On December 10, 2019, after a three-week trial, a New York state judge dismissed a case brought by the Attorney General of the State of New York (“New York”) against the oil giant, ExxonMobil Corp. (“ExxonMobil”). The climate change lawsuit was dismissed on its merits.

New York had pursued claims for three-and-a-half years against ExxonMobil on a theory of securities fraud. The case focused on how ExxonMobil represented the costs of climate change to its investors. New York argued that ExxonMobil used one set of numbers for the public and a separate set of numbers internally.

Rex Tillerson, former United States Secretary of State, and former CEO of ExxonMobil from 2006 to 2017, testified as a witness in the trial in October, defending his former employer in the $1.6 billion lawsuit. He said that the costs of climate change had been accurately presented to stockholders.

COURT SAYS NEW YORK FAILED TO PROVE ITS CASE

In his 55 page decision, Judge Barry Ostrager concluded that “the Office of the Attorney General failed to prove, by a preponderance of the evidence, that ExxonMobil made any material misrepresentations that would have been viewed by a reasonable investor as having significantly altered the 'total mix' of information made available.” TSC Industries, Inc. v. Northway, Inc., 426 U.S. 438 (1976).” (Slip Op. at 3.)

While New York had reviewed millions of pages of internal corporate documents related to how ExxonMobil priced potential new opportunities and presented predictions related to energy costs in the future—a review undertaken to show that separate, more conservative climate change damage figures were being given to investors—New York was unable to prove its case.

The Court rejected any evidence of wrongdoing, saying there was “no allegation” and “no proof” that anything ExxonMobil did or failed to do “affected ExxonMobil’s balance sheet, income statement, or any other financial disclosure.” No reasonable investor would have made investment decisions “based on speculative assumptions of costs that may be incurred 20+ or 30+ years in the future with respect to unidentified future projects.” (Slip Op. at 34.)

In a further blow to New York, the Court held that “ExxonMobil executives and employees were uniformly committed to rigorously discharging their duties in the most comprehensive and meticulous manner possible … the testimony of these witnesses demonstrated that ExxonMobil has a culture of disciplined analysis, planning, accounting and reporting.” (Slip Op. at 37.)

The Court highlighted New York’s failure to offer any testimony “from any investor who claims to have been misled.” (Slip Op. at 38.) The only witness that New York provided was a professional analyst, Rodger Reed, whose own testimony helped ExxonMobil because it showed that even Reed was not paying attention to climate change accounting when he made professional investment decisions. (Slip Op. at 39-41.)

NEW YORK STATE’S EXPERT WITNESSES WERE UNCONVINCING

The Court also rejected expert testimony provided by Dr. Eli Bartov and a Mr. Peter Boukousiz. Dr. Bartov stated that ExxonMobil’s stock price was inflated from April 1, 2014 through June 1, 2017 because of ExxonMobil’s misstatements relating to climate change. Mr. Boukouzis attempted to use economic models to show how ExxonMobil was using two sets of figures—one internal for itself, and another for the public.

The Court was not impressed with either expert witness, holding that their testimony “was eviscerated on cross-examination and by ExxonMobil’s expert witnesses. (Slip Op. at 54.) It is rare for a Court to use this type of sweeping language.

WERE MISTAKES MADE BY THE ATTORNEY GENERAL?

The tone of the 55-page court order is unmistakably favorable to ExxonMobil, and reflects a fundamentally flawed legal presentation by New York. Basic elements of New York’s theory did not appear to have any evidentiary weight, and their experts were totally unconvincing to the Court.

In contrast, ExxonMobil’s witnesses received praise from the Court for their professionalism and uniformity in their testimony. The failure of New York to produce a single investor who claimed it was harmed by the supposed misstatements was mentioned by the Court, almost in disbelief. One is left to wonder whether mistakes were made by New York in the presentation of the case.

IS EXXONMOBIL IN THE CLEAR?

While the Court found in a resounding manner for ExxonMobil, it made clear that its decision was a narrow one—it was not absolving ExxonMobil “from responsibility for contributing to climate change through the emission of greenhouse gases in the production of its fossil fuel products … But ExxonMobil is in the business of producing energy, and this is a securities fraud case, not a climate change case.” (Slip Op. at 3.)

Whether or not fossil fuel corporations will be eventually liable for climate-related damages thus remains an important question. And other theories are potentially viable. The State of Massachusetts is pursuing a consumer fraud case against ExxonMobil, and that litigation is ongoing. Just Atonement Inc. (disclosure: the sponsor of Human Rights Pulse) is pushing on U.S. state Attorneys General to pursue a strategy of general corporate accountability against fossil fuel corporations under their general statutory powers—the argument being that the potential devastation of an imminent climate breakdown, combined with knowledge of the damage caused by greenhouse gas emissions, is sufficient to have a court impose limitations and restrictions on how fossil fuel corporations conduct their business.

HUMAN RIGHTS FRAMEWORK ITSELF AT STAKE

But New York’s defeat will certainly impede efforts to hold fossil fuel corporations liable. The Attorney General of the State of New York is one of the most powerful attorneys in the United States, if not the world. New York received more than a million documents from Exxon and had access to key corporate decision makers, including its former CEO, Rex Tillerson.

The failure of New York to prove a narrow case of securities fraud now stands as testament to the power of the fossil fuel corporations in avoiding liability for their products. And at risk is the general framework of human rights itself. Climate change threatens to upend the world in a way that no previous crisis has ever done to the human species. Basic human rights, particularly the right to life, are gravely threatened by climate change. Unchecked climate change will destroy the social framework; human rights may not survive. Holding corporations accountable—particularly corporations that knew what they were doing, and the damage they might cause—is fundamentally a question of who pays for the survival of the species in an era when civilization itself is threatened.

The case is PEOPLE OF THE STATE OF NEW YORK, by LETITIA JAMES, Attorney General of the State of New York v. EXXON MOBIL CORPORATION, Index No. 452044/2018.

Dave Inder Comar is the co-founder of Human Rights Pulse and a practising attorney.

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