There are allegations rolling around the internet that some big companies intentionally suppressed climate change data. Here’s the New York Times, and here’s Matt Levine of Bloomberg View. A fashionable legal theory of the moment is that this purported suppression may have violated securities disclosure laws. As perhaps an example, here’s a related (but different in important ways!) story where a public coal company agreed with the New York Attorney General to change its disclosures regarding the impact of, among other things, climate change regulations on the company’s financial performance. It seems as though at least one attorney general is prepared to use securities law as a platform for – well, I’m not quite sure what. Something about climate change. Or, more cynically, as a platform to extract settlement payments from the industry under the guise of campaigning against climate change.
But securities regulation is well outside of my area of practice. I would rather talk about whether this new theory may extend to private lawsuits outside the securities context. Levine suggests for his part that the answer probably is “no,” largely on the basis that the causal link between the alleged misrepresentations and the alleged harms perhaps is too tenuous.
That strikes me as about right in the context of classic fraud allegations. But consumer protection laws present a different question. Let’s take the Missouri Merchandising Practices Act as an example. The MMPA declares it unlawful for anyone, in connection with the sale or lease of merchandise (which, for our purposes, can safely be interpreted to mean “anything”), to omit material facts of which the seller knows or reasonably could know. A fact is material if it would make a person more or less likely to enter the sale or lease. When a person buys merchandise for personal, family, or household use and suffers an ascertainable loss of money or property as a consequence of the employment of an unlawful act – like an omission of material fact – that person gets to sue the seller for actual damages, punitive damages, and attorneys’ fees. Class actions are allowed too. Cool.
So let’s say for a moment that you sell widgets to consumers. You make your widgets in a coal-powered plant. One of your buyers is shocked – shocked! – that you didn’t disclose that you are killing the planet in your manufacture of widgets. Had you disclosed that fact, your buyer would not have purchased the widget at all, or would have paid a reduced price for it. Can your buyer sue you under the MMPA? Can your buyer sue on behalf of a putative class?
I mean, the answer obviously has to be “maybe,” because as far as I’m aware nobody has actually tried this under the MMPA. But let’s take a closer look. The widget is merchandise, so check that box. He bought the widget, so check that box. He bought the widget for personal, family, or household use, so check that box. You didn’t disclose the fact of the coal-powered plant, and clearly you knew about it, so check those boxes.
The tougher questions, I guess, are whether you failed to disclose a material fact, and whether the buyer suffered an ascertainable loss of money or property. Materiality of an omitted fact generally is a fact question for a jury, so your buyer at least probably survives a summary judgment motion. And, Missouri courts generally hold that purchase of merchandise at a price greater than one would have paid if omitted facts were disclosed is sufficient to establish an ascertainable loss of money or property. So things are looking kind of bad, and that’s before we even dive into the class analysis. (Suffice to say that the failure to disclose probably is a class-wide issue, but maybe damages predominate? I don’t know. I’d be worried if I was trying to avoid class certification on damages issues alone. Usually common law fraud classes can be killed based on the individualized issue of reliance, but reliance isn’t an element of an MMPA claim).
I’m not saying a claim like this is a sure-fire winner, but it’s strong enough to have me concerned. Right now the focus is on energy companies, but once plaintiffs’ lawyers run out of energy companies, they’re going to start looking elsewhere. It’s worthwhile to look at the consumer protection laws of your state and the other states in which you do business, and question whether it’s time to have more discussions with the state legislatures about putting reasonable boundaries on the scope of these acts.