A historic hybrid of political grandstanding and legalese has finally come to a close. After four years of litigation, reams of documents, a laundry list of failed legal theories and countless taxpayer-funded court resources, the New York Attorney General’s embarrassing climate change case against ExxonMobil is over.
Manhattan Supreme Court Justice Barry Ostrager admonished the state’s lawyers while ruling in Exxon’s favor, saying that New York failed to provide evidence that “ExxonMobil made any material misstatements or omissions about its practices and procedures that misled any reasonable investor.”
Calling the lawsuit “meritless,” “bizarre,” “twisted” and outside the realm of “objectivity and fairness” at the trial’s opening arguments, Exxon’s lawyer, Theodore Wells Jr., defended the company against the AG’s demand for up to $1.6 billion in payouts. Lawyers for the AG lobbed allegations that ExxonMobil has deceived the public and investors for years by misrepresenting financial risks related to current and future climate change-related regulations. The case, said Wells, was the result of a “political alliance with activists for the purpose of advancing an agenda.”
How did we get here? In early 2015, Rockefeller Family Fund director Lee Wasserman met with then-AG Eric Schneiderman’s office to urge the ideologically-aligned prosecutor to use New York’s powerful Martin Act to probe the company for allegedly denying the impact of climate change on its assets. That November, the now disgraced ex-AG officially announced an investigation.
By using the Martin Act, a near-century old financial fraud statute — referred to as the “state’s most notorious” and “due-process-neglecting law” — the Empire State’s lead lawyer is able to assert authority without having to prove intent. And, of specific interest to headline-hunting pols like Schneiderman, the law allows the AG to keep an investigation secret or openly try a case in the press.
Employing the Martin Act to score political points was not pioneered by Schneiderman and ExxonMobil was not his first target in the energy sector. At a time when the fracking industry drew the ire of like-minded politicos, Schneiderman went after natural gas-firms Anadarko and EOG, seeking information regarding their financial disclosure practices related to now-banned upstate fracking projects.
This vague law — allowing the NY AG to subpoena and pursue penalties without providing proof of fraudulent intent — bullies most defendants into settling. But ExxonMobil fought back, demanding public release of documents and emails involving Schneiderman, his staff, and central actors in the coordinated legal war against the energy giant. Those include Matthew Pawa, the activist trial lawyer involved in New York City’s now-dismissed (and on appeal) federal case against Big Oil and the Bloomberg-funded NYU State Environmental Impact Center, which paid the salary of one of the AG’s lawyers who signed the initial filing against Exxon.
Over the years, as theory after theory failed, the AG’s charge against the company mutated. After previous efforts came up short, Schneiderman’s successor Barbara Underwood filed the current suit, alleging that the company relies on lower estimates of the cost of complying with government regulations than the estimates it used to report costs to investors. In essence, the AG’s office oddly claimed the company lied internally yet told the truth in public statements.
“I want to talk about the elephant in the room. Why would the New York Attorney General bring such a meritless case?” ExxonMobil’s lawyer asked the court.
Lo and behold, at the 11th hour, the AG withdrew all but one of their claims that the company allegedly misled investors. All three of the state’s shareholder witnesses could not credibly prove they were deceived or faced material harm. In dropping these charges, the AG’s lawyers admitted that their case lacked any real evidence of wrongdoing.
Only the claim under the Martin Act remained intact. Still, the judge did not buy it.
Truth is, tarnishing the company in the court of public opinion is what Schneiderman and his allies were after all along. If that isn’t abuse of that Martin Act, one of the nation’s most powerful laws, I don’t know what is.
When it comes to partisan prosecutions and petty politicking New Yorkers always seem to get a front-row seat. Shame on the current AG for keeping up this charade. We are happy to see that the judge saw through this baseless scheme and finally put an end to this ridiculous and wasteful case.
Tom Stebbins is executive director at the Lawsuit Reform Alliance of New York.
