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Amidst historically low oil prices and economic shutdowns, fossil fuel companies continue to defend against lawsuits brought by state and local governments claiming climate-change related damages.  In two companion cases, a panel of the United States Court of Appeals for the Ninth Circuit decided whether a federal district court could properly exercise jurisdiction over climate change suits brought against energy companies by cities and counties in California.  In County of San Mateo et al. v. Chevron Corporation et al., Docket No. 18-15499, the Ninth Circuit held that 28 U.S.C. § 1447(d) limited appellate review of an order to remand to the extent the order addressed whether removal was proper under the federal officer removal statute, 28 U.S.C. § 1442(a)(1).  The Ninth Circuit further held that the district court did not err in finding that it lacked subject matter jurisdiction under the federal-officer removal statute.  In City of Oakland et al. v. BP PLC et al., Docket No. 18-16663, the Ninth Circuit vacated the district court’s order denying remand and sent the case back to the federal district court with instructions to consider whether alternative grounds for subject-matter jurisdiction exist.

Procedural Background

The County of San Mateo, the County of Marin, the City of Imperial Beach, the City of Oakland, the City and County of San Francisco, the City and County of Santa Cruz, and the City of Richmond each filed complaints in California state courts asserting California public nuisance claims against thirty fossil fuel companies, alleging that the energy companies’ “extraction, refining, and/or formulation of fossil fuel products; their introduction of fossil fuel products into the stream of commerce; their wrongful promotion of their fossil fuel products and concealment of known hazards associated with use of those products; and their failure to pursue less hazardous alternatives available to them; is a substantial factor in causing the increase in global mean temperature and consequent increase in global mean sea surface height.”  Thus, the cities and counties sought an order of abatement requiring the energy companies to fund a climate change adaptation program.

The energy companies removed the cases to federal court asserting several bases for subject matter jurisdiction, including jurisdiction under the federal-officer removal statute, 28 U.S.C. § 1442(a)(1).  The cities and counties in all eight cases filed motions to remand the suits back to California state courts based on a lack of subject-matter jurisdiction.  The two federal district court judges handling the eight cases reached different conclusions on Plaintiffs’ remand motions.  For the County of San Mateo, the County of Marin, the City of Imperial Beach, the City and County of Santa Cruz, and the City of Richmond, the district court found that it lacked subject-matter jurisdiction.  The district court in the City of Oakland and the City and County of San Francisco found that it had federal question jurisdiction under 28 U.S.C. § 1331 because the cities’ claims were “necessarily governed by federal common law.”

Scope of Appellate Review of Remand Orders

Turning first to the threshold question of the scope of its appellate review, the Ninth Circuit addressed whether it could consider all of the energy companies’ grounds for removal or whether 28 U.S.C. § 1447(d) limited its review to the federal-officer grounds for removal.  Section 1447(d) contains two clauses: the non-reviewability clause and the exceptions clause.  The non-reviewability clause states that “[a]n order remanding a case to the State court from which it was removed is not reviewable on appeal . . .”  The United States Supreme Court has interpreted this language narrowly as prohibiting review only if a remand order was issued based on a ground enumerated in § 1447(c), which includes lack of subject-matter jurisdiction.  The exceptions clause states that the non-reviewability clause holds true “except that an order remanding a case to the State court from which it was removed pursuant to section 1442 or 1443 of this title shall be reviewable by appeal or otherwise.”  The Ninth Circuit has interpreted this clause as giving the court the authority to review the district court’s remand order only to the extent that the order addresses the statutory sections listed in the clause (i.e., §§ 1442 or 1443).  The Defendant-companies’ only asserted ground for removal under §§ 1442 or 1443 was federal-officer removal, § 1442(a)(1).

The energy companies argued that since the ground for removal based on federal-officer jurisdiction was reviewable by the court pursuant to the exceptions clause of § 1447(d), then the court could consider any other grounds for removal because § 1447(d) authorizes appellate review of “an order,” and not just particular reasons for an order.  The Ninth Circuit rejected Defendants’ argument and held that (1) the district court’s order was not reviewable pursuant to the non-reviewability clause of 28 U.S.C. § 1447(d) because the lower court remanded for lack subject-matter jurisdiction, and (2) the exceptions clause of § 1447(d) provided for review of federal jurisdiction to the extent the remand order addresses § 1442(a)(1), federal officer removal, but not any other ground for removal.  San Mateo, pp. 18-19.

Climate Change and Federal Officer Removal

Upon review of federal officer jurisdiction, the Ninth Circuit concurred with the San Mateo district court’s finding that the fossil fuel companies failed to prove by a preponderance of the evidence that they were “acting under” a federal officer through various contracts they had with the federal government during historic operations.  Id. at p. 25.  Specifically, the Court found that the contracts entered into between the energy companies and the federal government were “typical of any commercial contract” and the companies activities under those agreements are not “so closely related to the government’s function that the [companies] face a significant risk of state-court prejudice.”  Id. (internal quotation marks omitted).  Thus, the Ninth Circuit affirmed the district court’s decision holding that there was no subject-matter jurisdiction under the federal officer removal statute.

