Global Warming Litigation

A rise in global temperatures has coincided with a significant increase in the concentration of carbon dioxide in the atmosphere, and evidence that the two trends are related has gained widespread acceptance. Though some commentators deny a cause-and-effect relationship, the Intergovernmental Panel on Climate Change ('IPCC') last year concluded that the majority of global warming over the last 50 years has been caused by human emissions of greenhouse gases. (When carbon dioxide is released into the atmosphere, it acts like the ceiling of a greenhouse, trapping solar energy and retarding the escape of reflected heat. It is therefore a 'greenhouse gas.')

Notwithstanding any lingering scientific debate over the extent to which human activities alter the Earth's climate, the reality is that the current political and legal climates are the factors that should propel this issue into the collective consciousness of industries that produce large amounts of CO₂ and other greenhouse gases. Whether or not a company accepts the idea that increased temperatures on Earth are due to human activities and pollution, every company in these industries needs to devise a corporate response to global warming.

Currently, the railroad industry is working to reduce pollution from the transportation of goods, with 40% reduction in emissions being realized since 2004, and bringing 80 new, less-polluting locomotives on line, according to statistics from the House Committee on Transportation and Infrastructure Subcommittee on Railroads, Pipelines, and Hazardous Materials. One impetus for this progress is due to an increased commitment to reducing the collective pollutants that contribute to global warming. But these types of measures could also help railroads reduce their exposure to lawsuits that might follow in the wake of the Supreme Court's recent 5-4 decision in Massachusetts v. EPA.

Massachusetts v. EPA

In this case, 12 states and several U.S. cities brought suit against the U.S. Environmental Protection Agency ('EPA') to force the agency to regulate carbon dioxide ('CO₂') and other greenhouse gases as pollutants.
(The class of petitioners included the states of California, Connecticut, Illinois, Maine, Massachusetts, New Jersey, New Mexico, New York, Oregon, Rhode Island, Vermont, and Washington, along with the cities of New York, Baltimore, and Washington, DC, and several nonprofit organizations). The EPA had previously determined that it lacked authority under the Clean Air Act to regulate carbon dioxide and other greenhouse gases. The agency also determined that, even if it did have such authority, it was within its discretion to decline to regulate carbon dioxide and other greenhouse gases. Other respondents who intervened to argue in support of the EPA's position included several industry associations representing companies involved in leasing transportation equipment ' e.g., the Alliance of Automobile Manufacturers, National Automobile Dealers Association, Engine Manufacturers Association, and Truck Manufacturers Association ' as well as the CO₂ Litigation Group, Utility Air Regulatory Group, and 11 states.

Section 202(a)(1) of the Clean Air Act, 42 U.S.C. '7521(a)(1), requires the administrator of the EPA to set emission standards for 'any air pollutant' from motor vehicles or motor vehicle engines 'which in his judgment cause[s], or contribute[s] to, air pollution which may reasonably be anticipated to endanger public health or welfare.' The question presented in Massachusetts v. EPA was essentially whether the EPA has the authority to regulate CO₂ and other air pollutants associated with climate change under section 202(a)(1), and whether the EPA Administrator may decline to issue emission standards for motor vehicles based on policy considerations not enumerated in the statute. The petitioners argued that the definition in the Clean Air Act is broad enough to ensure that CO₂ must be counted as air pollution, and a five-justice majority agreed, stating that the act gives the EPA the authority to regulate tailpipe emissions of greenhouse gases, and that greenhouse gases fit well within the Clean Air Act's broad definition of air pollutants. They further argued that they had been injured, and would continue to be injured, by the effects of global warming attributable to greenhouse-gas emissions.

