On April 9, 2019, Judge John Z. Lee of the District Court for the Northern District of Illinois, Eastern Division denied the City of Evanston’s motion for a preliminary injunction against two utility companies in a RCRA action that sought to compel the utility companies to investigate and remediate polycyclic aromatic hydrocarbon (PAH) contamination in the area.  After a lengthy evidentiary hearing spanning eight days, Judge Lee found that the city had failed to meet its overall burden of proving likelihood of success on the merits, in part because he believed one of the city’s main theories of contamination to be “simplistic.”  (Memorandum Opinion and Order, at *4, City of Evanston v. Northern Illinois Gas Company, No. 16 C 5692 at *19 (N.D. Ill. Apr. 9, 2019)). And on May 16, 2019, the Seventh Circuit Court of Appeals affirmed a similar decision in Varlen Corporation v. Liberty Mutual Insurance Company, No. 17-3212 (7^th Cir. May 16, 2019), excluding an expert witness and granting summary judgment to the defendant because the expert's testimony regarding the cause of contamination was found to be unreliable, having failed to meet the Daubert standard.

City of Evanston

In 2016, the City of Evanston (the “City”), brought suit against two utility companies (Northern Illinois Gas Company and Commonwealth Edison Company, together, the “Utilities”) alleging violations of RCRA (42 U.S.C. § 6901 et seq.) and other state and municipal laws. The City’s main claim was that PAHs were found on City property (namely, in the soil near a municipal park, and also on and around a decommissioned water main), and that predecessor companies of the Utilities were the source of those contaminants. The City later moved for a preliminary injunction under RCRA to issue an order: 1) appointing an investigatory panel, and 2) requiring the Utilities to fund studies and perform any associated remediation activities.

The City brought its claim under the “citizen-suit” provision of RCRA which states that the party must show “that (1) ‘any person . . . including any past or present generator, past or present transporter, or past or present owner or operator of a treatment, storage, or disposal facility,’ has (2) ‘contributed or . . . is contributing to the past or present handling, storage, treatment, transportation, or disposal of any solid or hazardous waste…” Opinion at *14, City of Evanston v. Northern Illinois Gas Company, No. 16 C 5692 at *19 (N.D. Ill. Apr. 9, 2019)(citing 42 U.S.C. § 6972(a)(1)(B)). The Utilities did not dispute the fact that they were indeed a past generator, transporter, or owner of a treatment, storage, or disposal facility, and instead centered their defense on the assertion that they were not the source of the specific PAHs found in the City’s sampling. Because the claim and the defense both revolved around the question of whether the Utilities were the source of the PAHs, and because the legal standard for a preliminary injunction requires that that the party show that its case has “some likelihood of success on the merits,” Judge Lee held an eight-day evidentiary hearing to determine whether the City’s claims did in fact have a likelihood of success on the merits. This evidentiary hearing was instrumental in Judge Lee’s decision to deny the City’s motion for a preliminary injunction.

One of the main things that the City had to demonstrate to prove likelihood of success on the merits was that the Utilities were the probable source of the PAHs found in the City’s sampling. The City tried to demonstrate that the Utilities were the source of the PAHs by advancing a “simplistic” causal formula of a + b = c, where:

a) represents the fact that PAHs are found in the byproducts of the waste oils and raw fuel oil that were generated by the Utilities, and

b) represents the fact that PAHs were found in the soil near certain abandoned pipelines belonging to the Utilities, and that therefore

c) represents the necessary conclusion that the Utilities were the source of the PAH contaminants found in the City’s sampling.

The Utilities argued that the City’s attribution of blame was scientifically flawed, and that the City had failed to demonstrate that the Utilities were the source of the PAHs. To continue this article’s equation metaphor, the Utilities argued that a + b did not necessarily = c. Judge Lee found this reasoning much more persuasive, especially when viewed in the light of the testimony he heard from both sides’ expert witnesses.  

The City’s primary expert witness presented his theory that the Utilities were the source of the PAHs because one of their predecessor companies operated a manufactured gas plant from 1911 to 1931 and used a pipeline (the “Dodge Gas Line”) to distribute product throughout the city. The theory continued with the assertion that “waste oils and raw fuel oil (the City refers to the combination as ‘MG Waste Oils’) leaked out of the Dodge Gas Line and migrated into the surrounding soil and over to the Dodge Water Main. The chemicals in the MG Waste Oils, according to the City, then created the crust on the outside of the Dodge Water Main and infiltrated into the water main itself, posing a risk to the City’s water system.” Id. at *17. The City also alleged that the MG Waste Oils migrated to the bedrock and biodegraded into methane, which measured at dangerous, high-pressure levels.

The City’s expert “ruled out” the fact that there were other potential sources for the PAHs, “such as the former landfill underneath James Park, a nearby gas station, a nearby crude oil tank, a ‘Rust-oleum plant,’ and the possibility of a coal-tar coating applied to the Dodge Water Main to prevent corrosion.” Id. at *18. The expert did not give a clear answer as to why he ruled those possibilities out, and he also failed to conduct tests that would determine the relative concentrations of PAHs in the City’s water samples to those at other similar sites. The expert’s lack of detailed analysis clearly influenced Judge Lee’s decision-making. The Opinion notes that “merely pointing out that certain PAHs detected in the samples at issue also appear in wastes from the [manufactured gas plant] manufacturing process, without regard to their relative concentrations or other indicia that permit a more detailed comparison of the samples, does little to show that the PAHs found in the water main and park samples actually came from the Skokie [plant].” Id. at *19.

