When Massachusetts residents need to refuel, a quick visit to Exxon’s website directs them to the nearest filling station emblazoned with the familiar Exxon signs. Once there, consumers can use Exxon credit cards to purchase gasoline from pumps bearing the oil giant’s logo.
But in trying to shake its way out of an investigation into Exxon’s business practices in Massachusetts, the company attorneys argued in a hearing Tuesday that Exxon doesn’t sell gasoline in the state and therefore, Massachusetts Attorney General Maura Healey does not have jurisdiction to investigate the oil giant.
That comment from Exxon attorney Justin Anderson drew disbelief from one justice on the Massachusetts Supreme Judicial Court, who said the court “is going to have real trouble believing Exxon gasoline isn’t in Massachusetts.”
The arguments in Tuesday’s hearing focused on the licensing agreements between Exxon and its 300 Massachusetts franchises and whether they are sufficient to convey jurisdiction over the company.
Healey served Exxon Exxon with a Civil Investigative Demand (CID) in April 2016 as part of an investigation into whether the company deceived Massachusetts shareholders by failing to divulge potential climate change-related risks to their investments. Healey is also investigating whether the corporation violated Massachusetts consumer protection laws by misleading consumers on the impacts of its products on climate change.
The oil giant responded by petitioning a Massachusetts court claiming the lack of jurisdiction and alleging that Healey’s investigation was politically motivated.
Massachusetts Superior Court Judge Heidi E. Brieger said in January that “zealously” pursuing defendants does not make Healey’s actions improper and ordered Exxon to turn over the documents requested in the CID, rejecting Exxon’s allegation that Healey’s request was overbroad, arbitrary and burdensome.
Exxon filed a federal case in Texas, which was transferred to New York in March and is ongoing. In that case, Exxon is alleging the state investigations violate its First Amendment rights, an argument that drew skepticism from a U.S. District Court judge in a hearing last week.
Richard Johnston, an attorney for Healey’s office, said evidence to support jurisdiction in Massachusetts lies in the franchise agreements.
According to Johnston, the agreement states that Exxon controls the advertising and marketing for each franchise and refers to Massachusetts residents as “our customers.” He said the CID asks for documents and information that could help his office determine if Exxon deceived Massachusetts customers on the effect its gasoline has on climate change.
Anderson argued that Exxon does not have sufficient business connections in the state.
Anderson said the franchises, not Exxon, are responsible for local advertising. Exxon contends its advertisements target a nationwide audience and don’t specifically target Massachusetts residents.
Johnston said that argument is asking the court to “suspend common sense.”
“They tell people where to go to buy products on websites. Press releases say they are partnering with Massachusetts State Police to develop an environmentally friendly motor oil,” said Johnston, who asked the court not to be tricked into focusing on the “little guy” or franchisees.
He also said that not telling Massachusetts customers about the detrimental effect of their product on climate change is deception.
Exxon also contends that it shouldn’t be subject to investigation for shareholder deception because it does not directly sell to investors in Massachusetts. Stock purchased in the state, Anderson said, is done through third parties.
“There is no evidence in the record that any of those stocks were purchased directly from Exxon,” said Anderson.
Anderson said an investigation into whether Exxon deceived third parties who sell to large numbers of shareholders would likely fall under the realm of a Securities and Exchange Commission (SEC) investigation, not a state investigation.
The current set of probes into Exxon has spanned three states and generated thousands of pages of court documents.
When asked by the court where to start, Johnston suggested they look at Exxon’s 2014 Managing the Risks report, which he said was sent to all shareholders, including those in Massachusetts. That report denied the risks of climate change and told investors that climate change would not result in the stranding of its assets.
Johnson said only two years later Exxon had announced it may have to strand assets and in 2017 they announced just that, resulting a shareholder suit in Texas that is still pending.
The Supreme Judicial Court justices now have the task of examining previous fillings from both sides and will attempt to render a decision within 130 days.