D.C. Circuit Rejects Oil Company Attempt to Remove District's Climate Suit to Federal Court

Yet another federal circuit court of appeals rejects energy company removal claims.

Today, in District of Columbia v. Exxon Mobil Corp., a unanimous panel of the U.S. Court of Appeals for the D.C. Circuit rejected an attempt by oil company defendants to have a "greenwashing" lawsuit against them removed to federal court. Rejecting the oil companies' argument that the climate change-related claims should be heard in federal court, the D.C. Circuit instead concluded that the District of Columbia's district-law-based claims against oil companies could remain in district court where they were filed.

The unanimous opinion, written by Judge Neomi Rao, is quite clear and direct. It was joined by Judges Greg Katsas and Florence Pan.  Here is how it summarizes the decision:

The District of Columbia sued several energy companies in the Superior Court of the District of Columbia, alleging the companies violated District law by making material misstatements about their products' effects on climate change. The defendants removed the case to the federal district court, which determined it lacked jurisdiction and remanded.

We agree that remand was proper. Under the time honored well-pleaded complaint rule, it is the cause of action chosen by the plaintiff that governs whether a lawsuit may be filed in federal court. Here, the District did not invoke a federal cause of action but relied instead on the District of Columbia's consumer protection statute. The companies raise what amount to federal defenses, but that is not enough to establish federal jurisdiction over the District's claims.

The opinion makes clear that this is not a particularly close question, and aligns with that of every other federal circuit court to consider the question. The panel that heard the claim was about as favorable for the oil companies as they could have hoped for, and their claims still still went nowhere. The ruling further supports the arguments I made in my post last week explaining why these cases are not cert-worthy.

The District's lawsuit alleges that oil companies engaged in "greenwashing" by downplaying the contribution their products make to global climate change, leading consumers to purchase and consume more fossil fuels than they would have otherwise. I find this claim somewhat implausible, but that is irrelevant to the legal question at hand in this case, which is whether the District's claims necessarily raise federal questions and are preempted by federal common law. Yet as Judge Rao's opinion explains, these arguments do not work.

That oil companies would like to claim that the District cannot pursue climate change-related claims in the District's courts because such claims are preempted by the federal common law of interstate nuisance. The problem is that the federal common law governing interstate pollution has been completely displaced by federal environmental statutes, while state common law has not been, even when applied to interstate pollution. Thus, not only could the District's claims not have been pleaded as a federal common law action, there is no complete preemption to justify removal of these claims.

From Judge Rao's opinion for the court:

Although they recognize the Clean Air Act has displaced the federal common law of interstate air pollution, they maintain that this fact is irrelevant to the jurisdictional question of whether removal is proper. They contend that state law suits about interstate emissions are barred by federal common law as a jurisdictional matter, and therefore that the District's complaint must be understood as bringing a federal common law action. The jurisdictional question, they insist, is distinct from the merits determination of whether there is a remedy under federal common law.

The Companies' argument is foreclosed by the doctrinal underpinnings of federal common law and by numerous Supreme Court decisions. We can find no support for the suggestion that federal common law has the Schrödinger quality advanced by the Companies—where one does not know if it is alive or dead until the case is removed to federal court. The Court has repeatedly emphasized that when Congress "speak[s] directly to a question," that legislation displaces federal common law. Mobil Oil Corp. v. Higginbotham, 436 U.S. 618, 625 (1978). . . .

In the Clean Air Act, Congress displaced federal common law through comprehensive regulation, but it did not completely preempt state law, nor did it provide an independent basis for removal, as it has done in many other statutes. See, e.g., 28 U.S.C. §§ 1442, 1452, 1453 (allowing removal of suits against federal officers, claims related to bankruptcy, and class-action suits). It would be inconsistent with Congress's directives and the Supreme Court's decision in American Electric for this court to conclude that federal common law persists solely for the purpose of removing the District's CPPA claims to federal court.

When Congress legislates to displace federal common law, the statute governs the extent to which state law is preempted. Milwaukee II, 451 U.S. at 312–13 (explaining "[t]he enactment of a federal rule in an area of national concern, and the decision whether to displace state law in doing so, is generally made not by the federal judiciary, purposefully insulated from democratic pressures, but by the people through their elected representatives in Congress") (emphasis added). For example, the Supreme Court concluded that the Clean Water Act displaced the federal common law of interstate water pollution. See id. at 317. The Court later considered whether state common law pollution actions were preempted. In doing so, the Court assessed the question of preemption entirely as a matter of statutory interpretation, stating that the relevant question was "whether the [Clean Water] Act pre-empts [state] common law to the extent that [common] law may impose liability." Int'l Paper Co. v. Ouellette, 479 U.S. 481, 491 (1987). The Court repeatedly emphasized Congress's directives in the statute, rather than the preemptive effect of (any residual) federal common law. See id. at 491–500. And while the Court held the particular state-law claim at issue was preempted under the Clean Water Act, it held that other state-law claims were not. Id. at 497.

Ouellette is directly analogous to the question before us, and the Supreme Court has explicitly signaled that courts should apply the Ouellette reasoning to state-law claims involving interstate air pollution. In American Electric, after holding the Clean Air Act displaces the federal common law of interstate air pollution, the Court stated that "the availability vel non of a state lawsuit depends, inter alia, on the preemptive effect of the federal Act." 564 U.S. at 429 (citing Ouellette, 479 U.S. at 489, 491, 497). Whether the District's suit may go forward thus depends on the preemptive effect of the Clean Air Act, not on the preemptive effect of federal common law.

The Companies' argument—that the District's state-law claims implicating interstate air pollution arise under federal common law even following the Clean Air Act—simply cannot be squared with American Electric or Ouellette. Under the pollution would remain barred by federal common law. Yet Ouellette explicitly concluded that some state-law claims could proceed despite the Clean Water Act, confirming that the federal common law of interstate pollution was no longer a jurisdictional bar to state-law pollution claims. Ouellette, 479 U.S. at 497.

The panel also joined the other federal circuit courts to consider this question in rejecting other potential bases for removal, including the federal officer removal statute and the Outer Continental Shelf Lands Act.

As I have noted in prior posts, there are reasons to question some of the premises underlying these lawsuits, and there are strong policy arguments from addressing the issues raised in the district's suit at the federal level, and not in state court, but those are policy arguments that should be addressed to Congress, and not to federal courts.