A U.S. District Court judge in Texas dismissed a case filed by a group of former employees against ExxonMobil last year claiming the company mismanaged their retirement plan because of climate risks. But the judge gave the plaintiffs until the end of April to file an amended complaint.
The plaintiffs—all former Exxon employees—filed the complaint Attia v. Exxon under the Employee Retirement Income Security Act (ERISA). They alleged that the fossil fuel company’s retirement fund managers should have used information at their disposal about climate change and its impacts on Exxon oil reserves to hedge their bets rather than going all in on the company’s own stock.
In its motion for dismissal, Exxon argued that climate science was “uncertain” until recently, so its fiduciaries had no reason to avoid Exxon stock. In a statement, Exxon spokesperson Alan Jeffers said, “This lawsuit misstates our financial reporting and repeats the same tired allegations pushed by activists and inaccurate media reports that claim we reached definitive conclusions about climate change decades before the world’s experts and while climate science was in an early stage of development.”
In an ERISA case, not only do plaintiffs need to show that fund managers had some knowledge (internal or external) that contradicted the market value of a stock, and did not behave in a fiscally responsible manner, but also that there were viable alternative actions they could have taken. In this case, Exxon argued that none of the three alternatives proposed—disclosing the information that was allegedly kept hidden, freezing purchases of the company’s stock and hedging against a decline in ExxonMobil’s stock price—were reasonable. The first two, the company said, have been rejected by courts in previous cases and the third would be illegal if the defendants had information that the stock was overvalued, as the plaintiffs claim they did.
Judge Keith P. Ellison, of the U.S. District Court for the Southern District of Texas, Houston Division, approved the motion to dismiss last Tuesday, but gave the plaintiffs until the end of the month to amend the complaint. The plaintiffs’ lawyers indicated they would file a new complaint.
“The standard of proof for ERISA cases is hard to surmount, so we’ll keep that in mind in preparing more documentation for the amended complaint,” said Sam Bonderoff, securities fraud attorney with Zamansky, LLC, and the lead attorney for the plaintiffs.
Bonderoff said he was pleased to see the recent ruling by a federal judge dismissing Exxon’s legal challenge to the climate fraud probes by the attorneys general of Massachusetts and New York, investigations that spurred this ERISA case in the first place, but said it won’t have much bearing on amending his complaint.
“I’m happy to see that these aggressive tactics Exxon took in Massachusetts and New York have been rebuffed by the courts and that they will now have to fully comply with the subpoenas issued,” Bonderoff said. “I hope more will come to light, but I don’t necessarily expect it to before we have to file our amended complaint.”
Even if those documents were to come to light quickly, Bonderoff said they would be unlikely to be specific about decisions made by retirement fiduciaries, which is the evidence he needs to press his case. He said his firm is currently looking for that proof to add to its amended complaint.