Plaintiffs continue to struggle in their attempts to obtain class certification in toxic tort cases, the most recent example being the May 14, 2012 decision in Earley v. Village of Crestwood, No. 09-CH-32969 (Cook County Ill). In Earley, Plaintiffs brought suit ostensibly on behalf of the residents of Crestwood Village, contending that the municipality had been providing them with tap water from a contaminated well for some twenty plus years. In an opinion that does not even reach three pages in length, the trial court made quick work of their class action claims, focusing on proximate cause. Relying on Smith v. Illinois Central RR, 223 Ill, 2d 441 (2006), which rejected class certification in mass toxic torts because of the complex and individual nature of establishing that the alleged contamination proximately caused each class members’ alleged injuries, the trial judge in Earley found that the necessity for each plaintiff “to establish the amount and type of their damages proximately caused by Defendants” would “overwhelm any common issues,” thus dooming certification.
Posted in Toxic Torts | Tagged cancer, class actions, Illinois, Toxic Torts, water | Leave a Comment »
With increasing frequency, courts around the country are using their inherent power to control the proceedings before them in order to structure environmental and toxic tort cases in such a way as to reduce, as much as possible, cases to their essence and, more importantly, ensure that the time and resources of parties are not needlessly wasted on discovery or lengthy proceedings when spurious claims are brought. And that’s exactly what has happened in the case of Strudley v. Antero Resources Corp., No. 2011 CV 2218 (Denver Co. Dist. Court May 9, 2012), where the Court dismissed plaintiffs’ claims against companies involved in drilling natural gas wells when the plaintiffs failed to show, prior to the initiation of discovery, that there was a prima facie basis for associating their personal injury claims with the defendants’ activities.
The case was brought by the Strudley family, who contended that they had suffered various adverse health effects such as nose bleeds and sinus congestion as a result of contamination of their groundwater by the chemicals used in the defendants’ hydraulic fracturing process – a claim that has been made in numerous venues and one which courts are likely to see many more of as the business of hydraulic fracturing continues to grow. Unfortunately for the Strudleys, however, their claims had already been investigated by the Colorado Oild and Gas Conservation Commission, which had concluded that their water supply had not, in fact, been affected by the drilling. This caused the Court to enter a case management order requiring the Strudleys, as an initial step in their litigation, to submit expert opinions, scientific testing results, and personal medical information sufficient to set forth a prima facie case, and in particular, evidence of causation. The Court patterned its Case Management Order after the order issued more than twenty-five years earlier in Lore v. Lone Pine Corp., No. L-33606-85 (N.J. Sup. Cr. Nov. 18, 1986), another case in which the plaintiffs’ case was dismissed for failure to establish causation early in the case.
In analyzing the evidence before it, the Court noted that there was no expert opinion that the contaminant levels were high enough to cause injury and that even the Strudleys’ own expert would not attribute the Plaintiffs’ alleged injuries to the water supply. In fact, the expert was not even provided with the results of water testing done before the Strudleys moved out of their home (allegedly because of the contaminated water). Rather, the best that the Strudleys could muster were reports that stated that their alleged injuries “could be consistent with” well water contamination and that their symptoms appeared to be temporally related to the drilling, all of which, the Strudleys argued, merited discovery. This was not enough as “Plaintiffs’ requested march towards discovery without some adequate proof of causation of injury [was] precisely what the [Case Management Order] was meant to curtail.”
While some may argue that this type of early intervention unfairly prejudices plaintiffs who may lack the significant resources often necessary to engage in sophisticated testing and the preparation of extensive expert reports, it is perhaps time that courts begin to evaluate the merits of such cases early in the litigation, as was done here. The burden and costs of defense of toxic tort cases, as well as the risks always inherent in litigation, too often back defendants into a corner where settlement is the least costly, although not necessarily most just, result.
Posted in Decisions of Note, Marcellus Shale, Oil and Gas, Procedure, Real Estate, Toxic Torts | Tagged drilling, Marcellus Shale, medical monitoring, Multi-District Litigation, oil and gas, Toxic Torts | Leave a Comment »
In the second appellate case within the past year addressing the “diligent prosecution” bar under environmental citizen suit provisions, the Fifth Circuit Court of Appeals held last week that the Clean Water Act’s bar on citizen suits when governmental enforcement action is underway is not jurisdictional – reversing the dismissal of a citizen suit at the Rule 12(b)(6) stage, and remanding the case for further proceedings before the district court.
