Environmental Toxic Torts Blog

Experts - Daubert Motions Should Not Be Routine

Gail Wurtzler — Thu, 06 Nov 2008 15:34:17 -0700

Both plaintiffs and defendants in toxic tort cases routinely file Daubert motions seeking to exclude the other sides’ experts. Often, the motions are based on serious questions about the qualifications of an expert or the expert’s methodology and seek to exclude “junk science.” Such motions are without a doubt a proper application of Daubert. However, at times, a motion styled as a Daubert motion is no more than an argument that the expert’s conclusions are wrong. The United States Supreme Court opinion in Daubert specifically noted that such an argument was not the proper focus of a motion to exclude under Rule 702. As a result, courts frequently hold that attacks on an expert’s conclusions should be made through cross-examination of that expert at trial or through presentation of rebuttal expert testimony rather than by means of a Daubert motion.

A recent example of such a situation is Cannata v. Forest Preserve District, 2008 WL 4360644 (N.D. Ill. September 23, 2008), where the court repeatedly admonished counsel that the attacks on the expert should be made on cross-examination and not through a motion to exclude.

The lesson for counsel (and their clients) is to limit Daubert motions to a focused attack on the expert’s qualifications and/or principles and methodology, rather than a generalized attack on the expert and his/her conclusions. In addition, it is the rare case where all or most of a party’s experts should be subjected to a Daubert motion. However, properly focused Daubert motions can be an efficient and effective use of litigation resources.

Class Certification - Medical Monitoring

Gail Wurtzler — Wed, 05 Nov 2008 15:24:00 -0700

It continues to be difficult to predict the outcome of motions to certify classes in toxic tort cases. In a recent medical monitoring case in West Virginia, Rhodes v. E.I. du Pont de Nemours & Co., F.R.D. , 2008 WL 4414720 (S.D. W. Va. September 30, 2008), the plaintiffs patterned their certification motion on a medical monitoring class settlement involving the same defendant, the same chemical (perfluorooctanoic acid or PFOA or C-8), and similar exposure levels. However, the court refused to certify the class.

See Continue Reading for more detail.

Denial of class certification was based on the court’s conclusion that the plaintiffs had not shown the class met the criteria for a medical monitoring claim under West Virginia law. In particular, the plaintiffs did not show that the proposed class had been significantly exposed to PFOA, a chemical used to manufacture products including non-stick pans, or that their exposure jeopardized their health.

No Significant Exposure. The court was unimpressed that the prior class settlement included people with similar exposures. The concession in the prior case meant nothing. Evidence of recommended precautions by public health agencies was similarly unhelpful because none of the agencies making recommendations had definitively concluded that persons exposed to [PFOA] have a significantly increased risk of disease. Finally, the court rejected the plaintiff expert’s risk assessment, and risk assessments in general, as evidence of causation in toxic tort cases because “risk assessments have largely been developed for regulatory purposes and thus serve a protection function in providing a level below which there is no appreciable risk to the general population. They do not provide information about actual risk or causation.” 2008 WL 4414720 at *12.

No Health Jeopardy. Regulatory agency concerns that PFOA may be harmful were not sufficient to show that the plaintiffs’ health was in jeopardy from exposure to PFOA. A public potential public health risk in the abstract was not evidence of the common individual injuries needed for class certification

No Perchlorate MCL

Gail Wurtzler — Tue, 04 Nov 2008 15:04:26 -0700

Last month, EPA reached a “preliminary determination” not to regulate perchlorate in drinking water. Unless EPA changes its position, there will be no national primary drinking water regulation or Maximum Contaminant Level (“MCL”) established for perchlorate. Perchlorate is frequently discovered in soil and water. It is also increasingly the subject of toxic tort litigation. The absence of a clear national standard like an MCL to define “injury” is an element of uncertainty in a toxic tort case and increases the litigation risk for both plaintiffs and defendants.

See Continue Reading for: why is perchlorate important; what are perchlorate sources; and why is the lack of a perchlorate MCL important.

Why Is Perchlorate Important? The Agency for Toxic Substances and Disease Registry reports that high levels of perchlorate may affect the thyroid gland. The thyroid gland provides hormones necessary for normal growth and development. The thyroid gland also affects the functioning of many organs in the body. Some studies have linked perchlorate exposure to thyroid problems in pregnant women, young children and newborns.

Perchlorate has been found in at least 49 Superfund sites. It has also been found at numerous other waste sites.

What Are Perchlorate Sources? Perchlorate is an ingredient in rocket fuel, fireworks, highway flares, some munitions and other explosive products. However, perchlorate is often discovered in locations where those items are not manufactured, stored or used. Perchlorate may also occur naturally according to EPA.

Why is the Lack of a Perchlorate MCL Important? An MCL is a widely accepted measure of a safe level of exposure to a chemical. In a toxic tort case, as a practical matter, a plaintiff has a stronger claim of injury if the chemical exposure at issue exceeds the MCL. Some courts regard an exceedance of the MCL as sufficient evidence in itself of an actionable injury. Similarly, a defendant may more easily argue absence of injury when the exposure does not exceed the MCL. Several courts have dismissed plaintiff’s claims based on a factual finding that the relevant MCL was not exceeded.

