Referencing a recent decision by the U.S. Court of Appeals for the Second Circuit allowing public-nuisance lawsuits to proceed against companies that produce greenhouse gases, former Vice President Al Gore and current White House climate change czar Carol Browner warned companies and lawmakers that courts are ready, willing and able to use their power to regulate greenhouse gases if Congress fails to act.

At a U.N. press conference Tuesday, Gore told journalists "[a]ll of the discussion has been about the President and the Congress. ... We have a third branch of government - the courts." At a separate briefing, Browner told reporters that "[t]he courts are starting to take control of this issue ... if they were to follow this out, they would be setting the standards." They are right of course, unless the Second Circuit Court of Appeals' decision in State of Connecticut v. American Electric Power Co. Inc., 05-5104-cv (2d Cir., Sept. 21, 2009) is overturned or modified.

In their decision, a two-judge panel of the Second Circuit ruled that five of the nation's largest power utilities (American Electric Power, The Southern Company, the Tennessee Valley Authority, XCEL Energy, and Cinergy) can be sued by a coalition of eight states, three land trusts, and the city of New York, for creating a federal common law global warming public nuisance by emitting greenhouse gas into the atmosphere. In their complaint the governmental entities seek to force the companies to abate "ongoing contributions to a public nuisance" and are asking the court to require the utilities to reduce their carbon emissions 3 percent per annum during the next 10 years.

A federal district court dismissed the lawsuit in 2005 as a dispute the court should not resolve. The district court held that the plaintiffs' claim raised "political questions" that could not be decided by federal courts because of a lack of standards for determining whether the defendants' conduct was unreasonable, and the overarching national and international policy implications of regulating greenhouse gases.

Specifically, the district court held that the plaintiffs' claims could not be adjudicated without the court first (1) determining the appropriate level at which to cap Defendants' carbon dioxide emissions;" (2) determining "the appropriate percentage reduction to impose upon Defendants;" (3) creating "a schedule to implement those reductions;" (4) determining and balancing "the implications of such relief on the U.S.' ongoing negotiations with other nations concerning global climate change;" (5) assessing and measuring "available alternative energy resources;" and (6) determining and balancing "the implications of such relief on the U.S.' energy sufficiency and thus its national security - all without an "initial policy determination" having been made by the elected branches." State of Connecticut v. American Elec. Power, 406 F. Supp. 2d 265 (S.D.N.Y. 2005) (see page 15 of the linked opinion). Disagreeing, the Second Circuit stated in part:

It is error to equate a political question with a political case. Given the checks and balances among the three branches of our government, the judiciary can no more usurp executive and legislative prerogatives than it can decline to decide matters within its jurisdiction simply because such matters may have political ramifications.

Thus, the Second Circuit court held that although the claims have political implications, they remain actionable in federal courts. Moreover, the court also held that all of the plaintiffs had standing to bring the suit and none of their claims are currently preempted by regulations or legislation.

Although the decision is lengthy and complex, and bears detailed study, the points below are especially significant.

The court concluded that the claims did not involve "political questions" that were unsuitable for judicial decisions. Even though the case plainly concerned damages caused by global warming, the court characterized the case as an "ordinary tort case" concerning emissions from six power plants. It concluded that the controversy involved nothing other than the localized activities described in the complaint - and held that the narrowed controversy entailed no overarching national or international issues. Since the case was therefore governed by '"well-settled'" principles of tort and public nuisance, federal courts were fully competent to resolve it. In so holding, the court trivialized the significance and scope of the controversy and belittled the ultimate impact of its holding - even though, in fact, its ruling may serve as a '"bellwether" determination' for many controversies yet to arise.

The court applied reduced standing requirements. Previously, the Supreme Court held in Massachusetts v. EPA that states have "special solicitude" standing to pursue relief when challenging environmental regulatory issues. In its decision, the Second Circuit held that municipalities and even private nonprofit entities have standing to sue, based largely on the impact of global warming on properties they allegedly own.Contrary to the Restatement of Torts, which the court professed to follow, the court did not require these injuries to be a "substantial interference." Instead, they need only be an "identifiable trifle" involving "recreational" or "aesthetic" concerns. Apparently, the court decided to graft the standing requirements for statutory citizen suits seeking to protect the public from recognized harms onto the common law tort of public nuisance. Under this reasoning, it is difficult to imagine persons who lack standing to file nuisance claims regarding greenhouse gas emissions.

The court also held that the federal public nuisance remedy was not "displaced" by the Clean Air Act or regulations issued pursuant to it. Quoting language from Illinois v. Milwaukee, 406 U.S. 91, 107 (1972), a 1972 Supreme Court opinion dealing with similar common law questions concerning pollution crossing state lines, the court stated:

It may happen that new federal laws and new federal regulations may in time pre-empt the field of federal common law of nuisance. But until that time comes to pass, federal courts will be empowered to appraise the equities of the suits alleging creation of a public nuisance.

Following this quote, the court inserted the words "by greenhouse gases" in lieu of "by water pollution." Until Congress or the EPA actually chooses to preempt federal common law, it remains available. Currently, the EPA has merely 'proposed' to regulate the area, and Congress is still deliberating whether to pass climate change legislation. In the absence of concrete action, the common law remedy remains viable.

This decision presents business interests with a "Hobson's choice" scenario. So long as industries resist regulations and legislation, they risk public nuisance liability in the courts. Delaying regulation does not confer any advantages. Indeed, it may be advantageous to accept comprehensive regulations and statutes that 'displace' private tort remedies. If, however, the regulations and legislation are not sufficiently comprehensive, industries may still face lawsuits to the extent that claims are not completely preempted. Hence, the entire process must be handled carefully.

The ultimate resolution of these complex controversies is difficult to project. It is ironic, however, that the phenomenon of public nuisance litigation, which so recently was 'on the ropes' after being rejected by the highest courts of several states, is now being reinvigorated by our federal judiciary. This fact was most vividly displayed when Connecticut Attorney General Richard Blumenthal, who personally argued the matter before the Second Circuit, told the press:

This ruling restoring our legal action breathes new life into our fight against greenhouse gas polluters and changes the legal landscape to impose responsibility where it belongs. Our legal fight is against power companies that emit a huge share of our nation's CO2 contamination, but it will set a precedent for all who threaten our planet with such pernicious pollution. This ruling vindicates our tenacious and tireless battle on behalf of a powerful coalition of states and environmental advocates - a battle that will now have its day in court.

The Second Circuit's decision is extraordinarily broad and entails major risks for all industries, not just the electric utilities. Any industry that generates greenhouse gas emissions is implicated, and that category includes virtually all businesses.

The Second Circuit panel's decision will almost certainly be challenged by a motion for rehearing en banc. Whatever the result of that proceeding may be, an application for .S. Supreme Court review seems inevitable. The panel's decision may also influence proceedings on other federal public nuisance cases involving greenhouse gas emissions that are currently pending in other federal courts in the Fourth, Fifth and Ninth Circuits.

If you are interested in learning more about the subject of this alert or any other Climate Change related matters, please contact Richard Faulk, John Gray any other members of the task force to discuss your particular concerns and needs in this challenging arena.