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SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
In the Matter of the Application of the
PEOPLE OF THE STATE OF NEW YORK, by
ERIC T. SCHNEIDERMAN,
Attorney General of the State of New York,
Petitioner,

IAS Part 61
Hon. Barry R. Ostrager

Index No. 451962/2016
Motion Sequence No. 5

- against –
PRICEWATERHOUSECOOPERS LLP and
EXXON MOBIL CORPORATION,
Respondents.

REPLY MEMORANDUM OF LAW IN FURTHER SUPPORT OF THE
OFFICE OF THE ATTORNEY GENERAL’S CROSS-MOTION TO COMPEL

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TABLE OF CONTENTS

TABLE OF AUTHORITIES .......................................................................................................... ii
PRELIMINARY STATEMENT .................................................................................................... 1
ARGUMENT .................................................................................................................................. 3
A. OAG Has Set Forth a Clear Factual Basis for the Subpoena Duces Tecum .......................... 3
B. The Subpoena Duces Tecum Does Not Pose Undue Burdens ............................................... 8
C. Exxon Continues to Ignore OAG’s Express Statutory Authority
to Request Information ......................................................................................................... 11
D. OAG’s Investigation Is Not Preempted ................................................................................ 12
E. Exxon Should Be Required to Produce Mr. Iwanika for Testimony ................................... 12
F. Exxon Should Be Required to Produce the Four Employees that Exxon’s Own
Witness Identified as Having Relevant Knowledge of Exxon’s Apparent Spoliation ......... 14
CONCLUSION ............................................................................................................................. 15

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TABLE OF AUTHORITIES
Cases
Am. Dental Coop., Inc. v. Attorney-General, 514 N.Y.S.2d 228 (1st Dep’t 1987) .................... 4, 9
Ambac Assur. Corp. v. Countrywide Home Loans, Inc., 27 N.Y.3d 616 (2016) .................. 14 n.27
Anheuser-Busch, Inc. v. Abrams, 71 N.Y.2d 327 (1988)................................................................ 3
Bank of Tokyo-Mitsubishi, N.Y. v. Kvaerner, A.S.,
175 Misc. 2d 408 (Sup. Ct. N.Y. Cnty. 1998) .................................................................. 13
Commonwealth of N. Mariana Is. v. Canadian Imperial Bank of Commerce,
21 N.Y.3d 55 (2013) ......................................................................................................... 13
D’Alimonte v. Kuriansky, 535 N.Y.S.2d 151 (3d Dep’t 1988) ............................................. 10 n.17
Delagi v. Volkswagenwerk A.G. of Wolfsburg, Germany, 29 N.Y.2d 426 (1972) ............... 13 n.25
E.E.O.C. v. Sterling Jewelers Inc., No. 11-CV-938A,
2013 WL 5653445 (W.D.N.Y. Oct. 16, 2013) ................................................................... 9
F.T.C. v. Texaco, Inc., 555 F.2d 862 (D.C. Cir. 1977) ....................................................... 4 n.4, 10
Gelb v. Kuriansky, 118 Misc. 2d 960 (Sup. Ct. Kings Cnty. 1983).............................................. 10
Grande Prairie Energy LLC v. Alstom Power, Inc., 5 Misc. 3d 1002(A),
2004 N.Y. Slip Op. 51156(U) (Sup. Ct. N.Y. Cnty. Oct. 4, 2004) ................................... 13
Hogan v. Cuomo, 888 N.Y.S.2d 665 (3d Dep’t 2009).............................................................. 3 n.3
Krasinski v. Polimeni Org. LLC, N.Y.L.J., Jun. 19, 2003,
p. 23, col. 5 (Sup. Ct. Nassau Cnty. 2003, Austin, J.) ................................................. 13-14
Litemore Elec. Co. v. City of N.Y., 467 N.Y.S.2d 200 (1st Dep’t 1983) .............................. 11 n.22
Mijatovic v. Noonan, 569 N.Y.S.2d 176 (2d Dep’t 1991) .................................................... 11 n.22
Mosallem v. Berenson, 905 N.Y.S.2d 575 (1st Dep’t 2010) .................................................... 3 n.2
Myerson v. Lentini Bros. Moving & Storage Co., 33 N.Y.2d 250 (1973) ...................................... 4
N.L.R.B. v. Am. Med. Response, Inc., 438 F.3d 188 (2d Cir. 2006) ............................................... 9
N.Y. State Comm’n on Judicial Conduct v. Doe, 61 N.Y.2d 56 (1984)................................ 10 n.17
N.Y. State Joint Comm’n on Pub. Ethics v. Campaign for One N.Y., Inc.,
53 Misc. 3d 983 (Sup. Ct. Albany Cnty. 2016) .................................................................. 4
Napatco, Inc. v. Lefkowitz, 43 N.Y.2d 884 (1978) ......................................................................... 4
Nicholson v. State Comm’n on Judicial Conduct, 50 N.Y.2d 597 (1980) ...................................... 4

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OneBeacon Am. Ins. Co. v. Newmont Mining Corp.,
918 N.Y.S.2d 470 (1st Dep’t 2011) .......................................................................... 13 n.25
People v. H & R Block, Inc., 16 Misc. 3d 1124(A),
2007 N.Y. Slip Op. 51562(U) (Sup. Ct. N.Y. Cnty. July 9, 2007) ........................... 13 n.25
Reuters Ltd. v. Dow Jones Telerate, Inc., 662 N.Y.S.2d 450 (1st Dep’t 1997) .................... 10 n.17
Smith v. Russo-Asiatic Bank, 170 Misc. 408 (Sup. Ct. Albany Cnty. 1939) ........................ 10 n.17
Volkswagenwerk Aktiengesellschaft v. Beech Aircraft Corp.,
751 F.2d 117 (2d Cir. 1984)...................................................................................... 13 n.25

Statutes
General Business Law § 352(1) ...................................................................................... 11, 12 n.23

Other Authorities
SEC Staff Guidance on Accounting Standards Codification 360,
available at https://www.sec.gov/interps/account/sabcodet5.htm .............................. 7 n.11

