Since 2017, there has been a resurgence in litigation attempting
to impose liability on businesses (including both fossil-fuel
producers and carbon-dioxide emitting utility companies) for the
consequences of global warming and rising sea levels. A majority of
these suits are brought by state attorneys general and city
authorities, seeking billions of dollars for "climate
resiliency costs" allegedly incurred by states and cities,
which largely outsource these claims to contingency fee
lawyers.
Each of these lawsuits is founded on a common-law claim for public
nuisance under tort law, although other theories of recovery are
usually pleaded as well. These cases represent a second round of
litigation, after an earlier round concluded in 2012. All of the
cases in the earlier round were unsuccessful, but the plaintiffs
lawyers press on. While there has been a focus on the oil and gas
industry, the underlying legal theories could extend to
transportation and other industry sectors (auto, rail, aerospace,
shipping, power and utility companies).
Surprisingly, there have been no insurance coverage lawsuits (at
least so far) associated with this current round of litigation,
although that is likely to change if any of these claims gain
traction. We further note that, perhaps as a measure of corporate
social responsibility or risk management in light of existing and
anticipated climate change related litigation, several insurers and
reinsurers have publicly declared that they will not underwrite or
invest in certain coal-related businesses.
The key case from the prior round was American Electric Power
Company v. Connecticut.1 In
AEP, eight states, New York City and three land trusts sued six
electric power companies, alleging a public nuisance under state
and federal common law, and seeking injunctive relief in the form
of an immediate cap and future reductions in the defendants'
carbon-dioxide emissions. The district court dismissed the
complaints as presenting nonjusticiable political questions, but
the U.S. Court of Appeals for the Second
Circuit reversed, ruling that the plaintiffs had standing,
that the dispute did not constitute a political question, that the
plaintiffs had stated a claim for nuisance under federal common law
and that the federal common law claims were not displaced by any
federal statute.
On certiorari, the U.S. Supreme Court reversed in part.
The court split 4-4 on standing and other justiciability doctrines.
On the merits, the court held that the plaintiffs could have stated
a claim for nuisance under federal common law, except that the
Clean Air Act displaced any federal common-law right to seek
abatement of emissions from fossil-fuel fired power plants. Lastly,
the court acknowledged that the plaintiffs had alleged claims under
state law, but did not address those claims. On remand, the
plaintiffs voluntarily dismissed their state-law claims.
The following year, in a case brought against an assortment of
energy companies (including both petroleum producers and electric
utilities) by a native Alaskan village threatened by coastal
erosion, the U.S. Court of Appeals for the Ninth Circuit
extended AEP to actions seeking damages as opposed to injunctive
relief, reiterating that federal common-law nuisance claims are
displaced by the Clean Air Act.2 Once again, the plaintiffs chose not pursue
their state-law claims, which had been dismissed by the district
court without prejudice.
The bulk of the current crop of litigation attempts to pursue a new
theory that plaintiffs contend (and defendants vigorously contest)
was left open by AEP and Kivalina — that is, to pursue state
law claims, and, if possible, in state courts. Plaintiffs have
little choice, since, in light of AEP, any claim based on federal
common law will almost certainly be displaced by the Clean Air Act.
Actions in federal court, moreover, are subject to significant
justiciability requirements not normally present in state courts
— standing, the political question doctrine and case or
controversy. Filing in state court also potentially gives
plaintiffs the option of choosing a state where the law is thought
to be favorable.
At the same time, these claims must overcome a number of difficult
questions. First among them is whether it is even possible, in the
context of an interstate pollution dispute, for the plaintiffs to
state a claim for nuisance under state law as opposed to federal
common law. The plaintiffs contend that AEP itself contains
seemingly contradictory passages, at one point stating that when we
deal "with air and water in their ambient or interstate
aspects, there is a federal common law," at another point
stating that "if a case should be resolved by reference to
federal common law, state common law is preempted," before
finally concluding by declining to address the availability of a
claim under state law.3
Another issue concerns whether state common law, if otherwise
available, is preempted by the Clean Air Act, as defendants assert.
In this regard, the plaintiffs assert that legislative preemption
of state law is, in general, judged by a more demanding standard
than legislative displacement of federal common law, thereby
allowing the state common-law claims to survive. The plaintiffs
also assert that the Clean Air Act, moreover, has savings clauses
that may limit, to some extent, the preemption of state law.4 Suffice it to say, there are a
number of hotly contested issues before the courts on these
issues.
Another point of contention concerns how the substantive law of
nuisance would be applied in the context of a global warming claim.
It is well recognized that nuisance standards are "vague and
indeterminate," and, indeed, that "there is perhaps no
more impenetrable jungle in the entire law than that which
surrounds the word 'nuisance.'"5 The restatement defines a public nuisance as
"an unreasonable interference with a right common to the
general public."6 Whether
an intentional interference will be deemed unreasonable involves
"weighing the gravity of the harm against the utility of the
conduct."7 The decision of
whether the utility of the conduct outweighs the gravity of the
harm is normally made by the trier of fact.8
Important differences exist among the states. California, for
example, has a statutory definition of nuisance. "Anything
which is injurious to health ... or is indecent or offensive to the
senses, or an obstruction to the free use of property, so as to
interfere with the comfortable enjoyment of life or property ... is
a nuisance."9 Applying
this standard, California courts have approved actions for public
nuisance based on the sale and promotion of commercial products,
including lead paint,10 and
polychlorinated biphenyls.
