Source: http://www.lexology.com, May 20, 2014
By: Jennifer J. Dotson and Anna Y. Boureiko, Reed Smith LLP
On April 22, 2014, after a two-and-a-half week trial, a Dallas County Court at Law entered a final judgment on a split jury verdict awarding $2.925 million to Texas family, Bob and Lisa Parr from Decatur, against Barnett Shale operator, Aruba Petroleum, Inc., of Plano, Texas, for personal injury and property damages arising out of Aruba’s drilling operations near the Plaintiffs’ property. Parr v. Aruba Petroleum, Cause No. 11-1650-E, County Court at Law No. 5, Dallas County, Texas. Although it has been characterized by some observers as a “win against fracking,” there are reasons to question whether the verdict will stand on appeal and whether it is a harbinger of verdicts to come in the oil and gas industry.
Plaintiffs filed suit in March 2011 against Aruba Petroleum, Inc., Encana Oil & Gas (USA) Inc., Halliburton Co., Republic Energy Inc., Ryder Scott Co., and Tejas Production Services, alleging “cumulative environmental contamination and polluting events caused by the conduct and activities of the various Defendants.” Tejas was dismissed by agreement without prejudice, Halliburton was dismissed with prejudice after the court granted its motion for a “no-evidence” summary judgment, Republic was dismissed, and finally, Encana and Burlington Resources Oil & Gas Co. were dismissed with prejudice after settling with the Plaintiffs.
Plaintiffs originally claimed: (1) assault – infliction of bodily injury; (2) intentional infliction of emotional distress; (3) negligence; (4) gross negligence; (5) negligence per se; (6) private nuisance; (7) trespass and subsurface trespass to real property; and (8) strict liability for abnormally dangerous activities. However, after both sides filed motions for summary judgment, the only claims remaining against the two defendants, Aruba and Encana (Encana settled several months later), were nuisance and trespass. Plaintiffs proceeded to trial against Aruba as the sole defendant. Plaintiffs alleged the drilling activities conducted on and around their land resulted in exposure to toxic airborne chemicals, trespass on their property, and disturbance of the livestock they kept on adjacent land. After a two-and-a-half-week trial, the jury awarded Plaintiffs $2.925 million in damages which included $2 million for past physical pain and suffering by Bob and Lisa Parr and their daughter, $275,000 for loss of property value, $250,000 for future physical pain and suffering, and $400,000 for past mental anguish. Although significantly less than the original alleged damages of more than $9 million, Aruba did not see the verdict as a victory and plans to appeal.
Plaintiffs’ Home Surrounded by Well While of least consequence when compared to other factors, it is, nonetheless, important to highlight that Plaintiffs reside in Wise County, Texas, which is situated in the Barnett Shale. Barnett Shale is unique because the formation underlies the city of Fort Worth, Texas and at least 17 surrounding counties. Here, well development tends to be closer to urban areas, as opposed to the Marcellus, the Eagle Ford, or the Bakken Shale formations. As a result, the outcome of the case may have had less to do with the technical nature of hydraulic fracturing operations than it does with the level of activity and density of wells – Aruba had 21 wells within Plaintiffs’ 40 acres, including one within 800 feet of Plaintiffs’ home.
Questionable Expert Testimony Admitted by the Trial Court In December 2013, the court granted in part and denied in part Aruba’s No Evidence Motion for Summary Judgment, strictly limiting Plaintiffs’ claims to only those seeking recovery for injuries which were (1) within the common knowledge and experience of a layperson and (2) the sequence of events was such that a lay person may determine causation without the benefit of expert evidence. Simply put, due to Plaintiffs’ lack of evidence of any “disease,” the court restricted Plaintiffs’ claims to damages that did not require expert testimony. Despite this strict limitation and Aruba’s Motion to Exclude Plaintiffs’ Expert Testimony, the court allowed the Plaintiffs to introduce into evidence experts’ opinions regarding the causation of Plaintiffs’ physical symptoms from exposure to oil and gas operations in the Barnett Shale.