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PRELIMINARY STATEMENT
In response to the Office of the Attorney General’s (“OAG”) papers detailing the factual
basis for its subpoenas, Exxon Mobil Corporation (“Exxon”) has now effectively admitted that,
for years, the company did not apply a proxy cost of greenhouse gas emissions (“GHGs”) in the
manner that it repeatedly touted to its investors and the public. Rather, Exxon: (1) applied a
separate internal proxy cost to investment decisions; (2) did not apply a proxy cost to its
vulnerable Canadian oil sands projects; (3) excluded 90% of relevant emissions from its proxycost computations; and (4) did not apply a proxy cost to asset-impairment reviews.
Unable to dispute these facts as documented in its own files, Exxon resorts to an
elaborate, unsupported discourse on the propriety of its now-admitted use of “different figures”
for “different purposes.” Exxon’s rationalizations contradict a decade’s worth of its public
statements to investors about a “rigorous” and “consistent” risk management practice against
which “everything gets tested.” In doing so, Exxon has further inculpated itself—and
strengthened the factual basis for OAG’s ongoing investigation.
Exxon also complains about the purported burden of OAG’s continuing law enforcement
investigation, but does not even try to meet the applicable standard requiring evidence that
compliance would seriously interfere with the operation of its business. In fact, OAG’s
subpoena duces tecum requests specific, targeted documents and information, and flows directly
from the facts already unearthed concerning Exxon’s potential fraud. This would be enough to
preclude Exxon’s burdensomeness argument, even if the company had not forfeited its
credibility through its bad-faith violation of compliance obligations, its consequent and stillunaccounted-for document destruction, and its unprecedented and wasteful attempt to enjoin
OAG’s investigation in an improper federal venue.

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Exxon also makes a variety of demonstrably false legal arguments, including that OAG
lacks the authority to request information in the form called for by the subpoena. As chief
enforcer of the State’s securities and business fraud laws, OAG is authorized by the plain
language of the relevant statutes to make these information requests, and no court has ever
limited that authority by importing the inapposite civil-discovery case law cited by Exxon.
Likewise, Exxon’s refusal to tender an employee of Imperial Oil Limited (“Imperial”), its
majority-owned subsidiary, relies on an inapplicable legal standard used to assess long-arm
jurisdiction in alter ego litigation. Exxon ignores the on-point authority that focuses on a
company’s practical ability to comply with a subpoena. Exxon’s own documents confirm that it
has the practical ability to control relevant Imperial employees, belying Exxon’s assertions to the
contrary in its brief.
Exxon also fails to sustain its preemption argument, which continues to conflate its
valuation of long-lived assets for impairment purposes—which requires cost projections like the
proxy cost of GHGs—with reporting of proved reserves as per SEC regulations. Exxon’s
asserted compliance with SEC regulations is not a defense if Exxon committed fraud as to its
separate, repeated, affirmative promises to investors indicating that proxy costs are used in
valuing assets for impairment purposes.
Finally, Exxon brazenly argues that the company has already accounted for its disturbing
failure to preserve documents, and their consequent destruction, by producing a witness who
knew almost nothing about the relevant facts. Under OAG questioning, this witness pled
ignorance almost 200 times—and deferred specifically to the four witnesses OAG has now
subpoenaed for testimony. Exxon’s argument makes a mockery of the Court’s March 22, 2017
order that Exxon substantiate its claimed preservation and recovery efforts.

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Exxon has not tempered its resistance to OAG’s investigation in light of the nowdocumented factual basis indicating potential fraud. To the contrary, Exxon continues to use
every means that one of the largest companies in the world can afford to delay and obstruct
disclosures it has no legal basis to avoid. 1 The Court should reject Exxon’s tactics, deny its
motion to quash, and grant OAG’s cross-motion to compel. 2
ARGUMENT
A. OAG Has Set Forth a Clear Factual Basis for the Subpoena Duces Tecum
OAG has far exceeded what is required and shown a strong a factual basis for its
subpoena duces tecum by setting forth the details of how Exxon’s own documents contradict its
representations to its investors and to the public. In response, Exxon does not demonstrate, as it
must, that the material OAG seeks is “utterly irrelevant to any proper inquiry,” or that the
legality of Exxon’s practices is “so well established . . . as to be free from doubt.” AnheuserBusch, Inc. v. Abrams, 71 N.Y.2d 327, 332 (1988). 3 Rather, Exxon provides only attorney
argument that its now-admitted use of “different figures” for “different purposes” (Exxon
Memorandum, June 9, 2017, NYSCEF No. 205 (“Exxon Memo.”) at 3) can be defended as
somehow consistent with its plainly contradictory representations. But motions to quash or
1

One prong of Exxon’s strategy has been its facile refrain about OAG’s purportedly “shifting” investigative
theories, but OAG’s original subpoena, issued some 17 months ago, focused specifically on the same matter at issue
now—Exxon’s integration of climate change-related risks into its business.

2

The Court should also deny Exxon’s request, made in a footnote without motion or support, for a retroactive
protective order that would oblige OAG to provide notice before filing any document produced by Exxon. Exxon
has not cited any authority that would support such a restriction. Nor has Exxon established that it would have had
any basis to request that the documents attached to OAG’s June 2 papers be sealed. It is not sufficient that Exxon
may have preferred that documentary evidence of its suspected fraud be kept confidential, especially in the context
of these motions, where Exxon challenged OAG to identify evidence of Exxon’s suspected fraud in order to justify
its subpoenas. “Confidentiality is clearly the exception, not the rule, and the party seeking to seal court records has
the burden to demonstrate compelling circumstances to justify restricting public access.” Mosallem v. Berenson,
905 N.Y.S.2d 575, 579 (1st Dep’t 2010) (internal citation and quotation marks omitted).
3

See also Hogan v. Cuomo, 888 N.Y.S.2d 665, 667 (3d Dep’t 2009) (“The person challenging a subpoena bears the
burden of demonstrating a lack of authority, relevancy or factual basis for its issuance.”).

