Greenhouse gas litigation heats up: unpacking the latest legal battles

At Praedicat we’ve been watching the unfolding saga of greenhouse gas (GHG) public nuisance litigation in the United States.  Although this second wave of climate litigation began in 2017, it’s only starting to reach the essential questions that will determine the outcome.

To recap, the last several years of litigation has focused on the question of whether state or federal courts are the appropriate venue for adjudicating these claims.  The state attorneys general filed their claims in state court under the theory that these were fairly normal state law claims, while the defendants argued that federal court was appropriate since they cast the claims as trying to assail federal emissions policies and regulate GHG emissions in contravention of the Clean Air Act.  Almost every court to decide the issue has allowed the claims to proceed in state court.

So, seven years since these cases were filed, we are now seeing the first judicial decisions on some of the legal (not factual) merits of the cases.  The questions fall into two different, but related, topics: whether the state law claims are preempted by the federal clean air act, and whether the states are impermissibly trying to regulate GHG emissions outside their borders.  In insurance-related actions we are also starting to see how courts may interpret insurance contracts as applied to these lawsuits.

We begin our tour of recent decisions with Mayor and City of Baltimore v. BP PLC, et al.  This case was filed in Maryland state court in 2018, and Baltimore alleged that 20+ fossil fuel companies deceived the public about the dangers of using their products.  This case has travelled to federal court and back, including a trip to the US Supreme Court to settle a technical issue about how to decide which court should keep the case.  Finally settling back down in Maryland state court, this July, the judge published her decision saying that the lawsuit only alleges injuries from global climate change.  She concluded that having accepted the defendants’ arguments to view the case through that lens, and as an attempt to regulate GHG emissions, the case must be dismissed because they are preempted by both federal common law and the Clean Air Act.  The city is appealing that decision.

In a near mirror image of the Baltimore case, the Colorado state judge presiding over County Commissioners of Boulder County et al. v. Suncor Energy USA Inc. et al. found that he had jurisdiction and that federal law did not preempt state law in this case.  The judge found that, contrary to the defendants’ assertions, the local governments were not trying to litigate policy solutions or GHG emissions limits.  Instead, he reasoned, they were asserting their rights to seek compensation for damages already caused by the defendants’ allegedly “intentional, reckless, and negligent conduct”.  He also found that the Clean Air Act did not need to specifically authorize the lawsuits in this case because the law did not go so far as to regulate the effects of GHG emissions and does not meet the standard for any of the three types of preemption recognized in the courts.  The court further held that all defendants’ other arguments in favour if dismissing the case were insufficient.  The case is currently under appeal to the Colorado Supreme Court and is awaiting argument.

The final case we look at is City and County of Honolulu et al. v. Sunoco LP et al.  Although not filed until 2020, this case is the farthest along, procedurally.  The history of this case is similar to the Boulder, Colorado case.  After several rounds of argument, the state court agreed it had jurisdiction to hear the case and refused to dismiss it based on federal preemption and other grounds.  Unlike the case in Colorado, the Hawaii Supreme Court has also heard the case and agreed with the trial judge that the case may proceed to trial on the merits.  The Hawaii Supreme Court took care to show how the defendants’ arguments would leave plaintiffs with no recourse and engaged in what the court called backwards reasoning: “According to Defendants, federal common law is both dead and alive – it is dead in that the [Clean Air Act] has displaced it, but alive in that it still operates with enough force to preempt Plaintiffs’ state law claims.”

Defendants appealed the Honolulu case to the US Supreme Court, and the court is considering whether to grant review.  Unsurprisingly, this case has attracted a bevy of briefs in support of both sides.  The Supreme Court has also taken the somewhat unusual step of asking the US Solicitor General to provide her views on whether these state law tort cases should proceed and if the Supreme Court should intervene.  An unusual companion case is also before the Supreme Court, where Alabama and several other states have asked the Supreme Court to stop California from suing fossil fuel companies over emissions outside of California.

Turning now to insurance coverage decisions, on October 7th the Hawaii Supreme Court handed down a decision saying that AIG did not have to cover or defend its insured because the underlying GHG-related suits fell into the pollution exclusion.  The court said that the pollution exclusion covers “traditional pollution”, which they held to include greenhouse gasses.  The court rejected the insured’s argument that the pollution exclusion covered only hazardous waste, but the court declared that interpretation to be too narrow and that a product is a pollutant when it causes damage to the environment – which GHG emissions certainly do.

The court also addressed whether an “accident”, as part of the definition of an occurrence under the policy, included reckless conduct.  The court held that reckless conduct creates “expected or intended” injuries only when the harm was actually intended or was practically certain.  The court described it as holding that awareness of risk is not the same as awareness of certain harm and that insurance covers the former not the latter.

All of this leaves the current second wave of climate litigation in a very precarious state.  A Supreme Court decision could come at any time that either blesses or eliminates the efforts of state and local governments to recover damages from GHG emissions nationwide.  In the meantime, plaintiff lawyers are no doubt looking toward the third wave of climate litigation, perhaps as outlined in our climate scenarios, to attempt to hold GHG emitters responsible and to compensate society for the harms of the past century of emissions.