Litigation Update: People of the State of New York v. ExxonMobil Corp.

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In late October, the People of the State of New York v. ExxonMobil Corp. trial began in the Supreme Court of the State of New York before Justice Barry Ostrager. The lawsuit was brought under New York’s Martin Act, an anti-fraud statute, and alleged that ExxonMobil misled its investors about how the company accounted for climate-change risks. The trial was the culmination of a nearly three year investigation that was initially launched by former New York Attorney General Eric Schneiderman with his successor eventually filing a lawsuit against ExxonMobil in the fall of 2018. Justice Ostrager handed down his decision on December 10, 2019, ruling for Exxon. Andrew M. Grossman, partner at BakerHostetler, joins us to discuss the ruling, next steps in the case and its implications for other ongoing litigation brought by states and municipalities against energy companies.


Andrew M. Grossman, Partner, Baker & Hostetler LLP


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Event Transcript

Operator:  Welcome to The Federalist Society's Practice Group Podcast. The following podcast, hosted by The Federalist Society's Environmental Law & Property Rights Practice Group, was recorded on Friday, December 13, 2019, during a live teleforum conference call held exclusively for Federalist Society members.


Micah Wallen:  Welcome to The Federalist Society’s teleforum conference call. This afternoon’s topic is titled “A Litigation Update on People of the State of New York v. ExxonMobil Corporation.” My name is Micah Wallen, and I’m the Assistant Director of Practice Groups at The Federalist Society.


      As always, please note that all expressions of opinion are those of the expert on today’s call.


Today, we are fortunate to have with us Andrew Grossman, who is Partner and Co-Chair of Appellate Litigation at Baker & Hostetler, as well as an adjunct scholar at the Cato Institute. After our speaker gives his opening remarks, we will then go to audience Q&A. Thank you for sharing with us today. Andrew, the floor is yours.


Andrew M. Grossman:  Thank you. I’d like to thank The Federalist Society for hosting this forum, and I’d also like to thank those who are attending. Before I get started, I should probably provide the customary disclaimer which is that I’m speaking for myself today and not for my firm or its clients.


What activists called the climate trial of the century is now over, and ExxonMobil won. The New York Attorney General claimed that Exxon mislead or deceived investors over the impacts of climate change. And after 12 days of trial earlier this fall, the decision was handed down just this past Tuesday. The verdict: the New York Attorney General lost on every single count, and it wasn’t even close.


According to the judge, Barry Ostrager, the AG’s own evidence actually contradicted the claims of wrongdoing. In fact, the judge found, and I quote, “The evidence at trial revealed that ExxonMobil executives and employees were uniformly committed to rigorously discharging their duties in the most comprehensive and meticulous manner possible.” I think it’s fair to say that this is not how the AG’s Office and its allies saw things coming to an end when they launched their campaign against energy producers four years ago.


The idea at the time was to put the energy industry on trial and to bloody it up as a means of promoting climate policy. And New York was the perfect place to do it. A state statute known as the Martin Act puts a brick on the scale against companies defending themselves against charges that they misled investors. But even the Martin Act wasn’t enough for the New York Attorney General to win a verdict because there was zero evidence of misconduct. The big question now is how do the New York Attorney General’s Office, which is one of the nation’s top law enforcement entities and has a truly enviable win rate -- how did it go to trial on a case that is had to know was doomed? 

Now, there is an answer to that question, but it requires understanding how we got to this point and how the case against Exxon fits into a broader movement to target energy companies across the economy. On this call, I’m going to address three things. First is how we got here, second is the Court’s decision, and third, what that decision means in terms of the law and the broader debate around energy policy.


So to begin with, how did we get to this point? I actually think the backstory here may be more interesting than the trial. It’s, in fact, quite sordid. A logical starting place is a March 2016 press conference hosted by New York’s then-Attorney General Eric Schneiderman. Schneiderman was joined by 16 other attorneys general, as well as former Vice President Al Gore, to announce a new initiative that was called AGs United for Clean Power. Schneiderman explained that the idea was to step into the breach left by the gridlock in Washington over climate change.