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compel the enforcement of an investigative subpoena are not the appropriate vehicles to resolve
the merits of such disputes. See Nicholson v. State Comm’n on Judicial Conduct, 50 N.Y.2d
597, 611 (1980) (holding that recipient of subpoena may not “avoid compliance by attacking the
specific allegations upon which the investigation is based”). 4
That these subpoenas were not the first ones issued in this investigation does not change
the fundamental principle that OAG need only show “some factual basis for [the] investigation”
and “the relevance of the items sought.” Am. Dental Coop., Inc. v. Attorney-General, 514
N.Y.S.2d 228, 232 (1st Dep’t 1987); see also OAG Memorandum, June 2, 2017, NYSCEF
No. 168 (“OAG Memo.”) at 15 & n.18 (citing cases); N.Y. State Joint Comm’n on Pub. Ethics v.
Campaign for One N.Y., Inc., 53 Misc. 3d 983, 998 (Sup. Ct. Albany Cnty. 2016) (enforcing
follow-on subpoena with “sufficient” factual basis; refusing to decide factual and legal disputes
that would be at issue if a proceeding were ultimately filed).
The authorities cited by Exxon (Exxon Memo. at 5) do not counsel otherwise. This is not
a case like Myerson v. Lentini Bros. Moving & Storage Co., in which a bare reference to
“numerous complaints” was insufficient to justify requiring the production of “all books and
records” of a company. 33 N.Y.2d 250, 259-60 (1973); see also id. at 258 (making clear that a
“strong and probative basis for investigation” was not required). Nor is this a case like Napatco,
Inc. v. Lefkowitz, in which the only evidence of wrongdoing was a single advertisement and form
letter. 43 N.Y.2d 884, 885-86 (1978). 5 OAG’s detailed recitation of its factual findings to date
provides a more than sufficient basis to justify its narrowly-targeted subpoena duces tecum.

4

See also F.T.C. v. Texaco, Inc., 555 F.2d 862, 879 (D.C. Cir. 1977) (“[S]ubstantive issues which may be raised in
defense against an administrative complaint are premature in an enforcement proceeding . . . . [I]f a formal
complaint is issued, subpoenaed parties may assert their defenses.”).

5

See also OAG Memo. at 14 n.14 (discussing additional cases cited by Exxon).

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In any event, Exxon’s new, unsupported assertions about its internal practices, and its
tortured interpretation of its prior representations, do not survive even minimal scrutiny, let alone
provide a basis to conclude that the legality of Exxon’s conduct is “well established.” 6 Indeed,
Exxon now admits that for years it maintained two separate proxy cost figures—one that it
represented to its investors and to the public, and a second, secret, lower figure, that Exxon
applied in its internal planning and budgeting. Exxon attempts to justify this inconsistency by
asserting that it used its public “proxy cost” figures to forecast global demand for energy, while
using a “separate GHG cost” to evaluate the impact of potential climate change-related
regulations on investments in specific projects. (Exxon Memo. at 8.) This explanation,
however, appears nowhere in Exxon’s public disclosures, which plainly state just the opposite.
As just one example, in its 2014 Energy and Climate report, Exxon refers not to a
separate “proxy cost” for demand projections and a “GHG cost” for investment evaluations, but
to “this GHG proxy cost.” 7 Exxon then boasts of its “robust process for evaluating investment
opportunities and managing our portfolio of operating assets,” and specifically states that it
“requires that all business units use a consistent corporate planning basis, including the proxy
cost of carbon discussed above, in evaluating capital expenditures and developing business
plans.” 8 Indeed, Exxon’s new interpretation of its prior disclosures is contradicted by its own
Greenhouse Gas Manager, who specifically acknowledged that “we have implied that we use the

6

While Exxon has set out its version of the facts in a memorandum of law, signed by an attorney, the company was
required to provide actual, competent evidence to the extent it intended to present a factual dispute on the merits.

7

Exxon Mobil Corp., Energy and Climate (2014), at 6 (emphasis added), available at
http://cdn.exxonmobil.com/~/media/global/files/energy-and-environment/report---energy-and-climate.pdf.

8

Id. at 20 (emphasis added); see also Oleske Aff. ¶¶ 10-19; Ex. 1 at 17-18.

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[publicly-disclosed] basis for proxy cost of carbon when evaluating investments.” (Affirmation
of John Oleske, June 2, 2017, NYSCEF No. 169 (“Oleske Aff.”), Ex. 5, at 3) (emphasis added). 9
This evidence alone is more than enough to provide a sufficient factual basis for the
subpoena—but there is considerably more. The investigation to date has also revealed three
significant areas in which Exxon appears not to have applied a proxy cost of GHGs at all, in
direct contradiction of its representations to investors and the public.
First, Exxon represented to investors that it was assuming rising GHG costs over time,
reaching certain milestones such as $60/ton of CO2-equivalent in 2030, and $80/ton in 2040, and
applying those assumptions to safeguard Exxon’s business for the long term. Such projections of
future GHG costs were intended to “reflect all types of actions and policies that governments
may take” over a multi-decade period. (Oleske Aff., Ex. 1, at 17-18.) However, in 2015, Exxon
directed planners at Imperial, its majority-owned subsidiary, not to apply a proxy cost of GHGs
to the company’s oil sands projects, and instead to apply indefinitely into the future the much
lower GHG tax under existing Alberta law. (Oleske Aff. ¶¶ 29-33; see also infra at 12.)
Exxon’s response that “[w]hen an actual cost is known, it serves no legitimate purpose to ignore
that cost and replace it with one that is hypothetical” (Exxon Memo. at 11) is completely at odds
with what Exxon told investors it was doing, and why. Projecting and applying future GHG
costs, which Exxon now dismisses as “hypothetical” and not even “legitimate,” is exactly what
Exxon told investors and the public it was doing. 10 Exxon’s approach to its Alberta oil sands

9

Given that a GHG cost that affects global demand would also affect the profitability of Exxon’s oil and gas
projects, there is no sound basis for applying different proxy cost figures for demand projection purposes and
planning and budgeting purposes, and any such distinction would not have been apparent to Exxon’s investors.

10

See also Exxon Mobil Corp., Corp. Citizenship Report 2014, at 37, available at
http://cdn.exxonmobil.com/~/media/global/files/corporate-citizenship-report/2014_ccr_full_digital_approved.pdf
(“We believe our view on the potential for future [climate-related] policy action is realistic and, by no means
represents a ‘business as usual’ case.”).

