Has the Supreme Court frozen climate change litigation?
Wansheng Jerry Liu (email@example.com) practices in the intellectual property department of Fox Rothschild LLP, residing in its Princeton office. David Restaino (drestaino@ foxrothschild.com) provides compliance counsel at Fox Rothschild in many subject matter areas, including regulatory aspects of environmental law.
In April 2007, the U.S. Supreme Court delivered its landmark decision, Massachusetts v. EPA (Massachusetts), confirming the government’s ability to regulate greenhouse gases.1 That decision can be considered the “end of the beginning” of the battle against climate change. Since then, proponents of a forceful climate change response have taken matters into their own hands and filed federal nuisance claims against large emitters of greenhouse gases. These efforts have led to a second climate change case, American Electric Power v. Connecticut (AEP), recently decided by the U.S. Supreme Court.2
AEP strongly limits private nuisance actions by keeping them out of federal court. But AEP isn’t the next big step in climate change litigation even though it reined in wayward plaintiffs. Instead, the case won’t stop the expansion of the government’s greenhouse gas toolbox, and won’t even prevent private plaintiffs from filing similar actions in state court. Nevertheless, its holding represents an important ruling regarding climate change that shouldn’t be underestimated.
Massachusetts v. EPA
In Massachusetts, the first landmark case in the climate change context, the Commonwealth of Massachusetts and several other states, cities, and organizations filed a total of eight petitions with the United States Court of Appeals for the District of Columbia to, among other things, challenge the denial by the U.S. Environmental Protection Agency (EPA) in the Bush administration of its authority under the Clean Air Act (CAA) to regulate greenhouse gas (GHG) emissions from new motor vehicles.3 The petitioners claimed the GHG emissions caused climate change and the climate change would cause injuries to them, such as loss of property, damage to facilities, increased health problems and related costs, reduced water supply, and harm to economies.4 Petitioners also claimed the EPA’s regulation of the GHG emissions would reduce or delay the injuries that resulted from a climate change.5
The issues before the Supreme Court included: 1) whether the petitioners had established standing to challenge the agency’s denial to regulate GHG emissions; 2) whether the CAA had authorized the agency to regulate GHG emissions, in particular CO, from motor vehicles; and 3) if the agency has the authority, whether it has the discretion to decline to issue emission standards for motor vehicles based on policy considerations.
On the standing issue, Justice Stevens acknowledged the relevance that Massachusetts is a sovereign state, not a private individual.6 As a sovereign state, Massachusetts isn’t a “normal litigant” to invoke federal jurisdiction. However, given the procedural right to challenge the governmental agency’s rejection of rulemaking petition pursuant to 42 U.S.C. § 7607(b)(1) and Massachusetts’ stake in protecting its “quasi-sovereign interests,” the Court concluded that Massachusetts is entitled to “special solicitude” in the standing analysis.7 To reach this conclusion, the Court cited Georgia v. Tennessee Copper Co.,8 a century-old case in which the Court upheld the State of Georgia’s standing for an injury to it in the capacity of “quasi-sovereign” in seeking to protect its citizens from air pollution originating from its borders.9 Analogously in Massachusetts, the Court held the Commonwealth should also have standing for its “well-founded desire to preserve its sovereign territory.”10
On the merits, the Court in a 5-to-4 slight majority agreed with the petitioners that CO is an air pollutant within the “sweeping definition” of the term under section 302(g) of the CAA,11 and ruled the EPA’s reading of the statutory provision with regard to the definition of air pollutant is unreasonable and the EPA can’t deny its authority to regulate CO2 emissions under section 202(a)(1) of the CAA.12
Thus, in Massachusetts the Supreme Court held the CAA authorizes federal regulation of emissions of carbon dioxide and other greenhouse gases, and the EPA had misread the act when it denied a rulemaking petition seeking controls on GHG emissions from new motor vehicles. In response, the EPA commenced a rulemaking under section 111 of the CAA,13 to set limits on GHG emissions from new, modified, and existing fossil-fuel fired power plants. The EPA has committed to issuing a final rule by May 2012 but it remains to be seen whether or not it will stick with that timetable; on Sept. 15, 2011, the agency said it would miss its September deadline for issuing proposed rules.
