Yesterday, the U.S. Supreme Court issued an 8-0 decision in Chevron USA, Inc. v. Plaquemines Parish. The landmark ruling reaffirmed the rule of law and wisely confirmed that the federal court system is the appropriate forum for the claims made by the State of Louisiana and coastal parishes against Chevron over critical production activities carried out by their predecessors during World War II. By finding that the federal officer removal statute applies, the 40+ coastal lawsuits languishing in state courts will finally receive the fair hearing they deserve. The decision also represents a significant defeat for the state’s trial lawyers, who have a direct financial interest in the outcome.
At issue is the scope of the federal officer removal statute, which allows defendants acting under federal authority to remove cases from state to federal court. The specific question the Court considered was whether federal contractors, such as Chevron, may remove cases to federal court when sued for conduct “related to” activities that were carried out to fulfill federal oil refinement contracts during wartime.
For more than a decade, the State of Louisiana and several local municipalities, including Plaquemines Parish, have pursued litigation targeting Louisiana’s energy producers in state court, seeking damages for production activities dating back to the 1940s, much of which was conducted under federal permits, contracts, or wartime directives in support of America’s efforts to win the Second World War. With the help of private plaintiffs’ attorneys working under fee-shifting agreements, state and local governments asserted a new legal theory for the first time, alleging that the decades-old drilling operations violated a Louisiana coastal use permitting law enacted in 1980.
Citing the federal officer removal statute, Chevron and other energy producers sought to remove the cases from state to federal court. They argued that their predecessors had contracts with the federal government during World War II to produce aviation gasoline, known as “avgas,” and, in order to fulfill those contracts, they had to refine crude oil.
The District Court rejected this argument and remanded the cases to state court. The U.S. Fifth Circuit Court of Appeal affirmed the District Court’s decision, erroneously findingthat Chevron’s conduct did not meet the “for or relating to” requirement of the federal officer removal statute because the federal government’s contract with Chevron did not specify how the crude oil for the avgas was to be obtained.
Writing for the Court, Justice Clarence Thomas vacated the judgment of the Fifth Circuit and remanded the case. Specifically, the Court found that Chevron’s directive was to supply avgas, the “essential feedstock” of which is crude, as Judge Andrew Oldham of the Fifth Circuit, noted in his dissenting opinion; the federal government was well aware of this fact. Chevron agreed to work “day and night” to dramatically increase refining capacity. It used vertical drilling, earthen pits, and canals rather than other methods to fulfill the requirements of the contract because vertical drilling is faster and earthen pits were a substitute for steel, which the government asked to be preserved for the war effort. Furthermore, the Petroleum Administration for War, a federal agency created by President Franklin D. Roosevelt, required production methods like vertical drilling to get the crude out of the ground as quickly as possible.
The Court easily found that Chevron’s conduct “related to” its contractual obligation to supply the federal government with avgas to power the Allies’ air campaign against Nazi Germany and Imperial Japan. “Relating to” does not require Chevron to show that the federal government invited the challenged conduct, as the State of Louisiana argued.
Finally, the Court rejected the State’s alternative theory that this case turns on the federal officer removal statute’s “acting under” requirement. The State argued that Chevron did not act under the direction of a federal officer because there was no federal contract to produce crude. Justice Thomas wrote that such a finding is inconsistent with the statutory text because it would render the “relating to” requirement with no independent function.
The US Supreme Court’s unanimous ruling in Chevron v. Plaquemines was an easy one for the Court to reach. The strength and breadth of the high court’s decision sends a clear message: these lawsuits belong in Federal court. This decisive ruling upholds the rule of law and should help to bring an end to the legal uncertainty and courtroom chaos created by these meritless lawsuits over a decade ago.
We are hopeful the Fifth Circuit will move swiftly in carrying out further proceedings that are consistent with the Supreme Court’s ruling and urge state and parish leaders to abandon this misguided litigation scheme once and for all.
Sarah Harbisonis general counsel at the Pelican Institute for Public Policy.
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