Do State Nuisance Claims Related to Climate Change Arise Under Federal Law?

In the City of Oakland et al. v. BP PLC et al., the district court found that the Plaintiffs’ claims supported federal question jurisdiction because those state-law claims were “necessarily governed by federal common law.”  The district court reasoned that the “public-nuisance claim raised issues relating to ‘interstate and intentional disputes implicating conflicting rights of States or . . . relations with foreign nations’ and that these issues had to be resolved pursuant to a uniform federal standard.”  Subsequent to the question of jurisdiction, the district court dismissed Plaintiffs’ case for failing to state a claim upon which relief could be granted.

On appeal, the Ninth Circuit addressed (1) whether California’s state nuisance law presented a federal question, and (2) whether the claims were completely preempted by the Clean Air Act.  The Supreme Court has recognized a small category of state-law claims that “arise under federal law” for purposes of federal question jurisdiction, “because federal law is a necessary element of the . . . claim for relief.”  In order to fall within this category of cases, a federal issue must be “(1) necessarily raised, (2) actually disputed, (3) substantial, and (4) capable of resolution in federal court without disrupting the federal-state balance approved by Congress.”  Gunn v. Minton, 568 U.S. 251, 258 (2013) (citing Grable & Sons Metal Products, Inc. v. Darue Engineering & Manufacturing, 545 U.S. 308, 314 (2005)).  Removal is also allowed “where federal law completely preempts a plaintiffs’ state-law claim.”  Rivet v. Regions Bank of La., 522 U.S. 470, 475 (1998).

The Ninth Circuit found that the state-law claim for public nuisance failed to raise a substantial federal question, because adjudicating the claim does not require the resolution of a substantial question of federal law or the interpretation of federal statutes.  “The question 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 purpose of determining whether there is jurisdiction under § 1331.”

The court similarly rejected the energy companies’ assertion that the Clean Air Act completely preempts the state-law nuisance claims.  In support of its conclusion, the Ninth Circuit explained (1) the Supreme Court has not determined that the Clean Air Act completely preempts state law, (2) the statutory language of the Clean Air Act does not indicate that Congress intended to preempt every state law cause of action, and (3) the Clean Air Act does not provide the plaintiffs with a “substitute” cause of action.

Implications Moving Forward

The Ninth Circuit’s decision regarding the scope of its appellate review under 28 U.S.C. § 1447(d) is aligned with the Fourth Circuit’s March ruling remanding Baltimore’s suit seeking climate change damages from fossil fuel companies.  Both courts determined that § 1447(d) limited its appellate review to only consider removal based on federal officer jurisdiction.  The energy companies have petitioned the Supreme Court to review the Fourth Circuit’s decision.  It could be expected that the energy companies may also petition the Supreme Court for review of the Ninth Circuit’s decision.  The energy companies have already argued to the Supreme Court that the Fourth Circuit’s decision is in conflict with the Seventh Circuit’s 2015 ruling in Lu Junhong v. Boeing Co., 792 F.3d 805 (7th Cir. 2015).  While the Seventh Circuit case wasn’t a climate change case, it held that Boeing was not entitled to a federal forum.  In addition, a federal district court in New York dismissed New York City’s lawsuit against various U.S.-based energy companies after determining that federal common law governed the City’s claims.  New York City’s case is currently on appeal before the Second Circuit (Docket No. 18-2188).

A circuit split in climate cases may also be likely, because, in addition to the Second Circuit’s review of New York City’s climate change case, the Tenth Circuit is considering a district court’s decision to remand Boulder, Colorado’s climate change suit back to state court (Docket No. 19-1330), and the First Circuit is likewise reviewing the remand of Rhode Island’s climate change lawsuit back to state court (Docket No. 19-1818).  In addition, the scope of appellate review issue is currently before the Fifth Circuit in coastal erosion suits brought by local government entities against the oil and gas industry (Docket Nos. 19-30829 and 19-30492).  Finally, a Massachusetts federal district court also recently issued its decision to remand a climate change lawsuit brought by the Massachusetts Attorney General against ExxonMobil, alleging that ExxonMobil defrauded consumers and investors.  Commonwealth of Massachusetts v. Exxon Mobil Corporation, No. CV 19-12430-WGY, 2020 WL 2769681 (D. Mass. May 28, 2020).  The cases before the First, Second, Fifth, and Tenth Circuits present several of the same or similar issues decided by the Ninth Circuit.  Thus, the scope of § 1447(d) is still uncertain.  Further, as a result of the Ninth Circuit’s decisions, we are likely to see an increase in cities, counties, and other local municipalities filing nuisance claims against fossil fuel companies.

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