AEP v. Connecticut
The U.S. Supreme Court on June 20 decided the second landmark case in the climate change context, AEP, which is also the first climate change-related tort case decided by the Court. The Supreme Court through Justice Ginsburg unanimously (8-0)14 held the federal common law nuisance action seeking injunctive relief in the form of emissions caps on stationary source GHG emissions is displaced by the CAA and the EPA’s regulatory activity that the act authorizes. An equally divided court (4-4) affirmed the holding of the U.S. Court of Appeals for the Second Circuit that plaintiffs had standing to bring the case. The court didn’t reach the Tennessee Valley Authority’s prudential standing arguments, or base its decision on the political question doctrine defense advocated by petitioners. Nor did the Court reach the plaintiffs’ state common law claims.
In 2004, Connecticut and a coalition of seven other states (New York, California, Iowa, New Jersey, Rhode Island, Vermont, and Wisconsin), the City of New York, and three land trusts sued American Electric Power, American Electric Power Service, Southern Company, Tennessee Valley Authority, Xcel Energy, and Cinergy, seeking an order to require the defendants to abate the public nuisance of global warming.15 The plaintiffs alleged the defendants’ coal-operated power plants create a public nuisance under federal and state common laws. The plaintiffs claimed the defendants were “substantial contributors to elevated levels of carbon dioxide and global warming,” since their annual emissions constitute “approximately one quarter of the U.S. electric power sector’s carbon dioxide emissions and approximately ten percent of all carbon dioxide emissions from human activities in the United States.”16
In their complaint filed in the U.S. District Court for the Southern District of New York, the plaintiffs claimed they are or will be harmed by climate change, such as “warmer average temperatures, later fall freezes and earlier spring thaws, and the decrease in average snowfall and duration of snow cover on the ground.”17 For example, California alleged the climate change will lead to the reduction of its mountain snowpack, “the single largest freshwater source, critical to sustaining water to the State’s 34 million residents,” as well as diminished summer runoff from mountain snow, water shortages, disruptions to the interrelated water systems and hydroelectric plants, and increased flooding. The states also alleged future injuries such as, among other things, increased deaths and illness due to heat waves, increased smog, increased concomitant respiratory problems, beach erosion, sea level rise and coastal inundation, salinization of marshes and water supplies, droughts and floods, and increased wildfires.18
The plaintiffs asked the trial court to hold each defendant jointly and severally liable for creating, contributing to, or maintaining a public nuisance. The plaintiffs also asked the court to permanently enjoin the defendants to abate the global warming nuisance by requiring them to cap their carbon dioxide emissions and then reduce the emissions by a specified percentage each year for at least a decade. The defendants moved to dismiss the case on numerous grounds, including lack of recognized federal common law cause of action to abate GHG emissions, the displacement of federal common law by statutes, the political question doctrine, lack of standing to sue, and lack of jurisdiction for failure to state a claim under federal laws.19 The U.S. District Court for the Southern District of New York dismissed the plaintiffs’ case based on the political question doctrine, stating “these actions present non-justiciable political questions that are consigned to the political branches, not the Judiciary.”20 In other words, the district court held these types of cases should be handled by the executive branch or Congress, not the courts.
On appeal, a two judge-panel of the Second Circuit21 vacated the trial court’s dismissal and held the plaintiffs’ claims don’t present non-justiciable political questions.22 Characterizing the case as an “ordinary tort suit,” the court stated that seeking to limit emissions from coal-fired power plants is something that could be adjudicated by the courts.23 The Second Circuit also held the plaintiffs have standing to bring their claims,24 since they sufficiently alleged that their current and future injuries, i.e., harm to the environment, to the states’ economies and to public health, are “fairly traceable” to the defendants’ acts.25 Moreover, relying on the Supreme Court precedents,26 the Second Circuit held the plaintiffs can assert claims under the federal common law of nuisance,27 and such claims aren’t displaced by federal legislation,28 in part because no comprehensive federal GHG regulatory scheme has been established. The Circuit Court didn’t reach the plaintiffs’ state common law nuisance claims because it held the federal common law on nuisance would control.
The Supreme Court overturned the Second Circuit’s ruling on the federal common law issue, holding the CAA and the EPA’s authority and actions under the CAA categorically displace any federal common law right to seek abatement of carbon dioxide emissions from coal-fired power plants.29 Citing Milwaukee II, the Court reiterated that “the relevant question for purposes of displacement is ‘whether the field has been occupied,’ not whether it has been occupied in a particular manner,” and when Congress addresses a question previously governed by a decision rested on federal common law, the need for such an unusual exercise of law-making by federal courts disappears.”30 The Court explains the legislative displacement of federal common law doesn’t require the same sort of evidence of a clear and manifest congressional purpose demanded for preemption of state law,31 but rather, the test is simply whether the statute “speaks directly to the question” at issue.32 The Court stated that Massachusetts made plain that emissions of carbon dioxide qualify as air pollution subject to regulation under the CAA, and the act “speaks directly” to emissions of carbon dioxide from the defendants’ plants.
