The Fourth Circuit employed colorful language in holding that the confirmation of the chapter 11 plan by Texaco Inc. 34 years ago provided no basis for removing an environmental lawsuit from state court to federal court.
The litigation has already been to the U.S. Supreme Court once and was back in the Fourth Circuit after remand. The plaintiff is the City of Baltimore, having brought suit in state court by asserting only state law claims against 26 multinational oil and gas companies.
The city alleged that the oil companies contributed to greenhouse gas pollution and deceived customers when they knew for almost 50 years about the link between fossil fuels and climate change. As Circuit Judge Henry F. Floyd said in his April 7 opinion for the Fourth Circuit, the city was seeking “to shift the costs of climate-change injuries onto” the oil companies.
The defendants removed the suit to federal district court based on eight theories of federal jurisdiction. Originally, the district court remanded the suit to state court, and the Fourth Circuit affirmed. The Supreme Court reversed and remanded, for reasons of little significance to bankruptcy nerds.
After remand, the district court remanded the suit a second time to state court, prompting the defendants’ second appeal to the Fourth Circuit.
Although the “impacts of climate change undoubt[ed]ly have local, national, and international ramifications,” Judge Floyd said, “those consequences do not necessarily confer jurisdiction upon federal courts carte blanche.”
Judge Floyd knocked down all of the asserted grounds for federal jurisdiction, principally because the city’s suit was based only on Maryland law and there is no governing federal common law. Among other things, he said that product liability has traditionally been in the realm of state law. He said that the oil companies “have failed to show that federal common law truly controls this dispute involving their fossil-fuel products and misinformation campaign.”
Judge Floyd also rejected the idea of federal jurisdiction based on the federal Clean Air Act and the concept of “federal officer removal” under 28 U.S.C. § 1442.
For ABI members, the opinion is noteworthy for its treatment of 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.
Once a chapter 11 case has been confirmed, Judge Floyd said that the Fourth Circuit limits bankruptcy jurisdiction to disputes having a “close nexus” to the implementation, consummation, execution or administration of the plan.
For the defendants, the jurisdictional hook was the chapter 11 plan confirmed in 1988 by Texaco Inc., a subsidiary of one of the defendants.
“First,” Judge Floyd said, “we find it hard to fathom how Baltimore’s suit, filed thirty years later, has any ‘close nexus’ to Texaco’s confirmed plan because it is so far removed from the initial bankruptcy confirmation.”
“Secondly,” Judge Floyd said, “Baltimore’s claims are completely independent and distinct from Texaco’s bankruptcy plan, there is no indication that the bankruptcy plan involved climate change, and Defendants do not explain how a judgment more than thirty years later could impact Texaco’s estate.”
In short, Judge Floyd held that “Baltimore’s suit is too far removed from Texaco’s 1988 confirmed plan for us to find a ‘close nexus’ warranting bankruptcy jurisdiction.”
But Judge Floyd found a second ground for remand under Section 1452(a). It disallows the removal of a governmental unit’s enforcement of police or regulatory powers, and the defendants had sought to remove a suit exercising the city’s police or regulatory powers.
Baltimore indisputably is a governmental unit, and Judge Floyd had “no doubt this suit is a valid exercise of Baltimore’s police power” because the city was seeking “to protect its citizens, property, and resources by suing Defendants, all of whom are private parties, for the detrimental impacts of their fossil-fuel products.”
Naturally, Judge Floyd took “no view” on whether the city would prevail on its claims under state law. However, he affirmed the district court and said, “These claims do not belong in federal court.”
The Fourth Circuit employed colorful language in holding that the confirmation of the chapter 11 plan by Texaco Inc. 34 years ago provided no basis for removing an environmental lawsuit from state court to federal court.
The litigation has already been to the U.S. Supreme Court once and was back in the Fourth Circuit after remand. The plaintiff is the City of Baltimore, having brought suit in state court by asserting only state law claims against 26 multinational oil and gas companies.
The city alleged that the oil companies contributed to greenhouse gas pollution and deceived customers when they knew for almost 50 years about the link between fossil fuels and climate change. As Circuit Judge Henry F. Floyd said in his April 7 opinion for the Fourth Circuit, the city was seeking “to shift the costs of climate-change injuries onto” the oil companies.