On October 3, 2025 a three judge panel for the Second Circuit ruled that Exxon Mobil Corporation, BP P.L.C., Shell Oil Company, and the American Petroleum Institute (“API”) must pay New York City (“the City”)’s attorneys’ fees and costs for advancing “absurd” arguments in opposing the City’s motion to remand to state court its suit for deceptive practices connected to climate change. City of New York v. Exxon Mobil Corp., No. 24-1568-CV (2d Cir. Oct. 3, 2025). This decision demonstrates that while parties may, at times, find success in advancing arguments that have been rejected by other courts, there are risks to advancing such arguments, including the risk of sanctions.

The City filed its case in New York state court against defendants Exxon, BP, Shell and API in 2021 alleging they violated the City’s consumer protection laws by misleading the general public about the climate-related impacts of their petroleum products. The defendants quickly sought removal to the U.S. District Court, Southern District of New York, advancing several different removal arguments.  After the City’s remand motion, the district court stayed the case pending a separate decision by the Second Circuit on a remand motion in a similar case. Connecticut v. Exxon Mobil Corp. was brought by Connecticut’s Attorney General in 2020 against the same defendants, alleging deceptive practices in concealing the risk of their petroleum products contributing to the effects of climate change. 83 F.4th 122 (2d Cir. 2023).  The Second Circuit remanded the case to Connecticut state court in September 2023 and subsequently lifted the stay in New York City’s case asking parties to re-brief the remand issues with the benefit of the court’s decision in Connecticut.  

In November 2023, defendants filed a renewed opposition to the motion to remand containing two arguments that the Second Circuit had previously rejected in Connecticut: federal question jurisdiction based on federal common law governing transboundary pollution and foreign affairs; and the federal official removal statute.  Defendants also included four other arguments which had not been explicitly addressed in Connecticut including: federal enclave jurisdiction, diversity jurisdiction, class action jurisdiction, and federal constitutional claims under the First Amendment. In May 2024, the district court rejected all six of the defendants’ arguments, remanding the case to New York state court. The district court also granted the City’s request for attorneys’ fees and costs based on five of the six bases asserted by the defendants for removal, but only for costs incurred working on those five bases following the Second Circuit’s ruling in Connecticut. In June 2024, the defendants appealed this fee award, and both parties stipulated that in the event the fee award was affirmed on appeal, defendants would pay the City $68,262.46. 

The Second Circuit reviewed the district court’s decision to award attorneys’ fees and costs under 28 U.S.C. § 1447(c) for abuse of discretion.  The Court noted that a district court maintains discretion to award such fees in “unusual circumstances” even where there exists an objectively reasonable basis for removal. See Martin v. Franklin Capital Corp., 546 U.S. 132 (2005).  The defendants argued that the district court abused its discretion in this decision by: 1) awarding fees and costs despite finding one of Exxon's six grounds for removal to be objectively reasonable, and 2) assessing the reasonableness of the grounds for removal based on the law and circumstances at the time of the renewed motion to remand rather than at the time the case was initially removed.

In addressing defendants’ first argument, the Second Circuit noted that while the district court found that the diversity jurisdiction argument for removal was not “unreasonable,” the district court can still award such fees in the case of “unusual circumstances” under Martin.  The Second Circuit found unusual circumstances clearly existed in this case, because defendants’ renewed opposition to the motion to remand “was not made in a vacuum, but after efforts to remove similar state cases to federal court had been rejected all around the country.” When defendants renewed their opposition in November 2023, their arguments opposing remand had already been rejected by eight different circuit courts (the First, Third, Fourth, Fifth, Eight, Ninth, Tenth and Second in Connecticut) and well as by eleven district courts. Additionally, the language of the district court’s decision awarding fees referred to defendants’ arguments in the renewed motion as “ridiculous” and “objectively absurd,” again showing that “unusual circumstances” existed in this case.

Assessing defendants’ second argument, that the “district court erred in awarding fees based on the state of the law in 2023” because at the time of the initial removal action in 2021 their arguments were “reasonable,” the Second Circuit disagreed.  The Second Circuit stressed that this case was stayed with the intention of giving parties the benefit of the court’s decision in Connecticut.  It reasoned that, in 2023 the defendants had the opportunity to analyze the decision in Connecticut, as well as decisions from other circuits across the country in deciding whether to continue to oppose remand in this case.  At that point, it was irrelevant whether there were reasonable grounds for removal in 2021, instead the question became whether given this clear change in the legal landscape surrounding the removal of climate change litigation cases, defendants still maintained reasonable grounds for prolonging the litigation by opposing remand. Additionally, the Second Circuit noted that there is no rule or decision limiting the temporal scope of a district court’s ability to award fees, in fact, such a rule would unduly restrict the court’s discretion to award fees “when such an award is just.”  Indeed, the Court emphasized that a ruling to the contrary would undermine the purpose of § 1447(c) - to discourage removals intended to delay litigation and inflict costs on the other party.

While neither the district court nor the Second Circuit found that the defendants acted in bad faith, both concluded that many of the defendants’ arguments for removal were “plainly meritless.” This required the parties and district court to relitigate baseless claims, delaying the overall litigation.  Therefore, the district court did not abuse its discretion in awarding fees and costs to the City for work done on the remand action after the Second Circuit’s decision in Connecticut.

In his dissent, Second Circuit Judge Jacobs disagreed with the panel’s decision on two grounds. First, he believed the district court abused its discretion by awarding attorneys’ fees even though the defendants had asserted at least one objectively reasonable basis for removal, diversity jurisdiction, and the court did not make a sufficient finding of “unusual circumstances” required to justify a fee award under Martin. Second, he disagreed with the district court’s decision to judge the reasonableness of defendants’ arguments based on the 2023 briefing rather than at the time of removal in 2021.. Additionally, Judge Jacobs stated that he would vacate and remand the case because “what is frivolous in this case is the claim, not its removal.”  He asserted that “City cannot have it both ways by, on one hand, asserting that consumers are aware of and commercially sensitive to the fact that fossil fuels cause climate change, and, on the other hand, that the same consumers are being duped by [d]efendants’ failure to disclose that their fossil fuel products emit greenhouse gases that contribute to climate change.” On October 20, the defendants asked the Second Circuit for an en banc review of the three judge panel’s decision in this case.  

This decision demonstrates that defendants must weigh the risks of advancing arguments for removal that have been rejected in similar cases. This case also demonstrates federal courts’ willingness to let consumer protection and tort claims against fossil fuel companies for their contribution to climate change effects advance in state court.

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