The Utilities advanced several arguments in their defense, one of which was that (as noted above) PAHs can come from many possible sources. Another major argument advanced by the Utilities’ expert was that he performed advanced chemical analyses on the samples that the City’s expert did not, and that the results from the more scientifically complex studies show that that the Utilities were not the source of the PAHs. The expert conducted two kinds of gas chromatography analyses (gas chromatography with mass spectrometry and with flame-ion detection) and used those studies to demonstrate that the PAHs found in the different samples all had different chemical compositions, and were not actually related to each other.

The Utilities also advanced the argument that even if the PAHs found in the different samples were the same chemically, they still could not have migrated from the Dodge Gas Line to the Dodge Water Main in a way that would support the City’s allegations. Again, the proffered experts differed in their level of scientific analysis. The City’s expert explained that the chemicals travelled from the Dodge Gas Line to the Dodge Water Main via lateral pathways in the soil. Although this is technically possible, the Utilities’ second expert noted that this phenomenon would likely result in concentrations of PAHs being highest near the Dodge Gas Line, and would get lower and lower as they travelled along the lateral pathways to the Dodge Water Main. The expert pointed out that that simply was not true because the data demonstrated that the concentration of PAHs was highest at the Dodge Water Main itself.

The Utilities also put forth the argument that (in order for the lateral migration theory to work) the City needed to prove the existence of dense non-aqueous phase liquids (DNAPL tars) in the pipeline. The City needed to prove DNAPL tar presence in the pipelines because DNAPL tars have a specific gravity greater than water, and could therefore travel through the soil to the bedrock, making the lateral migration theory possible. The Utilities were able to show, however, that it was an “absolutely crucial” industry practice to remove all DNAPLs from the finished product before it left the plant, because the DNAPLs would “drastically and immediately” clog up the pipelines. Id. at *22. The City could not demonstrate that the plant went against crucial industry practice, and the argument therefore failed.

Finally, the Utilities offered a “plausible alternative explanation” for the presence of PAHs. Id. at *23. A third expert for the Utilities offered his opinion that the outside of the Dodge Water Main pipe had a coal-tar coating. According to the expert, this coal-tar coating could explain the presence of PAHs in the water. The expert further explained that it was his opinion that the black crust found on the outside of the water main was, in fact, old coal-tar coating. He also noted that it was industry practice at the time to coat cast iron pipes (like the Dodge Water Main) with coal-tar. The possibility of an alternative source was also a major factor in Judge Lee’s decision-making.   

Although other factors were considered (including whether the PAH contamination at issue was an “imminent and substantial” risk to health or the environment), the thorough scientific analyses offered by the Utilities’ experts regarding the source of the contamination seemed to win the day. As it currently stands, the parties in City of Evanston v. Northern Illinois Gas Company have entered into settlement negotiations, and the litigation is stayed pending those negotiations.

 Varlen Corporation

The conclusion reached in City of Evanston v. Northern Illinois Gas Company is not an isolated occurrence, either. On May 16, 2019, the Seventh Circuit affirmed a similar decision from the District Court for the Northern District of Illinois, Eastern Division’s Judge Joan B. Gottschall. In that case, Judge Gottschall excluded the plaintiff’s expert witness and (because the case depended almost solely on his testimony) granted summary judgment to the defendant. In Varlen Corporation v. Liberty Mutual Insurance Company, the Varlen Corporation incurred “millions of dollars in damages and remediation expenses” for property it owned, and sought indemnification from its insurance company. (Opinion at *2, Varlen Corporation v. Liberty Mutual Insurance Company, No. 17-3212 (7^th Cir. May 16, 2019)). When the insurance company, Liberty Mutual, refused to indemnify Varlen under a pollution exclusion, Varlen sued for indemnification, claiming the pollution exclusion did not apply because the pollution was “sudden and accidental.” Varlen’s case relied almost solely on the testimony of its expert witness.

The expert witness testified that the releases at the property were sudden and accidental, but did not elaborate much on why or how he arrived at that conclusion. The judge reviewed the witness’ testimony and deemed it unreliable based on an analysis under Rule 702 of the Federal Rules of Evidence and the Supreme Court’s opinion in Daubert v. Merrell Dow Pharmaceuticals. Under both of those standards, experts are permitted to make inferences about what happened and base those inferences on their personal expertise. Those inferences, however, must still be “based on sufficient facts or data.”

Judge Gotschall found that the expert’s testimony was unreliable because he “failed to explain why this data mattered or why his inferences were justified. When pressed specifically on the connection between the contaminant mass and the circumstances of the release, he simply stated that the data was ‘an indication’ but acknowledged that it was ‘not conclusive.’” Id. at *6. Because the judge found the expert to be unreliable, his testimony was excluded, and Varlen’s case fell apart. In affirming the lower court’s ruling, the Seventh Circuit wrote, “In short, [the expert] failed to demonstrate that his conclusions were anything more than guesses. To satisfy Daubert, [the expert] needed to provide an explanation of how the evidence led to his conclusions. He had to articulate a justification for his inference that the chemical spills were sudden and accidental beyond a simple say-so.” Id.

The holdings in City of Evanston v. Northern Illinois Gas Company and Varlen Corporation v. Liberty Mutual Insurance Company clearly underscore the importance of having the best possible experts in scientifically complex litigation.

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