U.S. District Court Throws Out Class-Action Claim Made by Property Owners Near Oil Refinery

The U.S. District Court certified a class of property owners in Roxana, Ill., which is a small town across the Mississippi River from St. Louis.  In the lawsuit it was claimed that Shell Oil, together with its subsidiaries, was responsible for the leakage of poisonous benzene and other contaminants into the groundwater under the class members’ homes. 

This case, filed as a diversity lawsuit, charged that the defendants were responsible for the nuisance and related torts in violation of Illinois common law. The property owners sought a remedy for the damages, which they say were primarily the effect of groundwater contamination.

The defendants petitioned the U.S. Court of Appeals for leave to appeal the certification of the class.  The court of appeals decided to grant the request in order to clarify class action law.  See Blair v. Equifax Check Service, Inc., 181 F.3d 832, 835 (7th Cir. 1999). 

In this case, the issue was the responsibility to perform a “rigorous analysis” before determining that issues common to the class predominate over issues that differ among the individual class members.  Comcast Corp. v. Behrand, 133 S.Ct. 1426, 1432 (2013).  Because the petitions filed and response concerns the certification issue, the court of appeals moved ahead with the case to resolve the issue without requiring further briefing.

There were 150 class members.  The argument by the defendants was that a number of the class members were not injured.  Either their groundwater was not contaminated by leakage from the refinery or the contamination did not affect the value of their property.  Because of the fact that they were not damaged, they had no standing to seek relief and didn’t belong in the class. 

The defendants said that if those members were removed, there would not be enough members to make a class action a superior procedural vehicle to joinder of individual plaintiffs.  The court of appeals rejected that argument.  The court said that determining which of the 150 potential members were damaged and which were not was an unworkable process. 

The district court judge identified a question common to the class, which was whether the defendants’ “failure to contain petroleum byproduct at the refinery resulted in contamination to Roxana property.”  The defendants argued that this ruling does not establish the predominance of issues common to the entire class over issues that vary among the members of the class.  And predominance is, of course, one of the requirements for class certification if damages are sought.  Fed.R.Civ.P. 23(b)(3).

Predominance of issues in all class members, like other certification requirements, is key in the efficiency of a class action as an alternative to individual lawsuits.  Here, the alleged groundwater contamination was caused by different polluters. Not every class member had experienced the same loss of value in property even if everyone had the same level of contamination.  The plaintiffs’ expert hydrogeologist intended to measure contamination by the benzene levels in the groundwater beneath the plaintiffs’ properties, even though their water does not come from groundwater, but comes from an uncontaminated aquifer. 

Because it could not be assumed that a decline in the value of the plaintiffs’ property values was the result of proximity to an oil refinery, the district court judge did not explore any of these issues, but treated predominance as a pleading requirement.  The court of appeals thought otherwise.

The appeals panel stated that the mere assertion by class counsel that common issues predominate is not enough.  If that were the case, certification for class action would be virtually automatic.  In this case, the defendants argued that the contamination alleged by the plaintiffs took place over a 90-year period and involved acts and omissions charged against the six defendants and maybe other polluters as well.  The area in which the Shell refinery is located is industrial and the defendants have identified other oil leaks by gas stations and other refining companies. 

In addition, the panel stated that real estate values had taken a drubbing in recent years because of the collapse in the housing bubble and then the financial crisis that followed.  Further, it could be assumed that a decline in the value of residential property in Roxana is the result of its proximity to an oil refinery that, for all one knows, has been leaking contaminants into the ground for the last 95 years without causing detectable harm. 

Because the district court judge did not explore the possibility that there are other things commonly found in soil beneath rural or suburban homes, most of which would not cause a decrease in property values, the test was to go further.  Benzene in the water supply is one of those things; benzene in groundwater that does not feed into the water supply is another thing.  The district judge did not explore those issues.  The trial judge just treated the predominance as a pleading requirement. 

Accordingly, the court of appeals reversed the certification order with directions that the judge revisit the issue of certification in conformity with the analysis in the panel’s opinion.  Here, the plaintiffs have not presented a theory or credible evidence of a connection between the leaks and contamination and the loss of property values.  Accordingly, the district court judge’s decision granting certification was reversed with further instructions.

Jeana Parko, et al. v. Shell Oil Co., et al., No. 13-8023 (U.S. Court of Appeals for the 7th Circuit, Jan. 17, 2014).

Kreisman Law Offices has been handling litigation matters for individuals, families and businesses for more than 38 years in and around Chicago, Cook County and its surrounding areas, including Alsip, Arlington Heights, Barrington Hills, Bedford Park, Bellwood, Berkeley, Berwyn, Blue Island, Justice, Homewood, Hillside, River Forest, Western Springs, Thornton, Streamwood and Worth, Ill.

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