In Louisiana Environmental Action Network v. City of Baton Rouge, No. 11-30549 (5th Cir. April 17, 2012), a local environmental group called LEAN filed a citizen suit against the City of Baton Rouge and the Parish of East Baton Rouge alleging violations of the Clean Water Act at three wastewater treatment plants owned and operated by the City and Parish. The defendants promptly moved to dismiss the suit under the Clean Water Act’s diligent prosecution bar in 33 U.S.C. § 1365(b)(1)(B), citing to a consent decree that they entered into with EPA in 2002 to address violation of effluent limitations at the three plants (a consent decree that, by the way, LEAN never commented on or challenged). The 2002 consent decree, though entered eight years prior to LEAN’s suit, was the subject of ongoing compliance, requiring the defendants to implement what the Fifth Circuit described as “extensive, physical remedial measures according to applicable schedules,” requiring full compliance with their permitted effluent limitations by January 2015, and imposing less stringent limitations in the interim.
The district court granted the defendants’ motion to dismiss, but not quite for the reason you would expect. Rather than address whether the ongoing enforcement of the 2002 consent decree was the type of “diligent prosecution” that would preclude LEAN’s citizen suit, the district court held that the defendants’ compliance with the consent decree addressed LEAN’s grievances, and therefore rendered LEAN’s suit moot. Further, while LEAN asserted that the defendants were not complying with the 2002 consent decree, the district court found that LEAN should “take up the matter … with EPA, as the EPA has the power to enforce the consent decree.”
On LEAN’s appeal of the district court’s ruling, the Fifth Circuit had little trouble addressing the mootness issue. Mootness, the court explained, concerns whether there are any circumstances subsequent to the filing of suit that eliminate any actual controversy between the parties, destroying the justiciability of the plaintiff’s claims. As neither party argued that any circumstances subsequent to the filing of LEAN’s lawsuit rendered the matter moot, the court held that the district court improperly dismissed the lawsuit on the basis of mootness.
The Fifth Circuit then took on the question left unresolved by the district court – whether LEAN’s suit was barred under the Clean Water Act’s diligent prosecution bar, an issue that first required a determination as to whether the bar operated as a jurisdictional limitation on the ability to bring suit. Drawing upon recent Supreme Court guidance on the topic, the Fifth Circuit held that the Clean Water Act’s diligent prosecution bar is not jurisdictional because Congress did not clearly mandate that it be so: the provision does not speak in jurisdictional terms; it is located in a separate subsection than the Clean Water Act’s jurisdictional grant; and it is located in the same section as the 60-day notice provision for citizen suits, “a typical ‘claim-processing rule.’”
So what did this ruling mean for LEAN’s suit, and what might it mean for other future cases? Well, as for LEAN, after spending a significant amount of time on the jurisdictional issue, the court took no position on whether the diligent prosecution bar, now appropriately characterized as a non-jurisdictional rule, actually precludes LEAN’s citizen suit, remanding the matter to the district court to decide the issue in the first instance. The Fifth Circuit’s articulation of why the jurisdictional question matters, however, may be instructive as to how the motion to dismiss is ultimately resolved, and what the decision might mean for future cases. As the Fifth Circuit explained, when a rule goes to the subject matter jurisdiction of the court, the court is not obligated to accept the allegations in the plaintiffs’ complaint as true, and in fact, may review the evidence and resolve the dispute on its own. On the other hand, if a rule is non-jurisdictional, then a plaintiff on a motion to dismiss is protected by the safeguards of Rule 12(b)(6): the district court is required to accept all well-pleaded facts in the complaint as true, and view the facts in the light most favorable to the plaintiff.
In light of these practical differences, it would not be unexpected for the district court in LEAN to deny the defendants’ motion to dismiss on remand. LEAN alleged in its complaint, and apparently has at least some documentary evidence to support it, of ongoing violations not only of the defendants’ permit limitations, but of the interim limitations required under the 2002 consent decree. Accepting these allegations as true, the district court may agree with LEAN that, at a minimum, the issue of whether EPA is diligently prosecuting the 2002 consent decree is a fact-intensive question that can only be answered after the proper development of a record.
