Trial Lawyers and the Future of Oil & Gas in the Bayou

The Supreme Court heard oral argument last week in a case that will determine whether oil and gas companies can stop politically-connected Louisiana trial lawyers from marching them through state court proceedings over allegations that the companies’ drilling activities dating back to World War II caused coastal erosion. 

The high court hearing left little doubt about the policy merits of federal removal laws. Congressional statutes allowing contractors to transfer — or “remove,” in legal terminology — civil lawsuits from state court to federal court are nearly as old as the country itself. Arguing for the oil companies, veteran Supreme Court advocate Paul Clement quoted Daniel Webster, the famed nineteenth century Senator and diplomat, who defended Congressional removal statutes as necessary to protect federal policies that were “popular nationally and unpopular locally.” In the immediate aftermath of Independence, these laws protected federal officers who prosecuted the War of 1812, which was fiercely opposed in the northeast. Today, they protect contractors working with federal agencies to secure the border.   

The coastal lawsuits — more than 40 are pending in Louisiana state courts — are a poster child for federal removal. Current federal law permits the removal of civil cases “relating to” federal contracts. Congress added the term “relating to” in 2011 to expand the scope of cases that could be removed to federal court. The word choice matters. When Congress amended the removal statute, the Supreme Court had already instructed lower federal courts to interpret the common statutory term “relating to” broadly, in accordance with the ordinary meaning of the term. If the oil and gas companies’ exploration activities undertaken to satisfy wartime contracts to supply the Allies don’t clear this low bar, it’s hard to imagine what would. 

In an encouraging sign for the rule of law, the operative statutory text loomed large at the high court hearing. The term “relating to” exerted a gravitational pull over the proceeding, providing the basis for numerous questions from justices across the philosophical spectrum. Virtually all of the justices, moreover, appeared to read the term in accordance with its plain meaning. Justice Elena Kagan captured the group vibe when she made a passing comment that “relating to” is a “pretty broad” term.  

Only Justice Ketanji Brown Jackson raised the possibility that Congress may not have meant what it said when it last revised the removal statute. The justice questioned whether the “Conforming Amendment” caption that accompanied the additional term in 2011 indicated that Congress intended it as a non-substantive change, like alterations to the numbering or lettering of a statutory scheme for which conforming amendments are sometimes used. 

The ensuing exchange over the legal status of conforming amendments, however, is unlikely to affect the outcome of the case. In a 2008 opinion authored by Justice Ruth Bader Ginsburg, the Supreme Court unanimously rejected arguments that Congressional captions trump the plain meaning of the text that’s enacted into law. Furthermore, the legislative history cuts against a non-substantive interpretation here. The House report on the 2011 amendment confirms that the new language served a material purpose — namely, to “broaden the universe” of cases that can be removed to federal court. Perhaps for this reason, none of the plaintiffs taking on the oil and gas companies raised the argument in their briefing. The theory instead came from a lone friend-of-the-court brief from a non-party. 

Amy Howe commented in her recap of the proceedings at SCOTUSblog that the justices seemed concerned “about the scope” of the oil company’s proposed standard for determining whether a lawsuit “relates to” a federal contract. Another reading of the courtroom is possible. Since it seemed obvious to the justices that the drilling activities at the heart of the coastal cases “relate to” the oil and gas companies’ federal contracts, their questions on the scope of the statutory language were more about elaborating a judicially workable framework to help lower court federal courts decide future removal cases than they were about signaling the outcome of this case. 

For this reason, none of the justices pushed back on the basic premise for why removal is warranted in the coastal litigation: the drilling at issue in these cases was required to produce crude oil, which was an essential ingredient needed to fulfill World War II era federal contracts for aviation fuel (“avgas”). After Louisiana’s Solicitor General Benjamin Aguiñaga tried to attenuate the crude production from the avgas contracts by noting that 70 percent of crude output went to civilian use, Clement slammed the door on this line of attack, remarking that during World War II, civilian uses meant “the homefront.” Justice Brett Kavanaugh drew further attention to the close connection between the war and the avgas contracts when he highlighted a friend-of-the-court brief from two retired chairmen of the Joint Chiefs of Staff, who argued that U.S. petroleum production was crucial to the successful war effort. In the span of a few years, America’s industrial base was transformed to supply munitions and other essential supplies to support Allied forces around the globe. This would not have occurred without the drastic increase in oil and gas production enabled by the wartime contracts. If the justices doubted this tight federal nexus, their skepticism wasn’t visible at argument.   

The hearing also resurfaced the practical consequences of the removal decision. In response to questioning from Justice Kavanaugh about “the fairness of the state court system” in Louisiana, Clement noted the stark difference in outcome between two land-loss cases brought in federal and state courts. The state case returned a $745 million verdict based on claims that the federal case rejected as barred by state law. 

Indeed, former U.S. Attorney General William Barr has described the state proceedings as a “kangaroo court.” The plaintiffs’ firm, which won the nuclear verdict, donated to the judge's election campaign. The same private firm also contributed to the campaign of Louisiana’s governor, who, as attorney general, agreed to work with the firm to bring coastal erosion lawsuits. The agreement prohibits the state from recognizing meritorious defenses raised by the oil companies. 

As private plaintiffs’ attorneys and the state have teamed up to seek damages from oil and gas companies, investment capital has fled Louisiana for places offering greater legal certainty. Meanwhile, the state’s oil and gas production has dropped to less than 3 percent of the U.S. total, down from 7 percent in 2009, costing billions in lost wages and royalties. 

A Supreme Court ruling directing the coastal lawsuits to federal court won’t just deliver a win for the rule of law. It could also help Louisiana shake its reputation as a major litigation risk.  

Michael Toth is the Director of Research at the Civitas Institute at the University of Texas at Austin.