WEBVTT - Is New York’s Battle Against Exxon Uphill?

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<v Speaker 1>Welcome to the Bloomberg Law Podcast. I'm June Grosso. Every

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<v Speaker 1>day we bring you insight and analysis into the most

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<v Speaker 1>important legal news of the day. You can find more

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<v Speaker 1>episodes of the Bloomberg Law Podcast on Apple podcast, SoundCloud

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<v Speaker 1>and on Bloomberg dot com slash podcasts. Billions of dollars

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<v Speaker 1>are at stake in New York's case against x On

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<v Speaker 1>Mobile over its climate change disclosures. Joining me is Brendan Barnes,

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<v Speaker 1>Bloomberg Intelligence Senior Litigation Analyst. Brendan It's hard to keep

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<v Speaker 1>track of all the climate change cases out there. How

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

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<v Speaker 1>a great question. I think that's part of the reason

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<v Speaker 1>why this case deserves being pulled out and discussed differently.

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<v Speaker 1>So a lot of the other cases we've talked about

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<v Speaker 1>in the past are related to various states of damage

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<v Speaker 1>or allegations of erosion to coastal areas, where you're talking

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<v Speaker 1>about actual property impacts, Whereas here New York's really pinning

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<v Speaker 1>their climate change arguments onto shareholder fraud as the main

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<v Speaker 1>thrust of the case against x in here. So what's

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<v Speaker 1>the core of the claim? Well, it really revolves around

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<v Speaker 1>sort of a unique idea that Exxon used a proxy

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<v Speaker 1>cost in its calculations, and it's reporting to the public

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<v Speaker 1>for what the cost of g h G or greenhouse

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<v Speaker 1>gas emission regulations would be in the future. So down

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<v Speaker 1>the line, when they're assessing these different individual projects, how

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<v Speaker 1>much was the cost of g HD regulations going to

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<v Speaker 1>actually impact whether those projects will be worthwhile? Has this

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<v Speaker 1>approach been tried before? It has actually Back in Peabody Energy,

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<v Speaker 1>which if you were called, was a pretty big coal producer,

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<v Speaker 1>was sued sort of under the same idea or investigated,

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<v Speaker 1>then sued, but reached a very quick settlement with New

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<v Speaker 1>York and the result wasn't actually any financial damages, but

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<v Speaker 1>it was they had to change their climate disclosures and

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<v Speaker 1>there were some tweaks to how they did that. Um

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<v Speaker 1>and that's that's sort of the same set of allegations

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<v Speaker 1>they're being used here. So Exxon has been battling this

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<v Speaker 1>case in New York and Massachusetts. The allegations here, I

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<v Speaker 1>would say, furiously would be a word to use. Is

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<v Speaker 1>it likely to settle? I would I would add vigorous,

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<v Speaker 1>all right, maybe a tough word to use, but you know,

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<v Speaker 1>from our perspective, we've watched XN for a number of

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<v Speaker 1>years and how they approach litigation generally, and how they

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<v Speaker 1>approach litigation from government entities, and our expectation is that,

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<v Speaker 1>you know, you're basically talking about two different sets of

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<v Speaker 1>principles here that are going up against each other. And

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<v Speaker 1>it's a little bit less about the money involved because

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<v Speaker 1>we don't expect those dollar amounts get too high, So

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<v Speaker 1>we don't think that settlement is really the option. And

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<v Speaker 1>we expect Exxon, you know, their their profile here, they're

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<v Speaker 1>probably gonna litigate this true trial and we expect that

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<v Speaker 1>will probably extend into any appeals that would be potentially necessary.

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<v Speaker 1>So you think they will appeal if they lose a trial,

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<v Speaker 1>if they lose, and if they win, I'm sure there

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<v Speaker 1>will be an appeal on the other side. That's definitely

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<v Speaker 1>been the case in the past. So these climate change

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<v Speaker 1>cases can be an uphill battle in different ways. Whose

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<v Speaker 1>favorite to win this So for this one, we we

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<v Speaker 1>still expect Exxon has the upper hand, and a lot

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<v Speaker 1>of that is the result of I think New York

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<v Speaker 1>State government painting these allegations with a pretty broad rush.

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<v Speaker 1>When Xon seems to have pretty specific rebuttals. So for example,

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<v Speaker 1>you know, the allegation is, hey, you guys used a

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<v Speaker 1>proxy cost that we think was probably too low based

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<v Speaker 1>on your representations for all these projects, and that includes

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<v Speaker 1>you know, this oil stands project in Canada and excell

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<v Speaker 1>and says no, wait a second, look, if you look

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<v Speaker 1>at on an individual basis, we actually used a proxy

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<v Speaker 1>cost that's the statutory proxy cost, and we didn't use

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<v Speaker 1>anything above that or below that. And so I have

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<v Speaker 1>a feeling once we get past this nation stage, we're

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<v Speaker 1>going to see a lot more of that specific rebuttal.

