Environmental Roundup – May 2019

Federal Courts of Appeal

Dam Claims Collapse
On May 7, 2019, the U.S. Court of Appeals for the Eleventh Circuit decided the case of Navelski, et al. v. International Paper Company. After a major storm, a dam constructed by International Paper to serve the operations of its local paper mill, was breached, releasing millions of gallons of water into a nearby creek resulting in the flooding of many homes located downstream from the creek. IP was sued by the homeowners in a class action, alleging negligence and strict liability for conducting an abnormally dangerous activity. The trial court dismissed the strict liability claim, and the jury found IP was not negligent in the operation of the dam. On appeal, the court upheld the jury verdict, agreeing that the verdict was supported by the evidence heard by the jury. The appeals court also agreed that the strict liability claim was properly dismissed as a matter of law because the operation of this dam was not an abnormally dangerous activity under Florida law. The plaintiffs had also argued that the jury should not have been advised that the home county, Escambia County, has applied for a FEMA grant which apparently made the case that some of the downstream homes were naturally prone to flooding. A redacted version of the application was allowed to be shown to the jury, but the appeals court held that the plaintiffs had not demonstrated that the court ruling was prejudicial.

Unswayed by Expert Opinion
On May 16, 2019, the U.S. Court of Appeals for the Seventh Circuit decided the case of Varlen Corporation v. Liberty Mutual Insurance Company. Two of Varlen’s industrial sites, insured by Liberty, were found to have significant groundwater contamination resulting from their operations. Varlen has spent millions of dollars cleaning up these sites and sought indemnification from its insurer, which denied the claim. The policies had a “pollution exclusion” for any property damage arising out of chemical leaks or discharges. However, there was also a policy provision stating that Liberty would cover chemical leaks or discharges that were “sudden and accidental.” However, there was no direct evidence of how these releases occurred, so Varlen proffered the testimony of a geologist to prove the releases were in fact sudden and accidental. The trial court ruled that the expert’s opinions were speculative and unreliable, and his testimony was struck from the record. The appeals court agreed with trial court that the expert failed to demonstrate that his conclusions were “anything more than guesses,” affirming the affirmed the judgment of the lower court.

En Banc Shot, Denied
Also on May 16, 2019, the U.S. Court of Appeals for the Sixth Circuit denied petitions for rehearing en banc of another Sixth Circuit panel’s ruling that cases can proceed against many state and local officials involved in the what the courts have described as “the infamous government-created environmental disaster known as the Flint Water Crisis.” This case is Guertin, et al. v. State of Michigan, et al. That panel had held that the actions of some of the officials were plausibly alleged to have violated the plaintiffs’ due process rights, and that at the pre-discovery phase, it was too early to assess the strength of some of the defendants’ claims that they enjoy qualified immunity. Therefore, the Sixth Circuit holds that discovery should proceed, under the watchful eye of the district court.

State Courts

Crude and Refined
On May 16, 2019, the Texas Court of Appeals (sitting in Houston) held that the term “oil and gas” that is used in a 1919 right-of-way lease can permit the transportation by pipeline of refined petroleum products, gasoline and diesel, as well as “crude petroleum.” In Texas Land & Cattle II, Ltd. v. ExxonMobil Pipeline Company, landowner Texas Land & Cattle argued that the term “oil and gas” as used in that easement, granted many years ago to Exxon’s predecessor (Humble Oil Company), can only meant the right to transport “crude oil” or “crude petroleum.” As a result, the landowner sought an injunction, damages for trespass and declaratory relief. The trial court denied the plaintiff’s motion for summary judgment, granted Exxon’s motion, and signed a “take-nothing judgment” in favor of ExxonMobil. The appeals court affirmed this ruling, noting that it did not find any Texas appellate decision addressing directly the meaning of the term oil and gas in a pipeline easement. However, “reference to the ordinary meaning of oil and gas as reflected in dictionaries and other secondary sources supports the trial court’s judgment.”