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Climate Change: Will Property Owners Weather the Flood?
Real Estate Newsletter
Property owners, particularly those in low-lying areas along the ocean or other tidal waterways, have begun to realize that climate change could affect them dramatically in the not-so-distant future. Since 2004, there have been more than a dozen actions by a variety of affected parties around the country to quell the release of greenhouse gases (GHGs) into the atmosphere. To date, these actions have availed little. None has proceeded beyond the pleading stage. Nonetheless, the proponents of these actions, including both private parties and state attorneys general, have worked to assert common law theories of liability in innovative ways. In particular, these proponents have tried to adopt theories used in toxic tort and environmental litigation involving the gasoline additive Methyl tertiary Butyl Ether (MtBE) as a paradigm for GHG litigation. Although GHG litigation is still in its nascency, it could have far reaching consequences for both property owners and GHG producers (which, significantly, will often be the same). Greenhouse Gas – The Emergence of a Tort
In Massachusetts v. United States Environmental Protection Agency, 127 S.Ct. 1438 (2007), the U.S. Supreme Court found that the EPA has the statutory authority to regulate CO2 emissions from motor vehicles as air pollution under the Clean Air Act. The Court found that C02 emissions are plainly linked to global warming, stating that “the EPA does not dispute the existence of a causal connection between manmade greenhouse gases and global warming.” The Supreme Court’s ruling is significant in that it arguably recognizes a causal link between GHG emissions and resulting damage, although some might argue this is leaning on a thin reed, indeed. Plaintiffs’ Unsuccessful GHG Theories
Whatever the conclusion about the effect of GHGs, the Massachusetts case clearly is only a beginning. As with early litigation involving MtBE, courts have to date met plaintiffs’ claims in GHG litigation with skepticism. In Connecticut v. American Electric Power Co., Inc., 406 F.Supp.2d 265 (S.D.N.Y. 2005) (AEP), for example, several states brought claims against CO2 emitters to abate what the plaintiffs described as the “public nuisance” of global warming. The court dismissed the claims, holding that the suit raised nonjusticiable political questions.
In Native Village of Kivalina and City of Kivalina v. ExxonMobil Corp, No. CV08-1138-SBA (N.D.Cal. Feb. 26, 2008), defendant oil and utility companies moved to dismiss plaintiffs’ nuisance claims alleging that defendants’ GHG emissions were causing property damage from flooding. Kivalina, threatened by erosion for several decades, faced a recent increase in the frequency and intensity of storms, melting of permafrost, and shoreline erosion, forcing the coastal Alaskan village into a state of emergency. (United States Army Corps of Engineers Kivalina Relocation Master Plan, Executive Summary (June 2006).) Erosion threatened several structures and the village’s airstrip, and in 2006, the U.S. Army Corps of Engineers determined that the entire town needed to relocate by 2012 at a cost ranging from $123 million to $249 million.
The complaint alleges that the “planet’s natural systems take hundreds of years to absorb carbon dioxide”; consequently, “defendants’ past emissions remain in the atmosphere and are contributing now to Kivalina’s harms and will continue to do so for years to come.” Plaintiffs seek hundreds of millions in compensation and relocation costs. Defendants assert that plaintiffs cannot show defendants are a factual and legal cause or a substantial factor of the flooding. More importantly, the defendant companies argue that the Clean Air Act displaces the authority of the courts to regulate nationwide GHG claims. In 2008, ExxonMobil made a motion to dismiss the complaint. The court has yet to rule on the motion. Further Challenges in Applying Product Theories to GHG Claims
In light of Massachusetts, the policy and political questions fatal to these early GHG cases will eventually be resolved, leaving plaintiffs free to craft liability theories based upon GHG as a toxic pollutant. They will face substantial challenges in doing so.
Identifying a ‘Product.’ Product liability theories of recovery by definition originate with a product. Yet GHG emissions are not a product in and of themselves; they are a byproduct of manufacturing. Unlike automobiles, for example, the majority of GHG emissions come from stationary sources that produce products that do not emit GHGs. To overcome this hurdle, plaintiffs will likely focus on Massachusetts’ definition of CO2 as an air pollutant, arguing that GHGs emitted into the atmosphere are no different than MtBE released into drinking water.
Identifying a Design Defect. Plaintiffs in GHG litigation might also contend that GHGs are the result of design defects. Application of this analysis in the context of GHGs is problematic. The test most often applied in design defect litigation is a risk-benefit analysis. The core issues are whether the product performs as safely as can reasonably be expected when put to a reasonably foreseeable use, and whether the risk of the design outweighs its benefits.
In GHG litigation, plaintiffs will be challenged to show that the risks of GHG emissions outweigh the benefits. Among the largest GHG emitters are fossil fuel companies, utilities and automobile manufacturers. The notion that an automaker defectively designed its vehicles or a power plant used fossil fuels in such a way that they emitted an unacceptable amount of GHG is likely to be tenuous. Few would argue that the benefits of such technology are not substantial: Society needs transportation, warm homes and lights at night. Further, the costs associated with significantly reducing these emissions could be staggering. (Cass R. Sunstein, Irreversible and Catastrophic, 91 Cornell L. Rev. 841, 881-82 (2006).)
