Two years ago, in a preemptive move, Shell sued a host of environmental and advocacy groups to prevent them from suing Shell over its plans to drill for oil in the Arctic.
On Wednesday, a federal appeals court called Shell's legal strategy "novel" and ruled it unconstitutional.
A three-judge panel of the U.S. 9th Circuit Court of Appeals said Shell could not sue environmental and Alaska Native advocacy groups on the chance that those organizations might challenge offshore drilling permits granted to the oil giant by the U.S. government.
"Shell may not file suit solely to determine who would prevail in a hypothetical suit between the environmental groups" and the federal Bureau of Safety and Environmental Enforcement, one of several agencies overseeing offshore drilling, the panel wrote in its 12-page ruling.
Shell has spent more than $6 billion purchasing oil leases and pursuing exploration in Alaska's environmentally sensitive Beaufort and Chukchi seas.
As part of the offshore drilling efforts, Shell was required to submit plans to the bureau detailing what the company would do in the event of an oil spill. The bureau approved Shell's oil spill response plans in late 2011 and early 2012.
Arguing that 13 environmental and advocacy groups were certain to challenge those approvals, Shell filed three separate suits against them in federal court in Anchorage in 2012. Using the Declaratory Judgment Act, Shell wanted the court to rule that the government's approvals of its spill response plans were legal.
On Wednesday, the three-judge panel ruled against the oil company in one of those three suits. A second suit was dismissed earlier. The third suit also was dismissed earlier, but that dismissal is under appeal.
"We believe this was a legitimate use of the Declaratory Judgment Act," said Curtis Smith, a spokesman for Shell. "However, we respect the court's ruling."
Michael LeVine, Pacific senior counsel for Oceana, one of the groups sued by Shell, called the decision "good news for the oceans and for those of us who believe in the rule of law and our ability to speak out for what we believe in."
"Shell's waste of time, energy and money on these lawsuits further reinforces the problem with its Arctic Ocean exploration program," he said.
The Natural Resources Defense Council was another of the organizations sued by Shell. Chuck Clusen, the group's director of national parks and Alaska projects, said in a statement that the oil company was "attempting to quash dissent and circumvent due process" but failed.
"As multiple accidents have already shown, Shell's drilling plans in the Arctic are severely flawed," Clusen said. "Shell is not equipped to handle offshore drilling in some of the world's most treacherous waters, and we'll continue to do all we can to stop them from endangering the precious wildlife and local fishing economies that they're putting at risk."
Said Cindy Shogan, executive director of the Alaska Wilderness League, another defendant in the case: "Today David beat Goliath."
Soon after its drilling rig ran aground on New Year's Eve in 2012, Shell halted exploration plans for the following year. It withdrew drilling plans for 2014 after a federal court ruled that the government violated the law when it held Chukchi lease sale 193 in 2008. The company bought all of its leases in that sale.
Shell has submitted an expanded, multi-year drilling plan that it hopes to kick off in 2015. But the government cannot approve that plan until it completes the 193 lease sale process, which is expected in April.