Win for American Energy Companies Facing Climate Change Litigation

June 01, 2021

Written By Mike Theroux, Laura Gill and Jon McKay

In a 7-1 ruling in BP PLC et al v Mayor and City Council of Baltimore (19-1189), the Supreme Court of the United States ruled that the Fourth Circuit Court of Appeals did not fully analyze whether a climate change tort lawsuit seeking damages against several energy companies operating in the United States should be heard in federal court, instead of in state court. The decision is a welcome reprieve for energy companies facing potential litigation across a multitude of jurisdictions in the United States, as it could potentially result in climate change claims falling under the jurisdiction of federal courts instead of state courts, and under federal law rather than state law.

Background

In 2018, the City of Baltimore filed a lawsuit in the Maryland state court against 21 energy companies claiming damages resulting from their promotion of fossil fuels and alleged concealment of the harmful environmental impacts to consumers. While Baltimore's claim includes a number of causes of action based in Maryland state law, the primary grounds for Baltimore's lawsuit relates more broadly to the energy companies' alleged failure to warn about the dangers associated with their products.

Shortly after the lawsuit was filed, the energy companies invoked a procedural right to move the case to the federal district court, on the basis that Baltimore's complaints were in fact to be determined under federal law, not state law. The energy companies invoked a variety of federal statutes, including the United States Judiciary and Judicial Procedure section of the United States Code, 28 USC §1442(a)(1). That legislation provides that the federal court has jurisdiction over any action against an "officer (or any person acting under that officer) of the United States or of any agency thereof, in an official or individual capacity, for or relating to any act under color of such office." The energy companies argued that they were guaranteed a federal forum because some of their activities took place at the direction of the United States federal government.

Baltimore disagreed and filed a successful motion with the federal district court to have the case remanded back to the state court. The Fourth Circuit Court of Appeals denied the energy companies' appeal of the remand order, stating that the federal district court's §1442 analysis was sound and that it did not have jurisdiction to review the other theories of removal included in the remand order.

Federal appeal courts generally lack the power to review a federal district court's decision to remand a case to state court, however 28 USC §1447(d) provides a narrow exception to this rule for issues that involve federal officers (§1442) and civil rights (§1443).

The Supreme Court of the United States ruled that the §1447 exception referred to remand orders in their entirety. Appellate courts must consider each of the theories of removal upon appeal and not just the §1442 and §1443 analyses. As a result, the ruling of the Fourth Circuit Court of Appeals was vacated and the matter was sent back for reconsideration.

Takeaways

While the Fourth Circuit Court of Appeals has not yet determined the issue of whether federal courts have jurisdiction over United States-based climate change lawsuits, the decision represents an initial victory for the energy companies. Industry stakeholders in the United States prefer federal jurisdiction over environmental issues (including climate change lawsuits) because civil cases in state courts are decided under state law. Where certain states have decided to take a more aggressive approach to combating climate change and environmental issues–as compared to the federal government–this poses increased risk for energy companies in those jurisdictions if claims against the companies proceed in state court. The results of the Fourth Circuit Court of Appeals' decision with respect to the proper forum for climate change related lawsuits may impact similar cases currently proceeding through state courts throughout the United States.

Should the Fourth Circuit Court of Appeals determine that climate change litigation belongs under federal jurisdiction, this may encourage the federalization of climate change litigation in Canada. While the division of powers and jurisdictional issues in Canada and the United States are distinct from one another, the Supreme Court of Canada recently suggested that it may also be trending towards recognizing that environmental issues fall within the sphere of federal jurisdiction. In re Greenhouse Gas Pollution Pricing Act, 2021 SCC 11, the Supreme Court of Canada adopted similar reasoning to the energy companies' argument in the Baltimore lawsuit that energy production is an inherently federal issue because the effects of climate change and emissions cross both local and international borders.

Climate change liability also raises the issue of justiciability and whether this issue is appropriate or suitable for review by a court. Canadian courts have reached differing conclusions surrounding the justiciability of climate change claims, some raising the question of whether Charter-based climate change claims concerning government action (or in-action) are a matter of public policy. Traditionally, courts have held that public policy is better left for the legislature and executive branch of government rather than courts to address, as courts are not elected, and therefore are not accountable to the citizenry for making public policy decisions. Further analysis on the justiciability of climate change claims can be found in recent blog posts: Are Climate Change Claims Based on Charter Rights Justiciable? Canadian Courts Render Conflicting Decisions and Quebec's Superior Court Leaves the Door Open to Canadian Climate Change Litigation. The issue is likely to be revisited by courts in future cases as the number of climate change-based claims increase and proceed through Canadian courts.

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