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<v Speaker 1>And also there's sort of a more salacious point raised

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<v Speaker 1>in defense, which is that at some point New York

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<v Speaker 1>a g attorney general had met with those who are

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<v Speaker 1>in favor of climate change regulation and had reached some

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<v Speaker 1>alleged agreement in a backroom deal to try and get

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<v Speaker 1>an Exxon and other companies like that to try and

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<v Speaker 1>force climate change from a policy perspective through the courts.

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<v Speaker 1>I was going to use the word sexy that you know,

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<v Speaker 1>this suit doesn't seem as sexy, you might say, as

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<v Speaker 1>some of the other climate change lawsuits, because it's narrowed

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<v Speaker 1>in the way that it is well, that's right, and

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<v Speaker 1>I think you know New York is not new at

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

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<v Speaker 1>using the Martin Act to kind of leaver this, and

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<v Speaker 1>they've used that in a number of different cases in

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<v Speaker 1>different ways. It's very broad based approach to trying to

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<v Speaker 1>enforce shareholder rights and make sure that financial disclosures are

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<v Speaker 1>appropriate when necessary. Prosecutors love the Martin Act. Now, what

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<v Speaker 1>about the Massachusetts because the a G in Massachusetts was

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<v Speaker 1>also pursuing this against Exxon, same fight, different state, right,

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<v Speaker 1>And so part of this is is the allegation that

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<v Speaker 1>in Xen's defense that you know, there was some sort

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<v Speaker 1>of clusion between Keely of Massachusetts Schierman in New York

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<v Speaker 1>and they're just in a different stage because x Son

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<v Speaker 1>still beating up on We're trying to the subpoena that

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<v Speaker 1>Massachusetts had filed, and so there this has been progressing

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<v Speaker 1>across a number of years. That started with the investigations

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<v Speaker 1>where subpoena's have been issued for forty plus years of

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<v Speaker 1>documents internal to Exon related to their climate change research

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<v Speaker 1>and things like these disclosures related to proxies. Was excen

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<v Speaker 1>ever able to prove that it was politics involved. I

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<v Speaker 1>remember when it was in the New York Court, there

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<v Speaker 1>were a lot of allegations that this was all pure politics.

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<v Speaker 1>So most of that was sort of resolved only on

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<v Speaker 1>a procedural basis at the time. And that's actually part

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<v Speaker 1>of exns affirmative defenses here, is that some of their

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<v Speaker 1>rights are being impinged upon, and there's prosecutorial i s involved,

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<v Speaker 1>and so, you know, even though we're at a very

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<v Speaker 1>early stage right now, what's interesting is their emotions flying

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<v Speaker 1>back and forth on the discovery side to try and

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<v Speaker 1>stop Exon from pushing these affermative defenses and their rights

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<v Speaker 1>to information backing those defenses through discovery, like depositions of

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<v Speaker 1>some of the attorneys or documents related to you know,

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<v Speaker 1>decision making that was involved there, which is typically very

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

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<v Speaker 1>of this as normally as a very important stage for

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<v Speaker 1>the purpose of forecasting what's going to happen at the end,

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<v Speaker 1>this could be material to whether X and can can

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<v Speaker 1>turn the rhetoric of this case from hey, xcens proxies

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

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<v Speaker 1>as you said, politics involved in this and that that

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<v Speaker 1>I think would change the tenor and potentially, you know,

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<v Speaker 1>maybe change the levers for settlement. It sounds like a

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<v Speaker 1>difficult case to make though, So if the case is

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<v Speaker 1>decided against Exxon, what is the potential liability? So you know,

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<v Speaker 1>there are a lot of numbers thrown around in the

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<v Speaker 1>initial complaint by the State of New York. You know,

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<v Speaker 1>they're looking for things like discorchment of profits or some

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<v Speaker 1>damages related to inflation of the share price because they

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<v Speaker 1>were picking these projects that actually are at higher risk

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<v Speaker 1>because of various climate change regulations going into effect an

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<v Speaker 1>increasing cost. So you could, if you wanted to, you

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<v Speaker 1>could you could put a billion dollar plus number on

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<v Speaker 1>this based on the allegations and the complaint. I mean,

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<v Speaker 1>they say, you know, New York has said that at

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<v Speaker 1>some point in for example, d HD related costs could

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<v Speaker 1>be over seven billion dollars um. But a lot of

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

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<v Speaker 1>Litigation Analyst. Thanks for listening to the Bloomberg Law Podcast.

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<v Speaker 1>You can subscribe and listen to the show on Apple Podcasts, SoundCloud,

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<v Speaker 1>and on Bloomberg dot com. Slash podcasts. I'm June Bralso

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<v Speaker 1>this is Bloomberg. A drink Peter to give the D