Climate Liability Suits: The Trend to State Courts Gains Momentum

By Karen Savage

Despite the Covid-19 crisis that has slowed court proceedings, municipalities across the country that are seeking to hold fossil fuel companies accountable for climate damages have scored big legal victories in recent months. 

Amid the pandemic, two separate appellate courts ruled two sets of these suits belong in state court, where the municipalities filed them, alleging the companies violated state laws and caused localized damage. The appeals courts said the suits filed by Baltimore and by six California communities against several fossil fuel companies, including Exxon, Chevron and Shell, should be considered under state laws, rejecting arguments by the companies that they belong in federal court. The industry has aggressively fought to move the cases there, where they believe they will be more easily dismissed.

The Ninth Circuit Court of Appeals also helped this trend by overturning a U.S. District Court judge’s dismissal of cases filed by Oakland and San Francisco against Exxon, Chevron, Shell, BP, and ConocoPhillips.

Cases filed by Rhode Island against many of the same companies, as well as a case filed by several Colorado communities against Exxon and Suncor have been allowed to proceed in their respective state courts while the companies continue to press their appeals to push them to federal court. 

A climate fraud lawsuit filed against Exxon by Massachusetts Attorney General Maura Healey was also given the green light to proceed in state court, with U.S. District Court Judge William G. Young writing that the issue of whether a company “engaged in negligence, fraud, misrepresentation, concealment, or deceit” “is not governed by federal common law at all, but by state common law.” Young’s opinion cited a tobacco case ruling.

Topping it off, the city and county of Honolulu filed suit against Aloha Petroleum, BHP Group, BP, Chevron, ConocoPhillips, ExxonMobil, Marathon Oil, and Shell in March. The recent appellate court rulings are expected to inspire the filing of even more new cases.

“This idea that climate litigation would be a fleeting phenomenon, that these cases were political, that they were anomalous, that they would basically die because of U.S. civil procedure, I think that idea is utterly without merit,” said Carroll Muffett, president of the Center for International Environmental Law.

“The industry’s strategy of pulling these cases into federal court and killing them there before they ever reach the merits, that strategy has failed,” Muffett said.

Two Circuit Courts Rule Climate Cases Belong in State Court

The state vs. federal court battle has been the biggest point of contention between the fossil fuel defendants and the dozens of communities suing them.

For now, at least, the plaintiffs seem to have the upper hand, bolstered by the Ninth Circuit’s key decision in the California suits last month.

In its ruling, the court rejected the companies’ argument that they were acting as federal officers because they sold or extracted fossil fuels under government contract. That, they said, meant any civil action against them must be heard in federal court. 

“The court said, ‘no, the federal officer doctrine is much more narrow than that—you have to have some kind of special relationship between the private defendant and the federal government in order to invoke that doctrine,’” said Pat Parenteau, a professor of environmental law at the Vermont Law School.

“The fact that the court gave really short shrift to that kind of argument is a secondary win,” Parenteau said, adding that the Ninth and Fourth Circuits both rejected it. 

The Ninth Circuit’s ruling was critical because it was the second appellate court to side with the plaintiffs on the question of jurisdiction. The Fourth Circuit ruled earlier this year that a suit filed by Baltimore belongs in state court. For now, that case is proceeding in a Maryland court, but the defendants, led by Chevron, have already asked the U.S. Supreme Court to review the ruling.

The decision also sets in motion suits filed by the city and county of Honolulu, King County, Wash., and the Pacific Coast Federation of Fishermen’s Association. All were paused pending the Ninth Circuit’s ruling.

It could also open the floodgates to a barrage of new lawsuits against the fossil fuel industry, particularly in California, Hawaii, Nevada, Oregon and Washington, which all fall under the jurisdiction of the Ninth Circuit.

“[Potential] plaintiffs who were watching the cases and trying to decide whether this was a dead end now know that it’s not,” Muffett said, referring to communities like Maui, which last year indicated it intends to file a suit.

Unresolved Jurisdictional Questions

Despite the recent rulings, the question of jurisdiction is far from settled. Decisions are pending in the First, Second and Tenth Circuits to decide the jurisdiction and fate of cases filed by Rhode Island, New York City and the Colorado communities, respectively. The Ninth Circuit also acknowledged that it may need to weigh in again on the Oakland and San Francisco cases. 

