Ramirez v. Exxon Mobil Corp.

In a securities fraud class action against Exxon Mobil Corporation (Exxon) and Exxon officers, the federal district court for the Northern District of Texas denied a motion by the lead plaintiff to certify a class to the extent the motion sought to certify claims regarding the defendants’ alleged misstatements about carbon proxy costs. The court determined that the defendants sufficiently rebutted the presumption of reliance on the alleged misstatements with an expert’s analysis that found no statistically significant negative price reactions to alleged corrective disclosures that included a November 2015 article about the New York Attorney General’s investigation into whether Exxon disseminated inaccurate information about climate change, a January 2016 article about a California Attorney General investigation about Exxon communications about business risks from climate change, and a 2016 op-ed by Senators Elizabeth Warren and Sheldon Whitehouse entitled “Big Oil’s Master Class in Rigging the System.” The court said the expert’s analysis not only rebutted the presumption of reliance by showing a lack of price impact but also supported the defendants’ assertation “that the market did not care about the state attorneys general’s investigations into whether Exxon Mobil misled investors about its internal use of carbon proxy costs.” The court also found unpersuasive the plaintiff’s theory characterizing Exxon’s 2016 third quarter earnings release (which did have a negative price impact) as partially correcting previous public statements about carbon proxy costs. The court did certify a class with respect to the plaintiff’s remaining claims related to the defendants’ alleged failures to properly account for and disclose losses related to certain bitumen operations in Canada and dry gas operations in the Rocky Mountains.

In a brief order, the federal district court for the Northern District of Texas denied a motion by Exxon Mobil Corporation and former Exxon officials (Exxon) to reconsider a 2018 decision denying Exxon’s motion to dismiss a securities fraud class action based on allegations of materially false and misleading statements concerning climate change risks. Exxon argued that its victory in 2019 in an enforcement action brought by the New York Attorney General required dismissal of the class action. The court did not include the reasoning for its decision in the order.

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The lead plaintiff in a federal securities action against Exxon Mobil Corporation told the federal district court for the Northern District of Texas that a New York State court’s rejection of the New York attorney general’s fraud claims against Exxon should have no impact on the district court’s previous denials of Exxon’s motion to dismiss the securities action. The plaintiff argued that the claims in this action were not dependent on evidence or allegations at issue in the New York decision, that the New York decision’s factual findings did not provide a basis for finding the plaintiff’s claims in this case implausible, and that the limited evidence produced to date strongly supported the plaintiff’s claims.

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The defendants contended that the court should hold an evidentiary hearing on the motion for class certification but requested that the court only do so after considering the defendants' motion for reconsideration of its denial of their motion to dismiss and their supplemental brief addressing the verdict for Exxon Mobil Corporation in the New York Attorney General's fraud action.

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Exxon Mobil Corporation (Exxon) and Exxon officials filed a motion for reconsideration of a 2018 decision by a federal court in Texas that partially denied their motion to dismiss a securities fraud class action based on allegations of materially false and misleading statements concerning climate change risks. The defendants argued that the plaintiff’s theory was premised on the New York Attorney General’s allegations in its unsuccessful fraud action against Exxon under New York law. The defendants argued that the New York State’s December 2019 decision “unmasked” the Attorney General’s allegations as “entirely meritless” and that the plaintiff’s allegations in this case therefore could not meet the plausibility standard. The defendants also argued that the New York decision precluded the plaintiff’s claims under res judicata principles and that the preclusive effect defeated class certification.

The defendants argued that the New York State Supreme Court's rejection of the New York Attorney General's fraud claims against Exxon Mobil Corporation precluded all claims in this case and defeated class certification or, at the very least, "significantly truncate[d]" the proposed class.

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The federal district court for the Northern District of Texas denied Exxon Mobil Corporation’s motion for reconsideration of the court’s August 2018 decision partially denying’s Exxon’s motion to dismiss a federal securities fraud lawsuit. The court also denied Exxon’s motion to certify its order denying the motion to dismiss for interlocutory appeal. The court ruled on August 14, 2018 that investors had adequately pleaded claims that Exxon and Exxon officials made material misstatements concerning the company’s use of proxy costs for carbon in business and investment decisions.

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Exxon Mobil Corporation filed a motion for reconsideration of a Texas federal district’s order that partially denied Exxon’s motion to dismiss a lawsuit brought by investors who alleged that Exxon and Exxon officials made material misstatements concerning the company’s use of proxy costs for carbon in business and investment decisions. Exxon argued that the court’s conclusion that the investors had adequately pleaded scienter was inconsistent with the Private Securities Litigation Reform Act of 1995 and Fifth Circuit precedents. Alternatively, Exxon requested that the court certify its order for interlocutory appeal.

