As published on, Nov. 5, 2015:

Could ExxonMobil be guilty of fraud for taking a public stance on global warming? New York Attorney General Eric Schneiderman thinks so, and news that he’s demanded years of records from the oil giant shows how creative some lawyers have become in using litigation to try and achieve the sort of policy changes once left to legislators.

The New York Times reports Schneiderman issued a subpoena Wednesday evening seeking emails, financial records and other information about the company’s activities around climate science since the late 1970s, “including a period of at least a decade,” the Times says, “when ExxonMobil funded groups that sought to undermine climate science.” The probe is focused on whether the company adequately warned investors about potential financial risks stemming from tighter controls on fossil fuels, the Times said, citing unnamed figures who shared the details of the AG’s investigation with the paper on condition of remaining anonymous.

It’s an interesting question whether a company can break the law by financing research that it hopes will influence the public debate on a subject that affects its business. If the AG’s target is disclosures to investors, as the unusually well-informed Times reporters suggest, that raises the question of how a company can adequately disclose the risks associated with global warming when the sources and magnitude of the problem are still being studied.

“Public interest groups cannot be permitted to define what is a risk factor – securities laws do,” said Jacob Frenkel, a former Securities and Exchange Commission enforcement attorney now with Schulman Rogers in Potomac, Md. “What’s next? Advocates for electric cars positing a mandatory risk factor disclosure that gas-driven cars may become obsolete?

The model the AG is using resembles lawsuits attorneys general across the country filed against the tobacco industry in the 1990s for supposedly misleading consumers about the dangers of smoking and running up public-health costs as a result.

That was a dubious theory for two reasons: First, no matter how much tobacco executives lied, each pack of cigarettes had an explicit warning from the government telling smokers the product they were about to put in their mouth was deadly. Were profit-motivated executives more trustworthy? Second, smokers tend to die quickly and years before nonsmokers, thus actually saving the state money in healthcare and pension expense after accounting for all the tax revenue cigarettes bring in. But the important lesson from the tobacco settlement is that neither argument was sufficient to overcome the combined legal might of 50 state attorneys general, especially when the industry leader, Philip Morris, had the chance to negotiate a settlement that gave it a de facto cartel by blocking new competitors from entering the cigarette market. The litigation accomplished a goal anti-smoking activists couldn’t get through legislation: Higher taxes on cigarettes to discourage smoking, billions of dollars of which will flow through in fees to the private lawyers who helped negotiate the deal.

Could a similar maneuver be afoot with ExxonMobil? Oil and coal companies have the advantage they sell a useful product whose risks have been largely known for more than a century. But creative lawyering by public agencies is on the rise.

State AGs pried $50 billion or so out of mortgage lenders including Citi, JPMorgan Chase JPM +0% and Wells Fargo WFC +0% in 2012 over claims they processed foreclosure documents improperly, achieving the policy goals of activists who wanted those banks to offer more principal reductions to borrowers. Cities in northern California convinced a judge to sock Sherwin Williams and other paint companies with the bill for a $1.2 billion remediation program to remove lead paint from deteriorating housing even though the defendants voluntarily removed the product from the market in the 1950s.

Santa Clara County, Calif. even has an Impact Litigation & Social Justice Section devoted to thinking up new lawsuits to achieve policy goals. They sued Purdue Pharma and four other drug manufacturers of abetting heroin addiction (a public nuisance) because of how they marketed opiate painkillers. (A judge dismissed the case in August, saying it was “about determining what the public and doctors needs to be told about opiods,” a job best left to regulators.)

Are the oil companies next? This blogger traces the AG’s strategy to a 2012 meeting organized by the Climate Accountability Institute and Naomi Oreskes of the University of California-San Diego that produced this report titled “Establishing Accountability for Climate Change Damages: Lessons From Tobacco Control.” Speakers at the meeting included Stanton Glantz, an anti-tobacco activist, and the report concluded:

A key breakthrough in the public and legal case for tobacco control came when inter – nal documents came to light showing the tobacco industry had knowingly misled the public. Similar documents may well exist in the vaults of the fossil fuel industry and their trade associations and front groups, and there are many possible approaches to unearthing them.

Of course, there was never much question cigarettes are dangerous, no matter what tobacco executives said. Climate science is a much more difficult subject to nail down. Even NASA’s Goddard Institute for Space Studies acknowledges the difficulty of measuring changes in global temperature given sensors located in urban and non-urban areas and the massive effect of ocean current changes such as El Nino. And last year the U.K.’s Daily Mail revealed that Goddard’s statement 2014 was the hottest year on record came with the caveat it was only 38% likely to be true.

Given this uncertainty, can ExxonMobil be prosecuted for failing to report exactly what the majority of climate scientists believe? The U.S. Supreme Court had the opportunity to decide a similar question in Nike v. Kasky back in 2003. The athletic shoe company was sued by activists for mounting a campaign of op-eds and full-page ads to defend itself against claims it used Asian contractors with unfair labor practices. The California Supreme Court rejected Nike NKE +0%’s free-speech defense against the lawsuit and the U.S. Supreme Court agreed to hear an appeal and heard oral arguments, but then a majority of the justices decided to dismiss the case as premature since the California Supreme Court hadn’t issued a final judgment. Justice Stephen Breyer, in dissent, warned that allowing such litigation could squelch public comment by companies worried about being sued:

If this suit goes forward, both Nike and other potential speakers, out of reasonable caution or even an excess of caution, may censor their own expression well beyond what the law may constitutionally demand. That is what a “chilling effect” means. It is present here.

Schneiderman may restrict his inquiry to evidence that can allow him to bring a case under New York’s Martin act, a broad statute dating back to 1921 – does the Times think it’s dusty? –that allows the state AG to bring fraud charges against companies for any “deceitful practice” involving securities. That may include the valuation of oil and gas reserves, the Times suggested, which ExxonMobil may not have written down to levels appropriate to the threat of controls on their sale to achieve climate goals. Of course ExxonMobil executives would have to be clairvoyant to predict the effects of future legislation on the value of their reserves today, and one wonders whether we really want a system where their predictive skills outweigh the judgment of auditors and reserve engineers.

But all that is less important than the fact the AG is investigating. Perhaps if enough other AGs join in, ExxonMobil can negotiate another settlement giving it a majority share of the oil market and preventing new companies from coming in.