In a decision firmly shutting the federal floodgates, the U.S. Supreme Court decided that federal common law nuisance claims cannot be brought against utilities for their greenhouse gas emissions. In the closely-watched case American Electric Power v. Connecticut, the Court ruled 8-0 that the federal Clean Air Act “displaces” the federal common law cause of action, which to date has been one of the primary avenues for tort claims arising out of greenhouse gas emissions.

In 2004, eight states, New York City and three land trusts brought suit against five electric utilities, including the government operated Tennessee Valley Authority. The plaintiffs alleged that the utilities were the five largest emitters of carbon dioxide in the United States and that the utilities’ emissions amounted to a public nuisance under federal common law by contributing to global warming. The plaintiffs sought an injunction requiring each defendant to abate its contribution to global warming through an initial cap, followed by annual emission reduction.  

The U.S. District Court for the Southern District of New York dismissed in the complaint in 2005, holding that the case presented a “political question” more appropriately handled by the elected branches of government. Connecticut v. American Electric Power Co., 406 F.Supp.2d 265, 288 (S.D.N.Y. 2005). In 2009, the Second U.S. Circuit Court of Appeals reversed, holding in a lengthy opinion that courts have long adjudicated nuisance claims involving pollution, and further holding that the plaintiffs had “standing” to pursue these particular claims. Connecticut v. American Electric Power Co., 582 F.3d 309, 350-71 (2d Cir. 2009).  

Justice Ruth Bader Ginsburg, writing for the Supreme Court, held that the Clean Air Act “speaks directly” to the question at issue. Because carbon dioxide is a “pollutant” under the Clean Air Act (as determined by the Court’s 2007 decision Massachusetts v. EPA), EPA has the power to set emissions limits for carbon dioxide after making certain findings. According to the Court, this delegation of the power to regulate is sufficient to “displace” the federal common law cause of action – even though actual EPA regulation of greenhouse gas emissions by utilities is not expected until mid-2012 at the earliest.  

“Displacement” of federal common law by federal statute is akin to “preemption-lite.” Quoting its historic opinion in Milwaukee v. Illinois, 451 U.S. 204 (1981) (determining that the 1977 Clean Water Act amendments similarly displaced federal common law in the water arena), the Court explained that displacement “does not require the ‘same sort of evidence of a clear and manifest [congressional] purpose’ demanded for preemption of state law.” In its displacement analysis, the Court saw “no room for a parallel track” of ad hoc emissions regulation through individual federal nuisance claims.

Expressing concern that nuisance claims adjudicated by ill-equipped federal judges would lead to piecemeal decisions and inconsistent remedies, the Court noted that the Clean Air Act provides for a comprehensive regulatory scheme administered by an expert agency. The Court emphasized, however, that EPA’s future regulatory actions remain subject to judicial review under the well-established “arbitrary, capricious, abuse of discretion, or otherwise not in accordance with law” standard.  

Interestingly, the Court was evenly split on whether the plaintiffs had Article III standing. Four justices believed that the plaintiffs had standing under Massachusetts v. EPA, while four were of the view that the plaintiffs lacked standing. The latter four justices followed the dissent in Massachusetts v. EPA or distinguished that case. Because the Court was equally divided, the practical effect was to affirm the Second Circuit’s holding that the plaintiffs had standing.  

Justice Sonia Sotomayor recused herself because she had heard oral arguments in Connecticut v. American Electric Power Co. as a member of the Second Circuit. Ironically, she did not actually participate in the Second Circuit decision because she was elevated to the Supreme Court between the argument and issuance of the decision.  

Of particular note, the Supreme Court concluded its opinion by observing that the question of whether nuisance claims based on state common law could proceed was not decided below. The precedent cited was International Paper Co. v. Ouellette, 479 U.S. 481 (1987), a case holding that the Clean Water Act does not preclude environmental plaintiffs from pursuing state common law claims in water pollution matters. Whether that pointed citation was foreshadowing or not, many of the same considerations that led the Supreme Court to its displacement decision here – such as piecemeal decisionmaking and the judiciary’s lack of expert agency resources – likely will play a role in any preemption analysis regarding state common law claims.  

Finally, in addition to potential state common law claims and challenges to EPA’s administrative process, actions under NEPA remain a threat for many significant projects involving greenhouse gas emissions, particularly challenges to the sufficiency of environmental assessments and impact statements that fail to adequately consider climate change. So, while the Supreme Court has closed the courthouse door on federal common law nuisance claims attacking greenhouse gas emissions, the potential for continued climate change litigation remains very real and present – at least for now.