But what was unusual was the way that Schneiderman said the group was going to do that. The plan was not to promote particular public policies. Instead, the idea was to target what he called the well-funded, highly aggressive and morally vacant forces that are trying to block every step by the federal government to take meaningful action. And the way to do that, he said, was for the AGs to wield their powers, quote, “creatively and aggressively” to clear up confusion among the public concerning climate change that he said was, quote, “sowed by those with an interest in profiting from the confusion and creating misperceptions in the eyes of the American public.” Now, lest there be any doubt about what Schneiderman had in mind, he made clear that what the AGs would do was to target the energy industry and its allies for law enforcement action under a variety of legal theories, including specifically consumer protection law and securities fund law.


Now, step back and think about that for a moment because it’s really quite a remarkable statement. Here you have 17 attorneys general, people who are the chief law enforcement officers of their states, announcing that they’re going to take aim at a group of private parties because they disagree with those parties’ speech and advocacy. The AGs don’t even know whether those parties violated any particular law. They don’t even necessarily have any suspicion to believe that it’s the case. But that doesn’t matter because the AGs have the power to investigate. And so far as they’re concerned, any legal theory will do.


I don’t think that it’s overwrought to observe that there is a historical precedent for this kind of approach to law enforcement. The famous quote by Stalin’s chief enforcer, Lavrentiy Beria, captures it perfectly. “Show me the man, and I’ll show you the crime.” It’s terrifying to think that law enforcement officers here in the United States would consider that to be a valid approach. And it was later revealed that the genesis of this strategy was, in fact, the climate activist conference to explore ways of turning public opinion against the energy industry. In other words, this was never about law enforcement. It was a political crusade.


Say what you will about that, but it does explain what followed. A few weeks after the press conference, the Attorney General of the U.S. Virgin Islands, who was part of Schneiderman’s gang, sent kitchen sink subpoenas to ExxonMobil, as well as to one of my clients, the Competitive Enterprise Institute. CEI is a think tank that publishes research and advocacy on public policy issues, including energy and the environment. The subpoena demanded all of its internal and external documents and communications going back decades on those particular policy issues.


Before it received that subpoena, CEI had absolutely nothing to do with the Virgin Islands. Likewise, Exxon had no property, operations, employees, business -- it had nothing to do with the U.S. Virgin Islands. CEI and Exxon both challenge the subpoenas, and the Attorney General withdrew them. In other words, he gave up rather than defend them in court. That was a very good indication, I think, that this AG coalition was not exactly engaged in business as usual law enforcement directed at things like actual crimes or misconduct. There was something else going on.


Of course, the Virgin Island sideshow wasn’t the end of the AGs United for Clean Power. It was only the beginning. New York and Massachusetts both launched wide-ranging investigations into Exxon with the hope of finding some evidence of some kind of crime or violation or who knows what. What followed was years of litigation over their subpoenas that went up and down the courts across many states. Ultimately, Exxon produced millions of pages of documents.


But something interesting happened relatively early on in that process, although its complete importance didn’t become apparent until more recently. What happened was the case very quickly started shrinking. The original New York subpoena was based on the idea that Exxon some how knew more about climate change than anyone else in the world going back to the 1970s, and it hid that information from the public.


By mid-2016, however, the New York Attorney General seems to have abandoned that theory and arrived at a new one that ExxonMobil had failed to disclose to investors the risk that future climate policies could render some of its assets uneconomical, what’s often referred to as stranded. But there was still more shrinking to be done. In 2017, the AG narrowed its investigation yet again to the theory that Exxon misled investors about how it applied so-called proxy cost of carbon to decide whether to undertake new projects.


Now, let me take a brief aside here to explain this whole proxy cost business because it’s important. The idea is that governments may in the future adopt policies that make fossil fuels more expensive, for example, a carbon tax. Higher prices, in turn, generally mean reduced demands for things like fossil fuels. So the idea of a proxy cost is to predict how those policies will influence the prices of fossil fuels in a given future year. And then that number can be used as an input to determine the likely returns on a project and ultimately whether a given project, like development of a new oil field, for example, will make economic sense over the lifetime of the project. Presumably, the higher the proxy cost reflecting stricter regulations, the less likely an energy producer will be to pursue the particular project in the future.


The enforcement action that the New York Attorney General eventually brought against Exxon focused on its use and disclosure of proxy costs. The AG’s theory at the end of the day was that Exxon misled investors about how it was managing the business risk of climate change regulation. In 2013 and 2014, Exxon published several reports looking at trends in the energy industry, including possible climate regulation. Those reports and other statements and issuances by Exxon indicated that it generally applies a proxy cost of carbon when it evaluates potential projects. And it does that on a company-wide basis.