The Supreme Court's decision in Massachusetts v. EPA is noteworthy not only for regulatory purposes, but also for its potential impact on proving causation in tort cases based on climate change. While the crux of the majority opinion turns on the meaning of the Clean Air Act and the regulatory duties that it assigns to the
EPA, the Court makes clear that it acknowledges a legitimate connection between CO₂ emissions and a risk to climate change. The Court did not address causation at length, because the EPA did not dispute a causal connection between man-made greenhouse-gas emissions and global warming. The EPA instead argued that regulation of tailpipe CO₂ emissions would not significantly mitigate the injuries that the petitioners alleged. The Court, however, rejected the notion that the petitioners lacked standing because the relief they sought would address only a fraction of the global problem. Thus, although the exact relationship between greenhouse-gas emissions and global climate change remains uncertain, that uncertainty was not enough to release the EPA from its statutory obligation to regulate CO₂ emissions.

The Massachusetts v. EPA decision is significant to companies in the railroad, logistics, and transportation spheres because now that federal law unequivocally defines CO₂ as a pollutant, the risk of both citizen suits under the Clean Air Act and traditional common-law tort actions increases. Lower courts may take Massachusetts v. EPA as a cue that CO₂ production can be the basis for tort liability, and some judges will likely be inclined to recognize a causal link between greenhouse-gas emissions and climate change as a result of the Supreme Court's decision.

Courts Still Hesitant

To date, however, courts have declined to take on the immensely complicated issue of whether to impose liability for global climate change on major CO₂ producers. A California federal district court, for example, dismissed a global-warming lawsuit brought against automakers under a public nuisance theory, and held that the case presents a 'political question' unsuitable for resolution by the courts. The State of California had sued six of the world's biggest automakers ' General Motors, Toyota, Ford, Honda, DaimlerChrysler and Nissan ' for their vehicles' contributions to climate change and its effects on the state of California. Alleging that the defendant companies' automobiles emitted 289 million metric tons of carbon dioxide and other greenhouse gases annually, California argued that the emissions were a public nuisance under both federal common law and state law. California v. General Motors Corp., __ F. Supp. 2d __, 2007 WL 2726871 (N.D. Cal. 2007). The complaint also cited an array of past and ongoing harms that global warming has allegedly visited upon the state, including a reduced snow pack at mountain elevations (a source of fresh water), increased flooding, raised sea levels along its coastline (causing saltwater intrusion into drinking-water supplies and beach erosion), increased ozone pollution in cities, heightened wildfire risks, and adverse impacts on animals and fish. The lawsuit sought monetary damages for these alleged California's injuries, for which the state has already spent millions of dollars.

The automaker defendants moved the court to dismiss the case as posing a nonjusticiable 'political question' that must be resolved, if at all, by legislative action. They argued that the state's public nuisance claims were either 'displaced' (in the case of the federal claim) or 'preempted' (the state claim) by two federal statutes: the CAA and the Energy Policy and Conservation Act EPCA. The primary obstacle to the state's case, the court determined, was that its nuisance claim required the court 'to make an initial decision as to what is unreasonable in the context of carbon dioxide emissions.' Noting a Southern District of New York opinion from a case in which Connecticut (Connecticut v. American Electric Co., Inc., 406 F. Supp. 2d 265 (S.D.N.Y. 2005)) asserted similar claims against power-generating companies, as well as Massachusetts v. EPA, the California court found that the authority to regulate greenhouse-gas emissions and, if appropriate, apportion responsibility for climate change were 'policy decisions [that] lie with the political branches of government, and not with the courts.' Stating that it would not 'inject itself into the global warming thicket,' the court dismissed California's claims as nonjusticiable, but declined to reach the preemption and displacement arguments.

The dismissals in California v. General Motors and Connecticut v. American Electric underscore the challenges facing states or other plaintiffs who might assert legal claims based on CO₂ emissions. But by the same token, these lawsuits might be only the opening salvo. To be sure, the stakes are high enough to warrant many more attempts to find the right combination of a receptive judge and a colorable legal theory.

What Happens Next?

In spite of the lower courts' refusal to consider specific claimed injuries linked to global warming by states, in-house attorneys for companies that are connected to the railroad, transportation, and logistics industries may ignore the public debate on global warming and the decision in Massachusetts v. EPA at their own peril. The public debate seems to be approaching a critical mass where the link between global climate change and human activities ' most notably, the emission of CO₂ and other greenhouse gases into the atmosphere ' is treated as a given. With the Supreme Court holding that CO₂ is a pollutant under the Clean Air Act, it appears that the legal debate may be headed in the same direction.