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projects suggests that Exxon may have fraudulently disregarded its claimed proxy-cost analysis
when it produced less profitable results.
Second, Exxon represented in public filings that, as required by GAAP, its “[c]ash flows
used in impairment evaluations . . . make use of the Corporation’s price, margin, volume, and
cost assumptions developed in the annual planning and budgeting process, and are consistent
with the criteria management uses to evaluate investment opportunities.” (Oleske Aff. ¶ 47)
(emphasis added). However, documents produced by Exxon’s independent auditor
PricewaterhouseCoopers LLP (“PwC”) indicate that prior to 2016, Exxon did not apply a proxy
cost of GHGs when estimating future cash flows for purposes of determining whether to take an
impairment charge on its long-lived assets, such as oil and gas reserves and resources. (Id. ¶¶
41-54.) Exxon does not dispute this fact; instead, the company defends its past practices by
making incorrect statements about GAAP requirements that are directly contradicted by its own
public statements. (Exxon Memo. at 10.) GAAP specifically requires that companies consider
projected cash flows in making impairment evaluations, and Exxon represents that it follows
these requirements. (Oleske Aff. ¶¶ 44-46.) 11
Third, Exxon publicly represented that “[t]he proxy cost seeks to reflect all types of
actions and policies that governments may take over the Outlook period relating to the . . . use of
carbon-based fuels.” (Oleske Aff. ¶ 38) (emphasis added). However, documents produced by
Exxon indicate, and Exxon does not deny, that it did not apply a proxy cost of GHGs to so-called
“Scope 3” emissions caused by the “use” of fossil fuels. (Id. ¶ 40.) Such emissions constitute
approximately 90% of fossil-fuel-related GHGs. (Id. ¶ 39.)

11

See also SEC Staff Guidance on Accounting Standards Codification 360, available at
https://www.sec.gov/interps/account/sabcodet5.htm (stating that “forecasts made for purposes of applying FASB
ASC Topic 360 [must] be consistent with other forward-looking information prepared by the company, such as that
used for internal budgets”).

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These inconsistencies between Exxon’s statements to its investors and its documented
internal practices make the absence of documents reflecting the actual application of the proxy
cost of GHGs all the more alarming. Exxon cites only to a handful of stray mentions of GHG
costs (Exxon Memo. at 13), 12 none of which consists of or even discusses actual cash flow
models or other key documents necessary for investment or impairment evaluations—much less
one that includes a proxy cost of GHGs.
Finally, Exxon’s refrain that “no law or policy” required it to apply a proxy cost of GHGs
is simply false in light of Exxon’s representations. (Exxon Memo. at 13.) New York’s antifraud laws require that Exxon make accurate representations to investors and the public. It was
shareholder demands for more robust reporting concerning the company’s response to the
financial risks posed by climate change, rather than any pre-existing legal requirement, that
apparently led Exxon to make many of its representations concerning proxy costs. (Oleske Aff.
¶¶ 6-8.) Exxon cannot now escape scrutiny simply because its choice to make these false
representations was unforced.
B. The Subpoena Duces Tecum Does Not Pose Undue Burdens
OAG’s May 8, 2017 subpoena duces tecum to Exxon 13 flows directly from the facts
described above. Specifically, the subpoena requires Exxon to state whether it applied a proxy
cost of GHGs as part of its economic decision-making process for the very decisions for which it

12

Specifically, these documents consist of mentions of GHG costs to an executive of another company (Affirmation
of Justin Anderson, June 9, 2017, NYSCEF No. 206, Ex. I) and to a university professor (id. Ex. J), a general
environmental policy that is not specific to proxy costs (id. Ex. L), a document concerning an anomalous project in
which Exxon generated GHG credits by selling CO2 to other operators (id. Ex. M), and a document concerning
Exxon’s compliance with the EPA’s Mandatory Greenhouse Gas Reporting Rule (id. Ex. N). Exxon places great
emphasis on excerpts from the two-page insert in Exxon’s Corporate Plan Dataguide Appendix (id. Exs. K and O),
but that document only describes certain parameters concerning what Exxon promised to do, and does not provide
any evidence of what it actually did.
13

Affirmation of Justin Anderson, May 19, 2017, NYSCEF No. 132, Exhibit T.

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publicly represented that it was doing so. To the extent that Exxon did apply a proxy cost, the
subpoena requests specific information about the price, intensity, scope, and pass-through
assumptions that Exxon applied, as evidence reviewed by OAG indicates that Exxon has in many
cases adjusted those assumptions to make its proxy-cost analysis all but meaningless. 14 These
requests are designed to focus further investigation by separating projects for which Exxon
applied proxy costs from those for which it did not. The subpoena also requests documents that
are highly relevant to these questions. 15 Exxon does not, and cannot, contest the relevance of
OAG’s requests to the investigation.
Instead, Exxon asserts, without any factual support, that complying with the subpoena
would be unduly burdensome. “Relevancy, and not quantity, is the test of the validity of a
subpoena,” Am. Dental Coop., Inc. v. Attorney-General, 514 N.Y.S.2d 228, 234 (1st Dep’t 1987)
(internal brackets and citation omitted), and “courts have refused to modify investigative
subpoenas unless compliance threatens to unduly disrupt or seriously hinder normal operations
of a business.” N.L.R.B. v. Am. Med. Response, Inc., 438 F.3d 188, 193 n.4 (2d Cir. 2006).
Establishing that “the cost of gathering this information is unduly burdensome in light of the
company’s normal operating costs” is a “difficult burden” to meet. E.E.O.C. v. Sterling Jewelers
Inc., No. 11-CV-938A, 2013 WL 5653445, at *9–10 (W.D.N.Y. Oct. 16, 2013) (emphasis in
original) (citing cases; holding that although the subpoena recipient’s “cost estimate for
complying with the [subpoena] is substantial, it fails to identify how this cost would present an

14

For example, there is evidence that Exxon has (i) applied a lower proxy cost than it publicly represented to
investors; (ii) applied a proxy cost to only a fraction (i.e. limited intensity) of GHG emissions from a given project;
(iii) applied a proxy cost to only certain GHGs and not others; (iv) applied a proxy cost to only direct emissions as
opposed to emissions stemming from end use of the oil and gas (i.e. “Scope 3” emissions); and (v) assumed that it
could pass-through most or all of the proxy cost to its customers, while unreasonably assuming that such passthrough would have no effect on demand for its products. (Oleske Aff. ¶ 110.)
15

The relevance of these documents, which Exxon does not dispute in more than a cursory fashion, is set out at
OAG Memo. at 10 and Oleske Aff. ¶¶ 113-16.