The Court held it was irrelevant that the CAA permits emissions until the EPA acts, because it is Congress’ delegation of regulatory authority under the Clean Air Act to the EPA, not the extent of the EPA’s specific regulatory actions on the issue, that displaces the federal common law of nuisance. Thus, the Court rejected the plaintiffs’ argument that the cause of action isn’t displaced because the EPA has yet to fully or actively regulate GHG emissions from these sources. Justice Alito filed a concurrence on the Court’s displacement holding, joined by Justice Thomas, stating his concurrence is based on the assumption that the interpretation of the Clean Air Act in Massachusetts was correct.
Moreover, the Court reiterated the EPA not only has authority to regulate GHG emissions, but also has an obligation to do so. According to the opinion, the CAA in section 111 directs the EPA to establish emissions standards for categories of stationary sources that, “in the Administrator’s judgment,” “cause, or contribute significantly to, air pollution which may reasonably be anticipated to endanger public health or welfare.”33 However, the term “judgment” doesn’t grant the EPA a “roving license to ignore the statutory text” in this respect.34 Once the EPA lists a category, it must establish performance standards for emission of pollutants from new or modified sources within that category,35 and relevant to this case, the EPA must regulate existing sources within the same category.36
Further, the courts noted the CAA provides multiple avenues for enforcement. If the EPA doesn’t set emissions limits for a particular pollutant or source of pollution, states and private parties may petition for a rulemaking on the matter, and the EPA’s response will be reviewable in federal courts.37 The act itself thus provides a means to seek limits on emissions of carbon dioxide from domestic power plants—“the same relief the plaintiffs seek by invoking federal common law.”38 The court noted that if the plaintiffs are dissatisfied with the EPA’s course of action or inaction, their recourse under federal law is to follow the CAA procedures and seek review by the courts.39
The equally divided Court (4-4 split) affirmed the Second Circuit’s holding on the plaintiffs’ standing to bring their claims.40 At least four justices held that at least some plaintiffs have Article III standing under Massachusetts, which permitted a state to challenge the EPA’s refusal to regulate GHGs under the Clean Air Act. As a result, the Second Circuit’s holding on the standing issue stands, and the district court has jurisdiction to hear the case, although the Supreme Court’s affirmance on this issue isn’t binding on other circuits. Thus, the Court’s decision doesn’t provide a jurisdictional bar to future climate change tort lawsuits, although such a bar was sought by the industrial defendants in this case.
The Court didn’t decide other threshold issues, namely prudential standing and the political question doctrine, nor based its holding on these issues. In fact, the Court barely mentioned those doctrines in its decision, but instead noted that four members of the Court also held there’s no other threshold obstacle that bars review. The Court noted in a footnote that in addition to the political question doctrine arguments made below, the power companies sought dismissal “because of a ‘prudential’ bar to the adjudication of generalized grievances, purportedly distinct from Article III’s bar.”41 Therefore, the Court’s statements on these “other threshold issues” are rather limited and wouldn’t provide much guidance to future litigation in the climate change context.
Finally, as the Second Circuit didn’t reach the state tort claims, neither did the Supreme Court. In light of the holding that the CAA displaces federal common law, the Court stated the availability of a state lawsuit depends, among other things, on the preemptive effect of the federal act.42 Because none of the parties have briefed preemption or otherwise addressed the availability of a claim under state nuisance law, the Court left the matter for consideration on remand.43
While the Supreme Court firmly held in AEP that federal nuisance suits were inappropriate, it would be stretching the holding to assume it stands for more general propositions. It does not.
First, the landmark Massachusetts case made it clear the Supreme Court won’t stand in the way of government regulation when that regulation results from a detailed scientific analysis and is specifically allowed by statute. So, while AEP makes it difficult for federal nuisance claims to proceed, AEP shouldn’t be viewed as slowing the regulatory process. Instead, that process continues. For instance, in July 2011 the EPA finalized its Cross-State Air Pollution Rule (CSAPR), which is designed to implement new requirements concerning the transport of air pollution across state borders. The EPA also proposed a new rule to increase to 28 the number of states subject to CSAPR; EPA amended its proposed emissions budgets in October, and the rule is expected to be finalized in late fall 2011.
