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Exxon, BP Lead Big Oil Victory in Supreme Court Climate Case (3)

May 17, 2021, 2:16 PMUpdated: May 17, 2021, 6:12 PM

Exxon Mobil Corp., BP Plc, and other energy giants triumphed Monday in an arcane but consequential U.S. Supreme Court case that gives the industry a chance to gain the upper hand in climate litigation nationwide.

The justices ruled 7-1 that a federal appeals court should have considered a full suite of industry arguments, rather than focusing on a narrow issue, in a tussle over whether a pioneering lawsuit from Baltimore belongs in state or federal court.

The decision will reverberate in the rapidly expanding world of climate liability, likely delaying more than a dozen other cases from state and local governments caught in similar procedural fights. Justice Samuel Alito, who has previously disclosed investments in energy companies, didn’t participate in the case.

The Supreme Court’s decision doesn’t address the merits of the climate claims, but it gives oil and gas companies a fresh chance to steer litigation toward the federal court system, which is viewed as a more favorable venue than state courts for industry defendants.

“Today’s decision from the Supreme Court addresses an important issue of federal appellate jurisdiction, and Chevron looks forward to showing in the next stage of the proceedings why this case belongs squarely in federal court,” Chevron Corp. spokesman Braden Reddall said in an email. An Exxon spokesman likewise reiterated that climate cases should proceed in federal court.

Sara Gross, chief of the affirmative litigation division in the Baltimore City Department of Law, said in a statement: “While this isn’t the outcome we wanted, we are fully confident that the City will prevail again when the remaining issues are considered by the Court of Appeals.” She added that federal judges across the country have rejected an array of industry arguments for federal jurisdiction.

Opinion Details

The cases are part of a nationwide legal movement to make fossil fuel companies pay for local costs associated with climate change, including rebuilding roads, responding to natural disasters, and strengthening infrastructure.

Baltimore filed its case in Maryland state court in 2018, and industry lawyers quickly maneuvered to litigation to federal court, setting off the procedural tug of war that ultimately landed before the justices. The Trump administration argued alongside the oil industry in the case on President Donald Trump’s final full day in office.

The Supreme Court ruled Monday that the U.S. Court of Appeals for the Fourth Circuit approached the case too narrowly when it reviewed only one of the industry’s argument’s for federal jurisdiction, rather than considering other points that were rejected by a federal district court.

The justices remanded the case to the Fourth Circuit for further consideration—which will allow industry lawyers to make broader arguments for blocking proceedings in state court.

The court declined the industry’s invitation to take the ruling a step further by declaring that federal court is the proper venue. “That task, however, does not implicate the circuit split that we took this case to resolve and we believe the wiser course is to leave these matters for the Fourth Circuit to resolve in the first instance,” Justice Neil Gorsuch wrote for the majority.

Justice Sonia Sotomayor was the sole dissenter in the case, arguing that the procedural decision could create gamesmanship in litigation by encouraging defendants to angle for access to appellate courts using “strained theories of removal.”

What’s Next

The ruling is expected to delay various state court proceedings against oil and gas companies, giving industry lawyers a new opportunity to pursue federal court jurisdiction in some cases.

“This is a victory in the sense it’s a significant delay, and these have already been delayed,” said Karen Sokol, a law professor at Loyola University New Orleans. “So that that’s a big victory for the defendants because that’s been their part of their strategy all along.”

Allies of Baltimore and other plaintiffs say the Supreme Court’s decision may shift the timeline but won’t derail efforts to hold the industry accountable for allegedly misleading the public about the leading role of fossil fuels in climate change.

“This narrow procedural ruling may ultimately have little impact on efforts by Baltimore and more than 20 other states and municipalities to hold oil and gas corporations accountable for causing and lying about climate change,” Richard Wiles, executive director of the Center for Climate Integrity, said in a statement.

The decision is also likely to result in earlier federal court consideration of the merits of the cases, said BakerHostetler lawyer Mark DeLaquil, who frequently represents industry clients. “Both plaintiffs and defendants would benefit from the certainty federal-court consideration would provide on the legal questions these suits raise,” he said.

Jurisdiction Debate

Baltimore’s case started three years ago. After the city launched its challenge in state court in 2018, industry lawyers raised a variety of arguments to push the suit to federal court, including that it falls under what’s called “federal officer jurisdiction” because U.S. officials directed and leased some of the defendants’ oil and gas production. A federal judge disagreed and remanded the case to state court.

Remand orders usually can’t be appealed, but U.S. law includes an exception when “federal officer” arguments are at play. Relying on that exception, industry lawyers took the case to the U.S. Court of Appeals for the Fourth Circuit.

The appeals court then focused its review on that federal officer issue and ultimately sided with Baltimore, keeping the case in state court. The oil companies say the Fourth Circuit should have looked beyond the federal officer question and considered all their additional arguments for federal jurisdiction.

The case will now return to the Fourth Circuit for a panel to consider those broader arguments.

The case is BP Plc v. Mayor & City Council of Baltimore, U.S., No. 19-1189, 5/17/21.

(Adds Exxon response in fifth paragraph, Sokol in 14th paragraph.)

To contact the reporter on this story: Ellen M. Gilmer in Washington at egilmer@bloomberglaw.com

To contact the editor responsible for this story: Seth Stern at sstern@bloomberglaw.com

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