Lincoln Davis Wilson is Counsel to Dechert LLP.
In its decision last term in BP v. Baltimore, the Supreme Court reversed the Fourth Circuit and GVR’ed (granted, vacated, and remanded) several others on the scope of review on an appeal from a remand order under a federal-officer removal statute. In those cases, cities and states seek to hold energy companies liable in state court for alleged effects of climate change. The Supreme Court held that review of a remand order under the federal officer statute in those cases goes to all asserted theories of removal, not just federal-officer removal. Now, chastened by the Supreme Court, the courts of appeals have begun to weigh in on the other theories—and they have been rejecting them. Does that mean the energy companies will fail in their efforts to get these cases into federal court? Unlikely.
The first court of appeals to issue its post-remand decision in this litigation was the Tenth Circuit in Suncor, which rejected every theory of removal asserted. Next, the Fourth Circuit, on remand in BP, issued its decision, rejecting all asserted theories of removal again. And now the Ninth Circuit in San Mateo has added its voice to the choir, agreeing with the Tenth and the Fourth that none of the theories of federal jurisdiction stick. But despite these post-remand decisions, the energy companies still have a strong basis to get into federal court.
Among the many theories of jurisdiction the energy companies assert in these cases, federal common law in particular is the one to beat. The theory is a one-two punch of dual displacement. First, to obtain jurisdiction, the energy companies rely on the “artful pleading” or complete preemption doctrine, contending that federal common law completely displaces any ostensible state-law claims the plaintiffs assert about climate change, making them removable to federal court. And second, on the merits, the energy companies argue that the Clean Air Act and its implementing regulations completely displace federal common law on greenhouse gas emissions and climate change, preempting any alleged liability of the energy companies. Thus, the argument goes, what the plaintiffs say is a state-law claim is actually a federal claim and a preempted one at that.
There’s good reason to think the energy companies are right. The Supreme Court has long held that issues of interstate pollution are governed by federal common law: “When we deal with air and water in their ambient or interstate aspects, there is a federal common law.” And in American Electric Power v. Connecticut, a previous iteration of climate tort litigation in federal court, the Supreme Court held that the Clean Air Act preempted claims asserted by state and local governments under federal common law.
This dual-displacement regime makes plenty of sense too. Federal common law should apply when there is an overriding federal interest in the need for a uniform rule of decision. That is particularly the case with interstate pollution questions that might otherwise be grounded in state tort law. If different states could set different laws about the same pollution, those laws might conflict, and a defendant might be forced to choose with which state law to comply. So to avoid that conflict and respect the coequal sovereignty of the states, a federal rule must control. And when Congress has decided to legislate in the relevant space—as it has with the Clean Air Act—then its legislation necessarily displaces any rule of federal common law. The state-court climate-tort litigation illustrates the importance of this framework perfectly: the alternative is de facto national climate change regulations issued unilaterally by state-court judges under the guise of state-law tort theories.
Yet following remand in BP, the courts of appeals have not seen it that way. All three decisions have rejected federal common law as a basis for removal. In the recent decision by the Ninth Circuit, the court did not address the dual displacement theory of federal common law. Instead, relying on its prior decision in Oakland, it considered federal common law under two separate theories: the substantial federal question doctrine and the complete preemption doctrine. As to the first, it held that state-law tort claims did not necessarily raise an issue of federal common law, and as to the second, it held that the Clean Air Act did not completely preempt state-law claims. But it did not address the critical premise for removal: whether federal common law—not a statute—completely displaced state-law tort claims in this area. And so the post-remand decisions have missed these important structural and constitutional concerns by maintaining a narrow, doctrinal focus on jurisdictional questions.
But even though the three decisions on remand from BP have rejected the energy companies’ federal common law arguments, a conflict persists. Just before the Supreme Court’s decision in BP, the Second Circuit recognized both aspects of the dual displacement theory in a climate change case by the City of New York: federal common law displaced the state law claims, and the Clean Air Act displaced the federal common law. Though the decision was issued in a case originally filed in federal court (and thus not raising any question about removal), it is still directly on point. That is, if the Second Circuit is right that federal common law displaces any state-law tort claims in this space, then these claims are necessarily removable.
The post-remand decisions have tried to avoid this split with the Second Circuit—the Tenth Circuit denied it exists, and the Ninth Circuit did not address it. But the conflict endures. And even if that conflict were not enough alone to send this back to the Supreme Court, there are still more decisions to come. The energy companies did not seek rehearing in the Tenth Circuit, but they filed for it in the Fourth and obtained an extension of their time to do so in the Ninth. Those rehearing petitions may ripen the conflict further with en banc rehearing or a denial with dissents. And the First Circuit is still to weigh in post-remand.
In the end, this split is likely to entice the Supreme Court to intervene. Who gets to decide in climate change litigation is critically important to determining whether emissions standards are a matter of comprehensive federal regulation or a race to the bottom in state court litigation. But if the Supreme Court grants review, then apart from a break from the decade-old decision in American Electric Power (and the principles of federalism it rests on), one can expect the energy companies to come out on top. And in federal court.