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undue burden for a retailer of its size”); see also F.T.C. v. Texaco, Inc., 555 F.2d 862, 882 (D.C.
Cir. 1977) (enforcing investigative subpoena concerning hundreds of gas fields when “the
breadth complained of is in large part attributable to the magnitude of the producers’ business
operations” which were the legitimate subject of investigation; noting that burdens were
mitigated through negotiations with investigating agency); Gelb v. Kuriansky, 118 Misc. 2d 960,
962 (Sup. Ct. Kings Cnty. 1983) (“[t]he problem of volume” is “inherent to investigations
involving . . . extensive business operations”; parties operating “extensive” businesses “cannot
complain of the magnitude of their own operation as a basis for resisting compliance with
otherwise lawful subpoenas.”). 16 Exxon has presented no evidence of such a significant
disruption here. 17
Rather than meeting and conferring with OAG in good faith to determine whether there is
a narrowed subset of documents or information that would meet OAG’s legitimate investigative
interests, Exxon has chosen to engage in hyperbole concerning the burdens of compliance. 18 In
fact, the answers to most of OAG’s requests are likely found in Exxon’s projections and models
used in making investment or impairment decisions. OAG has not located in Exxon’s
productions, and Exxon has not identified, any such projections or models that include a proxy

16

See also OAG Memo. at 16 (citing cases).

17
The cases Exxon cites (Exxon Memo. at 15-17) do not support its position. See Reuters Ltd. v. Dow Jones
Telerate, Inc., 662 N.Y.S.2d 450, 454 (1st Dep’t 1997) (declining to enforce subpoena issued to a non-party in
private litigation; noting that a “broader view of relevance may be applied when the subpoena is issued by an
administrative or legislative investigatory body, since the relevance of such an ‘office subpoena’ depends on the
authorized breadth of the investigation itself”); D’Alimonte v. Kuriansky, 535 N.Y.S.2d 151, 152 (3d Dep’t 1988)
(subpoena sought “materials that clearly are irrelevant to the matter at hand”); Smith v. Russo-Asiatic Bank, 170
Misc. 408, 411 (Sup. Ct. Albany Cnty. 1939) (compelling production of “a mass of papers” so long as they do not
constitute “all the books and papers of a party” and thereby “completely put[] a stop to business of a corporation”);
N.Y. State Comm’n on Judicial Conduct v. Doe, 61 N.Y.2d 56, 62 (1984) (modifying subpoena to exclude only
documents “having no relation to the matters presently under investigation”).
18

Additionally, Exxon’s repeated invocation of the number of pages it has produced rings hollow, as most of the
documents it produced were not responsive to the production priorities that OAG repeatedly made clear to Exxon,
duplicative, or both.

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cost of GHGs. But given Exxon’s public statements that it “rigorously consider[s] the risk of
climate change in [its] planning bases and investments,” 19 engages in “structured management
processes across an asset’s life cycle,” 20 and has established “common worldwide expectations
for addressing risks inherent in [its] business,” 21 all of this information should be readily
available to the company.
Contrary to Exxon’s assertion that the subpoena requires Exxon to produce information
about every investment decision ever made at the company for the past 12 years, OAG remains
willing to consider the prioritization of the requested information for a subset of representative
projects that meet particular criteria (such as geography, dollar value, or GHG emission levels),
or as to which OAG has significant unanswered questions.
C. Exxon Continues to Ignore OAG’s Express Statutory Authority
to Request Information
Exxon does not, and cannot, contest OAG’s express statutory authority to request data
and information as part of its investigations, or the clear case law upholding such authority.
(OAG Memo. at 17-19.) 22 Instead, Exxon makes an unsupported semantic argument that only
“interrogatories,” not requests for information, are permitted, ignoring OAG’s authority to
“require such other data and information as [it] may deem relevant[.]” Gen. Bus. Law § 352(1)

19

Oleske Aff., Ex. 1, at 21 (emphasis added).

20

Exxon Mobil Corp., Environmental Management (emphasis added), available at
http://corporate.exxonmobil.com/en/environment/environmental-performance/environmental-stewardship/overview.
21

Exxon Mobil Corp., Operations Integrity Management System (emphasis added), available at
http://corporate.exxonmobil.com/en/company/about-us/safety-and-health/operations-integrity-management-system.
22
Once again, Exxon’s citations (Exxon Memo. at 18) are to inapposite decisions in the civil litigation context that
do not concern OAG’s statutory authority. In Litemore Elec. Co. v. City of N.Y., 467 N.Y.S.2d 200, 202 (1st Dep’t
1983), a civil contract dispute, the interrogatories did not “pinpoint the critical areas of contest,” and in Mijatovic v.
Noonan, 569 N.Y.S.2d 176, 177 (2d Dep’t 1991), the court struck only interrogatories that sought “opinions or
conclusions of law, rather than relevant facts.” Those are not the circumstances here.

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(emphasis added). 23 Further, as described above, the subpoena calls for existing “data and
information,” not “analysis” as Exxon incorrectly asserts. (Exxon Memo. at 18-19.)
D. OAG’s Investigation Is Not Preempted
Exxon’s preemption argument is premature, as no complaint has been filed. (OAG
Memo. at 21.) It is also misguided, as Exxon’s internal long-lived asset valuations, and the
impairment decisions they feed into, are entirely separate from the SEC-mandated proved
reserve estimates upon which Exxon inexplicably continues to focus. (Id. at 19-21.) Unlike
proved reserve reporting under the SEC formula, under which retroactive oil and gas prices and
existing costs are applied, impairment evaluations require consideration of projected costs (such
as proxy costs) over time. (See supra at 7.) If Exxon misrepresented its own impairmentvaluation practices, OAG cannot be preempted from enforcing classic securities-fraud claims
that flow from those misrepresentations. 24
E. Exxon Should Be Required to Produce Mr. Iwanika for Testimony
Exxon concedes that under New York law, a parent company subject to New York
jurisdiction can be compelled to produce for testimony employees of a foreign subsidiary under
that parent’s control. (Exxon Memo. at 19-20.) But Exxon sets out the wrong test for
determining whether it controls its majority-owned subsidiary, Imperial, for purposes of
requiring Exxon to produce Imperial employee Jason Iwanika for testimony. The “mere