Well, no good deed goes unpunished. Exxon published several of those reports in response to requests by green investors to disclose more information about how it was responding to climate change. And the AG’s main theory was that Exxon didn’t uniformly use its proxy cost estimates for every potential project. Based on its proxy cost theories, the AG brought claims alleging both fraud as well as violations of the Martin Act.


A funny thing happened, though, when the case went to trial. At the close of the case, the AG asked the Court to drop the fraud claim because it was apparent that there was no evidence that Exxon ever intended to mislead anyone. In other words, before the Court even put pen to paper to render a verdict, something like two-thirds of the case involving the most serious charges against Exxon were already gone.


So that’s a lot of background to bring us to this week’s decision. And the bottom line on the decision, of course, is that the Attorney General lost. But that doesn’t fully capture how completely, how thoroughly its case collapsed. Begin with the alleged misrepresentations. The Court found that there were no misrepresentations by Exxon, zero. As the Court recognized, Exxon disclosed precisely how it arrived at its proxy cost, its general methodology, and then how it used those proxy costs in considering projects.


The AG argued that Exxon misled investors because, while it disclosed proxy costs, its internal modeling for some projects also included a separate and usually lower per-project cost called the GHG cost, or greenhouse gas cost, that was meant to reflect additional expenses that might be required for the a given project as a result of local regulation. I’ll explain that more in a minute. It can be a little bit complicated.


But the problem, as the Court found, was that Exxon actually disclosed how it used the GHG cost and how it was different and distinguishable from the proxy cost. Really, the problem with the AG’s theory here, confusing the GHG cost and the proxy cost, is that it really just doesn’t make any sense. And here’s where I’ll unpack this a little bit. Proxy costs affect, at the end of the day, demand for energy, which then relates to the amount of revenue that a given project would expect to bring in over a period of time.


GHG costs, by contrast, at least as Exxon uses them, are actually quite different. They represent expenses for a given project that may result due to local regulation. For example, if the local government requires Exxon to pay a tax on oil pumped from a particular well, that would go in as a GHG cost, but it’s not a proxy cost because it doesn’t affect directly the cost of energy in the market and so therefore would not directly affect the revenue coming into the project. In other words, one is cost. That’s GHG cost. The other more goes to income.


The AG’s theory here was that Exxon should have set both of these things at the same level and applied them both to every project. At least, I think that’s what the AG’s theory was. Frankly, going through all the papers that were filed, as well as the decision, I think even the Court had a bit of trouble figuring out exactly what it was that the AG was arguing. But as best I can tell, the AG’s point was that Exxon should have double counted the proxy cost in assessing every single project. And of course, that is obviously wrong.


Apparently, the AG’s Office doesn’t know how accounting works and that revenues and costs are different things. Or at least, if you want to look at this charitably, the AG’s main argument appears to be based on simply a mistaken view of accounting and a factual lack of understanding about how it is that energy companies account for future projects.


So it’s bad enough for the Attorney General that there were no misrepresentations, but the Court also found that none of this was material to investors either. To bring a fraud claim or a Martin Act claim, you have to identify a misrepresentation that actually makes a difference to investors. And here, I will quote what the decision had to say. “There is no allegation in this case, and there was no proof introduced at trial that anything ExxonMobil is alleged to have done or failed to have done affected ExxonMobil’s balance sheet, income statement, or any other financial disclosure.”


Let me put that plainly. An essential element of the AG’s case was to show materiality, and it had zero evidence on that point. It literally had nothing to say. In fact, the AG put on testimony that actually contradicted its claim of materiality. And even worse, it had represented to the Court that it was going to put on testimony by investors who claimed to have been misled. Apparently, it couldn’t find any. And the AG’s expert witness on materiality testified only that Exxon stock took a hit when the various attorney general investigations against Exxon were publicly announced.


I think the Court was quite restrained when it observed, and I quote, “There is something circular about claiming that a stock drop precipitated by the announcement of an investigation constitutes evidence of wrongdoing.” I think the Court’s view of the AG’s case is best reflected in its treatment of the fraud claims. Remember that the AG tried to have these dismissed at the end of trial so as to avoid the inevitable loss. The Court, though, went out of its way to rule the AG necessarily would have lost in those claims. They all would have failed. And it ordered them dismissed with prejudice.


