A federal judge in Texas dismissed a lawsuit by Exxon Mobil against activist shareholder Arjuna Capital over a climate proposal due to the shareholder’s promise not to submit a similar resolution in the future. The judge ruled that the case was moot and must be dismissed without prejudice. Exxon had sued Arjuna Capital and Follow This to stop them from submitting a carbon dioxide emissions reduction proposal at the oil major’s annual shareholder meeting. Critics argued that the lawsuit could have a chilling effect on future shareholder petitions.
Arjuna Capital and Follow This withdrew the proposal after Exxon sued, but the oil major continued with its lawsuit, claiming that the investors could file a similar proposal in the future. Initially, the judge allowed the suit against Arjuna to proceed while tossing out the suit against Follow This due to jurisdiction issues. However, the judge later determined that there was no longer an issue at stake in the case after Arjuna made an “unconditional and irrevocable” pledge not to file a similar proposal again. The judge noted the vast difference in size and resources between Arjuna, a boutique wealth management firm, and Exxon, one of the largest multinational conglomerates.
Exxon’s claims against Arjuna were based on Securities and Exchange Commission rules that allow companies to exclude shareholder resolutions related to ordinary business operations or similar to past proposals. The judge acknowledged that the SEC was behind on the issue but stated that they could not advise Exxon on their rights without a live case or controversy to trigger jurisdiction. Arjuna declined to comment on the ruling when contacted by CNBC. Overall, the decision highlights the complexities of shareholder activism and legal disputes between corporations and investors over environmental and social issues.
The ruling has implications for future shareholder proposals and the interaction between companies and activist investors. The lawsuit and subsequent dismissal bring attention to the challenges faced by shareholders advocating for environmental action and the tactics used by corporations to block such proposals. The judge’s decision could impact how companies approach shareholder resolutions related to climate change and emissions reductions in the future. Additionally, it underscores the importance of transparency and communication between corporations and investors on these critical issues.
The case also raises questions about the power dynamics between smaller investors and large corporations in the realm of environmental activism. The judge’s ruling reflects the legal complexities surrounding shareholder resolutions and the need for clear guidelines from regulatory bodies like the SEC. Moving forward, both companies and investors may need to navigate these issues carefully to ensure that shareholder activism can continue to play a role in shaping corporate policies on climate change and sustainability. The outcome of this case sets a precedent for how similar disputes may be resolved in the future and highlights the evolving landscape of corporate governance and responsible investing.
