(originally published in the Oil & Gas Law Brief on October 10, 2011)

On August 17, 2011, the Oil & Gas Law Brief reported that a West Virginia judge had entered an order striking down a ban on hydraulic fracturing enacted by the City of Morgantown.  The judge ruled that West Virginia statutes make oil and gas regulation exclusively a matter of state law, and that local governments do not have authority to enact additional regulations.  That judgment is now final. 

Carrier not responsible for covering clean-up costs at a CERCLA site under Maryland law. Those costs were incurred to satisfy a regulatory requirement.

Background: On July 9, 1999, the U.S. Environmental Protection Agency ("EPA") expressed its intent to include Industrial Enterprises’ property and other neighboring properties near the Back River in Baltimore County, Maryland, in a Superfund Site designated for cleanup under the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”). The EPA cited the presence of hazardous substances on the Site. At the time of the EPA letter, Industrial Enterprises held a comprehensive general liability insurance policy (“CGL policy”) with Penn America Insurance Company. Industrial Enterprises forwarded the EPA letter to Penn America and requested that it provide a defense.

The insurer denied coverage. Penn America countered that its CGL policy did not provide indemnity for costs incurred by Industrial Enterprises because: 1) such costs are not damages because of "property damage" of a third party, as required for coverage under the CGL policy, and (2) that the pollution exclusion applied because facts to support the exception to the exclusion – that any "release or escape" of the hazardous substances on Industrial Enterprises’ property be "sudden and accidental” – were not demonstrated.

Industrial Enterprises commenced this action for a judgment declaring that Penn America was obligated to pay Industrial Enterprises the amount that it had incurred and reasonably would incur as defense costs in response to the demands made by the EPA.

Issue: 1) Whether a standard CGL policy, which indemnifies the insured for "all sums which the insured shall become legally obligated to pay as damages because of ... property damage," covers the insured’s liability under the CERCLA for costs to remediate the presence of hazardous substances on the insured’s land.

Holding: On appeal, the Court of Appeals reversed the judgment of the lower court, concluding that a standard CGL policy does not cover the insured’s liability under the CERCLA. The Court based its decision on Bausch & Lomb, Inc. v. Utica Mutual Insurance Co., 625 A.2d 1021 (Md. 1993), where the Maryland Court of Appeals held that a similar CGL policy did not cover expenses incurred in response to the State’s regulatory order to remove soil containing hazardous chemicals. Therefore, the Court concluded that Industrial Enterprises’ liability under CERCLA was not liability for "property damage," but rather regulatory liability for response costs. Accordingly, the Court concluded that Penn America’s CGL policy did not cover Industrial Enterprises’ regulatory liability and, therefore, Penn America had no duty to provide Industrial Enterprises with a defense.

The U.S. Supreme Court is getting set to hear the challenge to a federal court of appeals decision allowing several states to pursue a public nuisance suit against various utilities for their alleged greenhouse gas emissions. See American Electric Power Co. v. Connecticut, No. 10-174 (U.S. certiorari petition granted 12/6/10).  Last week the federal government weighed in and asked the Court to overturn the Second Circuit's decision in this public nuisance suit against American Electric Power Co. and other utilities for their greenhouse gas emissions, but on relatively narrow grounds. The brief filed by the Acting Solicitor General argues that the plaintiffs lacked “prudential standing” and that their suit should therefore be dismissed. One central issue in the case is whether the EPA will be the primary regulator of greenhouse gas emissions or whether private parties will be permitted to go directly to court. Should a single judge set emissions standards for regulated utilities across the country — or, as here, for just that subset of utilities that the plaintiffs have arbitrarily chosen to sue? Judges in subsequent cases could set different standards for other utilities or industries, or conflicting standards for these same utilities. A second issue is whether controlling power plant emissions' alleged effects on the climate is a political question beyond the reach of the courts. The government's current position is that if plaintiffs' overall theory is correct, that means that virtually every person, organization, company, or government across the globe emits greenhouse gases, and also virtually every one of them will sustain climate-change-related injuries. Principles of prudential standing do not permit courts to adjudicate such generalized grievances absent specific statutory authorization, said the SG.

