On Remand from U.S. Supreme Court, First Circuit Upholds Original Decision to Remand Massive Fossil-Fuel Case to Rhode Island State Court

The First Circuit returns to State of Rhode Island v. Shell Oil Prods. Co., LLC, No. 19-1818 (1st Cir. May 24, 2020) – previously discussed on this blog on November 20, 2020 (No Appellate Jurisdiction Over Remand Order Under 28 U.S.C. § 1447(d) Except on Federal-Officer Ground, Holds First Circuit) – and addresses the unanswered grounds for removal jurisdiction, all of which the panel rejects.

As previously described, the case is a potential blockbuster challenge to the alleged deceptive practices of the fossil fuel industry that, according to the plaintiff, drove global warming and caused physical damage to the state:

“The case is a high-stakes one for the oil- and gas-company defendants, sued for property ‘damage caused by fossil fuels while those companies misled the public about their products’ true risks.’ (A huge list of prominent attorneys and amici are published in the opinion.) ‘Most Rhode Island cities and towns are below the floodplain and New England as a whole is losing ground to the ocean at a rate three to four times faster than the global average (and Rhode Island is hardly big enough to sacrifice so much of its land). Those rising sea levels have already increased erosion and the damage of storm surges along Rhode Island’s coast.’

The state sued in state court on solely state-law grounds and included in-state defendants, parrying the usual diversity and federal-question jurisdiction grounds for removal. Nevertheless, ‘[t]he oil companies … argued that any of a flock of specific jurisdiction statutes provided the necessary hook to keep the case in federal court, citing the federal-officer removal statute, the Outer Continental Shelf Lands Act, federal-enclave jurisdiction, the bankruptcy-removal statute, and admiralty jurisdiction.’”

The district court denied all the defendants’ grounds for removal jurisdiction and remanded to state court. In the first panel opinion, the First Circuit held owing to the appellate jurisdiction statue for reviewing remands, 28 U.S.C. § 1447(d), the only ground the panel could consider was federal-officer removal. Thereafter, in BP p.l.c. v. Mayor & City Council of Baltimore, 141 S. Ct. 1532 (2021), the Supreme Court interpreted that section to permit review of all potential grounds for removal. The Court also granted certiorari in this case, vacated and remanded for further review in light of the BP decision.

The panel (a quorum of two judges, Judge Torruella having died while the appeal was pending) reaffirms the remand order. It notes that in the past year, the Fourth, Ninth and Tenth Circuits had already denied similar appeals by the fossil-fuel defendants in other cases brought by counties and municipalities.

“The Energy Companies argue for removal based on federal-question jurisdiction, which they think exists because (as they tell it) Rhode Island artfully pleaded state claims that are at bottom governed by federal common law; completely preempted by federal law; necessarily dependent on substantial and disputed federal issues; and based on injuries or conduct on federal enclaves. They also argue for removal based on other jurisdictional and removal statutes, namely the OCSLA-jurisdiction [Outer Continental Shelf Lands Act] statute, the admiralty-jurisdiction statute, and the bankruptcy-removal statute.”

On the federal-common-law/artful-pleading argument, “the Energy Companies argue that even though Rhode Island’s complaint says nothing about federal common law, the claims alleged ‘are inherently federal’ and necessarily arise under federal law because they are ‘based on interstate and international emissions’ (excess capitalization removed) — i.e., uniquely federal interests, the theory goes, that must be governed by federal common law.” The panel holds, though, that no federal common law exists to cover this situation. “[T]he circumstances where the ‘judicial creation of a special federal rule’ ought to displace state law are ‘few and restricted,’” and a precondition for such preemption is that a “specific, concrete federal policy or interest” exists “with which state law directly conflicts.” Even if there were unique federal interests implicated by these claims, “the Energy Companies (despite being the burden-bearer on the removal issue) never adequately describe how ‘any significant conflict exist[s] between’ these ‘federal interests. and the state-law claims.”

The fossil fuel companies relied on Grable & Sons Metal Prods., Inc. v. Darue Eng’g & Mfg., 545 U.S. 308 (2005), which held that in a “very rare class” of cases, federal law might supplant state law as the rule of decision. These are cases that “(1) necessarily raise a federal issue that is (2) truly disputed and (3) substantial and that (4) a federal court can decide without upsetting the balance between state and federal judiciaries.” The panel holds that defendants don’t even clear hurdle (1): federal law is not “an essential element to the kind of classic state-law claims Rhode Island raises — claims, as we keep saying, that accuse the Energy Companies of contributing to climate change that (per the complaint) is wreaking havoc on the state’s infrastructure and coastal communities.”

The defendants also argued complete preemption, i.e., that the federal Clean Air Act entirely occupies the field. But “complete preemption requires that defendants show Congress clearly intended to supersede state authority,” and to the contrary, the Act has a savings clause that preserve state and local law. (The Supreme Court has found only three federal acts completely preemptive:  National Bank Act, the Employee Retirement Income Security Act, and the Labor Management Relations Act.)

The defendants then argued the “federal enclave” doctrine that torts occurring on federal lands fall within federal-court jurisdiction. “The problem for them, though, is that ‘[t]he doctrine of federal enclave jurisdiction generally requires that all pertinent events t[ake] place on a federal enclave’. . . . [a]nd some of the pertinent events — e.g., the Energy Companies’ deceptive marketing and Rhode Island’s injuries — occurred outside federal enclaves.”

The defendants invoked OCSLA jurisdiction for activities occurring “in connection with” mineral exploration and extraction on the Outer Continental Shelf. The panel holds that Cases finding OCSLA jurisdiction involve “either . . . a direct physical connection to an OCS operation (collision, death, personal injury, loss of wildlife, toxic exposure) or a contract or property dispute directly related to [that] operation . . . . [J]ust because the Energy Companies’ have ‘extensive OCS operations’ does not mean that Rhode Island’s claims satisfy OCSLA’s in-connection-with benchmark. If it did then any suit against fossil-fuel companies regarding any adverse impact linked to their products would trigger OCSLA federal jurisdiction[.]”

Finally, the panel rejects two other branches of federal jurisdiction, bankruptcy and admiralty, finding the connections simply too remote or strained.

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