Five years after the New York attorney general’s office opened a sweeping investigation into oil titan Exxon Mobil, the state’s closing arguments in a Manhattan courtroom last week were a good deal narrower than it once hoped they would be.
In 2015, when then-attorney general Eric Schneiderman opened the investigation, his office was examining whether Exxon Mobil had lied to investors and the public about how much it knew about the scope of climate change. But no smoking gun ever surfaced. When lawyers for one of Schneiderman’s successors in the office, Letitia James, delivered closing arguments in the case last Thursday, the allegations were rather narrower. New York says the oil giant disclosed one set of carbon “proxy costs” to investors while actually applying a lower set of costs to its oil and gas assets, thus giving an inflated view of just how well it had prepared for the financial risks of climate change.
As if to underscore the narrowing scope, one of the state’s lead lawyers, Jonathan Zweig, on Thursday quietly dropped two claims that Exxon Mobil intentionally misled investors, causing “a stir,” Bloomberg reported.
The case — People of the State of New York vs. Exxon Mobil — was once expected to be historic. Has it now been winnowed down into technocratic obscurity?
There are reasons to believe that the legal precedent, no matter which way the ruling by judge Barry Ostrager goes, won’t pose much of a roadblock to Exxon Mobil or other oil and gas companies.
For one thing, the statute on which New York has staked its case — the Martin Act, which prohibits fraud — is unique to the state of New York. It also happens to be one of the most powerful acts of its kind in the US, meaning that even a successful prosecution against Exxon Mobil couldn’t be replicated in the same way elsewhere. “It is even more difficult to make out a case of securities fraud under the blue sky laws of most other states,” said Michael Gerrard, a professor at Columbia Law School.
Even if prosecutors could bring similar cases elsewhere, they still might not be able to. “It isn’t clear whether other companies engaged in a similar sort of accounting for greenhouse gas emissions,” said Ann Carlson, a professor at UCLA law school. “This case isn’t like the nuisance cases, where if one jurisdiction prevails against the oil companies the floodgates are likely to open and other jurisdictions will likely follow suit.”
In fact, it is even possible that the case could serve the interests of energy companies, although it isn’t clear how likely such an outcome is. Thomas Muinzer, a professor at Scotland’s Dundee University, outlined such a scenario. If judge Ostrager rules, for instance, that corporations are allowed to tell investors about expected climate change costs while at the same time ensuring that those costs represent overestimates “via complex accounting regimes,” said Muinzer, that would in essence allow financial information received by investors to be, to a degree, “permissibly misleading.”
As for the possibility of a broad ruling in New York’s favor, the odds are not strong. One expert who preferred not to be named said the prospect was “highly unlikely.”
A milestone, if indirectly
Even if the case may not have a significant impact on its own, it may well have already helped to usher in a new era of climate litigation.
Exxon Mobil alone faces a phalanx of other climate cases. Massachusetts only several weeks ago filed a securities case much broader than New York’s, and altogether more than a dozen suits have been brought by cities, counties and a state alleging that Exxon Mobil and others have worsened climate change. The plaintiffs in the cases are trying to force oil and gas companies to pay for the cost of climate change adaptation, measures that could include, among other things, paying for seawalls and other defenses.
One of the most recent additions to the stable of climate change cases was brought only several weeks ago by the attorney general of Massachusetts, Maura Healey, after a lengthy investigation. The case — Commonwealth of Massachusetts vs. Exxon Mobil — makes arguments similar to those heard in New York, including allegations that Exxon Mobil misrepresented its estimates of the financial risks of climate change. But, in asserting that Exxon duped not just investors but also consumers, the Massachusetts suit arguably goes further.
For example, the new suit argues that Exxon Mobil told consumers in advertisements for its Synergy or “green” Mobil 1 products that they reduce greenhouse gas emissions. But that’s a “highly deceptive” claim, Massachusetts says, “since Exxon Mobil fails to disclose the fact that production and consumer use of such transportation fuels is a leading cause of climate change that endangers public health and consumer welfare.”
Many of these cases, if they are allowed to move forward, will be among the first of their kind. New York’s Exxon Mobil case was only the second climate change case in US history to go to trial, and the first where plaintiffs were able to obtain discovery from fossil fuel companies, said Columbia’s Gerrard.
They are part of a vanguard of cases helping to turn the courts into a regular battleground to press for climate change regulation — primarily in the US, but also around the world. In May, researchers at the London School of Economics found that climate change cases have been brought in at least 28 countries around the world, with three-quarters filed in the US. Most of the defendants in these cases are governments, the researchers said, but large fossil fuel companies are being targeted more and more often.
“Climate change litigation is increasingly viewed as a tool to influence policy outcomes and corporate behaviour,” researchers Joana Setzer and Rebecca Byrnes wrote.
Of course, the Massachusetts case and others face obstacles. Exxon Mobil has sued Healy, the Massachusetts attorney general, to try to prevent her office from obtaining documents — a tactic likely to be repeated. The sued companies are also seeking to have cases moved to federal court, where they stand greater odds of fending them off. Where they are less likely to succeed, however, is in stanching what is all but certain to be a stream of new cases in years to come.