Seventh Circuit Rejects Class Action Alleging Groundwater Contamination From Refinery Because Homeowners’ Claims Lack Commonality

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The U.S. Court of Appeals for the Seventh Circuit recently reversed the certification of a class of property owners who alleged an Illinois refinery leaked potentially carcinogenic chemicals into their property and water supply.  The court also required additional evidentiary findings of claim commonality.  Parko v. Shell Oil Co., 2014 WL 187184 (7th Cir. Jan 17, 2014)(rev’g Parko v. Shell Oil Co., 2013 WL 4721382 (S.D. Ill. Sep. 3, 2013)).  The opinion provides a significant reminder that predominance in class certification should not be treated as a mere pleading requirement; a rigorous analysis of evidence is required to determine the cohesion of a class.

 

The suit was originally filed in 2011 by residents of the Village of Roxana, Ill., alleging property damage from benzene and other potentially toxic chemicals released from the Wood River refinery.  Last September, a district judge certified a class of homeowners in the village who alleged the refinery had contaminated the groundwater beneath their properties and negatively affected their property values, even though the residents obtain their drinking water from a nearby uncontaminated aquifer.  In certifying the class, Judge G. Patrick Murphy held that the homeowners had sufficient common interests and questions at issue to proceed as a class.  The current and former operators of the refinery appealed.

 

After analyzing whether the district court performed a sufficiently “‘rigorous analysis’ before determining that issues common to the class predominate over issues that differ among individual class members,” the Seventh Circuit reversed the district court’s certification.

 

The panel rejected the plaintiffs’ argument that a question common to the class – whether the failure to contain petroleum byproduct at the refinery resulted in contamination to the plaintiffs’ property – established predominance of issues common to the entire class.  In particular, the panel noted varying factual patterns and differing damages alleged by the plaintiffs mitigated against class certification.  Circuit Judge Richard A. Posner, writing for the unanimous panel, noted first that the district court did not perform a thorough examination of predominance issues, relying instead on the “mere assertion by class counsel that common issues predominate.”  The contamination alleged in the case occurred across a span of almost a century while the refinery was owned or operated by six defendants, meaning that possible contamination of plaintiffs’ properties could have occurred at different times, at various levels, due to different acts or omissions by disparate defendants.  In addition, it could not be assumed that every plaintiff suffered the same diminution in property value.  “For the greater the variance in property values (about which the district judge made no findings), the less likely it is that contamination would affect the value of all or most of the properties by the same amount of money or the same percentage of market value.”

 

Moreover, the panel noted that the plaintiffs’ water supply does not come from the allegedly contaminated groundwater beneath their properties, nor do they even own that groundwater.  “Benzene in the water supply is one thing; benzene in groundwater that does not feed into the water supply is quite another.”  The plaintiffs’ claims relied on expert hydrogeology modeling and contaminant measurements that had yet to occur, and the district court inappropriately accepted the plaintiffs’ allegations as to what the expert’s methods would show rather than taking evidence on what that methodology actually did indicate.  “Nothing is simpler than to make an unsubstantiated allegation,” the panel cautioned, “but if intentions (hopes, in other words) were enough, predominance, as a check on casting lawsuits in the class action mold, would be out the window.”  The district court should have thoroughly investigated the plaintiffs’ injuries and hydrogeology models and should have taken evidence; the failure to do so requires reversal. Without the expert evidence, there is no basis for any claim that benzene levels in groundwater are a common issue or a common cause to blame for diminished property values.

 

Finally, the panel took pains to point out that its holding in no way affected its earlier decision in Mejdrech v. Met-Coil Systems Corp., 319 F.3d 910 (7th Cir. 2003).  That case involved a class of homeowners whose properties were contaminated by a single source of pollution, which did, in fact, contaminate the drinking water supply and affect property values in a contiguous area.  Conversely, in this case, the plaintiffs “have presented no theory, let alone credible evidence, of a connection between the leaks [and] property values, or between specific defendants and the leaks and property values, that would justify a class action on behalf of all the property owners whose properties sit above” the allegedly contaminated groundwater.

 

The Seventh Circuit’s decision provides important support for corporations defending class action suits: a challenge to a class’ predominance is a worthwhile exercise and should be undertaken where evidentiary findings of predominance issues and a class’ cohesion have not been made.