23

Were Exxon’s prospective responses to be deemed written testimony, the result would be the same, as “OAG may
require a potential violator to file “a statement in writing . . . as to all the facts and circumstances concerning the
subject matter . . . and for that purpose may prescribe forms upon which such statements shall be made.” Gen. Bus.
Law § 352(1). In any event, if Exxon were questioning nothing more than the subpoena’s formal header, it should
not have occupied the Court’s time, but should have simply requested that a replacement subpoena be issued.
24

Exxon’s argument that OAG’s investigation represents an attempt to compel Exxon “to adopt [OAG’s] preferred
assumptions about the potential impact of future climate change policies” (Exxon Memo. at 19) is simply false, and
bears no relation to the potential fraud claims OAG has described.

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department” test that Exxon cites (id. at 20-21) applies to establishing jurisdiction over a foreign
entity based on an alter ego theory of liability. 25 Jurisdiction, however, is not at issue here.
Rather, the question is whether Exxon has the “practical ability” to produce the requested
witness. Commonwealth of N. Mariana Is. v. Canadian Imperial Bank of Commerce, 21 N.Y.3d
55, 62-63 (2013). Under applicable case law, majority ownership of a foreign subsidiary,
particularly when combined with practical control over the subsidiary as to matters at issue in the
case, is sufficient to meet this standard as to production of both documents and testimony. See
Bank of Tokyo-Mitsubishi, N.Y. v. Kvaerner, A.S., 175 Misc. 2d 408, 411 (Sup. Ct. N.Y. Cnty.
1998) (parent company must “produce any and all appropriate discovery under its aegis,
including that under the control of its subsidiary”); Grande Prairie Energy LLC v. Alstom Power,
Inc., 5 Misc. 3d 1002(A), 2004 N.Y. Slip Op. 51156(U), at *3 (Sup. Ct. N.Y. Cnty. Oct. 4, 2004)
(“a parent company . . . can be compelled to produce for deposition an employee of its foreign
subsidiary”; holding that “significant ties” between company and employee of affiliate as to
matters at issue were sufficient to require deposition).
Imperial’s status as a majority-owned, rather than wholly-owned, subsidiary of Exxon
does not alter this conclusion. In Krasinski v. Polimeni Org. LLC, the court, applying Bank of
Tokyo, held that a parent company subject to jurisdiction in New York was required to produce

25

Specifically, Delagi v. Volkswagenwerk A.G. of Wolfsburg, Germany, 29 N.Y.2d 426 (1972) and Volkswagenwerk
Aktiengesellschaft v. Beech Aircraft Corp., 751 F.2d 117 (2d Cir. 1984), address whether foreign corporate
manufacturers can be subject to New York’s jurisdiction by virtue of sales of their product by a subsidiary in New
York. In People v. H & R Block, Inc., 16 Misc. 3d 1124(A), 2007 N.Y. Slip Op. 51562(U) (Sup. Ct. N.Y. Cnty. July
9, 2007), the court held that it lacked personal jurisdiction over a non-resident corporation with no presence in or
contacts with New York. In OneBeacon Am. Ins. Co. v. Newmont Mining Corp., 918 N.Y.S.2d 470 (1st Dep’t
2011), the court dismissed a complaint against foreign companies on the grounds of lack of personal jurisdiction and
forum non conveniens.

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documents of its majority-owned foreign affiliate, even though the court lacked jurisdiction over
the affiliate. N.Y.L.J., Jun. 19, 2003, p. 23, col. 5 (Sup. Ct. Nassau Cnty. 2003, Austin, J.). 26
Documents produced by Exxon demonstrate its practical control over Imperial in
connection with the proxy cost analysis. (Oleske Aff. ¶¶ 33 & 120.) These documents show that
Mr. Iwanika believed that he and his team were “held” to Exxon’s Corporate Plan guidance
specific to Alberta, regardless of contradictory instructions from his colleagues at Imperial. Mr.
Iwanika then followed Exxon’s instructions to abandon the Corporate Plan guidance on proxy
cost and instead hold flat into future years the much lower actual GHG tax under existing Alberta
law. Having produced these documents, Exxon should not be permitted to change course and
withhold Mr. Iwanika’s testimony on the very topic as to which it exercised control over him and
over Imperial. 27
F. Exxon Should Be Required to Produce the Four Employees that Exxon’s Own
Witness Identified as Having Relevant Knowledge of Exxon’s Apparent Spoliation
Exxon does not deny that years’ worth of emails from key custodians, including the
company’s former Chairman and CEO, Rex Tillerson, have been destroyed. Exxon also does not
deny that the witness it proffered in purported compliance with the Court’s prior order was
unable to explain the company’s identification, preservation, collection, destruction, or
reclamation of the destroyed documents, and instead repeatedly referred to the four witnesses

26

See id. (holding that “[a] party, which is subject to the in personam jurisdiction of the New York courts and
controls a foreign business entity, should be obligated to produce, in New York, all appropriate discovery including
documents and records in the control of the foreign entity wherever the foreign entity may be located.”) (attached as
Exhibit 1).

27

Additionally, Exxon’s listing of Mr. Iwanika (and other Imperial employees) on its privilege log evinces Exxon’s
control over Mr. Iwanika and over Imperial. Exxon’s assertion that privilege was not broken because Exxon and
Imperial share a common interest in responding to OAG’s subpoena is unavailing, as the common interest doctrine
“extend[s] no further than communications related to pending or reasonably anticipated litigation.” Ambac Assur.
Corp. v. Countrywide Home Loans, Inc., 27 N.Y.3d 616, 630 (2016). Exxon does not assert that these
communications bear any such relationship to litigation. Thus, it is only because of Exxon’s control over Mr.
Iwanika that his inclusion in a communication does not break privilege.

