By Dana Drugmand
As a wave of climate liability lawsuits come to a crescendo this fall, one fossil fuel major finds itself facing peril from more directions than any other: ExxonMobil.
With the trial in New York’s lawsuit against the company for climate fraud starting Oct. 23, it also faces key hearings in a set of liability lawsuits by California communities that will decide if they are heard in federal or state court. Other communities around the country have started to win those jurisdictional battles, forcing Exxon and other companies to argue their cases in state courts, where most believe the communities have a better chance to succeed. Shareholder lawsuits have also cropped up in Texas and New Jersey accusing the company of misleading investors and a judge has greenlighted another suit over climate impacts at an Exxon oil terminal in Massachusetts, a state which is also investigating the oil giant for potential consumer fraud over climate change.
“If Exxon loses any of these suits, that could be very significant for them, and it could inspire similar suits elsewhere,” said Michael Gerrard, faculty director and founder of the Sabin Center for Climate Change Law at Columbia Law School.
One thing is clear: Exxon’s lawyers are going to be busy.
The biggest, most immediate legal threat to Exxon is the securities fraud lawsuit filed last year by the New York attorney general. The case, People of the State of New York v. ExxonMobil, is currently scheduled for trial in New York Supreme Court starting Oct. 23. New York is arguing that Exxon violated the state’s Martin Act, which allows the state’s attorney general to prosecute securities fraud claims against Wall Street firms and is the strictest anti-fraud act in the country.
New York has accused Exxon of deliberately inflating its own value by withholding from investors lower calculations, or “proxy costs” of greenhouse gas regulations. The state’s investigation found Exxon had kept two sets of books accounting for potential costs of greenhouse gas regulations—one set was made public while the other was used for internal calculations. As New York’s complaint states, “Exxon in effect erected a Potemkin village to create the illusion that it had fully considered the risks of future climate change regulation and had factored those risks into its business operations. In reality, Exxon knew that its representations were not supported by the facts and were contrary to its internal business practices. As a result of Exxon’s fraud, the company was exposed to far greater risk from climate change regulations than investors were led to believe.”
Should Exxon lose, it could be ordered to pay back “all amounts…by which Exxon has been unjustly enriched in connection with or as a result of the acts, practices, misrepresentations, and omissions alleged herein.” The Martin Act allows for criminal penalties as well as civil ones. Former AG Eliot Spitzer used the law to extract more than $1.4 billion in fines from 10 of New York’s biggest investment firms he investigated for fraud in the early 2000s. Documents unveiled in the investigation could also be used by others to bring more civil suits.
ExxonMobil also faces an ongoing investigation by Massachusetts Attorney General Maura Healey. The probe is similar to the one undertaken by New York but focuses on how Exxon potentially misled consumers as well as investors. Exxon has tried to stop the investigation by suing Healey in both state and federal courts. The Massachusetts state courts, including the state’s highest court, have ruled against Exxon and upheld the AG’s authority to investigate the company. The U.S. District Court for the Southern District of New York also dismissed Exxon’s federal lawsuit against Healey’s investigation. Exxon has appealed that dismissal to the Second Circuit Court of Appeals, and that appeal is pending. Earlier this year the state of Michigan, under new Democratic AG Dana Nessel, withdrew its support of Exxon in the lawsuit, which it filed under a previous Republican AG. “The safety of our air and water and the deep concerns with climate change are compelling reasons for us to withdraw from this case,” said Nessel. “ExxonMobil has tried to withhold information from public officials and we simply can’t support their position.”
Exxon did not immediately respond to a request for comment.
Exxon and Its Allies Fight Back
The lawsuit against Healey is only one example of how Exxon has pushed back. From litigious counter-attacks to investigating the funding and the individuals involved in climate liability lawsuits, Exxon has unleashed various retaliatory tactics.
“Part of what’s going on here is the nature of the beast. If you start poking the tiger, you draw a response,” attorney Vic Sher, who is helping represent plaintiffs in some of the climate liability suits, told Climate Liability News.
“All evidence suggests—including my own experiences—that the Exxon tiger really doesn’t like to be poked,” said Geoffrey Supran, a research associate at Harvard who has studied fossil fuel industry misrepresentation of climate science.
Supran and Harvard professor Naomi Oreskes published a study in 2017 analyzing Exxon’s public and private communications on climate change from 1977 to 2014. The study found that “as documents become more publicly accessible, they increasingly communicate doubt,” concluding that ExxonMobil misled the public. Exxon called the study “inaccurate and preposterous” and later funded an expert to produce a study rebutting the findings from the Oreskes/Supran paper. The Exxon funded study was not peer-reviewed.
“In an effort to smear my and Naomi Oreskes’s peer-reviewed research demonstrating that ExxonMobil misled the public about climate science, they’ve tried everything from cherry picking evidence, to falsehoods, to expert-for-hire doubt mongering to straight up character assassination,” Supran said.
These tricks, he said, are a “clear reminder that the tiger hasn’t changed its stripes.”
Exxon is also fighting the liability suits with legal action of its own.