Absent an MCL for perchlorate, there is no uniform national measure of safe exposure to perchlorate. Some states, but probably not all states, will promulgate their own standards. Inevitably, those state standards will vary, permitting a situation where a specific level of exposure is a violation of the standard in one state but of no significance in the neighboring state. Risk assessments and toxicological profiles and reports issued by different scientific and regulatory agencies may also vary in their conclusions regarding safety of specific exposure levels.

As a result, toxic tort litigants must understand the scientific literature and the different possible standards and be prepared to litigate about which standard is the appropriate test to determine if a specific exposure is an actionable injury. For both sides, it will be critical to have experts in toxicology, risk assessment or similar fields who can explain the competing standards and studies and assist the judge or jury in sorting through them.

Hiring Counsel for an Environmental Toxic Tort Case - Part 3

Gail Wurtzler — Tue, 28 Oct 2008 10:26:19 -0700

Continuing with my series of posts on “Hiring Counsel for an Environmental Toxic Tort Case,” this week I address the third criterion - FAIRNESS

The criterion of Fairness is slightly different for plaintiffs than for defendants, but it essentially relates to whether you are charged a fair price for the lawyer’s help. Three thoughts:

For a plaintiff, if you are agreeing to a contingent fee arrangement, take a hard look at the terms of proposed agreement, especially the treatment of expenses (expert witness fees, travel, document management, etc.) and the percentage of any verdict or settlement that the lawyer will take. Although expenses usually come off the top of any recovery, it can have a huge impact on the amount of your and your fellow plaintiffs’ recovery if the percentage for legal fees is calculated before or after expenses are deducted. A 30 percent contingent fee is typical, so ask for an explanation if the percent is higher.
For both plaintiff and defendant, ask for a budget for expenses. Expert witness fees, travel and document management costs can be substantial. For example, in an environmental toxic tort class action that is tried, expenses could easily top a million dollars. Up-front understandings on these expense categories help avoid unpleasant surprises. In addition, it may be appropriate for you to participate in some of the major decisions on expenses such as whether to retain an expert on a particular topic, whether to select a particular expert from several candidates, or whether to pay for a Cadillac-type document management system as opposed to a Chevrolet-type system.
Talk to the lawyer’s clients from prior cases about whether they felt they received fair treatment.

The bottom line for choosing a lawyer is to do your due diligence on each of the candidates (and you will likely have several to choose from for one of these cases) and then select the one that best meets the three criteria I addressed in these posts (Expertise, Commitment, and Fairness) as well as any other criteria you identify.

My next series of posts will addressthoughts about working with your lawyer going forward with one of these cases.

Hiring Counsel for an Environmental Toxic Tort Case - Part 2

Gail Wurtzler — Tue, 21 Oct 2008 10:22:20 -0700

Continuing with my series of posts on “Hiring Counsel for an Environmental Toxic Tort Case,” this week I address the second criterion - COMMITMENT.

Commitment applies to both plaintiff and defendant. You want the lead lawyer and his/her team to commit fully to your case. Environmental toxic tort cases are difficult to win if your lead lawyer is pulled in multiple directions and not focused on preparing your case. Having too large or small of a team, or a team composed of an inappropriate mix of people, interferes with efficient and effective preparation and trial of one of these cases. Similarly, repeated turnover of team members always costs you, the client, even if you are not billed for the time for a new person to get up to speed because you lose case-specific knowledge of the departing team member. Three thoughts:

Ask the lead lawyer to commit to you to make your case his/her priority for as long as it takes. Environmental toxic tort cases are complicated and frequently have a lot of moving parts. You want your lead lawyer to be on top of all aspects of your case so s/he can make good judgments and adjust strategy as needed.
Discuss staffing with the lead lawyer and his/her firm. At the end of the initial discussion, you want an understanding that the case will be staffed leanly, i.e., with a smaller number of people who have substantial continuing roles, rather than with a larger number of people who may drop in and out on a project-by-project basis. You also want to see a team staffed with lower costs people where appropriate. Finally, you want a commitment from the firm to revisit staffing with you periodically or as the case develops to make sure that staffing continues to be appropriate.
Talk to the lawyer’s clients in prior environmental toxic tort cases and ask about the level of commitment they experienced.

Hiring Counsel for an Environmental Toxic Tort Case

Gail Wurtzler — Tue, 14 Oct 2008 10:14:31 -0700

Since I started blogging on environmental toxic torts earlier this year, I received several emails from readers asking me questions about choosing an attorney to represent them in an environmental toxic tort case. Unlike most of the issues I address, there are no cases on point. There probably are no black and white answers either.

Nonetheless, I have handled environmental toxic tort cases (mostly for defendants) for a number of years and have observed and talked with attorneys and their clients. As a result, it seems to me that whether you are a plaintiff or a defendant in such a case, you need to consider at least three things when you choose an attorney: Expertise, Commitment and Fairness.

In this week’s post, I’ll address the first criterion – EXPERTISE. I’ll address the other criteria in future posts.

