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Speaker 1: Welcome to the Bloomberg Law Podcast. I'm June Grosso. Every

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Speaker 1: day we bring you insight and analysis into the most

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Speaker 1: important legal news of the day. You can find more

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Speaker 1: episodes of the Bloomberg Law Podcast on Apple podcast, SoundCloud

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Speaker 1: and on Bloomberg dot com slash podcasts. Billions of dollars

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Speaker 1: are at stake in New York's case against x On

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Speaker 1: Mobile over its climate change disclosures. Joining me is Brendan Barnes,

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Speaker 1: Bloomberg Intelligence Senior Litigation Analyst. Brendan It's hard to keep

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Speaker 1: track of all the climate change cases out there. How

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Speaker 1: is New York's case against x on different, June. That's

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Speaker 1: a great question. I think that's part of the reason

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Speaker 1: why this case deserves being pulled out and discussed differently.

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Speaker 1: So a lot of the other cases we've talked about

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Speaker 1: in the past are related to various states of damage

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Speaker 1: or allegations of erosion to coastal areas, where you're talking

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Speaker 1: about actual property impacts, Whereas here New York's really pinning

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Speaker 1: their climate change arguments onto shareholder fraud as the main

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Speaker 1: thrust of the case against x in here. So what's

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Speaker 1: the core of the claim? Well, it really revolves around

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Speaker 1: sort of a unique idea that Exxon used a proxy

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Speaker 1: cost in its calculations, and it's reporting to the public

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Speaker 1: for what the cost of g h G or greenhouse

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Speaker 1: gas emission regulations would be in the future. So down

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Speaker 1: the line, when they're assessing these different individual projects, how

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Speaker 1: much was the cost of g HD regulations going to

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Speaker 1: actually impact whether those projects will be worthwhile? Has this

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Speaker 1: approach been tried before? It has actually Back in Peabody Energy,

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Speaker 1: which if you were called, was a pretty big coal producer,

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Speaker 1: was sued sort of under the same idea or investigated,

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Speaker 1: then sued, but reached a very quick settlement with New

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Speaker 1: York and the result wasn't actually any financial damages, but

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Speaker 1: it was they had to change their climate disclosures and

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Speaker 1: there were some tweaks to how they did that. Um

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Speaker 1: and that's that's sort of the same set of allegations

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Speaker 1: they're being used here. So Exxon has been battling this

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Speaker 1: case in New York and Massachusetts. The allegations here, I

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Speaker 1: would say, furiously would be a word to use. Is

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Speaker 1: it likely to settle? I would I would add vigorous,

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Speaker 1: all right, maybe a tough word to use, but you know,

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Speaker 1: from our perspective, we've watched XN for a number of

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Speaker 1: years and how they approach litigation generally, and how they

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Speaker 1: approach litigation from government entities, and our expectation is that,

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Speaker 1: you know, you're basically talking about two different sets of

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Speaker 1: principles here that are going up against each other. And

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Speaker 1: it's a little bit less about the money involved because

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Speaker 1: we don't expect those dollar amounts get too high, So

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Speaker 1: we don't think that settlement is really the option. And

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Speaker 1: we expect Exxon, you know, their their profile here, they're

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Speaker 1: probably gonna litigate this true trial and we expect that

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Speaker 1: will probably extend into any appeals that would be potentially necessary.

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Speaker 1: So you think they will appeal if they lose a trial,

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Speaker 1: if they lose, and if they win, I'm sure there

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Speaker 1: will be an appeal on the other side. That's definitely

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Speaker 1: been the case in the past. So these climate change

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Speaker 1: cases can be an uphill battle in different ways. Whose

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Speaker 1: favorite to win this So for this one, we we

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Speaker 1: still expect Exxon has the upper hand, and a lot

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Speaker 1: of that is the result of I think New York

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Speaker 1: State government painting these allegations with a pretty broad rush.

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Speaker 1: When Xon seems to have pretty specific rebuttals. So for example,

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Speaker 1: you know, the allegation is, hey, you guys used a

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Speaker 1: proxy cost that we think was probably too low based

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Speaker 1: on your representations for all these projects, and that includes

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Speaker 1: you know, this oil stands project in Canada and excell

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Speaker 1: and says no, wait a second, look, if you look

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Speaker 1: at on an individual basis, we actually used a proxy

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Speaker 1: cost that's the statutory proxy cost, and we didn't use

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Speaker 1: anything above that or below that. And so I have

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Speaker 1: a feeling once we get past this nation stage, we're

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Speaker 1: going to see a lot more of that specific rebuttal.

