Supreme Court: Federal Common Law Survives Erie — If Congress Has Statutorily Delegated an Area to Agency Expertise, the Statute Displaces (Preempts) Federal Common Law

From Am. Elec. Power Co. v. Connecticut, 2011 U.S. LEXIS 4565 (U.S. June 20, 2011):

We address in this opinion the question whether the plaintiffs (several States, the city of New York, and three private land trusts) can maintain federal common law public nuisance claims against carbon-dioxide emitters (four private power companies and the federal Tennessee Valley Authority). As relief, the plaintiffs ask for a decree setting carbon-dioxide emissions for each defendant at an initial cap, to be further reduced annually. The Clean Air Act and the Environmental Protection Agency action the Act authorizes, we hold, displace the claims the plaintiffs seek to pursue.

I

In Massachusetts v. EPA, 549 U.S. 497, 127 S. Ct. 1438, 167 L. Ed. 2d 248 (2007), this Court held that the Clean Air Act, 42 U.S.C. § 7401 et seq., authorizes federal regulation of emissions of carbon dioxide and other greenhouse gases. ***

Responding to our decision in Massachusetts, EPA undertook greenhouse gas regulation. ***

EPA and the Department of Transportation subsequently issued a joint final rule regulating emissions from light-duty vehicles, see 75 Fed. Reg. 25324 (2010), and initiated a joint rulemaking covering medium- and heavy-duty vehicles, see id., at 74152. EPA also began phasing in requirements that new or modified "[m]ajor [greenhouse gas] emitting facilities" use the "best available control technology." § 7475(a)(4); 75 Fed. Reg. 31520-31521. Finally, EPA commenced a rulemaking under § 111 of the Act, 42 U.S.C. § 7411, to set limits on greenhouse gas emissions from new, modified, and existing fossil-fuel fired power plants. Pursuant to a settlement finalized in March 2011, EPA has committed to issuing a proposed rule by July 2011, and a final rule by May 2012. See 75 Fed. Reg. 82392; Reply Brief for Tennessee Valley Authority 18.

II

The lawsuits we consider here began well before EPA initiated the efforts to regulate greenhouse gases just described. ***

IV

A

"There is no federal general common law," Erie R. Co. v. Tompkins, 304 U.S. 64, 78, 58 S. Ct. 817, 82 L. Ed. 1188 (1938), famously recognized. In the wake of Erie, however, a keener understanding developed. See generally Friendly, In Praise of Erie — And of the New Federal Common Law, 39 N. Y. U. L. Rev. 383 (1964). Erie "le[ft] to the states what ought be left to them," id., at 405, and thus required "federal courts [to] follow state decisions on matters of substantive law appropriately cognizable by the states," id., at 422. Erie also sparked "the emergence of a federal decisional law in areas of national concern." Id., at 405. The "new" federal common law addresses "subjects within national legislative power where Congress has so directed" or where the basic scheme of the Constitution so demands. Id., at 408, n. 119, 421-422. Environmental protection is undoubtedly an area "within national legislative power," one in which federal courts may fill in "statutory interstices," and, if necessary, even "fashion federal law." Id., at 421-422. As the Court stated in Milwaukee I: "When we deal with air and water in their ambient or interstate aspects, there is a federal common law." 406 U.S., at 103, 92 S. Ct. 1385, 31 L. Ed. 2d 712.

Decisions of this Court predating Erie, but compatible with the distinction emerging from that decision between "general common law" and "specialized federal common law," Friendly, supra, at 405, have approved federal common law suits brought by one State to abate pollution emanating from another State. ***he plaintiffs contend that their right to maintain this suit follows inexorably from that line of decisions.

