For a second time in 12 days, a circuit court has held that a chapter 11 plan confirmed by an energy company doesn’t permit multinational oil companies to remove a climate-change lawsuit to federal court.

Like the Fourth Circuit’s decision on April 7 in Mayor and City Council of Baltimore v. BP P.L.C., 19-1644, 2022 BL 121937, 2022 US App Lexis 9409 (4th Cir. April 7, 2022), the Ninth Circuit ruled on April 19 that a confirmed chapter 11 plan did not bear a “close nexus” to a climate-change lawsuit and thereby justify removal from state court to federal district court. To read ABI’s report on Baltimore, click here.

The facts and the procedural posture in the Fourth and Ninth Circuits were similar. In 2017, six California cities and counties sued dozens of oil and gas companies in California state court, asserting only state-law claims. The plaintiffs alleged that the energy companies wrongfully promoted fossil fuels and concealed their known hazards. The plaintiffs are seeking damages for the costs to be thrust on municipalities as a result of climate warming and rising sea levels.

The energy companies removed the suit to federal court, asserting there was federal jurisdiction on six grounds, including federal question, federal enclave, federal officer removal and bankruptcy jurisdiction. The district court rejected all assertions of federal subject matter jurisdiction. The district court stayed its remand order pending appeal to the Ninth Circuit.

In 2020, the Ninth Circuit affirmed the district court’s ruling regarding federal officer removal. The appeals court dismissed the remainder of the appeal for lack of appellate jurisdiction.

Meanwhile, the energy companies had appealed Baltimore to the Supreme Court, where the high court reversed and held that 28 U.S.C. § 1447(d) permitted appellate review of all of the defendants’ asserted grounds for removal. In the California case, the Supreme Court reversed and remanded for consideration in light of Baltimore.

So, the question of remand was back in the Ninth Circuit’s lap to consider whether remand was proper despite all of the defendants’ theories about federal jurisdiction.

In her April 19 opinion, Circuit Judge Sandra S. Ikuta affirmed the district court’s remand. Because our readers are (mostly) bankruptcy nerds, we will only discuss her opinion regarding the bankruptcy removal statute, 28 U.S.C. § 1452(a). It allows a party to

remove any claim or cause of action in a civil action other than . . . a civil action brought by a governmental unit’s police or regulatory power, to the district court where such civil action is pending, if such district court has jurisdiction of such claim or cause of action under section 1334 of this title.

In turn, Section 1334(b) confers federal jurisdiction over civil proceedings arising under title 11 or arising in or related to a case under title 11.

The energy companies based removal on the chapter 11 plan of Texaco Inc., which was confirmed in 1988, and the plan confirmed in 2017 by Peabody Energy Corp., a coal company.

In deciding whether a lawsuit is “related to” a bankruptcy, Judge Ikuta said that the Ninth Circuit has “differentiated between bankruptcy cases that are pending before a plan has been confirmed and bankruptcy cases where the plan has been confirmed and the debtor discharged from bankruptcy.”

Consequently, Judge Ikuta said, “the same term ‘related to’ has a more limited meaning after a plan has been confirmed.” When a lawsuit arises after confirmation, she said, there is “related to” bankruptcy jurisdiction “only if there is ‘a close nexus to the bankruptcy plan or proceeding.’”

In turn, Judge Ikuta said there is a close nexus if the new case involves the interpretation, implementation, consummation, execution or administration of the confirmed plan.

The energy companies argued there was a close nexus to the Peabody bankruptcy because the confirmed plan would have discharged the California municipalities’ claims. In fact, by the time the district had ruled on the remand motion, the Peabody bankruptcy court had directed the plaintiffs to dismiss the suit against Peabody.

Where “the district court’s review of a plan involves merely the application of the plan’s plain or undisputed language, and does not require any resolution of disputes over the meaning of the plan’s terms,” Judge Ikuta said that “the review does not ‘depend upon resolution of a substantial question of bankruptcy law.’”

Judge Ikuta said that the energy defendants did not contend that the district court would be interpreting “disputed language” in the Peabody plan. “Accordingly,” she said, “the complaints before the district court were not ‘related to’ Peabody Energy’s bankruptcy case for purposes of § 1334(b), and the district court did not have removal jurisdiction over the complaints under § 1452 on that basis.”

The energy’s company reliance on the Texaco bankruptcy met the same fate. The energy companies did not argue that the district court would be interpreting “disputed language” in the Texaco plan, Judge Ikuta said.

“Moreover,” Judge Ikuta said, Texaco’s relationship to the California lawsuit was “attenuated” because Texaco was not named as a defendant. The district court, she said, would not “look at” the Texaco plan unless Texaco was held to be “a proper defendant” and the court decided that the municipalities’ claims arose before Texaco’s confirmation in 1988.

Seeing no “close nexus” to the Texaco plan, Judge Ikuta saw no bankruptcy removal jurisdiction under Section 1452.