April 03, 2020 Practice Points

Fourth Circuit Affirms Remand of Climate Change Lawsuit Back to Maryland State Court

The case is of public significance because many natural disasters are commonly attributed to climate change and few, if any, energy companies have been held responsible for the costs relating to climate change.

By David Y. Loh

On March 6, 2020, in Mayor and City Council of Baltimore v. BP P.L.C., et al., the U.S. Court of Appeals for the Fourth Circuit ruled that a climate-change lawsuit filed against major oil and gas companies was properly remanded back to state court. This case is of public significance because many natural disasters are commonly attributed to climate change and few, if any, energy companies have been held responsible for the costs relating to climate change. This appeal, however, is focused almost exclusively on a technical analysis of the federal removal statute, 28 U.S.C. Sec. 1441, et seq.

In July 2018, the mayor and City of Baltimore commenced suit in Maryland state court against every major oil and gas company doing business in the United States, 26 in all (referred to here as “defendants”), alleging that they are partly responsible for climate change. Baltimore specifically alleged the defendants were aware for the last 50 years that the use of fossil fuels substantially contributed to global warming and engaged in a concerted effort to conceal that knowledge by (a) discrediting publicly available scientific studies, (b) undermining public support for federal and state regulation and (c) promoting continued, even expanding, use of their fossil fuel products. Because of the defendants’ activities, Baltimore claims it has suffered various climate-related injuries, including increased sea levels and an increased severity and number of adverse weather events. Baltimore alleged only Maryland state law causes of actions, including public and private nuisance, strict liability for failure to warn and design defect, negligent design defect and failure to warn, trespass and breach of Maryland Consumer Protection Act.

Two of the defendants, Chevron Corporation and Chevron U.S.A. Inc., timely removed the case to the U.S. District Court for the District of Maryland. Chevron asserted eight grounds for removal. Keeping mind that under 28 U.S.C. Sec. 1441, “any civil action brought in State court of which the district courts of the United States have original jurisdiction” may be removed, Chevron argued the Baltimore’s claim arose under federal law because they

  1. were governed by federal common law, rather than state law;
  2. raised disputed and substantial issues of federal law under Grable & Sons Metal Products, Inc. v. Darue Engineering & Manufacturing, 545 U.S. 308 (2005);
  3. were completely preempted by the Clean Air Act, 42 U.S.C. Sec. 7401-7671q, as well as the foreign affairs doctrine; and
  4. were based on conduct or injuries that occurred on federal enclaves.

The remaining grounds relied on alternative jurisdiction and removal statutes, including:

  1. the jurisdictional grant in the Outer Continental Shelf Lands Act, 43 U.S.C. Sec. 1349(b);
  2. admiralty jurisdiction under 28 U.S.C. Sec. 1333;
  3. the bankruptcy removal statute, 28 U.S.C. Sec. 1452; and
  4. the federal removal statute, 28 U.S.C. Sec. 1442.

Baltimore moved to remand the case back to state court under 28 U.S.C. Sec. 1447(c). In granting Baltimore’s remand, the district court rejected each of the eight theories asserted in support of removal.

The defendants timely appealed and sought to stay remand to state court while this appeal was pending. The district court and Fourth Circuit denied this motion. The Supreme Court also denied the defendants’ application for a stay. See BP P.L.C. v. Mayor & City Council of Balt., 140 S.Ct. 449 (2019).

In considering the defendants’ appeal, the Fourth Circuit first considered the extent of its appellate jurisdiction by focusing on 28 U.S.C. Sec. 1447(d), which states

An order remanding a case to the State court from which it was removed is not reviewable on appeal or otherwise, except that an order remanding a case to the State court from which it was removed pursuant to section 1442 or 1443 of this title shall be reviewable by appeal or otherwise.

28 U.S.C. Sec. 1447(d); see also 28 U.S.C. Sec. 1442 (“Federal officers or agencies sued or prosecuted”); 28 U.S.C. Sec. 1443 (“Civil rights cases”). Therefore, based on the plain meaning of the removal statute, an appeals court can consider whether removal is appropriate only based on Sec. 1442 (federal officer) or Sec. 1443 (Civil rights).

The defendants argued that the Fourth Circuit had the power to review the other arguments for removal on the basis of Yamaha Motor Corp., U.S.A. v. Calhoun, 516 U.S. 199 (1996) and the Removal Clarification Act of 2011, but the Fourth Circuit quickly disposed of this argument by stating that neither Yamaha nor the Removal Clarification Act did not alter the scope of Sec. 1447(d).

Baltimore’s suit did not address any issues involving civil rights and defendants alleged removal on the basis of the federal removal statute, so the Fourth Circuit then addressed the defendants’ entitlement to removal on the basis of 28 U.S.C. Sec. 1442(a)(1), which authorizes the state-court actions filed against “any officer (or any person acting under that officer) of the United States or of any agency thereof, in an official or individual capacity, for or relating to any act under color of such office.” The overall purpose of this statute was to prevent states from interfering with federal operations by arresting or suing federal officials on the theory that they were violating state law. To remove under Sec. 1442(a)(1), a private defendant must show “(1) that it ‘act[ed] under’ a federal officer, (2) that it has a ‘ colorable federal defense,’ and (3) tha the charged conduct was carried out for [or] in relation to the asserted official authority.” Sawyer v. Foster Wheeler LLC, 860 F.3d 249, 254 (4th Cir. 2017) (citations omitted). In this case, the defendants alleged that Baltimore’s state-court action is removable “because the City bases liability on activities undertaken at the direction of the federal government.” BP P.L.C.,388 F.Supp.3d at 567.

In support of this argument, the defendants sought removal based on three contractual relations between certain defendants and the federal government: (1) fuel supply agreements between one defendant (Citgo) and the Navy Exchange Service Command from 1988 and 2012; (2) oil and gas leases administered by the Secretary of the Interior under the OSCLA; and (3) a 1944 unit agreement between the predecessor of another defendant (Chevron) and the U.S. Navy for the joint operation of a strategic petroleum reserve in California. After a thorough analysis, the Fourth Circuit concluded that none of these contractual relationships were enough to justify removal because they either failure to satisfy the acting-under prong (the first prong) or they are insufficiently related to Baltimore’s claims for the purposes of the nexus prong (the third prong).

For all the foregoing reasons, the Fourth Circuit decided to affirm the district court’s decision to remand the case to Maryland state court. Baltimore’s case against the defendants will now continue, and it will be interesting if they will have any success to the oil and gas industry.

David Y. Loh is a member with Cozen O'Connor in New York City, New York.

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