Emissions quantities that exceed what industry deems as 'appropriate levels' represent a litigation risk. For example, the current thinking is that it is possible to foresee a day when carmakers (and those who lease, repair, or serve carmakers), the fossil fuels industry and the electric utility industry will be judged on a combination of defendants' respective market-shares and their GHGs. This means that an organization that causes the CO₂ is faced with the business decision of whether to incur the costs of reducing emissions or to face the risk of liability in proportion to its market share of impermissible emissions.

One building block for the foundation of preparedness in the area of global warming-based tort claims is to establish workable defense theories linked to individual liability. There are various schools of thought among law theorists, one of which is market share liability. But this has traditionally been an inefficient index, given how rare it is to have a uniform risk market, so to expect a perfectly reliable method for assigning liability from one's market share within their own CO₂ -creating industry has challenges.

Some have proposed a model for allocating liability among CO₂ producers based on an expected value arrangement that accounts for environmental and economic costs. This proposed model seeks to assign liability by identifying acceptable CO₂ emissions quantities for each entity and then constructing a liability market based on the sum of exceeded units produced by all market participants.

Companies in the railroad and logistics industries can expect to see the development of a cottage industry of expert witnesses who specialize in determining what is needed for a particular business or industry to deliver its product or service at a reasonable cost to the environment. (It is worth noting that progress along the lines of cost-effective creation of products with lower CO₂ emissions has already occurred among U.S. carmakers, in part as a result of regulations.)

One model that has been discussed since Massachusetts v. EPA would not call for the level of permissible CO₂ emissions to be independently determined through individual evaluation for every agent that creates emissions. It would instead determine the efficient emissions quantity for the average business in each germane market, and then take the sum of excess emissions from all industries as the denominator for calculating individual companies' shares of the overall emissions gross.

Under this model, each company's share of emissions would be the excess quantity of emissions over the efficient average for that particular industry, divided by the sum of all such figures from all relevant industries. But this model does not account for companies' special responses to the challenge of global warming. In other words, a company that has taken great pains to reduce its own emissions from its lease of railroad cars, for instance, would nonetheless be judged according to industry averages. Companies that have put their best foot forward by attempting to reduce their greenhouse-gas emissions proactively should be aware that included in the current conversation about how to apportion liability is at least one mode of analysis that would disregard individual actors' efforts, and instead analyze only industry standards and averages.

Conclusion

A company that leases equipment to transport goods across the country will likely be forced to address the business decision of whether to incur the costs of reducing emissions or to face the risk of liability in proportion to its market share of impermissible emissions. (This is not to suggest, however, that reducing one's CO₂ emissions prospectively will necessarily prevent being named as a lawsuit.) These organizations, particularly those subjected to a new liability climate for businesses that have CO₂ emissions, will have no reliable way of anticipating the precise quantity of emissions that a fact-finder would deem reasonable.

The challenge to the plaintiffs' bar in this setting will be to define a level of impermissible emissions for which a given defendant is responsible, and then to define the type and extent of injury caused by the defendants' actions. There is no doubt that this is a monumental task, but companies that might be in the crosshairs of attempts to impose liability for climate change need to understand that, in terms of both public relations and potential liability, the developments outlined above bear close monitoring and careful consideration of what they can do now to help protect themselves in the future.

In-house counsel and executives within the railroad, logistics, and transportation industries need to be aware of an increasing likelihood of litigation-related to global warming. In the wake of the U.S. Supreme Court's 2007 decision in Massachusetts v. EPA, suits have been filed seeking to impose liability on companies whose activities emit carbon dioxide. As additional suits arise, they will doubtless reach companies in the oil, electric power, auto, and railroad sectors.

