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June 23, 2011Client Alert

U.S. Supreme Court Decides American Electric Power Co., Inc. v. Connecticut

Holds That Federal Judges Cannot Set Greenhouse Gas Emissions Standards by Judicial Decree Under Federal Tort Law

On June 20, 2011, the U.S. Supreme Court ruled that several states, the city of New York and three nonprofit land trusts could not maintain federal common law public nuisance claims against five major electric power companies for their carbon dioxide emissions. American Electric Power Co., Inc. v. Connecticut, U.S., No. 10-74, June 20, 2011 (references are to the Slip op., publically available here). The plaintiffs sought injunctive relief requiring each power company to cap its emissions at a certain level (to have been determined by a federal judge) and then make further emissions reductions annually for at least a decade. The state of Wisconsin was one of the original plaintiffs in the suit but withdrew from the suit when Governor Walker took office.

 

In an 8-0 decision written by Justice Ginsburg (Justice Sotomayor took no part in the decision because she was on the Second Circuit panel who heard argument on the case), the Court held that the Clean Air Act, and the U.S. Environmental Protection Agency’s (“EPA’s”) actions authorized by the Clean Air Act, displace federal common-law claims concerning carbon dioxide emissions.

 

Background

The Southern District of New York dismissed the plaintiffs’ suit as presenting nonjusticiable political questions but the Second Circuit reversed and held that the suits were not barred by the political question doctrine and the plaintiffs had adequately alleged Article III standing. On the merits, the Second Circuit held the plaintiffs had stated a claim under the federal common law of nuisance, relying on prior Supreme Court’s decisions, including Illinois v. Milwaukee, 406 U.S. 91, 93 (1972) (Milwaukee I), that allowed States to maintain suits to abate pollution produced by other states or by out-of-state industry. The Court’s decision in Milwaukee I recognized that the state of Illinois had the right to bring suit in federal district court to abate the discharge of sewage into Lake Michigan. However, in Milwaukee v. Illinois, 451 U.S. 304, 316-19 (1981) (Milwaukee II), the Court held that amendments to the Clean Water Act displaced the federal common law nuisance claim recognized in Milwaukee I

 

In the Second Circuit, the plaintiffs argued that the Clean Air Act did not “displace” federal common law in this case because, at the time of the Second Circuit’s decision, EPA had not yet promulgated any rule that regulated greenhouse gases (“GHGs”). Slip op. 5. The Second Circuit found the lack of a final rule related to greenhouse gases to be dispositive and held that, without a final rule, the court could not determine whether the Clean Air Act’s regulation of GHGs would be displaced by federal common law. 

 

Supreme Court Split on Standing Issue

The Court, by a 4-4 division, affirmed the Second Circuit’s decision to exercise jurisdiction. Justice Ginsburg noted that “[f]our members of the Court would hold that at least some plaintiffs have Article III standing under Massachusetts v. EPA, 549 U.S. 497 (2007), which permitted a State to challenge EPA’s refusal to regulate greenhouse gas emissions” and that “no other threshold obstacle bars review.” Slip op. 6. However, “[f]our members of the Court, adhering to a dissenting opinion in Massachusetts, or regarding that decision as distinguishable, would hold that none of the plaintiffs have Article III standing.”  Id.

 

Clean Air Act Displaces Federal Common Law

According to the Court, the test for whether federal legislation excludes federal common law is “whether the statute ‘speaks directly to [the] question’ at issue.” Slip op. 10. The Court held that:

 

[T]he 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.  Massachusetts, 549 U.S. at 528-29, made plain that emissions of carbon dioxide qualify as air pollution subject to regulation under the Act. And we think it equally plain that the Act “speaks directly” to emissions of carbon dioxide from the defendants’ plants. Slip. Op. 10.

 

Justice Ginsburg outlined the Clean Air Act’s regulatory framework and enforcement mechanisms, and noted that the Clean Air Act already 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.” Slip op. 11. 

 

The Court rejected the plaintiffs’ argument that federal common law is not displaced until EPA actually exercises its regulatory authority. The Court relied on its holding in Milwaukee II, and emphasized that the “relevant question for purposes of displacement is ‘whether the field has been occupied, not whether it has been occupied in a particular manner.’” Slip op. 12. Justice Ginsburg made clear that “[t]he critical point is that Congress delegated to EPA the decision whether and how to regulate carbon-dioxide emission from power plants; the delegation is what displaces federal common law.” Id. The Court was quick to add that EPA’s judgment does not escape judicial review and, if the plaintiffs are dissatisfied with EPA’s rulemaking with regard to carbon-dioxide emissions, their recourse is to seek review in the U.S. Court of Appeals and, in the end, petition the Court for certiorari. Slip op. 12-13. Further, the Court reiterated that the “first decider under the Act is the expert administrative agency” and that EPA, as the expert agency, was better equipped to regulate GHG emissions than individual district court judges that lack the “scientific, economic, and technological resources” of an agency such as EPA.  Slip op. 13, 14.

 

Decision Does Not Explicitly Prohibit Lawsuits Based on State Law

Although the plaintiffs also sought relief under state law, the Second Circuit did not reach the state law claims because it held that federal common law governed. The Court noted that because it held that the Clean Air Act displaces federal common law, the availability of a state lawsuit depends, in part, on the preemptive effect of the Clean Air Act. Because the parties did not brief the preemption issue or address the availability of a claim under state nuisance law, the Court left the matter open for consideration on remand. 

 

Going Forward

The Court’s decision does not explicitly prohibit lawsuits based upon state legal theories such as those already filed in California, Minnesota and many other states. Because of this uncertainty, it is possible that interested plaintiffs will focus on bringing state law actions against emitters of GHGs. In Wisconsin, the non-profit organization “Kids v Global Warming” recently petitioned the Wisconsin Department of Natural Resources requesting that rules be promulgated to regulate GHG emissions in this state.  

 

State lawsuits will not be without significant hurdles, not the least of which is the federal preemption issue recognized in this Court’s decision. Nonetheless, the possibility of state actions being filed in multiple jurisdictions presents the possibility for divergent and inconsistent judicial precedents amongst and between the states. This will lead to further uncertainty and confusion amongst the regulated community.

 

Also, depending on the outcome of the numerous judicial challenges to EPA’s endangerment finding related to greenhouse gases, there is a possibility that the displacement effect of the Clean Air Act could be revisited. If a reviewing court were to conclude that the Clean Air Act does not authorize EPA to make such a finding, the interest in federal common law nuisance claims to control GHG emissions might be resurrected. 

 

Finally, the threshold issues of Article III standing and the political question doctrine defense remain unresolved and will undoubtedly be raised in subsequent actions.

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