By Dana Drugmand
ExxonMobil, currently a defendant in multiple climate change liability lawsuits and one for alleged securities fraud over its climate risk disclosures, has asked a federal judge in Texas to deny class certification in a class action suit brought by investors against the company.
That suit, Ramirez v. ExxonMobil Corporation, claims that Exxon misrepresented the value and amount of its reserves and the proxy cost of carbon—an estimated carbon price used to guide decision-making on fossil fuel projects—because the costs it disclosed publicly differed from the data it used internally. The Greater Pennsylvania Carpenters Pension Fund and lead plaintiff Pedro Ramirez Jr. filed the complaint in 2017 as a federal securities class action on behalf of investors who purchased Exxon stock between March 31, 2014 and January 30, 2017. The complaint says Exxon’s “material misstatements and omissions,” means investors “paid artificially inflated prices for Exxon common stock.”
The case is proceeding in federal district court following Judge Ed Kinkeade’s refusal to dismiss it and his denial of a motion to reconsider. Exxon filed its response on Friday opposing the plaintiff’s motion for class certification. The certification is a procedural requirement to establish a case as a class action.
Exxon argues that because the misrepresentations did not impact the stock price, the claim is unfounded. The company points to an analysis by economist and securities law professor Dr. Alan Ferrell, which found “no price impact from any of the alleged misrepresentations or alleged corrective disclosures.” Exxon said the plaintiff’s expert, financial consultant Frank Torchio, did not prove an impact on the stock price.
The Supreme Court held in a previous case (Halliburton Co. v. Erica P. John Fund Inc.) that if a defendant can prove alleged misrepresentations did not affect its stock price, class certification can be denied.
The alleged misrepresentations came in Exxon’s 10-K forms, where the plaintiffs say it failed to account for losses at the company’s operations in the Canadian tar sands and gas fields in the Rocky Mountains, as well as statements on the company’s use of proxy costs of carbon.
The plaintiffs cite several examples of the company’s stock price decreasing following belated disclosures of losses in filings to the Securities and Exchange Commission. “These declines are evidence that defendants’ failure to timely disclose the losses, write-downs and impairments relating to these specific assets materially impacted Exxon’s stock price,” the plaintiffs wrote supporting the motion for class certification.
The plaintiff has until May 24 to reply to Exxon’s opposition to class certification. Exxon also filed a request for an evidentiary hearing.