Virgin Islands and Exxon Agree to Uneasy Truce Over Climate Probe

Subpoena withdrawal opens debate over who won and who lost, but legal experts say the bigger battleground is in New York and Massachusetts.

Exxon dropped its suit against the Virgin Islands attorney general

Exxon declared victory last week when the Virgin Islands attorney general withdrew a subpoena in its climate probe of the oil giant. Credit: Reuters

In the legal volleying between Exxon and the U.S. Virgin Islands Attorney General Claude Walker last week, both managed to claim victory. But several experts pegged it as more a ceasefire in a broader battle of investigating the oil giant's alleged efforts to disseminate misinformation on climate change.

Walker, who said his office continues to investigate Exxon for possible fraud, withdrew his subpoena for nearly 40 years of documents from Exxon. In exchange, the oil corporation agreed to withdraw its lawsuit against the attorney general for what it claims is a violation of its constitutional right to free speech. Both sides left open the possibility of reinstating their respective legal actions against the other in a "joint stipulation of dismissal" filed by both parties last Wednesday.

Several legal experts said Exxon got the better deal from the joint withdrawal. Some suggested that of the various probes underway, the Virgin Islands' investigation was the most vulnerable to Exxon's challenges. Had the Virgin Islands pursued its case and lost, it could have given Exxon legal momentum to combat investigations from both the New York and Massachusetts attorneys general.

"The Virgin Islands attorney general is really not capable of taking on Exxon and this quick retreat confirms that," said Pat Parenteau, an environmental law professor at the Vermont Law School. "It was a distraction. They were in over their head. They were going to get pounded and it's good they are off the field."

Walker said he is continuing his investigation of Exxon for potentially violating the territory's anti-racketeering law, and claimed Exxon's agreement to drop its lawsuit allows his office to continue with its investigation "without the distraction of this procedural litigation."

Exxon declined requests for comment. The Competitive Enterprise Institute, a conservative group also subpoenaed by Walker's office only to have the subpoena subsequently withdrawn, said last week's joint withdrawals were a victory for Exxon. "The clear conclusion to draw following [Walker's] withdrawal of the ExxonMobil subpoena is that these subpoenas were a baseless fishing expedition from the beginning," CEI president Kent Lassman said in a statement.

The joint withdrawals came after the attorneys general of Texas and Alabama intervened on Exxon's behalf in its lawsuit against Walker, which may have influenced Walker's decision to withdraw his subpoena. "It clearly made it more difficult for the Virgin Islands AG to proceed without investing a lot more resources in a higher stakes fight," said Tracy Hester, an environmental law professor at the University of Houston. "To a certain extent there was a point where you had to put your chips all on the table or hold your hand and wait for the next deal."

Walker is part of a coalition of 17 attorneys general organized by New York State Attorney General Eric Schneiderman. They have vowed to hold fossil fuel companies accountable for their conduct on climate change. Of the 17, only three—Schneiderman, Walker and Maura Healey of Massachusetts—have subpoenaed Exxon. When the coalition was announced on March 29, Walker described the Virgin Islands' fight against Exxon as one of David versus Goliath and pledged to do something "transformational" to end reliance on fossil fuels. So far, he is the only attorney general to say he is investigating the company for racketeering, and he also widened the probe by subpoenaing CEI, tactics that some now say were overreaching.

Had Walker continued with his subpoena against Exxon and Exxon continued its lawsuit against the attorney general, some said it could have undermined the entire coalition.

"He [Walker] gets out of a case which could have threatened the game plan of the attorney general coalition that he belongs to," said Robert Collings an energy and environmental attorney with the law firm Schnader Harrison Segal & Lewis LLP. "If one federal court looks at the Virgin Islands' subpoena and decides that it is faulty, then you could have a case created that establishes at least an influence on other state litigation, if not a precedent, that would control their ability to bring their own actions and subpoenas in the future."

Daniel Riesel, an attorney with New York based environmental law firm Sive, Paget & Riesel, said the damage may have already been done.

"You have the attorney general from the Virgin Islands doing this grandstand act where he has made statements about pushing the law to new horizons, it just leaves the whole cause of this investigation under a cloud," Riesel said.

"I don't think anybody will lose sleep over whether or not the Virgin Islands attorney general has lost some tactical or strategic advantage, but it would be a shame if the inquiry into Exxon or other energy companies gets a black eye from this effort."

Others offered a different interpretation of Walker's strategy.

Sharon Eubanks, a former U.S. Department of Justice attorney who prosecuted and won the racketeering case against the tobacco industry, said Walker may have come out ahead by agreeing to withdraw the subpoena.

Walker avoided a court battle with Exxon over the company's lawsuit to block the subpoena as well as getting an insight into Exxon's legal strategy, Eubanks said.

"All parties just packed their briefcases and walked away from the ledge," said Eubanks, who underscored that she has no inside knowledge of the case.

"It can all be litigated another day, and from the V.I.'s perspective, kicking that can down the road doesn't look so bad."

There may have been some conditions agreed to between Exxon and Walker, a sort of uneasy truce, which remain confidential, she speculated.

For example, any closed-door negotiations might have centered on voluntary cooperation by Exxon or an agreement that Walker would scale back the scope of any future demands, Eubanks said.

Hester said the Virgin Islands can continue its investigation without subpoenaing documents from Exxon.  

"The AG has the capacity just like any other law enforcement or attorney general to access the public record or discovery produced in other proceedings," Hester said. "If another attorney general proceeds with a subpoena and succeeds they'll have access to that information. To the extent that there is congressional testimony, they can access those documents as well."

Exxon has turned over more than 700,000 pages of documents to the New York attorney general's office and is continuing to cooperate with that investigation, said Eric Soufer, a spokesman for Schneiderman.  

Investigators have begun reviewing the documents, Soufer said, but he declined to characterize what the records reveal.

The New York attorney general's office has not, however, shared any of the documents with other attorneys general and has no plans to do so, according to Soufer. He did not comment on whether that was because of an agreement with Exxon.

Healey also subpoenaed Exxon for documents going back 40 years and Exxon has subsequently sued Healey in an attempt to derail her investigation. That suit strikes the same themes as the one against Walker, claiming violation of the company's First and Fourth Amendment rights that protect free speech and prohibit unreasonable searches.

A judge has ordered both sides to file briefs between August and October in that case.

It is New York's case, however, that has the strongest legal footing, according to Parenteau.

The probe is based on New York's powerful shareholder-protection statute, the Martin Act, a 1921 statute, which forbids "any fraud, deception, concealment, suppression, false pretense" or "any representation or statement which is false" and gives the state broad powers of discovery.

"No other state has a law quite like the Martin Act, not Massachusetts, not California and certainly not the Virgin Islands," Parenteau said. "It's so critical for New York to be lead state because the argument that this is an attempt to intimidate Exxon or interfere on First Amendment rights of corporate speech can gain traction. It's just critical that the subpoena be on the most solid legal ground that it can be."

Parenteau said Exxon is likely cooperating with the New York attorney general's office because of that legal basis, but predicted the cooperation won't last.

"At some point Exxon will take New York on as well, I'm quite sure," Parenteau said.

Parenteau stressed that the recent withdrawals by the Virgin Islands and Exxon are early skirmishes in what will be a long, protracted fight.

"Exxon scored in the first round but there are many, many rounds to go," he said.

David Hasemyer contributed reporting for this story

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