Additionally, AEP can be strictly applied only to the concept of nuisance suits brought in federal court under the federal common law. It doesn’t explicitly hold that nuisance suits brought in a state court under state common law can’t be sustained, so uncertainty remains in that regard. And behind that uncertainty is the ever-present risk that utilities and other GHG emitters can be forced to expend litigation costs in response to nuisance suits—with the ultimate question of liability in state court still undecided.
Also undecided are those other aspects of climate change litigation unrelated to air emissions. Specifically, the use and release of water are also factors in any broad analysis of climate change, and whether the principles of state nuisance law can be applied to these areas is yet another unanswered question.
Accordingly, the main thrust of AEP is merely that allegations about the adverse impact of climate change are best served in a broad regulatory process and not in piecemeal federal litigation filed against only certain components of industry. Stated differently, AEP answers only one of the many litigation questions relating to climate change.
Just as it remains difficult to predict what types of lawsuits can still be brought after AEP, it’s equally difficult to predict the impact that AEP will have upon utility companies. However, questions of costs and financing certainly remain. For example, a major utility recently announced it’s putting a hold on efforts to implement a carbon capture strategy at a coal-fired power plant located in West Virginia.
Finally, an analysis of damages potentially recoverable in litigation would be incomplete without mentioning insurance. Whether claims for damage from climate change are covered by a general liability insurance policy also remains an open issue, although one court recently held that there was no coverage.44
Simply put, while large-scale emitters of greenhouse gases can take solace in the AEP decision, they can’t consider the larger issues to have been resolved.
1. 549 U.S. 497 (2007).
2. Slip Op. No. 10-174 (U.S., June 20, 2011).
3. See Pets. for Rev., Massachusetts v. EPA, 415 F.3d 50 (D.C. Cir. 2005)(Nos. 03-1316 to 03-1368, consolidated under 03-1361) (“Consol. Br. for Petrs.”).
4. Consol. Br. for Petrs. at 2-3.
5. Id. at 4.
6. Massachusetts, 549 U.S. at 518.
7. Id. at 519-520.
8. 206 U.S. 230 (1907).
9. Massachusetts, 549 U.S. at 518 (citing Tennessee Copper Co., 206 U.S. at 237.).
10. Massachusetts, 549 U.S. at 518.
11. Id. at 528-529.
12. Id. at 528.
13. 42 U.S.C. § 7411.
14. Justice Sotomayor recused herself because she sat on the Second Circuit panel that decided the case (although she took no part in the decision).
15. Connecticut v. Am. Elec. Power Co., Inc., 406 F. Supp. 2d 265 (S.D.N.Y. 2005).
16. Connecticut v. Am. Elec. Power Co., Inc., 582 F.3d 309, 316 (2d Cir. 2009).
17. Id. at 317.
18. Id. at 318.
19. Connecticut, 406 F. Supp. 2d at 270-74.
20. Id. at 274.
21. Judge Sotomayor recused herself from participating in the decision after she was appointed to the Supreme Court.
22. Connecticut, 582 F.3d at 332.
23. Id. at 329.
24. Id. at 349.
25. Id. at 345.
26. Illinois v. City of Milwaukee, 406 U.S. 91, 92 (1972) (“Milwaukee I”); City of Milwaukee v. Illinois, 451 U.S. 304, 317 (1981) (“Milwaukee II”) (holding that amendments to the Clean Water Act displaced the nuisance claim recognized in Milwaukee I).
27. Connecticut, 582 F.3d at 345.
28. Id at 387-88.
29. Am. Elec. Power, Slip Op. at 10 and 12.
30. Id. at 9 (quoting Milwaukee, 451 U.S. at 314).
31. Id. (quoting Milwaukee, 451 U.S. at 317).
32. Id. at 10.
33. Id. (citing 42 U.S.C. § 7411(b)(1)(A)).
34. Id. at 13.
35. Id. (citing 42 U.S.C. § 7411(b)(1)(B)).
36. Id. (citing 42 U.S.C. § 7411(d)).
37. Id. (citing 42 U.S.C. § 7607(b)(1)).
38. Id. at. 9–11.
39. Id. at 13.
40. Id. at 6.
41. Id. at 6 n.6.
42. Id. at 15.
43. Id. at 15–16.
44. AES Corporation v. Steadfast Ins. Co., 2011 WL 4139736 (Va. 2011).