A judge has handed Exxon Mobil a victory in only the second climate change lawsuit to reach trial in the United States. The decision was a blow for the New York Attorney General's Office, which brought the case.
Justice Barry Ostrager of the New York State Supreme Court said that the attorney general failed to prove that the oil giant broke the law.
"Nothing in this opinion is intended to absolve ExxonMobil from responsibility for contributing to climate change through the emission of greenhouse gasses in the production of its fossil fuel products," Ostranger wrote. But, he added, "this is a securities fraud case, not a climate change case."
In a three-week trial, New York state prosecutors argued that the oil company had downplayed the financial risks it faces from possible climate regulation. Attorney General Letitia James said doing so made Exxon's assets appear more secure than they really were, which in turn affected its share price and defrauded investors.
Ostrager concluded that James' office "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.' "
James released a statement following the verdict, saying that the case had compelled Exxon "to answer publicly for their internal decisions that misled investors."
"Throughout this case, we laid out how Exxon made materially false, misleading, and confusing representations to the American people about the company's response to climate change regulations," James said.
"Exxon's inability to tell the truth further underscores the lies that have been sold to the American public for decades," she said. "Despite this decision, we will continue to fight to ensure companies are held responsible for actions that undermine and jeopardize the financial health and safety of Americans across our country, and we will continue to fight to end climate change."
Exxon said the ruling "affirms the position ExxonMobil has held throughout the New York Attorney General's baseless investigation. We provided our investors with accurate information on the risks of climate change. The court agreed that the Attorney General failed to make a case, even with the extremely low threshold of the Martin Act in its favor."
"Lawsuits that waste millions of dollars of taxpayer money do nothing to advance meaningful actions that reduce the risks of climate change," the company said.
There were signs of weakness in the state's case. On the last day of the trial, the attorney general's office withdrew two counts of fraud from its lawsuit. Exxon asked the judge to rule on those counts anyway, saying the state had tarnished the company's reputation in making its case on them.
The state went forward with two counts based on the Martin Act, a New York statute that grants the state's attorney general the authority to pursue investigations and actions against those it suspects of securities fraud.
The Martin Act has a lower burden of proof: Prosecutors must show that a company made misrepresentations to investors and that there were consequences.
Ostrager minced no words in describing how he thought the trial had gone: "The testimony of the expert witnesses called by the Office of the Attorney General was eviscerated on cross-examination and by ExxonMobil's expert witnesses."
Ostrager said his ruling found Exxon not liable on any of the counts.
The highest-profile witness in the landmark case was former Secretary of State Rex Tillerson, Exxon's CEO from 2006 to 2017.
Exxon used two ways to estimate the impact of potential climate-change regulations on its future business. Tillerson testified that one assessment was used to estimate the effect of future climate change regulation — such as a carbon tax -- on the global energy system. But for specific projects, such as the Alberta oil sands in Canada, the company would use a different way of calculating a "greenhouse gas cost."
Tillerson insisted that this was appropriate and that Exxon had no incentive to underestimate carbon costs internally, since "we'd be misinforming ourselves."
Exxon battled for years to prevent this case and others from reaching trial, but there are now numerous pending lawsuits against Exxon and other oil companies, including a similar case that was recently brought in Massachusetts.
In Massachusetts, Attorney General Maura Healey accuses ExxonMobil of systematically misleading investors about climate change's impact on the economy and its own business, and of deceiving consumers about fossil fuel's environmental impact.
Elsewhere, many city and state governments are using "public nuisance" arguments to try to hold energy companies accountable for their role in climate change. The idea is to force them to help pay for the mounting impact of climate change that communities now struggle to address.
Fossil fuel companies often attempt to get the cases moved to federal courts, which they believe will be more sympathetic to their side.
ARI SHAPIRO, HOST:
A judge has found ExxonMobil not liable in a landmark climate change lawsuit. The case was a defeat for New York's attorney general, who accused the oil giant of defrauding shareholders, downplaying the risks that future climate regulation could pose to its investments.
NPR's Laurel Wamsley has been following the case, and she's here in the studio. Hi, Laurel.
LAUREL WAMSLEY, BYLINE: Hi, Ari.
SHAPIRO: Why did the judge decide in favor of ExxonMobil?
WAMSLEY: Well, this case was about securities fraud. And for one thing, the judge said that New York's attorney general had failed to produce any shareholders who would say they were actually misled.
SHAPIRO: OK, so no fraud found. Tell us more about this case and where it came from.
WAMSLEY: Well, it's a little thorny, so stick with me here. In this case, all the parties involved agreed that Exxon had used different methods to account for the potential impact of future climate change regulation on its investments. And so Exxon employees testified during the case that they used one method to estimate the cost of carbon in the future, like in the years 2030 and 2040, assuming that the countries of the world will take certain steps to limit greenhouse gas emissions. But internally, for specific projects like the oil sands in Alberta, Exxon used more specific numbers that were available to estimate the future carbon costs.
SHAPIRO: So a public accounting and a private accounting.
WAMSLEY: Yes. So the attorney general's office argued that using these different methods had resulted in misleading investors, but like I said, the judge said the attorney general's office had failed to produce enough evidence that this occurred. And an analyst from Wells Fargo who testified said that he had read the climate change documents in question and he didn't think much about them. And during this time, Exxon's stock had actually outperformed, suggesting that shareholders weren't hurt by these practices.
SHAPIRO: A lot of people were watching this case for what it said about climate change, about the energy industry. Now that the judge has ruled, what are the two parties saying?
WAMSLEY: Well, Exxon says that the ruling affirms what it's been saying all along. It called the investigation baseless and said that millions of dollars of taxpayer money had been wasted on the case. And the ruling was a big blow to New York's attorney general, Letitia James. In a statement, she said that her office had laid out how Exxon had made materially false and misleading representations to the American people. But she says her office will continue to fight for companies to be held accountable and that she'll keep fighting to end climate change.
SHAPIRO: This is the leading edge of a wave of similar lawsuits. It was just the second one to reach trial, but there are so many others pending against Exxon and other fossil fuel companies. What does this verdict likely mean for those other cases?
WAMSLEY: Well, we're going to have to see. So in the end, the judge in this case said it wasn't a climate change lawsuit, really, but a securities fraud case, and because of this loss, it may be that other states don't pursue securities fraud charges against Exxon. The attorney general of Massachusetts has announced a similar lawsuit against Exxon, and I imagine this decision could lead to a shift in that strategy.
But elsewhere, cities and states are pursuing other lines of strategy. So they're looking at public nuisance arguments, saying that energy companies should be held accountable for their role in climate change. The idea there is to force them to help pay for the mounting impact of climate change that companies - that different communities are struggling to address. And so it may be that those cases are more squarely about climate change rather than about accounting practices and risk assessments.
But even in this case, the attorney general brought it after gaining access to troves of internal documents, and it could be that those documents are able to pay off down the line in other cases.
SHAPIRO: NPR's Laurel Wamsley. Thanks.
WAMSLEY: You're welcome. Transcript provided by NPR, Copyright NPR.