Opinion ID: 6323334
Heading Depth: 2
Heading Rank: 1

Heading: State Court Investigations

Text: In 2015 and 2016, respectively, the Attorneys General of New York and Massachusetts commenced investigations into “whether ExxonMobil committed consumer or securities fraud by misrepresenting its knowledge of climate change.” J. App’x at 396. In November 2015, the New York Attorney General (then-Attorney General Eric Schneiderman) served Exxon with a subpoena seeking documents and communications related to its research on climate change. In April 2016, the Massachusetts Attorney General served a Civil Investigative Demand (the “CID”) to investigate potential violations of Section 2 of Massachusetts General Laws chapter 93A, which prohibits “unfair or deceptive acts or practices” in “trade or commerce.” J. App’x at 1026. The CID focused on the marketing and sale of fossil fuel products to Massachusetts consumers, and on the marketing and sale of Exxon securities to investors. The New York Attorney General sought additional documents related to the ongoing investigation in the fall of 2016. Although Exxon initially produced 8 documents in response to both New York subpoenas, the New York Attorney General moved to compel further compliance with the 2015 subpoena in November 2016. Shortly thereafter, Justice Barry R. Ostrager, who oversaw that proceeding, set a deadline for Exxon to complete production. Exxon subsequently certified compliance with the November 2015 subpoena. B. Exxon’s Federal Action in the Northern District of Texas On June 15, 2016, Exxon filed a complaint against Massachusetts Attorney General Healey in the United States District Court for the Northern District of Texas (Kinkeade, J.) seeking declaratory and injunctive relief under Texas and federal law. Among other things, Exxon sought to enjoin the CID, alleging that the Massachusetts investigation was pretextual and violated the dormant Commerce Clause and Exxon’s rights under the First Amendment, its right to be free of unreasonable searches under the Fourth Amendment, and its due process rights under the Fourteenth Amendment. Exxon moved for a preliminary injunction, while Attorney General Healey cross-moved to dismiss. The district court sua sponte ordered certain jurisdictional discovery relevant to Attorney General Healey’s motion to dismiss. Exxon filed an amended complaint on November 10, 2016, adding then- 9 Attorney General Schneiderman as a defendant and including allegations pertaining to the New York investigation. In addition to asserting various constitutional claims, Exxon also alleged that the two Attorneys General conspired to silence and intimidate one side of the climate policy debate through pretextual investigations. In support of its claims that the Attorneys General were biased and conducted investigations with improper political motives, Exxon pointed to, among other things, public comments made by both Attorneys General at an “AGs United for Clean Power” conference. Exxon also alleged that the two offices received private presentations from climate activists and lawyers, who enlisted the public officials to utilize state investigative authority to bring fossil fuel companies’ internal corporate documents to light. The Attorneys General eventually moved to dismiss Exxon’s amended complaint. In December 2016, the Northern District of Texas court stayed its prior jurisdictional discovery order, and, following the Fifth Circuit’s denial of the Massachusetts Attorney General’s petition for a writ of mandamus, ordered briefing on its ability to exercise personal jurisdiction over the Attorneys General. C. Exxon’s Petition in Massachusetts State Court On June 16, 2016, one day after Exxon filed its original complaint against the 10 Massachusetts Attorney General in Texas, Exxon separately petitioned a Massachusetts Superior Court to set aside the CID and disqualify Attorney General Healey. In that petition, Exxon contended – among other things – that the CID violated state constitutional protections for free speech and freedom from unreasonable searches, and that the CID was arbitrary and capricious. Acknowledging that its petition raised issues that potentially overlapped with those in its federal suit, Exxon requested that the Massachusetts Superior Court grant a stay pending the outcome of the federal litigation in Texas. The Massachusetts Attorney General cross-moved to compel Exxon to comply with the CID. On January 11, 2017, the Massachusetts Superior Court denied Exxon’s petition to set aside the CID and granted the Massachusetts Attorney General’s motion to compel. The Superior Court rejected Exxon’s assertion that the Attorney General’s actions constituted political bias or viewpoint discrimination rising to the level of arbitrary and capricious conduct, determining instead that the Attorney General had “assayed sufficient grounds – her concerns about Exxon’s possible misrepresentations to Massachusetts consumers – upon which to issue the CID” and thus acted in good faith. J. App’x at 1017; see id. at 1016. But the 11 court declined to consider Exxon’s free speech claim at that time, reasoning that the Attorney General was still investigating whether Exxon’s statements or omissions in communications to consumers were misleading or deceptive, and that misleading or deceptive speech would not be “entitled to any free speech protection.” Id. at 1017 