Second Circuit Holds That Federal Common Law Defeats State-Law Tort Suit For Production and Sale of Fossil Fuels

In City of New York v. Chevron Corp., No. 18-2188 (2d Cir. Apr. 1, 2021), the Second Circuit affirms a decision dismissing, on federal common law grounds, a tort action brought by New York City against five major international oil companies (Chevron, ConocoPhillips, ExxonMobil, Royal Dutch Shell, and BP, collectively “Producers”) for the harms caused by global warming.

“In 2018, the City sued the Producers in federal court, asserting causes of action for (1) public nuisance, (2) private nuisance, and (3) trespass under New York law stemming from the Producers’ production, promotion, and sale of fossil fuels.” The city alleged that “New York City ‘is exceptionally vulnerable’ to the effects of global warming, such as rising sea levels, because of its ‘520-mile coastline.’” The city has invested billions of dollars to bolster seawalls and improve water infrastructure. In its lawsuit, “the City asserts that its taxpayers should not have to shoulder the burden of financing the City’s preparations to mitigate the effects of global warming” and that because the Producers “are primarily responsible for global warming [they] should bear the brunt of these costs.”

The Second Circuit holds, though, that a suit against international climate change cannot lie under state common law. While Erie R.R. Co. v. Tompkins, 304 U.S. 64 (1938), wiped out free-ranging development of federal common law, federal courts continue to recognize specialized categories of common law in a “few and restricted” enclaves. These categories include “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” (quoting Tex. Indus., Inc. v. Radcliff Materials, Inc., 451 U.S. 630, 640 (1981)).

The case against climate change falls under federal common law, governed by a matrix of national and international laws. “For over a century, a mostly unbroken string of cases has applied federal law to disputes involving interstate air or water pollution …. This is because such quarrels often implicate two federal interests that are incompatible with the application of state law: (i) the ‘overriding . . . need for a uniform rule of decision’ on matters influencing national energy and environmental policy, and (ii) ‘basic interests of federalism’” …. Such a sprawling case is simply beyond the limits of state law.”

The effect of the lawsuit, holds the panel, would be to allow a judicial decree to set emissions standards for the world. “[W]hile the City is not expressly seeking to impose a standard of care or emission restrictions on the Producers, the goal of its lawsuit is perhaps even more ambitious: to effectively impose strict liability for the damages caused by fossil fuel emissions no matter where in the world those emissions were released (or who released them). If the Producers want to avoid all liability, then their only solution would be to cease global production altogether.”

The panel then holds that the federal common law in this field is entirely displaced by the federal Clean Air Act. “[I]t it is beyond cavil that the Clean Air Act displaced federal common law nuisance suits seeking to abate domestic transboundary emissions of greenhouse gases …. [W]hether styled as an action for injunctive relief against the Producers to stop them from producing fossil fuels, or an action for damages that would have the same practical effect, the City’s claims are clearly barred by the Clean Air Act.”

Moreover, the panel rejects New York City’s argument that state law could survive a “statutory preemption analysis” against the Clean Air Act. The “Act’s expansive set of enforcement mechanisms” gave little room for application of the city’s state-law claims. While the Act includes a savings clause to “create and enforce their own emissions standards applicable to in-state polluters,” such authorization only extends to applying the law of the pollution’s source state. Here, the City sought to apply New York law to emissions “emanating simultaneously from all 50 states and the nations of the world.”

Finally, as to international emissions (not covered by the Clean Air Act), federal common law would not authorize an extraterritorial claim. The panel notes “broad concerns over separation of powers, intrusion on the political branches’ monopoly over foreign policy, and judicial caution with respect to creating (or extending) federal common law causes of action.”

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