In a ruling that will likely have implications for climate change litigation across the United States, a state judge in New York has dismissed the New York Attorney General’s suit against ExxonMobil Corporation. The 55-page opinion issued by Jude Barry Ostrager is a scathing rebuke of the AG’s case.
Over the three and one-half years of investigation and legal proceedings, Exxon produced millions of pages of documents and dozens of people were deposed or interviewed. The AG made several claims against Exxon in the original petition, which Judge Ostrager called “hyperbolic.” At trial, the AG 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 twelve days and eighteen witnesses testified.
At the close of evidence, the AG withdrew its fraud claims, perhaps realizing that the judge would rule against them or that they had not proven the claims. Even so, the judge found that Exxon “would not be held liable on any fraud-related claims,” reasoning that because the AG 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 AG claimed that Exxon made misrepresentations and omissions in reports and shareholder meetings from 2013 to 2016 about how Exxon managed the risks of climate change and increasing regulations. The judge reviewed all of the publications which the AG asserted contained misrepresentations and omissions, the testimony of Exxon employees, and the AG’s expert. Tellingly, the AG offered no testimony from any investor who claims to have been misled.
In the publications, Exxon made clear that it anticipated possible restrictions on fossil fuel production and decreasing consumer demand in the future based on global concerns regarding climate change. Indeed, Exxon mandated that all of its business segments include, where appropriate, greenhouse gas costs when seeking internal funding of capital investments. The judge found that there was no proof that anything Exxon is alleged to have done affected Exxon’s balance sheet, income statement, or any other financial disclosure. Specifically, the judge found that 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 testimony, the judge found that all of the Exxon employees were “truthful” and were “uniformly committed to rigorously discharging their duties in the most comprehensive and meticulous manner possible.” As to the testimony of the AG’s expert, the judge found that his testimony actually provided no support for the AG’s theory of the case because, as an investment professional, he had never downgraded Exxon as a result of any of the events which were the focus of the AG’s claims.
While the denial and dismissal of the New York AG’s claims is significant, other suits are still pending around the country. Many contain the same type of fraud allegations asserted by the New York AG. However, these suits also contain other claims as well, such as common law nuisance claims. Nonetheless, the ruling in New York will certainly be touted by Exxon in the other pending cases.
For now, though, Exxon has won a decisive victory against a determined opponent. For the New York AG, the case was simply not strong or persuasive enough under New York’s securities law to convince the judge. We will have to wait and see if other claims will meet a similar fate.