Archive for the ‘Litigation’ Category

Judge Pulls Spikes Off TransCanada’s Pipeline Tracks

via Wikimedia Commons

via Wikimedia Commons

TransCanada’s Keystone XL pipeline has been hurtling along and blowing through opposition like a runaway train. Opponents of the pipeline haven’t exactly been meek and mild but TransCanada has been able to roll right over them without so much as a bump.

Most of the opposition to the pipeline has focused on its obvious ecological demerits; the dirty fuel’s filthy extraction at the source in Alberta, the near certainty of a rupture, the consequences of fuel spills in the  Ogallala Aquifer, and the increase in global emissions. Those concerns have given way like wet Kleenex in the face of TransCanada’s political and financial clout. The State Department’s recent report on the pipeline’s impact certainly doesn’t look like it will produce much friction – its conclusion that pushing ahead with the project won’t have any significant impact on global emissions or the rate of oil sand extraction is hardly calculated to put the brakes on the project.

While TransCanada has been able to sweep the nation’s environmental groups aside, a single judge in Nebraska has succeeded in taking the sheen off the company’s aura of  invincibility. The Nebraska legislature, in its wisdom, recently passed a law placing the state’s power of eminent domain at TransCanada’s disposal. In effect, it forced landowners to sell their property to TransCanada by transferring the power to force such sales from the Nebraska Public Service Commission – where it had resided for more than a century – to Governor Dave Heineman.

Late last month, District Judge Stephanie F. Stacy took a long hard look at that law and decided to drag it out behind the barn and put a bullet in its head. The law, she said, was unconstitutional and void in that it divested the PSC of authority and bestowed upon the governor the ability to wield the power of eminent domain without the possibility of judicial review. In other words, it allowed the governor to grab Nebraskans’ land and give it to a foreign company for that company’s profit.

Nebraskans are an ornery and independent lot, and some of the ranchers over whose land the pipeline is slated to run didn’t take kindly to having the governor  snatch their property up in such an imperious fashion. Three landowners whose property was in the path of the pipeline filed suit. The judge’s decision went over very well with them. The attorney who handled their case had reason to crow, saying, “They thought the governor would be a rubber stamp and he was.”

For the time being, TransCanada will have to negotiate with every individual landowner along the pipeline’s route, a prospect that must not fill the company’s directors with delight; the ranchers in the pipeline’s path haven’t been sending TansCanada Valentine cards. The issue will surely be fed into the appeals system where it will grind along. But the delay won’t do the company any favors either. The administration is unlikely to act on the State Department report while the court’s clear this issue off the tracks – the delay is a perfect excuse not to act. And Nebraska isn’t the only state gumming up the works. The Texas Supreme Court recently handed pipeline opponents a major victory in ruling that TransCanada couldn’t avail itself of the right of eminent domain under the state’s “common carrier” regulations. “We’re thrilled,” said one of the plaintiffs fighting TransCanada’s land grab, “because the Supreme Court has finally ruled in favor of us—the little guys—and against a foreign oil giant.”

Nobody likes the idea of having their property taken and handed over to a foreign company so that company can make money off the property. The misuse of eminent domain has been a volatile issue ever since the Supreme Court’s Kelo v. City of New London opinion upholding a city’s use decision to use eminent domain to take property from one private owner for the gain of another private owner.

If Keystone is running into a buzz saw over the issue in deep red, oil-friendly states like Nebraska and Texas, it’s got more trouble on its hands than it might have reckoned with. TransCanada’s train may be running at full throttle, but the tracks might not be stable.

Injured On the Job, Offshore

Photo by Patrick Mackie. Some rights reserved.

A Mayer Brown Legal Update published late last week discussed the January 11, 2012, Supreme Court Opinion in Pacific Operators Offshore, LLP v. Valladolid, which held that “an injury is covered by the OCSLA [Outer Continental Shelf Lands Act, 43 U.S.C. 1331 – 1356] when there is a ‘substantial nexus’ between the injury and extractive operations on the Outer Continental Shelf (OCS).”

Juan Valladolid, an employee of Pacific Operators Offshore, LLP, was killed in a forklift accident onshore, though he spent “99%” of his time working offshore on drilling platforms off the coast of California. His widow sought benefits under the Longshore and Harbor Workers’ Compensation Act (LHWCA, 33 U.S.C. §901 et seq.), pursuant to the OCSLA, but because LHWCA only covers injuries “occurring as the result of operations conducted on the [OCS],” an Administrative Law Judge dismissed her claim – Valladolid was onshore when the accident occurred, after all.

The Department of Labor’s Benefits Review Board affirmed the decision, but the Ninth Circuit reversed it, concluding that a claimant seeking benefits under the OCSLA “must es­tablish a substantial nexus between the injury and extractive opera­tions on the shelf.”

The Supreme Court held that OCSLA extends coverage to an employee who can establish a substantial nexus between his injury and his employer’s extractive operations on the OCS.

