On May 20, 2022, the Massachusetts Supreme Court upheld a Massachusetts state court decision to allow an ESG climate lawsuit to proceed against ExxonMobile (Exxon) by the Commonwealth’s Attorney General. While the issue addressed by the state’s Supreme Court was narrowly focused, the lawsuit is nevertheless noteworthy due to the fact that, at its heart, it alleges that Exxon mislead consumers and investors with respect to climate-related risks faced by the company. The lawsuit shows the continued importance for companies to not misrepresent, appear to mislead, or put forth vague statements that pertain to ESG in company statements, disclosures, prospectus materials, or marketing materials. Failing to do so could lead to significant litigation risks.
Exxon ESG Climate Lawsuit
In 2019, the Commonwealth of Massachusetts filed a Complaint against Exxon “for misleading Massachusetts investors about the fossil fuel-driven climate change risks to its business and deceptively advertising its fossil fuel products to Massachusetts consumers.” More specifically, the Attorney General alleged that Exxon failed to disclose material facts to investors related to climate change initiatives and the impact on Exxon’s business. In addition, the state alleged that Exxon’s marketing materials mislead consumers regarding the impact that Exxon’s products had on climate change. Finally, the Complaint alleged that Exxon engaged in greenwashing by advertising its efforts to fight climate change and reduce carbon emissions in order to influence consumer product decisions.
In state court, Exxon petitioned the court to dismiss the case brought by the Attorney General, arguing that the Massachusetts anti-SLAPP (strategic litigation against public participation) statute protected Exxon’s alleged practices as they constituted permissible “petitioning” of the government. The state court, however, ruled that at least some of the alleged practices had nothing to do with marketing to the government and anti-SLAPP protection therefore did not apply to Exxon in this case. The state court held that anti-SLAPP protection only applies to actions that are “solely based on” petitioning actions.
The Supreme Court of Massachusetts upheld the state court decision, albeit for a different reason. Instead, the Massachusetts Supreme Court held that the anti-SLAPP statute was not applicable to actions brought by the Attorney General because the role of that office is to bring civil enforcement actions. Holding that anti-SLAPP statutes bar the Attorney General from bringing such actions would prevent the Attorney General from carrying out the role that it is required to fulfill. The state Supreme Court also looked to the legislative history behind the anti-SLAPP statute and found that there was no legislative intent to bar lawsuits brought by the Attorney General. As such, the state Supreme Court held that the lawsuit against Exxon should be permitted to proceed.
Impact of Decision On Businesses
While the court ruling regarding Attorney General legal action and anti-SLAPP protection is certainly noteworthy from a legal perspective, the lawsuit is also highly relevant as an ESG climate lawsuit. Most of the state’s allegations against Exxon focus on the company’s statements that may have mislead consumers and investors with respect to climate related issues faced by Exxon. The fuel industry is perhaps the most impacted industry by climate related matters, and so the ruling may have ripple effects on similar litigation in other states. In addition, the lawsuit is a noteworthy example of state-level regulatory enforcement or legal action related to ESG issues that add to the federal government’s efforts on the same front.
Companies must proceed with caution in making representations that touch on ESG topics. Any statements, disclosures, prospectus materials, or even marketing materials must be scrutinized closely for accuracy, while sound and reasonable marketing statements that touch on ESG factors must be the standard for companies to follow.
CMBG3 Law LLC has represented clients in ESG’s environmental and social related issues for years. We assist companies with ESG related plans, goals, and public statements. We regularly consult with private equity, banking, and investment world firms to identify future risk potentials from portfolios under consideration, and assist issuers and investment world firms alike with ESG related issues. For more information about our ESG and risk assessment consulting services, please contact John Gardella (617-279-8225).