Climate Change Case to Impact Others Questioning Oil Company Liability
U.S. Supreme Court to resolve questions of court choice for state, local lawsuits

by Hank Lacey

The Supreme Court heard arguments Dec. 19 in a closely watched case that could guide the course of a growing batch of lawsuits filed by states and municipalities in an effort to force oil companies to pay for climate change-related costs to taxpayers. Among governments using litigation as a tool to obtain the compensation are two Colorado cities and two of the state’s counties.

Lawyers for nearly two dozen fossil energy firms, the federal government (which supports the oil companies in the case) and Baltimore, Maryland, clashed over a technical procedural issue involving the role of appeals courts in decisions about whether the cases should be decided in state courts or federal courts. Baltimore, like plaintiffs in about 19 other cases around the U.S., filed its case in state court. The fossil fuel defendants removed the case to the federal district court, which sent it back to state court. The oil entities then asked a federal appeals court to review the trial judge’s decision to remand the litigation, a request that was rejected and is before the Supreme Court. “Typically, district court decisions — federal district court decisions — remanding a case that has been removed are not appealable,” said Fredric Bloom, a professor of law at the University of Colorado Law School who specializes in the law of federal court jurisdiction.

For energy companies, shifting the cases to federal court may make it less likely that they’d face financial liability for climate crisis-related harms caused by the burning of the fossil fuels they extract and sell. Kannon Shanmugam of Paul, Weiss, Rifkind, Wharton & Garrison, who represents the oil giants at the Supreme Court, said during his argument before the justices that his clients believe there is “a risk of local prejudice” in state courts. He added that the widespread harm caused by climate change demands, in his oil industry clients’ opinion, federal court involvement. “There is something profoundly counterintuitive about the notion that these cases, which seek relief for injuries caused by worldwide greenhouse gas emissions, should be litigated in state courts under the laws of different states.”

To get the state and local cases into federal court, the oil companies must fit within the jurisdictional bounds Congress specified. In the Baltimore case, the firms argue they are “federal officers” because they removed fossil fuels from beneath the planet’s surface under U.S. government oil leases. “Chevron, BP, Mobil, Exxon are saying, ‘look, you’re only suing us because you’re aggrieved about things that we did pursuant to federal direction — leases for offshore drilling, federal permission and various other things,’” Bloom said. The Supreme Court agreed in October to hear the case.

The companies’ argument is that, even if they don’t qualify as “federal officers” under the removal statute, the “plain language” Congress used when crafting that statute means that an appeals court can scrutinize whether there is any basis to shift a case to federal court. Baltimore, on the other hand, insisted that the statute gives appeals judges the power to review only whether a “federal officer” is a defendant in the case. The federal courts of appeal are split on the question. Most, including the 10th U.S. Circuit Court of Appeals, have agreed with Baltimore’s take on the statute’s meaning.

Bloom said that acceptance of the oil companies’ argument might mean that defense lawyers routinely add an allegation that their client qualifies as a “federal officer,” or fits within another exception to the ban on appellate review of a remand order, to a pleading. “I think it’s a pretty problematic argument in lots and lots of ways and, in fact, it was problematic enough that the lower courts in this case rejected it,” he said. Chief Justice John Roberts immediately picked up on the conundrum during the Jan. 21 oral arguments. “Your theory applies regardless of the merits of the federal officer or the federal civil rights basis for removal,” he told Shanmugam. “But what if those bases are frivolous, that everybody who wants to keep their case in federal court will put in as many grounds for removal as they can, and they have to — all they have to do is tack on one of these federal officer or federal civil rights grounds?”

Shanmugam responded with an assertion that frivolous claims of being a federal officer, or that a civil rights violation is involved in a lawsuit, have not often been seen and that, in any event, courts can sanction defense lawyers who attempt the deception or dismiss the appeal. Bloom was skeptical that this response by a federal judge is likely. “In a technical, formal sense, I think [his] answer is exactly right,” Bloom said. “There are all sorts of limits on your ability to plead those things. But the reality is that courts are not particularly aggressive or assertive in imposing those limits and it’s not clear that [the] backstop is actually going to do the work you want it to do.”

