ExxonMobil Faces Heightened Risk of Climate Litigation, Its Critics Say

Advocates explore holding the company accountable after new evidence shows it's long understood that global warming threatened its business and the planet.

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Sen. Sheldon Whitehouse, pictured here, is among those who has raised the possibility of litigation aimed at ExxonMobil, claiming that it should have acted to address the risks of climate change long ago. (Credit: The Leadership Conference on Civil and Human Rights via Flickr)

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ExxonMobil may face renewed legal challenges from plaintiffs claiming that it should have acted to address the risks of climate change, based on new evidence that its own researchers warned management about the emerging threat decades ago.

In an online petition drive, in public statements and behind the scenes, environmental advocates and their political allies are pressing federal and state authorities to launch investigations, subpoenas or prosecutions to pin down what Exxon knew and when. The oil giant’s critics say Exxon might be held liable either for failing to disclose the risks to shareholders and financial regulators, or for manufacturing doubt to deceive people about the science of climate change.

“I think the case is already there to be made,” said Sen. Sheldon Whitehouse, a Democrat from Rhode Island. He has raised the possibility of a Justice Department investigation under federal racketeering law. A former prosecutor, he is one of the Senate’s leading voices for action to address the climate crisis.

The interest in pursuing legal action against Exxon has been sharpened by new disclosures from an eight-month InsideClimate News investigation documenting extensive concern within the company about the risks of global warming dating back nearly 40 years, according to environmental advocates, litigators and legal experts.

The evidence, much of it drawn from internal Exxon documents, shows Exxon understood that climate change posed catastrophic risks to people if nothing was done to control pollution from fossil fuels. It was also aware of material risks to the company if the use of fossil fuels had to be limited.

The new documentation of Exxon’s internal study of climate science would influence the tactics in future litigation, said several people active in the long-running strategizing among the company’s most determined antagonists.

Pressure could come from the U.S. Justice Department, state attorneys general, private plaintiffs in the U.S. or abroad, or shareholders, legal authorities said. While no legal pathway is assured, and Exxon would surely mount a powerful defense, at the very least the litigation might lead the company to reveal new details of Exxon’s actions, or force it to be more forthcoming in its public statements.

Whitehouse, for one, has outlined the case for a Justice Department probe of whether Exxon violated the federal Racketeer Influenced and Corrupt Organizations Act, known as RICO. The advocacy group Climate Hawks has mounted an online petition drive to urge Attorney General Loretta Lynch to open such an investigation. Prosecution under that law, which was used against the tobacco industry in the 1990s, would require evidence of a conspiracy.

Another frequently mentioned option is for Attorney General Eric Schneiderman of New York to invoke the state’s powerful stock-fraud statute, the Martin Act, as the state has done in recent years to force other fossil fuel companies to disclose more about the financial risks they face from climate change.

A third possible approach is seeking compensation for people harmed by global warming, tort lawyers say. But that might not be the likeliest course, given the unsuccessful track record of this kind of lawsuit.

Whatever the approach, an important objective of Exxon’s critics would be to turn up even more information similar to that already disclosed in ICN’s unfolding investigation of Exxon’s decades-long engagement with climate science.

ICN reported that researchers told Exxon’s management between the late 1970s and the mid 1980s that the most likely cause of climate change was the burning of fossil fuels. They pursued climate science partly on the grounds that Exxon’s management must be kept informed of the “bad news, if any.” Their own models confirmed a “clear scientific consensus” of the severity of climate change, and they warned that by the time the rise in temperatures became unmistakable it might be irreversible, and some people could face “catastrophic” harm. They understood that solving the problem might involve laws or treaties to cut the use of fossil fuels – the company’s main product.

Only in about 2007, after 20 or 30 years of warnings like these, did Exxon’s annual reports begin to reflect the risks, and even then only obliquely. In the meantime, the company mounted a public campaign to undermine the scientific consensus.

“These revelations confirm that Exxon was well aware of the catastrophe it was inflicting on the world with climate change and that it knew what it was doing with reasonable scientific certainty,” said attorney Matt Pawa. He is head of the Pawa Law Group in Boston and Washington.

There is “no way, no way,” Pawa said, for Exxon to escape eventual legal accountability. “Not when it’s in plain sight and they recognized it decades ago.”

Pawa is one of many lawyers who, along with advocacy groups, have struggled to hold Exxon and other fossil fuel companies legally accountable for climate change. Pawa and others sued Exxon and 23 other companies in 2008 on behalf of the Inupiat village of Kivalina, Alaska, alleging that the companies’ activities were causing the sea level to rise and inundate the village. The case died in a tangle of appeals.

That was one of a series of failures as the climate change docket bubbled in recent years. Holding corporations legally accountable for climate change is a tough challenge because of regulatory and jurisdictional issues, statutes of limitation, the difficulty of assigning specific damages to any one company, and fossil fuel companies’ arguments that they acted prudently based on their assessments of risk at the time.

