In Setback to Industry, the Ninth Circuit Sends California Climate Liability Cases Back to State Courts

The rulings foil oil companies’ efforts to move the lawsuits to federal jurisdiction, where they have prevailed in prior cases.

May 27, 2020
Richmond, California, home to a Chevron refinery near San Francisco Bay, in one of several cities suing fossil fuel companies over climate change. Credit: Justin Sullivan/Getty Images

Richmond, California, home to a Chevron refinery near San Francisco Bay, is one of several cities which sued fossil fuel companies over climate change. Credit: Justin Sullivan/Getty Images

A federal appeals court has delivered a one-two punch to the fossil fuel industry, knocking it back in its fight to stop a series of California lawsuits that seek to hold the industry responsible for damages associated with climate change.

The industry setbacks came in two rulings handed down Tuesday by the Ninth U.S. Circuit Court of Appeals. One denied requests by defendants that include Chevron, Exxon, BP, ConocoPhillips and Shell to have cases filed by three counties and five cities heard in federal court instead of California state courts.

In the other, the three-judge panel ruled that lawsuits brought by San Francisco and Oakland, which were previously dismissed by a federal district court, should be revived and sent back to the district court to consider whether state court is the proper jurisdiction.

 

The rulings did not address the core complaints that the industry's fossil fuel products are a primary driver of climate change and that the companies are therefore responsible for paying billions to fund climate change adaptation programs for the cities. Rather, they rested on whether federal courts or state courts were the proper jurisdiction for the issues' adjudication.

Although mostly procedural, the rulings are nevertheless significant in giving the municipalities the upper hand in the next round of the legal skirmish, the scholars say.

Most significantly, they rejected the industry argument that the liability claims made under California laws are preempted by the federal Clean Air Act, a legal tactic that successfully derailed similar climate cases over the last decade.

If the appeals court would have embraced the federal clean air preemption doctrine championed by the industry, the cases would have faced nearly insurmountable legal obstacles, experts agree.

"Today's Ninth Circuit decisions represent a very big win for the California local governments bringing these climate change-related lawsuits and, correspondingly, a major loss for the carbon-based energy industry," said Richard Frank, director of the California Environmental Law & Policy Center at the University of California Davis School of Law. "The carbon-based energy defendants should be worried about today's decisions, and what they portend for the future resolution of these cases."

The lower courts had handed the three judge Ninth Circuit panel a kind of split decision to sort out—a pair of appeals from two separate sets of cases where federal judges in San Francisco offered up contradictory rulings.

In the first, U.S. District Judge Vincent Chhabria of the Northern District of California remanded the lawsuits brought by Marin, San Mateo and Santa Cruz counties, along with the cities of Imperial Beach, Santa Cruz and Richmond, to state court because state nuisance lawsuits were best suited to settle the dispute.

Meanwhile, Chhabria's colleague, U.S. District Judge William Alsup, denied a request for state court trials in cases brought by the cities of Oakland and San Francisco. He later dismissed their cases outright in June 2018, holding that climate change "deserves a solution on a more vast scale than can be supplied by a district judge or jury in a public nuisance case."

In overturning that decision, the appeals court ordered Alsup to reconsider his decision to throw out the cases and then rule on whether they should be heard in state court.

In the ruling in favor of the other counties and cities, the appeals court found the industry failed to "carry their burden" of establishing convincing arguments that the cases should be heard in federal court rather than state court, according to the opinion.

The unanimous opinions were written by Judge Sandra Ikuta, one of two judges appointed by Republican presidents on the three-judge panel. The other, an appointee of President Donald Trump, was Judge Kenneth Lee.

High Stakes in Narrow, Technical Decisions

The rulings come at a time of increasing uncertainty for cases pending before the Ninth Circuit affecting environmental regulation, natural resources and climate change. The reliably pro-environment court has undergone a shift to the right, with 10 judges appointed by Trump.

But it might be too early for climate activists to cheer that a conservative leaning panel of judges ruled against the industry, said Pat Parenteau, a professor of environmental law at the Vermont Law School.

"The question presented was very narrow and technical," he said. "So it may not say much about how conservative judges might rule on the substantive issue or whether the oil companies should actually be held liable."

Nevertheless, Parenteau said the rulings are most important because they keep the cases alive and subject to state liability laws, which are stricter than federal laws.

The eight California communities behind the suits are at the forefront of a small but growing effort nationwide to hold oil companies financially responsible for rising seas, wildfires, heat waves and other climate-related havoc.

The central issue in the cases nationally is whether climate change and the damage it causes should be decided in state or federal courts.

Federal appeals courts in other districts have already ruled against the industry in lawsuits brought by the city of Baltimore, the state of Rhode Island and in three Colorado cases. Those appeals courts, like the Ninth Circuit, concluded state courts were the proper legal venue for assessing damages in the climate cases.

The industry has fought to have the lawsuits adjudicated in federal courts, where previous rulings have favored dismissing such cases on the belief that controlling climate change is a political and regulatory matter rather than a legal matter, and should thus be left to government agencies like the Environmental Protection Agency.

The local governments favored trials in state courts, which are more receptive to arguments that the industry has liability because it long ago understood the danger posed by burning fossil fuels but hid that evidence and went on promoting their products.

During the hearings before the Ninth Circuit earlier this year, attorneys for the oil companies painted the claims by the cities and counties as overbroad attempts to hold them liable for oil production going back to the dawn of the industrial revolution.

An attorney for the cities and counties told the panel they weren't targeting oil production, but rather a 50-year campaign to mislead the government and the public about the long-term effects of greenhouse gas emissions.

The remanding of the cases to state courts puts the municipalities a step closer to being allowed to seek discovery of documents going back decades. Those could disclose what the oil companies knew about climate change, when they knew it, and what they did to undermine climate science while, at the same time, protecting their own assets from global warming.

But the fight is far from over, said Ann Carlson, an environmental law professor at the University of California, Los Angeles, School of Law.

There undoubtedly will be further procedural battles over discovery, about where in California the cases will be heard and whether they will be tried together, she said. Such fights in the weeds of the process can delay the arrival of the facts of the cases in court.

"The oil companies would very much prefer to keep fighting procedural battles than get into the substance of what they actually did and what they actually knew," Carlson said.

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