Ninth Circuit Rebuffs Shell’s Declaratory Judgment Act Suit

by BakerHostetler

The Ninth Circuit recently rejected “a novel litigation strategy” under the Declaratory Judgment Act (DJA). Shell Gulf of Mex. v. Ctr. for Biological Div., 13-35835 (9th Cir. Nov. 12, 2014) (Slip Op.). According to the Ninth Circuit, a beneficiary of a federal agency action cannot establish a case or controversy under Article III in a DJA action against nongovernment parties where the legal interests of the beneficiary and the federal agency are not adverse. The court reached this determination notwithstanding the fact that the DJA suit was filed against groups vehemently opposed to the agency action that had threatened litigation. This opinion may reduce the potential strategies that a beneficiary can employ to protect its rights from the threat of litigation regarding a federal agency decision under the Administrative Procedure Act (APA).

This lawsuit began as a result of Shell Gulf of Mexico’s (Shell) efforts to explore the Arctic for oil and gas development. In order to do so, Shell obtained lease rights to areas in the Beaufort and Chukchi Seas from the federal government and as part of this process submitted oil spill response plans with the federal Bureau of Safety and Environmental Enforcement (BSEE) for approval. The BSEE approved the plans in accordance with the Oil Pollution Act. During the review period a large number of environmental organizations opposed the approvals and threatened to sue if the BSEE granted its approval.

In an effort to stave off legal challenges to its offshore oil and gas operations, Shell filed suit against several environmental organizations under the Declaratory Judgment Act seeking a decision from the district court that the BSEE’s approval of the oil spill response plans did not violate the APA. The purpose of this suit was to obtain “a swift determination of the legality of the approval so it could conduct exploratory drilling without worrying that the environmental groups would seek to overturn the Bureau’s approval of the spill response plans” on the eve of operations. Slip Op. at 4. The environmental groups moved to dismiss the action, arguing that there was no case or controversy to decide. The district court denied their motion and granted summary judgment to Shell. The environmental groups appealed.

On appeal, the Ninth Circuit noted that the purpose of the DJA is “to allow potential defendants to file preemptive litigation to determine whether they have any legal obligations to their potential adversaries.” Slip Op. at 7. However, the court recognized that the DJA does not create new substantive rights or expand the jurisdiction of the courts, and thus the focus of whether a case or controversy exists is the law underlying the request for a declaratory judgment. Id. at 8. The APA allows for actions against federal agencies; it does not allow for claims against private parties. Id. Accordingly, “with respect to declaratory judgment claims arising out of the APA, the relevant ‘adverse legal interests’ are held by a federal agency and a person aggrieved by that agency’s action.” Id. at 9.

Shell’s interests and BSEE’s interests were not “adverse” because BSEE approved Shell’s plans. Thus, the court found that “Shell was not ‘aggrieved’ by the Bureau’s actions.” Id. The court also found that Shell had no legal obligation to the environmental groups because Shell is not a federal agency. Id. Given these conclusions, the court held that Shell’s legal claims presented no case or controversy.

Though this case limits an avenue of relief available to a beneficiary of a federal agency action, it does not completely close the door on DJA actions. In the Ninth Circuit, this decision will likely preclude DJA claims brought against parties other than federal agencies where the purpose of the suit is to affirm an agency decision under the APA. This case does not, however, prevent DJA claims based on other environmental laws that might provide a private right of action outside the APA.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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