Speaker 1: Welcome to the Bloomberg Law Podcast. I'm June Grosso. Every
Speaker 1: day we bring you insight and analysis into the most
Speaker 1: important legal news of the day. You can find more
Speaker 1: episodes of the Bloomberg Law Podcast on Apple podcast, SoundCloud
Speaker 1: and on Bloomberg dot com slash podcasts. Billions of dollars
Speaker 1: are at stake in New York's case against x On
Speaker 1: Mobile over its climate change disclosures. Joining me is Brendan Barnes,
Speaker 1: Bloomberg Intelligence Senior Litigation Analyst. Brendan It's hard to keep
Speaker 1: track of all the climate change cases out there. How
Speaker 1: is New York's case against x on different, June. That's
Speaker 1: a great question. I think that's part of the reason
Speaker 1: why this case deserves being pulled out and discussed differently.
Speaker 1: So a lot of the other cases we've talked about
Speaker 1: in the past are related to various states of damage
Speaker 1: or allegations of erosion to coastal areas, where you're talking
Speaker 1: about actual property impacts, Whereas here New York's really pinning
Speaker 1: their climate change arguments onto shareholder fraud as the main
Speaker 1: thrust of the case against x in here. So what's
Speaker 1: the core of the claim? Well, it really revolves around
Speaker 1: sort of a unique idea that Exxon used a proxy
Speaker 1: cost in its calculations, and it's reporting to the public
Speaker 1: for what the cost of g h G or greenhouse
Speaker 1: gas emission regulations would be in the future. So down
Speaker 1: the line, when they're assessing these different individual projects, how
Speaker 1: much was the cost of g HD regulations going to
Speaker 1: actually impact whether those projects will be worthwhile? Has this
Speaker 1: approach been tried before? It has actually Back in Peabody Energy,
Speaker 1: which if you were called, was a pretty big coal producer,
Speaker 1: was sued sort of under the same idea or investigated,
Speaker 1: then sued, but reached a very quick settlement with New
Speaker 1: York and the result wasn't actually any financial damages, but
Speaker 1: it was they had to change their climate disclosures and
Speaker 1: there were some tweaks to how they did that. Um
Speaker 1: and that's that's sort of the same set of allegations
Speaker 1: they're being used here. So Exxon has been battling this
Speaker 1: case in New York and Massachusetts. The allegations here, I
Speaker 1: would say, furiously would be a word to use. Is
Speaker 1: it likely to settle? I would I would add vigorous,
Speaker 1: all right, maybe a tough word to use, but you know,
Speaker 1: from our perspective, we've watched XN for a number of
Speaker 1: years and how they approach litigation generally, and how they
Speaker 1: approach litigation from government entities, and our expectation is that,
Speaker 1: you know, you're basically talking about two different sets of
Speaker 1: principles here that are going up against each other. And
Speaker 1: it's a little bit less about the money involved because
Speaker 1: we don't expect those dollar amounts get too high, So
Speaker 1: we don't think that settlement is really the option. And
Speaker 1: we expect Exxon, you know, their their profile here, they're
Speaker 1: probably gonna litigate this true trial and we expect that
Speaker 1: will probably extend into any appeals that would be potentially necessary.
Speaker 1: So you think they will appeal if they lose a trial,
Speaker 1: if they lose, and if they win, I'm sure there
Speaker 1: will be an appeal on the other side. That's definitely
Speaker 1: been the case in the past. So these climate change
Speaker 1: cases can be an uphill battle in different ways. Whose
Speaker 1: favorite to win this So for this one, we we
Speaker 1: still expect Exxon has the upper hand, and a lot
Speaker 1: of that is the result of I think New York
Speaker 1: State government painting these allegations with a pretty broad rush.
Speaker 1: When Xon seems to have pretty specific rebuttals. So for example,
Speaker 1: you know, the allegation is, hey, you guys used a
Speaker 1: proxy cost that we think was probably too low based
Speaker 1: on your representations for all these projects, and that includes
Speaker 1: you know, this oil stands project in Canada and excell
Speaker 1: and says no, wait a second, look, if you look
Speaker 1: at on an individual basis, we actually used a proxy
Speaker 1: cost that's the statutory proxy cost, and we didn't use
Speaker 1: anything above that or below that. And so I have
Speaker 1: a feeling once we get past this nation stage, we're
Speaker 1: going to see a lot more of that specific rebuttal.
