City of New York v. Exxon Mobil Corp.

The federal district court for the Southern District of New York granted New York City’s motion to remand to state court its action against fossil fuel industry defendants under the City’s Consumer Protection Law. The City alleges that the defendants violated the Consumer Protection Law by misleading consumers about their products’ impact on climate and falsely representing that they are “environmentally responsible companies developing innovative green technologies and products.” The court rejected the companies’ six grounds for removal. First, the court ruled that even if federal common law could serve as a basis for the complete preemption exception to the well-pleaded complaint rule in the absence of a federal statute, federal common law could not preempt the City’s “garden-variety false advertising claims,” which the court said did not implicate either federal interests in regulating environmental pollution or the U.S.’s foreign affairs. Second, the court found that the federal officer removal statute did not apply for the same reason that the Second Circuit concluded it did not apply in <a href="https://climatecasechart.com/case/state-v-exxon-mobil-corp/">Connecticut v. Exxon Mobil Corp.</a>: “there is no causal nexus between Defendants’ work for the federal government and Defendants’ allegedly false and misleading advertisements.” Third, the court rejected federal enclave jurisdiction either based on extraction, production, or sale of fossil fuels on federal enclaves (which was not the subject of the complaint) or based on the “ridiculous” theory that the defendants’ allegedly misleading advertisements reach federal enclaves. Fourth, the court found that the defendants did not meet their heavy burden of proving that Exxon Mobil Corporation was fraudulently joined and therefore could not establish diversity jurisdiction. Fifth, the court rejected the contention that the City’s suit could be removed under the Class Action Fairness Act (CAFA), finding that a Consumer Protection Law cause of action can be brought only by the City and therefore “bears absolutely no similarity to a class action.” Sixth, the court rejected the contention that the City’s claims necessarily implicated First Amendment elements and was removable pursuant to the Grable exception to the well-pleaded complaint rule. The court granted the City’s request for costs and fees regarding five of the six bases for removal: three grounds for removal that the Second Circuit rejected in Connecticut (complete preemption, federal officer, and Grable) and federal enclaves and CAFA, which the court described as “objectively absurd” arguments. The court did not award costs and fees in connection with the defendants’ diversity jurisdiction argument, finding that it was not unreasonable for the defendants to make that argument.

A New York Supreme Court dismissed New York City’s claims that fossil fuel companies violated the City’s Consumer Protection Law by misleading consumers about the climate change risks of their products and their commitments to renewable and alternative energy sources. Applying “an objective reasonable-consumer standard,” the court concluded the City failed to plausibly allege that the defendants’ statements regarding the environmental benefits of specific products were likely to mislead. The court was not persuaded by New York City’s theory that the companies’ statements were deceptive because they failed to disclose their products’ substantial greenhouse gas emissions. The court found that because the City also conceded that “the connection between fossil fuels and climate change is public information,” a reasonable consumer could not have been misled. The court also cited additional independent reasons for dismissal of these product greenwashing claims: (1) that the alleged greenwashing statements were taken out of context and (2) that they constituted “statements of aspiration, opinion, or puffery.” Regarding the City’s claim of “corporate greenwashing,” the court found that the companies’ statements regarding their investments in clean and alternative energy sources were not actionable under the Consumer Protection Law because they were not alleged to be “made in connection with the sale” of a consumer good. The court also held that allegations of violations based on statements made more than three years before City filed its complaint (i.e., statements made before April 22, 2018) were time-barred under New York law and pursuant to a July 2024 stipulation by the parties. The court rejected the companies’ arguments that they were not subject to the court’s jurisdiction, finding that the companies’ contacts with and activities in New York City were “purposeful” and “substantially related to the underlying claims of deceptive practices in NYC.” The court also declined to dismiss the City’s claims under New York State’s anti-SLAPP (Strategic Litigation Against Public Participation) law, citing its earlier decision denying American Petroleum Institute’s anti-SLAPP motion to dismiss. The court did not address the defendants’ First Amendment arguments.

A New York trial court dismissed New York City’s claim that American Petroleum Institute (API) engaged in deceptive trade practices in violation of New York City’s Consumer Protection Law. First, the court found that personal jurisdiction was not established because API did not acquiesce to general jurisdiction by registering to do business in New York and because the City did not allege that API’s alleged false and misleading greenwashing statements were targeted at New York State. Second, the court found that New York City did not sufficiently plead that API’s statements were “in connection with the sale or purchase of fossil fuel products” as required for liability under the Consumer Protection Law. The court rejected, however, API’s argument that New York’s anti-SLAPP (Strategic Lawsuit Against Public Participation) law barred the City’s claim. The court said it was “hard-pressed to find that the New York State Legislature intended for the anti-SLAPP law to apply to New York governmental agencies that are empowered to work on behalf of the citizens of New York.” The court also was persuaded that there was a presumption in New York law against allowing general statutory language to bind the State and its political subdivisions.

In a 2-1 decision, the Second Circuit Court of Appeals found that a district court did not abuse its discretion when it ordered fossil fuel companies to pay New York City for attorneys’ fees and costs related to the companies’ removal to federal court of the City’s suit alleging the companies violated the City’s Consumer Protection Law by misleading consumers about the climate change risks of their products and their commitments to renewable and alternative energy sources. The district court awarded the City fees for five of the six bases for removal asserted by the companies but only for work performed and costs incurred after the Second Circuit affirmed a remand order in September 2023 in a similar case brought by the State of Connecticut. The parties stipulated that the companies would pay the City $68,262.46 if the award of fees was affirmed on appeal. The Second Circuit first rejected Exxon’s contention that the district court erred by awarding fees and costs despite determining that one of the rejected bases for removal (diversity jurisdiction) was “objectively reasonable.” The Second Circuit found that in this case “unusual circumstances” were clearly present that justified assessment of fees and costs, including the rejection by eight circuit courts of appeals and at least 11 district courts of arguments opposing remand in similar cases around the country. The Second Circuit also found that the record supported application of the “unusual circumstances” exception even though the district court did not invoke it. The court found, moreover, that the record made clear that the district court believed the removal presented “unusual circumstances” even if it did not use that phrase. The Second Circuit also disagreed with the companies’ second argument that the district court should have considered the validity of their removal jurisdiction arguments based on the state of the law in 2021 when they initially removed the case and not in November 2023 when they renewed their opposition to remand. The Second Circuit also found that the extent of the award was reasonable, noting that the district court “exercised its discretion to award fees and costs in a measured way—that is, only with respect to fees associated with the objectively unreasonable grounds for removal and only for work required after the legal landscape had shifted significantly.”

The dissenting judge would have found that the combination of the two errors identified by the defendants required reversal or vacatur and remand of the fees and costs award. He wrote that “[w]hat is frivolous in this case is the claim, not its removal,” considering that the City’s case had been dismissed “under the indulgent New York pleading standard.” He conclude that “[i]n any event, a party that uses a local consumer protection law to combat global climate change should not be compensated on the premise that the other side is filing frivolous papers.”