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ExxonMobil climate change trial continues
US
THE trial relating to the State of New York’s lawsuit against ExxonMobil, alleging that the super-major knowingly misled investors about the impact of climate change on its business, has entered its second week.
New York Attorney General Letitia James filed a lawsuit against ExxonMobil in October 2018 under the Martin Act, a state law that had been used primarily to go after financial fraud. The lawsuit accuses ExxonMobil of defrauding investors of up to $1.6bn.
However, a series of witnesses in the first week failed to provide any concrete evidence that the super-major had knowingly misled its shareholders.
Nonetheless, testimony by both investors and employees of the company suggested a potential lack of clarity on the difference between two measures of climate-related costs used by Exx- onMobil. One is a public “proxy cost” for the impact of climate change regulations on future energy demand, while the other is a greenhouse gas (GHG) cost used internally by the company to decide on spending for new projects.
ExxonMobil’s lawyer, Theodore Wells, said in his opening statement in Manhattan Supreme Court last week that the company had evidence provingthetwometricswereusedfordifferent purposes and were never intended to be public. The super-major claims New York is conflating the two costs to prove a discrepancy where none exists.
New York is alleging that the “proxy cost,” made it look to investors as though ExxonMo- bil had a more sober view of future demand and regulations than what it applied internally. And Bloomberg noted that under New York law, how things appear to shareholders – rather than what ExxonMobil had actually intended – may be what decides the case.
More witnesses are still due to appear, and more evidence may yet emerge. However, under the Martin Act, New York does not have to prove intent in order to win its case.
“This is precisely why New York is pursuing Exxon under the Martin Act,” a Brooklyn Law School professor, James Fanto, was quoted by Bloomberg as saying. “New York could prevail if it showed that Exxon’s disclosure had a kind of fraudulent effect in misleading shareholders.”
Indeed, New York Supreme Court Justice Barry Ostrager, who is presiding over the trial, asked the lawyers representing the two parties in the trial last week whether confusion among ExxonMobil’s shareholders was enough to trig- ger a Martin Act violation.
ExxonMobil’s Wells argued that it was not. “I
would state that under the law that there’s a dif-
ference between somebody being confused and
a statement being misleading. I think you have
to look at it in context. I think the concepts are
different,” he said. does not have to
However, Kevin Wallace, a lawyer for the attorney general, rejected Wells’ argument, saying that the case turns on what ExxonMobil disclosed to the public and what the company’s investors understood. “There’s no dispute on the groundsabouttheexistenceofthetwosystems,” Wallace said. “The dispute is in how that was portrayed to the investors.”
The trial is expected to last up to three weeks. The verdict, when it comes, is likely to be appealed against, delaying resolution of the case for years unless a settlement is reached.
This is the first of several lawsuits currently pending against major oil companies related to climate change to go to trial. And even after the verdict is given, the broader question of oil com- panies’ liability for climate change will not have been addressed.™
prove intent in order to win its case.
Under the Martin Act, New York
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w w w . N E W S B A S E . c o m Week 43 29•October•2019