Class Certification Denied in Plant Explosion Case

A Massachusetts federal court last week declined to certify a class in a suit against chemical company Ashland Inc., in a dispute over a factory explosion. Riva et al. v. Ashland Inc., No. 1:09-cv-12074 (D. Mass.).

Plaintiffs alleged that the defendant negligently maintained certain highly explosive chemicals at a Danvers, MA, facility in such a way that caused an explosion in 2006. At the time of the explosion, Ashland was the primary provider of chemicals to C.A.I., a manufacturer of commercial printing inks, and Arnel Co., Inc. a manufacturer of paint products. C.A.I. and Arnel both operated from the Danvers facility.  There was an incident that destroyed the Danvers facility and caused property damage to the surrounding Danversport community. The named plaintiffs claimed that Ashland, among other things: did not inquire or determine whether C.A.I. or Arnel had a license or permit to maintain the quantities and types of chemicals Ashland provided; failed to warn about the scope and magnitude of the explosive risks and hazards of the chemicals and chemical mixtures that it was providing; delivered chemicals into inappropriate containers and vessels. Ashland prepared a vigorous defense. Plaintiffs sued under theories of strict liability, negligence, nuisance, and breach of implied warranty of merchantability.

As is typical with mass disasters, multiple law suits were filed, including a Borelli matter.  Ashland was not named as a defendant in Borelli or in any of the additional suits brought against C.A.I., Arnel and its insurers.   In connection with the Borelli action, certain households and businesses in the Danversport area in close proximity to the site of the explosion created the Danversport Trust for the benefit of those whose real estate Property was directly impacted by the explosion and fire at the Danvers facility.  The state court eventually certified the Borelli class and approved a comprehensive settlement agreement.  It gets a little complicated because not  all Borelli class members were Trust beneficiaries, and the settlement agreement also contained an indemnification provision which applied to Trust beneficiaries and certain other settling parties, but not all of them. Specifically, this indemnification provision did not require Borelli class members who were not in the Trust or in a "Subrogated Group" of claimants to indemnify the released defendants from future claims. Rather, the settlement agreement provided that the remaining Borelli class members expressly reserved the right to initiate individual, class, or collective actions against any or all non-released parties. 

And that is how this case came to be filed against Ashland. Borelli class members, including the
named plaintiffs in the present action, received compensation resolving their claims in that matter.  Named plaintiff  Riva alleged that her residence and personal property in Danvers were destroyed by the explosion. Although Riva was not a Trust beneficiary, she was a member of the
Borelli class and received money from the Claims Review Committee to resolve her claims in that
matter.  Named plaintiff Corrieri alleged that his uninsured boat was damaged in the explosion while it was stored at Liberty Marina in Danvers. Corrieri was neither a Trust beneficiary nor was
he asserting individual claims for damages to real property. He received a settlement payment in the prior class action for damage to the same boat for which he now asserted claims against Ashland.

The plaintiffs moved for class certification, and the court's analysis focused on the typicality and adequacy prongs, particularly in light of the prior class settlement.

The requirements of typicality and adequacy focus on the class representatives, Fed. R. Civ.
P. 23(a)(3) & 23(a)(4), and in the eyes of some courts “ tend to merge.” In re Credit Suisse-AOL Sec. Litig., 253 F.R.D. 17, 22 (D. Mass. 2008). Rule 23(a)(3) requires that “the claims or defenses of the representative parties [be] typical of the claims or defenses of the class.” The class representatives’ claims are “typical” when their claims arise from the same event or practice or course of conduct that gives rise to the claims of other class members, and are based on the same legal theory.  The class members' claims here did appear to arise from the same event (the accident), but despite these similarities, the court found that the named plaintiffs had not shown that their interests in proving liability were aligned with those of the class to meet the typicality requirement.

The indemnification provision of the prior settlement required the "Subrogated Group" and Trust beneficiaries to individually defend, hold harmless, and indemnify C.A.I. for any and all claims in the nature of third-party claims for indemnity or contribution which might be brought by Ashland. Since Ashland, a non-released party, had indeed brought a third-party claim for indemnification and contribution against C.A.I., a released party in Borelli, the impact of this indemnification provision on class members who were Indemnitors (i.e., Trust beneficiaries or members of the Subrogated
Group), was in the eyes of the court a "live issue in this case." The indemnification provision did not apply to the other class members who are neither Trust beneficiaries nor members of the Subrogated Group. So the indemnification provision could affect the Indemnitor and non-Indemnitor class members differently,  i.e., if the case was certified as a class action and the class prevailed, the Indemnitors in the class could become obligated to indemnify C.A.I., but other class members would not.

