Columbia Law Prof.: Schneiderman’s #ExxonKnew Probe an “Abuse of Extraordinary Powers”

Yet another legal expert has joined at least 12 others in calling New York Attorney General Eric Schniederman’s investigation of ExxonMobil legally flimsy.  This morning, Columbia Law Professor Merritt B. Fox published an op-ed in the National Law Journal with a scathing review of Schneiderman’s use of the Martin Act to investigate ExxonMobil, noting that the whole affair is an “abuse” of “extraordinary powers.” As Fox states,

“The Martin Act grants the attorney general extraordinary powers to subpoena private documents without either obtaining a court order, which is required in most ordinary New York criminal proceedings, or the filing of a complaint, which is required in an ordinary civil action and is subject to court review. The Exxon subpoena is an abuse of these extraordinary powers.” (emphasis added)

Fox continues,

“The bigger, more unambiguous problem for Schneiderman’s investigation, however, is its misuse of tools designed for another purpose. The Martin Act regulates speech made in connection with transactions in securities. Its subpoena powers are to assist investigations of possible violations. It is very unlikely, no matter what the subpoena turns up, that the attorney general will be able to plausibly argue that Exxon in fact committed such a violation.” (emphasis added)

This abuse of power sets a troubling precedent because “At the extreme, the Martin Act subpoena power could be used to bully corporations into any kind of desired reform under the guise of a securities investigation.”

Fox goes on to explain that the Martin Act only works if a corporation makes an omission that would have been material to securities, which means that what was omitted would have had a substantial impact on the body of available information. Fox notes that the views of Exxon’s scientists were “very much in the public realm” and that they “did not deny the possibility that carbon emissions were causing warming,” only “stressed the scientific uncertainties concerning the extent of carbon’s contribution.” Therefore, Fox notes, “Neither Exxon’s statements, nor those of its scientists, would likely have added significantly to the total mix of information in a way that would have affected most investors’ decisions.”

Fox then notes what has been obvious from the start of this entire campaign: that Schneiderman’s actions are clearly motivated by politics rather than the practice of the law:

“While the Exxon investigation may nominally be about misled investors, it is really about the attorney general acting as a champion in the fight against global warming. In a press release primarily devoted to the Exxon investigation, Schneiderman leads off by describing storm damage to the state and saying, ‘That’s why I am committed to the fight to combat climate change.'” (emphasis added)

To use the law for political ends may be “tempting” according to Fox,

“But it is inconsistent with responsible government that one official, without any legislative guidance or judicial oversight, can use such a strategy to make public policy over almost any kind of business activity.”

And this is not coming from someone who could be put in the “denier” camp, either. As Fox explains,

“Reducing carbon emissions is one of the great challenges of our time. This is the end claimed by New York Attorney General Eric Schneiderman for his high-profile investigation of Exxon Mobil Corp., but his end does not justify his means.” (emphasis added)

Of course, Fox is the latest in a long string of legal experts to call out Schneiderman for not having a case. Just to name a few, Dennis C. Vacco, who served as the attorney general of New York from 1995 to 1999 said in a recent column,

“I was one of 46 state attorneys general who signed the tobacco Master Settlement Agreement in November 1998. On behalf of New York’s taxpayers, I filed one of the suits that eventually pushed the cigarette makers to settle. I can tell you from experience that our fight against the tobacco industry has almost nothing in common with today’s campaign by several state attorneys general against ExxonMobil — despite what supporters of the effort would like you to believe.” (emphasis added)

Philip Hamburger, also a law professor at Columbia University, recently wrote that New York’s investigation of Exxon is “a prosecutorial threat to liberty and due process”:

“But with the usurped subpoena power, he can engage in a roving investigation, unlimited by any formal accusation, and then can use the results to bring criminal charges. This is a dangerous amalgam of grand-jury and prosecutorial power in one person. Mr. Schneiderman’s subpoena to Exxon Mobil thus stands apart. His ability to demand information in this way is a quintessential case of the fox guarding the henhouse.

“The threats to privacy in our society are not merely technological; they also are legal. In addition to electronic surveillance, nonjudicial subpoenas allow government to examine private documents as if they were an open book. And as shown by Mr. Schneiderman, when attorneys general can issue such subpoenas, a valuable judicial power becomes a prosecutorial threat to liberty and due process.”

Harvey Silverglate, an attorney and a member of the ACLU, said recently that the Exxon investigation is “pure harassment.” He continued, “It is outrageous for any law enforcement official to be seeking to win this battle for minds by flexing law enforcement muscle and trying to shut up the other side.”

Brooklyn Law School professor James Fanto told Bloomberg News that the investigation seems “completely politically motivated.” Former U.S. attorney Matthew Whitaker recently called the investigations “unconstitutional and unethical.”

Tristan Brown, a lawyer and assistant professor of Energy Resource Economics at State University of New York who even admitted that he “empathizes” with the #ExxonKnew campaign, noted that the AGs launching climate investigations are essentially changing the definition of what it means to commit fraud, which sets a “dangerous” precedent.

Walter K. Olson, senior fellow at the Cato institute, said pursuing fraud charges against Exxon is like pursuing fraud charges against candy or ice cream makers.

 “Every ice cream maker is disliked by some obesity expert, but it doesn’t mean that every time an ice cream maker tells its stockholders, ‘Everything is great, we’re selling more ice cream this year,’ they’re committing consumer fraud,” said Cato Institute senior fellow Walter K. Olson. “It doesn’t matter even if the critique of ice cream is correct. You still don’t have fraud.”

Brendan Collins, a partner with the law firm Ballard Spahr and an expert on environmental regulations, put it this way:

“The evidence brought against the tobacco industry two decades ago is “pretty substantially different from the idea that Exxon may have duped me from getting a low-mileage [car] and now the island of Tuvalu is going to get covered by water,” Collins said. It’s a “very big leap” to link what Exxon “did or didn’t do” to the harm posed by climate change.

And as Kevin Ewing, an attorney with the Houston law firm Bracewell, explained,

“Tobacco was shown to cause specific harm to specific individuals,” he added. “Not so with climate change, where we cannot yet discern the factual connection between a company’s conduct and individual harm, even though we can observe the global effects of climate change at large.”

At least 23 editorials from boards across the country have echoed these legal experts. Just to highlight a couple, Bloomberg News said Schneiderman’s actions are a “dangerous arrogation of power.” The Washington Post has expressed concern about the legal precedent of pursuing “criminal penalties over those involved in a scientific debate.” The New York Post has called Scheiderman’s investigation “a purely political vendetta in a blatant abuse of office.” Financial Times said, “The legal basis for these actions seems flimsy…Beyond that, the implications of the investigations for free speech on public policy issues are alarming.”

So where are the legal experts and editorial boards lining up to defend Schneiderman and the #ExxonKnew campaign?


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