County of San Mateo v. Chevron Corp.

A federal district court in Missouri upheld a bankruptcy court’s order requiring the San Mateo and Marin Counties and the City of Imperial Beach (the plaintiffs) to dismiss their climate change lawsuits against the reorganized Peabody Energy Corporation (Peabody). Peabody, a coal company, filed for bankruptcy in 2016 and emerged from bankruptcy in April 2017. The plaintiffs filed their lawsuit against Peabody and other defendants in July 2017. The district court found that Peabody’s Chapter 11 bankruptcy plan discharged the plaintiffs’ claim under California’s public nuisance statute because not only equitable but also legal relief was available to the plaintiffs for an alleged breach of the statute. The district court also found that the bankruptcy court did not abuse its discretion in determining that the plaintiffs’ other claims were not exempt from discharge.

The federal district court for the Eastern District of Missouri denied a motion by the County of San Mateo, the City of Imperial Beach, and the County of Marin (the appellants) for a stay pending appeal of a bankruptcy court’s decision enjoining them from pursuing their climate change tort law action against Peabody Energy Corporation (Peabody). The bankruptcy concluded that the appellants’ claims, which were filed in June 2017, were discharged in Peabody’s bankruptcy, from which it emerged in April 2017. In the appeal to the district court, the district court found that the appellants had not established either that they were likely to succeed on the merits or that they would suffer irreparable injury absent a stay pending appeal.

Defendants Chevron Corporation and Chevron U.S.A., Inc. (together, Chevron) removed all three of the actions to the federal district court for the Northern District of California. Chevron said all other defendants joined in or had consented to the notice of removal. Chevron also said the defendants would be moving “at the appropriate time” to dismiss the plaintiffs’ claims. Chevron asserted that though the complaint nominally asserted state law claims, it should be heard in a federal forum because there was federal question jurisdiction. Citing the Ninth Circuit’s opinion in Native Village of Kivalina v. ExxonMobil Corp., Chevron argued that “[r]eflecting the uniquely federal interests posed by greenhouse gas claims like these,” the Ninth Circuit had recognized “that causes of action of the types asserted here are governed by federal common law, not state law.” Chevron also said removal was also authorized because the action “necessarily raises disputed and substantial federal questions that a federal forum may entertain without disturbing a congressionally approved balance of responsibilities between the federal and state judiciaries”; because the Clean Air Act and other federal statutes and the U.S. Constitution completely preempted the plaintiffs’ claims; because the action arose under the Outer Continental Shelf Lands Act (OCSLA); because a causal nexus existed between the alleged actions taken by the defendants pursuant to a federal officer’s directions and the plaintiffs’ claims and because the defendants could assert colorable federal defenses; because the claims were based on alleged injuries to or conduct on federal enclaves; and because the state law claims were related to bankruptcy cases.

Defendants Chevron Corporation and Chevron U.S.A., Inc. (together, Chevron) removed all three of the actions to the federal district court for the Northern District of California. Chevron said all other defendants joined in or had consented to the notice of removal. Chevron also said the defendants would be moving “at the appropriate time” to dismiss the plaintiffs’ claims. Chevron asserted that though the complaint nominally asserted state law claims, it should be heard in a federal forum because there was federal question jurisdiction. Citing the Ninth Circuit’s opinion in Native Village of Kivalina v. ExxonMobil Corp., Chevron argued that “[r]eflecting the uniquely federal interests posed by greenhouse gas claims like these,” the Ninth Circuit had recognized “that causes of action of the types asserted here are governed by federal common law, not state law.” Chevron also said removal was also authorized because the action “necessarily raises disputed and substantial federal questions that a federal forum may entertain without disturbing a congressionally approved balance of responsibilities between the federal and state judiciaries”; because the Clean Air Act and other federal statutes and the U.S. Constitution completely preempted the plaintiffs’ claims; because the action arose under the Outer Continental Shelf Lands Act (OCSLA); because a causal nexus existed between the alleged actions taken by the defendants pursuant to a federal officer’s directions and the plaintiffs’ claims and because the defendants could assert colorable federal defenses; because the claims were based on alleged injuries to or conduct on federal enclaves; and because the state law claims were related to bankruptcy cases.

