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Second Circuit Climate Change Ruling Affirms Dismissal of State-law Claims – JD Supra

In the past four years, state attorneys general or municipalities have brought 21 lawsuits based on state-law claims (e.g., nuisance, trespass, consumer fraud) seeking to hold fossil fuel companies liable for costs allegedly resulting from climate change. Of these 21 lawsuits, only the City of New York brought its case in federal court on diversity grounds—the rest were first filed in state court only to be removed to federal court and later remanded to state court in almost every case.

On April 1, 2021, the Second Circuit issued its long-awaited opinion affirming the dismissal of New York’s climate change lawsuits against Chevron, ConocoPhillips, Exxon Mobil, Shell, and BP.1 While much of the current litigation surrounding climate change litigation has been whether such lawsuits should be exclusively brought in federal court, the Second Circuit’s opinion addresses the merits of a federal preemption defense for fossil fuel companies. Judge Sullivan wrote the opinion for the three-judge panel, which also included Judges Kearse and Park. The Second Circuit held that claims related to domestic emissions are displaced by the Clean Air Act and claims related to foreign emissions are non-justiciable political questions because of the foreign policy implications better suited to the executive and legislative branches.

BACKGROUND

In 2018, New York filed its lawsuit based on state-law claims for public nuisance, private nuisance, and trespass. New York sought compensatory damages for past and future costs of climate-proofing as well as an equitable order enjoining the defendants to abate the public nuisance and trespass if the defendants did not pay the compensatory damages.

In July 2018, the U.S. District Court for the Southern District of New York granted the defendants’ motion to dismiss for failure to state a claim, holding that New York’s claims could be pursued only under federal law, not under state law2; any federal common law nuisance and trespass claims based on domestic emissions were displaced by the Clean Air Act3; and any claims based on foreign emissions were barred by the presumption against extraterritoriality and need for judicial caution in the face of serious foreign policy consequences.4

SECOND CIRCUIT OPINION

In City of New York, the Second Circuit affirmed the federal district court’s opinion on the basis that New York’s state-law claims were displaced (i.e., preempted) by federal common law.5 The Second Circuit recognized the difficulty in tracing greenhouse gas emissions from specific emitters or tracing the effects of greenhouse gases to a particular state; so any attempt to impose one state’s laws “for the cumulative impact of conduct occurring simultaneously across just about every jurisdiction on the planet…over the past several hundred years” is untenable.6

For domestic emissions, the Second Circuit held that the Clean Air Act displaces any federal common law claim7. This displacement doctrine was recognized in American Electric Power Company v. Connecticut, which held in an opinion authored by Justice Ginsburg that “the Clean Air Act and the EPA actions it authorizes displace any federal common-law right to seek abatement of carbon-dioxide emissions from fossil-fuel fired powerplants”.8 Following the logic of that decision, the Second Circuit held that federal common law displaced state-law claims—an issue that was not expressly addressed in American Electric Power Company v. Connecticut—and that the Clean Air Act displaced any federal common law claims for domestic emissions. The Second Circuit distinguished the ability of states “to create and enforce their own emissions standards applicable to in-state polluters” with New York’s attempts “to impose New York nuisance standards on emission emanating simultaneously from all 50 states and the nations of the world.”9 The Second Circuit observed:

Artful pleading cannot transform the City’s complaint into anything other than a suit over global greenhouse gas emissions. It is precisely because fossil fuels emit greenhouse gases—which collectively “exacerbate global warming”—that the City is seeking damages. Put differently, the City’s complaint whipsaws between disavowing any intent to address emissions and identifying such emissions as the singular source of the City’s harm. But the City cannot have it both ways.10

Because New York’s allegations were that the local effects of climate change on New York City resulted from global emissions, the Second Circuit held that state-law claims were displaced and any federal common law claims for domestic emissions were also displaced under the Clean Air Act.

For foreign emissions, the Second Circuit held that although the Clean Air Act does not apply to foreign emissions, “foreign policy concerns foreclose New York’s proposal here to recognize a federal common law cause of action targeting emissions emanating from beyond our national borders.”11 The Second Circuit noted that “federal courts must proceed cautiously when venturing into the international arena so as to avoid unintentionally stepping on the toes of the political branches.”12

IMPLICATIONS

The Second Circuit’s City of New York addresses the merits of whether a federal preemption defense exists for fossil fuel defendants against state-law claims seeking damages related to climate change, and whether such a defense entitles fossil fuel defendants to dismissal at the pleading stage for failure to state a claim. This is different from the issue pending before the Supreme Court in its anticipated City of Baltimore opinion, which is expected to be decided before June.13

In City of Baltimore, the Supreme Court is set to address whether City of Baltimore—and the other 19 pending climate change lawsuits originally filed in state court—was properly removed to federal court. The Second Circuit distinguished City of Baltimore and related cases because the issue in those cases is “whether the defendants’ anticipated [federal preemption] defenses could single-handedly create federal-question jurisdiction.” Because City of New York was filed in federal court (and not removed there), the Second Circuit determined that it was “free to consider the [fossil fuel companies’] preemption defense on its own terms.”14

Although City of Baltimore primarily focuses on the scope of appellate review for remand orders and whether an appellate court can consider removal grounds beyond federal officer removal, there is a possibility that the Supreme Court could address whether federal-question jurisdiction exists based on the fossil fuel defendants’ arguments that federal common law and/or the Clean Air Act displaces any state-law claims for climate change. But it seems unlikely that the Supreme Court would go further to address the merits of the fossil fuel defendants’ federal preemption defense.

City of New York is therefore a possible vehicle for the Supreme Court to address the merits of whether the fossil fuel defendants’ federal preemption defense is viable. It is likely that New York will file a petition for certiorari, but whether the Supreme Court agrees to hear the case will not be known until next Fall at the earliest. If the Supreme Court were to grant review and affirm the Second Circuit’s federal preemption defense, this would drastically diminish the chances of success for the current climate change lawsuits filed by states and municipalities.

1 City of New York v. Chevron Corp., et al., No. 18-2188, 2021 WL 1216541 (2d Cir. Apr. 1, 2021).

2 City of New York v. BP P.L.C., et al., 325 F. Supp. 3d 466, 471–72 (S.D.N.Y. 2018).

3 Id. at 472–75.

4 Id. at 475–76.

5 City of New York v. Chevron Corp., et al., 2021 WL 1216541, at *4–*8.

6 Id. at *6.

7 Id. at *9–*14.

8 564 U.S. 410, 424 (2011). AEP involved eight states, New York City, and three land trusts who separately sued the same electric power corporations seeking abatement of ongoing contributions to the public nuisance of global warming from fossil-fuel-fired power plants in twenty states.

9 City of New York v. Chevron Corp., et al., 2021 WL 1216541, at *13.

10 Id. at *5 (emphasis added).

11 Id. at *14; see generally at *14–*16.

12 Id. at *16.

13 Mayor & City Council of Baltimore v. BP p.l.c., et al., 388 F. Supp. 3d 538, 548 (D. Md.), as amended (June 20, 2019), aff’d, 952 F.3d 452 (4th Cir.), cert. granted, 141 S. Ct. 222 (2020).

14 City of New York v. Chevron Corp., et al., 2021 WL 1216541, at *8.

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