The plaintiffs rely on these precedents for fossil fuels. We also
note that public nuisance claims are being tested in the ongoing
opioid litigation matters, in which states and municipalities are
attempting to recover substantial abatement costs associated with
the public health consequences of addiction. The outcome of these
could provide relevant precedents to claims associated with the
production of fossil fuel-related products and industries allegedly
responsible for the emission of greenhouse gases.
The common-law-based climate change cases that are currently
pending against businesses in the United States include the
following:
County of San Mateo v. Chevron
Starting in July 2017, a number of California counties and cities filed separate but substantially similar complaints in state court against a common set of fossil-fuel production companies. The complaints allege common-law causes of action, starting with public nuisance, and seek damages and abatement based on the defendants' production and promotion of fossil fuels. The defendants removed to federal court. The district court11 remanded the actions to state court based on the lack of a federal question.12 The remand orders are currently on appeal to the Ninth Circuit.13
City of Oakland v. BP
In September 2017, Oakland and San Francisco filed separate but substantially similar complaints in state court against five major petroleum companies based on the defendants' production and promotion of fossil fuels. The original complaints asserted a single claim for public nuisance under California law and sought the establishment of an abatement fund. The defendants removed to federal court. The district court14 denied plaintiffs' motion to remand, reasoning that the claims were governed by federal common law.15 The district court subsequently dismissed the actions based on separation of powers and foreign policy concerns.16 Several defendants were also ordered dismissed for lack of personal jurisdiction. These orders and the resulting judgments are currently on appeal to the Ninth Circuit.17
City of New York v. BP
In January 2018, the city of New York filed a complaint in federal court against five major petroleum companies based on the defendants' production and promotion of fossil fuels. The complaint asserts claims for public and private nuisance and trespass, and requests damages and injunctive relief. The district court18 dismissed the action on the grounds that federal common law displaced state law, the Clean Air Act displaced federal common law as to domestic emissions, and any claims over foreign emissions would interfere with separation of powers and foreign policy.19 The order and resulting judgment are currently on appeal to the Second Circuit.20
Board of County Commissioners of Boulder County v. Suncor Energy (U.S.A.)
In April 2018, three Colorado local government entities filed a complaint in Colorado state court against Suncor Energy and Exxon based on based on the defendants' production and promotion of fossil fuels. The complaint, which alleges common-law causes of action, starting with public nuisance, as well as violation of the Colorado Consumer Protection Act, seeks damages, remediation and abatement. The defendants removed to federal court. A motion to remand is pending.21
King County v. BP
In May 2018, King County, Washington, filed a complaint in Washington state court against five major petroleum companies based on the defendants' production and promotion of fossil fuels. The complaint alleges state-law claims for public nuisance and trespass, and seeks an abatement fund and compensatory damages. The defendants removed to federal court. The case has been stayed on plaintiff's motion pending the outcome of the appeal in City of Oakland.
Rhode Island v. Chevron
In July 2018, the state of Rhode Island filed a complaint in Rhode Island state court against a large set of petroleum companies based on the defendants' production and promotion of fossil fuels. The complaint, which alleges common-law causes of action, starting with public nuisance, as well as impairment of public trust and violation of the state Environmental Rights Act, seeks compensatory damages and abatement. The defendants removed to federal court. A motion to remand was heard on Feb. 6, 2019, and is under submission.22
Mayor & City Council of Baltimore v. BP
In July 2018, the city of Baltimore filed a complaint in Maryland state court against a large set of fossil-fuel production companies based on the defendants' production and promotion of fossil fuels. The complaint, which alleges common-law causes of action, starting with public nuisance, as well as violation of the state Consumer Protection Act, seeks compensatory damages and abatement. The defendants removed to federal court, and the district court23 granted the city's motion to remand, finding no basis for federal jurisdiction.24 Defendants have appealed to the U.S. Court of Appeals for the Fourth Circuit.25
Pacific Coast Federation of Fishermen's Associations v. Chevron
In November 2018, a commercial fishermen's association filed a complaint in California state court against a set of fossil-fuel production companies for alleged harm to crab fisheries caused by global warming. The form of the complaint is similar to County of San Mateo (the plaintiff's private counsel is the same). The defendants removed to federal court, and the case has been assigned to the same judge who granted remand in County of San Mateo.26
Conclusion
None of these cases are concluded, and most are in the early
procedural stages. So far, the results in the federal district
courts are mixed, with appeals pending. There are so far no
decisions from any state courts on the merits of the state-law
claims being asserted. What happens next on the litigation front is
likely to be determined by the results of the current round of
cases. If one case succeeds, more will surely be filed, regardless
of any political calculation.
