Trial News

In two cases against five of the world’s largest energy companies alleging public nuisance claims for causing or contributing to climate change, the Ninth Circuit has ruled that the plaintiffs’ claims belong in state court because the district court lacks federal question jurisdiction and federal environmental law does not preempt the claims. (City of Oakland v. BP PLC and City and Cty. of S.F. v. BP PLC, Nos. 3:17-cv-06011-WHA and 3:17-cv-06012-WHA (9th Cir. May 26, 2020).)

The cities of Oakland and San Francisco filed public nuisance claims against BP, Chevron, ConocoPhillips, Exxon Mobil, and Royal Dutch Shell, alleging they caused or contributed to climate change through the production and use of fossil fuels. This has led to coastal flooding, coastal erosion, adverse impacts on wastewater and stormwater infrastructure, and more—conditions that will worsen over the coming years, the plaintiffs claim. The cities seek an order of abatement to require the defendants to fund climate change adaptation programs to offset their costs of taking action on this issue and making infrastructure changes to deal with climate change.

The defendants removed the cases to federal court arguing federal common law governed the plaintiffs’ claims, conferring subject matter jurisdiction on the federal district court. The district court denied the plaintiffs’ motion for remand, holding that it had federal question jurisdiction under 28 U.S.C. §1331 because the claims involved “interstate and international disputes implicating conflicting rights of States or . . . relations with foreign nations” that must be resolved through “a uniform federal standard.” The plaintiffs amended their complaints to include a federally based claim while also preserving their right to challenge the court’s exercise of jurisdiction. The district court dismissed the complaints for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6) because it would be “inappropriate” to extend federal common law to their claims. It also dismissed the claims against four of the defendants for lack of personal jurisdiction.

The Ninth Circuit reversed, finding that federal question jurisdiction did not apply and that the Clean Air Act does not completely preempt the plaintiffs’ state law claims. The court remanded to determine whether subject matter jurisdiction existed.

The Ninth Circuit considered the bounds of the “well-pleaded complaint rule,” explaining that “a civil action arises under federal law for purposes of §1331 when a federal question appears on the face of the complaint” and that anticipated defenses, such as preemption, are not relevant to this determination. Under §1331, federal question jurisdiction can apply to a state law claim only if one of the exceptions to the “well-pleaded complaint rule” is met.

One exception to this rule is for state law claims that would arise under §1331 because federal law is “a necessary element” of the claim—but the court cautioned that this is a “slim category” that has encompassed few cases. The U.S. Supreme Court has developed a four-part test for applying this exception: A federal issue must be “necessarily raised, actually disputed, substantial, and capable of resolution in federal court without disrupting the federal-state balance approved by Congress.”

The plaintiffs’ claims do not raise a substantial federal question, the Ninth Circuit concluded. Nothing in the state law public nuisance claims requires interpretation of a federal statute or raises a challenge to a federal statute’s constitutionality. “Indeed, it is not clear that the claims require an interpretation or application of federal law at all, because the Supreme Court has not yet determined that there is a federal common law of public nuisance relating to interstate pollution,” the opinion stated.

The court said that the defendants failed to raise a legal issue for federal question jurisdiction, relying instead on abstract public policy interests that could be affected by the cases’ outcomes. And the fact-specific nature of whether the defendants’ conduct amounts to public nuisance is not appropriate for exercising federal question jurisdiction.

The Ninth Circuit also rejected the defendants’ Clean Air Act preemption argument. The Supreme Court has determined that the act does not preempt all state law causes of action because Congress included a saving clause and because there is no parallel federal cause of action provided in the act that could replace the state law claim of public nuisance and its available remedies.

The court then turned to whether the plaintiffs’ amended complaints to include a federal claim warranted dismissal. The defendants asserted that the plaintiffs waived their right to remand to state court and that the district court had subject matter jurisdiction at the time the complaints were dismissed under Rule 12(b)(6).

However, under 28 U.S.C. §1441(a), the district court’s ability to later assert subject matter jurisdiction over the amended complaints is irrelevant if the case was not fit for adjudication in federal court when the defendants petitioned for removal. Remand to state court is required, regardless of actions taken after the ruling that would confer federal subject matter jurisdiction. This can be overcome only if there are “considerations of finality, efficiency, and economy” that would justify keeping the case in federal court—which the Ninth Circuit did not find here because the case was in federal court for less than a year, no discovery was conducted, and the cases were dismissed at the pleading stage.

After the ruling, the plaintiffs said, “The court thoroughly rejected the fossil fuel companies’ argument that our cases somehow magically belong in federal court despite the fact that they were filed in state court raising only state law claims. We look forward to proceeding in state court, where the Californians we represent will have a chance to present the facts about what the defendants knew about the climate change-related dangers their fossil fuel products pose, how the defendants both deceived and didn’t warn us about those dangers, and why those companies should be held accountable for the costs of surviving climate change.”