con-tainers, boats andother debris spread byHurricane Katrinacourtesy of NOAA’sPhoto Library, fromthe collection ofWayne and NancyWeikel, FEMAFisheriesCoordinators


suit alleging that Crowley acted negligently byfailing to timely remove or secure its storage con-tainers before Hurricane Katrina made landfall.

AnalysisSummary judgment is only appropriate whenthere is no genuine issue of material fact to bedecided by a jury. In order to determine if therewas a genuine issue of material fact, the courtexamined the elements of the plaintiff ’s negli-gence claim. In order to prove a claim of negli-gence, the plaintiff must show (1) that the defen-dant had a duty to protect others against anunreasonable risk of harm; (2) the defendantbreached that duty, (3) the harm was reasonablyforeseeable; and (4) harm actually occurred.

The court held that Crowley owed a duty toproperty owners in close proximity to the Port totake reasonable measures to prevent its shippingcontainers from washing away during a storm.Evidence presented by Crowley established thatblock stowing requirements are found within

several United States marine terminal hurricanecontingency plans, block stowage is typicallyreliable and greatly minimizes potential damageand loss, and there had never been a separationof the block stow from its facility in the UnitedStates or the world prior to Hurricane Katrina.The court held that the measures taken were rea-sonable under the circumstances because thedefendant could not reasonably have foreseenthat the extraordinary force of HurricaneKatrina would wash its containers ashore dam-aging neighboring property. Crowley was, there-fore, not required to take additional measures tosecure the storage containers.

ConclusionThe court granted summary judgment in favorof the defendant after concluding that the LeeBrothers failed to prove that Crowley hadbreached its duty to protect neighboring proper-ty owners from damage caused by its shippingcontainers during Hurricane Katrina.

A revised edition of “A Citizen’s Guide toConservation Easements in Alabama andMississippi” originally published in 2003 is nowavailable at http://www.olemiss.edu/orgs/SGLC/ -MS-AL/citizen2007.pdf . The conservation ease-ment is a useful tool for landowners to ensurethat the cherished characteristics of their land willbe preserved and protected in the future. Theconservation easement is a flexible tool. It may beexchanged for money or donated to a charitableorganization. The landowner conveys only therights he or she chooses to convey and retains therest. This guide is intended to acquaint Alabamaand Mississippi landowners with the law applicable

to conservationeasements in their states. Summaries of the rele-vant state and federal statutes and regulations areprovided, along with the text of the statutes andregulations themselves. A list of land trusts andrelevant state agencies in Alabama and Missis-sippi is provided at the end of this guide. Hardcopies are available upon request.

A Citizen’s Guide to ConservationEasements in Alabama and

Mississippi (Revised Edition)Now Available


The method for calculating royalties on oiland natural gas sales differs depending on wherethe lease is located (federal or state waters) andthe terms of the individual leases. Although roy-alties are calculated based on sales, oil companiescan reduce the value of their sales by deductingcertain costs, such as transportation, processing,brokerage fees, and pipeline reservation fees.Excessive deductions can deprive the federal andstate governments of millions of dollars inunpaid royalties.

According to Exxon, “the case is a simpledisagreement over how to interpret the compa-ny’s contract with the state, including whatexpenses it could deduct before paying royaltiesto the state.”2 Alabama claimed Exxon inten-tionally underpaid the royalties in a scheme tocheat the state. Key to the state’s fraud case wasa memo prepared by in-house counsel CharlesBroome as construction at the drilling sites wasnearing completing in 1993. An Exxonaccounting manager asked Broome “to performa legal analysis of the royalty provisions of thelease agreement ‘to ensure that royalties werepaid in accordance with the terms of the miner-al lease’ and to evaluate potential areas of costrecovery for Exxon in the production and treat-ment process.”3 In his memo, Broome analyzedthree different interpretations of the lease lan-guage and the likelihood of success. After dis-cussing the state’s position, Broome presentedtwo possible interpretations, labeled “moreextreme contruction[s],” that would permit abroader range of deductions. Broome cautionedthat these interpretations had little chance ofsuccess in court. “If we adopt anything beyonda ‘safe approach,’ we should anticipate a quickaudit and subsequent litigation.”4 But, thememo suggested a way to calculate the risk.“Our exposure is 12% interest on underpay-ments calculated from the due date, and thecosts of litigation.”5 Exxon, with full knowledgeof the state’s position, began paying royaltiesbased on a “more extreme construction” of thelease agreement.