For cases under New York’s anti-stock fraud Martin Act, there are “dozens of defense strategies,” according to Jeffrey A. Smith of Crowell & Moring, a New York-based law firm.

As for use of RICO, the federal racketeering statute has been so widely invoked in a variety of cases, ranging from labor to insurance to the environment, that its use has been limited by a considerable body of case law.

“To see a RICO count get past a motion to dismiss is now the exception rather than the rule,” Smith said.

Any litigation would eat up time and money, said Richard Ayres, a Washington, D.C., environmental lawyer who co-founded the Natural Resources Defense Council. Ayres and his firm have looked into a private RICO complaint or suing on behalf of shareholders, but so far have concluded they couldn’t make a strong enough case and didn’t have enough resources.

When asked for comment Sept. 29 on Exxon’s legal risk, spokesman Richard Keil referred to the company’s Sept. 9 statement that “from the time that climate change first emerged as a topic for scientific study and analysis in the late 1970s, ExxonMobil has committed itself to scientific, fact-based analysis of this important issue.”

Calls for RICO Probe

A federal prosecution under the 1970 RICO statute would probably have the biggest impact, Ayres and other lawyers said. The Department of Justice has the deepest pockets and the broadest powers for discovery.

Whitehouse, who is a former U.S. attorney and a former state attorney general, outlined the argument for deploying federal racketeering laws against Exxon and other oil companies in a speech last May on the Senate floor.

The government’s RICO investigation of the tobacco industry in the 1990s “opened up discovery into the files of the tobacco companies and showed finally and unequivocally that for decades the tobacco industry knew about smoking’s harm,” Whitehouse said before the Senate. Oil companies similarly make “products that put health and safety at risk, and they don’t tell the truth about their products,” he said.

“In the tobacco case, people were harmed by false beliefs propagated by the companies and were tricked into dangerous behavior,” he said in an interview. “In the case of climate change, there is the general harm, the damage that carbon is wreaking, and the cost to the government of flooding, wildfires and other disasters.”

Tobacco probes by the Justice Department and attorneys general of more than 40 states produced a trove of “millions and millions” of documents, said Jeffrey Smith, a partner in the law firm Wolf Haldenstein Adler Freeman & Herz in New York. He sued Phillip Morris’s four most senior officers in 1994 on behalf of a group of shareholders, based on evidence in the documents. The suit alleged that by not informing investors that cigarettes were addictive, the company misled them. Phillip Morris ultimately settled the class action lawsuit for more than $100 million.

In a Sept. 1 letter to Attorney General Lynch and President Barack Obama, a group of 20 climate scientists also called for a RICO probe “of corporations and other organizations that have knowingly deceived the American people about the risks of climate change, as a means to forestall America’s response to climate change.”

The political action group Climate Hawks Vote started an online petition urging supporters, “Tell the DOJ: Prosecute Exxon’s deliberate climate denial.”

The Department of Justice didn’t respond to a request for comment.

Many Legal Avenues

Whatever course of action lawyers might select, one of the main objectives would be to uncover more of what Exxon knew, and to publicly compare that with what the company has been saying over the years.

“What we know now is probably just the tip of the iceberg,” said Pawa, the Massachusetts litigator. “No doubt there is much more out there.”

New York’s Martin Act, which forbids “any fraud, deception, concealment, suppression, false pretense” or “any representation or statement which is false,” gives the state broad powers of discovery.

“The attorney general of New York could subpoena the oil companies for what they know deep down about climate change and the perils to their business and hiring phony scientists and all kinds of things, including emails,” said Michael Gerrard, a professor of environmental law at Columbia University in New York.

The office of Schneiderman, a second-term Democrat, declined to make him available for an interview. His spokesman Doug Cohen said he couldn’t discuss ongoing cases and declined to elaborate. Former Attorney General Andrew Cuomo, now the governor, investigated five coal-burning utility companies under the Martin Act, arguing that they failed to provide a complete picture of the risks related to climate change in their regulatory filings. They agreed to make more complete disclosures.

A comprehensive review of more than a decade of corporate disclosure statements found that Exxon’s inclusion of seven words on the subject in its annual report for 2007 “can only be described as one of the most cursory and insubstantial discussions concerning climate change risks.” The review was done by legal experts at the University of Colorado in 2009. Over the years, the Securities and Exchange Commission has toughened its disclosure requirements, and Exxon has become somewhat more forthcoming.

Exxon and other fossil fuel companies could face “a huge universe of potential plaintiffs” in civil liability suits in coming years, said Carroll Muffett, a lawyer who is president and CEO of the Center for International Environmental Law, with offices in Washington and Geneva.

“The fossil fuel companies are much more vulnerable than before,” Muffett said. The U.S. isn’t the only place where fossil fuel companies can be sued; these companies could face “a raft of cases” arising from any country where they do business, Muffett said.

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