These developments raise an important question: Are companies in transportation-related fields adequately prepared for the acceleration of climate change-based tort cases that their industry will likely encounter in the near future? The theories of liability for contributing to global warming are still being developed, and with the vast array of factors that may contribute to climate change, issues of causation may seem insuperable. But the perception that the White House and Congress have not taken adequate measures to confront global warming may stoke interest in turning to the judicial system for relief. The potentially calamitous impact of climate change means that liability could be enormous, which gives inventive plaintiffs' lawyers great incentive to formulate a colorable legal theory. Climate change will also test the U.S. court system's ability to manage a new brand of complex litigation characterized by difficult scientific issues, burdensome numbers of litigants, and novel liability theories.

The Role of CO₂

A rise in global temperatures has coincided with a significant increase in the concentration of carbon dioxide in the atmosphere, and evidence that the two trends are related has gained widespread acceptance. Though some commentators deny a cause-and-effect relationship, the Intergovernmental Panel on Climate Change ('IPCC') last year concluded that the majority of global warming over the last 50 years has been caused by human emissions of greenhouse gases. (When carbon dioxide is released into the atmosphere, it acts like the ceiling of a greenhouse, trapping solar energy and retarding the escape of reflected heat. It is therefore a 'greenhouse gas.')

Notwithstanding any lingering scientific debate over the extent to which human activities alter the Earth's climate, the reality is that the current political and legal climates are the factors that should propel this issue into the collective consciousness of industries that produce large amounts of CO₂ and other greenhouse gases. Whether or not a company accepts the idea that increased temperatures on Earth are due to human activities and pollution, every company in these industries needs to devise a corporate response to global warming.

Currently, the railroad industry is working to reduce pollution from the transportation of goods, with 40% reduction in emissions being realized since 2004, and bringing 80 new, less-polluting locomotives on line, according to statistics from the House Committee on Transportation and Infrastructure Subcommittee on Railroads, Pipelines, and Hazardous Materials. One impetus for this progress is due to an increased commitment to reducing the collective pollutants that contribute to global warming. But these types of measures could also help railroads reduce their exposure to lawsuits that might follow in the wake of the Supreme Court's recent 5-4 decision in Massachusetts v. EPA.

Massachusetts v. EPA

In this case, 12 states and several U.S. cities brought suit against the U.S. Environmental Protection Agency ('EPA') to force the agency to regulate carbon dioxide ('CO₂') and other greenhouse gases as pollutants.
(The class of petitioners included the states of California, Connecticut, Illinois, Maine, Massachusetts, New Jersey, New Mexico, New York, Oregon, Rhode Island, Vermont, and Washington, along with the cities of New York, Baltimore, and Washington, DC, and several nonprofit organizations). The EPA had previously determined that it lacked authority under the Clean Air Act to regulate carbon dioxide and other greenhouse gases. The agency also determined that, even if it did have such authority, it was within its discretion to decline to regulate carbon dioxide and other greenhouse gases. Other respondents who intervened to argue in support of the EPA's position included several industry associations representing companies involved in leasing transportation equipment ' e.g., the Alliance of Automobile Manufacturers, National Automobile Dealers Association, Engine Manufacturers Association, and Truck Manufacturers Association ' as well as the CO₂ Litigation Group, Utility Air Regulatory Group, and 11 states.

Section 202(a)(1) of the Clean Air Act, 42 U.S.C. '7521(a)(1), requires the administrator of the EPA to set emission standards for 'any air pollutant' from motor vehicles or motor vehicle engines 'which in his judgment cause[s], or contribute[s] to, air pollution which may reasonably be anticipated to endanger public health or welfare.' The question presented in Massachusetts v. EPA was essentially whether the EPA has the authority to regulate CO₂ and other air pollutants associated with climate change under section 202(a)(1), and whether the EPA Administrator may decline to issue emission standards for motor vehicles based on policy considerations not enumerated in the statute. The petitioners argued that the definition in the Clean Air Act is broad enough to ensure that CO₂ must be counted as air pollution, and a five-justice majority agreed, stating that the act gives the EPA the authority to regulate tailpipe emissions of greenhouse gases, and that greenhouse gases fit well within the Clean Air Act's broad definition of air pollutants. They further argued that they had been injured, and would continue to be injured, by the effects of global warming attributable to greenhouse-gas emissions.

