Court to hear argument in case seeking to hold companies liable for damaging Louisiana coast

When the Supreme Court returns to the bench next week for the first argument of 2026, in Chevron USA Inc. v. Plaquemines Parish, Louisiana, it will confront a thorny dispute over the circumstances in which a federal contractor can transfer a case from state to federal court. The question comes to the justices in a high-profile case brought by Louisiana parishes – the equivalent of counties in that state – seeking to hold oil and gas companies liable for damage to the Louisiana coast. A federal appeals court in New Orleans rejected the companies’ latest attempt to move the case to federal court, but now the Supreme Court will weigh in. Litigants on both sides of the dispute tell the justices that the stakes are high, not only because of the amount of money in play, but also because of what the court’s ruling could mean for other companies that do business with the federal government.

More than a half-century ago, Congress passed a law that was intended to encourage states to regulate the land and waters on their coasts by promising federal funding for states whose coastal management programs were submitted to, and approved by, the Secretary of Commerce. In 1978, Louisiana adopted the State and Local Coastal Resources Management Act, which took effect in 1980, to opt into this federal program. The law, known as the SLCRMA, requires a permit to “use” the coastal zone, which is defined as “any use or activity within the coastal zone which has a direct and significant impact on coastal waters.” The law allows lawsuits against entities that violate or do not obtain a coastal use permit; it also contains a grandfather clause, which exempts “specific uses legally commenced or established prior to the effective date of the coastal use permit program.”

In 2013, a group of Louisiana coastal parishes, along with state officials, filed 42 lawsuits under SLCRMA against oil and gas companies whose predecessors had produced crude oil along the Louisiana coast during World War II. The parishes contended that the companies violated the law by either failing to obtain proper permits or violating the terms of any permits that they did obtain. Moreover, they contended, the companies’ pre-1980 activities were not covered by the grandfather clause because they did not follow prudent industry practices. The parishes sought to have the companies pay damages, including to have the areas where the oil companies were operating restored to their original condition.

Earlier efforts to rely on other legal theories to transfer the cases to federal court were unsuccessful. The efforts in the case now before the Supreme Court centers on a federal law known as the “federal officer removal statute.” The law gives federal courts the power to hear state court cases filed against “any officer (or any person acting under that officer) of the United States or of an agency thereof, in an official or individual capacity, for or relating to any act under color of such office.”

The companies argued that the case belonged in federal court under the federal officer removal statute because two of Chevron’s predecessors were federal contractors: They had contracts with the federal government during World War II to produce aviation gasoline, known as “avgas,” which (among other things) required them to refine crude oil.

The U.S. Court of Appeals for the 5th Circuit agreed with the companies that they were “acting under” a federal officer for purposes of the federal officer removal statute. But the divided three-judge panel concluded that the companies could not meet the law’s final prong, requiring that the case be filed “for or relating to any act under color of such office.” The parishes’ lawsuits, the panel majority wrote, “target Defendants’ oil production and exploration practices.” But there is nothing in the companies’ refinery contracts about oil production, and the federal government’s wartime regulation of crude oil production was “minimal,” the majority concluded.

Turning to the refinery contracts themselves, the majority stressed that although the companies were not required to “show that a federal officer directed the specific oil production activities being challenged, they still must show these activities had a sufficient connection with directives in their federal refinery contracts.” The companies cannot meet this requirement, the majority said, “because, as emphasized by the district court, the contracts gave Defendants ‘complete latitude . . . to forego producing any crude and instead to buy it on the open market.’”

Judge Andrew Oldham dissented from the panel’s ruling. He pointed to Congress’ 2011 amendment of the federal officer removal statute – which, he said, “broaden[ed] the universe” of cases covered by the statute by making clear that cases could be removed not only if they were filed “for” a federal act but also if they were “relate[d] to” such an act. In this case, he said, the companies fulfilled their contractual obligations to produce avgas “by increasing their own exploration and production of crude. The exploration/production of crude was therefore undeniably ‘related to’ the avgas refining contracts” with the federal government.

By a vote of 7-6, the full 5th Circuit denied rehearing. The companies then came to the Supreme Court, which agreed in June to weigh in.

In their brief on the merits, the companies emphasized that during World War II, their predecessors “played an integral part in our Nation’s unprecedented effort to expand its oil industry to accommodate wartime demands.” When Congress allowed private parties to rely on the federal officer removal statute, they wrote, it did so because it wanted to make sure that “private parties sued for assisting federal officials in performing duties that are nationally important but locally unpopular will have their federal-law defenses resolved in federal court, ‘free from local interests or prejudice.’”