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Speaker 1: And also there's sort of a more salacious point raised

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Speaker 1: in defense, which is that at some point New York

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Speaker 1: a g attorney general had met with those who are

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Speaker 1: in favor of climate change regulation and had reached some

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Speaker 1: alleged agreement in a backroom deal to try and get

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Speaker 1: an Exxon and other companies like that to try and

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Speaker 1: force climate change from a policy perspective through the courts.

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Speaker 1: I was going to use the word sexy that you know,

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Speaker 1: this suit doesn't seem as sexy, you might say, as

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Speaker 1: some of the other climate change lawsuits, because it's narrowed

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Speaker 1: in the way that it is well, that's right, and

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Speaker 1: I think you know New York is not new at

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Speaker 1: this game, right, they have a very powerful statute. They're

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Speaker 1: using the Martin Act to kind of leaver this, and

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Speaker 1: they've used that in a number of different cases in

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Speaker 1: different ways. It's very broad based approach to trying to

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Speaker 1: enforce shareholder rights and make sure that financial disclosures are

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Speaker 1: appropriate when necessary. Prosecutors love the Martin Act. Now, what

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Speaker 1: about the Massachusetts because the a G in Massachusetts was

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Speaker 1: also pursuing this against Exxon, same fight, different state, right,

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Speaker 1: And so part of this is is the allegation that

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Speaker 1: in Xen's defense that you know, there was some sort

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Speaker 1: of clusion between Keely of Massachusetts Schierman in New York

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Speaker 1: and they're just in a different stage because x Son

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Speaker 1: still beating up on We're trying to the subpoena that

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Speaker 1: Massachusetts had filed, and so there this has been progressing

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Speaker 1: across a number of years. That started with the investigations

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Speaker 1: where subpoena's have been issued for forty plus years of

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Speaker 1: documents internal to Exon related to their climate change research

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Speaker 1: and things like these disclosures related to proxies. Was excen

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Speaker 1: ever able to prove that it was politics involved. I

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Speaker 1: remember when it was in the New York Court, there

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Speaker 1: were a lot of allegations that this was all pure politics.

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Speaker 1: So most of that was sort of resolved only on

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Speaker 1: a procedural basis at the time. And that's actually part

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Speaker 1: of exns affirmative defenses here, is that some of their

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Speaker 1: rights are being impinged upon, and there's prosecutorial i s involved,

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Speaker 1: and so, you know, even though we're at a very

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Speaker 1: early stage right now, what's interesting is their emotions flying

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Speaker 1: back and forth on the discovery side to try and

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Speaker 1: stop Exon from pushing these affermative defenses and their rights

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Speaker 1: to information backing those defenses through discovery, like depositions of

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Speaker 1: some of the attorneys or documents related to you know,

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Speaker 1: decision making that was involved there, which is typically very

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Speaker 1: hard to get. So this, even though we wouldn't think

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Speaker 1: of this as normally as a very important stage for

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Speaker 1: the purpose of forecasting what's going to happen at the end,

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Speaker 1: this could be material to whether X and can can

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Speaker 1: turn the rhetoric of this case from hey, xcens proxies

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Speaker 1: costs were X two. Well, maybe there's an element of

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Speaker 1: as you said, politics involved in this and that that

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Speaker 1: I think would change the tenor and potentially, you know,

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Speaker 1: maybe change the levers for settlement. It sounds like a

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Speaker 1: difficult case to make though, So if the case is

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Speaker 1: decided against Exxon, what is the potential liability? So you know,

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Speaker 1: there are a lot of numbers thrown around in the

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Speaker 1: initial complaint by the State of New York. You know,

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Speaker 1: they're looking for things like discorchment of profits or some

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Speaker 1: damages related to inflation of the share price because they

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Speaker 1: were picking these projects that actually are at higher risk

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Speaker 1: because of various climate change regulations going into effect an

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Speaker 1: increasing cost. So you could, if you wanted to, you

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Speaker 1: could you could put a billion dollar plus number on

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Speaker 1: this based on the allegations and the complaint. I mean,

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Speaker 1: they say, you know, New York has said that at

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Speaker 1: some point in for example, d HD related costs could

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Speaker 1: be over seven billion dollars um. But a lot of

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Speaker 1: that's very speculative. Thanks. That's Brandon Barnes, Bloomberg Intelligence Senior

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Speaker 1: Litigation Analyst. Thanks for listening to the Bloomberg Law Podcast.

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Speaker 1: You can subscribe and listen to the show on Apple Podcasts, SoundCloud,

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Speaker 1: and on Bloomberg dot com. Slash podcasts. I'm June Bralso

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Speaker 1: this is Bloomberg. A drink Peter to give the D