Obviously, whether you are a plaintiff or a defendant, you want an attorney who has handled a case like yours before and has done so successfully. By success, I mean either winning in court or obtaining a favorable settlement for the client. But how does a prospective client (plaintiff or defendant) pierce the marketing spiel and get to the facts? Three thoughts:

Ask for identification of specific cases (names of parties, court, date, citations in reporters if written opinions were reported) with successful outcomes, what the outcomes were, and reasons why the outcomes were considered to be successful or not. An attorney interested in representing you should provide copies of verdicts, court orders on the merits, and any public information about settlements in those cases. If s/he does not, you can likely find the details about those cases yourself. But if s/he really wants your case, you should not have to do that.
“Google” the lawyer and his/her firm. Do not limit your review to the lawyer’s or firm’s website but look at whatever else you find about that lawyer’s practice, articles, presentations and other work on environmental toxic tort issues. As you know, not everything on the internet is reliable, but there is useful information out there.
Talk to the lawyer’s clients in those cases. Find out whether they were satisfied with the result and whether they had any concerns about the lawyer’s expertise.

New ASTM Vapor Intrusion Standard

Gail Wurtzler — Tue, 15 Apr 2008 17:17:35 -0700

In March 2008, ASTM International issued its Standard E2600-08 entitled “Standard Practice for Assessment of Vapor Intrusion into Structures on Property Involved in Real Estate Transactions.” The goal is to identify whether there is a potential for a vapor intrusion condition to exist. The stated purpose of the standard is to define “good commercial and customary practice” for real estate transactions in the United States for conducting vapor intrusion assessments for properties with, or in proximity to, contamination of soil and groundwater by certain volatile compounds. However, it is likely that the standard will be significant in litigation involving claims based on alleged vapor intrusion.

Contents of Standard E2600-08.

The standard specifies a relatively conservative four-tier screening process to identify whether a property has a vapor intrusion potential. The process is site-specific and requires collection of information about the specific property and neighboring properties. The four tiers are:

· Tier 1 - Initial (non-invasive) Screening

· Tier 2 – Semi-Site Specific Numeric Screening

· Tier 3 – Vapor Intrusion Condition Assessment

· Tier 4 – Mitigation

Tiers 1 and 2 should be conducted by an “environmental professional” as defined in Standard E1527 addressing Phase I Environmental Site Assessments or ESAs. Tiers 3 and 4 should be conducted by such an environmental professional who has specific vapor intrusion experience.

At any point in the screening process, the property owner may elect to avoid potential vapor intrusion issues by implementing preemptive mitigation.

In Tier 1, the environmental professional uses non-numerical information typically collected during a Phase I ESA to determine whether a potential vapor intrusion condition is unlikely to occur because of the site conditions or physical setting. Information to be considered includes: existing/planned uses of the site; site and neighboring property histories; physical setting (soil type, geological, hydrological, hydrogeological and topographic information); existence of natural or man-made conduits; types of contamination (i.e., likely to have soil vapor). The distance from potential sources of volatile contamination must be considered. Standard E2600-08 presumes a potential for vapor intrusion is unlikely when the lineal distance between the nearest edge of contamination and the nearest planned or existing structure is greater than or equal to 100 feet for volatile contaminants other than dissolved petroleum hydrocarbon chemicals and 30 feet for those petroleum chemicals. The types of structures planned or existing on the site are also important. If there are intrinsically safe building designs such as well-ventilated underground parking garages or multifamily units with first floor open parking, a potential for vapor intrusion is unlikely.

The screening moves on to Tier 2 if the potential for vapor intrusion cannot be ruled out as a result of the Tier 1 screening and if the property owner does not choose to implement preemptive mitigation. Tier 2 compares site-specific groundwater and/or soil vapor concentrations to applicable government-established generic and semi-site-specific Risk Based Concentrations (RBCs). Site-specific soil, soil vapor and groundwater data from previous sampling and analyses may be used. If such data are not available, sampling is required. If the applicable RBC is exceeded, a potential vapor intrusion condition exists. The next step is either Tier 3, vapor intrusion assessment, or Tier 4, preemptive mitigation.

Tier 3 uses interior or exterior measurements and predictive modeling or attenuation factors (whichever procedure is accepted by relevant lead agency) to assess vapor intrusion potential. A multiple lines of evidence approach is recommended to determine whether vapor intrusion exists.

Tier 4 is selection of mitigation alternatives. Mitigation may include one or more of institutional controls, engineering controls or intrinsically safe building design. Institutional controls in this context are like those used in other environmental contexts and include deed restrictions and other legally enforceable conditions placed on property to reduce the likelihood of exposure. Engineering controls may include source removal and treatment, barriers and venting to prevent subsurface vapors from entering a building, pressurization of building interior to direct vapors away from enclosed spaces, and indoor air treatment systems.

Limits on Standard E2600-08.

First, the new standard is not intended by the ASTM to represent the standard of care by which the adequacy of an environmental professional’s service is judged. However, as a practical matter, it is likely that courts and litigants in negligence cases involving vapor intrusion will nonetheless regard Standard E2600-08 as evidence of conduct that meets the standard of care.

