ExxonMobil Appeal Denied in $1 Billion InterOil Shareholder Suit

NEW YORK (LN) — A First Department panel on Tuesday unanimously affirmed a lower court’s denial of ExxonMobil’s motion to dismiss a shareholder lawsuit alleging the energy giant manipulated appraisals to reduce payments from its 2017 acquisition of InterOil Corporation.

The court ruled that plaintiffs, led by Phil E. Mulacek, established standing to sue under the Contingent Resource Payment Agreement (CRPA) because they acquired enough Escrow Verification Receipts (EVRs) in May 2024 to exceed the 25% ownership threshold required to bring a claim.

ExxonMobil had argued that transfer restrictions survived the agreement’s termination, which would have blocked the plaintiffs from consolidating their interests. The appellate court rejected that argument, finding that the specific sections restricting transfers did not survive termination because they were not listed among the surviving provisions.

"A specific provision will not be set aside in favor of a catchall clause," the court wrote, citing New York contract law principles.

The dispute stems from ExxonMobil’s 2017 purchase of all outstanding InterOil stock for $45 per share. The deal included contingent consideration based on post-closing estimates of natural gas resources in Papua New Guinea. Plaintiffs allege ExxonMobil manipulated the appraisal process, resulting in a valuation more than 30% lower than prior estimates and reducing payments to former shareholders.

The plaintiffs now represent the interests of all EVR holders, seeking damages exceeding $1 billion.

In a 2024 decision, the New York Court of Appeals dismissed an earlier version of the lawsuit, ruling that the plaintiffs did not hold enough EVRs to qualify as "Required Holders" under the CRPA. The current action proceeds because the plaintiffs subsequently aggregated their holdings.

The appellate court also rejected ExxonMobil’s argument that the plaintiffs were not Required Holders because they were not listed Register. The court noted that ExxonMobil failed to demonstrate that inclusion was possible after the CRPA terminated.

The panel declined to rule on arguments regarding the statute of limitations and equitable estoppel, noting those issues depend on facts not on a motion to dismiss.