New York Supreme Court Justice Barry Ostrager today acquitted ExxonMobil of all charges brought against the company by New York Attorney General Letitia James. It was a beautiful result, nicely summarized by Spencer Walrath of Energy In Depth:
After four years, three different legal theories, four million documents, hundreds of hours of depositions, 11 embarrassing days of trial for the New York Attorney General (NYAG) and a month long wait, the verdict is in: ExxonMobil did not deceive or mislead investors over climate change impacts [emphasis in original]. The decision from New York Supreme Court Justice Barry Ostrager will have ramifications for Massachusetts Attorney General Maura Healey’s related lawsuit against the company, which copied and pasted portions of New York’s lawsuit.
By “three different legal theories,” Walrath refers to (1) Schneiderman’s original failed accusation that ExxonMobil hid the terrible truth about climate change from the public, (2) Schneiderman’s subsequent, and also failed, accusation that ExxonMobil did not protect shareholder value by stress-testing its investments under the assumption of steep carbon penalties in future decades, and (3) Schneiderman and James’ additional accusation, rejected today by Justice Ostrager, that ExxonMobil’s accounting methodology either deliberately deceived or unintentionally confused investors about the vulnerability of the company’s exposure to potential future carbon penalties.
The conclusion of Justice Ostrager’s 55-page decision is worth quoting in full:
In sum, the Office of the Attorney General failed to prove, by a preponderance of the evidence, that ExxonMobil made any material misstatements or omissions about its practices and procedures that misled any reasonable investor. The Office of the Attorney General produced no testimony either from any investor who claimed to have been misled by any disclosure, even though the Office of the Attorney General had previously represented it would call such individuals as trial witnesses. ExxonMobil disclosed its use of both the proxy cost and the [greenhouse gas] metrics no later than 2014. Perhaps, the 2014 paragraph in Managing the Risks which indicated that ExxonMobil applied a [greenhouse gas] cost “where appropriate” and which was the subject of questioning of virtually every witness in the case could have been written in bold type, but the sentence was consistent with other ExxonMobil disclosures and ExxonMobil’s business practices. The publication of Managing the Risks had no market impact and was, as far as the evidence adduced at trial reflected, essentially ignored by the investment community.
The testimony of all the present and former ExxonMobil employees who were called either as adverse witnesses by the Office of the Attorney General or as defense witnesses by ExxonMobil was uniformly favorable to ExxonMobil, and the Court credited the testimony of each of those witnesses. The testimony of the expert witnesses called by the Office of the Attorney General was eviscerated on cross-examination and by ExxonMobil’s expert witnesses. Confronted with the disclosures in ExxonMobil’s Corporate Citizenship Reports, Form 10-K’s, and ExxonMobil’s annually published Outlook, the Office of the Attorney General failed to prove by a preponderance of the evidence that any alleged misrepresentation in Managing the Risks and Energy and Climate (or any other disclosure by ExxonMobil) was false and material in the context of the total mix of information available to the public.
For all of these reasons, the claims asserted by the Office of the Attorney General under the Martin Act and Executive Law S 63(12) are denied, and the action is dismissed with prejudice.