Smith v. Fonterra Co-Operative Group Ltd.

In 2020, Michael Smith, an Indigenous New Zealander of Ngāpuhi and Ngāti Kahu descent and the climate change spokesman for the Iwi Chairs Forum, filed a petition against seven New Zealand-based corporations. The respondent corporations represented a diverse mix of greenhouse gas emitting industries in New Zealand: fossil fuel-based power generation, industrial dairy farming, coal mining, and steel production. In this way, the case represents a novel development in climate litigation: typically, climate cases targeting corporations focus on fossil fuel corporations alone. A few cases have implicated corporations associated with agriculture. This case, however, is one of the first to file claims against corporations that represent a mix of activities, not just one activity and not just fossil fuel production. In this way, it attempts to expand the range of corporations feeling pressure through litigation to reduce their greenhouse gas emissions. After all, while fossil fuel corporations are, in general, the biggest historic emitters of greenhouse gases, they are not the only corporations that make meaningful contributions to the ongoing climate emergency.

In his petition, Mr. Smith argued that the respondent corporations were responsible for three types of (tort) harms: (1) public nuisance; (2) negligence; and (3) breach of a duty of care. Pointing to the fact that all of the respondents either emit greenhouse gases or supply products that emit greenhouse gases when burned, Mr. Smith explained that the respondents, through these actions, have contributed to climate change, the impacts of which harm the plaintiff in specific ways. These harms, in turn, are so substantial that the respondents are liable for public nuisance, negligence, and a breach of a duty of care. To rectify these harms, Mr. Smith sought two types of remedies. First, he wanted the Court to issue declarations confirming that the respondents have unlawfully caused or contributed to a public nuisance, acted with negligence, and breached a duty of care owed to the plaintiff and the public. Second, he asked the Court to issue an injunction requiring each of the respondents to reduce emissions from their activities to net zero by 2030.

Decision of the High Court

The respondent corporations tried to persuade the High Court of New Zealand, Auckland to dismiss the petition. They succeeded in doing so for two of the three claims. The High Court found that the negligence and public nuisance claims were untenable, but the claim concerning a breach of a duty of care had grounds to proceed.

The Court started with an analysis of the international scientific consensus on climate change as well as New Zealand’s domestic response, focusing on its framework climate legislation (the Climate Change Response Act) and the emission reduction targets and trading scheme it puts into place. The Court notes, importantly, that most sectors of the New Zealand economy are subject to this emissions trading scheme that limits greenhouse gas emissions, including fossil fuel production, steel production, and agriculture. Indeed, the Court emphasized that this emissions trading scheme was established as the “consensus solution” after an “extensive process of policy formulation and consultation.” In other words, the legislature made a policy choice about what was necessary for corporations to do to reduce greenhouse gas emissions, resulting in the emissions trading scheme.

After establishing this background, the Court asked the following question: does tort law apply to the issues raised in the case given the extensive legislating Parliament has already done on the matter? To answer that question, the Court went claim by claim to evaluate their viability.

Starting with public nuisance, the Court noted that, in order to succeed, Mr. Smith would have to demonstrate that he has suffered some sort of special or particular damage greater than that suffered by the general public as a result of the respondents’ activities. The Court also indicated that the connection between the respondents’ activities and the alleged climate harms that the plaintiff experienced was too indirect. Moreover, importantly for the Court, the plaintiff couldn’t argue that the respondents’ activities were unlawful, as they complied with all applicable statutes and regulations concerning greenhouse gas emissions. For these reasons, the Court dismissed the public nuisance claim as unfounded.