Recognition that a subject is meet for federal law governance, however, does not necessarily mean that federal courts should create the controlling law. Absent a demonstrated need for a federal rule of decision, the Court has taken "the prudent course" of "adopt[ing] the readymade body of state law as the federal rule of decision until Congress strikes a different accommodation." United States v. Kimbell Foods, Inc., 440 U.S. 715, 740, 99 S. Ct. 1448, 59 L. Ed. 2d 711 (1979); see Bank of America Nat'l Trust & Sav. Ass'n v. Parnell, 352 U.S. 29, 32-34, 77 S. Ct. 119, 1 L. Ed. 2d 93 (1956). And where, as here, borrowing the law of a particular State would be inappropriate, the Court remains mindful that it does not have creative power akin to that vested in Congress. ***

B

"[W]hen Congress addresses a question previously governed by a decision rested on federal common law," the Court has explained, "the need for such an unusual exercise of law-making by federal courts disappears." Milwaukee II, 451 U.S., at 314, 101 S. Ct. 1784, 68 L. Ed. 2d 114 (holding that amendments to the Clean Water Act displaced the nuisance claim recognized in Milwaukee I). Legislative displacement of federal common law does not require the "same sort of evidence of a clear and manifest [congressional] purpose" demanded for preemption of state law. Id., at 317, 101 S. Ct. 1784, 68 L. Ed. 2d 114. "'[D]ue regard for the presuppositions of our embracing federal system . . . as a promoter of democracy,'" id., at 316, 101 S. Ct. 1784, 68 L. Ed. 2d 114 (quoting San Diego Building Trades Council v. Garmon, 359 U.S. 236, 243, 79 S. Ct. 773, 3 L. Ed. 2d 775 (1959)), does not enter the calculus, for it is primarily the office of Congress, not the federal courts, to prescribe national policy in areas of special federal interest. TVA v. Hill, 437 U.S. 153, 194, 98 S. Ct. 2279, 57 L. Ed. 2d 117 (1978). The test for whether congressional legislation excludes the declaration of federal common law is simply whether the statute "speak[s] directly to [the] question" at issue. Mobil Oil Corp. v. Higginbotham, 436 U.S. 618, 625, 98 S. Ct. 2010, 56 L. Ed. 2d 581 (1978); see Milwaukee II, 451 U.S., at 315, 101 S. Ct. 1784, 68 L. Ed. 2d 114; County of Oneida v. Oneida Indian Nation of N. Y., 470 U.S. 226, 236-237, 105 S. Ct. 1245, 84 L. Ed. 2d 169 (1985).

We hold that the Clean Air Act and the EPA actions it authorizes displace any federal common law right to seek abatement of carbon-dioxide emissions from fossil-fuel fired power plants. Massachusetts made plain that emissions of carbon dioxide qualify as air pollution subject to regulation under the Act. 549 U.S., at 528-529, 127 S. Ct. 1438, 167 L. Ed. 2d 248. And we think it equally plain that the Act "speaks directly" to emissions of carbon dioxide from the defendants' plants.***

If EPA does not set emissions limits for a particular pollutant or source of pollution, States and private parties may petition for a rulemaking on the matter, and EPA's response will be reviewable in federal court. See § 7607(b)(1); Massachusetts, 549 U.S., at 516-517, 529, 127 S. Ct. 1438, 167 L. Ed. 2d 248. *** The 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. We see no room for a parallel track.

C

The plaintiffs argue, as the Second Circuit held, that federal common law is not displaced until EPA actually exercises its regulatory authority, i.e., until it sets standards governing emissions from the defendants' plants. We disagree. ***

The Clean Air Act is no less an exercise of the legislature's "considered judgment" concerning the regulation of air pollution because it permits emissions until EPA acts. See Middlesex County Sewerage Auth. v. National Sea Clammers Ass'n, 453 U.S. 1, 22, n. 32, 101 S. Ct. 2615, 69 L. Ed. 2d 435 (1981) (finding displacement although Congress "allowed some continued dumping of sludge" prior to a certain date). The critical point is that Congress delegated to EPA the decision whether and how to regulate carbon-dioxide emissions from power plants; the delegation is what displaces federal common law. Indeed, were EPA to decline to regulate carbon-dioxide emissions altogether at the conclusion of its ongoing § 7411 rulemaking, the federal courts would have no warrant to employ the federal common law of nuisance to upset the agency's expert determination.

EPA's judgment, we hasten to add, would not escape judicial review. Federal courts, we earlier observed..., can review agency action (or a final rule declining to take action) to ensure compliance with the statute Congress enacted.

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