As government privatization efforts grow, lawsuits against federal contractors get more difficult
- Written by Steph Tai, Professor of Law and Associate Dean, Nelson Institute for Environmental Studies, University of Wisconsin-Madison
The question of which court should hear a case isn’t always as easy as it might seem – and the answer can sometimes make a difference[1] in the potential outcome. For instance, in 2013, the government of Plaquemines Parish, Louisiana, decided to sue several oil companies for violating a 1978 state law that required a state permit for oil production along the Louisiana coast.
Some of that oil production activity dated back even further, to World War II. The oil companies, led by Chevron, fought the lawsuit in part by saying they were under a federal contract[2] and following federal directives to boost oil production to support the war effort.
The case made its way to the Supreme Court over a question that was not about the substance of the case – whether the companies had or had not violated the state law – but rather whether the dispute should be heard in a Louisiana state court, or whether it should be heard in federal court. On April 17, 2026, the Supreme Court issued a unanimous decision making it easier for companies to move cases[3] from state to federal courts. The ruling is likely to make it harder for the public to seek redress from companies they believe acted wrongly.
Jurisdiction questions
The question of state versus federal jurisdiction is a technical legal one, but for a scholar who studies local challenges to quasi-federal actions[4], I can report that the difference can be significant.
Common wisdom among attorneys is that state courts are more friendly to plaintiffs[5] than federal courts are, since state trial juries are drawn from local pools, which are potentially more sympathetic to their own communities. But in fact, the distinction – and the prospect for any particular outcome – is not quite so clear[6] because federal judges exert more control over jury selection than state judges do.
Plaintiffs’ attorneys may also be more familiar with local state court rules and procedures than they are with the mechanics of how federal courts operate – and some state courts may be more welcoming to plaintiffs’ claims of having been harmed, and therefore more likely to find that they have standing to file a lawsuit[7]. And in some state courts, it is harder for a defendant to get a case quickly dismissed by a judge[8] than is typical in federal court.
The dispute in Louisiana
In the Plaquemines Parish case against Chevron[10], the oil companies argued that because some of their drilling activities were conducted as federal contractors during the war, they were acting as an agent of the federal government[11], so the case belonged in federal court.
Plaquemines Parish said the companies had significant control themselves[12] over how they increased production and what they did to produce oil, and therefore the dispute was about the state law’s permitting requirements and should be heard in state court.
The Supreme Court, in an opinion written by Justice Clarence Thomas, sided with Chevron, saying the company had “plausibly alleged a close relationship[13] between its challenged conduct and the performance of its federal duties – not a tenuous, remote, or peripheral” connection.
Effect on government contractors
This opinion sets a precedent, which courts typically follow for future similar cases, that has the potential to broadly affect corporate behavior, especially in connection with government-related work.
For instance, the federal government is seeking private contractors to help with artificial intelligence services for the Department of Defense[14], operating Immigration and Customs Enforcement facilities[15] and potentially privatizing the Transportation Security Administration[16].
Anyone alleging harm from these practices – such as if generative AI systems or airport screening practices unfairly discriminate against some people, or the construction of a new ICE detention center damages a local waterway – would likely have to take the more significant and more demanding step of suing in federal court, rather than state court, to seek compensation or redress.
References
- ^ sometimes make a difference (plaintiffmagazine.com)
- ^ under a federal contract (supreme.justia.com)
- ^ making it easier for companies to move cases (www.supremecourt.gov)
- ^ local challenges to quasi-federal actions (law.wisc.edu)
- ^ state courts are more friendly to plaintiffs (plaintiffmagazine.com)
- ^ not quite so clear (plaintiffmagazine.com)
- ^ therefore more likely to find that they have standing to file a lawsuit (statecourtreport.org)
- ^ get a case quickly dismissed by a judge (digitalcommons.law.ou.edu)
- ^ Tasos Katopodis/Getty Images (www.gettyimages.com)
- ^ Plaquemines Parish case against Chevron (www.oyez.org)
- ^ acting as an agent of the federal government (www.law.cornell.edu)
- ^ companies had significant control themselves (supreme.justia.com)
- ^ plausibly alleged a close relationship (www.supremecourt.gov)
- ^ artificial intelligence services for the Department of Defense (www.npr.org)
- ^ operating Immigration and Customs Enforcement facilities (www.npr.org)
- ^ privatizing the Transportation Security Administration (www.govexec.com)
Authors: Steph Tai, Professor of Law and Associate Dean, Nelson Institute for Environmental Studies, University of Wisconsin-Madison
