ExxonMobil won a first-of-its-kind climate change fraud trial on Tuesday as a judge rejected the state of New York's claim that the oil and gas giant misled investors in accounting for the financial risks of global warming.
New York Supreme Court Justice Barry Ostrager said the state failed to prove that Exxon violated the Martin Act, a broad state law that does not require proof of intent of shareholder fraud.
“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,” Ostrager wrote in a 55-page ruling, deciding the case without a jury.
Exxon celebrated the ruling, saying it confirms their argument that addressing climate change is a shared global challenge better handled through public policy and that litigation threatens to undermine cooperation between the industry and policymakers.
"Today’s ruling affirms the position ExxonMobil has held throughout the New York Attorney General’s baseless investigation. We provided our investors with accurate information on the risks of climate change," Exxon said in a statement. "The court agreed that the Attorney General failed to make a case, even with the extremely low threshold of the Martin Act in its favor."
The result of the case was thought to be the likely outcome after New York surprisingly dropped two of its four claimsagainst Exxon at the close of the three-week-long trial in early November.
New York Assistant Attorney General Jonathan Zweig announced during his closing statement that the state would no longer be claiming Exxon knowingly and willfully misled investors on how it accounts for the financial risks of climate change.
Instead of claiming common-law fraud, New York decided to commit to using the Martin Act to make its case, which does not require proof of intent to demonstrate fraud.
The conclusion of New York’s lawsuit is the first in a series of court battles playing out related to climate change and the role of oil and gas companies.
New York's case took a different tack than other climate-related suits filed by cities and localities since 2017, so it's hard to read into what the result means for other cases. The Democratic-led state had been investigating Exxon for more than three years before filing the lawsuit in New York's Supreme Court, eventually narrowing its focus to look at the issue of shareholder fraud.
New York alleged that Exxon underrepresented the potential future costs to its business of climate regulations, deceiving investors about their true financial exposure.
Most of the other lawsuits against oil companies make public nuisance claims under state law, seeking compensation for the costs of adapting to droughts, wildfires, severe storms, and other effects of climate change.
The exception is Massachusetts, which sued in October alleging Exxon has misled investors and consumers, both about the risks the company faces from the transition to a low-carbon economy and about the actions the company is taking to clean up its portfolio.
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