In December 2000, a jury awarded the state$60 million in additional royalties, $27 million

in interest, and $3.42 billion in punitive dam-ages. The Alabama Supreme Court reversed thisverdict in 2002 on evidentiary grounds. TheCourt held that the Broome letter, which washeavily relied on by the state during the 14-daytrial, was a confidential attorney-client commu-nication which should not have been admitted.The case was retried in late 2003.

Despite being handicapped by the loss of akey document, the state did even better the sec-ond time around. In 2003, the jury handeddown the largest verdict in Alabama history. Thestate of Alabama was awarded $63,769,568 inadditional royalties for the period of October1993 through December 2002, $39,235,154 ininterest, and $11.8 billion in punitive damages!

Large punitive damage awards are rarelyrationally related to the damage actually causedby the company. That’s what compensatory dam-ages are for. Punitive damages are intended tohurt and send a warning to companies engagingin egregious conduct. According to the jury fore-man, the jury “wanted to set an amount thatwould get their attention.”6 Exxon argued thatsomething more was going on. Alabama was fac-ing serious budget cutbacks in 2003 and thestate’s fiscal woes were widely reported by thepress around the time of the trial. A few com-ments by jurors afterwards, such as “the verdictwould help bail the state out if its financial cri-sis,”7 hint at this ulterior motive. Exxon sought arehearing to consider whether the punitive dam-ages were excessive and the trial judge reducedthe award to $3.5 billion in adherence with U.S.Supreme Court guidelines.8

Legitimate Disagreement or Fraud?In November 2007, the Alabama Supreme Courtcaused a bit of a stir, to say the least, when itoverturned the jury’s punitive damage award dueto the lack of evidence of fraud and reduced thecompensatory damage award due to some finerpoints of contract interpretation. In its simplestterms, this case boils down to whether Exxonopenly disagreed with DCNR as to the calcula-tion methods or intentionally schemed to cheatthe state out of royalties due under the leases. If

Punitive Damage, from page 1


the former was the case, the state would be lim-ited to contractual remedies (basically unpaidroyalties and interest). If the latter, the statewould be entitled to punitive damages because ofExxon’s fraudulent conduct.

While the Supreme Court’s decision is hardto swallow, the evidence of actual fraud was thin.Exxon, the multi-billion dollar corporation weall love to hate, never hid anything. DCNR wason notice that the oil companies were calculatingroyalties differently as early as 1993 and knewabout Exxon’s calculation methods by 1996.Scandals over oil royalties during this same timeperiod sounded warnings about padded deduc-tions.9 It should not be surprising or shockingthat Exxon would attempt to game the system.But, as one of the Supreme Court justices statedin a concurring opinion, corporate greed doesnot equal fraud.

We are thus left with a situation in whichone of the parties to a contract has takena hard-nosed bargaining position, cynical-ly relying on a downside that it accurate-ly deemed to be limited to compensatorydamages plus interest, without any risk ofexposure to punitive damages. Although ajury could reasonably conclude from theevidence that Exxon’s business ethicswould pass only the first prong of theRotary Club’s famous “4-way Test,” thatcircumstance does not give rise to a basisunder settled Alabama law for an award ofpunitive damages.10

ConclusionAlthough Governor Bill Riley decided not to askthe Alabama Supreme Court to reconsider itsdecision, the case is not over quite yet. The par-ties went back to court in January to argue overwhether the interest on the remaining $51.9million in compensatory damages should be cal-culated at 12 or 24 percent. Judge McCooey,agreed with Exxon that 24 percent was too highand approved its calculation of royalties andinterest due of $120.4 million.11 The state’sattorneys said they would appeal.12

Endnotes1. Shell Oil later settled with the state following

a similar lawsuit agreeing to pay $27.1 mil-lion in unpaid royalties and interest and $6.4million in attorney’s fees. See, Shell ReachesSettlement in Lawsuit by Alabama, HOUSTON

CHRON., March 21, 2002.2. Phillip Rawls, This Case is Notorious, MOBILE

REGISTER, Feb. 7, 2007.3. Exxon Corp. v. Alabama Dept. of Conservation

and Natural Resources, 859 So. 2d 1096,1100 (Ala. 2002).