The court issued an order clarifying the stay of remand was intended to remain in place until the mandate issued and that the companies could have requested an additional stay.

Three local governments in California (San Mateo County, Marin County, and the City of Imperial Beach) filed separate lawsuits in California Superior Court alleging that fossil fuel companies’ “production, promotion, marketing, and use of fossil fuel products, simultaneous concealment of the known hazards of those products, and their championing of anti-regulation and anti-science campaigns, actually and proximately caused” injuries to the plaintiffs, including more frequent and more severe flooding and sea level rise that jeopardized infrastructure, beaches, schools, and communities. Their complaints included claims for public nuisance, strict liability for failure to warn, strict liability for design defect, private nuisance, negligence, negligent failure to warn, and trespass. The relief sought by the local governments includes compensatory damages, abatement of the alleged nuisance, attorneys’ fees, punitive damages, and disgorgement of profits.

Three local governments in California (San Mateo County, Marin County, and the City of Imperial Beach) filed separate lawsuits in California Superior Court alleging that fossil fuel companies’ “production, promotion, marketing, and use of fossil fuel products, simultaneous concealment of the known hazards of those products, and their championing of anti-regulation and anti-science campaigns, actually and proximately caused” injuries to the plaintiffs, including more frequent and more severe flooding and sea level rise that jeopardized infrastructure, beaches, schools, and communities. Their complaints included claims for public nuisance, strict liability for failure to warn, strict liability for design defect, private nuisance, negligence, negligent failure to warn, and trespass. The relief sought by the local governments includes compensatory damages, abatement of the alleged nuisance, attorneys’ fees, punitive damages, and disgorgement of profits.

Three local governments in California (San Mateo County, Marin County, and the City of Imperial Beach) filed separate lawsuits in California Superior Court alleging that fossil fuel companies’ “production, promotion, marketing, and use of fossil fuel products, simultaneous concealment of the known hazards of those products, and their championing of anti-regulation and anti-science campaigns, actually and proximately caused” injuries to the plaintiffs, including more frequent and more severe flooding and sea level rise that jeopardized infrastructure, beaches, schools, and communities. Their complaints included claims for public nuisance, strict liability for failure to warn, strict liability for design defect, private nuisance, negligence, negligent failure to warn, and trespass. The relief sought by the local governments includes compensatory damages, abatement of the alleged nuisance, attorneys’ fees, punitive damages, and disgorgement of profits.

On April 24, 2023, the U.S. Supreme Court denied fossil fuel industry defendants’ petitions for writ of certiorari seeking review of decisions affirming remand orders that sent climate change cases brought by state and local governments back to state courts. The fossil fuel companies had asked the Court to consider whether there was federal jurisdiction over state-law claims seeking redress for injuries allegedly caused by the effects of interstate or transboundary greenhouse gas emissions on the global climate because federal common law necessarily governs such claims. Justice Alito did not participate in the consideration of or decision on the petitions.

Briefing was completed on February 14, 2023 for fossil fuel companies’ petition for writ of certiorari seeking review of the Ninth Circuit’s affirmance of remand orders in cases brought by the County of San Mateo and other California local governments. The case originally was distributed for the justices’ conference on March 3 but was rescheduled on February 27; a new date was not noted on the docket.

In December 2020, the fossil fuel companies filed a petition for writ of certiorari seeking review of the Ninth Circuit decision affirming remand orders in cases brought by the County of San Mateo and other California local governments. The companies requested that the petition be held pending the outcome of the Baltimore case since their petition raises the same jurisdictional issue.

