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Legal Update

US Supreme Court Issues Opinion in American Electric Power Co. v. Connecticut

21 June 2011
Mayer Brown Legal Update

In Massachusetts v. EPA, 549 U.S. 497 (2007), the Supreme Court held that the Clean Air Act authorizes federal regulation of emissions of carbon dioxide and other greenhouse gases. In American Electric Power Co., Inc. v. Connecticut, No. 10-174, the Court held that the Clean Air Act and EPA action authorized by the Act displace any claims for abatement of carbon-dioxide emissions under the federal common law of public nuisance.

In July 2004, two groups of plaintiffs—eight States and New York City, and three nonprofit land trusts—filed suit against five electric-power companies in the Southern District of New York, alleging that the companies “are the five largest emitters of carbon dioxide in the United States.” Slip op. 4. The plaintiffs, respondents in the Supreme Court, asserted that the defendants’ emissions violated the federal common law of interstate nuisance by creating a “substantial and unreasonable interference with public rights.” Id. In the alternative, the plaintiffs alleged a violation of state tort law. They sought an injunction requiring each of the defendants to comply with an initial cap on carbon-dioxide emissions, which would be reduced annually.

The district court dismissed the suits on the ground that they presented non-justiciable political questions, but the Second Circuit reversed. The court of appeals held that the suits were not barred by the political-question doctrine; that the plaintiffs adequately alleged Article III standing; that their complaint stated a claim under the federal common law of nuisance; and that the Clean Air Act did not displace federal common law. In finding that the Act did not preempt the common law of interstate nuisance, the Second Circuit reasoned that EPA had not yet spoken “directly” to this “particular issue” because it had not completed the rulemaking process with respect to greenhouse gases. Slip op. 6.

The Second Circuit’s exercise of jurisdiction was affirmed by an equally divided Supreme Court. On the merits, however, the Court reversed by a vote of 8 to 0. (Justice Sotomayor, who was originally a member of the Second Circuit panel that decided the case but was elevated to the Supreme Court before the panel’s decision was issued, did not participate in the case.)

In an opinion by Justice Ginsburg, the Court recognized that a “new” federal common law has emerged in the wake of the Court’s statement in Erie R. Co. v. Tompkins, 304 U.S. 64, 78 (1938), that “[t]here is no federal general common law.” Slip op. 6. The Court acknowledged that this specialized federal common law encompasses the subject of “air and water in their ambient or interstate aspects.” Id. at 7 (quoting Illinois v. Milwaukee, 406 U.S. 91, 103 (1972)). But the Court declined to decide the “academic question” whether the plaintiffs could ever state a federal common law claim of nuisance, because “[a]ny such claim would be displaced [here] by the federal legislation authorizing EPA to regulate carbon-dioxide emissions.” Id. at 9.

The Court held that the Clean Air Act and EPA’s actions under it displace any federal common-law right because the Act “speaks directly” to the question at issue—namely, the emission of carbon dioxide by the defendants. Slip op. 10. The Court explained that the Act puts in place a comprehensive regulatory program. It directs EPA to list categories of sources that contribute significantly to air pollution; requires EPA to establish standards of performance for emission of pollutants within those categories; obligates EPA to issue guidelines for existing sources within the categories; and directs States to promulgate performance standards in compliance with those guidelines. Private parties may petition for a rulemaking, and EPA’s response is reviewable in federal court. In that connection, the Court noted that EPA is currently engaged in rulemaking to set standards for greenhouse gas emissions from fossil-fuel fired power plants. As the Court explained, “[t]he Act itself thus provides a means to seek limits on emissions of carbon dioxide from domestic power plants—the same relief the plaintiffs seek by invoking federal common law.” Id. at 11.

The Court rejected the plaintiffs’ argument that federal common law is not displaced until EPA actually sets standards. That the Clean Air Act permits emissions until EPA exercises its authority is inconsequential, the Court said; “[t]he critical point is that Congress delegated to EPA the decision whether and how to regulate carbon-dioxide emissions from power plants, [and] the delegation is what displaces federal common law.” Slip op. 12 (emphasis added). As the Court put it, there is “no room for a parallel track.” Id. at 11. The Court also noted that this is an exercise of authority for which EPA is better suited as federal judges “lack the scientific, economic, and technological resources an agency can utilize in coping with issues of this order” and “lack authority to render precedential decisions binding other judges.” Id. at 14.

The Court did not reach the question whether a claim under state nuisance law was available. That question had not been resolved by the Second Circuit, and so the Court left it to be addressed on remand.

In an opinion concurring in part and concurring in the judgment, Justice Alito, joined by Justice Thomas, stated that he agreed with the Court’s displacement analysis, but only on the assumption that the Court’s prior interpretation of the Clean Air Act in Massachusetts v. EPA is correct.

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