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New York Goes Out With A Whimper In Its Case Against ExxonMobil

David Blackmon, Contributor

Last Thursday, in a move that surprised everyone but perhaps shouldn’t have come as a surprise at all, New York State Attorney General Tish James withdrew two counts of fraud against ExxonMobil during her closing arguments in the flimsy case she and her predecessor, Eric Schneiderman, spent the last half-decade pursuing against the energy giant.

Tellingly, AG James dismissed the two of her original fraud counts that were based on laws requiring demonstration of actual harm in order to obtain a positive judgment. Her suit claimed that ExxonMobil’s alleged “fraud” of keeping two separate estimates of the future costs of greenhouse gas emissions had cost investors in recent years. Yet, as the Wall Street Journal’s editorial board pointed out in an editorial titled “Parody of a Climate Trial” published on November 7, “Not a single Exxon shareholder at trial claimed to have been deceived. A PricewaterhouseCoopers director who performed 13 years of audits for Exxon said he was not aware of any attempt to manipulate either cost.”

Faced with her failure to produce any real evidence of damages in the case, Ms. James is stuck with clinging to two other counts of alleged fraud under the state’s 1921 Martin Act. As I pointed out in a piece last week, that hyper-expansive law does not require the state to prove details like “intent, fraudulent public statements by the defendant or even that investors were adversely impacted.” Under that law, the Attorney General must only prove that some misrepresentation took place.

Thus, at long last, the case that originated as a much-ballyhooed multi-state effort to prosecute ExxonMobil under the false allegation that it somehow knew all about “greenhouse gas” theory decades before Dr. James Hansen and then-Senator Al Gore started talking about it in the late 1980s, concludes with the Attorney General for the State of New York admitting that she can’t even prove that the company’s public disclosures about its bookkeeping damaged a single investor. Here is how ExxonMobil attorney Ted Wells summarized the experience in his closing remarks:

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“I have lived with this case, I’ve watched the three year investigation where they changed from theory to theory to theory. I mean it was like, you know, somebody in Moby Dick going after the great white whale. They were trying to get ExxonMobil. We started with climate science. We went to another theory. Went to stranded assets. We ended up with this theory. And then we did something that a lot of corporations don’t do. We did. We said put up or shut up. We said we will try this case, we will not settle this case because we have not done anything wrong.”
ExxonMobil attorney Ted Wells

ExxonMobil felt the case under the two counts that Ms. James dropped was so weak that Mr. Wells urged the judge to rule on them with prejudice during his own closing arguments: “Your Honor, the executives who came to court, some of whom were retired, didn’t have to show up, came here because they wanted to clear their reputations, I submit have a right to either a stipulation that says there was no intentional misconduct or a court ruling. They can’t put us through the whole trial, I submit, and then at the last minute recognize they didn’t prove the claims. And then say I’m going to dismiss it. And that leaves both a cloud over the reputations of the people.”

In a scathing November 10 editorial, the editorial board of the New York Daily News, historically no fan of fossil fuels or ExxonMobil, lambasted the Attorney General for presenting what they called a “dubious lawsuit.” The board ends its piece by noting that, “The judge will rule in about a month. He should do so in the sound of a sad trombone.”

That may be sound advice, and it does not portend good things for the Democratic attorneys general of several other states who initially coordinated with Schneiderman and his orginal “Exxon Knew” theory of the litigation. These other AGs have been closely watching the progress of the New York case for cues on how they should proceed on their own cases. In fact, Massachusetts Attorney General Maura Healey filed her own case on October 24, making claims similar to those pursued by Ms. James.

The problem for AG Healey and those other attorneys general is that none of their states have an expansive law like the Martin Act on which to fall back when they find they haven’t been able to prove up that any actual fraud or damages have occurred.

It’s a real conundrum. Somebody cue the sad trombone.