A New York appellate court has ruled in favor of former shareholders of InterOil Corporation, allowing them to proceed with their lawsuit against ExxonMobil Corporation. This decision, made on May 5, 2026, could have significant financial implications for ExxonMobil and the plaintiffs, who claim they are owed over $1 billion due to alleged breaches of contract.
The case, Mulacek v. ExxonMobil Corp. (Index No. 659043/24), centers on a 2017 acquisition where ExxonMobil purchased InterOil for $45 per share. The plaintiffs allege that ExxonMobil manipulated the appraisal of certain oil and gas fields, resulting in lower payments to shareholders. This ruling is crucial as it gives the plaintiffs a chance to seek damages after previously being denied standing in a related case.
The plaintiffs in this case are former shareholders of InterOil, a company with natural gas interests in Papua New Guinea. In 2017, ExxonMobil acquired all outstanding InterOil stock, agreeing to pay $45 per share and additional contingent payments based on appraisals of oil and gas fields. However, the plaintiffs argue that ExxonMobil's appraisal was manipulated, leading to a reduction in the payments they were entitled to receive.
The dispute escalated when the plaintiffs previously attempted to file a lawsuit for breach of the Contingent Resource Payment Agreement (CRPA). However, the New York Court of Appeals dismissed their claims because the plaintiffs did not hold more than 25% of the outstanding Escrow Verification Receipts (EVRs) required to have standing under the CRPA. In May 2024, one of the plaintiffs, Phil E. Mulacek, was assigned additional EVRs, allowing them to exceed the threshold and refile their claims.
The Appellate Division of the Supreme Court of the State of New York ruled to affirm the lower court's decision, which had denied ExxonMobil's motion to dismiss the complaint. The court stated, "The court properly denied defendants' motion to dismiss the complaint because plaintiffs established standing." This ruling allows the plaintiffs to represent all holders of EVRs, whose collective damages are claimed to exceed $1 billion.
The court found that the CRPA had terminated, and certain provisions that restricted the transfer of EVRs did not survive this termination. The court noted that the EVRs became freely transferable after the CRPA ended, meaning the plaintiffs could pursue their claims without restrictions that previously applied. The court emphasized that if the parties intended for specific provisions to survive termination, they would have been explicitly listed as surviving provisions.
Furthermore, the court rejected ExxonMobil's argument that the plaintiffs were not Required Holders because they were not listed in the EVR Register. The court stated that the defendants failed to demonstrate that inclusion in the EVR Register was possible after the termination of the CRPA. This ruling reinforces the notion that breach of contract claims are generally assignable in New York.
The implications of this ruling are significant for both parties. For the plaintiffs, this decision opens the door to potentially recover substantial damages from ExxonMobil. For ExxonMobil, the ruling could lead to a lengthy legal battle and significant financial exposure if the plaintiffs succeed in their claims.
This case highlights the ongoing legal challenges that can arise in corporate acquisitions, particularly when it comes to the treatment of shareholder interests and contractual obligations. It also underscores the importance of clear contractual language and the consequences of manipulation in financial appraisals.
Looking ahead, the plaintiffs can now move forward with their claims against ExxonMobil, seeking to prove their allegations of breach of contract. The case may still face further legal challenges, and it remains to be seen how the court will ultimately rule on the merits of the case.
As for an appeal, details were not available in the court filing regarding whether ExxonMobil plans to appeal this ruling. The outcome of this case could set a precedent for similar disputes involving shareholder rights and corporate acquisitions in the future.