The Activist Side Third-Party Litigation Support

In September, the House Oversight Committee held a hearing on third-party litigating funding, whereby a nonparty finances a lawsuit in exchange for some portion of the final award or settlement. Often this is done purely for profit—essentially turning lawsuits into investment products—but sometimes there is an ideological component to a third party’s involvement. Committee Chair James Comer (R-KY) remarked that “activist groups will find plaintiffs and pour millions into claims against energy, mining, and manufacturing companies . . . all in the name of political activism.”

Indeed, some tax-exempt groups—501(c)(3) public charities and giant private foundations—actively encourage, underwrite, and otherwise support strategic litigation aimed not at vindicating the rights of injured plaintiffs, but at achieving public policy objectives that have proven elusive through the traditional political process. Such suits are problematic for multiple reasons, not the least of which being the questions that they raise about the proper relationship between philanthropy and charity, government and the political process, for-profit law firms, and our judicial system.

Climate “Legislation Through Litigation”

At the hearing, Rep. Jake LaTurner (R-KS) zeroed in on activist lawsuits targeting major energy producers. Environmental litigants routinely sue members of the oil and gas industry such as ExxonMobil and Chevron over their role in bringing to market the resources to which humanity owes its entire modern standard of living. The argument boils down to saying companies that produced and sold fully legal and utterly indispensable products to consumers worldwide should now be civilly liable because those consumers actually used the products that they demanded. All this is done with an eye toward forcing a substantive public policy shift on climate change—a strategy that has been characterized as “legislation through litigation.”

One particularly troubling category of such lawsuits—to which Rep. LaTurner alluded—is those being brought by state and local governments. They argue that oil and gas companies knew that their products could contribute to climate change but took steps to conceal or downplay this information and therefore should be liable for the vast expenses that those governments claim they will incur due to climate change. More than 40 such suits have been filed, and many of the governmental plaintiffs are being represented by the for-profit San Francisco law firm Sher Edling, reportedly on a contingency fee basis.

Every one of these suits that has been heard on the merits has failed, but experts have explained that the goal of the massive litigation campaign is “to find one judge in one state in one courtroom that sees a path to allowing these cases to go to trial,” which would open the discovery floodgates and give activists considerably more leverage to “start constructing a narrative about what the industry knew and how it acted in the face of that knowledge.” They hope to maintain this leverage all the way through future debates over potential climate legislation in Congress. This shotgun approach was given something of a boost by the Supreme Court in April, when it ruled that several such suits could proceed in state court—widely seen as a more favorable venue—instead of federal.

Charitable Lawsuits?

Those familiar with the importance of 501(c)(3) charities and their foundation funders to American political outcomes will not be surprised to learn that the tax-exempt sector plays a major role in encouraging, funding, and supporting the coordinated litigation campaign against Big Oil—including those lawsuits being brought by state and local governments.

One such group is the Center for Climate Integrity, which runs a multifaceted campaign to encourage governments to bring climate lawsuits and to support those suits once they are filed. Grant descriptions explain that the center’s “central goal” is to use lawsuits targeting energy companies in order “to accelerate corporate and governmental policy changes that speed the energy transition from fossil fuels to carbon-free energy sources.” It preemptively rebuts questions or hesitations about such litigation, writing of the need for communities to make “corporate polluters . . . pay their fair share” and emphasizing that taxpayers will not be on the hook for the legal fees charged by outside counsel unless and until their suit is successful. The center also runs a website called ExxonKnews, which functions as a clearinghouse for news and opinion attacking Big Oil and supporting climate litigation.

The Center for Climate Integrity is organized as a 501(c)(3) charity, and it reported total revenue of about $5.5 million in 2022. Formerly a fiscally sponsored project of the Institute for Governance and Sustainable Development (IGSD), it was founded in 2017 and appears to have spun off from IGSD sometime in 2021.

Big Philanthropy has been a major funder of the Center for Climate Integrity, both during its time as a fiscally sponsored project and as an independent nonprofit. The Rockefeller Family Fund has been especially important, giving the center at least $9.05 million from 2017 to 2021. The Children’s Investment Fund Foundation provided an additional $7 million from 2018 to 2020, while the Schwab Charitable Fund (a donor-advised fund) reported sending $1.5 million to the center in 2022. Significant funding has also come from the MacArthur Foundation, the High Tide Foundation, the Marisla Foundation, and others.

Another climate litigation supporter about which there is very little public information is the Collective Action Fund for Accountability, Resilience, and Adaptation, which is apparently also sometimes called the Collaborative Action Fund. It has no website or other public profile, but published grant descriptions explain that the fund’s purpose is to make “charitable grants that enable cities, counties, and states hard hit by climate change to file high-impact climate damage and deception lawsuits represented by expert counsel.”

The Collective Action Fund was originally a project of the 501(c)(3) Resources Legacy Fund, but sometime around 2020 it shifted to the New Venture Fund—the largest constituent member of the massive left-of-center political nonprofit network managed by Arabella Advisors. Major known funders of the Collective Action Fund include the MacArthur Foundation ($6 million total, awarded in 2017 and 2020) and the JPB Foundation ($2.15 million from 2020 to 2021, plus an additional $2.3 million approved for future payment). Other six-figure grants came from the Hewlett Foundation, Rockefeller Brothers Fund, Chicago Community Trust, and Gordon E. and Betty I. Moore Foundation.

As a fiscally sponsored project, the Collective Action Fund does not file tax forms detailing precisely what it did with this money, but there are some clues. Fox News reported last year that the group “appears to primarily fund California-based law firm Sher Edling’s litigation efforts on behalf of state and local governments.” A review of tax filings confirms that the Resources Legacy Fund reported granting Sher Edling over $5.2 million from 2017 to 2020. It only gave $55,575 in 2021, but the New Venture Fund suddenly reported sending $3 million to the firm that year—its first such grant. These grants closely align with the timing of the Collective Action Fund’s fiscal sponsorship transfer, which suggests that the fund is being used to underwrite Sher Edling’s representation of governmental plaintiffs in their dubious climate lawsuits against energy producers.

Thoughts and Questions

It is reasonable to argue that curbing carbon emissions would be good for the global climate. But crucially, the burden rests on those making such arguments. They need to persuade the American people and their elected representatives and rebut counterarguments about the substantial and very real economic tradeoffs and uncertainties inherent to any public policy that would meaningfully do so. Thus far they have been largely unable to do this at the federal level, hence the turn toward the courts.

It’s not just on climate change either. Gun control activists have long dreamed of a firearms industry kneecapped by the threat of civil liability as a method of circumventing the substantial political and constitutional obstacles blocking the implementation of their agenda. Congress acted to stop this with the Protection of Lawful Commerce in Arms Act back in 2005, but activists and their allies in government are still trying to get around the law that was passed to stop them from trying to get around laws.

A separate set of questions surround the way these climate lawsuits are being encouraged, funded, and supported. Is it right for tax-exempt activists to push elected officials into bringing long-shot lawsuits against major energy producers—whose products are quite literally essential to the daily lives of those officials’ own constituents—simply because those activists disapprove of the industry? How would one characterize the charitable purpose of the 501(c)(3) money that supports this litigation—and would ordinary Americans agree with any such characterization? There aren’t clear answers, but commentators have raised good questions along those lines.

Ends-justify-the-means rationalization is a deeply regrettable feature of contemporary politics, activism, and ethics—particularly given that our republican form of government is quite rightly designed to place far more emphasis on how public policy objectives are accomplished than on what objectives are accomplished. Legislation through litigation is an attempted end run around democratic governance and an abuse of the civil justice system. Congress is right to examine who is behind it.