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OAG has subpoenaed. Instead, Exxon principally argues that because it produced a witness with
a very limited amount of second-hand knowledge, it cannot be compelled to produce the
individuals with first-hand information. (Exxon Memo. at 23.) This is simply absurd. 28
Exxon also argues that its admitted document destruction is unlikely to have eliminated
evidence relevant to the OAG’s investigation. Exxon bases its argument on the documents that
were not destroyed—not the communications that were destroyed, such as those between the
Wayne Tracker email account and any individuals not on litigation hold, including any of Mr.
Tillerson’s several assistants, on which no one else may have been copied. In any event, whether
“unique” responsive documents were actually lost is not at issue at this stage, where OAG is
simply attempting to determine the basic facts of Exxon’s document destruction and recovery
efforts. If OAG ultimately seeks a remedy for this document destruction, Exxon can make these
arguments then, in the context of full disclosure and a complete record.
CONCLUSION
For the reasons set forth above and in OAG’s prior memorandum, Exxon’s motion to
quash should be denied in its entirety, and OAG’s cross-motion to compel compliance with
OAG’s subpoena duces tecum, its four subpoenas for the testimony of record custodians, and its
subpoena for the testimony of Mr. Iwanika should be granted in its entirety.

28

Incredibly, Exxon claims that “the Court has already determined that ExxonMobil has responded to each of the
Attorney General’s concerns” relating to subpoena compliance (Exxon Memo. at 25), as if the Court’s prior order
compelling Exxon to produce a spoliation witness contained a pre-determination that no further witnesses would be
required, even if Exxon proffered an unknowledgeable witness in bad faith, as it did here.

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Exhibit 1

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DECISION OF INTEREST; Supreme Court; DOI
New York Law Journal
June 19, 2003 Thursday

Copyright 2003 ALM Media Properties, LLC All Rights Reserved Further duplication without permission is prohibited

Section: Pg. 19, (col. 4); Vol. 229
Length: 2038 words
Byline: Justice Austin

Body
DOI
Supreme Court
Nassau County
Krasinski v. The Polimeni Organization LLC - Defendant, Polimeni International, appeals from the Order of Special Referee
Frank Schellace appointed by this Court to oversee the conduct of the accounting in this action claiming that he exceeded his
authority in directing discovery and to clarify the judgment which directed the accounting.
Background
Plaintiff commenced this action seeking declaratory relief and injunctive relief, specific performance of an agreement, an
accounting, money damages based upon breach of contract, breach of fiduciary duty, fraud and unjust enrichment.
Plaintiff had entered into an agreement with Defendant Polimeni Organization LLC (Organization), whereby Plaintiff agreed to
assist Organization in developing commercial property in Poland. Upon the performance of his services, Plaintiff would be
entitled to receive a percentage of Defendant Polimeni International LLC (International). The percentage of the interest that
Plaintiff would receive in International would depend upon Plaintiff's level of participation in the transactions.
After trial, a judgment was entered in this action declaring that Plaintiff was entitled to a 5 percent interest in International and
two other limited liability companies to be formed by International with regard to owning and operating shopping centers in
Gniezno and Gliwice, Poland. This action was then referred to Special Referee Frank Schellace to conduct the accounting and
to determine the amount owed to Plaintiff pursuant to the fifth and sixth decretal paragraphs of the judgment.
One of the entities in which Plaintiff claims to have an interest is Polimeni International Konin entity Sp. zo. o. (Konin entity).
The Konin entity is a limited liability company formed in Poland which operates a shopping center in Konin, Poland.
International owns 89 percent of the Konin entity and is the controlling member of the Konin entity.

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The Konin entity was named as a Defendant in this action. By decision and order of this Court dated August 20, 2002,
summary judgment was granted dismissing the action against the Konin entity on the grounds that the court lacked long arm
jurisdiction over it. Nevertheless, Plaintiff's claim for an interest in that entity remained viable.
At a conference held before Special Referee Schellace on January 28, 2003, counsel for International furnished to counsel for
Plaintiff copies International's 2001 income tax return and preliminary financial statement dated December 31, 2002. At this
conference, counsel for the Plaintiff requested the underlying financial records of the Konin entity and copies of the leases for
the shopping center. After argument, Special Referee Schellace directed that the financial records of Konin entity and the leases
be produced.
The motion before the court is, in essence, an appeal from this ruling pursuant to CPLR 3104 (d).
Discussion
International, as movant/appellant herein, argues that the non-party Konin entity is a Polish entity which is not subject to the
jurisdiction of this Court. Thus, International contends that discovery, as provided in the Hague Convention, is mandatory. This
Court disagrees.
The Hague Convention on the Taking of Evidence Abroad in Civil or Commercial Matters (the Hague Convention) is not the
exclusive or necessarily primary method for obtaining document discovery from a foreign entity. Societe Nationale Industrielle
Aerospatiale v. United States District Court., 482 U.S. 522, 535 (1987). See also, Kreinerman v. Casa Vearkamp, S.A. de C.V.,
22 F. 3d 634, 640 (5th Cir. 1994). The procedures of the Hague Convention apply to discovery sought from a non-party in a
foreign jurisdiction. Orlich v. Helm Bros., Inc., 160 A.D. 2d 135 (2nd Dept.1990). See also, Carmody-Wait 2d, New York
Practice 42.39. As the United States Supreme Court held in Societe Nationale:
[T]he text of the Convention draws no distinction between evidence obtained from third parties and that obtained from the
litigants themselves; nor does it purport to draw any sharp line between evidence that is 'abroad and evidence that is within the
control of a party subject to the jurisdiction of the requesting court. Thus, it appears clear to us that the optional Convention
procedures are available whenever they will facilitate the gathering of evidence by the means authorized in the Convention.
Although these procedures are not mandatory, the Hague Convention does 'apply' to the production of evidence in a litigant's
possession in the sense that it is one method of seeking evidence that a court may elect to employ. Supra at 541.
Here, Plaintiff has attempted to employ discovery procedures available under the CPLR against a party litigant which does not
deny having access to the documents and records sought by virtue of its majority status and control thereof.
The party asserting that the provisions of the Hague Convention are applicable has the burden of establishing the reasons for
employing the procedures of the Convention. See, Scarminach v. Goldwell GmbH, 140 Misc. 2d 103, 107 (Sup.Ct. Monroe Co.
1988), where Special Term held that in doing so, that party must establish * * * that resort to the Convention is required, given
the particular fact of this case, the sovereign interests involved, and the effectiveness of such procedures. See also, In re
Anschuetz & Company, GmbH, 838 F. 2d 1362 (5th Cir. 1988); and In re Benton Graphics v. Uddeholm Corp., 118 F.R.D. 386
(D.N.J., 1987).
In this case, the Defendants have failed to make an adequate showing as to the privacy of the Hague Convention over
competing, available state discovery procedure. The affidavit of counsel submitted in support of International's motion/appeal
fails to establish or even hint as to how production of these documents would be an affront to Polish sovereignty inasmuch as
they do not assert that the documents would not be discoverable under the provisions of the Hague Convention had Plaintiff
sought discovery of these documents pursuant to those procedures. A party should not be required to use the costly and
cumbersome procedures of the Hague Convention where discoverable documents can be obtained through the discovery
procedures established by the CPLR. See, Wilson v. Lufthansa German Airlines, 108 A.D. 2d 393 (2nd Dept. 1983).
A party, which is subject to the in personam jurisdiction of the New York courts and controls a foreign business entity, should
be obligated to produce, in New York, all appropriate discovery including documents and records in the control of the foreign
entity wherever the foreign entity may be located. Bank of Tokyo-Mitsubishi, Ltd., v. Kvaerner, 175 Misc.2d 408, (Sup.Ct.,
N.Y. Co. 1998). See also, Carmody-Wait 2d, New York Practice 42.39.

