Federal court dismisses Exxon climate case against shareholder group

A Texas federal district judge has dismissed ExxonMobil's lawsuit against an investor group over a shareholder resolution calling on the company to ramp up its climate ambitions.

Arjuna Capital LLC withdrew the resolution before Exxon's annual meeting and urged the oil company to drop the expensive case.

"While the court sympathizes with Exxon's predicament, its hands are tied by the Constitution," US District Judge Mark Pittman wrote in a June 17 order.

"The court cannot advise Exxon of its rights without a live case or controversy to trigger jurisdiction," Pittman concluded.

At a hearing preceding the ruling, an attorney for Arjuna Capital rejected Exxon's claims that Arjuna would work behind the scenes to promote shareholder resolutions pushing the company to reduce its greenhouse gas emissions. The court agreed.

"[H]ypotheses about the actions of other entities with whom Arjuna is ideologically aligned are 'conjectural' and 'hypothetical,'" Pittman wrote, citing federal case law. "Even if they're plausible."

Thus, the judge ruled Exxon's claim moot and dismissed it without prejudice.

Natasha Lamb, Arjuna Capital's chief investment officer, said her group was pleased with the verdict in the case, Exxon Mobil v. Arjuna Capital (No. 4:24-cv-00069-P).

"Climate change presents real headwinds to the oil and gas industry, and deflection will not change that simple fact," Lamb said in an emailed statement. "Investors understand these risks and are looking to their companies to engage with them on measured approaches to risk mitigation, not engage in litigation."

The court previously dismissed a case against Follow This, a Dutch shareholder group that had filed a similar resolution.

The reintroduction of such resolutions is "meant to divert ExxonMobil from its core business lines" while wasting management resources, Exxon said in January.

In suing the two small shareholder groups, Exxon sidestepped the usual process of challenging a resolution before US Securities and Exchange Commission staff. The company argued that the SEC was partial to investor activists and acted inconsistently with federal law.

In a June 18 statement, Exxon CEO Darren Woods said his company met its objective by litigating the matter.

"In this particular case, the defendants withdrew their proxy submission twice in an effort to convince the court that our case against them was moot," Woods said. "Both attempts failed and, yesterday, the court went one step further and made it clear that Arjuna is bound by its commitment to not submit, or work with others to submit, similar proposals to ExxonMobil in the future."

Mark van Baal, founder of Follow This, called the court decision "a victory for all shareholders."

"The dismissal stalls Exxon's attack on the rights of all shareholders to table proposals about emissions, the root cause of the climate crisis," van Baal said in a news release. "Exxon will not be able to reach its true goal with the lawsuit: Circumventing the SEC to seek a court ruling to prevent any shareholder from filing emissions proposals in the future."