The federal district court for the Northern District of Texas found that investors in Exxon Mobil Corporation (Exxon) had sufficiently pleaded claims that Exxon and certain Exxon officials made material misstatements concerning the company’s use of proxy costs for carbon in business and investment decisions. Exxon argued that the investors’ allegations that it stated a different proxy cost in public statements than it used in internal calculations were based on the investors’ confusing of two separate proxy costs—one for carbon and one for greenhouse gases—as the same proxy cost. The court concluded, however, that “[w]hether the two differing proxy cost values represent two different costs or the same cost with different values applied internally than publicly purported to be applied is a factual dispute and cannot be determined at this motion to dismiss stage.” The court also noted that the complaint alleged that Exxon had indicated to investors that it used only one proxy cost across all business units. The court also found that the plaintiffs had alleged sufficient facts to plead other material misstatements related to the condition of certain specific businesses. The court further ruled that the plaintiffs had adequately pleaded loss causation and had met the heightened scienter standard for all defendants except for Exxon’s vice president of investor relations. The allegations supporting the court’s finding that the scienter standard was met included allegations that Exxon’s management committee regularly received detailed information on carbon-related risks and proxy costs, allegations that Exxon was particularly motivated to maintain its AAA credit rating in advance of a $12 billion public debt offering, and allegations that three of the defendants signed documents filed with the Securities and Exchange Commission that allegedly contained materially misleading information.

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The lead plaintiff in a securities class action against Exxon Mobil Corporation (Exxon) filed its response in opposition to Exxon’s motion to dismiss. The lead plaintiff contended that Exxon had admitted to internal use for planning purposes of “a separate, undisclosed set of proxy costs” of carbon that was significantly lower than the proxy costs described in defendants’ representations to investors. The lead plaintiff argued that Exxon’s justification of the internal use of the separate set of costs raised factual questions that could not be resolved on a motion to dismiss. The lead plaintiff also asserted that Exxon’s explanations were “plainly inconsistent” with its representations. The lead plaintiff contended that the complaint alleged a strong inference of scienter “by alleging numerous particularized facts establishing that each of the defendants ‘knowingly or recklessly made statements to the market while aware of facts that, if not disclosed, would render those statements misleading,’” and that the complaint sufficiently alleged loss causation by alleging partial disclosures that revealed fraudulent conduct and the value of Exxon’s reserves and that caused significant declines in Exxon’s stock price.

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Exxon Mobil Corporation (Exxon) and four of its current and former officers moved to dismiss a federal securities class action in the federal district court for the Northern District of Texas in which the complaint alleged that the defendants made materially false and misleading statements regarding the value and amount of Exxon’s oil and gas reserves and regarding Exxon’s purported efforts to incorporate carbon or greenhouse gas proxy costs into the investment and valuation process for its oil and gas reserves. Exxon asserted that it had fully disclosed the risks of climate change to its business and that it had not misrepresented the methodologies it used to analyze those risks. Exxon said the complaint’s allegations “rest on confusing two distinct concepts”: first, “a proxy cost of carbon,” which Exxon said it used to represent the impact of climate change policies on future global demand and, second, a “greenhouse gas … costs,” which Exxon said it used to “to estimate its own expenses for its emissions of carbon dioxide or other greenhouse gases.” Exxon contended that the complaint’s allegations “establish only the unremarkable fact that ExxonMobil used two different numbers for two different purposes, all for the purpose of prudently taking account of climate-change risks.” Exxon also argued that the complaint did not adequately plead fraudulent intent or loss causation.

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On July 26, 2017, the lead plaintiff in a federal securities class action against Exxon Mobil Corporation (Exxon) and four Exxon officers filed a 186-page consolidated complaint. The consolidated complaint alleged that Exxon was a “company with a well-documented history of intentionally misleading the general and investing public with regard to the science concerning global climate change and its connection to fossil fuel usage, as well as the impact the changing climate is likely to have on Exxon’s reserve values and long-term business prospects.” The proposed class includes persons who acquired Exxon’s publicly traded common stock between March 31, 2014 and January 30, 2017. The consolidated complaint alleged that the defendants made materially false and misleading statements regarding the value and amount of Exxon’s oil and gas reserves and regarding Exxon’s purported efforts to incorporate carbon or greenhouse gas proxy costs into the investment and valuation process for its oil and gas reserves.

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