Thursday, December 3, 2015
C.A. Approves Settlement With Shell in Carson Oil Litigation
By KENNETH OFGANG, Staff Writer
A Los Angeles Superior Court judge did not abuse his discretion in approving a $90 million good-faith settlement between Shell Oil Co. and nearly 1,500 Carson residents who claim they were injured as a result of exposure to waste oil buried in the ground, this district’s Court of Appeal has ruled.
Div. Three Tuesday upheld Judge William Highberger’s approval of the settlement, which was opposed by co-defendants Barclay Hollander Corp., developer of the Carousel housing tract, and Dole Food Co., the present owner.
Presiding Justice Lee S. Edmon said the settlement met the good-faith test laid out in Tech-Bilt, Inc. v. Woodward-Clyde & Associates (1985) because it was in the “ballpark” of the settling defendant’s proportionate liability.
In July 2013, the Carousel tract was found to be contaminated with oil and toxic chemicals which was discovered in the soil. Investigation revealed the presence of toxic chemicals, including benzine and petroleum, and that the site had once been used for an oil tank farm.
The homeowners, in their complaint, alleged that Shell had used the land as storage for toxic substances, which were kept in underground tanks after it purchased the land in the 1920s for $10, and that Shell did not give full disclosure of the contamination to the developers when it sold the land.
Late last year, the Regional Water Quality Control Board—which ordered Shell to investigate the site in 2008—gave final approval a “remedial action plan,” or RAP. The board had ordered Shell to come up with such a plan in 2011.
As finally approved, the RAP requires Shell to, among other things, excavate five to 10 feet beneath the homes, install a vapor extraction and venting mechanism, and follow up with comprehensive monitoring. The company was ordered to provide temporary relocation assistance during the implementation, and to make whole any homeowners who chose to sell their residences.
Shell estimated the cost of compliance with the RAP at $146 million.
Around the time the final RAP was approved, Shell reached its $90 million settlement with the homeowners and the City of Carson and moved to approve the settlement. The developers objected, in part on the ground that the cost of compliance with the RAP would not be included, thus reducing the credit to which the developers would be entitled against their own liability.
The developers further argued that the settlement represented a very small percentage of the total $11 billion in damages they said were claimed by the plaintiffs. The plaintiffs disputed the figure.
Highberger, in finding that the settlement was agreed to in good faith, noted that Shell had numerous defenses to the claims, as discovery regarding dozens of test plaintiffs showed that there was little medical evidence that would support findings that the contamination caused the various ailments those plaintiffs were claiming.
None of the residents left their homes, the judge noted, concluding that the damage claims were “inflated” and their ultimate value “unknown.” The objecting defendants, he said, failed to carry their burden of proof and persuasion that the settlement was in bad faith under Tech-Bilt, which requires that the proportionality of the settlement be determined on the basis of information known at the time of the agreement.
The judge approved the settlement, appointing retired state Supreme Court Justice Edward Panelli as special master to administer a settlement process in which each plaintiff will receive an amount based on whether he or she has cancer, has another ailment that may have been caused or exacerbated by the contamination, is not sick but fears cancer and seeks payment to cover the costs of medical monitoring, or claims property damage only.
In denying the developers’ petition for a writ of mandate that would have set aside the approval of the settlement, the Court of Appeal concluded that the RAP, “mandated…pursuant to the state’s police powers,” could not be credited as part of the settlement.
The oil company, Edmon wrote, “is under a preexisting obligation, imposed by the Water Board…to remediate the site.” There can thus be no basis to treat the costs of compliance with that obligation as part of the settlement, and “no merit to Developer Defendants’ contention that the settling parties’ exclusion of the cost of the RAP from the settlements was collusive and intended to minimize the amount that would be set off against the nonsettling parties’ liability.”
As to the proportionality of the settlement, Edmon cited evidence that the original developers were aware of soil contamination in the 1960s and undertook to remove waste while preparing the site for homebuilding.
Citing Tech-Bilt, the presiding justice wrote:
“Given this showing that substantial liability should be allocated to Developer Defendants, Shell’s payment of over $60,000 on a pro rata basis for its share of Plaintiffs’ purported personal injuries does not appear to be ‘grossly disproportionate to what a reasonable person, at the time of the settlement, would estimate [Shell’s] liability to be.’ ”
The plaintiffs were represented on appeal by Thomas V. Girardi, Robert Finnerty and Christopher T. Aumais of Giradi Keese and by Martin Buchanan. David L. Scrader and Deanne L. Miller of Morgan, Lewis & Bockius represented Shell, while Gibson, Dunn & Crutcher’s Andrea E. Neuman, Thomas A. Manakides and William E. Thomson represented the developers.
The cases is Dole Food Company, Inc. v. Superior Court (Shell Oil Company), 15 S.O.S. 5749.
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