The Supreme Court's decision in Massachusetts v. EPA is noteworthy not only for regulatory purposes, but also for its potential impact on proving causation in tort cases based on climate change. While the crux of the majority opinion turns on the meaning of the Clean Air Act and the regulatory duties that it assigns to the
EPA, the Court makes clear that it acknowledges a legitimate connection between CO₂ emissions and a risk to climate change. The Court did not address causation at length, because the EPA did not dispute a causal connection between man-made greenhouse-gas emissions and global warming. The EPA instead argued that regulation of tailpipe CO₂ emissions would not significantly mitigate the injuries that the petitioners alleged. The Court, however, rejected the notion that the petitioners lacked standing because the relief they sought would address only a fraction of the global problem. Thus, although the exact relationship between greenhouse-gas emissions and global climate change remains uncertain, that uncertainty was not enough to release the EPA from its statutory obligation to regulate CO₂ emissions.

The Massachusetts v. EPA decision is significant to companies in the railroad, logistics, and transportation spheres because now that federal law unequivocally defines CO₂ as a pollutant, the risk of both citizen suits under the Clean Air Act and traditional common-law tort actions increases. Lower courts may take Massachusetts v. EPA as a cue that CO₂ production can be the basis for tort liability, and some judges will likely be inclined to recognize a causal link between greenhouse-gas emissions and climate change as a result of the Supreme Court's decision.

Courts Still Hesitant

To date, however, courts have declined to take on the immensely complicated issue of whether to impose liability for global climate change on major CO₂ producers. A California federal district court, for example, dismissed a global-warming lawsuit brought against automakers under a public nuisance theory, and held that the case presents a 'political question' unsuitable for resolution by the courts. The State of California had sued six of the world's biggest automakers ' General Motors, Toyota, Ford, Honda, DaimlerChrysler and Nissan ' for their vehicles' contributions to climate change and its effects on the state of California. Alleging that the defendant companies' automobiles emitted 289 million metric tons of carbon dioxide and other greenhouse gases annually, California argued that the emissions were a public nuisance under both federal common law and state law. California v. General Motors Corp. , __ F. Supp. 2d __, 2007 WL 2726871 (N.D. Cal. 2007). The complaint also cited an array of past and ongoing harms that global warming has allegedly visited upon the state, including a reduced snow pack at mountain elevations (a source of fresh water), increased flooding, raised sea levels along its coastline (causing saltwater intrusion into drinking-water supplies and beach erosion), increased ozone pollution in cities, heightened wildfire risks, and adverse impacts on animals and fish. The lawsuit sought monetary damages for these alleged California's injuries, for which the state has already spent millions of dollars.

The automaker defendants moved the court to dismiss the case as posing a nonjusticiable 'political question' that must be resolved, if at all, by legislative action. They argued that the state's public nuisance claims were either 'displaced' (in the case of the federal claim) or 'preempted' (the state claim) by two federal statutes: the CAA and the Energy Policy and Conservation Act EPCA. The primary obstacle to the state's case, the court determined, was that its nuisance claim required the court 'to make an initial decision as to what is unreasonable in the context of carbon dioxide emissions.' Noting a Southern District of New York opinion from a case in which Connecticut ( Connecticut v. American Electric Co., Inc. , 406 F. Supp. 2d 265 (S.D.N.Y. 2005)) asserted similar claims against power-generating companies, as well as Massachusetts v. EPA, the California court found that the authority to regulate greenhouse-gas emissions and, if appropriate, apportion responsibility for climate change were 'policy decisions [that] lie with the political branches of government, and not with the courts.' Stating that it would not 'inject itself into the global warming thicket,' the court dismissed California's claims as nonjusticiable, but declined to reach the preemption and displacement arguments.

