Over the past decade or more, plaintiffs have sought to “hold companies accountable” for their supposed contributions to climate change. Having been rebuffed from bringing claims in federal court under federal common law, they now seek to proceed in state courts under state common law. Defendants in a number of these cases have sought or are seeking to remove the cases to federal court and use favorable federal precedent to get them dismissed. But in the first half of 2020, federal courts of appeals have found that federal jurisdiction is lacking.
The Fourth Circuit and the Ninth Circuit have recently held that state-law public nuisance claims must be remanded to state court because federal courts did not have subject-matter jurisdiction. The plaintiffs (cities and counties in California and Maryland) had sued a number of energy companies involved in extracting and refining fossil fuels, contending that their activities contributed to global warming. The energy companies removed the cases to federal court, and the plaintiffs sought to remand.
In Maryland, the district court remanded the case to state court, rejecting all of the reasons for removal proffered by the defendants; the Fourth Circuit affirmed. Mayor of Baltimore v. BP P.L.C., 952 F.3d 452 (4th Cir. 2020) (Baltimore). In California, the cases were assigned to two district court judges; one remanded the cases before him back to state court for lack of subject-matter jurisdiction, and the other retained jurisdiction and ultimately dismissed the claims. In two separate opinions, the Ninth Circuit concluded that federal courts did not have subject-matter jurisdiction. Cty. of San Mateo v. Chevron Corp., No. 18-15499, --- F.3d --- (9th Cir. May 26, 2020) (San Mateo); City of Oakland v. BP PLC, No. 18-6663, --- F.3d --- (9th Cir. May 26, 2020) (Oakland).
Federal Officer Removal
In light of federal appellate courts’ limited authority to review remand orders, both the Fourth Circuit in Baltimore and the Ninth Circuit in San Mateo concluded that they could only review the district court’s analysis of one basis for remand: the federal officer removal statute. Baltimore, 952 F.3d at 461; San Mateo, slip op. at 23. That statute allows removal of a state-court case against an officer of the United States or one “acting under” such an officer. 28 U.S.C. § 1442(a)(1). To remove a case under the statute, a company must show that it “acted under” a federal officer, that it has a “colorable federal defense,” and that the alleged wrongdoing was causally connected to or related to the official authority. Baltimore, 952 F.3d at 461-62; San Mateo, slip op. at 24. A company is acting under a federal officer if it is acting on the officer’s behalf, under his close direction, to fulfill basic governmental tasks, or at risk of state-court prejudice. San Mateo, slip op. at 26-27. The company’s allegedly wrongful acts must also have some “connection or association” with the federal office to meet the “related to” prong of the test. Baltimore, 952 F.3d at 466.
In both Baltimore and San Mateo, the courts of appeals affirmed the respective district courts’ orders remanding the cases to state court due to lack of federal subject-matter jurisdiction. The energy company defendants asserted that their agreements with the federal government—a fuel supply agreement, a unit agreement for petroleum reserves, and oil and gas lease agreements—each caused them to “act under” a federal officer. The appellate courts disagreed. The Fourth Circuit concluded that selling fuel to the government under a commercial contract did not constitute acting under a federal officer, and that limited restrictions on certain oil and gas production were not sufficiently connected to the marketing and sale of fossil fuels alleged by the plaintiffs to meet the “relating to” requirement. Baltimore, 952 F.3d at 463-71. The Ninth Circuit likewise concluded that these agreements were merely arm’s-length business arrangements with terms that were commercially standard or required by law; the companies were not acting on the government’s behalf, fulfilling governmental duties, or at risk of state-court prejudice. San Mateo, slip op. at 29-34. Both courts therefore held that the energy companies had not met their burden to show that the federal officer removal statute applied, and so there was no federal subject-matter jurisdiction over the case.
Defendants in the Fourth Circuit case have petitioned for certiorari to the Supreme Court; that petition is pending.
