Ninth Circuit Denies Energy Giants’ Request to Revisit Dismissal of Climate Change Suits

The Ninth Circuit breathed new life into a 2017 case by the City of Oakland and the City and County of San Francisco (the Cities) against five of the world’s largest energy companies on Tuesday. The novel lawsuit accused the companies of causing a public nuisance in the form of “global warming-induced sea-level rise,” due to their “production and promotion of massive quantities of fossil fuels.” The panel, consisting of Judges Sandra S. Ikuta, Morgan Christen, and Kenneth Kiyul Lee, decided in an amended order that the cases must be sent back to the district court to determine whether there is an alternative basis for subject-matter jurisdiction.

The suit originated when the city attorneys filed complaints in California state court asserting a California public nuisance claim against energy giants BP plc., Chevron Corporation, ConocoPhillips, Exxon Mobil Corporation, and Royal Dutch Shell plc. Sea level rise, the Cities claimed, has and will continue to cause “coastal flooding of low-lying shorelines, increased shoreline erosion, salt-water impacts on the Cities’ wastewater treatment systems, and interference with stormwater infrastructure.” The plaintiffs contended that they unfairly shoulder the costs of mitigation and expect damage to worsen over the next eight decades.

Accordingly, the Cities sought an order of abatement requiring the defendants to fund a “‘climate change adaptation program’ for Oakland and San Francisco ‘consisting of the building of sea walls, raising the elevation of low-lying property and buildings and building such other infrastructure as is necessary for the Cities to adapt to climate change.’”

The defendants removed the complaints to federal court on subject-matter jurisdiction grounds. Subsequently, the federal court denied the Cities’ motion for a remand to state court, finding that it had federal question jurisdiction. The Cities subsequently amended their complaints to include federal nuisance claims.

In June 2018, the district court dismissed the amended complaints for failure to state a claim, determining “that it would be inappropriate to extend federal common law to provide relief because ‘federal courts should exercise great caution before fashioning federal common law in areas touching on foreign affairs,’” and the Cities’ claims “‘implicate[d] the interests of countless governments, both foreign and domestic.’” On appeal and on procedural grounds, the Ninth Circuit reversed.

After wading through the annals of the subject matter jurisdiction statute, its intent, and exceptions thereto, the Ninth Circuit held that “at the time the district court dismissed the cities’ complaints, there was subject-matter jurisdiction,” but, “it could not affirm the district court’s dismissals [because] there was no subject-matter jurisdiction at the time of removal [to federal court].”

In deciding to remand, the panel first determined that the Cities did not waive their opportunity to make an argument in favor of remand by amending their complaints. Next, the panel rejected the defendants’ argument that “any impropriety with respect to removal could be excused by considerations of finality, efficiency, and economy,” because in this case, these factors were “far from ‘overwhelming.’”

The panel cited a Fifth Circuit standard, that a “dismissal for failure to state a claim, unlike a grant of summary judgment or judgment after trial, is generally insufficient to forestall an otherwise proper remand.” The judges implemented this principle, and in turn, found that the appropriate course was to remand the cases to the district court to consider if there is an alternative jurisdictional basis.

Oakland and San Francisco are represented by lawyers from their city attorney offices, Altshuler Berzon LLP, and Sher Edling LLP.

The energy companies are represented by Arnold & Porter, Gibson Dunn & Crutcher LLP, Paul Weiss Rifkind, Susman Godfrey, Wharton & Garrison LLP, King & Spalding, Bartlit Beck Herman Palenchar & Scott, O’Melveny & Myers, and Kellogg, Hansen, Todd, Figel & Frederick, among others.