Emerging Issues: Climate Change Litigation

 

CLIMATE CHANGE LITIGATION:

WHEN AND WHERE WILL THE NEXT STORM HIT

  

 

By Christopher R. Reeves, Esq.

The Finley Firm, P.C.

 

Published in ABA’s Litigation Section Newsletter – May 2008

 

© 2008 Christopher R. Reeves

 

Introduction

 

According to the November 2007 Synthesis Report issued by the United Nations Intergovenmental Panel on Climate Change, there is little doubt that climate change both exists and is caused by human activities.  The Intergovernmental Panel on Climate Change [IPCC], Fourth Assessment Report, Climate Change 2007: Climate Change Impacts: Summary for Policymakers 5 (Abdelkader Allali, et al. eds., 2007).  Eleven of the past twelve years are the warmest years on record.  According to the IPCC, the planet has warmed by an estimated 0.76°C (1.3°F) since the mid-1800s, with warming likely over every continent except Antarctica.  IPCC, supra note 71, at 5. 5, 11.  It also estimates global average temperatures will rise an additional 1.1°C to 6.4°C by the year 2100.  IPCC, supra note 71, at 13.

 

This growing consensus and foundation of scientific support for global warming is creating fertile ground for climate change litigation.  Legal theories of climate change and global warming litigation are growing mainstream since the days of early environmental law.  This article provides a brief overview of the development of climate change litigation, highlighting some of the more significant theories and cases to date.  It also discusses the impact this litigation is having on the insurance industry and insureds sitting in the shadow of this growing legal concern.

 

Relevant Regulatory Framework

 

The traditional basis for climate change litigation is federal statutes and their corresponding state statutes.  The main statute is the Clean Air Act (CAA).  42 U.S.C. 7401, et. seq.  Under Section 202(a)(1) of the CAA, “The [EPA] Administrator shall by regulation prescribe (and from time to time revise) in accordance with the provisions of this section, standards applicable to the emission of any air pollutant from any class or classes of new motor vehicles or new motor vehicle engines, which in his judgment cause, or contribute to, air pollution which may reasonably be anticipated to endanger public health or welfare . . . .”  The CAA was enacted to address air pollution and smog.  It defines “air pollutant” to include “any air pollution agent or combination of such agents, including any physical, chemical, biological, radioactive . . . substance or matter which is emitted into or otherwise enters the ambient air.”  § 7602(g).  “Welfare” is also defined broadly: among other things, it includes “effects on . . . weather . . . and climate.”  § 7602(h).  Thus, greenhouse gases are arguably covered by the CAA.  Thus, groups and governments can use the CAA to push for regulatory change and regulation of greenhouse gas emitters.

Another federal statute that is often implemented in this arena is the National Environmental Policy Act of 1969 (NEPA).  42 U.S.C. 4321, et. seq.  NEPA requires that an Environmental Impact Statement (EIS) be conducted to determine environmental impacts of the proposed action; unavoidable adverse environmental impacts; alternatives, including no action; the relationship between short term uses of the environment and maintenance of long-term ecological productivity; irreversible and irretrievable commitments of resources; and secondary/cumulative effects of implementing the proposed action.

Under the implementing rules, an Environmental Assessment (EA) must be conducted to determine whether the proposed project requires an EIS.  Like an EIS, an EA considers the impacts of the proposed action and alternatives.  It may conclude with a recommendation to prepare an EIS or it may conclude with a recommendation to prepare a Finding of No Significant Impact (FONSI).  Both documents are written with the assistance of a federal agency.  Through these reports, feasible alternatives are explored and the likely environmental consequences of those actions are determined.  Where a permit is granted without performance of an EA or EIS, private groups and governments can move to stop issuance of the permit.

 

A Global Phenomenon With Local Legal Consequences

 

The clearest indication to date that Courts are willing to address the global phenomenon of climate change at the local level comes from the recent case of Massachusetts v. EPA, 127 S. Ct. 1438, 1447 (U.S. 2007).  Challenged for refusing to regulate CO2 emissions, the U.S. Environmental Protection Agency (EPA) suggested it lacked the authority or obligation to regulate such greenhouse gases.  68 Fed. Reg. 52929-52931.  Citing Congress’ inaction to enact specific climate change legislation and the CAA itself, EPA suggested CO2 is not considered an “air pollutant” sufficient to mandate its regulation.  Massachusetts v. EPA, 127 S. Ct. at 1450.

 

The U.S. Supreme Court disagreed.  First it noted, “[t]he harms associated with climate change are serious and well recognized.  Indeed, the NRC Report itself, which EPA regards as an ‘objective and independent assessment of the relevant science,’ 68 Fed. Reg. 52930, identifies a number of environmental changes that have already inflicted significant harms, including ‘the global retreat of mountain glaciers, reduction in snow-cover extent, the earlier spring melting of rivers and lakes, [and] the accelerated rate of rise of sea levels during the 20th century relative to the past few thousand years . . . .’” Massachusetts v. EPA, 127 S. Ct. at 1455  (citations omitted).  The Court noted that one has standing to bring a claim for such injury, even if “widely shared,” so long as the litigant can demonstrate a particular injury to his or her own interests.  Id. at 1456, citing Federal Election Comm’n v. Akins, 524 U.S. 11, 24,118 S. Ct. 1777, 141 L. Ed. 2d 10 (1998).  Thus, the States’ challenge to EPA was both proper and warranted.

