Oil and gas companies that have taken public positions on the threat of climate change – or have funded industry groups or independent scientific research that has done so – may become targets of US investigation, litigation, or other governmental actions.
In March 2016, for example, a coalition of 17 US state attorneys general (AGs) announced a joint effort to investigate oil and gas companies that allegedly had mislead the public about the risks of climate change and their own purported role in causing climate change. Similarly, US Attorney General Loretta Lynch has stated that the US Department of Justice (DOJ) has discussed the issue, and has "referred it to the FBI to consider whether or not it meets the criteria for which we could take action on." (see cnsnews.com, "AG Lynch: DOJ Has Discussed Whether to Pursue Civil Action Against Climate Change Deniers").
The proponents of these actions have emphasized with importance, in their view, of obtaining internal company documents to enable governmental and private plaintiffs to prove allegedly fraudulent intent and to reveal purported conspiracies, including attempts to support industry trade organizations or to fund scientific research casting doubt on the scientific consensus regarding climate change. (see Climate Accountability Institute, "Establishing Accountability for Climate Change Damages: Lessons from Tobacco Control").
While some of the still nascent efforts to investigate climate change claims already have faltered and more full-fledged climate change claims — if they are ever pursued — likely would encounter several significant impediments to establishing liability and entitlement to any remedial relief, oil and gas companies continue to face US litigation and investigation risks on a number of fronts, including:
- Use of the subpoena power by state attorneys general (AGs) to obtain company documents and testimonial evidence from corporate officer and employees.
- State prosecutor investigations under state securities laws such as New York's Martin Act (see our reporting on this here: New York Attorney General investigates energy companies regarding climate disclosures.
- The pursuit of civil racketeering claims by State AGs, the US Department of Justice (DOJ), or private plaintiffs.
- Claims brought by private plaintiffs under state consumer protection laws, with state legislators potentially seeking to facilitate these claims by passing legislation that suspends or extend the statute of limitations under the relevant state statute.
State Attorneys General Issue Subpoenas
Several state AGs have issued climate change-related subpoenas to oil and gas companies over the past year. One of the first to do so was New York AG Eric Schneiderman, who subpoenaed ExxonMobil and Peabody Energy based on potential violations of the Martin Act — New York's securities fraud statue. These subpoenas sought information regarding the companies' understanding of and public statements regarding climate change over the past four decades. Soon after receiving the subpoena, Peabody reached a settlement with New York, in which it agreed to revise its shareholder disclosures so as to "accurately and objectively" disclose the risks to investors and the public posed by climate change. (see "A.G. Schneiderman Secures Unprecedented Agreement With Peabody Energy To End Misleading Statements And Disclose Risks Arising From Climate Change"). ExxonMobil has complied with its subpoena and has begun producing responsive information. (see Increasing Number Of Investigations Into Fossil Fuel Industry’s 'Disinformation Campaign).
AGs in Massachusetts and the Virgin Islands have also subpoenaed ExxonMobil for internal documents related to its understanding of the risks of climate change. These subpoenas focus on ExxonMobil's relationship with trade and advocacy groups that allegedly cast doubt on the risks of climate change. The civil investigative demand ("CID") issued by Massachusetts, for example, includes a request for ExxonMobil's communications with 12 industry groups and think tanks. The Virgin Islands — which recently withdrew its subpoenas — had requested documents both from ExxonMobil and from the Competitive Enterprise Institute, a think tank and advocacy group. California has also announced that it is investigating ExxonMobil, but has not stated that it has subpoenaed the company.
ExxonMobil has pushed back aggressively against the subpoenas from the Virgin Islands and Massachusetts, though it is complying with New York's subpoena. ExxonMobil filed suit against both the Virgin Islands and Massachusetts, claiming that the subpoenas violated its constitutional right to free speech and its Fourth Amendment right to be free from unreasonable searches. In late June, the Virgin Islands agreed to withdraw its subpoena; Massachusetts' response to ExxonMobil's countersuit is due in August, though the state has agreed not to enforce the CID while ExxonMobil's countersuit is pending.
Civil RICO Claims Loom, But Have Not Yet Arrived
Many proponents of climate change activism have proposed bringing civil claims under the Racketeer Influenced and Corrupt Organizations ("RICO"), or individual "baby RICO" state laws. Indeed, the Virgin Islands subpoena was predicated on an investigation into whether ExxonMobil had violated the Virgin Islands' Criminally Influenced and Corrupt Organizations Act.