The dismissals in California v. General Motors and Connecticut v. American Electric underscore the challenges facing states or other plaintiffs who might assert legal claims based on CO₂ emissions. But by the same token, these lawsuits might be only the opening salvo. To be sure, the stakes are high enough to warrant many more attempts to find the right combination of a receptive judge and a colorable legal theory.

What Happens Next?

In spite of the lower courts' refusal to consider specific claimed injuries linked to global warming by states, in-house attorneys for companies that are connected to the railroad, transportation, and logistics industries may ignore the public debate on global warming and the decision in Massachusetts v. EPA at their own peril. The public debate seems to be approaching a critical mass where the link between global climate change and human activities ' most notably, the emission of CO₂ and other greenhouse gases into the atmosphere ' is treated as a given. With the Supreme Court holding that CO₂ is a pollutant under the Clean Air Act, it appears that the legal debate may be headed in the same direction.

Emissions quantities that exceed what industry deems as 'appropriate levels' represent a litigation risk. For example, the current thinking is that it is possible to foresee a day when carmakers (and those who lease, repair, or serve carmakers), the fossil fuels industry and the electric utility industry will be judged on a combination of defendants' respective market-shares and their GHGs. This means that an organization that causes the CO₂ is faced with the business decision of whether to incur the costs of reducing emissions or to face the risk of liability in proportion to its market share of impermissible emissions.

One building block for the foundation of preparedness in the area of global warming-based tort claims is to establish workable defense theories linked to individual liability. There are various schools of thought among law theorists, one of which is market share liability. But this has traditionally been an inefficient index, given how rare it is to have a uniform risk market, so to expect a perfectly reliable method for assigning liability from one's market share within their own CO₂ -creating industry has challenges.

Some have proposed a model for allocating liability among CO₂ producers based on an expected value arrangement that accounts for environmental and economic costs. This proposed model seeks to assign liability by identifying acceptable CO₂ emissions quantities for each entity and then constructing a liability market based on the sum of exceeded units produced by all market participants.

Companies in the railroad and logistics industries can expect to see the development of a cottage industry of expert witnesses who specialize in determining what is needed for a particular business or industry to deliver its product or service at a reasonable cost to the environment. (It is worth noting that progress along the lines of cost-effective creation of products with lower CO₂ emissions has already occurred among U.S. carmakers, in part as a result of regulations.)

One model that has been discussed since Massachusetts v. EPA would not call for the level of permissible CO₂ emissions to be independently determined through individual evaluation for every agent that creates emissions. It would instead determine the efficient emissions quantity for the average business in each germane market, and then take the sum of excess emissions from all industries as the denominator for calculating individual companies' shares of the overall emissions gross.

Under this model, each company's share of emissions would be the excess quantity of emissions over the efficient average for that particular industry, divided by the sum of all such figures from all relevant industries. But this model does not account for companies' special responses to the challenge of global warming. In other words, a company that has taken great pains to reduce its own emissions from its lease of railroad cars, for instance, would nonetheless be judged according to industry averages. Companies that have put their best foot forward by attempting to reduce their greenhouse-gas emissions proactively should be aware that included in the current conversation about how to apportion liability is at least one mode of analysis that would disregard individual actors' efforts, and instead analyze only industry standards and averages.

Conclusion

A company that leases equipment to transport goods across the country will likely be forced to address the business decision of whether to incur the costs of reducing emissions or to face the risk of liability in proportion to its market share of impermissible emissions. (This is not to suggest, however, that reducing one's CO₂ emissions prospectively will necessarily prevent being named as a lawsuit.) These organizations, particularly those subjected to a new liability climate for businesses that have CO₂ emissions, will have no reliable way of anticipating the precise quantity of emissions that a fact-finder would deem reasonable.

The challenge to the plaintiffs' bar in this setting will be to define a level of impermissible emissions for which a given defendant is responsible, and then to define the type and extent of injury caused by the defendants' actions. There is no doubt that this is a monumental task, but companies that might be in the crosshairs of attempts to impose liability for climate change need to understand that, in terms of both public relations and potential liability, the developments outlined above bear close monitoring and careful consideration of what they can do now to help protect themselves in the future.