Second, Standard E2600-08 does not replace, expand or otherwise change Standard E1527 addressing Phase I ESAs. ASTM intends that Standard E-2600-08 may be used independently of Standard E1527 or as a voluntary supplement to that standard. It is not intended to be a substitute for a Phase I environmental assessment under Standard E1527.

Third, Standard E2600-08 states that it is not a requirement for “all appropriate inquiry” under CERCLA and does not “constitute, expand, or in any way define” the scope of CERCLA all appropriate inquiry. Compliance with Standard E1527 is generally regarded as sufficient to satisfy CERCLA’s all appropriate inquiry rule, and Standard E2600-08 was developed specifically to address a gap in Standard E1527. In light of these circumstances, prospective brownfields developers may well conclude that it is prudent to include Standard E2600-08 in their environmental consultants’ scope of work.

Fourth, Standard E2600-08 does not address requirements under federal, state or local law regarding vapor intrusion. For example, it does not address action levels, required remediation or possible legal obligations such as disclosure.

Finally, Standard E2600-08 does not address whether a potential vapor intrusion pathway is a complete exposure pathway or whether potential vapor intrusion poses an unacceptable risk to human health. Those determinations require further analysis under federal and/or state guidance documents identified in appendices to the standard.

Benefits of Standard E2600-08.

The Standard E2600-08 process is intended to quickly and inexpensively screen out properties that are unlikely to have a vapor intrusion condition. This process is not intended to be exhaustive or eliminate all uncertainty. Consistent with good commercial practice, the process will be guided by the type of property, the risk tolerance of the buyer and the information already available or developed in the screening process. Standard E2600-08 also confirms that a commercially reasonable option for owners of properties that are not screened out at Tier 1 is to choose preemptive mitigation and thereby avoid the expense and time to proceed through the Tier 2 and 3 activities.

Later Discovered Environmental Conditions Are Not Title Defects

Gail Wurtzler — Wed, 20 Feb 2008 12:42:22 -0700

As is probably no surprise to lawyers and real estate professionals, a Pennsylvania appeals court held that title insurance does not protect a buyer from claims arising from the physical condition of the property such as later discovered environmental problems like asbestos, lead paint or abandoned septic tanks. In Rood v. Commonwealth Land Title Ins. Co., 936 A.2d 488 (Pa. Super. 2007), a landowner made a claim against his title insurance company thirty five years after the policy had been issued, claiming that an abandoned septic tank discovered in his yard was a “defect” under the policy. Mr. Rood asserted that the presence of the tank made his title unmarketable because he would have to disclose the presence of the tank if he tried to sell his home under Pennsylvania’s Real Estate Sellers Disclosure Law and such a disclosure might cause a reduction in the price he was able to obtain. The trial court entered summary judgment in favor of the title company.

The appellate court affirmed because title insurance insures only marketability of title. It cautioned title insurance policyholders not to confuse economic lack of marketability based on physical conditions possibly affecting property use with title marketability that relates solely to “defects affecting legally recognized rights and incidents of ownership.” 936 A.2d at 494.

Summary Judgment After Exclusion of Property Damages Expert Opinion

Gail Wurtzler — Wed, 20 Feb 2008 12:39:56 -0700

Often Daubert or similar motions are the key pre-trial motions in environmental toxic tort cases because exclusion of an expert, particularly the plaintiff’s causation or damages expert, provides the basis for a summary judgment in favor of the defendant. Player v. Motiva Enterprises, LLC. 240 Fed. Appx. 513 (3^rd Cir. 2007), is such a case. Plaintiffs owned or formerly owned 27 parcels of residential real estate in Gloucester Township, New Jersey. They claimed that leaks at a nearby gas station contaminated groundwater under their properties. Twenty six of the properties depended upon wells for drinking water. Of those properties, the wells on eighteen properties showed no contamination. Wells on the remaining eight properties showed some VOC contamination but the amounts detected were within the permissible range for drinking water under New Jersey’s ground water Quality Standards.

Notwithstanding the groundwater quality analytical data, plaintiffs claimed that the values of their properties had diminished due to the leaks at defendant Motiva’s gas station. Plaintiffs retained an experienced appraiser licensed in New Jersey to establish their injuries. Motiva filed a Daubert motion seeking to exclude the appraiser and to obtain summary judgment on the plaintiffs’’ negligence claim. The district court granted both motions. For the Daubert motion, the court found that the appraiser was not qualified because he had no experience appraising contaminated properties and that his methodology was unreliable. Without the expert, plaintiffs could not carry their burden of proof for their negligence claim.

The trial court was affirmed by the Third Circuit. The appellate court did not address the issue of the appraiser’s qualifications, but focused solely on the methodology he had employed. The appraiser had used a “Detrimental Condition Model,” which he said illustrates how market value is affected by a detrimental event and by the subsequent stages of recovery. As he interpreted this model, property will experience a drastic drop in market value immediately after a detrimental event occurs and then will regain value during four stages of recovery. 240 Fed. Appx. at 519. For this case, the plaintiff’s appraiser decided that the site was at the beginning of the remediation process, and early stage in recovery, so the loss in value would be two to three times greater than a property near a site in the final state of recovery. 240 Appx. at 520. For the comparison site, namely the site in the final stages of recovery, he used a site in another township even though he had no evidence that it was similar. In fact, he knew it was not similar because the contamination at the comparison site, unlike this site, had caused children to develop cancer. The appellate court concluded that it was within the trial court’s discretion to exclude the appraiser’s testimony.