Echoing Oldham’s dissent, the companies contended that Congress’ 2011 amendment of the statute “substantially widened the availability of federal-officer removal to encompass not just suits challenging conduct caused by federal direction, but suits challenging any conduct related to acts taken under federal direction.” Here, the companies wrote, because refined avgas cannot be produced without crude oil, the companies inevitably increased their exploration and production of crude oil – the activities at the center of the parishes’ complaints. Those activities therefore “clearly ‘related to’” the refining activities covered by the companies’ contracts with the federal government.  

A brief from the federal government, supporting the companies, agreed with them that “[t]he close link between oil production and refining” is enough for the cases to be transferred to federal court. But in any event, U.S. Solicitor General D. John Sauer wrote, the companies can move the case to federal court on an entirely separate ground. “During World War II,” Sauer explained, “the oil industry operated as a unique public-private partnership with a special wartime agency, the Petroleum Administration for War, overseeing the industry’s operations in service of the Nation’s shared wartime mission. That special relationship supports the removal of these suits challenging wartime production practices.”

Two different “friend of the court” briefs warn the justices of what they see as the potential fallout from a ruling in the parishes’ favor. A brief by senior retired military officials cautioned that the United States “can ill afford the division, confusion and uncertainty that would necessarily result if disputes arising from wartime decision-making were adjudicated in piecemeal fashion in various state courts.”

And a brief by seven states, led by West Virginia, told the court that if the 5th Circuit’s ruling is allowed to stand, “then all manner of issues of serious import could be relegated to state courts that prioritize local concerns over national ones.” The states suggested that local governments – like the parishes in this case – were motivated in part by financial concerns, noting that “[e]specially as some parishes are still working their way back from the destruction of Hurricane Katrina, a sudden influx of funds is much needed. And one parish has already secured a $744 million verdict, with 40 more cases to come.”

In their briefs on the merits, both the parishes and the state of Louisiana focused, in part, on a different prong of the federal officer removal statute (which the court of appeals had resolved in the companies’ favor): the requirement that the companies have been “acting under” a federal officer. That requirement, the parishes wrote, can be met “only when the plaintiff’s allegations are directed at the relationship between a defendant and a federal officer.” But in this case, the parishes and the state emphasized, the plaintiffs are targeting the companies’ crude oil production. And because, as the court of appeals concluded in an earlier case, federal officers did not direct or control the production of crude oil during World War II, none of the companies “could have ‘acted under’ a federal officer in producing WWII crude.”

The state assailed what it characterized as the companies’ “mix-and-match theory of removal.” The companies, it said, are trying to “identify another context in which a defendant acted under a federal officer” – here, refining oil – “and ask whether that act relates to the subject of the lawsuit,” which is the exploration for and production of crude oil. But that theory, the state stressed, “does not work. If it did, then a federal contractor sued for assault after a Friday night bar fight might actually have a path to federal court.”

The parishes also pushed back against predictions that a ruling in their favor might undermine national security. “From 1948,” when the federal officer statute was “expanded to include all federal officers,” until 2011, they emphasized, federal appeals courts required defendants to show a direct connection to transfer a case to federal court. “During this period, th[e] country fought the Korean War, the Vietnam War, Desert Storm, the Iraq War, the Afghanistan War, and engaged in other numerous military interventions. There is no evidence that the alleged risk of state court parochialism caused any military contractor to shy away from meeting the military’s needs during these conflicts.”

A “friend of the court” brief from former Louisiana Gov. John Bel Edwards rejected suggestions that cases like this one should be moved to federal court to ensure that the companies receive a fair trial. Edwards observed that “Louisiana is the nation’s second largest producer of oil and gas. Coastal residents,” he told the justices, “are hardly hostile to the industry,” so “there is no reason to doubt the fairness or impartiality of the Louisiana citizens serving on parish juries.”

And two groups of plaintiffs’ lawyers, the American Association for Justice and the Louisiana Association for Justice, argued that a ruling in Chevron’s favor would have broad ripple effects, allowing any federal contractor to remove a case against it to federal court “even if any linkage to the actual dispute remains highly attenuated.” The groups noted that, relying in large part on the federal officer removal statute, nursing homes sought to remove wrongful-death lawsuits arising from the COVID-19 pandemic to federal court. Although the courts of appeals rejected those arguments, the groups wrote, a ruling for Chevron would “mandate reversal of those decisions, since its treatment of relatedness would not require the type of close relationship between federal objectives and private assistance that characterized this COVID-era jurisprudence.”

A decision in the case is expected by summer.