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Climate change in the courts: Big Oil and Big Tobacco

July 15, 2016 by Lana Ulrich


Shell Puget Sound Refinery (Shell Oil Company), Anacortes, Washington (credit: Wikimedia Commons)
Shell Puget Sound Refinery (Shell Oil Company), Anacortes, Washington (credit: Wikimedia Commons)

In November 2015, New York Attorney General (AG) Eric Schneiderman issued a subpoena to ExxonMobil for “documents on what Exxon knew about climate change and what it told shareholders and the public.” The subpoena compels Exxon to hand over scientific research and communications about climate change dating back to 1977, before the company’s merger with Mobil in November 1999.

On March 29, 2016, a coalition of state attorneys general—referred to as the “Green 20”—teamed up with former Vice President Al Gore and announced their collective efforts to deal with the problem of climate change. Gore explained that Big Oil was being targeted because companies like Exxon have misled the public about the role that fossil fuels play in climate change. He compared this to the tobacco industry’s deception of the public health risks of smoking uncovered in the 1990s, conduct that also faced a legal onslaught by state AGs.

Indeed, this legal assault on “Big Oil” has been compared to the lawsuits brought against “Big Tobacco” in recent decades. As Brandon Garrett, law professor at the University of Virginia, said, “This could open up years of litigation and settlements in the same way that tobacco litigation did, also spearheaded by attorneys general. In some ways, the theory is similar—that the public was misled about something dangerous to health. Whether the same smoking guns will emerge, we don’t know yet.”

But there has been pushback, both from legislators and from fossil fuel companies. For instance, representatives from the House Committee on Science, Space, and Technology wrote a letter to AG Schneiderman, informing him of their investigation into the efforts of the Green 20. The letter claims the AG strategy “to fight industry in the courts” was devised by environmental groups at a 2012 workshop: “to persuade attorneys general to use their prosecutorial powers to stifle scientific discourse, intimidate private entities and individuals, and deprive them of their First Amendment rights and freedoms.” The Committee members requested various documents and communications relating to the subpoenas.

In turn, ExxonMobil has filed suit, requesting injunctions against the AGs, claiming that the investigations violate the company’s “constitutionally protected rights of freedom of speech, freedom from unreasonable searches and seizures, and due process of law.” Exxon cites AGs from Alabama and Oklahoma who believe that scientific and political debate “should not be silenced with threats of criminal prosecution by those who believe that their position is the only correct one.” They emphasized: “It is inappropriate for State Attorneys General to use the power of their office to attempt to silence core political speech on one of the major policy debates of our time.” Others have compared the assault against climate deniers to the inquisition launched against Galileo. Since Exxon’s filing, Virgin Islands AG Claude Walker has withdrawn his subpoena. But AG Schneiderman has held fast on his position: “The First Amendment, ladies and gentlemen, does not give you the right to commit fraud.”

The First Amendment issue raises questions about the extent of corporate free speech rights as well as whether prosecutorial power in this case will silence speech and chill the “robust exchange of ideas” on the climate change issue. But the case may boil down to whether or not ExxonMobil actually committed fraud in deceiving the public—and/or its shareholders—in failing to disclosing risks of climate change, if it even knew of them. (Exxon has said that it is “preposterous” to believe it was able to draw conclusions about climate change before scientists did.)

In Citizens United v. FEC (2010), the Supreme Court held that corporations have free speech rights. But it also established, in Gertz v. Robert Welch, Inc. (1974), that fraudulent statements have a lesser level of protection than other speech because “the intentional lie [does not] materially advance society’s interests in uninhibited, robust, and wide-open debate on public issues.” Moreover, as Yale Law School Dean Robert Post explains, Exxon is seeking to quash the subpoenas before an investigation has even revealed whether or not there is evidence of fraud. And the Court in Herbert v. Lando (1979) held that the Constitution does not preclude ordinary discovery of information relevant to a lawsuit, even with respect to a news organization. Investigators in the Exxon case are currently reviewing the company’s disclosure filings made since the 1970s, focusing on recent statements to investors. ExxonMobil has started disclosing risks of how environmental regulations might affect business, but it is unclear whether these disclosures were sufficient. A fraud prosecution might also depend on whether company executives played a role in directing campaigns of climate denial.