Then, moving on to the negligence claim, the Court explained that in order for this claim to succeed, the respondent companies would need to owe Mr. Smith a duty of care – or, a duty to act as a reasonable person would in their shoes not to cause harm. Mr. Smith argued that the respondent corporations owed him a duty of care “not to operate its business in a way that will cause him loss by contributing to dangerous anthropogenic interference with the climate system.” The Court didn’t buy it. Pointing to the requirement that the damage alleged by Mr. Smith must be a reasonably foreseeable consequence of the respondents’ activities in order for the respondents to be liable for negligence, the Court concluded that the climate harms that Mr. Smith has experienced just aren’t a reasonably foreseeable consequence of the companies’ business activities. Moreover, the Court noted that it wasn’t true that the harm alleged by the plaintiff wouldn’t have happened “but for” the respondents’ activities – since their total greenhouse gas emissions comprise a tiny fraction of global emissions – as is usually required in proving negligence. And finally, the Court expressed concern that recognizing the plaintiff’s suggested duty of care was inconsistent with the climate regulatory regime established by the New Zealand Parliament. For all these reasons, the Court dismissed the negligence claim as untenable.

The plaintiff, however, had more luck with his claim that the respondents had breached an inchoate (or, new and undefined) duty of care. Though Mr. Smith did not provide much by way of specifics – declining to point to existing legal obligations that inform the duty or analogous obligations through which the law could be developed – the Court declined to dismiss this claim, ruling that the claim presented issues that needed to be examined at trial in order to be resolved.

Decision of the Court of Appeal

Both Smith and the respondent corporations appealed the High Court’s decision. And in the fall of 2021, the Court of Appeal issued its decision, siding with the corporations and issuing a decision that, overall, was not a favorable development in climate litigation. It found, in short, that none of the three claims made by the plaintiff were tenable.

Tort law, according to the Court, was not an appropriate vehicle to address the problems of climate change and the climate impacts alleged by Mr. Smith. Essentially, the Court found that permitting the tort claims raised by the plaintiff would constitute a radical departure from a common law tradition (tort law) that develops incrementally, not overnight with major departures from established case law. Allowing this type of change would, according to the Court, undermine the coherence of tort law. Moreover, the Court emphasized that the magnitude of the problem of climate change meant that it called for a “sophisticated regulatory response at a national level supported by international coordination,” not a fragmented and individual response through tort law.

The Court also emphasized another concern common to courts hesitant to issue more novel rulings: the slippery slope. The plaintiff, according to the Court, failed to provide a principle that would distinguish the seven respondents from every other greenhouse gas emitting individual and business in New Zealand. As a result, if the plaintiff’s claims were successful, it would, according to the Court, open the door to far-flung liability: “If the courts were to accept the argument that the emitting activities of the defendants amount to a tort, it would follow that every entity (and individual) in New Zealand that is responsible for net emissions is committing the same tort.”

Like the lower court, the Court of Appeal also noted that tort law concerns activities that are unlawful and should not be permitted to continue. Here, however, the respondent corporations were in compliance with the regulatory regime established by Parliament – in other words, their activities were not unlawful. This, according to the Court, means that their activities (specifically their greenhouse gas emissions and their consequences) do not fall within the domain of tort law.

Finally, the Court noted that the relief the plaintiff requested would amount to a “court-designed and court-supervised regulatory regime.” The Court, however, chaffed at this request, noting that courts lack the institutional expertise, democratic participation, and democratic accountability needed to do this. The other branches of government, according to this thinking, are better and more appropriately suited for such regulatory choices. For these reasons, among others, the Court dismissed all three claims.

The courts in this case did not dismiss the very idea of climate litigation. Indeed, the Court of Appeal said explicitly that litigation was an appropriate tool to support and enforce the statutory scheme established to address climate change and to hold the government accountable to it and its commitments. However, the findings in this case were not a positive development for attempts to hold corporations accountable for climate harms by applying an old area of law – in this case tort law – to climate change. All of this ultimately demonstrates that while pushing the boundaries of climate litigation can come with real rewards, there is still the risk of a negative outcome and, more significantly, bad precedent.

Appeal Before the Supreme Court

The case is currently on appeal before the Supreme Court of New Zealand. The Court heard the appeal on September 2, 2022, though a decision by the Court is still pending.

Interestingly, in his submissions before the Supreme Court, Mr. Smith argued that tikanga Māori, a set of customary practices and principles from New Zealand’s Indigenous community (Māori), must inform how tort law develops in New Zealand in relation to climate change. Tikanga Māori is a system of law that includes obligations owed by people to others (and the natural world) and wrongs arising from those obligations. It has been described as the first law of Aotearoa New Zealand. How the Supreme Court applies tikanga Māori will be significant, as it could set a leading precedent for how Indigenous principles and practices could be used to shape common law responses to climate change.