With this legal framework, numerous organizations are challenging rulemaking and permits under various environmental laws.  As in the example of Mass. v. EPA, the CAA is fertile ground for challenges.  A sampling of D.C. Circuit reveals there are several cases pushing for more stringent regulation of greenhouse gases.  See Coke Oven Environmental Taskforce v. EPA, No. 06-1131, 06-1322 (D.C. Cir. 2006) (enforcement of CAA regulations against new source emitters of greenhouse gases); New York v. EPA, No. 02-1387 (D.C. Cir. 2002) (same). 

 

Similar NEPA litigation is forcing agencies and permit applicants to account for the impact an action may have on the environment.  Recent examples include, Center for Biological Diversity v. Kempthorne, No. 07-CV-00894 (N.D. Cal. 2007) (demanding analysis of petro exploration and associated greenhouse gases, and their impact on polar bears), Mayo Foundation v. Surgace Transportation Board, 472 F.3d 545 (8th Cir. 2006) (arguing railroad extension would create additional greenhouse gas emissions). 

 

Tort Liability Moves To the Front

 

With an arguably lower standing burden being established under Mass v. EPA, common law tort claims such as nuisance and negligence are gaining greater attention from litigants seeking redress for claimed global warming injuries.  In the example of California v. Gen. Motors Corp., the Attorney General of California filed suit against six major auto manufacturers for damages, including “such future monetary expenses and damages as may be incurred by California in connection with the nuisance of global warming.”  No. 3:06CV05755 (N.D. Cal. Sept. 20, 2006).

In Connecticut v. American Electric Power, eight states, the city of New York, and three nonprofit groups challenged the greenhouse gas emissions of four power companies and the Tennessee Valley Authority.  406 F.Supp.2d 265 (S.D.N.Y. 2005).  The states argued that the defendants were the “five largest emitters of carbon dioxide” in the United States.  Under the theory of nuisance, the litigants charged the defendant’s actions were a danger to the public’s health and environment and that global warming would cause irreparable harm to plaintiffs’ property.  The Court, refusing to implement “cap” on emissions, determined the action presented a “political question” that demanded dismissal.

Individual litigants are also pushing the legal theories to gain access to the Courts.  To establish standing to maintain environmental cases requires a showing by the litigant that he or she has suffered a particularized injury to himself or his property.  The injury must be specific to the litigant as opposed to an injury alleged to a class of people. As forewarned by Justice Roberts, the Mass. v. EPA opinion may have lowered the bar for private standing in environmental cased.  He suggests that the majority’s opinion welcomes defendants to invoke the Majority’s opinion in challenging standing in other global warming suits.  127 S. Ct. at 1466 (Roberts, C.J., dissenting).  In other words, the majority’s traditional standing analysis could permit individual litigants to establish  standing formerly unsupported by prior precedent.

 

Comer v. Murphy Oil, is a dramatic example of individual litigants trying to gain ground in the Courts.  No. 05-CV-436 (S.D. Miss 2006).  In Comer, property owners brought suit against insurers, along with chemical, coal, and oil companies, for production of greenhouse gases.  In a long, expanded causation theory,  the plaintiffs complained,

 

Defendants have willfully, wrongfully, unreasonably, unwarrantably and unlawfully used their property and conducted their business to mine, drill, manufacture, release, vent, and/or combust substances in such a way as to produce massive amounts of greenhouse gasses.

 

The Defendants’ behavior and greenhouse gas emissions resulted in material annoyance, inconvenience, discomfort, injury, and/or hurt to the public and the Plaintiffs in particular . . .

 

In all, they alleged the companies’ emissions caused global warming, which in-turn warmed the waters in the Gulf of Mexico, increasing the frequency and severity of hurricanes, and thus, the defendants were responsible for damages caused by Hurricane Katrina. 

 

The tort allegations included: unjust enrichment; civil conspiracy; public/private nuisance; trespass; negligence; and fraudulent misrepresentation and concealment.  In all, the defendants conspired to hide the harmful impacts of their actions and ultimately caused Hurricane Katrina damage, including property damage, business interruption, wrongful death, mental anguish and emotional distress.

The court, in dismissing several insurance defendants noted, “I foresee daunting evidentiary problems for anyone who undertakes to prove, by a preponderance of the evidence, the degree to which global warming is caused by the emission of greenhouse gasses; the degree to which the actions of any individual oil company, and individual chemical company, or the collective action of these corporations contribute, through the emission of greenhouse gasses, to global warming ….”  The action was ultimately dismissed by the Court on August 30, 2007.