In addition to the Detrimental Condition Model, the appraiser sent a survey to thirteen lenders asking whether they would approve a loan to purchase plaintiffs’ properties. Only six responded, and of the four who were unwilling to loan, one appeared to have misunderstood the survey. Nonetheless, based on the survey, plaintiffs’ appraiser concluded that only buyers with private financing were potential buyers of the plaintiffs’ properties. Comparing the plaintiffs’ properties to the only two properties sold for cash in the area, he then concluded that plaintiffs’ properties, if sold for cash, would be discounted by 66 percent. The trial court found the survey and the methodology for this opinion unreliable. 240 Fed. Appx. at 517. The appellate court found no abuse of discretion.

The appellate court also rejected the plaintiffs’ argument that the trial court was required to hold a hearing on the admissibility of the appraiser’s opinion. Whether to decide the motion without a hearing was a matter left to the trial court’s discretion. 240 Fed. Appx. at 521.

"Stigma" Property Damages Rejected

Gail Wurtzler — Wed, 20 Feb 2008 12:39:56 -0700

Often, plaintiffs in environmental toxic tort cases seek to recover property damages based on a theory that contamination or other environmental conditions have imposed a “stigma” on the property. Sometimes the property is itself contaminated or formerly contaminated. Other times the property is only in proximity to contamination or the other environmental condition. The latter situation is often a difficult one for plaintiffs to convince courts to allow.

A Kansas Supreme Court decision issued at the end of October 2007 exemplifies such a case. In Smith v. Kansas Gas Service Co., 169 P.3d 1052, after a two-week jury trial the plaintiff class recovered $5 million in stigma property damages based on a 2001 accidental release of natural gas from a storage facility. The gas release caused an explosion in a downtown Hutchison, Kansas business and a second explosion a day later in a mobile home that killed two people. Eventually, the source of the release was discovered and corrected. The gas storage company also entered into agreements with a number of local property owners so it could drill venting wells to vent gas that had escaped from the storage facility.

The plaintiff class alleged that their property values had diminished because of the accident. Their expert, Dr. Robert Simons, performed a mass appraisal using three techniques. The first was a comparison of housing trends in Reno County with trends in surrounding counties. He also utilized a contingent valuation survey posing hypothetical questions to area residents, a technique similar to the CVM surveys used in CERCLA natural resource damages cases. His final technique was a hedonic regression analysis that identified factors affecting the value of a house and assigned a value to each factor. Here, he opined that being within a quarter mile of a deep-drilled vent well caused a 5% loss in the house’s value. 169 P.3d at 1055.

The plaintiff class tried only its nuisance and negligence claims. The trespass claim had been dropped before trial. For the Kansas Supreme Court, the key question was whether the plaintiff class could collect damages under either of those two claims for stigma or market fear when the class did not prove that the escaping gas caused any physical injury to the properties or interfered with the owners’ use and enjoyment of their properties. 169 P.3d at 1059. The court concluded that the plaintiff class could not recover.

For nuisance, the court held that a plaintiff must show an interference with his use and enjoyment of the property. That interference must be separate and distinct from an allegation that the property’s value has diminished because of marketplace fear or stigma. 169 P.3d at 1062. For negligence, the court described the plaintiffs’ theory as “negligent infliction of emotional distress on real property.” Id. A claim for negligent infliction of emotional distress to a person requires “a physical injury directly and proximately caused by the negligent conduct.” Id. The court saw no reason to apply a different standard to property claims. Therefore, “in order to recover for the diminution in value of real property resulting from the marketplace fear or stigma alleged to have been created by a defendant’s negligence, the plaintiff must establish that the property sustained a physical injury as a direct and proximate result of the negligent conduct.” 169 P.3d at 1063.

In reaching these conclusions, the court distinguished a handful of Kansas cases allowing recovery of stigma damages because in each the stigmatizing condition occurred on and directly affected plaintiff’s property. In two electric transmission line cases, plaintiffs were allowed to recover stigma damages when the power lines were constructed on their land. Ryan v. Kansas City Power & Light Co., 815 P.2d 528 (Kan. 1991); Willsey v. Kansas City Power & Light Co., 631 P.2d 268 (Kan. App.), rev. denied, 230 Kan. 819 (1981). In the third case, involving a termite inspector’s negligent inspection and report, the plaintiff purchaser’s house had termite damage. Horsch v. Terminix Int’l Co., 865 P.2d 1044 (Kan. App. 1993), rev. denied, 254 Kan. 1007 (1994).

Under these standards, plaintiffs did not meet their burden of proof by presenting only individual class member testimony that failed to establish physical injury or interference and Dr. Simons’ analysis based upon a perceived stigma among the buying public. For that reason, the court reversed and remanded with directions to enter judgment for defendants.