This topic will be featured at the breakout session for the Mass Torts & Class Actions SLG at this year's DRI Product Liability Conference in New Orleans. We'd be interested to hear you reaction to the briefs, including the papers from amici. DRI's amicus brief stresses to the Supreme Court that it should reverse the Second Circuit's decision in order to bring fairness, consistency and predictability to public nuisance litigation seeking to redress alleged climate change injuries. Although DRI acknowledges in its brief that the respondents' goal of reducing the threat of possible global climate change is laudable, pursuing a federal common law public nuisance action against a handful of arbitrarily selected energy-generating targets is an improper use of the courts in achieving that end.

Originally posted at Bill Ruskin's Blog site: http://www.toxictortlitigationblog.com

Two electrifying Circuit Court of Appeals cases handed down in 2009 may set the stage for climate change litigation in the years to come. The decisions are Connecticut v. American Electric Power Co., et al., 582 F.3d 309 (2d Cir. 2009) and Comer v. Murphy Oil USA, et al., 585 F.3d 855 (5th Cir. 2009). In both cases, the Court of Appeals reversed the decision of the federal district court and held that the plaintiffs had pleaded adequate facts to permit their cases to proceed. Therefore, unless the United States Supreme Court weighs in and reverses this growing momentum in climate change litigation, it is likely that federal trial courts will be grappling with all of the issues surrounding climate change liability, not least of which will be the science. Did defendant oil and coal producers, chemical companies and coal-using companies bring down the wrath of Hurricane Katrina on the Mississippi plaintiffs? What scientific evidence will be marshaled by plaintiffs to support their allegations? These are the questions that the Comer court will have to grapple with. The very idea that a corporate entity could be found legally responsible for unleashing the catastrophic power of a hurricane would have been unthinkable even ten years ago. Leaving aside epochal issues of public policy, justiciability and theology, the science surrounding climate change litigation will figure prominently in these lawsuits. More...

The study of nanotechnology has fueled debate over whether it involves potentially toxic substances that may cause activity in the mass tort arena.  Nanotechnology refers to research and technological development at the atomic, molecular, and macromolecular levels, aimed at creating and using structures, devices, and systems that have novel properties and functions because of their small size.  A nanometer is one billionth of a meter; a human hair is roughly 100,000 nanometers wide.  At these sizes, nanomaterials exhibit unique chemical and physical properties that they would otherwise not exhibit in larger forms.

In 2007, the global market for goods incorporating nanotechnology totaled $147 billion, and this figure is estimated to grow to $3.1 trillion by 2015.  Current applications of nanotechnology include, but are not limited to, wrinkle free textiles and sunscreens that can be applied without typical white residue.  The cosmetics industry is also beginning to incorporate nanomaterials into some of its products, most notably skin and anti-aging creams.  A multitude of other applications, such as green energy and drug delivery systems, are currently under research.

Several recent studies have demonstrated the potential toxicity of nanomaterials, some making comparisons to the toxic effects of asbestos fibers.  Some studies have demonstrated the potential adverse health consequences of another type of nanomaterial called carbon nanotubes (“CNTs”).  In one study, rats were injected with CNTs, which then led to the development of mesothelioma in some rats, a rare illness typically associated with asbestos exposure.  However, this study was criticized since human lungs would be exposed to CNTs through inhalation rather than injection.  Although scientists question the accuracy or usefulness of drawing parallels between CNTs and asbestos fibers, most agree that further research is needed to determine the scope and extent of the potential health hazards of CNTs in an effort to create effective protective measures for workers, consumers, and the general population.

Health organizations, the state of California, and the EPA have taken action in an effort to investigate the potential environmental and health-related impacts of this emerging field.  California recently signed into law Assembly Bill 289, which allows the California Department of Toxic Substances Control (“DTSC”) to request information regarding analytical test methods, fate and transport in the environment, and other relevant information from manufacturers of certain chemicals of concern, including nanomaterials.  Under the law, “manufacturers” include persons and businesses that produce chemicals in California or import chemicals into California for sale.  The purpose of these requests is to identify information gaps and develop further knowledge about the chemicals.  On January 22, 2009, the DTSC sent a formal request to manufacturers who produce or import CNTs in California.

