The Scope of Appellate Review of Remand Orders—Implications for Climate Change Litigation and Beyond

Kelley Drye Client Advisory

Energy companies caught in the crosshairs of public nuisance lawsuits filed by cities and counties are asking the U.S. Ninth Court of Appeals to stay a federal district court’s order allowing two California cities’ lawsuits to proceed in state court. The companies are also asking the U.S. Supreme Court rule on the proper the scope of appellate review of cases removed to federal court—a question that has split the federal circuits. This issue matters not just for climate change litigation, but also for myriad lawsuits seeking cleanup costs and damages arising from per- and polyfluoroalkyl substances (PFAS).

Most of the climate cases were filed in state court, and the defendant energy companies promptly removed them to federal district courts. The plaintiff cities and counties then moved to remand the suits back to California state courts. Two federal district court judges reached different conclusions on those motions—one concluding that it lacked subject-matter jurisdiction, the other finding that it had federal jurisdiction because the cities claims were necessarily governed by federal common law.”

On appeal, the Ninth Circuit addressed whether it could consider all of the energy companies’ grounds for removal or whether 28 U.S.C. § 1447(d) restricted its review to federal officer grounds only.[1] The energy companies argued that because removal based on federal-officer jurisdiction could be reviewed by the court under § 1447(d)’s exception clause, then the court also could consider any other grounds for removal because § 1447(d) authorizes appellate review of an order,” and not just the particular reasons for an order. The Ninth Circuit rejected this argument, holding that (1) the district court’s order was not reviewable pursuant to the non-reviewability clause of 28 U.S.C. § 1447(d) because the lower court remanded for lack of subject matter jurisdiction, and (2) Ninth Circuit precedent has interpreted the exception clause as giving an appellate court authority to review a remand order only to the extent that the order addresses the statutory section listed in the clause. County of San Mateo v. Chevron Corporation et al., No. 18-15499, at 18-19.

The Ninth Circuit further held that the district court did not err in finding that it lacked subject matter jurisdiction under the federal officer removal statute because the companies failed to prove by a preponderance of the evidence that they were acting under” a federal officer through various contracts with the federal government. County of San Mateo, at 33-34. Specifically, the Court found that the contracts were typical of any commercial contract” and the companies’ activities under those agreements are not so closely related to the government’s function that the [companies] face a significant risk of state court prejudice.” County of San Mateo, at 31-32.

In City of Oakland et al. v. BP PLC et al., No. 18-16663, the district court found that the plaintiffs’ claims supported federal question jurisdiction because those state law claims were necessarily governed by federal common law” and raised issues relating to interstate an international disputes implicating conflicting rights of States or . . . relations with foreign nations” and thus these issues must be resolved under a uniform federal standard. City of Oakland, p. 3. But the Ninth Circuit held that the plaintiffs’ claims did not fall within the narrow category of state law claims arising under federal law: The question whether Energy Companies can be held liable for public nuisance based on production and promotion of the use of fossil fuels and be required to spend billions of dollars on abatement is no doubt an important policy question, but it does not raise a substantial question of federal law for purpose of determining whether there is [federal] jurisdiction . . . .” Id. at 20. The court also rejected the energy companies’ argument that the Clean Air Act entirely preempts the state law nuisance claims for climate change damages. Id. at 21-23. Ultimately, the Ninth Circuit vacated the district court’s order denying remand and instructed the district court to consider whether other grounds for subject matter jurisdiction exist. Id. at 29-30.

Future Implications

Even though the companies removed climate change cases on several different bases, three circuit courts of appeals remanded those cases after considering and rejecting just one of the removal theories. Those courts reasoned that remand orders are reviewable only to the extent they address whether removal was proper under the federal officer removal” statute—a federal law that permits a defendant to litigate claims in federal court whenever the activity of the defendant of concern in a lawsuit was at the direction of a United States agency or officer.

The companies, for their part, contend that the federal officer removal statute authorizes appellate review of the entire remand order. And because they invoked the statute in the motions for removal, the circuit courts should have considered all other arguments for federal jurisdiction too:

Defendants could be forced to incur substantial burden and expense litigating these six cases is four different state courts, which could entail briefing and resolution of various threshold and dispositive motions as well as potentially extensive discovery,” the companies said in their stay request. Def.’s Mot. 7. These harms will be irremediable if the remand is ultimately determined to be improper and further proceedings in federal court are required.” Id. In their response to the defendants’ motion, the municipalities wrote that the mere fact that litigation may proceed in the absence of a stay is far from enough to cause irreparable harm.” Pls.’ Opp’n. 10.

The federal circuit courts are split on this issue. First, in March 2020, the U.S. Fourth Circuit Court of Appeals ruled that the city of Baltimore’s climate lawsuit belonged in state court. City of Baltimore v. BP P.L.C. et al., No. 19-1644. By limiting the scope of its review to federal officer removal, the Fourth Circuit parted ways with the Seventh Circuit[2], which held that appellate courts may consider the entire remand order on review. Lu Junhong v. Boeing Co., 792 F.3d 805, 811 (7th Cir. 2015) (Easterbrook, J.).

The consequences of remand can be far reaching. As the companies told the Ninth Circuit in a motion asking the court to stay its recent decision remanding San Mateo County and other California municipalities’ lawsuits to state court:

Absent a stay, these six cases may be remanded to four different California state courts based on the Court’s conclusion that removal was not proper under [federal officer removal], even though the Court has not considered whether removal was proper on any of the other grounds presented in Defendants’ notice of removal.

Def.’s Mot. 1  It should be noted that these appellate rulings are purely procedural and don’t reach the climate lawsuits’ merits of the case or the substantive interpretation of the federal removal statute. Indeed, both courts that have reached the merits have dismissed these cases because they present political questions” that should be resolved by the political branches of government. Even so, this preliminary legal issue, while not resolving the plaintiffs’ merits claims, could have a significant impact on how these and similar lawsuits progress in the months and years to come.
[1] Section 1447(d) contains two clauses: the non-reviewability clause and the exceptions clause. The former states that “[a]n order remanding a case to the State court from which it was removed is not reviewable on appeal . . . ..” The U.S. Supreme Court has interpreted this language as barring review only if a remand order was issued based on a ground enumerated in §1447(c), which includes lack of subject matter jurisdiction. The exceptions clause states that the non-reviewability clause applies except that an order remanding a case to the State court from which it was removed pursuant to section 1442 or 1443 of this title shall be reviewable by appeal or otherwise.” The Defendant companies’ only asserted basis for removal under those sections was federal officer removal, § 1442(a)(1).
[2] Although the Seventh Circuit’s 2015 ruling in Lu Junhong was not a climate change case, it held that Boeing was not entitled to a federal forum.