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DECISION OF INTEREST; Supreme Court; DOI
In this case, it is undisputed that International owns an 89 percent interest in Konin entity and is the controlling member of the
Konin entity. Under these circumstances, the Court finds no basis for requiring Plaintiff to resort to the provisions of the Hague
Convention. Special Referee Schellace properly concluded that International should produce these documents.
Contrary to International's assertion, the Court is not compelling the Konin entity to account. The Court is simply directing
International to provide documents which will aid the Special Referee in determining the value of Plaintiff's 5 percent interest
in the Konin entity. Utilizing the records and documents of the 89 percent owner of Konin entity - International - is a fair,
reasonable and cost effective means to accomplish that goal.
This is consistent with CPLR 3101 (a) (1) which provides for full discovery of all matter material and necessary in the
prosecution or defense of an action, regardless of the burden of proof from a party to an action. The provisions of CPLR
3101(a)(1) are to be liberally interpreted. The term material and necessary requires disclosure of * * * any facts bearing on the
controversy which will assist preparation for trial by sharpening the issues and reducing delay and prolixity. The test should be
one of usefulness and reason. Allen v. Crowell-Collier Publishing Co., 21 N.Y. 2d 403, 406 (1968).
In lieu of utilizing the cumbersome process of the Hague Convention, CPLR 3120 (a) (1) (i) provides for discovery against a
party of any designated documents * * * which are in the possession, custody or control of the party served; * * * . In order to
obtain disclosure of a document, the party seeking its disclosure must demonstrate that the document exists and is in the
possession, custody or control of the party served. Corriel v. Volkswagen of America, Inc., 127 A.D. 2d 729 (2nd Dept.1987);
Linton v. Lehigh Valley Railroad Co., 25 A.D.2d 334 (3rd Dept. 1966); and Avila Fabrics, Inc. v. 152 West 36th Street Corp.,
22 A.D.2d 238 (1st Dept. 1964). The only basis for avoiding such disclosure from a party is for the party opposing disclosure to
establish that the demanded material is subject to privilege, an evidentiary privilege, established pursuant to CPLR 3101 or that
the demanded document does not exist. Corriel v. Volkswagen of America, Inc., supra. See also, Rosado v. Mercedes-Benz of
North America, Inc., 103 A.D.2d 395 (2nd Dept. 1984); and Caveney v. Sorrano, 84 A.D.2d 557 (2nd Dept.1981). In order to
assert that the documents do not exist or are not in the party's possession, custody or control, the party opposing disclosure must
submit an affidavit from the party or someone with knowledge indicating that the documents do not exist or are not in the
party's possession, custody or control. See, Fugazy v. Time, Inc., 24 A.D. 2d 443 (1st Dept.1965).
In this case, International does not assert that discovery of the requested documents is subject to any legally recognized
privilege. In addition, and more importantly, the Defendant does not assert that the demanded documents are not in its
possession, custody or control or are not obtainable. In this circumstance, Plaintiff is demanding production of specifically
identified documents which are in the possession, custody and control of International, a party to this action and which is
subject to the jurisdiction of this Court. The Hague Convention does not apply to discovery sought in New York from an entity
subject to the jurisdiction of the New York courts. The source of the documents is irrelevant to the issue of whether they can be
obtained in discovery. See, Wilson v. Lufthansa German Airlines, supra, and Bank of Tokyo-Mitsubishi v. Kvaerner, supra.
This Court will not force Plaintiff to resort to the costly Hague Convention procedure which would be tantamount to denying
discovery against a party which is subject to this Court's jurisdiction and which undisputedly has control of the foreign entities
which possess the demanded documents. Bank of Tokyo-Mitsubishi v. Kvaerner, supra.
Finally, with regard to the scope of discovery to be permitted herein, this Court specifically found that Plaintiff is entitled to
five percent of International and the Konin entity as well as the entities to be formed upon the development in Gniezno and
Gliwice, Poland. As a result, Plaintiff is entitled to an accounting of the finances of International and the Konin entity.
International must thus produce all documents relating to its business and its finances and those of the Konin entity in its
possession and which it can obtain in its role of majority shareholder.
Accordingly, it is,
ORDERED, that Defendant's motion declaring that the Special Referee appointed to supervise the accounting in this matter
exceeded his authority or clarifying the judgment with respect to discovery is denied; and it is further
ORDERED, that the Order of Special Referee Frank Schellace which directed production of documents and records of Konin
entity is hereby confirmed and the stay thereof is hereby vacated; and it is further,

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DECISION OF INTEREST; Supreme Court; DOI
ORDERED, that Defendant Polimeni International LLC, shall produce said documents and records within 30 days of the date
of this order; and it is further,
ORDERED, that parties shall appear for a conference in the within matter before Special Referee Frank Schellace on July 16,
2003 at 9:30 a.m.
This constitutes the decision and Order of the Court.
Load-Date: August 6, 2011

End of Document

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