On this “substantial-nexus” test, the Supreme Court says:

The test may not be the easiest to administer, but Administrative Law Judges and courts should be able to determine if an injured employee has estab­lished the required significant causal link. Whether an employee in­jured while performing an off-OCS task qualifies will depend on the circumstances of each case. It was thus proper for the Ninth Circuit to remand this case for the Benefits Review Board to apply the “sub­stantial-nexus” test.

EPA Initiates Proposed Rulemaking Process to Obtain Fracking Fluid Data

Photo by dmott9. Some rights reserved.

On November 23, 2011 the EPA issued a letter partially granting a petition from the environmental group Earthjustice requesting disclosure and evaluation of the fluids and chemicals used in hydraulic fracturing under the Toxic Substances Control Act (TSCA).

Earthjustice had submitted the petition in August 2011 on behalf of more than 100 public health, environmental, and “good government” groups requesting that the EPA “adopt a rule under TSCA section 4 [15 USC 2603], requiring that manufacturers and processors of E&P Chemicals (defined in the petition as “chemical substances and mixtures used in oil and gas exploration or production” – ed.) conduct toxicity testing of all E&P Chemicals and identify all chemical substances and mixtures tested.” The petition also asked for the “promulgation of a rule under TSCA section 8 [15 USC 2607], requiring maintenance and submission of various records related to E&P Chemicals, calling in records of allegations of significant adverse reactions to E&P Chemicals, and requiring submission of all existing health and safety studies related to E&P Chemicals.”

Earlier in November, the EPA provided an initial response to the petition in which they denied the TSCA section 4 request, as the petition did not “set forth sufficient facts to support the assertion that it is ‘necessary to issue’ the requested TSCA section 4 rule, as required by TSCA section 21(b)(1).”

However, as stated in the November 24 letter, the EPA “has now decided to partially grant the TSCA section 8(a) and section 8(d) requests in the petition,” because they “believe there is value in initiating a proposed rulemaking process using TSCA authorities to obtain data on chemical substances and mixtures used in hydraulic fracturing.”

Hogan Lovells and K&L Gates have more.

Endangered Species Act “Mega-Lawsuit” Seeks EPA Review of 300+ Pesticides

Photo by C. G. P. Grey. Some rights reserved.

Southwest Farm Press reports that the Plaintiffs and Defendants in Center for Biological Diversity et al v. Environmental Protection Agency et al have filed a joint status report requesting a 30-day continuation of the stay of the litigation and the postponement of the October 14 status conference until November 18.

The lawsuit kicked off in January of this year, when the Center for Biological Diversity (CBD) and the Pesticide Action Network North America (PANNA) filed a complaint against the EPA for “its failure to consult with federal wildlife agencies regarding the impacts of hundreds of pesticides known to be harmful to more than 200 endangered and threatened species,” according to a CBD press release. The press release calls the lawsuit “the most comprehensive legal action ever brought under the Endangered Species Act to protect imperiled species from pesticides.”

The specific relief requested by the plaintiffs is as follows:

1. Declare that EPA is violating Section 7(a)(2) of the ESA by failing to consult with the Service [United States Fish and Wildlife Service (“FWS”) and National Marine Fisheries Service (“NMFS”) (collectively “Service”)] concerning effects of pesticides on the endangered and threatened species and critical habitat identified herein;

2. Order EPA to begin or reinitiate consultation pursuant to Section 7(a)(2) of the ESA on the effects of pesticides identified herein on the endangered and threatened species and critical habitats identified herein in an expeditious fashion;

3. Order appropriate restrictions on the use of the identified pesticides where they may affect endangered and threatened species and critical habitats until the consultation process has been completed and EPA has brought its pesticide registrations into compliance with Section 7(a)(2) of the ESA;

4. Award Plaintiffs’ costs, including reasonable attorneys’ fees and expert witness fees; and

5. Grant Plaintiffs such additional and further relief as the Court may deem just and appropriate.

In June more than 130 organizations and business banded together with CBD and PANNA and sent a letter to EPA Administrator Lisa P. Jackson echoing the demands of the lawsuit:

“Specifically, we ask the EPA to immediately initiate formal consultations under the Endangered Species Act with federal wildlife agencies regarding the impacts of pesticides known to be harmful to hundreds of federally threatened and endangered species.”

Yet the letter also implores the EPA to take action without being compelled: “Rather than waiting for a court order, the EPA should comply with its statutory responsibility and revise its pesticide review program to incorporate input from federal wildlife agencies.”

The parties in the lawsuit have been exploring the possibility of settlement since May, but as of now, no substantive agreements have been reached.

Seeking Medical Monitoring After Environmental Contamination

Photo by cote. Some rights reserved.

A Legal Update from Mayer Brown covered the recent Third Circuit opinion in Gates v. Rohm & Haas Co.

The plaintiffs in the case, which started as a complaint filed against Rohm and Haas (a manufacturing company that is now a subsidiary of The Dow Chemical Company) in a Pennsylvania district court five years ago, sought certification for a class of residents of McCullom Lake Village who wanted the defendants to cover costs associated with medical monitoring “designed to determine whether any other former or current resident of McCullom Lake Village may have brain cancer.”

