By Karen Savage
Exxon claims the New York attorney general harmed its reputation by withdrawing two climate fraud charges during closing arguments of its trial, which concluded earlier this month in New York Supreme Court.
The AG had charged Exxon with four fraud-related claims, but dropped charges of equitable fraud and common law fraud, which would have required the AG to prove Exxon intentionally defrauded investors. The other charges fall under the Martin Act, the state’s tough law governing investor fraud, which does not require the AG show intent.
Exxon filed a motion this week asking Judge Barry Ostrager to force the AG to clear Exxon of intending to defraud investors. The AG’s office has until Nov. 27 to file its opposition to the motion and both sides are scheduled to appear before Ostrager on Dec. 6.
Evidence presented during the trial shows Exxon violated the Martin Act and a second statute covering repeated violations of the Martin Act, according to New York Attorney General Leticia James.
The decision to drop—or discontinue—the two charges came as a surprise to Exxon and drew the ire of Theodore Wells, the company’s lead attorney, who said the state should have dropped the chargers much earlier.
By withdrawing charges after evidence was presented but before the judge’s ruling, Exxon “can never repair the reputational damage that the [AG] inflicted on the company and its employees,” Wells wrote in the motion. “Nor can it deter copycat litigants across the country that have repackaged [the AG’s] allegations word-for-word.”
Wells said the law allows the AG to discontinue charges only with Exxon’s consent.
Exxon wants Ostrager to issue an order dismissing the two discontinued fraud charges with prejudice, meaning the charges cannot be refiled—which Ostrager already said he would do. It is also asking Ostrager to state in the order that the evidence shown at trial did not indicate the company intended to defraud shareholders, nor did the evidence show that shareholders relied on potentially deceptive information when making investment decisions.
Alternately, Exxon said it would agree to the discontinuance if Ostrager orders the AG to issue a stipulation that includes the same statement.
The AG’s office did not immediately respond to a request for comment.
“By withdrawing its fraud claims after four years of costly investigation and litigation, [the AG] is effectively attempting to deny ExxonMobil and its employees the opportunity to clear their names and set the record straight,” Wells wrote.
Exxon maintains it will continue to be harmed by “copycat cases” in other jurisdictions. As evidence, it points to a similar fraud lawsuit filed by Massachusetts Attorney General Maura Healey in October and suits filed against it in Texas by shareholders who allege they were misled by Exxon.
As in the New York AG’s suit, both of those suits allege Exxon deceived investors by disclosing that it used one set of numbers to calculate climate risk to shareholders while using a different, undisclosed calculation to internally make investment decisions.
“Ultimately, this case will be a bellwether for lawsuits all across the country,” Wells wrote.
After resolving this issue on Dec. 6, Ostrager is expected to issue a decision on the remaining charges by late December.