Preemption
The issue addressed in the Ninth Circuit’s Oakland opinion was slightly different. The energy companies in that case contended that the plaintiffs’ claim was governed by federal common law and so federal-question jurisdiction existed. The district court denied a motion to remand on this basis. On appeal, the Ninth Circuit analyzed whether the case implicated either of two exceptions to the general rule that a federal question must appear on the face of the complaint and concluded that it did not. First, federal law was not a necessary element of the state-law public nuisance claim; the claim did not raise a substantial federal issue, as it did not require interpretation of a federal statute or challenge a federal statute’s constitutionality. Oakland, slip op. at 19-21. Second, the state-law claim was not completely preempted by the Clean Air Act. Id. at 21-23. (While the Supreme Court has held that the Clean Air Act and associated regulations displace the federal common-law right to bring a nuisance claim, it has not held that the Act preempted state-law nuisance claims. See Am. Elec. Power Co. v. Connecticut, 564 US 410, 424 (2011); Native Vill. of Kivalina v. ExxonMobil Corp., 696 F.3d 849, 856-58 (9th Cir. 2012).) The Ninth Circuit therefore held that the district court did not have jurisdiction at the time of removal. For that reason, it also vacated the district court’s dismissal of the plaintiffs’ amended claim. Oakland, slip op. at 29. However, the Ninth Circuit remanded for the district court to determine whether there was an alternative basis for federal jurisdiction.
What Comes Next?
Although the Fourth Circuit and Ninth Circuit decisions in Baltimore, San Mateo, and Oakland are largely consistent, the law concerning the proper forum for climate change litigation is hardly settled. Notably, forthcoming decisions from the First, Second, and Tenth Circuits could result in a circuit split, significantly altering the current landscape.
In the First Circuit, various energy companies are appealing a district court’s decision remanding Rhode Island’s global warming claims to state court. Rhode Island v. Shell Oil Prods. Co., No. 19-1818 (1st Cir. appeal filed Aug. 20, 2019). Although the complaint purports to assert state-law claims for relief, the defendants argue that federal common law governs because Rhode Island’s allegations concern “worldwide fossil-fuel production and interstate greenhouse gas emissions.” Alternatively, the defendants argue that their conduct, “on federal land and at the direction of federal officers,” is sufficient to support federal jurisdiction under the federal officer removal statute.
In a case akin to Oakland, the Second Circuit has been asked to reverse a district court’s decision dismissing the City of New York’s claims against multiple energy companies based on their alleged contributions to global warming. City of New York v. BP PLC, No. 18-2188 (2nd Cir. appeal filed July 26, 2018). The defendants removed the case to federal court arguing that the city’s claims, although cast as arising under state law, were governed by federal common law. The district court, citing unique federal foreign policy considerations, agreed and denied the city’s motion to remand. Subsequently, the district court dismissed the city’s claims, finding they were preempted by the Clean Air Act.
Finally, in the Tenth Circuit, a group of fossil fuel companies has argued on appeal that a district court erred in remanding the plaintiffs’ global warming claims to state court. Boulder Cty. Comm’rs v. Suncor Energy, No. 19-1330 (10th Cir. appeal filed Sept. 9, 2019). The appeal, as in Baltimore and San Mateo, centers largely on whether federal jurisdiction is warranted under the federal officer removal statute.
Special Considerations for Electric Cooperative and Other Utilities
Utilities that own or participate in fossil fuel-based generation may face another wave of climate change litigation, particularly if the current suits against oil and gas companies are successful. Notably, electric cooperatives may have more success removing cases to federal court under the federal officer removal statute than the oil and gas companies had in the Ninth and Fourth Circuits. In other contexts, courts have found that the “unusually close and detailed regulatory and contractual relationship” between cooperatives and the Rural Utilities Service (RUS) satisfies the “acting under” prong of the federal officer removal statute. Whether there is a sufficient causal nexus between the RUS regulations and any supposed public nuisance claim will depend on the specific allegations and remains to be seen.
Future case law may shed additional light on these issues, so utilities should keep a watchful eye on the cases pending in the First, Second, and Tenth Circuits as well as the Supreme Court’s decision on any petitions for certiorari.
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