Frankly, it is amazing that this case went to trial at all. Really, it is unimaginable that a competent law enforcement agency would have actually moved forward with this case based on the facts as it understood them. So why was this case different? Why did the AG’s Office move forward? Why did it undertake what was ultimately destined to be a doomed enterprise? And I think the history, the background of this case explains it. This was a political attack, not a good faith attempt to enforce the law and to protect investors. I mean, really, they couldn’t even identify a single victim. So that’s the decision.


And let me conclude with a few thoughts on what comes next and how we should look at this decision. My hope, and perhaps I’m over optimistic about this, is that the complete and total failure of this case will be a wakeup call to the remaining members of the AGs United for Clean Power Coalition. During the trial in this case, Massachusetts Attorney General Maura Healey sued Exxon based on some of the same theories that were rejected in the New York case. You have to expect that Attorney General Healey’s office is thinking long and hard about the risk that it faces in moving forward.


The decision should also prompt second thoughts about whether litigation against energy companies, as well as their allies like CEI, is the best way or even an appropriate way to advance climate policy. From the very beginning, the idea of investigating and suing your policy opponents to advance your own policy agenda was problematic to say the least because it raises serious First Amendment concerns. But now we can see that it also doesn’t work.


Not only that, it’s expensive. The New York Attorney General’s Office spent probably millions of dollars overall to bring this dog of a case that blew up in its face. As a matter of principle, taxpayer dollars shouldn’t be used to carry out political vendettas. But even for those who disagree with that proposition or simply don’t care, as a matter of practice, this kind of abuse of law enforcement authority turns out to be bad politics, too, because it doesn’t work.


Finally, I don’t think it should be lost that this decision is a complete vindication for Exxon. Let me repeat the Court’s words that I began with. “ExxonMobil executives and their employees were uniformly committed to rigorously discharging their duties in the most comprehensive and meticulous manner possible.” I repeat that because it’s important to take notice of it.


I know that companies like Exxon make unlikely victims. But given what happened here, it was a victim. It had to endure years of investigation, bad publicity, aspersions on the honesty of its employees, and ultimately serious fraud charges because a few politicians happened to disagree with its lawful business activities and some of the positions that it’s taken on policy issues. No one, not even a major corporation, not even an energy producer, deserves to be targeted by prosecutors based on policy differences or as part of a political campaign.


So for me, I’m pleased that Exxon prevailed for two reasons. First, it means that justice was done. And second, it is a rebuke of a serious abuse of law enforcement authority. And with that, why don’t we open it up to questions?


Micah Wallen:  Thank you, Andrew. We will now go to our first caller.


John Crouch:  Hi, there. It’s John Crouch from Virginia. This kind of suit is just one more revolting development in the pattern that started with lawsuits against the tobacco industry and then against the firearms industry in order to just use lawsuits as a way to pursue policy change by other means that you can’t do in the political realm. When you get a case like this that’s particularly groundless, has anyone tried to either sanction the lawyers who bring it, or even do a fee award against them, or actually look at trying to bring them up on ethics charges?


Andrew M. Grossman:  Thank you for the question, and it’s a very interesting one. I agree with the import of what you said that these cases really are about trying to affect policy change through litigation and really by bullying litigation rather than pursuing the normal legislative and regulatory process that we use to democratically enact policy reforms. And I think it’s important to remember that not only is litigation ill-suited to that, but it doesn’t even lead to good results. At the end of the day, if people are in favor of particular climate policies, the way to achieve that is through the democratic and representative process. One-shot litigation like this, even a campaign of cases, is really an unlikely way to achieve lasting and durable and thoughtful policy reform.


Going directly to your question, “What are the remedies here?”, it’s tough. Sanctions are sometimes available in cases like this, and it may well be that Exxon has a claim for attorneys’ fees or something of that nature. But when you’re talking about law enforcement actions, those are typically part of the police power of the state. And it is the most unlikely case ever where that type of remedy is going to be available to somebody who prevailed at trial. You would certainly think that in a case like this it would be a worthwhile remedy and something that may well be appropriate.


