Earlier this month, the Second Circuit affirmed the District Court for the Southern District of New York’s ruling that state common law claims against oil companies for costs resulting from climate change were either preempted by the Clean Air Act, or, in the case of foreign emissions, represented a non-justiciable political question. See City of New York v. Chevron Corp., 993 F.3d 81, 2021 WL 1216541 (2d Cir. 2021). The decision represents the first time an appellate court has had the opportunity to rule on the merits of the federal preemption defense raised by defendants. Although there are active lawsuits in other jurisdictions where plaintiffs have made substantially similar claims, decisions in the other active climate change suits thus far have been restricted to the issue of whether climate change suits brought in state court were properly removed to federal court. The decisions in those cases, therefore, have not addressed the merits of the federal preemption defense. (The Supreme Court is predicted to issue a ruling on the removal issue by the end of its term in June. See Mayor & City Council of Baltimore v. BP p.l.c., et al., 388 F. Supp. 3d 538, 548 (D. Md.), as amended (June 20, 2019), aff’d, 952 F.3d 452 (4th Cir.), cert. granted, 141 S. Ct. 222 (2020)).

By way of background, in 2018, the City of New York filed a lawsuit in the Southern District of New York on diversity grounds, alleging state common law claims of public nuisance, private nuisance, and trespass. The City sought “compensatory damages for the past and future costs of climate-proofing its infrastructure and property, as well as an equitable order ascertaining damages and granting an injunction to abate the public nuisance and trespass that would go into effect should the Producers fail to pay the court-ordered damages.” City of New York, 2021 WL 1216541 at * 3. The defendants, all multinational fossil-fuel-producing corporations, filed motions to dismiss for lack of jurisdiction and failure to state a claim. The district court granted the motions and dismissed the City’s claims with prejudice, holding that the City’s state common law claims were displaced by federal common law, which was in turn displaced by the Clean Air Act. The district court also warned that, although the Clean Air Act did not specifically preempt claims stemming from foreign emissions, there is a “need for judicial caution in the face of ‘serious foreign policy consequences.’” City of New York v. BP P.L.C., 325 F. Supp. 3d 466, 475 (S.D.N.Y. 2018) (citing Jesner v. Arab Bank, PLC, 138 S.Ct. 1386, 1407 (2018)).

The Second Circuit largely agreed with the district court’s opinion and affirmed the dismissal. The court’s analysis determined that: 1) the City’s state law tort claims were displaced by federal common law; 2) the Clean Air Act, in turn, displaced the City’s federal common law claims where domestic emissions are involved; 3) the Clean Air Act’s displacement of federal common law does not resuscitate the City’s state law claims; and 4) the extraterritorial reach of federal common law does not extend to international greenhouse gas emissions.

The court opened its analysis by noting that federal common law exists only for “few and restricted” issues. City of New York, 2021 WL 1216541 at *4. Those issues “fall into essentially two categories: those in which a federal rule of decision is necessary to protect uniquely federal interests, and those in which Congress has given the courts the power to develop substantive law.” Id. at *5 (citing Tex. Indus., Inc. v. Radcliff Materials, Inc., 451 U.S. 630, 640 (1981)). The court concluded that facts presented in the case were the “quintessential example of when federal common law is most needed.” Id. The relief requested by the City, the court held, would regulate cross-border emissions in an indirect manner because greenhouse gases have rapid and widespread global dispersal, and regulation of those gases by New York would impermissibly expand New York’s authority over other states.

After concluding that the City’s claims must be brought under federal common law rather than state common law, the court then considered whether the Clean Air Act displaced federal common law. The court noted that federal statutory law preempts federal common law when there is a statute that speaks directly to the issue and held that prior precedent clearly dictates that the Clean Air Act displaces any federal common law claim “seeking to abate transboundary emissions of greenhouse gases.” Id. at *9. Allowing the suit to continue, the court reasoned, would “impose New York nuisance standards on emissions emanating simultaneously from all 50 states and the nations of the world.” Id. at *13.

The court also rejected the City’s argument that, in the event that the Clean Air Act displaced federal common law, the state law claims would be revived via the Clean Air Act’s savings clause. Because the savings clause of the Clean Air Act has been narrowly construed to include only state suits brought under the law of the pollution’s source state, the court held that “the Clean Air Act therefore [did] not authorize the City’s state-law claims, meaning that such claims concerning domestic emissions are barred.” Id. at *14.

Finally, the court determined that the City’s claims concerning foreign emissions must fail as well because the Clean Air Act does not contain a specific provision indicating extraterritorial application. The court also noted that Congress “tasked the State Department – not [the] EPA – to formulate United States foreign policy with reference to environmental matters relating to climate.” Id. at *14 (quoting Massachusetts v. E.P.A., 549 U.S. 497, 533 (2007). The court therefore held that the claims must be dismissed against the foreign defendants as well.

With every passing day, as new climate change lawsuits are filed, the contours of the issue are shifting. With the Supreme Court set to weigh in on the removal issue soon, and with the Biden administration’s renewed emphasis on addressing climate change, there are sure to be many new developments in this field of law.

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