Judge Clears Exxon in Investor Fraud Case Over Climate Risk Disclosure

The judge excoriated the New York AG, but also said: 'nothing in this opinion is intended to absolve Exxon from responsibility for contributing to climate change.'

Rex Tillerson was Exxon's CEO from 2006 until his retirement shortly before becoming U.S. secretary of state in the Trump administration in 2017. He testified at the New York trial. Credit: Eric Piermont/AFP/Getty Images
Rex Tillerson was Exxon's CEO from 2006 until his retirement shortly before becoming U.S. secretary of state in the Trump administration in 2017. He testified at the New York trial. The company still faces more than a dozen pending climate lawsuits across the country. Credit: Eric Piermont/AFP/Getty Images

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A New York judge has cleared ExxonMobil of allegations that it misled investors about the risks posed to its business by climate regulations, handing the oil giant a major victory in the first trial of a fossil fuel company involving climate change.

Justice Barry Ostrager sided entirely with Exxon on the claims brought against it by the New York Attorney General’s Office, saying that he found all the company’s witnesses to be truthful and that the state had failed to present any evidence that convincingly cast doubt on their testimony. 

While he praised Exxon’s executives for “rigorously discharging their duties in the most comprehensive and meticulous manner possible,” the judge excoriated the attorney general’s case, saying it failed to establish that any investor was misled.

Ostrager also made clear, however, that “nothing in this opinion is intended to absolve ExxonMobil from responsibility for contributing to climate change,” adding that the company’s emission of greenhouse gases was not on trial. “ExxonMobil is in the business of producing energy, and this is a securities fraud case, not a climate change case,” he wrote.


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For Exxon, the decision ends a years-long battle with the New York Attorney General’s Office.

The attorney general had accused Exxon of essentially using two sets of books when it came to evaluating the costs of future climate regulations. Exxon did in fact have two different estimates for what those costs would be, one that was higher and made public in numerous reports, and another that was lower, not disclosed, and which the company used internally to evaluate its own investments. The state had argued that this practice falsely assured investors that the company was taking the risks of regulation seriously, when in fact it was being much less cautious.

In order to win, the attorney general had to establish that Exxon had made “materially misleading” statements—statements that were not only false but that a reasonable investor would have considered important when considering whether to buy or sell the company’s stock.

On both counts, Ostrager wrote, the attorney general failed.

Exxon spokesman Casey Norton said the ruling affirms that the company “provided our investors with accurate information on the risks of climate change,” adding, “lawsuits that waste millions of dollars of taxpayer money do nothing to advance meaningful actions that reduce the risks of climate change.”

Attorney General Letitia James viewed it through a different lens: “For the first time in history, ExxonMobil was compelled to answer publicly for their internal decisions that misled investors,” she said in a statement provided by spokesman Fabien Levy.

James maintained that Exxon had failed to tell the truth, which she said “further underscores the lies that have been sold to the American public for decades.”

While the ruling ends a grueling battle for Exxon against New York, the company still faces more than a dozen pending climate lawsuits across the country.

New York’s case relied on state securities fraud laws and focused narrowly on Exxon’s disclosures to investors over the past five years. Most of the other lawsuits focus more broadly on the fossil fuel company’s allegedly deceptive marketing and public relations campaigns stretching back decades, and several legal experts said the New York ruling will have little if any impact on these cases.

“Exxon may have beat the rap” in the New York securities case, said Pat Parenteau, a professor of environmental law at the Vermont Law School, “but it can’t escape the history of deception that has exacerbated the damage from climate change.”

The decision by Ostrager, a judge in the commercial division of the New York Supreme Court in Manhattan, may have a more direct bearing on efforts to pressure oil companies to disclose more about the risks they face as governments try to limit greenhouse gas emissions. The trial centered around just such a campaign that Exxon had faced beginning in 2013.

“This doesn’t hold the company accountable for what it tells investors and what it does in practice,” said Natasha Lamb, managing partner of the sustainable investment firm Arjuna Capital, who was part of the 2013 campaign and testified against the company at trial.

“That sets a dangerous precedent that companies can say one thing and do another and not be held accountable,” she said.

But this is hardly the end of these cases, said Ken Kimmell, president of the Union of Concerned Scientists.

“ExxonMobil is not off the hook,” Kimmell said. “More than a dozen communities within the U.S. are already suing such companies for their fair share of local climate damages.”

Exxon’s Two Different Cost Estimates

New York launched its case against Exxon more than four years ago, when then-Attorney General Eric Schneiderman issued a subpoena seeking a broad set of documents covering decades of internal communications and records related to climate change, including research, marketing and business practices.

The subpoena followed an investigative series of stories by InsideClimate News, and later the Los Angeles Times, that disclosed that Exxon researchers knew in the mid-1970s that burning fossil fuels likely accelerated global warming and foresaw catastrophic consequences. Despite this knowledge, the companies later spent millions to promote misinformation about climate science.