One also wonders whether there ought to be some form of political sanction. As I mentioned in my remarks, the Attorney General’s Office here spent an awful lot of money on an investigation and then a trial that, at the end of the day, was entirely meritless and was apparently conducted for entirely political reasons. You would think that the state legislature would have something to say about the misuse of taxpayer funds to pursue such a fruitless endeavor.


The Attorney General’s Office certainly has plenty of legitimate law enforcement activities that it could be directing its resources to carry out. So one wonders that is it really the case that crime in the state of New York has been so well taken care of that it can spend money pursuing its vendettas and on these sorts of political campaigns. Now, I think that would be a very big question for the legislature and for other politicians in the state to think through.


Micah Wallen:  All right.  We’ll now move to our next question.


Mark Chenoweth:  Hey, Andrew. It’s Mark Chenoweth at the New Civil Liberties Alliance. What ramifications do you think this verdict has for the future of the Martin Act?


Andrew M. Grossman:  That’s really a very interesting question. You know, the Martin Act has always been seen as this bludgeon that effectively gives the New York Attorney General’s Office carte blanche over financial regulation and over businesses that conduct business within New York, which is pretty much all large businesses. And there’s always been this prevailing view that you can’t win a Martin Act case. The way courts have interpreted and applied the law, the litigation risk is simply enormous because the burden for the state to prove violations is really just so very low.


But I think Exxon really put on a great defense here and was very meticulous in picking through the Attorney General’s allegations, picking through their witnesses, as the Court put it, eviscerating one of the Attorney General’s witnesses. And I think it shows that that type of attention to the details and really meeting the government on every single element actually is something that can be viable in a Martin Act case. So I really wonder that this is a useful precedent with respect to the Martin Act because it really does show that it’s not simply -- that the defendant really can fight back against unfair or improper Martin Act charges and that defendants shouldn’t simply accept that if they’re being threatened with being charged under the Martin Act that losing is a forgone conclusion.


At the same time, the decision here is not the normal results that you see under the Martin Act. I think it does reflect the extreme nature of this case, as well as the wonderful defense that ExxonMobil mustered. So the fact that this case came out right should not, at the end of the day, really detract from efforts to reform the Martin Act and to align it with other law in this area that, at the end of the day, actually focuses more on purposeful violations of business’ obligations to investors and consumers and so on rather than providing a vehicle for politicians to carry out their policy preferences through litigation.


Micah Wallen:  All right. We’ll now move to the next caller.


Chris Horner:  Hi, Andrew. Chris Horner. With that press conference that you referenced, the March 2016 press conference, as you know, I and others began looking into how in the world this office came to be used this way. And a lot of those records were used in the proceedings. And while the Court, in the end, didn’t allow Exxon to advance the defenses based upon the unseemly way this case was clearly brought about with a lobbying campaign by a tort lawyer, some activists, and so on, it was clear -- it seems clear to me that it let the Court know what was going on here. 


So now we move on to Massachusetts it appears, where we have even more records showing how that case came about. Can you compare and contrast what to expect with the Massachusetts claims, which, while they don’t have the Martin Act, aren’t all that dissimilar from what New York was pursuing?


Andrew M. Grossman:  Sure. Thanks for the question. First of all, for those of you who are unaware, Chris Horner has done wonderful work with oil law, state oil law, public records laws generally to uncover a lot of the evidence and communications about how this Attorneys General United campaign came to be, the involvement of tort lawyers and activists in devising the strategy, and the aims of this coalition and the ways that they are distinct from normal law enforcement activities. So he’s really done wonderful work, and he’s made available all of his -- the records that he’s obtained on this online, mostly, I think, on the climate litigation watch website, or at least many of them.


With respect to what you can expect for the Massachusetts case, who knows? It does have, as I understand it, some claims that overlap with the proxy costs related and project related claims and theories that were put forward in the New York case. So you would have to think that, given what happened in the New York case, there has to be some serious consideration going on in Massachusetts about whether those are claims they really wish to maintain. If they do go forward with those claims, it would seem to me that that would be a pretty strong demonstration of their bad faith in doing so, particularly given that the AGs United coalition has long had in place information sharing agreements amongst themselves. So presumably whatever information Massachusetts had is not anything to which New York was not also privy.


My understanding is that there are also some additional claims in that case involving things like misleading the public about climate change and other things along those lines. One may expect that some of those broader claims that seem a little bit more handwavy and a little bit more divorced from the facts may not make it to trial or, if they do make it to trial, may run into some of the same challenges, to put it lightly, that New York experienced in its case.


