No Good Deed Goes Unpunished

Weil Gotshal & Manges LLP
Adam S. Tolin

October 8, 2015

Sometimes the plaintiffs’ bar cannot help themselves, even if a corporate entity tries to do the right thing.  In Missouri, Phillips 66 (Phillips) attempted to remediate contamination to an underground well, demolished homes to fix the problem, and provided free bottled water to neighboring homeowners until the problem was rectified.  What did they get for their troubles?  Why, a class action lawsuit, of course!  Fortunately, the 8th Circuit recently reversed class certification on grounds that the class was not uniformly injured, and probably not even injured at all.  Smith v. ConocoPhillips Pipe Line Co., 2015 WL 5332450 (8th Cir. Sept. 15, 2015).

The facts are far more defense friendly than we are accustomed to seeing.  Phillip owns a petroleum products pipeline which runs through the town of West Alton, Missouri. After a leak in the line was discovered in 1963, its source was repaired, but the contamination at the leak site was not remediated. In 2002 contaminants from the leak were discovered in a family residence in West Alton.  Phillips purchased and demolished this property, as well as others affected by the leak. In cooperation with the Missouri Department of Natural Resources, Phillips fenced in the area around the leak site and set up monitoring wells to track any spread of pollutants. For five years, Philips provided precautionary bottled water for household use for residents nearby. While groundwater under the property owned by Phillips is contaminated, the surrounding properties have tested clean.  Happy ending?  Well, not quite.

Plaintiffs filed a nuisance class action against Phillips in 2011 on behalf of property owners within a 1.1 mile radius of the contamination site, alleging Phillips had undertaken unreasonable uses of its land which diminished its property value by storing contaminants on site where they had leaked, fencing in that area with posted warning signs, and distributing drinking water instead of regularly testing neighboring wells and remediating the contamination. The class sought money damages for the diminution in property values and injunctive relief requiring Phillips to rid the area of leaked petroleum products and to conduct testing for soil and water contamination on nearby properties.

The district court certified the class concluding that there was sufficient preliminary evidence of contamination to certify a class action with a focus on the area within a .25 mile radius of the contamination site.

Phillips appealed.  The 8th Circuit reversed, finding that the fundamental flaw in plaintiffs’ case is they did not have cognizable injury, let alone the “same injury” needed to satisfy the Rule 23 requirement of commonality.

In certifying the class, the district court concluded that some contamination had reached 0.25 miles from the contamination site, referring to a low level concentration of MTBE that had been discovered on a class representative’s land. But the 8th Circuit was not convinced because additional testing showed that MTBE was not a chemical found at another representative’s contamination site. The primary toxins identified from the spill were benzene, BTEX, and lead, and those chemicals were not all found on land owned by the class members. Plaintiffs argued, and the district court accepted, however, that their nuisance claim does not depend on a showing of actual physical invasion, because the presence of contaminants on one class site creates a “cloud on the class’ land” and diminishes its property value.

Citing a litany of federal and state cases interpreting the common law of nuisance, the 8th Circuit disagreed, concluding that a nuisance must be visible or “capable of physical detection from the plaintiff’s property.”  Numerous courts nationwide have rejected nuisance claims seeking diminution in the value of their property based on a “fear of negative health effects resulting from the proximity of their property to an environmental hazard” but where the plaintiffs “failed to show harmful levels of any toxic or hazardous substance in the [plaintiff’s] well water.” In short, the 8th Circuit was convinced that there is a “contemporary consensus reached by persuasive authority on the meaning of common law nuisance in the context of environmental contamination . . .that the putative class fear of contamination spreading from the [] leak site to harm their property is not a sufficient injury to support a claim for common law nuisance in the absence of proof.”

If nothing else, this decision is evidence of a corporation appearing to behave well, and an 8th Circuit that will require an identifiable and common injury to justify class certification.

This article is being provided for informational purposes only and not for the purposes of providing legal advice or creating an attorney-client relationship. You should contact an attorney to obtain advice with respect to any particular issue or problem you may have. In addition, the opinions expressed herein are the opinions of Mr. Tolin and may not reflect the opinions of Synergy Environmental, Inc. Weil Gotshal & Manges LLP or either of those firms’ clients.

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