That’s because when the Ninth Circuit last month overturned U.S. District Court Judge William Alsup’s dismissal of Oakland and San Francisco’s cases against Exxon, Chevron, Shell, BP, and ConocoPhillips, it decided only one of the companies’ several arguments for keeping the case in federal court. It ordered Alsup to determine if the other arguments were persuasive and if not, to return the cases to state court. 

In its decision, the appellate court rejected the companies’ arguments that the cities’ claims are preempted by the Clean Air Act, in part, Judge Sandra S. Ikuta wrote, because the act “does not provide a federal claim or cause of action for nuisance caused by global warming,” nor does it allow the cities a way to pursue compensation for climate damages. 

“Whether the energy companies can be held liable for public nuisance based on production and promotion of the use of fossil fuels and be required to spend billions of dollars on abatement is no doubt an important policy question, but it does not raise a substantial question of federal law for the purposes of determining whether there is jurisdiction,” Ikuta wrote.

Also pending is an appeal by New York City, which unlike most, filed its suit in federal court, charging BP, Chevron, ConocoPhillips, ExxonMobil, and Royal Dutch Shell with violations of federal law. The city has asked the Second Circuit Court of Appeals to review the dismissal of its case by a federal judge who unlike the Ninth Circuit, determined that the city’s claims were displaced by the Clean Air Act.

What’s Ahead

The fossil fuel defendants are almost certain to ask for a review of the Ninth Circuit’s pivotal ruling, Doug Kysar, a deputy dean and professor at Yale Law School, said. 

“No doubt the energy companies will try for an en banc rehearing or [U.S. Supreme Court] appeal next,” Kysar said. A request for an en banc hearing must be approved by a majority of the Ninth Circuit’s 29 judges and if approved, a panel of 11 judges would then review the ruling.  

Whether the Supreme Court agrees to take up a request to review either the Fourth or Ninth Circuit’s decisions could depend whether the First, Second and Tenth Circuits come to the same conclusion or issue conflicting rulings. The high court generally only accepts cases for review if there is what’s known as a circuit split, where appellate courts reach different conclusions on the same issue, 

The key ruling is likely to come from the Second Circuit’s review of the New York case, Parenteau said. That decision is expected soon. 

“I think we may see a split in the circuits, which obviously would open the door to Supreme Court review,” Parenteau said. 

For their part, Chevron, Exxon and the other defendants still believe the cases belong in federal court.

“They present substantial issues of national law and policy which makes them inappropriate for state law,” Chevron spokesperson Sean Comey said in an email. “In whichever forum the cases are ultimately determined, these factually and legally unsupported claims do nothing to sensibly address the significant national economic, legal, and policy issues presented by climate change.”

Exxon is reviewing the Ninth Circuit’s recent rulings and “evaluating next steps,” company spokesman Casey Norton said in an email.

As climate damage mounts, the fossil fuel industry as a whole could potentially be on the hook for billions, or even trillions of dollars. If the companies can’t get the suits dismissed outright, they seem poised to try to delay them as long as possible.

That strategy could backfire.

“These delaying tactics by the companies, one of the things that they are doing is actually creating more space for both the evidence and the law to continue to mature and both the evidence and the law actually profoundly favor the plaintiffs,” Muffett said. “Even as these cases have been trickling along, new evidence has continued to come out and the implications of climate for things like human rights and things like the economy have become progressively clearer.”

Another strategy could be to try to stop climate liability suits legislatively. Several states, including Florida, Louisiana and Kansas have introduced bills that would limit contingency fee agreements and strip local municipal leaders’ power to file suits. One Louisiana proposal would retroactively kill existing suits. 

“The oil companies tried to sneak an immunity provision into the stimulus bill and it was vaguely worded, but I suspect if they thought they could get away with it, they put an immunity clause in something moving through Congress,” Parenteau said. 

Even in state court, where defendant companies have continued to try to shake the cases, the municipalities still face an uphill battle. A hearing on a motion to dismiss a case filed by the city of Boulder and the counties of Boulder and San Miguel is scheduled to take place June 1 in a Colorado state court.

If the cases survive, the fossil fuel companies could find themselves in the place they have sought above all else to avoid, Muffett said. 

“Once things reach the merits, once they move to discovery, the companies are on much shakier ground, precisely because of the scale of the impacts, the scale of damage and the robust bodies of evidence about what they knew and what they failed to do with what they knew,” he said.