12 May 2020

Eighth Circuit Affirms Discharge in Bankruptcy of Common Law Climate Change Claims

On May 6, in In re: Peabody Energy Corp., a unanimous panel of the U.S. Court of Appeals for the Eighth Circuit held that certain climate-change-related claims had been discharged in Peabody Energy’s Chapter 11 bankruptcy plan. Three municipalities had brought state common law claims for negligence, trespass, nuisance and strict liability against energy companies, including Peabody, asserting that the companies contributed to global warming that has caused damage to the municipalities. Peabody removed the matter to federal bankruptcy court, which ruled that Peabody’s Chapter 11 plan had discharged the municipalities’ claims. The plan “exempts from discharge governmental claims brought ‘under any applicable Environmental Law to which any Reorganized Debtor is subject.’” The plan defined “Environmental Law” as “all federal, state and local statutes, regulations and ordinances concerning pollution or protection of the environment, or environmental impacts on human health and safety … and any state or local equivalents of the foregoing,” and named 10 federal environmental statutes, including the Clean Air Act and the Comprehensive Environmental Response, Compensation, and Liability Act.

On appeal, the municipalities argued that their common law claims were “state or local equivalents” of environmental law claims brought to protect the environment. The Eighth Circuit disagreed, finding that the bankruptcy court reasonably interpreted the plan’s exemption for “Environmental Law” to include claims arising under federal, state or local statutes that only directly concern “pollution or protection of the environment, or environmental impacts on human health and safety” and that “are designed to remedy particular environmental problems.” By contrast, while the municipalities’ common law claims may resolve environmental problems, the claims do not focus on such problems. Moreover, the court reasoned, had the plan intended to also exempt from discharge any common law claims, those claims should have been exempted explicitly or the exclusion should not have been limited to statutes, regulations and ordinances.