While these medical opinions were provided in reports and depositions prior to the court’s summary judgment ruling, each expert proffered opinions that multiple Defendants were responsible for Plaintiffs’ alleged damages. However, not a single expert was able to offer an opinion which could be narrowly tailored to Aruba alone, leaving the jury to decipher how much, if any, of the alleged harm was caused by Aruba versus harm caused by Defendants that had been dismissed prior to trial. In its unsuccessful bid to block the expert testimony from admission, Aruba argued that experts failed to differentiate between alleged acts and omissions of Aruba and those of numerous other oil and gas operators in the area. Furthermore, the court’s admission of medical testimony following its holding that the only damages for physical suffering the Plaintiffs could recover must be based upon the common knowledge and experience of a layperson further muddied the waters. At best, the court seems to have admitted evidence it had already ruled was irrelevant and, at worst, the jury was unduly exposed to medical testimony it should not have utilized as a basis for its award and was almost certainly biased as a result.
The Trial Court Admitted “Investigative” Reports Outlining Unproven and Disputed Allegations by the Texas Commission on Environmental Quality (“TCEQ”) In addition to the expert testimony, the court admitted numerous TCEQ investigative documents, including the prior settlement of an alleged violation issued to Aruba. Counsel for Aruba argued the TCEQ documents were inadmissible because they did not constitute findings of statutory or regulatory violations, but were merely unproven allegations. Aruba cited the testimony of Jeff Saitas, former TCEQ Director, who testified the Agreed Order (see below), and, by extension, all supporting investigative documents, were allegations made by TCEQ against Aruba. In particular, in his deposition testimony, Saitas stated that, among other things, “there were allegations put forward by TCEQ that, my understanding were settled.” The director further stated that he did not review any adjudicated final decision on any matter of non-compliance.
The Agreed Order, which specifically provides it is not to be used in civil litigation, states in relevant part:
“During investigations conducted in January 17th, 2010 and February 3, 2010, through February 20, 2010, a TCEQ Dallas/Fort Worth regional officer documented that Aruba, A, failed to prevent the discharge from any source of one or more air contaminants or combinations thereof, in such concentration as to interfere with the normal use and enjoyment of animal life, vegetation or property. Specifically, the results of air sampling conducted on January 17 and February 3, 2010, documented that the site was emitting elevated concentrations of volatile organic compounds consistent with odor complaints received by the TCEQ.”
See Deposition of Jeff Saitas, Former TCEQ Director
In his testimony, Saitas stated that he believed the notice of violation was an allegation of the TCEQ investigator which Aruba subsequently challenged. He went on to testify there was “reason to doubt” said allegations which were never proven given the procedural posture of the investigation. Most importantly, the Agreed Order did not mean that Aruba violated state regulations; on the contrary, it constituted a settlement document without the admission of guilt. Saitas testified the purpose of such documents is to settle the allegations set forth and put in place any technical corrections. The Agreed Order was the only enforcement document presented and no other sampling performed resulted in allegations of violations. The alleged fines paid by Aruba were agreed settlement penalties, with specific language on the initial documentation from TCEQ stating “a notice of violation represents a written allegation of violation of a specific regulatory requirement from the commission to a regulated entity. A notice of violation is not a final enforcement action nor proof that a violation has actually occurred.” See Deposition of Jeff Saitas, TCEQ Director.
Notwithstanding the argument of Aruba’s counsel and the testimony of the TCEQ director, the trial court admitted the TCEQ investigative documents into evidence. Aruba has indicated it intends to appeal the admission of both the medical expert testimony and the TCEQ documents. Given the information currently available, we believe an appeal on those grounds has a high likelihood of success.
Parr is not a “Fracking Case” While media sources have labeled this case a “fracking case,” this description is misleading for two reasons. First, the facts of the case do not focus on or discuss hydraulic fracturing fluids or the fracturing process in general. Second, in making their claims, the Plaintiffs did not allege groundwater contamination associated with natural gas development, or the hydraulic fracturing process – instead, Plaintiffs’ claims focused on exposure to air contaminants.
Although the Parr case is certainly food for thought for Texas Oil and Gas companies and contractors, the unusual circumstances giving rise to the claim and the potential for a successful appeal based upon the trial court’s admission of expert testimony and TCEQ investigative documents combine to prevent the Parr verdict from being predictive of future results. While not necessarily a predictor of future verdicts, the decision may add momentum to the latest push by environmental and public health groups’ call for restrictions on air pollution from hydraulic fracturing operations. The coalition of organizations has recently called on the Environmental Protection Agency to set national air toxic standards for oil and gas wells, citing specifically the proliferation of drilling in more densely populated areas as part of their impetus.