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San Diego Businesses: Do I Have to Worry About Climate Change Litigation?

Climate change litigation is becoming an increasing threat to businesses here in San Diego and throughout California. At the moment, the targets of climate change litigation are big publicly held companies. Just last summer, the federal court in San Francisco dismissed climate change litigation against four of the five largest investor-owned producers of fossil fuels worldwide — Exxon Mobil Corporation, BP p.l.c., Royal Dutch Shell plc, and ConocoPhillips. According to the plaintiffs, the City of Oakland and the People of California and others, these four companies are responsible for 11% of the trapped carbon dioxide gas that has accumulated in the atmosphere. See City of Oakland v. BP, PLC, Nos. C 17-06011 WHA, C 17-06012 WHA (US Dist. N.D. Cal. July 27, 2018).

The claim was based on the legal concept of public nuisance — a person or business has engaged in some sort of activity that causes a danger to property or to lives or to the public health and safety. The plaintiffs alleged that the fossil fuel companies were aware of the dangers but continued extracting the oil and gas anyway. The court agreed that climate change was serious, but dismissed the case holding that the courts were not well-suited to handle the problem. The court held that Congress and the politic branches should determine how to proceed. See news report here.

Another notable case is pending in Germany called Lliuya v. RWE AG. In that case, a farmer in Peru filed suit against a Germany energy company called RWE, AG. Mr. Lliuya lives on a small farm in Huaraz, Peru, a small city in the Andes situated below a glacial lake. Mr. Lliuya alleges that global warming, caused in part by RWE, AG, has cause the glacier to melt, posing serious risk of flooding from the lake and overflow. His home and his farm are at risk, according to his complaint. As with the case filed by the City of Oakland, the claim is based on the concept of nuisance and property damage. The case was originally dismissed by a German trial court, but was reinstated by an appeals court. See news report here.

Aside from nuisance and property damage claims, climate change cases have also alleged causes of action on these legal theories:

  • Human rights violations
  • Deceptive business practices including non-disclosure and concealment
  • Stock-related and financing related non-disclosures (in government filings, stock sales brochures, loan applications, and similar)
  • Violation of local ordinances, licensing, permit, use-restrictions, and more

No doubt, the plaintiffs and the environmental activists who are suing will be creative and develop additional theories of potential liability. Like other mass tort and consumer litigation, the sides are digging in and we are likely to see decades worth of legal battles.

What can Your Business do?

Even though the current targets of climate litigation are large publicly held companies, eventually these types of cases may create new law and new risks for medium-sized and small business. Here are a few steps to take now:

  • Use business contracts to reduce liability risks that might come from your commercial and business partners (examples include indemnity provision, proper sourcing, and similar provisions). An experienced San Diego corporate attorney can help.
  • Be proactive and aware if there are any possible climate-related claims associated with your business.
  • Investigate insurance products that might cover any filings or cases with respect to your business.
  • If you are looking to sell your business or acquire another, climate change issues should be covered in the purchase agreements. Representations and warranties should be included whereby the seller states that it is unaware of any climate-related issue, that it has not received any notice of a climate-related change, etc.

Call San Diego Corporate Law Today

For more information, call corporate attorney Michael Leonard, Esq., of San Diego Corporate Law. Call Mr. Leonard at (858) 483-9200 or contact him via email. Mr. Leonard’s law practice is focused on business, transactional, and corporate matters and he proudly provides legal services to business owners in San Diego and the surrounding communities. Like us on Facebook.

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