SAN FRANCISCO (CN) — The Ninth Circuit affirmed Tuesday that lawsuits seeking to hold the world’s largest energy companies financially liable for climate change and the rising sea levels that threaten California’s coastal communities should stay in state court, setting the stage for a legal offensive comparable to one that won multibillion-dollar awards against Big Tobacco.
The ruling comes after a three-judge panel took a second look at a jurisdictional dispute between the energy companies and four municipalities after being ordered to do so by the U.S. Supreme Court.
San Mateo County, Marin County and the cities of Santa Cruz and Imperial Beach in San Diego County sued Chevron, BP and three dozen other oil, gas and coal companies in separate state courts in July 2017, claiming the fuel companies created a public nuisance by hiding for nearly 50 years that fossil fuel consumption was heating and damaging the earth.
After the cases were removed to federal court, the local governments fought to remand them 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 to their respective state courts.
A unanimous three-judge Ninth Circuit panel upheld Chhabria’s ruling two years later, 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.
The U.S. Supreme Court granted the energy companies’ petition for certiorari and sent the cases back to the Ninth Circuit to reconsider its ruling in light of the high court’s 2021 decision in BP p.l.c. v. Mayor & City Council of Baltimore, where it held that a federal appeals court can review a federal judge’s entire remand order. In that case, the city of Baltimore sued 26 oil companies for creating the greenhouse gases responsible for rising sea levels.
But Ikuta and her fellow panelists, U.S. Circuit Judges Morgan Christen and Kenneth Lee, declined to change their minds, sticking to the long-standing principle that federal courts should narrowly limit their reach to protect the jurisdiction of state courts.
“Our adherence to this doctrine does not change merely because plaintiffs raise novel and sweeping causes of action,” she wrote. “We therefore reject the broad interpretations of removal jurisdiction urged on us by the energy companies and affirm the district court’s remand order.”
The panel also rejected the argument that the energy companies’ conduct occurred on federal land and must be governed by federal law. The judges found that while some of the companies operated on federal land, such as the Elk Hills Naval Petroleum Reserve run by Chevron predecessor Standard Oil, the companies fail to account for how much of their conduct took place on federal enclaves. “The connection between conduct on federal enclaves and the counties’ alleged injuries is too attenuated and remote to establish that the counties’ cause of action is governed by the federal law applicable to any federal enclave,” Ikuta wrote.
The companies had also argued that the cases should stay in federal court because a portion of their fossil-fuel extraction took place on the Outer Continental Shelf, which falls under federal jurisdiction. “We reject this argument, because the connection between such conduct and the injuries alleged by the plaintiffs here is too attenuated to give rise to jurisdiction,” Ikuta wrote, reasoning that the counties’ lawsuit claim only local injuries, and focus on the companies’ “concerted campaign” to hide the harmful effects of fossil fuels from the public. “These allegations do not refer to actions taken on the Outer Continental Shelf,” she wrote.
The cities and counties praised the opinion as “clear and reasoned” in a statement.
“We appreciate the panel’s thorough review of this matter and are eager to return to the state courts where we filed our cases more than four years ago,” the plaintiffs said an email sent through the law firm Sher Edling LLP. “It is time to go to trial to hold these defendants accountable for deceiving consumers about the dangers associated with the use of their products, and to protect our taxpayers from having to bear the enormous costs resulting from that deception.”
The same Ninth Circuit panel found U.S. District Judge William Alsup lacked jurisdiction when he dismissed similar lawsuits brought by the cities of San Francisco and Oakland. The judges remanded the cases to Alsup so he can reconsider if alternative grounds justify keeping the two lawsuits in federal court, though their ruling Tuesday means those cases will likely end up in state court as well.
In an email, BP head of corporate communications Megan Baldino said the company could not speak about pending litigation. Chevron spokesman Braden Reddall said in an email that the company “respectfully disagrees” with the panel’s decision.
“Plaintiffs’ claims are based on allegations about worldwide carbon emissions and address global climate change — national and international issues that can be governed only by federal, not state, law. The court acknowledges that cases such as this one “raise novel and sweeping causes of action,’” Reddall said, noting that like Alsup, the Second Circuit had dismissed nearly identical claims as “sprawling” and overly ambitious. “Although the court has decided that plaintiffs’ claims for now can proceed past this preliminary stage, Chevron looks forward to additional challenges that should put an early end to this meritless lawsuit.”