Exxon–the world’s largest publicly traded oil and gas company–has come under fire for the dramatic differences between the company’s internal knowledge and assessments of climate change versus how it has communicated that information to investors, consumers, and the public at large. If the reports are borne out by the investigations, this could be the biggest corporate governance scandal since the Volkswagen diesel emissions-cheating fraud.
When corporations make public statements about issues that affect their bottom line, they have an obligation not to mislead investors and consumers. Facing investigations about whether it committed fraud, Exxon took the extraordinary step of suing the investigators. Exxon has challenged investigations by the Massachusetts and New York Attorneys General in both federal and state court, claiming that the investigations violate its supposed constitutional rights. On October 12, 2018 Free Speech For People filed an amicus brief, on behalf of a group of esteemed law professors, supporting the Attorneys General in the U.S. Court of Appeals for the Second Circuit and explaining why Exxon’s claim that the investigations violate the First Amendment are invalid.
Both Massachusetts’ and New York’s highest law enforcement officials are treading on solid ground supported by law and precedent. The New York Attorney General already reached a settlement with Peabody Energy concerning its representations about the potential impacts of climate change to investors and markets in 2015. The Securities and Exchange Commission exacted a stiff fine from Shell for violating anti-fraud provisions related to overstating its reserves in 2004, and has questioned Exxon’s decisions regarding whether to report impairments or write-downs on multiple occasions. In addition, Exxon’s own investors have expressed serious concerns about whether Exxon has adequately and accurately disclosed the scale and scope of its internal assessments of the risks that climate change poses to its business. Here, the investigations are focused on how Exxon’s internal information and analysis squared with its external communications to markets and market actors, such as investors, consumers, and regulators. That is the crux of the case in any securities and consumer protection investigation.
Exxon’s claims, on the other hand, are unsupported and unprecedented. As the lower court noted, Exxon’s theory that the investigations resulted from improper motives were based on nothing more than “extremely thin” allegations and speculation. And, despite seeking to cloak its profit-motivated statements in the First Amendment, Exxon failed to identify any statements that merited First Amendment protections. When publicly traded corporations make statements to the public and the markets, they must do so in compliance with the law. The mere fact that Exxon’s statements to the markets may also be of interest to the general public does not insulate them from investigation.
Constitutional scholars from across the country came together to expose the weaknesses in Exxon’s case and reiterate the basic principles of First Amendment law that Exxon ignores.Free Speech for People and Cornell Law Professor Steven Shiffrin served as counsel for the amici curiae. Free Speech For People thanks the professors who joined as amici:
Michael C. Dorf, Robert S. Stevens Professor of Law, Cornell Law School;
Daniel J.H. Greenwood, Professor of Law, Deane School of Law, Hofstra University;
Steven Heyman, Professor of Law, Chicago-Kent College of Law;
Robert Kerr, Edith Kinney Gaylord Presidential Professor, Gaylord College, University of Oklahoma;
Douglas Kysar, Deputy Dean and Joseph M. Field ’55 Professor of Law, Yale Law School;
Helen Norton, Professor and Ira C. Rothgerber, Jr. Chair in Constitutional Law, University of Colorado School of Law;
Tamara R. Piety, Professor of Law, University of Tulsa, College of Law;
Frank Pasquale, Professor of Law, University of Maryland;
Catherine J. Ross, Fred C. Stevenson Research Professor, George Washington University Law School; and
Laurence H. Tribe, Carl M. Loeb University Professor and Professor of Constitutional Law, Harvard Law School.
Read our press release.
For a full explanation of how why Exxon’s claims are unfounded, read the brief.
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Find out more about Free Speech For People’s actions to rein in Exxon’s corporate overreach.