Judgment Day for Climate Change Litigation

December 7, 2010

On Dec. 6, 2010, the U.S. Supreme Court granted certiorari in the case of American Electric Power Inc. v. State of Connecticut, No. 10-174. Oral argument is expected in March or April. This is very good news for the energy industry. The 2nd Circuit’s ruling in this case is by far the most significant and far-reaching victory for plaintiffs in climate change litigation. The decision singlehandedly revived the practice of combating climate change through the common law tort of public nuisance. In doing so, it arguably made one of the most expansive pronouncements on standing for environmental plaintiffs in recent jurisprudential memory.

The decision is now in significant peril, and the energy industry is poised to rid itself of climate change litigation once and for all. It’s possible the court might go even further – it may choose to undermine the recent holding in Massachusetts v. EPA by restricting standing for plaintiffs in environmental litigation, and it may fundamentally change the relationship between the common law and statutory claims in environmental litigation by restricting the future use of common law suits.

Lower Court Decision

In 2004, eight states (California, Connecticut, Iowa, New Jersey, New York, Rhode Island, Vermont and Wisconsin) and New York City sued five electric utility companies on a public nuisance theory for greenhouse gas emission. The district court, following the precedent of other related decisions, had dismissed the case on political question grounds, noting the “the impossibility of deciding [the case] without an initial policy determination of a kind clearly for non-judicial discretion.”

On Sept. 21, 2009, a two-judge panel of the 2nd Circuit Court of Appeals ruled that defendants can be sued, holding that: (1) the district court erred in dismissing the complaints on political question grounds; (2) all plaintiffs had standing; (3) plaintiffs stated claims under the federal common law of nuisance; and (4) plaintiffs’ claims were not displaced by federal legislation. In doing so, the court reinstated the suit and remanded to the district court for further proceedings.

Possible Outcomes

Outcome #1: Narrow Reversal

The most likely outcome is that the court reverses the 2nd Circuit’s ruling and does so on a narrow basis. The court dealt with similar issues in the 2007 case of Massachusetts v. EPA, and Chief Justice Roberts and Justices Scalia, Thomas and Alito in that case all took positions that strongly suggest they will vote to reverse here. If they’re able to pick up only one more vote, they’ll have the votes to reverse.

The two justices to watch are Kennedy and Kagan. Kennedy was the deciding vote in Massachusetts v. EPA, and the majority opinion which he joined made some fairly far-reaching statements that have been cited by climate change plaintiffs ever since. Has he changed his mind at all? Kagan has a reputation as a strong proponent of executive power, and we know that the Solicitor General’s Office, which she headed up prior to becoming a justice, filed a brief on behalf of the TVA supporting reversal this summer. Will she side with conservatives here? No one knows, because there is no judicial track record for her.

The key question is will the court rule narrowly or broadly? Unless either Kennedy or Kagan defects to the conservative bloc, a narrow ruling is more likely. The Solicitor General’s brief on behalf of the TVA argued that because the EPA has adopted GHG regulations since the 2nd Circuit’s decision, the federal common law of nuisance has been displaced. If the court rules narrowly, this is the most likely basis for a reversal.

Outcome #2: Affirmance

It’s not outside the realm of possibility that the court could end up affirming the 2nd Circuit’s ruling. Justice Sotomayor recused herself from this case, because she originally sat on the 2nd Circuit panel that heard it. That sets up potential for a tie vote which would result in the 2nd Circuit’s decision being affirmed.

If this occurs, then not only would climate change litigation have new life, but it would largely be inoculated from dismissals prior to discovery. There could be an explosion of new climate change litigation. Thus, contrary to conventional wisdom, the recusal of Sotomayor does little to affect the possible outcome. For those in favor of affirming the 2nd Circuit, a 4-4 vote is almost as good as 5-4.

Outcome #3: Broad Reversal

It’s also possible that instead of reversing on a narrow basis, the court could reverse by issuing a broad proclamation that radically alters the environmental litigation landscape. For instance, it could choose to revisit Massachusetts v. EPA and undermine that decision’s position on standing, either explicitly or in dicta.

In addition, the court could declare climate change a political question and re-establish the political question doctrine as a viable defense in certain types of litigation. Moreover, the court could restrict the use of common law remedies in environmental litigation going forward, by strengthening the displacement and preemption doctrines. Though a broad ruling on any of these issues is unlikely given the current makeup of the court and its past votes, it is a possibility.

Potential Significance

This case immediately becomes one of the most important cases of the term, for several reasons.

1. Final Word on Climate Change Litigation

Climate change litigation has existed for more than six years and has been quite a roller coaster ride. It went from the depths of all the district courts dismissing various actions on political question grounds to the heights of two federal courts of appeal allowing the suits to proceed – at least until the Comer decision by the 5th Circuit was vacated due to not having a quorum. To call the current law of climate change litigation murky is an understatement.

But the U.S. Supreme Court will decide once and for all this spring, whether this type of litigation should be allowed to proceed. If the court reverses, it will drive a stake in the heart of climate change litigation, and it will cease to exist. However, if it affirms the 2nd Circuit’s decision, there will likely be many more of these suits. Either way, there will be a great deal more clarity than there is now.

2. The Future of Environmental Common Law Litigation

This case has the potential to significantly rewrite environmental law. At issue is whether the federal common law of nuisance has been displaced by statutes and regulations related to greenhouse gas emissions. But underlying that issue is a larger question: To what extent should any environmental common law tort claims, state or federal, be permitted in today’s world where there are federal and state statutes as well as regulations regarding every conceivable subject matter?

The fact that the cert. petition relied so heavily on a recent 4th Circuit decision (State of North Carolina v. TVA) in which state common law was held to be preempted by the Clean Air Act, is proof. The court’s ruling could potentially bolster the law of both preemption and displacement, and limit the number of future common law environmental claims.

3. Standing

Another issue likely to be decided in this case is the scope of federal standing. Massachusetts v. EPA opened the door to this type of litigation by expanding the scope of federal standing – at least with regard to statutory causes of action challenging agency decisions. This case has the potential to rollback that expansion and make it harder for plaintiffs in environmental litigation to move forward with such suits in the future. In particular, the court will likely address how speculative a potential injury is permitted to be, in order for a plaintiff to establish an “injury in fact.”

The petitioners argued that one consequence of the 2nd Circuit’s holding was “to permit any plaintiff claiming global warming injuries to sue virtually any entity in the world, limited only by the reach of personal jurisdiction.” Many in the defense bar will look for the court to establish a rational framework for standing in complex litigation such as this going forward.

This case is extremely important for not only the energy industry, but also for any business with potential exposure to environmental litigation. It will bear close watching as the court hears oral argument this spring and likely issues a decision in early summer.