On June 20, 2011, the U.S. Supreme Court blocked an attempt to use federal common law to force the reduction of greenhouse gases from power plants, by holding that the Clean Air Act and the EPA action the Act authorizes displace any federal common law right to seek abatement of carbon dioxide emissions from fossil-fuel fired power plants.  American Elec. Power Co., Inc. v. Connecticut, ---- S.Ct. ----, 2011 WL 2437011 (June 20, 2011) ("AEP").  However, the Court did not decide whether state common law claims would also be barred, leaving open future litigation on such claims, and the Court did not tackle the merits of the significant issue of standing to sue.

The plaintiffs in AEP (eight states, three nonprofit land trusts and the City of New York) alleged that the defendant power companies' and Tennessee Valley Authority's emissions contributed to global warming, thereby creating a "substantial and unreasonable interference with public rights" in violation of the federal common law of interstate nuisance or, in the alternative, of state tort law. The plaintiffs sought injunctive relief requiring each defendant to cap its carbon dioxide emissions and then reduce them by a specified percentage each year for at least a decade. The trial court dismissed the cases as presenting nonjusticiable political questions. The Second Circuit reversed, finding that it had jurisdiction and holding that the plaintiffs had stated a claim under the federal common law of nuisance. The Second Circuit did not address the state tort law claims.

The Supreme Court split on the initial question of whether the federal courts had authority to adjudicate the case and therefore was forced to affirm the Second Circuit's exercise of jurisdiction without addressing its merits. The Court also did not address the merits of the question whether federal courts should create the controlling law or whether they should adopt existing state law as the federal rule of decision. Instead, the Court decided the case by unanimously holding that the federal common law claims were displaced by the Clean Air Act, which authorizes the EPA to regulate carbon dioxide emissions, thereby "speaking directly" to the emissions of carbon dioxide from the defendants' plants. "The Act itself provides a means to seek limits on emissions of carbon dioxide from domestic power plants - the same relief the plaintiffs seek by invoking federal common law. There is no room for a parallel track."  AEP at *1. 

The Court rejected the Second Circuit's holding that federal common law was not displaced until EPA actually exercised its regulatory authority by setting emissions standards for the defendants' plants.  "The critical point is that Congress delegated to EPA the decision whether and how to regulate carbon-dioxide emissions from power plants; the delegation is what displaces federal common law."  Id. at *10.  The Court added that the relevant question for displacement purposes is "'whether the field has been occupied, not whether it has been occupied in a particular manner.'"  Id. 

The Supreme Court noted that if EPA arbitrarily declined to set emissions limits for a particular pollutant or source of pollution, or if the plaintiffs were dissatisfied with EPA's rulemaking, they could seek review in the courts.  But the Court found that Congress' vesting of discretion in EPA to be wise.  "It is altogether fitting that Congress designated an expert agency, here, EPA, as best suited to serve as primary regulator of greenhouse gas emissions.  The expert agency is surely better equipped to do the job than individual district judges issuing ad hoc, case-by-case injunctions.  Federal judges lack the scientific, economic, and technological resources an agency can utilize in coping with issues of this order."  Id. at *11.  The Court explained that expert agencies such as EPA could commission scientific studies, could convene groups of experts for advice, and could issue rules for public notice and comment, whereas judges are confined to the evidence the parties present. 

Because the Second Circuit had not opined on the merits of the state law claims, the Supreme Court remanded the case for further proceedings.  However, the Court suggested that the plaintiffs' state common law claims might be preempted by the Clean Air Act, noting that "[n]one of the parties have briefed preemption or otherwise addressed the availability of a claim under state nuisance law."  Id. at *12. 

The legal impact of the AEP decision is potentially large, as it significantly curtails the ability to use federal common law to pursue greenhouse gas emission limitations. However, the decision's practical impact is less clear, as it does not affect the claimants' state common law claims. Whether such claims can survive preemption will be a matter of great interest. The Supreme Court unfortunately did not provide direction on the fundamental issues of whether federal common law should be the rule of decision and whether courts can properly exercise jurisdiction over claims of this nature.