A PRP Cannot Recover From Other PRPs For Response Costs Paid By Insurer

Gail Wurtzler — Wed, 20 Feb 2008 12:37:54 -0700

In Friedland v. TIC - The Industrial Co., et al., Case No. 1:04-cv-01263-REB-KLM, slip opinion issued on January 18, 2008, the United States District Court for the District of Colorado joins two other federal district courts in refusing to allow a CERCLA potentially responsible party to collect response costs from other potentially responsible parties when those costs were paid by an environmental or other insurance policy. The other two courts are: the United States District Court for the District of Kansas (Raytheon Aircraft Co. v. United States, 2007 WL 4300221 at *4 (Dec. 8, 2007) ) and the United States District Court for the Eastern District of Texas (Vine Street, LLC v. Keeling ex. rel. Estate of Keeling, 460 F. Supp.2d 728, 765 (2006)).

Mr. Friedland had defended a CERCLA response costs action brought by the United States that ultimately ended with a consent decree pursuant to which he agreed to pay more than $20 million in response costs. While that case was pending, he and others sued, first, a contractor and its guarantor under a contractual indemnity provision, and second, he sued under his employer’s liability insurance policy, several insurance companies. Both of those cases settled, and Mr. Friedland recovered more than the $20 million of response costs he agreed to pay.

Notwithstanding the recoveries from the indemnitor and the insurers, Mr. Friedland sought contribution under CERCLA section 113 from two other potentially responsible parties at the site. Mr. Friedland argues that the prior recoveries should be allocated between response costs and legal defense costs, and that given such allocation, he still was owed response costs by the two defendants.

The court disagreed on two grounds. First, the settlement agreements with the indemnitor and insurers did not allocate the settlement amount between response costs and defense costs. In the absence of an express allocation in the settlement agreements, the court refused to make such an allocation and permitted the defendants full credit for the settlement amount. Slip op. at 5-6. Second, the court rejected Mr. Friedland’s argument that the collateral source rule prohibited crediting defendants with any insurance proceeds. The court noted that the collateral source rule has never been applied in the context of a CERCLA action and that it is unlikely that a rule derived from tort law would be. Slip op. at 6-7.

Cause of Action for Medical Monitoring Rejected by North Carolina Court of Appeals

Gail Wurtzler — Wed, 20 Feb 2008 12:37:54 -0700

For a number of years, environmental toxic tort plaintiffs have sought to recover future medical monitoring expenses because of alleged exposures to chemicals even though they may not have any present physical injury. Appellate courts in several jurisdictions have recognized such claims. See, e.g., Potter v. Firestone Tire & Rubber Co., 863 P.2d 795 (Cal. 1993); Meyer v. Fluor Corp., 2007 WL 827762 (Missouri March 20, 2007); Redland Soccer Club Inc. v. Department of the Army, 696 A.2d 137 (Pa. 1997); Hansen v. Mountain Fuel Supply Co., 858 P.2d 970 (Utah 1993). However, appellate courts in other jurisdictions have declined to do so, holding that a present physical injury is a prerequisite. See, e.g., Paz v. Brush Engineered Materials, Inc., 2007 WL 14891 (Miss. Jan. 4, 2007); Henry v. Dow Chem. Co., 701 N.W.2d 684 (Mich. 2005); Hinton v. Monsanto Co., 813 So.2d 827 (Ala. 2001). Often, appellate courts state thatcreation of new causes of action is better left to the legislature.

In December 2007, the North Carolina Court of Appeals issued a decision in Curl v. American Multimedia, Inc., 654 S.E.2d 76 (N.C. Ct. App. 2007), declining to recognize a medical monitoring claim in the absence of a present physical injury. The plaintiffs in Curl alleged that their drinking water wells were contaminated with trichloroethene and tetrachloroethene. Because of the exposures they had experienced, plaintiffs’ asserted that they were at increased risk of certain illnesses and therefore they needed to undergo periodic medical monitoring to ensure early detection of those illnesses. Plaintiffs had no present illnesses or other physical injuries. The court noted that, to allow such a claim to proceed, it would need to recognize a new cause of action. Because of the “complex policy questions” presented by plaintiffs’ request, and the need to “balanc[e] the humanitarian, environmental, and economic factors implicated,” the court determined that the question was better left to the legislature and not the courts. The court declined to create a new cause of action. 654 S.E.2d at 80-81.

CGL Policy That Would Reimburse Cleanup Costs Does Not Reimburse Seller For Price Discount Given To Purchaser Of Contaminated Properties

Gail Wurtzler — Wed, 20 Feb 2008 12:36:40 -0700

In Goodstein v. Continental Casualty Co., No. 05-35805, (9^th Cir. December 3, 2007), a property owner sought reimbursement under his Comprehensive General Liability policy for a discount he provided to purchasers of two contaminated Washington properties. The purchasers did not commit to clean up the properties on their own, but they did agree to be responsible for any cleanup that might be required in the future by government agencies or potential purchasers. Under Washington state law, if Mr. Goodstein had actually cleaned up the properties, his CGL policy would have covered the costs of those cleanups. However, the insurers rejected Mr. Goodstein’s assertion that the price discounts were the functional equivalent of cleanup costs and should be reimbursed under the CGL policy. Mr. Goodstein sued, asserting claims for breach of defense and indemnity duties under the policy. The trial court granted the insurers summary judgment on Mr. Goodstein’s claims.