Most recently, on February 26, 2008, the Alaska Native Village Kivalina and others filed suit against numerous defendants, including oil, power and coal companies.  08-CV-1138 (N.D. Cal. Feb. 2008).  Relying on the nuisance theory, the Complaint alleges the defendants’ activities warmed the climate, causing coastal erosion. 

 

To date, common negligence claims have failed to support litigation.  In negligence, the first question is whether the defendant owes the plaintiff a duty of care.  Under the common law of torts, one can be liable for negligence by breaching a duty of care that requires the person to conform to a standard of conduct and his failure to so do thereby causes loss or damages to the interests of another.  W. Paige Keeton et. al., Prosser & Keeton on the Law of Torts 164-165 (5th ed. 1984).  How that standard is derived is dependant on whether there are common law, statutory, or regulatory rules in place on a certain duty or issue.  Industry standards can also play a role in defining what is expected from others in the same industry.

 

Under Judge Learned Hand’s BPL formula, as set out in United States v. Car-roll Towing Co., tort liability is established when the burden of preventing injury is less than the product of the gravity of the injury and likelihood of injury, “B < (P × L)”.  159 F.2d 169, 174 (2d Cir. 1947).  This is often referred to as a risk-utility analysis, where one compares the costs of avoiding damage or preventing harm with the expected damages from the activity.  So long as the risks are less than the burden of avoiding them, liability can’t be established.

 

Courts generally balance a range of considerations including: convenience of administration, capacity of parties to bear the loss, preventing future injuries, moral blame attached to the wrongdoer, and other considerations, foreseeability of harm to plaintiff; degree of certainty that plaintiff suffered injury; closeness of connection between defendant’s conduct and injury suffered, and availability, cost and prevalence of insurance for the risk involved.  Keeton et. al., supra note 24, at 357-59 (footnotes omitted) and Vu v. Singer Co., 538 F. Supp. 26, 29 (N.D. Cal. 1981).

 

With a base of growing scientific support for global warming and its causes, tort claims based on negligence are likely to enter the courtroom.  Scientific research on the topic has aided in development of technologies that are cost effective in reducing greenhouse gas emissions.  At some point in the near future, a litigant will likely be able to use the risk-utility analysis to establish that the risks are well-known, documentable and preventable in a cost-efficient manner.  This demonstration will then support liability against industries.  What will remain is the challenge to standing discussed above.

 

Insurers In the Crosshairs

As noted in a recent study – while the “most widely discussed insurance-related consequences of climate change are the impacts of property damage from extreme weather events,” there are also emerging liability consequences.  C. E. Millis and S. Hecht, 2007 Limiting Liability in the Greenhouse: Insurance Risk-management Strategies in the Context of Global Climate Change, Stanford Environmental Law Journal and the Stanford Journal of International Law, Symposium on Climate Change Risk, Vol. 26A/43A: 251-334, 252 (2007).  Climate change litigation “claims of third-parties who allege injury or property damage that may be the fault of the insured” is also a growing concern.  Id. at 253-254.  As the climate change science and technology is developed, the basis for such claims is established.

The threat of climate change litigation and associated costs are real, whether the science supports ultimate liability or not.  As demonstrated above, litigation in this arena is growing.  Litigation expenses alone demand attention from insurers.  Yet, if liability is ultimately established, insureds could suffer.  Damages from catastrophic losses are the greatest fear today, but even small, more common extreme-weather events and the projected slow sea-level rise pose risks to insurers and insureds.

 

Risks to insurers are presented under several different policies, including: General Liability Insurance (negligence, personal injury, business interruption & product liability),  Environmental Policies (emitters liability for direct and indirect impacts from climate change) and Directors and Officers Policies (liability for emitters or arising from obligations to protect shareholder value from the impacts of climate change). 

 

Large insurers are taking note of these risks.  Lloyd’s of London recently wrote in its “Adapt or Bust” Report: “We foresee an increasing possibility of attributing weather-related losses to man-made climate change factors.  This opens the possibility of courts assigning liability and compensation for claims of damage … .  If the courts conclude that damage was reasonably foreseeable then liability could follow, as would the search for ‘deep pockets’ to meet the costs, with insurers a likely port of call.”  Zurich Financial Services has formed “a global initiative focused on the development of products and services addressing the evolving risks associated with climate change….”  In all, insurers, like their insureds, are facing the bleak reality that claims for climate change are coming.  As evidenced by the impact Hurricane Katrina had on insurance availability and insurers move away from high risk coastal areas, insurers are unwilling to be naive of the future liabilities on the horizon.

 

Conclusion

 

Whether desired or not, climate change litigation is coming.  The Supreme Court’s recent opinion in Mass. v. EPA, appears to have lowered the bar significantly for standing, long thought to be the ultimate hurdle for such cases.  And, although causation and liability theories are also currently limiting the numbers of cases, emerging developments in science and technology will ultimately make such concerns moot.  Regardless of the current likelihood of success, insureds and insurers are facing growing legal fees in defending against such actions with foresight that such costs can only grow with the development of this area.  It remains to be seen just how large an impact climate change litigation will have on those in the cross-hairs of such actions. 

 

 

 

 

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