The Environmental Protection Agency has taken similar measures under the Toxic Substances Control Act (“TSCA”), which requires manufacturers of “new chemicals” to submit pre-manufacture notices to the Agency.  If the EPA finds that the new chemical in question poses an "unreasonable risk to human health or the environment", the Agency may regulate the substance in a variety of ways, from limiting uses, limiting production volume, or banning it altogether.  Most recently, the EPA issued “significant new use rules” (“SNURs”) for two nanomaterials—siloxane modified silica nanoparticles and siloxane modified alumina nanoparticles—which were subject to a pre-manufacture notice under the TSCA.  The EPA determined these two nanomaterials may cause health problems through inhalation and dermal exposure.  The SNURs require anyone who manufactures, processes, or imports the materials without the use of impervious gloves or a NIOSH-approved respirator to notify the Agency at least 90 days before doing so.  The Agency will then evaluate the use, and if necessary, limit or prohibit the activity.

Despite the recent environmental and toxicological studies and governmental attempt to implement some degree of regulation, there has been little to no activity in the realm of tort litigation regarding nanomaterials.  This is likely due to the current lack of scientific confirmation as to whether or not nanomaterials pose environmental, health, and safety risks.  Currently, manufacturers incorporating nanotechnology into their products do not make such disclosures on product labels.  To be sure, the law has not yet determined whether or not such disclosures are required, but as billions of dollars continue to be spent on incorporating nanotechnology into consumer products, plaintiffs’ attorneys and watchdog groups will certainly be tracking the results of continuing research to determine whether various nanomaterials have toxic properties that may support claims for damages.

Dee Cohen Katz
Walsworth, Franklin, Bevins & McCall
dkatz@wfbm.com

Vandad Khosravirad
Walsworth, Franklin, Bevins & McCall
vkhosravirad@wfbm.com

This is a toxic tort case wherein Plaintiff’s experts were excluded under Daubert principles and Defendant’s summary judgment motions for general and specific causation were granted.  The opinion by Hon. Justin Quackenbush (Senior Judge) is an extremely thorough and scholarly analysis that contributes significantly to the body of Daubert case law.

The plaintiff, a tanker truck driver, sued ConocoPhillips and others, claiming that his occupational exposure to gasoline caused a form of cancer, acute myelogenous leukemia (AML).  While the medical and scientific evidence supports the proposition that AML can be caused by exposure to the chemical benzene, the science is more equivocal when it comes to gasoline, which contains benzene as a minor component.  Defendant attacked the scientific methodology employed by plaintiffs’ experts, arguing that the case was a gasoline and not a benzene case, despite the presence of benzene in gasoline.

This case represents a significant victory for the gasoline refining and marketing industry, involving its number one product.  An adverse result would have sent shock waves, and potentially opened the door to a new mass tort wave.  The potential number of persons exposed to gasoline vapors in the workplace and at the pump is huge.  Discouraging those who would seek to connect such exposure to cancer is of major importance to the industry.

Introduction

Plaintiff Neil Henricksen was employed as a tanker truck driver.  His job duties required him to load and unload cargo (typically gasoline and diesel fuel) several times per day over a period of many years.  Defendant operated a petroleum product terminal in Spokane, Washington where Plaintiff loaded his truck.  Plaintiff’s alleged exposure to benzene in gasoline was the basis for his lawsuit against Defendant.  Plaintiff alleged that his acute myelogenous leukemia (AML) was caused by exposure to benzene while loading gasoline at Defendant’s terminal.

Daubert Challenges

To support his case, Plaintiff designated experts from the fields of industrial hygiene, warnings, hematology, epidemiology, and toxicology.  Plaintiff’s causation experts included hematologists (John Caton, Frank Gardner), a toxicologist (William Sawyer), and an epidemiologist (Peter Infante).  Plaintiff’s dose calculation experts included a professional engineer (Marco Kaltofen) and a toxicologist (William Sawyer).  Defendant successfully challenged the methodologies of Plaintiff’s expert witnesses and all five were excluded by the Court.  Henricksen v. ConocoPhillips Co., 605 F.Supp2d 1142 (E.D. Wash., February 11, 2009).

Frank Gardner, MD

The causation opinion of Plaintiff’s expert in hematology (“Gardner”) was excluded for three methodological reasons.  First, Gardner’s general causation opinion (gasoline exposure causes AML) was excluded because he could not “point to any source which reliably supports his conclusion.”  Id. at 1161.  As the Court noted, this methodological flaw “renders his opinion merely [a] personal opinion.”  Id.

