(Bloomberg) -- Exxon Mobil Corp. can proceed with its lawsuit against Arjuna Capital even after the activist investor group withdrew a shareholder proposal the company opposed, a federal judge ruled.

The Houston-based oil giant filed the suit in a novel move to use the courts to keep environmental and social investor bids out of annual meetings. It’s part of a broader corporate pushback to the power wielded by the US Securities & Exchange Commission in the vetting of shareholder proposals.

Wednesday’s ruling by a judge in Fort Worth, Texas, will allow Exxon to pursue claims that Arjuna abused the shareholder vote process by buying minimal shares to campaign for proposals that “are calculated to diminish the company’s existing business.”

Arjuna and another activist group targeted by Exxon’s suit called Follow This had argued that because they rescinded the proposal that the company didn’t like, the lawsuit was no longer relevant and should be thrown out. 

US District Judge Mark Pittman found that Amsterdam-based Follow This didn’t need to be part of the case for the claims against Arjuna to proceed and that it would be more difficult for Follow This to litigate in Texas than it would be for Arjuna.

Pittman agreed with Exxon’s argument that even after the one offending proposal was pulled, there is nothing to stop the activist groups from continuing to file similar ones. 

“As worded, Arjuna’s letter allows defendants to take the 2024 proposal, add an Oxford comma here, shorten a sentence there, and submit the results anew for Exxon’s shareholders,” Pittman wrote in the order.

Exxon said in a statement it’s pleased “the judge agreed that we’re entitled to our day in court.”

“We’re one step closer to restoring the integrity of a process that is supposed to allow shareholders’ voices be heard, particularly the vast majority of our shareholders who rejected the proposal in the last two years,” according to the statement.

A representative for Arjuna didn’t respond to a request for comment.

Publicly traded companies typically debate the merits of individual proposals with the SEC, which can advise whether they be excluded from the ballot. But critics of the process, including Exxon, claim the SEC’s advice can vary widely depending which administration is in office. 

Exxon’s highly unusual decision to seek legal judgment rather than go through the SEC tests corporations’ ability to shut down activist investor proposals they don’t like. 

The US Chamber of Commerce and the Business Roundtable backed Exxon in a February court filing. The business trade groups said the SEC’s decision to allow “shareholder proposals pushing social and political agendas” enables “a subset of activists to commandeer corporate proxy statements for their own parochial ends.” This takes time away from “genuine proposals” and wastes company money printing and distributing the activist proposals, they said. 

Arjuna and Follow This argued that Exxon is using the lawsuit to “fight a proxy war” with the securities regulator.

Marcie Frost, chief executive officer of the California Public Employees’ Retirement System, said that the pension plan is “disappointed, but not surprised, that the court is permitting ExxonMobil to plunge forward with its wrongheaded lawsuit.”

“The company’s dangerous legal gambit, if successful, would undermine shareholder rights and allow corporate leaders to stifle the ideas of investors with impunity,” she said in a statement.

The case is Exxon Mobil Corporation v. Arjuna Capital, LLC, 24-cv-00069, US District Court, Northern District of Texas (Fort Worth).

--With assistance from Eliyahu Kamisher.

(Updates with Exxon comment)

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