Why brain cancer? Well, according to the complaint, at least five individuals in McCullom Lake Village had developed malignant brain cancer within a short period of time, and others in the neighborhood had also developed brain cancer and rare brain tumors. The plaintiffs argued that exposure to vinyl chloride – a highly toxic chemical that was found in groundwater where Morton International (owned by Rohm and Haas at the time) was dumping liquid chemical waste – gives the proposed class members “a significantly heightened risk of developing malignant brain cancer and other illnesses.”

Despite what looked like a pretty convincing correlation/causation between the chemical waste dumping and the health of the residents of McCullom Lake Village, what the case came down to was Rule 23 of the Federal Rules of Civil Procedure. It was under this rule that the plaintiffs sought class certification, and it was this rule that undermined their case.

The district court denied the plaintiffs class certification under Rule 23.  When the case eventually came to the Third Circuit, the outcome was the same: “Given the inability to separate common issues from issues where individual characteristics may be determinative, […] the District Court did not abuse its discretion in denying the plaintiffs’ motion for class certification under Fed. R. Civ. P. 23(b)(2) and (b)(3). We [the Third Circuit] will affirm its judgment.”

For a more thorough review, and a point-by-point explanation of the courts’ reasoning, don’t forget to check out Mayer Brown’s Legal Update.

D&O Insurance May Cover Subpoena “Claims” in Fracking Investigation

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Dickstein Shapiro gives companies under investigation a light at the end of the tunnel with their recently published legal alert, which suggests that directors & officers that are the subjects of subpoenas may indeed be able to recoup costs related to the subpoenas from their D&O insurance companies.

The alert specifically addresses a situation in New York, where the Attorney General has subpoenaed three energy companies as part of an investigation into hydraulic fracturing disclosure. The subpoenas – which made headlines a few days ago in the New York Times – were sent under the authority of the Martin Act (NY General Business Law Article 23-A, sections 352-353), which gives an AG  “extraordinary powers” (according to Wikipedia) when fighting financial fraud.

The specific disclosure the AG is interested in relates to potentially misleading reports to investors regarding the prospects and profitability of the companies’ natural gas wells. One of the companies’ larger investors is New York State itself, which has invested more than $45 million of its pension money with the companies under investigation.

According to Dickstein Shapiro, the costs of “responding to and defending” such investigations could cause the target companies “to incur significant sums of money, perhaps millions of dollars.” Yet the firm sees cause for optimism.

A recent 2nd Circuit decision, MBIA Inc. v. Federal Insurance Co., held that a subpoena constitutes a “claim” covered under the D&O policy in question, where “claim” is typically defined to include “a formal or informal administrative or regulatory proceeding or inquiry commenced by the filing of a notice of charges, formal or informal investigative order or similar document.” (emphasis added) The 2nd Circuit agreed (with a district court’s previous decision) that a subpoena is “at absolute minimum, a ‘similar document’.”

Chevron Company Found Guilty in Historic Environmental Lawsuit

Photo by Peter π. Some rights reserved.

On Tuesday, Chevron Corporation was ordered by Ecuadorian courts to pay $9 billion in damages for massive environmental contamination of the Amazon rainforest. The lawsuit was filed in 2003 by Ecuadorian citizens, many of whom are representatives of multiple indigenous groups from northeastern Ecuador. The litigation was originally brought against Texaco Petroleum Company in a Manhattan court some 18 years ago, and was inherited by Chevron when it acquired Texaco in 2001.

Critics like Amazon Watch and Rainforest Action Network say that Texaco “dumped 18.5 billion gallons of toxic wastewater into streams and rivers, spilled some 17 million gallons of crude oil, and left behind more than 1000 waste pits that continue to leech toxins into surrounding soil and water. The pollution has caused a spike in cancer rates and decimated the cultures of various indigenous groups in the area.”

But Chevron denies these allegations. In the company’s most recent quarterly report, it states that Texaco Petroleum subsidiary Texpet carried out a $40 million remediation program, after which the Ecuadorian government granted “a full release from any and all environmental liability arising from the consortium operations.”  Disclosure of this litigation is qualified with the claim that “Chevron believes that this lawsuit lacks legal or factual merit.”

In a recent press release, Chevron states that much of the evidence provided in this suit “shows an elaborate criminal scheme involving fraud, extortion, collusion, forgery and witness tampering,” and is already taking steps to prevent enforcement of the ruling: the company was granted a temporary restraining order against the plaintiffs, barring them from taking enforcement action. Chevron has also filed a racketeering suit against the plaintiffs’ legal team.

In the history of environmental damage cases, this judgment is second only to the $20 billion BP Gulf spill settlement; it is also the first time a foreign court has held an American corporation accountable for its environmental impact abroad. Chevron will appeal the decision; the Ecuadorian judge who issued the verdict says that Chevron has 15 days to issue a public apology after which the fine will be doubled.


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