Two companies filed a lawsuit in state court in North Carolina asserting that they had incurred substantial liability to the California Air Resources Board (CARB), as well as other costs, due to misrepresentations by a defendant company (Heartwood Forestland Fund IV Limited Partnership (Heartwood)) regarding the amount of carbon sequestered by timberlands in West Virginia that one of the plaintiffs acquired from one of the defendants in 2017. The plaintiffs alleged that Heartwood “significantly overstated the carbon stocking” on the property when it sought carbon offsets, which CARB granted in 2017. The plaintiffs alleged that a carbon inventory conducted in conjunction with a 2023 “reverification”—which CARB requires to confirm carbon stocking—indicated that carbon stocks were “significantly below” modeled levels, resulting in a “reversal,” where the carbon stocking was below the project’s baseline. The plaintiffs alleged that the reversal would require them to purchase carbon offsets to comply with CARB requirements and to incur other costs, including legal and investigative costs and costs associated with the need to limit harvests at the property. The complaint sought a declaration that the defendants were obligated to indemnify the plaintiffs under a “Carbon Cooperation Agreement” that the plaintiffs and Heartwood entered into in conjunction with acquisition of the timberlands. The plaintiffs also requested damages commensurate with the indemnification rights. In the event the Carbon Cooperation Agreement is determined to be invalid and unenforceable, the complaint asserted an unjust enrichment claim.

Lawsuit seeking indemnification for costs allegedly incurred as a result of the defendants' overstating of the amount of carbon sequestered by timberlands in West Virginia in application for carbon offsets from California Air Resources Board.

LFF IV Timber Holding LLC v. Heartwood Forestland Fund IV, LLC

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Companies Sought Indemnification from Sellers Who Allegedly Misrepresented Property’s Carbon Inventory

Filed

United States of America

North Carolina

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An aim to achieve a quantifiable outcome within a given time-frame, set by an institution such as a national government.

Policy instruments are techniques or tools used by governing authorities to promote certain policies in order to achieve predetermined goals. Put simply, instruments are how a government tries to achieve its goals, with this taxonomy being focused on national policy instruments.

Risk is the potential for adverse consequences resulting from the dynamic interplay between (climate-related) hazards, exposure, and vulnerability of affected human or ecological systems.

Groups  of people who are adversely affected by climate change or the response to it

A set of principles, processes, and practices that build economic and political power to shift from an extractive economy to a regenerative economy.

Justice is the ethical and political framework that addresses fairness, including issues of responsibility, rights, and structural inequity.

Renewable energy means all forms of energy produced from renewable sources in a sustainable manner.

Fossil fuel is a generic term for non-renewable energy sources such as coal, fossil gas, and oil (including crude oil, and petroleum products), that can be used for electricity and heat generation. Fossil fuels are hydrocarbons formed from pressurised and heated organic material buried over millions of years.

Molecules in the atmosphere that play a key role in the greenhouse effect by trapping heat radiating from Earth’s surface.

Area of the economy in which actors engage in identical or related activities.

In human systems, the process of adjustment to actual or expected climate change and its effects, in order to moderate harm, increase resilience or exploit beneficial opportunities. In natural systems, the process of adjustment to actual climate change and its effects; human intervention may facilitate adjustment to expected climate change and its effects.

The management and allocation of funds, assets and investments to meet various objectives

A loan is a policy instrument where funds are provided to a borrower with the expectation of repaying the principal plus interest.

Tradable permits are market-based tools that grant permission for specific activities, frequently used to regulate emissions. These permits can be issued within a trading system to manage environmental impacts.

Zoning and spatial planning are both methods for guiding the distribution of people and activities in a space, and are regulatory restriction.

Either money or something of monetary value is transferred between two or more organisations, people or countries.

Actions or measures to adapt terrestrial systems to climate change.

A long-lived, colourless gas, chiefly emitted from fossil fuel combustion, deforestation and cement production.

Terrestrial means "of the earth" and relates to the risks to ecological system that includes all living organisms and their interactions within land-based environments, such as forests, grasslands, and deserts.

Oil is a combustible liquid fossil fuel composed mainly of hydrocarbons, occurring as crude oil and refined into petroleum products such as petrol, diesel and kerosene.

Fossil gas, commonly known as natural gas, is a fossil fuel consisting chiefly of methane with smaller amounts of other hydrocarbons and trace gases, found in underground deposits.

Coal is a combustible sedimentary rock formed from carbonised plant matter, rich in carbon and hydrocarbons, and occurring in several main types including hard coal and brown coal.

People with different national or cultural traditions from the dominant population

Social and cultural groups that share collective ancestral ties to the lands and natural resources where they live, occupy or from which they have been displaced

woman and genders outside of the gender binary

Any compulsory, unrequited payment to the government levied on corporations or individuals. This can be for environmental reasons, such as introducing a Carbon tax to set a price that emitters must pay for the greenhouse gases they emit.

Activities of industries that extract natural resources, such as mining, oil, and gas, for commercial use.

The activities of industries that transforms raw materials into finished goods through industrial processes.

This sector involves managing waste treatment, sanitation, pollution control and environmental cleanup.

Activities that involve planning, designing and building infrastructure, residential, and commercial structures.

This sector involves activities to move goods and people, alongside the storage of products.

Activities of government agencies and institutions that provide public services, enforce laws and manage public resources.

This sector includes firms and individuals offering specialised expertise in fields such as law, accounting, consulting, science and engineering.

Activities of businesses and institutions that provide financial services and products to individuals and organisations.

Activities that relate to the production of goods and services from forests.

Climate change can have a range of impacts on technological system. Extreme weather events can cause infrastructure failures like power outages or damage to roads and bridges, as well as the impacts from waste following natural disasters. Human activities also cause technological impacts, such as the risks posed by oil spillage and leaks.

Slow onset events evolve gradually from incremental changes over many years or from increased frequency or intensity of recurring events. As defined in the Cancun Adaptation Framework (2010), slow onset events include risks and impacts from rising temperatures, desertification, biodiversity loss, land and forest degradation, glacial retreat, ocean acidification, sea level rise, and salinization.

Companies Sought Indemnification from Sellers Who Allegedly Misrepresented Property’s Carbon Inventory

Policy instrument

Risk

Impacted group

Fossil fuel

Greenhouse gas

Economic sector

Adaptation/resilience

Finance