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Tuesday, August 20, 2019

'Dispassionate analysis' lacking in California climate change litigation, environmental attorney says

By Karen Kidd | Feb 20, 2018

WASHINGTON (Legal Newsline) – Government officials in California who made dire climate change predictions in lawsuits against energy companies but not to prospective bond investors didn't think hard enough before filing those cases, a Washington, D.C.-based environmental attorney said during a recent interview.

"I find it difficult to believe that the municipalities and their counsel dispassionately assessed the pros and cons of what they were doing before deciding to move forward with filing suit," Andrew R. Varcoe, a partner at Boyden Gray & Associates, told Legal Newsline

"Or, if the lawyers did so, it is not clear to me that their clients carefully considered the analysis."

A "dispassionate analysis" would have emphasized the risks of making those predictions in litigation that could also be seen as contradicting in bond offering statements, Varcoe said. 

Last year, Marin, Santa Cruz and San Mateo counties and San Francisco, Oakland, Santa Cruz and Imperial Beach in California all filed suit against dozens of energy companies, including ExxonMobil Corp. and 17 other Texas-based businesses, over climate change. Exxon also has been targeted by the attorneys general of Massachusetts and New York over many of the same allegations.

The cities and companies, through private attorneys working on a contingency fee, claim a climate change-created disaster is imminent. Making those claims in their lawsuits but not in their bond offerings to potential investors smacks of hypocrisy, Exxon is arguing in a Texas state court.

"I have an overarching concern about the California municipalities' lawsuits," he said. 

"I don’t see how they're going to help solve the problems and risks that arise from climate change. If the goal is to increase political pressure for national and international solutions to climate change, I think there are probably safer and more effective ways to pursue that goal."

In January, Exxon filed a verified petition with the District Court in Tarrant County, Texas, seeking pre-suit discovery from California officials and their attorneys, as well as responding to a litany of alarming climate change predictions, including dramatic rises in sea level. 

For instance, San Mateo County claimed in its complaint to be "particularly vulnerable to sea level rise" with a 93 percent the county will experience a "devastating" flood before 2050. However, San Mateo's 2014 and 2016 bond offerings told would-be investors that the county "is unable to predict whether sea-level rise or other impacts of climate change or flooding from a major storm will occur."

Imperial Beach and Marin County also claimed in their separate complaints to be vulnerable to devastating floods because of climate change but never disclosed that same information to perspective bond investors, Exxon's petition said.

"Notwithstanding their claims of imminent, allegedly near-certain harm, none of the municipalities disclosed to investors such risks in their respective bond offerings, which collectively netted over $8 billion for these local governments over the last 27 years," the petition said.

"To the contrary, some of the disclosures affirmatively denied any ability to measure those risks; the others virtually ignored them."

The counties and municipalities have painted themselves into a corner by making climate change claims in their lawsuits but not in their bond offerings, which makes it tricky to find the correct defense moving forward, Varcoe said. 

The counties and municipalities could claim their court filings are accurate and that their bond disclosures are inaccurate or incomplete, Varcoe said. 

"That approach would seem to enhance their exposure to lawsuits from bondholders, as well as their exposure to Securities and Exchange Commission liability, as is suggested by the Competitive Enterprise Institute's recent letter requesting an investigation of certain municipalities' bond disclosures," Varcoe said.

To avoid that, the counties and municipalities could claim that their bond disclosures are accurate and complete and could concede that the allegations in their court filings are false or at least require amendment, Varcoe said.

"That approach would seem to create risks for them in the litigation, but there may be ways for the municipalities to mitigate those risks," he said.

"The municipalities could voluntarily dismiss their suits, which would seem to avoid the potential problem for a plaintiff of having to explain to a court why its bond disclosure statements are so different from the statements in its litigation complaint. 

"I can imagine a scenario in which one or more municipalities choose to dismiss their suits first, leaving the others to consider whether they want to continue."

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Organizations in this Story

Boyden Gray & Associates PLLC Competitive Enterprise Institute Exxon Mobil U.S. Securities and Exchange Commission