On appeal, the Ninth Circuit affirmed the holding that the policy did not cover the diminution in sale value of the properties. For the appellate court, a key fact was that Mr. Goodstein failed to ensure that the contaminated properties would be cleaned up promptly. The purchase agreements contained no cleanup condition, and the purchasers retained the right to contest any specific government-imposed cleanup requirement that might be imposed in the future as well as the right to delay incurring cleanup costs as long as possible. For these reasons, the reduction in price was “thus almost surely not equivalent in amount to the present costs of prompt cleanup.” Slip op. at 15586.

In addition, the policy language weighed against an interpretation that a price discount was covered. First, the policy requires “physical injury to tangible property” for “property damage.” Under Washington law, diminution in property value by itself does not constitute such an injury.

Slip op. at 15587. Second, diminution in value is not included in “‘damages’ that the ‘insured shall become legally obligated to pay’ because of ‘property damage.’” Slip op. at 15587-88. Mr. Goodstein was not required to spend any money and did not ‘constructively’ spend any money because the purchaser was not obligated to perform any cleanup. All of these reasons lead the Ninth Circuit to affirm the lower court summary judgment.

Class Certification in Environmental Toxic Tort Cases

Gail Wurtzler — Tue, 19 Feb 2008 17:28:16 -0700

Like prior cases, the most recently decided class certification opinions provide little consistent direction to litigants for framing future battles over class certification. The opinions do, however, reflect some of the difficulties inherent in class property damage claims.

Precisely Defined Class Critical For Plaintiff To Meet Rule 23 Requirements

Chief Judge John G. Heyburn II of the United States District Court for the Western District of Kentucky refused to certify a class of residents in areas surrounding a Barton Brands, Ltd. distillery seeking relief for “fallout and noxious odors.” The class proposed was defined as “owners or residents of single family residences within two miles of the distillery who owned or resided beginning on July 11, 2003.” Judge Heyburn found the class definition, an overriding concern in environmental mass tort cases, to be insufficient. The Memorandum Opinion was issued on November 20, 2007.

Although the factors listed in Rule 23(a) and (b) do not expressly mention class definition, the judge stated that a precisely defined class in which the named plaintiffs are members is an essential prerequisite for maintaining a class action. Slip op. at 4. Many courts treat class definition as a threshold issue because a flawed class definition will adversely affect the Rule 23(a) and (b) analysis. Slip op. at 7. At a minimum, plaintiffs must provide a logical reason for drawing the boundaries as they propose. Id. They need to provide the court with evidence establishing a connection between the defendant’s conduct and the proposed class area. Slip. op. at 6.

In this particular case, the plaintiffs offered no evidence that “the airborne contaminants spread in a uniform fashion in all directions from Defendant’s facility for a distance of up to two miles, or that the contaminants complained of by proposed class members bear a relationship to defendant.” Slip op. at 7-8. To meet this burden, plaintiffs could have provided test results for any substances that they claim fell on their properties or analysis of where the emissions of defendant’s plant spread once they leave Defendant’s smokestack, but they provided no such evidence. Slip op. at 9. Under the circumstances, Judge Heyburn was understandably troubled by “the lack of evidence that something occurred to distinguish the members of the [proposed] class from the general public.” Slip op. at 9.

Because of the problems with the proposed class definition, Judge Heyburn could not determine how many of the 5,864 proposed class members really were class members and therefore whether the numerosity requirement of Rule 23(a)(1) was satisfied. Slip op. at 11. Similarly, without a better class definition, Judge Heyburn could not determine how many of the proposed class members were similarly affected and whether the typicality requirement of Rule 23(a)(3) was satisfied. Slip op. at 12.

The “infirmities” in the class definition also affected the Rule 23(b) analysis. Absent evidence that the cause of the entire class’ damages could be determined on a class wide basis, the court concluded plaintiffs failed to satisfy the requirement in Rule 23(b) that common questions of law and fact predominate.

Three Judge Appellate Court Panel Issues Three Separate Opinions On Class Certification

Dow Chemical Company requested the Michigan Court of Appeals to review class certification in Henry, et al. v. Dow Chemical Co., No. 266433, a property damage case alleging dioxin releases. Class certification was affirmed in a divided decision issued on January 24, 2008. Each of the three appellate court judges issued a separate opinion.

The trial court certified a class consisting of property owners on February 1, 2002 within the one hundred year flood plain of the Tittabawasee River in Saginaw County, Michigan without an evidentiary hearing. Approximately 2000 people were said to be members of the class.

The per curiam opinion noted that the trial court’s decision should be evaluated against a “clearly erroneous” standard. Slip op. at 7. However, such an evaluation was difficult. There was no evidentiary hearing, and the parties presented conflicting documentation. The trial court made no factual findings and relied on case law to support its decision. Consequently, the appellate court could not conclude that the trial court had clearly erred. Slip. op. at 8.

