In a ruling that will likely have implications for climate change litigation across the U.S., a New York Supreme Court justice has dismissed the attorney general's suit against ExxonMobil Corp. The 55-page opinion issued by Justice Barry Ostrager is a scathing rebuke of the attorney general's case.
Over the three-and-a-half years of investigation and legal proceedings, Exxon produced millions of pages of documents and dozens of people were deposed or interviewed. The attorney general made several claims against Exxon in the original petition, which Justice Ostranger called "hyperbolic." At trial, the attorney general claimed that Exxon committed equitable and common law fraud and otherwise violated certain state laws, including the Martin Act, which generally relates to misrepresentations associated with the sale or distribution of stocks or securities. The trial lasted 12 days and 18 witnesses testified.
At the close of evidence, the attorney general withdrew its fraud claims, perhaps realizing that the justice would rule against them or that they had not proven the claims. Even so, the justice found Exxon "would not be held liable on any fraud-related claims," reasoning that because the attorney general failed to prove the other claims that did not require proof of intent, they certainly could not prove claims that did.
As to the Martin Act or securities claims, the attorney general posited that from 2013 to 2016 Exxon made misrepresentations and omissions in reports and shareholder meetings about how the company managed the risks of climate change and increasing regulations. The justice reviewed all of the publications the attorney general asserted contained misrepresentations and omissions, as well as the testimony of Exxon employees and the attorney general's expert. Tellingly, the attorney general offered no testimony from any investor claiming to have been misled.
In its publications, Exxon made clear that it anticipated possible restrictions on fossil fuel production and decreasing consumer demand based on global concerns regarding climate change. Indeed, Exxon mandated all of its business segments include greenhouse gas costs when seeking internal funding of capital investments, where appropriate. The justice found there was no proof that anything Exxon is alleged to have done affected Exxon's balance sheet, income statements or other financial disclosures. Specifically, the justice found no reasonable investor would make investment decisions "based on speculative assumption of costs that may occur 20 or 30 years in the future with respect to unidentified future projects."
As to the testimony, the justice found all of the Exxon employees were "truthful" and "uniformly committed to rigorously discharging their duties in the most comprehensive and meticulous manner possible." As for the attorney general's expert, the justice found his testimony provided no actual support for the attorney general's theory of the case because, as an investment professional, the expert had never downgraded Exxon as a result of any of the events that were the focus of the attorney general's claims.
While the dismissal of the New York attorney general's claims is significant, other suits are still pending across the U.S. Many contain the same type of fraud allegations asserted by the New York attorney general. These suits also contain other claims, such as common law nuisance claims. Nonetheless, the ruling in New York will certainly be touted by Exxon in other pending cases.
For now, Exxon has won a decisive victory against a determined opponent. For the New York attorney general, the case was simply not strong or persuasive enough under New York's securities law to convince the justice. We will have to wait and see if other claims meet a similar fate.
John B. King is a partner with Breazeale, Sachse & Wilson LLP in Baton Rouge, Louisiana. His practice relates mainly to environmental regulatory permitting and compliance. Prior to joining the firm in 2003, he served as chief attorney for enforcement for the Louisiana Department of Environmental Quality.
For more information, visit www.bswenviroblog.com, or contact John B. King at jbk@bswllp.com or (225) 381-8014.