The Eighth Circuit Court of Appeals upheld a district court judgment that affirmed a bankruptcy court’s determination that California municipalities’ climate change-based common law and statutory nuisance claims against the coal company Peabody Energy Corporation (Peabody) were discharged during Peabody’s bankruptcy proceeding. The Eighth Circuit found that the district court did not abuse its discretion in finding that the bankruptcy plan’s exemptions for governmental claims brought “under any applicable Environmental Law” or “under any … applicable police or regulatory law.” The Eighth Circuit also rejected the municipalities’ argument that their public-nuisance claim asserted on behalf of the people of California was not a claim under bankruptcy law because it only entitled them to equitable relief. In addition, the Eighth Circuit agreed with the bankruptcy court all of the municipalities’ claims were directed at Peabody’s pre-bankruptcy conduct and therefore did not survive the bankruptcy.

On June 30, 2022, the court granted the companies motion to stay issuance of the mandate pending the filing and disposition of a petition for writ of certiorari in the Supreme Court.

In a motion to stay the mandate, fossil fuel companies argued that the Ninth Circuit’s decision affirming the remand order had “deepened an entrenched circuit split and is in significant tension with longstanding Supreme Court precedent” related to “whether nominally state-law claims that, because of our constitutional structure, are necessarily and exclusively governed by federal law alone, are removable to federal court.” The companies further argued that the potential harm posed by remand of the six cases to four different state courts justified stay of the mandate.

On June 27, 2022, the Ninth Circuit Court of Appeals denied fossil fuel companies’ petition for rehearing en banc of the court’s decision affirming the remand to state court of climate change cases brought by six local governments in California. The panel voted unanimously to deny the petition, and no Ninth Circuit judge requested a vote on whether to rehear the matter en banc.

San Mateo and Marin Counties and the City of Imperial Beach appealed the order of a federal bankruptcy court in Missouri enjoining them from pursuing their climate change lawsuits against the coal company Peabody Energy Corporation.

A federal bankruptcy court in Missouri enjoined San Mateo and Marin Counties and the City of Imperial Beach (the plaintiffs) from pursuing their climate change lawsuits against Peabody Energy Corporation (Peabody). The plaintiffs alleged that Peabody (and a number of other fossil fuel companies) caused greenhouse gas emissions that resulted in sea level rise and damage to their property. Peabody, a coal company, filed for bankruptcy in April 2016 and emerged from bankruptcy under a plan that became effective on April 3, 2017. As an initial matter, the bankruptcy court said the plaintiffs had not established any basis for a claim because the complaints’ only Peabody-specific allegations were that Peabody had exported coal from terminals or ports in several California counties and was a member of organizations that plaintiffs said denied climate change. The court further concluded, however, that even assuming claims did exist, the claims were pre-bankruptcy petition claims that had been discharged under the bankruptcy plan because the plaintiffs had not filed proofs of claim. The court determined, moreover, that even if the plaintiffs’ claims could be construed as post-effective date claims (i.e., claims concerning conduct and harm after Peabody emerged from bankruptcy), the claims did not fall within the scope of a settlement with the U.S. Environmental Protection Agency (EPA) and other governmental entities to allow continued enforcement of environmental laws related to ongoing mining operations. The bankruptcy court also rejected the plaintiffs’ argument that one of their nuisance claims did not constitute a “Claim” or “Liability” pursuant to the Bankruptcy Code and Peabody’s bankruptcy plan and therefore could not be discharged and enjoined.

San Mateo and Marin Counties and the City of Imperial Beach (the plaintiffs) opposed Peabody Energy Corporation’s (Peabody) motion in federal bankruptcy court in Missouri to enjoin them from pursuing their public nuisance and tort law claims against Peabody. The plaintiffs filed lawsuits in California state court, since removed to federal court, alleging that Peabody and other defendants’ release of greenhouse gases into the atmosphere made them responsible for sea level rise and other climate change impacts affecting their communities. Peabody argued that the discharge and injunction contained in its plan for reorganization barred the claims. The plaintiffs argued that multiple carve-outs in the injunction allowed them to proceed with their claims against Peabody. They contended that they were governmental plaintiffs exercising their police powers, that their statutory public nuisance cause of action did not constitute a “claim” subject to the injunction, and that their claims fell within a carve-out for governmental claims brought under “Environmental Law.”