A federal judge has ordered Exxon Mobil to explain by Monday why it is continuing a lawsuit against two shareholder activists after they withdrew the climate resolution they had proposed for consideration at the company’s annual meeting.
In an order issued on Friday, U.S. District Judge Mark Pittman directed Exxon to provide a status update “on or before” February 13 on what claims or issues remain for the court to resolve.
“As it stands now, the Court struggles to see what the ongoing case or controversy is in this matter given the only relief sought from the Court was a declaration that Exxon may exclude Defendants proposal from its annual shareholder meeting,” Judge Pittman wrote.
Exxon had preemptively filed the lawsuit in January seeking to block a shareholder proposal from activist groups Arjuna Capital and Follow This before it could be raised at the company’s shareholder meeting. The proposal called on Exxon to set emissions targets consistent with the Paris Climate Accords.
Rather than utilizing the standard process of asking regulators for permission to omit the proposal from its proxy materials, Exxon took the unconventional step of going directly to court. This prompted concerns that the company was attempting to silence investors.
The shareholder groups announced on Friday that they had withdrawn their resolution. However, Exxon responded that important issues remain for the court to settle, indicating it plans to continue the litigation.
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When asked about the judge’s order, an Exxon spokesperson on Monday reiterated that the lawsuit will proceed because there are still salient matters for the court to decide. They declined to specify what particular issues remain.
Legal experts say Exxon now faces an uphill battle justifying the continuation of the case given the shareholder proposal at the crux of the dispute has been pulled.
“Now that the proposal has been withdrawn, the two shareholders have a strong argument that Exxon’s claims are moot,” said Professor Eric Talley of Columbia Law School.
In Talley’s view, it appears Exxon is seeking a broader court ruling against climate-related shareholder proposals that can be used to fend off similar resolutions in the future.
“I can imagine a law firm that represents a lot of these companies that get shareholder proposals wouldn’t mind having a holding on the books saying this is excludable,” Talley commented.
The order from Judge Pittman ratchets up the legal pressure on Exxon as it scrambles to articulate how a live controversy persists when the contested shareholder proposal is no longer on the table. The company risks having the entire lawsuit dismissed if it fails to adequately justify the ongoing proceedings.