City of New York v. Exxon Mobil Corp., 2024 WL 2091994, No. 21-CV-4807 (VEC) (S.D.N.Y. May 8, 2024)
Being a multitrillion-dollar
corporation means you can survive a “ridiculous” argument or two. Here, the
city successfully wins remand (and a fee award) in this opinion rejecting
removal of its false advertising suit against Exxon, other fossil fuel
companies, and their top trade association for violations of New York City’s
Consumer Protection Law. Following a similar case, Connecticut v. Exxon Mobil
Corp., 83 F.4th 122 (2d Cir. 2023), the court understandably refuses to
distinguish it.
The complaint alleged
that defendants “misled consumers about the impact of their products on the
climate and falsely represented themselves as corporate leaders in the fight
against climate change.”
Defendants removed,
alleging (eventually) six bases for federal jurisdiction: (1) the City’s claims
arise under federal common law because they implicate transboundary pollution
and foreign affairs; (2) the action falls under the federal officer removal
statute, 28 U.S.C. § 1442(a)(1); (3) Defendants’ production and sale of fossil
fuels occur on “federal enclaves;” (4) the Court has diversity jurisdiction
over the action under the fraudulent joinder doctrine; (5) the action is
removable under the Class Action Fairness Act; and (6) the City’s claims
include federal constitutional elements.
The federal removal
statute allows a defendant to remove to federal court “any civil action brought
in a State court of which the district courts of the United States have
original jurisdiction.” “[O]ut of respect for the limited jurisdiction of the
federal courts and the rights of states,” federal courts must “resolv[e] any
doubts against removability.” The “well-pleaded complaint rule” provides that
federal question jurisdiction “exists only when a federal question is presented
on the face of the plaintiff’s properly pleaded complaint.” However, a
plaintiff cannot defeat federal question jurisdiction by pleading its complaint
as if it “arises under state law where the plaintiff’s suit is, in essence,
based on federal law.” Nonetheless, federal question jurisdiction cannot be
created “on the basis of a federal defense, ... even if the defense is
anticipated in the plaintiff’s complaint, and even if both parties concede that
the federal defense is the only question truly at issue.” There are only three
circumstances in which a complaint that does not allege a federal claim may
nevertheless “arise under” federal law for purposes of removal: “(1) if
Congress expressly provides, by statute, for removal of state-law claims; (2)
if the state-law claims are completely preempted by federal law; and (3) in
certain cases if the vindication of a state-law right necessarily turns on a
question of federal law.”
Federal common law
that completely preempts state claims based on transboundary pollution and
foreign affairs: That’s not a thing. False advertising claims “do not become
claims about transboundary pollution and foreign affairs just because the
alleged deception relates to the impact of fossil fuels on the climate.” Plus, “there
is no indication that Congress expressly authorized or intended to completely
preempt state laws that have a glancing relationship to transboundary pollution
or foreign affairs,” and the constitutional structure doesn’t do that all on
its own. “Even if federal common law could, in the abstract, have complete
preemptive effect, it would not preempt Plaintiff’s claims, which are
garden-variety false advertising claims…. There is simply no conflict between
the State’s interest in ensuring its consumers are not misled by false
advertising and any federal interest in regulating environmental pollution.” So
too with foreign affairs: “[T]his Court cannot imagine any state of affairs
under which [foreign affairs] would be affected by an order enjoining
Defendants from disseminating misleading ads in New York City.”
Federal officer
removal: The federal officer removal statute permits removal of a state court
civil action “that is against or directed to ... any officer (or any person
acting under that officer) of the United States or of any agency thereof ...
for or relating to any act under color of such office.” For non-federal
officers to invoke this statute, they “must (1) show that [they are] a person
within the meaning of the statute who acted under a federal officer, (2) show
that [they] performed the actions for which [they are] being sued under color
of federal office, and (3) raise a colorable federal defense.” They did not.
Federal enclave
jurisdiction: This is the “silliest” of defendants’ argument. Section 8 of
Article I of the U.S. Constitution authorizes Congress “[t]o exercise exclusive
Legislation in all Cases whatsoever ... over all Places purchased by the
Consent of the Legislature of the State in which the Same shall be, for the
Erection of Forts, Magazines, Arsenals, dock-Yards, and other needful
Buildings.” Defendants’ theory, “contrary to fact,” was that the complaint
targets their extraction, production, and sale of fossil fuels, including
“operations that occur on military bases and other federal enclaves.” Also, the
advertising the City alleged is false reaches federal enclaves, i.e., “API’s
Super Bowl ads reach federal enclaves, such as Ellis Island and Fort Tilden.” This
is silly because (1) the complaint doesn’t target extraction, production, and
sale of fossil fuels, and (2) the “advertising reaches federal enclaves”
argument is “ridiculous” and would federalize “all consumer protection laws
that relate to advertisements (and probably everything else); it is
self-evident that all advertisements on the internet, television, radio and in
newspapers can be viewed or heard by persons who happen to be in a federal enclave.”
Diversity
jurisdiction: Defendants argued that the only non-diverse party, ExxonMobil,
was fraudulently joined. Not so.
CAFA: This was “[s]econd
in absurdity.” The City was suing under its parens patriae power, not as a class
action. As the court pointed out, the City can sue without proof that consumers
have actually been injured, “a far cry from the basic requirement in Rule 23
that a class representative have a representative injury.”
First Amendment: Federal
jurisdiction where a complaint doesn’t state a federal claim exists if a
federal issue is: “(1) necessarily raised, (2) actually disputed, (3)
substantial, and (4) capable of resolution in federal court without disrupting
the federal-state balance.” For a federal issue to be “necessarily raised,” the
“mere presence of a federal issue in a state cause of action” is inadequate;
the question of federal law must be “a necessary element of one of the
well-pleaded state claims.” The false advertising claim would “necessarily
raise” a federal issue only if it was “affirmatively ‘premised’ on a violation
of federal law.” But they didn’t: the false advertising claim requires that
defendants (1) engaged in “deceptive or unconscionable trade practice[s]” and
(2) those practices involved “consumer goods or services.”
Still, defendants
argued that their speech was on a matter of public concern, so the court couldn’t
resolve the misrepresentation claims without addressing whether the First Amendment
protected the advertising. That argument confused a defense (the statements
were truthful protected speech) with an element of the city’s claim. “If the
law were as Defendants urge, every libel, slander, and false advertising claim
in the country” would be removable.
Fee-shifting in unsuccessful
removals is up to the district court’s discretion, but should deter “removals
sought for the purpose of prolonging litigation and imposing costs on the
opposing party.” Here, the Second Circuit rejected three of the (initially)
seven grounds for removal defendants argued, plus three that weren’t before the
Second Circuit, but had been “roundly rejected by countless courts throughout
the country.”
Even if removal was
in good faith before the Second Circuit’s ruling, the renewed motion to remand
was briefed afterwards, and it made multiple already-rejected arguments. The
court found it appropriate to award costs and fees “in connection with
arguments that it was not reasonable for Defendants to press when the City
renewed its motion for remand: arguments that had largely been decided by the
Circuit in Connecticut – federal common law, federal officer removal,
and First Amendment defenses, and those that were objectively absurd – federal
enclaves and CAFA.” Only the diversity jurisdiction argument was not
unreasonable.
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