The risk-benefit analysis also requires consideration of economic risks associated with increased regulation, such as lower productivity and economic downturns. Plaintiffs must address the fact that significant modifications “are often too costly to be justified.” (Robert D. Klein, A Comparison of the Restatement (Third) of Torts: Products Liability and the Maryland Law of Products Liability, 20 U. Balt. L. Rev. 273, 284 (2001).) Courts must strike a balance “between interests seeking strict schemes to reduce pollution rapidly to eliminate its social costs and interests advancing the economic concern that strict schemes [will] retard industrial development with attendant social costs.” (Chevron U.S.A. Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 847 (1984).)
Failure to Warn. Plaintiffs will likely find it difficult to prevail under a failure to warn theory, as well. Traditional failure to warn theory requires foreseeability and a duty to warn after the manufacturer becomes aware of a defect. (Imaging Business Machines v. BancTec, 459 F.3d 1186, 1190 (11th Cir. 2006).) The duty is imposed on all parties in the chain of distribution. Plaintiffs will likely argue the enormous amounts of GHG emissions were foreseeable, and if the manufacturer or utility had warned of the risks, plaintiffs could have purchased alternative products or power. This creates barrier questions: how does an emitter foresee the alleged “damage to the planet,” given that GHGs have been produced for more than a century? What emission level is “too high,” triggering the duty to warn?
Market Share Liability. Historically, “traditional” tort liability theories have proven inadequate in cases involving multiple manufacturers, generic products, and long latency periods. In Sindell v. Abbott Laboratories, 26 Cal.3d 558, 144, 607 P.2d. 924, 936 (1980), the California Supreme Court recognized that in a “complex industrialized society . . . fungible goods which may harm consumers and which cannot be traced to any specific producer” will exist. The court proceeded to expand the scope of alternative liability theories to create market share liability.
Plaintiffs successfully applied market share liability in MtBE litigation by suing numerous defendants on theories of design defect and failure to warn of MtBE’s health and environmental effects. (In re Methyl Tertiary Butyl Ether Products Liability Litigation, 379 F.Supp.2d 348, 364-65 (S.D.N.Y. 2005).) There, the court had before it multiple manufacturers, distributors and end purchasers of a product that caused harm that could not be traced to a specific defendant. Allowing plaintiffs’ claims to proceed, the court fashioned the “commingled product market share liability” theory – market share liability incorporating elements of concurrent wrongdoing.
The court reasoned that MtBE was a “fungible product” because all brands are interchangeable, and different concentrations of MtBE in different batches of gasoline do not affect its ability to contaminate groundwater. Allowing plaintiffs’ claims to proceed, the court reasoned that if plaintiffs could prove many products were commingled “at the time and place that the risk of harm occurred, and the commingled product caused a single indivisible injury, then each of the products should be deemed to have caused the harm.” The court narrowly tailored liability to “fungible products that pose equivalent risks to users who have no reasonable means to prove which manufacturer provided the product that caused plaintiff’s harm.” Moreover, “[o]nly products that cause harm after a lengthy latency period between exposure and development of harm are likely to create the systematic proof problems that market share liability addresses.”
Plaintiffs will undoubtedly seek to use market share liability theories to press GHG claims. However, GHGs have no physical boundaries and freely migrate through the atmosphere, where they remain for decades. Like MtBE, GHGs lack a chemical structure that would enable them to be traced to a specific manufacturer or utility. Finally, GHGs have a long latency period between exposure and harm, which is likely to create proof problems for plaintiffs that only the commingled product theory of market share liability can address.
Unlike other products or toxins, however, a single emission source for GHGs is highly unlikely to be toxic by itself. A single drug alone might cause substantial harm. A single emitter will almost never be responsible for more than the smallest fraction of GHGs. Moreover, since GHGs can migrate over vast areas, the measure for market share is extremely problematic.
State of the Art. The “state of the art” defense exists where a particular product’s risk was neither known nor knowable at the time of manufacture or distribution. Plaintiffs will argue that defendants knew of and deliberately ignored cleaner technologies. However, “scientific knowledge” about the effects of GHG emissions has been the subject of controversy. Additionally, alternative designs currently available to reduce GHGs are highly expensive and often unfeasible.
Preemption. Finally, federal preemption is also of concern. Courts have found it significant that Congress made specific findings refusing to impose limits on carbon dioxide emissions. In Central Valley Chrysler-Jeep v. Witherspoon, 456 F.Supp.2d 1160 (E.D. Cal. 2006), automobile dealers challenged the California Air Resources Board’s authority to regulate GHG emissions from motor vehicles sold in the state. The court held that such regulation was preempted by the Clean Air Act absent an EPA waiver. Recently, in denying California’s request for a waiver, the EPA stated that there was an overriding need for uniform federal standards for air quality. Further, federal preemption in product litigation continues to gain traction in courts. (See, e.g., Rigel v. Medtronic, Inc., 128 S.Ct. 999 (2008).) The EPA’s regulation of air pollutants may provide the underpinnings for the development of a preemption defense in GHG litigation. Conclusion
Litigation over GHGs is just beginning, and the science surrounding global warming is far from absolute. Rising sea levels and increasing storms, however, are already impacting the development and planning of real estate. It is unclear where it will end. But one thing is certain: it will take some time before the law develops to a point where the affected parties know where they stand.
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