The court predicted that a substantial number of putative class members would be Indemnitors.  But the named plaintiffs were all non-Indemnitors and therefore would not be bound by the
indemnification provision. As non-Indemnitors, the named plaintiffs had a clear interest in proving
Ashland’s liability and maximizing damages. The majority of the class, the Indemnitors, on the
other hand, would not have the same goal since, according to the indemnification provision, they might be required to pay certain damages over to C.A.I.  Thus, it could not be said that the interests of the class representatives were typical of the class in this respect.

The adequacy requirement demands a similar inquiry into whether the putative representative plaintiff’s interests are aligned with other class members and whether the plaintiff is in a position to vigorously protect the class' interests.  Adequacy requires that the representative parties will fairly and adequately protect the interests of the class. To be adequate class representatives, plaintiffs must show that: (1) the interests of the representative party will not conflict with the interests of the class members; and (2) counsel chosen by the representative party is qualified, experienced and able to vigorously conduct the proposed litigation.  Here, an apparent conflict of interest exists between the non-Indemnitors (i.e., the named plaintiffs) and the Indemnitors (i.e., most of the class). The Indemnitors’ interest in shielding themselves from liability over indicated they would pursue tactics contrary to the named plaintiffs’ objectives in both proving liability and maximizing all kinds of damages against Ashland.

The court noted that the fact that the class representatives have suffered the same injury as the Indemnitors and non-Indemnitors in the class was insufficient to show that the adequacy requirement was met. Class representatives must also “possess the same interests” as other class members.

Class certification denied. 

Update on Gulf Oil Spill Litigation

Couple of interesting issue being debated in the Gulf Oil Spill Litigation.  In re: Oil Spill by the Oil Rig "Deepwater Horizon" in the Gulf of Mexico on April 20, 2010, MDL-2179 (E.D. La.).

The first concerns control over the testing of key components of the rig, once they are recovered.  Readers know how important such testing can be in supporting or refuting causation theories. But the very act of testing, even if not destructive, potentially alters the condition of the product.  Who goes first; what tests get run in what order; who does the testing; how tests are done... all of these can be vitally important issues in accident investigation and product liability litigation.

Defendant Transocean Ltd. unit has asked the judge in the MDL to grant a motion for a protective order that would block the government's apparent plan to unilaterally control testing of the oil rig's blowout preventer. Press reports suggest the blowout preventer could be recovered from the Gulf floor in the near future. Transocean Offshore Deepwater Drilling Inc. and several other defendants thus filed a motion last week in the U.S. District Court for the Eastern District of Louisiana for an expedited hearing on the protective order covering the blowout preventer.

The federal government has indicated that it wants to take exclusive control of the blowout preventer, transport it to a government site, and then contract for forensic testing and analysis. The motion argues that while the government has solicited input from other parties on testing protocol, it never said it would pay attention to any of those suggestions.

The second issue is a battle between Transocean and co-defendant BP over document discovery. Transocean attorneys are claiming that BP has been withholding documents and limiting Transocean's access to sensitive information connected to the accident, including records of tests on the blowout preventer, lab reports on components of the rig such as the well cement mix, and data on equipment used to keep well pipes in place during cementing.  BP, for its part, calls the claim a "publicity stunt” designed to divert attention from Transocean's alleged role in the accident.  BP claims it has already turned over thousands of pages of documents, including materials on the initial exploration plan, lab tests and daily drilling reports, and mud log reports.

Third, the American Petroleum Institute and other parties who are defendant-intervenors have asked the MDL judge to remand one of the many coordinated cases.  Gulf Restoration Network et al. v. Salazar et al.  This one is the suit brought by environmental groups against the federal government, and the argument is that it is fundamentally different from the other cases because it focuses on administrative law issues regarding the government’s approval of offshore drilling plans.

The Gulf Restoration Network, along with the Sierra Club, accused the U.S. Department of the Interior of ignoring environmental regulations when it allegedly waived safety regulations to allow BP and Transocean to conduct offshore drilling exploration in the Gulf of Mexico.

The discovery for negligence claims at the core of the MDL, these moving parties assert, will not materially assist or advance a case that stems from the legal issue whether the federal government took proper steps in granting the companies the offshore drilling exploration permits.  In fact, the argument goes, keeping Gulf Restoration in the MDL would unreasonably delay what would normally be a quick resolution to an administrative law action.