When his turn for questioning during the oral arguments came, Justice Neil Gorsuch pointed out that, if Shanmugam’s argument were adopted, appeals courts would be in a position of deciding an underlying question relating to the legal strength of the case itself and not just a procedural impasse. “Isn’t it a little bit odd to police jurisdiction based on whether an argument is frivolous or not?” Gorsuch asked “Wouldn’t that seem to be more of a merits determination in the first instance?” The former10th Circuit judge from Colorado seemed to express some frustration when Shanmugam declined to advise the court about exactly how he would suggest dealing with the possibility of frivolous arguments aimed at securing federal jurisdiction. “I don’t think you can press the point and then say, ‘Well, I don’t know, the Court can do whatever it wants,’” Gorsuch said. “I mean, you surely have to take a position here.”

Baltimore’s lawyer, Victor Sher of Sher Edling in San Francisco, emphasized an argument that Congress has effectively agreed with federal court of appeals rulings holding that remand orders can be scrutinized by appellate judges only to the extent they determine whether an exception to the ban on appeals applies. “In 2011 Congress ratified 50 years of unanimous circuit court authority that limited review of remand orders to the exception clause’s enumerated grounds and only to those grounds,” he said. Sher also urged the court to consider that the “structure” of the removal statute indicated Congress’ intent to ban appellate review of most remand orders.

Justice Stephen Breyer gently told Sher that his “linguistic argument” may not be Baltimore’s most convincing plea and pushed him to make a policy argument. “It’s important to have an appeal,” Breyer said. “It’s unfair not to give people appeals. But, if you give them appeals in the middle of the case, too often you will really muck up the system, take too long. And so we allow some things to go ahead even though there was no appeal and it might be unfair and wrong because we don’t want to muck up the system.” Sher caught the clue, pointing to exhaustive exhibits in the trial court that would add to delays caused by appeals of a remand order. “To foist on the courts of appeals records of that extent and issues, it does not take a lot of extrapolation to understand how that would burden the courts of appeals,” he said.

Justice Brett Kavanaugh also pushed Sher to address the problems posed for Baltimore in a text-based argument, asking him to explain how the justices should deal with a 1996 decision that read the word “order” in the way the oil companies prefer, but in a different context. “[Y]ou know, it’s never good to be on the wrong side of a Justice Ginsburg opinion, but particularly on a jurisdictional issue,” Kavanaugh said, referring to the late Ruth Bader Ginsburg. Sher batted the question away by distinguishing the “commonsense reading” of the two different statutes involved in the cases. They are “not similar,” he argued.

If the fossil fuel giants’ argument succeeds, then the 4th Circuit would be able to decide, when the case is returned to that court, whether Baltimore’s complaint involves questions of “federal common law.” If so, then a 2010 Supreme Court decision involving a claim that the Clean Air Act is the only available federal legal tool to address climate change liability might block at least some of those claims. The possibility that the Supreme Court’s review of the technical question of what an appeals court can decide when presented with a remand order might end up being an inquiry into the substance of the case seemed to trouble the newest member of the tribunal. Justice Amy Barrett asked Shanmugam whether agreement with his argument would put the court in an uncomfortable position. “Don’t you think it would be fairly aggressive for us to resolve the federal common law question here, assuming that we agreed with you on the antecedent removal point?” Barrett asked. Shanmugam demurred and said that he thinks “prudential reasons” dictate doing so.

Baltimore’s lawsuit against the oil companies alleges that the “production, promotion and marketing of fossil fuel products, simultaneous concealment of the known hazards of those products, and their championing of anti-science campaigns” has caused it financial damage. That claim is similar to those brought in an array of similar cases around the nation. Among them is one filed in April 2018 by Boulder, Boulder County, and San Miguel County. The town of Telluride joined that lawsuit in December.

Other cases have been initiated by Connecticut, Delaware, Massachusetts, Minnesota, Rhode Island, the District of Columbia, and cities and counties including Charleston, S.C.; Hoboken, N.J.; Honolulu; New York; Oakland; San Francisco; Santa Cruz; King County, Wash.; and Maui County, Hawaii.

 

This article appears in the Jan. 25 issue of Law Week Colorado. To read other articles from that issue, order a copy online. Subscribers can request a digital PDF of the issue.