One of the most vocal proponents of this strategy is Senator Sheldon Whitehouse of Rhode Island, who has called the parallels between tobacco litigation (where RICO claims were pursued against the industry) and potential climate change litigation "striking" — both involve allegations that "the industry joined together in a common enterprise and coordinated strategy" to cast doubt on an otherwise widely-accepted scientific consensus. (see "The Fossil-Fuel Industry’s Campaign To Mislead The American People"). Because US RICO law and state "baby RICO" law are intended to punish illegal and fraudulent RICO enterprises, many proponents of climate change litigation see civil RICO claims as a potentially promising avenue for pursuing these claims.
As noted above, Attorney General Lynch has acknowledged the potential for an investigation that may lead the US to assert civil RICO claims against energy companies, but has not commented beyond that.
Climate Change Claims Face Significant And Potentially Insurmountable Legal Hurdles
While the push to investigate and punish oil and gas companies for taking allegedly misleading public positions on climate change is still in its relative early days, would-be claims likely will face several substantial obstacles. For starters, broad use of subpoena powers may run afoul of the US constitution. Indeed, as argued by ExxonMobil in its suits challenging the Virgin Islands and Massachusetts subpoenas, the use of subpoena power in this context violates ExxonMobil’s First and Fourth Amendment rights under the US constitution.
Other potentially fatal issues have yet to be litigated. Among these are:
- Plaintiffs may be unable to prove standing and injury — Does a private citizen have the right to bring suit for damages caused to the climate? Is this a concrete injury that would give a private citizen standing to sue? Even if it did, private plaintiff claims brought under RICO, securities fraud laws, or state consumer protection laws will need to show a causal link between the defendant’s activities, statements or concealments and the plaintiffs’ purported injuries, which is likely to be a difficult causal burden for would-be plaintiffs seeking to establish damage as a result of alleged climate change fraud.
- Government RICO claims are limited to injunctive relief — Where the government is the civil RICO plaintiff, it is not entitled to money damages, but instead, is limited only to “forward looking” injunctive relief. The DOJ’s RICO lawsuit against the tobacco industry reaffirmed controlling US law on this key point. (see U.S. v. Philip Morris USA, Inc, 396 F.3d 1190, 1200 (D.C. Cir. 2005) (the remedies available to the government "are all directed toward future conduct and separating the criminal from the RICO enterprise to prevent future violations").
- Claims may be time barred — Claims may be time barred by the applicable statute of limitations under statutes like RICO or state consumer protection statutes, as most of the purported misconduct took place several years, or even decades, ago. Further, many oil and gas companies now acknowledge the existence of climate change and advocate for certain policy remedies — ExxonMobil, for example, included a disclosure about the risks of climate change in its 2006 10-K filing with the SEC, and for the past several months has been advocating a carbon tax to limit greenhouse gas emissions. (see "Exxon Touts Carbon Tax to Oil Industry").
Legislators in California recently attempted to address the statute of limitations hurdle by introducing a bill that would have lifted the four-year statute of limitations for claims brought under the state's unfair competition law that related to claims regarding scientific evidence of climate change. However, last month the California state senate withdrew the bill from consideration before a floor vote.
- Claims brought under US statutes may not proscribe extraterritorial conduct — For oil and gas companies that are non-US corporations whose allegedly fraudulent activities and statements regarding climate change may have taken place outside the territorial bounds of the United States, these companies may be beyond the reach of US subpoenas and claims brought under various US state and federal statutes. While the extraterritorial reach of US statutes is statute-specific and depends on the text and purpose of the particular statute, there is a longstanding principle of American law that absent a clear intent to the contrary, US legislatures do not intend for US laws to proscribe extraterritorial conduct. This strong presumption against extraterritoriality may limit the reach of climate change claims brought against non-US corporations.
Conclusion: What Are the Risks Going Forward?
Despite the many potential challenges and impediments to climate change subpoenas and lawsuits, there remains a strong political interest among many US legislators and prosecutors to investigate and potentially litigate climate change claims, and more generally, to use the investigatory and litigation process to educate the public about climate change and the purported role of oil and gas companies in casting doubt on the climate change science. Consider too that New York's subpoena of ExxonMobil — notably, a subpoena based on a securities law, rather than fraud or consumer protection laws — remains unchallenged, and ExxonMobil has produced a significant amount of information in response to New York's subpoena. Moreover, and as is often the case in assessing US litigation risk, there is the threat of private plaintiff suits against oil and gas companies, including suits brought under RICO, securities fraud laws, and state consumer protection statutes.
To summarize, oil and gas companies should not discount the risk of receiving a subpoena or complaint from a state AG, or potentially the DOJ, that seeks a broad swath of documents regarding their positions on climate change — especially if the company has been a public skeptic about the risks of climate change, or has funded or joined climate change-skeptic industry groups. The political will to seek documents, and perhaps ultimately assert claims, against oil and gas companies still exists and will likely not soon abate.