The company filed a petition in a Texas court in January 2018 seeking to conduct depositions and obtain documents from the municipal officials and lawyers involved in the California lawsuits. Exxon claims those lawsuits are part of a “civil conspiracy” aimed at villainizing the company and stifling its right to free speech right. The depositions and documents it seeks would lay the groundwork for a counter-lawsuit in the company’s home state. A Texas judge already ruled that the court would have jurisdiction in a potential suit brought by Exxon, but the California municipalities are appealing. The Second Court of Appeals held a hearing in January and its decision is expected soon.
Exxon’s strategy of attempting to countersue in Texas is a familiar tactic, as the California municipalities note in their appellate brief. It pointed out that Exxon battled New York and Massachusetts’ investigations in a Texas federal court, which eventually transferred it to New York, where it was dismissed.
The judge presiding over the New York attorney general’s lawsuit recently rejected Exxon’s attempt to compel third party witnesses to provide documents ahead of depositions. The AG’s office argued the document request placed an undue burden on witnesses and discouraged them from testifying against Exxon. Judge Barry Ostrager agreed, calling Exxon’s document request a “gigantic, burdensome fishing expedition.”
What Exxon Fears
The company’s legal maneuvers serve to show how much it wants to avoid not just a trial in all of these cases, but the discovery process that goes with it. Any cases sent to trial means Exxon executives would be compelled to participate in depositions under oath, which could reveal more documents and evidence of their motives. UCLA environmental law professor Ann Carlson, who recently wrote an op-ed titled “Why Big Oil Fears Being Put on Trial for Climate Change,” said the fossil fuel industry fears paying damages for climate impacts, which could run into the billions of dollars, but also wants to avoid discovery at all costs.
“Exxon and other oil companies like Shell and BP want to avoid discovery because – as the limited evidence reporters have already uncovered shows — they have known about climate change in remarkable detail since the 1960s, even predicting with alarming precision the concentrations of CO2 in the atmosphere,” Carlson said in an interview. “Rather than acting to protect the planet from increasing emissions, the industry funded a disinformation campaign to persuade the public that climate change isn’t human-caused; at the same time they spent huge amounts of money fortifying their own assets against the predicted consequences of climate change.”
“Discovery will undoubtedly unearth even more damning evidence of oil company knowledge and funding, much of which will be admissible at trial. The oil companies don’t want the public to see this evidence and they don’t want juries to hear it either.”
Vermont Law School professor Patrick Parenteau, who like Carlson is closely following the climate liability cases, said that undergoing discovery and depositions could be immensely damaging for fossil fuel companies. He explained that corporate officers could give conflicting testimony under oath, opening up chances for perjury and exposing them to various types of liability.
“There’s personal liability, there’s corporate liability, there’s securities liability, there’s shareholder liability, there’s all kinds of things just like what happened to the tobacco companies,” he said. “Once they’re put under oath and made to answer really specific, tight, penetrating questions, which the lawyers know the answers to, it’s a different ballgame. They are terrified of that.”
Sharon Eubanks, an attorney who previously led the federal government’s lawsuit against the tobacco industry, said that there is already evidence that Big Oil, just like Big Tobacco, committed fraud in order to increase profits.
“There definitely are parallels in the cases,” she said. “Indeed, some of the same lawyers, Ted Wells, for example, are representing Exxon. Ted represented Philip Morris in the federal tobacco case.”
Supran also pointed to the similarities between the tobacco industry’s behavior and the conduct of the fossil fuel companies.
“What historians find is that over the decades, tobacco companies started off challenging fundamental causality—that cigarettes are toxic and deadly—and then, over time, increasingly began denying culpability and accountability, putting responsibility solely on their customers,” he said. “Likewise, fossil fuel companies cut their denialist teeth by trying to discredit basic climate science. Now, as those talking points grow stale and ridiculous and the lawsuits heat up, they seem to be increasingly spinning the climate crisis another way: by denying responsibility for cleaning up their mess.”
Carlson said that the oil companies will likely escalate their retaliatory attacks in order to avoid discovery and accountability.
“Because so much is at stake, and because the oil companies have already demonstrated that they will fight on all fronts to derail the litigation, we can expect to see aggressive attacks on the plaintiffs, their lawyers, and anyone associated with the cases,” she said. “They will also make every conceivable legal claim to avoid getting to discovery so expect to see many more attempts to dismiss the lawsuits, to get Congress to immunize them from liability, and any other tactic they can think up to avoid facing their day in court.”
Parenteau said he expects nothing less.
“These guys are fighting for their lives,” he said.
A senior official in New York City, which is fighting the dismissal of its climate liability suit in the Second Circuit Court of Appeals, said the city remains committed to pursuing accountability.
“New Yorkers aren’t easily intimidated and we don’t back down,” said Daniel Zarrilli, NYC’s chief climate policy advisor. “New York City will continue to fight to hold Big Oil accountable for the impacts their greed has inflicted on our planet and their part in contributing to the climate crisis.”
Oral arguments are expected in that appeal in November.
It will be just one part of Exxon’s very busy, and potentially ominous, fall.