The judge set to hear New York Attorney General Barbara Underwood’s lawsuit against Exxon Mobil Corp. has agreed to divest from his current stock in the gas and oil company and decline any restitution that may come from the case for investors.
Manhattan Supreme Court Justice Barry Ostrager of the Commercial Division said in court on Wednesday that he would sell his shares in the company—which amount to somewhere between $100,000 and $250,000 in one fund, and an unknown amount in a retirement account.
Underwood’s office had asked Ostrager, after filing their suit against Exxon last month, to recuse himself from the case because of his stock in the company. A spokeswoman for Underwood said his decision to divest addressed their concerns.
“Our office raised specific concerns regarding the court’s ownership of a significant quantity of Exxon stock, which were addressed by Justice Ostrager’s decision to sell the shares and renounce his portion of any potential restitution shareholders may receive,” said Amy Spitalnick, spokeswoman for Underwood.
The office will no longer seek his recusal from the case because of his decision to divest. They will also withdraw a motion they filed last week for judicial disqualification, which could have forced Ostrager to give up the case on appeal.
Ostrager had originally indicated that he would not recuse himself from the case over his shares in the company because the attorney general’s office had already waived his recusal in a different, but related, legal action involving Exxon. In that case, the state was moving to compel Exxon to cooperate with a subpoena into its representations to investors. Ostrager ultimately ordered Exxon to comply with the subpoena.
That litigation, brought in 2016, was part of a broader investigation from Underwood’s office into Exxon, which started three years ago. That resulted in a lawsuit from the state last month alleging that Exxon had misled its investors on the financial risks posed by more stringent regulations promulgated to mitigate the effects of climate change.
Theodore Wells Jr., a partner at Paul, Weiss, Rifkind, Wharton & Garrison who represents Exxon, had argued in a filing last month that because the attorney general’s office had waived Ostrager’s recusal in the subpoena matter, the litigation over alleged fraud shouldn’t be any different. Ostrager suggested the same in his own filing with the court.
“If, as Mr. Wells represents, the parties waived any conflict that might inhere by reason of the Court’s ownership of the ExxonMobil shares, the Court is disinclined to recuse itself for the reasons state in Mr. Wells’ letters,” Ostrager wrote. “The Court does not believe that its ownership of the ExxonMobil shared would, in any way, affect the Court’s impartiality in dealing with the issues raised by the recently filed case.”
The state attorney general’s office then filed a motion for judicial disqualification to remove Ostrager from the case. The initial decision on his recusal would have been entirely up to him, though it could have been challenged on appeal.
Exxon argued in a filing this week opposing the motion for judicial disqualification that Ostrager should remain on the case because he’s familiar with the issues involved, having presided over the subpoena action for the last two years. They also said the waiver from two years ago should carry over into the fraud lawsuit.
Those arguments are now moot after Ostrager decided to divest from the company. A spokesman from Exxon declined to comment on his decision, which was made from the bench this week.
The lawsuit was filed last month by Underwood’s office, which claimed that Exxon falsely told investors it was preparing to adjust its business for future climate change regulations, when in reality it was doing much less than it claimed.
While the attorney general’s office already has power to investigate companies for allegedly defrauding investors under the Martin Act, the state has a particular stake in this litigation. The New York State Common Retirement Fund, the state pension fund for public employees, holds shares in Exxon with a combined value of about $1.5 billion.