Wednesday, July 18, 2018

Shale Law in the Spotlight – Overview of Recent Legal Actions Relating to Induced Seismicity Damage Claims in the United States (Part 1 of 3)

Written by Chloe Marie – Research Fellow

This article provides an overview of recent legal developments relating to induced seismicity damage claims in the United States. This article and two articles that will follow look at select cases addressing this issue. 

Sierra Club v. Chesapeake Operating, LLC, Devon Energy Production Co. LP, and New Dominion, LLC, in the U.S. District Court for the Western District of Oklahoma (Docket No. 5:16-cv-00134)

On February 16, 2016, the environmental organization Sierra Club filed a complaint for declaratory and injunctive relief against the following energy companies: Chesapeake Operating, LLC, Devon Energy Production Co. LP, and New Dominion, LLC, seeking to hold them responsible for triggering multiple earthquakes throughout the state of Oklahoma and southern Kansas. Sierra Club alleged that this seismic activity was caused by defendants’ waste disposal activities and also claimed that defendants’ activities violated section 7002(a)(1)(B) of the Resource Conservation and Recovery Act as they posed a risk to health and the environment. Sierra Club therefore sought a court order to reduce “immediately and substantially” the amount of waste produced to acceptable levels. 

On April 25, 2016, each defendant separately filed a motion to dismiss plaintiff’s claims – all arguing that the issue of increased seismicity already was being addressed at the state level. About a year later, on April 4, 2017, the court granted such motions under the Burford abstention and primary jurisdiction doctrines and opined that primary jurisdiction here belonged to the Oklahoma Corporation Commission (OCC). The court declared that the record in this case showed that the OCC had considerable expertise to address plaintiff’s claims. 

Sandra Ladra v. New Dominion, LLC, in the District Court of Lincoln County, Oklahoma (Docket No. CJ-14-115) and in the Supreme Court of Oklahoma (Docket No. 113396)

On August 4, 2014, Sandra Ladra, an Oklahoma resident, filed suit in the Lincoln County district court against New Dominion, LLC, and Spess Company seeking compensation for personal injuries based on the argument that such injuries resulted from seismic activities in November 2011 that were triggered by the companies’ wastewater injection well activities.

On August 28, 2014, both companies filed motions to dismiss plaintiff’s claims. The court granted these motions on October 16, 2014, concluding that only the Oklahoma Corporation Commission (OCC) had jurisdiction to hear the case. The case was then appealed to the Oklahoma Supreme Court on December 10, 2014, for a review of the District Court’s order. 

On June 30, 2015, the Supreme Court of Oklahoma held that private tort actions against oil and gas companies are to be decided before the state district courts. The Supreme Court explained that the OCC has exclusive jurisdiction over oil and gas matters; however, it is a limited jurisdiction in dealing with disputes over public rights. In this case, there were no public rights at issue. The Supreme Court concluded that the decision was consistent with the “long-held rule that district courts have exclusive jurisdiction over private tort actions when regulated oil and gas operations are at issue.” Consequently, the case was remanded back to the district court. 

New Dominion, LLC, and Spess Company each filed another motion to dismiss plaintiff’s claims in September 2015, arguing that the time limit for filing the lawsuit had expired. In response to the motions to dismiss, plaintiff argued that “the statute of limitations was tolled until March of 2013 when [she]learned of the alleged causal connection between the subject earthquake and the Defendants’ actions.” On December 18, 2015, the District Court denied the motions, holding that the discovery rule exception extended the statutory deadline for filing a personal injury lawsuit. It held, however, that “the Defendants will be allowed to re-urge the affirmative defense of statute of limitations in a motion for summary judgment.”

On September 20, 2017, the Court dismissed plaintiff’s claims with prejudice following a settlement agreement between the parties. 

Jennifer Lin Cooper v. New Dominion, LLC, in the District Court of Lincoln County, Oklahoma (Docket No. CJ-15-24)

On February 10, 2015, Jennifer Lin Cooper, an Oklahoma resident, filed a class action petition against New Dominion, LLC, Spess Oil Company, and several unnamed entities involved in injection well activities in Oklahoma. Plaintiff sought class action status to include residents and homeowners in Lincoln and eight surrounding counties. In her petition, plaintiff argued that three earthquakes that occurred near Prague, Oklahoma, in November 2011 were linked to the underground disposal of hydraulic fracturing fluids and asserted four causes of actions against the companies alleging private nuisance, strict liability, negligence, and trespass. 

On May 23, 2018, the court certified this lawsuit as a class action. Trial is expected to begin on September 10, 2018.

Certain Underwriters at Lloyd’s, London Subscribing to Policy No. PGIARK03959 v. New Dominion, LLC, in the U.S. District Court for the Southern District of New York (Docket No. 1:16-cv-05005)

On June 27, 2016, the insurance company Lloyd’s filed a legal action against its client New Dominion, LLC, requesting a declaratory judgment that it did not have any obligation to cover defense costs incurred by New Dominion, LLC, in litigating the five following actions: 

·      Griggs v. Chesapeake Operating LLC, et al., Docket No. CJ-2016-6, in the District Court of Logan County (filed January 12, 2016);
·      Felts v. Devon Energy Production Company, LP,Docket No. CJ-2016-137, in the District Court of Oklahoma County (filed January 11, 2016);
·      Hopson et al. v. ABC Oil Company, Inc. et al., Docket No. CJ-16-49, in the District Court of Pottowatomie County;
·      Lene v. Chesapeake Operating LLC et al., Docket No. CJ-2016-27, in the District Court of Logan County (filed February 12, 2016); and
·      Sierra Club v. Chesapeake Operating LLC et al., Docket No. CIV-16-134, in the U.S. District Court for the Western District of Oklahoma (filed February 16, 2016).

The insurance company argued that the subscribed and insuring agreement, entitled Site Pollution Liability Policies, provides coverage only for damages resulting from a “pollution condition,” which the agreement describes as a discharge, dispersal, seepage, migration, release or escape of a pollutant. In this case, the insurance company argued that the allegations in each of the five actions relate to earthquakes caused by New Dominion, LLC’s wastewater disposal activities, and thus argued that these allegations are not referring to a pollutant condition as previously described. 

In addition, the insurance company argued that the Site Pollution Liability Policies contain provisions providing coverage for physical injury or property damages and excluding coverage for punitive damages. Since the remedies sought in the five actions are injunctive or declaratory relief as well as punitive damages, there is no coverage possible under the said Policies according to Lloyd’s.

On July 26, 2016, New Dominion, LLC, moved to dismiss Lloyd’s complaint, putting forward the arguments that the court should forbear from taking action on the issue under the Wilton/Brillhart doctrine of abstention. The court denied the motion on September 7, 2016, holding that the court has personal jurisdiction over the matter based on the policy’s forum selection clause.

On October 28, 2016, the court dismissed the insurance company’s claims without prejudice following a settlement agreement between the parties.
 

This material is based upon work supported by the National Agricultural Library, Agricultural Research Service, U.S. Department of Agriculture.