Is New York’s Battle Against Exxon Uphill?

track of all the climate change cases out there. How is New York's case against x on different, June. That's a great question. I think that's part of the reason why this case deserves being pulled out and discussed differently.

So a lot of the other cases we've talked about in the past are related to various states of damage or allegations of erosion to coastal areas, where you're talking about actual property impacts, Whereas here New York's really pinning their climate change arguments onto shareholder fraud as the main thrust of the case against x in here. So what's

the core of the claim? Well, it really revolves around sort of a unique idea that Exxon used a proxy cost in its calculations, and it's reporting to the public for what the cost of g h G or greenhouse gas emission regulations would be in the future. So down the line, when they're assessing these different individual projects, how much was the cost of g HD regulations going to actually impact whether those projects will be worthwhile? Has this

approach been tried before? It has actually Back in Peabody Energy, which if you were called, was a pretty big coal producer, was sued sort of under the same idea or investigated, then sued, but reached a very quick settlement with New York and the result wasn't actually any financial damages, but it was they had to change their climate disclosures and there were some tweaks to how they did that. Um and that's that's sort of the same set of allegations

they're being used here. So Exxon has been battling this case in New York and Massachusetts. The allegations here, I would say, furiously would be a word to use. Is

it likely to settle? I would I would add vigorous, all right, maybe a tough word to use, but you know, from our perspective, we've watched XN for a number of years and how they approach litigation generally, and how they approach litigation from government entities, and our expectation is that, you know, you're basically talking about two different sets of

principles here that are going up against each other. And it's a little bit less about the money involved because we don't expect those dollar amounts get too high, So we don't think that settlement is really the option. And we expect Exxon, you know, their their profile here, they're probably gonna litigate this true trial and we expect that will probably extend into any appeals that would be potentially necessary.

So you think they will appeal if they lose a trial, if they lose, and if they win, I'm sure there will be an appeal on the other side. That's definitely been the case in the past. So these climate change cases can be an uphill battle in different ways. Whose favorite to win this So for this one, we we still expect Exxon has the upper hand, and a lot of that is the result of I think New York State government painting these allegations with a pretty broad rush.

When Xon seems to have pretty specific rebuttals. So for example, you know, the allegation is, hey, you guys used a proxy cost that we think was probably too low based on your representations for all these projects, and that includes you know, this oil stands project in Canada and excell and says no, wait a second, look, if you look at on an individual basis, we actually used a proxy cost that's the statutory proxy cost, and we didn't use

anything above that or below that. And so I have a feeling once we get past this nation stage, we're going to see a lot more of that specific rebuttal.

And also there's sort of a more salacious point raised in defense, which is that at some point New York a g attorney general had met with those who are in favor of climate change regulation and had reached some alleged agreement in a backroom deal to try and get an Exxon and other companies like that to try and force climate change from a policy perspective through the courts.

I was going to use the word sexy that you know, this suit doesn't seem as sexy, you might say, as some of the other climate change lawsuits, because it's narrowed in the way that it is well, that's right, and I think you know New York is not new at this game, right, they have a very powerful statute. They're using the Martin Act to kind of leaver this, and they've used that in a number of different cases in

different ways. It's very broad based approach to trying to enforce shareholder rights and make sure that financial disclosures are

appropriate when necessary. Prosecutors love the Martin Act. Now, what about the Massachusetts because the a G in Massachusetts was also pursuing this against Exxon, same fight, different state, right, And so part of this is is the allegation that in Xen's defense that you know, there was some sort of clusion between Keely of Massachusetts Schierman in New York and they're just in a different stage because x Son still beating up on We're trying to the subpoena that

Massachusetts had filed, and so there this has been progressing across a number of years. That started with the investigations where subpoena's have been issued for forty plus years of documents internal to Exon related to their climate change research and things like these disclosures related to proxies. Was excen ever able to prove that it was politics involved. I remember when it was in the New York Court, there were a lot of allegations that this was all pure politics.

So most of that was sort of resolved only on

a procedural basis at the time. And that's actually part of exns affirmative defenses here, is that some of their rights are being impinged upon, and there's prosecutorial i s involved, and so, you know, even though we're at a very early stage right now, what's interesting is their emotions flying back and forth on the discovery side to try and stop Exon from pushing these affermative defenses and their rights to information backing those defenses through discovery, like depositions of

some of the attorneys or documents related to you know, decision making that was involved there, which is typically very hard to get. So this, even though we wouldn't think of this as normally as a very important stage for the purpose of forecasting what's going to happen at the end, this could be material to whether X and can can turn the rhetoric of this case from hey, xcens proxies

costs were X two. Well, maybe there's an element of as you said, politics involved in this and that that I think would change the tenor and potentially, you know, maybe change the levers for settlement. It sounds like a difficult case to make though, So if the case is decided against Exxon, what is the potential liability? So you know, there are a lot of numbers thrown around in the

initial complaint by the State of New York. You know, they're looking for things like discorchment of profits or some damages related to inflation of the share price because they were picking these projects that actually are at higher risk because of various climate change regulations going into effect an increasing cost. So you could, if you wanted to, you could you could put a billion dollar plus number on

this based on the allegations and the complaint. I mean, they say, you know, New York has said that at some point in for example, d HD related costs could be over seven billion dollars um. But a lot of that's very speculative. Thanks. That's Brandon Barnes, Bloomberg Intelligence Senior Litigation Analyst. Thanks for listening to the Bloomberg Law Podcast. You can subscribe and listen to the show on Apple Podcasts, SoundCloud, and on Bloomberg dot com. Slash podcasts. I'm June Bralso

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