Texas judge lets Exxon challenge cities’ oil suits

Source: Anne C. Mulkern, E&E News reporter • Posted: Tuesday, May 1, 2018

Exxon Mobil Corp. can pursue its bid to challenge several California cities suing the oil giant over climate change impacts, a Texas judge has said.

Judge R.H. Wallace Jr., in a district court in Tarrant County, Texas, last week ruled the state is the appropriate jurisdiction for Exxon’s petition seeking to gather information for a potential countersuit.

Exxon wants authorization to question numerous municipal officials and to obtain documents. Texas law allows companies based in that state to seek that information in anticipation of filing a lawsuit. Exxon’s headquarters are in Irving, Texas.

“ExxonMobil has an inherent interest in obtaining convenient and effective relief by litigating its potential claims in Texas,” Wallace said in his decision. “ExxonMobil’s anticipated action concerns a conspiracy to suppress and chill speech and associational activities of the Texas energy sector. Texas has an inherent interest in exercising jurisdiction over actions that concern the infringement of constitutional rights within its borders.”

The California cities and counties suing oil companies are: San Francisco, Oakland, San Mateo County and Marin County in the San Francisco Bay Area; Imperial Beach in San Diego County; and Santa Cruz and Santa Cruz County.

They are targeting firms that include Exxon, Chevron Corp., BP PLC, Royal Dutch Shell PLC, Citgo Petroleum Corp., ConocoPhillips and Arch Coal Inc., as well as trade groups that include the American Petroleum Institute and California-based Western States Petroleum Association. The cases argue that the oil companies knew about climate change for decades and misled the public about it while protecting their own assets.

Exxon in its Texas court petition contends that by filing the cases in California, the cities “are attempting to stifle ExxonMobil’s exercise, in Texas, of its First Amendment right to participate in the national dialogue about climate change and climate policy.” It added that “because California courts lack personal jurisdiction over ExxonMobil, the pending California cases do not provide an appropriate forum to litigate the claims anticipated here.”

Exxon has filed a motion to dismiss the California cases, saying there’s a lack of jurisdiction because the company is headquartered in Texas.

Cases brought by San Francisco and Oakland against the five biggest oil companies are before Judge William Alsup in the U.S. District Court for the Northern District of California.

Located in the same federal courthouse, Judge Vince Chhabria has ordered that cases from Imperial Beach, San Mateo, Marin County, Richmond, Santa Cruz and Santa Cruz County should go back to state court, where they originated. A 9th U.S. Circuit Court of Appeals decision is pending on whether to uphold that ruling.

Attorneys for the cities said they were appealing the Texas judge’s decision. The petition won’t advance until a ruling is issued on those appeals.

“These proceedings in Texas are simply a smokescreen,” said John CotĂ©, communications director for San Francisco City Attorney Dennis Herrera. “Exxon’s attack on the California cities and counties that have sued Big Oil is part of their usual playbook.”

Exxon similarly sued the attorneys general of Massachusetts and New York after those states launched investigations. A federal judge dismissed Exxon’s case there, finding it based on “extremely thin allegations and speculative inferences” (Greenwire, March 30).

Oakland City Attorney Barbara Parker said in a statement that “the proceedings in Texas are more of the same shameless intimidation tactics that Exxon has used against plaintiffs in other climate change cases. … It is no surprise that Exxon will do everything in its power to obfuscate and escape accountability, rather than address the merits of our complaint.”

The law firm Sher Edling LLP represents Imperial Beach, Marin and San Mateo counties, Richmond, Santa Cruz, and Santa Cruz County.

Matt Edling, a partner at the firm, said that Exxon’s claims “are clearly frivolous and intended only to delay and distract from Exxon’s role in knowingly causing the climate-change-related damages that are affecting our clients and other communities around the country.”

2 different climate stories?

The Exxon petition also charges that the municipalities are telling investors a different story from what they say in their suits against oil companies. In paperwork connected with bond offerings, they’ve said it’s not clear how much impact climate change will cause, while the suits claim potentially billions of dollars in future damages.

Texas Judge Wallace appeared to side with Exxon on that issue.

“While the California municipalities alleged in their complaints against the energy companies that the impacts of climate change were knowable, quantifiable, and certain, they told their investors the exact opposite,” Wallace wrote. “These contradictions raise the question of whether the California municipalities brought these lawsuits for an improper purpose.”

For example, his ruling said, Oakland’s and San Francisco’s suits claim that the conduct of Exxon Mobil and other energy companies “will continue to cause ongoing and increasingly severe sea level rise harms to the cities.”

However, the municipal bonds issued by those cities “disclaim knowledge of any such impending catastrophe, stating the Cities are ‘unable to predict’ whether sea-level rise ‘or other impacts of climate change’ will occur, and ‘if any such events occur, whether they will have a material adverse effect.'”

Five of the municipalities today released a letter sent to the Securities and Exchange Commission to rebut charges made about the bond disclosures by oil industry ally Manufacturers’ Accountability Project, an arm of the National Association of Manufacturers. It’s asked for an SEC inquiry. San Mateo, Marin and Santa Cruz counties and the cities of Imperial Beach and Santa Cruz submitted an analysis by Martha Mahan Haines, who headed the SEC’s Office of Municipal Securities from 2001 to 2011.

Her report found no wrongdoing. It said that, among other facts, “information that does not yet exist or is unknown necessarily cannot not be disclosed”; “the maturity of the securities was so short that it was not reasonable to foresee any impact on their timely repayment from long-term sea level change”; and that “it is not reasonably foreseeable” that the municipalities “would ignore the risks of sea level rise” once known and fail to mitigate impacts in a way that would result in default on repayment obligations.

Exxon in its Texas filings has said that a plan to target oil companies emerged from a June 2012 gathering in La Jolla, Calif., organized by the Union of Concerned Scientists and the Climate Accountability Institute. Participants advocated for government investigations and litigation against energy companies to “pressure” the targets to provide “support for legislative and regulatory responses to global warming.”

The court document references a 2015 legal strategy paper on suing oil companies, from Pawa Law Group and attorney Matt Pawa. He’s now a partner at Hagens Berman Sobol Shapiro LLP, which represents San Francisco and Oakland.

As part of his findings on jurisdiction, Wallace said that Pawa formed links with Texas by “initiating a plan to use litigation to change corporate behavior of Texas-based energy companies at the La Jolla conference … engaging with the Rockefeller Family Fund to solidify and promote the goal of delegitimizing ExxonMobil as a political actor … [and] instigating state attorneys general to commence investigations of ExxonMobil in order to obtain documents stored in Texas.”

Pawa has previously declined to discuss allegations from Exxon and others.

Energy in Depth, an arm of the Independent Petroleum Association of America, provided the judge’s ruling.