Exxon losing ground in climate disclosure case
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April 18, 2018
Exxon losing ground in climate disclosure case

The Supreme Court of Massachusetts affirmed the decision by a state Superior Court judge who found that the Massachusetts Attorney General (AG) has the authority to seek documents and information relating to Exxon Mobil Corporation’s (Exxon) knowledge of and activities related to climate change.

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The case began to take form in March 2016 when Massachusetts Attorney General Maura Healey launched an investigation into whether Exxon deceived Massachusetts consumers and investors about the impacts of burning fossil fuels on the planet and its business. Healey’s civil investigative demand (CID), ordered the company to produce a wide range of internal documents going back to 1976 “concerning Exxon’s development, planning, implementation, review, and analysis of research efforts to study CO2 [carbon dioxide] emissions (including, without limitation, from fossil fuel extraction, production, and use), and the effects of these emissions on the climate.”

300 service stations

In Massachusetts, Exxon operates a franchise network of more than 300 retail service stations under the Exxon and Mobil brands that sell gasoline and other fossil fuel products to Massachusetts consumers. Healey contended that this network establishes an independent basis for personal jurisdiction over Exxon in this matter.

Instead of complying with the CID, the company sued the AG’s office in federal district court and Massachusetts Superior Court. The company argued that Exxon is not subject to personal jurisdiction in Massachusetts; the AG is biased against Exxon and should be disqualified; the CID violates Exxon’s statutory and constitutional rights; and Exxon's Massachusetts Supreme Court case should be stayed pending a ruling on Exxon’s request for relief in federal court.

Question of advertising

According to the Supreme Court, the central question was whether the CID arises from Exxon’s stations. Exxon argued that it does not because while the AG’s investigation is concerned primarily with Exxon’s marketing and advertising of its fossil fuel products to Massachusetts consumers, Exxon does not control its franchisees' advertising. In other words, Exxon contended it has no contact with the state’s consumers and, hence, is not subject to the AG’s authority.

BFA

The Court disagreed based on Exxon’s Brand Fee Agreement (BFA) under which the company exerts considerable control over its franchises in Massachusetts. For example, the BFA holder must pay Exxon a monthly fee for the use of Exxon's trademarks and to participate in Exxon's business services and programs. Also under the BFA, Exxon prescribes a method for converting unbranded fuel to Exxon-branded gasoline by injecting certain fuel additives; these additives are to be obtained exclusively from suppliers identified by Exxon and are inserted according to Exxon's specifications.

Regarding advertising, the BFA holder “must diligently promote the sale of Exxon-branded fuel, including through advertisements.” The BFA further states that “Exxon shall have the authority to review and approve, in its sole discretion, all forms of advertising and sales promotions ... for the promotion and sale of any product, merchandise or services” that “(i) uses or incorporates any [Exxon trademark] or (ii) relates to any Business operated at a BFA Holder Branded Outlet.”

The Supreme Court stated:

“This leads to our conclusion that the CID ‘arises from’ the BFA and Exxon’s network of branded fuel stations in Massachusetts. Through its control over franchisee advertising, Exxon communicates directly with Massachusetts consumers about its fossil fuel products (and hence we reject Exxon’s assertion that it ‘has no direct contact with any consumers in Massachusetts’).”

Accordingly, the Court affirmed the Superior Court’s order granting Healey’s cross motion to compel Exxon's compliance with the CID.


The Supreme Court also noted that Exxon’s federal petition was originally filed in a district court in Texas and transferred to the U.S. District Court for the Southern District of New York. On March 29, 2018, that Court dismissed Exxon’s complaint with prejudice due to Exxon’s failure to state a claim and the preclusive effect of the Superior Court ruling in favor of Healey.


The Massachusetts Supreme Court’s ruling in Exxon Mobil Corporation v. Attorney General is here

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