A federal appeals court has affirmed that a “greenwashing” lawsuit by the District of Columbia against several major energy companies should not be heard in federal court. In doing so, the court found itself “in accord with the other courts of appeals, which have unanimously found there is no federal jurisdiction where state or local governments have brought state-law actions against energy companies for conduct relating to climate change.” District of Columbia v. Exxon Mobil Corporation, et al., No. 22-7163 (Dec. 19, 2023) (“D.C. v. Exxon”), at p. 6.

Part I of this blog covers some basics about state and federal courts, explaining why the jurisdictional question of where a case will be decided is often contested. Part II summarizes the jurisdictional analysis in D.C. v. Exxon.

Part I – Fighting About the Forum: State v. Federal Court

“Removal” is the name for the process when a party transfers a case originally filed in a state court to a federal court. Even in mainstream media, there is sometimes confusion about removal—like the erroneous idea that the law is “different” in federal court. When a case is successfully removed from state court to federal court, the substantive law does not change because of that removal. Only the court is different.

Practically speaking, what does it mean to be in one court or another? Some significant differences between state and federal courts are the judiciary, the jury pool, and the procedure. 

• Different judges. Most state judges are elected. State district judges in Louisiana and Texas, for example, run for office in partisan elections. In contrast, federal judges are nominated by the President and, after a hearing and approval by the Senate Judiciary Committee, confirmed to lifetime appointments by the U.S. Senate.

• Different jury pool. Jurors for a case come from within the borders of a court’s geographic jurisdiction—its “district.” There are many more state courts than federal courts, so a federal court usually has a much larger territorial jurisdiction. Texas, for example, is divided into more than 450 state districts, compared to just 4 federal districts. A larger district means that jurors are pulled from a larger geographic area. A smaller district means a smaller jury pool.

• Different procedural rules. As mentioned, the substantive law in a case—the law sued over—is the same in state or federal court. But the procedural rules may differ. State procedural rules vary from state to state. Federal rules of procedure are uniform across the country and are therefore more predictable.

Given these differences between state and federal courts, litigants might prefer one forum over another for any number of reasons. But whenever a jurisdictional issue is being litigated, both sides are fighting about the forum. In D.C. v. Exxon, while the energy companies desired to be in federal court, the District of Columbia desired not to be in federal court.

Regardless of which forum litigants prefer, the question of whether a case should or may be heard in a federal court is a question of jurisdiction. Federal courts may only hear certain types of cases. Put another way, federal courts are courts of “limited jurisdiction.” The scope of federal jurisdiction is defined by the Constitution and federal laws. A federal court’s first order of business, then, is to decide whether it has jurisdiction over a case.

The recent appellate ruling in D.C. v. Exxon decided that the case should be litigated in state court. Part II of this blog discusses why.

Part II – The Jurisdictional Ruling in D.C. v. Exxon

In D.C. v. Exxon, the District of Columbia (“D.C.”) alleges that energy companies violated a local consumer protection statute by making misstatements about their products’ effects on climate change.  The energy companies removed the lawsuit to federal court, asserting four bases for federal jurisdiction. The appeals court affirmed remand on December 19, 2023.

• 28 U.S.C. 1331, providing federal jurisdiction for claims “arising under” federal law. The removing companies argued that although D.C.’s lawsuit “artfully pled” that it was based on a local consumer protection law, it was actually premised on the federal common law governing interstate air pollution. The companies acknowledged that Congress’ enactment of the Clean Air Act supplanted the federal common law on air pollution. However, the companies argued that notwithstanding the absence of a federal common law remedy, the nature of D.C.’s claims were still grounded in that supplanted common law. Rejecting this argument, the court articulates that “legislative displacement of federal common law applies for both jurisdictional and merits purposes.” Thus, “while the Companies may invoke Clean Air Act preemption as a merits defense, this does not support removal of the District’s [consumer protection] claims to federal court.” See p. 16.

• Grable “federal question” jurisdiction for cases when a federal issue is, inter alia, necessarily raised. The court rejected the contention that any federal issue was necessarily raised, finding that this argument was similar to the rejected “artful pleading” argument. It held that while certain federal laws promoting fossil fuel use may implicate federal preemption on the merits, a federal defense is not a basis for jurisdiction.

• 28 U.S.C. 1442(a)(1), allowing for federal officer removal. Much of the oil production allegedly associated with climate change occurred at the direction of the federal government during wartime or other geopolitical events. Defendants are entitled to remove cases that are “connected or associated” with acts taken under color of federal office. However, the court found that there was no relationship between the actions taken by the companies in the mid-twentieth century and the allegedly misleading statements that companies made while marketing to the public. The court cited D.C.’s statement at oral argument that it would not seek damages for climate change globally or within the District of Columbia, but “only those damages associated with misrepresentations made by the Companies. It follows that there is no link between the leasing activities conducted by the Companies and the damages at issue in this lawsuit.” See p. 21.

• Outer Continental Shelf Lands Act. OCSLA provides federal jurisdiction for claims arising out of or in connection with operations conducted on the Outer Continental Shelf. The court reasoned that misrepresentations in advertising are not connected with operations “conducted on” the OCS. 

Importantly, jurisdictional inquiries do not resolve the merits of the case—that is, who is right or wrong about the underlying claims. It only resolves where the merits of the case will be decided. Since D.C. v. Exxon will proceed in state court, that state court may have to apply and interpret federal law, such as when deciding “questions of federal preemption” (see p. 18) or other defenses that may defeat D.C.’s claims.

Contact Liskow attorneys Laura Springer Brown and Jana Grauberger for more questions regarding this topic.

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