The coal giant Peabody did not dispute its product's impact on the environment in its court filing, just that its bankruptcy deal precludes them being held accountable. Photo credit: Spencer Platt/Getty Images

By Ucilia Wang

Three coastal California communities suing fossil fuel companies over their role in climate change are now heading to a bankruptcy court to stop the largest coal producer in the country from claiming it can’t be held accountable.

Peabody Energy emerged from bankruptcy on April 3 with a court-approved plan to reorganize the company. In a motion filed last week, the company argued that the plan protects it from lawsuits that deal with its operations before April 3.

“They are trying to avoid responsibility for their action by hiding behind the bankruptcy,” said Vic Sher, a partner in Sher Edling, the San Francisco law firm representing the three communities.

The lawsuits, filed by San Mateo County, Marin County and the city of Imperial Beach, contend that 36 oil, coal and gas companies have emitted a significant amount of greenhouse gases, contributing to climate change and its impacts, including  sea level rise, severe flooding and other problems that have caused major damage to private and public properties along their coastlines. The lawsuit asserts that the companies collectively generated roughly 20 percent of the global carbon dioxide and methane emissions between 1965 and 2015, and should be responsible for a commensurate amount of the damages.

The lawsuits, filed in California courts in July, named some of the biggest fossil fuel companies in the world, including Chevron, ExxonMobil and Shell.

Peabody spokeswoman, Beth Sutton, said in a statement, “We believe the case is without merit and will vigorously defend against it.”

Peabody’s argument that it should be left out of the lawsuits isn’t unusual, said Ken Ayotte, a professor of corporate finance and bankruptcy at the University of California at Berkeley School of Law.

“Bankruptcy reorganization discharges most liabilities caused by a company’s conduct prior to the bankruptcy,” Ayotte said. “So Peabody is arguing that these communities can’t go after the reorganized company because of the bankruptcy discharge, which seems like a valid argument.”

Sher said he will point out the “well-established exceptions” to that rule when he files a response to Peabody’s motion, which is due Sept. 25. He declined to discuss his argument in detail.

The lawsuits have attracted national attention because they are attempting to hold fossil fuel companies accountable for the impact of climate change in  state courts.  

Previously, similar lawsuits were unsuccessfully argued  in federal courts. In a few key cases, including American Electric Power v. Connecticut, which reached the Supreme Court in 2011, judges ruled that the courts couldn’t intervene because the Environmental Protection Agency is responsible for regulating greenhouse gas emissions.

Those precedents could have been why the companies filed a notice last month to move the lawsuits to U.S. District Court. The companies argued that the lawsuits deal with federal regulations, including their contracts with the U.S. government to extract and sell fossil fuels.

The companies are “seeking to move the case out of where people are most in touch with what’s happening,” said Kathy Mulvey, climate accountability campaign manager for the Union of Concerned Scientists. “The impacts of climate change are very much at the local level.”

Many of the climate change-related cases, such as the ones in California, contend that the fossil fuel companies took actions they knew would harm people and property. The plaintiffs, including the employees and investors of some of the companies, pointed out that these corporate giants have carried out research that showed global warming was taking place, but they downplayed the risks publicly and funded organizations to cast doubt on climate science.  

The California lawsuits said Peabody and other companies were negligent in their business practices by generating an enormous amount of emissions and failing to disclose the risks and impacts.

Marin County, for example, estimated that the damage to homes and other structures from rising sea levels could reach nearly $16 billion by the end of the century.

One of the big challenges for the plaintiffs is to prove the companies are directly responsible for the problems cited by the municipalities, said Tseming Yang, an environmental law professor at the Santa Clara University School of Law.

“Even if there’s no question on science and the court accepts that, you still have to establish a causation and link the injuries you are suffering to the actions of the defendants. These aren’t the only companies that contribute to climate change,” Yang said.

The California plaintiffs haven’t specified how much money they are seeking through the lawsuits. They will be asking for compensations to deal with the impacts of climate change from the past and into the future, Sher said.

“The key concept is that even if the emissions ended now, the impacts from the emissions that already occurred will continue to be severe and in fact will grow,” he said.

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