4. Mike France, When Big Oil Gets Too Slick,BUSINESS WEEK, Apr. 9, 2001 at 68.

5. Id.6. Phillip Rawls, Judge Cuts Alabama Verdict

Against Exxon Mobil to $3.6 Billion, APDATASTREAM, March 20, 2004.

7. Editorial, Sympathy for Exxon Mobil,BIRMINGHAM NEWS (Ala.), Aug. 20, 2005 at15A.

8. Rawls, supra note 6.9. See, Edmund L. Andrews, As Profits Soar,

Companies Pay U.S. Less for Gas Rights, THE

NEW YORK TIMES, Jan. 23, 2006.10. ExxonMobil Corp. v. Alabama Dept. of Con-

servation and Natural Resources, 2007 WL3224585 at *36 (Ala. Nov. 1, 2007).

11. Phillip Rawls, Alabama Judge Sides withExxon Mobil in State Royalty Dispute, APALERT – ALABAMA, Jan. 8, 2008.

12. Id.

Photograph of gas platform courtesy of ©Nova Development Corp.


2007 Alabama Legislative Update

Stephanie Showalter

The following is a summary of legislation enacted by the Alabama Legislature during the 2007 session.

2007 Ala. Laws 150 (H.J.R. 152) (Approved April 11, 2007)

Creates a Permanent Joint Legislative Committee on Energy Policy for the purpose of developing anAlabama Energy Plan to recommend to the Governor and the Legislature courses of action to addressthe State’s long-term and short-term energy challenges. The initial focus of the Committee will be onthe diversity of transportation fuels used in Alabama and developing markets and technologies for alter-native fuel products. The committee is required to submit its recommendations on a yearly basis.

2007 Ala. Laws 232 (S.J.R. No. 68) (Approved June 1, 2007)

Designates the second Tuesday of every April as “Rivers of Alabama Day” to recognize the many valu-able assets rivers bring to the State of Alabama.

2007 Ala. Laws 252 (H.B. 450) (Approved June 6, 2007)

The Lauderdale County Tennessee River Preservation Act prohibits the withdrawal of water from theTennessee River Basin for transfer to any other river basin outside of the Tennessee River Basin in anamount greater than the amount being withdrawn on the effective date of the act.


The Wildlife Heritage Act of 2007 provides hunting license buyers with the option to hunt under a“supervision required” status in lieu of passing a hunter education course. Hunters under supervisionmust be under normal voice control, not to exceed 30 feet away from a properly licensed hunter 21years of age or older. The Act also raised the statewide hunting license fee from $16 to $24 and fresh-water fishing license fees from $9.50 to $12.


The Alabama Uniform Environmental Covenants Act provides rules for the creation, enforcement, andmodification of environmental covenants to restrict the use of contaminated real estate. An environ-mental covenant is “a servitude arising under an environmental response project that imposes activityand use limitations.” Environmental covenants are used to encourage the redevelopment of brownfieldsand other contaminated sites.


Interesting Items

Around the Gulf…

Hurricane Katrina wiped out over 300 homes on Dauphin Island's west end. Now, the future of the 3.5 milesof eroded beach is in question. Last March, the Dauphin Island Property Owners Association voted to turn

the private beach into public land. The association's hope was that if the landwere converted to a public beach managed by the town, it would be eligiblefor public restoration funding. However, two property owners filed suitopposing the action. In November, Mobile County Circuit Judge CharlesGraddick issued a continuance in the case pending the release of a report ina federal lawsuit. The report concerns the U.S. Army Corps of Engineers'dredging practices in the Mobile Bay Ship Channel. The property ownerswho filed the suit believe the study will show that the beach has begun torebuild and there is no reason to turn it over to the public.