Starting in the 1950s, tobacco companies financed internal research studies that eventually proved that cigarettes were harmful and addictive. Yet they buried these findings, while mounting vast public relations campaigns and hiring scientists to cast doubt on reports—including Surgeon General reports—linking smoking to cancer and other diseases. As Senator Sheldon Whitehouse describes it: “The Big Tobacco playbook looked something like this: (1) pay scientists to produce studies defending your product; (2) develop an intricate web of PR experts and front groups to spread doubt about the real science; (3) relentlessly attack your opponents.”

By contrast, some point out, ExxonMobil has published extensive research over decades that lined up with mainstream climatology. Yet reporters have revealed that a researcher who had published papers questioning climate science had received funds from fossil fuel companies, including ExxonMobil, without disclosing them. And other media outlets have reported that the oil industry was aware of the risks of climate change from its own scientific research. Senator Whitehouse cites a memo that was leaked from a meeting of industry representatives, trade associations, and policy institutes, which documented plans for a public relations campaign to raise “questions among those (e.g. Congress) who chart the future U.S. course on global climate change.” Such actions have struck some experts as similar to the activities of tobacco companies.

Thus, environmental groups hope to use the Big Tobacco strategy in their fight against Big Oil. In 1999, the Justice Department filed a civil racketeering lawsuit, United States v. Philip Morris USA, Inc., against major tobacco companies and industry groups, alleging that the companies “engaged in and executed—and continue to engage in and execute—a massive 50-year scheme to defraud the public, including consumers of cigarettes,” in violation of the Racketeer Influenced and Corrupt Organizations Act, or RICO. After six years of litigation and nine months of trial, in August 2006, D.C. District Court Judge Kessler issued a 1,683 page opinion, holding the tobacco companies liable for violating RICO by engaging in an ongoing conspiracy to deceive the American public by fraudulently covering up the health consequences and addictiveness of smoking cigarettes and for marketing their products to children. The state AGs fighting Big Oil have asked the Justice Department to investigate RICO charges against Exxon.

To establish liability under RICO, the government had to prove that tobacco companies engaged in a pattern of racketeering acts in a scheme to defraud. For instance, despite their internal knowledge, Big Tobacco made numerous statements in press releases trivializing and denying the addictiveness of cigarettes. “Defendants knew of their falsity at the time and made the statements with the intent to deceive,” the court concluded, finding that the evidence of fraud was “overwhelming.” Moreover, company statements to consumers were not protected by the First Amendment, the court held, citing the Court’s opinion in Gertz and reiterating that the First Amendment does not protect fraudulent statements. The D.C. Court of Appeals upheld the decision (including certain orders requiring the companies to publish corrective advertising statements on cigarettes as a permissible restraint on commercial speech, which also has lesser First Amendment protection).

In a RICO case against Big Oil, the government similarly would have to prove that companies engaged in a pattern of actions with the specific intent to defraud. As Senator Whitehouse writes, ongoing civil discovery in the case may reveal whether and to what extent Exxon may be liable.

There is a tradeoff in pursuing a RICO charge: the burden of proof is higher, but the payoff is greater, since a court is enabled to craft special remedies that could “prevent and restrain” future RICO violations. Conversely, in a case against Big Oil brought under New York’s Martin Act, a broad anti-fraud state statute, the remedies would be limited, but AG Schneiderman would have less to prove. Under the Martin Act, New York prosecutors aren’t required to prove intent, and the statute allows for broad-based investigations.

And Lincoln Caplan questions whether “tobacco strategy” is the appropriate way to try to prove that Exxon fraudulently deceived the public about climate change and hold the company accountable. He explains that it’s “a promising but hugely expensive and grueling model,” and even if it succeeds, “it is likely to be one victory in a very long war.”

Lana Ulrich is associate in-house counsel at the National Constitution Center.

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