Exxon Shareholder Proposal Withdrawal May End Lawsuit

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Exxon Mobil has been ordered to explain to a federal judge by Monday why a lawsuit it filed against two shareholder activists should continue after the groups withdrew the climate resolution they had proposed for the energy giant’s annual meeting.

In the order issued on Friday, U.S. District Judge Mark Pittman told Exxon to file a status update “on or before” Monday as to what claims or issues remain before the court.

“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,” Pittman wrote.

Exxon filed the lawsuit in January against Arjuna Capital of Massachusetts and Follow This, an Amsterdam-based climate activist group, aiming to block their shareholder proposal.

Exxon’s suit had sidestepped the usual process whereby companies ask U.S. regulators for permission to skip votes, raising concerns the move would silence investors’ voices.

On Friday the groups said they had withdrawn the resolution, but Exxon said the litigation would continue because there were “still important issues for the court to resolve.” Its complaint questioned the motivations of the investors and noted a rising number of resolutions being filed.

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Asked about the judge’s order, on Monday an Exxon representative reiterated the company’s comment that important issues remain and that “the suit is continuing.” The representative did not specify how the company would reply to the judge’s order.

Now that the proposal has been withdrawn, the two shareholders have a strong argument that Exxon’s claims are moot, said Eric Talley, a Columbia University corporate law professor.

The U.S. Constitution gives federal courts authority to decide “cases and controversies.” Where there is no controversy to address, courts typically dismiss the case.

Talley said that the case now looks like an attempt to garner a ruling to wield against other similar proposals.

“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,” he said.

(Reporting by Ross Kerber in Boston and by Jody Godoy in New York; Editing by David Gregorio)