A federal judge tossed Exxon Mobil’s lawsuit against activist investor Arjuna Capital because the shareholder proposal on which the lawsuit was based was withdrawn, rendering the case moot.
“The court cannot advise Exxon of its rights without a live case or controversy to trigger jurisdiction,” U.S. District Court Judge Mark T. Pittman wrote in a June 17 order. “As Arjuna has eliminated any case or controversy between the parties here, Exxon’s claim is moot and must be dismissed without prejudice.”
In January, Exxon filed a lawsuit in U.S. District Court in Fort Worth, Texas, against Arjuna and nonprofit Follow This to prevent shareholders from once more considering a proposal on its greenhouse gas emissions.
The previous month, Arjuna and Follow This submitted a shareholder proposal calling for a "further accelerating" of Exxon Mobil's emission reduction plans that include Scope 3 emissions, which are the indirect emissions generated by the company's supply chain.
Facing the lawsuit, Arjuna and Follow This withdrew the proposal and promised not to resubmit one substantially similar, but Exxon proceeded with the lawsuit, seeking a more permanent victory.
"A judgment from this court can stop this cycle and provide the relief that Exxon Mobil seeks — by declaring the 2024 proposal is excludable … and preventing defendants from submitting a similar version of the 2024 proposal in the future,” the company said in a Feb. 21 court filing. “As a result, this case is not moot."
Arjuna and Follow this argued that because the proposal was withdrawn, the case should not proceed further.
In May, the judge allowed the case to continue against Arjuna but dismissed Follow This, writing that the Dutch-based group was not a proper party to the case.
Following a June 17 hearing, the judge ruled that while the court “sympathizes with Exxon’s predicament, its hands are tied by the Constitution.”
Pittman added, “The exercise of judicial power is improper without a live case or controversy.”
In an email, an Exxon spokesperson said the company’s lawsuit put a spotlight on the abuse of the shareholder-access system. In considering the decision, “It’s important to remember that the defendant’s first and second attempts to make our case against them moot were rejected by the court,” the spokesperson said. “In ruling now that there is no continuing controversy, the court has made absolutely clear that Arjuna cannot continue abusing the process. Shareholder democracy is only as strong as the rules that govern it, which must be fairly and consistently applied.”
Natasha Lamb, Arjuna’s managing partner and chief investment officer, said the firm was pleased with the court's decision. "Climate change presents real headwinds to the oil and gas industry, and deflection will not change that simple fact," she said in a 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.”
Mark van Baal, founder of Follow This, hailed the decision as a victory for all investors. “The dismissal stalls Exxon’s attack on the rights of all shareholders to table proposals about emissions, the root cause of the climate crisis,” he said in a statement. “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.”
Shareholders can file proposals before a company's annual meeting and if a given proposal makes it on to the company's proxy statement, all shareholders have the chance to vote on it. If a company thinks a proposal is out of bounds or has already been addressed, it can file a no-action letter with the SEC, requesting permission not to include the proposal in its proxy statement.
Exxon took the unusual step to skip the SEC and go straight to court.