As for future cases, there are a couple of points to make. First, the Fifth Circuit’s ruling that the diligent prosecution bar in the Clean Water Act is non-jurisdictional comes on the heels of a 2011 decision out of the Seventh Circuit, which held that the diligent prosecution provision of RCRA is, likewise, non-jurisdictional. Given that most federal environmental citizen suit provisions, like those in the Clean Water Act and RCRA, are modeled after the Clean Air Act citizen suit language, we may find other courts arriving at this same conclusion under other environmental statutes. Second, because of the practical consequences that flow from a conclusion that the diligent prosecution bar is not jurisdictional, as emphasized by the Supreme Court in recent years, we may see courts more favorably inclined to deny a Rule 12(b) motion to dismiss on diligent prosecution grounds, even where there is a judicial consent decree with an ongoing compliance period.
Posted in Cases To Watch, Clean Water Act, Decisions of Note | Tagged citizen suit, Clean Water Act, diligent prosecution, subject matter jurisdiction | Leave a Comment »
Yesterday, in discussing the Pennsylvania Supreme Court’s grant of review in Butler v. Estate of Powers, we suggested that maybe it was time to do away with the rebuttable presumption that the owner of “mineral rights” does not own rights in a property’s natural gas stores and instead make it a firm rule of law, particularly in light of the fact that the presumption has been around for over a century. Well, last week, this is exactly the step that the Supreme Court of Arkansas took in Staggs v, Union Pacific RR Co., 2012 Ark. 156 (Apr. 12, 2012), although holding that “mineral rights” do include oil and gas rights.
Under Arkansas case law, ambiguity as to what substances were included within a general reservation or grant of mineral rights had always been interpreted in light of the intent of the parties at the time the deed was executed. At issue in the case was a deed executed in 1934 conveying certain land, now owned by the Staggs, but reserving “all the minerals” on or in the land. The trial court granted summary judgment to the defendants, holding that Arkansas law had long recognized that “mineral rights” included oil and gas rights. Plaintiffs appealed, contending that the trial court was required to hold an evidentiary hearing on the factual issue of the intent of the parties.
Not necessary said the Arkansas Supreme Court. Looking at case law from the late 1930’s, the Court found that some time after the turn of the century, it became “common knowledge in Arkansas that a reservation of mineral rights included oil and gas.” Moreover, the Court looked at case law dating from 1912, finding that “natural gas is a mineral.” Based on this history, the Arkansas Supreme Court had no hesitation in concluding that an evidentiary hearing was unnecessary, and that a 1934 grant of mineral rights included oil and gas rights.
Posted in Leases, Marcellus Shale, Oil and Gas, Real Estate | Tagged Arkansas, deeds, leases, Marcellus Shale, oil and gas | Leave a Comment »
Last fall we wrote about the decision in Butler v. Estate of Powers in which the Pennsylvania Superior Court appeared to overturn more than 100 years of case law to cast doubt on whether the natural gas found in shale is a “mineral” for purposes of deed interpretation. We called it a “Case to Watch,” and it looks like we were right because earlier this month the Pennsylvania Supreme Court agreed to hear the case.
From their petition for allowance of appeal, we know that the plaintiffs in Butler will argue that the Pennsylvania Supreme Court should reverse, and apply the rule from the Dunham case, which created a rebuttable presumption in Pennsylvania that the owner of “mineral rights” does not own rights in a property’s natural gas stores. Given the fact that so many leases have been written relying on this rule, it is hard to imagine that the Pennsylvania Supreme Court would do anything else. In fact, it could do even more, and hold as a rule of law that deeds that convey or reserve mineral rights do not include the rights to natural gas. Given the activities in the Marcellus Shale and other shale plays, any additional certainty in this area of the law would surely be welcomed by all interested parties.
Posted in Cases To Watch, Leases, Marcellus Shale, Oil and Gas, Real Estate | Tagged drilling, leases, Marcellus Shale, mineral rights, oil and gas | 1 Comment »
As we reported previously, recent exploration and production in the Marcellus Shale has forced Pennsylvania courts to address interpretation of oil and gas leases which may be over 100 years old, relying on cases that are similarly over 100 years old, and to harmonize or reject those cases as they impact the people and property in the 21st century. On March 26, the Pennsylvania Supreme Court attempted to do just that in T.W. Phillips Gas and Oil Co. v. Jedlicka, No. 19 WAP 2009 (Mar. 26, 2012). The case involved a 1926 oil and gas lease which provided, in relevant part, that the lease would continue for “as long . . . as oil or gas is produced in paying quantities” and required interpretation of the term “in paying quantities.”
