Posted by: Steven M. Taber | September 22, 2009

Second Circuit Rules that States Can Sue Power Companies for Nuisance Created from Emissions

In an unusual two-judge decision, the U.S. Court of Appeals for the Second Circuit held in State of Connecticut v. American Electric Power, Case No. 05-5104, (2nd Cir. Sept. 21, 2009) that power companies can be sued by states and land trusts for “public nuisance” for their emissions of greenhouse gases.  More importantly, however, the decision may have ramifications in the on-going debate over the power of the EPA to regulate CO2 and other greenhouse gases.  The Court of Appeals Panel, comprised of Judge Peter W. Hall (a George W. Bush appointee) and Joseph McLaughlin (a George H.W. Bush appointee), remanded the case back to the U.S. District for trial after holding that the case did not raise a political question and therefore was judicially reviewable.

Filed in 2004 during the second Bush administration when it became apparent that the Bush Administration was going to do little to regulate carbon dioxide emissions, the lawsuit brought eight states – California, Connecticut, Iowa, New Jersey, New York, Rhode Island, Vermont and Wisconsin – together with New York City and three land trusts.  On the other side are American Electric Power, Southern Corporation, the Tennessee Valley Authority, Xcel Energy and Cinergy Corporation, all of which have large coal mining operations.

The Coalition of States have alleged that the power companies are creating a “public nuisance” and sought reductions in emissions that scientists are saying change the climate.  The power companies, on the other hand, did not attack the merits of whether emissions were harmful, but rather alleged that federal courts did not recognize a federal common law cause of action of “public nuisance.” And if any action were to be taken, Congress should be taking it, not a court.

The District Court agreed with the power companies and found that the issues demonstrated the “transcendently legislative nature of this litigation,” which, if decided by a court, would pull the court into making legislative and political decisions instead of purely judicial ones.

Aside from the determination that a federal common law nuisance action is not a political question, the decision overturning the District Court’s decision is notable for its holding regarding “displacement” (the court’s analysis of displacement starts on page 102 of the 139 page opinion).  As the court states in a footnote, “the concept of ‘displacement’ refers to a situation in which ‘federal statutory law governs a question previously the subject of federal common law.’” The idea being that if Congress has enacted a statute that covers the same ground as the judicially conceived “common law,” the Congressional take on the situation is dispositive.

After determining that the Coalition of States had properly brought a claim under the federal common law of nuisance, the court had to decide whether the nuisance claim had been displaced by the Clean Air Act.  That is, the court had to decide whether the “problem formerly governed by federal common law” (in this case, climate change), had been addressed by Congress (in this case the Clean Air Act.  Relying on the U.S. Supreme Court’s pronouncement in County of Oneida v. Oneida Nation of N. Y. State that “federal common law is used as a ‘necessary expedient’ when Congress has not ‘spoken to a particular issue’” the court determined that the Clean Air Act did not regulate emissions of greenhouse gases from stationary sources and therefore, the federal common law action of public nuisance had not been displaced.

In order to get to that conclusion, though, the Court had to explain that Massachusetts v. EPA only gave EPA the authority to regulate greenhouse gases, but did not regulate their emissions.  Likewise, the proposed endangerment finding is just that – a proposal.  Thus, the court concludes “[w]e cannot say, therefore, that EPA’s issuance of proposed findings suffices to regulate greenhouse gases in a way that “speaks directly” to Plaintiffs’ problems and thereby displaces Plaintiffs’ existing remedies under the federal common law.

Moreover, the court continues, the EPA’s proposed endangerment finding only touches on mobile sources, not stationary sources, which are at issue here.

In sum, at least until EPA makes the requisite findings, for the purposes of our displacement analysis the CAA does not (1) regulate greenhouse gas emissions or (2) regulate such emissions from stationary sources.  Accordingly, the problem of which Plaintiffs complain certainly has not “been thoroughly addressed” by the CAA.

As pointed out by other commentators, this puts utilities and other large stationary sources of air pollution in a quandary.  If they oppose the EPA’s regulation of greenhouse gases, then they open themselves to public nuisance lawsuits because the Clean Air Act would not be displaced until such time as EPA actually begins to regulate greenhouse gases from stationary sources.  Will the utilities ask to be regulated by the EPA in order to avoid public nuisance lawsuits?  Probably not, but the Second Circuit has given them food for thought.

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