n.2. The court also denied Exxon’s motion to disqualify Attorney General Healey, finding that her comments about the investigation at the “AGs United for Clean Power” conference did not reveal bias. On February 8, 2017, Exxon appealed the Superior Court’s order. In April 2018, the Supreme Judicial Court of Massachusetts (“SJC”) affirmed the Superior Court’s decision. On January 7, 2019, the United States Supreme Court denied Exxon’s petition for a writ of certiorari to review the SJC’s decision. D. Transfer of the Federal Action to the Southern District of New York On March 29, 2017, while the Massachusetts action was pending, Judge Kinkeade sua sponte transferred the federal case from the Northern District of Texas to “the proper venue” – the Southern District of New York – where it was assigned to Judge Caproni. J. App’x at 988–1001. After receiving additional briefing on the Attorneys General’s motions to dismiss and Exxon’s cross-motion to amend its complaint, the district court (Caproni, J.) issued an order on March 12 29, 2018, dismissing the amended complaint with prejudice and denying Exxon’s request for leave to amend as futile. Although the court found that Exxon’s claim was ripe and that it had personal jurisdiction over the Massachusetts Attorney General, it held that Exxon’s claims against the Massachusetts Attorney General were barred by res judicata – also known as claim preclusion – since Exxon could have raised those claims in the Massachusetts proceeding. As to Exxon’s remaining causes of action against the New York Attorney General, the court dismissed those claims pursuant to Federal Rule of Civil Procedure 12(b)(6), concluding that Exxon had failed to plead an improper motive – a prerequisite for each of Exxon’s constitutional claims. E. Appeal of District Court’s Dismissal Exxon timely appealed, challenging both the dismissal of its claims and the denial of its motion to amend. Exxon asserts that it stated plausible constitutional claims that were not barred by res judicata, and that the district court failed to address Exxon’s viewpoint discrimination claim, incorrectly analyzed Exxon’s allegations, wrongly demanded evidence at the pleading stage, and improperly drew inferences in favor of the Attorneys General. After the merits briefing on appeal concluded, the New York Attorney 13 General closed the New York investigation and brought an enforcement action against Exxon in state court alleging “that Exxon engaged in a scheme to deceive investors and the investment community about the risks posed to its business by climate change regulation,” in violation of New York law. See Dkt. 190 (“MTD”) at 5 (internal quotation marks omitted). The New York Attorney General then moved in this Court to dismiss the appeal as moot, arguing that because the Attorney General had ended the investigation on which Exxon’s claims are based, there was no longer a live controversy capable of redress. Exxon opposed the motion on several grounds, including its contention that a live controversy still existed because the relief sought in the federal action would prevent the New York Attorney General from using wrongfully obtained documents in the state enforcement action. Exxon also contended that the New York Attorney General’s termination of the investigation fell under mootness exceptions for voluntary cessation of challenged conduct and conduct capable of repetition but evading review. The New York Attorney General’s motion was referred to this panel to be considered with Exxon’s appeal from the district court’s ruling. After the parties completed briefing on the motion to dismiss in this Court, 14 the state enforcement action proceeded to trial in the Commercial Division of the New York State Supreme Court. On December 10, 2019, after a twelve-day trial, Justice Ostrager issued a thirty-one-page decision in Exxon’s favor. See People v. Exxon Mobil Corp., 119 N.Y.S.3d 829, 2019 WL 6795771 (N.Y. Sup. Ct. Dec. 10, 2019). Among other things, Justice Ostrager concluded that, after an extensive three-and- a-half-year investigation and pre-trial discovery period during which Exxon produced “millions of pages of documents and dozens of witnesses for interviews and depositions,” id. at , the New York Attorney General “failed to prove [at trial], by a preponderance of the evidence, that ExxonMobil made any material misstatements or omissions about its practices and procedures that misled any reasonable investor,” id. at . Justice Ostrager further emphasized that the New York Attorney General had not produced “testimony . . . from any investor who claimed to have been misled by any [of Exxon’s] disclosure[s], even though the Office . . . had previously represented it would call such individuals as trial witnesses.” Id. On January 24, 2020, the New York Attorney General represented she would not appeal Justice Ostrager’s ruling, and the time in which to do so has since expired. On October 24, 2019 – while this appeal was pending and the New York trial 15 was in its third day of testimony – the Massachusetts Attorney General filed a civil complaint against Exxon under the Consumer Protection Act. That action, which was removed to federal court and has since been remanded to state court, is still ongoing. See Commonwealth v. Exxon Mobil Corp., No. 1984CV03333BLS1, 2021 WL 3493456, at  (Mass. Super. Ct. June 22, 2021) (denying Exxon’s motion to dismiss).