A Select History of Suing Oil Companies

By Michal Shimonovich (Staff Writer)

For as long as stereotypes about the judicial system have existed, US-Americans have been infamous for suing. McDonalds made you gain weight? Dunkin Donuts should have had a ‘hot content’ label on its coffee cups? Congress hates the Affordable Care Act? There’s a lawsuit for all of that. Indeed the USA’s fascination with litigation is enshrined in its constitution, the writers of whom made sure to include that a right to a ‘speedy trial’ was included in the documents first 10 amendments. In reality, however, our legal rights aren’t so easily executed. Whilst North American’s may possess litigious predilections, their ability to satisfy them is often stymied by systemic, structural and legislative obstacles. For instance, large corporations ingrained in the nations economic landscape have been known to become too big to sue, even when the destruction they cause is disproportionate and long lasting. Oil companies provide an interesting instance of this. They are remarkably hard to bring action against – a real shame, as they are often responsible for significant damage to the public. In what follows, I outline some of the difficulties associated with suing the behemoth oil industry. 

Firstly, it is hard to know who – exactly – should be the target of punitive action. In a lawsuit regarding water contamination, the U.S. District Court for the Southern District of New York ruled that plaintiffs needed to be able to identify liable defendants, and that the onus should not be placed on defendants to prove that they were not responsible for damage[1]. That’s quite difficult for plaintiffs who have to account for corporate mergers and acquisitions and a multitude of companies who might be responsible for a given calamity. When the BP operated ‘Deep-water Horizon Oil Rig’, which sat on the shores of Louisiana, exploded and sunk in 2010, a presidential report suggested that individual defendants might not be liable – the disaster, it was suggested, could have been a result of systematic problems in the industry and could have occurred anywhere[2]. And it’s not so unreasonable to see how a governing body would believe that – just look at how exceptionally difficult it has been to hold anyone in the financial industry accountable for the global crisis in 2008.

Even if you do happen to identify a lucky defendant, it takes time to assess the damage being done and it is often necessary to wait for a prolonged period before you can truly comprehend the extent of it. BP might have hoped its troubles were over when they paid for the clean up of the Deepwater Horizon spill, but now the clean-up workers are suing for medical liability[3]. Potential plaintiffs have the impossible task of assessing, objectively, long term damages to tourism, business and any psychological damage resulting from financial losses[4]. Psychological harm is just one among many consequences that are difficult to monetize. How do you, for instance, put a price on the loss of business to restaurants because of the perceived health risks of seafood, even if it has been deemed acceptable by regulatory agencies?[5] Even if you do land on a number, are you confident it is a figure which will exceed the money spent fighting a lawsuit?

Perhaps better legislation is the answer? But legislation is only as powerful as enforcement, and if oil companies aren’t held liable in the courts then taxpayers are wasting their money paying legislators to create laws (can that be included in suits against oil companies?). Even if legislation were the answer, another problem presents itself. Oil and natural gas companies cannot be compared to the traditional “evil industries” with congressmen on their payroll (think tobacco or guns) as they don’t employ as many people as oil companies. ‘“If you want to know what the Louisiana economy might be without oil,” said Andy Horowitz, a history professor at Tulane, “look at Mississippi”’ – the poorest US-state[6]. Of the 2.7 million jobs created in the US since 2002, one million of them were created by natural gas and oil companies. It is therefore difficult to see how a self preserving legislator, with a hoard of constituents mewing at her back, would be compelled to take on the specter of the oil industry! Is there any compensation for employees when oil companies are forced to lay off tons of them because they need to spend all their money paying back injured fisherman?[7] Or any comfort for the congressman who allowed such a turn of events?

