The moment we have been waiting for since 2004 (when the first climate change liability case was filed) finally arrived. The Supreme Court today rendered its opinion in American Electric Power Co., Inc.. v. Connecticut. As many predicted following oral argument, the use of the federal common law of nuisance to limit carbon dioxide emissions simply is not a viable theory because it has been displaced by the Clean Air Act and the EPA's steps to implement the Act.
For those who have not yet read the opinion, it is straightforward. Following the Supreme Court's 2007 decision in Massachusetts v. EPA, the EPA undertook to begin the regulation of carbon dioxide emissions. AEP at 2. Within the framework of the Clean Air Act it issued its "Endangerment Ruling" (76 Fed. Reg. 66496), and then adopted final rules regulating emissions from light-duty trucks, initiated a joint rulemaking covering medium and heavy-duty vehicles, began phasing in requirements for best available control technology for major greenhouse gas emitters, and commenced a rulemaking on emissions from fossil-fuel fired power plants. Id.at 2-3. That rule is due to be final in May 2012. Id.at 3. With those steps, and the comprehensive activities authorized under the Clean Air Act (id. at 10-11), the Court applied the simple test: "whether congressional legislation excludes the declaration of federal common law is simply whether the statute 'speak[s] directly to [the] question' at issue." Id.at 10. The Court held: "the Clean Air Act and the EPA actions it authorizes displace any federal common law right to seek abatement of carbon-dioxide emissions from fossil-fuel fired power plants." Id.
The Court responded to arguments that the EPA was only beginning to regulate but had not yet finished the process by emphasizing that it was the "delegation [that] displaces federal common law.". Id.at 12 (emphasis added). That is, even if the EPA chose not to regulate carbon dioxide emissions, "the federal courts would have no warrant to employ the federal common law of nuisance to upset the agency's expert determination." Id.
Some may recall that the political question doctrine was front and center in the decisions below. See id. at 5-6. Here, however, the Court mentions it only indirectly. In describing the "prescribed order of decisionmaking" (i.e., expert agencies and then federal judges), "the expert agency is surely better equipped to do the job than individual district judges issuing ad hoc, case-by-case injunctions." Id.at 14.
Notwithstanding the apparently simple rule and its application, we do not expect AEP to end climate change liability litigation. State nuisance law (which plaintiffs pleaded) remains. Although the Court offered no opinion on such a theory's efficacy, it did give a hint of where it might land: "the Clean Water Act does not preclude aggrieved individuals from bringing a 'nuisance claim pursuant to the law of the source state.'" Id. at 15-16 (citing International Paper Co. v. Ouellette, 479 U. S. 481 (1987)). Accordingly, the case was remanded to the Second Circuit.
Further, the significance of Justice Sotomayor's recusal (which we called in an earlier post) manifested itself. The Court split 4-4 on the issue of standing (which compelled it to hear the case on the merits). Id. at 6. This jurisdictional dispute could surface in the future when Justice Sotomayor is included in the full panel. She presumably would be in favor of broader standing, which is likely to support more claims of aggrieved climate change plaintiffs.
Last, the Court offered some helpful commentary for future carbon-dioxide liability insurance coverage cases. We have written often on how carbon dioxide should not fall within the meaning of pollution in a comprehensive general liability policy's pollution exclusion. The Court appears to agree. In discussing the scope of legislative activity needed to preempt federal common law, the Court stated: "Congress could hardly preemptively prohibit every discharge of carbon dioxide unless covered by a permit. After all, we each emit carbon dioxide merely by breathing."
Immediate effects of the decision will be filings by the defendants in the Kivalina v. ExxonMobil case before the Ninth Circuit for dismissal. Undoubtedly the justices deciding Steadfast Insurance Co. v. AES Corp. will read the decision; how it will affect them is hard to say. It should have no effect on the multiple climate change lawsuits orchestrated by Our Children's Trust. And over the long term, it likely will have the effect of forcing plaintiffs' to come up with new climate change liability theories. That will not be necessary, of course, if (as has been suggested) Congress acts to remove carbon dioxide from EPA's jurisdiction. In that case, we just might find AEP revived.