What you need to know

The United States Supreme Court ruled that the Clean Air Act displaces federal common law claims of nuisance seeking to cap greenhouse gas emissions.

What you need to do

Companies should consider the impact of the Supreme Court’s ruling in assessing the potential liabilities of their policyholders relating to climate change.

Background

Several states, New York City and private land trusts sued carbon dioxide emitters under federal common law of nuisance, seeking to cap the defendants’ carbon dioxide emissions.  The plaintiffs asserted that public health, lands and infrastructure were at risk from climate change.  The US District Court for the Southern District of New York dismissed the claims as presenting non-justiciable political questions.  However, the Second Circuit reversed the dismissal, and permitted the suit to continue.  The Second Circuit concluded that the plaintiffs stated a claim under the federal common law of nuisance, and that the Clean Air Act did not displace federal common law.

The Supreme Court reversed, holding that the plaintiffs’ federal common law nuisance claims were displaced by the Clean Air Act, which authorizes the US Environmental Protection Agency to regulate carbon dioxide emissions.  See American Elec. Power Co., Inc. v. Connecticut, 564 U.S. __ (2011).

The Court’s Ruling

The Supreme Court held that:

  • 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.
  • The EPA may bring enforcement actions, the Clean Air Act permits private enforcement actions to enforce emissions limits, and the EPA is currently engaging in rulemaking to set standards for greenhouse gas emissions from fossil-fuel fired power plants.   The Court held:  “The Act itself thus 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.  We see no room for a parallel track.”
  • Federal common law nuisance claims were displaced even though the EPA had not yet actually exercised its regulatory authority.  The Court noted that “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” – even if the EPA were to decline to regulate carbon-dioxide emissions altogether.

Conclusion

The Supreme Court ruled that the Clean Air Act displaces federal common law claims of nuisance seeking to cap greenhouse gas emissions.  The decision forecloses federal common law nuisance lawsuits as a vehicle for imposing liability for climate change on policyholders, and in turn, on their insurers.