Micah Wallen:  And we will now go to our next caller.


Francis Menton:  Hi. It’s Francis Menton. I’m the Manhattan Contrarian, and I also have been Chris Horner’s local counsel here in New York when he sues the New York AG under his FOIA requests. A couple of things, one, I wonder if you could, Andrew, comment on the odd thing of the New York Attorney General, in the effort to get Exxon somehow, stepping in in the guise of protecting investors who obviously are investors in fossil fuel companies. So now he’s pretending to protect them, and then he’s going to protect them by hitting the company that they’ve invested in up for $1 billion or $2 billion. How is that going to help them? Some of the odd aspects of this case. So that’s one question I have.


And the other question, if I can toss in another one while I have you here, is obviously Exxon’s not out of the woods yet at all on this, and they have all these nuisance cases, including one in New York that’s been dismissed but was argued in the Second Circuit a week or two ago. And I wonder if you could comment on the number and status of those cases around the country.


Andrew M. Grossman:  Sure. With respect to the unusual nature of the New York Attorney General’s lawsuit, I’m of two minds on it. On the first hand, I agree with the sentiment of your question that there probably isn’t a single Exxon investor out there who thought that this enforcement action to protect investors was a good idea or aided them in any way whatsoever. To the contrary, it cost Exxon money, as well as some reputational harm most likely, at least up to the decision. And those things are going to be bad for Exxon investors, all else being equal. So no, it didn’t protect investors. The New York Attorney General’s suit actually injured them.


But at the same time, you’re going to have that tension, at least in a certain extent, in any suit that’s brought by regulators or by a state attorney general to protect investors because, ultimately, a suit that’s brought against a company to protect its investors -- different investors are going to think different things about it depending on where they stand. So I don’t think there’s a broad proposition to drop in this. But I think what makes this suit, in that respect, so notable and so unusual -- and I just can’t get over this. They couldn’t find a victim. They couldn’t find somebody who had been misled.


It’s sort of trial advocacy 101 that you put the victim up on the stand. You have somebody who is sympathetic. You have somebody who can explain why they were hurt. You have somebody who can explain why it is they were misled in a case like this and how it affected their decision-making with respect to investment. It’s the sort of thing that you would expect to see in any securities fraud case, ever.


Whether you’re talking about a private suit or a government law enforcement action, it would almost be unthinkable to bring a case without that being, that type of factual presentation being part of the case. And the fact that the New York Attorney General’s Office couldn’t find, couldn’t muster a single witness to sit up on the stand and explain what had happened to them and explain how it was materialled and explain why they were misled and so on, it really shows that there was never any basis for this suit. And I wouldn’t even say it should have been a red flag to the Attorney General’s Office. It should have been a blaring siren with flashing lights that there was something seriously amiss with this case. The fact that the Attorney General’s Office didn’t view it that way I think speaks volumes.


With respect to the nuisance cases that have been brought against Exxon and Chevron and seemingly every energy company under the sun, I think at the end of the day the likely outcome is that none of those cases are going to go anywhere. But of course, there’s going to be a lot of litigation and a lot of litigation costs in the interim. It’s interesting these are nuisance cases because, if you think about it at least rhetorically, they are basically a nuisance. The idea is that, although the legal theories in some of these cases differ, that simply by selling a lawful product and producing a lawful product that these energy companies are violating state or local nuisance law because of the effects of climate change.


You’ve got all kinds of problems regarding causation. Generally speaking, it’s not the energy companies that are the ones that are consuming most of these fuels. To the contrary, it’s people who live everywhere around the world, including people who lived in the municipalities and states bringing these cases, as well as the municipalities and the states themselves. There’s all kinds of problems regarding apportionment of damages, regarding preemption based on federal law, and the bottom line problem that, at the end of the day, the fundamental legal theories simply don’t work and have never been recognized.


So you put that all together and I don’t see a lot of this succeeding. But at the same time, I think that a lot of the activists view this as something tangible that they can do now. And they seem to have directed their energy in that direction rather than attempting to work through the political process. It seems to me that, if what you want to do at the end of the day is to change policy, that’s an unusual choice to make, but so be it.


Micah Wallen:  We’ll now go to our next caller.