Second, Gardner’s specific causation opinion was excluded because he neither attempted to calculate his own dose assessment for Plaintiff nor relied on the dose assessment of any other expert.  Id. at 1162.  In short, while agreeing that benzene-induced AML is a dose-dependent phenomenon, Gardner opined on specific causation without a dose.  Id.  As the Court explained, “this renders his opinion on specific causation inherently unreliable.”  Id.

Finally, Gardner’s specific causation opinion was excluded because he did not “reliably rule out reasonable alternative causes of [the alleged harm] or idiopathic causes.”  Id. (citing Soldo v. Sandoz Pharmaceuticals Corp., 244 F.Supp.2d 434, 567 (W.D. Pa. 2003)).  As the Court made clear, “the presence of a known risk factor is not a sufficient basis for ruling out idiopathic origin in a particular case, particularly where most cases of the disease have no known cause.”  Id.  The Court paid careful attention to the presentation of Plaintiff’s disease and described ways in which Plaintiff’s presentation could have been compared to individuals with and without benzene-induced AML.  Id. at 1162-63.  Garder performed no such analysis.

John Caton, MD

John Caton, one of Plaintiff’s treating physicians, opined that Plaintiff’s occupational exposure to gasoline caused his AML.  Although the Court struck Caton on procedural grounds, it noted that Caton’s opinions would have not have withstood Daubert scrutiny.  Id. at 1160.  Caton’s main methodological flaw was that he failed to consult the relevant literature before offering an opinion on causation.  Id.

William Sawyer, PhD

Dr. William Sawyer provided both causation opinions and a retrospective dose calculation for Plaintiff.  Neither opinion survived Daubert scrutiny because, as the Court noted, “At each step of his analysis, Sawyer bases his analysis upon speculation and/or erroneous data, and without adequate explanation, these steps render his methodology unreliable and misleading, and his opinions are therefore inadmissible.”  Id. at 1163.

Dr. Saywer’s causation opinion was rejected for one principal reason: he embraced the “no safe level” model for carcinogenicity.  Citing to numerous district court and appellate court opinions, as well as to the Federal Judicial Center Reference Manual on Scientific Evidence (2d ed. 2000), the Court recognized that the “no safe level” theory is: (1) a hypothesis that cannot be tested, verified, or falsified, (2) has been rejected by a majority of the scientific community, and (3) has no known potential rate of error.  Id. at 1166.  About Sawyer’s theory, the Court wrote:

“Sawyer's theory that any amount of exposure more than negligible should be considered substantial risk factor for AML flies in the face of the scientific literature reviewed and other expert testimony in this case that there is a threshold or dose below which you do not see a statistically significant risk of developing AML. Even though benzene has been shown to cause AML, it is too difficult a leap to allow testimony that says any amount of exposure (above the short term exposure limits) to this toxin can cause AML and caused AML in Henricksen.

Because Sawyer's dose calculation is unreliable and his belief that low-dose exposure to benzene as a component of gasoline is capable of causing AML a hypothesis rather than science sufficiently reliable for causation purposes, it is fails the Daubert factors.”

Id. at 1166.

Sawyer’s dose calculation did not survive for three reasons: (1) he cherry-picked a non-representative study from which to base his overall calculation, (2) he cherry-picked an exposure value (and the less reliable value) from within that study, and (3) his calculation was full of factual errors.  Id. at 1164-65.

If Dr. Sawyer had relied on published industrial hygiene data describing the exposure of U.S. tanker-truck drivers (like Plaintiff), the remainder of his errors may have gone unreported.  Instead, Sawyer relied on a small and obscure Japanese study with an unknown work environment, and without explaining the scientific reason for doing so.  Id. at 1164.  As the Court noted: “While Rule 702 does not require an expert to find a study linking the exact facts, it does require the expert [to] demonstrate a scientifically valid basis for projecting the findings of a study to the proffered casual theory. Sawyer has not provided an adequate basis for reliably linking the values derived from the circumstances of [the Japanese study] to the circumstances of Henricksen's case.”  Id. at 1164-65

