No Rehearing in Appeal Over Big Oil’s Liability for Climate Change

Los Angeles smog

SAN FRANCISCO (CN) — The Ninth Circuit on Tuesday refused to reconsider a thorny jurisdictional issue that could allow the world’s largest energy companies to be held liable for climate change in state court.

The Ninth Circuit denied a request for an en banc rehearing in three lawsuits brought by two California counties and one city claiming the fuel companies created a public nuisance by hiding for nearly 50 years that fossil fuel production was heating and damaging the earth. 

San Mateo County, Marin County and the city of Imperial Beach in San Diego County sued Chevron, ExxonMobil and three dozen other oil, gas and coal companies in state court in July 2017. After the cases were removed to federal court, the local governments fought to remand them back to state court, arguing state law claims of public nuisance should be decided by California’s judicial system.

The energy giants objected, insisting the claims are governed by federal law because they implicate “uniquely federal interests,” including matters of interstate and international commerce and environmental policy.

In March 2018, U.S. District Judge Vince Chhabria remanded the cases, finding a state court should decide if the state-law public-nuisance claims are pre-empted by federal law.

In May, a unanimous three-judge Ninth Circuit panel upheld Chhabria’s ruling, finding the federal court lacks jurisdiction to consider state law claims. Writing for the majority, U.S. Circuit Judge Sandra Ikuta, a George W. Bush appointee, rejected the oil companies’ argument that because they provided fuel to the U.S. government through service contracts, they were “acting under” a federal officer’s directions.

“A person is not ‘acting under’ a federal officer when the person enters into an arm’s-length business arrangement with the federal government or supplies it with widely available commercial products or services,” Ikuta wrote.

Last month, the energy companies petitioned for an en banc rehearing. On Tuesday, the three-judge panel unanimously rejected that request, and no active circuit judge in the appeals court asked for a vote on the petition for an en banc rehearing.

In an emailed statement, Marin County Counsel Brian Washington applauded the appeals court’s decision and said the county looks forward to advancing the case to trial in state court.

“The 9th Circuit has unanimously ruled – again – that Marin County’s lawsuit to hold fossil fuel companies accountable for climate change related damages belongs in state court where it was originally filed,” Washington said.

Chevron spokesman Sean Comey, Chevron attorney Theodore Boutros Jr., and officials with San Mateo County and the city of Imperial Beach did not immediately respond to emails and phone calls requesting comment Tuesday.

The same Ninth Circuit panel is still mulling a request for an en banc rehearing in separate appeal involving two lawsuits brought by the cities of San Francisco and Oakland, California, against the world’s five largest oil companies: BP, Chevron, ConocoPhillips, ExxonMobil and Royal Dutch Shell.

In that case, the panel found U.S. District Judge William Alsup lacked jurisdiction when he dismissed the two lawsuits seeking to make oil and gas giants cover the cost of sea walls and other projects to protect the cities from rising sea levels and other consequences of climate change.

In May, the panel rejected the oil companies’ argument that state law public nuisance claims are preempted by the federal Clean Air Act and found the companies’ liability under state law “fails to raise a substantial federal question” that would justify federal court jurisdiction.

In June, Judge Alsup wrote a letter asking the panel to “correct a mistake” in its May 26 opinion. Alsup said the panel had been “led astray” by the cities’ legal teams and incorrectly concluded that he relied on admiralty jurisdiction to keep the lawsuits in federal court. The panel held that the admiralty jurisdiction argument was waived because the oil companies did not include it in their notices of removal to federal court.

“Even if the Energy Companies could and did waive admiralty jurisdiction as a ground for removal, the district court did not sustain removal under (and did not mention) admiralty jurisdiction,” Alsup wrote. “Rather, the district court found the complaints’ necessary dependence on the navigable waters as the instrumentality of the alleged nuisance raised a federal question based in federal common law, grounds expressly stated in the notices of removal.”

The cities replied in a July 7 letter that “no mistake” was made, but they proposed a correction to clarify that although Judge Alsup considered the “navigable waters of the United States” theory as an “instrumentality” of the public nuisance claim, the argument still fails and was waived because the oil companies failed to invoke it in their notices of removal.

In July, the U.S. Chamber of Commerce also filed an amicus brief in the case arguing the appeals court should not remand a case to state court after it’s been dismissed in federal court because it would enable a “wasteful do-over” in state court.

“The rule creates a heads-I-win, tails-you-lose situation: If the plaintiffs won their case ‘on the merits in federal court [they] could claim to have raised the federal question in [their] amended complaint voluntarily,’ but having lost, they could claim that it never should have been in federal court so they are ‘entitled to start over in state court,’” the Chamber wrote in a 20-page brief, citing the Seventh Circuit’s 1984 ruling in Bernstein v. Lind-Waldock & Co.

On Monday, the Justice Department also weighed in, arguing claims against oil companies for climate change should stay in federal court because they are “necessarily federal in character” and could substantially affect interstate and foreign commerce.

“If successful, these claims would, in practice, impose a tax on fossil-fuel production and use nationwide and potentially worldwide — but to the sole benefit of these cities for an alleged harm shared by many,” the United States wrote in a 17-page brief.

The Ninth Circuit denied the request for an en banc rehearing in the two lawsuits brought by San Francisco and Oakland in an order and amended opinion on Aug. 12.

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