The per curiam opinion continued in dicta to criticize Dow for taking what it called an “all or nothing” approach. As an alternative, the per curiam opinion suggested defendants in these cases should seek to limit class certification to particular issues or forms of relief or even to discovery. Slip op. at 12. Finally, the per curiam opinion suggests defendants should seek to limit class definition to owners of property with more than “zero to a little amount of dioxin level.” Slip op. at 13.

The concurring opinion notes that “with regard to damages, individual questions predominate over common questions and that the damages phase, should liability be established, must be dealt with on a case-by-case basis.” Slip concurring op. at 1. For that reason, the concurring judge would have directed the trial court to bifurcate the proceedings into a class action with respect to liability and individualized proceedings with respect to damages.

The dissenting judge would have reversed the trial court because individual issues of liability, causation and damages predominated. Individual issues included: variation in Dow’s activities over time; lack of uniformity in type, amount and timing of discharges; variation on flooding in terms of areas and cycle; changing environmental laws and waste discharge methodology. Slip dissenting op. at 2. In addition, the trial court would need to consider individual proof for each plaintiff of dioxin exposure levels, causation, injury-in-fact, damages and/or defenses. Slip dissenting op. at 5.

Commercial Kitchen Waste Is A Pollutant

Gail Wurtzler — Tue, 19 Feb 2008 17:26:32 -0700

The United States District Court for Colorado held that used cooking oil and other nontoxic restaurant wastes are “pollutants” under the pollution exclusion clause in a restaurant owner’s commercial general liability policy. Mountain States Mutual Casualty Co. v. Kirkpatrick, 2007 WL 2506640 (D. Colo. Aug. 30, 2007). The circumstances leading to this broad definition of “pollutant” began with two workers alleging that they were injured in October 2003 while cleaning sewers located near the Hog’s Breath Saloon & Restaurant in Otero County, Colorado. The workers claimed that Hog’s Breath discharged cooking oil, grease, fat and other food by-products directly into the sewer in violation of several city ordinances. The workers further claimed that nearly five feet of oil and grease had accumulated in the manhole closest to the Hog’s Breath sewer connection. The accumulation of oil and grease allegedly produced hydrogen sulfide gas that was trapped in the manhole and in air pockets within the grease. Both workers were overcome when sewer cleaning began. Both survived but then sued in state district court for among other things, negligence and negligence per se.

After service of the complaint, Hog’s Breath requested that its carrier, Mountain States Mutual Casualty Company, provide a defense and indemnification under its commercial general liability policy. Mountain States accepted the defense under a reservation of rights and filed this action seeking a declaration that the pollution exclusion clause in the policy precluded coverage. The policy defined “pollutant” as:

Any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste includes materials to be recycled, reconditioned or reused.

In Colorado, as Judge Walker D. Miller noted, an insurance company seeking to avoid a duty to defend has a “heavy burden.” Compass Ins. Co. v. City of Littleton, 984 P.2d 606,613 (Colo. 1999). The insurer must establish that “the exemption claimed applies in the particular case and that the exclusions are not subject to any other reasonable interpretation.” Hecla Mining Co. v. New Hampshire Ins. Co., 811 P.2d 1083, 1090 (Colo. 1991). For an insurer to prevail, there can be “no factual or legal basis on which the insurer might eventually be held liable to indemnify the insured.” Hecla, 811 P.2d at 1090.

For Judge Miller, the critical question was whether the kitchen waste in addition to being “waste” was a “contaminant or irritant.” Applying standard dictionary definitions of “contaminant” and “irritant,” Judge Miller concluded that under the plain meaning of those words and in the context of the facts and circumstances alleged in the underlying lawsuit by the two sewer cleaners, the kitchen waste was a “contaminant” and therefore a “pollutant” for purposes of the pollution exclusion clause. Therefore, Mountain States had no duty to defend or indemnify.

Hog’s Breath made a number of arguments that would have required Judge Miller to look beyond the four corners of the policy such as the reasonable expectation of a restaurant owner is that garbage and food by-products are not normally considered to be “contaminants” and the likelihood that there were many other sources of the hydrogen sulfide gas found in the sewer. Judge Miller concluded that such arguments could not be considered because the policy was unambiguous.

Defense Verdict in Property Damages Case

Gail Wurtzler — Tue, 19 Feb 2008 13:03:43 -0700

On January 7, 2008, following one of the longest jury trials ever held in Kansas, jurors in a class action property damage lawsuit returned a verdict in favor of defendants BP Corp. North America, Inc., BP America Inc., BP Products North America Inc., Atlantic Richfield Company and BP America Production Company. The litigation concerned a former Amoco oil refinery that operated in Neodesha, Kansas from 1897 until it was dismantled in 1970. Defendants had been conducting a cleanup of the site. Plaintiffs included the City of Neodesha, the local school district, several local businesses, and residents. The plaintiffs claimed that most of the town overlies groundwater contamination from the refinery consisting of petroleum hydrocarbons and metals such as arsenic, lead and mercury. Plaintiffs’ claims included breach of contract and fraud as well as typical property tort claims. Property valuation experts were: Dr. Louis Wilde, LECG, for the defendants and Dr. John A. Kilpatrick, Greenfield Advisors, for the plaintiffs.