Citing Dr. Zenner’s testimony in the decision, the New York State Supreme Court ruled that the plaintiff failed to establish that Exxon violated the relevant laws.
Retained by Paul, Weiss, Rifkind, Wharton & Garrison
The Attorney General of the State of New York (NYAG) alleged that ExxonMobil (Exxon) “deceive[d] investors and the investment community…concerning the company’s management of the risks posed to its business by climate change regulation,” resulting in $1.6 billion in damages. Counsel for Exxon retained Cornerstone Research and Marc Zenner, an expert in corporate valuation, to respond to these claims. Dr. Zenner submitted an expert report and testified during trial in November 2019.
Specifically, the NYAG alleged that Exxon misrepresented the risk and future cost of climate change regulation to its business. According to the NYAG, this resulted in the company’s “financial vulnerability to climate change regulation [being] significantly greater than it led investors to believe.” One of the experts retained by the NYAG purported to show that investors were attuned to these particular climate change regulatory issues and that Exxon’s misrepresentation of these costs resulted in overly optimistic financial forecasts.
At trial, Dr. Zenner testified that, based on his review of hundreds of analyst reports, market participants did not find these climate change regulatory costs central to evaluating Exxon’s financial performance during the relevant time period. He also opined that adjustments to Exxon’s internal financial models made by the NYAG’s expert were flawed and did not establish that Exxon would have made different investment decisions had it incorporated these adjustments.
The New York State Supreme Court agreed with Dr. Zenner’s opinions and found that the NYAG failed to establish that Exxon made material misrepresentations that misled investors. Specifically, the court noted: “ExxonMobil’s credentialed expert, Dr. Marc Zenner . . . found that virtually no analysts’ reports mentioned proxy costs, GHG [greenhouse gas] costs, or the Office of the Attorney General’s Complaint.” Furthermore, the decision agreed with Dr. Zenner’s conclusion that the NYAG expert’s financial model adjustments had no effect on project viability.
The court credited Dr. Zenner’s report and Exxon’s cross examination of the NYAG’s expert as having “convincingly undercut [the NYAG expert’s] opinion.” As a result, the court gave “no weight to [the NYAG expert’s] testimony” and concluded overall that the “testimony of the expert witnesses called by the Office of the Attorney General was eviscerated on cross-examination and by ExxonMobil’s expert witnesses.” Ultimately, the court ruled that the NYAG failed to establish that Exxon violated the Martin Act or Executive Law 63(12) in connection with its public disclosures of climate change risks.