After a 12-day trial, a New York court found that the New York Office of the Attorney General failed to establish by a preponderance of the evidence that Exxon Mobil Corporation (Exxon) made any material misstatements or omissions that misled any reasonable investor about its practices or procedures for accounting for climate risk. The court therefore denied claims asserted under the Martin Act—New York’s securities fraud statute—and Executive Law § 63(12), which prohibits repeated or persistent fraudulent acts. Although the court granted the attorney general’s request to discontinue its common law and equitable fraud claims with prejudice, the court also said its decision established that Exxon would not have been held liable on any fraud-related claims since the attorney general failed to establish Exxon’s liability even for causes of action that did not require proof of the scienter and reliance elements of fraud. The court found that Exxon’s public disclosures in the 2013 to 2016 time period at issue in the case—including Form 10-K disclosures and March 2014 reports specifically addressing climate change risk and regulations that were prepared in consideration for withdrawal of shareholder proposals—were not misleading. The court said one of the March 2014 reports identified proxy costs of carbon and GHG costs as “distinct and separate metrics,” one of the factors leading the court to reject the premise of the attorney general’s case that Exxon’s disclosures “led the public to believe that its GHG cost assumptions for future projects had the same values assigned to its proxy cost of carbon.” The court also found that an analyst’s testimony undercut the attorney general’s assertion that information in the March 2014 reports was material to investors and found the attorney general’s expert testimony on materiality to be unpersuasive, “flatly contradicted by the weight of the evidence,” and “fundamentally flawed.”

Action alleging fraudulent scheme by Exxon Mobil Corporation to deceive investors about the company's management of risks posed by climate change regulation.

People of the State of New York v. Exxon Mobil Corp.

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Trial Court Ruled for Exxon in New York’s Climate Change Securities Fraud Case

Filed

United States of America

New York

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Trial Court Ruled for Exxon in New York’s Climate Change Securities Fraud Case

Policy instrument

Risk

Renewable energy

Fossil fuel

Greenhouse gas

Economic sector

Adaptation/resilience

Finance