It should be recognized that these cases are only one subset of the
climate change-related litigation currently pending worldwide. For
example, there is a noteworthy case now pending in Germany, Lliuya
v. RWE AG, in which a Peruvian farmer filed suit in a German
court against a German electricity producer for damages allegedly
resulting from global warming. On Nov. 30, 2017, a regional appeals
court in the city of Essen recognized the complaint as validly
pleaded, with the defendant potentially responsible for damages in
the percentage of the defendant's contribution to global
greenhouse gas emissions.
Another category of cases concerns "public trust" claims,
in which citizens bring suit against the government alleging that
government policy on fossil fuels deprives them of their rights
under the common-law doctrine that natural resources are held in
public trust, or of analogous constitutional rights. The most
noteworthy of these cases is Juliana v. United States, currently
under submission before the Ninth Circuit, after an oral argument
on June 4, 2019.27 Another
category of climate change cases concerns alleged violations of
state or federal securities laws, a prominent example being the New
York attorney general's recent suit against Exxon for alleged
misrepresentations in its climate disclosures.28
The only coverage case relating to these climate change cases so
far, AES Corp. v. Steadfast Insurance Co.,29 arose out of the Kivalina case, described
above. In Steadfast, the Virginia Supreme Court held that AES was
not entitled to a defense because the complaint "plainly
alleges that AES intentionally released carbon dioxide into the
atmosphere as a regular part of its energy-producing
activities," and "the natural and probable consequence of
such emissions is global warming and damages such as [what]
Kivalina [had] suffered."30
Therefore, "if an insured knew or should have known that certain results were the natural or probable consequences of intentional acts or omissions, there is no 'occurrence' within the meaning of a CGL policy."31 To the extent the current round of climate-change litigation gains traction as the state public nuisance claims are sorted out, insurers will need to carefully evaluate the allegations supporting these claims, and whether they give rise to coverage defenses arising from pollution exclusions, expected or intended injury, known loss and products completed operations, among others.
Given the potential that climate change litigation is here to stay, business policyholders should take steps to minimize their exposure to these types of claims. These policyholders should be scrupulous to comply with all applicable environmental regulations, especially those businesses that produce fossil fuel-related products, or products, services or operational processes which result in greenhouse gas emissions. These policyholders should also ensure their public disclosures about climate change (if applicable) – or those of trade associations of which they are members – are complete and accurate. Lastly, businesses of these types and their insurers should closely monitor ongoing climate change litigation, especially since our sharply divided political dynamics across the states and federal governments will continue to include constituencies looking to deep pocket sources of recovery for "resiliency" costs.
Disclosure: Duane Morris is counsel of record for Encana
Corporation in the County of San Mateo, County of Marin, City of
Imperial Beach, County of Santa Cruz, City of Santa Cruz and the
City of Richmond, as well as Pacific Coast Federation of
Fishermen's Associations v. Chevron.
The opinions expressed are those of the author(s) and do not
necessarily reflect the views of the firm, its clients, or
Portfolio Media Inc., or any of its or their respective affiliates.
This article is for general information purposes and is not
intended to be and should not be taken as legal advice.
1 American Electric Power Company v. Connecticut, 564 U.S. 410 (2011) ("AEP")
2 Native Village of Kivalina v. ExxonMobil Corp., 696 F.3d 849 (9th Cir. 2012).
3 AEP, 564 U.S. at 421, 429 (quoting Illinois v. Milwaukee, 406 U.S. 91, 103 (1972), and International Paper Co. v. Ouellette, 479 U.S. 481, 488 (1987)).
4 42 U.S.C. § 7416 (retention of state authority), § 7604(e) (citizen suits).
5 Ouellette, 479 U.S. at 496.
6 Restatement (Second) of Torts § 821B(1).
7 Id. at § 821B cmt. e; see also §§ 826-831.
8 Id. at § 826 cmt. e.
9 Civ. Code § 3479.
10 See, e.g., People v. ConAgra Grocery Products Co., 17 Cal.App.5th 51 (2017).
11 Vince Chhabria, N.D. Cal.
12 294 F.Supp.3d 934 (N.D. Cal. 2018).
13 Docket Nos. 18-15499, et al. [consolidated].
14 William Alsup, N.D. Cal.
15 2018 WL 1064293 (N.D. Cal. February 27, 2018).
16 325 F.Supp.3d 1017 (N.D. Cal. 2018).
17 Docket No. 18-16663.
18 John Keenan, S.D.N.Y.
19 325 F.Supp.3d 466 (S.D.N.Y. 2018).
20 Docket No. 18-2188.
21 William Martinez, D. Colo.
22 William Smith, D.R.I.
23 Ellen Hollander, D. Md.
24 2019 WL 2436848 (D. Md. June 10, 2019)
25 Docket No. 19-1644.
26 Vince Chhabria, N.D. Cal.
27 Docket No. 18-36082 [an interlocutory appeal of orders denying motions to dismiss, for judgment on the pleadings, and for summary judgment].
28 People of the State of New York v. Exxon Mobil Corp., N.Y. Sup. Ct. No. 452044/2018, filed October 24, 2018.
29 AES Corp. v. Steadfast Ins. Co. , 725 S.E.2d 532 (Va. 2012).
30 Id. at 537.
31 Id. at 538.
Reprinted with permission of Law360.
Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.