When New York filed its complaint in October 2018, it focused squarely on what Exxon disclosed to investors and the company’s estimations of the future costs that climate regulations would impose on its business.

Specifically, the lawsuit said that even as the company was disclosing to investors that it used an escalating cost of carbon estimate to evaluate its investments, it was actually applying much lower estimates internally.

During the trial, Exxon executives—including former chief executive and former Secretary of State Rex Tillerson—explained that this higher, public figure, which it calls a “proxy cost,” was used only for estimating future oil and gas demand. The lower estimate, executives said—called a “ghg cost”—was used internally to approximate direct costs that Exxon’s operations would face from specific regulations, such as a tax in a given jurisdiction.

In its defense, Exxon’s witnesses repeatedly pointed to a single sentence in one report the company published in 2014 in response to the campaign by Lamb and other investors. Exxon argued that the sentence did in fact disclose that the company had a “ghg cost” distinct from its proxy cost that it used when evaluating investments. The attorney general’s lawyers argued that it was unreasonable to expect that investors would have understood the meaning of the sentence. They pointed to examples where a market analyst, Exxon’s external accountant and even one former executive appeared to conflate the two terms, arguing that no reasonable investor would have understood the distinction. Ostrager was unconvinced.

Perhaps, he wrote, the passage “could have been written in bold type, but the sentence was consistent with other ExxonMobil disclosures and ExxonMobil’s business practices.”

Ostrager also said the attorney general’s lawyers had failed to make the case that this distinction, or any alleged failure to provide clear disclosures about it, registered as important to the investment community.

That finding was a disappointment to Andrew Logan, who runs the oil and gas program at Ceres, a nonprofit that advocates sustainable business practices and was involved in the campaign to pressure Exxon in 2013.

“It’s really frustrating to see this judge not appreciate just how important of a financial issue climate change is for investors, to use language that is fairly sweeping in its scope that I think the evidence doesn’t support,” said Logan, who represents large institutional investors in communications with Exxon and other energy companies. “Hopefully this is an aberration in terms of the courts not being willing to acknowledge climate change as a material issue for mainstream investors.”

Climate Lawsuits Beyond New York

Ostrager’s ruling hands Exxon a major public relations victory as it battles a bevy of lawsuits it faces across the country. Massachusetts filed a complaint earlier this year that more broadly accuses Exxon of both consumer and investor fraud.

A spokeswoman for the Massachusetts attorney general’s office said the New York ruling will not deter prosecutors from pressing their case against Exxon.

“We will continue our work to hold the company accountable for its misrepresentations,” said Chloe Gotsis, spokeswoman for Attorney General Maura Healey.

The bulk of the climate lawsuits—brought by more than a dozen cities, counties and one state—are much different in nature. They accuse Exxon and other fossil fuel companies of harming the public by continuing to market and sell products that they knew posed a threat to society. These cases focus on the oil and gas industry’s decades-long effort to sow doubt about climate science, even as internal corporate reports had warned of the risks of climate change.

These plaintiffs are seeking compensation from the companies for helping to pay the costs associated with the effects of climate change, including worsening heat waves, more extreme rainfall and rising seas. And Ostrager’s ruling, experts say, is unlikely to influence rulings in these other cases.

“It’s a footnote, absolutely no more than that,” said David Bookbinder, who is part of the legal team representing a group of local governments in Colorado in their suit against Exxon and Suncor, a Canadian oil company. Bookbinder, who is also chief counsel at the Niskanen Center, a nonpartisan think tank, said Exxon’s lawyers may try to point to the ruling to establish the company’s credibility, but that it wouldn’t actually play into any decisions by judges overseeing his case or any similar lawsuits around the country.

Industry groups including the National Association of Manufacturers have dismissed these lawsuits as politically motivated, and Phil Goldberg, a special counsel for the manufacturers group welcomed Ostrager’s ruling, saying it showed that the lawsuits “have no place in the courtroom.”

In his opinion, Ostrager wrote that Schneiderman had made “certain politically motivated statements” before the case was filed, a position Exxon maintained during the course of the years-long investigation, but which the attorney general’s office denied.

Celia Taylor, a professor of securities and corporate law at the University of Denver, said Ostrager’s ruling is narrowly focused and not a sweeping win for Exxon or the industry. In particular, she said New York’s attorney general faced a much higher burden of proof in its case than its counterpart in Massachusetts.

“They simply have to prove Exxon deliberately misled the public through its advertising,” Taylor said of lawyers for the Massachusetts attorney general.

The ruling marks a win for Exxon and the industry, but it does not put them in the clear on climate change, said William Ruskin, a long-time New York industry defense lawyer who is active in environmental issues.

“This is a brutal and very reasoned decision by a judge extremely upset by the way the attorney general tried this case,” he said, adding, “Securities fraud is not the way to go after companies with poor track records on climate change.”