The Mississippi Chapter of the Coastal Conservation Associationfiled suit against the Mississippi Department of MarineResources on January 25 to prevent the enforcement of new speck-led trout recreational catch limits scheduled to go into effect inFebruary. In December 2007, the Commission on MarineResources, by a 3 - 1 vote, passed a 13-inch catch limit for the state'scoastal waters. CCA alleges that the Commission ignored the rec-ommendations of DMR scientists when establishing the limit inviolation of state law.

The Mississippi Band of Choctaws recently lost its bid to open a casino on the Mississippi coast in JacksonCounty. The Bureau of Indian Affairs within the Department of Interior recently quashed the plans of eleventribes to open off-reservation casinos ruling that the requested sites were too far from the reservations. Withrespect to the Choctaw's request, the BIA stated that the tribe failed to show how the casino was necessaryfor tribal self-determination, economic development, or housing. The tribes can appeal the decision to theInterior Board of Indian Appeals or federal court.

On January 30, U.S. District Judge Stanwood Duval reluc-tantly dismissed a class action lawsuit against the U.S.Army Corps of Engineers for levee breaches followingHurricane Katrina. Judge Duval ruled that the FloodControl Act of 1928 protects the federal government fromlawsuits over damages caused by flood control projects.Approximately 489,000 claims by Louisiana business-es, governments, and property owners were associated withthis lawsuit and it is unclear which, if any, can move for-ward. The decision is likely to be appealed to the FifthCircuit.

Speckled trout drawing courtesy of NOAA’s HistoricFisheries Collection.

Photograph of flooded New Orleans courtesy of NOAA’s Photo Library.

Photograph of Dauphin Island welcome signcourtesy of Valerie Winn, Mississippi-Alabama Sea Grant Consortium.

Mississippi-Alabama Sea Grant Legal ProgramKinard Hall, Wing E, Room 262P.O. Box 1848University, MS 38677-1848

WATER LOG

WATER LOG (ISSN 1097-0649) is supported by theNational Sea Grant College Program of the U.S.Department of Commerce’s National Oceanic andAtmospheric Administration under NOAA GrantNumber NA060AR4170078, the Mississippi-A l abama Sea Gran t Conso r t ium, St a t e o fMississippi, Mississippi Law Research Institute, andUniversity of Mississippi Law Center. The state-ments, findings, conclusions, and recommendationsare those of the author(s) and do not necessarilyreflect the views of the Mississippi-Alabama SeaGrant Legal Program, The Mississippi-Alabama SeaGrant Consortium or the U.S. Department ofCommerce. The U.S. Government and theMississippi-Alabama Sea Grant Consortium areauthorized to produce and distribute reprintsnotwithstanding any copyright notation that mayappear hereon. Graphics and/or photographsby ©Nova Development Corp., USFW, USGSand NOAA.

The University complieswith a l l appl icable lawsregarding affirmative actionand equal opportunity in allits activities and programsand does not discriminateagainst anyone protected by

law because of age, creed, color, national origin, race,religion, sex, disability, veteran or other status.

MASGP-07-003-04This publication is printed on recycled paper.

February, 2008


• • • Upcoming Conferences • • •

• MARCH 2008 •1st Annual Sea Grant Law and Policy Journal Symposium

March 25-26, 2008, Oxford, MShttp://www.olemiss.edu/orgs/SGLC/National/SGLPJ/SGLPJ.htm

• APRIL 2008 •Marine Habitat Mapping Technology Workshop for Alaska

April 2–4, 2007, Anchorage, AKhttp://seagrant.uaf.edu/conferences/2007/benthic/index.html

WaterTech 2008April 16-18, 2008 Lake Louise, Canadahttp://www.esaa-events.com/watertech/

• MAY 2008 •Monitoring: Key to Understanding our WatersMay 18-22,

2008, Atlantic City, NJhttp://www.wef.org/ConferencesTraining/

ConferencesEvents/NatlWaterQualityMonitoringConference/

9th Annual Smart Growth ConferenceMay 5-6, 2008, Biloxi, MS

http://www.dmr.state.ms.us/CMP/CRMP/Conference/08/conference.htm

Water Log 27:4

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