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Supreme Court Decision Complicates Misguided Tactics to Regulate Business Through the Courts

Editor’s note: Interested in aligning with other North Carolina job creators to shape a top-10 business legal climate here in our state? Contact NC Chamber Legal Institute President Ray Starling to learn what you stand to gain from your engagement and support.

It has become an unfortunate legal trend in recent years for cities, state attorneys general, and activist groups to bring actions in state courts against oil and gas companies for damages stemming from – among other claims – their alleged concealment of the environmental impacts of fossil fuels. Such cases often include claims falling under state laws on public nuisance. One recent example of such a misguided lawsuit, B.P. P.L.C. v. Mayor and City Council of Baltimore, was decided against the plaintiff, the City of Baltimore, in a 7-1 ruling by the U.S. Supreme Court.

In an op-ed penned for Newsweek, Phil Goldberg, special counsel to the Manufacturers’ Accountability Project, explained that the objective of such cases is often to “raise the price” of energy and “[hold] oil companies responsible [by holding] the oil consumers responsible.” These tactics, Mr. Goldberg argues, constitute an “undemocratic attempt at regulating through the courts” and, in fact, are counterproductive to solving the issue of climate change.

We see wisdom in this assessment here at the NC Chamber Legal Institute (CLI). After all, as the late Justice Ruth Bader Ginsburg observed in a 2011 Supreme Court ruling (more on this case later), national energy policy should be set by Congress and the Environmental Protection Agency, not by the federal courts (and certainly not by a patchwork of state court decisions).

On its face, the Baltimore case might seem esoteric in scope and unlikely to interest many in the larger business world beyond those rare few, like myself, who actually enjoy contemplating arcane issues of federal jurisdiction. But could this seemingly unimportant case hold broader implications for job creators? To find out, let’s start with the facts.

Before the Baltimore case was taken up by our nation’s highest court, it began its life in the Maryland Superior Court. Upon its filing, the defendant oil companies, BP and others, moved to remove the case to federal district court. In doing so, they cited a provision in the U.S. Code allowing such recourse where the claims are against a person acting under the direction of an officer of a federal agency for, or relating to, an act under the purview of that office or agency. While no federal agency or officer was named in the suit, aspects of the challenged exploration, drilling, and production operations took place at the behest of a federal agency.

Though the defendants were granted their request for removal, the City of Baltimore sought to have the case returned to the Maryland court. The U.S District Court agreed with the plaintiffs and remanded the case back to the state court, a decision subsequently upheld by the Fourth Circuit Court of Appeals.

The defendants persisted, appealing ultimately to the Supreme Court. Ordinarily, an esoteric point of law is not likely to capture the attention of our highest Court. However, as it turns out, there was a split in the Circuit Courts of Appeal on this issue – and split decisions have a much better chance of getting noticed. The Supreme Court took the case, vacated the Fourth Circuit’s decision, and remanded it for further proceedings consistent with the Court’s opinion.

That’s a lot of remanding and appealing. But why, you’re still probably wondering, does this case matter for business, aside from clarifying federal jurisdictional issues concerning removal? To answer that, let’s return to Justice Ginsberg’s aforementioned 2011 ruling.

In 2004, American Electric Power, Inc. v. Connecticut was filed in federal court. It involved similar claims to those brought in the Baltimore case. The State of Connecticut, eight other states, and the City of New York, sued multiple electric power companies and the TVA, seeking an injunction compelling the defendants to reduce their greenhouse gas emissions. The court dismissed the suit as a non-justiciable political question. On appeal to the Second Circuit Court of Appeals, however, the dismissal was reversed and the claims of public nuisance under federal common law were allowed to proceed.

In the years between the 2004 filing of the Connecticut action and the Second Circuit’s 2009 appellate ruling in that same matter, the U.S. Supreme Court decided Massachusetts v. EPA. In this case, the Court ruled that the EPA was required under the Clean Air Act to consider and regulate the emission of greenhouse gases, including carbon dioxide, methane, nitrous oxide, and chlorofluorocarbons. However, the EPA had not yet issued these rules when the Second Circuit was presented the Connecticut case. The Court of Appeals allowed the case to proceed as a claim under federal common law, in part because no federal regulations had been adopted regarding the emission of greenhouse gases.

Fast forward to 2011, when the EPA’s greenhouse gas rules had been firmly established. In an 8-0 decision closing the loop on the Connecticut case, Justice Ginsburg delivered the opinion of the court. It held that, since the Clean Air Act authorized the EPA to regulate greenhouse gases – irrespective of whether the agency had yet adopted rules – this displaced the federal common law of nuisance with respect to the effect and consequence of greenhouse gas emissions.

And now the significance of the seemingly esoteric holding in the Baltimore case comes into sharper focus.

In Massachusetts v. EPA, the Court found authority in the Clean Air Act for the EPA to regulate emissions of greenhouse gases, displacing the federal common law. And the subsequent decision in American Electric Power, Inc. v. Connecticut established that plaintiffs could not rely on the federal common law of nuisance to enjoin emissions of greenhouse cases. Thus, many plaintiffs, including state attorneys general, began resorting to state laws – including laws regarding public nuisance – to justify climate litigation. The Baltimore case raises questions about the continued effectiveness of this duplicitous strategy since defendants in such actions will now seek removal to federal courts where common law nuisance will not be an option for plaintiffs.

These matters reinforce a principle that underlies our whole philosophy at the CLI: Using the courts as a vehicle to regulate business flouts the wisdom inherent in the separation of powers doctrine on which sound governance depends.

But the Baltimore case may not necessarily be the last word on the issue. Clever plaintiffs and state attorneys general may yet find new avenues to litigate climate-related issues in state courts. The Baltimore decision is, however, the latest welcome development in a series of cases to complicate such misguided tactics.


Ray Starling
NC Chamber Legal Institute