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

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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

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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

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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.


And In Other Oil Spill Claims News…

The Hill’s E2-Wire blog reported yesterday on updated payment options available to Deepwater Horizon claimants.

Photo by Fibonacci Blue. Some rights reserved.

The Gulf Coast Claims Facility (GCCF) is a facility that manages claims for costs and damages incurred as a result of the Deepwater Horizon oil spill. BP contributes funds to an account that are then distributed by an independent claims administrator.

Emergency payments, which were advance payments to individuals or businesses having financial hardship resulting from the spill, ended November 23, 2010. However, the GCCF just recently indicated that they will soon begin accepting claims for Interim and Final payments. There are three payment options available at this time, which are summarized here.

And what are the payment options?

    This claim option provides an automatic payment of $5,000 for Individuals or $25,000 for Businesses, with no further review or requirement for additional supporting documentation. However, this option requires claimants to sign a release of liability that prevents them from seeking further compensation from GCCF or in court.
    A Full Review Final Payment Claim will be paid in a lump sum single payment for all documented losses and damages, both past and future. A Full Review Final Payment Claim requires complete substantiation and documentation of all damages sustained in the past. This option also requires claimants to sign a release of liability that prevents them from seeking further compensation from GCCF or in court.
    An Interim Payment Claim may be submitted for past losses and damages incurred as a result of the Spill – and ONLY past damages. For future losses or damages to be evaluated and paid, one must submit a Full Review Final Payment Claim. However, those submitting an Interim claim will not be required to sign a release of liability.

According to E2-Wire, the claims administrator “has encouraged oil spill victims to seek compensation through the GCCF, warning that legal battles could last for years.” As we discussed yesterday, in the case of Exxon Valdez, “years” is no exaggeration. Even BP admits in a 6-K filed last month that “claims and litigation settlements are likely to be paid out over many years to come.”

Insuring Against Climate Change

A recent Alert from Perkins Coie underscores the risks corporations face from climate change fallout, and how insurance policies may – and may not – be able to protect you.

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Disasters associated with climate change have the potential to hurt you in more than one way. After the debris has been cleared from increasingly intense cyclones, tornados and floods, there’s a chance that someone could find you, well, responsible for the damage.

According to Perkins Coie, “although no one has yet successfully sued a company for climate change damage allegedly caused by greenhouse gas (“GHG”) emissions, lawsuits blaming industrial emitters for global warming, extreme weather events and other natural disasters are pending in Alaska, Washington, D.C., California and Louisiana.”

As a preemptive measure, some corporations are disclosing climate change related risks, as mandated by the SEC or, more recently, by the National Association of Insurance Commissioners (NAIC), which last March adopted a “requirement that insurance companies disclose to regulators the financial risks they face from climate change, as well as actions the companies are taking to respond to those risks.” (You can see a template of the required survey here.)

And if lawsuits do arise? Perkins Coie points out how existing insurance policies may cover your behind if you get into a climate change related pickle:

  • Comprehensive General Liability (“CGL”) Insurance
    “CGL insurance generally protects companies from claims that a policyholder’s activities caused property damage or bodily injury to a third party.”  However, many CGL policies include pollution exclusions that supposedly deny coverage for damage arising from pollutants. GHG emissions are likely to fall within this exception after the Supreme Court included greenhouse gases in the definition of pollutant in Massachusetts v EPA.
  • Directors & Officers Liability Insurance (“D&O”)
    “By requiring disclosure requirements that relate to climate change, the SEC has created a scenario where a corporation could be held liable for failing to make adequate disclosures.” D&O insurance may provide “coverage for a ‘Loss’ that directors and officers become obligated to pay for ‘wrongful acts’ – such as an inadequate climate change disclosure.”
  • First-Party Property Damage and Business Interruption Insurance
    “First-party property damage and business interruption insurance typically protects a policyholder against risks to its property or operations.” However, policyholders should make sure that such policies “provide coverage for all of the perils associated with severe weather events.”

I recommend reading the full Alert for more detail. The overarching lesson to be learned is that you should know your insurance policy inside and out, put in place all reasonable prevention measures, and be willing to increase your coverage where necessary.


This is another topic on which there’s no dearth of insightful analysis. Again, check out our Law Firm Memos search page. Enter the string climate change and insurance in the Text Search box, and insure yourself against ignorance.

Spygate: Greenpeace Sues Dow Chemical et al. for Espionage

A lawsuit filed Monday in federal district court by Greenpeace accuses chemical big-wigs Dow and Sasol North America of engaging in a “pattern and practice of clandestine and unlawful activities” including “misappropriation and theft of confidential information and trade secrets, unlawful surveillance, misuse of law enforcement personnel, and, in all likelihood, unlawful breaking and entering into Greenpeace offices and other locations.”

Photo by DaveFayram. Some rights reserved.

Between 1998 and 2000, Greenpeace was involved in campaigns to expose environmental hazards, some of which targeted the practices or products of Sasol and Dow. This included Sasol’s vinyl chloride production, which emitted toxic chemicals into the Lake Charles region of Louisiana, and Dow’s manufacturing activities, which create dioxin, a chemical that can cause skin diseases, liver damage, and changes in hormonal levels. (This wouldn’t be Dow’s last trouble with Dioxin – they have been working to clean up the Tittabawassee River, Saginaw River & Bay site in Michigan of high dioxin concentrations for several years now).

Greenpeace was working with Lake Charles community members when a local citizen’s group was reportedly infiltrated by the private security firm Beckett Brown International (BBI) – many of the employees of which were former Secret Service and CIA officers! BBI then supposedly expanded their surveillance activity to Greenpeace’s DC office, where they stole thousands of documents. Dow and Sasol paid BBI for this confidential Greenpeace information, which was then used to “anticipate and frustrate” Greenpeace’s campaigns and fundraising plans, according to the suit.

The story originally broke in 2008 when Mother Jones, an investigative nonprofit news organization, released supporting documents obtained from a former investor in BBI. The juicy documents pulled as evidence (published here) are equal parts ridiculous and creepy. In one report to BBI, a research consultant describes a tour she received of the Greenpeace office, where everyone was “dressed granola” and the space “was in disarray with […] pillows strewn on the floor.” But another report details the following stalker-esque surveillance: “At 8:21 AM, the green van departed the residence with four women. I followed the van to Interstate 10 West. I stayed with the van for approximately five miles.”

Equally juicy is Greenpeace’s complaint, which – dotted with phrases such as “under the cover of darkness” and “dress[ed] all in black” – reads more like a spy novel. If the drama surrounding the story to date is any indication, one can expect that all further action on this case will be no less exciting. Greenpeace’s message to corporate Goliaths?

“We’ll see them in court.”

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