Applying a developed body of law in the context of climate change

In this case, the plaintiff sought to apply tort law – a body of law that has developed over many centuries – to the phenomenon of climate change, in order to hold diverse corporate actors responsible for their contributions to climate change.

Utilizing a variety of legal arguments to increase the likelihood that one such argument will succeed in front of the court

Though all of the plaintiff’s arguments were based in tort law, he did present three separate tort claims – public nuisance, negligence, and breach of a new/undefined duty of care – as an attempt to increase the likelihood that the court would rule in his favor for at least one claim. That strategy worked in the lower court, where the judge dismissed the public nuisance and negligence claims but found that there were grounds for the breach of a duty of care to proceed. That temporary win, however, was ultimately rescinded at the Court of Appeal, where the judge found that all three claims – including the duty of care claim – lacked grounds to proceed. It is yet to be seen how the Supreme Court will respond.

The choice of defendants (respondents) matters.

A sticking point, in this case, was the courts’ concern that permitting tort claims against the seven identified defendants would be a “slippery slope,” opening up the possibility that any business – or so the courts argued – could be subject to tort litigation for emitting greenhouse gases or selling products that eventually emit greenhouse gases. In particular, the courts found it significant that the respondents, relative to other corporate entities globally, emitted a very small amount of greenhouse gases. This, to them, meant that exposing these respondents to tort liability for greenhouse gas emissions would be unfair and that allowing this case to proceed could expose any business with greenhouse gas emitting activities to similar litigation.

Litigants trying to convince courts to apply established, more traditional legal theories and claims to climate change still face consequential hurdles.

In this case, the courts resisted the idea that tort law could be applied to redress individual harms brought on by climate change.

Procedural hurdles – including requirements to demonstrate individual harm in the context of a phenomenon (climate change) that affects everyone in some way – can still prevent climate lawsuits from proceeding.

In this case, the plaintiff’s inability to demonstrate that he suffered special or specific harms meaningfully worse than other New Zealanders meant his public nuisance claim couldn’t go forward to trial.

Regardless of the outcome of this case, it is important that a broader, more diverse range of corporations are targeted for their greenhouse gas emissions and contributions to climate change.

Traditionally, the relatively few climate cases that have targeted corporations have focused on fossil fuel companies. While this is understandable – given the core role they play in supplying the products driving the climate emergency – they’re not the only ones contributing significant greenhouse gas emissions. Targeting other types of corporations – including, for example, industrial agriculture corporations or concrete manufacturers – ensures that those companies making and profiting off of meaningful greenhouse gas emissions don’t elude responsibility.

The scope of the remedies requested matter. Courts can be more reluctant to rule for the plaintiffs if doing so would require far-flung, policy-oriented remedies.

In this case, the Court of Appeal found that the remedies requested were beyond the scope of the judiciary’s role and abilities – it would require institutional expertise, democratic participation, and democratic accountability that the judiciary simply did not have, at least according to the Court.

Climate litigation is not without its risks – it can establish bad precedent.

In this case, not only did the courts not rule in the plaintiff’s favor, but they established some precedent unhelpful to climate litigators in New Zealand as well as those in other parts of the world where courts consider international precedent.

This case establishes bad precedent for the use of tort law to challenge corporate greenhouse gas emitters, both internationally and in New Zealand. This precedent, however, is not insurmountable, as it may be possible for future litigators in New Zealand to choose the corporate defendants more carefully so as to preempt some of the concerns raised by the courts in this case. Likewise, litigators outside of New Zealand can also preemptively respond to the concerns raised by the courts in this case by choosing their defendants and claims carefully.

The ultimate impacts of this case, however, won’t be clear until the Supreme Court issues its ruling.

And, despite the innovation represented by this case – in particular, through its naming of a diverse range of corporate actors as defendants – it has not made major waves in media internationally. The precedent the case establishes and the lessons it offers, however, may trickle into the body of rights-based climate law as more litigators and judges become aware of the case.