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Judgment Day Comes in Global Warming Litigation

Rodney Taylor | February 1, 2011

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On December 6, 2010, the U.S. Supreme Court granted certiorari in a case that is likely to have a significant impact on the future of climate change litigation in this country.

In agreeing to review the Second Circuit Court of Appeals' decision in Connecticut v. American Electric Power Co., 582 F.3d 309 (2d Cir. 2009) ("AEP Case"), the Supreme Court indicated it will review briefs, hear testimony, and rule on three questions regarding public nuisance lawsuits aimed at addressing climate change damage.

  • The standing of the plaintiffs to bring the action
  • The possible displacement of judicial consideration due to the passage of greenhouse gas legislation and implementation of Environmental Protection Agency (EPA) regulation
  • The ability of the Court to weigh countervailing issues without a policy determination by the executive or legislative branches 1

Rulings on these questions have the potential to not only resolve the matters raised in this case, but may also establish precedent on important legal issues in cases presently under consideration in other jurisdictions. The decision could also establish new ground rules for future litigation involving greenhouse gase (GHG) emissions and the liability of emitters for damage arising out of climate change.

The Supreme Court's ruling could also have a material impact on insurance companies providing liability insurance to electric power, oil, gas, coal and chemical companies, automakers, and other manufacturers that have been or could be sued by third parties for damages allegedly caused by climate change. Even if obligations to indemnify injured parties are not established, the defense of the claims could cost insurers tens of millions of dollars.

The History

Eight states, the City of New York, and three nonprofit land trusts filed an action in 2004 against five power generators on a public nuisance theory, alleging damages as a result of the emissions of GHGs from the defendants' operations. The trial court dismissed the case on political question grounds.

On dismissal by the trial court, the plaintiffs appealed the decision to the Second Circuit Court of Appeals. In October 2009, a two-judge panel 2 of the Second Circuit reversed the lower court's decision and ordered the case to be reinstated to proceed with hearings on the merits. The Second Circuit found the case to involve "ordinary tort law" issues that were well within the competence of the federal courts to decide and, therefore, the case was not barred by the political question doctrine. In addition to the political question matter, the justices specifically determined that: (1) all plaintiffs had standing to bring the suit; (2) the plaintiffs had stated a claim under the federal common law of public nuisance; and (3) the claims were not displaced by federal statutes or prohibited from proceeding on foreign policy grounds.

The reversal was appealed by the defendants, who asked for a review by the entire Second Circuit Court sitting en banc. The Second Circuit denied a rehearing, and the defendants then sought Supreme Court review, which was granted.

Previous Supreme Court Decision on Climate Change Allegations

The only previous case in which the U.S. Supreme Court provided guidance on some of these climate change issues was Massachusetts v. EPA, 519 U.S. 497 (2007), in which the parties' rights to compel enforcement of a federal law was at issue. In the initial action, Massachusetts and 11 other states, several local governments, and nongovernmental organizations sought to compel the EPA to enforce existing Clean Air Act regulations as they related to GHG emissions from new motor vehicles. The EPA denied the petition, claiming that the Clean Air Act did not authorize it to regulate GHG emissions. The Agency also argued that it had the discretion to defer a decision to regulate until more research could be done on the causes, extent, and significance of climate change.

In a 5 to 4 decision, the Supreme Court ruled in favor of the plaintiffs, finding the EPA has the authority to regulate CO2 and other GHGs under the Clean Air Act. The majority decision specified the Court's findings in three areas:

  • Standing. The Court found that the EPA's failure to regulate emissions of GHGs, at a minimum, contributed to "alleged climate change injuries." While acknowledging that regulation of GHG emissions from new motor vehicles was not a complete solution, it could nonetheless play a role in slowing or reducing the pace of climate change. 3
  • EPA's authority to regulate GHGs. The Court found that CO2 fits within the Clean Air Act's broad definition of "air pollutant" and rejected the EPA's argument that limiting CO2 would require regulation of fuel economy standards, which was delegated to the Department of Transportation.
  • Relationship to national climate change goals. The Court found that a reduction in emissions of GHGs from domestic automobiles would slow the pace of global emissions, regardless of what happened elsewhere, and the Court ruled that the EPA could avoid enforcing its regulations only if it determined that GHGs do not contribute to climate change.

There are several differences in the issues addressed by the Supreme Court in Massachusetts v. EPA and those raised in the AEP Case. While Congress specifically afforded a right to the states to challenge the EPA's inaction in the earlier case, there is not necessarily a similar right to challenge a court's determination in federal common law nuisance cases in the case before the Supreme Court now. Therefore, standing could be a problem for the petitioners in the AEP Case.

