Article Summary

• The United States Supreme Court recently agreed to hear arguments in a long-running lawsuit brought by Louisiana and two of its parishes, attempting to hold oil companies liable for their production of crude oil in the state dating back to World War II.
• The outcome of the case will likely have wide-ranging implications for federal contractors and related businesses and consumers regarding their ability to remove suits to federal court.

Background

Beginning in 2013, six Louisiana coastal parishes filed 42 lawsuits alleging that oil and gas companies violated Louisiana’s State and Local Coastal Resources Management Act of 1978. The state permitting law requires certain activities within the state’s designated “coastal zone” to comply with an environmental permitting system.

Specifically, the parishes claimed the companies engaged in oil and gas exploration, production, and transportation in various “Operational Areas” along the Louisiana coast without securing the proper permits or by violating the conditions of the permits they did have, and that other pre-1980 activities (before SLCRMA’s effective date) were not “lawfully commenced,” and, consequently not exempt under the Act’s grandfather clause. The parishes sought wide-ranging remedies, including damages and restoration of affected coastal lands.

The first of these cases went to trial in Louisiana state court in April 2025, with a jury finding that Chevron must pay Plaquemines Parish $744.6 million.

Legal Issue

The challenged conduct spanned decades, in some cases dating back World War II. During the war, some defendant companies operated under federal government contracts to refine petroleum products for the war effort, and the companies have argued that some of the crude oil produced in the disputed areas was used to fulfill those contracts.

The oil companies have repeatedly attempted to remove these cases to federal court, invoking various theories of federal jurisdiction, including, as relevant here, the federal officer removal statute, based on their World War II-era federal contracts. Pursuant 28 U.S.C. § 1442(a)(1), federal officers and “any person acting under that officer” may remove lawsuits involving their official duties from state to federal court. In 2011, Congress amended the statute to allow the removal of not just actions “for” any act under color of office but also actions “relating to any act under color of such office.”

In affirming the District Court’s order denying removal, the U.S. Court of Appeals for the 5th Circuit ruled that although the oil companies may have been “acting under” an officer of the United States when they fulfilled contracts to supply the federal government with gasoline for aviation, their production of crude oil did not “relat[e] to” their contracts to refine the oil into gasoline because the contracts did not specifically address oil production.

Arguments and Analysis

The Supreme Court must now determine the appropriate test for determining when federal contracts sufficiently “relate to” challenged conduct, under the federal officer removal statute. Although the Fifth Circuit here demanded a contractual provision directly on point to satisfy that test, other circuits have adopted a more lenient test that requires only some “connection” or “association” between the challenged act and the defendant’s federal duties or directions.

The Supreme Court’s decision in this case will likely affect federal contracts and contractors across a variety of industries. The federal officer removal statute reflects an understanding that state court proceedings may “reflect ‘local prejudice’” or priorities, and contractors required to implement federal priorities may therefor prefer to litigate in a federal court, as opposed to a state court selected by plaintiffs. A Supreme Court decision narrowing the removal protections for federal contractors would potentially subject contractors to a greater risk of liability in unfavorable state court forums.