Charlie Carter:  Good afternoon. This is Charlie Carter calling from North Carolina. I’m just curious. You mentioned the group of attorneys general along with New York in the, I guess, press conference in 2016. Could you identify the other states that were involved in that?


Andrew M. Grossman:  I don’t have the list here on my computer. As I said, I believe there were 17 in total. And at least one of those -- I think two of them actually are not states. But one was the District of Columbia and the other was the U.S. Virgin Islands territory. The information is available online. The New York Attorney General’s website has the press release that lists everybody who was involved in the coalition. It consisted primarily of, I believe, elected democratic attorneys general.


Micah Wallen:  We have one more question in the queue. We’ll now move to that caller.


Caller 6:  Hi. Just taking a step back and putting in some background, there were, if I recall correctly, the New York Attorney General did send out prior rounds of subpoenas to other companies, other energy companies or utility companies related to sort of the same issue of climate change disclosures. And if I’m recalling correctly, that led actually to a number of settlements where some of those companies agreed to improve disclosures or change disclosures. I don’t remember exactly what the terms of the settlements were.


So I guess my question is why the drastically different path here? Did the new Attorney General get more aggressive than the prior one, or did Exxon resist disclosures that don’t seem like they were especially painful for the companies that decided to make them? And as far as the stranded assets question, there are prior examples of companies being very focused on their strategy and being so close to what they’re doing and so focused on it that, for example, there were a lot of plans to build nuclear power plants that led to some pretty dramatic loses.


Andrew M. Grossman:  So there were some settlements. You know, I view those largely as effectively strike suits. They weren’t exactly suits, but they were in effect demands by the Attorney General. So for the companies that were subject to them, it was easier just to go along with it rather than fight the issue -- rather than fight the matter. You see that kind of thing happening all the time in this type of law enforcement area.


So far as Exxon is concerned, it is -- as far as I can tell from the outside, and I don’t want to claim that I have any particular insight into the thinking of the New York Attorney General’s Office other than what’s been reflected in the records it’s disclosed in its litigation strategy, but when you look at it, they do seem to have taken a very different tact with respect to Exxon, and that was true from the very beginning. There seems to be this unusual sort of targeting of Exxon as opposed to its peer energy producers. And I think part of the reason for that is the extent to which Exxon was outspoken on energy policy issues, particularly in the early -- in 1990s and the earlier 2000s.


Exxon was involved in a variety of policy initiatives that a lot of climate change activists vehemently disagreed with. And although Exxon more recently has adopted a different policy view and, in some instances, is in favor of different sorts of carbon regulation and climate change regulation, Exxon still seems to be viewed by a certain group of activists and political activists as public enemy number one in this space. So there is this kind of strange vendetta for Exxon based on public policy positions that it took years ago that at the time were mainstream policy positions in what were very prominent public policy debates.


So is that what drove the New York Attorney General to train its sights on this one company as opposed to all of its peers and single it out for disparate treatment? I think that may well be the case. But at the end of the day, I think that’s really a question for the New York Attorney General. But at the same time, when you look at how this case came out and when you look at the wholesale failure of evidence on every single element of the claims that were brought, you really have to wonder what was going on. This was, as I’ve said -- this does not resemble in any way, shape, or form a normal law enforcement action. And presumably, there’s some reason that the AG’s Office decided to pursue it, nonetheless.


Micah Wallen:  We had another caller jump in the line, so we’ll move to that caller now.


Carter Page:  Hi. It’s Carter Page. I actually gave the oral argument right before that Second Circuit case that someone asked a question about. And I would be curious -- I don’t think I heard an answer in terms of the other New York Attorney General case that’s currently pending there. So I’d be curious to hear your feedback on that, unless I missed something.


Andrew M. Grossman:  You know, I’m aware of that but just not really the topic of the call today, unfortunately.


Micah Wallen:  No other callers jumping in the queue as of yet, so, Andrew, did you have any closing remarks for us?


Andrew M. Grossman:  No, I don’t think so just other than to thank The Federalist Society and to thank everyone who attended, and particularly those who asked questions.


Micah Wallen:  And on behalf of The Federalist Society, I’d like to thank our expert for the benefit of his valuable time and expertise today. We welcome listener feedback by email at [email protected]. Thank you all for joining us. We are adjourned.


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