The landowner Plaintiff, Ms. Jedlicka, sought to terminate the lease when the successor to T.W. Phillips sought to drill several new wells on her property. Ms. Jedlicka contended that the driller did not have this right because the lease terminated in 1959 when the wells on her and other parcels subject to the lease has a loss of $40.00 and thus had not produced “in paying quantities.” Defendants disagreed, arguing, among other things, that a mere dollars-and-cents measurement of profitability over a one-year period of time was not the standard upon which to determine whether wells were producing “in paying quantities.”
Both parties looked to and relied upon the case of Young v. Forest Oil Co., 194 Pa. 243 (1899), to support their claims. The Pennsylvania Supreme Court had been faced with a similar question in 1899, and held that “in paying quantities” meant, first, quantities to the lessee and not to the lessor and, second, … well, what Young held was actually what the parties in T.W. Phillips disputed. Plaintiff argued that the standard found in Young was that the lease must first produce a profit for the driller and if it did not, then the lease might still terminate if the driller failed to act in good faith, but instead maintained the wells merely for purposes of speculation of future profits. The Defendants disagreed, arguing that Young stood for the proposition that so long as the lessee was operating in good faith, regardless of the actual profitability of the wells, then the lease would not terminate. The Superior Court agreed with the Defendants, and held that the lease had not terminated because the Defendants had been operating the wells in good faith and did not appear to be holding the land for speculation.
The issue that the Ms. Jedlicka raised on appeal was a narrow one: “whether Pennsylvania employs a purely subjective test to determine whether an oil or gas lease has produced ‘in paying quantities.’” And it is debatable as to whether the Supreme Court actually answered that question. The four-justice majority affirmed the Superior Court’s ruling, but appear to have injected a dose of objectivity into the standard. After expressly rejecting any calls for “modernization” of Pennsylvania law or the adoption of a definition that relies on a determination as to whether a reasonably prudent operator would continue to operate the well in light of marginal profitability, the Court announced that:
if a well consistently pays a profit, however small, over operating expenses, it will be deemed to have produced in paying quantities. Where, however, production on a well has been marginal or sporadic, such that, over some period, the well’s profits do not exceed its operating expenses, a determination of whether the well has produced in paying quantities requires consideration of the operator’s good faith judgment in maintaining operation of the well. In assessing whether an operator has exercised his judgment in good faith in this regard, a court must consider the reasonableness of the time period during which the operator has continued his operation of the well in an effort to reestablish the well’s profitability.
If that last qualifier reads to you like something of an objective standard, you are not alone. It does to me, and it did to Justice Saylor, who points out in his dissenting opinion that “the majority evidently believes that the lessee’s good-faith judgment test is a component of (or perhaps subsumed within) the reasonably prudent operator standard.” Justice Saylor also took issue with the Court’s rejection of what he believed was an absolute in Young, namely that one looks to the good faith of an operator only if the well has been, over some period of time,[1] profitable, but if it has not been, then the lease has terminated and no amount of good faith on the part of the lessee can cure the default.
While the majority’s decision is intended to state a rule to be applied in all cases, there are some additional facts in this case that were probably relevant to the decision. First, the Plaintiff, despite arguing that the lease terminated in 1959, was quite content to continue receiving free gas and royalty payments for decades, just as her family had received before she inherited the property. In addition, the lease was what is known as a “pressure lease,” meaning that royalties were paid based upon the pressure in the well, not its profits, such that even in the years when the well did not make a profit, the Plaintiff (and her predecessors) were still paid royalties.
These facts certainly played into Justice Eakin’s concurring opinion. Justice Eakin commented on the fact that the lease termination provision could be either a shield or a sword to be used by either the lessor or the lessee to terminate a lease that was no longer wanted. And because it was the lessor, and not the lessee, who sought to terminate “even though she has received payments and gas throughout the life of the lease,” he opined that the good or bad faith of the lessee should not be the issue. Justice Saylor, dissenting, also refers to these facts, but in a contrary way. Without expressly saying so, one might interpret his dissent as saying that the majority opinion was the archetypical situation of bad facts making bad law, and that the standard set by the majority will, under other facts, give rise to an unjust result.
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[1] None of the Justices attempted to define what a relevant period of time for judging profitability would be, and even Justice Saylor did not automatically accept that measurement by calendar year was appropriate.
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Posted in Decisions of Note, Leases, Marcellus Shale, Oil and Gas, Real Estate | Tagged drilling, exploration, Marcellus Shale, oil and gas, Pennsylvania, royalties | Leave a Comment »
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