16 April 2014

Important Developments from Two Influential Fracturing Litigation Jurisdictions

Over the past two years, an increasing deluge of stories has flooded our lay media and popular culture concerning hydraulic fracturing. Indeed, barely a day now passes without at least one widely-distributed article debating the various scientific and economic issues related to fracturing, which then echoes throughout all manner of social media. To date, most discussions address state-wide or local regulatory efforts to either encourage or restrict fracturing as well as varied scientific studies concerning the practice — both “pro” and “con.” Most articles about fracturing from the litigation perspective have centered on outlining theories of recovery, corresponding defenses as well as tracking the filing of the ever-expanding universe of cases. However, two important events from fracturing “hot-beds” will soon create reverberations across the national litigation landscape.

Texas Trial

A Dallas jury is now being asked to award a Texas family $9 million in a “nuisance suit” against one remaining defendant – Aruba Petroleum, Inc. (Parr, et al. v. Aruba Petroleum Inc., CC-11-01650-E, in the County Court at Law No. 5 of Dallas County). The Parr family alleges that Aruba’s fracturing of the Barnett Shale Deposit exposed them to hazardous gases, chemicals and industrial waste – causing various illnesses. The Parrs settled with other defendants while Halliburton won summary judgment before trial. Aruba obtained the dismissal of the Parrs’ negligence claims, also via summary judgment. As such, the jury will now focus upon theories of trespass and nuisance to determine potential liability. In another important pre-trial holding, Judge Mark Greenberg ruled that the Parrs could not recover any damages for personal injury claims requiring expert witness testimony.

What is perhaps most interesting for those watching this early trial from a key fracturing jurisdiction is how the jury approaches claimed damages, assuming Aruba is even found liable. For example, the Parrs must prove not only that their claimed injuries did not pre-exist Aruba’s drilling, but also that they were caused by Aruba’s wells and not other companies’ wells which also surround the Parrs’ property. The Parrs must carry these significant burdens not only without the aid of expert testimony as to the causation of injuries, but also in the face of Aruba’s argument that their wells’ emissions were within the applicable air quality limits. While most other jurisdictions would permit, if not require, litigants to carry their specific medical causation burden with the support of expert testimony, the following two issues will likely be important considerations in future cases throughout the country: (1) how does a litigant prove claimed damages are from a particular defendants’ wells when litigants’ properties tend to be situated in an area surrounded by other companies’ active wells; and (2) how much protection, if any, will compliance with local environmental regulations afford defendants, at least within the context of trespass and nuisance theories of liability (as opposed to negligence where they would be admitted as evidence of but not per se compliance with reasonable care).

By the time of our next report (UPDATE), we should know the answers to these two questions, and perhaps begin to see how this particular Texas jury’s answers might affect other future cases.

Colorado Constraint

Over the past several years, defendants in toxic tort and product liability lawsuits have achieved increasing success in convincing courts to enter Lone Pine orders as a case management tool to cull significant numbers of cases before undertaking time-consuming and expensive pre-trial fact and expert discovery. A Lone Pine order, named after a leading New Jersey case, typically requires a plaintiff to put forward prima facie evidence of specific causation for claimed injuries before full-blown discovery from a defendant is permitted. If a plaintiff fails to comply, the case is dismissed. In contrast, if sufficient evidence is proffered “normal” discovery activities take place, although plaintiff still carries his or her evidentiary burden as to causation. Defendants have a better chance of persuading courts to employ this tool in cases which would involve drawn-out and expensive discovery typically involving complicated and unsettled scientific and medical issues. As such, fracturing defendants have understandably pursued Lone Pine orders with great vigor.

Colorado’s Supreme Court just announced that it would review an appellate court’s ruling in a fracturing case forbidding the use of a Lone Pine order. The underlying case involved claims by Mr. William Strudley that several defendants caused him and his family to become sick from their drilling activities near his property. The trial court entered a Lone Pine order which led to the eventual dismissal of the case after the Strudleys were unable to comply with its requirement that they proffer sufficient prima facie evidence that their claimed injuries were caused by defendants’ fracturing. The appellate court resurrected the case in July of 2013 by ruling that the trial court erred when it entered the Lone Pine order.

Defendants convinced the Supreme Court to hear this matter by arguing that the appellate court’s ruling not only impermissibly inhibited trial courts’ abilities to tailor discovery to individual cases, but also was inconsistent with the Supreme Court’s general endorsement of trial courts’ use of early and active case management strategies. In accepting the matter for its consideration, the Supreme Court announced it address two issues: (1) whether a trial court is barred as a matter of law from entering case management orders requiring a plaintiff to produce evidence essential to his or her claims after initial disclosures but before further discovery (i.e., a Lone Pine order); and (2) assuming such an order is not barred as a matter of law, whether the trial court in this case acted within its discretion in entering and enforcing the order at issue.

Along with Texas and Pennsylvania, Colorado is one of the most influential fracturing jurisdictions. As such, the Supreme Court’s eventual holding on these important issues will not only affect Colorado’s future docket, but will likely have a significant extra-jurisdictional impact. We will report the Court’s eventual ruling and provide our analyses of its impact for Colorado and other jurisdictions.