Climate Change Lawsuits Against Fossil Fuel Companies Are Heating Up

, president | October 22, 2019, 10:09 am EST
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Update: On October 24, the Massachusetts AG filed suit against ExxonMobil in state court. The Massachusetts suit focuses on deception to investors regarding the proxy cost of carbon, similar to the New York suit. But the MA suit also includes claims of deception to consumers that are fresh and new, such as the company’s claims that some of its products reduce harmful emissions, and that the company is playing a leadership role to solve climate change and develop clean energy alternatives. The complaint also includes fascinating allegations about the acumen of Exxon’s climate scientists. For example, it alleges that 37 years ago, Exxon scientists predicted the exact year (2019) when we would exceed a 415 ppm threshold for carbon dioxide in the atmosphere.

In the span of four years, there’s been a flurry of litigation aimed at holding the oil and gas industry accountable for its role in spreading climate change disinformation and making the climate crisis worse.

Nearly four years ago, the state attorneys general of New York and Massachusetts launched investigations of ExxonMobil for climate change deception; since 2017, several municipalities have filed lawsuits against major fossil fuel companies seeking damages for the costs of climate change adaptation and resilience.

At the time, many, including me, hoped these legal actions would reveal the truth about climate deception and create leverage to persuade these companies to get out of the business of opposing necessary governmental climate solutions. We hoped, too, that in the long run, the lawsuits might provide funding for communities ill-equipped to pay for the enormous impending costs of climate change.

Until recently, the litigation has seemed to have been mired in procedural matters but, in the last few months, we have begun to see significant progress on many fronts.

NY case against ExxonMobil goes to trial

On Tuesday, October 22, New York’s trial against ExxonMobil begins. The case centers around claims against the company under the state’s “Martin Act,” which gives the New York attorney general broad powers to challenge corporate actions that defraud investors. The lawsuit alleges that, for years, ExxonMobil misled investors about the value of its fossil fuel assets and the risks to its portfolio posed by robust climate policies to limit global warming emissions.

Particularly stunning is the revelation that ExxonMobil used two sets of numbers, or carbon “proxies”, (i.e. a hypothetical price on carbon which it added to its cost estimates for business investments). One carbon proxy had a high range of prices to show investors that the company was factoring in the cost of global warming emissions in its business decisions, but a second carbon proxy had a lower, undisclosed carbon price that it used for actual business decisions. This conflict between the publicly disclosed and privately applied carbon price could have misled investors into believing that ExxonMobil was factoring in the social cost of carbon when making business investment decisions, when it actually was using an artificially lower price that, for example, inflated the value of risky assets such as tar sand holdings in Canada. (An excellent summary of this litigation, is available here).

The fact that this litigation is actually coming to trial represents a monumental success, and it could open the floodgates for many more lawsuits if it is successful, including investor class action cases.

Federal courts send cases back to states and open doors to discovery

We are also seeing positive developments in several of the lawsuits brought by cities, counties, and states against fossil fuel companies, seeking damages for the costs these government entities will pay to cope with the climate impacts, such as sea level rise and forest fires. Several of these state and local governments are now winning major procedural skirmishes over whether federal courts or state courts should hear these cases.

Why does this matter? All of these lawsuits were originally filed in state court. But the fossil fuel companies “removed” them to federal court, contending that federal law should preempt state law, and that federal law allows no such lawsuits.

Two federal courts agreed with that argument and dismissed cases brought by San Francisco, Oakland and New York City. But four other courts have disagreed in cases brought by Rhode Island, Boulder County, Colorado, Baltimore, Maryland; and San Mateo County, California. This means that in these four lawsuits, the cases will proceed in state court and under state law.

Unless the fossil fuel companies are successful in getting a federal appeals court or the US Supreme Court to put a hold on these cases (which seems unlikely), the plaintiffs will eventually be able to conduct “discovery,” which is likely to include requests for documents and depositions of fossil fuel company executives to find out sensitive matters such as: 1) when did the companies know that emissions from their products were causing global warming; 2) to what extent does their internal knowledge diverge from what the companies were saying publicly about climate science and climate change?

I expect the companies to work hard to resist this disclosure of documents and internal information; so far they have already used their vast legal and financial resources to try to intimidate elected officials and advocacy groups, including ours. But the early victories that keep these lawsuits in state courts may make such disclosure inevitable. Because of that, we could be witnessing a pivotal moment in these cases.

It is worth remembering that, in the early days of litigation against tobacco companies, plaintiffs routinely lost their cases, and saw little tangible benefit from the litigation. This changed abruptly, however, when a number of state attorneys general filed suit together and eventually used the legal discovery process to wrest access to very damaging internal memos. Similarly, internal pharmaceutical company documents about the opioid epidemic are now coming to light through litigation. We may be at a comparable inflection point here.

Massachusetts attorney general seems ready to file suit

In addition to these existing lawsuits, another big one appears to be on the way. On October 10, the Massachusetts Attorney General’s office notified ExxonMobil that it intends to file suit against the company, claiming that the company acted deceptively with respect to the dangers of fossil fuel consumption.

If that lawsuit is filed, it appears that it will be based on the state’s unfair and deceptive practices act, a broad law that allows the state attorney general (and private parties) to sue when a company commits fraud or other related wrongful practices. The claims may parallel the New York lawsuit mentioned above, but could also include claims that consumers, in addition to investors, were deceived. If so, it will represent a new legal theory based on fraud.

Fossil fuel companies still increasing global warming emissions

The pressure brought on so many fronts through this litigation may already be having an effect on the companies and on public opinion, but it is critical to keep it up. Although we have seen some statements of support by fossil fuel companies for policies such as a national carbon fee and dividend, and even some thoughtful deep decarbonization scenarios, the industry for the most part continues to fight vigorously against climate policies, such as recently spending $30 million to defeat a carbon tax initiative in Washington state.

Moreover, while some companies have pledged to adjust their business plans to align with the carbon-constrained goals pf the Paris agreement, the plans prepared so far are very limited and tenuous.

Perhaps most importantly, several companies have not even taken the most basic steps to put their own houses in order. For example, as detailed recently in the New York Times, ExxonMobil and BP have increased their venting and flaring of methane gas from their oil extraction operations, a pollutant that has 34-86 percent greater potential to trap heat than does carbon dioxide. In essence, these companies and others are increasing their use of the earth’s atmosphere as a free sewer for the global warming pollutants that flows directly from their operations, despite claiming their commitment to being more responsible actors.

The legal developments are thus all the more welcome for the prospect that they can change company behavior and finally help hold these companies accountable for the climate damage they have wrought.

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Posted in: Energy, Global Warming, Science and Democracy

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