Speaker 1: And also there's sort of a more salacious point raised
Speaker 1: in defense, which is that at some point New York
Speaker 1: a g attorney general had met with those who are
Speaker 1: in favor of climate change regulation and had reached some
Speaker 1: alleged agreement in a backroom deal to try and get
Speaker 1: an Exxon and other companies like that to try and
Speaker 1: force climate change from a policy perspective through the courts.
Speaker 1: I was going to use the word sexy that you know,
Speaker 1: this suit doesn't seem as sexy, you might say, as
Speaker 1: some of the other climate change lawsuits, because it's narrowed
Speaker 1: in the way that it is well, that's right, and
Speaker 1: I think you know New York is not new at
Speaker 1: this game, right, they have a very powerful statute. They're
Speaker 1: using the Martin Act to kind of leaver this, and
Speaker 1: they've used that in a number of different cases in
Speaker 1: different ways. It's very broad based approach to trying to
Speaker 1: enforce shareholder rights and make sure that financial disclosures are
Speaker 1: appropriate when necessary. Prosecutors love the Martin Act. Now, what
Speaker 1: about the Massachusetts because the a G in Massachusetts was
Speaker 1: also pursuing this against Exxon, same fight, different state, right,
Speaker 1: And so part of this is is the allegation that
Speaker 1: in Xen's defense that you know, there was some sort
Speaker 1: of clusion between Keely of Massachusetts Schierman in New York
Speaker 1: and they're just in a different stage because x Son
Speaker 1: still beating up on We're trying to the subpoena that
Speaker 1: Massachusetts had filed, and so there this has been progressing
Speaker 1: across a number of years. That started with the investigations
Speaker 1: where subpoena's have been issued for forty plus years of
Speaker 1: documents internal to Exon related to their climate change research
Speaker 1: and things like these disclosures related to proxies. Was excen
Speaker 1: ever able to prove that it was politics involved. I
Speaker 1: remember when it was in the New York Court, there
Speaker 1: were a lot of allegations that this was all pure politics.
Speaker 1: So most of that was sort of resolved only on
Speaker 1: a procedural basis at the time. And that's actually part
Speaker 1: of exns affirmative defenses here, is that some of their
Speaker 1: rights are being impinged upon, and there's prosecutorial i s involved,
Speaker 1: and so, you know, even though we're at a very
Speaker 1: early stage right now, what's interesting is their emotions flying
Speaker 1: back and forth on the discovery side to try and
Speaker 1: stop Exon from pushing these affermative defenses and their rights
Speaker 1: to information backing those defenses through discovery, like depositions of
Speaker 1: some of the attorneys or documents related to you know,
Speaker 1: decision making that was involved there, which is typically very
Speaker 1: hard to get. So this, even though we wouldn't think
Speaker 1: of this as normally as a very important stage for
Speaker 1: the purpose of forecasting what's going to happen at the end,
Speaker 1: this could be material to whether X and can can
Speaker 1: turn the rhetoric of this case from hey, xcens proxies
Speaker 1: costs were X two. Well, maybe there's an element of
Speaker 1: as you said, politics involved in this and that that
Speaker 1: I think would change the tenor and potentially, you know,
Speaker 1: maybe change the levers for settlement. It sounds like a
Speaker 1: difficult case to make though, So if the case is
Speaker 1: decided against Exxon, what is the potential liability? So you know,
Speaker 1: there are a lot of numbers thrown around in the
Speaker 1: initial complaint by the State of New York. You know,
Speaker 1: they're looking for things like discorchment of profits or some
Speaker 1: damages related to inflation of the share price because they
Speaker 1: were picking these projects that actually are at higher risk
Speaker 1: because of various climate change regulations going into effect an
Speaker 1: increasing cost. So you could, if you wanted to, you
Speaker 1: could you could put a billion dollar plus number on
Speaker 1: this based on the allegations and the complaint. I mean,
Speaker 1: they say, you know, New York has said that at
Speaker 1: some point in for example, d HD related costs could
Speaker 1: be over seven billion dollars um. But a lot of
Speaker 1: that's very speculative. Thanks. That's Brandon Barnes, Bloomberg Intelligence Senior
Speaker 1: Litigation Analyst. Thanks for listening to the Bloomberg Law Podcast.
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