A federal judge in Texas on Monday dismissed a controversial lawsuit by Exxon Mobil against activist shareholder Arjuna Capital over a climate proposal, ruling that the investor’s promise that it would not submit a similar resolution in the future had rendered the case moot.
“Arjuna has eliminated any case or controversy between the Parties here, Exxon’s claim is moot and must be dismissed without prejudice,” U.S. District Judge Mark Pittman for the Northern District of Texas wrote in his ruling after a hearing held Monday.
Exxon had sued Arjuna Capital and another shareholder, Follow This, in January to stop them from submitting a proposal at the oil major’s May 29 annual shareholder meeting. The investors called for the company to accelerate carbon dioxide emissions reductions.
Critics of the lawsuit argued that it would have chilling effect on future shareholder petitions.
The two activist shareholders withdrew the proposal after Exxon sued. However, the oil major proceeded with its lawsuit, claiming that the investors could file a similar proposal at a future shareholder meeting.
Pittman had originally allowed the suit against Arjuna to proceed, echoing the oil major’s arguments, while tossing out the suit against Netherlands-based Follow This due to jurisdiction issues.
But the judge said Monday that there was no longer an issue at stake in the case after Arjuna made an “unconditional and irrevocable” pledge to ensure Exxon that it won’t file a similar proposal again.
“Arjuna was caught between a rock and a hard place,” Pittman wrote in his ruling Monday. “Arjuna is a boutique wealth management firm with offices in North Carolina and Massachusetts. Exxon is one of the largest multinational conglomerates on the planet.”
Exxon’s claims against Arjuna stemmed from Securities and Exchange Commission rules that permit companies to exclude shareholder resolutions that deal with a matter relating to the company’s ordinary business operations, or are substantially similar to proposals offered in the past five years.
“The SEC is behind the ball on this issue,” Pittman wrote in the ruling. “But the Court cannot advise Exxon of its rights without a live case or controversy to trigger jurisdiction.”
When contacted by CNBC, Arjuna declined to comment.