Somewhat recently, the Southeast Louisiana Flood Protection Authority-East (Slfpa-E) attempted to sue 97 oil and gas companies for damage to the state’s wasteland which, by the oil industry’s own estimates, amounts to at least 36% of it[8]. There attempts were, however, quickly stopped. Louisiana’s governor, Bobby Jindal, received $1M in campaign contributions from the energy industry and in a completely unrelated move, said of the lawsuit: “This is nothing but a windfall for a handful of trial lawyers at the expense of our coast and thousands of hardworking Louisianans who help fuel America by working in the energy industry”[9]. In another completely unrelated move, he passed legislation that makes it illegal for the Slfpa-E to sue for the destruction of the wetlands. A judge – incidentally – cannot review the proposed Bill, a judge can only objectively assess a cases legitimacy within the framework of the law. He or she cannot account for a legislators intention or campaign contributions. In aiming to be above bias by ignoring it, the judicial system in America is its most pitiful victim.

I must not take for granted that everyone feels the same way I do about oil companies, so let me be clear: I believe we basically have to let them exist until we perfect this solar power thing, and in the meantime we should hold them as liable as we can for as much damage as possible. I always think that if we ever make them pay too much for any given incident, we can ameliorate our concerns by assuming that they, more often than not, pay too little for the damages they cause overall. But the law, to my chagrin, doesn’t work that way. In 2008, the Supreme Court decided to reduce punitive damages owed by Exxon to 32,000 fisherman, landowners and Alaska Natives, resulting from the 1989 Prince William Sound spill in Alaska, from $5B to $500M[10].  In the worst piece of news you’ll hear today, that means that the plaintiffs received an average of $15,000 each since 1989 to account for loss to marine life, devaluation of boats, destruction of tourism and a reduction in business.

At a certain point, we have to concede that the private industries that function within the judicial system do so legally. They only break the law insofar as a court will hold them accountable. Legislation in the US often underestimates the power and the ability of corporations to marginalize people’s legislative power by buying politicians and employing constituencies[11]. This then becomes an inherently systematic issue – one which demands that we admit that the USA’s revered forefathers could not have foreseen just how much power the Koch brothers would have.

[1] Claims Seeking MTBE Groundwater Cleanup Costs from Oil Companies Allowed to Proceed’ 2005, Hazardous Waste Consultant, 23, 4, pp. 3.3-3.4, Business Source Alumni Edition, EBSCOhost, viewed 17 November 2014

[2] US oil spill lawsuit’ 2011, Chemistry & Industry, 1, p. 6, Business Source Complete, EBSCOhost, viewed 17 November 2014.

[3] Associated Press. “BP Back in Court in Bid to Reclaim Settlement Payments from Workers.” The Guardian. 24 Sept. 2014. Web. Viewed 15 Nov. 2014.

[4] Palinkas, LA 2012, ‘A conceptual framework for understanding the mental health impacts of oil spills: lessons from the Exxon Valdez oil spill’, Psychiatry, 75, 3, pp. 203-222, MEDLINE with Full Text, EBSCOhost, viewed 17 November 2014.

[5] Johnson, L, & Rudolph, H 2011, ‘Gulf spill update: What should damaged companies do?’, Journal Of Corporate Accounting & Finance (Wiley), 23, 1, pp. 23-32, Business Source Complete, EBSCOhost, viewed 17 November 2014.

[6] Rich, N 2014. ‘The Most Ambitious Environmental Lawsuit Ever’, New York Times, 15 November.

[7] Mullaney, T 2014. ‘Want a job? Look to the energy field’, USA Today, 5 October.

[8] Rich, N 2014. ‘The Most Ambitious Environmental Lawsuit Ever’, New York Times, 15 November.

[9] ibid

[10] Liptak, A. ‘Damages Cut Against Exxon in Valdez Case’, New York Times, 26 June.

[11] Bernal, AM 2011, ‘Power, Powerlessness and Petroleum: Indigenous Environmental Claims and the Limits of Transnational Law’, New Political Science, 33, 2, pp. 143-167, Academic Search Premier, EBSCOhost, viewed 17 November 2014.