There are also differences in the composition of the Supreme Court, and the makeup of the panel that will hear the AEP Case may be affected by recusals of one or more justices. Two justices that participated in the earlier case have retired. Justices John Paul Stevens and David Souter have been replaced by Justices Sonya Sotomayor and Elena Kagan. It is possible that Justice Sotomayor will recuse herself as she did from the decision on granting certiorari in the AEP Case since she heard testimony on the issues while serving on the Second Circuit Court of Appeals. Justice Kagan may have been involved in the amicus brief filed by her former office (U.S. Solicitor General) on behalf of the Tennessee Valley Authority (TVA) in the AEP Case, and her position with respect to the case is unknown.

The Solicitor General's Amicus Brief

The petitioners in Connecticut v. AEP have received substantial amicus support for their position. One of the most interesting of the supporting briefs is that of the acting solicitor general, drafted on behalf of the TVA. This brief argues the Administration's view that several factors make limited intervention by the Supreme Court appropriate at this juncture. Their arguments are based on the following areas of inquiry.

  • Would a decision in favor of the plaintiffs encourage future climate change litigation with expensive suits filed by parties, both within and outside the United States, against domestic emitters of GHGs?
  • Would the doctrine of prudential standing counsel the judiciary to refuse to adjudicate some claims? The Supreme Court has identified three rules as prudential ones, only one of which has been a significant factor in the jurisprudence of standing—the ability of plaintiffs to represent the constitutional rights of third parties not before the court.
  • Have common law claims based on public nuisance been displaced by the actions taken by the EPA since the Second Circuit's decision in Massachusetts v. EPA in October 2009? In fact, the EPA has taken only fledgling steps toward limiting emissions of GHGs. The EPA has issued GHG emissions standards for fixed sources, including fossil-fueled power plants, but these regulations apply only to new construction and sites undergoing major modifications.

Possible Outcomes and Consequences of Decisions in the AEP Case

Given the issues that must be decided and the uncertainty regarding the makeup of the panel that will hear the AEP Case on behalf of the Supreme Court, there are three possible outcomes.

  1. Narrow reversal of Second Circuit ruling. The Supreme Court may reverse the ruling of the Second Circuit, but do so on narrow grounds. It is possible that the decision will be based on the argument that the federal common law of nuisance has been displaced by the EPA's actions to control emissions. A second possible ground for a narrow reversal is lack standing to bring the claim.
  2. Reversal on broader grounds. It is also possible that the Supreme Court will reverse the Second Circuit's ruling on broader grounds in order to establish new rules for future litigation and to encourage more responsible climate change legislation. A broad reversal could change the future of environmental litigation in this country or at least litigation related to global warming and climate change.
  3. Affirming the Second Circuit's ruling. If only Justice Sotomayor recuses herself, but Justice Kagan participates in the hearing, it is possible that the review of Connecticut v. AEP could result in a tie vote among the eight-justice panel. In the case of a tie, the ruling of the Second Circuit would be affirmed, but it would not necessarily be followed in other circuit court cases involving climate change issues. On the other hand, there could be an affirmation with a majority of the justices siding with the plaintiffs. In the case of an affirmation with a clear majority vote, the decision in this case would serve as precedent for climate change cases in other jurisdictions.

What's Next for the AEP Case

Briefing and arguments are scheduled for the spring of 2011, and a decision in the case is expected by late June or July. The case is being watched carefully by the power industry since the defendants are the largest operators of fossil-fuel generating plants in the country. Owners and managers of other industrial, commercial, and manufacturing facilities are also anxious about the outcome of this case since it could lead to limitations on emissions of GHGs across broad segments of the economy. A decision affirming the Second Circuit's ruling could dramatically expand the range of possible defendants targeted for climate change suits while also expanding the number of plaintiffs alleging damage from global warming as a result of GHG emissions.

On the other hand, a reversal of the Second Circuit's ruling in Connecticut v. AEP could sound a death knell for climate change litigation in the United States. Regardless of the outcome, it is clear that the Supreme Court's decision in Connecticut v. AEP will strongly influence, and perhaps directly control, whether similar cases can proceed at all. Depending on the outcome and the reasoning, there may also be a completely new set of standards by which courts at all levels will review future actions alleging damage or public nuisance as a result of climate change based on emissions of greenhouse gases.

The Court's ruling may also affect the pace and direction of legislation affecting climate change in the United States, especially if the EPA must step up and implement a comprehensive program to cap and then reduce emissions of GHGs from a wide variety of stationary and mobile sources. The Barack Obama Administration seems to be prepared to settle for regulation of GHGs by the EPA under the Clean Air Act. However, some members of Congress are opposed to broad EPA involvement in climate change limitations, and the Supreme Court is not likely to be swayed by the Administration's preferred course of action unless that position is also supported by their determination of the legal issues in the AEP Case.

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1 Kevin Holewinski, "Supreme Court Will Hear Appeal Addressing Use of Public Nuisance Suits against Greenhouse Gas Emitters," (January 20, 2011).
2 While the case was heard by a three-judge panel, Justice Sonya Sotomayor, then a justice with the Second Circuit, recused herself since she was under consideration as an appointee to the U.S. Supreme Court.
3 "Court Rules 5–4 in Massachusetts versus EPA," (April 3, 2007).