Richard...Thought that you might like to see the case that got the spate of litigation started. My testimony was about the control that that Shell and Union should have exercised. The case is now on appeal to the Indiana Supreme Court with a decision due this summer.

"LEXIS (R)-NEXIS
Copyright 1997 LRP Publications

Environmental Laboratory Washington Report
October 30, 1997
Legal Ruling; Vol. 8, No. 20
LENGTH: 853 words

Major Oil Companies Held Accountable For Underground Storage Leaks At
Independently Owned Station in Indiana

Knowledge of the possibility of leaking gas tanks polluting an entire community's drinking water with carcinogens, among other things, was sufficient to convince an Indiana court that two major oil marketers had the ability and authority to control underground storage tanks at an independently owned service station and were deemed "operators" under the appropriate environmental statute. The ruling could have additional implications if major oil companies can be held responsible for the actions of franchise holders.

In 1992, the Indiana Department of Environmental Management determined that contamination of
residential property originated from a Union 76 service station, formerly a Shell Oil. Co. station. The affected landowners sued Shell Oil Co., Union Oil Co. and the current and former owners, asserting claims under the state Underground Storage Tank Act and common law.

The trial court found that the USTA issue was equitable and should be decided separately by the court after disposition of the landowners' common law claims by a jury. The jury returned a general verdict in favor of the oil companies.

The oil companies asserted that the issue of their status as "operators" was fully litigated before the jury, was decided adversely to the landowners and thus was collaterally estopped. Appellate Judge Linda Chezem noted that the jury rendered a general verdict in favor of the oil companies and did not state precisely why it determined that the landowners' common law claims should fail. She added that there is no estoppel where anything is left to conjecture as to what was necessarily involved and decided where the judgment does not show upon which of several grounds it was based.

CERCLA Definition of 'Operator' Useful [note: this is a fed statute related to toxic materials ex gasoline]

The parties disagreed on whether the oil companies were operators. The oil companies contended that they were only wholesale suppliers of gasoline and thus did not exercise sufficient control to be
deemed operators. Conversely, the landowners maintained that the trial court's conclusion to the contrary was amply supported by the facts presented and by the applicable law. Indiana law defines
"operator"; as a person in control of, or having responsibility for, the daily operation of a UST. In examining whether Shell and Union were in control of the daily operation of the USTs at the gas station, the court had to determine whether they "exercised restraining or directing influence" over the daily operations. She found that they did not exert influence over all aspects of the station, especially not on a daily basis. [note: this was the problem we had to overcome]

Next, the court considered whether the oil companies had responsibility and whether they had legal accountability for the UST's daily operation. Because of a lack of cases interpreting operator
responsibility under the USTA or RCRA, the court looked to CERCLA for guidance. She noted that
"the most commonly adopted yardstick for determining if a party is an owner-operator under CERCLA is the degree of control that a party is able to exert over the activity causing the pollution" and that a defendant "need not have exercised actual control" over a facility "so long as the authority to control the facility was present."

Evidence was presented to Judge Chezem that the oil companies knew of the pervasive problem of leaking steel USTs, of the limited engineering knowledge of leak detection and resources of most gas station owners, and of the possibility of leaking gas tanks polluting an entire community's drinking water with the carcinogen benzene. Thus, she found that the oil companies had the authority and ability to control the USTs at the station. Consequently, she ruled that they had the responsibility or accountability for the daily operation and thus were operators of the USTs.

Future Corrective Action Costs Proper

The oil companies next contended that the costs of future corrective action were "wholly speculative" and could not "be recovered under the guise of contribution." They claimed that their liability must be limited to the costs actually incurred by the landowners. Judge Chezem observed that the USTA did not limit contribution to past-incurred costs. She added that the "trial court has full discretion to fashion equitable remedies that are complete and fair to all parties involved." Consequently, the judge ruled that the trial court was within its discretion to order the oil companies to pay 2.7 million into a federally insured bank account, the funds to be use "solely and exclusively for ... environmental and human health corrective action plans." However, Judge Chezem ruled that the trial court abused its discretion by
allowing the landowners to draw upon the account without notice to the trial judge or to the oil companies.

Opinion by Appellate Judge Linda Chezem

Counsel for Appellants: Karl L. Mulvaney, Nana Quay-Smith, Larry J. Kane and
Phil L. Isenbarger, Bingham Summers Welsh
& Spilman, Indianapolis, Ind.

Counsel for Appellees: Robert
M. Baker III and Thomas A. Barnard, Johnson Smith Pence Densborn Wright
& Heath, Indianapolis, Ind.