Marco Kaltofen, PE

Marco Kaltofen also attempted to perform a retrospective benzene dose calculation.  Had Mr. Kaltofen relied on the reported data describing exposure among U.S. tanker truck drivers, his methodology may have survived.  Instead, Kaltofen relied on a Swedish study, made an assumption from that study which the authors never reported, and then applied his assumption to Plaintiff’s work environment without any support in the literature for doing so.  Id. at 1167.  The Court noted that Kaltofen’s assumption (“the five times multiplier”) had never been tested, recognized by an expert in the field, or reported in the literature.  Id.  Other factors weighing against admissibility were that Kaltofen’s methodology was crafted for purposes of rendering an opinion in this case, and that it was subject to a wide rate of error.  Id. at 1168.  The Court concluded:

“Kaltofen's methodology in arriving at the multiplier of 5 shows a lack of scientific rigor in that he expands the application of [the Swedish study] beyond good science, drawing conclusions the authors of the study did not make from limited data. It is this kind of scientifically unsupported “leap of faith” which is condemned by Daubert.”

Id. at 1168.

Peter Infante, PhD

Dr. Infante’s general causation opinion (gasoline exposure causes AML in humans) and specific causation opinion (low-dose benzene exposure from gasoline caused Plaintiff’s AML) were excluded because the studies advanced for those propositions did not support them.  In both instances the Court noted that there was simply “too great an analytical gap between the data and the opinion proferred.”  Id. at 1168, 1170.  Infante’s specific causation opinion was also struck because he relied on Marco Kaltofen’s unreliable dose assessment.  Id. at 1176.

Summary Judgment

Defendant moved for summary judgment on the grounds of general causation and specific causation.  Having excluded Plaintiff’s causation experts because the literature they relied upon did not support their opinions, Plaintiff could not meet his summary judgment burden:

None of the studies relied upon have concluded that gasoline has the same toxic effect as benzene, and none have concluded that the benzene component of gasoline is capable of causing AML. The studies relied upon by Plaintiffs make clear that the connection between gasoline or the benzene component of gasoline and AML is at this point in time only a hypothesis in need of further investigation. Based upon the court's review of these studies Plaintiffs' experts can only reliably attest to gasoline exposure as a theoretical or possible cause, not a probable cause of Henricksen's AML

Id. at 1176.

Without reliable evidence of general causation, Plaintiffs' experts can not analyze specific causation while comporting with the scientific method. However, even if the court were to admit the testimony that gasoline is generally capable of causing AML, these studies do not support the conclusion that exposure at 8 ppm-years is capable of causing AML.

Id. at 1176.

Conclusion

Henricksen v. ConocoPhillips Co. is an important opinion for two reasons.  First, it is a landmark opinion concerning the non-carcinogenicity of gasoline.  The scientific “evidence” put forward by Plaintiff to support his claim, and the experts hired to advocate for Plaintiff’s position, were scientifically and legally inadequate to survive a summary judgment challenge.  Second, the opinion provides practitioners with thorough and well-reasoned application of Daubert principles to a variety of expert methodologies.

July 2009

Brett J. Young
Senior Associate
Fulbright & Jaworski L.L.P.
1301 McKinney Suite 5100
Houston, Texas 77010-3095
(713) 651-5200 direct
(713) 651-5246 facsimile
byoung@fulbright.com

On March 2, a Federal Class Action lawsuit was filed in Miami District Court on behalf of Florida homeowners against the Knauf Plasterboard Tianjin Co. LTD (manufacturer) and Rothchilt Int'l, LTD (US distributor).

It is believed that more than 60,000 homes in 13 states were built using the alleged defective drywall. Some estimate that 20 million square feet of Chinese drywall entered the US since 2003.

The Consumer Products Safety Commission is conducting an investigation and it is anticiapted that they will issue a nationwide recall.

According to the U.S. Green Building Council (USGBC) the number of both LEED-registered and LEED-certified projects doubled in 2008-from about 10,000 registered projects at the end of 2007 up to more than 20,000 by the end of January 2009. Square footage of LEED-certified construction also rose 92% during that time period, from 148 million up to 284 million square feet.

As the number of LEED registered and LEED certified projects grows so does the potential for claims. Is anybody handling any "green" building claims, if so share your experiences.